Lau Infra Grupa AS (IGR1R) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to Lau Infra Grupa webinar. We will begin with the presentation of the company's first half 2026 financial results and key developments followed by a live Q&A session. [Operator Instructions] For your convenience, we have a recording this session and replay will be available shortly after the call. That being said, I'm handing over to our host, Vilnis Vitkovskis, Chairman of the Management Board; and Armand Basic, member of the Management Board of Lau Infra Grupa.

Ladies and gentlemen, investors, shareholders or a shareholders. Good afternoon. Good to see you in very welcome, and we will share what our situation of the first half of this year, and we will provide you with updates and important information about our company operations.

Hello. Dear ladies and gentlemen, it's really pleasure to be hearing these premises and then to present Lau Infra Grupa first half year results and tell about our strategy and future plans.

Okay. Let's start, and I'll let us remind about ourselves about our executive management team. So my colleague, [ Selman].

Yes, my name amantadine Board member in Lau Infra Grupa and I'm responsible for commercial activities, tendering process and also while we are just 2 board members. I'm responsible for ICT and cybersecurity matters in our company.

Yes, and my name is Jon Sidoti. I'm Chairman of Management or Executive Board and -- my main focus is strategy, corporate governance and important activities of other companies. And yes, it's a very important moment for us to provide or to organize first in investor revenue and let us to start to remind to remember our way to IPO. We think -- we believe that we did very successful that we did very well. It was a hardboard period, a lot of new experience, a lot of new knowledge and a lot of new communication context partnership and everything. And actually, I'm really proud that we did it that we attract more than EUR 6 million investments at the moment in -- or among our shareholders with a number near the 2,000. And we think that it's really good that we have a good balance that we have in institutional investors and more than 1,900 retail investors. And if we see things in amount that it's very near 50-50, 50 from this attracted investments belongs to institutional investors and lifting to retail investors. We believe that it's really a very good balance and like this moment that many from retail investors did the first time this deal to buy shareholders of any company, and we're happy that it is our company fast experience first steps in stock markets. So somehow, we were icebreakers to for many people in Latam. We as breakers among state-owned companies to go to capital market. And yes, this trust from retail in store and ZenTrust from leading Baltic pension funds and fund managers. It gives us a big motivation, also a responsibility to operate and to lead and to develop our company. And yes, Joe, it was an important date for us. So we started trading of shares in Baltic Main least in North agri. Yes. And this communication with investors, we take it very, very responsibly -- responsible thing and we created our investor come that is able to find any information regarding our company regarding our activities, investment plans, reports also maybe not recordings and everything related to our company and start market issues. And yes, if we have to describe how is this selling in stock market of other shares, we see the listing some base, some sales. We see that this price of share is a little bit lower than the initial price, and we experienced at least 2 or 3 moments that this price became higher than the initial price and -- and we take it later, we talk about strategic plans about initiatives and everything, and it gives us to believe that, of course, the value of our company, value of every share will grow in medium and long-term or even short-term. Yes, and this was kind of introduction. And again, we are very proud about this process, which we experience and we with we have the first state-owned company in the stock market and Italy gives good experience and knowledge about many things. But we continue about the environment where we operated this last half of year, and I give forward to my colleague, Armando.

Thank you, Willis. Yes. Lovina Group from beginning of this year has continued successfully our road maintenance services on state roads, on municipality roads. So as you remember, beginning of this year was quite cold and snowy, so we have managed to fulfill all our obligations agreements, contracts with partners to make sure that the roads are safe, clean and the infrastructure in Latvia is in good shape. So we can see that during first half of this year, our maintenance revenues have increased by more than 26%, and we have achieved good results and also municipality tenders Latin forest standards where we attracted new income segment for our business due to vessel conditions first half of year as lower income in construction business. We actually started just in April, May, our construction works, which have been started last year. Due to winter ever stopped and frozen. And in second quarter of this year, we could continue them and successfully have finalized and closed quite many projects on infrastructure in area. This year has been geopolitically, quite interesting and from cost base, we have we are feeling quite big increase in our cost structure, especially for all products like diesel fuel and bitumen -- so -- and these are quite important part of our daily cost segments. As they see that comparing to our budget, those costs have increased 11% for diesel, a few more than 40% for Bitumen, which is main 1 of the biggest components in road construction works. To reduce this impact on our P&L statement. We are actively looking how to make our daily works more efficient, how to work for better cooperation with suppliers and better prices regarding bitumen. So it's ongoing procurement process to get the best prices for our main product. And also, we have actively participated in public procurement tenders Already this year, we have signed agreements for more than EUR 16 million, which are agreements for this year. Some of them also are a more longer period also next year. So I would say that we are very successful, not just with these many partners like what inroads, Latin forest and potties, and we can broadly say that we have -- we are increasing our portfolio -- income portfolio.

Yes, and I will continue a little bit about the company strategy. We set our priorities. We set our strategic directions and very short introduction for us, it's kind of new discovery, but it really means company strategy for us now, it means like internal agreement among employees, which direction our company goes. That is our ambition. What is our action plans, what is our new business offers, that is advantages that is our market. And if we describe it, if we define it, it's really good to get common understanding and common agreement about company interactions. And if it is inside, it's much easier to communicate outside. You have to communicate with community with shareholders, investors with partners, yes. So we know or we describe our role. And it gives us big confidence and probably 3 main directions is our business direction. And yes, maintenance construction and production, it makes our business model very strong and perspective, very, very actual topic for us is digital transformation. At the moment, we are in the final stage to implement our business systems and contract management systems and human resource management systems and more. So we can call it coal as a very digitalized company. So it gives us extra efficiency, extra opportunity to analyze our data to make better decisions and more and very, very high attention to our sustainable government chart to develop our team to make -- to increase competencies to training education, skills self-confidence and many things which is necessarily to be in this business environment. Yes. And the next or the main topic is financial results. And just at the beginning to give kind of temperature. So actually, we are happy. We are satisfied about the first half year of this year. You will see that other are not very big numbers of profit. But despite all this geopoticorcrisis and this half of year is really is very, very, very big crisis and our message is that we were able to adapt this great situations that we will able to adapt this increase of costs and to demonstrate successful result. Okay. Let's go into the details. Our turnover is EUR 36.7 million. It's lower than previous year, but anyway, it's a little very high. And if we owe go with a bit more in analytics and details that this income from maintenance actually has increased in this first part, and Alan mentioned that this winter season was very long. So had many construction projects were postponed for the latest later months. So it impacted our -- but anyway, as you see, EBITDA, it's EUR 4.48 million. And in margin, it's 12.2% and it's -- it's attractive. It gives confidence about how successful will be hold this year and also we generated profit, EUR 0.1 million. And as next information will explain, this is a revenue structure and actually very healthy, very balanced. It's half our maintenance service and half from construction service and plus other activities like mineral motel production like renting of our real estate. So altogether much more confidence about our approach about our business model and just to continue. And about financial indicators, you can see these numbers, it's still very, very strong. Current ratio is 1.4, debt service it's 2.4. Yes, that can be 2 opinions. -- some 1 opinion that maybe we are conservative, and that is need to involve our financial resources in business development or investment programs. But we think that at the moment, because of this political alliances because of just restart our business model because we still have very good cash flow from maintenance and we have a portfolio of construction projects that there is still potential to use this money really to have this buffer to have this amortization. And for sure, this is a good message that we can absorb really hard crisis and still be very financially a very strong company. And yes, a little bit later, we will tell you about our investment plans about CapEx. There is a number that at the moment we had this investment EUR 2.4 million, but it's ongoing program. So I want a little bit later more. And yes, this is almost September and how stand, we can make expectations is to mention about the total results of this year. And based on our portfolio based of our contracts, so we can provide the information that this dapsone can be from EUR 75 million to EUR 80 million. It's probably -- not probably, but it's lower than we expected in the beginning of this year. But still, it's a very high turnover. It's a multiple turnover and also in tenement, we expect or what we see is that this will be very high. This range can be from EUR 10 million to EUR 12 million, and it's attractive for our company for investor ourselves. This will be a kind of estimation for this year. Yes, we are really focused to double the cost discipline investments. So yes, financial situation is stable with good potential. -- to use different kind of financial tools, leasings, loans and model. Okay. I go for to Valmont. Antitell about our commercial success and challenges.

Yes. Thank you, Vilnis. Already in IPO process in June, we described that our business is very much related to tenders to the tender process of state municipality other institutions. So -- and currently, we can see that during first half year, we managed to already won quite many tenders in all these areas and then what is very good that those partners are not 1 or 2 big partners but separated our income portfolio is quite separated. And as you'll see, our biggest part of almost EUR 5 million of signed agreements with municipalities. It is road construction, surface treatment, maintenance and pavement renewal, so we are already in IPO process, we told that the municipalities are very important. Our partner, and it is a growing segment where we are achieving more and more good results, signing new agreements and then showing our competencies, our quality of our works. State road, EUR 4.5 million. In state road tenders, which is renewable and renewal of state roads. So -- and I would say this also very successful are where we are working. We are investing also in equipment that can do so also that we are more efficient and faster in realization of those projects. Forest road. Latvia is known as a forest country, big part of Latvia territory is covered by forest and it's very important that those roads are in good condition forest workers can access all necessary areas. And we are a big partner for Latvia forest company to maintain to renovate and to be construct those forest works. And of course, defense infrastructure, it is are currently not just like to Baltic states are investing big money and we are part of those projects in construction part and also in maintenance part of defense infrastructure. And other contracts with smaller partners, with private partners, EUR 0.2 million, but it's probably a segment where we are stepping in, and this is also a good potential also in the future where we can show our competencies. As we are located all over Latvia, we have more than 50 bases in every region of Latvia. So this is our strength with technical part and also very competent employees so that we can do work in every corner of Latvia. Yes. And about the investments, please, yes. This year plan was almost EUR 13 million to invest in tech digital systems, acquisition of land and biological assets and in development of new business areas. I can say that we have successfully already in the first half of year, received equipment in value of more than EUR 2 million. This equipment is more related to strengthen our maintenance segment, these are new chapters, new techniques that could work on roads, on state rotates, roads to clean snow to grass. And also, we are very much looking and have signed all the agreements about equipment that will be delivered at the second half of the year so that we can achieve our plan more than EUR 12 million for this year. we are quite flexible and we are really looking to tenders, to new partners, new segments where we are working, and we are actively can relocate and replan our budget to very much needed new investments, new equipment, new technologies and ecology so that we are flexible in that segment so that we have all possible equipment to do our contract obligations. And currently, we are also in final stage to finalize our ERP system, which was started last year. And very, very soon, it will be finalized and then production. It will be in production for our employees, for our work managers so they can really quickly organize works. We can follow how works are done and we can make analysis of works and make really use this data for future processes, for future tenders.

Yes. It was information about our financial situation about our operations, about challenges, success and also how we manage prices in difficult situations. Time for the questions and answers.

[Operator Instructions] We'll start with the first 2 questions that we have received prior session. How important is the company's long-term contract portfolio for business stability.

Thank you for this question. Very good question. And as I mentioned, we are working in a tender business and -- of course, it's important that we can plan our resources, our investments in technique in people, in materials. So it's very important that we have this portfolio is divided in short-term and long-term agreements. So -- and by long-term agreements, we can show that confidence to our employees' confidence to our shareholders that we are here with long-term strategy with plans to achieve our results, not just in short term but also in long-term future.

Yes. I can just add that to remind you that we have our employees more than 1,000, as that we operate in on a lot in every part of water. So if we have this long-term contracts, it gives us a good base to participate and to make more competitive offers or financial offers to those tenders. So cash flow long term was good decisions for other tenders. It's really a great combination.

What gives you confidence in the company's long-term growth potential?

Thank you for this question. And probably here, I would refer to history for example, around 5 years ago, Lau Infra Grupa was just maintenance company taking care about state roads during the last 3 years, company has developed competencies and knowledge and employee base and also our technique so that we can fulfill more words, more complicated boards. So I can say that knowledge and experience of company's business model is growing and this gives us confidence that a company can perform long and also complicated projects. So a company and has good financial base to be stable and financially successful.

I would add that it's really about our business model and strategy. it really makes sense that maintenance is like a flow business, and it allows us to operate our infrastructure our resources and plus construction. It is about dynamic shapers plus production, which can provide with us is higher than to and then continuing strategy with new business direction, so it's new markets, it's good messages for our long-term growth potential. And yes, thank you, this question is very retreat. -- because, in fact, we are just in the beginning of this potential. So thank you very much for this question.

How do you see the revenue bridge in second half of this year to achieve the guidance meaning do you have higher share of engineering projects coming in? Or will it depend solely on the road maintenance and road works?