Flsmidth & Co A/S B Shs

Welcome to the Cure Call from FLS. My name is Toni Laaksonen and I will be presenting today with our CFO, Roland Andersen. We start from depth. So first going to the market and commercial highlights. On the service and PCV side, we saw very strong development with our organic growth. So in both business lines, the order intake was growing with double-digit numbers. With services we captured 19% organic growth compared to last year and with BCV 16%. So very strong development which reflects that the market activity remains high at the brownfield sites. Then with the products, we saw different developments. There the market is more like subdued and we didn't capture growth. The order intake was declining compared to last year, but still the underlying market activity remains positive. Then, when going to the revenue figures, our revenue declined organically by 7%, and that was driven by the timing and order mix based on the recent quarters. On the profitability side, we saw positive development compared to Q1-25, so our EBITDA margin percentage increased, and it was 15.2%. in Q1 and it was in line with our financial forecast for this year. Then with the cash flow we saw satisfactory development so the cash flow improved compared to last year so good year-on-year development and that was a positive sign for this year. Then a few strategic and corporate highlights from Q1 and one highlight after the quarter so The sale of the former corporate headquarter was completed and we received the cash from the deal and that was one major milestone for us. Then we had certain changes with our executive leadership team as we are gearing towards the new strategy and new period in the company's development. And then one positive milestone which is then reflecting the products, activities and the underlying market is that we received one repeat order from South Asia for one iron ore beneficiation project and we were awarded this in May 2026. So good development over there and reflects that there are certain underlying activities within the products market as well. Then a couple of updates on the ongoing investigation which we have with the potential non-compliance case related to sanctions. So as announced previously, we have identified a potential sanctions related compliance matter This is part of an ongoing internal investigation and it's related to the pre-contract tender materials which we have submitted to a limited number of projects in Kazakhstan. The case is only related to the tender materials. We have not signed any agreements. We have not delivered any equipment or services to these customers. These customer cases are not part of our sales funnel. financial forecasts and neither are estimates for this year. So they will not impact on our guidance and there are no material impacts on any of our businesses. We have informed the US and Danish authorities on the issue and the process is ongoing and the initial information has been shared as we want to be transparent and compliant with the case. and then later on we will do then the final filing of the case. Due to this, we continue reviewing and strengthening our compliance programs and risk management processes globally, and we want to ensure that we prevent similar actions happening again in the future. With our key sustainability targets, we were seeing mixed results in Q1, so certain positive development with our suppliers and scope 3 emissions. But then on the other hand, as one negative highlight, I must say that on the safety side, we saw a declining development, and this is definitely something that we wouldn't like to see with our figures. So safety will be a key focus area for us in the coming quarters, and we will strengthen our safety practices, policies, and policies when moving forward. All in all, the market conditions are pretty much unchanged compared to last year in Q1. And as mentioned, we saw positive development with our service and PCV business lines in line with the market development in Q4. So in Q4, we were seeing uptick with our orders, the same in Q3. and the dispositive momentum with the brownfield sites is continuing. So most of the miners are investing in their brownfield operations, which is then visible with our service and PCV business lines. Then, on the other hand, with the products, the market was relatively soft still in Q1, so no major changes over there. But then, as the commodity prices are at the high level, especially copper and gold, it means that the miners are assessing investment activities even to the greenfield sites. And therefore, the underlying demand might pick up in the end of this year or early next year. And that was also visible now when we booked that one order in May with the iron ore project. Then moving on to the business lines, starting from the services, as mentioned, order intake-wise, very strong developments. So the organic growth was extremely strong in Q1, but then on the revenue side, development was negative and it was primarily driven by the timing of the orders so most of the orders we received in the back end of the quarter and of course then we couldn't revenue recognize them in in q1 which was impacting on on our revenue and then on the other hand there were certain Mixed related things also which were impacting on the bookings on the revenue side. But all in all, we see that the positive development with our order intake is then reflected to the revenue in the coming quarter. So we don't see any major issues here. When it comes to the profitability, the profitability was lower with our service business line compared to the previous quarters, and that was mainly driven by the low revenue figure. So with normal revenue level, we would have had clearly higher profitability, so that was impacting on us. Then, of course, certain mix-related things impacted the Q1, revenue and margin level and so as well that the input cost inflation which we were seeing but all in all that the normal level which we have had for the service business line which is 19 to 20 percent EBITDA we expect that to continue in the coming quarter so this was not a big surprise to us that what was the profitability level. So this was in line with our budgeted figures. Then on the product side, the Q1 was low as described previously. So order intake wise we were down and as well as with the revenue. And revenue of course is something that we can estimate pretty accurately based on last year's like order intake So, the bookings continued in line with our expectations. From the order intake point of view, we saw this uptick already in May with that one booking, and we believe that the underlying demand is such that, especially with the copper and gold projects, we should see some positive development in the back end of this year. Then with the products margin, we saw positive movement. So we were at the zero level practically with the products business line. One big impact was that certain project goals were happening and therefore we were capable of releasing some provisions related to these projects and that created positive momentum. But we have been also doing cost initiatives to take the cost level down so that it's in line with the current revenue level and that that's helping us then from the profitability point of view. So we can be happy with this development with our margin on the product side. Then with PCV the strong development continued so like said significant order intake rolls. We were definitely gaining some market share with our pumps, cyclones and valves when comparing to the peers. Then with revenue, the development was stable and also with this business line, the bookings were done in maturity during the backend of the quarter. So we expect that the following quarters will be a bit better than from the revenue point of view and that we should see solid performance from the business line. On the margin side, PCEV was again very strong, so continued at the same level with the profitability, and we were really happy about this. So no issues over here, positive movement, and we expect the similar trend to continue in the end of this year and in the next quarter.

Okay, thank you for that, Tony. So the financial performance overview here for Q1, an order intake of 3.9 billion, a revenue a little less than 3.3 billion, a healthy gross profit and obviously a very large operating net income, which is predominantly the sale of our former head office in Valby in Copenhagen. And running through the P&L, that of course leaves us with a relatively high profit for the period of 985 million Danish kroner. The gross margin for the quarter remains healthy. This is predominantly the mix in a period where the product business haven't picked up in revenue yet and service business line and our PC&V business is 80% or plus of our revenue stream, healthy gross margin, and an absolute number lower than last year, predominantly driven by the nominal revenue level. Our next year cost continue to decline slowly but surely, so lower Q&Q, but also lower than the same quarter last year. that is a significant result from our simplification exercise and also the change to our new corporate model that now starts to sit more steady in the numbers. The adjusted pizza margin is improving to 15.2 compared to the same quarter last year on an adjusted basis and the nominal lumber here of course impacted by the sale of the Valby office. Networking capital is streaming up this quarter predominantly by inventories, so inventories from the relatively high order intake in both service business line and the pumps business. There's a bit of commodity inflation in that as well and the fact that the orders were back in load and then the Q01 means that now sits in in inventories and will be delivered over the remaining part of the year. And all this needs a solid cash flow for the quarter, traditionally a relatively low cash flow quarter, but cleaned for the Valby sale, a cash flow from operating activities of 103 million Danish kroner. This means that our leverage continues to be low 0.6x and that leaves us ample room to do the M&A that we want to do as we move forward. Our financial guidance for 26 is maintained and that means an organic revenue growth of minus 1% to plus 4% for the company. and an adjusted beta margin of 15.5% to 16.5%, and we are on track to deliver on that. The revenue bridge, a bit more flavor underlying how to get to minus 1 to plus 4%. Service business line unchanged, expected to deliver 2 to 5% organic growth. The product business line in revenue returns minus 5 to minus 15%. percent of organic growth and the pump business PC&V will deliver 4-7% organic growth for the full year. And if we then apply the forex rates from the 11th of May for the remainder of the year, by coincidence our organic growth will equal our reported growth for the full year 2026. And the EBITDA margin bridge here, not so much here. The adjusting items for PCM and ERP implementation is about a percentage point. And other operating income here is the sale of our value office that makes up the difference between the adjusted EBITDA margin and the fully forecasted EBITDA margin. When we are ready to invite all of you to Capital Markets Day it will be on the 17th of November and we have decided to welcome you all to our new headquarter offices in Copenhagen where we think we can host most of you guys. So we are looking very much forward to that event and that will be again on the 17th of November 2026. And with that I think we can move to Q&A

Thank you, sir. We will now begin the question and answer session. To ask a question, you may press star and then 1 on your telephone keypad. If at any time your question has been addressed and you would like to withdraw your question, please press star and then 2. Again, if you would like to ask a question, please press star and then 1 now. The first question we have comes from Chitsuna of J.P. Morgan. Please go ahead.