Elopak A S

Good morning everyone and welcome to the second quarter 2025 results presentation for ELOPAC. My name is Erika Honningsvåg and I am the investor relations and treasury officer. Today's presentation will be held by our CEO Thomas Cormendi and our CFO Bent Axelsen. and will last for about 30 minutes, followed by a Q&A session where the people here in the audience and the people watching online will be able to ask questions. So with that introduction, I will hand it over to you, Thomas.

Good morning. Thank you, Erika. Good morning to everyone here in Oslo and everywhere else you may be watching this webcast. We are presenting Q2 and we are happy actually to present yet another strong result for ELOPAC, both in terms of our development, strategic development, but also in terms of our profitability. So let's go through it. And just to set the scene, for those of you who are not so familiar with us, we are in the world of sustainable packaging. What we do is we produce packaging to protect essential commodities such as, but not only, milk. And with that, we also see it as our role to enable world nutrition while always on the Road to Reduce Plastics. This is what we do and this is what we've been doing for many, many, many years and this is the performance we're having for this quarter. We are presenting a quarter with good growth and a very solid EBITDA result of 15.8. The growth is around 2.4%, which is very much impacted by continued solid development in Americas, which is now also impacted by the opening of our brand new plant in Little Rock, which we opened in April, so during the quarter, and which is now ramping up and starting to produce in bigger numbers. During the quarter, we also... announced that we changed the dividend policy to pay out twice a year so we did the first installment already back in may and we are now of 21 million we are now doing the second installment of the 24 a dividend in October together with the first half of 2025 which will also be in October and which the board has decided declared a dividend of 3 euro cents to be paid then. All in all, of course, we are then paying all of 24 plus the first half of 25 in October and will then continue in line with our policy to do semi-annuals also next year. Let's have a look at the performance. As you can see here, in revenue terms, Correct for the impact of the dollar effect, we have 2.4 in revenue growth and that's why you have the 0.4 here. This revenue is mainly driven by the continued development we have on PurePak. We see that in the US, of course, where we are currently selling various sizes and formats in PurePak. We also see a revenue growth in India, but in that case more so in the WorldFed side. It's also clear for those of you who've been following us in Q1 that on a quarter-and-quarter basis, we have a deviation versus Q1, and that is really driven by a couple of factors. One is production of finished goods. From an accounting point of view, that has an impact in the figures now. We have customers who were building stock back in Q1 because of the tariff risk, we can call it like that, at least uncertainty, and also we have an impact in these figures of the weakening of the US dollar. So overall, if you compare it from a business point of view, we are continuing the progress in business terms and delivering pretty much in line with what we had hoped and planned. The margin level on for the group is as you can see here 15.4 without the correction of the US plan cost but 15.8 is the actual EBITDA level and that corresponds to around 15.4 if you correct it on a year-to-date basis as well. Overall a good level and also a level that is in line with our mid-term targets as we have declared them. Now, just a little recap on the priorities we've set in the group and how we're delivering on our strategic goals. Back at the Capital Markets Day, we announced our repackaging tomorrow strategy, which essentially consists of three areas. One is realizing global growth. Clearly, the Americas movement, the opening of the new factory, the development we see in America is a very, very significant part of that. The other one we had was strengthening the core, which relates to our core business in Europe. It relates to the sustainability drive we have around this core business. And the third one was replacing plastics. the ongoing shift. During these presentations, we tend to show different examples of how we're doing in the various parts of the strategy. Today, I'd like to focus on the second box, namely strengthening the call. During the quarter, we have a couple of new innovations that we've announced, and that is part of building our position as a sustainability frontrunner. The first one is on the left of the screen, and you will see we call it natural whiteboard. We've been talking for a while about the natural brownboard. This is the natural whiteboard. The main purpose of doing this is actually to help our customers to reduce their CO2 footprint. By introducing a board type, which has been developed together with our suppliers, we have the opportunity to reduce the CO2 footprint by around 14%. which is of course very significant and is continuing to strengthen the position of carton versus plastics, which in itself already now would be around 60-70% lower CO2 versus a plastic bottle. So adding another 14% by Engineering the board and having a more sustainable board, of course, is a big, big, big advantage for our customers and also part for us in reducing our CO2 footprint in line with our science-based target. The other one is also a development that we have targeted now, what we call the non-food business. And non-food is the area we have with the deep-packed gardens targeting the... household chemical areas, detergents, soaps, softeners, where we have now introduced a polymer, a recycled polymer in that kind of category. That means together with the board, the recycled polymer and the polymers made out of renewables, we have the opportunity of another 20% reduction in CO2. Again, comparing that to the classical plastic packaging used in that industry, it delivers yet a significant difference for our customers who want to reduce their CO2 footprint. This is now available. It's being used by Okla here in Norway and in Scandinavia, and we're rolling that out to more customers in the coming period. It's a system that is developed in close cooperation with our suppliers, and it is also a system that is important because it's part of our commitment to deliver on the regulations that are coming, the PPWR, the packaging and packaging waste regulation, which requires that plastics being used have a higher level of recycled material. The next example I'm just going to highlight is our innovation around the machinery. So all, as you know, what we do, we supply filling machines, we supply the technical services, the innovation around that, and of course with that the consumables, the packaging material. In our aseptic technology center in Mönchengladbach, we have developed the PureFill filling machine, which is a modular filling machine. We have announced it a couple of years ago, but what we now see is that it's entering the market successfully. We are seeing that this filling machine is unique in the way it operates. It allows for a high level of modularity at production, allowing it for different for extending into different capacities, different formats at a lower cost and at a higher speed versus a traditional way of building filling machines. And I just like to Read the quote from one of our customers. This is the customer, Fanner. Fanner is Europe's biggest iced tea manufacturer and a very significant big juice manufacturer. And I'm just quoting him, Ellopax Purefill has exceeded our expectations. Flexible, efficient and built for the future. A game changer for our production line. Thank you. But the very positive news we have is, of course, that the customers who have ordered and have installed the first lines are now several of them also ordering or installing more lines. So that is the best testament to success in our industry when you start with one and you move on to next ones. it is a system that is unique and we are actually very very happy that it is the world's best performing large size two liter carton filling machine i think with this i will hand over to pint thank you thomas

The financials for the second quarter are categorized by a stable development in the EMEA segment and continued growth in America. Let's start with EMEA. Here we see a stable revenue development both for the quarter and for the first half year. And it is characterized by steady performance despite continued observed consumption decline both for dairy and juice and also an intense competition in Rolfed. So PurePack is only impacted by the consumption because we are strengthening our relative positions. We are increasing our market share by winning new customers and increasing share of wallets among existing ones. On Rollfed, we are losing volumes because of the intense competition in Europe. In India, we are continuing to grow, albeit at a lower pace compared to the first quarter, 9%, and this is linked to a softer juice season in the market. The equipment sales is up around 9 million and we are going to continue commissioning the same amount of machines as last year but more of these projects are sold instead of rented out and that is inflating our revenues. If we move to the EBITDA, we are delivering 34 million for the quarter and 71 year to date. Building on what I started on is that the equipment sales, which is 9 million growth in revenues, they have limited margins. The Rolfed growth in India has traditionally lower margins than PurePak. So the impact of equipment in India is diluting the EBDA measured in percentage. The R&D activity is increasing in line with the strategy. On a good note, the pure pack margins in Europe are strengthening and that is mainly the result of our price increases and also attractive product mix. If we move to Americas, we see a growth supported by closures, carton pricing, and also the beginning of the ramp up of our US plant. The growth is 7.4% as reported, but if you adjust for the Euro dollar, the organic growth is 14%. If you move to the EBITDA, we are reporting 17 million euro. That is up 6% compared to the same quarter last year. Thomas pointed out the impact of the ramp-up. If you look at the America figures, 22% becomes 23.6% if we adjust for that ramp-up effect. As Thomas mentioned, the plant was close to break even in the quarter. If you look at the year to date figures, the EBTA margin is 21%. So if you adjust for the ramp up for the first half year, then the EBTA margin is 23.2%. What we also report is a lower net income from our joint ventures. So that is driven by two effects. One thing is the softening of local currencies for the sales in the local markets. And we also have some softer volumes in Mexico because of increased competition. And the way we report joint ventures in an EBITDA is the share of net income. So when you get the result, when we get a profitability loss of the joint ventures, you don't have any revenue loss. So percentage wise, it also has a great impact on the EBITDA margin. So that is just one thing to note, which is more technical. Let's take the group perspective where we go from 44 to 45, 44.7 and then 45.1. I think if you start with the big pictures, this is a story of improved quality of earnings that more than compensates for increased costs. Net revenue mix is 44.4, combined with positive raw materials impact. So what is happening? We have our price increases in Europe. We do have some price increases in America. We are growing with high margins in America, as you know, and that contributes to the positive mix As we report, we are reducing some in Rolfed, and Rolfed has a lower margin than PurePak, so the average margin for our carton enclosure is then also increasing because of that impact. The operating costs are up 1.7 million euro and we already mentioned the wanted R&D increase and then we have other cost increases driven by FTE increases and inflation. I think interesting to note that the inflation of the cost base is around 2 million euro in this quarter which means that we are beating the inflation. when it comes to joint venture and fx we already mentioned the joint ventures which are down 1.6 but we also have the translation effects between mainly between us and dollar which is 1 million Then we have taken one more bridge element, and that is just to illustrate the impact of the ramp-up of a US plant. So without that, the margin is then 15.8. So a solid result in the second quarter. Let's move to the cash flow. We are generating cash flow from operations that enables us to reinvest in both our new plant and to pay the dividends in the quarter. If we start with the left-hand side with an EBITDA of 45, we have a slight improvement on working capital that is mainly improvement of inventory and account receivables. We have some reduction in AP but that is a quite volatile number in our balance sheet and that will go up and down according to the payment schedule of the raw materials. We pay our taxes and if we move to cash flow from investments we have a capex of 21 million euro. That is mainly driven by the investment in the second plant. And it's also the investment program to replace converters in Europe. Maintenance is at normal level. Filling machine investments are slightly lower because we are selling more machines than renting out machines. And that has a positive impact on the CapEx. We have an order of 1 million and that is because we received 1.2 million for the sales of Russia in this quarter. So that was the sales that we did back in 2022 and so 1 million in the quarter, very pleased to get that. if you look at the cash flow from in financing activities that is minus 34 that consists of normal lease payments interest but also the first installment of the dividends and Let's move to our balance sheet and ROCE. What we can say is that our leverage ratio remains stable, so there's no change of the leverage ratio between first and the second quarter. The net interest-bearing debt is only up 4 million despite the heavy investment program and the dividends paid, and combined with the stable last 10 months on EBITDA, that gives us the steady leverage ratio development. On the return of capital employed side, we are obviously getting ready for the ramp up and look forward to a more rosy, rosy by the end of the year. And we look forward to see an upwards trend in the years to come. Maybe it's good to add a few words on the US plant. For the whole project we have invested 80 million dollars and we have around 18 million dollars left for the second line. The amount is slightly higher because we expected tariffs to give us an additional two to three million dollars in capex because we are using equipment from the EU. That concludes the financial section so I will bring it back to you Thomas.

Thank you Bent and in terms of summary See this beautiful picture here highlighting where we are going. We look at a quarter of 15.8%, strong epidermal quarter. We look at it as a continued development of the strategic focus we've had on Americas for years with the 14% growth. We are looking at a plant now that is in operation, that is very close to break-even, and where we are now saying we are going to ramp up and we are looking at a year-end with a fully ramp-up plant in Little Rock. Secondly, we also from the Board declare a dividend payout for the first half of €0.03 to be paid out together with the remainder of the dividends from €0.24 here in coming October. All of that in line with the dividend policy that we announced during Q1. And moreover, we expect that the strong performance we've had during first half will continue during second half of the year. And hence, we expect to deliver in line with our midterm targets, which you recall is on a revenue level 4% to 6% and EBITDA 15% to 17% in line with what we announced in during the capital markets day so this concludes uh this quarter thank you very much for your attention and i'm going to hand over again to erica

Thank you, Thomas. Thank you, Ben, for your presentation. And we will now move on with the Q&A session, starting with the audience here first. So please raise your hand, and I will bring you the microphone. And also please state your name and the company that you represent. Okay. No questions from the audience? Okay, then I think we'll move on with the questions that we have received online. This first one about the purefill machine. Can you please elaborate more on the futures and improvements, speed increase and cost decrease?

The improvements in the machine and the cost decrease, I assume, on the machine. Yes. I can do it in a little bit more general term. I cannot give you exactly what is going to happen, but the Purefilm machine is built on a set of modules. We started out doing this with two targets and two specific changes in how you build filling machines. From a target point of view, it was about reducing cost for a new filling machine per individual machine, but also cost reduction in how you bring a new format to the market, so the development cost of machines. That was number one. The second target related to time to market. The existing or then existing way of producing filling machines resulted in a rather slow time to market and by introducing this new technology we could reduce that to a significant faster one. The technologies that allow this is on one hand modularity. construct the machine in such a way that you can change modules and reuse the same modules depending on both capacity and size. To do that, the structure of the machine, the heart of the machine has to be a transport system that is not based on the traditional chain-based system, but is based on a different magnetic system that allows for much, much more flexibility. That's the structure and that's the beginning of the machine. We have then, when we started developing this back in 19, actually experienced issues not the least related to COVID, which did actually delay our development. development and our way of testing it and suppliers and all the rest that we all know of and think of, thankfully, is now years ago. But we, I think, recall it as well. That did have a delay. And for that reason, all of the value engineering activities that are needed to drive down the cost of this and ensure that we can built on the key drivers, i.e. the modularity, using the modules produced in different places. That is something that we are embarking on now. It's a long answer, but I think it's more or less accurate.

Thank you. And we have received a couple of questions from Charlie in BMW. I will take them one by one. Can you elaborate on the delays to ramping up new customers in the US mentioned in the report?

Yes. So To give you a little background on how this works, when you have new customers, they typically will have, or actually almost always will have, particularly when they're very big customers, a number of manufacturing plants. These manufacturing plants will have different equipment types. Some of them some of them newer, and for that reason you need to qualify the plants to ensure that the material will work on that specific plant, not only on something else. That takes a little while, together with the planning and production of designs needed for the various SKUs that the customer would have. And in some cases, the transition in actually ensuring that you move, in our case, from another supplier into EloPak and it secures that it works on the various plants takes longer than, in this case, some of our customers anticipated themselves. So that is the background. In fact, from an operational manufacturing point of view, our performance in Little Rock is good. We do not see today that there are significant delays in how we are performing the factory, but there is this time issue of getting things ready in time.

Thank you. And also from Charlie, can you say something about expectations for the full year CAPEX?

I think I will refer to the capital markets day where we shared some figures we haven't updated those figures but the way the capex is progressing is according to the plan and in line with the capital markets day presentation and since I don't have that number exactly in my head right now I refer to the capital markets day presentation

You have mentioned role-fed competitive share losses for several quarters now. Are you still sequentially losing business or should this effect analyze or be better soon?

I think we're not sequentially losing business, but the role-fed market is characterized with very tough competition. You actually have new entrants, you have a very depressed price level. In our case, the simple fact is that We back off in the cases where we find this is not at a level where we want to do business. That has meant for us that we have backed off on contracts in Europe while also gaining other contracts where we think we can add more value than these in Europe. It's not that we every quarter lose new business. That's not the case.

And last one from Charlie. Susano has talked of a second round of increased prices at its Pine Bluff. Do you see this and do you expect this to pass on?

Yes. Well, when it comes to specifics on the pricing and cost level in our supplies, we are a little bit more opaque than in other cases. The case with Americas, as you know, we have a system in Americas where we pass on, we have a mechanism where we pass on. the cost increases, which is a mechanism that is built in the market. In the case of increases of the board, we also pass these on when they happen in the market. So there are some mechanics in the US that are a little bit more specific on how that works this year. But generally speaking, we are passing on the cost increases we are meeting.

Maybe one thing to add is that we do have inventory returns, we have different contracts you will never find in a situation like that, kind of a clinical one-to-one inside a quarter. So that's just a comment that I would like to add.

So I think that was the last question. So if there's not any further questions from the audience here, I think we will round off today's results presentations. Thank you, everyone.

Thank you very much.