Alleima AB (publ)

Hello, everyone. Welcome to Aleima's presentation of the second quarter results, 2026. My name is Frida Adrian, and I'm 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 a Q&A session. You're welcome to ask questions via the conference call, or submit your questions through the webcast interface. The presentation materials are available to download at aleima.com. And as always, safety is a top priority for us, so I trust that you are familiar with the safety procedures at your current location. And with that, I hand over to you, Jaro.

Thank you, Frida. I would like to begin this webcast by addressing a very sad event that happened on May the 5th. I want to express my deep sorrow with a tragic traffic accident at our industrial site in Sandviken, in which one of our colleagues sadly lost their life. My thoughts are with our colleagues' family, friends and colleagues, and our deepest sympathies go to all of those affected. This tragic Tragedy is a painful reminder of why safety must always remain a layman's highest priority. We are cooperating with authorities while continuing our long-term work to strengthen our safety culture, mitigate risks and ensure a safe working environment for everyone. This is an ongoing effort that is never complete and that requires our full commitment every single day. So while this loss has been deeply felt across the organization, I will now turn to the key developments and highlights for the quarter. So let's look at them. Overall, I think it's a strong quarter on several fronts. We are, for the first time since quarter one 2025, again showcasing top line growth, where both order intake and revenues grew organically. The 12-month rolling order intake went from minus 12 organic order intake in quarter one to now plus 3% in quarter two, supported by strong performance in key segments like parts of oil and gas, medical, industrial heating, and transportation. And so, as you have seen, we received the largest order yet in the history of Lehman on almost one billion prime medical tubes. At the same time, there are still uncertain markets where the situation in the Middle East still affects us, mainly in the OCTG business, but creating overall uncertainty in other areas as well, while we are pleased with the quarter, but remain cautious going forward. Earnings-wise, we saw a strong contribution for Kantar, which I will get back to, but also strong performance from the umbilical business, as well as titanium tubing to aerospace. This is somewhat offset by weaker short-cycle business within tube, where the weak Europe continues to dampen the result. Also noted is slight FX tailwind. We'll continue our journey on long-term value creation. During the quarter, Alema inaugurated tube in 2026. Spanning capacity was steam-generated tubes to the nuclear industry by 60%. also paid a dividend to our shareholders on total 625 million, an increase of 9% compared to 2025. And in addition, the targeted measures announced in the third quarter last year are progressing according to plan and are delivering cost savings in line with expectations. I think taken together, these actions position the labor well to continue creating value going forward. Moving to sustainability, which remains an important part of our strategy, and during the quarter, the share of revenues from a sustainable product portfolio increased, mainly driven by the growth in medical and industrial heating segments. Health and safety, always our highest priority, rolling 12-month accident frequency improved versus quarter two last year, but sequentially increased due to more accidents this quarter than quarter two last year. And we need to continue and to maintain a strong safety focus across the organization. CO2 emissions increased mainly due to a lower share of biogas and a higher use of natural gas. At the same time, the share of recycle speed remained high at above 80%, both on a rolling 12-month basis and year-on-year. If we take a look at our review on the market development, we still view it as mixed. uncertain or challenging, whichever word you like, stemming from the uncertainty around the Middle East and an already weak Europe. Volatility is expected to linger, but we also expect momentum to continue in key segments. Maybe you noticed that we changed a few arrows, but I will walk you through each segment, starting with oil and gas. I can say that I feel confident to say that it was a good decision to increase output pace for umbilicals in the beginning of the year. Major order received is a confirmation that the market is strong and we stick to a positive view, as the product list still is very attractive. For OCTG business, on the other hand, we talked last quarter about the effects from the situation in the Middle East. We flagged for a weaker outlook already in the Q4 report, and we stick to that view as well, where we land in a flat arrow. Industrial European demand is still weak. Asia also declined, but North America improved, but on low levels. Chempetrochem values in Europe and North America are low, while Asia has been holding up better, but where we now have a slight slowdown. Industrial heating, we continue to see growth driven by Asia and North America, while Europe is still on the weaker side, and it's still sub-segments like electronics and semiconductors are still the main drivers. Consumer flat demand on a good level, And medical, strong momentum, no signs of slowing down. And let me remind you again of our greenfield investment in Malaysia that will be up and running towards the end of the year. Transportation, titanium tubing for aerospace, also including space, is continued to be strong. Mining construction, demand was stable overall, again driven mainly by the mining industry. Nuclear, nothing has changed where the outlook remains positive. And last, how do you know renewable energy? There are some bright spots, for instance, biofuel, but all in all still weak. So let's turn to the Middle East. Market uncertainty continues. The situation remains unstable, and as you know, there is new information emerging almost every other day. The uncertainty is negative for the market as it affects visibility, customer sentiment, and decision-making. And just as previous quarter, it's important for us to focus on what we know and to avoid speculation, whether it's negative or positive. A large exposure in the region is within OCTG, which is part of the oil and gas segment. And this business has both direct and indirect exposure to the Middle East and is being negatively affected by the developments in the region. We continue to see slowdown in new well completion, which is expected to negatively impact our order intake in coming quarters. And as I said in quarter one, we have reduced our output to support our customers in avoiding excess inventory, which have had a negative impact on revenues. We also have a petrochemical business in the Middle East, and that is also effective, although this is a much smaller part than OCDG in that region, and therefore less significant from an overall exposure perspective. And at the same time, the impact on other businesses remains limited. Momentary order intake and revenue order intake, rolling 12, amounted to 18.6 billion. Again, up 3% organically compared to the minus 12 we had in quarter one. And this is supported by strong development from umbilicals, including the large order, but also excluding the large order, umbilicals was good. And also strong development, industrial heating, medical and aerospace. We are growing despite the lower OECD volumes we flagged for previously, and we are still low in CanPetrogram, while we strategically have booked some more contribution business in the quarter to cover costs, which will have a somewhat diluted effect in the margin near term. Revenues grew organically by 2%, supported by the same key segments that drove order intake. Tube and strip declined, while Cantal grew. And book-to-bill rolling 12 recovers to 102% from the 90% we had in Q1. Earnings. Adjusted EBIT improved to 519 million and a margin of 10.6%. Strong performance despite lower volumes in the OCTG and the short cycle businesses. This is explained by solid performance in umbilicals, aerospace, and I would say all of the cantal. And in addition, we see positive effects from the targeted measures announced in Q43 last year, and somewhat helped by FX cash flow of 330 million, which Johan will get back to show some details later. So let's look at the division performance during the quarter, starting with tube. And I would say it is a mixed picture. Some parts of the business, like umbilicals within oil and gas, titanium tubing within transportation, are performing really well. While short cycle business, mainly industrial and petrochem, still are weak. Our APEC unit has previously held up strong, both in terms of top line and earnings, but we now expect a somewhat weaker Chinese market. Rolling 12, order intake grew 1% organically on the back of the major umbilical order, held back some by high comps in both SGT and OCTG. Revenues declined by 3%, again affected by the short cycle business, OCTG, and also some timing effects in nuclear. Book-to-bill grew to 101%, recovering from the 85% sequentially. Just an EBIT margin of 11.2% on par with last year despite lower revenues, coming from strong contribution in umbilical and aerospace, as well as savings from the targeted measures, mitigating the negative effect from the short backlog in short cycle business and the lower volumes in OCTG. And currencies had a positive effect on 18 million year-over-year. Cantal, let me take a moment and really highlight the great performance of Cantal. In the recent downturn, where volumes in industrial heating were low, while facing a significant FX headwind throughout most of 2025, they've done an excellent job in taking actions to protect profitability. And now, when volumes have recovered, and with the growth investments ready to scale, I would say the future of Kantar looks really bright. Ronin-12 water intake grew organically with 19% where medical and industrial heating were the main drivers, and the same can be said for revenues, which grew 21% organically. Ronin-12 booked a bill of 109%, and the adjusted EBIT more than 19.6% is a record high in a quarter, and we see contribution from several product groups, both within medical and industrial heating. FX had a minor positive effect on 4 million year-over-year. So to STRIP, it's been a challenging quarter for the STRIP division. We have experienced some production disruptions in Sandviken. I would say these issues have now been resolved. Mitigating actions are ongoing, and STRIP is working to strengthen its cost position, with, of course, the aim to once again contribute positively to the group margin. Rolling 12 water intake declined organically with 16%, heavily impacted by a negative development with the hydrogen business, but also a weaker industrial segment. Revenues declined 1% organically, with the consumer segment contributing positively. Justed EBIT margin was 2.5%, but impacted negative 3 million year-on-year, and underlying margin was 3.3%. A book-to-bill amounted to 89%. And with that, I'll leave it over to you, Johan.

Thank you, Göran. So looking at the financial summary and starting with the table to the right, So water intake for the rolling 12-month period amounted to 18.6 billion, corresponding to an organic growth of 3%. We had a negative impact from FX and alloys of 4 and 1% respectively, indicating a total growth of minus 2%. If we look then at the quarterly revenues, we reached 4.9 billion with organic growth of 2% and still some impact from FX, which in total had a negative impact of 1%, while Alloys had turned to a slight positive effect of 2% on quarterly revenues. If we look ahead into the quarter three, we see on revenues a neutral currency effect, And we expect roughly plus 2% from alloys. And on the order intake side for the rolling 12 months, we expect minus 3% on currency and a neutral effect from alloys. And we have no contribution from structure, we can conclude. We haven't done any acquisitions in the last 12 months, and there is no structure effects on top line then. And then back to the big table on the left, where I'll get back to adjusted EBIT in a coming slide. The reported EBIT increased to 715 million, coming from higher revenues and positive metal price effects. And net financial items for the quarter amounted to minus 10 million compared to plus 18 million last year, mainly driven by valuations of derivatives, which mostly were in the comparison period last year. Normalized tax rate at 21.1% for the quarter, but preferably we look at the year-to-date figure, which is 22.5, so on the lower side of our guidance. Free operating cash flow came out at 330 million in the quarter, and I'll get back to that in a coming slide. And finally, adjusted EPS for the quarter at 1.57 SEC, impacted positively by a higher adjusted EBIT. So let's have a look at the bridge for adjusted EBIT. We start at last year's 454 million and margin of 9.5%. compared to this year's 519 million with a margin of 10.6. And this is a solid organic development, I must say, with a healthy leverage of 46% and a strong contribution from, as Søren also mentioned, from Cantal and parts of the tube business. And, of course, the targeted measures that we announced after the Q3 closing last year. All of these mitigated then the underabsorption effects that we saw from the lower OCTG volumes and the weaker short cycle business. And we're pleased that the targeted measures are proceeding according to plan, both the permanent ones and the volume related ones. So in total, they yield some 45 millions in the quarter, putting us roughly at the 85% of our targeted run rate. And we saw no contribution from structure in the EBIT bridge this quarter. Moving over to the balance sheet and looking at the capital efficiency, networking capital increased in absolute terms year over year, mainly due to the higher metal prices, but it decreased as a percentage of revenues. So in relative terms down to 35.5% due to higher quarterly sales. Sequentially, we increased networking capital, and you can see that in the graph, and that can be derived from increase of accounts receivable and higher inventories than driven by the increasing metal prices and some volumes as well. Capital employed that you have on your right hand side, excluding cash increase year over year to 16.6 billion, mainly driven by higher networking capital. and the return on capital employed excluding cash based on the reported operating profit, so that includes metal price effects and items affecting comparability. That was 7.7% for the rolling 12-month period, down from 9.2% last year, coming from a lower rolling 12-month period reported operating profit. Looking at the cash flow, And what is worth mentioning and some food for thought is that we have been talking for some quarters now about the challenging market and not being 100% satisfied with our own performance. But this graph shows that we, despite that, are generating and continue to generate a healthy cash flow. And moving to the table on the left, EBIT and EBITDA, I think we've touched on already. The non-cash items, which most commonly refers to cash or non-cash effects from provisions or provision releases. And this year, it was affected by cash flow effects from the ongoing restructuring activities. We note the negative impact from changes in working capital, mainly due to increased inventory, and that comes from the higher raw material prices and some volume effects as well. And also higher accounts receivable affect this networking capital number. And capex for the quarter is almost on par with last year. Amortization of lease liabilities is slightly higher this year. And all in all, this leaves us with a free operating cash flow of 330 million. And please remember that cash flow normally is lower in the first half of the year when we have seasonal buildup in preparation for the maintenance stops that we have in the third quarter. Looking at our financial position, and overall, our financial position remains strong, where we are well below our financial target of the net debt to equity ratio below 0.3 times. At the quarter end, we were at negative 0.02 times. Net pension liabilities has decreased to 604 million from last year's 813, mainly as a result of higher discount rates. and the leasing liabilities are slightly lower than last year, and our cash position continues to be strong. Despite paying dividend of 625 million in May, we have a net cash position of 283 million. Let's look at the guidance we gave ahead of the quarter and the outcome of that. On CapEx, we guide on full year, and so far CapEx spent for the first half of 2026 is almost 400 million, and normally the second half of the year is more capex heavy. Currency, transaction and translation effects came in at minus 39 million, where we estimated minus 60. In the total currency effect, the transaction and translation effects were more than offset by hedges and bridge effects from revaluations. So this year we had positive hedges and positive revaluations, and last year we had some negative revaluations, resulting in a total breach effect from those items of plus 57. So that takes us to the positive 19 that we have in the total currency effect. If we then look at the metal price effects driven by increased metal prices, the metals affected as positively in EBIT with almost 200 million, where we died for 150. And the normalized tax rate year to date is 22.5, where we are guiding for 23 to 25 for the full year. So at the low end, but quite close to the range. And looking into the third quarter and full year and the guidance for That full-year capex, we keep the full-year capex guidance of 1.1 billion coming from growth projects for the year of the one that you know that we have inaugurated, the steam generated tubing capacity increase in Sandviken, but also investments like the industrial heating in Japan and medical in Malaysia. And a little less than half of the total is also for maintenance. Currency effects for the third quarter based on the rates per the 15th of July. The transaction and translation effects are estimated to be neutral. On the metal price side, based on the metal prices and currency rates per the 15th of July, we anticipate a positive effect also in the third quarter of 100 million. And here it's probably worth reminding about the dynamics that the price increase, especially for nickel, but also for molybdenum and chromium, over time leads to positive metal effects in our EBIT, while a stronger SEC against the US dollar, as an example, has the opposite effect. On the tax rate for the full year 2026, we expect a normalized tax rate in the range of 23 to 25%, just as before. And by that, I hand back to you, Göran, for outlook and summary. Thank you, Johan.