Arjo AB Call Balances Cash Gains, Margin Pains

Arjo AB Class B (($SE:ARJO.B)) has held its Q4 earnings call. Read on for the main highlights of the call.

Operating cash flow fireworks and balance sheet gains could not fully offset Arjo’s heightened profitability worries on the latest call, as executives projected confidence in liquidity and efficiency work while conceding that gross margin compression, U.K. weakness, and U.S. rental/DVT softness are keeping sentiment firmly mixed.

Strong Operating Cash Flow and Improved Cash Conversion

Fourth-quarter operating cash flow rose to SEK 600 million, a SEK 121 million jump aided by leaner inventories and tighter receivable collection, propelling quarterly cash conversion to nearly 120% versus 82% last year and lifting the full-year ratio to 79%, just shy of the company’s 80% target.

Working Capital and Balance Sheet Improvement

Working capital days fell to 76 from 82 in the prior quarter, net debt scaled down, leverage stayed at 2.2 times adjusted EBITDA, and the equity ratio edged up to 49.8%, underscoring steady deleveraging even amid margin pressure.

Maintained Dividend and Solid Top-Line Positioning

The board kept its SEK 0.95 dividend proposal while reminding investors that full-year growth landed within guidance, bolstered by robust North American performance and a strong finish from Global Sales.

Product Launches and Commercial Momentum

New offerings such as Maxi Move 5 and the Symbliss hygiene solution rolled into 2025 gained favorable customer reviews, supporting Arjo’s effort to re-energize its portfolio and accelerate go-to-market upgrades.

Inventory and Supply Chain Progress

A sizable fourth-quarter inventory drawdown confirmed traction in the supply chain program, while SEK 90 million of investment into SlingCare highlighted targeted M&A meant to deepen critical nursing accessories exposure.

Cost Efficiency Traction

Organic OpEx crept up only 1.9% after adjusting for variable items, reflecting early benefits from efficiency drives, and management reiterated that restructuring plus IT harmonization should yield at least SEK 30 million in annual savings from 2028.

Gross Margin Deterioration

Gross margin slipped to 42.1% from 44.7%, with roughly one percentage point each blamed on currency/tariffs and adverse product and geographic mix as higher volumes of lower-margin medical beds diluted profitability.

Profitability Decline

Adjusted EBIT dropped to SEK 249 million from SEK 375 million and adjusted EBITDA to SEK 526 million from SEK 653 million, knocking the EBIT margin down to 8.9% as operating leverage failed to counter product mix drag.

Market and Demand Headwinds in the U.K.

U.K. revenue sank 11% organically due to persistent NHS budget strain, which the company said is materially eroding gross profit and demand visibility.

Rental and DVT Business Pressures in North America

Delayed flu hospitalizations dampened U.S. rental utilization while intense price competition in DVT consumables further pressured North American margins, leading management to flag short-term softness in that region.

One-Off and Restructuring Charges

Restructuring expenses totaled SEK 68 million, including a SEK 35 million IT write-down, and currency swings shaved SEK 73 million off adjusted EBIT, compounding earnings volatility.

Visibility and Near-Term Margin Uncertainty

Executives declined to offer 2026 margin guidance given tender-driven variability and ongoing product mix shifts, warning that margin strain may persist until strategic and efficiency measures are fully embedded.

Guidance

Arjo reaffirmed its 3–5% top-line growth outlook for 2026 and promised a refreshed strategy with potential new financial targets in the second half of that year, while underscoring strong cash conversion, stable leverage at 2.2x, and the steady SEK 0.95 dividend as anchors during the transition.

Management closed the call emphasizing that cash discipline and product renewal offer meaningful support, yet investors must brace for continued margin volatility and region-specific demand challenges until the upcoming strategic reset provides clearer profit traction.