Loomis AB (publ) ($LOOMIS)

Ladies and gentlemen, welcome to the Loomis Quarter 1, 2026 Conference Call. I'm Lorenzo, the Chorus Call operator. [Operator Instructions] At this time, it's my pleasure to hand over to Aritz Uribiarte, President and CEO. Please go ahead.

Thank you very much. Good morning, everyone, and welcome to the First Quarter 2026 presentation for Loomis. My name is Aritz Uribiarte, and I'm the CEO of Loomis. And with me here today, I have our CFO, Johan Wilsby, and Jenny Bostrom, our Head of Sustainability and Investor Relations. I'll start by providing a quick summary of our first quarter before opening for questions. Let's start the presentation by turning to Slide #2, We delivered a strong first quarter with revenues close to SEK 7.5 billion despite an 11.6% negative impact from changes in exchange rates. Currency adjusted growth reached 9.7 -- sorry, 9.3% with both strong organic growth and contribution from acquisitions. During the quarter, we saw very strong growth within the international and [ FSCS ] business lines, driven by increased trend for the movement of precious metals, partly due to geopolitical uncertainties. We also continued to deliver strong growth in our [ automated solutions ] business line. We increased our EBITDA margin by 1 percentage point year-over-year to 12.6%. This represents our highest first quarter margin to date, and I'm pleased to see that the restructuring and efficiency initiatives we have implemented support the margin expansion. We delivered another quarter of strong operating cash flow with a cash conversion of 95% over the rolling 12 months. On a quarterly basis, cash flow was slightly impacted by higher working capital but remained at a solid level with 84% conversion. This robust cash flow enables us to continue investing in the business while also delivering attractive returns to our shareholders. I'm also proud that we have been the first in our industry to have our climate targets validated by the Science Based Targets initiative. I will come back to this later in the presentation. Yesterday, the Annual General Meeting approved the ordinary dividend of SEK [ 15 ] per share and the extraordinary dividend of SEK 5 per share. This means we will distribute over SEK 1.3 billion to shareholders next week. I would also like to highlight that today is the ex-dividend date. Finally, earlier this week, we announced that we had entered into a share tender agreement with, among others, [ CVC Capital ] for their shares in Hermes Transportes Blindados, marking our entry into Peru. The transaction will be carried out through a public tender offer. I will spend some time on this acquisition after summarizing the first quarter performance. Turning to the next slide to go through Europe and Latin America. Our Europe and Latin American segment delivered a strong performance in the quarter with revenues of SEK [ 3.6 ] billion. We achieved organic growth of 6.6%, which was particularly strong, considering the communicated revenue decline in the [ ATM ] business line. The uncertainty of political climate has increased global demand for secure logistics and the management of physical assets such as precious metals. This has positively impacted both our international and [ FSGS ] business lines, with [ international ] business line growing by over 30% in the quarter compared to prior year. We also achieved double-digit growth within our [ automated solutions ]. The operating margin increased close to 1 percentage points to 10.2%, demonstrating that our focus on operational efficiency yield positive results. Let's move on to the next slide to talk about the U.S. The U.S. segment delivered another strong quarter. Adjusting for currency impact, the U.S. achieved record high revenues. Organic growth was 5.3%, and the acquisition of [ borrows ] contributed positively to overall growth. International business line, in particular, delivered strong performance, which was driven by an increased demand of cross-border movement of precious metals. As you know, we have had double-digit growth -- organic growth within [ automated solutions ] for many quarters in a row. And this trend continued also in the first quarter with an organic growth in the mid-teens. We also saw that price indexation related to higher fuel costs in March following developments in Iran contributed positively to [ revenue ] in the first quarter. Despite significant currency headwinds of 15.2%, the business achieved record high operating profit of over SEK 700 million. The operating margin reached 17.9%, marking a new record for us. Our operational efficiency initiatives continue to deliver results, enabling us to grow the business without increasing headcount. At the same time, we have maintained a high service quality and strong customer satisfaction. The volume growth, combined with improved efficiency, contributed to the expansion of the operating margin. The precious metal storage facility in Canada acquired at the end of 2025 has been successfully integrated during the quarter and contributed positively to profitability. In addition, the [ sale ] of a facility and relocation to a new leased site had a slightly positive and nonrecurring impact on the margin. Let's turn to the next page and talk about [ SME pay ]. Revenues in the [ SME Pay ] segment increased to SEK 72 billion in the quarter. More than 45% of this revenue now comes from new small- and medium-sized customers, demonstrating that our strategic focus on SMEs is driving both growth and improved operating results. A reduction in the operating loss compared to the previous year is in line with the segment's strategic priorities. The migration to new POS platforms enables [ LumiSpa ] to focus on larger SME customers across additional verticals. As part of this process, [ LumiSpa ] has chosen not to migrate nonprofitable customers, which has some impact on [ set ] transaction volumes. Let's now move to the next slide where I'll share a few updates on our sustainability progress. We continue to make solid progress against our carbon emissions reduction plan. During the first quarter, our use of biofuel [ HBO ] increased by 10% compared to the same period last year. Today, 40% of the group's total electricity consumption comes from renewable sources, reflecting our ongoing efforts to transition to cleaner energy. Year-over-year, our combined Scope 1 and Scope 2 emissions have increased slightly, primarily due to the acquisitions completed in 2025. However, when compared to the fourth quarter of 2025, we have achieved a meaningful reduction with Scope 1 and 2 emissions down by 3%. Safety remains an equally important priority for Loomis. We have set a target to reduce our recordable work-related injury rates by 10% by 2027 compared to 2024 levels. On a rolling 12-month basis, we are performing slightly better than this target level. Protecting our employees and further reducing workplace injuries remain a key priority for the company, and we will continue to maintain strong focus on both safety and continuous improvement. Let's move to the next slide. where I'm pleased to share that the Science Based Targets initiative has validated our new emissions reduction targets. Our new targets address both our direct direct emissions and indirect emissions across our value chain, reflecting a comprehensive and responsible approach to climate action. With this, we cemented our role as the industry leader within sustainability, showing that it is possible to reduce our environmental footprint and deliver critical infrastructure at the same time. We have now taken a leading role in transforming the industry towards a more sustainable future. Now let's turn to the income statement slide, where I'll begin by noting that despite the significant negative impact from exchange rate headwinds, we achieved both strong currency adjusted growth and organic growth. Our net financial items have improved compared to the previous year, driven by lower financial expenses as interest rates have declined. Our strong performance has resulted in record high earnings per share despite the currency headwinds. I would also like to highlight that our net debt-to-EBITDA ratio is stable and well below our target of staying under 2x. With the acquisition of [ Hermes], net debt-to-EBITDA is expected to temporarily exceed 2x following completion. However, this increase is short term and leverage is expected to come down within 6 months. We remain fully committed to maintaining our investment-grade credit rating. Now let's move on to the next slide to review our performance in a historical context. As we can see, we have a stable and resilient business model that continues to deliver. Looking at the rolling 12 months, we have achieved a record high operating margin of 12.9%. Despite significant currency headwinds, we have maintained revenues at SEK [ 30 ] billion. Currency adjusted growth for the rolling 12 months was 7.2%, slightly above our growth target for the strategic period. Moving to the next slide before opening for Q&A, I want to spend some time on the intended acquisition of Hermes Transportes Blindados. Earlier this week, we announced the intention to acquire Hermes, marking our entry into Peru. For many years, Loomis has operated in Argentina and Chile, and we have continuously explore opportunities to expand our business in Latin America. As you know, this is one of the strategic priorities we presented at our Capital Markets Day in 2024. And Peru is one of the countries we have been closely monitoring. It's an attractive market for Loomis, one of the fastest-growing economies in the region with high cash usage and a stable macroeconomic framework. Hermes is a market leader in secure transportation and cash management in Peru with around 50% market share and a diversified base of approximately 1,000 clients and about 3,200 employees. The transaction values the business at an enterprise value of SEK [ 1,450 ] million with an adjusted EBITDA multiple of 6.6x. We have entered into a tender offer agreement with [ CVC Capital Partners ] and other minority shareholders, who together hold 99.5% of the shared capital. Loomis will conduct a public tender offer to acquire up to 100% of the company's shares. We expect to launch the tender offer during Q2 or Q3 with closing of the acquisition during Q3. From an earnings perspective, the acquisition is expected to be immediately accretive to earnings per share. Overall, this acquisition strengthens our position in Latin America and is a strong strategic fit for Loomis. It aligns well with our growth ambitions within both [ Automated Solutions and International ] business line. This concludes my summary of the quarter. Operator, we are now ready for questions.

[Operator Instructions] The first question comes from the line of Johnson Simon from ABG Sundal Collier.

Good morning, everyone. Thanks for questions. I want to start off with the [ international ] business here. Very strong growth again. But I wonder if you can clarify a little bit how much of the growth is driven by the [ precious metals ] business, of course, a large part of it. But also if the [ other ] categories in [ international ] are also growing and contributing or how that mix is doing?

Yes. Thanks, [ Simon ]. The situation in Q1 has been mixed. The beginning of the year was mainly driven by silver movements, where a lot of silver was transported globally as well as the -- we have also opened new geographical lanes and expanded our business. So the key drivers include an increase in global interest in precious metals trading during geopolitical uncertainty as we had in Q4 last year as well. The [ word we run ] at the beginning of March with the closing of aerospace has impacted somehow flights and also our business in Dubai and the Middle East. But there was -- there's been a continued high demand to move precious metals that [ do at the ] same time.

All right. And what's the near-term outlook you think for for that business, given that volatility may not be as high in the precious metals markets here? What do you see in coming quarters?

So as we've always commented, this business is cyclical. So it's very difficult to estimate how the year will proceed. But [ forwarding ] is more of a spot market and the year opened with high demand. However, we don't know how long the situation in Iran will last and the impact it will have on both [ aerospace ] and availability of flight. Nevertheless, so far, we've seen the same level of momentum in Q2 -- at the beginning of Q2 as we saw in Q1.

All right. Then turning to the contribution from other segments in Europe, excluding the positive impact of [ international ] for the European margins, how how did the rest of Europe develop here in the quarter?

As you mentioned, we had [ international ] impacting positively. We also had automated solutions with double-digit growth. You know that we have diversified also our portfolio within [ international], expanding into pharmaceutical logistics, also growing with lower-value goods business as well. And now the focus moving forward is to keep growing automated solutions and to try and recover part of the [ ATM ] business that we lost in prior year.

Okay. So it's fair to assume that -- the core cash business has been more [ flat ] on margins then?

Yes Yes, you [ see ] that.

All right. You also did not take any new [ charges ] for restructuring, I think, here in Q1, if I read correctly. So what does that mean for the future of the cash business in Europe in terms of margins and outlook and so on?

So I mean, looking at the restructuring costs, you know that we still have an ongoing review on Europe. So therefore, we showed that some additional restructuring may occur in 2026, although not to the level of what we saw in 2025. And regarding the margins, you know that our ambition is to just try to recover the margins that we had of the -- before we got impacted by [ Kobi ], I think we're on the right track there. There's still work to be done. But we're happy with the pace that we're showing. I mean, increasing close to 1% of margins in Europe is a strong performance, I would say.

All right. Then just the last one for me on the Hermes acquisition, You talk about synergies with your existing [ international ] business taking the cross-border business over there. But do you also plan to expand the the local [ mining ] business to more countries in the region, for example? Is that part of the plan?

I mean it's -- we already do that in certain parts of Argentina as well. But I think -- the main purpose with Hermes is on the [ international ] side, they only take care of the domestic side of the business, and we [ want ] to add that international leg to be able to do that door-to-door service. And then another key thing there, a driver of growth will be [ automated solutions ]. We think there's a low penetrated market in that sense in Peru, and we can be very successful as well with our [ team ] of products.

All right. Just a follow up on that on the [ mining ] business in in both Peru but also you mentioned you have some in Argentina. Is -- what kind of metals or that primarily gold or other [ claims ]?

In Peru, you know that they are one of the biggest producers in gold, silver and copper. But you got other materials as well. We manage [ the as ] numbers -- the names don't come up to me now. But palladium, for example, we got other type of [ press ] metals as well. But basically, it's gold, silver and [ up ].

All right. You mentioned copper. Is that something you work with as well?

Yes.

The next question comes from the line of Varanasi Sami from Goldman Sachs.

Just one for me, please. [ Testing ] by your commentary around [ international, automated solutions ] effects, et cetera and also your commentary around passing on higher fuel cost to customers, would it be fair to say that your growth rate at the end of the quarter was a lot higher than the average that you printed and therefore, that's a trend that we can probably expect, depending on how the macro evolves into the next quarter as well?

Sorry, [ Anthony ], we didn't get all of your question. You said in the beginning, you were commenting around international, automated solutions, et cetera -- the last part of the question. .

So I just wanted to check whether the growth rate in March, end of the quarter was higher than what you printed for 1Q as a whole. And therefore, is that something that we can look for going into the next quarter as well qualitatively?

I mean in terms of the [ fee ] indexation that we have, that is true that some of that happened to a larger extent in March. So the [ earlier ] in the quarter. You can compete. .

Yes. I mean that's the growth due to the fuel fee that came mainly in the U.S. So we've got 2 countries where we have those fuel metrics in the contract. That is U.S. and France to a certain extent. We saw the big impact in the U.S. and -- on the revenue. And we expect, for example, Q2 -- the beginning of Q2, it has been as high as it was in Q1. Now we don't know how long the [ year ago ] with last, but as far as the fuel costs are high, then we should see that growth in revenues went from [ PMT ].

So just a follow-up. The [ international ] and the FX business did not see any phasing on growth through the quarter?

Not really.

The next question comes from the line of Amer Dan from SEB.

Yes. A couple of questions from my side. Maybe starting a little bit on the U.S.A. margin, which was the strongest one on record. Just to clarify the positive effect from the sales leaseback here. It sounds like it's quite minor, like SEK 10 million or so. if you can confirm that. So also just for this, it would be -- yes, your best quarter ever margin-wise in the U.S. Yes.

The sale of the facility generated approximately $1 million in [ EBITDA ] in Q1.

Perfect. And following up on that, I would assume that [ boroughs ] is still quite a bit dilutive. I was just curious to hear how far progressed you are with the integration there?

So first of all, answering your question, yes, it is diluting the margin. We're still in early stages with [ borrowers ]. Our immediate focus is more on solving some existing quality issues to ensure service excellence. And then once we achieve that, then we will shift our efforts into improving margins and efficiency.

Yes. Perfect. And final one from my side. I noticed that the headcount is down 600 [ FTEs ] year-on-year. I assume it's impacted by the restructuring measures. But can you remind me how you're thinking about further restructuring measures for 2026, primarily for Europe? I noticed you didn't record any items affecting comparability in this quarter. Would you say the [ FTE ] reductions are [ done ] now? Or do you see certain countries where you need to adapt still?

So you're mixing two things here. First of all, we focus in the U.S. Yes, we had 600 employees year-over-year, less FTEs in the U.S. due to operational efficiencies, and we will continue with the work there. If we look at Europe, we didn't have any restructuring cost in Q1 2026. But we do expect to have restructuring cost in the remaining part of the year. again, not to the extent of what we had in [ 2021 ]. But there's still work ongoing on the different European countries.

Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Aritz Uribiarte for any closing remarks.

So thank you very much, everyone, for listening in, and please reach out if you have any follow-up questions. Thank you. Bye-bye.

Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.