NKT A/S

Welcome to NKT's interim report for the first half of the 2026 conference call. 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 during the Q&A, please press 5-star on your telephone keypad. Today's call is being recorded. I'll now hand it over to the speakers, CEO Claes Westerlind and CFO Michael Young. Please begin.

Good morning, everyone, and welcome to the presentation of NKT's Interim Report for the first half of 2026. My name is Claes Westerlind, the CEO, and here in the room together with me, I also have our CFO, Michael Young. As usual, I will take you through the key developments, business highlights and performance for the second quarter and first half of the year. Then I will hand over to Michael, who will walk you through the financials, and we will conclude the call by looking at the updated outlook for the year and open up for Q&A. Please turn to slide number three. Before we begin, please take a moment to study this disclaimer concerning that the presentation and our related comments contain forward-looking statements and actual developments and results may differ from expectations due to uncertainties and risks, including factors which are beyond our control. Now, let's move on to the key messages for the quarter on slide four. Let me start with the key messages for the second quarter of 2026. Overall, Q2 was another quarter with solid financial and operational execution. Activity remained high across the business and we continued the diligent execution of our strategic priorities under our new strategy, Charging Forward. This includes both execution of the project portfolio and the ongoing investment projects to expand capacity and capabilities. As expected, organic growth was negative, driven by the transmission business line. This was due to the lower revenue on the Champlain-Hudson Power Express project, where we in the second quarter last year had a high activity level on the project including subcontracted work. Despite this revenue development, operational EBITDA level was maintained at 104 million euros and the operational EBITDA margin improved to 15.7%. A major milestone in the quarter was that the Champlain Hudson Power Express project reached commercial operation. This is an important achievement for NKT and for the energy transition in New York City. The cable system enables the transmission of hydropower from Canada to New York City and can supply electricity equivalent to approximately one million households. We also maintained a high transmission order backlog, which stood at 13 billion euros at the end of Q2, only slightly down from the record high level at the end of Q1, driven by product execution during the quarter. In parallel, the high voltage expansions in transmission remained on track to become operational in 2027, while the additional medium voltage capacity in Denmark was completed towards the end of the quarter. Based on the performance so far in 2026 and our expectations for the remainder of the year, we have updated the financial outlook. Revenue at standard metal prices is now expected to be in the range of 2.65 to 2.75 billion euros and operational EBITDA is expected to be between 400 and 430 million euros. We are narrowing the ranges for both revenue and operational EBITDA and we are also lifting the EBITDA range. Let's turn to slide number 6 for a look at the overall financial performance in the quarter. Revenue at standard metal prices declined to 657 million euros from 723 million in the same quarter last year, corresponding to an organic growth of minus 9%. This negative development was expected and driven by transmission where revenues declined due to lower revenue from the Champlain Hudson Power Express project as it reached commercial operation during the quarter. Operational EBITDA was stable at 104 million euros compared to 105 million euros in Q2 2025. This was a solid performance considering the lower revenue level and the operational EBITDA margin improved to 15.7% up from 14.5% in Q2 2025, supported by solid execution and a favorable product mix in transmission and grid solutions and accessories. In transmission, organic growth was minus 20%, while operational EBITDA increased to 67 million euros. Grid solutions and accessories delivered strong organic growth of 15% and operational EBITDA of 20 million euros, driven by high activity levels and satisfactory execution. Distribution delivered organic growth of 1% and operational EBITDA of 27 million euros, supported by continued robust demand in the power distribution grid segment, although profitability was affected by higher material costs and ramp-up costs related to the capacity expansion in Denmark. Now I will take a deeper look at each of the business lines starting with transmission on slide number 7. Looking at transmission, the business line maintained a high activity level and had solid execution in Q2. As in Q1, revenue was lower relative to last year where we had a high activity level in the Champlain project. Revenue at standard metal prices amounted to €334 million, down from €419 million in Q2 2025. This corresponds to an organic growth of negative 20%. As mentioned, the decline was driven by lower revenue in Champlain, including a lower level of subcontracted work compared to the relatively high level in Q2 last year, fully in line with our expectations. Operational EBITDA increased to 67 million euros from 64 million euros Q2 2025, corresponding to an operational EBITDA margin of 20.2%, which is an historical high margin for the business line. The margin improvement was driven by solid execution across the portfolio, a slightly improved product mix, and good utilization of our assets, including NKT Victoria. I'd like to remind that in a product business like transmission, quarterly profitability will vary depending on the products and execution, and in this quarter we benefited positively from this. During the quarter, we continue to progress and execute on several large projects, including Biscay Gulf, Horn C3, Immutin Vier, Spittel to Peterhead, Sydlink and Sydostlink. In addition, Champlain Hudson Power Express reached commercial operation, marking a significant milestone after extensive engineering, manufacturing and installation work across both onshore and offshore environments. Please go to the next slide and the transmission market and order backlog. Market activity in transmission remained at a high level during the first half of 2026. We estimate that around 10 billion euros of products were awarded in our addressable transmission power cable market during H1, with the majority based on DC technology. This underlines the continued strong demand for high voltage production and installation capacity where NKT remains well positioned. At the end of Q2, the transmission order backlog amounted to €13 billion to be compared to €13.5 billion reported at the end of Q1, driven by product execution during the quarter. The backlog remains at a high level, notably above the level from previous years, and continues to provide strong visibility for the business in the coming years. From a customer perspective, more than 95% of the backlog relates to European transmission system operators, while the remaining shares relate to other types of customers. From an application perspective, the backlog remains balanced across the long-term priorities in the market, with around 70% related to interconnectors and around 30% to offshore wind projects. Looking ahead, we continue to anticipate that our average addressable transmission market will exceed €10 billion per year between 2024 and 2030. We still expect short-term variations, given the volatile geopolitical and macroeconomic environment, but the overall supply and demand balance is expected to remain healthy throughout the decade. As the market approaches the 2030s, we expect the high-voltage market to be more balanced. Please turn to slide 9 for grid solutions and accessories. Turning to grid solutions and accessories, the business line delivered a good quarter with growth in revenue and improved profitability. Revenue at standard metal prices amounted to 129 million euros, an increase from 112 million in Q2 2025, corresponding to an organic growth of 15%. The growth was driven by higher revenue in both grid solutions and accessories. In grid solutions, the activity level remained high and was supported by offshore repair projects, installation work and delivery of high voltage AC onshore cable projects. In accessories, revenue increased in both high and medium voltage accessories, supported by satisfactory order execution and continued ramp up in additional production capacity. Operational EBITDA increased to 20 million euros compared to 16 million in Q2 2025 and the operational EBITDA margin improved from 15.6 to 15.6 from 15.0 last year. This reflects higher activity levels, satisfactory execution as profitability improved in both parts of the business line. Also worth highlighting is that the Power Cables Hesry site in Nordenhamn became our first zero carbon factory during the quarter. This is an important milestone for our sustainability agenda and supports our target of reaching zero emission operations across our sites. Let's go to slide number 10 and distribution. Moving on to distribution, the business line continued to benefit from robust demand in the power distribution grid segment. Revenue at standard metal prices reached €239 million in Q2 2026 compared to €234 million in Q2 2025, corresponding to an organic growth of 1%. The development was mainly driven by continued robust demand for medium voltage cables in the power distribution grid segment where volumes and revenues increased relative to the same quarter last year. Revenue growth in the quarter was however limited by capacity constraints. In the construction exposed segment the development varied between segments and local markets and it led to revenue being marginally down from Q2 2025. Operational EBITDA amounted to 27 million euros relative to 31 million in the strong Q2 last year. The decline was mainly due to increased cost of materials, which was only partly offset in the quarter, as well as costs related to the ramp-up of the additional capacity in Denmark. Despite these effects, the business line sustained a double-digit operational EBITDA margin of 11%, a sequential improvement compared to Q1. The construction of the additional medium voltage capacity in Denmark was completed towards the end of the second quarter. This includes a new production hall, production machines and test facilities and improvements to the overall production flow. These assets will continue ramping up into Q3 and will contribute to organic growth in the coming quarters. The capacity expansion in Portugal also progressed according to plan and is still expected to become operational at the end of 2026. Please turn to the next slide. Across the major capacity investment projects, execution continued according to plan during Q2. In transmission, the new high voltage capacity in Karlskrona remains on track to become operational in 2027. During the quarter, installation and testing of machinery intensified in both the new extrusion tower and surrounding buildings. NKT Eleonora also reached an important milestone during the quarter as the vessel was launched into the water in Romania and during July she started the journey to Norway, which was actually completed yesterday, where the final equipment, technical installation and onshore commissioning will be done. The vessel will strengthen our installation capabilities and is also expected to become operational in 2027. In Cologne, the investment in additional high voltage capacity and capabilities also progressed according to plan, with installation and testing of production machinery and test equipment continuing during the quarter. In distribution, the medium voltage expansion in Denmark was completed towards the end of Q2, as said, while the expansion in Portugal remains on track to become operational at the end of 2026. Overall, we are satisfied with the continued execution of our major investment projects, which, as you know, are essential to support future growth and strengthen NKT's position in the market. This concludes my part of the presentation and I will now hand over the word to Michael and he will walk you through the financials. Operators, please turn to slide 12 and please go ahead, Michael.

Thank you, Claes, and good morning for me as well. On the next couple of slides, we'll take a closer look at the financial development in the quarter. Let's start on slide 13 with the income statement. In the quarter, profitability improved despite the expected lower revenue. Revenue at standard metal prices amounted to €657 million in Q2 2026 compared to €723 million in Q2 2025. This corresponds to a negative organic growth of minus 9%. As Claes described, this development was as expected and driven by the Champlain-Hudson Power Express project reaching commercial operation compared to a high activity level in the comparison quarter. Operational EBITDA of 104 million euros was stable from Q2 2025. Despite the expected decline in revenue, the operational EBITDA margin improved to 15.7% from 14.5% in Q2 last year. The margin improvement was mainly driven by transmission and grid solutions and accessories, supported by solid execution and a slightly more favourable mix of projects and activities. Depreciation and amortization were basically flat relative to last year and thereby EBIT amounted to 69 million euros compared to 71 million in Q2 2025. Net financial items amounted to a cost of 3 million euros mainly driven by non-cash exchange rate fluctuations and thereby the net result was 52 million euros compared to 54 million last year with tax also slightly lower than last year. The average number of employees increased by more than 650 since Q2 2025 average, driven by high activity levels and the ongoing investments across the business. Please turn to slide 14 and the cash flow development. Cash flow from operating activities amounted to minus 145 million euros in Q2 2026, compared to minus 1 million in Q2 2025. The positive EBITDA contribution was more than offset by an outflow from changes in working capital, which amounted to minus €225 million in the quarter. The working capital development was driven by phasing between milestone payments and project execution and transmission, but also an increase in inventories and trade receivables. Inventories rose slightly due to the strategic stock buildup of materials in response to the conflict in the Middle East, and trade receivables rose as a consequence of increased activity level. As we have mentioned previously, working capital will vary from quarter to quarter, depending on the timing of customer payments and project execution across the high voltage portfolio. Cash flow from investing activities was minus 104 million euros in Q2 2026, relative to minus 174 million in the same quarter last year. Investments were driven by the ongoing investments to increase capacity and capabilities in transmission and distribution. Activity level across the investment programs remained high and continued to progress according to plan. The actual spend in the quarter was slightly lower than preceding quarters, but this was a result of timing of payments. As a result, free cash flow was minus €249 million in Q2 2026 compared to minus €175 million in Q2 2025. This reflects both the continued high investment level and the working capital development during the quarter. Please go to the next slide where we will look at the balance sheet. Moving to the balance sheet, NKT maintained a robust financial position at the end of Q2 2026. Working capital remained negative at €1.2 billion at the end of the quarter. This was lower than the three months ago, mainly driven by the phasing between milestone payments and project execution and transmission, but better than the working capital balance one year ago. Capital employed increased to almost €1.7 billion at the end of Q2 2026, up from €1.4 billion at the end of Q1. This was driven by the working capital development and continued investments in capacity and capabilities. Return on capital employed was 20% at the end of Q2, down from 22% at the end of Q1. The net cash position was reduced by €251 million during the quarter, mainly reflecting the negative free cash flow development. At the end of Q2, the net cash position amounted to €591 million, compared to €842 million at the end of Q1. Financial leverage was minus 1.5 times operational EBITDA on a last 12-month basis. Available liquidity reserves was more than 1.3 billion euros at the end of the quarter. This provides NKT with a strong financial foundation as we continue to execute on our growth journey and deploy capital into the announced investment programs over the coming quarters. Let's turn to slide 16 and the updated outlook for 2026. Based on the solid financial performance so far in 2026 and the expectation for the remainder of the year, we have updated the outlook for the full year. Revenue at standard metal prices is now expected to be approximately 2.65 to 2.75 billion euros compared to previously 2.63 to 2.78 billion. and Operational EBITDA is now expected to be approximately 400 to 430 million euros from previously 360 to 410 million. With the update, we are narrowing the ranges from both revenue and Operational EBITDA. The revenue range is narrowed around the previous midpoint while we are lifting the EBITDA range with the new top end being 20 million above the previous range. The update is driven by the solid project execution as we have seen and expected to see in the remainder of the year. This is the case across the business lines with the main contribution coming from transmission and grid solutions and accessories. The underlying revenue expectations are unchanged. In transmission, we still expect slightly lower revenue with an expected mid-single digit percentage organic decline. This is due to a combination of a lower level of subcontracted revenue compared to 2025 and then an expected normal level of variation orders, as production and installation capacity available in 2026 is unchanged from 2025. Grid Solutions and Accessories is still expected to benefit 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 the second half of the year, distribution is expected to benefit from the additional capacity coming online mainly in Denmark, but also in Portugal towards the end of the year. In total, they are still expected to contribute with up to 10% growth to the business slide. And unchanged, distribution is expected also to contribute positively to the EBITDA development in 2026. The expected margin dilution of up to 2 percentage points from increased costs to support the ongoing investments and production ramp-up remains unchanged. The outlook continues to be based on several important assumptions, and they are listed on the right-hand side of the slide. Please turn to slide number 17 now. Before we conclude the call, I will just briefly recap the key messages of the quarter. Q2 2026 was characterized by solid financial performance and continued diligent execution of our strategic priorities. Organic growth was negative, as expected, driven by the lower revenue and transmission following the commercial operation of Champlain-Hudson Power Express. While operational EBITA remained stable at 104 million euros. The transmission order backlog remained at a high level at 13 billion euros at the end of Q2, providing strong long-term visibility. Market activity also remained high during the first half of the year and we continue to see a healthy demand environment for high voltage power cable solutions. In transmission, the Champlain-Hudson Power Express project reaching commercial operation was a major milestone for NKT and for the energy transition. The project demonstrates the role NKT plays in enabling renewable energy to be transported across regions and into major consumption centers such as New York City. Our major capacity expansion projects continue to progress according to plan. The high voltage expansions in transmission remain on track to become operational in 2027 and NKT Eleonora is now arriving in Norway for final installation. The medium voltage expansion in Denmark was completed towards the end of Q2 and the expansion in Portugal remains on track for completion at the end of this year. Finally, we have updated the outlook for the year as I just described. We are narrowing the ranges both for revenue and operational EBITDA. The outlook for revenue is narrowed around the previous middle point, while we are lifting the EBITDA range. Let's go to the next slide. Before we move to Q&A, I would like to briefly remind you of our upcoming Investor Day, which will take place on 29 September in Karlskrona, Sweden. At the event, we will present our charging forward strategy in more detail, provide additional insights into the new business line structure that became effective on 1 January 2026, and you will also have the opportunity to meet the group leadership team of NKT. The day will also include a visit to our production facilities in Karlskrona, where participants will have the opportunity to see the progress on our high-voltage subsea cable expansion and gain a deeper understanding of the capabilities we are building for the future. If you are interested and have not yet registered for the day, further information is available on our investor relations website. This concludes today's presentation and I will now hand over the word to the operator who will guide us through the Q&A session. Operator, please.