NKT A/S

Welcome to NKT financial presentation for the first quarter of 2026. For the first part of this call, all participants will be in a listen-only mode. Afterwards, there will be a question and answer session. To ask a question, please press five star on your telephone keypad. I will now hand the call to your speaker. President and CEO Claes Westerlund and CSO Michael Young. Please begin.

Good morning and welcome to this conference call following the release of our interim report for the first quarter of 2026. I'm Claes Westerlund, the CEO, and for today's call I'm happy to be joined by our new CFO Michael Young. As usual, I will begin by taking you through the key developments in the quarter, focusing on the main messages, the operational performance, commercial highlights and the market dynamics. I will then hand over to Michael for a deeper look into the financials. We will conclude with the outlook and open the line for questions. As you are aware, 2.1.2026 is the first quarter where we present and comment on the business in our new business line structure, transmission, grid solutions and accessories, and distribution, which became effective from 1st of January this year to support our charging forward strategy. With that, please turn to slide 3. Before we begin, I'd like to highlight that today's presentation and related comments, including forward-looking statements, These statements are subject to risks and uncertainties, many of which are beyond NKP's control, and actual results may therefore differ from expectations. I will ask all of you to read this disclaimer carefully. Now let's move to the key messages for the quarter on slide four. Q1, 2026 was a solid start to the year with a combination of record order backlog, a record first quarter result, continued progress on our investments and disciplined operational execution. Our new business line structure is now live and operational supporting the charging forward strategy. This is an important step because it reflects how we engage with customers, execute projects and build scalable capabilities in the organization. From a commercial perspective, we had a historically strong quarter. During Q1, we secured order intake exceeding €4.2 billion, driven by the Eastern Green Link 3 project and the two SSE products in Scotland. This resulted in a record high transmission order backlog of 13.5 billion euros at the end of the quarter. This provides extended visibility for the coming years and supports our execution planning and long-term value creation. We also continue to progress on our major capacity expansion projects, all of them according to plan. The high voltage capacity expansion and transmission remains on track to become operational from 2027 and the addition of medium voltage capacity and distribution is coming online during 2026. Financially, we delivered organic growth of minus 4% and operational EBITDA of 97 million euros in Q1. The negative growth was as expected and linked to a specific product ramp down in transmission, but profitability improved. And finally, we maintain our financial outlook for 2026 with revenue at standard nettle prices expected to be 2.63 to 2.78 billion euros and operational EBITDA expected to be between 360 and 410 million euros. Let's turn to slide 6 for a look at the overall financial performance in the quarter. The development in Q1 was largely as expected. Revenue at standard metal prices declined from 630 million euros to 610 million euros, corresponding to organic growth of minus 4%. This was driven by the ramp down of the Champlain Hudson Power Express project, including subcontracted work, compared with a relatively high level in Q1 last year. Despite the revenue decline, operational EBITDA increased from €81 million to €97 million and the margin improved from 12.9% to 16%. This reflects improved profitability across all three business lines and satisfactory operational execution. The transmission business line was the driver behind the negative organic growth for the quarter, but excluding the effect from Champlain product, the activity level remained high and we continued to execute on our high voltage order backlog with several products being active during the quarter. Grid Solutions and Accessories delivered organic growth of 2% and slightly improved operational EBITDA compared to the same quarter last year. This was supported by high activity levels and satisfactory execution and mainly driven by accessories. The positive development was maintained in distribution. Driven by continued robust demand in the power distribution grid segment, the business line reported 3% organic growth and an improved operational EBITDA. Let's turn to the next slide for a deeper look at each of the business lines, starting with transmission. Transmission delivered a quarter with high activity levels and satisfactory execution, but with lower revenue compared to last year, exactly in line with expectations as the Champlain product is ramping down. Revenue at standard metal prices was €331 million, down from €360 million in Q1 2025, corresponding to an organic growth of minus 8%. The decline was driven by the mentioned ramp down, including a lower level of subcontracted revenue compared to the relatively high levels in Q1 2025. Operational EBITDA was 50 million euros, slightly lower than the 52 million euros reported last year, but margin improved to 15.1% up from 14.4%, demonstrating improved profitability despite the lower revenue base. From an execution perspective, we continue to progress a broad portfolio of high voltage projects throughout varying stages of execution, including Biscay Gulf, Horn C3, Sydlink, Sydostlink and Champlain Hudson Power Express. As always in the product business, quarterly facings can influence both revenue and margins, and we remain focused on discipline, project and risk management across the portfolio. In parallel, our transmission investment programs progressed according to plan, with additional high voltage capacity still expected to be operational from 2027. In Karlskrona, we saw the expected progress with installation of machinery and selected commissioning tests ongoing. Let's move to slide 8 for an update on the market and our backlog. Q1 was a strong commercial quarter for NKT. Market activity remained high and we saw historically strong order intake for the company within a single quarter. NKT estimate that the value of products awarded in our addressable transmission power cable market was around 7 billion euros in Q1, with a majority based on DC technology reinforcing the structural shift towards large-scale HDDC projects where our capabilities are strong. In the quarter, our transmission order backlog increased to 13.5 billion euros, supported by two significant announcements. The conversion of booking commitments into firm orders with SSE, adding around 2 billion euros to the backlog. And the firm order for Eastern Greenlink III, valued at more than 2.2 billion euros, representing the largest contract for a single cable product in our history. From a backlog composition perspective, more than 95% is with European TSOs, and on application, roughly 70% is interconnectors and around 30% offshore wind. Looking forward, we continue to anticipate that our average addressable transmission market will exceed €10 billion per year between 2024 and 2030. Naturally, there can be short-term volatility driven by geopolitical and economical conditions, but we expect the supply-demand balance to remain healthy throughout the decade, gradually moving towards a more balanced market in the 2030s. With the record backlog, our commercial focus remains disciplined, prioritizing the right projects to optimize the mix of production and installation, balance risk and long-term earnings quality. Let's move to slide 9 for grid solutions and accessories. The new business line grid solution and accessories delivered a solid quarter with positive organic growth and increased profitability, supported by high activity levels and satisfactory execution. Revenue at standard metal prices amounted to €113 million up from €109 million in Q1 2025, corresponding to organic growth of 2%. The development was mainly driven by the accessories business area, with growth across both high and medium voltage accessories. Operational EBITDA was 19 million euros, up from 18 million euros last year, and the margin improved to 16.8%, reflecting improved profitability and solid execution. Activity levels were high across the business line. In grid solutions, we executed repair and installation work, including offshore repair projects. while accessories benefited from continued strong demand and good operational performance. Overall, this is a good illustration of how the combination of services, onshore projects, and accessories support stable profitability and resilience in the group, and it's a key reason behind the creation of this business line. Let's turn to the next slide and distribution. Distribution continued to perform well, with growth driven by the power distribution grid segment and improved earnings, Revenue at standard metro price was €212 million compared to €203 million last year, corresponding to organic growth of 3%. The increase was driven by continued robust demand in the power distribution grid segment, and we also noticed a gradual improvement in the construction segment. Operational EBITDA increased to 22 million euros from 18 million euros last year, and the margin improved to 10.5% from 8.9%, reflecting the higher revenue level and improved profitability. On investments, we continue to progress the planned capacity expansions. The additional capacity in Denmark is ramping up here during the first half of the year, and the capacity expansion in Portugal remains expected to become operational at the end of 2026. Let's move to slide 11 for an update on our major capacity investment projects. Let me provide a brief update on our major investment projects across the group. As highlighted earlier, our capacity expansion projects progressed as planned in Q1, In transmission, the high-voltage capacity expansion remains on track, with the key asset expected to become operational for commercial perspective from 2027. The slide highlights the key sites and projects. The construction of our second cableway vessel, NKT Eleonora, progressed during the quarter, and she has now been launched into water in Romania, as you can see in the picture. She is a beauty, isn't she? During the coming months, she will be transported to Norway for final installation of technical equipment and commissioning activities. In Karlskrona, the installation of machinery continued during the quarter as planned and the expansion of the harbor showed visible progress. Our medium voltage expansions in Denmark and Portugal progressed in line with plan and timelines are unchanged. In Denmark, we are currently ramping up production while we are entering the final construction stages in Portugal. Our investments remain central enablers for our growth journey. They expand capacity and strengthen capabilities, allowing us to execute on the growing backlog and capture attractive long-term demand. With that, I've concluded my part of the presentation. Please turn to slide 13 as we transition to the finances. And I will hand over the word to our new CFO, Michael. Welcome, Michael, and please go ahead.

Thank you, Klaus, and good morning from me as well. We'll now take a closer look at the financial development in the first quarter of 2026. I will start out with the income statement. Q1 2026 showed an improvement in profitability despite the slightly lower revenue level. Revenue was €864 million reported and €610 million at standard metal prices, reflecting organic growth of minus 4%. As Klaus described, this negative organic growth was driven by the ramp down of the Champlain-Hudson Power Express project in transmissions. Operational EBITDA increased by 16 million euros versus Q1 2020-25 to 97 million euros, and the group EBITDA margin improved to 16%, up from 12.9%. This improvement reflects increased margins across all three business lines. Financial items were an income of 15 million euros compared to 25 million euros last year, mainly driven by foreign exchange gains relating to the strengthening of the Swedish krona and interest income on the net cash position. The average number of employees increased by 650 compared to Q1 last year, reflecting the continued high activity levels and ongoing investments. NKT is now more than 6,500 colleagues strong. Overall, the income statement underlines improved earnings quality and margin development, which is important as we continue to execute on backlog and investments. Let's turn to cash flow on slide 14. Free cash flow was negative 92 million euros, reflecting that EBITDA was more than offset by continued high investment level during the quarter. Cash flow from operating activities for the quarter amounted to €52 million, an improvement compared to minus €141 million in Q1 2025. Changes in working capital were an outflow of €17 million, impacted by normal phasing of milestone payments and project execution and transmission. This is in line with the typical movements we see in the project-based business, In the quarter, we had tax payments of 45 million euros, reflecting the increased earning level. Cash outflow from investing activities was 144 million euros, compared to 160 million euros last year. The investments were driven by our ongoing programs to increase capacity and capabilities in transmission and distribution. We expect the investment level to remain high throughout the year. So overall, the cash flow profile is what we expect at this stage based on continued high investments and normal working capital phasing. Let's turn to the balance sheet on slide 15. The working capital position stood at 1.5 billion euros at the end of the quarter, stable compared to the end of 2025, reflecting milestone payment phasing and transmission executions. Capital employed increased during the quarter, driven primarily by the continued investment program. This had a slight negative effect on return on capital employed, which was 22%, down from 24% at the end of Q4. Looking ahead, return on capital employed 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 was reduced by 121 million euros to 842 million euros as a result of the negative free cash flow in Q1. We continue to maintain strong liquidity. Available liquidity reserves were 1.5 billion euros comprising 1.1 billion euros in cash and cash equivalents and 400 million euros in undrawn credit facilities. Finally, during the quarter, the green hybrid security of 150 million euros was successfully refinanced at favorable rates, supporting our overall capital structure and financial flexibility. Let's turn to slide 16 and the outlook for 2026. On the back of the development here in the first quarter and our expectations for the rest of the year, we maintain our financial outlook for 2026. Revenue at standard metal prices is still expected to be in the range of 2.63 to 2.78 billion euros, and operational EBITDA expected between 360 and 410 million euros. Transmission. Unchanged, we expect slightly lower revenue level in transmission with an expected mid-single-digit percentage organic decline. Production and installation capacity available in 2026 is unchanged from 2025, and thereby the negative development is driven by a combination of a lower level of subcontracted revenue compared to 2025 and an expected normal level of variation orders. The development throughout the year depends on execution and timing of specific operations in different projects. In 2026, we will continue to execute on our backlog, mainly on projects awarded in the 2020 to 2022 period. The expected margin dilution of around two percentage points from increased costs to support the ongoing investment and production ramp up is also unchanged. Grid solutions 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. Distribution Distribution is still 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 with up to 10% growth to the business line. As usual, the outlook is based on several assumptions as outlined on the slide. Please note that we have updated the assumption for supply chain to reflect the development seen in the Middle East. In Q1, we saw no material adverse financial effect. But depending on the duration and evolution of the conflict, cost increases are expected in the coming quarters. We have solid processes in place with longstanding relations with both suppliers and customers. We are working to minimize the financial impact, and we confirm our outlook for the year. Please turn to slide number 17. Before we conclude, let me briefly recap the key messages from the first quarter. Q1 2026 represents a solid start of the year, both operationally and commercially. We delivered a record high order intake. driven by major project awards, which increased our transmission order backlog to 13.5 billion euros. This enhances our visibility and provides a solid foundation for execution in the coming years. At the same time, we continue to execute at a high level across the business. Although revenue declined in transmission, the development was fully expected as the Champlain project ramped down. Importantly, the underlying activity level remained high, and we delivered record-high operational EBITDA for our first quarter, with improved margins across all three business lines. We also maintained discipline in executing our investment programs, with capacity expansion projects progressing according to plan. These investments are essential enablers for capturing the strong structural demand we see in the market and for supporting our growth trajectory towards 2027 and and beyond. Finally, the charging for strategy is not is now fully operational, supported by the new business line structure, which strengthens our ability to execute on the backlog, optimize our operations and continue to deliver value for our customers and shareholders. Please turn to the next slide. As you're probably aware, we will host an investor day on 29 September 2026 in Cascorna, Sweden. On the day, we will present the charging forward strategy in greater detail, including views from the business lines. Just as important, you will also get the opportunity to see the production site in Cascorona, both the existing areas and areas we are currently expanding. We invite you to sign up for the day at our investor website if you would like to attend. With this, we have concluded the presentation, and I will now hand over the word to the operator for the Q&A session. Operator, if you would kindly take over.