AFRY: A Leading Engineering and Design Firm
AFRY, currently trading at 151.6 kr, is a prominent technology consulting company specializing in infrastructure and industry. With a strong presence in the Nordic region and projects spanning over 100 countries globally, AFRY serves major clients such as Stora Enso, Billerud, Nordic Paper, and Trafikverket.
Boasting a workforce of approximately 19,000 employees worldwide, AFRY has achieved an impressive turnover of 27.2 billion kr in the last 12 months, establishing itself as one of the largest consulting firms in the Nordics. The company’s largest shareholder is research foundation ÅForsk, holding 11% of the capital and 37% of the votes, with other major shareholders including prominent capital managers.
Under the leadership of CEO Jonas Gustavsson and Chairman Tom Erixon, AFRY has seen steady growth and expansion across its five core business areas:
1. Infrastructure: AFRY undertakes projects in buildings, transportation solutions like roads and railways, and water and sewage systems, catering to the societal need for robust infrastructure.
2. Industrial & Digital Solutions: Providing technical solutions and digital tools for industries such as automotive, food, and pharmaceuticals, enhancing operational efficiency.
3. Process Industries: Supporting sectors like pulp and paper, mining, and chemicals with engineering services and advice to optimize production and manage large-scale investment projects.
4. Energy: Engaged in energy solutions encompassing nuclear power, hydroelectric power, and grid systems, assisting clients in planning, constructing, and modernizing energy facilities.
5. Management Consulting: Offering strategic guidance to companies in the energy, industrial, and infrastructure sectors, providing analyses and planning support to bolster competitiveness and profitability.
While the consulting operations in infrastructure and industry contribute the majority of revenues (63% in the last year), energy, process, and management consulting are the most profitable business areas for AFRY. The company has witnessed substantial growth in the management sector, doubling revenues since 2020, reflecting positively on its performance.
However, a concerning trend has emerged with a decline in the billability rate over time. This decrease, from 77% during 2015-2018 to around 73% in 2024, indicates a gradual inefficiency in time billing. AFRY’s rival, Sweco, also a multinational engineering consultant, has historically maintained a higher billability rate than AFRY. While both firms have shown a downward trend, AFRY’s decline has been more pronounced, posing a significant challenge for the company.
AFRY’s strategic acquisitions in recent years have aimed to consolidate its market position in key segments like energy, infrastructure, and industry. These acquisitions have been integral to complementing organic growth and diversifying service offerings, focusing on firms with strong local presence or specialized expertise. The acquisition of Pöyry in 2019 stands out as AFRY’s largest, valuing the Finnish consultancy at 12.4x Ebitda, enhancing AFRY’s market share and global footprint.
Looking ahead, AFRY’s future lies in prioritizing revenue growth while improving profitability. Addressing the declining billability rate and implementing capacity adjustments are crucial steps to enhance the company’s financial performance. The impending change in leadership, with CEO Jonas Gustavsson stepping down in 2025, presents an opportunity for transformative leadership and strategic direction, signaling a potential catalyst for change within the organization.
In conclusion, AFRY stands as a well-established consultancy with a robust foothold in the Nordic market. Despite facing challenges in sectors heavily impacted by economic fluctuations, the company’s diversified service portfolio and strategic acquisitions position it for resilience and growth. With a cautious outlook on the falling billability rate, AFRY’s future trajectory hinges on operational efficiency improvements and effective leadership transition.