Earnings call transcript: Catena AB reports strong Q2 2025 growth, stock dips

Catena AB reported robust financial results for the second quarter of 2025, showcasing a significant increase in rental income and property management profits. According to InvestingPro data, the company maintains strong profitability with an impressive 82% gross margin and has consistently raised its dividend for nine consecutive years. Despite strong earnings, the stock saw a 1.87% decline in early trading, reflecting mixed market sentiment. The company recorded a 26% rise in rental income to 1,288 million SEK and a 32% increase in profit from property management, with an EPS of 13.27 DKK. However, investor concerns over market conditions and future guidance may have contributed to the stock’s decline.

Key Takeaways

• Rental income surged by 26% year-over-year.
• Property management profit increased by 32%.
• Stock price fell by 1.87% in pre-market trading.
• Net debt to EBITDA ratio stood at 7.6x.
• Strategic acquisitions continue to drive growth.

Company Performance

Catena AB’s performance in Q2 2025 was marked by notable improvements in key financial metrics, including a 26% rise in rental income and a 32% increase in profit from property management. This growth reflects the company’s strategic focus on expanding its property portfolio and optimizing its operations. InvestingPro analysis shows the company has maintained strong revenue growth with a 5-year CAGR of 13% and receives a "GOOD" overall financial health score. The company also reported a strong equity ratio of 52%, indicating a solid financial foundation to support future growth. For deeper insights into Catena’s financial health and growth prospects, discover 6 additional exclusive ProTips available on InvestingPro.

Financial Highlights

• Revenue: 1,288 million SEK, up 26% year-over-year.
• Earnings per share: 13.27 DKK, reflecting a 16% increase.
• Equity ratio: 52%
• Net debt to EBITDA: 7.6x
• Loan to value: 38.6%

Market Reaction

Despite the positive earnings report, Catena AB’s stock price fell by 1.87% in pre-market trading, closing at 491.2 SEK. Based on InvestingPro Fair Value analysis, the stock appears fairly valued at current levels. This decline may be attributed to investor caution regarding the broader market environment and future guidance. With a P/E ratio of 20.4x and beta of 1.1, the stock shows moderate market sensitivity. The stock’s movement contrasts with its 52-week high of 590 SEK, indicating potential investor concerns despite strong quarterly performance.

Outlook & Guidance

Looking ahead, Catena AB remains optimistic about its growth prospects, supported by strong cash flows and strategic acquisitions. The company plans to maintain competitive funding terms and has increased its MTM program framework to 8 billion SEK. Additionally, the completion of significant bond transactions highlights Catena’s focus on strengthening its financial position to navigate potential market volatility.

Executive Commentary

"We close the half year with solid numbers in a somewhat cautious market," stated Jorgen Eriksson, CEO. His confidence in the company’s growth trajectory is underscored by recent strategic acquisitions amounting to 2 billion SEK in 2025. David Silvso, Chief Treasury Officer, added, "We expect rent levels to stay stable," reflecting a positive outlook for the company’s rental income streams.

Risks and Challenges

• Market Volatility: Potential fluctuations in market conditions could impact future growth.
• Interest Rate Changes: Rising interest rates may increase financing costs.
• Competitive Pressure: Increased competition in the logistics sector could affect market share.
• Regulatory Changes: New regulations may pose operational challenges.
• Economic Slowdown: A broader economic downturn could impact rental demand.

Q&A

During the earnings call, analysts raised questions about market vacancy trends and potential tenant redemptions. Catena’s management addressed these concerns by highlighting stable rent levels and a strong leasing portfolio. Additionally, discussions on financing costs and debt structure underscored the company’s strategic efforts to optimize its financial position.

Full transcript - Catena AB (CATE) Q2 2025:

Conference Operator: report twenty twenty five. During the questions and answers session, participants are able to ask questions by dialing 5 on their telephone keypad. This call will be conducted by CEO, Jorgen Eriksson and Chief Treasury Officer, David Silvso. Now I will hand the conference over to CEO, Jorgen Eriksson. Please go ahead.

Jorgen Eriksson, CEO, Caterina: Hi, everyone, and welcome to this Q2 presentation for Caterina. And here is the agenda for for today, a summary, business overview, update followed by sustainability, finance, and a short takeaway before we ending up with q and a. So next slide, please. A summary of the Q2 twenty twenty five report where we report 26% increase in rental income ended up at SEK 1,288,000,000 driven by acquisitions and by our CPI linked contracts. Profit from property management increased by 32% in total and per share, it was up to 16%.

And our NRV came in at SEK $4.28. The balance sheet remains very solid with an LTV at 38.6%. And we expect to generate strong cash flows in the coming quarters. And with that said, in the combination with our robust balance sheet, we are in a favorable condition for more growth. Next slide, please.

And business overview and the next slide, please. We have witnessed more transaction this spring, and we have also noted that in some cases, yields have ended below 5%. We are talking about prime yields, and we were actually involved in one of those transactions when our joint venture together with Klatzer disposed a property in Gothenburg with Volvo as a tenant. E commerce continues to develop in the right direction. In the first quarter of the year, it grew by 9%.

In addition, digital trade has a stronger growth than physical, which means that the sales channel is taking market shares in the retail sector as a whole. This growth is the highest since 2021 when e commerce was at the historical peak. We continue to struggle to find new projects, but the market remains cautious. We have some dialogues going on, but do not expect any major change in the demand for the next six months. The Swedish logistic market has continued to see increases in the vacancy rates, currently at 9% as of Q1 twenty twenty five on a national level.

The continued rise in vacancy rates is mainly driven by extensive development of new logistic assets, of which a high proportion have been built speculative. And of course, there is a weaker demand also. So all in all, it’s a quite struggling market. Next slide, please. There are no major changes in our customer portfolio, but worth mentioning that El Giganten will stand for a higher share in the coming quarters.

More about El Giganten later on in this presentation. And next slide, please. There has not been bigger changes in our portfolio compared to Q4 and Q1. We have disposed the smaller assets in Region South and the rental value is up a bit and the surplus ratio is now up to 84%. Next slide, please, and a business update.

In May, we acquired a Postnord property in Copenhagen. The location is very strategic and there is a ten year lease agreement with Postnord. We look forward to continuing and deepening the cooperation with Postnord with this transaction and the total GLA is around 25,400 square meters. Next slide, please. During the quarter, we agreed with Boost to expand their facility by approximately 6,000 square meters.

And in connection with that this, the lease for all 82,000 square meter was also extended by five years and is now valid until 02/1937. Boost that has a turnover of more than SEK 8,000,000 billion has only dislocation for all of the outgoing goods. And next slide, please. And the other day or actually yesterday, we signed an agreement to acquire LG Ganton’s distribution and central warehouse in Yongeoping. The property is located opposite our newly built facility that LG Ganther rent from us.

Closing will take place on September 1. And after that, we will have about 200,000 square meters of logistics space leased to El Giganten. And the investment is 1,275,000,000 before deduction on deferred tax and has an estimated net operating income of approximately 80,000,000. And this transaction was an off market and shows that we can act as fast fooded as anyone else, and we really enjoyed doing the transaction together with NEA. Next slide, please.

Our ongoing project portfolio totals to around SEK 1,200,000,000.0 where SEK 400,000,000 is remaining investments. When always completed, we will add another 91,000 square meter to the portfolio and the yield of those projects is around 7%. Next slide. Regarding our land bank and future development, we are approaching the adoption of new zoning plans for two of the areas, namely in Engleholm, which the municipality will decide on in September, and in where the municipality is expected to adopt the plan at the end of q four. So that’s positive for us.

Next slide, please. Looking at our leasing operations, our net leasing came in with plus SEK 63,000,000 for the first six months, and for the second quarter, it was plus SEK 16,000,000. Our whale is at six point six years, and the letting ratio is at 96.5%. Next slide, please. And over to the sustainability.

Next slide again. The environmental is certified area is now 57% and will increase further as projects and new acquisitions will be finalized. The Scoop three is now decreasing on twelve month rolling basis due to less projects. We continue to maintain a high level of EU taxonomy alignment. Example, our turnover came in at 76%.

Produced energy from solar channels reached around 23,000 megawatts megawatt hour on rolling twelve months basis. Total installed output on our roofs is now above 71 megawatt. And now over to David for some financial update. Next slide.

David Silvso, Chief Treasury Officer, Caterina: Thank you, Jurgen, and good morning to everyone. This slide highlights the continued strength in our underlying earnings with solid year on year growth across all key metrics. Rental income, as Jurgen mentioned earlier, is up by 26%, mainly driven by acquisitions. Net operating surplus increased by 31% and profit from property management rose by 32%, reflecting both scalability and cost control, which we expect to continue going forward. Earnings per share from Property Management grew by 16% to DKK13.27, underlining our ability to translate top line growth into shareholder value.

While not shown here, our earnings capacity, we should say, implies, 26.3 krone per share on a full year basis. That’s 15% above the level we presented a year ago. The model continues to deliver predictable resilient earnings with operational leverage. Let’s move to the next slide. And this slide breaks down the key drivers behind our rental income growth for the first half of twenty twenty five.

As I just mentioned, total rental income, which increased by 26% year over year, the largest contributor was acquisitions, accounting for more than 22% of that growth. Our completed development projects added 4.5 percentage points, including new facilities in Jonkoping and the Gothenburg region, both leased to well known tenants in retail and food service. Like for like rental income rose by 2%, mainly reflecting CPI linked indexation. Altogether, this underlines our ability to grow through multiple channels, strategic acquisitions, value adding development and strong day to day operations. Next slide, please.

And then let’s turn to the capital structure. The second quarter brought a noticeable pickup in real estate transactions and increased activity in the credit markets as well. Toward the end of the quarter, we saw growing optimism partly fueled by a reallocation of capital flows from The US to Europe. That said, long term structural uncertainties remain, and we are prepared for potential renewed volatility. At the end of the second quarter, our equity ratio stood at 52%, which we believe is a balanced level that supports strategic flexibility.

EPRA and RV per share increased to $4.28 krone, calculated after reserving 9 krone per share for dividends, half of which was paid out in cash during the quarter. And this reflects continued value creation even as shareholder returns are being realized as well. In short, we see a market that’s beginning to open up, and we remain our focus on Readiness. Passing on to next slide, please. And then let’s move on to our financial position.

We continue to demonstrate strong financial control with all key metrics well within policy levels. Net debt to EBITDA came in at 7.6 times, interest coverage at four times and loan to value at 38.6 time percent. These are healthy figures, and they reflect both a solid capital structure and strong on underlying cash flow. Importantly, this gives us significant headroom to our financial covenants and the ability to move on new investments without compromising financial resilience. Next slide, please.

Let’s take a look then at our debt and liquidity management specifically. We remain our focus on maintaining and securing funding on competitive terms. During the quarter, we updated our MTM program and increased the framework to 8,000,000,000, strengthening our platform for both future growth and refinancing opportunities. We issued 450,000,000 in secured bonds during the quarter with a two year maturity and pricing at steeper three months plus 83 basis points. In early July, after the end of the second quarter, we also completed a 1,000,000,000 senior unsecured bond transaction split across three and five year maturities.

The terms reflect the market’s continued confidence in our credit quality. This issuance is not included in the balance sheet of q two, but was structured to give us additional flexibility for our upcoming investments or, refinancing activities. Our average debt maturity remained solid at four point eight years. Liquidity is strong with 3,100,000,000.0 in cash and liquidity ratio well above one. We’re also generating positive returns from the liquidity with 30,000,000 in interest income during the quarter.

Passing on to next slide, please. We entered q two with an upward sloping yield curve again. Markets are pricing that the Riksbank, the Swedish one, is nearing the end of its cutting cycle. The two year swap now trades below the policy rate. Meanwhile, long rates remain a bit more elevated, reflecting more stable expectations on growth and inflation as well as a return of risk premium in longer maturities.

As of the balance date, 61% of outstanding debt carried fixed interest. Our current and average interest cost of 3.2% broadly reflects prevailing market conditions for a full refinancing of the portfolio, including derivatives. This reflects a timely and balanced interest management approach, though there still remains headroom for further optimization. Next slide. And back to you, Jurgen.

Jorgen Eriksson, CEO, Caterina: Thank you, David. Our capital deployment is for the first half year divided into acquisitions, $414,000,000 and development SEK $570,000,000. And we have at the same time divested properties for SEK 98,000,000. And next slide, please. Property value stayed stable and ended up the period with a positive value change of SEK 174,000,000, which correlates to 0.4% of the total portfolio before adjustments.

The average weighted valuation yield, exit yield for the portfolio is at 5.9% by the end of the period, and the EPRA net initial yield came in at 5.6%. And next slide, please. So a couple of takeaways from today. And for the first, Katena closes the half year with solid numbers in a somewhat cautious market. And second, we have presented new acquisitions for almost 2,000,000,000 SEK during 2025 so far, so our growth journey continues.

And with that said, we would like to open up for a q and a.

Conference Operator: If you wish to ask a question, please dial 5 on your telephone keypad to enter the queue.

Analyst: Yes. Thank you and good morning. Firstly, I have a question on the net lefting. So it was SEK 16,000,000 in the quarter. And then first of all, what was the net effect from the renewed Boost agreement?

And also secondly, how is the speed agreement, which is together with Platts are treated in the net cutting figures in the quarter?

Jorgen Eriksson, CEO, Caterina: Good morning, David. First of all, Boost is is a is a prolongation, so it’s no it’s no net letting. The joint venture, it’s it’s it’s has no impact in in our net leasing. It’s a joint venture, so it it it’s not in our numbers. And what Okay.

But but

Analyst: yep, because I think that boost, it was also an extension, which I would assume is Ah, yeah.

Jorgen Eriksson, CEO, Caterina: Yeah. Yes. Yeah. I mean yeah. Those 6,000 square meters, yes, they are there.

I I thought you meant the the renegotiation or the prolongation of the another five year. Sorry.

Analyst: Yeah. Okay. And how much is that in million SEK?

Jorgen Eriksson, CEO, Caterina: Yeah. Yeah. I mean, we don’t guide exactly about the the the rent in that case, but it’s fair to assume it’s the rent is like the other one around 800 something, $8,900 per square meter.

Analyst: And I also yep. Thank you. And also another question on the share of profit loss from associates at negative SEK 2,000,000. Could you maybe elaborate on what that includes?

Jorgen Eriksson, CEO, Caterina: It’s from the joint venture, Food Hills, where we have had struggling with keeping all the tenants. So it’s basically that joint venture.

Analyst: Okay. Because I noticed in the earnings capacity that you have included SEK 2,000,000 there. So is this a reoccurring item going forward as well?

Jorgen Eriksson, CEO, Caterina: We hope to to to find some new tenants which can balance it. It’s it’s tough to to say, but we hope that there will be no more negative impact during this year.

Analyst: Okay. And then I also have a question on the SEK $385,000,000 divestment that you made also with Platzel. Could you maybe say something about the yield on this transaction?

Jorgen Eriksson, CEO, Caterina: The yield was definitely below 5%.

Analyst: And is this below our book value?

Jorgen Eriksson, CEO, Caterina: Well, this this joint venture I’m not

Analyst: I mean yeah.

Jorgen Eriksson, CEO, Caterina: We don’t don’t disclose that. We don’t have that as a as a booked value. It it it doesn’t have any impact on on on the p and l for for Cateana. It’s within this m and a we did with Boca for a couple of years ago. So there is no impact for Caterna in the P and L.

Analyst: Okay. Thank you. And then I have the last question. Do you have any type of indicative volume on the current acquisition pipeline?

Jorgen Eriksson, CEO, Caterina: No. We are, as you know, all the time looking into new opportunities, but we cannot disclose any numbers.

Analyst: Okay. Thank you. Those were my questions.

Jorgen Eriksson, CEO, Caterina: Thank you.

Conference Operator: The next question comes from John Vong from Van Lantz at Kempen. Please go ahead.

John Vong, Analyst, Van Lantz at Kempen: Hi, good morning. You mentioned that the market vacancy continues to grow. It’s not 9% driven by weak tenant demand and supply still being added. Just looking at the current developments being added and your own discussions with tenants, what’s your take on the trend on vacancy in the next twelve months? And maybe also a follow-up on this.

How often this vacancy is triggered by the major urban region? Or what’s, let’s say, what’s the vacancy without this this vacancy here?

Jorgen Eriksson, CEO, Caterina: Good morning, John. It was very hard to to hear you. It’s it’s a bad bad line. I heard something about the the vacancy, and we said 9% in total. Can you try to repeat the question?

Sorry. We we don’t hear you, John. Maybe you you you have to to email a question or call us later.

John Vong, Analyst, Van Lantz at Kempen: Sorry. Can can hear me better like this? Otherwise, I’ll take it offline.

Jorgen Eriksson, CEO, Caterina: Not not good enough. Sorry. Try to call call me after.

Conference Operator: The next question comes from Pierre Emmanuel Kluwerd from Jefferies. Please go ahead.

Pierre Emmanuel Kluwerd, Analyst, Jefferies: Yes, good morning. Thank you for taking my questions. So the first one is actually, I think, a follow-up of John’s questions. As you will have to renegotiate 9% of your return on base next year, I was wondering if you already received any early redemption from tenants. Where you will where do you see lending that they can see by the end of this year and the end of next year?

Jorgen Eriksson, CEO, Caterina: We we we we don’t have any any guidance of what where we see next year. What we disclose in the report is our earnings capacity for the coming twelve months, and that one is included all the lease agreements that is is valid for the coming twelve months. We are humble for the for the future with those kind of dynamics that are in the market. So we are doing all we can to keep our customers, but you never know. We can lose some, but that’s also part of the game where tenants are moving in and moving out.

But, yeah, it’s a it’s a bit struggling in the market right now.

Pierre Emmanuel Kluwerd, Analyst, Jefferies: But just to quantify how many are the redemption requests that you received so far since the beginning of the year?

David Silvso, Chief Treasury Officer, Caterina: We we have no redemptions redemptions to to disclose at at this point. And and when we and when we have, we will disclose that.

Pierre Emmanuel Kluwerd, Analyst, Jefferies: Okay. Thank you. And my second question is on your like for like growth. It would be useful if you can give us a more precise breakdown on your like for like rental growth with the contribution of indexation, but also the contribution of the reversion And a quick addendum on that is what is the reversionary potential today on the portfolio. And given the fact that the inflation is decelerating rapidly in Sweden, where do you see the like for like gross lending by the end of the year?

David Silvso, Chief Treasury Officer, Caterina: Yes. Pierre, that’s obviously a very relevant question. But from our standpoint first of all, most of the 2% is index based. We have we have some cases where where we have been able to raise the rent levels. Going forward, what we have said before and that that is the same story going for forward is that we expect rent levels to stay stable, and that goes then I’m counting in our portfolio to begin with.

We expect a stable level going forward. We know that there are some cases where we can lift rents, of course. But overall, it’s in line with market rents. That’s that’s, basically the the the story that you should, take into account. Yeah.

But there is clearly what we have seen over the last twelve months is clearly there is a bigger difference between the call quality, overall quality in the in the in the market. And that’s what we expect we’ll continue to to show. Okay. But we have more specific numbers to hand.

Pierre Emmanuel Kluwerd, Analyst, Jefferies: Okay. And just to fully understand that maybe you have a better view than I do on the quality of vacancy that is in the market today. But from what I understood, had you had a lot of new deliveries with a brand new platform that has been delivered over the past twelve months. So the quality of the vacancy is pretty decent, no?

David Silvso, Chief Treasury Officer, Caterina: The quality of what has been built is of high quality, yes. I think one of the relevant thing things to to think about going forward is where has it been where is it built, in what locations. So I think a lot of the things that have been built over the last three or four years is perhaps not because you expect the demand in that particular, location is where the demand is highest, it’s probably because that’s where you have been able to source land. So I think what we will see is different supply demand dynamics for for different regions. So some regions will structurally have difficulties going forward, whereas other regions will still where where you will still have the undersupply, basically.

So you have to dig deep. You have to know the regions because there will be big ver varieties in in in different regions, basically.

Pierre Emmanuel Kluwerd, Analyst, Jefferies: Okay. Understood.

John Vong, Analyst, Van Lantz at Kempen: Thank you very much.

David Silvso, Chief Treasury Officer, Caterina: Thank you.

Conference Operator: The next question comes from Fredrik Stenzved from ABG Sundal Collier. Please go ahead.

Fredrik Stenzved, Analyst, ABG Sundal Collier: I would like to ask a couple of questions on financing costs, if I may. Firstly, can you say anything about sort of where bank margins are, either in absolute terms or in change this year or year over year?

David Silvso, Chief Treasury Officer, Caterina: Yes. Hi, and thank you for the question. Well, the bank margins, I would say, is between a five year, I would expect to be somewhere between 125140%. And the bond market, as as I mentioned and what we disclosed in this report, was €1.35 for five years right now.

Fredrik Stenzved, Analyst, ABG Sundal Collier: Yes. That’s clear. Thank you. And on that second point, sort of bond margins currently looking a bit lower than bank margins. You currently have 42% in bank debt.

How much or how high share of bonds would you be comfortable with having?

David Silvso, Chief Treasury Officer, Caterina: Yes. That’s also a relevant question. Right now, if we isolate this to to the Swedish market because, historically, we have so far used Danish mortgage bonds for for our Danish properties. So we are at around 50% if we isolate looking at the Swedish portfolio, and and that’s where we are pretty comfortable with. But with that said, we are not religious about this.

It’s it’s always something that we are assessing, basically. What’s important at the end of the day is that we have a good control over the spread of maturities. That’s that’s, that’s, first of all, and and the most important thing. And also in combination with always knowing that we have many options available. Because at the end of the day, when we have to refinance, it’s all about making sure that we have options available.

So so it’s all about financial control, then, you know, how many percentage points you have in the capital market or in the bank market is perhaps not the most important question.

Conference Operator: There are no more questions from the telco at this time. So I hand the word back to Jorgen and David.

Jorgen Eriksson, CEO, Caterina: Thank you very much for listening. We wish you all a very nice weekend and a very nice summer, and stay in touch.

David Silvso, Chief Treasury Officer, Caterina: Thank you. Goodbye. Thank you.

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