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Garo AB reported its second-quarter 2025 financial results, revealing a 13% year-over-year decrease in net sales to $266 million. Despite the decline in revenue, the company improved its adjusted EBIT to NOK 1 million from a negative NOK 4 million last year. The stock price reacted negatively, with a pre-market drop of 1.51%, following the earnings release. According to InvestingPro data, the company’s revenue has declined by 13% over the last twelve months, though analysts expect net income growth this year.
Key Takeaways
- Net sales fell by 13% year-over-year.
- Adjusted EBIT improved from negative NOK 4 million to NOK 1 million.
- The stock price decreased by 1.51% in pre-market trading.
- New strategic agreements in the e-mobility sector were signed.
- The company is focusing on cost reduction and financial optimization.
Company Performance
Garo’s performance in the second quarter of 2025 was marked by a significant decline in net sales, attributed to a weak residential construction market in Sweden. However, the company managed to improve its adjusted EBIT, signaling better operational efficiency. International markets, particularly in Ireland and the UK, showed stronger performance, contrasting with challenges in the Swedish and German e-mobility markets. InvestingPro analysis shows the company maintains a healthy gross profit margin of 42%, though its overall Financial Health Score currently indicates a weak position. Get access to 6 more exclusive ProTips and comprehensive analysis with an InvestingPro subscription.
Financial Highlights
- Revenue: $266 million, down 13% year-over-year.
- Adjusted EBIT: NOK 1 million, improved from negative NOK 4 million.
- Gross margins remained stable.
- Net debt reduced to CHF 279.6 million from CHF 293.2 million.
- Equity asset ratio stands at 51.4%.
Market Reaction
Garo’s stock experienced a 1.51% decline in pre-market trading following the earnings announcement. This movement reflects investor concerns about the company’s revenue decline and the challenging market conditions in the Swedish residential construction sector. Based on InvestingPro Fair Value analysis, the stock appears to be undervalued at current levels, despite trading at high EBIT and EBITDA multiples. The stock has declined 19.76% over the past year, with a beta of 1.42 indicating higher volatility than the market average.
Outlook & Guidance
Garo remains optimistic about long-term growth drivers such as electrification and energy efficiency. The company expects a gradual recovery in public charging and continues to focus on execution and profitability. While Garo has expressed caution about expanding into Germany and Spain and does not plan any new product launches in 2025, InvestingPro data shows the company maintains strong liquidity with a current ratio of 1.64. Discover detailed growth projections and 12+ key financial metrics with an InvestingPro subscription, including exclusive access to the comprehensive Pro Research Report for Garo.
Executive Commentary
CEO Jonas Klaren emphasized the company’s readiness to adapt to market changes, stating, "GARO is ready to accelerate when conditions shift, and we have the ability to adapt quickly, act with discipline, and always move with purpose." Klaren also highlighted the strong long-term drivers of electrification and energy efficiency.
Risks and Challenges
- Weakness in the Swedish residential construction market could continue to impact sales.
- Challenges in the e-mobility market, particularly in Sweden and Germany, may affect growth.
- Macroeconomic pressures and potential market saturation pose additional risks.
- Expansion into new markets like Germany and Spain carries inherent uncertainties.
Q&A
During the earnings call, analysts focused on Garo’s e-mobility strategy and market challenges in residential construction. The company provided clarity on its cost-saving measures and the termination of a bank covenant, reinforcing its commitment to financial discipline.
Full transcript - Garo AB (GARO) Q2 2025:
Operator: Hello, and welcome, everyone, to the Garo Interim Report April to June 2025. My name is Becky, and I will be your operator today. I will now hand over to your host, Jonas Clarin, CEO, to begin. Please go ahead.
Jonas Klaren, CEO, GARO: Welcome everyone to GARO’s Q2 presentation. I am Jonas Klaren, CEO and it’s great to be here today. With me is Helena Klauson, CFO, who will walk you through the financials later. But let’s start with the key highlights for the quarter. Next slide please.
Operation and highlights. I want to start by emphasizing that Kingaro continues to move from structure to execution. We have a clear direction and an increased operational pace. GARO Electrification growth areas. We see continued volume growth and a strong performance in Ireland and UK alongside early signs of stabilization in Norway, Stable demand.
Demand in commercial, public and renovation projects remain stable. Challenges. However, the Swedish residential construction market remains weak and the segment continues to face pressure improvements. Outside Sweden margins are improving in several markets and we are focusing on expanding our product portfolio to reach new market segments. Outlook.
The outlook remains stable with continued discipline on margins. GARO e mobility. Headwinds. The market remains challenging particularly in Sweden and Germany with delayed investment decisions. Actions, we have completed cost reduction measures, optimized inventory and shifted to a more focused go to market strategy.
Sales drivers, AC destination solutions are returning to growth and sales entity platform are going in the right direction. Progress, we have signed strategic framework agreements for a larger infra project in Upland and with a Stusund municipality for both stronger market references. Outlook. The outlook is for gradual recovery in public charging especially AC charging. Strategic focus.
Leadership. On the leadership side, I have taken on an interim responsibility for e mobility and we have appointed a new country manager for Sweden. Integration, we now will have a clearer priorities and joint action plans for each business area country readiness. Financial control has improved and we have repaid part of our credit facility and lifted the special covenants from our bank innovation. We continue to adapt to new market requirements including UK cybersecurity standards outlook.
Long term growth drivers remain intact and we are focused on execution and profitability while keeping short term caution. In summary, we are delivering on our plans, making strategic moves in the right direction and preparing GARO for the market recovery we know will come. And now over to you Helena. Next slide please.
Helena Klauson, CFO, GARO: Thank you, Jonas. And I would like to start by looking at the financial summary for the second quarter. Net sales amounted to $266,000,000, a decrease of 13% compared with the same quarter last year. The uncertain and varied market situations continued to affect sales in the quarter. Coro electrification as business area showed a stable business, but the demand in Sweden was weaker than expected.
Immobility remains challenging, not least in Sweden. We noticed a lag in order intake and also categories have not yet made an impact on the market. Gross margins has been at similar levels to previous quarters, where strong margins within Golar Electrification has been offset by lower gross margins within Golar Immobility. The adjusted EBIT for the quarter amounted to NOK 1,000,000 compared to negative NOK 4,000,000 in the same quarter last year. Next slide please.
And now let’s look into the two business areas separately, and we start with Gauro Electrification. Net sales dropped with 7% compared with the same quarter last year and came in at SEK $2.00 6,000,000, where the overall market for electrification business area was mixed. While Sweden experienced a significant decline, preliminary in the product area project, our market managed expectations. Our sales to Europe, excluding the Nordic countries, showed a growth of 10 in the quarter, and sales in Ireland continues to be very strong. The market new construction of single family homes and apartments in Sweden remained at a very low level during the full first half of this year.
Positive signs such as lower interest rates and expected falling inflations are overshadowed by negative global uncertainty related to tariffs and escalating conflicts in various parts of the world. Sales within our product area project and temporary power both decreased by 19% compared to the same quarter last year. The entire decline in the sales within the product area project is attributable to Sweden, while the other markets actually have a positive development albeit from lower volumes. Adjusted operating profit, also the EBIT for the period amounted to million compared to CHF20 million in the same quarter last year. Adjusted operating margin came in at 7.4% compared to 9.2%.
The ongoing ERP project is burdening this business area, which together with the pressured prices and lower sales in the product area project explains the lower profitability. Next slide please. And now we move up and focus on the Goro e mobility business area. Net sales amounted to CHF 61,000,000 for the quarter, giving us a negative growth of CHF 24,000,000 compared with the same quarter last year. Coro entity, the new charging platform accounted for the larger part of the business areas total sale in this quarter.
This is a statement of strength and confirms reception of the platform, which has now reached good technical stability. Golar has signed a framework agreement for a larger project within infrastructure to deliver a large number of charging stations and also some DC fast chargers. The agreement constitutes a strategic reference for the future strengthens of the position with charging infrastructure connected to Sweden’s critical energy supply. Furthermore, in collaboration with the wholesaler Rexel, Goro has signed a multi year agreement with Ostensund Municipality. This agreement includes the installation of approximately 700 charging points spread across the municipality.
The adjusted operating profits, also the business areas EBIT for the quarter, amounted to negative SEK 14,000,000 and is entirely explained by the low sales. Next slide please.
Sofia Soling, Analyst, DNB Carnegie: And
Helena Klauson, CFO, GARO: now let’s look a little bit on the cash flow and balance sheet. Cash flow from operating activity before changing working capital amounted to GBP 300,000.0. Cash flow from operating activities after changes in working capital amounted to NOK 9,000,000. Tied up capital from inventories decreased net with NOK 4,000,000. We have a deposit with a supplier for materials ordered but not yet called off.
The deposit being in euros has remained unchanged during the quarter and amounted to the equivalent of CHF 44,000,000. Our net debt position amounted to CHF 279,600,000.0 compared with CHF 293,200,000.0 in the year earlier quarter. We had an equity asset ratio of 51.4% and available liquidity including overdraft facilities of million. And also as Jonas referred to earlier, as a result of improved cash flow over time, Goro’s separate bank covenants ended on June 30. In July, of overdraft facilities was reduced and €2,400,000 was repaid.
And now back to you Jonas. Next slide please.
Jonas Klaren, CEO, GARO: Thank you, Navigating change, strengthening Sweden for the future. Sweden is the heart of Garo. Success here strengthens the whole group. Niklas Rohnen has as I said earlier decided to leave e mobility and I sincerely thank him for his dedication and contributions. But to ensure stability and a clear direction, I would take on the interim leadership of eMobility.
We are also merging the two Swedish sales organizations, electrification and e mobility into one national organization. This removes duplication, increases collaboration and gives us one clear face to the market. Daniel Emilson becomes country manager Sweden with full responsibility for sales, support, marketing, personnel and results. With his eighteen years in Garo, Daniel has the experience and the relationships to succeed. The aim is a stronger energized sales team closer to customers capturing synergies across our four product areas.
We are also creating a Swedish steering group, sales operations, R and D, HR and finance ensuring aligned cross functional decisions. These changes are about a stronger foundation in Sweden enabling faster growth both at home and internationally. Please. Execution path. As I showed you before, we have laid the foundation in Q1 structure, governance and leadership in place.
In Q2, we moved into alignment and strengthening with early results from integration. Now in Q3 and Q4, we move into integration and acceleration embedding transformation into daily operations. We are fine tuning the plan as we move forward with the finalization in the budget and strategy process later this year. The message is simple. We are staying the course.
Next slide please. Outlook, staying the course ready when the market turns. In Q2, we saw a clearer increase in operational pace after the leadership changes earlier this year. We made the decision to restructure and integrate Swedish sales operations and now changed and implemented as we speak in Q3. Electrification performed strongly in our international markets even though the Swedish residential sector remained weak.
Our cost control measures and inventory optimizations are delivering results with improved cash flow and EBIT back in positive territory. In e mobility LS4 solutions and our entity platform are gaining renewed traction for the year and the strategic contracts are strengthening our market position. Looking forward, I will take the interim leadership free mobility to ensure stability and clear direction. We will fully implement the Swedish sales and integration under Daniel Emerson and the market recovery is slow however, but we are seeing early signs in both housing and charging infrastructure and the long time drivers electrification energy efficiency and infrastructure remains strong and our focus. Gauro is ready to accelerate when condition shifts and we have the ability to adapt quickly, act with discipline and always move with purpose.
Thank you and next slide please. Questions?
Operator: Thank Our first question comes from Sofia Soling from DNB Carnegie. Your line is now open. Please go ahead.
Sofia Soling, Analyst, DNB Carnegie: Right. Thank you. Hi, Jonas and Helena. Can you hear me? Yes.
Great. Okay. So I have a couple of questions. I will start with focus on the e mobility segment. Could you give us a little bit more details on your strategy ahead within this business area?
What will be your main focus point if I start there?
Jonas Klaren, CEO, GARO: For sure, the main focus point will be sales as we now platform and that goes for all our countries. So as you all know we have struggled a few years now with the functions and now we have a very good product ready to accelerating sales.
Sofia Soling, Analyst, DNB Carnegie: All right. And you mentioned could we expect for example new product launches ahead or will you expand on already developed products? That
Jonas Klaren, CEO, GARO: is hard to say. I mean if you’re asking merely for the e mobility segment, there will always be upgrades such as plug and play, plug and charge you can call it and also vehicle to grid that we are working on like all other players in the market.
Sofia Soling, Analyst, DNB Carnegie: All right. Okay. But a more explicit question then, could we expect that you will do any product launches within e mobility during this second half of twenty twenty five or will that be more expected into 2026?
Jonas Klaren, CEO, GARO: I don’t think we will launch any new products. We have to wait a bit more for the markets as we are seeing that there still needs to be a more push of larger sales in the segment I would say. So we have a good platform and it’s electrical safety is the driver for Garo and we will continue to work on that.
Sofia Soling, Analyst, DNB Carnegie: Okay. But also if I continue with e mobility segment, so the expansion into Germany and Spain, could you give some more details on that type of strategy ahead?
Jonas Klaren, CEO, GARO: The expansion is somewhat we are just waiting for the market you can say. Germany has still been a slow moving market and that is mainly why we haven’t allocated the resources to make the bigger move on Spain yet because we want to see that Germany for us is moving before you shift focus and move even more onto other markets.
Sofia Soling, Analyst, DNB Carnegie: Okay. And if we go to electrification, it seems like it’s quite still quite weak market, especially in Sweden, as you mentioned in your report and your presentation. But can you give any reflections on the current renovation market, if you see any changes regarding perhaps CapEx investments among commercial or residential buildings? Have you seen any change now compared to previous quarters or perhaps the same period last year? Perhaps difficult for you to say since you’re a new CEO, but have you seen any change in the CapEx appetite among your end customers, so to speak?
Jonas Klaren, CEO, GARO: What we have seen and what we have experienced is, as we have discussed with some of your analysts before is that we are electrical is the last thing that is put in the new buildings. As we are supplying products, we have been the last so to say in the food chain of this following years here. So what we haven’t been experiencing now is basically almost two years after the big drop. We are at the tip of the tail of the civil engineering phase. So our drop this year is basically that we have caught up with the market.
But of course we are very active out on the sales now and speaking to engineering firms that is also again now preparing a lot of new projects that will be coming as we see. But then again it will take some time before the electrical material will be bought and put inside of the new buildings. So the drop has been around 70,000 newly built was the baseline three years ago and it has dropped to around 30,000 or 28,000. So we are following that closely to see when it will be turning but we see that there will be a move forward. When it comes it’s hard to say.
Sofia Soling, Analyst, DNB Carnegie: All right. Okay and let’s see, we’ll go to next question here. Just on your financials there, you mentioned that the covenant was ended the covenant linked to the cash flow was ended Is this can you give some more details on this? Should we expect that you will not have any covenants ahead?
Or is it possible why does the bank agree on, yes, ending this covenant?
Helena Klauson, CFO, GARO: When we went into an agreement with the bank regarding covenants I think it was fall twenty twenty four for the upcoming sort of a year or so, and that was based on our cash flow improving over time. And that agreement were in place until June year, and we sort of say we have fulfilled our obligations and met the KPIs towards the bank. So this was just a sort of say a result of the entered agreement with the bank.
Jonas Klaren, CEO, GARO: And the measures we did last year has also fallen into place?
Operator: Yes.
Helena Klauson, CFO, GARO: If we were going if we were to enter into new agreements with the bank, would say that would depend on other activities within Gauru.
Sofia Soling, Analyst, DNB Carnegie: Okay. But you haven’t any new agreements with the bank now, if I understood No. You Okay.
Jonas Klaren, CEO, GARO: And
Sofia Soling, Analyst, DNB Carnegie: my next question is about the cost measurements. You mentioned a little bit in the report that you will cut some costs perhaps in e mobility, improve profitability. But are there any more cost measurements you actually can do now and you can talk separately with the electrification and the e mobility? Or is it just necessary with sales to increase ahead?
Helena Klauson, CFO, GARO: No. I would say that if we start with electrification, we did two, so to say, cost saving programs in 2024 relating to both staff within production and elsewhere. And they have had desired effect and that the sort of say the weaker margins within that business area right now is as explained due to the ERP project and weaker stakes within certain product groups, project being one of them. So I would say that has it will not be any more cost reductions. More or less the same goes for the business area in mobility.
We made a big saving program late twenty twenty four, which has come into place. And if you compare the quarters, I would say that, yes, we are following that. We are on the OpEx side saving somewhere between SEK 4,000,000 and 5,000,000 per quarter, which is what we communicated. And the result or the EBIT levels we are at right now is fully explained by low sales volume. This is as Jonas said, this is not the volumes we would like to have.
Jonas Klaren, CEO, GARO: But no.
Helena Klauson, CFO, GARO: And something we are focusing on.
Operator: All right. The
Sofia Soling, Analyst, DNB Carnegie: ERP project costs, how much was that Q2? It
Helena Klauson, CFO, GARO: varies a little bit, but right now we are entering into a more intense period. Hopefully, we will launch the new ERP in the beginning of next year. So somewhere perhaps between million to SEK2 million per quarter.
Sofia Soling, Analyst, DNB Carnegie: Yes. Okay. All right. Thank you so much for answering all my questions.
Jonas Klaren, CEO, GARO: Thank you, Sofia.
Operator: Thank you. We currently have no further questions. So I’ll hand back to Jonas for closing remarks.
Jonas Klaren, CEO, GARO: I just want to thank everybody for listening. Stay tuned for the Q3 report in a few months time as we are continuing the course. Thank you.
Operator: Thank you. This concludes today’s call. Thank you for joining. You may now disconnect your lines.
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