Aspo Oyj (ASPO) Earnings Call Transcript & Summary

Welcome to the Q4 2025 reporting of Aspo. I will start by reviewing the full year 2025 figures and development. We made EBITA of EUR 36.5 million, which is approximately 25% increase versus last year. Net sales growth of some 4%, basically Telko and Leipurin growing, and a small decline when it comes to ESL. And if you look at the EBITA percentage, we ended up close to 6% -- 5.9% of EBITA of net sales. Operating cash flow around EUR 50 million and free cash flow EUR 26.5 million and leverage 3.6 coming down from Q3 2025. Then earnings per share, EUR 0.51 per share. If you look at the comparable EPS figure and then total reported earnings per share, EUR 0.72. If we look at the businesses, ESL Shipping, profitability development fairly flat, positive that the new vessels were very competitive and generated profit throughout the year. Telko, significant profitability improvement, close to EUR 18 million, more than EUR 5 million of EBITA improvement, driven by the acquisitions and then also driven by a bigger share of value-added products versus volume products. And then finally, the transformation of Leipurin has successfully continued, particularly in Sweden both due to the acquisition of Kebelcoin Sweden, but also due to organic growth and successful efficiency improvements, particularly in supply chain, clear profit improvement. Like-to-like a bit more than EUR 1 million and reported figures EUR 2 million of improvement. If we then look at the bridge between comparable EBITA and reported EBITDA, we have here a positive trend. So the sales gain of Kallio, one of the Handysize vessels, generated close to EUR 10 million of sales gain. And then on the other side of the coin, we also have costs, particularly regarding the strategic projects, namely the executing of our portfolio vision and then also some costs related to the sale of Leipurin. So reported EBITA group totaled EUR 43.1 million. Then if we look at the quarterly figures, we ended up at EUR 8.9 million for the Aspo Group, close to EUR 1 million of EBITA improvement. ESL Shipping, a decline in profitability to EUR 3.8 million, particularly due to the weak market of the Coaster business, namely the poor demand for the forest industry and low spot market pricing. Telko improving its profitability, namely due to higher sales margin driven by a higher share of value-added products. And Leipurin, positive development due to the Swedish business and the improvements related to that. Sustainability is close to our hearts and particularly we follow both emission intensity and then safety frequency. Emission intensity, we set the goal 3 years ago, reaching 0.3 emissions -- CO2 emissions divided by net sales. And I'm proud to say that we clearly reached this level then in 2025. So 0.23 was the end result for full year 2025. As reported during the year, on the safety side, we have had some challenges but glad to see that the development picked up during Q4. So if we -- last quarter, we reported year-to-date figures of some 9-point something. Now we're down to an accident frequency of 7 for the full year 2025. So despite not reaching the target, the development has been good throughout the year. We got our sustainability targets, short-term targets approved by the science-based target initiative. And these relate both to our own emissions, namely the emissions, particularly of ESL's vessels. And then also Scope 3 emissions, which we focus particularly on when it comes to Telko, so making sure that the suppliers and principles that we use are also committed to science-based targets. And then finally, we agreed to stop transporting energy coal by late this year 2030. It only represents a small share of our traffic currently. And both of our businesses, Telko -- namely Telko and ESL Shipping have a gold rating when it comes to EcoVadis. Then to the transformation that we communicated in November last year. So basically, we're saying that first, what we will do during Q1 2026, we will sell Leipurin to Lantmannen and this deal was announced already in August last year, but it takes some time as anticipated to get all the kind of local country-specific approvals by the authorities for closing this. But this deal, we are aiming to close over the next couple of weeks. Then when it comes to Telko and ESL Shipping, we're either going to have a demerger of Aspo by year-end 2026 or alternatively, we are going to sell ESL Shipping. And we have made progress when it comes to both of these scenarios and the ambition is, of course, to release untapped value by doing this. We have a very good starting point when it comes both to ESL Shipping and Telko to have separate companies formed out of these, possibly listed companies. And the reason is that we have decentralized a lot of the functions already from Aspo, including IT, HR and finance. And part of this development, I've taken -- during January, I've taken the role also as the Telko CEO in parallel to acting as Aspo CEO still. And this is also a sign of executing this portfolio vision. We will assess further integration of Aspo activities to -- with Telko and ESL and assess further opportunities to take out kind of structural cost from the company. Then I would ask our CFO, Erkka, to go through the financials in more detail.

Thank you, Rolf. First, looking at the rolling 12 months EBITDA development. ESL Shipping has continued fairly stable profitability from rolling 12 months view, about 9% EBITDA percentage, which shows that the good resilience of the profitability in such a weak market that we have today. Telko and Leipurin have been both improving the profitability, both on absolute terms and on percentage relative terms as well. Telko and Leipurin profit improvement comes from margin management with the pricing actions and then on the mix in both businesses, then also on the cost efficiency measures that we have been taking and then acquisitions that have contributed on the increasing profitability trend, leading then on Aspo level that a trend of profit improvement. On ESL Shipping on the fourth quarter 2025, the profitability declined compared to the previous year. The net sales on the Handys slightly increased, but clearly decreased in the Coasters. The weak spot market pricing continued and the soft contractual freight volume demand also continued, especially in the forest industry impacting then primarily the Coaster's operations. The steel industry activity continued on a healthy level. The contractual demand reached its lowest level early in the quarter and has then improved from thereafter. And during the quarter, we sold the vessel Kallio with EUR 18 million with a sales gain of about EUR 9.6 million, and that was reported as a comparable item. In Telko, the profitability increased to EUR 4.4 million compared to EUR 3.9 million the year ago. The net sales in Telko declined slightly with the modest demand in the most European markets where we operate. The organic sales volumes declined, driven mainly by the decline in the commodity products, while the demand in the specialty products remained on the same level than on the previous year. The product prices in Telko, in general, significantly declined during last year, driven by a decline in the oil price. Price levels have stabilized during the fourth quarter. However, the average sales price of Telko was slightly higher compared to the same quarter last year due to the higher share of the specialty products in our product portfolio. The profitability improvement compared to last year was driven mainly by the improved sales margin with the increased share of the specialty products and with our own pricing actions and also with the cost efficiency improvements, especially on the supply chain and then addressing our lower-performing businesses. Leipurin continued improving the net sales with a very strong organic volume growth development in Sweden and overall, the price development was also positive on the last quarter. The like-for-like profit improvement in Leipurin was EUR 300,000 and in addition to that, as there are no depreciations anymore after our announcement of selling Leipurin business that impacted EUR 600,000 to our profits. For the full year, the impact from not having the depreciation was EUR 900,000. Then on the Aspo Group level costs, the rolling 12 months cost level is EUR 5 million on the group level, and we are expecting to reduce that during this year with Aspo's strategic transformation continuing. During last year, we have already decentralized the common functions that we had on the Aspo level. They are now being moved to the businesses. And the full carve-out of all the common functions is expected to be completed during this year, supporting our transformation. Our net debt decreased to EUR 213 million. That was driven by the sale of Kallio, also decrease in our inventories and then also decrease on the prepayments related to the 3 Coaster vessels that are sold to the investors. The net debt figure includes EUR 56 million of advanced payments of vessels under construction. So considering that, the kind of like operative net debt is EUR 157 million, which is related to the assets that we have kind of operational today. Our net debt-to-EBITDA ratio is 3.6 and then the operational net debt-to-EBITDA ratio is 2.6 when considering against the operative net debt that we have. Leipurin sale is expected to decrease the net debt by about EUR 60 million on quarter 1. After Leipurin divestment, the ESL Shipping net debt is expected to be about EUR 130 million and then on Telko about EUR 30 million. And these net debt figures represent kind of the net debt level that you can assume on the kind of on a stand-alone basis. Liquidity continued strong with EUR 44 million in cash and EUR 40 million on unused credit facilities. And we have EUR 92.5 million of committed undrawn loan agreements in place for Green Handy investment. And for ESL Shipping, the net debt was EUR 123 million and the operative net debt for the current assets is EUR 57 million. The net debt to comparable EBITDA ratio was 3.6 and when looking at that from the operative point of view, that was 2.0. For the Green Coaster investments, net for this year will be close to 0. So that has been already kind of paid the investment. We still have some investment outflows, but they are then netted with the proceeds from the vessel sales that we have when we are selling the Green Coaster vessels to the investors. For the Green Handy investment, the cash outflows are going to be primarily in '27 and also in '28. Then handing over back to Rolf for dividend and the guidance.

Thank you, Erkka. So the Board's proposal to the General Annual Meeting will be to pay a dividend of EUR 0.25 per share, which generates a yield of close to 4% if you look at the December 31 share price. And this represents approximately 50% of the comparable EPS of year 2025. And it can also be compared then to the dividend paid last year, EUR 0.19 per share, so a small increase. And if we look at this year, we have a guidance and now we guide Aspo's profitability, excluding Leipurin. So Aspo Group's comparable EBITA from the continuing operations is expected to increase compared to previous year. So -- and that then means that looking at last year, we did EUR 29.4 million, which then includes Telko, ESL Shipping and Aspo Group. If we look what is behind this guidance, we expect -- in our core market, we expect economic growth to slowly revive during the year. Still, however, so that during the beginning of year 2026, we still have some challenging market. The figure -- the picture is, of course, a bit blurred. We still have geopolitical uncertainty. We have tensions when it comes to global trade, and these can impact then economical growth negatively. The good news is though that we feel that we have a lot of actions which we can focus on to improve our profitability, both in ESL and Telko. When it comes to ESL, it's primarily about fleet renewal. We will receive 4 additional electric hybrid vessels during year 2026. And then we also have opportunity to improve fleet utilization. So using the fleet of ESL in a more efficient way. When it comes to Telko, as you know, we have done a lot of acquisitions, and there's still a lot of potential to capture synergies between these acquired companies and Telko. And then what Erkka already mentioned, we have an opportunity to further reduce Aspo Group level costs, which are currently in the magnitude of EUR 5 million. If we then specifically look at ESL Shipping, we expect demand to slightly improve during 2026. And also, we expect the spot market pricing to gradually improve during the year. During the second quarter, we have quite significant dockings, which will impact financial results for Q2 2026. Then looking at Telko, we expect stable market development in 2026. And also, we are aiming to do further acquisitions, now leveraging the balance sheet as presented today and leverage the income sales gain from the sale of Leipurin. Then if we summarize the highlights 2025, 25% growth in EBITA during the year, ending up at EUR 36.5 million. We communicated a goal to split Aspo basically in 3 parts during -- by the end of year 2026, basically selling Leipurin into Lantm nnen during Q1 and then either selling ESL or having a partial demerger of Aspo by year-end. The dividend proposed by the Board is EUR 0.25 per share will be paid in one tranche after the general meeting in April. And then guidance for the continuing operations of Aspo is that the EBITA is increasing compared to last year when we had an EBITA of EUR 29.4 million. Then I would ask Erkka to join me on the stage, and we're ready to take any questions that you might have.

Pasi, please go ahead.

This is Pasi from Nordea. Regarding ESL Shipping, so are these dockings in the second quarter actually kind of a way to reduce your capacity due to kind of supply-demand problems? And if you don't have actually now enough customers and cargo for current fleet, where you are going to find new customers and cargo for new ships you are going to kind of receive in coming years? So have you truly sold the capacity already which you have ordered in terms of kind of ESL Shipping?

These dockings relate to the Handysize vessels. And as mentioned today, so we have good demand when it comes to the Handysize segments during last year and also looking into this year. The challenges have been more on the closer side, which are more dependent on the forest industry. Then if we look at kind of demand going forward, there are different elements of that. One is market revival, which, for example, when it comes to the forest industry, I think the general take is that kind of deepest dip in forest industry demand has been passed already, giving kind of positive signs for the outlook there. And then in addition to that, we still have a lot of investments in Finland, Sweden, which will add to the demand of ESL. One needs to remember that I think we are fairly well positioned in the market when it comes to this kind of green transformation of the Nordic industry. We're also well positioned when it comes to the forest industry where, for example, paper is not a segment which we are transporting. We were more in pulp and raw wood. Hopefully, I was able to answer your question.

Yes. Just to clarify, so...

Yes. We typically have 2 dockings every 5 years, and then they don't equally come on every year. So this year, we have an unusually high amount of dockings, partly related that on some of the older vessels, we are extending the lifespan with those dockings of those vessels. So bridging those vessels to a longer lifespan and therefore, giving us kind of certainty for the Handysize capacity for the coming years.

So just to understand, these dockings are made for technical reasons, not for demand-driven reasons?

Technical reasons, yes.

Yes. So you can confirm that new vessels will eventually add EUR 30 million on EBITDA on an annual basis when you have actually received all the vessels?

We still have the same forecast, which is EUR 30-plus million of EBITDA driven by the investments made.

Excellent. And then lastly, regarding shipping, if I saw right, you still have roughly EUR 100 million missing from the financial kind of arrangements for the new vessels. So how you are going to finance that missing part of EUR 100 million? Or are you going to sell all vessels to the pool or lease those back to the operations?

We already have a committed lending for EUR 92.5 million for the Green Handys, and our plan includes that we are selling 1 Green Handy vessel for the investor -- external investors.

So this EUR 92 million was actually for the 2 latest orders you have made?

Yes. So from that point of view, we do not see a concern on the funding.

Joonas Ilvonen from Evli. My understanding is that this This will be the iciest winter in 15 years around the Baltic Sea coastal regions. And I think a couple of years ago, ESL had like -- I think you a headwind this was on EBIT back then. I think it was -- maybe it was pulled with the labor issues back then. But can you comment on this outlook? I mean, I think it will affect at least Q1 and probably also Q2 efficiency for ESL?

Yes. The previous time, it was partly the strike and then it was tough ice conditions combined with very windy climate as well. I would still say that this is the kind of stronghold of ESL Shipping. So this is the core why ESL Shipping exists. So we are able in these tough ice conditions to serve the client with good service quality. Then you are right, depending on the ice conditions, the distances of the transportation will increase, there will be more fuel consumptions and which will affect negatively our effectiveness.

Okay. But now you're not giving any like figure at this point, what kind of a...

No. So far, the traffic has been functioning well. And I guess one clear reason is that it hasn't been so windy in the area yet. So we have been able to have quite efficient traffic so far during this winter.

All right. And then about this Aspo Group level cost, the reduction of them. Any -- can you elaborate on what kind of -- I mean, do you -- so now it's around EUR 5 million per year. Do you expect to be able to decrease them maybe 1/3 more of 50% or what kind of a magnitude?

No precise figure. It also depends a bit on the scenario which we are taking, but it's very clear that if you have a stock listed company, that ties up some extra costs. So in a demerger scenario where both ESL Shipping and Telko would be a listed entity we would have more costs allocated to both companies. But it's still, in all scenarios, we see some opportunities to decrease the EUR 5 million that you are mentioning.

All right. Then my final question. So the sale of ESL is a likely option, but ESL's profitability has been quite low for a while, and it still hasn't improved that much. So how do you think this impacts the possible sale dynamic of ESL at the moment? How are you like kind of taking care that you might be able to capture some of the future earnings upside that should be coming in the next, if not this year -- I mean, to some extent this year, but maybe more in the, let's say, '27 or '28?

The investor looking at ESL Shipping must understand that we're kind of generating value long term. We have a very stable cash flow, we have a very stable EBITDA and therefore -- and good opportunities to leverage also the balance sheet of ESL. And this gives a good return. So if you make a decision today to invest in a vessel, you will receive that vessel 3 years from now, and then you have a lifespan of 25 years for this vessel. So looking only at a quarterly figure or looking at an annual figure doesn't tell you very much because as we try to explain here today is that a lot of the net debt tied to ESL today does not generate any profitability today. So you need to kind of figure out the details of these figures. And then it's a very interesting investment looking at it. So I wouldn't too much look at a single quarter result. We still believe in what we mentioned is profitability uplift from the new second generation, following generation vessels.

Maybe just another question related to the guidance. So you guide improving EBITA for basically ESL and Telko. How can -- is it more -- I guess it's more driven by ESL, maybe Telko can also improve to some extent, but can you elaborate a bit on these, like how is the earnings outlook like, how steeply you might expect them to improve this? Or are you very confident on ESL improving this year?

I think it's really related to both of the businesses. So we have -- on the Telko side, we have untapped synergies. We also have a split between value-added products and volume products. We see organic growth opportunities and also, of course, from acquisitions, particularly in the value-added product segment, which will drive up our gross margin. And on ESL, as mentioned, we will get some new capacity, very cost-efficient, competitive capacity on board. And then it's all about us utilizing the entire fleet. So it's about fill rates, making sure that when you leave the harbor, your vessel is filled with cargoes to be transported. And then it's also about minimizing the time where you do not have cargo in your kind of transportation system so that you have kind of get revenue for most of the sea miles that you are running the fleet.

Then we have 2 more questions from the chat. These are both from [indiscernible]. So what do you consider a more likely scenario right now with ESL, sale or the merge?

I think we have basically 2 good scenarios on the table, and I don't want to speculate at this point in time, which one is more likely. We're preparing for both. We have a good kind of technical conditions to move ahead with this portfolio vision from the perspective that we have already decentralized a lot of the functions. We have, during the past, led these companies quite independently. And then also, we have a very good strategic prerequisites for executing the vision. We are going to sell Leipurin over the next couple of weeks, and we have invested a lot in ESL, and we have made a lot of acquisitions when it comes to Telko. So the preconditions for both of these scenarios are very good. And time will tell which one we pick.

Okay. And then another one. Could you comment on organic growth outlook of Telko? What are the key drivers increasing the demand of your products?

Last year, which Erkka earlier mentioned, we had very negative organic development in the volume products. So prices came down. Basically, they followed the oil prices and also volume came down. But on the specialty side, we had more flat development. And then looking forward, it's, of course, all about the revival of economical development, particularly here in Europe, how that will evolve. And that also is related to paper and pulp, it's related to construction, automotive, a lot of different industrial segments where Telko is in. But I think on a macro level, the overall kind of forecast is that in our core markets, the economical growth will be higher in year 2026 versus 2025. That goes for Finland, Sweden, in particular. So better outlook than last year.

Great. That's all from the chat.

Big thank you for joining our Q4 financial reporting. Thank you very much.

Thank you.

Thanks.