Elopak A S

Good morning everybody and welcome to the first quarter 2025 results presentation for ELOPAC. My name is Christian Eide and I'm the head of Treasury and Investor Relations. Today's presentation will be held by our CEO, Thomas Kermendi, and our CFO, Bent Axelsen, and will last for around 30 minutes, followed by a Q&A, where people here in the audience and the people watching in online will be able to ask questions. So, with that brief introduction, I will hand over to our CEO, Thomas Kermendi.

Thank you, Christian, and a warm welcome to everyone here in Oslo on, I think actually I can use this one, on this beautiful day. We will go through yet another strong quarter for ELOPAC, and I'm very happy to present to you our results for the beginning of the year. Before we start, just remind everyone what it is that we are doing and the essence of what we're doing is really sustainable packaging. What we do is replacing plastics. We do that by packaging of essential commodities around the world and then providing consumers around the world with essential nutrition. Everything we do is around the sustainability and providing the world with sustainable packaging. So that we have that clear, let me just start now on the quarter. And this has been an exceptional, positive quarter for us, both in terms of results, as you will see, but also in terms of key events that has happened for us in the period and will shape the future to come. Starting with revenue, we now report a result above 300 million for the quarter, which is the first time ever. And that is driven by very strong developments in across our business, but as you will see, primarily Americas. We have a growth level of 5.3 organic growth, which of course is historically also a very strong level. And that, as I said, is to the very large extent fueling the growth we have had in Americas for decades. some years now we are heading up to more than 20 23 growth in america's in our core business with pure pack and the caps closures filling machines etc the ebitda for the period is equal to Q4 of last year, and that gives us a margin level of 14.4. Also a strong period given the amount of investments we have been doing and the increased costs we have had over the period as a consequence of exactly the next point, namely the opening of our new factory in Little Rock that we inaugurated only last week exactly. More about that one, of course, later. Finally, in the period, the free cash flow has been impacted partly by the extraordinary costs related to establishing and opening the plant in Little Rock, and also some temporary buildup of working cap that you will see later in the presentation from Bent. An exciting event as well during the period has been the partnership that we have started with Blue Ocean Closures. Blue Ocean Closures is a sustainability tech company from Sweden. They're delivering fiber-based caps and closures, and it's part of our partnership. road to provide more and more sustainable solutions, both on the pack and also on caps and closures. Now, on the revenue side, clearly 6%, 5.3% organic growth is a very strong result. And it's driven by, on one hand, America's business in on PurePak mainly and also on CAPS. It's also driven by an extraordinary strong growth in India. We have been looking at 60% growth in our business in India year on year. And that is fueled by the investments we made end of last year, extending and adding capacity, doubling the capacity impact in India. which then in Q1 of this year has enabled us to offer more products and create more sales in India. We've also seen in the period that the Rolfed business in Europe has been challenged and we've also seen that our business in Europe has continued on a high level. In some parts, we have been increasing our market share and in other parts, the consumption has been somewhat strained. From an EBITDA level, we can say that the A bit their level we have of fourteen point four actually as an underlying margin level of plus fifteen percent around fifteen point one and that difference relates to the more than two million euro we have We have an extraordinary cost related to the new plant in Little Rock. So the underlying business is strong and we are looking at business that excuse me in America's continues at a high level and also a pure pack business in the remainder of our organization that continues at a very solid level now we have outlined three priorities in our strategic roadmap, which we call repackaging tomorrow. And for those of you who saw this during the Capital Markets Day, you may remember that these are the paths and the roadmaps that will drive us and lead us to the 2 billion euro target that we have set. Number one relates to the realizing global growth. And clearly, the America's development that we're seeing now is a very important part of that development. Equally, the developments we see in India is also a very important part in realizing global growth. And thirdly, we have the MENA, our acquisition back a couple of years back that we are now developing and driving business both with the old companies portfolio, but also adding new products to the region. Secondly, and number two, very importantly, is all around the sustainability, where we talk about strengthening our dealership in core. Here, we talk about technology development, material development, and the Blue Ocean closure is an example how we are fueling that part of the strategy, adding more materials, adding more innovations around the sustainability part of the business. The last part is the plastic to carton shift. And this is, of course, the big part that we strongly believe in and that we see around the world, not only here in Norway, but now also with other products. We have been seeing now that, for instance, products like Unilever have been launched in Europe on detergents, softeners, etc. This is a big, big part of our business. a big part of our growth and a big part of how we see the business moving forward. We have, of course, also experienced here now quite a busy period when it comes to the geopolitical arena, and not the least tariffs, which have been discussed quite at length. So I thought I'd just give you a little update on where we stand with the tariffs in the US. Now, firstly, it's very important to note that everything we use in US Americas essentially is based on US suppliers, almost. And I'm coming back to the almost, but basically we are sourcing in Americas and using in Americas. From our plant in Canada, 70% of what we produce there is being exported into the US. The board comes from US, it's converted in Canada, re-exported into US. That business is not impacted by tariffs because there is an agreement called the USMCA, which is an agreement between the United States, Mexico and Canada that means that materials such as ours produced in Canada is exempt from tariffs. We have some imports, but rather limited from the Dominican. And these imports, on the other hand, are impacted by 10 percent tariffs to the US. Our filling machines that we use in the US are currently impacted by another 10 percent. They come from Japan. And as it stands now, today, this is 10%. This may, of course, change. As you know, there are ongoing discussions on trade agreements. And potentially, this may even increase to 24%. But where we stand now, it is 10%. Very importantly, though, is we have, as I said before, just opened a brand new plant in the U.S., serving the American market. And Given that more than 90%, 93% of the material we use in that plant is sourced out of US, it's clearly going to be a very efficient factory also from a tariff point of view, should that change. Having said that, we are continuing to monitor the situation on tariffs. We think we are in a really, really good situation. with or without tariffs, I would say, given our new plant in Little Rock. And we're just incredibly excited with the fact that PurePak, which actually originates from US, now also is back and being produced in the US. So with that, let's just have a brief look at what this means. So we, as I said, had the pleasure really to open and inaugurate the plant only exactly actually a week ago today. At a grand opening in Little Rock, we had customers from around the country. We had suppliers from including international suppliers flying in. And we had a lot of dignitaries from evidently Little Rock, the state and around. It's been a fantastic experience. journey for us. And I cannot stress how happy we are that we are opening on time and within budget. We're running now, we're producing now and really, really excited to spend Q2 of actually increasing and scaling up the production. So with this, I will hand over to Bent, please.

Thank you, Thomas. I think we can say that with the turbulence we had in the geopolitical arena, Elapak has navigated very well and demonstrated our resilience with both revenue growth, as Thomas pointed out, and solid profitability. Let's dive into the operating segments, starting with EMEA. So in EMEA, we are reporting stable revenues and continued satisfactory and strong profitability. The revenues are 229 and EBITDA is 36 million. If you look at the revenues, we are reporting stable volumes for PurePak in EMEA, where we see growth in the central part of Europe and a little bit of facing and decline in the northern part. However, for Rolfed, we continue to see the strong competition that we have reported earlier, so we do have a decline for Rolfed in the European markets. When you look at this year's revenues compared to last year's, this development is also impacted by the relatively strong quarter in MENA one year ago, where revenues were really high because of the timing of Ramadan plus other events. other impacts like the Red Sea conflict. So that has made the baseline a little bit higher. But in India, we are seeing a continuous strong demand and revenues grew by 60%. And this is enabled by the capacity instalment. As you may remember, we doubled the capacity in the second half of 2024. If you take a look at the EBITDA, the product margins, they remain strong, especially for pure pack and cartons and closures. If you look at the Rolfed business in India, with a 60% revenues, that has a dilutive effect to the average margin. Because one, Rolfed margins, generally speaking, have lower margins compared to those of PurePak cartons. And in Q1, the margins on Rolfed in India were a little bit lower compared to last year. The same you can say for filling machines. So we have increased the revenues related to filling machines in EMEA. And as you know, the margins on filling machines are lower compared to packaging materials. So technically speaking, that also has some dilution effects. R&D costs are increasing in line with the repackaging tomorrow strategy and that will in the short term impact the margins, but it will enable the future growth that we have committed to in our midterm targets. If we move to America's report, 94 million euro, and as a fun fact, this is more than double the revenues compared to four years ago. when we got listed. So I think this is just fun to look at. And it's not only about year-over-year comparison, but if you take the bigger perspective, that shows the progress that we have demonstrated in America and the progress that is to come. So we are super proud of that. If we look at the comparison versus last year, the revenue growth is the organic revenue growth is 23%. And you see the difference here that is basically the currency exchange rates between dollar and euro. This growth comes from growth in the core segments, fresh dairy segment. It is increasing share of wallet with existing customers, both of acquiring new customers and the growth we see across all product segments within the fresh dairy area as well. So how did we manage this growth? This was enabled by increased import. from our joint ventures in import from Europe, but we also managed to improve the production output of the Montreal plant. When we look at the EBITDA for America, we need to interpret the figures as Thomas pointed out. We have these pre-production costs of around 2 million euro. And if we calculate the EBITDA margins without those pre-production costs, the margin is 22%. And that is quite comparable to what we normally report for the America segment. Part of the picture here is also the import that we are making from the JVs and Europe. They have a significantly lower margin compared to having those produced in Canada or Little Rock in the future. As Thomas pointed out, as of now, we are exempted from tariffs. Tariffs have not affected any of our figures for Q1. But I just want to point out that for three days in March, tariffs were actually paid. when importing product to the US. So it also proves the unpredictability of the trading regime these days. Now if you look at the bridge for the group, we are going from the 46 million last year to the 44.6 million this year. And mentally remember that we have the 2 million in costs related to Little Rock that we didn't have last year. I have pointed out the main drivers already, so let's see how I can complement the picture somewhat. If you look at the net revenue mix, which obviously is driven largely by the growth in America, we also have successfully implemented the price increases in Europe for the year 2025. Raw materials do have a positive impact in our P&L, and that is related to a positive inventory turn effect in our books. On the operating cost sides, we pointed out used plants, they increased R&D spend. In addition, we have the inflation of our cost base. Now let's take a look at our cash flow. So in this quarter, we are reporting a cash flow from operation of 5 million euro. And as you can see from the chart, there is a significant increase in working capital in this quarter. In the report, we have explained this in quite detail to show you the drivers of this development. I will point out the two most important drivers of this. One is that we have a temporary increase related to filling machine payments. We have account payables with different timings. We have commissioning with different timings and prepayments. And in this quarter, that had an increase, and that is almost half of this 34. We believe that to be a temporary impact on the filling machine, and we are committed to the targets, the commissioning targets, as we say. The second main point is that we are building inventory for the ramp-up in the US plant. And as a part of the picture here, we also need to remember that end of last year, the inventories were particularly low because of the supply chain incident we had in mid last year. And we are also normalizing the inventory level. So those are the two points. key explanation factors and there are other facing effects that we are describing in the report. On a general note, with our working capital initiatives we are confident to bring working capital levels to better levels in the months to come. The cash flow from investments, those are driven by two things. We have invested 11 million euro related to the US plant. A little bit line one, mainly line two. And we also started the replacement of converters in the Netherlands, which is a part of the investment program to enable repackaging tomorrow. Filling machine investment is at normal levels. Finally, we have cash flow from financing activities of six and a half, and that consists of the lease payments, interest payments, but also positive supply chain financing effects. That brings us to the capital structure and our return on capital. We have a stable EBITDA year-over-year, when we say LTM, so last about a month. But with the investment program, we have in Little Rock and also the production plants in Europe, and with a temporary increase in working capital, the leverage ratio is 2.3. We work very systematically to bring that down because we also have future cash flow effects related to the remainder of the investment program in Little Rock that is around $22 million, bringing to the 95 frame as communicated. And we also have dividend payments both in this quarter Q2 and also in the second half of the year. Moving over to return on capital employed, we are reporting 15%. And that is mainly driven by building the capital employee, the balance sheets. We have all the balance sheet impacts from Little Rock, and we are really, really waiting to get the contribution from this exciting investment. So that wraps up the financial part. So Thomas, please.