Kemira Oyj Ord

Good morning and welcome to Kemira's Q4 and full year 25 earnings conference. My name is Kiira Fröberi and I'm the head of investor relations at Kemira. Here with me today, I have our president and CEO, Antti Salminen, and our CFO, Petri Kastreen. This will be actually Petri's last and 50th earnings webcast as Kemira's CFO. Before we start the actual presentation, I would like to remind you that our presentation today includes forward-looking statements. Next, Antti will cover our full year 25 and Q4 highlights, after which he will discuss Kemira's group-level performance. After that, Petri will talk about business unit performance and cover financials in a bit more detail. And then in the end, before the Q&A, Antti will discuss Kemiras strategic focus areas in 2026 and also talk about our financial outlook for the year. But now, Antti, the stage is yours. Please go ahead. Thank you.

Thank you, Sira. Good morning on my behalf as well. Great pleasure to present Kemiras 25 results as well as, of course, in a bit more detail, the Q4 results. And the year was challenging for us. Markets were soft and uncertain, which is visible in the numbers. So really challenging market environment, which then resulted in a clear revenue decline for the full year as well as for the Q4. But I'm very proud of the organization. We managed to maintain our profitability in a very healthy level, operative EBITDA being over 19% for the full year, which I think is a really good achievement under these market conditions. And it enabled us to continue to invest into our strategy execution. So building the future growth for the company and basically In water business, we announced earlier in the year the acquisition of water engineering in North America, which is a really good platform investment into a fast-growing water services market in North America. We also invested or started an investment project in Helsingborg, Sweden, for building activated water. carbon reactivation capacity, which is part of our strategy to step into the fast-growing micropollutants removal market. And we have now been working for more than six months with the Cambridge UK based AI material science company, GUSP AI, to significantly accelerate and basically change the way innovation is done on this area, and also that work is focusing on this fast-growing micropollutants area. So soft markets, but good profitability performance, which enables us to continue to invest into our growth initiatives. Also, our customers have been very committed, and I have to thank all the customers for the long-term partnership and commitment. We had an all-time high net promoter score, which I think tells about our capability to be dependable and trustworthy also in the volatile uncertain market environments. And our employees continue to stay very engaged, which again is the platform on which we can build the strategy execution going forward. So despite of the challenging environment, putting a lot of stress and pressure on the organization, the organizational changes that we've been going through, the organization is committed and engaged. We also made good progress on our sustainability targets. This is in the heart and core of what we do and our strategy. So we increased our score in the GDP, both in water security and climate change, reaching the A- level, which has been our target. We increased our score in EcoBuddies rating. And we continue to reduce the CO2 emissions exactly according to our SBTI commitments. Again, really solid improvement there. And on February 20th, when we will publish our sustainability statement, we will publish the new positive water impact target, which will be then guiding our way forward in terms of water stewardship. Then, if we look at the Q4 in a bit more detail, so as mentioned already, the markets were soft and this market softening and uncertainty actually accelerated towards the end of the year. As a result, the Q4 revenues were 8% below the previous year and the revenues declined in all the three business units. Operative EBITDA margin, however, solid at over 18% and actually increasing in packaging and hygiene solutions where basically we have continued the self-help program to improve the underlying profitability of the business and results are visible there. the strategy execution continued as I already mentioned and actually accelerated during the Q4 so the water engineering acquisition happened in Q4 and then we were working during Q4 on the first bolt on acquisition on this platform Aqua Blue a company which we then finalized the acquisition in early January So this is first in the row of several such bolt-ons that we are planning to build on the platform of water engineering. And we have a really healthy pipeline, which we are working on. So basically kind of executing a programmatic acquisition-driven growth in the water business there. And then the latest announcement just a couple of days ago announcing the acquisition of Seedra Wasserhemi in Germany. And this is then strengthening our position in the most profitable and resilient part of the business, i.e. the coagulant business in Europe. So basically building on the core, strengthening the water solutions business core part and strengthening our position in Western and Central Europe. So market softness accelerated in q4 but we accelerated also our actions to to continue to invest in the future growth of the company uh revenue as you see uh basically again Just the numbers kind of proofing the acceleration of the softening of the market towards the end of the year. And it's good to remember here that there's also quite significant FX impact in these numbers and Petri will soon elaborate a bit more on that. And then looking at the profitability, healthy over 18% profitability, as I mentioned in the Q4. Q4 typically is the weakest quarter for us. There's the underlying seasonality of the businesses. You see it in the previous years as well. So under these conditions, I'm happy about the ability of company to maintain this level of profitability. And especially happy to see that our self-help actions in the packaging and hygiene solutions are bearing fruit, and we have been improving the profitability of that business. there's quite some items affecting the comparability in the Q4 totaling more than 30 million euro mostly coming from the restructuring and streamlining costs so working actively to basically balance the softer top line and keep the profitability on a healthy level and those costs are there and again Petri will soon elaborate a bit more on those and it also included then the transaction cost of the water engineering transaction and then as a result of these all these the full year 25 earnings per share totaled 1 euro 18 euro cents And if we then look at, finally, the financial long-term targets that we have set so clearly, we are below the organic growth target driven by the soft demand from the markets, but we are within our target range both in terms of operative EBITDA and return on capital employed. Of course, the capital employed going closer to the target threshold There you see clearly the impact of the acquisition of the water engineering, which is then basically increasing the capital employed there. But with this, I will pass it on to Petri, who will elaborate a bit more on the financials for the very last time for Kemira.

As Antti said, we made good progress in our strategy execution during the year and also during the first quarter. The other headline, I think, from this report, of course, is that the market has been weak, but we have been able to defend and protect our profitability quite well. I'll go directly to the variance analysis next. Headline revenue decline, 8%, really three components that Antti already mentioned. It's all negative now. Volumes were declining. Negative FX impact mostly. It's the weakening of the U.S. dollar, which everybody knows about it and everybody has paid attention to it. But, yes, it has been impacting us quite severely. And also a little bit on the product pricing as well, about 1% on average for the quarter. Of course, these are the same components that impact profitability. In addition, there was a little bit of a higher variable costs impacting primarily our fiber essentials, and I will come back to that when I talk about the business unit comments. Fixed cost savings that Antti already alluded to regarding packaging and hygiene solutions where we really have had headcount reductions. But obviously, there have been fixed cost saving actions throughout the company that we have been doing to really protect the profitability during the quarter and for the year. Full year story, same components again. Of course, there you have the addition that there is still the tail in the comparison period of the oil and gas business. So if you eliminate that part, the comparable decline 5%. And again, biggest contributors being the volume development and the US dollar weakening. Then if we look at the big year in totality, And we look at sort of the various components. Obviously, it's clear that the volume decline is more impactful during the second half of the year. So there was an acceleration in the business decline. And again, I will come back to those during the business comments. Sales prices actually have been relatively stable over the year. But in the first part of the year, the year-on-year comparison was quite negative. But if you look at the one-year comparison, meaning Q4-25 to Q4-24, it's 1% decline. So overall, we are in a pretty stable pricing environment. It's really a volume issue that we are dealing with. And, of course, this slide actually tells the same story. Prices and variable costs have significantly stabilized during the last four or five quarters. So you'll see that there's a fairly flat line when we had this huge peak during the COVID and supply chain problem years. Energy costs were sky high in 21, 22, but we are sort of putting that period of time into history and we are now in a much more stable environment. And our crystal ball, as far as we can say or see, doesn't really indicate much of changes to this. I mentioned this comment after Q3, but I do it again. So it's really a volume game now for us. Volume increase is the key to driving up our profitability now. And for us, that is largely market dependent. And it applies to all of our business units. We have capacity available in most of our plants. And so any additional volume we can progress or process without really adding any fixed costs to our structure. This means that if and hopefully when the markets improve, the operating leverage will help us with the bottom line. Having said that, you'll see that in the assumptions, we are not yet foreseeing really a market recovery at this time. Antti mentioned the items affecting comparability. We are taking action because of the lower volumes. So we're taking action on our manufacturing assets. We're ramping down our production entirely in our T-SPORT UK site, resulting in an asset write-down, restructuring, and closing provisions. We're also making an efficiency and automation investment in our Botlex site, resulting in a reduction of manual work and there are related restructuring costs related to that as well. Unfortunately, we had to take a 12 million environmental provision for a site that had been closed long time ago, many years ago, more than a decade ago. in Finland where we actually disagree with the authorities of how the land remediation should be done. The land has been remediated and the polluted land impacted soil has been taken away, but there's a difference of opinion how that soil should be treated. We'll probably continue that dispute for a while, but we have now taken the provision for that. for the worst-case scenario. Let's put it this way. All in all, this restructuring, streamlining, and transaction costs add up to 32 million within EBITDA and 43.8 million within EBIT. And of course, the impact of that is driving EPS down for the quarter to just 7 euro cents per share. And for the year 118 below previous years of 161. Next I'll go to the business unit commentary as I promised. And I'll start with the water solutions. So first of all, let's start with a reminder of the basics. So in water solutions, we do have seasonality. So our particular municipal customers do treat less wastewater during the winter months, and they require less of our chemicals, so that creates the seasonality that is within our water solutions business. Having said that, revenue was weak, particularly it was weaker in the industrial side. The revenue was down 9%. That's quite a significant decline, but more than half of that is attributable to our contracting volumes that we receive from our oil and gas business acquirer. And their customer has had an operational issue, so it's not a loss of customer, it's not a loss of business, but an operational issue that has dragged on longer than anybody expected. There was also some general weakness on the industrial side. Industrial production in general has been weak, in particular in Europe, and there are many processes where there are some waste waters created that impact us in the industrial side. Urban water service in Europe was very stable. It is a very resilient business. There was a 4% organic decline in North America and, of course, in your terms, clearly bigger in our numbers. So lower volumes impact the overall profitability so that the operative EBITDA declined. by 7%. Still, operating margin at 18.5% for the business unit, slightly below the level of that last year. Next, comments on PHS, packaging and hygiene solutions. So, challenging market continued. And year and year, the market was clearly softer and volumes impacted. organic revenue declined 6%. Profitability has been protected by the measures that we have taken. We also have received and gained some new customer wins, so that has been helpful, but the underlying market has been really soft. But the important point is that the market has now seems to have just bottomed out. It has not gotten any worse since Q3, if not any better either. We saw, in fact, very little volume or very little price changes from Q3 to Q4. Profitability in Q4, slightly lower than in Q3, mainly due to product mix type of issues. I think I commented that the product mix in Q3 was favorable. Now it was less favorable than Q3. than in Q4, Q4 was less favorable than Q3. And we're not done with the profitability improvement action. So we are just implementing the new operating model as of beginning of this year. And we will be seeing benefits of that in the coming quarters as that is being implemented. Regarding regions, fair to say that APAC continues to be the biggest challenge. We see a particularly weak market in China with weak demand and with the local oversupply situation leading to much depressed prices and volumes. Regarding fiber essentials, environment has been weak for pulp chemicals, particularly here in the Nordics, which is a key market to us. Also market prices for base chemicals have remained low. For example, caustic soda is relatively important for us. For fiber essentials, there we have seen some price, I'm sorry, variable cost increases, raw material cost increases in the second half of the year. It's really isolated to sulfur products, but the increase has been quite significant. And that's the sort of one area where there is significant increase. significant inflationary pressures. And it's enough that it's visible in the fiber essentials margins to some extent in the second half of the year. So again, looking at the full year, the volume decline, it's really in the second half of the year. And you see that the quarterly revenues have fallen to 132, 134 million range, whereas before that, we were clearly in the 145, 150s per quarter run rate. And as the drop through impact is quite significant, these are good gross margin products, but high fixed cost operating plans. so the volume any volume increase would have a obviously positive impact to our profitability should and if and when that hopefully happens all right moving to balance sheet now during 25 our net level debt level has increased due to the acquisition of the water engineering and, of course, the share buy program that we had on the second half of the year. The smaller addition is that we actually inaugurated our new R&D facility in Espoo here in Finland with a 15-year lease, so that's added to our lease liabilities and reported as a part of debt obligations. Rosie, that Antti was already talking about, return on capital employed, has come down to 16.5% due to this water engineering acquisitions. But, of course, it's also heavily impacted by the reported EBIT or operative EBIT that we have. And those two components clearly impacting there. Cash flow from operations. 127 million during the quarter and 373 million for the year. Maybe a comment on the cash flow components. So, on networking capital increased from previous year. We perhaps were not quite successful in reducing our inventory levels with reduced volumes as the business was experiencing. So, obviously, trade payables are coming down, but if inventory levels remain roughly at the same level, it does reflect as an increase in net working capital. And therefore, inventory levels will now need to be and are in the focus for us going into 26. There is some opportunity to tighten the inventory rotation. CapEx fell just about where we expected and how we got it, slightly below 200 million in 25. And now we estimated any for 26, it will increase slightly. We have some growth investments ongoing. And then we are doing these modernization investments. I mentioned the potluck, but we have a few others as ongoing as well. dividend we have a strong track record of increasing our dividend and now we are proposing a increasing our dividend to 76 euro cents to our annual general meeting this increase is consistent with our dividend policy of paying a competitive dividend as well as increasing the dividend over time And in recent years, the dividend has been paid into installments and we'll continue that practice. In addition to increasing our dividend, we're continuing to return capital to our shareholders through share buyback program. The purpose is to continue to optimize our capital structure. We have received almost universally positive feedback for the program that we initiated last year, and we feel that it's important that we continue to serve the interests of our diverse shareholder base. However, this is not limiting our desire or our ability to continue to execute our growth strategy. And again, it's evidenced by the two acquisitions that we have already done or announced. Well, the first one is already completed, but the second one that we announced yesterday will continue to invest into organic growth opportunities when they are as well as inorganic growth opportunities. And again, this acquisition of Sitra Asekemi for 75 million euros approximately is a proof point of that. I will turn next to Antti, but before I do, I reflect a little. So this, as Kiira said, it is my 50th and it's my last quarterly announcement. As announced, I will leave my position as Kemera CFO at the end of March, so March 31st will be my last day of work. Looking back, I'm really proud of what Kemera has been and what Kemera has become during those 12 and a half years. Kemera is much stronger, much better company, and I believe that Kemera has a really bright future. In this forum with you, our analysts and investors, there's one group of Kemera employees that I want to thank, and it's the IR officers I had the privilege of working with during the years. So when I joined, started working with Tero Huaminen, then continued work with Olli Turunen, then up to quite recently with Mikko Pohjola, and now most recently with Kiira. Kemera's IR team has always been top-notch, and it's been my intention only to recruit the best that I can find in the market, and I've been successful with that, and we've been able to maintain a top-notch IR practice for Kemera. And I'm really proud of that, and besides, the team has always been fun to work with. So thank you all. With that, now I'll turn to Antti.

Thank you, Petri. Yes, so then I'll finally say a couple of words about the strategy execution a bit more. Petri already quite nicely talked about the kind of the latest announced investment and how we are really committed to grow the company via both organic and inorganic. Investments. I'll elaborate a bit more on that, but just to remind everybody that these three cornerstones are the focus areas of the strategy. So expanding the water business. There's plenty of evidence of that and we continue to work on that. then building our presence as the leading provider of renewable chemistry in in our target markets and and even more widely so so clearly we have been recognized as as one of the leaders in the world on this area and we continue to work on that we have a lot of good progress on innovation projects both in-house and with external partners from that domain and solutions that have been proven not only in lab but in extensive customer trials. So I'm expecting quite a lot of positive things to come back for the future growth in coming years. And then, thirdly, investing kind of into these new adjacent high-growth market areas, tapping or unlocking the growth potential from those and areas where we have clear right to win, which are part of kind of our – domain, but where we have been historically out of, and the NVS, New Ventures and Services Unit, has been actively working on these, and there's a lot of good stuff in the pipeline there as well for the future growth. Then looking at a bit on a timeline, basically the time since 22 when we have been executing the growth strategy, which we then sharpened two years ago a bit more, uh but basically we've been constantly investing into the focus growth areas they did in the strategy started from the acquisition of the sim analytics which basically has strengthened our position in the digital services area for the water business so being present on and growing our position in there then continued with organic investments into coagulant capacity so that's the core the resilient core of our water business so we continuously invest in there and as Petri said, we have capacity, we are able to benefit from the market recovery when it happens without adding fixed costs as we have been building the capacity for that. Then entering into the micropollutants removal area so small first acquisition in the UK and then continuing with organic investments for that area so clear commitment to grow in that area as well and then lately the entry into the fast-growing industrial water services market in north america via water engineering and as i already mentioned that's a platform acquisition so we have a really healthy pipeline of small and a bit also some a bit bigger uh bolt on acquisitions uh and and first example already happened in the in the first week of january so also progressing very well on that area and then the last announcement two days ago regarding Sidra. So again, strengthening the core, increasing our position, improving our position in the world of business and basically on the path to grow the significance of the business in our portfolio. lot of things have happened and and our aim is to further accelerate that execution of strategy so working on on these growth initiatives which is enabled by our strong financials and strong profitability despite the weak market so i think this is exactly the time when the markets are soft then when basically we need to continue to believe in our strategy and invest in these growth activities to make us able to capitalize on the growth and the markets get healthier so this is clearly essential for us and we continue to be committed to that. So the three business units have clearly separate different roles in the strategy execution as mentioned already water solutions being the growth engine will continue to invest both organically and inorganically to growth in water solutions. Short-term packaging and hygiene solutions, the profitability improvement is the key target, but then also the packaging board markets which we serve are now in the basically historical low point and the world will need packaging material so that business unit has growth potential when the market ultimately recover. And then FiberEssentials, clearly a profitable cash flow generation unit enabling us to invest in the growth in other areas. So, to close this with our outlook for 26, amid the uncertainty and fussiness of all the possible crystal balls, we expect the revenue to be between 2.6 and 3 billion euros. and the EBITDA, operative EBITDA between 470 and 570. So clearly kind of you see from here as well that it's very difficult to predict the markets, but this is our outlook to the year. It assumes this continuation of global economic uncertainty and the softer volumes. and basically especially the impact being heavy on pulp and paper but also pulp and paper markets but also on the industrial water markets we assume stable raw material environment as Petri already alluded to so basically no big swings from there and thus this is the outlook that we give for this ongoing year so with this thank you very much and finally Once more, big thanks to Petri. He's been elementary in this growth journey and making the company the good company. company it is today completely different compared to 12 years ago as he mentioned already but i have to personally thank petri for the past two years because he's been the kind of a brick wall that i could always lean on as a new ceo and and giving me the confidence that you know no matter if i miss some details here or there he will always be there to support me and correct me so so very big thanks petri for for these past two years and then with these we move on to q a

Alright.

Okay, thank you, Antti, and thank you also, Petri. And now we are then ready for the questions, so I think we could start from the line. So, operator, please go ahead. And we will, of course, also take questions through the chat, so those will be coming also.

If you wish to ask a question, please dial pound key 5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key 6 on your telephone keypad.

the next question comes from andres castanos from burenberg please go ahead hello petrie first of all best of wishes for the future and also congratulations on on to the company and to you and all the ball actions in the finance side m a buybacks uh dividend increase in the full lot so well done there for My question would be the first one. Can you please put some numbers to the U.S. pipeline, the water pipeline there? How much money can you possibly deploy there in the next year ahead? Also, I would love a comment on the Germany deal that you announced yesterday. It seems like a rare opportunity. Do you think this could be replicated, similar deals like this one?

Well, I'll start, and then I'll let Petri comment on the kind of, especially how much we can allocate to this. But as I mentioned, the pipeline is very healthy, and we've already mentioned that these kind of small bolt-ons, like the AquaBlue is a very good example of roughly the size of a single deal. So they are in the range of a 10 million annual revenue type of pipeline. hovering a bit lower, a bit higher, typically. And I've also mentioned earlier that we have a solid pipeline, and the aim is to execute several of those every year going forward. So that's basically giving you the idea. And then there are a couple of bits, bigger ones also in the pipeline, which then would change the pattern. But basically, it's a solid programmatic growth ambition that we have there. And then regarding the CIDRA type, so all the time we've said that we actively look at the base business, coagulant market, and look for opportunities. There are not too many, but each and every one we will act on. You already saw the Thatcher in North America earlier, and then we have now the CIDRA, which is, I think, really good strengthening of our central European business. So we are actively monitoring the market. We know all the players there. And when something becomes available, we will promptly act on that.

Yeah, I don't know if I have much to add, but... But the aqua blue type companies, there are probably couple hundreds or few hundreds in North America. And theoretically, almost everyone, not everyone, but so it's the beginning of the pipeline. Then as the pipeline is progressed, but I have seen long lists that have 20, 30 names in it. Currently short list is obviously shorter. It needs to be shorter. But like Antti said, These type of deals is really where we have the strong natural platform executing the 10, 20 million type revenue companies. And there are multiple those cases. And of course, from the finances point of view, balance sheet point of view, we have no restrictions on executing on that one. So that certainly continues. Obviously, if we are looking at the water engineering pipe, which was well over 100 million type of investment, then those would be looked at a little differently. That's progressed in a different way in our M&A process.

Thank you. A second question, if I may, please, on margins trajectory in the water business. You mentioned some seasonality, and I wonder, is that it? Should we see a rebound in Q1 versus Q4 on margins? And also, can you comment on the margins of the acquired companies that you have acquired so far? Are they accretive to the current water business margins? Thank you.

I can start with the seasonality and then pass on to you so basically the water business has this natural seasonality which because big part of the water business is especially on the urban municipal side is weather dependent and but there are also other things and I will talk a little bit more about them but basically typically the the summer months are the strongest or the summer quarters are the strongest quarters and then the winter quarters are always a bit weaker and especially q4 being typically historically and especially in north america the weakest one so it's partly weather dependent there's less water in the systems but especially the kind of entering into this water industrial water services business There's also the industrial patterns, because a lot of that business is in cooling towers, for instance, and when you have cold months, you have less need for cooling in industrial applications. Also, there's a lot of business in the services part business, which has to do with the, you know, there's a lot of pools in the US. So, basically, again, pools are not used in wintertime and so forth. So, it will only strengthen the seasonality, I think, in the water business, this entry into the services area.

And if your question was really regarding the pipeline of these services companies, they actually vary quite a bit. They vary from the low teens to 40% EBITDA margin in the business. And it often depends on how much product and possibly equipment sales they have in it. or whether it's pure services where the margins tend to be higher. So I don't think I can give you an universal answer on the types of margins that you see. But philosophically, we don't want to dilute our profitability with these acquisitions. So even if the coming in margin is lower than ours, there needs to be synergies that get to our sort of at least average group margins.

Makes sense. Thank you very much.

Thank you. Let's take the next question, please.

The next question comes from Tommy Raylow from DNB Carnegie. Please go ahead.

Hello, it's Tommy from DNB Carnegie. I hope you can hear me.

Yes, we can.

And thank you also from my side. It's been absolutely a pleasure to spend a short while.

Now we can't really hear you, Tommy. Could you please repeat your question?

Can you hear me now better?

Yes, we can hear you now. We heard the thank you part, but then when you started to ask your question, we lost you.

Okay. Maybe that's a signal. But the question is simply, was there something still extraordinary in the water clean? You mentioned some of the items, but was it just a very clean, clean number what you reported?

I would say that it's clean. And of course, during the Q4, you always tend to look at your inventories and you tend to get some invoices from your suppliers that hadn't been accrued for small amounts. So we have a fondness of talking about 13th month. It's not 13th month, but there is typically some new expenses that come in December timeframe. We usually plan for that, but there's a little bit of unknown. But I would put that in the level of noise. particularly for water solutions.

Okay, thank you. And the second question on the outlook, I'm just trying to make sense. You mentioned that kind of the softness accelerated in the fourth quarter from the third quarter. But then when I'm reading your kind of outlook commentary, it doesn't really sound that the market has changed for worse actually you also mentioned yourself that it's stable so kind of is the market now stable what do you believe or is there still some further weakening?

Let me correct me first, and then I think it's more appropriate that Antti talks about the outlook. I probably may have miscommunicated a bit poorly. What I meant to say that the volume decline was higher in the second half versus the first half. And this was clearly driven in Nordics by the pulp mill, not closures but downtime thank you for the word as well as the contracting volume decline in industrial and then perhaps there was some more industrial decline in water service in second half But if you sort of, I recognize the accelerate is probably the wrong word. So, it was not accelerating. So, third quarter to fourth quarter, there was no acceleration. So, let me correct that if I communicated that poorly. But then I let Antti talk about the outlook.

Yeah, and as I said, when I introduced outlook, so basically, if anything, the visibility is really poor. So commenting to this or that direction, whether we see kind of a improvement or declining, the visibility is really poor. But as Petri mentioned, I think many indicators from the market show that we believe that this is kind of the bottom level. We haven't seen any significant further weakening, but we haven't seen really any kind of a bright signs for at least for the first half of the year either and there I would again as we discussed earlier so Tommy I would recommend to look at you know what our big key customers have stated about market because of course they see it first and we get hit in kind of upper in the value chain of those phenomena so basically you can read that and that's the kind of crystal ball we have

Of course, thank you. Just to follow up, if you could give kind of price and volume assumptions into 26, what you are saying, I hear you, that kind of it's a bit of volume game, but would you assume that pricing is down or stable?

in this environment or what's the price and volume assumption maybe if there's something I already offered my view of the crystal ball and it's pretty stable and it has been stable for the last four or five quarters and we don't see changes to that and that applies both the pricing environment and the variable cost environment thank you let's now take the next question from the line please

The next question comes from Joni Sandvall from Nordia. Please go ahead.

Yeah, thanks for the presentation. A couple of questions from my side. In PHS, you mentioned the continued improvement that you have started now with the new operating model kicking in from 26. So, if I remember correctly, you maybe have mentioned, you know, around 15% EBITDA margin target by end of 26 is still valid with the current market environment.

Market environment, of course, plays a role there, but that's the ambition level that we have been talking about. So, I mean, if you look at from the group perspective, that's the expectation now. Whether the market support reaching that exactly during the last quarter of 26 or later,

later in 27 that depends but but that's the ambition level that we have set for it okay okay that's clear and maybe maybe question on the on the you know energy prices have been spiking both in the nordics and in europe are you seeing any any support for yourself through the pricing now now in in h1

Well, the weather forecast, I was looking for it to be snowy for the weekend, but then I heard that the weather forecast changed. It's not getting more snow. I'm looking for the cross-country skiing next weekend. Honestly, let's not get too excited about one month of cold weather in Finland and in Europe. So I think we have to look at the bigger picture and longer period of time. It is true that in the fiber essentials typically our customers do benefit, also customers benefit of high energy because they do produce energy, electricity, while their pulp mills are operating. So that's sort of an ongoing market commentary that I can say. But really regarding a crystal ball for the weather,

for the remaining of the year don't know don't have that okay okay that's clear then maybe maybe other vibrations also question on on because sales were declining now now in q4 so could you give any indication how large part of this was driven by you know lower utilization rates ratios of of the nordic partners in q4 which is you know It's not typical that those are curtailed during Q4.

It's not typical, but they were. So Latin America, there's no change. There's obviously some currency impacts year on year from North America. But honestly, I don't have the data now to break down in my head. But it's mostly Europe. It's mostly Nordic.

It is really mostly Europe. So basically... As Petri said, Latin America, there was no change quarter on quarter in terms of our delivery volumes. In North America, we actually improved a bit in quarter four, if anything. So it's really coming pretty dominantly from the Nordics.

Okay, thanks. And then maybe lastly, quickly for Petri, about your supplementary pension fund returns expectations for 2016.

Well, we are expecting to receive another 10 million of return from capital because the fund is roughly 100 million overfunded. So we are unwinding the overfunding slowly and gradually. Obviously, continue to invest smartly. And I trust my successors will continue to do that. So the pension fund is in good shape. So no issue there. So, okay.

Thank you, Joni. We now have a few minutes time to take some questions from the chat. And I think that we could start with the fiber essentials team. So the question is, do you expect volume recovery in fiber essentials in early 26, given that pulp wood prices in the Nordic area are clearly down supporting profitability of pulp mills in the region?

Well, yeah, I mean, again, I would refer back to what our customers in that business have announced and said. But clearly, I mean, as Petri already mentioned, it's favorable for the Nordic pulp mills to run as full as possible in the cold winter months as they produce electricity as well. So basically, typically, the first quarter is volume-wise a strong one. And then, of course, the kind of decreased wood prices should be supporting the business of our customers also going further into the year. So, of course, we dearly and truly hope that the volumes are improving as a result of this phenomenon. But it's really up to our customers.

There's another question which is related to the water solutions business and I think that we covered the seasonality part yet, but this is related now to the measures or the kind of like items affecting comparability. That's how I read this. So could you come back on the measures to increase production capacity in the water division and why these measures make sense despite the lower volumes and lackluster demand in water?

so maybe kind of like why these sites and so let me I'll cover this the two IAC items affecting comparability so T-SPORT UK has been a site with low capacity utilization for quite some time let's be honest about that one And we have reviewed and now what we have made a decision that it's sort of now falling below the threshold. And we are moving the production from particular some deformers from that site to another site in Europe. So, we are closing that site entirely. So, we are obviously reducing fixed costs significantly with the closure of that site. So, I think that's fairly obvious. Then in Botlik, Netherlands, we're not closing a site, we're actually investing into a site, but it's a site with relatively high fixed cost because, I mean, it's Netherlands. The salaries are relatively high there. and we are doing an automation investment. So, what has been a fairly manual process we are automating and in the process we are eliminating manual work and fairly significant or big enough number of employees that it actually makes a difference. And so it's a, there we, I'm not sure if we're investing into capacity addition. I think it's a, we call it improvement and automation investment. So it's not capacity constraint that particular site. It's really an efficiency improvement with a quite decent payback period.

Exactly. And then if I continue on the, if you look at the kind of a, couple of years timeline and the coagulant investments that we have been doing into water solutions. So we have been there. I mean, the growth, the population in Europe is not growing. The per capita water consumption is not growing, but the regulation is getting tighter. So basically we have been doing this investment or initiating them when we see the regulation on certain part of Europe changing. It's not same even if the EU regulation is the same, but the application in jurisdictions is different. So that's why we have twice expanded the Coagulant capacity in UK. The first one we sold immediately to practically full utilization. That's why we did the second capacity expansion. Same goes for the Iberia, the Tarragona side. So there are certain factors in the regulation and the market that drive the demand. And we do kind of very targeted, relatively small, add-on capacity investments on existing site to capitalize on those pockets of market that we see the growth potentially.

Thank you. Let's now take one last question from the chat. And it's about the packaging and hygiene solutions profitability program or profitability improvement program. So can you comment on the progress? How much more work is there to be done? And when are you expecting the full impact to kick in?

Well, I'll start, and then if there's something that Petri wants to add. But basically, I mean, it has progressed in phases. So what we did last year is that we basically found the kind of so-called low-hanging fruit in terms of cost, both in the business unit itself and then on the operations side that are supporting it. And those we kind of had implemented, so the run rate should be kind of built into this year's numbers. we similarly found some kind of new ad on top line which basically was realized those contracts were negotiated and closed last year so basically again us the customers change suppliers we should see the revenues in this year's numbers but then the next phase of that is the new operating model which we have implemented where we basically change also the structure and basically how we serve the customers, giving better service for our key customers, the key accounts, and then streamlining the service levels for the kind of a tail end. That work, the implementation is ongoing as we speak. So that happens during the Q1, and then the results would be visible later in the year. And then the business unit management has in pipeline the next round as well, because this is a kind of continuous process of when we kind of – put something into shape, then we realize that there are other things that can be further improved. So we will continuously work on that, but gradually during the year, those benefits will be visible. And some of them in 27 only also. So this is a long process.

Yes, thank you. Unfortunately, we are running out of time. So we will start to conclude the conference. And if there are any other questions, you know where to find the investor relations. So please be in touch. And we have a pretty full roadshow agenda coming in now after the earnings. So we will start with Petri next week in Geneva. So there are still plenty of opportunities to meet also Petri. And Antti and myself, we will be back here in our results studio in connection with our Q1 report, which will be published on April 24. And we of course hope that Petri will be cheering for us, maybe from the golf course or I don't know. Thank you all. Have a great day.

Thank you. Thank you.