Hiab Oyj ($HIAB)

Hiab just announced the acquisition of refuse collection vehicle manufacturer, Labrie Environmental Group, based in North America for enterprise value of USD 1,035 million. The acquisition significantly strengthens Hiab's position in the essential industry of waste recycling. Welcome to the joint investor and press conference. My name is Aki Vesikallio. I'm from Investor Relations. Today's presentation will be held by Hiab's President and CEO, Scott Phillips. Our CFO, Mikko Puolakka, will join us for the Q&A session to be held after Scott's presentation. With that, over to you, Scott.

Thank you, Aki. And good morning from my side. Really excited to have the opportunity to share with you this milestone announcement. First, I'd like to start out by saying a huge thank you to all of those within and outside of the business that help make this happen and bring it all together. Secondly, I would like to extend a warm welcome to the 1,200 terrific colleagues that will newly join the Hiab family post closing. So a big warm welcome from my side. So diving into the rationale and to give you some highlights and details around the acquisition. So first, really excited that we were able to expand our position in a core segment exposure waste and recycling by further being able to serve customers and essential industry needs by adding a significant new product vertical within Hiab, which is the Labrie Environmental Group, who is a leading provider of refuse collection vehicles in North America, serving both Canada and the U.S. Taking you through from left to right on the slide, a bit of highlights from the company itself. Currently, last 12-month sales are USD 491 million, delivering a comparable EBITDA margin of 23% or USD 113 million as well as USD 83 million of comparable operating profit at 17% margin. Labrie comes into the Hiab family with a significant and strong order backlog of USD 435 million. And as mentioned earlier, 100% of the sales are in North America. So it also aligns quite nicely with our strategy objectives, not only to grow in a critical essential industrial segment, a waste and recycling, but then also helps significantly expand our position in North America. From a product portfolio overview, Labrie competes with 4 brands, all offering industry-leading solutions, and I'll go into a bit more detail in a few slides. So we have Labrie side loaders that are the fastest-growing subsector within the overall market, Wittke front loaders, Leach rear loaders and providing continual aftermarket and life cycle services for its customers through LabriePlus. So as I mentioned earlier, there is a nice fit and alignment for us in terms of not only the segment, but as well as the customer base that it served. Labrie competes on a differentiated level business strategy, serving a set of premium customers that can be defined in 3 different sectors. The core of the business is serving municipal and independent regional customers, making up about 60% of the overall market exposure. Then there is an exposure with national accounts as well as rental companies. The applications that are served can be bifurcated or are bifurcated between both residential and commercial applications. And as -- in the company, we think one of the key and attractive capabilities that we have to bring to the equation is, is that there's currently a nice penetration in parts and services, but we think this is one of at least 3 or 4 areas with which Hiab's capability and scale can help enhance further the penetration of parts and service business. So then moving forward into giving you a bit more insights into the deal logic and why we find this so attractive. First and foremost, I think, as I mentioned, it gives us a much greater expanded opportunity to serve a critical set of customers in an essential industry. And at the same time, enabling us to have an even more stable demand curve cycle on a go-forward basis. Now this is underpinned by the fact that there are good overall structural characteristics that define the growth curves in the past 10 years as well as those we see in the years to follow on the basis of the fact that overall aggregated volume of waste and recycling is growing. And at the same time, on a per capita basis, that trend continues to grow as well. Now as a consequence, the refuse collection vehicle equipment market is expected to grow in the low to single mid-digit range and as well as supported by an overall case due to differentiation and the fact that the solutions, in particular, on automated side loaders should enable from an increased set of outcomes for safety and productivity, also allow us to compete on a basis to defend a premium price for the offering as well. And then as I mentioned previously, the fourth element that's critical here is that side loaders, where Labrie has an excellent position and #1 in their sector is the fastest-growing segment of the RCB market, approximately 200 basis points faster than the overall market. And we think on a full potential basis, there's room between 500 and 1,000 basis points of further penetration of this solution in the overall market. Now currently, the overall market picture is such that about 50% or roughly 35% to 40% of the market is side loaders. And then you have the balance of the market between front loader and rear loaders. And then as I mentioned earlier, on an aggregated basis, municipal solid waste generation in the U.S. in particular, has grown year-over-year. So nicely stable and anticyclical demand patterns, if you will. Now diving a bit into more detail in terms of the tools with which Labrie has to compete with. From a brand perspective, I mentioned that they compete on a multi-brand strategy similar to Hiab. And so in looking through the Labrie brands, automated side loaders designed to enhance radically safety and efficiency. And with the quality and the design capability that Labrie's team has brought to the equation, the level of durability and quality is second to none in the industry. Now the selected products can be -- are bifurcated between Automizer series as well as Minimax series. And as I mentioned earlier, commanding a #1 position overall in the market in North America and the most significant contribution to the overall top line demand curve. Moving to the right, the Wittke brand is a front-loader brand of solution, primarily targeted for urban industrial as well as commercial collection applications. Two different offerings here. One is on the XPress, the other Starlight brand, currently holding a #3 position. And then moving to the far right-hand side, the Leach brand, are rear loaders optimized for tight space locations, serving both residential and commercial applications, with 2 different solutions, the 2R-III as well as the Alpha-III commanding a #4 position in the market. And then as I mentioned previously, the services and life cycle business come to the market as part of the LabriePlus offering and supported by a dealer network of approximately 80 dealers and offering a comprehensive set of services and parts support as well as a proprietary set of hydraulic solutions as well as loader arm components. So a great technological fit as well as a mission fit with the overall Hiab offering. Now in addition to the technological and emission fit, we love how this enhances Hiab's overall footprint within the North American market. And so just to give you a comprehensive overview on a page, if you will, how does this all fit together? Looking from left to right, and you'll know from the Capital Markets Day, I call this color peach that if you think about what we currently bring to the equation, we have an at-scale sales and service network globally and as well as in North America of 3,000 different locations, both our own as well as supported by a comprehensive dealer network, we participate in 100 different countries within our delivery footprint. And we do compete on a basis of asset-light supply chain model, which served us well both in terms of upside flexibility with regard to capacity, but then also downside risk with regards to our cost curves. Approximately 60% of our sales in the past 12 months have been indirect sales, 40% direct. Now combining that with the Labrie footprint, you see that in terms of Labrie, they have over 80 dealer locations, as I mentioned previously, all located, allowing them to serve the bulk -- the aggregate of their customers within a 4-hour drive, which is critical in this industry. And approximately all but 5% of the sales are through their indirect channels. And then if you look at what the team has accomplished amongst their many accomplishments in the last 5 years, you've got 11 new dealers that have been added since 2021. And from a manufacturing footprint perspective, we're nicely positioned with 2 locations in Canada, 1 in the U.S. and 1 in Mexico. So a very nice fit to the overall Hiab footprint. Now in addition, as I mentioned previously, the business level strategy is clearly differentiated, which fits within our portfolio perfectly. And that's competing on a basis of differentiated safety productivity as well as quality outcomes. Now at the same time, this enhances our desire not only both to grow and grow above the industry, but at the same time, have more resilient growth into the future as well as higher quality level of earnings. Overall, Labrie is #3 in the market in North America, #1 in the subsector and automated side loaders. So an opportunity for us to add significant value in a couple of different ways. And I mentioned a few previously, but in addition to the services piece and the overall technology, the opportunity to help fast track and accelerate not only overall product development, but at the same time, to be able to enhance and fast track the digitalization of the fleet, which will be increasingly important now and into the future, we think that this is quite a nice fit. Similarly or at the same time, with the combined footprint, we have an opportunity now to optimize our local manufacturing and sourcing footprint for both the combined organization, but also each of the individual product lines that are served within the North American market. And we're excited with the potential of synergies on the sales side, combining our GALFAB business together with the Labrie Environmental Group. At the same time, from a synergies perspective, we see clear opportunities for material procurement, and I mentioned previously, sales synergies. And then the fifth element here that -- the fifth attribute that we find a must in terms of our criteria and how we evaluate M&A or acquisition targets, if you will, is that it's an extremely high-quality business that is soon accretive to Hiab earnings and in this case, should be immediately accretive to both Hiab growth as well as earnings. And at the same time, due to that fact, the sixth attribute that we think makes us a perfect fit in terms of our strategic criteria and evaluating inorganic growth opportunities that we will, over a short period of time, have our balance sheet back within our targets of less than a 50% gearing and should enable us to also stick to our commitments in terms of returning value to our shareholders. Now as Aki mentioned in his opening, the overall purchase price was USD 1.035 billion on a cash-free, debt-free basis. And in terms of the last 12 months comparable EBITDA, it represents a multiple of 9.2. So in line with our criteria in terms of how we evaluate opportunities such as this in consideration of the current trading multiple of our business. From a financial impact perspective, we see the opportunity to have an enhanced financial profile. And as I mentioned previously as well that we expect this to be soon to be accretive both in terms of margin as well as our growth ambitions. And as this is a high-quality business at the same time, it has very similar characteristics in terms of cash conversion as we have in Hiab. So again, a really nice fit here. And we do expect synergies both in the form of sales synergies as well as cost synergies. And as we progress through the next 30 to 60 days or so, we will all share additional details around that particular topic. On a financing basis, it's 100% cash consideration, and it will be financed with cash at hand as well as additional debt to a maximum of EUR 900 million. And had the acquisition been completed at the end of Q1 which is the latest financial period that we published, as you all know. The planned financing would have resulted in a pro forma gearing of approximately 70% compared to our target of 50% and a pro forma net debt-to-EBITDA of 2.1x. Long-term target for gearing, as I mentioned, is still below 50%, and we believe this supports that case quite nicely as we expect continued strong cash generation. Now in terms of timing, we anticipate the closing to be early Q3 of this year. And of course, this transaction is subject to regulatory approval and customary closing conditions. Now how will our portfolio look in aggregate post closing? Going from left to right, you all are familiar with our loader crane offering in the form of 6 different brands, Hiab, ARGOS, EFFER, ING, JONSERED and LOGLIFT. We have, of course, our truck-mounted forklifts, MOFFETT and in addition to MOFFETT, we have PRINCETON. And then in terms of our leading hooklift and skip loader solutions, we compete under 2 brands, MULTILIFT AND GALFAB. Tail lifts are, generally speaking, been a regional offering, competing across 3 brands, ZEPRO, primarily serving Europe; WALTCO, primarily serving the United Kingdom -- or my apologies, WALTCO serving the U.S. market and DEL serving the United Kingdom market. And then we have our services brand, and we have a brand of solutions under our HiPerform umbrella. And then, of course, we now get the privilege of adding not only the great brands within Labrie Environmental Group, but as I mentioned before, a fantastic team that we inherited and pleased to say that the majority, if not all, of the key management team members, we expect to continue to stay with the business, which we're super excited about. Now how do the combined businesses look on an overall basis just in terms of the financial profile as well as the market segment exposure profile. I won't take you through all the details on the slide as it's quite comprehensive. But looking at a last 12 months basis on a top line perspective, Hiab is last 12 months at a little over EUR 1.5 billion. On an EBITDA basis, EUR 241 million or 16% margin. And of course, on an EBIT basis, a little under EUR 200 million or 13%. Now we have a varied sector and segment exposure, which we quite like, primarily serving essential industries as well as defense logistics. And from a geographical perspective, we serve all 3 regions in terms of APAC, EMEA as well as the Americas. And then drawing your attention to the middle slide, on a euro basis, I gave you U.S. dollars previously, on a euro basis, you see that Labrie Environmental Group has EUR 438 million of top line, EUR 101 million at 23% margin on an EBITDA basis, EUR 74 million on an EBIT basis at 17% and with a concentrated focused exposure in waste and recycling. And then similarly, a focused exposure in North America. Now drawing your attention to the third column, then the combined pro forma financials on a last 12 months basis, a little under EUR 2 billion combined business, 6% CAGR over the last 10 years in terms of growth. EUR 342 million margin 17% on a relative basis and 14% on an EBIT level and nicely positioning the business to increase in line with our strategy, our exposure in waste and recycling as a core essential industry, slightly change in terms of the geographical mix where APAC would reduce slightly, EMEA, of course, reduce slightly and then North America increase in line with our strategy. So we love the 4 attributes that this brings to the overall equation for Hiab to be able to deliver an optimized value for all of its stakeholders. So one, it increases our scale and as well as our growth profile. Two, it's margin accretive, solid cash generation characteristics, gives us more diversification in end markets critically reducing our cyclicality, adds to our technology and our mission fit perfectly and absolutely strengthens our position in North America. So getting close to wrapping up here. The 6 attributes that I took you through before, just to give you a different visualization, if you will, in terms of what this does as far as delivering on our inorganic growth that I know has been a lot of topic of conversation here, especially in the past 1, 1.5 years. So certainly fits our overall strategic imperative to make choices that enable us to enhance our ability to be 1 or 2 so that we can be differentiated within the subsector and the overall segment and Labrie fits that equation perfectly. Number two, it allows us to continue to create growth through innovation as this segment is absolutely critically impacted by technology and innovation and capabilities that will significantly drive differentiated outcomes for the industry as well as its end users. So we see that as a perfect fit as well. Three, it allows us to be geared to expand in our leading position in North American market, which is absolutely critical given the scale and size and scope of the -- of that overall market as well as the fact that just 2 years ago, when we introduced our strategy via our Capital Markets Day in May of '24, as we shared with you, we were geographically underexposed in this critical geography. And this helps absolutely solve for our scale and coverage within the market quite nicely. Then four, it further enhances our ability to leverage a sizable installed base by digitalizing our offering with our connected solutions and with our digital services capability. And we think this will set Labrie Environmental Group offering geared to grow nicely into the future and allow them to accelerate the nice growth path that they've already been on. Now in terms of value creation, we feel strongly convicted around the fact that our operating model that we bring to the equation here and our decentralized operating model, allowing for focused end-to-end businesses with full transparency and accountability are going to further enhance our ability to maximize the value creation potential not only for Hiab, but then our newest platform. And so we still aim to focus on profitable growth and this will further enhance our ability to create incremental value creation for the Labrie Group. And as wrapping up, last but not least here on this page, we have a combined best-in-class financial profiles that create a nice fit in all of the characteristics that we look for in terms of ideal inorganic opportunities to catalyze growth. We see this ticking those -- all of those key criteria nicely. So concluding here quickly before I welcome my colleagues on the stage with myself. Together with Labrie Environmental Group, this is a clear opportunity for us to accelerate our combined profitable growth strategies by providing the highest quality, most differentiated offering to the set of customers that we proudly serve within the critical waste and recycling and essential industry that makes up the foundation of what it is we do at Hiab as well as the foundation of what we do at Labrie. So we're excited to add this new product vertical, refuse collection vehicles to our overall portfolio, enhancing our ability to do that. And as I mentioned before, we anticipate the transaction to close early Q3 of this year, subject to regulatory approval and customary closing conditions. So with that, I'll conclude and turn it over to Q&A. And welcome, Mikko and Aki to the stage.

Thank you, Scott. We have received a couple of questions from the chat function. So we can start with these questions before entering into the telephone conference. So firstly, the first question is about if we are worried about buying from a private equity owner at all-time high margins. And do you think that -- is this too expensive deal for Hiab considering the private equity could have had tendency to stress up the figures?

Yes. Well, we obviously like the valuation of what we were able to bring this over the line with. We think that it was certainly after an extensive amount of due diligence, a fair representation. This is an asset along with others within the same segment and sector and geography that we've been looking at for half a decade. And so we feel like we have a pretty good view as to where the fair valuation of this asset is. And as I've talked about with a lot of the audience previously, we always consider these deals in the context of how Hiab is trading overall. So we feel from that standpoint, good about the valuation piece. And then most importantly, we see a significant upside opportunity for incremental value creation agnostic of industry tailwinds, if you will, within this particular platform given what we bring to the equation and what they already have to bring to the equation. And we do see this as a perfect fit in terms of incremental value creation. So we feel quite okay about where this deal ended up transacting at.

Thanks. And the next question comes from Frans, I assume, from Bastian. So he is saying good morning. And he asked us how comparable are Hiab and Labrie in terms of equipment versus aftermarket mix? What are the specifics for the Labrie aftermarket revenue? Is there any potential to improve that mix?

Yes. We've got a pretty good view on that, and we know where the best-in-class benchmarks are within the North American market. So we know that there is significant upside potential with further services penetration. We think that on a like-for-like basis from our recurring revenue, a quite similar mix to the overall revenue profile. And then we know within the industry that there is a competitive benchmark on the -- that also brings to the overall market a digital enhanced service offering. And so that offers further upside potential. So therefore, there's a realistic opportunity if you look forward in the next 5 to 10 years or so, that we would have a similar type of mix of services to overall revenue profile, somewhere in the range of our recurring revenue and to our overall services percent of sales.

Okay. And the next question, I assume this is for Mikko. So this is coming from Mark Mullen from Nordea. So you have a EUR 150 million bond maturing in September. What is the plan regarding it? And has this announced transaction changed your plans in any way? Secondly, is there any seasonality in the Labrie business, maybe more for Scott. And thirdly, you highlighted Labrie's strong cash flow generation in the presentation, but can you discuss what the cash conversion rates look like as a stand-alone basis and compared to Hiab? Maybe if we start from the bond.

Yes, we have EUR 150 million bond maturing in September, and the plan is to repay that bond. We are planning to finance the Labrie acquisition by raising EUR 900 million of debt. Most of that approximately 5 years term loans. So solid financing with competitive pricing. So...

And Scott, how about the seasonality of the business and the cash conversion profile?

Yes. So I'll start with the latter first. Of course, as I mentioned during the presentation, the cash conversion profile historically has been well in line with the Hiab historical cash conversion. Having said that, much like we saw for our business as well in '22 and '23 with the backlog situation, they've been a little bit off of their cash conversion profile over the past couple of years, but we know exactly what needs to be done. And Michael and the team have a great plan in place in order to solve for that. So on a long-term basis, we see no issue there. And then the second part was relative to the question around seasonality. And we don't -- we see not so much seasonality characteristics in the Labrie revenue profile. But you also have to appreciate at this point, we'll learn more in the period to come. But at the same time, with the backlog and the nature of their ability to mass customize solutions and the customers' willingness to wait because of the quality and technical differentiation, that's probably smoothed out a little bit of what could be some inherent slight seasonality effects in terms of the top line. But more details to follow on that in future periods.

Okay. Then we have the next question. When was the first time we took a look at this asset, if you can give any insights. Of course, it's really well aligned with our strategy that we published in 2024.

Yes. Yes, it was more than 5 years ago. And probably in some of my team members now, they're virtually kicking me under the table, but likely they've looked at this asset long before that. But I can say myself, it's been on my radar intensively for more than 5 years.

Then we have a slide that is showing that Labrie has had a CAGR of 14% in the last 10 years, but the market has not been growing as fast. So what explains that?

Sure. And it's due to a combination of factors. You have the overall structural characteristics on the increase in aggregate waste and recycling, the emergence of now more recycling, which is in the sweet spot of Labrie's offering and technology. But at the same time, you also have this increasing uptake of automated side loaders as an alternative solution to the front and rear loaders. So the combination of those 3 factors as well as the fantastic support of the Labrie team as well as the personnel within the at-scale dealer group. It's those 4 factors is really the key ingredients that has enabled them to grow this fast.

And finally, looking at Labrie, they seem to be much more capital intensive considering they are a manufacturer of these vehicles. Also, the depreciation and amortization as a percentage of sales is more than 6%, while Hiab has less than 4% of sales. Do you intend to get more into capital-intensive segment because Hiab is, by nature, quite asset-light?

Yes. We've -- this actually fits quite perfectly into how we've thought about our supply chain strategy. If it makes sense for us to have some manufacturing because of the level of criticality and complexity of components, both in terms of how that equipment performs relative to its normal duty cycles, but also in terms of securing the aftermarket life cycle services such that we can secure and guaranteed near perfect delivery within the time constraints required to keep our customers up and running. And we've always had that view. And so certainly, one of the key work streams within the overall integration plan will be to take a deep dive look into the overall supply chain setup, but in consideration of the whole combined footprint and then make choices that are in line with our strategy because we still like the way that we're positioned. And it really isn't a matter so much as we seek to have an asset-light and a more flexible cost structure for ourselves, but it's also even more about leveraging the real expertise and capability of companies whose mission is a little bit more focused on those type of mission-critical components compared to us. And so we'll take the same strategic look and apply the same choice criteria. And then on a go-forward basis, we'll execute on the supply chain strategy where it makes -- in ways that make sense in line with our strategy.

Okay. Great. So let's now take the question from the telephone line. So you have the possibility to post questions in the chat. We will take them after the telephone.

[Operator Instructions] The next question comes from Antti Kansanen from SEB.

Congrats on the deal. A couple of questions from my side. I'll take them one by one. And the first one is maybe a follow-up on the revenue trends. And Scott, I guess you mentioned that you expect the deal to be accretive for Hiab's growth as well as margins after the transaction. So maybe a little bit of color on how does the USD 491 million in terms of sales look in historical perspective compared to the past couple of years? How is the business momentum in this business compared to your own? And maybe then on a more structural basis, maybe you can talk a little bit about the competitive landscape especially on the U.S. market regarding market shares, regarding kind of potential to maybe regionally grow the business, take market share on the equipment side aside from the fact that you can bring on the aftermarket?

Yes, sure. So starting with your first one relative to the characteristics of the last 12 months, USD 491 million -- I almost said euro, but U.S. dollar revenue profile. Coming back to the earlier comments I made, Antti, for the most part, you have, of course, the overall industry demand. But on the other hand, you have this subsector trend where automated side loaders have been growing faster than the overall market, which is right in the sweet spot of this particular business. And then what has really underpinned Labrie's performance in this critical market is that combination of designed in quality, manufactured in quality, in particular, of the hydraulic and the lift arm performance, the ability to get up and running and performing faster as compared to the competition in that regard and the recognition then that the subsequent durability and performance is clearly differentiated. And then as I kind of snuck in as a bit of a throwaway comment earlier, and I'll highlight it a bit more now, the ability to have a rapid configuration within their own design and manufacturing platform that integrate together quite seamlessly. They've been much more successful in being able to at scale, design more customized solutions or purpose fit for the application with which customers have been then willing to wait for -- on a longer lead time basis. So that's been a key factor. Then on the other hand, I would say that the management, rightfully so in my view, have taken the view that they wanted to be conservative in terms of the capacity ramp-up that growth curve has dictated in the prior 5-year period. And that has helped smooth out the overall backlog of the business and it has allowed them to better perform in terms of supply chain, in terms of the trade-offs of going after top line, but then at the same time, being able to control cost. And I think that absolutely has been a key factor in terms of when you think about the sequential development of their revenue profile, that also had a contributing factor as well. Then you asked about the competitive landscape. It's a still a fairly concentrated market in North America. You have the top 2 players are in our context, business areas within large at-scale listed companies. You have McNeilus and Heil, if you will, from Oshkosh and Terex, respectively. And then in addition, you have New Way, which as of, I believe, September or I think it was September of last year was announced, recently acquired by Federal Signal, also a listed company within the U.S. with a similar revenue profile as the Labrie Environmental Group in terms of a bit more focus and concentration or, let's say, scale of their revenue profile on automated side loaders versus front loaders and rear loaders and I would say, competing on a slightly different competitive basis with excellent lead times, nice at-scale manufacturing that's fully concentrated in the U.S. and able to compete on extremely competitive pricing.

So in regards of Labrie's ability to outgrow the market going forward and take market share, it's more about kind of the penetration rates on the side loaders continue to grow rather than any substantial potential on, let's say, geographical expansion within North America or things like that.

Yes. And just to add a bit of additional color here and I'll probably get myself in trouble a bit. But also, there are 3 other key characteristics there. One I alluded to during the pitch was the rate of services penetration. They recognize that's a big opportunity for them and one of the reasons that I think they're excited to be part of the Hiab portfolio. Two, there are some key product introductions current and in the future that will allow or enhance this platform's ability to grow in the automated side loader subsector. And then, of course, three, as one of the many areas that has me excited is the fact that they're lagging in the front and rear loaders with a massive opportunity to further or to establish a position within national key accounts because you have quite also a concentrated end market profile for that offering. So there's real opportunity to grow in that space as well, all of which then can be underpinned by having the full complement of supply chain capability and sourcing capability in North America that allows for flexibility given the today's and in the future demand and trading environment.

Okay. Then the next question is on the production setup and how is this company exposed to the U.S. tariff regime currently, which products does it serve from the U.S. setup and which comes from Mexico and Canada? And are they exempt from the -- especially on the Section 232 side?

Yes. Yes. Overall, taking you through the supply chain setup, you have an at-scale factory in Canada, producing the full build solutions located in Quebec City. That is supported by a smaller manufacturing facility that's manufacturing the critical components I was showing on one of the pages in the presentation around the hydraulic and the lift arm components. Then in the U.S., you have a factory located in Georgia that is primarily focused on automated side loaders and that also is the primary bulk of the solution that are produced in Canada as well. And then you have a facility in Mexico that's primarily focused on front and rear loaders in an excellent facility in the maquiladora across the border. The tariff exposure is at present for both solutions that come from Canada as well as from Mexico. As you all know, the team has done an excellent job in mitigating the tariff exposure, however they are exposed, and it is captured within the financial pro formas that we shared previously, and they have an excellent view as to the exposure moving forward. But we do have the opportunity to continue to carry on with the 3 different mitigating strategies that they've employed, and we would expect then over time for us to continue to further mitigate any tariff exposures. But that will take just a bit of time as we continue to scale the operation and lift and shift where need be.

All right. And then the very last from me is obviously already looking at the next thing. So how is your capital allocation priorities now for the, let's say, short term next 6 to 12 months, balancing any further M&A opportunities versus dividends versus your gearing target?

Yes. Yes. So we've got the flexibility in our dividend target profile that we should be well in line in terms of adhering to our 30% to 50% dividend policy. Capital -- from a capital allocation perspective, due to the strength of the balance sheet that we come into this transaction with and how we see that balance sheet developing over the next couple of years. We still believe that from an allocation prioritization that we can stick with the same tune that we've been seeing and sharing with all of you in the past. We still have opportunities and one of the many reasons I'm excited about this platform that this gives us an opportunity for further bolt-ons for this new product vertical, and we see a number of opportunities to do so, and we have the balance sheet strength in order to go execute, provided we can meet all of our criteria and characteristics. At the same time, we certainly aim and seek to then in terms of the balance of our available balance sheet to continue to return predictable and attractive dividend profile to our shareholders.

The next question comes from Mikael Doepel from Nordea.

Congratulations on the deal. A couple of questions here as well. So firstly, coming back to the competitive landscape and the market structure. So I think you mentioned, Scott, that #1 and #2 players are roughly the same size as the company you are now acquiring, Labrie. Why are they market shares? Just trying to understand kind of the level of consolidation in the market and also coming back to your kind of comment you just made in terms of doing potential bolt-ons on these new platforms. Just trying to get a better feel for the level of concentration in the market. Let's start there.

Yes. So if you think about the headline numbers, so the revenue piece, I would say Labrie Environmental Group overall is a bit of a distant #3. If I think about the revenue profile of both Heil and McNeilus are, I would say, significantly higher compared to Labrie, which is a positive. And as a consequence, the -- that would be #3 in terms of overall market share. And number 4 would be the New Way platform that's part of Federal Signal. In terms of the automated side loaders, we have a leading market share position that's roughly between 1/3 and about 35% of the overall market, and we see opportunities to further expand that position. And then if you do the math in terms of the overall growth potential within that subsector, we see an opportunity to both in the short as well as the medium term to perform quite nicely in terms of expanding not only market share in automated side loaders, but then offering a nice alternative in the 2 subsectors with which we are -- or Labrie is performing significantly behind the top 2 players within the overall sector.

Okay. And just on kind of that same topic, if you look at the profitability, I mean, looking at where Labrie is currently, would you say there is a significant difference compared to the main competitors or broadly in line? Do you have any insight into that?

Yes. I'd say broadly in line compared to the top 2 and a bit better compared to #4.

Okay. Okay. And just continuing on that topic. So we talked about the historical revenue growth of Labrie right here, which was quite strong. I just wanted to check if there is any kind of acquisition-driven growth also representing that number. And even more importantly, actually on the margin trajectory, if you could talk a bit about how these margins have developed within Labrie in the past, call it, 5 years or so?

Yes. No, excellent question. I would say -- I have to give credit to the current ownership group together with the management team. So if you think from the owner's perspective, looking back a little over 5 years ago, roughly, they recognized quite right away that there was a need to invest in supply chain capability, both in terms of derisking the overall cost curves by scaling up in both the U.S. as well as Mexico. And from my perspective, they did that quite nicely. Number two, they were successful in bringing in and complementing the incredible technical capabilities and personnel that they had from the core business. and layered over the top of that world-class type leadership talent that has then enabled the business to go through a nice transformation over the past 5 years. And that's translated into the nice top line growth that was the core of this question. But then also then the variable B is it also translated into a better incremental profit pull-through or operating leverage compared to the platform in the 5-year period prior. So -- and then number three, they made a nice investment not only in terms of the IT piece in terms of creating a unified ERP platform that integrated nicely with the design platform, but then also have continued to invest in new product and technology. So those factors combined have enabled this business to accelerate its trajectory, both in terms of driving top line, but more importantly, the quality of the top line.

The next question comes from Panu Laitinmäki from Danske Bank.

I have 3 questions. Firstly, starting on the current trading and kind of short-term outlook of the acquired company. Can you comment on how the order intake and order book has developed if you look at kind of sequential development of the past quarters and the growth in the past 12 months was pretty substantial. So was there anything kind of unusual in that number?

Nothing unusual in that number that I can report. Now I'm looking for support to my side here, Panu. So nothing unusual. The overall market had certainly been softer in '24 and '25 or '24 somewhat, but certainly '25. And then coming into this year, I'd say it looks -- mirrors very much what you've seen from Hiab overall. And having said that, where this platform had been so nicely positioned is the nature of its backlog and the type of solutions that it provides to its customers, whereby they've been able to smooth out the delivery of the backlog, which is -- even though it looks quite a positive slope in the last couple of years, it could even have been more substantially positive, but they've been able to, I think, intelligently work through the backlog. So yes, from an order intake perspective, you see a bit of softening over the last 12 to 24 months and hasn't quite translated into the top line for this platform in particular.

Okay. Then secondly, on the synergies, maybe both on sales and cost side, do you -- how does the overlap with your existing waste and recycling business look like? Are you selling to the same customers? And where do you think the sales synergies would come from? And then on the cost side, will you quantify this going forward? Or will it remain as just like an ambition to do it in procurement?

Yes. We will absolutely provide additional insight on a go-forward basis. And then the broad headlines, we're, at this point, not trying to be overly aggressive in terms of what we expect in the next 3, 5 years in terms of pro forma EBIT synergies, but we see that there's clear and attractive opportunities on the materials and manufacturing and sourcing piece that should represent anywhere between 50% and, let's say, 60% to 65% of the synergies. In the near term, we see clear sales synergies opportunities from 2 vectors. One, there are channel as well as customer overlap with our existing business in the U.S. with GALFAB. And similarly, we have some overlapping customers with regards to our lifting solutions as well, albeit today a bit subscale, but nevertheless there. And then the second vector of sales synergies, as I've alluded to, is certainly on the service side as well and will enable this platform to have even more proximity and more density in terms of coverage for its existing customer base. And we've got at scale level of existing capabilities to deploy at this located both here in Europe as well as in North America as the customer profile is quite similar to many of the customers that we have here in Europe. So we understand how to participate in these customer end markets very well.

If we calculate the sales and procurement synergies together, so our initial assessment is that those should be on EBITDA level, a low-double-digit U.S. dollar amount per year. So of course, that synergy assumption then gets more granular as we proceed with the integration planning.

My final question is that can you comment on the deal valuation? Because it looks quite reasonable, which is obviously good, but it also kind of raises the question that how did you manage to acquire the company at this price given the really good financial profile and kind of earlier indications that the valuations in the U.S. might be a bit on the high side?

All right. I'll answer that question. Yes. I'll give you the same answer as to the online question. We arrived at a valuation that we felt was well representative with the quality of this asset, well in line with what we could from a balance sheet perspective, manage and at the same time, still have a line of sight to, in a relatively short period of time, get our gearing ratio and our -- the level of debt that we have on the balance sheet work down fairly quickly. And I think like always in these scenarios, timing is always a factor. And I think that given the timing that we find ourselves in and the way in which we were able to work together with the current owner, I think, allowed both sides to come out with a deal that they were quite happy with, one that we could accommodate relative to the valuation and one that the current owner was quite happy with in terms of their return profile to their LPs or their shareholders.

The next question comes from Tom Skogman from DNB Carnegie.

This is Tom Skogman from DNB Carnegie. Congratulations on the deal. I have a couple of questions. First, with this growth, 14% sales CAGR over the last 10 years is very fast. But I didn't really understand what was the -- what acquisitions have they made? And kind of what is the organic growth number? Do you have the exact number? Or could you elaborate on that you get some kind of a picture?

In the past 5 to 10 years, it's all organic growth, Tom. Otherwise, I would have included that as part of the previous question in my answer. So sorry, I didn't clarify that there weren't any acquisitions.

And I would say that also during the past years, some of the growth is driven also by this kind of post-COVID order book and backlogs supply chain constraints, which are now kind of getting resolved as well.

And then how much is the order book up or down at the end of March?

Overall, the order book, I would say, has been fairly stable and at the moment, corresponds roughly 1 year of sales if we look at the last 12 months revenue profile. So stable order book.

So that means that book-to-bill has been around 1. So it's basically -- that's the situation.

Broadly speaking.

Broadly speaking in the last 12 months, yes.

And then this raises your margin in one strike by 1 percentage point if you -- based on the numbers you show. And you have -- I mean, you have your financial targets. So should this trigger a change to the financial target to raise the margin target from 16% to 17%?

Well, we'll certainly come back and address that topic as we do each quarter, Tom. So if you hold on to that, then as we get more visibility to the next 2 years. And as we work our way through the integration process, as Mikko had alluded to, then we'll certainly address that topic in due course.

And perhaps it's good to note also that those consolidated numbers, what we showed on the slide, they don't yet include the purchase price allocation amortization, which, of course, will be then granularized as we have completed the acquisition and have then the full calculations for the PPA available.

Actually my next question, how should we model the depreciation and the PPAs when you move to IFRS bookkeeping here? Will there be any change in depreciation? And how large have they been?

The depreciation, I would say, in the big picture, the depreciation percentage should not dramatically change. Of course, the PPA allocation, like I said, we have some initial estimates about the PPA and anticipate that it could be potentially around EUR 30 million to EUR 40 million in the first couple of years due to the fact that Labrie has a sizable order book and that will be amortized as a part of the PPA amortization in 2 years' time. After that, the PPA amortization would go down quite significantly.

And how about the goodwill amortization that they report currently?

Yes. So according to the U.S. GAAP, the goodwill can be amortized when Labrie would be part of Hiab, that would be part of the overall Hiab goodwill based on the Labrie acquisition and then it's not amortized.

And so how large will the depreciation, you say just the same percentage, but in millions of euros if you want to do a model?

Are you talking now about amortization or depreciation?

Both, of course, but starting with the depreciation, as you said, just percentage will it remain the same?

Yes. I would say that in the big picture, the depreciation percentage should not dramatically change from the top line. The amortization, of course, from this acquisition is sizable compared to our past amortization, which has been more or less single digit on an annual basis.

Okay. So you mean the same percentage of sales as Hiab currently with the depreciation basically. That's how you define it.

Roughly on that level.

Yes. And I didn't fully understand this -- PPAs, I understand, but the other amortization, how was it that?

Sorry, can you repeat?

The amortizations that are not PPAs, you said they will -- you will not do that or move into IFRS.

So Labrie has had goodwill, which is amortized according to the U.S. GAAP. And that will disappear and that will become part of the overall acquisition goodwill. And according to IFRS, that will not be amortized.

You can find the details in the stock exchange release. So that's why the gap between EBITDA and EBIT is quite big.

Yes. That has been, if I remember correctly, roughly EUR 20 million exactly per annum.

And the interest rate is 4% to 5%, I guess?

If we look at this overall EUR 900 million financing, so the average interest would be approximately 3.6% based on the current Euribor levels.

And then do you have any plans to expand into this segment in Europe as well as this is a new opening and the other products you have tried to have products available both in Europe and in Americas.

Yes. Just to come back to the reground in the strategy. So 4 focus segments, waste and recycling amongst those. So broadly speaking, yes, is the answer to that question, both in Europe as well as other parts of the world.

And could you just help us to understand a bit when you bought the GALFAB company, I mean, that was about transferring technologies from Europe to the U.S. How advanced would you say that American products are in this industry compared to European products?

Yes, certainly lagging behind in some areas, but the uptake, we're certainly seeing in our GALFAB business that's moving along very nicely. And similarly, we're seeing a bit more penetration of -- especially if you think about the MULTILIFT product, we're starting to see a bigger conversion of containers to the hooklift solution, which is enabling, albeit step-by-step slow uptake, but a bigger uptake of that solution as well. So the foundation is laid, if you will, to have a more rapid uptake of a similar type of technology given the application.

So even though you don't have this product, you still have this feeling that you can -- American products can be developed more to catch up against European products in this industry. Is that the way to think?

In this particular industry, I'd say that -- because I took your question to mean if you think about the GALFAB business, there were certain control systems, digitalization as well as duty cycle automation characteristics. There are capabilities we had to share and scale within the GALFAB offering. That's gone very well and according to plan, and we see the benefits of that. Similarly, we've seen the benefits to our operating model and business excellence in terms of turning around significantly the GALFAB platform as well as our commercial excellence. So that's gone along nicely. And then as I was trying to get to where I thought your question was, you see a bit more convergence of the demand for the similar type of higher technology in the U.S. in the duty cycle and applications on a like-for-like basis than if I think about when I started this role. And so I do see that trend continuing in the future, albeit with purpose-built and fit-for-purpose type solutions that may not necessarily be the same as here. I'd say on an RCV basis and thinking about the automated side loaders, I'd say that's likely to be on a different level and a higher level of differentiation technology than what I at least personally have seen here in Europe. Whereas here, we tend to use a bit more knuckle boom crane applications and in-ground bin storage, if you will, whereas that trend is not quite in the U.S., and I'm not sure that it will be.

[Operator Instructions] the next question comes from Antti Kansanen from SEB.

It was mainly the same thing that Tom already asked about the adjusted EBIT kind of comparability with all of the amortization. So do I now understand correctly that the way that we should model is that add the EUR 22 million of goodwill amortization to the announced pro forma adjusted EBIT, so you get EUR 96 million and then take EUR 30 million to EUR 40 million in PPA out of it, so you get around EUR 60 million as a comparable adjusted EBIT number that would be comparable to your reporting?

Roughly speaking, yes.

And how you'll kind of amortize the backlog in a couple of years' time and afterwards, then the PPAs would be perhaps half of the EUR 30 million to EUR 40 million or something else?

Correct.

There are no more questions at this time. So I hand the conference back to the speakers.

Thank you for the interest and for the great questions, and thank you for the great answers and presentation, Scott and Mikko.

Yes. Thank you, everyone. Have a safe day.

Thank you.