UPM-Kymmene Oyj (UPM) Earnings Call Transcript & Summary

Good afternoon to our guests here in the room and to everyone joining us online. My name is Ulla Paajanen, and I will be responsible for WISA Investor Relations. A warm welcome to WISA's first Capital Markets Day hosted here at UPM's Biofore House. I would also like to remind you of our disclaimer since we might be making forward-looking statements. And before we begin, let me briefly go through some important safety information regarding the premises. Safety is a top priority for WISA. Therefore, I would like to remind everyone here that in the event of evacuation, please leave all personal belongs behind and proceed outside as quickly and [indiscernible] possible. Our designated meeting point is located directly in front of the Biofore House. Your today's presenters are Chair of the Board, Tapio Korpeinen, whose distinguished career spans leadership position as a CFO and business area Executive at UPM. Joining him is President and CEO, Tuija Suur-Hamari, a highly respected leader with extensive experience across the forest industry, particularly in materials-based and industrial businesses. Completing the team is Chief Financial Officer, Lasse von Hertzen, who brings a unique combination of capital markets expertise from investment banking and deep financial leadership experience from UPM. Let us now turn to today's agenda. As you can see, Tapio will begin by sharing why UPM believes WISA is well positioned to create greater value as an independent listed company. Tuija will then provide an overview of WISA's market strategy and investment case. Following these presentations, we will open the floor for a Q&A session with Tapio and Tuija. After a short break, Tuija will continue with a deeper look at WISA's operations and product offering. And last, I will present then WISA's financial profile. Before our final Q&A session with all presenters, Tapio will conclude the formal presentations with closing remarks, and we expect today's event to conclude approximately 4:00 p.m. Helsinki time. So at this point, thank you for joining us. We look forward to an engaging discussion and to answering your questions throughout the afternoon. Before we begin, a few words about questions. [Operator Instructions] For those joining us here in person, please raise your hand -- if you would like to ask a question and a microphone will be brought to you. We welcome your active participation and look forward to engage in discussion. And now let's move on to today's presentations. Tapio, please.

Thank you, Ulla, and good afternoon. Welcome on my behalf as well, quite a historic moment, the first CMD for WISA Group, even if it's a long established industrial company, but about to be listed there for the first CMD. I will give, as I said, a bit of a background to the demerger and also, let's say, the rationale for the demerger and the listing of WISA. And in terms of background to start, let's say, from 2 years ago when we had a Capital Markets Day for UPM. We sort of laid out the priorities for UPM as such and also, let's say, the focus for looking for new growth for the company. Since then, we have disclosed 2 important sort of portfolio initiatives actually last year, the joint venture that is in the works between us and SAP, which addresses Communication Papers, which is the business within UPM portfolio that operates in a structurally declining market. And of course, there, the rationale is to look for synergies in combining the 2 businesses and an upside for the business as a joint venture -- independent joint venture going forward. But then the other news from last year was the strategic review for the plywood business of UPM. And now we are at a stage where at the end of August, the shareholders of UPM approved the plan to demerge WISA Group from UPM. And here we are at the first CMD. And of course, in the case of WISA, the rationale is different, let's say. So it is about distinguishing the potential that the business has in terms of value creation and also profitable growth. WISA Group is a leading player in the plywood business and with a focus on the premium categories of the market, so with a premium position in the market. Also, WISA has, let's say, a strong track record of being able to deliver good results in terms of returns and cash flow throughout the business cycle during the past years. And also, the focus of the group means if we look at the sort of market segments, geographies where the business operates, we expect to have the market grow by more than 5% per year during the coming years. So there is room to grow, have room to pursue its strategy to deliver value, deliver profitable growth, also, I would say, the capability and the capacity to do so. And then also, we can make basically those value drivers and actions more visible to the investor and, let's say, distinguish the value that can be created in the WISA business stand-alone and as a listed company. We have an experienced leadership team also. And today, you have a chance to discuss with some of them and especially here from Tuija and Lasse as was shown in the agenda. But then about the transaction as such, just a short note on that. So basically, as was approved in the AGM, WISA Group will be carved out or separated from UPM through a partial demerger. And that means that each UPM shareholder will receive one WISA Group share at the time of the demerger. So therefore, on day 1, the shareholder base of the company will be exactly the same as it is at that time for UPM as a whole. And then the plan -- after the demerger, which will take place at the end of October, plan is to list those shares as quickly as possible in the beginning of November in the Helsinki Stock Exchange. And I believe that in the Helsinki Stock Exchange in the list of companies, WISA will be a quite unique investment case for the shareholders. As said, it is a well-established leader in the plywood business with a premium focus. The sort of dynamics or fundamental drivers of the segments and customers of the market where WISA Group focus is means that, again, we believe that there is healthy growth, more than 5% per year going forward. The premium position, which I've mentioned a couple of times here already is based on both quality and service capability that is tailored for the customer and end-use segments that WISA is focused on. That means that, first of all, that is evidenced by the price point that WISA is able to fetch for its plywood in the marketplace. Tuija will show more about that. And also, it means that WISA has a quite resilient, sticky customer base to base its business on. And when you combine that with the fact that WISA is able to manage and control its costs in the different sort of points of business cycle, then therefore, also this resilience and, let's say, good cash flow throughout the cycle has been there. And the final point there is that when then looking at the business at hand, what WISA Group has in terms of the customers, but also in terms of the asset base, the portfolio of plywood mills, the potential for growth and reaching the financial targets, which we'll talk about later today, it's possible without any major capital investments during the first coming years here. So in that sense, there is a case also for profitable growth, improving performance in a very capital-effective efficient way. But maybe I'll stop there, and we'll have a chance to discuss and dig into each of these points deeper today. So I'll hand it over to Tuija, who will then tell you about the business and the strategy in more detail.

Dear guests, welcome on my behalf as well. My name is Tuija Suur-Hamari, and I'm the future CEO of WISA Group. When I joined UPM Plywood about a year ago, I thought that plywood is a good business and has excellent opportunities. And now after a year, I truly feel that this is the case and even stronger. So very excited to start the journey as WISA Group. And I believe that after today, you will also see WISA as a company with strong financial track record and potential for clear growth and future development. So it's our pleasure to introduce WISA Group to you. WISA Group is one of the leading plywood producers in Europe, focusing on those end users where the requirements for the material and for the service of the -- are the most demanding ones. So in high and medium requirement end users of plywood. WISA has a diverse product and market exposure and strong financials. Our sales in the previous 12 months have contributed to EUR 457 million comparable EBITDA to EUR 67 million and EBIT to EUR 49 million. Together with our net debt position, these figures demonstrate strong financials and room to grow. plywood as a material is a very versatile material. It can be used in various end uses because it possesses properties that are superior compared to, for example, other wood-based materials. Those are properties such as the high strength to weight performance, durability, wear resistancy and dimensional and thermal stability to name some. In WISA, our strategy is really to take the maximum out of these excellent properties of plywood and bring them to the end users that are most demanding and where plywood is the material of choice and difficult to replace. WISA's industrial footprint is close to where the forests are. We have our mills in Finland and in Estonia. And then our sales is close to our customers positioned in our markets in the -- serving our customers in their local language and supported by warehouse hubs located strategically close to the customers. Responsibility is built into WISA's business model, and this continues to be so also in the future. That's because it's in our values, but also because that's what our customers expect of us. Our responsibility approach has 6 pillars. Firstly, responsible sourcing. We know our suppliers, and we know where our wood comes from. Secondly, efficiency in terms of energy efficiency and both also in material efficiency. Third pillar, we are a reliable partner for our customers and close to them. We keep our promises, and we do the right things right. Fourth point, we want to continue developing WISA as a safe and engaging workplace also in the future. Fifth, renewability and low carbon performance. Plywood is part of a solution and WISA is part of a solution in the decarbonization journey where plywood as material is a biogenic carbon sink. And lastly, but not least, also we continue R&D for fossil substitution in our own processes, but also offering solutions for our customers. Like I said, WISA has a very focused approach towards the end users that we serve. So we focus on 4 key end users. Biggest one of those is panel trading and construction, so different construction end uses in the European market. 58% of our turnover comes from this end use. And vehicle flooring, floorings for commercial vehicles like trailers and reefers trucks, 12% of our turnover coming from that end use. And then maybe the most demanding end use there is for plywood is the LNG shipbuilding business where plywood is used in the cargo containment systems of liquefied natural gas as an insulation material around the gas tanks. 14% of our turnover comes from this end use. And then the smallest end use for us, focus end use is the Pari manufacturing, representing 4% of our turnover during the past 12 months. And you may notice that we have the mark that there is both birds and spruce plywood in our portfolio. And we have this premium positioning across both hardwood and softwood plywood. So we produce hardwood, plywood out of birch. And birch as a species, wood species is more dense. So we get the stiff and strong plywood produced out of birch, whereas then our other wooden product line, so our spruce plywood, their spruce as material is less dense. And therefore, the plywood produced out of it is more lightweight and excellent for structural use, so in different construction end uses. Share of these 2 product lines in our sales is about 50- 50%. And these birch plywood products are used in a bigger variety of key end users. And therefore, because those are the more demanding ones, then also the average gross price that we get from birch products is significantly higher than that of the Spruce. In this picture, you can also see that our delivery volumes for birch have been lower, and we also have a lower capacity than for Spruce plywood. One thing that Tapio already mentioned and can be found out in this equation here is also that we have available capacity in both birch and Spruce plywood, and we can capture the market growth with our existing capacity without any major investments. Plywood production as such is a highly technical process. You need to have access to quality raw materials rightly harvested according to the plywood needs brought to the mills in an efficient manner and favorably from as close distance as possible to minimize the logistics costs. And then plywood production has many stages, efficiencies needed in each of these to reach the qualities needed for the different demanding end users. This is kind of core of WISA. We are very good in this plywood operations and production and can do this in an efficient manner. But then let's take a bit closer look into WISA's markets and competitive environment. The global plywood market is in volumes about 107 million cubic meters large. In values, this represents about EUR 39 billion. And WISA's focus market these high- and medium-grade applications in Europe and the global LNG market. That's a size of 4.6 million cubic meters in volumes translating to value of EUR 3.1 billion. And there, you can also calculate from this that actually, even though WISA's focus market is less than 5% of the global plywood market in volume. In terms of value, it's almost double of the share. size is almost double, so close to 8%. WISA is focusing on the demanding industrial applications, high and medium end uses and selected customers in Europe and then globally on the LNG market. And the good news is that these focus markets of WISA are expected, estimated to grow -- continue growing until 2030 at the pace of 5.3% annually. You can see in this picture that the biggest market, biggest single key end use here is the construction market, but all of these key end users are estimated to continue growing. And that's because of the attractive end market dynamics and geopolitical landscape. So in the LNG demand, the global demand for liquefied natural gas has been growing. And there's -- already, we know that there is a large backlog of LNG carriers to be produced also in the years to come. Construction business has been in a low cycle for some years already. That is expected to turn into growth part of the cycle. And good to note that even though this has been the case in construction sector for some time already, WISA has nevertheless been able to show good financial performance. So there is a big potential in this one. Vehicle flooring demand is also expected to grow following macroeconomic conditions, but also because there's aging fleet in Europe. And there's a new European directive, Vector directive coming into force, forcing then commercial logistics companies lowering their CO2 emissions. And all in all, also the demand for sustainable products is expected to continue growing, also supported by regulation, for example, by intensifying the use of less carbon-intensive products. Let's take a bit closer look into these 2 biggest key end users of WISA, so construction and the LNG market. And in this picture, you can see in the graph below the distribution of WISA Group sales in Construction segment by different countries. And you may notice that the Nordics, Ireland and the U.K. and Benelux are the biggest construction markets in Europe for WISA. And if you then look at the upper graph showing the estimated construction market growth in Europe, you may notice that WISA's focus market in construction is expected to grow faster than the European average. On the right-hand side, you see a very nice house. there's a lot of plywood in there, and that's picturing the different end uses or different ways of using WISA plywood in construction across the different usages. So lovely house. Like I said, the LNG vessel fleet and LNG market is estimated to continue growing close to 9% a year for the -- until the end of 2030. And WISA is one of the suppliers of the few suppliers globally who is able to supply this very demanding market where the barriers for entry are the highest. So in order to become a supplier in this segment, first of all, you need to have certification from the French technology owner, GTT, who certifies who can start supplying. You need to have, obviously, the required technical qualities with your products and you need to have relevant volumes to be able to supply that market. Obviously, you need to win over the shipyards as well and be continuously able to deliver quality products with quality service. In this market, the customers are also sticky. They prefer to work with customers -- suppliers who they know they can trust on. So we have good market and to turn this into good business, we also need a strategy how we're going to capture that market growth. So let's take a look into WISA's strategy as well. Also in the future, WISA will be winning with focus, partnership and disciplined execution. We have clear strengths that we build our strategy on also going forward. WISA continues to rely and be focused on those premium applications of plywood. We continue to work closely with our customers in a true [indiscernible] The pillar A here is commercial excellence. How do we plan to capture the growth that is on the market? How do we grow in our focus end users. Then the second pillar is the operational excellence, how we develop our mills, increase the efficiencies and maintain and improve our competitiveness. And the pillars A and B put together our existing capacity and capabilities. By these, we believe that we can meet our financial targets without significant investments. But then as WISA going forward as an independent company, there is also the pillar A that gives us additional potential and opportunities. This may be geographical expansion into attractive markets could be selected strategic investments or an optionality for M&A should an interesting opportunity arise in that front. If we take a little bit closer look into the commercial strategy of WISA, like I said, focusing -- continuing to focus on our key end users also going forward. We put together the strategy for each of the key end users considering selected customers, considering geographical areas. And the common in common denominators in our commercial strategy are how do we capture the market growth with our existing customers, how do we increase the share of wallet within our existing customers, but also on how do we create new key accounts, especially in markets where we currently may be underrepresented. A lot of potential there. In the operational pillar, so the B pillar, we are focusing on, let's say, classical operational improvement issues. productivity growth, improvement of yield, so getting more out of the precious raw material that we use, improving the product quality, having higher share of higher-margin products produced in our mills and then optimizing our maintenance costs, turning the focus from fixing or maintaining more into preventive maintenance. We can also -- and good to note that we can increase our production with the existing fixed cost base, so without the need of adding significantly the fixed costs. But all of this is, like I said, classical things and also needs to be supported by targeted investments in automization, in smaller bottlenecking investments and also in bringing digitalization tools to our shop floor and production units. And one example of this kind of new digital tools that has brought our plywood production to new era is the mill data platform, a new digital tool that we have now launched into all of our production sites during the past year, allowing real-time data on operational visibility available for our operators and engineers, enabling then faster decision-making and earlier identification of possible deviations and also a tool for -- better tool for analysis and planning the future improvement areas. We can already see the results of the new tool in our KPIs. And we've created a huge pool of data and knowing that data has maybe today more value than ever. We're already now testing in our [indiscernible] in Estonia, AI-based quality sorting. These type of examples and digitalization, we will continue to bring on to our production sites also going forward as part of our strategy. So these were the pillars A and B. And like I said, then WISA is also well positioned to capture additional potential across strategic growth levers. We have -- in our R&D laboratory, we have a major R&D project ongoing on developing next-generation plywood products. We may be considering extension of our product portfolio and M&A like we already discussed as well. So the horizons are open for WISA in the future. I hope by now, we've been able to weaken your interest towards WISA as an investment case. And Tapio already went through the highlights in the beginning. Now let's take a bit closer look into those still. So WISA is one of the leading European plywood producers in an attractive position in the forestry value chain with high entry barriers. And here, we have pictured -- this is one way of looking into the leading, obviously, here, we have placed our main competitors, main European producers in terms -- put them into order in terms of capacity. And you may notice that WISA has a nice podium place there. You may also notice that there are 2 suppliers that are marked with gray. Those are our Russian competitors who are not currently able to deliver their products to the European market. So WISA is a significant player, premium supplier and focusing on those most valuable markets. That's our strategy. We already went through the attractive market dynamics. So the expectation of our focus market is to continue growing. So not going to stop there. It's good to remember that it's a growing business. WISA has its offering tailored towards the premium application, and that's facilitating us a strong pricing power. On the left-hand picture, you see a qualitative map of the different end uses of plywood. And on the Y-axis, they are ranked according to the technical and service level requirements. And you may notice that the WISA's focus end users are there on the highest end-use categories, which then translate to the pricing position that we enjoy on the market. On the right-hand picture, we describe that. So it's showing the hardwood and softwood markets in Europe. And on the X-axis, you again have the qualitative scoring and then -- sorry, on the Y-axis, you have the qualitative scoring and X-axis is the price -- average price for the material. And you may notice that both WISA Spruce and WISA Birch are in their categories in the upper right corner. So that's how it can be interpreted as our premium position. And one reason also behind the previous is that we have a clear commercial strategy. which is, in turn, facilitating a sticky customer base. We have shifted from a higher number of key customers. So from 400 key customers down to 100 for 10 focus end users down to 4 and from 28 different applications to 10. And this has brought focus to the whole WISA business. You can imagine that it translates in efficiencies throughout the organization, think about stock levels, for example, for different products and complexities in the production. So strong -- WISA has now today a strong emphasis on serving large industrial customers and end users and distribution partners. And as a result of this, the retention rate of WISA's customers varies between 99% to 100% a year, which is quite amazing in my opinion. I haven't seen such numbers anywhere else. WISA has a resilient financial profile. And you can see it in this picture where we show in the upper graph, we show the WISA -- the turnover development of WISA during the past 10 years. And then below graph shows the comparable EBITDA development in the same time frame. And there's been a lot of things happening. There's been different business cycles. There's been pandemic and a couple of wars. And during this same time frame, the EBITDA -- the comparable EBITDA percentage has been hovering between 14% to 18%. So this, in my opinion, signals the resilience of WISA. And one reason behind this resilience, you may find here. WISA's cost base is flexible. We have a high proportion of variable costs. So 76% of our costs are variable, meaning that we can adjust on different business cycles and market conditions easier than some other more fixed cost-intensive productions. Also, the capital requirements for WISA have been low over time. And these have then led to consistently high cash generation and capital efficiency of the business. So the average cash conversion has been 76% in the past 3 years and the return on capital employed 18%. And the good news is that we still have significant upside like already mentioned, we have capacity to meet the market growth with our existing machine park. You see on the left-hand side here in this picture, our delivery volumes in '25. And maybe a good reference is to use our record year of production '21 as a reference on how much we can easily grow with our existing current product pallet, considering also that we've been able to develop our production since '21, but that gives you some kind of a ballpark. That concludes the first part of my presentation.

Thank you, Tuija. [Operator Instructions] And here in the room, if you want to ask a question, raise your hand and microphone will be brought to you. So Antti, before we go to your question, may I ask a couple of questions here from the chat. So Tapio, you elaborated about the investment highlights of WISA. But if you would like to single out one particular highlight, what would you like to share with us?

Well, I would say, like I was pointing out earlier that WISA is a very well-established industrial leader in the plywood market with quite a lot of operating leverage, so therefore, able to actually deliver on the sort of financial targets in a very sort of capital efficient and I would say, reliable way when we look at the next years to come.

Okay. Thanks. And then maybe also to Tuija, here's one for you that could you please elaborate why Wisa is able to get premium prices for its products?

Thank you for the question. I think that's a combination of the things that I explained. So focus on the premium markets, our clear commercial strategy, taking extremely good care of our customers and on our sticky customer base. I think that's where it comes from.

Okay. And now, yes, why don't we go to Antti Koskivuori at Danske.

So Antti Koskivuori from Danske. Two questions. Firstly, on the competitive landscape, one observation, obviously, from the slide was that there's quite a lot of capacity in Russia, which are now, I guess, more or less blocked from the European market. If we see a scenario that those volumes would be returning to the market, what kind of implications you see for your core markets and segments?

Yes. Thank you. Yes, the case, like I said, is today so that Russians are not able to be present on the European market, but we do consider that the fact that one day, there will be peace in Europe and most likely, we also get more competition from Russia. Even today, we are competing with the Russians in Asia. So they are present on the LNG market. So that picture wouldn't be changing. Then they also don't have spruce plywood in their portfolio. That picture wouldn't be changing either. Then they have been importing significant volumes of birch plywood to the European market earlier on. And our assessment is that they would first come to those end users and applications where they were present before the war. And quite a lot of the capacity that has left or not the Russians haven't been able to bring to Europe has been then filled with imports from outside Europe. So our expectation is that, that would be kind of the first battle there. At the same time, we also believe that when there is peace in Europe. Also the construction sector most likely will turn into strong growth mode and the absolute cake also grows for everybody to take their shares and grow. And still one point is that then it also remains to see what happens to the wood imports and wood pricing in this type of scenario. So I can't give you an exact answer, but it's not the black and white picture.

And also kind of what Tuija was already pointing out, these players are no strangers to us before the war. We were competing with them, and we did so quite well. So then we will see what the situation is if those circumstances come that they are able to come back to Europe, but then the market will probably look quite different as well.

Second question would be on WISA as a separate company versus part of UPM Group. Wonder how do you see the potential dis-synergies coming from the spin-off to WISA? I guess one thing that comes to my mind is wood sourcing, for example. I mean, WISA as a procure of wood is a quite much smaller player than UPM as a whole. do you see that this type of -- this particular thing or other topics, similar matter would have an impact on WISA's potential to kind of operate as good as it has been going forward?

WISA has already been independent in terms of business. So we've had our independent mills, our independent sales. Then where we have been relying strongly on UPM is the different functions serving us. And now during the past year, we've been and since spring time, more significantly so, we've been able to build our own organizations and also actually during summertime, we also carved ourselves out of UPM SAP. So we've kind of built the independent WISA already. So we know that our fixed costs through -- and I think Lasse will come more into details into this, but we will have higher fixed cost as a stand-alone company. But there will be continuing some agreements with UPM also going forward. Wood sourcing being another one of those. But I've actually come back to the wood sourcing agreement after the break. The other kind of win-win cooperation that we are continuing with UPM is -- UPM continues to be our logistics supplier, where volumes matter and WISA has significant volumes to be shipped out of Finland to European continent.

Okay. Thanks. And Linus, before we go to you, I had take one here from the chat, which is an interesting topic. So Tuija, you mentioned in your presentation about the possibilities for M&A. And here's a question that is WISA expected to grow through acquisition? If yes, what businesses the company is looking for?

That's an option for WISA. And if we go that way, then the target needs to meet our strategic or be aligned with our strategy one way or another. As we know, the plywood market in Europe is rather -- is fragmented. So there are different avenues depending on how we look into it.

Good. Thank you. And now I think it's Linus Larsson from SEB.

I wonder a bit about business practices and how they may change now for you as an independent company? What constraints have Tapio put on your business while you've been part of a big group and how may that change? And maybe in particular, in terms of your growth aspirations, what you may let lose and how you may try to grow differently from before?

I don't know about the constraints, but maybe a way to put it is that WISA has been the smallest business area in UPM. And when capital allocation is being considered, maybe we have not been in the forefront of the investment decisions. And now going forward, WISA is able to, let's say, use the money it's making. Maybe Tapio has a better comment on this.

Well, maybe first, I would sort of turn it around also this way that, of course, let's say, UPM has a kind of a certain level of excellence that we look for from all companies and all businesses and of course, from the company as a stock-listed company. So in that sense, there's a very strong base in terms of practice for WISA as a new listed company to build on in terms of what a listed company must be able to do and how to manage its business and so on and so forth. Then, of course, it's a question that when looking at, let's say, a global large-scale large-cap company like UPM, we have many kind of requirements that are put on us and probably there will be, obviously, now we have been focusing on getting ready for the day 1 and getting the sort of business ready to fly in the beginning, but probably there will be also chances to sort of really kind of sharpen the focus in terms of what WISA as a listed company needs to be able to deliver to its investors and where there is, let's say, chances to sort of simplify.

Good. We have some very good questions here on the chat. Some of them will be addressed in the second part of the presentation. So I will skip them and leave it for the final Q&A. But here is one for you, Tuija. There is a question about WISA's financial result is heavily dependent on workers' union relations as we saw first quarter 2025. What has the message been from the personnel on the demerger?

Yes. Obviously, when the announcement was made September last year that plywood is under a strategic review, the first impression was a surprise and obviously, as a shock, at least in some people's minds. And then it took a time to digest the topic. And since then, I would say that now our teams across the mills, but in different functions as well are very motivated in creating something totally new and getting a new start. So not going to be able to speak for every individual, but that's the big spirit we have. And actually, we've been also measuring and following this as part of our transformation journey, how people take the situation and to make sure that we also communicate and bring information in a timely manner to our people to understand where we are heading.

Yes. Good. And then I think it's Tomi here from DNB Carnegie.

Tomi Railo, DNB Carnegie. Sticky customer base, premium pricing. Can you talk a little bit about the pricing trends and fluctuations over the years? Is it highly linked to the volumes? Or how do you sustain kind of the pricing picture?

We have a principle of value-based pricing. So we try to -- we hang on to our prices, and that's part of our pricing excellence that we don't only sell volumes and products, but truly the value proposition that is respected also by the customers. Obviously, when there are big changes on the market, then our pricing follows. And we'll actually be discussing the pricing a bit later. But we are not like changing our approach in -- after every cycle or market movement.

Then I think it's Joni Sandvall from Nordea.

Joni Sandvall from Nordea. Maybe one question still on the competition, especially from Chinese competition. Those are more on the low end of requirements of end users. But how do you see in the future? Is there a possibility that the Chinese competitors would develop their products as they have done maybe in the packaging space historically. So is there a risk that these competitors would enter, let's say, on the medium requirement market?

If we have learned something from where the world has developed over the recent years, I think it's not to underestimate the Chinese capabilities. So I can't say that there wouldn't be a risk like that. We can only concentrate on our game and maintaining our sticky customers and developing the sales from our perspective and bringing in new solutions because that's what WISA has in its tradition to be a forerunner in the industry.

Okay. So let's go here to the chat because there are no other questions here in the room. There is a question to you, Tuija, again. What would you characterize as the main competitive advantages of WISA?

I would say, coming back again to our premium focus. So customer knowledge, business understanding, quality of our products, but also quality of our services for each of the key end users that we have, we have defined a specific value proposition and then worked on the value proposition, so to develop to a higher differentiation factor from our competition.

Good. Thanks. I have here some more questions, but some of these are for Lasse von Hertzen and some are so that we will be covering them in the second presentations. So I will park them until the end of the day. So are there any more questions here in the room for these 2 presentations that we have now already listened in? Okay. It seems like not. So we will have now a break. And I would hope to see you all here in the room [ 5 to 3 ] Finnish time. And so it's about 25 minutes, and we will start again then. And thanks for the first session of today. [Break]

Welcome back from the break. So let's continue with the agenda. Earlier on, we looked into WISA's markets, strategy and key investment highlights. Now let's go deeper into operations and sales and financial figures. So starting from the wood supply, premium quality plywood needs, obviously premium quality logs and secure supplies. And going -- also going forward, forestry dynamics support WISA being the buyer of choice for veneer logs. So plywood producers have superior ability to pay for the most valuable part of wood harvested in the forest, so for the logs compared to, for example, to the pulp producers or even to the sawmill timber producers. Having said that, there is a good symbiosis on the wood market with these actors. It's good that there is an outlet industry utilizing the logs, having the capability to pay for them. And at the same time, there is a market for the byproducts of the timber and plywood producers who can then use the byproducts as valuable raw material in their processes, the pulp and board producers as an example and also energy industry. Also going forward, WISA continues to rely on its current wood supplier, UPM Forest. And in term WISA continues to supply its byproducts to UPM to be used in energy production and in pulping processes. We have a wood supply agreement in place and also the byproducts agreements in place that are in force until the end of 2030. The first 2 years of the duration of the agreements, the supply will cover 100% of the needs and then the latter remaining 2 years with decreasing volumes ranging from 80% to 60%. There is an optionality to continue the cooperation, obviously, even after that. This arrangement then also allows WISA to develop its own procurement operations and test the market outside the single supply model as well. After we have procured the locks, we move into production. And production of plywood is technically demanding with lots of stages. So first, we receive the logs. We need to work on the logs, soak them, debug, obviously, then scanning for potential defects and to determine the optimal cuttings towards crosscutting and then we come to peeling where the log is then peeled and produced into a thin few millimeter thin sheets of veneer. Then we start processing the veneer sheets and making sure that we use them to the optimal. So we also need to further process them to prevent waste resulting from our process. So we do jointing of the seats. We do composing of whole veneer sheets, full-size panels from pieces. And we also do batching repairing holes and knots in the seats. This is needed when we want to produce the premium material that's in our focus. Then we start composing plywood out of these seats of veneer by gluing them together. We may also add different kinds of further processing on the plywood produced depending on the end uses and needs of the customer. So several steps there, and then we end up into packing of the premium plywoods that we produce. This is bread and butter of WISA. We have been producing plywood for over 100 years, and we've been perfecting these processes ever since. Also, byproducts result from this process. And like I already said, the byproducts of plywood production are valuable raw material for other industries. There is market for this and nothing goes to waste from the wood that we use in WISA. Our production units are located near the major forest resources. Our production footprint is very much based in Finland, but we also have one excellent birch plywood mill in Estonia. We have -- each of our mills is specialized. We have birch mills and spruce mills, and they have a defined portfolio, each of them, supplementing the overall offering of WISA. And then obviously, our sales are then located close to customers, whereas the mills are there where the forests are. cost discipline is deeply rooted in WISA's DNA. And here, you see a graphic illustration of a Smart spend program, which is actually the methodology in WISA that we used to make sure that we continuously develop our variable cost base. There are lots of things happening in the raw material space, for example, in the costs. So we always focus on those things that we can influence, finding savings, finding better agreements with our suppliers, more efficient raw materials, efficiencies on our production lines, very disciplined way of looking into things. And during the -- since 2014, the cumulative savings of this program have amounted to EUR 99 million. And as a message from this is that this is a methodology that we use, but I think it describes WISA way of working very well. We focus consistently on production optimization. And the foundation that you can see on the bottom of this graph describes that. So through kind of lean methodology principles, we systematically improve our operations and also through engaging everyone in the continuous improvement. means of standardization, eliminating waste, fast reaction to deviations and visualizations, they form the foundation. Then on top of that, we have our improvement projects focusing on issues of like removing bottlenecks in our production in improving the process flows of materials and then different kinds of improvement projects and some of them may include CapEx needs, but not all of them. So this is part of our mindset as well, continuous improvement. Now we've also produced the products. So let's take a look into what the products actually are. But before going to that, I want to highlight that we have a wide portfolio. We have nice excellent mills, 7 of those. So to manage all of the complexities we have with the portfolio of 3,000 SKUs, we also use efficient steering processes to make sure that we don't lose on time or resources. We do portfolio management on a central level, making sure that our product portfolios meet or are aligned with our strategy. We have centralized product management that ensures that our products meet the customer demands of today, but also those of the future. And very importantly, and there was a question on this, pricing is handled. -- pricing guidelines are done centrally within WISA. And followed up continuously monitoring where we are in terms of market conditions and facilitating the forecasting of our sales and results. And last but not least, efficient sales and operations planning, making sure that our capacity utilization and the customer demands meet in the best possible way. These are needed to manage and produce the products that we have in our portfolio. So for each of the key end uses that we focus on, we have a comprehensive product portfolio that is designed to meet the customer needs. But we don't sell actually only products. We have very much focused on value creation, what's our value proposition towards our customers. So actually, in the Construction segment, it's not only about product, it's about the consistent quality and reliable availability of the materials, thus having our warehouses close to the customers, trusted long-term relationships with the customers and responsible and traceable sourcing are the cornerstones of our value proposition in this end use. If we take a look into the vehicle flooring end use, there are also top-notch product offering supported by the value proposition focusing on performance and durability of the materials in these heavy usages, floorings of trailers, for example, and optimized material flows and also the life cycle value of the products in their end uses. LNG shipbuilding, the specific interesting market. There are also solutions for the different technologies on the market. Value proposition is built on the industry-certified quality and traceability of materials on the reliability of supplies and confidence built through long-term partnerships with the customers and WISA between. And as the last focus end use and product segment, the [indiscernible] manufacturing, their application expertise and tailored solutions, consistent quality and performance and reliable availability are cornerstones of the value proposition. So now we have those products gone through and then still a few words about how we bring them to the markets. We have a strong own sales organization in WISA. We have local sales offices in each of the main markets. And where we are not present physically ourselves, then we rely on trusted sales agents to represent us or facilitate our sales in a given country. And an example of such a market for us can be mentioned as an example is South Korea. We are also powering our customer service with digital capabilities. And we have launched -- my WISA customer portal that is supporting our customer service, but especially the customers with real easy access and real-time data on their orders, on their deliveries and other business relevant data, for example, the certificates or needed strength properties and all when they plan for the use of material. So everything is there for them, and it's a portal that we are constantly developing. WISA has a diversified portfolio of customers and runs this focused partnership model. If you take a look into the pie on the left-hand side, you notice that actually top 20 customers of WISA bring in 48% of the sales. And from the other perspective, looking it from the end-use perspective, there this panel trading and construction segment represents 58% of the turnover. There's also a variation by the customer groups in terms of the way of doing business with them, meaning the customers' sales agreements. Typically, the panel trading customer contracts have a longer duration than of those in the industrial segment. And then the pricing updates on the panel trading side are let's say, more frequent than what is the typical case in the industrial customer segments where we sell directly to industrial customers. WISA has strong market shares in the focus markets that we've been talking about. And you can take a different approach by looking into this in terms of euros or in terms of volumes. You can see that in both segments, the market shares are relevant, but measured by value, they are higher. And once again, I think this represents the premium position that we have on those markets. And that premium is facilitated by this value-based pricing approach that we have. So we don't sell only products delivered to the -- at the door of the customer, but really starting from the premium end users and then considering the unique value creation potential that we have in each of these key end users. And we've built our pricing approach, value-based pricing approach on these principles. This is actually my last slide, and it's my favorite slide because I'm extremely proud for the whole WISA team to be able to share with you the high customer satisfaction numbers that we constantly get from our customers. We perform customer satisfaction surveys twice a year, which is quite an effort, but it's because we want to maintain our position at our customers, and we want to stay tuned to where things are going. We get the results twice a year and analyze them, identify things for improvement. And there's always something to be improved. These are not same numbers every time. They vary a little bit, but they remain on the high level. So customers show high satisfaction with WISA's quality, reliability and customer relationships. And the Net Promoter Score of WISA in this recent study, latest study was 59, where the industry average in business-to-business markets is from 25 to 30. So it's a strong message from our customers and a repeatedly strong message. And most of all, I think this picture shows you the strength of WISA. It's not about one salesperson doing an excellent job or mill having excellent production numbers or great quality or our sourcing making stellar agreements with our suppliers. But it means that the whole WISA is showing its strength. And yes, like it takes a village to grow a child. I think it takes the whole WISA Group to reach these numbers. So we have a great team in WISA. And that's where I would like to end my presentation today and invite Lasse von Hertzen on stage to show you more good numbers.

Good afternoon. My name is Lasse von Hertzen, and will be the future CFO of WISA. I've worked 13 years for UPM. And before that, I worked in investment banking. And today, we'll look at WISA's financials. Let's start with sales development. So WISA's sales and deliveries have grown since '23. You can see that from the top graph in the slide, where you see both our sales and deliveries. And '23 saw a low point in demand and economic activity. And since then, demand has grown steadily, and that is then reflected in our numbers as well. In '25, there was an industrial action that impacted our sales and deliveries. Without this incident, our sales and deliveries would have been higher in '25 than in '24. During this time period, the demand for birch plywood has remained strong, whereas for spruce plywood, the demand has been weaker because of the weakness in the construction sector. In terms of pricing, prices came down during '23. The stabilized during '24 and have remained relatively flat since then. And in the bottom graph, you can see our sales per quarter and our seasonality. And the typical seasonality for WISA is that Q2 tends to be the strongest quarter for us. Q3 is then impacted by maintenance breaks, meaning that we have slightly higher maintenance costs then. It also, of course, impacts the production volumes that we get out of our factories. And it is the holiday season, summer holiday season, of course, then has an impact on demand as well. Then going into Q4, October and November tends to be very strong months and December then is impacted by the Christmas break and our customers' inventory optimization. If we move over to profitability. So profitability and the picture here is very much similar to the picture that we saw on the previous slide when we looked at sales. One thing to note here is that these numbers are now presented on a carve-out basis, and I think there was a question regarding the fixed costs earlier. And you may notice that these numbers are approximately EUR 4 million lower than the numbers that UPM Plywood segment has been presenting in the UPM reporting. And this gives a relatively good picture of how WISA would have looked as an independent company during these years. During the last 12-month period, our comparable EBITDA margin has been almost 15% and the comparable EBIT margin almost 11%. On the right-hand side, you can see our comparable EBIT and EBITDA from the first half of '25 and the first half of '26. And there, you can see the impact of the industrial action. Our variable costs have remained stable during this time period. I'd like to draw your attention now to the table on the right-hand side, where you can see our variable costs per cubic meter. Wood cost by far is the biggest cost item, representing roughly 50% of the total cost base, followed by production wages, coating materials and chemicals. You may notice that the costs have come down a bit. That is mostly due to the change in mix. So you can see that the total volumes in the table below that the share of spruce volumes have increased, and that largely explains the trend seen in the table. To also mentioned earlier in her presentation that a significant part of the cost base, so 3/4 of the cost base is variable, and that means that our costs scale down in a downward scenario. And then the flip side of the coin being that when there is demand, we can easily take capacity into use without additional investments or fixed costs and that additional sales margin that is being generated then goes all the way down to the P&L on the last line in the P&L. WISA has well-invested assets that require relatively low operative CapEx. And that means that our CapEx has been around EUR 16 million in '23 and '24, which is very close to the depreciation level that we have in the business. '25 and then the last 12-month period ending Q2 '26 then, of course, has been impacted by the strategic review, meaning that the CapEx allocation has been lower than normally. But the good news is then that when WISA is an independent company, we can, of course, then decide on the capital allocation and when attractive investments emerge, we are in a good position to seize those opportunities. And the low CapEx requirements then, of course, translate into high cash generation potential and a high cash conversion. And with cash conversion, we mean -- and you can see that in the table at the bottom of the slide, so comparable EBITDA, less changing working capital, less capital expenditure divided by EBITDA. And the cash conversion has been between 60% and 85% during this time period. You may also notice then that the last 12-month period that the cash conversion has been lower. And the reason there is that we had a big project that Tui already mentioned that we separated WISA's IT systems from the UPM landscape that project was highly successful. Our factories started on time, and we were able to send invoices and pay wages and salaries to our employees. But what it meant as well was that in order to do this, we had to pay our invoices in advance, which meant that our payables were extremely low, and we also asked our customers to make orders in advance, and that meant that our trade receivables were also slightly higher. And I want to stress that this was, of course, a one-off event. And yes, generally speaking, trade receivables and payables when we talk about in euro amounts are approximately equal on average, meaning then that our working capital consists then of inventories if receivables and payables net out each other. And the inventories are then mostly tied into finished goods. And as explained earlier in the presentation, we have several warehouses close to our customers that enable us then to deliver products to our customers with a short lead time. Of course, part of the inventory is then also tied to raw material, but mostly to finished goods. And then, of course, when we look here in the table at the year-end numbers, those are then, of course, impacted by the general business activity at that point in time at year-end. WISA will start its journey as an independent company with a strong balance sheet. And here, we have presented the pro forma balance sheet, meaning that it shows how the balance sheet would have looked like had the demerger taken place at the end of Q2. So WISA's assets would have been more than EUR 300 million. On the right-hand side of the table, you can see that noncurrent debt of a bit more than EUR 130 million, that consists of a term loan of EUR 130 million that will be drawn down after the demerger. The majority of this will be used to pay down the debt that UPM allocates to WISA after the demerger, but then also partly to fund the cash position that you see on the right-hand side of this picture. And this EUR 42 million cash position that you can see here is sufficient for our daily liquidity needs. This then translates into a net debt that would have been at the end of Q2, EUR 94 million and a net debt to comparable EBITDA of 1.4. So to summarize, WISA is a profitable company. We have clear opportunities to grow without significant investments. And we have a strong balance sheet. We have strong cash flow, and that gives us an ability to pay dividends. We also have a great team in WISA. We are very enthusiastic to start the journey as an independent company, and I'm confident that, that will translate into good numbers. So I'll hand over then to Tapio for final remarks.

Okay. Thank you, Lasse. And we have now heard quite a bit of facts and figures around WISA and WISA business, I would say, about the strength of the company, also, let's say, the kind of levers to pull on to develop the business further and to improve performance, deliver value. And maybe to sort of wrap up, let's go back to what the investor can or should expect from WISA as a listed company and maybe obviously, the good way to sort of discuss that is to go through the financial targets that we have published for the company. So well, first of all, we have talked about the market growth and sort of operating leverage and the potential that exists in WISA and in the customer base and markets that it serves. So therefore, of course, we also have, as a target, an ambition to grow the business and to reach sales exceeding EUR 550 million by the end of this decade by 2030. And then obviously, also, there is a target for profitable growth to improve profitability, let's say, through efficiencies through, of course, let's say, further leverage of the assets at hand. So our EBIT margin percentage, we target to be at 13% again by 2030. So profitable growth, annual sales exceeding EUR 550 million and EBIT margin more than 13%. That obviously is improvement on both accounts. And well, as Lasse already pointed out, we are kind of setting the company up with a solid balance sheet and intention is obviously to keep it that way. So it's kind of a financial policy. The target is to keep leverage on net debt to EBITDA under 1.5x. And then as said already several times, we believe that it is possible to reach these targets without, let's say, extensive investments, basically using the potential in the business and also in the asset base at hand at the moment. So therefore, we believe that the company will generate healthy cash flow and therefore, also be able to deliver good dividends to the shareholders. So then the policy in terms of distribution to the shareholders is set such that over time, the target is to distribute around half of the profit to the shareholders. So that is, let's say, the kind of a fair way where we want to land over the coming years. And of course, I think it is valuable for the company, but also for the shareholders and, let's say, financiers of the company to have kind of predictability and stability in terms of also distribution to the shareholders and obviously keeping the financial standing of the company overall in solid shape while pursuing the targets for growth and profitability as well. Then we have in the slide also the guidance that we have given at this point for the full year profitability this year. So it is a range on a comparable EBIT basis, approximately between EUR 32 million and EUR 50 million on a carve-out basis. So as it's sort of pointed out there as well is that we are guiding for improving profitability for this year. So I think, again, we have heard quite a bit about the business as such. So I think now it's a good time to go to the final Q&A session. So I believe we will all be available for questions at this last part of the discussion.

Okay. Thank you, Tapio. [Operator Instructions] And in the room, please raise your hands to -- and we will bring a microphone to you. But I was advertising in the previous section that there will be questions for Lasse. So why don't I start with one for you. So as you showed in your slide, WISA has had a great cash conversion during the past years. So do you expect that to continue also in the future? And if so, why?

Yes. So Tuija explained our business model, and we saw from the numbers that our cash generation has been very strong, and we are not planning to change the business model, and we can also reach our financial targets without significant investments. So yes.

Good. Thanks. I guess now we could start from the room. So Linus Larsson from SEB can go first.

I'm curious to hear more about your organization and how you will inspire the rest of your organization to create shareholder value. And if you could talk just a little bit about the incentives you provide on the top level, but maybe also in other parts of your organization.

Thank you. So WISA already has -- main part of the organization has been established, and then we have been adding on new functions, new recruitments to the team. And while bringing in new team members and while going through this huge carve-out project like we've had during this year, this already has kind of put everyone's focus on the future and the mindset is there. Obviously, then we need to make sure that the motivational things are in place also for the future and big changes in our current rewarding structures are not planned to be made. And at the same time, then you had a question on the top management rewarding. That's something that is Board's responsibility and under planning at this stage because, obviously, we are not the WISA yet. So those will be published then in due time.

The Board obviously has started preparing for that. Those decisions will come then when the company actually starts as a listed company. And let's say, again, both sort of long-term and short-term incentives are part of the sort of structure as is the case with listed companies. And of course, we are sort of looking for metrics in a sense that are well aligned with the shareholders' interest and also, let's say, well suited for this particular situation that WISA is going to be now as a newly listed company, but more to come on that.