Hiab Oyj Unsp/Adr

Okay, I think the clock is now one here in Helsinki, so I can welcome you to HIEP's free silent call ahead of our fourth quarter results. But still some people joining, so I'm letting them in. So we will start for having a presentation. by Mikko Puolakka recapping the third quarter results and any notable releases during the fourth quarter. After that one, we will have a Q&A session. You can post the questions in the chat or then use raise your hand function. I will also take any questions from the telephone lines. Just a note that this call is recorded and will be then later available on IAB's website. So, with that, over to you, Mikko.

Thank you, Laki, and Happy New Year also from my side. So, a quick recap on our quarter three results, then a couple of words about the releases and the developments that we have seen. during quarter four, and then like Aki said, questions and answers section. About quarter three, so our order intake was 351 million euros, that was down by 8% year on year, and based on the first nine months, the order intake was more or less flat, compared to the previous year. So this was now the 12th quarter, consecutive quarter in a row and our order intake has been fairly flat. Our last 12 months order intake has been roughly on the level of 1.5 billion euros. And primarily the order kind of intake headwind we have seen in the Americas region, especially while in Europe we have seen some improvement in the overall market, and also in a couple of second markets like defense logistics and the wind segment orders, what we have announced also earlier in 2025. When we look geographically, the first nine months EMEA, has been up by 30%, America's down by 14%, very much driven by the tariffs related uncertainties, especially smaller customers withholding their investment decisions, while some kind of bigger home improvement customers have been still quite nicely placing orders. On a positive side, there has been a positive momentum in defects logistics, we have a very good pipeline in that area. Of course, the deals typically kind of revenue we recognize from defense logistics orders, typically over multiple years. And then the energy segment, like I mentioned already earlier. All in all, there is a robust replacement demand both in EMEA But also in America, like I said, in the U.S., especially the larger kind of home improvement customers have been doing their thing. But on the kind of minus side, trade tensions in the U.S., those have increased the customer's uncertainty. customers uncertainty and that's why we have seen especially in the smaller customers in the US quite cautious ordering activity. Our sales decreased in quarter three due to the low order book. Sales were basically on the same level what we had the order intake in quarter three In currencies, we had in quarter three roughly 2% points negative impact. And if we look at the year-to-date, the nine-month sales starts down by 6%, primarily coming from the U.S. market, lower order intake, especially in the early part of the year. America's sales was down by 9% during the first nine months. EMEA was down by 4%. APAC sales grew slightly in Q3, but year-to-date, September, more or less flat on year-on-year basis. We have had good development in the ECO portfolio. circular solutions and climate solutions. So to date, 38% of the total sales. If we look at our comparable operating profit, so especially in quarter three, our comparable operating profit was negatively impacted by the lower US equipment sales. That impact was approximately 20 million euros in our comparable operating profit. Cross-profit margin decreased by 80 basis points, also very much coming from the US kind of lower utilization. SG&A costs we have been able to reduce year on year, but that's not necessarily enough to compensate the quite sizable decline in the U.S. equipment sales. And that's why we have also announced in connection of quarter three the 20 million euros cost savings program in order to protect the profitability. in 2026 if this kind of market activity would continue in the coming quarters. Key takeaways from quarter three. So overall, the market uncertainty has continued. Overall, we have not seen any dramatic changes compared to the previous quarters, so a gradual improvement in EMEA, while in America, especially in the US, the customers' decisions have been impacted by the tariffs situation. Despite the market situation, we have been able to improve our comparable operating profit if we look at the rolling 12 months performance and as mentioned we have started the planning for the 20 million euros court savings program and this would be 20 million euros lower costs compared to the 2025 level. Nothing has been changed in our strategy. So even despite the current current situation in the U.S., we see that the U.S. market is able to offer us good growth opportunities in the future by addressing those white spaces, what we have, for example, in the central and western part of the U.S. Also services and the focus on four key growth segments have still intact in our strategy. So overall, no changes in our strategy. Despite the lower top line, our cash flow has been very strong in the first nine months, and our balance sheet is also very strong. Offering, for example, in quarter three, if we would book the quarter three balance sheet, that would offer us roughly 800 million euros M&A firepower. And with that kind of 800 million euros additional debt, we would be still below the 50% gearing target. Couple of releases from quarter four. So we announced in the first week of January, the acquisition of ING grains. ING has been founded in 2010, last 2024 revenues 50 million euros. We had already before the ING acquisition, a business in Brazil, Argos, which we acquired back in 2017. Argos has been mainly focusing on light and medium load of range, while ING brings into our portfolio heavier load of range in the Brazilian market. actually quite nice complimentary acquisition for our Brazilian business. Plus then offering also sales channels for the Southern American markets. We also announced the proposals by the nomination board for the board of directors So the current board members would continue, except for Ilkka Herlin, who has informed that he's not available for re-election in the AGM, which is to be held on 24th of March. And the other press releases that we have announced during quarter four, you can find in our website. And as a last topic, our outlook for 2025 is unchanged. So what we have said already earlier this year, we are aiming at reaching higher than 13.5% comparable operating profit. And as we are now at the end of the year, I would like to remind you also about our dividend policy, which is 32, 50% of the net income.

Thank you, Mitko. We can jump to this consensus already now and then take the Q&A. At the change of the year, we also changed the provider of our consensus services. So we now work with Modular Finance. So all of the analysts will be, sales analysts will be reached out by Modular Finance to collect the numbers. the consensus is now available on HIAP's website, hiapgroup.com. But with that, we jump to Q&A, and Antti Kansanen was first with his hand. Please, Antti, go ahead.

Yeah, thanks. A couple of questions, and I'll start with the earnings side of things. If we think about Q4 versus Q4 last year, I think there was a couple of recurring type of cost elements on the fourth quarter last year. So how much of those that you don't expect to repeat this year? Just a reminder. And maybe then also reflecting on the 20 million that you are flagging on the lower U.S. sales impact on Q3. Will that impact be different on Q4 in terms of realized savings or higher volumes on the U.S. production on the fourth quarter?

Thank you, Antti. So if I remember correctly, we had last year in Vodafone approximately 15 million euros non-recurring items. We have also announced when we communicated this 20 million euros cost savings program that for the full transparency, we would report these as items affecting comparability, so below the comparable operating profit. However, as the program is still on the planning phase, we do not anticipate, let's say, significant amounts of one-off items in quarter four. Some, but not in a significant manner. Once the program implementation starts in the first half of this year, based on the planning, then we should start to see the non-recurring items. What comes to the U.S., our quota fee, like you mentioned, was impacted by the low volumes. We got a very sizable home improvement customer order in quarter two and basically that order we have started to deliver now in quarter four so that will support the US market probability to some extent at least so the expectation is that that kind of volume impact would contribute to

contribute to to the equipment and total higher top line in quarter four okay and then then on the order side don't have it in front of me don't remember if you disclose the u.s orders from q4 last last year but overall just if you think about kind of the run rate that we saw in the u.s especially on the equipment side in the past two quarters versus q4 last year what's what's kind of the delta

we have not, if I remember correctly, in quarter four, we have not announced any sizeable orders in the U.S., so the comparison period as such was quite high.

Yeah. And is there any seasonality that if we just think about that the demand is similar as it has been, let's say Q3, is Q4 typically higher and lower in any type of a calendar impacts or anything like that?

Overall, quarter three for us is the lowest, typically due to the holiday season and then quarter four is higher than quarter three. If I think the U.S. market in general, like I mentioned also earlier, that kind of bigger customers are kind of quite okay from the investment side, while the smaller customers are more considerate. However, with the bigger customers, the order timing might sometimes fluctuate so that they don't necessarily place orders in every quarter.

Okay, thank you.

Thank you, Antti. Next in line, we have Mikael Debel. Please, go ahead.

Yes, thank you, and thanks for hosting the call. So a couple of questions. Just firstly, coming back to the cost takeout, so just to be clear here, so what you're saying is that it's still in the planning phase and it's going to be implemented in the first half of this year, but you still expect the full $20 million to flow through on your P&L next year. And related to that, how big will the one-off costs be at the end of today?

Yes, it's still in the planning phase. Of course, we need to have the Welsh Council negotiations before we can start to do the implementation. This 20 million is the 2026 impact. So if you would compare at the end of 2026, our fixed cost base, that would be 20 million euros lower compared to 2025. One of costs, we would come to the one of costs most probably somewhere around the full year results announcement. Okay. In February.

Yes, right. And this 20 million, is this purely just layoffs or are you doing something else as well to get those costs down?

It's anticipated that it comes from various sources, personal costs plus also other non-personal related costs.

Okay, good. Then just secondly on the aftermarket or the service business. So, you know, despite the fact that the markets have been fairly muted overall, I think you have been able to grow the business in quite a good way in the last couple of quarters. How should we think about this business overall? going forward into Q4, into next year, what are kind of levers for you to keep that business growing? And are you seeing any headwinds within this aftermarket business currently?

Overall, like you said, despite the equipment volumes decline, we have been able to grow the services business. In our case, in 2025, the services growth has been very much coming from the recurring services, so spare parts maintenance-related services, and this is actually very much according to our strategy, because in our strategy we have been focusing on the connected fleet, And increasing through that, basically, the scale parts capture rate from the, let's say, current 47% towards 52% by 2028. And then, basically, whenever we sell new equipment, we try to combine with that also the maintenance contract there. and through the maintenance contract then we can ensure that we or our partners like dealers get then the maintenance work and the spare parts sales when the customer requires the servicing. So basically we have not, let's say, made any of new inventions as such but we are just prudently executing those strategic initiatives which we have been let's say identifying already some years backwards and these are now starting to bear the fruit and you can see that in our service development What comes to the U.S. market, we have seen that equipment utilization in the U.S. has been on a good level despite the kind of new equipment orders declining. So we think that customers are actively using the equipment that for that purpose is they need to buy spare parts. In the U.S. we have seen to some extent that customers are perhaps not holding as large spare parts inventories and what they kind of in a pre-tariff situation would hold in the spirit of not tying up capital in the inventories.

Okay, thank you. And then just finally a question on your guidance. So you tend to guide and adjust it. EBIT margin for the year is this the way forward as well or are you considering some other measures perhaps sales growth or something else also for this year any changes planned for the guidance essentially for the question at the moment no changes planned so we have considered that for us

the most important is the profitable growth and of course we need to make sure that the profitability is on that kind of trajectory that it brings us to the 16% comparable operating profit margin by 2028.

Okay, thank you very much. Thank you.

Thank you, Mikko.

Next in line is Tom Sturman, please go ahead.

Yes, hi, Mikko, Aki, and Oskar. I'd just like to talk with you about the dynamics of the U.S. market. So, I mean, now we have had a time with tariffs on your products and also on trucks. I've heard at least some rumors that, you know, in the truck industry that some seem to have difficulties to push through the tariffs and are backing off a bit, you know, not to kill demand too much. Have you heard anything about this, and are you 100% confident your kind of price arcs are sticking, basically?

Yeah, I can't talk about the others, but in our case... We have sticked with the principle that tariff is an extra cost for us, which we move to the customers. So we are also very transparent with the so-called tariff surcharge in our invoicing. Not kind of hiding it in the price lists, but showing as a separate line item in the in the invoice. Of course, we are doing also actively measures to mitigate as much as possible the tariff impacts, localizing the supply chain. We already assembled assembly more than 50% of our U.S. revenues in the U.S. market. So continuously looking ways that how can we reduce the tariff cost, and that is also something what we continuously also reflect in the customer invoicing. So not kind of just sitting and waiting, because most probably these tariffs are here to stay, at least in some extent or in some form and shape.

And in our industry, many of the OEMs have a similar type of assembly setup that we have. So, the global supply chains with local assembly. So, there will be differences between the players.

And there seems to be discipline that all stick to kind of adding tariffs to prices.

Yes, this is what our competitors have been doing as well. And in the US, the most, let's say, most of the competition is coming from European companies.

We have seen lately that the Trump administration is quite active when it comes to, you know, Fannie Mae and Freddie Mac and, you know, trying to boost private consumption and construction, making it easier for the consumer. But do you see any positive signs, you know, in some segment of the market or some geography in the U.S., or is it still just, you know, negativity everywhere, basically?

At least so far, until today, we have not seen any kind of notable changes in customers' behavior in the U.S. market, in none of the kind of end markets where we operate.

And then the opposite in Germany. We have seen good construction data in December. Do you see any, I mean, the recovery is continuing, I guess, but do you see that it's accelerating or?

I would say that the recovery what we started to see in the latter part of 2024 has continued in those main markets like Germany here in Europe. I can't say that we would have seen acceleration in the recovery, but solid development in that improvement path. Still, it's good to remember that or note that also European volumes if we would look the unit volumes those are not necessarily in all markets even yet on 2019 level so there is a kind of replacement need coming up but at least so far we have not seen any kind of accelerated replacement activities overall good rendering activity has continued like we saw already in quarter three but still it takes quite quite a while for the customers to make the kind of final investment decisions also in europe

And then I'd like to not discuss the Q4 margin, but if you go to H1, I mean, you had very good margins in H1 in 25. And help us to remind us about this cost savings you had last year when you had the biggest incremental help. I mean, how is it then you roll over to Q1 and Q2 in 2026 then? Apparently these savings for this year, these 20 million euros, will not really help now in H1, it's rather an H2 thing. But you had savings, if I remember right, immediately from the beginning of last year, right?

Yeah, some kind of quick wins we had already from the beginning of 2025, but I would say that let's say, majority of the previous 20 million euros cost savings, the kind of a run rate we started to reach somewhere in the middle of 2025. And also in this new program, which we announced now in Q3, I would say that it will not have, let's say, significant impacts, at least not in the first quarter, and possibly also not yet in the very early part of the second quarter.

As a reminder, in the first half last year, the US business were still much less impacted by stemming from the latter part of 24 and January 25.

So do you, I mean, is it wise just to expect that margins go down in the first six months then, given you have lower order books and these savings are not really helping all the new savings in H1 and you had big savings from the beginning of last year? It sounds like that. I mean, it's just good that we don't expect too high margins in H1 if that's the case at the moment.

Yeah, let's come back to the 2026 margins when we provide the full year outlook. Overall, like I said, the first half of last year, i.e. 2025, was still quite normal for the US market, while we were then negatively impacted in quarter three and to a certain extent in quarter four even though we started to book some of the revenues from those US orders which we received in quarter two but overall as the US order intake has been has been lower this year compared to last year, that will at least impact us to a certain extent in the first half of next year, before the cost savings start to kick in.

Then finally, are you in active acquisition discussions for more companies at the moment, given your strong balance sheet and earlier communication?

We have discussions with potential target companies

Okay, thank you. Thank you, Tom. Edward, you are next in the headlight. Please go ahead.

Hi, sorry about that. Just an understanding on the 20 million savings. Is this a structural saving or if the market turned in the US, as one hopes it does, and gets back to a normalized market conditions, how much of that 20 million would you actually see having to go back in? And then just on the other question, Do you actually see then a sort of margin mix dilution as the equipment part picks up, going back to your comment about the overall usage and extension of either rental and lease contracts and over usage of equipment as it is, that you actually see the new kit being bought and the service side drops? That's one. And then the other question was just on pricing in the U.S. If you looked at your pricing for 26 versus your pricing that you were thinking about for the second half of 25, is there a major delta difference between that thinking?

Thanks for the questions. First on the savings, we aim at doing as much as possible very sticky, i.e. not kind of traveling type of savings which might go up when the business picks up. So as much as possible structural savings. Then what comes to the mix when the business improves, yes the equipment growth equipment business growth might have a slightly negative impact on the mix as services is now a bigger portion of the business due to the equipment sales decline. But it's good to remember that before the U.S. market decline also equipment business was doing a very solid double digit comparable operating profit. Yes, equipment growth can have a slightly negative adverse impact on the mix. But on the other hand, with the equipment volumes, we can get good leverage on our SG&A costs. And then what comes to the pricing in the U.S., I would say that the kind of underlying pricing have in the U.S. has been fairly stable. But then, of course, due to this tariff surcharge, I would say that our pricing kind of invoicing to customers has been, say, 10 plus percent higher since, I would say, 1st of March compared to the beginning of 2025.

Okay, and then just the last question. If you just look at the overall inventory between both from yourselves and from competitors actually in the distribution network, how is that looking running into 26?

In our case, our kind of inventories have declined in 2025 due to the top line declining and If we think our dealers, they don't typically hold sizable inventories. When they get an order from the customer, then there's an order for our equipment. So they don't, except for some kind of high-runner, they standardize the products. Otherwise, they don't typically hold sizable inventories.

Okay, gentlemen, thank you very much indeed.

Thank you. Thanks so much. I don't see any hands up or any questions in the chat, but if we have any questions from the telephone lines, now is your chance. So I don't hear any questions from the telephone lines, but Edvard has a follow-up, so please go ahead.

Hi, sorry, I'll take an opportunity then. You talked earlier about discussions with clients in the US that not much really has changed, but if you take the commentary from the larger clients at least, What is their planning for 426? I mean, okay, we have the whole tariff friction, 325, but at some point companies just say, okay, we just have to swallow it. To a certain extent, we've had it so far. There's a degree of known dynamics within it. We've got to get on with the business. So what are they actually talking to you, the larger clients at least, who probably have the financial flexibility to make decisions?

Yeah, the larger clients, they have done, for example, market consolidation, so they have been buying competitors, and what they have been doing in 25, and most probably they would possibly do also in 26, is this kind of fleet renewals. They might have thousands of our equipment in use and basically every year they may have to replace hundreds of those so basically they have like you said they have strong balance sheets they have established relationships with leasing companies and they are looking perhaps things in a bit longer time horizon than perhaps smaller players who might kind of have a bit more constraint balance sheets.

Okay. Thanks a lot.

Thank you. I don't see any further hands up, so it's time to conclude today's call. So we will go into the silent period on 22nd of January and the results will be published on 12th of February. So stay tuned and have a nice, let's say, winter so far, and let's get back to the topics on 12th of February. So thank you and bye-bye. Thank you. Thank you. Thank you.