Qleanair Holding AB reported its financial results for the first quarter of 2025, highlighting steady gross margins despite a decline in revenue. The company also outlined its strategic initiatives aimed at driving future growth. Following the announcement, Qleanair’s stock rose by 4.86%, reflecting investor optimism about the company’s operational adjustments and market positioning. According to InvestingPro data, the company maintains impressive gross profit margins of 65.1%, though the stock has experienced a significant decline of over 50% in the past year. Current analysis suggests the stock is trading below its Fair Value, presenting a potential opportunity for value investors.
Key Takeaways
- Q1 2025 revenue declined by 2.5% year-over-year.
- The company maintained stable gross margins.
- No dividend was proposed for 2024 due to market uncertainties.
- Stock price increased by 4.86% following the earnings release.
Company Performance
Qleanair Holding AB experienced a 2.5% drop in revenue for the first quarter of 2025, reaching SEK 116 million. The decline was more pronounced when adjusted for currency fluctuations, amounting to a 3.2% decrease. Despite this, the company’s gross margin remained stable, indicating effective cost management amid challenging market conditions. The company has been focusing on product development and operational efficiencies to bolster its market position.
Financial Highlights
- Revenue: SEK 116 million, down 2.5% year-over-year.
- EBIT: SEK 8.4 million, compared to SEK 11.6 million in the previous year.
- Recurring revenues: SEK 70 million, contributing significantly to the company’s financial stability.
Outlook & Guidance
Qleanair is targeting organic growth of 7-13% annually and aims to achieve an EBIT margin of 15-20% in the medium term. The company is focusing on cost control, sales efficiency, and customer engagement to drive future performance. Additionally, legal proceedings are expected to be clarified by the end of the second quarter, which could impact the company’s strategic direction.
Executive Commentary
CEO Sebastian Lindstrom emphasized the company’s commitment to innovation and market expansion. "Taking our company to new levels is a journey. We have a very structured and systematic approach in this that we stick to," Lindstrom stated. He also highlighted the company’s dedication to improving health and product quality, noting, "We dedicate our work to improve the health of people, the quality of products, and the performance of processes."
Risks and Challenges
- Economic Environment: Weak economic conditions in the EMEA region could continue to impact sales.
- Legal Proceedings: Ongoing legal issues, such as the Curexa case, might incur additional costs.
- Market Saturation: The company needs to navigate competitive pressures, particularly in mature markets like Japan.
Q&A
During the earnings call, analysts inquired about the recovery in the Japanese market, particularly in cabin solutions. The management also addressed the strategy for new product development and provided insights into managing legal costs associated with the Curexa case. Inventory and margin improvement strategies were also discussed, reflecting the company’s proactive approach to operational challenges.
Full transcript - Qleanair Holding AB (QAIR) Q1 2025:
Conference Moderator: Welcome to the Clean Air q one presentation for 2025. For the first part of the conference call, the participants will be in listen only mode. During the questions and answer session, participants are able to I will hand the conference over to CEO, Sebastian Lindstrom and CFO, Fredrik Sandelin. Please go ahead.
Sebastian Lindstrom, CEO, Clean Air: Thank you. Welcome to the Clean Air investor presentation for q one twenty twenty five. My name is Sebastian Lindstrom. I’m the CEO of Clean Air, and joining me in today’s call is Friedrich Sandelin, new CFO at Clean Air from April 1. Please, Frederic, a few words to introduce yourself.
Fredrik Sandelin, CFO, Clean Air: Thank you, Sebastian. My background, if I take the short version, is that I have for twenty plus years been either the CFO or the CEO of predominantly listed companies. For example, I’ve been finance director for Altos. I’ve been CFO for Scaniq Hotels, IBS, and in the Euro. And now I’m glad to be here and look forward to meeting you all.
Sebastian Lindstrom, CEO, Clean Air: So I’m I’m very excited to have on board. I expect that given Friedrich’s background, that we’ll be able to accelerate our journey and faster improve our company. Friedrich and I will go through the presentation and then open up for q and a towards the end. So let’s jump straight into the numbers. So given the market conditions, especially in EMEA, we delivered a stable report.
Revenue was slightly weaker than last year, but stable gross margins. We delivered a hundred and 16,000,000 in sales, which was 2.5% behind last year. Currency adjusted 3.2 behind last year. So there was a slight tailwind in currency for the first time in many quarters. The main reason for the decline was lower sales in EMEA, which affected the top line with negative 7,000,000 in the quarter, but was partly compensated for by stronger performance in APAC and Americas.
Our recurring revenues remained stable at SEK 70,000,000 amounting to SEK $294,000,000 on a rolling twelve months basis by the March. The decline in the rolling twelve months is mainly attributable to the cancellation of school orders that we reported on in q two last year. Our gross margin was stable, thanks to the base of renewals to finance companies in Japan coming back to pre ’20 ’20 ’4 levels and the fact that we are now getting the benefit of improved COGS and installation cost in The US. EBIT marked a strong improvement over last year, but still off our long term targets. We achieved an EBIT of 8,400,000.0 versus 11.6 last year.
The shortfall versus last year was due to lower revenues and higher costs related to legal expenses on the clean room side. Cash flow was better than last year. We’ve been able to reduce our inventory levels, our outstanding accounts receivables in a in a good manner. These two measures have been added as focus areas for the regions for 2025, but more on cash flow on the periodic section. Summing up the quarter, we still have work to do.
We’ll keep our focus on our three objectives towards the long term profitable growth. Given the uncertainty out there in the market, the board has proposed no dividend for 2024. Before moving on to the regional performance, I’d like to high again highlight that our base for renewals have come back in Japan to more normal levels. These renewals to finance companies follow a typically a three year cyclical pattern as I’ve described in earlier calls. So to understand how this affects the present, you must go back three years and look at the sales to finance company at that time.
So if we look at the low point in q one twenty twenty one of twenty million, it moved up to 27 in q one of twenty twenty two. See the circle to the left, which and and this allow us to renew more contracts in q one twenty twenty five versus q four twenty twenty four as you see on the circle to the right. We do not get the full benefit as the Japanese yen has lost value towards the Swedish krona of about 13% in this three year period. But if you look at this slide and in our report, you can easily understand how this works. So now back to looking at the performance from a regional perspective.
Now let’s start off with EMEA. EMEA represents about 45% of our revenues. We have an installed base of over 6,400 units to over 1,800 customers. Our business model is to sell our products on rental contracts, rental contracts sold to finance company, and normal product sales. We cover the market both with the direct sales approach complemented with market partners for certain markets.
We operate a regional supply chain, so we do not have to consider the trade barriers between Europe, China, and The US. For Europe, the year started very weak. For q one, EMEA accounted for 42% of total sales. We see longer sales cycle is in Germany. We have, however, seen a pickup in the order intake towards the end of the quarter versus last year.
We as well, despite the tougher market condition, have been able to improve our gross margin in the EMEA region in the quarter. Given the market conditions, we’re increasing our sales and marketing efforts in the region currently. And in Europe, I want to highlight our focus in France, a market that we aim to build up as the third pillar for us in EMEA, next to Germany and The Nordics. On the left side of the slide, I asked added a customer case from the French team with SNADEC. SNADEC is a leading subcontractor of the free French naval defense.
They dismantle and they depollute old ships. We help them in ensuring health and safety in this process. We do not only filtrate particles, but we also provide the solution for environmental surveillance of the site with sensors, etcetera, to ensure worker safety. Surveillance of environment is an area where we intend to increase our presence in the coming years. We call it MAAS, measurement as a service.
Second up is APAC, and Japan in particular. Japan represents 45% of the group turnover. We have an installed base of over three and a half thousand units with over 1,500 customers. In Japan, we mainly offer our product as a service, and we also very often sell those contracts to finance companies. We operate a direct sales force with a limited amount of market partner as as a complement.
We get our products from within the region and are not dependent on deliveries from the other regions, US or Europe. In Japan, we’ve been very successful in the search engine optimization and search engine marketing, an expertise that we’re now bringing into EMEA in a project led led by the Japanese team. Q one marked a comeback of base of renewals to finance companies. We passed the low point in q four twenty twenty four. Apart from the improved base of renewals, we’re also currently experiencing a stronger than normal demand on the cabin side.
Air cleaners continue according to plan in Japan, But due to very strong rollouts, in particular in the first quarter of twenty twenty four, the comps leads to actually a drop in air cleaners in the quarter. On the right hand side of the slide, you see a case representing our extension of strategy in Japan to target small and medium business owners with secondary smoke prevention solutions. In the case of Relax twenty four, they’re an Internet cafe with limited floor space and where we are able to support them with a solution of our one person cabin, the SF 1,000 x, measuring one meter in-depth and a width of 85 centimeters. A unique solution we developed together with our Japanese team in ’24 that is built to target this particular market. Over to The Americas.
Americas account for about 10% of our revenues. The focus in The US is fully on clean rooms, and it is different from the other region when it comes to business model. It is mainly a product sale. We do have some rental contracts, but given the nature of a clean room, the clients are less likely to buy it as a service other than for pure financing reasons. Our clean space product is very solid product.
We have frame agreements and multiple installations at a number of top IDNs. In total, we’ve delivered more than a hundred clean rooms in The US. We have a recurring component as we signed service agreements on the room. This recurring annual revenue is over SEK 4,000,000 per year. We showed greatly improved margins in The US in Q1, thanks to cost initiatives on COGS launched at the end of twenty twenty three and improvements in our installation cost and efficiency.
We’re working on expanding our reach through partnerships with other companies calling in on the same customer segment. A great example of our business in The US is the business we have with UNC Health. We started working with the University of North Carolina back in 2015 and have since delivered 18 rooms to their hospitals totaling over 3,800 square feet. When it come so we move on to our focus. When when it comes to our focus, we’re moving on as planned.
We stick to our three prioritized objectives, cost control, sales efficiency, and customer focus. Starting off with cost control, we did during q one some additional reductions at the central organization. We have launched value engineering projects within both cabin solution and air cleaners, including product line simplifications, especially within cabin solutions. And we finally take advantage of the cost down projects launched in The US End Of Twenty Twenty Three. We would have seen this benefit already two quarters ago as less profitable older projects would have flushed out from our contract mix.
But given the absence of the large room to Turexa, we had too low revenues to prove it in q three and q four and instead see the effects now in q one. Moving over to sales efficiency. We’ve simplified the setup for sales in Europe, removed the layer of management, and now have four regions in EMEA reporting directly to me. We have consolidated France, Belgium, and The Netherlands into one region, a region we’re aiming to build as the third pillar in Europe on the side of Germany and Nordics. The German market has been challenging, and we are strengthening the technical team to further support the sales team.
Overall, there’s a strong focus, of course, on the six new products launched back in 2024 as well as the recently introduced FS 60. And I’m happy to report that these new products already in the first quarter of shipping make up 6% of our air cleaner volume in q one. When it comes to customer focus, we completed our third run of annual workshops with our teams to across Europe and APAC. Given our strategic decision to leave out the clean room site for these two regions, we’ve been able to go deeper in our exploration for industrial solutions for these markets. We just announced the launch of the new FS 60.
This lightweight ceiling or wall mounted air cleaner is specifically designed to enhance indoor air quality in industrial and logistic facilities where the limit floor space is limited. The FS 60 closes an important gap in our air cleaner lineup. In the background, we continue further explorations to continue to address more critical application areas within the industry and hope to have new solutions to unveil in the fall of twenty five. We to sum it up, we stick to our plan of developing our company both operationally and strategically as we keep doing the right things following a very structured approach, we’re convinced the financial results would follow. With that, I hand over to Friedrich in the financial section.
Fredrik Sandelin, CFO, Clean Air: Thank you, Sebastian. We have operations spread over the world in three major areas, EMEA, APAC, and The US. We have a large number of customers, and the customer base is well spread geographically. EMEA accounts for 42% of total sales, and there we have all our three product categories. Focus today is on Cabin Solutions and Air Cleaners.
APEX stands for 44% of total sales, and their focus is also on Cabin Solutions and Air Cleaners. U. S. Accounts for the remaining 14% of total sales, and there we are focused on clean rooms. And as you can see, APAC has this quarter become our largest region.
APAC and EMEA together are our largest regions and together they stand for 86% of total sales. All in all, we have a good balance between the three regions. EMEA is facing a weaker economic environment with longer sales cycles. Revenues are down with 12% compared to first quarter in 2024. Despite that, we are satisfied that gross margin is improving.
Regarding the financial model, we have a combination of all our three possible options, rental contracts, sales to finance companies and product sales. APAC, on the other hand, is facing a stable demand and a continued high margin. Sales are up slightly. And in this quarter, we’ve had a positive currency effect from the Japanese yen compared to a negative effect during last year. The yen is also balancing the effects of the US dollar and the euro for us.
The financial model is sales of rental contracts to finance companies and renewals to finance companies are now back to normal levels. We also see a continued strong demand for catalyst solutions. The U. S. Is showing a strong quarter with sales up 24%, improved gross margin and a good order backlog.
The financial model is project delivery with service and maintenance contracts. We have continued to work on partnerships, and several good dialogues are underway. If we start with having a look at sales to the left, we see that this quarter is slightly down compared to same quarter last year, but better than our last two quarters. Recurring revenue decreased in the first quarter of twenty five compared to the same quarter in ’24. The decrease is mainly attributable to the withdrawal of units at German schools that started in the second quarter last year.
Profitability wise, we see that gross profit and gross margin are stable. We are back at the same level for gross margin as in the first quarter of twenty twenty four and higher than our last three quarters. Adjusted EBIT is almost back to previous levels after two bad quarters during 2024. The black bars are the recurring revenues, relatively stable over time with the reduction mainly due to the German schools that we have mentioned before. The blue bars show the book value of the units that generate these revenues.
This shows that we have an asset light business model with low CapEx. SEK 45,000,000 in book value generates around SEK 300,000,000 in yearly revenues. On this slide, we see the split between, on the left hand side, recurring revenue, sales to finance companies and product sales. And to the right, the corresponding split for units that we hold on our balance sheet, contracts sold to finance companies, and sold units. The installed base is stable over time, and the revenue split is primarily affected by the decline for recurring revenue that we already talked about.
The financial position is stable. Equity ratio and net debt in relation to equity is in line with first quarter last year. Cash flow is among other things impacted, but we’ve had reduced inventory and accounts receivable, both compared to last quarter and to first quarter in 2024. We have changed bank during this quarter. We continue to amortize on our loans quarter by quarter also with our new bank.
We have received a waiver for the first quarter from the bank. And in light of the economic uncertainty in the prevailing market, the Board has decided to propose no dividend to the AGM. And with that, I hand it back over to you, Sebastian.
Sebastian Lindstrom, CEO, Clean Air: So thank you, Fredrik. And to close off the session in front of the Q and A, what we do at Clean Air is important. We dedicate our work to improve the health of people, the quality of products, and the performance of processes. And we do so throughout the three product categories, cabin solutions, air cleaners, and clean rooms. Looking at the amount of clean air that is delivered through our solutions, we estimate that we cleaned 8,000,000,000 cubic meters of indoor air by end of q one.
And it does matter as air pollution is a key challenge for human health. People die prematurely from exposure to polluted air, and we spend an important part of our lives in indoor environments. And indoor air can often be more polluted than outdoor air. And let me reiterate, a number of measures have been initiated that we expect to yield results. We stick to our plan with a very systematic approach to both operational and strategic development.
We have our three clear top priorities, customer focus, sales efficiency, and cost control. We continue our focused product development that just brought seven new products to the market. With that, I’d like to open up for questions.
Conference Moderator: The next question comes from Anders Roslin from Pareto Securities. Please go ahead.
Anders Roslin, Analyst, Pareto Securities: Yes, morning. And I just want to say I missed part of your first presentation, so So I may ask some questions you’ve already commented about. But nevertheless, I would like to start off with the Cabin Solutions recovery here. How should we look upon this Japanese recovery? Is it a new level that you reach now that you expect to maintain?
Or do you continue to see a sequential improvement here?
Sebastian Lindstrom, CEO, Clean Air: So we don’t make forward looking statements, right, Anders? But I think I’ve given some hints by looking back at the numbers, right, from how they went from 20,000,000 to 27,000,000 in q, q one, in q four twenty twenty one to 27 in in q one twenty twenty two. And and by looking there, you can sort of see what kind of renewal base that we will be facing in the coming quarters. Right? So I I we Okay.
It was really a low point, and we were open with that in 2024. And and the low point of the low year was really in q four.
Anders Roslin, Analyst, Pareto Securities: And how is, the cabin solution development in in Europe proceeding?
Sebastian Lindstrom, CEO, Clean Air: Yeah. So I think there in Europe, we are you know, when you look at cabins, and I touched a little bit that on the strategy in in q in the q four report. In cabins, we have a pretty broad market approach. And I think what what the focus in Europe is to to really take advantage of the where we see market opportunities in one market. We try to develop that in further markets in Europe.
And and it’s a stable business in Europe. But but, of course
Anders Roslin, Analyst, Pareto Securities: Excellent. Germany,
Sebastian Lindstrom, CEO, Clean Air: it’s it’s affected by the the economic situation, so to say.
Anders Roslin, Analyst, Pareto Securities: So you also see a little bit of of tougher demand in Germany due to the overall softer situation?
Sebastian Lindstrom, CEO, Clean Air: Yes.
Anders Roslin, Analyst, Pareto Securities: Okay. You have been a little bit more aggressive on the French market. Is something that is you see any effects of that?
Sebastian Lindstrom, CEO, Clean Air: Yeah. So I I think it we really started that push in last year where we added on two more salespeople, and we have now, in the beginning of this year, added another salesperson. And we finished the year in growth in both cabins and air cleaners in the French market. The q one was not really in growth, but that’s more due to that we had a very strong rollout in q one twenty twenty four. And, I mean, we are sort of backing the French expansion with also with our central resources.
So we’re putting a lot of focus in that market, and we really see a lot of similarities from this industry point of view with Germany, which already is our largest market in Europe. So we’re very positive on that.
Anders Roslin, Analyst, Pareto Securities: And then, going over to air cleaners. You have launched a new product program last year, and you say that 6% of sales comprises these new products. Are there any sort of COVID related sales left now in the Air Cleaner? Or could we have this 21,000,000,000 as a starting point for for a more better growth scenario sequentially now?
Sebastian Lindstrom, CEO, Clean Air: So so there are a a few school orders still out there, right, on on recurring revenue side. I think it’s limited to a hundred units. Those units will expire their contracts towards the end of this year. But but when you look at our development in air cleaners, we’re really going for more and more critical applications and specifically towards the industry. And we believe that that will really help us in this tougher economic environment.
And I think that’s why we see even in in a tough economic environment in EMEA that we’re really reaching out with these new products. They were all targeted at very, you know, oil mist, the industrial f s 30, you know, really addressing critical areas of the industry.
Anders Roslin, Analyst, Pareto Securities: And you’ve had a very strong development in Japan for for air cleanings from from low level, of course, but how do you but there you had a little bit of weakness in the first quarter.
Sebastian Lindstrom, CEO, Clean Air: No. I I think they’re Relative. Oh, sorry.
Anders Roslin, Analyst, Pareto Securities: Yeah. No. Just how is the
Sebastian Lindstrom, CEO, Clean Air: So so we are
Anders Roslin, Analyst, Pareto Securities: The Japanese development proceeding.
Sebastian Lindstrom, CEO, Clean Air: Yeah. So it’s absolutely according to plan. Now in last year in q one, we had a very strong rollout of six year contracts on the air cleaner side within the food sector, and that’s what sort of masking the, you know, the according to plan development in Japan. We are moving gradually more and more people from the Cabin Solutions sales side over to the air cleaner side. So I’m very happy with the performance of the Japanese team when it comes to air cleaners.
Anders Roslin, Analyst, Pareto Securities: So this was more of a tough year on year development than than sort of any change in the marketplace.
Sebastian Lindstrom, CEO, Clean Air: Absolutely.
Anders Roslin, Analyst, Pareto Securities: When you say you’re moving salespeople from cabin solutions to to air cleaners, I mean, that that is definitely positive. But does it also mean that you have a relatively stable business in in the cabin solutions area? Or or
Sebastian Lindstrom, CEO, Clean Air: Absolutely stable. And you weren’t on the call in the beginning when I alluded to we actually see a pickup in the in the new sales on cabins in the beginning of this year. So it’s Okay. Both are actually quite positive. But, of course, in the in the long term, we want to grow even more on the on the air cleaner side.
Anders Roslin, Analyst, Pareto Securities: Excellent. And the product you announced another new product in the Air Cleaner segment here. Is that the new programs you lost last year and now this new product this year, are there other products in in in the pipeline? Or are you sort of we’re Ready now?
Sebastian Lindstrom, CEO, Clean Air: No. I I think we’re following a very structured approach. We have these annual workshops with our teams in the beginning of every year where our product managers run workshops and understand where we see gaps in our lineup. So you can expect us to continue this journey, of developing products. And the the FS 60 really closes a gap for us on the on the wall or wall mounted or ceiling mounted side.
We used to have only the f s 90 towards that segment. Now we have sort of two levels of products into that, and we think that’s gonna be a really good add on when we look at also the current situation in the market. They’re very it fits quite well into the current market situation.
Anders Roslin, Analyst, Pareto Securities: Okay. And now to the final clean rooms. You had, at least according to my estimate, a very strong sales outcome of EUR 16,000,000 here. And given that you had order book of EUR 35,000,000 at the end of last year, how will the year proceed? Have you given any indication of I mean, you got one large order, 14,000,000 now in the first quarter, but that was related to sales at the end of this year and the beginning of how is it what is your projection?
Could you maintain the €60,000,000 Or is it the onetime effect here? Or how should we look upon the
Sebastian Lindstrom, CEO, Clean Air: paid about $1,500,000 in the first quarter, and we have already signed the contracted backlog to be delivered in the current year of $2,700,000. So so for the
Anders Roslin, Analyst, Pareto Securities: $2,700,000. Okay.
Sebastian Lindstrom, CEO, Clean Air: So for the first three quarters, we have a very good level of of activity. And we have within our our field of vision, a number of projects that we strongly believe that we’ll be able to close, both close within the year and start to deliver to have a quarter four in the same range.
Anders Roslin, Analyst, Pareto Securities: Excellent.
Sebastian Lindstrom, CEO, Clean Air: But I think the important thing for us in The US is that we see gross margins coming back. Right? We would have wanted to see that second half of last year, but because of the absence of the Cueresco project of, you know, close to 30,000,000, we really didn’t have the revenue to prove it then. So I think that’s a big step change for us.
Anders Roslin, Analyst, Pareto Securities: When you talk about the gross margins now, is it overall, or is it specifically the clean room business?
Sebastian Lindstrom, CEO, Clean Air: No. As I alluded also to EMEA, we’ve increased our margins in EMEA, and I think that’s a very strong sign of of clean air through, you know, a market which a lot of companies find difficult, especially in Europe, that we, you know, protect our margins through this.
Anders Roslin, Analyst, Pareto Securities: You mentioned in the report a couple of, call it, extraordinary events, legal costs for the Corexa deal, assume, and then also some additional cost for inventories. How should we see upon those? They continuing? Or are they more of a onetime character?
Sebastian Lindstrom, CEO, Clean Air: No. So I think when you look at the inventory sort of ongoing depreciation, that’s a new policy that we have taken on, which I think is a very balanced policy that we should maintain going forward. Right? The the legal aspects of of, specifically, the Curexa case, well, that will be during that this, litigation, so to say.
Anders Roslin, Analyst, Pareto Securities: Yeah. But that will continue until you have got some, final
Sebastian Lindstrom, CEO, Clean Air: Yes.
Anders Roslin, Analyst, Pareto Securities: I guess, lawyers in The US cost some money. So this will that part will will remain. But have you any idea how long these legal proceedings will continue?
Sebastian Lindstrom, CEO, Clean Air: So we think that we will know more really by end of Q2. Of course, in when you file a complaint like we’ve done, you have first a couple of months where, you know, you look at the the venue and and and things like that. So but my expectation is that we’ll have a be able to report back that on that rather towards, the end of q two.
Anders Roslin, Analyst, Pareto Securities: And the inventory issue, I guess, it’s, is it related to the school, related, air cleaners? Or
Sebastian Lindstrom, CEO, Clean Air: No. No. It’s it’s it’s a general, policy that we’ve taken on. I think the we we did a bit of a deep dive on the balance sheet in in q three, and and we made some write downs for in the Q3 report. And from that, we have sort of derived a new policy on having a more, what would you call, conservative or balanced, I would say, approach to inventory.
Anders Roslin, Analyst, Pareto Securities: If we look overall for last year, you had some cost issues, and those are related to change of service supplier in Germany, mainly in the Cabin Solutions. And you also had some cost issues in The U. S. Cleanroom business. How are you proceeding in those two areas?
Sebastian Lindstrom, CEO, Clean Air: So I think if I start on the second one, on the cleanroom side in The U. S, we made an adjustment to the team at, I think, end of q two last year, and the the cost issues that we had were really dating back and addressed in end of twenty twenty three. But as these contracts you win these contracts, you sometimes you don’t deliver the contracts until a year later. Therefore, it took us some time to flush out the old contracts that were less profitable and and with material that was more costly to flush that out of our mix of contracts. And now we’re through that.
So we have none of those. So therefore, the the cost adjustment was done in ’23. It just took quite a while to to see it. We saw it on the installation side much quicker, but on the COGS side, it it took a while to flush out the old projects. On the on the service side, that’s was specifically to Germany, and we we had about 3,000,000 of additional cost in ’24 relating to our issues on service in Germany.
In the end of of twenty twenty four, we made that switch to a new partner. And, really, the the transition phase has been during q one. It’s not been without trouble, but but I think we have a very focused team in Germany working on it. Then I don’t expect, you know, the same situation as last year.
Anders Roslin, Analyst, Pareto Securities: Okay. So it looks like most of the margin related issues could be improved here going forward. So finally, I just had a question on the cash flow, the SEK 2,000,000 here. Is that part of that you are building up working capital ahead of deliveries here in the clean room business? Or is it something we should what could we expect in the cash flow?
Sebastian Lindstrom, CEO, Clean Air: So overall, I the cash flow varies quite a lot between quarters and and for the reasons that you mentioned. But I think the most important for us is that we are, during 2025, with our new board, we have really put a focus on on the working capital. So in my follow-up with each region, we go through the accounts receivables. We’re adding on the inventories that we have across the service depots in Europe. So I expect us to be able to continue to deliver improved cash
Fredrik Sandelin, CFO, Clean Air: flow.
Anders Roslin, Analyst, Pareto Securities: Excellent. No. I think, those were the questions from my side.
Sebastian Lindstrom, CEO, Clean Air: Okay.
Anders Roslin, Analyst, Pareto Securities: And very positive to see that you are having a sequential improvement here in place.
Sebastian Lindstrom, CEO, Clean Air: Thanks, Sanjay. Do most of the call.
Conference Moderator: As a reminder, if you wish to ask a question, please dial 5 on your telephone keypad.
Sebastian Lindstrom, CEO, Clean Air: Okay. There seems to be no further questions on the the system. So if there are no further questions, I’d like to reiterate, our communicated financial targets remain delivering 7% to 13% organic growth annually and building up our EBIT margin into the range of 15% to 20% in the medium term. Taking our company to new levels is a journey. We have very structured and systematic approach in this that we stick to, and we’re convinced that this is the right way and that it will yield financial results and allow us to meet our communicated financial objectives in the mid to long term.
Thank you for your participation and interest in Clean Air, and I wish you a great continuation of the day. Thank you. Thank you.
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