Earnings call transcript: Solar Q3 2025 sees revenue dip, strategic moves planned

Solar A/S reported its third-quarter 2025 earnings, highlighting a slight decrease in revenue and strategic initiatives aimed at strengthening its market position. Despite challenging market conditions, the company is focusing on digital transformation and strategic acquisitions to drive future growth.

Key Takeaways

• Q3 revenue decreased by 1.6% year-over-year to DKK 2.8 billion.
• Organic growth was negative, but adjusted for the Solar Polaris project, it improved slightly.
• The company announced the acquisition of Sonepar in Norway to enhance its market position.
• Investments in digital platforms and warehouse automation are ongoing.
• Market conditions remain challenging, particularly in the installation and industry segments.

Company Performance

Solar’s overall performance in the third quarter was marked by a decline in revenue, reflecting challenging market conditions. The company reported a year-over-year revenue decrease of 1.6%, with organic growth also declining by 2.1%. However, when adjusted for the Solar Polaris project, organic growth showed a smaller decline of 0.4%. Solar is leveraging strategic acquisitions and digital innovations to counteract these challenges and position itself for future growth.

Financial Highlights

• Revenue: DKK 2.8 billion, down 1.6% year-over-year.
• Organic growth: -2.1%, adjusted to -0.4% excluding Solar Polaris.
• Q3 EBITDA: DKK 110 million.
• Year-to-date EBITDA: DKK 296 million.
• Gross margin: Decreased by 0.9% from the previous year.
• Net gearing: Increased from 2.7 to 3.4.

Outlook & Guidance

Solar has set a revenue guidance of DKK 12 billion and an EBITDA guidance of DKK 460 million for 2025. The company anticipates an improvement in gross margins in the fourth quarter and is exploring a potential solar project pipeline for 2026. However, achieving a 5% EBITDA margin target for 2026 remains challenging.

Executive Commentary

Jens Andersen, CEO of Solar, emphasized the transformative impact of the company’s investments, stating, "We have invested more than DKK 2 billion in central warehouses, and as I said before, that will change Solar dramatically." Michael Jeppesen, CFO, highlighted the competitive strategy, noting, "Our weapon is to lower our cost to serve and therefore still be able to compete."

Risks and Challenges

• Market competition: Intense price competition across all segments.
• Economic conditions: Weak performance in key markets like Sweden and Denmark.
• Industry dynamics: The cyclical nature of the industry poses ongoing challenges.
• Investment risks: Significant capital investment in warehouses and digital infrastructure.

Q&A

During the earnings call, analysts focused on the synergies expected from the Sonepar acquisition and strategies to mitigate margin pressures. Questions also addressed the cyclical nature of inventory gains and challenges in the industry and MRO segments.

Solar’s strategic initiatives and investments indicate a proactive approach to navigating current market challenges and positioning the company for long-term growth.

Full transcript - Solartron PCL (SOLAR) Q3 2025:

Conference Operator: Good day, and thank you for standing by. Welcome to the Solar AS Q3 Report 2025 conference call. At this time, all participants are in a listen-only mode. After the speaker’s presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press Star 1, 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press Star 1, 1 again. If you wish to ask a question via the webcast, please use the Q&A box available on the webcast link anytime during the conference. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Jens Andersen, CEO. Please go ahead.

Jens Andersen, CEO, Solar A/S: Thank you. Dear all on the line, a warm welcome to this third-quarter webcast for the Solar Group. Together with me, I have my colleague, CFO Michael Jeppesen. The agenda for today is a general update with some highlights in the quarter, then a short summary of how we invest in future growth. Michael will present the financial highlights for the quarter and our guidance expectations for 2025. Finally, and hopefully, we will have a Q&A session. Next slide, please. If we go into the highlights, revenue in Q3 decreased to DKK 2.8 billion, similar to an adjusted organic growth of -2.1%. When adjusted for Solar Polaris, delivered to a major solar park project, organic growth amounted to -0.4%. Revenue in Q3 was in the low range of our own expectations.

Segment-wise, our organic growth amounted to -2.3% for installation, which are the biggest segment, and -6.2% for industry, and finally a plus of 15.3% for trade, mainly driven by Solar Polaris. If we then turn into the EBITDA, then I can say from first Q to third Q, we delivered an EBITDA of DKK 296 million, highly impacted by non-recurring cost of DKK 65 million. Looking isolated at third quarter, the EBITDA amounted to DKK 110 million and was in the low range of our own expectation. Adjusted for non-recurring income in only Q3, the underlying EBITDA margin amounted to 3.9%. If you want, you can see the result from the individual markets at page 33 in our quarterly message. As we speak, our Halmstad warehouse in Sweden has been vacated, and we are now operating our total Swedish business from one warehouse in Örebro.

This was originally planned to take place next year, but we managed to do the transition already in third quarter this year. Short about the guidance, Michael will turn into that later, but we expect the revenue now at DKK 12 billion and an EBITDA of DKK 460 million, which is in the low range of our previous EBITDA guidance of between DKK 450 million and DKK 510 million. Next slide, please. Investing in future growth, as many of you may recognize, we announced on the 22nd of October that we are in the process of acquiring Sonepar in Norway. With this bold acquisition, we will be one of the leading electrical distributors in Norway with a combined revenue of DKK 2.5 billion after the merger. This is, for us and also for our Norwegian team, a very transformative move in Norway. We expect closing early December.

Integration should be finalized by the end of the first half year 2026. Swedish warehouse in Kumla, as you all recognize, we have a big investment going on in Kumla. When Kumla is operational in 2026, all our main market central warehouses will be fully automated and digitalized. In other words, we are close to the ending of a huge investment program that has been going on for the last seven years. We have invested more than DKK 2 billion in central warehouses, and as I said before, that will change Solar dramatically when we end up this big program. The remaining investment in Kumla is DKK 70 million in Q4 this year, and then finally DKK 160 million in 2026. All in all, a gross investment of approximately DKK 600 million. Thus, our investments in optimization, digitalization, and standardization.

We think, have set the stage for future growth and improve operational performance to new standards going forward. The first of October this year, we decided to upgrade our digital platform. The ambition is at least to be on par and hopefully beyond our competitors. The upgrade includes investments in new data platforms and AI to digitalize sales and strengthen customer insights. Furthermore, last but not least, to enhance customer experience through improved e-commerce features, including a new search engine and platform. Already in the first half year of 2026, the first customer segment will be able to use the new platform. I will now give the word to you, Michael, for some insights. Please, Michael.

Michael Jeppesen, CFO, Solar A/S: Thank you, Jens. Please turn to page six. Now, revenue in terms of DKK decreased with 1.6% in the quarter, meaning that we came out with DKK 2.8 billion versus close to DKK 2.9 billion last year, or equal to an adjusted organic growth of minus 2.1%. As also mentioned by Jens, the impact from Solar Polaris affected the growth positive with approximately 2 percentage points, meaning that the remaining part of the business saw a headwind of approximately minus 4%. Looking ahead, the effect from Solar Polaris will reduce for two reasons. One, the current project is coming to an end here in Q4. In addition, the reference point, meaning the revenue that generated last year, will increase substantially. Instead of lifting the organic growth between 2-4 percentage points, we expect to see a negative impact on them in Q4. If you look a bit on the main.

Segments, installation, only Poland, we did see real positive growth, but it’s fair to notice that Denmark came in very, very close. Holland and Sweden faced more headwinds, and I would say particularly Sweden was a surprise to us. We did expect, as also communicated on several occasions, that the Swedish market would start to pick up by now. Doesn’t seem to be the case. We have fairly good insights in the Swedish markets, and it’s not because that we are losing market share. As we got Norway, this can be explained by the loss of one major customer, as also announced previously. We still believe that all markets will start to improve, also supported by the initiatives that we have kicked off. If you look at industry.

Once again, the main positive driver was marine offshore in Norway, but actually also in Norway supported by utility and OEM and MRO. Unfortunately, not enough to set off the setback we saw in other countries. In Denmark, we did see headwinds in all subsegments. As we got utility in Denmark, we see that the customers really have scaled down on their investments, and we actually expect this to last for the remaining part of the year, which also is reflected in our guidance for the year. MAC 45 is still seeing two-digit negative growth. However, for the first time this year, the order backlog has started to increase. It’s still early days, but potentially this could be the first positive sign off that we are starting to reach a turning point within MAC 45. Trade, particularly with DNY, which mainly is a DNY, did see headwinds across all countries.

Now, please turn to page seven. The EBITDA of DKK 110 million in Q3 was in the low end of our expectations. If you look at the underlying EBITDA of DKK 180 million, there is a setback compared to the underlying margin last year. This can mainly be attributed to the loss of gross margin. If you look at the gross margin, we saw a decrease of 0.9% in the margin compared to last year, of which 0.3% can be explained by the dilution that we get from Solar Polaris. The remaining part of the drop can be explained by fierce price competition in the market, but also a lack of the cyclic inventory gains that we traditionally see here in Q3. Compared to Q2, where we actually managed to strengthen the underlying margin, we did see a setback. We still, however, expect this to change in Q4 due to.

A huge range of initiatives that we have set in motion. Despite our initiative both last year and also in year to date on cost containment and process optimization and staff reduction, this was not sufficient to set off the drop we did see in revenue. We did experience a slightly diluting effect on the margin from the cost side. We will continue to have a strong focus on this, and as also announced, we did several initiatives in this quarter in order to reduce and ensure that we can strengthen the margin going forward. We are very pleased, I would say, with the transition from Halmstad to Örebro. It is, as Jens also said, moving ahead faster than anticipated, and it is also freeing up more cash than what we initially anticipated.

I think it should be noticed at the same time that the Swedish organization has managed to improve the service level towards our customer with this move. Loss on trade receivables remains under control. Please turn to page eight. Now, short look on the year to date. We have an organic growth of approximately 1%, but again, if we adjust for Solar Polaris, we are actually looking at minus 1.1%. It is an average. It has accelerated in Q2 and Q3. The main setback for the year to date can be explained by the drop in gross margin, but the initiatives have ensured that the cost in the underlying business, that means excluding the one-off cost, remains more or less flat, meaning we have been able to offset not only the setback in revenue, but also salary inflation and ordinary inflation.

On a comparable basis, you can see we actually have a drop of 0.6 compared to last year, and you can base it’s more or less explained by the margin. Please turn to page nine. Operating activities came out with a plus of DKK 64 million, and if we take a closer look at that, we can see a continued reduction in the inventory level, freeing up cash, which is in line with our expectation. Having that being said, the current level remains still above what we would see as the optimal point, meaning we’ll continue our journey here. There’s a minor increase in the accounts receivable, but that’s basically seasonality from June to September. Investing activities came out with DKK 94 million. We invested DKK 58 million in Kumla, that is the new central warehouse.

As Jens also mentioned, this will continue throughout the year, where we expect to invest DKK 70 million, leaving DKK 160 million to be invested next year, and the main part of this will happen in H1. Please turn to page number 10. If you look at the working capital as an average for the last quarter, we see a continued reduction coming down from 15.5% last year to now, 14.8% in Q3. Despite the negative growth, we’ve actually managed to reduce the investment in working capital, not only in absolute figures, but also in relative figures. We are very pleased with the trend, and we, of course, will continue to work on prolonging this effect. Looking at the gearing level, we see an increase from 2.7 to 3.4, which is above our guidance on gearing, which is from 1-3.

Assuming the acquisition will be approved early December, the gearing will remain in the same ballpark for the remaining part of the year despite the seasonality effect. What basically will happen is that you get a P&L effect from the acquisition of one month potentially, but you get the full balance sheet effect. Looking ahead, we will, due to the investments that we have done, continue to increase in the coming quarters before we gradually will start to reduce this due to an end to the investment program, as Jens also mentioned. Now, please turn to the last page, page 11. We refine our guidance for 2025. Bear in mind that when it came out with the first guidance for the year, we expected growth to take root in the second half.

We revised that just after the summer vacation, and it seems that this is not really going to materialize. Hence, we will be in the low end of our guidance in terms of earnings. We now expect a revenue of DKK 12 billion, where we previously were on DKK 11.75-12.25 billion, and we expect an EBITDA now of DKK 460 million versus previously in the range of DKK 450-510 million. We’re not directly affected by the tariffs that have been imposed by the U.S., but we can definitely not rule out any knock-on effects having a negative impact on our MRO OEM customers, which remains the main part of our industry segment. This is also where we faced most headwinds for the year. As you can also see in our segment report, it’s the most profitable part of our business.

We continue, of course, to monitor the market very closely. We stick to our initial assumption that we’ll see a continued recovery, but, of course, the timing and the strength of it is absolutely unpredictable. We do, however, have seen a few small, and bear with me, it is early days, green leaves within this area where we are now. If we dive further down in the segments, we can see that the SME, which means the very small MRO OEM customers, they have actually started to grow now. The main challenge is still the mid-size and the large OEM customers where we are still seeing indexes around 80 or even below this level. The small ones have started to grow. They moved from index 1 to approximately 105. Yes.

In the lower right corner, you can see a like-for-like comparison with our guidance where we tried to take out the one-off effect, meaning on a comparable basis, we now expect DKK 525 million versus last year DKK 565 million in EBITDA. Thanks. Thank you, Michael. It is time for questions if you have any. Please. Thank you. As a reminder, to ask a question, you will need to press star 1, 1 on your telephone, and wait for your name to be announced. To withdraw your question, please press star 1, 1 again. If you wish to ask a question via the webcast, please use the Q&A box and click submit. We will take our first question, and the question comes from the line of Christian Tonneau from SEB. Please go ahead. Your line is open. Yes. Thank you. I have a couple of questions.

First, questions for your guidance. Just to clarify, Michael, you talked about potentially one month of Sonepar Norway if the deal is approved. Is that included in your guidance, and can you quantify how much? It’s basically within the rounding areas. Because assuming it gets approved early December, the impact is going to be like 0.2-0.3% of the total revenue. I would say it’s within the rounding areas. We do not, even if it gets approved, which is still the underlying assumption, we do not expect any P&L effect from it whatsoever. It’s neglectable. I would say it’s beneath the threshold given that we give guidance in hundreds of millions DKK. That is absolutely fair. Then again, to your guidance, so obviously with a fairly exact guidance, your implicit Q4 guidance on revenue and EBITDA is fairly easy to calculate.

I am, however, struggling slightly with the items in between because if you apply a gross margin in Q4 similar to what you had in Q3, you would need your fixed costs to decline substantially year on year and vice versa. If you assume unchanged fixed costs, your gross margin needs to come up substantially. Maybe just elaborate a bit on the assumptions between revenue and EBITDA for Q4. It’s absolutely a fair question to raise. The underlying assumption is we will be able to strengthen the gross margin rather substantially. We launched a portfolio of initiatives supported by.

Some newly developed models that create higher transparency enable us better to benefit from, say, for illustration purposes only, if you have a stepwise increase bonus model with one supplier, and a supplier of a similar product does not have a similar, then this model can optimize where we should place our purchases. The guidance has taken part of this into consideration. In addition, similar to what we have done in other years successfully, we launched extraordinary supplier negotiations. This is maybe more in the, we can always discuss how much money this will bring in. We already now see the effect of the expected purchase of Sonepar in Norway, meaning that there are suppliers who start to reach out to us. Certainly things that we could not do and have been fighting over for months, certainly now they just send a check.

I can give you an example. A supplier sent DKK 2.15 million, which we’ve been struggling over for quite some months, and certainly we’ve paid. We are starting to see a lot of good things coming through. We are reasonably comfortable with it, I would say. Of course, there’s always uncertainty. It’s a future prediction. If we look at the potential, as we calculated it, compared to what we’ve taken into the guidance, there’s also room for that everything will not succeed. It’s based on the assumption that the gross margin will increase. Also, bear in mind that the gross margin, I think this is important to notice, in Q3 was particularly low because we did not get these capital gains on the inventory that you normally would see. This simply dropped to zero, mainly in Norway and Sweden, but also in the other countries.

We do not expect this pattern to repeat itself here in Q4. At least we see the color prices increase quite dramatically. Just to follow up, I mean, this pattern which you described on the gross margin, are you already seeing that in your October numbers? To a certain extent. I’m not updated on all the companies here, but I know Denmark on these initiatives were ahead of the plan. Where they should be in October. I would say if that trend continues, I mean, there was nothing in October on these initiatives that told us that this is not going to work. I would say it actually confirmed it. Haven’t seen the final October figure. That is the disclaimer here. What we can see, what we get reported, we are ahead of. Fair enough. Thank you. That’s quite clear.

Maybe just on your fixed cost, then we have seen that in the past two quarters trend up, say, 1-4%. I don’t know. There was a bit of extraordinary in Q3, but is that still how we should think about your fixed cost in Q4, sort of a sliding inflationary increase then? No, I wouldn’t expect that, to be honest. So the main driver question is it’s not savings. It is the gross margin. It will be for the remaining months. It will be. All right. And then maybe just on the gross margin, you highlight price pressure. So in this gross margin improvement, you’re expecting is there an element of you assuming price pressure to ease? And more generally, how do you address price pressure? What’s your strategy when prioritizing volume versus price? Pricing is a difficult thing to predict. So we take it.

More or less customer-wise. Of course, there is a fierce price competition, especially because we have been close to, in a non-inflation scenario. Now we see also from the vendors that price increases will start to materialize. We also see the cover price going up. Whether that will be put into the market, that is always a big question to answer. At least so far, we have seen, I would say, more or less a crazy or fierce competition among our competitors in all markets in order to gain volume. One day, you need to have your cost to serve lower if you want to proceed with that way of doing business. That is also why we have invested heavily in our store and now also in our customer or digital customer platform.

Simply to lower our cost to serve, to be the best in class, to compete if the market conditions will be as we have seen it in 2024 and 2025. Our weapon is lower our cost to serve and therefore still be able to compete if that is the new trend, so to say. Understood. Just maybe two questions on the Sonepar Norway acquisition. Can you give any flavor of what level of depreciation and amortization we should expect? Also, how will revenue from this business flow into your installation and industry segment? What would be the split? Take the last question first. By far, the main part of it is installation. On top of my head, I think it is in approximately 85%, and you have 10%, which is industry, and then 5% other. This is how you should think of it.

What was the first question? I forgot. You have been clear on the EBITDA impact and the synergies, but what about depreciation and amortization? Yeah. Sorry. We have not made a purchase price allocation yet. We need to get access to them in order to be able to do this in a clear way. Given that we basically hold the assets that we need, I would say depreciation on property, plant, and equipment should not change anything whatsoever. It is basically a matter of the allocation of the purchase price if parts of it will be registered as customer list and the rest as goodwill. To be honest, we simply do not have these figures yet. No. Okay. When should we expect that clarity? Will you have it when you close, or should we wait until you are fully reported?

I think you should wait until we report on Q4, assuming we close in Q1. Sorry, 1st of September. Yeah. Excellent. And then just my very last question, I promise you. Lastly, just to be crystal clear, there are no expected revenue from any solar projects in Q4. Was that what you’re saying? It’s wearing off substantially. Last year, they were performing more or less on the level we’ve seen in the last couple of quarters this year. This is why you get quite a negative effect within the quarter. Okay. Due to the reference. Sure. That makes sense. Is there a pipeline here? Would it be fair to assume solar projects in our 2026 estimates? I mean, how are you thinking about that? Let’s see. We are working on some huge ones, but so far, they’re not in the book.

As we speak, we have our quotation out with some very big ones. Let’s see if we succeed or not. Basically, again, as we discussed, it does not carry that much operational leverage. Even if they win a project, say, for the sake of the rationale of DKK 100 million, you should not expect an EBITDA effect of more than DKK 5 million plus or minus. I mean, it is in that range. It is a rough business we are in. Looking at the total, it does not matter that much. To a large extent, there are very low fixed costs and very high variable costs. That is basically what I am trying to say. On the group, it does not matter that much, not in terms of EBITDA. It can have a more substantial impact on the revenue, clearly. No, I fully understand.

Obviously, I’d like to get my revenues estimated as qualified. Yeah. So do we. So we share it. I mean, it’s more if you win it, you get maybe DKK 100 million-DKK 200 million in revenue. If you don’t, you get zero. There’s nothing in between there, basically. They don’t have a size where they run 10 projects in parallel. They can run maybe two major projects in parallel. That’s pretty much it. Yeah. That’s where we are right now. They still have some small projects that are running, but that’s very, very limited revenue that you can expect from that. They’re more profitable in terms of percentage, at least. Not in real currency. All right. Fair enough. Thank you so much. That was all for me. Okay. Thank you. Thank you.

Once again, if you wish to ask a question, please press star one, one on your telephone. We will take our next question. Your next question comes from the line of Alexander Rosikov from DNB Carnegie. Please go ahead. Your line is open. Yes. Thank you. Christian asked a lot of good questions, but just maybe following up on his. You speak about this lack of cyclical inventory gains, which is not the first time we’ve discussed that over the past, let’s say, 12 to 24 months. Do I understand you correctly that you expect this to improve because you’re seeing sort of suppliers already pushing through price increases, or is it more based on the fact that copper prices are increasing. And you then expect suppliers to increase? Yeah. That would be my first one. I would say both. We see people. Sorry.

We see suppliers coming up with, I would not say major price increase, but at least inflation-wise, more or less back to normal. We have not had that picture in all countries, but at least we see that in Denmark for the moment. We expect maybe not back to a normal situation, but at least some way. It will be normalized over the coming months. It is not that we expect that we go back, as you may remember, in 2020, 2021, and 2022, where I think at the peak, we had additional DKK 200 million coming up of this on its own. That is definitely not the case. It is more I see interesting expected cracking to turn back to what we can call a normal level. If I remember correctly, a normal level is in the DKK 20-40 million range? Ooh, did we ever tell that?

I simply can’t remember. Just don’t. Fair enough. Because it varies a lot from country to country. How it works. And there’s quite some seasonality in it as well. So it’s a bit of a puzzle whenever you do your estimates trying to get this right. I simply can’t remember. Fair enough. And then just on the sales price pressure. The pressure you’re seeing, is that general across categories? Are there any particular categories that are seeing price pressure like we saw with solar panels a couple of years back? Good question. I would say all in all, there is a fierce competition. Also in a way that we haven’t seen for many years going on. That also means that some, at least, will have a huge problem if they don’t structure their business in another way. I would assume. But let’s see.

At least we saw that in the PV business, that they are more or less bleeding all of our competitors. We will, I think, over time see the same pattern within technical wholesale if prices are not into a more decent level compared to the cost to serve. That is why we are so focused on cost to serve until we see, hopefully, a normalization. If not, we will keep on focusing on our cost to serve. Yeah. That would then be my second question on this pressure. Sort of what can you do within, what is in your hands to do to mitigate this? Or is it just a question of waiting for market competition to become necessary? No. That is cost to serve. At least there we can do a lot. We are doing a lot.

We’re ending up our central warehouse program when Kumla is finished. That will help quite a lot. At the same time, Sonepar is coming into Norway. Of course, over time, hopefully, we’ll get a lot of scale, especially in our operations, by doing that. It’s also a matter of working with a mix. It’s also a matter of a few new customer groups. Of course, we are hit by—we are pretty dependent on industry, and that’s where we see a lot of problems right now. Hopefully, that will not last for a long time, but at least that’s for us a problem, customer mix-wise. Okay, that’s very clear. I think I have a—this is probably a micro question, but the 2025 revenue guidance was narrowed to the midpoint.

The organic growth guidance was actually revised to, you can say, the higher end of the range. Is that purely FX, or is that because you, for instance, have some product pruning that’s excluded from your organic growth? No, no, no. There are basically three reasons and well spotted. First of all, notice that when we give an expected growth rate, and this also goes to the range, it’s an approximate figure. That means if we say 4, it can just as well be 4.49 as it can be 3.5. There is slack in the end of it. You cannot say it’s exactly 4. Secondly, as you say, there is an FX effect, clearly. That explains bits and pieces of it. At last, but not least, we give guidance in hundreds of millions. I have been reflecting a bit on this here as I expected the question.

I think it’s good that we stick to the hundreds. Maybe when we get to the last quarter, we get this accordia effect. It all piles up into one quarter. Maybe we should go down to DKK 50 million on it instead of on. I think that’s the three main reasons for Alexander that you cannot breach it completely. Did it make sense? That makes sense. Yeah. Absolutely. Just a final question from my side. You revised your 2026 EBITDA target at the full-year report to above 5%. Given what you’re seeing with sales price pressure, and I understand you expect to see the cyclical inventory gains improve, but do you still find that target achievable with where the market is today? Because your guidance for this year implies an EBITDA margin of 3.8%, if I’m not mistaken. It’s quite a significant improvement year over year.

True. Basically, for the time being, it’s a bit unclear where we will end in 2026. We have two major moving targets here. We have the acquisition, which will have a substantial negative impact the first year due to all the restructurings. Second, we will close down Örebro and move to Kumla. Initially, this was expected to take part in the later part of 2026. As we are ahead of schedule, we’ll now get the full weight of it as we see things right now. I think there’s simply too many moving parts here. I agree, if you look at the 3.8 and you look at the cost we’ve taken out, that’ll add approximately 0.8. That doesn’t bring you up there. You know there’s going to be salary inflation. There’s going to be cost inflation. On the other hand, there might also be growth.

It is simply too early days for us to say anything particular. I agree, from where we are standing right now, it looks to be much more difficult than in Q1, for instance. That was absolutely achievable. I think we will simply have to be a bit more patient on that one and wait until we come out with our exact 2026 guidance. We will try to be as clear as we can be about that, as transparent as possible. Yes, about also the move on Kumla, what do we expect that to have an impact on the timing of it. Similarly, we will also try to give our best estimate on the integration of Sonepar and the financial impact it will have. To the extent possible, trying to break it down in quarters as well, because it has quite an impact on the figures. Makes sense.

That was all for me. Thank you. If there are no further questions from the phone lines, I would like to hand back for any webcast questions. First online question is, in connection with the acquisition of Sonepar Norway, could you elaborate on which specific commercial and operational synergies you expect, and how soon you anticipate the acquisition will start contributing positively to the EBITDA margin? Okay. Basically, there is not much new since we gave the initial announcement. We are still absolutely comfortable with the synergies we have announced. We stick to it that this is an issue of looking at the supplier base. I hinted to it that we’re already starting to see benefits of it, even though it’s not approved yet. It is also a matter of gaining scale, economy of scale within our handling and distribution of products and back office in general.

We are mapping out. Even though it’s not approved, which branches we expect to keep and which we expect to merge. Bear in mind, it could be Solar people will have to move to a Sonepar branch. It will be Sonepar people moving to a Solar branch. It might also be that we keep both or move to a third new location. That is being mapped out. In a nutshell, we do not have much new knowledge. We are very comfortable with the synergies. In terms of when we will start to see a positive gain, you have to wait until the later part of 2026, assuming that the approval is early December. On that note, I can say that we have received information from the competition authorities that the application is complete.

It does not mean it is approved, but basically means that they have all the information that they need. I think it was the beginning of this week, late last week, we got that message. Second question. What specific initiatives have you implemented to improve margins in 2026? I assume it is the EBITDA margin that the question refers to. Yeah. We have launched some growth initiatives, as I also hinted to, where we are trying to target various niches, both product-wise but also in terms of customers, in order to accelerate growth and thereby gain scale. There is no doubt that one of the things that has had a diluted effect on the margin is we lost scale. You can see it in the Q3, actually. We have carried out a lot of cost initiatives trying to offset the growth in cost by changing structures, procedures. We will, of course, continue to do that.

In addition, we’ve launched a lot of margin initiatives. We’re doing some specifics here in Q4. On a more long term, it is a matter of working with, amongst other things, the mix, which will probably be the main contributor, but also other initiatives will be brought in. You can say we’re working on all parameters in order to strengthen the EBITDA margin, not only percentage, but also in terms of euro. Third question. You called it a Sonepar deal, a transformative deal for Norway. Beyond scale, what differentiations does combined Solar Sonepar company competitively in the Norwegian market? Yes. I think it is transformative because we will be able to serve the customers not only 12,000 SKUs or a number of products. We will double that to 25,000. We will lower the cost to serve. We have an automated out-of-store solution in our central warehouse.

In Sonepar, it’s more manual. We will be close to number one in Norwegian marketing. Right now, we are in the middle of the field of competitors. With that move, we will be at least close to the number one in the market within electrical. I think, and I hope, at least also to our A-brand suppliers, that they will see us as an exciting place to be combined with our digital way of doing business. I think that is more or less the overall framework for this acquisition, I would say. Fourth question. Given the current margin pressure and limited top-line momentum, how are you prioritizing between cost, discipline, and growth investments? That is always a balancing act. I would say I have been here for many years, and I would say that has always been the case in Solar. It is a very cyclical industry.

It goes up and down. It’s like a roller coaster industry to be in. At least we cannot run the company from quarter to quarter. We need to look into how to invest cleverly. We have done that, I think, I hope, and I hope you agree. We have invested DKK 2 billion in out-of-store over the last seven years, closing up with Kumla. Now we turn into a new customer platform that should help our customers to ease in their findability. We will also extend the use of AI quite dramatically. Of course, we need to look into ourselves, hopefully see a market come back to a more normalized situation. We cannot make a strategy or an ambition on luck. That is also why we always do activities despite the headwind we are facing right now.

In my mind, cost to serve has to go down to be among the best in the coming years. A final question. You write that the savings initiatives will correspond to an EBITDA margin increase of 0.8 percentage points for 2026. You mentioned other initiatives will dilute this positive effect. Can this be interpreted as the expected EBITDA margin will increase less than 0.8 percentage points for 2026? I think the short answer is no. It was just to point out that the 0.8 is all other things equal. We do know for a fact that they are not. We need, of course, to work with a lot of other initiatives in order to ensure that we strengthen the margin. It’s still early days, but I mean, you always have salary inflation. There’s nothing new in it.

I would say the main challenge for the last couple of years has been that we’ve been unable to put this on top of the prices. Bear in mind that the prices in various categories increased quite substantially in 2021, 2022, and to some extent 2023 as well. We didn’t put anything on top of it. We just passed on the price increases we got from the suppliers. I would say with the current market, it’s been very difficult for us to add anything more to the prices. It is up to us also to start to generate some growth. That is really a focus area for us. Again, as I also mentioned on.

The gross margin, we need to start to increase this, amongst other things, to work with a mix because there are definitely things that are going in the other direction as well as your question indicated. Cleverly. No further questions. Okay. From here, we will thank you for listening in and have a great and nice day. Bye-bye. This concludes today’s conference call. Thank you for participating. You may now disconnect.

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