Arjo Stock

Welcome to the Arjo Q2 presentation for 2026.[Operator Instructions]

Now I will hand the conference over to President and CEO, Andreas Elgaard; and CFO, Christofer Carlsson. Please go ahead.

Hello, everybody. So first of all, thanks for taking time off from your, hopefully, good start to the summer. Today, we're going to present the Q2 reports. And I would like to begin by just going through some basic information about Arjo. So those who are new to the call or new to following us get a better grip on what we do.

So we really are purpose-driven. We have an organization that is really inspired by the purpose of helping patients when they need it the most to protect their dignity, their integrity, and also to help caregivers do their very important job.

We are experts in improving mobility, mainly in acute care and long-term care settings. A little bit also in home care, but mainly in acute care and long-term care. So everything from patient handling, hygiene and wellness, medical beds, pressure injury prevention, VTE prevention, diagnostics and disinfection. We were founded in 1957 in Eslov by Arne Johansson, and that's where the name Arjo comes from. We had in 2025 SEK 11 billion in turnover, and we have approximately 7,000 employees globally. Our sales arms reach more than 100 countries around the world.

So a summary of the Q2 reports. So really happy about the growth. Very solid organic growth of 4.7%, still pressure on the margin. This comes from cost increases. It also comes from some price pressure in certain segments of the market. But all-in-all, we believe that the quarter was good.

Global sales was really leading the way, and we'll come back to that on the next slide. What is important to highlight is that there is an increasing demand for our sustainable solutions. And today, this quarter, ReNu had their all-time high sales. And ReNu is our business of taking disposables, cleaning them in a safe way and being able to use them again and not dispose of them.

We have a very slight EBIT improvement. This is despite then the pressure on the margin, and this is mainly due to us being able to get some of the tariffs back this quarter. So we also have a positive development of the cash flow this month, and we have an improved cash conversion, not really according to our goals, but improvements from last year.

So I will continue. Yes. Maybe I can shout out this that we have also made our strategy. I will mention that towards the end as well. But as a summary, we informed in the Q2 report that we see clear potential to improve Arjo's value generation, and we are going to share all about that in more specific numbers and terms in the Capital Markets Day on September 24.

So just to shout out that North America, they continue to grow. U.S. was leading there. Canada was slightly behind last year. And Canada also came from really high numbers last year, as did also U.S. So both countries in North America really had very tough numbers to beat. So we're happy that they managed to grow. Global sales with Western Europe and the rest of the world grew by impressive 7% and Western Europe were on 6%, and it was really nice to see U.K. being back to growth.

And by that, I hand over to Christofer Carlsson to go into the financial performance.

Thank you, Andreas. And as Andreas stated, we had a solid growth in the quarter. Our gross margin came in somewhat lower than last year.

Looking at the drivers. During the quarter, we experienced an unfavorable sales mix driven by strong growth in global sales and relatively lower growth in North America. Increased transportation cost and cost of materials pressured the margins in all categories. Part of the increased transportation cost is an implementation of a new transportation management system where initial implementation challenges resulted in approximately SEK 10 million of one-time transportation cost during the quarter, but this will be fading out during the third quarter.

Group rental margin declined in the quarter, primarily due to weaker profitability in the U.S. rental business. During the quarter, we received an initial reimbursement of SEK 22 million related to U.S. tariffs. In addition, SEK 30 million is currently being processed with the majority expected to be reimbursed during the third quarter. The reimbursement is recognized as a reduction in cost of goods sold. Excluding the reimbursement, U.S. tariff costs were at SEK 12 million lower than in corresponding quarter last year. FX had a minor negative impact on gross margin.

In absolute terms, gross profit was negatively affected by SEK 23 million year-over-year. Nevertheless, this represents a significant improvement compared with previous quarter. Gross margin was impacted by a number of factors during the quarter. But as you will see on the next slide, disciplined cost control helped offset part of that pressure.

Let's move to adjusted EBIT. Next slide, please. As you can see, adjusted EBIT for the second quarter amounted to SEK 211 million compared to SEK 208 million in Q2 last year. Despite continued inflationary pressure, underlying profitability, was broadly in line with last year when adjusting for one-off effects and FX. One of the drivers was continued improvement in operating expense efficiency. The OpEx to sales ratio decreased by 1 percentage point year-over-year to 34.6% compared to 35.5% last year. Organic OpEx growth was 1.9%, which is a lower than increase reported in the first quarter.

Overall, the total FX had a negative impact of SEK 12 million on adjusted EBIT during the quarter. Moving on to the adjusted EBITDA, which amounted to SEK 482 million compared to SEK 475 million last year. The adjusted EBITDA margin was 17.5%, broadly in line with last year. The EBIT margin improved to 7.6% compared with 6.5% last year. The improvement was supported by lower restructuring costs, which amounted to 0 in the quarter compared with SEK 34 million in Q2 last year.

Turning from profitability to cash generation. Let's look at our working capital and operating cash flow development in the quarter. Next slide, please. Operating cash flow improved during the quarter and amounted to SEK 257 million, an increase of SEK 52 million compared with the same period last year. The improvement was driven primarily by strong operating profit, partly offset by less favorable development in working capital.

Working capital changed by negative SEK 122 million compared with negative SEK 87 million last year. Following a relative soft start to the quarter and a very strong June, a large share of the receivable remained outstanding at the quarter end. The increase in inventory is mainly related to finished goods in transit intended to support sales during the second half of the year.

Working capital days increased to 87 days compared with 83 days in Q2 last year. Cash conversion improved to 53.3% compared with 46.6% in the corresponding period last year. For reference, cash flow from investing activities was minus SEK 194 million compared to minus SEK 171 million in Q2 '25. The number includes an acquisition of the service business in Australia amounting to SEK 30 million.

Cash flow remained solid during the quarter. And with that context, let's move on to the net debt and leverage. Next slide, please. The increase in net debt during the quarter was primarily driven by the annual dividend payment of SEK 259 million and higher investment levels. Net financial items amounted to negative SEK 49 million compared with negative SEK 48 million in Q2 last year. The improvement was mainly driven by lower interest expense.

As is typical in the second quarter following the annual dividend payment, net debt-to-adjusted EBITDA increased and ended the quarter at 2.4x. Our equity ratio stood at 49.5%, slightly down from 49.8% at year-end '25. To summarize, we delivered stable profitability, improved cash generation and maintain a solid balance sheet.

With that, I will hand it over to Andreas.

Thanks, Christofer. My voice is breaking up a little bit, but I hope it will be okay for those listening in. So I'm happy to announce, as we wrote in the report that we have appointed 5 regional leaders to join the management team and report to me. This is something that will help us to really strengthen the voice of the customer in all group decision-making. It's also something that will help us to improve product development. It will help us to drive a common agenda and efficiency across the group.

So all of these regional managers are already part of Arjo, and they lead some of our biggest markets today, but now I'm happy that they have accepted to step up and lead our regions then. So -- and then I want to just make a small advertisement for our Capital Markets Day that will take place in Stockholm on September 24. And at that meeting, we're going to share our strategy, what it consists of, the direction Arjo's intending to take in the next few years, and we're also going to validate and put concrete numbers on what shareholders can expect from Arjo in the coming years, the value creation behind and the timing of it.

So this is something for everybody to look forward to. We have a strategy approved by the Board. We have activated approximately 90 leaders around this, and we are now then calculating the effects and the timing of the strategy. So I'm really looking forward to share all of that with you in September.

[Operator Instructions] The next question comes from Kristofer Liljeberg from Carnegie.

Two questions. First, could you maybe talk a little bit about how you view the underlying demand situation in North America and globally? And then I would like to dig in a little bit more into the reason here for the margin pressure or the gross margin pressure despite strong organic sales growth. So is it possible maybe to split the impact you see here from the negative mix and the underlying transportation and purchasing costs and also how you viewed the potential to offset this more near term?

Okay. Christofer, would you like to take that?

Yes. When it comes to underlying demand, we see a strong demand in North America. The growth in the quarter is, of course, a little bit held back due to strong comparison numbers. And we know that we have a strong pipeline for the second half year. And also in the global sales market and European markets and Rest of World, where we also see a good demand and healthy demand in the markets.

When it comes to margin pressure, yes, there is an unfavorable mix due to both from a product and country mix, so to say. We have medical beds increase is part of the growth, especially in Europe and the U.K. But we also have a weight against products group in Rest of World and in Europe, that is lower margin compared to what we have in the North America countries. So when North America is not growing so fast, their share of the total is then declining and that will have an effect.

We also have some kind of installation projects in Europe that is typically lower margin for the first time, and then that will drive consumable and service business going forward. So that is also part of the product mix explanation.

Could I ask -- would you say that this mix effect is a bigger impact in the quarter than higher material costs and higher transportation costs?

I would say transportation cost is actually higher.

The next question comes from Sten Gustafsson from ABG Sundal Collier.

Yes. I would like to follow up there on Kristofer's question on the gross margin. Could you potentially share with us how much of sales is related to transportation cost. That would be my first question. And also, if you look on a sort of country-by-country basis, do you see any pressure on the gross margin in any market? Or is this purely mix? That would be my second question.

So I mean, the price pressure, I mean, there is -- has been for quite some time, and we've reported on this, that in the DVT business, there has been a clear price pressure that is eroding our margins. And that is -- we don't think that is going to jump back. That's the market situation.

And then Christofer, I'm not sure if we have a number on the total transport cost.

No, we have to get back on that one.

So yes, I understand the DVT business, but is that still eroding? And my question was more like if you look at the U.S., for example, would you say that the underlying margin is under pressure? Or is it flattish?

Right now, we believe it's -- yes, depending on the mix, it is -- it plays a big role. But we don't see eroding margin more than the price pressure in certain segments, if I say like that. Christofer, can we add any flavor to that or...

No. Of course, it depends a little bit on what product categories we are talking about. We have a healthy development in certain categories and for some other, there are more pressure. And as I mentioned also that the rental business in the U.S. is under pressure from a profitability standpoint.

Okay. If I may squeeze in a last question here and it's related to Canada. If you maybe you could remind me about the how the comps will look like in the second half? I believe they become easier. Is that correct?

Yes. They were a little bit softer second half, still growth. I can come back with the exact numbers there, but they had a tremendous first half last year.

The next question comes from Filip Wetterqvist from SB1 Markets.

Just one follow-up on the gross margin and transportation costs. Given that oil prices have come down slightly in Q3 compared to Q2, should we then expect some positive effect quarter-over-quarter on transportation costs? Or how long does it take before these swings impact the P&L?

I mean, we usually don't forecast anything. And right now, I think it's hard to say that the oil price is coming down in the quarter. There are attacks on Iran going on as we speak. So of course, if the oil price is going down and it hits the pumps, our transport cost will also go down. So -- but it's -- we will not do any forecast on that at this moment.

Yes. But so you don't have like hedged any freight cost or so? So it affects you directly if the oil price jumps or goes down, so to say?

It depends. It depends on how we report. And of course, we try to resist all increases as much as we can, but it's not everything that we can resist. And of course, we -- when prices come down, then, of course, we want to be able to capitalize on that. So -- but Christofer, do you have any more details on this?

No. I mean, there is no major program in terms of hedging transportation costs. But I mean -- and this is also just to understand the whole value chain. It's not only the global big transportation from our factories to sales units. It's also a lot of our rental business and service businesses with trucks going back and forth between customers and our rental and services, they're also driving quite a lot of the fuel cost, for instance.

Yes. And then my second question, you mentioned that June was very strong. What drove that? Was it like one particularly strong order? Or was it just in general, a good momentum across the board?

It was a fantastic month. And I must say now I'm 6 months into the job here at Arjo, it's always -- I would say, there is a pattern of having strong last months in the quarter, so very nerve-racking. But -- so it was really a fantastic month, I must say. So that's the background. So it's also -- our order intake is also positive when we look forward.

The next question comes from Mattias Vadsten from SEB.

I have 3 questions. I'll take them one by one. First one, I think the wording in the report suggests improving conditions in the U.K. If you could comment if this is underlying or more of a timing effect? Maybe you can just describe the situation in the U.K. right now based on your experiences.

Yes. So I mean, U.K., we are really happy that we saw growth in the quarter because we've had a very troublesome time and not just Arjo, many companies have issues with the business in U.K. So for us, we're really happy. It's too early to say if this is a trend or not, but it's really positive signs. We believe that there is no particular change in U.K., I would say, politically or in the healthcare system. NHS is really struggling and needs to do a lot of transformation. So I would say that it's more our focus that helped us to come back to growth. But the market has not changed. That's how I would express it.

Would you say the recovery was across most categories of Arjo? Or was it some specific items or categories -- product categories that drove the improvement?

I don't have that level of detail in front of me right now for U.K. Christofer, do you have that?

It's primarily driven with medical beds, and that is one category in the U.K. that is increasing.

Okay. That's perfect. Next question. The organic OpEx increase you saw during Q2, I think, pretty good cost control. Would you say this is likely a good proxy also for the second half of the year? Or would you say we should keep any specific drivers in mind here for the second half? That's the next question.

We keep a very sharp eye on our costs. And that's also something we will come back to with further detail in the Capital Markets Day, because it is really clear that we need to drive value generation, both in terms of growth and additional business, but also then to be efficient in our costs and look at cost out. But that will come back to in September.

Okay. Perfect. Then the last one, higher costs related to the transportation management system implementation challenges that you mentioned in the presentation. Are those costs -- would they remain in that magnitude going forward? Or are they fully taken here?

Our belief is that the majority of the problems we have seen, we are still not entirely happy with how the system is working. So we're still working on it. But the bulk of the problem is behind us.

[Operator Instructions] The next question comes from Ludwig Germunder from Handelsbanken.

I just want to start with a quick follow-up on the gross margin. You mentioned the mix effect here. Should we see this as a mix effect in terms of the North America not growing, meaning that all the other markets are growing faster? Or is there any market outside of North America that is standing out in terms of how much is growing?

I mean, I think, we were really -- I mean, clear earlier in the presentation that North America faced some really strong comparable numbers, and we have seen really strong growth in, I would say, specifically, what we call Rest of the World. So even if Europe grew really strong, Rest of the World was really where we had a lot of strength in the growth.

Okay. And then just a quick one. I get that you want to save the details for the Capital Markets Day in terms of the new strategy. But just a quick question on the increased investments that you mentioned in the CEO letter. Is there anything we should expect to change dramatically in the near term here in terms of increased CapEx or anything like that?

No, I would say no. Christofer, would you like to comment?

No. I think we'll leave that for the Capital Market Day.

There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.

So big thanks, guys, for joining us on this call. And I hope you could hear me in a good way despite my voice is breaking up a little bit. So by that, we say thanks from me and Christofer. Bye-bye.

Thank you, and goodbye.

Welcome to the Arjo Q1 presentation for 2026. [Operator Instructions] Now I will hand the conference over to President and CEO, Andreas Elgaard; and CFO, Christofer Carlsson. Please go ahead.

Thanks a lot, and thanks everybody for dialing in and listening to Arjo's First Quarter of 2026. So we believe we have been able to pull together a stable first quarter and we're happy to share that with you. And also, we will talk a little bit on how we are progressing the work with shaping the future Arjo. So just to begin a little bit from my side. And to remind everybody of who we are and what we do because we are really very purpose-led in everything we do. This is something that is very strong in Arjo. We exist and are present at people's most vulnerable moments, and we help them to keep their integrity and dignity and really make sure that they have the best possible situation when they need it the most.

We, as you know, we work across several product segments and categories. So from patient handling and hygiene to medical beds, the mattresses that goes on top often focused on helping to relieve pressure injuries. We work with VTE prevention, diagnostics and disinfection. So these are our product categories. We are about 7,000 people and with an annual turnover of approximately SEK 11 billion. And we are truly a global company with sales to more than 100 countries.

So let me just start by fly over a summary of the first quarter of 2026. So we delivered solid growth in Q1, 3.8% is within our guidance. And it's really driven this year by a positive trend in U.S. in capital sales and strong sales in rest of the world. And also this year, as you saw in Q4, the flu season was not as strong as it usually is for us in U.S. and that has continued. So this is despite a somewhat weak flu season. So we are -- we think this is really a stable result that we deliver.

The gross margin is slightly below last year, and we are, of course, put under continued pressure when it comes to currency and the tariffs in U.S. We are working with trying to compensate this through efficiencies and also to manage our costs in a good way and then looking into price adjustments, especially considering the situation that is in West Asia. So still uncertain how this will affect us, but we are preparing for making sure that we manage those effects.

So just to also highlight, we had healthy cash flow in the quarter compared to last year, it's an improvement, and it follows the seasonal pattern. So this is also something to mention. The adjusted EBITDA came in at SEK 456 million. And maybe one thing to highlight is that we started in the quarter to work on our future strategy, and we've had very intense work and a lot of engagement across the company, and we are progressing in a really good way. And I will come back to this a little bit more towards the end.

So if I zoom in a little bit on sales in North America, we had both in Canada and U.S., really strong end to the quarter. So month of March was really strong. In total, I would say that U.S. continued to grow in the quarter, and Canada came in slightly below last year. But they really met some very strong comparable number. So all in all, a really strong performance is what we have seen, meeting very strong comparable numbers.

Of course, when you meet stronger numbers, the percentage growth is, of course, affected. And as I mentioned before, for U.S., the flu season was not as strong as it usually is but we compensated that through capital sales in Patient Handling.

If you look at the rest of our sales beyond North America, in Western Europe, we were struggling a little bit and it's mainly U.K. that is helping us with it -- not helping us, but that stands with the decline. And most other markets are performing in a good way, and especially France and Italy have had a really good performance in the quarter. Rest of the world beyond Europe then and North America was really, really strong, and the growth was really carried through several markets performing, but the shout out, especially to South Africa that delivered a large medical beds order in their region. And I just want to hang on that topic just because it gives some flavor to what we're doing.

So we have modernized 36 health care facilities in South Africa, this was a special product tailored for their needs. So 2,300 new, more than 2,300 new beds and mattresses. And this to us is not just -- it's a logistic exercise. It's an installation exercise. It needs to be done when it suits the hospital and it needs to be done with good margin and good cash conversion. And all of this came to life through really good strong teamwork from customer to back in supply chain.

So by that, I hand over to Christofer.

Thank you, Andreas. As Andreas stated, we had a stable start of the year. Overall, our gross margin came in at 42.6% compared to last year's 43.7%. Looking at the drivers. The growth in Patient Handling improved group margins, driven by strong development for our floor lift Maxi Move 5 and ceiling lift. Also, our Diagnostic business improved margins driven by higher volumes and a favorable sales mix. The Rental business gross margin slightly increased, driven by France, U.K. and Australia, while U.S. had a negative development due to weaker flu season and some capital conversion among customers.

However, the main part of the gap came from an unfavorable product and country mix impacting the gross margin by minus 1 percentage point, mainly related to a large medical bed order in South Africa. At the same time, U.S. tariffs had a negative impact of SEK 10 million year-over-year, representing a 0.4 percentage point decline in gross margin. In addition, FX had a minor negative impact on gross margin but in absolute numbers, the gross profit and negative FX effect of SEK 123 million.

Finally, our Service business margins were in line with last year when excluding U.S. tariffs. If we now move on to the EBIT slide. Next slide, please.

As you can see, adjusted EBIT in Q1 came in at SEK 190 million compared to SEK 208 million last year. However, when excluding U.S. tariffs and FX, the result is in line with last year. Looking at the costs, OpEx declined in the quarter due to FX effects, at the same time, the organic OpEx increase was 2.8%. In addition, we had a positive effect from revaluation of accounts receivable and accounts payable of SEK 3 million in the quarter reported under other income and expenses. Last year, the equivalent amount was minus SEK 34 million, resulting in a delta of plus SEK 37 million year-over-year. So overall, the total FX impact on adjusted EBIT amounts, therefore, to a minor amount of minus SEK 7 million in the quarter.

Moving to EBITDA. Adjusted EBITDA for the quarter was SEK 456 million compared to SEK 486 million last year. And adjusted EBITDA margin was in line with last year and came in at 16.9% versus 17.0% last year. The EBIT margin increased to 6.8% versus 5.9% last year. This improvement was supported by lower restructuring costs that came in at minus SEK 6 million in the quarter versus SEK 40 million last year.

Now we move over to working capital and cash flow. Next slide, please. Operating cash flow improved in the quarter amounting to SEK 237 million. This was SEK 53 million higher year-over-year, mainly due to improved cash flow from working capital. Following our normal season pattern, the change in working capital were minus SEK 142 million versus minus SEK 180 million. Working capital days increased to 83, up from 81 in Q1 '25. Cash conversion in the quarter improved to 52.7% compared to 41.3% last year. For reference, our cash flow from investing activities was minus SEK 135 million compared to minus SEK 215 million in Q1 '25. The decrease is mainly due to SEK 48 million lower investment in rental assets. If we now move over to the net debt and leverage. Next slide, please.

The decrease in net debt this quarter is driven by improved operating cash flow, lower investments and positive FX effects. Our financial net came in at minus SEK 36 million compared to minus SEK 43 million in Q1 '25. The improvement relates to some positive FX effects. Our cash position remains strong. Net debt to adjusted EBITDA stayed flat versus the year-end and came in at 2.2. Our equity ratio stood at 50.5%, up from 49.8% at year-end '25, mainly due to positive FX effects in equity.

With that, I will now hand it back to you, Andreas.

Thank you, Christofer. So I thought that it would be good maybe to just share a little bit on how the work of shaping the future of Arjo is going. And too early to reveal anything, but I can still try to give you a flavor on what we're doing. And we put the headline here, but it will be a story of untapped potential because being new now into Arjo soon, 4 months into the role, I see a lot of potential in the people, in our relationships with our suppliers and in the relationships with our customers. It's really -- it's not just an industry that has healthy growth expectations, but it also Arjo as an organization is really filled with potential. But this in order to be able to untap that, we really need to have clarity on where we're going and make sure that we build the capability to execute as well.

So one way of doing that is by inviting leaders from across the organization to make sure that we build a common ground, we create alignment, we create understanding on where we are and where we need to be in the future. And by doing that, you don't just get the strategy that comes from top, you get a strategy that is well anchored across the organization, and that really helps you when it's time for execution. So our ambition is to go from strategizing straight into execution, that is the ambition. And creating a clarity in where we're going is really important for everything from product development to supplier relationship development and to product development.

But it's also very important if we want to continue to grow also in new product segments or if we want to open new segments where care is moving. It will also be something that will guide us if we need to accelerate our growth or our strategic movement through acquisitions in the future.

But strategy and talking too much about the future, sometimes can dilute the focus on here and now. And I, for one, is super focused on that we need to deliver two things. We need to deliver clarity for the future, so we know how to execute and build the future Arjo, but we also need to deliver results short term.

So what you can expect from us is a strategy that will focus both on the here and now and how we lay the foundation for the future. so you will have both of it so to say. And our ambition is to get this strategy approved during summer and that we will be able to communicate that to you after the summer. That means the second half of 2026 so that's a little bit the status on where we are by in the work of creating the future Arjo.

And by that, we hand over to the Q&A section.

[Operator Instructions] The next question comes from Filip Wetterqvist from SB1 Markets.

I have a couple. First, can you quantify a little bit more on the contribution from the 36 facilities in South Africa to global sales organic growth? Like what would the underlying organic rate have been ex this order? And how does that inform into the exit run rate into Q2? The first one.

Okay. Thank you for your question. I don't think we have communicated the size of the single order. And I do think that when we have orders of materiality, we will do press release and specify those things. So we have not done that. So we are not giving guidance on that because that will reveal information to competitors that we don't want to reveal. But 2,300 -- more than 2,300 beds to 36 care facilities. It is a substantial order, but we don't judge it being material.

And my second question, you mentioned Middle East cost pressure from Energy & Transportation as a fresh headwind here in the report. Did you see any impact already here in Q1? Or do you anticipate it in Q2? And what is the current run rate assumption for '26?

Yes, thanks for the question. So we have seen a minor effect in Q1. But of course, we and everybody else in the world are very much aware of how much oil affects not just the energy sector, but every -- I would say every process industry and every food production farm in the world through the production of fertilizers. So of course, this will have effects. But we -- so we are preparing to try to mitigate that in the ways that we can. We don't give forecasts on what that might be because -- and I don't think Arjo is the best equipped to give forecast on the financial consequences of the crisis that is ongoing right now.

But given that, of course, we are preparing us for the scenarios that we see internally. So I hope that answers your question enough. And I mean if this conflict becomes short term, hopefully, there will still be effects. That's for sure. But if it becomes short term, I also think it will be something that the world will be able to manage. And this is something that affects Arjo in the same way as it affects everybody else.

[Operator Instructions] There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.

Okay. Thank you very much. So today is the Annual General Meeting. So we are super excited. There will be more than 120 shareholders that will come and listen to us, and we will give a similar message to them. But of course, we will focus on 2025. We'll give a short highlight of the first quarter this year, and we will also give some flavor on the strategy work. So we'll share a movie where different leaders from Arjo is talking about that. We are really excited about that. And by that, we say thank you for this call, and we remain at your disposal. Bye-bye.

Bye-bye.

Welcome to the Arjo Q4 Presentation for 2025. [Operator Instructions]

Now I will hand the conference over to President and CEO, Andreas Elgaard; and CFO, Christofer Carlsson. Please go ahead.

Thank you very much, everybody that have called into this Q4 year-end report 2025. My name is Andreas Elgaard, and with me today, I have Christofer Carlsson. And then I will start the meeting, and then I will hand over to Christofer, when we come into the financial figures, and we will do this together.

So before we begin, I mean, I am -- I've started now in Arjo since 3-plus weeks back. So I'm still new at work, and I'm super excited to lead this first call and also to share a little bit with you guys what I'm experiencing as a new person discovering Arjo. And I thought also that maybe it's a good idea that there could be some newcomers to this call who are interested in getting to know Arjo a little bit.

So just very, very briefly, we are experts in improving mobility in acute care and long-term care settings. And our products truly make a difference when people are at their most vulnerable. They provide safety, dignity and integrity to patients, and they also provide good working conditions for the caregivers. And of course, they deliver value to the clinics and to the institutions where they are in use.

Arjo is founded in the South of Sweden, in Eslöv by Arne Johansson. That's also where the name comes from. It has a long tradition, leading up to where we are today, an SEK 11 billion company with almost 7,000 coworkers and with active sales in 100-plus countries.

I think we can take the next slide. And you know when you're new, of course, you discover the company, and I discover Arjo through all the products and our business, but mainly I discover it through the lens of all of our people. And we have a very, I would say, a rich company in terms of diversity. We have many businesses. We are active across many countries, and we have many versions of Arjo out there. And it's really the people that represent these different versions. So a lot of diversity across Arjo.

We are not always using that to our benefit to drive maybe best practice or learn from successes or failures, but there is one thing that we have in common across Arjo and was a big reason for why I wanted to join as well, and that's we are all connected and really, I would say, passionate about the purpose, and it is the purpose of doing good, to be there when patients are at their most vulnerable situations and provide products that truly help the care situation. I already said it, but integrity, dignity are super important when you are in this position and also to provide that in a safe way. So it is something that is truly a superpower in Arjo and something we will build on for the future.

So let's talk about Q4. So first of all, I would say that we had stable demand throughout the quarter. And then towards the end of the quarter, we saw maybe not the development that we would have wished. We have been challenged by, of course, currency and tariffs, and we have also been challenged a little bit on price pressure in parts of our markets and in the mix where we are selling, where we have slightly higher growth in markets with lower margin versus markets with a little bit higher margin.

But overall, healthy organic growth, very strong cash flow in the quarter. So we almost hit our yearly cash conversion targets, but really, really strong in the quarter. And of course, we had hoped for more when it comes to the gross margin and maybe some of our cost control.

We can look a little bit into the full year. So when we zoom out and look at the full year, we see a growth figure that is within the range that we have promised. And we can see that we deliver this despite being challenged, I would say, mainly in U.K. where we all know that the market in the U.K. and the political situation, the struggles in the health care system in the U.K. is also something that hits Arjo and has been a red thread throughout the year. That is impacting our performance, I would say. And then the headwinds in terms of tariffs and currency together with price pressure in parts of our range, and then the mix is challenging our profitability and our margin.

All in all, our EBITDA is -- we would have -- we expect a little bit more from the quarter. But if you look at the full year, given the adjustments that have been throughout the year, some of the write-offs, this is the level that we landed on.

As I mentioned previously in the -- thanks to the strong performance in Q4, we managed to almost come up in line with our target of 80% cash conversion. We are just south of that. And then very important to highlight is that we propose to stick to the same level of dividend that we had last year. And we -- the Board is recommending to the AGM a dividend of SEK 0.95.

Just very briefly on North America and Global Sales, the 2 segments that we have. You can see that the quarter in North America was slowed down a little bit. But looking at the full year, it was quite strong growth. And looking then at Global Sales, we had a reverse trend where we had a stronger finish and a full year that was more, I would say, stable. And important to notice is that some of the more emerging markets in what we call Rest of the World have high growth, and that's also areas where we have a slightly different profitability, gross profit level. And that hits the overall gross profit of approximately 1%, and then tariffs, currency, et cetera, by approximately another 1% when you look at us from the outside and compare with last year.

And by that, I think it's time to hand over to Christofer.

Thank you, Andreas. Yes, my name is Christofer Carlsson. I'm the CFO of Arjo. As Andreas mentioned, profitability was a challenge in the quarter. Our gross margin came in at 42.1% compared to last year's 44.7%. We continue to have headwinds from currency and U.S. tariffs, representing around 1 percentage point of the drop. In addition, 1 percentage point can be explained by the unfavorable geo and product mix due to higher sales in Global Sales with higher volumes of medical beds. On top of this, the delayed flu season in U.S. pressured our rental volumes, and we also saw impact from continued price pressure in the DVT business in the U.S. in the quarter.

Meanwhile, we had a good momentum and margin development in the rental business in Continental Europe, especially in France, Germany and Italy in the quarter. However, the market condition in U.K. continued to be a challenge, and an 11 percentage point drop in U.K. sales consequently had a negative impact on the gross profit, and offsetting the positive effect from Continental Europe. All in all, a disappointing finish to the year from a gross margin perspective, where we did not have a seasonal uptick that we usually see due to a number of headwinds.

Next slide, please. Adjusted EBIT in Q4 came in at SEK 249 million versus SEK 375 million. The main driver is the drop in gross profit and an OpEx increase of SEK 23 million. We had a negative effect from revaluation of accounts receivable and accounts payable of SEK 3 million in the quarter, booked under other operating expenses. And this was plus SEK 19 million in the same quarter last year, resulting in a delta of SEK 22 million year-over-year. Total FX impact on adjusted EBIT amounted to SEK 73 million in the quarter. The EBIT margin decreased to 8.9% versus 12.5% last year.

On the OpEx side, the increase during the quarter is mainly driven by higher sales of capital sales in U.S., resulting in high GPO fees and sales commission. The organic OpEx increase was 1.9% in the quarter, which means that adjusted for the variable cost, we see a good traction from the cost efficiency initiatives implemented early in this year. Adjusted EBITDA for the quarter was SEK 526 million versus SEK 653 million in Q4 last year. The adjusted EBIT margin decreased with 3.2 percentage points versus last year.

Restructuring costs came in at SEK 68 million in the quarter, where SEK 35 million is a write-down of capitalized IT costs related to an ongoing IT harmonization project. This initiative is expected to lead to annual savings of at least SEK 30 million from 2028 and onwards. Another SEK 33 million related to ongoing improvements in our Global Sales structure to improve the cost and situation for the future.

Next slide, please. Operating cash flow continued to improve in the quarter amounting to SEK 600 million. This was SEK 121 million higher year-over-year, primarily due to inventory reduction and good receivable collection. The decrease in inventory is significant in the quarter, and it turns also to the full year number into a positive number. Our increased capital sales together with the supply chain inventory reduction program is now starting to show results.

Working capital days decreased to 76, down from 82 in Q3, and it's good to see a continued positive trend here. The working capital improvement is also the driver for the improved operating cash flow of SEK 600 million in the quarter. Consequently, cash conversion in the quarter was almost 120% compared to 82% last year. For the full year, we came in at 79%, which is in line with our target of 80%, and an increase versus 2024. For reference, cash flow from investing activities was SEK 172 million compared to SEK 191 million in Q4 '24. The decrease is mainly due to SEK 23 million lower investment in tangible assets. This quarter includes SEK 90 million in investment in the Dutch entity, SlingCare, which was announced in the Q3 report.

Please, next slide. The decrease in net debt in this quarter is mainly due to the improved operating cash flow. Our financial net came in at minus SEK 77 million, which include a noncash flow impact of SEK 35 million, negative revaluation of our holdings in Atlas, Infonomy and Veplas. Adjusted for this revaluation of our financial assets, the financial net was minus SEK 42 million and on par with last year.

Our cash position remains strong. Net debt to adjusted EBITDA stayed flat versus Q3 this year and came in at 2.2. Our equity ratio stood at 49.8%, up from 49.5% in Q3, mainly due to the improved cash flow.

With that, I will hand it back to you, Andreas.

Thanks, Christofer. So let's look ahead. How will we define our future direction. And I would like to say that, I mean, there is always ongoing positive work in preparing for the future. During '25, we launched the Maxi Move 5 that many customers think is really a game changer. We have just recently also launched the new hygiene solution, Symbliss that has received a lot of positive acclaim so far. And we are going to continue to rejuvenate our offer and how we go to market going forward.

But maybe just a few words on what it means to work on this. So we have a solid foundation to build on. We have a macro economics, I would say, or trends that are incredibly positive for us, which is people live longer, more people come out of poverty. The need for care is growing faster than the population is growing and the GDP is growing. So from a macro perspective, all things are positive.

At the same time, we know also that many political systems and many health care systems are set under pressure because it is difficult to keep up with the growing need of care. So there are changes in how care is being administered and given to patients. All of these things will create a more dynamic market in the future, and it's very important for Arjo to set our point of view on that. Part of our foundation is also that we have a very passionate team dedicated and committed to the purpose of doing good for our patients and caregivers.

So that said, there is also a lot of things that Arjo can do that is not about the macro, that is not about the patients, but that is about our own performance and there is significant opportunity across Arjo to share best practice and learn by that and implement going forward and use -- decide on the future in order to be able to take out maybe cost and drive efficiency.

So we can look at the next slide. So how do we realize our potential? Part of that is to know where we're going and setting a strategy, setting a direction. And we intend to present this back to the market in the second half of this year. The work has already started, and we will bring together leaders from all parts of Arjo. We are going to workshop with them and decide on where we want to go for the future, how we will get there, what to prioritize, what we want to do, which markets to have focus on, which parts of our product portfolio to put emphasis on. And if needed, acquire additional capability, additional market position, or maybe additional portfolio offering.

And those things are all easier when you have clarity in your strategic direction. And I think that for Arjo, the last time we set the strategy was back in end of 2019. So we are due to create that clarity for ourselves and for all our shareholders.

The only outlook that we give right now is, of course, the usual one, about 3% to 5%, and we are really looking forward to presenting our future direction and with that also, update the financial targets in the second half of 2026. So that's what you can expect from us during this year.

And by that, I think we are at the Q&A.

[Operator Instructions] The next question comes from Sten Gustafsson from ABG Sundal Collier.

A question on the quarter. You talked about a strong start, but then it slowed down. I was just wondering if you could clarify exactly what happened there, and also if that change in the market has continued into now, the beginning of 2026?

Thank you for your question. I would say, no, that's not how to interpret it. I would say that we -- it's more how we see the result developing across the quarter. So we don't see any trend shifts that we bring with us. We more see that we expected more from the quarter. And I would say that you all know that when you close the books, there are some decisions that you need to take. And as you have seen, we have had a couple of write-offs and write-downs during the quarter that, of course, impacts the situation. So I would say that there is no -- nothing to interpret when it comes to bring forward into 2026.

Would you like to add something to that, maybe?

No. I mean it's always an uncertainty about the flu season, that is impossible to predict exactly, of course, how that will develop. And that can go in both directions.

All right. And then specifically, the U.K., when do you expect that to improve? Or do you expect it to improve near term? Or is it too difficult to say today?

Yes, I would say that, I mean, there are two things here. I mean one is, of course, what is going on in U.K. within NHS and the U.K. health care system. That's one part of it. And of course, we can try to contribute with as much value as we can and to be a good partner to our customers and NHS in particular. So that's one part.

Then it's also about our own performance and what are we doing in this situation. And we have had a lot of actions throughout 2025 to improve our efficiency and productivity. So we have done several things throughout the year that we expect will have effect. If it's enough or not or what will happen in the bigger picture around NHS, that's another topic. And I think most of you guys that follow this sector, you know that U.K. is really troubled. The pressure on the health care system is very high, and there has been some fundamental challenges and still are going forward. At the same time, this is a top priority for all political parties. So we also believe that there is a lot of interest in solving this for the benefit of the people across U.K.

The next question comes from Mattias Vadsten from SEB.

First one is just a follow-up on the U.K. Did you say it was down 11% year-on-year in local currency in Q4?

Yes, that's correct. In the quarter, it's down 11%.

In local currency?

Yes. So organic, delta is 11% down.

Then you talked about the gross margin development. It's quite clear description. And you talked about the mix effect, both from a region perspective and product perspective. So I'm just asking, this mix effect that you saw in Q4, is that likely to sort of sustain here into the coming quarters? Or are you seeing anything to reverse that trend near term, so to speak?

Okay. Maybe if I try to start, and then Christofer can correct my mistakes or add on flavor. No, I think it's -- I don't think that you can draw any major conclusions like that, that is now a sustained level. I think it's, as always, it's a product mix question. It's a market mix question. Then also parts of our business is project driven and tender driven. And depending on how these project or programs land, you get different mixes that will vary naturally between different quarters. So that's -- I mean, that's the natural flow. So we don't have that kind of super stable underlying trend. So that's one thing to bring with you.

And then also, I mean, of course, we expect -- we said this earlier that we expected maybe a different pattern from the flu season in U.S. And when you look at statistics and data, if you just look at the high level, you can see that the flu season looks to be more severe when we dig down in the areas where we have strong representation, especially Western U.S., the hospitalization is not as high as last year. And also, in general, the flu seemed to not cause as much hospitalization as previous years. But it's very early and all data is not accessible. But we have seen that trend in our data.

So I don't know if you want to add some flavor in terms of this mix or this trend moving forward, Christofer?

No, as we said, medical beds has a strong development in this quarter, but that is also very much a business depending on tenders and bigger shipments, it's not a continuous business in that sense. So it could be a different mix in the next quarter for us.

Yes. When you equip a hospital, you do that once, then it takes a number of years before you get the chance to come with a big order again.

Okay. Then I had a question on the ERP systems that will be replaced by Global System. And you said you will find savings of, I think it was SEK 30 million 2028 onwards. I'm looking to understand what this will cost you. So yes, can you comment on the cost for this in 2026 and '27? And also how you aim to report it if it's sort of nonrecurring item or if it will be a drag on adjusted earnings metrics?

The vast majority of the cost for this implementation is actually capitalized because it's -- we are having a system where we actually own the product. So it's not a cloud solution.

And maybe to add some flavor. This has been ongoing for a couple of years in Arjo already. So we only have a few markets left to do this change. So it's not something that is new to us. It's something that have been ongoing for a couple of years. So we are -- yes, we had a couple of go-lives during '25 already. And yes.

We went live with Australia and New Zealand this year. And that's, of course, kind of the key point where we actually -- with the successful implementation in Australia and New Zealand, we decided to also go ahead for the rest of the countries. Otherwise, with a less positive outcome in Australia, we would probably have put on a brake and reverse this project somehow. So this was kind of a key decision point for taking this costs as well.

Okay. Is it possible to say how much it has costed you already or with this?

No. We have not shared that. But I think -- I mean, the write-down is for the old system. This is important, too because we discontinue it before end of life. So it's not connected to the new.

The next question comes from Kristofer Liljeberg from Carnegie.

I have three questions. I'll take them one by one. First, what do you say about the flu hospitalization? I agree it started slowly, but if looking at the public statistics, it seems it picked up a lot in the last weeks 3 weeks of the fourth quarter, but you didn't see that in your rental business then, correct?

Like we said before, we have seen that the flu season has been stronger or I mean, more severe than last year, but it is also distributed differently across U.S. So in the states where we are strong, we have not had the same pattern of hospitalizations. And also, we have seen a pattern that fewer patients are being hospitalized or they quickly get out of hospital versus before. So we don't see a one-to-one pattern as before.

Okay. That makes sense. Then I wanted you to clarify then what still seems like a pretty poor visibility for sales in North America, the message after the third quarter was that you have delayed deliveries that was expected to pick up in Q4. So did you see this happen, i.e., was the disappointing sales for you in Q4, was all of that flu related, i.e., that capital equipment sales were according to plan?

That majority is, of course, the flu season. But we also have seen a less improvement in Canada, which had a very strong comparison numbers. So they actually have a lower growth in the quarter versus U.S. And to some extent, I mean, it didn't pick up at the end. Normally, there are quite a lot of transactional sales, what you say that hospital calls the last week or last 2 weeks when they know that they have x dollar remaining of the budget and they just need to purchase something before the year end. And that volume did not repeat from last year's all-time record actually in Canada.

Do you know why that was the case?

I think there are general budget constraints in the Canadian market. We do see some of the states being more and more restricted in the budgets. But that's the main reason, I think.

Okay. And then my final question, you talked about the mix effect that could, of course, vary a lot between quarters. But otherwise, is there anything you could do here short term to turn this negative margin trend?

Yes. I mean from my point of view, being new now into the company, if I answer first, and then Christofer can add on. I would say that Arjo has a lot of potential to drive efficiency. I would say, both in cost and capital out. That's clear. So we are going to work on that to do our own homework, so to say. Then also, I think that we need to look into parts of our business where market conditions have maybe changed a little bit or market dynamics have changed a little bit. We also need to update our commercial models and make sure that we share best practice in a more rapid way so we can be quicker to react.

So there are always things that you can do on your own. Sometimes there is a lag in that, of course, because you don't know what is changing before it's happened and then it takes some time to adjust. But there are always things that we can do on our own, and we intend to do that.

And in the strategy work, there will be parts of things that we want to do for the future that is long term to build capability, build -- expand our offering or our market position, but we also need to fund that journey. And to large parts, we're going to do that through also, I would say, efficiency initiatives across the group.

I mean, if you start the strategy -- yes. But if you start the strategy work now, then you're going to present this in the second half of the year. It sounds that 2026 will be yet another lost year when it comes to margins for Arjo, or am I missing something here?

Yes. I mean there are always parts that require direction and maybe long term and that you come together as an organization, and that will take some time. But there is plenty of also quick wins that you can activate around procurement, IT and your own efficiency. So there is not -- I am -- I've worked a lot with change in the past, and I'm a firm believer in that you have to transform yourself, you have to change, but you also have to perform while you do that.

And you need to fund the journey of when you need to invest in capability or in products or in M&A. Somehow, you need to fund that journey and you do that by driving efficiency in both capital and cost out of the company. So I think that you cannot say that you need to wait another year, and I think we're going to have -- we will be very, very focused on these also short-term actions.

The next question comes from Ludwig Germunder from Handelsbanken.

Ludwig Germunder from Handelsbanken. I have two, please. The first one is a follow-up on the last one around the strategy work that you will initiate during the spring. I understand that you will do work in the meantime as well. But what should we expect regarding margins for the beginning of 2026?

I mean, we usually don't give any forecasts, and we will continue not to do that. I mean the only outlook we give is what we believe how sales will develop on top line, the 3% to 5% interval. So beyond that, we will not share any outlook until we maybe have a reason to do that.

So that's -- and as I said before, we expect to come back and explain our view on the future and also at that point, also potentially revise our financial targets. So we need to work this through before we communicate it. But we are going to be super focused on trying to drive efficiency before we present our future direction.

Okay. Got it. And the second one is also kind of a follow-up on the discussion around the flu season. So I got you that the hospitalization levels are lower in the parts of the U.S. that you are most active. Could you say something about the sequential development or demand you're seeing from the flu season? Is it at the same levels so far in Q1 as you saw in Q4? Or has it moved in any direction from the Q4 levels?

We're not reporting Q1 today. So we stay on Q4. So I think that what we said is what we have seen that the flu this year seem to end up in fewer hospitalizations. That's what we've seen in Q4.

The next question comes from Erik Cassel from Danske Bank.

First question on North America. If my modeling is decent, it looks like the rental business now is in organic decline over there. Could you potentially comment anything if that only has to do with the ICU rental part or if you're also seeing that for, say, the more long-term contracts as well?

No, it's more on a short-term perspective and the flu season, I would say.

All right. And then on DVT, that business has been under pressure for several years now, I think, I mean, Cardinal started cutting back in '21. So how much additional pressure can you face there now? And can you talk a bit about the sort of current levels of sales and profits to some extent that you're seeing and sort of we should expect that pressure to continue now throughout '26 as well, if there were any, say, pricing cuts now in Q4 that will sort of feed over into at least H1 of '26.

I mean -- so we will not talk about '26. But what we can say is that, I mean, there's a fierce competition on, I would say, the consumables in DVT part of our business. And I think that -- and that Cardinal and others have -- I would say, they have pushed the prices down. We also believe that we've come -- we are either at the bottom or close to the bottom of how far down you can go. And then you can say also that triggers the need for us to counter by looking at our business model, if it is set up for this level or if we need to do any adjustments. But we don't expect the decline to continue in the same pace that it has in the last couple of years. Is that correct, Christofer?

Yes. So the vast majority of our business is on the new price level.

Okay. Good. And then in the U.K., are you seeing continued rental pressures for more and more contracts being lost? Or is this still an effect of those initial -- or was it 5 or 7 contracts that you lost earlier in '25 that, in a way, should be out of comps soon?

And also in U.K., if I could do a follow-up to the follow-up. How much of the negative 11% organic growth that you saw in U.K. was from the rental part of the business versus the product side?

So when it comes to the rental business in general in the U.K., I mean, we have not lost any new contracts in the quarter. So it's more an effect of the early ones that we communicated in 2025. And then I have to come back to you on the rental margins for the U.K.

And how do we usually communicate them. So I think that if we don't communicate them, we will probably not come back. But if we do that, then we'll come back to you, just to be clear.

Okay. I'll wait to see them. And then just a final question. There's been a hiring freeze now outside of sales for quite some time, I believe. So I'm just wondering, in terms of those pruning additional costs, et cetera, how much are you actually able to slim the organization from this point? It seems like this sort of pruning has been done for years now. So are you nearing a point where you can't really cut any more fast?

I don't think I would express myself in that way about the organization, but we can see that we have, as any organization, we have room to improve, and we are going to focus on that. And part of that will, of course, be released to improve our profitability, and part of that might be part of also funding the journey of investing and creating a strong future Arjo.

But I mean, Christofer can add some flavor, but I have now 3.5 weeks in the company. I've spent some time during my onboarding as well. But the only thing I can share is that I see opportunity across Arjo. It's a really mature business, but we also have some inefficiencies. We don't always use our best practice. We don't always share our failures or successes across the company. And there's a lot of commercial excellence in that. And if we can release that, that has a really positive effect. I have first-hand experience of doing that in other contexts.

And then also, we need to take a good look in the mirror and put question marks to ourselves when it comes to our administrative costs because we are high, and we need to be able to do things more efficiently by leveraging our IT systems and by also delivering the administration that is necessary and not something beyond that. So there are clear opportunities for us to address, then it is too early to say when the effect will come and so on. But we will focus on this together as an organization.

The next question comes from Ludvig Lundgren from Nordea.

Yes, I only have one. So you've highlighted quite a strong order intake in the last few quarters, in particular, in patient handling products in the U.S. So can you say anything about how this has developed here in Q4 and whether you're still way above 1 in book-to-bill?

Yes. The order intake has come in a little bit weaker in the quarter. But from an order book perspective, we are almost at the same level as last year. But also please remind yourself that 80% of our transaction is in and out in the same period. So it's an indicator, but it's not the actual true of the sales in the coming quarters.

[Operator Instructions] There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.

So by that, we close this call, the year-end report for 2025. I thank you for listening. I also thank you for bearing with me as being new. And I am really looking forward to coming back and presenting Q1 to you guys, and in the second half, presenting our future strategy. By that, we say thank you.

Yes. Thank you all.

Welcome to the Arjo Q3 Presentation for 2025. [Operator Instructions].

Now I will hand the conference over to Interim President and CEO, Niclas Sjosward; and CFO, Christofer Carlsson. Please go ahead.

Hello, and good morning to everyone, and welcome to Arjo's Quarter 3 2025 Earnings Call. With me here today, I have Christofer Carlsson, our CFO. We will give you some details on the quarter 3 report that we released an hour ago. The agenda looks as usual and includes a summary of activities and results from quarter 3, the balance sheet items and the outlook for 2025 before we open up for questions. We intend to keep this call to an hour and finish no later than 9:00. Next slide, please.

We closed the third quarter in a solid way and could see how demand continued in the quarter with organic net sales growth well in line with our targeted range and as expected, sequentially higher than first half of the year. We had continued strong momentum for our service business and now also supported by stronger growth in our capital sales, while our rental business was slower this quarter. Our North America business is showing stable growth also this quarter, while global sales is now delivering from a strong order book and healthy customer demand and is showing the strongest growth quarter for several years. This all together makes us close the quarter with plus 3.8% organic net sales growth for the group.

We continue to have materially higher order book than the same period last year, and we are looking forward to a strong finish of the year in quarter 4. Our gross margin came in at 41.1% compared to last year, 42.0%. We continue to get support from lower material costs and price adjustments, while these improvements are offset by currency and U.S. tariff headwinds. In quarter 3, we also had unfavorable geo mix impact due to the relatively higher sales volume in global sales and the Rest of the World markets as well as higher medical bed sales, which also impacts the gross margin. Excluding currency and U.S. tariffs, the gross margin would have been on par with last year despite the geo and product mix effects.

For the rest of 2025, we will continue to drive efficiency focus throughout the value chain based on the plans that we have put in place, for example, within supply chain. Our focus on price adjustments will obviously also remain to secure compensation for salary inflation and the U.S. tariffs. The organization is doing a good job on the OpEx side, and we have been able to slow down the cost increase versus quarter 2. Our efforts to increase cost efficiency are showing effect, bringing down the organic OpEx growth versus last year to almost flat. Adjusted EBITDA for the quarter increased to SEK 436 million versus SEK 434 million in quarter 3 last year, a result coming from higher sales and improved OpEx to sales ratio.

The adjusted EBITDA margin improved with 0.6 percentage points versus last year. Overall, our underlying profitability continues to improve and excluding the effects of currencies and tariffs, the adjusted operating profit increased over 20%. Our operational cash flow came in at SEK 446 million, leading to a cash conversion of 105% for the quarter. Both cash flow and cash conversion improved versus last year same period. So in summary, we are delivering a stable third quarter of 2025. Our underlying business develops in a solid way, and we can see how our business model with capital, rental and service is helping us to deliver stability in growth and underlying earnings trend.

In addition to this, we see several important markets showing good signs of increased activity level and healthy demand for our products and solutions. We see increased sales growth and an overall positive momentum in the business, making we believe in a strong finish to 2025 in quarter 4. Next slide, please.

Our North America business continued to show stable growth also this quarter. In our largest market, U.S., we have this quarter a stable but sequentially versus last quarter, a more modest growth due to timing of customer deliveries following on a very strong quarter 2. We have a positive momentum in the U.S. business and overall high customer activity level and expect a stronger quarter 4. Canada also had a stable quarter, but sequentially versus last quarter, a more modest growth after some exceptionally good quarters. And also here, we expect sales growth to increase again in quarter 4.

Then over to Western Europe and the Rest of the World that make up the global sales region. In quarter 3, this region grew net sales organically with plus 5.7%, coming from a strong order book and high customer activity level. In Western Europe, the organic net sales growth was plus 2.1% despite the continued weak market development in U.K. Several other European countries saw good demand and strong organic net sales growth in the quarter, such as France, Germany, Italy and Spain. Our service business in Western Europe continued to develop well in the quarter as well. Our business in the rest of the world markets had an organic net sales growth of 15.9% in the quarter, with most markets performing well. Many important markets grew double digit in the quarter, where India stands out with an impressive 40% growth for the second sequential quarter, which now makes India one of the top 10 markets for Arjo. In addition, Australia, Africa, Singapore all performed well, and we enter into the last quarter of the year with overall good momentum in the Rest of the World markets. Next slide, please.

Our gross margin came in at 41.1% compared to last year, 42.0%. We continue to get support from lower material costs and price adjustment, while these improvements are offset by currency and U.S. tariff headwinds. In quarter 3, we also had negative geo and product mix impact due to relatively higher sales volumes in global sales Rest of the World region with high volume of medical beds. Excluding currency and tariffs, the gross margin would have been on par with last year despite the geo and product mix headwinds. We are, as before, working hard to mitigate the headwinds with continued long-term efficiency gains throughout the value chain, including solid focus on continued supply chain efficiencies. We will also continue to work on price adjustments as one part of the puzzle to mitigate the U.S. tariffs and other external cost increases. Next slide, please.

Adjusted EBIT in quarter 3 was in line with last year despite headwinds in gross profit due to increased sales and improved OpEx to sales ratio. The EBIT margin improved slightly. Excluding the effects of currencies and tariffs, the adjusted EBIT increased over 20%. On the OpEx side, we have been able to slow down the cost increase versus quarter 2, and our actions to mitigate cost increases are showing effect, which makes organic OpEx development now almost flat versus last year and gives us an improved OpEx to sales ratio. I'm happy to see the response from the organization with much sharper focus on cost improvements over the last quarters, and we have now set the tone going forward to manage OpEx in a good way.

We had a negative effect from revaluation of AP and AR of minus SEK 4 million in the quarter booked under other expenses. This was minus SEK 13 million in the same quarter last year. Adjusted EBITDA for the quarter was SEK 436 million versus SEK 434 million in quarter 3 last year, a result coming from higher sales and an improved OpEx to sales ratio. The adjusted EBITDA margin improved with 0.6 percentage points versus last year. Restructuring costs came in at minus SEK 13 million in the quarter related to ongoing improvements in global sales structure to improve the cost situation for the future. Next slide, please.

And here, I hand over to our CFO, Christofer Carlsson.

Thank you, Niclas. Operating cash flow improved significantly with SEK 241 million compared to the second quarter '25 and was SEK 9 million higher year-over-year, primarily due to good receivable collection, which includes the vast majority of the temporary VAT receivable from Q2. The increase in inventory is modest and in line with last year. Our supply chain inventory is declining and instead, the goods are now residing in sales units for deliveries in Q4. As a result of the decline in working capital, working capital days decreased to 82, down from 83 in the second quarter '25. Combined with lower interest costs, this led to an operating cash flow of SEK 446 million versus SEK 437 million in Q3 '24. Consequently, cash conversion was 105% compared to 102% last year.

The last quarter is typically our strongest cash flow quarter. For the full year, we expect to be in line with last year, just below our full year target of 80% for the cash conversion. For reference, cash flow from investing activities was SEK 148 million compared to SEK 190 million last year. The decrease is mainly due to SEK 38 million lower business acquisition. This year, we made a small SEK 5 million acquisition in Australia of Arden service business, while last year, we had the acquisition of GerroMed in Germany. Next slide, please.

The decrease in net debt this quarter is mainly due to the improved operating cash flow. Our financial net improved to minus SEK 41 million, an SEK 18 million improvement from Q3 2024, and it's driven by lower interest rates. Our cash position remains strong. Net debt to adjusted EBITDA improved versus Q2 this year and came in at 2.2, which is on par with Q3 '24. Our equity ratio stood at 49.5%, up from 48.7% in Q2 '25, mainly due to the profit made in the quarter.

With that, I hand it back to Niclas.

Thank you, Christofer. Let's also update you on some other business highlights during the quarter. We received the U.S. FDA approval for our fetal monitors in our diagnostics business. Furthermore, we completed 2 small supplementary acquisitions, which will strengthen our local business in Netherlands and Australia, both of which will start contributing positively already during quarter 4 this year. During the quarter, we also received the latest ESG rating from MSCI, and Arjo was upgraded to the highest possible scoring, AAA. And finally, earlier in the quarter, it was announced that Andréas Elgaard has been appointed to President and CEO starting in January. Next slide, please.

Our outlook for 2025 is that the organic net sales growth will be well within the group's target interval of 3% to 5%.

With that, I would like to summarize today's telco. We have continued healthy demand for our products and solutions with net sales growth comfortably in line with target and sequentially higher growth than the first half of the year as expected. Global sales is the growth engine in the quarter and is showing the highest sales growth in several years. Several markets are standing out positively, and we see good opportunities to continue to build on this momentum moving forward. We see clearly that our cost efficiency measures are paying off, and our focus in this area will continue moving forward. The underlying profitability continues to improve as seen in this quarter with adjusted EBIT, excluding the effects of currency and tariffs, increasing over 20%.

Our cash flow and cash conversion improved in the quarter, and our work to improve working capital is paying off. Overall, a positive quarter for us despite the current macro environment and related uncertainty, and we remain confident that we will be able to deliver a strong finish to the year in quarter 4.

So with that, we can open up for questions. Moderator, please go ahead.

[Operator Instructions]

The next question comes from Ludwig Germunder from Handelsbanken.

It's Ludwig Germunder from Handelsbanken. My first one would be on the tariff impact for the quarter. Is it possible for you to quantify a general impact that you saw from tariffs over the quarter? Is it close to the 15% rate? Or is it below the 15% rate still? And then my second question is around the development in the U.K., which we know is a weak market for you right now. Do you see any changes in the development there? Any color would be helpful.

Yes. Thank you, Ludwig. Regarding the tariffs, the way we explain the impact there is in million SEK as we did last quarter. So we are slightly above SEK 10 million negative impact in the quarter -- in quarter 3. So it's similar impact as last quarter. On the U.K. market, we are working very hard, of course, to find a way forward in the difficult market situation. And of course, we have plans in place. But with uncertainties with NSA's restructuring in the market, we think probably that we can improve from where we are, but it will continue to be a difficult market the rest of the year. I think we need to see it like that.

Okay. And then one more, if I may. You have had a positive development in your net debt to EBITDA. Do you have any plans? Or could we expect any bigger M&A going forward or anything to -- anything in different?

Yes, we have a good development there. And of course, if there are any M&As that we see are helping our business forward, we are open for that. But short term, nothing in the pipeline that we can talk about.

The next question comes from Sten Gustafsson from ABG Sundal Collier.

So a question on the U.S. market. It sounds like you're quite upbeat there and you -- I think you mentioned that you have a strong order intake and expect strong deliveries in Q4. I assume you don't want to comment on the sort of growth rate in orders you have received there. But if that could be sort of the first one. But maybe you can comment on what type of products where you see growth for Q4 in the U.S., please?

Yes. But what I can say is that we have a strong order book in U.S., materially stronger than same period last year. That's why we are upbeat. We had some, you can say, timing issues in quarter 3. We grew very, very strongly in quarter 2, more modest in quarter 3. But the order book is still there and should be delivered. And the piece of the order book that has been growing quickest is the patient handling part in U.S.

And rental, how is that in the U.S.?

It's comparable to last year. So it's no big growth in quarter 3. We are a little bit waiting and anticipating the flu season, which has not kicked in yet, but it will depend on the magnitude of the flu season, how quarter 4 plays out.

Okay. My second question would be on India. If you could comment on how much lower profitability you have there in sort of in general compared to group average on the gross margin?

Yes, exactly. So I think, generally speaking, it's not so bad in India, if we put it that way. But medical beds was one of the drivers of the sales in India this quarter. So you get a combination of geo mix and product mix in quarter 3, you can say. So that's what we're trying to say there. Otherwise, generally, we are selling our products as premium products in India. And with that comes lower than Western Europe and North America, obviously. But for being an emerging market, not bad at all.

[Operator Instructions]

There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.

Okay. Thank you very much for joining and listening in to our quarter 3 update, and we close the meeting by that.