Gränges AB (publ) ($GRNG)

Good morning, ladies and gentlemen, and welcome to Granges' First Quarter Results Presentation for 2026. My name is Jorgen Rosengren, and I'm President and CEO at Granges. And today, I'm joined here in this conference by Oskar Hellstrom, our CFO and Deputy CEO; and Anna Hedenberg, our Investor Relations Director. I'm going to give you a short summary of the first quarter, after which Oskar will present our results more fully. And then I will round off with some comments on the outlook. Today, we'll try to go through the presentation rather quickly, which means that there is going to be ample room for questions and answers after the presentation is done. Now to summarize the first quarter, we'd like to first point out the good volume growth that we've enjoyed. We grew our sales volume by 5% and all of that's organic, of course, since it's now a while since we made our latest acquisition, despite actually quite weak demand -- unstable demand, but also quite weak demand in many of our markets. So we grew quite a bit faster than the market. An encouraging sign was that this growth actually speeded up during the quarter and March was a very strong month, which gives us, of course, momentum going forward. The driver behind the growth that we did realize is that we took market share in all of our regions in this quarter as we have been doing for some time now. And in fact, the first quarter of 2026 was the ninth consecutive quarter, if we counted that correctly, of year-on-year sales growth in Granges, and that's a very good trend and one we'd like to, of course, to keep up going forward. A little less positive, of course, is the pressure that the higher aluminum price, which again rose during the quarter, exerts on our working capital and our cash flow. And we believe that this trend will persist at least into the second quarter. On the other hand, we had quite strong operational performance in all regions in the quarter, especially towards the end of the quarter. And this was a key factor behind the strong volume growth and also the good result. And that's, of course, because, as you realize all of you, of course, good operational performance that enables us to flexibly capture market share opportunities that emerge during the quarter in a speedy way. But it's also, of course, so that good operational performance also drives productivity. Now then as a result of this good commercial performance and operational performance, we were able to offset cost increases as well as a large negative currency effect around SEK 85 million or so with share gains, price and productivity in the quarter. And in doing so, we realized an EBIT increase of 12% to SEK 459 million, which is the best ever EBIT in the first quarter for Granges. And if you'd count in constant currencies, of course, you'd see that the underlying performance improvement is much higher still, probably around or above maybe even 30%. It's also great to see that our sustainability performance speeded up in the quarter, resulting in both an even lower carbon footprint for our business and also increased recycling, something that's a strategic priority for Granges. Now as I mentioned, we took significant market share in the first quarter in all of our regions, in fact. And here, you can see how that plays out across the regions and across our end customer markets. But let me just touch on some highlights here. In HVAC, we saw a very weak market, which -- a trend that started, I guess, in July or so last year and persisted during the autumn and also during the first quarter of 2026. But nevertheless, we were able to keep sales volume roughly flat, thanks to significant market share gains. So we very strongly outperformed the market in this segment, which secured then a volume growth of 3% for Granges Americas. In Asia, too, we took market share gains, and we did outperform the market. So the share gains almost offset weak market demand. And the weak market demand, of course, was due to low vehicle production in Asia in general and in China specifically. And the growth ended up just slightly below 0 and slightly negative. In this chart, I think Europe deserves a special mention. We had a very strong share gain in automotive and other niches, which created a very healthy growth around 15%, which, of course, far outstrips any growth that the market provided us with and also, we believe all competitors. Now for several years in a row, we've experienced large volatility around this geopolitical volatility, macroeconomic volatility, also practicalities that have been quite volatile, for instance, in the supply chain. And for our business, of course, that means that the landscape we're playing in, the conditions we have to accept change rather rapidly, both commercially, operationally and also financially. And this, in turn, means that we have to react fast and flexibly together with our partners to offset those effects. We've done this, we feel, in a good way, and this latest quarter was certainly no exception. Now the outbreak of the war in the Middle East added, I guess, you could say, to an already complicated situation in many ways besides being, of course, from a human angle, a really terrible thing. We did see higher market prices for energy, for freight and other factors that are important in our P&L. But thankfully, the impact on our profit, at least in the first quarter was rather limited, and that's thanks to timing effects because some of these things take time before they work themselves into the P&L. It's also thanks to our hedging and other risk management policies and other various actions that we've taken. And this, of course, is something that we've had quite a lot of practice with over the past years, and it's, I think, no exaggeration to say that we've significantly strengthened our ability to withstand such external shock effects, such external shocks by way of strengthening our risk management, our processes internally and also our commercial contracts, both upstream in the value chain and downstream. We also saw a significant aluminum supply chain disruption, which further fueled the already existing trend towards higher aluminum prices. And these, as you know, will do and will impact our cash flow and working capital. Like I said, we've gotten quite used to handling turbulence like this over the past years. And in the first quarter and as has been the case in the past and will be the case also going forward, our focus is on things we can control or at least influence. And that top of that list, I guess, is market share gains and then to optimize productivity -- sorry, price and mix and also to improve our productivity, all things that we did in a good way, I think, in the first quarter. Now if the cash flow took a bit of a hit in the first quarter from the higher aluminum price, but was also influenced by our seasonal working capital buildup, which takes place every year. It was, however, helped by lower CapEx than we've had before. And that's because we're now fully out of a year's long and rather intensive investment phase, which lasted from 2018 to 2025. And you can see this on this chart in the dark blue bars that we had quite a lot of expansion CapEx in those years on average and in total. But as you can see on this picture also and maybe reiterating a message from the last several quarterly reports, we now project very limited capacity expansion CapEx in the next 2 years. And that we hope will make a meaningful difference to our balance sheet strengthening it and also of course, provide for a better cash flow going forward. That said, the cash flow in the first quarter was weak, and we want to be clear about that. And with that, I'd like to thank you for your attention and turn over to Oskar, who is going to take us through a little bit more fully how the first quarter played out.

Yes. Thank you, Jorgen. I will certainly try to do that. And as we just heard here, the first quarter 2026 was, in fact, the best quarter we've had so far. We continue to experience a solid sales growth despite the continued softness across most of our markets. And as you can see on the left here, the sales volume grew by 5% year-on-year to 160,000 tonnes. Also on the earnings side, we saw a positive development with the adjusted operating profit increasing by 12% or SEK 50 million to SEK 459 million. Looking at the margin or the adjusted operating profit per tonne, this improved by SEK 200 from SEK 2,700 in Q1 2025 to SEK 2,900 in Q1 this year. I think this is a very good development, taking into account the strengthening of the SEK against primarily the U.S. dollar, which led to a negative year-over-year currency effect of SEK 85 million in the quarter. In constant currency, the operating profit increased 33% and would then have reached SEK 544 million with a SEK 3,400 per tonne margin in the first quarter. And this, I think, is a good indication of the momentum that we have in the underlying business right now. If we look at some of the earnings drivers, we note increasingly inflationary pressure for several cost items, not the least in Americas. But on the positive side, we also see a continued sequential improvement of the market scrap spreads. And also from a year-on-year perspective, we saw a slightly positive impact on profits from the improved scrap spreads in the first quarter. Here, we should also say that provided that these scrap spreads remain on the current level, we expect to see increasingly positive year-on-year effects from this over the next 2 quarters. Looking at the things we can control ourselves, we continue to see positive effects from volume growth, improved pricing and continued productivity improvements. Let's continue with some more details of the group financials then before we go on to the operating segments. And here, I think it's worth to highlight that the profit for the period increased by close to 24% to SEK 322 million for the quarter. And this is, of course, driven by the improved operating profit, but we also see positive effects from a lower financial net, primarily from lower market interest rates. And thanks to this, earnings per share attributable to Granges' parent company shareholders increased to SEK 2.93 for the first quarter. The return on capital employed reached 11.1% in the quarter. This represents a sequential improvement of 0.3 percentage points compared to the fourth quarter, but a decrease of 0.6 percentage points compared to a year before. And the year-on-year decrease is primarily attributable to 2 things. First, the additional capital we've added in Asia to the acquisition and ramp-up of the facility in Shandong. And second then, of course, to the higher market price for aluminum. And the development of the aluminum price, I think, is something we should comment a little bit more on before we look into the cash flow and leverage development for the quarter. Now as most of you probably know well by now, Granges makes money on the value that we add on top of the raw material and the aluminum price is to be considered as a pass-through to our customers, right? This means that the impact from the aluminum price on the operating profit in absolute terms is limited. The aluminum price does, however, impact the value of our working capital. And when the market price for aluminum increases, this has a negative impact on the change in working capital and consequently on our operating cash flow. Understandably, the reverse is true when the market price declines. On the back of the U.S. introduction of tariffs on primary aluminum from Canada, the Midwest transaction price for aluminum has close to doubled since the beginning of 2025. And driven by this, the average aluminum price for Granges on a global level then has increased by about USD 1,500 per tonne in the same period. And we continue to see a further increase of the aluminum price in Q1 in all 3 regions where we operate, and this is then largely fueled and driven by the war in the Middle East. In the first quarter, the increasing aluminum price had a negative impact on our working capital and cash flow with some SEK 550 million. And provided that the aluminum price remains on the current level, we expect that the increase to date will impact the operating cash flow negatively with about SEK 500 million in the second quarter. With this in mind, let's now look at the cash flow for the first quarter. Starting with the operating cash flow, this amounted to negative SEK 333 million in Q1. As you can see on this chart, the strong EBITDA could not fully compensate for the buildup of net working capital that totaled SEK 877 million. As I mentioned earlier, SEK 550 million of this is related to the increased aluminum price and the remainder is a volume-driven seasonal increase from the fourth to the first quarter. Capital expenditure amounted to SEK 123 million in Q1. Including taxes and interest paid as well as changes in currency rates, this led to that the financial net debt increased by SEK 517 million to close to SEK 4.6 billion during the first quarter. The net debt-to-EBITDA ratio increased to 1.8x, so still within our target range of between 1 to 2x. Now let's continue with the operating segments and starting with Granges Americas that made a record quarter and reached a new all-time high for both sales volume and operating profit. And as you heard from Jorgen earlier, the sales volume in Americas increased by 3% year-over-year in Q1 despite a continued weak HVAC demand, despite impact from a rescheduled maintenance stop and some adverse weather that we experienced there in the beginning of the quarter. But if the start of the quarter was a bit slow, that was compensated by a very strong finish and driven primarily by share gains. The sales volume in Americas came in just about 62,000 tonnes for the quarter. In terms of earnings, we see increasing negative year-on-year currency translation effects from the strengthening of the Swedish krona against the U.S. dollar. And in the first quarter, the net change in foreign exchange rates was negative SEK 57 million compared with the same period last year. Further, we continued to experience increased inflationary pressure on wages and other input costs. Still, we managed to compensate for all of this with volume growth, increased average fabrication price and improved productivity. And as a consequence, the adjusted operating profit increased by 17% to SEK 378 million. And in terms of the margin, this represents an operating profit per tonne increase from SEK 5,300 to SEK 6,100. And needless to say, I think our Americas team has done an outstanding job here. Leaving Granges Americas, moving on to Granges Asia, where the market slowdown that we saw toward the end of last year remained in quarter 1. We continue to gain market share with primarily automotive customers, and this compensated for some of the lower demand. And in total, the sales volume decreased by 2% to slightly below 48,000 tonnes. When it comes to earnings, the effects from lower demand and market price pressure were only partly offset by the share gains and by productivity increases. And as a consequence, the operating profit decreased to SEK 51 million and the operating profit per tonne came in at SEK 1,100. Changes in currency rates had a close to neutral impact compared to the first quarter last year. Moving on to Granges Europe. And here, we continue to experience weak demand across all markets. We did, however, successfully compensate for this with market share gains, especially within automotive and other niches. In total, the sales volume in Europe increased by 7,500 tonnes or 16% to 54,000 tonnes in Q1. And against the backdrop of today's European market, I think this is truly an impressive achievement. Despite negative effects from foreign exchange rates of SEK 27 million compared to last year, the operating profit increased by 55% to SEK 73 million. And this is driven by the volume growth, together with improved pricing and cost productivity. The operating profit per tonne reached SEK 1,300, up SEK 300 per tonne compared with last year. Finally then, some words on our sustainability performance, which remained strong in the quarter. We continue to reduce our carbon emissions intensity, which is down 15% and to increase our share of recycled aluminum or sourced recycled aluminum, which is up 9% compared to first quarter last year. During the quarter, we also issued a new SEK 600 million green bond for which we experienced quite large investor interest despite the market turmoil. And this, I think, reflects the confidence in our strategic direction and sustainability ambitions, which I think is great to see. And last but certainly not least, we have achieved the highest MSCI ESG rating of AAA, recognizing our leading ESG performance and resilience within our industry. And this, we are, of course, also very happy with. With that, I hand over back to Jorgen, who will provide you with an outlook for the second quarter.

Thank you, Oskar. Yes, now we're getting near to the end of our prepared remarks here, but let me first give you a flavor of what we're expecting for the second quarter of 2026. And then I think first, we need to say and acknowledge also that we do see a lot of uncertainty around us and larger uncertainty maybe than ever, although we have been saying that now for quite some time, every quarter almost. And as a result of that, of course, market demand is weak, I want to say, generally and also quite difficult to predict. But having said that, though, our ambition is to continue to take market share in all of our regions. And that's also the reason we're -- we feel confident in being able to forecast a mid- to high single-digit volume growth in the second quarter. And all of that, again, is based on taking market share. Now to get the full benefit of that growth, we aim to continue to offset any negative external effects such as the negative currency we expect to experience in the second quarter and cost increases of various kinds. We intend to effect -- offset those negative effects with pricing and with productivity. A little bit on the negative side, however, we do expect that increased all-in aluminum price will continue to weigh on operating cash flow and working capital also in the second quarter despite the fact that we expect lower capacity expansion CapEx going in the second quarter and also going forward. And then to try to summarize today's presentation before I hand it back to the operator, we realized market share gains across all our regions, all our markets, which drove a 5% volume growth despite weak demand. And we also had very strong operational performance, and that helped us both get the volume out the door and also helped our financial results greatly by providing good flexibility to take opportunities that show up and also good productivity. So I have to say that all of the regional teams really in Americas, in Europe and in Asia have done a fantastic job creating these results. As a result of that work, we did indeed have strong financial performance in the quarter on almost all lines, except for our cash flow then, which was weak. We delivered some excellent sustainability results that Oskar just spoke about. And we continue to focus as we've done in the past and will do in the future also on things we can influence or even control the market share, the price mix and also our own productivity. And in all these areas, we have high ambitions also going forward. The outlook for the second quarter is for more growth, good growth, in fact, and we aim to try to get the full financial benefit of that growth. And all in all, I guess we could say we had a record first quarter and feel that we have strong momentum going into the second quarter of 2026 and therefore, also strong confidence. Now before we move on to the Q&A session, I'd like to invite all of you to participate in our Capital Markets Day, which takes place on June 2 in Stockholm. And we hope to see many of you there, and there are more details, including a registration form available on our website for you to go there, I suggest immediately after this call and sign up. And that really concludes our prepared remarks for today. So operator, now we're ready to take questions if there are any, and we will try to answer them as best as we can, please.

The next question comes from Kaleb Solomon from SEB.

Just a few from me. First, on automotive. Growth in Europe was, as you said, very strong. It was up 21% year-over-year and sort of on par with last quarter despite not having any sort of effects from the backlog reductions. So is it fair to extrapolate this sort of growth rate in Europe for automotive during the -- for the next -- for the remaining period of the year, for the next few quarters?

Well, Kaleb, thanks for showing up here. Good question. Look, the growth that we have in Europe now is the result of a several years' effort of building up a strong market share in various new platforms. Specifically, it is driven to a large extent by electric vehicle platforms, which we're, of course, very happy about seeing growth now. Whether it's fair to extrapolate or not, I mean, it's fair to assume that we will have a mid- to high single-digit growth in the second quarter because we're predicting that. And that, of course, is based on our belief that we will continue to take market share. So in that respect, I think it is fair to extrapolate our ambition to continue to take market share. But as you know, we don't give specific forecast for the individual regions.

Yes, that's clear. And another question on Europe. I mean, European aluminum premiums are up quite a lot since the sort of turbulence in the Middle East started. And just given that you have a relatively high share of recycled materials, can you maybe say something about how we should reason around the sort of recycling economics and metal spreads in Europe?

Yes. Kaleb, it's Oskar here. I think that's also a very good comment. And I briefly touched upon this a while ago here now in the prepared remarks. But you're absolutely right now that we do see the European metal premiums increasing. And I think generally, that is a positive for us. We saw the reverse of this in 2025, and we all know that, that pressured our earnings quite significantly. And when we now look ahead, premiums are up now on much more attractive levels. That means better recycling margins for Granges. And when we also see the movement in the premiums, that also gives some positive timing effects as well on the actual premiums itself, right? So looking ahead now in the second quarter, assuming now that the current situation remains, we basically, as I said earlier, expect to see quite a substantial year-over-year effect on earnings from less pressure, you could say, on metal spreads and metal premiums. And if you recall, last year, we had some negative SEK 60 million of earnings impact from this. And I think it's fair to assume that approximately this will be reversed in looking from '25 to '26 second quarter.

Okay. That's clear. And just briefly to clarify on HVAC in the U.S. I mean, it performed quite strongly given the market situation. Is all of that due to market share gains? Or did you see any sort of changes in inventory levels or overall demand? And can you maybe also say something about how inventory levels have developed, if there's anything you can observe or have observed during the beginning of Q2?

The short answer is yes, it's all due to market share demand. It's probably more than all of it is due to market share demand, so to speak. But -- and regarding inventory levels in the supply chain downstream, we don't know. I think a short answer -- slightly longer answer is we don't know, but people say that they are more normalized now than they were in the past.

Okay. And just lastly, on Asia, the sort of volume decline seems to be entirely driven by weak automotive demand, right? And I guess the sort of mix of improvements you've discussed in the earlier quarters, at least as I interpreted, has mainly referred to sort of increasing the share of automotive products. So how should we sort of view the possibilities for that sort of mix improvement in the next few quarters given that automotive demand seems to be on the weaker side in Asia? And I guess, can it simply sort of be done through market share gains moving forward? Or is it reasonable for us to be a bit more conservative on that side?

It's a really difficult question because it's always very reasonable to be conservative about the Asian market if you look at the market. But we feel we have a strong team in Asia, and they have performed -- outperformed the market for very long periods of time. So we are slightly more optimistic, I guess, than what the market would make you think. On your question about the mix, there are some good mix opportunities in automotive and also some worse mix opportunities in automotive, and that's also true for the other segments. So it's not so simple to say that automotive is good mix and the other segments are bad mix. But it is true that in this particular quarter, we did not have the market growth that we needed even after offsetting it with market share gains that we needed to sustain a profit improvement. That's how it is. And we are a little bit soft on our expectations, I think, for Asia specifically in Q2. And then we expect a recovery. As you probably know, the market was down -- the LV, the light vehicle production was down quite a bit in Asia as a whole despite some countries performing well, and it was down even worse in China, of course, right? And some of our new business is related to China. And of course, then we didn't get quite the same growth that we used to have in the last 8 quarters or so.

The next question comes from Adrian Gilani from ABG Sundal Collier.

I'd like to start off with a question on the very strong profitability in the U.S. with EBIT per tonne in dollars is up more than 30% year-on-year despite volumes not really being up that much. Would you say that there was anything exceptional behind this quarter? Or is this a sustainable level of profitability going forward?

Adrian, this is a very good question as well. I think what you see here is, of course, an impact of many things, right? I think as Jorgen said earlier, we had a good operational quarter in the U.S. with the exception of a little bit in the beginning of January there, started slow, but ended very strong as you see, of course, good operational performance helps margins typically. But that being said, I think what you see here primarily is the effect of that the contract that was renegotiated going into 2026 now, they were renegotiated under even better market conditions than the contracts that expired. And as a consequence, of course, we managed to further improve the pricing of those -- in those contracts. And of course, then that means that a lot of the margin is price driven or margin increase is price driven. And it also means then that the contracts that are in place will be in place now for the remainder of this year.

Okay. Understood. That's very helpful. And then also, I guess, sticking to the U.S., what's your view on end market demand in HVAC now that we sort of head into the peak HVAC season? Can you comment anything about current order books compared to how they looked at this point last year?

We don't really have that kind of visibility that would make that comment meaningful. We had good volume in the first quarter. And like we say also in the report, we entered the second quarter with good momentum. But as what happens to the market in the second quarter, of course, depends a lot on the market, right? And there, you have some uncertainties on demand and you also have the wildcard of the weather and so on, right? So I don't think anybody knows that. But we try to not focus so much on forecasting that demand, to be honest with you. Instead, what we try to focus on is to take market share so that we can know that we have the ability to grow no matter what happens to the HVAC market, right? And it can be up a few percent, it can be down a few percent. But if we have the market share gains that -- if we can keep the market share gains that we had in the first quarter, we feel that we are well equipped to face whatever comes our way there. So the honest answer at least is we don't know what the HVAC market will do this year. The only positive sign going into the year maybe that we feel reasonably sure of is that we believe that the supply chain inventories have normalized after being quite high after summer last year and during all of the fall.

Okay. Understood. And then a final one for me. Oskar, you have previously talked about the sort of rule of thumb of conversion profit around [ 7,000 to 8,000 tonnes ] for every incremental tonne of volume. And last year, you didn't quite manage to realize that because of other external headwinds, but it sounds like those are perhaps subsiding now. So is it fair to say that for 2026, we should expect each added tonne to add perhaps 7,000 to 8,000 to EBIT as the usual rule of thumb should be?

I think that's still a good proxy. Then, of course, we need to be aware of that as you -- clearly, as you say here, that there are other things that can impact these things as well. But -- and not the least also, of course, where in the group, the incremental tonne shows up, right? Because we all know that we have typically higher margins now in Americas than in Asia, for instance. But on a group level, I think SEK 7 to SEK 8 per kilo is still a good proxy.

The next question comes from Gustaf Schwerin from Handelsbanken.

I have a few follow-ups on the earlier automotive question, I guess, mainly for Europe, but also in Asia. I mean the outgrowth trend is very clear now for at least 5 quarters in a row. I won't try to get the split between gains and, call it, the structural tailwind. But with what you know today, so with the market shares that you have already taken, for how long do you think that supports an outgrowth versus the underlying market? That's the first part of it.

That's a good question, but it's also a difficult one. I think we look at it in this way that in automotive specifically, and you referred specifically to Europe, so let's narrow it down to that then. In automotive in Europe specifically, the platforms that we have, we have, and generally, it's so that more than one supplier gets each platform, but there is also an understanding around what are the volumes that are associated with that platform and the shares and so on, right? So in automotive, the platforms we have, we have, the market share we have, we have, right? We built it up over some time. And then it depends indeed on the underlying production of those platforms relative to other platforms and, of course, on the automotive production in general. And that's a bit of a difficult thing to forecast really, and we don't do that to such an extent. But we do believe that we will keep these platforms that we've taken now. And in that sense, I guess you could say that this could persist.

All right. Okay. But put it this way, if I look at Q1 isolated, and that might be too short of a period. I guess there could be timing effects as well. But if you just compare the number you posted for Europe versus both production rates, but also our sort of forecast of heat exchanger growth depending on the mix. Is this a quarter where you're selling volumes to new platforms versus last year? Or is this sort of spillover effect from gains you took earlier?

It's both.

I mean just to highlight, Gustaf, we had some...

Okay. I mean, it should be very clear.

Sorry, there are some new platforms coming out now that are starting to be ramped up this year that we have not had before, right? And that's also one of the reasons why you see this quite substantial growth.

Yes. And I mean, I guess it would be fair to assume that the volume impact from one share comes gradually, right? So if you've taken contracts where you start delivering early 2026, that could be a tailwind throughout the year, right?

Yes, it could be, absolutely.

The next question comes from Oskar Lindstrom from Danske Bank.

Three sets of questions for me. The first one is you mentioned strong operational performance during the quarter, but especially towards the end of the quarter. What was that improvement? What drove it? And yes, a little bit more color on that, if you will. Should I take the other 2 questions immediately?

One by one. Oskar, well, we had a really good March. I guess we're a little bit proud of that, and that's why we're emphasizing it. But it was also so that during the beginning of the quarter, we had some various negative effects in our production. For instance, we had some adverse weather events in the U.S. and so on, which took some catching up. So when we look at the quarter, we see this acceleration, right? And it's always nicer, of course, to exit the quarter on with a high momentum than with a low momentum. It is really important, though, in our business to be very close between sales and operations because when you are and an opportunity presents itself as it did several times during the last year, then we can be fast on our feet and we can take advantage of it, right? But if we're struggling to keep up and do not have good operational performance, then maybe we have to pass. So the good operational performance also is necessary for and a strong -- has been a strong driver of our market share gains as well.

Good. My second question is on the scrap spreads, which you've talked about already and -- I mean you talked about. My question here is, was there any positive impact already in Q1 from increasing scrap spreads? And if so, is something you can quantify?

Yes. There was a little bit of positive impact, especially if you look sequentially comparing with the fourth quarter. If you look on a year-on-year perspective, now it's on group level, I would say it's in the order of magnitude, SEK 10 million or so positive versus last year in the first quarter.

Wonderful. My third and final question is if you see any impact from the new tariff regime on aluminum and derivative products on your business or on demand from your customers? If so, how should we expect this to materialize for you?

Well, there have been 2 very tangible impacts on our business since April last year then. One is, of course, all the practical things that this has led to in sales in our supply chain in various ways and finding new supply routes and new suppliers and discussing with customers and invoicing the customers for these tariffs. And then now maybe hopefully getting some money back from the U.S. government and then having to refund the customers for that, right? So it's quite a strain on the whole organization, I think. More financially and KPI-wise, I think the biggest effect has been that for sure, these tariffs and the increased regionalization that they represent have been 2 strong factors, not the only factors, but 2 strong factors behind the acceleration of what we call the all-in aluminum price, right? So the LME, the global aluminum benchmark price, you could say, plus the various premium we pay in the various markets, right? And that has increased quite dramatically during the year, and you see that quite clearly, unfortunately, then you could say in our working capital and our cash flow. When it comes to effects on customers in terms of substitution and such things, I imagine that's what you're asking about. That's not been a big thing so far, at least. It can be a factor going forward, I assume. But there are also other substitution effects going the other way, right? For instance, copper has also become more expensive and more expensive more rapidly and more massively than aluminum, for instance. And that then drives a bit of substitution in the other direction. So the answer to the question is no, we haven't seen any strong effects from our customers of that kind. And whether we will is a bit of an open question. I hope that was what you were asking for. Otherwise, please elaborate.

Yes, that was part of what I was asking. I was also wondering if the most recent changes to these, I think there 232 tariffs where they will go from, as I understand it, basing the tariff on the metal value of the imported derivative products to the total value of the imported product. Is that having an impact on your customers who -- the alternative to producing HVAC units in the U.S. and buying raw materials from you would be to import an HVAC unit or other products?

That's a good question, Oskar. And I think what the U.S. administration has done here is that they have also clarified a little bit here because there has, in the past, been different interpretations of whether or not this -- the tariffs were valid only for the metal part of the product or on the whole product value. Now from a Granges perspective, we have always interpreted this as the tariff should be applied to the full value of the product, the metal and potential value add. And that's exactly now what they have clarified. So for us, there is no change. Now there might be peers to us out there that have interpreted this differently and then charged or paid a different tariff in the end and maybe they have to pay additional tariffs now. But from a Granges perspective, we -- this is no change to us.

The next question comes from Linus from Nordea.

Just a few questions here from me. You mentioned there are good mix opportunities in Asia. I was just wondering if you could elaborate a bit on which end markets these are? And at 1.1 EBIT per tonne in Q1 here, what margin levels are you targeting for Asia on a sustained basis? And do you have any time line for that?

Yes. So as you know, we acquired a big chunk of capacity in the form of 2 operating units up in the Northeast there in Shandong province, a little more than a year ago. And the strategy we used going into that was to fill them up to a level where we were breaking even, I guess, you could say. And we did that rather rapidly or we think very quickly, in fact, and we're quite proud of that. But it's, of course, so that when you take so much market share so quickly, then you have to -- then you can't be choosers, so to say. That means that we've taken in some really good variable margin product, and we've also taken in some product that has a low variable margin into our mix then. So when I say mix opportunities, it's really to try to, over time now, grow the higher-margin variable products and maybe at the expense of shedding some of the lower-margin product volume. So it's not so much about the market mix, so to speak, but really about how we optimize our mix after having quickly grown it over a period of 12, 15 months or so. And in doing so, we had a target last year of meeting the -- of offsetting the added fixed cost that we had in a way that would be EPS accretive, and we're sort of around there now. And now, of course, we have a target to grow the profit, right? But exact targets profit per tonne per region is not a forecast that we give out. By way of example of markets that we think we can grow in, we have some of the similar markets that we also are after in Europe that has to do with EV platforms and various components to do with the thermal management in them and in the cars, but also in the battery platform there, right? It has to do with some new segments for us in plate and in other areas. And it has to do a little bit also with the battery industry in general and maybe also some niches that are new to us, right? So it's a checkered picture, I guess, you'd say, but it's also a very large market, and we have the experience of going after small niches in a large market and making that pay. And that's also the plan for Granges Asia.

Okay. Super. That's super clear. Just another question. I don't know if you already answered it, but just let me know in that case, I mean you talked a bit on the Americas margin here, which is due to the repriced contracts for the rest of '26. And my question is just at the next -- or at new renewal contract renewals, if the Midwest premium normalizes, will you be able to uphold those -- these margins that we've seen here in Q1?

Yes. Good question, Linus. I would say that these things has not so much to do with the actual base metal price and the Midwest price. The fact that the market as such is slightly more favorable. It has more to do now -- what has changed really is the additional 232 tariffs that was introduced last year, right? That is what is impacting the market when it comes to our own fabrication pricing and so forth, right? The Midwest premium has more to do with the cost of metal, which is a pass-through for us, right? So Midwest premium changing is more of a working capital and cash flow thing for Granges rather than something that impacts our operating profit.

Okay. It doesn't work like Europe, yes, and I remember. Yes, just one last question here. You've earlier talked about the SEK 20 million upside here from scrap spreads in H1. And now you talked that you've seen like SEK 10 million in the quarter here. Can we -- given that the -- I mean, European premium is above pretax -- pre-tariff levels, can you expect the level to go beyond the SEK 20 million that you guided for earlier?

Yes. I think I said SEK 60 million to SEK 70 million year-over-year in Q2, somewhere around there. Whether or not it will be higher, it very much depends on what happens going forward, of course. But that being said, I mean, if things remain on current levels, we see quite good effects both in the second quarter as well as looking into the third quarter. Of course, then that's based on the fact that we saw quite some pressure on scrap spreads and premiums in both second and third quarter last year.

Yes. So adding to that, I guess you could say last year's downside is this year's upside, and that's good, of course. We also have to mention, I think, in the context that there is -- there are concerns, of course, about the aluminum supply to Europe, which are related to the war in Iran and the fact that a lot of the world's aluminum production comes from that region and now has difficulty reaching the rest of the world. And exactly how that will impact prices, premium and also scrap prices in Europe, I think it's really hard to predict. When there was a similar shortage, I guess, in the U.S. market last year, first, the scrap spreads went down and the premium went up -- sorry, the premium went up and the scrap also went up, right? So the spreads went down. But now that also led to more generational scrap and keeping more scrap in America. So it's possible that we'll see such an effect in Europe or some other effect, we don't know. So -- but based on today's values, we are quite bullish, I guess, on the year-on-year effect exactly as you explained, Oskar.

Yes. I mean year-on-year positive, right? But we need to remember that they are positive this year because they were largely negative last year, right? So it's a reverse effect, if you wish.

Yes. Understood. And just one last question here. Sorry, one more. I mean we saw a controlled shutdown of Qatalum during this turbulence here. Have you guys picked up any other production here controlled or uncontrolled shutdowns or...

Well, in general, nobody is getting much aluminum out of the Middle East right now, and that's problematic, of course. How long that will last depends on after the controlled shutdown, but also after the attacks that those sites have been under, how long does it take for them to start up and how long does it then take for the traffic to resume its normal routes and capacity and so on. And all of those things are way, way, way above my pay grade. I really have no clue. I really don't. The experience is though that -- or at least my experience, limited experience, I guess, after the 5 years in the aluminum industry is that the price mechanism is quite strong, the global price mechanism is quite strong as a means to offset or equalize any shortages or bottlenecks in supply. And that's maybe especially so in aluminum because the scrap market also is a large buffer. There's a lot of scrap in the market, right? And when the aluminum price goes up, then the scrap becomes more attractive to convert and then you can start up more scrap remelting furnaces and so on, right? So it's a complex picture. We have seen some of our competitors, I think, having a little bit of difficulty with supply of aluminum because they were maybe then contracted with very specific alloys or very specific SKUs from the Middle East. We have been fortunate in not having that problem right now. So, so far, so good, I guess. We'll see.

[Operator Instructions] The next question comes from Mats Liss from Kepler Cheuvreux.

A couple of questions from me as well. Coming back to this metal price premiums you mentioned you have a positive or reverse impact there of SEK 60 million to SEK 70 million in Europe in Q2 to be expected. Didn't you see anything in Q1? Or what amount have already benefited Europe in the first quarter?

Yes. Good question, Mats. The SEK 60 million to SEK 70 million, we should say is a global number. It's not Europe specific. It was an outlook for the group. In the first quarter, we do see some positive impact. And as I said, sequentially, of course, we see a continued impact. Year-over-year, it's around SEK 10 million or so positive impact in Q1.

Okay. Great. Then coming back to China, maybe, well, I mean, it's -- well, volume decline and I guess you saw soft automotive and so, but did you see any sort of inventory reductions also on top of somewhat soft production?

You mean inventory in the market, you mean or what?

Yes, supply chains. I mean, historically, there's been some sort of supply chain inventory impacting volumes also, but yes...

I don't really think we know, Mats. I mean the picture is quite complex. Firstly, in China, of course, the first quarter is always a bit of a gamble because you have the Lunar Festival in the middle and then it takes time to start up again. So it's a little hard to tell. Secondly, we saw quite a different picture with some markets in Asia producing at high growth rates and others at negative growth rates. And third, you have this rather big global disruption of the supply chains and so on. So inventories, of course, include what's on the water. The answer is I don't know the answer to your question.

And then, I mean, you mentioned that March was quite strong, and you saw a sequential improvement. I mean that must mean that you have started out pretty well in April also. And I guess that includes in your guidance, but...

That as we said -- go ahead and ask your question, sorry for the interruption.

Yes. But my question is really, I mean, due to the Middle East tensions, et cetera, do you think that -- or do customers have sort of prebuy or tried to stock up with some extra aluminum components to secure deliveries and so on.

That's certainly been the case in some markets when it comes to aluminum, the metal, right? When it comes to our products that we make, that may not be such a big factor because they are bulky, they're hard to store and the supply chains that we feed them into are not engineered to build up a large inventory of products, right? So when there is stocking of aluminum or securing, I think, is a better way to put it of aluminum volume because of fears of supply chain disruption or fears of higher prices. That doesn't necessarily mean that the aluminum is actually moving anywhere, it's just sitting there waiting to be used. So when it comes to our products, I don't think that prebuy has been a really strong effect in the first quarter. But that's a little bit with the caveat that we never really know exactly prebuild, prebuy, where is that, right?

Yes. I think you see for customers in -- especially within automotive and the higher-value segments, this type of behavior is, I would think, less -- well, it's not really there to any major extent. But you do see these effects from time to time, Mats, when you come to the products that we sell through distributors and so forth. They act a little bit more opportunistic when it comes to metal pricing and when to buy and when to not buy, right? But we need to remember then that the majority of our products are fairly high-value products, more -- I shouldn't say our distribution customers are not sophisticated, they are very sophisticated. They're very good at what they do, but they act a little bit more opportunistic maybe than our average customer does.

And generally, also, I think the higher aluminum price quite in general, of course, makes it much more expensive to hold inventory. It's one thing to prebuy when the aluminum price is 40%, 50% lower than it was today. But now it's a very expensive commodity to be holding on to, right?

Very good. And a couple of small ones to finish with. First, I mean, you talked about the production shutdown, that was due to maintenance that was moved from Q4 to Q1. What was the impact? Maybe you have already mentioned that, but...

Yes. We mentioned that especially in -- when we did the quarter 1 -- sorry, quarter 4 presentation because it had an impact then. But in essence, what happened was that we moved 2,000 tonnes in the U.S. from the first quarter back to the fourth quarter and moved basically some SEK 20 million of EBIT over year-end there basically. So if everything else would have been the same and we wouldn't have done the maintenance stop in Q1 this year, then we would have produced 2,000 tonnes more in the U.S. and hopefully then had a SEK 20 million higher earnings or EBIT in Q1. But that was also an explanation why Q4 maybe came in a little bit better than we originally thought.

Yes. Okay. And then final one about the energy prices. I mean some of your capacity are operated on gas in Poland. I guess, what's your sort of ability to pass on those higher energy prices compared to previous peaks also...

Yes, we have certainly -- previous peaks of energy have been very high at some point, right? I think in Europe, we struggled a little bit after the outbreak of the Ukraine war. That's when we really had a peak in energy prices. And that made us make some changes to the way we operate at that time. And that also means that now we feel that we have quite good tools in place for managing energy price fluctuations. And just to very briefly explain what we do. I think we hedge energy, we hedge natural gas short term to a quite large degree, right? And we also have in our contracts -- in our long-term contracts, we have surcharge clauses, which allows us to, with some delay then pass on changes in energy price to our customers. And the delay in the surcharge clauses are covered by the hedging. So that means that we don't currently foresee any major impact from energy price changes.

There are no more questions at this time. So I hand the conference back to the President and CEO, Jorgen Rosengren, for any closing comments.

Thank you, operator, and thanks to everybody who attended this first quarter presentation for 2026 for Granges, and thanks, especially those who provided us with these interesting and thoughtful questions. And with that, we close the conference and wish all of you a nice day. And when the weekend comes around tomorrow evening, a good weekend also. Take care. Goodbye.