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.

Thank you, Bent. And that actually also wraps up our presentation today. As you can see, we are highlighting Little Rock. This is the biggest event we have, of course, for the quarter. It's a fantastic plant, I can say. And we are really excited to continue ramping up production during Q2. We're also closing a quarter with exceptionally strong revenue growth, more than 5%, more than 300 million in revenues, first time ever for us as a company, and with a solid EBITDA level of an underlying performance above the 15%. Our balance sheet, as you saw from Ben, remains solid, even though we are investing and have invested quite substantially, both in America, but also in Europe now. And we then have a temporary build of the working capital. All in all, looking ahead, we see that our strong performance from Q1 will continue. So we are looking at a full year continued in solid performance. Thank you very much. Christian.

Thank you, Thomas. Thank you, Bent. Another strong quarter and exciting times ahead with the opening of the new US plant. So with that, we will move to Q&A, taking questions from the audience first. So if you raise your hand, I will come with the microphone to you. Please state your full name and the company that you represent.

Yeah, thank you. Marcus Covelli from Pareto. So you mentioned that the good results in America today is somewhat contributed to Montreal, higher up there, and also the JV in Mexico. Could you provide some color more specifically on what you did in Montreal that led to this good result and how sustainable is that moving forward?

Right. I think because we have been presenting and been faced with a situation where we were running out of capacity in Montreal. I think that's what you are alluding to. And clearly, that's why we are building the plant in Little Rock. So what happened during last year is that we're running the plant. We then had a disruption in our supply chain during the year that Ben also mentioned. For us, that meant that we had to prioritize to supply customers the best we could. in some cases was very very very difficult and it also meant that we were we needed to produce smaller batches in order to satisfy pretty much everyone's needs now when we have the possibility of organizing ourselves better we can produce longer series we can make it more efficient we can simply get more output of the factory The shorter runs you do, the more change over time you have and the lower the OEE level in the plant you get. So we get better OEE, we get better output and we have a higher efficiency. Is that sustainable? I absolutely believe it is because it's the right way of doing it.

Thank you. And just one more question regarding Americas. So as you said, Bengt, leverage level might be a bit inflated, if you can call it that, right now, with the CapEx and working capital. How should we think about, or how do you think about another FID in Americas regarding your leverage level? Is that something you... you will need to get down to, let's call it, comfortable levels before you think about FID, or is that something you could see yourself doing while building down the leverage?

So when you say FID, you mean further expansion, right? Yes, yes. So first of all, we are comfortable with the current leverage ratio, and we have demonstrated before how fast we can deleverage this company. Since the working capital movement, much of that is temporary. If you play with a number, right, if you are... Fundamentally, the working capital should probably move 5, 6 million for this quarter. So the rest I regard as temporary. That's the price over line three.

OK, thank you.

You mentioned that some of the revenue effects came from price adjustment in Europe, looking towards your competitor Tetra Pak. Rumors has it that they increased prices by 3%. What can we expect from your price adjustments in 2025?

so you know we we did increase price across the board in in 25 we have implemented our price increases um i'm not going to comment exactly on the amount nor the range but we have done it and we've successfully completed the plan we had for the price increase the price increases relate simply to as we've seen here you know inflation continues of course with board increases so That's essentially the background for the price increases. But we have through it, we've done it and are happy with the execution of it.

Yes, a question on FID or FID beyond line one and two, given the geopolitical uncertainty, giving the economics on the line or each incremental line, and also the market balance in the US. Why or why not? Does it make sense to invest in a third and a fourth line?

You know, we're not saying it doesn't make sense, right? We're just saying that we built the facility that you saw on the video which is a fantastic facility actually, and it's built for a lot more capacity than what we will have right now. So I don't think it's unreasonable to think that at some point we would want to increase capacity, but we also want to do it in a controlled way. You know, the thing is, We're adding new customers. We're adding more volume from existing customers. We are onboarding plants, dairies, etc. All of that is actually a lot of work and a lot of people getting involved, a lot of testing, etc. And we just want to make sure that we can do what we say and deliver to our customers and ensure that they get the quality that they expect from EloPack. So, It's a big plant, and at some point it would be nice to see that being fully utilized, but we take it step by step.

Any further questions here from the audience before I move to the questions that we received online? No? Okay. So we have a couple of questions coming in. I will do them one by one. Thank you. Do you see any logistical impact from potential tariffs in the quarter?

We have discussed that internally. I think from an operational perspective, I cannot recall that we have any issues. Has there been any front-loading of orders in Q1 awaiting tariffs in April? That could have been, but at least from what we have understood from the organization is that those effects are rather limited. But it's also difficult to really get the truth when it comes to these things. And then you need to know what's in the customer's mind. And that is not always clear to us.

Thank you, Bent. Second question from Ocon. What is the negative Ramadan impact in Q1? And do you expect carton sales to improve for H2 in EMEA?

Okay, so I can maybe comment and you can compliment. I think it's not a negative effect this year, but I think I'd rather say that the impact was very positive last year. So you got the full effect of Ramadan in Q1 and the timing is different between years. I would definitely not say that MENA revenues are weak this quarter. If you compare to Q4, they are quite comparable. That makes it not that obvious that we see a significant increase into Q2 since this impact was more a last year impact.

Thomas, I'm not sure if you have any... I actually agree. I think if you look at EMEA and the volume in EMEA, I think we will see, because we have projects and contracts that will come on board, we will continue to see the market share growth that we have had over the last at least year, maybe two years. But it's also being offset, as it is now, with some consumption decline in major markets. And with our market share, of course, it impacts our volume. So I don't think necessarily we're going to see a big jump. But overall, I think the EMEA business is doing well and will continue to do well for the remainder of the year with ups and downs a little bit where you look.

Thank you. Following up with another question from . How much of America's revenue growth stems from EU imports? And has there been any, I think you answered the last part of it, so how much of the revenue growth that we've seen in America comes from imports from the EU and JVs?

We don't disclose the split between Europe and joint ventures, but I think, roughly speaking, you can say import and increased output is roughly 50-50. Roughly 50-50. But I think the import from Javis are somewhat higher than the import from Europe.

Thank you, Bert. The last question from Håkon so far. What can we expect of filling machine deliveries in 2025 for Americas?

We expect the development we've had the last few years to be in line this year as well. We see good traction, good demand and filling machine. For us, it's a question of ensuring that we install them, commission them, get them out in the market. Sometimes that happens. There can be some delays in this, but overall, I don't see any reason why this year should be different than previous year when it comes to filling machines to the market.

Thank you, Thomas. Then we have some questions from Charlie Muir Sands in BMP. I'll start again doing one by one. Was there a demand pull forward in America's in Q1 or is the run rate, is this the run rate that you expect through 25? Yeah.

I think Ben answered before.

Yeah, so I think, in all honesty, I think that demand has been there for some time. So I think the explanation for the revenue growth is that we find one way to enable it. So by continuing to import and to find productivity improvements So what we expect is that we will now do the ramp up. We were gearing up Little Rock day by day. And gradually, we will replace those imports with domestic production in the US. And the growth to be expected in America is in line with what we have talked about before that. By the end of this year, we will reach the practical capacity utilization, full capacity utilization in Little Rock. So by the end of the year. On line one. On line one. Line one.

Yeah. And as you know, we installing line two to be up and running next year. So overall, this moves along with in line with plan.

Another question from Charlie, what startup costs do you expect for the rest of the financial year 25 for Little Rock?

Yeah, so in this quarter we had the costs. I think in moving forward, I think the second quarter will be more neutral, I would say. And then we will start to generate positive EBITDAs from second half and onwards. And then we will aim by the end of the year to have a margin, an EBITDA margin on Little Rock in line with the rest of America for the end of year in isolation.

Thank you, Bent. A couple of more questions from Charlie here. What share of Line 2 in Little Rock is now pre-sold?

We are not very, actually we are not disclosing that, but where we are on the volume right now is we have, enough demand for us to fill the line. We are currently not actively filling it. And it's back to the point I made before. We want to make sure Little Rock is up and running. We think of it like this. It's a green field, as you saw in the movie. We have a lot of new people. We have to ensure that we get the quality, the efficiency, everything like we want it to be before we sell and commit too much. So we are running the expansion of Line 2 a little bit more carefully than what maybe demand would

say we should do thank you thomas and then we have one final question from charlie here which i think is the last one that we've received uh and that relates to the competitive landscape in the us so are are there any changes in the competitive situation with the sale of uh pactive to to novolex um

Look, it's difficult to say, right? The sale has been confirmed and has been approved. And of course, clearly, when we talk to our customers and future customers, they are very clearly looking for what that sale will mean for the market. I think for us it's too early to be specific of what it means. Thankfully, and we're very happy about that, the demand on our side, the interest in the filling machines, in filling up Little Rock, in working with us, has certainly not diminished in any way.

Perfect. Thank you, Thomas. Thank you, Bent. I think that concludes the questions that we've received from the audience online. So unless there are any final questions here from the crowd, we will round off today's results presentation. Thank you, everybody, for joining in.

Thank you, everyone.