Street Calls of the Week
Hexatronic Group AB reported its Q3 2025 earnings on October 24, revealing a solid financial performance that led to a notable 10.19% surge in its stock price. The company’s revenue hit SEK 1.9 billion, with an organic growth of 2%, while its adjusted EBITDA stood at SEK 146 million. Despite non-recurring costs of SEK 202 million, Hexatronic’s strategic initiatives and market positioning contributed to the positive market reaction. According to InvestingPro data, the company maintains a strong financial health score, with several positive indicators suggesting potential for continued growth.
Key Takeaways
- Hexatronic reported Q3 2025 sales of SEK 1.9 billion.
- Stock price increased by 10.19% following the earnings release.
- The company launched new products and expanded its market presence.
- Hexatronic’s performance improvement program led to significant cost savings.
Company Performance
Hexatronic’s performance in Q3 2025 demonstrated resilience and strategic growth, particularly in its fiber solutions and data center markets. The company achieved a turnover of SEK 7.5 billion with a workforce of 2,000 employees, showcasing its global reach. Hexatronic’s focus on diversifying its offerings beyond fiber solutions to data center and harsh environment solutions is paying off, aligning with strong market trends in these sectors.
Financial Highlights
- Revenue: SEK 1.9 billion, with organic growth of 2%
- Adjusted EBITDA: SEK 146 million, 7.7% margin
- Net debt: SEK 1.7 billion
- Cash conversion rate: 117%
- Non-recurring costs: SEK 202 million
Earnings vs. Forecast
Hexatronic’s earnings call did not provide specific EPS figures; however, the company’s revenue performance aligns with market expectations, contributing to the positive stock movement. The market had anticipated a revenue forecast of approximately SEK 1.81 billion.
Market Reaction
Following the earnings announcement, Hexatronic’s stock price rose by 10.19%, reflecting investor confidence in the company’s strategic direction and market opportunities. The stock’s performance is particularly noteworthy, considering its 52-week low of SEK 18.49 and high of SEK 47.94, indicating a robust recovery trajectory.
Outlook & Guidance
Hexatronic has set ambitious targets for 2028, aiming for SEK 2 billion in revenue from harsh environment solutions and SEK 3 billion from data center solutions, with expected EBITDA margins of 15%. The company plans to continue its focus on mergers and acquisitions to strengthen its market position, particularly in the data center and harsh environment sectors. With an EV/EBITDA ratio of 7.19 and strong financial health metrics according to InvestingPro, the company appears well-positioned to execute its growth strategy. Discover more insights and 8 additional ProTips with an InvestingPro subscription, including detailed analysis of the company’s growth potential and market positioning.
Executive Commentary
CEO Rikard Fröberg highlighted the company’s transformative journey, stating, "The Hexatronic of 2028 and beyond will look quite different from the Hexatronic of the past." Deputy CEO Martin Åberg emphasized the importance of leveraging market growth, saying, "Our focus is to leverage the strong market growth in the data center space, but equally important to continue to diversify the business."
Risks and Challenges
- Market saturation in fiber solutions could impact growth.
- Potential supply chain disruptions may affect operations.
- Macroeconomic pressures could influence investment strategies.
- The need for significant CapEx investments in new markets.
- Competitive pressures in the rapidly growing data center sector.
Q&A
During the earnings call, analysts raised questions about the North American market challenges, margin sustainability in data center solutions, and Hexatronic’s CapEx investment strategy. The company addressed potential growth avenues in the fiber solutions market, indicating a proactive approach to navigating industry dynamics.
Full transcript - Hexatronic Group AB (HTRO) Q3 2025:
Conference Moderator: Welcome to the Hexatronic Q3 2025 report presentation. For the first part of the presentation, participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by dialing the pound key 5 on their telephone keypad. If you are listening to the presentation via webcast, you can ask written questions using the form below. Now, I will hand the conference over to CEO Rikard Fröberg. Please go ahead.
Rikard Fröberg, CEO, Hexatronic Group AB: Good morning, everyone, and very welcome to Hexatronic Group AB’s third quarter presentation for 2025. I’m Rikard Fröberg, CEO of Hexatronic Group AB, and with me today, I have Martin Åberg, Deputy CEO, and Pernilla Lindén, Group CFO. As always, we start with an overview and introduction to the company. Hexatronic Group AB today, it’s a global business with about SEK 7.5 billion in turnover and roughly 2,000 employees. We are a connectivity business, providing our customers with solutions for a wide range of communication applications, and it’s all centered around fiber optics. Our business is organized into three business areas: fiber solutions, harsh environment solutions, and data center solutions. The majority of our business today is in Europe. North America accounts for about 35%, and we have a smaller but growing presence in Asia-Pacific. Now, going right to the highlights of the third quarter financials. I would summarize this.
Overall, the quarter was in line with expectations. We saw SEK 1.9 billion revenue, which was an organic growth of 2%, and adjusted EBITDA was SEK 146 million, corresponding to a margin of 7.7%. Our strategic shift towards high-growth businesses continues, with data center solutions and harsh environment solutions now generating more than one-third of sales and over half of the profits. Our fiber solutions business area is still challenged by softer market conditions in the fiber-to-the-home (FTTH) segment. This business area came in slightly below our expectation at 5.4% adjusted EBITDA margin, which reinforces why we’re moving swiftly with the performance improvement program, currently focused on reducing our costs. On the other hand, we saw better-than-expected performance, again, I should say, in data center solutions. This business grew 39% organically and landed at almost 17% EBITDA margin.
Also, for the harsh environment solutions business, it was a very solid quarter with 15% organic growth and some clear improvements in the Rochester Cable unit, where we have been laser-focused on operational efficiency. Last but not least, it was good to see that cash flow came in strong as we expected, with 117% cash conversion, which allowed us to reduce our net debt and keep the leverage ratio around two times. A few key events that were announced in the quarter. First, as already mentioned, we launched step one of the performance improvement program for fiber solutions. This step includes some hard cost savings, totaling around SEK 110 million, mainly from right-sizing our organization and actually closing one duct factory in the Netherlands. It will be followed by additional and more long-term efficiency initiatives within sourcing, plant productivity, as well as investments for growth.
Secondly, we introduced financial targets by business area, and I will come back to those in a minute. We were excited to roll out a major new product innovation in our Viper Ease micro cable product. This is an upgrade to the popular Viper family of micro cables. With Viper Ease, we are introducing actually new-to-the-world technology, which allows a tangle-free and grease-free installation. It may not sound like much, but it actually saves over 50% of preparation time for the installer. This is a launch which is very much in line with our strategy to be leading in innovation, particularly where it helps our customers improve their productivity and, therefore, their total costs. I’m also happy to share today that we have hired a strong Investor Relations leader. His name is Patrik Johannesson, and he will join us in January. Now, going to the financial targets then.
If I recap those, they were already communicated in September, and there are two sets of targets here: a 2028 top-line ambition and an EBITDA margin target. Both these targets are now set by business area, and they replace our prior financial targets, which were stated on group level. These new targets are now aligned with how we run the business and also with our segment reported, which started earlier this year, and they do showcase that our business areas have slightly different prospects, both when it comes to growth and margin. We have a strong growth agenda for both harsh environment solutions and data center solutions, with an ambition to be in 2028 of SEK 2 billion for harsh environment solutions and SEK 3 billion for data center solutions.
This would roughly double the size of these two businesses combined and make it about 50% of Hexatronic Group AB total sales. We also see that harsh environment solutions and data center solutions are highly differentiated offerings that we feel should be making 15% EBITDA margin over time. In fact, data center solutions is currently slightly higher than that, while harsh environment solutions still has some way to go. The fiber solutions business has some segments with high differentiation, and I think submarine cable is a great example of this. We also have primarily on the duct and pipe side of the business a little bit lower level of differentiation, and therefore we see that an EBITDA margin of 10% over the business cycle is more realistic.
As noted, given the current trading, this is where we still have quite a bit of work to do to get back up to that level. If you take one step back and think about where this takes the company in a few years’ time, it’s clear that the Hexatronic of 2028 and beyond will look quite different from the Hexatronic of the past. We will have almost half of the revenue from data center and harsh environment and probably more than half of the profits. This is a journey that we’re on, which started some years ago, and we are now taking steps to accelerate. Same format on this slide, but really zooming in on the actual performance in the quarter. It illustrates quite clearly that diversification journey that I just mentioned and the direction of travel. We can see that fiber solutions is still 65% of the revenue.
Harsh environment has grown from 15% a year ago to 17% in this quarter, and data center has grown rapidly from 13% to 18% of total. Moving to the EBITDA, the shift becomes even more substantial. The two smaller business areas already today account for close to 60% of the EBITDA in the quarter. Of course, that is driven by their strong performance, but also obviously by the relatively lower margin of fiber solutions in the quarter. The bottom line here is that this trend towards diversification is good for the business, and it’s something that we expect to see and that we want to see. We expect the higher margin in data center and harsh environment to prevail.
Even as we are very focused on improving the margins in fiber solutions, we expect longer term that the data center and harsh environment should contribute 50% of group profits, if not more. Now moving on to take a closer look at the business areas, and we will start with fiber solutions. Sales in the quarter were down 14% year over year, and about half of that decline was simply FX translation, where our selling currencies have weakened against the Swedish krona. While we’re down year on year, if we look sequentially, we see that sales have been flat now for about the last three quarters. Geographically, we saw declines in both Europe and North America. APEC was slightly down in SEK, but saw modest growth in local currency. The volume shortfall, particularly in micro duct, is causing underabsorption in our factories and therefore some margin pressure.
This is why we have decided to close one of the duct facilities. Looking ahead, we expect the market situation to remain similar to today in the next one or two quarters. There’s still some overcapacity in the market, and it will not go away immediately. At least for the U.S. market, we expect volume growth in 2026. Here is a look at our different product segments within fiber solutions and how they developed in the quarter. We don’t disclose the size of each, but here they’re listed roughly in order of size, and in total, these categories represent about 80% or so of the sales in fiber solutions. First is micro duct, where we have seen a clear decline in demand. This is driven by the market shift within FTTH from really building homes past, which use a lot of micro ducts, towards connecting customers to existing networks.
This is a shift that we have talked about before, and we see that trend continuing. Conduit, the second category, is a little bit of a mixed bag. It’s actually showing double-digit volume growth, but has significantly lower prices compared with a year ago. If you go down the list, the rest of the portfolio all shows green. Fiber optic cable in general and submarine cable in particular has a growing trend that we expect to continue. The negative is, of course, that the micro duct and conduit segment are challenged, and this is where we have some underutilized capacity today and obviously the focus of our performance improvement program to address. However, we also see that there’s underlying growth in all the other categories. Now we’re moving over to the harsh environment business, and it was a really solid performance here in the quarter.
Revenue organically up 15%, and EBITDA margin came in at 11%, well in line with expectation. We were pleased to see that the dedicated work at Rochester Cable is starting to pay off. In the quarter, Rochester saw slight margin improvement sequentially over Q2 and a meaningful improvement over last year. Things are moving in the right direction. It will continue to take time, as we have said before, but definitely in the right direction. A slight watch out here is the U.S. government shutdown, which means a few of our customers are not able to place orders right now. This is more of a timing effect, and because of lead times, it could impact Q2 next year if it’s not resolved soon.
I want to make the usual reminder here that this is a heavily project-based business, so we actually shouldn’t put too much weight at individual quarters, but more at the overall trend. That trend is positive. We see a healthy market and stable demand primarily in offshore energy and defense. With that, we will move on to data center, which saw again a very strong performance in the quarter. I will hand it over to Martin to tell us more about that.
Martin Åberg, Deputy CEO, Hexatronic Group AB: Thank you, Rikard. We closed another strong quarter, as Rikard said, with 39% organic sales growth. We saw strong performance across our businesses in the quarter. Over the last two years, we have focused on growing our service business, which continues to be the main growth driver, and this is both in Europe and in the U.S. market. If we look at it sequentially, we are slightly down from the second quarter. The second half of the year is always slower, especially the fourth quarter, and this is due to fewer working days in December. In terms of EBITDA, the margin increased 2.3 percentage points to 16.9%, and the margin expansion we see in the quarter, and that has actually been throughout the year, is fully attributed to scale, with OpEx as a percentage of sales decreasing compared to the previous year.
The gross margin is slightly down compared to the previous year. If we move over to outlook and starting with market, we have the same view as we communicated last quarter. We will continue strong demand, and this is especially among the larger players in the hyperscale and colocation segments or the cloud segment, but we also expect continued solid demand from the other market segments where we’re active. We will continue to broaden our service offering. Earlier this year, we strengthened our U.S. organization within the installation of security systems, audio visual solutions, and also wireless networks for indoor environments. We have also recently expanded our electrical offering in Europe, and this is to become an even stronger partner to our customers.
As we discussed in our investor update in September, acquisitions will continue to be a strong focus moving forward, and this is important to achieve our 2028 sales target. We will continue to see the seasonal pattern where we have a slower second half and especially the fourth quarter due to the fewer working days, as just mentioned. This is a slide that we presented at our investor update in March earlier this year. Looking at the sales breakdown from data center business area, we have a balanced business that we’re actively working on to diversify even further. In terms of our capital allocation, service, as we mentioned before, is the key focus. This will continue to grow at a higher rate than our product sales, both organically and from acquisitions.
Today, it’s almost a 50/50 split between the service and the product sales, but the balance will then slowly shift towards more services. If we move on to look at customer sales breakdown, we have a very healthy sales split. Roughly 40% of our sales is towards the cloud segment, and this is the main growth segment, as just mentioned. When we look at independent market studies, this segment is expected to have an annual growth rate of plus 15% over at least the next five years. The remaining 60% of the sales in the business area is quite evenly split between enterprise data centers and other end markets. This market is growing at mid-single digits, and we have a strong focus to continue to grow this 60% of our business. It is a lower growth rate in that segment, but it’s very diversified and a very stable customer base.
Finally, on customer concentration, our 10 top customers accounted for roughly half of our sales. The focus here is, of course, to continue to broaden and diversify our customer base. All in all, the focus is, of course, to leverage on the strong market growth that we have in the data center space, but equally important to continue to diversify the business in terms of offering and customer segments as well as the customer base. With that, I hand over to Pernilla for the financial overview.
Pernilla Lindén, Group CFO, Hexatronic Group AB: Thank you, Martin. Overall, we had a total sales of SEK 1.9 billion in Q3. It’s an overall decline of 3%. Organically, we had a growth of 2%. Growth was driven by strong performance in both harsh environment solutions and data center solutions, and that was partly offset by the decline in fiber solutions. We had a 1% acquisition-driven growth from a recent acquisition, Endor, within our data center solutions business. Next quarter, the Endor business will be included in the organic growth. We also had a 6% negative effect from exchange rates this quarter, more or less all currencies in the group having a negative impact, primarily due to a weaker U.S. dollar, Korean won, Aussie dollar, and sterling. During the quarter, Hexatronic Group AB has recognized SEK 202 million of non-recurring costs linked to the performance improvement program launched in Q2.
The program is mainly in the fiber solutions business area, and non-recurring cost is related to severance costs, facility costs, write-down on tangible assets, inventory, and transition costs. Adjusted for the non-recurring one-time cost in the quarter, adjusted gross margin was at 37.5% compared to 43.1% in Q3 2024. The 5.6 percentage points lower gross profit is mainly related to price pressure, as well as lower capacity utilization and fixed cost coverage within our factories within fiber solutions, but also a mix of our different business areas. Adjusted operating costs were at 26.2% of sales in the quarter, which is lower than last year at 27.8%. The reduced operating cost is mainly related to lower freight costs explained by the reduced freight costs from Asia, but also lower cost of external services.
Overall, we had an adjusted EBITDA of SEK 146 million or 7.7% compared to Q3 last year at an EBITDA level of 11.8%. Actual EBITDA, including non-recurring one-time cost of SEK 202 million, was minus SEK 56 million or minus 3% EBITDA. Net financial items of minus SEK 9 million was mainly related to net interest expense of SEK 31 million, but also other financial items that include revaluation of additional purchase price and acquisition options with a positive of SEK 20 million. Tax rate during the quarter amounted to minus 35% compared to 29.5% in Q3 2024. The tax rate this quarter is mainly heavily affected by the non-recurring items related to the performance improvement program. The negative tax rate is explained by the fact that the group recognized a tax expense in connection with a negative profit before tax.
The cost has a rise in countries where the group currently has no taxable profits. As it is currently not possible to assume with reasonable certainty that these tax losses will be utilized in the future, it is not possible to report any deferred tax assets. If we exclude the one-time effect here, we are more or less in line with the last quarter. During the quarter, Hexatronic Group AB announced the performance improvement program mainly, as I said, in the fiber solutions business area, with consolidation of the manufacturing footprint, organizational alignment in Europe, and then with an increased focus on selected growth areas. The total cost savings are estimated at SEK 102 million, and the net effect on EBITDA at SEK 110 million on an annual basis.
This will be realized starting from the fourth quarter of 2025, and be fully realized by the end of the first quarter in 2026. Non-recurring items are estimated at SEK 230 million, but now in the third quarter, we have recognized SEK 202 million. Those costs are related, as I said before, to severance, facility costs, write-down of tangible assets, inventory, and transition costs. The remaining communicated non-recurring items for the program are expected to be reported in the fourth quarter. If we then take a look at the fiber solutions, we had a total sales of SEK 1.2 billion in Q3, with an overall decline of 14%. Organic, we had a decline of 7%, and that is mainly due to the weaker demand of the FTTH equipment business and price pressure.
Europe declined by 7%, and for this quarter, that is mainly related to Sweden and Finland, and that was partly offset then with growth in Germany and UK. North America declined with 26%, and it’s related to Canada with a slowdown in the build-out of FTTH, but also our U.S. business. The conduit business in North America saw good volume growth, but with low pricing, where year over year, there’s still a meaningful price decline. APEC declined with 3%, but increased in local currency. Adjusted EBITDA of SEK 66 million or 5.4%. Profitability was hurt by the lower sales volume, mainly within micro duct and also then low capacity utilization and continued price pressure. Within fiber solutions, we realized SEK 190 million of non-recurring items in Q3. EBITDA then for the quarter of minus SEK 124 million, minus 10% compared to 12.6% last year.
We also had then low capacity investments during the quarter, SEK 10 million for the quarter or 0.8% of sales, which is all related to maintenance. If we then take a look at harsh environment, total sales for harsh environment of SEK 314 million, a growth of 8% or organically a growth of 50%. Growth is mainly driven by the defense and energy sector. As we previously have communicated, the company within harsh environment has an international customer base, and the majority of revenues from larger projects, which means that both quarterly sales and sales per geography can fluctuate between the quarters. Adjusted EBITDA at SEK 35 million and a margin of 11%. We continue to see a positive effect from improved production efficiency within Rochester Cable. CapEx investment in the quarter of SEK 13.2 million or 4.2% of sales, mainly related to production and efficiency improvement in Rochester Cable.
Let’s move over to data center then. Total net sales for data center of SEK 334 million, with an overall growth of impressive 43% and an organic growth of 39%. I’m especially pleased to see that we have strong development for all units, especially in the service business in Europe and North America. The contribution from the acquired business is in line with our expectations. A solid EBITDA margin at 16.9%, and CapEx investments in the quarter are low at SEK 3.7 million or 1.1% of sales. If we then move over to cash flow, if we’re looking at cash flow from operating activities before changes of working capital, we had SEK 132 million. We had a positive effect from working capital of SEK 22 million. Inventory was decreased by SEK 68 million, mainly in the fiber solutions business area, but offset by lower accounts payable.
That is mainly due to the focus of reduction of inventory. Accounts receivable has increased with SEK 22 million during the quarter, mainly due to customer mix, but an increase in operating liabilities of SEK 46 million is mainly due to prepayments from customers related to the harsh environment business area. Cash flow from operating activities of SEK 154 million or 117%. Total CapEx investments in Q3 of SEK 27 million or 1.4% of sales, and mainly maintenance investment and production efficiency improvement investments in Rochester Cable. Group financing activities amounted to SEK 33 million, which is related to amortization of lease liabilities. Interest-bearing net debt, which corresponds to net debt excluding lease liabilities, amounted to SEK 1.7 billion at the end of the quarter. That is a decrease of SEK 96 million compared to last quarter.
Due to positive cash flow and positive FX effect of revaluation of our loans of $19 million, that was partly offset by the decreased rolling 12 adjusted EBITDA leading to an interest-bearing net debt in relation to pro forma-adjusted EBITDA on a rolling 12 months at two times during the quarter. At the end of Q3, we had $596 million of cash and $1.1 billion of unutilized backup facilities, which gives us a total liquidity of $1.7 billion. We have a continued solid financial position.
Rikard Fröberg, CEO, Hexatronic Group AB: Okay, time for me to wrap things up. First, again, as a summary of the quarter performance, organic sales growth of 2% overall and an adjusted EBITDA that landed at SEK 146 million or 7.7% margin. Our fiber solutions business continues to operate in a rather challenging environment, particularly for fiber-to-the-home and micro duct. The performance improvement program there is up to speed and fully on track, and we booked one-off costs associated with this of about SEK 200 million in the quarter. Data center and harsh environment, strong results and double-digit organic growth now accounting for more than half of group profits. Our cash flow is healthy, generating SEK 154 million operating cash flow, which corresponds to 117% cash conversion. Our net debt was slightly reduced to SEK 1.7 billion.
In terms of the outlook, starting off with a reminder of the seasonality that we typically see, where fiber solutions usually have lower activity in Q4 and Q1, this is simply weather-related. Data center is slightly different with a lower second half and stronger first half, as we heard from Martin, and we expect these patterns to remain. Looking at the business areas for fiber solutions, we expect the market situation to stabilize, and by stabilize, I mean no real improvement is expected in Q4, but also not expecting conditions to get worse. Of course, remembering that seasonality effect. The performance improvement program here will continue to ramp up as planned, and we will see full run rate of the cost savings by the end of Q1. For data center, simply put, we expect a good growth to continue in Q4.
Just take the seasonality in account, and then going into next year, continued strong development, but also keeping in mind that the comps are getting significantly higher, so percentage growth is likely to be somewhat moderated. Also for harsh environment, more of the same, I would say. We expect stable, robust development here. The margin trend should be slow and gradual upward, with some quarterly ups and downs because of the project nature of the business. Last but not least, we are still focused on executing our M&A pipeline, primarily in data center and harsh environment, where we see compelling opportunities for value creation. I have said now a number of times that we want to make one or more deals this year. I think that is still the ambition, but obviously there’s less year remaining by now, and it always takes two parties to make a deal.
It is not entirely in our hands when it will happen, but the pipeline is promising, and we continue with that ambition. That wraps up the presentation part of the session today, and with that, we will move on to Q&A.
Conference Moderator: If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. Please limit your questions to a maximum of two. If you have additional questions, feel free to rejoin the queue. The next question comes from Adrian Galani from ABG Sundal Collier. Please go ahead.
Yes, hello and good morning. For my first question on data center solutions, as we have spoken about before, you’ve chosen to set the margin target at 15% over the cycle, and that’s, as you mentioned, below where you’re currently at. With that in mind, how long would you say that the current margin levels in data center solutions could be sustainable?
Martin Åberg, Deputy CEO, Hexatronic Group AB: Thank you, Adrian. It’s Martin here. This will very much depend on our M&A pipeline, obviously. We see nothing that is trending downwards today, rather the opposite, where we have grown the business at quite a flat gross margin and good scale effect. It’s always difficult to assess what the margin will be long term, but it will be a function of the M&A pipeline, I would say.
Okay, understood. On the CapEx, before you’ve said that we should expect the CapEx at 3 to 4% of sales, you’re now on track to come in quite a bit below that. Does this mean we should expect higher investment pace in next year, or will you rather keep the current pace?
Pernilla Lindén, Group CFO, Hexatronic Group AB: Okay, so we are at this stage now at a lower, you’re right, and that is mainly because of the fiber solutions. We are maintenance investments. If we’re looking at the harsh environment, we are between the 3 to 5 that we have already communicated, and we are also on the data center where we have communicated. When it comes to fiber solutions, as we talked at the investor update, there will be specific investments in some areas going forward where we see that we have a possibility to have a good growth. For now, it is lower due to that we are only doing maintenance.
Rikard Fröberg, CEO, Hexatronic Group AB: I think, Adrian, this is tied to also the performance improvement program. Right now, it’s very much focused on right-sizing and lowering our costs. The next step, the next stage here is to invest for growth, and we have areas that we’ve talked about. We see, for example, the submarine cable business is growing. We have one line, and we’re starting to get closer to the full utilization of that line. That could be a type of investment that could come, and that would be a step up, of course, in the CapEx rate for fiber solutions.
Okay, understood. In that case, thank you. I’ll let the next person come in.
Conference Moderator: The next question comes from Frederik Nielsen from Redeye. Please go ahead.
Good morning, thank you. I want to start with the growth you saw within fiber solutions in Germany and UK. What is driving that growth, and do you believe it is sustainable?
Pernilla Lindén, Group CFO, Hexatronic Group AB: I would say that the major reason for that is that the market has been lower for a period of time, as you know, and you have lower comparables. We have in this quarter a slight growth, and the market has stabilized somewhat.
Okay, I see. Next question from me. I mean, considering the strong data center market, have you seen any increase in valuations of potential M&A targets?
Martin Åberg, Deputy CEO, Hexatronic Group AB: We target the small, mid-sized, open management-owned businesses. In that part of the market, we’re still talking about the same valuations. Of course, we can see some transactions between private equity and similar that are priced significantly higher. On the private small size bilateral discussions, it’s still in the same valuation range.
Okay, great. Thank you very much.
Rikard Fröberg, CEO, Hexatronic Group AB: Thank you, Frederik.
Conference Moderator: As a reminder, if you wish to ask a question, please dial the pound key five on your telephone keypad.
Rikard Fröberg, CEO, Hexatronic Group AB: I think we had a couple of written questions come in.
Conference Moderator: There are no more phone questions at this time. I hand the conference back to the speakers for any written questions or closing comments.
Pernilla Lindén, Group CFO, Hexatronic Group AB: We have one question here. Could you elaborate a bit on what is happening in fiber solutions North America in general, with -26% sales growth? Additionally, Duraline reported yesterday stating that it sees strong volume growth within duct. Are you seeing the same? What are your thoughts on fiber solutions North America going into 2026?
Rikard Fröberg, CEO, Hexatronic Group AB: Good question, and there’s quite a lot there, so let me try to unpack it. Starting with our decline in North America, it’s a few different factors that are working together here. The first one is exchange rate, right? I think that’s 6 or 7% in the quarter with the U.S. dollar weakening. The second effect is a decline in volumes, primarily in micro duct that we’ve seen. It’s important to remember it’s North America, it’s not just the U.S. There’s some decline in the U.S., but actually a more drastic decline in Canada, where the building for now of homes passed has more or less stopped. There are some new rules that the government is trying to push in Canada that if you build a network, you have to allow access to your competitors, and all the majors are saying, in that case, we’re not going to build anything.
We will have to see how that situation develops. For the last two quarters at least, we’ve seen very, very low activity in Canada. The third aspect of this is the conduit business, and this relates a bit with Duraline. As we have talked about, we are seeing actually volume growth is quite healthy. It’s volume growth, but we are comparing with a year ago when prices were significantly higher. Building on that, if I then compare with Duraline, they came out with what I consider to be a strong result they reported yesterday, but well done by them. I think we match, from what I can see, if not exceed their volume growth, but we’re not matching their margin. I think, I don’t know exactly, of course, with Duraline, I believe that they have higher capacity utilization. They are the market leader.
I believe that on the back of that, they have higher capacity utilization and also stronger pricing with a few accounts. That was a good result. There are others in the space that we know are having a harder time. Recently, there was a public disclosure from Atcor that they’re doing a strategic review. If you read between the lines, my interpretation is that they’re looking to get out of the business because they are struggling in that business. You can find that it’s publicly available.
Pernilla Lindén, Group CFO, Hexatronic Group AB: Thank you. What’s your perspective on the bid opportunities in the U.S. for 2026? It seems the program is finally gaining significant momentum. Are you and your partners ahead of the curve in preparing for this with your customers?
Rikard Fröberg, CEO, Hexatronic Group AB: I’d like to think we’re always ahead of the curve. I think I agree, it looks like it is coming in 2026. I don’t think it will be a January 1 the tap is turned on 100%, but gradually during 2026, we do expect to see the impact of that. That’s one of the reasons why we are expecting better development in North America next year. Also, the tax incentives in the big, beautiful act could be quite powerful for CapEx investments as well. Yes, we are seeing the same signs, and it seems also that at the end of the day, there will be a reasonable split between fiber and other technologies in the bid program. I think we have no more questions. Thank you, everyone, for calling in. For those of you who are in Sweden, I hope you enjoy a well-deserved and action-filled sports break next week.
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