Welcome to H+H International Q1 2025 Financial Results Presentation. Today's call is being recorded. All participants will be in a listen-only mode throughout the presentation, and afterwards there will be a question-and-answer session. To ask a question, please press five-star on your telephone keypad. I will now turn the call over to your speakers. Please begin. Yes, thank you, and good morning, and welcome to H+H Conference Call for the first quarter of 2025. My name is Niclas, and I'm the Head of Investor Relations and Treasury. Joining me this morning is our CEO, Jörg Brinkmann, and our CFO, Bjarne Pedersen. Yesterday evening, the interim financial report and supporting documents, including the presentation for this call, were published and uploaded to our Investor Relations website. During today's call, management will present the Q1 financial report, after which there will be a Q&A session. This call is scheduled to last a maximum of one hour. Please note that this conference call is also being recorded and will be made available on our Investor Relations website after the call. Before handing the call over to Jörg, I would like to direct your attention to the disclaimer on page number two. Please be advised that this call will include forward-looking statements which are subject to risk and uncertainties that could cause actual results to differ materially. For more information about these risk factors, please see the 2024 annual report. With that, over to you, Jörg, with an update on our performance highlights in Q1. Yeah, thank you, Niclas, and good morning, everyone. Thanks for dialing in into our Q1 earnings call this morning. If you go to the next page, you can see our financial results for the first quarter. I do not want to get into all the details here, but overall, one statement: all KPIs actually have developed in the right way. When I look really where the company was a year ago and I compare the quarter-on-quarter performance, I would really say we have nicely improved the business, actually, and are in a way more stable position than we were a year ago, actually, which is encouraging to see. However, when you look into the different markets, we still see some changes in some markets, our markets taking different dynamics, and I want to comment a little bit about it, actually. The first thing that is actually a very encouraging thing to see is that the U.K. market is improving. We see more new build activity in the market happening, leading to higher sales volume in the U.K., which is really nice, and also the midterm trend looks positive. A positive market development in the U.K., mainly driven by the new government's activity here. However, what we are dealing with at the moment is ramping up capacity, and that is also what you can see in the gross margin, and Bjarne will talk a bit about this a little bit later. Certainly, this ramp-up and making sure there is enough volume to fulfill the demand is causing some inefficiencies still in the network in the U.K., and that is one of the key priorities we are working on with the team in the U.K. Overall, it's going in the right direction. The second market certainly is Germany. I'd say this is still a very challenging market for us. You've heard there's a new government in place, and I'm going to comment on this a little later, but we have to confess for now that building activity is still super low. We are not seeing any impact in the market, and that is certainly giving us challenges. Volumes are still low, as is the efficiency of the business. We've done a lot over the last two years, but still we're not seeing the full potential of the German business yet. Poland, also here, the market has cooled down a little bit after the 2% program, but it's holding a very stable level, actually. We are fairly happy and also optimistic with the results that we're seeing from Poland, despite Q1 came in quarter-on-quarter comparison, lower from organic growth than last year. Overall, what we are driving is, and we've really changed the spirit in the company from restructuring and streamlining, which we've done for two years, to focus on profitable growth. That is really what we are driving, mainly focusing on the efficiency in the plant network and making sure there's enough capacity when the demand is going up again. With that, let's have a little closer look into our markets on page four. What you can see here is the three core markets, and I think the slide is telling the story in a really nice way, actually. It's the building permits that we are tracking here. Starting off with the U.K., what you can see is that literally mid-last year, the building registrations really took some momentum, and we are seeing fairly nice growth here in the U.K. It is mainly coming from what the new government is driving. One of their political commitments was to increase house building in the U.K. It is basically sitting in the planning system at the moment, and that is driving new build and a lot of activities from our house builders' customers. As I said, yeah, some nice outlook, 11% organic growth in the first quarter. Yeah, going in the right direction. Poland, what you can see here is the 2% program. You can really see that effect started mid-2023, really driving the building permits. The peak we were experiencing actually last year, Q1, that was the highest volume, and that is also why the quarter-on-quarter comparison only leads to an organic growth of -4% here. Overall, the fundamentals in Poland remain strong. There is building activity out there, fairly stable business, delivering nice results. A good contributor to the group results also in the first quarter of 2025. Germany, and here you can really see a completely different view. You see when you just look at the blue line here and the growth rates, you just see only in January we were at a 0% growth, i.e., it is not declining further. We are not seeing the same momentum like we were seeing in Poland or the U.K. when the market really started picking up again. We still have not seen that. As you're all aware of, there's a new government in place, there's a new building minister in place, there was a governmental speech, housing is on the agenda. The government is addressing the right topics here, but still it's too early to see what kind of initiatives they will come up with to really stimulate the market so that we see similar momentum like we are seeing now in the U.K. and that we were seeing earlier in Poland. However, CWE delivered an organic growth of 3%, and that is because out of the network in Germany, we are also delivering the other countries where we see also positive signs. Scandinavia going in the right direction, nice growth here. Czech Republic, Netherlands, Switzerland, all these markets developing in the right way. It is really Germany that we are waiting for to take the right direction here and making sure that the long-term demand for housing is finally addressed. Literally, it's all about volumes. However, we've done a lot in the last two years, and if you go to next page, page five, I don't want to comment again on all the stuff we've done over the last two years. My key point is we've streamlined the business. We've taken a lot of costs as you have followed. For us, it's very important that we are now making sure we are shifting the agenda towards profitable growth. It is going back and closer to our customers, identifying those growth opportunities. There is a lot of trends in the industry. We're talking lack of skilled labor, we're talking affordable housing, and that is where we have the right products for, and that is what we really want to drive together with our HOME initiative and making sure that the efficiency of the plant network is increasing quarter on quarter, and that is literally the agenda for me and the team, and that is what we are driving for. Yeah, the rest, we need to see and observe when Germany starts to improve. Until we are waiting for that, this is what we are focusing on. With that, let me turn over my speech to Bjarne, who will get a little closer look to the financial figures. Thanks for that, Jörg, and good morning to everybody on the call. On the next slide, we have more or less, I think, the statement in the header saying that higher prices offset the lower volumes. That is the nutshell of the first quarter. On the left-hand side, there is a chart showing we are having a negative volume development of 2%, as indicated in particularly Poland. They had some tough comparison numbers. If we adjust for that and let's say normalize the first quarter of last year for Poland, we would more be at a 2-3% volume growth. Similar on the pricing side, we also see a minor growth where we are passing on the inflationary cost. The volume growth that we are seeing is coming from the U.K., as Jörg alluded to. Germany is still difficult and going backwards in volume compared to one last year, but the adjacent markets are supporting the German factory network. On the right-hand side, you have the revenue breakdown, and that is all in line with the pattern that you're seeing on the volumes. All markets are slightly improving their prices, so we can defend our margins in that regard. Organic growth was 3%, and again, mentioning that Poland had tough comparisons, we will catch up on that during the year to get into our guidance range of 5-10%. On the next slide, there is a chart showing the development in gross margin. On the German side, with a continuous decline in volume, we are seeing more and more factories running at very low volumes. That also means low factory utilization, and with a less efficient absorption of our indirect production cost, that is one of the, let's say, key factors on our gross margin. Of course, we have the situation in the U.K. where we are, let's say, investing some of our indirect production costs in some future volume out of the factories, which will be particularly visible in the second half of this year. When we are comparing to the first quarter last year, gross margin was at 17%. The progress from that is predominantly coming from gas. That was an excessive gas cost in Q1 last year. There was also something on the stock build, de-stocking that we had last year, and then the underlying improvements we have done since then. On the next slide, we have the cash flow, and Niclas, you want to give a few remarks on that? Yes, thanks, Bjarne. Cash flow from operating activities before financial items and tax amounted to negative DKK 43 million in Q1 2025 compared to a negative DKK 42 million in Q1 2024. The improvement in earnings in the first quarter compared to last year was offset by a negative development in working capital. Three factors are impacting cash flow this quarter. First, we had an unusually strong net working capital position as per December 31 last year. Second, there have been payouts in Q1 related to special items accrued for in 2024. This will also be the case in Q2. Lastly, the third factor is payment to the old gas contracts that were settled in Q1 2024, which is also affecting cash flow during the quarter and will continue to do so in the coming quarters. On the debt side, per 31st of March, net interest-bearing debt totaled DKK 765 million, corresponding to an increase of DKK 33 million since the beginning of the year. On the next slide, a review of our financial guidance for 2025. First of all, there are no changes to our outlook, and that means we expect organic growth of 5-10%, and EBIT before special items will be in the range of DKK 120-180 million. Volume growth will predominantly come from the U.K. Low market activity in Germany will continue. In other words, we cannot see a market recovery in the short term. Pricing will largely reflect cost inflation. On the housekeeping side, we assume CapEx of around DKK 200 million, and this will be in line with our depreciation for the year. With that, I'll now hand it over to Jörg, who will finish this presentation with a few final remarks. Please turn to page 10. Thank you, Niclas. Before opening the call to questions, really key summary. I'd say Poland was the first market that we covered in 2023. It's nice to see that despite it cooled down a little, it's holding a nice level actually, and we have still good momentum from Poland, and it's strongly contributing to the group's results. That is nice to see, and we are positive about the underlying fundamentals in Poland. U.K., good to see that the market is recovering. Good to see that the government took initiative here, and that is now turning into more activity. That is certainly positive. Also, as I said, the midterm outlook is positive. Key change for us is to make sure the production network is following the higher demand we are seeing. It is basically the ramp-up of the closed line in Pollington, where we are focusing on, and then also making sure we are building a stock position because we have to make sure that the supply chain is run in an efficient way. That is one of the key focuses for us. Overall, developing in the right way, we need to follow here, and then the U.K. market is also in a really good position from our point of view. Germany, that is the big question mark. Positive signs, new government in place. There is an opportunity that also this market will experience some stimulus and then also hopefully show a recovery like our other two markets. Until then, we are really focusing on making sure that we balance price and volume in the market and operate in the market in the best way we can. Overall, we are driving, as I said, towards profitable growth, dealing with our customers, making sure the plant network is developing in the right direction and really executing our strategy. That is the menu. With that, let me open the call up for questions. If you do wish to ask a question, please press five star on your telephone keypad. To withdraw your question again, you may do so by pressing five star again. We will have a brief pause while questions are being registered. The first question is from the line of Sebastian Grave from Nordea. Please go ahead. Your line will now be unmuted. Hi, good morning, guys, and thank you for taking my questions. First one, on the gross margin performance, down 360 basis points in the quarter from Q4 last year. This means that you are seeing sort of DKK 44 million more direct costs, basically on the same amount of volumes. You alluded to, guys, in the presentation, more blue-collar work in the U.K., but I guess that is not the whole explanation for this sort of more cost in the quarter. Maybe you could expand a bit on the dynamic impacting the gross margin here in the quarter. Thanks. Hi, Sebastian. Good morning, and thanks for your question. Overall, we had this price growth that is part of our organic growth, and with the negative volume growth, you can more or less calculate where that is. Overall, a big part of that price increase we're seeing is passed on from the input cost increases we are seeing. That is, let's say, one of the main drivers for the increase in the absolute cost number. You're right, we have built back some shifts, and in particular, in the U.K., we have some extra cost in order to get, let's say, the underlying machine into the right state as soon as possible. A consequence of the things we're doing in the U.K. is also that we are distributing our products in a suboptimal pattern because we want to maintain as high a service level to our customers as possible, which effectively means that we are running shorter production batch in order to have all the varieties ready for delivery. We sometimes have to drive from another plant than the preferred supply plant, and that is also adding to the cost base. Those are the main drivers. No, thank you, Bjarne. That is very helpful. Second question on the building activity in Germany, still on super low levels here, but I just want to try to get your sense of your expectations for the development going forward. As you say, you have positive signals, new government, signs of willingness to spend more money, and maybe also on house building, we hope. What are you thinking in terms of starting to ramp up capacity here in Germany? I mean, also in light of your learnings from the U.K. ramp-up. Yeah, good question. The first thing is, I mean, it's super early days, but to just give you two reference points. The first thing is, there's that EUR 500 billion fund in infrastructure. That's the first thing that has changed from the former government. There is funding, and there's money available, and that was not the case in the old government. That is certainly what has changed. Second is, when you listen to the new government, actually, you hear them talking about, "We need to bring building costs down. We have to do more social housing," whereas the old government was talking a lot about the green transformation, about the housing sector, actually. That also means the agenda and the focus has changed. For me, both are encouraging signs, and now we need to see how they transmit that into, let's say, a real program, into a real stimulus. That is the government side. On our side, capacity, the point is that in Germany, to get more demand, we get this out of the plants that we are operating today. There is no plant that we have mothballed in Germany that we need to reactivate short term, actually. There are two plants that are mothballed, but we do not need them for the first stimulus and for the first recovery, actually, not needed. We can do that out of the existing network, and that is why it is a different approach, actually. Plus, Germany, we have significantly higher stock levels than the U.K. That means when we see the momentum, there is stock, there is the existing plants, so there is enough time, actually, to then make sure that the supply is following the demand. It is a really different situation wherein let's get the stimulus, and what I'm telling you is we are well prepared to supply higher demand. Okay, two follow-ups. How much more volume can you squeeze out of the existing network in Germany? How long does it take to open and ramp up a mothballed factory in Germany? Yeah, so I mean, the point is, I can give you a little bit. There are plants that we are running one shift, two shifts. That gives you a little bit of indication of how much capacity is sitting there. It is a lot of volume we talk, actually. We need really, really big recovery rates before we are going to look into opening up mothballed plants, actually. We can do that using additional shifts and just ramping that up. There is huge volume potential in the existing plants that we are operating today. Okay, that's very clear. Thank you, guys. The next question is from Anders Preetzmann from Danske Bank. Please go ahead. Your line will now be unmuted. Yes, thank you for that. Hello, Jörg, Bjarne, and Niclas, and thank you for taking my questions. I have a couple as well. If we can move back to the gross margin development for the coming quarters here in 2025, it's my understanding, of course, that you expect this to increase over the coming quarters, peaking sometime in H2. Can you maybe give some additional comments on how much, perhaps in percentage points, that you expect the gross margin to increase in the coming quarters? Thank you. Hi, Anders, and thanks for the question. You're right. In line with our communication, when we came out with our guidance, we had just seen a kind of a linear increase during the year. With where we are and what we know right now, we are probably more seeing it to be moving a little bit sideways. We also think that when we get the machine running in the right order, which we think we will into the second half, we are still fairly optimistic that our gross margin for the full year will be higher than what we showed in the first quarter. We need a little bit more time because we need to get the machine configured properly because the game is, in particular in the U.K., really about coming out of the year with the right stock position. When we get the factories going, it can recover quite some because we see some opportunities there, but we do not see the Q2 improvement we had originally expected. Okay, no, that's fair. I suppose also the pickup in activity can't take longer than just one or two quarters, of course. Perhaps a question on the guidance. I was wondering if you can share your assumption for Poland. Do you assume flat revenue growth in Poland or to reach the midpoint of guidance, for instance, or where are we at there? We expect that the Polish market overall will be in line with the volumes we saw there last year, and we expect minor price increases. It is like Poland has been, let's say, improving significantly over the last couple of years, where we see the more plateauing for the full year, where we're particularly in the first quarter on the volume side, then we're behind. Again, playing the balance around the price and volume, we want to make sure we maintain the price quality, and then we are less buoyant on the volume in order to defend the price in a flat market. That's perfectly understandable. Can you maybe share your capacity utilization in Poland in percentages, maybe? It's always a little bit what you compare against, but let's say most of the factories are running at a good utilization. If you're looking for how much extra capacity we would be able to pick up there, it's not a lot. A step change in Poland would make us run a little bit too high because some of the HOME efforts are ongoing, and both this year and also into 2026, a big part of our HOME investments will go into Poland to support both optimization and to give some extra capacity. All right, thank you very much, Bjarne. That was perfectly clear. Maybe just a final question from my side. I mean, I'm delighted to see that you do not book any special items here for Q1, but do you have any expectations for booking of special items for the remainder of 2025? No, we don't. That is clear. Thank you very much for your answers. Let me just remind you, if you wish to ask a question, please press five star on your telephone keypad. It does not look like we have any further questions, so I will hand it back to the speakers. Please begin. Yeah, thank you for listening in for our earnings call this morning. Wish you a good rest of the week, good success, and then looking forward to seeing some of you later throughout the day and in the next couple of days. Thank you. Thank you.