Elopak A S

Good morning everyone and welcome to the third quarter 2025 results presentation for ELOPAC. My name is Erika Honningsvog and I'm the investor relation and treasury officer. Today's presentation will be held by our CEO, Thomas Kermendi, 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 our CEO, Thomas Kermendi.

Thank you, Erika, and good morning to all of you here in Oslo. It's actually lovely to see such a filled room here today. And also, of course, a very warm welcome to everyone joining us on the webcast. Today, we are particularly happy actually to present the best ever financial result for the group to date. So it's a presentation with quite a few milestones and we're very, very excited to present. Before we start on the quarter, of course, just for those of you who are not so familiar with EloPak, what we do is we are in sustainable packaging. What we do is we protect commodities, we enable nutrition around the world, and we do all of that with a mission of actually reducing the overall plastics consumption. So replacing more and more plastics with more and more carton packaging. But let's then look at the quarter. And it's been quite a unique quarter, as I said. First of all, we have seen a plus 49 million euro EBITDA result with 17% margin level. It's a very strong result in absolute terms. And it's also with an organic revenue growth of 1.2%. Most of the revenue, most of the result is driven by an incredible strong performance. Again, I have to say, in Americas with 18% growth. And also in a period where our plant in Little Rock actually for the first quarter started turning a profit, as we said that it would do actually after Q2 as well. It's also... A quarter where we, and I will address that more later in the presentation, have decided to increase the capacity ahead of time in US with yet another line, so the third line to be installed. And also now a quarter where we say that even though the A mere business is meeting some consumption headwind generally. We are seeing that the business is resilient and doing well in spite of all of this. And finally, and very importantly, I'm sure for many in this room here as well, this is a quarter where we have a solid cash generation. We've been able to pay back. are now facing a 2.1 leverage ratio, again almost in line with the mid-term target. So overall, strong financial performance in the quarter and some very important milestones for the future growth of EloPAC. Let's just think two minutes on the strategy that we presented back at the Capital Markets Day and that we've been following up since and where you see that the quarterly result we have now is a direct result of the activities we have initiated throughout this period and on the back of the strategy. Our strategy consists of three elements. Number one relates to the geographical, what we call global growth. For us, global growth for a very, very, very big part relates to America and the continued development in America. Needless to say, performance in America, and what I've just shown, is a testament that that is actually paying off. The second one relates to the development around making our core stronger. And our core in Europe, where we have a significant part of our business, also relates to development, innovation around new materials in line with and meeting the regulations upcoming in the EU, such as the packaging and packaging waste regulation. A lot of the work in that field is directly transferable into the overall ambition we have in replacing plastics, what we call plastics to carton. This is a massive area way outside our current business but in adjacent areas but also in the actual substrate shifts happening in our business i.e. if you think of it the milk currently packed in plastics moving into gardens etc. But the potential of course is way way way beyond that. Now Starting with number one and the geographical expansion, let's just turn and think about Americas again. Because it has been quite a journey for us. We, as some of you remember and seen as we decided back in 23 to establish a new plant in US. And that is on the back of a position we've had in US for actually for 20 years. We came to North America in 2000, yes, and supplied North America with plants in Canada, our big Montreal plant, and also the plants in Mexico and the Caribbean. In 23, we decided we need a plant inside US, and then we decided to establish a plant in Arkansas, Little Rock. In September of the same year, we announced that we're going to put in another line in that plant because we saw increasing demand around our services, our packaging offerings, and generally an opportunity in the market. In April of this year, we had the inauguration of the plant. The plant, I can happily say, was built, constructed and made in time and on budget and has been up and running ever since and we are ramping up and as you have heard earlier we're now seeing the fruits with the plant turning a profitable business already here in Q3. So the demand actually in America is very clear. And if you think of it, we have been growing since 2020 on an average 15% a year. That's 76% actually growth in the America's business in a market, in a stable, mature category such as milk and juice. So we have seen that there is a demand for what our services and for that reason we have also taken the step now to announce the decision that we are going to build, extend our capacity with the third line in Little Rock. Allowing us to drive our market share, continue on the growth pattern we've been on, allowing us to establish a much broader portfolio than we had before, simply given that as equipment gets, the manufacturing plant gets more and more full with existing orders, we need to have a broader setup to be able to offer a broader portfolio. And that is what we're going to do with the third line. So, what is very fundamental is that with this third line that we are actually putting in place somewhere a year ahead of what we had originally thought. But with this we confirm again that we will reach our targets as presented on the CMD back in 24. The mid-term target as well as the long-term target. This will enable us to drive, as I said, increase our value share, our share wallet with a number of our customers as well as increasing our market share in general in America. Because of the product mix, though, in America, which is in the third line will be primarily focusing on smaller size packs, including anywhere from school milk size and upwards. For our large customers in the US, they always have a mixed portfolio in their sales, i.e. from very small ones to the larger half gallon sizes. For us, establishing a third line enables us to get a higher share of wallet with them, supplying them the full portfolio and hence become a better and more valuable supplier to the industry and to our customers in general. So although we have a run rate because of the product mix on the third line, which is different than what we have announced on the first line, we're also going to see that with this it's accretive to the group and it's certainly very, very strongly supporting the group's industrial presence in It would also mean that we will have a higher level of flexibility in how we run operations in America. We will have a higher level of operations with line 2 and 3, which will allow us to ramp up line two at a faster pace because of line three than without line three. And that has to do with product mix and how you move products and sizes, et cetera. Very important is we are building line three because we have the commitment, full commitment on that line from customers in US. So the line three acts both as an industrial strategic investment. It has the full backing of customers and it is definitely accretive to the group and will strengthen our overall position in US. Now back to our results. And as you will see, we have a revenue that is down due to the currency effect in US. On an organic level, we are up by 1.2% and up by around 2% for the full year. We have a strong performance, which is both in the quarter and of course in the year but in the quarter very strongly driven by the development in US. And remember we have a negative currency effect that we'll address later in this period. All in all We are heading now at 17%. And for those of you who recall our capital markets day targets, we did say 15 to 17 mid-term targets. So it's a very healthy level for us to be at in this period here. There is a one-off, though, which has to be said in EMEA of 1.5 million, which is also part of why we get a positive one of 1.5 million. With this, as I said, this is actually the highest EBITDA we've had to date. And we are very excited with what that brings to the future. So with this, I think I'm going to hand over to you, Bent, on the financials.

Thank you, Thomas. From financials to more financials, which is fun today. Let's jump straight to it with EMEA. What we can see here is that we are delivering a revenue of 206 million euro, which is 5% down compared to last year. But if we analyze the performance, the underlying performance, we can say that we do have a resilient performance despite continued soft consumption. Now, why is that? If we look at our PurePak revenues, they are stable year over year. So what we are seeing despite the soft consumption, we continue to increase market share. Specifically for this quarter, we are regaining our business in Mena as fresh dairy is strengthening in that region. And for the aseptic business, we are growing by taking market share and basically growing with our customers. If you look at the key contributor to the revenue decline, it's actually related to filling machines. We are commissioning around the same number of machines this quarter compared to last year, but the machines are smaller, so we have a negative mix effect. That actually explains around 60% of the revenue decline. So if you move on, as we have reported before, we still observe competition in the role fed segment. And that is happening both in Europe and in India. In Europe, it plays out through lower volumes, albeit the pace has slowed down. So we see a positive development in the Rolfed area, because we see that the trend is slowing down. In India, it plays out with a margin squeeze because it's a crowded place. We are growing organically 19% in India with our role-fed business. When it comes to profitability, we are reporting 36.7%. That is up 2% compared to last year. That comes from improved pricing and improved mix in PurePak. And we also have this switch from PurePak to RollFit, which is also contributing to the positive mix. And Thomas already mentioned the one-off, which is in Europe, which also impacts these results positively by 1.5 million. So in conclusion for EMEA, resilient performance despite continued soft consumption. Over to America, the growth journey continues with revenue growth of 11% or 80% on a fixed currency basis. We are still seeing the interest and the demand in our products, so the growth in revenue is volume, carton and closures, and it's enabled by two things. Obviously, we have the ramp up in the US, but we're also seeing improved productivity in the assets in Canada and in combination that is then enabling this growth. Also in America we have a negative revenue impact in regards to filling machine. So it's the same explanation here. We have a mixed effect. In these quarters we have commissioned school milk machines and they are smaller in size and also then smaller in revenues. If we move to the EBITDA, we see a very strong growth of the EBITDA, 21% growth of the EBITDA up to 21 million euro with a margin of 24%. In addition to the top line growth itself, we have positive mix effects, but we also do see the benefit of improved asset utilization and we are leveraging our fixed cost base. It's also, of course, as Thomas mentioned, very proud that this is the first quarter with positive EBITDA in Little Rock, a milestone for us. We are very, very pleased with that. The ramp-up continues, and it's obviously better than last quarter. But we obviously would have liked to see an even faster ramp-up than what we have seen. When it comes to the joint ventures, we have an EBITDA or share on net income of 1.4 that is actually declined from 2.1 and the explanation for that is a softer demand and a change in consumption habits. But overall, the key message is that we do have improved utilization that enables growth in America. Let's take the group perspective and start with the net revenue mix. So this is 7.4 million euro and that is mainly driven by one, the growth in America and the positive mix and pricing effects in EMEA. When it comes to raw material, this is again where we have the one-off, which is positive, and then we have a negative effect of 0.6 for the underlying raw materials. That comes from board price increases, ALU price increases, even though the PE has softened year over year. Our operating costs are mainly explained by salary inflation of 3% and also the ramp up in Little Rock which also is affecting the operating cost level somewhat naturally. The rest of the fixed cost base in the company remains rather stable. The last bridge element, we have already mentioned joint ventures and the FX, which also Thomas talked about, that is the result of the 6% weakening of the dollars versus the euro on an average year-over-year basis, leading to the 70%, which is on par with the best we have done. Let's move to the cash flow, which is probably the most exciting part of the financial this time, because we also are not only reporting record profitability, but we are also reporting record cash flow generation from operations. The cash flow from operation is 55 million euro. It's not only driven by the profitability, but it's also driven by the improvement in working capital. This element is, to a large extent, driven by timing of accounts payables. That can go up and down between quarters. It was quite low last quarter, and then it's higher. So this could vary a little bit up and down, important to notice. But we also have an underlying improvement inventory in Europe from our working capital project. Also here, we are seeing the ramp up effect of Little Rocks. We are also building working capital, obviously, as a part of growing the top line in the US. Our cash flow from investing activities is 11.5 million euro. We are still having 2.4 million in investment in Little Rock in this quarter. The rest is our replacement program in Europe. while filling machine investments are lower than lesser because most of the project are sales rather than lease and then it doesn't impact the investment line. Cash flow from financing activities is also 11.5, nothing special there, which brings us to a net debt of 272, which means that the cash bank debt has reduced 31 million euro quarter over quarter, which we regard as a rather solid figure. With this cash flow generation, we are deleveraging the company. As Thomas said, we are bringing the leverage ratio very close to our mid-term target of 2. This comes from not only the payment of the debts, but we also have improved the LTM EBITDA by 3 million euro. And the good thing with that is it enables future investment in our strategic initiatives, and it allows us to continue to pay healthy dividends. And if you check your bank accounts yesterday, you received dividends in total 21.5 million euro. This comes from the second installment of 2024 and also from the first half result of 2025 as we are in this transition year from annual dividend payments to semi to try to try two payments per year. If you look at the right hand side, it's a little bit difficult to see, but the curve is going upwards on ROCE. So we finally are seeing improvement of our return on capital employed, as we have talked about in earlier quarters. And that is coming from the fact that we are finally making profit from our Little Rock investments with the capital that we already have installed there. We have so far invested 86 million dollars in Little Rock. We have 42 million to go and we expect that around 6 million of those will come this year in Q4. So in summary, the financial position is really strong. And we are continuing to leverage the company despite the investment program. So this concludes the financial section, which was actually quite great to present.