Luotea Oyj

Good morning and welcome to Lassilan Tikanoja Q3 2025 Interim Report webcast. I have here today with me our CFO, Joni Sorsanen, and he will go deeper into the financials, but I will first go through how did we perform in our businesses. First few highlights for first nine months of 2025. Overall profitability in facility services improved significantly and I'd say the big news for this Q3 report is that Sweden returned to black figures in Q3. In circular economy businesses, we had a solid performance despite the quite challenging market environment. And in Q3, our net sales overall grew by 3.8%. And speaking of net sales, when we look by the segment in circular economy business, we also saw a 5% growth over a comparison period. and year-to-date we are still slightly behind, but catching up now towards the end of the year. In facility services, Finland still slightly below last year's net sales, but the decrease was less in Q3 than what it has been for the first half of 2025. In Sweden, solid growth, net sales growth continued. Even though it was aided by a stronger Swedish crown, still there is very healthy underlying growth in our Swedish facility services business. Adjusted operating profit on par. compared to the previous year in Q3. And first nine months, we are exactly 5 million euros ahead of last year's levels. In circular economy business, we were a little over 1 million euros behind. And in facility services Finland, at the same level as previous year, but as I said, in facility services Sweden, we saw 100,000 positive adjusted operating profit in Q3. Overall, I'm quite pleased with the performance of all of our businesses in Q3. If we look at our performance through kind of circular economy business and facility services business lens, we can see that very stable and solid performance continued in circular economy business. and adjusted EBITDA was at the same level as it was a year before and this is year to date figures now 86 million euros and adjusted EBIT was slightly below 41 million euros but still on a very good level. We tied up a little more networking capital in our circular economy business this year than we did last year, and Joni will go into the reasons later in the presentation. In facility services, businesses, the profitability overall has improved. Adjusted EBITDA percent is now almost six and adjusted EBIT percent 2.7. And obviously this is due to the good improvement in Sweden, but the solid performance in Finland as well. Then let's go a little deeper into the circular economy business. Relative profitability remained stable, and this is due to the successful efficiency improvement measures that we have continued overall in the group, but especially in the circular economy businesses. Very solid quarter again in process cleaning business. Staffing was successful and demand for our services was on a very good level. In hazardous waste business, we saw a very steady demand for our services and the profitability remained on a very good level. In environmental construction, there is a lot of demand overall. There is a good demand for infrastructure projects and we have a special niche where we work and our order book is full, so we are working with maximum capacity now in environmental construction business, which is obviously a very positive sign. In waste management, net sales and profitability are a little bit under pressure and there are sort of overall macroeconomic reasons for this because, as we all know, construction has still not recovered and Right now, it looks like it won't recover. This year, maybe towards summer 26, we will see an improvement in construction sector. But also an interesting piece of information is I saw recently some statistics that in retail, in general, even though the euros are stable the volumes under these euros are pretty much at the same level as they were seven years ago 2018 so overall activity in Finnish society is on very low level and this is reflected especially in the waste management part of our business also A more positive thing is that we have completed our rollout of our ERP system. This project has been ongoing for six to seven years, so it's been a very big undertaking. And I'm pleased to say that the last rollout wave went very well. and overall the project has been very successful and we will be seeing the benefits of this state-of-the-art cloud-based system in the coming quarters and years once we have sort of fine-tuned the operations to get everything out of this new system. But our people have done really good work in this very Very comprehensive project. In facility services Finland the good performance continued and adjusted operating profit percent was 6.5 which is overall on really good level. So the efficiency measures that we have done for a few years now are now finally visible in our numbers as well. And obviously now the next thing is then to focus more on growth once we have the operations in order. And operations are in order not only in terms of profitability, but also the quality. overall has improved quite a bit in our operations and also KPIs like work safety and personal satisfaction. ENPS have improved. And that sort of is a sort of positive spiral that hopefully will yield even better results in coming years. In Sweden, we are behind Finland, but we are doing similar efficiency measures as we have been successfully done in Finland. And now we can say that they are working. There's still a lot of work ahead of us because one quarter doesn't make it where it should be, but it is a very positive sign that we have and are able to report a positive adjusted operating profit for Q3. Also adjusted EBITDA for the first nine months of 2025 is positive in Sweden. Another good indication that the turnaround is happening. But as I said, a lot of systematic work needs to be done. for the rest of this year, but also next year to get the profitability in Sweden also to the same levels as the Finnish profitability is. But I have full confidence on our management and team that we will see that improvement in the coming quarters. I already referred to these efficiency measures and they are and have been across the board. And when we compare 24 to 23, we can see that there was about 5 million euros improvement. Now in 25, so far in the first nine months, we have been able to improve by 2 million euros, but this is affected by this rollout of our ERP system. And we have estimated that the negative impact for this rollout is about 800,000 euros. So kind of on a comparable basis, we have improved about 1 million euro per quarter, still in 25 hour efficiency. From sustainability front, a lot of positive development here, but maybe one highlight is that our scope one and two carbon footprint has decreased by 19% and this is not by accident, but it is because of the systematic persistent work that we have done for several years now and we are gradually replacing our old fleet with a new fleet that is much more environmentally friendly and also we consistently use more and more biodiesel or HVO diesel and this obviously has an impact to our own carbon footprint. In spring, this spring, we for the last time measured our NPS and it was on record high level. For the one, we obviously will have results of the fall period. Then once we release our full year results of 2025. Then a few words about the demerger. Everything is progressing according to the plan. It's been a lot of work, but I'm happy to say that things are very much on track. And as a result of this demerger, we would have 2nd of January, 2026. Lassilan Tikanoja or new Lassilan Tikanoja and Luotea listed in the Helsinki Stock Exchange. Obviously this still requires the approval of extraordinary shareholders meeting and that is planned to take place on 4th of December. Before that, we will release the listing prospectus on November 20th, so about three weeks from now. And then right after that, we will host a capital markets day where we will open more the sort of business logic and also the future plans for both Lasse Lantikanoja, New Lasse Lantikanoja and Luotea. And obviously you are very welcome to participate in that event either live or through the webcast that we will have from that event. But now I'm handing over to Joni and he will dive deeper into the financials.

Thank you Eero and good morning everyone. As usual I will start this section by highlighting some of the key events during the review period. And first of all, we can see a strong earnings per share growth in January, September. So in the review period, earnings per share was 63 cents compared to 51 cents. uh in in the comparison period and this means eps growth of 23 percent also at the reporting date so the last day of of september we can see a solid financial position and a decreasing interest varying liabilities year on year And as part of the parcel demerger preparations, we initiated in the beginning of August a written procedure for our outstanding bond, and we can report that the process was successful, which means that this bond will be exclusively transferred to new L&T, which will become the new issuer of the notes. in the event of partial demerger. As Eero already mentioned, our networking capital development was not as strong as in the comparison period. So at the end of the reporting period, networking capital minus 15 million compared to minus 30 million which means that the working capital has been tied up by 14 million and this solely comes from the circular economy business where we have three specific reasons for the development and in the order of significance The first one is project-driven business mix in environmental construction. So in terms of networking capital, it is more favorable. to the company to receive material in the treatment centers compared to project business. And as Eero mentioned, we have had strong demand for environmental construction businesses, and this is partially now impacting our networking capital development. Secondly, we saw an active Q3 in process cleaning business. And this year, the invoicing of annual maintenance breaks took place at the end of the quarter, which means that much of this revenue generated into Q3 was tied up in receivables at the time of reporting. Obviously, we expect this to be released then towards the end of the year. And finally, as Eero also noted, we have had a successful ICT or ERP renewal. However, we still need to do fine tuning and performance enhancements to reap all the efficiency benefits we have targeted ourselves, and this has also impacted our invoicing, and that's why we have had some invoicing delays, which we also expect to sort out in the coming months. In the facility services businesses, the networking capital development has been fairly stable year on year. And also looking at the graphs, we can see that seasonally Q3 or end of Q3 is the worst quarter end during the financial year, which means that we also expect to see the similar type of networking capital release towards the end of the financial year. Capital expenditure was below previous year, so 26 million euros in the first nine months compared to 30 million euros, which is a decrease of approximately 12% year-on-year. Here you can see that the acquisition of Steno Recycling's pallet business was completed. during Q2 and this amounted to approximately 8 million euros. If you look at the organic capital expenditure, we can see a decrease of approximately 10 million euros. However, this is basically attributable to to ICT related investments. So Capex in machinery and equipment. Has been almost in line with with previous year. Then as a final comment if you look at in P&L depreciation and amortization we can see an increase of 1 million which is almost totally attributable to new ERP amortization that was commenced in the second quarter of this year. Then, looking at cash flow, we have here illustrated the rolling 12-month cash flow. Obviously, the net working capital development is negatively impacting the operating cash flow development. However, improvement in cash flow from investments results in almost stable free cash flow development in the first nine months. One comparison point when analyzing this operating cash flow is to compare it to EBITDA development, and we can see that the cash conversion rate has been 72% in the last 12 months. And normally, LFT has posted cash conversion rates between 80 and 90%, and this highlights the timing issues in networking capital. in the review period. As I already said, financial position at the end of the quarter remains strong, gearing almost 79% compared to 77 cents, sorry, 77%. in the comparison period and also stable development in equity ratio in the Q3. Liquid funds amounted 36 million euros at the end of Q3 and all the committed credit facilities were unused at the end of the period. Then if we look at the maturity structure of our interest bearing debt, we can see that at the end of the September, we had 10 million euros of commercial papers. These no longer exist in the balance sheet. These were repaid in the beginning of October. So at the moment we have outstanding notes, which are due in 2028, and then we have a bank loan of 55 million euros, which is set to mature in 2028, but with assuming two-year extension option utilized to the full, The due date is in summer 2030. So no major refinancing that taking place in the coming years. And then if we already look at the coming parcel demerger, these interest bearing liabilities will be split between the two companies as follows. So the bank loan of 55 will be divided so that 5 million of the loan will be carried by Luotea. and 50 million will be carried by new L and T. And as I already mentioned, we, uh, successfully, uh, solicited consents from bond holders in August, which means that new L and T will become the new issuer of the bond and, and the bond will be there for, uh, exclusively transferred to, to new L and T in, uh, in the merger. And here I would like to again thank our bondholders for unwavering support in the process in August, supporting our demerger proposal. Then moving on to return on capital. And if you look at the reported return on capital figures, we can see that at the end of September on a rolling 12-month basis, 4.4%, burdened by one of items especially booked at the end of 24. On an adjusted basis, 11.4% return on capital compared to 11.1% at the end of financial year 24. In circular economy, return on capital improved to 13.5%. And in facility services, Finland, we continue to report strong, very strong return on capital, almost 75% compared to 34% in the comparison period. However, return on capital was negatively impacted by our joint venture Lania and the share of profit from, from joint venture in, in January, September was 1 million euros compared to 2.3 million in, in the comparison period. And the reason for, for the decline in profits is for the most part due to a weakened demand for, for energy wood as a result of exceptionally warm spring. Then finally, and as already mentioned, strong EPS growth in the first nine months, so 63 cents compared to 51 cents, and then looking at free cash flow per share almost at the level of previous year, 30 cents compared to 32 cents negatively impacted by tied up capital, but on the other hand, positively impacted by strengthening operative profitability. Then, as you most likely have noticed, we specified our outlook two weeks ago, so on October 15th, and now we estimate that net sales in this financial year will be at the same level as in previous year, while adjusted operating profit is estimated to be in the range of 44 to 48 million euros. And this concludes the financial section, and we are ready for your questions, and I will ask Eero to join me for the Q&A session.

Thanks, Juli.