Alleima AB (publ)

Hello and welcome to Alema's presentation of the first quarter results 2026. My name is Frida Adrian and I am Head of Investor Relations. I'm joined by our President and CEO Göran Björkman and our CFO Johan Eriksson. Göran and Johan will take you through the highlights of the quarter and following the presentation we will open up for Q&A session. You are welcome to ask questions via the conference call or submit your questions through the webcast interface. All the presentation materials are available for download at elema.com. And as always, safety is a top priority for us and I trust that you are familiar with the safety procedures at your current location. And with that, over to you, Göran.

Thank you, Frida. Hi, everyone, and thank you for listening. So I'll start with the highlights for the first quarter. Well, market uncertainty continued throughout the first quarter with the ongoing geopolitical instability reducing our customers' willingness to invest. We also have this situation in the Middle East that has impacted the market and in particular affecting our OCGG business. I will come back to that shortly. But these circumstances continue to impact our short cycle business, which began to experience a slowdown roughly at this time last year. On a positive note, key segments such as medical and industrial heating have contributed favorably, supported by a strong organic order intake. Look at the order intake for the group. Rolling 12 months declined 12% organically. Revenues declined 5% organically, also affected by the short cycle business and OCGG, somewhat mitigated by medical, nuclear and industrial heating. Adjusted EBIT amounted to 386 million and a margin of 8.4%, down from 10.5% last year, but here diluted roughly 150 basis points by FX. We have started to see positive impact from the earlier announced efficiency measures. They cannot, however, yet compensate for the negative currency effects and the lower sales in the quarter. But given the market and currency circumstances, I believe we in a good way still are protecting our profitability, while our solid balance sheet enables us to stay with our long-term strategy. And during this quarter, we opened up two facilities for industrial heating focused on silicon carbide heating elements. One in Perth, UK, expanding our production capacity on that site. And one new service center in Concord, US, which expands our reach of silicon carbide heating products and improves our position on the American market. Moving on to sustainability. the sustainability performance remains solid in the quarter with continued progress in safety high share recycled steel and a record high sustainability product portfolio safety remains our top priority and i'm pleased that performance continues to move in the right direction the measures we have implemented are delivering results and we will continue to build on that progress Our share of recycled steel stayed above 81%, both on a rolling 12-month basis and year-on-year. I think that is a strong outcome, especially considering our product mix with relatively high share of high nickel products. We saw an increase of CO2 emissions in the quarter. That was mainly due to the cold winter and also temperate cost-driven energy mix effect with somewhat lower share of biogas. And our sustainable product portfolio reached nearly 26% on rolling 12-month basis, which is a new high. Through close cooperation with customers, we help them address technical challenges and support their sustainability and climate goals. Moving on to our review on the market development. Given the situation in the Middle East, market uncertainty has increased. One could argue that high energy prices would be positive for us. And this is to some extent true, but it needs to be high energy prices for the right reasons. And I believe what we see now with oil and gas prices are rather speculative and not driven by increased demand. But we are, of course, monitoring the situation closely and we are ready to act. Overall demand stayed weak in Europe, subdued in North America, while Asia showed strong resilience, but not as strong as last year. And several key segments are performing well, and I will walk you through development in each segment, starting with oil and gas. Overall, our review on the underlying demand is still solid, but more so for umbilicals, where the project list of upcoming tenders and potential orders remains strong. And we have increased production pace during the quarter. For the OCTG business, we flagged a bit weaker outlook already in the Q4 report. And given that a large part of that business is exposed to Middle East, we are, of course, affected by the development where the arrow now is pointing down. Industrial European demand is still weak. Asia declined while North America improved on low levels. We noted some improvement in Europe, but on low levels was too early to tell, while Asia and Middle East was weaker and North America at low levels. Industrial heating continued to see good growth, mainly driven by Asia and North America, while Europe is still on the weaker side. Subsegments like electronics and semiconductors are the main drivers for the growth. Consumer demand continued to be flat, but on a good level. And the medical continued good momentum across the product portfolio. And our greenfield investment in Malaysia is going according to plan and will add additional capacity by the end of the year. In transportation, titanium tubing for aerospace continued to be strong while marine and automotive is weaker. Mining construction demand was stable overall driven by the mining industry with somewhat weaker demand related to the construction industry. nuclear continue good activity and a solid bath block but please remember it's a business with natural long lead times and then we then take the last one hydrogen renewable energy hydrogen related business is negative but with some bright spots in renewable for instance for biofuels so let's look more in detail on the Middle East crisis. I mean, it's not only increasing uncertainty in the market, it's also causing volatility in energy prices, shipping costs, and the risk of inflation has increased. We're monitoring those areas closely. I understand that there are questions how this crisis is affecting LAIMAP. I think at this stage, it's important to focus on what we know and avoid speculation, whether it's negative or positive. At the same time, we are, of course, working with different scenarios. Our OCTG business, part of the oil and gas segment, is currently affected both direct and indirect exposure to the Middle East region. What we know is that the drilling pace in the region relevant to the OCTG business remains low. And we're working closely with our customers, who is currently operating at a lower pace than normal, and they have asked us to hold back, which means that we have reduced output pace for the time being. And we, of course, also know that similar businesses in the region are also impacted. What we don't know yet is how long this situation will last, or how much of the oil and gas infrastructure in the region that may be damaged and required repair. And if we look at the OCG business, it's mainly CapEx-driven and can actually vary year from year. We are expecting lower OCG volumes in 2026, partly due to the weaker market that predates the Middle East crisis. Now it's been about eight weeks since the war in Iran began, so we, like the rest of the world, are working to get a clearer picture on how this is affecting our businesses. And we are, of course, also closely following the development and noting cautious customer behavior, causing tenders and project decisions to be postponed. So let's look at the order intake and revenue in the quarter. Order intake for the rolling 12-month period amounted to 16.3 billion, down 12% organically. This is mainly explained by the major order of SGTs received in Q1 last year, as well as OCTG forms. Just for those two products, order intake would be slightly positive. For this GT business, this is normal, given the nature of that business, while the Middle East crisis is affecting those GT business negatively. On the positive side, strong order intake from Cantal, both in medical and industrial heating. At the same time, we saw the short cycle business continue to be negatively affected by market uncertainties and lower investments in our value chains. Revenue on 4.6 billion negative order growth of 5%, where both Cantal and Strip again grew, while Tube declined, affected by the aforementioned short-cycle business, but also lower revenues from OCDG in the oil and gas, and also lower in automotive in the transportation segment. Booked-in bill rolling 12 months was 90%, which is on the low side. but not really surprising given the market development and high comps in the project-related business. Book-to-bill rolling 12 was 100% excluding SGT and OCTG. Moving on to the profits, so adjusted EBIT decline, which of course I'm not pleased with, but as I alluded to earlier, I think we are doing an okay job working on what we can affect. And given the lower volumes in industrial and especially the more profitable chemical and petrochemical segment, gross profit is lower. We also get lower absorption in some of our factories. Margin was 8.4%. 9.9% if I adjust for FX. The early ramp-up issues with expansion presses suddenly can have only minor impact on performance in the quarter. Press has been operating more efficiently than in quarter four and is not any more restricted in production volumes and is expected to be fully operational during the summer. We started to see positive effects from the already announced efficiency measures. They cannot, however, yet compensate for negative currency effects and the lowest sales in the quarter. And finally, we had a negative cash flow in the quarter of 65 million due to lower EBITDA and also working capital. And cash flow is normally lower in the first half of the year than the second half. So let's look at the performance of the division, starting with Tube, where we have the largest volumes. I mean, Tube has been the division most affected by the market development over the last 12 months. Although some areas are performing well, such as umbilicus, where we're ramping up output for 2026, also titanium tubing for aerospace and the Asia market. However, overall volumes remain on the low side. Order intake rolling 12-month period declined organically by 19%, and that is on back on the major STG ordering Q1 2025 and somewhat high comps in oil and gas, as well as the short cycle business. Revenue declined organically by 9%, affected by the aforementioned short cycle business, but also lower revenues from OCDG in the oil and gas and automotive in the transport segment. Book-to-bill mounted to 85%. Just an EBIT margin on 8.9% and 9.2% excluding FX effects of 23 million year-over-year. And the fact that Tube has the lowest relative FX headwind stems from the fact that Tube has most of the project related business and therefore the biggest hedges. But also the fact that they make the biggest purchases of raw material in US dollars, which of course is mitigating the negative effects. Moving over to Cantal. Cantal continued the positive trends seen over the past few quarters with a broad-based growth and a strong performance in the quarter. I think they've done a great achievement. Rolling 12 order intake grew organically by 14%, driven by medical and also industrial heating, especially in North America and APEC. Revenues grew 8% organically on the back of medical, consumer and industrial heating with strong performance in the same regions. And the adjusted EBIT margin of 17% or 18.8 adjusted for a negative 41 million coming from FX is a good level coming from a solid product mix. All in all, a really solid performance from Cantal in quarter one. Tripp, I think also is doing a lot of good things, for instance, with his channel partner network and also to improve that cost position, aiming to again be a margin contributor to the group. Rolling 12 order intake declined organically by 16%, driven by all segments. But this is heavily impacted by the negative development within the hydrogen business, while we should call it the original strip is still on a good level. Revenues grew 5% organically, driven by especially razor blades. And book-to-bill amounted to 88%. Adjusted EBIT margin was 5.9%, but heavily impacted by FX, negative 29 million year over year. And the underlying margin was 12.6%, where the consumer segment was strong across all regions. Also solid performance from Stript. With that, over to you, Johan.

Thank you, Göran. So, the financial summary, and starting with the table to the right. Order intake for the rolling 12-month period amounted to 16.3 billion, corresponding to an organic decline of 12%. We had negative impact from currency and alloys of 6% and 2% respectively, totaling a growth of minus 19%. The quarterly revenues reached 4.6 billion with a negative organic growth of 5%. including the U.S. tariffs that is estimated to impact us with plus 70 basis points. Also for revenues, we note a significant impact from FX, primarily from a stronger stake against the U.S. dollar, which in total had a negative impact of 6%. Alloy effects impacted by minus one on quarterly revenues. And looking at the coming quarter, we see a neutral currency and alloy effect for that time period. We had no contribution from structure, meaning acquisitions or divestments, as our latest acquisition, Endox, now has been with us for the full year and no longer affect comparability. Going back to the big table on the left, where I'll get back to adjusted EBIT in a coming slide, and the reported EBIT declined to 391 million. affected negatively by lower revenues, effects and items affecting comparability, while helped somewhat by positive metal price effects and the savings from the targeted measures. On the items affecting comparability, we now have in total taken 344 million of the estimated 400 million for the targeted measures that we communicated in the earnings call for the third quarter. The remainder is expected to be taken in the coming three quarters. Net financial items for the quarter amounted to minus 11 million compared to plus 13 million last year. And this is mainly driven by valuation of derivatives. The normalized tax rate came out at 24.5 for the quarter. Free operating cash flow came out at minus 65 million in the quarter, which I also get back to in the coming slide. And finally, adjusted EPS for the quarter at 1.14 sec, impacted negatively by the lower adjusted EBIT. So looking at the bridge then for adjusted EBIT, where we start at last year's 540 million and a margin of 10.5. compared to this year's 386 million with a margin of 8.4. And like Göran pointed out, FX is a big factor behind the development. This quarter dilution was 150 basis points. But of course, we also are affected by the negative organic development stemming from the weaker markets, especially in this short cycle business, and therefore impacted by underabsorption effects. Meanwhile, we also had some contribution from the savings related targeted measures with positive effects of roughly 30 million in the quarter. The 6 million contribution in structure comes from an M&A related cost book last year. Moving over to the balance sheet and capital efficiency, networking capital decreased in absolute terms year over year, mainly due to volume and currency effects, but increased as a percentage of revenues to 35.5 due to lower quarterly sales. The sequential increase of networking capital in the graph can mainly be derived from an increase of accounts receivables, given that invoicing was tilted more towards the end of the first quarter. Capital employed excluding cash decreased year over year to 16.2 billion, mainly driven by lower networking capital. The return on capital employed excluding cash based on reported operating profits, meaning that we include metal price effects and items affecting comparability, was 5.0% for the rolling 12-month period, down from 11.9% last year, coming from the lower reported operating profit due to the reasons described before. Looking at our free operating cash flow for the quarter, as you can see on the graph to the right, the Q1 cash flow normally is lower than the preceding quarters as per normal seasonality, as we during this quarter start preparing for the Q3 summer shutdown and maintenance stop. Moving over to the table on the left, I think we've touched on the EBIT and EBITDA already. Looking at the non-cash items, which most commonly refers to cash or non-cash effects from provisions or provision releases. And this year, it's also affected by cash flow effects from the targeted measures. the restructuring activities. So that is about minus 20 million SEK from that in this year's cash flow. We note the negative impact from changing working capital, mainly due to higher accounts receivable coming from the strong invoicing at the end of the quarter, but also increased inventory as per normal seasonality. The decrease in CapEx year over year is mainly comes from timing on the ongoing projects. Amortization of lease liabilities is only slightly higher this year. And all in all, this leaves us with a free operating cash flow of minus 65 million. And as I pointed out, this follows seasonality and as cash flow normally is lower the first half of the year when we start to prepare for the upcoming summer stop in the third quarter. And looking at our financial position, it remains strong. And we are well below our financial target of a net debt to equity ratio below 0.3 times. At the quarter end, we were at the negative 0.04 times. Net pension liabilities decreased to 699 million from last year's 839, mainly as a result of higher discount rates. Leasing liabilities are slightly lower than last year. And our cash position continues to be strong. And we have a net cash position of 596 million, which will come in use as there is a dividend proposal of 2.56 per share for the AGM later this week. So looking at the guidance and how we guide it prior to the quarter and the outcome on CapEx, we guide on full year. And so far, the CapEx spend for the first quarter is 160 million. And it's worth noting that normally the second half of the year is the more CapEx heavy part of the year. Currency. Transaction and translation effects came in at minus 173 million, where we estimated for minus 240, where the difference mainly is due to a weaker Swedish krona towards the end of the quarter. In total, the currency effect in the total currency effect, the transaction and translation effects were partly upset by a bridge effect. from this year's hedges and revaluations and last year's negative revaluations. So in totaling, giving a bridge effect of plus 80 million. So taking the total currency bridge effect on EBIT to minus 93 million. Metals affected us positively with 8 million where we guided for minus 50. And the reason is mainly increased metal prices during the quarter. Normalized tax rate came in at 24.5 for the quarter, where we were guiding for 23 to 25 percent for the full year. Moving over to the guidance for the second quarter. So full year capex, we keep the full year capex guidance of 1.1 billion coming from growth projects of For example, steam generated tubing capacity increase in Sandviken as well as industrial heating in Japan and medical in Malaysia. And a little less than half of the total is for maintenance. Currency effects for Q2 based on the rates as per 23rd of April, so last Thursday. The transaction and translation effects are estimated to minus 60 million on the back of a stronger SIG. Looking at the metal price effects based on metal prices and currency rates, also the 23rd of April, last Thursday, we anticipate the positive effect of 150 million for quarter two. And here it's worth probably worth reminding about the dynamics that the price increase for nickel or molybdenum or chromium over time leads to more positive metal price effects. While a stronger set, for example, against the US dollar has the opposite effect. And the tax rate for the full year 2026, we expect a normalized tax rate in the range of 23 to 25%. So by that, I hand back to you, Göran, for outlook and summary.