Elekta's Turnaround Gains Traction: Tariff Refunds and Regional P&Ls Drive Margin Upside
Q1 FY27 shows gross margin above 40%, EBIT margin up, and a path back to growth despite China drag.
EKTA-B.ST · Earnings Call · 2026-08-27
Margin Inflection Ahead of Tariff Refunds
Elekta’s first quarter of fiscal 2026-27 delivered a clear step-change in profitability, validating the three-phase turnaround plan announced at the Capital Markets Day. The adjusted gross margin jumped to 42.6% from 37% a year ago (reported component 8764402945978785753), and adjusted EBIT margin rose to 11.2% despite a 190-basis-point headwind from more prudent R&D accounting. The company was explicit that a portion of the gross margin uplift was one-off: tariff refunds under the U.S. International Emergency Economic Powers Act contributed SEK 53 million, or about 150 basis points, with a further USD 3 million expected in Q2. CFO Klara Eiritz noted, “the refund is for Q1 and Q2” — Klara Eiritz, CFO · 2026-08-27 and that the company continues to pay tariffs going forward, implying the benefit fades after this quarter. The margin improvement is not purely tariff-driven. CEO Jakob Just-Bomholt highlighted that the new operating model has reduced cost levels more than expected: “The savings we indicated a few quarters ago has materialized above expectation, more than SEK 500 million.” — Jakob Just-Bomholt, CEO · 2026-08-27 He also emphasized that the underlying EBIT improvement is significant, with the reported figure suppressed by the R&D accounting change. The company is now pushing P&L responsibility down to five regions, which is beginning to show in higher service margins and better price discipline. As Eiritz explained, "we are operating at a lower cost level than we have in the past" (component 2366079288123479157), a structural shift that should persist.China: A Temporary Drag, a Structural Opportunity
The top-line story was softer, with net sales down 2% in constant currency, driven by a 9% decline in Solutions and weak APJ, China, and TIMEA. China was the largest drag, a consequence of poor order intake a year ago that has depleted the backlog. However, Just-Bomholt was clear that this is a timing issue: “We have had 3 consecutive quarters of good order intake” — Jakob Just-Bomholt, CEO · 2026-08-27 and the market is recovering from the anticorruption campaign. Centralized procurement is expanding, but the company has experience winning in that channel, with a >50% win rate last year under similar conditions. The CEO also pointed to a government push to accelerate CapEx in healthcare, which could provide tailwinds. He expects "solid revenue growth" in Q2 as installations catch up with the order book. This echoes a recurring theme in prior calls. In the Q3 FY26 call, Just-Bomholt said regarding Evo: “We are now converting that order backlog from Versa HD into Evo” — Jakob Just-Bomholt, CEO · 2026-03-05 — a conversion that is now showing up in the U.S. order momentum. The company’s market share in China is in the mid-30s, down slightly but still leadership. The challenge is the inventory buildup that pressured cash flow — free cash flow was negative SEK 266 million, but that was a seasonal pattern, and the company expects to address it going forward.A Leaner Operating Model
Beyond margins, the structural changes are significant. Headcount has been reduced from 4,500 to below 4,000, and a new COO, Rodolfo Velasco, has been appointed to drive operational excellence. The new regional P&L structure is designed to improve accountability and speed. As Just-Bomholt put it:This is a company that is finally executing on its turnaround. The order intake growth of 3% and book-to-bill of 1.11 indicate that the top line should reaccelerate. Management reiterated the full-year guidance of 2-4% constant-currency sales growth and 12.5-13.5% adjusted EBIT margin, with a forecast of positive growth in Q2. The market will be watching whether the margin gains can hold without tariff refunds and whether China’s recovery materializes as promised. The combination of cost discipline, product-cycle tailwinds from Elekta Evo, and a simpler organizational structure makes this a genuinely interesting inflection point.We are starting to see a nice inflow ... on the price uptick. We have implemented new pricing frameworks, and we are starting to see that gradually flow into the gross margin.