Borgestad ASA ($BOR)

Good morning. Welcome to Borgestad Group's First Quarter Presentation for '26. My name is Pal Larsen, and I'm the CEO of Borgestad ASA. And with me today, I have Bendik Persch Andersen, the Group CEO of Hoganas Borgestad. We'll together take you through this first quarter presentation. Start with some highlights. For first quarter '26, Borgestad Group delivered a result before tax of negative NOK 28 million compared to negative NOK 21.6 million in first quarter 2025. First quarter is a quarter where the activity is low due to Nordic refractory market in general mostly due to climate and seasonality within maintenance business for Hoganas Borgestad. For Hoganas Borgestad, market conditions have been increasingly challenging across the Nordics. As part of the global steel value chain, the Norwegian ferro-alloy sector has been affected both by the international steel demand and by specific developments in Norwegian market. Trade measures introduced by the European Union on imports from Norway, combined with persistently high electricity prices in Northern Norway have led to temporary shutdowns and reduced activity at several ferro-alloy plants. These factors have had a negative impact on revenue and margins during the period. Also, a general slowdown in Sweden and the Finnish market has intensified competition and increased price pressure negatively affecting both revenue and margins for the group. Despite a challenging market environment, it's important to emphasize that Hoganas Borgestad has a solid underlying operational performance. The Hoganas Borgestad Group has initiated comprehensive internal improvement initiatives aimed at further adapting and professionalizing the organization. These measures include improved project execution and cost discipline, as well as focus on organizational development and competence building. Together, these efforts have strengthened and will continue to strengthen the Group's resilience in a volatile market environment and have established a stronger platform for profitable growth and market conditions to improve. For Agora Bytom, first quarter is considered strong considering several tenant changes during the period. The changes include temporary reductions in rental income related to the onboarding of new tenants. Based on the changes within the center to increase year-on-year, both for revenue and EBITDA is a good performance. At first glance, the cash and net interest-bearing debt can be viewed as weaker than last year, but this is due to timing effect of paid dividend. In 2025, dividend was distributed to shareholders in second quarter, while in 2026, dividend was distributed in first quarter. Borgestad Group remains solid and fully financed. Before going into details, we'll start with a brief introduction to Borgestad. Borgestad is a company with a lot of history with industrial and shipping routes dating back to early 1900s. Over the years, we have now evolved into an industrial investment company currently invested in real estate and industrial refractory industry. Our current main priority is to improve and maximize the value for existing holdings. But looking ahead, we aim to take positions in niche segments with consolidation potential where we see that we can make a difference. We operate as active owners, meaning that we work closely and support our portfolio companies to drive operational improvements. In addition to profitability, capital efficiency is always a priority, ensuring resources are deployed effectively. We take a data-driven approach, continuously measuring everything we do. Additionally, M&A has been and will continue to serve as a tool to strengthen the competitive position of our portfolio companies. Our current portfolio consists of 2 key assets: Agora Bytom, our fully owned shopping center and refractory supplier, Hoganas Borgestad, which we hold a stake of 69.7% ownership in. Agora Bytom is a modern shopping center located in the city center of Bytom in Poland. The center is 52,000 square meter large of gross area with nearly 34,000 square meters of leasable area. With close to 5 million visitors annually, Agora Bytom holds a leading position in this primary catching area. Hoganas Borgestad is a manufacturer and supplier of high-quality refractory products and installation services serving industries that rely on high-temperature processes such as steel, cement and pulp and paper. With a strong presence in Norway, Sweden and Finland, Hoganas Borgestad is the market leader in the Nordic region. Let's go into some details for first real estate and Agora Bytom. Agora Bytom continued its positive trend with improvement driven by revenue growth by 5.2% in the quarter. EBITDA for first quarter increased from NOK 10.3 million in '25 to NOK 10.7 million in first quarter 2026. First quarter was a quarter with a lot of changes of new tenants and new tenants opened mostly at the end of the quarter and beginning of second quarter. Agora Bytom has a positive momentum on signing leases and had by end of first quarter occupancy rate of 96.4%. As part of the increase in occupancy, also the total area for commercial square meters is increased by converting common areas to leasable areas. Based on the occupancy rate and the most -- that most changes have been implemented for new tenants in first quarter, the remainder of the year is expected to be relatively stable for -- on operations, but with increased performance for revenue and EBITDA quarter-by-quarter going forward. Agora Bytom obtained a BREEAM In-Use certification during first quarter. The certificate confirms a solid standard for environmental performance, energy efficiency and sustainable building management. Going forward, Borgestad will focus on increasing rent levels by replacing tenants with low rents. As of March '26, debt stands at EUR 28.9 million, maintaining a sustainable financial position. It's worth mentioning that Agora Bytom started amortization in April '26 after amortization-free period over 2 years. This is according to the agreed schedule with Bank Pekao as we agreed when we refinanced the center in end of '23, and the debt is due at 31st of December '28. Tenant turnover at Agora Bytom decreased by 3% in first quarter compared to the same period in 2025. Number of visitors are stable in the quarter. It's estimated that decrease in turnover among the tenants is due to changes of tenants in the first quarter. The Polish economy growth has been resilient and above the EU average growth despite the trade turmoil and ongoing war in neighboring Ukraine. Borgestad expects continued positive development in consumer spending in Poland, and this should lead to better performance for the shopping center going forward. Agora Bytom benefits from a diverse tenant base and a healthy weighted average and expired lease term of about 4 years, ensuring low contract duration risk and high visibility for the years ahead. Contract duration are well spread over time with the first due date for top 10 tenants at first quarter 2028 and more than 55% of contract measured by number of square meters is due 2029 or later. Local management is actively engaged in ongoing negotiations with both existing and potential new tenants to further strengthen the tenant mix and occupancy level. I leave the word to you, Bendik.

Thank you, Pal. Hoganas Borgestad reported a first quarter revenue of NOK 181 million, down from NOK 186 million in the same quarter last year. EBIT for the quarter came in at minus NOK 18.3 million compared to minus NOK 11.5 million in the same quarter last year. This is largely reflecting the general slowdown in the European and Nordic refractory markets in addition to some challenges in our own project execution. As Paul mentioned in the introduction, market conditions remain demanding with several customers within multiple industries, having temporary shutdowns or delaying projects, which in the short term is resulting in lower overall utilization across Nordic refractory players, which inevitably is impacting us as well. This has been particularly visible in Sweden and also now in February and March, also among ferro-alloy producers in Norway, which have been affected by both the recently introduced tariffs on Norwegian ferro-alloys into the EU and by unusually high electricity prices during the winter in the Northern parts of Norway. While the weaker performance is clearly driven by the broader market downturn with similar trends being reported by refractory players across Europe, it's also evident that we have internal improvements to make. In particular, there is a need to further professionalize parts of the organization. To address this, we have initiated a range of measures, both at the group level and within each single subsidiary. As highlighted in previous presentations, the Nordic refractory market is characterized by pronounced seasonality with lower activity levels during the winter months as the activity level is typically picking up in the first part of second quarter and peaking in the third quarter. This year's first quarter has been no exception with limited project activity throughout the quarter. Looking ahead, we expect a substantial pickup in both revenues and profitability in the second and third quarter. To mitigate some of this seasonal slowdown during winter, we are also further intensifying our focus on securing projects for execution in Q4 '26 and Q1 2027. And finally, a brief update on the Bjuv leaseback agreement, where we do not have any meaningful updates since our Q4 2025 report. But for those less familiar with the background in late 2023, Hoganas Borgestad signed an agreement to divest 2 properties in Bjuv to the local municipality. As part of the structure, we secured the option to lease the properties back for up to 5 years, giving us the necessary flexibility while planning for relocation of production. Following a complaint from a local resident regarding the transaction price, the Administrative Court in Malmo set aside the agreement in March 2025, referring to insufficient documentation supporting the valuation. The municipality appealed this ruling in April and provided additional supporting material. And in June '25, the court agreed to reopen the case. And in December 2025, the Court of Appeal ultimately ruled in favor of the transaction, clearing the way for the sale to proceed. In January this year, however, the same individual filed a further appeal, and the case is now being reviewed by the Supreme Court. Based on typical time lines, we expect a final decision prior to the summer or just after this summer. We remain confident in the outcome. And once the transaction is finalized, intend to resume planning of future production, which has been put on hold while waiting for the legal process.

Going to financials. Turning to the financials for Borgestad Group. We start with the P&L. Revenue is stable in first quarter '26. EBIT decreases in first quarter compared to same period '25 due to increased depreciation in Hoganas Borgestad and a write-down of fixed assets in connection with the tenant change in first quarter '26 for Agora Bytom and the fact that Hoganas Borgestad has a weaker start of the year. Net financials are stable year-over-year. Looking at the balance sheet. Working capital stands at NOK 199.1 million, a decrease from NOK 216.6 million as of March 31, 2025, mainly driven by decreased trade receivables and inventory within Hoganas Borgestad. Per December -- per March 31, total interest-bearing debt stood at NOK 456.4 million, while net interest-bearing debt was at NOK 335 million. As communicated, the debt in connection with Agora Bytom has in April 2026 started amortization according to plan and agreement with Bank Pekao. The property in view remains classified as held for sale pending the expected court decision in near-term future. Borgestad expect that the process will be finalized in 2026 with closing of the transaction, of course, conditional of the positive Supreme Court decision. Net cash flow from operating activities for the period was positive at NOK 11.8 million. Cash flow from investing activities was negative with NOK 8.4 million, and it's a 50-50 split between -- in investments between Agora Bytom and Hoganas Borgestad. Net cash flow from financial activities is negative with NOK 34.5 million compared to negative NOK 9.8 million in first quarter '25. The main difference is timing of dividend payment. Dividend was paid in first quarter in '26 and second quarter in '25, as earlier mentioned. March 31, available liquidity stood at NOK 121.5 million, including NOK 75.3 million undrawn credit facilities -- credit facility for Hoganas Borgestad, meaning that Borgestad have a good cash situation going into high season. To summarize, Borgestad delivered as communicated and expected in first quarter '26. Borgestad expect the group to deliver improved underlying results and stronger cash flow with continued positive margin development in both the refractory and Property segments over time. To be a bit more specific, Borgestad expect Hoganas Borgestad to deliver the coming quarters as mainly in 2025 (sic) [ 2026 ] quarter-by-quarter. While for Agora Bytom, we expect a small decrease both in revenue and EBITDA quarter-by-quarter going forward compared to '25. Cash flow remains solid and net debt at a sustainable level. Borgestad expects to continue the good development going forward on a longer term. We got any questions, Bendik?

Yes. We have got 2 questions, starting with the first. What caused the increase in right-of-use assets and lease liabilities?

Yes. Both items on the balance sheet increased quite heavily and is due to the fact that Hoganas Borgestad has signed 1 or 2 leases with a quite a long timing effect.

Then we have a question regarding the sale leaseback in Bjuv. Is the cash receipt expected immediately in the case of a favorable ruling in the Bjuv case? I can start answering. So as I said, we do expect to have a decision either just before the summer or in August. And we intend in close dialogue with the municipality to close the transaction as soon as possible following a favorable ruling. And then the -- we do expect the cash proceed so the first tranche of 3 to be distributed closely after transaction. But we will do some debt amortization, whereas most of the cash proceeds will be distributed as dividend. presumably.

Any other questions?

No other questions.

Then thank you for participating, and have a nice day.

Thank you. Thank you.