INDUS Realty Trust, Inc. Price & Performance (INDT)

Welcome, and good morning on our behalf as well. As usual, let's start with the overall highlights. In terms of order intake, we had a total growth of 5%. Organically, an increase of 1% despite the uncertain market situation good demand from customers within pharmaceutical production, process industry more broadly, and also the energy sector, And the majority of companies had organic order intake growth. Net sales increased 4% in total, Organically, it was unchanged. The EBITA margin came in at 13.6%. Excluding some one offs, 13.3%. And continued improvement in working capital efficiency, and Reg one operational cash flow of million and three acquisitions completed so far in 2025, and the pipeline remains good. If we then turn to order intake and sales, As mentioned on the previous slide, demand was good with order with organic order intake growth despite the increased market uncertainty We had a positive book to bill with orders being 5% higher than sales. And there was continued variation between companies, segments, and countries. Strongest growth in med tech and pharmaceuticals. The process industry and the energy sector Demand within infrastructure and construction was stable. While the general engineering customer segment continue in general to be somewhat weaker.

In terms of sales, we grew 4% during the quarter, all related to acquisitions. Organically, it was flat on the back of the lower order backlog coming into the quarter. During Q1 last year, we were negatively affected by the Easter holiday, And also this year, we had no help in terms of number of working days. If we then look at sales in a geographic perspective, the development within The Nordics, on an aggregated level flat from last year. Finland continued to be a bit weaker sales to Norway was strong. And in Norway, we had good development within valves and other flow related components as well as filters. To mention some product areas. Benelux and UK Ireland were stable and Germany was a bit weaker. For Switzerland and Austria, the sales growth was high driven by good development within the process industry and the pharma related single use area. In North America, sales was down A difficult reference linked to last year. With some larger projects during that time period was the sort of key reason And sales in Asia was higher than last year. Driven, for instance, by good development for products within the marine segment. I also want to briefly address the tariff situation, which so far have only had a marginal impact on demand, our direct exposure to The US is limited, with total sales to North America in 2024, corresponding to less than 6% of the group net sales.

As most of you know, we are mostly a Western European business group with many companies being strong. Local players. However, this situation is creating increased uncertainty the effect on the global economy and thus the indirect effect is hard to predict. Our companies are proactively implementing appropriate measures for example, review on trade flows, supply chains, and commercial agreements. If we then turn to our profits, our EBITDA increased 6% in total to 1,100,000,000.0, the EBITA margin came in at 13.6% however, supported by some one off items underlying EBITDA margin was 13.3%. Same level as last year. Our ambition and objective is to be at a higher margin level, but this was not a complete surprise or unexpected. At the end of last year and also the first part of Q1. We expected a gradually better demand situation during the year. And a large part of our companies were therefore geared up in terms of initiatives for organic growth to increase. This somewhat higher expense level and the flat top line explains the EBITA margin. The market risk and volatility have now obviously increased. And many companies are now actively working to align costs to the situation prevailing in their respective markets.

On a positive note, our gross margin was record high for Q1, and acquisitions divestment margin accretive. We turn to the business areas and start with sales. As mentioned, we had no help from our working days during the quarter. Despite Easter taking place in April instead of March. On an aggregated level, half of the company's organic sales growth in the quarter. Business area life science was the only BA with organic sales growth. Mainly driven by sales of equipment for pharmaceutical production including single use equipment Infrastructure and construction was flat from last year, while the other three BAs showed declining organic sales due to the generally weaker business climate and the lower order book coming into the quarter. Business Area Technology and System Solutions in is standing out negatively They are the most global business area and are slightly more dependent on investment and CapEx decisions. Customer side. Is making their current demand situation more challenging. Than the other business areas. And then EBITDA profit in terms of business areas, EBITDA margin improved in business areas, infrastructure and construction, and then also life science. Infrastructure and construction is on a positive EBITDA margin trend. Mainly due to effects from acquisitions and divestments.

However, many company specific initiatives and other organic BA actions during last year also contributes. The main driver for the margin increase in life science was a strong organic sales growth. And the other three BAs had a lower EBITA margin than last year with the largest decline in Process, Energy and Water. Due to the organic sales decline and higher expense levels mainly linked to a higher activity level and inflation. Regarding acquisitions, we have made three acquisitions so far this year. With an annual turnover of $390,000,000. The first company is Ecoroll in Germany, which is a manufacturing company offering highly technical tools mechanical surface treatment to a wide range of industrial segments and geographies globally. We also signed an agreement to acquire IPP on Ireland which has an extensive machine product offering targeting the electronics and life science sectors. And finally, we also welcomed the Swedish technical trading company, Ideus, who specialized in customer specific metal components. Following the high acquisition pace in 2024, the pace has now been slightly slower However, nothing dramatic. This can fluctuate over quarters. Despite ongoing market uncertainty, we feel that the acquisition climate in 2025 remains positive. We have a good activity in our acquisition processes and a strong financial position So we are looking forward to welcoming more companies during the year.

It's always relevant to repeat acquisitions should be followed over a longer period of time. As mentioned, high pace in 2024 and good contributions in Q1 Looking at the bridge effects from acquisitions over the last twelve months, we have added million to the group's EBITA in the quarter. Furthermore, we can also see that the acquisitions are margin accretive with an accumulated EBITA margin of 15.9% for the quarter and over 17% rolling twelve months. Now I leave the word over to Patrick to comment more on the financials.

Yes. Thank you, Bo. Yes. Then total growth for orders and sales was 54%, respectively, in the quarter. Book to bill most positive orders 5% higher than sales and above one in four out of five. Business areas. And as Bo previously mentioned, our gross margin was strong, record high for Q1, 35.4%. EBITDA increased with 6% in the quarter driven by FX from acquisitions and currency. But negatively affected by the dampened organic sales development and and slightly higher expenses. The EBITA margin improved to 13.6% in the quarter, but again then as as Bo mentioned, we had some one offs during the quarter primarily connected to earn out regulations, which had a net positive effect of SEK 27,000,000 if you exclude these, the margin was SEK 13.3 line with last year. We of course then aim to be on a higher margin than this but the important note is that Q1 is historically a seasonally low margin quarter for us. And additionally, the backlog coming into the year was slightly lower. Than last year. Moving further down in the P and L, the finance net increased with 3%. [indiscernible] if you look at the interest net included in the finance net, it was lower than last year, but this was offset.

By other financial items, primarily financial currency effects. Tax cost increased by 5% for the quarter corresponding to a tax rate of 23%, which is in line with last year. Earnings per share increased with 6% in the quarter and we were at the separate slide on that. Later. Return on capital employed, amounted to 19%. That's slightly lower than our target. And in terms of cash flow, q one is seasonally the weakest quarter, but we had a good development during the quarter, up as much as 32%. Lastly, the net debt to EBITDA ratio was at historically low level of one one point three by the end of q one. So move on and look to look on the cash flow more in detail. It is, as I said, a record high for the Q1 amounting to SEK644 million in the quarter. And the improvement versus last year relates to both the slightly higher result and in combination with more favorable working capital movements during the quarter. Diving into the capital side slightly more, the organic inventory levels are basically unchanged since year end, but we've had an underlying decreasing trend. In the on the inventory side. Since beginning or mid twenty three.

So the level at end of Q1 this year is around 5% lower than the same period last year. As we mentioned before, our companies are relatively capital light and there is a continuously strong underlying operational cash flow. Coming into the group and that's reflected in a good cash conversion as you can see. From the slide. Right now trending on a rolling 437%. Compared to net profit less less CapEx. And in terms of working capital efficiency, that also improved compared to the same period last year. So earnings per share. The EPS development has, as you can see from the slide, flattened out the last two years due to the weak organic development, but also then increased interest costs this quarter, we managed to increase earnings per share in line with EBITDA improvement. That's an increase of 6% from 1.61 to 1.71 SEK. Per share. Looking at the zooming out and looking at the long term perspective, the the growth in the three five year rolling four quarter EPS We were 7% up on the three year three year trend and and 13% on the five year trend. Then lastly, looking at the financial position, the debt development, the interest bearing net debt, decreased since same period last year, but also sequentially. [indiscernible] Q1 being a seasonally low cash flow quarter Improvement in cash flow is of course the main driver for this reduction, but also then a slightly lower acquisition pace in the beginning of the year.

So looking at debt ratios historically low I would say, net debt equity ratio at 47% compared to 55% last year. Net debt EBITDA 1.3 versus 1.5 last year. And if you exclude earn out liabilities, which we, of course, include in the measurement it would have been 1.2 versus 1.4. Last year. To summarize, debt ratios are low debt maturity profile is well balanced and we have a strong financial position going forward. By that, I move on we move over to Bugen.

Thank you. Then time to conclude in terms of the takeaway message here. Organic order intake growth despite increased market uncertainty with Positron in several large customer segments. We had stable sales and stable profit levels. Really good operational cash flow, a strong financial position, slightly lower order backlog in combination with higher market volatility post April 2, leads now to that many companies are actively working to align cost to the situation prevailing in their respective markets. Three acquisitions completed this year and a good pipeline positive outlook All in all, a strong platform for long term sustainable profitable growth going forward. And by that, we end the formal presentation. And open up for questions.

Good morning. It's Karl here from Nordea. A couple of questions. Firstly, I think we could jump into the gross margin and the cost side again. Gave some comments on it, course. But gross margin again looks quite healthy, I think, up a bit year over year. I guess you're pretty satisfied on that side. However, I still struggle a bit on the cost side, which is still an issue as I look upon it. I mean, and if we take a step back looking into Q1 last year, right, then we said that you had a cost overrun, right? You started to come down during the year and now we seem to be back at it again. So historically, given Indutrade's high decentralization, you managed so well with the sort of balance between growth and sort of taking out costs quite quickly. So what is the difference this time around? Is it a more difficult market environment, which I, of course, acknowledge? Or yes, how would you explain it? And also, finally, on that side, I know it's a long question, but how do you look at the sort of cost growth balance for the rest of the year?

And when do you think that you are sort of on par again?

Well, obviously, very relevant comments, questions. Agree that we are happy with the with the gross margin. As we said, it was record high for a quarter one, and I think maybe the best ever or the best second best ever for for Indutrade. So the companies are doing a really good job in terms of managing direct material, direct labor, pricing, So that's good, which is very comforting in a situation like this. It would be worse if it was the other way around with low cost and and and or or or a low gross margin, I would say. And then commenting on the cost situation, This time around, we as as you said, last year, we were not at all satisfied with our overhead cost expense levels in Q1.

And then the company's worked on that in Q2, Q3 sequentially. And at that time in Q1, we had a very recessionary outlook in terms of of the market demand Right now, or or I would say towards the end of of last year and and also in the beginning of this year, we had a more positive outlook in terms of the market demand. We expected and the companies expected more sequential growth during the year And And I think felt that they could take some activity costs and and potentially refrain from from downsizing effort because there was sort of light at the end of the tunnel. So that's one aspect. The other aspect, as you bring up in a in a more historical perspective, I think, can be commented with that we have actually worked more with organic growth as a as a key strategic initiative the last of years within Indutrade. And it's it's usually so in general that that you need to invest before you harvest. So there has been some I would say, organic growth initiatives in product innovation, in product range extensions, in different types of business development initiatives, in in some companies where there have been good reasons for that and and strategically good plans linked to this So that's probably also, to some extent, explanation that we have the situation we have Support of this is deliberate.

And but I would also say that there is a bucket of come companies where perhaps they they should have been a bit more cost conscious also Q4, Q1 here now. And maybe being a little bit too interested in organic growth versus you know, managing their cost situation. Long answer here now, but all in all, I would say that the culture, the value system is extremely cost conscious in the group. So so we talk about expense overhead cost now. The the sort of the direct labor is is under control. And in our companies and and especially the trading companies, it's it's basically office office people if I express myself.

That way, and and they are not very headcount heavy, as you know. So to to reduce with one or two headcounts for a smaller company is is a quite big decision. So if they then see light at the end of the tunnel, as I said, they might refrain from that if that's soon to happen. Yeah. So so No. I totally agree with you. I I clearly see your point there. But but when I look at line items, obviously, they're not always correct. I can see that it's admin costs increasing, which is I guess, one way to, I guess, grow organically. But but maybe you're, of course, better than me in it. But I'm not sure if that is be probably selling expenses that should grow more, right? And we have seen admin cost Indutrade come up from 5% to now 7.2%. Is it the right line item that is actually growing right now, you think? Or how should we see that? Yeah.

I don't know, Patrick, if you want to Yeah. Sort of from the from the accounting side, I I it's difficult sort of to judge from a sort of a group p and l of that sort of high level impacting not only organic things, but it's it's a lot of other things, acquisitions as well and and and so [indiscernible] the con the concrete initiatives that we'll talk about and the additions that we have done, they have for sure, mostly been on on on the quality the business side, salespeople, market activities, products. For sure, is even though there are, of course, other increases as well, but but the majority is for sure. On the business side. Where the companies are adding if they are adding, I would say.

They are accounted under admin cost then?

Again, it's difficult sort of to judge from the group p and l. So I I don't sort of have that bridge for you exactly what sort of that increase rates. So it's mean, you have other things as as well, not only organic Sure.

It's it's you have, you know, effects of, you know, acquisitions over time depending on their categorization of cost etcetera. So it's really difficult sort of to look at the group e n l and draw those conclusions. So I I don't have a better answer now, unfortunately.

Okay, perfect. Just Just clarify, you wrote that you had negative impact from divestments of SEK 33,000,000. Is it a write down is the transaction costs included? What is this SEK 33,000,000?

It is related to I mean, we did the divestment then in the beginning of the year, which which I think we already mentioned in the q four q four report, but it's in the in front infrastructure construction business area, and it's we have a we have a sort of book loss on that. On that divestment.

Okay. So okay. Yes. Okay. Very good. And finally, I mean, we've seen a few divestitures in construction in How many more? I mean, I just looked at the one you wrote about this time. It's been loss making since at least 2019 when I look at it. How many more companies do you think that that you have up for potential divestitures still in the segment?

Very few, I would say. It's not zero, but it's not 10. It's not five even. So so it's it's it's it's very few. So I think we have made And are they loss making as well?

We have still some loss making companies in that segment, unfortunately.

Okay. Perfect. Okay. Thank you so much. Mhmm.

From Handelsbanken. Go ahead.

Just a bit of a follow-up to the outcomes on the margin. And that you were in kind of similar position in Q1 last year. Where you managed to improve quite quickly. Do you think that the cost measures to your companies are taking will have a similar speed in terms of margin recovery as we saw last year.

Yes. We definitely, Q2 will be better than q one and but this time, as I said, it's a little bit different from market situation perspective. Last year, we felt it was a little bit more clearly a recessionary market situation. Or at least sort of a very flattish outlook and now this if we exclude the tariffs, which we can't do in a sense, but but if we still do that, we we were on a trajectory to to actually improve in in several segments and sectors and geographies And some of that, I think, will will continue. So, hopefully, top line will will be okay. The reference sales wise in q two is is going to be more difficult than what we had in Q1. But all in all, we expect step change between Q1 and Q2 in terms of profit margin. And then it's it's it's difficult to predict things now with with with the volatility from from the tariffs and and maybe not so much the direct situation, but but the indirect situation. And perhaps mostly in our segment or or a business area, technology and system solutions, which is more global and and you know, they have situations potentially with company selling to a UK company, selling to an American company, and the American company being afraid of tariffs, avoiding importing from Europe, and potentially buying from from a US source instead and so on.

But it's predominantly in that business area, less so in the others, but but not completely you know, free from from from that sort of second type of impact.

Yes, that's very clear. And when you're speaking on the top references in the next quarter, are you mainly referring to or is it both sales and margin or either or?

I think we had 14.8% EBITDA margin last year, which is high level for us. So that's [indiscernible] a difficult reference in a sense. But also, sales wise, we had a rather good sales, as I remember, in quarter two last year.

Yeah. And then it's from your comment, is it sounds or is it fair to interpret that? The quarters started out quite quite well and finished in so to say, worse from a relative perspective?

No. Actually, in in a clear majority of the business areas, it was the other way around, the January, February, was weak and and March improved was in one business area. It was the other way around that that actually [indiscernible] became even even weaker But 80% of sort of of Indutrade also had the other trajectory. Trajectory that January, February weaker and a pretty good March.

Okay. Interesting. And and my my last question. On Life Science. I think you mentioned that single use saw a bit better better say, demand. Was that correct? Can you elaborate on the single use? [indiscernible] that was huge. Prebuys link to COVID And as we have discussed several quarters, that stock is now normalized. And we also still see an underlying demand for single use production equipment, not not obviously only linked to COVID, but but a lot of other can be cancer treatment areas or more sort of smaller, if I say so, in size pharma related areas and also more biopharma related treatment areas where the batches are produced in these more silicon based production systems rather than the big stainless steel systems. So so I would say the industry is predicting underlying growth, and we also see step by step signs of this now.

Okay. Thank you. Those were my questions. I'll get back to Thank you.

Question comes from Mats Liz from Kepler Cheuvreux. Please go ahead.

Yes. Hi, thank you.

A couple of questions. I mean orders look pretty good from my point of view anyway. And but do you see any sort of customers being sort of a bit concerned about the potential tariff impact and so on? I mean, do you see pre buys on components and so on to stock up ahead of potential supply chain issues going forward?

We have seen extremely little of that in our companies. We have more read about for example, a lot of export from Irish pharmaceutical companies to The US in in March and and so on. But we haven't really seen it too much Maybe it's also a lot of semiconductors, electronic components, from from China, Asia being shipped to The U. S. Again, February, March, But sort of in a normal Indutrade company, it's been not very significant at all.

Great. And then, I mean, you've seen quite good performance by the Swedish currency. And just if you can update me on the sort of operational impact there. Maybe something on procurement and also on the gearing side?

Yeah. If I take that question, then I in in general, I think a stronger mean, if you look at the margin impact, EBITDA margin impact of a stronger SEAC, it's not it's not it's not big, I would say. In general, I would say that top line moves as much as bottom line for us. So it's we don't move margin that much when currency changes. So that's the first statement. The other one that we have a lot of trading companies as you know, and and and strong corona in general means means better purchasing power for for these these trading companies. And there are some buying in buying in dollars, but definitely even more so in euros. So so they have they have a bit of a sort of a good momentum now, I would say.

Part of that needs to be transferred to the customers, but the part of that will also help us. So there's a slight positive effects embedded in that. That's that's my hope and belief. And on the gearing side, I would say we [indiscernible] we aim to have a sort of a an even we have, of course, an an exposure on on on other currencies on the debt side, which means that the debt is going down slightly now. But we try to to match it with the e EBITDA exposure. So it shouldn't have an impact on the EBIT net measure. But looking at the absolute debt value, it it is going down. Thanks to the Swedish krona being stronger.

Okay, great. Thanks a lot.

Question comes from Karl Bokhvist from ABG Sundal Collier. Please go ahead.

Thank you. Good morning. Apologize I was a bit late on the call, but could you clarify the comments you made in the start regarding larger orders in The U. S, I believe? [indiscernible] it's it's not super significant for for Indutrade. We We have we have one company in The US, and and we have, I think, eight, nine companies having sales companies in The US. And then we have some companies, obviously, exporting to The US and some of them have you know, it can be CapEx driven projects where someone in The U. S. Is building a large energy facility or something like that. And and some of our companies receive a big order to that. So we have some of those situations a year ago and less so this year.

Mhmm. I think we had a couple of, for instance, project in the energy and also I think in the in the engineering sector last year, which was delivered Q One Last Year. So It's It's So A Bit Of Tough Reference. I Think It Was Mainly Technology And System Solutions And Also In Process Energy And Water. I Think They Had A Strong References In The U. S. Last year.

All right.

Understood. And then most questions have been asked here earlier, but I understand the comment you made earlier regarding how this year is a bit of a different situation to last year. But nevertheless, just when looking at it, is there any kind of calendar effect involved here, I. E, that's some of your businesses are perhaps ramping up costs at the start of a new year and then the volumes might not have improved as they had hoped? I'm just thinking about this comment here. In, for example, [indiscernible] organic volumes overall and you say higher expense levels which led to margin pressure?

Yeah, I'm not sure if I fully understand what you're after here, but but we don't I think more generally, it is so that companies expected a better market demand situation and they refrain from from pure cost reductions, which would have meant, I think, laying off people, because this is overhead expenses as the problem relates to some extent. And And they were in some aspects, having product development. Obviously, that didn't start this quarter, but maybe in quarter four, they geared up in terms of product development business development initiatives and things like that. To be ready for a better 2025. I think that's the simpler, more general explanation. Yeah.

But cost is obviously something we control, and and and we can decide to do something about it So I I feel that we are in a much better situation. Now with really good gross margins, [indiscernible] And then some of the companies will will align cost now and some will probably continue to see a better organic growth situation based on their investments and also based on a somewhat better segment, then there are different niches, which definitely will continue to grow.

Understood. And then I apologize if this has been asked, but now you did say a bit of for many companies, March was better than the earlier start of Q1, but is there anything you can say on how April has Yes. Not surprisingly bad, if I say so.

Yeah. So Alright. Now we Okay.

Yeah. Sorry. So [indiscernible] which significantly negative. [indiscernible] more an okay start, I would say.

Alright. Good. Thank you. That was all from my side.

Thanks.

If you wish to ask a question, please closing comments.

Yeah. Then we say thank you for listening in and for good engaged questions. And we took we talk to you going forward. Thank you for us.