Glaston Oyj Abp (GLA1V) Earnings Call Transcript

Hello, and welcome to Glaston's Half Year Financial Report Webcast. My name is Agneta Selroos, and I'm in charge of Investor Relations here at Glaston. Today, our CEO, Miika Appelqvist, will start with the Q2 highlights and the market review. After that, our CFO, Magnus Sjoblom, will continue with the financials. After the presentation, there is a Q&A session. You can submit your questions by using the chat function. And now over to you, Miika.

Thank you, Agneta. As Agneta shortly already introduced today, we will go through quarter 2, '26 in brief, what were the highlights, what happened during the second quarter this year. We will take a look at the market review, what is happening in the market at the moment and in what kind of environment we in Glaston are playing at the moment. And then, of course, looking at the financial development in the second quarter. And at the end, we will update our outlook for 2026. But let's start now second quarter '26 in brief. Market in general remain challenging for us. If we look at especially our architectural customers, their demand level was at a low -- clearly lower level compared to last year. And then as a result, then machine investments were limited among our target customer base, especially in architecture side. But then again, upgrade investment. So service as a whole, but especially upgrades, customers are looking at what they can do with the existing equipment. And there, we had -- we really gained momentum in that area, and we expect that to continue. Order intake overall, slightly up, but on a unsatisfactory level comparison period last year, second quarter was weak. So as a result of the weak market, also then second quarter in order intake remained challenging for us. What was very positive was the service orders went up 21%, which is obviously very important for us in this market situation. Net sales down. So as a result already from last quarter's declining order intake and declining order backlog, what has been visible in end of last year, end of '25 as well as now first and second quarter this year then net sales was down 20% compared to the comparison period, resulting EUR 41.5 million. Out of that, close to half was services, and that, of course, provides a good mix and supports the profitability. As a result of the mix as well as then different actions done in cost base and the fixed cost base, comparable EBITDA went down slightly being EUR 2.7 million from the comparison period, EUR 3.1 million and the relative profitability actually improved to 6.6%. If we look at other events then quarter 2, one important event for us was the successful sale of the property in Switzerland. We made the decision already earlier to transfer preprocessing machinery manufacturing to China. And now in the second quarter, we were able to conclude the sale of the property. And now in quarter 2 numbers, we booked then a gain of EUR 7.2 million from a total sales value of EUR 9.9 million of the property. Other events during quarter 2, we reorganized our commercial structure. We used to have an area of combined EMEA plus Asia Pacific, and we split that into 2, one EMEA and then China and Southeast Asia. And new commercial leaders were nominated to both positions, and we believe this market closeness will drive our commercial performance forward in the coming quarters. Other events, overall technology portfolio, IT portfolio remains important for us. And we acquired then technology rights and patents then into a coating area, new area for us. That particular technology has then niche opportunities in developing new intelligent class solutions then together with our customers. But that's just a sign of us investing continuously in new technologies. Then if we look at our operating environment, architecture, mobility and solar market as well as services overall, I start with architectural part, which is as a segment, it's the biggest segment that we have in Glaston. And there, if we look on a big picture overall, architecture and how many buildings are being made at the moment, that is on a low level in many of our core markets, and that's visible now in this picture. Europe, overall, the situation is still and the architectural market remains at a low activity level. However, there are certain countries then where the area -- the investment activity is increasing. But overall, in the big picture among our target market, the activity in new machines is still low -- at low level. Americas has been also at low level in the last quarters, but we saw actually quite good uptick then in Americas in the end of second quarter. And in Americas, this is important to see that the decisions have been affected by the global situation, and we saw at the end of second quarter that certain projects then went already forward. So that's a positive sign for us. China architecture remains at a low level. The activity in new buildings, especially that's driving our customers' business. But we still succeed in certain niche areas. But overall, the market activity remains at low level as well as in Asia Pacific among our target market. And if we look at our mobility automotive and solar market, There, we saw some activity, challenging situation for many automotive players in Europe, but we also saw activity in niche players activating investments in getting then the competitive edge for the future. Americas remained at low level in mobility and solar market. But in China, we saw market activity continuing. So that's an area that we also anticipate to continue and that develops positively. But then if we look at services, services is definitely the bright spot in the market at the moment, both in terms of numbers that we are reporting today as well as then operating environment and future potential. In our core markets in EMEA, in Americas, the service demand continues to be strong. When there are less new machine orders and less new investments, customers are looking a lot on how they can get the best out of their equipment. And our customer closeness is very important in order to capitalize on that opportunity and that potential and helping our customers in that area, getting everything out from their equipment, and that is already visible also in our numbers. In China, service remains challenging for us as well as in the rest of APAC, but overall service operating environment developing very positively. That is quarter 1 in brief as well as some words about the operating environment. And now I would like to give the floor then to Magnus to go through the financial development part of the presentation.

Thank you, Miika. So again, let's start with the order intake. The market continued to be soft in the second quarter of '26. The uncertainty in the global business environment persists. Customer visitation continued regarding machine investments, and that had a clear impact on the Q2 order intake. Our comparison period that was low, as Miika told, hence, our order intake increase of 2% is good. However, we landed at EUR 38.9 million, which is not the level where we want to be at. Looking at the order intake by product area. We see order intake for tempering and laminating technologies being up by 19% from the low comparison period and at EUR 7.1 million. During the quarter, major tempering orders included a Jumbo Chinook line and FC and RC Series lines. IG, Insulating Glass Technologies was mostly affected by the weak market and order intake was down by 61% and total at EUR 4.6 million. MDS Technologies at 5.7 million and up by 124% from a low comparison period. Several automotive orders China customers were received during the quarter. Service order intake up by 21% compared to same period last year. Demand for upgrades were good for both segments. Moving on then to net sales. Our Q2 net sales were down by 20% and landed at EUR 41.5 million. The net sales was impacted by the lower order intake from last year. The low group level net sales was reflected in all machines. Tempering and laminating technologies declined by 19% and were at EUR 7.4 million. Insulating Glass Technologies declined by 29% and landed at EUR 11.5 million. Mobility Technologies net sales were down by 50% and were EUR 4.1 million level due to lower order intake for 2025. Service net sales were holding quite well and were on the same level as the comparison period. Moving on to net sales by region. The group net sales that fell short by 20% and landed at EUR 41.5 million were visible in all regions. Americas had the biggest decline and was at EUR 10.6 million, which is a decrease of 33% and catering for 25% of the [ Technical Difficulty ] was only partly offset by the service that was pretty good. EMEA, EUR 22 million and continue to be the biggest region and now more than 50% landed at 53% of the total net sales, a decrease of 5% when the decrease came from the machines. APAC at minus 30% against the comparison period and total at EUR 9 million, which is 22% of Glaston net sales in Q2 '26. China was approximately 13% of Glaston's total net sales in Q2 this year. Then on the profitability, our comparable EBITDA was down by 13% and landed at EUR 2.7 million. It was same level as previous quarter, though. The lower net sales was reflected in the group profitability. However, mainly due to the cost actions that were taken, the negative net sales impact could be offset to the extent that EBITDA margin percentage, so the relative margin was at 6.6% and was hence better than the comparison period. Then let's move on a bit and look at the segment as a whole. Architectural market remains soft. The wholesale segment machine orders were down by 34%. Insulating gas fell short by 61%, which was only partly offset by tempering and laminating that were up 19%. As a positive note was the service order intake that was up by 14%, landed at EUR 14.3 million. Order backlog now 30% lower than Q2 '25. This was then reflected directly into the net sales. Architecture segment net sales decreased in total by 17% and landed at EUR 32.6 million. While service net sales were on the same level as the comparison period, the decline in net sales came from machines, which were down by 26%. Comparable EBITDA was affected by the lower volume and slightly lower margins and were offset partly by lower fixed costs. Then MDS. So looking at the order intake, that was up 76% to the low comparison period and landed at EUR 11.8 million. The machines order intake increased more than 100% and where China was the most active region. During the quarter, demand for upgrades picked up in Americas and EMEA with strong year-on-year growth. Good development was noted, especially in the U.S. where customers initiated upgrades for older lines with orders for, among others, the CNC 96 upgrade. Service as a whole was strong and was up by 47%. The order backlog has declined by 9% compared to Q2 '25, which is also reflected in the net sales in this quarter. The Mobility segment net sales were down by 26%. However, service net sales increased by 3%. Hence, the net sales decline was solely coming from machines, and due to the lower order backlog from previous -- that was reflected in the orders from previous year. Profitability improving. The comparable EBITDA and EBITDA margin year-on-year was improved. That comes from lower fixed cost and the higher margin contributed positively to the comparable EBITDA. Then we move still to the cash flow. Our operating cash flow was barely positive, EUR 0.1 million positive in Q2 '26. The cost saving measures have been contributing positively and the cash management actions that we have been taking when it comes to net working capital, those have been both contributed positively to the operative cash flow when the amount of advances due to the lower order intake has been reducing that one. Net debt was decreased clearly, and this is mainly because of the sale of the Switzerland real estate that occurred in Q2 '26. Impact of that is visible in the numbers, and you can see that the net debt decreased -- decreased now to EUR 18.2 million and the net gearing landing at 25% from previous 42%. That was my slides on the financial part, and I now hand over to you, Miika.

Thank you, Magnus. Last part of the presentation, updating the outlook. In the beginning of the year, we entered the year with a lower order backlog compared to the previous year. And as a result of the market environment, we then gave the outlook that our sales will decrease to this year. And now as we have done already in earlier years, we are specifying that in terms of profitability. And now we update our outlook for comparable EBITDA to be in the range from EUR 9 million to EUR 11 million. And as a reminder, then the figure -- EBITDA figure last year '25 was EUR 14 million. That -- with that, I conclude the presentation. And then forward any questions that there might be.

So thank you, Miika. Thank you, Magnus. And as said, now we are ready for the questions. So here, we have the first one. How does Glaston plan to allocate the capital from the sales of the Swiss property?

I can take that. And of course, we are continuously looking at how we develop the company and there are different kind of different options. I'm very happy that we have been able to stabilize the overall the company financial situation and the numbers that Magnus went through show now a very solid balance sheet at the moment, and that gives us a very good base in any kind of moves, whatever they might be, and we will definitely keep them posted when those -- when there is time for that.

Here is another question that is connected to this -- to the first one. Could you comment your capital allocation principles like profit distribution?

So it's general linked already to the previous answer that regarding capital allocation plans and then whether it's profit distribution, or investments, or whatever moves, then we will communicate about that when the time comes.

Thank you. And then we go to the next one. Regarding the market situation, should we assume that customers' own activity is at somewhat stable level if we look at your service development besides China, but there is no need for new capacity investments in the short term, especially in the architecture side?