Earnings call transcript: Boreo Oyj sees 10% stock rise in Q1 2025

Boreo Oyj reported a robust performance in the first quarter of 2025, marked by a 4% organic sales growth and a 28% increase in operational EBIT to €1.3 million. The company’s gross margin improved to 32%, and a significant cash conversion of €22 million was achieved for the quarter. With a market capitalization of €43 million and trailing twelve-month EBITDA of €9.53 million, these positive financial results contributed to a 10.32% surge in Boreo’s stock price, reflecting investor confidence in the company’s strategic direction and market position. According to InvestingPro data, the company maintains a healthy current ratio of 1.47, indicating strong liquidity management.

Key Takeaways

• Boreo Oyj’s stock price rose by 10.32% following its Q1 2025 earnings report.
• The company achieved a 4% organic sales growth and a 28% increase in operational EBIT.
• Strategic acquisitions and product innovations are expected to drive future growth.
• The Finnish economy’s downgrade poses potential challenges, but electronics and defense sectors show promise.

Company Performance

In Q1 2025, Boreo Oyj demonstrated strong financial performance with a focus on operational efficiency and strategic growth. The company reported a 4% increase in organic sales, indicating a healthy demand for its products. Operational EBIT rose by 28% to €1.3 million, showcasing improved profitability. The gross margin also improved to 32%, reflecting successful cost management strategies. InvestingPro analysis reveals an impressive free cash flow yield of 27%, suggesting strong cash generation capabilities. For deeper insights into Boreo’s financial health and growth potential, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro.

Financial Highlights

• Revenue: Not specified, but 4% organic growth reported.
• Operational EBIT: €1.3 million, a 28% increase from the previous period.
• Gross Margin: Improved to 32%.
• Cash Conversion: €22 million for the quarter.
• Rolling 12-month sales: €135 million.

Market Reaction

Boreo Oyj’s stock experienced a notable increase of 10.32%, reflecting positive investor sentiment. This surge is attributed to the company’s strong financial results and strategic initiatives, including recent acquisitions and product innovations. The stock remains within its 52-week range of €10.37 to €26.39, suggesting sustained market confidence. InvestingPro analysis indicates the stock is currently undervalued, with a strong year-to-date return of 28.31%. Discover more undervalued opportunities at Most Undervalued Stocks.

Outlook & Guidance

Looking ahead, Boreo Oyj anticipates continued organic growth and improvement in market conditions. The company aims for a significant earnings rebound and is targeting a 50% return on trade working capital in the long term. Strategic acquisitions and product innovations, such as the launch of a fully electric pump, are expected to support this growth trajectory. InvestingPro has identified multiple positive factors, including expected net income growth and attractive valuation multiples. Access 8 additional ProTips and comprehensive financial analysis through an InvestingPro subscription.

Executive Commentary

CEO Karri expressed optimism about the company’s future, stating, "We do expect that once the situation normalizes or becomes somewhat better, there’s a big rebound potential in our earnings." He also highlighted the strong performance of the electronics sector, which has been "performing quite strongly the second half of twenty twenty four."

Risks and Challenges

• The downgraded forecast for the Finnish economy could impact Boreo’s growth prospects.
• The construction sector remains challenging, potentially affecting related revenues.
• Geopolitical uncertainties pose risks to international operations.
• Production bottlenecks in specific business units may hinder efficiency.
• Potential US tariff impacts could affect cost structures and profitability.

Q&A

During the earnings call, analysts inquired about the potential impacts of US tariffs and production bottlenecks. Boreo’s management detailed their acquisition strategies and partnership approaches, emphasizing their focus on strategic growth and operational efficiency.

Full transcript - Boreo Oyj (BOREO) Q1 2025:

Karri, CEO or Senior Executive, Borreo: Good morning, and welcome to Borreo’s Q1 twenty twenty five Trading Update. My name is Karri. And together with our CFO, Jes, we will discuss in the next thirty to forty five minutes the events of Q1 twenty twenty five and outlook going forward. Agenda is as quite as normal as usual. I will discuss first the highlights, bit of longer term trends of the company.

Yes. So we’ll then dive deeper into business performance, some of further financials after that, and then we will recap or finish off with a couple of points on related to the back to growth plan we’ve been working with the last year in the company. As normal, please use the Q and A function if you want to ask any questions, and we will then address those at the end of the session. Q1 highlights. The start of the year has been very close to and in line with our own expectations.

We are pleased with the fact that now two consecutive quarters, we’ve been able to record organic growth during the first quarter, ’4 percent organic sales growth and a strong gross margin of 32%, both then contributing to the profitability uplift we saw. So result quarter on quarter improving from €600,000 last year now to €1,300,000 Looking at the markets and developments during the first quarter, we saw an increase an improvement in our order books. So compared with the end of twenty twenty four, our order books grew, providing a decent outlook now for Q2. As we all know, there is uncertainty in the world in with regards to geopolitics and trade discussions, tariffs. The uncertainty there, for sure, is for the rest of the year.

But so far, the impacts of that or the signals direct signals to our operations have been limited. With regards to our order book, it’s also good to note that now in Q2, Swedish Botsmeister business PM Nordic has also recorded and managed to finalize a bunch of sizable orders for concrete mounting pumps for this year and the next year. So even though the construction sector continues to be in a tough situation, overall, our Swedish BUZZMAISTER business shows strong performance and strong outlook going forward. We are an acquisitive firm. Latest acquisitions the last acquisition we completed in mid-twenty twenty three.

Now we were happy and pleased to announce during the quarter one acquisition of Spezselectrodi AS, a welding technology distributor in Estonia on the last day of the quarter. And then on the first day of Q2, a bit more sizable acquisition from our long standing partner, RS Group, acquiring the AlphaDistrolec sales activities in Finland and The Baltics. So we do expect the Spets Electronic acquisition to close on the second quarter of this year and then the Alpha DISJOELEC acquisition in the third quarter of the year. Looking at where we are, we are still not where we think that the portfolio and the group overall can be in terms of results. But as said, happy to see that we’ve bottomed in our profit generation and expect I’ve seen and as a result of the organic sales growth primarily, but and now going forward, expect to also be able to deliver quite decent results going forward.

With regards to our strategic targets, now you see too much red on the slide. And hopefully, in the coming quarters and years to come, we are moving and trending more closer to the targets we’ve set. With regards to our leverage, now you see a bit of a peak or an upward tick in our leverage, mainly as a result of the payback of our existing or old hybrid bond raised in ’24, so roughly EUR 4,000,000. And in addition to that, hybrid bond interest and senior debt interest payments in Q1. Looking at a bit more in detail the performance.

Now you can see from the left hand side on the slide that the sales trend has changed. So now we last year, we landed at €134,000,000. Now we, on a rolling 12 basis, are at €135,000,000, primarily primarily driven by the the the positive development of our electronics business area. So as we would typically see in in a sort of economic cycles like like this, the the the electronics businesses of ours do react first as opposed to our technical trade businesses. So electronics has already been performing quite strongly the second half of twenty twenty four and now recorded a good quarter for the first quarter of twenty twenty five as well.

With regards to our technical trade businesses, we’ve now sort of bottomed in terms of our sales in the last couple of quarters going forward, expect an uptick on that side as well, then contributing overall to the development of group figures. Slide and looking at our gross margins and profits. First of all, I’m pleased to see that if you look at the last three to four years, we’ve been able to improve the quality of our revenues, meaning improving the gross margin profile quite significantly. So from 2125% of gross margin, now we are looking at somewhat above 30% gross margins. This is a result, of course, of acquisitions we’ve completed during the last years.

Quite a lot of organic or quite a lot of development actions in the existing portfolio as well. So stop and accelerate decisions we’ve done in in in many of our companies. Going forward, we do expect that the the the gross margin profile somewhat sort of dilutes due to the fact that there will be sizable machine deliveries that will come through in the coming quarters. But definitely, we do expect to remain on a much higher level compared to where we were, say, three, four years ago. The profitability improvement, again, driven by the Electronics business area, sales growth compared to last year, the gross margin improvement of roughly 3% compared to last year’s first quarter and then the cost actions implemented in ’24.

Those are the sort of impacting factors behind the improvement now seen in the result of roughly 130% compared to the first quarter of twenty twenty four. Cash flow, we communicated in our Q4 report that we expect some buildup of working capital. And this happened not as quite as much as we expected, but we the working cap overall in the group increased by roughly EUR 1,000,000, resulting in a cash conversion operating cash conversion of EUR 22,000,000 for the quarter. Now going forward, we expect in the beginning of Q2 some buildup of working cap to happen. But as we’re operating in these levels, roughly the EUR 25,000,000 level plusminus a few million euro is a reasonable number to look at.

We do expect some sales growth to happen and expect that we are able to improve the efficiency of working capital in relative terms going forward. So working capital overall is managed way better compared to a couple of years back in the company. Returns are on the rise, again, sort of mainly main contributor main contributor looking at our return on trade working capital metric, the Electronics business area return on trade working cap steadily now upwards for a couple of quarters, thanks to the significant uplift in operational EBIT. We’ve seen now two quarters in a row, so roughly an improvement of EUR 1,000,000 in Boeing twelve month numbers. So Electronics business area currently operates at a good 57% return on trade working cap, considering our targets for our companies being in the mid to long term at around 50%.

The same goes with our technical trade business area, somewhat of an improvement now in the recent history, there we have work to do and work made primarily with the objective to improve profitability and through that then also to see an uptick in those return metrics. Finally, before handing over to Jese for further review, overall, if we look at where we stand, as I said in the beginning, there is a way to go to where we think that that we the group can be considering the potential of our existing businesses. So there is a significant rebound potential and an earnings improvement potential once the market conditions improve. Overall, we’re happy with the fact that the company functions very well on looking at the on the long term on a long term basis, the foundation we created, the strong foundation for our decentralized operating model, the solid returns we’ve achieved so far to for the acquisitions and the money deployed to acquisitions during the last years, those sort of give us conviction that we are on the right path. And then I think a strong and a big thank you goes to our organization on the short term execution.

So basically, as we launched a year ago the back to growth brand, which I will discuss a bit more in detail, This has enabled us to manage in tough times rather well with regards to our profitability. Cash flow generation has been strong. And now during the first quarter, very happy to see that three projects, the sale of the Tallinn real estate, the acquisition of Spez Electrode and then the acquisition of Elpha Distrolek operations from Mares came through. So basically, we have reached majority of the targets we have set for the company in early twenty four. So the order books, which I noted in the beginning that they have improved compared to the year end, They, of course, provide us with comfort level that we continue to operate in a decent way in the short run.

Many of our companies do have a positive outlook going forward. As you all know, we don’t have a crystal ball in our hands and what happens then in the second half of the quarter is a bit more uncertain. But as I said, so far, the signals from the portfolio companies we today have are rather limited in terms of that comes out of the uncertainty in the world. With that said, I hand over to Jesse for further q one review, and then I and I finish off with the back to growth plan topics.

Jes, CFO, Borreo: Thank you. So having a look at quarterly figures. As as Karri mentioned, q one saw growth in both sales and profits. This was our second consecutive sales growth quarter, keeping in mind that q one is typically a slower season for us. In terms of profitability, we managed to increase operational EBIT by 28% to €1,300,000.

This was supported by increased or improved gross margins compared to last year as well as cost actions taken during 2024. Having a look at the business areas on a closer level, electronics continued with a strong performance. They grew 10% on a quarter to quarter basis compared to last year with their operational EBIT for the quarter doubling to €1,000,000 and the business area continuing their strong trend of improving rolling 12 operational EBIT as well. Due to this, or the return on trade working capital also increased to 57%, which was also supported by successful working capital management during during the quarter and and the end of last year as well. Operationally, key factors behind the performance, we could lift up an excellent quarter by SSN.

They have continued strong demand through their largest customer having an investment program going. Milkon had strong sales exceeding last year’s quarter. Milkon also successfully grew their order book as the defense industry demand continues. Hawaii, Finland performed in line with expectations and had their profitability supported by by cost measures taken in 2024 as well. Then on the flip side, the Baltic countries, our Baltic companies were still impacted by the challenging operating environment in the countries.

But all in all, looking at electronics, the quarter was very positive, and we see see good signals from from across the companies with the with the Baltics being being a challenging exception at the moment in terms of operating environment. Moving on to technical trade. The business area managed a decent operating EBIT for the quarter, reaching €900,000 which was roughly 41% increase to last year’s q one. This was done in a challenging market environment where sales remained flat compared to last year’s q one, and profitability was improved through work done on the gross margins and then cost savings as well, which were implemented during during last year. In terms of return on trade working capital, the business area reached a slight increase from the end of the year up to 25%.

But on a rolling basis, EBIT levels and and trade working capital returns are are lagging from the rolling 12 figures a year ago. Operationally, highlights for the quarter. Botsmeister both in Finland and Sweden had a solid solid quarter. And then as Kare discussed in the earlier section, the Swedish Bootsmeister business received sizable orders now in now in April, which will strengthen the order books considerably in in q two. On the other hand, F and B fell a bit short of expectations in q one.

The company had some challenges related to production, but there we see a stable demand continuing and order book supporting the rest of the year. Machinery, similarly, some delivery delays in their largest unit on the motor side, which impacted profitability. But otherwise, a positive start to the year for the for the other machinery business units and outlook remains decent for for machinery as a whole going forward. In terms of positive signals that we see in the companies, we we have a lot of good things going on. Filterit had a strong start to the year, both performing strong strongly in in q one, but then also growing order book significantly and receiving positive messages from the market.

JMatic, solid quarter and significantly improved outlook from last year. ASKP performing up to expectations and also securing new new routes at the end of q one, which will lead to going forward for for ASKP. So technical trade, a bit more mixed than electronics, but all in all, going in a positive direction. But here we see a lot of work to be done to to still improve profitability and reach reach more of the historical levels that this portfolio has has historically been able to do. Then jumping over to our debt facilities and loan maturity structure.

To start off, recapping a bit what what Karri mentioned as well. In in q one, we redeemed our old remaining hybrid of roughly €4,000,000, and then we had our first interest payment on the hybrid bond, which was issued last year. Then we also announced two acquisitions, which will be mentioned more more in detail soon after after these slides. But one one signed in end of q one, one at the April. Both will close in in later this year, so in q two and q three.

These will or our plan to be financed through our acquisition loan facility. This is still not not visible in in the graphs you have on the page. So this is showing end of q one figures. So at the end of q one, we had a total facilities available to us of €69,000,000, of which we had €53,800,000 in use. And on the maturity schedule for this, we have €2,500,000 of upcoming loan repayments in 2025 and 5,000,000 in 2026, and then the remaining utilized facilities are maturing in 2027 in combination with our hybrid bond, which has a reset date in March 2027.

So at the moment, we are we are comfortable with the debt maturity schedule and facilities, which we have. And then on top of this, we have, at the end of q one, liquidity in terms of short term facilities and cash of roughly €14,400,000, which we are also comfortable with at the moment. But we, of course, are keeping a close eye on both cash flows and and order books going forward and any changes in the operating environment. But all in all, things things looking stable, and and we we feel good with the facilities. Then well, then handing back over to to Karri.

Karri, CEO or Senior Executive, Borreo: Okay. Thank you. Thank you, Jes. So then just a couple of words, finally, of of of what we’ve been basically working with the last the last year and and and then finishing off with some words on the two acquisitions. So basically, this slide, sort of with the headline how to return back to growth, this is something we basically an operational short term plan we put in place in early twenty twenty four.

And this plan overall is comprised of, of course, performance related metrics. So primarily last year, as we’ve seen, a reduction of fixed cost to adjust the cost level to the activity levels of ’24. Then secondly, release of working capital, making sure the financial standing of the firm remains decent. We did close to meet our targets last year on these two fronts. Then also in the portfolio, we worked a lot with our companies to make them stronger for the long run.

As an example, within in our largest business machinery, we took a decision to to spin off the business and and and break it to two with sort of mind mindset of smaller is more beautiful and better, breaking the company to two parts, making sure the sort of decentralized mindset, the local decision mindset goes goes through in those two companies, also making sure the strategy execution becomes more efficient. And and then both of both of the firms, I I believe, are on a good track now after six months of operation as independent companies to to to become better in in the future. Similarly, with with, for example, our YE electronic component trading business in in Estonia, the closure of our b to c business, selling off the real estate, focusing on industrial B2B distribution. We do we have already seen positive impacts and do expect that in the long run, this is the right thing to do. And so and in addition to that now, we’ve said in the last year, the quarters, even though the financial standing is not over the firm.

It’s not where we where we would ideally like it to be, that we maintain the flexibility to to do acquisitions in case, basically, two things two things or two criteria are met. Number one, they take the firm overall into the right direction with regards to the the the quality of the portfolio and and the organic growth prospects that new companies provide. And then secondly, not jeopardizing the financial standing of the firm. And both of the acquisitions made, I think, meet these two criteria, that’s why we took a decision to enter into these acquisitions. So two good deals we hope to have made and believe we have made are important steps for us as a firm to not only to show organic growth but also growth through acquisition.

Then as we’ve discussed here in now during the last thirty minutes, there are even though we do see that generally still the demand environment in our portfolio is not where it sort of in a normal situation would be. There are some positive signs in Milkon, in our defense industry business field that as Jesje just mentioned, Putsmeister business within construction space, also the same thing. And then there’s been technologies as an example of life sciences business in in Co op. So quite a lot of quite quite a good share of our companies do see a more positive short and, of course, mid mid and long term future ahead of them. And and then and then we do expect that these these companies support the overall development of the group.

And then finally, as we said, market conditions, the Finnish economy still not performing too well. The forecast for this year have been now on a country level taken downwards. However, we do think that once the situation normalizes or becomes somewhat better, there’s a big rebound potential in our earnings potential and earnings as well. So continuing to be confident on the long term trajectory of the firm. Things will not happen overnight, but quarter by quarter, year by year, I think we’re moving and trending in the right direction.

Two final slides. First of all, the acquisition of the Elfa DistrolX sales activities in Finland and The Baltics. So I mean, the company we acquired, 50,000,000 or the businesses we acquired in roughly EUR 50,000,000 sales, a bit more than EUR 1,000,000 EBIT contribution we expect from this acquisition from Q3 this year onwards. I think it’s an important transaction from a couple of point of view from a couple of viewpoints to us. Number one, our long standing partner, RS Group, from The UK, is placing their trust on continuing to work with us and develop the four markets in a distributing partner model.

So thirty years of joint cooperation continues and and gets bigger following following this acquisition. So very pleased of that. And and the fact that we’re becoming also more important for RS and the the markets become more sizable, we do expect that this is a sort of a partnership model, which enables us to create growth in the markets in the future. Also very important internally, the transaction from the point of view that basically we are breaking up the former YE business into two parts in four different countries at the same time. So as I sort of discussed earlier with the machinery breakup completed in ’24, this sort of follows the same thinking.

We take the existing RS business from YE, bring it to a new structure together with the acquired companies. And fact that the YE existing YE businesses, component trading businesses become smaller, we do think they become stronger, more focused, more more efficient in their sort of business plan and execution and provides opportunities for that business also or for those four businesses in four different countries as well. So internally, a big exercise, creating new ERPs for the new business, establishing new for or new companies, bringing teams together. And I believe we’re creating for the YERS a good and a modern platform that can then continue to grow in the future and provide opportunities for our people as well. So look forward to then sort of providing updates on how this venture starts to develop in the coming and the first month, then from operations and seeing how successfully we run the business in new structure.

And then finally, also an important transaction, also building on a bit of a partnership a partnership viewpoint as well. So we announced to sign announced to have signed the transaction with the with the with the entrepreneur of Spezselectrodi, mister Indrakan in in in in Estonia. Spezselectrodi is a distributor of welding technology in the market. We do we acquired in ’22 in Finland, the distributor of FRONUS, a an Austrian technology leader in in the welding space. And similarly to FRONIUS, SPETSELECTROIUS representing FRONIUS in the Estonian market.

So good business we know in collaboration, a transaction done with our existing supplier business, a fact that provides a certainty for for continuity and our operations going forward and and then showcases that that that the the trusted partners of ours and the supplier side are willing to continue and expanding their relationship with us. So I think something we’re very pleased with and investing in this space overall. So a steady good business, roughly EUR 4,000,000 sales, long standing successful history in Estonia in the market, strong market position backed up by a catalog of excellent suppliers supplying the company. So this transaction, we hope to sign in the next or close in the next couple of days, and then you would see this flow through our figures in Q2 twenty twenty five onwards. With that said, we finish off the presentation and go into Q and A.

There are some here which have been presented. I think you will not see them, but we go them through. First of all, a couple of questions related to the construction sector and our Swedish businesses. So first of all, can you talk about the drivers of working capital? What is the impact of PM Nordic’s orders to working capital development?

A good question. I mean, as I think you will remember from the history, the Puzzmaster business, even though we’re dealing with big machines and sizable single orders with quite high monetary value. We’ve been the business has been decided in a way that from a working capital point of view, the business remains rather light. So we do not expect, even though the volumes and sales numbers are expected to go up, do see expect some buildup of working capital as well, but not very material. There might be some swings on the short run, but overall, given that sort of the the time those machines in our books is rather limited, and we have arrangements with our suppliers then and the customers, which make it from a cash flow point of view quite favorable, I think we manage with those rather well.

The second question goes, what is behind F and B? So our timber truck mounting business in Sweden, what is behind the production issues? And when do you expect these to be solved? Do you want to just answer to that? Yes.

Jes, CFO, Borreo: Yes. I think q one is mainly due to I mean, it’s in combination with the end of twenty twenty four, which was very strong for the company. So they put a lot of resources for deliveries, which were at the end of the year. And this led to a lot of overtime with the production employees who then needed to take some of their overtimes as holidays in in q one, and then there was some delivery changes which coincided with this. So we had a bit of a bottleneck in the production.

This was also combined with the company currently recruiting a new new constructor for for planning and and and designing the structures. So they have a resource in place, but the timing of deliveries has has led to a bit of a bottleneck during q one. This is not a long term issue, so this that this has had been solved. End of q one was already already looking better, so the problem was more on on January, February. We we see the problem being solved going forward.

Karri, CEO or Senior Executive, Borreo: Yes. And then thanks. Yes. So we continue then with a couple of questions on the Buzzmeister business. I’ll try and take them.

At the same time, there is there is a first question, can you talk about the development in the construction related businesses, excluding PM Nordic? And what kind of volume trends are you seeing there? So basically, we talk about companies directly exposed to construction, so PM Nordic, that’s Tormekone in Finland, Nordic in Estonia and Motikolomio and machinery construction in the Finnish market. The outlook for the Putschemeister business in Finland and Estonia remains quite modest. We do see some uptick.

We had already a good start in the year in Finland or significantly better start compared to ’24 and and also quite a lot of interest and and and sort of inquiries and expectations from our customers that that if and if and when they win some additional jobs jobs on their side, this can then materialize quite quickly into into new deliveries for for us as well. But not a not a big sort of not not something that has really quickly now turned totally different. The Nordic situation is is way better compared to the Finnish and Estonian Estonian part of it. In Finland, overall, if you look at our machinery construction business, for example, the outlook remains rather moderate. No of course, seasonality as well now going into spring, interesting to see what happens, but nothing dramatic in terms of kind of a shift in in in paradigm there.

From what the that business is supported, I think, from the sales side and sales mix and customer and customer side a bit more. It’s a more stable on renovation construction side and so forth. So rather rather stable there as well. But but as you would as you surely surely know from other companies and and and the market, the construction business in in Finland is not really booming yet. No, we expect that to happen in the next couple of months either.

There was also some additional questions. I take these all Bussmeister questions at the same time. You received significant new orders in Swedish Burzmeister business. Roughly, how big this is? And when do you expect to deliver it?

How much of the bigger earlier deliveries were delivered in q one? So we first of all, we delivered a cup so a handful of machines now already in q one from the earlier big sizable order we already won a year ago. We continue to deliver those in the coming quarters. The new orders, as we said, you will see that from communication from Gudzmeister and PM Nordic from social media and their websites as well. We sold to one customer 11 machines.

We also launched in the world’s largest construction fair in Bauma, the the fully electric pump on an electric chassis as well with with our cup one of our key customer in Sweden. In addition to that, we sold some machines in in in that that fair as well. So those are sizable. I mean, when we we talk about machines worth of, call it, half a million euro plus minus, so so you can do the do the math there on on how sizable it is. It, of course, is so that with these deliveries, the gross margin profile is different as opposed to looking at our group numbers overall.

So the so gross margins are way higher when we do aftermarket service and spare parts sales and so forth. But before sales, it will provide us support support going going into this year. And we do expect some of the new orders also to be delivered this year, but partially then in twenty six six ten as well. I think let me discard some of these questions so that we get we get this done. Some I think there were a few order book questions.

Yes. There’s one sort of on on outlook. So one one question goes, can you comment the magnitude of growth in order books in group level? Are we talking about mid or high single digit levels? In q one, we were talking about roughly, I would say, single high single digit levels.

That’s the answer to that. And then there was another question that we showed in the bridge growth bridge in the presentation, so the one of the last slides that improving market conditions was only the first step. Do you think that you can remain at organic growth path even if the economy in general wouldn’t improve? Yes, we do. I mean, if if the market conditions remain as they are at the moment, we do expect sales to to grow because of the reason that that the order book is is there.

As said before, h two is more uncertain, but we have some some solid fixed order book in in our businesses. For example, Peer Nordic, for example, Milkon, for example, filter it into second half as well. Then continuing still on sort of general market commentary. Have you seen change in operating environment after trade war escalation in the beginning of q two? As we commented in the webcast, the signals are still quite quite limited.

There are some signals in in in in few of our businesses we’ve heard commentary from our key key people in the businesses saying that some hesitancy around investments. We have seen communications from our suppliers on on actions that that are sort of referring to that that that preparatory actions are being taken in case the the the tariffs materialize. But given that sort of the situation the situation is sort of on hold for for for some time At least, we haven’t seen a sort of a dramatic change now during the month of April. So that’s how I would comment that. There was another question also on tariffs.

There’s a question in Finnish. So in English, the question goes, what what are the what are the impacts of possible tariffs into the operations of Delphin Technologies? So first of all, Delphin’s sales to The US market is round about, call it, 20%, varying depending on the year to The US market. Secondly, majority of those sales are for the scientific part of the business or or cosmetics mainly, so not as much on the medical side. With regard we are currently, as we’ve communicated, we are in the process of renewing our global distribution network, working with working in in a number of countries at the moment in looking at new alternatives, a way to to go to market, including potential new partners.

So especially for for The US market, there are we are currently evaluating different options, including, for example, establishment of of own own subsidiaries and operations in the country to mitigate the potential impacts of possible increased tariffs going forward. So far, we haven’t seen pretty much any impact out of those, but it’s sort of in the plans and in and currently, as we speak, we are we are looking at ways and, of course, monitoring the situation, but looking at ways to mitigate any any potential impacts out of out of those on on DELFIN. Still some additional questions. Have you seen one question on why international AS, I believe? This is for Y International AS, yeah, Estonian business.

So have you seen all the top line impact from rationalizing Y International business already now, or do you expect more going forward? Yes. We have seen everything already already to date. And and I would remind that this is not something of of quite material nature on the on the profit and loss statement side. The impact was more on the balance sheet side.

So we we we have been able to take working capital down and then also the sale of the real estate were more material than the profit and loss statement impacts. Then continuing, you had been, during the past one to two years, focusing on profitability improvement more than acquisitions? What was the trigger to change this and return back to acquisition path considering the current balance sheet structure? So basically, I can repeat what I already said during the webcast. So we’ve communicated consistently during the last last quarters, I think, last year that that in case we find transactions meeting two criteria.

One, new companies improving the quality of the portfolio, taking the firm on a longer term basis into right direction. And number two, being able to acquire businesses in in in in arranging financing so that we don’t take take or or make the the the financial standing worse. We we we have been sort of consistent on that, that we might take take those actions as well. And now, of course, two acquisitions and referring to what I said in the the sort of partnership aspects to both of these acquisitions as well. We know these businesses.

We know we are in these businesses already today. Makes us confident that we knew where we were what we were getting into. And and I believe we find found also a way to structure purchase price payments and so forth, providing cushion and buffers for the group’s financial standing as well. Some additional questions. Do we expect any synergies from the recently announced acquisitions?

How much and when? Not commenting on any numbers. What I would say, in general, in both of those acquisitions, these are not cost driven. There are some synergies, but these are not cost driven business cases. In YERS, we’re combining two businesses to create the platform for growth.

We are investing in a new newly a fully new digital setup, which we expect to enable us to be more efficient, provide a better service for our customers, and and through that increase increase, you know, and grow in the future. Now I will not call them as much of synergies. It’s basically something we’re creating a total new firm, putting two companies and good businesses together. And and out of that, I think we get we get a good platform going forward. With regard to speciality, the opportunity, there are there are opportunities between the two countries, so Prone, Finland and Estonia.

There are some, for example, new suppliers in Estonia, of which we potentially can take advantage of in the Finnish market. Vice versa, for example, in Finland, not only in Pronius, but also in in in machinery MT. There are suppliers with whom we potentially in the longer run could work in the Estonian market. So those might be sources for creating growth in the future, both in the Finnish and in the Estonian market. And then I think, importantly, you know, on the strategic side of things, we have people now who are looking after similar companies in two countries, sharing best practices among those, you know, working together toward our largest suppliers.

I think those are sources of sources of improvement and making the companies overall stronger. I would not, however, call them or or we haven’t done the the transaction on the back of expecting significant synergies, but this is long term work that needs to be first done, and and then we see what the potential positive impacts in the long run can be. Still three questions. There’s some defense defense industry related questions. So what is the general opportunity or this is not really defense, but what is the general opportunity for ProNews and regarding upcoming US icebreaker orders if materialized?

It’s a good question. I specifically, these potentially icebreaker orders from The US would mean, I do not have an answer. I would answer it this way that shipyards are an important and overall, the welding industry is, of course, important for both ProNews and SpecElectroly. So anything any sizable investments taken in these countries in shipyards similarly in the defense space, for example, provide, of course, opportunities for the two companies keeping in keeping in mind that we we represent the the clear global technology leader in these two markets and have solutions and products available, which serve exactly these purposes. So I think a general opportunity that we see, but but but what it it what it specifically is to those orders, this This I cannot comment further at this stage.

The second question related to defense cluster opportunities. So question goes, do you see an opportunity building a defense cluster on SSN, Milkon and JMatic. This is something we don’t have specifically with these companies at the moment in play. However, given that we see in many of our businesses potential in defense industry related customers. We are collaborating collaborating on on between the between the companies.

And, for example, as you said, and Milkon have worked together on customer projects or Milkon and some of the other group companies as well to provide a a a sort of a larger package and a bigger solution as part to our to Milkon’s customers through the collaboration. So it opens up opportunities, but but not, I would not call it at this stage at least as a defense cluster as such, but but but opportunities within the portfolio between the portfolio companies. Then finally, can we elaborate more on the potential of Delphi’s business globally in mid long term going going forward? Well, at this stage, I I think we’re now we’ve now owned the company for one one and a half years or close to close to two two years. Just quite a lot has happened to date.

We have sort of renewed renewed the strategy, built capability into the organization, recruited new people. We still are ongoing. We we still work with the product platform renewal, which was started, I think, in twenty three or two, if I’m not mistaken. Last year was a heavy investment heavy investment year for for that product platform project. Now it still continues this year, and we are entering toward the end of the year then into regulatory approval processes as well on the medical side, so FDA updates and MDR in Europe as well.

So that’s one of the key things happening in addition to organizational buildup. The renewal of the global distribution network is also very important initiative they’ve taken to date. So we have already renewed and introduced, I think, three new distributors in the Chinese market. We we as I mentioned before, we’re working with with US and some of the other key markets. We have renewed the brand in q one, or I think maybe it was in in on the side of q two, the company also came up with the new brand brand identity and more sort of a spot on a spot on sort of presentation of of how the company positions itself within scientific and medical businesses.

We have a lot of good potential sizable projects ongoing, potential sales opportunities, which may also materialize on in the short run. And I think we’re getting more and more convinced that the company has sort of potential not only on the scientific side where majority of the revenue comes from, but also on the medical side. However, it’s sort of maybe a bit too early still to comment on what the big, big opportunities will be. It’s patient work. It’s it’s day to day work, and I think we are sort of happy of the way that we’re now now working with the team to to materialize those those opportunities.

But but we will we will revisit those ones. We then have something more to hopefully tell some examples of larger scale collaborations or sales opportunities so that you can get a better better grasp of that. But but overall, I think the firm is moving in the right direction. It has has has great potential great potential for for the future and is operating on a on a sustainable basis comparing the history and then growing sales as well. All good on that front.

I think with that said, the presentation was a bit shorter this time. The Q and A was a bit more extensive. But thank you. Thanks a lot for the participation and posting good questions. So yeah, I think with this said, we we say thank you and look forward to seeing you then after the summer in in the same format again.

And and as always, if any anything was not clear, please do reach out, and and we’ll try and answer the best the best way we can. So wish you all a good spring and and coming summer, and and happy Labor Day as as well. Thank you. Thank you so much.

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