Good afternoon and welcome to Rautes' half-year financial report session. My name is Mika Saari, I'm Rautes' CEO, together with our CFO, Wille Haltun, and we will go through the highlights of our second quarter and first half of the 2026. We also will reserve some time at the end for questions and answers, so the audience online, you can post your questions in the chat box and the audience here can also then use the microphone at the end of the end of this presentation okay very good let's get started so if i'll start with some of the highlights of our second quarter events i would maybe describe that there was no major change in the operating environment where we've been operating for already for some time which is characterized quite by quite big uncertainty and turbulence in the in the market so really the uncertainty remained elevated during second quarters as well and when i see elevated i really mean what it means to our customers so if you look at the customers industries they operate and their their offering is very much to the construction industry somewhat to transportation furniture industry especially construction industry has remained very uncertain and volatile and we've been now waiting for the recovery of that industry for some time already as an industry and and and this is really uh let's say impacting quite a lot in our customers decisions in terms of the new investments into technology also services and and other things that RAUTE can offer to this industry. So this uncertainty really resulted in us having not really great order intake. It was 18 million. It was higher than a year ago, but a year ago also first half of the year was very low in terms of the order intake. So this was the challenge in coming from the market environment. If you look at our own operations, I'm actually very pleased what we achieved in this environment. So despite the low order intake and also quite low net sales, which was 33 million, it was similar to what we had in the first quarter of this year, which is low for us. And it's much lower than a year earlier. Our profitability still was on a good level. I would describe as actually very good level, considering the level of operations, level of net sales that we achieved. So we had 12% relative profitability in terms of the comparable EBITDA, 4 million euros of comparable EBITDA. And this was thanks to very much the continued good work in our customer delivery projects and savings we also received throughout our own operations and then also in these projects with the prudent project management. So very happy with that development and continued good performance in our operations. To me, this also demonstrates that also in this low volume environment, we are able to maintain quite good profitability. And that's thanks to a lot of effort and work we've been put into our operational excellence work during the last and past years. In wood processing, which is the biggest unit responsible for this project deliveries to our customers, big projects, especially we can see the profitability on a good level, despite the reduced top line, thanks to this project execution and some project provisions also that we were able to release during the second quarter. we also were able to release some reservations in the first quarter of the year so this same good level of work continued now so and this of course is an operational achievement it now is visible in this second quarter numbers but thanks to good good work that i'm very pleased during the second quarter in terms of service business we we were a little bit behind our own plans also in terms of the top line we saw that still our customers in this environment they are trying to protect their cash flow so they are even saving on some quite critical small investment services maintenance this type of work which then has impacted our service business top line and and due to the lower top line the profitability although it was positive it was not on the level that we expect from our service business in the future, you know, in a more normal operating environment. And then as a positive thing, an analyzer's business, which is very important for whole router, providing really the technology edge into our offering. We saw good, I would say, turnaround during the second quarter. Actually, analyzer's business did increase from the previous quarters in terms of top line. And when there was an increase, we immediately saw also profitability improvement on the bottom line. So this really, to me, demonstrates the underlying potential we have in the analyzers business and its importance for RAUDE in the future. So we continued, of course, in this difficult environment, focusing on our own things, things that we can impact, which of course is a customer work, which is our own delivery operations, cost control, efficiency improvements, and we obviously, this is fully in our hands. Some of the things happening on the global industry environment are a little bit outside of our hands, so we need to focus on things that we can impact, which is the good customer work, of course trying to realize those new orders also, but then really the internal operations. And I'm happy with that performance and that development during this year as well. Now, in terms of the market, we have to be a little bit cautious in any statements, but I could say, and we are saying that we have observed some signs of improving customer sentiment. It was not realized in Q2 as a new order intake, but this sentiment is clearly there. And why I'm saying this is, of course, some of these projects which we are following and negotiating with customers, they have different gates in the sales funnel and we see real progress towards completion phase in some of these decisions from a customer point of view. Nevertheless, the uncertainty, turbulence clearly remains in the market and we still have to see when really the sustained recovery in a broader way is taking place. But some good signs we see there in the market. Okay, and here we see some of the same messages in numbers. So net sales we saw clear dip from a year ago figures, but it was on the same level as first quarter this year. Comparable EBITDA, I described this 4.0 million euros as a very good result. It's 12% of the net sales. Our long-term ambition is to achieve 12% over business cycle. And then assuming that this is some kind of a lower cycle, at least, that we are now experiencing. This is actually a very good, very good achievement indeed. Order intake on a low level, as I said, the same is true now for the order book. It's going down. I will say soon how the development has been over the past years. Equity ratio is good. So we have a strong balance sheet. Obviously, we have generated profit now during the past year. So we have a strong balance sheet. So we are in good position in this turbulent market environment to manage this situation from that point of view. And this, of course, provides also good basis to go forward when the market recovers. Personnel roughly on the same level than in the previous quarter and about 700 people working directly at RAUD. Auto intake here we see comparison also to previous years. So obviously, low figure, although this 35 million is more than a year ago for the first half, it still is a very low figure. But we can see from this picture also that there is a huge variation between different quarters in terms of routers' order intake. So we have to admit the order intake volatility is big for our type of a business. And of course, if we book any bigger orders for wood processing, that would have immediately a bigger impact. But this is where we are now. And if you look at the second quarter events, North America actually played an important role on this quite low number. But still, North America is an important strategic focus area for us and very important for the whole industry as well. And in terms of order book, we see here the development over the last six years or so. So, obviously, we had this huge peak at the end of 2023 and beginning of 2024. And there has been a more difficult time for the whole industry since that. So, this downturn in construction industry and now customers and industries has really continued now for a prolonged time. so obviously during these years years i i should say there has been expectation not only from us but for many many many parties that the recovery would be starting so we still haven't seen that and there still is this uncertainty in the market but i believe strongly that the recovery will take place we can also see from this figure that when the recovery takes place it can also be quite fast so we'll see what happens this time when we move to that phase. Net sales came down from year ago figure 66 million in total in the first half both quarters quite similar Europe still playing quite big role we still have this quite big projects which are now towards the the end of those project deliveries and from the accounting point of view we are recognizing revenue from those projects so very much europe dominating there but not america coming uh coming second and then the other regions and comparable epita i'm happy as i said on this level of 4 million with this volume that we now achieved on top line uh we can see here the development over over the past years as well and i would say the quite nice recovery from the very challenging years we had 2021 and 2022 in particular, so happy with that development and taking, we have taken router operations, I think, to a better level during this time. This is even more visible in the operating profit, where the huge losses are visible from the inflation and the war in Ukraine that Russia started. So since that, we have had a nice recovery and operating now on a positive territory also with this lower business volumes. Personnel, about 700 people, as I said, the drop from year ago figure is due to the fact that we closed the China operations a year ago during Q2. So there was a reduction in the personnel and that's impacting these numbers. Most of our people work in Europe, but we have important workshops in North America, in USA and Canada, operations there, and also important global footprint for us from production point of view. And then we have the sales representatives and sales offices, service centers all around the world. Okay, a couple of more words about the different segments, wood processing. I already said this is the most important business unit for us in terms of the overall volume. This represents a major part of the whole router volume and I'm so happy to see the overall development from loss making to profit making unit and actually this second quarter profit margin which was close to 13% I would describe this still as a little bit extraordinary so it was due to the release of some cost provisions which of course might happen in the future but you can't count on that we we we aim to do the accounting so that you know it takes into account uh the whole project to the completion and then this kind of provision release is required that then there's something better happening in the quarter than what we even expected but could be a good development in the wood processing happy with this uh 13 percent margin from this business unit. Services, there was 20 percent, close to 20 percent drop in the top line. And this was now then quite clearly visible in the profitability as well. So obviously services, other businesses as well, there is a quite big net sales to EBITDA lever there. So when the top line drops, we can see, we see this unfortunately in the profitability as well. And I think services, which is now close to 8% comparable EBITDA margin, is clearly not where we want to be on the service business. So I would, if in wood processing this was exceptionally high, this is a little bit exceptionally low for services. It should be much higher percentage-wise. The reason also for this is that we haven't stopped really the development initiatives in services. So there's been quite high fixed costs on services. We want to develop the new offering types, which are very important for us in the future, different type of performance contracts and new models serving our customers. And this development work we have continued despite this challenging environment. Analyzers has had experienced quite tough times last quarter of last year and then first quarter of 2026. We actually had loss-making business, which is obviously not where we should be. We see that this was also due to very low volumes that we had on the fourth and third quarter, if you see from this draft. And now when the volume is up, we can quite directly then see the impact on the profitability. This should be a very high profitable business for us. It's obvious and everybody knows that in this sort of business, the product margins are on a good level as they should be because we are putting a lot of R&D effort into this. But then it means that when the top line increases, it is visible on the bottom line as well. So this was to us a good proof again that this is a good profitable business which we want to grow in the future as we as we go forward. Okay, and then I will hand it over to Ville. some more words on the numbers.
All right. Thank you, Mika. So, hello and good afternoon also on my behalf. My name is Ville Halttunen and CFO for RAUTE. So, as usual, I'll start from the earnings per share development. We delivered 36 euro cents of EPS in the quarter, nearly half from a year ago comparables where we were at a record high level. This is primarily volume driven as how net sales came down by 25%. Also the operating profit came down and as a result, then EPS came down. So despite the good margins, we relatively kept the absolutes came down. And no big surprises in the financial items below operating profit, with slightly positive financial net items and a tax rate of 20%. In the comparable period, we had a relatively high one-offs related to the China clause, which are then visible in the reported EPS numbers, and also the effective tax rate was higher than normally. And looking into our cash flow performance in the quarter, Cash flow was negative 8 million in the quarter. This was now second consecutive negative operating cash flow in this picture. At the same time, we are delivering positive EBDA. And then this is an outcome of our business model, basically, where the revenue recognition is much more stable. And then the EBITDA performance is showing that. And then the cash flow cycles are different, as primarily our customer payments cycles are very different than the revenue recognition cycles. So the networking capital change was quite negative now in the quarter. When we look at the networking capital development there, we ended now the quarter at 18.5 million, which is a relatively high number in our business and actually it's the highest level since 2019. I also brought you a picture of the longer term history, which is this smaller picture here, where you can see also that we have been historically also on these levels. And over the long term period, we are roughly at the zero level, But there are large swings around this one, depending on the cycles of our projects, where they are. At the moment, we have had very low order intake of new incoming orders, which typically have upfront payments, which are then impacting this kind of positively. And then on the other hand, there's been some postponements of payments in our existing customer projects. but expect this to now come actually down as we look into second half of this year our balance sheet remains strong equity ratio 65 percent during the quarter we have paid dividends also we we repaid the junior loan of three million and then we have had also the share buyback program ongoing and liquidity we still have a strong liquidity of 17 million and then on top of this we have also 15 million revolving credit facility available so which give us flexibility and one should also remember now that we have this networking capital being now tying the cash quite a lot compared to the history so that that's good to keep in mind uh investment level is uh same as last year so no no big news here so 1.7 million after uh first six uh months a similar level as last last year so we going to continue to do some reinvestments in in our uh operations and then some some rnds also into these these numbers which is being capitalized so those those are the primary uh capex uh items uh there and still the rnd as what comes to pnl uh we have a uh here also similar level of r d efforts uh that that we had last year minor minor decrease compared to last year but this is also somewhat now increasing in relation to sales as the sales is coming down more fast. So this is all from from my side and then I'll hand back to Mika to close with the outlook and guidance.
Okay thank you Ville. So by the way I forgot to say in the beginning if you want to post questions in Finnish that's also okay in the chat box so we'll look at those after I say something about the outlook for 26. I actually already spoke about this the the operating environment it's been a challenging environment for the industry overall and when i say industry i mean our customers in particular of course we are here to serve our customers and we live and breathe together with our customers and their investments of course in in a market where they are struggling with gas flows and and profits is impacting some of the decisions on the investments as well. And we still have this sustained global geopolitical uncertainty as well. So all these are impacting our industry. We have seen also during the second quarter, again, changes in the tariffs, which are impacting our customers in North America in particular. There was again discussions and I was visiting myself. Some of the customers there and they are impacted quite differently. A little bit arbitrarily also, So I would even say in some of these cases, so that is making very difficult then to make investments in this environment. But then I would say again that despite this uncertainty, we are seeing our customers in the Europe, North America, and I would also say in Asia and Oceania now, which was a little bit maybe a new thing, that they have continued preparations for future investments. and especially such that, you know, then improve the production efficiently and their competitiveness. And what they are really looking for is something where I think we as a router, we have a good fit. I mean, our customers are looking sustainable technologies, automation levels and really efficiency overall for the whole process, which is something where we can support maybe also versus some of our competitors who are more focused on particular equipments when we have the overall process expertise in-house so we can serve our customers in with these cases and of course the major industries which are impacting us are the construction industry but of course some of our customers are then working in these areas and it might be something on the furniture transportation and and maybe even lng vessels or something like that and then they have a little bit different dynamics from their point of view so not all customers are suffering suffering there are also customers who are actually having a good profitable business and they are they are planning at least for the future future investments and and of course all we are waiting that you know some of these signs from the overall geopolitical tensions and and those to ease out so this would make it easier easier for the decisions take place overall i think that we are well positioned to capture these opportunities when the recovery really in a wider way takes place and of course service analyzers play a very important role in that business service was now down but it's very important our field service people and personnel who are meeting our customers literally daily so they really know what is happening in the customer operations and it makes it then possible for us to help with the investments as well same is true with analyzers digital services where we capture also with the with the help of ai we capture information and and manage that and provide insights to our our customers so this is where we are as a as an industry and i cannot promise when exactly the the odor intake will start to recover, but I remain confident that it will recover and there are good signs and someday it will happen. But this, of course, has proven now that we are living in quite cyclical environment as RAUTE. And because of that, we have really seriously focused on our own internal operations and on that development. I'm very happy and that is bearing fruit now in this challenging environment as well. in terms of the guidance for this uh 2026 uh we have communicated in the beginning of the year that we we gave actually quite a wide range for our our guidance and and the idea is also that we now narrow it when we move forward and now in the second quarter what we did was that we narrowed the net sales expectation we did take down somewhat the upper limit of this range so now Now we are saying it's going to be 125 to 145 million for the full year and then in terms of the comparable EBITDA although we took down net sales guidance we did not at least we did not change the midpoint of the guidance for the EBITDA so we took a little bit up the lower limit and then a little bit down to the upper limit so we expect now 11 to 18 million comparable EBITDA for 2026. And you can see here the figures for 25, which is demonstrating how cyclical the industry is. And the businesses, it was 175 year earlier, it was more than 200 million. So we need to live in this kind of environment. We want to increase the share of services, recurring revenue analyzers. And I think we are on the right path to that. But still we are experiencing this prolonged downturn in the top line and but ready to capture new opportunities when those emerge. Okay, very good. So that was the key messages, highlights of second quarter, first half of the year. Maybe I invite Wille on stage. So are there any questions? Questions or maybe we start from the audience here. Is there any questions here?
Yes, of course. It's Antti Villekanen from Indires. uh first uh could you please elaborate a bit what is the status of these uh five projects that you sold in 23 and 24. metsa is not yet in production but how about the other other four uh uh factories and do you still expect payments from these projects yes actually not not going to into any secrets of any of any customer but ETSA is actually already producing so so we have we have some stages have been passed already from that point of view of course the full production is only coming online then later this year and in line of the timeline that we have agreed with them
things are progressing very well there no no no worries then we have a couple of other projects we announced in 2023 that was in in Baltics area in France and then there was in Uruguay. Those are also progressing, I would say, in line with the normal variations of those projects in terms of timeline. Some things are happening a little bit faster, some a little bit slower, but in terms of our performance, which we can see also in the in the financial figures, we are very happy with that and things are progressing okay. In terms of the payment, which is more than, well it's both the POC question but also maybe more cash flow question, there will be still payments coming from those projects and it's very typical for project the last payments are at quite end then when really everything has been accepted and the site is really up and running. I don't know Ville you want to comment that was more the cash flow projection we have which we are not giving but I think you said we probably see some improvement in the situation.
I think yeah you can draw the same conclusions that also now in these big projects we have now recognized more revenue than what we have received cash in so still we expect the material payments from them but I think it's within the normal cycles as you said the payments okay that's clear then you said that orders were postponed but they were like a move to completion phase.
So does it basically mean that you have won some meaningful amount of projects from competition, but the final investment decision is pending on customer?
Well, if we look at the market, of course, I would say in the competitive landscape, maybe it would be too much to say that we have won something significant from competitors, but I wouldn't say the other way around also that we would have lost something. I would say the competitive landscape remains quite similar to what it has been. Then in terms of the moving to completion stage, where I was maybe a little bit fuzzy what I said, I maybe remain fuzzy, which is to say that, you know, it's more like, of course, these are long negotiations with customers and you need to understand the dynamics and particular customers have certain certain gates in their process. So some things have become even closer to their final decisions maybe they have they are pending board decisions or they or some financing bank decisions or things like that so i would say from our funnel more things have moved to those those stages which is very close to getting orders in and and yeah whether then and when we get get anything bigger it really is like i can't say i can't promise it can be any Any quarter of it can still take a while.
And is there any kind of rule of thumb how often your customers review these decisions? Is it like monthly or quarterly or biannually?
I would say maybe if we need to separate into at least two things. So there's this maintenance type of a budget, which is normally very local for the local mill personnel and mill managers to decide whether they buy service or whether they buy spare parts and things like that. so that's not requiring really any high level decisions and same is true maybe for up small upgrades as well but of course if in our customer company those people have gotten advice from the top that you know be save save on everything so that will impact on how they operate but they can make the decisions without any big reviews but then on a bigger uh bigger projects i would that varies between the customer but i would say normally you know it's it's their board meetings So normally, any bigger company has monthly board meetings and things like that. That typically is somehow the cycle. Some customers are then saying that they only decide on big things like four times a year or something like that. But the board is meeting every month. So we are talking about kind of monthly cycles. Very typically, and this has happened also if I look at the past, when we see that maybe something could happen and maybe the recovery is that, you know, maybe we have considered that the next month there is a decision again. but so far the decisions have been that let's wait still for a while before we do something so so hopefully hopefully this is improving and and we see some signs on that but i can't promise that this will it's so so much dependent on this very big big moves in the world geopolitical environment and trade politics and so forth okay and then your order book is quite clearly down year and year and from the end of the last year as well.
How is your workload in different units as we speak?
Yeah, that varies also. And this is of course part of the unfortunate measures as well we've had to be taken, which is that we have temporary layoffs ongoing now. The whole Finland operations are subject to that consideration, so that impacts different departments differently. So there is quite a lot of temporary layoffs which are taking place for us to manage this cost side because we cannot afford as a company, obviously, that those, let's say, variable costs become fixed costs. So there's no other way. So workload is varying, I can say. And then there are locations or other departments where actually it's fully loaded. We still are getting some orders in. So this 18 million also was good orders for some part of the operations which we got in second quarter so they are might be fully fully fully occupied to work on those those orders so it really varies the message we can give and that's the message we are managing this very proactively so that's the that's the approach we are taking and it also requires some some tough tough management from that point of view but when i look at your personal cost figures in q2 i see like a one million year increase in staff cost uh year over year what is reason for that okay that's a good question maybe i don't know if will is able to explain this i think it's probably related to the accruals and i think that comparables in the prior year
were a bit like abnormally uh like on a problem level because of those and and primarily the bonuses and such what we accrue on a yearly basis so the underlying development is is not not such what you see in the P&L.
So I guess you can see that also in the personnel numbers at least that part of the fixed because it's been very flat now the same number of people working and they have their salaries and travels and other things so I don't see that and also we have continued to invest into other operations and development work in a pretty similar way which you can see both on the R&D investment and some of the other things that we are disclosing so I don't see a big difference there. And overall that level is, I think, we want to maintain the focus on the R&D and development work, because we believe that for sure this market will recover at some point, and we want to be strong in this at that moment.
Okay, thank you. That's all from me.
Thank you, Antti. Any questions from?
Yes, we have two questions, and so let me read here. Could you give us some more color on the development of order intake during the second quarter, have you seen meaningful improvement in the customer activity or decision making, particularly in the wood processing, and do you feel that the recovery is now becoming more visible?
Okay, maybe it's a bit of the same question, which I fully understand that everybody's interested on that one, but maybe if I once again repeat, 18 million of orders in the second quarter things were pushed from second quarter further to the other quarter so let's see when we start realizing those but we did see improving activity as i said and activity is not necessarily just the order intake but us knowing that they have moved in our sales funnel that we have into further further in the process closer to the decision point so we clearly see that happening and and we hope that that is that is a sign of realizing some of these things and as i said we see this happening in europe which has been some time already the case but also in north america and i would say as a new thing also there's been good discussions in asia oceania now uh in in that sense so overall i would say some some encouraging signs in the activity among our customers then there's another question still Well, your profitability has held up quite well despite the lower sales volume.
How confident are you that this level of profitability can be maintained going forward?
Well, going forward, we hope, of course, that the top line is not as low as it is now. So that will help, of course, because we have still this profitability lever in the top line development. I would need to say, and we are saying that the current level of 33 million euros of net sales in a quarter, normal expectations maybe shouldn't be quite that we get 12% comparable EBITDA because 12% is the target over the cycle, which means that there are good times and not so good times. and I would still describe and hopefully we can confirm it in hindsight in a couple of years time that this was the downtime and the difficult time and we maintained the 12 percent so the project releases that we've been able to do are a sign of operational excellence and efficiency that we have but one can't count on that happening every quarter or so so probably this is a little bit too high profitability with the current top line. All right. That's all from the chat. OK, thank you very much. Thanks to the audience online and audience here. And I will see you again in the third quarter release at the latest. Thank you very much. Thank you.
