Arjo's Q2: Growth at a Cost, but a Strategic Reset Looms
Solid organic growth masked by margin pressure from unfavorable mix and transportation costs; tariff relief and a new CEO's efficiency drive offer a path to value creation.
ARJO-B.ST · Earnings Call · 2026-07-14
A Quarter of Contradictions
Arjo's Q2 2026 results paint a picture of a company in transition: solid 4.7% organic growth, but margin pressure that management attributes to an unfavorable sales mix and rising costs. The headline numbers show adjusted EBIT of SEK 211 million, up from SEK 208 million a year ago, but the underlying profitability was "broadly in line with last year" after adjusting for one-offs and FX, according to CFO Christofer Carlsson. The growth story is led by Global sales (rest of world and Western Europe), which grew an impressive 7%, while North America – traditionally the higher-margin region – lagged. This geographical mix is at the heart of the margin drag. “When it comes to margin pressure, yes, there is an unfavorable mix due to both from a product and country mix” — Christofer Carlsson, Chief Financial Officer · 2026-07-14, Christofer explained. Medical beds, often project-based and lower-margin, drove growth in Europe and the U.K., while the North American rental and consumables business, typically more profitable, saw slower growth. This mix effect is not new – management flagged it in Q4 and Q1 – but its persistence is worrying.Tariff Relief and Transportation Costs: The New Variables
Two forces are shaping the quarter's profitability: tariff reimbursements and transportation costs. Arjo received an initial “reimbursement of SEK 22 million related to U.S. tariffs” — Christofer Carlsson, Chief Financial Officer · 2026-07-14, with more expected in Q3. This helped offset the tariff burden, which was SEK 12 million lower than the year-ago quarter on an ex-reimbursement basis. However, transportation costs remain a headwind, amplified by a new transportation management system that caused SEK 10 million in one-time expenses. The company also faces ongoing price pressure, particularly in the DVT business, which CEO Andréas Elgaard acknowledged has been "eroding margins" for years. The link between oil prices and transportation costs is a recurring theme. “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.” — Andréas Elgaard, President and CEO · 2026-07-14 This echoes comments from the Q1 call, where management noted the minor effects of Middle East turmoil. The oil price sensitivity is a real operational risk for a company with a fleet of trucks serving rental and service depots.Strategic Reset: From Cost-Cutting to Value Creation
The most significant development is the strategic overhaul under new CEO Andréas Elgaard, who took the helm six months ago. The company has appointed five regional leaders to a new management structure, aimed at strengthening the "voice of the customer" and driving a common agenda. This is a precursor to the Capital Markets Day on September 24th, where Arjo will lay out its strategy for "value generation."This is a far cry from the defensive tone of prior quarters. In January, Elgaard spoke of "opportunity across Arjo" and inefficiencies; now he is talking about driving both growth and cost out. The emphasis on value generation suggests a shift from managing decline to actively reshaping the portfolio. The improved cash generation – operating cash flow up 22% to SEK 257 million – provides ammunition for this strategic push.We have a strategy approved by the Board. We have activated approximately 90 leaders around this. We are now then calculating the effects and the timing of the strategy. I'm really looking forward to share all of that with you in September.