Luotea Oyj

Good morning and welcome to Lassila and Tikanoja January-March 2026 earnings release broadcast. My name is Eero Hautaniemi and today with me I have Joni Sorsanen, our CFO. Today's agenda is as follows. First, we go through some highlights, both financial and operational highlights. Then we will take a look at the market environment in first quarter 26. Then we'll dive into the efficiency and operations and then sustainability. Then Joni will go through the financial highlights and then we'll wrap up with the outlook. And obviously we are ready for your questions after the presentation. First with a few highlights. Our net sales grew by 6% despite the challenging market environment. And I'm actually very pleased to report growth like this in typically very difficult quarter for us. So always the first quarter for us is the most difficult of the year. Our adjusted EBITDA was 11.5 million, which was 1.3 million less than a year ago. And our adjusted EBITDA was 0.2 million compared to 2.6 million a year ago. Our free cash flow was in line with the previous years if we exclude the impact from demerger related payments and settlements. So operationally we were at the same level. Operationally, as I mentioned already, the market environment is challenging, but we did take active measures to tackle the sharp increase in diesel price and those measures have been implemented already. Our transition service period is approaching to end and everything is going as planned. And we expect to end the transition services between Luotea and us by the end of June. And our cost efficiency program is on track. Then let's go a little deeper into the net sales. As I said, our net sales grew by 6% and organic growth was 2% and the rest obviously came through acquisitions. This represents a nice continuation for the growth that we had in second half of 2025, a little over 5%. So overall, I'm pretty pleased how we have been able to get the growth on track towards our strategic goal, which is growth over 6%. When we look at the growth through different service areas, we can see that in the waste management and recycling, the growth was only 1.2% and this came from the acquisition that we made last summer. But in hazardous waste and remediation and industrial services and water treatment, we saw a very healthy growth in both these business areas. In hazardous waste and remediation, the growth was all organic and it was over 23%. And in industrial services and water treatment, 14.3%. And largely, this was organic growth. So very pleased with both of these business areas. Obviously, we do have a very challenging environment in waste management and recycling. Then when we look at the EBIT A development, as I said in the highlights, it was 0.2 compared to 2.6. So quite substantially lower, but there are quite logical reasons behind this decline. First of all, the overall volumes in municipal solid waste declined and this is and has been a challenge for us for quite some time already. I was a little bit optimistic when we released our 25 numbers, but obviously because of the crisis in the Middle East now the growth is very fragile and the market doesn't look quite as good as I thought at the time. Also because of this crisis in the Middle East, the oil price has increased sharply and that affected our EBITDA by 0.5 million euros. We have completed our ERP rollout and the depreciations are about €500,000 higher in the first quarter than they were in the comparison period. And also we did saw a difficult market when it comes to the treatment fees, because there was oversupply of waste to be incinerated. We expect this to be more of a temporary situation, but that did affect negatively to our first quarter profitability. And obviously, behind all of this, we do have the effects of continuing municipalization. Going to the market environment, as I said, the market was more challenging than we expected a few months ago. The GDP growth is expected to be between 0.5 and 1% only when we thought earlier that it could exceed 1% to be closer to 1.5%. But as I said, now it looks like it will be less than that. And overall in Finland, the economic recovery is delayed due to this geopolitical situation. This graph shows how the diesel price has reacted to this crisis in the Middle East. And as you can see that the pattern is very similar to what it was in 2022. So it's a bit of a deja vu when it comes to the diesel prices. And we have very good processes for situations like this. And like I said earlier, we have already implemented very comprehensive price increases to address this abnormal situation in the market. The effect of these price increases was not at all visible in first quarter, but it will gradually come through in April and May. So we will see already partially the impact in second quarter and then full impact from third quarter onwards. This situation does affect also to the recycled material prices. It was not really visible yet at the end of March in the recycled plastic prices, but the expectation is that Prices for recycled plastics will go up as a result of this oil price increase. For cardboard and paper, the price level is pretty stable. And we do expect also the prices of recycled metal to increase as a result of this problems in supply of materials. Then I'll move on to efficiency and operations. Our fixed costs development is visible in this graph, and as you can see, it is very flat. And even though we did complete the demerger, you can see that there is no increase in fixed costs. So we have been able to offset the sort of potential increases in fixed costs with our cost efficiency measures. And the costs are flat, even though our sales have now started to grow. So eventually we expect to see the benefits of being able to keep the fixed costs at these levels or even slightly lower going forward also in the EBIT-A line. We have initiated a separate review to improve the gross margin in the waste management, and this is to offset the negative impacts I just went through that we experienced in the first quarter. And that program... as I said, has been initiated and we expect to see results of that program from second quarter this year onwards. So our ICT transformation is getting to the sort of final stages and we went live with our finance system. Also that is now in D365 environment and fully cloud-based from the beginning of May. And obviously, this is very good news. And we will start to see the benefits of this transformation gradually second quarter onwards this year. But obviously now, right now, 2026, the amortization burden is at its highest and will gradually increase. go down as the time progresses. But overall, I'm really pleased where we are with our ICT transformation and there is a big opportunity for us to improve our operational efficiency, but also more importantly, improve our customer service and reporting to our customers. Then a few highlights from a sustainability perspective. Our own carbon footprint has continued to decline as planned. So it is 4.7 compared to 4.9 a year ago in the corresponding quarter. Our carbon handprint is also going down, which is obviously not the goal. But the reason is that the amount of recycled paper has come down for years. 15, 20 years already. And in the past five years, we have lost and the market has lost almost two thirds of the recycled paper. So the decline is more than 10 percent per year and will continue. Obviously, that is partly offset by the recycled cardboard. but not to the same extent as we are losing recycled paper. And that is the main reason why our carbon handprint is going down. At the same time, our recycling rates are going up and are supporting the carbon handprint. A very positive development in work safety. Our TRIF was 16.2 and this is with big margin the best result we have ever seen and this what is sort of in the background of these good results is very good preventive work that we have done across the organization. And I'm really pleased to see these kind of levels in our work safety. Also, our customer satisfaction has remained on a good level despite the very extensive rollout of our ERP systems. And perhaps the final point we have sort of contribute to giving the opportunities to the next generation. And we are offering 250 jobs for summer employees. With this, I'd like to hand over to Joni and he will go through the financials. Joni.

Thank you, Eero. And good morning, everyone. I would like to start this section by highlighting some of the key events in the field of financials in the first quarter. As already noted in Eero's section, we had a positive development in net sales. We were growing in line with our mid-term strategic target at 6%. However, profitability was below previous year. in a seasonally slow quarter due to reasons already outlined in Eero's section. We had a stable development in financial position throughout the first quarter and the balance sheet remains strong at quarter end. Operationally, our free cash flow was in line with comparison period. If we take into account the partial demerit related one of payments and settlements. And finally, L&T's share of profit from joint venture Lania was in line with previous year at 1.7 million euros. Looking at networking capital development, networking capital at the end of the quarter was minus 21.5 million compared to minus 24.6 million, which is a change of 3.2 million year on year. It's good to note that the comparison figures are prepared on a carve-out basis. If we look at the change compared to year end, we can see NWC tying up by 8.3 million euros. And the large part of this change is due to these parcel demerger related payments. So operationally, we are fairly satisfied with the networking capital development in the first quarter. And in terms of seasonality, we expect the pattern evident in 2025 to also take place in 2026. So we expect networking capital to weaken in the second and third quarter and then again release towards the year end. Capital expenditure in the first quarter was around 4 million euros compared to 3.4 million euros in the comparison period. CAPEX consisted of investments in machinery and equipment, and to a small extent also in ICT systems. Our depreciation and amortization increased from the comparison period, partly due to these ERP-related investments, and we're at 11.8 million compared to 10.5 in Q1-25. In full year 25, our capital expenditure was around 42 million euros, also consisting of organic CAPEX of 29 and M&A CAPEX of 12.5. In terms of gas flow, as already noted, taking into account one of type of partial dementia related payments, free cash flow was in line with previous year. Here we have depicted the free cash flow bridge on a rolling 12-month basis, so from April 25 until March 26. So on a rolling 12-month basis, the company has generated adjusted EBITDA of 83 million, net cash flow from operations of 67 million, impacted by items affecting comparability around 6 million, and finally, free cash flow on a rolling 12-month basis around 34 million euros, which in relation to reported EBITDA is a conversion of around 45%. Balance sheet remains strong at quarter end. Our net debt in relation to adjusted EBITDA was 1.9, which is well in the range of 1.5 to 2.5, which is our mid-term strategic target. Net interest-bearing debt at 161.5 million, consisting or including also lease liabilities around 66 million euros. Equity ratio was practically intact compared to year end and was 35.1% and gearing also developing on a fairly stable manner compared to year end at 94.5%. Looking at the financial position, it's good to note that the first, second and third quarter of 2025 were prepared on a carve-out basis, so they do not reflect the capital and financing structure of Lassila and Tikanoja. Looking at the maturity structure of our interest-bearing liabilities, so the financial debt of the company consists of 75 million bond, which is due in 28 and a 50 million bank loan which is also due in 28 but includes a two-year extension option by which the maturity date can be moved into 2030. The company had a strong liquidity position At the end of the quarter, around 30 million euros. We had no commercial papers outstanding at reporting date. Also, the company's credit limits and account limits were totally unused at the quarter end. The average interest rate of our long-term loans was 3.2%. And finally, some other KPIs for the company in the first quarter. Our reported return on capital was 9.3%, impacted by one of our items and also covered principles, especially concerning financial year 25, because this KPI is calculated on a rolling development basis. Here we have calculated a more comparable and adjusted figures for return on capital and also for return on equity So 10.7% for return on capital and 14.4% for return on equity. And as already noted, our share of profit from Laania was on previous year's level at 1.7 million and earnings per share minus one cent. Also, when looking at the earnings per share figures, it's good to note that the 2025 due to carve out principles are not comparable with 2026. But with these words, I would like to hand over back to Eero.

Thank you, Joni. And then our outlook for 2026, which is unchanged. So we estimate our net sales to be between 420 and 450 million euros and adjusted EBITDA to be between 38 and 44 million euros. But with this, we'd like to hand over to you and we are ready for your questions.