Earnings call transcript: Adelma’s Q1 2025 results show strong growth

Adelma reported robust financial performance for the first quarter of 2025, with revenue reaching SEK 5.2 billion, marking an 8% year-over-year organic growth. The company’s adjusted EBIT saw a 19% increase to SEK 540 million, reflecting a margin of 10.5%. According to InvestingPro analysis, Adelma currently appears undervalued, with a strong financial health score of 2.86 (GOOD). Despite mixed market sentiments and geopolitical uncertainties, Adelma’s stock experienced a positive reaction, driven by its strategic focus on profitable and less cyclical markets.

Key Takeaways

• Adelma’s Q1 2025 revenue increased by 8% year-over-year.
• Adjusted EBIT grew by 19%, with a margin of 10.5%.
• The company maintained a strong net cash position of SEK 1.7 billion.
• Strategic investments in growth initiatives and sustainability continue.
• Stock price rose by 5.92% following the earnings announcement.

Company Performance

Adelma’s performance in Q1 2025 demonstrated resilience in a cautious economic environment. The company capitalized on strong demand in the Oil & Gas, Nuclear, and Medical segments, offsetting weaker performance in Industrial Heating and Solar sectors. Adelma’s strategic initiatives in China, Japan, and Perth, along with its on-site tubing solution for the Canadian hydrogen market, contributed to its growth trajectory.

Financial Highlights

• Revenue: SEK 5.2 billion, 8% year-over-year growth
• Adjusted EBIT: SEK 540 million, 19% increase
• Adjusted EBIT Margin: 10.5%
• Free Operating Cash Flow: SEK 46 million
• Net Cash Position: SEK 1.7 billion
• Dividend: SEK 577 million (SEK 230 per share)

Outlook & Guidance

Adelma remains focused on executing its growth initiatives, with a full-year CapEx guidance of SEK 1.2 billion. The company anticipates a Q2 currency headwind of approximately SEK 130 million and a negative metal price impact of SEK 150 million. The tax rate is expected to range between 23-25%. InvestingPro analysis shows strong cash flows sufficiently covering interest payments, with liquid assets exceeding short-term obligations. Adelma continues to target more profitable and less cyclical markets, supported by its strong balance sheet. InvestingPro subscribers have access to 8 additional key insights about Adelma’s financial position and market outlook.

Executive Commentary

CEO Jaran Bjorkman emphasized the company’s strategic focus, stating, "We are targeting more profitable and less cyclical markets." He also highlighted Adelma’s capacity to drive growth in challenging markets: "Our strong balance sheet means that we are prepared to drive growth initiatives even in a weaker market."

Risks and Challenges

• Economic uncertainties and geopolitical tensions could impact market dynamics.
• Potential currency fluctuations may affect financial results.
• Metal price volatility poses a risk to cost management.
• Performance in Industrial Heating and Solar remains weak.
• Ongoing management transitions could affect strategic continuity.

Adelma’s strategic initiatives and focus on sustainable growth have positioned it well to navigate the current economic landscape, with a strong balance sheet supporting its ambitions.

Full transcript - Alleima AB (ALLEI) Q1 2025:

Emily Arleman, Head of Investor Relations, Adelma: Hi, everyone, and welcome to the presentation of the first quarter twenty twenty five interim report for Adelma. My name is Emily Arleman. I am head of investor relations. And I’m joined today by Jaran Bjorkman, president and CEO, and Olof Begsson, CFO. So Jaran and Olof will take you through our results, and then we will have a q and a session.

You can ask questions through the conference call, and you can also write them in the webcast. You can also download the presentation from alema.com. And as always, safety is a top priority for us, and I trust that you are safe where you are located. So with that, I would like to hand it over to you, Jaram.

Jaran Bjorkman, President and CEO, Adelma: Thank you, Emily. Hi, everyone, and thank you for listening. So let me start with the highlights of the quarter. Quarter one, I think, is another solid quarter, continued strength and financial performance. We had order intake growth for the rolling twelve month period of plus 1%, continued organic revenue growth.

We are executing on our solid backlog. And we achieved broad based revenue growth of plus 8% organically, and where actually most of our segments showed growth. Backlog remained solid with good product mix and visibility for near term future. Our adjusted EBIT margin also grew year on year to 10.5% with a solid operational leverage and margin development despite a slight FX headwind, and that is the bridge effect. We did not note any major effects from the ongoing turbulence stemming from trade barriers and The U.

S. We view the main risk going forward is a potential negative impact on global demand and economic environment, not the tariffs themselves. We will comment more on this in detail in just a moment. A strong financial position enables us to stay with our strategy with several ongoing projects for profitable growth that we now are executing on. And we are targeting more profitable and less cyclical markets.

We will continue to implement these growth initiatives to continue strengthening the company in the long term and also strengthen local presence in important and attractive markets. This is an important part of the long term strategy. I think in general, we are performing in line with our targets. Move to sustainability, we are generating positive impact both through our operations and our product offering. And I’ll start with our own operations.

And I’ll start with safety. Safety is always a top priority. We are continuously and actively implementing measures to maintain safety as a top priority. Development is going sideways at the moment, long term heading in the right direction. But I would say safety is an area where I’m not satisfied.

We have to improve and have to do that on a higher pace. Our share of recycled steel remains high, over 80%, both on a rolling twelve month basis and year over year. I think that’s a good figure given our product mix. Our CO2 emissions are steadily decreasing both on rolling twelve month basis and year over year, with a reduction of 38% respectively. During the quarter, we submitted our plan to SPTI and we are now awaiting their approval.

And the proportion of female managers increased to 24.8%, important and again recognizing this is only one aspect on a broader diversity inclusion initiatives. When we talk about our offerings towards the hydrogen market, we often talk about our unique production technique towards hydrogen fuel cells. But we are supporting the whole lot more in the build out of the supporting infrastructure. In the quarter, we launched an on-site tubing solution to the Canadian hydrogen market. This container based solution, which could be seen as a small mobile tube factory, can be installed directly on the construction sites and decreases the need for off-site processing, ensuring the exact specification wherever it’s needed.

And there are broad based savings such as materials. Instead of having tubes at certain fixed length that you cut, you can get the exact length you need from the container. This improves yield and also reduces the number of couplings or welds, and also savings related to energy, space and time. I think this support this solution is already supporting more than 70 hydrogen refluting station projects in Europe. And I think this is another good example on how Aleema, with our expertise in our customer processes, acts as an enabler for solutions of tomorrow.

So let’s look at the market development. Overall, we continue to see a mixed market sentiment and the macro environment is continued uncertain. As said, no impact from the global trade barriers was visible in our order intake to date, but there is of course a risk that potential negative impact on global demand and the economic environment. However, this comment is, of course, very general. Walk you through the development in each segment, starting with oil and gas.

The underlying demand is still on higher levels, and the project list of upcoming tenders and potential future orders is strong. In order intake, we still meet high comps from the backlog built up last year. Last quarter, we said that the backlog for umbilicus was getting shorter, but we have now booked more orders and we have not consumed backlog. The book to bill was above one in the quarter for umbilicals. And the OCTG backlog remains strong.

Chemical and Petrochemical year over year underlying flat. Europe is down as a solid demand in Asia on good levels and the sentiment in North America was somewhat improving but from low levels. Industrial segment, we noted an improving year over year demand, improving in North America from low levels, stable in Asia and slightly weaker in Europe. I think it’s important then to know that due to capacity priorities, we are being selective in booking orders in the Industrial segment. Industrial heating, flat demand year over year and still some hesitance from customers in placing orders, which refers mainly to CapEx related business.

For the solar segment especially, we also have high comparables from last year and for this quarter and to some extent also in the next quarter. However, demand was positive in some applications for ceramic elements for electronics, including semiconductors and also glass industry, but weaker in solar and metals. Consumer demand is now on a good level, mainly driven by the white goods industry in the strip division. Medical continued to be a strong market. Several drivers of momentum is strong across the product portfolio.

Mining and Construction, flat underlying demand year over year, strongly related to Mining and Manufacturing and Nuclear, the high activity and growing demand continues, and we’re building a good backlog to execute for a long time. Transportation demand was flat year over year, but with high activity for aerospace and marine titanium tubing. And Hydro and Renewable Energy is still a bit mixed. This is a wider segment where some businesses are doing better than others, but in total, I have no clear signs that this is taking off quite yet. Order intake rolling twelve months amounted to just below SEK20 billion, noting a broad based organic growth and is now turning positive to plus 1%.

The Oil and Gas segment is still contributing negatively, where we are to some extent still affected by high comps. Our view on the market is still positive. Nuclear Medical segment noted the highest rolling twelve month year over year growth, but as I said, a broad based positive contribution. Revenue grew organically by 8% year over year with growth in tube and strip and decline in Kantal. Main contributors were oil and gas and nuclear, but all segments except Industrial Heating noted organic growth.

We continue to deliver on our backlog and managed to grow revenue for the third consecutive quarter, rolling twelve months book to bill of 99%, and order backlog remains solid with an overall positive mix. So let’s move over to earnings. Adjusted EBIT amounted to million with a margin 10.5%, thus indicating solid operational leverage in the quarter, which makes this quarter, I think, a quarter I’m pleased with. Margin in Q1 last year was, however, down by dilution from the European implementation and some under absorption effects. We are seeing margin contribution from more segments now than in the past, Medical being the prime example of this, but also Oil and Gas and Nuclear and also our the way our ratio footprint is evolving.

In Cantal, we noted quite a margin decline year over year, which I will come back to. The Cantal decline had a negative impact on the group. Free operating cash flow SEK 46,000,000 lower than last year, impacted by higher production volumes and higher CapEx. Overall, we are benefiting from our diverse exposure and how we in the longer term have been driving a positive product mix shift while maintaining our order booking discipline in weaker market condition, which brings me to the next slide, a slide that we have shown a couple of times before. Looking at the longer perspective, we have improved our resilience.

2024 wasn’t by any means a perfect year. I would say it was rather challenging in many aspects. But looking long term, we are at historically high levels. This does not mean that we are satisfied. We still acknowledge things we can do better, but it’s still important that we have taken some great steps in improving our stability and profitability, a journey that we intend to continue.

Production volumes have slowly and steadily increased over the last few quarters, but we’re still on low volumes compared to 2019. So let’s look at the division, starting with Tube. Tube noted organic order growth of minus 3% for the rolling twelve month period, again coming from lower intake in Oil and Gas segment due to the backlog built up last year. Nuclear, mining, construction and transportation developed positively. Europe continued to be on the weaker side, while Asia and North America grew year over year.

Our order backlog in oil and gas is still solid. Book to bill of 98% rolling twelve months with solid backlog in key segments. Organic revenue growth of 12%, mainly driven by Nuclear and Oil and Gas, but several segments are contributing. This means that we have a positive product mix. Margin increased to 11.1%.

And we are utilizing our capacity in a good way by prioritizing more profitable orders. Note that we had some dilution effects in the comparative margin in quarter one twenty twenty four, meaning that the underlying performance was better last year than it looks. Anyhow, this was an overall good quarter for Tube. Until order intake growth for the rolling twelve month period of plus 4% on low comparables. Still with a somewhat soft industrial heating market, however, demand was sequentially flat but on low level and positive in some applications for ceramic elements for electronics, including semiconductor and glass industry.

Previously announced investments in both Sakura, Japan and Perth, Scotland are both related to those customer segments. Medical segment is maintaining its strong momentum, growing in order intake and maintaining good revenue levels. Backlog remains solid. And book to bill recovers a bit to 99%. The adjusted EBIT margin for Kantal was 16.6% in the quarter.

I think it is a good performance given the lower volumes especially in the solar end market, which is highly profitable. Margin includes an FX headwind of minus SEK 17,000,000 year on year on adjusted EBIT. And if we exclude FX, margin would have been on par with last year, which is a strong performance in a challenged market environment and low volumes in Industrial Heating. And Kantal’s ability to adjust capacity and reduce cost, improving mix from the growing medical business makes me stand firm with my previously made comments, and that is that Kantal has established a new margin level compared to the historical numbers. Strip after a tough 2024, where Strip was heavily affected by the weak consumer related demand, volumes have returned to better levels.

Organic order intake grew 34% on a rolling twelve month basis, with growth in all segments. Marketing conditions have improved and we are building up a solid backlog in segments like consumer, where the main product is compressor valve steel for white goods. Revenue grew organically by 19% in the quarter, however, coming from a weak quarter one last year. Book to bill now amounts to 115%. Adjusted EBIT margin improved to 6.9% from last year’s 3.1 And adjusting for dilution from the offering to hydrogen fuel cells, which has been slow now for some time, the underlying strip business is steadily improving.

On the other hand, year on year FX also a positive contribution of SEK 12,000,000 on strip. Let’s have a look at our global footprint, and that is to describe our review on tariffs. As I have stated already, the main risk we see is the potential negative impact on global demand and economic environment, not the tariffs themselves. We have been through this before with Section two thirty two back in 2018 and which we handled in a good way. We have a clear local for local strategy, and recent investment decision also supports this.

I will give you some color on our production flows looking at our U. S. Production footprint. Starting with tube. We have several production units.

I will not comment on all of them, but to give you an overview. Starting with Scranton in Pennsylvania, that’s the largest site. That is mainly for industrial, but also for the chemical and petrochemical segments with products like high temp tubes, heat exchanger tubes and also hydraulic and instrumentation tubes. Also in Pennsylvania, we have Scott Hill and we have Kennewick in Washington State, both for stainless and titanium tubes for the transportation segment, mainly aerospace and marine. And in general, the melt shop in Sandvik can supply input material for these units, which are mainly bar and sometimes follows, those being low refined products, and where the main part of the value add is taking place locally in The U.

S. Factories. And competitors that does not have this capacity of extrusion in U. S. That we have.

We also have sales in The U. S. Where the customer is the importer as we have very specialized production units. To give you a couple of examples: umbilicals, which are produced in Komotov in Czech Republic steam generator tubes for nuclear that are produced in Sandviken and here the competitors are mainly based in Europe and some in Asia, and none in The U. S.

Cantal. In Cantal, we have Palm Coast in Florida and Tucson in Arizona for our medical wire business. And for the Cantal heating business, we have Bethel in Connecticut. That is a wire production unit that is serving external customers, mainly with industrial heating and the consumer segment. And Bethel is also an internal wire supplier to the more added value heating elements production, which we have in Concorde in North Carolina.

So it’s a similar setup like tube, with exception for the medical business. Input is a wire rod from Sweden, where the more value add production like wire production and manufacturing heating elements is taking place locally in The U. S. Again, many competitors lack our capacity and capabilities in The U. S.

So how do we handle the tariffs? We are passing on tariffs to customers like our competitors in The U. S. In EU and Asia are doing. And remember that tariffs are paid on the low refined input material like bar for extrusion in the tube case and wire rod in the control case.

And we are acting in very specialized niches, where many times there are limited domestic alternatives. If we see that tariffs will impact demand, we are ready to adjust capacity and cost base if needed. So what are our key takeaways from 2018 when Section two thirty two was introduced? We lost some volumes on low refined products like VARs. This is an industrial segment and part of the long term strategy is to be less dependent on the industrial segment.

On the more high added value products, we had no major impact due to limited local competition. Also at that time, to reduce risk of having Chinese steel imports to Europe due to the tariffs into US, EU implemented import quotas, and those are still active. Again, we are not worried about the tariffs. The risk lies within the impact on the global economy. And with that, over to you, Lof.

Olof Begsson, CFO, Adelma: Thank you, Joran. And let’s go through some numbers then on the financial summary slide. And looking at the bridge table to the right in the slide, starting with order intake amounts to close to billion on a rolling twelve month basis. And organically we are now turned positive and are growing by 1% on this rolling basis, which is a change from previous quarters. We see growth, for example, in nuclear and medical segments on this basis.

Quarterly revenues just below SEK5.2 billion with a strong organic 8% growth. And we have now shown revenue growth for three consecutive quarters. And the growth is slightly broad based with all segments except Industrial Heating growing. Alloys, we still see some negative alloy effects on orders with minus 2% on a rolling twelve month basis, neutral on quarterly revenues though. And if we look at the coming quarter, alloy effects are expected to be neutral on both the rolling twelve month order intake and on the revenues.

Structure, that’s zero on both order intake and on revenues. We actually have a small acquisition there, Endox in Kantal, closed in January, but we only see minor effects from this in the quarter. Then turning to the table on the left, and I’ll get back to the adjusted EBIT in a minute, starting with the reported EBIT coming to 10% then from 2.7% same quarter last year. And this is the improvement here comes from the increased revenues, of course, and the better performance, but also from the fact that the metal price effects are much lower this quarter compared to the same quarter last year. We go from a negative SEK $328,000,000 to a negative SEK 27,000,000 this year.

So that, of course, has a strong impact on that line. Net financial items, a positive SEK13 million in the quarter compared to a negative SEK42 million last year. And the change comes mainly then from revaluation of financial instruments that we use to hedge our various exposures. And some of these hedges do not fully qualify for hedge accounting, thereby impacting the finance net when they are revalued. However, we have a positive underlying interest net coming from our strong cash position and that is currently yielding about 2.2%.

Tax rate. We have a reported tax rate of 25.1% in the quarter. And if we normalize that, it comes out at SEK 20 3 point 1 percent, so that is well in line with what we’re guiding for. Free operating cash flow of SEK 46,000,000, lower than last year. I’ll get back to that in a minute as well.

And finally, adjusted earnings for the quarter at SEK 1.65 per share, impacted positively from the higher adjusted EBIT number and also the improved finance net. That is the finances shortly. And then looking into the bridge or the change in adjusted EBIT from quarter one last year to quarter one this year, we are growing EBIT by 19% in total, going from SEK453 million to SEK540 million, with a sound operating leverage of 28% in the quarter. We note a solid organic development in tube and strip from improving volumes and good mix, somewhat mitigated by a negative development in Kantal. Slight currency headwind in tube and Kantal year over year, Wall Street was positive and total currency effects in the quarter was negative SEK 21,000,000 in this bridge.

On structure, we have a positive underlying contribution from the Endox acquisition in Kantal, but some temporary M and A transaction costs, including a real estate transfer tax, has impacted the numbers, so they come out at a negative four. However, the acquisition is performing as planned. Then going to the balance sheet. Net working capital then to the left, more or less on par with last year in absolute terms, however lower as a percentage of revenues. And the sequential increase you see from the preceding quarter is mainly driven by higher volumes, resulting in higher accounts receivable and inventory as well as lower accounts payable change.

And as you can see on the bars to the left, looking back two years, we normally have a buildup of inventory during the two first quarters of the year for the annual summer stop, when we also do maintenance of our mills. This also goes through this year. And in addition to this, this summer we will have a prolonged stop for reinvestments related to one of our extrusion presses in Sandvikan. But with this in mind, we expect the working capital change coming from this to be neutral cash flow for the full year. Year over year, capital employed look to the right capital employed, excluding cash, increased to billion from SEK15.5 billion last year.

This increase comes mainly from higher fixed assets as we are investing in our growth than with the increased CapEx levels we have seen for the last quarters. And if we look at sequential, the increase also of course comes from the increased net working capital position that I just mentioned. ROS, or return on capital employed, excluding cash, which then based on the operating profit including the metal effect, was 11.9% in the quarter, based on a rolling twelve months. And the increase from last year’s 7.1 is attributable to the improved performance in the reported EBIT and the lower macro price effects. Looking at the cash flow, free operating cash flow amounted to SEK46 million in the quarter, that’s lower than last year, despite a higher EBITDA as CapEx levels are higher and also of course coming from the aforementioned changes in working capital.

CapEx increase relates to higher growth CapEx and our maintenance CapEx levels are still approximately SEK400 million per year as we have previously communicated. We see a slight increase in our lease liabilities. And normally, we improve cash flows in the second half of the year as we release working capital from the seasonal inventory buildup during the first half. Looking at the financial position then, the position remains strong. We are well below our financial targets, net debt to equity ratio below 0.3x, at the quarter end we were at negative 0.0x, and if you prefer the net debt to adjusted EBITDA measurement, this came in at negative 0.14x.

Looking at the different components then, net pension liabilities increased to SEK839 million from last year’s SEK722 million, and that is mainly a result of lower discount rates year over year, obviously affecting the pension liability. Leasing liabilities more or less on par with last year at SEK481 million. Cash position continued strong with a financial cash position of SEK1.7 billion. And then a net debt position of negative $4.14, that is a net cash position there. And subject to an AGM decision next week, we are getting ready for paying our dividend of a total of SEK577 million that will be paid in May, and that corresponds to SEK230 per share.

And again, we also have contributing to our strong financial position is that we have an unutilized revolving credit facility of SEK3 billion at the end of the quarter. So if we look at the guidance that we gave you ahead of the quarter that just passed, we had CapEx of SEK213 million. We are guiding for a full year CapEx of SEK1.2 million. So I would say we are well in that range, considering that we normally have more CapEx in the third and fourth quarters. Currency translation transaction and translation effects at SEK64 million in the quarter, we guided for SEK85 based on what we knew then.

And the lower outcome has to do with the significant strengthening on the Swedish krona that we saw in March versus our main currencies. Total currency effect, including hedges and revaluations, came out at a negative 21 in our year over year bridge. Metal price effects, we guided for neutral effects and we came out at a negative 27. So I think we were fairly well in line there. Tax rate, 23.1 and we guide it for ’23 to ’25.

So at the lower end of that range, still in the range. And if we look into the second quarter then, CapEx, we remain with our guidance of SEK1.2 billion for the full year CapEx, mainly coming from already decided and announced investments. And as I just mentioned, SEK400 million of that is maintenance or reinvestment CapEx. And then we have some IT and safety investments, but the rest of the CapEx is actually for improvements and growth. Currency effects: Transaction and translation approximately SEK130 million negative for Q2.

And this obviously comes down from the Swedish krona versus our main currencies. And this is based, I should say, on FX rates at the March. Currency is quite difficult at the moment, I think. And with the recent quite considerable currency movements, it’s difficult to give any longer guidance on currency effects. But to get a better understanding of currency effects for the full year, what I would recommend is a deep dive into our recently published annual report for 2024.

As a note there, to be specific, it’s note ’26, where we have a sensitivity analysis on our transaction and translation exposure and the possible impact on EBIT. There you can see the different currency exposures that we have. Coming to metals then, with metal prices at the March, specifically the nickel price, we expect negative metal price effects of SEK150 million in the second quarter. And for tax, we keep our guidance of the range of 23% to 25% for the full year. And that takes me back

Jaran Bjorkman, President and CEO, Adelma: to you, Jara. Thank you, Olof. The outlook for the second quarter. I mean the economic environment remained somewhat cautious during the quarter. And considering the changing global trade policy situation, the general uncertainty concerning future development has increased.

We take a positive view on the development in several of our customer segments, where the underlying megatrends are expected to continue to support performance, while there are challenges in others. Our backlog is solid in several of our key segments, and we have a good visibility in our near term deliveries. Europe is on the weak side, North America picking up on low levels and Asia is doing fine. And please note that we are meeting high comps in second quarter. Product mix is expected to be similar to the one in the first quarter.

And on the basis of the exchange rates of the March 2025, currency headwind is expected in the second quarter, as Olof just described. Cash flow is normally lower in the first half of the year compared with the second half. So that brings me to summarize. Overall, we had a solid financial performance in quarter one. Company is in good shape, and we deliver on our financial and strategic targets.

Quarter one, we noted a continued mixed market sentiment. The future is difficult to foresee as the turbulence in the market related to trade barriers and geopolitics. Revenue continued to grow organically in the quarter with a broad based contribution. Our diversified exposure to customer segments at different stages of the business cycle as well as our strategy to grow within more profitable and less cyclical initiatives have proven to be successful. EBIT margin grew year over year and the long term development is solid.

This shows how we long term have driven positive product mix and maintained our order booking discipline in weaker marketing conditions and thus able to maintain profitability. We have several ongoing growth initiatives, which will strengthen our company in the long term. Our strategy has always been to have a global footprint, the production close to customers and our announced investments are strengthening this further. Our financial position remains strong, which will enable us to continue to execute on our strategic agenda. And with that, I’d like to hand over back to you, Emily.

Emily Arleman, Head of Investor Relations, Adelma: Thank you, Joran. So now it’s time to start the Q and A session. Again, please write your questions in the webcast or you can ask them on the conference call. So operator, please go ahead.

Conference Operator: Ladies and gentlemen, we will now begin the question and answer The first question comes from Giuliani Adjuan, ABG. Please go ahead.

Giuliani Adjuan, Analyst, ABG: Yes. Hello. A couple of questions from my end. First of all, it sounds like you’re not really seeing any notable negative impacts from lower demand yet. But given that the whole trade war situation started in April, are you able to talk about how the order intake has looked so far in April?

Can you give anything quantitative on that, whether there has been a drop off or not?

Jaran Bjorkman, President and CEO, Adelma: It’s only been a couple of weeks, and we have an Easter. And when I look at the numbers, I see nothing actually. That doesn’t mean that we will not see anything going forward, but we need to describe what we see. And so far, we do not see anything. But of course, is not good for us either.

Giuliani Adjuan, Analyst, ABG: Okay. Understood. And I guess on a similar note, and I appreciate it’s a bit hard to tell, but do you think there’s a risk that Q1 was perhaps boosted by pre buying as well ahead of sort of building inventories ahead of the tariffs?

Jaran Bjorkman, President and CEO, Adelma: I don’t think so. That is a question we also have raised internally and tried to see if that is the case, and that is not what we see.

Giuliani Adjuan, Analyst, ABG: Okay. And do you base that off of sort of conversations with your customers? Or what’s the reasoning behind that?

Jaran Bjorkman, President and CEO, Adelma: The reasoning behind that is how the divisions and the business units are viewing their order intake, and we don’t see anything like that.

Giuliani Adjuan, Analyst, ABG: Okay. And perhaps a final one from me on the margin in Kantal, it was down almost two percentage points year on year. And I get that FX is part of that, but is there anything else unusual in the Q1 numbers? Or should we assume that unless industrial heating improves, then this is perhaps the level Kantal will be at for the coming quarters as well?

Jaran Bjorkman, President and CEO, Adelma: I think Kantal could improve from the levels they are at right now. You’re right, industrial heating is low. And if that continue to be flat, we still have the positive mix effect of more medical as share of Kantal, and that is bringing up the level. I think and then we should not speculate on the FX level, but I believe is that they can improve from this level even though industrial heating will not start to grow a lot.

Giuliani Adjuan, Analyst, ABG: Okay. Understood. In that case, that’s all for me. So thank you.

Olof Begsson, CFO, Adelma: Thank you.

Conference Operator: The next question comes from Ekblom Anders from Nordea. Please go ahead.

Anders Ekblom, Analyst, Nordea: Hi, all. Thank you for taking my questions. Getting back a bit maybe to the and sorry to repeat this, but the tariff potentially tariff induced component of purchases in the quarter. I mean, for me, just looking at Tube in North America, I mean, you reported 63% organic revenue growth year over year. For me, that kind of pops out.

And sorry, not to grill on kind of how you make the assessment that there’s not such a component to purchases in the quarter, but at least maybe if you could explain the North America figures, that would be very appreciated.

Jaran Bjorkman, President and CEO, Adelma: Let me start with the numbers. Yes, the growth is high but from very low levels. So the sales in Americas in the regional tube is still slow, even though it’s improving. We were there or I was there two weeks ago and also met with the organization because they are worried about the uncertainties and they, for what would they say, haven’t seen anything like sort of speculating purchasing from customers. And on the margin, you never know exactly what all customers are doing, but we have not seen that as a big thing.

No.

Giuliani Adjuan, Analyst, ABG: Okay. Okay. Thank

Anders Ekblom, Analyst, Nordea: you. Just thinking about the kind of metal prices currently, I mean, during the quarter, at the current spot at least, nickel prices came down by some low single digits year over year. But if the current spot is maintained, and I mean, obviously, you guide for this in terms of the impact on EBIT. But I mean, this will have a quite significant impact sub to something around 20% year over year in Q2 at the current spot. I mean and you say that the underlying profitability and the mix maybe is the same, which I interpret as the potentially underlying profitability.

Should one view this as the profitability of projects getting worse in the quarter to come, given that you get such a significant margin support from metal prices coming down? Or how should one think about that?

Olof Begsson, CFO, Adelma: Yes. I mean the metal prices, we the adjusted EBIT is excluding the metal price effect. Or is that your question?

Anders Ekblom, Analyst, Nordea: No, not really. I mean looking just at reported EBIT, if one thinks about when you say that you expect a fairly similar mix in the coming quarter, I interpret that maybe as saying something about what the margin level should be assumed to be at. But we have metal prices coming down very significantly, which will, of course, support the margin level for reported EBIT. So how should one think about the profitability in the backlog for the coming quarter with that in mind?

Olof Begsson, CFO, Adelma: I don’t see any big impacts on that. I mean, takes some time for the metal price changes to work through. We normally say it s about four months. So the figures we give is based on that assumption. And of course, also the fact that we are hedging part of our metal exposures.

So is that okay? That’s an answer. But that’s I mean and we, of course, look at the adjusted EBIT as well, reported EBIT, there you have the impact of the metal prices. But it takes time for them to come through. So the spot price is maybe not the best indicator of exactly how the metal prices will work out in our income statement.

Think that’s the best answer

Anders Ekblom, Analyst, Nordea: fair enough. Fair enough. Okay. Thank you. And finally, just on CapEx.

I mean, you previously guided full year around SEK 1,200,000,000.0. In the quarter, it was just above something like SEK 200,000,000, so of course, below the run rate level. How should one think about the timing of the investments going forward? I mean will it be more back end loaded for ’25? Or what’s the case there?

Olof Begsson, CFO, Adelma: Yes. Q3 is normally when we have our summer stops, when we do quite a lot of CapEx.

Jaran Bjorkman, President and CEO, Adelma: Yes. And end of the year also have higher CapEx.

Olof Begsson, CFO, Adelma: It seems

Jaran Bjorkman, President and CEO, Adelma: like suppliers try to be paid before end of the year. So it’s normally higher end of the year.

Olof Begsson, CFO, Adelma: Yes. Q4 was if you go back to Q4 in 2024, you’ll see that we’re at a very high CapEx level.

Anders Ekblom, Analyst, Nordea: All right. Perfect. Thank you.

Conference Operator: The next question comes from Victor Trollsten from Danske Bank. Please go ahead.

Victor Trollsten, Analyst, Danske Bank: Yes. Thank you, operator, and hello, Jaron, Olof and Emily. Perhaps first on getting back to the Kantal margin. And you mentioned, Ola, some temporary effects from acquisitions and the Endox acquisition. Could you remind us what sort of profitability is it basically that we are looking at this in Endox?

Is it I think you said slightly below Camtola as an average or perhaps in line. I guess what I’m after here is that you reported minus 4,000,000 impact on EBIT, but obviously, you added to two percent of sales. So the dilution on the margin seems to be fairly substantial. That’s one percentage point, something like that. But if you can help us with the Amdex margin.

And then secondly, on that question also, will those temporary effects linger into Q2 as well? I’ll start there, please.

Olof Begsson, CFO, Adelma: No, I mean, we closed the Endox acquisition. It’s part of the medical part of Cantal. We closed that in January, and we also then accounted for the transaction related costs. And in those costs, you will find, of course, all the legal costs and the due diligence costs and so on. But also, there is also a transfer of a real estate asset, transfer tax on a real estate asset in, I think it was in Germany.

That has affected the numbers. So that is a one off thing you’re seeing there. And we have a really close profitability on the acquisitions, but I think it’s performing according to plan, I would say, the acquisition.

Emily Arleman, Head of Investor Relations, Adelma: And what we said is that the margin is in Amdocs is slightly accretive to Kantal. Yes. It’s slightly accretive.

Victor Trollsten, Analyst, Danske Bank: Okay. Yes. Yes. Fair enough. But then I guess that the impact from acquisition or the delta is SEK 8,000,000 basically.

So I mean the minus SEK 4 will not linger into Q2. And then I guess, end of as you point out, it’s not loss making. So it’s basically SEK 8,000,000 coming in Q2 versus Q1.

Olof Begsson, CFO, Adelma: I don’t to forecast that. But you will not see any one off costs related to the acquisition in Q2, I would say. You will see the plain end of us.

Victor Trollsten, Analyst, Danske Bank: Yes, yes, yes. Fair enough. Fair enough. And just from my side, it would be okay if you put this as one offs from my perspective, so we get the underlying profitability in Control because then it’s actually, call it, much better than the SEK 16,600,000,000.0. Let’s say that it’s SEK 17,300,000,000.0 underlying EBITDA equal to this effect, but fair enough.

And then I guess the question to Johan and on the executive management turnover that we have seen, I guess, a majority of management is now changed since listing. And that could, of course, be natural as Alethma is venturing into new sales. But are you too tough, Joran? Or could you give any comment on this? And also whether this impacts the pace that can run the company at as a lot of new people are coming in?

Jaran Bjorkman, President and CEO, Adelma: I don’t think I’m too tough. These are three individual cases that has nothing to do with each other. Start with the one on the other side of the table. Olof has decided to retire. Of course, we know how old Olof is so that we have prepared for that for some while without knowing when he will take the decision.

So that is one thing. That Johanne is leaving, good for her and bad for us. She’s a very competent legal counsel and sort of appreciated member of the team, but she’s moving to another position. Then I made a change in strip end of the year. Klaus had been there for about five years.

We were reviewing the strategy, and I just wanted to have sort of a new leadership. So three individual cases that has nothing to do with each other. And things like this happens.

Igor Toubid, Analyst, Carnegie: And

Jaran Bjorkman, President and CEO, Adelma: I’m not worried about the team. The team is strong.

Victor Trollsten, Analyst, Danske Bank: Good to hear. And then finally, and I guess to you Jaron,

Anders Ekblom, Analyst, Nordea: and I

Victor Trollsten, Analyst, Danske Bank: know we’ve been over this before, but on Slide nine, as you point out, the margin resilience, I do agree it’s actually quite remarkable how the margin has kept up on low volumes. But I guess the question is to you, as the title suggests, how much must the margin resilience improve before you feel comfortable to use the balance sheet and the net cash position in another world and letting it yield 2%. Just to hear your thoughts, how much must Alethma change from history before you feel comfortable?

Jaran Bjorkman, President and CEO, Adelma: I understand your question. I am comfortable right now, and I think we are utilizing our strong balance sheet. We have more CapEx than we used to have. And it has to be good cases before we do anything. Then as we all know, fast swings in the metal price could have an impact, and we need some margin on that.

But I think overall, the strong balance sheet means that we are prepared to drive growth initiatives even in sort of a weaker market that we have been into. So there’s no target where we should really start to act differently. This is the strategy, and we will continue to drive it as we are doing right now.

Victor Trollsten, Analyst, Danske Bank: Okay. No, fair enough. Thank you very much.

Hanna Grimberg, Analyst, Handelsbanken: Thank you.

Conference Operator: The next question comes from Igor Toubid from Carnegie. Please go ahead.

Igor Toubid, Analyst, Carnegie: Thank you, operator, and thank you, the team. I have two questions. First one, if, Ljoran, if you can comment anything around the lead times of OCTG and the umbilicals. If I remember it correctly, it was like six months for umbilicals and twelve months post last report. And the second question is around the project that you have and how they are developing and what should we expect in terms of ramp up in China and Japan this year.

Are you will you reach like 50% of capacity by the year end? Or how should we think about that? Thank you.

Jaran Bjorkman, President and CEO, Adelma: Thanks, Igor. I’ll start with the Oil and Gas business. I mean last quarter, we said that the backlog in umbilical was roughly two months. I think I said that, that is good from one perspective. It means that we are flexible in booking orders, but I don’t want it to be much shorter.

We have a positive slightly positive book to bill in quarter one, and that is on high revenue pace. So we have built backlog a little bit, and there’s still a lot of interesting projects coming up. So situation is a little bit improved, but mostly rather stable in umbilicals. OCGG is still a long backlog we’re booking into 2026 as we speak. And regarding the projects, I think the team around me needs to help.

I mean, first of all, two of China will just start ramp up end of the year. Mid year, we’re going start ramp up the silicon carbide Perth. The nuclear steam during the Juvia study is next fall. Japan, when are we starting ramping up that? I don’t know that by heart actually.

End of the year. So we start ramp up, Kanto, Asia Japan end of the year. So they’re coming, some during the year and some next year.

Igor Toubid, Analyst, Carnegie: Okay. Sorry, I didn’t get you on the China and the chemical and petrochemical. Was that ramped

Victor Trollsten, Analyst, Danske Bank: up this year

Jaran Bjorkman, President and CEO, Adelma: of the year, we’re going to ramp it up. I’m going to be there, I think, in November for the inauguration. So we’ll start ramping up at the end of the year.

Igor Toubid, Analyst, Carnegie: Okay, great. That’s all from me. Thank you. And good luck, Ulaf, with your retirement.

Olof Begsson, CFO, Adelma: Thank

Conference Operator: The next question comes from Hanna Grimberg, Handelsbanken. Please go ahead.

Hanna Grimberg, Analyst, Handelsbanken: Yes. Hi, Hanna here. So I have two questions, and both are of them are a bit regarding markets. So first of all, in oil and gas, I mean, the oil price has come down a bit this year. With the oil prices at this level, do you think that, that could have a negative effect on demand?

Or do you think that oil prices would need to come down much more and would need to be at these levels for much longer for the outlook in oil and gas to change for you? So that was the first one. And then also in Industrial Heating, last quarter, you said that you thought that you might see a recovery at the end of the year. Has anything changed during the quarter for you? Do you think you still see a chance that industrial heating could recover at the end of twenty twenty five?

Jaran Bjorkman, President and CEO, Adelma: Thank you, Harna. I’ll start with the oil price. I think the drop we’ve seen is quite significant. And of course, that creates some kind of uncertainty. But I think I looked at Brent today, was around 65% or 68%.

From what we know, that is the levels where also the offshore investments are a bit above breakeven. I think last time we saw really downturn that was when oil price came down to around 30. So I think the level is still good enough. But of course, it could create some uncertainty. But we have not seen any of our customers act differently due to the last weeks of lower oil price.

When it comes to industrial heating, we said for some while that we expect to see a recovery. We haven’t seen it. It’s quite flattish. In some of the subsegments, we see some lights, as we said now in the call here, semicon and glass starts to improve, while, for instance, solar and metal industry is still pretty weak. I mean, I would say, Heating is the segment where we would have expected a recovery faster than we have seen.

Hanna Grimberg, Analyst, Handelsbanken: All right, great. Then that’s great info. Thank you.

Conference Operator: We have a follow-up question from Giuliani Adrien, ABG. Please go ahead.

Giuliani Adjuan, Analyst, ABG: Yes. Hi, again. I just wanted to do a quick follow-up on the margin resilience profile that I think Victor talked about before. I agree that Slide nine is a great illustration, but it also sort of, I would say, highlights the limited value of the current margin target of nine percent. So you’ve been clearly above that for quite some time, and it doesn’t look likely that you’re going back down to those levels.

So I guess I mean the question becomes how long do you have to outperform that before evaluating whether you should raise it?

Jaran Bjorkman, President and CEO, Adelma: Yes, that’s a question I’ve had before. We have no plans right now to change it. And I can agree with you. We are we hope to perform better. I think that’s all we can say at this moment.

We have not changed our financial targets. You should see it through a business Yes. And what is the business cycle? I think we have business cycles. And still, I mean, we’ve been around for a little bit more than two point five years.

So still pretty fresh targets. At some point, I guess, will be adjusted, but it’s not so planned at the moment.

Giuliani Adjuan, Analyst, ABG: Okay. Understood. Thank you again.

Conference Operator: We have a follow-up question from Eker Blomme Anders. Please go ahead.

Anders Ekblom, Analyst, Nordea: Yes. Thank you. Hi, again. So I just wanted to follow-up on my second question, which a bit poorly phrased perhaps of me. So apologies if that created some confusion.

But what I was referring to specifically was if you could give any kind of indication of the magnitude of the support for metal prices coming down to adjusted EBIT, given that it lowers the revenue base? That was kind of the question. So should one interpret it as given that, that creates a margin support, then you guide for a fairly similar mix in Q2 that the underlying profitability of that mix is worse, if one interprets the mix as being somewhat again to the profitability level. Do you get my question if I phrase it that way?

Olof Begsson, CFO, Adelma: You mean if the top line the metal price impact on the top line helps supports the margin.

Anders Ekblom, Analyst, Nordea: Nicely. Given that I assume that you kind of you pass on the potential metal

Jaran Bjorkman, President and CEO, Adelma: price

Anders Ekblom, Analyst, Nordea: to top Give like some type of indication of the magnitude of the margin potential margin support in Q2 if metal prices remains close to level that they are currently.

Jaran Bjorkman, President and CEO, Adelma: I understand the math you’re doing right now. I would say it’s more neutral. Okay.

Anders Ekblom, Analyst, Nordea: Fair enough. Thank you.

Emily Arleman, Head of Investor Relations, Adelma: Thank you. Super. With that, thank you, Olaf and Joran. And thank you all for listening to the call. We will be roadshowing from tomorrow.

Hope to see many of you there. So thank you very much, and goodbye.

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