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Anders Edholm: Good morning, and welcome to this presentation of SCA's 2026 First Quarter Report. With me here today, I have President and CEO, Ulf Larsson; and CFO, Andreas Ewertz, to go through the results and take your questions. Over to you, Ulf. Ulf Larsson: Thank you for that, Anders. And also from my side, a very good morning. So despite the increasing costs and the continued challenging market for forest industrial products, we delivered SEK 1.1 billion on EBITDA level and by -- that's an EBITDA margin of 23% for the first quarter. Segment Renewable Energy had a record high result during the first quarter, and that was driven by electricity prices, strong deliveries and also a very good market for liquid biofuels. Our new wind farm located in Jamtland started operations during the quarter and contributed to a high profitability within the segment. And our high degree of self-sufficiency in strategic areas continue to be an important factor to mitigate higher costs, partly offsetting higher wood raw material and energy costs. Turning over to some financial KPIs for the first quarter. As already said, our EBITDA reached SEK 1.1 billion, and that corresponds to a 23% EBITDA margin. Our industrial return on capital employed came out on 2% accounted for the last 12 months, and the leverage was 2, while our net debt to equity reached 11.9%. And I will now make some comments for each segment, starting with Forest. Stable harvesting levels from our own forest have contributed to balanced supply of wood raw materials to our industries during the period. We have seen a long-term trend of increasing sawlog prices, and they continued up also in the first quarter. However, availability of sawlogs has increased towards the end of the quarter due to the big storm, and that will also gradually reduce prices coming quarters. Regarding pulpwood prices, they have been rather flat for a couple of quarters, and now they have started to come down. When we compare the first quarter '26 with the first quarter '25, sales were up 2%, while EBITDA was up 1%, mainly due to higher prices for wood raw materials. Over to solid wood products. And -- in general, we still have a slow underlying market for solid wood products. We continue to note signs of improvement in the repair and remodeling segment, and we also see a decreased production in Scandinavia and Germany, generating a better supply and demand balance, especially for spruce. Stock levels remain on the high side among producers for pine, but are on normal levels for spruce and stock levels at customers continue to be on the low side. Delivery volumes were lower in Q1 '26 in comparison with the first quarter of '25, but first quarter '25 was an exceptionally strong quarter. SCA stock level of sawn goods is currently on a very balanced level. The price for solid wood products increased by a bit less than 4% in the first quarter of '26 in comparison with the fourth quarter of '25. And this development is in line with what I said when we presented the report for the fourth quarter last year. Sales were 13% lower in comparison with the same quarter last year. EBITDA margin decreased from 16% to 4% due to higher raw material costs, lower deliveries and a negative currency effect. Today's stock level of solid wood products in Sweden and Finland is described at the top left on this slide and is shown in relation to the average for the last 5 years. As mentioned earlier, we note that the inventory level is on the high side, especially for pine, while the SCA inventory level is balanced. As can be seen in the diagram to the bottom left, the Swedish and Finnish sawmill production has been lower than average in the beginning of '26. And in the diagram to the top right, we can note that the export price index decreased in the first quarter. SCA's prices, however, increased due to a better mix. Going into the next quarter, I estimate that prices in the market will increase. On the other hand, increasing freight costs will have a negative effect, resulting in a slight net price increase for SCA. Looking forward, we will probably see a stable development going into autumn with an okay balance between supply and demand. Over to pulp. When comparing the first quarter '26 with Q1 '25, sales were down 16%, mainly due to lower prices and negative currency effects. EBITDA was down 88%, which was also driven by lower prices and negative currency effects. During the third and fourth quarters of '25, demand for NBSK pulp was rather weak and prices were stable at low levels. Net prices on NBSK then decreased further in the first quarter of '26, very much due to the higher rebates in Europe and U.S. At the same time, gross prices increased in Europe and U.S. despite weak demand. In China, demand for NBSK pulp was on a normal level during the first quarter, but prices remained low. The conflict in Middle East is adding complexity in the pulp market, and it also increases the cost pressure. Looking at CTMP, demand was very low in January and February, and prices were at the bottom. However, during March, we saw an improvement in demand and prices started to increase. Inventories of NBSK were on a high level during the first quarter. Hardwood inventories on the contrary were below average level. Finally, CTMP inventories have been on a rather normal level. Moving over to containerboard. Sales were up 4% in Q1 in comparison with the same period last year, driven by higher delivery volumes, somewhat mitigated by lower prices and the negative currency effect. EBITDA was down by 56%, driven by lower prices, negative currency effect and higher energy costs. We have noted a rather soft box demand during the start of the first quarter, but it has since then developed in a cautious positive direction. The retail business remains a positive driver, and we have also seen the manufacturing industry recovering in the beginning of the year. European demand of containerboard has been moving sideways during the first quarter, in line with the box demand. There is no new containerboard capacity expected to start up in the first half of '26, although we can expect a ramp-up effect of new capacity started in '25 with the vast majority coming in testliner. Kraftliner inventories remain above historical average in Q1, as you can see in the graph. During the first quarter, the availability of OCC has been in balance with supply and demand, which in its turn has led to stable prices in the first quarter. Prices for brown kraftliner in Central Europe has during the first quarter decreased with EUR 25 per tonne and for white kraftliner with EUR 20 per tonne. Anyway, we now feel a more solid underlying demand in combination with strong cost pressure. And due to that, we have implemented a price increase of EUR 60 per tonne for brown kraftliner and EUR 40 per tonne for white kraftliner from the 1st of April. Finally, I will say some words about renewable energy. And in the segment, we have had a stronger quarter compared to the same period last year and maybe the strongest quarter ever. And that is, of course, mainly due to higher production and stronger margins in our -- with St1 jointly owned biorefinery in Gothenburg. In addition, we have also had a positive impact from our new wind farm in the county of Jamtland. Electricity prices were high during the quarter, which had a positive impact in our wind business. Our new wind farm, Fasikan, was taken over in time and on budget and has been ramping up production during the quarter. SCA's land lease business is stable at 10.6 terawatt hours according to plan. And this is, as said before, equal to 20% of installed capacity of wind power in Sweden. The market and price for solid biofuels were strong due to cold weather during the first quarter. Anyway, the positive effect was mainly offset by higher costs for raw materials compared to same quarter last year. For liquid biofuels, we have seen continuous high margins compared to previous quarters. The main reasons are the implementation of RED III across European countries as well as strengthened EU control mechanism regarding imported products and feedstocks. In March, we also see additional price increases due to the situation in the Middle East. We expect market volatility in renewable fuels to remain high as Europe ramps up the blending mandates, both in HVO and SAF. And with that, Andreas, I hand over to you. Andreas Ewertz: Thank you Ulf, and good morning, everybody. I'll start off with the income statement for the first quarter. Net sales decreased 8% to SEK 4.7 billion, driven by lower prices and negative currency effects. EBITDA decreased 33% to SEK 1.1 billion, driven by lower prices, negative currency effects and higher cost for wood raw material. EBIT decreased to SEK 543 million and financial items totaled minus SEK 86 million with an effective tax rate of below 20%, bringing net profit to SEK 380 million or SEK 0.54 per share. On the next slide, we have the financial development by segment. Starting with the Forest segment to the left. Net sales were in line with the previous quarter at SEK 2.5 billion. Higher prices for sawlogs were offset by lower delivery volumes to SCA's Industries. EBITDA decreased slightly to SEK 884 million due to seasonally lower harvest from SCA's own forest compared to the previous quarter, which was offset by higher prices for sawlogs. In Wood, prices were slightly higher compared to the previous quarter. Net sales decreased to SEK 1.3 billion due to lower delivery volumes. EBITDA decreased to SEK 49 million, corresponding to a margin of 4%. High costs for wood raw materials and lower delivery volumes were partly offset by higher prices. In Pulp, net sales decreased to SEK 1.6 billion compared to the previous quarter, while EBITDA increased to SEK 40 million, corresponding to a margin of 3%. Lower costs for planned maintenance stops were offset by negative currency effects and lower prices. In the quarter, we took market-related downtime in our CTMP mill due to high electricity prices. In Containerboard, net sales were in line with the previous quarter at SEK 1.7 billion. EBITDA decreased to SEK 104 million, corresponding to a margin of 6%. Lower prices, negative currency effects and higher energy costs were partly offset by lower costs for raw materials and higher delivery volumes. Renewable Energy, we had a record quarter. EBITDA increased to SEK 206 million, corresponding to a margin of 31%. The increase was driven by high electricity prices, the new Fasikan wind mill and higher results in liquid biofuels. On the next slide, we have the sales bridge between Q1 last year and Q1 this year. Prices decreased 4% with lower prices in pulp and containerboard, partly offset by somewhat higher prices in wood. Volumes were flat with higher volumes in containerboard, but lower in wood. And lastly, currency had a negative impact of 4%, bringing net sales to SEK 4.7 billion. Moving on to EBITDA bridge and starting to the left. Price/mix had a negative impact of SEK 255 million. Higher costs from mainly wood raw materials had a negative impact of SEK 111 million. We had a positive impact from energy of SEK 34 million and a negative impact from currency of SEK 203 million. In total, EBITDA decreased to SEK 1.1 billion, corresponding to a margin of 23%. Looking at the cash flow. We had an operating cash flow of SEK 569 million in the quarter. And as you know, other operating cash flow relates mostly to working capital currency hedges and should, therefore, be seen together with changes in working capital. Looking at the balance sheet. The value of the forest assets totaled SEK 104 billion. Working capital decreased to SEK 5 billion. Capital employed totaled SEK 112 billion. Net debt stood at SEK 12 billion and equity totaled SEK 100 billion, corresponding to a net debt to equity of 12%. And we are now almost finalized our large ongoing investment projects. Thank you. With that, I'll hand back to you Ulf. Ulf Larsson: Thank you, Andreas. And just to summarize, I mean, we have had a challenging first quarter. I think we have controlled what we can control in a good way. We see a positive effect from the ramp-up of our big strategic investments, and we are looking forward to the time when we can move over those extra volumes to our main market in Europe and the margin that can create. We have also started up our new wind farm outside Bracke in Jamtland and the project was done on time and in budget. So by that, I think we open up for questions. Operator: [Operator Instructions] We will now take our first question from oannis Masvoulas of Morgan Stanley. Ioannis Masvoulas: Three questions from my side. I'll take them one at a time, if that's okay. First, on containerboard. So you're starting from a fairly depressed EBITDA margin level in Q1. And going into the second quarter, you should be benefiting from lower fiber costs as well as lower power costs. How about other input costs around logistics, chemicals, et cetera? Just trying to understand the overall development into the second quarter on the cost side. And then related to that, is it fair to expect another increase in kraftliner prices in May to help restore margins? I'll stop here for the first one. Ulf Larsson: I'll start with the market and then Andreas will give you the cost perspective. And I guess, I mean, as you realize, we did increase the price for kraftliner from 1st of -- first, we reduced the price by EUR 25 per tonne for brown kraftliner in the first quarter and EUR 20 for white top. And then from 1st of April, we have announced that we will also come through with price increases of EUR 60 per tonne for brown and EUR 40 per tonne for white from 1st of April. And that will stepwise be implemented in the price for the first quarter. I guess we see no price movement in May. We haven't heard anything more from testliners producers. And I think it's fair to say that they have to start and then I believe that kraftliner can come after. So nothing is planned for May. But if we will remain on this level when it comes to gas prices, I guess, we'll see some attempts in -- yes, later in Q2 or in the beginning of Q3. So that's my view. Then Andreas, about the cost situation. Andreas Ewertz: Yes. On the cost side, if we start with pulpwood, the pulpwood will continue to go down slightly in Q2, but very slightly. As we talked about earlier, we have this 6 months lag effect. So the pulp wood prices will go down mainly in the second half of the year. OCC prices are fairly stable. If we look at electricity prices, they're very high in January, February. So depending on how the electricity prices develop, but most likely, it will be lower compared to Q1. And then in terms of transportation costs depending on the oil price development, but the oil price will, of course, affect transportation. So that's the big moving parts. Ioannis Masvoulas: Okay. Then the second question, can you comment about current pulpwood prices? I know you mentioned a slight benefit in the industrial units in Q2, but just trying to understand where are we now on pulpwood prices versus the peak of 2025? Andreas Ewertz: Yes. So pulpwood prices, they went down slightly in Q4, slightly in Q1, but we are talking about maybe 1% to 2% down. It would continue to go down 1%, 2% in Q2. And then you get a larger effect in Q3 and in Q4 because of this lag effect. Ioannis Masvoulas: Okay. And just the last one for me. You talked about the CTMP market where demand remains low, same with prices. Could you give us an update on operating rates in Q1 here and your expectation for Q2? And how are you feeling about this business given the depressed market backdrop? Are you willing to run the asset? I know it's a low-cost mill, but just trying to understand how you're looking at optimizing the business here. Ulf Larsson: Well, in the first quarter, I would say that we have maybe run the CTMP mill at 50% or something like that, I mean, due to high electricity prices and also the margin cost for pulpwood. So that's the case for first quarter. And I mean, CTMP has been a very bad business in the first part of this year. Now we see that the CTMP market is picking up. And I guess one part of it is that short fiber pulp is picking up step by step and maybe we see some kind of substitution. I also feel that we have a better consumption by board customers, not the least. And so I mean, just now, we are running more or less full for the moment being. Of course, we keep an eye on the electricity price. And if it's too high, then we have to close down, but we are rather positive for the CTMP business in the second quarter. Operator: And we'll now move on to our next question from Linus Larsson of SEB. Linus Larsson: I'll start with a follow-up on the input cost side. And if you could maybe elaborate a bit on the pulpwood cost declines that you're seeing in your wood consuming operations over the course of the next few quarters. If you could quantify in any way what you're expecting going into the second half of 2026, please? Andreas Ewertz: Yes. So as I said, now we got maybe 1% down on pulpwood cost in Q1 compared to Q4, while the sawlog prices increased with around 7% in Q1 compared to Q4. In the second quarter, we expect both pulpwood and sawlog prices to go down slightly, but we're talking about 1%, 2%, maybe 3% on pulpwood and 1% to 2% on sawlogs. And then we'll see a bigger effect in Q3 and Q4. But it's hard to say exactly now because it's now we're going to -- in second quarter, then we're going to get more of these storm volumes, of course, will help to get the price down. So we'll see, but we expect a bigger decrease in Q3 compared to in Q2. Linus Larsson: Great. And then -- and I hate to ask this, but if you could maybe please help us dissect the other line, which was weaker in the first quarter? And if you could help us understand what the normalized level might be going forward? And the reason I'm asking is that this is actually where more than the entire deviation compared to consensus occurred. So if you could just help us understand that would be super helpful. Andreas Ewertz: Yes. Firstly, we have a seasonal effect, but the biggest thing is, of course, profit in stock. So when we sell something, for example, from the Forest business to the Wood business, then the Forest segment, of course, makes a profit. But until the Wood division sells that final product, you eliminate that profit. And that's why you have this cyclicality between -- dotted line between different quarters. So because of the increased prices of sawlog and a bit lower delivery volumes in our Wood segment, you have a higher other costs, but that's only periodization between different quarters. Linus Larsson: Great. That's really helpful. And like given what you just said, Andreas, any pointers for what to expect in the second quarter? Andreas Ewertz: I think if you look at the full year, of course then these prioritization effects, I mean, they get canceled out. So if you look at the full year, then you get quite a good picture of the yearly other costs. Linus Larsson: Sorry, what do you mean -- if I look at the past couple of years, that... Andreas Ewertz: Yes, yes, exactly. The past year. Operator: And we'll now move on to our next question from Robin Santavirta of DNB Carnegie. Robin Santavirta: Now in terms of Middle East crisis, you mentioned in the report that it increases uncertainty and of course, the oil price is also higher and you call out this as an indirect negative. But you have high energy self-sufficiency. Do you think you have a competitive advantage to Continental European producers, especially in containerboard? Ulf Larsson: Yes. I mean, we are not dependent on Russian oil and gas or oil at all, more or less. I mean that is, of course, a positive thing. And the other thing is that when it comes to distribution, I mean, we used to say that we have 40% -- degree of self-sufficiency due to the fact that we now produce liquid biofuels in Gothenburg and our part, I mean, account for around 40% coverage of the total cost. So that is, of course, very positive. And as you could see also in this quarter, I think we did the strongest quarter ever for renewable energy and a big part of that was, of course, liquid biofuels. Robin Santavirta: Right. And then also related to containerboard from what I hear from not only you, but from other companies in the market, it seems demand has increased quite significantly in March and April, and it's certainly in containerboard grades in Europe and the start of the year was much slower. What explains the pickup in demand? Is this just pre-buying before prices go up? Or are there other dynamics in play? Ulf Larsson: It's hard to say really. I think one thing can be that you have -- I mean, I guess people, they are securing the raw material supply in different areas due to the geopolitical situations. So that might be one thing. But we also feel that -- I mean, the retail sector has been quite good for a while. And now we feel also that the industrial customers, they are coming back. And I mean, not at least today, I mean, we have seen some reports and also yesterday from some companies. And I mean, they also say that the order inflow is quite strong also from the more heavy industry, which has -- that will have a good impact also on our kraftliner business. So yes, the market is definitely strong just now. The balance is -- still we are a little bit on the high side when it comes to the inventory level. And I mean, we all know that we have a lot of testliner capacity out there, curtailed just now, I guess. And on the other side, if we will -- if gas prices will remain on this level, there still -- I guess, many of them, they lose money. So I guess we will see -- it's a mix between supply-demand and cost pressure and so on. But I guess we can -- we might see some further price increases coming into the autumn. Robin Santavirta: I understand. Finally, just on saw timber. I mean, this market, of course, is tricky. But when I look at log prices in Europe and when I speak to companies there, they complain about scarcity, essentially of sawlogs -- prices of -- log prices that are much higher than you have in Northern part of Sweden. Why wouldn't you sort of have better -- I mean, you're in black figures most of the quarters, even in this tough environment. But could it be a setup where you basically do not need the construction market to come back and still get higher prices? Or is there something I'm missing with the mismatch of sawlog prices in Europe versus Northern part of Sweden. Ulf Larsson: I don't know if I fully took your question, but you talked about price deviation from Northern -- Southern part of Sweden... Robin Santavirta: I mean, they are paying 2x more for sawlogs... Ulf Larsson: No, no, they don't. No, no, they don't. And I think that's a misunderstanding. No. I mean you look at public price lists, and that is, of course, not the price in the market. So I guess, when we do some comparisons, I mean, you don't -- it doesn't really differ too much. And also when it comes to log size, I mean, the log is much more narrow in the Northern part in comparison with the Southern part and so on. So I don't think that delta is -- yes, we are favored. Robin Santavirta: So the price is roughly the same. Ulf Larsson: Maybe not the same, but it's not -- as you say, I mean, it's not the double price. So I mean, I think it's -- and then, of course, now with -- now you have the storm effect, and we haven't seen really the result out of that. You see a big difference between spruce logs and pine. You see also in the end market that now we have a deviation for sawn goods by SEK 300 per cubic meter more or less if you compare spruce and pine to the advantage of spruce, of course. And I guess that's a result of the spruce beetle effect that we had in Central Europe a couple of years ago. So I mean they have a deficit of spruce logs. So it's a more complex market than that. And you cannot really look at official price list. That's my clear message. You have to -- because what we buy in the market is something completely different in many cases, where you have to add premiums and things like that. Operator: And we'll now take our next question from Johannes Grunselius from SB1 Markets. Johannes Grunselius: It's Johannes here. I have two questions. I would like to zoom in on your energy business and the containerboard business. So on energy, you said it already, Ulf, but you had a nice tailwind from higher biofuels. So I was wondering if you could provide some color on what that means. I think your earnings delta were like SEK 60 million Q1 versus Q4. How much did biofuels supported that earnings growth? Ulf Larsson: I can first start with the production. I mean, we are also in the ramp-up phase with biorefinery in Gothenburg, and that is the first thing. We have had record production in that unit, and we are far above design capacity. So that is a very positive thing, of course. And then in addition to that, of course, we have had a very good price development. And then Andreas, you can. Andreas Ewertz: Yes. So if you look in Q4 compared to Q1, the solid biomass pellets and unrefined fuels basically had the same profitability in Q4 as in Q1. So the increase comes from -- roughly half from the wind segment and roughly half from the biofuel business, roughly speaking. Johannes Grunselius: Okay. But what you're saying, it's more of a ramp-up benefits, not sort of pricing benefits. And could you comment on Q2, how we should think about the pricing effect here coming from higher prices? Andreas Ewertz: Both. We got both, higher margin in the biofuel business compared to Q4 as well as good production. And we'll have to see how the market develops. But for energy, I mean, if fuels continue to be high, that, of course, will benefit our fuels business. But then, of course, Q2 is a weaker market for our Solid Biomass segment and Wind compared to Q1. Johannes Grunselius: Got you. And then on containerboard, if you could elaborate a bit on basically operations and also the mix because I assume you're still in sort of a ramp-up phase in Obbola. So do you foresee sort of tangible benefits from more efficient operations in the coming quarters and also benefits from a more commercial mix, if you can elaborate on that one, please? Ulf Larsson: I mean, step by step -- I mean, we produce more in Obbola. And by that, we also will be -- if you count per tonne, I mean, then you will be more also cost efficient. And first, the volume and then we fine-tune the cost level. And this year, as we said before, I mean, we will probably produce around 100,000 tonnes more in '26 in comparison with '25. And step-by-step, we will be more and more cost efficient. So that is one thing. But as you say, I mean, all surplus volumes today, I mean, they are placed in overseas market and the margin is completely different if you have to place those volumes in Asia or U.S. or South America or wherever. So I mean, when the market comes back in Europe, that will, of course, improve the margin quite a lot, I would say. Operator: And we'll now take our next question from Gabriel Simoes of Goldman Sachs. Gabriel Simoes: So I have two. The first one, they're both on the forestry side. But the first one is related to your forestry -- your silviculture cost in the first quarter, which are usually lower. But then I would expect some of that to come back in the second quarter, right? So overall, if you could guide us towards the level of expected profitability on a per cubic meter basis for wood harvested maybe excluding the revaluation, of course, for the remainder of the year and for the second quarter, specifically, that would be very helpful. And then a longer-term or more strategic question here would be basically on the valuation of these forests, right? So the company now trades at a significant discount to the book value of the forest. And I just wanted to pick your brains on whether this is something that bothers you and if there are any measures to try and unlock some of that value of these forests. Andreas Ewertz: Yes, I can start with the seasonality of the forest. I won't go into exact figures, but just to get some flavor. And as you know, we harvest seasonally more from our own forest in Q2 compared to Q1. So that's a net benefit. Then you're absolutely right that in Q2 and Q3, especially, we have our fertilization and silviculture cost because it's then we replant, we do this fertilization. And that's maybe, roughly speaking, what can it be SEK 50 million to SEK 80 million per quarter in Q2 and in Q3. And then, of course, we will see how higher oil prices, of course, will also affect our -- the transportation and harvesting business. So on the plus side, we harvest more from our own forest, will have slightly lower prices, and we will have higher seasonal costs for silviculture and fertilization. Ulf Larsson: And then when it comes to the valuation of the forest and if you plan something to unlock the hidden value of the forest, I mean, we don't. I mean, we have had a couple of big transactions recently. And I mean, they show that the book value is also the market value. And I mean, we trust that. And forest and forest business is a cyclical business. So you have to like that and see opportunities when you have them. And I guess we will -- we are looking forward to what's going to happen now when Stora Enso will split, of course, and that might have an impact on the view of the price of the forest. Otherwise, I mean, we are following continuously the market for -- I mean, the local market for -- when you buy and sell forest estates, and we can just see that we are more or less on the same level as before. So I mean nothing has changed. Operator: And we'll now move on to our next question from Oskar Lindstrom of Danske Bank. Oskar Lindström: Three sets of questions from Danske Bank here. First off, I'm just very curious, are sort of higher oil prices and talk of possible aviation fuel shortages in Europe creating a greater interest from you or from others in your aviation fuel project in -- biorefinery in Ostrand? That's my first question. . Ulf Larsson: Yes. I mean, as you say, just now, it is good profitability in the biorefinery in Gothenburg. And by that, you can say that conditions for the Ostrand project should also be very good. And I guess they are. But that is, of course, a much bigger bet. And as we have also said, this market will be very volatile, and it's also very capital intensive. And I guess if -- before you start a big project like that, you need to have some security when it comes to some kind of offtake agreement or at least the price level for SAF long term. I mean you can talk about resilience and degree of self-sufficiency and things like that, both in the union, but also in Sweden. Will that come? We don't know. And the tricky thing, I guess, with these kind of projects is always the political risk. I mean we are used to take the technical risk, the project risk, and we can handle that. But the challenge is really the political risk. Will something change when we have a new government in place, both in Sweden and in the union and what kind of impact will that have? And that will, of course -- it's more challenging to raise the money needed for such a big projects. Oskar Lindström: But -- follow up on that. I mean, would you be open to doing that as a JV then? Ulf Larsson: Absolutely. I think that's the only solution really. I mean we can provide a fantastic place close nearby Ostrand, lots of synergies. We also have from now the energy supply, which is really important. But maybe the most important thing, I mean, we are maybe the only player in that part of Sweden that can provide with the raw materials, I mean, the feedstocks. I mean, I guess we are a perfect partner in the JV, but this project is, of course, too big for us alone. And -- so we have to talk with some friends if this should come through. Oskar Lindström: Very interesting. My second question is, I mean, continuing on that with the Middle East conflict causing disruptions, as you mentioned. We hear a lot about how this is having an impact on Continental European producers, perhaps especially of containerboard, who are dependent on natural gas and oil for energy. What about sort of -- is it causing other shifts sort of that you're noticing, for example, in Asia or having impacts on logistics, which is causing shifts in the market or in the cost curve that are meaningful for you. Ulf Larsson: Yes, I don't know if we see some structure -- I mean, for everyone, I mean, we see that the freight costs, I mean, they will increase, of course. And in our case, as I said before, I mean, we have maybe a degree of self-sufficiency due to the biorefinery we have in Gothenburg up to 40%, and that is different for different companies. And as you also say, I mean, we are not depending on oil and gas prices as we have a fantastic energy supply situation in not only SCA, but Scandinavian companies. So I mean, that is, of course, in our advantage. But input costs will increase and freight costs, oil, one thing. The other one is, of course, chemicals into the industry. But on the other hand, I mean, that will have, I guess, a bigger impact from plastics and other competing materials. So it's really hard to say how this will turn out. If you will see a big restriction now when it comes to aviation and things like that, that might create the same situation as we had during the pandemic that people they will stay home and build Verandas and do a lot of work in their gardens and the houses and so on that might create some kind of better market for solid wood products. I mean, it's hard to say and it's hard to speculate. We are so focused now on trying to control what we can control. And that is also something that we are very happy in the first quarter. I mean we have had a good production. The cost level is good, very strong energy business. We see a positive effect of those strategic projects that we have launched. And -- but still, we are at the bottom of the business cycle just now, and let's see when it will recover. Oskar Lindström: And my third and final question is more straightforward. In the Renewable Energy division, I mean, you've obviously been able to benefit here in Q1, partly from the ramp-up, of course, which will be hopefully sustainable for the rest of the year, but also from higher prices due to the situation in the Middle East. Are you able to lock in any of the higher prices through hedging or something like that so that we get a little bit of that benefit for the rest of the year as well? Andreas Ewertz: If we start with the wind business, then we don't hedge anything. I mean, that's just our self-sufficiency, so then we're exposed to spot prices. If we look at our solid biofuel business, here I say you have much more long-term stable contracts and they have some spot volumes, but a large share is long-term contracts and they are quite stable prices, while the spot, of course, that moves up and down with the market. And with the biofuel business, there you do some contracts in advance, but not very far. So I would say we are exposed to spot, and that's part of our strategy to be -- have a high self-sufficiency. As I said, on oil, we are around 40% self-sufficient. So there we want to have when the cost goes up or down, our renewable energy income goes up and down as well. So I would say we don't have that long hedge exposure on renewable energy, more spot. Operator: And we'll now take our next question from Andrew Jones of UBS. Andrew Jones: I just got a couple of questions. First of all, on containerboard, you mentioned the first EUR 60 hike through in April, nothing expected in May. The index realized EUR 30. I'm curious what you're seeing from some of your competitors where some of them hiking, but with a bit of a delay, maybe coming through in May? Or like what explains the lower index move? And just to confirm, like are your customers in April already paying that EUR 60? Has that been fully implemented? Ulf Larsson: Good question. And yes, I guess they -- many of them, they have announced price increases from 1st of May. So what you see now in the index is the price hike from SCA. And I mean, as I would say, the major part of our business is also related to the index movements. I mean, we will not get even 50% of this price increase in April, but we will get it in May. So that's the case. Andrew Jones: Yes. Okay. That makes sense. And just on the Wood Products business. I think you guided last quarter to flat price development in the first quarter, and it looks like it went up about 7% on a revenue per tonne basis. So kind of curious what changed versus your initial thought process? And can you give us some guidance on how you see prices developing in the second quarter? Ulf Larsson: Maybe you have a better memory than me. I think I said 4%, and I think we had 4% more or less. But I'm not sure. But anyway, we had a small price increase, but the price development for sawlogs was even higher. So that's also the main reason for the profitability coming down. In the second quarter, I mean, it was a little bit of a disappointment for me. I thought that we should have a higher price increase in the second quarter in comparison to the first quarter. But I guess we will have around 4%, a little bit more for spruce, a little bit less for pine, a little bit more in some markets, a little bit less in other markets. So we try also to work with the mix, of course. And now this quarter, we see that log prices will come down a bit. But on the other hand, I guess that 50% of the price increase will be mitigated by higher freight costs. So it will be a small positive effect from increasing prices and also a positive -- small positive effect from decreasing log prices, I would say, in the second quarter. Andreas Ewertz: And you're right. I mean, as Ulf said, we probably expected prices to be a bit more flat in Q1, but then get a larger effect in Q2. Now we got a bit of that Q2 effect already in Q1. So I think the increase was about the same as we thought, but less -- more in Q1 versus Q4, but less in Q2 versus [indiscernible]. Ulf Larsson: Yes, related to what we said. But my thinking was that we should have a stronger market really in the second quarter. But that has not come through. It is much stronger for spruce than in comparison with pine. So spruce is maybe a little bit better and pine is a little bit less good, I would say. Andrew Jones: Yes. That's clear. And actually, just on the freight question. You have -- I know you have some of your own vessels, I mean, obviously, that probably doesn't protect you from bunker fuel and all that sort of stuff. But I mean, how does -- can you quantify the impact on your freight costs across the various divisions from what you're seeing now and maybe compared to what you think your peers might be paying, but without that self-sufficiency in vessels? Andreas Ewertz: [indiscernible] so figures you can work with, it's that if you took both bunker oil, we took oil for burning and then also diesel for trucks and everything. I think our total exposure is around 130,000 to 140,000 tonnes. And then we get back 50,000 tonnes is from tall oil and that's linked to the fossil price plus a green premium. So there we are self-sufficient at around 40%. And then, of course, [indiscernible] and our pellets business will be also an indirect hedge. But if you remove those, I mean, our total exposure of 130,000 to 140,000 tonnes, minus 50,000, that's around 80,000, 90,000 tonnes of exposure. And of course, this indirect effect from pellets and [indiscernible]. Operator: We'll now take our next question from Cole Hathorn of Jefferies. Cole Hathorn: I'd just like to ask on the pulp markets for softwood pulp in particular. What do you think is ultimately needed to bring down those inventory levels and tighten this market here? Because we've seen some kind of demand shift to the hardwood side. We've still got a lot of inventory levels in China. Softwood futures have come lower. It just seems like quite a disconnected market, softwood versus hardwood. So I'm just wondering what do you think needs to play out over the next few months to help balance the softwood market and ultimately support further pricing? Ulf Larsson: It's a very good question. And I mean we are a little bit surprised ourselves, I must say. I mean, we have heard also talk about interest in implementations in China that swing capacity is now running long fiber and so on. But honestly, I don't know really. But what we have seen is that a positive price development step-by-step for eucalyptus pulp. And just now, I mean, you have a small delta between hardwood and softwood. So I guess that is the first sign that we will see some kind of substitution going forward. But again, when you look at the inventory level, you are still on the high side for softwood and on the low side for hardwood. And also, we have big producers in hardwood, they have announced some curtailments. But on the other hand, we have also heard that some Scandinavian producers, they have also announced curtailments now. But I mean, short term, it's always a question about supply-demand balance. And I guess, the price difference now between short and long fiber, that will help a bit. We see that on CTMP already now, definitely for March, but also, I guess, coming in now in the second quarter, that will help us. I don't feel that we have any structural things that dramatically have changed the situation. I mean, as long as something is a little bit cheaper than something else, I mean, then you try to substitute as much as you can. So I mean, long term, I don't think this is a structural thing. It's more a question about supply-demand. And so let's see, but a little bit annoying, of course. Cole Hathorn: Well, hopefully, we see some capacity closures. But if I look at some of the softwood producers, there's some listed players that have seen their debt trade down. It seems like a lot of the market is really under pressure. If assets do become available, how does SCA think about M&A in that context at the right price? Or are you just comfortable staying with your business in Sweden? Ulf Larsson: Yes. I think our -- I mean, we are an integrated forest company with the industry. And I mean, I have a great respect to move into other geographies if you don't -- can guarantee the raw material supply. So I think the integrated model we have today, I think, has been very profitable over time. And also in relative terms, I mean, we perform well. And as it is just now, we have also done a lot of big strategic investments, and we will be very cautious now. We will focus on, I mean, ramping up what we have started and also to consolidate the balance sheet. And so I mean, for us, no M&As, at least not short term. Operator: And we'll now take our last question from Pallav Mittal of Barclays. Pallav Mittal: So firstly, just following up on oil and appreciate all the self-sufficiency and hedges that you have highlighted. But if I just look at your transportation and distribution, it is almost 25% of your cost base, so say, roughly around SEK 4 billion and diesel is up 30%, 35%. So how do you plan to offset that SEK 1.5 billion cost headwind that you have? And just as a follow-up to this, are you seeing the roadside pulpwood increasing on the back of diesel costs going up? Andreas Ewertz: As I said before, we have around 140,000 tonnes of exposure to bunker oil and diesel and oil in our industries. And roughly that we produce 50% to get back from a tall oil. So there is an exposure of 80,000 to 90,000 tonnes. So of course, I mean, if the prices of diesel or oil goes up, I mean, they will have a 90,000 around roughly exposure, so they can calculate the figure. And then in [indiscernible] that's the pure oil part. And then transportation, I mean, part of our business, I mean, we have our own RORO ships. So there is only the bunker exposure. And of course, [indiscernible], especially to U.S. and there we freight ships. And of course, then it depends on how the market for renting those or freighting those vessels move forward. But to bunker and diesel, our net exposure is around 80,000, 90,000 tonnes. Pallav Mittal: Okay. And then just -- how should we think about your capital allocation now going forward given the pressure on -- I mean, the market and the free cash flow generation? Do you think maintaining dividend is possible in this market environment? Andreas Ewertz: So in terms of CapEx, I would say that we will have around SEK 1.5 billion in current CapEx this year and then around another maybe SEK 400 million, SEK 450 million in strategic CapEx. And then in terms of capital allocation with dividend or with share buybacks or other strategic CapEx, I think that's something for the Board and now we're focusing just on ramping up and getting the cash flow for our investments. Operator: With no further questions on the line, I will now hand it back to the host for closing remarks. Ulf Larsson: And that concludes our presentation of the first quarter report, and we wish -- welcome back in July for our half year report. Thank you very much for joining us today.
Operator: Good morning, and welcome to FIBRA Macquarie's First Quarter 2026 Earnings Call and Webcast. My name is Alicia, and I'll be your operator for this call. [Operator Instructions] I would now like to turn the conference over to Nikki Sacks. Please go ahead. Nikki Sacks: Thank you, and hello, everyone. Thank you for joining FIBRA Macquarie's First Quarter 2026 Earnings Conference Call and Webcast. Today's call will be led by Simon Hanna, our Chief Executive Officer; and Andrew McDonald-Hughes, our CFO. Before I turn the call over to Simon, I would like to remind everyone that this presentation is proprietary and all rights are reserved. The presentation has been prepared solely for informational purposes and is not a solicitation or an offer to buy or sell any securities. Forward-looking statements in this presentation are subject to a number of risks and uncertainties. Our actual results, performance, prospects or opportunities could differ materially from those expressed in or implied by the forward-looking statements. These forward-looking statements are made as of the date of this presentation. We undertake no obligation to publicly update or revise any forward-looking statements after the completion of this presentation, whether as a result of new information, future events or otherwise, except as required by law. Additionally, on this conference call, we may refer to certain non-IFRS measures as well as to U.S. dollars, which are U.S. dollar equivalent amounts, unless otherwise specified. As usual, we have prepared supplementary materials that we may reference during the call. If you have not already done so, I would encourage you to visit our website at fibramacquarie.com and download these materials. A link to these materials can be found under the Investors Events and Presentations tab. And with that, it's my pleasure to hand the call over to FIBRA Macquarie's Chief Executive Officer, Simon Hanna. Simon? Simon Hanna: Thank you, Nikki, and good afternoon, everyone. Thank you for joining us for FIBRAMQ's First Quarter 2026 Earnings Call. Before we begin our earnings presentation and open the call to questions, I want to take a moment to address the ongoing offer by FIBRA Prologis to acquire up to 100% of FIBRAMQ's outstanding CBFIs, which commenced on April 7, as well as the potential offers by other third parties that have not yet been formally commenced. As noted in our earnings release, we have published the relevant market notices in connection with the FIBRA Prologis offer and we will continue to do so as required. For clarity and due to legal restrictions, we are unable to comment further or answer any questions on these offers. Overall, we delivered a strong and steady quarter with in-line results from both a financial and operating perspective. Portfolio performance remained resilient, and our operating platform continued to execute effectively against a subdued market backdrop. Our outlook on the Mexican real estate market remains cautiously optimistic. We continue to see some softness driven by an ongoing wait-and-see dynamic ahead of the expected USMCA renewal with market-wide industrial vacancy inching up by approximately 100 basis points during the quarter. At the same time, it is encouraging to see a continued decline in new construction starts, which is helping keeping the overall demand-supply balance in check. Importantly, market rental rates have held up relatively well, particularly in core logistics and border markets. We view the current environment as one defined by timing rather than a deterioration in fundamentals. Turning to our industrial portfolio. During the quarter, we executed new and renewal leases on approximately 1.6 million square feet of GLA, a 12-month high across a broad mix of customers and geographies. Leasing spreads were 13.8%, an overall strong outcome and in line with expectations. This supported an overall rental rate increase of 6.1% year-over-year, while industrial NOI reached $51.2 million, up 4.4% annually, highlighting steady cash flow growth and disciplined cost management. Quarter end industrial occupancy was 94.6%. Underlying customer demand remains stable and leasing activity continues as we look forward to working through a very manageable lease expiration profile of just 7.3% for the remainder of the year. A highlight during the quarter was a new lease in Tijuana, which includes an expansion component for a large first-time Asian entrant into Mexico assembling high-end consumer electronics. The expansion is expected to generate a double-digit cash-on-cash yield. We view this transaction as another encouraging signal on the increasing potential in Northern markets as we move towards gaining greater visibility around the longer-term trade and tariff policy. Our retail portfolio remains stable with sustained new and renewal leasing volume of 22,000 square meters. The modest decline in occupancy during the quarter was attributable to the departure of a single cinema tenant at lease expiry. Excluding this event, occupancy would otherwise have been broadly stable. Retail NOI increased 3.6% sequentially, and we also expect full year retail NOI to steadily increase from 2025 as we work through other low-impact scheduled move-outs during the balance of the year. Turning to growth CapEx. We remain committed to our strategy of allocating capital to our industrial development program, focusing on land acquisition opportunities while taking a disciplined approach on new building starts. During the quarter, we completed our largest land acquisition to date, acquiring a 124-hectare parcel in Tijuana's Boulevard 2000 corridor for $114 million. The site supports the future development of up to 3.4 million square feet of Class A industrial space. Importantly, the park will also include a dedicated 90-megawatt substation currently under construction, providing a significant competitive advantage in a power-constrained market. The transaction was structured with favorable payment terms over 3 years with approximately 35% paid at closing, preserving liquidity while securing a long-term strategic asset. While the land bank will not contribute to NOI in the near term, we believe it will generate some meaningful returns over time and aligns directly with our disciplined development strategy. In summary, while leasing velocity continues to be influenced by broader market uncertainty, our portfolio fundamentals remain solid. Cash returns from the top line through to AFFO are robust, and our asset quality and vertically integrated operating platform continue to differentiate us. Importantly, our long-term investment thesis remains intact. We remain committed to executing our strategy with discipline and delivering value for our certificate holders. With that backdrop, I'll turn it over to Andrew to walk through our financial results and guidance outlook. Andrew McDonald-Hughes: Thank you, Simon, and hello, everyone. From a financial perspective, we delivered quarterly results in line with expectations across our key metrics, including record quarterly EBITDA of $55.1 million, up 6.7% and record quarterly FFO of $38.5 million, up 6.8%. AFFO per certificate was MXN 0.65, up on a sequential and annual basis in underlying U.S. dollar terms, driven by robust same-store consolidated NOI growth of 5%. NAV per certificate increased to MXN 49.7 representing a 1.2% quarter-over-quarter increase. Importantly, our NAV incorporates our high-quality land bank at cost, which comprises 8.4 million square feet of buildable GLA and does not reflect the embedded value creation potential given our expectations to develop at 9% to 11% NOI yield as we construct and stabilize these projects over the coming years. Our balance sheet remains strong. Liquidity is ample, our leverage is comfortable, and we retain substantial flexibility to navigate current market conditions while continuing to invest selectively. This strength allows us to remain patient and focused on opportunities that deliver attractive risk-adjusted returns rather than reacting to short-term market noise. Our balance sheet metrics remain prudent with a real estate net LTV of 33.6% and regulatory debt service coverage of 4.2x. Our debt is 99% fixed rate with a weighted average tenor of 3.5 years. Subsequent to quarter end, we completed the refinancing of a sustainability-linked revolving credit facility, upsizing it to $200 million and extending its maturity through April 2031. Notably, this refinancing was completed with the lowest credit spread achieved to date of 105 basis points. As of today, total available liquidity stands at $835 million. On the ESG front, we published our first-time S1 and S2 reports, representing a meaningful step forward in our disclosures. We also achieved another LEED Platinum certification with a record score of 91 points for an industrial development that had previously stabilized at a strong double-digit yield, reinforcing the alignment between sustainability initiatives and strong financial performance. We are updating full year 2026 AFFO guidance to be between MXN 2.54 and MXN 2.64 per certificate, primarily reflecting the additional funding expense associated with the Tijuana land acquisition announced during the quarter. AFFO guidance assumes the exclusion of transaction expenses related to the potential acquisition of FIBRA Macquarie certificates. These expenses include financial adviser fees of up to $9.25 million contingent upon the completion of the acquisition as well as additional legal, advisory and other transaction-related expenses. Our distribution guidance remains unchanged at MXN 2.45 per certificate, which represents an approximate 11% increase in annual distributions in U.S. dollar terms based on current FX levels, following a similar U.S. dollar increase last year. This ongoing momentum in distribution growth reflects the underlying strength and stability of our cash flows as well as our confidence in underlying AFFO growth drivers. Of note, FIBRA Macquarie also declared a first quarter cash distribution of MXN 0.6125 per certificate, which will be paid on or about June 18. While near-term market conditions remain subdued, our financial position is strong, embedded value across the portfolio remains significant, and we are well positioned to continue executing with discipline. Simon and I would also like to take this opportunity to acknowledge the tremendous contribution of our team across the FIBRA Macquarie platform, and we remain confident in our ability to deliver sustained growth and value for all stakeholders. With that, we're happy to take your questions. Operator: [Operator Instructions] Our first question comes from the line of Rodolfo Ramos with Bradesco BBI. Rodolfo Ramos: Just a couple, if I may. First, I know you there is limited to how much you can discuss here. But just wondering whether your technical committee will be evaluating the most recent Monterrey tender regarding its fairness and what could be the timeline there? And second, it was a slight quarter-on-quarter occupancy decline, but can you comment whether it was something like an industry-specific or client, just to give us a sense of how the broader circumstances are weighing on that decision process for tenants? Simon Hanna: Yes. Thanks, Rodolfo. Rodolfo, great to hear from you. That's right. We saw FIBRA Monterrey come out this morning with their offer. And so from a process management perspective, we'll also be managing that with -- after 10 business day deadline to -- for the technical committee or the independent members of the technical committee to provide that fairness opinion. So that will be the other next step on that -- on that front. Look, with regards to move-outs, yes, we saw some move-outs through the quarter. I'd say, in general, nothing particularly concerning there and also not really much in terms of a read-through in terms of market specific or geographic specific, sort of a mixed bunch in terms of -- in terms of reasons for move-out, but I'd say no trend to call out. Through all that, we picked up some good leasing spreads as well on the renewals. You would have sort of seen a good bounce back to 13.8% and the expiration profile for the remainder of the year at 7%, we feel very comfortable sort of working through that. So those move-outs, as always, backfilling will be the aim of the game. And we have actually had some success even in this environment in doing some backfilling. Actually, one of the new leases that we did in Tijuana this quarter was a move-out from the fourth quarter. And that I think last quarter as well in Guadalajara, we had a couple of hundred thousand square feet move-outs, and we actually backfilled that the same quarter. So I think it goes to show that good quality buildings with the right approach, you can actually backfill in good order and something that we'll be addressing as part of those move-outs. But as I say, nothing fundamentally too concerning. When you take a step back and actually look at the market overall, I'd say softening backdrop, mildly softening backdrop in terms of the market-wide vacancy picking up maybe 100 bps or so. But again, I'd say nothing that we're too concerned about, given it is a wait-and-see dynamic as we all wait to get through to USMCA renewal, which to be fair is looking more like back end of this year, but maybe it's looking into next year. But when we look about that softening backdrop, again, we feel good about it. Just remembering 94%, 95% as an occupancy market -- number for the market overall. That's fundamentally healthy and actually where Mexico industrial has historically been. So that's something we feel good about. We also are seeing a rather steep decline in new construction starts. So again, as I said earlier, that's helping to just moderate the demand-supply dynamic and importantly, asking rates are holding up. So you saw us working through with that 14% leasing spread, and we feel good about where rental rates are even with that softening backdrop. So yes, we feel good about the rest of the year, albeit we did see a little bit of a slip in occupancy this quarter. Operator: Thank you. This concludes the question-and-answer session. I'd like to turn the conference back to management for any closing remarks. Simon Hanna: Okay. That was quick. And look, thank you, Alicia, and thanks, everyone, for participating in today's call. Along with Andrew, I would like to thank all of our stakeholders for ongoing support, and we look forward again to speaking with you over the coming days and weeks as we go through this quarter. So thanks very much, everyone. Operator: The conference has now concluded. Thank you for joining our presentation today. You may now disconnect.
Operator: Ladies and gentlemen, welcome to the Kuehne + Nagel Management AG Q1 2026 Results Conference Call and Live Webcast. I am Sandra, 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 is my pleasure to hand over to Stefan Paul, CEO of Kuehne + Nagel. Please go ahead, sir. Stefan Paul: Thank you very much, Sandra. Good afternoon, and welcome to the presentation of Kuehne + Nagel's First Quarter 2026 Financial Results. I'm CEO, Stefan Paul, and I'm joined today, as always, by our CFO, Markus Blanka-Graff. Page #2, first quarter 2026 results. Recurring EBIT exceeded our guidance. The recurring EBIT of CHF 308 million in Q1 exceeded the guidance we communicated with Q4 results. That is a result that would broadly match the CHF 285 million we achieved in Q3. We attribute most of the upside to first signs of visible cost reduction with phasing running ahead of plan. We had announced this cost reduction program in Q3 and booked provisions, as you all know, for it in Q4. We still expect to achieve at least CHF 200 million of annualized gross savings by year-end 2026. At the close of the first quarter, we are running ahead of plan and confident in our ability to reach our target. Our successful cost management in Q1 mitigated some of the effects of volume impacts from the conflict in the Middle East. Also, the year-over-year comparison was high, especially in Sea Logistics, where underlying volume growth last year was 6% in the first quarter. That was due in part to front-loading before Liberation Day. The net effect in Q1 was a year-over-year decline of 17% in group EBIT. Recurring group EPS declined by 18% year-over-year on the same basis, excluding consideration of negative currency effects and a one-time CHF 35 million gain on a real estate sale and leaseback transaction. The combined Sea & Air conversion rate was 26%. Free cash flow generation in Q1 exceeded that of last year, supported by disposal proceeds linked to the real estate sale. Excluding these, underlying free cash flow conversion of 40% in Q1 reflects typical seasonality as the first quarter is normally the weakest of the year. Before moving on, I would like to address the current market situation. With respect to market share, it is currently more difficult to assess our progress versus peers in Q1, given the spike in volatility set off by conflicts in the Middle East. Pending further clarity, we are assuming that recent trends continued and that our market share was stable or slightly greater in the period. In terms of expectations for near term, we expect a Q2 EBIT result greater than that of Q1 on the back of higher and sustained service intensity during a period of supply chain disruption. As such, we are modestly raising the lower end of our full year financial guidance, a topic which Markus will cover in more detail shortly. Now let's turn to our performance by business unit. Page #3, Sea Logistics. Cost control drives recovery of unit profitability. As always, volume on the left-hand side, GP per container unit in the middle and EBIT per TEU on the right-hand side. In Sea Logistics, unit profitability recovered significantly versus the last couple of quarters, thanks to our cost reduction efforts. You can see this underlying improvement in the last 2 quarters in the middle and in the right-hand chart on the slide. Sequentially, the Q1 volume performance was better than the average change over the last 5 years. Volumes in Q1 declined by 2% year-over-year, mainly due to the events in the Middle East. This pace matched that of Q4, but with a tougher comp. Underlying volume growth last year in Q1 was plus 6% versus plus 4% in Q4 2024, Enhanced by front-loading effects ahead of Liberation Day, European imports volumes from the Far East were once again robust, extending the strong trend we saw in Q4. Transpac volumes remained under pressure on a year-over-year basis. Average yields were stable sequentially for the second consecutive quarter, in line with the expectations we shared during our last earnings calls. This stability has continued thus far into the second quarter. As we mentioned at the time of Q4 results, we do not foresee a repeat of the yield pressure we saw in Q2 and Q3 2025. The Q1 EBIT improved sequentially by 7% to CHF 113 million as cost management efforts more than offset the volume decline. This resulted in a plus 13% increase of EBIT per TEU quarter-on-quarter basis. The Sea Logistics conversion rate was at 25% in Q1. This compares to 23% in Q4 and a 35% conversion rate in Q1 last year. Let me turn now to Page 4, Air Logistics. Stable unit profitability is supported by cost control and mix. In Air Logistics, strong cost control was the most prominent factor supporting stable unit EBIT during the seasonally weak first quarter. You can see this development in the third figure on the slide. Favorable mix shifts also contributed to the stability. Volumes in Q1 were flat year-over-year. This marked a declaration from plus 7% growth in Q4, chiefly due to reduced perishables and Apex e-commerce volumes. Excluding these lower-yielding segments, we achieved upper single-digit volume growth. On a quarter-over-quarter basis, the volume decline exceeded the 10% seasonal decline we have averaged since Apex was acquired in 2021. Volume growth was most robust in Asia-Europe trade lanes, followed by North American exports. North American imports were relatively weak, especially from Europe. Average yields increased by 2% quarter-on-quarter, a notable improvement on the result we usually expect coming out of Q4. From Q4 to Q1, demand for higher-yielding cargo usually softens while lower-yielding perishable volumes tend to remain stable. As I just explained, this was not the case in the most recent quarter as the mix shift resulted in positive yield effects. EBIT rose by 7% to CHF 111 million year-over-year in Q1, excluding FX headwinds. The Air Logistics conversion rate was at 27% in Q1 versus 26% in Q1 last year. That was Air Logistics. Now Page #5, our business unit, Road Logistics. EBIT growth supported by ongoing volume recovery. In Road Logistics, the signs of demand recovery we highlighted in Q4 extended into the first quarter and supported our EBIT growth. Net turnover grew by 9% year-over-year in Q1 or 5% organically, both excluding currency headwinds. This affirms our view that Q4 marked a positive inflection point for shipment demand after a sustained weaker period in the European market. Demand for custom solutions also remained robust, a consistent trend since Liberation Day in April last year. Additionally, we reinforced our services to the UAE in response to supply chain disruption from the conflict in the Middle East. EBIT rose sharply to CHF 25 million in Q1, a 42% improvement on last year or 35% on an organic basis. Please follow me to Page #6, our Contract Logistics business unit. Strong underlying profitability impacted by FX headwinds. In Contract Logistics, recurring EBIT increased modestly year-over-year, offsetting material currency headwinds. The net turnover grew by 5% year-over-year in Q1, excluding these currency effects, in line with the underlying rate of growth over the previous 4 quarters. We saw continued market share gains across geographies with a particularly strong contribution from our North American business. Recurring EBIT totaled at CHF 59 million in Q1, which is 4% higher year-over-year or 11% higher, excluding the currency effects. This figure excludes the CHF 35 million gain from a real estate sale and leaseback transaction. The recurring conversion rate of 6% is in line with the prior year result. With the Q1 results, the trailing 12 months ROCE for Contract Logistics alone is stable at a level of 25%, excluding the effects of exceptional items. And lastly, we are confident in the growth trajectory with more than 30 new contracts currently in the implementation phase. This overall concludes my comments on the performance of the business units, and I will now hand over, as always, to Markus. Markus Blanka-Graff: Thank you, Stefan, and good afternoon all. Thank you once again for your interest in Kuehne + Nagel and taking the time today to review our financial results for the first quarter 2026. First, we see on our profit and loss statement a pronounced 7% foreign exchange headwind at both EBIT and net earnings level. That is because the prior year benefited from a stronger U.S. dollar ahead of Liberation Day. Second, the material cost reductions in the first quarter, which are part of our restructuring program, helped mitigate this impact of the headwinds. Third, while Sea Logistics yield stabilized over the last 2 quarters, the first quarter year-over-year comparison for gross profit reveals some pressures. And lastly, Stefan already mentioned a nonrecurring CHF 35 million EBIT gain related to the real estate sale and leaseback transaction in Germany, a factor to consider when evaluating recurring profitability. Turning to working capital. We saw the base increase to more than CHF 1.5 billion over the past quarter or an increase of 9%. With this, net working capital intensity sits at 6% or above our guidance corridor of 4.5% to 5.5%. This compares to 5.2% at the close of the fourth quarter or 5.1% at the end of the third quarter last year. You can see the spread between DSO and DPO narrowed as DSO deterioration outpaced the DPO improvement due to a temporary shift of business mix. Additionally, the share of multinational customers with extended payment terms in contract logistics is growing. The net CHF 129 million increase of core working capital in the first quarter 2026 was comparable to a CHF 132 million increase over the same period last year. All business units contributed to this expansion, except for Air Logistics. So let's now have a look at how this fits into overall free cash flow generation in the first quarter 2026. We produced CHF 194 million of free cash flow, bolstered by CHF 105 million of cash proceeds from the real estate sale and leaseback transaction just mentioned earlier. Excluding the proceeds, free cash flow sits at CHF 89 million, and that compares to CHF 167 million from last year in Q1, also excluding modest disposal proceeds. For a closer look at cash conversion, let me move on to the next slide. Here, we see the usual comparison of free cash flow conversion in the most recent quarters versus the historical average. The first quarter is typically the weakest cash conversion quarter of the year with an average 48% conversion. In the first quarter 2026, conversion was 40%, including some material cash flows linked to our cost reduction program. Accounting for these, we view the first quarter cash conversion as very much in line with the historic average. We expect a continuation of normal underlying free cash flow conversion trends over the coming quarters. Turning to our financial guidance for 2026, and Stefan mentioned that we have raised the lower end of our 2026 recurring EBIT guidance to reflect both our current expectations and the better-than-expected Q1 results. As such, our guidance range is now CHF 1.25 billion to CHF 1.4 billion, up from the previously communicated CHF 1.2 billion to CHF 1.4 billion. For the second quarter, we expect the recurring EBIT results to exceed that of the first. This is also consistent with the historical long-term average seasonal development from Q1 to Q2. And we consider the seasonal impact of any wage increases, the bulk of which take effect in April. As a reminder, our underlying core guidance assumptions include the global GDP will grow, but with persistent uncertainty across geopolitics, macroeconomic policy and trade. As a base case, global sea and air freight volume demand will grow no faster than GDP. And as we have already highlighted, our cost reduction program remains and is on track, and we still expect more than CHF 200 million of gross savings on an annual basis. These savings will ramp up over the course of 2026 with an estimated impact of at least CHF 100 million in the current year. There is no change to the assumed 5% currency translation headwind reflected in our EBIT guidance nor is there any change on our expectation for a 25% effective tax rate. With this, I would now like to close our presentation with a summary of our key takeaways. Our focus remains on market-beating growth in targeted attractive sectors. At the same time, we are striving to meet the heightened market demands and complexity borne out of the conflict in the Middle East. Yields in both sea and air logistics remain stable and slightly improved. Our cost reduction program is on track with continued confidence in targeted savings, whereby the progress in the first quarter was ahead of plan. We have a strong foundation to achieve AI productivity gains and foresee material traction from 2027 onwards, a view that we shared on our last call. We have seen continued progress over the past few months with AI adoption expanding across our operations, empowering our workforce in their daily work. We will share a more comprehensive update, including further details on operational integration and next steps alongside our second quarter results. Lastly, we are raising the lower end of our full year earnings guidance range to reflect the better-than-expected first quarter results and current expectations for the rest of the year. With this, I want to thank you for your attention and hand back to the operator to open the Q&A session. Operator: [Operator Instructions] Our first question comes from Alex Irving from Bernstein. Alexander Irving: Two for me, please. First one, what impact on earnings do you expect from the recent events in the Middle East? Given the small narrowing of the guidance range, the answer looks like none or at least net none to get your perspective on that. Second, regarding the cost cuts, how far into those and especially how far into the expected headcount reductions are you now? How much is still to be done? And how significant do you take the execution risk to be? Stefan Paul: Alex, Stefan speaking. I take the 2 questions. First of all, in the first quarter, just to reiterate, there was no no impact to be seen on GP or EBIT level from the Middle East crisis. Moving forward into the second and third quarter, mainly into the second quarter, we do not believe there is a significant impact to be expected other than the volume trajectory in sea freight. We see bookings currently are down by 70%, 80% in and out for the GCC. We have mentioned in the numbers that, that had an impact of 1.5% approximately, particularly in March on the volumes. The yield will be stable, as Markus mentioned as well. Yield will be stable in sea freight moving into the second quarter. What you will see more and more coming into the second quarter and the result to be expected is the fuel adders, which we transparently pass forward to our customers. And I want to reiterate very transparency, very transparent. So we definitely will share that on a regular basis with our customer base in order to ensure that everybody understands what is happening. So overall, from a volume perspective, we expect air freight slightly picking up. Volumes overall in sea freight, most probably flattish. We are confident that we can move forward with certain other trade lanes and piggyback on certain other trade lanes and growth, particularly coming in from Asia to Europe and to a certain degree as well to the U.S. to offset the decline in the Middle East. So overall, not a huge impact to be expected from the Middle East crisis, rather not negative, not neither positive. And the main focus in terms of the EBIT improvement will come from the cost efficiency and cost-cutting program. That now focuses on the -- or let me focus on the second question, how many FTEs, what has been executed already by end of March this year, end of March 2026, we have executed in full, and there will be no further reduction from that particular program to be expected in terms of additional FTEs in the second or third quarter. Operator: Next question comes from Muneeba Kayani from Bank of America. Muneeba Kayani: I just wanted to follow up a bit more on the air market, which is clearly tightened because of the Middle East disruption, a bit surprised to hear you say that, that hasn't had an impact and you don't expect it to have an impact. So I just want to understand how you're seeing that. And I wanted to clarify on air yield expectations for 2Q. Do you think there could be a further pickup from the strong performance we've seen in the first quarter on air yields? And then secondly, just on the guidance. So I appreciate you've raised the lower end. But based on what you've said on kind of 2Q expectations, that would imply a second half EBIT lower than the first half, which is seasonally not what happened. So really kind of what needs to happen to reach the second -- the lower end of your guide? And why did you raise the upper end of your guide by a similar CHF 50 million? Markus Blanka-Graff: Muneeba, let me just take the second question first on the guidance. I think I even mentioned it, I think, in my presentation, we expect the second quarter to be seasonally as well stronger than the first quarter. So there is no concern that the second is going to be lower than the first. Why we increased and raised the lower end of the -- the lower end of the guidance is basically because we exceeded on the first quarter and we adjusted the lower end to that effect with a little bit of an add-on on top of it. But it actually means we are consistent and remain with our assumptions and conclusions for the guidance for the rest of the year. Stefan Paul: Yes, Stefan speaking. Muneeba, so clarification or more clarity on the air yield. So what we expect is a slightly higher yield into the second quarter versus the first one on Air Logistics. I mentioned Sea Logistics most probably rather flat in terms of volume and yield. Air will be slightly up. Same is expected for volume. Remember what I said during the call 6 weeks ago in the first quarter in March, when the crisis started, when the war started in the Middle East, we missed roughly 16% to 18% of the total volume, the capacity, which was grounded from the Middle East carriers, that is now back. Single digit still is missing, but this is back. And why do I state that we believe there is a little bit higher EBIT to be expected or yield per 100 kilo expected is based on the product mix, based on the better mix, which we have seen in the last couple of weeks, less perishable, significantly less e-commerce and a better basically gain ratio in the hard cargo segment where we traditionally see a higher yielding paired with the surcharge adders, which will increase the rate level as well to a certain degree. Muneeba Kayani: That's clear. Markus, actually, my question on guide at the lower end was on the second half, not the 2Q, which 2Q is very clear, but how you thought about the second half of the year in that guide? Markus Blanka-Graff: As I said, we are not changing our assumptions for the rest of the year. Operator: The next question comes from Parash Jain from HSBC. Parash Jain: My question is more into -- in your discussion with your customers, both on air and sea, what kind of commentary are they sharing with you given we have seen U.S. retail sales to inventory has come down. But at the same time, do you think that higher inflation will dent the business sentiment or consumer sentiment as it is shown in the U.S. Michigan index. So going into the second half, do you have certain assumptions by when this crisis will be over or where the oil price will be to get to the numbers, the range that you are offering? Stefan Paul: Yes, Stefan speaking, Parash, thank you for the question. So as mentioned, so the Transpac, so the volume, the consumer volume and the sentiment mainly from Asia into the U.S. is rather soft. And I think depending on where you are in the U.S., $1 -- up to $1.50 more per gallon basically and the inflation overall is impacting the consumer sentiment, and you mentioned that quite rightly so. This is definitely ongoing. We do not see any signals that the Transpac market, the U.S. market is recovering soon as long as we have that situation. But that was baked into the updated outlook and forecast that will be offset to a certain degree by other trade lanes and in particular, by our cost measures. But your main question was about the consumer sentiment, and we see that is still rather soft. Parash Jain: And then just in terms of -- has the duration of the war or oil prices has gone into your assumption? Or you think that oil price irrespective will be passed through almost on a real time? Stefan Paul: It will pass through, yes. As I mentioned before, I think that was the question. It will be passed through. And at the beginning of your question, you mentioned how our customers are reacting, right? I think we have very open, transparent discussions and 99% of the customers fully accept and expect it, right, and accept the discussion, and we do not see a significant topic in regards to the fuel price and the adders. But as I said again, and I'm repeating myself, we are extremely transparent. Operator: The next question comes from Marco Limite from Barclays. Marco Limite: I have one follow-up question on your Q2 outlook. So you have talked about sea yields stable quarter-over-quarter. And then you have talked about volumes also stable. Now the question is, is that year-over-year stable or stable quarter-over-quarter? Because generally, Q2 has got better seasonality versus Q1. So yes, wondering if that's year-over-year or quarter-over-quarter. And actually, same question for air freight volumes, where you -- when you said slightly up for volumes, were you referring to year-over-year or quarter-over-quarter? And then my second question, again, another follow-up question is on your cost savings. Clearly, the peak in Q1 was all driven by -- or mostly driven by cost savings. Now are you able to quantify where are you in terms of run rate compared to the CHF 50 million run rate by year-end? Because I mean, if the beat versus the CHF 285 million guidance is all coming from cost savings means that, yes, you achieved CHF 30 million basically more of cost savings than what you expected. So that's a run rate of -- yes, rate compared to the CHF 50 million by Q4. So yes, that would be helpful. Markus Blanka-Graff: Marco, it's Markus. And I'll start with the cost saving part. I appreciate your reverse engineering calculation and you are relatively close to reality. So we had a head start, I would call it, into the first quarter with the cost savings. So it's not a linear development as we anticipated still at year-end. I would say that from our ambition of a CHF 50 million per quarter cost reduction, so CHF 200 million annualized, we are probably just past the 50% on a quarterly basis cost reduction. So you talked about CHF 30 million. We're probably somewhere in that ballpark. That also means we might not see the same linear development going into the CHF 200 million run rate. We might see the second quarter being a bit flatter. We have already talked about inflationary impact on April through the manpower cost. So we might see a bit of a slower progression. But then from then on, we will continue into the third and the fourth quarter. As I said, I think our CHF 100 million ambition for this year, we should be able to exceed that. On your first question, the comparatives had all been on a year-on-year basis. So every comparison on volume and yield had been on a year-on-year basis. Marco Limite: Sorry, just to -- I think it's quite an important point. So also your comment on air yields of small up is on a year-over-year basis, okay, which was CHF 770 million, right? Does not make -- if I can, does not make sense, does not make the outlook for Q2 quite positive, especially in air if you have quarter-over-quarter, let's say, based on normal society, 10% more volumes on higher yields means that Air EBIT will be significantly up quarter-on-quarter versus Q1 in your view? Stefan Paul: I would say the likelihood is there, yes. Short and crisp. Operator: The next question comes from Cedar Ekblom from Morgan Stanley. Cedar Ekblom: I just wanted to ask a little bit more on your air business. Can you talk about your approach to buying capacity? Obviously, there's a huge amount of volatility in the market. And so I just want to get a better understanding for how you're risk managing some of the potential impacts around spot rates for your business. So how are you positioned, net long, net short? Maybe a little bit of color by region would be helpful. Stefan Paul: Yes. What we do is, as you know, we have a combination of block space agreements long and short with the commercial carriers. And we have since years now, a charter operation together with our subsidiary, Apex, where they operate on our behalf as well. So what we do is we have secured in addition the last couple of weeks, we have secured additional charter operation, especially when you look into the Southeast Asian markets where the technology comes from large demand from the hyperscaler, semicon industry and the other tech companies, mainly from Thailand, from Vietnam, to give you 2 main examples, Taiwan, Taipei is as well, very hot in terms of the volume demand is concerned. And we don't only piggyback on the normal commercial flights, the uplifts directly airport to airport from these destinations into the -- or from that locations into the receiving countries. We will operate or we already operate with charter capacity point to point. But additionally, with capacity, which we utilize from Southeast Asia to China, and then we take from China, from Western -- from an airport in the West China region, we take uplift, significant additional uplifts from China in order to ensure that we always promise or keep the promise towards our customers to have enough capacity and to guarantee a certain transit time even if there is a problem on the commercial flights, we add and balance this with additional charter capacity for the customers. Operator: The next question comes from Kulwinder Rajpal from Baader Europe. Kulwinder Rajpal: So 2 questions on my side. First on Road Logistics. So I wanted to better understand how much of the EBIT growth actually came from going to road from sea in the Middle East and how much actually came from the demand recovery in Europe? Just a qualitative flavor there would help. And secondly, I'm not sure if I missed it, but when we look at the decline in air volumes in Q1 on the lower-yielding side, was there some selectivity at play here? Or if there are some other factors behind the scenes. So could you please elaborate on that? Stefan Paul: I'll take the road question first. So it was mainly 90%, 95% coming from additional volumes in the European marketplace plus the U.S. and only to a smaller degree based on our size of business, book of business from the Middle East crisis. Markus Blanka-Graff: Raj, on the second question on the decline in air volumes in Q1 compared to last year, major contribution is coming from a reduction on e-com business, e-commerce business that in the first quarter 2025 was still let's say, there in a simple world. And right now, it has declined by over 50% in volumes. So that's really the volume impact and also the mix impact. Kulwinder Rajpal: Right. So just to clarify, I mean, would we expect some sort of a catch-up? Or would it be determined by customer behavior in the future as to how these volumes trend? Markus Blanka-Graff: But it's not only customer behavior, I think it's also how attractive that volume is for our profitability and how it matches with capacity, right? Operator: The next question comes from Hugo Watkins from BNP Paribas. Hugo Watkins: Just to go back to airfreight. Can you give any insight on potential jet fuel shortages, whether that's from yourself or what you're hearing from carriers and just what that might mean for airfreight capacity more structurally for the remainder of the year? Stefan Paul: Yes. We all know, and this is not a secret that especially in Southeast Asia, I think lowest capacity is in Indonesia, followed by Vietnam, Thailand to a certain degree. I think China has significantly more reserves. I would not worry about China currently. And as I said before, with our strategy to balance charter block-based agreements and own capacity operated by FX, I think we are well positioned to manage that crisis if it would even come. But repeating myself, the highest risk in terms of mitigating lies in Southeast Asia, where some of the countries do not have buffer beyond end of May or so. Operator: The next question comes from Alexia Dogani from JPMorgan. Alexia Dogani: Just firstly, you mentioned you are targeting growth in other trade lanes to offset the Middle East pressure. Can you tell us which trade lanes you're working on? And what gives you confidence that there is kind of growth to be captured there? And then secondly, I'm aware that usually wage deals reprice every April. What is your target or I guess, your assumption for wage inflation this year, considering the CHF 100 million or over CHF 100 million is a gross cost saving target? Stefan Paul: Yes, I tackle the growth question, trade lanes, we have started, and I think I mentioned it now 2 times, we have started heavily to look from a sea freight perspective into the prepaid China market. You have a lot of new Chinese giants who are asking for support and they always call it help me to become global. So we have reiterated and dedicated additional sales force in the Shenzhen area, for instance, where a lot of these customers are located. And we are confident from what we have seen already in the last couple of weeks in terms of business gains are concerned that we can offset with China prepaid additional volume coming in from new customers and existing customers, the mid prices from a pure volume perspective. Markus Blanka-Graff: Alexia, it's Markus. On the inflation base, so as you can imagine, we try obviously to address inflation topics and compensation on the larger workforce on the ground. And I think overall, we usually have a compensation for inflation also for Contract Logistics business. That is usually a pass-through. So where we really have cost impact that is also impacting the bottom line is on the sea and air freight basis. And here, I can safely say we remained below the global inflation values, but I don't want to disclose precise numbers. Alexia Dogani: And can I just ask a follow-up on this prepaid China market? Is that intra-Asia or kind of ex China to the world? Stefan Paul: No, it's ex China to the world. As I said a couple of times, we are not focusing so much on intra-Asia. The volume is huge, but the profitability is rather low on the low-end side, $50, $60 per container unit. So it's always focusing on China long haul to the world. Operator: The next question comes from Gian-Marco Werro from ZKB. Gian Werro: I have 2 questions. The first one is a follow-up really on what you discussed already on this kerosene potential shortage in the belly capacity. So can you tell us, are your clients already planning alternatives to Air Solutions with you, which might be beneficial to you, I think? And then also the charter situation, how does that work with the kerosene availability? Does some of the charters already have their own stock fuels? And then the second question is just on your AI potential that you mentioned already 6 weeks ago. Can you so far already give us a bit more details here about the potential cost cutting that you see there? Stefan Paul: So on the jet fuel, I would say, yes, of course, we have with certain customers different models. And what we do is -- and don't get me wrong, we are -- we cannot do something which is not possible at all, but we can do proper planning. And then with our charter capacity, as I mentioned before a couple of minutes ago, Gian-Marco, so we refill certain charter flights in China. We have access to certain capacity in China. So we bring cargo from Southeast Asia into China and then we refill our aircraft on the way back to Vietnam, for instance, in China. And on the long-haul flights, we refill as well in China. And remember what I said, China capacity will last significantly longer than in Southeast Asia, just in case something is happening. And I'm not saying that we will see a significant shortage. It remains particular on how fast the straight of homes will be reopened and we come back to a normal situation. But just in case this is going to happen, then we are already in close contact with some of our very large customers to do certain planning and scenario planning in order to help them to maintain a certain supply chain accuracy. Markus Blanka-Graff: And Gian-Marco, on AI, so clearly, that's an ongoing development, and we see continued progress over our last couple of weeks. But between our last announcement and today, it's really just a couple of weeks. And I would ask you to wait until we get into the half year results in July. And I think we should be -- you can expect from more tangible report and numbers, I think, at that point in time. But between the last 6 weeks and now, really not much has changed. We have expanded our use cases, and we are more and more seeing the benefits in empowering the workforce and making really their work more or supporting their work in a much better way. Operator: The next question comes from Lars Heindorff from Nordea. Lars Heindorff: The first one is on the road business. It sounds like you actually see maybe a little bit of sign of improvement in the European market. Maybe just if you can sort of elaborate a bit on that. We've seen Maut statistics in Germany still being down. So this increase in the organic revenue growth, is that caused by price increases? Is it volumes? Or where do you see any pockets because I mean, feedback on Germany is still pretty big in my view. And then the second part, which is what most of the other questions have been around, which is still regarding the yield development, the bunker surcharge, particularly in sea freight. To what extent is that affecting the yields positively or negatively? In sea freight, I'm hearing that the carriers are, to some extent, struggling a bit passing through the emergency bunker surcharges and maybe that many customers are waiting for the regular BAF to kick in sometime in the third quarter? And how will that affect your yield development if we look a little bit further beyond just what goes on right now? Stefan Paul: Yes, Lars, it's Stefan. I'll tackle the first one. It is mainly market share gains, right, in the U.S., in particular as well in Europe. We have seen a pretty good development in the last 6 weeks. We have gained additional volumes in Germany and France in the large domestic markets, but as well international. I think it has to do with what we have started last year on the back end of the softening when we saw that the market has really started to soften quite a bit. And then we increased our sales efforts. This is paying off now. And then with you, overall, the German economy is still pretty challenging, but even so we see good development from customers and new customers and the volume is coming in much better than expected. Markus Blanka-Graff: And Lars, I'll take the question on -- I think your general question is any fuel bunker or any surcharges beneficial to the yield. And I can answer, I think, for all 3 business units, if it's road, sea or air, that is neutral to the yield. I think what is important is what Stefan also mentioned a couple of times, there is transparency from that impact towards the customers. And I think that is the most important thing we can do being transparent and straightforward. It's not a yield topic. It's a cost pass-through. Operator: The last question comes from Marc Zeck from Kepler Cheuvreux. Marc Zeck: Last question then would be actually on the macro situation in Europe. We talked about the U.S., I guess. But let's say, volumes into the U.S. were kind of sluggish for the last 2 years and most of the volume growth, at least for the entire market was driven by volumes into Europe. And now the energy crisis is probably more of an issue for Europe as we are not really self-sufficient on energy over here. So what is the latest really that you see for April or that you see forward bookings for May? How is the energy crisis affecting Europe? And why would you be kind of positive that -- yes, that you will get over this rather without a major slowdown in European activity towards peak season in ocean freight in August and September? That's my question. Markus Blanka-Graff: Mark, this is an interesting question because it's, I think, nearly impossible to answer correctly. So I take the risk of being wrong, right? So I think on energy crisis and what is the impact on the macroeconomics, the first question for us is, and I have -- we have talked about a little bit what is the expectation of how long energy prices are going to stay at such a super elevated level, much connected to how long the crisis in the Middle East is going to continue. What -- what we can see is that at the current stage, the trade lanes, Asia to Europe are basically holding up strong. How much the inflationary impact is going to put on customer confidence in the U.S. remains to be seen. But again, here is a question more like how long is it going to persist. So I think too early to say if there is already an impact into the third quarter peak season expectations. I think we really have to sit here and look at the development for the next couple of weeks before we have any idea what's going on. You know better than certainly us, oil price volatility is a topic on the day. And obviously, for us, as I said in the previous answers, we are passing through this impact towards the customers. Their behavior, I think, cannot and has not reacted on a daily basis. How that's going to be going forward, I think, as I said, we have to wait a bit. Marc Zeck: Understood. If I just have a chance to follow up on that one. If you compare the current situation to how things played out during the Ukraine crisis, let's say, from a current perspective was pretty similar end of February, right? When -- then when did you see from European customers really the action that they put back a bit on the other side? Markus Blanka-Graff: Well, I think my first answer would be the magnitude or the impact on economy, on macroeconomics of the Middle East crisis now is far bigger than what we have seen on the Ukraine war. So the energy prices and the severity, I think we have talked about even the potential of jet fuel shortages. That has never been a situation from the -- coming from the Ukraine war. So I'm not sure if that is comparable. What we can generally say is when there is such severe disruption in supply chains, there is a certain period of a couple of weeks, so maybe 6, 8 weeks where alternatives, we spoke about how alternative supply chains are being designed are being done. And then if that new situation persists, then slowly that becomes that new situation to deal with. But I think we are far away from any of that stage right now. We are still in a stage of disruption. Operator: We have a follow-up question from Marco Limite from Barclays. Marco Limite: So I just want to go back to one of your statements, which is the Middle East had no real impact in Q1 and potentially into Q2. Was that referring to the sea freight business or to all the divisions? Yes, I would say this is the question and then in case I've got a small follow-up. Stefan Paul: So my answer was -- Stefan speaking. My answer was that the impact from an EBIT perspective in Q1 was not to be seen from the Middle East crisis. just piggybacking on what I said before, we will see an impact on the overall freight rates due to the fuel surcharge adders, which we transparently hand forward and put forward to our customers, and I talked about that as well. From a yield and from a volume perspective, you might see and I mentioned it as well that the second quarter in air freight will have a little bit of a better yield. Is that coming from the crisis or from a better mix? I would say it's more coming from a better mix and less from the crisis. But overall, one thing is clear due to the fuel surcharge adders, the freight rates overall are getting higher. Marco Limite: That makes a lot of sense. And when we think about the better mix, is that market-driven? Or is you guys trying to... Stefan Paul: Nothing to do with the market. It's us we decide basically based on verticals and higher profitability, where do we play and where do we want to play. Marco Limite: That makes sense. Is that because in a period where capacity there is shortage of capacity, I guess you prefer to go with better yield volumes. Is that the logic or... Stefan Paul: Some of the logic, yes. some of the logic that and we put much more emphasis on the general cargo on the hard cargo, right? And with our service, with our product offering, with the quality we offer, we have the choice to basically go for the higher-yielding business. Operator: Ladies and gentlemen, there are no further questions. Back over to you for any closing remarks. Stefan Paul: Thank you very much, as always, for your interest, listening for the good questions, and we speak to you then when we communicate the Q2 figures. Stay tuned and healthy. Bye-bye. 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.
Operator: Good afternoon, ladies and gentlemen, and welcome to Eni's 2026 First Quarter Results Conference Call, hosted by Mr. Francesco Gattei, Chief Transition and Financial Officer. [Operator Instructions] I'm now handing you over to your host to begin today's conference. Thank you. Claudio Descalzi: Good afternoon. Amid the volatility and disruption to the energy system over the past 2 months, at Eni, we continue to focus on the delivery of financial performance and key strategic milestones. As we set out at our capital market update just over a month ago, we are working to deliver reliable, affordable and lower carbon energy for all our customers. Our industrial strategy anchored to technology skills and long-term investment into top tier assets across a diversified portfolio has, if anything, been further validated in the context of the event of this year. Our investment framework underpinned by strong cash flow and a robust balance sheet supports us in delivering sector-leading growth. As a result, we can also reward our investors through a combination of attractive distribution and the continued rise of the capital value of the business, something that has been reflected by the share price improvement. It's also worth keeping in mind that while energy markets have been highly volatile since March, Q1 average, also higher than the planning assumption set out at our capital market update were well within a historical normal range for our volatile industry. Actually, in euro terms, it was a bit softer than last year. 2026 has seen very positive advancement in strategic terms and Q1 supports this progress with strong financials. I will analyze the financial in more detail shortly, but we reported EUR 3.5 billion of pro forma EBIT, cash flow from operation of EUR 2.9 billion and pro forma gearing at 15%, well within our expected 10%, 15% range. Our pro forma gearing, assuming the full effect of Plenitude Deconsolidation is even lower at 12%. Major strategic events of the year-to-date include probably the ever best start to a year for exploration with an exceptional level of new resources discovered in 7 different countries. The FID of Geng North and Gehem in Indonesia, the dual exploration strategy, realization of a stake in our Baleine discovery. Strong production growth helped by start-up of production at NGC in Angola and first LNG export from the second Congo LNG. And in the transition sector, the agreement to reorganize and deconsolidate Plenitude and advancing 2 new biorefineries at Sannazzaro and Priolo. But before we get into the details of the financials, I will spend a bit more time on what was the most remarkable start of the year for exploration. As you know, we have established a track record as the leading exploration company in the sector, discovering an average 900 million barrels per year over the past 10 years. And while our impact activity is somewhat front-loaded in the first 4 months of 2026, we had already added around EUR 1 billion of new resources. Critically, these new resources also all have a credible and visible pathway to development and production, consistent with our focus on efficient time to market where we are also an industry leader. Our production growth to 2030 is visible and sector leading, and we are building material optionality for the 30s. In Angola, our Azule affiliate, as operator, announced the significant oil discovery of Algaita on Block 15/06, preliminary estimates put oil in place at around 500 million barrels and the presence of an FPSO merely 18 kilometers away promises a speedy and efficient development. In Cote d'Ivoire, the Murene South-1 well significantly extended the proven area of Calao gas condensate discovery, confirming a world-class discovery of up to 5 Tcf and 450 million barrels in place. In Libya, in March, we announced a 2 offshore gas discovery estimated to total more than 1 Tcf in place and closed by the existing Bahr Essalam facilities, enabling rapid tieback. In early April, we announced the Denise discovery in the Temsah concession offshore Egypt. Our preliminary estimate for Denise is 2 Tcf of gas and 130 million barrels of condensate in place and situated less than 10 kilometers from existing production infrastructure. Last, but certainly not least, this week, we announced the giant Geliga gas condensate discovery in the Kutei Basin, offshore Indonesia. Our preliminary resource estimate is in place gas of 5 Tcf and 300 million barrels of condensate, effectively a second Geng because Geliga is close to the undeveloped 2 TCF Gula discovery that includes also an additional 70 million barrels of condensate and thus development synergy plus the same infrastructure and time to market advantage of Geng. There is a clear case for a fast track development of a third major production hub and the significant production and value uplift this implies. Q1 results were consistent with the scenario condition we faced and the positive momentum we are generating in growing the company. But not all the upside of the scenario was captured in this quarter as our downstream and biorefineries were under the traditional maintenance that we execute before the start of the driving season. E&P delivered 9% year-on-year production growth and consistent capture of venture prices. Year-over-year, growth contribution from Norway and Congo were especially notable, and the outcome is after disruption to Middle East volumes in March. GGP pro forma EBIT of EUR 0.3 billion is reflecting the more volatile scenario, and it is consistent with our updated guidance of EUR 1.3 billion in pro forma EBIT. In our transition businesses, pro forma EBITDA of EUR 0.52 billion is consistent with our full year guidance of EUR 2.4 billion. Plenitude that will continue to grow both on clients and new capacity will increase its gross EBITDA by 20% to EUR 1.3 billion, while Enilive will continue to see supportive biorefining margin, and will reach an EBITDA of EUR 1.1 billion, 16% over last year. Our refinery utilization was low, reflecting a major turnaround program, which should position us well for the remainder of the year. Meanwhile, our results in Versalis highlight some evident progress in the reported results of curtailing its losses in line with our plan. Contribution from associates reflected the macro scenario condition with reporting a strong production growth. A higher scenario along the year will enhance the results of our satellites and could improve their distribution and our cash flow, too. The tax rate of 42% was in line with our full year guidance. Cash flow from operation generated was in line with our expectation with good contribution from associated dividend and a cash tax rate of around 25%. Working capital had a large negative impact on cash flow, consistent with the sharp rise in prices in March, but it's not out of the ordinary in that context. We do expect to reverse this in the coming quarters. CapEx was EUR 1.9 billion, in line with the full year amount of EUR 7 billion for the year. Net CapEx was broadly equal to gross with limited portfolio activity in this quarter beyond announcing but not completing the sale of a 10% stake in Baleine in Ivory Coast to SOCAR. After the quarter ended, we completed on the previously announced acquisition by Plenitude of Acea Energy for around EUR 500 million. We paid the third quarterly dividend referring to 2025 in March and repurchased EUR 280 million in share. Shares in issues have reduced by 17% since the end of 2021. Pro forma gearing of 15% incorporates M&A transaction announced but not yet concluded and represent a broadly balanced quarter for cash in and cash out. We expect the consolidation of Plenitude to close in the third quarter with a benefit to consolidated net debt over the following quarter as Plenitude funding is restructured. If we incorporate also this effect, our pro forma gearing is actually at 12%. Updating our guidance for 2026, we confirm the outlook for E&P production with a growth rate of 3% or 4%, incorporating our current assumption for the impact of Middle East disruption. We have also updated our market scenario projection for the year in the context of the current situation, raising full year Brent to $83 per barrel from $70, the TTF to EUR 50 per megawatt hour from EUR 36 as we believe that higher price will be necessary for the refilling of empty storage and refining margin in Europe our term to $8 per barrel from $6. From a financial perspective, reflecting the changed scenario underlying outperformance, we now estimate cash flow from operation, pre-working capital of EUR 13.8 billion, up 20% from EUR 11.5 billion set in March. Applying our proposed updated distribution policy, this implies a share buyback raised by around 90% to EUR 2.8 billion. As previously communicated, this is the floor for 2026 that will be maintained even in the case of future scenario deterioration. Actually, taking into account the current market prices are well above that level, we should expect even further increase in our distribution policy in the coming quarters. Our new policy will be put to shareholders for approval at the AGM on 6th of May. And this concludes my remarks. And along with my colleagues from any top management on the call, I am ready to take your questions. Operator: [Operator Instructions] I now leave the floor to Mr. Jon Rigby for the Q&A session. Jonathon Rigby: Thanks, operator. [Operator Instructions] And we're going to start with Biraj at RBC. Biraj Borkhataria: [Technical Difficulty] How should we think about that EUR 55 million this quarter and what we should assume for the full year '26 and into '27? And then second question is just on Indonesia, and congratulations again on the exploration success. Now that we're closer to the deal closing in Q2, are you able to say what the cash adjustment is set to be net to Eni? Jonathon Rigby: Biraj, can you just rego over your first question because we missed the start of it. Biraj Borkhataria: Sorry. It's the transformation costs, the EUR 55 million you've broken out, what should we expect for the full year? Claudio Descalzi: Okay. I'll leave the question about the transformation cost to Adriano Alfani. On Indonesia, we do expect a cash settlement. And also, you know that we work in this kind of model with some distribution that are related to the capability of funding of this entity stand-alone, but we do not disclose this amount that will be in any case irrelevant. Adriano Alfani: Sure. Thanks for the question. I mean on the EUR 55 million, while we started a new project, we continue to drive efficiency on all the sites that are in transformation. So you should read on annualized basis, roughly EUR 50 million of efficiency that we are going to bring. So you should not multiply EUR 55 million or [indiscernible], but you should discount about EUR 50 million at least of efficiency that we are going to bring. But you need to consider that today, the sites are in transformation for the future, adding value through the new project because we are going to start the new activities. So this is something that in the future will generate value. And by the way, it is incorporated in our CFO for guidance. Jonathon Rigby: Thanks, Biraj. We are now going to go -- sorry, one second. We'll now move -- sorry, apologies. We'll now move to Alejandro Vigil at Santander. Alejandro Vigil: The first one is about the situation in the Middle East in your portfolio. How are you managing the situation and potential impact in terms of your supply contracts, your oil and gas production in general, how you are managing this context? And the second one is about Indonesia. I remember that you were talking about the plateau of the new joint venture of about 0.5 million barrels per day. With the new discoveries, this is now a very conservative assumption? Or you reiterate this 0.5 million as a guidance for the production? Claudio Descalzi: I leave to Guido Brusco to answer both questions. Guido Brusco: First, on Middle East, the impact overall is marginal, both on oil production and of course, on free cash flow. We have limited exposure in terms of production, 3% of our total production comes from Middle East. As far as concerned, the products and LNG also is limited, if not 0 impact on LNG, thanks to the flexibility of our portfolio, the diversified geographical footprint, we could basically cope with the missing volumes coming from Qatar essentially. While for the products, we -- on all the commodities, gasoline, diesel and even jet fuel, we are prepared to honor all our commitments with our customers. So -- on Indonesia, yes, indeed, I would say the -- that assumption was reflecting the status of the base of resources at that time. Of course, having discovered Geliga, which is equivalent in terms of volume in place to Geng and having also another stranded asset there, Gula, which is give and take 2 Tcf, so we can basically replicate another hub in the region. So clearly, this will raise the production target in the medium to long term to more than 500, I would say, 700, 750 might be a reasonable figure. Jonathon Rigby: Thank you, Guido. We're going to move to Josh at UBS. Joshua Eliot Stone: Two questions. One, just on the buyback and your decision to list it. Obviously, I understand there's sort of mechanical nature here given the new cash flow guidance, but more a question of the timing of why you felt now was the time to do it so soon after the Capital Markets Day and your confidence there? And then second question, looking at your macro deck, one thing that does stand out is the gas assumption at EUR 50 per megawatt hour, which is above the curve. You're involved in the market, your storage business. Can you explain maybe why prices haven't moved higher so far? What do you think are the main reasons? And why you set your assumption above the forward curve? Claudio Descalzi: Thank you for the question that are partially connected clearly. We decided to move the buyback because we believe actually that is already evident there is a completely different trend even versus the Capital Market Day. The Capital Market Day occurred in the middle of March. The event at the time were just started once we were presenting our first scenario that was based on clearly a crisis, but that could be solved in a shorter time. There were not yet bombing on the facilities that occurred at that specific time and were expanded in the following weeks. And we see there is a continuous or practically 2 months already inside the crisis. This crisis is not just a matter of reaching a sort of cease fire or peace, but it's also to restart a lot of infrastructure and production facilities, processing facilities that were shut down or were impacted by fire and bombing. So it will take longer. So for this reason, we believe that there is a quite unexpected compliance by the market on the duration of this crisis that appears, I would say, much more impactful that the market is probably evaluating. On the gas specifically, we believe that in a EUR 40, EUR 45 megawatt hour environment with extended shortage of gas, particularly from Qatar because even if Qatar will be able to restart or there will be some kind of agreement in the coming weeks, it will take time to restart all these plants of this facility to restart the flow. You have to consider there is also bottlenecks in terms of tankers or ships and clearly LNG carriers. So the overall process of refilling European storage that completed the winter at the minimum, almost at the minimum 25%. Now we are at 30% and to reach at least 80%, 90% before the start of the next winter will require some price signals that should be increased. Price signals not only in the amount of the first front month value, but also on the structure of the curve that is not supportive. So we believe that both on oil and on the gas, our price deck that we have uplifted is still conservative. Jonathon Rigby: We are going to now move to Alessandro Pozzi at Mediobanca. Alessandro Pozzi: The first one is on the number of discoveries that you've made so far this year. I was wondering there is -- in your capital allocation framework, there is a little room for increase in CapEx. And we all appreciate the need to be disciplined when it comes to CapEx budgeting. And I was wondering, to this point, is CapEx more of an input to your modeling assumption? I mean, you want to stick to that level of CapEx despite the current scenario or there is some headroom for maybe accelerating some of these projects, especially the ones in Indonesia? And the second question on GGP. Just wondering whether you can give us more color behind the increase in guidance and whether that is connected to your higher macro assumptions as well. Francesco Gattei: Okay. I will -- just a very short introduction, then I leave to Guido Brusco and Cristian Signoretto for the two questions. Clearly, CapEx, we are strict to a level of CapEx that we want to keep under certain range. You have to consider in exploration that there are exploration that are occurring inside our business combination or affiliates, associates that are reported in equity. So once you see a discovery in Azule or in Indonesia, this will have a different treatment in terms of CapEx. Then I leave to Guido to explain also why CapEx will be relatively softer in this case. Guido Brusco: Yes. I think there are 2 handles here. One is some of the discoveries are discoveries near infrastructure. So our tieback, which are not requiring massive capital intensity. And I mean those are the ones that, on top of what Francesco said, that are in Angola, like Algaita, like the one in Libya or the one in Egypt, basically, those are tie in with, I mean, low cost. The other angle is the others, which we have made in Ivory Coast and in Geliga. The one in Indonesia, it applies again, the concept that Francesco just illustrated. It is in a business combination. But on those, we can also eventually apply our dual exploration model. So the net CapEx would be even accretive from our perspective. Now Cristian... Cristian Signoretto: Well, on guidance of GGP. So I'd say based on the Q1 results, which were fairly strong and the volume increase and the increase of asset-backed trading that we have seen in a more volatile scenario, we updated the guidance, taking that into consideration. And as we said before, also extending this, let's say, situation and scenario broadly along the next month, given the situation that Francesco just explained before to you. Alessandro Pozzi: Is there any new arbitration that we need to be aware of for the rest of the year? Cristian Signoretto: Say it again, sorry? Alessandro Pozzi: Is there any new arbitration that we need to be aware of for the next... Cristian Signoretto: No. Absolutely, not. Jonathon Rigby: Thanks, Alessandro. Next, we're going to move to Al Syme at Citigroup. Alastair Syme: First question just on gearing. Can you just confirm exactly how much net debt sits in Plenitude that obviously gets deconsolidated in third quarter? And then secondly, just a question around the biofuels market. Obviously, we've seen massive price increases through first quarter. You're putting a lot of growth capital in that business. But also this week, we've seen Europe's largest airline announced cuts to routing because of the price of jet fuel. And yet, I look and see sustainable aviation fuel, SAF, is 40% more expensive than jet fuel. So I wonder how you think about the issue of affordability of biofuels in your forecasting and investment [indiscernible]? Claudio Descalzi: Yes, about the Plenitude amount of debt that we are going to deconsolidate is EUR 2.6 billion. That clearly will be reduced once there will be the increase of capital as a consequence inside the new entity. And then I'll leave to Stefano Ballista to answer about the biofuel and SAF. Stefano Ballista: Yes. No, as you said, the scenario significantly improved. And actually, the main reason for the scenario improvement, it's driven by market fundamentals. It's driven by the demand increase that we are seeing due to the regulation and the mandates that are under deployment. And these are rules, mandates, target that has been defined. If we look at the most recent definition of new target, I'm thinking about U.S. with a new renewable volume obligation, we got an increase of about 60% of demand for the next couple of years. So this is the main reason. The geopolitical situation is going to give a little bit of extra headroom, but marginally compared to the fundamentals. This means actually that the perspective on biofuel is and remain definitely strong. When you look at biofuel, you need to look both at renewable diesel on one side and sustainable aviation fuel. The market is coupled. Sustainable aviation fuel is going to be the only answer to decarbonize the aviation transport. There is no other answer at the moment. And even with a small target in terms of blending, now in Europe, we are about 2%, you can create significant demand, but pretty much affecting marginally the overall cost position. So we've got significant space for improvement, not only on renewable diesel as it's happening, but also on sustainable aviation fuel with a marginal impact on a marginal component -- on one side of the component of the aviation business as a whole. So this is the view on the biofuel. And as I said, there is no other answer actually to decarbonize the aviation sector for a long while. Alastair Syme: Stefano, I mean, Europe's largest airline has basically said they can't afford jet fuel at this price. And I accept the mandate is only 2%, but it's meant to go up. So how on earth are they going to be able to afford a high percentage of biofuel of SAF, if it's 40% more expensive than the price of jet fuel, which they can't afford. It seems to be a conundrum. Claudio Descalzi: Okay. I can -- we can comment about what was the statement. But from our point of view, clearly, the biofuel now a solution to have a resource full in a situation of scarcity. The premium eventually could reflect the impact of the scarcity. And you have to consider the supply chain or the chain of production of SAF is relatively young and small. Once you will have a potential larger market, you have also improved synergies. So the cost position is not just a matter of, let's say, industrial process. It's also a matter of having this process aligned in terms of size and materiality with demand potential. We do expect that after this crisis, there will be as a reply, not only on environmental solution, but also apply towards a potential diversification risk to deploy a larger use of this kind of alternative solution for ships, for airplane and for cars. Jonathon Rigby: Thanks, Francesco. Thanks, Al. We're now going to move to Michele Della Vigna at Goldman Sachs. Michele Della Vigna: I wanted to follow up on your exceptional exploration success. And I believe you've also completed the first deepwater well in Libya and I was wondering what were the early results there? And second, I wanted to come back to aviation, but from a different side, I think we keep reading that we may be short of kerosene this summer. How do you see the situation? And how low do you think inventory days can go before flights are actually starting to be grounded? And how much do you think that in your refineries, you can actually tilt towards more jet fuel production? Claudio Descalzi: I leave to Guido to answer both questions. Guido Brusco: So the one in Libya has resulted in a noncommercial discovery. And -- but it was very important either for us to have a better understanding of the basin, which is quite large, huge, diverse in terms of number of prospects. And so you have to think that this is a block where the last well drilled was drilled by us in the early 2000s. So we are talking of a large basin with quite a number of untapped resources. So it's the first well, but we'll have, for sure, more understanding of the basin. As far as concerning the jet fuel, as I said before, we are prepared to satisfy and honor our commitment with our customer. Of course, the situation is very different and diverse if you, I mean, if you look at the different flight operator and supplier. But as far as concerned, Eni, we are prepared to satisfy our customers. Jonathon Rigby: Thanks, Michele. We're going to now move to Paul Redman at BNP. Paul Redman: Yes. First question is just come back to Enilive. Could you give us some insight into kind of what you've seen in terms of margins, February, March and what you're seeing in April for the biofuel business? And if they're a lot stronger, I was surprised the EBITDA guidance didn't get upgraded. Is this because biofuels is positive for the commercial business, maybe having a few more issues. And then secondly, just on working capital, I think you mentioned in your prepared remarks that you expect this to come down. Could you just talk us through how you expect that to play out? Francesco Gattei: I'll let Stefano to answer on Enilive, and then I will reply on the working cap. Stefano Goberti: Yes. First of all, on the scenario. Actually, the scenario on biofuel improved significantly along the first quarter even before the starting of the conflict. This is what's true in Europe. And it's, as I said before, linked to mandates, so to fundamentals. An example, we got recently approved in Holland, the new GHG target is 28% versus a rate of 14%, and we got no more double counting. So, a good news, to be honest, fully expected. Same in U.S., we got a market significantly increasing, again, linked to fundamental. Even in the first quarter, we got an average on the RIN about $1.5 per RIN. It was less than $1 last year. And now we are about $1.8 after the approval of the new target. So the market was already expecting the new mandate. In terms of output, it has been even better. So this got an extra drive in terms of overall margin. So this is in terms of market setting. In terms of results, a comment. In the first quarter, we got as Enlive as a whole, EUR 220 million of EBITDA pro forma adjusted. This means EUR 50 million above the first quarter of last year. And this has been fully driven by biorefinery performance. It actually, on top of driving the upside, as you said, balanced the partial pressure on retail prices that we are experiencing in Europe linked to fossil fuel prices. On top, I want to highlight that actually in the first quarter, we got Venice under maintenance and upgrading maintenance. So it has been shut down for the whole quarter. And that result has been achieved without that kind of production. Venice is going to come in place during the second quarter. And we're going to be at full potential for the second half, so being the condition of capturing results. Last comment, as I said, we were definitely expecting the improvement of the scenario even in the business plan. So this improvement has been for the majority already crafted in our business plan, that one related to fundamentals. The extra upside, assuming the extra upside is going to last for the time being, this is going to get an additional value that we are capturing and we're going to keep capturing. Jonathon Rigby: Thanks, Paul. So watch this space. The next questions come from Lydia Rainforth of Barclays. Lydia Rainforth: Two questions, if I could. I mean just... Francesco Gattei: No, I would like just to answer about the working capital very fast. The working capital will turn back, will improve immediately in the next quarter and clearly along the year, is subject to the evolution of the spike of the price that we -- let's say, we were -- we recognized in the first quarter. Sorry, Lydia, please continue. Lydia Rainforth: No, no, that was important. Just 2 questions. One, I just wanted to touch on Venezuela and what you're seeing there. And then the second one, sorry, this is more of a long-term thing. But are you seeing in terms of the conversations you're having with host nations, with governments, has anything changed yet? Are they suddenly going, actually, we'd like to accelerate plans around exploration. We want more in terms of energy security. We want you involved more. So just if there's anything -- those sort of conversations, or is it just too early for that at this point? Guido Brusco: On Venezuela, just a month ago, we've signed an agreement, which we call Cardón IV Sustainability Agreement, which would allow us to basically produce sustainably the gas and provide energy to the country. And this implies also future -- so this fix for the future essentially and implies also some activity to do some debottlenecking to the plant to increase slightly the amount of volume to the domestic and to have an export outlet for the larger resources, which Perla carries. Basically, Perla is a reservoir of 20 Tcf. So there is quite a significant potential for an export. On the oil side, we have 2 assets there, one in conventional water and one unconventional onshore. Two things happened. First, a new general license was issued by OFAC, which allows the -- I mean, the operator to carry activity in Venezuela. And second, a new hydrocarbon law was enacted at the end of January this year. And this provides a framework, a legal framework, a fiscal framework to develop in a sustainable way our oil assets. And of course, we are engaging the authorities to make this happen. Jonathon Rigby: And Lydia's second question was on host governments and changing. Guido Brusco: In Venezuela. Jonathon Rigby: More broadly, I think, as well. Lydia Rainforth: Accelerate the exploration. Guido Brusco: Yes. No, I mean, broadly, there is, of course, a positive reaction from government. And we are noticing in several geographies that government are more prone to provide the right enabler for the operator to increase exploration, provide fiscal term to produce stranded resources. Of course, there is a price element which plays a significant role, but many governments are trying to introduce enablers to make it possible. The focus is on energy security, of course, most of them are trying to maximize the domestic production on the government side. On the international oil company side, of course, diversification is another pillar of the strategy. It has proven in the last 5 years that 2 major providers of energy, Russia and Middle East for both oil and gas have failed to or has proven that they could fail to deliver and diversification in other geographies like Far East and South America or America in general and Africa is very welcomed now in the strategy. As Eni, we are very well positioned in these 3 geographies. We had very limited exposure to Russia. We have, as I said before, limited exposure to the Middle East. And if you look at the portfolio in the long term, which we presented also at our last CMU, the Americas, Africa and Far East will play a larger role in our portfolio. Jonathon Rigby: Thanks, Guido. We're now going to move to Martijn Rats at Morgan Stanley. Martijn? Martijn Rats: I've got 2. First of all, I just thought I'll ask you a broad question about demand destruction. It clearly is a topic and with a broad range of views of whether there is and how much oil and gas demand might have been destroyed as a result of these high prices. But I was wondering if you could share a perspective. And to be clear, the nature of the question goes just beyond jet fuel, which is sort of separate topic in its own right. But what do you think is the amount of oil demand that has been destroyed as a result of these very high prices? And the second thing I wanted to ask you is about the Argentina LNG FID. I noticed there wasn't a mention any more of it in the 1Q sort of statement, but that should still be on the schedule for later this year. I just wanted to confirm that. Francesco Gattei: About demand destruction, I think that thinking about demand destruction in a matter of 1.5 months, it's too early. So I think that demand is there. Clearly, there is potentially some small reduction that potential buyers that do not afford, but demand destruction is generally happening in a certain time frame. So for the time being, you see that there is no demand destruction. There is supply destruction. There is storage use and there is some kind of switch wherever it is possible to switch, eventually in certain coal gas plants. But I haven't seen a real material destruction in terms of demand from the data that we can collect. About the Argentina LNG, I leave to Guido for completing the question. Guido Brusco: On Argentina LNG, we are still projecting an FID by the year-end. And just to give you more visibility on the activity, the engineering work is almost completed. The main -- all the major EPC tenders are progressing, and we are estimating to complete by Q2, the majority of those and in early Q3, the remaining. And in parallel, a significant progress has been made also in LNG and NGL marketing as well as on project financing. So definitely, we're setting up ourselves and our partner and all the stakeholders in Argentina to -- for an FID by the year-end. Jonathon Rigby: Thanks, Martijn. And to be clear, it's probably more of a function of a long list of projects that we can't fit in every quarter. Martijn Rats: Excellent. Yes. Jonathon Rigby: Yes. Martijn. Moving on, we've got Matt Lofting at JPMorgan. Matt, have you got some questions? Matthew Lofting: Yes. Two, please. First, it struck me looking at the revised cash flow guidance for 2026 that if we annualize Q1, the new full year targets look comfortably above that. I imagine there's probably some price lagging effects in oil and gas that impacted the numbers in Q1, particularly given prices rallied sharply in March. I wondered if you could sort of share the price lagging impact and how that might come through. And then secondly, obviously unusual in many respects to raise distributions and buybacks so much so early in the year. Obviously, it's an unusual macro situation that we're in, in that context as well. But in the past, you've talked about effectively a sort of a hard floor and a sort of a soft ceiling to buyback revisions. Does that still apply for 2026 against the 2.8 baseline? Francesco Gattei: Yes. About the cash flow from operation results and the fact is clearly the -- as a consequence, you know that in the first quarter, as we mentioned, there were -- and downtime, still some maintenance. So we are not able to capture certain results. Also from the point of view of GGP, there were some benefits that we were able to capture partially but just the last month of the quarter. There is a ramp-up of production in E&P to improve the further benefit along the year. And on the other side, you have to consider that there is distribution from associates that follow in certain cases, quarterly, but in other cases, there are half-year or yearly distribution. So there are various elements that will determine a different distribution in the next 3 quarters versus what we had in the first quarter. The other question was. Yes, the unusual distribution is because we had the policy and we apply the policy. I think that I do expect that this distribution will become potentially even more unusual in the coming quarters if the market persists. Jonathon Rigby: Thanks, Matt. We're going to move to Massimo Bonisoli at Equita. Massimo Bonisoli: Two questions. One on the discovery in Indonesia regarding the SEARAH JV with PETRONAS. In light of the significant discovery in Indonesia, can you clarify whether the terms of the agreement already incorporated the option of the additional resource upside you just discovered ahead of the closing? And the second on the sensitivity table, given the recent increase in volatility in physical commodity markets with widening differential across crude qualities and geographies, do you believe the sensitivities you provided on benchmark prices are still fully representative? Or should we expect some divergence between benchmark movements and your realized profitability in the current environment? Francesco Gattei: On the sensitivity, then I will leave to Guido for the question about Indonesia. On the sensitivity, we gave -- you remember that we're, let's say, applied assuming a broader volatility range. So we're different than the usual sensitivity that we fixed on a shorter size fluctuation. Clearly, volatility and -- sorry, sensitivity is just a theoretical number. We do not capture all the arbitrage also because the arbitrage cannot be modeled because we don't know where this potential gap and the effect that on the physical barrel bottleneck that could emerge. So you keep it as a key reference, but it's clear there will be some specific spot situation where the sensitivity is not applied, but the sensitivity is applied also on 1.7 million barrels per day of production. So that effect is already in a certain way, diluting any specific case. I'll leave that to Guido. Guido Brusco: There are adjustments on the free cash flow working capital, but there are also adjustments on the new resources discovered in the interim period and beyond the interim period. So there are a mechanism in the agreement to readjust value accordingly. Jonathon Rigby: Thanks, Massimo. We're going to move to Fergus Neve at Rothschild. Fergus? Fergus Neve: There's been a flurry of exploration success at the start of this year and the 1 billion BOE of resources discovered is very impressive. I just wanted to know whether there was any color you could give on further wells being drilled this year that we might be looking out for and if there are any others you're particularly excited about? And then secondly, it was positive to see the chemicals result improved sequentially this quarter. How should we think about this improvement in terms of the contribution from the Versalis restructuring and then also the scenario in the quarter? And looking forward to 2Q, do we expect the business to be able to capture any improved margins should they materialize? Francesco Gattei: I'll leave then to Aldo Napolitano for the exploration and Adriano Alfani back for Versalis. Aldo Napolitano: Yes. In terms of program -- exploration program for the rest of the year, -- of course, we had a program this year that was really front-loaded. So many of the high-impact wells have been drilled. And so in 4 months, we have -- so we had the sequence of results that you mentioned. However, we still have some interesting wells to drill during the year, again, in Indonesia, so in the Kutei Basin. So we plan to drill another well, another interesting prospect. And we will have a couple of wells in Egypt and a well in Ghana. So this will complete the wells at least with a certain materiality. There's a large part of our exploration portfolio anyway that is interested by drilling for near-field ILX drilling, so contributing to production in very short term. But in those cases with more limited reserves. Adriano Alfani: So on the chemical side, if we look back to the Q1, the transformation has a positive impact of roughly EUR 100 million. Although we are facing a negative scenario because in the first quarter, clearly, there was a sort of a time lag between what Francesco was talking about before, the effect on the demand versus the negative effect of supply because we had higher cost in terms of feedstock, higher cost in terms of utilities. So at the end, the positive impact quarter-on-quarter at pro forma level is a little less than EUR 100 million because for the effect of the negative scenario, roughly EUR 85 million. If we go in the second quarter, we are putting in place a significant action in addition to further reduce costs and to continue the transformation plan, and we expect the second quarter significantly better than the Q1, also catching some shortage that we see on the polymer market despite still the high cost in terms of feedstock and utilities. Jonathon Rigby: Thank you, Adriano. We're going to now move to Mark Wilson at Jefferies. Mark? Mark Wilson: Okay. My first question is, you say how you can honor commitments to customers, gasoline, jet fuel, diesel, et cetera, totally understandable. And just does that flag the idea that margins can be squeezed given feedstock prices? That's the first question. And then the second one, more general, yes, yet more exploration success, deepwater, talking about additional developments as well. You commented previously, Claudio, on the service market and how there could potentially be tightness. We're seeing service providers talk about renewed developments. So how would you see tightness in that contractor market and any particular services you feel may be under pressure given developments that we're looking at? Francesco Gattei: Yes. About the first question on the margin -- potential risk of margin squeeze, this is -- for us, it's a relative risk because substantially, we are -- in our chain of supply, we can able to cover most of the products that we are delivering to our customers. So from our point of view, we are not in a situation where we have to rely too much on the cargo market. There could be some volumes related specifically on jet fuel, but this is a marginal amount. So for this reason, we do take the commitment. That this is a commitment that is clearly related to our integrated value along the chain. About the contractual services in the oil market, I leave it to Guido. Guido Brusco: Sorry, I have to restart again. So I was talking with the microphone off. So there are 2 elements of -- that are driving cost at the moment. One is driving the short-term cost inflation, and this is mainly driven by the conflict in the Middle East and of course, across the whole oil and gas value chain, higher energy prices, logistics, insurance, commodity costs are increasing, and these are bringing almost immediate cost inflation. But for one moment, let's imagine that this cost pressure will be shortly fixed, assuming that this cost pressure on the short term will disappear. There are, of course, longer-term drivers of cost pressure, an increase -- a general increase in the activity in the upstream. And we've noticed that basically, I mean, if you look at the inflation trends from '22 to '23, '23, '24, up to '25, we already had a 15% cost increase in -- I mean, starting from the 2022. And the pre-war 2026 and coming here, we were in the region of the 3% to 4% of cost increase. But if you add up this short term, which I was mentioning before, the range would expand from 4% to 7%. Of course, this is the average. There are costs which are in the long term, more under pressure like the vessel installation for the deepwater activity and others which are less under pressure like the onshore drilling rig, but this is the general overview that we see in the market. And that is backed up also by sources like IHS UCCI Index. Jonathon Rigby: Good stuff. Thanks, Guido. Thanks, Mark. We're going to move now to Chris Kuplent at Bank of America. Chris? Christopher Kuplent: Hope you can hear me okay. Just 2 quick detailed questions to follow up on. I wonder whether you can talk to us about those exploration blocks that have ended up with BP. Was there a consideration whether to do this with Azule? I'm talking about Namibia, sorry. And maybe you can tell us why not with Azule. And second, even smaller detail, I just wonder whether between your CMD and now, you've changed your expectations regarding receiving dividends from ADNOC Refining. Francesco Gattei: I leave the answer to Aldo for the block in Namibia and then on ADNOC, I will reply later. Aldo Napolitano: So if I understood correctly, so you're talking about the blocks that BP has -- the new blocks that BP has taken in Namibia. So these are real exploration blocks in frontier areas. So for the time being, it's an initiative of BP. So we are, of course, talking to each other, but they are not part of the Azule Energy activity. Francesco Gattei: About the ADNOC Refining, you have to consider that, that dividend is based on 2 activities. One is the one of refining the crudes. The other is related to trading. So these 2 activities clearly have different perspectives under the current crisis. We do not have yet changed any assumption. It's not material in the overall amount of dividend that we received in the year. So I will keep the assumption as it is and it's not -- eventually, we do believe there is a relative hedging between these 2 activities. Jonathon Rigby: Thanks, Chris. Christopher Kuplent: Sorry, the first answer was this was too much greenfield. I'm aware that you are not taking part, but I just wondered why not. Francesco Gattei: So as I said, it's an initiative taken by BP, so based on their geological reconstruction. And so I think the question should be made to BP, sorry. Jonathon Rigby: Thanks, Chris. We're going to move now to Sadnan Ali at HSBC. Sadnan Ali: First of all, could you just remind us of the divestment proceeds you're expecting for the rest of the year? And secondly, I was wondering if there's any further updates or developments in your plans to get back into trading. Of course, the volatile price environment that we're seeing now is a perfect opportunity to capture trading profits, which your peers will benefit from. So I was wondering if the current environment has accelerated your plans at all? Francesco Gattei: On M&A, you know that we have completed Baleine in the first quarter. And also on the other side, we have completed in the acquisition side, HNR, Energea, with Plenitude. We do expect to have a further disposal completed in the -- during the year. You have the one that we announced last year. There will be further opportunity that we are valorizing. We do exploration model, some tail assets or areas that we do not consider core. So there is activity ongoing negotiations that are getting closer to completion, and we do expect eventually to disclose later on. So remain, as we said before, quite material this year. On top of that, you should include the deconsolidation of Plenitude as an opportunity. Clearly, Indonesia is another factor that will benefit from the partial disposal of Indonesia, referring to the 10% that will benefit not only of a scenario that is quite supportive, but also of the new discoveries that are emerging and the overall upside potential that is related to that basin. On the trading, I hand back to you. Guido Brusco: Yes. On the trading, we had a journey which started with step 1 was to include the trading into the overall value chain of global natural resources to try to capture all the margin. This was the step #1. Step #2 was to change the model, to do some transformation internally and turn our trading arm from a pure service provider of the different business to a marketplace where we've optimized our activity in the assets driven by the market needs. And then there is this third stage where we wanted to improve our soft skills in trading. We have a large base of assets. We have refineries, we have storage, we have physical oil, we have physical gas. We have a lot in terms of resources and assets, and we wanted to improve our soft skills. So we started this engagement with other trading players to try to combine the best of the 2, the best of an oil company and the best of a trading company. And this is the objective of the third step, which are -- which is definitely forthcoming. And this scenario, of course, will accelerate it. But despite this contingent situation, we would have done in both cases, yes. Jonathon Rigby: We're going to move to the last question, which is from Bertrand Hodee at Kepler. Bertrand Hodee: I have just one left. On Venezuela, you had outstanding receivables of around $2.3 billion, with an estimated realized value of $1 billion. Do you expect to recover more than the $1 billion because of the new Cardón IV Sustainability Agreement? Guido Brusco: Yes. As I said before, we just signed one agreement, the Cardón IV Sustainability Agreement to fix the future. And now with this new engagement and conversation we are having on how to develop the oil assets, we will fix also the past. Bertrand Hodee: And so how should we think about this $2.3 billion of outstanding receivables? Guido Brusco: There will be mechanisms developed to recover these past dues within the framework of the development of the oil field. Is that more clear? Bertrand Hodee: Yes. So it's not going to be within the Cardón IV JV, but within the new oil framework? Guido Brusco: Or a combination. It's very flexible, but it will be essentially more focused or centered around the oil development. Francesco Gattei: New development that will clearly give more flexibility in terms of cargo that could be used or new revenues that could emerge by production -- additional production. Jonathon Rigby: Think of it as an holistic solution to all the challenges that we have. Thank you, Bertrand. Thank you, everybody, for joining the Q&A and your attention on Eni's Q1. We look forward to speaking to you soon. Have a great weekend. Thank you. Operator: Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones.
Xiuyi Ng: Good morning, everyone. Welcome to CLCT's 1Q 2026 Analyst Briefing. I'm Xiuyi, Investor Relations for CLCT. With me today, we have our CEO, Gerry; CFO, Joanne; CFO Designate, Lintong; and Head of IPM, You Hong. For this meeting, we will start with a brief presentation followed by a Q&A session. [Operator Instructions]. So with that Gerry, please go ahead. Kin Leong Chan: Thanks, Xiuyi. Welcome everyone to CLCT's first Q 2026 business update. Thank you again to making some time this morning to attend this presentation. This is update. So I think it will be relatively short. There'll be more Q&A time later. So CLCT, we are the first and largest China-focused S-REIT. So now, of course, we also have connectivity to the C-REIT market through us jointly listing a C-REIT on the Shanghai Stock Exchange with our sponsor. Our current total asset is SGD 4.5 billion. We have 8 retail malls, 5 business parks, 4 logistics assets. And most of our assets are in Tier 1 and Tier 2 cities. Distribution yield using FY 2025 DPU with the unit price now is roughly about 7.5%, right? That reflects some of the unit price movement from the broad market winners after the start of the Iran war. In terms of our asset allocation, you can see that relatively unchanged. Our retail is still our largest and most resilient asset class, 70% of gross rental income, that's the biggest part. And then the remaining 30% is what we term as more new economy, so business parks 27% and logistics parks smaller at 7%. In terms of the different segments, generally speaking, the retail has been showing relatively more resilient with our AEI effects starting to flow in Q1 of this year. Logistics stabilized, of course, with some rent resets that we have done in 2025. And business parks, we will see that continue to have weak demand. So overall portfolio gross revenue and NPI dropped about 5% and 3%, respectively. And that's mainly due to the divested Yuhuating effect. So encouragingly, on a same-store basis, you will see that our portfolio gross revenue marginally negative at minus 0.4% year-on-year and NPI actually increased 1.3% year-on-year. If we dissect further for retail, again, on the headline revenue, it declined by 7.2%, but again, mainly due to the loss of Yuhuating's revenue, which alone was about RMB 21 million. So without that, if you exclude that on a same-store basis, it narrows to -- the drop narrows to minus 0.5% year-on-year. The other effect is -- for retail is that the completed AEIs started to provide us with new revenue flow. That's about RMB 5 million per quarter, and it was somewhat offset by some of the weakness -- continued weakness we see at Xinnan, Grand Canyon Mall and Aidemengdun. For BP and Logistics, when we combine together the revenue is relatively flat year-on-year. What we have done, of course, we continue to focus on operating efficiency. Our operating costs on a year-on-year basis, we reduced by 3.7% on same-store basis. Next, if you look at some of the retail operational statistics for first Q. Continued growth in traffic and tenant sales. You can see traffic grew by 3.3%. Tenant sales grew by 5.5%. And both of these statistics are generally faster than we have seen in terms of growth than the average of full year 2025 over that full year 2025, which grew about 2-plus percent for the full year 2025. But really, we are continuing the strong momentum that we saw 4Q 2025. Overall, occ cost is healthy, 17%. Again, there's a slight drop in occ cost and that's due to the good healthy sales growth that we have seen. Trade categories that have done well. F&B 4.2%, that's not a surprise, it has been a big category for us. Again, last quarter, I shared the same trends that are driving this F&B segment. We introduced new high-performing trading brands, which are 2 factors for [ shoppers ]. Growth also was broad-based. We have all local favorites, Japanese sushi chains and bakeries all doing well. IT up 8.5%, that's again boosted by consumption voucher as far as we mentioned, we expanded more digital brands during our AEI in Xuefu and Wangjing. Brands like Huawei continue to do very well in our malls. Jewelry & Watches plus 8%, again, driven by the trend to invest in gold. Toys & Hobbies, again, a standout, plus 59.6% this quarter, continued popularity of the collectible toys market. So again, POP MART was 100% up year-on-year. Again, we did very well. [indiscernible] Xuefu going strong. They are up about 58% in terms of sales growth. The other categories that are not in the slide, but I can share a little bit. Last year, we did a lot of supermarket AEIs. So the supermarket upgrading Wangjing share to Xizhimen did well, so those powered our supermarket category. Actually, it's there in the right-hand side. We had strong sales from that RMB 80 million, right? So the growth there is, of course, that double digit since last year's supermarkets, some of them have closed down. And once they were open, this supermarket drove good traffic growth at the 3 malls that we opened. Another category that did well, sporting category, we also opened Decathlon in Rock Square and very good ANTA Guanjun [indiscernible]. So the sporting category this quarter also did very well, plus 46%. One real surprise for me is that the fashion category actually turned positive this quarter, was positive 1.4%, a small positive, and growth was driven by the stronger malls and some of the names that have been going well, most of them, which is basically winter wear, thermal wear. And perhaps it's driven by the winter season. We had a strong overall growth of about 40% sales growth. While no one quarter is in a trend yet, but certainly, this is encouraging because we have had many quarters where we have not seen fashion had a positive sales growth. In terms of occupancy, our malls continue to have high occupancy. So this quarter, we had 97%, with almost all malls are above occupancy of 95% except for Xinnan, which is, of course, we are continuing to reposition. In terms of reversion, similar levels to 2025 at about minus 2% with 2 anchor renewals affecting our reversion number. We are doing some anchor renewals at Nuohemule and Aidemengdun. Business Park occupancy is at 86%, a slight drop from 4Q 2025. Usually, leasing momentum in the first Q is usually slower. But our Business Park assets outperform -- continue to outperform our submarkets despite generally softer environment for business parks. We see improvements in Xinsu and Ascendas Innovation Hub. But they are small -- they are decline in some of the other assets, for example, AIT, Ascendas Innovation Towers' occupancy dropped mainly due to one of the BPO tenants that did not renew upon expiry. We are looking to fill that. Hangzhou Phase 1 and 2 challenging market, which we shared before supply-wise, occupancy drop was from 2 bigger e-commerce tenants that pre-dominated that took up about 4% space of Hangzhou 2. Previously, we also shared that for Hangzhou 2, we had some X master lease service office that -- service office lease that we took back, that's about 55,000 square meters. And then where we subleased now from about 70% last year, we are now up to 74% backfill, right? So we'll continue to backfill that space. Overall Business Park's reversion is at minus 11%. We are, of course, prioritizing occupancy to actively trying to retain our tenants and conversion of the new leasing pipelines. You can see that actually this quarter, we did do quite a lot of leases, almost 60,000 square meters of renewals and new leases in first Q. So we are working hard at it. Logistics Parks, smallest part of our portfolio, 3% of GRI. We can probably say that I think the Logistics portfolio has stabilized. We further improved in Chengdu, driving occupancy of that asset to 96.2%, and also improving the overall logistics portfolio to about 99%. So we feel that rents have almost bottomed up in this Logistics portfolio. We aim to continue to achieve full occupancy at this level. Capital management before I hand it off to Lee to talk about it, I would like to just highlight that in terms of our average cost of debt, this quarter, we have managed to cut it down from 3.3%, where we ended off the year in 2025 to 3.1% by benefiting our efforts from [ RMB ] financing and overall constructive rate environment in both SGD and in RMB. So for this quarter, with the combined efforts, we managed to translate loan interest rate savings of about SGD 2.9 million. So that's about 18% year-on-year drop. So over to you, Lintong. Lintong Yan: Thank you, Gerry. So capital management remain a core strength and priority for CLCT. So our focus is actually very clear. We wanted to maintain a healthy balance sheet and they're actively lowering our cost of borrowing and protect distribution stability across the cycle. So as at March 2026, our CLCT's debt level is slightly higher than 1 quarter ago, following our distribution. That has resulted in aggregate leverage of 41.4%, which still remain comfortably within the regulatory limit. More importantly, like what Gerry has just now highlighted, we actually have achieved year-to-date average cost of debt of 3.1%. This represents 40 basis point reduction year-on-year and 20 basis point reduction versus full year 2025. These are tangible outcomes from active actions taken early in 2025, when we proactively refinanced and shifted funding from higher cost SGD debt into lower cost RMB debt. And also, we have increased our proportion of RMB-denominated debt, which has strengthened our balance sheet against resilience FX -- make it more resilient against the FX movement. So in -- as we deliberately balanced our SGD and RMB debt mix to stay flexible across various macro conditions, I want to highlight that in the small table on the upper right corner, right? That actually shows our distribution sensitivity on SGD and RMB interest rate movement. We now have more floating rate debt in RMB in SGD, right? This actually positions CLCT to benefit from monetary easing in China while being better suited for any potential volatility in SGD interest rate, given the global macro environment. And with lower borrowing costs, that has also strengthened our credit profile. Our interest coverage ratio has improved to 2.9x under stress test scenario, where the 100 basis point increase in average cost of borrowing or 10% decrease in our EBITDA, our ICR, interest coverage ratio, is remaining -- is able to remain comfortably above 2.3x, well above various regulatory threshold. CLCT's debt maturity profile also is very well staggered with annual refinancing kept at around 25% of our total debt, that is to manage our refinancing risk. The only offshore bond that is maturing in 2026 is RMB 600 million, 3.8% FTZ bond, which is due for refinancing in Q4 2026. While CLCT has sufficient committed bank facility to refinance this bond, but we see this as a good opportunity for us to further diversify our cost of funding as well as to refinance our debt and meaningfully lower costs. So we will actually keep unitholders informed about our refinancing efforts in the following quarters. So finally, we have strengthened our natural hedge. Our RMB-denominated debt now represents about 60% of our total borrowing, including other hedging instruments, we have around 78% of our total debt in RMB-denominated form. So in summary, our capital management strategy is to deliver a very clear and measurable outcome for our unitholders, lower cost of debt and stronger resilience to interest rate and FX movement, right? So these efforts underpin our distribution stability and provides CLCT with long-term growth capacity. Over to Gerry. Kin Leong Chan: Okay. Thanks, Lintong. I will just end off with maybe just a summary of our strategy in 2026, which is really a continuation of what we have done in 2025. We're trying to build a portfolio in the long term that aligns with China's focus on domestic consumption and innovation-driven economy. How we are doing it? We create value. We have, in 2025, established a long-term capital recycling vehicle via C-REIT platform. This will continue to support our ongoing portfolio reconstitution. 2026, our immediate target is to expand in -- some expansion in our new assets, especially retail, while continuing to make sure our properties have a stable occupancy. Unlock value, what we have done, of course, is last year, we have recycled CapitaMall Yuhuating. In 2026, our first priority is still to buy an asset to replace, replenish and reconstitute what we have sold in Yuhuating. But we will continue to work on and see whether there are suitable opportunities to recycle some of the noncore or mature assets where we feel that value has kicked. Extract value. Our AEIs, I think it's clear for everyone to see have been successfully completed and helping us in terms of organic income in 2026, right? So that will be -- continue to be a key part for us. We are trying to identify whether we can attract more value from existing assets. And as we look for new acquisition, we also want to see whether the new acquisitions that we are evaluating have potential and room for us to continue to apply our AEI expertise on them. Proactive capital management, I think Lintong has already touched on it. We will continue to drive down our average cost of debt while reducing our FX risk where appropriate. So that's the end of my presentation. I'll hand it back to Xiuyi for the Q&A session. Xiuyi Ng: Thank you, Gerry for the presentation. Now let's proceed to the Q&A segment. We have our first question from Terence. Please go ahead. Terence Lee: Congrats on actually the strong numbers. Actually, I really wanted to ask on Q-on-Q. I noticed that in fourth quarter last year, actually both revenue and NPI did drop in sort of like the mid- to high single-digit number on a Q-on-Q basis in fourth quarter. And then this first quarter, it did improve quite substantially on the Q-o-Q from fourth quarter. So maybe can you share on the Q-on-Q movements in the numbers? That's my first question. Yes. Maybe you can answer this first. Kin Leong Chan: I will answer that, and if there's some additional info that the CFO want to provide, he can do so. For the first Q numbers, I think if you look at this slide, we sort of have already laid that out. Of course, the big effect is Yuhuating, right, in terms of the revenue. And that's -- I think, I mentioned that actually quite for a big number, that's about RMB 21 million that we lost for revenue just because we lost -- we divested Yuhuating. But if you exclude that, you look at the other components, right? We have the AEI effects flowing through. So last year, most of our AEIs are completed, some at the late part of 3Q, some at the late end of 4Q. So most of the income really haven't come in. But this year, we have full contributions from all our AEIs. Just now I mentioned that the swing there is about RMB 5 million per quarter. So that's a key part of why I suppose you saw that retail revenue has on a same-store basis has been quite stable, right? Of course, as I mentioned, it's slightly offset by some of the poorer assets. I'm talking about Xinnan, Grand Canyon Mall and Aidemengdun. So that's basically how we come to about flat, excluding Yuhuating for the retail revenue. Business Parks. Business Parks NPI-wise, actually, if you look at the segmental breakdown, you would have saw that actually Business Parks also improve. Like part of it was because you recall last year, we had been trying to backfill some of the spaces in Hangzhou Phase 2, I mentioned about the service office master tenant, which we took back the leases from and then started releasing up. Last year, we said that we finally managed to lease it up to 70%, but a lot of it was really committed at the back end, right, of the year? And then, again, the income flows and effects started flowing in 2026, right? So that helped basically together with Logistics Park get us to a position where revenue is flat rather than declining in those sectors. And of course, generally, we're trying to maintain cost control. So I mentioned the cost control, and we have saved about 3.7% on a same-store basis. So that's why on overall basis, you can see the NPI is up 1.3%, excluding Yuhuating's effect. Is that... Terence Lee: Yes, that's very helpful. Maybe if I can ask a separate question. I understand that the C-REIT regime has changed quite dramatically. I mean your sponsor is looking at another separate C-REIT. So I wanted to get your views on how the changes impact the existing C-REIT and whether you may look to divest assets via C-REIT or how are you looking at asset divestments? Kin Leong Chan: So two questions. I think one is about the new C-REIT and the relationship with us and the sponsor. Second one is whether we are looking for more securitization or divestment from our portfolio into the new C-REIT. I think those are the two questions. So the new C-REIT format is something that really picked up in concept only end of last year, and it's something that the CSRC in China, the securities regulator, is driving very hard to get going off the back of quite a successful -- already quite a successful C-REIT market that they have right now. And CapitaLand as a very reputable REIT player globally and also in China, right, has been invited to do that sort of the first pilot batch of this new C-REIT format. The differences -- I can let Lintong explain the 2 differences in the short while. But when this was discussed, right, certainly, CLCT was also in the loop. And we also were consulted to see whether we want to have any assets securitized into this vehicle, right, new vehicle that's coming up, which will probably be second and third Q by the time they listed of this year, right. And we decided that since we have done our first securitization quite recently, right, we wanted to pace up the pace of our securitization or divestment, so that our DPU can have some income stability. As you can see from the results, we -- even though Yuhuating's divestment was not that big, we still lost some income. And we wanted to see whether there are opportunities to basically buy some assets to put -- to basically replenish those income before we go on to the next securitization, right? And if you look at the general market for C-REIT, it's actually very buoyant. So we are in no hurry. The market will be there for quite a while for us to take advantage of when we need that liquidity, right? So it depends on whether we have the capital needs, maybe we find very good assets at very good attractive yields that then we may think of activating another round of securitization. You Hong can explain the diverse between a new and old C-REIT as well as what people are seeing in terms of how they work together. Hong You: Yes. So on the new regime, if I may, we can call it commercial C-REIT, just to terminology it differently from the previous regime called infrastructure C-REIT. They are actually quite similar in terms of leverage, the legal structure and all that. I would just say there are 2 to 3 main differences that drives them. One is the speed at which I think the regulatory wanted to move this faster. So I think they have sort of -- the approval window will be shorter because last time, there's NDRC, CSRC sequentially have to approve it. But now I think it's all in the CSRC's purview, so that's number one. Number two, I think asset class, they've expanded into a more bigger real estate focused commercial asset class, namely including office, hotel. Of course, retail are still in it, and all the other more generic type of income-producing real estate are all admitted to this commercial real estate, which previously it was very limited. Number three, I think they've also relaxed certain reinvestment obligations. So I will not go into too detail. But having -- so basically, I think this is welcomed generally by the market as a whole. And from our point of view, I think we are indifferent as to which vehicle is -- can be our offtake vehicle. I think there were also questions on why there are 2 [indiscernible] C-REITs in the -- under CapitaLand's name, I think the regulators also suggest that there could, in the future, be actions there to take care of that, but that will be a next-stage action, yes. Terence Lee: That's very, very clear. And hopefully, we can see more C-REITs to come. That's all I have. Xiuyi Ng: The next question is from Geraldine. Geraldine Wong: Congrats on the more stable than expected set of results. Maybe just tying back to Terence's question on divestment, you'll probably look to phase out a little bit more to reduce DPU impact. Can we also say the same for the existing recycling to your -- to [ CRCR ] in terms of retail assets? Kin Leong Chan: Yes, I think we view it the same actually because it's kind of, I would say, a slew of tools that we have in our disposal because we are part of the same group, right? So we will -- whether it is to the new C-REIT or the old C-REIT, we will place it according to our own needs. Geraldine Wong: Okay. Okay. You also mentioned about acquisition opportunity that you see in other retail assets. Just wondering, would you want to pace that with a divestment? Or if the opportunity is really very interesting, will you actually consider doing EFR given that gearing now is at 41%... Kin Leong Chan: Well, it depends on how attractive the deal and basically the timing that we have basically to complete the deal. So there are quite a lot of permutations, yes. So it really depends. Geraldine Wong: Okay. Okay. Maybe just squeezing in question on Logistics and Business Park. Logistics reversion was a positive surprise. Is this lease specific or really reflecting a potential bottom -- early bottom for the Logistics asset class within China? Kin Leong Chan: I think it's quite been a trend for about 2 quarters already. You Hong can add a little bit more color, but we have tried to communicate that we feel that rentals have really reset, so that's why if you look at the reversions, it's actually just mildly negative in this quarter. Hong You: The reversion mainly come from, if I recall correctly, Kunshan and Chengdu because these 2 are the ones that have a bit of change in leases. But having said that, I think our observation of the market, I think we have alluded to previously as well that we will hopefully be seeing the rent are stabilizing and following 2 years of quite, I would say, drastic drop. Of course, we can't say for the whole China because I think North part of China, Southern part of China may be in a different -- slightly different timing and cycle of the market. But in the 4 cities that we are in, I think this is generally observed. Geraldine Wong: Okay. China, very big. Maybe just on Logistics, right? If you look at your 4 assets, how many percent of the leases are still on the rent that has yet to be [indiscernible] versus the already mark-to-market rents? Hong You: I will say that our leases are generally in the 2, 3 years kind of lease cycle. And then we have more or less done with the [ marketing ], that's my view. Geraldine Wong: Okay. So it looks like one more year to go then. Hong You: No, I would say that we have more or less [indiscernible] to the market, although some of them are 2, 3 years, but I think we have done the big churn in the last 1 and 2 years. Xiuyi Ng: The next question is from [indiscernible]. Unknown Analyst: [indiscernible] from OCBC here. Just a few questions. I noticed that the retail reversion is still negative despite the trade sales going up. So what's causing the divergence? Is it just a timing issue or like tenants still being squeezed? And related to this question is occupancy cost. What should we think about as a steady state kind of occupancy cost like trended lower to 17%? And is this going to trend further lower? And another question I have is on cost reduction, 3.7%. So it is somewhat substantial. What was actually being done to drive that kind of cost reduction? And should we be expecting further cost reduction? Then my third question will be in terms of the cost of debt. So do you have some guidance on where it will go towards the end of this year? Kin Leong Chan: Thanks for the question, 4 questions. So the first 2, I will touch on a little bit before I let You Hong to take the first 2 in detail and then I'll let Lintong answer second 2 in more detail. So generally speaking, the whole China environment is still in a deflationary or environment, right? So prices are not really moving up, right? And that certainly [ keep true ] when you try to ask tenants to increase rent. But of course, for those categories and those malls that we are really well, we have better ability to ask for higher rents, right? This quarter, I spoke about there was -- for the retail, there were some anchors that we renew that affected our reversions. I recall the number without them is minus 1.6%, minus 2%, but still negative. You're right, still on a negative trend or slight negative. And I shared previously, I think last quarter that what I'm -- we believe that sales trend are leading indicator for reversions, right? Of course, the timing you can debate of how much leading indicator it is, right? We have had a year -- almost a year plus or 2 years actually of sales growth, right, that outstrips -- obviously outstrips rental growth, right? So that to me shows actually our tenants are actually in a healthy position, right? That should continue to underpin the strength of our retail portfolio. In terms of the savings, we do work very hard on them. The details, I will let Lintong talk about it. And in terms of both operating expenses as well as our interest, we are working very hard on it. So the first details maybe on the operating side, occupancy costs, maybe You Hong, you want to add more color on that? Hong You: Yes. Thanks. So I think that's a really good question actually. We are also trying to understand and in my conversation with ground team, we are also trying to see whether there's room for us to drive ramp up. So I think the 70% is actually already below the levels of -- before the levels of the pre-COVID. So then again, I think our -- what we hear is that when we talk to the tenants, they are still relatively cautious on upping the rent, although they are able to still do good business, but I think the resistance is there because for one reason is that the they are also sort of in the deflationary environment, trying to promote and do more promotions, do more sales events. So they also felt that the margin -- their business margin is also not as good as the good old days, right? I think that's number one. And number two, I think in terms of the aggressive expansion tenants, what we are seeing is more in the drinking, in the bakeries, some of them still do. But the large format kind of tenants, F&B, fashions are still sort of lacking or rather the willingness to expand is still not there overall. I would say, so we would want to work with them to see how to drive it up. But I think at the moment, we are still seeing the rent being rather subdued, right? So I think that will probably take a bit of time. But hopefully that with now we see the new data on the DPI and all that. Hopefully, the CPI will also be able to go into the positive territory for a longer time, right? I think then people will start to feel that the inflation cycle will turn. I think that will help us generally. Lintong Yan: So for the interest saving, yes, so for this quarter, we are very encouraged to see our cost of borrowing has actually come down. So, yes. So this is actually years of efforts. Since 2025, we have been actually very much focused on lowering cost of debt and also to use the renminbi borrowing to actually lower our overall cost of borrowing. This actually takes time to filter through because we do have some expensive swaps that actually need time to mature and reset. So I think for now, I guess, this level of cost of borrowing, I think we hope to actually hold it there because we still have some floating rate that are actually subject to macro environment, right? But we do hope that we are able to hold the interest rate here at this level. And then we are also looking for opportunities to further reduce our interest rate, right? Take for some example, our FTZ bond that is actually currently the passing coupon rate is 3.8%, right? So this bond is actually coming due. So I think we are able definitely to refinance this bond at below 3% kind of level, even better than that. So -- but this bond will actually -- any refinancing effect will probably be filled in 2027 and when they -- actually interest savings contribute full year, right? And also, we do observe that occasionally, there are opportunities for us to swap our SGD debt into RMB debt through cross-currency swap because the interest rate environments are actually still quite volatile on the long end, right? So opportunistically, we are able to capture some interest savings when we swap SGD into RMB using cross-currency swap. That is actually we might be able to actually pick up a few interest savings here and there. So generally, if you want to look for some guidance, I guess we will be able to keep at this level, like 3.1% kind of level and hopefully can do better. Also want to highlight that earlier, I mentioned our fixed and floating rate debt, right? The ratio is now 65%. And that actually allowed us to enjoy any interest rate savings if the SGD rate actually continue to stay low and then if there's any chance of RMB further monetary easing coming this year. Unknown Analyst: Source of operating costs? Lintong Yan: Okay. Source of operating costs, right? So the team has actually been very focused on the cost measure, right? So a part of our operating costs actually come from revenue-linked expenses because if you look at our cost structure, we have a lot of expenses, including the property tax as well as some of the management fees are actually linked to our revenue. So this part, the decrease -- a portion of it is actually linked to our revenue decrease because we have actually some -- our Yuhuating has been divested. And on the operating front, we have actually seen significant savings in maintenance costs, right? So these are something that we continue to focus on and to actually save the NPI. Kin Leong Chan: Maybe I'll just add a little bit color on that. So the property cost savings, of course, we work indeed very hard actually with our property managers, who, of course, you know is our sponsor, right? So as Lintong said, if you take out the Yuhuating effect, right, if you look at same-store basis, the minus 3.7%, half of it is the revenue-related cost drivers. Some of the costs basically goes and correlates to the revenue levels. The other half, somewhat like, I would say, somewhat like fixed cost, but we have trimmed that down by quite a bit. And the first Q actually, we have made very, very double-digit sort of cuts to those fixed costs on a year-on-year basis. So on a combined basis, that's why you get this minus 3.7%. Xiuyi Ng: We have the next question from Terence Lee. Terence Lee: Terence Lee from UBS. If we look at Page 7, the 1Q year-on-year sales improvements, is there a way to just maybe talk through what would be like from the bottom of the list, like which sectors are more, I guess, worrisome or not performing that well? Kin Leong Chan: Okay. You're talking about trade categories that we may not have shown here. I would say usually, when this question is asked, last quarter, I would say fashion, but this quarter, fashion sort of surprised us a little bit. So the other category is the beauty category, the cosmetics. Again, I think last quarter, I did say within the beauty category about minus single digit, minus, I would say, maybe mid-single digits. But actually, this quarter also not -- it's negative, but it's not so bad, a little bit. I think you also can talk about EVs a little bit that's a big trend. Hong You: Correct. So I think from what we are seeing, the 3 categories that we see year-on-year drop, which is more on the slightly higher side is ranking them vehicle EV sales. And secondly is -- I think EV sales is also reflected in the nationwide consolidation number that was published a while ago. And I think leisure and entertainment also dropped. I think last year, we had a good movie and all that. This year, I think the movie hasn't been -- we haven't seen any big blockbusters, right? So I think that's that. And thirdly, I think home livings, we also -- but that's a very small trade to begin with. But home livings has also seen a little bit of decline year-on-year. I think these are the 3 main ones that we see drop. The rest is a bit more like a mixed bag. There are malls that do better. Also on fashion, I think Gerry mentioned, overall, we see a slight positive. But between more malls, we see differences, right? So some of the strong must do better. I think our [indiscernible] negative. So I think the rest I wouldn't be able to generalize too much, I think. Kin Leong Chan: I mean, in summary, I think this quarter, particularly the positive has more than the negatives. Terence Lee: Yes. I think it almost sounds like the negatives are not that negative broadly, like the range from slight negative to positive as it gets for Toys & Hobbies. Kin Leong Chan: We hope the trend continues. I don't want to call a trend, but this is 1 quarter, yes. Terence Lee: Okay. And next question, remind us of the RMB hedge policy again? And I guess what would be the effective hedge rate on this first quarter results? Kin Leong Chan: Okay. I'll turn that question to Lintong. So the hedge policy and... Terence Lee: FX hedge policy, sorry. Kin Leong Chan: You're talking about the income, right? Terence Lee: RMB to SGD? Lintong Yan: Okay. So we typically hedge -- we look at our RMB exposure and cash flow, right? We typically are forward looking at our upcoming distribution from China, right? We typically hedge about 75% to 90% and then probably 6 to 12 months ahead. So that actually really depends on the hedging cost because I mean, RMB and SGD depends on the tenure that might have some positive carry, which means the forward premium is in our favor. And sometimes the forward premium is actually quite expensive. So we actually look into these hedging costs to decide how much we hedge and for how long we hedge. But generally, it's about looking forward, right so 6 to 12 months and then hedge about 75% to 90%. So as you can see that actually RMB versus SGD recently has actually stabilized. That actually has helped us in terms of our hedging decision as well. Terence Lee: So just if you can help us make our job easier, what would be the effective rate for first quarter or even first half? Lintong Yan: You mean we hedging. Yes. So we hedged about 80% of our forward rate. So our rate hedge is about 5.4%, around that kind of level. Terence Lee: Okay. That's weaker than spot. Lintong Yan: Yes, because some of these hedges was actually done at the second half of last year and then some are actually done at the beginning of this year. So you can actually see that the spot rate has actually strengthened, especially after the [indiscernible], right? So actually towards the March, right, the RMB has actually reached, I think, [ 5.35 ] kind of level. So some of our hedges was actually done before that. Kin Leong Chan: Usually, 6 to 12 months, can do in 6 to 12 months. Terence Lee: Got it. And maybe just going back to the comment by Gerry about wanting to buy first before doing securitization. Just a question on the rationale, like why isn't this more so done at the CLI level? And I guess a little bit more relatedly, related to capital deployment, is there not more value you see in buying back your stock now? Kin Leong Chan: The first question, you were asking why is it not more with the CLI level? Terence Lee: Meaning to say like why -- I mean, if the plan was to so-called like buy or source for, let's say, malls in the market to buy, improve and sell, like why would this not be done at the CLI level? Like why would -- what is the strategic rationale for doing this at the CRCT level? Kin Leong Chan: Okay. Okay. Same strategy. Why CLI is not doing it and why CRCT is doing it? Is that the question? Terence Lee: Or rather, why would it be done at both levels? Kin Leong Chan: I think, first of all, I would say the objective and strategy for China-focused REIT will be very different from the objective and the strategy of global asset management or fund management platform, which CLI is trying to -- CLI is positioned for basically, right? So from CLI's perspective, I'm sure you have heard Paul and Chee Koon talk about it. It not only have China business, they got business basically across different jurisdictions. The asset allocate their business according to where it may bring them the best growth. So it may or may not be China. And in China, they may have different strategies than us. We are quite straightforward, right, because we are China focused. And China for us is Greater China, China, which means Mainland China, Hong Kong and Macao. These are the 3 places that we can look for assets. And we will portfolio reconstitute within these countries across asset class that we currently play in or we may in future, but not -- perhaps not immediate future to look at other asset class, right? So our acquisition, our divestment, our value add would therefore, be contained within China. So that's quite clear for us. I think the other thing that the relationship between us and the sponsor is that the sponsors have different strategies. But one thing that's certain is that they are supportive of our objective. And you will recall, we still have historical ROFRs with the sponsor, right? So when we are looking for assets that we -- assets to basically inject into the REIT, those assets are, of course, up for consideration together with third-party pipeline that we generate from [indiscernible], right? So that's in terms, I think, of the strategy. Second question is unit buyback, right, unit buyback. I think I addressed this in this manner, right? Of course, stock price, it's sort of volatile, sometimes it's down, sometimes it's up, right? And therefore, the trading yield present itself accordingly. Right now, our trading is about 7%. So in terms of capital allocation, right, for the same dollar, which we are using the same gearing headroom, we got to decide for ourselves whether we can find a deal that is basically accretive against the trading yield, right? And that's our ultimate test, right? We sold an asset only end of last year. You Hong is still working hard. Just now, I talked about the pipelines that we have assessed to see whether indeed we can find something that we can buy and add value. Of course, if you buy back our own stock, it could be immediate. But if you buy something that's an asset that's accretive, that means we are basically buying at a yield higher than our trading yield plus, as I said, we want to have some value add in there plus potential to improve on the assets that we buy in. That could actually prove to be a better proposition for the same unit of [indiscernible]. Xiuyi Ng: The next question is from [indiscernible]. Unknown Analyst: I have two questions from me. First, how do you see rental reversions for the Business Park assets trending for the rest of this year? And how is the leasing sentiment like on the ground? Second question is more on aggregate leverage. Was the increase in the total debt a temporary bump to pay out the FY '25 distributions? And what is the ceiling that you'll be comfortable with if you were to acquire an asset and fund it with debt? Kin Leong Chan: First question, I'll let You Hong take, then I'll comment on the second question. Hong You: Yes. On the reversion side, Business Park, I think we -- between assets, we see that since we are still the stronger one, although it also had slight negative this quarter, but the stress really comes from, I would say, Hangzhou. And the situation on the ground, I think we have shared before for the last couple of years, I think there were quite a bit of supply coming on board, but it has sort of I think the last bit of the supply should be already in, right, in that submarket per se. So I think within the submarket, we look at how the other people are doing. I think generally, we are looking at close to 70% already. We are also at slightly above 70%. So I think the kind of competition that we see probably will last a bit longer, but hopefully not that long. So for this year, I still expect that reversion to be stay within this kind of range level. But hopefully, by the time when all the supply glut have sort of been absorbed by the market, I think then we will see a more healthy situation going forward. Kin Leong Chan: On the leverage, indeed, yes, first Q is affected by the fact that we drew on some loans for distributions. So we do expect, over the next few quarters, some money to come back as we extract dividends from our assets in China. So that's something to look out for. In terms of for acquisition, what's our limit? I think generally speaking, yes, the S-REIT environment, although MAS guideline is 50%, most S-REITs will try to contain themselves within 45%, right? And I think that we are now about 41%. So different REITs have different level of gearings. Also a little bit -- we have to look at it a little bit with regards to the -- maybe the cost of debt as well. I think our ICR is still quite healthy, right, a good buffer above the 1.5x required by MAS. So I think generally speaking, our financial metrics still look quite stable, yes. So that will be how I think about basically the leverage that we can take on. Xiuyi Ng: The next question is from [ Joell ]. Unknown Analyst: I just have two questions. The first is regarding electricity prices. I noted from your AGM Q&A is more impacted by coal prices rather than oil prices. I believe coal prices is probably up about 15% higher year-to-date. So I'm just wondering what is CRCT doing? Any proactive actions to handle the higher electricity costs going forward? Kin Leong Chan: Okay. That's the first question. You Hong can take that. I think main thing is basically electricity trend in China as well as I think maybe you can talk about our ability to cut electricity consumption at the ground. Yes. Hong You: I think for the electricity price so far, based on our survey, it has not been affected by the Middle East situation. In China, generally, I think we have seen news that oil price, the gasoline price has gone up, but not the electricity. So I think the government also have -- would want to keep that stable for obvious reasons. So I think that's number one. I think for the ways to reduce consumption, I think this is -- has been always something that we have discussed and hopefully drive. Along -- over the years, I think we have also tapped on, [ for example ], the automation or data analytics to actually help our technicians to be able to drive the efficiency on the same chiller, same electricity level. Of course, the weather -- sometimes weather conditions fluctuate. So I think that can only help. But from our point of view, I think we do what we can in terms of equipping our technicians with smarter and better tools to analyze and to drive the unit rate down. The other thing I may just want to share a little bit that I think this is still [ probably ] coming. I mean we are trying to source our electricity, a portion of it from green renewable sources. In China, some of the cities, this has become available at a rate that's equivalent, not more expensive than the equivalent nongreen energy. So I would say so far, we have been sort of procuring a portion, I think, around slightly above 10% of our energy from the green sources. So I think this is something that we are also watching and experimenting without increasing our costs. Unknown Analyst: That's quite clear. My next question is regarding new leases versus renewed leases. Noted that roughly it's 40% new lease, 60% renewed lease across all your segments. Is there a preference? And also a follow-up on that, any incentives that you're giving on the ground? Kin Leong Chan: You Hong? Hong You: Sure. For retail, I think we would generally like to see a healthy level of renewals, right? It ranges between -- or rather new brands, I would say, right? New brands inject new vibrancies and interesting ideas to the malls. So I think between 40, 50 of new brands is actually quite common. We have seen before, right? In times that's a bit more challenging, of course, then we tend to renew more. But if we have a choice, we do want to get new brands in. That's retail. But for Business Park and Logistics, I think our preference is more sticky tenants, right? So I think generally, the pie will shrink to more fit, I would say, renew, right? So I think usually, we see that figure between 60 to 70 renewal, another 30 to 40 in the new tenants, I mean. Okay. Of course, we do what we can to drive up occupancy and rent. But I think generally, we are also watchful of not going over the line. So I think generally, our save on core, the rent free or -- basically, we do save on core market type of rent-free on incentives. It's quite typical that we have first 1 to 2 months that's for renovation and it could also be some of the market where it requires, it can be about 1 month of rent free that also happens, right? So I think that's something that we will do. Kin Leong Chan: And apart from incentive, I think what we want to do is to be responsive to the tenant needs, right? So in some situations where they need additional power, they need better transportation. We may upgrade power, we upgrade lease for them if the tenant is serious and a strong tenant, right? So these are the kind of things that we do take into consideration. Xiuyi Ng: We have a final question from Vijay. Vijay Natarajan: I have three quick questions. Maybe I'll take it one by one. Firstly, in terms of this Middle East conflict, have you seen any impacts to your portfolio of tenants? Is there any tenants who are exposed to energy, logistics, shipping, et cetera, in Business Parks, Logistics that you are -- that is facing some pressure. And from my understanding, China has a cash flow issue. Are you seeing in terms of rent collection, has this been improving and your rent collection is much more on time at this point of time compared to 1 year before? Kin Leong Chan: Okay. I think for the Middle East conflict, one thing that has really stand out for me is China seems to be quite well controlled in terms of the effect. Utilities, I think You Hong has covered. But that's really tip of the iceberg in terms of they are owning self-sufficiency. Supply chains are being disrupted. But by and large, what we hear in China is things are still available, right? And then in terms of businesses, direct businesses to our tenants, retail, there's actually no issues because just like in last year, when we talked about tariff war, most of our retailers, many of them are local buyers, local sellers, basically selling to local crowd, buying from local producers, right? And the international brands, they do not typically ship from Middle East. Middle East is not a merchandise producing area, right? So retail is not that big an issue. Business Parks, there are a handful who have businesses or sell particularly to Middle East, but that's not a big portion of their business. Nobody really went out of business because of that in our Business Parks. And in terms of Logistics, again, our logistics portfolio, maybe half of it service domestic distribution, right, half of it export facing that's in Shanghai, right? Again, not much to report in terms of disruption from Middle East because they don't have that much business going with Middle East, right? What we do say is second order impacts you cannot ignore, which is in our outlook slide, because petrochemicals, which come from Middle East are a feedstock to some manufacturing inputs for some of the factories in China, for example, plastics and so on and so forth, right? But as many economies and China watches would also inform even that China have a solution because actually, you can produce the same petrochemical with coal, right? It depends on how much in terms of cost of production, basically. But with the prices that the petrochemicals from oil is -- we are talking about, it's making the coal chemicals quite actually a good alternative. So economy and production base is as diversified as China. Actually, we had just one economist spoke to us yesterday. In fact, you would say that strategically it favors China to withstand the pressures that come from the Iranian war. So that's my take on it. Sorry, the second the arrears. No problem with arrears. Hong You: Yes. We don't see any major change in pattern in terms of arrears. Vijay Natarajan: Okay. My second and third question, okay, earlier, you touched upon acquisitions. Maybe can you touch upon which segments you would be looking at and what kind of yield benchmarks you would be looking at for potential acquisitions ahead? And third question is, is there a trend of retail tenants signing a slightly longer lease because I noticed your WALE going up a bit. I mean are the tenants trying to lock in the rents at these levels in the retail segment, especially? Kin Leong Chan: Your first two questions, I will answer. Maybe You Hong can take the last one. The type of assets we're looking at and then the new levels, okay? So actually, we spoke about it, the type of assets that we are looking at. Today, we have 3 asset classes, retail, business park and logistics. We are more focused on the more defensive part, which is retail, right? 70% of our portfolio is in retail. We look at the trends, retail have been more resilient, particularly our sort of our subset, which I call bread and butter, malls, right, not the luxury malls, but maybe more the middle market ones. We are looking more in terms of that segment. But that doesn't stop us from looking at other asset classes. For example, while business park in general are not doing so well, you would have because of the manufacturing drive in China, right, would have seen factories actually doing quite well. And on and off, there may be industrial properties that are not so much decentralized offices, but more of the R&D, more catering to actual production, right, that may be available for sale. Those if they are at the quality of our Xinsu portfolio, which have been very, very strong, right, certainly is something that we can look at. But as a priority, of course, we are -- I think we want to stick to where we add the most value, which is really retail, right? So that's one thing that I can share. The other thing in terms of yield, I think it's very simple. As a REIT, we want to look for something that is yield-accretive. Today, our trading yield is about 7%. That's one way that you look at it. The last deal that we sold for our retail mall, we sold it at NPI cap of about 6-plus percent. So definitely we want to beat those metrics, right, in order to basically, over time, improve the average yield of our assets. You Hong, you want to touch on the next question. Hong You: Yes. WALE, so I don't think we have -- okay. Indeed, some of the retailers do ask for longer locking for both -- I mean, trying to sort of see that the rent is rather favorable and reasonable and also secondly to have a reasonable period of recovery of their investments, right? But we have been more careful in not lock ourselves in if we deem that the rent is [indiscernible]. So I think that will protect us and give us the chance, of course, to go back in terms of negotiating rent on a higher side when the cycle is due. So I think we don't see a big trend in having to lock in very, very long leases, fair to say that. Kin Leong Chan: The bump you see in the first probably is the 2 anchors that we sort of [ resigned ]. Hong You: Yes. Yes. Correct. Correct. Xiuyi Ng: Thanks, Vijay. And thank you, everyone. Since we have no further questions, this concludes our session for today. Please feel free to reach out to me or my team if you have any questions. Thank you all, and have a good day. Kin Leong Chan: Thank you.
Ben Jenkins: Good morning, everyone. Thank you for joining us. There's obviously a lot to get through in the announcements today. So alongside the presentation, the Aura-Qoria team is going to be in the ground in Australia next week, meeting with as many of you as possible. In terms of the call today we have Peter, Tim, Ben and Crispin joining from Qoria alongside Brian from Aura. Everyone's going to be available with the line of Q&A at the end of this call. Hari is unfortunately, already in transit to Australia. But we do have some comments from him played shortly. So with that, Peter, I'll pass over to you to make a start. Peter Pawlowitsch: Thanks, Ben. And good morning, and thank you all for joining us. So today, we announced some changes to our merger arrangements with Aura. These changes reflected deliberate set of decisions by our respective boards to ensure that the combined group AXQ is positioned for long-term success in a rapidly evolving global technology landscape. We've announced that Aura secured binding commitments for an increased equity placement of USD 100 million. That's a significant increase from the original USD 75 million. And importantly, it's fully supported by existing Aura shareholders, demonstrating their confidence and strong conviction to the mission. Also it ensures that we have a strong balance sheet for the group on when the merger completes with only a modest dilution. We also announced today a new organizational structure, one designed to get the best out of the capabilities of the group, combining U.S.-based technology and growth leadership with Qoria's global market presence, regulatory expertise and customer footprint. Hari, Sujay and Brian have all agreed to continue in their current roles as CEO, Chairman and CFO, respectively, of Aura. And the group has been secured by the continued service of Tim to drive our ambition to be the global trusted name in online safety and Ben to support Brian as Australia's CFO. The Qoria Board is delighted to announce today's changes and continues to unanimously recommend the transaction. They ensure that Aura enters the ASX as a well-capitalized global platform, has the ability to execute through integration and invest in growth and is unconstrained in this area of significant technological change. We believe this structure, both capital and ownership gives shareholders the best opportunity to participate in the long-term value creation. Regretfully, Hari is currently on a plane coming to Australia to meet with investors. We wish he could have joined us on this call and has recorded a few comments. Tim, can you please roll the play? Timothy Levy: Sure. Hari Ravichandran: Hello, everyone. I'm really disappointed. I cannot be on this call live as I'm on my way to Australia to meet our investors and the Qoria team. I'm extremely excited and looking forward to meeting with the investors and engaging with all of you over the course of next week. What we are building here is something very significant. This is a global platform for digital safety and security at a time when the problem set is accelerating, it's not slowing down. The change announced today will reflect a very thoughtful and conscious decision to prioritize strength. The markets have moved, everyone in global SaaS knows that. We want to position Aura to win with both capital and capability. Sujay and I are excited to get behind the merger and commit a further $25 million to its success on top of our previous investments. The leadership structure here also reflects our commitment with me and Sujay continuing. My role here is to bring the businesses together and ensure that we hit our numbers and to drive global innovation, replatforming and growth. I'm also really looking forward to continuing my work with Tim Levy, who will support me at Aura through a leading Aura Alpha. Aura Alpha is a critical part of our strategy. This is how we will build new growth vectors across partnerships, markets and corporate development. This is not a site initiative. It focuses Tim on his unique vision, his global relationships and his skill set. And this is how we'll ensure that we stay ahead of the market as it evolves. We now have the platform, the leadership and the capital to build a global category leader. Again, I'm very sorry I'm not live on this call. However, I'm sure I'll get some baseline with many of you next week. With that, I'd like to now hand it over to Tim, Brian and Ben to deliver our results. Thank you all. Timothy Levy: Thanks, Hari. Thanks, Peter. That's great. So what I'll do now is I'll do a highlights of the Qoria, Aura and the group, and then I'll hand over to Brian DeCenzo who's going to run through Aura's results, which are fairly impressive. And then we'll cover off our typical Qoria results operational update with Crispin and Ben and then a brief Q&A at the end. So I guess if I was to summarize this slide, which is becoming increasingly complex. The overall thematic here is that the Qoria business, if you look through FX movements for the falling U.S. dollar and the transactional costs that we've been spending is actually performing extremely strongly. In the March quarter, it was probably a surprise to all of us. I think we outperformed analysts' expectations in terms of ARR added and net ARR growth at 49% improvement on what we did in the equivalent period last year, so that was pretty remarkable and not just in K-12. And one real highlight actually, which I do want to call out now is the K12 business in the U.K. that's been battling some headwinds for a while, particularly around funding and the lack of product. Now both of those things seem to be solving themselves. And so we had over a 60% PCP improvement in the performance of the U.K. operation in the March quarter. So it was tremendous. But really the But really the standout clearly continued to be still Qustodio's $2.7 million of ARR, which is more than double what they did in the equivalent period last year. So Victoria and the team are doing an outstanding job there with very modest increases in investments. On a constant currency basis, we ended at -- we would have ended at $169 million of recurring revenue, which would have been beyond everybody's expectations, I feel. But of course, we were buffeted by FX. The FX in our -- when we started the year was $0.64, that is $0.72 now. Now turning to Aura, if I can speak just briefly for Brian. Let me speak with admiration, added $26 million of recurring revenue in the quarter, 40% up versus the prior period with less marketing spend, improved AOV, improved CAC. It's an astonishing result. Just to remind everybody, when we started talking to Aura, I think they had $180 million or thereabout of recurring revenue. This is in October, November last year, ended the year with $216 million and now at $241 million. That's astonishing. And the businesses in combination now have $345 million in ARR. And if you extrapolate the March result, you get to a very big number. And remember, for those people that know Qoria well, the June quarter is our biggest period of growth. Last June, we added $14 million recurring revenue, around $10 million we added in the June quarter. If we replicate that, then a very big number will appear on the right-hand side of the screen in July. So all of those numbers are really, really strong. The unit economics of Aura in particular, I would like you to note because they're the things that give us the confidence as to why this deal is the right thing for our shareholders to do. So that being said, I might hand over to Brian. Brian DeCenzo: Yes. Thanks, Tim. So as Tim alluded to, very pleased to report that the performance that we had indicated through February on the call that we had about a month ago at this point, continued through the end of March. So GAAP revenue or statutory revenue was $59 million for the quarter with ARR ending at $241.5 million. That represents 31% up year-over-year for both metrics. Again, sort of reiterating some of the themes that we talked about at that March session, a lot of this has to do with strong unit economics in our D2C business, not only the CAC that Tim talked about, but really being able to mitigate the burn on account of the sales within our D2C business and then the deliberate upsell motions that we were able to employ to drive incremental AOV. Adjusted EBITDA for the quarter was negative AUD 14.3 million. So that was an improvement of AUD 1.1 million year-over-year. And while that is an improvement over last year, we would note that it does not reflect the full run rate impact of the cost actions that we executed in February, which we discussed on that call about a month ago or any additional planned cost savings, including the performance marketing spend pullback that we've indicated to the market we will do in the back half of the year. So just to summarize, I think these results reflect our ability to achieve the targets that we've set out and very much as we think about the performance in the first quarter and as we roll forward in the year, aligned with the prior communication that on a combined basis, we will be free cash flow positive from the time of closing through the end of 2026. On the next slide, if you turn there -- thank you. So as Tim noted, what we wanted to highlight here was when we first spoke with the market in February around this transaction, we indicated a commitment, again, free cash flow positive on a combined basis from the time of closing through the end of the year. And one of the ways that we would get there was through improved efficiency in our performance marketing spend. And so what we want to highlight here is we were able to both bring CAC down and then on account of the reduction in CAC and that improved AOV that I referred to on the prior page, we were able to see a very dramatic improvement, not only in CAC, but also in the overall burn rate through the first quarter at that $5 million number. If you flip to the next 2 pages, Tim, I also wanted to provide the market just a roll forward of the metrics that we've shared in prior sessions, so people can get a sense of how everything is trending. Obviously, as we talked about, we'll be in front of investors over the coming days and happy to answer any further questions. So with that, I'll turn it back to Tim. Timothy Levy: Thanks, Brian. So yes, I'll quickly skip through the quarter highlights. Obviously, I'm sure there are going to be a lot of questions and thorough side of things is probably less interesting, but I'll go through them. At the end of the year, actually, it should be 31 million children now. So we've added a further 1 million students since we last reported 10 million parents. All of the kind of operational metrics within Qoria are performing really well. Growth within the regions, U.S. is growing north of 26%. We expect to improve that through June. Qustodio is a standout, 30%. I think we're talking at the beginning of the year, 30% growth, and that's comfortably doing that. EMEA is the U.K. and now operation in Spain called Qoria Spain that's starting to target international schools globally and now recently in the Middle East. It's subdued at 6%, but you'll see that really picking up, particularly as we're launching this Qoria Connect product, the unified Qoria K12 platform is literally rolling out now. We've got customers using it now. So this year, I think I've said many times, for Qoria, it's about retention in the U.K. and next year, it's about growth. and we're seeing some really, really positive signs. The team there are doing outstanding work. And as I said, for now about a year, Australia is our best-performing K12 market with the community proposition of selling parental controls through schools in the Australian private school system. It's an outstanding performance. I think their PCP performance was like 80% above what they did in the prior year. That's just extraordinary growth out of this market here. So the contributors to ARR, obviously, Qustodio is a standout there at $2.7 million. Remember, that's net of churn, so that's a fabulous result. There's a modest amount of price optimization in that. They run a number of price optimization trials in January, February. They launched those at the back end of February. They've had to pull them back a bit tweak because it was elevating churn, but you will definitely see a flow through the year, particularly in that key renewal period in back-to-school and Christmas period. So there's something like a 5%, possibly 10% natural growth rate, net dollar retention and price increases coming to that business. So that's really exciting. And then the K12, as I said, a big contribution from new, increasingly strong contribution from existing cross-sells and upsells. I think our target was 33% or 34% contribution of growth through existing customers, and we're easily outperforming that. So Crispin and his team are doing a fantastic job. Obviously, the big story is the big red line on the right-hand side, we are being buffeted by the FX movement of the U.S. dollar. But the underlying business is really strong. And fortunately, for us, from July, we'll be reporting in U.S. dollars. So that will become much less of a problem for us and much less of an issue to explain to analysts. K12, I mean the numbers here speak for themselves. The real highlight for us, given our focus on that back to -- so the June quarter in the U.S. is the pipeline. $40 million of pipeline with a weighted value of $19 million. It is the highest I think we've ever had or equivalent to the highest that we had last year. We're set up really well. And of course, we have a number of [ whales ] that are outside that pipeline that give us a lot of confidence to outperform. So feeling really good about that. I think I touched on all these metrics, everything else is pretty stable. Average sales order, average price per unit, they really -- the June quarter is a really important period for us. So you'll see a turn in that chart down the bottom, average sales price per order, you'll see that click up in the June quarter again, as you saw last year. Qustodio performing on all metrics, profitable business growing really well. As I said, there's been price optimizations. We've given Victoria an extra 30%, 40% in marketing spend, and she's spending it very, very wisely. She's -- as compared to the -- and I'm not being disparaging but the Qustodio business is selling parental controls, they have the benefit of a positive cash burn in marketing. And so we've told Victoria, you can spend up to that burn and no more. So basically manage your cash flow and grow as hard as you can. And she is doing very well. School promotions continuing to grow. The old community stuff that we spoke about is going really well, 540 districts now. So I think we're now about 18% of our districts on that program, which is equivalent to 1.3 million parents. So the parents of 1.3 million students are being promoted Qustodio. That's pretty exciting. We're still getting those schools that launched our program north of 20% taking up the freemium offer and of those 1% taking up the premium offer. We're launching monthly subscriptions to those customers literally this quarter actually. So we're now starting to get into the cadence of promoting and seeing how we can monetize that pretty big audience. So stay tuned. Okay. It's obviously very, very cyclical. I would urge investors to not read too much into our December quarter or March quarter -- sorry, the March quarter or June quarter cash flows because really the key selling period for us, the key is June and the cash comes in, in that December half. 65% of our growth is typically in the June quarter. So I should be on our ARR performance for June. And you can see in this chart that the business is growing every year, and there's a high cyclicality now in our numbers. These charts are hard to interpret given the FX movements and what we've tried to do is show that our net ARR is growing, which is the -- on the bottom chart is the green box, the green shaded area. And the column on the right-hand side is our FX adjusted underlying cost structure. And you can see that there is -- it's moderated now with these -- we announced some changes in the last couple of months. We're pulling some costs out of the business, essentially reducing new hires and replacements to make sure that any operational cost expansion in our business is covered by cost outs or any delays in cash flows are similarly covered by very careful spending. But I'll let Ben talk more about that at the end of this deck. Over to you, Ben. Ben Jenkins: Thanks Tim. I'll just touch on a couple of things here quickly so that we can get into questions sooner rather than later. One of the main things that people will notice is the customer collections, the cash receipts are only slightly up year-on-year. Tim has touched on the seasonality of that. The December quarter is what feeds the March quarter receipts, so December sales and the December quarter is -- the U.S. is about 5% of its business in that quarter. And so it's more about Australia and New Zealand. So it's very hard to shift the March cash flows. But as noted here, the U.K. had a good quarter. That was largely in the month of March. So very little collections, if any, related to that in the March quarter, and that will flow through to a good growth in year-on-year comparisons for cash collections in the June quarter. On to a little bit more of the detail around the costs. Obviously, you can see direct costs in the quarter were up significantly. There's 2 things at play there. December quarter was down. It's just timing of cash flow payments falling into January. So some of that related to December. But also there's an annual billing cycle for some of the Google costs and that occurs at the end of November, invoiced in December, paid in the March quarter. So you'll see the direct costs come back down into line with the June, September quarter from last year. There's nothing structural that's changing that spend to be up on an annualized basis. It's a little bit in line with growth in students, but it's not linear. So we do get economic benefits there as we grow. Marketing costs are obviously up year-on-year, but as we flagged in the December quarter would be down from December, which is one of the biggest spending periods. The June quarter should be a similar number and staff costs well under control, some changes made during the March quarter that we announced as part of the half year results. So we've taken some cost out of the business, a slowdown on recruitment, and we've got that well under control, fixed other down as well and leases down as well. So overall, costs very much under control. And if you project that forward with the growth in ARR that Tim is talking about in the June quarter, you'll be able to see the growth in cash flows and cash generation over that period. So very comfortable with where we're at the moment, got line of sight through to July where the cash starts to flow strongly again and comfortable that the June quarter will significantly outperform the March quarter in terms of free cash flow. That's probably all I'll cover on that and happy to jump into questions there. Unknown Executive: We can. Ben Jenkins: Thanks a lot. We have some restrictions in place given around what we answer given the scheme booklet publication late May, early June. However, that being said, happy for you to ask whatever is top of mind around the update today. And if we're restricted from answering it, we'll just take it on notice and address later on. So with that, I think we'll go to Lindsay for our first question. Lindsay Bettiol: I think like probably today's results, there's kind of 3 parts to it. So maybe like first question just on the stand-alone Qoria business. Your pipeline is $44 million and your weighted pipeline is $19 million, which more or less is the exact same numbers you printed this quarter last year. So like how should we think about the June quarter in terms of -- if I'm just taking the pipeline as a gauge, it doesn't look like you're going to have much improvement year-over-year in the June quarter. Could you just maybe talk to that and explain where I'm not wrong, please? Timothy Levy: Crispin, you want to take that? Crispin Swan: Yes. So it is the biggest pipeline we've had, as you correctly state marginally. Yes. So from the North American market, as we know, it's the biggest selling period, and they are on track to have their largest ever quarter, Lindsay. We've also -- I don't know if you remember, we changed the structure of the team with an individual call Adam leading that team recently. And he's really implemented a lot of additional focus on deal management. So we're seeing extremely strong conversion ratios at this point in time as well. And as an example, we've got 30 deals in the pipeline with over 40,000 students each, which represents 2.5 million students with a [ fee ] of $350,000. So it will be our biggest ever quarter in the U.S. And then if you add the U.K. on top of that, as Tim said, they've had a really strong performance. They've essentially hit their annual budget year-to-date with 1 quarter to go and are projecting a strong Q4 as well and similarly for Australia. So all in all, I'm incredibly confident where we're at and the pipeline is definitely sufficient for us to have -- if you're focusing on the U.S., our biggest ever quarter. Lindsay Bettiol: Okay. So summary is absolute dollars is the same, but they're probably higher quality dollars. Crispin Swan: Yes. Lindsay Bettiol: Very good. Okay. Maybe a question on that. You've given us some updated figures versus, say, the Feb update. I look at the CAC that you've given for the first quarter, it's $169 in the D2C business. It was $173, I think, in the last update you gave, but that was only weeks ago. So just backsolving it implies like the CAC has collapsed in March. So one, like is that math correct? And two, could you just talk to what you're seeing on the CAC front, please, in the D2C business? Brian DeCenzo: Yes, absolutely. So yes, that math is correct. We saw some really favorable CACs towards the last few weeks of March. The prior update that we had given was only through the February month. So we had a full another month of performance, and it was a favorable month from a CAC standpoint. Look, it's a dynamic market. And so you look at what channels you're in, who is bidding on words in certain of those channels at different rates at different points in time. And then ultimately, there's the end market demand that exists at any point in time. And so based on those combination of factors, I think we were able to meet demand at a really attractive rate over the course of the month of March. Lindsay Bettiol: Okay. Brilliant. And I'll sneak in a third question just on the merger update. I think like probably one of the biggest critiques on the proposed merger I got is that it didn't make a lot of sense for what is essentially a U.S. business to run out of Perth. So you've obviously changed that. But my question is like is there not maybe an element of overcorrecting here? I mean Qoria is still going to be 1/3 of the combined business. And it just feels like -- I guess my question is who runs the legacy Qoria business inside the combined entity with both Tim and stepping back a bit. Timothy Levy: I'll take that one. So the structure, not everyone on this call will understand kind of the organizational structure of our businesses. But Crispin, who you see here on the call, who runs K12, he'll be reporting to Hari in the structure. So that's signaling the importance, the critical importance of K12 in this broader strategy. Victoria, who runs our Qustodio business will fall under Tom Clayton, who runs is the COO, current COO of Aura. And so he will essentially be looking after all of the consumer-facing revenue. And then our kind of functional product and engineering kind of security people and finance people will fall under their functional head. So in many ways, it's BAU to Crispin in particular, he's running his team. They're responsible end-to-end for revenue. And he has a product person, Nabil, and he has an engineering person, Rick, that will keep doing the things that he needs done, with their new reporting line. So but below the surface, not much difference. And the message internally is constantly reiterated, we're hitting our numbers, road maps aren't changing, plans aren't changing, hit your numbers, hit your numbers, don't break, [ it is not broken ]. Ben Jenkins: Thanks Lindsay. Owen, over to you. Owen Humphries: A quick question for me. Just we're getting to know the Aura business a bit better. I'm keen to learn more around the seasonality of that business. A critique this morning has been around the Jan and Feb run rate when you gave an update in March, running at around $11 million per month for Aura and then stepped down to, call it, $3 million for the month of March. Just keen to understand a little bit around seasonality of that business. What was March last year? Brian DeCenzo: I don't have those numbers. I don't have the March numbers at my fingertips. Ben Jenkins: Yes. Year-on-year ARR added is 39% up. So it's significantly up. Growth was around about $16 million in the March quarter last year. So it's not all seasonality. It's a really good quarter from the Aura business. Owen Humphries: So I guess the concern in the market has been around run rating a March number -- the March net add number? Brian DeCenzo: Yes. So there's a high degree of recurrence in that number. The -- when you look at the business, we have the big step up in January on the employee benefit side. And in the -- on the consumer side, there does tend to be some seasonality in the business. It actually tends to correlate a little bit more with a couple of things. One is the holiday period when you have people getting new devices and wanting to bring protection on those devices. You tend to see in the U.S. actually in the March and early April tax quarters around tax season with tax day being April 15, so anticipation of people getting their return checks. And then there are certain historical events that have driven excess demand. We've talked about those in prior forums, in particular, data breaches and so what you'll see is you'll see a little bit not necessarily on a new cash basis, but on a P&L overall basis, including renewal, you'll see slight bumps in late April and then a bigger bump in sort of the August, September period every year because of a prior event in 2024, if I'm understanding your question the right way. Crispin Swan: Yes. I think if I can jump in. This chart here, I think, shows you what you need to see, which is the EB business has an annual step change in the first quarter of the year, and that's magical, like it just -- they sell new logos and then they do essentially upselling within existing employers. That's a great business. So that's probably what the question is actually -- answering the question that you received. I think that's the answer to it, which is the March comp there was definitely step changes in that kind of more enterprise motion of the EB channel. And then the light blue is the typical consumer model. There is cyclicality far less than in the Family Safety business. But you also see in that Q1 '25, a jump that I think it was Q1 '25 when there was that big data leak in the U.S. And so there's also a consumer bump in that period as well. But they're the 2 cycles that flow in. Owen Humphries: And I guess a question for you guys then is just to understand the confidence of ARR growth. I understand the Qoria side of the growth in ARR in the second quarter of the calendar year. Maybe, Brian, if you can give us an indication of the expectations of where ARR growth would lie in the second quarter? Brian DeCenzo: Yes. Look, we continue -- so we grew at 31% year-over-year through the first quarter, as we talked about. We wouldn't necessarily view that as being the year-over-year run rate going forward. But we -- I think what we would say is we anticipate it growing sufficient to achieve the objectives that we put out to the market in terms of growing 20% on a combined basis year-over-year. Owen Humphries: So that is rolled over on the same ARR in the second quarter of last year, I'm not sure of the nuances in the D2C business. I'm guessing you'd expect to exceed that in the second quarter this year? Brian DeCenzo: Yes. So there were some issues around, frankly, Google algorithm changes and then also the shift to AI search that occurred in the second quarter of last year that I think we don't expect to see those same types of headwinds this year. Ben Jenkins: Sorry, I just realized you were asking about the March month. But the March quarter last year was $18.5 million. The March month last year was $1 million. So the $3.5 million of written this year is significantly up on last year as well. [indiscernible] over to you. Unknown Analyst: Just a couple of questions from me. Just with the new products flagged with Aura Enterprise, for example, can you just talk through how big the potential is there, sort of when that should be contributing to revenue? And then more broadly, just the road map and the opportunity across the 1.75 million subscribers that you've got and sort of what you think you can do with that over time? Brian DeCenzo: The first question, James, specifically relates to the Aura MSP business, if you will? Unknown Analyst: Yes. Yes, that's right. Brian DeCenzo: Yes. So that business is early days. We just moved the product out of beta. It's a sales channel that we find very compelling from a sales dynamic standpoint because it's a very large sales channel in the MSP network. We've seen estimates 30,000 MSPs plus in the United States alone. And then there's a multiplier effect underneath those 30,000 MSPs where they'll each have a number of small business clients who will each have a number of endpoints for each one of their SMB customers that are addressable. And it tends to be a very levered sales channel because these 30,000 MSPs, many of them don't compete with one another because they don't cover either the same industry or in the same geography. But they do tend to get together at large sort of conference-type events and sort of compare notes. So we find that to be a very interesting and levered sales channel when you can tap something that really appeals to that customer base. Again, early days, the feedback and the early returns have been good. It's growing off a base of 0. So I'd say it would take a period of time before it's going to be a material contributor. I think we'll start to see more momentum in that next year and then really start to see some ramp in sort of '28 and '29. Unknown Analyst: Excellent. And then second part of the question, just in terms of monetizing the existing user base over time with additional functionality and the like, maybe things like pace or locations and these type of things. Brian DeCenzo: Yes. Look, I think I'd say core to the discussion between the 2 of us, say Qoria and Aura is how do we deliver more value to the customer in the first instance based on the things that we each bring to the table today. And so as we go through and think about the back half of the year operating as a combined entity, we're thinking a lot about how to deliver value across the 2 different customer bases, one to the other, how do you take a Qustodio customer as an example, and make them an Aura customer. And then as we go forward, I think we're going to be very deliberate in terms of adding new products and features that they can deliver value to the existing customer base as well as new customers and also be very thoughtful about the way that we merchandise new product features, I'd say, in line with the merchandising that we have demonstrated with our upsell motion over the past couple of 6 months or so as we've talked about with the boost in AOV. I don't know, Tim, would you add anything to that? Timothy Levy: I think you answered it perfectly. Unknown Analyst: No, that's great. That all makes sense. Maybe just a couple more. Just on the rationale for taking the extra cash. I suppose the merged group is slated to be breakeven on completion. So strategically, is there a pathway to accelerating some strategic ambitions or just the thinking on taking that cash given the breakeven? Brian DeCenzo: Yes. So the way I would characterize it is given the dynamic operating environment that I think we all find ourselves in, we feel it's prudent from a balance sheet standpoint to capitalize ourselves in that way. Unknown Analyst: Okay. Great. And then just last one, I think you might have touched on it with Owen's question a little bit. But just with the ARR growth ambition of 20% this year and the performance marketing rolling off, I suppose you're growing at 28% currently, and we're 1/4 of the way through the year. So I suppose how do you get visibility in terms of what the growth does sort of post deal completion with that performance marketing reduction? Brian DeCenzo: Yes. So again, I didn't fully grasp Owen's question while he was asking it. And I think one of the things to highlight that's sort of embedded in the ARR growth year-over-year is the step-up, as I think Tim mentioned, around our employee benefits business that happens really in January and then a little bit of an incremental effect in February. Because of -- there is ballast from that business that continues through the course of the year on a year-over-year basis. So that gives us some visibility into the overall ARR growth. And then the remaining visibility that we have is it's very formulaic the way that we think about modeling out spend versus return in the D2C business and ensuring that we spend in order to be able to hit certain top line performance targets that we have. Unknown Analyst: Great. And maybe just last one, I'm not sure if we touched on it during the presentation, I dropped off. Just in terms of time line and catalysts and I suppose what we can expect to hear out of the company forward over the next 6 months? Brian DeCenzo: Yes. So in the first instance, I think the -- we have the deal process to get through. We've highlighted the time line to get through that process. So you'll be hearing a lot from us, frankly, through a regulatory lens over the course of the next 2 months, scheme booklet, et cetera, which will be published. And so you move forward with that. In terms of other announcements, we will be obviously having the Qoria fourth quarter announcements at some point in July, I would assume. And at that point, I think we'll have more updates, obviously, on the deal process, which should be near hopefully completion as well as incremental actions that we've taken to sort of put the business in the position what we've indicated to the market we will get it in. Ben Jenkins: Wei-Weng, go ahead. Wei-Weng Chen: I guess one of the announcements today was the creation of Aura Alpha, which is, I guess, a strategic sort of corporate dev-type division. Given the near-term sort of post-merger is very much about driving the path to positive free cash flow. Wondering what the near term looks like for that division? Timothy Levy: Yes, that's a good question. Thanks for that. There's seems to be things that we can -- we have to do actually that unlocks. And that when you're busy -- and we've been through this, Crispin and I have been tortured by a unification process that's been running way too long, probably 4 years. You don't get to do them when you're in BAU or the grind of unifying businesses. So what Hari wants me to do is to not get distracted by the day-to-day operations, hitting quarterly numbers, restructuring and so on and focus on those things that unlock value and not on the quarterly results, but unlock value in 2 or 3-year horizons. Some of those, of course, are going to be corporate, but they don't have to be. Some of those will definitely be partnerships. A lot of that is in relation to the work that I've been doing in a sense,, part time in advocacy, government relations, competition law reform, safety law reform, things that are really starting to change. One -- something that came up today is not -- I wouldn't claim in any respect that I or Qoria drove this, but there is this push for digital safety globally, and that's now manifested in California with an obligation for schools to limit screen time. And that's everything we've been talking about for 10 years in our business, and now that's coming to law in California. And who is better placed to organize to respond to that opportunity or that challenge than us with the parental control tools we have with the Octopus acquisition that allows us to measure time, use of on school devices, on school and other apps, like it's such an opportunity, and we're in the right place at the right time. So my job is to look for those opportunities and where I can internally or externally, make sure that we're pursuing them. We're already in discussions and have been prior to this deal, but since the deal was announced, we've opened up some new discussions with some really interesting strategic partnerships. So look, there is -- my problem actually is there's too much opportunity, not too little. As this business comes together and we get the confidence of the capital market, so our cost of capital comes down, then I think there's probably more corporate things that we can do. But for now, look, there's some really interesting stuff that I can do in my day-to-day and partnerships that will add a lot of value, I think, pretty quickly. So look, that's a stay tuned thing, but I'm hoping to very regularly update the market on that progress. Wei-Weng Chen: Yes, cool. And there's been, I guess, a few changes to the structure of the deal announced today. At the time of the announcement, I guess -- would it be correct to say, firstly, that you had no intention for, I guess, your announcement to be in negotiation, but it seems like you've taken on some feedback and kind of obviously restructured things in what I view as kind of a pretty logical manner. But I guess is the work now on, I guess, negotiating the structure in terms of the deal now kind of over and now it's just all about just kind of executing on the deal? Crispin Swan: Do you want to take that? Peter Pawlowitsch: Yes. So it wasn't an intention to have that, but a lot has changed since January, we're finalizing this what's happened with Claude AI, what you can now do from a development point of view and the AI stuff coming through is a dramatic change. And I think what we want to be known as a dynamic organization that adapts to what's happening to the market quickly. So there's a factor of that tied into it. We're not -- right here today, we're not expecting other changes. And we think we've got the structure that can handle that dynamism for the next period of time. So we're confident with that. And now it's just let's get this thing done and execute as quickly as we can. We put our timetable today. Obviously, some of these changes take a few weeks, but we're pushing [indiscernible] to get it done as quickly as we can and hit that strong growth. Wei-Weng Chen: Yes. And then just one more, just, I guess, to follow up on a prior question. The upsized raise, the $25 million, is that additive to your prior net cash guidance of $65 million to $70 million post transaction? Or -- and I guess, if not, does this reflect potentially higher-than-expected deal costs or... Brian DeCenzo: It is additive to the anticipated net cash position. Ben Jenkins: Possibly to be higher, we're still tracking in line with what we're expecting originally. So strong net cash position is the -- I guess, the outcome of the higher placement. Owen has a followup question. Owen Humphries: Yes. Just hitting directly on that, can you guys give an indicative guidance on -- or an update or reiteration around what the cash balance will be post transaction, noting that your guidance is free cash flow positive in the second half or July or close in July to December. So what the cash balance would be and then the undrawn debt facility? Brian DeCenzo: The cash balance at the time of the transaction, like in pro forma for day 1? Owen Humphries: Yes. Brian DeCenzo: Yes. So I would say that is still moving around on the basis of, I'd say, balance sheet management with respect to the various debt facilities that are in place. But we're currently anticipating somewhere in the order of magnitude of net cash of $20 million. Owen Humphries: Which is? Peter Pawlowitsch: At the time of merger, we said [ 0.5 negative ] so plus 25... Ben Jenkins: I've got a written question come through. So on today's announcement, the additional funds from the Aura founders, a figure of $0.40 was mentioned. I'm unclear as to what the jargon means. Will Qoria's shareholders still receive 1 AXQ share for average 17.2 Qoria shares? Unknown Executive: Yes, they will. There's no change to the relative valuation of the merger still a 35-65 split preplacement money. So the 17.2 exchange ratio that was disclosed when we originally announced deal still holds. Ben Jenkins: Awesome. I think that's all the questions I can see in the queue. Lindsay just put hand up actually. Lindsay Bettiol: Yes, I might just ask a third way on the balance sheet piece. So like rather than looking at it from a net debt perspective, just think about like the available liquidity. So you're going to raise $100 million, you have a debt facility of $100 million. Could you just remind us again like what the plans are in terms of existing debt facilities and like how much liquidity you're thinking you're going to have on day 1 post merger completion, please? Brian DeCenzo: Yes. So the anticipation is as quickly as practicable to consolidate all forms of debt that we choose to have outstanding into the new facility with the Banc of California. Again, as you highlighted, that would be a $100 million facility. And so I guess the math on that liquidity-wise would be we'd have, let's call it, $80 million drawn and $20 million of cash, so about $40 million of liquidity. $20 million of net cash. So $100 million of cash total and an additional $20 million of liquidity from the facility. Ben Jenkins: Tim, I'll pass back to you for closing remarks. Timothy Levy: Yes, cool. Thank you. Look, so this might be my last time closing one of these sessions. So first, I'd like to say thanks for everybody for supporting us to where we've got to. I'm very excited about this merger. I guess if I could position the bringing together these businesses and the most recent changes, what we're trying to do here is concentrate on setting up something that is globally significant. And the moves of the last announced today are really about setting this company up for success to tackle that immense opportunity with a heightened focus on the speed of pace of change in valuations, [indiscernible] and so on. So setting the organization up with the right division of labor with the right focus on engineering capability, where our revenue is based in the U.S., but also having an eye to the future with the role of Aura Alpha, setting up the business with the right capital structure, taking advantage of the extraordinary network of connections that the Aura team have, which is something I'm incredibly excited about. And so yes, that's what this whole thing is about is not creating a nice little business that's growing and making a little bit of profits, but to solving a global challenge and doing so in a really big way. And that's really the underlying message. And one final thing I'd add is the Aura leadership team are here with us in Perth. The senior leadership team of Aura are going to be in Sydney talking to investors next week. So please find the time to speak to them and be as excited about what we're creating. I'm sure we will be loving that process. Thanks for your time, everybody. I'll see you all very soon.
Operator: Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Westport's Fourth Quarter 2025 Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. At this time, I would like to turn the conference over to Ms. Ashley Nuell. Ashley Nuell: Thank you. Good morning, everyone. Welcome to Westport Fuel Systems' conference call regarding its fourth quarter and full year 2025 financial and operating results. This call is being held to coincide with the press release containing Westport's financial results that were issued yesterday after market close. On today's call, speaking on behalf of Westport will be Chief Executive Officer and Director, Daniel Sceli; and Chief Financial Officer, Elizabeth Owens. You are reminded that certain statements made on this conference call and our responses to certain questions may constitute forward-looking statements within the meaning of the U.S. and applicable Canadian securities laws, and as such, forward-looking statements are made based on our current expectations and involve certain risks and uncertainties. With that, I'll turn the call over to you, Dan. Daniel Sceli: Thank you, Ashley, and good morning, everyone. I want to begin by addressing recent events, and we appreciate the patience and support of our shareholders as we work through our recent cybersecurity incident. Our priority was to ensure the integrity of our IT systems, business continuity and financial reporting, and we are pleased to confirm that this review has been successfully completed. With this behind us, we're looking forward to executing on our strategy and delivering on the next phase of our business objectives. Turning to our financial results. The past year has been a defining one for Westport, marked by the successful divestiture of our light-duty business, the recent receipt of a $6.5 million payment and further strengthened by Cespira's agreement with a leading OEM to manufacture and deliver HPDI components for a truck trial assessing the future commercialization. These accomplishments, combined with ending the year with over $27 million in cash and very low debt reflect the meaningful progress we have made in sharpening our strategic focus and building a stronger company. The global heavy-duty transportation market is increasingly recognizing natural gas as a practical lower emission solution available today. This is evidenced by Volvo's recent milestone of delivering more than 10,000 natural gas trucks on the road, underscoring the accelerating adoption of Cespira's HPDI fuel system technology and validates the strategic direction we have taken. From a market perspective, the U.K. leads to the adoption of HPDI powered LNG trucks, followed by Germany, Sweden, the Netherlands, Norway and France. Emerging gas markets such as India and Latin America are also gaining momentum with volumes seeing steady growth. When we introduced our proprietary CNG fuel storage and delivery system several months ago, we emphasized its potential to significantly expand our addressable market, particularly in North America. Development has progressed well, and our confidence in the commercial opportunity continues to build. We look forward to showcasing this solution at the upcoming Advanced Clean Transportation Expo, ACT, where we will have the opportunity to show up our technology to industry partners and customers. By integrating advanced high-pressure CNG storage with Cespira's field-proven HPDI fuel system, we match or exceed the performance and efficiency expected from diesel engines with compelling economics in markets where CNG is the natural choice like North America. We believe this innovation meaningfully enables Westport and Cespira to capture new opportunities as we move into field testing. Our GFI brand through our high-pressure controls business has also delivered important operational milestones. The opening of [ our China facility is one ] of the fastest growing hydrogen markets, and in Canada represents a step in localizing manufacturing, reducing costs and improving competitiveness. As the transportation industry continues to balance economic realities with sustainability objectives, we are confident that alternative fuel systems, including Cespira's HPDI technology and our high-pressure components provide real-world solutions that deliver both performance and affordability. With the completion of our strategic transition and only a few milestones remaining, a growing market validation of Cespira's expansion, a path to address the North American market and a clear strategic focus. Westport is excited to drive into this next phase. Now I'll have Elizabeth to run through some financial details and then come back afterwards. Over to you, Elizabeth. Elizabeth Owens: Thank you, Dan. Before I dive into the details, I'll just touch on a few key milestones that has achieved. The first of which is our strong cash position, reflective of the successful divestiture of the Light-Duty segment. As of December 31, 2025, our cash and cash equivalents position increased by $12.4 million to $27.2 million compared to $14.8 million at December 31, 2024. The increase in cash was primarily driven by the sale of our Light-Duty segment, as I mentioned, partially offset by cash used in our operating activities and debt repayments. Exiting 2025 with the proceeds from the disposition of Westport's Light-Duty segment, our long-term debt, including the current portion, reflected a 57% reduction to $2.9 million as at December 31, 2025. This was compared to $6.8 million in the prior year period. Including the long-term debt from discontinued operations, reduction was more than 90%. This improved financial position provides Westport with greater flexibility to concentrate on markets that are best suited to our current strategy. Cespira continues to drive meaningful improvement in our results. In the fourth quarter of 2025, total revenue was $29.3 million, compared to $22.9 million in the same period last year, representing an increase of 28%. This progress is supported by strong market adoption, including Volvo reaching the milestone of more than 10,000 natural gas trucks on the road equipped with Cespira's HPDI fuel systems. We are also encouraged by the continued progress of a second OEM that is currently conducting truck trials. We are excited about the opportunities ahead as we target an improvement in Cespira's capital requirements. Turning to the details of our 2025 results. Westport reported revenue of $23.3 million for the year ended 2025. Compared to $40.7 million in 2024. The 43% decrease in revenue was primarily due to the end of the transitional service agreement for inventory and contract manufacturing between Westport and Cespira. Our adjusted EBITDA for 2025 was negative $17.3 million in as compared to the negative $11.4 million reported for 2024. We reported a net loss from continuing operations in 2025 of $29.6 million compared to a net loss from continuing operations of $31.3 million for the prior year, with the decrease in net loss attributed to lower operating expenditures across R&D and SG&A and a favorable change in foreign exchange rates, partially offset by a full year pickup of Cespira's operating results in 2025 compared to the 7 months in 2024. Looking at our specific business units. High-Pressure Controls revenue for the fourth quarter of 2025, increased 20% to $1.9 million compared with $1.6 million in the prior year quarter and decreased to $8.3 million for the year ended December 31, 2025, from $9.4 million for the prior year. The decrease in year-over-year revenue for the period ending December 31 was primarily driven by the general slowdown in the hydrogen infrastructure development, leading to a slower adoption of automotive and industrial applications powered by hydrogen. In Q3 2025, we kicked off the move of our manufacturing capacity from Italy to our new facilities in Canada and China, which required shutting down our operations. In late Q4 2025, we resumed selling products to our customers to meet the backlog demand from the aforementioned shutdown. Gross profit for the year ended December 31, 2025, decreased by $1.3 million to $0.9 million or 11% of revenue, compared to $2.2 million or 23% of revenue for the prior year. Moving on to Cespira. Total revenue generated in Q4 2024 -- or 2025 was $29.3 million compared to $22.9 million in the same period last year, an increase of 28%. Cespira product revenue of $23.4 million increased 30% compared to Q4 2024, driven by higher volumes. Gross profit was negative $1.1 million for Q4 2025 compared to $0.5 million in Q4 2024, and with a negative variance, driven primarily by an obsolete inventory provision of $1.7 million and a recognized loss on one of our contracts valued at $2.8 million. As I previously mentioned, we had a cash and cash equivalents balance of $27.2 million as at December 31, 2025. Net cash used in operating activities from continuing operations was $14.2 million for the year ended December 31, 2025, compared to $5.8 million in the prior year, an increase of $8.4 million. The decrease in net cash provided by investing activities was mainly driven by $21.7 million in capital contributions to Cespira. And purchases of property, plant and equipment of $2.7 million, partially offset by proceeds from the sale of the Light-Duty segment. As noted, we also strengthened our balance sheet with total outstanding debt of $2.9 million, down from $6.8 million while reducing the complexity of our corporate structure in 2025. Our business is focused on the right markets for us, and we are continually looking at ways to streamline our operations. With that, I'll pass it back to you, Dan. Daniel Sceli: Thank you, Elizabeth. As we look to 2026, we see a transportation market increasingly grounded in economic reality. Operators are seeking solutions that deliver measurable emission reductions without sacrificing durability or operating economics. Natural gas is playing a larger role in that equation, not as a transitional concept, but is a fuel that can compete on performance and cost today. The HPDI platform delivered through Cespira is centric to that opportunity. By pairing compression ignition performance with the advantages of natural gas, including the potential to incorporate hydrogen blends over time, we are providing OEMs and fleets with a pathway that aligns emission reductions with commercial expectations. As I mentioned earlier, Volvo's milestone of more than 10,000 natural gas trucks on the road in over 30 countries, featuring Cespira's HPDI fuel systems, highlights our combined success in helping drive this path of success. We are encouraged by the progress of a second OEM conducting a full truck trial throughout 2026, which we further believe validates additional commercial potential. 2026 will be a pivotal year as we advance demonstrations and fleet trials. Present this exciting new platform at the ACT conference this spring and follow with targeted show-and-tell sessions with Canadian fleets through the spring and summer. Together, these initiatives position us to build momentum across our portfolio and translate technology progress into tangible commercial interest. I can appreciate the investment community's interest in our 2026 outlook. We are focused on delivering disciplined execution, continued advancement of OEM programs and converting technical validation into new commercial opportunities. In our High-Pressure Control segment, we're optimistic that volumes can increase as customers facilities ramp up production, while we actively pursue cost reduction opportunities in China through greater total sourcing and supply chain optimization. With a focused organization and technologies aligned with market demand, we believe 2026 represents an important step forward and we intend to deliver. Thank you. Operator: [Operator Instructions] Our first question or comment comes from the line of Amit Dayal from H.C. Wainwright. Amit Dayal: So Dan, just on the margin side of things, it looks like inventory issues and relocation issues were sort of pressuring margins in the fourth quarter. Do you think we see some bounce back in 1Q and the rest of 2026 on the margin side? Daniel Sceli: Yes, for sure. I think this transition, I'll start with the High-Pressure Controls transition from Italy to Canada and China, launching the two new production facilities, moving the equipment over, managing the inventory transfer starting up, getting the plant certified, which is quite an extensive process, that put a lot of pressure on margins, and we do expect margins to improve. And volumes as well. We're already seeing some pickup in volumes as we move through the year. Amit Dayal: Understood. For the High-Pressure Control segment, can you talk a little bit about sort of how maybe the China market or the Indian market, et cetera, the international opportunities you highlighted could start ramping for you? Like what should we expect in terms of like go-to-market sort of strategy in these geographies? Daniel Sceli: Sure. So I'll start with China. I think everybody knows that China is the fastest-growing hydrogen market. The government goals that they set out are driving volume increases. We're in a bit of a lull right now where volumes globally have slowed down on hydrogen, but we expect them to begin to pick up again at some point here in China. Having our plant there allowed us to compete locally. It allowed us to have local costs, source local suppliers. It's -- for us, it's the right strategy to compete in China for the Chinese market. shipping from Italy or from Canada just didn't make sense. The comment on India. India is really a huge opportunity for Cespira in the long-haul trucking market. India has now put in a multistate highway system. They're investing in clean fuel stations. And we see that a number of trucking OEMs look at India as a beachhead for growth, and that market is going to pick up, we believe, pretty significantly. Amit Dayal: Understood. Just last one for me. Any opportunities or possibilities in the power gen or backup power space for you guys? Daniel Sceli: Well, interesting you asked. So we've been looking into power gen. We currently supply into power gen today. We have a customer that used to be Kohler, Rehlko, that we supply out of our High-Pressure Controls business. we see that opportunity growing with the investments going into Power Gen across North America and, of course, globally, we think that there's an opportunity to build out that business. And are expected to grow there. Operator: Next question comment comes from the line of Rob Brown from Lake Street Capital Markets. Robert Brown: First question is on the OEM trial at Cespira, the second OEM. I know you can't give a lot of detail, but I think you said this year is sort of when the trial is happening. What's sort of the decision point on that? Is it sort of work this year and then just make decisions and then start potentially ramping into a production model or just sort of the outlines of the process would be helpful. Daniel Sceli: Sure. Sure. I mean, I wish I could say who it was, but in this commercial truck world, they're very, very careful about their commercial information. But the trial is ongoing right now, right? There's trucks on the road running there's discussions about expanding it, but we believe decisions will be made in the second half of the year at some point. We don't know the exact timing. It depends when they get the miles on the trucks but our expectation is that in the second half of the year, we're going to start getting feedback. And of course, if it all goes well, we're hoping this is going to lead to a commercial launch. Robert Brown: Okay. Got it. And then back to the High-Pressure Control business run rate. to get a sense of what's the sort of revenue run rate now that you've gotten the production transition? Is it sort of growing off the Q4 run rate? Or is it I guess how much of the Q4 run rate was depressed from that, I guess, just a sense of the run rate in that business. Daniel Sceli: Sure. The Q4 run rate was depressed. Number one, the market has slowed down somewhat. But also with shutting down the equipment in Italy, moving it all to the two new plants. Obviously, we weren't producing for some time while that transition happened. But yes, we do see that market starting to grow we see volumes increasing over what we expected for 2026 already. So it's on a good path, and we believe that the I think specifically the Chinese market is the one that will take off first as the Chinese government puts those goals in place for hydrogen transition in both automotive and in the industrial markets. Operator: [Operator Instructions] Our next question or comment comes from the line of Mr. Eric Stine from Craig-Hallum Capital Group. Eric Stine: Dan, you touched on HPDI in India and in your prepared remarks, Latin America and some other markets. But in terms of in North America, I mean, I know that's a very high priority. You did mention some trials that you are planning or that the joint venture is planning. In Canada. Could you maybe go into that a little bit? Anything you can share? And should we assume then that Canada is kind of the initial spot in North America that you would target? Daniel Sceli: I think if [Audio Gap] for CNG is a Westport product, not a Cespira product. Obviously, Cespira has the on-engine HPDI technology that will be part of the solution. But the -- in the back of cab, High-Pressure storage, smart storage system is a Westport product. We have already got the first truck, Volvo got us a truck, and we've already put the back of cab system on it. It's been running miles developing data. And the reason that is that we're not having to redevelop any of these systems. It's a matter of putting these systems together. And so it's not a huge development project. It's more of a market development that's required. The truck, as I said, is on the road, the truck will be on its way shortly to Las Vegas for the ACT show. I hope you're going to be there, Eric, and see it. We have a booth right next to Volvo there. And as you know, this CNG storage system is primarily focused on the North American market. We will be doing the initial trials in Canada. And -- but we will, at some point, here, be moving to the U.S. for trials as well. Eric Stine: Got it. Okay. I misunderstood that. So then I guess the follow-up then would be just about bringing HPDI, the joint venture, since you just talked about back of cab, but HPDI to North America. And I would assume that, that would be Volvo, right? Daniel Sceli: Well, as a starting point, for sure, but this whole CNG, I mean, HPDI is growing fast globally. The difference is that all the growth of 10,000 trucks are on LNG because that's how those countries receive their natural gas. Natural gas in North America is primarily delivered through compressed, right? It's a CNG market. So what our on-engine system really doesn't care whether it's compressed or liquid, the system adapts to that. the storage system is the big difference going from a liquid storage to a compressed storage. And that's what we're bringing. And the first truck on the road is a Volvo truck. It's their new truck, and we're very excited to have it showing up at ACT. And this is pretty exciting for us. We're finally getting to execute on this strategy. And any growth we have on this back-of-cab system obviously pulls through HPDI for Cespira. Eric Stine: Yes. No, absolutely. Okay. And just housekeeping for my last question or questions. Just I might have missed it, but did you quantify or estimate what you think the move did in terms of limiting Q4 for the High-Pressure segment? Daniel Sceli: Oh, sure. I mean we -- I think we lost probably a couple of months of production. And we had built up some inventory. But when you lose a couple of months production, you got to play catch up. And that coincides with a bit of the market pause that had happened. But we've launched both plants, both plants are up and running and shipping products. So we've gotten through that transition hump through the launch hump, and we're pretty excited about where that's going to go. We have the control in our hands. All right. Thanks, Eric. Well, that's all the questions we have for today. I want to thank you for your time, everyone, and have a great, wonderful weekend. Operator: Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day. Speakers, stand by.
Operator: Good day, and welcome to the Hansa Biopharma First Quarter 2026 Earnings Results Conference Call. [Operator Instructions] This event is being recorded. I would now like to turn the conference over to Hansa Biopharma's CEO, Renee Aguiar-Lucander. Please go ahead. Renee Aguiar-Lucander: Thank you very much. Good afternoon, and good morning, everybody, and welcome to Hansa Biopharma's conference call to review the Q1 results for 2026. I'm Renee Aguiar-Lucander, CEO for Hansa Biopharma. And joining me today is Evan Ballantyne, Chief Financial Officer; Richard Philipson, Chief Medical Officer; and Maria Tornsen, Chief Operating Officer and President of the U.S. Please -- next slide, please. Please allow me to draw your attention to the fact that we'll be making forward-looking statements during the presentation. You should therefore apply appropriate caution. Next slide, please. This is the agenda for today's call, and these are the people who will, as I just mentioned, who will be covering the different sections. Next slide, please. So let me start by taking you through an overview of the quarter. As I mentioned in the Q4 report, we expected Q1 to be impacted by the significant number of initiatives, which we rolled out during the quarter, which I'll cover in some more detail later in the presentation. This is intended also that -- this is indeed also what we observed with revenues amounting to SEK 34.6 million, slightly above Q3 of 2025. We know that there will continue to be significant variability between quarters, and I do not expect this to change over the medium term due to the structural issues related to organ allocation in Europe. During the quarter, we raised $30 million in a convertible note, significantly extending our runway. We also paid down the NovaQuest debt by almost $15 million in January as per the restructuring agreement, and we now do not have another payment due until the middle of 2027. We also spent significant time and resources during the quarter compiling the briefing pack to the FDA related to GBS, which we submitted in early April. We're very excited about the fact that our abstract of the ConfIdeS study was accepted for oral presentation at ATC in June. In the quarter, we continued to build out our U.S. leadership team and also initiated our BLA review with the FDA. Next slide, please. In December of 2025, we announced the leadership change of the European commercial organization and initiated a significant reorganization in combination with the rollout of new system support and ways of working. We believe that this was necessary in order to be appropriately prepared for the rollout of a significant amount of data, which we'll be able to share with the physician and patient community starting in Q2 and continuing for the remainder of 2026. I want to thank all of my colleagues in the commercial organization for their leadership, collaboration and ability to adapt quickly as we all know that change is not easy and especially not when it comes in high concentration over a short period of time. However, we have achieved a lot over the last 3 months, and we can now start to see some of the benefits, though it will still take a couple of months for everything to truly get bedded down. Next page, please. I am not planning to provide any detailed guidance for this year, but I would like to share some fundamental components of which we will leverage to successfully navigate 2026. One year into my CEO role at Hansa, I'm glad to announce, and I'm sure that the organization is happy to hear that the changes which were necessary to stabilize the business and position it for growth have more or less been completed. This included the restructuring reduction in force, the renegotiation of the debt facility, raising of equity capital to ensure sufficient runway to read out key clinical data and obtain a potential U.S. approval, strengthening the internal expertise and experience required to successfully build an international and sustainable life science business, clarify and focus the pipeline strategy and last but certainly not least, review, reorganize and adapt the European commercial organization to improve transparency, performance and ensure the effective delivery of key clinical data to the physician and patient community. I believe that the company now is well positioned to benefit from the key events coming up this year, and we look forward to sharing them with you as the year progresses. Q1 was, I said in my report, a transition quarter, but there is no new or different information fundamentally impacting our market, and we have no reason to believe that the performance -- the performance was primarily impacted by the main changes that we rolled out during the quarter. We're also encouraged by the strong start to Q2, which we hope is the beginning of a consistent trend of improvement, which will be further strengthened by the data coming out in Q2. With this, I will hand over to Maria, who will provide some more details on several of these topics. Monika Tornsen: Thank you very much, Renee. Next slide, please. Let me first turn your attention to the European and international markets. In Europe, Idefirix has maintained a unique position since launch. There is no other approved therapy on the European market, which can do what Idefirix does, enabling a life-saving kidney transplant for highly sensitized patients. Across Europe, there are up to 11,000 highly sensitized patients waiting for a kidney transplant today. These patients need to navigate the complexities of finding an organ, and in some cases, that can take up to 12 years. In Europe, we launched with very limited data from only Phase II studies. And over the years, we have built on that clinical experience and now have over 200 patients treated with Idefirix in Europe. 2026 is a very exciting year for our European business as we will finally gain access to additional clinical data, which we know European KOLs are eagerly awaiting. Our Phase II data was published last year. And in 2026, we look forward to releasing additional data from our U.S. Phase III study, ConfIdeS, and most importantly, from our European Phase III trial, PAES. This data will allow us not only to communicate additional data to European transplant centers, but it will also enable us to seek full approval in Europe. In addition, we know that European KOLs are anticipating publishing their own real-world evidence, and we look forward to seeing these data published. Next slide, please. Our Q1 performance was, as Renee mentioned, impacted by the changes we made to our European business. We made those changes as we felt they would be necessary to drive growth in the second half of this year and in future years. Our Q1 product sales was SEK 33.9 million. The performance was mainly driven by France and our international markets. We do not believe this performance is a reflection of Idefirix potential, but rather a short-term impact based on the decisions we made. We have in previous calls talked about the challenges we have faced in Germany with the pause of the Eurotransplant program and in the region of Catalonia, Spain with regional reimbursement. I'm very pleased to report that our targeted efforts have resulted in positive changes. In Germany, the KOLs have submitted new consensus recommendations for publication in an international journal. These recommendations, which will enable German transplant centers to transplant centers -- transplant patients within the ETKAS program, where the majority of highly sensitized patients are listed, have been rolled out to German transplant centers in a webinar, and we anticipate the recommendations will be published in mid-2026. In Spain, we secured reimbursement in the region of Catalonia after months of targeted efforts. The new reimbursement pathway went into effect as of April 1 and post-Q1 close, we have seen our first sale in Catalonia with this new reimbursement pathway. Catalonia is a very important region for Idefirix. In our PAES trial, 1/3 of all enrolled patients came from 3 centers in the Catalonia region. As such, we have significant clinical experience already, and we anticipate this region will be a strong contributor to future sales. In addition to these positive accomplishments, we have also made targeted investments in new systems and activities to drive further growth of Idefirix in the coming years. Let's now turn our attention to the U.S. market. Next slide. We are excited about the potential of bringing imlifidase to the U.S. market. Today, there are approximately 15,000 highly sensitized patients on the wait list for a kidney transplant in the U.S. and 7,000 of those have a cPRA over 98%, making it very difficult to find a matching organ. For the patients with the highest cPRA, they may never receive an organ offer or have to wait over 7 years before they could have a transplant. Unfortunately, approximately 10,000 patients die or become too sick to transplant while waiting and a higher proportion of those patients are highly sensitized. This is where imlifidase can play an important role in reducing the wait time and enabling more patients to have access to a life-changing transplant. Next slide, please. We have recently conducted several market research projects in the U.S., which all confirm the unmet needs for patients and the potential place for imlifidase in their treatment journey. Today, there are no approved treatments for the desensitization of highly sensitized kidney transplant patients and the off-label treatments used are not seen as great options for patients. The burden of dialysis is also very real. Patients who wait for a kidney transplant need to undergo dialysis 3 times a week for several hours each time. That creates an extreme burden on the patient, impacting the patient's quality of life and also contributing to significant costs for the healthcare system. When preparing for a potential launch in the U.S., we know that we need to engage with several stakeholders within the transplant centers from surgeons to transplant coordinators, pharmacists and HLA directors. In particular, the HLA director will play an important role with imlifidase as they are responsible for the delisting protocols and managing the antigen profile of the patient. P&T approval will be critical to ensure access at hospital level. And in our initial research, financial decision-makers and clinical experts believe imlifidase will gain P&T approval given the strong clinical profile of imlifidase. Finally, we believe our initial launch drivers and uptake will likely come from centers with prior clinical experience of imlifidase and from high-volume kidney transplant centers. So let's turn to the next slide and look at our launch preparations. Our launch preparations are in full motion, and we are focusing our efforts on two critical areas: site of care strategy and market access. As I mentioned in the previous slide, we believe our initial uptake will come from centers with clinical experience and from centers who are performing high volume of kidney transplants. We are, therefore, focusing our efforts on the top 100 centers initially in the U.S. Those centers represent approximately 80% of the volume. And among those centers, we have 25 ConfIdeS centers who are accounting for 25% of the volume. These centers have clinical experience, which we believe will be a differentiating factor compared to the European launch where we only had two centers with clinical experience prior to European approval. Our market access activities have been focused on completing our market research and gaining a better understanding of transplant centers' financials. The majority of transplants are paid by Medicare and in particular, those patients who have waited for a long time for a transplant tend to a larger extent, have Medicare insurance. When speaking with financial decision-makers in the transplant centers, they all recognize the significant burden for these patients and the strong value proposition of imlifidase. Our efforts are focused on enabling speed of access at launch and breadth of adoption across multiple transplant centers. As mentioned in previous calls, we know that NTAP, new technology add-on payment and Outlier payments will be important for transplant center economics and prior CAR-T launches are good launch analogs that we are using to model our center engagements. Finally, we have also focused on identifying our distribution partner and other aspects of the supply chain to ensure we can deliver the product to the U.S. shortly after approval. Other activities in the quarter have been focused on building out our U.S. team with a particular focus on market access and medical affairs. Our full commercial build is expected in Q4, shortly before PDUFA. Our medical team are focused on engaging with KOLs and transplant center stakeholders at medical conferences. And we are, in particular, looking forward to the American Transplant Congress in Boston in June, where we will present our full ConfIdeS data, have a Hansa symposium and other KOL engagements. Finally, across the U.S. organization, we are focused on our site of care strategy. As I mentioned earlier, in each transplant center, there are multiple stakeholders we need to engage with from market access to medical affairs and commercial to ensure we have a successful launch. We have developed a strong strategy for how to engage these centers to ensure we know the stakeholders and can best support the incorporation of imlifidase into their treatment workflow once approved. With that, I will hand it over to our Chief Medical Officer, Richard Philipson, for an overview of our pipeline. Richard? Richard Philipson: Thanks, Maria. Next slide, please. I'd like to start by discussing Study 20-HMedIdeS-19, which we refer to as the post-authorization efficacy and safety study or the PAES study. As indicated by the name of the study, this is a post-approval commitment to the European regulatory authority following the conditional approval of imlifidase in Europe in 2020. Next slide. Primary objective of the study is to determine the 1-year graft failure-free survival in highly sensitized kidney transplant patients pretreated with imlifidase to turn a positive crossmatch against the deceased donor into a negative crossmatch. Secondary objectives include the evaluation of renal function, patient survival and graft survival up to 1 year after transplantation. And of course, safety is also one of the secondary objectives of the study. Next slide. Here, we provide an overview of the design of the study. Starting at the top of the schematic, patients enrolled in the imlifidase treatment group were highly sensitized with the highest unmet medical need based on the local kidney allocation system. Patients underwent a delisting step at prescreening to increase the likelihood of receiving a donor organ offer. When an organ offer was received, if the patient was cross-match positive to the organ, then the patient proceeded to treatment with imlifidase and transplantation, subject to meeting required eligibility criteria and converting from cross-match positive to cross-match negative. It was planned to enroll 50 patients into this treatment group. Moving down the schematic, there were 2 noncomparative reference groups. It's important to note that patients were not randomized to these reference groups, and there are no statistical comparisons made between the imlifidase treatment group and the reference groups. Furthermore, patients in these 2 reference cohorts have different baseline characteristics when compared with the imlifidase treatment group. The noncomparative concurrent reference group comprises 50 to 100 contemporaneous kidney transplant patients enrolled at the same sites at approximately the same time as patients enrolled in the imlifidase treatment group. These patients were not sensitized and had a negative cross match to the diseased donor organ offer. Rationale for inclusion of this reference group is to understand outcomes at the same sites when undertaking matched kidney transplants. Finally, the non-comparative historical reference group comprises 100 kidney transplanted patients randomly selected from a patient registry from 2010 onwards. Selection of patients was performed by the registry administrators and was completed prior to the start of the enrollment of the main study. Patients in this cohort were sensitized but to a lesser degree than patients in the imlifidase treatment group and were crossmatch to negative to the donor organ offer. Again, to emphasize, the primary objective to determine the 1-year graft failure-free survival in highly sensitized kidney transplant patients applies to the imlifidase treatment group only. Next slide. In this slide, we summarize the treatment schedule for patients enrolled in the imlifidase treatment group. Following the prescreening and screening steps, patients meeting eligibility requirements and with a positive crossmatch to a donor organ offer were treated with imlifidase. Prior to administration of imlifidase, all patients received premedication in the usual way with intravenous methylprednisolone and then antihistamine. A second dose of imlifidase could be administered within 24 hours if crossmatch conversion was not achieved after the first dose, which is in keeping with other imlifidase trials. Patients converting to a negative crossmatch were transplanted and then immediately went on to receive standard post-transplant immunosuppressive treatment comprising tacrolimus, mycophenolate mofetil and corticosteroids. Transplanted patients also received rabbit anti-thyroglobulin on day 5, rituximab on day 7 and IVIg on day 9 to 10. Next slide. The study enrolled the first patient in May 2022. There have been 22 participating sites in a total of 11 countries in the EU and U.K., and we expect database lock next month. Next slide. Now moving on to discuss Hansa's plans for its next-generation IgG cleaving enzyme, HNSA-5487, which I'll hereafter refer to as 5487. This is a rapidly acting IgG cleaving endopeptidase. This highly specific IgG degrading enzyme that includes all human subclasses of IgG, whether free or bound, antigen or cell membranes and no substrate other than IgG has been identified. Next slide. First, I'd like to provide a brief overview of Guillain-Barré Syndrome or GBS. This is a rare, rapidly progressive monophasic immune-mediated neuropathy where the immune system attacks peripheral nerves often following a viral or bacterial infection. The disease affects 1-2 in 100,000 people annually with approximately 3,500 to 7,000 cases annually in the U.S. There are also seasonal and geographical variations in the disease prevalence. GBS is characterized by rapid onset muscle weakness, tingling and numbness, typically starting in the legs and moving symmetrically upward. Symptoms can escalate to paralysis, breathing difficulties requiring assisted ventilation and consequent immediate hospitalization. GBS is an antibody-mediated disorder in which complement fixing IgG antibodies directed against gangliosides play a key role in the pathogenesis. Disease progression is typically rapid, reaching a nadir within 4 weeks in most patients with many attaining maximal weakness within 2 weeks. Although many patients recover from the acute phase, long-term morbidity is common and approximately 20% of patients remain unable to walk independently at 6 months. Current standard of care treatments include intravenous immunoglobulin or IVIg infusions or plasma exchange in addition to supportive care such as respiratory support and management of complications such as infection and thrombosis. It's estimated that approximately 25% of patients require mechanical ventilation for days to months following the acute autoimmune attack. Next slide. Experience with imlifidase, our first-generation IgG cleaving enzyme followed by IVIg provides relevant clinical precedent for the proposed 5487 development in GBS. Specifically, a Phase II single-arm open-label clinical trial has previously evaluated imlifidase followed by IVIg in patients with GBS enrolled within 12 days of symptom onset and followed for 12 months after imlifidase treatment. In this study, a single dose of 0.25 milligrams per kilogram of imlifidase rapidly cleaved IgG in 28 out of 30 patients. At a group level, treatment with imlifidase followed by IVIg led to early improvement of the patient's functional status. The median time to walking independently was 16 days. Most patients improved markedly in motor function early after imlifidase treatment by 1 week after imlifidase dosing, 37% of patients were able to walk independently. 4 weeks after treatment with imlifidase, 52% of patients were able to walk independently and 33% were able to run. Next slide. Results from the imlifidase Phase II trial in GBS have been compared to patient data from an external prospective cohort treated with IVIg known as the International Guillain-Barré Syndrome Outcome Study, or IGOS. The figure in the slide presents an unadjusted comparison of muscle strength as measured by MRC sum scores between the imlifidase treatment group and the reference cohort, demonstrating the rapid improvement in imlifidase-treated patients. Further, a matching-adjusted indirect treatment comparison or MAIC has been performed. The MAIC confirmed that the patients treated with imlifidase and IVIg walked independently, that is a GBS disability score of less than 2, 43 days earlier than those in the IGOS cohort treated with IVIg alone. In the same MAIC analysis, the median number of days required for patients to improve one grade in the GBS disability score was 6 days for patients treated with imlifidase and IVIg compared to 31 days for patients treated with IVIg alone. And this difference was statistically significant with a p-value of 0.002. Next slide. Now turning to the current status of the program. The first time in human study in healthy participants has been completed. In this study, it was shown that circulating IgG was efficiently and rapidly reduced by a single dose of 5487 by more than 95% within a few hours. There was a positive correlation between dose and duration of reduced IgG levels where a higher dose resulted in a longer duration of effect. In other words, there was a clear dose response relationship. There was also a significantly reduced antidrug antibody or ADA response when compared with imlifidase and the treatment was at least as efficacious as imlifidase in reducing total IgG levels. Furthermore, 5487 was shown to be safe and well tolerated across all tested doses and no serious or severe adverse events were reported from the trial. Based on these data and the clinical experience with imlifidase in GBS, the clinical development program for 5487 in GBS has been designed and submitted to FDA in the form of a briefing document. The response to this submission is expected in May. Based on the current plan, the clinical phase of the development program will start by the end of this year. I'd now like to hand over to Hansa's Chief Financial Officer, Evan Ballantyne. C. Ballantyne: Thank you, Richard. Q1 sales performance. Total revenue for Q1 2026 was SEK 34.6 million, representing a 48% decrease compared to Q1 2025 of SEK 66.3 million. Product sales for Q1 2026 were SEK 33.9 million, also representing a 48% decrease as compared to Q1 2025. We continue to see fluctuation in our quarter-over-quarter performance and quarterly volatility reflects the unpredictability of the organ allocation market. Next slide, please. For Q1 2026, SG&A expenses totaled approximately SEK 106 million and were essentially flat compared to Q4 2025 of SEK 102 million. Compared to Q1 2025, SG&A expense of SEK 76 million were SEK 29.6 million higher. This variance was driven by noncash LTIP expense of SEK 6.1 million, fees associated with securing the convertible note of almost SEK 10 million, investments in commercial activities associated with the U.S. launch and improvements in the company's quality systems. R&D expense in Q1 2026 totaled approximately SEK 57 million and were 11% or SEK 7 million favorable compared to Q1 2024. The decrease in R&D expenses was primarily driven by the wind down in clinical trial activities and restructuring actions taken in 2025. In Q1, the loss from operations was SEK 143 million compared to SEK 125 million in the prior quarter Q4 2025. Next slide, please. Headcount for the period totaled 122 compared to 138 in Q1 2025. Headcount was essentially flat compared to Q4 2025 of 125. Cash used in operations in Q1 2026 totaled SEK 157 million compared to SEK 152 million in Q1 2025. In Q1 2026, cash and cash equivalents totaled SEK 677 million, on March 19, 2026, the company entered into a USD 30 million convertible note purchase agreement with Athyrium Capital Management. The convertible note has a fixed rate of 3% payable on a semiannual basis in cash beginning on September 15, 2026, and a maturity date in March of 2031. This transaction extends Hansa's cash runway and strengthens the company's balance sheet in advance of the FDA approval and a subsequent U.S. launch. And now I'd like to turn the presentation back to Renee for closing remarks and the Q&A portion of the call. Renee Aguiar-Lucander: Thank you very much, Evan. Next slide, please. So in summary, we're looking forward to the continuation of this quarter as it brings many exciting updates for the company, and I'm proud to be able to sit here today and say that we're now operating from a strong and stable foundation with a clear road map ahead. We have a robust financial position with an extended runway and access to multiple future financing options should they be required in the future. We are in full execution mode and with a very experienced team in place, I look forward to the rest of the year with great excitement and enthusiasm. This includes the readout of the PAES study with database lock expected next month. Feedback from FDA regarding the GBS study design, presentation of the ConfIdeS Phase III data at ATC a Capital Markets Day with input and discussions from U.S. and European KOLs covering ConfIdeS and PAES top line data, which we expect will be available by that time. And finally, in Q4, we plan to file for full approval with EMA Idefirix and look forward to the outcome of the PDUFA date in December. Next slide, please. As I mentioned, we hope to share some of this information with you towards the end of this quarter at our Capital Markets Day, which will take place following the ATC conference in June in New York. It will also be possible to follow this event virtually and a full agenda will follow. Next slide, please. So with this, this concludes the presentation, and we can open up for questions. Next page, please. Thank you. Operator: [Operator Instructions] The first question comes from Farzin Haque with Jefferies. Farzin Haque: I wanted to ask on the U.S. approval process. How are the interactions with the FDA going so far? And have they signaled any key focus area or questions during the review of the BLA filing package so far? Renee Aguiar-Lucander: So I will take that question initially and then see if Richard has anything to add. I would say that the FDA BLA review process is going very well. There has not been any kind of, I would say, odd or strange kind of key questions or any kind of area for that matter that would kind of be out of the scope. So I would say that it's really going quite well and kind of as expected. I don't know, Richard, if you have anything to add. Richard Philipson: No, I agree. Everything is going well. It's going as expected, as Renee has said, and nothing untoward so far in our interactions, and we've been able to address any questions from the FDA so far. Farzin Haque: Makes sense. And then for EU sales, the 1Q impact, it makes sense. And for the second quarter, you said that you had a strong start. Any color on the ordering trends, center feedback that gives you confidence that sales will rebound? Renee Aguiar-Lucander: So I don't really want to get into any kind of very specific details on this, and I know better than to kind of assume that what has kind of started really well will necessarily be continuing in the same very, very positive manner going forward. But I would say that we're very encouraged by what we've seen so far. Obviously, it's kind of 20 days into the quarter. So it's -- again, it's not going to be able to kind of judge what the final kind of quarter outcome is going to be. But I do think that what we're seeing is a significantly different trend than what we saw in Q1. Operator: Your next question comes from the line of Douglas Tsao from H.C. Wainwright. Douglas Tsao: I guess, Renee, maybe as a follow-up on what you're seeing so far in the quarter, is this sort of a direct result of some of the changes you made in terms of the commercial organization? And I'm also just curious, are they across all the regions? Or is it again seeing strength in some of the core regions where we've seen pretty good use of imlifidase over the last few years, in particular, France? Renee Aguiar-Lucander: I'll have Maria provide any additional detail, but I would say that I think that this is a kind of -- it's a follow-on from the initiatives that we have launched. I think that, that is clearly how we see it. And again, we don't expect this to -- I mean, we know it's going to take another couple of months for it to be fully kind of implemented and rolled out. But I do think that we have established better kind of transparency, more focus. We provided some system support, some investments, which I think are very important. And with regards to kind of the breadth of that, I'll leave it to Maria to cover the kind of the general just kind of brief trends that we're seeing to date. Monika Tornsen: Yes. I would just echo what Renee said. I mean, we are very encouraged by the trends that we're seeing in the first 20, 22 days of the quarter. It is not unique to one country. Without going into further details, we're seeing that across multiple markets. I think in particular, what I think is critical is what we have managed to accomplish in Spain in the Catalonia region. As I mentioned, that region contributed to 1/3 of the enrollment in the PAES trial. And now that we've resolved the reimbursement there, as I mentioned earlier, we saw our first sales there. And I think that is a very strong sort of indicator of that the actions that we have taken are starting to turn into results. And it will take, as we mentioned before, a few months for everything to settle, but we are seeing that what we are doing is starting to have an impact. And I think that is the most encouraging in this. Douglas Tsao: Okay. Great. And then just if I have a follow-up question for Richard, in terms of the GBS program, 5487, I guess, do you intend that to be a registrational study? And then also, just given the opportunity to redose, is there -- do you see clinical value in perhaps redosing patients, which is something that you weren't able to do with imlifidase in the original Phase II study? Richard Philipson: Okay. So thanks for the questions. We're still at a relatively early stage in terms of the overall clinical development plan. As I mentioned, we have submitted this to the FDA. We are waiting for feedback from the FDA that we're going to receive next month. And I think it would always be our sort of strong wish to be able to put in place a plan that gets us efficiently through to registration, let me put it like that. But we really need to get those comments back from the FDA before we really start kind of explaining how we're going to do that. And I think redosing is an interesting component of a development program. I think for GBS, we're very much focused on that acute treatment. It's an acute disease. So we don't necessarily see in that specific acute scenario a strong need for subsequent repeat dosing. Operator: The next question comes from the line of Romy O'Connor from Kempen. Romy O'Connor: This is Romy on for Suzanne. Two questions. In Q1, Idefirix sales were particularly strong in France. Just wondering if these were at the same level as in Q4 last year and was France not impacted by the new initiatives? And secondly, are you able to expand on the multiple system and process initiatives in Europe? Is it beyond regional authorization in Catalonia and the work that the German KOLs are doing? Renee Aguiar-Lucander: Sure. I will have Maria cover these questions. Monika Tornsen: Yes. Thank you for the questions. So first, when it comes to France, I think France has since launch been a very strong contributor to the European sales, and we've talked about that in previous calls. We haven't gone into the details exactly what we are selling in each country, and I'm not going to do that. But I can say that we continue to see a strong growth in France. And that is attributed to the fact that we have many physicians in France that had early experience with the product. We also had one center that participated in the Phase II trial. So going back to what I mentioned before is that clinical experience is critical, and we have that early on in France, and that has sort of spread into many transplant centers in France. We also know, as an example, that France is about to publish some data from the real-world experience that we look forward to seeing when that gets published. But the sales trend in France continues, and that is very encouraging. And I think it proves that if you put the efforts behind the right type of educational initiatives and you get strong clinical experience, you'll see that growth in the product. So those are some of the things that we are putting in place for other markets as well. And to your second question on systems and processes, these are not just this sort of processes that you asked about in Catalonia and in Germany, but it's also things like CRM systems that we haven't had at Hansa historically. It is new dashboards that enables the teams to have greater insight into performance and numbers and opportunities. So it's sort of a broad across Europe system. And the other thing that we are doing is just trying to drive that clinical education. So we have more pan-European webinars, educational sessions to really drive that clinical discussion and clinical experience and spread some of that positive momentum that we're seeing in countries such as France, but also many other smaller countries in Europe. Romy O'Connor: Great. And if I may, one more. I'm just wondering what we can expect from the confirmatory PAES study and what your thinking is on the impact of Idefirix sales? Renee Aguiar-Lucander: So I think in terms of the -- what we can expect, obviously, we're going to report out kind of top line data. And I think Richard laid out kind of how the study is designed. And that's the data that we're going to share is kind of primary and kind of like the top line data as well as whatever kind of secondary information we might have at the time. As I'm sure you're aware, we are under MAR in Europe. And so we really have to kind of publish the data once we get it, and we don't always have all the actual kind of data at hand when we go out and have to report the actual kind of top line outcome. In terms of kind of the impact, and I think following on to Maria's point, I think my personal view is that this will be very, very important. It will, as always, take a little bit of time to kind of get that information into the kind of hands and minds of kind of physicians and patients in Europe. But I do think that there's a lot of expectation and people are waiting to kind of see that data because it is kind of a truly a European-based kind of clinical experience that we're going to be able to see, which really I don't think has really been the case previously. It's been very small amounts of clinical data that kind of really has come from the European region. And so I think that data together with ConfIdeS, together with the real-world data, I think all of this data is going to just bring additional kind of comfort kind of characterize kind of efficacy and safety of imlifidase and Idefirix. And so I think it's always important in my view, to really be able to share clinical outcomes with physicians, particularly in these kind of situations where there really hasn't been a way of treating these patients before. There isn't a lot of understanding in some places in terms of what do they do with these patients. And so I think having as much kind of clinical information data as we can, I think, will be very impactful in general. Operator: We now have a question from the line of Thomas Smith from SVB Leerink. Thomas Smith: Looking forward to the detailed ConfIdeS data at ATC in June. I was wondering if you could just help frame expectations for the detailed data? Like what additional analyses can we expect to see? And will this include any additional patient follow-up beyond what was available at the top line? Renee Aguiar-Lucander: Rich, do you want to take that? Richard Philipson: Yes, sure. So I mean, we would anticipate a comprehensive description of the outcomes of the study at ATC detailing -- giving more detail around some of the other endpoints that were included in the study relating to outcomes such as antibody-mediated and cell-mediated rejection and antibody responses, et cetera. So as well as some other efficacy endpoints and also, of course, the safety outcomes of the study. We won't -- there will not be any additional follow-up on those patients. The cut of the data occurred last year, and there's been no further cuts of the data since then. So we won't have any additional follow up. Thomas Smith: Got it. That makes sense. And then with respect to the ongoing BLA review and maybe as a follow-up to that point, Richard, can you just remind us, I guess, plans for submission of an additional cut of the data from ConfIdeS to FDA, I guess, when that would take place? And then has there been any indication from FDA whether they would look to convene an advisory committee meeting to discuss the application? Richard Philipson: Okay. So there won't be any further cuts of the data submitted to the FDA other than the standards 120-day safety update. That's a standard part of any submission. So that will be submitted. We've had absolutely no indication of the requirement for an advisory committee. Thomas Smith: Looking forward to the presentation at ATC. Renee Aguiar-Lucander: We are too. Operator: The next question comes from the line of Matthew Phipps from William Blair. Matthew Phipps: Let me also offer my congrats on that late breakthrough for ConfIdeS. I was wondering, as we see data this summer from both the PAES and ConfIdeS, any key differences in the baseline of these patients such as cPRA levels or maybe differences in the post-treatment immunosuppressive regimens that we should keep in mind to help kind of compare and contextualize those data sets? And then I realize it might be too early to discuss this, but I guess, any color on the labeled indication you're seeking in the U.S. or discussions with the FDA around cPRA cutoffs in the label at this point? Renee Aguiar-Lucander: So I'll have Richard talk about, so there are some differences in terms of kind of the patient profiles between the 2 studies, which I'll have Richard cover. We have not yet had any kind of interactions with the FDA with regards to the label. Richard? Richard Philipson: Yes. So can you hear me? Renee Aguiar-Lucander: Yes, I can hear you now. Richard Philipson: So there were some -- essentially in both the ConfIdeS study and the PAES study, patients enrolled into the study are highly sensitized. It is true to say that there were some minor differences in how that is defined dependent on the country in which patients are enrolled in Europe. But overall, they can still be considered to be highly sensitized. And in general terms, the post-treatment immunosuppressive regimens used in Europe and the U.S. were the same. Operator: The next question comes from the line of Georg Tigalonov-Bjerke from ABG. Georg Tigalonov-Bjerke: This is Georg from ABG. I have 2 questions. First, a follow-up on France. I'm curious to whether there was any considerable contribution from lung transplants. And secondly, in which particular regions do you expect particularly strong positive effects from the PAES data? Renee Aguiar-Lucander: Maria, do you want to take that? Monika Tornsen: Sure. So when it comes to France, our contributions in Q1 was attributed to kidney transplant. I'm not aware of a lung transplant as of yet in France. And could you repeat the second question? It was related to PAES? Georg Tigalonov-Bjerke: Yes, sure. I was wondering if you can elaborate on which particular regions you would expect particularly strong positive effects from those data, for example, PAES with many patients included in the trial, but -- yes. Monika Tornsen: Yes. I mean that is a great question. And I think if you look back to how the product was launched in Europe, we only had 2 centers that have participated in the Phase II trial. So across Europe, there has been many physicians and transplant centers that have been waiting for additional data. As Richard mentioned before, we have 22 centers that have participated, and they are one of the largest centers in Europe. I would say all of them are waiting for this data. And they obviously know they've seen the product used in their clinic, but they're waiting for that pool data of the 50 patients being rolled out. So I expect this to have a positive impact across all markets. I think for France, it will confirm what they already know. I mean they have a lot of experience in France. But we know that there are many markets where physicians have been waiting for this and to see the outcomes of a larger trial with European patients. I think this will have a positive impact across all of our European -- the largest markets, the U.K., but also some of the smaller markets where there may be 1 or 2 centers in each clinic. So that is why, as Renee mentioned before, like having the PAES readout this year, more data from ConfIdeS in June, that is why we are very excited about the opportunity in front of us in Europe because this is really what the physicians have been waiting for, for a very long time. Operator: We now have a question from the line of Richard Ramanius from Redeye. Richard Ramanius: I have a follow-up question to one I asked at the last Q&A regarding your accounting definition of sales, namely how representative are your quarterly revenue figures of real-world use of imlifidase in actual transplantations? Renee Aguiar-Lucander: Evan, do you want to take that question? C. Ballantyne: Sure. Yes. We recognize revenue on the transfer of product from Hansa to a potential hospital. So I think the revenue recognition reflects actual sales very well. Richard Ramanius: I was wondering the transplantation could occur much later than the actual sales. So how do actual transplantation track revenue? C. Ballantyne: So most of our customers pay us within pretty common terms of 30, 60 or 90 days once the product has been transferred. And some of our customers, a small portion, pay us based on transplantation. And we break accounts receivable into 2 groups, groups that pay us on standard terms are current accounts receivable and groups that pay us based on transplantation are categorized as noncurrent. Renee Aguiar-Lucander: I think this is obviously an issue in terms of the fact that we can't -- because they have to have the product available because obviously, by the time that they decide to delist a patient, there is not known the time period that will elapse between the act to delisting a patient and receiving an organ is completely unknown. So that could be a couple of days, it could be a couple of weeks, it can be a couple of months. But obviously, once kind of the drug has been used, obviously, it's generally replaced immediately by the hospital. But there isn't really a way of kind of having a 100% kind of immediate kind of connection because you will have to have some of that -- just have it accessible because the time lines are so short that this is not a drug that you can just kind of order once you actually have the organ in the clinic. So hopefully, that addresses your question. Operator: We now have a question from the line of Christopher Uhde from SEB. Christopher Uhde: I have a few, if I may, but stop me if we're running out of time. The first one is on Germany and Eurotransplant. And maybe if you could say anything about what your expectations are for the guidelines, what they'll actually contain with respect to use of Idefirix or perhaps what we should be watching for? And then a follow-on to that would be then what are your expectations in terms of the time to actually implementing any such changes? That's my first question. Renee Aguiar-Lucander: Maria, do you want to take that? Monika Tornsen: Sure. So the consensus recommendations that have been put together in Germany have been written by all the major key opinion leaders in Germany. They have rolled them out among the clinics on a webinar in March, and they have -- so they have the German version of those guidelines in their hands right now. They have submitted it in English for -- to an international journal to be published. And it's -- we are not controlling the publication, but our expectations is probably mid of this year that we will see that publication in English. But in addition to the webinar that was held in March to discuss these new recommendations, our German team are also hosting different roundtables and KOL sessions with immunologists, with transplant surgeons, et cetera, to discuss the practicalities of these guidelines. But the good news here is that all of the German KOLs are standing behind the guidelines. They put their name behind those recommendations. Christopher Uhde: And so -- are we to understand that it's basically to begin to reuse Idefirix in... Monika Tornsen: Yes, yes. So yes, so this -- sorry for not answering that question. So the guidelines are written keeping in mind the ETKAS program in Germany. As we mentioned before, the priority program was paused by the German Bundesärztekammer. However, 2/3 of German highly sensitized patients are in the normal ETKAS program. So this consensus guidelines practically speaks about how to use Idefirix within that ETKAS program. Go ahead. Christopher Uhde: No, sorry, I guess you feel free to add. But otherwise, my second question would be on what are your expectations for how the PAES study data will look out -- look like? Renee Aguiar-Lucander: That's the crystal ball question. So I guess that, I mean, I'm happy to have Richard also weigh in on this. But I mean, I think at this point in time, there's been a lot of transplant taking place with this drug. I think that what we've seen is a very, very consistent behavior of this drug. It is highly targeted. We know what it does. We know that it works. And so I think my view is that we certainly don't expect any surprises from the PAES study at all. And -- but obviously, we don't have any access to the information. We don't have -- we've not seen any part of any data. So obviously, we are kind of in the same place as you are in terms of we'd be very interested in seeing it. But again, I feel very comfortable with all of the kind of clinical experience and what we've seen in other clinical trials and also obviously, in real world. So again, I don't expect any surprises there. But Richard, I don't know if you have another crystal ball that you can look at. Richard Philipson: I don't have a crystal ball, but I agree. I mean I think we don't expect any surprises. The outcome of the ConfIdeS study was -- we were really pleased with the outcome of that study. As I've said in answering a previous question, the patient populations are very similar in the ConfIdeS and the PAES study in terms of patients receiving imlifidase in the PAES study. So I think we haven't got a crystal ball, but agreeing with Renee, I mean, I really don't anticipate any surprises. Christopher Uhde: Great. And then if I could ask then third question would be on Italy and Spain and the outlook there in terms of the rollout across the remaining regions. How do you see that progressing in terms of, let's say, the time line? Renee Aguiar-Lucander: Maria, do you want to take that? Monika Tornsen: Yes. So Spain and Italy are obviously 2 of the important markets in Europe. What I am observing are positive changes in those markets, both in terms of the rollout of reimbursement, which in both Italy and Spain is first on a national level, but then on a regional level. And we have made progress in all of the key regions where the major transplant centers are. I'm also seeing more physicians sort of adjusting to delisting patients and understanding how to delist. And I'm also observing more utilization in -- by meaning more centers that are starting to adopt the product post the sort of PAES trial enrollment finishing. So I think those are sort of positive lead indicators. Both Italian and Spanish physicians are obviously waiting for the data. They participated in the PAES trial. So I think that will be important as we get the data middle of this year, both from ConfIdeS, full data and also PAES part of our actions in both Italy and Spain is making sure that all of these centers that both participated in the PAES trial and did not that they have access to this information. I think that will confirm again the clinical confidence in the product. But we're seeing positive momentum, I would say, in both markets. So I'm sort of cautiously optimistic about the future in those markets. Christopher Uhde: And if it would be okay to squeeze in one last question. I'd just like a little bit more -- if you could explain a little bit more the CAR-T analog that you mentioned for the U.S. That's it for me. Monika Tornsen: Sure. Happy to. Yes. So imlifidase will be an inpatient drug in the U.S., meaning it's being used in the hospital setting. Obviously, as the patient is going through a major surgery. The CAR-Ts were also used inpatient. And that means that the way the products are paid and reimbursed is very similar. So like the reimbursement pathway that they took when they launched will be very similar for imlifidase. Specifically, these drugs are covered by DRG codes as an inpatient drug. And when they launched the CAR-Ts, the DRG code, I think Renee will correct me, was very low, around USD 40,000. And the hospitals needed to apply for Outlier payments. And in addition, the manufacturers of those products applied for NTAP, new technology add-on payment to give that extra reimbursement to the hospitals. And eventually, after a few years, they got their own assigned DRG code. So when you think about how imlifidase will be used in the U.S., it will be inpatient. We will apply for NTAP, new technology add-on payment. The hospitals will do Outlier payments, with Outlier payments to CMS. So that's why we say that the CAR-T launch and the uptake of the launch and how it was managed from an access and reimbursement perspective is a very good analog to look at if you want to sort of think about how the financials work for these inpatient drugs in the U.S. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to CEO, Renee Aguiar-Lucander for any closing remarks. Renee Aguiar-Lucander: Thank you very much. Thank you very much for listening to this Q1 review, and we definitely look forward to our Q2 review, where we will have a lot of things happening between now and then. So thank you again. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Aki Vesikallio: Welcome to Hiab's First Quarter 2026 Results Call. My name is Aki Vesikallio. I'm from the Investor Relations team. Today's results will be presented by CEO, Scott Phillips; and CFO, Mikko Puolakka. As a reminder, please pay attention to the disclaimer in the presentation as we will be making forward-looking statements. Before handing over to Scott and Mikko, let's take a look at the highlights of the quarter. Book-to-bill was positive in all three geographical areas. Our sales were still impacted by low order intake in the U.S. during the previous three quarters. However, our comparable operating profit margin increased sequentially to 13.5%, and we continue to deliver strong cash flow. The new operating model announced in January was successfully implemented in the beginning of April. We also specified our outlook for full year comparable operating profit margin from above 13% to above 13.5%. 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: Greetings, everyone, and a warm welcome to our first earnings report for 2026. I would like to start out sharing 3 developments highlighting our execution of our profitable growth strategy. So during third quarter earnings report, as you'll recall, we shared our plans to reduce our cost by EUR 20 million within this year as a result of the increased uncertainty that has led to a more challenging demand environment in the U.S. as well as the overall development of the order backlog. Consequently, we have announced plans during the quarter to evolve our organizational structure and our operating model targeting to create three positive outcomes. Number one, to evolve to further clarity on our end-to-end accountability through further decentralization by reducing layers of complexity within our overall organizational design. That should help us to attend to a few issues that occasionally come to light in terms of suboptimal customer support. And then third, overall, it allow us and enable us to reduce our fixed cost in line with our plans, which should create much more improvement in our value creation resiliency. So core to our strategy is our aim to lead the sustainability transition for on-road load handling industry. So I'm really pleased to share the second development here in the execution of our strategy, and that's the fact that we have validation in our science-based targets to achieve our commitment to be net zero by 2050. The third development I would like to share with pride is another example of a key outcome-based innovation co-created with our distribution partner, MYCSA, together with key customers in Spain, aiming to optimize productivity for dump-over column lift tippers by developing a new DEL brand lightweight lift gate. So another great example of our focus on developing new innovations together with our customers and our partners that's purpose-built to solve our customers' most challenging problems. So let's get into the headline results of our group financials for the quarter. So starting off with our order intake development. I'm pleased to see that our organic order intake increased by 7% in constant currencies versus the comparison period. In actual exchange rates, order intake reached a level of EUR 402 million or EUR 419 million in constant currencies for an 11% positive variance. ING contributed EUR 15 million in the quarter, so in line with our business plan. And all regions contributed a solidly positive book-to-bill, increasing our backlog sequentially. Now unlike prior periods, we didn't get the advantage of large lumpy orders as we've -- myself and Mikko and Aki have talked about in the past, but rather resulting from a number of increased activities that manifested in smaller order intake or midsized order intake. So no real large orders of note to report within the period. So overall, a good start to the year despite the uncertainty in the macro environment. So let me turn your attention to the regional breakdown of our order intake profile for the quarter. Now as you can see from the table, we had growth in all regions with the exception of Asia Pacific. Europe, Middle East and Africa increasing from EUR 203 million to EUR 207 million or 2 percentage points. The Americas grew by 15% from EUR 145 million to EUR 166 million. And Asia remained relatively flat at EUR 29 million compared to EUR 30 million in the comparison period. Europe continues to show signs of steady demand growth, which we do see in all businesses, but most notably our lifting solutions. The growth in the Americas was primarily driven by ING acquisition, but at the same time, we certainly did not see further declines in the U.S. Now overall, the environment remains highly uncertain with ongoing trade tensions in the U.S. and heightened geopolitical tensions in the Middle East. So let's turn our attention to the revenue results for the quarter. Our revenues were down 7% year-over-year due to the EUR 114 million lower order book we started the period with. Now in line with our expectations, revenues were on the level of EUR 383 million, as you can see on the table on the left-hand side. Our rolling 12-month revenues are now converging towards our order intake level of prior periods at EUR 1.528 billion. Now our share of services and actual exchange rates increased a percentage point due to the decline in equipment sales. However, as Mikko will explain, we had a nice increase in service sales in constant currencies, and ING contributed EUR 13 million in sales or 3% and currencies overall had a negative impact of 4% on group results. Now geographically, our share of sales were impacted by the positive order intake development in the second half of 2025 in Europe, while the Americas was negatively impacted by the decline in the U.S., but partially offset by ING. Now in addition to the increase in Europe, our Asia Pacific region was also slightly up, improving to EUR 26 million or 7% year-over-year. And I'm pleased to see the development of our ECO portfolio sales as they increased by 23% to EUR 176 million or 46% of sales overall. Now with our year-over-year decline in sales, our comparable operating profit was negatively impacted, so I'll guide you through the numbers. For the period, we delivered EUR 52 million on sales of EUR 383 million, which is a 22% decline versus the comparison period. But all in all, a good start to the year. On a relative basis, the group was on a level of 13.5% versus 16% last year. Now the factors most impacting comparability were lower sales in the U.S., lower indirect costs affecting gross profit and lower fixed costs affecting operating profit. Now consequently, our operative return on capital employed declined due to the reduction of profit, items affecting comparability and the ING acquisition. Now Mikko will further guide you through the bridge. Now wrapping up on our quarterly check-in for how we are performing versus our long-range targets. Our last 12 months -- our 10-year CAGR is now at 5% versus our long-range targets of 16% of comparable operating profit, our last 12 months is at 13% and versus our long-range target of greater than 25%, we're in line at 27%, albeit a decline sequentially for the factors that I shared earlier. So with that, I would like to turn the stage over to Mikko to share with you results for the reporting segments. Mikko Puolakka: Thank you, Scott, and good morning also from my side. Let's start first with the Equipment segment performance in quarter 1. So the equipment orders were EUR 284 million during the quarter. This is 10% increase year-on-year. But if we exclude the currency impact, the growth would have been 14%, so in constant currencies. Lifting equipment grew very nicely. Growth came mainly from Americas, like elaborated already by Scott, very much driven by the ING Cranes acquisitions. The delivery equipment orders were flat year-on-year. I would say that taking into account the market situation in the U.S. and the fact that we did not book any major key account or defense orders during the quarter, I would say that the Equipment segment performed well in terms of orders during quarter 1. Sales were EUR 266 million. This is minus 9% year-on-year. And again, if we exclude the currency impact, the decline would have been minus 6%. Lifting equipment actually grew in all three geographies, and the decline in sales is coming solely from our delivery equipment, especially in the U.S. market. The U.S. decline is very much due to the past quarters below one book-to-bill caused by the volatile tariff environment and the delayed decision-making by the U.S. customers. Equipment comparable operating profit was EUR 32 million or the margin 12.1%. And the biggest driver for the lower profitability was the decline in the delivery equipment sales in the U.S. Like I mentioned earlier, equipment profitability was very much impacted by the lower sales as can be seen in the bridge on the right-hand side. Lower sales affected gross profit margin as the gross profit margin includes also fixed production overhead, so the factory overheads. We had a slight positive impact coming from the lower SG&A costs. But I would say that the cost savings from the early announced EUR 20 million cost savings program are not yet visible in our quarter 1 results. Then let's have a look on service performance. And I would say that currencies had a significant impact on services orders and sales during quarter 1. Service orders were EUR 119 million. With constant currencies, actually service orders would have grown 4%. Sales was EUR 117 million. And again, with constant currencies growth would be plus 5%. So in absolute terms and in constant currency services, quarter 1 revenues would be EUR 123 million. Really nice development in our recurring services like spare parts and maintenance. Those sales grew in quarter 1. However, installation services sales declined. So I would say that the recurring services growth was able to offset really nicely both the currency headwinds as well as the decline in the installation services. The number of connected equipment and maintenance contracts also continued to grow in quarter 1. So really nice performance in executing also the services strategy. Services profitability was stable at EUR 28 million or the margin 23.6%. If we look at the services bridge on the right-hand side, services sales growth would have been actually EUR 6 million with constant currencies instead of the EUR 1 million decline as we have reported. Recurring services growth very much offsetting the decline in installation services. And then the negative FX impact, mainly coming from the weaker U.S. dollars offset the volume growth. Next, let's have a look on Hiab's total financials. The overall Hiab profitability decline came from equipment volumes as you were able to see from the previous bridges. Lower volumes affected gross profit margin as the gross profit includes fixed production overheads. Our SG&A costs were stable in constant currencies. Like mentioned, the cost savings program effects are not yet visible in quarter 1. Those start to be more visible in the second half of this year. Currencies had a notable impact on quarter 1 profitability, mostly stemming from the weak U.S. dollar. We booked EUR 11 million restructuring costs during quarter 1 as items affecting comparability. So this is below the comparable operating profit. These items affecting comparability, they are related to the ongoing EUR 20 million cost savings program, headcount reduction, including also the ZEPRO tail lift production move from Sweden to Poland. And our quarter 1 tax rate was 26%. Our cash generation continued on a very good level in total, EUR 75 million in quarter 1. The cash conversion was really high, 186%. Our inventories decreased slightly, but I would say that the main contribution to our cash flow was coming from the net working capital like accounts receivable decline and the VAT receivables collection. So those were the main contributors to quarter 1 cash flow. Hiab has a very, very strong balance sheet with a net cash of EUR 219 million at the end of March. Our gearing was stable at minus 23%. And thinking the target to keep our gearing below the 50% threshold, this would allow us to raise more than EUR 700 million debt. So really strong balance sheet to execute the inorganic growth strategy. We paid the EUR 75 million dividend in April 2. So this is not yet -- the dividend payment is not yet visible in our quarter 1 numbers. And then on the right-hand side chart, you can see that we have only one major debt item that's the EUR 150 million bond, which is maturing in quarter 3 this year. And today, we have also revised or specified our outlook for the 2026 based on a very good start for the year. So we estimate that the comparable operating profit margin for this year exceeds 13.5%. This is up from the earlier above 13%, what we announced in February. The key assumptions behind this outlook are more or less unchanged what we said in February. We expect EMEA to continue to grow. U.S.A., not further declining from the previous quarters. However, the customer decision-making continues to be still slow and difficult to predict. 2026 has started with EUR 114 million lower order book. Also, the March '26 order book was almost EUR 40 million lower than what we had a year ago. We have factored in the outlook also, the EUR 20 million cost savings materializing in 2026, as mentioned, mainly effective from second half onwards. And then our group admin underlying costs would be more or less on 2025 level, plus then approximately EUR 5 million investments in process and systems development, mostly in the second half this year. So with those words, then I would hand the word back to Scott, please. Scott Phillips: Thank you, Mikko. So just closing with a few key takeaways summarizing the quarter. I'd say, first and foremost, we certainly continue to see a gradual recovery in lifting equipment in Europe, Middle East, Africa, which is great to see. Our delivery equipment market in the U.S. is expected to be in a cyclical trough. Third key takeaway is we are on track to achieve our EUR 20 million lower cost level in 2026 versus the prior year. We continue to nicely execute on our profitable growth strategy with a keen focus on where we can take advantage of opportunistic growth. As Mikko mentioned, our strong cash flow and balance sheet position us nicely to catalyze growth in the coming periods. And we're really pleased to see the solid good start to the year in 2026. So with that, I'll turn it back over to Aki. Aki Vesikallio: Thank you, Scott. Thank you, Mikko. With that, we are ready to start the Q&A session. Operator: [Operator Instructions] The next question comes from Antti Kansanen from SEB. Antti Kansanen: And I'll start with a bit of a long-winding one on the U.S. demand. I mean, backing out kind of your Americas orders, the FX impacts and the acquisition impact, it still looks quite good organic order growth for the quarter. Then again, if we look at kind of the quarter, you flag increased geopolitical uncertainties. There was a bit of a back and forth on the Section 232 tariffs and things like that. So how would you kind of describe the demand environment that you saw on the first quarter? Did you start to see a gradual recovery in some sense? Or is it kind of the heightened uncertainties adding kind of an extra layer of slower decision-making versus what you kind of saw going into the quarter? Scott Phillips: Just starting that one off. In the U.S., I think one of the key factors to note is that there was a bigger impact towards the second half of Q1 last year impacting both of our at-scale Delivery Solutions business within the U.S. So we're coming off of, I'd call it, a relatively low comp. So therefore, I'd say that was a driver in terms of the positive variance that you see slightly in the U.S. year-over-year. But on the other hand, I'd say from the combination of still the factors that existed prior to the trade tensions and then subsequent to the trade tensions and even with the geopolitical unrest notwithstanding, we are seeing a bit of stability, albeit as Aki characterized and Mikko as well, that the decision-making is still on a similar level in terms of customers being cautious. Having said that, I think it boded quite nicely for us in the quarter that similar to what we saw here in EMEA, the composition of the order profile in the period was more skewed towards smaller midsized type orders. So the overall activity level was quite strong. And I'd characterize the sales funnel within the quarter also nicely positive variance compared to last year. Having said that, we still have the same level of uncertainty. We have the added variable of geopolitical unrest. So therefore, we're trying to stay quite balanced in terms of managing expectations that -- which is why we made the note of where we think we're in a situation where we don't see it imminently getting worse. And so therefore, I think there is a potential to be stable to slightly improving. And certainly, you see that supported nicely in some of the reports from the truck OEMs. And then as has been noted in some of the analyst reports, there will be a bit of a lag in terms of the impact for our business compared to what you see at the truck OEMs. So the factors at least are lining up to be, I think, skewed more positive versus negative. Antti Kansanen: All right. And then specifically on the changes on the Section 232 tariff start of April, what's your analysis on -- are there any impacts on your clients in terms of truck prices or truck costs? And also what's the direct impact to your specifically? Scott Phillips: Yes. The impact of the change in the tariff code certainly has a negative impact from a customer perspective and that the cost level goes up somewhat. And so we've run through all the analytics and the math, and we've revised our price model vis-a-vis the surcharge as a consequence. So our customers will certainly see that. I don't see it at a level where there would be an imminent negative impact compared to the current demand environment, but certainly an additional factor to consider on behalf of our customers in terms of deploying the budgeted capital within the year. And then as we have highlighted in some of the past periods, one of the key changes that we did see in the U.S. was a tendency to move away from providing longer-term view of demand and capital allocation and rather going to more shorter demand horizons, if you will, in terms of quarter-by-quarter or biannual, if you will. So we still see that trend continuing. Antti Kansanen: Sure. And then kind of talking about pricing and surcharges, how much would you say that the U.S. orders in Q1 benefited from pricing in terms of year-over-year basis? Mikko Puolakka: Yes. The U.S. orders benefited approximately EUR 10 million from the surcharges during quarter 1. Antti Kansanen: All right. That's very clear. And then just a housekeeping question on the savings program on the EUR 20 million. So would I model it correctly if I kind of add a full run rate impact for Q4. So it's a little bit of a benefit on Q3 and then in a similar fashion first half of next year as well on a year-over-year basis? Scott Phillips: Yes, I'd say that's about right. Mikko Puolakka: Yes. Operator: The next question comes from Panu Laitinmaki from Danske Bank. Panu Laitinmaki: I would have two questions around the guidance. So firstly, what kind of triggers the upgrade? I mean, is it that you have now more visibility towards the end of the year? Or was Q1 or what you see in the market better than you were expecting? And then the second one is kind of what kind of -- what are you expecting for the U.S. market for the rest of the year in your guidance assumptions? Scott Phillips: Do you want to take the first part, and I'll take the second part. Mikko Puolakka: So basically, what triggered the specified outlook is that we had, of course, a solid start for the year, and we have now basically 3 months better visibility for the year. We don't see in customers' behavior at the moment any change. So that -- those are basically the elements which basically made us to slightly specify the outlook from above 13% to above 13.5%. Scott Phillips: Yes. And just adding one more to that one, Panu, is also the view that Europe continues on the positive glide path that we've seen. So better visibility to the order book now as we have an additional 3 months coverage, positive variance to the start of the year versus expectation or plan and then the continued good development in Europe and offset, of course, by a more or less stable situation in the U.S. Then the second part of your question was with regards to the U.S. demand, yes. Yes. So in terms of U.S. demand, just to reiterate the prior comments, we certainly see the similar factors coming into the year that we did for the second half of last year, where you had the environment where there was already a bit of a slower level of decision-making, or let's say, a longer time horizon to deploy capital based on changes in the cost levels and the inability of our customers to know, let's say, upon the time of taking possession of the equipment, what their forward-looking cost curves would look like. So then naturally, you would, if you could delay the decision-making until you have better visibility there. We see that continuing within the year. Having said that, we did see a bit of recovery, of course, in the Delivery solution business in the U.S. and activity level bodes well as the composition of the order intake was, again, rather than being skewed towards a few lumpy key account orders, but rather a number of small to midsized orders. So the key account orders are also still in the pipeline. So overall, we see a situation where we feel a bit more comfortable, given that we still have a lack of coverage to the end of the year, which then will further clarify potentially in line with our Q2 earnings report. But for now, given those three factors that I talked about earlier and this U.S. situation that we think is on quite a stable level or we don't see it imminently declining, supported by the data that we're seeing with the truck OEMs, key factor for us to be able to bump up the outlook for the year slightly. Panu Laitinmaki: My final question is on the European market. So it continues to recover, but could you kind of tell a bit more like which segments are looking better for you? And what about construction, which I understood has been still slow, but do you see any pickup there? Scott Phillips: Yes. For us, the quick answer on the construction side is not yet. But what we do see is we see a pickup on special logistics, a bit of infrastructure, a little bit of retail last mile, but significantly, of course, in our Waste and Recycling segment, somewhat offset by a slight decline in the defense logistics, as that's a consequence of timing of fulfilling past very large orders that were won in the past and then the fulfillment schedule is starting to wind down a bit. So overall picture with the exception of construction is all moving somewhat in the positive direction and somewhat steady. We're not seeing big swings period-over-period or sequentially within the quarter, but rather a nice steady improvement. Operator: The next question comes from Mikael Doepel from Nordea. Mikael Doepel: Just starting off following up on the EMEA question there. Any specific countries you would like to flag here that are looking particularly strong where you're seeing some kind of improvement, maybe some early signs into Q2 or any specifics you could add there? Scott Phillips: Yes. If you think about our demand environment in Europe, it very much follows along with the countries that have the highest or the most at-scale GDPs. And those were certainly the countries that had the most positive variance for us within the Europe, Middle East, Africa region. So of course, U.K., France, Germany, Benelux, France, Spain, all were nicely positive. Mikael Doepel: Okay. No, that's clear. And then also coming back to what you mentioned on defense. How would you describe the pipeline there currently? And also maybe a specification, did you book any orders there in Q1? And then the pipeline and potential, how you see it going forward? Mikko Puolakka: Mikael, was your question concerning Middle East or because the line was a bit... Mikael Doepel: On defense, yes, I was asking, did you book any orders related to that segment in Q1? And also how would you describe the pipeline and potential here going forward? Scott Phillips: Yes. A quick answer, yes, we did, albeit I'd say, overall, there was a slight negative variance on the defense orders from the comparison period. Pipeline looks really healthy. And as we've called out in the past, it's challenging to call the timing of converting the orders. But Hermanni, Frank, the team are doing a great job managing the pipeline, and we feel really good about how we're positioned to convert the pipeline. The question is around the timing. Mikko Puolakka: The defense orders were roughly 4% of the total order intake in quarter 1. So as we have said earlier, they are a bit lumpier than the kind of typical commercial orders. So from quarter-to-quarter, it might fluctuate a bit. But like Scott said, solid pipeline and something to come most probably later this year, so yes. Mikael Doepel: Okay. No, that's fair. And then just finally, on the M&A, I think you, Mikko mentioned the EUR 700 million firepower here. How would you describe the pipeline? I mean, which regions would you say are most active right now? And what are the key hurdles to get the deals done? Scott Phillips: Yes. So let me start out and take that question. Pipeline is quite active, as we have consistently called out in the past. Of course, it's always all a matter of timing. Our focus is in line with our focus segments. Similarly, from a geographic perspective, I'd say there's an active pipeline, of course, in both of our core markets, both within Europe as well as the Americas. And of course, that's a critical area of focus for us. At the same time, we continue to look for opportunities to help us scale quicker in regions where we're subscale. And so we still like the APAC region and are investing a lot of time and expense in analyzing and understanding the opportunities in that part of the world. And similarly, we still see opportunities in Latin America as well. Mikael Doepel: Okay. And then just a follow up, I mean, what would you say are kind of the key hurdles to get the deals done? I think you said valuation question more or is it something else that's kind of stops? What are the key kind of things being discussed? Scott Phillips: Yes. Sorry for -- just to give you a bit of context around the history. So the first key factor was just needing to work our way through the merger and then the demerger process, as we were certainly constrained for good reasons to take actions during those years. So post-completion of the demerger, then the key constraint really has just been a matter of timing of working the processes. Operator: [Operator Instructions] The next question comes from Antti Kansanen from SEB. Antti Kansanen: Yeah. Thanks for taking my follow-up, which would be on the U.S. distributor. So Scott, maybe could you talk a little bit about where you are with this kind of a growth strategy, adding the distributor network or expanding the distributor network in the U.S. and expanding geographically? What type of a revenue potential should we think about from these actions in the next, let's say, 12 to 24 months? I mean, if the demand in the U.S. is starting to bottom out, I guess, the fact that you have a wider distributor network today than, let's say, a year ago, would add a little bit of a bigger potential for you going forward? Scott Phillips: Yes. Thank you very much for the follow-up question, Antti. I'd love to provide some color on this follow-up. So quite pleased with where we are relative to executing on our growth strategy in North America vis-a-vis activating a hybrid model, whereas in the past, we were almost entirely direct with the exception of our Princeton branded truck mounted forklifts. So over the past 2 years, we've activated 16 new dealers, of course, very much back-end loaded towards that time period. So great companies at scale. For the first time, it gives us real coverage in all 48 contiguous United States. And so that's a key milestone for us. And then I'd say number two, and I couldn't emphasize this one enough that the quality and capability within these dealers is extremely good and proud that they've elected to work together with us as real partners, and they're going to certainly help our overall growth strategy as well as to develop the overall Hiab brand in the U.S. Now having said that, we're in the mode of developing and going through the training and activating the dealers. And so that's a bit of a step-by-step process. Hard to exactly characterize the amount of positive variance certainly within this year, but we expect some positive variance to our order intake development in the U.S. as a consequence. And over the time series, if I think about '27, '28 and beyond, then that should steadily pick up. We believe that we'll end up somewhere around 20 to 22 distributors overall. So we still are in the process also of adding new dealers in areas where either we're undercovered and/or we're looking for the capability, be it for a lifting solution or a delivery solution as some of our dealers are quite specialized and others are more generalists covering the whole portfolio. Antti Kansanen: Is there any way for me to kind of compare from revenue potential-wise, say, 20 to 22 distributors versus your prior direct model, kind of how much does it expand the addressable market? Or how much kind of a dollar revenue potential would it give you down the road when all are fully activated and selling your equipment? Mikko Puolakka: Difficult. Scott Phillips: Yes. On the spot, no probably, but however, as we work -- progress through subsequent periods, and of course, as we certainly have touch points with all of you that cover our business, we certainly would be able to start to give better and better color on just that point. Operator: There are no more questions at this time, so I hand the conference back to the speakers. . Aki Vesikallio: Thank you for the telephone conference questions. We have at least one question from the iPad. This one is related to the Germany infrastructure package. Did we see any impact in the quarter? How would you characterize the situation or the stimulus money from the German infrastructure package? Is it visibility better, the same or worse than in the beginning of the year. Scott Phillips: Well, certainly, better visibility compared to the beginning of the year. Timing-wise, I'd say, too early yet. But we do anticipate having nice opportunities in the future, and we're starting to get visibility in the opportunity funnel. Aki Vesikallio: Great. How about then the supply chain? Do you see any constraints, especially in the hydraulics or electronics, I think this must be related to the Middle East situation. Scott Phillips: Ones, a great question and it gives me an opportunity to put the spotlight for a second on our supply chain teams. I think they've done a great job, both in terms of our factories and in collaboration with our sourcing team. So really pleased to share that no impact. Now, that picture, of course, looks a lot like the duck on top of the water. But of course, below the surface, there's a lot of activity behind the scenes, both internal to Hiab, but also in our partner network vis-a-vis our suppliers as well as the logistic shipping companies. But overall, no negative impact within the quarter. But a lot of organizational bandwidth that's been redirected to make sure that we secure and stabilize the overall supply chain. Aki Vesikallio: Indeed. The next one here is that do we see any potential considering new trade agreements between Europe and South America or then potentially how about India, do we see any potential there? Will this lead to Hiab's new equipment production service units in the medium term, impacting sales year-on-year growth rate in these regions? Any color you could provide? Scott Phillips: Yes, we haven't seen yet any impact at this point as a consequence of the new trade agreements. However, I would say that markets such as India are a great example of those that we are constantly pulsing and checking for what's the right opportunity for us to better participate in the market? Is that an import opportunity? Or is it a produced local opportunity? And certainly, I anticipate that a market such as this will play a key and ever increasingly important role in the future of our business. Aki Vesikallio: And I think we have still some more questions from the telephone line. So let's turn back to the moderator. Operator: The next question comes from Mikael Doepel from Nordea. Mikael Doepel: Just very briefly a question around your service business. Just talk a bit about how you see the environment there, the dynamics there? I mean, where are we currently on the spare parts capture rate? And how do you see the kind of the overall growth here going forward? Scott Phillips: In terms of the services business, what I would still say is that Mikko and his team are progressively working towards better and better partnership training and development of how to, one, make sure that as a result of having new or current activated connected units that, that gives us great control then over the installed base, which is the first key factor, and that's why that's one of the critical KPIs that we track relentlessly each period. Then that enables to have the dialogue of converting the management of those assets in the installed base wrapped around ProCare contracts that we do both for direct as well as through indirect. And we know that we have a significantly different outcome of capture rate and revenue per unit on those units that are captured in ProCare. And the good news is that our Net Promoter Score and feedback from the customers are on a significantly higher level as well. So the team is doing a good job getting better and better control of the overall installed base. But it will take time as given the top line split between what we sell direct versus indirect. The biggest opportunity for us is to continue to increase the share of capture on the indirect sales side. And so a lot of good progress is being made there. Overall, in terms of the capture rate versus what we shared in 2024, we continue to step-by-step make good improvements sequentially and throughout each period. The limiting factor so far, potentially, and this is a bit of opinion as it's quite variable, has been around the utilization rates of the equipment. And we have seen a lot of variability through the period where some period, some geographies is up and some within the same geographies may be down, and that might have a bit of a factor if I think about the past 2 years. Moving forward, our expectation is that given the age of the installed base, the replacement rate should continue to increase. And at the same time, the level of service events or the frequency of the service events should get slightly increasing as well, which bodes well for our recurring revenue business. So overall, good progress there. When we come back on our next Capital Markets Day, we'll give a lot more color on how we're progressing relative to the three KPIs that we shared in '24 as well as the overall capture rate. And I'd say the last comment I would add is, I think I did share in either Q3 or even in February in the Q4 earnings, our share of recurring revenue is now on quite a good level at around 75%, 76% level. Operator: The next question comes from Tom Skogman from DNB Carnegie. Tomas Skogman: I know you have sensors installed in your equipment. Can you open up a bit what you see, how customers are using the equipment sequentially year-on-year and between different geographies. What can you read about your customers from this? Scott Phillips: We get quite a lot of data-driven insights off of our connected equipment and really pleased by the fact that we are able to provide condition-based monitoring services, so we can see any number of data points from the amount of how they're being utilized, the time under load, the type of loads, whether it's overload, under load, time in idle, even if an operator has not buckled the seat belt and attended to some of the basic requirements around safe operations. So a whole host of variables that we're able to see relative to most of the units that we have connected. And then quite pleased to tell you that at least before the end of the year, you'll start to also see quite a nice uptick in connected units in our tail lift business as well. Tomas Skogman: But what do you see in customer activity, like in the U.S. where we have this kind of both kind of uncertain demand situation. Do you see positive signs in how customer equipment is used, for instance. Scott Phillips: Sorry, now I understand a little better than what you're getting at there, Tom. So in terms of utilization, we see quite a lot of variability. I'd say, overall, we don't see any real negative or positive trends, but some periods, utilization or activity levels are up. And then in the next period, it might be down. So overall, I'd call it quite stable. And I'd say it's the same roughly applies here in Europe as well. In some periods, it's trending more positive and then in another period, it will trend slightly negative. Tomas Skogman: All right. And then about your M&A pipeline, do you have any targets you would like to share? How many companies you would like to acquire this year or how much sales you would like to add in through an M&A in 1 year or 3 years period or so? Scott Phillips: Yes. I mean I'll stick to my same answer as before. I think that given we're a business configured of 6 divisions and a number of business units, I would love to get to a steady state where we're able to do a bolt-on at least 1 per year per division per business unit. And similarly, if you think about then the composition of our business, managing 1 or 2 more transformative or, let's say, business unit or division size acquisitions per year would be a great steady state to get to. But to go from where we are to that steady state, then it's going to take some time as we now are, what, 9 months or so into being able to now action opportunities that we weren't -- we were constrained in action until we completed the demerger. So we'll also share a lot more color on that as we progress towards the next Capital Markets Day. Tomas Skogman: And when is the next Capital Markets Day? Scott Phillips: We haven't set the date yet, but we will share that as soon as we do. Tomas Skogman: But it's already this year, you plan to have it or... Scott Phillips: Yes. My sense is that it's likely to be in 2027, yes. Mikko Puolakka: Not yet decided, yes. Scott Phillips: Yes. Tomas Skogman: Yes. And perhaps a bit more on this service sales target. You have EUR 700 million as a target. I realize this downturn probably was a bit steeper and longer than you expected. But just on a general level, how do you feel about this? Because, I mean, that would really demand exceptional sales CAGR to reach that number. Scott Phillips: Yes, you're exactly right. There is that element if you think about the -- especially on the nonrecurring revenue piece, there is a significant element there of when does the equipment demand recover relative to the way we modeled the demand curve in Q4 '23 when we established the current strategy period. So a lot will be understood depending upon how the balance of this year and the beginning of ' 27 plays out, of course. Mikko Puolakka: But of course, one should still -- if we think quarter 1 service development, so sales up by 5% with constant currencies. At the same time, we saw a decline in the installation services. So if the installation services, i.e., new equipment sales, then attached with the installation sales would improve, then that would, of course, have had in this quarter a nice further addition to service revenues. Scott Phillips: Yes. Tomas Skogman: And then finally, these new U.S. distributors, do they wish that you would expand your product portfolio to some certain direction? Scott Phillips: I think at this point it's too early to tell. They're still in the mode of getting themselves up and running on understanding the scope of the portfolio that they're responsible for, how to work within our processes and systems and with the support staff that's available to them. But I am confident that as we look forward, they will certainly and frequently share insights where they see that we have opportunities to fill gaps within the portfolio. But at this point, I'd say it's too early. Operator: The next question comes from Antti Kansanen from SEB. Antti Kansanen: Just a quick follow-up on the U.S. order side. I mean, I just wanted to get a reminder like last year, your Americas orders declined by 14% on euro basis, but I'm sure that there was a pricing contributor on a positive side. So how much did the volumes last year decline? Or how much your pricing was up with the surcharges and all of that during '25? Mikko Puolakka: The surcharge impact, if I recall correctly, was something like between EUR 20 million, EUR 30 million for last year. A bit less than EUR 30 million, around EUR 25 million, yes. Antti Kansanen: Do you have any view kind of how much the volumes are currently. The order volumes are below, let's say, what you booked on '24, which was kind of the previous peak? Mikko Puolakka: You mean in the U.S.? Antti Kansanen: In the U.S., just trying to kind of think about that if there's a recovery on the market, what is kind of the upside in terms of your order intake, given that your prices are quite much higher now than they were a few years back? Mikko Puolakka: Of course, it's good to remember that the surcharges are something which, I mean, they change all the time as tariffs change. So of course, depends on the tariff landscape, whether one can use that as a, let's say, permanent price increase or we have communicated to the customers that the tariffs will -- if the tariffs change, then the surcharge will change. But all in all, last year roughly that EUR 25 million, let's say, impact in the order intake. It's a bit difficult to -- because to -- because there are so many different products in the U.S. market. There are tail lifts, loader cranes, truck-mounted forklifts. So one cannot count those together. It's like calculating apples and bananas together. So from that point of view, it's a bit difficult to say the kind of volume impact. Antti Kansanen: Sure. I mean, it's a simplification, but it seems like the pricing had a mid-single-digit impact and then that would kind of suggest, almost 20% down on volume. Scott Phillips: That's the right way to think about it, yes. Mikko Puolakka: Yes. Overall, it's the biggest impact is coming from the customers' overall demand, the pricing having a quite small impact. Operator: There are no more questions at this time, so I hand the conference back to the speakers. Aki Vesikallio: Yes. Let's still take a couple of questions from the iPad. So firstly, on the services. So do we always nowadays offer service agreement when we sell a new piece of equipment? And what is our hit ratio with service agreements with new equipment sales? Scott Phillips: The quick answer to that is that's certainly our expectation that it's one of our key strengths. And certainly, if I think about the 50 or 60 customer meetings that I have a year, that's usually the first topic of conversation is services and the availability of services proximity to installed base and the high need to secure uptime as most of our customers are understanding that they're paying a premium on the margin in order to secure the service outcomes that they need to keep them going. So therefore, it's critical for us to offer the services concurrent with the opportunity to sell a new piece of equipment. The hit rate or, let's say, the attachment rate of the service contract varies depending upon region. So I would kind of come back to Mikko's comment earlier. It's a bit -- it's not a great metric if you just aggregate it all together and say, here's our percentage of attachment because it's much higher in certain areas depending upon how we're configured with our own organization and the personnel that we have, but it varies, I'd say that overall, I can say that is one of the key opportunities for us to continue to not only drive our services business, but more importantly, a key factor for us to increase our Net Promoter Score or customer satisfaction. So the teams are working quite diligently together and with our partners to ensure that we feel like we have all the tools, processes and capability and training in order to not only offer the services, but then most importantly, to execute successfully in delivering against those service contracts. Aki Vesikallio: Then we have two more questions this. I think these are quite quick ones. The first one is on the M&A, any preferences in geographical regions? I think you, Scott, already mentioned that we like EMEA, Americas, our key regions, but we also seek for opportunities in the APAC region. So that was the answer already. And then the final one, which one of you remembers the numbers, how large proportion is the U.S. out of our Americas sales? Of course, we provide that on an annual basis, the North American sales, but we don't split U.S. separately. But of course, it's a significant share out of the Americas and also on the North American side. Mikko Puolakka: Yes, I don't remember now the exact percentage, but it's -- I would say U.S. is the majority of the Americas revenues. Aki Vesikallio: Exactly. Scott Phillips: Yes. Yes. A very high percentage. Aki Vesikallio: Yes. And of course, for this year, the rest of the Americas is somewhat higher due to the ING acquisition impact. So the Brazil market is proportionately higher than last year. Scott Phillips: Yes. Aki Vesikallio: Okay. That then concludes our Q&A session. Thanks for the great questions and for the great answers. We will be back with our second quarter results in 22nd of July. So stay tuned. Scott Phillips: Thank you. Mikko Puolakka: Thank you.
Anders Edholm: Good morning, and welcome to this presentation of SCA's 2026 First Quarter Report. With me here today, I have President and CEO, Ulf Larsson; and CFO, Andreas Ewertz, to go through the results and take your questions. Over to you, Ulf. Ulf Larsson: Thank you for that, Anders. And also from my side, a very good morning. So despite the increasing costs and the continued challenging market for forest industrial products, we delivered SEK 1.1 billion on EBITDA level and by -- that's an EBITDA margin of 23% for the first quarter. Segment Renewable Energy had a record high result during the first quarter, and that was driven by electricity prices, strong deliveries and also a very good market for liquid biofuels. Our new wind farm located in Jamtland started operations during the quarter and contributed to a high profitability within the segment. And our high degree of self-sufficiency in strategic areas continue to be an important factor to mitigate higher costs, partly offsetting higher wood raw material and energy costs. Turning over to some financial KPIs for the first quarter. As already said, our EBITDA reached SEK 1.1 billion, and that corresponds to a 23% EBITDA margin. Our industrial return on capital employed came out on 2% accounted for the last 12 months, and the leverage was 2, while our net debt to equity reached 11.9%. And I will now make some comments for each segment, starting with Forest. Stable harvesting levels from our own forest have contributed to balanced supply of wood raw materials to our industries during the period. We have seen a long-term trend of increasing sawlog prices, and they continued up also in the first quarter. However, availability of sawlogs has increased towards the end of the quarter due to the big storm, and that will also gradually reduce prices coming quarters. Regarding pulpwood prices, they have been rather flat for a couple of quarters, and now they have started to come down. When we compare the first quarter '26 with the first quarter '25, sales were up 2%, while EBITDA was up 1%, mainly due to higher prices for wood raw materials. Over to solid wood products. And -- in general, we still have a slow underlying market for solid wood products. We continue to note signs of improvement in the repair and remodeling segment, and we also see a decreased production in Scandinavia and Germany, generating a better supply and demand balance, especially for spruce. Stock levels remain on the high side among producers for pine, but are on normal levels for spruce and stock levels at customers continue to be on the low side. Delivery volumes were lower in Q1 '26 in comparison with the first quarter of '25, but first quarter '25 was an exceptionally strong quarter. SCA stock level of sawn goods is currently on a very balanced level. The price for solid wood products increased by a bit less than 4% in the first quarter of '26 in comparison with the fourth quarter of '25. And this development is in line with what I said when we presented the report for the fourth quarter last year. Sales were 13% lower in comparison with the same quarter last year. EBITDA margin decreased from 16% to 4% due to higher raw material costs, lower deliveries and a negative currency effect. Today's stock level of solid wood products in Sweden and Finland is described at the top left on this slide and is shown in relation to the average for the last 5 years. As mentioned earlier, we note that the inventory level is on the high side, especially for pine, while the SCA inventory level is balanced. As can be seen in the diagram to the bottom left, the Swedish and Finnish sawmill production has been lower than average in the beginning of '26. And in the diagram to the top right, we can note that the export price index decreased in the first quarter. SCA's prices, however, increased due to a better mix. Going into the next quarter, I estimate that prices in the market will increase. On the other hand, increasing freight costs will have a negative effect, resulting in a slight net price increase for SCA. Looking forward, we will probably see a stable development going into autumn with an okay balance between supply and demand. Over to pulp. When comparing the first quarter '26 with Q1 '25, sales were down 16%, mainly due to lower prices and negative currency effects. EBITDA was down 88%, which was also driven by lower prices and negative currency effects. During the third and fourth quarters of '25, demand for NBSK pulp was rather weak and prices were stable at low levels. Net prices on NBSK then decreased further in the first quarter of '26, very much due to the higher rebates in Europe and U.S. At the same time, gross prices increased in Europe and U.S. despite weak demand. In China, demand for NBSK pulp was on a normal level during the first quarter, but prices remained low. The conflict in Middle East is adding complexity in the pulp market, and it also increases the cost pressure. Looking at CTMP, demand was very low in January and February, and prices were at the bottom. However, during March, we saw an improvement in demand and prices started to increase. Inventories of NBSK were on a high level during the first quarter. Hardwood inventories on the contrary were below average level. Finally, CTMP inventories have been on a rather normal level. Moving over to containerboard. Sales were up 4% in Q1 in comparison with the same period last year, driven by higher delivery volumes, somewhat mitigated by lower prices and the negative currency effect. EBITDA was down by 56%, driven by lower prices, negative currency effect and higher energy costs. We have noted a rather soft box demand during the start of the first quarter, but it has since then developed in a cautious positive direction. The retail business remains a positive driver, and we have also seen the manufacturing industry recovering in the beginning of the year. European demand of containerboard has been moving sideways during the first quarter, in line with the box demand. There is no new containerboard capacity expected to start up in the first half of '26, although we can expect a ramp-up effect of new capacity started in '25 with the vast majority coming in testliner. Kraftliner inventories remain above historical average in Q1, as you can see in the graph. During the first quarter, the availability of OCC has been in balance with supply and demand, which in its turn has led to stable prices in the first quarter. Prices for brown kraftliner in Central Europe has during the first quarter decreased with EUR 25 per tonne and for white kraftliner with EUR 20 per tonne. Anyway, we now feel a more solid underlying demand in combination with strong cost pressure. And due to that, we have implemented a price increase of EUR 60 per tonne for brown kraftliner and EUR 40 per tonne for white kraftliner from the 1st of April. Finally, I will say some words about renewable energy. And in the segment, we have had a stronger quarter compared to the same period last year and maybe the strongest quarter ever. And that is, of course, mainly due to higher production and stronger margins in our -- with St1 jointly owned biorefinery in Gothenburg. In addition, we have also had a positive impact from our new wind farm in the county of Jamtland. Electricity prices were high during the quarter, which had a positive impact in our wind business. Our new wind farm, Fasikan, was taken over in time and on budget and has been ramping up production during the quarter. SCA's land lease business is stable at 10.6 terawatt hours according to plan. And this is, as said before, equal to 20% of installed capacity of wind power in Sweden. The market and price for solid biofuels were strong due to cold weather during the first quarter. Anyway, the positive effect was mainly offset by higher costs for raw materials compared to same quarter last year. For liquid biofuels, we have seen continuous high margins compared to previous quarters. The main reasons are the implementation of RED III across European countries as well as strengthened EU control mechanism regarding imported products and feedstocks. In March, we also see additional price increases due to the situation in the Middle East. We expect market volatility in renewable fuels to remain high as Europe ramps up the blending mandates, both in HVO and SAF. And with that, Andreas, I hand over to you. Andreas Ewertz: Thank you Ulf, and good morning, everybody. I'll start off with the income statement for the first quarter. Net sales decreased 8% to SEK 4.7 billion, driven by lower prices and negative currency effects. EBITDA decreased 33% to SEK 1.1 billion, driven by lower prices, negative currency effects and higher cost for wood raw material. EBIT decreased to SEK 543 million and financial items totaled minus SEK 86 million with an effective tax rate of below 20%, bringing net profit to SEK 380 million or SEK 0.54 per share. On the next slide, we have the financial development by segment. Starting with the Forest segment to the left. Net sales were in line with the previous quarter at SEK 2.5 billion. Higher prices for sawlogs were offset by lower delivery volumes to SCA's Industries. EBITDA decreased slightly to SEK 884 million due to seasonally lower harvest from SCA's own forest compared to the previous quarter, which was offset by higher prices for sawlogs. In Wood, prices were slightly higher compared to the previous quarter. Net sales decreased to SEK 1.3 billion due to lower delivery volumes. EBITDA decreased to SEK 49 million, corresponding to a margin of 4%. High costs for wood raw materials and lower delivery volumes were partly offset by higher prices. In Pulp, net sales decreased to SEK 1.6 billion compared to the previous quarter, while EBITDA increased to SEK 40 million, corresponding to a margin of 3%. Lower costs for planned maintenance stops were offset by negative currency effects and lower prices. In the quarter, we took market-related downtime in our CTMP mill due to high electricity prices. In Containerboard, net sales were in line with the previous quarter at SEK 1.7 billion. EBITDA decreased to SEK 104 million, corresponding to a margin of 6%. Lower prices, negative currency effects and higher energy costs were partly offset by lower costs for raw materials and higher delivery volumes. Renewable Energy, we had a record quarter. EBITDA increased to SEK 206 million, corresponding to a margin of 31%. The increase was driven by high electricity prices, the new Fasikan wind mill and higher results in liquid biofuels. On the next slide, we have the sales bridge between Q1 last year and Q1 this year. Prices decreased 4% with lower prices in pulp and containerboard, partly offset by somewhat higher prices in wood. Volumes were flat with higher volumes in containerboard, but lower in wood. And lastly, currency had a negative impact of 4%, bringing net sales to SEK 4.7 billion. Moving on to EBITDA bridge and starting to the left. Price/mix had a negative impact of SEK 255 million. Higher costs from mainly wood raw materials had a negative impact of SEK 111 million. We had a positive impact from energy of SEK 34 million and a negative impact from currency of SEK 203 million. In total, EBITDA decreased to SEK 1.1 billion, corresponding to a margin of 23%. Looking at the cash flow. We had an operating cash flow of SEK 569 million in the quarter. And as you know, other operating cash flow relates mostly to working capital currency hedges and should, therefore, be seen together with changes in working capital. Looking at the balance sheet. The value of the forest assets totaled SEK 104 billion. Working capital decreased to SEK 5 billion. Capital employed totaled SEK 112 billion. Net debt stood at SEK 12 billion and equity totaled SEK 100 billion, corresponding to a net debt to equity of 12%. And we are now almost finalized our large ongoing investment projects. Thank you. With that, I'll hand back to you Ulf. Ulf Larsson: Thank you, Andreas. And just to summarize, I mean, we have had a challenging first quarter. I think we have controlled what we can control in a good way. We see a positive effect from the ramp-up of our big strategic investments, and we are looking forward to the time when we can move over those extra volumes to our main market in Europe and the margin that can create. We have also started up our new wind farm outside Bracke in Jamtland and the project was done on time and in budget. So by that, I think we open up for questions. Operator: [Operator Instructions] We will now take our first question from oannis Masvoulas of Morgan Stanley. Ioannis Masvoulas: Three questions from my side. I'll take them one at a time, if that's okay. First, on containerboard. So you're starting from a fairly depressed EBITDA margin level in Q1. And going into the second quarter, you should be benefiting from lower fiber costs as well as lower power costs. How about other input costs around logistics, chemicals, et cetera? Just trying to understand the overall development into the second quarter on the cost side. And then related to that, is it fair to expect another increase in kraftliner prices in May to help restore margins? I'll stop here for the first one. Ulf Larsson: I'll start with the market and then Andreas will give you the cost perspective. And I guess, I mean, as you realize, we did increase the price for kraftliner from 1st of -- first, we reduced the price by EUR 25 per tonne for brown kraftliner in the first quarter and EUR 20 for white top. And then from 1st of April, we have announced that we will also come through with price increases of EUR 60 per tonne for brown and EUR 40 per tonne for white from 1st of April. And that will stepwise be implemented in the price for the first quarter. I guess we see no price movement in May. We haven't heard anything more from testliners producers. And I think it's fair to say that they have to start and then I believe that kraftliner can come after. So nothing is planned for May. But if we will remain on this level when it comes to gas prices, I guess, we'll see some attempts in -- yes, later in Q2 or in the beginning of Q3. So that's my view. Then Andreas, about the cost situation. Andreas Ewertz: Yes. On the cost side, if we start with pulpwood, the pulpwood will continue to go down slightly in Q2, but very slightly. As we talked about earlier, we have this 6 months lag effect. So the pulp wood prices will go down mainly in the second half of the year. OCC prices are fairly stable. If we look at electricity prices, they're very high in January, February. So depending on how the electricity prices develop, but most likely, it will be lower compared to Q1. And then in terms of transportation costs depending on the oil price development, but the oil price will, of course, affect transportation. So that's the big moving parts. Ioannis Masvoulas: Okay. Then the second question, can you comment about current pulpwood prices? I know you mentioned a slight benefit in the industrial units in Q2, but just trying to understand where are we now on pulpwood prices versus the peak of 2025? Andreas Ewertz: Yes. So pulpwood prices, they went down slightly in Q4, slightly in Q1, but we are talking about maybe 1% to 2% down. It would continue to go down 1%, 2% in Q2. And then you get a larger effect in Q3 and in Q4 because of this lag effect. Ioannis Masvoulas: Okay. And just the last one for me. You talked about the CTMP market where demand remains low, same with prices. Could you give us an update on operating rates in Q1 here and your expectation for Q2? And how are you feeling about this business given the depressed market backdrop? Are you willing to run the asset? I know it's a low-cost mill, but just trying to understand how you're looking at optimizing the business here. Ulf Larsson: Well, in the first quarter, I would say that we have maybe run the CTMP mill at 50% or something like that, I mean, due to high electricity prices and also the margin cost for pulpwood. So that's the case for first quarter. And I mean, CTMP has been a very bad business in the first part of this year. Now we see that the CTMP market is picking up. And I guess one part of it is that short fiber pulp is picking up step by step and maybe we see some kind of substitution. I also feel that we have a better consumption by board customers, not the least. And so I mean, just now, we are running more or less full for the moment being. Of course, we keep an eye on the electricity price. And if it's too high, then we have to close down, but we are rather positive for the CTMP business in the second quarter. Operator: And we'll now move on to our next question from Linus Larsson of SEB. Linus Larsson: I'll start with a follow-up on the input cost side. And if you could maybe elaborate a bit on the pulpwood cost declines that you're seeing in your wood consuming operations over the course of the next few quarters. If you could quantify in any way what you're expecting going into the second half of 2026, please? Andreas Ewertz: Yes. So as I said, now we got maybe 1% down on pulpwood cost in Q1 compared to Q4, while the sawlog prices increased with around 7% in Q1 compared to Q4. In the second quarter, we expect both pulpwood and sawlog prices to go down slightly, but we're talking about 1%, 2%, maybe 3% on pulpwood and 1% to 2% on sawlogs. And then we'll see a bigger effect in Q3 and Q4. But it's hard to say exactly now because it's now we're going to -- in second quarter, then we're going to get more of these storm volumes, of course, will help to get the price down. So we'll see, but we expect a bigger decrease in Q3 compared to in Q2. Linus Larsson: Great. And then -- and I hate to ask this, but if you could maybe please help us dissect the other line, which was weaker in the first quarter? And if you could help us understand what the normalized level might be going forward? And the reason I'm asking is that this is actually where more than the entire deviation compared to consensus occurred. So if you could just help us understand that would be super helpful. Andreas Ewertz: Yes. Firstly, we have a seasonal effect, but the biggest thing is, of course, profit in stock. So when we sell something, for example, from the Forest business to the Wood business, then the Forest segment, of course, makes a profit. But until the Wood division sells that final product, you eliminate that profit. And that's why you have this cyclicality between -- dotted line between different quarters. So because of the increased prices of sawlog and a bit lower delivery volumes in our Wood segment, you have a higher other costs, but that's only periodization between different quarters. Linus Larsson: Great. That's really helpful. And like given what you just said, Andreas, any pointers for what to expect in the second quarter? Andreas Ewertz: I think if you look at the full year, of course then these prioritization effects, I mean, they get canceled out. So if you look at the full year, then you get quite a good picture of the yearly other costs. Linus Larsson: Sorry, what do you mean -- if I look at the past couple of years, that... Andreas Ewertz: Yes, yes, exactly. The past year. Operator: And we'll now move on to our next question from Robin Santavirta of DNB Carnegie. Robin Santavirta: Now in terms of Middle East crisis, you mentioned in the report that it increases uncertainty and of course, the oil price is also higher and you call out this as an indirect negative. But you have high energy self-sufficiency. Do you think you have a competitive advantage to Continental European producers, especially in containerboard? Ulf Larsson: Yes. I mean, we are not dependent on Russian oil and gas or oil at all, more or less. I mean that is, of course, a positive thing. And the other thing is that when it comes to distribution, I mean, we used to say that we have 40% -- degree of self-sufficiency due to the fact that we now produce liquid biofuels in Gothenburg and our part, I mean, account for around 40% coverage of the total cost. So that is, of course, very positive. And as you could see also in this quarter, I think we did the strongest quarter ever for renewable energy and a big part of that was, of course, liquid biofuels. Robin Santavirta: Right. And then also related to containerboard from what I hear from not only you, but from other companies in the market, it seems demand has increased quite significantly in March and April, and it's certainly in containerboard grades in Europe and the start of the year was much slower. What explains the pickup in demand? Is this just pre-buying before prices go up? Or are there other dynamics in play? Ulf Larsson: It's hard to say really. I think one thing can be that you have -- I mean, I guess people, they are securing the raw material supply in different areas due to the geopolitical situations. So that might be one thing. But we also feel that -- I mean, the retail sector has been quite good for a while. And now we feel also that the industrial customers, they are coming back. And I mean, not at least today, I mean, we have seen some reports and also yesterday from some companies. And I mean, they also say that the order inflow is quite strong also from the more heavy industry, which has -- that will have a good impact also on our kraftliner business. So yes, the market is definitely strong just now. The balance is -- still we are a little bit on the high side when it comes to the inventory level. And I mean, we all know that we have a lot of testliner capacity out there, curtailed just now, I guess. And on the other side, if we will -- if gas prices will remain on this level, there still -- I guess, many of them, they lose money. So I guess we will see -- it's a mix between supply-demand and cost pressure and so on. But I guess we can -- we might see some further price increases coming into the autumn. Robin Santavirta: I understand. Finally, just on saw timber. I mean, this market, of course, is tricky. But when I look at log prices in Europe and when I speak to companies there, they complain about scarcity, essentially of sawlogs -- prices of -- log prices that are much higher than you have in Northern part of Sweden. Why wouldn't you sort of have better -- I mean, you're in black figures most of the quarters, even in this tough environment. But could it be a setup where you basically do not need the construction market to come back and still get higher prices? Or is there something I'm missing with the mismatch of sawlog prices in Europe versus Northern part of Sweden. Ulf Larsson: I don't know if I fully took your question, but you talked about price deviation from Northern -- Southern part of Sweden... Robin Santavirta: I mean, they are paying 2x more for sawlogs... Ulf Larsson: No, no, they don't. No, no, they don't. And I think that's a misunderstanding. No. I mean you look at public price lists, and that is, of course, not the price in the market. So I guess, when we do some comparisons, I mean, you don't -- it doesn't really differ too much. And also when it comes to log size, I mean, the log is much more narrow in the Northern part in comparison with the Southern part and so on. So I don't think that delta is -- yes, we are favored. Robin Santavirta: So the price is roughly the same. Ulf Larsson: Maybe not the same, but it's not -- as you say, I mean, it's not the double price. So I mean, I think it's -- and then, of course, now with -- now you have the storm effect, and we haven't seen really the result out of that. You see a big difference between spruce logs and pine. You see also in the end market that now we have a deviation for sawn goods by SEK 300 per cubic meter more or less if you compare spruce and pine to the advantage of spruce, of course. And I guess that's a result of the spruce beetle effect that we had in Central Europe a couple of years ago. So I mean they have a deficit of spruce logs. So it's a more complex market than that. And you cannot really look at official price list. That's my clear message. You have to -- because what we buy in the market is something completely different in many cases, where you have to add premiums and things like that. Operator: And we'll now take our next question from Johannes Grunselius from SB1 Markets. Johannes Grunselius: It's Johannes here. I have two questions. I would like to zoom in on your energy business and the containerboard business. So on energy, you said it already, Ulf, but you had a nice tailwind from higher biofuels. So I was wondering if you could provide some color on what that means. I think your earnings delta were like SEK 60 million Q1 versus Q4. How much did biofuels supported that earnings growth? Ulf Larsson: I can first start with the production. I mean, we are also in the ramp-up phase with biorefinery in Gothenburg, and that is the first thing. We have had record production in that unit, and we are far above design capacity. So that is a very positive thing, of course. And then in addition to that, of course, we have had a very good price development. And then Andreas, you can. Andreas Ewertz: Yes. So if you look in Q4 compared to Q1, the solid biomass pellets and unrefined fuels basically had the same profitability in Q4 as in Q1. So the increase comes from -- roughly half from the wind segment and roughly half from the biofuel business, roughly speaking. Johannes Grunselius: Okay. But what you're saying, it's more of a ramp-up benefits, not sort of pricing benefits. And could you comment on Q2, how we should think about the pricing effect here coming from higher prices? Andreas Ewertz: Both. We got both, higher margin in the biofuel business compared to Q4 as well as good production. And we'll have to see how the market develops. But for energy, I mean, if fuels continue to be high, that, of course, will benefit our fuels business. But then, of course, Q2 is a weaker market for our Solid Biomass segment and Wind compared to Q1. Johannes Grunselius: Got you. And then on containerboard, if you could elaborate a bit on basically operations and also the mix because I assume you're still in sort of a ramp-up phase in Obbola. So do you foresee sort of tangible benefits from more efficient operations in the coming quarters and also benefits from a more commercial mix, if you can elaborate on that one, please? Ulf Larsson: I mean, step by step -- I mean, we produce more in Obbola. And by that, we also will be -- if you count per tonne, I mean, then you will be more also cost efficient. And first, the volume and then we fine-tune the cost level. And this year, as we said before, I mean, we will probably produce around 100,000 tonnes more in '26 in comparison with '25. And step-by-step, we will be more and more cost efficient. So that is one thing. But as you say, I mean, all surplus volumes today, I mean, they are placed in overseas market and the margin is completely different if you have to place those volumes in Asia or U.S. or South America or wherever. So I mean, when the market comes back in Europe, that will, of course, improve the margin quite a lot, I would say. Operator: And we'll now take our next question from Gabriel Simoes of Goldman Sachs. Gabriel Simoes: So I have two. The first one, they're both on the forestry side. But the first one is related to your forestry -- your silviculture cost in the first quarter, which are usually lower. But then I would expect some of that to come back in the second quarter, right? So overall, if you could guide us towards the level of expected profitability on a per cubic meter basis for wood harvested maybe excluding the revaluation, of course, for the remainder of the year and for the second quarter, specifically, that would be very helpful. And then a longer-term or more strategic question here would be basically on the valuation of these forests, right? So the company now trades at a significant discount to the book value of the forest. And I just wanted to pick your brains on whether this is something that bothers you and if there are any measures to try and unlock some of that value of these forests. Andreas Ewertz: Yes, I can start with the seasonality of the forest. I won't go into exact figures, but just to get some flavor. And as you know, we harvest seasonally more from our own forest in Q2 compared to Q1. So that's a net benefit. Then you're absolutely right that in Q2 and Q3, especially, we have our fertilization and silviculture cost because it's then we replant, we do this fertilization. And that's maybe, roughly speaking, what can it be SEK 50 million to SEK 80 million per quarter in Q2 and in Q3. And then, of course, we will see how higher oil prices, of course, will also affect our -- the transportation and harvesting business. So on the plus side, we harvest more from our own forest, will have slightly lower prices, and we will have higher seasonal costs for silviculture and fertilization. Ulf Larsson: And then when it comes to the valuation of the forest and if you plan something to unlock the hidden value of the forest, I mean, we don't. I mean, we have had a couple of big transactions recently. And I mean, they show that the book value is also the market value. And I mean, we trust that. And forest and forest business is a cyclical business. So you have to like that and see opportunities when you have them. And I guess we will -- we are looking forward to what's going to happen now when Stora Enso will split, of course, and that might have an impact on the view of the price of the forest. Otherwise, I mean, we are following continuously the market for -- I mean, the local market for -- when you buy and sell forest estates, and we can just see that we are more or less on the same level as before. So I mean nothing has changed. Operator: And we'll now move on to our next question from Oskar Lindstrom of Danske Bank. Oskar Lindström: Three sets of questions from Danske Bank here. First off, I'm just very curious, are sort of higher oil prices and talk of possible aviation fuel shortages in Europe creating a greater interest from you or from others in your aviation fuel project in -- biorefinery in Ostrand? That's my first question. . Ulf Larsson: Yes. I mean, as you say, just now, it is good profitability in the biorefinery in Gothenburg. And by that, you can say that conditions for the Ostrand project should also be very good. And I guess they are. But that is, of course, a much bigger bet. And as we have also said, this market will be very volatile, and it's also very capital intensive. And I guess if -- before you start a big project like that, you need to have some security when it comes to some kind of offtake agreement or at least the price level for SAF long term. I mean you can talk about resilience and degree of self-sufficiency and things like that, both in the union, but also in Sweden. Will that come? We don't know. And the tricky thing, I guess, with these kind of projects is always the political risk. I mean we are used to take the technical risk, the project risk, and we can handle that. But the challenge is really the political risk. Will something change when we have a new government in place, both in Sweden and in the union and what kind of impact will that have? And that will, of course -- it's more challenging to raise the money needed for such a big projects. Oskar Lindström: But -- follow up on that. I mean, would you be open to doing that as a JV then? Ulf Larsson: Absolutely. I think that's the only solution really. I mean we can provide a fantastic place close nearby Ostrand, lots of synergies. We also have from now the energy supply, which is really important. But maybe the most important thing, I mean, we are maybe the only player in that part of Sweden that can provide with the raw materials, I mean, the feedstocks. I mean, I guess we are a perfect partner in the JV, but this project is, of course, too big for us alone. And -- so we have to talk with some friends if this should come through. Oskar Lindström: Very interesting. My second question is, I mean, continuing on that with the Middle East conflict causing disruptions, as you mentioned. We hear a lot about how this is having an impact on Continental European producers, perhaps especially of containerboard, who are dependent on natural gas and oil for energy. What about sort of -- is it causing other shifts sort of that you're noticing, for example, in Asia or having impacts on logistics, which is causing shifts in the market or in the cost curve that are meaningful for you. Ulf Larsson: Yes, I don't know if we see some structure -- I mean, for everyone, I mean, we see that the freight costs, I mean, they will increase, of course. And in our case, as I said before, I mean, we have maybe a degree of self-sufficiency due to the biorefinery we have in Gothenburg up to 40%, and that is different for different companies. And as you also say, I mean, we are not depending on oil and gas prices as we have a fantastic energy supply situation in not only SCA, but Scandinavian companies. So I mean, that is, of course, in our advantage. But input costs will increase and freight costs, oil, one thing. The other one is, of course, chemicals into the industry. But on the other hand, I mean, that will have, I guess, a bigger impact from plastics and other competing materials. So it's really hard to say how this will turn out. If you will see a big restriction now when it comes to aviation and things like that, that might create the same situation as we had during the pandemic that people they will stay home and build Verandas and do a lot of work in their gardens and the houses and so on that might create some kind of better market for solid wood products. I mean, it's hard to say and it's hard to speculate. We are so focused now on trying to control what we can control. And that is also something that we are very happy in the first quarter. I mean we have had a good production. The cost level is good, very strong energy business. We see a positive effect of those strategic projects that we have launched. And -- but still, we are at the bottom of the business cycle just now, and let's see when it will recover. Oskar Lindström: And my third and final question is more straightforward. In the Renewable Energy division, I mean, you've obviously been able to benefit here in Q1, partly from the ramp-up, of course, which will be hopefully sustainable for the rest of the year, but also from higher prices due to the situation in the Middle East. Are you able to lock in any of the higher prices through hedging or something like that so that we get a little bit of that benefit for the rest of the year as well? Andreas Ewertz: If we start with the wind business, then we don't hedge anything. I mean, that's just our self-sufficiency, so then we're exposed to spot prices. If we look at our solid biofuel business, here I say you have much more long-term stable contracts and they have some spot volumes, but a large share is long-term contracts and they are quite stable prices, while the spot, of course, that moves up and down with the market. And with the biofuel business, there you do some contracts in advance, but not very far. So I would say we are exposed to spot, and that's part of our strategy to be -- have a high self-sufficiency. As I said, on oil, we are around 40% self-sufficient. So there we want to have when the cost goes up or down, our renewable energy income goes up and down as well. So I would say we don't have that long hedge exposure on renewable energy, more spot. Operator: And we'll now take our next question from Andrew Jones of UBS. Andrew Jones: I just got a couple of questions. First of all, on containerboard, you mentioned the first EUR 60 hike through in April, nothing expected in May. The index realized EUR 30. I'm curious what you're seeing from some of your competitors where some of them hiking, but with a bit of a delay, maybe coming through in May? Or like what explains the lower index move? And just to confirm, like are your customers in April already paying that EUR 60? Has that been fully implemented? Ulf Larsson: Good question. And yes, I guess they -- many of them, they have announced price increases from 1st of May. So what you see now in the index is the price hike from SCA. And I mean, as I would say, the major part of our business is also related to the index movements. I mean, we will not get even 50% of this price increase in April, but we will get it in May. So that's the case. Andrew Jones: Yes. Okay. That makes sense. And just on the Wood Products business. I think you guided last quarter to flat price development in the first quarter, and it looks like it went up about 7% on a revenue per tonne basis. So kind of curious what changed versus your initial thought process? And can you give us some guidance on how you see prices developing in the second quarter? Ulf Larsson: Maybe you have a better memory than me. I think I said 4%, and I think we had 4% more or less. But I'm not sure. But anyway, we had a small price increase, but the price development for sawlogs was even higher. So that's also the main reason for the profitability coming down. In the second quarter, I mean, it was a little bit of a disappointment for me. I thought that we should have a higher price increase in the second quarter in comparison to the first quarter. But I guess we will have around 4%, a little bit more for spruce, a little bit less for pine, a little bit more in some markets, a little bit less in other markets. So we try also to work with the mix, of course. And now this quarter, we see that log prices will come down a bit. But on the other hand, I guess that 50% of the price increase will be mitigated by higher freight costs. So it will be a small positive effect from increasing prices and also a positive -- small positive effect from decreasing log prices, I would say, in the second quarter. Andreas Ewertz: And you're right. I mean, as Ulf said, we probably expected prices to be a bit more flat in Q1, but then get a larger effect in Q2. Now we got a bit of that Q2 effect already in Q1. So I think the increase was about the same as we thought, but less -- more in Q1 versus Q4, but less in Q2 versus [indiscernible]. Ulf Larsson: Yes, related to what we said. But my thinking was that we should have a stronger market really in the second quarter. But that has not come through. It is much stronger for spruce than in comparison with pine. So spruce is maybe a little bit better and pine is a little bit less good, I would say. Andrew Jones: Yes. That's clear. And actually, just on the freight question. You have -- I know you have some of your own vessels, I mean, obviously, that probably doesn't protect you from bunker fuel and all that sort of stuff. But I mean, how does -- can you quantify the impact on your freight costs across the various divisions from what you're seeing now and maybe compared to what you think your peers might be paying, but without that self-sufficiency in vessels? Andreas Ewertz: [indiscernible] so figures you can work with, it's that if you took both bunker oil, we took oil for burning and then also diesel for trucks and everything. I think our total exposure is around 130,000 to 140,000 tonnes. And then we get back 50,000 tonnes is from tall oil and that's linked to the fossil price plus a green premium. So there we are self-sufficient at around 40%. And then, of course, [indiscernible] and our pellets business will be also an indirect hedge. But if you remove those, I mean, our total exposure of 130,000 to 140,000 tonnes, minus 50,000, that's around 80,000, 90,000 tonnes of exposure. And of course, this indirect effect from pellets and [indiscernible]. Operator: We'll now take our next question from Cole Hathorn of Jefferies. Cole Hathorn: I'd just like to ask on the pulp markets for softwood pulp in particular. What do you think is ultimately needed to bring down those inventory levels and tighten this market here? Because we've seen some kind of demand shift to the hardwood side. We've still got a lot of inventory levels in China. Softwood futures have come lower. It just seems like quite a disconnected market, softwood versus hardwood. So I'm just wondering what do you think needs to play out over the next few months to help balance the softwood market and ultimately support further pricing? Ulf Larsson: It's a very good question. And I mean we are a little bit surprised ourselves, I must say. I mean, we have heard also talk about interest in implementations in China that swing capacity is now running long fiber and so on. But honestly, I don't know really. But what we have seen is that a positive price development step-by-step for eucalyptus pulp. And just now, I mean, you have a small delta between hardwood and softwood. So I guess that is the first sign that we will see some kind of substitution going forward. But again, when you look at the inventory level, you are still on the high side for softwood and on the low side for hardwood. And also, we have big producers in hardwood, they have announced some curtailments. But on the other hand, we have also heard that some Scandinavian producers, they have also announced curtailments now. But I mean, short term, it's always a question about supply-demand balance. And I guess, the price difference now between short and long fiber, that will help a bit. We see that on CTMP already now, definitely for March, but also, I guess, coming in now in the second quarter, that will help us. I don't feel that we have any structural things that dramatically have changed the situation. I mean, as long as something is a little bit cheaper than something else, I mean, then you try to substitute as much as you can. So I mean, long term, I don't think this is a structural thing. It's more a question about supply-demand. And so let's see, but a little bit annoying, of course. Cole Hathorn: Well, hopefully, we see some capacity closures. But if I look at some of the softwood producers, there's some listed players that have seen their debt trade down. It seems like a lot of the market is really under pressure. If assets do become available, how does SCA think about M&A in that context at the right price? Or are you just comfortable staying with your business in Sweden? Ulf Larsson: Yes. I think our -- I mean, we are an integrated forest company with the industry. And I mean, I have a great respect to move into other geographies if you don't -- can guarantee the raw material supply. So I think the integrated model we have today, I think, has been very profitable over time. And also in relative terms, I mean, we perform well. And as it is just now, we have also done a lot of big strategic investments, and we will be very cautious now. We will focus on, I mean, ramping up what we have started and also to consolidate the balance sheet. And so I mean, for us, no M&As, at least not short term. Operator: And we'll now take our last question from Pallav Mittal of Barclays. Pallav Mittal: So firstly, just following up on oil and appreciate all the self-sufficiency and hedges that you have highlighted. But if I just look at your transportation and distribution, it is almost 25% of your cost base, so say, roughly around SEK 4 billion and diesel is up 30%, 35%. So how do you plan to offset that SEK 1.5 billion cost headwind that you have? And just as a follow-up to this, are you seeing the roadside pulpwood increasing on the back of diesel costs going up? Andreas Ewertz: As I said before, we have around 140,000 tonnes of exposure to bunker oil and diesel and oil in our industries. And roughly that we produce 50% to get back from a tall oil. So there is an exposure of 80,000 to 90,000 tonnes. So of course, I mean, if the prices of diesel or oil goes up, I mean, they will have a 90,000 around roughly exposure, so they can calculate the figure. And then in [indiscernible] that's the pure oil part. And then transportation, I mean, part of our business, I mean, we have our own RORO ships. So there is only the bunker exposure. And of course, [indiscernible], especially to U.S. and there we freight ships. And of course, then it depends on how the market for renting those or freighting those vessels move forward. But to bunker and diesel, our net exposure is around 80,000, 90,000 tonnes. Pallav Mittal: Okay. And then just -- how should we think about your capital allocation now going forward given the pressure on -- I mean, the market and the free cash flow generation? Do you think maintaining dividend is possible in this market environment? Andreas Ewertz: So in terms of CapEx, I would say that we will have around SEK 1.5 billion in current CapEx this year and then around another maybe SEK 400 million, SEK 450 million in strategic CapEx. And then in terms of capital allocation with dividend or with share buybacks or other strategic CapEx, I think that's something for the Board and now we're focusing just on ramping up and getting the cash flow for our investments. Operator: With no further questions on the line, I will now hand it back to the host for closing remarks. Ulf Larsson: And that concludes our presentation of the first quarter report, and we wish -- welcome back in July for our half year report. Thank you very much for joining us today.
Maria Gabrielsen: Welcome to Yara's First Quarter Results Presentation. The presentation today will be held by Yara's CEO, Svein Tore Holsether; and Yara's CFO, Magnus Krogh Ankarstrand. I would like to mention that we have a change in how we do our Q&A session today. Once the presentation is done, we will move straight into the Q&A session. [Operator Instructions] But first, let's start the presentation. It is my pleasure to hand over to our CEO, Svein Tore Holsether. Svein-Tore Holsether: Thank you, Maria. Good morning, good afternoon, good evening, depending on where you're dialing in from. And thank you for joining our first quarter presentation. As always, I'm starting with our safety performance. Our license to operate is creating a safe working environment for all our employees and contractors. And we have a lot to be proud of our performance in the first quarter, but safety is not one of them. We continue to see an increase in accidents, and this has also been the case in April, which means that we will likely see further deterioration as we get into the second quarter. And there is only one responsible for it, and that is me. And I take that responsibility very seriously. I'm now in my 30th year in industry. And what I've learned from safety is that you cannot dictate your way to safety and also that campaigns, they only have a short-term impact. It is what we do every day, every week and every year that matters. And we know what to do. We will continue to work according to our Safe by Choice approach that has now been in place for 12 years. This is our joint commitment to safety throughout the whole organization because at the end of the day, 1.2 TRI, that's a ratio. But behind that, there are 59 accidents, 59 colleagues, someone's mother, father, brother, sister, friend that got injured at work during the last 12 months. We can, and we will bring that to 0. But for now, we need to turn the negative trend. On Tuesday next week, we will have our Annual Safety Day, and that is another opportunity for us to spend time together and get this right. That was the low light. Now let's take a look at some of the key highlights for the first quarter. Yara delivered a strong quarter with an EBITDA, excluding special items of $896 million. This is an increase of 40% compared to last year, and that's reflecting higher nitrogen upgrading margins in a tight market in the start of 2026. And in addition, Yara has increased deliveries to customers in the quarter, reflecting a strong commercial execution. And this also enables us to maximize production volumes and consequently also capital efficiency. First quarter results mostly reflect pre-war markets, but the Middle East conflict has disrupted global fertilizer markets since the end of February. The blockage of the Strait of Hormuz disrupts around 1/3 of global traded urea. It also has other key raw materials for fertilizer production such as its gas, its ammonia, its phosphates, and sulfur. And this supply shock has led to significant increase in global fertilizer prices. And that, coupled with weak crop prices and high regulatory burdens, farmer affordability has increasingly come under pressure. And the high prices are increasing volatility and also risk premiums across the fertilizer value chain and eventually into the food markets as well. As we said at our Capital Markets Day in January, Yara is a battle-proven organization due to our global diversification, our energy flexibility in Europe and also our highly competent workforce. And now that is being put to the test again, and we are demonstrating the strength of our business model where our global system enables us to uphold production and to ensure the continuity of supply. And this means that we are uniquely positioned in the current situation with strong commercial and operational execution in a disrupted nitrogen market. And I want to thank all my colleagues in Yara for their strong performance this quarter. Looking then at the EBITDA variance for the quarter. The increase of 40% since last year mainly reflects the increased nitrogen spreads. Nitrogen prices have seen a significant increase since first quarter of 2025. And gas price changes are typically reflected after 2 months in our earnings. So this quarter, EBITDA is largely based on pre-war market dynamics. Volumes are also up, reflecting strong commercial execution in the season to date. And keep in mind here that we also had a strong fourth quarter on volumes. We continue to see a positive impact on EBITDA from our fixed cost reduction program and a further $18 million down from last year. Return on invested capital has doubled from 6% last year to 12.2% on a rolling 12-month basis. And that's above our through-the-cycle target of 10%. Global fertilizer markets are currently heavily affected by the ongoing conflict in the Middle East. Around 1/3 of globally traded urea is exported through the Strait of Hormuz, but also 1/4 of the world's ammonia as well as 50% of sulfur, which is significantly impacting the availability of phosphate fertilizer. And furthermore, 20% of global LNG trade is disrupted, and that's leading to urea production curtailments as well, such as in India. The disruption to urea availability has led to a significant price increase, so far, 47% since February. And urea FOB Egypt is up even more at 77%. TTF gas prices have also increased, however, less so than urea and phosphate prices. Farmers' situation was challenging before the war driven by weak crop prices and cost inflation across many input factors as well as regulatory burdens and global market volatility, which all add to this pressure, and this is concerning. And those that will be hit the hardest are smallholder farmers in the poorest parts of the world because of lower ability to pay. But it's actually a double hit because it's likely also impacting the farmers where the yield curves are the steepest, meaning that marginally lower fertilizer application will have a higher yield impact. Fertilizers are essential for food production and stable access is really critical for farmers to produce the food that the world needs. Yara's role is to remain robust and to ensure the continuity of our production and also the deliveries to the farmers. Building on long-term operational improvements, our production system has seen a steady increase in output. And this is also our core focus in the current situation. And as you see here, deliveries to customers are also up in the same period. Volumes on this slide are not adjusted for turnarounds, but it's reflecting actual production and actual deliveries. And ensuring a high uptime of our assets is really a key objective, and it improves our capital utilization and also our energy efficiency. In addition, our energy flexibility enables us to import ammonia if needed in order to keep finished goods production running. And this has enabled Yara to be a reliable source of fertilizer in this critical period as well, alleviating some of the pressure on markets and serving farmers around the world. Yara's position is unique globally and the flexibility in our system continues to limit cyclical downside as well as maximizing output in the current situation. And with that, I'll now hand over to our CFO, Magnus Krogh Ankarstrand. Magnus Ankarstrand: Thank you, Svein Tore. As mentioned, EBITDA is up more than 40% on a strong first quarter 2025, predominantly driven by increased nitrogen operating margins before the effects of this ongoing conflict in the Middle East. This translated into a 60% increase in earnings per share as depreciation, interest and tax remained stable. Return on invested capital increased to 12.2% on a 12-month rolling basis, reflecting both increased earnings as well as portfolio adjustments. The quarter saw a USD 35 million increase in operating capital, driven by an increased price environment. However, this was more than offset by an increase in cash from operations, resulting in a significant increase in free cash flow of USD 196 million as net investments were flat. This increase in cash returns is attributable both to the improvements undertaken as well as the constructive nitrogen market in the first quarter. Turning to deliveries. We see an increase of 3% in Crop Nutrition deliveries compared to first quarter last year. This was primarily driven by increases in the Americas, but worth noting that stable deliveries in Europe, comes on top of a strong first quarter last year that saw a 15% increase over the year before and a 6% increase in volumes in Q4 2025. That means that season-to-date deliveries in Europe are up 2.5% and are among the highest in the last 5 years. In Africa and Asia, we saw a reduction of commodity volumes, however, an increase in deliveries of our premium products. And deliveries in Industrial Solutions are down 5% for the quarter, following plant closures in Brazil. However, these portfolio changes have a positive impact on our cash flow. Yara has focused through the last months to ensure both production and supply chains flow in the extreme situation to safeguard deliveries to our customers worldwide, and we have not experienced major disruptions to our production or supplies. This then increases our cash earnings further and strengthens our balance sheet, putting Yara in a robust position in the ongoing market volatility. Cash earnings are partly offset by an increase in net operating capital, which despite the seasonal release of inventory is up due to the increased values driven by prices. We are currently experiencing a strong market for all nutrients, especially nitrogen and phosphate. This increase in Yara's nitrogen and phosphate operating margins and increases the bar for our premiums, which we measure above commodity value for the nutrients. That, combined with lower crop prices in general, exercised some pressure on our premiums in certain markets. For the fourth quarter, strong demand and pre-buying in Europe supported European nitrate premiums ahead of the year-end and premiums in the first quarter of 2026 were comparable to the fourth quarter, but lower than first quarter last year given the higher nitrogen prices in general. NPK premiums are somewhat pressured, and primarily driven by Asia, we see a contraction towards more normalized premium levels at a very high commodity price base. Yara has a robust commercial organization and is on a day-to-day assessing the market environment on how to optimize volumes and margins globally. This also underlines flexibility of our business model and the ability to create value both on the upstream margin as well as the premiums, which also limits the commodity downside through the cycle. And building on that, there is no doubt that the current global situation puts significant stress on supply chains, and this is particularly visible in the fertilizer space. Yara's global reach and flexibility is uniquely positioned to navigate this. The current price environment, coupled with weak crop prices, is already leading to a substantial difference in buying appetite in prompt markets versus off-season markets. Despite moving into the end of the season in the Northern Hemisphere, the significant loss of nitrogen and phosphates as described by Svein Tore, means a supply and demand shortage in several Southern Hemisphere market as well in addition to India being a main driver for demand in the period to come. And due to Yara's global reach, we are able to optimize global deliveries and ensure we can keep our production system running at full speed, also by changing from locally produced to imported ammonia, if necessary, due to gas prices in Europe. And this is vital to keep serving a market in severe shortage of nutrients in our core markets such as Latin America. Ensuring our assets are uninterrupted is a core part of our operational excellence. However, we have had an unfortunate outage in Pilbara since mid-March, expecting to come back on stream in May. That is our ammonia plant that was stopped. In addition, we will execute a long-planned major turnaround in Belle Plaine after the season is over in June. And this will lead to a reduction of approximately 150,000 tonnes of urea in Belle Plaine compared to a full year of production and a loss of 140,000 tonnes of ammonia in Pilbara due to the outage. Diving deeper into this market situation, it is clear that the ongoing crisis in the Middle East has an unprecedented impact on global supply, not only urea and phosphate, but also other raw materials essential for fertilizer production such as sulfur are stranded and limiting fertilizer supply globally. And with as much as 1/3 of urea supply impacted and further supply reductions from Russian plants as well as reduced production in India due to LNG shortages, global availability is severely reduced and in an already tight urea market without spare capacity, significant demand reduction is required to balance the lack of supply. And naturally, market prices go up to balance the market and ration demand. This has been exacerbated by the ongoing season in Europe and the U.S., and it's obviously an extraordinary situation given the crisis in the Middle East. Market development going forward will depend a lot on the duration of the blocked Strait of Hormuz, the level of damage to infrastructure and the ramp-up time required to get back on stream. Demand reduction is a balancing factor as is potential exports out of China. In the medium term, as previously illustrated at our Capital Markets Day, there's a limited number of supply additions from ongoing urea projects, and this already seem to increase market tightness versus historic demand growth. And recently and recent announcements suggest that several of these projects are -- that were announced to be commissioned in 2027 will be further delayed, driven by both the Middle East situation and other factors. Capacity and export out of China is likely to remain the balancing factor in the medium term. And for Yara, this medium-term constructive nitrogen outlook is set to drive further value creation. However, our strategic priorities are designed to increase shareholder value irrespective of market developments. As presented at our Capital Markets Day, our strategic priorities rest on 2 pillars: driving performance and competitiveness and growing from our core. The former is the operationalization of our improvement program, focus on asset utilization, logistical optimization, capital reallocation and commercial excellence, all aimed at increasing our EBITDA and cash flow. Our medium-term goal of diversifying our energy position further remains a core part of that agenda. Meanwhile, growing from our core is key to increase value creation, scale and return to our shareholders. This includes healthy organic growth from recent and future production increases, up to 1 million tonnes on premium products as we announced in January. In addition, this includes realization of recent growth projects such as the NPK expansion in Cartagena, our YaraVita plant in the U.K. and the CCS project in Sluiskil, all to be completed this year. In addition, Yara will explore further growth opportunities linked to our core, all within our commitment to strict capital discipline and focus on cash returns. As mentioned on the previous slide, energy diversification is core for Yara and the collaboration with Air Products is a strong strategic fit to deliver this. The combination of Yara's significant ammonia system, including import infrastructure in Europe and Air Products advanced projects in the ammonia space is a strong strategic fit for both parties. For Yara, the drivers are threefold: access to low-cost gas, asset competitiveness and renewal through scale and the ability to harness carbon premiums. Predominantly through CBAM and with our collaboration with Air Products, we get all of these 3. At the same time, Yara is able to place volumes from Air Products more cheaply and efficiently into the core markets without the significant infrastructure investments otherwise needed. Commercial negotiations are proceeding according to plan with a priority on the NEOM project that is due to commission in 2027, and the U.S. project is progressing according to the previously announced time line. Yara is fully underway to materialize the improvement program announced in January. And summarizing the first part, our cost program that we launched almost 2 years ago, we already have a head start on that. Excluding currency changes, our fixed cost level on a 12-month basis is at USD 2.3 billion, down approximately USD 230 million from the second quarter of 2024, and this incorporates the underlying inflation in those 2 years as well. Going forward, we will include this into our improvement program, which expands the value levers into a range of other areas as well, but having achieved a strong cost control environment upfront provides us with a very solid starting point. And the improvement program remains a core focus going forward, aiming at more than USD 200 million EBITDA improvement by the end of 2027 and USD 350 million by the end of 2030. This includes our 10% ROIC target through the cycle, and we are starting to see strong financial metrics through a combination of market developments and improvements. It is, however, important that our aim of improvements irrespective of market developments. Looking at the last 12 months, we see a significantly increased EBITDA of about USD 3 billion, and accumulated cash flow close to USD 1.2 billion and perhaps most importantly, a return on invested capital firmly above 12%. And with that, I will give the word back to Svein Tore. Svein-Tore Holsether: Thank you, Magnus. The current situation is really unprecedented for the global markets, and the fertilizer industry is no exception to that. Together with the Ukraine war, the current conflict in the Middle East adds to the geopolitical volatility. Yara's business model is well adapted to navigate such volatility. And as we said at our Capital Markets Day, we have improved our resilience, building on our experience over recent years. And our competitive edges are really key in achieving this. The bedrock of this is our scale and global optimization, which is even more vital in the current situation. Operational excellence combined with flexible energy sourcing helps us to uphold finished fertilizer production. And our premium and diversified product portfolio provides a strong foundation helping to mitigate earnings volatility when commodity prices fluctuate. Finally, a disciplined and flexible investment approach, clearly anchored in our strategic priorities, will continue to strengthen our long-term competitiveness. Then to conclude our presentation, it is important to highlight that our ambitions and commitments remain firm despite the current market turmoil, further maturing our resilient business model and delivering on the improvement program launched at our Capital Markets Day back in January. They remain core focus areas. And our long-term goals of diversifying our exposure to lower gas costs and enabling low-carbon ammonia opportunities remain key priorities with a strong balance sheet, capital discipline maintained and a clear commitment to our credit rating, Yara is well positioned to deliver sustainable long-term value creation. And with that, I'll hand back to Maria. Maria Gabrielsen: Thank you, Svein Tore. That concludes today's presentation. We will now take a short break to set up and get ready for the Q&A session. [Operator Instructions] With that, we'll see you in a short bit. Thank you. [Break] Maria Gabrielsen: Okay. Welcome back to everyone. We are now ready for the Q&A session. This is Maria speaking. I'm here joined by today's presenters, our CEO, Svein Tore Holsether; and our CFO, Magnus Krogh Ankarstrand, in addition to our Head of Market Intelligence, Dag Tore Mo. [Operator Instructions] Christian Faitz, please unmute yourself and ask your question. Christian Faitz: Two questions, if I may. First of all, can you remind us how you deal with the volatility in gas prices at this point in time? And are you considering hedging at some point? And how are you secured through the rest of the year on the gas side? That's the first question. And then the second question, obviously, yes, thanks for the helpful slides you had in the presentation and in the slide deck. And you did show, obviously, that a large part of the European -- of the Northern Hemisphere is actually covered in terms of fertilizer demand. But if I was a farmer, I would obviously try to optimize costs and maybe also skip one or the other topping during the season. Is that what you see? And could that also be an inventory issue at some point heading into the '27 season? Svein-Tore Holsether: Yes. It's Svein Tore. I can start with the first and then I'll hand over to my colleagues on the second one. When it comes to gas prices, we're not hedging that. And that's been our practice over a very long time period because we see a very strong correlation between global energy prices and nitrogen prices that we have that flexibility to move with the market. And then we've built in additional robustness in our system by also being able to switch between producing ammonia and then I can use Europe as an example, where it's most exposed. So we don't have to produce the ammonia in Europe for about 75% of our finished goods. We can bring ammonia into Europe, and that gives us flexibility to switch if it should not be economical to use gas to produce ammonia in Europe. For the time being, the upgrading margins from gas to ammonia in Europe are also at a level that justifies continued operation, and we're running at full blast. And should that, for some reason, change, well, then we will do like we did back in 2021 and 2022 to bring ammonia in. And that's part of the strength in our business model where we can utilize the global network that we have on ammonia. We're one of, if not the largest ammonia traders in the world, and we have ships that can transport ammonia across the world, and we're utilizing that to maintain finished goods production. And should we have hedged, then we would have lost some of that flexibility. So that's the reason we have that structure in place. And then I'll hand over to Dag Tore or Magnus on the second question. Dag Mo: Yes. When it comes to, let's say, markets like Europe or North America, in some ways, they are kind of well covered when you talk about the import situation and urea in particular, I think I should mention that we are still seeing nitrogen demand. I mean we are delivering both from Belle Plaine and from our production system in Europe now in the second quarter as well. But if you look at -- if you just look at the urea situation, both the U.S. Gulf, which is far away from the application areas in North America at the moment and in Europe, pricing now is such that they do not match, let's say, the India price or the peak pricing elsewhere. So from that perspective, at the current global urea values, there is very low demand, import demand and probably not the need for it either if you look at relative pricing between nitrates and urea, for instance, in Europe. So in that sense, covered on the application, I think that nitrogen application, most areas that are exposed to the global values today will see some demand destruction more or less, you have kind of -- you have China and India covers almost half of global demand for urea, which are not covering -- which are not following the global market and have their own domestic pricing, which is way below. So that leaves kind of half the global market that has to do the demand rationing in a situation where there are significant supply losses. So if we again take Europe as an example, just to give some more details, I think that the industry deliveries in Europe are fairly stable, season over season. And we see that imports according to Eurostat and the numbers from the European Union, so far this season through March, Europe or EU has imported 4.2 million tonnes of urea, which is down from 4.9 million tonnes of urea same period last year, and there's probably been some declines also in other products or there has been some declines in other products, although urea is the dominant one. So I think that just looking at the current supply situation, it's logical to expect, let's say, a short fall of demand or a drop in demand of 5% to 10%, something like that in Europe probably. On your question of inventories, that is something that I kind of concerned us or we have been trying to follow that as well. And what we hear from the field is that from our commercial units is that the farmers are generally using the fertilizer they have bought. So no big carryover risk there into next season, we think, and that distributors and retailers are also back-to-back mostly so that in Europe, and that is normal, there are kind of regularly -- people are quite careful about not having too much inventories. North America, that can be a little bit different because of the longer lead times on the import side that it could end up with a situation where, let's say, imports are a little bit more than what is needed. So I hope that helps. Maria Gabrielsen: The next question is then from Magnus Rasmussen. Magnus Rasmussen: Magnus Rasmussen, SEB. I wanted to touch upon volumes as well. And I wonder if you can give some comments about what you are thinking for Q2. You stated in the presentation that Europe had among the highest season-to-date levels, but also strong volumes in America in Q1. I think Dag Tore touched upon it a bit as well, but some further comments sort of for Yara specifically as well would be helpful. Also a question on price realization in Q2. I mean we see urea prices skyrocketing and nitrate prices not so much and Profercy also reduced their European nitrate prices yesterday. Your sensitivities cover a mix of different products. Is there anything that we should keep in mind and be aware of in terms of price realization into Q2? And also how do you read the low nitrate prices in Europe relative to urea from, call it, demand or market perspective in Europe? Magnus Ankarstrand: Yes. I can maybe start a bit on the volume side. We don't -- as normal, we don't give any future guiding on volumes as such. I think what we can comment, as we also said in our presentation, is that Yara has a global system. And of course, that's also in normal circumstances, obviously, benefit given the difference between season in the Northern Hemisphere and the Southern Hemisphere. And we think that will be even more so the case this year. And of course, beyond that, I mean, our production levels are a question of whether we are -- whether we have sufficient margin to actually produce at different times. And so in a way, looking at market prices and gas prices throughout the quarter, that will kind of explain that situation. But of course, in addition to that, it's important to keep in mind the fact that we also can import ammonia from -- into Europe if gas prices were to go up. But obviously, as everyone can see right now in the current situation, nitrogen prices have increased a lot more than gas prices. So I mean, so that in terms of what we produce and then ultimately sell, that's really what determines that. And of course, where we sell it depends a bit on how markets develop. And I think on maybe the urea nitrate pricing, I can give to you, Dag Tore. Dag Mo: Yes. I think it's, of course, a bit more challenging for you and others to monitor this now that prices are so extremely high because it leads to some more fragmentation and regional differentiation than otherwise. When prices are more normal, then you can use fairly straightforward sensitivities, right, because everything is kind of correlating very strongly. Some of that is now kind of a little bit distorted. Let's say, if you put in spot prices in the Arab Gulf, that is basically the netback from the India tender which they paid kind of $950, say, there are very few regions now in the world that are willing to pay $100 -- $950 for urea, as you can observe, if you observe carefully in the regional prices that the publications quotes, nothing secret about that. You see that U.S. Gulf is discounted. Even Europe is somewhat discounted. Brazil is discounted. So just putting in, let's say, $910, $920 for Arab Gulf, for instance, is giving a little bit exaggerated picture probably. So that is one thing that, of course, we have to be a little bit careful about. When it comes to Europe, of course, I mean, if you were a farmer now that needs urea for March, would you buy it now, question mark. And of course, that is an understandable dynamic. I think that for a while now, maybe the urea import parity is not really the main driver of nitrogen prices in Europe for a period and that we see already as you were hinting at, right? You have 0, say, round numbers, 0 nitrate premiums right now based on the publication references. And it wouldn't be a surprise if you, let's say, with a starting price for next season that you will see a negative nitrate premium versus urea unless urea comes down a bit. So I think that as Svein Tore was saying, I mean, the farmer affordability is so stretched that I think that there will be more regional differentiation based on what farmers need the product right now and what -- and those farmers that can defer the purchasing to closer to their application season. So a bit more challenging, I think, to be very precise on price realization than normal. Maria Gabrielsen: And just to remind everyone as well, the sensitivities are based on high-level easy assumptions, right, 1-month lag and 2 or 3 market prices in volatile markets and with increased regionalization, like you say, it's natural that they will be less precise than in a more stable market environment, yes. Moving to the next question is from John Campbell. John Campbell: It's John from Bank of America. I have 2 quick questions. So maybe if we continue kind of on the NPK and nitrate premium. If I remember properly, I think second quarter '25 had pretty robust reported NPK, I think it was $265 per tonne. I think you've discontinued the practice of actually quoting the specific figure. But presumably, based on what you're kind of saying, gathering the comments you've made on this call, it sounds like that will be down maybe quite steeply into the second quarter. That was my first question. Second question, just very quickly, any comments or assumptions or expectations for resumption of Chinese exports of urea in 2026? I think Bloomberg had a comment saying that it could be something like 3 million tonnes, which should be down year-on-year, but anything you've heard interesting, given, as you say, it's kind of one of the market balancing areas of supply. Dag Mo: Should I take the China question first. Nobody knows, of course. I think there is discussions ongoing in Beijing as we speak. So our understanding, they are debating this right now. The flow started in July last year, so a little bit of time left for that. We also see that there are quite a few market players that have already started to move products to ports. I mean, effectively removing that product from the domestic market already. And that has caused some reactions both from the government and from the nitrogen association. It seems that are a little bit upset about this development ahead of approval. So that there are even some discussions of maybe that -- whether that could lead to some delays in the export approvals. Let's see how that fits. And I also said you referred to those 3 million tonnes. I've also seen those referred. And to me, I haven't seen anything concrete yet nor from our experts in the market. So I tend to believe that must be some kind of speculation. But I also saw 3 million tonnes mentioned. I would think that would be a first tranche then in that case and not necessarily the total volume for the year. But that's what they also did last year, right? They first approved 2 million tonnes and then they added to that quota as they saw that the domestic market did not react to the export volumes. So I don't think you should conclude -- I wouldn't have concluded that those 3 million tonnes, that's it. But be open that this is a really important factor in the market for the rest of the year. Magnus Ankarstrand: And on NPK premiums, and again, of course, we don't give guiding on premiums, exact premium levels as such. But I think it's fair to say that the last couple of years, NPK premiums have been very high and higher than maybe average over a longer time period. But obviously, now with commodity prices increasing as much as they have and nitrogen, as we talked about, but also phosphates with a significant increase in -- due to -- well, same reasons that for nitrogen in the current crisis. It's also natural that, that puts some pressure on the premium that farmers are -- can pay on top of that, of course, also considering the farmer economics. But -- so even though NPK premiums are somewhat down since last quarter and a year ago, it's still holding up quite well, and we'll see how that plays out, which will depend as well on the commodity development in the next quarter. But of course, for Yara, we -- I mean, we, of course, make money both on the premium as well as the operating margin or the commodity margin. And there, of course, on both end, but also particularly phosphate, of course, there's been a significant increase. And I think also worth to mention in our production system, roughly only 1/3 of our NPK production depends on sulfur in the production system. And of course, sulfur is right now being a significant cost driver in phosphate or DAP production and phosphate prices. That's, of course, an advantage that we have on the margin side. Maria Gabrielsen: [Operator Instructions] The next question is from David Symonds. David Symonds: It's David from BNP. I have 3, I think, please. First one, could you talk about your assessment of damage to Middle Eastern nitrogen and LNG facilities so far? How much do you think we've lost longer term? And if the war ends this weekend, let's say, what would be the time lag before we get back to a more normal situation in nitrogen? Second, could you -- this is more just a modeling question. You very generously gave us the 150,000-tonne number for the Belle Plaine turnaround. Is there an estimate of how much you might lose from the India and Australia outages and curtailments that you announced in the second quarter? And then thirdly, what could the policy response to this current crisis be? Is there an increased likelihood of CBAM suspension for fertilizers in the near term? Do you think we might see reopening of plants as we saw Brazil do with Petrobras? Any thoughts on that would be great. Dag Mo: On the Middle East, it's, of course, hard for us to know. We -- what has been announced is that Qatar has had some damage to their natural gas infrastructure that will take quite some years to repair. We don't think that the fertilizer plant is damaged, so that should be able to restart very quickly. There has been some damage in Bahrain and some damage in Saudi Arabia also we hear, a little bit unclear how much and how long it will last. And in Iran, there is quite a lot of damage to the gas infrastructure, and there are only a few of the plants in Iran that has been able to start up. So -- but to your question about how long time this would take to normalize, I think it's hard for us to speculate around that. It certainly takes some time, how much -- yes, it's hard to estimate. Magnus Ankarstrand: I think on your questions on India and Australia, I mean, on the Indian side, the impact to -- I mean, to our results is fairly limited from the current curtailment there. On the Australian part -- sorry, Australian ammonia plant, as I said, we assessed roughly 140,000 tonnes in total. I think we also said in the market that we expect start-up sometime in the first half of May. So then -- I mean, from a -- you can sort of do math on how much that -- because -- I mean, when the plant went down, so how much of that will be in the second quarter versus the first quarter policy? Svein-Tore Holsether: Policies, here. You mentioned CBAM. I think the last thing that Europe should do right now is to create any uncertainty around CBAM because that's in place in order to create a level playing field so that imported volume pays the same emission cost as European players do. And if there's one region that has felt the consequence of dependencies, it's Europe, look at what happened in the energy sector on the energy crisis and what that meant for households and industries that we're still struggling with in Europe right now. So then -- to then weaken such a vital industry as fertilizer and farming would further emphasize the challenges in Europe. So I think what the policymakers should consider here is rather use the CBAM revenue and redirect that towards farmers to not put a burden on the shoulders of the farmers. They don't have the margins to support this, but we need food production in Europe, and we need a healthy fertilizer production system in Europe as well. And if we're -- as a result of this creating an uneven or not a level playing field, that would maybe come at a very short-term relief maybe, but a very high-cost long term because then we would be even more dependent on imports. So it's important to keep the long term in mind here as well. But any uncertainty on CBAM in Europe for the industry right now will have impact on the ability to invest in long-term projects. But of course, as we look globally and with fertilizer being responsible for half of the world's food production, I understand that this is something that is very high on the agenda for politicians all over right now, but it's important that we balance the short-term need with the long-term implications for that interventions could have. But we really do think that CBAM is an important lever and that in combination with ETS, if you are to reach the Paris Agreement to reach the emission targets for Europe, that needs to stay here. And that's also important for the long term of actually growing food because we also have to solve the climate challenge here. And I would say that one of the occupations hardest hit by climate change is actually farming. They work out in nature, and they work, whether it's floods or droughts or record heat or record cold, that's where they have to produce food. So it is in our interest that we deal with the climate challenge as well, but it's not something that we could just put on the shoulders of farmers. Maria Gabrielsen: Let's move to the next question, which is from Tristan Lamotte. Tristan Lamotte: Tristan Lamotte, Deutsche Bank. Two questions, please. The first one is how high is the risk that the CapEx number that you quoted for central blue ammonia projects has to move up given the developments in the world since you first gave those numbers and given that the final agreement is yet to be signed? And the second question is, I'm just wondering if you could talk about any opportunities for permanent market share gains relating to the conflict. Magnus Ankarstrand: Yes. When it comes to the project with Air Products, as we said when we had the announcement, I mean, the time we spend towards midyear to the next phase of that project, including the preparations of the potential FID is sort of around the contracting market and evaluating the technical side the project together with AP. And I think that work is still ongoing, and there's nothing particular that's happened since then that sort of changed anything substantial in that regard. So I mean, it depends on the market, depends on the bids. And so yes, there's nothing new as such there and sort of things are proceeding according to the plan that we had. I think in terms of market share, I would say -- our primary objective also sort of reflected in our improvement program is to increase organically production output for organic growth from our production system, so up to 1 million tonnes of additional premium products through production improvement and debottlenecking. And in addition, we have a few projects coming online now with NPK expansions in Cartagena as well as YaraVita biological plant in the U.K. and so on. So obviously, that will go into increasing our market share as we sell what we produce. But in addition to that, and also as a part of the improvement program, we are looking at optimizing our global system, taking more market share in our most profitable markets. I think -- and as we also communicated there, Europe is one, not the only, but one core market for us, of course. And I think that is also why it is very important for us to keep production running now as we have, take some risk in doing that. But of course, at the current levels so far, we have good production margin on finished products. We also had good operating margin on ammonia. And if gas prices were to go up further, we also have the possibility to import ammonia and keep finished fertilizer production going. So we believe that Yara as such as a quite strong competitive edge also against competition, also in Europe in terms of being a very stable, reliable supplier for the European market and gaining market share. Svein-Tore Holsether: And to add on, you put it very well, Magnus. And as we said at our Capital Markets Day back on January 9th as well, we said that we're a battle-proven organization, and we've been tested again now. And I want to thank all our colleagues for an outstanding performance where finished goods production is at one of the highest levels we've seen. But one thing is to produce, but also to get it out to our customers as well and it's been an outstanding performance on really working hard throughout our whole supply chain in order to get that done. And we've used the robustness and the flexibility that we knew that we had in our business model before the energy crisis and before Russia's war in Ukraine, but the learnings that we had from that, we've also built in even more flexibility in our system, and that's what we're fully utilizing now to maintain production at high levels, but also moving the product. Maria Gabrielsen: [Operator Instructions] With that, we'll move to the next question, which is from Mazahir Mammadli. Mazahir Mammadli: So 2 questions from my side. Sorry, firstly, as we near the planting season in the Southern Hemisphere and if the situation stays the same, how should we think about the market development, whether it's volumes, demand destructions, acreage decisions and also perhaps some relief from amsul substitution in Brazil from Chinese imports? And my second question is, with the free cash flow that you are generating now and perhaps in the next few quarters, what's the plan first, in the scenario where you decide to go ahead with the Air Products project? And second, in the scenario where you decide not to do that, what would be the capital allocation decision there? Dag Mo: On the first, I think it's hard to -- at least for me here in Oslo now - to have a full picture on exactly how the decision-making is going to be on the Southern Hemisphere by the farmers. What we have heard -- it's logical that the topic is on the agenda, right? We hear from Australia, for instance, where -- which has a peak import season for urea now in the second quarter and maybe one of the regions that are hardest hit by the timing of this conflict. There are some talks about reducing wheat acreage, for instance, to go for maybe barley, maybe some canola, find some other crops that are a little bit less nutrient demanding. And I would think that, that would be also a topic in places like Brazil, Argentina. We know South Africa is struggling with high prices and low margins. So exactly -- I think a good -- very good questions, but I think it's hard for us to speculate on exactly how that will play out. But surely, there will be efforts to try to find solutions that would maybe require less nutrients. Magnus Ankarstrand: To the question on cash flow and capital allocation, I mean, for us, it obviously starts with strong capital discipline and as we outlined in January, investing into U.S. projects, as we said, is a core priority for our energy diversification strategy. And then we outlined there as well roughly over the period up to 2030, how much money we sort of -- or much CapEx we plan to spend on that. I think irrespective of sort of FID decision there, I mean, capital discipline will stay strong. Potentially, we would do other projects, pursue other similar type projects for the same objective, but still with the same discipline. And that's really driven by how much we believe that we can take on at one point in time, not only sort of from a balance sheet perspective, but also to make sure we actually deliver a strong return on those projects. And that's kind of the guiding star for that. And of course, if our cash flow was to increase significantly in the period as well, I mean, that doesn't change our plans on the investment side materially necessarily as such. But of course, then we would look at the levers that we have at hand. And of course, as we've said, additional distribution is also something that we would always consider, right, in such a scenario. And I think also on that note, of course, also important to mention that with the current market volatility that we see, we also, of course, need to keep in mind that there could be changes in the market as well. And I think particularly with what we see now, of course, maintaining a very strong balance sheet is extremely important for our flexibility, both to navigate the market, but also to sort of make shareholder-friendly decisions. But sort of regardless, of course, our capital discipline remains even though our cash flow would increase. But that said, we are sticking to our capital allocation policy, our dividend policy, and we will, as a part of that, always consider additional distributions. Maria Gabrielsen: The next question is then from Angelina Glazova. Angelina Glazova: Angelina Glazova from JPMorgan. I just have one question left actually, and that's on the U.S. blue ammonia project. I am wondering how you think about the time line for mid-2026 FID that you provided us with. Do you view it as a hard deadline? Or do you think that this is a goalpost that can be moved potentially? And the reason I'm asking is that we had quite a detailed discussion on policy earlier on the conference call. And it is a possibility that we might not get final certainty on CBAM regulation in Europe by mid-2026. And I'm wondering, in this case, how would you approach the decision? Would you still make the decision in conditions of uncertainty? Or would you rather wait until we get this final certainty on regulation? Magnus Ankarstrand: Yes. Thank you for the question. I think when it comes to certainty around political decisions, whether it's CBAM or tax rates for that matter, you never get that right. They never get 100% certainty. So I think we, as such, are -- always have to make decisions knowing that there is that level of uncertainty. Everything that's politically decided could, of course, be undecided. That being said, I think sort of the tendency that we see on CBAM now as well, also politically and the signals that are public out there is that the appetite for changing it seems to meet with resistance in many places and importantly, among those European parliament as an example. That being said, when we do a project like this, obviously, we don't base that solely on subsidies or sort of political incentives like that, right? As we've said many times before, basically 3 main objectives. It's lower gas prices, it's increased scale and with that comes lower fixed cost and CapEx per tonne. And then it's tapping into carbon -- sort of carbon margin as well. So all 3 are important and play a role in the business case. Obviously, if you take one away, then the business case is less strong. But I mean, still, for us as a big ammonia producer, the 2 first ones are very important. When it comes to the time line, I think that is our plan, and we work by the plan. But I mean, what's important both for us and for Air Products is to make the right decision. So I mean, if there's outstanding technical matters or any other good reason that it makes more sense to wait a little bit, that's, of course, what we do. I mean there's nothing forcing our hand to make a decision on a certain date. I mean we will make the right decision for both companies, and that is one that is value-creating for all our shareholders. Maria Gabrielsen: Thank you. We only have one more question so far. So if anyone else has a burning question, they should raise their hand now. First, Bengt Jonassen, the line is yours. Bengt Jonassen: Bengt Jonassen, ABG. Just one follow-up question on the comment on the Industrial segment. I think you stated in the webcast that there were some curtailments or permanent curtailments of some capacity in the industrials. Could you confirm that? And how much of the capacity was curtailed? Magnus Ankarstrand: So yes, so it's -- on the volume side, we have made -- we announced last year a few closures of segments in Brazil for the industrial side. In addition to that, we had some smaller production issues as well in Cubatao this quarter that also impacted on the volumes. So it was a bit remiss not mentioning that in the presentation as well. Maria Gabrielsen: It's the hibernation of the sulfuric acid plant in Paulinia which we've mentioned last year, if you remember. Smaller plants as such or a smaller volume impact. Okay. There are no further questions, it seems like. So that means that we will end the Q&A session now. Should you have any need for follow-ups, the IR team remains at your disposal. But with that, thank you for joining, and we wish you a pleasant day. Thank you.
Leonardo Karam: Good morning. Welcome to the conference call of Usiminas in which the results of the first quarter of 2026 will be discussed. I'm Leonardo Karam, Investor Relations Officer at Usiminas. [Operator Instructions]. This conference call is being recorded and simultaneously broadcast on the Usiminas YouTube channel. We would like to remind you that this conference call is intended exclusively for investors and market analysts. We kindly ask you to identify yourself so that your question can be addressed. We also request that any questions from journalists be directed to the media relations team at Usiminas via e-mail, imprensa@usiminas.com. Before proceeding, I would like to clarify that any forward-looking statements that may be made during this conference call regarding the prospects of the company's business as well as projections, operational and financial goals related to its growth potential constitute forecasts based on management's expectations regarding the future of Usiminas. These expectations are highly dependent on the performance of the steel sector, the country's economic situation and the situation on international markets. So they are subject to change. With us here today is our President, Marcelo Chara, the Vice President of Finance, Investor Relations, Diego Garcia; and our Commercial Vice President, Miguel Homes. First, Marcelo will make a few initial remarks, then Diego will present the results. Afterwards, the questions asked in the Q&A session will be answered. Now I give the floor to Marcelo. Please, Marcelo. Marcelo Chara: Thank you, Leonardo. Ladies and gentlemen, good morning, everyone. It's a pleasure to be here with you to share the results of the first quarter of 2026. We started the year with an improvement in the results of our company, recording a consolidated EBITDA of BRL 653 million that accounts for a growth of 56% in relation to the previous quarter. As to steel sector, there was an increase of 5% in the net per ton, especially as a result of the better mix of sales, the better share in the automotive sector and a reduction of the COGS. And this was driven by the appreciation of the real and the higher efficiency in our industrial activities. In mining, we had a reduction as a result of the rainy season in the region that impacted the production and the logistics. And also due to the prioritization of mining activities with better performance. Considering the present moment, we see a challenging scenario for the next quarters, especially due to the adverse effect of the Iran war at the global economy. And this is due to the expressive increase in the natural gas and oil prices, higher inflation and lower speed in the drop of interest rates and also the maritime aspects that have been impacted. In spite of this complex scenario, we have expectation of consolidated results relatively stable. In steel sector, volumes of sales should remain at the same levels maintaining the segment in the automotive due to the high level of imports. The increase of cost, especially of energy and logistic inputs should be accompanied by the increase in the net revenue per ton. We expect sales volumes to be recovered and also considering the freight prices and fuel prices. There are positive measures that were imposed by the government with antidumping duties related to coated steel, and this should strike a balance in the future. Considering the perspective of the changes, importers responded internalizing an expressive volume of steel in February and March that increased the inventory levels of imported materials in the Brazilian market. In addition to the measures that have been implemented, there is an investment of in China, and we believe that we are going to close them in July 2027. It's important to mention that there's a risk of the oversupply at the structural level with an increase of imports of steel from Asia and China and with an increase of 78% when compared to the first quarter of 2025, especially from South Korea and Vietnam. In addition to Egypt, Internally, we continue with our focus and safety and a continuous improvement in our environmental performance in our operations, increasing competitiveness so as to reduce costs and also have a higher industrial efficiency and basically with a strong financial discipline. In relation to investments, we continue executing priority projects of the company, such as the PCI plant who is to complete it in the second quarter -- second half of 2026. But the benefits have already been captured in the first half of 2026 and also the retrofitting of the coke [ oven ] and also all the activities on the way. We would like to thank all our employees for their efforts, for the engagement as well as the suppliers, clients and shareholders and the community at large for the confidence and for the solid relationship we have been building along those years. Thank you very much. And I turn the floor to our CFO, Diego. Diego Garcia: Thank you, Marcelo. Good morning, everyone. And before beginning the presentation of the results, I would like to remind you that these are the first results that were converted in reals from dollars. Let's move on to the highlights. Steel sales were decreased by 7% in relation to the fourth quarter '25. And this is a result of the strategy of giving more importance to the most effective activities. So there was a lower production due to the stronger rain during the period. EBITDA shows a significant moment in relation to the previous quarter. This was driven by a better mix of products in the steel sector and higher profitability that more than offset the drop in volumes. This improvement in the mix is reflected in an improvement of nearly 5% of the revenue per ton in the steel sector as the increase more than offset the drop in the mining activities. The cost per ton had a slight drop due to the expenses with retrofitting, and this is the impact of the appreciation of the real against the dollar. Let's move on Leo to talk about the consolidated results. Net revenues reflects the significant reduction in the iron ore and also steel products that were not totally offset by the increase of the increase per ton. This is an improvement of the steel unit as a result of the better mix, reaching to levels that the company had reached since the first quarter of last year. Consolidated net income reflects in addition to the best operating results, the positive FX fluctuation in relation to our operations and also an accounting impact and noncash of deferred taxes due to the appreciation of the real as well. Steel sales recorded a drop of 6.9% concentrated in industry, distribution and exports and partially offset with a significant increase in the automotive area, leading to a better sales mix. And there was also a better mix in exports due to a better share in the Argentinian auto market. This better mix led to a better mix of revenue per ton. And as for exports, there was an improvement of nearly 9%. Adjusted EBITDA more than improved and it was very much in line with the first quarter of 2025. This was a result of the better mix, as we mentioned, and the best cost per ton. A better cost per ton. And here, we can see the effect of the improvement in EBIT over EBITDA. COGS was positively impacted by reduction of maintenance costs and major retrofitting, as we mentioned. In addition, we have a better mix that was offset by the lower exchange rate when converting to reals. This positive result apply especially by lower sales of prices and costs and higher volumes. In the mining sector, during the quarter, we had a significant reduction of 21% in the sales volume as it was driven by the seasonal rainfall on production and also on logistics. We also prioritized some areas with best operating performance. Net revenue reflects this drop in volume and the net revenue per ton was maintained stable at $87, the same level as last quarter. The reference price were practically stable with a slightly increase of 0.9%, but they were offset by the higher level of discounts and the different -- differentials as prescribed by the market. Adjusted EBITDA per ton reflects especially the impact of the absorption of fixed costs as a result of lower sales. And now in relation to the financial indicators for the quarter, Usiminas frozen an operating cash flow of BRL 370 million was driven by the EBITDA generation, partially offset by the increase of working capital of BRL 120 million. The working capital variation is associated to a lower accounts payable and an increase of receivable accounts and also due to a reduction in inventory levels. We had a reduction of BRL 67 million in [ trading ] in order to reduce the cost of expenses for the company. It's a movement that we want to continue implementing along the next quarter. We had a CapEx of BRL 285 million, a reduction of 23% in relation to the previous quarter. As a result, we ended the quarter with a free cash flow of BRL 84 million. We ended the quarter maintaining a net cash position at levels which were very similar to the previous quarter. This movement reflects a proportional reduction in the gross debt and also to the cash level influenced by the appreciation of the in relation to the dollar, considering the conversion in the statements. The indicator of net debt over EBITDA also remained stable, reinforcing the consistency in our capital structure. Finally, we have a debt profile, which is very comfortable without relevant maturity in the next years and with the cash and investments enough to cover the indebtedness of the company. Leo, over to you. Thank you. Leonardo Karam: Thank you, Diego. Now we're going to start our Q&A session. Our first question is for you, Diego. Now we have most questions about costs. So we are going to try to address them all, breaking them down so that we can avoid confusion. So the first question comes from Caio Ribeiro from Bank of America. And this is what they ask from XP. Could you provide more color about the cost evolution of the input of the second quarter in relation to the first quarter? Which are the main drivers? How do you expect the cash per ton to increase? [ Guilherme ] completes -- asking for more details about the impact in the context of the increase in inputs and raw materials and freight that you mentioned in the outlook. Diego, over to you. Diego Garcia: Thank you very much for the question. In relation to the inputs for the next quarter, all raw materials will have an increase. We have already been seeing in slabs and this has no impact in the previous quarter due to the timing considering the moment when the slabs were purchased, but there will be an impact for the next quarter. And we also see that higher price in cokes and also in the coal. And Marcelo has mentioned that we see an impact caused by the freight increases that would affect mining activities, especially. However, as of the second quarter, they will start causing impact on the supply of raw materials. So these are the main drivers. Leonardo Karam: Thank you. Still about costs Rafael Barcellos, Bradesco, Gabriel Barra from Citi, and [ Emerson ] from Goldman Sachs. They ask the following. So what's the magnitude of cost reduction when you reduce maintenance costs? Is this something we are going to have an effect in the next half of the year? And the retrofitting will be offset in the next quarters? Or do you see that the cost will have some level of sustainability? And is there a space for room for better performance in the operations in terms of energy and raw materials? Diego? Diego Garcia: The cost per ton was at $15 per ton. So divided by ton, we made some savings. In relation. Leonardo Karam: I'm sorry, Diego, just to specify that you're talking specifically about major repairs, right? Unknown Executive: Yes, major repairs and maintenance. Yes, these are the 2 factors that explain the savings that we had. So I mentioned, we have $15 per ton. So it's an temporal or permanent effect. This was the question. We believe that this is going to be permanent. We have no expectations of anything changing unless something unexpected change happens. So this -- the cost may come back in the future, and this will be reflected in the activities. And these are the activities we are trying to do more efficiently. And to add Diego's comments, as I had mentioned in the previous calls, we are deeply focused in improving industrial efficiency, and we started important initiatives in order to improve efficiency. We have adopted tools to optimize and make all the repairs in a more effective way, especially the planned repairs. And in terms of cash control and in terms of asset controls, we have [ mentioned ] all the dimension in order to optimize all the flows and all the related costs. And we can see the results because we have been doing this for more than 2 years. And this is a continuous process as the expectation is to continue improving efficiency along those lines. Leonardo Karam: We have here another question related to cost, but I believe it's more directed to Miguel. Caio Ribeiro from Bank of America. He asks if the price increases were enough to offset the cost pressure? Or do you think more increases will be necessary? Miguel Angel Camejo: I think your question is very important so that we can clarify and apply the dynamics that we use for our prices along the quarter. And also for the present moment. The increase of January had the purpose of improving the margins of the steel sector after a long period of lean margins, considering that we were in conditions of unfair competition as we have observed in the last 3 years in Brazil. After the beginning of the war in 28th of February, we saw the pressure on costs, as Marcelo and Diego mentioned. And this leads the need for increasing prices as of April. As of now, we are always mentioning the negotiations in relation to spot businesses and the distribution. So we are in a scenario of high volatility and uncertainties. So we are going to be analyzing very cautiously the profitability of each operation in terms of imposing new prices for the spot prices. The industrial sectors will continue this trend. We'll continue making adjustments in the spot prices as we renew the agreements. Leonardo Karam: Thank you, Miguel. Diego, still related to costs. Now focusing on the ForEx. We have questions by Gabriel Barra and Ricardo Monegaglia from Safra. He says, should we expect 2-digit levels? Or should there be any pressure should the ForEx fluctuation revert? The functional currency helped us in nonrecurring manner. Or how -- what were the changes? And what were the exchange rate used? Ricardo ask saying the following. What was the estimated impact on the COGS price for the first quarter, considering this FX rate? And can we think about the aid of BRL 50 million in the EBITDA of the quarter compared to the previous methodology? And what's the evolution that we can expect in relation to the FX fluctuations? Miguel Angel Camejo: Thank you, Gabriel and Ricardo. In relation to the margins that we are -- what we are estimating for the next quarter, as Marcel has mentioned, we are expecting an EBITDA level, which should be stable. And we are likely to have an improvement in the steel sector to offset the mining activities. In relation to the functional currency effects, the main effects that we can see is on the one side, we should consider the net position in reals in a consolidated way. Because that will lead it to FX gain of BRL 110 million. And also, there is an impact in the deferred credit, which was something very significant, amounting to BRL 450 million, which is a very large -- a large share of the net income. And that will depend on the future FX variation. If there's no variation, we are going to see the effect on the results. If the FX is maintained what we saw yesterday, for sure, we are going to have a very similar result. And then the type of FX rate used. If I'm not mistaken, -- at the end of December, it was 5.5. And at the end of the March, it was 5.2. It had an impact on the cash cost of the steel sector in dollars. So it is cash cost. It's in dollars, so there will be no changes. So when we convert into reals, we use FX, FX rate, which was lower in relation to the previous period. Leonardo Karam: So there was another question. No, that's it. Okay. The next question is still about costs. Diego, Edgard and Daniel from Itau, [indiscernible], would like to understand this line in our cost of others. So they are asking us to give more color because when we look at the history track, there may be a seasonality influencing. So what can we expect for the second quarter? Is this already considering the outlook of the cost increase that was shared with us? So from BRL 240 million, we saw a drop of BRL 89 million in the line. And what can we expect? So they want details about this reduction, and this is what [ Guilherme ] asks us. Diego. Diego Garcia: This line is very pulverized, but we're not likely to see a seasonality influence. Now answering your last question in relation to the bonus payment. So except for this, all the others are very [polarized]. Leonardo Karam: Now Miguel, about third-party slabs, [indiscernible] they say it attracted our attention, the level of purchases that you made of slabs. So how does slab price has impacted the production of rolled steel in Cubatao. So how do you use the blast furnaces of Ipatinga? And can we expect the slab price level to be maintained at the same level? So the question is, is the level of purchase likely to be maintained? Miguel Angel Camejo: Of course, you have been following the international indicators for slabs. We have been suffering a lot of pressure since the Iran war started. And based on this, we can simulate the allocation of our production between Ipatinga and Cubatao. Of course, this will be a result of the best economic decision. Obviously, so we have to meet the need of each client at a certain moment. So what to expect for the future, we can expect our production to increase in Ipatinga with the blast furnaces and a reduction of activities in Cubatao in the short term. We are going to continue monitoring the market opportunities and alternatives so that we can go back to the levels at Cubatao that we want or to look for profitable alternatives for the company. Leonardo Karam: Thank you, Miguel. Marcelo There's a question by Gabriel Barra from Citi about the Iran conflict. This is a question. The effect of conflict did not affect the quarter of the steel sector is not so affected by the war. Marcelo, could you answer this? Marcelo Chara: Gabriel, thank you very much for the question. We all know the impact of the gas, of the oil barrel, which has a significant increase. And this impacts the cost of transportation and energy in all the logistics and production chain in general. In the first quarter, we hadn't seen this reflected on the results yet. But as we update all the indicators and all the contracts related to the indicators, we are sure to see those impacts. All industrial sector will have this impact and other sectors in the economy will also have the impact. The freight will have a significant impact. So the maritime transportation imports and exports will be impacted. I would say that this is inevitable. So the cost will be impacted eventually. Leonardo Karam: Thank you, Marcelo. Miguel -- now about sales. We have many questions about sales, and I'll try to concentrate them. of Goldman Sachs, [ Guilherme ] of XP and Caio Greiner of UBS asked the following questions. Considering the stable volume of production, considering the strategy of the company, is there room for gain in market share? The focus would be in maximizing the revenue per ton and profitability. And the expectation -- what's the expectation to imports to drop? And what you expect the stable volumes? And the first quarter was lower than we expected. Do you see any deterioration of the demand and [ Guilherme ] adds about the performance of the domestic market. And if we already have a tighter scenario for some specific products, especially those related to antidumping. And Caio Greiner also asks about the strategy. Are you going to continue with the same strategy? Or are you going to go for higher market share? Are you going to prioritize the old over volume? Miguel Angel Camejo: I'm going to give answers. And Leo, you can help me if I did not answer some questions. In relation to the market, we see a very important resilience of the main consuming sectors of steel. The first would be the automotive sector with an increase in production of auto and also in the formalization of those cars. And ANFAVEA estimates a 4% increase in production. Sectors related to consumption has a very resilient level with the expectations of growth, not very high, but following the macroeconomic indicators of the country. On the other hand, we have sectors that are being affected more in relation to consumption. And they have been facing tough times, especially the sector related to the agribusiness, roads implements, agricultural machineries, which have been drops in consumption. Considering this context and since imports have been increasing in the first quarter, in spite of the measures that have been implemented by the government, especially antidumping and cold rolling mill and coated rolling mill, but we see that the inventories will be very high. And as a consequence, there will be a stability in the apparent consumption of steel that could be better in the second half of the year when the inventory levels are more normalized. And then we expect a stability in the sales in the second quarter. In relation to the share, it would be fair to think we can talk about the second half of the year. We can talk about export -- import of steel, especially those with unfair competition will have some improvements. And Usiminas will then be a very important player in increasing the share of supply of local or domestic market. In relation to the prioritization of value over volume and profitability, it's fair to think that in a scenario of high volatility after the year on war, we tend to be more demanding in our decisions. so that we can make spot negotiations and also in relation to important projects in the medium and long term. Leonardo Karam: Thank you, Miguel. There is a follow-up on the functional currency. [ Gabriel Simoes ] and Marcelo Arazi from BTG. So what would be a follow-up on the cost and the function currency, especially those which have higher consumption. For example, the change of functional currency helped to reduce the cost of the raw materials after the conversion in real. And Marcelo asks us to quantify the effect of this variation should the function of currency remains intact, if there were no changes, what would be the evolution of the cost? What would be the cost behavior? Yes, Diego. Diego Garcia: Thank you, Ricardo and Marcelo. The costs are in dollar, the slab cost, coal or they were all converted into dollars. And the costs are accounted for. And then what happens is the conversion into real that happens every month. If the currency is lower, the cost will be shown in real. But it doesn't mean that the functional currency helped to reduce the cost. So we convert into real that will show this effect. In relation to the second question, if you're going to make a quantification, it's something very complex to be done because we would have to redo of the previous quarter that used a different functional currency. We -- it's not something that is required to be done. So it's very complex to redo the previous accounting of the previous quarter. Leonardo Karam: Thank you, Diego. Miguel, now about exports. [ Rodolfo Angele ] JPMorgan and Igor from Genial asks about exports. Steel sector volumes were lower. So what do you expect for the next period? And Igor asks more details about the prices. And he says that there was a better mix, especially what happened in Argentina. So are you going to continue with this price over volume now in the external market? Are you going to apply this as well to the external market? So what are the expectations for exports? Miguel Angel Camejo: Thank you, Leo. Our expectations for the second quarter of this year is to maintain a stability, both in terms of mix and the market -- exports market. So we don't see a lot of changes, a lot of variations in this regard. The higher average price is a result of the better mix. As we anticipated in the fourth quarter of last year in the call, we ended the deliveries of oil and gas that we had in the past. We maintain a positive expectation in the sector of oil and gas, especially in Argentina. In the short term, we do not see any closures. For the second half of the year, we have been negotiated important projects that we hope to have -- to be very successful in the negotiations. Leonardo Karam: Thank you, Miguel. Still about imports. Gabriel, Barra, Citi, [indiscernible] JPMorgan, they ask the following. In spite of the expectation of normalizing the exports, galvanized products has high levels still. So how do you see the competitive dynamics in this specific segment? Should we expect an accommodation of exports in the short run? And Igor says he understand that there was a raise of importers in order to go for the volumes before the measures were applied. So how long do you believe that the market will absorb this excess volume? And lastly,[ Thais ] asks about cold rolling products. So we saw that the volumes dropped, but we still have some inventories in the chain. So some volumes in other regions were also coming in. And we heard about volumes coming in, in other regions. Could you provide some more information about this? Miguel Angel Camejo: Gabriel, Igor Guedes. For sure, imports of the first quarter were very high, increasing by 30% when we compare to the previous quarter. This suggests a very big pressure in the inventories in the chain. And this will cause impact in the apparent consumption of steel, especially in the domestic market in the next months. The inventory levels cannot be calculated very accurately. But there is an expectation of increasing consumption. But -- so we believe it will take some levels. We believe that this inventory levels will be normalized in the second half of the year. And at that moment, the steel industries, including Usiminas will have more chances of opportunities in relation to the steel consumption in Brazil. What was the other question, Leo, please help me. The question was very relevant. In addition to the increase in imports, we can see an increase of imports, especially in the Southeast Asia. It's very relevant to understand that the world oversupply will be maintained. Even though the Chinese steel in March stands at BRL 120 million per year and generate an imbalance in different countries. This situation generates an indirect impact in the Southeast Asia countries that is to direct those oversupply to Brazil. So it's very important to continue monitoring together with the government, and we must take the right measures so that we can avoid the indirect impact generated by the Chinese oversupply. Leonardo Karam: Miguel still for you. A question about automotive. [ Diego Mora ] from Goldman Sachs says Ricardo Monegaglia from Safra has 2 questions. The stronger sales mix is sustainable. What are the negotiations of the agreements related to prices? What were the agreements for the automotive industry in April? And what are the impact of the coated and galvanized products in relation to agreements? In the first quarter, we had a big influence of the automotive sector. So how do you expect this to play out in the future? Miguel Angel Camejo: So let's start from the agreements. The agreements have showing reductions of 2% or 3%, similar to what we negotiated with the agreements that we had in January. We expect the automotive sector to continue the way it is. March was a very relevant month in production, especially in the first 15 days of April, we see this materializing. And ANFAVEA expects an increase of 4% for the year. However, it's very important to mention that both the steel sector and the automotive sector and other sectors of the economy and the Brazilian industry have been facing challenges in relation to imports, both for final products and also in relation to business models that will that are coming to Brazil. So we have a lower impact and lower impact in the production chains in Brazil. It's important, therefore, to continue with our agenda of reindustrialization and also with the public policies to reinforce the productive chain in different sectors. The galvanized products in the auto sector and also the coated products account for 70% of our installed capacity. So 30% of this is impacted by spot businesses and also other industrial sectors. that follow their own agreements. In relation to the favorable mix of the first half of the year, the expectation is to maintain this favorable mix for the second half of the year. In the second half of the year, we have to understand the dynamics of different sectors, the potential reduction of imports in Brazil after the implementation and also the inspection of the measures that were to be implemented by the government. Leonardo Karam: Thank you, Miguel. Miguel and Diego now. In relation to the outlook that we provided, Rafael Barcellos with Bradesco and Ricardo Monegaglia with Safra asked the following. What is the magnitude of price increase and cost in the steel sector as we're projecting in the outlook? So it's the same questions. They want to know the magnitude. They want to know about the cost and the price for the next quarter. Miguel Angel Camejo: I'll start, Diego. In terms of price, we have already mentioned, there was an increase in price as of April 1 for the distribution and the spot prices, as we mentioned previously. As -- in relation to the industry, the industrial agreement as of April will follow the trend of the mix of spot prices as we observed in the first quarter of the year. In the automotive sector, we continue with the agreements that we mentioned previously according to the negotiations that have been completed. So we are looking at the raw materials, especially plates and also Coke and coal. And this will have an impact that we will try to handle. However, I cannot provide you with exact numbers or precise magnitude. Leonardo Karam: Still about outlook related to prices, Guillermo [indiscernible] from JPMorgan and Carlos from Morgan Stanley, they said, what is the domestic performance along the second quarter? And do you see a more positive impact for the dumping -- for the local industry during the antidumping measures? So when will the price pass-through will happen? And how has this been impacted by the imported products? And [indiscernible] asks for more color about the increases in April that you have already mentioned. And if you expect any price changes for May and June, do we expect movements to happen, Miguel? Miguel Angel Camejo: In relation to the positive scenario for the local industry based on commercial measures, we do not see the impact of the measures that were defined in the beginning of the year. Why? Because as we mentioned previously, there were there was an increase of the import of there was an increase of the inventory level. So the results will take a bit longer. So there was a drop in the local production. So as the local mills cannot increase their share in the apparent consumption of steel in the country. Of course, the measures will then have the expected results. In relation to prices, we implemented a 5% increase in the spot sector as of April 1 and we're going to continue monitoring the pressure of costs in the international market, the cost of energy. And based on that, we will see the -- what will happen to the new adjustments for the next months. We still do not have the adjustments already defined, but we are monitoring all the situation very closely. And this will also be related to higher volatility in our local costs. Leo, did I miss anything? Leonardo Karam: No, I think you answered his questions. I said that the cost would be the most successful question, but no, there's a very long section about the commercial aspect. Carlos asks if you could mention this percentage of increase in April for the spot price as distribution and industrial segment industrial agreements. Miguel Angel Camejo: For the distribution sector, the adjustments implemented was at 5% as of April 1, the industrial agreements that start as of April should follow the dynamics that was observed in the spot price in the first quarter that had a very similar level of 5% or 6% in the distribution sector. Not all the agreements are updated on April 1. Some of them will have the update only on July 1. Leonardo Karam: Thank you, Miguel. We're moving towards the end, and I still have a lot of questions here with me. So I'm going to try to select the main ones. Miguel, about price parity. As Brian and Marcelo has asked about what's the import parity for the rolling and coated product? And what are we to expect for the future? The calculation of the parity is very interesting and why is that? Miguel Angel Camejo: Because different from what we saw in the past, when we talked about parity, the calculation used to be made based on market prices and outside of unfair competition and oversupply situation. When we compare, for example, the domestic market price against the price -- domestic price in Europe and the United States, we still are at lower levels that have defense -- commercial defense so as to balance the commercial market in the -- internally. So you can make recalculations. So it could be about 15% nowadays. But with impact on this price which is a price, which is impacted by the oversupply conditions of the international market. Leonardo Karam: Now, Miguel, commercial defense, Gabriel Barra, [indiscernible] of UBS ask the following: Gabriel asks about the hot rolling product. When the antidumping was not implanted, can we see this reflected in imported volumes? Do you think there will be other drop in hot coils and what are the measures to be implemented along the year? Marcelo completes asking about the share. If you have seen alternative routes for the imports of steel, such as Korea or Vietnam. And the price -- have the prices being more competitive than those are Chinese products. And could this increase the parity of the industries and [indiscernible] completes, asking about the vision about the implementation of the antidumping measures. After the implementation of antidumping measures, we will see an increase of prices and how you see the import parity of coated products? Yes, please. Miguel Angel Camejo: It's very relevant to implement the antidumping measures for hot rolling product. So we see what we saw in the cold rolling and coated products that have been very important. We still do not see a reduction in the results. So we are likely to see this when the -- there was a raise for anticipating those purchase of those materials. In terms of Vietnam and Korea, as an alternative route, we have observed a significant increase of imports from other origins China, especially Korea, Vietnam and other countries from the Southeast Asia. In commercial conditions, very similar to those offered by China. So this is a result of the high pressure that China has in the local market, leading those countries or leading those industries to have unfair competition in their exports. So this is very relevant, and we are very attentive to those cases so that we can activate the tools that we have for commercial defense so as to avoid the impacts that we have seen in the last 3 years, with a high increase of Chinese imports. So it's very important to keep monitoring and working with the local authorities, so that we can make -- adopt the right measures of defense. In relation to the price, I think I answered previously in relation to the parity and how we see the prices to play out in the future. Leonardo Karam: Thank you, Miguel. There is a follow-up. But I think you have already answered. Luis from -- asks about the price of Asia, you have heard Asia about Vietnam and Korea. So we are moving towards the end. So let's try it a bit quick. Diego, about deferred, Gabriel Barran says, the income was very favored by deferred tax credits and FX effects. How can we expect the effective tariff or liquid for the next quarter. How can you see that? Gabriel? Miguel Angel Camejo: The impact of the tax credit with deferred taxes will depend on the type of FX rate because the accounting base is in dollars and when the real is appreciated against the dollar, there's an increase. And then this credit is increased. We have the inverse movement we would have a negative result on this. So that will depend the kind of effects. In relation to the financial result, and this is more linked to the net position in reals will also depend on the evolution of net cash in reals that we have. So we are going to continue monitoring this, so that we can minimize the effect. Leonardo Karam: Marcelo, one question for you about compacters. Gabriel Barra from Citi, and Ricardo from Safra ask the following: what are the analysis of compact analysis can be done in phases, which is the most likely scenario and the friable, what the duration of the life of the mine. Is there any decision to be made still this year and the environmental permitting and all the documents at MUSA, what would be the expected timing for those -- and for the FID and approval? Marcelo, can you answer that? Marcelo Chara: Thank you, Leo, Rafael, Gabriel and Ricardo. I'm going to try to summarize. As we have been mentioning, the permitting is working well. According to the time line, considering magnitude and complexity of the project. In 2026, we believe we can have the confirmation, so that we complete all the permitting process. In relation to the friables, we have been making a new sizing of all the reserves and by using different strategies, we have been able to extend the useful life of the friables. And this is very important for us, the strategic view in addition to optimizing the assets that are already existing for the operation of friables. I would say that these are the main components. And as we evolve and we continue with the process of permitting, so at the end of 2026 and the beginning of 2027, we expect to have a proposal and also to analyze the alternatives. And this is a highly complexity project. And we have different alternatives. We have very good engineering team in order to optimize each of the possible steps. And we are very likely to have a very competitive and efficient split. So this proposal can be callinated in phases. Leonardo Karam: Thank you, Marcelo. Marcelo and Diego. We have questions about projects. So Gabriel Coelho Barra . Gabriel asks about the advances of the PCI project. Can it give an additional upside in the margin still this year. Can you comment on the evolution of other projects of the efficiency of the company, such as Coke batteries and gas holders. And how can we think about the PCI implementation leading to lower cost per ton. What can we expect in terms of efficiency after the implementation? And would it would reduce the purchase of still called for by third parties -- from third parties? Miguel Angel Camejo: The PCI project is a project that is in the final stage. And as I mentioned in the remarks, we are already capitalizing on it because there's a part in the blast furnace that has already been completed and that helps us to make the distribution of fuel and blast furnace in a very efficient manner. So we have been able to implement our PCI and our blast furnace 3 is where this investment is mostly concentrated. So we have already started to capitalize on this on the efficiency of the field as of this quarter, the second quarter and we are likely to capitalize it on full as of the fourth quarter without a doubt. And this will allow us to reduce the purchase of external Coke because this is going to be a replacement from this coal to Coke because this is a field that we are going to be applying internally. And the other projects are moving in alignment to our plan in a very efficient manner. For example, our Coke plant has two main sectors. One of the sector is undergoing hot repair. We have already advanced by 50% in this activity. So this will improve our environmental performance and we also have a very good thermal efficiency and there is a complete construction destruction of the other section of the Coke plant. And next month, we'll be able to see the construction works. So we had auction process and also the technical part, the technical dimensions in order for the implementation to happen. And the engineering side is also very advanced. So in 2 years' time, 2.5 years' time, we will have a very good improvement. And also for gas holders, we will see a very important evolution of the gas holders that will allow us to recover a large quantity of internal gas and we improve the overall efficiency. The sum of all those projects -- we'll be capitalized in a progressive manner in the next quarter until the full completion. In the calls, we are going to share with you the progression of all those activities. And Marcelo, in fact, the hot repair and the PCI plant used up most of the CapEx for the quarter. Leonardo Karam: Okay. Last question now, we are running out of time. It's about sales at MUSA. Caio Ribeiro with Bank of America, they ask the following: and the mining sector, then with increase of cost and freight, will there be a decrease in the shipping to the external market. MUSA operations were affected in the volumes because of the rainfall. And in the second and third quarters, which are dryer periods, do you believe that you can recover the volumes at the same levels that we had in 2025? Yes, Diego? Diego Garcia: In fact, we exported to Asia, but those cost increases impacted our profitability, but it's still profitable. As we can see in the results of MUSA. The diesel cost impact has not had a significant increase. So the higher consumption was associated with internal movement. So in terms of volume, as we mentioned at the beginning of the presentation, we expect a recovery volumes, especially due to higher production. And we are going to prioritize the area with higher grades so that we can continue exporting. Leonardo Karam: Thank you very everyone. We end the Q&A session now. We would like to thank you for taking part in this event. And if you have any questions, we would like to remind you that the IR team is available to take your questions. Have a good day, everyone. [Statements in English on this transcript were spoken by an interpreter present on the live call.]
Hermann Haraldsson: Good morning, and welcome to our Presentation of our Q1 2026 Report. Yes, let's just go to the agenda slide. We will have the usual agenda for the presentation, and I will present the highlights of the quarter and the strategic update before handing over to Michael for the financials. So next slide, please. We have said that 2026 would be a year of growth acceleration and the first quarter tells us that we are back on track for that. We delivered 4% constant currency growth. And while January and February were soft, momentum changed in March, which saw a significant increase. This correlated with the launch of our spring/summer assortment where we went into the season with around 35% more styles than last year and an assortment that we believe is the most relevant and inspiring we have offered for some time. And we can see that our customers are responding. So that's very positive. On profitability, the underlying margin continues to improve. Our adjusted EBIT margin increased slightly versus last year despite significant FX headwinds. Looking ahead, we are in a strong position to push harder in the second half. Our inventory is clean and healthy, and we have already committed to a significant ramp-up for the autumn/winter season to fully capture the growth momentum that we are building. We will do this from our new base as the headquarter transition to Copenhagen was completed in February. This was done without disruption and gives us the foundation to build our culture and the best team in our industry. Today, we are also initiating a new SEK 200 million buyback program. Cash generation remains solid, and we will continue to distribute excess cash in a disciplined way. And finally, on the outlook, we confirm our revenue guidance of 3% to 8% constant currency growth. But given the solid start of the year, the higher end of the revenue range is now considered being more likely. The adjusted EBIT margin guidance is raised 30 basis points to 5.6% to 6.8% to reflect the favorable currency moves. And Michael, he will take you through the details later. So now please turn to the next slide. We believe that the improvement we saw in March is due to the strategic adjustments we made to Boozt.com going into 2026. We have elevated the brand. We are providing more inspiration, and we're using AI to improve the whole customer experience. And most importantly, we have rightsized and improved our inventory in many ways. Following a year where we had to focus on cleaning our inventory, which had become too deep and without enough freshness and newness, we are now gradually building a more inspirational and a more aspirational assortment. In the first quarter, we added more than 100 new brands to Boozt.com, including well-known names like Birkenstock and Hunter in fashion and Peugeot in home. We have also widened our buying within our current brand portfolio, making slightly more fashion bets. With more than 135,000 styles launched as part of the spring/summer campaign, we brought 35% more options than in SS25 to shop, and our customers responded well by buying 40% more style variations than last year. For the second half and the autumn/winter season, the buy plan is even more ambitious. We are adding more brands and more breadth across categories, including the return of Max Mara and GAP to the site and new additions like Paul Smith. In total, we are on track to add more than 200 new brands during 2026 across our different categories. The point is simple; our customers are responding to a better and broader assortment. This gives us confidence in the acceleration that we are planning for the second half. Next slide, please. Looking at the women's category, we are also seeing a better trend here. After a number of quarters with a decline in customers engaging with the category, we are starting to see a stable improvement. Active customers buying women's fashion on Boozt.com grew 3% in Q1, but the underlying development was even more encouraging. January and February were difficult, cold weather and limited inventory held us back, but it actually got a bit warmer in the region. And as we saw the first signs of spring, women reacted very well to the SS26 launch, supporting our acceleration in March. We expect this momentum to continue as we broaden our assortment even further in the second half of the year. It goes without saying that this also has a spillover effect onto the rest of the business. When women engage with fashion, they often also move into beauty, kids, sports and home. So you might say that a healthy women's category drives the entire platform. Next slide, please. As we scale that volume, it is essential that we do so efficiently and keep the cost base lean. AI has become a key part of how we do that, allowing us to handle increasing volumes without a proportion increasing costs. A clear example is in customer service, where AI now handles 40% of all inquiries. By automating the routine cases, we have been able to reduce our staffing requirements, allowing us to operate with a more focused team while maintaining a high service level. In the supply chain, we have removed 20% of the manual workload by automating product categorization, among other things, which also ensures better data consistency. And in the warehouse, we have effectively added 5% to 10% in capacity within our existing footprint through the use of AI. So it's all about using technology to make our current infrastructure work harder and more efficiently. These are just a few examples, but they give a good idea of how broadly we work with AI to increase efficiency across the entire value chain. So next slide, please. On the customer side, we are using AI to remove friction and make the shopping experience more relevant. This is already live and already contributing. All products now have AI-generated descriptions and tags. And for the spring/summer collection, we're also using AI-generated model pictures. We're also seeing a direct commercial impact from AI-supported style suggestions. When customers see outfits mixed and matched by AI, they add more to the basket, increasing the average order value. As we've said before, AI is going to get us to a shopping experience that is very close to the experience you get when you engage with an outstanding shopping assistant in a physical store. The only thing that is missing is the ability to feel and touch the products. Our Virtual Shopping Assistant is also off to a good start. While adoption rate is still in the very early stages, the conversion rate for customers who engage with the assistant is 130% higher than those who don't engage. So even though the sample size is still quite small, results are quite encouraging. On product discovery, our recommendation click-through rate has improved from 1.5% to 5%, a meaningful step in making it easier for customers to find what they are looking for. By delivering more relevant suggestions and testing a number of AI tools, we ensure that finding the right product remains as intuitive and easy as possible for the consumer. But to wrap it up, AI is making us a more efficient business and better retail at the same time. That is not always easy to achieve, and this is why we keep investing in it. The next slide, please. We work continuously to build out our non-fashion categories, adding both strong brands and more breadth to that part of the assortment. These categories performed well in the quarter, which is also evident from the increase in customers buying from more categories. If we look at the chart, the trend is solid. Every group from 2 to 6 categories is growing in high single digits, up between 7% and 9%. This is a positive step-up from what we saw last year, and it shows that our focus on cross-selling between departments is paying off. This is fundamental for us. We know that when a customer buys more than just fashion, when they add items from home or kids, they stay with us for longer and they return fewer items. The strategy is working, and it gives us a very strong foundation for the rest of the year. With that, I will hand it over to Michael for the financial review. Michael Bjergby: Yes. Thank you, Hermann, and good morning, everyone. I will start out by presenting our financials for the quarter, followed by comments on our updated outlook for the year. I'll start on Slide #11. So as Hermann said, we grew 4% in constant currency, and this was despite of lower inventory. We thereby maintained our growth momentum from Q4, and we improved our general return profile. There are a few notables in the growth patterns that I believe are worth highlighting. First of all, our strategy with increased focus on our main premium side is firmly executed and showing results as expected, growing Boozt is growing 6% in constant currency and Booztlet is declining. Secondly, the Nordics grew quite nicely with good stable growth in Denmark and Sweden, and we saw Norway grew 13%, where we continue to see that we have very strong potential for further growth and where we believe that we are underrepresented. Finland did not grow, and here, consumer behavior appears quite weak generally. As mentioned, a couple of times, March was materially stronger than January and February, and I just want to mention that this is both because constant currency growth was stronger, but also because we now see less currency headwind. This is something that will benefit us for the rest of the year and something that will show in the reported numbers already from April. Please go to the next slide for comments on our profitability. I think it's critical to understand that the quality of earnings are actually much stronger than they appear in the headline figures. The underlying gross margin is actually up and -- but impacted by FX, 70 basis points and also timing of other revenue as well as some COGS adjustment. And this is timing. As FX effects disappear, the reported gross margin will go up, and we saw that in March. So we had a positive reported gross margin in March, and that is a trend that we see continuing into April now, and we also expect for the rest of the year. So the EBIT margin was slightly up. This was driven by less marketing spend. We have produced offline and improved efficiency, and this particularly related in this quarter to Booztlet due to reduced focus and reduced need for clearance at our outlet site. The marketing spend was completely in line with plan and expectations as when we started the quarter, so nothing out of the ordinary. Next, please -- next slide, please. In Q1, the return on our capital improved as our inventory is moving faster and performing better. As you can see on the chart to the right, our quarterly inventory turnover improved to 0.4. And this, we believe, reflects both a broader, fresher and more relevant stock profile. When you have a stock profile like that, that's a very solid foundation for us to increase stock and take bets. So we actually strive to increase stock as soon as possible, but we are also very firm and very strict on the quality that we require, and there is not much high-quality stock available at this point for the spring/summer trading. As such, the larger inventory ramp-up will be seen in the second half of the year where the increased buying budget is committed. Now please move to Slide 14 and our cash development for the year. The free cash flow was negative and in line with expectations. It's driven by the normal working capital seasonality where we have significant payments of VAT provisions, et cetera. And this was combined with an increase in inventory where we're building up for the spring/summer trading. On the bridge on the slide, you can see that the change from the same quarter last year, which is quite a representative quarter. The main difference is really related to exit tax payment in Sweden; CapEx increase due to the relocation of headquarter and then a bit of a larger increase of inventory than what we had last quarter. I want to mention also that our last 12 months' free cash flow is SEK 754 million, so far above 100% cash conversion. Please move to Slide 15. So we ended the quarter with a cash position of SEK 239 million, and we also acquired shares for SEK 97 million in Q1. And as such, we continue to have a very strong balance sheet, and we have financial room to maneuver as we take on commercial opportunities in the market. Today, we have also find liquidity and space to initiate a new share buyback program of SEK 200 million that we are returning to our shareholders, and we will continue to be disciplined in our return of excess cash. This completes my financial review, and I'll now turn to our outlook on Slide #17. I'll start out with some comments on the currency because this obviously had a relatively large impact due to the macro volatility, which had an impact on our main currencies and particularly the NOK has appreciated against the SEK supported by increasing oil prices. This has changed the expected FX impact on our financials for the year, and as such, we are increasing our EBIT margin guidance. In the first quarter of 2026, we still had significant headwinds, both on revenue and EBIT margin. But if we assume that the current exchange rates hold, then that effect is diminishing quite materially for the rest of the year. That will be visible in our reported gross margin and our reported EBIT margin already from March. The full year impact is now expected to be around 1 percentage point negative on revenue growth and a small negative impact on EBIT margin, and this is based on [ bank's ] fixing rates as of yesterday. By the end of Q1 2026, we have also hedged more than half of our NOK exposure. We found that the current levels are attractive compared to last year. Although when we hedge, it did come with some implied cost because the forward rate is lower than the spot rate due to the interest rate difference between Norwegian kroner and the Swedish krona. The hedging also means that our sensitivity on our EBIT margin and our profit is lower now, which makes our updated EBIT margin guidance relatively robust. Please go to Slide 18 for the outlook of the underlying business. So as mentioned, the spring season has started well for us, and the business is progressing in line with plan. As we said from the beginning of the year, we are targeting a growth acceleration during 2026, and we have an inventory buying plan and commercial initiatives lined up to deliver exactly that. With the current momentum, we, therefore, consider the high end of the guidance range more likely. And on top of this, we also have almost 1 percentage points less negative impact from currency than what we expected in February. The EBIT margin guidance is upgraded by 30 basis points, which corresponds to almost SEK 30 million in absolute EBIT. So with this, I will now hand the word back to Hermann for some final remarks. Hermann Haraldsson: Thank you, Michael. It has been a strong start to the spring/summer season, but we are far from claiming victory. The macro and consumer environment is uncertain, and our most important quarter of the year is still a long way off. But for now, Boozt is in a stronger position than we have been for a long time. Consumers are responding. Our inventory is excellent and commercial initiatives are yielding results. So now it is up to us to work hard to build further momentum as we move into the summer months. So this concludes our prepared part of the presentation, and we will now open up for questions. So operator, please. Operator: [Operator Instructions] The next question comes from Daniel Schmidt from Danske Bank. Daniel Schmidt: Just a couple of questions from me. And I clearly hear you when it comes to sort of the sales momentum that you are experiencing currently, especially for March and April. And of course, that builds confidence to take more risk on inventory, but you have done that before and misjudged the market. I think you mentioned a year ago that you came into 2025 with too high inventories in the hope that the market would pick up. So what measures are you taking this time to not make that same mistake? Hermann Haraldsson: Well, experience is a good teacher, Daniel. I think if you noted that we have made quite a big change in our assortment strategy, buying more options, buying more breadth. I think we became too cautious going into '25, so buying more narrow or more depth. And unless when you do that, we're, of course, relying on existing customers to basically buy more. And by selling 40% more variants. And actually, we didn't mention that during the call -- during the presentation, but we had 250,000 new customers. So the growth is very much driven by new customers. And that gives us confidence that by changing our assortment strategy and also -- we have also changed quite heavily in our marketing setup. This gives us confidence that we are on the right track. And again, experience tells us that if we have too much stock, Booztlet is the best channel to clear that and get cash. So that gives us confidence to be -- take a bit more kind of risk or fashion risk or stock risk, you might say so. But in general, our stock is too low at the moment. And if you don't have the stock, you don't sell anything, right? So I think that kind of we are seeing that the actions we made end of last year and beginning of this year, they are paying off. Daniel Schmidt: And what do you mean by significant ramp-up? What would that sort of entail in terms of inventory risk? Hermann Haraldsson: Well, we are talking about that we want to get back to double-digit growth in the second half. So probably, hopefully, that kind of -- at the end of the year, we see double-digit growth figures again. And of course, if you want to grow double digit, then you have to buy inventory for that. We are getting a higher inventory turnover. So that's kind of -- so we probably don't need to buy kind of much more than for the double-digit growth that we're expecting. But we, of course, have to buy in advance. And we are adding something like 100 new brands in the second half as well as 35% new styles or new options. So of course, we have to ramp up because we just have -- don't have enough at the moment. Daniel Schmidt: Okay. And just your comments on current trading, basically March and April, are very upbeat. Is that you alone specifically, you think, given what you've done with the assortment being more aspirational [ inbiz.com ] offering? Or is it also the market that you are, in general, seeing a better momentum in? Hermann Haraldsson: In all modesty, I think it's very -- it's quite company-specific because we don't see a tailwind with regards to the consumers. At best, the kind of the headwind that we've been facing over the last 2, 3, 4, 5 years is still the same. We're seeing consumer confidence figures actually in Denmark going down last month. So we're not seeing increasing headwinds. And of course, we're hoping for tailwind, but it's based on the things that we have done. And as I said before, when you launch 35% more options on the site and customers are buying 40% more variants and options, and you're getting more new customers than you have been getting for a long time. I think that tells the story that it's very much company-specific what we're doing. Daniel Schmidt: And is that -- given that you're sort of widening the offering and already done so, even though we didn't see this in this quarter when it comes to other revenues and you right timing effects, is that something that should drag along other revenues to pick up basically as we go into the coming quarters? Hermann Haraldsson: Yes. Daniel Schmidt: Do they correlate basically? Hermann Haraldsson: Yes. Yes. Yes. Daniel Schmidt: Yes. And that sort of builds your confidence that, that particular line will also pick up in the second half? Hermann Haraldsson: Yes. And it's baked into the EBIT guidance, yes. Daniel Schmidt: And are you also saying that when you say that there's not much quality inventory out there for the summer and spring season that even though you are seeing a pickup, you can't expect too much in the near term in terms of growth when we look at Q2? Hermann Haraldsson: Yes. That is why we are maintaining the revenue guidance with Q1 being better than expected, then, of course, it's more likely that we would end up in the high end of our guidance, but we just don't have enough stock for the first half of the year to go faster than we have expected. Daniel Schmidt: Yes. And then just a final question. When you talk about AI and the inventory capacity, you've seen additional 5% to 10% inventory capacity at the warehouse through AI. How does that work? What have you done basically? Hermann Haraldsson: Yes. That's -- it's actually quite a complicated thing, but it has something to do with kind of the stocking and the cross stocking because you know we have a bulk stock warehouse where we -- so we kind of -- yes, it's about refilling and making the stock available to when we need it. So -- and it's a long story, but when we have the transfer cells that we introduced made it possible for us to -- I wouldn't call it just in time, but something similar that basically present the relevant stock to the warehouse when we need it for sale. And this is -- and these are, of course, tweaks because we need to start building more automation as we grow. But that's within the plan that's baked also into the CapEx that we're guiding on. Daniel Schmidt: Yes. Okay. Hermann Haraldsson: Thanks, Daniel. Operator: The next question comes from Erik Sandstedt from Kepler. Erik Sandstedt: Erik Sandstedt with Kepler. Three questions, please. Firstly, in terms of the brands, you're adding a lot of new brands to the platform now. But could you just help us understand why some of these brands are coming on board now rather than earlier? Is this driven more by sort of improved acceptances from the brands or changes in your own proposition? I'm just a bit curious why so many brands are being onboarded now. Hermann Haraldsson: It's a good question. The -- of course, we are have become a very big platform in the Nordics. And we have a lot of customers, I think, something like 2.8 million customers in -- over the last 12 months. So if you want to sell fashion or apparel, et cetera, in the Nordics, it's difficult to kind of pass by us. But of course, we did -- we've tried to make a more clear distinction between Boozt and Booztlet. So making Boozt.com a more mid- to premium site, less discounting and more kind of premium. So of course, that means that brands are seeing it being more attractive to be in Boozt.com. Also when they see how we've been able to improve the customer experience, more inspiration, more guidance on the site. But kind of it all adds up. So it has a lot to do with us being much more clear on the profile of both Boozt and Booztlet. Erik Sandstedt: That's interesting. And then on marketing, I'm just wondering to what extent the Q1 margin improvement here is basically driven by lower Booztlet-related marketing. You also talked about structural efficiency improvements and so forth. But how should we think about this dynamic if inventory levels now build again? Will you need to market more? Or is there a risk that you have sort of underinvested a bit in marketing in this quarter? Michael Bjergby: Yes. Thank you. This is Michael. So we have invested exactly as we planned. But as you said, it is correct that we have spent less on Booztlet than what we did last year. So the decline is mainly coming from Boozt in the first quarter. This was completely in line with plan. So we have definitely not underinvested, but we are also at a level in Q1, which is lower than we expected to be for the full year. So as such, we do expect to ramp up as we get into higher or important trading seasons and potentially also in Booztlet if needed. Hermann Haraldsson: If I can chip in also is that if you don't have enough stock inventory, there's no reason to spend a lot of money on marketing. So that's why we are very much data-driven on our marketing. So we spend what is needed to attract the customers. So that's why kind of -- it's not a case of pumping the EBIT. It's just by being clever on marketing that we're doing this. Erik Sandstedt: But another way to frame that is, are you mainly spending on marketing to sort of clear out stock? Or are you not also just sort of building brand? Hermann Haraldsson: No, we are totally building brand. But of course, brand building has changed a lot over the recent years. And when it used to be offline media and TV is now across a lot of channels. So we are just -- we have become much better at getting return on our marketing investment. Erik Sandstedt: Perfect. And finally, on AI, you spoke about how that's sort of driving efficiencies. And I think you touched upon the revenue side as well. But a bit curious specifically on agentic commerce, how -- is that an opportunity for you? Or is it more a way to sort of mitigate risks and how the entire market is kind of changing how consumers are interacting with platforms and brands? Hermann Haraldsson: It's both. It's an opportunity if you embrace it and it's a risk if you kind of discount it, right? So you have to embrace it. It's still small. But of course, you have to prepare for the future where agentic commerce might be big. And of course, we are doing that and they are putting a lot of resources within resources. So I think it's kind of -- it's a given that you have to -- it's a sales channel and where consumers buy. So you have to be able to kind of accommodate that. So we see this, yes, again, opportunity if you embrace it, but a risk if you don't do that. Operator: The next question comes from Sebastian Gravefrom Nordea. Unknown Analyst: I'm Michael. And also congrats on what looks like a very encouraging start to the year. Hermann, you say you're far from claiming victory at this point yet. I mean you upgrade your growth guidance, at least you indicated that you're going to end in the upper end after only a small Q1 quarter here. So I mean, I guess, in light of everything going on with energy prices and still low consumer confidence, you must be very confident with the new assortment strategy and happy with what you see here in April so far. So maybe -- could you maybe again try to elaborate a bit on the dynamics here around introducing new premiumized assortment? I mean what effects does it have on shopper behavior, engagement and potential overall -- spillover effects on the overall platform? And I guess what I'm asking is what provides you the comfort and confidence on H2 performance trending towards double-digit growth? Hermann Haraldsson: Yes. It's quite depressing to look at outside the window, seeing wars in Ukraine and in the Middle East. So kind of consumer sentiment or macros are not really helping. But what gives us confidence is that the things that we are in control of, they seem to work. And '25 was a boring year; to be honest, it was a transition year where we did some cuts on staff. We announced the move. We had too much of you could always almost claim kind of noninteresting inventory, especially for the women. So we changed that. And the learning, of course, and we knew that is that women are the key because they are buying and they are buying the best. So if we're not attractive to the women's category, they would not shop also across categories. So this is why we did actually quite a big change to our assortment and said, okay, instead of buying deep and narrow, which is kind of you tend to do when you get a bit conservative or cautious, then you just rely 100% on the data and it means that you end up buying white and blue and black, et cetera. We said, okay, we'll provide more inspiration, take a bit more fashion risk on the edges, knowing that it probably will be the stuff that will be discounted in the season, but basically if showing more freshness and more inspiration and that has paid off. And I think that the interesting KPI is that we have like 35% more variants live, but have sold 40% more. So apparently kind of inspiring a bit inspires a lot and makes them buy more. So it's kind of -- and we have kind of have done that for the spring/summer and are doing that even further in the second half. And then that combined with our site shopping experience as well as our really, really strong marketing team that gives us confidence that the things that we are in control of will make us come back to a double-digit growth. I know it was a long speech, but I get really excited about it. Unknown Analyst: And if you look at the geographical performance, it appears that rest of the Nordics ex Norway continued to be fairly sloppy. I suppose this is a Finnish market. But what is your approach really to turn this around? And is it a priority at all here? Or are your focus elsewhere at the moment? Hermann Haraldsson: Yes. If you -- there's not much time to dig into the numbers. But if you notice Boozt.com, we are growing quite well both in Sweden and Denmark. I think 7% in Sweden, 9% in Denmark constant currency. And I think that is kind of some of the most encouraging numbers because our focus has been Boozt.com. We have to get Boozt.com. It's our premium brand. It's our flagship store and getting good growth in those 2 countries, along with a very strong growth in Norway, that gives us confidence. Finland, they are still cautious and probably still a bit concerned about their big neighbor to the East. And that means that -- but again -- and Booztlet, we haven't had the need to clear stock, which -- so we have a negative growth in Booztlet. I think it's something like 33% in Denmark reported. So I think that is -- so I think that kind of the underlying numbers are quite positive for us because the changes that we've made start with Boozt.com and Booztlet only steps in when we have excess inventory. So all in all, kind of -- we are also quite happy with the Nordics, to be honest. Unknown Analyst: Okay. And what I hear you say is continue to build momentum in Sweden, Denmark and Norway and [indiscernible] today. Hermann Haraldsson: Yes. I think we will fix Finland as we get along. Unknown Analyst: Okay. And then my last question, I think and maybe this is for Michael, on the NOK appreciation. It looks like you're getting some -- obviously, some benefits in '26 as reflected in your margin guidance. However, it doesn't look like you're getting the full benefit from the recent NOK appreciation. I guess maybe you've been somewhat hedged here in the start of the year. So is it fair to assume a somewhat positive spillover into 2027 on the margins if the NOK remains at the current levels? Michael Bjergby: Thank you. Yes, that is correct that we have done some hedging that implies some losses also because the forward rate is lower than the spot rate. But -- so there will be a little bit of a positive spillover into next year if the current rates hold, but it's relatively limited in sort of the 10 to 15 basis points area. Unknown Analyst: Okay. Very clear. Great stuff. Operator: The next question comes from Benjamin Wahlstedt from ABG Sundal Collier. Benjamin Wahlstedt: So a couple of more -- let's go to the long-term questions maybe. So your USD exposure is quite limited directly, but your suppliers are most likely paying for plenty of goods in USD. What have you heard in terms of pricing intentions for the autumn/winter assortment? Do you think lower USD rates will benefit Nordic consumers or well, by extension, fashion volumes in the end, do you think? Or what are your thoughts about this? Hermann Haraldsson: The USD doesn't affect us on the autumn/winter because the buy has been done and the prices have been agreed upon. So if they have any effect, that would be at the earliest for 2027. Benjamin Wahlstedt: And have you heard anything of the guidance... Hermann Haraldsson: No. No. No. Benjamin Wahlstedt: Any sort of pricing intentions for 2027? Hermann Haraldsson: No, not yet. Not yet. Benjamin Wahlstedt: All right. And then perhaps more of a bookkeeping question. Your D&A has been rather volatile in recent quarters. Could you say anything about what you see as a reasonable run rate assumption going forward? Michael Bjergby: Yes. So our D&A is going to be relatively stable also going forward. We have, as you know, because of the IFRS 16, we have the new headquarter, which is slightly higher. And the last quarter was impacted by some one-offs. But if you consider a little bit of increase compared to the run rate in 2025, then that is a good assumption for now. Benjamin Wahlstedt: All right. So up from the Q1 '26 level? Michael Bjergby: Yes, exactly. Operator: [Operator Instructions] The next question comes from Daniel Schmidt from Danske Bank. Daniel Schmidt: Yes. Just a follow-up on -- I think you talked about it last quarter in terms of the sort of upgraded Boozt Club that you've been introducing should have some accounting effects on Q2. Am I right? Michael Bjergby: Yes, we mentioned that at the last call. We are still fine-tuning the concept, and we have not finalized the Club benefits. We are in testing right now, and we have the technical platform in place. But it's critical for us to get in the calibration right before we launch that is essential. And it's not something that is easy to unwind once we are live. So -- but I will also say that with the performance that we see right now, we are not in a rush to relaunch the Club as it is, even though we will launch at some point in time this year. However, for Q2, you should not expect a sort of an increase in depth from deferred revenue recognition from the Club. Daniel Schmidt: So it's going to be postponed a bit? Michael Bjergby: Indeed, yes. Daniel Schmidt: Yes. Okay. And you don't know really when then basically? Michael Bjergby: But we are -- as I said, we are calibrating the benefits of the Club. And that means that it may not be a revenue -- deferred revenue recognition depending on how it launches exactly because it's only if it's cash benefit directly that you have to reduce revenue. But if you are launching the benefits in a different way, then you can actually avoid it potentially. So that is what we are considering right now. Daniel Schmidt: Okay. So it's still up for discussion. Okay. Operator: There are no more questions at this time. So I hand the conference back to the speakers for any closing comments. Hermann Haraldsson: Thank you for joining the conference, and thank you for some very good questions. So this -- yes, this concludes the webcast and the presentation, and I look forward to meeting you and engaging you over the next couple of weeks. Thank you very much, and have a good day.
Operator: Good day, everyone, and welcome to today's Nomura Holdings Fourth Quarter and Full Year Operating Results for Fiscal Year Ended March 2026 Conference Call. Please be reminded that today's conference call is being recorded at the request of the hosting company. [Indiscernible] Please note that this telephone conference contains certain forward-looking statements and other projected results, which involve known and unknown risks, delays, uncertainties and other factors not under the company's control, which may cause actual results, performance or achievements of the company to be materially different from the results, performance or other expectations implied by these projections. Such factors include economic and market conditions, political events and investor sentiments, liquidity of secondary markets, level and volatility of interest rates, currency exchange rates, security valuations, competitive conditions and size, number and timing of transactions. With that, we'd like to begin the conference. Mr. Hiroyuki Moriuchi, Chief Financial Officer. Please go ahead. Hiroyuki Moriuchi: This is Moriuchi, CFO. Thank you for joining us. I will now give you an overview of our financial results for the fourth quarter and full year for the fiscal year ended March 2026. Please turn to Page 2. First of all, our full year results. As you can see on the bottom left, group net revenue increased 15% year-on-year to JPY 2,167.7 billion, while income before income taxes grew 14% to JPY 539.8 billion, and net income increased 6% to JPY 362.1 billion, setting a record high for the second consecutive year. We achieved full year ROE of 10.1% on target for the second year in a row since we set our ROE target range of 8% to 10% or more by 2030. Four segment income before income taxes reached an all-time high of JPY 506.9 billion. Wealth Management and Wholesale drove company-wide earnings while both divisions achieving their highest income since their respective establishments. Wealth Management achieved growth of 23% in income before income taxes as the recurring revenue-based business model gained further momentum and major KPIs also saw substantial growth. Investment Management saw its assets under management rise by more than 50% over the year to around JPY 137 trillion, with a substantial increase in the stable business revenue base. Meanwhile, wholesale saw revenue growth across all regions and both Global Markets and Investment Banking achieved record high revenue, resulting in income growth of 21%. As for banking, it has steadily expanded its business base since the division was established and is making solid progress toward implementing deposit sweep. In view of our strong performance for the period ended March 26, we expect to pay an ordinary dividend of JPY 24 per share. This brings the annual dividend to JPY 51 per share for a dividend payout ratio of 41%. Next, let me give you an overview of the fourth quarter results. Please turn to Page 3. All the percentages I mention from here on are quarter-on-quarter comparisons. First of all, group net revenue rose 5% to JPY 577.2 billion. Income before income taxes fell 20% to JPY 107.7 billion, and net income was down 19% at JPY 73.9 billion. Earnings per share came to JPY 24.34 and ROE was 8%. While four segment net revenue rose income fell due to factors, including a decrease in the amount of profit recognized from affiliates in the Other segment as well as an impairment loss at an investee company in Investment Management. Next, please turn to Page 7, and I will present an overview of each business in the fourth quarter. As you can see in the top left, in Wealth Management, net revenue was more or less flat versus the previous quarter at JPY 133.1 billion, while income before income taxes exceeded the strong previous quarter, rising 5% to JPY 61.2 billion. The recurring revenue cost coverage ratio reached 72%, and the division achieved a high level of profitability with the margin on income before income taxes remaining above 40%, which is higher than the industry average. As shown on the bottom left, recurring revenue reached an all-time high of JPY 56.8 billion. Net inflows of recurring revenue assets remained at a high level, exceeding JPY 400 billion once again this quarter. Flow revenue was down slightly, but at JPY 76.4 billion remain high in absolute terms, second only to the level of the previous quarter as we were able to effectively support customers' need amid volatile market conditions. Next, I will give you an update on total sales by product. Please turn to Page 8. Total sales rose 75 quarter-on-quarter to around JPY 11.7 trillion. This was largely due to major tender offers totaling JPY 4 trillion. But even excluding this factor, total sales remained at a high level by product. Excluding the tender offers, sales of Japanese stocks remain high, thanks to a contribution from primary deals. Sales of bonds fell by 5%, while demand for foreign products was solid, sales of Japanese bonds fell slightly in the absence of primary deals. Sales of investment trust and discretionary investments, which constitute recurring revenue assets saw some fluctuations but remained at a high level as a flow from savings to investments continued. In insurance, meanwhile, sales of foreign currency-denominated products declined on weaker yen. Next, we take a look at KPIs on Page 9. Net inflow of recurring revenue assets shown on the top left were JPY 422.8 billion, the 16th straight quarter for inflows to exceed outflows. Recurring revenue assets at the end of March, shown on the top right, were down owing to market factors, but recurring revenue came to JPY 56.8 billion, a record high even when factoring out the receipt of half yearly investment advisory fees. As shown on the bottom left, number of flow business clients rose by around 200,000 from the previous quarter, reaching 1.74 million. Business was -- has been growing against the backdrop of high market volatility, primarily in face-to-face channels. Next is Investment Management. Please turn to Page 10. As seen on the top left, net revenue increased 42% to JPY 86.2 billion, and income before income taxes was more or less flat at JPY 18.1 billion. Business revenue, which is a stable type of revenue, was at an all-time high, owing to growth in existing business and the expansion of international business through acquisitions. At the same time, expenses related to acquired businesses and losses on impairment of our equity stake in an investee company were recognized. As an explanation of the breakdown of net revenues can be found on the bottom right. Solid asset management business in the aircraft leasing business, Nomura Babcock and Brown both contributed to the increase in business revenue, while investment gains related to American Century Investments rose quarter-on-quarter. Moving on to Page 11, we look at our asset management business as a backbone of business revenue. The graph on the upper left shows that assets under management hit an all-time high of JPY 136.9 trillion at the end of March. Shifting our focus on the bottom left, we see there were net outflows of JPY 279 billion. In the domestic investment trust business, which had inflows of JPY 816 billion, funds went mostly into Japanese equity products in the ETF category and into balanced funds, Japan equity active funds and private asset-related products in the investment trust category. In the domestic investment advisory international business, outflows came to about JPY 1 trillion, mainly from business targeted for acquisition. In line with the industry trends in the U.S., we expect funds to continue flowing from active-type mutual funds for now, but we aim to grow assets under management by boosting total sales and bringing net flows close to neutral as soon as possible with enhancements to making capabilities and expansion of active ETF SMA business opportunities. Alternative assets under management on the bottom right grew to a record high JPY 3.6 trillion, an increase of about JPY 300 billion from the end of December, of which fund inflows account for more than half. Next, wholesale. Please refer to Page 12. On the top left, you can see that wholesale net revenue fell 2% to JPY 308.1 billion and income before income taxes declined 31% to JPY 43.2 billion. Looking at the breakdown on the bottom left, Global Markets net revenue split 2% and Investment Banking net revenue fell 3%. Discussion by business line can be found on Page 13. Global Markets net revenue was down 2% at JPY 252.5 billion. Please find the middle section on the right. Fixed income revenue declined 8% to JPY 125.3 billion. In macro products, rates revenue was weak in the Americas with weak volatility rising, but rose in Japan. FX emerging revenue offset some of the weakness in rates revenue as client flows were accurately captured. In spread products, securitized products revenue remained high, mainly in Americas and fell quarter-on-quarter in AEJ. Credit revenue was unchanged despite widening spreads. Equities revenue was up 6% to JPY 127.2 billion. Equity products revenue reached a record high as revenue rose sharply in Japan and AEJ on strong financing and derivatives performance. Execution Services revenue rose in all regions, benefiting from a pickup in client activity. Please go to Page 14 next. As shown on the bottom left, investment banking net revenue came to JPY 55.6 billion, down 3%, but still at a high level. By product in advisory, revenue growth momentum continued based on involvement in many M&A deals, chiefly in Japan. The range of deals was varied and included domestic realignment, privatization and cross-border deals in financing and solutions, et cetera. ECM revenue rose slightly on contributions from large-scale CB and PO deals. Solutions business continued to perform well as it tapped demand for unwinding of cross-shareholdings holdings. Let's continue to banking on Page 15. On the top left, banking net revenue was up 6% at JPY 14.5 billion, and income before income taxes was down 27% at JPY 3.0 billion. Loans outstanding accumulated steadily due to -- during the quarter as recognition of loan products on offer grew. The investment trust balance grew, thanks to both market factors and establishment of new trust. Income fell as expenses rose, including spending on IT and a part of the standardization of business processes and recognition of taxes and public charges. We would like you to view this as an upfront investment aimed for future business expansion. Next, expenses page -- on Page 16. groupwide expenses were JPY 469.5 billion, a quarter-on-quarter increase of about 13% or JPY 53 billion. Extraordinary factors that boosted expenses include impairment losses associated with our equity stake in investee company, compensation and benefits accompanying changes to remuneration regulation and effects from changes to the method of presentation of financial statements. When these factors are excluded, we think it's evident that the cost structure in place is appropriate for the revenue growth. We aim to balance revenue growth and cost controls while making steady investment in growth. Next, Page 17 for financial position. As you can see in the bottom left, the common equity Tier 1 ratio stood at 12.9% at the end of March, down 0.1 points from 13.0% at the end of December. This concludes our overview of our fourth quarter results. In closing, we announced which -- lastly, please allow me to briefly talk about the situation related to private credit. First, our group's exposure is properly diversified and managed, breaking down our exposure in wholesale business, lender financing for private credit funds comes to about $800 million. and direct lending to SMEs comes to about $1.2 billion, while in investment management, investment holdings related to private credit come to about $400 million. Lender financing is backed by a diversified corporate credit portfolio and the credit fund counterparties are, by and large, supported by long-term capital provided by institutional investors and the like. Direct lending is diversified across more than 40 companies and investment management investments are also suitably diversified and have been performing stably. In closing, we announced reaching for sustainable growth, our vision for business in 2030 in May 2024 and set as numerical targets, a consistent attainment of ROE of 8% to 10% or more and income before income taxes of more than JPY 500 billion with the targets attained now in the span of 2 years. Great strides have been made to build the franchise required to realize sustained growth of the Nomura Group. I would like to briefly touch upon the situation as of now in April. In Wealth Management, net revenue is largely at the same level as in the fourth quarter. Uncertainty remains in the market due to geopolitical risk, but the flow of funds into products and services, assuming the long-term diversification of investments remains firm and client sentiment has been recovering. In wholesale, net revenue has been trending much higher than in the fourth quarter with equity markets rebounding sharply from the end of March and rising to new all-time highs. Client activity has picked up and equity products revenue has been strong. The rates has also been steadily monetizing client flows amid moderate market volatility. We aim to monetize business opportunities while keeping mindful of appropriate risk levels and cost controls. Your continued support is appreciated. Operator: [Operator Instructions] The first question is from SMBC Nikko Securities, Muraki-san. Masao Muraki: SMBC Nikko Muraki, I have 2 questions. First, international asset management company control. On Page 10, on the footnote, 4 years ago, investment had been made forest-related asset management investment was done and JPY 12 billion of losses have been booked this time around. Can you explain the backdrop? And on Page 11, Macquarie Asset Management. Regarding the cancellation of the agreement, there is a comment. But against the plan, how is the actual performance? That's my first question. Second question is with regards to capital, Page 17. The short question is, in the next quarter, what would be the CET1 ratio? This is the new fiscal year. So I think this is a quarter where you can quite easily leverage your balance sheet. In equity derivatives, you are taking significant credit risk and private credit, U.S. division portfolio has been increasing in the past few years, which is using your balance sheet. So what's your idea regarding the use of balance sheet? And how will that impact your CET1 ratio? Hiroyuki Moriuchi: Muraki. Then let me take the first question. First, international asset management-related question. You touched upon 2 points. The forestry asset management company, we made an investment 4 years ago. And what about the loss and the history that had led to this loss. Back then, when we made the investment, ESG -- global ESG trend was on the rise globally and in the United States. And we expected that this will become a major trend. And we were also advocating public to private, and we were trying to expand our private asset business. So those have been the objectives based upon which we made a decision to make an investment into this company. On the other hand, after the investment was made, as is well known to all of you, the ESG environment had significantly changed mainly in the United States. So that had triggered some difficulties in fundraising. This company itself, AUM is top 5 in forestry. So the health doesn't change. But in comparison to the plan we had drawn back when we made the investment, the growth has decelerated. So we had to book that based upon accounting standards, and that is why we've decided to book for impairment this time around. Carbon offset requirements from operating companies, there are funds that will be introduced and those initiatives are under study. So we are hoping to further accelerate this business in the coming months and years. So that's the backdrop. Now this company is booking profits at the moment. However, the growth of profit is slower than we had expected. And international Asset Management, your second point, net outflow, I touched upon that in the initial presentation. Against the plan, what is the current situation? That was your question. Net outflow itself. From the acquisition, U.S. traditional asset management company was the industry trend. So that had been factored into the valuation in making investments. And based upon that, what about the performance? In principle, onetime of investment or excluding onetime of costs, the original revenue and expense and EBITDA expected in the CEO Forum in December, we made a presentation at the pure earning power a quarter. So 1 quarter worth has been booked. On the other hand, -- as we mentioned on that occasion, towards integration, onetime of expenses have been booked and amortization of intangibles have also been booked. So more or less -- we are more or less in line with the original expectations. But in the mid- to long run, this net outflow will be minimized, and we have to achieve net inflow. So back when we hosted the CEO forum, active ETF transition, and we will also be making J-curve investments in order to expand the business. On your second question, CET1 ratio for the next quarter. Wholesale equity and SPPC balance sheet, use of the balance sheet. Those were the points that you touched upon. Regarding wholesale, as you know, self-funding -- based upon self-funding within the border of additional capital, balance sheet is used, RWA leverage exposure is used within that framework. So based upon the earning power, they are hoping to grow business in that quarter. But additional capital within self-funding -- additional capital is within self-funding. So CET1 ratio impact through business expansion is not that significant. And then within that, what would be the positioning of equity PC and credit business? In the mid- to long run, we want to have a balanced portfolio, and that policy remains unchanged. Of course, we want to grow equity, but regarding SPPC, we will be looking at certain opportunities, and we will not deviate from that policy and quantitative control will be in place as we try to manage our portfolio. I hope I answered your question. Masao Muraki: Then in Q1, top line performance was good. CET1 ratio will not decline so significantly and ROE will improve. Is that the right interpretation? Hiroyuki Moriuchi: CET1 ratio will not decline due to this factor. We don't think so. As you rightly pointed out, we are also hopeful that this will lead to improved ROE. Operator: Next question comes from BofA Securities, Tsujino-san. Natsumu Tsujino: Regarding personnel expense on a Q-on-Q basis, it's up by more than JPY 6 billion. But in the U.K. regulatory change, there was regulatory change. And from the third quarter, there has been a change made to the deferred compensation. So what's the impact coming from them? That's my question. And also, then in the first quarter, what is going to be the impact coming from them? Could you explain? Another question relates to global markets. In April compared to the fourth quarter, wholesale outperformed compared to the fourth quarter. In other words, I believe that's due to thanks to global markets performance and Japan equity was mentioned, and it may be the case for overseas as well. But could you speak more about geographical split, equity or FIC and something like that? Hiroyuki Moriuchi: Thank you, Tsujino-san, for your questions. Regarding personnel expense, in the fourth quarter, as you pointed out, or in the third quarter, we made the announcement, but deferred compensation change, so that had an impact. And as a result, in the fourth quarter, we booked a relevant impact. Compared to the third quarter, the impact, the amount is smaller. However, it's about the same as in the third quarter. In the third and fourth quarters, deferred compensation related expense is booked. But in the third quarter, I explained it, but there is a timing gap, timing difference in terms of bookings. So for the fourth quarter, in terms of the amount, it's smaller. And this year, the impact is going to get closer to 0. As for the compensation regulation relaxation in the U.K., I am skipping details, but it's one-off in nature. So it's similar to the difference, quite a slight in the booking timing. That's my answer regarding personnel costs. Regarding April, when wholesale performance improved compared to the fourth quarter. The main factors are as follows: In wholesale, mainly rates, equity products drove the outperformance. And in the fourth quarter, rates, especially from the middle of March based upon the turmoil in the Middle East, the risk had to be controlled. So it's not just about the end of year factors, but due to risk control, revenue slowed down. And in April, we saw the significant improvement. Equity product is continuously performing well. As for nations, please give me a moment. As for the geography -- geographical split, all regions compared to the fourth quarter, we see outperformance, but regions other than the U.S. are particularly outperforming. The U.S. is performing well, but compared to other regions, growth rate is relatively lower. I hope I answered your question. Natsumu Tsujino: I have not captured everything, but U.S. was doing well as of the end of fiscal year -- previous fiscal year, if I am not mistaken, the U.S. business was strong. On the other hand, compared to the U.S. in the first quarter, growth is limited. Hiroyuki Moriuchi: Tsujino-san, sorry, I did not explain clearly, but bottom right on Page 12, you can find revenue by geography. In Americas, in the fourth quarter, revenue has come down relatively significantly in Americas compared to other regions. That's partially due to seasonality and also due to the impact from the Middle East. Since the middle of March, we had to control business. So especially macro business in Americas was particularly impacted and the timing didn't work well, especially the last 1 week of the month. And those -- that happened. And then the situation got relaxed. And then there has been a less tension after April, and we saw recovery. Operator: The next question is Daiwa Securities, Watanabe-san. Kazuki Watanabe: Daiwa Securities, Watanabe. I have 2 questions. First, private credit, $2.4 billion you explained. You also said diversification is in place, software by sector, can you give us some more detailed breakdown? And retail, private-related products, what is the redemption call? And what is your policy of sales going forward? And secondly, capital policy. You didn't announce any new buyback program. RSU, JPY 40 billion, it would be JPY 20 billion about buyback, 50% total return -- total payout ratio to shareholders. Is that the right interpretation? Hiroyuki Moriuchi: Watano-san, thank you very much. First of all, private credit sector diversification. So what is the picture? Overall, health care, business service, software and computer service, consumer, engineering and construction, these are the sectors included. Mostly health care and business service occupy quite a large proportion. Software, not necessarily high in terms of percentage. And on top of that, there is regional diversification in place as well. And regarding the second half of your first question, retail customers, private credit, what about the redemption and regarding sales policies, as client sentiments, there is some conservativeness. But at the moment, we are not seeing any calls for cancellation or requests. Originally -- or to begin with, when we sell to retail customers, we tell them that it's based upon the assumption of mid- to long-term investment. And when we obtain their understanding, we sell those products to them for the first time. So I think those communications have been effective so much so that there hasn't been any significant run. And on buyback and total payout ratio, first half, second half put together, full year RSU included 58%. Excluding RSU, it's beyond 50%. So I hope that answers your question. Kazuki Watanabe: Regarding buyback, announcement timing, if there's an announcement in 4Q, that would be fiscal year '25. Hiroyuki Moriuchi: The JPY 60 billion buyback program we announced in Q3, in Q4, we assumed the Q4 profit and we defined the amount based upon our assumption. Operator: The next question comes from JPMorgan Securities, Sato-san. Koki Sato: I am Sato from JPMorgan Securities. I have 2 questions. First question is about wholesale and wealth management expense outlook. In wholesale, performance was strong, and there was an adjustment made to the bonus, I believe. And as you explained, and there were onetime factors. So 83% of our cost-income ratio for the year and next following year onward, if top line is at the same level, then what kind of a level can we expect? And on the other hand, for wealth, in the fourth quarter, the performance was solid. The quarterly expense came down. So in this strong performance, I believe you are doing the payout to employees. And even in light of that, if this is the level you are achieving, then when recurring asset growth are bigger, then can we expect more leverage? So could you explain your outlook for expense for those 2 divisions? Secondly, in the third quarter related to laser digital loss was booked. At that time, risk control and net exposure reduction were explained. But in the fourth quarter period, what was the market situation -- based upon the market situation in the fourth quarter and based upon the result of the third quarter and what is the update on the effects achieved as a result of the countermeasure you have taken? Hiroyuki Moriuchi: Thank you for your question. First, outlook for -- the outlook for expense first, wholesale in the fourth quarter on a Q-on-Q basis, plus JPY 13 billion. Out of this increase, 30% is due to the compensation regulatory change and also end of the year performance-linked bonus adjustment. And then the last part is increase in the professional fee and the payment for services received. So the expense rate increased, but fixed cost was suppressed. So this fiscal year in the sense of the review of expense in the fourth quarter, wholesale, they had a few onetime items and also fees paid or professional fees. For example, SPPC pipeline -- so cost was incurred before the deal as we hired lawyers and the revenue recognition got delayed. So compared to the fourth quarter, we expect the expense level to come down. As for wealth management, we booked high level of margin. And can we expect the same level this year? As for this year, advanced investment in AI, also corporate cost increase due to inflation are expected. But continuously in Japan, for wealth management, we are going to tightly control cost. So even though there are timings when cost increases due to advanced investment, but it depends on revenues, but we expect we will be able to deliver a certain level of margin. And finally, regarding laser, in the third quarter, we troubled you and we got you worried with loss related to laser. But as you said, we have controlled risk volume and we have taken a more conservative stance. And in the fourth quarter, when we look at the market, Bitcoin and crypto market decline was the same level as in the third quarter. In terms of profit and loss, impact on consolidated result was limited. I hope I answered your question. Koki Sato: Regarding the latter part of your answer, the situation in the crypto market and the impact on your profitability. Simply put, you've reduced the exposure. So the benefit you've received is as a result of reduced exposure and hedging or different ways of conducting market making. In other words, what I'm getting at is previously, you said you are not intending to downsize the business. So the exposure level, I think, will increase in the future. Even with that, you have a structure in place to prevent impact on profit? Hiroyuki Moriuchi: Thank you very much. Regarding trading, the market making, the absolute amount of risk has been reduced. And of course, there are venture capital investments and asset management seed capital with our own fund. So for those areas, in nontrading areas, we have long positions. So when we have progress in asset management business, then from seed capital, we will see that transfer to equity capital by investors -- LP investment. Operator: The next question, SBI Securities, Otsuka-san. Wataru Otsuka: Otsuka of SBI Securities. Is my voice coming through? Operator: Yes. Wataru Otsuka: Could I do one question and one answer. The first question is just for confirmation purposes, but wholesale, quarter-on-quarter basis, profits declined. What's the reason? Can you recap that? Revenue, as you had explained, global markets fixed income, Q4 seasonality factor and Iran had been quite significant and expenses, expertise fee and performance -- pay for performance. And so due to the revenue and expenses, 30% decline in profit. That's quite significant, but it wasn't a surprise to you. So that's my first question. Hiroyuki Moriuchi: Thank you very much. And you've made the situation very clear. So if we divide it between revenue and cost, as far as revenue is concerned, seasonality due to the end of the fiscal year, risk position was controlled. And on top of that, due to the Middle East situation, in the mid- to late March period, there was exacerbation quite rapidly. So we had to control defensive position, and that's the big factor for the reduction of revenue. And on the cost side, I slightly touched upon this in my presentation. But due to the review of the compensation regulation and also being the end of the fiscal year, part of it is timing gap, and there has been a onetime of increase. And the remainder is increase of fees payable to experts and for transactions. But regarding this factor, the original understanding regarding SPPC we were to add one product to the lineup. So the initial investment, that was within our control. But professional fees, we paid it earlier than booking the revenue. So this was a relatively high cost increase higher than we had expected. That's my personal view. I hope I answered your first question. Wataru Otsuka: Sorry. One follow-up question. 86% expense ratio is slightly high. So there was the timing gap, but 83% for full year -- is that a normalized basis ratio? Hiroyuki Moriuchi: Q4, 86%. Obviously, it's quite significantly higher. And regarding expense ratio, rather than expense side, the impact from revenue is quite heavy. But at any rate, 86% is slightly higher than normal. Wataru Otsuka: Second question, at the end, you mentioned ROE, 10% full year basis. And 8% to 10% or higher and stably performing such ROE, you've achieved that goal. On the other hand, if we look at banks and other Japanese financial institutions or more so regarding overseas financial institutions, 8% to 10% ROE isn't that high. So plus, don't you have an intention to elevate your goal? Isn't that discussed at the Board of Directors meeting? Can you touch upon such aspects? Thank you very much. Hiroyuki Moriuchi: Otsuka-san. Your point is very true, of course, in comparison to mega banks, Japanese for financial institutions and peers overseas from the perspective of being in the investment business, 8% to 10% plus level is just a midpoint. It's not the ultimate goal. Regarding this matter, in the deliberations for the budget, there is intensive discussion on this matter. So if there are any points that we need to review, in late May, we will have the Investors Day, so we may touch upon that aspect. Thank you. That concludes my response. Wataru Otsuka: So your answer is you're discussing that point heavily, right? Hiroyuki Moriuchi: Yes, exactly. Operator: The next question comes from UBS Securities, Niwa-san. Koichi Niwa: I am Niwa. Can you hear me? Yes. Regarding wholesale cost and private asset initiatives of Nomura, I have a question about them. First, regarding wholesale cost this year and next year, on a run rate basis, what's the percentage? I do understand you have a medium-term goal. But given the environment where there is a strong cost increase pressure, what is your outlook? My second question is more long term than the earnings result. But in Americas, what's the future outlook of private asset market in the U.S.A. And on that basis, what is Nomura's strategy? So if it's in the initial phase, then there will be the room for expansion. And in the call today, listen to the tone of your explanation, it appears you remain positive. But looking at your peers, they are switching gears. So if you could give me some perspective on this, that's appreciated. Hiroyuki Moriuchi: Thank you very much. Regarding your first question on wholesale cost control and cost/income ratio target, what is the rate of progress and what is our outlook for this year? And the cost pressure may be high, as you said. But as you said, the group-wide cost control has an important theme of how to manage inflation. So certain parts of this are unavoidable, but rather than absorbing taking them 100%. The theme is to look at where we can reduce cost in other areas. For example, through location strategy, offshore can be more effectively used. So we are considering approaches, including structural approaches so that we can suppress cost increase to a certain level. And regarding cost/income ratio, we would like to grow revenue at a rate that beats inflation. That's an important factor. And for business, this is more important. So in wholesale, ROI against additional capital needs to be increased to increase ROE. That's our intention. Secondly, regarding our outlook for private credit, we need to separate my answer for midterm and long term. Regarding private credit market itself, our view is positive. In the medium to long term, market has the potential to grow. On the other hand, both the bracket and our peers have pointed out repeatedly that in the short term, credit cycle needs to be monitored closely and the risks must be controlled tightly. We do acknowledge the need to do so. So earlier, I answered to a previously asked question. But in SPPC, we have a rich pipeline with attractive opportunities, but our stance is to take selective approach and medium- to long-term portfolio, in wholesale as a whole, we would like to control so that no single product stands out too much. So that kind of control will be needed, and we have an agreement in our approach with wholesale. That's all. Koichi Niwa: Just one more thing from me. So mainly impact on you in terms of division, the impact is happening mainly in wholesale, not really in investment management, but wholesale is mainly impacted. in terms of product line? Hiroyuki Moriuchi: So as for the existing P&L, especially risk side, wholesale portion is the biggest. So your understanding is fine. But as we think about medium- to long-term growth, asset management is the area. As we have said since 2020, we are closely looking at the market opportunities and not just private credit, but we look to grow private business. And as part of that, hopefully, private credit will grow. And wealth management based upon the principle of suitability, based upon the needs of our clients, we would like to steadily accumulate assets. And going back to the previous point, in the short term, we need to control risk for wholesale, that's as you pointed out. Operator: We'd like to conclude question-and-answer session. If you have some more questions, please ask our Nomura Holdings IR department. In the end, we'd like to make closing address by Nomura Holdings. Once again, thank you for joining us. Hiroyuki Moriuchi: As I have said a few times, for 2 successive years on a full year basis, we've renewed the net profit and ROE. Yes, there were some voices saying that this may not be enough, but we exceeded 10% and we were able to achieve the goal towards the 2030 vision 2 years upfront. Recurring asset increased banking division establishment, Macquarie asset management, acquisition, these investments were done in order to make a robust platform for future growth. That was what we've done in the past 12 months. So I think we will begin to monetize out of those initiatives, and therefore, we call upon you to provide your continued support. That was Moriuchi, CFO. Thank you. Operator: Thank you for taking your time, and that concludes today's conference call. You may now disconnect your lines.
Operator: Good day, and welcome to the Hansa Biopharma First Quarter 2026 Earnings Results Conference Call. [Operator Instructions] This event is being recorded. I would now like to turn the conference over to Hansa Biopharma's CEO, Renee Aguiar-Lucander. Please go ahead. Renee Aguiar-Lucander: Thank you very much. Good afternoon, and good morning, everybody, and welcome to Hansa Biopharma's conference call to review the Q1 results for 2026. I'm Renee Aguiar-Lucander, CEO for Hansa Biopharma. And joining me today is Evan Ballantyne, Chief Financial Officer; Richard Philipson, Chief Medical Officer; and Maria Tornsen, Chief Operating Officer and President of the U.S. Please -- next slide, please. Please allow me to draw your attention to the fact that we'll be making forward-looking statements during the presentation. You should therefore apply appropriate caution. Next slide, please. This is the agenda for today's call, and these are the people who will, as I just mentioned, who will be covering the different sections. Next slide, please. So let me start by taking you through an overview of the quarter. As I mentioned in the Q4 report, we expected Q1 to be impacted by the significant number of initiatives, which we rolled out during the quarter, which I'll cover in some more detail later in the presentation. This is intended also that -- this is indeed also what we observed with revenues amounting to SEK 34.6 million, slightly above Q3 of 2025. We know that there will continue to be significant variability between quarters, and I do not expect this to change over the medium term due to the structural issues related to organ allocation in Europe. During the quarter, we raised $30 million in a convertible note, significantly extending our runway. We also paid down the NovaQuest debt by almost $15 million in January as per the restructuring agreement, and we now do not have another payment due until the middle of 2027. We also spent significant time and resources during the quarter compiling the briefing pack to the FDA related to GBS, which we submitted in early April. We're very excited about the fact that our abstract of the ConfIdeS study was accepted for oral presentation at ATC in June. In the quarter, we continued to build out our U.S. leadership team and also initiated our BLA review with the FDA. Next slide, please. In December of 2025, we announced the leadership change of the European commercial organization and initiated a significant reorganization in combination with the rollout of new system support and ways of working. We believe that this was necessary in order to be appropriately prepared for the rollout of a significant amount of data, which we'll be able to share with the physician and patient community starting in Q2 and continuing for the remainder of 2026. I want to thank all of my colleagues in the commercial organization for their leadership, collaboration and ability to adapt quickly as we all know that change is not easy and especially not when it comes in high concentration over a short period of time. However, we have achieved a lot over the last 3 months, and we can now start to see some of the benefits, though it will still take a couple of months for everything to truly get bedded down. Next page, please. I am not planning to provide any detailed guidance for this year, but I would like to share some fundamental components of which we will leverage to successfully navigate 2026. One year into my CEO role at Hansa, I'm glad to announce, and I'm sure that the organization is happy to hear that the changes which were necessary to stabilize the business and position it for growth have more or less been completed. This included the restructuring reduction in force, the renegotiation of the debt facility, raising of equity capital to ensure sufficient runway to read out key clinical data and obtain a potential U.S. approval, strengthening the internal expertise and experience required to successfully build an international and sustainable life science business, clarify and focus the pipeline strategy and last but certainly not least, review, reorganize and adapt the European commercial organization to improve transparency, performance and ensure the effective delivery of key clinical data to the physician and patient community. I believe that the company now is well positioned to benefit from the key events coming up this year, and we look forward to sharing them with you as the year progresses. Q1 was, I said in my report, a transition quarter, but there is no new or different information fundamentally impacting our market, and we have no reason to believe that the performance -- the performance was primarily impacted by the main changes that we rolled out during the quarter. We're also encouraged by the strong start to Q2, which we hope is the beginning of a consistent trend of improvement, which will be further strengthened by the data coming out in Q2. With this, I will hand over to Maria, who will provide some more details on several of these topics. Monika Tornsen: Thank you very much, Renee. Next slide, please. Let me first turn your attention to the European and international markets. In Europe, Idefirix has maintained a unique position since launch. There is no other approved therapy on the European market, which can do what Idefirix does, enabling a life-saving kidney transplant for highly sensitized patients. Across Europe, there are up to 11,000 highly sensitized patients waiting for a kidney transplant today. These patients need to navigate the complexities of finding an organ, and in some cases, that can take up to 12 years. In Europe, we launched with very limited data from only Phase II studies. And over the years, we have built on that clinical experience and now have over 200 patients treated with Idefirix in Europe. 2026 is a very exciting year for our European business as we will finally gain access to additional clinical data, which we know European KOLs are eagerly awaiting. Our Phase II data was published last year. And in 2026, we look forward to releasing additional data from our U.S. Phase III study, ConfIdeS, and most importantly, from our European Phase III trial, PAES. This data will allow us not only to communicate additional data to European transplant centers, but it will also enable us to seek full approval in Europe. In addition, we know that European KOLs are anticipating publishing their own real-world evidence, and we look forward to seeing these data published. Next slide, please. Our Q1 performance was, as Renee mentioned, impacted by the changes we made to our European business. We made those changes as we felt they would be necessary to drive growth in the second half of this year and in future years. Our Q1 product sales was SEK 33.9 million. The performance was mainly driven by France and our international markets. We do not believe this performance is a reflection of Idefirix potential, but rather a short-term impact based on the decisions we made. We have in previous calls talked about the challenges we have faced in Germany with the pause of the Eurotransplant program and in the region of Catalonia, Spain with regional reimbursement. I'm very pleased to report that our targeted efforts have resulted in positive changes. In Germany, the KOLs have submitted new consensus recommendations for publication in an international journal. These recommendations, which will enable German transplant centers to transplant centers -- transplant patients within the ETKAS program, where the majority of highly sensitized patients are listed, have been rolled out to German transplant centers in a webinar, and we anticipate the recommendations will be published in mid-2026. In Spain, we secured reimbursement in the region of Catalonia after months of targeted efforts. The new reimbursement pathway went into effect as of April 1 and post-Q1 close, we have seen our first sale in Catalonia with this new reimbursement pathway. Catalonia is a very important region for Idefirix. In our PAES trial, 1/3 of all enrolled patients came from 3 centers in the Catalonia region. As such, we have significant clinical experience already, and we anticipate this region will be a strong contributor to future sales. In addition to these positive accomplishments, we have also made targeted investments in new systems and activities to drive further growth of Idefirix in the coming years. Let's now turn our attention to the U.S. market. Next slide. We are excited about the potential of bringing imlifidase to the U.S. market. Today, there are approximately 15,000 highly sensitized patients on the wait list for a kidney transplant in the U.S. and 7,000 of those have a cPRA over 98%, making it very difficult to find a matching organ. For the patients with the highest cPRA, they may never receive an organ offer or have to wait over 7 years before they could have a transplant. Unfortunately, approximately 10,000 patients die or become too sick to transplant while waiting and a higher proportion of those patients are highly sensitized. This is where imlifidase can play an important role in reducing the wait time and enabling more patients to have access to a life-changing transplant. Next slide, please. We have recently conducted several market research projects in the U.S., which all confirm the unmet needs for patients and the potential place for imlifidase in their treatment journey. Today, there are no approved treatments for the desensitization of highly sensitized kidney transplant patients and the off-label treatments used are not seen as great options for patients. The burden of dialysis is also very real. Patients who wait for a kidney transplant need to undergo dialysis 3 times a week for several hours each time. That creates an extreme burden on the patient, impacting the patient's quality of life and also contributing to significant costs for the healthcare system. When preparing for a potential launch in the U.S., we know that we need to engage with several stakeholders within the transplant centers from surgeons to transplant coordinators, pharmacists and HLA directors. In particular, the HLA director will play an important role with imlifidase as they are responsible for the delisting protocols and managing the antigen profile of the patient. P&T approval will be critical to ensure access at hospital level. And in our initial research, financial decision-makers and clinical experts believe imlifidase will gain P&T approval given the strong clinical profile of imlifidase. Finally, we believe our initial launch drivers and uptake will likely come from centers with prior clinical experience of imlifidase and from high-volume kidney transplant centers. So let's turn to the next slide and look at our launch preparations. Our launch preparations are in full motion, and we are focusing our efforts on two critical areas: site of care strategy and market access. As I mentioned in the previous slide, we believe our initial uptake will come from centers with clinical experience and from centers who are performing high volume of kidney transplants. We are, therefore, focusing our efforts on the top 100 centers initially in the U.S. Those centers represent approximately 80% of the volume. And among those centers, we have 25 ConfIdeS centers who are accounting for 25% of the volume. These centers have clinical experience, which we believe will be a differentiating factor compared to the European launch where we only had two centers with clinical experience prior to European approval. Our market access activities have been focused on completing our market research and gaining a better understanding of transplant centers' financials. The majority of transplants are paid by Medicare and in particular, those patients who have waited for a long time for a transplant tend to a larger extent, have Medicare insurance. When speaking with financial decision-makers in the transplant centers, they all recognize the significant burden for these patients and the strong value proposition of imlifidase. Our efforts are focused on enabling speed of access at launch and breadth of adoption across multiple transplant centers. As mentioned in previous calls, we know that NTAP, new technology add-on payment and Outlier payments will be important for transplant center economics and prior CAR-T launches are good launch analogs that we are using to model our center engagements. Finally, we have also focused on identifying our distribution partner and other aspects of the supply chain to ensure we can deliver the product to the U.S. shortly after approval. Other activities in the quarter have been focused on building out our U.S. team with a particular focus on market access and medical affairs. Our full commercial build is expected in Q4, shortly before PDUFA. Our medical team are focused on engaging with KOLs and transplant center stakeholders at medical conferences. And we are, in particular, looking forward to the American Transplant Congress in Boston in June, where we will present our full ConfIdeS data, have a Hansa symposium and other KOL engagements. Finally, across the U.S. organization, we are focused on our site of care strategy. As I mentioned earlier, in each transplant center, there are multiple stakeholders we need to engage with from market access to medical affairs and commercial to ensure we have a successful launch. We have developed a strong strategy for how to engage these centers to ensure we know the stakeholders and can best support the incorporation of imlifidase into their treatment workflow once approved. With that, I will hand it over to our Chief Medical Officer, Richard Philipson, for an overview of our pipeline. Richard? Richard Philipson: Thanks, Maria. Next slide, please. I'd like to start by discussing Study 20-HMedIdeS-19, which we refer to as the post-authorization efficacy and safety study or the PAES study. As indicated by the name of the study, this is a post-approval commitment to the European regulatory authority following the conditional approval of imlifidase in Europe in 2020. Next slide. Primary objective of the study is to determine the 1-year graft failure-free survival in highly sensitized kidney transplant patients pretreated with imlifidase to turn a positive crossmatch against the deceased donor into a negative crossmatch. Secondary objectives include the evaluation of renal function, patient survival and graft survival up to 1 year after transplantation. And of course, safety is also one of the secondary objectives of the study. Next slide. Here, we provide an overview of the design of the study. Starting at the top of the schematic, patients enrolled in the imlifidase treatment group were highly sensitized with the highest unmet medical need based on the local kidney allocation system. Patients underwent a delisting step at prescreening to increase the likelihood of receiving a donor organ offer. When an organ offer was received, if the patient was cross-match positive to the organ, then the patient proceeded to treatment with imlifidase and transplantation, subject to meeting required eligibility criteria and converting from cross-match positive to cross-match negative. It was planned to enroll 50 patients into this treatment group. Moving down the schematic, there were 2 noncomparative reference groups. It's important to note that patients were not randomized to these reference groups, and there are no statistical comparisons made between the imlifidase treatment group and the reference groups. Furthermore, patients in these 2 reference cohorts have different baseline characteristics when compared with the imlifidase treatment group. The noncomparative concurrent reference group comprises 50 to 100 contemporaneous kidney transplant patients enrolled at the same sites at approximately the same time as patients enrolled in the imlifidase treatment group. These patients were not sensitized and had a negative cross match to the diseased donor organ offer. Rationale for inclusion of this reference group is to understand outcomes at the same sites when undertaking matched kidney transplants. Finally, the non-comparative historical reference group comprises 100 kidney transplanted patients randomly selected from a patient registry from 2010 onwards. Selection of patients was performed by the registry administrators and was completed prior to the start of the enrollment of the main study. Patients in this cohort were sensitized but to a lesser degree than patients in the imlifidase treatment group and were crossmatch to negative to the donor organ offer. Again, to emphasize, the primary objective to determine the 1-year graft failure-free survival in highly sensitized kidney transplant patients applies to the imlifidase treatment group only. Next slide. In this slide, we summarize the treatment schedule for patients enrolled in the imlifidase treatment group. Following the prescreening and screening steps, patients meeting eligibility requirements and with a positive crossmatch to a donor organ offer were treated with imlifidase. Prior to administration of imlifidase, all patients received premedication in the usual way with intravenous methylprednisolone and then antihistamine. A second dose of imlifidase could be administered within 24 hours if crossmatch conversion was not achieved after the first dose, which is in keeping with other imlifidase trials. Patients converting to a negative crossmatch were transplanted and then immediately went on to receive standard post-transplant immunosuppressive treatment comprising tacrolimus, mycophenolate mofetil and corticosteroids. Transplanted patients also received rabbit anti-thyroglobulin on day 5, rituximab on day 7 and IVIg on day 9 to 10. Next slide. The study enrolled the first patient in May 2022. There have been 22 participating sites in a total of 11 countries in the EU and U.K., and we expect database lock next month. Next slide. Now moving on to discuss Hansa's plans for its next-generation IgG cleaving enzyme, HNSA-5487, which I'll hereafter refer to as 5487. This is a rapidly acting IgG cleaving endopeptidase. This highly specific IgG degrading enzyme that includes all human subclasses of IgG, whether free or bound, antigen or cell membranes and no substrate other than IgG has been identified. Next slide. First, I'd like to provide a brief overview of Guillain-Barré Syndrome or GBS. This is a rare, rapidly progressive monophasic immune-mediated neuropathy where the immune system attacks peripheral nerves often following a viral or bacterial infection. The disease affects 1-2 in 100,000 people annually with approximately 3,500 to 7,000 cases annually in the U.S. There are also seasonal and geographical variations in the disease prevalence. GBS is characterized by rapid onset muscle weakness, tingling and numbness, typically starting in the legs and moving symmetrically upward. Symptoms can escalate to paralysis, breathing difficulties requiring assisted ventilation and consequent immediate hospitalization. GBS is an antibody-mediated disorder in which complement fixing IgG antibodies directed against gangliosides play a key role in the pathogenesis. Disease progression is typically rapid, reaching a nadir within 4 weeks in most patients with many attaining maximal weakness within 2 weeks. Although many patients recover from the acute phase, long-term morbidity is common and approximately 20% of patients remain unable to walk independently at 6 months. Current standard of care treatments include intravenous immunoglobulin or IVIg infusions or plasma exchange in addition to supportive care such as respiratory support and management of complications such as infection and thrombosis. It's estimated that approximately 25% of patients require mechanical ventilation for days to months following the acute autoimmune attack. Next slide. Experience with imlifidase, our first-generation IgG cleaving enzyme followed by IVIg provides relevant clinical precedent for the proposed 5487 development in GBS. Specifically, a Phase II single-arm open-label clinical trial has previously evaluated imlifidase followed by IVIg in patients with GBS enrolled within 12 days of symptom onset and followed for 12 months after imlifidase treatment. In this study, a single dose of 0.25 milligrams per kilogram of imlifidase rapidly cleaved IgG in 28 out of 30 patients. At a group level, treatment with imlifidase followed by IVIg led to early improvement of the patient's functional status. The median time to walking independently was 16 days. Most patients improved markedly in motor function early after imlifidase treatment by 1 week after imlifidase dosing, 37% of patients were able to walk independently. 4 weeks after treatment with imlifidase, 52% of patients were able to walk independently and 33% were able to run. Next slide. Results from the imlifidase Phase II trial in GBS have been compared to patient data from an external prospective cohort treated with IVIg known as the International Guillain-Barré Syndrome Outcome Study, or IGOS. The figure in the slide presents an unadjusted comparison of muscle strength as measured by MRC sum scores between the imlifidase treatment group and the reference cohort, demonstrating the rapid improvement in imlifidase-treated patients. Further, a matching-adjusted indirect treatment comparison or MAIC has been performed. The MAIC confirmed that the patients treated with imlifidase and IVIg walked independently, that is a GBS disability score of less than 2, 43 days earlier than those in the IGOS cohort treated with IVIg alone. In the same MAIC analysis, the median number of days required for patients to improve one grade in the GBS disability score was 6 days for patients treated with imlifidase and IVIg compared to 31 days for patients treated with IVIg alone. And this difference was statistically significant with a p-value of 0.002. Next slide. Now turning to the current status of the program. The first time in human study in healthy participants has been completed. In this study, it was shown that circulating IgG was efficiently and rapidly reduced by a single dose of 5487 by more than 95% within a few hours. There was a positive correlation between dose and duration of reduced IgG levels where a higher dose resulted in a longer duration of effect. In other words, there was a clear dose response relationship. There was also a significantly reduced antidrug antibody or ADA response when compared with imlifidase and the treatment was at least as efficacious as imlifidase in reducing total IgG levels. Furthermore, 5487 was shown to be safe and well tolerated across all tested doses and no serious or severe adverse events were reported from the trial. Based on these data and the clinical experience with imlifidase in GBS, the clinical development program for 5487 in GBS has been designed and submitted to FDA in the form of a briefing document. The response to this submission is expected in May. Based on the current plan, the clinical phase of the development program will start by the end of this year. I'd now like to hand over to Hansa's Chief Financial Officer, Evan Ballantyne. C. Ballantyne: Thank you, Richard. Q1 sales performance. Total revenue for Q1 2026 was SEK 34.6 million, representing a 48% decrease compared to Q1 2025 of SEK 66.3 million. Product sales for Q1 2026 were SEK 33.9 million, also representing a 48% decrease as compared to Q1 2025. We continue to see fluctuation in our quarter-over-quarter performance and quarterly volatility reflects the unpredictability of the organ allocation market. Next slide, please. For Q1 2026, SG&A expenses totaled approximately SEK 106 million and were essentially flat compared to Q4 2025 of SEK 102 million. Compared to Q1 2025, SG&A expense of SEK 76 million were SEK 29.6 million higher. This variance was driven by noncash LTIP expense of SEK 6.1 million, fees associated with securing the convertible note of almost SEK 10 million, investments in commercial activities associated with the U.S. launch and improvements in the company's quality systems. R&D expense in Q1 2026 totaled approximately SEK 57 million and were 11% or SEK 7 million favorable compared to Q1 2024. The decrease in R&D expenses was primarily driven by the wind down in clinical trial activities and restructuring actions taken in 2025. In Q1, the loss from operations was SEK 143 million compared to SEK 125 million in the prior quarter Q4 2025. Next slide, please. Headcount for the period totaled 122 compared to 138 in Q1 2025. Headcount was essentially flat compared to Q4 2025 of 125. Cash used in operations in Q1 2026 totaled SEK 157 million compared to SEK 152 million in Q1 2025. In Q1 2026, cash and cash equivalents totaled SEK 677 million, on March 19, 2026, the company entered into a USD 30 million convertible note purchase agreement with Athyrium Capital Management. The convertible note has a fixed rate of 3% payable on a semiannual basis in cash beginning on September 15, 2026, and a maturity date in March of 2031. This transaction extends Hansa's cash runway and strengthens the company's balance sheet in advance of the FDA approval and a subsequent U.S. launch. And now I'd like to turn the presentation back to Renee for closing remarks and the Q&A portion of the call. Renee Aguiar-Lucander: Thank you very much, Evan. Next slide, please. So in summary, we're looking forward to the continuation of this quarter as it brings many exciting updates for the company, and I'm proud to be able to sit here today and say that we're now operating from a strong and stable foundation with a clear road map ahead. We have a robust financial position with an extended runway and access to multiple future financing options should they be required in the future. We are in full execution mode and with a very experienced team in place, I look forward to the rest of the year with great excitement and enthusiasm. This includes the readout of the PAES study with database lock expected next month. Feedback from FDA regarding the GBS study design, presentation of the ConfIdeS Phase III data at ATC a Capital Markets Day with input and discussions from U.S. and European KOLs covering ConfIdeS and PAES top line data, which we expect will be available by that time. And finally, in Q4, we plan to file for full approval with EMA Idefirix and look forward to the outcome of the PDUFA date in December. Next slide, please. As I mentioned, we hope to share some of this information with you towards the end of this quarter at our Capital Markets Day, which will take place following the ATC conference in June in New York. It will also be possible to follow this event virtually and a full agenda will follow. Next slide, please. So with this, this concludes the presentation, and we can open up for questions. Next page, please. Thank you. Operator: [Operator Instructions] The first question comes from Farzin Haque with Jefferies. Farzin Haque: I wanted to ask on the U.S. approval process. How are the interactions with the FDA going so far? And have they signaled any key focus area or questions during the review of the BLA filing package so far? Renee Aguiar-Lucander: So I will take that question initially and then see if Richard has anything to add. I would say that the FDA BLA review process is going very well. There has not been any kind of, I would say, odd or strange kind of key questions or any kind of area for that matter that would kind of be out of the scope. So I would say that it's really going quite well and kind of as expected. I don't know, Richard, if you have anything to add. Richard Philipson: No, I agree. Everything is going well. It's going as expected, as Renee has said, and nothing untoward so far in our interactions, and we've been able to address any questions from the FDA so far. Farzin Haque: Makes sense. And then for EU sales, the 1Q impact, it makes sense. And for the second quarter, you said that you had a strong start. Any color on the ordering trends, center feedback that gives you confidence that sales will rebound? Renee Aguiar-Lucander: So I don't really want to get into any kind of very specific details on this, and I know better than to kind of assume that what has kind of started really well will necessarily be continuing in the same very, very positive manner going forward. But I would say that we're very encouraged by what we've seen so far. Obviously, it's kind of 20 days into the quarter. So it's -- again, it's not going to be able to kind of judge what the final kind of quarter outcome is going to be. But I do think that what we're seeing is a significantly different trend than what we saw in Q1. Operator: Your next question comes from the line of Douglas Tsao from H.C. Wainwright. Douglas Tsao: I guess, Renee, maybe as a follow-up on what you're seeing so far in the quarter, is this sort of a direct result of some of the changes you made in terms of the commercial organization? And I'm also just curious, are they across all the regions? Or is it again seeing strength in some of the core regions where we've seen pretty good use of imlifidase over the last few years, in particular, France? Renee Aguiar-Lucander: I'll have Maria provide any additional detail, but I would say that I think that this is a kind of -- it's a follow-on from the initiatives that we have launched. I think that, that is clearly how we see it. And again, we don't expect this to -- I mean, we know it's going to take another couple of months for it to be fully kind of implemented and rolled out. But I do think that we have established better kind of transparency, more focus. We provided some system support, some investments, which I think are very important. And with regards to kind of the breadth of that, I'll leave it to Maria to cover the kind of the general just kind of brief trends that we're seeing to date. Monika Tornsen: Yes. I would just echo what Renee said. I mean, we are very encouraged by the trends that we're seeing in the first 20, 22 days of the quarter. It is not unique to one country. Without going into further details, we're seeing that across multiple markets. I think in particular, what I think is critical is what we have managed to accomplish in Spain in the Catalonia region. As I mentioned, that region contributed to 1/3 of the enrollment in the PAES trial. And now that we've resolved the reimbursement there, as I mentioned earlier, we saw our first sales there. And I think that is a very strong sort of indicator of that the actions that we have taken are starting to turn into results. And it will take, as we mentioned before, a few months for everything to settle, but we are seeing that what we are doing is starting to have an impact. And I think that is the most encouraging in this. Douglas Tsao: Okay. Great. And then just if I have a follow-up question for Richard, in terms of the GBS program, 5487, I guess, do you intend that to be a registrational study? And then also, just given the opportunity to redose, is there -- do you see clinical value in perhaps redosing patients, which is something that you weren't able to do with imlifidase in the original Phase II study? Richard Philipson: Okay. So thanks for the questions. We're still at a relatively early stage in terms of the overall clinical development plan. As I mentioned, we have submitted this to the FDA. We are waiting for feedback from the FDA that we're going to receive next month. And I think it would always be our sort of strong wish to be able to put in place a plan that gets us efficiently through to registration, let me put it like that. But we really need to get those comments back from the FDA before we really start kind of explaining how we're going to do that. And I think redosing is an interesting component of a development program. I think for GBS, we're very much focused on that acute treatment. It's an acute disease. So we don't necessarily see in that specific acute scenario a strong need for subsequent repeat dosing. Operator: The next question comes from the line of Romy O'Connor from Kempen. Romy O'Connor: This is Romy on for Suzanne. Two questions. In Q1, Idefirix sales were particularly strong in France. Just wondering if these were at the same level as in Q4 last year and was France not impacted by the new initiatives? And secondly, are you able to expand on the multiple system and process initiatives in Europe? Is it beyond regional authorization in Catalonia and the work that the German KOLs are doing? Renee Aguiar-Lucander: Sure. I will have Maria cover these questions. Monika Tornsen: Yes. Thank you for the questions. So first, when it comes to France, I think France has since launch been a very strong contributor to the European sales, and we've talked about that in previous calls. We haven't gone into the details exactly what we are selling in each country, and I'm not going to do that. But I can say that we continue to see a strong growth in France. And that is attributed to the fact that we have many physicians in France that had early experience with the product. We also had one center that participated in the Phase II trial. So going back to what I mentioned before is that clinical experience is critical, and we have that early on in France, and that has sort of spread into many transplant centers in France. We also know, as an example, that France is about to publish some data from the real-world experience that we look forward to seeing when that gets published. But the sales trend in France continues, and that is very encouraging. And I think it proves that if you put the efforts behind the right type of educational initiatives and you get strong clinical experience, you'll see that growth in the product. So those are some of the things that we are putting in place for other markets as well. And to your second question on systems and processes, these are not just this sort of processes that you asked about in Catalonia and in Germany, but it's also things like CRM systems that we haven't had at Hansa historically. It is new dashboards that enables the teams to have greater insight into performance and numbers and opportunities. So it's sort of a broad across Europe system. And the other thing that we are doing is just trying to drive that clinical education. So we have more pan-European webinars, educational sessions to really drive that clinical discussion and clinical experience and spread some of that positive momentum that we're seeing in countries such as France, but also many other smaller countries in Europe. Romy O'Connor: Great. And if I may, one more. I'm just wondering what we can expect from the confirmatory PAES study and what your thinking is on the impact of Idefirix sales? Renee Aguiar-Lucander: So I think in terms of the -- what we can expect, obviously, we're going to report out kind of top line data. And I think Richard laid out kind of how the study is designed. And that's the data that we're going to share is kind of primary and kind of like the top line data as well as whatever kind of secondary information we might have at the time. As I'm sure you're aware, we are under MAR in Europe. And so we really have to kind of publish the data once we get it, and we don't always have all the actual kind of data at hand when we go out and have to report the actual kind of top line outcome. In terms of kind of the impact, and I think following on to Maria's point, I think my personal view is that this will be very, very important. It will, as always, take a little bit of time to kind of get that information into the kind of hands and minds of kind of physicians and patients in Europe. But I do think that there's a lot of expectation and people are waiting to kind of see that data because it is kind of a truly a European-based kind of clinical experience that we're going to be able to see, which really I don't think has really been the case previously. It's been very small amounts of clinical data that kind of really has come from the European region. And so I think that data together with ConfIdeS, together with the real-world data, I think all of this data is going to just bring additional kind of comfort kind of characterize kind of efficacy and safety of imlifidase and Idefirix. And so I think it's always important in my view, to really be able to share clinical outcomes with physicians, particularly in these kind of situations where there really hasn't been a way of treating these patients before. There isn't a lot of understanding in some places in terms of what do they do with these patients. And so I think having as much kind of clinical information data as we can, I think, will be very impactful in general. Operator: We now have a question from the line of Thomas Smith from SVB Leerink. Thomas Smith: Looking forward to the detailed ConfIdeS data at ATC in June. I was wondering if you could just help frame expectations for the detailed data? Like what additional analyses can we expect to see? And will this include any additional patient follow-up beyond what was available at the top line? Renee Aguiar-Lucander: Rich, do you want to take that? Richard Philipson: Yes, sure. So I mean, we would anticipate a comprehensive description of the outcomes of the study at ATC detailing -- giving more detail around some of the other endpoints that were included in the study relating to outcomes such as antibody-mediated and cell-mediated rejection and antibody responses, et cetera. So as well as some other efficacy endpoints and also, of course, the safety outcomes of the study. We won't -- there will not be any additional follow-up on those patients. The cut of the data occurred last year, and there's been no further cuts of the data since then. So we won't have any additional follow up. Thomas Smith: Got it. That makes sense. And then with respect to the ongoing BLA review and maybe as a follow-up to that point, Richard, can you just remind us, I guess, plans for submission of an additional cut of the data from ConfIdeS to FDA, I guess, when that would take place? And then has there been any indication from FDA whether they would look to convene an advisory committee meeting to discuss the application? Richard Philipson: Okay. So there won't be any further cuts of the data submitted to the FDA other than the standards 120-day safety update. That's a standard part of any submission. So that will be submitted. We've had absolutely no indication of the requirement for an advisory committee. Thomas Smith: Looking forward to the presentation at ATC. Renee Aguiar-Lucander: We are too. Operator: The next question comes from the line of Matthew Phipps from William Blair. Matthew Phipps: Let me also offer my congrats on that late breakthrough for ConfIdeS. I was wondering, as we see data this summer from both the PAES and ConfIdeS, any key differences in the baseline of these patients such as cPRA levels or maybe differences in the post-treatment immunosuppressive regimens that we should keep in mind to help kind of compare and contextualize those data sets? And then I realize it might be too early to discuss this, but I guess, any color on the labeled indication you're seeking in the U.S. or discussions with the FDA around cPRA cutoffs in the label at this point? Renee Aguiar-Lucander: So I'll have Richard talk about, so there are some differences in terms of kind of the patient profiles between the 2 studies, which I'll have Richard cover. We have not yet had any kind of interactions with the FDA with regards to the label. Richard? Richard Philipson: Yes. So can you hear me? Renee Aguiar-Lucander: Yes, I can hear you now. Richard Philipson: So there were some -- essentially in both the ConfIdeS study and the PAES study, patients enrolled into the study are highly sensitized. It is true to say that there were some minor differences in how that is defined dependent on the country in which patients are enrolled in Europe. But overall, they can still be considered to be highly sensitized. And in general terms, the post-treatment immunosuppressive regimens used in Europe and the U.S. were the same. Operator: The next question comes from the line of Georg Tigalonov-Bjerke from ABG. Georg Tigalonov-Bjerke: This is Georg from ABG. I have 2 questions. First, a follow-up on France. I'm curious to whether there was any considerable contribution from lung transplants. And secondly, in which particular regions do you expect particularly strong positive effects from the PAES data? Renee Aguiar-Lucander: Maria, do you want to take that? Monika Tornsen: Sure. So when it comes to France, our contributions in Q1 was attributed to kidney transplant. I'm not aware of a lung transplant as of yet in France. And could you repeat the second question? It was related to PAES? Georg Tigalonov-Bjerke: Yes, sure. I was wondering if you can elaborate on which particular regions you would expect particularly strong positive effects from those data, for example, PAES with many patients included in the trial, but -- yes. Monika Tornsen: Yes. I mean that is a great question. And I think if you look back to how the product was launched in Europe, we only had 2 centers that have participated in the Phase II trial. So across Europe, there has been many physicians and transplant centers that have been waiting for additional data. As Richard mentioned before, we have 22 centers that have participated, and they are one of the largest centers in Europe. I would say all of them are waiting for this data. And they obviously know they've seen the product used in their clinic, but they're waiting for that pool data of the 50 patients being rolled out. So I expect this to have a positive impact across all markets. I think for France, it will confirm what they already know. I mean they have a lot of experience in France. But we know that there are many markets where physicians have been waiting for this and to see the outcomes of a larger trial with European patients. I think this will have a positive impact across all of our European -- the largest markets, the U.K., but also some of the smaller markets where there may be 1 or 2 centers in each clinic. So that is why, as Renee mentioned before, like having the PAES readout this year, more data from ConfIdeS in June, that is why we are very excited about the opportunity in front of us in Europe because this is really what the physicians have been waiting for, for a very long time. Operator: We now have a question from the line of Richard Ramanius from Redeye. Richard Ramanius: I have a follow-up question to one I asked at the last Q&A regarding your accounting definition of sales, namely how representative are your quarterly revenue figures of real-world use of imlifidase in actual transplantations? Renee Aguiar-Lucander: Evan, do you want to take that question? C. Ballantyne: Sure. Yes. We recognize revenue on the transfer of product from Hansa to a potential hospital. So I think the revenue recognition reflects actual sales very well. Richard Ramanius: I was wondering the transplantation could occur much later than the actual sales. So how do actual transplantation track revenue? C. Ballantyne: So most of our customers pay us within pretty common terms of 30, 60 or 90 days once the product has been transferred. And some of our customers, a small portion, pay us based on transplantation. And we break accounts receivable into 2 groups, groups that pay us on standard terms are current accounts receivable and groups that pay us based on transplantation are categorized as noncurrent. Renee Aguiar-Lucander: I think this is obviously an issue in terms of the fact that we can't -- because they have to have the product available because obviously, by the time that they decide to delist a patient, there is not known the time period that will elapse between the act to delisting a patient and receiving an organ is completely unknown. So that could be a couple of days, it could be a couple of weeks, it can be a couple of months. But obviously, once kind of the drug has been used, obviously, it's generally replaced immediately by the hospital. But there isn't really a way of kind of having a 100% kind of immediate kind of connection because you will have to have some of that -- just have it accessible because the time lines are so short that this is not a drug that you can just kind of order once you actually have the organ in the clinic. So hopefully, that addresses your question. Operator: We now have a question from the line of Christopher Uhde from SEB. Christopher Uhde: I have a few, if I may, but stop me if we're running out of time. The first one is on Germany and Eurotransplant. And maybe if you could say anything about what your expectations are for the guidelines, what they'll actually contain with respect to use of Idefirix or perhaps what we should be watching for? And then a follow-on to that would be then what are your expectations in terms of the time to actually implementing any such changes? That's my first question. Renee Aguiar-Lucander: Maria, do you want to take that? Monika Tornsen: Sure. So the consensus recommendations that have been put together in Germany have been written by all the major key opinion leaders in Germany. They have rolled them out among the clinics on a webinar in March, and they have -- so they have the German version of those guidelines in their hands right now. They have submitted it in English for -- to an international journal to be published. And it's -- we are not controlling the publication, but our expectations is probably mid of this year that we will see that publication in English. But in addition to the webinar that was held in March to discuss these new recommendations, our German team are also hosting different roundtables and KOL sessions with immunologists, with transplant surgeons, et cetera, to discuss the practicalities of these guidelines. But the good news here is that all of the German KOLs are standing behind the guidelines. They put their name behind those recommendations. Christopher Uhde: And so -- are we to understand that it's basically to begin to reuse Idefirix in... Monika Tornsen: Yes, yes. So yes, so this -- sorry for not answering that question. So the guidelines are written keeping in mind the ETKAS program in Germany. As we mentioned before, the priority program was paused by the German Bundesärztekammer. However, 2/3 of German highly sensitized patients are in the normal ETKAS program. So this consensus guidelines practically speaks about how to use Idefirix within that ETKAS program. Go ahead. Christopher Uhde: No, sorry, I guess you feel free to add. But otherwise, my second question would be on what are your expectations for how the PAES study data will look out -- look like? Renee Aguiar-Lucander: That's the crystal ball question. So I guess that, I mean, I'm happy to have Richard also weigh in on this. But I mean, I think at this point in time, there's been a lot of transplant taking place with this drug. I think that what we've seen is a very, very consistent behavior of this drug. It is highly targeted. We know what it does. We know that it works. And so I think my view is that we certainly don't expect any surprises from the PAES study at all. And -- but obviously, we don't have any access to the information. We don't have -- we've not seen any part of any data. So obviously, we are kind of in the same place as you are in terms of we'd be very interested in seeing it. But again, I feel very comfortable with all of the kind of clinical experience and what we've seen in other clinical trials and also obviously, in real world. So again, I don't expect any surprises there. But Richard, I don't know if you have another crystal ball that you can look at. Richard Philipson: I don't have a crystal ball, but I agree. I mean I think we don't expect any surprises. The outcome of the ConfIdeS study was -- we were really pleased with the outcome of that study. As I've said in answering a previous question, the patient populations are very similar in the ConfIdeS and the PAES study in terms of patients receiving imlifidase in the PAES study. So I think we haven't got a crystal ball, but agreeing with Renee, I mean, I really don't anticipate any surprises. Christopher Uhde: Great. And then if I could ask then third question would be on Italy and Spain and the outlook there in terms of the rollout across the remaining regions. How do you see that progressing in terms of, let's say, the time line? Renee Aguiar-Lucander: Maria, do you want to take that? Monika Tornsen: Yes. So Spain and Italy are obviously 2 of the important markets in Europe. What I am observing are positive changes in those markets, both in terms of the rollout of reimbursement, which in both Italy and Spain is first on a national level, but then on a regional level. And we have made progress in all of the key regions where the major transplant centers are. I'm also seeing more physicians sort of adjusting to delisting patients and understanding how to delist. And I'm also observing more utilization in -- by meaning more centers that are starting to adopt the product post the sort of PAES trial enrollment finishing. So I think those are sort of positive lead indicators. Both Italian and Spanish physicians are obviously waiting for the data. They participated in the PAES trial. So I think that will be important as we get the data middle of this year, both from ConfIdeS, full data and also PAES part of our actions in both Italy and Spain is making sure that all of these centers that both participated in the PAES trial and did not that they have access to this information. I think that will confirm again the clinical confidence in the product. But we're seeing positive momentum, I would say, in both markets. So I'm sort of cautiously optimistic about the future in those markets. Christopher Uhde: And if it would be okay to squeeze in one last question. I'd just like a little bit more -- if you could explain a little bit more the CAR-T analog that you mentioned for the U.S. That's it for me. Monika Tornsen: Sure. Happy to. Yes. So imlifidase will be an inpatient drug in the U.S., meaning it's being used in the hospital setting. Obviously, as the patient is going through a major surgery. The CAR-Ts were also used inpatient. And that means that the way the products are paid and reimbursed is very similar. So like the reimbursement pathway that they took when they launched will be very similar for imlifidase. Specifically, these drugs are covered by DRG codes as an inpatient drug. And when they launched the CAR-Ts, the DRG code, I think Renee will correct me, was very low, around USD 40,000. And the hospitals needed to apply for Outlier payments. And in addition, the manufacturers of those products applied for NTAP, new technology add-on payment to give that extra reimbursement to the hospitals. And eventually, after a few years, they got their own assigned DRG code. So when you think about how imlifidase will be used in the U.S., it will be inpatient. We will apply for NTAP, new technology add-on payment. The hospitals will do Outlier payments, with Outlier payments to CMS. So that's why we say that the CAR-T launch and the uptake of the launch and how it was managed from an access and reimbursement perspective is a very good analog to look at if you want to sort of think about how the financials work for these inpatient drugs in the U.S. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to CEO, Renee Aguiar-Lucander for any closing remarks. Renee Aguiar-Lucander: Thank you very much. Thank you very much for listening to this Q1 review, and we definitely look forward to our Q2 review, where we will have a lot of things happening between now and then. So thank you again. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Aki Vesikallio: Welcome to Hiab's First Quarter 2026 Results Call. My name is Aki Vesikallio. I'm from the Investor Relations team. Today's results will be presented by CEO, Scott Phillips; and CFO, Mikko Puolakka. As a reminder, please pay attention to the disclaimer in the presentation as we will be making forward-looking statements. Before handing over to Scott and Mikko, let's take a look at the highlights of the quarter. Book-to-bill was positive in all three geographical areas. Our sales were still impacted by low order intake in the U.S. during the previous three quarters. However, our comparable operating profit margin increased sequentially to 13.5%, and we continue to deliver strong cash flow. The new operating model announced in January was successfully implemented in the beginning of April. We also specified our outlook for full year comparable operating profit margin from above 13% to above 13.5%. 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: Greetings, everyone, and a warm welcome to our first earnings report for 2026. I would like to start out sharing 3 developments highlighting our execution of our profitable growth strategy. So during third quarter earnings report, as you'll recall, we shared our plans to reduce our cost by EUR 20 million within this year as a result of the increased uncertainty that has led to a more challenging demand environment in the U.S. as well as the overall development of the order backlog. Consequently, we have announced plans during the quarter to evolve our organizational structure and our operating model targeting to create three positive outcomes. Number one, to evolve to further clarity on our end-to-end accountability through further decentralization by reducing layers of complexity within our overall organizational design. That should help us to attend to a few issues that occasionally come to light in terms of suboptimal customer support. And then third, overall, it allow us and enable us to reduce our fixed cost in line with our plans, which should create much more improvement in our value creation resiliency. So core to our strategy is our aim to lead the sustainability transition for on-road load handling industry. So I'm really pleased to share the second development here in the execution of our strategy, and that's the fact that we have validation in our science-based targets to achieve our commitment to be net zero by 2050. The third development I would like to share with pride is another example of a key outcome-based innovation co-created with our distribution partner, MYCSA, together with key customers in Spain, aiming to optimize productivity for dump-over column lift tippers by developing a new DEL brand lightweight lift gate. So another great example of our focus on developing new innovations together with our customers and our partners that's purpose-built to solve our customers' most challenging problems. So let's get into the headline results of our group financials for the quarter. So starting off with our order intake development. I'm pleased to see that our organic order intake increased by 7% in constant currencies versus the comparison period. In actual exchange rates, order intake reached a level of EUR 402 million or EUR 419 million in constant currencies for an 11% positive variance. ING contributed EUR 15 million in the quarter, so in line with our business plan. And all regions contributed a solidly positive book-to-bill, increasing our backlog sequentially. Now unlike prior periods, we didn't get the advantage of large lumpy orders as we've -- myself and Mikko and Aki have talked about in the past, but rather resulting from a number of increased activities that manifested in smaller order intake or midsized order intake. So no real large orders of note to report within the period. So overall, a good start to the year despite the uncertainty in the macro environment. So let me turn your attention to the regional breakdown of our order intake profile for the quarter. Now as you can see from the table, we had growth in all regions with the exception of Asia Pacific. Europe, Middle East and Africa increasing from EUR 203 million to EUR 207 million or 2 percentage points. The Americas grew by 15% from EUR 145 million to EUR 166 million. And Asia remained relatively flat at EUR 29 million compared to EUR 30 million in the comparison period. Europe continues to show signs of steady demand growth, which we do see in all businesses, but most notably our lifting solutions. The growth in the Americas was primarily driven by ING acquisition, but at the same time, we certainly did not see further declines in the U.S. Now overall, the environment remains highly uncertain with ongoing trade tensions in the U.S. and heightened geopolitical tensions in the Middle East. So let's turn our attention to the revenue results for the quarter. Our revenues were down 7% year-over-year due to the EUR 114 million lower order book we started the period with. Now in line with our expectations, revenues were on the level of EUR 383 million, as you can see on the table on the left-hand side. Our rolling 12-month revenues are now converging towards our order intake level of prior periods at EUR 1.528 billion. Now our share of services and actual exchange rates increased a percentage point due to the decline in equipment sales. However, as Mikko will explain, we had a nice increase in service sales in constant currencies, and ING contributed EUR 13 million in sales or 3% and currencies overall had a negative impact of 4% on group results. Now geographically, our share of sales were impacted by the positive order intake development in the second half of 2025 in Europe, while the Americas was negatively impacted by the decline in the U.S., but partially offset by ING. Now in addition to the increase in Europe, our Asia Pacific region was also slightly up, improving to EUR 26 million or 7% year-over-year. And I'm pleased to see the development of our ECO portfolio sales as they increased by 23% to EUR 176 million or 46% of sales overall. Now with our year-over-year decline in sales, our comparable operating profit was negatively impacted, so I'll guide you through the numbers. For the period, we delivered EUR 52 million on sales of EUR 383 million, which is a 22% decline versus the comparison period. But all in all, a good start to the year. On a relative basis, the group was on a level of 13.5% versus 16% last year. Now the factors most impacting comparability were lower sales in the U.S., lower indirect costs affecting gross profit and lower fixed costs affecting operating profit. Now consequently, our operative return on capital employed declined due to the reduction of profit, items affecting comparability and the ING acquisition. Now Mikko will further guide you through the bridge. Now wrapping up on our quarterly check-in for how we are performing versus our long-range targets. Our last 12 months -- our 10-year CAGR is now at 5% versus our long-range targets of 16% of comparable operating profit, our last 12 months is at 13% and versus our long-range target of greater than 25%, we're in line at 27%, albeit a decline sequentially for the factors that I shared earlier. So with that, I would like to turn the stage over to Mikko to share with you results for the reporting segments. Mikko Puolakka: Thank you, Scott, and good morning also from my side. Let's start first with the Equipment segment performance in quarter 1. So the equipment orders were EUR 284 million during the quarter. This is 10% increase year-on-year. But if we exclude the currency impact, the growth would have been 14%, so in constant currencies. Lifting equipment grew very nicely. Growth came mainly from Americas, like elaborated already by Scott, very much driven by the ING Cranes acquisitions. The delivery equipment orders were flat year-on-year. I would say that taking into account the market situation in the U.S. and the fact that we did not book any major key account or defense orders during the quarter, I would say that the Equipment segment performed well in terms of orders during quarter 1. Sales were EUR 266 million. This is minus 9% year-on-year. And again, if we exclude the currency impact, the decline would have been minus 6%. Lifting equipment actually grew in all three geographies, and the decline in sales is coming solely from our delivery equipment, especially in the U.S. market. The U.S. decline is very much due to the past quarters below one book-to-bill caused by the volatile tariff environment and the delayed decision-making by the U.S. customers. Equipment comparable operating profit was EUR 32 million or the margin 12.1%. And the biggest driver for the lower profitability was the decline in the delivery equipment sales in the U.S. Like I mentioned earlier, equipment profitability was very much impacted by the lower sales as can be seen in the bridge on the right-hand side. Lower sales affected gross profit margin as the gross profit margin includes also fixed production overhead, so the factory overheads. We had a slight positive impact coming from the lower SG&A costs. But I would say that the cost savings from the early announced EUR 20 million cost savings program are not yet visible in our quarter 1 results. Then let's have a look on service performance. And I would say that currencies had a significant impact on services orders and sales during quarter 1. Service orders were EUR 119 million. With constant currencies, actually service orders would have grown 4%. Sales was EUR 117 million. And again, with constant currencies growth would be plus 5%. So in absolute terms and in constant currency services, quarter 1 revenues would be EUR 123 million. Really nice development in our recurring services like spare parts and maintenance. Those sales grew in quarter 1. However, installation services sales declined. So I would say that the recurring services growth was able to offset really nicely both the currency headwinds as well as the decline in the installation services. The number of connected equipment and maintenance contracts also continued to grow in quarter 1. So really nice performance in executing also the services strategy. Services profitability was stable at EUR 28 million or the margin 23.6%. If we look at the services bridge on the right-hand side, services sales growth would have been actually EUR 6 million with constant currencies instead of the EUR 1 million decline as we have reported. Recurring services growth very much offsetting the decline in installation services. And then the negative FX impact, mainly coming from the weaker U.S. dollars offset the volume growth. Next, let's have a look on Hiab's total financials. The overall Hiab profitability decline came from equipment volumes as you were able to see from the previous bridges. Lower volumes affected gross profit margin as the gross profit includes fixed production overheads. Our SG&A costs were stable in constant currencies. Like mentioned, the cost savings program effects are not yet visible in quarter 1. Those start to be more visible in the second half of this year. Currencies had a notable impact on quarter 1 profitability, mostly stemming from the weak U.S. dollar. We booked EUR 11 million restructuring costs during quarter 1 as items affecting comparability. So this is below the comparable operating profit. These items affecting comparability, they are related to the ongoing EUR 20 million cost savings program, headcount reduction, including also the ZEPRO tail lift production move from Sweden to Poland. And our quarter 1 tax rate was 26%. Our cash generation continued on a very good level in total, EUR 75 million in quarter 1. The cash conversion was really high, 186%. Our inventories decreased slightly, but I would say that the main contribution to our cash flow was coming from the net working capital like accounts receivable decline and the VAT receivables collection. So those were the main contributors to quarter 1 cash flow. Hiab has a very, very strong balance sheet with a net cash of EUR 219 million at the end of March. Our gearing was stable at minus 23%. And thinking the target to keep our gearing below the 50% threshold, this would allow us to raise more than EUR 700 million debt. So really strong balance sheet to execute the inorganic growth strategy. We paid the EUR 75 million dividend in April 2. So this is not yet -- the dividend payment is not yet visible in our quarter 1 numbers. And then on the right-hand side chart, you can see that we have only one major debt item that's the EUR 150 million bond, which is maturing in quarter 3 this year. And today, we have also revised or specified our outlook for the 2026 based on a very good start for the year. So we estimate that the comparable operating profit margin for this year exceeds 13.5%. This is up from the earlier above 13%, what we announced in February. The key assumptions behind this outlook are more or less unchanged what we said in February. We expect EMEA to continue to grow. U.S.A., not further declining from the previous quarters. However, the customer decision-making continues to be still slow and difficult to predict. 2026 has started with EUR 114 million lower order book. Also, the March '26 order book was almost EUR 40 million lower than what we had a year ago. We have factored in the outlook also, the EUR 20 million cost savings materializing in 2026, as mentioned, mainly effective from second half onwards. And then our group admin underlying costs would be more or less on 2025 level, plus then approximately EUR 5 million investments in process and systems development, mostly in the second half this year. So with those words, then I would hand the word back to Scott, please. Scott Phillips: Thank you, Mikko. So just closing with a few key takeaways summarizing the quarter. I'd say, first and foremost, we certainly continue to see a gradual recovery in lifting equipment in Europe, Middle East, Africa, which is great to see. Our delivery equipment market in the U.S. is expected to be in a cyclical trough. Third key takeaway is we are on track to achieve our EUR 20 million lower cost level in 2026 versus the prior year. We continue to nicely execute on our profitable growth strategy with a keen focus on where we can take advantage of opportunistic growth. As Mikko mentioned, our strong cash flow and balance sheet position us nicely to catalyze growth in the coming periods. And we're really pleased to see the solid good start to the year in 2026. So with that, I'll turn it back over to Aki. Aki Vesikallio: Thank you, Scott. Thank you, Mikko. With that, we are ready to start the Q&A session. Operator: [Operator Instructions] The next question comes from Antti Kansanen from SEB. Antti Kansanen: And I'll start with a bit of a long-winding one on the U.S. demand. I mean, backing out kind of your Americas orders, the FX impacts and the acquisition impact, it still looks quite good organic order growth for the quarter. Then again, if we look at kind of the quarter, you flag increased geopolitical uncertainties. There was a bit of a back and forth on the Section 232 tariffs and things like that. So how would you kind of describe the demand environment that you saw on the first quarter? Did you start to see a gradual recovery in some sense? Or is it kind of the heightened uncertainties adding kind of an extra layer of slower decision-making versus what you kind of saw going into the quarter? Scott Phillips: Just starting that one off. In the U.S., I think one of the key factors to note is that there was a bigger impact towards the second half of Q1 last year impacting both of our at-scale Delivery Solutions business within the U.S. So we're coming off of, I'd call it, a relatively low comp. So therefore, I'd say that was a driver in terms of the positive variance that you see slightly in the U.S. year-over-year. But on the other hand, I'd say from the combination of still the factors that existed prior to the trade tensions and then subsequent to the trade tensions and even with the geopolitical unrest notwithstanding, we are seeing a bit of stability, albeit as Aki characterized and Mikko as well, that the decision-making is still on a similar level in terms of customers being cautious. Having said that, I think it boded quite nicely for us in the quarter that similar to what we saw here in EMEA, the composition of the order profile in the period was more skewed towards smaller midsized type orders. So the overall activity level was quite strong. And I'd characterize the sales funnel within the quarter also nicely positive variance compared to last year. Having said that, we still have the same level of uncertainty. We have the added variable of geopolitical unrest. So therefore, we're trying to stay quite balanced in terms of managing expectations that -- which is why we made the note of where we think we're in a situation where we don't see it imminently getting worse. And so therefore, I think there is a potential to be stable to slightly improving. And certainly, you see that supported nicely in some of the reports from the truck OEMs. And then as has been noted in some of the analyst reports, there will be a bit of a lag in terms of the impact for our business compared to what you see at the truck OEMs. So the factors at least are lining up to be, I think, skewed more positive versus negative. Antti Kansanen: All right. And then specifically on the changes on the Section 232 tariff start of April, what's your analysis on -- are there any impacts on your clients in terms of truck prices or truck costs? And also what's the direct impact to your specifically? Scott Phillips: Yes. The impact of the change in the tariff code certainly has a negative impact from a customer perspective and that the cost level goes up somewhat. And so we've run through all the analytics and the math, and we've revised our price model vis-a-vis the surcharge as a consequence. So our customers will certainly see that. I don't see it at a level where there would be an imminent negative impact compared to the current demand environment, but certainly an additional factor to consider on behalf of our customers in terms of deploying the budgeted capital within the year. And then as we have highlighted in some of the past periods, one of the key changes that we did see in the U.S. was a tendency to move away from providing longer-term view of demand and capital allocation and rather going to more shorter demand horizons, if you will, in terms of quarter-by-quarter or biannual, if you will. So we still see that trend continuing. Antti Kansanen: Sure. And then kind of talking about pricing and surcharges, how much would you say that the U.S. orders in Q1 benefited from pricing in terms of year-over-year basis? Mikko Puolakka: Yes. The U.S. orders benefited approximately EUR 10 million from the surcharges during quarter 1. Antti Kansanen: All right. That's very clear. And then just a housekeeping question on the savings program on the EUR 20 million. So would I model it correctly if I kind of add a full run rate impact for Q4. So it's a little bit of a benefit on Q3 and then in a similar fashion first half of next year as well on a year-over-year basis? Scott Phillips: Yes, I'd say that's about right. Mikko Puolakka: Yes. Operator: The next question comes from Panu Laitinmaki from Danske Bank. Panu Laitinmaki: I would have two questions around the guidance. So firstly, what kind of triggers the upgrade? I mean, is it that you have now more visibility towards the end of the year? Or was Q1 or what you see in the market better than you were expecting? And then the second one is kind of what kind of -- what are you expecting for the U.S. market for the rest of the year in your guidance assumptions? Scott Phillips: Do you want to take the first part, and I'll take the second part. Mikko Puolakka: So basically, what triggered the specified outlook is that we had, of course, a solid start for the year, and we have now basically 3 months better visibility for the year. We don't see in customers' behavior at the moment any change. So that -- those are basically the elements which basically made us to slightly specify the outlook from above 13% to above 13.5%. Scott Phillips: Yes. And just adding one more to that one, Panu, is also the view that Europe continues on the positive glide path that we've seen. So better visibility to the order book now as we have an additional 3 months coverage, positive variance to the start of the year versus expectation or plan and then the continued good development in Europe and offset, of course, by a more or less stable situation in the U.S. Then the second part of your question was with regards to the U.S. demand, yes. Yes. So in terms of U.S. demand, just to reiterate the prior comments, we certainly see the similar factors coming into the year that we did for the second half of last year, where you had the environment where there was already a bit of a slower level of decision-making, or let's say, a longer time horizon to deploy capital based on changes in the cost levels and the inability of our customers to know, let's say, upon the time of taking possession of the equipment, what their forward-looking cost curves would look like. So then naturally, you would, if you could delay the decision-making until you have better visibility there. We see that continuing within the year. Having said that, we did see a bit of recovery, of course, in the Delivery solution business in the U.S. and activity level bodes well as the composition of the order intake was, again, rather than being skewed towards a few lumpy key account orders, but rather a number of small to midsized orders. So the key account orders are also still in the pipeline. So overall, we see a situation where we feel a bit more comfortable, given that we still have a lack of coverage to the end of the year, which then will further clarify potentially in line with our Q2 earnings report. But for now, given those three factors that I talked about earlier and this U.S. situation that we think is on quite a stable level or we don't see it imminently declining, supported by the data that we're seeing with the truck OEMs, key factor for us to be able to bump up the outlook for the year slightly. Panu Laitinmaki: My final question is on the European market. So it continues to recover, but could you kind of tell a bit more like which segments are looking better for you? And what about construction, which I understood has been still slow, but do you see any pickup there? Scott Phillips: Yes. For us, the quick answer on the construction side is not yet. But what we do see is we see a pickup on special logistics, a bit of infrastructure, a little bit of retail last mile, but significantly, of course, in our Waste and Recycling segment, somewhat offset by a slight decline in the defense logistics, as that's a consequence of timing of fulfilling past very large orders that were won in the past and then the fulfillment schedule is starting to wind down a bit. So overall picture with the exception of construction is all moving somewhat in the positive direction and somewhat steady. We're not seeing big swings period-over-period or sequentially within the quarter, but rather a nice steady improvement. Operator: The next question comes from Mikael Doepel from Nordea. Mikael Doepel: Just starting off following up on the EMEA question there. Any specific countries you would like to flag here that are looking particularly strong where you're seeing some kind of improvement, maybe some early signs into Q2 or any specifics you could add there? Scott Phillips: Yes. If you think about our demand environment in Europe, it very much follows along with the countries that have the highest or the most at-scale GDPs. And those were certainly the countries that had the most positive variance for us within the Europe, Middle East, Africa region. So of course, U.K., France, Germany, Benelux, France, Spain, all were nicely positive. Mikael Doepel: Okay. No, that's clear. And then also coming back to what you mentioned on defense. How would you describe the pipeline there currently? And also maybe a specification, did you book any orders there in Q1? And then the pipeline and potential, how you see it going forward? Mikko Puolakka: Mikael, was your question concerning Middle East or because the line was a bit... Mikael Doepel: On defense, yes, I was asking, did you book any orders related to that segment in Q1? And also how would you describe the pipeline and potential here going forward? Scott Phillips: Yes. A quick answer, yes, we did, albeit I'd say, overall, there was a slight negative variance on the defense orders from the comparison period. Pipeline looks really healthy. And as we've called out in the past, it's challenging to call the timing of converting the orders. But Hermanni, Frank, the team are doing a great job managing the pipeline, and we feel really good about how we're positioned to convert the pipeline. The question is around the timing. Mikko Puolakka: The defense orders were roughly 4% of the total order intake in quarter 1. So as we have said earlier, they are a bit lumpier than the kind of typical commercial orders. So from quarter-to-quarter, it might fluctuate a bit. But like Scott said, solid pipeline and something to come most probably later this year, so yes. Mikael Doepel: Okay. No, that's fair. And then just finally, on the M&A, I think you, Mikko mentioned the EUR 700 million firepower here. How would you describe the pipeline? I mean, which regions would you say are most active right now? And what are the key hurdles to get the deals done? Scott Phillips: Yes. So let me start out and take that question. Pipeline is quite active, as we have consistently called out in the past. Of course, it's always all a matter of timing. Our focus is in line with our focus segments. Similarly, from a geographic perspective, I'd say there's an active pipeline, of course, in both of our core markets, both within Europe as well as the Americas. And of course, that's a critical area of focus for us. At the same time, we continue to look for opportunities to help us scale quicker in regions where we're subscale. And so we still like the APAC region and are investing a lot of time and expense in analyzing and understanding the opportunities in that part of the world. And similarly, we still see opportunities in Latin America as well. Mikael Doepel: Okay. And then just a follow up, I mean, what would you say are kind of the key hurdles to get the deals done? I think you said valuation question more or is it something else that's kind of stops? What are the key kind of things being discussed? Scott Phillips: Yes. Sorry for -- just to give you a bit of context around the history. So the first key factor was just needing to work our way through the merger and then the demerger process, as we were certainly constrained for good reasons to take actions during those years. So post-completion of the demerger, then the key constraint really has just been a matter of timing of working the processes. Operator: [Operator Instructions] The next question comes from Antti Kansanen from SEB. Antti Kansanen: Yeah. Thanks for taking my follow-up, which would be on the U.S. distributor. So Scott, maybe could you talk a little bit about where you are with this kind of a growth strategy, adding the distributor network or expanding the distributor network in the U.S. and expanding geographically? What type of a revenue potential should we think about from these actions in the next, let's say, 12 to 24 months? I mean, if the demand in the U.S. is starting to bottom out, I guess, the fact that you have a wider distributor network today than, let's say, a year ago, would add a little bit of a bigger potential for you going forward? Scott Phillips: Yes. Thank you very much for the follow-up question, Antti. I'd love to provide some color on this follow-up. So quite pleased with where we are relative to executing on our growth strategy in North America vis-a-vis activating a hybrid model, whereas in the past, we were almost entirely direct with the exception of our Princeton branded truck mounted forklifts. So over the past 2 years, we've activated 16 new dealers, of course, very much back-end loaded towards that time period. So great companies at scale. For the first time, it gives us real coverage in all 48 contiguous United States. And so that's a key milestone for us. And then I'd say number two, and I couldn't emphasize this one enough that the quality and capability within these dealers is extremely good and proud that they've elected to work together with us as real partners, and they're going to certainly help our overall growth strategy as well as to develop the overall Hiab brand in the U.S. Now having said that, we're in the mode of developing and going through the training and activating the dealers. And so that's a bit of a step-by-step process. Hard to exactly characterize the amount of positive variance certainly within this year, but we expect some positive variance to our order intake development in the U.S. as a consequence. And over the time series, if I think about '27, '28 and beyond, then that should steadily pick up. We believe that we'll end up somewhere around 20 to 22 distributors overall. So we still are in the process also of adding new dealers in areas where either we're undercovered and/or we're looking for the capability, be it for a lifting solution or a delivery solution as some of our dealers are quite specialized and others are more generalists covering the whole portfolio. Antti Kansanen: Is there any way for me to kind of compare from revenue potential-wise, say, 20 to 22 distributors versus your prior direct model, kind of how much does it expand the addressable market? Or how much kind of a dollar revenue potential would it give you down the road when all are fully activated and selling your equipment? Mikko Puolakka: Difficult. Scott Phillips: Yes. On the spot, no probably, but however, as we work -- progress through subsequent periods, and of course, as we certainly have touch points with all of you that cover our business, we certainly would be able to start to give better and better color on just that point. Operator: There are no more questions at this time, so I hand the conference back to the speakers. . Aki Vesikallio: Thank you for the telephone conference questions. We have at least one question from the iPad. This one is related to the Germany infrastructure package. Did we see any impact in the quarter? How would you characterize the situation or the stimulus money from the German infrastructure package? Is it visibility better, the same or worse than in the beginning of the year. Scott Phillips: Well, certainly, better visibility compared to the beginning of the year. Timing-wise, I'd say, too early yet. But we do anticipate having nice opportunities in the future, and we're starting to get visibility in the opportunity funnel. Aki Vesikallio: Great. How about then the supply chain? Do you see any constraints, especially in the hydraulics or electronics, I think this must be related to the Middle East situation. Scott Phillips: Ones, a great question and it gives me an opportunity to put the spotlight for a second on our supply chain teams. I think they've done a great job, both in terms of our factories and in collaboration with our sourcing team. So really pleased to share that no impact. Now, that picture, of course, looks a lot like the duck on top of the water. But of course, below the surface, there's a lot of activity behind the scenes, both internal to Hiab, but also in our partner network vis-a-vis our suppliers as well as the logistic shipping companies. But overall, no negative impact within the quarter. But a lot of organizational bandwidth that's been redirected to make sure that we secure and stabilize the overall supply chain. Aki Vesikallio: Indeed. The next one here is that do we see any potential considering new trade agreements between Europe and South America or then potentially how about India, do we see any potential there? Will this lead to Hiab's new equipment production service units in the medium term, impacting sales year-on-year growth rate in these regions? Any color you could provide? Scott Phillips: Yes, we haven't seen yet any impact at this point as a consequence of the new trade agreements. However, I would say that markets such as India are a great example of those that we are constantly pulsing and checking for what's the right opportunity for us to better participate in the market? Is that an import opportunity? Or is it a produced local opportunity? And certainly, I anticipate that a market such as this will play a key and ever increasingly important role in the future of our business. Aki Vesikallio: And I think we have still some more questions from the telephone line. So let's turn back to the moderator. Operator: The next question comes from Mikael Doepel from Nordea. Mikael Doepel: Just very briefly a question around your service business. Just talk a bit about how you see the environment there, the dynamics there? I mean, where are we currently on the spare parts capture rate? And how do you see the kind of the overall growth here going forward? Scott Phillips: In terms of the services business, what I would still say is that Mikko and his team are progressively working towards better and better partnership training and development of how to, one, make sure that as a result of having new or current activated connected units that, that gives us great control then over the installed base, which is the first key factor, and that's why that's one of the critical KPIs that we track relentlessly each period. Then that enables to have the dialogue of converting the management of those assets in the installed base wrapped around ProCare contracts that we do both for direct as well as through indirect. And we know that we have a significantly different outcome of capture rate and revenue per unit on those units that are captured in ProCare. And the good news is that our Net Promoter Score and feedback from the customers are on a significantly higher level as well. So the team is doing a good job getting better and better control of the overall installed base. But it will take time as given the top line split between what we sell direct versus indirect. The biggest opportunity for us is to continue to increase the share of capture on the indirect sales side. And so a lot of good progress is being made there. Overall, in terms of the capture rate versus what we shared in 2024, we continue to step-by-step make good improvements sequentially and throughout each period. The limiting factor so far, potentially, and this is a bit of opinion as it's quite variable, has been around the utilization rates of the equipment. And we have seen a lot of variability through the period where some period, some geographies is up and some within the same geographies may be down, and that might have a bit of a factor if I think about the past 2 years. Moving forward, our expectation is that given the age of the installed base, the replacement rate should continue to increase. And at the same time, the level of service events or the frequency of the service events should get slightly increasing as well, which bodes well for our recurring revenue business. So overall, good progress there. When we come back on our next Capital Markets Day, we'll give a lot more color on how we're progressing relative to the three KPIs that we shared in '24 as well as the overall capture rate. And I'd say the last comment I would add is, I think I did share in either Q3 or even in February in the Q4 earnings, our share of recurring revenue is now on quite a good level at around 75%, 76% level. Operator: The next question comes from Tom Skogman from DNB Carnegie. Tomas Skogman: I know you have sensors installed in your equipment. Can you open up a bit what you see, how customers are using the equipment sequentially year-on-year and between different geographies. What can you read about your customers from this? Scott Phillips: We get quite a lot of data-driven insights off of our connected equipment and really pleased by the fact that we are able to provide condition-based monitoring services, so we can see any number of data points from the amount of how they're being utilized, the time under load, the type of loads, whether it's overload, under load, time in idle, even if an operator has not buckled the seat belt and attended to some of the basic requirements around safe operations. So a whole host of variables that we're able to see relative to most of the units that we have connected. And then quite pleased to tell you that at least before the end of the year, you'll start to also see quite a nice uptick in connected units in our tail lift business as well. Tomas Skogman: But what do you see in customer activity, like in the U.S. where we have this kind of both kind of uncertain demand situation. Do you see positive signs in how customer equipment is used, for instance. Scott Phillips: Sorry, now I understand a little better than what you're getting at there, Tom. So in terms of utilization, we see quite a lot of variability. I'd say, overall, we don't see any real negative or positive trends, but some periods, utilization or activity levels are up. And then in the next period, it might be down. So overall, I'd call it quite stable. And I'd say it's the same roughly applies here in Europe as well. In some periods, it's trending more positive and then in another period, it will trend slightly negative. Tomas Skogman: All right. And then about your M&A pipeline, do you have any targets you would like to share? How many companies you would like to acquire this year or how much sales you would like to add in through an M&A in 1 year or 3 years period or so? Scott Phillips: Yes. I mean I'll stick to my same answer as before. I think that given we're a business configured of 6 divisions and a number of business units, I would love to get to a steady state where we're able to do a bolt-on at least 1 per year per division per business unit. And similarly, if you think about then the composition of our business, managing 1 or 2 more transformative or, let's say, business unit or division size acquisitions per year would be a great steady state to get to. But to go from where we are to that steady state, then it's going to take some time as we now are, what, 9 months or so into being able to now action opportunities that we weren't -- we were constrained in action until we completed the demerger. So we'll also share a lot more color on that as we progress towards the next Capital Markets Day. Tomas Skogman: And when is the next Capital Markets Day? Scott Phillips: We haven't set the date yet, but we will share that as soon as we do. Tomas Skogman: But it's already this year, you plan to have it or... Scott Phillips: Yes. My sense is that it's likely to be in 2027, yes. Mikko Puolakka: Not yet decided, yes. Scott Phillips: Yes. Tomas Skogman: Yes. And perhaps a bit more on this service sales target. You have EUR 700 million as a target. I realize this downturn probably was a bit steeper and longer than you expected. But just on a general level, how do you feel about this? Because, I mean, that would really demand exceptional sales CAGR to reach that number. Scott Phillips: Yes, you're exactly right. There is that element if you think about the -- especially on the nonrecurring revenue piece, there is a significant element there of when does the equipment demand recover relative to the way we modeled the demand curve in Q4 '23 when we established the current strategy period. So a lot will be understood depending upon how the balance of this year and the beginning of ' 27 plays out, of course. Mikko Puolakka: But of course, one should still -- if we think quarter 1 service development, so sales up by 5% with constant currencies. At the same time, we saw a decline in the installation services. So if the installation services, i.e., new equipment sales, then attached with the installation sales would improve, then that would, of course, have had in this quarter a nice further addition to service revenues. Scott Phillips: Yes. Tomas Skogman: And then finally, these new U.S. distributors, do they wish that you would expand your product portfolio to some certain direction? Scott Phillips: I think at this point it's too early to tell. They're still in the mode of getting themselves up and running on understanding the scope of the portfolio that they're responsible for, how to work within our processes and systems and with the support staff that's available to them. But I am confident that as we look forward, they will certainly and frequently share insights where they see that we have opportunities to fill gaps within the portfolio. But at this point, I'd say it's too early. Operator: The next question comes from Antti Kansanen from SEB. Antti Kansanen: Just a quick follow-up on the U.S. order side. I mean, I just wanted to get a reminder like last year, your Americas orders declined by 14% on euro basis, but I'm sure that there was a pricing contributor on a positive side. So how much did the volumes last year decline? Or how much your pricing was up with the surcharges and all of that during '25? Mikko Puolakka: The surcharge impact, if I recall correctly, was something like between EUR 20 million, EUR 30 million for last year. A bit less than EUR 30 million, around EUR 25 million, yes. Antti Kansanen: Do you have any view kind of how much the volumes are currently. The order volumes are below, let's say, what you booked on '24, which was kind of the previous peak? Mikko Puolakka: You mean in the U.S.? Antti Kansanen: In the U.S., just trying to kind of think about that if there's a recovery on the market, what is kind of the upside in terms of your order intake, given that your prices are quite much higher now than they were a few years back? Mikko Puolakka: Of course, it's good to remember that the surcharges are something which, I mean, they change all the time as tariffs change. So of course, depends on the tariff landscape, whether one can use that as a, let's say, permanent price increase or we have communicated to the customers that the tariffs will -- if the tariffs change, then the surcharge will change. But all in all, last year roughly that EUR 25 million, let's say, impact in the order intake. It's a bit difficult to -- because to -- because there are so many different products in the U.S. market. There are tail lifts, loader cranes, truck-mounted forklifts. So one cannot count those together. It's like calculating apples and bananas together. So from that point of view, it's a bit difficult to say the kind of volume impact. Antti Kansanen: Sure. I mean, it's a simplification, but it seems like the pricing had a mid-single-digit impact and then that would kind of suggest, almost 20% down on volume. Scott Phillips: That's the right way to think about it, yes. Mikko Puolakka: Yes. Overall, it's the biggest impact is coming from the customers' overall demand, the pricing having a quite small impact. Operator: There are no more questions at this time, so I hand the conference back to the speakers. Aki Vesikallio: Yes. Let's still take a couple of questions from the iPad. So firstly, on the services. So do we always nowadays offer service agreement when we sell a new piece of equipment? And what is our hit ratio with service agreements with new equipment sales? Scott Phillips: The quick answer to that is that's certainly our expectation that it's one of our key strengths. And certainly, if I think about the 50 or 60 customer meetings that I have a year, that's usually the first topic of conversation is services and the availability of services proximity to installed base and the high need to secure uptime as most of our customers are understanding that they're paying a premium on the margin in order to secure the service outcomes that they need to keep them going. So therefore, it's critical for us to offer the services concurrent with the opportunity to sell a new piece of equipment. The hit rate or, let's say, the attachment rate of the service contract varies depending upon region. So I would kind of come back to Mikko's comment earlier. It's a bit -- it's not a great metric if you just aggregate it all together and say, here's our percentage of attachment because it's much higher in certain areas depending upon how we're configured with our own organization and the personnel that we have, but it varies, I'd say that overall, I can say that is one of the key opportunities for us to continue to not only drive our services business, but more importantly, a key factor for us to increase our Net Promoter Score or customer satisfaction. So the teams are working quite diligently together and with our partners to ensure that we feel like we have all the tools, processes and capability and training in order to not only offer the services, but then most importantly, to execute successfully in delivering against those service contracts. Aki Vesikallio: Then we have two more questions this. I think these are quite quick ones. The first one is on the M&A, any preferences in geographical regions? I think you, Scott, already mentioned that we like EMEA, Americas, our key regions, but we also seek for opportunities in the APAC region. So that was the answer already. And then the final one, which one of you remembers the numbers, how large proportion is the U.S. out of our Americas sales? Of course, we provide that on an annual basis, the North American sales, but we don't split U.S. separately. But of course, it's a significant share out of the Americas and also on the North American side. Mikko Puolakka: Yes, I don't remember now the exact percentage, but it's -- I would say U.S. is the majority of the Americas revenues. Aki Vesikallio: Exactly. Scott Phillips: Yes. Yes. A very high percentage. Aki Vesikallio: Yes. And of course, for this year, the rest of the Americas is somewhat higher due to the ING acquisition impact. So the Brazil market is proportionately higher than last year. Scott Phillips: Yes. Aki Vesikallio: Okay. That then concludes our Q&A session. Thanks for the great questions and for the great answers. We will be back with our second quarter results in 22nd of July. So stay tuned. Scott Phillips: Thank you. Mikko Puolakka: Thank you.
Kati Kaksone: Good morning, everybody, and welcome to Terveystalo's First Quarter 2026 Results Call and Webcast. My name is Kati Kaksonen. I'm responsible for Investor Relations and Sustainability here at Terveystalo. As usual, I will go through the results with our CEO, Ville Iho; and our CFO, Juuso Pajunen. And after the presentation, you will have time for your questions. Without further ado, over to you, Ville. Ville Iho: Thank you, Kati, and good morning. Let's dive into it. So Terveystalo first quarter, during the first quarter, the market was even more negative than we expected going into the year. That was then clearly reflected into our revenue line, which came clearly down. And despite the adjustment measures that we did, especially in our operations, to adjust the ops to lower demand, there was a drop through to our adjusted EBIT, which was at EUR 34 million. Quality across the operations and services [ highest ] standard even improving, which is, of course, a positive sign of very professional and robust organization, delivering in any circumstances. If one then dives a little bit deeper in what's happening in Healthcare Services market, it is the market that is exceptionally negative this time around. We have not seen this type of a dip since the start of COVID. And basically, all of the segments, regardless of what data you look, all of the segments and services are roughly minus 5% to minus 10% down. The positive thing and silver lining with this one is that we are seeing a market bottoming out. So according to our judgment, and that's reflected also in our plans and actions, the bottom has been passed. And now the market shall start gradually slowly, but steadily grow from a low level. In our own operations, we have been, as we have reported earlier, we have been suffering from lower connected employees number. And that one as well, we see bottoming out. So going forward, now the number has been stable throughout the quarter and now looking at the sales funnel activities, looking at the renewals, looking at new opportunities, looking at win rates, we can with confidence say that we start turning this one into positive going into H2. Of course, the progress will not be rapid because this is B2B business and turning agreements around will take a while. But anyways, market and our own portfolio has bottomed out and now we can start developing on from this new base. The negative market environment was present in all of our 3 P&Ls, Healthcare Services, Portfolio Business and Sweden, a little bit different reasons and different levers into that one. But bottom line was that the market conditions were very, very tough during quarter 1 '26. Despite that one, of course, the absolute result level and profitability we achieved was high, and we can be pleased with our own ops. But now the eyes need to be fixed on growth going forward. Market will not give -- even though it starts gradually improving, it will not give anything for free. We still focus and concentrate on our own agenda. It is very much geared to boost growth in all of our segments. In Healthcare Services, we'll concentrate in occupational health care, a turnaround program and transforming that one to higher value for our customers and growth. We are renewing our offering for insurance customers and companies and intensifying cooperation with the insurance companies. We are focusing in segments that are growing in our traditional integrated care. One prime example is seniors where we have captured big markets in Kela 65 and Kela 65 continues developing positively for us. And of course, on top of this one, we are seeking drastic improvements in efficiency with our digital agenda in traditional operations in a digital 10X and also in prevention. In Portfolio Business, of course, a positive move from our side. This is dental growth. Actually, Dental has been a sort of a light or positive glimpse during quarter 1. It has -- the market conditions have been fairly good, and the team has done very good work in improving the business. And with the Hohde deal, the platform will be ever stronger and an integration of that platform, Juuso will comment on the phasing and timing of that one later in the presentation. We are actively engaging with healthcare counties. It is evident that they are very low with their purchases still. But at one point, that market will activate and we want to capture our fair share and even more from that one. In Sweden, market conditions have been tough. Now the efficiency is there, and we are operationally improving. Now the focus is in commercial actions and getting the revenue line in with the higher operating leverage and improving through that one, profitability. A cycle is a cycle, and it's clearly very, very negative at the present, but we need to look beyond this cycle. As I said, market will start gradually improving. But every time a strong cycle goes through an industry, some things change permanently. And that one, coupled with accelerating speed of technology development will mean that we need to be even speedier than the transformation of this industry, and we need to invest in all of the 3 modalities in Healthcare Services delivery. In integrated care, we are investing in Ella. We are making the life of our professionals easier, smoother, more efficient, and we are giving more time for professionals with the patients. In digital health care retail, we are improving the customer engagement call centers. We are investing in digital 10X and AI-assisted appointments and efficiency potential in this modality is huge. We are also starting to invest in prevention at scale, so digital engagement through digital and based on data proactive, active engagement with our customers being relevant when they need actively guiding them through their lifelong health journey and are looking for new growth in this emerging new market. We have the dry powder, we have the agenda, and we have the speed in executing in all of these 3 buckets. Two landmark milestones in this development during Q1. Terveystalo launched its new novel occupational health care digital platform for its first clients. This one is next level compared to current platforms in the marketplace. It's developed jointly with our joint venture, MedHelp, and it's now live, and it's used by the first paying customers. Early feedback from the market is very positive. We continue scaling this one rapidly throughout the year. And as I said, this is next level, this is future, and this will give way more value for our customers and better insights in their own personnel than before. This is a big step in our main business. In digital 10X, we have introduced AI-assisted appointments, and we are scaling that one. Also during the year, the efficiency potential in this modality is huge. We are also scaling volumes so that we can -- with our intelligent steering engines can steer more volumes in the digital modalities. At the same time, we are improving traditional physician-led integrated care. And there, the prime tool is Ella, which we have launched. It's the user interface for our physicians. And already now, we have gained some 30% efficiency improvement with the new platform. And at the same time, we have been able to give more time to physicians and patients. As said, we continue to scale this one up during the year. Within next 12 months, this is going to bypass any present platforms in the marketplace and will be a clear and powerful asset for Terveystalo. So market has been negative. It has bottomed out. We have agenda for growth. We continue investing. We continue accelerating our technology journey. And with that one, over to Juuso. Juuso Pajunen: Thank you, Ville. So good morning all. I'm Juuso Pajunen, CFO of Terveystalo. Let's go to the topic numbers. So first of all, if we look at the key numbers from first quarter, it is clear to say that the relative numbers are big. We see negative on everything else, excluding the NPS of appointments, which is improving and is a stellar 88. But outside of that one, each and every number is negative, and the market has been weaker than anticipated. But let's go through then a number by number, what we are talking about. But before we go to that one, it is good to note that if we look at absolute numbers, these are still quite robust figures. Our Q1 is materially above our average Q1 if we come to relative profitability. If we look in absolute EBITDA terms, this is the third best quarter ever in absolute EBITDA or EBIT, either way you want to look at. So in absolute terms, we are fairly strong. But in relative terms, we are absolutely disappointed and obviously, we'll work on to get forward. If we then look the group, we know that our big ticket component is the headwinds in the revenue. We also know that the mega trends are there. And in mid- to long-term, they will support, support the growth. But as stated, the market sentiment at the moment is exceptionally weak. If we then look on different segments, we will go a bit further into details. But in the Healthcare Services, the big thing is occupational health in the portfolios, it is the public sector. Sweden, we are now evening out. Then if we look on the group level and think about positives in here, our efficiency is strong. No matter how you view it in an exceptionally big market, we have been able to adjust our operations towards the lower demand, and we will continue to do that one. So all in all, with the efficiency, we will get forward. If we then look on the EPS impacting adjustment items, we have EUR 7 million of these ones. It is slightly more than I would like to see in there. But if we double-click those ones, we have a EUR 1 million related to divestment of child welfare, which was a strategic move, and we have now closed that deal at the end of January. We have EUR 1 million related to reevaluation of the values in the real estate assets. We are doing investments in those ones, and this is something that, when you reevaluate, this will take place. And then finally, EUR 1 million related to restructuring. It's good to note that structural restructurings, items that impact us in the future, not the demand-facing restructurings. And then finally, we have EUR 4 million in the strategic projects, which we have been communicating earlier that we have and we have guided how much annually is coming. This is slightly front heavy now facing a bit more in Q1 than I was anticipating. So all in all, then we end up in the reported EBIT of EUR 26.6 million. If we then go deeper into the Healthcare Services, margins are on a historically good level. So if we take any period of time and if we look at the Q1s of the history, the actual EBITDA and EBIT margins are solid. But obviously, they are coming materially down. So we come into the discussion of relative weakness and absolute weakness. And then if we look further where this is coming, this is coming from demand. The visit growth is minus 9.6%, and then everything else is basically flat. The visit growth, we will double click that one on the next slide. But basically, low morbidity impacts us through 2 different parts. We have the less appointments and weaker mix as the diagnostics are lesser than in a higher upper respiratory disease situation. And then obviously, the occupational health care has been contributing to that one. At the same time, as said, we are continuously adjusting for the lower demand, and we have also, during April, announced statutory negotiations towards the demand situation. And however, of these ones, once again, in absolute terms, we are in a good place, and we will continue to invest, for example, digital transformation like Ville explained. Then looking on the patient visits. We have -- the same factors we have been now going through in a couple of different quarters. We have the seasonality. We do know that we have some 43,000 fewer upper respiratory diseases than previous year. This is part of normal variation and changes annually. This is the lowest prevalence since the COVID pandemic if we take on the curves. Then if we look on the occupational health, it is very good to note, like Ville said, that we are now minus 5% in the connected employees, but it is now bottoming out or has bottomed out. Then the underlying impacts in there are still the same. We have the macro and macro component where there is less employees. And then in the dire times, employers are spending less into employee well-being. And then we have the actional part where we have the ongoing strong program to address this one. But at the same time, the connected employees and the large account sales cycles are longer. So we are getting back on growth in the second half of this year. Public sector has been now bottoming out like we see that this is not -- it's a minuscule bar in the chart. And consumer is having positive momentum in the total supported by the Kela 65 and general tendencies are there. If we then take a segue with that one to the portfolios, we already now see that in the consumer part, the dental business has been actually the best performing in relative terms of our businesses. They are basically flat while other modalities have been clearly down. This is a positive and then hopefully reflecting the future demand environment also. We have then good to note that in the portfolio numbers, we have the divestment of child welfare. It's visible in the bar order in here. Outsourcing is down 50%. This one, we have known. The contracts are expiring and ending. Staffing is still having negative momentum in the welfare -- wellbeing county market, but also that one is now little by little stabilizing out. Dental, as said, positive in relative terms in the performance. And we have announced the Hohde acquisition. That one is progressing well in a very good and positive dialogue with the authorities. And we are expecting the closing in the second half. And now based on the current visibility, it looks like it will be rather third quarter than fourth quarter. But obviously, in these processes, there are variables that are beyond our control. But as said, solid positive dialogue with the authorities. And if I would need to guess, it would be rather in Q3 closing than in Q4 closing. Moving to Sweden. We are having a weak market. It is a continued weak market and Sweden as an export-oriented nation is also having their share of the market environment. At the same time, it's good to note that our efficiency is in place. We have the EBITA margin is now improving, absolute numbers, 50% up, give or take, almost 60%. Obviously, within our scale, that is peanuts in the total absolute numbers. But it's signaling that we are going to the right direction. If we then look beyond the efficiency, our next battle in here is the growth. And we already now see that our connected employees are increasing. But at the same time, the behavior is similar by the employers as in Finland. So their behavior is dampened by the weak macro. But we have the means and the tools for growth in here. And we are confident that this will improve as we have iterated many times earlier. When talking about investments, we continue our investment cycle. We are now at EUR 56 million on the LTM. I think that it's good to highlight from here that what we are doing is facing the real world. It is in production, it is in use. Our brightest investments, Ella, it's the user interface for professionals. It's already live. We have been rolling it out to wider user groups with improved functionalities, and we are seeing continuous growth on the usage rate. So this is live. This is not something that happens at the back office and then one day comes somewhere. We are doing this one. The same applies to our joint venture, MedHelp. We have in March rolled out this to customers. We have paying customers on this one, and we are continuing this one. So what we are doing is already now impacting us positively. If we then look on the balance sheet, we continue to have a positive balance sheet position. Our net debt to EBITDA is at 2.4. It has been increasing due to weak cash flow in Q1 and reduced profitability in Q1. But if we double-click that one, we are in a good component. And on the cash flow perspective, it is good to note that in our cash -- how our cash operates. First of all, we are a negative net working capital company, which is obviously positive from a balance sheet perspective. But when the revenues decline, our cash flow also weakens because we don't actually release net working capital, we increase it. So that one is impacting us negatively. Then the second component on the cash flow is that if we -- if you look on the taxes paid now in Q1, we paid taxes from the record profits of '25, and that is having a negative impact on the cash flow. So all in all, our balance sheet is strong. We can continue to invest. We are not limited by the balance sheet. But at the same time, we are working on the cash flow and the key component in there is going back on growth. Then before going to guidance, let's take a quick view on the market environment. First of all, if we look at the red arrows, they are all pointing down. This is weaker than we originally expected in February. We have had negative momentum through all payer groups. And then we have had incidents in the world that are also impacting, for example, the consumer confidence that Ville was showing, now referring especially to the Iranian war. So the market environment in Q1 has been exceptionally weak. However, then if we look on the next 12 months and we look further the outlook, actually, the arrows are the same we had in February. And based on the data we have, we believe that the bottom has been seen. We do know that public sector both in Portfolio Businesses and Healthcare Services is on a lower level. They are still having stickiness in the system, but little by little, it will improve over time. If we then look at the consumer market, we have the dental, is already performing well. As stated in relative terms, it was the best performing payer group and discipline. And then looking forward, we have the Kela 65. We have recently heard the news on the widening of the scope of Kela 65 and widening the scope of the services within Kela 65, which are positive. Insurance market continues to be in a positive momentum. And then we have Sweden, which still is having positive macro forecast slightly coming down compared to their February post Iranian war, but they are still positive. So if we look at the market momentum, we believe that the market will improve. Then at the same time, we do know that this is tilting towards second half and the latter part of that one. So if we think about the developments, Q2 will definitely be difficult, Q3 is always seasonally low, and then Q4 is the place where we would see the impact. And with these ones, we reiterate our guidance. We expect full year '26 adjusted EBIT to be EUR 135 million to EUR 165 million. The estimates are based on the gradually improving demand environment as explained earlier and normalization of the upper respiratory infections in the second half. And as stated profitability in the first half is expected to be below the first half of '25. Then further to that one, it is good to note that our scenarios at the moment are pointing rather below midpoint than above midpoint of our guidance. So all in all, we have a difficult first half, but we have a strong, robust and efficient motor, and we are investing in the future. So we are confident that we are also delivering with those investments. With these words, thank you, and let's go to Q&A. Kati Kaksone: Thanks, Juuso. We are ready now for your questions. Do we have any questions from the phone lines? Operator: [Operator Instructions] The next question comes from Iiris Theman from DNB Carnegie. Iiris Theman: I have a couple of questions. So if I -- I'll ask them one by one. So firstly, what data indicates that the market has bottomed out? Can you explain that? Ville Iho: Over to you, Juuso. Juuso Pajunen: Yes. So basically, it depends how you look at on the market perspective. We obviously continuously follow up our different type of data points, consumer behavior, visits on different intervals, on days, on weeks and those ones. And at least our internal data is indicating that we have now bottomed out. Then you saw from Ville basically the connected employees perspective. Ville mentioned already in the call that it has been now stabilizing and gradually with the pipeline looking that we can capture going forward. But on the external markets, we are especially referring to our own internal data. Ville Iho: Yes. And I think it's important to note that now we are talking about sequential improvement. So market has -- if one a little bit cuts the corners, market has reset to post-inflation new normal. And now from that base, it starts slowly but steadily grow. Iiris Theman: Okay. And why did you keep your full year guidance even if your scenarios are pointing below the midpoint? Juuso Pajunen: Well, we have actually discussed this topic also earlier that when we are within the range and we see that both ends of the range are something within plausible scenarios, then we don't change it. So that is how we have behaved earlier, and that is how we continue to behave earlier. Iiris Theman: Okay. And can you still go through the drivers that will contribute to reaching the midpoint of the full year guidance, which implies basically only a 4% EBIT decline? Juuso Pajunen: Yes. So first of all, I iterated that we are likely to be rather below midpoint than above midpoint. So then it is up to you to decide on that one. But basically, the drivers that are pushing or that are impacting our guidance. And obviously, you need to put your own finger in the air, how you take them within your estimates. But we have the upper respiratory diseases, we have the consumer confidence and a general corporate behavior that we are expecting to improve from the current rock bottom. And then we are also confident that we have bottomed out in the connected employees and that we are getting forward with those ones in the second half. So these are the key drivers if we look our market. And then, of course, the public sector behavior is expected to have bottomed out at the moment. Iiris Theman: And then a question regarding portfolio businesses. The margin decreased significantly from Q4 and Q1 last year. So is this a one-off or a level that we should expect for the coming quarters? Juuso Pajunen: Well, all in all, portfolios is also facing a negative demand environment, especially from the public sector. And then it is good to note that now the outsourcing contracts have been also value contributing and decline in those ones will not anymore deliver margin expansion, but declining revenues is negative for us in the total perspective. So we are expecting improved performance in portfolios and also now sequential improvement, as Ville explained, for the full year. Ville Iho: Yes. So question, obviously, is warranted -- but if one looks at our plan and also our internal forecast, so we are not expecting as a drastic drop for upcoming quarters as you see during quarter 1, as you said. So we are looking for -- realistically looking for a gradual improvement from a lower base. Iiris Theman: Okay. But basically, the margin decrease is that related to -- mainly to outsourcing business? Juuso Pajunen: There are impacts. It is mainly related to the public sector. But basically, the overall market environment has been weak. So that has been contributing throughout. Iiris Theman: Okay. And my final question is related to the Finnish government's budget proposal that was just released. So is there anything negative or positive that you would like to highlight regarding private health care service providers? Ville Iho: Well, if anything clearly positive, expansion of Kela 65, obviously, is a highly welcomed initiative from our point of view. We have been investing in this segment. So user segment seniors. We have been investing in Kela 65 and now expanding the scope of the service to do more diagnostics and also allowing higher frequency of use will most probably increase the number of users and also frequency of use. So that's welcome news. Operator: [Operator Instructions] Sami Sarkamies: Can you hear me? Kati Kaksone: We hear you fine. Can you hear us? Sami Sarkamies: Okay. Four questions. I'll take this one by one. You're calling first half to be down from last year, but how should we think about the second quarter relative to last year, given your comments regarding the market having bottomed out during the latter part of Q1. Operator: The next question comes from Sami Sarkamies. Juuso Pajunen: Thank you, Sami. We identified you... Ville Iho: There's some stickiness online. Juuso Pajunen: But basically, we don't guide per quarter, but it is clear that quarter 2 will be also weak, but what we think about is sequential improvement in total. So at the moment, it is not against comparables as weak as quarter 1 was. Sami Sarkamies: Okay. And then on connected employees, we're expecting this to start growing sequentially in the second half of the year. Have you already won these deals? And how are front book prices looking relative to your current backlog prices? Ville Iho: Very good question. So deals are won and equally lost all the time. So then the real question forecasting forward is the funnel, how much renewals you have and how much new opportunities you have. And then against that one win rates. And then, of course, you have the packages and scopes and price levels. So what we are seeing now is a clear improvement in the new opportunities funnel. So new opportunities bucket increasing all the time and applying sort of average win rate to that one, we see a clear increase from that source. On the other hand, renewals from our existing customer base, that bucket is shrinking and renewal win rates are improving and really, really high. So just mathematically, looking forward, we can sort of, with confidence, expect growth. It's not going to be sort of early on rapid and skyrocketing, but it starts to grow. And of course, we want to accelerate it over time. Then looking at the scopes when these bids enter this tender space and comparing those ones with our current portfolio, the price levels are higher than existing ones. But then you need to, of course, do the full cycle of negotiations and go over the finish line. And only then you see what is the final package and what is the final price level on those agreements. But all in all, this is forward-looking picture, is positive, finally bottomed out and now looking forward and progressing to more positive. Sami Sarkamies: Okay. Then I may have missed, but did you give any commentary regarding cash flow in Q1? It was quite a bit below last year level. So what are you expecting for the full year? Juuso Pajunen: Yes. So basically, what I iterated on the balance sheet slide was that, first of all, cash flow was negatively impacted by the profitability. Then the second component is that we paid taxes from the record year previous year. So all-time high profits lead to all-time high taxes, obviously. And then the third component is that our net working capital is structurally negative, which means that decline in revenue impacts negatively our cash flow. And these are the 3 components. And obviously, taxes, we don't pay twice, but the growth component is very important for us for the cash recovery when we are going forward. Sami Sarkamies: Okay. And then my final question is on Hohde acquisition. Are you expecting to see any remedies from competition authorities? And what is your thinking on timing for closing when you sort of announced the deal at the year-end? Juuso Pajunen: Yes. So I also iterated that one on the portfolio slide. But basically, first of all, we don't comment the ongoing process from the content perspective. So that one we don't state at here. But on the closing, we have stated that the closing is expected to happen on the second half based on the dialogue so far that we have had with the authorities, we believe that it's rather in Q3 than in Q4. So we have a positive constructive dialogue continuously ongoing. Ville Iho: Yes. And maybe still, even though you said we don't comment the content, I can say that against the assumptions going in with what the process indicates and what is our current view on the sort of deal perimeter and the final package, I would say it's rational. It's rather on slightly more positive than we thought going in. Operator: There are no more questions at this time. So I hand the conference back to the speakers. Kati Kaksone: Thank you. We covered some of the questions from the webcast audience already earlier, but there are a few left. So maybe starting from the cost structure and the adjustment made. What specific actions did we take? And what actions are we still implementing going forward? Ville Iho: So we are -- of course, we are adjusting as agile company should -- for the lower demand and lower volumes, especially in our sort of customer-facing activities in our operations. We have scaled down almost according to the lower volume in our ops in Healthcare Services, where the volumes were down by 11%, we were able to adjust FTEs by 10%. So that's a very, very good and sort of robust achievement by ops team. Then we are -- one needs to note and remember that at the same time, we are also investing. So we are increasing resources in product, customer service, sales, account management-related activities, especially in occupational health care, but also in consumer and insurance-related activities. But all in all, we have been able to adjust nicely. Looking forward, of course, we are -- given the negative cycle, we are using this window as an opportunity also to look at the overhead and look at some structures. We have a separate program related to applying AI in the back-office functions, and that has started. But that's not really now in the scope when we are adjusting for the lower volume. But during next 12 months, you will hear more about this project Nova also. Kati Kaksone: Thanks, Ville. Then let's talk about the outsourcing in the Portfolio Businesses where we have seen the revenue decrease for quite some time. What does the remaining outsourcing portfolio look like? And do we expect further planned reductions beyond '26? Juuso Pajunen: Yes. So basically, if we look at the numbers in '25, the outsourcing delivering revenue of EUR 55 million, give or take. And we have already in our guidance stated that we are expecting roughly EUR 20 million -- we are expecting EUR 20 million reduction in the outsourcing portfolio revenues in '26. And currently, we are very clearly going towards that one. Kati Kaksone: And then beyond '26 is a... Juuso Pajunen: Beyond '26, that remaining -- roughly EUR 30 million portfolio will continue shrinking year-on-year. Kati Kaksone: Yes. Exactly... Ville Iho: And then we are, of course, talking about legacy outsourcing deals, and that's the focus for that sort of sliding curve. We are, of course, interested in partnerships with the health care counties and we are engaging actively. Right now, sort of the sales funnel for larger outsourcing type of -- new type of deals is fairly thin, but sort of engagement is active. And I would say, also according to our sort of data and interviews, some 50% of the counties are interested in increasing their purchases from private sector. But as we have seen, it's very difficult to put a date on when that starts to grow. Kati Kaksone: Yes. And it should be noted that the remaining legacy contracts are on a higher end in the margin as well. So getting healthier from that perspective as well. Then a question on the connected employees in the occupational health. We have seen a decrease for a few quarters for now. Can we just reiterate the reasons behind the decreases? And what are the sort of consequences from? For example, last year, we had some negative media coverage and had that impact... Ville Iho: Yes, it's a very, very good question. It's a combination of a couple of things. When we went into our profitability improvement program in late '23, one of the activities that we were adjusting back then was our very low price level in our main business, occupational health care. So the market was sort of had bypassed us in pricing for quite some time. And hence, the gap was way too large to operate with adequate profitability in this business. We did the increases in 2 steps. And in hindsight, I guess we could have done it a little bit more smoother so that maybe 3 steps would have been the better option. That sort of latter price increase, coupled with the negative media coverage related to billing was a negative trigger point for sort of many companies and additional tendering. Since then, of course, it has been rectified and trust is back. But we saw the damage last year. But as said, the important thing is that after negative development and cycle, now it's bottomed out and forward-looking funnel looks positive. Kati Kaksone: Exactly. Then the last question is related to the cooperation with the insurance companies. We have talked about intensifying our cooperation and sort of next generation of insurance partnerships. And what's the plan there? Ville Iho: First of all, we are doing fine with insurance companies. So actually, looking at the market view, even though the absolute volume in use of insurance coverage for health care spend, all in all, for all of the operators, is negative at the moment. Our market share has been improving. So we are gaining in that market, even though -- even that one is in negative cycle currently. So what we are doing there, of course, we are, in a way, putting ourselves in insurance company shoes and looking at what they are facing, what type of problems they are seeing, how they want our operations to serve the end customer, but also then what type of transparency we want and need to give them related to effectiveness of our care chain and fluency of our care chains and cost level. And we are building that sort of more active engagement all the time and getting positive feedback from that front. So we -- with our capabilities, excellent capabilities, we can be a better partner for insurance companies, guiding and steering the customers and patients to right modality of service, right care chain, measuring the care chain effectiveness, being very precise in billing and also give transparency on that one and also provide more transparency on sort of a full scope of the population on those contracts. So there are many things that we are doing and continue to do to further improve our relationship. Kati Kaksone: Thanks. With that, we don't have any questions left. So any closing words first from you, Juuso and Ville. Juuso Pajunen: No, thank you. We will continue pushing for '26. Ville Iho: Absolutely. It's a tough environment, but of course, we are tougher and now see forward building on a lower base, but with a very, very positive view. Kati Kaksone: Thank you. And on a personal note, this is my last quarter with Terveystalo. It's been a pleasure working with you guys for the last almost 9 years. I have full faith in this company and the team, and I believe that Terveystalo will come through as a winner from this cycle and from this industry transformation. Thanks. Have a great rest of the day and weekend.
Operator: Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Westport's Fourth Quarter 2025 Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. At this time, I would like to turn the conference over to Ms. Ashley Nuell. Ashley Nuell: Thank you. Good morning, everyone. Welcome to Westport Fuel Systems' conference call regarding its fourth quarter and full year 2025 financial and operating results. This call is being held to coincide with the press release containing Westport's financial results that were issued yesterday after market close. On today's call, speaking on behalf of Westport will be Chief Executive Officer and Director, Daniel Sceli; and Chief Financial Officer, Elizabeth Owens. You are reminded that certain statements made on this conference call and our responses to certain questions may constitute forward-looking statements within the meaning of the U.S. and applicable Canadian securities laws, and as such, forward-looking statements are made based on our current expectations and involve certain risks and uncertainties. With that, I'll turn the call over to you, Dan. Daniel Sceli: Thank you, Ashley, and good morning, everyone. I want to begin by addressing recent events, and we appreciate the patience and support of our shareholders as we work through our recent cybersecurity incident. Our priority was to ensure the integrity of our IT systems, business continuity and financial reporting, and we are pleased to confirm that this review has been successfully completed. With this behind us, we're looking forward to executing on our strategy and delivering on the next phase of our business objectives. Turning to our financial results. The past year has been a defining one for Westport, marked by the successful divestiture of our light-duty business, the recent receipt of a $6.5 million payment and further strengthened by Cespira's agreement with a leading OEM to manufacture and deliver HPDI components for a truck trial assessing the future commercialization. These accomplishments, combined with ending the year with over $27 million in cash and very low debt reflect the meaningful progress we have made in sharpening our strategic focus and building a stronger company. The global heavy-duty transportation market is increasingly recognizing natural gas as a practical lower emission solution available today. This is evidenced by Volvo's recent milestone of delivering more than 10,000 natural gas trucks on the road, underscoring the accelerating adoption of Cespira's HPDI fuel system technology and validates the strategic direction we have taken. From a market perspective, the U.K. leads to the adoption of HPDI powered LNG trucks, followed by Germany, Sweden, the Netherlands, Norway and France. Emerging gas markets such as India and Latin America are also gaining momentum with volumes seeing steady growth. When we introduced our proprietary CNG fuel storage and delivery system several months ago, we emphasized its potential to significantly expand our addressable market, particularly in North America. Development has progressed well, and our confidence in the commercial opportunity continues to build. We look forward to showcasing this solution at the upcoming Advanced Clean Transportation Expo, ACT, where we will have the opportunity to show up our technology to industry partners and customers. By integrating advanced high-pressure CNG storage with Cespira's field-proven HPDI fuel system, we match or exceed the performance and efficiency expected from diesel engines with compelling economics in markets where CNG is the natural choice like North America. We believe this innovation meaningfully enables Westport and Cespira to capture new opportunities as we move into field testing. Our GFI brand through our high-pressure controls business has also delivered important operational milestones. The opening of [ our China facility is one ] of the fastest growing hydrogen markets, and in Canada represents a step in localizing manufacturing, reducing costs and improving competitiveness. As the transportation industry continues to balance economic realities with sustainability objectives, we are confident that alternative fuel systems, including Cespira's HPDI technology and our high-pressure components provide real-world solutions that deliver both performance and affordability. With the completion of our strategic transition and only a few milestones remaining, a growing market validation of Cespira's expansion, a path to address the North American market and a clear strategic focus. Westport is excited to drive into this next phase. Now I'll have Elizabeth to run through some financial details and then come back afterwards. Over to you, Elizabeth. Elizabeth Owens: Thank you, Dan. Before I dive into the details, I'll just touch on a few key milestones that has achieved. The first of which is our strong cash position, reflective of the successful divestiture of the Light-Duty segment. As of December 31, 2025, our cash and cash equivalents position increased by $12.4 million to $27.2 million compared to $14.8 million at December 31, 2024. The increase in cash was primarily driven by the sale of our Light-Duty segment, as I mentioned, partially offset by cash used in our operating activities and debt repayments. Exiting 2025 with the proceeds from the disposition of Westport's Light-Duty segment, our long-term debt, including the current portion, reflected a 57% reduction to $2.9 million as at December 31, 2025. This was compared to $6.8 million in the prior year period. Including the long-term debt from discontinued operations, reduction was more than 90%. This improved financial position provides Westport with greater flexibility to concentrate on markets that are best suited to our current strategy. Cespira continues to drive meaningful improvement in our results. In the fourth quarter of 2025, total revenue was $29.3 million, compared to $22.9 million in the same period last year, representing an increase of 28%. This progress is supported by strong market adoption, including Volvo reaching the milestone of more than 10,000 natural gas trucks on the road equipped with Cespira's HPDI fuel systems. We are also encouraged by the continued progress of a second OEM that is currently conducting truck trials. We are excited about the opportunities ahead as we target an improvement in Cespira's capital requirements. Turning to the details of our 2025 results. Westport reported revenue of $23.3 million for the year ended 2025. Compared to $40.7 million in 2024. The 43% decrease in revenue was primarily due to the end of the transitional service agreement for inventory and contract manufacturing between Westport and Cespira. Our adjusted EBITDA for 2025 was negative $17.3 million in as compared to the negative $11.4 million reported for 2024. We reported a net loss from continuing operations in 2025 of $29.6 million compared to a net loss from continuing operations of $31.3 million for the prior year, with the decrease in net loss attributed to lower operating expenditures across R&D and SG&A and a favorable change in foreign exchange rates, partially offset by a full year pickup of Cespira's operating results in 2025 compared to the 7 months in 2024. Looking at our specific business units. High-Pressure Controls revenue for the fourth quarter of 2025, increased 20% to $1.9 million compared with $1.6 million in the prior year quarter and decreased to $8.3 million for the year ended December 31, 2025, from $9.4 million for the prior year. The decrease in year-over-year revenue for the period ending December 31 was primarily driven by the general slowdown in the hydrogen infrastructure development, leading to a slower adoption of automotive and industrial applications powered by hydrogen. In Q3 2025, we kicked off the move of our manufacturing capacity from Italy to our new facilities in Canada and China, which required shutting down our operations. In late Q4 2025, we resumed selling products to our customers to meet the backlog demand from the aforementioned shutdown. Gross profit for the year ended December 31, 2025, decreased by $1.3 million to $0.9 million or 11% of revenue, compared to $2.2 million or 23% of revenue for the prior year. Moving on to Cespira. Total revenue generated in Q4 2024 -- or 2025 was $29.3 million compared to $22.9 million in the same period last year, an increase of 28%. Cespira product revenue of $23.4 million increased 30% compared to Q4 2024, driven by higher volumes. Gross profit was negative $1.1 million for Q4 2025 compared to $0.5 million in Q4 2024, and with a negative variance, driven primarily by an obsolete inventory provision of $1.7 million and a recognized loss on one of our contracts valued at $2.8 million. As I previously mentioned, we had a cash and cash equivalents balance of $27.2 million as at December 31, 2025. Net cash used in operating activities from continuing operations was $14.2 million for the year ended December 31, 2025, compared to $5.8 million in the prior year, an increase of $8.4 million. The decrease in net cash provided by investing activities was mainly driven by $21.7 million in capital contributions to Cespira. And purchases of property, plant and equipment of $2.7 million, partially offset by proceeds from the sale of the Light-Duty segment. As noted, we also strengthened our balance sheet with total outstanding debt of $2.9 million, down from $6.8 million while reducing the complexity of our corporate structure in 2025. Our business is focused on the right markets for us, and we are continually looking at ways to streamline our operations. With that, I'll pass it back to you, Dan. Daniel Sceli: Thank you, Elizabeth. As we look to 2026, we see a transportation market increasingly grounded in economic reality. Operators are seeking solutions that deliver measurable emission reductions without sacrificing durability or operating economics. Natural gas is playing a larger role in that equation, not as a transitional concept, but is a fuel that can compete on performance and cost today. The HPDI platform delivered through Cespira is centric to that opportunity. By pairing compression ignition performance with the advantages of natural gas, including the potential to incorporate hydrogen blends over time, we are providing OEMs and fleets with a pathway that aligns emission reductions with commercial expectations. As I mentioned earlier, Volvo's milestone of more than 10,000 natural gas trucks on the road in over 30 countries, featuring Cespira's HPDI fuel systems, highlights our combined success in helping drive this path of success. We are encouraged by the progress of a second OEM conducting a full truck trial throughout 2026, which we further believe validates additional commercial potential. 2026 will be a pivotal year as we advance demonstrations and fleet trials. Present this exciting new platform at the ACT conference this spring and follow with targeted show-and-tell sessions with Canadian fleets through the spring and summer. Together, these initiatives position us to build momentum across our portfolio and translate technology progress into tangible commercial interest. I can appreciate the investment community's interest in our 2026 outlook. We are focused on delivering disciplined execution, continued advancement of OEM programs and converting technical validation into new commercial opportunities. In our High-Pressure Control segment, we're optimistic that volumes can increase as customers facilities ramp up production, while we actively pursue cost reduction opportunities in China through greater total sourcing and supply chain optimization. With a focused organization and technologies aligned with market demand, we believe 2026 represents an important step forward and we intend to deliver. Thank you. Operator: [Operator Instructions] Our first question or comment comes from the line of Amit Dayal from H.C. Wainwright. Amit Dayal: So Dan, just on the margin side of things, it looks like inventory issues and relocation issues were sort of pressuring margins in the fourth quarter. Do you think we see some bounce back in 1Q and the rest of 2026 on the margin side? Daniel Sceli: Yes, for sure. I think this transition, I'll start with the High-Pressure Controls transition from Italy to Canada and China, launching the two new production facilities, moving the equipment over, managing the inventory transfer starting up, getting the plant certified, which is quite an extensive process, that put a lot of pressure on margins, and we do expect margins to improve. And volumes as well. We're already seeing some pickup in volumes as we move through the year. Amit Dayal: Understood. For the High-Pressure Control segment, can you talk a little bit about sort of how maybe the China market or the Indian market, et cetera, the international opportunities you highlighted could start ramping for you? Like what should we expect in terms of like go-to-market sort of strategy in these geographies? Daniel Sceli: Sure. So I'll start with China. I think everybody knows that China is the fastest-growing hydrogen market. The government goals that they set out are driving volume increases. We're in a bit of a lull right now where volumes globally have slowed down on hydrogen, but we expect them to begin to pick up again at some point here in China. Having our plant there allowed us to compete locally. It allowed us to have local costs, source local suppliers. It's -- for us, it's the right strategy to compete in China for the Chinese market. shipping from Italy or from Canada just didn't make sense. The comment on India. India is really a huge opportunity for Cespira in the long-haul trucking market. India has now put in a multistate highway system. They're investing in clean fuel stations. And we see that a number of trucking OEMs look at India as a beachhead for growth, and that market is going to pick up, we believe, pretty significantly. Amit Dayal: Understood. Just last one for me. Any opportunities or possibilities in the power gen or backup power space for you guys? Daniel Sceli: Well, interesting you asked. So we've been looking into power gen. We currently supply into power gen today. We have a customer that used to be Kohler, Rehlko, that we supply out of our High-Pressure Controls business. we see that opportunity growing with the investments going into Power Gen across North America and, of course, globally, we think that there's an opportunity to build out that business. And are expected to grow there. Operator: Next question comment comes from the line of Rob Brown from Lake Street Capital Markets. Robert Brown: First question is on the OEM trial at Cespira, the second OEM. I know you can't give a lot of detail, but I think you said this year is sort of when the trial is happening. What's sort of the decision point on that? Is it sort of work this year and then just make decisions and then start potentially ramping into a production model or just sort of the outlines of the process would be helpful. Daniel Sceli: Sure. Sure. I mean, I wish I could say who it was, but in this commercial truck world, they're very, very careful about their commercial information. But the trial is ongoing right now, right? There's trucks on the road running there's discussions about expanding it, but we believe decisions will be made in the second half of the year at some point. We don't know the exact timing. It depends when they get the miles on the trucks but our expectation is that in the second half of the year, we're going to start getting feedback. And of course, if it all goes well, we're hoping this is going to lead to a commercial launch. Robert Brown: Okay. Got it. And then back to the High-Pressure Control business run rate. to get a sense of what's the sort of revenue run rate now that you've gotten the production transition? Is it sort of growing off the Q4 run rate? Or is it I guess how much of the Q4 run rate was depressed from that, I guess, just a sense of the run rate in that business. Daniel Sceli: Sure. The Q4 run rate was depressed. Number one, the market has slowed down somewhat. But also with shutting down the equipment in Italy, moving it all to the two new plants. Obviously, we weren't producing for some time while that transition happened. But yes, we do see that market starting to grow we see volumes increasing over what we expected for 2026 already. So it's on a good path, and we believe that the I think specifically the Chinese market is the one that will take off first as the Chinese government puts those goals in place for hydrogen transition in both automotive and in the industrial markets. Operator: [Operator Instructions] Our next question or comment comes from the line of Mr. Eric Stine from Craig-Hallum Capital Group. Eric Stine: Dan, you touched on HPDI in India and in your prepared remarks, Latin America and some other markets. But in terms of in North America, I mean, I know that's a very high priority. You did mention some trials that you are planning or that the joint venture is planning. In Canada. Could you maybe go into that a little bit? Anything you can share? And should we assume then that Canada is kind of the initial spot in North America that you would target? Daniel Sceli: I think if [Audio Gap] for CNG is a Westport product, not a Cespira product. Obviously, Cespira has the on-engine HPDI technology that will be part of the solution. But the -- in the back of cab, High-Pressure storage, smart storage system is a Westport product. We have already got the first truck, Volvo got us a truck, and we've already put the back of cab system on it. It's been running miles developing data. And the reason that is that we're not having to redevelop any of these systems. It's a matter of putting these systems together. And so it's not a huge development project. It's more of a market development that's required. The truck, as I said, is on the road, the truck will be on its way shortly to Las Vegas for the ACT show. I hope you're going to be there, Eric, and see it. We have a booth right next to Volvo there. And as you know, this CNG storage system is primarily focused on the North American market. We will be doing the initial trials in Canada. And -- but we will, at some point, here, be moving to the U.S. for trials as well. Eric Stine: Got it. Okay. I misunderstood that. So then I guess the follow-up then would be just about bringing HPDI, the joint venture, since you just talked about back of cab, but HPDI to North America. And I would assume that, that would be Volvo, right? Daniel Sceli: Well, as a starting point, for sure, but this whole CNG, I mean, HPDI is growing fast globally. The difference is that all the growth of 10,000 trucks are on LNG because that's how those countries receive their natural gas. Natural gas in North America is primarily delivered through compressed, right? It's a CNG market. So what our on-engine system really doesn't care whether it's compressed or liquid, the system adapts to that. the storage system is the big difference going from a liquid storage to a compressed storage. And that's what we're bringing. And the first truck on the road is a Volvo truck. It's their new truck, and we're very excited to have it showing up at ACT. And this is pretty exciting for us. We're finally getting to execute on this strategy. And any growth we have on this back-of-cab system obviously pulls through HPDI for Cespira. Eric Stine: Yes. No, absolutely. Okay. And just housekeeping for my last question or questions. Just I might have missed it, but did you quantify or estimate what you think the move did in terms of limiting Q4 for the High-Pressure segment? Daniel Sceli: Oh, sure. I mean we -- I think we lost probably a couple of months of production. And we had built up some inventory. But when you lose a couple of months production, you got to play catch up. And that coincides with a bit of the market pause that had happened. But we've launched both plants, both plants are up and running and shipping products. So we've gotten through that transition hump through the launch hump, and we're pretty excited about where that's going to go. We have the control in our hands. All right. Thanks, Eric. Well, that's all the questions we have for today. I want to thank you for your time, everyone, and have a great, wonderful weekend. Operator: Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day. Speakers, stand by.
Operator: Thank you for standing by and welcome to Comfort Systems USA's First Quarter 2026 Earnings Conference Call. [Operator Instructions] I would now like to hand the call over to Julie Shaeff, Chief Accounting Officer. Please go ahead. Julie Shaeff: Thanks, Latif. Good morning. Welcome to Comfort Systems USA's First Quarter 2026 Earnings Call. Our comments today as well as our press releases contain forward-looking statements within the meaning of the applicable securities laws and regulations. What we will say today is based upon the current plans and expectations of Comfort Systems USA. Those plans and expectations include risks and uncertainties that might cause actual future activities and results of our operations to be materially different from those in our comments. You can read a detailed listing and commentary concerning our specific risk factors in our most recent Form 10-K and Form 10-Q as well as in our press release covering these earnings. A slide presentation is provided as a companion to our remarks and is posted on the Investor Relations section of the company's website found at comfortsystemsusa.com. Joining me on the call today are Brian Lane, Chief Executive Officer; Trent McKenna, President and Chief Operating Officer; and Bill George, Chief Financial Officer. Brian will open our remarks. Brian Lane: All right. Thanks, Julie. Good morning and thank you for joining our call today. We had a fantastic quarter and a strong start to 2026, driven by continued outstanding performance by our field teams. Our same-store revenue grew by 51% and quarterly gross margins hit a new all-time high. We earned $10.51 per share this quarter, more than double our strong first quarter in 2025. We also ended the quarter with record backlog of $12.5 billion, reflecting persistent demand, including strong demand from our tech customers. And we entered the second quarter of 2026 with total backlog that is $5 billion higher than it was 1 year ago. We also announced another increase to our quarterly dividend to $0.80 by adding $0.10 per share and we remain committed to consistently rewarding our shareholders while maintaining a strong balance sheet. Trent will discuss our business and outlook in a few minutes. But first, I will turn the call over to Bill to review our financial performance. Bill? William George: Thanks, Brian. So yes, we had a really great start to 2026. Our first quarter revenue was $2.9 billion, an increase of 56% compared to last year. Same-store revenue increased by 51% or $943 million. Revenue increased in both segments with an increase of 88% in our Electrical segment, while our Mechanical segment revenue increased by 47%. Both segments also continue to benefit from strong demand in the technology sector, although we will face higher comparables in the second half of 2026, we believe same-store revenue for the full year 2026 is likely to be higher than 2025 revenue by percentage growth in the mid- to high 20% range. Gross profit was $754 million for the first quarter of 2026, which is $351 million higher compared to a year ago. Our gross profit percentage grew to 26.3% this quarter compared to 22.0% for the first quarter of 2025. Gross profit in the quarter benefited from $43 million in favorable developments on late-stage projects, including change orders, especially in our Mechanical segment. Quarterly gross profit percentage in our Mechanical segment improved to 26.9% this year compared to 21.7% last year. Margins also moved up by almost 2 full percentage points in our Electrical segment to 24.9% as compared to 23% in the first quarter of 2025. We currently expect that gross profit margins will continue in the strong ranges that we have averaged over the past several quarters. SG&A expense for the quarter was $269 million compared to $195 million in the same quarter of 2025 as we grew people and rewarded our busy teams in markets across the nation. With the large jump in revenue, SG&A as a percentage of revenue was 9.4% this quarter compared to 10.6% in the prior year. Our operating income increased by 132% from $209 million in the first quarter of 2025 to $486 million for the first quarter of 2026. With improved gross profit margins and SG&A leverage, our operating income percentage increased sharply from 11.4% to 17.0%. Our quarter-to-date effective tax rate was 23.2% compared to 18.6% in 2025. Our prior year effective tax rate was lower due to interest we received on a prior year tax refund. We expect our full year effective tax rate to be around 23%. After considering all these factors, net income for the first quarter of 2026 was $370 million or $10.51 per share and that compares to net income for the first quarter of 2025 of $169 million or $4.75 per share. EBITDA increased by 116% to $524 million this quarter from $243 million in the first quarter of 2025. And our trailing 12-month EBITDA at the end of March 2026 is $1.74 billion. Our free cash flow was a positive $242 million in the first quarter. Capital expenditures were $147 million in the quarter compared to $22 million in 2025. CapEx was 5.1% of revenue compared to 1.2% in 2025. Expenditures included a large modular assembly building purchase in Texas and other investments in our modular capabilities. We plan similar capital investment for the remainder of the year and we estimate full year CapEx will be in the range of 5% of revenue. We're also happy to note that during March, we entered into a definitive agreement, subject mainly to regulatory approval to acquire another highly skilled electrical contractor. The transaction is expected to close in early May and we expect our new partner to initially contribute annualized revenues of roughly $250 million with EBITDA margins in the 8% to 10% range. And that's what I've got. Trent? Trent McKenna: Thanks, Bill. Brian has asked me to comment on our business operations and provide an assessment of our outlook. Backlog at the end of the first quarter was a record $12.5 billion, a same-store sequential increase of just over $500 million and a remarkable same-store year-over-year increase of $5.3 billion. First quarter bookings were especially strong in the technology sector. Our companies are collaborating more than ever to deliver superior mechanical and electrical solutions for our customers. Our revenue mix continues to be led by the industrial sector with that sector accounting for 75% of our volume in the quarter. Advanced technology dominated by data center work increased to 56% of our revenue and advanced technology remains the largest driver of pipeline and backlog. Institutional markets, including education, health care and government are also solid, comprising 17% of our revenue. The commercial sector now accounts for about 8% of revenue with most of our commercial sector revenue flowing through our service activities. Construction accounted for 90% of our revenue with projects for new buildings representing 75% and existing building construction 15%. Modular revenue was 17% of total revenue in the quarter. We are on track to have 4 million square feet of modular capacity by the end of 2026 and we are actively evaluating additional capacity investments. We include modular in new building construction and in our Mechanical segment. Service revenue was up 8% this year but with faster growth in construction, service is now 10% of total revenue. Service profitability was strong this quarter and service continues to be a growing and reliable source of profit and cash flow. Before we turn the call over for questions, I want to join Brian and Bill and the team here in Houston in thanking our over 23,000 employees for their hard work and dedication. Comfort Systems USA's success is a direct result of the people that serve our customers every single day. We're now going to turn this call back to Latif for questions. Thank you. Operator: [Operator Instructions] Our first question comes from the line of Adam Thalhimer of Thompson, Davis. Adam Thalhimer: Bill, the CapEx forecast for the rest of the year, can you give a little more color on what that is? And is that more geared towards projects you've already booked? Or are you getting ready to handle future orders? William George: So just as it's been for the last really couple of years, the answer to that question is, all of the above. So we did buy our biggest building ever in Houston in the first quarter. Once you buy them, you then have to spend tens of millions of dollars putting cranes and robots and various turn tables and paint booths and stuff like that into the building. One of the reasons we're buying these buildings now is because we've become a lot more automated and we put so much money into the building that it doesn't make sense to make those big investments into a building you don't own. We are looking at other building investments later in the year. We are -- this building was part of getting to the 4 million square feet. But of course, we definitely have the demand from our existing largest customers and from new customers that we're doing trial -- large -- very large trial orders with -- adds additional capacity if we become comfortable with that later in the year. Adam Thalhimer: Okay. And then the other one for me, Geographically, I'm curious where you are seeing more of the data center demand these days and how that matches up with your capabilities? William George: Well, I would say, by far, in a way, the biggest epicenter of demand is Texas, right? And it's really, really strong. But we're seeing data center -- I don't know that there is a strongest place. I mean there's certainly the Mid-Atlantic, Carolinas and Virginia continue to have a ton of activity. And then you've got stuff in places like Mississippi and I don't know, up in the Upper West, there's stuff going in. So I just kind of -- it's kind of amazing just the sheer sort of span of it. Brian Lane: And Adam, we can handle the geographies because we have a significant traveling workforce. So where they want to build them, we pretty much can accommodate them. Operator: Our next [Audio Gap] comes [Audio Gap] William Blair. Samuel Kusswurm: This is Sam Kusswurm, on for Tim. I want to dig a bit more into your new guidance here. Mid- to high 20% organic growth for the year would obviously be a great result. It does imply though a fair amount of growth moderation through the year. And I understand the comps get a bit harder here but you had great momentum in the first quarter and your backlog growth continues to outpace revenue growth. I guess given this, I think it would be helpful for us to understand a bit more how you came to the mid- to high 20% organic growth rate for the year here. William George: So at Comfort, the way that we come up with this is very organic. We get projections from our field and we know what our work that's committed is. We -- obviously, if we give guidance, it's at levels that we feel have very good reasons to believe are extremely achievable. Having said that, I'm not sure I agree with you that to get to something like the high 20s or something, you still got to be above 20% on average for the next 3 quarters. And I know you acknowledge this but we had some really big revenue quarter -- revenue quarters in the third and fourth quarter. And then the last thing I'll say is, revenue is never our goal. Our goal is profit. And so we just want to make sure that we take the amount of work we can do, that we get paid fairly for the unbelievable productive capacity that we have and the risk that we take is also well compensated. Samuel Kusswurm: Yes. That makes sense. That's helpful. Maybe another one on the data center topic here. But several states have begun talking about data center bans or even limiting access to power. I guess I'm wondering, for the regions you're more exposed to on the data center side, are there any pieces of legislation or proposals that you're actively tracking or closely following that could put some of your projects or backlog at risk? Trent McKenna: At this point, no. There's no states where we're involved that have proposals out that we've been tracking as they just don't impact our geography. And then the other thing I'd add to that is, any time a large project that has a big footprint is getting put into some sort of community or state and there's a lot of build occurring, there's always been pushback on these things historically. So this is something that we've been able to work around for years. It's not, I don't think, a high level of concern. Additionally, we have a very good nexus of work in the states that are not currently in any sort of discussions. In fact, they're encouraging the build-out in the states that we are primarily focused on right now with where our geographies are. So in the long term, something we'll continue to keep an eye on but it's not a pressing concern in the current environment. Brian Lane: And as we sit here today, the demand, the data centers still exceeds the supply. Operator: Our next question comes from the line of Sangita Jain of KeyBanc Capital Markets. Sangita Jain: Can I ask one on the electrical acquisition that you just mentioned, maybe the geography of that acquisition, the core end markets it participates in or any other information that you can help us with? William George: So this is a company that is right in our sweet spot. It's the kind of company that is incredibly strong in its market. Its market is in the West. I can't get too specific because, obviously, until we announce it, you don't need to know about it before the people there know about it. But it's in a core market that we love where we already have a mechanical. It's going to be a great acquisition. I hope that helps a little. Sangita Jain: Got it. And appreciate you giving us more details on how you came up with the guidance for this year. So as you are planning for your guidance for the remainder of the year, can you talk about where you found the biggest pinch points for growth? Is it labor? Is it procuring the equipment that you need or maybe something else? Any color would be helpful. William George: I mean it's always and forever for us, it's labor. That may change someday. But as of today, we have unbelievable workforce but they can only do so much work. And they basically tell us they take the work that they can confidently deliver for their customers. If you look at our same-store growth, it's unbelievable what these -- our workforces are accomplishing. -- the additional work they're able to take. Our headcount, if you look at the headcount in the first quarter of 2025, it's 3,000 or 4,000 people higher in the first quarter of 2026, depending whether you include or don't include sort of travelers and temporary workers that aren't always W-2 employees. That's a very, very big source of that increase. In addition, our materials and equipment as a percentage of our revenue is up by a couple of hundred basis points and that drives -- a lot of that increase in headcount last year happened from the first to the second quarter. So a lot of the, sort of the 23,000-plus level that were -- we were much closer to our current level of employment by the end of the second quarter last year than we were -- we had a great spring hiring season last year. So we're just comfortable mid- to high 20s. Obviously, if you average that, it's well above 20% on average a quarter for the next 3 quarters. In the real world, what will happen, we never know but we feel like we should give you guidance based on what we see and we're confident in. Operator: Our next question comes from the line of Josh Chan of UBS. Joshua Chan: Congrats on a really good quarter. I guess I was wondering if you can talk about the project pipeline. So basically, the future projects that could enter the backlog in the future. I guess I'm asking this because book-to-bill this quarter was like 1.2, which is pretty normal for Q1. But for the last 4 quarters, you have been running massively strong book-to-bill. So I was just wondering if there's cadence change or how you're thinking about the market? Brian Lane: Yes. So Josh, we -- the high-level answer is the pipelines are still very full, very strong, coast to coast. So there's no issue with the pipelines and availability of work. What I am -- what I -- and we're really happy to see is, we're maintaining our discipline in the selection of work we're taking. There is no sense overcommitting ourselves on work that we can't do properly. So I think the way we're approaching this is the way we've always approached it, is just to make sure we can deliver a good product and service to our customers. And that means staying within our lanes, the work we're taking is in our wheelhouse and it's evidenced in the margins we're delivering. So pipelines are good and we're really comfortable with the backlog we have. William George: In the 30 years I've been watching this industry, almost the whole time, whenever you saw deceleration or whenever you saw limitations until the last couple of years in sort of the ability to convert revenue or book work, it was a demand issue. Today, I think it's really important for people to understand that it's a supply issue. We -- there is plenty more work we could take if we could possibly do it. And so it's very, very hard to really internalize that paradigm after it never having been true in living memory. But today, when you see somebody like a prognosticator like McGraw-Hill or FMI revise downward their number for next year, especially if it's anything remotely close to the super cycle and in the kind of markets we're in, in the Mid-Atlantic and the Southeast and Texas and the really, really hot Rocky Mountain states, it is not that suddenly people don't want to build buildings. It's that only a certain amount of buildings can be built and that's what's going on. Joshua Chan: Yes. Great color. And then maybe my second question on CapEx. So I know that for the modular capacity, you've historically leased your buildings and you mentioned why you're purchasing them now. I guess like what does that mean in terms of what you think about the durability of the cycle now that you're willing to kind of actually put your own money into the buildings? And does that suggest you have much more confidence in the outlook? William George: Well, so for one thing, you know us well enough to know that we don't go invest in buildings without being very, very confident that we have customers for those buildings. And for many of these buildings, we are insisting as a condition of us committing our capacity that customers make multiyear commitments at volume levels. And that allows us to give them better pricing, right? We would have to demand higher pricing if we were certain that the capacity we were building wouldn't have a longer period to pay off. And it also tightens our relationship with these customers, right? We try to find out what they need and we try to help them every way we can to get what they need. Operator: Our next question comes from the line of Brian Brophy of Stifel. Brian Brophy: Congrats on another nice quarter here. I wanted to ask about the $43 million change order closeout benefit you mentioned in your opening comments. Just any more color on what drove that benefit this quarter? And I guess to the extent, was this more of kind of a onetime benefit from your perspective? Or is this more of a reflection of the environment we're in, the favorable T&Cs? And is there an opportunity to continue to get these kind of benefits more consistently moving forward? William George: So I'll talk about it numerically. And then if Trent wants to, he can talk -- he's the one who would be able to talk about sort of what's happening in the jobs. But essentially, the reason we called this out, put it in the MD&A, quantified it, is because there really were a few unique things that we don't believe are just business as usual. We had late-stage jobs where we received change orders. You may recall we had something like this 2 or 3 quarters ago where we collected some money on a job based on a negotiation that we didn't expect. Where we see something that -- like we get the question from shareholders like you, was there anything special in the quarter? We like to be able to answer that truthfully. So to answer it truthfully, we have to disclose it in this forum. And those really are not repeatable things. Things like that. Things like that can happen in the future. They have happened in the past but they don't happen every quarter. If you take that $43 million and you back it out, it's almost $1 a share and it takes our gross margin and it puts it sort of at something like 25.2%, which sequentially is much, much closer. It's still very high but it's much closer to what you would expect in the first quarter. And so we just felt like the disclosure would be -- we don't like to give information but we do, do that when we feel like we owe it to you guys. So that's -- hopefully, that helps. Trent McKenna: It was just a mixture of change orders from a descope and then also additionally some really favorable closeouts on some work that was new to the operating companies that were performing it. And they just recognized disproportionate gains at the end of the job because of their ability to deliver. It's really just a -- it's really a credit to the teams that were working so hard to make sure that they deliver for their customers. So that's what it boils down to. Brian Brophy: Yes. That's helpful. And then I guess just looking at electrical growth, it was about 80% organic this quarter. It's been around that range for a few quarters now. I realize some of that is price and productivity but obviously, headcount is a big part of that as well. I guess maybe just touch on where are you finding all these electricians? And just how sustainable do you think your ability to grow headcount at this pace is? Brian Lane: Well, I think we're finding them everywhere. But as we've said, there is some -- we're a really good place to work. We pay people well. We do a lot of training. We have a lot of work that attracts people. So the type of work we're getting is attracting a lot of electricians throughout the country. Can we keep the pace? We're going to try to. We're full-court press on recruiting and hiring. And so far, we've had good luck doing it. But we'll continue swinging away at it, Brian. Operator: Our next question comes from the line of Julio Romero of Sidoti & Company. Julio Romero: Bill, you mentioned earlier that Comfort's goal and focus is on the gross profit dollars and still the 26.3% gross margin percentage you put up this quarter, eye-popping, even backing out the $43 million change order, as you said, 25.2% is still very strong. Just asking about the sustainability of those gross margins on a core basis going forward. And then kind of related to that, as you take on these additional larger projects, are we seeing any change in the mix of activity versus cost pass-throughs that flow through the revenue line that might cause gyrations in the gross margin line on a percentage basis? William George: So the answer to the second one is no. Actually, we're seeing, if anything, more uniformity in the work that we're taking and more repeatability, which is one of the reasons that we're doing so well. We're able now to sort of -- we have a much stronger ability to pick our counterparties to make sure that we do work with people we've done similar work with, people who have proven that they're constructive when issues come up. And so I would say, if anything, we probably feel more comfortable than ever with that sort of structural internal cadence. As far as the ability to maintain the margins, we said we expect to stay at the high margins that we've averaged over the last several quarters -- for the next several quarters. Everything else we said on this call is super supportive of our ability to extract high margins and to get rewarded for the work we do. And I -- as much as Brian Lane likes to complain and cry, we're in a pretty good market and we got the best teams in the world. And so at some point, we just have to take the win. Brian Lane: I want to keep crying, Bill, on that. Trent McKenna: And Julio, only one thing I'd like to tack on to that is just we wouldn't be achieving these types of results if it wasn't for the teams in the field and their commitment to constant improvement. It's really our companies, especially our company's field leadership that foster a culture of continuous improvement and that is -- it shows in these results, right? It's just hats off to the teams out there that are making this happen. Julio Romero: Really helpful and insightful. And then secondly, related to kind of your point earlier, Bill, about partnering with repeat customers and choosing your customers and repeat end-use customers. Kind of a broader question about the longer-term revenue opportunity on these technology construction projects. Is there an opportunity or have you thought about an opportunity to expand wallet share with the owner-operator of the data center beyond the initial construction scope by cross-selling any adjacent solutions related to monitoring sensors or just overall optimization of the data center? William George: I think there's a wonderful maintenance and service opportunity that -- think about the installed base that's being created and then sort of think about the companies that are doing it, the advantage we have in understanding it. And even if you take our modular stuff, the modular units that we build are built to be maintained. They're built to have great accessibility to the parts and pieces that we'll need in the future. There are also -- there's a lot of consideration that's going into the work we do today about what -- in what ways things might need to be retrofitted in the future. For example, if they were to achieve chips that do not need to be cooled as much, then at some point, you would -- you could keep high levels of cooling but you would still have to add electrical capacity in order to add additional servers. And I know for a fact that in some cases, consideration is being given much more than it has in the past about the ways that the technology might change in the future and making sure that you can't exactly future-proof stuff but you can give yourself options and a lot of that's happening. It's really -- what's one of the great advantages of doing something on this scale, you -- and for us, right, doing it in so many states with so many great companies that talk to each other, we can bring something to our customers that is pretty close to unique. Operator: I would now like to turn the conference back to Brian Lane for closing remarks. Sir? Brian Lane: Thank you. In closing, I really want to thank our amazing employees again. We are truly fortunate to have the people that work at all levels of this organization. It's a real privilege to be here. We appreciate all your interest in Comfort Systems and then we look forward to having a really strong 2026. Thanks again and I hope you all have a great weekend. Thank you. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Greetings, ladies and gentlemen, and welcome to the Vesta First Quarter 2026 Earnings Conference Call. [Operator Instructions] And as a reminder, this call is being recorded. It is now my pleasure to introduce your host, Fernanda Bettinger, Vesta's Investor Relations Officer. Please go ahead. Fernanda Bettinger: Good morning, everyone, and welcome to our review of the first quarter 2026 earnings results. Presenting today with me is Lorenzo Dominique Berho, Chief Executive Officer; and Juan Sottil, our Chief Financial Officer. The earnings release detailing our first quarter 2026 results was released yesterday after market close and is available on the IR website, along with our supplemental package. It's important to note that on today's call, management remarks and answers to your questions may contain forward-looking statements. Forward-looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ. For more information on these risk factors, please review our public filings. Vesta assumes no obligation to update any forward-looking statements in the future. Additionally, note that all figures were prepared in accordance with IFRS, which differ in certain significant respect from U.S. GAAP. All information should be read in conjunction with and its qualifying in its entirety by reference to our financial statements, including the notes thereto and are stated in U.S. dollars unless otherwise noted. I'll now turn the call over to Lorenzo Berho. Lorenzo Dominique Berho Carranza: Thank you for joining us today. and for your continued interest in Vesta. The first quarter marked a strong start to the year with solid leasing momentum and stable portfolio performance despite ongoing global tensions. Importantly, as our results demonstrate, we're seeing not only continued activity, but growing conviction from our tenants. This was reflected in new leasing and expansions with existing clients as well as with exciting new clients during the quarter. Our performance reinforces the strength of Vesta's platform and reaffirms our approach for 2026. And of our Route 2030 strategy, which is centered on expanding a well-curated high-quality portfolio for disciplined development, leveraging our privileged land bank to capture demand. We believe value creation in our space is driven more by quality than size. While we are seeing increased competition for stabilized assets, Vesta differentiation lies in our ability to develop and operate a selective portfolio aligned with global best practices and the evolving needs of our clients. Let me briefly highlight the key drivers of Vesta's results. As I noted, leasing activity remains strong with total first quarter leasing reaching approximately 1.6 million square feet, including 1 million square feet in new leases with best-in-class companies. Total portfolio occupancy reached 89.7% by $0.05, while stabilized and same-store occupancy reached 93.4% and 95%, respectively. Reflecting the strength and stability of our tenant relationships. During the quarter, we saw strength in the electronics and aerospace sectors and also in AI-related data center infrastructure which is becoming an increasingly relevant demand driver that will benefit from long-term structural tailwinds. On the development side, our pipeline continues to convert into active construction with Vesta projects breaking ground across key markets. This is further evidence of both improving demand visibility and the strength of our land bank which is expected to support the stabilization and gradual recovery of occupancy. Along these lines, as leasing activity continues to gain momentum, we have selectively resumed development. We launched 2 new projects in Mexico City and 1 in Tijuana during the first quarter, which brings our total development pipeline to approximately 1.6 million square feet. Importantly, our approach remains disciplined and demand-driven, prioritizing tenant back projects in high conviction markets. From a financial perspective, results remain solid. Total rental income increased to $76.7 million, while rental revenues reached $74 million, a 14.1% sequential increase. Also with sustained strength across our key profitability metrics, including NOI and EBITDA. Let me now turn to the broader market environment and how we are seeing it reflected across our portfolio. Recent data has focused on rising vacancy in certain regions, particularly in the North. However, what we are seeing is better characterized as a correction, not a structural slowdown or a decline in underlying demand. Markets such as Tijuana, reflect more uneven dynamics but it's important to note that this is largely due to supply from less experienced developers. Vesta's high-quality infrastructure-ready buildings continue to outperform, reinforcing our focus on portfolio quality. We're leveraging our strength in this market and launched a new project in Tijuana during the first quarter. New construction starts in key markets such as Monterrey have declined significantly year-over-year, reflecting a market that is adjusting quickly. In Mexico City, fundamentals remain strong. According to CBRE, Mexico City gross absorption reached approximately 6.7 million square feet during the quarter with pre-leasing accounting for most of the activity and more than half of new supply delivered already preleased. This dynamic reinforces both demand debt and forward visibility across this market. It has also led us to launch the 2 new projects in Mexico City, which I have described. In Guadalajara, we are seeing healthy demand, particularly from electronics and technology-related tenants, a key driver of activity in the market. During the quarter, we successfully pre-leased the 2 Vesta buildings under construction, underscoring the strength of underlying fundamentals and the sustained momentum we are seeing in the region. Let me now turn to how we are executing against this environment. Our strategy remains consistent. Vesta will grow through a high-quality well-graded portfolio developed with discipline and aligned with the long-term demand. As I have commented, our focus is on portfolio quality, not scale, ensuring that each asset meets the highest standards of infrastructure, energy and operational performance. This is particularly relevant in the current environment. Despite the competition for stabilized assets we are seeing, we believe there is greater opportunity in selective development where we can create value and differentiate through product quality and tenant alignment. Before I conclude, let me briefly touch on our capital position and outlook. As Juan will discuss, we continue to operate with a strong and flexible balance sheet, maintaining a disciplined approach to leverage and liquidity, which enables us to execute our strategy while navigating uncertainty. Capital allocation remains selective with a focus on high-quality projects supporting efficient growth. In closing, we are highly confident in our outlook. While near-term uncertainty persists, the underlying structural drivers underpinning our business are stronger than ever. Tenant activity continues to be robust. Foreign direct investment is maintaining strong momentum and manufacturing experts at record levels. At the same time, higher-value industries such as electronics, aerospace, semiconductors and data infrastructure are accelerating demand for Vesta's premium properties. We also expect a more favorable interest rate environment together with greater clarity around USMCA to support activity in the quarters ahead. Let me now turn the call over to Juan to review our financial results in more detail. Juan Felipe Sottil Achuttegui: Thank you, Lorenzo. Good day, everyone. Let me start with a brief overview of our first quarter results. On the top line, we delivered a solid start of the year, with total revenues increasing 14.4% to $76.7 million, primarily driven by rental income from new leases and inflationary adjustments across our portfolios. In terms of currency mix, 88.9% of first quarter 2026 rental revenues were U.S. dollar denominated compared to 89.7% in the same period last year. Turning to profitability. Adjusted net operating income increased 13.4% to $70.47 million. Our adjusted NOI margin decreased 62 basis points year-on-year to 95.1%, reflecting higher operating property costs relative to rental revenues in the quarter. Adjusted EBITDA totaled $62.1 million, up 12.4% year-over-year, while margin contracted by 130 basis points to 83.9% primarily driven by higher operating and administrative expenses during the quarter. Vesta FFO, excluding current tax, was $43.1 million compared to $45.1 million in the first quarter 2025. The decrease was primarily due to higher interest expense in the first quarter of 2026 compared to the same period in 2025. We closed the quarter with pretax income of $97.9 million compared to $28.6 million in 2025. This increase was primarily due to higher gains in the revaluation of investment properties, higher interest income and higher other income. This was partially offset by higher interest expense, reflecting an increase in the debt balance during the period, along with the increased foreign exchange losses and other expenses. Turning to our balance sheet. We ended the quarter with $206 million in cash and cash equivalents and total debt of $1.2 billion. Net-debt to EBITDA stood at 4.1x, and our loan-to-value ratio was 26%, down from the 28.1% at the year's end, reflecting the prepayment of the remaining $118 million MetLife III facilities. As of the end of the first quarter, we have no secured debt with 100% of our debt denominated in U.S. dollars and 87.2% of our interest rate exposure on a fixed rate basis. Finally, consistent with our balanced capital allocation strategy, on April 22, 2026, Vesta's shareholders approved a $74.8 million dividend for 2026 representing a 7.5% increase year-over-year. On May 6, we will pay a first quarter cash dividend. This concludes our first quarter 2026 review. Operator, could you please open the floor for questions. Operator: [Operator Instructions] Our first question will come from the line of Piero Trotta with Citibank. Piero Trotta: I have 2 questions. The first one is spec development in Tijuana. So given that the start, could you elaborate to us on the key conditions that supported the decision to move forward with this project in a market where vacancies remain high. More specifically, what metrics or market signals are you monitoring most closely when allocating capital in Tijuana? Just to understand as we see like in the market of Tijuana around 16% vacancy and even in your Vesta's portfolio is around 13%. What are you looking at when you're starting a new project in the region? And the second one is about leasing spreads that remained positive at around 9%. And I would like to understand how should we think about the sustainability of spreads from here as supply-demand dynamics continue to evolve across our markets, just to understand on this one. Lorenzo Dominique Berho Carranza: [Foreign Language] Thank you very much for your question and for being on the call. Well, definitely, this is a good quarter to start the year. And I would like to highlight that, as mentioned before, Vesta will -- with very -- little by little start development in certain markets, certain projects, we did good land acquisitions last year. And that's why we start again with projects in Mexico City as well as Tijuana with the ones that we started before in Guadalajara and Queretaro. So the Tijuana project, it's actually -- it's a continuation of our existing project mega region. We -- as you remember, we did a land acquisition on adjacent land to develop the second phase. We did the land improvements last year and today, we're happy to be able to now start the first building of the second phase. It will take us pretty much the rest of the year to conclude the building to be developed. And the reason of developing it is because we believe we have a good pipeline from either existing clients or potential clients that want to be established in a state-of-the-art industrial park in a good location where you can have good access to labor, good access logistically and very importantly, good access to energy. And that's what we already have in our park in Tijuana. And I understand that there's other vacant spaces in the Tijuana market. However, we know that none of them are so well located as this one and that's a key advantage. There has been some new vacant buildings in other submarkets of Tijuana. In many places, actually that lack energy, they lack logistic accessibility and they also lack labor. That's why they will probably remain for a longer period of time available until they find the right client. There's many, I would say, unexperienced industrial real estate developers. So that's why we feel comfortable with the type of buildings that we develop. And we think that eventually, this will turn into a successful project in a market that we know quite well. Secondly, on your question on spreads. Well, I think that the spreads will continue to be in a 10% to 13% range somehow. This one was -- this quarter was slightly lower just because of the -- maybe the combination of computation of previous quarters. But in the end, I think going forward, and we have stated this before, we think that over time, we will continue to see double-digit growth in terms of spreads. We have had some interesting re-leasing spreads throughout the quarter of projects in the 20% to 50% range, which is quite attractive. And I think that together with some of the new leases that have been signed also in some cases with rent, 30%, 40%, 50%, depending on the market. So this trend will continue. We see very strong rent levels in most of the markets. And in some markets, very strong rent growth still. So we are confident that, that will continue to be the same situation going forward. And we -- that's -- that continues to be a main driver of value for our existing portfolio with our existing clients and tenants. And we think that going forward, we will continue to see this positive trend. Operator: Our next question will come from the line of Gordon Lee with BTG Pactual. Gordon Lee: Just a quick question, it's sort of more a general sector question. But as you mentioned, there is a potential for a pretty significant consolidation in the sector, which obviously that's not something that you look at, your business plan is different. But I was wondering, generally, Lorenzo, how you feel about consolidation in the sector, particularly this type of consolidation, would you generally say that's good for better sort of competitive dynamics for a bit more disciplined on the ground? And specifically, do you think that might have also a positive effect in terms of discipline around development? Lorenzo Dominique Berho Carranza: Thank you, Gordon, for your question. It's quite interesting the market dynamics and what we have been seeing from a capital market perspective. I believe that this is a -- in some ways, this is a broader strategy from some global players that are active in Mexico that actually maybe their strength is on capital markets more than being on the local ground and having access to tenants as well as access to development and higher returns. And that's why I think that's a particular strategy for some of them. I think this is an industry that has -- that is very intense in capital. And I think that looking -- seeing that there's a lot of capital chasing for transaction, chasing portfolios even sometimes regardless of the type of assets they hold because sometimes they don't even match the original consolidator assets. But in the end, I think it's more the appetite of having industrial assets and being larger consolidators. I think that we will continue to see that going forward as long as there's strong capital chasing for attractive assets. I think that will continue to be the case. Also, I think it's relevant to consider that it sets a price -- sets pricing to transactions. So even for some assets that I believe are maybe below the quality of the Vesta standards having those prices, I think it's -- it sends a good signal on the opportunity that we see in our own assets that remember that Vesta, we selectively define which markets we invest on. We're very mindful of the quality of assets we develop. We also strategically define the type of tenants. So over the long term, we think that, that makes our assets be way more valuable and I think that, for that reason, these consolidations create an attractive baseline of reference so that we can have some sort of comparables to our own valuations. Gordon Lee: And do you think -- if I could just have a quick follow-up, do you think it has any implications, positive or negative on competitive dynamics or development discipline for the sector as a whole? Or no, I mean, do you think your day-to-day would be unchanged regardless of what happens? Lorenzo Dominique Berho Carranza: I mean frankly, most of these consolidators do not have development capabilities. So I think it doesn't -- I think it's only worth for certain merchant developers. But in the end, I think that we will continue to have our own discipline in terms of development. I think that maybe -- I think this will keep some of the acquirers more distracted in their own acquisition strategy, and I don't see them very active on the development. Operator: Our next question will come from the line of David Soto with Scotiabank. David Soto Soto: Just a quick one and It is related to the micro grid. It would be great if you could tell us in which regions are you currently developing this kind of facility? And what are the challenges that you are facing to develop this kind of facilities within the -- your industrial part? Lorenzo Dominique Berho Carranza: Do you mind repeating the question, David? Thank you. David Soto Soto: Yes, of course. It's related to your micro grid. It would be great if you could tell us in which regions are you currently developing these kind of facilities and which are the main challenges that you are facing? Lorenzo Dominique Berho Carranza: Thank you for which type of assets you mentioned? David Soto Soto: For the [indiscernible] that you are currently developing. If you are having these kind of development or micro grids development? Lorenzo Dominique Berho Carranza: Okay. So maybe if I understand correctly, the question is on which markets we might be developing well. Currently, we started a few projects in Mexico City, the land acquisition that we did last year. This is in the [ quality plan ] corridor, a very attractive market that has shown growth particularly coming from logistics as well as e-commerce and rental, and we continue to see rental growth. That's why returns are quite attractive. And for that reason, we believe that developing spec in the area is very, very appealing. We started a building in Tijuana. And very soon, we will start also development in Guadalajara, as you could see in our report, we were able to lease the 2 projects that we have under construction and we're happy to continue to see growth and demand coming in the electronics sector, particularly, but also this market has shown also strong dynamics in the logistics and e-commerce sector. So hopefully, soon, we're going to start some spec buildings similar to what we have done in the past in the rest of Park Guadalajara. So we're confident that with the land acquisitions we did last year, we're going to have a -- we're going to repeat the success that we have previously in the rest of Park Guadalajara I. Also, we acquired land recently in Monterrey, in La Palma, in Juarez. And these 2 markets are the ones that eventually, we will also start developing spec buildings or build-to-suit projects. We have started with a -- we have had good progress in the permitting licensing and little by little as long as we start seeing a strong momentum on the leasing, we will start buildings and will be a strong signal that the markets are permitting again to have some projects. And this is mainly driven by the pipeline that we have been generating. We have definitely seen stronger demand from different sectors particularly the ones related to electronics, the ones related to AI, to data center infrastructure as well as e-commerce, logistics and medical devices to name a few. So that's pretty much in most of the markets. We see that clients as well as potential new clients are -- have regained confidence in their expansions. Many of these clients have had record high numbers in terms of production and uncertainty is coming back again for them to continue expanding and continue opening up new operations in Mexico. Operator: Our next question will come from the line of Anton Mortenkotter with GBM. Ernst Mortenkotter: Congrats on the results. I have 2 quick questions. One is, I mean, you already mentioned a little bit of the dynamic that you saw that made you start the development. But I was wondering if there is any like specific sign that the market gave you in order for you to decide to move now and reactivate sort of strong Vesta development. That is one. And the other one is with all of these new newly announced developments, it's getting close to the cash balance that you already have. So how are you thinking about funding capacity from here? I mean, specifically, do you see any need or opportunity in the new term to tap either the debt or equity markets? Lorenzo Dominique Berho Carranza: Thank you, Anton, for your question. I think we -- definitely, we have internal metrics that we monitor in order to identify where we should be starting a project. And maybe just to use a positive example is the projects in Guadalajara that we started construction end of last year, we started without having a lease signed, but we identified that there was demand coming from certain sectors and that's why our decision was to anticipate to those clients by starting construction soon. So that in the meantime, while we are under development, we could be able to close with the potential demand that we saw. And this quarter, that's exactly what happened. We closed again, we pre-leased with 2 current existing clients of Vesta that continue to grow and require flexible space, the standards that we have developed in the past. Those particular metrics are the ones that we follow every time we start a building. Again, Mexico City, good dynamics. We have had some good success with the e-commerce clients. We will -- we think that there will continue to be demand for that. So we feel comfortable with that start for a project that will be eventually developed at some point end of the year. And again, Tijuana is a similar situation. Even that we have a few buildings available right now, which we are in a marketing stage, they're both in different regions, different submarkets in Tijuana, different dynamics, and that's why starting a new building in this region makes sense because of some potential demand that we are already identifying. So I think that this strategy has paid out well in other markets. We continue to see -- to have a few buildings that we are in the marketing stage. But we are confident that this will continue to be a good year and good absorption. And we think that we will continue to see good absorption. So this is actually the third quarter in a row that we see strong demand and good absorption. So I think that compared to, let's say, the start of last year, which was -- the uncertainty was incredibly high and projects were pretty much on all of them on hold. I think that dynamism has changed effectively end of last year and with a strong start of the year of clients looking for high-quality buildings with a great -- good reputation landlords where they can establish their new long-term operations and make their own investments in different sectors. Juan Felipe Sottil Achuttegui: As for the balance sheet, well, look, we have a very strong balance sheet. And we will always be flexible and keep our options open. We have $200 million in cash. We have a low leverage. So we will tap the market whenever possible, and we can sell properties, we can do equity. We will always be flexible and we'll see as we continue to grow, what is the best market to tap. And remember, all of this was mentioned on the 2030 plan and we have a long-term vision, and we will always take decisions that balance out the alternatives and balance out the capital requirements of the company. We're very flexible. Operator: Our next question comes from the line of Adrian Huerta with JPMorgan. Adrian Huerta: I have 2 questions. One is if there is any opportunities for asset recycling? Are you looking for potential asset sales? And the second one is how the yield on cost is today given movements on construction and land cost relative to what you can charge on rents? Lorenzo Dominique Berho Carranza: Thank you for your question. On the second question, I think that yield on cost continue to be very attractive in the 10% range, even in some cases, even higher than that. I think that one of the largest benefits to that has been our ability to acquire land at a lower cost basis, I think that we were very opportunistic last year and strategic so that we were able to acquire land at $0.70 to $1, and that's how, together with our ability to get competitive construction costs, that's -- and with a still attractive market rents. That's how we can be able to close a double-digit yield on costs in the -- we're doing deals in Mexico City at 9.8% yield on cost, close to 10%. And in markets -- in other markets, even at 10.5%, 11%, such as Queretaro, Tijuana, for example. So I think that our experience as a developer and managing well the construction process and construction competitive process. I think that that's giving us an edge so that we can make high returns. And more importantly, Adrian, it's not the ability to make 10% return on costs, but it's the spread on the investment that we can make since we believe that if properties in the larger portfolio environment we're seeing that are transacting at 7.5% to 7% to 8% range. We think that assets similar class to Vesta could be trading closer to a 6%. So developing at a 10% and stabilizing at around 6%. That's a lot of spread and this is exactly the value proposition that we have for our shareholders. Juan Felipe Sottil Achuttegui: Look as far as capital recycling -- building recycling, we will always be open to do that. I think that we have been successful in selling parts of our portfolio at a higher than net -- asset valuation value, and we will continue to look at those opportunities. And we do selectively -- we -- it's different to some of the FIBRA that they need to dump a lot of the assets they have recently acquired because they don't match their strategy. We don't need to do that. We sell selectively every now and then we want to only make a scope to our portfolio. But frankly, we invest -- develop to hold and we invest long term and every now and then opportunistically we sell. Operator: Our next question will come from the line... Lorenzo Dominique Berho Carranza: Just to add on that. I think our discipline is a good example. We like to sell above net asset value. Above valuations where we believe we can actually make -- create a premium and make a good profit. And I think a good example has been in the past where we have sold 10%, 20% above abrupt -- appraised value in the private markets. And then we have been able to develop again at 10%. I think that's the approach. In terms of capital allocation, I think that's a discipline that we will continue to see going forward. And I think that's a main differentiator on Vesta. Sorry for the interruption. Operator: Our next question will come from the line of Rodolfo Ramos with Bradesco BBI. Rodolfo Ramos: I only have 1 left, and it's a follow-up on Gordon's on the consolidation angle here. Just to get a sense of the impact that you could see, if any, particularly in the northern markets, let's say, Tijuana, Juarez, if this further consolidation takes place, whether you think that this has any impact on the -- your commercial efforts or on the lease spreads that you're able to get through, I mean -- and maybe perhaps on the positive side, whether a more consolidated market might just lead to better discipline on that front. Lorenzo Dominique Berho Carranza: Thank you. Well, I think that industrial real estate is -- in Mexico, it's a very fragmented sector. There's really no dominance from any player in any of the markets. I think that -- actually many of these consolidations, if you look carefully, most of the acquisitions are done in secondary and tertiary markets. Markets where actually we do not operate and are quite small. I mean, in the end, I mean, some of them there's an overlap, but the majority is in secondary and tertiary markets. So I don't think this could have a major impact when it comes to marketing certain regions as the ones that you mentioned. I don't know exactly what might happen with the -- those secondary and tertiary markets because in many of them, we're not that active. Operator: Our next question will come from the line of Carlos Peyrelongue with Bank of America. Carlos Peyrelongue: Total occupancy remained stable at 90% in the quarter. Your expectation for this year is for this level to be maintained or do you expect some increase. And in that case, which markets do you think would drive that potential increase in occupancy? Juan Felipe Sottil Achuttegui: Look, well, we generally don't project occupancy forward-looking. It's not a guidance item. However, we're very optimistic of the market dynamics, as Lorenzo mentioned, I think that we will have good absorption in the quarters to come. Carlos Peyrelongue: And in terms of market... Lorenzo Dominique Berho Carranza: And the market -- the market, mostly to be specific, we currently -- we have -- we're in a marketing stage in Monterrey in our Apodaca project, and that's gaining strong momentum. So we feel confident that we're going to see some good absorption in the next months -- in the next quarters, and that will have a very positive impact in occupancy. As you mentioned, it has stabilized, and I think there's an opportunity to see an upward trend. We will continue to see demand. So that Monterrey will recover soon also in some markets in the Bajio, which have shown resilience particularly in Queretaro. And actually, in some of the cases, we have good quality buildings where sometimes we rather wait until we have a good tenant. We think that our projects as well as our parks are in good locations with good energy infrastructure, with good quality buildings, again, good access to labor. So we think that eventually that will impact positive absorption and with that have a positive impact on occupancy. Operator: [Operator Instructions] Our next question comes from the line of Igor Machado with Goldman Sachs. Igor Machado: First one, a follow-up on construction costs. So could you please comment if given the ongoing conflict in the Middle East, are there any -- are you seeing imports are already increasing in price? And do you have any [indiscernible] to understand how could this impact your cost? And the second question is on the material equity in San Luis Potosi. So could you comment on what drove this and is this enough? And if you could please comment on how are you seeing the demand on the value region [indiscernible]. Lorenzo Dominique Berho Carranza: Excellent. Thank you for your question. Regarding marketing of San Luis Potosi. San Luis Potosi a smaller market for Vesta. However, we have a project which is next to the BMW plant of San Luis Potosi, this market has a strong dependence on the auto industry. And I think that last year was quite slow. But we start to see us -- as we start seeing a little bit of some adjustments in the production lines of them as well as other auto manufacturers. We think that there will be better demand throughout this year and with that, create a bit more absorption. We have a good quality project, again, right next to BMW. We already have good tenants, but definitely, it's a slower market. Should not have a major impact in the overall strategy for Vesta. And on your construction cost, well, definitely, that's something that we are monitoring carefully, how the -- what are the implications on the conflict of the Middle East on the construction cost. However, we have not seen any material adjustments -- I'm sorry, not materially -- larger adjustments so that could have a negative impact on construction. I think that what is -- nevertheless, I think that what is important to monitor is not only construction costs, but also FX because we calculate everything on a dollar per square foot basis. But even with that, I think that Vesta has been able to absorb well some fluctuations. And I think our -- and we will continue -- and also some of the projects that we have already started construction that we do on guaranteed maximum price. So even if there's fluctuations in the pricing throughout the construction process, that is not impacted to our final cost because we have already guaranteed the price. That's kind of the natural process to it. Operator: And there are no further questions. I'd now like to turn the call back over to Mr. Berho for his concluding remarks. Please go ahead, sir. Lorenzo Dominique Berho Carranza: [Foreign Language]. In closing, we continue to deliver on the important milestones of our Vesta 2030 strategy anchored in portfolio quality, disciplined execution and long-term value creation. Market dynamics are strong, particularly for high-quality infrastructure ready buildings, where demand continues to show resilience. This reinforces our confidence in the near-term outlook and our ability to capture incremental opportunities as activity continues to build. Against this backdrop, we remain committed to executing with discipline and expanding a well-curated platform to capture long-term demand. Along these lines, we look forward sharing important updates. Also on progress related to our Route 2030 strategy at our 2026 Vesta Day to be held in New York on November 11. As always, thank you for your continued support. Goodbye. Operator: This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.