Balco Group (Stockholm:BALCO) Q3 2026 Earnings Call

0:00 Hello and welcome to today's presentation with Balkan Group, who will present their report for the third quarter of 2026. Today we have Johan Dyberg, Acting CEO, and Viktor Arvidsson, CFO. We have a Q&A after the presentation, and if you call in and would like to ask a question, please press star 9 to raise your hand and star 6 to unmute yourself. You can also type in your questions using the form to the right of the broadcast. And with that said, I hand it over to you guys, and I'll be back when it's time for the Q&A. The floor is yours.

0:30 Thank you, so welcome everybody to our reporting of the Q3 period and also Balco Group up to today's date. Thank you for taking your time and for those who haven't been with us before, very briefly, Balco was founded in 1987. We have our head office in Växjö and we operate mainly in two segments, renovation and new build within balconies. I think, without going into all those details that you probably know about, I can say that we have a very strong position with the board offering throughout different entities in the Nordics, primarily in Sweden and Norway. And we really don't see any signs of that position weakening.

1:18 On the contrary, actually. A contributing part to our focus on our core business, on our core markets, has been that we during this quarter discontinued our local operations in the Netherlands. And we also consolidated our operations in Sweden. While we see good growth opportunities in Germany and UK as well in the maritime business as we are quite small in UK and Germany and very strong position in the maritime. So that's actually a snapshot of the Valko Group where we are right now. So from that, I'd like to jump on to Q3 highlights. We feel the order intake remains satisfactory on satisfactory levels, and we do have a strong order book. So again, as I said last quarter, the market is there.

2:11 That's not our challenge at this point. We are trying to find further steps we can take to decrease time between order and revenue, and we have come a little bit on that path.

2:25 We have

2:28 which you can see actually in the net sales, even though it's very early to say anything, taking a big conclusion on that. What I think is important to mention here is that we do have items affecting comparisons versus last Q3 of minus 88 million SEC, where write downs of assets are 79 of those. Also, I think it's very interesting and good to announce that Charlotte Mattsson now has been appointed as the new CEO and she will start sometime in Q1, 27. We have, as you've seen, taken extensive measures, reducing, we reduced our workforce with about 60 people, about 10% of our total employment.

3:19 we have integrated TBO Haglinds in RK Technik and we also integrated Stora Fasad into Balco AB and as I mentioned discontinued our local operations in the Netherlands and the property that was previously owned by TBO has now been sold and we'll see that in the figures in November I think that's mainly what I would like to mention on the Q3 highlights. I don't know if you want to take us on, Victor, in the results and walk us through those.

3:58 Yeah, absolutely. Thanks everyone. Let's look at the financials for the Q3. Net sales, as mentioned, amounted to 295 million SEK versus 277, same period last year. We had an organic growth of 6% and a currency effect of 1%. The adjusted operating result EBITDA amounted to 1 million SEK versus 3 million last year and corresponding to an adjusted EBITDA margin of 0.5% versus 1.1 last year. The order intake, as mentioned, amounted to 220 million SEK versus 222 last year. The order backlog was 1,571,000 SEK versus 1,377,000 the year before. The adjusted earnings per share amounted to minus 0.21 SEK versus minus 0.23 last year. Earnings per share amounted to minus 3.23 SEK versus minus 0.23 last year. And the operating cash flow amounted to minus 12 million SEK this year versus 3 million last year.

5:14 If we turn to our segments and looking first on the renovation segment in the quarter, the net sales was 226 million SEK versus 206 last year. That corresponds to 77% of the total net sales versus 75 last year. The order intake in the quarter amounted to 165 million SEK versus 188 last year. That corresponds to 75% of the total order intake versus 85 last year. The adjusted operating profit in the quarter amounted to 4 million SEK versus 2 last year, corresponding to adjusted operating margin of 1.7% versus 1.2 last year.

6:00 The order backlog amounted to 1,109,600,000 versus 1,107,000 last year. That corresponds to 71% of the total order backlog versus 80% last year. On the New Belt segment, the net sales in the quarter was 68 million SEK versus 70 last year, corresponding to 23% of the total net sales. Order intake in the quarter amounted to 55 million SEK versus 33 last year, corresponding to 25% of total order intake. And the adjusted operating 3.6 million versus 1 million last year. That corresponds to an adjusted operating margin of minus 3.9% versus 1% last year. The order backlog amounted to 462.6 million versus 269 last year.

6:58 If we turn to the financial position at the end of the quarter, our equity amounted to 668 million SEK versus 744 last year. The equity asset ratio was 43% this year versus 44 last year. The interest bearing net depth, including leasing depth in relation to adjusted EBITDA amounted to 6.7 times versus 6.8 last year. And as we reported before, we have a supplementary agreement with our principal bank, which entails time limited easings of our loan terms.

7:45 And I hand back to you, Johan.

7:49 Thank you. So a quick report here. If I summarize this, I mean, we do remain confident that we have a strong position, we have a strong order backlog, and we're supporting that with a sufficient order take that is pretty much in line with what has been for a while. And as we We continue to focus really now on higher margins, increase efficiency and to reduce restricted capital, tied up capital. That's our main focus right now. The market is there so we can focus on that. And also we're simplifying the group structure, really getting back to more core, which frees up resources for us to focus on the core business in the prioritized markets we have.

8:42 And as you've seen, We initiated that work. We've done quite a lot in line with that during Q3. And we expect a gradual improvement keeps going here in the operational and financial result as impact from these measures we've taken, these structural measures evolve. And that's really, yeah, that's where we're at. And yeah, I think that's pretty much And then of course, we're open to answer any questions you have regarding this. Yes, thank you so much for that presentation. We now open up for a short Q&A session. And as mentioned earlier, if you're calling in and would like to ask a question, you can do so by the form to the right of the broadcast.

9:33 Or if you're calling in and would like to ask a question, please press star 9 to raise your hand and star 6 to unmute yourself. The first question we have received is please remind us of the timing of execution of the maritime orders. Will some of the revenue generating work already start in Q4 this year?

9:55 Yes, I can answer that. Yes, it's already begun, so to say, generating revenues. So it will continue to do so for the coming years, but it has started this year. So that is something that we have already had revenue from. yes thank you for that the next question we have is have you seen any green shots as of late or during the year so far for instance do you see some renovation work if facade renovation or other smaller renovation work picking up faster than the more investment heavy new balcony projects I think we I think

10:46 We're staying, I mean, the market is pretty much, we're living with the market as the market has been for quite a while. We don't expect any help in the market picking up right now, neither in new build or renovation, but we think we are quite well positioned in both of them, corresponding to the market the way it is. We have seen maybe a slight, might a little better growth market in primarily Sweden and Norway in the new build, but there's nothing we really calculate on. We just do everything we can to be as good as we can every day in the marketplace we're at.

11:34 So we don't expect any fast upturns. We haven't seen that yet, no. yes thank you do you see any significant difference in customer behavior between the countries and if yes what do you consider to be the underlying reasons yeah i mean the we are we are very different uh in different markets and and the customer base is very different in different markets so that's kind of a chapter in itself i mean Behaviours between customers in the UK and typical customers in Sweden is quite different.

12:20 But it's nothing that's changing now. It's been that way. We don't see any customer behaviour changes in a specific market from what it was before. But that's one of the reasons for us to be in different markets because it evens out risks and it evens out So the behaviors is very different. If we take, for instance, we take Finland, we have a very dead new build. We see upturns in the renovation. In Sweden, we start seeing maybe a slight pickup in the new build, etc. So it's very different. And we also have different offers in different markets.

13:11 yes thank you for that the next question that we have is when will the new underlying cost level show will the Q4 this year already represent a clean quarter with the new ongoing cost level no it will maybe you can help me here Victor but really it's we start seeing it starts picking up the results or the

13:39 or what we've done starts showing in Q4, but then it will take some time for us to reach full effect. I would say sometime in Q2, probably full effect next year. But it starts showing now, and we start seeing it. But it's a gradual improvement. I don't know what you have to say there, Victor. Anything to add there?

14:05 No, I agree. Yes, thank you so much for that. How many employees do you reckon to be year end compared to the current 515?

14:17 Well, we have we have the measures we're taking now we're, we're roughly what we foresee right now is it's a we're actually going to be pretty much the same as we are right now, end of Q4. Yes, thank you for that. With Charlotte Mattsson appointed as incoming CEO, could you walk us through the onboarding process and how you plan to ensure a smooth transition and rapid ramp up in terms of operational and business understanding?

14:47 Yeah, sure. No, she's going to join Q1, but we already started that process. I communicate with Charlotte on a regular basis and She's very much up to date with what we're doing and onboarding in that term has already started. So I foresee a very smooth process when she's getting on board. And I'm really happy to, it feels very good to hand over to her. I mean, we've done a lot of work and I think she's going to be perfect for taking over and evolving, building the company from where we are there. Norway grew in Q3. Was that renovation or new build?

15:32 And did it come from project catch up after the cold winter or from underlying demand? Are project margins there improving?

15:52 Norway is still a very interesting market for us. There are good margins for us there and we have done changes during Q3 in Norway to capture those opportunities we have there. We also have some projects during end of 25 beginning 26 where we didn't do too well in specific project for specific reasons. We have repaired that and so Norway figures are not really representing the opportunities we see in Norway.

16:38 We've done some screw-ups there and we have taken measures not to do that. So we foresee a a positive growth in Norway going forward.

16:52 I can also add that Q3 is of course the shortest quarter as well. So specific projects can impact the sales on markets quite drastically. So it's also a bit of a timing effect, I would say, when you're looking at the net sales. Yes, thank you for that. Next question is, how do you see customer engagement developing? Are customers withdrawing, choosing other suppliers, shipper solutions, or do they stay with you?

17:32 We foresee that they're staying with us in a very big portion. We think we have a very strong We have a very strong offer and the customers like us. So we don't see that customers don't use us. We're actually the opposite. We have a very strong order intake and we take that on value and by bringing our customers really high value. So the customers like us very much. Yes, thank you for that. Renovation order intake fell to 165 million SEK and renovation backlog was flat. Are housing associations and property owners actually releasing deferred projects or are you being selective on margin?

18:31 You can also say also there is the timing. I think we usually say that you shouldn't put too much emphasis on single quarters when you look at the order intake. And it's the same here that we have quite large projects. So if one project falls in one quarter or just the days in the next, that can affect the order intake quite a lot. So as Johan mentioned before, there can be a little bit of hesitation. once we get an order until that project actually starts when it comes to getting building permits and so forth. But we don't see any big change in the customer behavior during the year so far.

19:36 Yes, thank you for that. Can you please quantify the annual SEC savings from the restructuring and when will it be fully visible in the P&L?

19:51 We have roughly, we have taken out salary cost for 45 plus million SEC. out of that was about 50% white color so that you know so about 22 million and then when it comes to 22-25 million and then when it comes to the other part we are using other resources to help us to you know to do a lot of the work on site and it's really hard to calculate exactly how much. There's two parts of that. One is, of course, the pricing of our own personnel, and the other one is the inefficiency or deficiency of our own personnel.

20:44 So we calculate on somewhere around 25 million. And as I said before, we're going to have full effect on that Q2 at the end, sorry, during Q2 27, but we already start seeing effects of it. Yes, thank you for that. The next question I have is how is your debt level trending and is share issues something you consider going forward?

21:13 Victor would like to answer that or you want me to? We did amortize 10 million on the bank loans during the quarter so the debt level is a little bit lower and I mean we consider all the measures when it comes to the capital structure so we don't put anything aside But at this point, I don't think we can say more than that and that we also have a very good dialogue with our principal bank and have a very good cooperation with them.

21:59 Yes, thank you for that. Adjusted gross margin in Q3 was 14.4% versus 15.2% last year, so lower. Even though you say gross margin has started to improve, what explains the decline in the quarter?

22:21 as I mentioned before there can be on single projects can affect the margins in the quarter and also different our companies have different margins so a little bit depending on who has the net sales in the quarter can affect the margins for the group But when we mentioned that we see improvements, we see that in the end of the quarter that it looks better. So we do see an improvement coming.

23:05 I think it's important also to say that, I mean, as Victor says, you know, we have a very long project in the product-based business. We have a successful recognition of profit. It's sometimes looking at a specific quarter, especially this short one, it doesn't really give the true picture of what's happening overall. I think here today is more representative at this point. Yes, thank you for that. The next question that we have is about the sold property. Can you tell us a little bit more about that and also what was the value of it?

23:47 The TVO property? Yeah, we actually signed, we won't tell exactly what price we sold it for. but it was slower than we, there's a write-off coming with that. But we don't, we can't tell exactly how much we sold it for. Yes, thank you for that. You have exited the Netherlands and the bulk of UK is handling their remaining commitments. Why the Netherlands and are other markers under review?

24:25 Well, Netherlands first, I mean, we have invested in Netherlands for quite a long time now and it really didn't take off so and also we need to you know be able to focus really hard on what we're focusing on in the job in the companies and in geographies we do and we didn't see that we didn't want to couldn't put more efforts into the Netherlands so that therefore we we went this direction instead. We see a very good, when it comes to Germany and take the bulk of companies, we take Germany and UK, we have a very small portion of the market there and we're actually doing a pretty good job in picking up there.

25:11 So we think that focusing on a few markets and they're really focused, we have pretty good growth