NKT A/S Q1 2025 Report: Growth Fuels Energy Transition Play, But Margins Pose a Hurdle

NKT A/S, a Danish leader in power infrastructure solutions, delivered a robust Q1 2025 performance, with revenue surging 11% organically to €630 million and EBITDA hitting €81 million. The results underscore the company’s critical role in the global energy transition, as demand for high-voltage cables and renewable energy infrastructure continues to expand. Yet, beneath the headline figures lie challenges—most notably margin pressures—that investors must weigh against the company’s long-term ambitions.

Segment Breakdown: A Tale of Two Drivers

NKT’s growth was powered by its Solutions and Applications segments. Solutions, which focuses on high-voltage power cables for offshore wind and grid projects, saw revenue jump 21% to €388 million. This segment’s operational EBITDA rose to €57 million, though its margin dipped to 14.7% from 16.2% a year earlier—a reflection of the project-based nature of its work.

The Applications segment, bolstered by the 2024 acquisition of SolidAl and expanded medium-voltage capacity in Sweden and the Czech Republic, grew revenue by 32% (excluding the acquisition) to €203 million. Its EBITDA reached €18 million, but margins fell to 8.9%, highlighting cost pressures in scaling operations.

The Service & Accessories segment, however, bucked the trend. Revenue dropped 5% to €70 million due to the absence of a large offshore repair project seen in Q1 2024. Yet, operational EBITDA nearly doubled to €13 million, thanks to strict cost controls. This segment’s margin soared to 19.3%, demonstrating NKT’s ability to optimize profitability even in smaller operations.

Strategic Momentum: Supply Chains and Long-Term Contracts

NKT’s Q1 results were underpinned by strategic moves to secure its supply chain and expand capacity. In April 2025, the company signed a 10-year aluminum supply agreement with Hydro, ensuring raw material stability through 2033. This deal, coupled with its ongoing Karlskrona expansion—which includes a new cable-laying vessel, the NKT Eleonora, due online in 2027—aims to solidify its position in high-voltage projects.

The company’s order backlog remained steady at €10.7 billion (in standardized metal prices), with new smaller orders and “variation orders” (add-ons to existing projects) offsetting any slowdown. CEO Claes Westerlind emphasized that these moves are designed to “future-proof” NKT’s operations against supply chain volatility and labor shortages.

The Margin Question: Can NKT Sustain Growth Without Dilution?

While revenue growth is strong, NKT’s operational EBITDA margin dipped to 12.9% in Q1, down from 14.1% a year earlier. This decline—driven by lower-margin projects in the Solutions and Applications segments—raises questions about profitability sustainability.

Analysts note that NKT’s margin pressures are not unique. Competitors like Nexans have also faced margin erosion as they scale up for renewable energy projects. However, NKT’s ability to improve Service & Accessories margins and secure long-term supply deals may give it an edge.

Financial Outlook: Betting on Execution

NKT reaffirmed its 2025 guidance: revenue of €2.37–2.52 billion and EBITDA of €330–380 million. These targets hinge on flawless execution of its high-voltage projects, stable metal prices, and minimal supply chain disruptions. The company’s free cash flow of -€308 million in Q1—a result of working capital timing—adds complexity, though its net debt of -€953 million reflects strong financial flexibility.

Investment Takeaways

NKT A/S is a critical player in the energy transition, with its Q1 results reinforcing its growth trajectory. The company’s strategic investments in capacity and supply agreements position it to capitalize on the €1.2 trillion global energy infrastructure market. However, investors must remain vigilant about margin trends and execution risks.

The stock, which trades at a 5.5% premium to its average price target of €571.26, reflects this cautious optimism. While NKT’s long-term story is compelling, its short-term profitability challenges mean investors should prioritize a disciplined approach.

Conclusion: NKT’s Future is Grid-Locked to Renewable Growth

NKT A/S’s Q1 report paints a company at a pivotal juncture. Its 11% revenue growth and €81 million EBITDA are clear wins, but margins remain a wildcard. With €10.7 billion in backlog and strategic moves like the Hydro deal, NKT is well-positioned to serve the renewable energy boom. Yet, its ability to balance growth with profitability will determine whether it becomes a grid-scale winner—or a cautionary tale of margin management in a high-stakes industry.

For now, the energy transition’s wiring is in NKT’s hands, and investors are betting the company can deliver both scale and substance. The next few quarters will reveal whether that faith is justified.