Hello and welcome to InderesTV, NYAB publishers. Its Q2 earnings result this morning and here with me, as always, I have the CEO, Johan Larsson.

Thank you. We're going to talk about Q2 results and the outlook for the remainder of the year. So with that, let's start with the topline. Can you explain that a lot of projects were in early design and planning phases, and that revenue would accelerate when they move to execution phases, and with that would you sum up? Q2, did that shift happen the way you expected?

It did, the way I expected. We have started production and execution on some of those contracts, although the phase two contracts are signed and received, but as I explained and stated quite clearly. I tried to communicate as transparently as possible to our shareholders there. The lack of growth in Q1 is a timing question and an exception, and the growth will come, and of course with the order book. We show now at the end of Q2, together with all of these potential phase two. Everything is on track.

And you mentioned slow Q1 and the record order backlog, given this and also now the Q2 report. Do you see that the year now could be more backloaded than it used to be?

A tad, but it's always backloaded and H2 is always prosperous, but it might be a bit more backloaded than previous years.

And then on profitability, similarly, the profits were impacted by this high proportion of early-phase projects, and also an older than usual winter, which limited your production volume, so to what extent. These projects transitioned into the more profitable execution phase during Q2, and has that operational leverage started to normalize as you expected?

It has normalized as I have expected. The main thing for me is the underlying growth, and I know where the company is going, then you will always have timing effects in individual quarters, so as a whole. We are growing this year. We expected growth, actually our Q1 this year was the only quarter in the last 13 quarters. I think, without growth, so but of course.

The growth now is on bigger numbers, and the potential with more than 500 miljoner euro in our backlog, we have an additional 600 miljoner euros in these phase ones, and it's not likely anyway that all of those will materialize in contracts. So yeah.

That's where we are, I think.

You mentioned in these interviews before that to margin-optimize, the preferred level of revenue growth should be around 20 to 25%, and now that you hit 19% in Q2. Are you happy with the margin development in Q2?

I'm happy with the margin development. Q2 is a slow quarter, and performing like Swedish civil engineering, that is our core and our organic growth motor, performing an EBIT margin at 5% is really good and indicates that our traditional margins in Q3 and Q4, which in that part of the company. The biggest part of ours, usually around 10%, indicates that we should reach that, and maybe even more, so pleased with the performance in our first half, but that's always the game is decided in the second half, so.

And of course we have to talk about Uppsala tramway phase two order that you recently won, at least in early July, which is worth 6.5 billion SEK, which is also the largest in history. How does a project of this scale impact your operational planning, and does it change your requirements for organic growth and recruitment in the coming years?

It doesn't change too much since the contract length is eight years, first six years at quite full speed and then two years with some additional work, the portion of our annual revenue that's from that contract not too big, and the value of that 6.5 billion contract, only half ours. So it doesn't have a large effect in any way. We already have the organization in place that has been there for phase one, doing project and planning of the project, designing it, and the only difference is that this will have execution below them, the revenue skyrockets in comparison to phase one.

And I think we also have to address the 6.5 headline, because I think a lot of investors maybe just saw the headline and then just assume that NYAB's revenue would jump thereafter, but as you said the project is run through a company that you own together with a Swede. So given this, what will investors actually see in numbers from this project. What will they not see as well?

They will see a margin that is in line with our business overall and roughly 500 miljoner SEK annual in revenue, so a company of this size. If we last year had revenues of 6 billion SEK, and we know that we are growing this year. I mean, we're talking about 7% of something the first year and the coming years, because the company is growing as a whole.

So they won't see too much in the figures. Of course it gives visibility and it gives guaranteed volume going forward, but investors should be quite confident that I'm a real pilot. I'm a big owner. I have founded this company, I'm not interested in risks. Risk is a part of the game and we'll manage them. But we grow in a way that is suitable for our business model and in line with our experiences and expertise.

I think during the earnings call you also mentioned that this project will not hit the revenue and the EBIT in your income statement, but rather share of results of. Associates and joint ventures. It's going below EBIT, right. I think that is important to clear for.

It's important to clear, and then there might be that NYAB. Involves the joint venture to some extent.

So it could come on revenue.

Some part could come as revenue and earnings, EBIT.

But what about the order backlog, because that will hit the Q3 figure, right, and how should investors think about the backlog now that is included there, but the revenue will not follow as your other projects?

Yeah, of course, we will be very clear in our future report.

You will separate backlog, maybe, or maybe mention how big part that Uppsala is.

I mean, that's an IFRS question and an accounting question, but we will be very transparent at least, good.

And then if we switch to the consulting segment, which has faced, at least in the offshore market, rather soft trends there, and the margin has fallen to around 2% on a trailing 12 months. Have you seen any signs of an inflection point in the offshore market, and also what do you see as the primary steps to take this segment back to 4 or 6% margin?

It has never had, this business itself has never had margins more than like. 3.5% or something at best in its history, we know clearly what we bought. It was an attractive multiple, synergies with getting resources, very competent energy experts and consultants to help us with planering och projektering in our business. Some of them are specialized in industrial buildings and in infrastructure as well. So when it comes to the margin.

We stated clearly when we did this acquisition that it will dilute our margin for 2025 and 2026. The margin drop is also related to activities that we have done to improve this business going forward. We have new leadership in Norway, which is the main market and the main business. We have new leadership for the consulting as a whole as well. We have started to implement and are running a startup in Sweden, we have hired quite a few consultants. We have organized the entities for cleaner purposes, cutting down costs going forward. So we are doing the right things with the company. I have no doubt in my mind about that. And I'm quite sure that we during 2027. We'll see more improvements due to our actions and also changing the culture of the company a bit.

And you have also gained a stronger foothold in the. SSAB Luleå programme with two early works agreements, when do you expect these early works to convert to much larger and more valuable execution phase?

I would say that all of our listed 600 miljoner euros that are in early works or phase ones at the moment, those. Should materialize before the end of the year. So it's nearby, I'd say. I mean the mill in Luleå. We are investing in a huge project. There are a lot of things depending on other things and such, but we work good together with them, and we are making progress all the way. So then if contracts are signed in September or in November. It's sort of out of our hands and we are not in a rush that way.

And this sort of early phases and early works agreements and stuff seems to be an increasingly bigger part of your plans and strategy. What is the main reason for getting these contracts earlier? For me.

It decreases risks because when we see it together with the clients. We are experts on this, most clients are experts. In something else, they are either experts at energy, electricity, providing stuff like that to society, or they're experts at producing steel or whatever. But if we sit down with them at an early stage, we take part in designing and planning the project that we'll later on execute on. So we know everything and everything is set from both a theoretical and then practical point of view, which is the difference when we only are constructors or contractors, then usually projects are very, very theoretical, and there are a lot more risks and unknown things and uncertainties and changes along the way.

And during the one you were also clear on that data centers are a market that you want to keep chasing or keep pushing up in, and then Compute Nordic in Mickel. It was your first real data center project. From what it seems from the report. It seems like that you have already moved to the execution phase, so based on this, how does the broader data center pipeline look for NYAB from here?

Well, there is a pipeline. Then we are, as always, very picky with our clients, as you know the base of our clients are super strong, very steady heavy base industry, the defense, and clients like the biggest energy companies in the world among others. So we are careful, but there are ongoing discussions about more data centers and we will see what in the end materializes in contracts.

And I think you also have said that this Mickel contract is worth around 100 miljoner euro. And I guess that is the reason also that the revenue in Finland also jumped now 65% or so, that you started this execution.

That's a part of it.

It, and lastly. If we look ahead, you have a backlog that is on record levels and as you now move into a period with higher activity. What are your main priorities to protect project margins against potential cost inflation and also ensure high-quality delivery across such a large volume of work.

Yeah, it's. It started early and as you mentioned yourself, our ideal growth phase. When we are about that size, it's in the region of 25%. So we are trying our best, of course we have to follow the market and follow our clients and such, as long as we keep it. Keep the growth rate somewhere around there.

We are quite safe and we have needed time and needed organization, and we can make up and build up the right way without having too much costs. In advance, but that should be stated, of course there are costs. If we only looked at improving, could stop growing, have a growth of 3%, that would quite heavily improve our margin, but in the long run. It would not be good for the company to be healthy.

All right. And with that. Thank you so much for joining me here today, and thank you for watching.