Elopak A S

Good morning and welcome everybody to this third quarter results presentation. For ELOPAC, my name is Christian Hedde. I'm the head of Treasury and Investor Relations. Today's presentation will be held by our CEO, Bent Axelsen, and our CFO, Ola Bjørø, and will last for around 30 minutes, followed by a Q&A session where the people here in the audience and people participating online can ask questions. So, with that short introduction, welcome, Bent.

Thank you, Christian. So good morning. We are very happy to light up October with our Q3 results. So we will basically jump straight into it with the business highlights. We are reporting 308 million euro revenues, which is a growth of 6.5%. EMEA grew its revenues from carton closure by close to 11%. America delivered revenue growth close to 6% despite the supply chain constraints on board. This has resulted in an EBTA of around 52 million euro with a margin of 16.8%. This is actually the best EBTA so far in Ellepark. and I think that is very encouraging given the challenges in the market the headwinds and the disruptions that we've been dealing with this quarter And despite our active investment program, we have a strong balance sheet and the leverage ratio is stable at 2.2, so dear banks. And lastly, we want to give some organizational updates. Håkon Valdahl will assume the CEO role as from November the 2nd so we are very excited to get him on the team and we are looking forward to the continued journey with the implementation of repackaging tomorrow Reinhard Dressmann has been appointed interim EVP Americas as Lionel Ettedgui has decided to pursue new opportunities after seven years in the company. I really want to thank Lionel for his excellent contribution in America, contributing to the profitable growth of Ellopak. and Reinhardt with his 35 years experience will ensure continued focus and momentum across the commercial and operational priorities in the company. When it comes to the permanent solution for EVP Americas, this process is underway. So more into the figures. If you take a look at the group, We continue to grow revenues and EBTA despite the demanding environments. And starting with America, I'm very impressed by how our teams have responded, working hard to secure board supply and under the commitments to our customers. Further, it has been a priority to rebalance our cost base as a response to the headwinds in the beginning of the year and also to address pricing given the raw material increases resulting from the Middle East conflict and we are happy to see the effect of all these actions in the quarter when you really see that in the figures. At the same time, we have stayed consistent with execution of the strategy and ensure that short-term priorities are not coming in the way of the longer-term development. If you take a look at the revenues, we are particularly pleased with the development in the eastern and northern part of Europe. where we see momentum in pure pack both in the UHT so the ultra heated the aseptic milk and fresh dairy segment and what you're seeing here in this quarter is that recent filling machines in commissionings are supporting this growth as the utilization rates are increasing We also continue to grow Rolfed with new customer business, particularly in Poland. In America, we continue to grow revenues despite the board constraints, and this comes from Selling filling machines, but maybe particularly interesting is that with that increased installed base we have in America, we are generating more revenues in the after market. This is a recurring revenue stream. When it comes to profitability, it remains strong despite raw material cost increases. The surcharges in Europe have really helped the situation and mitigated the impact in this quarter. In America, the disruptions held back reported and I would say profitability temporarily, and Ola will give some more color on this in his part, but the underlying profitability remained strong. So if we exclude the impact of the force majeure, the EBTA margin would have been around 17.5%, which is a really strong percentage. So I think we can say that in this quarter we clearly have demonstrated the resilience of our business and the effectiveness of our proactive responses. Every quarter, we take this slide and remind about the three strategic priorities. And as I said, even though we have a lot of short-term challenges on our plate, we are still staying focused with our strategy execution. And this time, we would like to take a look at strength and leadership in core strategies. Both in Q2 and Q3 we saw good development in our core business. PurePak volumes have grown year over year across several major European dairy producers. This is particularly significant because it's a mature market. And as you know, filling machine is a leading indicator of future growth. When you're a customer and you sign a filling machine with Ellepak, you have around a decade perspective. So you choose our machine, you choose a solution, and both the customer and Ellepak has a common interest to increase the utilization rate of that machine. So that will, one, it will increase our share of wallet with the customer, but also our solution is also helping customers to grow their market share because it's a good solution. So why are they then choosing us? One, and particularly in the ambient segment, Pure Pack is an iconic and a premium format with really a distinct appearance compared to the normal formats in the ambient, which are the brick shapes. So it stands out. It's preferred by the consumer from many consumer studies, which makes it possible to upgrade the brand and build the brand for our customers. Secondly, our machines are modern and they are reliable. And if you top that up with a very close customer relationship that we have our customers and our ability to work with them in a flexible and agile way, I think that is the recipe of success. So if you take Germany as an example, here we are growing in a stable market. It's the largest dairy market in Europe, accounting for 20% of the milk production. Here we are growing with leading producers, where actually the filling line ramp up gives this increased share of wallet and market share increases for our customers. And the fact that when you're leading dairy, when they are choosing our solution, it's more important than that single contract because it really validates the proposition. It increases the visibility of the pure pack format in the shelf for UHT. and it also provides a strong reference for future growth. So I really think that this is a good example of what strengthening leadership in court looks like in practice. Now we will look more into the figures and I would like to invite Ola on stage to present the financials.

Thank you very much, Bent, and good morning to everyone. So as usual, we will start with EMEA. So what happened in EMEA in the quarter? Well, we are pleased to see that the momentum we reported in the second quarter has continued also into the third quarter. As we reported in the second quarter, we see growth in the UHT dairy segment, but this quarter we are also seeing that we are growing within the fresh categories. It's mainly coming from the central and eastern European countries, and Germany in particular, so that's a continuation from what we have seen earlier in 2026. As Bent pointed out, it is a result of a systematic work with some of our key customers where we have expanded the installed base of filling machines recently, which are now ramping up fully. We do also have a few examples where some of our key customers, they have one market share within their own segments, leading to higher sales volume to those dairies. While we are seeing good momentum in the Central and European countries, we are at the same time also experiencing somewhat intensified competition in the more Southern European countries. And the same goes for the MENA region. When it comes to Rolfed, it is encouraging to see that the return, the growth, sorry, that we reported in Europe earlier in 2026, that is continuing also into the third quarter, while Poland continues to be the main driver. And that means, all in all, that carton enclosure revenue grew by almost 11% in Q3. That's not entirely driven by volume increase, but it's also driven by the customer surcharges we implemented mid second quarter, that we are now seeing the full benefit of. and also to some extent the build-up of customer-specific finished goods, also referred to as IFRS 15 effect. On the equipment side, the commission activity is steady year on year. However, what we see is a shift towards more lease arrangements rather than direct sales, and especially within our small and mid-sized customer segment. Meaning it is impact the equipment revenue recognition in the third quarter, meaning we are reporting a somewhat lower equipment revenue in the third quarter compared to Q3 last year, but that's mainly due to the shift from direct sales to more lease arrangements. All machine commissionings in the third quarter were new installations rather than replacements, meaning, and also as pointed out by Bent, we are adding LLPAC filling capacity to the market, which is an indicator of continued growth. Quickly back to the customer surcharges, which we implemented mid Q2. In the second quarter, we reported that it partially offset the elevated raw material prices, while in Q3, we see the full benefit of the surcharges, meaning that we are now offsetting the increased raw material prices following the Middle East conflict in Q3. However, the margin in percentage is naturally impacted, which brings the EMEA EBITDA to 20.4%. If you are to exclude the Middle East impact, the percentage or the margin in percentage would have also been stable year on year. If we look at the EBITDA year-to-date in EMEA, we are reporting a decline, but that is because of events that happened during the first half of 2026, including a one-off in Q2 and also the second half impact of the Middle East conflict. But we are happy to see that we in this quarter in EMEA is reporting an increased EBITDA. So turning to Americas, where I will give some color on the supply disruption, how that has impacted our financials in the region in the quarter. The disruption has impacted both top line and profitability. Our team has worked hard to secure board supply, and we have implemented several temporary measures. However, the disruption has limited volume growth as there's still a supply constraint, which has led to flat carton and closure revenue in the region in the quarter. and I will get back to this later also. When it comes to the commissioning activity in the quarter, we have had a high activity in the third quarter. We have commissioned several school milk machines and that's supporting the customer onboarding of a head of the startup of the third production line in the US, which is intended to school milk and is planning to be up and running in the second half of 2027. The expanded installed base of filling machines in the region is also leading to recurring revenue growth from the aftermarket. Quickly on the market conditions in Americas. We have reported for a while decline within plant based. We have seen signs in the market now that it looks to stabilize. However, there are no clear signs of recovery within that segment. While the more traditional dairy segments, we still see a high demand. I said that the profitability is impacted by the supply situation in Americas. So to maintain supply and delivery on our customer commitments, we have implemented temporary measures. However, that has led to somewhat increased bore costs in the quarter. It has led to some somewhat increased logistical costs in the quarter and also to some extent production inefficiencies. As we communicated in August, we expect most of these incremental costs to be covered through insurance. And in the third quarter, we have started to recognize some insurance compensation, and we expect more compensation to be recognized in the periods to come. However, we have had a negative impact in the quarter. We consider that to be a temporary impact. In terms of euros, the impact in the quarter is 2.6 million euros on the American profitability. But as I said, and that's the key message here, is that we expect most of the incremental cost to be covered through insurance. Hence, we consider this to be a temporary impact. How is this going to play out in Q4? Well, it is too early to conclude, but we expect it to be less significant than in Q3. If you are excluding the impact of the supply disruption, the EBITDA margin would have been around 23%, which is more in line with normal EBITDA levels in America. A few words on the tariff situation before I move on. In August, a 50% tariff on certain goods was implemented. However, the good news is that boards exported from the US to Canada and blanks exported from Canada to the US are still exempted. Meaning the ELOPAC exposure relates to our closure business. We have implemented mitigating actions. We consider the total financial exposure to be limited. However, it could be that we will see some near-term impact in Q4 and maybe also in the beginning of 2027. But not very significant. No CFO presentation without a bridge. So if we are moving to the EBITDA development in the quarter, we have introduced a separate bar illustrating the impact of the supply disruption in Americas. And as I said, it amounted to 2.6 million in the quarter. And again, this is net after insurance coverage, and we expect this to be a temporary impact. Net revenue mix and raw materials must be seen in combination. They are both impacted by the Middle East conflict, including the raw material prices and the customer surcharges, in addition to the volume increase we are seeing in MEA. In 2026, we have continued to work on our cost base. And in this quarter, we see a positive impact of 3.6 million. And it is encouraging to see that the measures are delivering on the intended benefits. And this brings the EBITDA to 51.9 million, as Bent mentioned, the highest reported EBITDA to date, and a margin of 16.8%. And if you are to exclude additional costs resulting from the supply disruption, the margin would have been around 17.5%. And it's also worth noticing that we haven't recorded any adjustments to the EBITDA this quarter. Before I move on, it's also worth noticing that Q3 typically is one of our higher margin quarters throughout the year due to a few reasons, and I can mention a few. That's because we typically have a high demand for our higher margin products during the summer month. And in Q3, we typically also have fewer public holidays compared to the other cores, which are allowing us to run more efficient product rents. Looking at the cash flow movements, the reported net debt was stable during the quarter. However, around 10 million, the FX impact relates to a translation effect on our green bonds as the NOC has strengthened compared to the Euro this quarter. We have hedged this through cross-currency swaps, but as the swaps are not meeting the definition of the net debt, it's not reflected on the bridge. But the key point is that the underlying development is better than what's presented on the slide. So maybe slightly more complicated than it needs to be. Cash generated from operations amounted to 36 million euros in the quarter, out of the 15 on capex. Before I move on to the CAPES, I will continue to comment on the cash flow from operations. So it's supported by the profitability. We see an increase on the working capital position as we have claims to the insurance company impacting the net working capital in the quarter. And we have normal Q3 levels of taxes paid. Now on to the cash flow to investments. Out of the 15 we see on capex around 10 million relates to EMEA. We are investing in a new coating line that's also described in the IPO documents and also repeated at Capital Markets Day. So that's part of the 10 million in EMEA. We are also replacing a converter in Europe, both allowing us to increase our production efficiency long term. while the remainder five is related to the third production line in the US. When it comes to cash flow to financing activities, both lease payments and interests are in line with normal levels. Looking at our financial position, it remains solid, still at the leverage ratio of 2.2, also after the investments made during the quarter. Return on capital employed increased to 15.4% in the quarter, reflecting a high return on our capital base. On the US plant, we have invested so far 113 million US dollars and we expect to invest additional 15 million dollars before we have completed the build out to three production lines in the US. As also disclosed in our notes, we have a bond maturing in May 2027. However, we do not anticipate any refinancing needs as it is expected to be covered through our long-term debt facilities. And finally, On a happy note, a message to all of you who are Yellow Pack shareholders. Keep an eye on your bank account tomorrow because the first half dividend is on its way. So with this, I give the word back to Bent.