Earnings call transcript: Inwido AB sees stable Q2 2025 with positive outlook

Inwido AB’s Q2 2025 earnings call revealed stable financial performance amidst challenging market conditions. The company reported flat net sales year-over-year with a 3% organic growth. Earnings per share increased by 7%, and profit after tax rose by 15%. Currently trading near its 52-week low at $18.40, InvestingPro analysis suggests the stock is fairly valued. With a market capitalization of $1.07 billion and a moderate debt-to-equity ratio of 0.4, Inwido maintains a positive outlook, driven by strategic initiatives and market leadership in the European window and door market.

Key Takeaways

• Stable financial performance with flat net sales and a 3% organic growth.
• Earnings per share rose by 7% compared to the previous year.
• Profit after tax increased by 15%, reflecting operational efficiency.
• Stock price declined by 1.35% following the earnings announcement.
• Positive outlook with a focus on mergers and acquisitions and energy efficiency.

Company Performance

Inwido AB demonstrated resilience in Q2 2025, maintaining stable net sales and achieving a 3% organic growth despite challenging macroeconomic conditions. According to InvestingPro data, the company maintains a healthy gross profit margin of 25.9% and has demonstrated consistent profitability with a return on equity of 11%. The company outperformed many of its peers, particularly in Scandinavia and Eastern Europe, due to its strong market position and strategic initiatives. For deeper insights into Inwido’s performance metrics and peer comparison, access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.

Financial Highlights

• Revenue: Flat year-over-year with a 3% organic growth.
• Earnings per share: Increased by 7% year-over-year.
• Profit after tax: Rose by 15% compared to the previous year.
• Operating EBITDA: Increased by 1% to NOK 264 million.
• Gross margin: Stable at 25.6%.

Outlook & Guidance

Inwido is optimistic about future growth, anticipating a market rebound and focusing on mergers and acquisitions. The company aims to achieve a 15% sales CAGR and expects energy efficiency regulations to drive future demand. InvestingPro analysis reveals the company’s strong financial health with an Altman Z-Score of 8.69, indicating low bankruptcy risk. With a current P/E ratio of 18.17 and analysts projecting profitability this year, Inwido plans to close 1-2 acquisitions before the year-end to bolster its market position. InvestingPro subscribers have access to 7 additional exclusive ProTips and detailed financial metrics to better evaluate Inwido’s growth potential.

Executive Commentary

CEO Fredrik Muller expressed confidence in the company’s strategy, stating, "We are managing the situation really well. We’re maintaining our profits despite a less favorable mix and despite an FX impact." He also highlighted the company’s strong backlog and market positions, which provide comfort amidst current challenges.

Risks and Challenges

• Challenging macroeconomic conditions with low consumer confidence.
• Decline in e-commerce sales in Sweden, down 24% in April-May.
• Real estate market slowdown with fewer transactions.
• Ongoing restructuring projects and cost efficiency measures.
• Potential impacts from raw material cost fluctuations.

Q&A

During the earnings call, analysts inquired about pricing strategies, with the company indicating slight price increases to counter raw material costs. Questions also focused on the company’s mergers and acquisitions strategy, with Inwido highlighting a broad and deep target funnel focused on quality deals. The potential for margin improvement from operations in Vietnam and Swedish factories was also discussed.

Full transcript - Inwido AB (INWI) Q2 2025:

Webcast Moderator: Hello and welcome to today’s webcast with Invedo, where President and CEO, Frederic Muller and CFO and Deputy CEO, Peter Valin, will present the report for the 2025. After the presentation, there will be a Q the Q And with that said, I hand over the word to you guys.

Fredrik Muller, President and CEO, Invedo: Thank you very much. Good morning, everyone, and welcome to this Invedo webcast. Today, we congratulate Sweden’s Crown Princess Victoria on her birthday. And what better way to celebrate that than to go through Invedo’s second quarter report of 2025. My name is Fredrik Muller.

I’m the President and CEO of Invedo. And right next to me here in Malmo today is Peter Vellin, our Group CFO and Deputy CEO. We will, as usual, go through some group highlights and then the detailed group financials, followed by a BA run through and finish off with summary and outlook and a Q and A. And as usual, this material is also available on Invedo’s website. Yeah, you’re all very well familiar with Envito already, of course, so there’s no need to dwell upon this.

What I would like to say though is that although Envito is leading in Europe’s window and door market, we are actually only in one out of the top 10 markets ranked by size in this industry, and that is The UK market. And my point with this is, of course, that there is still huge growth potential for Inveedo to expand both organically and through mergers and acquisitions. If we then look at the quarter, I guess it’s best summarized in the world of interesting. Lots of things happening in the world around us. And that has resulted in a bit of an amber, please wait button, where the expected and much needed rebound has been pushed forward yet again.

It’s very much a volume and a timing game. Worth noting, though, is that the fundamentals remain the same and the fundamentals remain rather strong. Invedo has strengthened its positions. We assess that we have gained share throughout the quarter. I’m overall pleased with the performance of the group and still rather optimistic about what’s around the corner.

Our sales are up a bit. Our order intake is down. Have in mind though that in Q2 last year, we did post a record order from Carlson, our entity in Ireland. So that has an impact in comparison now quarter on quarter. Having said that, we must not forget that the order book was up by 9% now in the quarter and is actually at an all time high for Invedo.

We did a good job in keeping margins up despite price pressure and a less favorable mix. And for the absolute operating EBITDA number, we must not forget the fact that it’s been hampered by a Swedish krona that has been strengthened and the impact is SEK9 million. There’s no cigar on M and A yet. It’s closed, but no cigar. It’s not for lack of activity.

You can see that if you go into our notes for the EPS that we have taken some transaction related costs and charges in this quarter. It will take time. Processes are a bit lengthy, partly because of the surrounding market turmoil, but also because of the fact that many of our discussions are related to families selling off their second or third generation company or baby. And that’s, of course, an emotional process. It simply takes time.

If we look at the snapshot of our Q2 key financials relative to same quarter last year, again, we’re lacking volume, meaning that some costs remain under absorbed. Again, the profit has been hurt by the FX impact, the SEK9 million in translation from our international entities. And at the same time, the margins remain the same as last year’s Q2. The main positive drive is coming in this quarter from our BA Scandinavia and Eastern Europe. And I think it’s worth mentioning that we continue to reduce our gearing, which of course, first of all, offers comfort in turbulent times like these, but also provides us with healthy firepower for the mergers and acquisitions spree that we are on.

And if we look at the full six months year to date, adding also Q1, The pattern is relatively similar across geographies and business areas. I guess one main difference is that we do see an uptick in Sweden, partly boosted by the government stimulus and lower interest rates. And so that’s an important market for us that’s performing better and better. Overall, I’m quite pleased with the performance given our circumstances where both top and bottom line is up of course. And lack of volume is really a common theme across all markets with household consumption not really taking off despite some stimulus and thicker wallets.

And if we look at the Swedish market, for example, it’s well illustrated by the fact that the real estate market is showing still rather few transactions and still relatively stable prices. So that’s an indicator in itself. Generally, though, we outperform the market, we are still perceived as a flight to safety with also our very high delivery position across many of our entities, is important. And again, Scandinavia and Eastern Europe performing a bit better in both absolute and relative terms, while e commerce and Western Europe are not bad in any way. They’re just facing a little bit more headwind.

Worth noting is that several of our peers are struggling, I guess most notably in The UK, but also in other markets. We did see some $20.24 figures for some of our e commerce peers the other day and they are performing much worse than Envito. We could also note on Friday last week that Eco Okna, a large Poland based window player is laying off thousands of workers at the moment. So sign of the times. But if we look at sustainability, green is not necessarily my favorite color.

I’m a true blue. But in this case, is definitely good. And it’s yet another quarter of really strong KPI development, which is super pleasing. And again, a sign of us doing the right things. It’s a small and big things that add up to the positive totality.

Good news is also that this is continued to be recognized also externally with, for example, the Financial Times putting us higher on their list of European climate leaders and CDP ranking us higher now with an A- ranking in their supplier engagement assessments. We continue to be candid about the vital few priorities that are key for us in order to achieve our 2030 roadmap. And I have to say we’re gradually getting there. If we start with M and A, again, active and positive level of activities. I think the outlook is rather promising based on the almost record broad and record deep funnel that we have and the ongoing discussions that we have.

Needless to say, the market uncertainty has been a bit of a wet blanket on M and A processes. And as I said, the emotional family ties means that some of these discussions are simply taking a bit more time. Moving on, the green transformation definitely happening. Everyone is talking about energy efficiency. And of course, we are eagerly awaiting some more clarity on the implementation of the EPBD directive, the energy performance for house for buildings directive that will come now in the second half of the year with implementation in the early part of twenty twenty six.

Worth mentioning is, of course, that we have a great add on to our already strong group management team. Marlene Culin will become our new EVP for People and Culture. And I’m really looking forward to having her on board. Pleasing to see also the interest we’ve had in applications for that role, meaning that Invedo enjoys a rather favorable employer brand situation, which is great. It’s also great to see that it’s a bit of a cultural revolution still continuing within Invedo in terms of collaborative much more collaboration across the entities, meaning that we have also started to exploit synergies even further.

And last but not least, the technology development is something that we are very close to primarily so far within marketing and within software to our machine investments. Now for a little bit more flavor on Invedo’s consolidated Q2 financials, I will hand over to you, Peter, please.

Peter Valin, Group CFO and Deputy CEO, Invedo: Thank you so much, Fredrik. And we start with the income statements. On this page, you can see the income statement for Q2 to the left year to date in the middle and to the right latest twelve months as well as last year. Starting with a quarter, net sales was on same level as last year organically is a growth of 3%. The gross margin was also same as last year 25.6%, operating EBITDA was plus 1% compared to last year and the operating EBITDA was million above last year, NOK264 compared to NOK263 last year.

Thereby the margin was in the same level as last year 11.3%. As Fredrik mentioned before, the operating EBITDA has a negative impact from the stronger Swedish krona when translating into SEK, the non Swedish door companies and that has a negative impact of SEK9 million compared to last year. Sales declined by SEK76 million due to currency and the operating EBITDA by SEK9 million due to the currency. The margin has also a negative impact when looking at the mix. In the quarter, the consumer sales declined by 5%, whereas project sales had an increase of 9%.

And those of you who are following indeed for some time knows that we have a higher profitability in consumer compared to projects and thereby the underlying margin was improved in the quarter when compared to last year. Between operating EBITA and EBITA, we have a NOK16 million of costs mainly related to acquisition projects in the quarter. Further down income statement, we can see that cost of the tax is up 8% and the earnings per share is up 7% compared to last year. Looking at year to date, January to June, sales is 5% above last year, organically is plus 6%, operating EBITDA is plus 6% compared to last year and also the operating EBITA is also plus 6% compared to last year And profit after tax is up 15% compared to last year and the earnings per share is up 16% from NOK $2.89 to NOK $3.34. And thereby rolling twelve months, indeed has a sales of NOK 9,340,000,000.00 with an operating EBITDA of million equal to a margin of 10.8% and the earnings per share is now on NOK9.74 billion in twelve months.

On this page, we can see the development in the quarter and to the left you can see development on sales Q2 last year until Q2 this year and to right you can see the developments on the operating in beta. We have improved resource as well as margins in Scandinavia and in Eastern Europe. E Trade is still a challenging with lower sales as well as lowest profitability. However, the order intake in the quarter for e commerce was plus 7%. Western Europe is lower sales as well as lower profit compared to last year.

Ireland is and the social housing in Scotland is still doing okay, whereas the deviation is mainly within England and the consumer sales in England. Looking at more long term perspective, this page is showing sales as well as operating in beta for Q2 twenty nineteen until 2025. During 2020 and 2022, NVIDIA had a positive pandemic impact, mainly due to higher consumer sales during this year in the second quarter. And then in 2022, we had also volume increase when it comparing to this year. The margin for this year is the same as last year and once again the underlying margin is improved when seeing that we have a negative mix impact with lower consumer sales of 5% and higher product sales of 9%.

And the margin this year is above the pre pandemic, the margin 2019 of 10.9%. Look at the cash flows, this page is showing the cash flow development in Q2. Cash flow from operating activities is up compared to last year from NOK275 million to NOK29.9, an improvement of 14.9%. We have a negative changes in working capital mainly related to operating receivables due to two things. One is of course the mix with higher product sales compared to consumer sales.

And the second thing was also the sales during the quarter with higher growth end of the quarter compared to being in quarter. And that has a negative impact looking at operating receivables. The cash flows from investments is slightly down compared to last year, both in the quarter as well as year to date as you can see to the right on the table to the right or the graph to the right. And we foresee an increased activities level during second half of this year. With that cash flow, we can see that the net debt is more or less on the same level in June as it was in March, even though we have paid a dividend in May of NOK $319,000,000.

So the net debt June equals to NOK 1,517,000,000.000 that is million lower compared to last year and the net debt includes IFRS 16 debts of NOK486 million as well as acquisition debts. Looking at net debt versus EBITDA and it’s now on 1.2 including IFRS 16 compared to 1.4 last year and excluding IFRS 16 we are on 0.9 compared to 1.1 last year, below the target of maximum 2.5, meaning in video has still a headroom for further growth. One of our targets, our financial targets is return on operating capital. The target is to be above 15% and this graph is showing the development and return of capital since Q2 twenty twenty one up until the Q2 twenty twenty five. Return on operating capital is defined as a beta rolling twelve months as percentage of average operating capital and that is calculated average latest four quarters.

We were above the targets up until Q4 in twenty twenty three. Since then we have been below the target, however, we have seen in the latest two quarters, we have seen improvement in return operating capital and we are today on 13.4. This page is showing the order backlog to the left, development order backlog to the left and order intake to the right. The order backlog is on the highest level ever on 2,829 million that is plus 7% compared to last year. Projects is plus 12% compared to last year and the consumer is down by 5% compared to last year.

All segments have higher backlog June this year compared to June last year. Looking at the order intake, the total order intake is down by 7% adjusted for FX organically is down by 8%. And the main reason is actually the high order we took in Ireland Carlson last year of 9,000,000. So about half of the decline of 7% is explained by the large order we took in at Carlson Island last year. Consumer is down by 3% compared to last year and adjusted FX down by 4% organically and the project is down by 15% compared to last year adjusted FX and organically down by 16%.

We have a positive order intake development in Scandinavia and with e commerce one, respectively 7%. And then we have a negative decline of East of 5% and Western Europe of 34% mainly due to the order of two cars of 9,000,000 last year. I’ll now hand over back to Fredrik.

Fredrik Muller, President and CEO, Invedo: Thank you very much, Peter. Let’s now look into our four business areas and let’s start with Scandinavia. Good performance versus last year, really from top to bottom with an operating EBITA margin of 14.5%. Our assessment is that we have gained share in the Swedish market and we overall see somewhat better sentiment across Sweden and Norway with Denmark still being stable. In Sweden, of course, the route incentive, the government stimulus and lower interest rates have helped improve demand.

Bear in mind though that in terms of sales mix, we’ve had a higher share of project business, meaning a little bit of a dent on margins. Moving on to Eastern Europe. It’s really a mixed bag between the larger entity of Pila Group that is performing better versus some of the smaller entities that are facing still a very, very tough market situation. We have a higher backlog and profitability is higher again. And we really see that those cost efficiency enhancing measures are kicking in.

So a good job by Antti and the team. Sentiment, I guess, in Finland is a little bit better. Nothing dramatic though, neither upwards or downwards. E commerce is, as you recall, they faced a challenging start already in Q1 this year. They took some correcting measures already then.

I think they managed the situation very well and the full impact has yet to be seen from these measures. But they were necessary and it’s been well executed, I think. E Trade as such is lower. We can see that from industry data in, for example, Sweden, where the households are not as active yet on e commerce as they were one year ago. Having said that, order intake now in the quarter actually edged higher for RBA e commerce.

It’s really purely a volume game for our friends here, both profit and margin lower. But they do have a nice efficient operational setup. So when they do get the volume back, and that can of course happen quite quickly, then they’re making more money. Last but not least, looking at Western Europe, there is really no real sight of England improving. It’s very tough market from a macro point of view, with very little consumer confidence, unfortunately.

It’s fiercely competitive. We do a good job with it though. And I’m pleased to note that we have, in some cases, decided to walk away from projects that have been facing some silly pricing from our peers. Ireland is more stable than England. And again, as Peter said, and as we’ve said several times already, do note the all time high order that we took with our Carlson entity in Q2 last year that is hampering the order intake comparison.

So largely a volume game here as well. We have some unabsorbed fixed costs, although they are being adjusted, which is painful but necessary. And relatively speaking, I’d say we do a better job than many of our peers here. So to conclude today’s key messages from our Q2 report that I think is rather solid. The anticipated and well needed bounce back in demand has been yet again deferred a bit out in time.

We are managing the situation really well. We’re maintaining our profits despite a less favorable mix and despite an FX impact, and we’re maintaining our profit margin. Worth bearing in mind, I think is that the fundamentals remain rather strong here. We still face pent up demand in both renovation and newbuild. And we face more and more discussions on energy efficiency and waiting for the EPBD to be implemented.

So the tide can, of course, turn quite quickly here. And Indira is standing firm. We have comfort from our all time high backlog, comfort from our number one and number two positions in the market and comfort from a very strong balance sheet. So we keep our eyes still on the ball and the 2030 roadmap. M and A relatively speaking is more important in the near to medium term for us.

But I’m optimistic also on that front. And again, to further help us in our strategy execution going from A to B, Maal and Keline will join us after the summer and help us even further with the talent management, which is key. As usual, please pencil in these dates into your calendars already now. And with that said, Peter and I will now be delighted to answer any of the questions that you may have. Please.

Webcast Moderator: Thank you so much for the presentation here. And as you mentioned, I will carry on with the Q and A. So if you’re calling in and want to ask a question, please press And the first question here we got here is Sofia Serling from Carnegie. You have the word.

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

Peter Valin, Group CFO and Deputy CEO, Invedo: Yes. Hi, Sofia. We

Fredrik Muller, President and CEO, Invedo: can hear you.

Sofia Serling, Analyst, Carnegie: Hi. Thank you. Okay. First question, a little bit on pricing and volumes. You mentioned that volumes are quite dampening all the business areas, but can you say anything about prices?

Have you lowered your prices and also in each of the divisions?

Fredrik Muller, President and CEO, Invedo: We have typically actually raised our prices primarily to counteract some slight upward changes on the raw material front and of course on direct labor as well. But overall margins have been kept, yes, obviously quite stable. And so no dramatic changes in a way. There is a lot of price pressure in the market because of the competition and because of lack of volume still. But otherwise, relatively stable, I’d say.

We are, of course, monitoring the raw material situation rather closely. We always do that, but particularly now and with an extra focus on glass, both in terms of availability and pricing. And so we are ready, if need be to, of course, adjust prices even further. And pricing is generally a topic very high on our agenda. Because again, the glass situation is a little bit tricky because many of the glass suppliers have reduced their capacity over the last year or so, meaning that when demand does bounce back, there may be a little bit of an effect that we saw during the pandemic with an impact on both availability and price.

But so far, so good.

Sofia Serling, Analyst, Carnegie: All right. Okay. Thank you. And if we go to Scandinavia, you mentioned that the project market, especially in Sweden, is quite strong. Could you say which type of customer segments is driving this demand, would you say?

Fredrik Muller, President and CEO, Invedo: In terms of sales, we had more project sales in the mix this particular quarter. I wouldn’t say that newbuild as such, if you look at that, is strong in Sweden, although there is increased activity of course and everyone is watching the interest rates from the risk bank and whether it will continue down, which would have a positive impact. Although today’s inflation figure was a bit on the high side compared to estimates. But otherwise, I think it’s a matter of building new buildings in the larger cities. In Sweden, particular, some of the smaller to medium sized cities see less activity and are struggling a bit with demographics.

So we’ll see more in Gothenburg, Stockholm and Malmo going forward. And to some extent less of what we are at the same time not really in anyway, but less of schools and hospitals perhaps.

Sofia Serling, Analyst, Carnegie: Okay. Okay. Yeah. And I noticed that the EBITA margin in Scandinavia is very strong during the quarter and then it’s an improvement year over year with about 30 bps. Do you think it’s sustainable into the 2025 to keep this increased improved margin year over year, if I

Peter Valin, Group CFO and Deputy CEO, Invedo: It take that of course depends on the markets and the volumes coming in. In the quarter this year, we can see that in general, Norway is still challenging, Denmark is still stable and improvement comes from the Swedish markets.

Fredrik Muller, President and CEO, Invedo: Think, Sofia, just to add to that, I think it’s from our end worth stating that because we are working from a portfolio management point of view quite a lot with our lower performing entities and that is beginning to bear fruit. And of course, that’s something that we’re overall pleased about. But it also means that in the short to medium term, we have a negative mix effect from that as they gain more ground faster than some of the other entities. It overall raises the profitability and the performance of the Envito portfolio, which is definitely something that we want to achieve. But there is a slight negative mix effect in there as well.

Sofia Serling, Analyst, Carnegie: All right. Let’s move on to e commerce. You mentioned that you have implemented some structural measures. Is that something you expect will continue into the 2025, or or is it something that you have already implemented and we can already see this reflected in the financials?

Fredrik Muller, President and CEO, Invedo: Yes, I would say it’s more the latter, Sofia. If you recall from Q1, we were geared up to meet what we anticipated to be higher demand level already early in Q1. The reality turned out to be quite the opposite, meaning that we had to take a step back and go through a bit of a strategic assessment of the whole BA, meaning that we also took some measures in January, February. They started to kick in March and we have seen more of that payback during the second quarter. I don’t expect more of that in the second half of this year and more measures to be taken that being.

It’s worth noting though that this business is, I mean, it’s a volume game. It requires that you have a very lean operational setup at the back end and that you have a rather lean sales and marketing set up also in the front end. We do that really well. And I think that some of those measures that we took in Q1 actually put us in a better strategic position for the medium to long term with this business. And at the moment, we’re just quote unquote lacking volume.

Again, if you look at, as I mentioned earlier, if you look at e trading, for example, Sweden in April, May, it was down by some 24% or something. So it’s more of a consumer pattern right here, right now. But again, history shows that it can very quickly bounce back up again. But we are ready for that capacity wise.

Sofia Serling, Analyst, Carnegie: Okay. Thank you. Yeah. A lot of question here, but a final one from my side. So you mentioned this energy performance for buildings directive and that it might that it will be implemented next year.

But do you see any risk that this directive is already reflected in in your volumes during 2025? Or do you expect more of acceleration in volumes into or during 2026?

Fredrik Muller, President and CEO, Invedo: Oh, again, it’s it’s it will be more of the latter. And we do think that this will still happen because energy efficiency, first of all, is very high on the EU’s agenda. Secondly, they have come very far in preparing for all of this. And it’s I mean, again, take Sweden as an example, you know, that BUVACET and others are right in the in the middle of getting proposals out that will in turn become legislation in each EU member country latest early next year. And thirdly, the upside potential is in terms of savings is huge, of course.

And thankfully, windows and doors are very well placed to benefit from that. So good news is that we’re beginning to see a lot of healthy and quite informed discussions with many of our customers already now. We did launch a low CO2 window in Finland in Q4 already last year. And that has gained a lot of excitement and interest from the market already. And we have a couple of positive case examples already to point towards.

And that’s beginning to spill over also into other markets as well. So we run the same type of discussions with some of our Sweden based customers at the moment. And in Finland, of course, this window is still on an exclusive basis. So we’re the only one in the market that can provide it.

Sofia Serling, Analyst, Carnegie: Okay. Okay. Thank you so much for your answers.

Webcast Moderator: Thank you. Thank you. Thank you so much for the questions, sir. We will now move on with the next questionnaire, and is the person that has the number that ends with 690. You’re welcome.

You have the word.

Jonny, Analyst, SEB: Hello. Can you hear me?

Fredrik Muller, President and CEO, Invedo: Yes.

Jonny, Analyst, SEB: Hi. It’s Jonny from SEB here. Good morning, Karel Capehart. Thank you for taking my question. I just want to start a little bit on the sales and the conversion ratio here in the quarter.

I want to understand that a little bit better. So I mean, if you’re looking at the conversion ratio compared to your backlog you ended in Q1, it seems to be around 88% here in the quarter. And this seems to be a little bit low in a historical context. But then I also know that you have more project business in the mix now as you have highlighted. But I mean, even compared to last year, it’s been low.

And if I recall correctly, you also said that some sales rolled over from Q1 into Q2 due to some weather conditions here in Western Europe. So my question is really, did something special happen here during the quarter that affect the deliveries? Or how should we think about the conversion ratios here going forward given your change in the mix? That’s my first question. Thank you.

Fredrik Muller, President and CEO, Invedo: Yes. Hi, Jani. This is Fredrik. Yes, it’s a relevant question, of course. Really there’s really no drama around this.

As you correctly pointed out already in Q1, we communicated that particularly in our Western Europe BA and more specifically, SIDI. They did see some deferrals, not cancellations or anything like that, more deferrals due to weather and other non site accesses given. So that it’s more of a rollover and not everything could happen in Q2. So more of that will come also in Q3 and Q4. So it’s primarily related to the project business.

Peter Valin, Group CFO and Deputy CEO, Invedo: And then compared to previous years, we have this large order we took at Saide and Walker in Scotland in Q4. So we have larger long term contracts, even also just looking at product business, we have a more long term contract this year compared to previous years. And that has a negative impact when you calculate your conversion rates.

Jonny, Analyst, SEB: Okay, I understand. So it’s maybe fair to say that the conversion ratio in this quarter is normal and that this is the new normal here going forward as well. Is that fair to say, would you say?

Peter Valin, Group CFO and Deputy CEO, Invedo: Yeah. Fair to say for the next coming one, two quarters. Then when these large orders have been reduced, then we’re back to normal until we get to some new large orders. So it’s more after acquisition of SIDI, the conversion rates looking at product sales will be more fluctuating compared to previous years. Whereas the conversion rate of consumer is more stable because that is more or less 100%.

Because that’s the nature of the business. Order delivered time within a consumer business is six to eight weeks, where the project depends on the large orders and the long lead time. So it will be more fluctuations, especially after the acquisition of SIDI.

Jonny, Analyst, SEB: Okay. Yes, that’s clear. And then I just want to follow-up on your comment around the uncertain macro conditions here. And you mentioned some postponed recovery. I mean, how was the momentum during the quarter, would you say?

Or were there any clear shifts? And I think if I heard you correctly, you said that there were some stronger sales towards the end of the quarter, which affected the cash flow as well. So how is the momentum going into Q3 here? Is it are we seeing a pickup, would you say? Or is it rather safe?

Fredrik Muller, President and CEO, Invedo: From a sales perspective, we start with that. Sales improved throughout the quarter, meaning that June was better than April. And then order intake wise relatively flat, I must say, but a little bit more positive perhaps towards the end. But again, if you look at the order intake, need to take the record large order of Carlson in Ireland in Q2 last year into account when you do the comparison against last year’s Q2.

Jonny, Analyst, SEB: Yes. Okay. That’s fair. But I mean, I suppose you always have a little bit of seasonality here during the quarters. I mean, if you compare the momentum year over year, so to speak, is it a clear shift?

Or I

Fredrik Muller, President and CEO, Invedo: mean, it it varies a bit from market to market. It’s definitely not worse in any way. I would say it’s, if anything, a little bit more positive, particularly if you take a country like Sweden that’s been, at very, very low levels and very dormant. It’s beginning to pick up, not at the pace or magnitude that everyone had hoped for, but it’s moving in the right direction. In Norway, we perform better than the market and the Norwegian entity is actually doing quite okay here Q2.

And Denmark, rather stable. Finland, as I said, we do quite well, but it varies a lot from the large entity to the smaller ones. We still have entities that lack 50% of their volume. And then England, very tough, but I have to say I’m quite impressed by our entities performance over there. And then to conclude, Scotland and Ireland quite stable, really.

It’s really a lot of people are sidelined. Households don’t open up their wallets yet, but it can the tide can turn quite quickly. And, yeah, it’s the the fundamentals remain the same.

Jonny, Analyst, SEB: Understand. Understand. We we see. But I also think that your comment around the project business in Sweden is is rather interesting, especially tying that to your new and more efficient factory in Vietnam now. So maybe could you maybe comment something around how is utilization rates in that factory at the moment?

And given your new and more efficient plant in Vietnam, suppose that you have also lifted your lowest level, if you know what I’m trying to say here. So are there more upside to the margin, would you say, if we fill the factories in Wirtlanda? And can you also maybe quantify that a little bit, the magnitude we can expect?

Fredrik Muller, President and CEO, Invedo: Yes, sure. Yes, the Wirtlanda Factory is about to conclude this large restructuring project called the One Factory project, which I’m quite impressed by as well. The full magnitude will come in the second half of the year, but there’s not much left to be done, to be honest, which is great. And you’re absolutely right. It comes with an expectation that profitability goes up.

In order to get to that profitability level, we need volume. And of course, Wirtland is of course quite dependent on the industrial, the project side of things. But overall, our Sweden entities, which of course include Elite Faster are performing better and better already now. So I’m quite optimistic about not only the Vietnam as a site, but also the other Elite Faster and the other Swedish entities as a whole.

Jonny, Analyst, SEB: Okay. Yes, that’s clear. But I mean, if we try to the magnitude a little bit of that, I know it in my head right now, but let’s say that you did 10% margin in Vietnam before. Could you maybe do 11% now if you feel the factor is? Or is that fair, would you say?

Peter Valin, Group CFO and Deputy CEO, Invedo: So looking at the late semester, we did 10, but that was some years ago. So the margin of the late semester is lower than that running rate running as of today. However, that has been improved and looking at the quarter, Scandinavian has improved the margin from 11.3 to 11.8, and that’s mainly related to Swedish, the improvement in Sweden, where then Leedskronstad is one of the main contributor.

Jonny, Analyst, SEB: Yes, I understand, I understand. It’s a lot of moving parts, have the efficiency gain and also you have this change in mix. But I mean, if we would compare the same mix as before and now after the change in Vietnam, I suppose that there should be a little bit more margin upside. Is that fair?

Peter Valin, Group CFO and Deputy CEO, Invedo: For this answer, yes.

Jonny, Analyst, SEB: Okay. Yeah. That’s good. And then just one final. I mean, I know I’ve been asking this repetitively, but I mean, coming back to M and A a little bit, it’s an important part of your strategy and your targets ahead.

So maybe, I mean, could you shed some more elaborating comments on the update, how that is going? And if I recall you correctly, you said before that you are targeting some larger targets now on new markets. And I suppose the discussions are ongoing and can take some time. But if they come and once they come, the larger platform acquisitions, let’s say, is it fair to assume that we can see an acceleration after that when you build on smaller acquisitions on that larger platform? Is that fair assumption, would you say?

Fredrik Muller, President and CEO, Invedo: Generally, would say yes, particularly if we go into a brand new market. But if we take half a step back and you put M and A in a relative perspective, it’s of course so that I mentioned already today that to get to the 15% CAGR, sales CAGR per annum, we now relatively speaking need we’re a little bit more dependent on M and A than what we were already last year, I would say. The good news is that we continue with a very structured effort in this field and we have a very, very high activity level, as you can see. And Peter mentioned the transaction related costs that we’ve taken in the charges that we’ve taken in the quarter. So I think we concluded the other day here internally that we’ve never had this broad and deep funnel of targets.

So a lot of high quality cases in there and several ongoing rather positive discussions. I think one needs to pay respect to the time that it takes to get this done. First of all, it’s all about relationships. I joined Envito little more than a year ago. And of course, I’ve been out there planting seeds for what hopefully becomes a deal in either five months or five years.

But that takes time and we probably lost some momentum between my predecessor and myself. Add to that the general market uncertainty, it certainly doesn’t help people moving from A to B. Of course, it’s not again about the multiples, it’s more about what you apply the multiples to. Is it the last two years performance? Is it the coming two years?

Or is it the current prevailing pace, etcetera, etcetera? It’s tricky. And again,

Peter Valin, Group CFO and Deputy CEO, Invedo: add to that that

Fredrik Muller, President and CEO, Invedo: we are really selective. I mentioned already as part of our Q1 reporting that we had left one or two processes because the risk was just deemed to be too high. And when I’ve been out meeting investors over the last few months, Everyone keeps telling me that, M and A is important, but you got to do the right deals. So that is something I can subscribe to, of course. So the funnel at the moment is a healthy combination of, small to primarily medium sized and large ones.

So everything from SEK100 to SEK500 million to SEK1.5 billion in turnover, but also a healthy combination of geographies, including the existing markets that we’re in, but also a couple of totally new markets to Indeedo. So, as I mentioned at the very outset of this call, we are a leading player in Europe, but we’re only literally in one out of the top 10 markets in this industry in Europe. So, and that’s The UK. So, we still have a lot of white spots on the map, and and that’s good news, I think.

Jonny, Analyst, SEB: Yeah. Yeah. We’ll we’ll see if we need to follow-up on that. It’s exciting. But if we would say I know timing is hard, but if you haven’t closed one or two acquisitions before the end of this year, would you say that you would be disappointed then?

Fredrik Muller, President and CEO, Invedo: Yes. I would be disappointed then.

Jonny, Analyst, SEB: Okay. That’s clear. We will follow-up. Exactly. Okay.

Thank you so much. That was all for me.

Fredrik Muller, President and CEO, Invedo: Thank you, Jani.

Webcast Moderator: Thank you so much. And now we’ll move on to the last question here that’s been sent to us. What will the increase in Scandinavian project sales likely imply for profitability given that it likely allows for better cost coverage in your facilities?

Peter Valin, Group CFO and Deputy CEO, Invedo: The margins on product sales is lower compared to consumer sales. So with a higher increase on product sales compared to consumer that have negative impact on the margin. However, now we need more volume in terms of product sales and also due to the implementation of the one factory we have at the Lidsnauerster in Sweden. And the product sales is mainly in Sweden. Denmark has more or less has a very low product sales and also Norway has low product sales.

So products like Scandinavia is mainly in Sweden. So with a higher volume and with improved efficiency from project that will compensate the lower profitability consumer competitive projects. I will say slightly improvement.

Webcast Moderator: Thank you so much. Those are all

Fredrik Muller, President and CEO, Invedo: the questions we had. So I

Webcast Moderator: will now hand over the word to Ken Pietro for some closing remarks.

Fredrik Muller, President and CEO, Invedo: Thank you very much and thanks everyone for attending this call. Let me also take this opportunity to thank all the InViro employees and our business partners for a job well done and wish you all a wonderful summer. Thank you

Jonny, Analyst, SEB: very

Peter Valin, Group CFO and Deputy CEO, Invedo: much and

Fredrik Muller, President and CEO, Invedo: thank you, Peter.

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