Alleima (Stockholm:ALLEI) Q2 2026 Earnings Call

0:00 Hello everyone. Welcome to Alleima's presentation of the second quarter results 2026. My name is Frieda Adrian and I'm Head of Investor Relations. I'm joined by our President and CEO, Joran Bjorkpan and our CFO, Johan Eriksson. Joran and Johan will take you through the highlights of the quarter. And following the presentation, we will open up for a Q and A session. You're welcome to ask questions via the conference call or submit your questions through the webcast interface. The presentation materials are available to download at aleima.com. And as always, safety is a top priority for us, so I trust that you are familiar with the safety procedures at your current location.

0:46 And with that, I hand over to you, Jarrod. Thank you, Frieda. I would like to begin this webcast by addressing a very sad event that happened on May 5. I want to express my deep sorrow with a tragic traffic accident at our industrial site in San Wieke, in which one of our colleagues sadly lost their life. The thoughts are with our colleagues' family, friends and colleagues, and our deepest sympathies go to all of those affected. This tragedy is a painful reminder of why safety must always remain Alleima's highest priority. We are cooperating with authorities while continuing our long term work to strengthen our safety culture, mitigate risks, and ensure a safe working environment for everyone.

1:37 This is an ongoing effort that is never complete, and that requires our full commitment every single day. So while this loss has been deeply felt across the organization, I will now turn to the key developments and highlights for the quarter. So let's look at them. Overall, I think it's a strong quarter on several fronts. We are, for the first time since quarter one twenty twenty five, again showcasing top line growth, where both order intake and revenues grew organically. The twelve month rolling order intake went from minus 12% organic order intake in quarter one to now plus 3% in quarter two, supported by strong performance in key segments like parts of oil and gas, medical, industrial heating, and transportation.

2:26 And and as you have seen, we received the largest order yet in the history of Alleima on almost 1,000,000,000 per tonne by little tube. At the same time, there are still uncertain markets where the situation in The Middle East still affects us, mainly in the OCTG business, but creating overall uncertainty in other areas as well, while we are pleased with the quarter, but remain cautious going forward. Earnings wise, we saw a strong contribution for CALTAL, which I will get back to, but also strong performance from the umbilical business, as well as titanium tubing to aerospace. This is somewhat offset by weaker short cycle business within tube, where the weak Europe continues to dampen the result, also noted a slight FX tailwind.

3:12 We'll continue our journey on long term value creation. During the quarter, Alleima inaugurated TUEM in 2026, spanning capacity of steam generated tubes to the nuclear industry by 60%. Also paid a dividend to our shareholders on total of $625,000,000, an increase of 9% compared to 2025. And in addition, the targeted measures announced in the third quarter last year are progressing according to plan, and are delivering cost savings in line with expectations. I think taken together, these actions position Alleima well to continue creating value going forward. Moving to sustainability, which remains an important part of our strategy, and during the quarter, the share of revenues from its sustainable product portfolio increased, mainly driven by the growth in medical and industrial heating segments.

4:07 Health and safety, always our highest priority, rolling twelve month accident frequency improved versus quarter two last year, but sequentially increased due to more accidents this quarter than quarter two last year. And we need to continue and to maintain a strong safety focus across the organization. CO2 emissions increased mainly due to a lower share of biogas and a higher use of natural gas. At the same time, the share of recycle still remained high at above 80%, both on a rolling twelve month basis and year on year. If we take a look at our review on the market development, we still view it as mixed, uncertain or challenging, whichever word you like, stemming from the uncertainty around The Middle East and an already weak Europe.

5:00 Volatility is expected to linger, but we also expect momentum to continue in key segments. Maybe you noticed a change that we changed a few arrows, but I will walk you through each segment, starting with oil and gas. And I can say that I feel confident to say that it was a good decision to increase output pace for umbilicals in the beginning of the year. Major order received is a confirmation that the market is strong, and we stick to a positive view, as the project list still is very attractive. For OCTG and business, on the other hand, we talked last quarter about the effects from the situation in The Middle East, We flagged for a weaker outlook already in the q four report, and we stick to that view as well, while we land in a flat arrow.

5:45 Industrial, European demand is still weak. Asia also declined, but North America improved, but on low levels. Chem, petrochemical, volumes in Europe and North America are low, while Asia has been holding up better, but we where we now have a slight slowdown. Industrial heating, we continue to see growth driven by Asia and North America, while Europe is still on the side. And it's still the segments like electronics and semiconductors are still the main drivers. Consumer, flat on flat demand on a good level. And medical, strong momentum, no signs of slowing down. And let me remind you again of our greenfield investment in Malaysia that will be up and running towards the end of the year.

6:33 Transportation, titanium tubing for aerospace, also including space, has continued to be strong. Mining construction demand was stable overall, again driven mainly by the mining industry. Nuclear, nothing has changed where the outlook remains positive. And last, public renewable energy, there are some bright spots, for instance biofuel, but all in all still weak. So let's turn to The Middle East. Market uncertainty continues. The situation remains unstable, and as you know, there is new information emerging almost every other day. The uncertainty is negative for the market as it affects visibility, customer sentiment and decision making.

7:20 And just as previous quarters, it's important for us to focus on what we know and to avoid speculation, whether it's negative or positive. Our largest exposure in the region is within OCTG, which is part of the oil and gas segment. And this business has both direct and indirect exposure to The Middle East and is being negatively affected by the developments in the region. We continue to see slowdown in new well completion, which is expected to negatively impact our order intake in coming quarters. And as I said in quarter one, we have reduced our output to support our customers in avoiding excess inventory, which have had a negative impact on revenues. We also have a chemical and petrochemical business in The Middle East, and that is also effective, although this is a much smaller part than than OCDG in that region, and therefore less significant from an overall exposure perspective.

8:18 And at the same time, the impact on Alleima's other businesses remains limited. Moving to order intake and revenue. Order intake rolling 12 amounted to 18,600,000,000, again up three percent organically compared to the minus 12% we had in quarter one. And this is supported by strong development from umbilicals, including the large order, but also excluding the large order, umbilicals was good, and also strong development in industrial heating, medical and aerospace. And we are all growing despite the lower OCTG volumes we flagged for previously, and we are still low in chempetrochem, while we strategically have booked some more contribution business in the quarter to cover cost, which will have a somewhat diluted effects in the margin near term.

9:05 Revenues grew organically by 2%, supported by the same key segments that drove order intake. Tubing strip declined, while Kantal grew. And book to bill Rolling 12 recovers to 102% from the 90% we had in quarter one. Earnings, adjusted EBIT improved to $519,000,000 and a margin of 10.6, a strong performance despite lower volumes in the OCTG and the short cycle businesses. This is explained by solid performance in umbilicals, aerospace, and I would say all of the CANTAL. And in addition, we see positive effects from the targeted measures announced in Q43 last year, and somewhat helped by FX.

9:51 Cash flow over SEK330 million, which Johan will get back to show some details later. So let's look at the division performance during the quarter, starting with tube. And I would say it is a mixed picture. Some parts of the business like umbilicals within oil and gas, titanium tubing within transportation are performing really well. While short cycle business, mainly industrial and chem, petrochem still are weak, Our APAC unit has previously held up strong both in terms of top line and earnings, but we now expect a somewhat weaker Chinese market. Rolling 12, order intake grew 1% organically on the back of the major umbilical order, held back some by high comps in both SGT and OCTG.

10:42 Revenues declined by 3%, again affected by the short cycle business, OCTG, and also some timing effects in nuclear. Book to bill grew to 101% recovering from the 85% sequentially. Adjusted EBIT margin of 11.2% on par with last year despite lower revenues coming from strong contribution in umbilical and aerospace, as well as savings from the targeted measures, mitigating the negative effect from the short backlog in short cycle business and the lower volumes in OCTG. And currencies had a positive effect on SEK18 million year over year. Let me take a moment and really highlight the great performance of Kantala. In the recent downturn, where volumes in industrial heating were low, while facing a significant FX headwind throughout most of 2025, they've done an excellent job in taking actions to protect profitability.

11:39 Now, when volumes have recovered, and with growth investments ready to scale, I would say the future of Kantar looked really bright. Rolling water intake grew organically, with 19 where medical, industrial heating were the main drivers, and the same can be said for revenues, which grew 21% organically. Rolling 12 book to bill of 109%, And the adjusted EBIT margin 19.6% is a record high in the quarter, and we see contribution from several product groups, both within medical and industrial heating. FX had a minor positive effect on SEK4 million year over year. So to strip, it's been a challenging quarter for the strip division. We have experienced some production disruptions in Sandvik, and I would say these issues have now been resolved. Mitigating actions are ongoing, and Strip is working to strengthen its cost position, with, of course, the aim to once again contribute positively to the group margin.

12:39 Rolling 12 order intake declined organically with 16%, heavily impacted by a negative development with the hydrogen business, but also a weaker industrial segment. Revenues declined 1% organically, with the consumer segment contributing positively. Adjusted EBIT margin was 2.5%, but impacted negative SEK3 million year on year, and underlying margin was 3.3%. And book to bill amounted to 89 percent. And with that, I leave over to you, Johan. Thank you, Joran. So looking at the financial summary and starting with the table to the right. So order intake for the rolling twelve month period amounted to SEK 18,600,000,000, corresponding to an organic growth of 3%.

13:29 We had a negative impact from FX and alloys of 41% respectively, indicating a total growth of minus 2%. If we look then at the quarterly revenues, we reached 4,900,000,000 with organic growth of 2% and still some impact from FX, which in total had a negative impact of 1%, while alloys had turned to a slight positive effect of 2% on quarterly revenues. If we look ahead into the quarter three, we see on revenues a neutral currency effect, and we expect roughly plus 2% from alloys. And on the order intake side for the rolling twelve months, we expect minus 3% on currency and a neutral effect from alloys.

14:24 So and we have no contribution from structure, we can conclude we haven't done any acquisitions in the last twelve months and then there is no structure effects on top line then. And then back to the big table on the left, where I'll get back to adjusted EBIT in the coming slide. The reported EBIT increased to SEK715 million, coming from higher revenues and positive metal price effects. Net financial items for the quarter amounted to minus 10,000,000 compared to plus 18,000,000 last year, mainly driven by valuations of derivatives, which mostly were in the comparison period last year. Normalized tax rate at 21.1% for the quarter, but preferably we look at the year to date figure, which is 22.5.

15:18 So on the lower side of our guidance. Free operating cash flow came out at $330,000,000 in the quarter and I'll get back to that in a coming slide. And finally, adjusted EPS for the quarter at SEK1.57 impacted positively by a higher adjusted EBIT. So let's have a look at the bridge for adjusted EBIT. We start at last year's $454,000,000 and margin of 9.5%, compared to this year's $519,000,000 with a margin of 10.6. And this is a solid organic development, I must say, with a healthy leverage of 46% and a strong contribution from, as Jorn also mentioned, from Kantal and parts of the tube business.

16:11 And of course, the targeted measures that we announced after the Q3 closing last year. So of these mitigated then the under absorption effects that we saw from the lower OCTG volumes and the weaker short cycle business. And we're pleased that the targeted measures are proceeding according to plan, both the permanent ones and the volume related ones. So in total, they yield some 45,000,000 in the quarter, putting us roughly at 85% of our targeted run rate. And we saw no contribution from structure in the EBIT bridge this quarter. Moving over to the balance sheet and looking at the capital efficiency.

16:59 Net working capital increased in absolute terms year over year, mainly due to the higher metal prices, but it decreased as a percentage of revenues, so in relative terms down to 35.5% due to higher quarterly sales. Sequentially, we increased net working capital, you can see that in the graph, and that can be derived from increase of accounts receivable and higher inventories done driven by the increasing metal prices and some volumes as well. Capital employed that you have on your right hand side, excluding cash increased year over year to 16,600,000,000, mainly driven by higher net working capital. And the return on capital employed, excluding cash based on the reported operating profit, so that includes metal price effects and items affecting comparability, that was 7.7% for the rolling twelve month period, down from 9.2% last year, coming from a lower rolling twelve month period reported operating profit.

18:10 Looking at the cash flow, and might be worth mentioning, and some food for thought, is that we have been talking for some quarters now about a challenging market and not being 100% satisfied with our own performance. But this graph shows that we, despite that, are continuing to generate a healthy cash flow. And moving to the table on the left, EBIT and EBITDA, I think we've touched on already. The non cash items, which most commonly refers to cash or non cash effects from provisions or provision releases. And this year, it was affected by cash flow effects from the ongoing restructuring activities. We note the negative impact from changes in working capital, mainly due to increased inventory.

19:00 And that comes from the higher raw material prices then and some volume effects as well. And also, higher accounts receivable affect this net working capital number. And CapEx for the quarter is almost on par with last year. Amortization of lease liabilities is slightly higher this year. And all in all, this leaves us with a free operating cash flow of SEK330 million. And please remember that cash flow normally is lower in the first half of the year when we have seasonal buildup in preparation for the maintenance stops that we have in the third quarter. Looking at our financial position, and overall, our financial position remains strong, where we are well below our financial target of a net debt to equity ratio below 0.3 times.

19:54 At the quarter end, we were at negative 0.02 times. And net pension liabilities has decreased to $6.00 4,000,000 from last year's 08/13, mainly as a result of higher discount rates. And the leasing liabilities are slightly lower than last year. And our cash position continues to be strong. Despite paying dividend of $625,000,000 in May, we have a net cash position of $283,000,000. Let's look at the guidance we gave ahead of the quarter and the outcome of that. On CapEx, we guide on full year and so far CapEx spend for the first half of twenty twenty six is almost SEK400 million and normally the second half of the year is more CapEx heavy.

20:45 Currency, transaction and translation effects came in at minus 39,000,000, where we estimated minus 60. In the total currency effect, the transaction and translation effects were more than offset by hedges and bridge effects from revaluations. So this year we had positive hedges and positive revaluations, and last year we had some negative revaluations, resulting in a total bridge effect from those items of plus 57. So that takes us to the positive 19 that we have in the total currency effect. If we then look at the metal price effects driven by increased metal prices, the metals affected us positively in EBIT with almost 200,000,000, where we guided for 150.

21:40 And the normalized tax rate year to date is 22.5, where we are guiding for 23 to 25 for the full year. So at the low end, but quite close to the range. And looking into the third quarter and full year and the guidance for that full year CapEx, we keep the full year CapEx guidance of 1,100,000,000 coming from growth projects for the year of the one that you know that we have inaugurated, the steam generated tubing capacity increase in Sun Beacon, but also investments like the industrial heating in Japan and medical in Malaysia. And a little less than half of the total is also for maintenance.

22:29 Currency effects for the third quarter based on the rates per the July 15, the transaction and translation effects are estimated to be neutral. On the metal price side, based on the metal prices and currency rates per the July 15, we anticipate a positive effect also in the third quarter of 100,000,000. And here, it's probably worth reminding about the dynamics that the price increase for, especially for nickel, but also for molybdenum and chromium, over time leads to positive metal effects in our EBIT, while a stronger SEK against the US dollar, as an example, has the opposite effect. On the tax rate for the full year 2026, we expect a normalized tax rate in the range of 23% to 25%, just as before.

23:20 And by that, I hand back to you, Janan, for outlook and summary. Thank you, Johan. So the outlook for quarter three, I would say the start of the third quarter has been influenced by new tensions in The Middle East, further dampening for us an already weak regional business within tube in Europe and North America, and also some indication of a slowdown in APAC and especially China. In contrast, umbilicals, industrial heating, medical, aerospace, as well as space, as well as nuclear remains strong with solid backlog and momentum going forward. Product mix is expected to be similar to quarter two, but there might be some diluting effects from the product mix, given that we short term have taken more contribution orders to compensate for the lower OCTG volumes.

24:14 Earnings in quarter three will also be somewhat impacted by some planned ramp up costs for the new STG mill. And as always, cash flow is normally higher in the second half of the year. Coming to summaries, overall, I think we delivered a strong second quarter with organic order take growth moving from minus 12 in quarter one to plus three in quarter two, supported by strong development in umbilicals, medical, industrial heating and aerospace. At the same time, profitability improved, supported by strong performance across several segments, and particularly by an excellent quarter from Kathaal. That said, market uncertainty remains, visibility is still limited in parts of the market, and the external environment continues to be unpredictable, while we maintain our discipline and our focus.

25:08 We constantly execute on our long term strategy, focus on profitable growth, attractive niches, and a strong product mix. We will continue to implement the target measures introduced in October last year, driving cost savings and efficiency improvements, which we continue to see the effects from. And I would say overall, I think the quarter shows that we are progressing well, despite a still uncertain market. And with that, back to you, Frieda. Thank you. We will now begin the Q and A session. Please feel free to ask a question via the webcast or directly through the conference call. Operator, please go ahead. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their telephone.

25:56 If you wish to remove yourself from the question queue, you may press star and 2. The first question comes from the line of Caleb Solomon from SEB. Please go ahead. Hi, guys. Thank you for taking my questions. You mentioned there will be some ramp up costs related to the reopening of the facilities for a steam generator tubing. Can you give us a rough figure of how much that is and maybe a rough split of how that will be divided in Q3 and Q4? You can look like this. We're leaving the product phase and now entering into sort of real production, during the ramp up, there is no invoicing. And with roughly 100 people, it's roughly 20,000,000 cost in the quarter that we will have until we have invoicing.

26:51 So quarter three first and quarter four, I would say. So in the size of 20,000,000. And just as a follow-up, how long do you expect the ramp up will sort of take before you reach normal utilization rates? I mean, I don't have the date right now, but our plan is to be operational end of the year, so including so then we will have absorptions from the factories. Exactly when the first invoicing will happen, I don't know right now. So sometimes during the quarter four, that ramp up cost will be reduced. That's clear. And another one for you maybe, Aron. After the sort of previous ramp up issues in Sandviken, you mentioned that catching up to the OCTG backlog would take until mid-twenty six and that it should be sort of fully operational by summer.

27:44 So first, just sort of wondering what, if any, impact it had this quarter and if the backlog reduction is now fully sort of done? And then second, is there any sort of impact to consider for Q3? I didn't follow that question. Delay related to the last year's ramp up. That effect was not so big in quarter three, it was more in quarter four, wasn't it? Yeah, delay into this year. If I may, I believe you referred to that we had delays due to that, that would sort of linger into OCTG then into quarter one and quarter two this year.

28:32 And that has been caught up now. And it's more market that Yeah, absolutely. The market has changed heavily since we were in those times. Yeah. Okay. And mining and construction was a negative contributor this quarter, which seems to be sort of a common theme among companies reporting today. Can you maybe give some color on what you're seeing from that segment and if you're sort of expecting anything else for Q3? We see a stable, good order intake from a couple of big Swedish customers. Okay. And just a final one. You give the same sort of comments just related to general uncertainty that you've done the previous quarters, but it sounded a little bit in the CEO letter that you were like you were somewhat more optimistic, Jaron. Is that correctly interpreted? And why is that?

29:40 Probably colored by sort of the strong order intake we have had in quarter two, and to some extent, I think we were kind of getting used to operate in very uncertain times. Because when you look around, weak Europe or in Middle East, US with tariffs, China maybe a little bit slower growth, but I but it looks like we are are sort of managing that pretty well. And, course, some of our our important key segments like umbilical, industrial heating, medical, aerospace, nuclear will be positive. I think that is what is probably coloring my my my approach.

30:29 Okay, that's clear. Thank you for taking my questions. Thank you. The next question comes from the line of Adrian Glani from ABG. Please go ahead. Yes. Hello. A couple of questions from my end. First of all, a follow-up on the nuclear line ramp up. When it does start ramping up significant volumes, should we see this as sort of extra volumes coming in that you didn't produce before, or is it volumes being redirected to the nuclear site, which would be sort of more of a mix effect rather than a growth effect? No, it's extra volumes. Will be able to make 60% more, and we have a backlog for that.

31:15 I'm talking at the group level. So I understand it's more nuclear volumes, but is it volumes that you would have produced in other segments being rerouted to nuclear, creating Okay. A positive mix We wouldn't. And it's open for this product, and if we didn't open this, we we wouldn't produce something else. And and in the backup system a back end system, I mean, the nuclear part is the small part. So it's more the value on the added value product. Yeah. Understand. And then just on the orders in tube, when you talk about orders at the group level, you talk about it being somewhat broad based improvement. If we look at tube specifically, would you say that the majority even if you strip out the one larger oil and gas order, would you say the majority of the improvement is still oil and gas improvements or even within two business broad based improvements?

32:14 So it's I mean, Talking about order intake, of course, they're heavily impacted by the umbilical. And of course, we had almost SEK1 billion order. But even if we wouldn't have had that order, umbilical would have looked good. So as you can imagine how strong it was. But if I look at other segments, I think they are strong in aerospace, that was good. And I would say those are the two segments that are the strongest within the Tube division, in order intake wise. Then, as you know, we don't book nuclear orders every day. So that is quite unstable from that perspective, we have very strong backlog, so that would still create revenues starting from end of the year.

33:08 Understand. And then sort of for us, when we're going to set our near term revenue and earnings assumptions, given that your orders can have lead times of anywhere between a quarter and several years, how much does the current very strong order intake in Q2 derisk estimates for perhaps the second half of the year? Are these orders that will be delivered fairly soon or further out? That is a very good question. I will try to answer it. If you look and I need to take them one by one, then if we start with Ambulatory, I mean, this is not impacting near term revenue in umbilicals. We increased our output in the beginning of the year even though the order backlog was not so strong, so that was a clever decision of us.

33:59 So these orders, including the big one, is more adding on to the backlog, so that will continue strong. Medical, they had some good orders. Some of their customers don't place order on a regular basis, and so there were some big ones. They are growing double digit all the time. So in some way, it's impacting quarter three and quarter four, but not the orders as such. Industrial heating, I would say, is more positive from that, because we are growing industrial heating, and you can see that Kantal organic revenue growth was around 20%. So that I think you could expect going forward as well.

34:47 So it's a mix. Somewhat will impact and some is building backlog. Yep. I understand. That's very helpful. In that case, those were all of my questions. So thank you. The next question comes from the line of Johannes Yirunselis from SP1 Market. Please go ahead. Yes. Hi, everyone. It's Johannes here. I'd like to zoom in on on Kantal and the very strong organic growth and even more stronger orders. We know that both medical and industrial heating are strong. Could you give maybe give some light there, Joran, which one is the strongest of these two, are they, like, equally strong now?

35:44 If you take them over a few years, medical is the strongest. And if you remember, industrial heating was struggling a little bit 2024 and 2025, and started to grow, I would say, end of quarter three last year. So we have seen strong growth in industrial heating, but in that case coming from, I would say, lower levels, which is not the case in medical. I don't have the numbers in front of me, but I think both industrial heating and medical is growing well now in quarter two. And you look at orders, medical had some, I would say, strong order intake that's where some of the customers placed orders maybe just two, three, four times a year.

36:31 Okay. That's helpful. And I was thinking also about capacity utilization and the different pockets in Kantal. Do you have available capacity where you are at the moment? Could you maybe comment on on kind of the operating rates there? We don't we're not transparent with capacity utilization numbers since I don't want my competitors to know that. I think it's a mix. I think if you look at medical, are they are now I mean, we communicated Malaysia. I think we also communicated that we're increasing capacity in Tucson, the second side we have in The US. Not not a very big investment, but still, they are constantly increasing capacity, small investments all the time.

37:19 So I'm not worried about that. If I look at industrial heating, it's a little bit mixed. There are some units that still could could gain could use some more volumes. Then we've done investments, for instance, in Perth and in The US for silicon carbide. So that way, we've invested in capacity. We're investing in capacity right now in Japan that that would be utilized. Then that there are a couple of examples that where we are struggling a little bit with output, where where the growth has been, I would say, significant, and that is part of the semicon business and doing everything. We have some new businesses there and and really good levels. But if you are surprised by new orders, you could have some struggle.

38:04 But I'm not worried about the capacity utilization in Kantar. I think they are running at good levels, I think mostly they they they are able to continue to grow. Okay. Thank you very much for helpful answers. Thank you. Thank you. The next question comes from the line of Thorsen Victor from Danske Bank. Please go ahead. Many thanks, operator. Good afternoon, Jarrod and Johan. Thanks for taking the questions. I perhaps just have one and I'm just trying to sort of square what you see in terms of demand. Obviously, it's a very mixed and dynamic picture, but also versus what you have sort of reported in terms of figures. So I mean, for the last couple of four quarters, order intake has been almost every quarter now around SEK 4,000,000,000, right?

39:05 We are now, if we didn't take away the large merger order, are SEK 1,500,000,000 up from that level, so SEK 5,500,000,000. And obviously, you mentioned a very strong umbilical market, aerospace, but what is sort of the delta from the SEK 4,000,000,000 to 5.5 in Q2? And obviously, there's seasonality, Q3, perhaps 10% lower, Q4, 10% up from that level that's on. But is this sort of the new normal bills, if I put it like that? If you could help from that perspective, please. Sure, I give you the data. One reason, Victor, why we are communicating and reporting order intake on rolling 12 is that the difference between the quarters, and then you've done your math and you can see through that.

40:00 I mean, I think we communicated for some time that umbilicals are strong, and apart from the order, it was a very strong umbilical quarter. Industrial heating is growing and continued to grow, and medical, as we've seen before, has sometimes large orders coming in, then it's slower. So I would say nothing surprising, it's just that a lot of it came at the same time. And what I am happy with is that it is in, for us, key important segments where we have the strong order intake.

40:48 I one comment to make is, of course, this is building backlog in umbilicals. And we also know that the backlog for our main competitor is pretty long as well. So for us, it's important to keep some flexibility to continue because when I see when I look at the project list, even though we put this big order and a lot of other orders, it still looks very attractive. That's good to hear. Perhaps also on the demand side, industrial heating has obviously been quite strong for several quarters now. What what is the the main driver of that? Is it, you know, increased focus on energy efficiency?

41:42 Is it on the CapEx side? Is it on the OpEx side? Just just to understand, you know, sort of what's driving the strength because, I mean, the sector overall or within capital goods, obviously, there's a very mixed picture on on what is working and what what is not working. So so just to understand what, you know, what is driving that very solid growth in in Kantal and what makes you comfortable that, you know, that could could continue to add to some extent? I'll try to answer that question. But but if I start answering on on on your reasoning, I mean, still, industrial heating is is meeting pretty poor comps. They started to grow in the quarter three last year. So of course, it's been easy to have sort of good percentage number growths, but now they also start to be at good levels.

42:31 So I don't think you should expect double digit sort of end of the year or beginning of next year, but still on good level. It's clear. I think it's a little bit of difference. If I look at control industrial heating Europe and sort of furnace builder metals, that is still pretty weak. The main driver what we see is semicon glass, which is also in electronics and electronics. Those are the main drivers for for the for the growth in industrial heating. How how big is semiconductors now? The last one from the top, just to get the sense. Semicon. Mhmm. Around 20% of the industrial heating part.

43:18 Super. Super. Many thanks. Thank you very much. Next question comes from the line of Okebloom Andres from Nordea. Please go ahead. Yeah. Thank you. Hi, and good afternoon. Wanted to follow-up a bit more on Kantal. Obviously, very impressive margin print. I mean, just in a general sense, Jan, I mean, how much of this would you say is sustainable? And as we sort of ramp up the growth investments in Japan and Malaysia, I mean, how should we think about that margin sort of scaling and phasing? I'm not sure what you want me to answer, Frantis, but let me put it this way.

44:07 I mean, is the best quarterly result Kantal has delivered. But I would not say it's sort of all stars or line, and this was extraordinary. I'm not saying that they will meet these levels all the time, but I don't think it's any extra. I think the the market is with them. We've we have done the the right investments. And, of course, also, I would say, granted to to the industrial heating part that from the downturn they were in, they they they mitigated and and defended their margins well. And now when market is coming back, of course, they have a very good leverage on a lower cost than before.

44:56 But I see no reason why this is the level of where a cot hole should be. Sounds promising. And I mean, you said the semiconductor end market, approximately one fifth of industrial heating, if I didn't mistake you there. I mean, if you just look at growth this quarter in Cantal and industrial heating specifically, how much of that specifically was driven by semiconductor customers? Not sure if I had the number I could give you. I don't have that number, but I would say the majority. Don't have the number, Anders, but there's a reason why we point at these ones.

45:42 And I think Yeah. To give you some more information then without going into too much details, I mean, Semicon has been a business within Kantor for quite some time. It's the furnace builders who make the furnaces look pretty much the same if it's solar or semiconductor. Semiconductor is a little bit more advanced, but there is always new businesses. There is a very thin glass thing into the semiconductors, semiconductors, and and in the production of those, they need furnace elements from from Kantal. So there are also new businesses that we didn't have before driving this.

46:35 All of this in it. Okay. The majority of that in Asia. Yes. Right. I'm very positive for the central control. Yeah. Feels like it's driving a lot of growth for many companies in different ways, so interesting that you have that growth as well. But I wanted to ask a bit as well in sort of the contribution business. I mean, you mentioned that you're booking some more contribution business as well. Could you quantify a bit how much you booked and sort of what the margin differential is between your normal mix? And I mean, how many quarters you think you need this sort of buffer, so to speak?

47:25 I thought you were gonna ask us if we're leaving the strategy with that, which we are not, of course. The strategy is not to be panicking and book unnecessary orders. This time we have decided to book more. The main reason is that the OCG volumes were reduced very fast since we are supporting customers that were overstopped. And if you have looked at these tubes for OCG, they are huge, heavy tubes, so there's a lot of volume upstreams, both in extrusion and of course in the primary system. I don't have the numbers, Johan, how much this is. But it's if you only look at gross profit margin, it is of course quite much lower, but the alternative to have absorption issues would have been even worse.

48:26 I don't have the numbers. Oh, and it's quite short in So it's a quite short turnaround, so it's not that we're building a long backlog. Okay, makes sense. And finally, I mean, obviously leverage is, I mean, you have essentially a net cash position even after the dividend. I mean, how are you thinking about deploying this sort of balance sheet strength? I mean, you looking to further M and A activity or could you accelerate buybacks? Should we see some additional growth CapEx going forward? I mean, I know that you guide for 2026 in terms of or CapEx in general, but how should we think about the respective components here?

49:12 First of all, I don't see a strong balance sheet as a problem, but I understand the question. Not at all. We always look for M and A opportunities, especially in medical, but it has to be the right company and it has to be the right price. And we have a pipeline of companies we're looking at. And yes, I think you should expect more growth CapEx. Those are in our plans and when we are ready, we will communicate that. Okay. Very good. Thank you. Thank you both for your answers. Have a have a good day. Mhmm. Thank you. Ladies and gentlemen, that was the last question.

50:00 I would now like to turn the conference back over to Frieda Adrian for any closing remarks. Thank you all for calling in and for really good questions. I think this concludes the call and we're wishing you all a great summer. Thank you.