Earnings call transcript: Netcar reports Q1 2025 loss, revenue down 27%

Netcar (NTCR) reported a challenging first quarter of 2025, with revenues dropping 27% year-over-year to NOK 111 million and a net loss of NOK 8 million. The company’s stock closed at NOK 11.05, reflecting a slight decrease of 0.45% from the previous session. Despite the downturn, Netcar maintains a strong cash position and a robust order backlog, signaling potential future growth.

Key Takeaways

• Revenue fell by 27% YoY, significantly impacting net profits.
• Strong order backlog of NOK 757 million indicates potential recovery.
• New contracts and strategic goals aim for NOK 2 billion revenue by 2027.

Company Performance

Netcar’s Q1 2025 results show a significant downturn compared to the same period last year. The company’s revenue decreased from NOK 152 million to NOK 111 million, and it reported a negative EBITDA of NOK 12 million, a stark contrast to the positive NOK 30 million seen in Q1 2024. Despite these challenges, Netcar’s order intake was robust at NOK 155 million, and the company has a strong cash position with no debt, which provides a cushion for future operations.

Financial Highlights

• Revenue: NOK 111 million, down 27% YoY
• EBITDA: Negative NOK 12 million, compared to positive NOK 30 million last year
• Net Profit: Negative NOK 8 million
• Order Backlog: NOK 757 million
• Cash Position: NOK 182 million, with NOK 62 million in treasury shares

Outlook & Guidance

Netcar is focusing on expanding its service agreements and long-term contracts, with a strategic goal of reaching NOK 2 billion in revenue by 2027. The company is exploring mergers and acquisitions to drive growth and anticipates improvements in project phasing by 2025. Expectations for increased commercial activity in the FISH segment and ongoing tender activity in the defense market are also noteworthy.

Executive Commentary

CEO Ulle Falconsen stated, "We aim to reach over NOK 2 billion in revenue by 2027 through a diversified and well-balanced portfolio." He emphasized the independence of each operating company within Netcar, highlighting their ability to stand alone while being part of the larger group. Falconsen also mentioned, "We are continuously in processes of evaluations or due diligences, but of course, it’s to make the right decisions."

Risks and Challenges

• Continued revenue decline could pressure profitability.
• Dependence on government regulations in the aquaculture market.
• Execution risks in expanding to 6-8 platform companies by 2027.
• Potential market saturation in key segments.
• Macroeconomic pressures affecting defense and maritime industries.

Netcar’s strategic initiatives and strong order backlog offer a foundation for potential recovery, despite the current financial challenges. The company’s focus on innovation and expansion could drive future growth, provided they navigate the outlined risks effectively. For comprehensive analysis including detailed financial metrics, growth projections, and expert insights, check out the full Pro Research Report available on InvestingPro.

Full transcript - Nekkar Asa (NKR) Q1 2025:

Ulle Falconsen, CEO, Netcar: Good morning everyone and welcome to this first quarter presentation for I’m Ulle Falconsen, I’m the CEO of Netcar. I will give you a brief presentation of our first quarter results and as normal, we will round off with some Q and A after the presentation. The Nekkal Group now consists of five companies in addition to the Skywalker venture project, as you can see illustrated on this slide. The Netgard operating companies are exposed to four main end markets, with defense and maritime being the largest. The target market revenue mix is also fairly balanced across these segments.

We have seen a steady growth in defense through our operating company SynchroLift through the recent years and also in the future pipeline to come. Also, the other markets have positive outlook. So, let’s look at some of the highlights for the first quarter. It was pleasing to see the Karna Ocean Lift sign a repeat order for a 150 tonne crane in the quarter, and subsequently to the quarter an award of a 70 tonne repeat crane. With these repeat order contracts, we are able to standardize products and improve operational efficiency.

The importance of building a market track record and proven products was underscored by a negative million EBITDA impact in the Karno Ocean Lift during the first quarter, from the two first market entry projects that’s been signed over the last couple of years. For Fiske, we are positive to see the increased focus on fish welfare and sea rise reduction in the proposed hardwood smelling by the Norwegian government. So let’s move to some of the key financial figures. The revenue for Netka came in at NOK111 million, which is down from NOK152 million same quarter last year. And EBITDA ended at minus NOK12 million for the Group as a whole.

The negative EBITDA in the quarter is disappointing and does not align with our performance goals. The figure was primarily driven by progress in Syncoli projects, currency and the mentioned Tucano Ocean Lift projects. However, at NECA, we continue to see a positive underlying development in our operating companies for the coming quarters to come. Net profit was negative of million, which was positively impacted by currency effect that helps to partly offset the negative currency contribution in the EBITDA. Netka still maintains a strong balance sheet with solid cash of NOK182 million, NOK62 million in treasury shares and no debt.

The order intake was NOK155 million in the quarter, driven by the Carno Ocean Lift business. As you can see, the first quarter revenue and EBITDA is far below our historical track record and also our own expectations. However, given NECA business activities, there will be some quarterly fluctuations, due to both phasing of projects, project mix, currency developments and also other factors. The order intake were NOK155 million in the first quarter, with NOK85 million coming from the 150 ton Tucano Ocean Lift project. Please note that the second contract was signed in April and is not included in the figures.

The order backlog at the end of the quarter was $757,000,000, which provides decent visibility for the coming quarters. Majority of backlog is still related to Syncolift, but more than NOK 100,000,000 is now from other companies. So let’s move to some business updates from our operating companies, and we start with SynchroLift, which is our largest company. For market and sales, the tender activity remains high and is increasingly driven by growing demand in the defense market, which now represents a substantial share of tendering activities. These often large contracts thus however carry with them some uncertainty related to the exact timing of award, as they are impacted by government planning and general infrastructure requirements.

This means that contract awards can slide in time independently of one another, but due to similar mechanism, and without decreasing the likelihood of the contract actually coming to award. As such, no contracts have been awarded in the quarter, nor lost in the quarter for Syncrolift. For financials, the Q1 revenue was lower than expected, driven by phasing of activity on awarded projects, which was lower than expected, coupled with lower order intake last year. The EBITDA margin in Syncrolift was also negatively impacted by the depreciation of the US dollar. However, the operational activities and also the performance in the projects are as normal otherwise.

Service activity held up well, both in terms of revenue margin and order intake for the quarter. And I’m also happy to say that the construction of Syncrolive’s new demo and training center in Vespi is progressing well with customer activities already started up. Our Capital Markets Day for Netgau during the second half of twenty twenty five will be at this location when it’s fully finalized and in operation. We continue to see a healthy outlook for Zyncholift activity levels, and the backlog remains above million. And we see high tendering activity in the newbuild upgrade segment.

From last quarter, total tender activity and volume has increased, while the tender levels for 2025 have decreased somewhat to billion, as some projects are expected to take longer time for award. And let me give you an example. Increased defense spending for a government may very likely impact Syncoli’s market for shiplifts and transfer systems. But time to award is impacted by decisions on vessel classes, construction and service yards and the following infrastructure developments of such yards. These are processes that takes time and are linked with some uncertainty on specific timing and volume.

In this quarter, we have also taken the liberty to split our view on contract awards for 2026 and 2027 to add some transparency to our near term market views. And as you can see, the total tender portfolio is increasing. The large amount expected for award in 2026 will of course continue to be at risk due to changes, but does also include the decrease of awards expected due this year, which we showed last quarter. I would also like to take a moment to highlight the exposure of Synchroleft to the defense as a key end market and also being the largest end market for Synchroleft. As a leading defense and naval supplier, Synchroleft directly and indirectly works with some of the world’s largest navies, specialized naval yards and commercial yards working on government contracts.

And SynchroLift’s defense exposure can be split into three segments, as you can see on this slide: Navy surface vessels to the left, Navy submarines in the middle, and also service and maintenance bases for such vessels. SynchroLift’s core products, ship lifts, fluid bed transport system and the lifecycle services are embedded in all these three categories. And working for these clients demands precision, quality and the ability to deliver at the highest levels, and I’m therefore proud of SynchroLift’s ability to deliver on large contracts to such an important sector over time. Let’s move to Tecano Ocean Lift, our offshore lifting and handling technology provider. So far this year, we have good order intake with two orders awarded, totaling NOK144 million.

And the company also continues to tender for a handful of solid leads. On the revenue side, the NOK11 million were on par with previous quarters, as market entry projects signed the last couple of years are nearing completion, but newly awarded projects have not yet ramped up in activity. The EBITDA was as mentioned negatively impacted by cost increases in the market entry projects. For these first deliveries, we have entered with lower prices and in addition experienced one off costs for engineering and manufacturing. While the margin mix in the first quarter still only contains market entry projects, these contracts are expected to near completion with newly signed contracts generating more reasonable project margins from Q2 and onwards.

And as you can see, the recent award of both the 150 tonne and the 70 tonne active heap compensated crane highlight the benefits of repeat awards. For such contracts, we will experience lower engineering costs and lower complexity, With the design work and technology developments already completed in previous projects, a cost and uncertainty driver is removed. And furthermore, we will improve efficiency in project execution by utilizing existing production setup and sub suppliers. Let’s move over to IntelliLift, which is the industrial software and automation provider. In the quarter, we signed a 10,000,000 NOK contract with an oilco to remotely drill with their digital twin by use of IntelliLift simulator and integration of third party software.

The Hanwa project signed last year is now successfully installed at a drillship in Korea, and the project demonstrates IntelliF’s capability as an integrator on drilling rigs for both control systems and human machine interfaces, as I will show you on the next page. Furthermore, we also received a new automation contract awarded from Hanwha for the said drillship, and we are tendering for drilling automation and other drilling projects through both IntelliLift and our joint venture Intelliwell. The NOK 19,000,000 revenue in the quarter is primarily driven by external drilling projects, and shows a steady increase from previous quarters. On the operational side, IntelliLift are progressing work on the mentioned projects. And as mentioned on this slide, you can see pictures from the newly installed human machine interface system delivered by IntelliLift to the Tidal Action drillship in Korea.

The drillship will be operated by Constellation Oil Services in Brazil on behalf of Hanwa Drilling, and it’s a good showcase to demonstrate IntelliLift’s wide range of capabilities. In GlobeTech, which we acquired in the third quarter last year, we continue to observe high customer activity on the market side, with sales driven by new vessels and deliveries to existing clients. Revenues for the quarter were NOK27 million, which is up 25% year on year for the company, with continued solid profitability. The company is now strengthening the team with senior hires across multiple functions, as part of its business plan for future growth. Moving on to FISH.

Following last quarter’s breakthrough contracts for the delivery of two Protector’s closed fish cages to a leading Norwegian fish farmer, FISH continues to see interest in closed cages, particularly within post smalt production strategies. New award has, however, been pushed in time, as customers have been awaiting new regulations on both Haarvvuchs Malignin, which were published now in April, and also the implementation of the Milliur Flex awning, which was published in December, which I will return to on next slide. The first quarter revenue were million, which is primarily driven by the start up of the two protectors projects awarded in fourth quarter. And these units are scheduled for delivery in the second half of this year. While the revenue is a decrease year on year, it’s worth mentioning that last year figures had business units that have since been divested.

The profitability of Fiske is still impacted by cost for market entry projects for these two projects and also current volume levels. And in April, the government released its Havwick smelling, outlining its wishes for impacting the aquaculture industry going forward. While the regulation will take some time to pass through the Parliament, its headlines are positive for Fiske, which includes focus on lower mortality, increased focus on sea lice and increased attention to fish welfare. The Milliur Flex awning, which was announced just before Christmas last year, is expected to be approved in Parliament in the near term and will remain as the main government regulations while we are awaiting the further progress on Harbrujsmellingen. And Fisk meets all the requirements of the proposed Milliour Flex awning, hence fish farmers could regain lost capacity by taking the solutions from Fisk in use.

So with this, we will move to some more financial details. Let’s start with the revenue. The revenue for the quarter came in at million, which is a 27% decrease compared to the same period last year. And the decline is primarily due to the lower progress in the ongoing Syncholift projects, which are driven by external factors combined with lower than expected order intake last year. On a positive note, both IntelliLift and GlobeTech delivered solid contributions.

For the profitability, the EBITDA ended at a disappointing minus NOK12 million compared to a positive NOK30 million in first quarter last year. This is below our performance expectations, but reflects previously communicated factors: the low project activity in SynchroLift, increased cost in market entry projects in Pecano and also negative impact from the currency development for the NOK versus the dollar. The net financial items of NOK7 million are driven by the currency effects and Netka share of his quarterly profit. And as a result, the net profit for the quarter was minus NOK8 million. Moving on to the balance sheet, if we look on the asset side, as you can see there is an increase in right of use asset this quarter, that’s primarily due to a renewal of a lease contract in Vespi for Zyncholift, and this also explained the corresponding increase in lease liabilities.

The financial assets are mainly tied up to the ownership in Fiske. For the working capital, the working capital is at million, which is unchanged from year end. And during the quarter, there has been various changes on the respective working capital parts, but overall the working capital is steady at NOK57 million. Netka’s total balance sheet amounted to NOK774 million at the end of the first quarter, and we remain debt free and have a robust equity of NOK466 million or a 60% equity ratio. Turning to cash flow.

The cash flow from business was negative at NOK8 million, which is mainly due to the negative EBITDA, although partially offset by positive contributions from financial items. We also had a cash outflow of SEK15 million in the quarter related to the share buyback program. And in total, this resulted in a net cash outflow of million in the quarter. And as mentioned, we remain a healthy asset balanced company with cash at NOK182 million, NOK62 million in treasury shares and also an undrawn credit facility of NOK200 million. So for the Q1, I will make some conclusion remarks.

In the quarter, we had soft revenues driven by CincoLift due to phasing of activity on awarded projects, which also impacts EBITDA, which was below a satisfactory level for Nektar. Our solid balance sheet, combined with order intake for Tucano and high tendering activity in Syncolift, provides solid outlook for the business going forward. And with GlobeTech and IntelliLift, we continue to see growth with good profitability in both companies. And with Fiske, we are expecting increased commercial activity from favorable regulatory changes proposed. So before we round off, I will just take a moment to recap the strategic ambition for 2027 that we first presented in our third quarter last year.

As announced, we aim to reach over 2,000,000,000 in revenue by 2027 through a diversified and well balanced portfolio. And we plan to expand to six to eight platform companies, creating a more diverse and balanced portfolio. And the focus is still to deliver financially solid results from this larger and more diversified portfolio. And to the right, you can see the current developments from 2023, with a 45% growth to 2024, in order to reach the 2,000,000,000 ambition. So with this, I will round off the presentation from the first quarter, and we will move to some Q and A questions.

Analyst/Moderator: Good. We have a couple on the line. First off, can you elaborate a little on the Neka defense exposure and SyncroLift’s role here? How much that is and how you see this developing?

Ulle Falconsen, CEO, Netcar: Yes. So I think if you look on the last year’s official figures in the annual report, Netka’s total defense share was about 45%, forty six %. And of course, with SynchroLift, this is 60% to plus of the business last year. And I think if you look on the current tender portfolio, we see the same level or also higher level of share of defense. And as I illustrated on the slide for SynchroLift, these are due to either newbuild projects for respective government countries’ navies or also part of larger upgrade maintenance service bases in such respective countries.

And I think if you look on the current pipeline of projects, which we are working on now, more than half of these are linked to such activities.

Analyst/Moderator: Good. And then there’s a couple of questions on GlobeTech. I will merge them together. It’s great to see GlobeTech doing well. Can you elaborate a little on future

Ulle Falconsen, CEO, Netcar: business activity of GlobeTech is linked to, you could say, the number of vessels being served from GlobeTech, whereby normally GlobeTech has a service agreement with a contract to kind of be the service partner for IT and communication on board the vessels. So of course, the business is likely to scale with a number of vessels being in the portfolio, both from the existing clients, making new builds and acquiring vessels, but also new clients coming into the portfolio. At the moment, we do not have defense customers in the GlobeTech portfolio. However, that’s, of course, something we are looking into. The majority of the customers are offshore and commercial vessels in oil and gas, wind and tankers and, yes, more commercial activities.

Analyst/Moderator: Great. Then there’s a question on service agreements. Do you observe any development or growth in service agreements that drives recurring revenue? And how do you work to develop this in general for Nektar?

Ulle Falconsen, CEO, Netcar: Yes. So I would say that all our companies today have service contracts with the clients in various degrees and of course, also in various share due to the number of installed products being in the market. So Fiske has service agreements for its previously delivered projects. Tekano will now sign that for the new cranes being delivered. And of course, for GlobeTech, that’s the majority share of their business.

And for SyncroLift, of course, we are continuing to add on service activity and service contracts. And we see a trend that we are moving towards more long term contracts, whereby clients leaves a larger scope and responsibility on us as the product and service provider, whereby there’s a share of fixed revenues and then also additional ad hoc scope, which will be built based on activity levels.

Analyst/Moderator: Great. There is a couple of questions on SynchroLift. And while we do not give guidance, you’re asked to comment in general on the how you see the phasing of projects developing going forward in 2025?

Ulle Falconsen, CEO, Netcar: Yes. So as mentioned, especially now in the first quarter, we had lower than expected progress on a couple of projects, which we kind of were in normal expected to drive more activity and revenue on. And these are due to some customer build out projects, whereby we either have to wait for another contractor to finalize or there are other kind of obstacles in the way in order to for us to deliver, for instance, a ship lift. So I think we of course, we expect the progress to come back again. Of course, it’s not lost, it just moved a bit out in time.

And of course, also, we are expecting to sign new contracts in SynchroLift as we move on later this year. There’s also a

Analyst/Moderator: few on SynchroLift. There’s also a few questions related to the changes in the tender pipeline. If you can comment a little on the moving between 2025 and onwards and if this is related to recent tariff discussions, particularly with The U. S?

Ulle Falconsen, CEO, Netcar: Yes. No, the tariffs are not a key reason. And I believe there are non U. S. Projects in the pipeline for 2025 and 2026, as I can recall.

So as mentioned in previous quarters, the main regions are Middle East and Southeast Asia. And when we kind of published the numbers now for the tender portfolio, we have seen that some projects have kind of been pushed one or two months or three months out in time, and we decided we move them to next year in order to provide a more kind of balanced and fair view on 2025 picture. And it’s important to say that kind of there could be surprises, both positively and negatively, due to kind of the hour indicated timing of award. So that’s, of course, something we will continue to update on when that happens.

Analyst/Moderator: Can you elaborate a little bit on the difference in earnings in market entry projects and repeat projects in Tucano Ocean Lift?

Ulle Falconsen, CEO, Netcar: Yes. No, and that’s, of course, important factor. When we entered as an owner in Tucano for for now a couple of years back, of course, Tucano needed to to gain a track record in the market and to be established as kind of a, yes, a well known provider of products and services. And in order to do so, we were in position to take on a few projects, whereby we, on pricing, had to be very competitive in order to kind of convince the customers. And of course, also for us, in order to deliver a product from the first time, there are additional costs due to design, engineering, and of course, the production and testing methods, whereby we now in the new contracts we have signed, which are repeat contracts in terms of products and the specifications, are able to avoid.

So of course, both on the cost side, but also on the pricing side, we now have a more competitive position than we had a couple of years back. And of course, we expect that we will be able to benefit from that going forward.

Analyst/Moderator: Great. Then there’s a question of how you view Netgar’s ability to draw synergies in terms of revenue between the different companies, like working together or at least drawing benefits from each other?

Ulle Falconsen, CEO, Netcar: Yes. I think that’s of course, we are all our businesses and our key mandate is within ocean based industries. So we try to explore and extract various types of synergies when it’s the right time and event to do so. We enforce synergies, but we stimulate and support driving that together. And of course, you could say, on the newbuild side in terms of vessels, you could say both Takano and IntelliLift are working together to deliver the crane control system.

And also you could say that GlobeTech is a perfect IT and service provider for such vessels when they get into operations. And also, there are other opportunities working together on sub suppliers, whereby we produce various types of products at same production sites. But it’s also important to say that each operating company within Netka stands on its own feet and should kind of have a primary stand alone business in addition to being part of the Netka family.

Analyst/Moderator: Changing to Fisk. Following the recent government announcement you mentioned in your slides, the Haarbrugsmelling, How do you expect to see dialogues with customers changing going forward?

Ulle Falconsen, CEO, Netcar: Yes, we have I think we have dialogues with all the major and also many of the smaller fish farmers, primarily in Norway. That’s our key focus at the moment. We had a customer demo day last week with many of these represented. And this week, we are visiting a lot of them in Barcelona, whether it’s the key kind of seafood expo year by year. And of course, what we see is that there are stimulus and drivers to kind of push, yeah, more closed containment type systems into especially regions where you have a very high sea lice adoption rates.

And of course, many of these are now either in the stage of ordering as we are producing or in the stage of evaluation evaluation in terms of which systems to use and also someone are already in the application process in order to kind of make new sites ready for such solutions.

Analyst/Moderator: On your communicated 2027 ambition, can you elaborate a little on your work with your M and A pipeline?

Ulle Falconsen, CEO, Netcar: Yes. So as you will see from the slide, we kind of have about NOK $05,000,000,000 in inorganic growth activities. And I think we work with M and A on kind of two from two angles. One is additional M and A, which kind of bolts on or rolls up into our existing operating companies, like with GlobeTech, we are looking for whether there are companies we could add to the portfolio, as an example, or we look for new platform companies, which will be additional to the existing five companies in the group. And of course, this is a mix of both incoming requests, which we evaluate, and also our own research and our own outreach to interesting companies.

And of course, we are it’s fair to say we are continuously in processes of evaluations or due diligences, but of course, it’s to make the right decisions and of course, be both restrictive and balanced on pricing and so on. So of course, when we have good opportunities, we try to get into the final picture.

Analyst/Moderator: Back to there’s a question on how should we think of Fiske’s capacity going forward? Yes. So as

Ulle Falconsen, CEO, Netcar: part of the growth strategy in Fiske, we have a plan to be able to significantly ramp up the number of units being able to be delivered. And of course, the production strategy is primarily based on outsourced production, whereby the floating collar is produced at sub suppliers and the bag, the plastic bag basically being the containment, is produced at the Fisk facility in Norway. And we believe at both such places, we have capacity to grow with multiple deliveries at the same time. And we say kind of, as of now, delivery time for the new deliveries are ten to twelve months for similar systems that we now are producing.

Analyst/Moderator: On GlobeTech, are we are you currently working to expand GlobeTech’s offering? Or is it more a focus on developing the offering that GlobeTech has today?

Ulle Falconsen, CEO, Netcar: Yes, I would say it’s kind of a it’s a continuous effort to build to build services and also some software products around what GlobeTech is serving today. But I would say that’s more evolution than we are kind of trying to capture a completely different type of market or solutions. I think with Globetrotch, we believe they are a focused provider of IT maritime services, and we believe that they will be kind of that will be a key strength to maintain focus and rather build volume and, of course, additional services around that. So that’s the plan. Okay.

Analyst/Moderator: Then I think we will wrap it up there. Thank you to everyone who posted questions.

Ulle Falconsen, CEO, Netcar: Yes. Thank you everyone for listening to the first quarter presentation.

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