Good morning, and welcome to Karnell's Q3 2026 earnings presentation. I'm Petter Moulianos, the CEO of Karnell Group, and I'm joined by our CFO Niklas Svensson.

As we announced with our preliminary figures from October 12th, the third quarter is the strongest in Karnell's history in terms of profits, with broad-based growth in both business areas. As usual, I'll begin with an overview of the quarter.

Niklas will then take you through the business areas, our value creation per share, our cash flow, and the balance sheet. I'll close off with some information about the acquisitions work that we are ongoing and the key takeaways before we then open for questions.

For those of you who are joining us for the first time, Karnell is an active long-term industrial owner. We acquire and develop small to medium-sized industrial technology companies with strong positions in their respective niches.

We operate with a fully decentralized model. Our companies run their own businesses, supported by a lean central team focusing on M&A, capital allocation, and ownership.

Today, Karnell comprises of 20 companies across Sweden, Finland, the UK, and Italy, and we are employing around 860 people. With that, let's turn to the quarter.

Net sales grew with 33% to 582 million SEK, out of which 18.8% was organic. EBITA rose 73% to 120 million with an organic EBITA growth of 42.6%.

The EBIT margin was 20.6% compared to 15.9% a year ago, and this is the highest quarterly margin we have reported as of yet. Net debt to EBITDA, excluding IFRS 16, is down to 1.4 times from 1.9 at the end of the second quarter.

What I'm most pleased about is how broad the growth was. Several companies in both business areas made significant contributions by gaining market share and through new customer relationships that we have been working on for some time.

The high demand from a single customer that we have commented on earlier this year continued in the third quarter. The company increased EBITA organically by around 10 million SEK, and that's roughly 1/3 of the group's organic EBITA increase in the quarter.

That's clearly a lower share than in the first half-year, but that shows that the growth is becoming more broad-based. These orders have short lead times, and our visibility is limited, and we still don't consider these demand levels sustainable in the long term.

In our product companies, we had a few larger deliveries and price adjustments that took effect ahead of our cost increases. Adjusted for these temporary factors, the underlying development is still good.

Q3 is also our seasonally strongest quarter, the results should not be seen as a new normal level. In terms of markets, we continue to see mixed conditions, with some improvements in Finland, but I would say that the largest contribution is growth our companies are creating themselves rather than any broad market recovery.

Zooming out a bit, looking at how our margin has developed over time, since our IPO, the rolling 12-month EBITA margin has moved from around 11% to 16.7%, and the last quarter, we passed the target of 15% for the first time, and this quarter, we moved further above that level. The 12 months figures include this year's temporary effects, I would also focus rather on the direction than the exact level, and our target is defined over a business cycle, and it's sustaining it what matters.

For the first nine months, our EBITA grew 68% to 286 million, and that was organically EBITA growth of 41%. Cash flow remains strong.

Operating cash flow was 135 million in the quarter compared to 46 a year ago, and 256 million of those were for the first nine months compared to 89 last year. With that, I'll hand over to you, Niklas.

Thank you, Petter. Let me walk you through the financial details for the quarter, and starting off with the group.

Net sales increased 33% to 582 million, with organic growth of 19%. Acquisitions contributed 15%, while currency effects were neutral.

On the right-hand side, you can see that EBITA increased 73% to 120 million in the quarter. The organic EBITA growth was 43%, acquisitions contributed 31%, and currency was a marginal negative 1/2%.

As Petter mentioned, part of the result reflects temporary factors, and the third quarter is seasonally our strongest. At the same time, the improvement was broad-based, and we had significant contributions from several companies in both business areas.

Acquisition costs during the quarter were limited; it was 0.9 million compared to 1.9 million last year. Moving to our segments, product companies delivered net sales of 310 million, up 25%.

Organic growth was 12%, and acquisitions contributed 13 percentage points. EBITA increased 54% to 71 million, and organically, EBITA grew 30%, and acquisitions contributed 25%.

The EBITA margin improved from 18.4 to 22.8%. Several companies grew organically by gaining market share, and the margin was also supported by temporary effects, such as larger deliveries and price adjustments coming through ahead of cost increases.

At the same time, a few companies developed weaker than last year. The recent acquisitions have continued to perform in line with our expectations.

Turning to niche production companies, they had another exceptionally strong quarter, where net sales increased 45% to 271 million, with organic growth of 28%, and acquisitions contributed 17%. EBITA increased 87% to 64 million, and organic EBITA growth was 57%, and acquisitions contributed 29%.

The margin reached 23.6%, which is up from 18.4. The high demand from a single customer continued, but as Petter mentioned, the growth is now clearly more broad-based than before.

Together, the two business areas remain evenly balanced, and product companies represented around 53% of group net sales in the quarter, and niche production companies the other 47%, which is in line with the year-to-date split. Before we go into the cash flow in more details, we have added a new slide this quarter showing how our development translates per share and in relation to the capital that we employ.

On the left, you see operating cash flow per share on a rolling 12-month basis, and it reached 7.2 kronor compared to 3.3 kronor a year ago, it more than doubled, while the number of shares have been largely unchanged. On the right is our return on capital employed, and from this quarter, we use an updated definition: EBITA in relation to the average capital employed over the last four quarters.

The change is made so that the key ratios better reflect the return on the capital tied up in the operating activities. On that basis, return on capital employed reached 16.4%, up from 14.7% last quarter and 12.5% a year ago.

Rolling 12 EBITA has grown from 221 to 349 million over the past year, which is clearly faster than the capital that we employ, and it shows that both our organic development and this year's acquisition are generating good returns on the capital that we invest. Turning to cash flow, operating cash flow for the quarter came in at 135 million compared to 46 million in the same quarter last year, and the increase is mainly driven by higher earnings, but working capital also contributed positively with 19 million compared to -20 million last year.

For the first nine months, operating cash flow reached 256 million, up from 89 million a year ago, and working capital has tied up 20 million so far this year compared to 86 million last year. This reflects our continued focus on core working capital and our work to smooth cash flow more evenly across the year, moving away from the old pattern where most of our cash flow landed in the second half.

On a rolling 12 basis, operating cash flow reached 387 million, an increase of 121% compared to 175 million at the same point last year, and is the strongest level we have reported to date. That corresponds to cash conversion of 111% of EBITA.

Finally, our capital structure. During the quarter, we made an extra repayment on our revolving credit facility, and interest-bearing debt decreased to 726 million from 771 million at the end of the second quarter.

Compared to 370 million at year-end, the increase reflects debt drawn for this year's acquisition, Uba and Flexseven, and cash equivalents stood at 188 million, giving us a net debt, excluding IFRS 16, of 537 million. EBITDA, excluding IFRS 16 on a rolling 12 basis, was 390 million, resulting in a leverage ratio of 1.4 times, which is down from 1.9 times at the end of the second quarter and well within our financial target of normally not exceeding two times EBITDA.

The decrease is driven by strong cash flow and by this year's acquisition now contributing with more months of earnings in the rolling 12 figures. Total financial debt was 867 million, including lease liabilities under IFRS 16, put/call options, and contingent liabilities.

With that, it concludes the financial overview, and I hand back to Petter before we open up for questions.

Great. Thank you, Niklas.

A few words on acquisitions. The two companies we acquired this year, Uba in Italy and Flex in the UK, are developing in line with our expectations and contributing positively to our group's profitability.

We have not completed any new acquisitions since April. We have had several interesting processes that did not in the end materialize, which is a natural consequences of us staying disciplined on valuation and the companies we choose.

With that, let me close with a few key messages from the quarter. Q3 is a record quarter.

EBITA grew 73% to 120 million SEK, and EBITA margin reached 20.6%, the highest in Karnell's history. With that, our rolling 12 months margin is now 16.7%.

Again, growth was broad-based with strong organic development across companies in both business areas. Part of the result is temporary, and the Q3 is seasonally our strongest quarter, this should not be seen as a new normal level, but the overall underlying development is good.

Value creation per share continue to build. 12 months EBITA per share is up 57%, and operating cash flow per share has more than doubled, and the return on capital employed has reached 16.4%.

Our markets remain mixed, but our decentralized model, geographical reach, and sector diversifications allows us to keep building the businesses regardless of short-term fluctuations. We are well positioned both from an organic development standpoint and to do new acquisitions.

Thank you for joining today's presentations, and with that, let's open the floor for your questions.

If you wish to ask a question, please dial pound key 5, and if you wish to withdraw your question, please dial pound key 6. No incoming calls, but we have some questions here.

It relates to the temporary volumes in Q4, Q3 and of 10 million on adjusted EBITA or EBITA and if that level also applied in Q1 and Q2.

Yes. I guess the question was from Max Bacco at SEB.

Yes, again, we have had questions from analysts and media around sort of this extraordinary effect. Therefore, we thought it was good to communicate roughly what that was this quarter.

I think those 10 million again are a smaller overall share of the 120 million than what we've seen in the first half, but in absolute numbers, this is roughly the contribution per quarter in the first half as well. Second question, I guess, concerns cash flow: Very strong cash flow during the quarter, should we expect the same for Q4?

Niklas, perhaps you want to answer that one?

As I said before, we have seen this year a slightly different pattern in relation to the previous years, where a lot of the cash flow has been released in the fourth quarter. Now we have seen a more steady cash flow generation over the year.

I wouldn't say that we would expect, without giving any forecast here, but I wouldn't expect the same release that we had in Q4 last year, which was extraordinary. We are focus on steadying the cash flow over the year, and we expect to continue with that going forward as well.

Great. The last question was: Given how the group looks today, how should we think about seasonality going ahead?

Which are the stronger/weaker quarters during a normal year? I think what you see this year is probably where we are at right now.

Again, the shift has been if you go back a few years, I think Q4 historically was the strongest, but since three years ago roughly, I think Q3 has been the strongest one, and typically Q1 is the lowest one. That also follows the industrial overall pattern to some extent, but I would also say the three companies we have who has higher seasonality effects, all are doing a good Q3 and has weaker quarters over the year.

I think the pattern that we've seen this quarter or this year will continue for a foreseeable future.

We received another question here: No acquisitions since April, is the market too expensive?

No, I wouldn't say that. We have had several interesting processes that in the end didn't materialize, which again comes from us staying disciplined on valuation and the companies we choose.

For the observant reader, one can see that we had roughly a million SEK in acquisition costs during the quarter, which is the results of us doing quite some extensive work on a company and in the end choose not to execute. Again, us being disciplined on quality versus the price we pay.

With the strong cash flow we had, and we're down at 1.4 in leverage, so that gives us good headroom to act when the right opportunity comes along.

We also received a question here that EBITA is up 73% but earnings per share is down during the quarter, and why is that? That is explained by the net financial items, where we have currency effect of around -16 million during the quarter, which it is related to revaluation of external loans that we have in euros and that impacting the net financials for the quarter.

We also have an impact of revaluation of put/call options of around 9 million when our companies perform better than expected. The revaluation of the put/call options ends up in the net financials.

That is reflected in the earnings per share going down during the quarter. We also received a question that we changed the return on capital employed definition.

A comment to that is we have a new definition this quarter, and that's EBITA over capital employed excluding cash and acquisition-related liabilities, and it's a better reflection in our view of the return on the capital tied up in our operations. We have also shown the historic figures of how we calculated return on capital employed before.

In Q3, that is 16% compared to the 16.4 that we have with our new definition. We will continue to show that also going forward for a clearer view.

Good. With that, we don't have any more questions that we haven't already answered in the presentation.

With that, thank you for taking the time and listening in, and have a good day.