Instalco's Cleanest Quarter Just Cost It Its Cash Conversion
A 7.2% margin in the seasonally worst quarter, a Swedish industrial book doing the heavy lifting, and a working-capital bill that pushed leverage above target
INSTAL.ST · Earnings Call · 2026-10-23
The quarter that broke the seasonal rule
Instalco's third quarter is normally the one nobody looks forward to. This year it arrived with a 7.2% EBITA margin against 6.0% a year earlier and 7.1% in Q2 — net sales up 16.4% to SEK 3.5 billion, organic growth of 8.2%, EBITA up 41% to SEK 254 million. CFO Christina Kassberg flagged the anomaly herself: “the third quarter usually dips compared with the second due to seasonality effects. This year it did not. 7.2% compared with 7.1% in Q2.” — Christina Kassberg, CFO · 2026-10-23 For a group whose long-term target is an 8% margin and whose last-twelve-month figure is now 6.9% (from 6.6% last quarter, and 5.4% a year ago), that is real distance covered. The order backlog did much of the framing: SEK 11.7 billion, up 30.1% and up 14.2% organically, equal to roughly 80% of trailing sales versus 77% at the half-year. Part of that uplift is arithmetic — Fabri's full order book sits in the number while only one month of its sales does — and the company was explicit that the ratio will fade.Sweden's industrial book, Norway's waiting game
The improvement is not evenly distributed. Sweden carried it: organic growth above 15%, sales of SEK 2.4 billion, EBITA jumping to SEK 179 million from SEK 105 million and the margin from 5.0% to 7.4%. Management described a genuinely wide phenomenon — a broad improvement across a majority of Swedish subsidiaries — and was careful to separate it from a market recovery. Asked directly whether the market was the driver, Per Sjöstrand was blunt: “I don't think you can see any changes in the market, any significant changes in the market. It's more like that we have improved across many subsidiaries.” — Per Sjöstrand, CEO · 2026-10-23 That is the honest reading, and also the riskier one: internal gains are harder to repeat than cyclical tailwinds. The composition of the book has shifted toward industrial customers, whose work is driven by specialist expertise rather than by residential newbuild. It also shifts the group, in the CFO's words, into a mix effect — more profitable, but more capital-hungry. Norway remains the hole. Sales rose only through currency, to SEK 553 million, while EBITA fell to SEK 20 million and the margin from 5.4% to 3.5%. The culprit is a familiar one in these pages: a delayed project backlog stuck in customer permitting and decision processes, now pushed to early 2027 — the second slip. “My best guess is absolutely early Q1 2027.” — Per Sjöstrand, CEO · 2026-10-23 Meanwhile the overhead runs. Q3 also carried project losses and credit losses. The backlog itself (SEK 2.6 billion, up 35%) is not the problem; utilization is. Finland and Germany were reported together for the first time, and the new fourth market cuts both ways. Segment sales rose to SEK 536 million from SEK 435 million, but organic growth was negative 13.3% in Finland against a tough comparison, with a couple of subsidiaries underperforming between larger jobs. The segment margin still came in at 10.4%, the group's best.The cash bill for a better mix
Here is the tension in this report. Cash conversion dropped to 74% from 90%, against a 100% target. Operating cash flow was negative SEK 66 million versus positive SEK 133 million a year ago, with SEK 281 million tied up in working capital. Kassberg tied it directly to the mix: “A growing share of our business is with industrial customers, including our scaffolding companies. These are some of our most profitable operations, but they tie up more working capital.” — Christina Kassberg, CFO · 2026-10-23 Trade receivables and contract assets both rose; invoicing is post-facto on larger industrial and consulting work. Management insists overdues improved sequentially and counterparties are established, and that Q4 is seasonally the strongest cash quarter — with an honest caveat that part of the shift is structural. The same logic hits the balance sheet. Fabri was debt-funded, and minority share buyouts added to financing outflows, taking reported leverage to 3.3x, or 2.9x pro forma for a full year of Fabri, against a 2.5x target. Fabri's 2025 margin of 12.7% explains the appetite. So does the pivot in tone: “the capital allocation will be more cautious, with clear focus on cash conversion and delivering.” — Christina Kassberg, CFO · 2026-10-23 For a serial acquirer with 175-plus companies, a deliberate pause on the M&A machine is the quiet headline of this call.The theme, and what the wider market is saying
Sjöstrand's prepared theme was unusually philosophical for an installation group — a tutorial on why identically-positioned contractors earn different margins. Supply and demand, tender discipline, planning, first-time-right execution, change-order management:The illustrative case: a residential electrical subsidiary completing a standard three-room apartment installation in roughly half the sector-typical 70 to 75 hours, on fixed price, which is why every saved hour falls to the margin. The point is real — but note the timing. A management team delivering a lecture on execution discipline while its cash conversion misses by 26 points is asking to be judged on delivery, not doctrine. He also conceded the program has quietly been rebranded: “we are probably closer to Instalco 2.5 by now.” — Per Sjöstrand, CEO · 2026-10-23 Two cross-currents are worth flagging. First, Instalco repeatedly cites data centre build-out as the demand engine for both Norway and Finland — yet the market's AI data centers basket is a 90-day decliner, with roughly 48 of 54 constituent names down. Instalco is not a compute play, so the read-through is indirect: it wants the construction phase while the equity market marks down the operators. If that capex pauses, Instalco's Norwegian relief valve pauses with it. Second, the public investments in defence, healthcare and critical infrastructure it leans on in Sweden are corroborated loudly across this week's Nordic reporters — Saab, MilDef and Hexcel all spoke to defence demand, and data centres recur across Trelleborg, Nibe-adjacent, NCAB and Nexans calls. That is consensus, not edge; the edge is whether Instalco converts it faster than peers who are also waiting for 2027. Three things to watch, then: whether Sweden's improvement survives a quarter without a strong August-September; whether Norway finally starts in Q1 as promised; and whether cash conversion recovers toward 90% before the next acquisition is signed. The margin story is excellent. The cash story is the one that decides the multiple.When there are plenty of projects available, installation companies can be more selective. Competition tends to be less intense, and there is generally more room to price projects at attractive margins. When demand weakens, the opposite happens.