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Published Jul 11, 2025 03:43AM ET
Netel Holding AB reported a 7.7% year-over-year decline in sales for the second quarter of 2020, totaling 789 million SEK. The company's adjusted EBITA stood at 41 million SEK, representing a 5.2% margin. Despite these figures, Netel's stock experienced a 4.24% decrease, closing at 10.38 SEK. According to InvestingPro data shows promising revenue growth of 3.93% in the last twelve months, supporting the company's expansion strategy. The company is targeting profitability enhancements in its telecom division and is expanding its geographical reach to capitalize on infrastructure megatrends like electrification and digitalization. Unlock detailed financial analysis and growth projections with InvestingPro's comprehensive research tools.
CEO Kannett Retticharl emphasized the company's strategic positioning in markets driven by critical infrastructure megatrends. He stated, "We operate in markets that are driven by the strong critical infrastructure megatrends." CFO Fredrik Heleneus highlighted the company's commitment to updating estimates and assumptions on projects to navigate the competitive landscape effectively.
During the earnings call, analysts inquired about the telecom project provisions, Norwegian service operations, and the performance of infrastructure services. Concerns were also raised about resource availability and market tender opportunities, reflecting the need for strategic adjustments in response to industry challenges.
Conference Moderator, Netel: Welcome to Nattel Q2 Report for 2020 Now I will hand the conference over to CEO and President, Jeanette Reutersgild and CFO, Fredrik Heleneus. Please go ahead.
Kannett Retticharl, CEO and President, Netel: Good morning, and welcome to our presentation of our second quarter. My name is Kannett Retticharl. I'm CEO and President of Netel. With me today, I have Fredrik Heleneus, our CFO. In the second quarter, we continued to have a large proportion of projects in start up phase across all divisions.
However, telecom has increased its volumes, primarily due to positive trend in Sweden and Germany. The high proportion of product start has also negatively impacted profitability since initial activities needs to be performed in our projects before we can start deliveries and invoicing. The major contracts that we are now commencing include, for example, LVL's power stations in Norway, a new framework agreement with GlitreNet in Norway, an expanded framework agreement with Teletor in Sweden and fiber networks for UGG and Enviatel in Germany. The order backlog continued to be strengthened and increased to 4,100,000,000.0, part of which will extend into 2027, but the vast majority comprises deliveries in 2025 and 2026. The adjusted EBITA margin amounted to 5.2% during the quarter, negatively impacted by the high proportion, as I said earlier, from products in the start up phase.
In Infra Services, sales decreased 29.8% in the quarter compared with an unusually strong comparative quarter last year. But the division has continued to capture new customers and expanded collaboration with existing ones. Step by step, we are expanding our operations geographically, which combined with our strong local presence provide us with competitive edge. Within Power, sales decreased 3.5% in the quarter, negatively impacted by product starts in Sweden and changed of product mix. In previous years, we have had a greater share of high margin power station products in the product mix.
Nevertheless, the power products that we are now delivering on have a favorable profitability over time, well in line with our above well in line and above our group's profitability targets. Profitability will also be positively impacted by new power station products that will commence during the year with product planning and will enter production phase next year 2026. In telecom, sales increased 3% during the quarter, driven by a healthy trend in Sweden and Germany. The EBITA margin increased 6.7% during the quarter due to higher volumes and gradually increasing contribution from the margin enhancing measures we carried out in Norway last year as well as one off effects. The one off effects comprise the reversal of previous provisions for completed projects.
We took a significant and important step in building a stronger nattel with the sale of our Finnish operations that we are operating at a loss. We also successfully continued to expand with new and existing customers and into new geographic areas. The high proportion, as I said earlier, of products in the start up phase during the quarter has temporarily had a negative impact on both sales and profitability. However, these projects form the basis for future growth and improved earnings. We received considerable interest in our Finnish operations, and the sales process proceeded quicker than expected.
Our Finnish operations and the associated losses and lack of growth have negatively impacted NTEL for several years. The sale will allow us to focus our resources on our core markets in Sweden and Norway and growth markets in Germany and The UK, and as such represents a very significant step in establishing a stronger Nattel further on. Now I would like to present some new wins under this quarter from each division to show example on how we deliver on our strategy. We start with division InfraServices. They have signed a new agreement with Mallard and Equi, and we extended our services with them.
Mallard and Equi is an important client for us with whom we already collaborate in the power sector. Now our colleagues at Moober has succeeded in expanding the partnership to include two new products focused on renewal of heating and water systems. Malla Energuy is owned by the city of Westeros and provides electricity, district heating, water, district cooling, and communication solutions, primarily in the Maladale region. Our Swedish team in division power has successfully been awarded a new five year framework agreement with E. ON in Sweden.
The agreement includes guaranteed volumes totaling 330,000,000 SEK and covers product contracting for local networks in the areas of Orobruch, Neuscha, Bengiste, Smallland, and parts of Norland. E. ON is one of Europe's largest energy companies with over 1,000,000 households and businesses as customers in Sweden alone. We are proud of E. ON's renewed trust, and together, we are helping to continue electrifying society and meeting the energy needs of the future.
Within division telecom, our German team have won a contract worth €90,000,000 with a significant new customer, Enviatel. Enviatel is a leading telecom operator in Central Germany and part of the E. ON group. The two year contract gives us full responsibility, including planning, installation, documentation, and product management for the construction of a fiber network in Eskibirskies, South of Dresden. Thanks to our solid experience in fiber networks and successfully secured the products we have done in Germany, we are now able to engage with a new major player.
This is yet another proof of how we are delivering on our strategy to win new customers and expand our geographical reach. And with that, let's move on to our financial performance in more detail, Fredrik.
Fredrik Heleneus, CFO, Netel: Perfect. Morning, everyone. Thank you, Konate. The financial performance during the quarter, the second quarter is impacted by the seasonality and the product life cycle where we have been focusing on start ups with new projects and new clients. We are moving forward within telecom in new areas and increased opportunities utilizing on the new service agreements, especially with Telenor in Norway.
We are working with new clients and projects in Germany. And with Empower, we have expanded into new areas in Norway and focusing on new projects with planning and permitting in in the Swedish markets. This phase and the project mix with relatively fewer projects running at full speed, generating our top line and revenue growth, especially the bigger power substations that we have seen previously, impacted the total top line during this quarter. However, we are pleased with the continuous work to increase the order backlog and in in enabling the necessary profitable volumes for our stepwise improvements over time. We delivered sales of 789,000,000 in the quarter with a negative growth of 7.7%, and we recorded approximately 1,500,000,000.0 in sales year to date, just below last year.
We note that the negative impact from FX translation has has has impacted the the total total negative growth, but telecom continued to deliver growth from Germany and grew as a division in the quarter despite a focus on new starts in Norway and in Sweden. Power closed just below last year with good momentum in Norway and continued focus on the new project starts, as we said, in Sweden. And Infoservices with a continued competitive landscape was trailing with almost 30% as we did not run as many projects as full speed as we did during the same quarter last year. We continue to position ourselves in the local markets for infra services for additional and profitable projects ahead. While we continue to ramp up our production and focus on starting many new projects, we have achieved several interesting wins and new contracts during this quarter, growing the order backlog to 4,100,000,000.0.
Our underlying markets and demand continue to provide opportunities. And during July, we have, as Gwyneth mentioned, communicated an additional 300,000,000 contract for power in Sweden. And overall, we believe that we have a fairly good position for '25 and the coming years. And out of the 4,100,000,000.0 in in total backlog, we estimate that we have around 1,500,000,000.0 for the final six months of '25. The profitability in the quarter increased from q one in line with the seasonality pattern, but with the relatively lower volume that we saw from the project startups, we we are slightly behind the the profitability from from last year.
We are currently in a buildup phase with many new long term opportunities. And and with that focus, we don't yet generate the higher revenues with additional contributions to the margins. The adjusted EBITA was 41,000,000 or 5.2% after adjustments with regards to the transaction costs for the Finnish divestments. Telecom contributed with higher margins as we continue to improve from our enhancing activities and increased volumes in Sweden and Germany. Power and Infra Services closed with slightly lower margins in comparison to last year due to the current phase of the projects.
With the growing order backlog and gradual improvements from, as mentioned, for instance, better and more efficient solutions within telecom and measures implemented during last year, we continue to work with the increased profitability over time. And the impact from new projects and ramping up our production today are expected to generate positive possibilities going forward. The relatively lower profit in absolute terms in the quarter implied an earnings per share of 0.11. The cash flow for the quarter also reflects the capital need when we ramp up production and focusing on project start ups. The operating cash flow was minus SEK 62,000,000 in the quarter compared to SEK 41,000,000 last year with high levels of ongoing production triggering cash inflows.
During the first two quarters of twenty twenty five, we have continued to see the need for working capital in general when we engage in new activities and projects. And the outcome from our invoicing in late q one and during q two was on the lower side for us to close q two on or with positive outcomes. During June, on the other hand, the last month of the quarter, we reached additional milestones in our production and noted increased levels of invoicing up to approximately 270,000,000. We believe that we have provided quite good understanding of our business and the capital need where the seasonality is an important characteristic for our business as we always much reach certain achievements before we are entitled to invoice and and bearing costs during that time. But in addition to the to the seasonality, the the project mix in the current phase of our production adds additional understanding to the capital lead, and power is a very good example during the first six months during '25.
Last year, we benefited from many substation projects running at a good speed with good good revenues and good cash good cash flows with beneficial payment schedules. Though during '25, the start of new projects, including substations, implies that we have both lower volume activities with planning and permitting, cash outflows when we ramp up production, and a need for a bit of time before we reach relevant levels of our own invoicing. We tend to see a higher capital need within telecom due to the relatively tougher terms and conditions within those projects, but the operating cash flow for '25 is quite evenly distributed and with tied up capital throughout our divisions given the overall production phase that we have and the start of many new opportunities across our business. As a consequence of of ramping up the production and starting these new projects, we increased the level of accrued sales or work in progress on our balance sheet and enhance the net working capital. And we we are around 13% of working capital in relation to sales in comparison to 10% last quarter or 12% June.
The higher working capital and negative operating cash flow implies a higher net debt position, and we increased the leverage ratio to 3.4 times. As we enter periods at year end, whether we finalize production to a greater extent and have a higher relative level of client invoices being sent, we expect to see the the contrary, meaning that we lower the working capital and benefit from the cash conversion that we have in our operations, and we'll see better cash flows. We have a very limited CapEx need within our business, and we do not foresee any substantial impact from from other investing activities. And and with that, we we do expect to deleverage from the current position towards the year end. Before we move on to the divisions, we have a few additional words on the outcome from the Finnish divestment.
And as previously mentioned, Micronet, we decided to initiate the process of the divestment during year end and now completed the transaction with a simultaneous signing and closing June. We are pleased with the process managing and closing before this summer. And while the transaction had limited effects on the financial position, the overall profit from the discontinued operations as reported in the in the in the second quarter, including effects from the from the actual transaction amounted to 20,000,000 in the quarter or 16,000,000 year to date. We have a small but settled purchase price. We have reported approximately 9,000,000 as transaction costs, and we report minus 2,000,000 as the cash flow effect from the transaction, and that's referring to the sold cash balances in the Finnish operation.
With this transaction in the books, we will free up our resources and continue to focus on core and growth markets and execute on on our strategies both on on short and long term. If we then move on to the segments and our divisions and looking at the performance across them, Infoservices delivered sales of 157,000,000 and decreased with almost 30% against, again, a very good comparable quarter last year where we saw additional projects running at at full speed. And vice versa, this year had fewer projects continuing since last year and focus on the start for new ones. We also noted a bit slower pace on on the start for new projects with more expected volumes being moved to future periods. But more importantly, we continue to work with existing clients and expanding on long standing corporations, evaluating new possibilities and and and possible clients and geographies in addition to the continued strong local presence, where we still managed to win interesting projects despite the competitive landscape.
Profitability for infra services, we we noted an EBITDA of 6,000,000 or 3.6%. The lower volume and slower pace in start for the new projects implied a decrease from last year margins. And hence, we will continue to execute on on the order backlog in addition to expanding on new possibilities in order to get back on volume and ultimately on profit and margins. It is a slower start for the first six months, but with partly a new organization in place, we we do look forward to to evaluate our opportunities ahead. Within power, we note a continuous growth from our Norwegian business as we increase production towards new clients and new areas.
And Sweden decreased from last year as the current start of new projects and relatively few substations running at the same rate of completion, and that implied focus on low lower volume activities with less material deliveries and and production costs generating our top line. In total, power generated 268,000,000 in sales compared to 277,000,000 last year, and Norway continued to contribute with both our power service contracts that we have as well as from projects, and we are looking forward to continue their promising start of entering South Norway as well as evaluating the industry segment. In the quarter, power delivered a decreased profitability of 8,000,000 in EBITA and a 3% margin. The margin is still impacted by cost in relation to our expansion in new regions and with new clients and also due to the project mix, as we have said, with fewer fewer substations running at the same speed as we saw during the same time during '24. Those projects have historically been providing our higher margins.
And as we bring the current projects that we now start up to speed, we expect to realize better volumes and increase profitability. The demand and the underlying markets within power provide good opportunities, and our current projects and the existing order backlog are set to deliver a good long term profitability for Netel. In telecom, we continue to increase speed since q one with projects in several of our markets. The division delivered 364,000,000 in sales in the quarter and grew with 3% with important contributions from Germany and from Sweden, and we continue to evaluate the progress as we increase production with our service agreements in Norway. Expanding into new geographies and onboarding new teams, utilizing on biggest bigger order volumes and implementing new efficiency tools naturally takes a bit of time, but we expect to continue the development throughout this year and really realize additional additional potentials.
In line with that, and as we have said previously, we expect to improve not only our our volume for for telecom and and tel, but especially the margins. We were not satisfied with the 1% margin during '24, and hence, the EBITA for telecom in the second quarter this year of 24,000,000 or 6.7% showcased important contributions from efficiency measures and new projects. The EBITA includes onetime effects, as Gwyneth mentioned as well, from reversals of previous reservations or provisions from finalized projects of and that amounts to approximately SEK 10,000,000, but the underlying operations continues to gradually improve. Telecom remains as our biggest division, and we will continue to find ways to leverage on the order backlog and new contracts, increasing the profitability over twelve months also from for this division.
Kannett Retticharl, CEO and President, Netel: Thank you very much for that presentation, Fredrik. I will finalize today's presentation with some concluding remarks. We operate in markets that are driven by the strong critical infrastructure megatrends of electrification, digitalization and modernization of water and sewage systems, and we hold a strong position in these attractive markets. I am confident in our ability to grow profitably, and we will do that by growing together with our customers by delivering on our contracts every day. Nataly celebrates twenty five years.
This year, we started our operations in telecom and have over the years developed a business our businesses in power and infra services as well. Through both acquisitions and the ability to grow organically, we have managed to develop our business over the years. We have successfully delivered on our strategy and continued to strengthen our positions in our markets by growing with new and existing customers, with focus on our core markets in Sweden and Norway and the growth markets in UK and Germany. Every day, I receive proof of the strength Nathal has in all our competent and motivated employees who has managed to increase our order backlog to SEK 4,100,000.0. We have a sharp team with a common clear goal to make us even stronger.
Overall, this quarter, to sum it up, as we said, we took a significant and important step with the sale of our Finnish operations that were operating at last. We also successfully continued to expand with new and existing customers and into new geographic areas. The high proportion of our projects in start up phase during the quarter has, as we said, temporarily had a negative impact on both sales and profitability. However, these projects form the basis for future growth and improved earnings in order to deliver on our financial targets. And with that, we open up for questions.
If
Conference Moderator, Netel: you wish to ask a question, please dial 5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial 6 on your telephone keypad.
Fredrik Heleneus, CFO, Netel: And we have Karl Johan Bonnevier from DNB Carnegie.
Karl Johan Bonnevier, Analyst, DNB Carnegie: Good morning, Sanath and Fredrik. A lot of moving parts in this quarter, obviously, and good indications going into the second half. But if we try to digest a couple of them. First, looking at the reversal you did in the telecoms area, just to give some color for it, when did you, say, account conservatively for this project if you put it like that? If you're looking at the timing effect so we can understand the comparison a little better from when we when this was really creative if you put it like that.
Fredrik Heleneus, CFO, Netel: You know, we we we always, work with with updated estimates and and assumptions on the projects. And as you say, trying to be conservative on on our judgments when with regards to the to the estimated margins, ultimately, then using using that margins as the base for for generating or calculating the revenues using the percentage of completion. And and during these times, we we have our provisions when needed. And and this time, when we had finalized the production and have finalized projects, we didn't have the need for those provisions and this time had a reversal, which was slightly bigger than we usually see. And that's why we want to to to point that out that we have these one off effects of approx approximately 10,000,000.
And that that's that's been sort of put in the asset provision during during the last periods of time, meaning a couple of a couple of quarters back, so during '24 and '25.
Karl Johan Bonnevier, Analyst, DNB Carnegie: Excellent. Thank you for that. And and looking at at telecom going forward, you point out that now the the Norwegian service operation seems to be, on a on a firmer footing. Is that the right way the right way of interpreting it?
Fredrik Heleneus, CFO, Netel: I think that we that we get imported buses from the from the, all the processes that were put in place during '24. A lot of efficiency measures regarding systems, regarding the organization. We have onboarded additional teams. I think that they they added approximately 40 team members for the service organization in new areas just recently. So, obviously, we have several ongoing processes for the division and and especially then in Norway for these bigger service contracts.
But we start to see important answers and and and expect to to continue to to realize the potentials, as we said, now during the the coming quarters as well.
Karl Johan Bonnevier, Analyst, DNB Carnegie: Excellent. And switching over to infra, obviously, a slow start for this year when you're looking at the year on year comparison. But do I interpret it right when you talk about the backlog and the effect going into the second half that, that might be even a catch up to deliver something similar to 2024 for the full year?
Fredrik Heleneus, CFO, Netel: Yeah. I think that the we we have a good order backlog now for the for the the remaining six months. As we said, we estimate that we have roughly 1,500,000 in total out of the 4.1 in backlog. And and, naturally, Infosys has has has parts in in in that in that volume as well. As you say, it was a tough start now for the first six months for the for the Infosys division, but we do expect to have a a a ramp up in production and and start delivering on those volumes and and see an increase from from the production that we have seen now for the first six months.
Karl Johan Bonnevier, Analyst, DNB Carnegie: And when you, for the total group, look at the the outlook straight for the second half and then for the full year, do you feel that your new financial target looking at gross margin are within reach, so to say, for also this year?
Kannett Retticharl, CEO and President, Netel: Yes. We still see that we estimate that we will ramp up our production in the second half year and we to reach our financial target. And our new financial targets also allows us better with between to show that there could be changes in our business due to what kind of product mix we have, but we estimate that we will reach our financial target this year. We have had a bit lower than expected volumes. A lot of products were delayed in the first half year, but we expect to deliver on them the second half this year.
Karl Johan Bonnevier, Analyst, DNB Carnegie: Sounds excellent. And and, Janet Janet, on that note, obviously, now going into a high production period, do you see any limitation on the resource side that you can access to your suppliers looking at the equipment and staffing?
Kannett Retticharl, CEO and President, Netel: No. We have from the beginning, we had planned a bit a slight or higher revenue for the first year. So we are equipped with the resources in our organization and ready to to ramp up the production for for the the second half of this year then. So we are ready to produce in our teams.
Karl Johan Bonnevier, Analyst, DNB Carnegie: Sounds perfect. And looking at what you see as ongoing project discussions outstanding with RFPs and these kind of things looking for for new business, how do you see that today maybe compared to six or twelve months ago?
Kannett Retticharl, CEO and President, Netel: I would say we a strong market still, but it has been some delays even for tenders the first half year. But a lot of tenders has come out now in all divisions just before summer as well. So we see a strong market even further on. And but it has been some delays in from our customers as well. They expected to to go out with more products in the beginning of the year, but it has been some delays for for them as well.
Karl Johan Bonnevier, Analyst, DNB Carnegie: Excellent. Thank you very much, and all the best out there.
Kannett Retticharl, CEO and President, Netel: Thank you. You.
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