NKT A/S (NKT) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the NKT acquisition of SolidAl Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Claes Westerlind.

Thank you and good day, everyone, and thank you for calling in to listen to today's presentation. My name is Claes Westerlind. I'm the CEO, and joining me today is my esteemed CFO, Line Fandrup. Earlier this morning, we announced that we have closed the acquisition of the Portuguese cable manufacturer, SolidAl. We are excited to walk you through the details of the transaction, explain the strategic rationale, how we see it and also how it will lead to attractive value creation for our shareholders, our customers, the society and also as NKT continues to play a key role in the electrification of society. But just before doing so, I want to draw your attention to this slide and highlight that this presentation and related comments contain forward-looking statements. which, of course, are subjected to many uncertainties and risks that are outside of our control. Now with that out of the way, we turn to the reason why you have all joined us today. Today, we are proud to announce the acquisition of SolidAl, the leading manufacturer of a broad range of primarily aluminum cables whose products address the power grid value chain. With this acquisition, NKT has gained a competent and competitive manufacturing base in Portugal that will be expanded to address the robust demand for medium- and high-voltage power cables across Europe. Before going into the terms of the transaction, I would like to extend also my sincere welcome to the 430 SolidAl employees who have now joined our family. We are excited to learn from and also to work together with you. The final terms of the transactions or transaction are as follows. The final enterprise value is EUR 192 million, and this was founded within our existing capital structure. It corresponds to 9.4x the enterprise value to the '23 SolidAl EBITDA, including reoccurring EBITDA synergies of EUR 7 million, which are expected to be realized by end of '26. This ratio decreases to approximately 7x. Line will provide some more color on these synergies later on in the call. To generate further value for our shareholders and customers, we will also invest an additional EUR 50 million to expand medium- and high-voltage capacity at the existing SolidAl sites. This additional capacity is expected to be operational in 2027, and the acquisition as a whole includes -- including this expansion investment is supportive of our medium-term financial ambitions. This includes generating also a ROCE of above 20%. In addition to the strong financial rationale, this acquisition is also highly complementary to our strategy and immediately strengthens our core business as a power transmission and distribution company. SolidAl has proven manufacturing capacity and capabilities up to 225 kV. It enhances the existing NKT product mix and also provides further geographical reach across Europe, both obviously, from a market perspective, but also from a supply perspective. Furthermore, the acquisition also provides us with an additional 400-plus employees that possess strong cable competencies which continue to be a scarce resource in the market today. In general, we believe that Porto and also the broader Portugal offers us a strong platform for talent recruitment in the future. For our customers, this acquisition immediately enhances our ability to serve power transmission and distribution operators with end-to-end grid solutions, while providing us with an attractive platform for future growth, as I just said. Overall, we believe that we are the right owner of SolidAl and that we can leverage our internal competencies, scale and balance sheet to generate significant value from this acquisition. We believe that we have an experienced management team in place to execute a thorough integration, harvest synergies, also expand the site in accordance with our own internal expectations. Line will address the financial implications of this transaction later in the call, both for NKT as a group and also for the applications business line, where the financial performance of SolidAl will contribute going forward. Turning now to SolidAl, who they are and also what they are doing. Founded in 1970, SolidAl has over 50 years of experience serving the power grid value chain as a manufacturer of high voltage, medium voltage and also low-voltage power cables, with a modern factory located in Northern Portugal and a highly skilled workforce of 430 people, they have manufacturing capabilities from 1 kV and up to 225 kV, From engineering to production to testing, to packaging and distribution, SolidAl possesses the competencies to manufacture a broad range of products that address the power grid value chain and that are highly complementary to NKT's product mix. In addition to their attractive manufacturing profile and commercially attractive location, another key consideration for us before acquiring SolidAl was their customer base. They have deeply embedded relationship with their largest customers, who are primarily European transmission and distribution system operators and particularly in France, Spain, the U.K. and Portugal. Their top 10 customers have been buying cables from SolidAl for an average of 20 years and selected customers include National Grid, RTE, REE, Enedis, ESB and also REN. This acquisition allows to strengthen our key relationship with existing customers and also broaden our reach across Europe and particularly then to the countries that we just discussed, France, the U.K., Spain and Portugal where SolidAl has a very strong foothold. In 2023, the SolidAl revenue mix was 45% to 50% medium- and high-voltage cables up to 225 kV, mainly serving the power grid distribution segment. Low voltage constituted roughly 35% to 40% of sales, with the remainder being other specialty cables. As part of the expansion of SolidAl's existing sites, we will optimize production with a target that 70% to 80% of the revenue mix will be medium and high voltage thereafter. This will maximize NKT's value proposition with our customers and also for our shareholders. Revenues in market prices were approximately EUR 150 million, which converted to standard metal prices between EUR 120 million to EUR 125 million. In 2023, SolidAl generated approximately EUR 20 million of EBITDA. Turning now to the strategic rationale that lies at the foundation of this acquisition. Overall, I would like to emphasize that the capacity and capabilities of SolidAl are highly complementary to our existing strategy where we would like to maintain and grow market share, especially in the medium and high voltage segments, while also offering a competitive platform for future growth. The acquisition immediately strengthens our production capacity in these segments with a competent manufacturing site that will allow us to meet an increased demand from our customers. The acquisition adds scale and strengthens NKT's product availability, particularly in the medium and high voltage, it also enhances the competitiveness of our current portfolio. Simultaneously, an established footprint in Portugal increases the robustness of our customer portfolio and also geographical presence across Europe. Today, we have a strong presence in Northern and Central Europe, which has now been expanded to France, the U.K., Spain and Portugal. Furthermore, NKT's core competencies and its leadership team are well positioned to realize reoccurring EBITDA synergies from the existing SolidAl perimeter, which will lead to value creation for our shareholders and also customers. We will optimize the current layout and leverage our expertise, scale and balance sheet to drive the value creation of EUR 7 million per year by end of 2026. And lastly, it offers us also an attractive platform for future growth with an additional investment of EUR 50 million to immediately expand medium- and high-voltage capacity, the SolidAl site will be a leading manufacturer with a robust product offering that can serve the ongoing electrification of society. In unison, this acquisition contained strong strategic rationale from an operational perspective, and we firmly believe that NKT is the right owner of this asset going forward. With SolidAl now a part of the NKT family, the efforts of our management team and applications and also that of our COO, Will Hendrikx, will be focused on implementing a successful integration and also executing the on-site expansion plan. Since 2020, Will and Carlos and also the current management team in applications have been instrumental in expanding margins and also creating an optimized factory footprint across our existing medium- and low-voltage factories under their leadership, application has improved from EUR 0.3 million in EBITDA at the end of 2019 to EUR 58.7 million in 2023. Supported by strong market outlook, we announced an investment program of EUR 100 million across our medium voltage sites in Denmark, Sweden and Czech Republic in April. And this acquisition is a natural next step in the progression of our distribution business. Both myself and Line have a lot of confidence that this acquisition is supported by their competencies as well as those of NKT in general and also that they will have our full support and trust in ensuring that this is executed in line with our philosophy of being prudent managers of risk. Shifting now to demand drivers before handing the word over to Line, who will then highlight the financial rationale of the acquisition. The acquisition of SolidAl is supported by increased demand for medium- and high-voltage power cables. Over the past years, investment in electrification, power grid upgrades, the renewable energy transition and data centers have grown in magnitude and will continue to do so in the years to come. These structural megatrends as well as tangible data points in the market have provided us with the demand visibility required to invest further in the power distribution segment of our business. The first driver of the increased demand we are seeing today has been the age of the European power grid infrastructure, which are, in many cases, worn down and in need of repairment or replacement. Reports from, for example, IEA, but also the EU Commission suggest that over 40% of the European power grid infrastructure is over 40 years old. And that EUR 584 billion must be invested across Europe for the remainder of this decade to strengthen the power grid and enable the ongoing electrification of society. We are seeing customer demand driven by the need to upgrade and replace the power grids, as I just said, especially from distribution system operators across Europe. And some of them have actually also formally laid out their CapEx budget until 2030. And looking at their filings, we see, on average, a 30% increase in demand compared to levels exhibited in the recent years. And the length and the visibility has also increased where we normally would see perhaps 2 to 3 years of volume demand, we are now seeing upwards of 6 years coming from distribution system operators in terms of frame agreements. Both of these trends highlight that demand will continue to support existing European production capacity in the years to come. On top of this, rapid adoption of renewable energy as a primary power source is placing further stress on the outdated grid infrastructure. Here, intermittency demands new connections and significant strengthening programs in surrounding communities and further growth in renewable energy will compound the current need for power cables and represents significant demand going forward. Lastly, we see a structural increase in the demand for electricity from society. Higher transmission and distribution requirements are being driven by fast-growing electricity-intensive applications, including EVs, feed pumps and data centers. which require both medium and low voltage cables to ensure successful integration into the power grid. Overall and in sum, it's a combination of these megatrends that I think all of you are well aware of that is driving the robust demand for power cables from 1 kV up to 525 kV in the market today and that it's expected that this will continue to persist in the coming years. As a power transmission and distribution company, we see this acquisition as an opportunity to grow our market share in a market where we have increased demand visibility and belief. Future results will continue to be subject to uncertainty, including, of course, competitive landscape and volumes do not yet come with the commercial commitment as they do in our Solutions segment. So this is still -- there is a difference. But with that disclaimer, we felt comfortable with the SolidAl technology that the demand is there and it's growing and that we could create value for our shareholders and our customers with this acquisition. And with that, ladies and gentlemen, I would now like to pass over the word to Line.

Thank you, Claes, and thank you everyone, who joined the call today. So in addition to the sound strategic rationale that SolidAl adds to NKT, this acquisition carries a financial rationale that will lead to value creation for our shareholders also. So first, just want to touch upon the financial details of the transaction. In 2023, SolidAl had revenue and market prices of around EUR 150 million and generated an EBITDA of around EUR 20 million. The final enterprise value regarding the transaction was EUR 192 million, corresponding to around 9.5x the enterprise value to our -- to the '23 EBITDA. In 2023, SolidAl recorded market price revenue of around EUR 150 million, and that corresponds to EUR 120 million to EUR 125 million in standard metal prices. As a part of the acquisition, we have identified recurring EBITDA synergies of around EUR 7 million per year to be realized by end 2026. So these synergies are expected to primarily be derived from [indiscernible] that will be achieved through the optimization of the existing SolidAl production flow. We have a management team in application that are already over the course of the last years have improved the production flows in our existing factories and are ready to do the same with SolidAl. Additionally, we will expect to harness synergies from channel distribution and geographical optimization of the existing sales footprint. Factoring in these synergies, the enterprise value reported to the '23 EBITDA multiple will decrease to around 7. On top of the existing factory footprint, NKT will invest an additional 50 million to expand medium- and high-voltage production at the site, capital expenditures associated with this investment will be incurred in the years '25 and '26 before capacity expected to become fully operational in 2027. From a financial perspective, we expect to see SolidAl to see gradual growth in revenue and earnings in '25 and '26 before taking a larger step-up in 2027 when the capacity -- full capacity is operational. Together, the enterprise value of this acquisition and associated investments are supportive of our medium-term financial ambitions, including generating a return on capital employed above 20%. Overall, this transaction has an attractive financial profile and will generate good returns when we execute on a successful integration and expansion of the current site. Just from an accounting treatment perspective, the financial performance of SolidAl will be recorded under applications business line going forward. And this will expectedly improved revenue and absolute EBITDA immediately while also being margin accretive for applications business line as a whole. On the transaction cost of this acquisition, they will be recognized as one-offs and will be around EUR 1 million. We have not required regulatory approvals for the transaction to close so therefore, the transaction costs are not expected to be very high. Over the course of the next years, we do expect to see integration costs less than EUR 5 million. Of course, this is subject to exact timing and the final amount and being the best estimate at this time. It would be part of the operational result of the application unit. SolidAl is expected to contribute to NKT's financial performance from the date of closing today. The financial contribution is expected to be in line with their performance in 2023. And it will come in addition to the 2024 financial outlook that we communicated on 21st of February 2024. So lastly, the transaction was funded within NKT's existing capital structure. It's really important for us to emphasize that we remain committed to maintaining a leverage ratio below 0 going forward, and we will secure a financially robust position, which is required for us to continue to fund the ongoing investment programs across the businesses and to meet the additional capital requirements from a growing high-voltage project business. We have not compromised on this commitment, and we are confident that our financial position will remain robust upon closing of this transaction. Having covered the strong financial rationale of the transaction, let's turn to the final slide for closing remarks. To conclude, the strategic rationale is strong, as Claes highlighted in the beginning of the call, and it also carries a strong financial rationale that will lead to significant value creation for shareholders and customers. NKT's expertise, our scale, the balance sheet will lead to synergies that are expected to be realized from the existing perimeter and the investment we will make into medium- and high-voltage capacitor -- capacity will significantly increase the revenue and EBITDA generation capabilities from the SolidAl asset in 2027. So going forward, we're really excited about the platform for future growth, both from a manufacturing point and for the people and the competencies that we are leading at SolidAl. Both Claes and myself as well as our experienced management team in application remain focused on executing a successful integration of SolidAl into the NKT Group. With that, we will now open up for Q&A.

[Operator Instructions] And the first question comes from the line of Casper Blom from Danske Bank.

Congratulations with the acquisition. I was hoping if, first, you could elaborate a little bit more on the synergies that you expect to realize here. How much is going to be top line synergies? How much is going to be cost savings to the extent you can do that? Secondly, the additional EUR 50 million that you plan to invest in the company, how should we see that in terms of potential revenue generation on top of the 150 million that SolidAl is doing already today? And then finally, more thought for housekeeping. Will we see this acquisition go exclusively into the applications business? Or will there be some sort of, what do you call it, smaller, high-voltage business going into solutions?

Thank you, Casper. So just trying then to take them one by one. And then if I forget anyone here, then you remind me, I hope. Starting with the synergies, to talk a little bit more about that. As I'm sure you read from the release, we expect around EUR 7 million of synergies. We expect them to be fully realized towards the end of 2026, gradually across '25 and '26. They will be primarily towards the top line. And there will be some different ingredients in it. Operationally, it is about efficiency measures inside the factory. It is also about procurement synergies. So to be able to, of course, to a certain extent, manage cost, but primarily to get more out of the same perimeter. And the other aspect next to operational discipline is also the sales part. So the way we sell, where we sell and to whom we sell will be another part of the synergy realization. But as I said, the absolute majority of it will be top line focused. And perhaps we haven't said that also, but important to remember is also that we will also pursue cash synergies trying to also push on that going forward. I hope that was an answer to your first question. On the CapEx, the EUR 50 million that we discussed. This is something which we will commence in the short term and the primary part of this the EUR 50 million will be spent in '25 and '26 with the expectation then of the ramp-up coming in '27. We will not disclose a detailed revenue number but if you want to think about something you can think both from a synergy and expansion perspective of something in the range of double of the current amount of revenues. And then going thirdly to the housekeeping matter, SolidAl produces high voltage and medium voltage cables alongside with the other product lines. And as you know, high voltage typically belongs in our Solutions business line and medium voltage typically in our applications business line, although the SolidAl business perimeter is a very product-focused business. So therefore, the best home, our assessment is within the applications perimeter, not only from a business orientation perspective, but also that the applications business line in mine and also Line's view is the best business line, both to drive the expansion programs, which are similar to the ones we launched earlier this year in Asnaes but also to extract the synergies that we are planning to and that we just talked about. And perhaps lastly, I should just mention that we will promote internally also intracompany transactions because in high voltage, this perimeter will enable us also potentially to do some product business by means of the cables coming out from SolidAl and that kind of a business is a solutions business within NKT. So that was, I think, a long and complex answer to a simple housekeeping question. But I hope you got that most of it.

Yes, absolutely. If I just may follow up a little bit. You tell us today that there is a revenue of EUR 150 million and EUR 120 million to EUR 125 million in standard metal prices and EBITDA of EUR 20 million which is pointing to a margin within SolidAl, which is significantly above the levels that we are currently seeing in your applications business. What is the reason for this?

Yes, I think this is something, of course, that will benefit us now when we are buying SolidAl. So it is margin accretive and supportive towards the applications business line from Day 1, which is good news in us doing this acquisition. It is a different product mix, which is existing in SolidAl. It is also different markets, different customers. So it is difficult to compare them one by one. So I would not be able to give you a sharp answer to exactly the underlying reasons for it. But in essence, this is good, and it gives a positive contribution to our existing applications perimeter.

And the next question comes from the line of Daniela Costa from Goldman Sachs.

Actually, my question is a quick follow-up on what you just commented and then 2 others, if possible. But when you are on the 13% EBITDA margin that you just commented and higher than NKT, but has that level been a stable level for the longer run? Or how have their margins evolved over the recent period given all the pricing trends that we have seen in low and medium voltage. Is their 13% more of a one-off or a stable margin they had for a long run?

Yes, I don't know if we are able to comment so far back, to be honest. But I think like most of the businesses, SolidAl as well as NKTs, also applications margins. We have made improvements in recent years. And I think it is as far as SolidAl perimeter goes, if you go a couple of years back, this business was in a very different shape. So it has not been about these margins in the past. So there has been a turnaround situation and a business improvement effort being done in the SolidAl perimeter as it also has been in the applications perimeter for the last couple of years. And here today, these 2 healthy businesses are being married and we think in a value accretive way. I think that that's the best comment I can give.

Got it. And towards the comment that '24 will be sort of in line with the figures of '23, given the strong growth outlook in distribution. Is that because at the moment, they are capacity capped? Or why not growing in '24?

I think we will -- our expectation is that it will be in line with '23. We believe it is a decent profit margin. And as Casper also pointed out in comparison to the existing perimeter in NKT also says the same. So we will not go into further details on that. But of course, as always, Daniela, we don't rule out any upside as well. And of course, we'll work forward to try to realize them.

And just a question more generic in terms of the industry outlook across Europe in medium voltage. And how do you assess the lack of capacity? Is it comparable to what sort of has been talked about in transmission? Or can you tell us industry-wise, how severe is the problem of lack of capacity and yes.

It's more coming from a solutions background myself there. The puzzle is also not easy to make, but it's fewer pieces of the puzzle to put this together. And the other difference is also that the technology height is less in medium voltage and low high voltage, if you will, than in HVDC. So and on top of this, it's a much more fragmented market being in medium voltage. So I think the capacity shortage, if I refrain from using that word and instead talked about pricing, I think you've heard me say before that a couple of years ago, the prices weren't sustainable in the medium voltage business, and now they have been coming towards being sustainable, which I think, for me at least suggests a less unhealthy supply and demand perspective or a healthy one, if you want to use that word. And looking to the indicators that we have, and I just quoted 2 of the data points, very overall, it appears also that this market will enjoy a positive trend going forward. with the amount of expansion and replacement that is necessary, both on the medium voltage side but also on the lower and high-voltage side.

The next question comes from the line of Claus Almer from Nordea.

Also a few questions from my side. So not asking about the growth outlook for the coming years, but the capacity of the business or the activities you're acquiring. Could you sell maybe 10%, 20%, 30% more based on what is already established capacity? That would be the first question.

I would say that part of the synergies that we are looking at and that we talked about earlier, the EUR 7 million or top line initiatives aiming at debottlenecking and also optimizing the existing perimeter also simplifying the products which we are producing there. So depending on, of course, now how we measure more and how much more I would not say that we can sell or do 30% to 40% more. But I think part of us promising or saying that we believe that these synergies are credible is saying exactly that, that we can do more with this existing assets than what it does today.

Right. And if you look at the current side, is it possible to add significant more capacity, maybe even in the higher end of the high-voltage space so subsea capacity. So how are you thinking about that?

It's a good question, Claus. Immediately, I mean, the investment that we are doing now, the EUR 50 million is what we call an in-perimeter expansion, meaning within the gates of what we have just acquired. And this is focused on medium and low high voltage. If we were to expand further, it is not likely that we will do that within the existing premises, even for onshore, but it could be in an area close to it, just thinking from a theoretical perspective now. When it comes to sea cable, Portugal, of course, offers a cost-competitive labor market. So that is clear. And this is also one of the strategic rationales for where we are going ahead with this acquisition for this moment. The site where the existing factory is not with the immediate access to sea, which is typically advantageous when it comes to sea cable. So that would also -- it cannot be there simply. It would have to be somewhere closer to the sea. I hope that gives some light.

Yes, absolutely. And then just a final one. So you're saying that this acquisition will be meeting your minimum 20% ROCE target. When is that?

So let me jump in here, Claus. So on the ROCE target, it is the part of the expansion of the site. So you should think about '27 on this part of it. But it's going to be EBITDA margin accretive immediately to applications.

Next question comes from the line of Akash Gupta from JPMorgan.

I have a few as well, and I'll ask one at a time. The first one I have is on technology. So you get one factory, a single factory where SolidAl is producing 1 kV to 230-kilowatt -- kV cables. And the question I have is basically when it comes to the technology that they use for production, is this something different which allows them to have a lot of cables under 1 roof? Or are there dedicated production line for different types of cable under 1 roof? So maybe if you can help us explain that one first.

No, they are not using a fundamentally different technology than what we do, depending on, of course, what different is. But of course, you can you can focus your factories on 1 product line or you can have several product lines in 1 factory. And I think with the history of this company having been within 1 perimeter for the last 50 years, for them to grow and expand, they have done that within the existing physical perimeter coming from bare wires going into cables, going from lower voltages to higher voltages, and of course, viewing it from the outside, I think that is also where -- what has brought them to where they are today. So it's not something fundamentally different. It's more that they have not focused the factory and then today carry quite a few different products, which I think I also have said or should have said earlier as well that part of our synergies or part of our work going forward will also be to work on the streamline of the different and amount of variants of products which are produced, and of course, with the ambition to lower, as an example, scrap levels, quality costs, but also to reduce setup times, et cetera.

My second one is on the cross-selling opportunity. Given these medium voltage and lower age cables are quite different in specification by countries. And is there any cross [indiscernible] in the medium term where you can use your production -- NKT stand-alone production to sell it to SolidAl customers or vice versa?

I would say that this is a benefit for our customers going forward that we join forces between these 2 companies. So that the SolidAl offering, to the extent that goes over and beyond NKT's and vice versa will become available for the customers in a very short term. So I won't be able to give you the details, Akash, on it. But for sure, it is a potential for our customers going forward.

And my last one is for Line. Can you give us some rough estimate of what is depreciation and amortization in just figures? So we know what is the adjusted EBIT contribution from SolidAl..

Yes. So I think right now, for '24, you should expect something like less than EUR 4 million. And when we get to the time after the expansion, a bit less than EUR 10 million is a fine number.

The next question comes from the line of Kristian Tornøe from SEB.

I have 3 questions as well. So first question goes to the demand visibility, I think, Claes, you indicated if I heard you correctly, that you need to roughly double revenue. So can you elaborate on any backlog visibility or framework visibility, which, at this point, already sort of secures a solid growth outlook.

Yes. I won't be able to go into details, Kristian, thanks for the question. It's highly relevant. But I think what I meant to point out was the fact that we see and you've heard us say before about our applications perimeters that basically whatever we can produce, we can sell, which testament to the demand we see for the moment. If we pair that with the data points that I mentioned through the earlier presentation and also with that many of the frame agreements because there has been also previously quite a few frame agreements in the medium-voltage space, but they have been very different in nature than what you see in solutions. So typically, a frame agreement will be a window to make business and the window to make call-offs through from a customer perspective but not in any way guaranteed volumes. What we have seen lately is 2 different trends or pieces of data suggesting for a more robust demand going forward. One is that the term of the frame agreements tend to be longer instead of 2, 3 years, they are now looking at 5 to be plus 1, plus 1 years. And also some frames even entail volume commitments. I think all these points that I just mentioned, combined gives us a belief that there is a stronger demand of medium voltage and also the low high-voltage cables going forward in the European region.

Okay, understood. So does SolidAl have any framework commitments of significance as of today?

Without going into details, they have frameworks, framework agreements, but I would just -- it's a word of caution there because framework agreements, which have been done in the past or not, we should not misconceive it to what is being contracted in solutions or hopefully also what could be in the medium voltage segment in the future. So frames is basically something quite standard. That's what I mean to tell, Kristian, in the legacy applications business.

Understood, quite clear. Then just to your '24 guidance and your '28 target. So Line, if I heard you correctly, you say that then I guess we should add roughly EUR 10 million in EBITDA to your 2024 earnings and that comes on top of guidance. So why are you not changing your guidance range?

Yes. It's a relevant question also. And we are close to closing Q2 and doing the regular cost look into the forecast. But if we had an upgrade to the NKT guidance, including SolidAl we would, of course, come with it, but we actually need to assess this first. So therefore, we communicate [indiscernible].

But would it be fair to assume that once you have a slightly better look into Q2, I mean, would likely get a change in the guidance before your actual Q2 results?

I think what you have to see is that NKT is currently within the brackets we already communicated, and that would mean both in the lower end and the upper end, meaning we are not at a stage where we are ready to say we would do an adjustment to the guidance.

Fair enough. And then to your '28 target, so this is the third investment you are announcing which sort of adds material earnings to 2028. And I know your target is open ended, but still we're getting to the point where it would be natural to address whether these 3 investments have a material change to the target. Should we expect you to revisit this anytime soon?

Yes. And then I guess that's a definition in [indiscernible] but I fully agree, and that's also what we will be doing and finding the process to communicate to you. We need a bit of time also with SolidAl now in, so allow us that and then we will get back.

Fair enough. And then just my last question. So in your slides on the revenue mix, if there's other 10% to 20%. And from the SolidAl website, I can see they have overhead lines as well. So maybe just some comments on the product types, which you don't have today and whether you should continue to have that today or whether it makes more sense to take that out and increase a medium voltage cadence instead, if that's possible at all.

Yes. I think it's a good question, Kristian. And let me try to shed some light at least. You're right and hearing me say overhead lines, it takes a lot. And I think it goes without saying that NKT historically today and also in the future, will advocate for power cables being the most effective means of transporting electrons. Now having that said, and as you rightfully pointed out, SolidAl does have overhead lines as part of their product portfolio and also revenue mix today. And this is entailed within the specialties or other types of cables. Now they come from a different background than what we do. So their conductor wires, and this is a legacy product from that. But it is also an elegant inclusion in their product mix because it allows them to get machine utilization for conductor stranding lines when they are not used for doing extruded cables. So you could take something out from a philosophical perspective, but it's doubtful whether it would make financial sense actually. So I think we don't -- we are not ready to say neither left or right. What I can say today is that it's highly, highly unlikely that NKT will invest to expand the overhead line capacity, which exists in SolidAl today. And I hope I used soft words here, but I hope you get the sentiment. And then on top of overhead lines, I can also mention that they are also carrying another product that NKT does not, which is aerial low-voltage cables. So I think all of us have been around Europe or primarily in Asia, where you see overhead lines, which are covered with black plastic basically. And this is also a product that they are carrying basically on the same basis that I just mentioned. And both these 2 components is not something which is part of the core business of NKT, but it does make financial sense for SolidAl has made financial space to carry these products. And of course, we will consider all options going forward but not do anything rash and not do anything for religious reasons, but rather let ourselves be driven by business logic.

The next question comes from the line of Bastien Agaud from Berenberg.

On SolidAl, are everyone in the industry in medium voltage are also operating at full capacity for medium voltage cable or there are some spare capacity that we should think about for our forecast?

They have, like we do, a good utilization of their medium voltage lines for the moment.

The next question comes from the line of Xin Wang from Barclays.

I think a lot of questions have been asked already. But can I ask a question on the execution of the integration because I think this is some of the other peers in the sector, NKT does not have a lot of experience in executing such similar MAs. So if you can share a bit of what you're planning to do, what would you like to keep and change in SolidAl?.

Thank you for the good question. It can be a long answer this, but I will try to make it fairly concise, we agree with you and when we look at the risks with this acquisition, of course, integration is one of them that we take quite seriously. Firstly, how we organize ourselves, I relayed earlier in the call that this will be entailed within the perimeter of applications. So this is the first thing from an operational control perspective and business running perspective. Looking at the integration process of the business, we have formed also a separate integration team, which will be led by our COO, Will Hendrikx. And this team will focus on both tagging along on the back of the due diligence, and to verify the findings there and also to process the integration of the company into both NKT systems, but also to the applications business line. As far as changes goes, the majority of what we see now in the immediate future relates to IT and IT security and also financial reconciliation. And of course, on top of this comes also operational aspects like the way we work with safety, the way we work with quality, the way we work with running our applications plants, and this will also tag along on the backside of that. But we will also, of course, operate with the principle that we will not try to fix what's not broken. But to leave that working as good as possible. So we will tread carefully, but we will also have a dedicated team working with the integration. And over time, as it comes into the applications business line, of course, there will -- will have to be also organizational realignment to fit that part. But as I said, everything has to be handled with diligence and in a timely manner.

Can I also ask a follow-up? So after this acquisition, I mean, I think the NKT always kind of take pride in being having higher exposure to high voltage being almost like a high-voltage fuel play. But after this acquisition, should we change how we think about your growth strategy going forward?

I wouldn't say so. I think we are, just to put things into perspective here, of course, you have already done it, but the applications business line revenue was 640 million roughly on standard prices last year. And here, we are adding a perimeter of around EUR 120 million to EUR 125 million of course, with the growth entailed on that, which would double that. The solutions revenues last year were more than EUR 1 billion. So just we get the sizes of the figures attuned. And even with that, we will be a player which has higher exposure towards solutions if you compare it to our peers. And that's also deliberate and then that we can also expect it to continue. But at the same time, as I also said earlier in the call, we will let ourselves be driven by business logic. And if we can find opportunities such as in the medium or low high-voltage space, which supports our medium-term ambitions, then we will evaluate them on a stand-alone basis, of course. So what makes financially and business-wise sense this we are open to pursue. But we have historically and we are also currently in an unproportionate high investment journey in solutions, and this will also continue for the next couple of years.

As there are no further questions, I would like to hand back to Claes Westerlind for any closing remarks.

Thanks a lot for joining us today. I don't know if you hear it in our voices, but you should know that we are very excited and also happy to add the SolidAl perimeter to our business and especially to welcome more than 400 new colleagues expanding our capacity, in our opinion, also improving our competitiveness of the company in full, including the product offering, our market reach. And as we touched up on the call as well, to bear in mind that we are adding a very competent, competitive and also expandable platform for the future from many different perspectives, both in perimeter but also outside the perimeter in the country of Portugal. And last but not least, business logic applies. So that's why we are happy to also conclude that this initiative, together with the expansion that we are now planning will support our 2028 ambitions, including being -- having a ROCE over and above 20%. So with those words, we thank you for joining the call today, and we look forward to discussing this more at the next opportunity.

This concludes today's conference call. Thank you for participating. You may now disconnect. Speakers, please stand by.