Flsmidth & Co A/S B Shs

Good morning everyone and welcome to the annual report release call. Today here with me is presenting Roland Andersen, our Chief Financial Officer and I'm the new CEO for FLSMIT, Toni Laaksonen. Briefly about my background. I have a 20-year industrial background from different companies and most of that from the mining industry and before joining the group I was a CEO of a stock listed company in Finland. Before the CEO position, I was with the service business line in FLS and spent like eight months over here leading the service team and now taking over the CEO position. I'm very excited to start working with the entire group across the world. Then a few strategic highlights from last year. 2025 was the big milestone in the FLS history. One big transformation in the company was the divestment of the cement business. We became a pure-plane mining supplier for technologies and services, which is a huge milestone for the whole company. Then on the other hand at the same time we were strengthening our offering commercially both with our service business line and products cyclones and valves. With both businesses we saw a solid organic growth throughout the year which was then strengthened in Q3 and Q4. Then on the other hand, with the products business, we saw an uptick during the Q4, but otherwise the market was pretty soft during the year and subdued. We saw certain engineering activities, but it was not a steady market as such, which we had with services and PCB. Therefore we continue to de-risk the product business and now we are more focused on the product side and we are not anymore as a project supplier as such. Then on the other hand from the financial point of view we had a very solid EBITDA margin. We continue to improve that compared to last years. We hit almost 16% as a total for the full year. And then from the free cash flow point of view, excluding the M&A activities, we had a strong year hitting 640 million DKK. So solid financial results as such. Then on the other hand, we introduced the share buyback program last year, which is also a big milestone for the company. It was in total 1.4 billion DKK, which is a very big commitment from the company to support the shareholder value. So several strategic highlights throughout the year and milestones for the company. Then from the sustainability point of view, we had good success in many fronts. And to take a few highlights from the picture, I would say that we still have improvement opportunities with our safety. We are aiming for zero harm and we still have 2.3 as an average injury rate, which is too high. We are making all the proactive actions. to take the number down continuously, and we have certain global programs which we are driving to get to the zero harm level. Then on the other hand, one improvement area is definitely the scope three, where we are doing a lot of work with our equipment and technology range to make improvements. But then the other aspects I would say that we were developing well throughout the year and now for this year we will have a new baseline when the cement business has been divested and we are just fully focusing on the mining technologies. Then a few words on the market conditions. As mentioned about the products, the market has been subdued. We have been de-risking and focusing more on the product business instead of the full-blown big projects, and that's of course impacting us. But then on the other hand, with the services and PCV, we have been seeing stable development, and we see that that development continues this year. The commodity prices have been increasing, especially copper and gold. Gold prices being very high, but then still that's not impacting on the customer decision making in the short term. Of course, the long term decision making might be impacted, but that's not meaning that they would release any large scale mining projects in the short run. The engineering activity has been very high in some countries, but of course that means that the engineering activity covers both brownfield and greenfield sites and the majority of the activities are with the brownfield operations at the moment. The customers are not sanctioning the greenfield projects as fast as maybe people would like to see from the market point of view. We believe that in Q4 or in 2027 we would see more action related to the project business. On the cold side, we have been seeing certain smaller projects being activated due to the high cold price. And there we see certain potential, especially with the smaller equipment deliveries. Although the cold sides do not consist of major projects as such. Then deep diving into the business lines and starting from the services, the Q4 results were very strong with service order intake up plus 14% organically compared to last year and then revenue up plus 15% compared to 24. So very solid quarter and there with services we were gaining backlog which was not delivered in Q3. So Q4 was catching up with our supply chain and catching up with the backlog, which resulted in very healthy revenue level in Q4. Then when looking at the total year, the organic growth was plus 4%, which was The normal level, I would say, in that sense, that's something that we expect as a yearly development for the business. Revenue-wise, we were up plus 9% as a total. So healthy results from the revenue and order intake point of view. Growth markets were specifically in South America and Africa. Then from the margin point of view, an excellent end for the year driven by the high revenue results. We achieved more than 20% EBITDA, adjusted EBITDA margin, which is on the high end, I would say, for the service business line. So a clear uptick there and the revenue level was supporting it. From the product's point of view, the year was subdued, as mentioned previously, so order intake organically declined for the full year, minus 5%. Certain uptick was visible in Q4, there we were gaining a few orders more than in a normal quarter, but then when balancing out the quarters, the organic growth was negative. From the revenue point of view, we were declining minus 28%, which also demonstrates that the market activity is not the highest at the moment. From the profitability point of view, good development in Q4 as we were gaining up with our deliveries and increasing our revenue, that resulted in a healthy result compared to the previous quarters and we were on the black numbers. So this was an extremely positive quarter in that sense, but then when balancing out the full year, we were still in negative figures. So there is still room to develop on the product side. With pumps, cyclones and valves, an excellent year from the growth point of view. Plus 12% order intake growth organically and the same with revenue. So we were driving consistently the business up and that was also helping us with the results. And we have been seeing continuous growth with the PCV business throughout the quarters. So very healthy activity over here. and of course the deliveries are smaller, focused on the mine improvements and replacements, and therefore this business has been more active during last year and this year. Also, the profitability remained at a very good level with BCV. So 25% was the entrance result in Q4 with our margin level, which was then a bit above compared to the previous quarters. So on average, very good development with our margins with pump cyclones and valves. And then I hand over to Roland.

Thank you for that, Tony. So let's just have a quick glance of the consolidated financials revenue of a bit more than 4 billion, gross profit at 34.6. And with a significant reduction in SG&A, we end up with an adjusted EBITDA margin for the group of 18%. Below the line, we decided to take an impairment charge on our deferred tax assets in Denmark. This is predominantly due to the macroeconomic and geopolitical developments around the world. And it's a pure accounting, non-cash impairment charge to our P&L. The tax losses live indefinitely and are in no shape or form lost. And when also finalizing discontinued activities in connection with the handover of our cement business, profit for that period was minus 282 Danish million. Our gross margin remained high through 2025, predominantly as a result of mix service and PCV business was a relatively high part of our revenue throughout the year. So a healthy end to the year of 34.6% gross margin. SD&A cost for Q4 is 19% down on the same period last year. both the drop in Danish kroner, but also a reduction in SG&A as a percentage of revenue. And that indicates that we are moving forward on rightsizing our organization and moving into our new operating model. Most of the last savings have been taken in the support functions. And then we have ramped up and invested a little bit in the commercial front end, both in our PCV business, but also bits and pieces in the service business. And adding all that up, a relatively high revenue quarter in Q4. healthy gross margin, SG&A at a lower level, means an 18% adjusted EBITDA margin for that quarter. This is by no means a run rate number. It's an exceptionally good quarter for us and, of course, a home run in terms of ending 2025. The higher revenue towards the end of the year in Q4 also means that we were invoicing and had a relatively higher trade receivables level New Year's Eve. Our product business line with a higher revenue, we're finalizing a few projects, and that means that we reduced our prepayments from customers and also a bit on work in progress. All in all means that our working capital in Q4 compared to Q3 went up by 573 million. And despite a relatively high EBITDA, that's partly offset by the uptick in net working capital, leaving us with a modest cash flow from operating activities of plus 3 million Danish kroner for Q4. And the free cash flow adjusted for M&A activities was plus 70%. Just a quick recap of the P&L. So 14.6 billion revenue, adjusted beta margin for the year 15.9. And a modest profit for the year of 8 million Danish kroner, which reflects that we have lost a bit more than 700 million on discontinued activities. So the cement business that is now finally out of Eiffel-Schmidt. and also the tax impairment charge of 600 million Danish kroner. Cash flow from operating activities for the year ended just shy of a billion, roughly in line with what we had expected. Our share buyback program that we launched last year is about to come to an end. By the end of Q4, we had a leverage ratio of 0.8x. And just last night, we announced an intention to launch a new share buyback program, given we get the authorization from the AGM by end of March. Then we intend to launch it after we have printed our Q1 result in May. And that also means that we are returning quite a fair bit to the shareholders in 2026. In 2025, dividends, ordinary dividends were 461 and share buyback of 1.4. This year, we will propose ordinary dividend of 231 and a share buyback program of 1 billion. This year, we have introduced a new way of guiding. We are done with the transformation and no longer see the need for directly guiding on our revenue in terms of Danish kroner. So we will convert to guiding on organic revenue growth. Organic means fixed currencies. And for the group, we're guiding 2026 at minus 1 to plus 4% organic revenue growth. And we expect to post an adjusted EBITDA margin of between 15.5% and 16.5%. A little bit of underlying flavor or assumptions to that guidance. Underlying, we expect the service business line to grow 2% to 5% organically. The product's business line will decline by minus 5 to minus 15. Sounds like a wide range, but it isn't really. It's plus minus 150 DKK or so. And that can easily happen when you execute larger product bundles or smaller projects. either because of delays on our side or changes in scope and timeline and so on on the customer side. So hence why that span. And then we expect our pumps business to post an organic growth rate of 4 to 7%, and that gives us the full guidance of minus 1 to 4. For those of you that like to do the reported revenue growth in Danish kroner, We can say that with the FX effects as per Monday, 16th of February, our DKK revenue growth would be about minus 2 to plus 3% growth. On the margin side, we came out of this year at 15.9. We'll guide next year 15.5 to 16.5% EBITDA margin. We'll adjust for about 100 million Danish kroner equal to around a percentage rounded, one of items predominantly related to our ERP implementation and principal company model. And on the other hand, as some of you recall, we are selling our former corporate headquarters in Denmark. And that cash comes in as extraordinary other operating income in Q1. And that means an extra plus 5% that we will also adjust for. And that means when we do that, the expected reported EBITDA margin will be around 19% to 20% margin. And with that, I'll give it back for a few comments to Toni.

All right. Thanks, Roland. Excellent results, I would say, last year. And I also want to use this opportunity to thank our employees for their efforts. Great contribution for the results. And then also our customers. I want to thank them for their collaboration with us. So a good year indeed for FLS. Then a few words on this year and the way forward. So, of course, we are now in a good position from the company point of view. We have cash credit limits available. Financially, we are in a strong position, which then means that we can start investing in the growth journey. So, we are looking for organic expansion opportunities actively, but on top of that, there are selective M&A cases, which we would like to explore this year, and we have been actively developing our pipeline. Through this, we want to be closer to the customers to support them even more in the future and help them to improve their operations. Then at the same time, we continue improving our customer offering. So we are looking into the portfolio, how we can drive that forward so that the miners can improve their productivity, reliability and sustainability by utilizing our technologies and services. Then on the other hand, it's super important that our supply chain and delivery experience is great for the customers and therefore we are continuously driving forward with our supply chain improvements, accountability within the organization, but at the same time securing that we are cost conscious when doing the exercise and securing that the cost level remains competitive throughout the organization. Through that, we want to ensure that the margin stays at the same level or even higher when moving forward based on our forecasts. And then, of course, we want to ensure that the growth journey continues from here. Then we of course want to balance the investments and so that we are utilizing a certain amount of money into our internal and external growth opportunities. But at the same time, we want to have the shareholder returns secured so that we have the combined financial flexibility for both company and the shareholder purposes. So those are the key teams when moving forward. And then, of course, we are continuing to do the strategic planning for the company so that we have the long-term plan available also for the external markets. And based on our current expectations, we will host the Capital Markets Day in September, when we would then release the full strategy for the coming years. And now it would be time for the questions.