Huhtamäki Oyj

Good morning all and welcome to the results call for Hurtamäki's second quarter of 2026. My name is Kristian Tammela, VP of IR. We will now present our development in the second quarter, starting with the presentation by President and CEO Ralf Wunderlich, followed by our CFO Tuomas Geust. After the presentation, we have time for Q&A. With that, let's get started and handing over to Ralf. Thank you, Christian.

Thanks for opening the call and really good to be back here. And today, of course, I'm very happy to report to you a very good outcome for both the quarter as well as the half for Utamaki. And that, especially in a market which is still very volatile, where we see a lot of uncertainties. And let me start with that one, because most importantly is that even though there is a strong crisis in the Middle East with the war in Iran, we were able to secure the safety of our co-workers in all our factories. And I'm also happy to say that we were able to secure raw materials and supply and deliver to our customers what they needed to ensure continuous supply of those. Now let me move to some of the outcomes. We had seen growth in the quarter, 2% comparable sales growth, and we were able to pass on the very steep raw material cost increases. We saw volume growth in a couple of our segments, namely flexibles and fiber. And our adjusted EBIT did increase by 1% with a strong margin of 10.3%, despite a 2 million negative currency impact in the quarter. We are continuing to be very disciplined when it comes to capital allocation. Now, it is very important if you go to the next slide to also say a few words about the situation in the Middle East. And let me start with the facts. Facts are that we have six operations, two in Dubai, one in Saudi Arabia, and three in Egypt. We are seeing a very, very strong impact in oil price increases in general, which of course then has an impact on the very, very strong increases on resin, on films, solvents, inks, other liquids and chemicals in general. The main segment involved is flexible packaging, even though all segments are of course seeing the impact. Availability of raw material varies by the region. And of course, there are risks of falling short. But you will see this later when I talk about the actions we were able to secure raw materials in all regions to ensure continuous supply. We are also seeing steep increases in energy and logistics costs. With the Middle East crisis, there are congested logistics chains. and again increased in energy and logistics costs, which we needed to manage. Now, what are the actions which we took into place? First and foremost, as mentioned before, safety and security of our co-workers. That is our highest priority. Also, all of our sites continue to operate throughout the crisis. And that was possible because of our close collaboration with both our suppliers and our customers. We were able to secure the raw materials even in the regions where it was very difficult. There was a lot of hard work done to reduce the impact to our customers and to ensure that they can supply to their customers all the time and we were able to do that. Now, the strong focus on growth and customer intimacy will continue and is absolutely needed to ensure that we can continue to deliver to our customers. At that point, I would also like to mention that the war in Europe, in the Ukraine continues to go on. And of course, safety and security of our coworkers there is as well of our first priority. Let me move on with an update on the team. I'm very happy to report that we were able to attract Thomas Morin to our management team. He is now part of the executive team and he will start with us in September. Thomas' previous job was as president and CEO of Transcontinental, a Toronto-listed packaging company. And of course, it's very, very good to have him with us on the global executive team and he will help us to continue to drive this very important segment forward in the future. As in all our quarterly meetings, I will update you on our value drivers which we implemented 18 months back. Namely, profitable growth supported by all levers. Secondly, disciplined capital allocation. And thirdly, accountability with speed of execution. If I go to the first one, profitable growth supported by all levers. What we really want to make sure is that we grow organically by being very close to our customers, both global key accounts as well as regional accounts and small accounts. All of them are very important to us and we want to improve our relationship and make sure that they win in their respective markets. And as previously mentioned, we also are looking continuously looking at inorganic growth. We had in April last year, the announcement of an acquisition in North America, and we are not stopping there. We are continuously looking at inorganic options, but we will do it in a very disciplined manner. Second point on disciplined capital allocation. We are moderating our cap expense, but we are not jeopardizing the growth opportunities which we are having. In fact, we are always looking at best yielding projects and we are allocating capital more or less equally amongst the three dimensions of maintenance, efficiency and growth. So think about this of 30% in each of those categories. And we are allocating approximately 10% to what we call license to operate. So things such as safety, regulatory requirements, sustainability and so on. So that will continue and we are very disciplined when it comes to our capital allocation. Also when it comes to working capital. So it's not just about capex, it's also about working capital and especially important in times like now, where we have an extreme increase in raw material costs. So we of course see that on the inventory side and on the receivable side. So it's even more important now to be very diligent and very disciplined. Last point, how are we enabling those? We are enabling it with accountability and speed of execution. So we are empowering the segments. We are empowering the teams within the segments very, very clearly to drive their performance, to be close to customers And from a group perspective, we are the center of expertise. We govern, we coordinate, we support value creation. So whatever the segments need, we will provide to the segments. Now today, I would like to give you a bit more taste of what that really means. So if you go to the left side of the slide and what I really would like to talk about is how are we going to help the segments? First of all, of course, we are, when it comes to business as usual, we are following up on their performance. We are supporting their performance whenever they need that support. We are also looking at acceleration. How can we increase scrutiny? How can we set targets which are really ambitious for them? And then of course, and you have seen this last year, when we had a couple of turnarounds, one in India and one in Turkey, where we openly talked about, we are also having a playbook on how to improve performance when it is needed. And then we implement it with task forces existing from external teams and internal teams. So we combine those and then we go with our task force to support turnarounds. Now also important is the M&A side, so the inorganic growth side. Whenever there is a project which we like and which is in our pipeline, we will make sure that it is in businesses where we have strong teams. in regions where we have already a good presence with products and technologies which we know and we understand and of course with management teams that fit our culture and we always want to make sure that we have a clear synergy plan and clear synergy opportunities and they must be financially sound then we accelerate them and then we go after them let me remind you on our value creation model and the way we are thinking about capital allocation and the priorities. So first and foremost, of course, we are running a business and we want to grow our business, which we have profitably. So we have announced that we have an ambition and we understand we are not yet there, but we have an ambition to have a strong annual growth. And we also have an ambition to be between 10 and 12% adjusted EBIT margin, which we are already now since a couple of years. That business will require capex to continue to grow organically. And it will need also capex and capital for both on acquisitions for inorganic growth or any other acquisition type. That money will then provide us solid cash flows. That solid cash flow will be used again to invest into the business as described before, or it will be used to be returned to our shareholders. We will aim to continue to pay dividends in the range of 40 to 50% payout ratio. As a reminder, we have increased our dividends in 17 years in a row. Or we will find other ways of returning money to shareholders if we do not find better means to invest the money back into growing our business profitably. All of that is underpinned by our leverage, and we want to stay between two to three times net debt. As you know, we are currently at the lower end of that leverage range. Sustainability is very important to Utamaki, and I'm very, very happy to report that we continue to make very good progress in advancing our ambition. You have seen those six different metrics as before, and I'm very happy to report today that we have made good progress in all six of those. So recycled fiber, we are now over 99% already at recycled fiber, which is certified. We are making good progress also on renewable electricity. We are now over 61%. We are at almost 84% on non-hazardous waste. We are making good progress on greenhouse gas and here we are looking at scope one and two, as well as reducing our overall total waste to landfill where we are now at 3.6 and we are getting closer to our ambition there as well. So in all dimensions, we are making good progress. So very proud of what we are doing here. Let me move on to business performance. And of course, as mentioned before, if we started net sales, then I'm really, really happy to say that we were able to grow our business in the quarter. And if you look at our comparable sales, we did grow it by almost 2%. That's very, very exciting for us as a business. It's also exciting to see that we did grow comparably in the half. So it's a 1% growth in the half one of this year. As you can also see on that slide is that the currency impact is getting lower. So whereas there was a very strong, almost 80 million impact for the half in the quarter itself, we only had 15 million impact. Let's move to some more details. So as mentioned before, we saw growth in the quarter on the top line, but we also saw growth on the adjusted EBIT line. And that is even before we take the impact of the currency into account here. So we were at a margin of 10.3%, which is stronger than at the same period last year, where we had a margin of 10.2%. a very strong adjusted EPS number of 0.64 in the quarter, again outperforming same period last year by 2%. If you look at capital expenditure and free cash flow together, and you see the delta there, and that delta which you see is explained by, if you go back to the quarter two last year, by a contractual compensation which we got in Q2 last year, which is explaining most of the difference which you have here. The rest is explained by what I mentioned in the very early stage of my presentation by the higher raw materials and hence the higher inventory and receivables which we have seen. So a very strong quarter performance for Utamaki. And also, if you go to the right side of the slide, a very strong performance in the half. So also here from a comparable perspective, as mentioned before, excluding the FX, we have growth in the quarter of 1%. Really important to see also the EBIT line increasing in the quarter if you take back the impact of the Forex. In the quarter, as mentioned as well, where we had a stronger margin, we also have it for the half year. So we are now over 10% also for the half, which is very encouraging. Very similar on adjusted EPS, 120 to the 121, so flat on the EPS line. And then, as explained before in the quarter, the same picture is true also for the half. that the delta between this half and last year's half is explained by the contractual compensation which we got last year in Q2. So a strong message also for you is that we have had now five quarters in a row with positive cash flow which we are very proud of. So our focus on very disciplined capital allocation is clearly showing the benefits already. Let me now go to the four segments in more detail. First, I'd like to start with food service. Food service in the quarter has seen negative growth of 1% in a still very challenging market and, of course, with an impact from the Middle East. They were still able to deliver a strong margin with 8.6% due to their continuous strong work on taking costs out of the system. And we are very proud to see them delivering very strong operating cash flow. In fact, slightly ahead of last year's performance, which already was a very strong performance. A very similar picture for the half. Also in the half, we are seeing negative growth of 4% for food service, We're seeing a similar margin of 8.3% as in the quarter where we had 8.6%. And also on the cash flow side, we see a similar picture where they are outperforming same period last year by 13 million, achieving 53 million of operating cash flow. Let me go over to our North American segment. And I think it's important to think about North America because of its very strong seasonality more with regards to the full half. So let me actually start with the half and making my comments. And they are very true for the quarter then as well. We were able in the half to see volume growth in our North American business. So you see comparable growth looks flattish, but in fact, it has some positive volume effects here. We were able to deliver double digit margin in North America, both in the half as well as in the quarter. And it's important to point out, as we did already last quarter, that we are seeing still operational challenges, which we are working on. They are focused on a few of our plants, which again, we have a task force to support the North American business to get those under control. but they are also focused on some of the cost increases like distribution and energy costs, which we need to work with the teams on for the overall North American segment. Let me move from North America to our flexible packaging segment. Flexible packaging saw in the quarter volume growth very strong cost management and continuous good progress on its turnarounds, which we have focused on last year. So in the quarter, we saw comparable growth of 14%. Of course, a lot of that is driven by the raw material pass on. But I would like to highlight again that we also saw volume growth in the quarter in flexible packaging. They ended up with a very strong margin of almost 11% and also delivered very strong operating cash flow, more than double of what they delivered same period last year. A similar picture also for the half. Also in the half, we saw comparable growth of 5%. We saw strong adjusted EBIT improvement, both in absolute as well as in relative terms. And also here, we see a very, very strong operating cash flow delivery. So very happy with the performance of our flexible packaging segment during the quarter and in fact, the half. Now let's move to our fiber packaging segment. In fiber, we see the first time in a quarter more than 100 million off sales. That's a comparable growth of a very strong 7% coming from both volume, price, and mix. adjusted EBIT did grow to 15.4 million so strong improvement versus same period last year and a very strong margin of over 15% for the quarter with a strong operating cash flow delivery in the quarter very similar picture also for the half here almost 200 million net sales with comparable growth of 6% strong margin for the half of over 15% Very strong operating cash flow as well. Double of what we have delivered last year with still a lot of capital expenditure because we want to, of course, invest as we have capital allocation in a very disciplined way behind our fiber packaging segment. With that, I would like to hand it over for the financial review to our CFO, Thomas Goist.

Thank you, Ralph. And I will try to bring some more flavor to the financial numbers, starting with the slide on the currency, which still continues to burden our P&L result. However, moderating versus what we saw in the first quarter. What that in reality means is that our impact in the second quarter is 15 million on roughly on net sales, 1.6 million on EBIT. However, if you look at the year-to-date numbers, it's as high as roughly 78 million on top line and 6.4 million on EBIT. The story remains very much the same as communicated in earlier quarters. The US dollar is the currency impacting the most, also the Indian rupee impacting our results. But if you look on the average rate, you can conclude that versus first half 2025, It's only three currencies trending favorably for us. However, when you are looking at the closing rate, which is the one measuring the balance sheet, then we see already an improving trend on many of the currencies. So if we maintain this level, we hopefully will see in the second half of the year an improving trend also on the currency side. With that one I will move onwards to the financial result and a bit of more detailing here. Here I would really say that the accountability our businesses are taking now is turning into strong results. The challenges or the opportunities are slightly different in each of the businesses, and all of them are adapting to the reality, be it then higher raw material cost, be it operational challenges, or be it then challenges with the volume. Thanks to that one, we are actually able to deliver a strong EPS, so the results really flowing through to the bottom line. 64 cents is the strongest Q2 in history, according to my understanding, or at least the recent history. And that we are, of course, very satisfied with. If you are looking at the net financial items, we have a small tailwind there with mainly lower net debt levels helping us. And then tax rate being slightly lower compared to previous year. If we turn to the next slide, we come to the cash flow, which has already been described quite in detail by Ralph. So really on the profitability side, the one-time gain we received last year helping us with the cash flow in 2025. So on a comparison basis, we are actually operationally on quite the same level as previous year. The working capital where cost is coming through on inventory and payables is obviously a drag for us. And then the timing of receivables also burdening the working capital. still when looking at the other parameters, capital expenditures lower than previous year and then taxes mainly a timing thing as well as for the net financial items. So I would say operationally doing quite well on the cash flow with the discipline we have now introduced to our business performances. With that one, we are improving on all the important balance sheet ratios and starting here with the net debt side. On the net debt side, we are now down to flat two. And as you can see, we are decreasing our net debt by 87 million versus previous year, same period. So we have continued the strong deleveraging story that we have started on and continued already for a few years. If you look at the gearing level, we are down to 0.62. So also improving on that one from 0.71 previous year. And also from a cash and cash equivalent point of view, we have a good situation. And maybe on that note, moving to the loan maturities, we did a renewal of our bond. So we issued a 300 million bond during the quarter under our EMTN program with a interest rate of 387.5. At the same time, we set out a voluntary offer for the repayment of 250 million bond maturing in 2027. And with that one, we have managed to prolong with a efficient finance rate our loan maturity to 4.1 years while it was 2.9 years previous year same period. So well positioned also when it comes to the loan maturity structure. With that one, we come to the financial position. On the working capital, it's really the raw material and all the things we have been discussing here earlier impacting the situation. Net debt, as said, improved versus previous year. And then, as Ralph already alluded to, going over 12% on return on investment, something to be proud about. With that one turning to the long-term ambitions, here we are seeing a positive, comparable net sales growth in the first half. Happy with that one, although being far below our long-term ambition, but at least the trend is the right one. Looking at the adjusted EBIT margin, maintaining above 10% level is where we want to be. and then the return on investments creeping closer and closer to the lower level of the ambition level, which is 13 to 15. So now passing the 12, as said here earlier, and net debt EBITDA being on the lower end of the corridor. Dividend payout for 2025, 46%, so also that one matching the dividend ratio. Looking forward, on the outlook side, we have maintained our outlook on the previous communicated level, as well as the short-term risks and uncertainties. And with that one, I would open up for Q&A.