Earnings call transcript: Solar Group’s Q2 2025 revenue dips, stock stable

Solar Group reported a decrease in revenue for Q2 2025, with figures falling to CHF 3 billion from CHF 3.1 billion the previous year. The stock closed at $0.29, unchanged from the previous session, though InvestingPro data shows a concerning year-to-date decline of 27.5%. According to InvestingPro’s Fair Value analysis, the stock appears undervalued, trading at just 0.54 times book value. The market reaction was muted, as the company had already signaled challenges in the industry, and the results were largely in line with revised expectations.

Key Takeaways

• Solar Group’s Q2 revenue fell to CHF 3 billion, down from CHF 3.1 billion last year.
• Organic growth was negative at -1.2% for the quarter.
• Restructuring and transition costs impacted financial results.
• The Solar Polys segment emerged as a growth driver despite limited operational leverage.
• Market slowdown affected industry and installation segments.

Company Performance

Solar Group’s overall performance in Q2 2025 reflected ongoing challenges in the market. The company reported a revenue decline to CHF 3 billion, compared to CHF 3.1 billion in Q2 2024. Organic growth was negative, registering at -1.2%, as the company faced headwinds in the industry and installation segments. Despite these challenges, the trade segment, particularly the Solar Polys business, showed positive development.

Financial Highlights

• Revenue: CHF 3 billion, down from CHF 3.1 billion YoY
• Organic growth: -1.2% in Q2
• EBITDA: CHF 112 million, below expectations
• H1 EBITDA: CHF 186 million
• Restructuring costs: EUR 45 million
• Transition costs: EUR 12 million

Outlook & Guidance

Looking ahead, Solar Group has revised its 2025 revenue guidance to DKK 11.8-12.3 billion, down from the previous DKK 12.3-12.8 billion. EBITDA guidance was also lowered to DKK 450-510 million from DKK 530-600 million. InvestingPro’s Financial Health Score of 1.69 (rated as ’Weak’) suggests continued challenges ahead. The company anticipates market conditions to improve in the latter part of H2 2025, with organic growth expectations ranging between -4% and 0%. For detailed analysis of Solar Group’s financial health and future prospects, access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.

Executive Commentary

Jens Anderson, CEO, noted, "We have to go seven years back to 2018 since we were in a similar situation," highlighting the company’s current challenges. He also remarked, "It’s widely spread. It’s not that one or two or three customers have left off," indicating that the market slowdown is affecting a broad customer base. Michael, CFO, added, "We are fairly convinced that this is a market thing," suggesting that external factors are primarily influencing the company’s performance.

Risks and Challenges

• Market Slowdown: The unexpected slowdown in the industry segment poses a significant risk.
• Restructuring Costs: High restructuring and transition costs could impact profitability.
• Geographic Variations: While Norway is performing well, other markets are experiencing a slowdown.
• Competitive Pressure: Similar market challenges are reported by competitors in Europe.
• Trade Uncertainties: Ongoing trade uncertainties and tariffs could further affect market conditions.

Q&A

During the earnings call, analysts inquired about the transition costs and their relation to the warehouse consolidation project. They also questioned the impact of market slowdown, attributed to trade uncertainties and tariffs, on the company’s performance. Executives emphasized the contribution of the Solar Polys segment to growth and noted that cost reduction efforts are nearing current capacity limits.

Full transcript - Solartron PCL (SOLAR) Q2 2025:

Jens Anderson, CEO, Solar Group: A warm welcome to this update regarding our guidance for 2025 and also preliminary second Q figures for the solar group. Together with me here at our headquarter unwind, have my colleague, CFO, Markus Jebisen. The agenda today will be pretty short. I will give a general update on our guidance and also try to explain why we have just lowered our guidance for year 2025. Then Michael will take over and give you some more detailed figures as background for our decision.

And then, of course, finally, there will be questions and answers. What we saw was an unexpected market slowdown for especially industry and, to a lesser extent, for installation. Trade and Climate and Energy delivered growth driven by mainly super employees who are right now building a major solar park project. Summaring up our figures for Q2 and especially July showed disappointing revenue growth in all key markets. In Q2, we, therefore, executed additional staff reduction and continued to initiate measures to optimize our operating model.

But our half year results, therefore, include transition cost of DKK12 million regarding KUMMA, but also restructuring cost of DKK45 million, of which the latter is expected to generate nearly equivalent savings in 2025 and full year savings of approximately million, equal to an EBITDA improvement of 0.7% into 2026. Therefore, we have decided to lower our 2025 revenue guidance to a range of DKK 11,800,000,000.0 to DKK 12,300,000,000.0 from previously DKK 12,300,000,000.0 to DKK 12,800,000,000.0, but also our EBITDA guidance to a range of DKK $450,000,000 to DKK $510,000,000, down from DKK $530,000,000 to DKK 600,000,000. Given our resilient business model combined with the already executed initiatives, we are convinced that Solar will be able to improve profitability in our strategy period despite the increased uncertainty in the market. Finally, I want to state that we have to go seven years back to the 2018 since we were in a similar situation as now. And with those words, I will hand over the word to Mario.

Please, Mario?

Michael, CFO, Solar Group: Thank you, Jens. Please turn to Page five. And bear in mind, these are preliminary figures. I’m only going to say this much. So what we’ll do is we’ll give you a 10,000 feet overview on both Q2 and H1 and then of course, some of some one beat to the bone regarding the new guidance.

But if we start on Page five, the revenue was disappointing in Q2 with an organic growth of minus 1.2%. But again, and minus for our Polys is currently a major growth driver. So if we adjust for them, we’re actually looking at a negative growth in the remaining part of the business of minus 3.6% even when adjusted for working days. Now the challenge with Solar Polys is that it is a business with a very limited scale effect. But of course, also on the other hand, they have a very limited risk.

Everything is hired in, but it doesn’t there’s no operational leverage in it basically. So we ended with CHF three billion versus CHF 3,100,000,000.0 last year in revenue. EBITDA came out with 112,000,000, which were below our expectations. And if you look at the underlying EBITDA, because we, as Jens also said, did restructurings of course, approximately EUR 5,000,000, it’s EUR 117,000,000 versus last year, you can see that we are going down earnings wise. If you look at cost of goods and the figure shows that it’s down with 0.1% compared to last year.

However, given the strong performance in Solana and Brilayse and since this is low margin, this actually dilutes a margin of 0.4%. Consequently, the underlying margin, as again defined as the rest of the business, is actually increasing compared to last year, which is a trend shift. It doesn’t change the fact that it is our assessment that there still is a fierce price competition in the market in all segments and all product categories. The restructurings we carried out in June had a cost of 5,000,000, which was expended in June, but they will deliver full year savings of EUR 10,000,000, and they will be cost neutral in 2025. Regardless of this, we’ll continue to have a very strong focus on the cost development and ensure that we continue to have a downward trend in it.

Loss on trade receivables is still under control. We may have seen the first signs of a slightly worsening situation among some customers. But again, credit management is really a competence winning solace. Now please turn to Page six. If we take a quick look at H1, then EBITDA of 186,000,000, we can say that H1 came out also below our initial expectation due to the performance in Q2.

The result is affected by restructuring costs of EUR 45,000,000 compared to EUR 27,000,000 last year and transition costs of EUR 12,000,000, meaning if we adjust for this and compare like for like, we’re looking at underlying performance of two forty three versus two fifty two, meaning it’s a more flattish development compared what immediately springs to the eye. Again, as in and we saw in Q2, there is a diluting effect on the gross margin also on H1 from Sour Prolaes. So if we adjust for that, we’ll actually see that the margin is slightly increasing also in H1 if we adjust for this. So to conclude on H1, yes, the development in Q1 was in line with expectations, whereas Q2 is clearly below our initial expectations. Please turn to Page seven.

Jens Anderson, CEO, Solar Group: If you

Michael, CFO, Solar Group: look at the figure on the left side, you can actually see what is happening with the growth rates that the constant improvement we’ve been seeing since Q1 twenty twenty four turned in Q2. And again, if you adjust for solar and polaris, it’s actually slightly more downturn, whereas polaris doesn’t really play any role in the preceding quarters. This continued into July, where we ended with a negative organic growth of approximately minus 3%. So and this is this trend shift that is the main reason behind the fact that we had to adjust our guidance. So we still expect an improvement in the market during this year compared to the current level.

If we look at the main segments, we now expect a slightly negative development overall for installation and a clearly negative development within industry, but a positive development within trade. But regarding trade, this is solely driven by solar supplies, which is reported as part of trade. So where we’ve seen the most headwind, if you look at the segments where we expect the most headwinds going forward, it’s the industry segment, whereas installation varying a bit from market to market is only slightly negative, some actually even being positive, but not sufficient to offset the industry. If you look at the guidance change, the revenue range down from 12.3% to 12.8 to now down to 11.75 to 12.25. As a consequence, we also changed our beta from a range of five thirty to 600 now down to four fifty to five ten.

If we take the midrange, you can see it in the figure in the middle, the reported the midrange guidance is EUR $480,000,000, whereas last year, we reported EUR $646,000,000. Last year had quite some extraordinary income. In the first half, it was expensive, but the remaining part of the year was income, mainly capital gain on sale on property. But the net effect was CHF 81,000,000, meaning that the underlying performance last year were CHF $565,000,000 If we do the same exercise in 2025, we end up at $537,000,000 meaning we are approximately 5% down. Given the initiatives we already have implemented, we do which have an impact on the margin, all other things equal, of 0.7%.

We are fairly comfortable that looking ahead and also here within the current strategy, we will be able to improve the profitability going forward. Thank you.

Jens Anderson, CEO, Solar Group: Thank you, Michael. And now it’s time for questions. So please?

Conference Moderator: Thank We will now take the first question from the line of Christian Ovegaard from AGCO Group APS. Please go ahead.

Christian Ovegaard, Analyst, AGCO Group APS: Yes. Hello. I was just wondering if you could define transition costs versus restructuring costs, the difference.

Michael, CFO, Solar Group: Thank you. Okay. Yes. The transition cost relates to closing down of our operation in Handelsbank. We are in the process of moving from two to one central warehouse in Sweden.

We’re constructing a new one in Krumla, which is just outside of Europe. And as a consequence, we have to close down two of the central warehouses. We have been able to accelerate the plan, meaning we can now close down Hamstadt even before Kumla is finalized, meaning we can both free up capital earlier than initially expected and we also reduce the total risk. The risk in moving from one central warehouse to another is less than the risk of moving from two central warehouse to one central warehouse. So it’s the cost of closing down, saying goodbye to people, cleaning up.

So that’s the difference. That’s €12,000,000 yes. That’s the €12,000,000 whereas the remaining €45,000,000 is simply redundancies.

Jens Anderson, CEO, Solar Group: And Eurobo is sold and Helmspace is on the market right now, just to clarify that. Thank you.

Conference Moderator: Thank you. We will now take the next question from the line of Sebastian Gray from Nordea. Please go ahead.

Sebastian Gray, Analyst, Nordea: Jens and Michael, and thank you for hosting this call. My first question, so you alluded to market slowdown for industry. And I know we get a lot more details in conjunction with numbers next week. But is it possible to expand a bit on what you’re seeing here in industry? And where you’re seeing it?

And also, I guess, most importantly, why you are seeing it? I mean, is this a trade war scare and companies holding back? Or could you maybe add some color to this at this point?

Jens Anderson, CEO, Solar Group: Of course, it’s pretty early days, but there are no doubt that the tariffs are, to some extent, postponing decisions. And thereby, also we have seen a lot of small machine builders which are exporting to U. S, which are, of course, in a situation, should they even sell? And if, could then they manage the now 15% tariff that was before 10%? But at least those decisions are postponed to some extent.

Then I think overall, the uncertainty due to all the gossip around tariffs still have some kind of impact. But we are not 100% sure yet. But it’s widely spread. It’s not that one or two or three customers have left off because that’s not the case in solar. We have a hell of a lot of customers.

So it’s more a spread of uncertainty among mainly industry customers because that is more export related than, of course, installation.

Michael, CFO, Solar Group: But if you look at where we see it, we see also MAC45 is suffering. This was partly expected because some of their big blue chip customers had announced that they expected to purchase less this year compared to the year before, but they also expected to pick up late this year, early next year. But it’s actually less than what we see. And here we talk medtech and high-tech. And so they’re suffering if you take a geographic view on it.

I think Norway is the only one which is not suffering, but industry in Norway is almost 100% marine offshore and utility as infrastructure, whereas if you look at the other countries, we see that particularly MRO and OEM are struggling and to some extent also infrastructure in other countries. So it is a sense of saying it’s widely spread and we’re of course monitoring this very closely. So it’s not the customers have completely less. They’re simply just buying less, and it seems that they are postponing orders.

Sebastian Gray, Analyst, Nordea: Okay. Thank you for the detail. That was very appreciated. And maybe to follow-up. I mean, you used the formulation, a market slowdown.

So do you have any strong indication that this is a question of a market slowdown and not you losing market share or anything like that?

Michael, CFO, Solar Group: We are fairly convinced that it’s I mean, we have I think it’s in industry we had I think 15,000 customers plusminus. Don’t kill me on the details here. I think that’s leaked. And we have, of course, been in close dialogue with a lot of these customers. It’s not the feedback that we receive, and we can see that some of our main international competitors, though we cannot see in which segments, But they have also announced headwind at the European markets, even though we cannot see the exact same markets we’re operating in.

So we are fairly convinced that this is a market thing also because it actually materialized rather suddenly. And normally, you don’t see that in a shift in market. And it’s not like they stopped completely, but I see it just by less.

Jens Anderson, CEO, Solar Group: We are not depending on a few customers. So it’s widely spread, as I said before. Of course, that’s a concern, but that’s also why we are sitting here today and have made the adjustment, yes.

Sebastian Gray, Analyst, Nordea: Sure, sure. And if I may, another one here. You’re expecting to see a pickup in the latter part of H2. Given July was slower than Q2, what makes you believe that we’re going see a pickup here in the latter parts?

Michael, CFO, Solar Group: It’s based first of all, we have a range. And of course, if you’re in the midrange, then you should look at the assumptions that we have given because that’s basically what will lead to the midrange plus. The assumption is that part of this is also that people are reducing inventory and they that you can do that to a certain amount of time. And also, again, it’s based on the feedback from some of the customers where they say, yes, This is looking like they they like to sit on the fence and wait. But, again, it’s it’s it’s uncertain, of course.

I I can’t give you any firm guarantees. It’s just based on the intelligence that we can collect from our customers what they tell us, But there are no guarantees of it. That’s for sure.

Sebastian Gray, Analyst, Nordea: Yes, I’m sure. I’m well aware. Last question here from my side. I was just a bit puzzled about the gross margin comment. So adjusting for solar parks, the underlying gross margin improved year over year and also from Q1.

So really, I’m just puzzled, how does that work? Is it a question of mix? Or is it you raising prices? Or you’re sourcing cheaper? Or can you help me?

Michael, CFO, Solar Group: It it it’s these big solar parks that they are construction construction. They have a very, very low single digit margin. And now that the revenue suddenly starts to weigh very heavy as a part of the total revenue, then you get this diluting effect. So it’s basically to make sure that you understand because we have been on a downward trend for several quarters in the remaining part of the business in the gross margin. So if you just look at it from a distance, you would say, wow, it’s continuing down.

That’s not the case because the mix between the companies has shifted dramatically. So whereas you could make elect, so on, polaris previously because they would and they had a high gross margin also because they built small roof installations, but that also drove a lot of cost below gross margin. They don’t do that now because everything is high on end, So so they have a very, very low gross margin. I think it’s around seven. Don’t count on the details, but way below 10.

And but there’s not that many costs. There’s still some costs below, but the main part is is above. And that’s simply now because they have reached the size they have to lose the margin the extent that it seems.

Jens Anderson, CEO, Solar Group: But also, Sebastian, you’re right. It’s about mix. It’s also about country mix. But anyway, our Solutions sales is growing pretty well. And there, we have a higher margin.

Of course, also a higher cost, but we have higher margin. And there, at least, we are doing pretty well.

Sebastian Gray, Analyst, Nordea: Okay. No, thank you. And again, thank you for hosting this call. Thank you.

Conference Moderator: Thank you. We will now take the next question from the line of Christian Turner from SEB. Please go ahead.

Christian Ovegaard, Analyst, AGCO Group APS: Yes, thank you. I have two questions. So first of first question is on your growth. So you’re saying organic growth between minus four percent and zero So if my quick calculations are right, that would imply between minus 10 and minus 2% in the second half of the year. So obviously, remembering second half of last year to last was quite strong.

So maybe just an elaboration on what’s the expected growth sort of excluding Solarpolite? Because obviously, minus 10% sounds a bit And five how does that stack up with the comment of expecting improving markets in the NPL?

Michael, CFO, Solar Group: So you’re spot on because what we expect to happen is that Solar Polaris, as they’re finalizing this huge product, this will wear off the effect from Solar Polaris that you are seeing right now because they don’t have any new projects coming into the same extent. So and they are ahead of schedule. So that will wear off going forward. So the impact they have on the figures will be much less, all other things equal, in Q4 than what you see right now. So that is the main explanation.

Of course, always ongoing negotiations about new start up of new projects, but it’s always difficult to say exactly in what month. But again, given the operational leverage in this business, it doesn’t really impact the earnings that much, I would say. So our price is one of the key reasons for this.

Christian Ovegaard, Analyst, AGCO Group APS: Is is there any way you can quantify that? I mean, how many percentage points can you’re second half And

Michael, CFO, Solar Group: you can if if if you look at it right now, they deliver, like, something they’re dealing approximately three percentage points of the growth in And it’s even more in July. They deliver an even bigger part there. So if you take that out. Then

Jens Anderson, CEO, Solar Group: you have the awful truth.

Michael, CFO, Solar Group: Yes.

Christian Ovegaard, Analyst, AGCO Group APS: Okay. Makes sense. The same question goes to your cost reductions. So you announced some restructuring in Q1 and then you announced a bit more here in Q2. So how much more can you do so if things doesn’t improve?

Is there more you

Jens Anderson, CEO, Solar Group: can do? Or are you at

Christian Ovegaard, Analyst, AGCO Group APS: a level now where it’s to do much more without sort of more major sort of strategic ambition?

Jens Anderson, CEO, Solar Group: I think we have done at least a bit. There’s always something to do. But looking ahead, at least what we believe, I think we are pretty close to the limit of what we will do in the current situation. But of course, we have a hell of a work with our gross margin, and we have a huge work of picking up or increasing the share of wallet and existing customers because I think that’s the easiest way to at least maintain some kind of growth even though that the uncertainty in the market lowered quite a lot as we see it. And again, Michael also stated it, one of our biggest competitors worldwide competitor, but they’re also in Europe, stay the same as we have stated right now as we speak in Europe, sorry.

Yes.

Christian Ovegaard, Analyst, AGCO Group APS: Understood. Thank you. Thank

Michael, CFO, Solar Group: you, Christian.

Conference Moderator: Thank you. There are no further questions coming at this time. I would like now to turn the conference back to Jens Anderson for closing remarks.

Jens Anderson, CEO, Solar Group: Jens, thank you. Thank you for listening in. Though we have hoped for better results this time, but at least we have to go back, as I said, to 2018 since we had a similar situation. So I wish you all a great weekend, and thanks for listening in. Bye bye.

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