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ITW 2025 Q3 财报电话会议

Operator: Good day, everyone, and thank you for joining us for today's ITW Third Quarter 2025 Earnings Webcast. [Operator Instructions] Also, please be aware that today's session is being recorded. It is now my pleasure to turn the floor over to our host, Erin Linnihan, Vice President of Investor Relations. Welcome. Erin Linnihan: Thank you, Jim. Good morning, and welcome to ITW's Third Quarter 2025 Conference Call. Today, I'm joined by our President and CEO, I'm joined by our President and CEO, Chris O'Herlihy, and Senior Vice President and CFO, Michael Larsen. During today's call, we will discuss ITW's third quarter financial results and provide an update on our outlook for full year 2025. Slide 2 is a reminder that this presentation contains forward-looking statements. We refer you to the company's 2024 Form 10-K and subsequent reports filed with the SEC for more detail about important risks that could cause actual results to differ materially from our expectations. This presentation uses certain non-GAAP measures, and a reconciliation of those measures to the most directly comparable GAAP measures is contained in the press release. Please turn to Slide 3, and it's now my pleasure to turn the call over to our President and CEO, Chris O'Herlihy. Chris? Christopher O'Herlihy: Thank you, Erin, and good morning, everyone. As detailed in our press release this morning, the ITW team continues to perform at a high level, successfully outpacing underlying end market demand and delivering solid operational and financial execution within a stable yet still challenging demand environment. For the third quarter, revenue increased 3%, excluding a 1% reduction related to our ongoing strategic product line simplification efforts. Organic growth was 1%, a solid performance relative to end markets that we estimate declined low single digits and a 1 percentage point improvement from our second quarter growth rate. Favorable foreign currency translation contributed 2% to revenue. Focusing on the bottom line, we achieved GAAP EPS of $2.81, grew operating income by 6% to a record $1.1 billion and significantly improved our operating margin by 90 basis points to 27.4%. We maintained excellent execution in controlling the controllables as enterprise initiatives contributed 140 basis points and effective pricing and supply chain actions more than covered tariff costs and positively impacted both EPS and margins in the quarter. Consistent with our long-term commitment to increasing annual cash returns to shareholders, on August 1, we announced our 62nd consecutive dividend increase, raising our dividend by 7%. Additionally, year-to-date, we have repurchased more than $1.1 billion of our outstanding shares. Furthermore, I'm encouraged by the significant progress on our next phase strategic growth priorities. We remain laser-focused on making above-market organic growth, powered by customer-backed innovation and defining ITW strength. The strategy is working, and we remain firmly on track to deliver on our 2030 performance goals, which include customer-backed innovation yield of 3% plus. As we stated before, ITW is built to outperform in challenging environments. As we look ahead to the balance of the year, we are narrowing our EPS guidance range, confident in our ability to continue leveraging the fundamental strength of the ITW business model, the inherent resilience of our diversified portfolio and the high-quality execution demonstrated every day by our colleagues worldwide. I will now turn the call over to Michael to discuss our third quarter performance and full year 2025 outlook in more detail. Michael? Michael Larsen: Thank you, Chris, and good morning, everyone. Leveraging the strength of the ITW business model and high-quality business portfolio, the ITW team delivered solid operational execution and financial performance in Q3. Starting with the top line, total revenue increased by more than 2%, driven in part by 1% organic growth, an improvement of 1 percentage point from Q2. Geographically, while North America organic revenue was flat and Europe was down 1%, Asia Pacific was a standout performer with a 7% increase, which included 10% growth in China. Consistent with ITW's Do What We Say execution, we continue to demonstrate strong performance on all controllable factors. Our enterprise initiatives were particularly effective this quarter, contributing 140 basis points to record operating margin of 27.4%, which expanded by 90 basis points year-over-year. Furthermore, our pricing and supply chain actions more than covered tariff costs and positively impacted both EPS and margin in Q3. Free cash flow grew 15% to more than $900 million with a conversion rate of 110%. GAAP EPS was $2.81 with an effective tax rate in the quarter of 21.8%. As detailed in the press release, the rate was driven by a benefit related to the filing of the 2024 U.S. tax return, partially offset by the settlement of a foreign tax audit. In summary, in what continues to be a pretty challenging demand environment, ITW delivered a strong combination of above-market growth with a revenue increase of 2% and solid operational execution, resulting in consistent improvement across all key performance metrics as evidenced by incremental margins of 65%, operating margins of more than 27% and GAAP EPS of $2.81, an increase of 6%, excluding a prior year divestiture gain. Turning to Slide 4 for a closer look at our sequential performance year-to-date on some key financial metrics. As you can see, ITW's organic growth rate, operating income, operating margins and GAAP EPS have all continued to improve in what has remained a mixed demand environment. Turning to our segment results and beginning with automotive OEM, which led the way on both organic growth and margin improvement this quarter. Revenue was up 7% and organic growth was up 5% with growth in all 3 key regions. Strategic PLS reduced revenue by over 1%. Regionally, North America grew 3%, Europe was up 2% and China was up 10%. The team in China continues to gain market share in the rapidly expanding EV market as customer back innovation efforts drive higher content per vehicle. In our full year guidance, we have incorporated the most recent automotive build forecasts, which are projecting a modest slowdown in the fourth quarter. For the full year, we continue to project that the automotive OEM segment will outperform relevant industry builds by 200 to 300 basis points as we consistently grow our content per vehicle. On the bottom line, strong performance again this quarter with operating margin improving 240 basis points to 21.8%, and we're well positioned to achieve our goal from Investor Day of low to mid-20s operating margin by 2026. Turning to Food Equipment on Slide 5. Revenue increased 3% with 1% organic growth. While equipment sales were down 1%, our service business grew by 3%. Regionally, North America grew by 2%, driven by 1% growth in equipment and 4% growth in service. Demand remained solid on the institutional side. International, however, was down 1%. Operating margins improved 80 basis points to 29.2%. For Test & Measurement and Electronics, revenue was flat this quarter as organic revenue saw a 1% decline. The demand for capital equipment in our Test and Measurement businesses remained choppy as revenues declined 1%. In addition, Electronics declined 2% as demand slowed in semiconductor-related markets. On a positive note, operating margin improved 260 basis points sequentially from Q2 to 25.4%. Excluding 50 basis points of restructuring impact in Q3, margins were 25.9% and both operating margins and revenues are projected to improve meaningfully in the fourth quarter. Moving to Slide 6. Welding was a bright spot, delivering 3% organic growth with a contribution of more than 3% from customer-back innovation. Equipment sales increased 6%, while consumables were down 2%. Industrial sales increased 3% in the quarter as North America was up 3% and international sales grew 4% with China up 13%. Operating margin of 32.6% was up 30 basis points as the Welding segment continued to demonstrate strong margin and profitability performance. In Polymers & Fluids, revenues declined 2%. Organic revenue declined 3%, which included a percentage point of headwind from PLS. Polymers declined 5% against a difficult comparison in the year ago quarter of plus 10%, while Fluids was flat in the quarter. The more consumer-oriented automotive aftermarket business was down 3%. But although the top line declined, the segment expanded margin by 60 basis points to 28.5%, supported by a strong contribution from enterprise initiatives. Moving on to Construction Products on Slide 7. Revenues were down only 1% as organic revenue declined 2% in the quarter, significantly better than last quarter's 7% organic decline. Revenue was also impacted by a 1% reduction from PLS. Regionally, revenue in North America declined 1%, Europe was down 3%, and Australia and New Zealand decreased 4%. Despite market headwinds, the segment improved operating margin by 140 basis points to 31.6%. For Specialty Products, revenue increased 3% with organic revenue up 2%. Revenue included a percentage point of headwind from PLS. By region, revenue in North America declined 1% against a difficult comparison in the year ago quarter of plus 8%, while international was up 7%, driven by consistent strength in our packaging and aerospace equipment businesses. Operating margin improved 120 basis points to 32.3%, supported by a strong contribution from enterprise initiatives. With that, let's move to Slide 8 for an update on our full year 2025 guidance. Starting with the top line, we remain well positioned to outperform our end markets in Q4, and we continue to project organic growth of 0% to 2% for the full year. Per our usual process, our guidance factors in current demand levels, the incremental pricing actions related to tariffs, the most recent auto build projections and typical seasonality. Total revenue is projected to be up 1% to 3%, reflecting current foreign exchange rates. On the bottom line, we're highly confident that the ITW team will continue to execute at a high level operationally on all the profitability drivers within our control. This includes our enterprise initiatives, which we now expect will contribute 125 basis points to full year operating margins, independent of volume. Additionally, we expect that tariff-related pricing and supply chain actions will more than offset tariff costs and favorably impact both EPS and margins. Our operating margin guidance of 26% to 27% remains unchanged. After raising GAAP EPS guidance by $0.10 last quarter, we are narrowing the range of our guidance to a new range of $10.40 to $10.50. Our EPS guidance range includes the benefit of a lower projected tax rate of approximately 23% for the full year and factors in that the top line is trending towards the lower end of our revenue guidance ranges. With those 2 elements effectively offsetting each other, we remain firmly on track to deliver on our EPS guidance, including the $10.45 midpoint, which, as a reminder, is $0.10 higher than our initial guidance midpoint in February. To wrap up, we remain highly confident that the inherent strength and resilience of the ITW business model, combined with our high-quality diversified portfolio and most importantly, our dedicated colleagues around the world, all put us in a strong position to effectively manage our way through a challenging macro environment. However, the demand picture evolves from here, we remain focused on delivering differentiated financial performance and steadfastly pursuing our long-term enterprise strategy, which is squarely centered around making above-market organic growth, a defining strength for ITW. With that, Erin, I'll turn it back to you. Erin Linnihan: Thank you, Michael. Jim, will you please open the call for Q&A? Operator: I'd be happy to. Thank you. [Operator Instructions] We'll hear first from the line of Jeff Sprague at Vertical Partners. Jeffrey Sprague: Maybe just 2 for me, hit 2 different businesses, if I could. First, just on construction. Clearly, you've been working the playbook. I mean one of the things that just jumps off the page to me is this is the 11th quarter in a row of organic revenue declines and the margins are still going up in the business. Maybe just anything in particular beyond kind of the normal 80/20 blocking and tackling that's behind that mix changes or other things? And just your confidence to be able to move those margins up further if and when the revenues do ever inflect positively. Christopher O'Herlihy: Sure. Yes. So Jeff, I think the margins in construction are squarely related to 2 things. Number one, I think the quality of the construction portfolio. As we often say, we tend to operate in businesses which -- there's a cyclicality and above that long term are fundamentally very healthy. And our strategy is always to try and operate in the most attractive parts of those markets. And that's what you're seeing in construction. We're in the most attractive parts of the market. We are executing very well from a business model perspective against those particular parts of the market. And that's ultimately what drives the margins. It's ultimately also what will drive the high-quality organic growth going forward. So very confident that not only will we grow in construction when markets recover, but grow at very high quality. Jeffrey Sprague: Great. And then maybe you could elaborate a little bit on, it sounds like you've got a fair amount of visibility on Test & Measurement improving in the fourth quarter. Maybe you could speak to that, anything in particular that you're seeing orders, end markets -- I'll leave it there, let you answer. Christopher O'Herlihy: Yes. So I think it's -- Test & Measurement had a normal cyclical improvement in Q4, which we expect to achieve again this year. Q3 was a little bit mixed, obviously. We saw continued slowdown on the CapEx side. Really, we would believe on the basis of the tariff uncertainty in Q2, ultimately having a spillover effect in terms of CapEx demand into Q3. So we expect that to improve a little bit. And then the other thing we saw in Q3, which should improve is we saw a little bit of a deceleration in semi, which only represents about 15% of the segment, but where we saw some real green shoots in Q2, we saw somewhat of a deceleration, still growth, but a deceleration in Q3, and we expect that to get a little better. Operator: Our next question will come from Andy Kaplowitz at Citi. Andrew Kaplowitz: Chris or Michael, you obviously didn't change your organic revenue growth guide for the year. I think last quarter, you talked about embedded in it was 2% to 3% organic growth for the second half, which means you still need a big uptick in Q4. I don't think comps get a lot easier for you in Q4 versus Q3. So it's just more pricing that's laddering in Q4? Because I think you just said, right, you're run rating as usual. Any other businesses get better in Q4 versus Q3? Michael Larsen: Well, I think what we are -- to give you a little bit of color on Q4, and you have to factor in what we said in the prepared remarks that we are trending towards the lower end of the organic growth guidance for the full year. We typically see a sequential improvement from Q3 to Q4 in that plus a couple of points of growth, primarily driven by the Test & Measurement business as Chris just mentioned, and offset by the typical seasonal decline that we're seeing in our construction business. So Q3 to Q4 revenue is up maybe 1 point or so. On the margin side, what we also typically see from Q3 to Q4 is a modest decline sequentially of about 50 basis points or so. So still in that 27% range and with a nice improvement on a year-over-year basis. And then the kind of the key driver of Q4 is then a more normal tax rate. So that's about a $0.10 headwind relative to Q3. So Q4 looks a lot like Q3 with the normal tax rate, and that's how you get to kind of the implied midpoint of our guidance here. Maybe just a comment or 2 on Q3. I think it was a little bit of an unusual quarter in the sense that we came into Q3 after a strong June. We had a strong July, perhaps related to some of the tariff announcement and related pricing actions. And then we saw a little bit of a slowdown in August -- actually pretty pronounced in August and then a more normal September, and really a mixed bag in the quarter with a stronger automotive performance, certainly, but also some of the green shoots we talked about last quarter in the order rates in places like Test & Measurement, and semi didn't really materialize for us. So I think at the end of the day, though, we're able to offset some of this choppiness, this macro softness with strong margin performance and as we typically do, we found a way to deliver a pretty solid quarter from a margin, earnings and free cash flow standpoint. Andrew Kaplowitz: Michael, helpful color. And speaking of that, I mean, you're well up already in your range in auto in terms of margin, almost 22% in the quarter. And auto markets, as you know, overall don't feel that great yet. So can you actually -- I know you did 5% organic growth, but can you actually push to the higher end of your low to mid-20s over the next couple of years? How should we think about that given you're kind of already there? Michael Larsen: Yes. I think we're pretty confident in the margin, the target we laid out kind of low to mid-20s by next year. I think there's still a lot of opportunity here from an enterprise initiative standpoint, primarily. You also see a pretty healthy dose of product line simplification again this quarter, which that's all short-term headwind to the top line, but really positions the remainder of the portfolio for growth and higher margin performance as we exit some of the slower growth and less profitable typically product lines. So the market builds will be what they are next -- in Q4, they will be a little bit lower probably than what we saw in Q3. So we won't have the same amount of operating leverage, but we'll still outperform as we have historically in the builds. And next year, you should expect kind of our typical 2 to 3 points above build. Whatever that build number is, obviously, as we sit here today, we don't know that. So... Christopher O'Herlihy: And Andy, just to add to that, the other big driver of margin improvement in auto is customer-backed innovation. We're getting a real nice healthy contribution from that this year. We expect that to continue and indeed accelerate over the next couple of years. And ITW innovation always comes at higher margin. Operator: Next, we'll hear from Jamie Cook at Truist Securities. Jamie Cook: The guidance relative to earlier in the year, I think earlier in the year, you assumed FX headwind of $0.30 that went positive or neutral last quarter. What's embedded in the guide? And you also have the benefits now from the lower tax rate. So I guess, Michael, I'm just trying to understand the puts and takes because it sounds like we have at least $0.40 of tailwind. You're lowering your organic growth to the -- sorry, your sales to the lower end, but it still seems like, I don't know, the guidance should be better, I guess, than what it is just based on those tailwinds. So if you can help me understand that, I guess. Michael Larsen: Yes. I think the short answer is that just given the choppy demand environment, we're maybe taking a more measured, a more cautious approach to our guidance here as we go into Q4. We're off to a solid start in October, but things can change quickly as we saw both -- as an example, the auto builds, the swing in auto builds, semi not really panning out. So I think we're just being a little bit more measured in our guidance here with 1 quarter to go. And as always, we have a path to do a little bit better than what we're laying out for you. You cut off initially, but I think you're talking about FX, what's embedded here is the current rates. As of today, and obviously, they can change a little bit, they are a little bit of a headwind -- tailwind now relative to a headwind earlier in the year, but we're talking pennies. So I think in Q3, FX was favorable $0.04. But then other things like restructuring were unfavorable by a couple of pennies. So there's some puts and takes there. And we've also embedded, obviously, as we said in the prepared remarks, the lower full year tax rate of 23%. And we expect a more typical 24% to 25% tax rate here for the fourth quarter. So hopefully, that's helpful. Operator: [Operator Instructions] We'll hear from Tami Zakaria at JPMorgan. Tami Zakaria: A medium- to long-term question for you. Given all the policy changes to incentivize bringing auto production back into the U.S., do you perceive this to be an opportunity down the line given your market share with the big 3? Or would onshoring not be a net gain because you already supply parts to manufacturing overseas? So how to think about that onshoring opportunity in auto? Christopher O'Herlihy: Yes. So Tami, I would say that largely, as we've said before, we're a producer we sell company. And so we've already -- we're positioned to supply our auto customers anywhere in the world wherever they are based on our current manufacturing setup. And that will continue. So business coming back to the U.S. would just mean more production for our U.S. factories, but they're already here. So we don't see -- I mean, there wouldn't be a huge net benefit that we can see based on the fact that we're a producer we sell a company. Tami Zakaria: Understood. And one question on PLS. I think it's about a 1% impact. Should we expect this to continue at that 1% range for the next few years? Or is this year more of a heavy lifting, so it might fade as we go into next year and beyond? Christopher O'Herlihy: Yes. So we haven't the planning process completed yet, Tami. But basically, what I would say is that for us, PLS is a bottom-up activity. It's driven by our businesses. It's very much an essential part of the ongoing kind of strategic review that we do and a critical part of 80/20 in our divisions. And obviously, deep into the company, we have this very tried and trusted methodology, requires a lot of discipline, but there's a lot of benefit that our divisions get from this. But the point is that there's -- it's bottom up. We don't have the numbers for 2026 yet. But whatever it is, it's something that makes sense in the context of -- it makes sense from a long-term growth perspective, in terms of it provides strategic clarity around where we want to focus, effective resource deployment on the back of that. And also from a margin improvement standpoint, obviously, there's some cost savings, which are a meaningful component of enterprise initiatives. A lot of these projects have a payback of less than a year. So we very much see PLS, whether it's 50 bps or 100 bps as an ongoing value-creating activity in our divisions. And like I say, we've got a lot of positive experience and expertise on this. But it's going to be a bottom-up number basically. Operator: We'll hear next from the line of Joe Ritchie at Goldman Sachs. Joseph Ritchie: I know that you'll typically like guide the trends, and -- but I guess as we're kind of thinking about 2026 and a potential initial framework with the moving pieces that you know today. Any color that you can kind of give us on how you're thinking about it, at least like this early on and what 2026 could look like? Michael Larsen: Yes. I mean I think as you say, Joe, we don't really give guidance until we've gone through our bottom-up planning process here and talk to the segments about their plans for 2026, and that doesn't happen until in November here. To give you a little bit of a way to think about this, maybe I think you should expect that per our usual process, our top line guidance will be based on run rates exiting Q4. We'd expect some continued progress on our strategic initiatives, including the contribution from customer-backed innovation. We'd expect some market share gains and the combination of those things leading to above-market organic growth again in 2026. And then the big question is really what will the market give us. On the things within our control, we'd expect to see continued margin improvement and a healthy contribution from enterprise initiatives. You should expect to see some strong incremental margins that are probably above our historical average. And I think those are kind of the big items. Then there'll be some puts and takes around price and FX and lower share count that may skew favorably. I'd expect a similar tax rate to this year. And then as usual, like I said, we'll update you in February, which -- and will include our usual kind of segment detail to help everybody kind of think through what the year might look like. Joseph Ritchie: Okay. Great. That's helpful, Michael. And then I guess just on capital deployment. I know you guys are doing the $1.5 billion buyback. It seems like you've got probably some room on your balance sheet if you wanted to lever up a little further and still stay investment grade. Like how are you guys thinking about the right leverage for you going forward? And put that in the context of potential M&A opportunities and what you guys are looking at across your different businesses? Michael Larsen: Yes. I mean I think we're sitting here at about 2x EBITDA leverage, which is right in line with what our long-term target has been. The buyback specifically is really the allocation of the surplus capital that we generate, which is a big number for ITW, about $1.5 billion, and that's what is being allocated to the share buyback program and leads to a reduction in the overall share count of about 2%. But all of that only happens after we have invested in these highly profitable core businesses for both organic growth and productivity. We're fortunate that only consumes 20% to 25% of our operating cash flow. The second priority here is an attractive dividend that grows in line with earnings over time. Chris talked about this being our 62nd year of consecutive dividend increases of 7%. And then when all said and done, we still have a lot of capacity on the balance sheet for any type of M&A opportunities. As you may know, we have the highest credit rating in the industrial space. We have arguably the strongest balance sheet. And so there's a lot of room here if the right opportunities were to present themselves. Operator: Next question today comes from Stephen Volkmann. Stephen Volkmann: So I'm curious whatever commentary you might wish to provide around what you're seeing on sort of price cost and obviously, it didn't impact you in the quarter. But are you seeing suppliers raising prices and you're kind of able to offset that however you choose? Or do you think maybe they're holding back and that's still to come? And then in that vein, just how do you ascertain that you will cover whatever costs? Will it be dollar for dollar or also on margin? Michael Larsen: Yes. I think, Stephen, the biggest driver of cost increases this year has been the tariff-related cost increases. And I think we've responded with both pricing actions that we've talked about and also supply chain actions. As you know, we are largely a produce where we sell company. I think the 93% or so of the company is produced where we sell. We had a little bit of exposure that we talked about earlier in the year. We've worked hard to mitigate that and put ourselves in a really good position. We've been able to, through those actions, offset the impact from tariffs this year. And in Q3, as we said in our prepared remarks, price/cost was positive both from a dollar-for-dollar earnings standpoint and also from a margin standpoint. So I feel like at this point, we're kind of back to a more normal environment. At this point, from a price/cost standpoint, we are not completely caught up yet, but we've got a quarter to go. And then for next year, who knows what the tariff environment might be for next year. But I think we feel very confident given our track record here in terms of being able to manage whatever those cost increases, whether they are typical inflationary increases or tariff increases might be as we head into next year. Stephen Volkmann: Super. Okay. And then just pivoting, China was obviously really good for you guys this quarter. I'm wondering if you might be able to drill in there a little bit and give us a sense of what's driving that? And I don't know, maybe some of the CBI initiatives or something. Michael Larsen: Yes. Do you want to go ahead, Chris? Christopher O'Herlihy: Yes. So basically, Stephen, what's driving China right now is auto in China, in particular, I think our penetration on EV in China, particularly with Chinese OEMs. We continue to make great progress on CBI and market penetration in China, particularly with Chinese OEMs. We continue to grow content per vehicle. As you know, China represents mid-60s in terms of percentage of worldwide EV builds. And we're growing nicely there, particularly with a strong position with Chinese OEMs. In addition, you mentioned CBI, I would say that China, even though it represents about 8% of our revenues, we certainly get a disproportionate amount of our patent activity from China in terms of the level of innovation activity that's going on. So yes, innovation in China, particularly in automotive is what's driving our progress there. And we're basically penetrating at a level well above the market. Michael Larsen: Yes. And maybe to put some quantification around it, if I just look at kind of year-to-date in China, as Chris said, the big driver is our automotive business, up 15%. That's our largest business in China, but also Test & Measurement, Electronics up in the mid-teens, Polymers & Fluids up 10%, welding up 20% plus. I mean, I think the fueled by CBI, certainly, in most cases here, I think the team is doing a really nice job overall, up 12% in China on a year-to-date basis. And pretty confident that the things, again, that are within our own control will continue to be -- have a positive contribution to the top and bottom line in Q4 and headed into next year. Operator: Next, we'll hear from the line of Julian Mitchell at Barclays. Julian Mitchell: Maybe just wanted to start with the operating margins. So I think you mentioned, Michael, that next year, you should be above the historical incremental. And I guess you have that sort of placeholder of 35% to 40% dating back to the Investor Day. So it's presumably in reference to that. But just wanted to understand as you look at next year on the margin side of things, is there a big kind of payback from the restructuring efforts that happened this year coming in? Price/cost maybe for this year as a whole is margin neutral and then that flips positive next year, maybe just any sort of fleshing out of the thoughts on some of those margin moving parts, please? Michael Larsen: Yes. I think, Julian, the biggest driver of margin performance for, I'm going to say, the last decade or so has been the enterprise initiatives. And we've consistently put up 100 basis points of margin improvement from our strategic sourcing efforts and from our 80/20 front-to-back efforts. And so we would expect that to continue to be the case next year. Whether that's exactly 100 basis points or not, we won't know until we've rolled out the plans, but that will far outweigh any contributions from price cost, for example. And then the other big element and which is a function of really what end market demand will do is if you look just at our performance year-to-date or in the third quarter, our incremental margins are significantly above kind of our historical 35% to 40%, including 65% in the third quarter. And you look at the margin performance this quarter in the automotive OEM business, where 5% organic growth translates into income growth of 20% plus. So it's just an illustration of we don't need a lot of growth to put up some really differentiated performance from a margin and profitability standpoint. So I can't tell you as we sit here today what the incrementals might be for next year on the organic growth. But I would tell you, I believe that they -- it will probably be above the historical range that we just referenced. Julian Mitchell: That's helpful. And then just maybe one for Chris. Looking at Slide 8 and that CBI contribution of sort of over 2 points to sales and the sort of partial offset from PLS headwinds that you discussed earlier on this call somewhat. And I realize this isn't how you look at it, and it's sort of really bottom-up driven. But if we're thinking about that spread of, say, CBI versus PLS enterprise-wide, is the assumption that, that should be more and more of a net positive as those CBI efforts that you talked about at the Investor Day a couple of years ago increasingly get traction? Just trying to understand how to think about the delta between those 2, understanding that they are independent bottom-up process. Christopher O'Herlihy: Yes. I'm not sure there's a huge amount of correlation between the 2, Julian. I mean, CBI is really referencing our efforts around improving the quality of execution on innovation, whereas PLS, we typically -- and our business is typically used for kind of product line pruning. I think the only correlation between the 2 is that they're both connected to differentiation. PLS results is as a result of where we feel we're on the same level of differentiation and we're product line pruning accordingly, whereas CBI, we're leaning in to basically create and develop more differentiated products. For sure, you're going to see an improvement in CBI over time. You've already seen that. The number has actually doubled since 2018, directionally in the 1% range. It was 2% last year, trending 2.3% to 2.5% this year, well on track to get to 3-plus by 2030. PLS is a circumstantial and ongoing review of our businesses by our businesses of their product lines and they react accordingly. And as I said earlier, we see this as there's a lot of value creation comes from PLS, but in a different way. So I'm not sure there's a huge amount of correlation between the 2. I kind of think of 2 kind of differently. Julian Mitchell: But the sort of net spread of them should be increasingly positive, I suppose. Christopher O'Herlihy: It should be -- no, absolutely. Driven by improvements in CBI. Correct, that's correct. Michael Larsen: I mean PLS, as Chris said, is an outcome of a process or 80/20 front-to-back process. We've talked about kind of in the long run, maintenance PLS being in that 50 basis points range. We have a little bit more this year. We've talked about specialty and kind of strategically repositioning that segment for faster organic growth. And then as Chris said, CBI will continue to improve from here. So that spread, to your point, will widen. But my thought for putting them right next to each other on Slide 8. They're completely independent of each other. And so I just want to make sure that's clear that there's no linkage between the 2. But mathematically, the spread will grow between the 2. And net-net will be a more positive contributor to organic -- above-market organic growth as we go forward. Operator: Our next question today will come from Joe O'Dea at Wells Fargo. Joseph O'Dea: Can you talk about the tariff impact a little bit? There were periods of time earlier this year where the math would have suggested something up to 2% kind of price requirement to offset. And it seems like we're in an environment now where the pricing required is probably less than 1%. But anyway, any thoughts around that? And then stepping back, it would seem like that's not necessarily a big hit to demand. And so the tariff kind of overhang would be more uncertainty related than magnitude of pricing required at this point related, but your thoughts on that? Michael Larsen: Yes. I think price cost from -- in terms of kind of combined with supply chain actions, our ability to offset tariffs, I think, is not really the main event at this point. I think we've demonstrated that we know how to do that, and we've further mitigated the risk of any tariff related specifically to China. So I think that part of the equation, we feel really good about. I think the impact on demand is probably something we talked about also on the last call that it may have led to a little bit of demand -- orders being frozen back in the April kind of Q2 time frame. And there's probably a little bit of overhang still from that. I mean I think we saw what's been a pretty choppy demand environment. As I said earlier, we had some positive order activity in June, July, then it slowed. April, May, kind of pretty choppy also. So I think the impact maybe from a demand standpoint, at least initially was maybe more significant. And who knows kind of where we go from here into next year. But I think it's largely behind us at this point, certainly from a cost standpoint and maybe from a demand standpoint, this is no longer -- tariffs are no longer the kind of the main event here. Joseph O'Dea: And so like what do you think the main event is in terms of seeing kind of an unlock of better demand, right? Because you're outgrowing markets, but that market growth rate, not kind of all that inspiring at this point. And so in sort of this protracted kind of challenged demand environment, if tariffs are kind of easing as a headwind, what do you think is the key to the unlock? Christopher O'Herlihy: Yes. So I think, Joe, we think we take a long-term view here. We believe fundamentally, we're in really good markets for the long term. We're obviously going through a period right now where there's quite a bit of contraction and uncertainty and so on and so forth in areas like construction. But our fundamental thesis is that we're in markets which we believe for the long term are attractive. We want to make sure we're in the best parts of those markets, and we believe that we are. We believe we can see quite clearly in areas like automotive and construction and historically in Welding and Food Equipment that we're outgrowing the markets at the point at which the cycle turns, we'll be really well positioned. And to Michael's earlier point, not just for growth, but for even higher quality of growth on the basis that our incrementals have strengthened from historical levels on the basis of portfolio pruning around sustainable differentiation, coupled with very high-quality execution on the business model. So we feel pretty good about the long term where we're just going through a period where we see some short-term demand issues. But we feel we've got a really good portfolio for long-term growth. Joseph O'Dea: Maybe just tying that into Test & Measurement and what you're seeing there. It seemed like in an environment, you're investing in CBI, like we hear a number of companies talking about innovation. It would seem like they need your equipment. Are you seeing this kind of build up in terms of what would have kept them on the sidelines, but if they want to invest in innovation, it would seem like they're going to need your help. Christopher O'Herlihy: Absolutely, that's correct. I mean Test & Measurement is a really fertile space for us in terms of long-term growth. There's lots of new materials being developed. There's increasing stringency in innovation standards and quality standards, all of which are requiring more and more exacting -- testing equipment. And that's where we play. So again, short-term issues here around CapEx environment and so on. So a little bit of compression in Q3 relating to some CapEx freezing in Q2. But for the long term, this is a really, really healthy environment for us -- will be a healthy environment for us on the basis of the quality of innovation in Test & Measurement and also the end markets they're lining up against like biomedical and so on, all of which have very strong fundamentals going forward. Operator: Next, we'll hear a question from the line of Nigel Coe at Wolfe Research. Nigel Coe: We covered a lot of ground here. Just want to go back to the comments around strong start to the quarter and then it sort of pared out. Do you think there's any unusual behavior with distributors around price increases or tariffs. Obviously, we had the big tariff event middle of the quarter. Anything you'd call out there, number one? And then number two, restructuring actions in the first half of the year, did we see the full benefit in 3Q? Or was there still some benefits to come through in 4Q? Michael Larsen: Yes. So let me start with kind of the cadence as we went through the quarter. And I'm not sure we have a great answer for you, Nigel. I mean I think like we said, June and July were really some of our better months with meaningful organic growth on a year-over-year basis, then a slowdown in August and a recovery in September. And if you look at net-net for Q3, we were actually pretty close to kind of typical run rates. But -- so the point I think we're trying to make, it's just a pretty choppy environment and things can change pretty quickly, but we're not really making any long-term forecast in terms of kind of what that may mean on a go-forward basis. Some of it may be related to the tariff announcements and the associated pricing, but really hard to tell. Restructuring for us, it's a little bit of a misnomer. I mean these are funds that are expenses that are funding our 80/20 front-to-back projects. And so there's no big restructuring initiative going on inside of ITW. Our spend this year will be similar to last year, in that $40 million range. We try to kind of level load things and do a similar amount every quarter. But it's really a function of the timing of tens of projects across the company and when the divisions want to execute on those projects. So those restructuring savings are -- these are projects with paybacks of less than a year. So it happens pretty quickly, but -- and it's part of what's funding the enterprise initiative savings that we're getting next year. But these are not big kind of restructuring -- traditional restructuring projects. These are all tied to 80/20 front-to-back as per usual. So... Nigel Coe: Yes. Okay. That's helpful. A quick one on Welding. We've seen, I think, now 2 quarters of nice inflection in growth on Equipment, but Consumables remains sort of step down in that low single-digit decline territory. Is that primarily a price differential between Equipment and Consumables or anything else you'd call out? Christopher O'Herlihy: Yes. So Nigel, I think it's mainly because the consumer is more of a discretionary purchase. I mean, Commercial or Consumables? Michael Larsen: Consumables, I think, right? Is that right? Nigel Coe: Consumables and Equipment driven up nicely. Michael Larsen: Yes. Yes. I think it's a little bit of a head scratcher, to be honest with you, Equipment up 6% and Consumables down 2%. Within that, there are -- some of the Welding -- some of the filler metals are actually showing positive growth. The other thing what we're seeing is a pickup on the industrial side. So these are typically large heavy equipment manufacturers. And then the commercial side or the consumer side is a little bit slower, where it's a little bit more of an exposed to the kind of consumer discretionary spending. So it's a little bit of a mixed picture. I think the real positive in Welding is this growth is fueled by CBI. And so it's not that the markets are picking up. It's really new products, primarily on the equipment side as well as both in North America and international with some really nice growth in our European and in our China business. So that's probably the best answer I can give you. Operator: Our next question will come from Avi Jaroslawicz at UBS. Avinatan Jaroslawicz: So I appreciate that you're saying that you're trending towards the lower end on the sales guidance. Can you just talk about some of the thinking for leaving that range unchanged and just kind of wider than you typically would for this time of year? I assume you're still thinking there could be some upside to get you to the midpoint or better for the year. And would that come from any particular segments or it sounds like more from demand than pricing. So just -- is that the right way to think about it? Michael Larsen: Yes. I mean I think typically, we update guidance kind of halfway through the year. And at this point, with a quarter to go, we're well within the ranges. And so we didn't see the need to kind of update the whole thing. And the decision was to narrow the range and to explain why we're not flowing through the benefit of the lower tax rate, which is really due to the fact that we're trending towards the lower end on the revenues. So that's our way of being as transparent as we can be around the guidance. I think the -- your question kind of Q3 versus Q4, I think we've kind of covered that. Again, the segment that typically shows the biggest pickup from Q3 to Q4 is our Test & Measurement business, and then that's partially offset by the Construction being down kind of typical seasonality. And when all is said and done, revenues from Q3 to Q4 should be up by 1 point or so. Certainly, we've also factored in, I should say, the lower auto build forecast there's been -- which is done by third-party kind of industry experts. And there's been some noise around some supplier issues for some of our customers, and all of that is included in our automotive projection here for the fourth quarter based on everything that we know as we sit here today. So hopefully, that answers your question. Operator: Our next question will come from Mig Dobre at Baird. Mircea Dobre: I also kind of want to go back to the PLS discussion. And I guess my question is this, when you sort of look at your comments for delivering above normal incremental margins, how reliant are you on PLS in order to be able to do that? How important is PLS in that algorithm? And I guess, given how high your margins are, and I'm kind of looking almost across the board in your businesses, you are pretty much outperforming anyone else out there that I'm looking at. Is there a point in time here where it's rational to sort of say, hey, look, maybe we can throttle back on PLS because we can actually deliver more earnings growth and more return for shareholders by just trying to accelerate organic growth rather than pruning the portfolio? Christopher O'Herlihy: Yes. So Mig, I think there is a relationship between PLS and incrementals and so on, but it's not the only factor. I mean PLS is an element of 80/20, it's not holistic 80/20. So I think the implementation of the business model, again, the quality of the portfolio is ultimately what drives the incrementals ultimately drives the margins. In terms of your comment on -- I guess, the comment on organic growth versus margin. And so from our standpoint, I mean, organic growth and operating margin and margin expansion kind of go hand in hand. And we talk about quality of growth. And I think we've demonstrated that for instance, coming out of the pandemic, we saw very healthy growth and margin expansion while over that period, we were investing in a very focused way in our businesses in innovation, strategic marketing, and that very much continues today. So really, it's about the quality of the organic growth, 35% incremental historically. We're now well above that, comfortably kind of into the 40s. And that's again at a time when we are very much investing in our businesses in a very focused way around innovation and strategic marketing and so on, and so for us, the math is pretty simple with margins at 26% and with growth in incremental margins at 35% plus or even 40-plus right now, it's the operating leverage that is really driving the margins forward from here. And as we look at 2030 and our 30% goal, that's a goal that's not going to be achieved through structural cost reduction. That's going to be achieved through continuous improvement in organic growth at high quality and high incremental margins. So we see the 2 as being correlated, I would say. Mircea Dobre: Understood. But in terms of maybe the framework for '26 asking the question that somebody else asked earlier, right, if CBI is contributing 2.3% to 2.5%, maybe you can rethink product line simplification to some extent and maybe the end markets get better. Again, from my perspective, being able to get your organic growth back to that 4%, 5-plus percent range is really the thing that at this point seems to be needle moving in terms of both maybe investor sentiment as well as overall earnings growth. So I'm curious if -- I understand it's early for 2026, curious though, if you think that it's plausible that we could be looking at that kind of growth as we think about next year? Michael Larsen: It's -- I think, Mig, we're probably, as we said earlier, running a little bit higher on PLS than kind of the normal maintenance run rate. We're doing that specifically in a business like Specialty Products, where we've talked about we're strategically repositioning that segment for growth. I will tell you that in other segments and industries that I know you follow like Food equipment and Welding, that number is significantly lower, maybe even 0 in some cases. So it's not an across the board. And it's also not a number that we want to or even could manage from the corporate -- from corporate. This is such an integral part of our 80/20 front-to-back process, it's a bottom-up number. And if we were to say -- and it's tempting, I know what -- I understand how you're thinking about it, it's tempting to say, okay, no more PLS. That also would say no more 80/20 front to back. And that is certainly not in anybody's long-term interest. I can promise you that. Operator: Ladies and gentlemen, that was the final question in our queue for today. We'd like to thank you all for your participation in today's session, and you may now disconnect your lines. Please have a good day.

203天前Insight Analytics约5分钟阅读

XTRA.TO 2025 Q4 财报电话会议

Operator: Good day, and welcome to the Xtract One Technologies Fiscal 2025 Fourth Quarter Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Chris Witty, Investor Relations adviser. Please go ahead. Chris Witty: Thank you, and good morning, everyone. Welcome to Xtract One's Fiscal 2025 Fourth Quarter and Annual Conference Call. Joining me today is the company's CEO and Director, Peter Evans; and CFO, Karen Hersh. Today's earnings call will include a discussion about the state of the business, financial results and some of Xtract One's recent milestones, followed by a Q&A session. This call is being recorded and will be available on the company's website for replay purposes. Please see the presentation online that accompanies today's presentation. Before I begin, I would like to note that all dollars are Canadian unless otherwise specified and provide a brief disclaimer statement as shown on Slide 2. Today's call contains supplementary financial measures. These measures do not have any standardized meanings prescribed under IFRS and therefore, may not be comparable to similar measures presented by other reporting entities. These supplemental financial measures are defined within the company's filed management's discussion and analysis. Today's call may also include forward-looking statements that are subject to risks and uncertainties, which may cause actual results, performance or developments to differ materially from those contained in the statements and are not guarantees of future performance of the company. No assurance can be given that any of the events anticipated by the forward-looking statements will prove to have been correct. Also, some risks and uncertainties may be out of the control of the company. Today's call should be reviewed along with the company's annual consolidated financial statements, management's discussion and analysis and earnings press release issued October 23, 2025, available on the company's website and its SEDAR+ profile. And now it is my pleasure to introduce Peter Evans, Chief Executive Officer of Xtract One. Please go ahead, Peter. Peter Evans: Well, thank you, Chris, and welcome to all of our investors and analysts joining us today. We're going to start off by turning to Slide 4 and talk a little bit about the state of the business. I'm very pleased to say that we ended fiscal 2024 with a very strong Q4 that has positioned us well for the immediate and long-term future, particularly as our new Xtract One Gateway benefited from strong and accelerating demand across a wide variety of markets, most particularly education where we are rapidly cementing ourselves in a leadership position by offering the most efficient, most adaptable frictionless technology suitable for screening solutions in environments where the average individual has a much higher volume of personal items on them as they pass into a venue, items such as backpacks or laptops, tablets, metal water bottles and other items. We see this application not only for schools in the education market but also for places like convention centers, office buildings and hospitals, where we've seen a significant uptick in interest for our solutions. Following a record $16.1 million of total bookings during the fourth quarter, we began fiscal 2026 with a solid backlog, including pending installations of nearly $50 million. These are signed contracts soon to be installed. This is clearly the largest in our company's history and something we're very proud and pleased about. While revenue was negatively impacted by certain onetime events, which we'll talk about in a moment, these were customer-initiated delays and also times when we saw a customer doing a phased approach for some of our larger installations. We continue to work through these items with our customers and cannot be happier about where the company stands as we begin on the next stage of our journey as a company. I personally am looking forward to the coming year being one of higher revenue growth, significant conversion of the backlog into revenue and continuing improvement of our bottom line results as well as continued progress on our path to cash flow breakeven, a key objective for the company and myself and the other executives. Let's turn to Slide 5 for a moment. I'd like to provide some further commentary on the rollout of the Xtract One Gateway. The market continues to be very large and growing for this recently launched product. As evidenced by the number of announcements that we've made over the past few months, particularly in the education marketplace, including organizations and school districts like Manor Independent School District out of Texas, The Delmar School District in Delaware, Volusia County Schools in Florida and Mecklenburg in Virginia. It was a very, very active summer for us with several of these awards taking place just before the end of our fiscal year or just after the fiscal year and some additional contract wins that have continued to go and be booked soon after the end of the fiscal year. Many of these are not yet reflected in our backlog. That said, during the year and predominantly in the fourth quarter, the company signed contracts for Xtract One Gateway with multiple customers worth over $13.1 million serving a variety of markets, including education, some health care and some commercial enterprises. Since then, we've continued to win additional contracts and have now successfully begun commercial deployment of the Xtract One Gateway just subsequent to the fiscal year-end. And the initial feedback from those first customers has been extremely positive with many of them looking to expand. We see this as the tip of the iceberg for us in terms of overall demand as deployments, referenceability, client demonstrations and all further drive interest that we believe will continue to show growth and acceleration in 2026 and beyond. We have surpassed the original business plan that we built and that we envisioned for the first year of deployments for the Xtract One Gateway. And accordingly, we now have plans in place to double the manufacturing capacity very quickly for the Xtract One Gateway in fiscal 2026 in order to serve this inbound demand that we're seeing from organizations like schools and others. This is a nice sign of having a vision to deliver something different and actually delivering on that and the market responding incredibly positively. That positive market response has been in comparison to other solutions where essentially you need to introduce other technologies like x-ray machines and create an environment like a TSA screening activity in airport in order to have a comparison versus the Xtract One Gateway. It's for these reasons that the customers are so excited. As a reminder and a point often asked by investors, we would love to announce many, many more of these customer wins but due to competitive reasons or their preference of a particular entity or perhaps their nondisclosure agreements, we may not always be able to announce some of those new wins. This is why we promote and highlight that our backlog is a much better barometer and a good forward-looking indicator of the health of our business and the future success of our business. It's the best measure of our performance than the number of press releases that we put out. We continue to visit potential customers and host demonstrations on a weekly basis, multiple different demonstrations across the country every single week, and this is resulting in an expanding way of interested school boards and new previously untapped industries who are intrigued by our unique and groundbreaking capabilities. Our AI-enabled technology is truly the best-in-class at determining real threats in a world where the average individual is carrying a large number of large metallic items like laptops, phones, chromebooks, chargers, metal bottles and all sorts of other paraphernalia. I'd invite anyone on this call to think about your own experience when you have to divest of all those items versus the Xtract One Gateway where you just simply walk through with your rolling luggage, your backpack or whatever, and we can uniquely highlight that is a gun and that is a knife on the person and on the location. We continue to meet not only the school boards, but health care entities have now shown interest, warehousing and distribution companies who are looking to protect on both inbound and outbound. Commercial property organizations due to some of the unfortunate incidents such as what happened in New York a few months ago, has caused these marketplaces to open up to us. Other organizations like that similarly are looking to showcase our applications, which will then result in us securing new contracts. All of this does take time, particularly as the size of the orders grow. A typical school board is much larger or a school district is much larger than, say, a theater. And so the analysis that goes in takes some time for these organizations, but we're very pleased because that is increasing the size of our average order, and it's -- we're very pleased with the pace of introduction and even more excited by what the future holds for this solution. With rapid growth on the horizon, we're planning for the future and expect fiscal 2026 to be a year of significant change here at Xtract One on many aspects. Complementing this new and accretive growth that we're recognizing with the Xtract One Gateway, we continue to win new contracts for our SmartGateway at a strong, steady pace. The SmartGateway has proven itself to certain specific vertical markets and is performing extremely well. In the past few months, we've announced awards from organizations such as Temple University in Philadelphia, a global performing arts organization, San Mateo Medical Center in California and follow-on contracts, for example, with a multinational entertainment organization amongst others. These wins underscore the continued and strong demand for the SmartGateway product and its unique fit to serve those markets particularly well, particularly with this latter customer that I mentioned, where this entity, a known worldwide organization known for its theme parks and related properties chose to order additional SmartGateway units to accommodate expansion in its locations. With a planned spring 2026 deployment for a 3-year contract worth about USD 2.6 million in value, we'll increase the Xtract One's global footprint, particularly with SmartGateway and further support the entertainment organization's mission to deliver a safer guest experience at all of its venues. Both the SmartGateway and the One Gateway deliver specific capabilities that are key requirements for unique market segments and their needs. So this is not a one size fits all, it's a perfect fit for each segment. So each of those products is well positioned to serve their respective marketplaces, and we're very pleased with the response from those markets. This provides balance across our portfolio and more future business predictability as we have different kind of cycles of purchasing across different segments and of course, delivers a differentiated value that each customer acquires out of their screening solutions. Overall, as a business, we continue to grow the pipeline of opportunities. We have more than about USD 100 million currently in our qualified sales pipeline, customers that we're actively engaged in at various stages of selling cycle. And this is across both product lines. And this number continues to rise due to increasing threats, unfortunately, across the world and in geographies outside the United States as well as inside the United States. This improves our positioning and growing brand recognition of who we are and what our technology can actually accomplish. Given the current outlook for these and other opportunities, we're very optimistic about the quarters to come, and we believe the company is on a precipice of a step level change in terms of the volume and scale of our operations; therefore, why we continue to do things like I mentioned earlier, about doubling the capacity to manufacture the One Gateway. This obviously leads us to be very positive about the trend towards cash flow neutrality and we look forward to sharing those updates as we get further into fiscal 2026. I'd like to address some prior comments about revenue delays. We have experienced a handful of customer-initiated delays in their deployments of systems, which will cause onetime delays in our revenue recognition. Let me provide a few examples of these. We've signed a contract and there's a desire for an expanded contract with a major U.S. federal organization that due to federal government optimization activities that have taken place through 2025 has caused a lot of reorganizations of their organizational structure and how different people are responsible for different activities like IT infrastructure, budgets, financing and these sorts of things. While the contract is still valid and while that organization has a federal mandate that they will screen for weapons at all of their locations, they've had to pause as they've gone through these reorganization activities. So the requirement is still there and the order is still there and has not gone away, but we're working with that customer as new individuals come into play to start scheduling those deployments. Similarly, a very significant sports venue that we signed a contract with earlier has undertaken a new rebuild of their venue, and they have paused deployment of the systems until such time as they get closer to building occupancy. The good news here is that they have invited us to work closely with them and with the venues architects, for the best placement of the systems, where the conduits would go underground, how do they bring wiring in, how they bring power in and optimize the deployment of the systems into the venue design to ensure the maximum guest experience and deployment of our systems. So I'm pleased that we're working with them closely. I'd just like the building to be finished that much faster, so we can actually convert that order to revenue. On the other hand, we do have scenarios where we're very pleased where things are accelerating. We signed a contract with one of the top 5 major car manufacturers who wish to protect various venues. And they had delayed their deployments for sort of reasons. However, when we were starting to get a little bit frustrated with their delays, they called us up and said, we are ready to take shipment. And so we shipped those months -- those systems this past month after about a 12-month pause where they worked through some entrance redesign activities. So along the same lines, these orders have not gone away. Sometimes a customer needs to pause as they work through some internal activities. The summary here that like all our investors to take from this is the bookings backlog is solid, and we are still actively engaged with all of those customers as well as new customers. At this point, I'd like to turn it over to Karen, who can then provide a little more detailed discussion on our financial results, and then we'll move to Q&A. Karen, over to you. Karen Hersh: Thanks, Peter. I'm happy to review the financial highlights for what amounted to a very busy quarter, setting us up nicely for a strong fiscal 2026. Turning to Slide 7. Total revenue was approximately $3.3 million for the fourth quarter versus $5.6 million in the prior year period, reflecting certain customer-initiated delays, which Peter highlighted previously. We've been working with these customers and many of these installations have started to ramp up in Q4 and into fiscal 2026. We have also been instituting a phased deployment schedule for some of our larger, more complex installations. In particular, this is an approach that we use with school districts, delivering first for the high schools, then moving on to the middle schools and finally, elementary schools. While this approach may initially slow down our revenue in the short term, we believe that working with our customers to develop systematic deployment schedules and instituting rigorous training programs are positioning the company for long-term revenue generation and high customer satisfaction. Similar to previous quarters, revenue for the fourth quarter was spread across numerous customers and industries with the largest contributors being entertainment, education and health care. We've recently made many announcements about various new customer contracts and growing demand for Xtract One Gateway, which are expected to positively impact revenue in fiscal 2026. The mix of business will continue to fluctuate and diversify in the coming quarters given the order acceleration and interest in our products across an expanding array of industries, which I'll elaborate on in just a few minutes. We also remain committed to expanding our channel partner program, which is a valuable contributor to the company's growth. Channel partners accounted for approximately 52% of deployments for the entire fiscal year and this is expected to increase in fiscal 2026. Our gross profit margin was a record 71% for the fourth quarter versus 65% in the prior year period. Margins were also higher versus the third quarter of fiscal 2025 with the improvement both sequentially and year-over-year due to efficiencies achieved in our SmartGateway manufacturing and supply chain processes, as well as the use of advanced software tools like our view dashboard that allow for continuous and proactive monitoring of customer environments. We anticipate margins to be slightly negatively impacted in the near term by costs related to the initial production and installation of the Xtract One Gateway. However, we expect that this will improve over time with broader commercial deployment in fiscal 2026. Turning now to Slide 8. New bookings for the quarter were a record for the company at $16.1 million compared to the prior year quarter bookings of $5.6 million, of which approximately 74% were upfront contracts, meaning that the majority of these new contracts will translate to revenue relatively quickly. Bookings for the quarter were almost evenly split between direct sales and channel partners, as markets like education and health care are well suited for the channel. Total bookings for the year were $38.5 million, up from $29.8 million in the previous year. Anyone who's been following our story will know that our initial target markets were entertainment and sporting venues with a view of further expanding into other markets like schools and health care. Interestingly, in fiscal 2025, approximately 33% of our annual bookings were in the education sector, up from 14% in the previous year, primarily due to the recent launch of Xtract One Gateway. We are excited to see that several schools are now coming on board as evidenced by many of our recent customer announcements. Further, health care currently represents 17% of our bookings, and we expect this will grow in the coming year given the strong product market fit with our SmartGateway for these facilities. With the diversification of our gateway products, we expect our customer base will continue to expand into a multitude of industries in fiscal 2026. Moving on to Slide 9. Our contractual backlog and signed agreements pending installation rose to record levels as Peter previously mentioned. At the end of the quarter, our backlog collectively totaled $49.5 million as compared to $26.8 million last year, almost doubling the backlog year-over-year, which we consider to be an excellent indicator of future revenue. The backlog of $49.5 million at year-end was comprised of $15.5 million of contractual backlog with an additional impressive $34 million worth of signed agreements pending installation, the majority of which are expected to be installed within the next 12 months. Given our current total backlog of almost $50 million and a substantial pipeline of opportunities reflecting strong bid activity and expanding interest in both of our gateway products, we anticipate bookings to continue to increase, putting us on sound footing for fiscal 2026 and beyond. Now let's turn to Slide 10, which shows fourth quarter and full year operating costs year-over-year for each of our key expense categories. Sales and marketing expenses were $1.8 million in the quarter versus approximately $1.5 million in the prior year period, reflecting increased business development initiatives across a wider spectrum of industries while costs associated with R&D were $1.9 million in the quarter versus $2.3 million in the prior year period due to streamlined R&D activities. General and administrative expenses were approximately $2.2 million for the quarter in both years. Overall, operating costs were lower year-over-year even as we significantly grew our backlog and invested in the rollout of Xtract One Gateway. We have consistently managed our operating expenses while growing the company, demonstrating the scalability of our business model as we move forward on our path towards cash flow breakeven. Finally, on Slide 11, I'll discuss cash flow. During the quarter, the company had operating cash usage of $1 million compared with $1.7 million in the prior year period. And excluding changes in working capital, we spent approximately $2.7 million compared to last year's $1.3 million. For the year as a whole, we had operating cash usage of $6.5 million versus $8.1 million in fiscal 2024, primarily due to focused management of our working capital. During the quarter, we also completed a successful public offering of a bought deal, including the full exercise of the underwriter's overallotment option and raised just over $8 million to finance working capital requirements and for general corporate purposes. Our fourth quarter has been a busy but productive quarter. With the completion of our financing, the successful launch of Xtract One Gateway and the growth of our bookings and backlog, we are well positioned for growth in fiscal 2026. With that, Peter and I welcome any questions that investors may have at this time. Operator: [Operator Instructions] Our first question comes from Amr Ezzat from Ventum Capital. Amr Ezzat: Congrats on the very strong bookings number. I appreciate your comments on revenue recognition, and I think it's -- we all get excited with signed contracts that often forget that customers have challenges as well in taking delivery. I'm just wondering how do you feel this friction from the customer side is evolving relative to your comments last quarter and I mean, Q1, which ends next week. Are you guys seeing a bit of easing into Q2? Peter Evans: Yes. From my perspective, Amr, it's Peter here. We are seeing that easing. We do see that some of the contracts take longer to work their way through from trial to contract signing because they tend to be larger deals that we're dealing with because there's more, let's say, as an example, Fortune 500 companies that we're working with. And then those organizations might have multiple locations that they wish to deploy, multiple manufacturing plants, multiple high schools and middle schools. And they're not as interested in flash cutting, for example, 12 high schools and 20 middle schools all in one week. It's not the best approach. So we're seeing kind of these phased deployments. And we're actually starting to see things loosen up and accelerate now in terms of those deployments and in terms of that acceleration. So I'm feeling much better. We did have these onetime events, but we're starting to see that subside. Amr Ezzat: Fantastic. But if I'm sort of thinking about fiscal '26, is it fair to assume a stronger second half relative to the first half? Is that a fair assessment? Peter Evans: From my perspective, yes, primarily because we will be -- as we've seen so far, we're seeing some good momentum for the business and for One Gateway. We're also seeing steady, solid momentum for the SmartGateway, and those contracts will start converting over revenue as we work our way through fiscal 2026. Amr Ezzat: Okay. On the bookings, like, again, exceptional this quarter, and you did announce a flurry of wins post quarter end. I'm just confirming your bookings number probably doesn't capture a lot of these post-quarter wins that you guys announced. So we should be expecting another strong Q1 bookings print. Then maybe on the $16 million of bookings, if you could walk us through the split between verticals. I believe, Karen, you gave it for the full year. Peter Evans: Yes. So in general, we're continuing to see the momentum. And to your question about the flurry of announcements. Yes, where we can, as we said earlier, Amr, we are always interested in keeping our investor base aware of the activities in the company as much as we're allowed to do so by the customers. And where we can announce schools, hospitals, other locations, we will. But the announcements that have been made post Q4, in general, it's a safe bet to say that those are new deals that are occurring post the close of Q4. Some might have been from a Q4 time frame, but just due to timing of getting press releases approved, they might have rolled over into Q1. Amr Ezzat: Then, Karen, I'm not sure if you guys have the split handy for the quarter itself between the verticals? Karen Hersh: For Q4? Amr Ezzat: Yes, the bookings for Q4, the $16 million. Karen Hersh: For sure. So the general split by industry for Q4 was 60% for education in Q4 and entertainment was about 24%. So those were the 2 big ones and health care came in around 12% with the rest being some miscellaneous through other industries. So the overwhelming winner for Q4 was definitely education followed by entertainment. And those, I think you could evidence towards 2 of the larger press releases that we did, one for Volusia and the other for an entertainment organization. Those ones both fell within Q4, and so those represented a good portion of the bookings for that period. As Peter said, the deals tend to get larger that we've noticed, certainly with the Xtract One Gateway, and that's evidenced in Q4 where we're seeing a number of larger deals come through. Amr Ezzat: Fantastic. I was very pleasantly surprised with the gross margins coming in at 71%. Can you unpack what drove that? You spoke to, I believe, manufacturing efficiency. And I just wonder, is that a peak you feel? Then obviously, into Q1, what I understood from the comments is that we should expect some step back on One Gateway before margins scale again. I just want to confirm if I understood that correctly. Karen Hersh: I think you've understood it exactly correctly, which is we have said all along that we continue to bring efficiencies in terms of our [ BOM ], In terms of our support that we manage for our customers, and we've done numerous things to help improve those efficiencies over time. And so it's really nice for us to see that this has sort of translated into 71% margins, which are frankly quite impressive for our industry. You did pick up correctly on the comments about Q1. This is what happened to us with SmartGateway. You bring a new product to market. There's things to work out in terms of support. There's little adjustments that we want to make. We want our customers to be completely happy. And this tends to cause some degradation in the gross margin, at least temporarily until we work out those kinks. And so that's what we're anticipating for Q1 is a little bit of an adjustment as we get used to the Xtract One Gateway and bring it to market. And we're also continually already making changes to our [ BOM ] and making further efficiencies. It's going to take a few quarters to run through that cycle and get it really running the way that we -- similarly to our SmartGateway. Amr Ezzat: Fantastic. Then maybe one last one on OpEx. I think you spoke to what's driving that. But are we -- should we view this as a new run rate going into fiscal '26? Or maybe you could quantify how much of it has to do with the launch of One Gateway? Karen Hersh: Well, a lot of the One Gateway charges that were sort of one-off type of expenses, we did capitalize because we felt that there was a long-term future value of those. We'll start to amortize those costs in Q1 as we've brought the product to market. But similar to what we've said in the past, we believe that our operating structure is fairly stable. We have to continue to add to it to some degree to continue to address, for example, business development across more markets than we were initially targeting. And R&D is still going to continue to be a focus for us as we continue to innovate. We're not going to sit on our laurels. So R&D is going to continue to be a focus for us. But these changes are relatively small when you compare them to what we're expecting from a top line growth. So I think that scalability, which is really what you're talking about is, I think, going to continue on. And I think the changes that we have and the growth that we have in the operating base will be quite modest. Operator: Our next question comes from Scott Buck with H.C. Wainwright. Scott Buck: Peter, I was hoping, given the momentum you're seeing in education, if you could give us a bit of a reminder on how big the education opportunity here is in North America? And then maybe touch on some of the other higher growth segments of the business like health care as well. Peter Evans: Yes, absolutely, Scott. So simple math, Scott, there's 130,000 K-12 schools in the United States. That is a public K-12 that doesn't include private. And if you assume 1 to 2 systems per school, depending on the size of the school, depending on the number of entrances, maybe they've got entrance for bus drop-offs, another entrance for main entrants. And we see a variety. Some schools want as many as 3 systems. So you can argue that depending on the systems, the feature functionality and things like that for very simple round numbers, $100,000 to $200,000 a school for argument's sake. And those are just round numbers for simple math. So multiply that by 130,000 K-12 schools, you're in the range of $13 billion to, what, $25 billion or so for that marketplace. So I believe that between ourselves and our competitors, we've barely scratched the surface in terms of the numbers of schools and the numbers of opportunities. I think there are some things that take time to work through the schools, particularly budgets. Most of the schools have to fund these kinds of acquisitions of the systems through grant applications and grant funds, which is -- can be a bit of an arduous process. The money is there, though. Recently, Texas awarded several hundred million dollars for school safety and security, which has opened up, for example, the Texas marketplace. So the market is there. The market is large. The market is significant. It doesn't all happen overnight, though, depending on grant monies and these sorts of things. What we're pleased with, though, is for those schools like Volusia County that did extensive testing over a month-long period, and they were previously using one competitive solution and tested a second competitive solution versus us. It was very obvious what the best solution was for those schools. They could choose an x-ray machine and a screening solution and still have issues with alerts and weapons getting through or they can walk through the One Gateway with kids streaming in at 66 per minute. So we're very pleased with our position that innovation has delivered. We're very pleased to be serving that school industry, that $13 billion to $25 billion market. And all of our customers that we've deployed with so far are very happy and have become strong references for us. Does that answer your question, Scott? Scott Buck: Yes. No, that's perfect, Peter. I appreciate that. You mentioned one example there where you went in and displaced a competitor. Typically in the education space, is that more often than not you're displacing somebody else? Or are there a lot of greenfield opportunities in there as well? Peter Evans: I think we barely scratched penetration in the marketplace between ourselves and all the competitive opportunities. There are some schools you'll see -- I think there's higher penetration, quite frankly, Scott, of walk-through metal detectors that might have been deployed in some intercity locations 5 years ago. I think a place like downtown New York or Detroit or Chicago. But in terms of advanced screening solutions, in the case of this one place where we displaced a competitor, they're using that competitive solution for screening of football matches on Friday evening. And they had occasionally used it for screening students entering into the school. And I was very pleased to get a call from the Chief Security Officer one day where he said, well, I finally scrapped my last of product X and thrown in the dumpster after we've deployed now in 6 high schools with you. Scott Buck: Great. That's helpful, Peter. And then one last one. I want to ask about some of the commentary you had on channel partners and that becoming, I guess, a larger piece of revenue. Are you adding new channel partners at this point? Or are your partners just getting better at helping sell the product? Peter Evans: It's a little bit of both, Scott. We are adding new channel partners, but we're very selective of how we do this. Weapon screening solutions need to be deployed correctly. It is a people, process and technology question, not just dropping technology on the ground. People need to be trained correctly. You have to get the [ con ops ] and the flow right. Otherwise, it gets a little lumpy. And so we look to very good channel partners who can essentially replicate what we do with the high quality and the high touch and the high customer focus. So I'm less interested in having 500 partners versus having 5 really excellent partners. Now we have more than 5, okay? But as an example or an anecdote. And so we're continuously recruiting new partners, but being very selective about who they are. And then what we're finding is our existing partners, as they get their fourth, fifth, sixth deployment with their customers, they as a company are starting to replicate our level of knowledge and our level of engagement, and we're seeing the aperture of their pipeline expand also. So we've got growth with new partners. We've got growth with the existing partners become more fluent in the solution. Scott Buck: Okay. And just given the partnership network that you guys have built, we shouldn't expect any kind of deployment delays on your side, given any kind of capacity constraints at this point. Is that right? Peter Evans: Right now, we don't have any capacity constraints. But as I mentioned in my comments, because of the high demand for the One Gateway that's outstripped what we had our original business plan, we are already in the process of looking to double the capacity that we built into the manufacturing lines so that we can deal with that. So there may be some slight delays until we get that ramped up, but not something that we think is going to be meaningful or significant. Scott Buck: Good problems to have, right? Peter Evans: Yes. Operator: Our next question comes from [ John Hyde ] with Strategic Investing Channel. Unknown Analyst: Congrats on the bookings as the other analysts have said. My first question is around contract split between upfront and subscription. I know, Karen, you mentioned, I think it was 75% or so was upfront in these bookings. Can you give us maybe, let's say, like a split between what type of customers are choosing the different types of subscription versus upfront? Karen Hersh: Sure. It was -- 73% was upfront for Q4. And interestingly, for the full year, the upfront came in at 58% versus 42% for subscription. And so we look to that to see what's going on here. And I think you heard from Amr's question that we had a strong education quarter. And I think that was the main reason for the upfront. So what we're finding sometimes with schools or fairly often with schools is that they have grant money that comes in and they tend to work on an annual budget. And that lends itself well to the upfront contracts. So we often see upfront when we're dealing with schools. Similarly, when we deal with entertainment or stadiums, arenas, any sporting facilities, they tend to be very highly focused on their P&L, and they like to have security as a service. And so that lends itself extremely well to our subscription model, and that's what we often see when we're dealing with sports and entertainment. Health care, we find can go either way. They're often upfront, but at the same time, we do find some of our health care facilities do like to use a subscription model. I would say it's perhaps a little bit more leaning towards the upfront. But you're definitely seeing a preponderance of a market going towards one type of contract versus the other. But that being said, we always have exceptions. And from our standpoint, we're agnostic as to which one our customers choose. We just want to meet the customer with what suits them best for their needs, and that's why we offer that flexibility of both models, whereas some of our competitors in the market are much less flexible in terms of what they offer and they're often pushing customers into a subscription model when they are, in fact, better suited towards an upfront model. So I think that's the key takeaway from us, which is we're very happy to meet our customer from whichever model suits their purposes. Our margins are comparable on both scenarios. And therefore, we just do what's best for our customers. Unknown Analyst: Awesome. So -- and on kind of that topic, having a lot to offer for the customers. I know, Peter, you mentioned, and I think this kind of goes under the radar sometimes. I think you guys are really the only player in the space as far as advanced weapons detection that offers kind of 2 different tailored products, whereas I think your competitors mostly kind of just take their product and try to maybe add on a metal detector like you were saying. Is this something that is really kind of driving some of the advantage with having those 2 products? And if you can talk about maybe which particular customers really do appreciate that advantage? Peter Evans: Yes. So John, it's a great question. I guess the easiest way to describe it is there are -- for each market segment, there are certain critical key factors that they're looking for. And by having more flexibility in the portfolio, that allows us to be more aligned to what those customers' needs are. And I'll give you some examples in a moment versus kind of a one-size fits all. If all you've got is a square peg and you've got to push into a round hole, a hexagonal hole, a triangular hole of unique needs, you kind of have to hammer it in there, and it's not going to fit very, very well. In our case, think of it like we have got a solution with SmartGateway and what it does uniquely and the flexibility for various environments to address the needs of the square pegs and the hexagonal pegs and with the One Gateway, the round pegs. There are certain things that certain markets want. The #1 thing for schools is they want the kids just to flow in. They don't want them to have to divest their backpacks, their laptops, put them on an x-ray machine, walk on through all that sort of nonsense. We want the schools to be very welcoming and the One Gateway allows people to do that. In the case of hospitals, the bulk of the hospitals, the majority of them are very worried about edge weapons. And there's unfortunate incidents like what happened in Nova Scotia in January this year, where 3 nurses were stabbed and one needed life-saving surgery, and that was from a 2-inch blade. And so being able to detect those small edge weapons without alerting on 70% to 80% of the smartphones like other solutions would do, is a competitive advantage for the SmartGateway. And then that applies when you start to think about international markets where the preponderance of the issues are edge weapons, they are not firearms. And so for health care organizations or international markets, the ability to detect the smaller knives without the untenable numbers of alerts is critical. For other organizations like stadiums and arenas, there's all sorts of other capabilities in the SmartGateway, ease of portability. Let just tip it, roll it, drop it on the ground, turn it on and it works. And it's up and running, self-calibrating, self-managing. I don't have to worry about moving metal doors or rebar under the ground or all these other silly things that make it operationally complex for people. The arenas and stadiums have enough to worry about to get 17,000 excited Billy Joel fans in to go see Billy. And so making our systems very simple to use, particularly in an environment where you're using outsourced security guards who change over frequently. Now these are things that we've built into the platform in a manner that makes it very easy for arenas and stadiums and the SmartGateway perfect fits that, very easy for hospitals. I was at one hospital location where they were doing a demonstration and the vestibule between the 2 sets of sliding doors was about 6 foot by 7 foot, fairly small, and we fit into it perfectly where others couldn't. So the ability to fit and align to those different market needs for the different segments is what's giving us competitive advantage. Unknown Analyst: Awesome. One last question. I know you talked about the advantage with -- internationally with knives. I know that's a big thing, especially with the SmartGateway. With schools, though, I know a lot of the schools, obviously, in the U.S. have been picking up on these technologies and we kind of only expect it to continue. But internationally, are you guys seeing the same trend with schools wanting to add security systems like these? Or is it kind of particularly just certain markets like the U.S.? Peter Evans: I think the primary issue in the U.S. is with weapons and firearms. There isn't a week that goes by where we don't hear a story about some child bringing a gun to school. You don't have the same issues in outside of the U.S. because there's not same easy access to firearms. However, there are anecdotally certain locations like I believe in the south of France, they have now mandated that schools will start screening for weapons. So we are starting to see this coming a little bit at the forefront, usually driven by some sort of an event. I was in the U.K. a month ago, and there are certain school districts that are now starting to make it mandatory to start screening for weapons also, primarily driven by some sort of unfortunate event. What we see is in countries outside of the U.S., when there is an event, there's a much faster reaction and mandate to start driving weapon screening solutions. Operator: Our next question comes from, Jeffrey Bennett, a private investor. Jeffrey Bennett: I just wanted to get some visibility into Europe with Martyn's Law coming into effect. I know you just signed Carlisle Support Services and you've done some demos for the Premier Soccer League over there. What kind of revenues are you expecting out of that? I'll put on mute there. And for Karen, I wanted to know what kind of warrant conversions are currently taking place with your warrants? Peter Evans: So thank you for the question. The U.K. is a very strong and emerging market for us. We're very pleased with the engagements with assorted football clubs, theater organizations and other iconic venues. Obviously, we can't speak to them specifically because we're under a nondisclosure with those organizations, until such time as we've either signed a formal contract with them or until such time as we have got their agreement to actually put out a formal press release. So I can't name any specific names. I wish I could, but we can't right now. But the U.K. particularly is becoming a very nice market for us, and we're very pleased with the business acceleration that's occurring there right now. All I can really say is stay tuned, more announcements to come. Jeffrey Bennett: Karen, for the warrant conversions, what kind of conversions are you seeing? Karen Hersh: We have seen some conversions happening in September. We had [ $2.8 ] -- almost [ $2.9 million ] of warrants that were exercised. And this was primarily -- this was exclusively actually related to the financing that we just completed in June. So we've had some additional cash come into the organization from those conversions. And that extended into a little bit more going on in October. In total, [ $4 million ] warrants, give or take, have been exercised since year-end that has provided additional cash for the company. And I would note that there are a number of warrants that are still in the money and could potentially convert throughout the rest of the year. Operator: At this point, there are no further questions in the queue. I would like to turn the conference back over to Peter Evans, CEO, for any closing remarks. Peter Evans: Well, first off, thank you, everyone, for taking the time out of your very busy day to join us today for this presentation. We are very pleased with how we wrapped up the year strongly. There's a few bumps in the road last year, but those were quickly corrected, and we feel that we've got our momentum back, and we've got that strength back in everything that we're doing. 2026 is looking very, very good. I'm feeling very pleased about it right now. I couldn't be happier. I'm very thankful for our investors who continue to support the company. I'm unbelievably thankful to all the employees that we have in our company. We have got a fantastic group of individuals who are all very passionate about what we do. And most importantly, I'm very thankful to our customers who continue to support us, continue to renew with us and continue to go tell all of their friends about us and why they want to work with Xtract One. So with that in mind, I'd invite everyone to stay tuned. We are looking forward to our Q1 announcement coming up very soon, and we will continue the momentum and keeping everyone aware of what we're doing here at Xtract One. Thank you, everyone. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

203天前Insight Analytics约5分钟阅读

MHK 2025 Q3 财报电话会议

Operator: Good day, everyone, and welcome to the Mohawk Industries Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please also note today's event is being recorded. At this time, I'd like to turn the floor over to James Brunk, Chief Financial Officer. Please go ahead. James Brunk: Thank you, Jamie. Good morning, everyone. Welcome to Mohawk Industries quarterly investor conference call. Joining me on the call are Jeff Lorberbaum, Chairman and Chief Executive Officer; and Paul De Cock, President and Chief Operating Officer. Today, we'll update you on the company's third quarter performance and provide guidance for the fourth quarter of 2025. I'd like to remind everyone that our press release and statements that we make during this call may include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, which are subject to various risks and uncertainties, including, but not limited to, those set forth in our press release and our periodic filings with the Securities and Exchange Commission. This call may include discussion of non-GAAP numbers. For a reconciliation of any non-GAAP to GAAP amounts, please refer to our 8-K and press release in the Investors section of our website. I'll now turn the call over to Jeff for his opening remarks. Jeff Lorberbaum: Thank you, Jim. Our third quarter net sales of $2.8 billion were in line with our expectations, slightly ahead of prior year as reported and flat on a constant basis. Though economic conditions across our regions weakened more than anticipated compared to the prior quarter, we believe we outperformed in most of our markets. Our sales and product mix continue to benefit from the success of our premium residential and commercial offering and collections introduced during the past 2 years. Our adjusted earnings per share of $2.67 reflected benefits from ongoing productivity and restructuring initiatives as well as the impact of favorable currency exchange and lower interest expense, offset by higher input costs and temporary plant shutdown. Across our markets, material and energy expenses are now improving from peak levels, though higher costs from early in the year will still impact our fourth quarter earnings as expected. With our markets remaining challenged, we're executing targeted actions across the organization to drive performance such as operational enhancements, administrative process improvements and technology advancements. We are lowering our cost structure without impacting our long-term growth potential when the market recovers. We've identified additional restructuring opportunities to rationalize less efficient assets and streamline logistics operations and administrative functions. These new actions will result in annualized savings of approximately $32 million at a net cash cost of approximately $20 million after asset sales. Combined with our previously announced restructuring actions, we anticipate delivering $110 million in savings this year. During the quarter, we continue to focus on our working capital management and generate approximately $310 million in free cash flow. We repurchased 315,000 shares in the quarter for approximately $40 million as part of our current stock buyback authorization. Year-to-date, we've purchased $108 million of our outstanding shares. Across our geographies, consumer uncertainty continues to limit discretionary spending on large projects, particularly if financing with debt is required. Postponement of large renovation projects and declining home sales have been the primary driver of weakness in the residential remodeling during the current cycle, while the commercial sector has remained stronger. In most of our markets, central banks have lowered interest rates to encourage economic growth and benefit housing turnover. The Federal Reserve's September rate cuts and potential future actions should benefit the U.S. housing market by bringing in potential buyers who have waited for better rates. As the supply of existing homes on the market rises, price increases have slowed, which should benefit future sales. Builders are attempting to offset weakness in the new home sales with price cuts, rate buydowns and closing cost assistance. The Fed's actions should also stimulate future business investment in nonresidential new construction and remodeling. European consumers have accrued record levels of savings since the pandemic and are now experiencing lower inflation rates, both of which should encourage greater discretionary spending. To address the ongoing housing shortage in Europe, several governments are initiating programs to incentivize new home construction. Our industry is currently at various stages of passing through the impact of higher tariffs on imported products and should compensate for increased product cost over time. As previously stated, we continue to address the situation by optimizing our supply chain and implementing price adjustments on affected product categories. Ocean freight costs have been declining and are partially offsetting the tariff impact for U.S. importers. Based on the recent changes, engineered wood and laminate imports will now be subject to reciprocal tariffs like our other flooring product categories, which should benefit domestically produced products. Because the evolving tariff situation will require some time to reach equilibrium, we will continue to adjust our strategies with the changing rates and market conditions. With that, Jim will review our financials for the quarter. James Brunk: Thank you, Jeff. Sales for the quarter were just shy of $2.8 billion. That's a 1.4% increase as reported and flat on a constant basis as our hard surface and commercial business continued to outperform the overall residential channels. In addition, FX benefited our business on a reported basis. As we noted in the earnings release, Q4 has 1 additional shipping day. And for planning purposes, Q1 of 2026 will have 4 additional shipping days and Q4 of '26 will have 4 less. Gross profit for the quarter was 23.7% as reported and 25.3%, excluding charges, as strengthening productivity of $57 million and favorable impact of FX of $15 million were offset by higher input costs of $39 million, continued pressure on price/mix of $20 million and lower volume and temporary shutdown costs of $23 million. SG&A expense for the quarter was 18.8% as reported and 17.9% excluding charges. That gave us an operating income as reported of 5%. Nonrecurring charges for the quarter were $69 million, primarily related to our ongoing restructuring initiatives. Combining the projects announced in Q3 with our previous actions, we should have savings of approximately $110 million this year. It gave us an operating income on an adjusted basis of 7.5%. That's a decrease of 130 basis points as the impact of inflation of $52 million, lower volume and temporary shutdown costs of $22 million and unfavorable price/mix of $20 million offset the benefit of productivity and restructuring actions of $62 million for the quarter. Interest expense was $5 million. That's a decrease versus prior year due to lower overall debt balance and the benefit of our interest income activity. Our non-GAAP tax rate was 17% versus 19.8% in the prior year, mainly due to geographic dispersion of our income. We are forecasting in Q4 and for the full year a tax rate of approximately 18%. That resulted in earnings per share as reported of $1.75 and on an adjusted basis of $2.67. Turning to the segments. Global Ceramic had sales of just over $1.1 billion. That's a 4.4% improvement as reported and 1.8% on an adjusted basis due to favorable price/mix in both channel and product categories, partially offset by lower unit volume. Operating income on an adjusted basis was $90 million or 8.1%, which was a decline of approximately 50 basis points as higher input costs of $31 million and lower sales volume were partially offset by favorable price/mix of $8 million and strong year-over-year productivity gains of $24 million. Flooring North America had sales of $937 million. That's a 3.8% decrease as residential new construction and remodeling remain under pressure. From a product perspective, our LVT and our laminate categories continued with positive gains versus prior year. Operating income on an adjusted basis was $68 million or 7.2%, which is a 190 basis points decline versus the prior year as productivity gains of $29 million were offset by higher input costs of $22 million and the impact of lower sales and increased temporary shutdown costs of $17 million and unfavorable price/mix of $10 million. In Flooring Rest of the World had sales of $716 million. That's a 4.3% increase as reported and an increase of 0.9% on an adjusted basis. The volume growth was driven by expansion in our insulation and panels business as well as in our laminate flooring category, partially offset by continued pressure in price and mix. Operating income on an adjusted basis was $59 million or 8.3%. It's a 220 basis point decline versus the prior year, primarily due to unfavorable price/mix of $18 million, partially offset by continued productivity gains of approximately $8 million. Corporate costs for the quarter were $12 million, in line with the prior year and for the full year should be approximately $50 million. Turning to the balance sheet. Cash and cash equivalents were $516 million with free cash flow for the quarter of $310 million. Inventories were just shy of $2.7 billion. That's an increase of approximately $80 million, primarily due to the impact of foreign exchange and inflation and some increase in imported goods. Property, plant and equipment were just shy of $4.7 billion with CapEx of $76 million and D&A of $170 million in the quarter. We have lowered our full year CapEx plans to approximately $480 million with D&A of $640 million. Overall, the balance sheet is in a very strong position with gross debt of $1.9 billion and leverage at 1.1x, positioning the company to be able to take full advantage of the changing market conditions. Now Paul will review our Q3 operational performance. Paul De Cock: Thank you, Jim. In the Global Ceramics segment, our performance benefited from our premium collections, commercial sales and expanded distribution. All of our markets faced pricing pressure due to excess industry capacity, though we were able to offset due to the strength of our product and channel mix. Across our markets, our commercial business is stronger as the A&D community embraces our industry-leading product innovation and design. Tile market trends are shifting to 3D surface applications that create premium visuals and our advanced technology and design expertise position us to lead the market in this transition. We are the only manufacturer in our markets to offer coordinated collections for very small to oversized options for both floors and walls, which makes selecting our products for a project easier for consumers. In the U.S., our commercial performance outpaced residential due to growth in the hospitality, health care and education sectors. We are leveraging our national distribution footprint to expand our relationships with contractors, specialty retailers and commercial specifiers. In the period, we announced price adjustments based on the current tariff rates. Due to importers building inventories earlier in the year, the tariffs have not significantly impacted the U.S. ceramic market at this point. Our countertop business grew in the quarter through new retail and high-end builder partnerships that will support increased production from our new quartz line that features advanced veining technology for greater realism. In Europe, we improved sales volume in a difficult market. Pricing pressure persists with low market demand and our mix and productivity gains offset higher-than-anticipated input costs. Residential remodeling and new construction remain constrained, while the commercial channel shows continued strength, particularly in hospitality. Across Europe, our regional showrooms and education sessions for architects and designers are enhancing sales of premium collections and our commercial participation. Our porcelain panel sales continue to grow due to our advanced printing technology, yielding more authentic marble and stone looks. In Latin America, markets have softened due to persistent inflation and weakness in housing. In Mexico, we are capturing volume by introducing new textures and a wider variety of sizes and expanding our distribution. In Brazil, our volumes increased across most channels as we enhanced promotional activity. In both markets, we are enhancing our product offering to improve our mix and lowering our cost with productivity and restructuring actions. In our Flooring Rest of the World segment, our results benefited from strength in panels and insulation with rising volumes increasing plant utilization. Our core European markets continued to experience weak remodeling and new construction, which is constraining flooring sales. In response to these conditions, we implemented selective price increases, continued to reduce our cost structure and lowered input costs by optimizing our supply chain. In the segment, we are rationalizing less efficient assets, consolidating operations and reducing administrative and manufacturing overhead. During the quarter, sales outside Western Europe were more stable, with the U.K. performing better as the government increased investments in social housing. With the laminate category remaining under pressure, we have increased participation in the DIY channel, and we are expanding our distribution in Southern and Eastern Europe. Pricing and mix remained difficult during the quarter, and we are executing promotional activities to optimize our sales. The European LVT market is becoming more competitive, and we are addressing this with product innovation, including new battling technology and parquet wood looks. We're expanding sales of both loose lay and glue down LVT, which is used in commercial applications. We are also reorganizing our sales teams to maximize opportunities with residential builders. In a difficult market, our panels division delivered sales growth in MDF boards and decorative panels, which we are expanding into new markets. Our insulation business delivered solid results in a competitive market. We increased our customer base and volumes, which improved our utilization. To support our forthcoming insulation plant in Poland, we are growing sales in Eastern Europe, where the economy is growing faster. In Australia, our expanded hard surface offering is gaining traction with our customer base, while pricing actions and productivity initiatives benefited our soft surface results. We have entered into an agreement to purchase a small New Zealand manufacturer of premium wool carpet, which we will integrate into our existing business. In our Flooring North America segment, we believe Mohawk's hard surface categories outperformed the overall market due to our growing relationships with major retailers and builders, successful promotions and our innovative products with superior visuals and performance features. Our restructuring projects in this segment remain on track as we retire high-cost assets, consolidate logistics operations and reduce overhead. We delivered productivity gains that offset higher energy, material and labor costs flowing through. Retail volume was affected by low consumer confidence that continues to impact large purchases, though some retailers reported improvement in store traffic as the quarter progressed. Market pricing remained competitive and in response to recent tariff changes, we announced pricing adjustments. To address pressure from input and labor costs, the industry also announced price increases in carpet collections. Our hard surface volume rose during the quarter as we expanded placement of our industry-leading laminate, hybrid and LVT product offering. As we expand our accessories portfolio, consumers are increasing attachment of these accessories with our hard surface collections. To grow our commercial participation, we continue to increase sales and marketing activities to expand our customer base. We are implementing promotions to grow volume in main street soft surface sales, and we also enhanced our commercial LVT offering to align with current decorating trends. I will now return the call to Jeff for his closing remarks. Jeff Lorberbaum: Thank you, Paul. All of our markets face a shortage of available housing as supply has failed to keep pace with household formation. To meet growing demand, new home construction and remodeling must expand, which will also lower housing inflation pressures. Most central banks have shifted from prioritizing inflation reduction to stimulating economic growth. Declining interest rates in the U.S. and around the world should gradually encourage increased home sales and remodeling. While we believe these actions will benefit the housing market over time, we remain focused on optimizing the controllable aspects of our business, including our sales strategies, product innovation and operational productivity. Our previously announced restructuring initiatives continue to benefit our results by streamlining our operations and reducing our cost structure. We have identified additional restructuring projects that should deliver approximately $32 million in annualized savings. We are leveraging the scope of our product portfolio, distribution advantages and industry-leading brands to expand our relationships with current and new customers. Our product mix continues to benefit from our premium collections and commercial sales, which is mitigating some of the pricing pressures in our markets. We are managing the impact of tariffs on our U.S. imported product offering through pricing actions and supply chain optimization, and we are reinforcing the value of our domestic manufacturing. Based on current trends in our regions, we believe that market volume should remain soft through the end of the year. Given these factors, we expect our fourth quarter EPS to be between $1.90 and $2 with 1 additional shipping day and excluding any restructuring or other onetime charges. For more than 3 years, the flooring industry has been impacted by both consumers postponing large discretionary purchases and low home sales, which have reduced new construction and remodeling activity. Housing turnover has a significant effect on our industry with U.S. consumers spending an estimated 5x as much on remodeling their flooring in the first year after buying a home than nonmovers. Declining interest rates, increased disposable income and higher home equity should support greater home sales and remodeling in our markets. The housing stock in our regions is aging and requires significant renovation to preserve property values. During the cycle, we have enhanced our operations, cost position and product offering to capitalize on the future market recovery. While the inflection point remains unpredictable, market fundamentals, significant pent-up demand and Mohawk's unique business strengths support long-term profitable growth. We'll now be glad to take your questions. Operator: [Operator Instructions] And our first question today comes from John Lovallo from UBS. John Lovallo: The first one is, in July, I believe you guys noted that 4Q EPS could potentially outpace the normal seasonal decline of about 20% quarter-over-quarter. I guess the question is, what do you view as the most significant changes that have occurred since then that sort of lowered those expectations? And how are you thinking about revenue and margins by segment embedded in that outlook? James Brunk: John, conditions did weaken since we last talked during the quarter with interest rates remaining elevated. The other aspect is consumer confidence decline, which affected our remodeling. Builders have actually slowed a little bit from a construction standpoint and international markets have softened. Inflation has eased, but our costs are still higher than the prior year. John Lovallo: Got it. Okay. That's helpful. And then there was a couple of mentions of outperforming the market. I know hard surfaces in North America was one area you called out in particular. But just curious if there were other product categories and regions where you guys outperformed? And what do you kind of attribute the outperformance to? Jeff Lorberbaum: Our ceramic sales in the third quarter grew, we think, more than the markets due to our improved product and channel mix. We have a larger commercial business than our other segments, which also enhances it. We benefited from new product introductions as well as operational improvements. And then we continue to get benefits from the restructuring in the Flooring Rest of World, as we mentioned in the original remarks, we also had the insulation business and the boards business whose volumes were up. And then across the business in the U.S., we had our hard surface business we're doing well as some examples. Operator: Our next question comes from Matthew Bouley from Barclays. Matthew Bouley: Question on the price increases that are related to the tariffs. I'm curious, it sounded like some of the initial price increases may not be fully flowing through yet, if I heard you correctly, given some of the inventory in the channel. So if you can just kind of delve into a little detail on kind of what's happened with the initial price increases and then some of these additional price increases that you've announced, when might those begin to benefit you guys? Paul De Cock: Yes. So the priorly announced price increases are flowing. And so we have also announced in the third quarter additional price increases, both to recover the tariffs and to recover inflation in carpet. For the tariffs, we announced an additional price increase between 5% and 10%. And for carpet, we have announced approximately 5%. And so as they are now announced and as we see realization of that, that will take us some time until it reaches equilibrium. And then given the volatility, we will also adjust our strategies if tariffs would change or market conditions would change because things are quite volatile, as you know. Jeff Lorberbaum: Just as a comment. Most of our tariffs today range between 15% and 50% of the pieces. We've taken actions to optimize the supply chain, which is negotiating different pieces, moving products between countries, dropping and adding different product categories, and we're implementing price increases to offset the balance. We've also got some benefit from lower freight rates that have been declined during the period, which is helping. And it will take some time for the market to equilibrate as he said. Matthew Bouley: Okay. Got it. Maybe I guess that then leads to the tariff question then. I'm just curious, since the reciprocal tariffs ended up in place over the summer, if there's an update or if you can quantify perhaps sort of the mitigated or unmitigated headwind and if any of that is in your fourth quarter guide or if we should think about more of a Q1 impact as those tariffs flow through? Jeff Lorberbaum: If you take the average of what we're paying, it's probably approximately 20% on all the imported products in general. That relates to, on an annual basis, about $110 million impact before any mitigations that we've done is that with the -- we just talked about the different things we were doing is that we have announced price increases, and it will take a while for them to flow through in the markets to absorb them as we go through. So we think as we go into next year, we're hoping to have everything aligned. James Brunk: And Matt, right now, to answer the second part of your question, we have seen some impact from a cost perspective in the third quarter. I expect to see it continue in the fourth quarter. But also, we've seen the benefit of the initial price increases, both in the third quarter and the fourth. And yes, it is contemplated in our guidance. Operator: Our next question comes from Collin Verron from Deutsche Bank. Collin Verron: You guys also called out raw material and energy costs have come down from their peak. Can you just help us think about the magnitude of declines that you've seen in your raw material costs? And maybe how early in 2026 they'll begin to help margin just given the normal lag from when it will move from your balance sheet to your P&L? And maybe touch on the order of magnitude we can expect in each segment. James Brunk: From an inflation standpoint, in the fourth quarter, we will see raw material prices easing from their peak earlier in the year. Energy and wages will continue to be higher than last year. And as I just noted, tariffs will also increase our costs. We do anticipate continued inflation in our input costs next year, and those can be across both from a material perspective, wages and benefits and energy. Collin Verron: Okay. Understood. That's helpful color. And then Rest of World, they reported adjusted sales growth, I believe, in the quarter. It was a little bit better than normal seasonality from 2Q to 3Q. I was just wondering if you could comment on if you think you found the bottom here in Rest of World? And are you anticipating year-on-year growth in the fourth quarter in that segment? Paul De Cock: Yes. Conditions in general in Europe and the housing market in Europe continue to be slow. We also have the geopolitical events in Europe that are reducing consumer confidence. And most of the Western European countries budgets are stretched. And so we think with the decreasing interest rates down to 2% in Europe, that housing should improve over time. We also know that households have built record savings levels and that inflation is coming down in Europe. And so both of those would fuel a recovery. And then lastly, also energy prices have continued to decline a little bit in Europe. That's kind of the European conditions we see at this moment. Operator: Our next question comes from Rafe Jadrosich from Bank of America. Rafe Jadrosich: I just wanted to follow up on the last question. Just on the material costs, like looking at oil prices have come down and natural gas has come down, I think some recycled like poly is lower. understanding like there's a lag when you guys realize it. Like what's sort of the visibility on inflation into 2026? Like could there be a relief as we go into next year? James Brunk: Well, to answer the first part of your question, it usually takes 3 to 4 months for it to cycle through the inventory. And as I stated, as we look forward into Q1, you'll have the normal wage and benefit increases -- and right now, we still see impact on the tariffs, obviously impacting Q1 and still some minor impact on the higher material costs. Rafe Jadrosich: Got it. Okay. And then can you just -- the cost savings initiatives that you've -- the previously announced and then the additional one that you just announced this quarter, can you just walk us through like the cumulative tailwind to the fourth quarter and then what you expect to carry into 2026? And then just remind us, do you expect additional productivity on top of that? Or is that inclusive? James Brunk: Sure. As we previously said, we were looking at savings about $100 million, fairly evenly spread across the quarters with the additional actions we announced, plus with a little better performance on the previous ones, we're up to about $110 million, so a little bit more in the fourth quarter. As I look forward to 2026, just from the restructuring actions, we should have approximately $60 million to $70 million of favorable impact next year. And again, fairly evenly spread across the quarters. In addition to that, you are correct that we continue to have our normal ongoing productivity initiatives really across the business. Operator: Our next question comes from Susan Maklari from Goldman Sachs. Susan Maklari: My first question is going back to the new products and knowing that there's a lot that's going on across the business, but maybe focusing mostly on the North America piece. Can you talk about where those launches are in terms of their life cycle? How much more momentum we could see next year? And any plans for additional products that could come through that could allow you to realize favorable mix or even outgrow the market in 2026 if the macro and the housing environment stay more challenging? Jeff Lorberbaum: Every one of the businesses has product innovation coming through it. So in ceramic, the business is going towards 3-dimensional tiles and different surface textures to make them look different. There's also new decorating technologies to enhance them further. In the LVT collections, they are updating the decorating trend as well as we're introducing PVC alternatives that we just lump into a group we call hybrid. We have a new quartz countertop line that's coming in that should be helpful today with the increased tariffs on those, especially because a large part comes out of India is it. So that's starting up, and it has new technology that will introduce new looks that I don't believe anyone else in the world can make. And then we continue to always increase the realism in the laminate, introduce new formats and sizes and shapes. And then continually, all the businesses are incrementally improving the offering. Susan Maklari: Okay. That's helpful. And then, Jeff, can you talk a bit about how you're thinking about the path for margins next year? How do we think about what the businesses can achieve given the company-specific elements in the macro that you'll likely be facing? And how that compares to the longer-term target that you've set for the business in kind of that high single, low double-digit range? Jeff Lorberbaum: Jim and I can get that together for you. First, in next year, we're looking at next year as being a transitional year from the cyclical low, and we're expecting it to improve somewhat as we go through. Central banks, we believe, with the lower interest rates everywhere should improve spending on housing around the world. We see the mortgage rates are declining. There's high home equity rates as the prices of houses have gone up and the increased housing supply around the world should help and benefit the category. There's also where we're going into, and this is a really long cycle. I don't remember one, I think, in my career that's lasted more than 3 years like this one has. And so there's a huge pent-up demand in the remodeling business as people have postponed larger projects. We anticipate with this higher volume and improved pricing and mix next year, we should see the restructuring and productivity initiatives that Jim talked about earlier should help lower our costs and improve the margins. And the exact point of the inflection point and when it's going to happen, we don't know exactly when, but we know it's going to. And then when it happens, there's usually multiple years of above-trend growth as we recover from the bottom of the cycle. James Brunk: And I would build on to that, certainly emphasizing the cost structure reductions that we've made should leverage our margins as we start to see those volumes increase. Input costs as we go into the first quarter of next year, as I said, will continue to go up in total, but productivity and tariff price increases should help us offset. And as Jeff said, it's tough to predict when the turn actually happens, but we're anticipating better results for the year based on the combination of our product innovation and our cost reduction actions. Operator: Our next question comes from Sam Reid from Wells Fargo. Richard Reid: I wanted to know if you could quantify the benefit to ceramic volumes in the third quarter from that new Daltile initiative into Lowe's. And then any sense as to whether there's plans for additional sell-in benefits in the fourth quarter that might be embedded in the guidance? Jeff Lorberbaum: Lowe's purchased ADG. And so we were a long-standing partner of both of them. At this point, it really hasn't impacted the business in the third quarter one way or the other. Our goal with every -- like with every customer is to optimize our business together and maximize our results together. Richard Reid: That helps. And then maybe just more of a housekeeping question. But if I heard correctly, I believe there's going to be 4 additional shipping days in the first quarter and then a corresponding 4 fewer days in the last quarter of '26. Can you be able to just quantify the impact from those shipping days, maybe the top line and to bottom line, especially in that first quarter, just so we have some context there for modeling? James Brunk: Well, it is a reset year for us in terms of the calendar. And so those 4 additional days from a year-over-year perspective, it's about 6.5% benefit on the sales line. And obviously, it really depends on by segment, the flow-through of which products and such for a margin perspective. But from a sales perspective, you could plan on kind of every day is roughly 1 point to 1.5% change. And then the fourth quarter obviously has, as you pointed out, has the same reduction in days. Operator: Our next question comes from Keith Hughes from Truist. Keith Hughes: One of Paul's comments about some improved retail traffic in the quarter. I didn't show up on sales it looks like. Can you talk more about that, where you're seeing it? And has that continued into October? Paul De Cock: Yes. As we went through the quarter, we saw a slightly improving retail traffic. We had some information from our customers. But in general, the current consumer uncertainty continues to limit remodeling activity. And so the postponement of large discretionary projects and also the declining home sales have significantly reduced the flooring sales through the specialty retailers. And so we are now, like Jeff said, 3 years into consumers deferring these projects. And so we anticipate when it turns that it could lead to a relatively strong recovery in that channel. Operator: Our next question comes from Michael Rehaut from JPMorgan. Michael Rehaut: I just wanted to start off with maybe just going back to tariffs for a moment. And I wanted to better get a sense of -- I think you kind of started to quantify a little bit of the impact from a cost standpoint on your own business. Just wanted to make sure -- maybe if you could just repeat those numbers. And what I'm really looking for is if you kind of think about 1Q, 2Q, 3Q now, what the cost impact has been on your business? And for each of those quarters, what have you been able so far to recover in price? I understand you expect 2026 for it to be fully offset, but kind of where we are today in that quarter-by-quarter? James Brunk: As Jeff talked about earlier, right now, we're doing -- we're seeing about an average impact of about 20% or just over $100 million to $110 million before the mitigating action. Again, that's an annualized amount. We've started to see in Q3, as I previously stated, some impact on -- from a cost perspective. But as planned, we are offsetting that with pricing both in Q3 and in Q4. And then we'll continue, I imagine, to see it build as you go into the first quarter of next year. But remember, from a pricing perspective, we are on our second price increase due to the tariffs on those specific products that are impacted. Michael Rehaut: Okay. I appreciate that. I guess, secondly, I just wanted to shift to the balance sheet and capital allocation. I know you kind of edged down, I believe, your CapEx outlook for this year. Your balance sheet remains pretty strong. I know you bought back a little bit more stock this quarter. Just trying to get a sense of what's kind of holding you back for being a little more aggressive in the share repurchase department. I know historically, all else equal, if it's a healthy market, you have a pretty active M&A program and certainly like to keep a certain amount of dry powder. I'm wondering if the reason for maybe this more continued restrained share repurchase approach is you have eyes on the M&A market over the next couple of years, if there are certain assets that are coming up because otherwise, I feel like people might have expected a little bit more on the share repurchase side. James Brunk: Well, really from share repurchase, just to recap, we bought about $108 million back year-to-date, and that's on free cash flow from a year-to-date perspective of about $350 million. We're going to continue to use that as part of our overall capital allocation strategy, and we expect to continue investments in our businesses as the market improves. Remember, that's one of our priorities to try to drive an increase in our margins and our results. We'll optimize our product offering and continue to increase productivity during that period. We should see, to your point, more opportunities to acquire businesses as the environment strengthens. And again, share buybacks will continue to be part of our strategy as we go forward. Operator: Our next question comes from Adam Baumgarten from Vertical Research. Adam Baumgarten: Given some kind of relative stability on the tariff front, again, relative being the key term, are you finding that the industry now is a bit more coordinated from a tariff-driven price increase perspective versus maybe over the summer when things were a bit more hectic and everyone was trying to figure things out, maybe it's a bit more kind of broad-based at this point? Jeff Lorberbaum: I'm not sure it's coordinated. The whole industry has the same impacts from the tariffs going up. the industry, like other ones, tried to increase inventories, not knowing what's going to happen to reduce it. So there's high inventories going into it. So -- and then with the changes in place, we put through an increase to the first of the year. At the moment, most of the industry has announced increases about now going into the fall, and it has to flow through all the pieces and get done. And we're assuming it will take until the first of the year for it to level out, given there's -- everybody has got different inventories and different strategies. But we assume that somewhere about the first of the year, it will equalize out. Adam Baumgarten: Okay. Got it. And then just on commercial, I know that's been a nice outperformer relative to residential for a while now. But you had at least last quarter, kind of talked about maybe some leading indicators pointing to some potential slowing. Are you actually seeing any signs of demand in that channel is slowing at this point? Paul De Cock: So yes, you're correct. Around the world in the different markets and segments that we are active, the commercial channel continued relatively to outperform the residential market and our backlogs have remained stable. But we also see in some markets and segments some slowing activity. And so we are trying to compensate that by pushing our higher-end products with unique advantages, which helps in pricing and in margins. And in general, also our Ceramic segment and our ceramic businesses have a higher exposure to the commercial segments than Flooring North America and Flooring Rest of World. Operator: Our next question comes from Philip Ng from Jefferies. Philip Ng: Now that you actually have a better view on where tariffs could land, remind us how you stack up from a cost standpoint in the U.S. in some of your major categories versus your competitors, like whether it's ceramic, laminate, LVT and then of course countertops, as you kind of pointed out, a lot of that's coming from India. So there's some pretty sizable tariffs coming in. Is your laminate product becoming even more competitive versus other laminate products and a better substitute for LVT? And have you started seeing any new placement from your channel partners, whether it's the builders, retailers or the R&R side of things? Paul De Cock: Yes. So you're right. Our waterproof laminate collections continues to be an excellent alternative to LVT, and we are indeed seeing builders shifting to our laminates given its performance and aesthetic and also installation advantages. And so with imported laminate now also included in the reciprocal tariffs, this should benefit us because, as you know, all our laminate products are produced here in the U.S. Philip Ng: Okay. Do you have a big cost advantage for most of these at this point, your products, some of these bigger categories that are impacted by tariffs? Paul De Cock: I mean laminate is a very good value-oriented product in the market compared to other options. And so with our domestic assets in North Carolina, we have a very competitive setup in that category. James Brunk: And then in ceramic, most of our portfolio comes -- is manufactured in the U.S. and Mexico, which is advantaged of tariffs increase. Philip Ng: Okay. That's helpful. And then A lot of moving pieces. Certainly, there's a price/cost element lag for your prices coming through early next year. And then obviously, input costs have come down, and there's a lag associated with that as well, and you got the productivity gains. I think, Paul, in your prepared remarks, you mentioned the word equilibrium. And then Jim, can you kind of help us unpack all that? I know a lot of moving pieces here. But when we look to early next year, is the goal that productivity restructuring plus price cost is kind of neutral and then whatever volume growth you have will ultimately drive EBITDA and profitability. Is that the right way to think about things? Jeff Lorberbaum: Jim will answer, but the equilibrium we were talking about was in the tariffs and the passing the tariffs through and the industry equilibrating so that it's a little confusing with the different inventories and strategies as people implement them. So we think by the first of the year, the tariff situation will equate. Jim, do you want to answer the second part? James Brunk: Yes. The second part, Phil, is if you kind of start with Q1, we'd expect somewhat normal seasonality, obviously, adjusting for the 4 extra shipping days, I noted. Input costs -- and again, when we say input costs, it's everything. So it's not only material, it's wages, it's labor, it's energy and shipping costs, and that should continue to go up, but productivity and tariff price increases really should offset. And although it's difficult to kind of predict the volume trajectory, we do anticipate that the results should improve from a year-over-year perspective. Philip Ng: So Jim, did I hear you correctly, the productivity and price and all that should offset the inflation that's like in equilibrium? Is that? James Brunk: Yes. The combination of all those, that is the plan right now. They should be able to basically offset. Operator: Our next question comes from Stephen Kim from Evercore ISI. Aatish Shah: This is Aatish on for Stephen. Just going back to the commercial question. Can you give us an idea of how large the commercial piece is for the company overall and by segment as well? And then which of the larger verticals, maybe like on a dollar profit basis, are you seeing strength in and which ones are the most challenged? James Brunk: Well, overall, from a company perspective, we have about 25% exposure to commercial, but a larger piece of that is in our Global Ceramic segment. And so you see strength not only in the U.S. but in Europe as well. And then in our U.S. business in Flooring North America, you have seen the backlog remained fairly stable, led by the government and education channels. Jeff Lorberbaum: And the Rest of World channel has the lowest amount with very limited commercial in it. Aatish Shah: That's helpful. And then just kind of taking a step back, overall, during this kind of challenged period, how are you managing your sales force? And then is there any distinction between how that's managed between commercial and resi? Any kind of color there would be helpful. Jeff Lorberbaum: [ Shah ] what you're looking for. The sales forces -- we have different sales forces in each business in each region. Depending upon the region and the size of the business, they are more or less specialized depending on where it is. The most specialized ones would have very specific sales groups calling on retail. They have national accounts. They would have multifamily would be separate and builder. And you would have a unique sales force calling on each one of those. And then same thing and you get in the commercial categories, they would be broken down by different segments and each of the segments would have specialists in it to be able to convey the value of the products to each. Now those would be the most specific. And then depending upon country and product category and how big it is, it could be very limited segmentation up to the extreme of every category segmented. Operator: Our next question comes from Trevor Allinson from Wolfe Research. Trevor Allinson: A follow-up question on the latest round of restructuring. Can you just talk about what you're accomplishing with this round that you didn't play with the previous restructuring? Is it just incremental capacity coming offline? And does the recent restructuring impact either different product categories or geographies and previous actions? Just how should we think about that being distributed across your segments? James Brunk: It's fairly spread, Trevor, across all 3 segments. The segments continue to kind of challenge each of their structures. And so there's nothing necessarily specific, but we're looking at unprofitable products or plants that we could do a consolidation in as well as just exiting inefficient assets. Jeff Lorberbaum: And it's also taking out costs in the administration as well as sales and marketing in addition to the operational costs everywhere. Trevor Allinson: Okay. That's helpful. And then I think Paul mentioned the LVT market in Europe becoming more competitive. Do you think that's due to more product moving into Europe from Asia due to the U.S. tariffs? Or is it simply just due to a weaker European market overall? Paul De Cock: Yes. The LVT is the largest imported category in Europe. And although it's a lot smaller than in the U.S., it's also growing a little faster than the market. And so imports from China are growing and the market continues to be competitive. And then in Europe, we are combining both manufactured and sourced products to optimize our position in the market. Operator: And our next question comes from Mike Dahl from RBC Capital Markets. Christopher Kalata: This is Chris on for Mike. Just going back to North America price/mix. I'm just trying to get a better sense of net of the tariff dynamics, the key drivers there. Could you just provide a little more color on the competitive pricing pressures you talked about? How much of that is driving the inflection lower in price mix this quarter? And how much is just mix down? James Brunk: Sure. What we're seeing, obviously, is demand is lower and less than last year that's creating -- competition is very aggressive and promotions are being used. Residential remodeling is probably impacted the most by consumer confidence, which is deferring projects and also creating some trade down. Internationally, political events are certainly constraining those markets. And in the midst of all this, we are continuing to see our ceramic with its commercial penetration outperforming the other segments. Christopher Kalata: Got it. Okay. And then in terms of the outlook on price/mix and layering in the tariff pricing out there, do you guys have a best guess in terms of when we could see that segment return to positive price/mix or some of the offsets and uncertainty around tariffs still leave that uncertain? James Brunk: From an overall company perspective, I would anticipate from a year-over-year variance that we will see some improvement in the fourth quarter as more pricing comes online. And then again, as we go into next year, continued improvement in that area. Christopher Kalata: And just to clarify, is that improvement sequentially in terms of still year-on-year headwind but moderating or year-on-year growth? James Brunk: I'm talking about year-on-year. Operator: We do have one additional question. It looks like it's from Timothy Wojs from Baird. Timothy Wojs: Maybe just one clarification and one question. So the clarification just on Phil's question, when you were talking, Jim, about kind of pricing and productivity kind of offsetting material costs. Were you talking more as you kind of enter 2026? Or are you kind of saying that should kind of be the expectation for '26? James Brunk: I was talking about as we entered 2026, looking at the first quarter into even the second quarter, depending on, obviously, what happens to material prices as we exit the year. Timothy Wojs: Okay. Okay. And then the second question, just in areas like ceramic, where your competition is raising prices because of tariffs and you're advantaged, how are you kind of approaching situations like that with regard to kind of optimizing price and volume? Are you trying to take price at the same time? Or are you kind of keeping price consistent and really pushing for volume and placements? Jeff Lorberbaum: This is really a balance between all of them. You have to take each market, each product and what's going on. And dependent, you can see in our carpet business, the industry has been absorbing the pricing for 3 years where we haven't had a price increase. We have inflation every year. So the industry -- or we announced prices and the whole industry has announced prices to try to get some of the coverage of the inflation back. We have to go through each product and category and evaluate it at the time. Operator: And ladies and gentlemen, with that, we'll be ending today's question-and-answer session. I'd like to turn the floor back over to Jeff Lorberbaum for closing remarks. Jeff Lorberbaum: Mohawk is taking many actions to prepare for the recovery of the markets that we're in. We are at the bottom of the cycle. We can't determine the exact inflection point, but there is significant demand for housing, remodeling that's been postponed. And with the interest rates coming down, we know we're going to see better times ahead. We just can't pick the moment. We appreciate you joining our call, and thank you for taking time to be here. Operator: And ladies and gentlemen, with that, we'll conclude today's conference call and presentation. We do thank you for joining. You may now disconnect your lines.

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CYJBY 2025 Q3 财报电话会议

Aki Vesikallio: Welcome to Hiab's Third Quarter 2025 Results Call. My name is Aki Vesikallio. I'm from the Investor Relations. Today's results will be presented by CEO, Scott Philips; and CFO, Mikko Puolakka. And as a reminder, please pay attention to the disclaimer in the presentation as we will be making forward-looking statements. Hiab's Q3 profitability was affected by lower sales in the U.S. Our orders decreased slightly. Comparable operating profit margin decreased to 11.4% due to lower sales in the U.S., which was caused by elevated market uncertainty due to increased trade tensions. However, our services business continued to grow. Sale of MacGregor was closed on 31st of July, and the business is now separated from the company. Let's then view today's agenda. First, Scott will present the group level topics. Mikko will go through reporting segments, financials in more detail and the outlook. After Mikko, Scott will join the stage for key takeaways before the Q&A session. With that, over to you, Scott. Scott Phillips: Thank you, Aki. And greetings, everyone, from my side. I will start with a few highlights looking towards executing on our strategy of profitable growth for the future. First, I'm pleased to share with you that we announced a partnership with Forterra to further develop automated solutions for our lOad Handling Systems business. So really exciting development there. Next, we launched a new 3.5 ton truck-mounted forklift for the EU, which will enable our MOFFETT forklift -- our MOFFETT branded solutions to be the clear industry leader in this size class of delivery solutions. And I would also like to highlight that we announced the launch of the smartest cable hoist solution in the U.S. market under our GALFAB brand. So really proud of the work the teams have done on both sides of the Atlantic there. And finally, we are pleased to announce the revised long-range climate targets, aiming to be net zero by 2050. Now getting into the financials for the quarter. I'll start first with order intake. Our orders received in the quarter declined by 3% to EUR 351 million versus last year comparison period of EUR 361 million. And then as a consequence, as you see on the left-hand side of the slide, we've gone from EUR 900 million order book to roughly EUR 636 million at this time last year and now stabilizing out around EUR 557 million following this quarter. Now for the period year-to-date, our order intake is up 1 percentage point to EUR 1.1 billion versus last year. And as you think about the last 12 months order intake, we're somewhere around the EUR 1.5 billion level, which has been the case for approximately the last 2 years. Now the decrease in orders received was driven primarily by the delayed customer decision-making in the U.S. Of course, that was partially offset by Defense Logistics, and we won a nice Wind segment order that we announced previously in the quarter. Currencies had a 2 percentage point negative impact on orders received in Q3, which we had highlighted would be the case with last quarter's results call. Now looking further into the geographic distribution of the order intake. Our EMEA market was represented 56% of the orders for the quarter or EUR 195 million versus last year at EUR 155 million. So that's up 26%. Year-to-date, we're at EUR 587 million versus EUR 518 million last year. That's a change of 13% year-over-year, year-to-date. In the Americas, however, a bit different picture. In the quarter, we were EUR 132 million versus last year at EUR 185 million. So that's a 29% reduction. Therefore, year-to-date, we're down 14% versus last year at EUR 435 million versus EUR 504 million the prior year. And in APAC, we were up nicely in the quarter by 11% from EUR 24 million versus EUR 22 million last year. Year-to-date, we're at EUR 84 million versus last year's year-to-date figure of EUR 72 million or up 16%. In terms of the operating environment, we do continue to have positive momentum in our Defense Logistics and Energy segment opportunities. So that's good. We have also a big robust replacement demand that's driving the majority of our business. Of course, on the negative side, we still have the uncertainty of the trade tensions. And this, of course, has impacted the demand curve, in particular, in the Americas and in particular, drilling further in the U.S. market, which, of course, means our U.S. customers have remained quite cautious. Then moving into the sales development. Sales in the quarter were down 11%, so EUR 346 million versus last year's comparison period of EUR 388 million. And year-to-date, we're at EUR 1.16 billion, which is 6% below last year's level at this time, which is EUR 1.235 billion. And then on an organic basis or in constant currencies, we're down 8% in the quarter versus last year and 5% year-to-date. Of course, our services percent of sales grew in the quarter to 34% versus last year's comparison period at 29% year-to-date. Services represent 30% of sales versus last year's year-to-date figure of 28%. So sales have leveled out at the -- approximately the level that we would expect given our prior 11, 12 quarters' worth of order intake adjusted for the seasonality effect. But of course, the big story was the negative impact that we had in the U.S. market, which I'll cover in the next slide. So looking into the geographic distribution of the sales. EMEA represented 51% of our sales in the quarter, down slightly from last year, 5%. Year-to-date, EMEA is at EUR 573 million versus last year at this time at EUR 599 million. So that's a 4% decline. In the Americas, however, is where we had the biggest decline. Americas in the quarter was EUR 140 million versus EUR 177 million last year, a 21% drop year-to-date. We're at 9% down versus last year, EUR 508 million versus EUR 556 million. And in APAC, much like the order intake, we were up slightly EUR 29 million in sales versus last year's Q3 of EUR 24 million in sales, representing an 18% positive variance. Then year-to-date in APAC, we're down 1% or EUR 1 million, EUR 79 million versus last year at EUR 80 million. Our ECO Portfolio sales continues on a positive development. We're at EUR 140 million in the quarter of ECO portfolio sales versus last year comparison period of EUR 114 million, so that's up 23% year-to-date, EUR 437 million versus last year, year-to-date at EUR 354 million, up 23%. So as indicated earlier, our sales decline was most prominent in the Americas. EMEA sales declined slightly, of course, linked quite closely to the order intake development in the region. APAC sales increased slightly, which, of course, is also linked to the order intake development in APAC. And on the positive note, our ECO portfolio sales increased, in particular, in our circular solutions from our service business as well as our Climate Solutions and our Lifting Solutions equipment business. Then looking into the profitability. For the quarter, our comparable operating profit was EUR 40 million versus last year, EUR 52 million. That's a 24% drop on the EUR 42 million drop in sales quarter-over-quarter. That puts our year-to-date comparable operating profit at EUR 166 million versus last year's EUR 176 million, representing a 6% drop. which, of course, all occurred within the quarter. On a percentage basis, our comparable operating profit percentage was 11.4% versus 13.4% last year. And year-to-date, we're at 14.3%, which is on the same level as last year due to our good performance in the first half of this year. We were primarily impacted by the EUR 20 million negative impact from our lower sales in the U.S. as I highlighted on previous slides. Our gross profit margin also decreased slightly by 80 basis points, primarily due to the change in the revenue curve, which we weren't able to fully offset with cost out in line with sales development or the revenue development. However, our SG&A costs were lower in the quarter by approximately EUR 5 million. EUR 1 million lower in sales and marketing, EUR 4 million lower in administrative costs, so well in line with our EUR 20 million cost reduction program that we announced last year. And then as a consequence, our operative return on capital employed improved driven by the nice development of managing the working capital within the team, especially as it relates to the days sales outstanding. So really strong execution in that regard. Then as we've done each of the past few quarters, we want to highlight where we are relative to our long-term targets. So just to remind you, our long-term target was to was to be on a level of 7% CAGR over the cycle, 16% comparable operating profit and above 25% return on capital employed. Our progress as of through Q3 of this year, our rolling 10-year average is down slightly to 6%. Our long-term -- last 12 months comparable operating profit is at 13.1%. This compares to 12.7% where we were at this time last year. And our last 12 months return on capital employed is at 29.8%. So with that, I'll hand it over to Mikko. Mikko Puolakka: Good morning also from my side. Let's first have a look on the Equipment segment's performance in the third quarter. Equipment segment had a slightly positive book-to-bill in quarter 3 with EUR 239 million order intake. Gifting equipment quarter 3 orders were actually flat, while the delivery equipment orders declined. This delivery equipment orders decline came from the U.S., as mentioned already earlier by Scott, and this is very much caused by the trade tensions driven slowness in our customers' investment decisions. Equipment sales was EUR 230 million. This is a 17% decline from prior year. Lifting equipment sales was flat year-on-year. So the decline came solely from the delivery equipment and in particular, from the U.S. market. The Equipment comparable operating profit declined to EUR 20 million, which represents an 8.8% margin. This decline in margin is solely again, attributable to the delivery equipment sales decline and very much attributable to the U.S. market. You can see clearly in the bridge on the right-hand side there, what kind of impact the EUR 46 million decline in Delivery Equipment volumes had in our profitability in quarter 3. The gross profit margin was negatively impacted by lower volumes. So all in all, the Equipment as well as the whole Hiab quarter 3 profitability was impacted by the lower delivery equipment sales in the U.S. Services grew nicely in quarter 3. We continue to increase the number of connected units, and there has been also really good intake for maintenance contracts as well. The growth both in orders and sales came from recurring services like spare parts and maintenance. Services grew even in Americas as there is an installed base, which needs to be up and running every day. Services profitability was on a good level, 23.5%, especially thanks to the higher sales as well as commercial and sourcing actions. When we look at the services profitability bridge, profitability improved by EUR 5 million in quarter 3. The main drivers for better profitability were EUR 4 million higher sales as well as the previously mentioned commercial and sourcing actions, which improved the gross profit margin in services. Also, the services fixed costs were slightly lower compared to the previous year. The foreign exchange or the translation impact had roughly 3% units negative impact in Services quarter 3 orders, sales as well as profitability. Let's have a look then at the total Hiab financials, and I'll focus here more on the right-hand side, the profitability bridge. The comparable operating profit declined EUR 12 million from the comparison period. Here, the EUR 42 million decline in sales is the main factor behind the lower profitability. As described earlier in the call, lower sales impacted also our gross profit margin, as mentioned by Scott earlier, it was 0.8% units lower. It's good to remember that some of the costs above the gross profit margin like factory overheads, those are not fully scalable within a few quarters. So when we have lower revenues like we had in quarter 3 that has a slight negative impact on the gross profit margin. We got some tailwind from the lower SG&A, which were roughly EUR 5 million lower than last year and then EUR 8 million year-to-date September. The currencies, as you can see from the picture, had a minor roughly EUR 1 million negative impact on our profitability in quarter 3. On a positive note, our cash conversion, i.e., the cash flow versus comparable operating profit was 173% for third quarter. Net working capital decline was the biggest contributor to the over 100% cash conversion and the net working capital declined mainly in accounts receivables. The reported cash flow still includes July cash flow from MacGregor, but as can be seen on the chart, the contribution to the overall cash flow was relatively small. When we look at our balance sheet, McGregor has now fully been removed from Hiab's balance sheet at the end of July 2025. Hiab is now EUR 308 million net cash position, and this converts to a minus 32% gearing at the end of September. As you have noted, we have also paid an additional dividend of roughly EUR 100 million in October. This is not yet visible in this September balance sheet numbers. If the dividend payment would have taken place in September, our gearing would have been minus 21% in September. Still a very, very strong balance sheet. On the right-hand side, you can see that we have a couple of outstanding interest-bearing debts, one EUR 25 million maturing this year and another bond EUR 150 million in September '26.. About our outlook, we reiterate our outlook for 2025. Our estimation is that the comparable operating profit margin for 2025 is above 13.5%. And please note that this is the floor for our profitability. This outlook is based on the year-to-date September comparable operating profit margin of 14.3%, as well as the order book that we have in hand at the moment and then also the current situation related to ongoing trade tensions. And then I would like to hand the presentation back to Scott for the quarter 3 summary. Scott Phillips: Thank you, Mikko. All right. Summarizing the quarter, a few key takeaways. Market uncertainty has continued to negatively impact our business. And keep in mind, we're a relatively short-cycled business. So we see these impacts in a relatively short period of time. But despite the market situation, we have been able to improve on our last 12 months comparable operating profit margin, so strong execution on delivering what we've committed to deliver. However, as a consequence in the uncertainty level that continues to be the case, we will start planning for a program which would target approximately EUR 20 million lower cost level in 2026, compared to current levels to give ourselves a bit more resilience and flexibility in dealing with the ongoing levels of uncertainty. However, we continue to execute on our strategy and focus on activating growth opportunities where they exist. And I would reiterate that we have an incredibly strong balance sheet, generating strong cash flow and that continues year-to-date, and that will continue to be our primary focus, moving forward. So I think we're well-positioned to deal with the levels of uncertainties that we face in the future and I feel really positive about our ability to deal with the changes in the demand curve, whether they would be up or down. So with that, I'll hand back over to Aki. Aki Vesikallio: Thank you, Scott, and thank you, Mikko. Now we are ready for the Q&A. Operator? Operator: [Operator Instructions] The next question comes from Panu Laitinmaki from Danske Bank. Panu Laitinmaki: I would have 3. Firstly, starting on the margins. I was a bit surprised to see such a big change in Q3 given that sales has been declining for 2 years already. So basically, the question is that what caused this? Is this mainly under absorption of fixed costs? Or is there an element that the lost U.S. sales had like really good gross margin compared to the rest of the business? Scott Phillips: Do you want to take it? Mikko Puolakka: I can take that. Yes. As we mentioned, basically, this profitability decline is fully attributable to the U.S. market and -- this is stemming actually from the fact that we started to see already in the beginning of the year, basically from February onwards, weaker order intake caused by these trade tensions. And as we have a fairly short lead time from the order to the delivery, we started to see that sales weakness already now in quarter 3. And this is stemming very much from the delivery equipment, truck-mounted forklifts, tail lifts in the U.S. market. This is the reason for the lower margins. As you can see, yes, our SG&A costs went down, but those are not enough to volume impact, which is then in addition to the U.S. market decline then also connected with the low seasonal volumes. Scott Phillips: Yes. Just to add a bit more color there. I think just to reiterate for you, Panu, it was a combination, as you pointed out, of sales decline which primarily happen in the U.S., but also it was more impactful than we would have anticipated from a mix perspective. So both of the 2 businesses that were primarily impacted there, normally have margins that are quite accretive to the overall higher margins. Panu Laitinmaki: Okay. Then secondly, on Q4, so what are you seeing in the -- during the rest of this year in terms of orders, like -- are the trends similar? Or should we expect sequential worsening? And also maybe if you can comment on the margins. So should we expect that the seasonality Q3 was maybe the lowest point of the year and how should we think about Q4 as in the comparison period, you had this restructuring costs last year? Scott Phillips: Yes. As you point out, we certainly tend to have a seasonality impact in Q3, which we've called out previously, anywhere in the 10% to 15% range, which we did see that materialize overall primarily due to the lower working days, both in Europe as well as in the U.S. So similarly, we would expect to see Q4 top line to be -- from a sales perspective, more in line with our trailing last month order intake and similarly follow the pattern of seasonality, whether it's negative or positive. So we expect Q4 to be quite in line with what you typically see in Q4. Panu Laitinmaki: Okay. And then thirdly, could you talk about Europe? So we saw pretty good orders in there. What is driving this? You mentioned defense and the wind order, but is this like an overall market recovery or some single orders? And do you have any kind of improvement in the Construction segment yet? Scott Phillips: Sure. I'd say 4 points that I'd highlight here. One, as we alluded to in the presentation material, primarily the demand is replacement cycle driven, which should follow along the lines of pattern that we would expect to see given the life cycle of our products. Two, we certainly are seeing an uptick in activity on the quote side on the lead generation side. We have seen a mixed picture in terms of lead conversion throughout the period, which has been interesting. Then the third point I'd highlight, as I alluded to earlier in the discussion, the Defense Logistics was a positive within the quarter. But then if you add the Defense Logistics from Q2, Q3, we were roughly flattish with an increasing pipeline of opportunity. And then the last point, we have seen a number of lumpy large key account deals. And in this case, in our Wind Energy segment that converted. So that was primarily the drivers for the increased level of order intake in Europe. Operator: The next question comes from Andreas Koski from BNP Pariba Exane. Andreas Koski: So firstly, I want to try to get your thoughts about 2026. When I listen to truck manufacturers, it sounds like the truck market is not going to improve at least substantially in 2026 or 2025. And now you are planning for restructuring program aiming to lower your cost base by EUR 20 million. So should I read that as a signal that you share the truck manufacturer's view that 2026 is most likely not going to be much stronger than 2025? Scott Phillips: Yes, I can start this one. Yes. Thanks for the question, Andreas. The way we think about 2026 is twofold. One is that we will adjust our cost base on the basis of what our trailing order intake levels are. And on that basis as well as the change in the mix that we've seen now reflected in the sales result, it's obvious that we need to adjust the cost base just to make sure that we're covered relative to the changes we've seen both in terms of the trailing order intake as well as then how that's affected from a mix perspective. And then in terms of the top line development for next year, we haven't typically provided forward-looking comments on the top line development. But of course, we want to plan for a scenario that would allow us flexibility to deliver if the demand curve were to pick up. And similarly, we want to manage our cost base so that we're well covered in the event that the demand curve goes in the negative direction. Andreas Koski: Understood. And then I understand that the tariffs might have impacted the demand for your products, but did it in any meaningful way also impact your your cost levels and in combination with that, what kind of price increases did you see in this quarter? And what should we expect for the coming quarters? Scott Phillips: Yes, sure. I can start with this one and Mikko, you can pick up if I miss a point here. Yes. Thanks for the question, Andreas. So what our policy has been our practice, so year-to-date relative to the tariff responses that we're trying to implement surcharges that we transparently share with our customers. So that we could stay neutral from a cost perspective, and that still remains our view today. So I would -- I couldn't say that we got either a positive or a negative impact relative to the tariffs. And if we did, it'd be just a matter of timing. I think Mikko alluded to in his presentation, though, the impact relative to order intake and to the sales level and perhaps maybe you can reiterate the impacts there. Mikko Puolakka: Yes. In our quarter 3 order intake, we had less than EUR 10 million kind of let's say, price increase effect coming from the tariff surcharges in sales due to the lead times, one could say that the impact was almost plus/minus 0. And the main impact there, I would say, from tariffs is on the demand side. So it's -- like Scott said, we are basically moving the tariff cost to the customer prices. Andreas Koski: I might be mistaken, but if I remember correctly, when we discussed on the pre-close call, we talked about price increases of 10% to 20%, but maybe I'm mistaken there, but was that on the case? Mikko Puolakka: Depending on the product category, the surcharges have been around 10% to 20% depending on the product category. These changes all the time because there are also changes in the tariff regulations and what kind of components are included in the tariffs. We are also doing actively measures how to mitigate the tariffs changing our supply chain so that we could make this as, let's say, bearable to our customers as possible. Operator: The next question comes from Antti Kansanen from SEB. Antti Kansanen: It's Antti from SEB. I will start with the same topic on the U.S. orders and sales going forward, kind of reflecting back to the price increases and the tariff surcharges. I mean, I get to a number that on a volume basis, your orders contracted quite a lot on the third quarter compared to what they were on the first half of the year. So I just wanted to better understand that is -- will the volume impact on profitability be much more severe going into Q4 and perhaps Q1 next year as it seems that the volumes that you are getting into your factories are still on a decline. Mikko Puolakka: Yes. If I take this one, you can complement. So overall, you may remember that in quarter 2, we received a key account order Order in the Home Improvement area. Basically, if one calculates the kind of lead times from the order to the delivery, we would start basically the delivery of that order, let's say, in the beginning of quarter 4. So that would then support the top line development in the U.S. in the quarter 4. That would allow them better loading for our factories, both in Europe as well as in U.S., which are supplying that kind of product during quarter 4, and that should also then improve the U.S. profitability in quarter 4. Antti Kansanen: Okay. And then the second one was on clarification on the previous questions on the difference between the communicated surcharges, 10% to 20%, and they achieved kind of the price impact, which I calculate to be around 8% of the U.S. orders. I'm not exactly sure if I calculate it correctly, but is the delta kind of something that you have given up on pricing in order to secure volumes? Or is there something -- some other dynamic in play here? Mikko Puolakka: Now these are basically this 10% to 20%, these are the surcharges. And then, of course, our, let's say, order intake, it cannot be kind of just simply be calculated from our kind of year-on-year order intake development development. So basically, like Scott mentioned, if there is a tariff of EUR 100 that EUR 100 million is reflected in the tariff surcharge to our customer invoicing or in the order intake. Antti Kansanen: Okay. And then on the development outside of Americas, I guess, mainly in Europe where you are flagging Defense Logistics and Energy Wind orders. Is there something regarding delivery times that we should be taking into account? Are there kind of a bigger deals or, let's say, frame contracts in the Q3 orders that would have a longer delivery times? Or should we just assume that it's a normal kind of a backlog to sales rotation? Scott Phillips: Yes, I can start this here and Mikko please jump in if this isn't reflecting an accurate picture. But we reflected in Q3 Antti, relative to the wind order is a consequence of a frame agreement that will be reflected as order intake over a number of quarters. So it's not a case where the entirety of the order was reflected in one quarter, and then it will be delivered sequentially from there over a period of time, but rather the order intake will also be reflected a bit more in line with the revenue recognition. Antti Kansanen: All right. Makes sense. And then the last one for me is the EUR 20 million cost savings program to be implemented next year. Will there be a one-off cost booked on Q4? And will that be included in the adjusted EBIT that you are guiding for? Or will that be a one-off? Mikko Puolakka: In case based on the initiative planning in case there would be one-off cost. We would report those in items affecting comparability -- so separately below the comparable operating profit depends on the planning and then we would be also opening how much that kind of cost we would have in quarter 4 or in 2026. Operator: The next question comes from Tom Skogman from DNB Carnegie. Tomas Skogman: This is Tom from DNB Carnegie. Did I understand correctly does that if you book an EU item, it is kind of above EBIT adjusted, like last year? Mikko Puolakka: So if we book for this EUR 20 million cost savings program, one-off costs, those would be reported as items affecting comparability below the comparable operating profit. So not included in the comparable operating profit. Tomas Skogman: Why will it be different from last year? Mikko Puolakka: This is very much related to the, of course, weakness in the U.S. market. But the EUR 20 million program would be company-wide. Previous programs have been more related to the kind of general optimization of the business, also in line with the order book. But this EUR 20 million is of course, in the first place, very much driven by the trade tensions. Tomas Skogman: Okay. And then I wonder about -- I mean this is perhaps more kind of a general big picture discussion. So last year, Americas was 45% of sales, and you have painted a picture where the Americas is quite an immature market. You have a lot of kind of white spots in distribution in the U.S. But still, I mean, it's been almost half of your business. So -- and I just remember 10, 15 years ago, Spain was the world's largest market. And that market basically never got back to all levels. It was so overheated. So could there be like just a risk that it will take many, many years before the U.S. market is back to where it has been in the last couple of years? Or do you really feel confident that it's just normal fast breaking, fast accelerating in the U.S. market? Or are there some kind of risk elements there that suggest that it could be that it takes many years to go back to all record levels? Scott Phillips: Yes. I'll start with this one. And thanks, Tom. I take this in pieces. So you mentioned our characterization of the U.S. market. And the way that we characterize it is threefold, if you will. So on the one hand, we were quite mature in our penetration of delivery solutions as it relates to serving primarily the building construction supply market. Two, we've had -- continue to have and did have quite a strong position also in delivery solutions relative to retail and last mile. So those were fairly mature markets, a long ways to go, especially on the retail last mile given the market share position relative to the #1 competitor that we face on a daily basis. Then the way we characterize it is we're underpenetrated both in our knuckle boom loader cranes as well as our hook lift and mountable solutions, primarily in waste and recycling, perhaps somewhat in terms of Defense Logistics that the market was definitely underpenetrated relative to knuckle boom loader cranes in the Construction segment as well. the way in which we wanted to attend to this is, is that we have a lot of geographic white spots because we weren't structurally set up similar to how we are structured in a European country, let alone Europe as a continent. And that was a weakness on our part. So the way that we've been attending to it and we continue to execute on the strategy is, is that we're turning on at scale distribution channel partners to cover the geographic white spots with a focus on shoring up those areas that we both were underpenetrated because of just lack of scale of sales and service excellence to support those products, but then also the geographic lack of coverage that we had as well. So that continues to be ongoing. Now in terms of the comparison relative to Spain, I'd say there's 2 things to keep in mind. Of course, let me start with the really obvious one is that just mirror scale, it's an order of 10x magnitude difference in terms of the GDP of comparing the U.S. versus Spain. But then more importantly, probably is the fact that the growth in Spain was primarily driven by one segment that was Construction. So at one time, it was one of the world's, if not the world's largest construction applied knuckle boom crane markets. And of course, that's the segment that had most been impacted following the global financial crisis. And to your point, hasn't quite recovered or hasn't recovered at all relative to the pre-global financial crisis levels. But definitely 2 different comparison cases and thinking through Spain versus the U.S. because the basket of of segments that we serve relative to our full portfolio, completely different opportunity set, if you will, in the U.S. versus, well, any country in Europe, but especially if you think about a country like Spain. Having said that, we've got a lot of opportunity to grow in Spain as we are underpenetrated there. Tomas Skogman: So what do you think then will be kind of -- what are you looking for in the U.S. is a trigger for customers to start ordering more again. What will be the trigger I mean the interest rate is quite high on the housing and the ABI index is not that strong. For instance, or just that you have this tariff situation with the loads of parts imported from Mexico that is just kind of cooling the entire market and we get the solution to that, then this will be normal again. What are you looking for? Scott Phillips: Yes. Yes. I'll sound like a broken record here, Tom, but I think it's still a factor of I can bifurcate it into 2 parts, right? One on the one hand, you're right, we need to see the macroeconomic costs come down a bit for our U.S. customers that we've talked about a lot, especially last year and a little bit in the first half of this year. in terms of overall inflation as well as the general level of interest expense. But I think then moving to the second piece now, of course, it's a matter of getting some stability in terms of being able to plan the business in the future on what your general cost level is going to be, I think that's a key factor as well. And then I would then add one more point to this scenario is that, once you see the level of stability achieved that no doubt will happen, it's just a matter of when. Then you'll start to see a pickup, I believe, from the stimulus bill that was enacted earlier in the year that I think is characterized as the one big beautiful bill. At the same time, we know that with the aging of our equipment in the installed base, there will be a robust replacement cycle coming as well. Tomas Skogman: Okay. And then finally, on the Defense side, I mean, it's just easy to say that it's a promising market generally. But I would like to understand a bit more. I mean we have seen orders from, for instance, the U.S. army and orders from Rheinmetall or bundle -- to Rheinmetall. But -- is it so that we should kind of perhaps also expect that just kind of national defense forces in different countries will be kind of major customers? Or will it be more like kind of defense companies that will order from you or how will it be? Scott Phillips: Yes, I can start here as well. Yes. Thanks for the question again, Tom. In Defense, we have a 40-plus year history of serving not only the U.S. Department of Defense, but then also the majority, if not all, of NATO countries as well as NATO partner countries, which will continue to do moving forward. And you're right, each of the defense organizations have made commitments to increasing spend unfortunately, due to the geopolitical changes that we've seen materialize over the last 3, 4, 5 years. And we expect that to continue moving forward. The challenge that we have is being able to forecast and model that business because the majority, if not all of these opportunities are typically larger tender opportunities that have quite a lot of variability in terms of time of opportunity to decision in terms of who that deal is going to be awarded to. And it's worked on both sides of the equation for us, if you think through the last year. On the one hand, we've seen more faster-moving emergent opportunities. And then on the other hand, we've also seen delays of opportunities that we knew were there prior to this period of increased geopolitical uncertainty that have pushed to the right. So difficult to model on our side in terms of the timing, both of booking the order as well as then how that will materialize and the change in revenue recognition. Operator: There are no more questions at this time. So I hand the conference back to the speakers. Aki Vesikallio: Yes. We will have a couple of questions from from the iPad, from the webcast audience. So first question is about the service order trends. Is there any lagging impact from that? So what is the profitability trend in the services going forward? Scott Phillips: Yes. So on the Services side, the only real lag would be the nonrecurring revenue that we have. And if you think about the mix within the quarter, we were approximately 74%, 75% recurring revenue. So that's been on a nice trend relative to the overall Service, both order intake as well as revenue. Within the nonrecurring, of course, you have installations that are a factor of the equipment lead times. And so that tends to be the piece that lags behind. But otherwise, the rest of the services order intake, will follow and link quite nicely to the revenue recognition. Aki Vesikallio: Yes. Thanks. And then we have a couple of questions. I'll try to combine them. It's both are related to the tariffs. So we went through quite a lot of the parts of the question already but there was also a question, do we see permanent impact that could be caused by the tariffs. For example, could we lose some of the U.S. customers because of these tariffs permanently? And do we have any estimates how long the situation would last? Scott Phillips: Yes. So I'll start with the easy part first, the last part of that question. Hard to tell, right, how long this will last. One thing that's certain is, is that I myself have lived in 9 countries, and I've had a long career of this type of work and serving 100 to 200 different countries and most countries have some form of tariffs. So we can count on that. There will continue to be some form of tariff. I think really, the core of the issue and the question is then how long will this level of uncertainty last? And that's hard to call at this point. So our job is to be as resilient in our overall cost as well as our ability to deliver and execute as we possibly can. So we need to be prepared that this level of uncertainty may continue indefinitely. Aki Vesikallio: And could you please then still repeat what were the mitigating measures that we do? And do we individually negotiate with U.S. to get lower tariffs? Scott Phillips: Yes. So far, no, we haven't directly negotiated with the U.S. government on the tariffs. That one, we haven't had the opportunity to, and I'm not aware that any individual company has. But what we do, however, is that the way we sell our equipment is a function of market list price, and we sell on value. So therefore, from the tariff perspective, relative to our price positioning, this is more mechanical, if you will. So the contribution of the equipment that is under subject to a tariff, then we transparently share that information with our customers. We link that then to a surcharge that is simply a mathematical calculation and we try to work on other mitigating factors on the market list price to see if we can make this more attractive for our customers or not. But to reiterate, the biggest impact at this point from the change in the trade policies has been on the demand cycle because all businesses have a need to be able to forecast the forward-looking cost in order to then be able to take risk on deploying capital in order to catalyze or to run their business or to grow their business. Mikko Puolakka: Supply also to reduce the, let's say, tariff base as an example yes. And then it's good to remember that a significant part of our U.S. sales are assembled in the U.S., but of course, the ultimate tariff depends on where the components are coming from. Aki Vesikallio: Thank you, Mikko. Thank you, Scott. And that concludes our third quarter earnings call. So we published our financial calendar for next year yesterday. So we will be back in February 2026. Thank you for watching. Mikko Puolakka: Thank you. Scott Phillips: Thank you.

203天前Insight Analytics约5分钟阅读

NLLGF 2025 Q3 财报电话会议

Krister Magnusson: Good morning, everybody, and welcome to the Nilörn Q3 interim report presentation. I know that today there's lot of presentations, a lot of companies. So I really appreciate that you take your time to join our presentation here. Myself, I am in Portugal at our factory here. As you probably know, we're doing quite the big adjustments in the factory, uplift in the factory, so here to follow that. So it's an interesting project going on. So I think that will be really good for Nilörn in the future. But I'm sitting here on a small laptop and I think it will work out well. So I will start sharing my screen and put that on presentation mode here. Yes. Now we start. The Q3, we are quite pleased with the Q3. The order intake here was negative 13%. But if we take into consideration that we had a big packaging order in Q3 last year on SEK 18 million, and that will come now in Q4 instead, that is around 7% of the explanation. We also have another currency effect explaining another 6%. So adjusted for the currency effect and this packaging order, it's quite flat. In general, it's a difference between the segments. Luxury segment is still quite weak, though the Outdoor and the other segments are quite strong. So still weakness in the luxury segment, no big improvement there. Sales up 10%, and adjusted for the currency effect, it's actually up 18%. I think it's partly -- we had a quite weak Q2, so it is spillover from the Q2. Looking at the different months, so it was quite strong both in July, August and September. So we're quite even throughout the quarter. And here, we see also in the Outdoor segment and the other segments, but still a bit weaker in the luxury segment. Operating profit, SEK 26.3 million versus SEK 15 million last year, and that gives an operating margin of 11.4% in the quarter. And as you probably know, the goal has been or should be between 10% to 12%. That is the goal we have set. So we in quarter, we target that. Looking at the P&L here. Also, we have a quite strong currency impact on the whole P&L and not only the top line. As you know, most of our business is handling outside Sweden. In Sweden it's mainly sales companies, but we don't do any invoicing from Sweden at all. And then we have the headquarter costs. So we have some costs in Swedish krona, but the majority and all the invoicing is outside Sweden. Yes. And what I want to say more here is also looking at the tax rate, tax rate for the quarter is 24.6%, and that is in line also with the accumulated number. We'll see what happens with the tax rate in the fourth quarter. It's always adjustments and everyone is doing proper calculation, really the calculation of the tax. But we think it will be in line with this 24.6% also for the full year. Personnel cost has quite been stabilized now on this level, I would say, also currency impact on this level and other external costs, but coming back to that a little bit later. Split by product group, not so big difference compared to last year. It's mainly in packaging. That has gone down and it's contradictory to what we do now. We're putting quite a lot of effort into the packaging. And the reason why packaging was down here is due to the luxury segment as we still have quite big packaging delivery to the luxury segment. But they are overstocked so it will take some time. So I think it will take like in mid-2026 until we are back into normal deliveries for the luxury segment in packaging. Looking at the quarterly income statement and the gross margin. Normally, the Q3 has a quite strong gross margin and also this quarter, as you can see here, if you're looking at the historical level. The reason for that is we have less packaging, packaging has a lower gross margin, and less packaging in Q3 normally and also this quarter. Operating cost is also lower normally in Q3 and also this quarter, and that is due to the holiday. Most countries take holiday in July, especially in Europe. So that's why that has a big impact on the quarter 3. Operating profit. As you see, it was a strong operating profit this quarter. And as I explained, it was not only one single month. I think it was strong all the July, August and September. And of course, you who have learned Nilörn now, it's very much volume driven. Once we get good volumes in a quarter or in a year, we also get a good profit. It goes a long way down. So we're very much depending on getting volumes. And then if you look at the similar but in a graph. And also that is to say that in the past, it was always Q2 and Q4 that was sticking out as the best quarter. Nowadays, we see it's very much flat. So it's the change of purchasing pattern from our customers. So they even out much more, buying much more into season and much more shorter lead times. And that makes our pattern different than it used to be. And here, it's also following the profitability, just in a graph. And you can see here now Q3, that was quite strong. Balance sheet. We have a strong balance sheet, an equity level of almost SEK 350 million. And that is good because we're now taking more and more time to search and see for acquisitions and so on. I will come back on that. And also we're doing at the moment both a big investment in Bangladesh and also in Portugal. Also coming back to that later in the presentation. Just want to raise here. As we are an international company, relatively our size, we are in 19 countries and with only the headquarters in Sweden, and therefore, we have a big part of our equity abroad. And that also had a big -- currency has a big impact when we translate the equity in the different countries into the Swedish krona. And this now in 2025, that's had a negative impact on the equity of SEK 32 million. And of course, in the past, we also have had positive impacts. But now due to the relatively strong Swedish krona, that has an impact. Financial indicators, I will not go through them so much. But I just want to mention here, we are almost 700 employees. And as you can see here over these years, we have increased that quite much. That is mainly in the production companies, mainly in Bangladesh, I would say. But also we have invested in other specialist areas, where we employ people to be in forefront with the competitors. And we also invested in countries like U.S. Also coming back to that later on. In U.S., now we have 4 people. This one, this is to explain the movement we have done between year 2020 and today. We, by heritage, has been really strong in design and we continue to be work on that. So design is a strong unique selling competence for Nilörn. We have in packaging started and done much more here effort. We have a really good collection. We have a Category Manager working with that. And so we're really taking a big step forward in packaging. Packaging, as I mentioned, we're also delivering into the luxury segment. But we're also packaging for sports and for Outdoor segment. We're talking here about underwear packaging, sock rider and so on. So it's not packaging for corrugated, standard brown packaging. It's more for the garments and for luxury segment. Financial strengths. We have had a strong balance sheet for many years, but we even now has even stronger. Sustainability, CSR and compliance is an area where we have put a lot of effort and employed people all around the world to build up that, which gives us also -- in the past, we were talking about design. But I would say now sustainability is another core competence that is unique -- I would not say unique, but a selling point for Nilörn, what we push for and where the clients appreciate our offer. Digital solutions and Nilörn:CONNECT, this one is something we didn't have. We had digital solutions like RFID in the past and so on, but now we're taking even more steps into this. I will explain, coming back to Nilörn:CONNECT, what that is all about a little bit later. Global deliveries. What I mean by that is that we're setting up distribution companies in new countries like in Vietnam end of last year and also now in Sri Lanka, but also we are setting up a company in U.S. So we're getting more and more international. Yes. Big currency impact both on the top line and in the balance sheet. And I used to say that we are quite well hedged. We match the cost with the income. So we take a country like Hong Kong, we have big income there. And then we have all the costs matching that. And then in the end, we have a net profit. So in different countries, we are matching quite well. But in the end, we have a profit that will be converted back to Swedish krona. And in my example then, the Hong Kong dollar will have an impact, as you saw earlier on the equity. As I mentioned, still volatility in the luxury market. And we see now less uncertainty due to the tariffs. We'd learned to live and also, I would say, it doesn't affect us directly. It's more indirect effect. It's our client that export to U.S. that has been affected. And I think the uncertainty is most -- I mean, as long as you have the uncertainty, you don't dare to move. But now the uncertainty moves away so it's more movement in the market. Operating profit, we mentioned already. Portugal factory where I am at the moment. We have been here in Portugal like in 40 years. So the factory needs an uplift. We looked at moving the whole factory but we decided to stay. We think there is less risk in that. And we moved out to warehouse to get more space in the factory. And at the moment, we are changing the complete layout inside the factory and to get a much more flow into the factory and also implementing LEAN. So that is good. I think Nilörn Portugal had tough times 10, 15 years ago, but that is now one also a competitive edge for Nilörn, to have a good factory in Europe. Building for the future, that was where we now employed or built up these specialists we have within the group, where we have compliances, our packaging materials. And that is supporting sales. So I would say being a salesperson in Nilörn today versus 5, 10 years ago is a totally different story. In the past, we were out selling labels. Now it's all about selling a concept. And the client is much more demanding now as it has been in the past. Yes, here is the specialist here in different in areas. And then we increased in production capacity. Here, we also have Bangladesh. We are currently -- I mean, we've got the land now and we're doing soil test and we are working on that. But it will take some time. And we said earlier that it probably most likely will be ready by end of 2026. Now we say it will be ready in first half year 2027. We've done geographical expansion, as I mentioned. We see a consolidation in the market. We've seen [ TIMCO ], we've seen SML. We see Avery and all the companies are taking part of that. And we also see companies now that are for sale and actively selling, looking at the label market as such. There are a few big players. It's a mid-segment and there's quite a long tail of small niche players that is working in one market or with a few products. And for Nilörn, we come to the stage now that we're putting much more effort into this, and we have a team dedicated to search for this. And what are we looking for? I think here, we will search for companies that can contribute either geographical expansion in areas and countries where we are not strong in. It could be like France. It could be Holland. It could be Spain. It could be U.S., where we can take more geographical expansion. Or it can be vertical integrations in areas where we are not strong like in heat transfer or in RFID or in packaging. So we're not sure that we will succeed, but we now definitely take this seriously and put much more effort into that. I presented this earlier. There are some new slides. I will just add them quite quick here. What Nilörn:CONNECT is about. Nilörn:CONNECT is the QR code, like you can see on a jacket here, where we have a system -- it is a system behind. That is the Nilörn:CONNECT. And it's a QR code and it's an NFC or RFID. And why Nilörn:CONNECT? We see three reasons why people want to go into buying Nilörn:CONNECT. One is the legal compliance. The legislation, Digital Product Passport, that is here to come. They will come, I would also present that, soon here. So this will be a must for our clients. So this is a headache that we, through our Nilörn:CONNECT, can be part of solving their problems. Then there are more nice to have for them. We can be part of the trend. Now we see repair, resell, recycle, where you have this QR code and the information carrier. And consumer engagement. They, through the QR code, can have consumer engagement and communicate with the end consumers. And that will drive sales, create loyalty and acquire new customers. Just the timeline regarding the DPP. It has been going on for some years with a lot of discussions, a lot of preparation. Some clients are in this already, not in the DPP but into the Nilörn:CONNECT, and have this providing information to the end consumers about their garment and their sustainability. And in 2026, [indiscernible] expected for the first product groups, and the first is apparel and accessories. And in 2027, batteries we go full live with DPP. And the mid of '27, we expect that the DPP will be a fulfillment for textiles. And through this QR code, when you scan it, you can have carbon footprint, you can have the different certificates they have on the garment, production history and the country where it's produced and so on, recycle instruction. All that is within the DPP fulfillment. To the brand owners, we provide them with information so they can see what countries they have been logged in. They can see how many scans they have had, what garments they are scanning. They can also see if they have a QR code outside the jacket and inside the jacket, and they see the difference how that is scanned. So we also provide information to the brand owners. And like this, they can see on the map here where it is scanned. And also what we have been working on is an AI tool, talking to the product. And when you're scanning the QR code, you get to the page where you can write and communicate with them through an AI tool and ask questions. I got this spot on my jacket here, how should I remove that and so on. And that we also do in cooperation with brand owners. So we make sure that we provide the information that they want. We can go out widely in the Internet or we can just provide their database and provide information that they have in their database. And this you have seen in the past, the financial target and so on for Nilörn. We have, yes, achieved 7% growth with an operating margin above 10%. Yes. Good. I will stop sharing this, and coming back to you and see here -- and Maria is also with me, I forgot to mention at the beginning, Maria, the CFO for Nilörn. And Maria, do we have any questions for us? Maria Fogelstrom: Yes. Actually we have only received one question. And that is the question about the sales split between outdoor and luxury, the percentage for each segment. Krister Magnusson: Yes. Outdoor is still the biggest, absolutely biggest. Luxury segment, we started off with a few years ago, and we see that the luxury segment is coming and we think we can do much more there. And the split here, I don't have the exact numbers, but I would guess that the Outdoor is between 25%, 30% and luxury is between 5% to 10%. But what's interesting with luxury is that we can do much more. Luxury, in the country, it's France. It's in Italy. Outdoor is mainly in -- and Outdoor, I would say outdoor sports, it's mainly in Scandinavian countries, in Germany and in the U.K. Maria Fogelstrom: Thank you for that. Now we received some more, so I will continue here. We also got a question about the EBIT. Could you elaborate on how much of the EBIT that comes from operating leverage and how much that is due to recent efficiencies? Krister Magnusson: I think most is -- I mean, as I mentioned, the volume matters a lot. I talked also last time that we intend to do cost savings. We have a program here. We have not launched all of that yet. And cost is -- but we're also taking on cost here, moving into new countries and so on. So for me, this quarter is volume driven, I would say. Maria Fogelstrom: And continuing on the cost savings because actually we got the question about that as well. And the question is, you previously commented on reducing your cost base in Turkey and doing a similar analysis on other parts of the group. Do you have any updates on that front? Krister Magnusson: Absolutely. We have done that in Turkey. So that is being implemented and fully -- and we are now working on other countries. This is partly, but also that we are moving now volumes from a country like Hong Kong, China into Vietnam and Sri Lanka. So that's moving our cost and, at the same time, doing cost savings. And so that is mainly in the Asian area but partially also in Europe. But at the same time, we're also taking on more and more employees in new assets. They are expensive and so on. But my goal is that we can be more clear on that once we have done the restructuring that we are in the middle of. Maria Fogelstrom: Thank you. And now we got a question about the outlook for 2026. Has anything happened during the quarter that changes your view of the market outlook for 2026, specifically regarding different product groups? Krister Magnusson: I cannot say. I think there's nothing new regarding the product group. I hope and think that luxury segment will be back in swing again but I think it will take until mid-2026. For other product group, I don't see any major change, not as it is at the moment, at least. We had, as you know, the Outdoor obviously peaking during the pandemic and then really bounced back. But that is back to normal now. Maria Fogelstrom: Thank you. And the last question that we have received is, are there any ongoing discussions to include segment reporting in the quarterly reports? Krister Magnusson: Segment. Maybe qualify what -- because we do segment reporting in the interim report with country-wise. But I assume here, it's more on product group levels, isn't it, I assume they want to know. Maria Fogelstrom: Yes. I would say. Krister Magnusson: Yes. And absolutely, that's a good point. I think that is something that we should consider maybe and see what we can do there. We have not done it in the past, but it's a good point. Maria Fogelstrom: Thank you. And that was all of the questions we have received. Krister Magnusson: Super good. Thank you very much for participating today. I know it's a super hectic day with a lot of companies presenting. And thank you very much, and have a great weekend. Thank you. Maria Fogelstrom: Thank you.

203天前Insight Analytics约5分钟阅读

PG 2026 Q1 财报电话会议

Operator: Good morning, and welcome to Procter & Gamble's quarter end conference call. Today's event is being recorded for replay. This discussion will include a number of forward-looking statements. If you will refer to P&G's most recent 10-K, 10-Q and 8-K reports, you will see a discussion of factors that could cause the company's actual results to differ materially from these projections. As required by Regulation G, Procter & Gamble needs to make you aware that during the discussion, the company will make a number of references to non-GAAP and other financial measures. Procter & Gamble believes these measures provide investors with useful perspective on underlying business trends. and has posted on its Investor Relations website, www.pginvestor.com, a full reconciliation of non-GAAP financial measures. Now I will turn the call over to P&G's Chief Financial Officer, Andre Schulten. Andre Schulten: Good morning. Joining me on the call today is John Chevalier, Senior Vice President, Investor Relations. I will start with an overview of results for the first quarter of fiscal '26 and spend a few minutes on strategy and innovation, and we'll close with guidance for fiscal '26 and then take your questions. First quarter results reflect strong execution of our integrated strategy in a difficult geopolitical competitive and consumer environment. This marks 40 consecutive quarters of organic sales growth and keeps us on track for the tenth consecutive fiscal year of core EPS growth. Organic sales rounded up to 2%. Volume was in line with prior year. Pricing and mix were each up 1%. Growth continues to be broad-based across categories and regions, with 8 of 10 product categories growing or holding organic sales. Skin & Personal Care led the growth, up high single digits. Hair Care, Grooming, Personal Health Care, Home Care and Baby Care each grew low singles. Oral Care and Feminine Care were in line with prior year, and Fabric Care and Family Care were each down low single digits. 6 of 7 regions held or grew organic sales. Focus markets were up more than 1%. Organic sales in North America were up 1%. Consumption in our categories decelerated throughout the quarter, with unit volumes essentially flat for both markets and P&G brands. Price mix added a point of growth. The pricing for innovation and supply chain costs that was announced on June 15 went into effect on September 15. This caused some trade inventory volatility in the quarter, but shipments were largely in line with offtake for the full quarter. European focus markets organic sales were equal to prior year with strong growth in France and Spain, offset by a softer period in Germany and Italy. Greater China organic sales grew 5%, another quarter of sequential improvement and positive momentum. 6 of 7 categories grew organic sales in quarter 1 with Pampers and SK-II each growing double digits. This progress is the result of interventions made across the digital commerce and distributor business, along with strong innovation and execution of the integrated strategy. Enterprise markets grew more than 1% for the quarter. Latin America organic sales were up 7%, with strong growth across Mexico, Brazil and the balance of smaller markets in the region. Organic sales in the European enterprise region were in line with prior year and the Asia Pacific, Middle East, Africa enterprise region was down low singles. Global aggregate market share was down 30 basis points, 24 of our top 50 category country combinations held or grew share for the quarter. On the bottom line, core earnings per share were $1.99, up 3% versus prior year. On a currency-neutral basis, core EPS also increased 3%. Core gross margin was down 50 basis points and core operating margin was equal to prior year. Strong productivity improvement of 230 basis points with healthy reinvestment in innovation and demand creation. Currency-neutral core operating margin was up 40 basis points. Adjusted free cash flow productivity was 102%, a very strong Q1 results. We returned $3.8 billion of cash to shareowners this quarter, EUR 2.55 billion in dividends and EUR 1.25 billion in share repurchases. In summary, a solid quarter to start the year in what continues to be a challenging environment, including heightened competitive activity in the U.S. and in Europe. Moving on to strategy. Given the market and competitive challenges we face now is the time for increased investment in and flawless execution of our integrated growth strategy consumer firmly at the center of everything we do. We will drive superiority in every part of our portfolio across all value tiers where we play, all retail channels and all consumer segments we serve to grow categories, provide value to consumers and customers and create value for shareowners. We will strengthen the integration of all vectors of superiority starting with a very strong innovation program this year, building stronger core brand propositions and growing bigger adjacencies and forms to enhance consumer delight, core and more. In U.S. Fabric Care, we recently started shipments of Tide's biggest upgrade to liquid detergent in 20 years. Tide's boosted formula combines its ultimate grease and stain fighting technology with an advanced perfume innovation, resulting in laundry that's cleaner, whiter, brighter and fresher. The significant innovation on liquid detergent strengthens the core of the Tide franchise as we continue plans for expansion of Tide evo, our new laundry detergent developed on our breakthrough Functional fibers platform. evo has started its first stage of national expansion with an online launch of Tide evo Free & Gentle. evo offers superior cleaning performance in a recyclable package, no plastic bottles or water. In test market stores, evo sales have been highly incremental to category growth and retailer demand has been well above initial expectations. We're in the process of adding manufacturing capacity to prepare for an eventual national launch. We have a strong bundle of innovation launching across U.S. Baby Care business -- the U.S. Baby Care business this fall, including improvements on Pampers, Easy Ups, Swaddlers, Cruisers, and the first phase of restage to our mid-tier Pampers Baby Dry line. Each are important upgrades to drive consumer trial and delight, especially considering the ramp-up in competitive promotional activity in the category. In Greater China, premium body wash innovation on both the Safeguard and Olay brands drove 9% Personal Care growth in the quarter. Safeguard Detox Body Wash is designed to provide superior deep for cleansing and skin transformation. The recent restage across all elements of the superiority has accelerated market conversion from bars to liquids and from basic products to premium offerings. Olay premium body wash launched in July, contains Olay facial skin essence and the first ever sparkling liquid to provide visible skin benefits and an unforgettable showering experience. Since launch, the new premium line has grown over 30% in off-line channels and 80% online, driving category growth and Olay share growth. In Latin America, Personal Healthcare grew organic sales plus 15% in quarter 1, driven by improved execution of the integrated superiority strategy. The combination of strong product and packaging innovation on the Vicks brand compelling consumer communication, strong retail execution and superior consumer value drove both growth across markets and the region. Brazil led the growth up nearly 30%, along with growth in Mexico, Peru, Colombia and smaller distributor markets. Our innovation program is designed to strengthen the core brand propositions combined with full media and in-store support across the portfolio. where we add new elements to our brands, like we are doing with Tide evo, we ensure the more is sufficient in size to warrant full brand communication and go-to-market support. Superiority integrated across all 5 vectors. We will continue to accelerate productivity in all areas of our operation, including the recently announced restructuring work to fuel investments in superiority, mitigate cost and currency headwinds and drive margin expansion. We have an objective for growth savings in cost of goods sold of up to $1.5 billion before tax, enabled by platform programs with global application across categories with Supply Chain 3.0. We have line of sight to savings for improved marketing productivity, more efficiency, greater effectiveness, avoiding excess frequency and reducing waste while increasing reach. We're taking targeted steps to reduce overhead as we digitize more of our operations. Visibility to more savings opportunities is increasing as the businesses continue to build their 3-year rolling productivity master plans and as we accelerate productivity with our restructuring efforts. We will continue to actively manage our portfolio across markets and brands to strengthen our ability to generate U.S. dollar-based returns in daily use categories where performance drives brand choice. The portfolio choices we are making as part of the restructuring program include different go-to-market choices in some geographies and surgical exits of some categories, brands and product forms in individual markets. We've announced several steps so far, redesigning our business model in Pakistan to an import model with local distributors managing trade relationships, discontinuing laundry detergent bars in India and the Philippines, exiting several low-tier oral care products in some enterprise markets, focusing the Olay brand on the most productive European markets, and streamlining our grooming device portfolio and focus and enterprise markets. These steps are aimed at accelerating growth as we move further through the restructuring program. Also, these portfolio moves enable us to make related interventions in our supply chain, rightsizing right-locating production to drive efficiencies, faster innovation, cost reduction and even more reliable and resilient supply. As part of the 2-year program, we are making additional organization process and technology changes to enable an even more agile, empowered and accountable organization, making roles broader, team smaller and faster and work more fulfilling and more efficient, actively reducing, eliminating or automating internal work processes, supporting teams with data and technology to increase capacity and capability to focus on integrated plans to deliver superior propositions to our consumers versus spending time internally. We expect to reduce up to 7,000 nonmanufacturing roles or up to 15% of our current nonmanufacturing workforce over this fiscal year and fiscal '27. We're making very good progress with organization designs to deliver this objective. While not easy, we firmly believe this will further empower our highly capable and agile organization that is ready to step forward to create value for our consumers, customers and shareowners. We will continue our efforts to constructively disrupt ourselves, our industry, changing, adapting, creating new ideas, technologies and capabilities that will extend our competitive advantage. These strategic choices across portfolio superiority, productivity, constructive disruption and our organization will continue to reinforce and build on each other. We remain confident in our strategy and its importance, especially in challenging times to drive market growth and to deliver balanced growth and value creation. Long-term focus on the strength of our brands and categories is the best way to position ourselves for stronger growth when the economic climate and consumer confidence improves. This starts with a strong innovation plan and healthy investment to drive trial and user growth, the plan we are executing. As we said in the July earnings call, there are times when bigger steps are needed to both the growth and value creation. The teams are on it. Moving on to guidance for fiscal 2026. As you saw in our press release this morning, we're maintaining all guidance ranges for the fiscal year. Organic sales growth of in line to plus 4%. Global market growth for our portfolio footprint is around 2% on a value basis at the center of our guidance range. As a reminder, this guidance includes a 30 to 50 basis point headwind from product and market exits that are part of restructuring work. As we consider phasing of top line growth, recall that Q2 last year benefited from 2 spikes in orders related to port strikes. The actual port strike that took place early October and the concern of another strike in January, these dynamics will likely result in quarter 2 this year being the softest growth quarter for the year with stronger growth in the back half. On the bottom line, core EPS growth, in line to plus 4%, which equates to a range of $6.83 to $7.09 per share or $6.96, up 2% in the center of the range. While we delivered strong EPS growth in quarter 1, we expect modest earnings growth over the balance of the year as investments in innovation and competitiveness increase, particularly in the U.S. and in Europe. This outlook includes a commodity cost headwind of approximately $100 million after tax and a foreign exchange tailwind of approximately $300 million after tax. Our fiscal '26 outlook now includes approximately $500 million before tax and higher costs from tariffs. While this is an improvement to the isolated tariff impact. Keep in mind that these -- that there are other offsetting impacts, including related supply chain investments and adjustments to pricing plans also assumed in our guidance. Below the operating line, we continue to expect modestly higher interest expense versus last fiscal year and a core effective tax rate in the range of 20% to 21% for fiscal '26 combined a $250 million after-tax headwind to earnings growth. We are forecasting adjusted free cash flow productivity in the range of 85% to 90% for the year. This includes an increase in capital spending as we add capacity in several categories, and as we incur the cash cost from the restructuring work. We expect to pay around $10 billion in dividends and to repurchase approximately $5 billion in common stock, combined a plan to return roughly $15 billion of cash to shareowners in fiscal '26. This outlook is based on current market growth estimates commodity prices and foreign exchange rates. Significant additional currency weakness, commodity or other cost increases, geopolitical disruptions, major supply chain disruptions or store closures are not anticipated within the guidance ranges. So again, a solid start to the year, growing sales and earnings and returning strong levels of cash to shareowners as we look to strengthen investments in demand creation throughout the balance of the fiscal year. We continue to believe the best path to sustainable balance growth is to double down on the strategy, excellent execution of an integrated set of market constructive strategies delivered with a focus on balanced top and bottom line growth and value creation, starting with a commitment to deliver irresistibly superior propositions to consumers and retail partners. We are taking proactive steps to improve the execution of the strategy and our ability to deliver our growth and value-creation objectives. With that, we'll be happy to take your questions. Operator: [Operator Instructions] Your first question comes from the line of Dara Mohsenian of Morgan Stanley. Dara Mohsenian: So I just wanted to touch on the restructuring you announced back in June, given you're now a few months into putting the initial plans into place. A, just how do you think the organizational changes are being received internally by your workforce, given there's a significant reorg and also rationalization of the job roles at P&G? And then just b, the context externally is a more difficult top line environment in general in CPG, that's also volatile. So I just love a high-level overview of what the reorg does for the organization and P&G's competitiveness relative to that challenging broader industry landscape. Andre Schulten: Dara, thanks for the question. Yes. So let me both -- take both elements here in turn, starting with the progress we are making. We are right now perfectly on track on all elements of the restructuring execution. This is never easy, especially when we're talking about reducing our enrollment. I think the organization is taking it in stride because the mission is clear. We have now constructive plans in every business around the world on which roles to reduce and how to organize ourselves with the vision of creating a more agile and faster executing -- better executing organization for the future. So if you go through the 3 components of the restructuring program. On the portfolio side, this is just the regular execution of portfolio discipline. We have now reviewed all brand country and category combinations to ensure that we can add value and in those where we found that we cannot add value, you see us changing the business model or reallocating resources. You heard us just talk about the projects that we can announce today, which is the business model change in Pakistan and some of the portfolio streamlining across our Fem care business et cetera. So those elements are now clearly defined. We are working through the execution, and I feel very good about the progress we are making. We'll end up with a faster-growing and more effective portfolio when we're done. On the supply chain side, these portfolio choices give us flexibility to take another look at our supply chain. And again, I think the product supply teams around the world now have firmly confirmed what the interventions are they want to make, and we are in execution mode. This will give us both a cost savings element but also an agility and supply assurance element which we feel very good about. The third component, the up to 7,000 non-manufacturing head count reduction really is the enabler for us to create smaller teams that are better set up. We are fully digitally enabled data access and analysis to focus on the consumer and focus on brand building. And those org designs have now been developed. They are slightly different in every category as they should be because the context and the work in every category is different but they have the consistent objective to create smaller teams that are focused on the brand. They are digitally enabled, and we're building some of these technologies and platforms globally. Some of them are individual. And they will ultimately result in what I see as the third step of the organization evolution when we went from the ticket to fully enabled category end-to-end now to smaller brand teams that are enabled by technology to be much faster and much more consumer-centric. And that, combined with Supply Chain 3.0, which will change the way that our supply chain operates via automation and digital towards is very exciting for us. The short-term benefit is cost and fuel for us to be able to invest over the next 12 to 18 months into the very strong innovation programs that we're launching. I think the longer-term benefit is just an even strengthened portfolio and a strengthened organization. Operator: Your next question will come from the line of Peter Galbo of Bank of America. Peter Galbo: Andre, I just wanted to maybe click in a bit more on some of the subcategories in North America. And in particular, on Fabric Care, and Baby Care, where you noted a bit more, I think, competitive activity. Obviously, there's a list of innovation that you outlined over the coming year. But maybe you can just give us a bit more detail on what you're seeing real time from a competitive standpoint, both in North America Fabric Care and Baby Care. Andre Schulten: Yes, Peter, look, both are obviously big and important categories for us. And as you will have seen in the results, both are not delivering at the level that we want them to deliver. And as you pointed out, what we see is a heightened competitive environment, which is not unexpected, where consumers are a bit more careful in terms of purchase decisions and consumption. The market gets tighter. And some of the response -- competitive response is increased promotion and that's certainly what we're seeing both in Fabric Care and in Baby Care. Our response to a more competitive environment has to be a more integrated answer, which is what we are executing across both baby and Fabric Care. So when we talk about driving integrated superiority, that's what we mean. And while value or promotion might be a component to that answer, the real solution here to create sustainable growth is to drive innovation and drive superiority, communicate that innovation with the right claims, meaningful to the consumer, meaningful to the retailer, get the retailer support online and in physical stores and thereby create value for the consumer that is attractive. Where we've done that, specifically on Baby Care, we're seeing the results. So we've continued to innovate and stay ahead on Swaddlers, on Cruisers 360, on the pants business, and we continue to do so, and we see share growth. We have intervened on the value tier with Luvs Platinum innovation which we've launched in the fall of last year, and we have been able to grow share even competing in what is probably the most pressured tier within the Baby Care portfolio. And we are now expanding that same approach to the mid-tier, launching the first wave of Baby Dry, which is our mid-tier innovation in the fall. And the second part of that innovation in the spring and we are confident that the share pattern will follow the same playbook as we've seen. You've heard us talk about the innovation in Fabric here. The Tide liquid innovation is truly exciting. The biggest upgrade in 20 years, a significant investment, great commercialization. We believe that is the right answer to drive trade-in, trade-up and continue to create category growth. We're adding on Tide evo, which will add a completely new form to the category. And again, that's the path forward to drive category growth, share growth in a sustainable way. Last comment, this plan takes longer. It's not as easy as throwing promotion funding out there. But again, we believe that is the way to both create value for our consumers and for our retail partners and shareholders. Operator: Your next question will come from the line of Lauren Lieberman of Barclays. Lauren Lieberman: Just wanted to touch on the market share stats, the global market share down 30 basis points. I know that can be very impacted by geographic mix to some elements, but even just at the 24 of 50 category country combinations are holding or gaining share is on the low side. So I'm asking for you to walk through the 26 that are troubled. Maybe just where might you call out some particular hotspots of activity things where is it a matter of macro and positioning and relative affordability at this time? Is it a matter of the innovation that's yet to come, you think will be the answer, but it was a pretty stark statistic, and I'd love to get your thoughts on that. Andre Schulten: Lauren. Yes, global aggregate share, as you point out, is down 30 basis points over the past 3 and past 6 months. if you look the past 1 month, we're closer to flat. So the last reading is minus 0.1%, but I would view that as normal variability. I think the hotspot. So let's talk with the U.S. Let's start with the U.S. I think we're coming from a very strong base period. And there are some categories where we clearly see increased promotional activity. We touched on Baby Care. We've seen very aggressive rollbacks and promotion activity in the Baby Care mid-tier section. We also see very intense promotions in Fabric Care. We've seen a period of intense promotion in Oral Care. So certainly, the competitive aggressiveness has increased. And the way we respond is more structural. It takes a bit more time. While we will remain value competitive in the short term. We truly believe the right answer here is to drive integrated superiority with innovation and investment in our brands. And the positive read of the U.S. shares would be that if you look sequentially, we are actually increasing absolute share. So past 12, past 6, past 3, past 1 month, our absolute share in the U.S. went from $33.6 to $33.9 to $34.1 to $34.9. So absolute shares are moving in the right direction. We are still annualizing a relatively high base period, but the plans are clearly in place, I think, to exit the year with share growth in the U.S. Europe is a very similar situation. Competitors have been not very active over the past years, and we see some of our competitors headquartered in Europe, get back in the arena which, if it's driven by innovation is a good thing in our mind. It drives attention to the categories. But in some cases, it's also very heavy promotion. So if you look at Fabric Care, for example, in our Germany business, we were up last year same quarter, 33%. We are down this year because we have competitive activity in the market. the playbook is the same. We will continue to invest in integrated superiority. On the other hand, if I look at our China business, very strong progress. We probably started the right interventions in China because of a difficult market environment earlier about 2 years ago. And with the interventions in innovation, the interventions in go-to-market capability, we now see solid progress in a difficult market environment, again, China Mainland up 6%, SK-II up, Baby Care up 20%. So it gives us confidence that these interventions were driving. They take some time, but they ultimately result in what we want in terms of market growth and share growth. Last example I'll give you on the success. If we do this right, is Latin America, again, 7% growth in the quarter, broad-based in Mexico, in Brazil and in a lot of smaller markets driven by a strong portfolio with strong innovation. Operator: Your next question today will come from the line of Steve Powers of Deutsche Bank. Stephen Robert Powers: Andre, maybe talk a little bit more elaborating on China picking up on what you had just spoken to. A good result this quarter with Greater China, up 5%. Maybe just a little bit more perspective about what you've seen evolving on the ground in that market, how the business was trending entering the quarter versus how it exited. And just how confident you are in the relative progress you've seen so far just sustaining through the year? Andre Schulten: Thank you, Steve. Let me maybe start with the team on the ground and the interventions they have made. I think it was clear to the team that the consumer environment will not get easier. The competitive environment will not get easier. And therefore, we had to fundamentally change many of the variables that drive the business. And that's, I think, what the China team has done very successfully. They basically lifted up every part of the business model across all categories. They completely changed the go-to-market model, including the incentive system for the distributor network, which is critical in China. They've launched consistently strong innovation grounded in local insights. When I think about our Baby Care business growing 20%, that certainly is driven by absolutely superior consumer insights and innovation that matches those insights. And lastly, they've changed the way we communicate with consumers and the way we collaborate with our most strategic customers, many of them online businesses. So all of that has resulted in, I think, a good turn of the business. It is China. So I'm not pretending that this will be a straight line. this can go up and down. But now we have 2 points on -- that we can connect and both points are pointing in the right direction. But again, I would urge us to be also cognizant of the fact that we're dealing with a volatile market environment. A couple of examples that we are particularly proud of, number one, SK-II, just the discipline with which the team worked on the brand fundamentals on strong innovation, having the courage to launch a super premium in addition to the core I think is paying dividends. SK-II up 12% and even the travel retail business has now turned positive. We have streamlined our Fabric Care portfolio, launched innovation that is truly superior. The business is up 5 points. The Hair Care business where we've been able to innovate is growing. And on the Skin Care business, the mass Skin Care business, Olay is growing and Skin & Personal Care in aggregate is growing 8%. And I mentioned Baby Care. So while the consumer sentiment is still somewhat less confident. I think the team has found a way to break through. Don't expect it will be a straight line, but I feel very good about the progress we've made. Operator: Your next question will come from the line of Rob Ottenstein of Evercore. Robert Ottenstein: Great. I want to swing back to the U.S. and there was a lot of talk about the need for competitive promos that are going on in the market. And I guess my question is, as you look at the other side of that, which is the consumer side and the research you're doing on the consumer, has affordability become a bigger driver of consumer choice in the quarter? Do you expect that to continue? And then specifically, if that is the case, that it is a bigger driver, how do you look to address affordability apart from innovations, but looking at whether it's a change in shift in channel strategy, RGM, price pack architecture, other ways to get at affordability issues. Andre Schulten: Thanks, Robert. I wouldn't call it affordability. I would say value is clearly in the center of the equation and value defined as price over integrated performance, which is the other 4 vectors that we're talking about. We continue to see consumers trade up, price/mix is positive, mix is positive in the U.S., where the value equation is attractive for consumers. In some channels, we see the majority of growth in our categories in the premium end, not in the value end of the lineup. We also see continued decline of private label. Actually, private label shares in the U.S. are now down 50 basis points. So for the first time, private label shares dropping below 16%. And which was kind of the historical threshold. And as I mentioned, our sequential value share is actually improving by more than 1 point even though we've not quite caught the base period yet. I think the right answer to the environment we're in is to serve the consumer where they want to shop and with the cash outlay and the value tier that they are prepared to go after. And I think we have built very strong price ladders across different pack sizes. We continue to optimize those. So we find in some channels that we might have crossed price points relative to competitive offerings we need to adjust. We will adjust those quickly. But we are present in every channel across the U.S. so we can compete with the right price points, both on shelves and in promotion as we need to. We continue to innovate across every value tier. You heard me talk about Luvs, for example, in Baby Dry -- in Baby Care, but we're also innovating at the top end, and both are successful if we do it if we do it right. I think the channel play is interesting because the consumers continue to move into a good part of the consumer continues to move into larger pack sizes. They shop in mass, in club and online. And so we need to make sure that we have the right value offering there, and we're working on that with all of our retail partners. And then some consumers continue to live paycheck to paycheck, and they are looking for smaller cash outlay. They're really looking at low promoted prices so they can stretch the paycheck a little bit longer and we're, again, very intentionally driving our competitiveness there. But again, I come back to where I started. I wouldn't say it's affordability. I think it's sharper value and how we present that value to the consumer is critical. And we don't believe it's just price. We believe it's the combination of all factors that we need to integrate. Operator: Your next question will come from the line of Chris Carey of Wells Fargo Securities. Christopher Carey: I wanted to follow up on your commentary in China, Andre, I think it sounds like SK-II and Olay and as such, your broader personal care business in China were similar to last quarter. Correct me if that's wrong, but I do think it implies then that you're seeing improvement in businesses outside of that Skin & Personal Care segment in China. Would you agree with that assessment and are you seeing signs that improvement is durable? Or were there any factors that are specific to the quarter that may have helped that business. So I just wanted to test that just a little bit. Andre Schulten: Yes. Chris, no, good pressure test. You're right. I think we're seeing our Skin and Personal Care business is moving along. It's slightly accelerating in terms of growth rate, but we see consistency in terms of results getting better. We also see the other categories picking up pace. As I mentioned, Fabric Care is up now 5%. We made portfolio interventions. We have strong innovation out there. We're driving distribution. Our Fem Care business is growing. Our Hair Care business is growing with a more streamlined and focused portfolio. Baby Care continues to accelerate with 20% growth. So the breadth is comforting. And the other comforting fact is that we understand what we did and what it's doing in the market. So our approach to how we define the priority and how we execute it, I think it's paying dividends. So that's reassuring that better consumer understanding, innovation that is grounded in that understanding with better shelf and retail execution, online and in stores is paying dividends. So I have a high level of comfort with the results and the breadth of results and how we accomplish them. It's still China. So we will continue to observe. I would -- we continue to expect some volatility here. We continue to expect strong competitive activity. But if I had to summarize, I think we are well positioned to continue to build the business in China. The market, hopefully, will strengthen over time, which will be a tailwind, and we'll keep track of where we are over the next 2 quarters. Operator: Your next question today will come from the line of Andrea Teixeira of JPMorgan. Andrea Teixeira: I was trying to -- Andre to dive into a little bit more on the price/mix and then by categories. I know you had invested more in Luvs and in particular, in diapers in the U.S. So I was hoping to see if you've seen response from the consumer. You did say that consumers in general have been into premiumization, but obviously, that's a picture -- overall picture. I wonder if you can kind of give us some examples of ways the Procter has been more active in pivoting for that low-income consumer and in categories where they are looking for value not only in diapers but also in paper goods. Andre Schulten: Thanks, Andrea, for the question. The first part of my answer will sound familiar, but where we choose to play, we choose to be superior. And that's across all value tiers. So when we innovate, we innovate across all tiers. So for example, the most recent Auto Dish innovation on Cascade was a formula upgrade across the super premium, the premium and the mid-tier. As we've talked many times on this call already, we've upgraded our product lineup on the super premium, the premium side and diapers the value side of diapers and we are about to upgrade the mid-tier. The same is true across categories. In Olay, for example, the most successful lineup is the super serum lineup right now, and that's at a premium to the market. And we're driving innovation on the Jars business with better execution, better packaging, a shelf reset, which is going into the market starting in O&D. And when we get this right, the consumer responds. We see volume share growth and value share growth, and we see trade in and trade up, which is ultimately what we're trying to accomplish. So when we're upgrading Tide liquid, we're also upgrading the other forms and tiers within the laundry lineup, for example, we're upgrading the gain lineup as well. And that combination of tier approach with the right pack sizes, as Robert pointed out, with the right channel distribution and the right promotion strategy to drive trial is what drives the response. Now we've not done that across the full portfolio in the U.S. And that's really the work that we are approaching over quarter 2, quarter 3 and quarter 4 that is enabled by the productivity progress, by the restructuring that allows us to push the investment, and I feel very good about the aggregate of the plan, but you're pointing exactly at the right thing. We need to be sharp on integrated superiority in every value tier in which we play. If we do that, the consumer response, and we have the examples that I just mentioned to confirm that, that still works. Operator: Your next question will come from the line of Filippo Falorni of Citi. Filippo Falorni: Andre, I wanted to ask on some of the items that you called out in the guidance. You clearly lowered the headwind from commodities and tariffs. So maybe if you can give us some more color on what drove that lower headwind on those 2 items. And then if you sum up all the items that you call out, it's now like a $0.19 headwind before it was $0.39. So you have some flexibility about $0.20, but obviously, the EPS guidance is unchanged. So can you walk us through like what is the offsetting factor? It seems like there's probably more investment in promotion in marketing to offset some of the competitive environment that you're seeing in the promotional environment. But maybe help us understand where is the incremental $0.20 of benefit being invested in. Andre Schulten: Thanks, Filippo. The commodity headwinds, you see the news on the petro complex oil is not -- is coming down. That's helping us from the energy side. And the tariff environment continues to be volatile, but the biggest help on tariffs has been exclusion of materials, natural materials and ingredients that cannot be grown in the U.S. So when you think about eucalyptus pulp, when you think about psyllium, which is the core ingredient in some of our PHC products that is imported from India. So the administration having an open year to adjust policy where product or ingredients cannot be produced in the U.S. retaliatory tariffs coming down, Canada, resending retaliatory tariffs of 25% which just happened before the last quarterly call. And so those components in aggregate are representing the commodity and tariff headwinds. On the question of guide impact. I will tell you there's really -- you called it out, right? Number one, we're in quarter 1. So it's still very early. And as you can see, the tariff environment can change very quickly. You heard the administration's comments on Canada. And so there's still volatility in the impact for the year. Number two, a lot of the commodity -- a lot of the tariff changes. So for example, Canadian tariff rescinded was linked to pricing. So as the tariff goes out, so does the pricing. So the net effect on the P&L within the year is limited. So volatility, it's still early, and you're very right, we want to absolutely preserve our ability to continue to invest because we have proof and we continue to be convinced based on the consumer reaction to where we successfully invested in integrated priority that this is the right path forward. It is the path to stimulate category growth back to 3% to 4%. and within that, the path for P&G share growth in a sustainable way. So early in the year, still volatile reserve investment. Operator: Your next question will come from the line of Peter Grom of UBS. Peter Grom: So I wanted to ask a follow-up on North America. Andre, I think you mentioned consumption decelerated throughout the quarter, and you alluded to some of the phase-in considerations related to the port strike a year ago. So just maybe first, how do you see underlying category demand evolving from here? I know it might be a little bit harder now because you're lapping some of the impact, but just curious whether you would expect this deceleration to continue? And then just related on the comment on the port strikes that will make 2Q the soft this quarter. Is there a way to frame how much of an impact these laps will have? Or maybe how much of a step back you would expect from where we started the year. Andre Schulten: Peter. Look, I think the North America consumption decelerated. So that's correct. We are -- we probably entered the year at about a strong 2%, 2.4% value consumption. We're now a weaker 2. So 1.8%, 1.9%. Some of that is just variability of base periods. But I do believe that for the next 2 quarters, the consumption will be around the 1.5% to 2% range. And as you said, particularly in quarter 2, because of the port strike in October and then the threatened port strike in January, what we expect to see is that the run rates of consumption, both on the market side and P&G side is probably going to continue. But you have a point higher base period. So that's probably the best way I can describe what we're expecting. And if there's 2 things you need to take away is quarter 2 is going to be lower than quarter 1 and half 2 is going to be higher than half 1. That's about the best logic I can give you. Over time, maybe last comment in the not too far future, if we are successful with everything we're doing with the investment, we expect category growth to return to 3%, both in the U.S. and at a global level. And again, that's job 1, 2 and 3, drive more users in the category, drive more usage and drive value per use. That's how we get back to 3%. Operator: Your next question will come from the line of Olivia Tong of Raymond James. Olivia Tong Cheang: Two questions for you, Andre. First, in terms of the regional outlook. Obviously, you just talked about the U.S., you've been pretty guarded in terms of China. But what about rest of world, just thinking through dynamics with respect to demand, how the consumer is doing in Western Europe and Latin America, in particular. And then in terms of some of the restructuring actions that you've taken, you mentioned some of the portfolio changes in the Middle East and then also in Fem Care. If you -- can you expand on that a little bit in terms of potentially bigger changes to the portfolio to make a step change in terms of the growth trajectory, either more culling -- more substantial culling of the portfolio or potentially looking the opposite way in terms of filling some of the gaps with inorganic growth. Andre Schulten: Thanks, Olivia. Dynamics in Western Europe, very similar to North America, volume growth in the categories that we're in about 1%, value growth, around 2% weak 2%, and effectively, the same dynamics I described in North America. L.A. continues to be strong. We saw 7% growth in the quarter. Last quarter was very strong. And we continue to drive market growth in the region. Strength in Brazil, up 6% or 7%, Mexico up 4%. So the LA region is doing well from a consumer standpoint and from a P&G standpoint. Asia, Middle East, Africa and Europe enterprise markets more muted, both geopolitically from a consumer standpoint and from a competitive standpoint, I expect that not to change. So in aggregate, I would say, enterprise markets probably around 3%, 4% developed markets, Europe, North America, around 2%. China is the wild card, still negative in terms of market growth. But again, we're making good progress. So that's as much perspective as I can give you. On the bigger portfolio changes, look, the portfolio actions we are executing are really on the fringes, right? We are making sure that we do what we should do is ensure that we can create value in every category country combination in which we are, and if not, make the appropriate changes. And the type of change you've seen us announce in this release, that's about the type of change you should expect. There's nothing more dramatic that we're planning to do. We're very comfortable with the core portfolio that we're in. We've chosen these 10 categories very carefully and we continue to believe these are attractive categories in which P&G can continue to drive growth. We have talked about the growth opportunities within the existing portfolio across regions driving our brands in North America, serving underserved consumers in North America is a $5 billion opportunity, getting Europe consumption in the European markets to best-in-class in Europe from a household penetration standpoint is $10 billion. And driving enterprise market penetration in those markets that are similar to GDP per capita as Mexico, to the same level of consumption in those categories in Mexico is about $15 billion. And as I said last time, these are numbers on the piece of paper until you start allocating resources to those ideas, and that's exactly what we're doing. That's exactly why we want flexibility to invest. So we can drive the consumer insights, we can drive the innovation that goes after these growth opportunities. And if you add them up, you find that they will allow us to grow with an algorithm for the next 5 to 10 years. So there's no need to have any transformational acquisition on inorganic growth opportunity added. If there is an attractive opportunity, we'll always look at it. Operator: Your next question will come from the line of Nik Modi of RBC Capital Markets. Nik Modi: Andre, I was hoping maybe you can just kind of opine on agentic commerce and how you think P&G can leverage some of the advantages you have in kind of the brick-and-mortar shopping environment to this kind of new world that we're walking into, especially given the announcement with OpenAI and Walmart. So just any thoughts you have. I mean, the big question I have is just how do suppliers get their products in the actual basket if people are shopping through prompts? Any thoughts would be helpful. Andre Schulten: Thank you, Nik. Indeed an interesting question. And the way I think about it is it is all opportunity, right? I mean if you think about it, we're in business for 187 years. We went from Kendall store to supermarkets to hypermarkets to online shopping to social commerce, all an opportunity. We went from newspaper ads to radio to TV to Internet to social media, all an opportunity. So I think it's about getting ready for that reality. And I do believe that it opens up new possibilities for brands to make themselves visible. And it all comes back to the underlying fundamentals, do you understand the consumer, do you understand how they look for information, how the agent will find your product, how the agent will extract the information to decide whether your product should be in the basket or not and how you work with your retail partners to ensure that you have the best understanding and the best access to these algorithms so that you can communicate your superior brand proposition every day and every shopping opportunity. And that's the path forward. I feel we're well positioned. I feel our data infrastructure, our consumer understanding, our collaboration with retail partners is very good. And so again, for me, this is all opportunity. Operator: Your next question will come from the line of Kaumil Gajrawala of Jefferies. Kaumil Gajrawala: Just a couple of clarifying questions. There was a commentary around tariffs and sort of natural products being exempted as Were there any particular deals or maybe just that the threat wasn't as much as what perhaps you had estimated earlier. And then on China, a lot of conversations around distribution and distribution changes. Was there anything onetime in there as it relates to sort of a near-term benefit from flipping into a new distribution structure? Or is what we're seeing more related to an improvement in consumption. Andre Schulten: Thanks, Kaumil. The change on the tariff side was before these products or these materials and ingredients were included in the overall tariff structure. And I think what the administration that has done is basically grant exceptions, broad exceptions in some of these tariff frameworks for those materials that cannot be grown in the U.S., which is highly appreciated and makes sense. On the China question, we've made these interventions on distribution network in the fall -- summer and fall of last year. I know there were not any onetime distribution gains that drive these results. It is just a streamlining and changing the incentive system for the distributor network. So we have fewer distributors. They are better aligned to what we're trying to do in terms of quality execution in stores and online, and that is starting to pay dividends. So this is not a onetime effect or onetime bump. This is actually the new go-to-market approach starting to pay dividends. And if everything goes well, I expect that benefit to actually slowly accelerate over time. Operator: Your final question today will come from the line of Robert Moskow of TD Cowen. Xin Ma: This is Victor on for Rob Moskow. Two for me as well. So I think previously, there was a discussion of taking a mid-single-digit pricing on about 25% of your U.S. SKUs to mitigate the tariff impact. So now that the tariff impact is half of what it was before curious on how that affects your pricing strategy, if at all? And then on LATAM, we've heard from competitors of consumer weakness and from a challenging macro backdrop, are you seeing this impact your trends at all? And if so, how are you performing so well? And did you gain other category share in the region? Andre Schulten: On the pricing question, yes, we've taken in the U.S., we've announced pricing in July. It's gone into effect in September. Most of the pricing was innovation-driven and in aggregate, it's about a 2%, 2.5% price increase across the entire portfolio. The underlying tariffs that have contributed to the need for pricing has not really changed. The biggest change in the tariff exposure has been retaliatory tariffs on the other side. And those pricing effects have been taking out, I was talking about Canada. But in the U.S., the majority of the pricing was underlying innovation-based with tariffs being a contributor, but not the main contributor, so no change to pricing approach. I think we've talked about the consumer backdrop in the U.S., plenty. We've talked about the share development. While we haven't fully annualized our base, we continue to make sequential progress in absolute share, and we expect to exit the U.S. with neutral to share growth by continuing to give the consumers better value propositions, we are integrated superiority every day. So I'll bring it back to integrated superiority to end the call. So if there are no more questions, I want to thank you for your time, and thank you for your support of the company. We continue to double down on the strategy. We feel we are well set up both from a funding standpoint, from a strategy standpoint with the right innovation at hand, and we'll continue to drive forward. Thank you very much. Operator: This concludes today's conference. Thank you for your participation. You may now disconnect, and have a great day.

203天前Insight Analytics约5分钟阅读

MYFW 2025 Q3 财报电话会议

Operator: Thank you for standing by, and welcome to First Western Financial's Third Quarter 2025 Earnings Conference Call. [Operator Instructions] I would now like to hand the call over to Tony Rossi. Please go ahead. Tony Rossi: Thank you, Latif. Good morning, everyone, and thank you for joining us today for First Western Financial's Third Quarter 2025 Earnings Call. Joining us from First Western's management team are Scott Wylie, Chairman and Chief Executive Officer; Julie Courkamp, Chief Operating Officer; and David Weber, Chief Financial Officer. We will use a slide presentation as part of our discussion this morning. If you've not done so already, please visit the Events and Presentations page of First Western's Investor Relations website to download a copy of the presentation. Before we begin, I'd like to remind you that this conference call contains forward-looking statements with respect to the future performance and financial condition of First Western Financial that involve risks and uncertainties. Various factors could cause actual results to be materially different from any future results expressed or implied by such forward-looking statements. These factors are discussed in the company's SEC filings, which are available on the company's website. I would also direct you to read the disclaimers in our earnings release and investor presentation. The company disclaims any obligation to update any forward-looking statements made during the call. Additionally, management may refer to non-GAAP measures, which are intended to supplement, but not substitute for the most directly comparable GAAP measures. The press release available on the website contains the financial and other quantitative information to be discussed today as well as the reconciliation of the GAAP to non-GAAP measures. And with that, I'd like to turn the call over to Scott. Scott? Scott Wylie: Thanks, Tony, and good morning, everybody. Starting on Slide 3. We executed well in the third quarter and saw positive trends in many areas of loan deposit growth, growth in our net interest income, well-managed expenses and generally stable asset quality. This resulted in an increase in our level of profitability and positive operating leverage. Market remains very competitive in terms of pricing on loans and deposits. We continue to successfully generate new loans and deposits by offering superior level of service, expertise and responsiveness rather than winning business by offering the highest rates on deposits or the lowest rates on loans as other banks are doing. We continue to maintain a conservative approach to new loan production with our disciplined underwriting and pricing criteria. However, as a result of the additions we made to our banking team over the past few years as well as generally healthy economic conditions in our markets, we had a solid level of loan production, which was well diversified across our markets and industries and loan types. As a result of our financial performance and the balance sheet management strategies, we had a further increase in both book value and tangible book value per share, and we used our strong capital position to repurchase some of our shares during the third quarter, which was accretive to our tangible book value per share. Moving to Slide 4. We generated net income of $3.2 million or $0.32 per diluted share in the third quarter, which is higher than the prior quarter and a 45% increase from our EPS in the third quarter of last year. With our prudent balance sheet management, our tangible book value per share increased by 1.2% this quarter. I'll turn over the call to Julie for some additional discussion on our balance sheet and trust and investment management trends. Julie? Julie Courkamp: Thanks, Scott. Turning to Slide 5. We'll look at the trends in our loan portfolio. Our loans held for investment increased $50 million from the end of the prior quarter. We continue to be conservative and highly selective in our new loan production. But with the higher level of productivity we are seeing from the additions to our banking team that we have made over the last several quarters, we are seeing a solid level of new loan production. While we are also seeing an increase in CRE loan demand that meet our underwriting and pricing criteria, new loan production was $146 million in the third quarter. The new loan production was well diversified with the largest increases coming in our residential and commercial real estate portfolios. And we are also getting deposit relationships with most of these new clients. We continue to be disciplined and are maintaining our pricing criteria, which resulted in the average rate on new loan production being 6.38% in the quarter. Moving to Slide 6. We can take a closer look at our deposit trends. Our total deposits increased $320 million from the end of the prior quarter. This was due to both new accounts and a buildup among existing client balances. We had an increase in noninterest-bearing deposits due to inflows we saw from title companies, driven by mortgage industry volume. Additionally, we had an increase in interest-bearing deposits as a result of the successful execution of our deposit gathering strategies. Now turning to trust and investment management on Slide 7. We had a $64 million decrease in our assets under management in the third quarter, primarily attributed to net withdrawals on low fee product categories, partially offset by improved market conditions on investment agency accounts. This resulted in increased $43 million or 2.7% during the quarter. Trust and investment management fees increased $100,000 from the prior quarter, primarily driven by the increase in investment agency AUM. Now I'll turn the call over to David for further discussion of our financials. David? David Weber: Thank you, Julie. Turning to Slide 8, we'll look at our gross revenue. Our gross revenue increased 8.7% from the prior quarter due to increases in both net interest income and noninterest income. Year-over-year, our gross revenue increased 15.5%. Now turning to Slide 9. We'll look at the trends in net interest income and margin. Our net interest income increased for the fourth consecutive quarter and increased 8.9% from the prior quarter, primarily due to an increase in our average interest-earning assets with the strong deposit growth we had contributing to our higher level of cash on the balance sheet. Our net interest income increased 25% relative to the third quarter of 2024. Our NIM decreased 13 basis points from the prior quarter to 2.54%. This was due to unfavorable mix shifts in both interest-earning assets and deposits as our deposit growth during the quarter was in higher cost money market accounts. The strong deposit growth during the quarter contributed to higher cash held on the balance sheet. As this liquidity is deployed into the loan portfolio during the fourth quarter, we expect to see NIM expansion. Now turning to Slide 10. Our noninterest income increased by more than $500,000 or 8.5%, which is 34% annualized from the prior quarter. This was primarily due to increases in all major fee categories, including trust and investment management fees, insurance fees and gain on sale of mortgage loans. The increase in gain on sale of mortgage loans was driven by a higher level of mortgage production and the increase in trust and investment management fees was driven by an increase in investment agency AUM as a result of improving market conditions. Now turning to Slide 11 and our expenses. Our noninterest expense increased by less than $1 million from the prior quarter. Most areas of noninterest expense were relatively consistent with the prior quarter as we continue to tightly manage expenses while also making investments in the business that we believe will positively impact our long-term performance. Turning to Slide 12. We'll look at our asset quality. As Scott indicated earlier, we saw generally stable trends in the loan portfolio in the third quarter with slight increases in NPLs and NPAs. This was primarily due to one loan that was downgraded during the quarter. And we had a minimal level of net charge-offs again this quarter. We had a slight increase in our allowance coverage from 75 basis points in the prior quarter to 81 basis points in the third quarter. Now I'll turn it back to Scott. Scott? Scott Wylie: Thanks, David. Turning to Slide 13, I'll wrap up with some comments about our outlook. Overall, we continue to see relatively healthy economic conditions in our markets, and we're seeing good opportunities to add both new clients and banking talent due to the ongoing disruption from M&A activity here in the Colorado market. Our loan deposit pipelines remain strong and should continue to result in solid balance sheet growth in the fourth quarter. In addition to balance sheet growth, we also expect to see positive trends in net interest margin, fee income and more operating leverage resulting from our disciplined expense control. Based on trends we're seeing in the portfolio and the feedback we're getting from our clients, we're not seeing anything to indicate that we'll experience any meaningful deterioration in asset quality. The positive trends we're seeing in a number of key areas are expected to continue, which we believe should result in steady improvement in our financial performance and further value being created for our shareholders going forward. So with that, we're happy to take your questions. Latif, if you could please open up the call. Operator: [Operator Instructions] Our first question comes from the line of Brett Rabatin of Hovde Group. Please go ahead, Brett. Brett Rabatin: I wanted to start with the deposits and the strong MMDA growth. And if I heard you correct, it sounds like that's a mix of internal efforts as well as maybe the mortgage department. Just any -- can you maybe go into a little more color there? And then are those levels sticky, the growth in the level? Scott Wylie: Well, I think we've talked about our efforts to grow deposits and the fact that, that would happen a little bit in a lumpy fashion wouldn't be a big surprise given our history here. We do see large deposits coming in and out. And in this case, I think the things that we saw that happened in Q3 are deposits that are going to stay here and give us a higher deposit base to grow from into Q4. Brett Rabatin: Okay. That's helpful. And then the NPA that you added during the quarter, any color on that credit? And then just was there part of the provision related to a specific reserve for that NPA? Scott Wylie: Yes. I think we have a number of credits that have performance issues over time, and this is one that is a C&I loan. We have been paying attention to it. We downgraded it in Q3, and we do have a specific provision for it. We expect it to be worked out and work through over time, the provision is more than adequate. Brett Rabatin: Okay. And then just maybe lastly, if I could ask on the margin. Julie, you indicated the margin would be up from here. Any magnitude that you could share in terms of what you think 4Q might look like, presuming we get a rate cut or 2? David Weber: Yes. I think we do have opportunity to see NIM expansion. If you look at the amount of liquidity that's sitting on the balance sheet, if we redeploy that into the loan portfolio at something like plus 200, I think that should drive NIM expansion there. We also certainly have the ability to continue to improve earning asset yields and lower our deposit costs. So I think we've got we've got a pretty nice path for NIM expansion in the fourth quarter. Brett Rabatin: Okay. David, any magnitude that you're thinking about in terms of basis points? David Weber: Yes. I'm thinking we can achieve something like 5 basis points of NIM expansion. Brett Rabatin: Okay. Okay. Great. Appreciate all the color. Operator: Our next question comes from the line of Matthew Clark of Piper Sandler. Matthew Clark: I wanted to start on the spot rate on deposits at the end of the quarter. David Weber: Yes. Matthew, it was 3.04%. Matthew Clark: Okay. And then any updated thoughts on the beta you're looking to achieve with additional Fed rate cuts through the cycle and whether or not that starts to decline over time? David Weber: Yes. It has been declining, and it will certainly continue. We achieved somewhere around a 63% beta on money market accounts in the third quarter. And I think that's reasonable for the fourth quarter expectation as well. Matthew Clark: Okay. And then the expense run rate going forward, I think some of the increase this quarter was related to incentive comp. But what are your thoughts on the run rate here in the fourth quarter? David Weber: Yes. The incentive comp can vary certainly with the financial performance. But I think something similar to third quarter as far as expenses is probably a reasonable estimate for fourth quarter. Matthew Clark: Okay. Great. And then last one for me, just on the wealth management business. AUM down a little bit. It looked like it was in the lower fee products, though may have been deliberate, not sure. But any update on the kind of renewed growth and profitability improvement strategy there? Scott Wylie: Yes. We've definitely been working on getting that going again, and we've replaced the team on the trust and in the planning side. We've got a new leader that joined us beginning in the second quarter for our planning team and definitely seeing some nice progress from them. As David noted, we saw AUM go down, which is not really something we manage for. We're really more concerned about the fee income, and we saw fee income grow in the agency accounts in Q3, which is what we want to see. So definitely nice progress from that new team with, I think, a lot more to come. And Matt, just a little bit more color on deposit pricing. With the increase in deposits, you're always going to see relatively expensive at first, and then it's going to moderate over time typically with these new relationships and additional deposits you bring in. Our average deposit costs last quarter peaked at 3.22% in August, and then we're down about 3.15% in September. And as David said, ended the quarter at 3.04%. So you're seeing a nice trend just within the quarter there. So hopefully, we can see that continue into Q4. Operator: Our next question comes from the line of Will Jones of KBW. William Jones: I wanted to circle back to the deposit growth. Obviously, a fairly banner quarter there for deposits, and it sounds like you expect maybe to see a little bit more balance sheet growth in the fourth quarter here. But should we, in any way, view this large influx of deposits as a way to prefund your expected growth for 2026, and maybe '26 then becomes more about just remixing the balance sheet? And then just, I guess, pairing within that, you obviously have a fair amount of liquidity from the deposit growth. How should we think about you guys being a little more opportunistic with securities purchases at this point? Scott Wylie: Well, I think that was a 3-part question. So let me see if I can get them all here. William Jones: Yes. I'm sorry about that through... Scott Wylie: Well, we appreciate the question. So I think you're right on with the idea that we were opportunistic in bringing deposits on. We have done a number of things over the last 12 months to get the team here focused on deposit growth. We know we can grow loans, and we wanted to see the loan-to-deposit ratio come more in line. And so the way you described that is reasonable. Although I would say it's not like a one-off thing that prefunds 2026 or something like that. I mean, I think this is an ongoing effort that goes throughout the product group throughout the -- our PTIM world, planning, trust and investment management world goes definitely through each one of our 19 locations. We require relationships with each loan, and that includes deposits. And so very much a focus of the company. I think that we're seeing a lot of market disruption out there. So on one hand, you've got this competitive environment for deposits, but you've also got people that don't want to be with really large out-of-state banks. And that disruption is continuing, I would say, increasing, and that creates opportunity for talent for people that we can bring centrally to support our teams. We can bring new people into our teams and then we're bringing in new clients. And so I think that's going to continue. I don't really see any reason to think that's going to abate. And at the same time, we've got this tiny low market share in most of our markets. We're kind of 1% or 2% in our bigger markets and less in the newer markets. So in strong and growing economy. So I think all those things set up for some nice continued asset growth into the fourth quarter and next year. William Jones: Okay. Helpful response. And just as I kind of like pair some of those comments, just into how the margin looks for 2026. As I kind of look back how you've transformed the margin this year, about 20 to 25 basis points of year-over-year expansion. Do you think that magnitude is repeatable again in 2026? Is the opportunity there from both a deposit pricing standpoint and loan growth standpoint to see that kind of magnitude again in 2026? Scott Wylie: Well, what I've been seeing is that we really got heavily impacted by that rapid run-up in short-term rates and the inverted yield curve and that we thought that, that would turn around and we'd see nice deposit betas as rates declined, which we have. And the fact that we've seen 22 basis point improvement from Q3 of last year to Q3 of this year, I think it's a nice start in that. We've moved out of the 2.30s into the 2.50s. And I continue to think that in normal environments, my banks, including this one, have produced 3.15%, 3.20%, 3.25% NIM for the way we do business. And that's where I think we're going. I don't think we're going to get there next quarter. I don't know if we can get there next year, but that, I think, is going to continue and the fact we've seen that amount of improvement here over the last 12 months in spite of the growth that we've seen on the balance sheet, I think, is really promising and bodes well for continued operating leverage into 2026. William Jones: Yes. Okay. Very helpful there. And then lastly for me, you touched a little bit on in some of your comments, just the organic opportunity that's arisen from some of the M&A disruption. But there has been a lot of deal announcements. There's been a lot of price discovery. So just curious how you think about your own scarcity value within that? And then maybe how you view yourself as a downstream buyer potentially of banks. Scott Wylie: Well, we believe that our path to -- we believe our job is to drive shareholder value. And we believe our path to creating shareholder value is creating operating leverage in our business here by growing revenues a lot faster than expenses. And that turns into improved efficiency ratio, improved bottom line. And we're not happy where the profitability is. We're not happy where the efficiency ratio is. But we've made a bunch of investments here over the last couple of years and changes that are now paying off, and we're seeing the green shoots of that, and that's going to drive continued organic growth and operating leverage for us. And now talked a couple of times about why we think that continues into '26 and beyond. So specifically, in terms of scarcity value, clearly, First Western is a unique franchise that both is becoming more unique in Colorado, but I would say also more unique as a successful wealth management business on a national basis. I mean I think the bank, in a lot of ways, most similar to us in terms of their balance sheet and AUM was FineMark in Florida, and the fact that they sold for 6.5x revenue and 92x trailing earnings to a really good buyer, I think, is an interesting data point for us. And I know others use other metrics on that, but I mean, I think that's what the data is. So yes, I think there is good scarcity value here. I think our clients, frankly, see that and they find us to be a desirable place to do business. I think other bankers around the country are seeing that, too. In terms of acquisitions, we would love to be buyers. We've done that over the years a lot, 13 times, and we just have to get our stock price back to something reasonable. And definitely, there's a lot of activity out there that we could benefit from if we can get our stock price back in line or when we get our stock price back in line. William Jones: Okay. I appreciate that. Appreciate that response. That's all for me. Operator: Our next question comes from the line of Bill Dezellem of Tieton Capital Management. Please go ahead, Bill. William Dezellem: First of all, Scott, it sounded like you may have had some additional comments that you were going to share to the last question. I'll let you do that if there's something more you want to add. Scott Wylie: No, I'll add a few comments at the end. Thank you, Bill. William Dezellem: All right. So continuing down the deconsolidation route, would you talk about what transactions have been most disruptive and possibly favorably impactful for First Western? Scott Wylie: Yes. I don't entirely understand it, Bill. So I can't really give you a really solid prediction of what's going to happen with all this. But I would tell you that when Guaranty Bank and CoBiz sold, I thought that was going to create a lot of opportunity because our type of clients definitely were at those 2 banks. And I thought with them being acquired by out-of-state banks, that was going to create a lot of opportunity for us. As it turned out, it didn't. And I think a lot of the reason for that is the bankers stayed in place for a while. And then when they did move, they were really bid up by other players. And so it got to be really expensive to bring those folks over. Now with the second-tier acquisitions that we're seeing, for example, with Citywide, which was a really great local family-owned and family-run bank, they sold to Heartland, I don't know, 5, 7 years ago, something like that. And then I think Heartland really had a strategy of trying to run these local banks as the way they had run historically. UMB buys Heartland, UMB is going to drive a UMB culture into what used to be Citywide. And so we've seen some good people and good opportunities come out of that. And so I think interestingly, it's sort of the second-tier acquisitions that really create more opportunities in some way. And then the FirstBank one in this market is just really interesting. Like FirstBank is a great retail bank and just really loved by Coloradans. So there's this emotional tie that I don't entirely understand. But definitely local people here, local business leaders, local entrepreneurs have strong relationships with that company. And it's just going to be a challenge for a big national player to keep that passion. And we'll see. I mean we've had lots of calls. We have clients that bank here and bank there. And you can be pretty sure that those folks are calling us to saying what additional capacity you guys have for us to stay with you guys. So I don't know how all that plays out, Bill. I do feel like we're seeing more benefits of the disruption in today's market than what we saw 5 or 7 years ago. And again, I'm not sure all the reasons why, but it's been really good for us so far. William Dezellem: So let me take that one step further. Do you sense that you have the opportunity to become the new bank that Coloradans love that others look at you and go, we don't even know why, but they sit on this pedestal. Scott Wylie: Well, I do know our clients love us. We're never going to be a retail bank the way FirstBank was. Like FirstBank, one of their strengths was they did one thing. And over the years, I've talked to people like John Ikard and other CEOs over there, and they're like, well, what do you think about the trust and investment management business? And I would tell them and they would say, well, that's fine, but we're never going to do that at FirstBank. So I mean they're just very focused on being a retail bank. And I think they did that better than anybody. And we're not ever going to do that. We're not going to open branches on every corner like they did and stuff like that. So I think we'll continue to be in First Western. I know that our folks are very committed to their markets and their communities. We talk here about taking care of our 4 key stakeholders, which are shareholders, associates, clients and communities. And so we try and do those things that are right for our people and create that emotional connection that you're talking about. And certainly, with our niche, that's something we would hope to expand and build on. William Dezellem: That's helpful. And then relative to Arizona specifically, are you seeing anything from a transaction standpoint that you see as benefiting your opportunity for bringing on new people there? Scott Wylie: Well, I don't think we've announced it yet. We have Julie, who is telling me. So I was thinking I was going to make some news here, Julie, but you're ahead of me. But we actually recruited one of the top folks out of First Republic to build our franchise in Arizona for us, and he had a garden leave period and all that stuff, but he's now joined us. And we are really optimistic about what we think the team there can do in the years to come. I think that, that Arizona market for us, if we had the same tiny market share that we had in Arizona that we have in Colorado, we would be -- what's the number, Julie, $4 billion, $6 billion, bigger or something like that. And so that's what we've charged the team there to come up with. I think we've got a leader in place that can do it. William Dezellem: Great. Congratulations on that. One additional question, please. The excess cash that you have on the balance sheet, how long are you thinking that it will take to redeploy that cash? Scott Wylie: Yes. Actually, that was one of the 3-part question that I missed on, David. And do you want to talk about what we've done already with investments and then what our thoughts are. David Weber: Yes. I mean, Bill, if you kind of look back at the history of our balance sheet, we certainly have our liquidity and capital really more earmarked towards the loan portfolio. And I think that continues. Now that being said, when there are opportunities from a bond perspective that we like, we will take advantage of them. So we did add about $50 million in the third quarter to the bond portfolio, and those were primarily floaters that got us a nice spread over interest-bearing cash, which still really remains highly liquid assets, government guaranteed bonds, agency GSEs, things like that. So I think the focus is still to deploy that liquidity into the loan portfolio. But as we see opportunities in the bond portfolio, we'll certainly assess those as they come up. William Dezellem: So 2 follow-on questions to that. Number one is that the $49 million available for sale that's now on the balance sheet that you're referring to. And then that redeploying of that, I mean, is this something that is a 2-, 3-quarter phenomenon given what you see with economic activity? Is it something you think by the end of the Q4 -- is it more like full year next year? I guess I'm looking for a bit more solid view of how you see loan demand relating to that excess cash -- excess liquidity, I should say. David Weber: Yes. Good question, Bill. We expect our loan demand trends to continue. We had a really strong second quarter in loan growth. We had a good quarter again in the third quarter as far as loan growth. And we -- given our loan pipelines and what we're seeing in our markets, we do expect those trends to continue. So I don't think it's a year down the road type of thing with those trends continuing as far as redeploying that liquidity. Scott Wylie: I would just add, Bill, that we have seen a modest growth rate in the balance sheet, right? Like I think that our expectation is that we can grow single digits, mid-single digits, maybe low double digits. We're not interested particularly in growing faster than that. And I think that you're going to see this growth continue at a moderate pace here into 2026 from everything we know. Not expecting to go out and lend all this money out next week. That is not in our game plan. Operator: I would now like to turn the conference back to Scott Wylie for closing remarks. Sir? Scott Wylie: Great. Thank you. We said for several quarters that we had success playing defense and that we were going to shift back on to offense in 2025. We had some pretty stiff headwinds there for a while with short rapid run-up 525 basis points in short-term rates. We had that inverted yield curve for an extended period. We have 3 of the 4 largest bank failures in U.S. history, including First Republic, which very much was seen as a successful player in our niche. But we said, we got through the defense, let's shift over to offense and really leverage the investments that we've made over the past couple of years in 5 key areas. We've replaced our technology infrastructure. We've moved to a completely cloud-based environment. We've installed middleware. We've rolled out a new digital platform. We're adding all kinds of new services and tools onto that tech platform that really, I think, help us be a leader from a tech standpoint. We've reorganized number two, our product teams, our loan deposit, investment management planning, trust, mortgage teams have all been strengthened and reorganized. We've expanded our PC local office teams. We've given them a new proprietary toolbox for growth and rolled that out here in the last quarter. We've reset and standardized our internal control processes for more efficiency and value add so that we're competing on value and not on price. And number five, we've rebuilt our credit and risk and support and marketing teams to support the First Western that we envision for the future. And that's all paid for and in our current expense structure. And so we were hoping to see some green shoots of progress in that this year, and that showed up in Q3. Our net interest income was up 35% Q-over-Q, quarter-over-quarter annualized. Our fees were up 31.6% quarter-over-quarter annualized in each of our key areas, David pointed that out, which I thought was a really great pointing in PTIM, in insurance, in banking, in mortgages, we saw nice growth. Our pre-provision net revenues were up almost 35% quarter-over-quarter annualized, and our efficiency ratio is trending down with operating leverage up. So thinking about 2026, we do our business planning in the fourth quarter. And so that's a big project that we're doing now with each department head in each office. And so we'll see how all that plays out. But if you just look at Q3 year-over-year trend lines, then our net interest income is up 25% year-over-year, and that was done with modest growth in the balance sheet plus NIM improvement, which drives nice operating leverage, which we saw. Our fees were up 21% from September of last year to September of this year. And our operating expenses were only up 4%, and that was mainly due to incentive comp that is driven off of revenue growth. So if we had higher expenses in Q4 because we're paying incentive growth because we're seeing good -- incentive comp because we're seeing good growth, and that's a good problem to have. So looking past this quarter, our intention is to get back to be a high financial performance like we were earlier in this decade. And we have a clear path to 1% ROAA and plenty of room beyond that. We were honored to be named one of just 16 KBW Bank Honor Roll members in 2025 for our performance over last year. We were just, I think, made as of Q3 now, Piper Sandler's list of the top 200 U.S.-listed banks in size. And then we just saw our schedule for the Hovde Conference down in Florida in a couple of weeks. And the organizers there asked us to add some time slots because of high demand. So I think there's good momentum here. We're really optimistic about how we can finish the year and continue to deliver shareholder value into 2026. Thanks, everybody, for your support, and thanks for dialing in today. We really appreciate it. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.

203天前Insight Analytics约5分钟阅读

BONHR.OL 2025 Q3 财报电话会议

Anette Olsen: Good morning, everybody, and welcome to this third quarter 2025 presentation. My name is Anette Olsen. I am the CEO of Bonheur and Fred. Olsen & Co. As usual, today, Richard Olav Aa, our CFO, will start the presentation going through the main figures and then the different CEOs for the individual companies will present to you. And we will take questions and answers at the end. Today, we have Samantha Stimpson with us, the CEO for Fred. Olsen Cruise Lines. So she will also present to you. So welcome. Richard, I give the word to you. Richard Olav Aa: Yes. Thank you, Anette, and also a hearty welcome from me to this third quarter presentation. Before we go into the numbers, I would like to give some reflections on the report. I think the Bonheur Group of companies delivered a solid set of numbers this quarter. But we can also say that there are room for improvements in the numbers. We see cruise lines improving utilization, but still room to grow. We see Windcarrier, vessel at yard also this quarter, and we also see downtime in renewables. So yes, a good set of numbers, but definitely more room to grow the earnings on existing assets. So with that in mind, we can move over to the highlights. And my colleagues will go through the main strategic and operational highlights of the quarter within each company. So I will limit myself to comment on the more financial aspects of the highlights. But starting on renewable energy, reporting an EBITDA slightly below last year, some NOK 40 million plus NOK 40 million down on EBITDA, mainly related to reduced generation and reduced prices of REGO that Sofie will cover in more detail. Things to be aware on the financial side that there will be a grid outage on Midhill now this winter, Midhill being a significant wind farm. So that will impact earnings and EBITDA going forward. And then we'll be notified on another downtime next winter. And these downtimes don't have any automatic compensation and [indiscernible] works heavily on mitigating actions on this downtime, especially the second one, which will come -- Sofie will come back to. But no doubt, if they last as long as they are stated there, they will have impact on the earnings going forward. Wind Service, an EBITDA from -- up from NOK 435 million to NOK 577 million, which is coming off of a good operational quarter, both in FOWIC and also in GWS. I'll come a little bit back to the underlying improvement in Wind Service on the next slide because there are some special items both last year and this year. I'm also happy to see the backlog increasing and 2 new contracts signed, and it's the firm contract that is reflected in the backlog, while the reservation agreement is not reflected in the backlog. Haakon Magne will cover that more in detail. On Cruise, I will leave that to Samantha, but all in all, an improved quarter. EBITDA up with close to NOK 100 million coming off improved occupancy yield and good cost control. Then in the other investments, NHST continued to deliver healthy results and the margin levels are at higher levels than we have seen in this company before. Also under other investments, we had a refinancing of a NOK 700 million green bond this quarter. utilizing a healthy market and also utilizing the Bonheur Group of companies good standing in this market, we were able to place that bond at the lowest spread we have ever seen of 215 basis points above NIBOR. Fred. Olsen 1848 will present later by Per, continuing to progress technologies. And today, we will cover more detail on the floating solar. Moving on to the segment analysis per third quarter '25. We have showed you these graphs a few quarters now. We think they are very good to also focus on how the group develops in the longer term. Maybe not so much reflection on the revenue side this quarter, but on the EBITDA side, where this quarter is another quarter that builds on the momentum we have seen coming out of COVID where we have been able to lift the running EBITDA of the Bonheur Group of companies to a level actually on an average, somewhat north of NOK 3.5 billion on a 12-month rolling basis compared to pre-COVID of around NOK 1.5 billion plus. And we see all 3 segments have significantly better earnings than pre-COVID, especially the Wind Service segment. Yes. Briefly comment on revenue and EBITDA per segment. We have covered the EBITDA already, but there are a few items to note, especially on Wind Service, which I mentioned on the previous slides. We see on Wind Service that the revenues are down by NOK 281 million and that is really related to that in the third quarter last year, we had a big contract with the Shimizu vessel Blue Wind, which contributed by more than NOK 500 million to the revenue. So excluding that and excluding UWL being included in the third quarter '24 and not third quarter '25 as we successfully sold that last quarter. There is a strong underlying revenue improvement in Wind Service. And we can see that more on the EBITDA on Wind Service, which has an improvement of NOK 142 million. I think if you exclude the Shimizu contribution, the one-off we also now have related to the Ocean Wind termination fee and UWL, we see an underlying improvement in EBITDA in Wind Service of more than NOK 200 million year-on-year this quarter. So on back of that, we come out with an EBITDA of NOK 1.117 billion compared to NOK 938 million third quarter last year, which is an improvement of NOK 179 million. And remember that figure when we move now on to the consolidated summary, so we can start with the EBITDA line. And again, the same numbers there, an improvement of NOK 179 million, and I will briefly comment on other P&L items. Balance sheet, I'll cover on the next slide. Depreciation is down by NOK 36 million. That's really related to a one-off and reversal of an impairment in the media company. So the improvement there is a one-off. Net finance. Interest cost at a quite normal level on a net basis this quarter around NOK 70 million. And then we have these unrealized currency and interest rate effects, mainly related to the interest rate swaps in the U.K. that goes up and down each quarter, but I really point out that, that's unrealized. So -- but also an improvement there of NOK 28 million. So earnings before tax is at NOK 680 million, which is an improvement of NOK 242 million. Taxes are up mainly related to better results. So the net result is NOK 561 million, which is an improvement of NOK 210 million. What is worth noting is that a bigger share of this result flows to the shareholders of the parent, the shareholders of Bonheur because more of the results comes from 100% controlled entities. So the NOK 561, NOK 461 flows to the shareholders of the mother company. So actually, we're delivering earnings per share of more than NOK 10 per share this quarter, which is quite strong. Then final slide for me is the group capitalization per third quarter. First to the left, our financial policy that we obviously reiterate every quarter because it's very important to us. And it's also important to check that we are in line with the financial policy, and we can confirm that our numbers are fully in line with the financial policy. Then going through the numbers. And if we start with the table above with 100% owned entities, we see that we now sit with more than NOK 5.3 billion in cash and close to NOK 3.4 billion in debt, and then a net cash position slightly below NOK 2 billion. So a few things to note there is that Wind Service, we have dividended out the proceeds from the successful sale of UWL and also some dividend up from FOWIC up to Bonheur this quarter. So there is a big change in the cash position between Wind Service and Bonheur ASA in the quarter. And that you will also see in the mother company's results, which are attached in the report that the mother company delivered profit close to NOK 900 million this quarter due to the dividends up from Wind Service. Despite that dividend, Wind Service still sits with close to NOK 1 billion in cash and very little debt left on [indiscernible] around NOK 300 million and net cash position of NOK 675 million. Renewable Energy, that is the Scandinavian wind farms plus the development portfolio is debt-free and a small cash position there of NOK 338 million. Point to note, Cruise Lines paid down the final installment on the seller credit on the 2 new vessels this quarter. So Cruise Line have no -- 0 external debt. So a small milestone for Cruise Lines there. And Earnings are improving. So a cash position of NOK 605 million, also Cruise lines is paying down its debt to Bonheur that they took up during COVID. And then finally, Bonheur, with the refinancing of the bond and the dividends out of wind service sits with NOK 3.4 billion in cash and net debt around NOK 3.1 billion and a net cash position of slightly more than NOK 300 million. So a solid position of what we control 100%. If we look below what we don't control 100% on renewable energy, which is really the joint ventures. Debt of NOK 4.3 billion and NOK 767 million in cash on net NOK 554 million. But remember, this we consolidate 100%, so Bonheur is 51% of this net debt position. Wind Service, it's Blue Tern and also GWS, almost now debt-free in combination and other investments also close to debt free. So all in all, a strong balance sheet, fully in line with the financial policy. So with that, back to you, Anne. Anette Olsen: Thank you. First to present today is CEO of Fred Olsen Renewables, Sofie Olsen Jebsen. Sofie Olsen Jebsen: Thank you. This quarter, we saw production lower than the same quarter in '24. There are some reasons for that, the Crystal Rig 1 recovery project, which I've told you about earlier, that has early generation turbines. Also, we have some market reasons at our Swedish wind farm that is ancillary services, low prices and grid export limits in addition to blade issues. We've also seen lower revenues due to lower REGO prices this quarter and REGO's renewable energy guarantees of origin, those are certificates that are issued per megawatt hour produced that can be bought by consumers wanting to offset their carbon emissions. In the last years, we've seen quite high prices on this before they have been decreasing back to the current levels because more renewable energy is coming into the market with subdued demand. Then we also have construction work of our 2 wind farms progressing well this quarter. Our business model, as you have seen before in Fred. Olsen Renewables, outlined on this slide, and there are some changes this quarter that I'm happy to report. If you see under the consented column, we have some projects that have received consent, 2 solar projects, one in the U.K. and one in Italy. In addition, we have received consent for Wind Standard 1 Repower, which is our first repowering project receiving this. And we are advancing and maturing these projects through our normal development process to ensure long-term value creation. Taking a step back and looking at the market, the prices have been steady. We see that there is now lower gas storage levels in the EU, which is a change in regulation there. This means that changes in weather or colder weather for longer times could mean an increase in prices. But what we also do see is that the long-term trends are pointing towards softer prices as there is an expansion of LNG supply. Moving on then to talk about production. The generation was below estimates this quarter. I mentioned the Crystal Rig 1 recovery project with the early generation turbines. This is increasing availability steadily, which is good to see. We've also had the lower production on Högaliden and Fäbodliden in Sweden. That is mainly due to market then shutting down due to low prices and provision of ancillary services, grid export limit and blade issues. In terms of the ancillary services, we have recently entered that market and are offering to turn down production of our wind farms in order to help the system operator, which is [ Svenska Kraftnet ] in this instance to balance the grid. And we see that this provides revenues, and we are offering this service on an hourly and 15-minute basis together with our balancing system provider. The blade issues I commented on the last quarter. We have 3 turbines offline with suspected blade cracks and are working together with the manufacturer to assess and perform necessary repairs. We also see grid outages this quarter. And as mentioned by Richard, we have a planned grid maintenance work at Mid Hill. That has been going on from the 15th of September and will last until May '26. And then we have a further estimated outage of from November '26 to April '27. There is no automatic compensation from the grid owner here. We are working on mitigating actions, especially on shortening the -- trying to shorten the second outage with Technical Solutions there. And I think it is fair to note that this quarter, we actually had more production from Midhill Wind Farm than the previous same quarter the last year. That was because last year, Midhill was out due to a failure at the external Fetteresso substation. That was a highly unusual event. And it is although still quite unusual that we see this length of grid outage that we now are in with Mid Hill and that we also have in front of us. I would like to point out that grid outages are, in general, infrequent. And when they do occur, it's normally due to scheduled maintenance, and it's quite specific for each substation. This outage we are in the middle of now is because of an upgrade of the substation at Mid Hill, which is still quite unusual. And we are notified of all the outages in advance and also monitoring to keep overview ourselves. So moving on then to talk about our construction projects. Crystal Rig IV has good progress this quarter. We have 5 turbines installed, most likely 7 by the end of this week. There has been a delayed transport of components that has postponed the installation start, and that has been due to low capacity on police escort in Scotland. We are taking mitigating actions to this and currently operating with 2 cranes for installing to use all available weather windows. We also saw blade damaged by the storm Amy that was under -- or the blade was under the manufacturer's responsibility, and we are working together with the manufacturer to see how this will might affect us. Then moving on to our second construction project, Windy Standard III, more in the Southwest of Scotland. The project is progressing well as well. We have 2 wind turbines foundations successfully poured. These are gravity-based foundations where you need to pour the concrete and the civil works are progressing according to plan. So that was all for me this quarter. Thank you. Anette Olsen: Thank you, Sofie. Next is Lars Bender, CEO of Fred. Olsen Seawind. Lars Bender: Thank you, Anette. Yes, and I will take you through the highlights for Fred. Olsen Seawind this quarter. First of all, we remain confident in our projects. We have good projects in attractive markets with strong political support, both Codling in Ireland and Muir Mhòr in Scotland are in markets with political support and where offshore wind is a focus area in the energy transition. We still, as I have alluded to before, deploy very diligent development strategies on our projects, which basically means that we have focused on having lean spend profiles. We limit pre-FID commitments, and we focus on progressing the projects and creating incremental value quarter-on-quarter. Then this quarter, we have received a request for further information for Codling in Ireland. This will postpone the expected consent determination, and I'll come back later in the presentation to what this exactly means and also put it into the context of the consenting process in Ireland. Then the fourth bullet, we have secured a landfall area and onshore substation area for the Muir Mhòr floating project. This is naturally a good milestone and good progress for the project. I'll also come a bit back to that later. So as I mentioned before, we are in the consenting process in Ireland with Codling. We submitted our consent application last year, and we have now in this quarter, received a request for further information. That request for information will postpone the expected consent determination. The content of the request for further information is a range of surveys, including offshore surveys, which we have to conduct. Then we have to, on the back of that, analyze the data and then put it into a report, which needs to be submitted to the consenting authorities. It's important to note that other Phase 1 projects have received similar requests for information, and we very much see this request for information as a clear sign from the Irish planning body that they want a diligent and process and very robust consent determinations at the back of that. So we have already started this work and we will naturally continue this at pace. Just to maybe recap the process around consent in Ireland because I think it's important to put this RFI into context. First of all, the RFI was from our perspective, expected. It is quite usual in offshore wind to have a request for further information. And also in Ireland being a new offshore wind regime and a new planning body, it was also expected in that context. As I said before, we submitted our consent application last year. That was then sent into consultation. And now we have received this request for further information from the government. On the back of that, the planning body will make a consent determination, which is basically the planning body's decision on our application. There is no fixed time lines to that, as I've said before on the quarterly presentations. And when the consent determination is issued, there is in Ireland, a risk of judicial review, which basically means that any person or any company can challenge the government's decision. We will not be parties to such challenge, but it is a risk that's sitting on the back. So this process, as I've said before, has some time uncertainty attached to it. But it's important to note a couple of things in that connection. First of all, our development strategy, as I mentioned before, we have been expecting that we had to be flexible in relation to timing. So we have been geared for that. Secondly, on the financial side, we have 100% indexation of our CfD until FID. And then I think thirdly, and that's my third bullet, we are in an environment in Ireland with a government with strong support, which also very much are supporting the build-out of offshore wind and taking measures to support the industry, which, again, of course, gives us confidence in the project. That leads me to the fourth bullet. We are still pushing ahead with the project and preparing all procurement processes and engineering and so forth for the project. So we are ready on the back of the consent determination to move the project forward towards FID. If we then go to Scotland, as I said before, we have secured land for both landfall and onshore substation this quarter. This is something we've been working on for a while. The area where we are connecting in north of Peterhead is a very attractive area for connection, and therefore, it has been important for us to be one of the first projects to secure this area because it is, of course, a very important precondition to develop the project that we have access to land and grid. Secondly, consent is progressing as planned. I said before that we received the onshore consent and we're awaiting offshore consent. When we have the consent, we are basically in a position to bid into a CfD auction. So currently, I would say the pieces of the puzzle, consent, grid, land are falling into place, and that also very much supports the strategy that we have deployed of being one of the first mover projects on floating wind in Scotland, and that continues to be our direction and also what we aim towards. And with those comments, I'll give the word back to you, Anette. Anette Olsen: Thank you. Per Arvid Holth, CEO of Fred. Olsen 1848. Per Arvid Holth: Thank you, Anette. So as mentioned by Richard and not visible on the first slide there, we'll focus on floating solar. And the backdrop for this presentation is that earlier this month, the International Energy Agency updated their annual report on renewables. So we'll allow ourselves to zoom out a bit and go through some of the results. So on this slide, I think we'll jump to the graph on the right side. This is one of the main conclusions to me. This is showing the actual product, the electricity produced until today and expected to be produced from renewable energy sources until 2030. If we look at wind first, then this shows a good momentum both in offshore and onshore wind as well, but it's solar that is sticking out, having started a significant momentum today, and that is expected to continue until 2030. So if we compare the sources a bit here, then more terawatt hours of electricity will be produced from solar than from onshore wind this year already. combined onshore/offshore will be surpassed by solar next year. And in 2028, 1 year earlier than was projected last year, it is expected that more electricity will be produced from solar panels than from hydroelectric plants around the globe. So that is quite significant. I also added the capacity expectations of installed capacity until 2030. And it's a bit more complicated looking at that when it comes to electricity production. But it gives an indication of how much solar needs to be installed to produce the power that is visible to the right there. And it's a significant amount. It's around 3,600 gigawatts, which is expected to be installed until 2030. So in conclusion, by 2030, amongst renewables, solar is expected to become the largest source and it will require a significant amount of panels. So then the question is whether the supply chain can supply those panels. So that is the next slide. And there are 2 things here. One is that the short answer is really yes. The panels -- panel production capacity is there. Already, there has been a significant increase in growth, but the utilization of the production facilities in the supply chain is quite low. And this fierce competition that exists, that has also resulted in a significant drop in prices. So it is -- now the global spot price is down to $0.09 per watt peak, and that is quite affordable. So if you add then that -- when it comes to solar PV, it's usually quite easily installed and it's available and quite affordable, then that is why that growth is picking up as shown in the first slide. But it does require a lot of area. And if we go then to the next slide, where does that leave us, 1848 promoting our floating solar technology, BRIZO. We, of course, see this as very positive. Solar PV is area intensive, and we see that the market for utilizing water surfaces for installing solar PV is growing. So that is positive. But of course, with the amount of solar that is expected, we believe that it's important that there is a high flexibility in the application areas and our technology can facilitate that, either utility scale in hybrid setups with hydro or storage or indirect industrial applications as well. So all in all, these offer a stable and flexible and robust solution, which serve the application areas that we see for floating solar and has a potential for opening up new areas. So that is it. Thank you. Anette Olsen: Next in line is Samantha Stimpson, CEO of Fred. Olsen Cruise Lines. And Samantha, you're joining us on Teams this time. So please go ahead. Samantha Stimpson: Thank you. Good morning. So an update from Cruise Lines. We've seen growth in revenue and EBITDA. This is through improving our occupancy and our yield as well as putting some cost control measures in place. I'll also update you in a bit more detail from customers telling us that they are happier, and that's through measurements of customer surveys, focus groups and the introduction of Net Promoter Scoring. And I'm also pleased to announce that the future bookings performance is good as well. If we move on to the next slide, I'll be able to talk you through some details. So our passenger numbers are up 19% in quarter 3. This is predominantly due to us taking the decision to introduce more shorter duration sailings. This was a decision taken to encourage new to Fred. Olson cruise line customers, introduce them into the business as well as giving our loyal customers more choice to sail with us during the summer months. And I'm pleased to say this has worked. Our occupancy in quarter 3 was up to 81%. And it's easier to achieve that through the warmer months of quarter 2 and quarter 3. So it was a good decision. If we then look at our yield performance, yield has improved by 13%. And this is due to some product mix. Every year, our itineraries and destinations and durations across the fleet change. In addition, we've made some decisions around how we manage our revenue performance pre-cruise and during the cruise. And all of the above initiatives have supported the growth that you can see here with our EBITDA. If I then talk to you about Net Promoter Score, I'm pleased to say this has increased from 68 -- from 63, sorry, to 68. That's a 5-point improvement in Net Promoter Score. We are investing a lot of time to understand where we need to make improvements with our customer satisfaction. And this is to ensure that we are improving retention and satisfaction rates. We're making good progress, and this is something as an organization, we are committed to continue to improve. If we look at the forward sales, during quarter 3, we had our 2027 World Cruise on sale. We had the rest of 2025 to continue to sell, and we had the year of 2026. And I'm pleased to say that a big focus on 2026 has driven the improvement in the forward sales performance that you see here of plus 12%. We understand in the organization the importance of filling our ships, and we understand that one of the best ways of doing this is to ensure that we get guest commitment further in advance. And if we move to my final slide, you'll be able to see during quarter 3, the number of departures that we took for each of the vessels and some of the key destinations that we visited. And what I'd like to highlight is that Norway continues to be a positive performing destination as did the U.K. during the period of quarter 3, and that's predominantly supporting the shorter duration cruises that we've been able to see improvement in occupancy through. And that's it for me. Thank you. Anette Olsen: Thank you, Samantha. Haakon Magne is now standing here to talk about Fred. Olsen Wind here. Haakon Magne Ore: Thank you, and good morning. Very happy that I can start the summary, as I've done the last time by reporting about a very good performance also this quarter. The vessels that has operated has been above 99% utilization, and we are delivering one of the best financial performance in the history. Further on the positive side, we have, during the quarter, signed 2 new installation contracts for installation in '27 and '28, respectively. And on the market, I think we reiterate what we have said for the last year that there is an increasing volatility on demand side, which impacts visibility and some uncertainty towards the end of the decade. If we go down to what the vessel has done during the quarter, Bold Tern that commenced the work offshore under the Saipem drilling campaign. It took almost 5 months to make the vessel ready for operations with all the equipment and is now performing well offshore. Brave Tern went into yard to do the same work as we did on Bold Tern to prepare her for a generic 3 turbine sea fastening setup with 15-megawatt generator. So we can easily switch between the different models. We also had to do some carryover work from our stay in Navantia on the crane upgrade last year. Blue Tern, it completed its second major on campaign with Siemens this quarter and went straight in direct implementation over to a third campaign with Vestas early October. Blue Wind, there, we completed the Hai Long in the quarter. If we then go over to the financials, as I said, good performance and good results. We had one vessel in yard. That's why we only were able to sell 67% of the days. But of the 67 days we were able to sell, we got paid over 99% of it. And that is decent. On the revenue side, we had revenues of around NOK 60 million with an EBITDA of close to NOK 43 million. Just note, I think, as Richard also mentioned, that around 4 of those are related to some -- the last accounting effect of the termination fee of a contract that was terminated in 2024. If we look to the bottom right of the slide, you see the development of annual performance. And year-to-date, we are close to 2024, which was a record year for us. So that is good. If we then go over to the market and the backlog slide. Yes, that appears not to be included in the slide. But I can take it anyway. If you see, I think order intake for the general industry has, to a larger extent than normal been driven by delayed projects and major O&M campaigns that has been triggered by quality issues on some of the turbines. But I think we are then happy to report that this quarter, we actually signed 2 contracts. We signed one contract for installation in 2027, and we signed a preferred supplier agreement for execution on the Gennaker project in 2028. Both contracts are for more than 60 turbines. Our backlog for the quarter stands at NOK 360 million, slightly up from last quarter. But please note that, that does not include the reservation agreement as we do not report that in the backlog to the market. On the market, as I think, we are giving the same measures as we have done now for some time. You see in the medium term, there is very limited vessel availability of the high-spec vessels. So their impact on the demand side could have a quite strong impact on the outcome. The uncertainty and the issues that we see in the offshore wind value chain in general industry, again, that impacts the volatility of demand. And that we continue to see. But given the lead times in our industry, that doesn't impact the next year performance. So it's more impact the end of this decade. But I think this is the pick we have seen for some time. So the trend is the same in this quarter as we have seen before. So I think that concludes my comments. Then I give it back to Anette. Anette Olsen: Yes. Thank you. We will now open up for questions. So please. Operator: [Operator Instructions] We will now take the first question from the line of Daniel Haugland from ABG Sundal Collier. Daniel Vårdal Haugland: Congratulations on great results, even though it's been maybe a little bit difficult quarter for some of the businesses. I think it's still great results. I have 4 questions. I think I'll just do them by segment. So just kind of a simple question on renewable energy. So the grid outage at Midhill, why is that not compensated given that -- yes, it's a grid outage, which seems to be controlled by someone else? Sofie Olsen Jebsen: In general, grid outages are not -- or planned grid outages are not compensated in the industry. Those are due to maintenance. In this case, it's upgrades of the grid. And yes, that's how it is. Daniel Vårdal Haugland: Okay. And then one question on Sea Wind. So the Codling consent, if I heard correctly, that is -- it's postponed a little bit. So I don't know if are you able to give any comments on when a potential FID on that project could happen? Obviously, I'm asking for kind of guidance here, but kind of more like are we now into maybe a '26, '27 decision or maybe even later? Lars Bender: I can, of course, understand the question, but we cannot guide on the FID time line. As I said earlier in the presentation, the process does have uncertainty attached to it, and we are dependent on the government in relation to this. So we are currently awaiting the determination. We are handling this RFI now where we have extensive surveys we have to do. We have to analyze the data. We have to submit it back. They need to issue the determination, which then again has uncertainty around whether it will be subject to a judicial review or not. So for me, to give an indication of FID would be very arbitrary at this point. But it is important to say that we remain confident in the project and the diligent development strategy that we are deploying currently for the project. Daniel Vårdal Haugland: Okay. And then I have one question for Haakon Magne on Wind Service. So just on the demand picture right now, you touched a little bit in on it being volatile. But if I'm kind of just thinking a little bit loudly here, so Ørsted canceled Hornsea, Hornsea 4 earlier this year. We're seeing Vestas and Siemens Gamesa now pausing expansion at some offshore wind factories that they planned. And we also saw Maersk cancel and almost finished WTIB. So other than kind of just the very short to medium term here, how do you see kind of the outlook a little bit more out? Is it possible to give any kind of comments around this? Haakon Magne Ore: Yes, thanks for the question, but I think it's a very hard question to answer. But I think I would like to start, I think that the main drivers behind offshore wind is still there. We see that the government in the key areas that building offshore wind still is supportive for the industry. We still see new countries coming in with plans. But unfortunately I think every industry has a tendency to get some growth. So I think it's very hard for me again to explain when exactly this growth then will come back into the growth trajectory. So I think it's a good question, but I think it's very hard for us to answer. Daniel Vårdal Haugland: Okay. I appreciate you don't have the answer, but do you kind of agree that the, should I say, 2028 to early 2030 picture looks a little bit different now than it did, let's say, 1 year ago or you don't see it that way? Haakon Magne Ore: No, I think we have been quite consistent in our focus on this last year on the quarterly presentations. Daniel Vårdal Haugland: Okay. And then I have a last question, and then I'm going to hand on to the line. I think this maybe will be for Richard. So you now have a lot of cash, and I've been asking almost the same question for a couple of quarters. But given that the outlook for offshore wind might have deteriorated a little bit at least in kind of the period I mentioned. Have you kind of changed any view on, for example, ordering a new wind vessel? Are you kind of able to share any thoughts with shareholders on what to do with the cash? Richard Olav Aa: Thank you for the question, Daniel. I think I'll then just relate to our capital allocation policy that we spent quite a bit of time with the Board to develop during the winter and that we announced in connection with our annual report, where we obviously are very aware of our duties of maximizing shareholder values and balancing what we invest in to secure that they create good value up against distribution to shareholders. So that is our starting point. Having said that, a lot of cash is relative. If we look at the capital intensity of the industries we're in, one single investment can easily relate to several billions of kroner. Just an example as wind farms, not the biggest wind farms in the world, but still sizable wind farms, but NOK 3 billion approximately in gross CapEx just on those 2 wind farms. You also have to put the cash position relatively to the investment sizes we are facing. But again, I'd like to reiterate to all listening to this call to read our capital allocation policy because you'll find very valuable information there about the thinking of the governing bodies of the Bonheur Group of companies. Operator: We will now take the next question from the line of Ral Hardison from Clarksons Securities. Unknown Analyst: Congratulations on a very strong quarter. I want to touch a bit on the Cruise segment. So your occupancy there stood at 81% this quarter, as far as I can see, the strongest on this side of the pandemic, but still a little bit behind what you saw during the strongest quarter before the pandemic, which could reach into the high 80s. So with that in mind, do you think there's still room to lift occupancy further for the cruise segment as bookings seems strong? And do you believe that the high 80s figures that we occasionally saw prior to the pandemic still is attainable for the summer quarters going forward? Anette Olsen: I think Samantha is there, hopefully, to answer your question. Samantha Stimpson: Thanks for the question. Yes, occupancy and retaining the focus on filling the ships is a priority for us within the organization. Definitely continuing to improve the increase as high as we can to the top part of the 80s, as you referenced pre-pandemic is something that we are focused on. Just to also reiterate that part of our focus as well has been to introduce additional sailing volumes. So that's where the passenger growth has come from. We've increased the number of sailings as well as trying to fill the vessels. So sometimes it's not a like-for-like comparable, but it is something that we're focused on finding the balance for sure. Unknown Analyst: And then on, I guess, a continuation of the question that was asked previously, but you are making quite substantial upstream dividends this quarter, freeing up cash to the parent company level. And I'm not going to ask about the return of -- or potential return of capital to shareholders because I think that has already been addressed. But should we view this as a step to increase flexibility and potential reallocation of capital within the group? And of course, I appreciate that you can't give any details there, but any color here is welcome. Richard Olav Aa: I think.. Yes. I think the distribution of dividend up to the parent comes also fully in line with our financial policy. Excess cash should not sit on the balance sheet of the subsidiary. It should be upstreamed to the mother company as then the mother company will have full flexibility in future capital allocation and can also do a better treasury activity than having excess cash spread around in the system. So the upstreaming of the UWL proceeds and the dividends out of FOWIC is just a normal upstreaming according to the capital allocation -- sorry, the treasury and financial policy. So it's nothing more than that. Operator: [Operator Instructions] We will now take the next question from the line of Helene Brondbo from DNB. Helene Brondbo: I have 2 ones on FOWIC. I can just start with sort of -- I just want to understand or maybe if you just could address sort of how are you addressing the situation with the higher uncertainty in FOWIC? How do you approach that when going into tenders, contract negotiations, et cetera? Are you, for instance, doing any planning for maybe taking on longer-term O&M agreements to secure a baseline of utilization? How are you thinking around this? Richard Olav Aa: I think we all think a lot of what we are doing, not necessarily in this situation. But I think it's hard for us, I think also back to Bonheur's general, I think it's very hard for us to comment on what we going forward. Helene Brondbo: Okay. I fully appreciate that. And I also wonder what -- in light of this, what do you see as a general trend in day rates given this market volatility? Richard Olav Aa: I think the market is well functioning, but I think we do not never go into details or into specific day rates neither on what we have or what we are bidding. But in general, we see a healthy market. Helene Brondbo: So you would say that day rates in the market are keeping up with levels seen before? Richard Olav Aa: I'm not saying anything. I'm saying that I think we do not comment specifically on day rates. You are saying that, but I'm not saying that. Operator: Thank you. There are no further questions at this time. I would like to hand back over to the speakers for closing remarks. Anette Olsen: Okay. Thank you very much, everybody, for joining us today, and have a nice weekend.

203天前Insight Analytics约5分钟阅读

COIN Rallies Alongside Crypto-Linked Stocks in "Flash Crash" Rebound

Coinbase (COIN) saw up to a 10% rally on Friday's trading session thanks to a bounce back in Bitcoin and a price target raise from JPMorgan. Rick Ducat notes the stock's close correlation to Bitcoin prices and outperformance compared to the SPX as stock highlights.

203天前Insight Analytics约5分钟阅读

AKBTY 2025 Q3 财报电话会议

Cenk Gur: Dear friends, this is Kaan speaking. Thank you for joining our third quarter earnings call. I'm speaking to you from Copenhagen. While I am on the road, I wanted to take a moment to connect with all of you and share my perspective on the current operating environment and how we are positioning ourselves for the period ahead. After my remarks, I will leave the floor to Turker, Ebru and Gulce and our IR team, who will go through the detailed financial results and handle the Q&A. Although I'm not able to stay for the entire call, I'm looking forward to catching up again soon. Before we dive into the numbers, I want to take a moment to talk about the broader macro environment, particularly what we are seeing in Turkiye. As you all know, the strong monetary tightening in April postponed the anticipated margin expansion. Following today's 100 bps rate cuts, we expect the policy easing to continue in measured steps. On the growth side, following a solid pace in Q2, economic activity shows sign of moderation in Q3. We envisage another period of mild economic growth this year around 3.5%. Current account balance remains supportive for exchange rate stability. Looking forward, achieving lasting this inflation will be key to sustaining healthy growth across the real and financial sectors. Monetary measures have successfully restored financial stability and the Central Bank restarted reserve accumulation in May. Gross reserve have surpassed its mid-March level by reaching $189 billion, while net reserves have steadily improved to around $57 billion. Domestic residents still favor Turkish lira assets and deposit dollarization remains weak. A fixed deposit share in the banking system has been stable around 40% levels on the back of the macro prudential measures, keeping Turkish lira deposit rates higher than the policy rate. Foreign capital flows have been on the rise since May. Without a doubt, global conditions generate a conducive environment for the continuance of the existing exchange rate regime and support financial market stability. Let's move on to our bank. Let me start with our overall performance. During the quarter, we delivered healthy loan growth accompanied by across-the-board market share gains, particularly in our core customer segments. This growth was quality driven, fully aligned with our disciplined and selective lending strategy as well as the regulatory requirements. On the funding side, our dedication continued on expanding and deepening customer relationship. This translated into market share gains in low-cost deposits and a strong performance in demand deposits, further enhancing the stability and efficiency of our funding base. This balanced development on both sides of the balance sheet supported a solid increase in net interest income, while our fee income also maintained its strong momentum. At the same time, we remain fully focused on asset quality and risk management. Our prudent underwriting standards, proactive monitoring and well-diversified portfolio continue to support the resilience of our asset base. As a result, we maintained strong solvency comfortably above regulatory threshold. This solid foundation positioned us well to capture growth opportunities ahead while continuing to safeguard the strength and stability of our franchise. We are executing today with discipline while transforming for tomorrow through a clear long-term vision. We have a strong proven business model, which we continue to enhance and adapt as customer needs evolve. Our business models brings together digital excellence, strong customer engagement and strategic investment in technology and our people, all shaping the future of sustainable growth and lasting value for all stakeholders. Let's move to our 3-year strategic plan, where we regularly share transparent updates on our progress each quarter. Execution remains strong with the majority of our 3-year strategic objectives already delivered or well within reach. Our only shortfall remains in Turkish lira time deposit market share, which is a reflection of our funding optimization efforts and the impact of a regulation-driven low level of Turkish lira LDR. Our dedication for customer growth remains fully in place through both customer acquisition and deepening relationship. Backed by a well-structured balance sheet, this forms a scalable, resilient earnings platform with strong momentum and long-term growth potential. Let me leave you with 3 takeaways. First one is we continue to grow selectively and with discipline. Secondly, we manage risk proactively. And lastly, we remain focused on sustainable core revenues that will drive real return on equity in the upcoming periods. I'm very proud of our teams. Their hard work and dedication truly drive our success. A sincere thank you to all people for their commitments. And dear friends, the partners, thank you for your continued trust and support. I look forward to seeing you all again soon, bye for now, Turker and Ebru. Over to you. Kamile Ebru GÜVENIR: Thank you so much, Kaan Bey. We will start now with the first slide on the NII and the revenues. Our net income in the 9 months was up by 17% year-on-year to TRY 38.908 billion, resulting in an ROE of 20.4% and ROA of 1.8%. During the same period, we had solid revenue growth, up 48% year-on-year to TRY 155.970 billion, led by robust fee generation and renewed NII momentum during third quarter. To put in numbers, our quarterly swap adjusted NII improved notably by 48% [ quarter-on-quarter ], supported by disciplined balance sheet management, while strategic investments, deepening client relationships and strong cross-sell execution continue to fuel fee growth. Together, these drivers further strengthened our recurring revenue base and the solid NII recovery this quarter underscores how we're leveraging our strong solvency position to deliver profitable growth and our balance sheet flexibility. Strong growth alongside robust solvency highlights our agility and risk reward discipline. As we move ahead, our sustainable growth mindset, solid balance sheet and analytical capabilities will drive margins further. Moving on to the balance sheet. We achieved a 28% year-to-date growth in TL loans, well on track to meet our full year loan growth guidance of over 30% shared at the start of the year. On a quarterly basis, our TL loan growth of 13% led to across-the-board market share gains, while risk discipline remained intact. Please also note that our robust growth achieved is in full alignment with the loan growth regulations. During third quarter, we captured 90 basis points of market share in business banking loans among private banks, illustrating our targeted focus on segments with growth potential. Building on our leadership in consumer lending, we expanded our presence further, capturing 30 basis points additional share among private banks. This demonstrates our readiness to capture new opportunities while managing risk. On the FX book side, we grew by 4.1% quarter-on-quarter and 5.1% year-to-date, capturing 30 basis points market share gain among private banks during the quarter. The increase was mainly driven by government-backed infrastructure projects, multinationals and blue-chip corporates, reflecting a prudent, quality-focused growth strategy, fully aligned with regulations. Please also note that we have a solid pipeline, indicating upside potential to our mid-single-digit foreign currency loan growth guidance for the full year. Moving on to the securities. Our security portfolio composition demonstrates our balanced approach with a focus on yield maximization, 69% of our securities are TL, while we have selectively increased our positioning in the foreign currency side through proactive Eurobond investments. This is underlined by a robust 21% year-to-date growth in our foreign currency securities in dollar terms. We are well positioned with long duration, comparatively higher yielding TL fixed rate securities, which will support book value growth going forward. To put in numbers, 65% of our TL fixed rate securities are classified under fair value through other comprehensive income. Our TLREF index bond portfolio offers decent spread. While our CPI linkers offer positive real rate and its share in total has actually declined since 2022 by 33 percentage points. Our active yield-focused management of the securities portfolio has supported timely adjustments to market dynamics and will underpin margin resilience in the periods ahead. Moving on to the funding side. We effectively utilized our flexible balance sheet and strong deposit franchise while optimizing our funding costs. At the same time, we successfully strengthened our TL deposit base, capturing notable market share gains in both demand deposits and widespread consumer-only segments. Our TL demand deposit market share among private banks increased quarter-on-quarter by 190 basis points, reaching a robust 18.6% as of third quarter. Accordingly, TL demand deposit share in total TL deposits advanced by 300 basis points year-to-date to 16%. Share of total demand deposits in total deposits also excelled by around 500 basis points to 33% during the same period. Meanwhile, our strong customer engagement helped us achieve a 40 basis point market share gain in the sub TRY 1 million TL time deposits, reaching 16.5% in third quarter. On top of our strong and widespread deposit base, our low TL LDR, which, as you can see, was partially utilized for growth opportunities during the quarter, is still offering substantial room for funding cost optimization in the coming period. Moving on to P&L. NIM recovery resumed in third quarter as expected, following the temporary margin pressure in second quarter due to the pause and the reversal of the rate cut cycle. Our swap adjusted net interest margin expanded by 73 basis points quarter-on-quarter, supported by both improved funding dynamics and well-positioned loan portfolio. Please note that our CPI normalized quarterly NIM improvement was also strong at 50 basis points after adjusting for the impact of CPI linker valuation change based on the revised October to October CPI estimation of 32.5%. It is worth to note that our weekly NIM trend towards the end of the quarter indicates ongoing progress in margin improvement for the fourth quarter. Our unwavering focus on profitable growth and effective funding strategies will remain key drivers supporting NIM evolution. On the other hand, the disinflationary phase and the magnitude of the upcoming rate cuts will continue to influence the extent of the quarterly NIM improvement. As a reference, the underlying year-end policy rate assumption of our revised guidance in July was at 36%, whereas the current expectations actually point to a tighter environment. Moving on to the fee slide. Our net fees advanced by 67% year-on-year, reflecting innovation, strong customer engagement and diversified offerings. Our diversified fee base remains a key strength with solid contributions from every business line. To name some of them, first, net payment systems fees advanced by 76% year-on-year, reflecting effective customer engagement and targeted campaigns. Second, net bancassurance fees surged by 77% year-on-year, backed by our advanced digital solutions actually, which are covering around 80% of our sales. Third, net money market transfer fees rose by 58% year-on-year, reflecting higher transaction volumes and digital channel migration of transactions. Our strong market positioning in key business lines ensures a diversified and resilient fee base throughout the rate cut cycle, offsetting the cyclical impact of interest rate-driven payment system fees. While the banking sector fees benefited from the rate environment, our market share gain among private banks reflects the bank's inherent strength in fee generation and ongoing focus on sustainable growth. I am very pleased to share that the fee growth once again outpaced OpEx, lifting our fee to OpEx ratio to 104% as of 9 months. Accordingly, our fee to OpEx ratio showed an 18 percentage point increase year-to-date, underlining our continued execution on customer-driven revenue growth and disciplined cost control. On that note, let's move on to the OpEx. The year-on-year increase in operating expenses was limited to 35% in 9 months, underscoring our strong cost control and operational efficiency. This realization is still evolving below our revised guidance of around 40% for the full year. Moving on to asset quality. Retail-led NPL inflows continue to be persistent trend across the sector. During this period, our disciplined risk management framework has enabled us to optimize the loan portfolio while preserving sound asset quality. This was supported by excellence in advanced analytical capabilities across the retail segments, automated and AI-based credit decision models, diligent tracking and individual assessment of our corporate and commercial loan portfolio as well as our prudent provisioning. Our NPL ratio remained at 3.5%, fully in line with our full year guidance. Meanwhile, the share of Stage 2 plus Stage 3 loans representing potentially problematic exposures remains low at 9% of our gross loan portfolio. Please also note that the restructured loans represent only 3.2% of the total loan portfolio. In 9 months, our total provisions reached almost TRY 68 billion, reflecting our continuous provision reserve buildup. Meanwhile, our coverage ratio for Stage 2 and Stage 3 loans stands strong at 34.3%, mirroring disciplined risk management practices. Excluding currency impact, our net cost of credit increased to 230 basis points on a cumulative basis, mainly driven by ongoing retail-led inflows and also further strengthening of our already strong coverage ratios. Hence, our full year cost of credit may slightly exceed the upper end of our guidance range of 150 to 200 basis points by the year-end. Our total capital, Tier 1 and core equity Tier 1 ratios without forbearances remain robust at 17.2%, 13.6% and 12.4%, proof of resilience alongside solid growth. As for the sensitivity, as we share every single quarter, 10% depreciation in TL results around 29 bps decrease in our capital ratios, while the impact diminishes for higher amounts of change. And 100 basis points increase in TL interest rate results in 9 basis point decline in our solvency ratios, again, demonstrating a limited sensitivity and the strength of our capital buffers and also declining as the interest rates go higher. So solid capital strength anchors resilience and long-term profitable growth. This slide highlights the snapshot of our 9 months financial performance. As a final note, across the board, strong loan growth, improving NII performance, along with robust fee income generation led to strengthened core revenue momentum. That said, the ongoing disinflation process and the magnitude of the rate cuts will determine the extent of the NIM improvement. Going forward, customer-centric growth will remain our main engine of sustainable profitability, supported by robust fees, disciplined operations and prudent risk management. Before moving on to the Q&A, I'd like to share a few highlights regarding our nonfinancial performance. As highlighted in our ESG video, we sustained a strong momentum, advancing our 2025 sustainable action plan with measurable results. We are on track with our long-term sustainability goals and notably have reached 74% of our sustainable finance targets as of third quarter. We are proud to pioneer a tailored banking program via Akbank's women platform, offering integrated financial and social benefits to women customers. We strengthened our internal engagement through the climate ambassador program in the third quarter, empowering Akbankers to foster a green future. With our consistent performance in climate strategy, governance and social impact, we maintained our leadership position, sustaining a AA score in MSCI, which was just updated this month. All these efforts reflect our continued commitment to building a low-carbon and inclusive economy in line with our long-term objectives. This concludes our presentation. Kamile Ebru GÜVENIR: And we are now moving on to the Q&A session. Please raise your hand or type your question in the Q&A box. And for those of us joining by telephone please send your questions by email to investor.relations@akbank.com. And as I see, there are a few hands up already. And the first question comes from Mehmet Sevim. Mehmet Sevim: I just had one question on the trajectory of margins. And maybe starting with the 3Q performance, which looks really strong and with the 73 basis point expansion this quarter, I just wanted to understand if this was completely in line with your expectation going into the third quarter? Were there any aspects that surprised you, such as loan or deposit pricing, behavior of households or corporates or anything in this quarter? And then secondly, just going into the fourth quarter, you already indicated the NIM trajectory from here depends on the policy rate understandably. But with what we know today, where do you see the exit NIM? And how should we think about it into the early quarters of 2025 -- 2026, apologies? Türker Tunali: This is Turker. Thank you very much for joining the call. Let me start with the third quarter and then move on to the fourth quarter of '26 to share some thoughts on '26. Actually, as you have rightly mentioned, so there was a strong recovery in our quarter NIM in the third quarter, mainly coming from the deposit cost easing. That was actually in line with our expectations. But having said that, actually, when we dive into deep, as you may recall, by the end of June, we had this like easing on the upper bands of policy of Central Bank funding decrease. So there was an indirect rate cut. And on top of it, we had another rate cut in July. We were successfully able -- like we were able to reflect these rate cuts into our deposit pricing as a result of which our core spread from second quarter into third quarter has improved by roughly 3 percentage points. But after the latest rate cut in September, as you may have followed from like market data, like second half of September, I am referring to. This deposit rate -- deposit cost easing has stopped somehow, maybe due to the ratio requirement of the Central Bank. But at the end of the day, that latest rate cut was not reflected into like deposit pricing. Now we are at the beginning of the fourth quarter. Let's wait and see actually how the -- like the coming weeks will evolve. Also not to forget like a partly a week ago, we had this monthly reporting period, and maybe that was one of the reasons of this pricing behavior in the market. So we will be observing how the upcoming days will evolve also after this -- after today's rate cut. So it will definitely impact our net interest margin in the fourth quarter. But having said that, I can say like the net interest margin starting into the fourth quarter is surely above the third quarter figure, but the magnitude of the improvement will be important since after today's announcement of Central Bank, probably last rate cuts will be also a bit more moderate. Therefore, actually, it puts some pressure on our full year NIM guidance in the range of 3% to 3.5%. So it's very likely that we may like stay behind this. But definitely, this rate cut cycle will further help us to improve our net interest margin also in the upcoming year as well. Maybe in the past, we were talking with some net interest margin peaks in '26. But probably like as of today, what we are like forecasting, this rate cut cycle will be more like gradual in '26. Therefore, we may see a gradual net interest margin improvement throughout the year rather than seeing a peak in the first quarter or in the second quarter. So that's what we are currently observing. But at the same time, so to offset some of this net interest margin maybe gap, our growth has exceeded our expectation. And it's very likely that we will be beating our full year loan growth guidance by the end of the year. So just recall, so mid-single digits for FX and 30% for TL loan growth, we will be probably ending year above this level, which is also currently increasing our Turkish lira LDR. So we are like in a way, operate in a more optimized manner. And also, we are funding roughly 20%, 25% of our TL balance sheet via wholesale funding, where we are fully benefiting from the rate cut cycle, albeit it is a bit maybe more moderate, but that's how it is at the moment. Kamile Ebru GÜVENIR: The next question comes from David Taranto. David Taranto: I have 3 questions, please. The first one is about this year. The 25% ROE target appears quite ambitious considering the 20% ROE achieved in the first 9 months of this year. Could you please elaborate on how you see the full year ROE outlook evolving following the third quarter results? Second question is a follow-up on NIM. In the last quarterly presentation, you mentioned expectations for NIM to reach 5.5% in the fourth quarter of this year and towards 6% in the first half of next year. And given the changes in the macro outlook, do you still see this trajectory as achievable? To my understanding, you now see the peak NIM at a lower level, but you do not expect an immediate normalization. You see it hovering around those levels for some time. Third one is about the fee. The fee income continues to show strong momentum. The year-on-year growth accelerated this quarter despite regulatory changes on the debit cards. When do you anticipate this growth to begin decelerating? And what factors would likely to drive that shift? And perhaps I could squeeze one more. The percentage of Stage 2 loans remain below the sector average, but there has been a large increase in restructured loans in this quarter. Are these driven by unsecured retail loans or business loans? And could you please elaborate a bit on your strategy here? Türker Tunali: David, let me start with the ROE. So definitely, so this gap on the -- potential gap on the net interest margin guidance side may put some limitation to like achieve this 25% ROE guidance. So probably we are going to end the year in between the existing level and 25% guidance. Definitely, the NIM improvements going forward will impact the level of ROE improvements in the fourth quarter. With regard to our like previous talks and the previous earnings call, so definitely, this delay in the rate cut cycle, just recall, when we made this guidance revision, we were anticipating policy rate to come down to 36% by the end of the year. But nowadays, we are more like 38% level. So at this 2% deviation. So will definitely also impact our exit NIM. But surely, exit NIM will be like much higher than the third quarter NIM, but maybe not at this 5%, 5.5% levels. And the improvement trend, as I answered Mehmet's question, probably the NIM improvements will be like more like in a step form like with gradual improvement. But definitely, like next year's NIM will be significantly higher than this year's NIM. That was your second question. And third question, fee income. Yes, our third quarter fee income performance wise was quite strong. That was also driven by our growth trend in the third quarter. It has also positively impacted our fee income growth. And currently, our year-on-year fee income growth is above our guidance, and we are expecting to end the year again at similar levels between the existing level and the full year guidance. And this latest regulatory change on the debit card side will impact fourth quarter, but its magnitude is more moderate. So it's not that significant. Probably into next year and maybe also into fourth quarter and into next year, the Central Bank's decision with regard to interchange commission caps will be important as we -- as you know, it hasn't been touched so far, which was also one of the reasons why this year's fee income growth was also way above the initial guidance of 40%. But assuming with the upcoming rate cut cycle and with some also central banks starting to reflect these rate cuts into interchange commissions, we may expect some moderation, but the aim of Akbank will be again to continue with this enhanced fee income generation capacity also as a result of our customer acquisition efforts. So definitely, we will be aiming to preserve this superior fee to OpEx ratio. We may see some moderation there, but our ambition will be always to stay at this 100% levels. Finally, with regard to stage -- not Stage 2, but yes, Stage 2 was almost the same at the same level, but the ratio of restructured loans increased from 2.6% to 3.2%, so only 0.6% increase. And just recall, by the end of the second quarter at Akbank, we had the lowest restructured loans, not only in nominal terms, but also as a percentage of total loan book. And this slight increase was mainly driven by the restructuring scheme of BRSA. As you may recall, that restructuring scheme was also -- was made available for credit card customers with not -- without overdue status, but having rolling over some of their debt. So we had to respond to them when the customer was coming with some restructuring demand. That's the main reason. But just to recall, 3.2% like probably will be, again, like a quite low figure when we see the sector figures in the coming weeks. And as Ebru has mentioned, we continue to further improve our provisioning charge. Therefore, our cost of risk is currently slightly higher than the full year guidance, and we may end the year slightly higher than the guidance, but it's like bottom line impact is not that material compared to the NIM impact. But I think so, it's a more prudent approach. I hope I was able to answer your questions? David Taranto: Yes, all good. Thank you. Kamile Ebru GÜVENIR: The next question comes from Konstantin Rozantsev. Konstantin, we cannot hear you. Okay. I guess I'm just looking into the written questions. They're mainly regarding NIM and cost of risk, and we've answered both of them. I don't know if there are any further questions. Another -- Konstantin is now again coming in. I guess this is a different Konstantin. Konstantin, please go ahead and ask a question. Konstantin Rozantsev: Could you please confirm, if you can hear me? Kamile Ebru GÜVENIR: Yes, we can hear you now. Konstantin Rozantsev: I had 2 questions, which I wanted to ask. The first one is on the retail FX deposits. So I see in the sector data that in the recent weeks, there has been some increase in the stock of retail FX deposits even on parity adjusted basis. So could you please confirm why is it happening? Well, is it completely explained by the fact that there are these KKMs, which are maturing and which have been moved into FX deposits? Or is there also some elements that regular lira deposits are being moved into FX deposits as well? So that's the first question. Second question, could you please comment if you have done any stress test on the loan quality in different macroeconomic scenarios. And if yes, then what do the results of the stress tests suggest? Do you have some specific examples in mind and some particular scenarios in mind saying that these scenarios lead to the high pressure or like large pressure on the loan quality. So could you please quantify these scenarios if you did this stress test? Türker Tunali: Konstantin, this is Turker. With regard to your first question, this FX deposit increase, as you mentioned, is mainly due to the parity change. Currently, gold deposits make up a significant part of FX deposits in the system. So therefore, actually, the gold price change has -- is impacting the level of FX deposits. But other than that, when I really look at our own portfolio, the strong TL deposit base is there and the shift from TL into FX is not material. Surely, with the phasing out of the KKM scheme, the remaining small part of KKM modelers are switching to FX. But it was in a way, FX indexed deposits. But other than that, there is no behavior change in the customers. With regard to the stress, surely, we are always monitoring our portfolio like in different ways. We are applying different stress scenarios into our capital. But in all these stress tests, we preserve our strong capital. But other than that, there isn't really currently any specific sector or area where we feel concerned. And when you look at our loan portfolio breakdown, there [ isn't ] a sector concentration. And it is really like in every sector, there are like customers with a better asset -- with a stronger financial performance and maybe a weaker financial performance. And according to that, we are continuously changing our lending criteria in terms of collateral version, in terms of duration. So that's how it's. Konstantin Rozantsev: Okay. And sorry, just a third quick question. Do you have any number in mind for cost of risk for next year, 2026 in the base scenario? Türker Tunali: Actually, currently, we are in our budgeting process, and we will be sharing our guidance by the end of -- probably by the end of January. But maybe as a reference point, probably it will evolve at similar levels like in '25. Kamile Ebru GÜVENIR: Okay. At this moment, I do not see any further hands up for questions. So I guess we're coming towards the end. There are no written questions that are different to the questions that have been actually asked. So this concludes our earnings webcast. Thank you all for joining us today. Please do not hesitate to contact our team if you have any further questions, we're always glad to help. And we also look forward to staying in touch in the upcoming conferences. We'll be in Dubai for the Jefferies Conference. We will be in London for the Goldman Sachs Conference, and we'll be actually in Prague for the WOOD's Conference. So if you're attending, we look forward to seeing you there, and bye for now.

203天前Insight Analytics约5分钟阅读

TOBII.ST 2025 Q3 财报电话会议

Operator: Welcome to the conference call. [Operator Instructions] Now I will hand the conference over to the speakers. Please go ahead. Anand Srivatsa: Okay. Thank you, and welcome again, everyone. This is Anand Srivatsa. I'm the CEO of Tobii. Joining me today is Asa Wiren, who is our Interim CFO, along with Rasmus, who heads our Investor Relations. I want to remind you that I have announced my decision to resign from Tobii in August of this year. My intention is to move back to the United States for family reasons, and my family has already relocated. I will remain with Tobii in my current role until the end of January 2026, and the Board is in the process of looking for a new CEO. And at this point, we do not have any additional information to share on the process. Now let's move on to the quarterly results. Q3 was a weak result for Tobii on both the net sales basis as well as on overall results. The net sales reduction is related to the end of acquisition-related revenue as well as lower-than-expected revenue in all 3 segments. In the Products & Solutions segment, we saw a year-on-year decline in revenue because of weakness in the U.S. market, while other regions demonstrated growth. In the Integration segment, we saw weakness in our XR NRE project pipeline, but we do expect to see some improvement in Q4 as customers shift their focus to new smart glasses type of solutions. On the Autosense side, we had a reduction in year-on-year revenue, but this is related largely to revenue recognition timing based on NRE projects. We expect that the Autosense business will show robust growth on a full year basis, and we expect that quarterly revenue levels will become more stable as we transition from NRE to license revenue over the next couple of years. The overall lower levels of revenue resulted in lower overall result, but we have still taken steps to move towards profitability with one clear example of our -- being our cash-related OpEx being 30% lower than the comparable quarter last year. Beyond the financials for the quarter, this was a milestone quarter for our Autosense business with our single camera DMS and OMS offering launching at IAA Munich. I will speak more about the significance of where we are with Autosense at the end of this presentation. Finally, we continue to be extremely focused on addressing our financing needs for the company. This has been an explicit focus over the last 1.5 years. Evaluating where we stand at the end of Q3 2025, we assess that we need additional cash to ensure that we are adequately financed for the next year. We intend to take the following steps to address this. We're taking a new cost savings target to reduce cash-related OpEx by SEK 100 million versus our Q2 2025 baseline for the 12 months that follow that timeline starting in Q3 2025. We're also continuing our strategic review process, including the divestment of assets, and this effort has made progress over the quarter, and we expect that a successful outcome will substantially strengthen our cash reserves. The Board has also selected an external adviser to evaluate capital market options as a backup for these strategic initiatives if needed. With the combinations of these tools, we believe that we can address our financing need for 2026. Before we discuss our financial results in detail, let's take a quick overview of our 3 business segments. Tobii is organized into 3 business segments with each of them at different stages of maturity and scale. Our expectations are that the Products and Solutions and Integration business segment will be profitable in the near-term, while Autosense is still in an investment phase. The Products & Solutions business delivers vertical solutions to thousands of customers every year, ranging from university research labs to enterprises and PC gamers. In Q3 of 2025, the Products & Solutions business represented 53% of Tobii's net sales. The EBIT result of Q3 of negative SEK 22 million is a slight improvement versus our last year results despite revenue decline because of our lower OpEx level. The Integration business segment engages customers who integrate Tobii's technologies into their offerings. This segment also includes some revenue from acquisition-related revenue. The onetime effects of that have ended in Q2 2025. In Q3 2025, this business represented 43% of Tobii's net sales, and this business was profitable for the sixth straight quarter. The result for the quarter does reflect temporary effects of the Dynavox contract that we signed in Q2 2025. The Autosense business segment sells driver monitoring and occupancy monitoring software solutions to automotive OEMs and Tier 1s. In Q3 2025, this business represented 4% of Tobii's overall net sales and delivered overall net sales. The business delivered minus SEK 42 million EBIT, a slight improvement versus last year despite a lower revenue level, lower capitalization and higher levels of depreciation. We expect the Autosense business to show solid revenue and profitability improvement on a full year basis. Now over to Asa for the detailed financials. Asa Wiren: Thanks, Anand, and good morning, everyone. Needless to say, Q3 was a weak quarter. Product & Solutions has its market challenges, for example, in the U.S., integrations, where the last part of the Dynavox deal did not fully compensate for the acquisition-related revenue that ended in Q2. For Autosense, we see a timing matter. Operating result and margin have decreased compared to last year, even if our cost levels is significantly lower. On that note, I will already now put some more flavor to our new savings target that Anand mentioned. When we presented our Q2 results, we emphasize that our cost reduction and efficiency focus still remains. Our target is to lower cost by at least another SEK 100 million for the 4 quarters starting Q3 2025 compared to Q2 2025. This is the same methodology we used for our previous initiative for which we reached savings of SEK 263 million, SEK 63 million above the target. This demonstrates that we have the ability to deliver. The savings will further rightsize the company for us being able to continue our product development and meet customer demands. That being said, let's move to Page 6 and look at some group details. I've already commented on the figures as such, but what this illustrates is the impact of the work that has been done. We see overall EBIT and EBIT margins lower than the comparable quarters last year. This is, of course, driven by lower revenue levels, but also by lower levels of capitalization and higher level of depreciation in this quarter. If we normalize for effects of capitalization and depreciation, we would have an improved level of profitability in this quarter. This improvement is due to the significant progress we have made on cost reductions. We are on the right track, but more work needs to be done. Turn to Page 7 for some Product and Solutions comments. The negative sales trend continues with a decline of 5% in organic growth and is mainly related to the Americas. Cost level is lower than previously. And to remind ourselves, in Q2 this year, write-downs of SEK 33 million impacted EBIT. Turn to Page 8 for some integrations comments. The last part of the Dynavax prepurchase deal did not fully compensate for the acquired imaging-related revenue that ended in Q2. As mentioned in Q2, from Q3 and onwards, there is a quarterly minimum guarantee in the Dynavax deal until 2029. We also saw fewer nonrecurring revenue projects during the third quarter. Turn to Page 9 for the Autosense segment. This segment is still in a phase with lumpy timeline dependent revenue as well as with nonrecurring revenue. These elements impact both how revenue is recognized and cost, such as capitalization and depreciation, as mentioned before. In Q3, revenue was pushed forward, capitalization decreased and depreciation increased. Let's continue to Page 12 for comments on our balance sheet and cash flow. During Q3, Tobii repaid SEK 91 million of its COVID-related tax release. This remaining -- the remaining debt has been reclassified to short-term and long-term interest-bearing debt previously reported as current liabilities. In Q4, we received the last SEK 45 million from Dynavox prepurchase deal. Where we are right now, there is a risk of insufficient financing for the coming 12 months. Having said that, with the measures taken and in progress, I repeat that we believe we can address the financing needs for 2026. With that said, thank you for your time, and over to you again, Anand. Anand Srivatsa: Thank you, Asa. Now I'm going to spend a few minutes talking a little bit more about Autosense. Q3 2025 was a milestone quarter for this business, and I want to share with you where we stand in our journey to become a leader in automotive interior sensing. First, let's take a look back at what has happened since our acquisition of the FotoNation business in February 2024. Since making the acquisition, we have built a comprehensive and combined road map that enables us to offer a leading in-cabin sensing product portfolio. This was capped off with the successful launch and final release acceptance of our SCDO product in Q3. We have continued to demonstrate our credibility in bringing our solutions to vehicles on the road over the last 1.5 years. We've increased the number of OEMs who are choosing Tobii solutions from 9 to 12, and our solutions are being deployed in volume from 300,000 vehicles on the road at the time of the acquisition to more than 800,000 vehicles currently. We are working hard on ensuring that our solutions meet the demanding requirements of the automotive industry in terms of quality and process. Notably, we have achieved ASPICE Level 2 for our SCDO program operating as a software Tier 1 to a leading European OEM. Our solutions have also achieved regulatory approval with EU homologation for both our DMS and SCDO offering. Finally, we have built an efficient and empowered team where Autosense engineering has been consolidated into Romania, and the organization has more centralized responsibility to deliver on our ambition by having functions from engineering to sales reporting into the same leader. We have realized the investment synergies as part of getting this efficiency by reducing our investment levels by more than 40% versus our 2024 peak. Looking back, I would say that we have substantially realized the rationale for the acquisition, including the synergies we expected. We have done this by reducing our overall investment, building a leading product portfolio and increasing our credibility in the automotive industry. A critical aspect of building automotive credibility is showing that your technology can get through the rigorous testing and validation of OEMs and start shipping in vehicles on the road. Tobii's Autosense Interior solutions have been shipping in vehicles on the road in 2019, and we continue to see significant growth in this footprint. As of the end of Q3 2025, we have more than 875,000 vehicles on the road with Tobii solutions, and we expect that this number will continue to accelerate as our high-volume passenger car wins get into production in 2026. Now I want to talk a little bit more about building a leading product portfolio for in-cabin sensing. The rationale for making the acquisition of FotoNation was the realization that for success in this space, Tobii required a full offering, not just driver monitoring systems. We could already see in 2023 that RFQs were looking for offerings that could support both driver and occupancy monitoring. Our belief was that the market would see increased adoption of DMS and OMS to the point that they would both become required capabilities. We are already seeing the early stages of this play out as we expected. Camera-based DMS is already a requirement in the EU starting in 2026. And we now see that Euro NCAP requirements for 5-star safety require more occupancy monitoring capabilities over the next few years. We believe that for new platform shipping in 2028, OMS will be required to get a 5-star rating. Tobii has been shipping DMS and OMS systems into vehicles in the road since 2019 and 2021, respectively. We recognize that while in DMS, we are not the market leader, our bet has been to move -- that move into a leading position in the space is based on our leadership in single camera DMS OMS and that this method will be the preferred deployment for in-cabin sensing systems in the future. Over the last 3 years, Autosense has pitched single-camera DMS OMS, but this approach has been met with skepticism as companies were unsure whether DMS from a rearview mirror location would get regulatory approval. This concern from the industry reflects the fact that DMS methodology from a rearview mirror position is quite different than the typical DMS systems that are deployed today, which have a much clearer and closer view of the driver's face. Given this context, our achievement this quarter is extremely meaningful in both getting EU homologation for our support regulatory approval and getting acceptance for our final release for our premium European OEMs launch in the second half of this year. We expect that our SCDO system will start shipping with our OEM in the second half of 2025 and be in end customers' hands in early 2026. Now we have expected over the last year -- last 3 years that a single camera DMS and OMS solutions mature, that the industry as a whole will also validate our view that this approach is not only feasible, but the most cost-effective approach for in-cabin sensing. The question, of course, is when would the industry take notice of SCDO and share their view on this approach? I am thrilled that we have seen significant industry momentum already this month with the keynotes and presentations at in-cabin Barcelona 2 weeks ago. At the event, Volkswagen, Magna and Gentex, leading OEMs and Tier 1s in the industry, shared their view of the suitability of doing DMS and OMS from the rearview mirror position. Volkswagen was even more specific, as you can see the slide that's shared on the screen about the benefits that this approach offers over traditional DMS and OMS systems that require 2 cameras. They shared that the single camera approach from a rearview mirror position saved over 30% of BOM cost, implementation cost, design complexity, et cetera. This is a stunning number that validates our view that SCDO will likely be the volume deployment for in-cabin sensing in the future. The outcome from this event is certainly surprising to us, but surprising for industry analysts as well. To quote Colin Barnden, principal analyst from Semicast Research from his post on LinkedIn following this event, he says, "What came over me in Barcelona is the sudden shift in industry awareness of the viability of both driver and occupant monitoring from the mirror. For several years, it has been clear there was a campaign of misinformation from some parties saying that the mirror is unsuitable for driver cabin monitoring. Those voices magically have become advocates of this idea already. He declares in his post that after the event, the question is, why wouldn't an OEM do DMS and OMS from the mirror? We at Tobii could not agree more. With a proven and mature offering that has gone through grueling acceptance test at one of the most demanding OEMs in the world, Tobii is well positioned to win as more OEMs come to the conclusion that DMS and OMS from the mirror is the most cost-effective and scalable approach for in-cabin sensing. Okay. Let's wrap up. Q3 2025 was a mixed quarter where we saw significant milestones achieved in Autosense, but where we saw weak revenue in the quarter that resulted in lower profitability. Our ambition in the long-term is clear that we intend to be leaders in all of our business segments and execute in a profitable and financially self-sustainable way going forward. We are already leaders in our Integrations and Products and Solutions business segments. And the progress that we have made so far in the Autosense business segment and industry validation of our approach puts us in a great position to build a leadership position as SCDO scales in the market. In the near-term, we have a key focus on addressing our financing needs. We will address this with 3 major approaches. The first is our new cost reduction target, which will reduce our cash need in 2026. We're also executing on a strategic review, which includes potential divestments, and our belief is a successful outcome in this area will substantially strengthen our cash reserves. Finally, the Board has engaged an external adviser to evaluate capital markets options as a back for these strategic initiatives. We are confident that with these tools, we will be able to resolve our near-term financial needs and allow us to focus on our objective to achieve sustained profitability, which we remain fully committed to. With that, thank you, and over to Q&A. Operator: We have received several questions about our combined DMS and OMS solution, how our offering compares to our competitors, what Tobii's position in the market is relative to our competitors and how we view the time line regarding ramp-up of SCDO. Can you please provide a comment on these questions? Anand Srivatsa: Absolutely. As I shared in my deeper dive on Autosense, we believe that we have been the clearest voice around the fact that the most scalable and most cost-effective approach for in-cabin sensing is a single camera DMS and OMS offering from the rearview mirror position. There are other players who have launched hardware solutions. And from our proprietary research, we believe that at the time of our launch, we have the most complete offering as well as an offering that delivers both DMS and OMS. We believe that our position in this space is that we have the leading offering here as well as an offering that has both proven itself and has matured as we have had to go through acceptance as a software Tier 1 for one of the most demanding OEMs in this space. We acknowledge that, of course, in this in-cabin sensing arena, we are not the -- driver monitoring systems, but our bet for getting to a long-term leadership position is that as SCDO sales, our leading position will put us in a great place to go and win future RFQs. We recognize again that over the last couple of years, there has been industry skepticism about whether a single camera approach will work, especially because the position of the sensors are farther away from the driver. We believe that a lot of these concerns are being addressed now with the successful launch that we have enabled, and we believe that RFQs will increasingly request this type of approach, and we are well positioned to win in the space. Operator: Is Tobii provider for eye tracking to Samsung Moohan? Anand Srivatsa: Samsung announced a new high-end VR headset. We are not the eye-tracking provider for that headset. Operator: Did you receive the SEK 30 million out of the SEK 100 million in Dynavox revenue in cash this quarter? And did you also receive the SEK 45 million in royalty from Dynavox from previous quarter this quarter? Anand Srivatsa: And I'll let Asa take that and clarify that question. Asa Wiren: We received the SEK 30 million in Q3 and the SEK 45 million in Q4. Operator: What types of assets are you planning to divest? Would you consider divesting one of the business units? Anand Srivatsa: Again, as you can imagine, these strategic reviews are extremely sensitive. We're not going to go into details of exactly what assets we are planning on divesting except for the fact that we believe that a successful outcome here will substantially strengthen our cash reserves. We will share more details as possible as these activities progress into maturity. Operator: Thank you for this presentation. On Autosense, in materials from Qualcomm, Tobii is a pre-integrated partner. What does this mean? Also, this seem to be a much wider opportunity than with EU regulatory requirements. What is your look on this? Anand Srivatsa: One of the big advantages of the engagement that we have had is that our solution is shipping on Qualcomm's Snapdragon Ride platform with our premium OEM. This has meant that we have done substantial work to go and pre-integrate the solution. Qualcomm's expectation is that they want to sell a pre-integrated solution that delivers their domain controller type architecture along with their ADAS functionality. The ADAS functionality does depend on capabilities that are enabled by in-cabin sensing technologies that we have -- like we have. We believe this is a big asset for Tobii, not only that we've gone and delivered a mature and proven platform, but that partners like Qualcomm see our solution as pre-integrated and an easy way for them to scale their offerings into the automotive industry as well. Operator: What is the total cost in absolute numbers for OMS and DMS for the car manufacturer? Please elaborate on the topic. Anand Srivatsa: We cannot, of course, share algorithm pricing levels. And in terms of overall system cost, you will have to go and speak to the Tier 1s who typically provide the hardware. Again, what I think is super meaningful as we look at the in-cabin sensing opportunity as a whole is that DMS and OMS are increasingly becoming requirements in this market. And therefore, from a regulatory perspective, these are required systems. And again, there's high interest from the OEMs to offer these in the most cost-effective and scalable way possible. The fact that Volkswagen has been clear that there is a substantial cost savings by offering DMS and OMS from a rearview mirror position in a single camera offering validates our view that this will be the way that in-cabin sensing is typically delivered to go and ensure that you can meet your regulatory needs. Operator: Is it correct to assume that you are involved in Samsung XR through your collaboration with Qualcomm? Anand Srivatsa: So you should assume that we are talking to lots of different companies in the XR space. We're talking to most of their leaders. We understand that people make decisions on their choices of algorithms for a variety of reasons. As I've mentioned before, on the specific Samsung Moohan VR headset, we are not the eye tracking provider in that system. Operator: Is the total Dynavox royalty SEK 52 million or SEK 45 million from Dynavox? In that case, when are the remaining SEK 7 million received in cash? Asa Wiren: The total is SEK 52 million, and the cash was delivered in Q4. Operator: Congratulations to fast acting. Is Tobii eye tracking integrated in Sony Siemens XR headset? Anand Srivatsa: I don't think we have made any announcement there. We will -- again, we will not comment on that particular headset. Okay. Thank you very much. That's the end of the Q&A section. Thank you all very much for participating, and we look forward to sharing our next set of results with you in 2026. Thank you. Operator: Thank you.

203天前Insight Analytics约5分钟阅读

SHLAF 2025 Q3 财报电话会议

Operator: Ladies and gentlemen, welcome to the Schindler Conference Call and Live Webcast on Q3 Results 2025. I am Valentina, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Lars Brorson, Head of Investor Relations. Please go ahead. Lars Wauvert Brorson: Thank you, Valentina, and good morning, ladies and gentlemen. Welcome to our Q3 2025 results conference call. My name is Lars Brorson. I'm Head of Investor Relations at Schindler. I am here together with Paolo Compagna, our CEO; and Carla De Geyseleer, our CFO. As usual, Paolo will discuss the highlights of our quarterly results and our market outlook, and Carla will take us through the financials. After the presentation, we're happy to take your questions. We plan to close the call at 11:00 in an hour's time. With that, I hand over to Paolo. Paolo, please go ahead. Paolo Compagna: Good morning, everyone. I am pleased to be back to report on our performance in Q3. And as Lars said, let me start by giving you some highlights on Slide #3. Firstly, let me say that we continue to face some growth headwinds in major new installation markets around the world, particularly in China. I will share our order trends in more detail shortly. But before, let me remind what we discussed back in February. A key pillar to our strategy of profitable growth is the pricing discipline. And we demonstrated it again this quarter on a few major projects where the economics were just not consistent with our return expectations. That said, we see good growth momentum in many parts of our organization and particularly in modernization. Here, orders were up over 16% in the quarter despite the strong growth we had in Q3 last year, allowing us to show another quarter of order growth for the group. Second, revenue slowed in the quarter, down 0.5%, whilst our year-to-date revenue is up 0.8%. Also here, the headwind from China intensified in the quarter. But our backlog is growing, up 1.5 percentage points year-on-year in local currency, driven by our modernization business, and we are confident that continuing to expand our capacities, we will execute successfully on this backlog. So I expect us to deliver our full year '25 revenue guidance of a low single-digit growth. Although this is likely to be a very low single digit, similar to what we delivered in '24, as Carla will discuss. Third, we delivered another strong operating margin in Q3 at 13%, up 130 basis points from Q3 last year. And we are now able to revise our full year '25 margin guidance, which we see coming in at around 12.5%. That compares to 12% previously. Carla will provide the detail on that, but I'm very pleased to see that the efficiency initiatives launched over the last couple of years are yielding their results. Now beyond our financial performance, let me touch on some of the other highlights of the quarter. First, we are making very good progress on the rollout of our new U.S. mid-rise product. This product was launched in '24, and we have now successfully delivered and handed over the first units. And our order intake so far in '25 is exceeding our plans. You will remember that this product launch was about leveraging our standardized modular platform and enhancing our mid-rise offering in the commercial and high-end residential segment, a key pillar to our strategy in the U.S. market. Now we are starting to see the results in terms of share gain in the U.S. mid-rise market, which is really encouraging. On to modernization, where we continue to industrialize our operations and standardize our product portfolio. We are seeing very good traction with our standardized packages, which now make up close to 17% of our modernization business. And that is not only driving growth, but also enhancing our competitiveness and supporting our journey towards higher profitability in modernization going forward. Then on the topic of sustainability, I'm very pleased to announce that we are installing the industry's first ever low carbon emission steel elevator. The steel used in this elevator reduces carbon emissions up to 75% compared to conventional production and marks an important step towards our 2040 net zero target. And finally, I'm also proud that we have been recognized by Forbes again this year as being among the world's best employer. In the engineering and manufacturing sector, Schindler was ranked third globally. We have close to 70,000 employees and attracting and retaining talent is absolutely essential to our competitiveness and overall health of the company. Well, so you can imagine this recognition is important for us. Moving to our market outlook for '25 on Slide 4. We expect the service markets to continue to expand across all regions, with the lowest growth rate in the Americas and the highest in Asia Pacific, driven by India. The modernization markets continue to offer a clear growth opportunity across the world with mid- to high single-digit growth outside of China and growth well into double digits in China, with around 100,000 aging elevators approved this year for an upgrade within the government's equipment renewal program. To put the scale of this initiative in the perspective, just imagine replacing all elevators in Australia in a single year. In installation, we continue to expect the global market to decline by high single digits, mainly due to a low teens contraction in China, where home starts by floor area continue to fall by close to 20% year-on-year in the January to September period, following a 3 years of 20-plus percent declines. Home sales have dropped 5% overall with only the 4 Tier 1 cities showing a slight increase with all other cities facing steep declines. Across the EMEA region, in addition to good growth in countries such as Spain, now also the important German market appears to have found a bottom and is expected to gradually recover going forward. The so-called Bau-Turbo initiative to fast-track housing project recently approved by the German government should be seen as a positive development overall as it aims to simplify planning, shorten approval times to 3 months and allowing flexibility in building rules to tackle the housing shortage in the coming quarters and years. Asia Pacific, excluding China, is projected to grow by mid-single digits, led by India and Southeast Asia with conditions improving in Australia and the U.S. new installation market has shown remarkable strength, further increasing from a tough Q3 '24 comparison point. In addition, we saw better data coming from Brazil in Q3 '25. And we have, therefore, decided to revise our Americas new installation market outlook to stable from slight down previously. So how did we perform in this market environment in the third quarter of the year. Turning now to Slide 5. Starting with service. Our portfolio units continue to expand, showing the strongest growth in Asia Pacific, excluding China. In Americas, we saw a slight decrease as a result of our increased selectivity when it comes to recaptures that we decide to pursue as well as from softer conversions. As a reminder, we saw a decline in our NI orders in '23, and this still has an impact given to the normally longer lead times, especially in North America. On modernization, we have maintained the strong momentum seen in the previous quarters and saw a double-digit growth across all regions, except for Asia Pacific, excluding China, with fewer large projects booked in this particular quarter, Year-to-date, our MOD growth in the region remains in double digits. Finally, on new installation, our global order volumes decreased by double digits due to China, where, as mentioned back in July, we are responding to the prolonged weakness in the NI market by resetting and repositioning our China business towards future growth opportunities. Outside of China, our NI orders grew mid-single digit, driven by an upswing in orders in our Europe, South and South America zone. And it is worth flagging the comparison from quarter 3 last year, which was the best quarter in '24 for NI, particularly due to our strong performance in the Americas. But the U.S. continues to develop well. And as mentioned, we are pleased with the customer reception of our new mid-rise product. With that, let me turn over to Carla to walk us through our financial results in more details. Carla Geyseleer: Thank you very much, Paolo. Good morning, everybody. Pleased to take you through our financials related to quarter 3. So let me start with Slide 7. And as a simple summary of the quarter, we continue to see headwinds to our top line, but we are executing very well on the bottom line. So starting with the headwinds at the top line. So they are particularly severe in China, and we remain committed to our strategy of pricing discipline, as Paolo just mentioned. Now it's also important to note that FX headwinds are definitely not declining. We had a hit of over CHF 100 million this quarter to both the order intake and the revenue. I will elaborate on the top line trends shortly. Now before doing so, let me point 3 highlights for this quarter. Firstly, we had another very strong quarter in terms of operating margins, up 130 basis points for both reported and adjusted EBIT margin. So we continue to make very good progress operationally, and that is obviously translating into a margin expansion, which is coming in slightly better than expected, which is also why we are revising our full year margin guidance. Secondly, our operating cash flow improved both sequentially and compared to last year. And now looking at the operating cash flow year-to-date, we are also up versus '24. So just shy of CHF 1 billion for the first 3 quarters and setting us up for another strong year for cash conversion. Finally, our net profit continues to increase versus last year in both absolute and margin terms, despite the decline in financial income as well as FX headwinds and higher restructuring costs. Now moving to Slide 8 and taking a look at our top line development. Let me first say that we don't see any material shift in order trends overall, even though growth in Q3 came in somewhat lower than in our first half. Now large projects are lumpy, and we had fewer of them this quarter compared to the prior 2 quarters. And if you look at the underlying trends by region and segments, there are 2 things that stand out. First, the continued steep decline in China; second, the strength in modernization. So on China, here, our new installation orders declined by over 30% in value in quarter 3, driving the group new installation orders down mid-single digits in the quarter and more than offsetting the growth we saw in new installation orders outside of China. So even as China becomes or became a smaller part of the overall group orders, it continues to materially impact our growth profile, notably in new installations. However, organic growth was still positive in the quarter due to the growth in service and modernization. So in modernization, order intake was up 16.4% in quarter 3 and this on a tough comparison versus quarter 3 last year when we grew at 20%. And growth was broad-based with strong double-digit growth in Europe and Americas, whilst China had a standout quarter, up well over 50%. Year-to-date, China is up close to 40%. Now this strong order growth in modernization also presents some operational challenges for us in terms of scaling up our delivery capabilities. So the execution of our MOD backlog was not as efficient in quarter 3 as it could have been. So we recognize that, which meant that revenue growth came in at mid-single digits in the quarter, albeit on a tough comparison from last year when MOD revenue grew over 12%. I should say that the slightly longer backlog rotation times are also a reflection of the project mix in the backlog. That said, we expect MOD revenue growth to accelerate in the coming quarters from the level that we have seen now in quarter 3. But it is still the new installation, which is actually burdening our revenue growth, down 10% in Q3, driven by the steep decline in China, which was down over 20%. And with MOD and Service, both growing mid-single digits, that left the total group revenue down 0.5 percentage point in the quarter, but up 0.8% year-to-date. Now as of the quarter end, our backlog was up 1.5% in local currencies, driven by MOD, driven by Service, which had backlogs up mid-teens and mid-single digit, respectively. So our backlog in new installations declined by low single digit. Now in terms of backlog margin, this quarter was slightly down sequentially, but still clearly up year-on-year. And the weaker sequential development was entirely due to the tariffs being reflected in our U.S. backlog. So as our backlog gets repriced over time, you will see the offset to backlog margins. And importantly, excluding the tariff impact, backlog margins continue to improve also sequentially. Now moving on to Slide 9 and looking at our EBIT performance. As I shared already, it's a really strong development now to 13% reported margin in quarter 3 and 13.9% on an adjusted basis. Now the operational improvement of CHF 35 million this quarter primarily reflects the good progress in SG&A savings, but also next to that, the procurement savings continue to deliver. Price and mix were contributors, but less so than the efficiency savings this quarter. Our reported EBIT was burdened by CHF 25 million of adjustments in quarter 3, of which CHF 21 million of restructuring costs, translating to minus CHF 2 million in our Q3 EBIT bridge compared to last year and minus CHF 13 million in our year-to-date bridge compared to last year. Now taking a look at the net profit on Slide 10. Net profit grew to CHF 265 million in quarter 3 reflecting a 9.9% margin and to CHF 796 million year-to-date with a margin of 9.8% despite lower interest income, despite higher restructuring costs and despite onetime financial gains in last year. So we are very pleased with this result. Moving to the operating cash flow on the next slide. So our operating cash flow grew in the quarter as well as on a year-to-date basis. So operating cash flow reached now CHF 967 million for the first 3 quarters of the year, and that sets us on the path to deliver another strong performance in '25, even if we might not hit the exceptional level of last year. The improvement of the operational cash flow is coming from our operating earnings, supported by higher noncash impacts, offsetting a minor headwind of net working capital after the strong improvement in '24 and the missing positive net cash flow from financing income. So that brings me to the guidance for the remainder of the year. And as Paolo mentioned already, we are now specifying our full year EBIT reported margin guidance at 12.5%. So this compares to the previous 12%. And as Paolo and I have discussed, this revision comes primarily on the back of the efficiency initiatives that we have been executing and which are yielding savings slightly ahead of our expectations. We also now have an increased visibility on the impact of the tariffs this year, while the measures also taken to restructure our Chinese operations are partly offsetting the end market headwinds that we are facing here. Finally, the mix headwinds associated with growth in modernization in H2 are somewhat less than we expected in July at the time of our H1 results. And on mix, it is also important to recognize that we are benefiting from the continued outgrowth in our service business. And this revision to our full year '25 guidance also implies that we expect to see continued strong margin improvement year-on-year in the final quarter of the year. Now a small word on tariffs, which I think we have managed well so far in '25. So the U.S. tariff cost now reflected in our backlog. So I just mentioned, we will continue to work on this hard in the coming period to mitigate the impact, including making price adjustments to offset the impact. Now it's fair to say that the U.S. tariff environment remains very dynamic. So let me give 3 additional comments as we see the impact today. First of all, you will recall that with our H1 results in July, we provided you with an estimated annual gross tariff impact of approximately CHF 30 million. What happened since then? Since then, we have had the changes to the reciprocal tariffs, which has taken U.S. tariff levels on Switzerland to 39%. That takes our estimated impact to CHF 35 million from the initially CHF 30 million. So we also had the expansion of the Section 232 tariff list in mid-August, but that had no material impact on our estimate. Finally, we had the recent escalations by the U.S., including a possible 100% tariff on Chinese imports starting 1st of November. If this were to be implemented, that would take the annual gross tariff impact to CHF 72 million. Now we will come back in February with our full year '25 results and update you then on the '26 impact. But I expect us to make good progress on continuing to offset the tariff impact with our mitigating actions. Now with regards to the '25 revenue outlook, I confirm that we expect to deliver on our full year '25 revenue guidance of low single-digit growth, albeit this is likely to be very low single digit, so similar to '24. So in conclusion, let me take the opportunity to thank all our colleagues around the world for their efforts so far in '25, not at least our colleagues in the field who are operating in some exceptionally challenging circumstances in many places around the world. And it's a clear testimony of their contribution to our strong results in the third quarter of this year. And so with that, I hand back to Lars. Lars Wauvert Brorson: Thank you, Carla. With that, Paolo and Carla are now happy to take your questions. Can I ask you please to limit yourself to 2 questions only, given the limited time we have available. With that, operator, please. Operator: [Operator Instructions] The first question comes from Daniela Costa from Goldman Sachs. Daniela Costa: I will have 2, but I'll ask them one at a time. The first one is regarding sort of your organic order growth rate today, quite a bit lower, I guess, than one of your peers yesterday. I understand from what you said sort of a much bigger drop in China from you. Can you talk to what extent that is just the regional or the product mix? Or it was more an intended effort to try to control your backlog margin or something else? I'll start there. Paolo Compagna: Daniela, Paolo here. Very clear, China order intake in the quarter is driven by 2 factors. One is obviously our clear dedication in pricing discipline that we watch out what we take into the books as part of our China program we discussed with you back in February. And the second one is also a quarter in which we still see a decline in the market, and we just follow here the trend. So this has impacted our Q3 numbers for the China order intake. Daniela Costa: And then just in terms of sort of the Americas service trend, which seems sort of weak and down. Can you elaborate a little bit? From one side, you're upgrading on the original equipment, but the delivery on the service side seems a little bit on the weak side. What's going on, on the service? Paolo Compagna: Yes. So let me elaborate on the topics. And our upgrade is on new installation going forward, we were not conservative. We were back in July looking at the market trends, and we saw some signs of cooling down in North and South America, which now for the reasons discussed, we say, well, market might stay stable, especially as in North America, we don't see yet a significant negative trend, which would require this adjustment downwards on new installation. But your question was about service, and let me elaborate on this one. Here, there is a mix of 2 factors and also a bit different between North and South America. What we see in Q3 in this quarter is a combination of 2 things. Number one, in the recaptures, we call it recoveries, these are the new service contracts we take on board. We moved to a more diligent way of assessing their economics. This led now in a comparison quarter-on-quarter, quarter to the quarter to a slightly negative trend. And the second one is that you might remember in '23, we were facing a couple of quarters with a slower NI new installation order intake. What we see now is the combination of the slower conversions, which means the contracts, right, which come into service after new installation is finished. And due to the lead time of the NI order backlog from '23, and it's the combination of these 2 factors leads to this mathematical slow Q3 in Service Americas. Operator: The next question comes from Andre Kukhnin from UBS. Andre Kukhnin: I've got 2 and one of them actually dovetails nicely with what Daniela asked about just now. So I'll start with that. I wanted to also ask about the dynamics between modernization and service growth in North America, but also in Europe, where you're seeing such a substantial divergence. And I presume at some point, this strong growth in modernization in all those projects that you execute on in MOD will help converting into service. Is that the case? And could you give us some idea on the kind of lead time on that? And maybe -- sorry to pile them on, but while we're on service, could you give us an idea of what the unit growth was for you globally in the quarter? Paolo Compagna: Thank you, Andre. Let me elaborate on both. Number one was about modernization, how it works into service. So here, obviously, yes, modernization captures as long as they are outside of our portfolio would obviously lead to portfolio gains. So here, the answer is yes, there will be a certain positive contribution to the portfolio, and that's clear one of our targets. This being said, the second part of the first question was about lead times. Here, I must say, a bit different geography by geography, but actually, overall trend is that the lead times on modernization are also going up. So it means the time to convert this modernization, I repeat outside of portfolio. So it's not that entire modernization would add portfolio, but the portion which adds portfolio might start to contribute between end of '26 and going forward. So there is a positive momentum. Yes, there is a time in between, yes, and we expect to contribute from Q4 next year going forward. The second question was about the growth in the portfolio, which we can share on a good low single-digit number. Andre Kukhnin: Great. And I appreciate it more than one question already. So I'll just ask a short one. On the tariffs and the backlog repricing, could you confirm that this is just purely mechanical that's kind of triggering the escalation clauses are already in contracts and it's just a matter of working through that? Or are there new renegotiations to be had with customers? Paolo Compagna: Yes, Andre. We have done, as we shared in July back a little program on it, which is showing good effect. But Carla, you might elaborate on that. Carla Geyseleer: Yes, yes. No, you're absolutely right. Andre, thanks for the question. Yes, I confirm it's rather a mechanical exercise that you need to work through. So because, of course, there is a pricing towards the customer, and there is also a piece in our supplier management side. Operator: The next question comes from Vivek Midha from Citi. Vivek Midha: I have 2 questions. My first is a follow-up around your comment around the margin drag from modernization growth not being as large as you thought. Is that because of that slower conversion of modernization growth that you highlighted, which potentially might then have more of an impact in 2026? Or is it also because of the improved modernization profitability as you've grown? Paolo Compagna: Well, it's a bit of a combination between margin and the rollout of the backlog, and I will leave Carla to come through the details. But actually, the margin within modernization are not deteriorating. The opposite is the case. So your observation, we are improving on modernization margins is right. And is this one of the reasons for having a slower conversion into operating revenue. It's not the case. But Carla, please, would you like to elaborate on this? Carla Geyseleer: Yes, I want to be clear. I mean -- so we have the strong growth in the order intake and a slower realization of the projects itself, but we don't have pressure on the MOD margin. So just to be very clear there. Vivek Midha: Totally understood. My next question is just looking at the headcount, the number of employees. It looks like it's gone down by over 1,000 relative to the second quarter. Is that the effect of your efforts to reposition in China? Or is there something else driving that reduction in the headcount? Paolo Compagna: That's a very good observation. Yes, we announced back in July that we are repositioning our -- especially new installation business in China. And what you see in the overall numbers is mostly that. That's true. Carla Geyseleer: Yes. But this comes on the combination. If you look at the year-on-year versus December, it comes on top of the initiative that we took to reduce our cost levels in the -- mainly in the back office in the indirect part of the headcount, and that is actually what you see coming through. So we are just executing on this. So it's a combination of the 2. Operator: The next question comes from James Moore from Rothschild & Co Redburn. James Moore: Could I ask one on service? I mean if we're talking about a sort of 5% constant currency growth for service, would it be possible to split that between maintenance and repair? Are they at a similar pace? And tied to that, if they're at a similar pace and we're at 5% maintenance growth, is that to say with your good low single-digit comment? 2.5% unit growth and 2.5% price. And I ask because I'd like to unpack that to another level, if I could. And behind the price piece, would it be possible to say how much of that is kind of a wage escalator pass-through versus any other form of premium over and above that, whether digital or other initiatives? And behind the unit growth, is that basically just the past orders coming through? Or have you got any conversion topics like is conversion getting better or worse? Or have you got any win-loss retention topics? And how do you think about maintenance growth going forward for the next couple of years? Paolo Compagna: Good question with some components into it. Let me combine them. So on the first part of your question, service, repair without going to the details of both as we never do. But it's obviously that both are growing together. So as repair, you can only execute on the portfolio you have and with the customers we are happy to serve. So there is obviously a certain correlation between the repair business expansion and the portfolio growth itself. So this is very fair to be assumed. Second part of the first question, are there components of digitalization, monetization of the digital business? Surely, yes. As we announced also previously, we continue our efforts in digitalizing for our customers our services. So we don't only digitalize for ourselves for the beauty of technology. We also have an increased and steadily increasing offering on digital services for our customers, which obviously, yes, starts to get some traction and contribute to this overall picture. So that's absolutely right. And your second question, how we expect this whole service/repair/digitalization business to move. Here, we expect, as mentioned before, that we see at least a steady continuation of this growth in which we absolutely intend to participate. James Moore: And can I just follow up on the NI margin, new equipment? My sense was you were doing better than others in China, and you had some topics in the West, which you're addressing with your standardization program. And we've seen some procurement savings, and I'm sure next year is more about efficiency savings and we're doing amazing things there. But are you seeing a scenario in which is the NI margin down year-on-year? And is it that the Chinese revenue decline is more than offsetting some of the organic actions on the other side or vice versa? Paolo Compagna: Your first assumption, I don't like to comment, as I don't have it. But in terms of margins in new installation, let me share in all clarity that our efforts in improving efficiency in the field, and we have talked about now the last couple of years and intensified last year and this year as now we see -- we start to see really traction in the field, this improvement of margins in new installation in the execution we see everywhere. So now to distinguish between China specific and rest of the world, I would say the improvement in the execution, I would say, is everywhere the same. And to assume that the picture has reverted between rest of the world and China, well, I would say China is more under pressure in terms of margins than the rest of the world. Operator: The next question comes from Rizk Maidi from Jefferies. Rizk Maidi: Just maybe start with a clarification on the full year guidance when it comes to revenues. I think now you're talking about very low single digit, which also means very low single digit for the Q4. How should we think about this? Is still these bottlenecks when it comes to modernization is still going to be there? And how should we also think about the service growth in Americas? You talked about recapture weak NI back in 2023. Does that still means that it's going to be a drag again in Q4 and potentially even 2026? Paolo Compagna: Let me start maybe with the second part on the service in the Americas. Obviously, right to observe that we are now on a level which we also compare to previous year growth rates, right? So is it expected to stay at that level? Maybe we will see not now in the next quarter, but we expect in the quarters to come to see growth again also -- more growth again also in service in Americas. When we get our backlog executed and as I was sharing before, we see certain delays in delivering on the project, which then it's a question of time, we will come back on that. So therefore, if you ask specific on Q4, we expect to be on that level. But going forward, we would also expect to see growth rates again also in Americas. Talking now the order -- revenue for the full year, we expect Q4 to be in line with our plans. So hence, if we see the year-to-date numbers in the Q3, we like to be super transparent in what would be the full year expectation. So we don't worsen it, but we also don't see room to get euphoric on additional revenues. To your observation, is it a timing issue? Is it projects and kind of delays? Yes. So why we still are quite confident for the future to come is that the backlog is promising. We are building up resources to execute on modernization. So your observation is absolutely spot on with the time, and we will see also this OR then picking up. Carla, anything you'd like to add? Carla Geyseleer: No, I think I confirm perfectly. I think we are complete. Rizk Maidi: And then the second one is really just to understand your cost efficiency. We're now getting towards year-end. Maybe if you could just please correct me if I'm missing anything. But my understanding is you're running with different programs. One of them is procurement. The other one is SG&A. There's an FTE sort of reduction or repositioning of your China business. Maybe can we talk about what has been achieved year-to-date? And what should -- how should we think about these -- each component heading into 2026? Carla Geyseleer: Yes. Thank you very much for the question. I will take it. So first of all, the plan has not changed. So we are still working on the same 4 building blocks that we have always been super transparent on. So first of all, starting with the procurement and the supply chain savings, that is the more mature one, and this is now the second year that it continues to fully deliver, and that is also the one with the biggest impact. Now what clearly scaled up during the first 3 quarters, that is the second initiative, the reduction of the SG&A cost. And of course, driving efficiency in the back office, that's what you see also coming through in the headcount reduction. So we started with that in quarter 4 last year, and that is now really delivering. And that will also, yes, I would say, continue to deliver, obviously, not with the same incremental savings, but we have not completely come to an end of that initiative. What is rather new, I would say, in the quarter 3, that is we have also been focusing on driving efficiency in the NI and the MOD business. And that is the third initiative where we see now in quarter 3, the first benefits coming through. So that is, in a nutshell, what you -- what is also flowing through to the bottom line. Now immediately making the step a bit to the period to come. So we definitely still have potential for these building blocks. And there will still be significant amounts coming through. However, the composition will change because, as I said, the procurement savings become more mature. So their relative weight will decline. And of course, also going forward with the SG&A. But then if we execute according to plan, the incremental savings coming from the efficiency in the NI and the MOD will further increase. And also on top of that, efficiency in our service business. So that is, in a nutshell, what is happening and what will -- or what is expected to happen going forward. What is also interesting to see is that we came now to a situation where the efficiencies are actually really offsetting the inflationary effects and becoming even more important than some of the pricing elements in some of the areas. And that was the whole initial target, why we have set up these 4 building plans. And that's why you see the nice uptick in the margins and in the profit. Does that answer your question? Rizk Maidi: Yes. Lars Wauvert Brorson: Thank you, Rizk. The next question, please, operator? Operator: The next question comes from Vlad Sergievskii from Barclays. Vladimir Sergievskiy: I'll ask 2 and start with modernization. You disclosed standardized MOD solution was 17% of total modernization orders now. Do you think there is a natural limit of how big standard solutions could be in the future compared to the total MOD market? And are those standardized solutions opening new market niches for you in any way? Are they addressing customers that would have perhaps otherwise not ordered at all or ordered it a bit late? Paolo Compagna: Yes. Vlad, to the first part, is there a limitation in the creation of standard solutions? Well, there will be a logical limitation one day as if you recognize that the installed base is a kind of 160 years of elevator technologies built many, many times in many countries by very local companies. So you've got 10,000s of different elevators to be modernized. So let's talk that. With that, you can imagine you cannot have a standard solution for 10,000s of different elevators around the globe. So you're going to fix it by group of similar technologies you can address. So to the first part of your question, is there a limitation? Yes. Are we already there? No. To the second part, -- does it open new opportunities? I personally believe, yes. Then when you get to a standard solution, which could offer to a customer to improve safety, quality and also maybe user experience by having affordable costs, I think there might be a group of customers who today can only go for a full replacement of the elevator, which comes with certain cost and also civil works around it. Now having this opportunity. So to the second question, I personally believe there might be a segment, is it incredibly big? I think it depends from country to country, coming back to my first part of the answer. Then in some countries, we have a bigger number of local products, as we call them, and we have some countries with less number of local products. So in those countries, this opportunity might be bigger. Vladimir Sergievskiy: Excellent. That's very clear. Second one is on the sales mix. Sales mix has been a tailwind to profitability for quite some years. Is there a chance that this tailwind eases or completely stops in '26 when MOD growth accelerates when perhaps new equipment decline slows and maybe grows outside of China and service keep growing as it does. Carla Geyseleer: Well, for sure, I mean, this mix will change. Will it go as fast as you point out? I don't think so. But we definitely -- yes, we definitely have that in our -- calculated that in our plans. So yes. Operator: The next question comes from Martin Flueckiger from Kepler Cheuvreux. Martin Flueckiger: I've got 2, and I'll take one at a time. First one is for Carla. Just coming back to your general comments regarding incremental cost savings from restructuring and operational efficiency going forward. I was wondering whether you'd quantify those for '25 and '26 to -- basically to understand whether there's been any changes? That's my first question. I'll come back to the second one. Carla Geyseleer: Well, as I said, there are no changes in the components that are driving this cost savings, but the relative weight of the components, that, of course, changes because, as I said, if you talk about procurement and supply chain, it's a very mature initiative. So your incremental obviously decreases. This year, we put a lot of focus on the SG&A savings. And together with that, we start up more and more the efficiency -- driving the efficiency in the new installation and in the MOD. But for -- going forward, we still have a significant incremental amount of potential sitting there, and we will work through that as we did over the last 2 years. Martin Flueckiger: Okay. And my second question is regarding the press reports with respect to TK Elevator being either up for sale or going for an IPO possibly. I was just wondering, thinking back, if I remember correctly, to 2020, I seem to remember press reports regarding Schindler's Board making statements about potentially suing KONE at the time if the deal had gone through, which, of course, it didn't. But I was just wondering if a major competitor were to take over TK Elevator, and I suppose Schindler is also interested. But just thinking if a major competitor were to get the bid, would Schindler's Board again consider legal actions? Paolo Compagna: Martin, let me take this one. Well, first of all, we don't intend to comment on competitors' decision about what they do in M&A. And in the same, as you know, we never disclose our M&As and what we do there. I must say what the reaction will be in the market, no one can predict. What will happen may be also difficult to predict. And with that, I must say, let's see what happens. With regard to ourselves, I mean, we always look at acquisitions which happens, and we look at our own opportunities in smaller and midsized and large acquisitions. So I would say there's no answer to your question in the form what will be a reaction. The market will show what happens. Operator: The next question comes from Walter Bamert from Zürcher Kantonalbank. Walter Bamert: Could you please comment which part of the 130 basis point margin improvement stems from the positive mix effect? Carla Geyseleer: Well, it is not the major part. So we will -- yes, we don't give the exact breakdown. But if you just -- I would say, yes, approximately, yes, up to 1/3, approximately is there [indiscernible] effect, yes. But we are very clear on that, and it's also part of our plans going forward if the mix effect changes. Walter Bamert: Perfect. And then nevertheless, coming back to the M&A question and that just generic, what's your assessment of the Asian market, which is still somewhat more fragmented? Do you think there is still room for globalization of those players? Or do you expect that the markets will remain fragmented somewhat? Paolo Compagna: Well, no one of us, Walter, has a glass sphere to look at for the future. If we would have then we would have to stop the call, go and make some decisions. But this being said, obviously, when you look into fragmented but interesting market, which you say -- if you say AP is it and it is, then one could assume things could happen in the next years to come. So this would be maybe my careful assumption. Then we talk about a still promising market, promising market for the future. And yes, as you rightly assess, there's a high fragmentation in that specific part of the world still. So therefore, one could assume there will be some movements, whatever type, difficult to say. When it happens, difficult to say. Could it happen? I would not exclude it, but it's a very personal assumption away from any detailed study. Operator: The next question comes from John Kim from Deutsche Bank. John-B Kim: I'm wondering if we could go back to the order backlog and the revenue delivery in Q3. If I remember correctly, there was going to be a bit of legacy overhang on Q3 and Q4 deliveries and negative mix from Chinese exposure. Did Q3 progress as planned? Or were there delays to that mix or margin dilutive delivery set, I suppose? Paolo Compagna: To Q3 specifically, the revenue development might have been partially impacted by some projects which see a bit of a delayed execution. And obviously, when it comes to installation and larger modernization jobs, right? If you got a job which then is not completed for whatever reason and often, you know how it goes on construction side, then you might even see it in the books. This has, for sure, an impact in Q3. So therefore, I was mentioning before, in going forward, this will be flattening out by itself as the jobs will be completed, will be then built and then it moves on. So your assumption is right, I think, in saying in Q3, there is a certain impact by larger projects not completed. Yes. John-B Kim: Okay. And just as a quick follow-up to a comment you made about modular. In terms of supply chain, OpEx and perhaps CapEx, do you have what you need to deliver your backlog and modernization? Or is further investment needed from here you think? Paolo Compagna: So for now, we shared in February, you remember when we were sharing our dedication now to move on the modernization business with some of you, we were even discussing in detail what is behind. And one part was the development, production and rollout of those standardized, we call it packages, we call it kits, right? And here, the investment in supply chain, supplier base have been done. So is there any major investment, not specifically, but I like also in all transparency to share that we continue to invest and develop on our supply chain as obviously with the modernization piece growing and the new installation piece being where it is, it's a kind of logical consequence that you keep developing, we call it upgrading internally, the supply chain. And we work now with the internal program in upgrading our supply chain. We don't talk much about, but this takes place. Does it come with major investments? No. Is it partially in the one or the other supply chain. We have different in different continents. There will be some adjustments, but no major investments. And yes, what we deliver now, we are ready to deliver, and this work has been done. It was part of our program in the last 12 months backwards. Operator: The next question comes from Kulwinder Rajpal from AlphaValue. Kulwinder Rajpal: So just wanted to come back on MOD orders in China. So if I heard Carla correctly, she said 50% growth in Q3 and 40% year-to-date. So would it be fair to assume that this business faces tough comps as we go into 2026? So any commentary on growth in the MOD market in China in 2026 will be helpful. And just tied to it, is the share of standardized MOD higher in China compared to other geographies? Paolo Compagna: Let me take your question. So China MOD '26, well, modernization business in China is growing nicely, as shared before, and we don't see any change in trend at all. As I mentioned before, there are even some governmental programs, which are supposed to give some support, and we will also participate there. Allow me also here a very personal note. We have seen in the past also massive supportive programs in new installation in China, which afterwards came with a limited real impact. So now the modernization ones are out, but we are still to see what is the impact. This said, I must say that beside of this stimulus, the modernization business in China is going well and is supposed to continue going well. On the second part of your question, which is the percentage of the packages in China, here, we must say we have to see the market. So if I would say percentage-wise, in that specific market, you could say yes. However, it's logical that in more mature markets in which for longer decades, more products were installed, one could assume that the number of kits, so standard solution kits is higher than in a country in which growth for MOD, you can say more of a homogenic market in terms of technology, right, in terms of installed base. So therefore, is it strategically different? No, in number of pieces of solutions, yes. I hope this answers your question. It's a bit technical, but unfortunately, in that case, it's a technical background. Kulwinder Rajpal: Yes, absolutely. And then just to come back on wage inflation. So I wanted to understand the assumptions for your wage inflation in 2025 and 2026. Paolo Compagna: So it was a bit of disturbed connection here. I think it was about wage inflation. Kulwinder Rajpal: Yes, wage inflation, the assumptions in 2025? And how should we think about it in 2026? Carla Geyseleer: Well, I will say that. So thank you for the question. Wage inflation in '26, I think it will be on a level that is comparable with '25. So that is how we currently see it. Lars Wauvert Brorson: Thank you, Kulwinder. We'll take one last question, please. Operator: We now have a follow-up question from Rizk Maidi from Jefferies. Rizk Maidi: I'll be very brief. Just clarifying some of the points just on China new installations. Am I correct in thinking that the orders here are down 30%, where I think in the P&L, you talked about 20% decline. So perhaps a little bit more drag here going forward? And then more generally, we're now 4 years into this downturn, we thought pricing is not going to be as bad because local players, competitors, including yourself, are doing much lower margins in this downturn than in previous ones, but it feels like it's not getting any better. I'm just wondering who is actually taking on these badly priced sort of projects? And number two, how should we think about -- and also pricing pressure, how do you see it by geography? And how do you think -- how are you thinking about 2026 here? Paolo Compagna: Let me take this one, which is a complex follow-up question. So let me start with this decline in order intake, which I always have to remind might be different between units and value. Then in units, the market is down, as you assume, close to 30% and in value even above that. So for us. So therefore, your assumption is right. There's a bit of a mismatch between units and value, but in value, it has declined a lot. So part of your second question, who is taking on all these bad jobs? I cannot talk about who is taking bad big jobs. However, as we see it also in our numbers, the pricing in China was very tough in the last years, you are fully right. And by now, well, to be very optimistic about pricing in China is not us. So if you ask me how do we look going forward, we would hope to see a stabilization of the pricing. And if we get there, it's already an improvement then till now, pricing has shown to be very tough. So therefore, as soon as we get to stabilization of the pricing, one could say, well, from that point, we can start all to work on it. So -- and this is what we see for '26, right? So we don't expect any special magic. And Carla was referring to our plans for '26. And when we meet in February, you will look -- you know us, we are always very -- we try to be and are very down to earth in our plans. So on China, there's no euphoric assumption for what will happen in '26. I hope this answers your question. Operator: Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Lars Brorson for any closing remarks. Lars Wauvert Brorson: Thank you, operator, and thank you all very much for attending the call today. Please feel free to reach out to me for any follow-ups you might have. The next scheduled event is the presentation of our full year results on the 11th of February 2026. You'll also find our reporting calendar for '26 at the back of our presentation today. With that, thank you all, and goodbye. Operator: Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.

203天前Insight Analytics约5分钟阅读

KCDMY 2025 Q3 财报电话会议

Operator: Good day, everyone, and welcome to Kimberly-Clark de México Third Quarter 2025 Results. [Operator Instructions] Please note this call is being recorded, and I will be standing by. It is now my pleasure to turn the conference over to CEO, Pablo González. Please go ahead. Pablo Roberto González Guajardo: Hello, everyone. I hope you're doing well, and thanks for participating on the call. We'll go straight to results, and then we'll make some brief comments about the quarter and our expectations going forward. Xavier? Xavier Cortés Lascurain: Thank you. Good morning, everyone. Results for the quarter were better, with net sales growing and gross and operating profits recovering. During the quarter, our sales were MXN 13.4 billion, a 2% increase versus last year. Hard rolled sales impacted total volume, which was flat and price/mix was up 2%. Consumer Products grew 5%, 1% volume and 4% price/mix, while Away from Home remained flat. Exports were down 15%, impacted by a 32% decrease in hard rolled sales, while finished products grew 7%. Cost of goods sold increased 3%. Against last year, SAM, resins and virgin fibers were favorable. Recycled fibers were mixed, while fluff compared negatively. The FX was slightly lower, averaging 1% less. During the quarter, our cost of goods sold reflected the higher prices of raw materials from prior months and very significantly, the much higher FX, including the hedges as those trickled down the inventory layers. Our cost reduction program once again had very good results and yielded approximately MXN 500 million of savings in the quarter. These savings are mainly at the cost of goods sold level and are generated by sourcing, materials improvement and process efficiencies. Gross profit was flat and margin was 38.7% for the quarter. SG&A expenses were 4% higher year-over-year and as a percentage of sales, were up 30 basis points as we continue to invest behind our brands. Operating profit decreased 4% and the operating margin was 21.3%. We generated MXN 3.4 billion of EBITDA, a 3% decrease, but within our long-term margin range at 25%. As mentioned, the benefits of better raw material prices and a stronger peso take time to show up on the actual cost of goods sold, due not only to inventories, but also to contract transit time and particularly in this case, the currency hedges. Having said that, our gross margin did improve 50 basis points sequentially from the second quarter to the third quarter. That improvement does not go down to the operating profit or EBITDA level because the SG&A remained constant and was, therefore, higher as a percentage of sales because the third quarter sales are traditionally lower than the second quarter sales. Cost of financing was MXN 404 million in the third quarter compared to MXN 287 million in the same period last year. Net interest expense was higher at MXN 401 million versus MXN 290 million last year, despite our lower gross debt because we earned less on our cash investments. During the quarter, we had a MXN 3 million FX loss, which compares to a MXN 4 million gain last year. Net income for the quarter was MXN 1.7 billion with earnings per share of [ MXN 0.56. ] We maintain a very strong and healthy balance sheet. Cash position as of September 30 was MXN 11 billion. We have no debt maturing for the rest of the year and maturities for the coming years are very comfortable. Net debt-to-EBITDA ratio is 1x and EBITDA to net interest coverage is 10x. Over the last 12 months, we have repurchased close to 50 million shares, around 1.5% of shares outstanding, which brings the total payout to shareholders to approximately 7%. And with that, I turn it back to Pablo. Pablo Roberto González Guajardo: So we continue to operate against a soft consumer backdrop, but we managed to increase sales and post EBITDA margin within the target range. Growth in Consumer Products was significantly better supported by innovations and commercial initiatives, together with a strategic decision to reduce spending during the heavy summer promotional season to protect the value of our brands as well as reduce the negative price effects. Volume was slightly ahead of last year, an important improvement, but consumers remain stretched and cautious given the increased uncertainty, job growth deceleration, remittances slowdown and overall lack of economic growth. We see no significant catalyst for this to change in the short term and are strengthening strategies accordingly. Still more relevant and differentiated innovation, more effective engagement with consumers efficient execution hand-in-hand with our clients, and importantly, relentless focus on our most important opportunities by category, channel and brands will guide all our actions. In a market that's not growing much, gaining share and playing in areas where we haven't participated at least not aggressively, will be key to accelerate our growth. We look forward to sharing more details on the strategies as we get into 2026. The same holds true for Away from Home business, and we expect exports of finished products to continue to grow and accelerate in the coming years, behind a concerted effort with our partner, Kimberly-Clark Corporation. With respect to costs, we have yet to see the full effect of lower input prices on results and lower sequential volumes typical of the third quarter meant we had weaker operating leverage. Despite these headwinds, margins remain strong. As we get into the final stretch of the year and particularly into next year, we will see lower costs reflected in our numbers. We expect lower pulp prices, stable recycled fibers, lower resins and superabsorbent materials plus a stronger peso to be tailwinds going forward. In summary, our results continue to improve. And despite an expected continued weak consumer environment, we're executing strategies that will translate into stronger results in 2026 and the years to come. With that, let's turn to your questions. Operator: [Operator Instructions] We'll take our first question from Ben Theurer with Barclays. Benjamin Theurer: Congrats on the results despite the challenging environment. So I wanted to follow up a little bit on just the consumer sentiment and what you've been seeing across the different categories. So maybe help us understand and kind of like getting a bit closer into that 4% price/mix change. How are you able to kind of like implement that and at the same time, actually get about a 1% volume growth, just given the consumer is weak, but it felt like a very good execution on price mix with volume growth. So that would be my first question. Pablo Roberto González Guajardo: Sure, thanks for the question. Look, as I mentioned, we see a stretched consumer. And this is [ not news of ] uncertainty. And as I mentioned, job growth has decelerated, remittances have slowed down. I mean overall, the economy is pretty slow and consumers' sentiment is not at its best, if you will. So consumers are being very careful in how they are spending. We do see a fork, if you will, with consumers that continue to spend on premium products, but there are those who are trending down from value to economy products, not at a very marked rate, but there's certainly something happening there given the -- how the consumer is stretched. So the way we were able to put all of this together -- and let me say, by the way, the growth in our categories is pretty muted. Some of them, the categories that don't have such high penetration like kitchen towels and others are growing at higher rates. But even those the rates have slowed down a little bit. And the more, if you will, mature categories are flat or slightly growing when it comes to volume. So what we did is, one, Remember, we decided not to play as aggressively on the summer promotional season. Because what we were seeing over the past couple of years is that when you did that, the price would take a hit not only within the promotional season, but then beyond that, because consumers ended up with some inventory on their hands. So then it was a little harder to move volumes forth. So we were very careful on how we manage that, and I think we were successful in doing so. Plus the fact that we are through our revenue management -- revenue growth management capabilities found certain instances where we could adjust pricing and move forth. So that's how we were able to keep prices going and then volume really helped because of innovation and all of our commercial activities during the third quarter. So it was really a combination of executing on price and innovations that allowed us to put together both growth in price and for the first quarter in the year, growth in volume. Benjamin Theurer: Okay. And then just one quick follow-up. You've called out the softer hard roll sales volume. Was there a technical issue? Is it a demand issue on the export side? What's been driving that? Pablo Roberto González Guajardo: Really, I think what's happening there is that there's a lot of supply of hard rolls in the U.S., a combination of companies with excess capacity sending it to the U.S. and then maybe a little bit of companies buying before some of the tariffs came into effect. So there's paper out there that I think the system is going through. And hopefully, that will become more normalized, if you will, in the fourth quarter, certainly, I think by the first quarter of next year. But overall, just oversupply in the market of hard rolls in the U.S. Operator: We will move next with Bob Ford with Bank of America. Robert Ford: Pablo, I also was impressed by the growth in consumer given your intent to stay away from some of the summer promotions. Can you give some examples maybe of some of the more successful innovation and execution of efforts that are enabling you to improve pricing and take share? And with respect to the export mix between hard rolls and finished products, can you give us a sense both in volume and value in terms of the breakdown of those exports? And then how should we think about current capacity utilization rates for both pulp and finished product? Pablo Roberto González Guajardo: Thanks, Bob. Thanks for your question. Yes. Look, I mean, when it comes to innovation, as I mentioned earlier in the year, we have strong innovations for all of our categories throughout the year. And by the way, we have a very, very strong pipeline for the coming years. So we're very excited about that. And a couple of particular examples are on the diaper front, where we pretty much improved on every single tier of our offerings. And when you take a look at our shares, we're -- even though the categories, as I said, pretty flat, we're gaining share in pretty much all of the channels given the -- all of the channels and all of the tiers, given the innovations that we were able to put into the market. And again, those have to do with better observancy core, better fit, better stretch, better softness. So depending on the tier, again, we improved every single one of them, and that's a category where we see our shares improving nicely. Also, for example, in bathroom tissue in the premium tier, where we've introduced a couple of new features and new sub-brands under Kleenex, Cottonelle, and we're absolutely convinced we have the best product in market and products that can compete with products anywhere in the world. and they've been very, very well received by consumers. And as well, we also made some innovations to our economic product, particularly Vogue in the -- or [ Vogue ] in the wholesale channel, and we've been able to gain ground with that product consistently and significantly. So again, innovation at the core of everything we do and very, very excited with what we see for the coming years when it comes to innovation. With respect to the breakdown of our exports, I mean, hard roll sales represent 46% of the sales and finished product, 54%. And hard rolls, as I mentioned, hopefully, volumes will stabilize here in the coming quarters, and we expect that to continue to be -- hopefully, be a tailwind and if not, certainly not a headwind going forward. And on the finished product, we're excited. I mean we've had a couple of meetings with our partner, and we're looking at opportunities in the coming years to further integrate our supply chain. We've done a good job here in the past couple of years, but many more things that we can do, and we're working very closely together to make that happen, and we're excited with the opportunities we see for it. And as we move and are able to turn more of our capacity into finished product, then certainly, our hard roll sales will decline accordingly because, as you know, what we do is our excess capacity is what we turn into hard rolled sales and sell outside. So as this plans with our partner materialize, a little by little, we'll start to see lower hard roll sales, but finished product sales increase hopefully significantly. Robert Ford: And that was actually the idea behind the question on capacity utilization is we agree. We see this massive opportunity in exports of finished product. And as a result, we're a little curious in terms of where you are right now in terms of capacity utilization, both for pulp? And then how should we think about where you are today on finished product and we can make some estimates in terms of what you need to add. Pablo Roberto González Guajardo: Yes. And it's a great question, Bob, and we -- let me put it this way. We have enough capacity to grow on finished products aggressively together with our partner in the coming years. And not only what we're producing right now, but we're putting plans together so that we can get more throughput through our equipment or through our machines. So we will be able to support growth with them. And I think we will still continue to be able to put a decent amount of hard roll sales out there in the U.S. So I think the combination over the coming years will certainly be a support our growth and support our margins going forward. Operator: Our next question comes from Alejandro Fuchs with Itau. Alejandro Fuchs: I have 2 very quick ones. Pablo, maybe I want to see if you can discuss a little bit about competition, right? How do you see competition today in Mexico, given the increase in price and sales mix, are maybe the competitors following? Are they being more aggressive promotionally? And if you can also discuss maybe your expectations into next year, hopefully, with a better consumer environment in the country. Maybe you can talk us about what do you expect going forward? Pablo Roberto González Guajardo: Sure, Alejandro. Look, when it comes to competition, I mean, you know our categories have always been very competitive. And we maybe are seeing a little bit more from some participants, not all when it comes to their promotional aggressiveness. I wouldn't say it's something that it's radically different, but a little bit more as, again, the pie is not growing, some are losing share. So they're trying to recoup some of that and are being a little bit more aggressive on it. But not -- again, not something that it's too surprising or too different from other instances. And the fact also that our retailers are, one, continuing to keep inventories and overall working capital under control, they're putting a lot of pressure on that. And two, trying to keep prices, it seems to me a little bit more consistent. I mean that helps in terms of the aggressiveness of promotions not being even more so that it could have been in other instances when the economy is not growing. So a little bit more, but really nothing marked, if you will. Coming into next year, I mean, we hope that a lot of the -- or at least some of the uncertainty that is hanging over the economy can be resolved or at least we get a clear direction as to where it's going. Certainly, the uncertainty that's coming from the USMCA revision or renegotiation and what will happen with that. I mean, you've heard -- we've heard that in a couple of weeks, we'll be hearing from our government as to some of the agreements they've come to with the U.S. administration. So hopefully, that will start to settle down, and we'll know a little bit better where it heads. Hopefully, as we get into the first -- or the workings of the judicial reform, we start to see how it how it works, and we start to see some decisions that support, again, giving more certainty to investment. And again, just hopefully, some of this uncertainties start to play out and we start to get a better sense of what's going on. We know then what to expect. And if that happens, I think the economy will be able to start growing again at a faster clip, maybe come back to what we were doing before all of this uncertainty, about a 1.5%, 2% rate, which at this stands would be pretty good. Not what we need certainly as a country. I mean, we really should be working hard to take all of the obstacles away from investments so that we can start growing at 3% or higher rates, but that's going to take some time and uncertainty is key for that certainty. So that will hopefully play out by '27, but at least by '26, if we can get some uncertainty out, we'll see greater economic growth and then we might see a consumer that feels a little bit better about things and then domestic consumption can start to pick up again. That's our expectation. But let's see how quickly we can -- how quickly it unravels and happens. Operator: Our next question comes from Renata Cabral with Citibank. Renata Fonseca Cabral Sturani: Congrats on the results. So my first question is still about the consumption environment, but specifically to understand if consumers are making the trade downs and if you see a bigger penetration of private label in the categories that the company has? And the second question is related to cost. In the initial remarks, I understood that the company expects that the raw material prices should maintain for the upcoming months. I would like just to confirm if that's the view. And for the fourth quarter, if the company has any hedges or the effects? Pablo Roberto González Guajardo: I hope I can answer your questions. You were not coming through too clearly, but if I don't, please let me know. Again, when it comes to consumers, we're seeing a divergence. Those that buy premium products continue to do so. Those consumers that are used to buy either value or economy products, we see a little bit of trade down to the economy segment. not a big trade down, but a little bit of trade down given how stretched they are. And tied to that, we are also seeing growth in penetration of private labels in the country. And it's a combination of the economic situation and retailers being a little bit more aggressive when it comes to pushing their private label. When it comes to costs, again, we already have seen in our purchases lower costs of most of our raw materials, excluding fluff. And that's just taking a little bit of time to reflect on our cost of goods sold, but we expect that to continue to -- start to happen certainly in the fourth quarter. And no doubt early in 2026. And our expectations for costs in the 2026 is that we will come in with, again, most of them on a downward trend and that will certainly be tailwinds for our cost together with the exchange rate, which will compare very favorably in the first half of the year. So that should be very, very helpful going forward. And when it comes to hedges, no, we have no more hedges during this quarter, and we don't expect to hedge going forward. Operator: We will move next with Antonio Hernandez with Actinver. Antonio Hernandez: Just following up on [ Renata's ] question, should we expect given that because of the tailwinds from FX and maybe raw materials and so on, that maybe EBITDA margin, at least in the short term has already hit rock bottom. Is that like you see basically upside on going forward? Pablo Roberto González Guajardo: Yes, absolutely. And it's interesting how you put it rock bottom when it's 25%, and it's still one of the best EBITDA margins out there for any Consumer Products company in the world. But yes, we probably have hit rock bottom. And going forward, we should expect better margins, no doubt. Antonio Hernandez: Exactly. Yes. I mean, rock bottom considering the 25% to 27%. Pablo Roberto González Guajardo: I understand. I just -- quite frankly, I just used it to make a point, sorry. Antonio Hernandez: Exactly. It's all relative in the end, but yes, pretty good margins. Just a quick follow-up. In terms of innovation and how you're also treating these consumers that are willing to buy these premium products. Maybe if you could provide any color on how much do they represent or innovation in terms of sales? Anything like that would be helpful. Pablo Roberto González Guajardo: Look, I think most of our growth really is coming from products that -- where we've innovated. And again, we're very, very excited with what we've done, but even more so with what we have coming. And early in 2026, we hope to share a little bit more of our strategies when it comes to areas -- main areas of focus and opportunities by category, channel and brands and also the -- what we see would be some of the very exciting innovations that we're going to be putting into the market. So let's hold on that until the first quarter of '26, and we'll be able to provide you more insight and details into what it's done and how we expect it to contribute to our growth going forward. Operator: [Operator Instructions] We will move next with Jeronimo de Guzman with INCA Investments. Jeronimo de Guzman: Start with a follow-up on the cost side. You mentioned that there's no hedges impacting the fourth quarter, but I just wanted to understand how much did the FX hedges impact the third quarter? Pablo Roberto González Guajardo: I would probably say they did impact about 50% of our purchases for the second quarter and for the first part of the third quarter. So assuming that what we saw on the third quarter was mostly based on those purchases. You could say that approximately 50% of our dollar-denominated purchases were impacted by those hedges in the quarter. I don't know if that made sense. Jeronimo de Guzman: But only half -- but only for half of the third quarter... Pablo Roberto González Guajardo: Yes, because of the -- no, I would say for the full quarter, about 50% of our U.S. dollar purchases, which are about 50% of our costs were hedged. Jeronimo de Guzman: Got it. Okay. And what was the average FX for those hedges? Pablo Roberto González Guajardo: [ 20 70 ] something. Jeronimo de Guzman: That will be a big improvement. And then just want to understand, given the much better cost outlook and the fact that these hedges are less of a headwind going forward or not a headwind going forward, how are you thinking about pricing going forward? Pablo Roberto González Guajardo: Look, we continue to take a very close look at each category and each tier and each channel to see where there are opportunities for pricing because, yes, we see tailwinds when it comes to costs of raw materials. We see headwinds in other costs, for example, on labor costs, which have been increasing in Mexico for quite some years. And when you compound their impact over the years, it's becoming a little bit more impactful, if you will, and some other issues. And plus we want to continue to generate important margins and profit so that we can further invest behind our brands. So pricing will not be as maybe in the past where you would just [indiscernible] we're going to increase 4% in the diaper category in March and period. It's going to be more of a strategic analysis, again by tier, by channel, et cetera, to determine where the opportunities are together with a very important push behind mix for our brands given the innovation we have. And so we will continue to look for opportunities to price and opportunities to improve our mix going forward. Jeronimo de Guzman: Okay. Yes, that's helpful. So the 4% that you had this quarter year-on-year, how much of that was mix versus actual price changes? Or was it just less promotions versus a year ago, I guess, which is kind of a... Pablo Roberto González Guajardo: It was about half and half. It was about 2% price, 2% mix. Jeronimo de Guzman: Okay. Got it. Great. And just one other question on the competitive environment. I wanted to get your sense on market share trends in general, kind of where -- in what areas are you seeing maybe more pressure on the market share side and where you're seeing more more of the market share gains that you're having? Pablo Roberto González Guajardo: Overall, I think we have a very stable market shares, maybe except on diapers, as I mentioned, we see that share growing. When you take a look at bathroom tissue, we're fairly stable. Napkins, we're growing share. kitchen towels, we're growing share. Wipes, we're growing a little bit on value, not on volume. But that's a category where we have lost a little bit of ground to not only private label, but a whole bunch of offerings coming from Asia and other parts of the world at very cheap prices. So we've got plans to attack there and recoup some of the share. And I would say about that, I mean, facial tissue is is flat at about 92%. I mean, our shares are pretty stable overall. Jeronimo de Guzman: Okay. Sorry, one more question on the new JV, the penetration, any updates on that? Pablo Roberto González Guajardo: On what, sorry? Jeronimo de Guzman: The new business, the pet, animal [indiscernible] Pablo Roberto González Guajardo: Pet business. No, thanks for the question. Yes, we continue to make inroads. I mean we're getting cataloged in more retail chains and improving our reach within them. So getting more SKUs in there and getting into more stores. And again, the consumer reaction so far has been very, very good. The retail reaction has also been good. So right on track where we wanted to be, and hopefully, that will accelerate in 2026. Again, this is a long-term play, but we should be this -- we absolutely should see this business accelerate in 2026. Operator: We will move next with [ Miguel Ulloa ] with BBVA. Miguel Ulloa Suárez: It could be regarding the CapEx for next year and any changes in the repurchase program. Pablo Roberto González Guajardo: Miguel, CapEx will remain very likely in the $120 million range. Could be a little bit more if some of the opportunities for exports capitalize, but nothing that would change significantly the capital allocation. For buybacks, this year, we will complete our EUR 1.5 billion program. Still too early to talk about next year. We will definitely have retained earnings from the net income this year to grow the dividend. And as usual, whatever we have left, we will devote to to buybacks. So that we'll have to see after we end the year. Miguel Ulloa Suárez: That's helpful. And just one, if I may, is regarding further investments or big investments in line for capacity in coming years? Pablo Roberto González Guajardo: Right now, it doesn't look like we need to do anything beyond that 120 average CapEx. Again, if we see more opportunity, we could see a couple of years of ramp-up. And even if at some point, we need a tissue capacity, which at this point, it doesn't look like, but hopefully, that changes, then we would see a couple of years of 150, maybe somewhere around that. Again, nothing that should change significantly the capital allocation. Operator: And this concludes our Q&A session. I will now turn the call over to Pablo González closing remarks. Pablo Roberto González Guajardo: Thank you. Nothing else to say just thanks for participating in the call. I hope you all have a terrific weekend. And since this is our last call before the year-end, I know it's early, but I hope you all have happy holidays and a terrific New Year's and look forward to talking to you early in 2026. Thank you. Operator: And this does conclude today's program. Thank you for your participation. You may disconnect at any time.

203天前Insight Analytics约5分钟阅读

GJNSY 2025 Q3 财报电话会议

Operator: Hello, and welcome to the Gjensidige's Q3 2025 Results Presentation. My name is Serge and I'll be your coordinator for today's event. Please note, this call is being recorded. [Operator Instructions] I will now hand you over to your host, Mitra Negård. Head of Investor Relations, to begin today's conference. Thank you. Mitra Negård: Thank you. Good morning, everyone, and welcome to our Third Quarter Presentation of Gjensidige. As always, my name is Mitra Negård, and I'm Head of Investor Relations. As always, we will start with our CEO, Geir Holmgren, who will give you the highlights of the quarter; followed by our CFO, Jostein Amdal, who will run through the numbers in further detail. And we have plenty of time for questions after that. Geir, please. Geir Holmgren: Thank you, Mitra, and good morning, everyone. The third quarter saw a relatively stable weather in our region. However, earlier this month, Storm Amy reminded us of the growing impact of climate change and extreme weather, affecting large parts of Norway and areas in Denmark. The storm caused significant property damage through strong winds, once again, testing our organization's resilience. In preparation for the event, cross-functional teams across the organization were mobilized to ensure customer safety and uphold the consistently high standards of service. Billion lessons from past events, we have streamlined our processes for faster, more effective support. According to the Norwegian Natural Perils Pool, over 11,000 claims have been registered in Norway with total industry-wide insurance losses from Natural Perils estimated at NOK 1.5 billion to NOK 2.1 billion. Additional claims for cars, boats and water-related incidents fall in a separate insurance schemes. You can see this total claims cost for Amy in Q4 2025 is estimated at approximately NOK 400 million net of reinsurance and including reinstatement premiums. With the emergency phase behind us, the focus is now on supporting our customers in repairing and replacing what has been damaged. Events like Amy highlight the need for continued climate risk preparedness, the insurance industry remains committed to prevention, collaboration with the municipalities and developing solutions that reflect the changing risk landscape. So now let us turn to Page 3 for comments on the third quarter results. We delivered our profit before tax of NOK 2,067 million. This result includes a nonrecurring expense of NOK 429 million related to the termination of the new core IT system in our pension business. We generated a general insurance service results of NOK 2,271 million, significantly up year-on-year. Our strong growth momentum continued in the quarter with 11.3% increase in insurance revenue when adjusted for the positive effect of the change in recognition of home seller insurance. The combined ratio declined to 79.7%, reflecting the improvements in both loss and cost ratios. The underlying frequency loss ratio improved by 1.4 percentage points and our investment generated returns of NOK 534 million, contributing to delivering a solid return on equity of 29.6%. We have a solid capital position and our solvency ratio was 191% at the end of the quarter. Jostein will revert with more detailed comments on the results for the quarter. Turning to Page 4. I will start with private property insurance in Norway, which sold lower profitability this quarter, reflecting the inherent natural volatility in claims. Claims frequency increased by 5%. Repair costs increased by 4%, in line with our expectation. We continue to implement price increases, although at a more moderate level, reflecting the outlook for inflation and frequency and the current profitability level. Average premiums increased by almost 16%, over the next 12 to 18 months, we expect the repair cost to remain within the range of 3% to 5%, and we will continue to price at least in line with expected claims inflation. Our current average rate of price increases of private property in Norway is 12.5%. So moving over to private motor insurance in Norway. Profitability for this product line improved over the same quarter last year, thanks to our targeted pricing measures. Claims frequency increased by 4%, reflecting an elevated claims level in July, likely as a consequence of the good weather and high traffic density in the vacation weeks. We estimate that the increase in the underlying claims frequency was in the range of 1% to 2%, repair costs increased by 4.4%, well within our estimated range. Average premium increased by 18.6%, although inflationary pressures are easing. The overall level is likely to remain within the 3% to 6% range for the next 12 to 18 months. We are monitoring the key drivers closely and acknowledge the uncertainty stemming from, among others, geopolitical risk and escalated trade tensions. Our current average rate of price increases of private motor in Norway is 13%. Moving on to Page 5. The strong performance in Norway continued this quarter, driven by sustained growth momentum and focus on efficient operations. We are very pleased to see that our retention rates for both the private and commercial portfolios, remain at a very high levels despite the necessary price increases. Sales activity has been strong, leading to an increase in both customer numbers and volumes for private in Norway. We continue to maintain strong competitiveness in the SME part of the commercial market with strong focus on profitability as we move closer to the January renewals. In Denmark, profitability improved for the private portfolio with solid revenue growth driven by both volume and pricing. Profitability for the commercial portfolio was lower, reflecting the inherent variability. We are satisfied with the underlying developments. The implementation of our new core IT system in Denmark is progressing steadily, supported through our testing and a strong focus on quality. Sales are being rolled out gradually, and we are preparing for the migration of the portfolio next year. We are seeing clear benefits from the experience gained during the implementation and use of the system in the private portfolio. And I'm pleased to see that our Swedish operation continued to build on positive momentum, showing sustained progress through solid growth and improved profitability. We are currently conducting a thorough assessment of the core IT system in Sweden, taking into account the specific characteristics of our operations in that market. Over to Page 6. We continue to actively pursue our strong sustainability ambitions. As shown on this slide, we have launched a number of innovative initiatives that are designed to create significant customer value, while reducing claims costs over time. So with that, I will leave the word to Jostein to present the third quarter results in more detail. Jostein Amdal: Thank you, Geir, and good morning, everybody. I will start on Page 8. We delivered a profit before tax of just over NOK 2 billion in the third quarter. The insurance service result increased significantly to NOK 2,271 million, driven by continued strong top line growth and a lower loss ratio. A further decrease in the cost ratio also contributed to higher results. Private delivered a higher result driven by both Norway and Denmark. The improvement in Norway mainly reflects revenue growth across all products, improved profitability for motor insurance and a lower cost ratio. And nonrecurring effect related to home seller reinsurance also added to the result. The positive development in Private Denmark was driven by a combination of revenue growth for all main products, higher profitability for property and motor insurance and a lower cost ratio. Decrease in results from commercial was driven by our Norwegian portfolio due to revenue growth for all products, improved profitability for Accident & Health, motor and property insurance and a lower cost ratio. Higher runoff gains also contributed positively. Our Danish commercial portfolio showed lower results, primarily driven by a higher number of fires impacting property insurance and lower run-off gains. In Sweden, the increase in insurance service result mainly reflected higher profitability for private and commercial property and private payment protection insurance. Our lower cost ratio also contributed to the improved results. The pension segment reported a loss of NOK 414 million, largely related to the nonrecurring expense of NOK 429 million related to the termination of the core IT system. The net result from our investment portfolios amounted to NOK 441 million in the quarter with positive returns from all asset classes. The negative development in the result under other items this quarter is attributable to profits from Natural Perils insurance transferred to the Natural Perils Pool and provisions related to the termination of cooperation agreements with 7 fire mutuals, effective from next year. We are taking proactive steps to secure our market position in the affected areas, and we expect only a limited impact on revenue. The result from our Baltic business is recorded as discontinued operations, pending regulatory approval for the sale. We expect to close the transaction in the beginning of next year. The higher result reflects the write-down of goodwill related to the sale of the company recognized in the third quarter last year. The insurance service result also contributed positively driven by an increase in runoff gains and lower loss and cost ratios. Turning over to Page 9. Our strong growth momentum continued in the third quarter with insurance revenues for the group increasing by more than 11% in local currency when adjusting for the nonrecurring effect in Private Norway. I'm very pleased with the increase, which was mainly driven by pricing measures across the private and commercial portfolios in all geographies, solid renewals in the commercial portfolios and higher volumes in Denmark and Sweden. The growth in our Private segment was driven by both Norway and Denmark. Private Norway showed a strong growth momentum even when excluding the home seller insurance product. This strong development was primarily driven by price increases in all main product lines. And I'm very pleased that we also saw increased volumes from motor, property, travel and accident and health insurance. The growth in Denmark was also strong, thanks to both price increases and higher volumes for all main products. Growth in commercial was also driven by both Norway and Denmark. In Norway, the growth was driven by price increases for all products and solid renewals. As in the previous quarters, this year, growth for some products within accident insurance was muted due to continued focus on profitability improvements. Growth in Commercial Denmark was good. Adjusting for an accrual last year, the growth rate was 6.4% in local currency, driven by price increases for all main products and higher volumes for property, accident & health and liability insurance. Growth in Sweden was negatively impacted by accruals. The underlying growth, however, was good, mainly reflecting higher volumes for leisure boat insurance in the private portfolio and higher volume and price increases for commercial motor and private property insurance. Turning over to Page 10. I'm very pleased with the development in the Group's loss ratio, which improved by 3.2 percentage points compared with the third quarter last year. Part of the improvement was due to lower large losses, which are random in nature. Another important driver was the improvement in the underlying frequency loss ratio of 1.4 percentage points. I'm very satisfied with the development in all the segments and particularly encouraged by seeing an improvement for Private Denmark. Let's turn to Page 11. Our commitment to operational efficiency remains strong. The group's cost ratio was 10.8% this quarter. The 1 percentage point improvement was driven by private in Norway and Denmark, commercially in Norway and the Swedish operations. We continue to strengthen our competitiveness, particularly in Denmark, and we're working to optimize our cost base across the group to create greater capacity for future investments in technology and growth. Over to Slide 12 for comments on our pension operations. Our pension business delivered a pretax loss of NOK 414 million this quarter, significantly impacted by the nonrecurring expenses from discontinuing the new core IT system project. For the time being, we will continue using the existing core system as recent improvements have enabled us to extend its operational life span. The underlying development in results for our pension business is good. Business volumes for the insurance products were high this quarter, which together with price increases lifted insurance revenue. Adjusted for the nonrecurring termination expense, the insurance service results improved year-on-year, but it was still in the red, due to asymmetric recognition of onerous contracts and expected future profits from new contracts. Net finance income contributed with just over NOK 1 million this quarter, reflecting running yield and higher interest rates. The unit-linked business continues to grow with a number of occupational pension members increasing by 5,500 to almost 335,000 at the end of the third quarter. Assets under management rose by NOK 4 billion to NOK 100 billion. This drove an increase in administration fees and management income, improving the net income from the unit linked business when excluding the nonrecurring item. Moving on to the investment portfolio on Page 13. Our investment portfolio generated positive returns for all asset classes, driven by running yields, lower credit spreads and positive equity and real estate markets. The match portfolio net of unwinding and the impact of changes in financial assumptions returned around 40 basis points, mainly reflecting lower credit spreads and the fact that the investments did not fully match the accounting-based technical provisions. The free portfolio returned 110 basis points, reflecting positive returns from all asset classes. The risk in our free portfolio remained low. A few words on the latest development of our operational targets on Slide 14. The customer satisfaction score is measured annually in the fourth quarter. We continue to identify measures and take steps to maintain a strong customer offering and high customer satisfaction. As Geir mentioned, retention in Norway remained high and stable. Retention outside Norway improved slightly during the quarter, with increases seen in Sweden and the private and commercial portfolios in Denmark. We are steadily progressing toward our 2026 target of achieving a retention rate above 85% outside Norway. The improvement in the digital distribution index this quarter reflects an increase in digital sales and digital customers, somewhat offset by a decline in digital service. Distribution efficiency is progressing well, primarily as a result of higher sales in Norway, but also in Denmark. Increased sales following the acquisition of Buysure contributed positively, improving this metric by 2 percentage points. Digital claims reporting increased during the quarter driven by Denmark and Sweden, and automated claims in Norway increased as well. Now over to Page 15 and a few words on our successful Tier 1 bond issue of NOK 1.2 billion in September. We aim to take advantage of what we viewed as attractive market condition, while also preparing for the first call of another Tier 1 bond in April next year. The issue was substantially oversubscribed, and we are very satisfied with the floating rate coupon of 3-month MBR plus 215 basis points. We also took the opportunity to buy back NOK 487 million of the Tier 1 bond with the upcoming call, resulting a net increase of NOK 713 million in outstanding Tier 1 capital. Over to Page 16. We had a solvency ratio of 191% this quarter, up from 182% in the second quarter. Solvency II operating earnings and returns from the free portfolio contributed positively total eligible own funds, while the formulaic dividend which corresponds to a payout rate of 80%, reduced eligible loan funds by NOK 1.3 billion this quarter. The net increase in Tier 1 capital, I just mentioned added NOK 713 million to the eligible own funds. The capital requirement increased slightly this quarter, primarily due to growth in our pension business. The non-life underwriting risks were stable, reflecting growth, offset by the effect of settlement of larger claims and changes in currency rates. And with that, I hand the word back to Geir. Geir Holmgren: Thank you. To sum up on Page 17, we are very pleased with the performance and continued progress across the private, commercial and Swedish segments this quarter. And our capital position is strong. We continue to implement measures and maintain a strong focus on operational efficiency, progressing well toward delivering on our financial targets this year and in 2026. So finally, on Page 18. Before we open for questions, I'm very happy to announce that we have set a date for our next Capital Markets Day, which will be held on the 26th of February next year in Oslo. We are looking forward to this opportunity to speak about our ambitions and plans. We will provide more details in a while. But in the meantime, please save the date. And with that, we will now open the Q&A session for this presentation. Operator: [Operator Instructions] Our first question is from Hans Rettedal from Danske Bank. Hans Rettedal Christiansen: So my question is around the claims frequency numbers that you gave in motor and property. And I guess there's a lot of sort of volatility, especially between Q2 last quarter and Q3 this quarter with quite a sizable effect on the overall claims outcome. So I was just wondering if you could give a little bit more color on your confidence that sort of frequency will come down and also perhaps just a bit more elaboration on what was driving the July pickup in motor and also in property? And just a very small question on the amounts recovered from reinsurance, which is lower than it typically is of only NOK 12 million this quarter. I know there's nothing typical about reinsurance, but still any help on why this is or sort of drivers behind it would be interesting to hear. Operator: We'll now move to our next question from Ulrik Zürcher from Nordea. Geir Holmgren: Operator, we'll try to answer the question first, please. Hans I can start with the claims frequency volatility. As you know, we are -- have an improvement when it comes to online compared this quarter to the third quarter last year. We see an improvement both on the group level and private and commercial and also in the Swedish operations. When it comes to volatility within the Norwegian part of the business, we see in the property side, more fires this quarter than you normally see. So it's also a kind of impact on some level of volatility, which is a part of our business from quarter-to-quarter. In addition, we saw a pickup, as you mentioned, on the motor side in the start of the third quarter. That's more due to higher frequency in July due to higher traffic density vacation weeks with this time tended to be more have a kind of an impact on the frequency side when it comes to motor. We do have quite high pricing measures, as mentioned in the October renewal. We see pricing measures, both for property and motor in Norway with renewables on 12.5% to 13% price increases on average, which is still above what we expect when it comes to frequency development and inflation going forward. Jostein Amdal: Yes. On the reinsurance recoveries, comment on specific claims. There is -- there has been a reduction of the estimates from some previous large claims, which have been above the retention limits. And that has then an effect that assumed the reinsurance recoveries will come down. So they're kind of -- if you have -- I try to explain it more clearly, if you have a reduction in a large claim estimate with no net effect because they have a reduction in gross claims and a reduction in assumed reinsurance recoveries. And that's the main reason why it's such a low number in the third quarter. Was that clear, Hans? Hans Rettedal Christiansen: Yes, very clear. Operator: Our next question is from Ulrik Zürcher from Nordea. Ulrik Zürcher: Just a short one. Jostein, when you say limited effects from the fire mutuals. Is it possible to -- like how much is that of premiums? And then secondly, just a technical one. You're trying to switch on profits to the Natural Perils Pool. I was just wondering, how will this work going forward? Jostein Amdal: Okay... Ulrik Zürcher: Is it like a quarterly thing or? Jostein Amdal: Yes. I get the question. The fire mutual there's a limited effect on the future development because there is -- this is -- first of all, this is a situation we also had 5 years ago when we had the termination of a number of fire mutuals as well. And it's then the fire mutuals have sold fire insurance in their own account, and then they have had been an agent on -- for all of the products for Gjensidige. And so we have both the fire mutuals and Gjensidige has had the customer relationship. And of course, we will be competing for the same customers. And we do expect a limited negative development on the premium development from this. So we will be strengthening our efforts within these geographical areas where these fire mutuals have operated. Yes. Geir Holmgren: If you talk about the impact on the profitability, I will also mention that because that's due to kind of agent distribution setup. We also definitely reduced expenses going forward regarding distribution. So we improved the distribution efficiency when it comes to existing customers through that channel. Jostein Amdal: The second question on Natural Perils technicalities is that when the line of business called Natural Perils has a surplus that surplus is transferred to the Natural Perils pool accounts in a way and that's then something we have to pay to this central Natural Perils Pool. Yes, and that's then on the negative on the others, other lines, other items. So it's a good year -- the positive will then be in the -- in a way where it's just a surplus or deficit. So if it's a surplus, it's a negative other. So there is no positive in a way. It's just a net negative. Ulrik Zürcher: Okay. So but will this be like done on a quarterly basis or annual? Jostein Amdal: In reality is every month, but then you, of course, get accounts every quarter. Operator: We'll now move to our next question from Derald Goh from Jefferies. Derald Goh: So my question is around the cost ratio. Now you're running at 12%. Is this the new base that is sustainable or would you -- and I guess, would you consider maybe reinvesting some of that into growth? Jostein Amdal: We are very happy to see reduced cost ratios. We have very strong cost discipline, and we have many cost efficiency measures going on in the organization and in our business. Our target at the moment is around 13% next year, but we are aiming for keeping the business still cost efficient, of course, and work every day to try to improve the cost efficiency. This, at the moment, as you mentioned, it could probably argue that it's some kind of room for doing other types of investments. But every type of investments we are doing have -- will have a good business case and will make -- improve the profit over time. So we are still focused on being a cost-efficient business and that's part of the core of our business and the way we are thinking. Derald Goh: But just to be clear, I guess, is it expected to assume that some of this 12% is a reasonable run rate for now? Jostein Amdal: I think we will not give any kind of guiding on our cost ratio going forward. The best thing to mention is our target for next year, which is around 13%. Operator: And we will now take our next question from Thomas Svendsen from SEB. Thomas Svendsen: Yes. So a question to the pension operation from my side. So can you just explain a little bit more why you scrap this system? Are there any changes in -- sorry, your market approach or something other? And also just remind us of the business plan for your business -- for your pension units? And also, could you sort of indicate sort of what to expect to be sort of normalized pretax profit level given the current asset base there? Geir Holmgren: Okay. the reason for terminating the core system within the pension business is due to our needs and requirements regarding the business we have today regarding pension business and pension-related products. Our assessment is that we are not getting the full benefit out of the existing core system, which was terminated and that has developed during the years we have doing the development, I would say. So this is a conclusion on something we -- the kind of assessment and consideration we have done in the past. And our assessment is that this is not the right system for Gjensidige going forward, taking care of our pension business in the Norwegian market with all the kind of requirements needed for doing that efficiently and with high quality. Our pension business in Norway is when it comes to a more strategic view on that. It's a very integrated part of our commercial business, especially in the SME areas, we see that we are running this business very cost efficient when it comes to distribution. It's capital efficient as well due to the types of products we have in the pension business. And I'm very happy to see the growth we have had within that business during the last couple of years, and it's a very motivated organization to keep that up on a high level going forward as well. So we are focusing on occupational pension and are happy to see that the market has a high level of growth, which we definitely take our earned part. So yes, I think that's probably on the business side. Jostein Amdal: I can add on the kind of financial guiding. I mean we don't guide us on much, but we have stated a return on equity target for the pension business back in the Capital Market Day in November '23, where we said that based on IFRS earnings, which is the company accounts for the pension business, we need to -- or target to return more than 15% return on equity. And if you exclude this nonrecurring item, year-to-date, the return on equity is 20.7%. So we are well ahead of our stated financial targets for the pension business as a company. Geir Holmgren: And if you look at the accounts for IFRS 4 in that business, it's -- actually we had a very good quarter when it comes to underlying profitability, good growth on the income side, revenue side, and it's run very cost efficient as well. Operator: We'll now take our next question from the next caller, please introduce yourself by your name and the affiliation after the automated prompt. Unknown Analyst: This is [indiscernible] from Autonomous Research. Can you hear me? Geir Holmgren: Yes. Unknown Analyst: I have just one question just on solvency given the very strong progress year-to-date. I was wondering whether you could comment on where your preferences in terms of capital deployment currently lies in terms of whether you see some good M&A opportunities on the horizon or whether you are more leaning towards passing your capital and potentially repatriate some in the form of special dividend or share buyback? And then secondly, look to the capital situation, if you could comment on any update, if any, on the approval process for your own partial internal model? Geir Holmgren: Okay. Yes. I'm very happy with the capital position. We have a strong solvency number, 191, which is above our target interval. We are -- the Board will do their assessment when it comes to dividend at year-end. We are not aiming for having any kind of surplus capital within the group. So this is definitely a part of the consideration when doing the assessment of ordinary and extraordinary dividends by year-end. Yes. Jostein Amdal: And -- yes, on the process, really no update at this point, really, we are still in the process with Norwegian FSA. Unknown Analyst: And so if I could follow up. And there's nothing interesting on the M&A profit you see at the moment? Geir Holmgren: No, we are focused on organic growth in the business. So we are not considering any structural way of growing the business. We are happy with the position we have in Norway and improving the business we're having in Denmark by many operational measures, and that's our focus now. And yes. Operator: [Operator Instructions] We'll now take our next question. Vinit Malhotra: This is Vinit from Mediobanca. So my one question would be just following up on your comment on the July weather effect driving the 1 to 2 points you mentioned on the underlying. I'm just curious, is there a similar explanation? Or is that the same explanation for commercial Denmark, which seems to have worsened about 4 points in the quarter when compared to 3Q '24, is there any comment on that you could share that also throw some light on what's happening there? Jostein Amdal: Thank you, Vinit. No, it's not related to the same cost. This is more just inherent quarterly volatility on our commercial book of business. So it's really specific explanation around it, we do see a somewhat increased level of both size and frequency of claims within that business, but nothing we regard as giving the indication of a future trend, so it's volatility. Operator: We'll move to our next question. Michele Ballatore: Yes. This is Michele Ballatore from KBW. So my question is related to the -- in general, the pricing regarding your comment earlier. So can you tell us what is the status of the -- your pricing, both in private and in commercial across Norway, Denmark and Sweden? Geir Holmgren: Starting with Norway. We have over time now, 2 years' time, we have had a quite heavily pricing measures going on, which also have increased the pricing level substantial -- substantially for both property and motor insurance. The average decrease within property was approximately 60% last year and promoter between 18% and 19%. The ongoing pricing measures are still having quite high price increases. But compared to what we have done in the past is a more moderate level, but we are talking about 12% to 13% price increases on average for property and motor insurance in Norway. That's above what we expect when it comes to inflation in the next 12 to 18 months, and it's about the frequency development. So -- but we have a very good and stable position in Norway, still high retention numbers and still I'm very happy to see our competitiveness in the Norwegian market, both on private and commercial side. When it comes to commercial, large parts of the portfolio have renewals at 1st of January. So we are preparing for that as well with quite high price increases due to what we have done in the types of considerations we are doing. In Denmark, we have price increases going on in the private segment. As I mentioned before, we have not been satisfied with the profitability in our private Danish business. We have had many, many quarters with red numbers. Happy to see that we have -- can pace of progress during second quarter and third quarter and cost profitability. But price increases are needed to improve that business in addition to cost measures and improving the cost efficiency of that business. On the commercial side, my opinion is that we have a very, very strong position in Denmark when it comes to our commercial business. We do have a good relationship with the main brokers. We have recognized brand name, a stable good portfolio. When it comes to results, it will be some kind of volatility from quarter-to-quarter, but our starting point going forward is at a very, very good level when it comes to our pricing power and our position in the commercial segment. And for Sweden yes, still ongoing pricing measures, I'm very happy to see that we have succeeded when it comes to improve our efficiency and to improve the way we are doing business with more digital solutions. And it's a small business, but we have -- but the business we have succeeded to improve profitability over time during the last couple of years, and I'm very happy to see that. Michele Ballatore: Sorry to follow up on Norway. If I understood correctly, you were talking about 12%, 13% price increases. I mean this is -- am I wrong in assuming I mean this is significantly above inflation. And you have, of course, quite sizable market share in Norway. But my point is, is this something -- I mean, is there the same level of discipline in the market? I'm just trying to understand what you're doing compared to what the market is doing in Norway, specifically? Geir Holmgren: Yes, good question. We started with repricing our private portfolio in Norway, third quarter 2 years ago. So it has been ongoing pricing measures above inflation now on -- during the last 2 years. My impression -- my view is that Gjensidige probably started that kind of price using pricing measures quite heavily, started that first in the Norwegian market. So we are actually a first mover when it comes to having the pricing measures. Yes. We still see that we have good pricing power. The retention rates are still high. We are prioritizing profitability before growth and used market situation, and you also see that our competitors are doing price increases that we are still continuing with quite high price increases as well. The pricing level you mentioned, that's correct. On average, 12.5% to 13% within motor property within private above inflation numbers as we see and frequency development, as we have seen in the past. So we also take care of the kind of claims mix which you will see from time to time when you get new cars in the market and different types of claims, and that would also change from quarter-to-quarter due to the weather conditions. Mitra Negård: Operator, are there any further questions? Operator: Yes, we have a question from Hans Rettedal. Hans Rettedal Christiansen: I guess it's a bit general, but I was just wondering sort of related to the previous question, do you see any effect from the price hikes that you've implemented now on customers, perhaps dropping coverage or changing coverage, changing terms of deductibles or any sort of movements on the customer side as an effect of kind of pricing having increased quite significantly over the past couple of years? Geir Holmgren: We spend more time with the customers now than we have done in the past due to everything that's happening in the market. But we also have a situation in Norway and in Denmark that we see quite high price increases due to what we have seen in the past. So the pricing discipline among our peers are at a high level as well. But this situation also makes the customer more -- doing more considerations regarding the insurance contracts, and they are checking prices more than had done in the past. But we don't see any negative impact on our business volume when it comes to that kind of activity. We still see that the retention numbers are still high. And I'm very satisfied with the level of customer satisfaction and customer loyalty. We do have in our -- especially our Norwegian portfolio. So my view is that we still have a very good pricing power when it comes to do all the necessary measures we have mentioned. Operator: And we have another follow-up question from Derald Goh from Jefferies. Derald Goh: The first one is a clarification. Could you say what are the rate increases that you're putting through in Denmark? Like what percentage is it? And how does it compete to the claims inflation in both private and commercial side of Denmark? And then could you maybe speak to how conservative you might be recognizing some of the margins? I think there are a few questions that has already being that the rate increases seem to be far outstripping the claims inflation number. Is it a case that maybe you are building up a bit of a reserve buffer? Jostein Amdal: I think on the first, what are the actual price or rate increases that we are putting through in Denmark, we haven't been as clear as we have been on the 2 main products in Private Norway, but we are looking at price increases that are well above our expected development in claims, which is a combination of claims inflation and number of claims, the claims frequency. So that's why what we're aiming for. And of course, as always, what we will get through will be a function also of the competitive situation there. And I remind you that our business is quite a lot larger in commercial than in private -- in Denmark, and we have very strong position within Commercial Denmark. We are looking at combined ventures at around 85%, 86%, depending on if you look at the quarter or year-to-date, which is a healthy profit. But we still continue to put through price increases above our expectations of the claims development. Operator: We have another follow-up question from Thomas Svendsen from SEB. Thomas Svendsen: Yes. This is Thomas again. So just on customer behavior in Private Norway. Is there -- this change in behavior by clients, do you see much more inbound call. Clients want to discuss the price? And also do you need to sort of get back to rescue clients that are leaving you? Is that an increased activity there within the net retention levels that you talk about? Geir Holmgren: We haven't seen any change this quarter compared to the last couple of quarters when it comes to that kind of activity. If you look at the number of customers, we are increasing the number of customers in our private portfolio in Norway compared to what we had year-end '24. So I'm very satisfied with the sales activity, distribution efficiency. But in all respect, we do talk more to customers during the last couple of quarters than we have done in the past due to all the high price increases, different types of customers meet across all insurance providers and for different insurance contracts. Jostein Amdal: I'll also remind you that the growth in Private Norway was although mainly price. We had an increase in the kind of the volume, the number of customers, as Geir mentioned, but also number of cars, houses, travel insurance policies and so on. So there's an underlying volume growth as well, although the main part of the growth is price driven. Operator: And we have another follow-up question from Mediobanca. Vinit Malhotra: Vinit from Mediobanca. The second question from me is on the inflation outlook, because I remember that we were all expecting you to provide an update on inflation in this quarter, and it appears to be unchanged versus Q2, whereas, obviously, in Q2, we heard you talk about reducing some of the price increases, and we see that in the numbers. So could you just comment that is this inflation being unchanged Q2 versus Q3, a surprise to you? And what are the drivers and are you still happy with lowering the price increase within Norway, even though inflation outlook is unchanged? Geir Holmgren: Starting with property in Norway, the actual inflation third quarter this year compared to -- or during the last 12 months was 4% and our expectation for the next 12 to 18 months is between 3% and 5%. That's a combination of repair cost and labor expenses in the property segment. We -- when it comes to motor, actual inflation in the last 12 months, around 4.4% expected. The next 12 to 18 months is quite big interval between 3% to 6% and the kind of uncertainties regarding trade barriers and what's happening in especially in the motor industry. And so it's a kind of a certainty, and that's the reason for having big interval as well when it comes to inflation, expected inflation going forward. But -- as mentioned, we are having pricing measures at the moment, which are definitely above the expected inflation, including also what you have seen on the frequency development in the past. Jostein Amdal: May I also add that remember that these are the what we tell you about are the price increases that are in place for policies that will be renewing now, whereas the accounting effect is a function also of all the price increases and the levels of price increase that we had over the last 12 months, which we have informed about every quarter, which have over the last 12 months, bit slightly higher than the ones we are currently putting through to the customers. So there's an overhang of kind of all the previous price increases now. And as Geir said, given that these price increases are higher than what we expect, at least as a future claims development, that should bode for a margin improvement also further down the road. Operator: And we have a new question from new caller, please introduce yourself and your affiliation. Unknown Analyst: It's Yulis from Autonomous Research. I was wondering if you could comment on the revenue growth dynamics in the near term. I mean, in the third quarter, your 13% year on growth was -- kind of helped by some one-off factors. At the same time, you're also -- because it can earn revenue, it's also benefiting and reflecting the higher rate increases that you implemented in the past year. So I was wondering whether that 13% is a sustainable level in the near term or whether it could potentially improve on the basis that it's reflecting the earned written premiums going forward? Jostein Amdal: First of all, I remind you that we talked about a onetime effect due to a change in principle on the home seller insurance. So the kind of current adjusted for currency, and that is 11.3%, which is kind of the level we report. And nonrecurring is, of course, not -- should not influence your forecast. So it's more like the 11%, which is based on the premiums that we have implemented over the last 12 months. And we've also given the growth numbers per segment. I think that is kind of the best way for you to try to predict what's going to happen. And we combined -- commented on the kind of effects on Commercial Denmark, which is 6.4%, rather than 4.4% in the currency, if you adjust for an accounting effect last year and also that the Swedish number due to the accruals is underlying a bit higher than what we have reported, which is 2.7%. So it's more in the 6%, 7% range as well. I think that is the building blocks you should probably use for your estimate of future revenue development. Operator: And we have another question, please caller introduce yourself. Qian Lu: It's Qian Lu, UBS. I just have one on the ongoing pricing measures in Norway, which slowed down quarter-on-quarter. I'm wondering if this is implying a more proactive strategy to enhance our competitiveness in the market and grow policy accounts? Or is it more of a reaction to increased competition in the market? And I guess related to this, given one of your peers has indicated that they plan to normalize price increases from next year onwards. I wonder how you are thinking about the time line for your price adjustments? Geir Holmgren: The price increases we are having at the moment and which are implemented as mentioned, it's above expected claims inflation and frequency development. The high level of price increases we have in the past is also a response on the frequency development we have seen during the last 2 years, especially on the motor side, but we have also seen some more volatility regarding property insurance, high number of fires in some quarters, more water-related claims and so on. So we have -- that's the reason in the past for doing quite heavily pricing measures and to improve the profitability, which was weaker going 2 years back. Going forward, I'm not in a position, where I can comment on future price increases due to antitrust and competition rules. But we are only commenting on what we're doing and have done at the moment, and we are still having price increases, which is above frequency development and inflation numbers. And we don't expect the frequency development we have seen in the past. We don't expect that to continue in the kind of way it has done during the last couple of years, but we have seen especially -- for instance, on the motor side, we have seen in the last quarter, underlying development on the frequency side is between 1% and 2%, and we still expect to have some kind of frequency development also for motor going forward, but not at certain levels we have seen during the last 2 years. Operator: And appears there are currently no further questions in the queue. With this, I will like to hand the call back over to Mitra for closing remarks. Over to you, ma'am. Mitra Negård: Thank you. Thank you, everyone, for good questions. We will be participating in roadshow meetings and a seminar during the next few weeks, starting with Oslo today and London next week. Please see our financial calendar on the website for more details. So with that, thank you for your attention, and have a nice day.

203天前Insight Analytics约5分钟阅读

NHYDY 2025 Q3 财报电话会议

Baard Erik Haugen: Good morning, and welcome to Hydro's Third Quarter 2025 Presentation and Q&A. We will begin shortly with a presentation by President and CEO, Eivind Kallevik, followed by a financial update from CFO, Trond Olaf Christophersen. And as usual, we will finish off with a Q&A session. [Operator Instructions] When we get to the Q&A, I will then read your questions on your behalf to Eivind and Trond Olaf. And with that, I turn the microphone over to you, Eivind. Eivind Kallevik: Thank you, Erik, and good morning, and welcome from me as well. Safety, as always, is our key priority. It's the most important metric in our quarterly reporting. The health and well-being of our employees is fundamental to the success of the company. And we have had positive development and lowered the number of injuries and incidents for a long period of time. The downward trend continued also over the last few years has continued also this quarter. And I'm pleased to report that both the total number of recordable injuries and the number of high-risk incidents are lower compared to the last quarter. However, we're also well aware that good results and safety cannot be taken for granted. This situation can change rapidly. Maintaining these low numbers demands continuous attention and commitment from all employees across all our locations. Our strong safety culture is rooted in genuine care for our people, ensuring everyone remains healthy and safe while working for Hydro. The commitment to safety is also essential for keeping our operations stable and efficient 365 days a year. By fostering a safe work environment, we are able to achieve our strategic targets and to increase our long-term value creation. Now let's have a look at the key highlights this quarter. We will get back and dig deeper into this also later on in today's presentation. Challenging markets are affecting the results this quarter, leading to an adjusted EBITDA coming in at NOK 5.996 billion. Now despite this, I'm also happy to report a solid free cash flow generation at NOK 2.2 billion, yielding an adjusted RoaCE of 11%, which is above our target of 10% over the cycle. Measures have been taken to meet the uncertainty in the market, and many initiatives are being executed to further increase robustness. And we can already now report progress on our strategic workforce adjustment and the cost reduction initiative announced back in June. On the energy side, we are pleased to have added another long-term power contract to our sourcing portfolio. Alouette has signed an agreement in principle for continued long-term power supply. This quarter, we also received a final judgment in the Dutch court dismissing all claims against Hydro filed by Brazilian Cainquiama and 9 individuals back in 2021, based on both legal as well as factual grounds. And lastly, we can report concrete results coming from our targeted strategic approach to partnerships. We continue to advance our low carbon and circular solutions through close customer collaborations. Executing on strategic workforce and cost reductions as a response to market uncertainty, we did launch a new cost-cutting measure in addition to strategic workforce adjustment measures back in June. The workforce adjustment project aims to reduce white collar manning by 600 people in 2025 and another 150 people for 2026. In addition, we introduced the hiring freeze and limitation on travel and consultancy expenditures. The estimated gross redundancy cost is estimated to be around NOK 400 million this year and estimated cost savings are NOK 250 million. This gives us a net cost of around NOK 150 million in 2025. As we can see from the graph, annual net run rate savings included travel and consulting cost reductions are estimated to be NOK 1 billion from 2026. This gives an adjusted EBITDA improvement altogether for the improvement programs for 2030 of NOK 7.5 billion. Processes like these are always challenging, and we are doing our best to be considerate and to be transparent towards all our employees. And to ensure a professional process, we work in close collaboration with employee representatives. I do want to emphasize that this project is done in parallel with other ongoing performance and capital discipline measures. We still conduct our improvement program with undiminished strength. There is also a parallel restructuring process in Extrusions with large reductions in employees already taking place. And lastly, we have reduced our CapEx guidance announced last quarter. These initiatives aim to strengthen Hydro's ability to navigate global uncertainty. We're not pulling the brakes on our strategy, but we are ensuring that when we grow, we do it with the right structure and with the right priorities. Moving on to some good news on Alouette, where Hydro holds a 20% ownership stake. This quarter, Alouette has signed an agreement in principle to secure supply of power from 2030 to 2045. The agreement is signed with the government of Quebec as well as Hydro-Quebec. This will ensure long-term competitive prices in a market where the energy balance is tightening. As you can see from the graph, our total power consumption in the years to come requires us to constantly explore alternatives for renewable power sources in order to maintain our energy resilience. And this agreement is an important step to ensure stability for Alouette and to further strengthen Hydro's global portfolio of long-term renewable power. Now let's move to another strategic priority. It's been almost a year since we announced the phaseout of Hydro Batteries, a decision driven by persistent market challenges. And I am pleased to report that we have made progress on the phase-out process. We have recently done 2 battery portfolio transactions in line with Hydro's strategic ambitions for 2030. Earlier this month, Hydro Energy Invest entered a transaction to exchange its minority stake in Lithium de France for a minority shareholding in the listed company, Arverne Group. In addition, Hydro signed an agreement to divest its entire ownership stake in a maritime battery company, Corvus Energy, and the closing is expected to happen early November. Hydro continues to remain engaged in the energy transition, but these transactions help us concentrate on core business within energy and step up our ambitions within renewable power generation in line with the 2030 strategy. Another important event this quarter was the final judgment issued by the Rotterdam court in the case for against Norsk Hydro ASA and its Dutch subsidiaries on September 24. The court fully dismissed all claims, including claims of pollution caused by Alunorte following the heavy rainfalls in the region in February of 2018. The court's dismissal was based on both legal and factual grounds. During the proceedings, Hydro presented extensive evidence, including expert analysis as well as empirical data. On this basis, the court confirmed an established fact that there was no overflow from the bauxite residue deposits back in 2018. And consequently, no harm was caused to the environment. And this is an important confirmation supporting our position throughout the years since the lawsuit was filed. Lastly, I will round off my part of the presentation with 2 customer cases from the past quarter. A key priority in our 2030 strategy is to shape the market for greener aluminum in partnership with customers. We are pleased to see the results of our increased efforts in this area. Our strategic partnership with Mercedes-Benz has continued to accelerate over the years, aiming to decarbonize their value chain. This picture is from the last month where the new electric CLA cars produced with Hydro REDUXA 3.0 aluminum from Årdal, drove from Oslo to Årdal. Hydro can provide Mercedes-Benz low-carbon aluminum, ensuring a traceable and transparent value chain. And this is important for Mercedes to be able to deliver on their ambitious sustainability targets. Another exciting collaborative initiative this quarter and in fact, a large milestone for us is a new bridge in Trondheim called Hangarbrua. This is the first aluminum bridge built in Norway since 1995. The pedestrian bridge is made entirely from recycled aluminum sourced from the decommissioned Gyda oil platform from the Norwegian continental shelf. It is built by Leirvik in collaboration with COWI, partnered with Hydro, Aker Solutions and Stena. This project demonstrates that aluminum can be used in producing bridges of tomorrow, contributing to innovative solutions for the infrastructure sector. And it shows how end-of-life aluminum can be transformed into durable and valuable building materials. Although this project is relatively small, it's a tangible example of the significant potential for aluminum in public infrastructure development, a sector where demand is expected to grow substantially in the years ahead. So for me, these 2 partnerships illustrate the growing demand and potential for low-carbon aluminum and our success in expanding the market for circular and sustainable solutions. With that said, let me give the word to Trond Olaf for the financial update. Trond Christophersen: Thank you, Eivind, and good morning from me as well. So I'll start my part with the market side and starting with the bauxite and alumina markets. After an eventful 2024 dominated by refinery disruptions and bauxite supply challenges, the global alumina market balance has been normalizing since the start of 2025. Around 10 million tonnes of new alumina capacity is expected to come online from India, Indonesia and China this year with full impact expected in 2026. After the drop in alumina prices we saw in Q2 this year, alumina traded around USD 360 per tonne for most of Q3. With more capacity ramp-up, especially in Indonesian refineries, we saw alumina prices falling to around USD 320 per tonne at the end of the quarter. The excess supply is putting pressure on global refiners. If prices stay at the current level, we could see curtailments for high-cost refineries, especially in China. We would then expect a future tightening of the alumina market, pushing back prices to a more normalized level. According to CRU, a small surplus of around 500,000 tonnes is expected in '25, down to a 300,000 tonne surplus in '26 in the 58 million tonne world ex-China market. Consequently, the market would remain sensitive to any production disruptions. Moving to the primary aluminum market. Despite the rate increase to 50% of U.S. Section 232 tariffs on aluminum coming into effect in Q2, the LME and premiums continued to digest its consequences in Q3. Looking at the global primary aluminum balance, external estimates suggest that the market will remain roughly balanced in '25. The 3-month LME aluminum price rose during the quarter, starting at USD 2,599 per tonne and ending at USD 2,681 per tonne. The U.S. Midwest premium continued to surge in Q3, starting at USD 1,432 per tonne and ending the quarter at USD 1,631 per tonne, driven by 232 tariffs, the structural aluminum deficit and the need to attract metal into the U.S. In Europe, the quarter opened with a duty paid standard ingot premium of USD 185 per tonne, increasing to USD 258 per tonne at the end of Q3. As in previous quarters, Hydro's main concern remains the broader risk of a global economic slowdown from tariffs, which would weaken demand and challenge current price levels as a consequence. Then moving downstream. Extrusion demand stabilized at moderate levels in both Europe and North America during Q3 compared to the same quarter last year with light uptick in order intakes. In Europe, extrusion demand is estimated to have remained flat in Q3 '25 compared to the same period last year, but decreased by 20% from Q2 due to seasonality. Demand for building and construction and industrial segments has stabilized at historically low levels with some improvements in order bookings. Automotive demand has been negatively impacted by lower European light vehicle production, partly offset by increased production of electrical vehicles. For Q4 '25, CRU estimates that European demand for extruded products will increase by 1% year-over-year. Overall, extrusion demand is estimated to be flat in '25 compared to '24. In North America, extrusion demand is estimated to have increased 2% in Q3 '25 compared to the same quarter last year, but decreased 2% compared to Q2. Extrusion demand has continued to be very weak in the Commercial Transport segment, driven by lower trailer builds. Automotive demand has also been weak. Demand has been positive in the Building and Construction and Industrial segments, while the ongoing impact from the introduction of tariffs are still uncertain, order bookings have developed better for domestic producers due to lower imports so far this year. In Q4 '25, North American extrusion demand is expected to increase by 5% year-over-year. Overall, extrusion demand is estimated to decrease 1% in '25 compared to '24. Looking at our own numbers, Hydro Extrusions sales volumes increased by 1% year-over-year in Q3 '25. Similar to the previous quarter, transport volume developments were negative, but headwinds are moderating compared to previous quarters. Shipments to the U.S. transport market were down 5% in Q3 compared to minus 11% in Q2. Automotive sales in Q3 were still negative in Extrusions Europe, driven by continued moderate production at some car manufacturers. Automotive sales in North America increased 5% in Q3 from a low base than the same quarter last year, as negative overall market development was offset by increasing volume to key customers. Sales volume growth in the Industrial segment was stable in Q3, while sales in the Distribution segment increased by 8% in Q3, mainly driven by increased shipments in the U.S. After a significant increase in volumes in the HVAC&R segment previously in 2025, the trend turned negative in Q3 '25, mainly caused by tighter consumer spending and an inventory offloading at customers. For Q4, total sales volumes in Hydro Extrusions for EU and the U.S. are expected to be in line with underlying market growth expectations. Then moving to the financials. When looking at the results Q3 versus Q2, adjusted EBITDA decreased from NOK 1.8 billion -- from -- sorry, NOK 7.8 billion to NOK 6 billion. The main driver was normalization of eliminations. Realized all-in aluminum and alumina prices contributed negatively with around NOK 300 million. Upstream volumes had a net neutral impact where somewhat higher volumes in aluminum metal were offset by somewhat lower volumes in bauxite and alumina. Raw material costs contributed positively by approximately NOK 700 million, mainly driven by lower alumina costs in aluminum metal. This was partly offset by higher energy costs and a slight increase in other raw material costs. Extrusions and recycling margins and volumes had a negative impact of around NOK 300 million. 85% of the effect came from Extrusions and the remaining 15% from recycling in metal markets. The negative development in Extrusions was largely driven by lower sales, partly offset by positive impact from the metal effect through the higher Midwest premium. In Energy, lower production and lower prices impacted results for the quarter with a net negative impact of around NOK 100 million. Furthermore, fixed costs were around NOK 200 million lower compared to Q2 with positive Extrusions. Currency effects negatively impacted the results by around NOK 400 million with 70% of the effect related to aluminum metal and 30% to bauxite and alumina. This was mainly due to a stronger NOK compared to U.S. dollar. The largest negative effect this quarter was normalization of eliminations, which amounted to NOK 1.4 billion. In the second quarter, realization of previously eliminated internal profit had a positive contribution of the same size. Finally, net other elements had a net negative impact of around NOK 100 million. And this concludes the adjusted EBITDA development from NOK 7.8 billion in Q2 to NOK 6 billion in Q3. If we then move to the key financials for the quarter. Comparing year-over-year, revenue increased by around 1% to NOK 51 billion for Q3. Compared with Q2, revenue decreased by around 5%. For Q3, around NOK 200 million positive effects were adjusted out of EBITDA, mainly related to NOK 206 million unrealized derivative loss, mainly on LME-related contracts and a net foreign exchange gain on risk management instruments of NOK 66 million. The result also included NOK 116 million in rationalization charges and compensation for termination of a power contract, of which NOK 251 million is related to future periods. This results in an adjusted EBITDA of NOK 6 billion. Depreciations were around NOK 2.5 billion in Q3, resulting in adjusted EBIT of NOK 3.5 billion. Net financial income for Q3 was around negative NOK 450 million. This was largely driven by net interest and other finance expenses of around negative NOK 730 million. This was partly offset by an unrealized currency gain on around NOK 380 million, mainly reflecting a stronger NOK versus euro affecting embedded euro currency exposures in energy contracts and other euro liabilities. Furthermore, we have an income tax expense of around NOK 900 million for Q3, and the quarter was mainly impacted by high power surtax. Overall, this provides a positive net income of around NOK 2.1 billion and foreign exchange gains of approximately NOK 380 million are adjusted out together with the EBITDA adjustments mentioned earlier and partly offset by income taxes of around NOK 120 million. And this results in adjusted net income of NOK 1.9 billion in Q3. Adjusted net income is down from NOK 3.5 billion in the same quarter last year and down from NOK 3.6 billion in Q2. Consequently, adjusted EPS was NOK 1.02 per share. And let's then go to the business areas and give an overview of each of the business areas, starting with Bauxite & Alumina. Adjusted EBITDA for Bauxite & Alumina decreased from NOK 3.4 billion in Q3 '24 to NOK 1.3 billion in Q3 '25. This was mainly driven by lower alumina prices, higher fixed costs from a low level in Q3 '24 and negative currency effects caused by a weaker U.S. dollar against the NOK. This was partly offset by higher sales volumes and positive year-on-year effects from the full implementation of the fuel switch to natural gas. Compared to Q2 '25, the adjusted EBITDA decreased from NOK 1.5 billion to NOK 1.3 billion in Q3 '25, mainly driven by negative currency effects caused by a stronger BRL versus the U.S. dollar and lower sales volumes. Alumina realized prices decreased but maintained above market prices indications due to intra-group pricing mechanisms. Raw material costs were slightly higher Q3 versus Q2 and fixed costs remained stable. For Q4, we expect the production volume at nameplate capacity. And compared to Q3, we expect stable fixed costs and raw material costs are also expected to remain relatively stable. Moving then to Aluminum Metal. Adjusted EBITDA decreased from NOK 3.2 billion in Q3 '24 to NOK 2.7 billion this quarter. The main drivers year-on-year were negative currency effects caused by a stronger NOK against the U.S. dollar, partly offset by higher sales volumes and lower alumina costs. Compared to Q2 '25, adjusted EBITDA for aluminum metal decreased from NOK 2.4 billion, and this was driven by lower alumina costs, partly offset by higher energy costs, currency effects caused by stronger NOK against U.S. dollar and lower all-in metal prices, mainly caused by a sales mix pushing premiums to the lower end of the guiding. The raw material cost release was around NOK 700 million, which was lower than we guided for in the Q2 reporting. The reduction was lower than expected, mainly due to intercompany alumina pricing mechanisms, where the opposite positive effect is realized in higher B&A alumina price and result. These effects cancel each other out on the group level. Decrease in fixed cost was above guidance at around NOK 200 million caused by currency translation effects. And this brings me then over to the guiding for the next quarter. For Q4, AM has booked 72% of its primary production at USD 2,597 per tonne, and this includes the effect from our strategic hedging program. We have booked 40% [indiscernible] USD 423 per tonne, and we expect realized premiums to be in the range of USD 310 to USD 360 per tonne. On the cost side, we expect stable total raw material costs and increased fixed costs in the range of NOK 100 million to NOK 200 million, and sales volumes are expected to remain stable. Moving to Metal Markets. Adjusted EBITDA for Metal Markets decreased in Q3 from NOK 277 million in Q3 '24 to NOK 154 million due to lower results from sourcing and trading activities. And those were partly offset by increased results from recyclers. Excluding the currency and inventory valuation effects, the results for Q3 was NOK 174 million, down from NOK 375 million in Q3 '24. And compared to Q2, adjusted EBITDA for Metal Markets decreased from NOK 276 million due to lower results from recyclers and from sourcing and trading activities. Recycling results ended lower at NOK 93 million, down from NOK 136 million last quarter. The decrease was mainly due to seasonally lower volumes, partly offset by positive premium development. For Q4, we expect lower recycling results following continued margin pressure. In our Commercial segment, we also anticipate a lower contribution from sourcing and trading activities in Q4. As always, we emphasize the inherent volatility of trading and currency fluctuations. And given the realized results year-to-date, we have adjusted down the guidance for the commercial area adjusted EBITDA, excluding currency and inventory valuation effects to NOK 200 million to NOK 400 million for the full 2025. Moving to Extrusions. The adjusted EBITDA increased year-over-year from NOK 880 million to NOK 1.1 billion, driven by positive metal effects from increasing Midwest premiums, partly offset by pressure on sales margins. We saw 1% higher sales volumes as well as somewhat weakened sales margin primarily in Europe. Furthermore, lower recycling production negatively impacted the results with around NOK 100 million. And compared to Q2 '25, adjusted EBITDA for the Extrusions decreased from NOK 1.2 billion due to seasonally lower sales volumes, partly offset by positive metal effects and lower costs. Looking into Q4, we should always look towards the same quarter last year to capture the seasonal developments in Extrusions. External market estimates suggest a positive volume development year-over-year of 1% for Europe and 5% for North America. However, we foresee increasing pressure in both Extrusions margins and Recycling margins. We expect further metal effects year-over-year of NOK 50 million to NOK 150 million based on current spot Midwest premiums, reminding that metal effects are strongly dependent on the movements in the Midwest premium. And then moving to the final business area, Energy. The adjusted EBITDA for Q3 increased to NOK 828 million compared to NOK 626 million in Q3 '24. The increase was mainly driven by higher gain on price area differences, partly offset by lower production. Compared to Q2, adjusted EBITDA decreased from NOK 1.1 billion, mainly due to lower production and lower commercial results. The price area gain was NOK 330 million in Q3 at a similar level as in Q2. Looking into Q4, as always, we should be aware of the inherent price and volume uncertainty in energy. For the next quarter, production volumes and prices are expected to increase mainly due to seasonality. Furthermore, price area gains are expected to be lower following seasonal convergence between area prices. And then let's move to the final financial slide this quarter. Net debt decreased by NOK 1.9 billion since Q2. Based on the starting point of NOK 15.5 billion in net debt from Q2, we had a positive contribution in adjusted EBITDA of NOK 6 billion. During Q3, we saw a net operating capital build of NOK 1.4 billion, mainly driven by increasing inventories and receivables related to indirect CO2 compensation, partly offset by a release in net accounts receivables and accounts payables. Under other operating cash flow, we have a negative NOK 200 million impact, mainly driven by net interest payments, settlement of taxes and reversal of net income from equity accounted investments, partly offset by positive mark-to-market reversals and adjustments for noncash effective bonus accruals. On the investment side, we have net cash effective investments of NOK 2.2 billion. As a result, we had a positive free cash flow of NOK 2.2 billion in Q3. And finally, we also had negative other effects of NOK 300 million, and this was mainly driven by payments of new leases, partly offset by positive net currency effects on cash debt. As we move to the adjustments related to adjusted net debt, hedging collateral has increased by NOK 400 million since the end of Q2. And furthermore, during Q3, the net negative pension position decreased by NOK 700 million, turning into a net asset position of NOK 600 million positive. And finally, we had no changes in other liabilities during Q3. And with those effects taken into account, we end up with an adjusted net debt position at the end of Q3 of NOK 21.1 billion. And with that, I end the financial update and give the word back to Eivind. Eivind Kallevik: Thank you, Trond Olaf. Now as we conclude today's session, I'd like to summarize our continued priorities going forward. As always, health and safety remain our top priority, and we are fully committed to safeguarding the well-being of our employees. While we recognize that strong performance metrics can shift in just a moment of inattention, the ongoing positive trend in this area stands as a clear evidence of our dedication. We are navigating an increasingly volatile geopolitical situation that continues to affect our markets, but in response to these uncertainties, we are proactively refining our operational structure to target our most critical strategic priorities. This quarter, we have taken steps to execute on the phaseout of our battery operations in accordance with our strategy. We have several performance and capital discipline programs ongoing to help us better navigate global uncertainty and keep up the attention on profitability. We are seeing positive outcomes in our power sourcing portfolio highlighted by the Alouette recent long-term contract, which strengthens our energy resilience. Continuing to identify and pursue new opportunities in power sourcing remains essential to secure our future energy needs. Achieving tangible results on our 2030 strategy remains critical, and we are proud to see that we are taking steps in the low-carbon aluminum transition. Our market for recycled low-carbon products continues to advance, exemplified by the partnership with Mercedes-Benz and the infrastructure project in [ Tonya ]. We create growing markets through partnerships while we execute on our decarbonization and technology road map. And these concentrated efforts on growth and profitability ensure that Hydro continues to stay relevant. And we are committed to our decarbonization strategy, and we will continue to pursue our 2030 ambitions with unwavering determination. Thank you so much for your attention. And with that, I hand it over to you, Erik. Baard Erik Haugen: Thank you, Eivind, and thank you, Trond Olaf. We will then move into the Q&A session. [Operator Instructions] And we have a few already, so let's get started. First one is from Liam. Can you please give your latest thoughts on CBAM? Do you expect implementation from early 2026 or potential delays? Eivind Kallevik: Thanks, Liam. The way we look at this today, we do expect CBAM to be implemented from 2026. What we are, I would say, excitingly awaiting is any changes or adjustments to CBAM, for instance, around the scrap loophole. That remains to be seen as we get towards the tail end of this year. Baard Erik Haugen: And then there's a second question from Liam. Is it possible or likely that you will underspend versus the NOK 13.5 billion CapEx guidance for 2025? Eivind Kallevik: We are keeping the CapEx guidance at NOK 13.5 billion. Remember that Q4 is typically the quarter with highest maintenance and sustaining capital. Now if we have any updates to that, we will certainly be sure to give it at the Investor Day that we have in late November. Baard Erik Haugen: Then there's a question from Amos. Can you discuss the state of play with the Tomago's energy contract? Is it reasonable to assume that the smelter shuts in 2029? Eivind Kallevik: So Tomago is, of course, placed in an area where renewable power is hard to get in Australia and the power situation is pretty tight, leading to high energy cost. Currently, today, energy costs is roughly 40% of operational costs for the Tomago smelter. We continue to work with the stakeholders to see if there are any opportunities to get renewable power post the end of '28, but it is a challenging situation. And we will make sure that we update the market if and when there are news in this context. Baard Erik Haugen: And another one from Amos. Is there any change to guidance for Metal Markets trading and commercial EBITDA contribution for '25? I think that one was covered already. Trond Christophersen: Yes. So as I said, we have reduced the guiding to NOK 200 million to NOK 400 million, down from NOK 300 million to NOK 500 million, as we said in the Q2 report. So that is the reduction in the guiding. Baard Erik Haugen: And then a question from Matt. Considering the recent volatility in alumina prices and the increase in refinery capacity from Indonesia with potential developments in Guinea, how is Hydro approaching the balance between LME linked and PAX-based pricing for future alumina contracts? Also, could you please provide some more color on the Alba supply agreement in Q3? Eivind Kallevik: Yes. So when it comes to pricing of alumina, PAX remains the predominant pricing parameter and that I suspect you should also expect going forward for the new contracts that we enter into. When it comes to the Alba contract, it's a contract that we are very happy to enter into. It's a long-term partner in the Gulf. Other than that, I really cannot comment on specific commercial details of any contract. Baard Erik Haugen: And then there's a question from Hans Erik. Any news regarding potential tariffs on scrap exports from Europe? Trond Christophersen: Yes. So the commission in the EU had planned for an announcement late in Q3. That has now been postponed until late Q4. So that is the latest information we have. So then again, we expect the news at the end of Q4. Baard Erik Haugen: Question from Magnus. There seems to be a miss versus guidance of NOK 300 million on raw material costs, looking at the group combined. Can you explain the drivers here? Trond Christophersen: Yes. So Magnus, on the raw material costs, I think you need to look at bauxite and alumina and aluminum metal together. And we guided on NOK 1 billion to NOK 1.2 billion. We realized NOK 700 million. But if you add roughly NOK 200 million plus from B&A to that guiding due to the internal pricing mechanism, we are closer to the NOK 1 billion. And then with some slight increases in energy costs and less reduction of carbon costs, both below NOK 100 million. But if you add all that together, you are within the guiding. So that is basically the difference. Baard Erik Haugen: Then we have a question from Bengt. Looking at actual price changes for premiums during the quarter and your expected range of USD 310 to USD 350 per tonne, the midpoint implies lower realized premiums quarter-on-quarter, whereas premiums are up quarter-on-quarter. Are there a temporary change in sales mix that explains this? Eivind Kallevik: So thanks, Bengt. And you are correct. When we've looked to the value-added products market, both in Q3 and when we look into Q4, we do expect to produce somewhat more standard ingots compared to what our normal product mix would be. And that, of course, drags the average premium somewhat down. Baard Erik Haugen: Then there's a question from Ioannis. Market expectations were for a meaningful increase in extrusion volumes in 2026 from through levels. Q1 '26 outlook suggests just 2% to 4% improvement year-on-year. Can you provide some color on end markets and whether you are seeing any uptick in Automotive and HVAC going into next year? Trond Christophersen: So I would say that the overall extrusion market is the market where we see a lot of uncertainty. It is difficult to give sort of additional flavor on the expected volumes going into next year. We use the external CRU as a reference. And as we said this quarter, we roughly followed the development for CRU, which we also expect for the coming quarter. We have been expecting a recovery in extrusion market for quite some time now. But again, as always, it's very difficult to tell when we will see the market turn. Baard Erik Haugen: Then we have a follow-up from Bengt. Follow-up on the standard ingot. Is that normal seasonality or changes in end-user demand? Eivind Kallevik: So I think you need to look at this 2 ways. One is that demand in Europe has been relatively weak, as Trond Olaf has been through. That's part of it. Second part of it is that customers -- our customers is then also drawing down their inventories quite significantly, both in the U.S. and in Europe towards the year-end. And as such, we produce somewhat more standard ingots to get our operating capital also out the door. Baard Erik Haugen: Then there's a question from Magnus. Are we done seeing significant positive eliminations? Our impression was that there was more to come as the Q2 release was smaller than the buildup in the year before. Trond Christophersen: Well, eliminations are unfortunately difficult to predict also for us internally. But if you look at the total accumulation of negative eliminations through the price increase for alumina, we accumulated roughly NOK 2 billion. And now we have released, I think, yes, around NOK 1.76 billion in total. But the remaining level we keep in the balance will fully depend on the development of the alumina price. And I think sort of the positive twist on this is that since we now are generating much better cash flows in bauxite alumina compared to the situation before the alumina price surge we saw last year, we then will have a higher eliminations in the balance if the current market prices stay. Baard Erik Haugen: Then there's a question from Amos. What is your guidance for Q4 working capital movements? Trond Christophersen: Yes. So we maintain our guiding that we gave at the Capital Markets Day last year that we will deliver the NOK 30 billion at year-end. Baard Erik Haugen: Okay. Then there seem to be no further questions, in which case we will round it off here. Thank you all for joining us here today. Please don't hesitate to reach out to Investor Relations if you have further questions. And we wish you all a great day. Thank you.

203天前Insight Analytics约5分钟阅读

KNSL 2025 Q3 财报电话会议

Operator: Good morning, and welcome to Kinsale Capital Group's Third Quarter 2025 Earnings Conference Call. [Operator Instructions]. As a reminder, this conference call is being recorded. Before we get started, let me remind everyone that through the course of the teleconference, Kinsale's management may make comments that reflect their intentions, beliefs and expectations for the future. As always, these forward-looking statements are subject to certain risk factors, which could cause actual results to differ materially. These risk factors are listed in the company's various SEC filings, including the 2024 annual report on Form 10-K, which should be reviewed carefully. The company has furnished a Form 8-K with the Securities and Exchange Commission that contains the press release announcing its second quarter results. Kinsale's management may also reference certain non-GAAP financial measures in the call today. A reconciliation of GAAP to these measures can be found in the press release, which is available at the company's website at www.kinsalecapitalgroup.com. I will now turn the conference over to Kinsale's Chairman and CEO, Mr. Michael Kehoe. Please go ahead, sir. Michael Kehoe: Thank you, operator, and good morning, everyone. Bryan Petrucelli, our CFO, Brian Haney, our President and COO; and Stuart Winston, our EVP and CUO, Chief Underwriting Officer, are joining me on the call this morning. We announced some management changes last night, the most significant of which is Brian Haney's recent election to the Board of Directors and the announcement of his retirement and new role as Senior Adviser beginning next year. We congratulate him on his election and are encouraged that he will continue to have a prominent role in the governance and direction of Kinsale. Brian and I have worked together for almost 30 years at three different E&S companies. He was one of the original founders of Kinsale and has made tremendous contributions to our success over the almost 17 years we have been in business. It's been a great run. And needless to say, we are fortunate that he will continue contributing to Kinsale as a Director and as a Senior Adviser with a focus on investor communications. I'd also like to congratulate Stuart Winston on his promotion to Executive Vice President and Chief Underwriting Officer. Stuart and his team have delivered some of the best underwriting results in the industry. So this recognition is well earned, and under his leadership, we have great expectations for continued profit and growth in the future. In the third quarter 2025, Kinsale's operating earnings per share increased by 24% and gross written premium grew by 8.4% over the third quarter of 2024. For the quarter, the company posted a combined ratio of 74.9% and a 9-month operating return on equity of 25.4%. Our book value per share has increased by 25.8% since the year-end 2024, and our float has increased by 20%. E&S market conditions were steady in the third quarter, generally competitive with our growth rate varying from one market segment to another with our overall growth rate at 8.4%. Our Commercial Property division saw premium dropped by 8% in the third quarter compared to a 17% drop in the second quarter. The overall third quarter growth rate, excluding our Commercial Property division was 12.3%. And Brian Haney is going to provide some commentary on the market here in a moment. Kinsales' disciplined underwriting and low-cost business model is a consistent winner in an industry where the customers are intensely focused on cost. As the E&S market has become more competitive over the last 2 years, Kinsales' efficiency has become a more significant competitive advantage, by allowing us to deliver competitive policy terms to our customers, without compromising our margins. Likewise, in a moment in the P&C cycle characterized by loose underwriting standards, Kinsales' control of its underwriting process and superior data and analytics helps deliver consistent and attractive results. And with that, I'll turn the call over to Bryan Petrucelli. Bryan Petrucelli: Thanks, Mike. As Mike just noted, we continue to generate great results, with net income and net operating earnings, both increasing by 24% quarter-over-quarter. The 74.9% combined ratio for the quarter included 3.7 points from net favorable prior year loss reserve development, compared to 2.8 points last year with less than 1 point in CAT losses this year compared to 3.8 points in the third quarter of last year. We continue to take a cautious approach to releasing reserves. Gross written premium grew by 8.4% for the quarter, while net earned premium grew by 17.8%, which was higher than the gross written premium due to an increase in retention levels upon renewal of our reinsurance program on June 1. We produced a 21% expense ratio in the third quarter compared to 19.6% last year. Higher expense ratio is attributable to lower ceding commissions, generated on the company's Casualty and Commercial Property quota share reinsurance agreements, as a result of the higher reinsurance retention levels that I just mentioned. On the investment side, net investment income increased by 25.1% in the third quarter over last year, as a result of continued growth in the investment portfolio generated from strong operating cash flows. Kinsales' flow, mostly unpaid losses and unearned premium grew to $3 billion at September 30 up from $2.5 billion at the year-end 2024. The annual gross return was 4.3% for the first 9-months of this year and consistent with last year. New money yields are averaging slightly below 5%, with an average duration of 3.6 years on the company's fixed maturity investment portfolio. And lastly, diluted operating earnings per share continues to improve and was $5.21 per share for the quarter, compared to $4.20 per share for the third quarter of 2024. And with that, I'll pass it over to Brian Haney. Brian Haney: Thanks, Brian. First, let me say it's been an absolute honor and privilege to have worked at Kinsale for the last 17 years. There's no better E&S company in the business, and there's no better group of people to work with. Kinsale has come a long way from its first days in 2009 when we were just starting out with Bryan Petrucelli, Mike, myself as well as Bill Kenney, [ Emery Morrison ] and Ed Desch, who I see is on the phone call today. I'm grateful for the opportunities I've been giving by Mike and the Board over the years. I'm proud to have played whatever part I could in the success of Kinsale. It's a tremendous honor to have the opportunity to serve on this Board with so many talented Directors, whom I've worked with over the years, and I'm really pleased that I will continue to be associated with this great company. And I am very confident in our future. We have built an amazingly deep bench. We have great young executives like Stuart and many others like him. The investors should rest assured that this company is in great hands and will continue to be going forward. With that said, on to business. The E&S market remains competitive, as Mike said, that the intensity varies by division. The shared layered Commercial Property continues to be very competitive. But it appears we hit an inflection point sometime early in the third quarter, perhaps late in the second, where the rate of decline is abating. When you look at all the Property business in total, including the Small Property, Agribusiness Property and in the Marine, the book actually grew in the third quarter. In other areas, we're seeing the most growth in Commercial Auto, Entertainment, Energy and Allied Health. Although the market is competitive, our model of low expenses and absolute control over the underwriting and claims handling works well in any market. I would argue it works better in a competitive market because it makes our expense ratio more telling, also the fastest-growing participants in the market today are largely funding companies, whose risk-bearing partners must contend with expense ratios often double ours or higher. And that math isn't going to work out for them. Submission growth was 6% for the quarter, which is down from 9% in the first quarter. That decline is driven by our Commercial Property division. Our pricing trends are similar to the Amwins Index, which reported an overall 0.4% decrease. Commercial Property rates are still declining, but we feel we have reached that inflection point, as I mentioned, where the rates are -- rate declines are stabilizing, and I expect we will see rates in the Commercial Property market, moderate going forward. Overall, we remain optimistic. Our results are good. Our growth prospects are good and as the low-cost provider in our space, we have a durable competitive advantage that should allow us to continue to gradually take market share from our higher expense competitors, while continuing to deliver strong returns and build wealth for our investors. And with that, I will turn it back over to Mike. Michael Kehoe: Thanks, Brian. Operator, we're now ready for any questions in the queue. Operator: [Operator Instructions] Our first question will come from Bob Huang from Morgan Stanley. Jian Huang: So Brian, congratulations on the new role and the retirement. But just maybe if we go into your business outside of Commercial Property, can you maybe comment on where you think the future opportunities would be? Especially given it seems like there's a little bit of a growth deceleration for the quarter. Just kind of curious outside of Commercial Property, what are the areas that you think that are very attractive for you? And what are the areas you think you want to pullback a little bit? Brian Haney: Well, I think we've got opportunity across the whole book. I would say some of our newer areas that we've developed recently would be the Transportation segment and the Agribusiness segment. But I think there's still a great opportunity in Casualty. And then some of the other property-related lines, I think there's still a great opportunity, high-value homeowners and our Personal Lines, it is an area we're putting a lot of emphasis into. We think that's a great opportunity. So I think it's really by the spread. There's a lot of different places we can grow. Michael Kehoe: Yes. For the quarter, all of our Property Lines, except for the Large Commercial Property division, all the other property-focused lines grew at a double-digit clip. So I would reiterate what Brian said. We're pretty confident. Jian Huang: That's very helpful. My second question is with regards to technology, obviously, that's one of your core competencies here. But just curious if you can give us a little bit of color in terms of new tech innovation and implementation into the business? And then just curious as to how you're incorporating emerging technology into your business and where are the areas you feel that would be advantageous for Kinsale going forward? Michael Kehoe: Well, Bob, this is Mike. When we started the business 17 years ago, we talked about making tech, a core competency of our company alongside of the underwriting and the claim handling. And I think we've done that. We build our own enterprise system over the years, took a long time. And about 2 or so years ago, we started what we call target state architecture, which is a complete rewrite of that entire enterprise system. It's an enormous undertaking, but it kind of puts us in a position to really speed up the implementation of new technologies and whatnot. So that target state is an enormous project. We're always enhancing and expanding our product line, that involves our technology department. We've been making ample use of the new AI tools that have come out, both in our IT department, as well as underwriting and claims, trying to drive automation in our business process. So I mean there's a there's a million ways, but I think it goes a long way to explaining why we're able to operate at such a significant cost advantage over our competitors. And I think a lot of it is, hey, we've got a really well-designed enterprise systems, specifically for our company. We don't have legacy software going back 20, 30, 40 years. We don't have thousands of legacy applications. I think we're just in a really attractive spot. Operator: Our next question comes from Michael Phillips from Oppenheimer. Michael Phillips: I wanted to touch on one line of business, the construction liability line. I was curious, was there any change in assumptions in that segment that affected your current year loss pick? Michael Kehoe: I don't know that there were any changes there specifically. We do a quarterly review of our loss reserves by stat line of business. And that goes -- we're in our, I think, 16th accident year. We've got about a dozen lines of business. So there's a high degree of complexity in that analysis -- could very well have picked up some adjustments in the construction, but I just don't know off the top of my head. I think in general, we feel great about the quarter. I think our losses continue to come in below our expectations. There's a little bit of variability in the loss ratios when you roll everything together, and I think that's normal. But again, we feel really positive about the loss performance. Michael Phillips: Okay. And then second one would be on your Excess Casualty segment. Could you talk about that segment, what you're seeing? Is there any growth opportunities there? And what you're seeing maybe for loss trends in that segment? Stuart Winston: Yes. Michael, this is Stuart. We're still seeing good opportunities in Excess Casualty. Rates are holding strong. We're seeing some pressure in the market at the high excess attachment points, where those are being more attractive for various competitors. But that's typically not where we play. We're typically in the lead or the first $10 million on most of our placements. So there's still a good opportunity for growth and rates are holding strong, where we participate in the market. Operator: Our next question comes from Mike Zaremski from BMO Capital Markets. Michael Zaremski: Going back to Casualty, but broader brush on all Casualty ex-Property, which is kind of your core business. You saw a bit of a sequential de-cel in premium growth there. Any color you can offer on just the state of the marketplace, Casualty-specific, pricing? You talked about MGAs in the past as well. Is that still -- are they still just as competitive? Michael Kehoe: I'll start, Mike, and then I'll maybe get Stuart to make a few comments. But I would just remind you that we write Casualty business across many specific underwriting divisions, each one focused on a different industry segment or coverage, and they never move in tandem, right? There's always variability as you go from one area to the next. But in general, I think things are still going well. Stuart Winston: Yes. The long-tail Casualty lines, we're seeing moderate competition, but there's a lot of rational actors out there with the adverse development over the last couple of years in the market. But there's segments like -- areas like Excess Casualty, Social Services and the Allied Health Group that are still really strong and the market will experience some dislocation, the same with Premises Liability, so General Casualty, Entertainment groups like that, it's still a very strong market there for growth. Michael Zaremski: Okay. I mean, I guess that's very helpful. So if we look at the Casualty trend, though it's still kind of -- it's decelerating from a growth perspective. I'm not saying growth, we want profitability, not growth. But is your view -- you shared your view that shared layer, things are becoming less negative, I guess, from a pricing standpoint, I'm assuming. Do you think the Casualty is also getting less competitive or it will remain -- increasing competition will remain kind of impacting the top line? Michael Kehoe: Mike, it's Mike again. I would say we're in a very competitive period in the insurance cycle. Again, it varies a little bit, division by division. But I think the -- you've seen over the last 2 years, the Kinsale growth rate has kind of come in from kind of an extraordinary 40% rate to this quarter's high single digits. I think we've reiterated many times that over the cycle, we think 10% to 20% is a good conservative estimate of our growth potential. I think that's probably the best commentary we can offer. I mean it's a diverse product line. It's a very competitive market. We've got a very competitive business strategy with the control we exercise over our underwriting. It drives a more accurate process. And then when you look at the cost advantage we have over competitors, it's extraordinary. So I think we're in a great spot. We were encouraged that the growth rate going from the second to the third quarter ticked up from 5% to 8.4%. Brian Haney highlighted the fact that if you took the Commercial Property out, that put us in the low double digits. Admittedly, that was down from -- it went from 14% to 12%. But to me, that's just kind of normal variability quarter-by-quarter. I wouldn't read too much into that 2-point decline. Michael Zaremski: Okay. That's helpful. And just to sneak one last one in. Part of your -- I think part of your special sauce, I believe, uniquely allows Kinsale to, I guess, maybe not need to [ profit share ] commissions to some of your broker partners. Is it ever a consideration, especially in more competitive times like today to rethink that strategy or that's not on the table? Michael Kehoe: The profit commissions are typically associated with delegated underwriting, right? So many companies, especially in the SME area, aren't able to handle the volume of transactions internally or for whatever reason, right? It's very common to outsource underwriting to MGAs and MGUs. And I think a lot of companies try to put some sort of profit or growth contingency into the compensation mix for the broker in order to better align incentives. We're not in that space, and we're not considering it. Our business model is to control the underwriting, provide the best customer service in the industry. I think we also offer the broadest risk appetite. So a lot of the business we write, falls out of the delegated or binding programs that are in the marketplace. So really for those reasons, no, we're not considering a change in our compensation model. Operator: Our next question comes from Mark Hughes from Truist. Mark Hughes: Congratulations, Brian, and also Stuart. Current accident year loss ratio was up a little bit. Was that mix? Was that competitive pressure? What would you say that was caused by? Michael Kehoe: Mark, I would just kind of write that off to normal variability. The overall numbers are phenomenal. The reported losses are coming in below expectations. We're always trying to be cautious with our reserving. You can look around the industry. There's a lot of examples of companies that are too optimistic in their loss reserving. We never want to be in that group. So can I would look at the loss performance is good news. Admittedly, it was up a couple of points. But to me, that's just normal kind of variability. Mark Hughes: Yes. Bryan Petrucelli, the ceded premium at 17% and then the expense ratio at 21%, given the kind of the reinsurance structure at this point to ceding commissions? Are those reasonable starting point for the next few quarters? Bryan Petrucelli: I think so, Mark. So the first full quarter that we've had with the new reinsurance terms. So it's a pretty good match for you. I would say mix of business is always going to drive a little bit of variability in that. But I think as we sit now, as good a guess as you can -- we can give you. Mark Hughes: Very good. And then one final question. The state E&S data in some of the coastal states, Florida, Texas, New York, it looked like your growth is a little faster there kind of implying that maybe in other states, growth was a little slower. Is that a correct perception? Is there anything we should read into that or the non-coastal state perhaps a little more competitive? Is there anything to think about there? Brian Haney: Mark, this is Brian Haney. I wouldn't read too much into it. We don't -- we don't know exactly how those numbers are calculated, and we don't do anything to try to match them up with our own data. Michael Kehoe: I think it's better to look at those state tax numbers over a number of months. I think there's a little bit more credibility to further look back. Mark Hughes: Well, if we put those numbers to the side, we say there's any sort of dynamic where non-coastal, the kind of those traditional E&S states, the New York, California, Texas, Florida. Are they -- are you seeing more opportunity there perhaps than elsewhere? Or would you not see it that way? Stuart Winston: I think it stayed relatively the same since Mark, it's Stuart. Relatively the same since we've been in business with obviously, the core E&S states are going to the largest bulk of our business. But I haven't seen a mix in that. Or change in that. Operator: Our next question comes from Andrew Andersen from Jefferies. Andrew Andersen: I think maybe 5 to 7 years ago, you kind of had talked about how there were certain areas you don't write like public company D&O or trucking. Maybe just bigger picture, pockets that 5 to 7 years ago, you did not write and now you're kind of rethinking that and perhaps see some new opportunities for growth? Michael Kehoe: Well, there's a bunch of examples. We've made a bigger push into homeowners. We started an Agribusiness Division. We started an Aviation Division, Ocean Marine, we're always enhancing the product line. Brian Haney: Yes. We're always looking at new products not that we don't, right that. We want to write it on our terms and our pricing to maintain our margin. So if you look at commercial auto, - we write a lot of auto adjacent, wheels adjacent business, but we will look at some small fleets at tighter terms. It's just not the large trucking schedule. So we will take a look at these out, but it's going to be a little more control. Andrew Andersen: Got it. And on the net commission ratio, about 10.5% in the quarter and recognizing there was some change to reinsurance, but the direct commission was pretty much unchanged. But if we go back a few years when the mix was more tilted towards casualty, it was kind of in a 12% to 13% range. Could we see it getting back up to that level? Or are there some offsets within there that might help keep it maybe around 11% or so? Bryan Petrucelli: Again, I think the 10.7% is as good a guide as we can give you. If we did have a change in mix of business, you could see that move around a little bit. Whether that goes up to 12% or 13%, who knows. But I think the best guide we can give you is what we have here for this first full quarter since those agreements have been in place. Operator: Our next question comes from Andrew Kligerman from TD Cowen. Andrew Kligerman: Congrats to Brian and Stuart. And first question is on the net reserve release of $10 million or 3.7 points. Just curious as to what the kind of mix on that was short tail versus casualty maybe on the casualty side vintage. Just kind of curious on the breakdown of that release. Michael Kehoe: Andrew, this is Mike. I would say, without getting too specific, the last couple of quarters, maybe even the last 2 years, including the quarter, most of the release -- the releases have been disproportionately on our first-party business. So short-tail business like property. Andrew Kligerman: Got it. Okay. And I've been noticing when talking to some of your competitors, some of them starting up micro and small, maybe even mid businesses. But I'm seeing a lot of micro and start-ups in the E&S area. Could you talk a little bit about maybe the number of competitors you're seeing in that area versus, say, 3 years ago? Michael Kehoe: I think we have more competitors today than 3 years ago, but it's not just insurance companies. There are hundreds and hundreds of MGAs that have started in the last several years. There used to be one fronting company. Somebody told me the other day, they're now 30. So a lot of capital has come into the industry, and there's just a lot more competition that reflects that. And that's certainly not new. I mean, it's always been a cyclical business, and we're hardwired to compete and win in this environment, I think. Andrew Kligerman: Got it. And the last one, in your commentary, you talked about rates in property. I heard the word stabilizing. I heard moderate. Could you possibly put some numbers around where rates were in property? I think you said that it started to inflect at the end of the second quarter. Maybe where were rates early in the second quarter going? And maybe where are they now? Just to kind of get some numbers around the commentary? Brian Haney: I don't have the exact numbers in front of me. I would have said it was double digits in the second quarter, down. If I had to guess now, I would say it's probably single digits, down. Let's call it, high single. I don't have it in front of me. So that's just an absolute speculative guess. But I do get the sense that at least in the market we're in, you have seen that inflection point, and I would expect to see that trend continue. Like I think it's going to normalize relatively quickly. Operator: Your next question comes from Ryan Tunis from Cantor Fitzgerald. Ryan Tunis: I guess just a follow-up on the underlying loss ratio. It sounded like you attributed kind of the 2-point year-over-year increase to just normal variability. Does that imply that we're not yet seeing pressure on that ratio coming from property lines? Michael Kehoe: No, we're not seeing pressure on our loss ratio from property lines because we've over-performed in property. That's why a disproportionate amount of the reserve redundancy has come from the short-tail lines like property. We've had great experience on property. And I think that's a tailwind. I think where we're being more cautious, and it's not because we're seeing any kind of a negative trend. It's just that on long-tail casualty, there's a higher degree of uncertainty. It just takes time for those accident years to mature, and coming out of a period a few years ago where we had a significant uptick in inflation, all sorts of supply chain disruptions with COVID. We saw some of our long-tail lines develop a little bit higher and a little bit later than we would have anticipated. And starting several years ago, we've addressed that with much more conservative loss picks. And so we're maintaining that conservatism to make sure that we -- we always have more than enough. We want our reserves to kind of develop favorably year by year. And when that happens, it just has a very therapeutic effect on the financial performance of our business. Ryan Tunis: That makes sense. And then I guess just a follow-up on the property. Yes. I guess it makes sense naturally that there'll be less price pressure in the third quarter simply because there's fewer like Florida [ shared and layer ] renewals. I mean to what extent is the improved pricing environment just sort of a function of seasonal mix? If you will. Michael Kehoe: Well, I'm going to start by just saying we didn't say it improved. It deteriorated at a slower rate. Brian Haney: Yes. I would characterize it more as rates were going down so fast that -- the faster rates go down, the quicker they're going to normalize, because the industry can't go around giving double-digit rate increases indefinitely. And I think we've reached that point where you're starting -- you saw that second order derivative turn positive. So I don't think it's based on the third quarter being less hurricane-intensive. Operator: Our next question comes from Joe Tumillo from Bank of America. Joseph Tumillo: Most of my questions have been answered, but I guess the first question is kind of thinking about. I appreciate the submission rate was decelerating a little bit to commercial property. If we exclude commercial property, has the submission rate kind of remained steady? Or has that also kind of decreased along with the ex property premiums? Brian Haney: It's closer to around 9%, excluding Commercial Properties. Joseph Tumillo: Okay. Great. And then the other question, just thinking about -- I saw you guys kind of stepped up the share repurchases this quarter from the $10 million from the previous ones. just kind of thinking, was that just more opportunistic where you saw the share price going? Or is that more of a function of kind of lower growth and a lot of the cash flow? I know you guys have mentioned before about kind of keeping the business kind of efficient capital. Michael Kehoe: I think it's the latter, Joe. We're generating mid-teens ROEs on a year-to-date basis and I think our year-to-date growth rate is high single digits. So we're definitely producing a lot of excess capital. And our first goal is always to grow the business. And then secondarily to that, the last couple of years, we've been looking at a very small dividend and a very small share repurchase, but I think both of those could continue to grow. Operator: Our next question comes from Pablo Singzon from JPMorgan. Pablo Singzon: So first question, with premium growth having slowed, how do you think about other underwriting expenses over the next 1 to 2 years, right? So I think over the past several years, it's been a good story. But given that growth has slowed, are you managing that line to sort of trail the growth in premiums? Or just given where you think opportunities might lie, there's a chance that you might see some degradation as you're building out new opportunity? Michael Kehoe: I think we have always worked like crazy to be as efficient as we can as a business. Given the industry that we compete in. And I think the other underwriting expenses will gradually come down over time as we drive productivity gains in the business through technology, et cetera. I don't think it's going to be sudden, but I think a gradual decline is what investors should expect. Pablo Singzon: Okay. And then, I guess, second question also related to expenses, right? So clearly, Kinsale has an expense advantage over the rest of the industry. I'd be curious to hear your thoughts about whether or not you're willing to trade some of that expense ratio to generate higher premiums and underwriting income? And I guess even if that trade is possible to begin with, right? Or are you sort of happy with the current configuration of pricing, profitability and volume? Michael Kehoe: Look, I mean, I think there's just a clear recognition that the customers we serve, principally small business owners, are intensely focused on limiting how much money they spend on insurance. And so we're doing everything we can to be as efficient as possible, to give them competitively priced insurance policies but also to protect our margins. So I don't see an advantageous trade where we would deliberately raise our costs, become less competitive and somehow that's going to net a better opportunity for our company. I was just going to say, we're going to continue to work -- do everything we can to be the efficient insurance provider in the E&S space. Pablo Singzon: Got you. And then just one small one. On reinsurance retention, do you think that could go up again in the next couple of years or you don't see any change from current status quo? Bryan Petrucelli: Yes. Again, I think what you're seeing this quarter is our best guess. Now if we had some dramatic mix of business, it could move one way or the other. Michael Kehoe: But our retention has changed many times over the years. Right. We've taken a bigger net position over and over again, and that's just consistent with our growth as a business. Operator: Our last question comes from Casey Alexander from Compass Point. Casey Alexander: Yes. And congrats to Brian and Stuart, particularly to Brian on his retirement. I'm sure that's something that we all look forward to. So not to beat a dead horse. Not to beat a dead horse, but Brian, I am particularly taken by your comments that the property rate decline is stabilizing, simply because the 20 years of covering property in the Southeast particularly in the Southeast U.S. when you have a year like this, it has a particularly low level of cat activity, at least up-to-date fingers crossed, right? You never know what happens in the month of November. It tends to attract alternative forms of capital that see very low loss ratios and think that they can get into the business and they tend to get into the business in commercial, because its than quicker than residential, and it's irrational. And so I just wondered, does that not concern you that you're possibly going to see alternative capital in 2026 enter the property market and leading with some irrational price structures? Brian Haney: You might be right. I was kind of referring more to the dynamics in the third quarter. So who knows? Operator: We have no further questions in queue. I'd like to turn the call back over to Michael Kehoe for any closing remarks. Michael Kehoe: All right. Well, we appreciate everybody joining us and look forward to speaking with you again here in a few months. Have a great day. Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect.

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203天前Insight Analytics约5分钟阅读

HPS-A.TO 2025 Q3 财报电话会议

Operator: Good morning, ladies and gentlemen. Welcome to Hammond Power Solutions Third Quarter 2025 Financial Results Conference Call. Certain statements that will be discussed in this conference call will constitute forward-looking statements. The forward-looking information and statements included in this discussion are not guarantees of future performance and should not be unduly relied upon. Forward-looking statements will be based on current expectations, estimates and projections that involve a number of risks and uncertainties, which could cause actual results to differ materially from those anticipated and described in the forward-looking statements. Such information and statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking information and statements. These factors include, but are not limited to, such things as the impact of general industry conditions, fluctuations of commodity prices, industry competition, availability of qualified personnel and management, stock market volatility and timely and cost-effective access to sufficient capital from internal and external sources. The risks just outlined should not be construed as exhaustive. Although management of the company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Accordingly, listeners should not place undue reliance upon any of the forward-looking information discussed in this call. I'd like to hand the call over to Mr. Adrian Thomas, Chief Executive Officer of Hammond Power Solutions. Mr. Thomas? Adrian Thomas: Thank you, operator, and good morning, everyone. Thank you for joining us for our third quarter update. In the quarter, we recorded revenue of $218 million, marking this our second best quarter for shipments ever, and a 14% increase when compared to Q3 2024. The increase was driven primarily by U.S. shipments with gains in all of our channels to market. The U.S. market experienced its strongest growth in private label channel and steady growth in the distribution channel with strong sales into data centers, switchgear manufacturers, motor control and mining. While sales of stocked products has grown, they have been outpaced by higher sales of custom products. At the same time that our sales grew, profitability for the third quarter remained below the prior year results, with gross margin of 30.1%, mainly due to ongoing material cost pressures and overhead expenses associated with our new facilities in Mexico. In September, we announced that changes to steel and aluminum derivative tariffs, Section 232 tariffs have affected certain products. Although we worked closely with customers and suppliers to address and mitigate these increased costs, our margins experienced short-term negative impacts. Pricing adjustments to offset these added costs were implemented in the final weeks of the third quarter, and we expect margin improvement in the fourth quarter as these adjustments take full effect. We remain vigilant on our cost structure while maintaining strong customer relationships. While material cost inflation and overhead costs relating to our new facilities in Mexico have pressured margins, recent sales developments give us confidence in the quarters ahead. As I have said over the last few quarters, quotation activity has been strong and has now translated into order volume. This increase in order volume grew our backlog in the third quarter by 28% compared to the beginning of the year, mainly driven by our U.S. distribution network and our OEM business. Digging down a little further, we saw data center activity accelerated in the quarter, and we are pleased to note that several large orders were received shortly after it's closed, amounting to 53% of total Q3 closing backlog. These orders are expected to be shipped primarily from our new facilities in Mexico over the next 12 to 18 months. As we have said in prior quarters, particularly with data center customers, we are delivering quotes for larger projects than what had been our historic averages. In addition, these customers require commitments of delivering high volumes within a reasonable time frame. Our Monterrey IV facility was built to provide that ability and the projects we have received have been possible due to those expansions. Due to the nature of some of these projects, we'll be able to exceed our original capacity designs by reconfiguring our equipment, streamlining supply chains and further maximizing square footage. In addition, we will be adding equipment to further increase our production capacity. These new additions and adjustments will add approximately an additional $100 million of capacity to our 2 new Mexico facilities, bringing our total manufacturing capacity to around $1.2 billion by 2027. Speaking for Richard and myself, it is incredibly rewarding to have a team capable of building and launching a new manufacturing facility within just 12 months and pairing that achievement with a sales team that's already engaging with customers to fill that new capacity. I give full credit to our build teams and to our customer service teams, quotes teams and salespeople for their hard work and dedication to meeting our customers' future plans. With that, I will turn it over to Richard for some financial details on the quarter. Richard? Richard Vollering: Thank you, Adrian, and good morning, everyone. I'll start by rounding out some of the items that Adrian touched on earlier. With respect to sales, we've seen a surprisingly resilient U.S. market in terms of shipments of standard and configured products in the distribution channel. We've also seen a significant improvement in bookings for longer lead time custom products led by strong data center orders. Overall, shipments in the third quarter of 2025 to the U.S. and Mexico increased by 21% versus last year. In contrast to that, the Canadian market showed some weakness with sales down by 3%. We believe that this decrease is likely the result of the Canadian economy experiencing slower growth and greater uncertainty in recent months. Gross margin continued to show a decline versus last year and was 30.1% in the third quarter of 2025, down from 30.7% in the second quarter of 2025 and 33.8% in the third quarter of 2024, which is a record high. The decline is a result of higher input costs continuing from the second quarter, with the added impact of tariffs and products being shipped into the U.S. from manufacturing locations outside of the U.S. In the third quarter, we continued to have unabsorbed overheads in our newer factories in Mexico, negatively impacting margins by 233 basis points. Pricing actions taken in September should offset some of these impacts, and we expect absorption to improve as we ramp up production to address a rapidly growing backlog. General and administrative costs are growing more slowly in the third quarter versus previous quarters, improving leverage. Net earnings were $17,440 million in the third quarter of 2025 or $1.46 per share. Adjusted EBITDA was $30,290 million, which was lower than adjusted EBITDA of $34,377 million in the third quarter of 2024. The decrease is attributable to lower gross margins, offset by higher sales volumes. Adjusted EPS was $1.56 in the third quarter of 2025. Working capital requirements increased in the third quarter of 2025 with inventory being the most significant factor. Inventories rose in the quarter due to delays in shipping of certain large projects, safety stock requirements for certain projects and tariffs. Capital spending tracked as we expected with year-to-date spending at $27 million. Looking forward, the increased backlog will help to alleviate the under absorption challenges in the newer factories in 2026, and we expect pricing actions to offset some of the negative inflationary impact on material inputs. We look forward to the quarters ahead. I will now hand the call back to the operator to take any questions from our participants. Operator: [Operator Instructions] Our first question comes from Matthew Lee with Canaccord Genuity. Matthew Lee: I want to drill down on the demand picture a bit. You provided some commentary on the October orders would be very impressive. Do you feel like the large orders are a bit of a onetime item? Or are you seeing sort of a sustainable shift in terms of the bidding environment? Adrian Thomas: Matth, it's Adrian. So I think a couple of things. One, our orders in the quarter were up. We had those significant orders which came in just after quarter close that were significant. What we see, generally speaking, and I made a comment in my remarks is that we're seeing more activity around quotations for larger projects. So we see a trend towards larger projects, particularly in the data center business where people are trying to build quickly and they need large quantities of transformers. So I think that trend is continuing, and I think the ability for us and other manufacturers to supply those quantities is critical to winning those jobs. Matthew Lee: And maybe as a follow-up to that, why are these big projects choosing Hammond over some of the peer groups or competitors? Adrian Thomas: So one, so we've got an established reputation in the industry for the quality of our products and for delivery. And second, as I mentioned earlier, just the confidence of the customer that we have the capacity to deliver those quantities of equipment. Matthew Lee: Okay. Great. And then maybe just one on the CapEx side. You mentioned that you're able to kind of do $1.2 billion in capacity with Monterrey IV. But I mean if demand continues this way, how easily could you open up a Monterrey V? Or would capacity beyond $1.2 billion be difficult to create? Adrian Thomas: Yes. So we're always evaluating the capacity requirements and locations. I think what you saw, we built 2 factories in Mexico successively pretty quickly. We have the ability now that we have those 2 new facilities to add some equipment in there, maximize the footprint. The other thing unique about these orders, although they're custom transformers, they're high quantities, high runs. So we're also able to utilize our footprint more effectively for those. So we'll continue to analyze that. We'll continue to add equipment, and we will continue to add capacity so that we can meet our future demands. Operator: Our next question comes from Baltej Sidhu with National Bank of Canada. Baltej Sidhu: So a few questions from me. So if we're looking at Line 4 in Mexico, how are conversations with potential customers evolving, appreciating the incremental investment for capacity? And just following up on that, could you provide color on how booked out Monterrey IV is? Adrian Thomas: So we were able over the last year to bring a number of customers down to Mexico to show our facilities and our operations and progress on the plant. And so I think that built confidence with our customers that they saw the capacity coming on board. Sorry, what was your second question? Baltej Sidhu: So just any color that we can have on Monterrey IV and capacity utilization and how booked out it is? Adrian Thomas: Yes. So when we announced it, we had announced sort of $120 million capacity. We will be adding additional equipment, and we'll be optimizing supply chains. So I believe with some additional CapEx this year, we should be able to add another $100 million of capacity to that factory. Baltej Sidhu: Okay. Great. And then just turning over to the backlog. Great to see the growth in Q3. And particularly of interest was the 53% of total value booked already a month in the quarter. Could you give any color on what percent of that sales would be from data centers in the backlog? Adrian Thomas: Nearly all of it is data center. Operator: Our next question comes from Nicholas Boychuk with Cormark Securities. Nicholas Boychuk: I just want to confirm my understanding on something here. So $100 million of new capacity that you're adding, is that specifically from Monterrey IV? Or does that include the other organic initiatives and facility improvements that you're doing across the spectrum of your assets? Adrian Thomas: Primarily [ not ] Monterrey IV. Nicholas Boychuk: Okay. So are there other things that you mentioned in the MD&A quickly that there are both capacity improvements, flow improvements, things that you can do at existing facilities. Is there additional capacity we could think about on top of the $1.2 billion outside of that? Adrian Thomas: So it's primarily Monterrey IV. We are reshuffling some of our production footprint. So we will utilize other factories as we optimize Mon IV. So we are doing some enhancements at other factories that will allow us to get more output out of Mon IV by taking some other loads and putting in other factories. So it's all inclusive of our other footprint. Nicholas Boychuk: Okay. Got it. And then just thinking about Mon IV, can you guys comment at all on the contribution margin and how we should be thinking about what that looks like on the custom business versus what you've historically done in wells? Is it fair to say that once you get that facility operational and fully humming and it's doing some of these larger data center projects, is the contribution margin higher than what we've historically seen? Richard Vollering: Yes. Nick, it's Richard. So Yes. Listen, I think -- I mean, as you know and as you can imagine, manufacturing in Mexico is less expensive. And having some of these projects where we can do longer runs is more efficient, particularly when you're ramping up labor and training and that kind of thing. So the other side of that is, of course, the pricing equation, right? And so I think you have to put the 2 of those things together. And because some of these large projects, I mean, as you can imagine, they're going to be competitive, very competitive. So I wouldn't -- I don't have an expectation that it's going to be significantly accretive to our margins, but it will definitely help our absorption. So to the extent that we are unabsorbed in those factories today, a lot of that will go away as we ramp them up with this new volume. Nicholas Boychuk: Okay. Makes sense. And when you say that these are longer run items, does that mean that you have greater visibility into data center demand where you'll be able to sell the similar product into other data centers? Or does it have applicability into other more traditional segments that you've sold into? Adrian Thomas: So when Richard -- so every data center customer has a unique sort of architecture, but there's a lot of similarities. So the longer run is when we do one design and then we're producing it. So what we see in a lot of other industries, we will do a design, and there will be a handful, maybe 2, 3, maybe 6 transformer for that design for the project and then you do a different design. When Richard says longer runs, you may see hundreds of the same design for some data center buildup. So that gives us some efficiencies. To reconfigure for -- we can use the same equipment. There is some spacing and some other things that minor tweaks that we do. So that does allow us to pack more in when we're doing these longer runs that we would have to reconfigure if we had a different mix. So that's how the longer runs help us. Nicholas Boychuk: Okay. Got it. And then last for me, just on the backlog. I know in the past, you've mentioned and even in the MD&A, highlighted again that the backlog isn't necessarily fully indicative of somebody placing an order. It's not a firm deposit. But given that these data center contracts that came in subsequent to Q3 are much larger than you've historically seen, were you guys able to get them to place an actual cash deposit or make this a little bit more of a firm order that you can then bank on versus an indication in the past? Adrian Thomas: Yes. These orders have deposits and firm commitments. Operator: [Operator Instructions] Our next question comes from Jim Byrne with Acumen. Jim Byrne: Richard, could you maybe just help us quantify the Mexico impact here on Q3 margins? Is it 1%, 100 basis points from kind of a drag from where you would expect margins to be? Or -- just help us understand that. Richard Vollering: Jim, yes. So in the MD&A, we talked about the impact of absorption having a 233 basis point impact on the margins. Jim Byrne: Okay. That's helpful. And then just thinking about the stock product and kind of distribution, maybe just starting with Mexico, I know that, that was something that was kind of a goal of yours to implement more and achieve more product distribution down there. How is that going? Adrian Thomas: So we continue to develop customer relationships. We have been able to develop some relationships because of our custom product down there, and then that drives some interest in customers working with us on standard products. I would say, Jim, overall, particularly with how much the U.S. has been growing recently. It's small in the total dollars, but we're making incremental progress. Jim Byrne: Okay. And then maybe just lastly, I didn't see or didn't hear any commentary just kind of on stock product in general in the U.S. Are we past kind of the construction slowdown that kind of was impacting results earlier in the year and you're kind of seeing a more normal market down there? Richard Vollering: Yes. So it's interesting because I think generally, a lot of the segments in the market are showing some weakness. And that hasn't really trickled through to our standard product sales. There is business out there. I think maybe one of the things to remember is that construction, it can be office construction, it can be data center construction, but they all need transformers. They need the large custom transformers, but they need smaller distribution transformers as well. So I mean that demand comes from a lot of different places. But the short answer is no. I mean we haven't seen a slowdown in stock products. It's been doing quite well. Operator: Next question comes from Baltej Sidhu with National Bank of Canada. Baltej Sidhu: Just one more for me here. So private label sales strength continued into Q3 from Q2. What would be driving that demand? And could we see this sustain going forward? And would it be fair to say that this would be typically custom product? Adrian Thomas: You cut out on our end, could you repeat your question? Baltej Sidhu: Yes. So private label sales strength continued into Q3 from Q2. What would be driving that demand there? And could we see this as sustained? And would this be fair to say that, that product mix would be oriented more towards custom? Adrian Thomas: Yes. Almost all of that is custom. And generally speaking, it's commercial construction. There is some data center in there as well. But predominantly, it's general commercial construction activity. So I think, as Richard mentioned, we continue to see sales on stock product that's going into general construction, and we saw good volume in the private label side. But there is a mix of data center business in there as well. So we would expect the private label volume to continue either way. Operator: That concludes today's question-and-answer session. I'd like to turn the call back to Adrian Thomas for closing remarks. Adrian Thomas: Thank you, operator. We're proud of what we have accomplished over the last few months and are motivated by our major customer projects to continue driving our growth trajectory and expanding our organizational capacity. While we'll continue to explore acquisition opportunities, I believe our ongoing production initiatives and capital expansion plans position us well for sustained growth in a world increasingly driven by demand for data and electricity. I thank everyone for joining us today. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.

203天前Insight Analytics约5分钟阅读

MTRS.ST 2025 Q3 财报电话会议

Line Dovarn: Good morning, and welcome to Munters' Q3 presentation for 2025. My name is Line Dovarn, and I'm Head of Investor Relations, joined here with -- by Klas Forsstrom, our CEO; and Katharina Fischer, our CFO. We will begin with a presentation of today's results, and we will then kick off the Q&A session. So if you do have questions from the webcast, you can post these questions throughout the presentation by using the chat function below, and we will address them at the end. So Klas, let's go. Klas Forsström: Thank you, Line. And once again, good morning, and very much welcome to this Q3 report. Let me start, as always, to give you some summarizing a few words of the quarter that has passed. A very strong order intake and invoicing complemented with robust profitability in an operating working capital development that pleases me very much. Data center technology in FoodTech, very well positioned for continued strong growth in the years to come. That thanks to the strategic decisions we made and the execution on those decisions. We see solid underlying demand drivers of both business areas, data center demand and the digitization of the food supply chain and our offer is very well fit to capture this growth. AirTech in general is meeting a continued tough battery market and a generally tight industrial investment climate in U.S. and EMEA. To offset these headwinds, we are resetting AirTech to be better fit for the future. They will be well positioned to capture growth when the demand returns with modern factories, continuous sharper R&D and a clearer commercial drive across several sectors. Yet Munters are creating a business with several legs to stand on in a world of continued tariffs, geopolitical tensions and general unpredictability , so this makes us well equipped for continued growth and market share gains. So over to the quarter then that has passed. Strong growth and solid profitability. That is what I think is the headline of the quarter. And drilling into the different components of this. Order intake a 57% increase. If I deduct the currency, it is 70% growth in comparable currency. AirTech showing growth, positive development in APAC and to some extent in Americas when it comes to order, Data Center Technologies increased, continued strong demand in Americas. And as you later will see also margin improvements and market gains in Asia as well. FoodTech, increased as well, solid demand in Americas, EMEA. Toward the backlog, 2% smaller backlog, but compensated to currency actually adjust 4% up. This has mainly been driven by Data Center Technologies. And the orders we receive now that brings us into 2026 and 2027, a pleasing book-to-bill of 1.1. Moving over then to net sales, 17% up, 9% currency, so that would end up in 20% in comparable currencies. AirTech, here, it declined, lower sales across all regions. Data Center Technologies, continued increase, successful execution on the backlog and also FoodTech increased and were driven mainly by controllers in this quarter. Very pleasing to see controllers, an area that we have allocated a lot of more resources into. Solid profitability, as I said. EBITDA margin of 13.5%, driven by DCT, the volume growth, production efficiency, still pleasing product mix and continuous lean improvements. FoodTech, strong contribution, although impacted by continued investments and to some extent, the product mix, as we all know, I mean, a software product has a higher margin than a controller, even if controllers is also on a good level. AirTech, impacted by lower volumes, unfavorable product and regional mix as well as uneven capacity utilization. This has been, to some extent, offset by cost and efficiency initiatives. And in the quarter, we had currency headwinds and more specifically, tariff impacts in DCT, and this I will come back to later on. A fair description of how the world looks like right now, variations in between regions and end markets. Americas represents close to 70% of our total order intake. EMEA about 20%; and APAC, 12%. If I divide it in between the different business areas, you can see that DCT, if I start with that, is -- continues to be dominated by the U.S. market, but very pleasing to see that we have started to make inroads into Asia already now. And when it comes to EMEA or Europe, I would say it is not us. It is the European weaker market that is holding our growth in Europe back. AirTech then more even balanced, 44% in AirTech in Americas and about 1/3 in EMEA and about 1/4, 25% in APAC then. And FoodTech then very much American and EMEA focused. Drilling down in Americas, AirTech the market remains soft, pockets though of growth. DCT continued to rapidly expand, led by hyperscaler investments and a drive across the full sector, to some extent definitely AI-driven. FoodTech, a growing market. Yes, avian flu, bird flu is controlled, but a pickup will take, as always, after that type of outbreak, some time to recover. EMEA, a mixed market sentiment across the sectors, competitive price environment when it comes to AirTech. As I alluded to earlier, DCT, slower markets with signs of picking up, focusing on energy efficiency, and that is good for us because we have the most energy-efficient solution there is in the data center market. And FoodTech positive market outlook, driven by increased regulation and push for better practices in this sector. APAC, signs of improvements in China, though continued high competition, Southeast Asia and India also showing growth as markets. Very pleasing to see that we are making inroads into Asia with data center. That is according to the plan, but it's always good to see that you're executing on the plan as well then. And FoodTech, China is not the focus market, but still, we are making inroads into China and Southeast Asia. Moving over to AirTech then. All in all, a stable growth situation in a challenging environment. You've heard me say many times that I have predicted that the battery segment would be in between 10% to 20% in the coming quarters. Now we were at the low end of 10%, and I will come back with some outlooks on the battery and what is happening there later on. Besides that then, about 50% of AirTech's markets do have a slight positive outlook moving forward. So you can see the blue arrows then in about 50% of the total market of what we have today, that is slightly positive. The order backlog decreased, highlighting here that is clean technology generated good growth in the volatile organic compound area, and that has been supported with good execution of the acquisitions we have done. And then in other areas, as I said earlier, that remained at the flat level in all regions, but not at a lower level. This is one of my favorite pictures. And you can have different views on this. If I take it on the long term, I would say that it's a fairly flat, solid demand across the segments. If I go into a couple of other inroads here, one inroad that as you can see, if you compare quarters to quarters, i.e., quarter 3 over the years, I see a small uptick in each and every quarter, and this is a currency adjusted graph then. And then if you see then last year compared to this year, I will also say, in general, a slight up pick on the total of the year, so to speak. But if I summarize this then, battery is still being in this 10% to 20%. Clean Technology continued to slowly increase, creating another leg to stand on and the other industrial, fairly stable, but a weaker investment climate in Americas. And that, I think, is something that you've heard from all industrial companies that it's a damp industrial economy in Americas at current. Moving over to sales then, lower volumes and profitability. I'm not pleased with the profitability that we generated. It has been affected with some not strong enough execution on move of factories and how we have been able to work with our internal areas. I'm not worried about this. I mean I look upon this as a quarter or 1.5 quarters delay on certain of that, but I'm not really pleased with this. The other side of the coin, that is that it is also a continued weak market as such. I would have anticipated that we would have seen somewhat of an uptick then. And all of this is also leading into that we then, as I will talk about later, are increasing our traction on how to reset AirTech for the future. Also very important, something that makes me very proud. That is, how do we drive investments then. Investment -- or should I say, innovation. Innovation can be driven by that we only innovate internally. For me, innovation is more and more about collaboration, collaborative work. This can be done with academia. This can be done with companies. This can be done by co-investing in certain areas. And here, you see a couple of examples where we have, over the last couple of years, made minority investments in different companies to fuel our innovation. Some highlights, ZutaCore, DCT being very, very close to the ship and how to handle that. AgriWebb and Farmsee FoodTech, when it comes to how to drive digitalization and software in different areas. And Capsol, the latest then addition, where we started to invest a little bit more than a year ago, and we have now invested even more. And now we talk about carbon capture and moving forward in clean technology. For me, this shows that we can co-innovate with others not only inside our own house, so to speak. Coming back then to AirTech. We have come to the conclusion, and this is something that is needed to be done that we need to reset AirTech. That means that we will intensify our cost out and how we work with AirTech. The market demand is lower than expected, and I foresee that it will continue to be flattish, especially when it comes to batteries moving forward. So we need to reset AirTech, position AirTech to the right level at current, but continue to keep it ready for a strong recovery when the market returns. What are we doing then here? We adjust on investments. We drive footprint optimizations. We are more selective on where should we then fuel certain investments. We are optimizing the workforce. We are balancing capacity while safeguarding core competencies. And all in all, we expect here to have an impact of some 200 positions globally. We drive increased efficiency. And you may say, I mean, okay, you don't have enough load in the factory, but you continue to drive efficiency. Yes, that is the never-ending story you have to do because when the market returns, you have an even more modern, even more efficient factory layout that can then have a very, very positive drop through on the way down. And we're on top of that also driving our commercial activities to reach out in wider sectors. All in all then, this will generate a net cost saving of about SEK 250 million to SEK 300 million at the end of 2026. It will generate a restructuring charge of about SEK 150 million, the majority taken in Q4 this year and some of it taken in Q1 next year. This is on top of the previously announced cost savings that are delivering according to plan. It is about resetting and be fit for the future when it comes to AirTech. What about battery? As you saw today, we announced a battery order. And I think this is really telling the story about battery sector. First of all, there is a battery sector. It is not dead, but it's a sector where decision processes are taking much longer time. I can take this as an example. This project that we then recently received, we have been discussing, working, talking about this for about a year. And then they put the thumb on the green button, so to speak, and they released it. I think that tells the story about the battery sector right now. We are working with 3, 4 different projects of some 100 million sizes moving forward. But what is clear, what earlier took perhaps half a year to decide, in current capital squeezed market, especially in the automotive sector, that can take up to a year, sometimes even longer. My other point here, that is, we have the best products in the marketplace. Here, we talk about, I mean, you that are nerds, into dehumidification then a minus 78 degrees Celsius. That means that we can extract humidity at a very, very low temperature, a high-performing type of product. All in all, this generated a USD 30 million towards a U.S. battery cell manufacturer and the planned deliveries for mid and end of 2026. Moving over to another reality. I'm so pleased to see that our strategic initiatives, our execution of those, are delivering order intake where it should be. So an order intake that generated a book-to-bill of close to 1.4 in the quarter, orders that we delivered into 2026 -- during 2026 and into 2027. We received it across the full product portfolio. And I think this is something that's extremely important. We have widened our assortment. And even if I'm a little bit biased, I still say we have the widest and in my book, the most competitive product offering in the cooling market of data centers. EMEA did grow, especially driven by CRAHs and service offer. APAC started to show good growth as well. So all in all, when it comes to orders, I'm very pleased. And I'm also looking forward, I'm very optimistic for the underlying market. But as always, some quarters are very, very high in orders and others could be lower. But with that said, I'm continuous very optimistic moving forward. If we move over to the other side then, net sales increased, successful delivery on the backlog, SyCool and CDUs, CRAHs the full assortment something to highlight. This is the last quarter with SyCool, so that will generate some product mix changes moving forward. We generated an adjusted EBITDA margin that continued to be strong. We had some tariff headwinds of 2 percentage units in the quarter. And here, I can say, I'm not happy to have this but I'm not too disappointed either because what we have, that is the most innovative and efficient chiller product in the market. And at current, we cannot produce that in U.S. We are building up capacity here. And I'm happy that we take and receive orders, so this tariff headwinds, I'm willing to eat, and I know that also data center because we gain market share moving forward. So all in all, we invest in strategic growth initiatives. We had solid volume growth in the quarter and also high production utilization. So a very strong quarter in all aspects in data center this quarter. And here, you can see that we are filling up, and this is just examples of publicized orders and other orders of significant size that and how they are delivered moving forward. In summary, you can say the majority of the orders we receive now that is for 2026 and 2027. Now I have to balance here in between trying to explain this is in as simple words as possible. And at the same time, when I return back to the Munters headquarter also get good enough grades from my experts then saying that I was not shortcutting this too much. But if I try to balance that then, liquid cooling is about the full scheme. It is the large loop, and liquid cooling is about dissipation, capture, transfer and release. You can say in simple terms that this consists of 2 different loops. One loop that is in the dissipation that is close to the chip, very, very close to the heat source, that is one loop then. And then you have the larger loop, the loop where we are the market leader in. That is the capture, transfer and release loop then. Let's call one technology loop and let's call one facility rejection loop. And the thing here that is we have all the products in the facility loop and we have the products that creates this plug and play in between. It is the connection in between the CDU and the LCDs that created this link. So I think what we should remember that is when we talk about liquid cooling, it is 2 loops. And those loops are connected, and they work together. And we have solutions to whatever is happening in the technology loop, we can attach and we can capture, reject and transfer it out. And then on top of that, we are also collaborating with the key players in the dissipation area. So I'm super excited about the different technologies that are here, and I'm super proud of what we have delivered when it comes to innovation and collaboration in this area. On another side then, but I'm also very, very happy about that is, I think that we have started to be the trend finder. I think we have started to be the trend setter. I think we have started to be the trend innovator. And what do I mean with that then? Let me give you a couple of examples. We brought to the market SyCool split, the first and very energy-efficient type of non-water coolant solution. We brought new CDUs of never before seen efficiency to the market. And we decided that either we develop the best chillers in the market, or we acquire the company that provides the best chillers in the market, and we decided to do the second. So we acquired Geoclima. We spotted the trends on where they were going, we developed that, and we brought it to the market. And I can tell you that customers are really saying that we are leading the innovation and technology game here. So that brings me to another trend, a trend that is emerging. I call it modularity in a different way. You have heard me talk about modularity many times. Then we talk about components that can be used in different type of products, and that drives efficiency internally. But when it comes to data center, it's another type of modularity. Look upon this as a little bit of Lego blocks that you put together subsystems and then you can build those subsystems. You can have 1, 2 or many together then. This is a trend that will complement other trends. And I can just tell you that we are also trend setters, trend spotters and working actively with the ones that are driving those trends in the market. So once again, I think we are ahead of the curve in this area as well, super excited about this. If I then go into another area, FoodTech. Here, I think we have something that we can really be proud of. We have made a transition of FoodTech from a more classic old equipment driven company to be now a fully-fledged digital and software company. Many, many companies are talking about this change. Here, we have done this. And this is just in the beginning of what this can deliver. So when it comes to order intake, it increased. Software is growing. Controllers, the new acquisitions and what we had inside our own house are generating good order intake. Synergies is worked in between the old controller companies and the new controller companies. And the order backlog increased in a good way. When it comes to ARR, we are continuing to increase in between 20% to 40% quarter-by-quarter. Here, we have decided to show this in U.S. dollar to take away the currency effect because now we have definitely currency headwind. But here, you can see more volume-driven type of increases and apples-to-apples. Super excited about this, and we are just in the beginning of this trend shift then. So what about artificial intelligence? Artificial intelligence are driving data center growth, yes. But what can a company get out of artificial intelligence using it. Let me introduce to our recently new employers. One, Calvin that are driving internal efficiency and one, Clarity that is driving how to work with our customers. Calvin, that is how do we program in a better way? How do we automate? How are we doing code reviews? How are we becoming faster and more efficient in developing software? And I'm amazed to see how much efficiency, how much innovation can be driven by this new employer, asked them. Controllers, the other area, not software. Here, we have Clarity. An agent that is a virtual assistant that is driving training for us, that is driving training for customers, that are generating customer support online and so on. And look upon those, yes, it is perhaps not tens of thousands of customers, but for Munters and FoodTech, there is an increasingly large amount of the users that we have. 1,300 users have joined Munters Academy. We have more than -- close to 200 training videos. We received more than 3,000 inquiries that was answered by Clarity, and we support 20 languages with our new digital-driven agent and Clarity. So 2 examples of what we do with artificial intelligence to drive efficiency and customer satisfaction. With that, I hand it over to you, Katharina, and please take us through the numbers. Katharina Fischer: Yes. Thank you, Klas. I'm pleased to talk about the continued strong performance for the group. In the third quarter, organic growth contributed with 56% to order intake and 15% to net sales. This was complemented by nonorganic growth of 14% and 11%, respectively. At the same time, we continued to experience negative currency effects of minus 39%. Worth highlighting is also the order backlog, that currency adjusted developed well and then increased about 4% in the quarter. The adjusted EBITA margin remained solid at 13.5%, although lower than prior year's exceptionally high level. Here, data center and FoodTech continued to deliver very strong margins, so really demonstrating operational discipline across the business. As you heard Klas say, the margin in AirTech declined, both compared to prior year and also versus -- slightly versus prior quarter. And this was due to lower volume, unfavorable product and regional mix and then also continued dual site costs for the transition into the new factory in Amesbury, which has taken longer than anticipated and is expected to be fully operational by the end of the year. A key achievement in the quarter was the continued improvement in operating working capital. Here, we have reduced to now 8.3% of net sales. which is well below our target range of 13% to 10%. So this is a clear result of very disciplined work across the organization. Our net debt increased, and this is mainly reflecting then the acquisitions made, debt finance acquisitions and also the higher lease liabilities due to the new facility in Amesbury. Looking at the margin development then. As mentioned, the margin remains solid then at the 13.5%, even though it was lower compared to the high -- tough comparison last year. The different factors then, volume growth for data center and FoodTech had a positive impact on the margin. And for AirTech, it was a negative impact from volume, obviously then. I'm pleased to see that we continue to drive positive net price increases, mainly in data center and FoodTech. We also saw a negative mix impact, both for AirTech due to the higher mix from APAC and also product mix, regional mix from FoodTech. Also then, as Klas has highlighted, we had negative impacts from tariffs in DCT with 2 percentage points, and this is something that we anticipate to remain until the U.S. production of US chillers is up and running then in the U.S. On the operational side, the under-absorption in AirTech weighted on the margin, although there was a positive offset from the high factory utilization in data center. And then it's worth mentioning also that all business areas continue to drive very strong efficiency improvements. We also continue to invest in our strategic initiatives, as we have mentioned in prior quarters, and this has to do with building digital capabilities, system support and further strengthening our footprint across the globe then. And then finally, the currency had a negative impact for this quarterly result. Turning to cash flow then. If we look at the main cash flow movements, cash flow was strong for the first 9 months, although slightly lower than prior year, and this was due to lower -- slightly lower operating earnings and also a less favorable development in working capital. If we look at the individual business areas, data center continued to deliver very solid cash flow, supported by customer advances and strong profitability. And in AirTech, there was a negative cash flow then due to the weakness in the battery market and also the continued under-absorption. If we look at cash flow from investments, you see that the main part there is that we, earlier this year, bought the remaining shares in the software company, MTech, and also the continued investments in the manufacturing footprint and mainly in Amesbury. Also, this slide is showing the continuing operations. If you look at the discontinuing operations, you will also see the SEK 1 billion that we received for the divestment of the FoodTech equipment business earlier this year. And we, of course, continue to maintain a very strong focus on cash management, and I'm very pleased to see the positive effects of all the efforts that we have ongoing to increase operational efficiency and also the capital discipline across the group. Looking at investments then. We maintain a highly disciplined approach to the capital allocation. We focus our investments in the areas that generates the strongest long-term growth and also supports profitable, sustainable growth. In the third quarter, the ratio CapEx to net sales was 3.9%. And if you look 12 months rolling, it was 6.7%, so although the quarterly level was a little bit lower in Q3, in the near term, we expect it to be somewhat elevated above the historical levels, as we continue to invest in automization and innovation and digital capabilities. And an example of this, of course, in the coming quarters, is the ongoing expansion of the Virginia site for data center, where we are setting up chiller production then in the U.S. and also investing in a new test lab. And these investments, of course, strengthen our technological capabilities and also the regional manufacturing footprint. So we are very well positioned then to remain and be able to capture future growth in this area for Americas. Looking at leverage. The leverage ratio was 2.8, which is then unchanged compared to the second quarter. if you compare to Q3 last year, it's somewhat elevated then, and this is due to the acquisitions made recently, and then also the increased liability for Amesbury. And in the coming quarters, I want to highlight that we will be paying some holdbacks relating to some acquisitions made recently, including Geoclima and MTech. And we maintain our ambition to keep leverage within 1.5 and 2.5%. And we are comfortable staying above this level temporarily since this is due to the strategic investments that are so important for us to really further develop our competitive position and support our long-term growth. I also want to mention that we, in the third quarter, issued our second green bond, so now we have more access to the credit market, and we have been able then to diversify our funding beyond the bank, traditional bank loans. Moving to service then. So expanding service is, of course, a key priority across all our business areas. And in the quarter, we had an organic growth of 6% for service. And of course, here, we want to keep our systems running for our customers in a very efficient and sustainable way through the whole life cycle. But of course, also for Munters, it creates stable and recurring earnings base for us. So that is also important. And service is defined as aftermarket service across the business areas and then also the software revenue for FoodTech. Components has also developed well in the quarter. And this is, as you know, sold mainly within AirTech. So here, we have dehumidification rotors and evaporative pads as growth drivers. And the group's ambition for service and components is to be above 1/3 of group net sales. And in the quarter, we were at 24%. And also if you look 12 months rolling, it was on 24%. And then if we look to the individual business areas, you can see that both AirTech and data center increased their service shares. So AirTech is at 22% and data center at 5%. FoodTech here has 21%, which is a decline compared to last year, but that has to do with this year, we have a higher mix of controller sales and they don't have as much service. So going forward, we will continue, of course, to build on our growing installed base and continue to invest in smarter and more connected and even more energy-efficient products that creates value for our customers and make our products even more reliable. And then looking at our sustainability initiatives here. So here, we continue to make very meaningful progress. Circularity is something that is part of our daily operations. And one example of this is the circularity program that we have been running them with Combient Pure. So this is about how we can increase circularity within AirTech with regards to their processes and products. So it's about designing for reuse, recycling and do it more efficiently. And here, we have identified opportunities for even higher materiality circularity with 15% and there is also a possibility then to further reduce Scope 3 emission by developing our service offering more broadly. Just recently, we also announced a very interesting collaboration around innovation. So here, the residues from our rotor production will be reused for plasterboard manufacturing. So this is a really innovative initiative where we will turn waste into new material and really strengthen our regional circular value chain. So I think 2 really good examples within circularity. And of course, this is a continued focus for the group. We will further expand this across the organization, and we will also deepen the supplier engagement further going forward. With that, I would like to thank you and hand it back to you, Klas. Klas Forsström: Thank you very much, Katharina, and let me then start to summarize the quarter before we move into Q&A then. How are we performing towards our overall financial targets? The numbers that is in the quarter. So currency adjusted growth, 26%, adjusted EBITA, 13.5% and operating working capital, 8.3%. So operating working capital ahead or below in positive terms of the target. Adjusted EBITDA a little bit shy of the set target and adjusted currency growth then ahead of the target. And I think this is very much the pattern that we've had the last -- very often, we have 2 out of 3 then beating or be very close to it. So all in all, we continue to progress towards those targets. If I summarize the quarter, strong performance driven by growth in key industries, predominantly data center and FoodTech. DCT, maintaining a strong momentum, and I said it in the past, and I say even stronger now, I am very confident for the future. We are delivering the right products to the right customers and expanding it to more than just one region. FoodTech advancing on the fully digital business, something that I think has not really brought full attention with one exception. Our customers are very, very interested in this. And then AirTech navigating short-term challenges, building a long-term strength, as I said, resetting it to current circumstances, but then also be fit for the future with very efficient factories, continued strong innovation and an even more focused sales force that's spread out not only in certain categories, but across the different industrial segments. So with that, let's go over to Q&A. Line Dovarn: Absolutely. Thank you, Klas, and Katharina now. So we are now ready for Q&A session. [Operator Instructions]. Operator: [Operator Instructions] The next question comes from Joen Sundmark from SEB. Joen Sundmark: Congrats on a very nice order intake in data centers. If we start with the margin there, you talked about tariffs impacting margins of some 2 percentage points in data centers. Do you sort of expect to get those 2 percentage points back once you have the new factory in the U.S. up and running? Or will sort of change mix offset that improvement once we are there? Klas Forsström: Thank you for the question. So if I divide it into 2 sides then on this coin, as you have heard me say several times, Joen, that is then, yes, we will have a gradual change in the mix, and that will start to intensify next quarter. And then later on then, when we have moved up chiller production and moved it in to be closer to the market, I mean, the mix will start to change back again, the normal pattern. The more we produce, the better it will become, so to speak. So that is the mix movement, so to speak, and that is according to what we have said for several quarters then. When it comes to the tariffs then and here, we look upon it like this. We have a fantastic product that we know that we will start to produce in U.S. first quarter next year. This product is very sought after. So when we sell it, at current, we will send it over from Europe to U.S. That's the reason why we have the tariffs impact this quarter. And I can say like this, if we need to take some more tariffs, i.e., if we sell more, I'm happy to take that for a short time period because that generates market share. When we have the production up and running, I mean then the tariffs are gone and at the same time, they have also become much, much better in producing those chillers. So you can say we balance it out over the long run. Joen Sundmark: Okay. Very clear. Then as you're talking about more measures taken in AirTech, when you sort of look into 2026 and your ability to reach this 13% to 16% margin range. How confident would you say that you are to reach those levels having both cost measures in mind, but then also combined with the current lower demand situation overall? Klas Forsström: Also a good question. I mean, the reason why we are driving those cost measures that is, as I said in the beginning, it was a weaker market than we foresee in the beginning of the year. At current, we say that the battery sector will continue to be subdued during the majority of 2026. But with that, and on and off, we may pick up orders, but it will continue to be in the range of 10% to 20% of the total order intake. So that is one thing then. So then we are resetting the organization to be handling that level. What we need to have in order to come up to the numbers that would please me, the 13% to 16%, of course, that is also more volumes. And that is the reason why we are resetting now and with modernization of the factories that we've done and continued efficiency then we will gradually start to move towards that target. But as I said in earlier statements, I think that we now have a prolonged period of somewhat weaker margins then, and that's the reason for the program. Line Dovarn: We'll take another question from the telephone conference. Operator: The next question comes from Adela Dashian from Jefferies. Adela Dashian: Klas, it'd be difficult to limit myself to just 2 questions after today, but I'll try my best. Just firstly, on the book-to-bill in DCT, you did promise a ratio above 1 last quarter, and you did deliver that today. So congratulations to you and Stefan and the rest of the team. Should we expect some quarterly volatility going forward? Or are you interpreting this as a new norm given the very strong market drivers that you're seeing in the market? Klas Forsström: Adela, thank you for the congrats, and thank you for the question and this is the silver bullet question, I think. My best way to phrase it, that is like this. I see a very strong market that continues for years. I see us having a very, very strong product offer. And then I see customers that sometimes are putting many orders, sometimes are waiting for a longer period. With all that said, I think that we have a strong market, a strong offer and a great team, so I'm optimistic for the future. If I would say a certain level, the only thing I can guarantee that is that I would be wrong. But I'm very positive moving forward. But to predict, I mean, what will come in orders in a quarter, then I should buy me a lotto ticket at the same time then, but I'm positive. Adela Dashian: Well, this quarter, you were right, so and for my second... Klas Forsström: And I bought the ticket. Adela Dashian: For my second question, I'm going to just try to push 2 into 2 and be a bit broader here. On the order book composition in DCT, I believe so far, the majority of the orders have still been for the traditional air cooling. But you do mention some CDU orders here, and I also noticed that the share of indoor units is increasing. So are you entering now a phase where liquid cooling solutions are starting to gain real traction? And then on the, I guess, flip side, SyCool is now diminishing as a share, but we did hear one of your paper partners announce an integrated platform for waterless direct-to-chip, so could this potentially reinstate the interest in refrigerant-based systems? Klas Forsström: I try to answer this expanded question with one answer as well. The first one, that is that we have now, in my book, the widest product offer when it comes to different cooling solution there is. And we have also, and here I'm biased, I know, but I say it anyhow, the most energy efficient and modern assortment. Our vitality Index for the group is about 40, i.e. of what we are selling, what is -- 40% has an age of less than 5 and in data center, much higher than that. Yes, you're right. We are shifting more and more to what we call them the liquid cooling universe. And here, we have really targeted right type of products. We have 2 different, call it, shifts when it comes to portfolio. One shift is towards the CRAHs that have a weaker profitability. And then we have the CDUs and we have the chillers that have higher than the average of what we have done. We are shifting out the SyCool that had the highest. And then to just complicate this, short term on the chillers, everything we sell into U.S. at current, we have a tariff then surcharge, but that will, of course, disappear. So if I shorten this up, we will have a headwind when it comes to mix on the quarters to come, but that will then gradually turn around when tariffs and more and more production of chillers, et cetera, are driving through efficiencies. So a little bit tougher moving forward, and then it will lease up. That is what I predict. Adela Dashian: Could you just expand a bit about the SyCool and what the trends that you're seeing and... Klas Forsström: Absolutely. Here, super excited. I think that we will have opportunities here. But as always, when it comes to this cooling very close to the chip, I mean, the euro is still there, but I'm optimistic for that. I don't see that we will generate short-term billion Swedish krona orders on it, but I'm definitely, call it, looking forward to see orders coming in, in that area. And here, we are unique. Line Dovarn: Let's take another question from the telephone conference. Operator: The next question comes from [ Karl Degenberg ] from DNB Carnegie. Unknown Analyst: So 2 questions from my side. And first of all, on the backlog of SEK 6.6 billion DCT, I just wanted to hear, could you give any sort of quantification of how much of that is for delivery in '26? And a related question to that as well is on invoicing capacity in DCT, I think we had that discussion on the last quarter results again. And that's around, I think you've been at around 1.5% in the revenues in DCT now for roughly 3 quarters. And I just wanted to understand, given the capacity that you're adding and so forth, for '26, '27, what kind of quarterly run rate could you achieve given the capacity additions? Klas Forsström: If I generalize, you can say, with current footprint in DCT with one exception that I will come back to then, we could definitely without -- if we add shifts, if we tighten the chip to some extent, we could easily deliver 30% more deliveries out of our factories. And then we have one exception, and that is now we are definitely, we cannot deliver much more when it comes to chillers short term from our European setup to U.S. But as soon as we have that up and running, I mean, we will have close to double capacity of chillers also in U.S. And then, of course, we don't have to pay the tariffs on that, so to speak. So we have plenty of room to grow. But in one area, we are short term, a little bit squeezed, but that is according to plan. Unknown Analyst: Yes, yes, very well. And then I'll maybe take my follow-up on the same topic. I mean I guess the chiller exposure came predominantly from the acquisition of Geoclima, correct me if I'm wrong. And given that you -- I mean remembering when you bought that business, it was obviously quite an addition for the division but given that it has a 2 percentage point impact now on the imports on the margins, it sounds like the growth has been very, very significant since you acquired the entity. So could you say anything, what's the share now? And maybe if you look at your own portfolio, let's say, transformation away from SyCool and so forth, what do you expect the mix to be, let's say, '26, '27 without giving any absolute forecast? Klas Forsström: No. What I can say that is -- and now I don't have that picture in front of me, but you see the graph there on one of the slides where we have the different components and how that is spread. There you can have some indications. But if I'm a little bit more straightforward, I'm super pleased with acquisitions of Geoclima. I mean it is the world's best chiller, and we have a very strong sales force. So in my book, we have achieved or we have overdelivered on what the chiller sales could generate here. And then according to the plan that we deliver on then to add this into the U.S. setup and then we have an in the region, in the market for the market. And suddenly, we also get rid of this volatility when it comes to tariffs then. And here, I just want to underscore, you can never be happy to pay tariffs. But if I have to choose in between having no chillers, and paying tariffs, I'm happy to pay tariffs because we have the world's best chiller in the market. Line Dovarn: Sorry, we need to break that, we are running out of time. Thank you very much for that. We do have more callers on the line, but we will reach out to you separately. We also have received some questions here. And I will just finish off with one last question for you, Klas, that you can answer quickly, if you can. Klas Forsström: I will try. Line Dovarn: What is Munters' biggest challenges going forward, Q4 and further on, 2026 to 2030? Klas Forsström: That was a broad-based question. I think that -- and I don't call this a challenge that is we should continue to be on the toes when it comes to drive innovation, when it comes to be very, very close to the customers. And then we need to get best use of our decentralized setup. We have 2 skyrocketing divisions at current and one that has tougher. And that is in the decentralized way. I mean then we handle the opportunities when we are skyrocketing, and we handle the challenges when we have tougher and that is what I think we will continue to work with. Line Dovarn: Great. Thank you very much. Thank you, Klas and Katharina, for presenting. Thank you, everyone, for listening in. And we will, as I said, reach out to those of you that we did not have time to talk to. With that, thank you and wish you a nice weekend. Klas Forsström: Thank you. Katharina Fischer: Thank you.

203天前Insight Analytics约5分钟阅读

MTX 2025 Q3 财报电话会议

Operator: Good morning, and welcome to the Minerals Technologies Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Lydia Kopylova, Head of Investor Relations. Please go ahead. Lydia Kopylova: Thank you, Gary. Good morning, everyone, and welcome to our third quarter 2025 earnings conference call. Today's call will be led by Chairman and Chief Executive Officer, Doug Dietrich; and Chief Financial Officer, Erik Aldag. Following Doug and Erik's prepared remarks, we'll open it up to questions. As a reminder, some of the statements made during this call may constitute forward-looking statements within the meaning of the federal securities laws. Please note the cautionary language about forward-looking statements contained in our earnings release and on this slide. Our SEC filings disclose certain risks and uncertainties, which may cause our actual results to differ materially from these forward-looking statements. Please also note that some of our comments today refer to non-GAAP financial measures. A reconciliation to GAAP financial measures can be found in our earnings release and in an appendix of this presentation, which are posted on our website. Now I'll turn it over to Doug. Doug? Douglas Dietrich: Thanks, Lydia. Good morning, everyone, and thanks for joining today. I'll start today's call with a review of our third quarter, followed by an update on what we're seeing across our key end markets. I figure it would be helpful to provide some perspective on how our markets have changed over the past year and how they continue to move within the global economic context. I then want to highlight some of the recent investments we've made to support the long-term growth we are seeing across several of our product lines. Erik will then take you through the detailed financials and share our outlook for the fourth quarter, and then we'll open it up to questions. Let me start with our Q3 numbers. We had strong execution across our business. delivering solid financial results despite facing mixed market conditions, which I'll get into a bit later. Our sales increased 1%, both sequentially and over last year to $532 million. Operating income came in at $78 million and earnings per share were $1.55, a company record for the third quarter. Cash flow was strong and was up 24% year-over-year. We continue to strengthen our balance sheet, providing us with a financial foundation from which we can evaluate different investments and opportunities to drive growth. We also returned $20 million to our shareholders in the quarter and last week announced a 9% increase to our regular quarterly dividend, making this the third consecutive year that MTI has had a dividend increase. We recognize our sales growth has been sluggish this year due largely to the softer market conditions we've been experiencing in residential and commercial construction, heavy truck and agricultural equipment markets and in Europe in general. These softer market conditions have largely offset the growth we are seeing in many of our other product lines where we are executing on opportunities in markets that are structurally expanding and where we have built a distinct competitive advantage. I'll highlight some of these specific investments and opportunities in a moment and outline how they will set us up for meaningful expansion across several product lines, both in the near and long term. But first, let me provide an update on our current market conditions. As a general overview, after the first quarter, most of our end markets have been and remain relatively stable. A few continue to be weaker than last year, and we expect them to remain so through the fourth quarter. Let's start with our Household & Personal Care product line. Pet litter market conditions in North America and Europe have remained stable and at similar levels compared to last year. We continue to see discounting activities from branded producers in North America, and in response, we've worked with our customers to make promotional adjustments to the products we supply them. These activities have had a positive impact on our sales volumes and profits. The pet litter market in Asia, and more specifically, China, continued to show strong growth. Our volumes are momentum there, and we are making investments to support this long-term growth. In our other consumer these markets, demand for our natural oil purification and animal health products has been strong, with our sales this year up 18% and 12%, respectively, and we see this trend continuing. In Specialty Additives, we're facing mixed market conditions in paper and packaging. Asia continues to be a market with good opportunities for us to expand our base business and introduce new technologies. However, this year, North America demand has been weaker. Elsewhere in this product line, demand in the residential construction market has been relatively flat all year. We did see some signs of further softening late in the third quarter, which may make it a slower end of the year. For our high-temperature technologies product line, conditions have remained relatively stable for steel production in the U.S. with utilization rates remaining in the mid to upper 70% range. It is not the highest level we've seen over the past 2 years, but healthy enough for stable volumes. Europe continues to be more of a challenge with steel utilization rates dropping below 60% this year. The U.S. foundry market has also remained relatively steady for most of the year, buoyed by stable auto production. Two areas that have been soft for this business all year are the agricultural equipment market and heavy truck markets. When these markets begin to rebound, they will provide good eye for foundry demand. The China foundry market has remained relatively strong this year despite the impact of tariffs and ongoing trade disputes. In fact, we've seen strong volume across our metalcasting business there with year-to-date volumes up over 10% from last year. In environmental and infrastructure, commercial construction remains slow compared to historical levels, and these similar conditions exist for the environmental lining and remediation markets. We expect to see some improvement in project activity as interest rates ease and projects are financed. We are already specified on several large commercial and environmental projects and expect an inflection in this product line sales when these projects commence. Elsewhere, we've seen strong pull for our infrastructure drilling products this year, increased geothermal drilling and fiber optic cable installation has been driving the increased demand. As you can see, we continue to experience mixed conditions across our end markets. But despite the impact these conditions are having on our top line this year, our team has navigated these conditions to maintain margins, profits and cash flow. At the same time, we've not deviated from our focus on investments in technologies and markets where we see the biggest growth opportunities, which I'll go into more detail on the next slide. We've spoken about our strategy to build positions in higher growth markets. Markets with economic or macro trends where we can deploy new technologies or expand our existing technologies to drive higher levels of growth and balance the more cyclical portions of our company. We've been executing on these opportunities, expanding our pet care business, investing in technology serving a variety of consumer-driven end markets, and deploying new technology in some of our more traditional businesses like refractories and paper and packaging to expand our value proposition globally. As you've likely seen, we announced a few recent investments made in support of these strategies, and I want to highlight a few of them to remind you of the opportunity we continue to see. Let's start with a few opportunities in our Consumer and Specialty segment. In our pet care business, we remain confident in the long-term growth trends of this market and in the private label portion in particular. We expect the North America pet litter market to continue to grow by 3% to 4% and in the Asia market to grow by 6% to 8% per year over the long term. Over the past 5 years, our pet litter business has grown organically at a 9% compound rate. Adjusted for the 2 acquisitions we've made over this period. To support this continued growth, we recently made investments at our plants in Dyersburg, Tennessee; Branford, Ontario, and Chaoyang City in China. We've broadened these plant manufacturing capabilities to increase throughput, lower cost and offer greater packaging flexibility to meet customer demand. Dyersburg and Branford are both strategically located and well connected to large portions of the North America market. These recent investments to expand capacity upgrade capability at these sites enabled us to secure some significant contracts beginning in 2026. In China, we've outgrown our existing facility and are bringing online a completely new one to meet the demand that we are seeing from this rapidly growing pet litter market. The upgrades across these 3 plants are expected to be completed by the end of 2025 and will fortify our position as the largest high-quality private label cat litter supplier to customers around the world. In our natural oil purification product line, we announced an investment at our plant in Turkey to support the significant growth we are seeing in this market. Since 2018, our Bleaching Earth business has grown at a compound rate of 20%, and this is our third expansion since we opened the facility to support this level of revenue growth. Our facility in Turkey at both mines the raw materials and manufactures absorbents and Bleaching Earth products sold under the brand name Rafinol , which are used for the purification of edible oils and renewable fuels. Including biodiesel, renewable diesel, sustainable aviation fuel. The market opportunity here is significant. The global natural oil purification market size was $1.1 billion in 2024. The renewable fuels portion accounts for over 12% of this market and is the fastest-growing segment. Demand for sustainable aviation fuel, in particular, is growing rapidly and is being bolstered by supportive regulatory changes in the U.S. and Europe. Our Rafinol product line is differentiated in the market with its high-performing absorptive properties that succeed in the most challenging applications like sustainable aviation fuel. Also worth mentioning, we've made other investments to meet the increased demand for our natural animal health products, and also for our higher tech Fabric Care solutions for dry laundry detergent. In our Paper and Packaging business, we continue to secure new contracts in Asia and in the next 6 months, we expect to commission 4 new satellites in the region. There continues to be a significant unpenetrated addressable market in Asia for our technologies. We've been driving the deployment of engineered calcium carbonate and the introduction of renewable technologies to the paper and white packaging industry as producers expand and look to upgrade their product quality. Since 2022, our volumes there have grown by 20%, including the doubling of our sales to the white packaging industry. We've always been the leader in the region and are well positioned to continue to grow by delivering the best calcium carbonate solutions including innovative technologies like NewYield. On the Engineered Solutions side, our MINSCAN installations and our Refractories business continue to go strong. We just signed our 18th MINSCAN contract and we'll be installing 6 new units this coming year. There's a large addressable market with over 130 electric arc furnaces in the U.S. and Europe capable of using MINSCAN, providing us with a significant runway to grow over the next several years. In summary, we expect these investments to generate $100 million in incremental revenue over the next 12 to 18 months as they ramp up. And these are just a few examples of the investments that we've recently made to support the growth opportunities for which we have strategically positioned ourselves. I want to be clear that these are just a subset of the initiatives that we are pursuing. Other areas like PFAS remediation, natural skin care additives, geothermal drilling products and further penetration of our greensand bond technologies into Asia are all progressing nicely as well. Together, they provide several significant pathways for us to drive sales higher going forward. And when our weaker markets begin to rebound, we see that providing additional upside to our top line growth. With that, let's have Erik take you through more detail on our third quarter financials and our fourth quarter outlook. Erik? Erik Aldag: Thanks, Doug, and good morning, everyone. I'll start by providing an overview of our third quarter results followed by a review of the performance of our segments, and I'll wrap up with our outlook for the fourth quarter. Following my remarks, I'll turn the call over for questions. Now let's review our third quarter results. Overall, our team delivered another solid performance while continuing to navigate mixed market conditions. Third quarter sales were $532 million, up 1% sequentially and 1% higher than the prior year. You can see in the sequential sales bridge on the top right, that sales increased in 3 of our 4 product lines. In Consumer & Specialties, our Household & Personal Care product line was up 2% sequentially and driven by increases in cat litter and other consumer specialties. In Specialty Additives, sales were 2% lower sequentially as we moved into the seasonally lower period for residential construction applications. In Engineered Solutions, sales in high-temperature technologies increased slightly from the second quarter as higher sales to steel customers were partly offset by lower sales to foundry customers in North America. And we saw a 5% sequential increase in our environmental and infrastructure product line, driven by increased demand for offshore services as well as infrastructure drilling products. To summarize, conditions played out mostly as we anticipated, and I'll take you through more of the details when I cover the segments in a moment. Operating income for the quarter was $78 million, down 1% sequentially and versus the prior year, and operating margin was 14.7% of sales. In the operating income bridge on the bottom right of the slide, you can see that unfavorable volume and mix primarily in the Consumer & Specialty segment impacted income directly by $1 million. And lower volume also contributed to temporarily higher operating costs at a few of our facilities in the quarter. Higher pricing of $1 million offset inflationary input costs, including higher tariff costs in the third quarter. EBITDA was $100 million, up 1% from prior quarter and prior year and EBITDA margin was 18.8%. I'd like to point out that versus the third quarter last year, we've done well to offset $10 million of higher costs, including tariff costs raw material increases, energy and temporary increases like higher logistics costs associated with our U.S. cat litter plant upgrade. We offset these cost increases with a combination of productivity improvements, supply chain actions, price increases and our cost savings program. And I would also highlight as we move through the temporary cost increases, we should see margin improvement from these actions going forward. Earnings per share, excluding special items, was $1.55 , the same level as the second quarter and up 3% from last year, representing a record third quarter for the company. We recorded special items of $7.5 million in the quarter related to litigation expenses. Now let's turn to a review of our segments, beginning with Consumer & Specialties. Third quarter sales in the Consumer & Specialty segment were $277 million, flat sequentially and down 1% from last year. In Household & Personal Care, sales improved by 2% from prior quarter to $130 million, driven by improving volumes in our cat litter business and continued progress on growth initiatives in consumer specialty applications. Most notably in edible oil and renewable fuel purification, where sales grew 18% with last year. In Specialty Additives, sales were $148 million, 2% lower sequentially. The Global Paper and Packaging volumes were flat compared with the second quarter as volume increases in Asia offset lower volumes in North America. Meanwhile, demand for residential construction products was incrementally softer in the quarter, which pulled volumes lower for the product line. Despite the volume pressure in Specialty Additives, the segment continued to build on the operating performance gains we saw in the second quarter, delivering a modest improvement to operating margin sequentially. Operating income in the quarter was $37 million, representing a 13.5% of sales. Looking ahead to the fourth quarter, in Household & Personal Care, we expect continued sequential growth in cat litter, edible oil and renewable fuel purification. And in Specialty Additives, we're expecting lower sales sequentially, primarily driven by typical seasonality for residential construction products. We do expect softer-than-normal residential construction volumes in the fourth quarter as some customers are indicating they have efficient inventory levels heading into the winter months. and they are planning to adjust production schedules accordingly. Overall, for the segment, we expect sales to be flat or slightly lower sequentially. Now let's turn to the Engineered Solutions segment. Third quarter sales in the Engineered Solutions segment increased by 2% sequentially and grew 4% from prior year to $255 million. In the high temperature technologies product line, sales of $179 million were similar to prior quarter and up 2% year-over-year. Sales to steel customers in North America continued strong more than offsetting continued weakness in the Europe and Middle East steel market. Sales to foundry customers were mixed with North America volumes impacted by continued softness in the heavy truck and agricultural equipment markets, in addition to the typical third quarter customer maintenance outages. On the positive side, we saw continued strong demand across a with foundry volumes up 5% sequentially and up 17% versus prior year. In Environmental & Infrastructure, sales led by 5% sequentially and were up 9% from prior year driven by a for offshore services and strong pull for infrastructure drilling products. The segment did a nice job of mitigating tariff impacts and turned in another strong operating performance. Operating income was $45 million, and operating margin improved by 20 basis points sequentially to 17.6% of sales, a record level for the segment. Looking ahead to the fourth quarter, we expect environmental and infrastructure sales to be 10% to 15% lower sequentially and due to typical seasonality for large project activity. And in high-temperature technologies, we expect sales to be slightly lower sequentially as several of our foundry customers in North America have communicated longer than towards the end of the year. This is due to the continued softness seen in the agricultural equipment in markets and in anticipation of some acute automotive production disruptions. While these plans could change, our current outlook assumes a reduced number of foundry working days in December, along with the temporary margin impact of the associated lower productivity at our plant sites. Overall, we expect segment sales to be lower by around 5% sequentially. Now let me turn to a summary of our balance sheet and cash flow highlights. We delivered another solid cash flow performance in the third quarter. with free cash flow of $44 million. Capital expenditures totaled $27 million in the third quarter, and we remain on pace for approximately $100 million of capital investments for the full year. Some of the key investments that Doug outlined earlier will be commissioned during the fourth quarter with revenue ramping up in the beginning of 2026. And we expect that sort of cadence to continue into next year with additional start-ups expected throughout the first half. In total, we returned $20 million to shareholders in the third quarter through share repurchases and dividends in keeping with our stated balanced approach to capital deployment. Our balance sheet remains strong, and our net leverage ratio remains at 1.7x EBITDA. Below our target of 2x EBITDA. Now I'll summarize our outlook for the fourth quarter. Overall, we expect fourth quarter sales to be approximately 2% to 4% lower sequentially and primarily driven by seasonal patterns in a few of our end markets. Operating income for the quarter is expected to be between $65 million and $70 million, with earnings per share between $1.20 and $1.30. Our sales range of $510 million to $525 million considers a number of factors. On the positive side, we expect continued traction with our growth initiatives in Household & Personal Care. The cat litter business is gaining sales momentum and the fourth quarter is typically a strong one for cat litter. In addition, we expect continued growth in edible oil and renewable fuel purification. As I noted earlier, some of our customers serving the residential construction and foundry markets in the U.S. are signaling the potential for slower order patterns and extended outages around the holiday. Which would impact volumes of some relatively high incremental margin products in both our Specialty Additives and high-temperature technologies product lines. We are also watching for potential volatility in order patterns due to uncertainty around tariff policy. As we've communicated, we don't have a significant direct exposure to tariffs. However, we're mindful of potential near-term impacts on our customers. Our guidance takes all of these to accounts and where we land in the range depends on how they play out. In summary, we have positive momentum across a number of product lines as we head into the fourth quarter, and we are focused on delivering the growth initiatives that will carry this momentum into next year. With that, I'll turn the call over for questions. Operator: [Operator Instructions] Our first question today comes from Daniel Moore with CJS Securities. Dan Moore: Pet Care. It looks like you saw an uptick in catlier volumes in Q3. How should we think about -- you described the market dynamics, how do we think about those and the potential to get your pet care business back to that kind of term mid-single-digit plus growth rate cadence, not necessarily 2026 guide, but over the next 12 to 24 months. Erik Aldag: Yes. I appreciate that. Look, Dan, as I mentioned, let me start. I'll hand it over to DJ for some details. There's been a challenging pet term market for us. But this is one year we -- I tried to make some comments to highlight, if you take a longer-term view on the market and our performance in it, we've grown organically. I mean, we pieced the business together through some acquisitions. But even adjusting for some of those over the past 2 years, the business has grown by 9% compound. This year, a little bit flatter, we've seen some dynamics in the market that haven't been seen before in terms of something. We've made those adjustments. We have to work with our customers to make those adjustments. We've done that. We've seen those the volume improve as a result. And I think that carries through the fourth quarter and into next year. The biggest thing is, I think this is a good business for us, vertically integrated. We're global, obviously the largest with the technology, and we're confident in that long-term growth rate of it, that I mentioned, 3% to 4% North America, 6% to 8% in Asia. And we're making investments to be able to support the growth that we see and what's going to be coming forward and short term next year. I'll let D.J. talk about that. But these are good investments to make this business is going to revert to that growth rate. I never said it's going to be a straight line, but we will have that business growing next year. And I'll pass it over to DJ to let's give you some details on what we're securing with some of these upgrades. D. J. Monagle: Yes. Thanks, Dan. We kind of close out some of the market dynamics and then just give you a sense of the return back to that upper single-digit growth rate. On the North American market, what we did see early on, and we had mentioned in previous calls, these battles among the brands and is the only way I would describe the significant discounting that went on the brands, that caused some pretty big market share shifts within the brands, but it also had an effect on private label. Most pronounced at some specialty pet stores and grocery stores. We want to adjust with our private label partners and come up with a promotional schemes that still keep their private label relevant. That includes price discounts, changes in packaging, changes on shelf allocation. And so we feel that, that part of the market has stabilized pretty well. Doug had mentioned some pretty significant investments that reposition us for some future growth and coming pretty quickly, Doug had mentioned some contracts. So what you'll be seeing is of some $30 million plus of growth that will be going into next year as those contracts come online, that's towards the end of the first quarter. So we feel really good about that. There's some further growth that's capable or enabled by these investments in North America, especially with the product flexibility and packaging flexibility. The other thing Doug mentioned that we're very excited about is the reinvestment or the establishment of a new facility in Asia. We outgrew our old facility. We've got a lot of pull from a wide range in the market on how to take advantage of that growing region. And the difference for Asia with us is that it's a much broader and more profound mix of branded customers, global brands that want to grow in Asia, and we're well positioned to manufacture and co-pack for them, but also supporting the regional private labels as well as an emerging e-commerce business there. So this investment does that for us. So that would be additional growth. So I think the market has stabilized. We've made some adjustments with our branded partners, and we're very well positioned to get that back on track as projected in 2026. Dan Moore: Really helpful. And just pulling on that string. With all of those investments you're making, how do we think about just the overall increase in capacity as we exit '25. Douglas Dietrich: Well, some of them in North America, so the overall increase in capacity. So we're looking at that 6% to 8%. I'll start with China. We've made this investment. It's a new facility. We've put in capacity to probably sustain it for the next 3, 4 years. It's a big enough facility that we can add additional packaging capacity to meet that growth over a longer period of time. So that one, we're starting with modular kind of growth to meet the incremental investments over the next 10 years. In North America, the investments we've made in Canada and here in the U.S. and these 2 we talked about were a lot of quality upgrades handling upgrades. Again, these are 2 acquired facilities. So these were planned a long time ago. We needed to find the right time to be able to shift production around keeping our customers supplied while we made these changes. That's a lot of the cost increase you've seen and some of the margin -- a bit of the margin deterioration you saw this year. But that's -- we're through that. And we've made upgrades to material handling, quality packaging, packaging flexibility, throughput, all of which have reduced cost as well and should accrue to profitability going forward. So it's a number of different things, but we've got plenty of capacity in these facilities to grow at those rates for I'd say the next 5 to 10 years. But again, we can also have space in them to add modular packaging capacity if we need to keep up with the market. So I think we're in good position, Dan. These investments, they're not significant huge investments for us, but they did put us in a position to be able to secure higher quality contracts. And as DJ mentioned, we see about $30 million of that coming in starting in the second quarter next year. Dan Moore: Very helpful. Switching gears, Environmental and infrastructure, little pockets of strength there at least this quarter. I know maybe a more difficult seasonally slower period that we're going into, but just talk about momentum as we kind of think about -- or to think about turning the page towards '26. Douglas Dietrich: We saw some momentum. Actually, this quarter was in our offshore water treatment business, which has been doing really well. I guess I'll start with just construction and environmental remediation, relatively flat. We've seen some projects come I mentioned were specific projects. We thought that business would probably turn this year. It still hasn't Commercial construction, large building is still relatively flat. I think when -- it's interest rate sensitive. I do think when interest rates start to move down, we will see more of that on the shelf activity come into play, and that will be positive for us. But this quarter a lot of water filtration stemming from our capability around PFAS remediation, our ability to take complex things out of water. And that was some new projects we secured offshore, and that really came through in the quarter, and we think that's sustainable through the fourth and into next year. Dan Moore: Very helpful. Just in terms of the Q4 guide, revenue down 3-ish percent sequentially at midpoint, op income down more like low teens. So a little bit of a higher decremental margin. I appreciate the color on boundaries, which is high margin. Are there other corporate incentive comp, any other expenses, which you might call out in Q4 that could pinch margins more than might be typical given the volume decline? Erik Aldag: Yes. Thanks, Dan. This is Erik. No, nothing unusual from a corporate expense standpoint in the fourth quarter. The main drivers are really the ones that I called out in the prepared remarks in terms of the mix. I mean, the markets that are down seasonally for us, Q3 to Q4 and then the foundry and some of the residential construction products that we have, those are higher incremental margin products for us. And so we do have a mix impact that goes against us in terms of the decremental margins that we're seeing Q3 to Q4. The only other thing I would highlight is we had some strong margins in the third quarter in the Engineered Solutions segment. That was continued strong performance from the team's offsetting tariffs, continued strong productivity, variable conversion cost control. We did have a couple of the equipment sales in the high-temperature technologies product line that helped margins in the third quarter, and we don't have any of those equipment sales forecasted for the fourth quarter. But as Doug mentioned, we've got about 6 to come next year in terms of those MINSCAN installations. Operator: The next question is from Mike Harrison with Seaport Research Partners. Michael Harrison: I was hoping we could talk a little bit about the margin performance in Consumer & Specialties. I think it was relatively close to where you were expecting, but you are kind of tracking like 150 to 200 basis points lower than you were last year. I was hoping that we could maybe break down or help kind of bridge some of those key factors that have driven that weaker margin performance. Maybe just talk about how you see the discounting or promotional activity in pet care. Maybe mix, maybe the volume declines in Specialty Additives and on that resi high-margin stuff as well as the temporary cost from pet care expansions like -- can you help us understand what's going on there? And then maybe just directionally help us understand what that -- as we start to think about consumer and specialty margin into next year, how some of those items should trend? Erik Aldag: Yes. Thanks, Mike. This is Erik. So I think you hit on a lot of the key themes there. And actually, for the third quarter, the margins were right where we expected them to be for the segment. The largest driver there is some of these temporary cost impacts we have. I mean we have a significant upgrade going on at one of our U.S. cat litter plants. And we've had to move around production across our footprint in North America, and there's been an increase in logistics costs as a result. So that's the primary driver of the margin pressure, I'd say, from Q2 to Q3 -- in Q2 as well as in Q3. That facility is going to be ramping up here in the fourth quarter. And so we're moving through that more temporary impact. You mentioned discounting. We're not seeing a negative margin impact because we've been helping our retail partners with discounting. And the reason for that is we've had some incremental pricing discounts on our products but it's helped with our volumes. And so as we get more volumes running through these plants, there is significant fixed cost leverage benefit that we get. And so we haven't seen margin donation from any of the discounting that we've been participating with our retail partner. As far as where this is going, the segment is set up well for 15%. We were very close to 15% last year, and we're going to get there again as we move through some of these more temporary issues. But that's our target. This segment should be delivering 15% operating margin. Douglas Dietrich: Michael, the only thing I'll add, and I'll put that same as echo what Erik just said. We'll get back to and probably exceed last year's margins in the segment. And that's going to come from a couple of things. A, the ending of the temporary logistics expense, number one, and some of the other ancillary expenses that came across as we made these investments in these facilities. Two, we have seen some lower volumes due to this discounting, which we've adjusted. And as Erik just mentioned, those volumes are coming back. That is helping profitability. And three, the additional volume that we're going to be putting through these plants next year, starting in the second quarter, is going to be very accretive to those margins. And so I think, as Erik said, we're set up to get back to last year's margins next year and probably see them with some of this additional volume. Michael Harrison: All right. That's very helpful. And then maybe just on the investments that you're making in Turkey with the Bleaching Earth for renewable fuel. . Can you help us understand what the dollar amount of that investment looks like? How much is your capacity expanding? And I guess, should we think about the investments as mostly mine expansion or is there something that you're doing on the, I guess, refining or processing side that's helping to improve your capabilities as well. Douglas Dietrich: Sure. I want to be careful about giving some information out there and how much capacity we're putting into the market. So I won't give you a ton give you a percentage. -- again, we built the facility 8 years ago. We built it with enough room to expand it. At the time, we want -- we were looking more at the edible oil market, which grows at about 3%, 4% kind of GDP business and we had a great product for that application. Since that time, we saw the development of the market for renewable fuels. And we started supplying that market probably 4 years ago, 5 years ago, and then more recently, the development of sustainable aviation fuel through regulation changes in Europe, in particular, now U.S. has really started to pull that product much harder. And so this expansion, $9 million, $10 million type expansion. We've expanded the plant by about 30% and in terms of capacity to be able to meet the growing demand. Like I said, we've been growing at about 20% per year for the past 8 years. But a large portion of what's happening is what started as a 100% edible oil kind of application and product sales has now moved probably 34% of our business is now in sustainable aviation fuel and renewable fuels. And that's growing very quickly. And so this expansion was -- it's going to supply both, but it will probably be consumed very quickly with some of the renewable fuels. We have sufficient reserves in the region for decades. And we will look probably to expand the facility again over the next 5, 6 years, depending on how the market goes. But this one is an incremental step within the current footprint. The next one might be a whole new footprint if we continue to grow at this pace. Michael Harrison: All right. Very helpful. And then last question I have is just on the cash flow and maybe some of the working capital dynamics. You mentioned the higher logistics costs, but I assume you're carrying some additional inventory in the pet care business as you work through these expansions. And then is there anywhere else that maybe inventory is a little bit elevated right now? I'm thinking, in particular, maybe MGO as you're trying to navigate or mitigate some of the tariff impacts. Just trying to think about how working title trends in Q4 and how we should think about it as we're starting to look at next year? Erik Aldag: Yes. Thanks, Mike. So in terms of working capital, AR, AP, both in good shape. We watch those metrics closely and no major changes there. We are holding on to a little more inventory, and you touched on it to a few of the spots there. a little higher inventory in pet care, but some strategic positions, I would say, in the high temperature business. MGO being one of them, every couple of years, there's a river closure in the middle of the U.S. that we have to work around and we build up some inventories to manage around those. We're going to be working through a lot of those inventory positions in the fourth quarter. And so we should be ending the year sort of at a more typical level in terms of the inventories. We'll still have some of those strategic positions in place, but more of a typical level from an inventory perspective. From a cash flow standpoint, we're expecting a strong fourth quarter as usual for the company, strong cash from ops, the free cash flow number is going to depend a little bit on the pace of some of these growth capital investments that we've talked about. We've got a number of them ramping up in the fourth quarter. And so the capital number that ends up happening in the fourth quarter could depend a little bit on the timing of how those come through. But overall, expecting a strong cash flow quarter in the fourth. Operator: The next question is from Pete Osterland with Truth Securities. Peter Osterland: I wanted to start just by following up on the recent investments across pet care and Bleaching Earth, so you've talked about an aggregate targeting $50 million of growth investments supporting $100 million of additional revenue -- just in aggregate, how much of those targets are represented by what you've already in a currently in progress. And to the extent that there's more to come, we're across your portfolio are you still targeting for additional organic growth investments? Erik Aldag: So if I understand -- Pete, this is Erik. If I understand the question correctly, the $50 million of CapEx and the $100 million of revenue that we've talked about, those are the investments that Doug laid out today in terms of the highlight on growth capital projects that we have. But importantly, that is just a subset of the growth opportunities that we have much of the opportunity we have is supported by existing capacity, and so it isn't requiring necessarily growth capital to support it. Those are just investments that we wanted to highlight supporting the growth opportunity. Douglas Dietrich: Yes. I guess I'll add, Pete, this is just -- when I look at -- when you look at those markets, and so the North America pet litter market, the Asia pet litter market, the bleaching earth market of $1.1 billion and the renewable fuels growing as the fastest segment. And then also with paper and packaging and our MI scans. -- just these investments are $100 million over the next 12 to 18 months, right? But that trend continues. That's not just the opportunity in those markets alone, right? I think just the MI scans, if you do the math on the MI scans, each MINSCAN is probably worth to us $1 million -- $1 million to $2 million depending on the size of the vessel that is going on, et cetera. So you're looking at just the 18 that we've installed are probably worth about $20-plus million of reoccurring revenue every year. And there's a whole runway of those to go. Not that we'll get 130 million of them, 100% of them, we might. But that market, that's a $0.25 billion market for us just in that product line, right? Look at the bleaching earth market with renewable fuels. We're targeting $75 million of growing this business to $75 million over the next 2 years. Pet care, we're a $400 million business. We think that business grows with some of the investments we're making to $500 million, and that's been our target for 2027. And I think we're on target for that. Given this year, it might be another 6 months, 9 months, but we're still seeing that, that business is another $100 million to grow. And these investments that we've made will support that. So all the way down the list, you're looking at hundreds of millions of dollars of opportunity that we positioned ourselves for -- these investments are the first step in tapping into them, but we've been making these investments over the past 5 years. This is our third bleaching earth expansion. We've upgraded these other facilities in pet care. Now we're upgrading these 2 or 3 key ones. And so these are investments that we've made before, we've delivered on. We're making them again, and they're setting us up for that continued growth. So I think you're going to see that. So I took your question a little bit further, but these are big opportunities, but we've positioned ourselves in these markets for these opportunities, and now we're taking advantage of. Peter Osterland: No, that's very helpful. And just kind of following up on the pet care investment specifically that you're expecting to finish by the end of '25. I guess what's the time frame to realize that run rate of incremental revenue that you discussed? I mean, is it kind of a gradual ramp throughout the course of '26, so you kind of expect that to continue driving growth into '27? Or how should we think about that? Douglas Dietrich: For pet care, in particular, as DJ mentioned, these investments will set us up for longer-term growth. But in particular, we've secured about $25 million, $30 million of contracts on an annual basis that should start to ramp up through the first, but be full run rate by the second. So I think if you snap the chalk line at the end of March and ran 12 months, we think that's $20 million, $25 million of revenue right there. So next year, probably expecting $20 million, $18 million of that $25 million to hit in pet care alone, and that's going to continue. And we've got capacity -- further capacity in China for that market that continues to grow. So we think we're getting this thing back on track. These investments position ourselves with high-quality operations, low-cost operations and strategically located to deliver on the business. And so I think you'll start to see that growth rate revert in the second quarter. Peter Osterland: Very helpful. And then just lastly, I wanted to ask for any update on Talc. It looks like litigation expenses have trended higher each quarter during this year. Just was wondering if you have any update to share on the time frame or expected cost to resolve? And would you expect that until it's resolved, with the $7.5 million of litigation expenses you saw in the third quarter, would that be the run rate of what to expect going forward? Douglas Dietrich: This quarter was a little bit higher in terms of activity. I think our average has been more $3 million to $4 million per quarter. We think it probably reverts back to that. I will say that we're continuing very diligently to work on establishing a 524G trust. There's not a lot significant in terms of updates to report this quarter. We're waiting to hear back from the Southern District of Texas District Court on a number of motions to figure out which lane we'll be in, whether it will be in the District Court or back in the bankruptcy court. And as I mentioned, we're continuing to work to establish that 524. We are wide open to getting this done and getting it done quickly. But the court systems, they take their time and they schedule themselves, and we have limited ability to kind of impact that portion of it. But -- so not a lot of progress, but rest assured, we are working to get this behind us as fairly and as finally and as quickly as possible. With regard to costs, the reserve that we have on our balance sheet, we see that as sufficient for the ongoing both establishment of the trust and the cost it's going to take to get there. So no change to what we see in terms of the reserve. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Doug Dietrich for any closing remarks. Douglas Dietrich: Thanks, everyone, for joining this quarter. We appreciate the questions. We appreciate the attention and interest in Minerals Technologies, and we'll chat with you again at the end of January. Thank you very much. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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