NKT A/S

Welcome to NKT's Annual Report 2025. For the first part of this call, all participants will be in a listen mode, and afterwards, there will be a question and answer session. To ask a question, please press five star on your telephone keypad. This call is being recorded. I will now hand it over to your speakers, President and CEO, Claes Westerlind, and CFO, Line Andrea Fandrup. Speakers, please begin.

Good morning and welcome to NKT's conference call following the release of our annual report for 2025. I'm Claes Westerlind, the CEO, and with me today is our CFO, Line Fondrup. As always, I will take you through the strategic, operational and market developments that shaped 2025 before handing over to Line for the financial review. We will then conclude with the outlook and open the line for questions. It's worth noting that we from 3rd of January this year have changed the scopes and names of our business lines. Solutions has become transmission, applications has become distribution, and service and accessories grid solutions and accessories. Throughout this call, we will keep to the previous structure and business lines to match the communication in our annual report. Let's turn to slide number 3. Before we begin, I'd like to highlight that today's presentation includes forward-looking statements. Actual outcomes may differ from expectations, and I therefore ask you all to pay close attention to this disclaimer. With that, let's move on to our key messages for the year. Please turn to slide number four. 2025 was another defining year for NKT. It was a year where the work we initiated several years ago, strengthening capabilities, expanding capacity and transforming the company, began to consolidate into a stronger, more resilient NKT. It was a year of disciplined execution, financial strength and important progress on our investments. And it was a year where we took decisive steps towards the next phase of our journey as we introduced our charging forward strategy. From a financial perspective, it was another year of continued solid progress for NKT. We delivered record high standard metal price revenue of 2.7 billion euros and operational EBITDA of 390 million euros in the upper end of the latest guided ranges as expected. Organic growth was 6%, reflecting healthy activity level across all business lines and continued solid execution according to plans. We maintained a high voltage order backlog of 10.2 billion euros at the year end, supported by robust market dynamics and several significant awards. This backlog gives us visibility and predictability well into the coming years. On top of the firm backlog at the end of last year, we added another 2 billion euros to the backlog during January 2026 by converting the booking commitments with SSEN to a firm order. In November, we launched our new corporate strategy, Charging Forward, leading our way towards 2030, complemented by new medium-term financial ambitions for the same year. It builds on the foundation created through our transformation over recent years and shifts our focus to execution and value creation, reinforcing NKT's position as a leading pure-play power cable solutions provider. An important enabler of the future value creation is the investments we are currently executing to expand capacity, and they all progressed according to plan during 2025, including in the fourth quarter. Machinery installation and commissioning as well as expansion of the harbor in Cascrona are ongoing. We advanced the capacity expansion in Cologne and the new medium voltage capacity in Denmark will ramp up during the first half of this year. And expansion in Portugal will become operational at the end of this year. Now let's have a look at the financial performance in the fourth quarter. Please turn to slide 6. In Q4 of 2025, the revenue development was negative, fully as expected, and organically it declined by 8%. This was explained by the development in solutions, where the execution on the Champlain project in the US ramped down during the quarter, leading to lower revenue. For comparison, we had a relatively high activity level, including subcontracted work, in the same quarter last year. Despite the negative revenue development, the operational EBITDA margin improved to 13.2% compared to 13% in Q4 2024. Excluding the effect of the Champlain product, the activity level in solutions remained at a high level, and we continued to execute on our high voltage order backlog with several projects being active during the quarter. In applications, the high activity level was maintained. and as in the previous quarters, it was driven by the power distribution grid segment with continued robust demand. Supported by the additional capacity that came online at the beginning of the year, the business line continued to deliver solid organic growth rates and improved operation of EBTA. The high market activity levels also had a positive effect on the service and accessories business line, as we have seen throughout the year. Here in Q4, it resulted in a more than 30% organic growth and an improvement in operation of EBTA. This was driven by both segments of the business line. Let's turn to the next slide for a deeper look at each of the business lines, starting with solutions. In the fourth quarter of 2025, revenue and solutions amounted to €409 million, a reduction compared to the €469 million reported in the same quarter of 2024. This development was fully in line with expectations and driven by the ramp down of activities in the Champlain Hudson Power Express product in the US. Here we are also comparing to a base in Q4 2024, where we had a high execution level on the product, including subcontracted work. With the risk of repeating myself, excluding the Champlain project, we continued to see a high activity level and we progressed with the execution of high voltage order backlog with overall satisfactory product execution. Again in this quarter, installation activities were at a high level and our cable lay vessel NKT Victoria was well utilized. Operational EBITDA came in at €61 million for the quarter and was therefore €6 million lower than the same quarter last year, driven by the development on the Champlain project as just described. The margin landed at 15.2% and thus improved by almost one percentage point compared to Q4 2024. This was the result of sustained high activity levels and a slightly improved mix among the orders in execution. Overall, the quarter confirms the trajectory NKT is on towards 2030. But I would also like to remind all of you that in a product-based business like ours, quarterly margins may fluctuate depending on the facing and progress of individual projects. During the quarter, we saw progress across several projects at different stages of execution. Key contributors for the quarter included Champlain Hudson Power Express, Horn C3, Hertel, East Anglia III, Bay of Biscay, Sydlink and Sydostlink. Our investment programs to expand capacity continued their consistent development during the quarter and progressed according to plan. This goes for the production sites in Karlskrona and Cologne as well as our second cable-lay vessel NKT Eleonora. All are on track to become operational from 2027. Please go to slide number 8 for an update on the market and our backlog. The activity level in the high voltage market remained high. Firm awards in our addressable market amounted to an estimated 4 billion euros in 2025. This is obviously lower than what we have seen in previous years, but it's also an effect of timing. In January 2026, we converted booking commitments with SSEN in Scotland to firm orders with a value of around 2 billion euros. We also remain selected preferred supplier on Eastern Greenlink 3, which we expect to convert into a firm order during Q1. The produce are clearly increasing in size. This is affecting all processes involved and they often depend on permits and political decisions. Therefore, the actual award can easily shift between quarters or even years. Our high voltage order backlog stood at 10.2 billion euros at the end of 2025, a slight reduction compared to Q3, reflecting the execution in the quarter. If we add the SSEN order awarded here in January, the EGL3 preferred supplier agreement and our booking commitments, they in total provide strong visibility into the coming years and supports our medium-term financial ambitions. It gives us the opportunity to focus on long-term development and while we remain highly active in commercial activities, we can maintain a disciplined approach and focus on optimizing utilization, risk and profitability. The composition of our backlog gives that around 95% of the backlog is with European TSOs. And from an application point of view, interconnectors make up more than 55%, while offshore wind accounts for around 40% of our orders. While there are many moving parts in the general market development, there are no changes to our overall view, and for the period 2024 to 2030, we continue to expect awards in our addressable market to exceed 10 billion euros on average. We are, on an ongoing basis, evaluating the situation and are recognizing both positive and negative sentiments across our markets, which we follow closely. With this said, we remain confident in a healthy supply-demand balance throughout this decade, and when looking further into the 2030s, our expectation of a market moving into a more balanced territory is also unchanged. Please turn to the next slide for a look at applications. Applications maintained its positive development in the fourth quarter, where revenue amounted to 197 million euros, corresponding to 9% organic growth. Like in the previous quarters, growth was driven by continued robust demand in the power distribution grid segment, supported by the additional capacity that came online in the Czech Republic and Sweden earlier in 2025. In the construction exposed segment, the overall development remained subdued, but it varied between markets and sub-segments. Revenue in this segment saw an improvement sequentially compared to Q3, but it remained below the level from last year. Operational EBITDA increased to €18 million compared to €13 million in the same quarter last year, driven by higher demand and revenue in the power distribution grid segment. The margin improved to 9.1% compared to 7.8% last year. During the fourth quarter, we were also able to conclude the integration of Solidal, which we acquired in June 2024. The business in Portugal now operates as a fully integrated unit in NKT and the business case is fully confirmed, all concluding work well done by the applications and wider NKT team. We therefore also expect to harvest the full effect of the synergies of 7 million euros in 2026. As mentioned, the demand for medium voltage cables remains robust, driven by upgrades, enhancements and strengthening of the European power distribution grids. In 2025, we have been able to meet this demand with our added capacity and the additional capacity we are ramping up here in Denmark during the first half of the year is also expected to positively contribute to the organic growth development. Please turn to slide 10 for an update on service and accessories. Service and accessories continued its positive development in the fourth quarter. Revenue amounted to 79 million euros, 20 million euros higher than the same quarter last year, corresponding to 31% organic growth. The growth was driven by both business segments as they experienced a high activity level in their respective markets. In service, we performed repair jobs, mainly onshore, as well as installation and maintenance work, while the high activity level in accessories was driven by demand for both high and medium voltage accessories. Our service business benefited from ongoing maintenance, repair and installation work, and accessories continued to realize strong demand across both medium and high voltage segments. In addition, the high voltage projects currently in execution also contributed positively to the development. Across the business line, operational execution was satisfactory. Operational EBITDA increased to 10 million euros, up from 6 million euros in the same quarter last year. The margin for the quarter was 12.5% compared to 11.1% in Q4 2024, mainly driven by improved profitability in the accessory segment. Please turn to the next slide where I will provide a status update on our ongoing investments. We maintain the solid progress on our ongoing investment projects to expand capacity and again here in the fourth quarter all projects developed in line with plans. We had a high activity level in Q4 and we confirm our expectation of accumulated capex of approximately 2 billion euros for the period 25 to 28. In Karlskrona, machine installation continued across the new buildings, and during the same quarter, we initiated the first commissioning test of new machine lines. Simultaneously, we progressed on the construction of the remaining buildings, as well as the expansion of the harbor, further improving the infrastructure and layout of the site. All in all, the additional capacity is expected to be operational from 2027. The same goes for the expansion of the high voltage capacity in Cologne, also in progress. The construction of our second cable-lay vessel, NKT Eleonora, also progressed as planned during the fourth quarter. The different sections of the hull are now joined together, as you can see from the picture on the slide. With solid progress on the different work streams, NKT Eleonora continues to be expected to be operational from 2027. In Asnus, here in Denmark, we have completed the construction of the additional medium voltage capacity as planned. It will ramp up during the first half of 2026 and contribute to the revenue development and applications. Construction at our site in Portugal is also progressing and the additional capacity is expected to come online towards the end of 2026. Please turn to slide 12, where I will share some thoughts on NKT's contribution to net zero. Power cables and thereby NKT are key enablers of the energy transition and general electrification of societies, and our ambition is clear and at the same time twofold. We focus on maximizing our contribution to the decarbonization of societies by facilitating clean electricity and the grids through our cable solutions. This is our handprint. Just as importantly, we are focusing on reducing our own emissions and achieving net zero across our value chain by 2050 at the latest. This is our footprint. We are constantly evolving on these topics, and despite our emissions going up as a consequence of our growth, It is mainly a function of the lifetime power losses from the cables until clean energy sources are utilized to a greater extent. On the handprint, we have several tangible examples of progress. A very good case is the Champlain Hudson Power Express product in the US, which will make a substantial contribution to our handprint. When the transmission line is operational, it will supply up to 20% of the electricity needs in New York City with clean and reliable energy. When you look at the total produce we have installed from 2019 to 2025, they will facilitate or enable 27 terawatt hours of clean energy in 2030. This number is equal to more than twice the number of households in Denmark. It is calculated using a transparent and conservative methodology developed and vetted externally, and it is based on internationally recognized sources. With this, I have concluded my part of the presentation, and I will now, sadly for the last time, hand over to Lina, who will take us through the financials. Slide 13, please.

Thank you, Claes. And good morning from me as well. I'll now walk you through the financial highlights for Q4 and the full year 2025. And I'll start out with the income statement on slide 14. Revenue in the fourth quarter amounted to 643 million euros, 50 million lower than in the same quarter last year, equaling a negative organic development of minus 6%. This was fully as expected and was driven by the ram down of activity on the Champlain Hudson project in the US, leading to a lower revenue in solutions. Excluding this specific project, the underlying activity level remained high and both applications and services and accessories continued to report solid positive growth rates. Operational EBITDA for the quarter was 85 million euros, which was 5 million lower compared to Q4 2024 due to the mentioned development in solutions. The EBITDA margin improved slightly from 13 to 13.2%, with all business lines contributing to the development. The margin reflects a temporary dilution by around 1 percentage point, which stems from a higher cost level for the capacity ramp-ups. We thereby completed the full year 2025 with revenues of 2.722 billion euros and an EBITDA of 390 million. Both numbers landed in the upper end of our latest financial outlook for the year. As seen in the last quarters, depreciation and amortization increased, reflecting the ongoing investments. For the full year, costs were 37 million euros compared to 30 million last year. Financial items net were an income of 12 million euros. This was mainly driven by currency gains and interest income on our cash position. Tax for the quarter was an income of 37 million euros, as we increased the capitalization of our German tax asset due to improved operational performance. For the full year, tax costs were 9 million euros, corresponding to an effective tax rate of 6%. This leaves us with a net result on 97 million euros for the quarter, compared to 56 million euros in Q4 2024. For the full year 2025, the net result amounted to 275 million euros. Our employee headcount continued to grow, reflecting our ongoing expansion and investments. On average, more than 6,300 people were employed at NKT during the fourth quarter of 2025. Let us now turn to the next slide to look at the cash flow development. From a cash flow perspective, we ended the year on a strong note with free cash flow in the fourth quarter of 341 million euros. The positive cash flow was driven by a positive contribution from changes in working capital and EBITDA of 85 million euros. Despite the positive development in the fourth quarter, free cash flow for the full year was a negative 244 million euros, fully as expected, as we invested almost 750 million euros mainly in increased capacity. Changes in working capital resulted in an inflow of 527 million euros in Q4 2025. This was a result of prepayment related to order awards achieved mainly in Q3 and the normal phase-in between milestone payments and solutions. The working capital position at the end of the year also benefited positively from timing effects. Investments amounted to 232 million euros in the fourth quarter, reflecting the high activity level across our investment programs. Investments for the full year were 743 million euros. The level in the quarter was slightly higher than in previous quarters, mainly as a result of timing, but we expect the investments to remain elevated also in the coming quarters. Net cash flow for the quarter was 337 million euros and was negative at 302 million for the full year 2025. Let's turn to the next slide for a look at the balance sheet. We ended the year with a negative working capital position of 1.5 billion euros. This was an improvement of 441 million euros compared to the position at the end of Q3. As mentioned when I presented the cash flow development, this was driven by prepayments, timing of milestone payments and supplemented by a favourable timing effect at the year end. Capital employee amount to 1.2 billion euros at the end of the year and thereby decreased by 158 million euros during the fourth quarter. This was driven by the improvement of working capital more than offsetting the investments during the quarter. So ROSI declined to 24% from 27% at the end of Q3, as EBIT for the last 12 months declined slightly. Looking ahead, ROSI will continue to fluctuate between quarters, influenced by operational earnings, customer payment timing and a growing asset base from our investment programs, which will ramp up over the coming years. Our net cash position improved and was at approximately 1.2 billion euros at the end of the year. We thereby maintained a robust financial position. This strong position is essential for funding our investments and supporting NKT's continued growth journey in the years ahead. Please turn to the next slide for a look at the outlook for 2026. For 2026, we expect revenue in standard metal prices in the range of 2.63 to 2.78 billion euros and operational EBITDA between 360 and 410 million euros. The outlook for 2026 reflects an expectation of a slightly lower revenue level in solutions. As we have discussed previously, production and installation capacity available in 2026 will be the same as in 2025. In combination with a lower level of subcontracted revenue compared to 2025 and an expected normal level of variation orders, revenue in solutions could be slightly lower in 2026 with a mid single digit percentage organic decline. This is depending on execution and timing of specific operations in different projects. We will in 2026 continue to execute on our backlog, mainly on projects awarded in 2020-2022. To support the ongoing investments, production ramp up and value creation, we are currently operating with a higher cost base. This diluted group margin by around 1 percentage point in 2025. As the actual ramp up is nearing, this temporary dilution is expected to increase in 2026 to around 2 percentage point. This is reflected in the EBITDA outlook. Application is expected to contribute positively to the revenue and EBITDA development in 2026. The additional medium voltage capacity in Denmark will ramp up during the first half of the year and in Portugal by the end of the year. In total, these are expected to contribute up to 10% growth to the business line. Service and accessories is expected to see positive effects from the general high activity level in the market But as always, the development is dependent on the amount of offshore repair jobs, which is difficult to predict. In 2026, we will continue the execution of our investment programs and the investment level is expected to remain elevated during the year, but lower than the spend of 743 million euros that we had in 2025. As always, the outlook rests on several assumptions. First of all, satisfactory execution of our higher voltage investments and projects along with satisfactory operational execution across business lines. Market conditions for distribution, service and accessories businesses are expected to be stable, including normalized offshore power cable repair work activity. We assume limited supply chain disruptions with access to required labor, materials and services and stable development in the global economy, foreign currency and metal prices. Let's turn to the next slide. With the financial and operational performance in 2025, we have further strengthened the foundation for the growth journey that lies ahead of us. The steady execution on our capacity expansion investments during the year is an important enabler of the future development. We are making clear progress towards our 2030 financial ambition, which we presented in November. In 2030, we will have a significantly higher revenue base with more than 7% organic revenue growth character from 2024 to 2030 and an operational EBITDA of more than 900 million euros. And just as important, we expect to generate a ROCE of at least 22%, reflecting the improved earnings level and a solid return on our investments. Let me recap the main highlights of 2025 on the next slide. Our financial performance improved during 2025, where we delivered 6% organic growth and a record high EBITDA of €390 million. We made solid progress on our investments to expand capacity across both solutions and applications. In solutions, the additional capacity is unchanged, expected to become operational in 2027, while the additional medium voltage capacity in Denmark will ramp up during the first half of 2026. A high voltage order backlog amounted to €10.2 billion at the end of the year, and this position was supplemented by the €2 billion conversion of booking commitments with HSE in January. And last but not least, our new corporate strategy, Charging Forward, which was launched in Q4, is now operational. With this strategy, we also provided medium-term financial ambitions, which I just went through on the previous slide. Let's turn to the next slide. Before opening up for the Q&A session, I'll ask you to save the day on the 29th of September, where we will invite you to an investor day in Karlskrona. On the day, we will in greater detail present the charging forward strategy, including views from the updated business lines. Just as important, you'll also get the opportunity to see the production site in Karlskrone, both the existing areas and the areas we are currently expanding. From Q1, we will start to report on the new structure with the updated business lines. In due time, before the release of the Q1 report, we will provide restated historic financials for the new business lines. As this is my last call as CFO of NKT, I would like to use the opportunity to thank you all for the great discussions and interactions over the past six years. I look forward to meeting many of you on the upcoming roadshows. And with that, we conclude the presentation. I'll now hand over to the operator to guide us through the Q&A session. Operator, please.