Aspo Oyj ($ASPO)

Welcome to the financial reporting of Aspo Q1 Stable performance in a challenging operating environment is the heading. If I start with some highlights. Our profitability development was flat against last year, a small decline. We made some EUR 7.1 million of EBITA compared to EUR 7.3 million last year. The divestment of labor into Lantmännen was completed in March and that has had a significant impact on the financial KPIs of Aspo. The reported EBITA was close to EUR 20 million. We had a strong free cash flow of EUR 50 million, and the leverage was in clear decline to [ 2.8 million ]. That's net debt divided by EBITDA. The earnings per share, cents per share based on the comparable profitability and EUR 0.5, if you include also the one-offs in the profit. Then a bit more about the profitability development, as said, EUR 7.1 million against EUR 7.3 million. Yes. So shipping had a decline in the profitability, EUR 3.3 million. And that was because of overall weak demand due to the war in Iran. Basically the fuel prices were double during March, and there's a certain lag before we can transfer these costs to the customers and hence, it had a negative impact on profit growth against 4.4% last year. There was a couple of reasons. One is, again, a good development in sales margin, driven by active management and then due to the growth in specialty products. Overall demand was fairly weak, but in specialty chemicals. And then we saw a bit of stock buildup among the customers due to the war in Iran during March. Price levels below the prices of Q1 last year but still a positive trend driven by positive oil prices development during March. If we then take an overall picture of the war in Iran and how that impacted our businesses, it was actually a quite different impact on ESL Shipping versus Telko. So ESL Shipping negative impact on fuel prices increasing significantly. And as I said, a certain time lag before these are transferred based on the customer contracts to the customers and hence, negative profitability impact. However, if we look over time by the contract. Telko, again, I would say, a positive impact. So partly due to the stock buildup, so customers securing supply, building up their stocks and a positive volume impact, therefore is during March. So some positive impact from the fact that by selling all cheaper inventory at a higher price. Some positive impact from that. And if we look kind of overall, some risks, of course, with the war in Iran, if you look at kind of direct impact on Aspo, there are risks regarding the supply chain, regarding some products could also be a risk. But I would, though, say that -- all of these will kind of be mitigated over time, but the major risk and indirect impact that is if the economic growth is in decline due to the war in Iran. And that's both for ESL then, of course, in the -- particularly looking at the Nordic industry and for Telko, if we look at particularly -- if that -- if the war will continue for a long time, this is a major indirect risk also for Aspo. As said, EUR 20 million of EBITA group total, and that then includes the profitability development of laboring for the approximately 2 1st months of the year and also includes the sales gain. Some one-off items, particularly regarding Telko. So we pulled out of 1 market segment with a small write-down. And therefore, the is EUR 6.5 million against EUR 7.1 million, which is the comparable EBITA. Safety and sustainability, good development during the first quarter, both companies were below the safety frequency target. So no accidents in Telko against the target frequency of 3.2 and then ESL Shipping due to the 1 accident, 4.2% as a frequency against a target of 6.7%. We continue to work hard to achieve these targets. As said, Leipurin now divested, which means that we are fully focusing on how to separate ESL Shipping and Telko still 2 options on the table. We have a possible partial Aspo creating 2 listed entities out of ESL Shipping and Telko or then alternatively a sale of ESL Shipping. And as I said before, what drives us here is the value creation and how the businesses will develop in the future. Leipurin had -- the sale of Leipurin had a significant impact on our financial KPIs. Here's a couple of examples, EUR 160 million compared to above EUR 210 million and the leverage down from EUR 3.3 billion to EUR 2.8 billion. The enterprise value was EUR 63 million, and the sales gain, this is now corrected figure. So it's EUR 12 million against the previously reported EUR 50 million on the purchase price, EUR 62 million. And this will impact particularly Telko opportunity to do acquisitions going forward. To our strategic vision, we are still on a dual track looking at both the demerger as well as a potential sale of ESL. Currently, ongoing financial discussions with financial institutions to secure financing of ESL shipping. And then ESL shipping as also Telko very much focusing on profitability improvement. And for ESL, that really means getting on board then fully leveraging the capacity of vessels of ESL. There's also a lot of activities to improve commercial performance. On the Telko side, there's a similar profitability improvement program going on, a lot of synergies that still can be captured from the acquired companies and also actions to improve operational efficiency and also commercial excellence. We're in the process of launching a new strategy for Telko as of 1st of May this year, also a new organization will be in place structure around 2 business units, Essential solutions, which is really focused on volume chemicals and these value-added services with the ambition to take synergies particularly with the Nordic countries, and that's approximately 1/3 of net sales. And then we have a second business unit [ adds Materials ], putting all the specialty products under the same umbrella to serve customers with a broad product range, and that's approximately 2/3 of net sales. And then I would like to hand over to Erkka Repo, our CFO, to go through in more detail the financials.

Looking first, the big picture on the rolling 12 months basis. Over the last 2 years, the latest slightly down -- but on a big, big terms, stable performance, whereas Telko continue improving the performance over this time. On ESL, on quarter 1, faced a fairly low demand in the early part of the quarter and the contractual quarter. And also the approach at cargo contracts that especially on the windmill projects in the coaster segment they increased also the demand for the business. The steel industry activity continued at a good level throughout the quarter. Like Rolf mentioned that the profitability was also negatively impacted to the price adjustment lag on the fuel price movements passed through to the customers. So this is a temporary and it will be evened out on a longer term as they pass through kind of correct then the pricing for the fuel price movements. Also in the second quarter, we acquired a secondhand Handysize vessel to ensure sufficient capacity until the green and the investment, the new fleet is coming in, in 2027 and 2028. This is filling the hole in the capacity since where on the second half of last year, we sold 1 Handysize vessel. On Telko, the market demand specialty products, the volumes increased clearly towards the end of the quarter, we saw a clear pickup on the volumes with the customers increasing higher prices and for supply security. The average prices were lower than last year on the first quarter. However, the table in the early part of the quarter and then prices started an increase in March impacted by the increase in the oil price. The profitability improvement by sales margin management and then some positive impact from the increasing prices and the inventory impact from that. The group level costs continued going down during the quarter. And then we see a clear trend on decreasing cost level on the rolling 12 months basis. The labor and divestment decreased our net debt by EUR 63 million. We see EUR 161 million net debt at the end of the quarter and 2.8 net debt-to-EBITDA ratio. The net debt by businesses is EUR 138 million for ESL Shipping. And then for Telko here, assuming that the rest of the net debt belongs to Telko being EUR 24 million. Have a dividend payout of EUR 0.25, about EUR 7 million going for the shareholders. Then our liquidity. We have a very strong liquidity with EUR 50 million in cash and then EUR 40 million of unused credit facilities. And we have also secured the committed funding for the Green Handy investments for now setting up the funding for the stand-alone companies going forward. And looking at the maturity profile of ESL Shipping funding with the long maturities out there. For ESL Shipping, there is no further net cash outflow for [ Green Coaster ] investment on this year. We do have an investment payment going out, but that -- but at the same time, we will have a positive the cash flow from the sale of the pooled Green Coast vessels. For the green on that, about 10% of that cash flow will -- is expected to happen during this year. Then handing back to Rolf for the guidance.

Thank you, Erkka. So the guidance is unchanged, and we expect the year, it was EUR 29.4 million, and that then excludes Leipurin. If we look at the assumptions Behind the guidance, it's very much focused on our own actions. So various profit improvements, both in ESL Shipping and Telko. Particularly in ESL, we have a fleet renewal under green coasters utilization. On the Telko side, synergy opportunities from the acquisitions completed -- and then we have still cost reduction opportunities at an Aspo level, which are, to some extent, already can be seen in the Q1 figures. If we then look at the assumptions behind the markets for ESL shipping, we expect demand to slight Telko. We expect fairly stable development, basically volumes and prices normalizing during the year. And again, Telko, we expect a fairly stable development, basically volumes and prices normalizing during the year. Then highlights from Q1, approximately flat profitability development, EUR 7.1 million of EBITA, big progress when it comes to strategy execution, sales of labor into Lantmännen. And then we continue to strengthen to be ready for executing sports vision, either a demerger or a divestment of ESL shipping. That is reporting, and I would ask Erkka to join me on the stage, and we are ready for possible questions.

Maybe then starting here in the audience, if there are some questions. Please, Kasper, go ahead.

Do you expect that Telko will see a more distinct positive impact from price increases during you Q2?

It, of course, very much depends on the war in Iran and how that evolves. But there are -- there is some spillover effects from March also going into Q2 as a positive effect. But fluctuations it's zero-sum games. So some -- if the prices are developing in a favorable direction, there's a small positive impact. And then in a decline, there's a slight negative impact. So no major effect of this.

All right. And how would you describe the short-term demand outlook for ESL going into Q2?

We look -- when we look at year 2026, we improving volumes for if we look at purely kind of Q1, the demand was very weak in the beginning of the quarter and then gradually picking up during the quarter. And there was a couple of drivers behind that. One was the increasing project cargo deliveries for the coaster business. And then we had good demand in steel product the Handy segment.

And how significant an impact on earnings is expected from the dockings in Q2? Do you expect ESL's EBITDA to come down in Q2 compared to Q1 because of [indiscernible]?

There's a negative effect. So some of the vessels need to be docked and that typically is done during the summer time. Of course, we try to mitigate any negative profitability impact, but that's a fact that we have a kind of reduced fleet for Q2.

And what about the EBITDA expectations? Do you expect the EBITDA to be lower in Q2 compared to Q1? Or should we expect to see better margins?

We don't guide on a quarterly basis.

All right. And lastly, what kind of costs have you been able to reduce within group expenses since this came down quite significantly compared to previous year? ?

It's a good question. So I would say partly, it's projects, but also it's kind of a reduced number of projects. But partly, it's also taking -- on the business level as well as on an Aspo level. So it goes for all the kind of activities, it's IT, it's finance, management and gradually taking out kind of double cost.

This is Pasi from Nordea. Can we start with the Telko segment and looking at the kind of the demand in the first quarter and probably the effect seen in the second quarter? So would it be possible that you are going to see a highly negative effect in the second quarter? If all your customers have actually filled up the inventories to kind of expected price increases in the first quarter. So would it be a fair assumption that volumes will be kind of definitely a negative tricky in the second quarter a q-on-q basis

I would not expect any drastic impact from this. I would still say that the big impact, which in specialty products. And then we assume that there's some stock buildup due to the war in Iran. But I wouldn't expect any major kind of negative impact from this.

So well, I would still assume that this inventory buildup cannot actually continue in the second quarter EBITDA because it has already been made.

That's true. But my point is that I think during Q1, the major impact from the volume increase comes from our success in specialty products and the stock build -- it's -- inventories when they go up at some point in time, they will normalize again, and that is likely to happen then during the year. And maybe the bigger impact is that is this going to have an impact on major question for Telko.

Yes. I truly understand that. And then when looking at the kind of money you actually received from the front labor and divestment. So obviously it's going to be used for the acquisitions in the Telko segment. So what is your kind of magnitude of fire power you are going to use for M&A activity on this year into the Telko segment?

Complete some acquisitions this year. So that's clearly the target. Now we have the firepower to do that. But of course, that also requires that -- we are not aiming to do any poor acquisitions. We will stick to the plan of making sure that we drive some positive synergies and have quality targets with good financial profitability above all.

Yes. But assuming that you would actually find a target. Would it be kind of EUR 10 million, EUR 20 millin, EUR 30 million, EUR 50 million like in terms of deal size?

We're looking at fairly small targets, maybe starting around EUR 5 million to EUR 10 million of net sales, and then it goes up to targets of similar size of [indiscernible] handling, which is already kind of EUR 50 million of sales. So this is the magnitude and looking at both type of acquisitions opportunities. So both the stuff of add-ons and then kind of new platforms for growth.

Excellent. And then when looking at the kind of the shipping segment. Well, this -- the problems and effect we have seen from the middle -- for the shipping yields in the second quarter or third quarter. So is this global effect for pricing actually visible on your fleet here in [indiscernible] or not?

If we look at fuel prices, as mentioned, we don't see that to have, over time, a big effect on the profitability of ESL Shipping. What can have a big effect that is the kind of indirect impact and that comes then from overall economic development and how that impacts the demand for ESL Shipping. So that's the question mark. But we are forecasting for this year kind of slightly improving demand also for ESL Shipping.

And then when you compare this indexes for shipping market, those indexes obviously include also fuel price impact. So obviously, for our contracts, the fuel prices are kind of rolling into the prices as well.

Excellent. And then do we have any figure to for us to offer regarding the capacity increase in the shipping segment. So it would be very nice to see kind of your capacity growth against kind of net sales growth or the earnings growth.

The capacity utilization comes from a couple of different sources. So one is that we will get more [ green coaster ] vessels during this year, 4 vessels. Then a second view on capacity is kind of fill rates, so that making sure that for every leg you have -- are using the full capacity of the vessel. And then there's a third source, which is the kind of cargo planning. So to what extent you have kind of ballast legs in the traffic. So to what extent you're able to maximize the -- in all of these areas, I mean, starting with the vessel capacity, we will get 4 more vessels this year than we have, by end of the year, 12 green coasters in the fleet and when it comes to fill rates and then ballast going on and following these KPIs and making the most of improving that.

No, no. On the longer term, we still see the same what we have communicated earlier that the demand on the ice class area towards the end of this decade and currently, we do see the new builds on the size that matches the demand increase.

Yes. I just thought that are you still happy with your earnings growth. So no negative -- incrementally negative rash on the expected yields you expect to kind of gain from this new ship on new investments?

Now if we look at the earnings of our fleet, so both when it comes to the green coasters that we have in the balance sheet and then the green coasters that are pooled investments made by a pool of investors, both are kind of -- it's quality earnings, the profitability compared to the old fleet.

The same on the Handysizes that the newest vessel -- so the new fleet is much more kind of cost-effective than the older ones. So we still believe on the kind of the earnings growth that we have communicated earlier.

Excellent. And are you going to run dual track until end of this year in terms of kind of to find a decent pricing and valuation for the ESL Shipping segment or are we still sort from this kind of possible divestment of the demerger?

In practice, yes, because the demerger of Aspo, it's a very kind of formal process, demerger by year-end. And in parallel, we are looking at the divestment scenario. So it is still open in there which scenario is preferred for us.

Yes. But would it be a right assumption that you would actually still prefer that the divestment of the segment rather than demerge?

That is to early to tell. So we have both options on the table.

Great. And then we have a few questions from [ Jonas loan Every ]. You already discussed -- another one, our customers for Telko still building up their stocks and what are the inventory levels of Telko if we start from those?

The inventory levels of Telko are fairly normal. We have inventories of a bit more than EUR 40 million in Telko. So fairly normal level. And when it comes to stock buildup of the customers, it's really depends on kind of market signals and the war in Iran, how that will evolve. So that is still a question mark.

Okay. Then related to the new business units of Telko, any comments on the relative profitability levels of essential solutions and advanced materials. Advanced Materials should have more potential for long-term value creation. What kind of organic investment opportunities do you see there beyond M&A?

Good questions. So if we look at Advanced Materials, it's basically specialty products. So by definition, they have a bit of a higher margin and we have good opportunities for M&A, but we also can invest in building up the sales force and gaining market share and growing with the market. Then when it comes to the other business unit, the essential solutions actually the profit lot of value-added services. So we blend the products, we package the products, we store the products. And by doing that, we add value. And here again, big opportunities to capture synergies, to basically leverage the knowledge of [indiscernible] handling outside Sweden, but also the knowledge and know-how of Telko chemicals outside of particular filmed.

Fuel prices has the war and the Strait of Hormuz situation had any logistical spillover effects on the Baltic Sea dry bulk cargo markets.

I would say that we haven't seen such at least so far. But there's -- it's naturally a risk of kind of supply chain disturbances and maybe also maybe particularly then for Telko that supply can be restricted in certain products. So these are risks going forward.

But also for Telko, so far, we haven't seen any supply chain constraints.

That was all from the line. So we are ready to conclude.

A big thank you for joining Aspo's Q1 2026. Thank you.

Thank you.