Translation: Original published in Finnish on 11/13/2026 at 8:15 am EET.

Solwers' third quarter was unprofitable and below our forecasts, which we had already lowered following the profit warning. This weak quarter continued the trend of several years of earnings turnaround being postponed time and again, while debt accumulated through acquisitions weighs increasingly heavily. We lowered our estimates for the rest of this year and the next, and according to our projections, the net debt-to-EBITDA ratio covenant will clearly be exceeded by year's end. In our view, a share issue is still not the most likely scenario, but the risk has increased. We lower our target price to EUR 0.9 (was EUR 1.3), and our recommendation remains Reduce.

Earnings turnaround has been postponed year after year

Since its IPO, Solwers has grown primarily through acquisitions, financing this growth largely through debt. However, due to the market downturn, the acquired companies' earnings have not been sufficient to service the debt. The EBIT margin has shrunk from around 8% in 2022 to nearly zero, while net debt has roughly doubled simultaneously. Solwers has expected a turnaround in earnings for several years, but it has been delayed time and again.

The third quarter continued the same pattern. Revenue decreased by ~7%, and adjusted EBITA turned slightly negative as the architecture business and Swedish industrial companies overshadowed the strong momentum in infrastructure and specialist expertise more. We estimate that cost-saving measures will gradually take effect, consequently improving the direction of Swedish industrial companies step by step, starting in the fourth quarter. However, price pressure continues, and the company has not been able to fully pass on wage increases to its prices.

Financier in the driver's seat

At the end of June, net debt was around 28 MEUR, about three times the company's market value of 9 MEUR. According to our calculations, the company met the September covenant limit, but the limit tightens to 5.0x at the end of the year, and based on our estimates, the ratio will be ~6.5x. The debt cannot be repaid quickly through operating cash flow because, at the current earnings level, EBITDA is mostly consumed by rents and interest expenses. Additionally, working capital was already released early in the year, and our estimates indicate that the cash flow for the remainder of the year will decrease net debt by only just over 1 MEUR.

The bank has already granted two waivers and eased the terms once, and we estimate that it will most likely postpone the decision once again, either with a new waiver or delaying the tightening of the covenants. However, we believe that the bank's willingness to be flexible diminishes with each round, and the new terms will likely be more unfavorable for the company than before. In our forecasts, financing costs already consume most of next year's EBIT.

Risk of a share issue looms unless there is a quick turnaround

We still do not believe that a share issue is the most likely scenario, but the risk increases clearly if earnings do not turn around in the coming quarters or if the bank requires additional capital from the owners in exchange for new terms. We estimate the share issue size to be 5–10 MEUR, pending how quickly the bank needs to return the net debt-to-EBITDA ratio to the original covenant level of 3.5x (in our forecasts, net debt at the end of 2027 is ~29 MEUR and EBITDA is ~5.5 MEUR). At the current price level, an issue could raise the number of shares quite clearly. We believe there is not much time, as our estimates indicate that the cash position will also drop close to or below the 4.0 MEUR minimum level in the financing agreement next summer when the seasonally weak cash flow of the early year, bank loan repayments, and earn-outs coincide.

Risk/reward ratio still not attractive

Based on our forecasts, the valuation multiples appear neutral only if the earnings turnaround continues from 2028 onward. However, the earnings level is so low in absolute terms that a faster turnaround than our estimates would decrease the multiples and clearly reduce balance sheet risk. In our view, financing-related risks currently outweigh the potential of the turnaround, and we do not yet find the share's risk/reward ratio attractive.