Mips Q2 2025 slides: Organic growth continues amid tariff headwinds, EBIT declines

Mips AB reported Q2 2025 results with robust 12% organic growth and an improved gross margin, yet net sales increased only 1% and EBIT declined 22% year-over-year to 41 million SEK. This significant EBIT contraction and a 28% sales drop in the Motorcycle segment were primarily driven by the materialization of tariff impacts in the key US market and negative currency effects. While management maintains a confident long-term outlook, expecting tariff disruptions to ease as production relocates, the quarter underscores the immediate vulnerability to trade policy changes, keeping the stock near its 52-week low despite the company's strong balance sheet.

Analysis

Mips AB's Q2 2025 results present a dichotomy between strong underlying operational performance and significant macroeconomic headwinds. The company achieved robust 12% organic growth, driven by resilience in its core Sports segment (+3% net sales) and momentum in the Safety category (+12%). This was further supported by an improved gross margin, which expanded to 74.2% from 72.9% a year prior. However, these positive indicators were overshadowed by external pressures, leading to a mere 1% increase in reported net sales to 135 million SEK and a substantial 22% year-over-year decline in EBIT to 41 million SEK. The primary drivers for this contraction were negative currency effects and the materialization of US tariffs, which severely impacted the Motorcycle segment, causing its sales to fall 28%. Despite the sharp deceleration from Q1's 42% organic growth, Mips maintains a strong financial position, evidenced by an 85% equity ratio, no debt, and a 176% increase in year-to-date operating cash flow, allowing for a 172 million SEK dividend distribution. Management's guidance suggests the tariff impact, while creating near-term uncertainty, is expected to ease as production relocates from China, but the quarter highlights the company's significant vulnerability to US trade policy.

Key Decisions for Investors

• Investors should weigh the significant near-term headwinds from US tariffs and currency volatility, which caused a 22% EBIT decline, against the company's robust 12% organic growth and strong underlying gross margin.
• It is prudent to closely monitor the performance of the Motorcycle segment for recovery and track the progress of production relocation out of China, as these are the key factors currently dragging on profitability.
• Given the stock is trading near its 52-week low despite a strong balance sheet, no debt, and continued dividend payments, investors may consider the valuation but must be prepared for volatility until the tariff impact stabilizes.
• Focus on the resilience of the Sports segment and growth in the Safety category, as their continued positive performance is critical to offsetting the severe, tariff-induced downturn in the Motorcycle business.