Aspo Oyj (ASPO) Earnings Call Transcript & Summary

Good morning to you all, and welcome to Aspo's Capital Markets Day 2024. My name is Mikko Heikkila from Aspo Group, and I will be hosting together with my colleagues this event today. Before we begin, I'd like to give you some words on practicalities. And now I actually noticed that we don't have the slide changer, so maybe that's something that I could also get perfect. Thank you very much. So before we begin, a couple of words on practicalities and the agenda. We will start the event with presentations by Rolf Jansson, our Group CEO; and Erkka Repo, our Group CFO. And after these two presentations, you hear today with us and also all viewers online, you will have the opportunity to post questions to both Rolf and Erkka before we then move on to the segment presentations. The segment presentations will start with ESL, Mikki Koskinen, who will give an overview of ESL Shipping; Mikko Pasanen from Telko and Miska Kuusela of Leipurin. And in between each of these segment presentations, there will be a separate Q&A opportunity as well for all segments. And then in the end, we will wrap things up by Rolf Jansson, again, coming to the stage, giving his closing remarks and wrapping up the session and then there will be another joint Q&A session. So we have quite a few opportunities to post questions to both Aspo Group and to our segments as well. And then after that, before you leave this event, I hope that everyone here today, present also has the opportunity to stay. We have Leipurin team here, especially with fresh pizza. We have ESL Shipping's new ship in the harbor here where you will be also having the opportunity to visit. And of course, we have a goody bag for you as well to take home. So please make sure that you get the full Aspo experience before you leave. But without further ado, I'd like to ask on stage Rolf Jansson, let's start the event. Welcome.

Thank you very much. Welcome also on my behalf to the Capital Market Day of Aspo. I will basically, in my presentation, cover 6 topics. The strategy of Aspo, the financial ambitions of Aspo, sustainability commitment, vision for our portfolio, our new leadership model and last but not least, a revised dividend policy. You are very familiar to Aspo, but maybe starting with taking one step back. So Aspo is an active owner developing its businesses long term and in a sustainable manner. If we look at the businesses, each business aim to be a market leader and a forerunner in sustainability. If you then look at the Aspo share price, and particularly fall 2021, then the share price was around EUR 12. In spring 2022, the share price basically collapsed due to the Russian attack on Ukraine. And what you see here is that it hasn't really recovered since. It's more or less followed the market index since the collapse. How is the Aspo creating value? Our starting point is to maximize the value of our current business portfolio. And that means that for each business, we have a kind of full profit potential program focusing on growth, focusing on profitability improvement. And what is then Aspo role that is to allocate resources to the different businesses pending on the performance. Growth is an extremely important element of Aspo DNA. Via growth, we will focus on continuously growing earnings. But at the same time, we will grow in segments which support our good profitability. And in addition, we think that growth is a lever to make sure that we are resilient also in economical downturn. So basically, if profitability margin would slightly decline during a downturn, we invest in growth and then the absolute profitability still will grow. Acquisitions, an important element of Aspo in addition to organic growth. We are long-term owners and the only reason for us to divest the company is under performance or then we find that there's a better owner for the business than Aspo. We are also flexible to different structural opportunities, and we have proven that over the past year or so, we have, for example, pooling financing when it comes to ESL Shipping, and we also have co-ownership that we introduced in ESL Shipping during this year. If we then look what has happened since -- basically over the past 2.5 years, I think we have given evidence of kind of solid strategy execution. We invested in the green transition, particularly by ESL. We've done a lot of acquisitions in Norway, Poland, the Baltic countries, France, Benelux and now latest, we also signed the acquisition of Swed Handling in Sweden. Then we also focused our portfolio. So we sold -- for example, when it comes to Leipurin, we've sold the machine equipment business, but I also want to add we have been able to significantly improve the financial performance of Leipurin. What then happened with our strategy when Russia attacked Ukraine, I would say that the strategic direction did not change at all. The only thing it did was that we exited Russia as such. If we then look at the financial performance over the past and start with net sales, basically, we have a growth of some 6% per annum, and that has been really driven by Leipurin, in particular, and Telko. Looking at profitability in 2021 and 2022 on an Aspo level, we were very close to the target level. And then last year, profitability was weakened by the softer market conditions of particularly ESL. And no surprises, if you then look at return on equity, a similar trend. So basically return on equity 2021 and 2022, on a level of 20% to 30% and then a drop to approximately 12% last year, again, of course, due to financial performance. Then going forward and then looking at our financial targets, we will revise them a bit. First, we will shift from EBIT to EBITDA, and the reason is that if you look at the past, there's basically no big difference. But considering the kind of compounding strategy, particularly of Telko, there will be an increasing part of amortization, and we don't want to build up unnecessary goodwill in the balance sheet. And hence, we will focus on EBITDA going forward. Net sales growth, we will revise the target saying that we will aim for a minimum of 5% to 10% of net sales growth for each year. Basically 5% organic growth and on top of that, at least then some growth from the acquisitions. Return on equity, 20% target unchanged, and then we will replace our gearing target. Instead, we will follow net debt to EBITDA target of less than 3 and that is really to kind of actively manage our financing capacity. How will we then reach these targets? I think we have extremely clear strategies for each of the businesses. Starting with the ESL, investments in green transition, basically, the Nordic industrials are investing a lot in environmental-friendly production. This gives tremendous opportunity for ESL doubling the market over the next 10 years. ESL will invest in this opportunity, new technologies even in fossil-free vessels going forward. And in addition, ESL will do it utmost to improve its performance, operational excellence, investments in business intelligence and commercial capabilities. Telko is aiming to take a leading position in specialty products in Europe, and we'll do that by acquisitions on top of organic growth and also focus a lot on performance improvement opportunities, supply chain, commercial activities, et cetera. Leipurin, again, will aim to be a market leader in Northern Europe for distributing ingredients, both to the food industry as well as to the bakeries. And with an improving profitability, and that goes two ways so investing in growth in segments which have a high gross margin and then also developing capabilities sourcing, supply chain and commercial. This is how we will reach the targets. New today as well is our financial ambition. So we are aiming for -- to create a EUR 1 billion business, basically doubling -- approximately doubling the revenue from last year. And as already said, EBITA of 8%. And if you look at this, how it's divided then by the businesses, you can see that actually a lot of steps have been taken already. So starting with ESL, what you see here is the current performance, basically, we invested in 12 green coasters that will gradually over the next 2 years, build up in revenue and net sales and in profitability. Telko actually the same. We have this year, acquired Swed Handling that closing to be expected during Q3, and we have already acquired Optimol and Greenfluid. So if you look at the run rate of these 2 -- these acquisitions, it's basically EUR 70 million. Then if you add the organic opportunities, considering how Telko is positioned, it should generate organic growth of some 4% to 5%. And then finally, Leipurin, we will add Kebelco to Leipurin when the Swed Handling acquisition is closed. That will add EUR 10 million of net sales. And in addition, also, Leipurin has approximately, let's say, 3% plus organic growth per year. This actually means that if you take all of these together, you are basically halfway to the EUR 1 billion. And what else needs to happen, ESL needs to invest in fossil-free green [ handies ] that will add net sales of some EUR 60 million, EUR 70 million and then Leipurin together with Telko need to do acquisitions, which during this period until 2028 would represent approximately EUR 200 million of sales. So I think this slide is a very strong evidence of the fact that the current performance of Aspo. If you look at the Q1 performance or 12-month rolling, it does not really reflect the kind of run rate potential we have in the company. Then looking at the businesses, there's a lot of similarities actually between Leipurin and Telko, but there are also a lot of major differences in the business logics, if you compare particularly ESL with Telko and Leipurin. How they are positioned in the value chain, what are the opportunities for organic growth, what are the kind of logic for acquisitions required CapEx investments, time span of the business and also kind of funding opportunities to name some examples. So if you, for example, look at the vessel here, the green coaster, it has a lifespan of maybe approximately 25 years. And then you look at the inventory of Telko and Leipurin, and we talk about weeks or a couple of months, CapEx investments really heavy into ESL but very limited into Telko and Leipurin, if you disregard acquisitions. Then from a sustainability perspective, First of all, Aspo and its businesses will commit to the science-based targets by end of the year. As said, sustainability is an important part of our strategy. But then you -- if you go a bit deeper into this and look at the kind of sustainability agendas of the companies and maybe particularly from an environmental perspective, ESL is very much focused on the emissions of the vessel that it operates, so basically Scope 1 to Scope 2 emissions. And then if you look at Leipurin and Telko, it's not much use to only reduce the emissions of the kind of own operations, instead, Telko and Leipurin and takes a grasp of the whole value chain, downstream, upstream, from production until to the customer. So basically saying that Scope 3 emissions is really what is critical. There are naturally some differences also when it comes to social sustainability and governance, but I would say, particularly these around environment are significant. Based on this, we today launched a vision for the business portfolio of Aspo. So our vision is to form 2 different companies, and as said here, before Aspo turns 100 years, meaning 2029. And that would mean Aspo Infra and ESL Shipping will be part of Aspo Infra. Then we have a business with a very heavy balance sheet, tremendous CapEx investments and stable and good profitability. And then on the other hand, we have Aspo compounder which is where Telko and Leipurin is part of. It's a very growth-focused company, very light balance sheet and a very resilient business model with very high returns. Traditionally, Aspo has invested primarily in ESL Shipping. And going forward, and that you've already seen over the past couple of months, we will also invest significantly into the Aspo Compounder business. Then what are the kind of building blocks of this transformation, the starting point is basically shareholder value. We haven't determined the approach how to do this. We have everything on the table, basically, as examples, demerger, IPO, sale of business, minority, majority, full sale. And when it comes to timing of this vision, it will be dependent on the CapEx investments when they are done and financial performance of the businesses and in addition, also business environment conditions. And ultimately, our target is to create very clear and transparent business profile -- investment profiles to the market. One colleague of mine said that basically, if you look at Aspo, the average doesn't tell you a lot because there are so big differences between ESL Shipping and other businesses. So we want to form kind of proposition to the market, which is extremely clear and extremely transparent. We think it's important to communicate this upfront because then the steps that we will be taking over the next years will be logic to the market. We also think that the business models and the strategies will kind of further diverge over time. And hence, this is also kind of rational for the whole transformation. What is also important is that we will keep our eyes on the ball, basically making sure throughout this transformation that we are implementing strategies of the businesses, pursuing growth and profitability. That is really key. And it's basically Aspo Group, who will then lead the transformation. This is the team who will run this transformation. We will very much focus on business reviews and line organization and the steering will take place by the Aspo Board. And ESL will continue to be governed also via its Board because we have a minority owners on board. Last but not least, we will update our dividend policy. So far, Aspo's dividend policy has been -- the goal is to annually increase the amount of dividends. We will put a bit more flavor to that. So the prerequisite of increasing dividends are, of course, increasing profitability. And we now say that we will pay up to 50% of net profit as dividends. And we will also make the assessment of strategic investment priorities to be able to pursue our strategy. This was basically in approximately 20 minutes summary of the key messages of the Capital Markets today. So strategy -- extremely clear strategies of each of the businesses, financial ambition to basically double the company's sales over the next couple of years. Sustainability, we will commit to science-based targets by end of this year. We have a vision for the portfolio of forming two separate companies, Aspo Infra and Aspo Compounder. We have a leadership model, which will very much focus on the full profit potential of each business, and then Aspo Group will run this transformation, and we have a dividend policy which will support this strategy. I propose that we go into our CFO's, Erkka Repo's, presentation, and then we have basically some, say, 10 minutes for questions at least.

Thank you, Rolf. So we have an ambition of having EUR 1 billion of sales and 8% EBITA by 2028. And I will go through that examples that how do we reach that profitability, and what does it require from us in terms of CapEx and how the funding of the CapEx is going to take place. If you look at our profitability, last year, we were in 5.1. We -- our ambition requires 3% increase in our profitability. And in growth, we have scale benefit from the organic growth. We know that from the M&A activities, there are significant synergies that we can gain from those. And on the investment in the ESL, the new vessels will bring significant efficiencies compared with what we have today. On the commercial excellence, it's all about managing our sales margin on the pricing actions, sourcing actions, managing our product mix, managing our customer segments and differentiating our offer on customer segments. And I believe that this first 2 ones, the growth and the commercial excellence, they are the biggest levers for our profitability improvement. And on the commercial excellence, if you read our quarter 1 release, we already have several examples, especially on Leipurin and Telko on these activities. And then when seeing, for example, Leipurin profit improvement lately, against the headwind of the market at the moment, that demonstrates the -- especially on the commercial excellence activities that we have been doing this successfully. On operational excellence, it's about the supply chain efficiency, our process development automation, and also how do we operate our vessels efficiently, how do we optimize the use of the vessels so we have lots of potential also on the operational excellence. And then on the OpEx side, we will, of course, turn every stone to improve the profitability, but I believe that the first three ones are -- there we have a much bigger lever than on the OpEx. Then 2 examples on the growth side, what kind of magnitude you can put there on the profitability development, here green coasters. We have -- we are investing in 12 green coasters together with the pool investment for Aspo. It's for EUR 70 million for six vessels. And we are expecting that once these 12 vessels are fully commercial, we will see a EUR 15 million EBITDA improvement in our results. And that is expected fully to be visible in our profitability only in 2027 when all the vessels are fully in commercial operations. And you can expect to see then a gradual implementation of that throughout the years. And with the vessel investments, it's also important to understand that we have, during the construction phase, also significant amounts tied into a construction -- assets under construction. And so those are assets that don't yet earn us any return, but they are tied on the construction project. And then, of course, then fully turning profits when the vessels are in use. So very, very important profit lever for us going forward. Then how should then understand on the profitability on Telko with the M&A activities that we are doing. We reported a comparable EBIT of EUR 2.2 million on the first quarter this year. If you look at what was our underlying profitability before M&A activities, it's EUR 3.1 million. And that figure, we are expected to improve with the performance improvement activities going forward. Then we do have -- did have M&A costs of EUR 700,000 in the first quarter. That was on a high level with the high activity that we had on ongoing -- going forward, we are expecting to continue M&A activities, but maybe more closer to the levels that you saw last year on average, which was EUR 1 million for the whole year. So that is maybe more representative on the longer term on the level of the costs that associated with the M&A costs. Then always when we do make a closing of the transaction, we revalue the inventories to the fair value or the sales -- the expected sales value of the inventory, which means that then when we -- after the closing, when we start operations, we are reversing that in the first couple of months when we are selling the inventory. That basically means that during the first 2 months of the operations, we don't make any earnings, but the earnings are only visible after the reversal of the inventory fair valuation. So it takes typically on the second quarter after the closing when the profits are visible in our results. Then on the Optimal, Greenfluid and Swed Handling, obviously, the stand-alone profitability is significant improvement to our results. And on the longer term, you can expect that we are bringing synergies from these M&A activities. So altogether with these, you can kind of estimate that what is then the Telko profitability after the M&A activities have been closed. And of course, it means that it's a significant difference where we are today after the -- this Swed Handling has been closed. Then our CapEx, we are expecting to use CapEx in the magnitude of EUR 350 million to EUR 400 million by 2028. Our needs for maintenance CapEx are very small. So primarily, the CapEx is going for new vessels and M&A activities. Our estimate is that it's about 50-50 going to this. We do have a high threshold for every investment that we are making. Our return target for return on equity is 20%, and that is also a threshold for our investments. And our capital allocation is always based on maximizing returns, so where can we get the biggest -- highest value for the money. And big part today of these CapEx plans, they are uncommitted. So what we have made commitments are the green vessels investment that is ongoing and the Swed Handling investment that is expected to close on the third quarter this year. Then if you looking at our dividend policy and also from the point of view that what has been the shareholder return, if you look at the last 10 years of the shareholder return, 85% of the shareholder return has been based on dividends. And with the revised dividend policy, more of the cash generated will be allocated to growth investments, both M&A and then investment into the vessels. And we are expecting that, that should then move more value creation of the company where you should be expecting to gain the returns. We do have a hybrid bond for EUR 30 million at the moment. On the long term, we do not see that as an instrument for us. But at the moment, we do have that, but not on the long term. While we are growing and investing, we want to, all the time, maintain a strong balance sheet. Our balance sheet has been strengthened a lot lately and especially this year with the minority investment into ESL, but -- and then we want to maintain a strong balance sheet throughout these investments. We are looking now, our leverage target from the net debt to comparable EBITDA to keep it below 3, but also from the equity ratio point of view, we want to maintain also a strong equity ratio at the same time. Then if looking at the funding of our investments, we're expecting that about 2/3 of the investments, the EUR 350 million to EUR 400 million investments, are to be funded by operating cash flow. So that links back to the -- where I started with the high profitability and improving profitability. That's a cornerstone of our strategy on getting the profitability up and funding our investments. Improved profitability also give us debt capacity without sacrificing our strength of the balance sheet. And we are also kind of having possibilities for our portfolio development and examples like selling the supramax vessels or selling of Kauko or the minority investment into ESL. So we are -- like Rolf said, we are up to kind of many different alternatives and they are also part of the kind of funding our growth investments. And at the same time, we want to have growing dividend but with the growth of the performance, not sacrificing our kind of growth percent. And as a last topic, we are changing our key performance metric from operating profit to EBITA. And that is to better reflect the ongoing profitability of the compounder business logic. When we are making acquisitions, we are basically paying for inventory, and the rest is intangibles, either goodwill or intangible assets that we are amortizing then. And these amortizations, we want to, of course, allocate as much as possible to intangible assets, depreciate them properly so that our balance sheet don't get inflated. And then therefore, the EBITA without amortizations better reflect the underlying profitability of the compounding business. We are updating -- or changing our guidance for the new metric EBITA and adjusting then the guidance accordingly. And so our new guidance for the year 2024 is that our comparable EBITA is expected to exceed EUR 32 million this year. Thank you. And now we are up for the Q&A.

Thank you, Rolf. Thank you, Erkka for -- may I say very insightful and exciting presentations Now is the time for our first Q&A. And I suggest we have already had some activity online. So I will start with a couple of questions from there and then open the floor for further questions. So first from Nordea, [indiscernible] asking about the EUR 350 million to EUR 400 million of investments during '24 to '28, which are sort of potentially planned. So the question is, is your plan to finance these investments with cash flow and with possible divestments? Or are you also considering of utilizing additional debt funding as well?

Yes. So primarily with the cash flow, so we are expecting that about 2/3 would be based on the cash flow of the operations, debt financing based on the -- keeping the leverage ratio as we have described it. And so that is coming from the improved profitability that gives us leverage potential. And then, of course, in any of the portfolio development that is also part of the funding.

Perfect. And Rolf, regarding the time line, you presented quite big changes and possible divestments or IPOs with relation to Aspo Infra and Aspo compounders. So A question that sort of time line wise, when can we expect to see some kind of next step and hear more about what's happening going forward.

We will naturally keep the market updated on any key milestones. We don't have a set time table. So as said before, we want to be transparent and want to communicate this kind of portfolio vision upfront. And we want to figure out the best way of doing it and the best timing for it in order to create value.

So please, any questions, let's make sure you get the microphone. And if you could -- when you start, present who you are and then ask your questions.

Great. Thanks for the presentation. This is Pasi from Nordea. I have 2 questions to start with. The first one is regarding the reporting. So are you going to change your reporting to be in line with these new 2 entities in Infra and Compounder. And then could you please elaborate a little bit about your liability side? So when looking at your instruments you are using, are you going to have an off-balance sheet debt and how that's visible on your numbers? So is this net debt to EBITDA figure actually fully comparable metrics for you?

Okay. For the reporting, we are going to continue reporting with the 3 business segments, ESL, Telko and Leipurin. And we will also kind of continue reporting the EBIT. And then we -- as a new measure, then the EBITA which is our new key measure. So you will get both. And we will kind of report the comparable figures from last year and in 2022. Still during the second quarter before, we are releasing them the second quarter result with the new KPIs. And then on the balance sheet, our net debt includes the lease liabilities. So from that point of view, it's the total liabilities of the company compared to the kind of the reported comparable EBITDA.

Great. Thanks. So we are going to have also the figures for Leipurin and Telko segments going forward?

Yes.

Any further questions in the room here. I have a couple of questions online still, so one question is related to financing of M&A. [ ArI ] is asking whether there is a need for equity financing considering a large M&A agenda?

At the moment, we saw that our financing is primarily on the cash flow, then on the portfolio development and then potential the debt with -- while maintaining our strong balance sheet. So on the equity, we communicated on Swed Handling, there is potentially an equity component on the acquisition, so up to -- from EUR 0 to EUR 9 million depending on Aspo's Board decision on how to -- whether to use it or not. So I don't rule out that, that similar could be used in the future, but it's not a primary source of our funding.

Thank you. And maybe related to this as well, a question related to dividends. So a question whether there is a possibility to keep the dividend at zero considering the high returns on equity?

The communicated dividend policy that's up to 50% of net profit, and that will then be very dependent on the strategic investment opportunities that we have and actually is also dependent on the profitability development. So that's been to judge based on this new dividend policy.

Thank you. Any more questions? If not, I think it's time to move on, on the agenda. And thank you, Rolf, thank you, Erkka, for insightful presentations and Mikki Koskinen, ESL Shipping Managing Director. Welcome.

Thank you very much. And good morning to all of you on my behalf as well. It's a real pleasure to be here today telling you about the developments at the shipping scene as well because we are really now seeing the opportunities of lifetime with the green industrial developments here in the Nordics. Fantastic development to be expected. We actually are creating the infrastructure for the green transition industries here in Scandinavia. And how we do it? Basically, we are currently the leading dry bulk shipping company within the Northern Baltic Sea market, in both segments, we operate today. Fresh news is that actually yesterday afternoon, we concluded the sale of the first of the supramaxes and their [ cargo ] was delivered to new owners yesterday, and now the cash is safely in bank from that transaction as well. So we are following the strategic path very efficiently at the moment, as we have informed to the market. ESL has a really strong track record of value-creative growth during the last 10 years. I will tell you briefly about that a bit later on, but we have grown in size, 2.5x, during the last 10 years. And our aim is to continue on that track, maintaining at the same time, the high profitability we historically have had. Our strategy is based on the growth in the green transition industries. We are defending our strong position by rebuilding our fleet to match requirements of the fossil-free industries in the future. And at the same time, we are developing our customer portfolio to be even more resilient and more flexible, more versatile. Really, this tremendous investment boom in Scandinavia is now driving the development of our company. For us, it's equal whether this investment takes place in Sweden or in Finland. We operate in both countries. Both countries are the home turf of ESL Shipping. And we also have a significant operation based in Sweden via the subsidiary, AtoB@C Shipping. And the new vessel Electramar is a visible showcase today of the developments we are doing also in the Swedish market. And as Rolf stated earlier, our ambition is to grow in size, to become a EUR 300 million revenue company by '28, maintaining the same target level of profitability as we have had until now. So we are today operating two different vessel classes and segments. The coastal vessels are typically vessels with a carrying capacity of a bit less than 6,000 tons -- between 4,000 to 6,000 tons. Vessels are typically 90 to 100 meters in length. And later today, you all will have the possibility of visiting one of these fantastic vessels. All our vessels are of the highest price class. They are either on 1A or 1A Super. And these are the requirements in order to serve the industries along the northern part of Bay of Bothnia. There will always be ice. As long as we leave, there will be ice. And this past winter was really a strong one when it comes to ice formation. And we had more severe ice conditions than we have had during the last 20 years of time. So the ice is not melting. It's not disappearing. But here in Helsinki, the ice may be only in the glass of some nice drink. But up in the north, ice is every year 6 months a year requirement of the trade. We are operating both segments typically in the same geographical area. We are serving the Scandinavian industries with raw materials, and we are taking the finished products to the market. So basically, we're operating on the European continental shelf with all the vessels. We own all the handysize vessels ourselves. They are tailored for the trade. They are all geared. It means they have cranes on board for independent cargo handling, which is really one of the specialties ESL Shipping is offering. We have high profitability niche markets, such as loading and discharging vessels at the sea. Then on the coastal vessels segment, we currently are time chartering the majority part of our capacity. And the profitability of that business has fluctuated most due to the increases or decreases in the time charter hires of the vessels. So our aim in the future is to have more owned vessels also in that segment. And this is why we started the transformative investment program into 12 of these new coaster vessels. If we look at the commodities we carry nowadays, we've gone through a significant change during the last 10, 15 years of time. Because we used to be a coal carrying company. We carried 5 million to 6 million tons of steam coal to the power plants in Southern Finland. That represented 50% of the portfolio we carried. Today, the share of energy coal is approximately 5% of the tons and of the turnover, and it's declining even further. Our businesses are more or less equal in size, both businesses, approximately EUR 100 million in turnover and both businesses are highly contracted businesses. So we are operating approximately 80% of our capacity on long-term contract with leading blue chip industrials in Scandinavia. We have happy customers, we have long-term customers and we have been serving these companies for decades. The longest contracts, I think, today have been running for more than 40 years already. We have a client base that is extremely satisfied also when they give us rating on the sustainability compared to our competition. And 60% of our clients, they see that we are doing better than our competition when it comes to environmental agenda and green transition. And at the same time, when we are gearing up for the new requirements, we're also planning really big time for the future, and we have spent quite a lot of time and intelligent resources in developing new vessels to be completely fossil-free. As Rolf explained, our business model is different from the other businesses of the Aspo Group because the time span of the business is a quarter, but it's a longer quarter than normally. We have a quarter of 25 years in the business. We are very capital intensive. That is not to be denied. But at the same time, we have great opportunity to leverage the vessels we have on debt. We have really solid cash flow, and we have shown that we have a solid cash flow over the business cycles. So the bank ability of our projects is really good. We are able to produce high margins, but at the same time, because of the heavy CapEx investment needed, the return on capital employed is only medium, but at the same time, the return on equity can be really high. During the last years, we have concentrated a lot of effort in making a big transformative change in the way how we finance our business. And one of the first steps we did 2 years ago in '22, when we were able to launch an investor pool for the coastal vessels. So of these 12 ships, 6 will be financed by ESL Shipping, Aspo group, and 6 others will be financed by external investors. So we have already sort of enabled lower leverage for the group, but at the same time, building a big fleet of really efficient vessels. And then, of course, the latest big change is that we have been able to strengthen our capability to invest via the minority investment into ESL Shipping. And this really gives us the tools for the future success and future investments. What has happened at the same time during the last 10 years is that we have made a transformation from a coal carrier with very few clients into market leading environmental shipping company with clear ESG strategy and with a much wider portfolio of clients and commodities to transport. So we have significantly better resilience in the business now than what we used to have, let's say, 10 years ago. And one of the big changes really was in 2018 when we acquired AtoB@C Shipping where we were able to grow from EUR 80 million revenue company to EUR 200 million during this few years' time. Now what is happening on the demand side, what is the green transition all about, what are these investments that are taking place in Scandinavia? Well, the great thing really is that the majority of it is taking place on our home turf along the northern part of Bay of Bothnia, which is always limited by the ice 6 months in a year. So this is really the home market of ESL. We are strong in ice. We delivered every single ton our customers required also during last winter in very heavy ice conditions where even ice breaker service was halted from time to time. We will see investments -- already announced investments, investments where the building process is already ongoing. We will see big increased capacity in the green steel production as an example. And a plant with approximately 2.5 million tons of production capacity will require significantly more transportation than this 2.5 million tons. So we will see significant growth. And that's why we expect, we foresee that the relevant market through ESL will double during the next 10 years of time. But there's development also in other industries. We have seen significant capacity increases in forest industry, in pulp production, at sawmills. We have many new sawmills operating now in Finland. And when the market turns into better, we expect higher volumes to be shipped also from them. And in addition, the green transition needs a lot of clean electricity. And we are expecting the wind energy market to double during the next 10 years. And from 2030 onwards, also wind farms will be built at sea. And this will increase to transport demand also during the construction stage significantly. And at the same time, when the market size is actually doubling, we are forecasting a reduction in shipping capacity in this market. And we've done statistical analysis on the tonnage that has been trading actively in the Bay of Bothnia. We have done statistical analysis on the world fleet with ice class. And what will happen is that the capacity of the fleet will be decreasing by approximately 20% during the next 5 years. And at the same time, the known investments for new tonnage are very limited. So a fantastic opportunity to grow and provide good returns on the investment. A third pillar of the growth story we have is the more strict environmental regulation. That's affecting also our clients, but it's also affecting us as a shipping company. We have entered the era of the emission trading. And from next year onwards, we will also have a regulatory environment where we must reduce the sort of greenhouse gas content of the fuel we are using in shipping. And [indiscernible] an example, has estimated that all these regulatory measures together will make marine fuel to be 2x more expensive by 2030. And it's that shipping companies that are investing into energy efficiency will be the winners in the market. So based on the increase in the transport demand, based on the shipping investment we will be doing in the best possible technology available. And combined with the sourcing of new fossil-free energy or low-emission energy, our intention is to be the leading environmental shipping company on the Scandinavian market. And we have a multi-fuel strategy. We already invested in LNG fuel vessels. We can start using liquid biogas anytime. We have very energy-efficient hybrid coaster vessels coming now every 3 months. And we are continuing to operate together with companies like Neste to use their renewable fuels fleet-wide. And at the same time, we are designing completely fossil-free handysize vessels. So what will happen is that this investment into these type of ships, we are showing to you today and the new green fossil free handies we are planning, we will be able to transport a much broader variety of commodities, not only bulk but more versatile or expensive materials, products in a large scale. We can build wider, more enhanced customer portfolio, using our highly energy-efficient, even fossil-free vessels. And all these things together, they will enable us to have stronger contractual risk sharing with the clients. And based on these measures we have taken and will take, we were able to commit in the science-based targets already at the turn of the year, as a first company in the Aspo Group. This means that we shall be net zero in our emissions by year 2040. And as sort of a midterm target, our ambition is to reduce our CO2 emissions by 50% already in 2030. So in short summary of the activities we intend to do, our ambition is to grow in the EUR 300 million company with a solid profitability, and we are doing it with the help of doubling market an investment into very low emission vessels, vessels that are multi-fuel capable. They are able to operate on hydrogen derived in methanol. They will have the versatility required by the customers and they will be very energy efficient just like the vessel you will be seeing today. Investments are needed, but we believe that we have a solid story, and we will earn nice returns during the years to come as well. Thank you very much.

Thank you, Mikki, for a great presentation. Now again, an opportunity to post questions to Mikki and ESL Shipping. I suggest this time around, we start here in the room and maybe here next to Pasi.

It's Joonas from Evli. You say that you're going to invest maybe more than EUR 150 million in this new green handysize vessels, and my understanding is that a new build handysize is maybe EUR 30 million per vessel or is it even more for these kinds of hybrid vessels?

We will come back to all the details at a later stage when we are more advanced in the discussions. And you will be among the first to know.

Okay. But if I just roughly try to arrive at some kind of figure that maybe you'll invest in, say, 4 to 5 new handysize vessels and is handy has like a 25,000 of DWT. So that would be more than 100,000 DWTs added to your current capacity. I mean, currently, you have like 30,000 DWTs after the supermax sales. So that would be like an increase in capacity of less than 50% while -- or...

At the same time, we need to bear in mind that some older vessels will also leave the fleet during this time period until '28. So the estimates of the increased turnover and the estimating investment, as Erkka has stated as well, they are quite accurate and they are reflecting sort of the size of the company we aim to have in '28.

Sure. But I guess what I'm getting at that you say you see your market is going to double, but your capacity expansion will still be quite limited compared to that. I mean, if you say that your market is double or maybe adding, I don't know, 50% of your capacity so I guess my question is why aren't you maybe adding more if it's -- or are they like -- is it a question of -- or if I can -- do you plan to maybe pull some of these new handysized vessels as well?

I think the vessel pooling concept as such has proven to be quite a good one. And we see no reason why not utilize that also in the future. That will then be sort of perhaps additional capacity to be available for the company's development. But we -- that will be sort of the next stage. And what we have informed today is basically the plan and the ambition the Aspo Group has and Aspo Infra has for the future. But of course, we keep all the doors open. And as long as we have happy investors in the current pooling concept, I don't see any reason why we should not succeed with the bigger vessels as well later on.

Got it. Good. And maybe another question. I think there was an earlier slide -- I think it was maybe Erkka slide that there was the EUR 15 million EBITDA that you see for this -- all these 12 green coasters. And I mean, the total cost of these green coasters is EUR 140 million, and that divided by EUR 15 million, that's like EUR 9.4 million or so. So can you say anything on this similar measure for these handysize vessels it may be somewhat similar?

To go back a little bit, we are investing EUR 70 million in the 6 own green coasters. And then we have additionally the investor financed vessels that are taken into the same pool. Our income at ESL is consisting from the income and earnings from the owned vessels, plus the earnings and commissions we will be earning from the pool vessels. So it's not that straightforward. You cannot sort of draw a conclusion directly that this and this money is coming from this and this source. But we have 6 own vessels and the combined income from the vessel earnings and the full earnings is this estimated EUR 15 million EBITDA when all the vessels are in operation.

Thank you. Any further questions? Pasi?

Great. This is Pasi from Nordea. Just to clarify, so what is the figure, I mean, on the top line effect coming from the divestment of supramax vessels? So -- and maybe if I just...

All numbers shown today, they are excluding the supramax vessels.

You mean -- what would be the pro forma effect coming from this supramax vessels. So what was the earnings or sales effect when they were active?

I think what we estimated -- what we informed today was a turnover of EUR 178 million for last year. And the full turnover for the company in '23 was, if I remember correctly, EUR 189 million.

And two more questions from my side. So did I hear right that you are actually not using on gas or LNG currently, even though you have those vessels able to kind of fuel...

Of course, we are -- of course. Okay. But I was referring to the use of liquid biogas instead of liquified natural gas.

And lastly, what was the reason actually you ordered these new hybrid vessels, a bit of fossil engines. So why you didn't actually buy 12 fossil-free vessels at the first place?

That is a good question. I think it takes many years to plan a series of vessels. Basically, you have a lead time of 5 to 6 years from the time you start the design until the vessel is delivered. Currently, based on the most recent technological developments, fossil-free technology is available for the bigger vessels, but it is still not today available for vessels of this size at a commercially viable terms. And this type of a vessel is equipped with the technology we plan to have for the fossil-free vessels, on this size of a vessel, it would be too expensive. So we have done everything possible to electrify the vessel to make it as fuel efficient as possible. And of course, we have the possibility of using renewable fuels on this vessel as well, even if the majority of the power is produced by a diesel engine.