Kreate Q2'25 flash comment: A somewhat subdued start to the year calls for strong performance in the second half

Translation: Original published in Finnish on 07/15/2025 at 09:29 am EEST

Kreate released its Q2 report this morning. Revenue growth exceeded our expectations in Q2, but the earnings level decreased slightly year-on-year and was also a bit below our forecast. On the positive side, the company's order backlog grew faster than expected, supporting revenue growth going forward. Kreate's first half of the year was subdued overall, and we estimate that growth will focus towards the end of the year, reflecting the typical seasonality of the sector, as also indicated in the company's guidance.

Source: Inderes

Revenue grew faster than we expected, driven by the strengthened order backlog

In Q2, Kreate's revenue increased by 8% to 73.5 MEUR, exceeding our forecasts (estimate: 69.1 MEUR). By business area, revenue of Structural engineering increased by some 3% to 48.5 MEUR, while Transport infrastructure revenue increased by nearly 12% to 22.8 MEUR, based on projects received. Large bridge projects have decreased, while railway construction projects have increased, which is reflected in the development of the business areas. By country, revenue developed strongly in Sweden, increasing by more than 40% to 9.0 MEUR, exceeding our 8.4 MEUR estimate. In Finland, business also developed better than we expected, with revenue growing by 5% to 64.5 MEUR (estimate: 60.7 MEUR).

Revenue development was particularly supported by Kreate's strengthened order book, which grew by some 40% year-on-year to 281 MEUR. New projects totaling 116 MEUR were added to the order backlog during the quarter, including the interior works contract for the Stockholm bypass tunnel, the construction of streets and water management in Oulu, and bridge projects in Lieksa and Säkylä. The company estimates that approximately 169 MEUR of the order book will be realized during the current year, of which Sweden accounts for some 15%. The development of the order book supports this year's development well, and we also estimate it will strengthen in the coming quarters as the railway projects in the development phase enter the work phase.

Profitability was slightly softer than we expected

Kreate's earnings decreased slightly from the comparison period to 2.2 MEUR and were slightly below our forecast (estimate: 2.4 MEUR). The EBITA margin was thus 3.0%, while we had expected a margin of 3.5%. In our view, profitability in the quarter was weakened by the company's front-loaded growth investments and the continued tight competitive situation in the industry, which manifests itself as price competition. In the bottom lines, financial expenses were slightly higher than we expected, so EPS decreased to EUR 0.14 (Q2’24: EUR 0.16) from the comparison period, also falling short of our forecast of EUR 0.15.

Guidance outlining growth weighted towards the end of the year was reiterated

In its guidance, Kreate estimates its revenue for the current year at 290-310 MEUR (2024: 275.5 MEUR) and EBITA at 9–11 MEUR (2024: 8.8 MEUR). To meet its guidance, we estimate that the company needs a strong H2, where growth is underpinned by the rail projects to be added to the order book and profitability, in turn, is supported by rising revenue volumes and easing cost pressures. The Swedish market still appears favorable for Kreate, but in Finland, the market situation remains challenging, and competition in infrastructure is tight. In addition, the deteriorating global economic situation adds uncertainty to the company's outlook. However, profitability lies at the heart of Kreate's investment story, and we believe that its potential is clearly higher than what is currently evident. Nevertheless, to achieve this, the company requires a stronger volume base and successful project deliveries, as well as an easing of price competition.