Salix Group AB (SALIX) Q2 2026 Earnings Call Transcript

Good morning and welcome to today's webcast with Salix Group. With us presenting today, we have the CEO, Martin Hansson, and CFO, Cardinal Nerma. If you're calling in and would like us a question, please press star 9 to raise your hand and star 6 on it yourself when you get the word. You can also submit a request from Houston to the right. And with that said, please go ahead with your presentation.

Thank you very much. A warm welcome to Salix's first quarterly report. we're happy to present this report to you and i'm doing this presentation together with salix cfo as you heard carolina neman so first of all some highlights from the second quarter as of 15th of june salix now is a listed company on nasdaq stock exchange just a few weeks back we had the pleasure to ring the bell and here we are today so strong underlying growth we see top-line growth as well as EBITDA growth in all business areas we have some substantial adjustments for extraordinary costs that stands out as historically high due to the IPO cost as well as higher advisory fees as we have entered a new country we have also expanded to a new market in this quarter so as of first of april latex is now a company within salix it's a market leading company within the building trade where we see potential for organic growth as well as acquisitions so some financial information from the quarter the sales turnover in the quarter lands on 1.3 billion sake that equals a total growth of 20 percent and an organic sales growth of seven percent the total growth is driven by the acquisitions of ladix and the organic growth of seven percent is stronger than the first quarter where we ended on three percent organic growth and all of our three business areas are delivering organic growth. We see some stronger development in the Swedish market overall and in particularly the DIY segment as well as in the agriculture and forestry segment. The EBITDA in the quarter lands on 121 million sec that equals an EBITDA growth of 9 percent excluding extraordinary adjustments salix delivers an EBITDA of 181 million which is a growth of 51 percent this quarter and actually since the start of the year is a bit special historically regarding adjustments. The IPO costs and market expansion in Ireland are a bit self-explanatory. I would like to say a few words about Finland. The restructuring cost in Finland relates to a structural change that is in line with our ambition to improve logistics productivity and service over time. We will now have consolidated our logistics activity to the helsinking area and sold logistic property in finland with a loss so the logistic restructuring in finland is now finalized and implemented over the first two quarter and we are looking forward for the period of head the ebitda margin for the quarter lands on nine percent and adjusted for extraordinary cost on 14 percent we now have nine consecutive quarters with ebitda growth if we look at the last 12 months the sales lands on 4.3 billion and ebitda lands on 421 million We have a CAGR of 14% and a positive trend with the result of 20% in this quarter. EBITDA margin remains on the 10% level and if we adjust for the extraordinary adjustments, we land our EBITDA margin above 11%. So over to you Carolina.

Thank you Martin. so moving on to one of our most important KPIs namely return on working capital this is an important measure for us as it shows how efficiently we allocate and utilize capital as you can see from the chart we have improved our return on working capital reaching 40% in the second quarter this year and compared to the same period last year we improved the ratio by 10 percentage points the improvement we see here is partly driven by higher margins beyond that it reflects a combination of optimized logistics and sourcing as well as improved payment terms with both customer and suppliers. And another factor is also that we have successfully acquired companies with strong return on working capital. Another important KPI we closely monitor is net debt to EBITDA. During the second quarter several important events have affected our net debt position and financing structure first of all we have secured 2.4 billion in committed financing providing a strong funding base and during the period we also completed the acquisition of latex and paid approximately 325 million of the purchase price the remaining consideration will be paid in the fourth quarter of this year and the second quarter of next year. In addition during the second quarter we paid a dividend of 400 million to equalize the debt allocation between Salix and the remaining reluctant group. And offsetting these transactions our net debt decreased by approximately 100 million in the quarter, mainly driven by strong positive cash flow. And as a result our net debt position has been impacted impacted by these transactions and our debt ratio came in at 2.9 times at the end of the quarter placing us at the upper end of our target range despite this we remain confident in the strength of our capital structure we expect strong cash generation in the second half of the year when our business in general generates more cash as well as we have current momentum in our earnings and our new credit facility includes a covenant requiring net depth to EBITDA to stay below 3.5 times and this provides comfortable headroom so on this slide we summarize our financial targets starting with sales growth our ambition is to deliver a cater of more than 15% including acquisitions this reflects our strategy of combining organic growth with acquisitions on a 12-month basis we reach 12% in the second quarter driven both by organic growth and acquisitions In terms of probability our target is an EBITDA margin of at least 12%. As for the LTM in the second quarter we reached 10% but if we exclude items affecting comparability we reached above 11% in the period. Our target for return on working capital is at least 40% which is also the level we achieved in the second quarter however it is important to note that this kpi was negatively impacted by items affecting comparability as the reported ratio of 40 includes these items regarding depth ratio our target is to maintain net depth to ebitda within in a range between two and three times as i mentioned earlier we came in at 2.9 times in the second quarter so to summarize we continue to see positive momentum in the quarter especially regarding profitability and return on working capital so over to you again martin

thank you Karolina, I will say a few words about our three business areas and I will start with consumables, trade and agriculture.

As you can see on this chart we have a net sales growth of 9%, we have an EBITDA growth of 29% and return on working capital of 44%. The DIY segment continues to show positive development and professionals and industry related segments are a bit more cautious but we do see some positive signs even here so this business area is strong in have a strong position in Sweden which is positive for the overall sales development we have new businesses coming our way and we continue to build a strong market position in the field of fasteners which is an important category in this business area we have improved margin from a pricing but also mixed effects and currency and we see overall a good development in the quarter in the agroforestry segment i will continue with our second business area which is home and fittings the next stage growth of three percent we have in this area an ebitda growth of 21 percent and return on working capital of 48 percent so a continued strong performance in the category of fittings which is an important area and where we are market leaders in the nordics we do have an impact with the logistic project in finland where the operational improvements will pave the way for continued margin development in this area. Despite the extraordinary cost in Finland, the business area delivers an EBITDA margin of 13% and the growth of 21% in this quarter. Our third and last business area is construction and packaging solutions where we have a net sales growth of 56 percent and excluding our acquisitions of latex a growth of six percent ebitda growth of 54 percent and return on working capital of 50 percent this business area is more exposed towards the industry related segment which is a bit later in the economic cycle. We do see some positive signs in the industry segment and mainly in the Swedish market. Integration of latex is ongoing and continues according to plan. I will say a few more words about that in a little while and we are happy to see a solid growth in this business area both with and without the acquisition of Laidex. To say a few words about Laidex, we acquired Laidex the 1st of Avery this year so quite new into the family of Salix and Laidex comes into Salix with many years of solid performance and adds to our overall performance. Laidex is market leaders in their segment in Ireland and they do business both in ireland and in northern ireland so it's a really exciting opportunity for us with a new platform for growth we have similarities from a product and customer perspective and the market with acquisition opportunities so we're hopeful to further build on their development and success. With Ireland now we have five main markets within Salix where 60% of sales currently are in Sweden, approximately 10% in Denmark, 10% in Norway, Ireland and some 7% in Finland. So five main markets with good foundation for future growth. And growth All through acquisitions is an integral part of Salix Group's strategy. We have done six acquisitions since 2023 and they are equally distributed between the three business areas as you can see on this chart. We have a delegated way of working with M&A and have the ambition to build a broad acquisition agenda in our relevant fields. I believe that this slide is proving that we are selective as well as keeping a solid pace. And I'm both proud and happy to see the list of acquisitions that we have managed over the last few years. A successful way of working with real additional value to the solids performance. With that said, I would like to summarize this quarter. We leave a quarter behind us with strong financial development in the quarter with extraordinarily high one of cost as mentioned we have achieved our financial target of return on trade working capital we have a positive momentum in the diy sector and agroforestry segments in parallel we see positive signs in all other segments we have expanded to a new market through the acquisitions of latex in ireland and we are well positioned for continued and profitable growth going forward. And before we open up for questions, I would like to take the opportunity to say a big thank you to all the great and hardworking Solix colleagues out in our businesses and as well as for the support for all the colleagues to making Solix now a listed company.

And then over to you, Martin. Thank you very much for that presentation and let's open up the Q&A. If you're calling in and would like to ask a question, please press star 9 to raise your hand and star 6 to amuse yourself when you get the word. You can also submit written questions using the form to the right. And we'll start off with a written question here.

Solix Group delivered a quarter of strong growth, supported by both acquisitions and organic development. what would you highlight as the main drivers behind the performance during the quarter so we have quite a broad development as mentioned in the presentation in all our business areas they all deliver growth we have year to date an organic growth of five percent within salix and in this quarter as you heard seven percent so sales has developed in a positive way over the first half year and even so compared to last year where we landed on a four percent organic growth so we have had a good start this year i think um we are a little bit helped by the market as said the diy sector uh has for a number of quarters now shown some progress and we also start to see that in the other segments where we are currently trading so and the total growth is of course impacted also by the new acquisition in ireland total growth of 20 percent and then organic growth of seven percent we are very happy with it's partly market driven but it's also driven by our own ability to i believe take market share in the last quarter we are in quite good pace right now i'm And I'm very happy about the development this quarter.

Thank you for that answer. How is the integration of latex going and what is your experience of the company so far?

A new country, all exciting. We are positive about Ireland as such. We have, as in Sweden and the Nordics, quite a positive outlook in terms of the market data that we have received. And Laidex is performing well and according to plan. And it's a solid foundation. They have many years of successful development behind them and continue to deliver a solid result also since we have acquired Ladex. So a very positive start for the company and we are now of course integrating them into our financial systems and get to know each other in a good way according to plan. So a very good start so far.

And will he be making more acquisitions outside of the Nordics?

So as said in the presentation we have five platforms now to grow from where we have a new platform in Ireland and we of course start to map also that country and learn that more in depth. So it's not excluded we are curious to go outside these five main markets but we have as we stand right now a very good foundation for further development. So, yeah, we don't exclude anything, but as we have right now, we have five good markets, five main markets to grow from. So I think that's our starting point, and we don't exclude other markets in that strategy.

Thank you for that answer. And we'll take one final question here. How has the building market developed so far this year?

So this is a little bit difficult for us to measure in the precise way as we are operating in five main markets. If we look at the Swedish market, we have an index that we follow that calls building material index. And so far this year, they are close to 5% in development, so quite a positive development. When we did the preparation for the IPO, we did quite an extensive market research showing that the underlying expected growth in the markets where we are trading are around the 5%. So 5% going forward in terms of expectations in the market. and that's we haven't changed our position towards that and we also see an underlying growth in in in sweden in particular these first two quarters which are good for us as we are a little bit higher exposed to the to the swedish market so around five percent going forward is the market data that we have collected and that is also what we are believing we have ahead of us thank you for that answer and that concludes today's presentation thank you both martin and Carolina for presenting today and I'll add over the words you mark in for some concluding remarks no thank you it is a special feeling to deliver the first quarterly results together with the colleagues and we are of course presenting on behalf of fantastic colleagues out there in the solace business and for the ones of you that are listening in thank you for good questions and And I wish you a wonderful summer and then see you at the next quarterly report.