Earnings call transcript: Balco Group sees decline in Q2 2025 earnings

Balco Group reported a challenging second quarter in 2025, with net sales declining by 12% to SEK 338 million. The company’s adjusted earnings per share (EPS) fell sharply to SEK 0.01, compared to SEK 0.36 in the same period last year. Despite these results, Balco Group remains optimistic about future order intakes, particularly in the renovation segment. The stock price reacted negatively, dropping 1.51% to SEK 26.10 during trading. According to InvestingPro data, the company’s shares have declined by 32.23% over the past six months, reflecting broader market concerns about its performance.

Key Takeaways

• Net sales decreased by 12% to SEK 338 million.
• Adjusted EPS fell to SEK 0.01 from SEK 0.36 last year.
• The maritime segment expanded with a significant new order.
• Renovation markets in Sweden and Norway are showing increased activity.
• Stock price declined by 1.51% following the earnings release.

Company Performance

Balco Group’s performance in the second quarter of 2025 was marked by a decrease in net sales and profitability. The adjusted EBITA dropped to SEK 6 million from SEK 19 million last year, reflecting a challenging market environment. Despite the downturn, the company continues to hold a strong market position in the Nordic countries and remains a key player in maritime balcony solutions.

Financial Highlights

• Revenue: SEK 338 million, down 12% year-over-year.
• Adjusted EBITA: SEK 6 million, compared to SEK 19 million last year.
• Adjusted EPS: SEK 0.01, down from SEK 0.36 last year.
• Operating cash flow: Negative SEK 30 million.

Outlook & Guidance

Balco Group is cautiously optimistic about the future, particularly in the renovation project sector. The company expects a longer recovery period for the new build segment but remains focused on improving profitability and cost savings. Management anticipates better working capital conditions by the fourth quarter.

Executive Commentary

Camilla Echdahl, CEO of Balco Group, highlighted the company’s highest historical order intake during the quarter, stating, "The order intake in the quarter is the highest historical order intake for Balco Group." However, she also acknowledged ongoing challenges, noting, "We are still suffering from delays in the start-up of projects."

Risks and Challenges

• Project delays due to builder hesitation and building permissions.
• Competitive pressures in the Swedish, Danish, and Finnish markets.
• Slow recovery in the new build segment.
• Negative operating cash flow impacting financial flexibility.
• Potential macroeconomic pressures affecting market demand.

Balco Group’s earnings call underscored the company’s strategic focus on the renovation and maritime segments, while addressing the operational challenges it faces. As the company navigates these hurdles, its strong market position in the Nordic region and expanding product offerings are expected to support future growth.

Full transcript - Balco Group AB (BALCO) Q2 2025:

Moderator, Balco Group: Hi, and welcome to Balco Group’s second quarter report for 2025. With us to present, we have President and CEO, Camilla Echdahl as well as CFO, Mikael At the end of the presentation, we’ll have a Q and A. If you’re on call and have a question, press 9 to raise your hand, and then press 6 to unmute yourself when given the word. You can also send in questions in the form to your right. And with that said, I give the word to you, Camilla.

Camilla Echdahl, President and CEO, Balco Group: Thank you, and welcome all to our quarter two presentation. First of all, for all new listeners, a short snapshot of VAALCO Group. Balko Group was founded in 1987 and consists of several balcony and facade companies. The head office is in Bekkoy, and the group has, approximately 600 employees. Balco operates in two main segments, renovations and new build.

The core expertise is to supply glazed balconies and balcony solutions, primarily on the renovation market and to tenant owned associations. The group has a broad offering of balcony solutions and a complementary offering such as facade renovation, and it can also act as a turnkey supplier in renovation projects. The key markets are Sweden, Denmark, Norway and Finland. We also have a strong challenger position on other Northern European markets. So let’s go over to the quarter.

I’m very glad to say that the order intake in the quarter is the highest historical order intake for Baku Group and amounted to SEK $519,000,000, which is an increase of 37% compared to previous year. The increase comes from mainly three areas. First of all, a restart in the maritime segment where we received an order worth about 80,000,000 SEK to the French shipyard Chantiers de Atlantique. This is our first order to both this shipyard and also to France. And on this order, we will also deliver doors together with the balconies.

So this is also a new product which we implemented to our maritime assortment. The second area is Norway, where we received orders of about NOK 180,000,000, during the quarter, and this is also we have communicated during with press releases during the quarter. And the third area is also very glad to see that we have an increase in the order intake for the Swedish balcony companies with about 47% in the quarter. However, the profitability in the quarter is not satisfactory. We are still suffering from delays in the start up of projects during the first half year, and the value of this is about SEK 100,000,000.

This affect both sales, cash flow and also earnings. The net sales decreased by 12% to SEK $338,000,000 versus SEK $3.74, 5% is coming from negative currency effect. The structural measures we announced in quarter one proceed as planned. The production move from TBO Haglin are in Arboga to the bulk of factories in Beckhoe and Poland has been completed, and the previously planned staff reductions have been implemented at our glazing company in Finland. And all these structural costs are taken in the first quarter.

If we go and talk a little bit about the market in general, we can see that the trend of increased activity, especially in the Swedish and Norwegian renovation market is continuing, as I said on the previous quarters. Customers are becoming more willing to make investment decisions, but the process continues to be long. We can also see that the recovery in the market continues to be affected by uncertainty in the outside world. And therefore, we must always look on the order intake over a longer period. But if we look on the first half year, we can see that there’s still a very positive trend there where we have an increase of 9% for the first half year in the order intake.

We can see that there are some smaller positive signals in the newbuild segment in the Nordic countries, but the increase comes from a very low level, and it will take a while before we see it’s visible in the increased order intake both our Facade and Balkanic Conference in Sweden and Finland. Since mid of previous year, the order bookings for the cruise ships to the shipyards have picked up, and this has also resulted in the increase of request for quotations to Balco. There are limited number of companies who are able to deliver balcony solutions to the shipyard and Balco is one of them. Balco is also a very interesting partner for the shipyards, not only for balconies, also for other products within the steel, aluminum and glass material. As now, when we have implemented the doors into our maritime segment, this is an example of that.

We can see on the markets that we have had some problems before with the strain competitive situation that continues, and this is especially for the Swedish facade companies and the balcony company in Denmark. And we also see a trend of increased competitive situation in Finland, both within the renovation and the new build segment. So hand over to you, Mikael, on the figures.

Mikael, CFO, Balco Group: Yes. And start with the quarter for the group and the quarterly result. Net sales amounted to SEK $331,000,000, down from SEK $374,000,000 last year. Here, the organic growth was minus 7% and currency effect was minus 5%. Our adjusted operating result on EBITA level amounted to €6,000,000 down from €19,000,000 last year, and it corresponds to an adjusted EBITA margin of 1.9%.

Order intake was, as Camilla mentioned, record high and increased by 37% up to $519,000,000 compared to $380,000,000 last year. Our order backlog has increased by 4% to SEK 1,439,000,000.000. The adjusted earnings per share amounted to SEK 0.01 compared to SEK 0.36 last year. And our operating cash flow was negative in the quarter by minus 30,000,000 compared to plus 48 last year. And if we look at our segments and start with the renovation segment, here the sales was more or less in par compared to last year, $253,000,000 compared to SEK $251,000,000 last year, and it corresponds to 76% of the total sales of the group.

Order intake in the quarter increased by 52% up to $386,000,000, and it’s correspond to 74% of the total order intake. The adjusted operating result EBITDA in the quarter amounted to 6,000,000 compared to 11,000,000 last year, and it corresponds to adjusted operating margin of 2.4%. Order backlog increased by 10% up to 1.144 and corresponds to 79% of the total order backlog. And our new build segment, here, sales decreased down to 78,000,000 compared to 123 last year, and it’s corresponding 24% of the total sales. Order intake, though, increased by 6% up to 133,000,000 compared to 126 last year.

The adjusted operating result, EBITA, in the quarter amounted to 1,000,000 compared to seven last year and an adjusted operating margin of 0.8%. Order backlog for the newbuild segment decreased slightly to $3.00 5,000,000 compared to $3.55 last year, and it’s 25% of the total order backlog. And a look at our financial position. At the end of the quarter, the group’s equity amounted to $753,000,000, down from $7.98 last year. The equity to asset ratio was 45% compared to 47 last year.

Our interest bearing net debt, including leasing debt in relation to adjusted EBITDA, amounted to 7.6 compared to 3.3 last year. And we have obtained a waiver with the bank, which is valid until the end of the year, and our covenants with the bank is well within this agreement. And the banking agreement we have with Danske Bank is valid until March 2028, and we have an option for further two year extension.

Camilla Echdahl, President and CEO, Balco Group: Thank you, Mikael. So if we look a little bit on the outlook, we say that we we are cautiously optimistic for the rest of the year regarding the order intake for the renovation project. For the new build segment, especially in the Nordic countries, we see that the recovery will take longer. And the recovery in the market continues to be affected by the uncertainty in the outside world. There continues to be a strained competitive situation for our Swedish facade companies, our balcony company in Denmark, and we also see within the renovation and new build market now in Finland.

The assessment is that the coming quarters will be affected in the terms of sales and earnings. And therefore, we continue to focus on our profitability improving measures and work on structural measures and cost savings, which is ongoing. Yes. So that’s all from us. So questions?

Moderator, Balco Group: Thanks for the presentation. Just to recap, if you are calling in and want to ask a question, press 9 to raise your hand and 6 to unmute yourself, when handed a word. And you can also send in questions via the form. The first question here is, is it possible to say anything on the expected margin of your order intake?

Camilla Echdahl, President and CEO, Balco Group: If it’s possible to say anything on the order intake we have taken, I guess, I mean. And then we can say that the on the order intake we have taken, the the margins are within the levels that where it should be, both in the Swedish market and the maritime market and on Norwegian market.

Moderator, Balco Group: Thanks for that answer. Now we have Sofia Serling from, Carnegie on a call. Welcome, Sofia.

Sofia Serling, Analyst, Carnegie: Thank you. This is Sofia from D and B Carnegie. Can you hear me?

Camilla Echdahl, President and CEO, Balco Group: Yes. We are. Hello, Sofia. Nice to hear your voice again.

Sofia Serling, Analyst, Carnegie: Thank you. Okay. I have a first question, maybe a follow-up on the previous question. So this maritime order, is that should we expect a similar margin as the normalized bulk group margin, or is it a lower margin in this type of orders or a higher one? That’s my first question.

Mikael, CFO, Balco Group: If we see at the maritime segment, the last two ships that we delivered to, it was more or less the same level as the standard Balko Group margin. It was a very good margin over the last two boats, and this one is sold on the same level.

Sofia Serling, Analyst, Carnegie: Okay. And then if we continue on the maritime segment, what is your expectations here ahead? Do you expect any more orders from this segment, or is this good enough at the moment, or what is your expectation?

Camilla Echdahl, President and CEO, Balco Group: As we’re saying in the report, we have received more request for quotations. So we are working on quotations within the segment.

Sofia Serling, Analyst, Carnegie: K. And then you mentioned profitability somewhat dampened by this the delays in project starts. Is that, in particular, in Sweden, the problem, or or do you see this in in other countries as well? And, also, when do you expect this to when do you expect these type of products to start again, or when the problem will be solved in your view?

Mikael, CFO, Balco Group: It’s for a couple of different markets as a matter of fact. We have it both in Sweden. We have it in Norway, more or less the same level in both countries. Also Denmark also, quite more or less the same level also in Finland in the newbuild segment and also some delay in the newbuild in UK. Some of them have already started up and but otherwise, it’s quite difficult to say exactly when they will start.

But we expect that it will be better in quarter four of this year as it looks now.

Sofia Serling, Analyst, Carnegie: Okay. And what would you say is the main reason? I mean, it seems like it’s different countries now, but what would you say is the main reason for these delays?

Camilla Echdahl, President and CEO, Balco Group: When it comes to the new to where we have the new build segment, there is delays from the builders. Mhmm. And this is usually, so to say, that you get these kind of delays, but we’ve got a little bit more now than we are used to get. So that’s why we see that as an increase. When we look on the renovation segment, that is mainly linked to either building permissions or discussions as in Sweden with the Heeres NEMT.

Sofia Serling, Analyst, Carnegie: Mhmm. Okay. Yeah. And regarding cost measures, do you think you can do implement any more cost measures ahead in second half of twenty five or into ’26, or is it fully implemented now and you really need volumes in order to improve profitability?

Camilla Echdahl, President and CEO, Balco Group: We have a couple of areas where we’re still working on with the cost cost, factor, so to say. But but mainly, so to say, to get the the profitability up, we need to get the the sales up. Revenue needs to increase.

Mikael, CFO, Balco Group: K.

Camilla Echdahl, President and CEO, Balco Group: Then last question

Sofia Serling, Analyst, Carnegie: We are Yeah.

Camilla Echdahl, President and CEO, Balco Group: Very happy to see that we now got such a good order intake this quarter.

Sofia Serling, Analyst, Carnegie: Yep. Yeah. And just a detailed question on the Danish market. Do you think this type this market is different? Do you see a different customer behavior on the Danish market compared to the other Nordic countries in your view?

Camilla Echdahl, President and CEO, Balco Group: Yeah. In the Danish market, the product we have there, that’s a very specific product. It is a product that you are the the majority of the projects, they are within the renovation segment, but they are actually that you are getting an a new balcony on an old building where you don’t have a balcony today. So that’s the main difference if you compare to the other markets where we are do working with the renovation, where the you’re in the majority of the projects, you’re replacing an existing balcony. And if you’re replacing a balcony and you have a need, then you have a that’s much more a demand of doing something.

You are more hesitating and you have even longer processes, and it takes longer time before you take the investment if you don’t have a balcony and it’s something nice to have. So there you see the big difference between the Danish market and the other renovation markets.

Sofia Serling, Analyst, Carnegie: Alright. Okay. That was all my questions. Thank you.

Moderator, Balco Group: Thank you for those questions. Now for a last question here. What should we expect regarding working capital development the coming quarter?

Mikael, CFO, Balco Group: We expect it to get better, I would say, especially in quarter four. Slight improvement, I expect, in quarter three, but mainly yeah. Quite Improvement. Big improvement in the fourth quarter of this year.

Moderator, Balco Group: Thank you for that answer. That was the end of the q and a. Now for some, closing remarks, Camilla?

Camilla Echdahl, President and CEO, Balco Group: Yeah. Thank you all for listening, to our presentation even though that is for July 14 and some of you have, so to say, summer vacation coming up. And, so thank you all, and I wish you all a really good summer. Thank you.

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