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CGBD 2025 Q4 财报电话会议

Operator: Hello, and thank you for standing by. Welcome to the Carlyle Secured Lending Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] I would now like to hand the call over to Nishil Mehta. Sir, you may begin. Nishil Mehta: Good morning, and welcome to Carlyle Secured Lending's Fourth Quarter 2025 Earnings Call. I'm joined by Justin Plouffe, our former Chief Executive Officer; Alex Chi, CGBD's newly appointed Chief Executive Officer; and Tom Hennigan, our President and Chief Financial Officer. Last night, we filed our Form 10-K and issued a press release with the presentation of our results, which are available on the Investor Relations section of our website. Following our remarks today, we will hold a question-and-answer session for analysts and institutional investors. This call is being webcast, and a replay will be available on our website. Any forward-looking statements made today do not guarantee future performance, and any undue reliance should not be placed on them. Today's conference call may include forward-looking statements reflecting our views with respect to, among other things, our future operating results and financial performance. These statements are based on current management expectations and involve inherent risks and uncertainties, including those identified in the Risk Factors section of our 10-K. These risks and uncertainties could cause actual results to differ materially from those indicated. CGBD assumes no obligation to update any forward-looking statements at any time. During this conference call, the company may discuss certain non-GAAP measures as defined by SEC Regulation G, such as adjusted net investment income or adjusted NII. The company's management believes adjusted net investment income, adjusted net investment income per share, adjusted net income and adjusted net income per share are useful to investors as additional tools to evaluate ongoing results and trends and to review our performance without giving effect to the amortization or accretion resulting from the new cost basis of the investments acquired and counted for under the acquisition method of accounting in accordance with ASC 805 and a onetime purchase or nonrecurring investment income and expense events, including the effects on incentive fees and are used by management to evaluate the economic earnings of the company. A reconciliation of GAAP net investment income per share, the most directly comparable GAAP financial measure to adjusted net NII per share can be found in the accompanying slide presentation for this call. In addition, a reconciliation of these measures may also be found in our earnings release filed last night with the SEC on Form 8-K. With that, I'll turn the call over to Justin. Justin Plouffe: Thanks, Nishil. Good morning, everyone, and thank you all for joining. As many of you know, I've assumed the role of Chief Financial Officer of Carlyle and resigned as CEO, President and Director of CGBD. Earlier this year, Alex Chi joined the firm as Deputy Chief Investment Officer for Global Credit and Head of Direct Lending and was recently appointed CEO and a Director of CGBD. With Alex's deep expertise, including prior experience as CEO of multiple BDCs, his proven leadership and strong industry relationships, we're confident he will help us continue to deliver results and growth for CGBD shareholders. Separately, Tom Hennigan, who has been with the platform since inception has been appointed President of CGBD in addition to his existing role as CFO, Chief Risk Officer and Director. I'd like to now introduce Alex and hand over the call for his remarks. Alex Chi: Thanks, Justin, and good morning. I'd like to start by highlighting how excited I am to join Carlyle. CGBD's core investment strategy will remain the same. We're focused on stable, high-quality credits in the core and upper middle market. As I look forward, I'm highly focused on continuing to build out our origination engine and harness the full power of the Carlyle platform for the benefit of CGBD shareholders. On today's call, I'll give an overview of our fourth quarter and full year 2025 results, including the quarter's investment activity and portfolio positioning, and provide an update on our investment outlook. I'll then hand the call over to our President and CFO, Tom Hennigan. 2025 was a record year of originations for both CGBD and the Carlyle Direct Lending platform, a direct result of our efforts to enhance our origination capabilities. We deployed over $1.2 billion at CGBD and closed over $7 billion of commitments at the platform level. The fourth quarter was also a record at CGBD with over $400 million of investment fundings, resulting in net investment activity of $193 million after accounting for repayments. Total investments at CGBD increased from $2.4 billion to $2.5 billion during the quarter and total investments at our MMCF joint venture increased to over $950 million. While we benefited from strong origination across the platform, CGBD was impacted by lower investment yields due to lower base rates and historically tight spreads on new originations. We generated $0.33 per share of net investment income for the quarter on a GAAP basis and $0.36 of adjusted NII per share. Our Board of Directors declared a first quarter 2026 dividend of $0.40 per share. Our net asset value as of December 31 was $16.26 per share compared to $16.36 per share as of September 30. Although the public markets have experienced volatility due to a reset in valuations for companies potentially disintermediated by AI, we remain confident in the quality and stability of our portfolio. Our software track record remains exemplary. Over the last 5 years, Carlyle Direct Lending has originated over $6 billion in commitments to software deals with 0 defaults. On average, the software borrowers in our book have grown revenue and EBITDA by approximately 8% and 20% year-over-year, respectively, and the weighted average loan-to-value of our software book is 40% below the rest of the portfolio, even after adjusting for multiple degradation based on public comparables. In addition, CGBD's software exposure as a percentage of the portfolio is below that of our peer group. We invest in software companies that we believe deliver embedded, data-driven and mission-critical products that deliver tangible ROI for customers on a daily basis. Our underwriting process focuses on businesses that have a strong competitive moat driven by either incumbency, data ownership, a network effect or any combination of these. Software as an industry has always been about innovation, and we believe that the same key factors that have traditionally provided market defensibility will also provide insulation from the newest market threat, AI. The products that are truly embedded in mission-critical, we view AI as a way to augment the functionality of these products, not necessarily to replace them. Many of our borrowers, which are already embedded mission-critical to their customers, either have already or are in the process of layering AI capabilities into their product sets to bolster their offerings. In addition to this core software investing framework, which we believe will insulate our portfolio from AI disintermediation, our underwriting process incorporates AI-specific risk factors into every new origination regardless of industry sector, and we actively assess both direct and indirect exposure across the portfolio using the same framework. In light of recent volatility and concerns in the software space, we have re-underwritten and examined our entire portfolio to evaluate AI disruption and displacement risk. We continuously monitor the portfolio closely through a detailed review process and continue to feel comfortable with our exposure, finding no material near-term risks to our portfolio companies from AI at this stage. We remain focused on portfolio diversification while managing target leverage. As of December 31, our portfolio was comprised of 165 companies across more than 25 industries. The average exposure to any single portfolio company was less than 1% of total investments and 94% of our investments were in senior secured loans. The median EBITDA across our portfolio was $97 million. As always, discipline and consistency drove performance in the fourth quarter, and we expect these tenets to drive performance in future quarters. Following quarter end, we announced the formation of a new joint venture capitalized by 4 BDCs comprised of CGBD, a private perpetual BDC Carlyle Credit Solutions and 2 BDCs managed by Sixth Street. The new JV, Structured Credit Partners, or SCP, is expected to increase diversification and portfolio yield at CGBD. SCP will focus on investing in broadly syndicated first lien senior secured loans financed with long-term non-mark-to-market and predominantly investment-grade rated CLO debt. Returns from SCP will be enhanced by no management fees or incentive fees at the underlying CLOs or at the joint venture, reflecting Carlyle's continued commitment to CGBD. SCP highlights the benefits of scale through partnership with Sixth Street and underscores the power of the Carlyle platform, which houses one of the largest CLO managers in the world with $50 billion of AUM. Historical median CLO returns have typically been within the 10% to 12% range, and we anticipate a potential 400 to 500 basis point uplift from the fee-free structure. So we expect the investment to be highly accretive to return on equity for CGBD. Looking ahead, we expect 2026 to be an active year as M&A activity increases. Through a combination of increased market activity in Carlyle Direct Lending's rejuvenated origination platform, our pipeline for the first quarter has picked up, and we expect to continue to see strong deal flow. CGBD is well positioned to capitalize on this opportunity with Carlyle's deep expertise across multiple asset classes, a strong and long-standing track record in direct lending and a growing origination apparatus. As manager dispersion increases, we expect the breadth of our platform and the consistency of our performance that differentiate us from credit managers that do not have access to the same scale, scope of investment capabilities or dedicated in-house investing, portfolio management and restructuring resources the Carlyle platform offers. With that, I'll now hand the call over to our President and CFO, Tom Hennigan. Thomas Hennigan: Thank you, Alex. Today, I'll begin with an overview of our fourth quarter financial results. Then I'll discuss portfolio performance before concluding with detail on our balance sheet positioning. Total investment income for the fourth quarter was $67 million, in line with prior quarter, in the average portfolio size was offset by a decrease in total portfolio yields, as a result of lower base rates and lower spreads. Total expenses of $43 million increased versus prior quarter, primarily as a result of higher interest expense due to a higher average outstanding debt balance as well as the acceleration of debt issuance costs from the repayment of our 2028 notes in December. The result was net investment income for the fourth quarter of $24 million or $0.33 per share on a GAAP basis and $0.36 per share after adjusting for the acceleration of debt issuance costs and the impact of asset acquisition accounting related to the CSL III merger and the consolidation of Credit Fund II, both of which closed in the first quarter of 2025. Our Board of Directors declared the dividend for the first quarter of 2026 at a level of $0.40 per share, which is payable to stockholders of record as of the close of business on March 31. In addition, we currently estimate we have $0.74 per share of spillover income to support the quarterly dividend. As mentioned during last quarter call, we expect to see earnings trough in the first half of 2026, primarily due to the impact of the base rate cuts, but we anticipate an increase in earnings thereafter as we ramp the portfolios of both JVs. Given CGBD shares continue to trade at a compelling discount, we repurchased $14 million of shares at an average discount of nearly 23% during the fourth quarter, resulting in $0.06 of accretion to NAV per share. We continued to repurchase shares in the first quarter with an incremental $14 million to date, which results in an additional $0.06 per share of accretion. Now we've nearly exhausted the existing $200 million share repurchase program. So our Board approved a $100 million upsize, increasing the total program to $300 million. On valuations, our total aggregate realized and unrealized net loss for the quarter was about $7 million or $0.09 per share, primarily attributable to unrealized markdowns on select underperforming investments. Turning to credit performance. We continue to see overall stability in credit quality across the portfolio. Key credit stats continue to be stable, including portfolio company margins, leverage levels and LTV and we expect interest coverage will continue to improve in future quarters, aided by lower base rates. The majority of our PIK is underwritten in origination or what we would consider to be a good PIK. And nonaccruals remained relatively flat as of December 31, with 5 names on nonaccrual representing only 1.2% of investments at fair value and 1.8% at amortized cost. Moving to the Middle Market Credit Fund, our long-standing JV. We continue to focus on maximizing both asset growth and returns. During the first quarter, we closed an upsize to the MMCF equity commitment, from $175 million to $250 million for each partner. MMCF is currently achieving a 15% dividend yield generated through over $950 million of investments with no fees at the JV. The equity upsize will enable us to continue to grow the JV and increase the impact of CGBD earnings. In addition, as Alex previewed earlier this month, we announced the formation of Structured Credit Partners or SCP, a new JV capitalized with $600 million of equity commitments from the Carlyle and Sixth Street BDCs that will invest in broadly syndicated first lien senior secured loans. The financing of these assets will be primarily through CLOs separately managed by Carlyle and Sixth Street, subject to oversight from SCP's Board of Directors. Governance of SCP has shared equally between Carlyle and Sixth Street as managers, and each BDC has equal representation on the Board. All key investment, financing and capital decisions are subject to joint approval by the JV board. CGBD committed $150 million of capital to the vehicle, which as Alex highlighted, will not charge any management or incentive fees on the underlying assets, providing a potential 400 to 500 basis point uplift to total returns, which have historically been within the 10% to 12% range for similar underlying vehicles. The JV plans to ramp at a cadence of 4 CLO issuances per year to ensure vintage diversification. And over time, the JV is expected to manage approximately $6 billion to $7 billion of assets fee-free at SCP. So we expect the JV to be accretive to return on equity for CGBD. I'll finish by touching on our financing facilities and leverage. As a reminder, in October, we raised a new 5-year $300 million unsecured bond at an attractive swap adjusted rate of SOFR plus 2.31%. We used the proceeds in part to repay in full the higher-priced legacy CSL through credit facility. And in December, redeemed the $85 million baby bond. In the aggregate, these capital structure optimizations lowered our weighted average cost of borrowing by about 10 basis points, extended the maturity profile of our capital structure with limited maturities until 2030 and reduced reliance on mark-to-market leverage. Our debt stack is 100% floating rate, matching our primarily floating rate assets, meaning CGBD is well positioned in advance of any additional interest rate cuts. At quarter end, statutory leverage was 1.3x. However, adjusted for unsettled trades of loans to MMCF, leverage at quarter end was closer to 1.1x, in line with prior quarter. Given our current strong liquidity profile, we believe we're well positioned to benefit from the expected pickup in deal volume in future quarters. With that, I'll turn the call back over to Alex. Alex Chi: Thanks, Tom. As we approach the middle of the first quarter, our portfolio remains resilient and our strategy remains unchanged. We continue to focus on sourcing transactions with significant equity cushions, conservative leverage profiles and attractive spreads relative to market levels. Our pipeline of new originations is active. And with a stable, high-quality portfolio, CGBD stockholders are benefiting from the continued execution of our strategy. As always, we remain committed to delivering a resilient, stable cash flow stream to our investors through consistent income and solid credit performance. At the platform level, I'm excited to continue building out the Carlyle Direct Lending team, expanding our existing capabilities. I'd like to now hand the call over to the operator to take your questions. Thank you. Operator: [Operator Instructions] Our first question comes from the line of Erik Zwick with Lucid Capital Markets. Erik Zwick: I wanted to start with a question for you, Alex, one nice to meet you virtually here. In the press release, you mentioned that fund is well positioned to take market share going forward. So I'm just curious from your perspective, who you'd be taking that share from? Is it BSL market, other private credit funds, banks? And then what is your competitive advantage relative to those that you'd be taking it from? Alex Chi: It's great to meet you as well. One thing I just want to underscore is that the investment strategy here, it's not changing. As I said, we're going to continue to focus on investing in high-quality companies in the core and upper middle market. While my prior firm's credit platform also had a strong presence in the large cap market, that's not an area I plan to aggressively push us into right now. As I mentioned, we have a strong credit culture, team underwriters dedicated to industry verticals, deep expertise. So we're going to stick to our knitting, and we're going to concentrate on playing a lead role in the majority of our deals. But also, one thing that we're going to do a lot more though is to win and take share is really just harness the power of the other parts at Carlyle, whether it's the large liquid platform we have, such as the CLO business, our Carlyle Alplnvest platform, which is truly differentiated, our Washington, D.C. presence in connectivity, of course, our global private equity platform and the list goes on. So we're not a pure-play direct lending shop. Rather, we have a direct lending business housed within one of the most formidable alternative asset managers in the world, and we're going to take it full advantage of that. Erik Zwick: I appreciate that. And then just a follow-up on the positive commentary that you guys expressed about the pipeline here in 1Q '26, seeing stronger deal flow. There's certainly some concern about a K-shaped economy and some cracks forming somewhere from your perspective and the sectors that you lend to. Can you just maybe talk about what's driving borrowing demand and contributing to the strong pipeline flow today? Alex Chi: Sure. Well, first of all, another good aspect of playing in the middle market and the core number is that there is always a better, more consistent flow of opportunities to look at. And we've all talked about the lack of DPI over the last 2, 3 years. We're starting to see that change. If you look at Carlyle at the platform level, you saw that last year that we returned a significant amount of capital through exits to our investors. We're starting to see that play through in the broader pipeline. What's also interesting is that, again, just given Carlyle's heritage around industrial, aerospace and defense, health care, those are areas that we're starting to see some more activity as those areas are now back in vogue, if you will. So -- that plus the fact that we have a rejuvenated origination platform. You've heard Justin say before, we hired a senior originator from Kaub that's been here for over a quarter. We have a couple of other managing directors who come with long-standing relationships. There are others coming on board. It's not a coincidence that the fourth quarter was a record quarter for us from an origination standpoint. And therefore, from a pipeline perspective, we're starting to see a lot more there as well. Erik Zwick: And last one for me. Just curious if you could talk a little bit about the rationale for the SCP JV. Why now? Is this potentially reflective of your view that spreads may remain tighter for a while in the middle market, and therefore, you can kind of take advantage of the nonqualified bucket availability to get some additional yield using the structure. Just kind of curious if how you describe kind of the timing and rationale for that new venture? Thomas Hennigan: It's Tom Hennigan. If you go back to last year, when we had our 2 JVs, we collapsed the 1 JV on the balance sheet. We've been looking to grow the existing JV with PSP. But we're looking to maximize and fully utilize the nonqualifying asset bucket. So we've really been over the last year, looking, "Hey, what's the next big venture for use is something we've been working on for a while. And to Alex's point, it's leveraging the broader Carlyle network and the strength of global growth syndicated team and at the same time, producing very strong expected returns based on no fee structure. So it's again, leveraging the broader Carlyle network and what we think is a very attractive overall structure. Operator: Our next question comes from the line of Brian McKenna with Citizens. Brian Mckenna: Alex, great to meet you, and congrats on the role and also same to you, Tom. Maybe starting with you, Alex, taking a step back here with a new set of eyes looking at the broader Carlyle Direct Lending platform, what are some of the near-term opportunities across the business? And what are your top priorities really for CGBD and the related direct lending strategies over the next year or so? Alex Chi: Sure. Look, as I mentioned, my plan is not to make large wholesale changes to the strategy. The Carlyle Direct Lending platform has actually been here for quite some time. Although I am relatively new here, Tom, who is sitting here next to me, has been on the platform for nearly 15 years. And our Chief Underwriting Officer, Mike Hadley, he's been here for 20 years. And there's deep underlying expertise across the core verticals where we play. So what we're going to do, again, with our rejuvenated origination strategy is just really start to take more share, see more flow. And one thing that I think that the leadership of Carlyle has done a great job of over the last handful of years is really start to just break down the silos so that we're harnessing the full power of all the different aspects of what Carlyle has to offer. And again, I don't want to interplay just the Washington, D.C. routes that we have. I think that really no one has a better handle on policy-driven cash flows than we do. So I think there's a lot of opportunity here for us to just take more share while we just stick to our core knitting. As I mentioned in my earlier comments, although, again, in my power shop, we had a formidable presence in the large-cap space, that's not an area that we plan to push into right now. Brian Mckenna: Okay. Great. That's helpful. And then just a little bit bigger picture. Clearly, volatility has picked up across a number of different segments within the market. It seems like capital liquidity is coming in a bit just across the capital markets. But I'm curious what you're seeing on new deals today that are coming together have spreads started to move out a little bit? Like I'm just curious what you're seeing real time on that front. Alex Chi: It's a great question. In terms of spreads, we are starting to see an opportunity where we're going to see a bit of spread widening. It's not going to happen in a significant manner. But in some of the deals that we're looking at right now, the proposed spreads that are coming in reflect what we were seeing perhaps 2, 3 months ago. I think just given the volatility that you just referenced, it's an opportunity to start getting some spread back, especially in the middle market. Another -- yet another reason as to why we're not actively pursuing a strategy back in the large-cap piece of the landscape. Look, I think software is an area that a lot of people have spoken about. I think in terms of the flow of software opportunities, I think you're going to see a bit of a pause there, not so much because we just think that software is better or anyone is getting out of the market. It's just because many of the software deals that were acquired, they were acquired at very, very high robust multiples 2, 3, 4 years ago. And I think just given the fact that people are still trying to figure out what AI means for these companies, I think the value expectations versus what buyers want to pay for, they're probably -- you're going to see some enterprise value gaps here. So I think we're going to need some time in order for people to really assess what's happening in that landscape before you start to see more deal flow. So I think that people are going to start to focus their areas more on more core parts of the economy, and those are areas where you see significant amount of portfolio companies that yet to be monetized. So I think that's where we're going to start to see more of the flow. And I think on spreads, to your question, I think for the time being, we're not going to see any more compression, which is good. And if anything, we're starting to see some opportunities for us to get the spread back. Brian Mckenna: Got it. Okay. That's helpful. And then just one more for if I may. Two months into the first quarter here, I mean, just any incremental color or detail you can share with quarter-to-date trends just as it relates to new originations, markups, markdowns, and even just credit quality more broadly. Thomas Hennigan: Brian, I think that the -- on the portfolio continue to have overall strong performance. We're still in the process of getting fourth quarter results. Obviously, you're not going to see anything in those fourth quarter results. One thing we have done is just based on -- certainly, we're seeing in the broadly syndicated market, some volatility in trading prices, while that does not directly translate by any means to our private credit valuations, we and our third-party valuation providers are taking a look broadly at the portfolio, specifically at the technology and software deals in the portfolio. So I think probably you're going to see a modest markdown on software names just based on market volatility and uncertainty, but relatively modest, certainly relative to some of the volatility in the broadly syndicated market. Operator: [Operator Instructions] Our next question comes from the line of Rick Shane with JPMorgan. Richard Shane: Congratulations on all youf new roles. Look, one of the themes that has emerged listening to all of the BDC calls or many of the BDC calls is the potential relief from the asset sensitivity of your borrowers' balance sheets. And I am curious when we think about this, and again, remember, we come at this from the perspective of also covering many of the commercial mortgage REITs where interest expense is a huge, huge part of owning commercial real estate. I am curious when you think about the businesses that you're lending to, and their revenue and cost structures, how significant is interest expense in their overall expense load? Thomas Hennigan: Yes. It's something that -- obviously, when we look at our credit metrics, interest coverage ratio is getting better, it's marginal, base rates down 75 basis points, expected additional rate cuts -- on the margin, it's going to be helpful. But just like we ran the sensitivities when rates were going up, even if we said, okay, rates were at 5%, 6%, they had a gap up materially before we were concerned about liquidity at particular our sensitivities that they had to go up another 300 basis points. So certainly, on the margin, it helps. Is it a material benefit where we think it's going to be a material difference? No, it's certainly going to help on the margin. But based on certainly where the current base rates are -- based on where the current curve is. Alex Chi: The other comment that I'd make is on new originations that we're looking at right now. It's not only just interest coverage that we're looking at. We're also looking at fixed-charge coverage ratios. And the fixed-charge coverage ratios that are now coming out that we're underwriting to, there's a lot more cushion than what we saw before. We would typically look at a 1.1x fixed-charge coverage ratio, and then we sensitize that, of course, for different industry curves. But now out of the box, we're starting to see much more cushion, call it, 1.25x or even higher going towards 1.5x, which is really nice to see because I think that the borrowers are starting to take a bit more of a conservative approach with respect to how much leverage that we'll put on these companies when we buy them. Richard Shane: Got it. Okay. And then the question that I've sort of asked a couple of companies through earnings. Look, you guys are in the position you are able to do more than one thing at a time, but you are experiencing significant repayments, stocks trading at a significant discount to NAV. You have a history of repurchasing shares. Is the best incremental dollar the next investment given dynamics in the market? Or is the best investment repurchasing stock? Thomas Hennigan: Rick, we think it's a balanced approach as you see what we've done in the last 90 days is we started buying back shares last quarter. We've continued into this quarter. So again, it was $14 million in the fourth quarter, another $14 million quarter-to-date in the first quarter. That represents 3% of our total shares. It's about $0.06 per share accretion in each quarter to $0.12 in total. That's $186 million since inception. So we've been supportive of going back a number of years in buying back shares. And our Board increased the $200 million threshold up to $300 million at our recent Board meeting. So we certainly anticipate based on where the stock is trading, it's certainly accretive for investors to continue considering buybacks. At the same time, when you look at primarily our 2 JVs where we we're within our target leverage range. Net-net, if we're adding investments to our JVs, that's very accretive for the fund. So on the margin, we're not adding -- if we're adding 475 or 450 spread deals. It's to our current JV where we're able to generate a 15% plus return from that fund. And certainly, we anticipate over the course of the next 2 years, investing and growing our second -- well, not our third JV, but our Structured Credit Partners JV. So we think those are very accretive dollars in terms of where we're putting our new investment dollars on a net basis... Richard Shane: I think I interrupted. Thomas Hennigan: No, go ahead. Richard Shane: No, that's it. I just wanted to say thank you. I appreciate the clarity on that. It helps us think about the talent you may be paying off over the next 12 months. Operator: Ladies and gentlemen, I'm showing no further questions in the queue. I would now like to turn the call back over to Alex for closing remarks. Alex Chi: Great. Well, thank you very much. Very excited to be here, and we look forward to coming back in subsequent quarters. Operator: Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.

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MER.TO 2025 Q4 财报电话会议

Operator: Hello, everyone. My name is Jenny, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Meren's Fourth Quarter 2025 Results Presentation. [Operator Instructions] This event is being recorded, and the recording will be available for playback on the company's website. I will now pass the meeting to Mr. Mussannah Chowdhury. Please go ahead, Mr. Chowdhury. Mussannah Chowdhury: Hello, everyone. Thank you for joining us today for Meren's Fourth Quarter 2025 Results Presentation. I'm Mussannah Chowdhury, part of the Investor Relations team here at Meren. And I'm joined today by Oliver Quinn, our Chief Executive Officer; and Aldo Perracini, our Chief Financial Officer. We'll begin today with prepared remarks and then open the floor to questions. Just before we get started, a quick reminder that today's presentation contains forward-looking statements. These reflect our current assumptions and expectations and are subject to risks and uncertainties that could cause actual results to differ materially. More detail on these risks can be found in our regulatory filings with SEDAR + and on our website. With that, I'll now hand you over to Oliver. Oliver, please go ahead. Oliver Quinn: Thanks, Mussannah, and thank you, everyone, for joining us today. This is my first results presentation as Meren's CEO, and I'd like to begin by thanking my predecessor, Roger Tucker, for his strategic leadership and personal support over the past few years. I'm proud to have been given the responsibility to steer the company through its next phase of growth to lead a great team of professionals and to continue working with our industry and government partners towards long-term value creation. Turning to Slide 4 and an overview of 2025. I'm pleased to report on a year of strong delivery. To begin with, last March, we closed a transformational prime consolidation deal, doubling our reserves and production from our high-quality and high netback assets offshore Nigeria. This was a strategic transaction as we simplify the ownership structure of our core assets, enhancing day-to-day control and creating a strong platform for further growth. Through 2025, we have successfully integrated Prime and have a lean and fit-for-purpose organization to manage our production assets as well as progress our strong portfolio of growth opportunities. Underpinned by closing of the Prime amalgamation, we delivered strong shareholder returns with USD 100 million in base dividend and $8 million in share buybacks. Alongside shareholder returns, the balance sheet has been strengthened with the repayment of $420 million of the outstanding RBL facility, delivering both cost savings and a healthy year-end net debt-to-EBITDAX ratio of 0.4x, all whilst maintaining significant liquidity to cushion the business against market volatility. Aldo will talk in more detail about the maintenance of a prudent leverage position and our broader approach to ensuring financial resilience through the cycle. 2025 was a year of transformation for Meren, but our focus today remains on continuing to maintain our balance sheet strength, enhancing the production profile through organic growth opportunities, and continuing to mature options to deliver long-term value to our shareholders. I'll now take you through our production performance on Slide 5. For 2025, we achieved working interest production of 30,800 barrels of oil equivalent per day and 35,100 BOEs per day on an entitlement basis, both in line with our full year guidance. During the first 9 months of the year, the Akpo and Egina infill drilling campaign supported steady average production of around 32,000 BOEs per day on a working interest basis with production lower during the fourth quarter primarily due to planned maintenance shutdown on the Agbami field. Q4 production was also impacted by minor facility issues, including temporary shutdowns related to power supply, particularly during the second period of the quarter. These issues were actively managed through targeted operational interventions, enabling the fields to continue performing in line with expectations following resolution. As previously communicated, the Akpo and Egina drilling program was paused in the third quarter to allow incorporation of positive early results from our recently acquired 4D seismic data set that will aid in the optimization of drilling locations. Due to the earlier finish of the 2025 drilling campaign, our full year capital expenditure came in at the lower end of our guidance range. In 2026, we expect to see sustained drilling campaigns in each of Akpo, Egina and Agbami commencing later in the year. I'll now hand you over to Aldo to take you through the financials. Aldo Perracini: Thanks, Oliver. In the fourth quarter, Meren completed three oil liftings for around 3 million barrels at a realized all-in sales price of $64.4 per barrel. For 2025, we have completed 12 total liftings totaling around 12 million barrels at an average all-in sales price of $72.2 per barrel. Comparing favorably to dated Brent at $69.1 per barrel. Meren has applied a variety of different hedging instruments to protect the downside while also maintaining partial exposure to potential upside. This will include a mix of physical and financial hedges such as swaps, collars and puts, and you can find further details on this in our Q4 MD&A. Moving on to financial highlights. Before going through our numbers, it is important to note that we have reported an impairment of $105.3 million this quarter in relation to the Agbami cash generating units. I must emphasize that this impairment is noncash and it has no impact on our cash flows. This charge has come as a result of oil price volatility in 2025 and updated cost forecast relating to the Agbami field. More specifically, the updated cost forecast is mainly in relation to planned long-term life extension activities, allowing the FPSO to continue to operate reliably and safely through to the end of the license. This will also allow more flexibility on the FPSO to support future infield drilling and tieback opportunities, which we will touch on shortly. Moving on to our highlights. For 2025, we delivered an EBITDAX of $441 million. This fell just short of our full year guidance, mostly due to a larger overlift adjustment for the period relative to the estimates for the midpoint range of the revised guidance and other smaller variations on Nigerian royalties and levies. Cash flow from operations before working capital came in at $262 million for the year with a reported CapEx of $100 million largely driven by drilling activity in Akpo and Egina this year and facility costs on Agbami, both of which have met our 2025 guidance. Free cash flow before debt service and shareholder distributions was $289 million. As Oliver mentioned earlier, we have significantly deleveraged the business this year, paying down the RBL by $420 million, as well as distributing roughly $108 million in shareholder returns. Moving on to cash flow for the year. This slide shows the 2025 movements and year-end 2024 cash balance on a constructive basis as if the premium amalgamation had closed on first of January 2025. We ended 2025 with a cash balance of $175 million compared to an opening cash balance of $461 million. Net cash generated in operating activities for the year was $348 million, which included a positive working capital movement of $86 million, primarily driven by the receipt of oil sale receivables driven by the timing of cargo liftings. The cash outlay of $480 million post consolidation was for the repayments of the RBL, clearly demonstrating our intention to optimize our capital structure and resulted in about $12 million savings in reduction of financing costs. We also distributed a little bit over $108 million during 2025, comprised of about $100 million in base dividends and $8 million in share buybacks. Overall, through disciplined cash management, we have materially reduced our debt, strengthen the balance sheet and established a solid platform for sustainable growth and value creation. We are also pleased to announce our first quarterly dividend of 2026 of $25 million, which will be paid next month. Moving on to the next slide. At year-end 2025, our amounts drawn under the RBL stood at $330 million with a net debt position of $155 million and net debt to EBITDAX of 0.4x, significantly below our target of onetime. The chart on the right demonstrates our consistent and prudent approach over the last few years towards debt management with continuous efforts to optimize liquidity while minimizing borrowing costs. It is worth recalling that post premium amalgamation, we canceled an undrawn $65 million Meren corporate facility to eliminate standby fees. As a post fourth quarter update, we drilled down an additional $40 million under the RBL due to normal working capital timing related to liftings and short-term liquidity positioning within the group. So we have very good flexibility on the RBL revolver facility at competitive borrowing costs. We are currently in the process of refinancing the RBL that facility which will allow us to save more on borrowing costs and to enhance our debt amortization profile. In the meantime, as shown on the right hand side, we do retain an ample liquidity headroom. Moving on to the next slide. With our full year results, we have also announced our full year management guidance. Our working interest production guidance comparing to 2025 actuals reflects the timing for the recommencement of infill drilling campaign, which is currently expected to start towards the last quarter of the year. Our EBITDAX and cash flow from operation guidance relative to 2025 actuals reflect the lower production base and accounts for a lower full year Brent oil price at $63 per barrel compared to the actual Brent average of $60 per barrel for 2025. Moving on to the next slide. And before handing back to Oliver to take you through our organic growth opportunities, I will briefly highlight the positive developments in Nigeria. Implementation of the PIA was supportive to our business, and this positive development has been followed by a number of presidential executive orders aiming at facilitating investment in Nigeria's oil and gas sector and tackle project execution risks such as cost inflation and schedule delays. So we are seeing greater fiscal clarity, stronger government engagement and targeted incentives aimed at supporting upstream investments. Recent final investment decisions on projects such as Bonga North the Ubeta gas project and the HI offshore gas project demonstrate renewed capital commitment and growing confidence in Nigeria as a long-term energy investment destination. For us, a more stable and predictable operating environment is constructive for both capital allocation and valuation across our Nigerian portfolio. We are also seeing Nigeria's USD credit spreads tightening significantly from peak levels, reflecting a meaningful reduction in the market's perceived sovereign risk and improving investor confidence in the country. This has also been reinforced by recent positive credit rates and developments in recent months. We are very pleased to see these positive developments and continue to have high confidence in Nigeria and its oil and gas sector with clear fiscal and regulatory frameworks supporting our core business and key assets. I will now hand over to Oliver to take you through our portfolio outlook. Oliver Quinn: Thanks, Aldo. Turning to Slide 12 and our business outlook, I want to focus on the organic growth opportunities in the portfolio, starting with our production hubs in deepwater in Nigeria. For Akpo and Egina, we are planning to recommence drilling in late 2026 with the Akpo Far East exploration well. Akpo Far East is a near-field prospects located just 5 kilometers from existing production facilities and represents the test of a fast-cycle infrastructure-led tieback opportunity with around 23 million barrels unrisked mean recoverable resource net to Meren. In a success case, first oil could be achieved through the Akpo FPSO in less than 2 years. The drilling campaign will then move toward infill drilling across both Akpo and Egina from late 2026 and into 2027. And this will add new production as we move through 2027. Beyond that, we have made progress around our undeveloped discoveries, Preowei, Egina South and Ekija, all located within 20 to 30 kilometers of existing Meren production hubs. That proximity is important as it offers a growth portfolio of short-cycle, capital efficient and lower-risk developments that utilize our existing brownfield infrastructure and together consist of around 42 million barrels of resource net to Meren. At Agbami, drilling also recommends in late 2026 with a campaign including appraisal of the adjacent Ekija discovery and 6 infill wells within the field. We are excited to get back to drilling in 2026 and the combination of testing new, low-cost resource and short-term production growth through infill drilling presents a series of low-risk, high-return opportunities to bolster our production profile and in turn, supports long-term value for shareholders. On Slide 13, let's turn to another key growth area for Meren, the Orange Basin. Beginning with Namibia, the joint venture continues to progress the Venus development project, which remains on track for final investment decision this year. According to the operator TotalEnergies, FID is targeted for mid-2026, with the environmental and social impact assessment now published and the environmental clearance certificate application submitted marking a key regulatory step towards FID. As a reminder, front-end engineering and design, FEED, is progressing with a plan for 40 subsea wells tied back to an FPSO with a peak capacity of 160,000 barrels of oil per day and a production life of 20 years plus, delivering significant and sustained cash flow to Meren. As we get closer to the final investment decision, we anticipate scope for us to include Venus in our annual reserves reporting process. Beyond Venus, several material exploration prospects remain to be tested on the license with planning in progress. And importantly, we retain full exposure to these high-impact opportunities with no upfront cost as all exploration and development spending is carried through to first commercial production. In Block 3B/4B in South Africa, the legislative notification and appeals process remains suspended pending the Supreme Court of Appeals judgment for Blocks 5, 6 and 7. From a project perspective, the identified lead prospects, Nila is drill-ready and the operator TotalEnergies is ready to commence drilling once the appeals process is concluded. To remind you, the cost exposure to Meren in South Africa is limited with the transaction completed with TotalEnergies and Qatar Energy including a capped exploration carry. Whilst the regulatory issues elsewhere in South Africa of cause delay, our 18% carried interest, combined with the scale of the prospects identified means we remain excited about the potential for the block and its ability to act as a transformational catalyst for Meren. Now turning to Equatorial Guinea on Slide 14. We hold two operated licenses to offer another set of organic growth options within the portfolio. Starting with EG-31. This is a shallow auto gas position close to existing infrastructure and situated around 30 kilometers from the Punta Europa LNG facility. Through 2025, our evaluation is focused on maturation of the existing Gardenia gas discovery that represents a circa 200 Bcf gross resource with the potential to be developed as a low CapEx, low unit cost short-cycle projects that utilizes capacity in the adjacent LNG facility. Beyond Gardenia, several nearby gas prospects, Macif and Whistler offer material longer-term growth potential with unrisked gross prospective resource estimates of around 5 Tcf. As part of our wider organic growth options, EG-31 provides an attractive rightsized LNG opportunity with low CapEx exposure through utilization of existing gas and LNG infrastructure. Moving to EGA team, a deepwater exploration block with oil prospectivity. We have identified basin floor fan targets with multibillion barrel potential in a series of stacked prospects. Across both blocks, we have been running a farm-down process. And whilst the two opportunities offer differing investment profiles, industry interest has been encouraging, and we are now in active discussions with potential partners. Importantly, we have secured 2-year license extensions for both blocks, giving us additional flexibility as we progress partnership discussions and align next steps with the government. With the right partners in place, drilling activity could take place in the next couple of years. Moving to Slide 15. I want to bring together these catalysts to outline the breadth and scope of our organic growth portfolio set across four countries and multiple basins. Whilst delivering corporate transformation from Meren in 2025, we have remained focused on active in deepening our evaluation of organic growth options and are confident as we move through 2026 that we are building a strong portfolio that offers compelling growth through choice and most crucially, whilst remaining within our disciplined approach to the balance sheet and financial frame. I'll conclude on Slide 16 and revisit our capital allocation priorities. Disciplined capital allocation underpins our business plan and the execution of our long-term strategy. Firstly, our balance sheet remains a core pillar of the business. Throughout 2025, we have demonstrated that discipline, and we will continue to maintain a minimum liquidity position of $150 million and a net debt to EBITDAX target ratio of 1x or less. Secondly, we see compelling value creation in our organic growth portfolio. Our Nigerian assets provide multiple pathways to grow production through infill drilling and subsea tiebacks. These low-risk short investment cycle opportunities, leverage existing infrastructure, generate capital-efficient returns and help build a durable foundation for long-term value creation. With a streamlined business firmly in place and a strong balance sheet, we continue to selectively screen inorganic opportunities that meets our strict strategic and financial criteria, ensuring they are accretive and complement our existing business and priorities. Thank you, and I will now pass you back to the operator for Q&A. Operator: [Operator Instructions] First question comes from Jeff Robertson with Watertown Research. Jeffrey Robertson: Thank you. Good morning. Aldo, can you talk a little bit about the timing of the liftings you anticipate in 2026? Aldo Perracini: Yes. So for -- we have to look at the lifting as per FPSO, right? That is discretionary, and that creates the timing difference in relation to the liftings. So for 2026, we are expecting around eight cargoes spread throughout the year. So I think it's safely to assume they are evenly spread throughout the year just for simplification purpose. Jeffrey Robertson: And Oliver, with respect to EG, does the 2-year license extension give the potential partners that you have had discussions with time to get an exploration well drilled on EGA team? Oliver Quinn: Yes. Jeff, yes, I think the 2 years is important in the sense of -- as we said in the presentation, we are in active conversations on both positions, and they are very different things, of course. But what that 2 years does is, it just gives us a runway to complete those conversations and see where we get to without license time pressure, if you like, which is good. It signals strong support from the government for the ongoing process. And to the specifics, yes, I think, look, it depends exactly when we might close the transaction and who it's with. But I think it's sufficient time to mature and drill a well. I think when you look at 31, we're very focused on Gardenia because that's a discovery. So that's kind of appraisal development straightaway that shallow water is technically not challenging. Quick to do. And 18 is deepwater. But again, we have one very, very high-graded prospects. I think people have looked at it take different views, of course, but they see the same prospect. And so therefore, you know what you're going after. It's not a matter of saying well, hey, let's get a partner and then rework the whole block. So yes, there's a reasonable time line there. I think next key step is kind of as we go through the first few months of the year here, where do we get to on the commercial front? And can we get the right partnership in place so we get the right funding structure to unlock both opportunities. Jeffrey Robertson: Under the timing of the extension for Block 18, would the permitting of an exploration well add any time to the extension such that a group could consider the results of the well? Oliver Quinn: Yes. So I think in the detail of it, you've got a 2-year -- well, whatever license period you've got, say, 2 years in this case. You drill a well, you make a discovery, let's say, and then you move in, in the contract, it defines kind of appraisal periods, commercial evaluation periods before you would declare commerciality and that brings time to do that, if that makes sense. So the first period is in summary, really for the first primary activity. And then depending on success and how clear it is from the first well, there is a period for appraisal there where you can come and put an appraisal plan together. That could be more appraisal drilling. It could say, well, hey, I'm going to test a well or whatever, but you have that period to do that. Jeffrey Robertson: And lastly, for now, with respect to inorganic growth, Oliver, when you think about Meren's current opportunity set over the next couple of years, which would require capital dollars. What type of asset it's best in the portfolio do you think? Oliver Quinn: Yes. Good question. So I think I'll start with what we have today, and I think hopefully you saw that in the presentation that I'll take a step back, really when we completed the prime amalgamation, of course, we were doubling down on production reserves, cash flow that we knew well because we've been a co-owner. We also knew there was a lot of organic growth opportunity in there. So exploration resource, contingent resource, high-value stuff. I think as we've moved through putting the two organizations together with a bit more capacity over the last 6 months, we're more excited about that. So I think we see a lot more opportunity around that portfolio for tiebacks to the three FPSOs. EG, as we've just talked about, we've matured that very well, and that's come a long way and looks exciting. So I think that set of opportunities in the company today is exciting and I think has emerged in a very strong way as a set of options. The other backdrop there, and Aldo touched on this in the presentation is the Nigeria landscape has drastically improved. I think both fiscally, politically support, you see production rising there quite quickly. You see investment dollars coming back from international firms as well as local companies. So there's a better landscape there beyond the technical for maturing things in Nigeria. So in sum, we're really excited about what's in the current portfolio. When you look at the character of that, it's high-value contingent resource coming into production short period, but infill drilling next couple of years, new kind of tiebacks end of the decade. So that's great, and that delivers a lot of value. What it does mean when we look at the inorganic space is we say, well, look, are there opportunities out there that could add production, cash flow, scale up the business in that respect in the shorter term. So they would complement the growth that's in the current portfolio, but they would kind of build the balance sheet, build the operating cash flow, let's say, and help us kind of fund some of those organic opportunities because, again, as we show our kind of capital allocation, we're not going to overlever the business to do that stuff, right? We develop a series of options, but we're choosing which ones to do in the context of that disciplined balance sheet. So again, some inorganic growth, if it's the right opportunity. And again, we're very, very disciplined on that, could help unlock some of those barrels as well Operator: [Operator Instructions] Our next question is from David Round with Stifel. David Round: Perfect. Sorry about that. A few questions from me, please. The first one is on the gas sales agreement. I read something about that this morning. Just wondering if you can give us a sense of how meaningful that may or may not be. The second question for me, please, is you've mentioned ATCO Far East and Acacia as specific targets. Just wondering how quickly those could be tied back in a success case. And I suppose if that is going to take a few years, how many infill wells should we be assuming each year to support production in the meantime? And if I -- actually, I'll sneak just a follow-on to that. You've got a '26 CapEx budget of $100 million to $140 million, I think. Are you able to just break that down for us, please, just in terms of how many wells are assumed in that? Is it all just long lead items, please? Oliver Quinn: Yes. Thanks, David. I'll take the first one on the gas and then I can come back on the second one, and we can get to the third. Aldo Perracini: Yes. Okay. So in relation to the gas sales agreement, it was a result of a prolonged negotiation that we were having to revise the index that's based on the contract that we signed back in 2018, given that it took some time to get that result. So there will be a couple -- a few impact that you're going to see through cash flow and P&L in the coming period. So there will be first one lump sum payment that we're going to receive now in the first quarter of 2026. Second, there will be an increased price coming from the revised index, which will flow through all the periods as we produce and export the gas from Akpo and Egina and there is a third component, which is the recovery of the arrears, right? The difference between what we should have received back from 2020 compared with what we have received and that delta we will receive also in time through a reduction of the handling fee. So you should expect a larger impact in 2026, given to the resolution of the contract. And let's say, on an ongoing basis, we are talking maybe something about, let's say, doubling the gas revenues that we have comparing with the last 2 to 3 years. So it should be meaningful, especially in the first year. Oliver Quinn: Okay. I think on the second one, David, it's a good question on Nigeria. So maybe I'll just take a step back. We're getting two rigs back end of this year, which we'll come on to on timing and your CapEx question. But actually, what has happened is we've had the longest drilling break across the three deals since kind of first oil. So when you look at our '26 guidance, it's effectively that's what it reflects. There's, of course, natural decline, as you'd expect. But we've had this long drilling gap that, again, we haven't really had before. And that's probably what's underpinning that decline. So we turn to how do you firstly arrest that decline? And then how do you grow from the base, if you like. So I think in terms of arresting the decline, it's, as you said, the infill drilling. So when we look at that next program, to start with Agbami, rig will come somewhere at the end of this year. I mean there's operational uncertainty on exactly what time the rig arrives. But nevertheless, it's firm, it's coming. And there are 6 infill wells planned on Agbami through '27 across the year. So when you look at that, I mean, that's quite -- for a field of that age, it's quite positive. It's quite sustained. So there's a relatively big infill drilling campaign there, which will arrest natural decline. And then we go across to Egina and Akpo with TotalEnergies operating. And again, in parallel, if you like, TotalEnergies are contracting for a rig. The plan is to bring the rig in again, towards the end of this year. So we're kind of guiding Q4 plus or minus operational kind of issues on where the rig is coming from. And again, interestingly, there's two buckets of opportunity there. One is the kind of Akpo Far East, so testing growth, either prospective resource that's near field, contingent resource. And then as we move into '27, the focus will be on infill drilling Egina and Akpo, so three wells there. So that gives us in the kind of near term, if you like, at the end of this year, the kind of barrels that are coming on stream. It will be early '27, but barrels come back on stream and rest of natural decline. and equally gives us some more certainty on prospective resource, contingent resource and how that may play out. On the latter, I think reality for the tiebacks is Akpo Far East is quick because it's 5 kilometers from the FPSO. So we hope to get first oil from that in the success case in less than 2 years. And I think the wider tieback opportunity set, we didn't talk about it today really, but Preowei near Egina, there's Egina South, which is a similar size discovery to the south of Egina. Those things are kind of 3-year cycle. And again, we are optimistic of making project progress on those this year, and then that would be Preowei first oil '29. Egina South, a bit more uncertain, but again, 3-year cycle, so kind of end of the decade. Akpo, which we did mention is a potential tieback to Agbami. And again, similar to the well that we will drill probably end of this year, early next year, that's an appraisal well. So again, it's discovery contingent resource. And depending on what we find in that appraisal well, that's again circa 3-year cycle tieback to Agbami. So I think I'd characterize it good campaign of infill drill coming in the short term, kind of end of this year, good testing of contingent resource that gives us kind of a lot of options for growth barrels end of the decade. And then that leaves us kind of one more gap, which is, well, what more infill drilling is there to do before the end of the decade to keep production up in the fields. And so I think there we see 2 or 3 options at least in Egina and Akpo, so potentially '28, '29. And in Agbami, 6-well campaign is pretty big anyway, but we're working there on is there another similar campaign a year or so later. So I think we'll be on and off active on the infill drilling in summary through to '29, 30 with the aim of sustaining base production. And again, in parallel, that keeps us going while we grow the kind of contingent resource projects and prioritize which of those are the best to do. David Round: Okay. That's really helpful. And sorry, just a final one, just around CapEx for this year. I mean, is that mostly long lead items? Oliver Quinn: It's -- there's some long leads in there. I think the range that you see is really the timing of rigs arriving. So it's a classic year-end issue. So we're planning on Q4, but those rigs could arrive just contractually operationally, possibly Q3, and they could equally arrive late Q4. So it gives us a bit of a range on that number. But it's primarily -- we're assuming the wells are drilling Q4, so it's CapEx in the ground as it were. We did put some numbers in some CapEx into long leads last year for Agbami, for example. So that was done kind of '25 mainly. Operator: Our last question comes from David Mirzai with SP Angel. David Mirzai: Firstly, on exploration, you've got Far East Deep. You've got [indiscernible]. Is this in reference to deeper reservoirs or down fault? Have you intercepted them? What's the reservoir like? What's the kind of risk both around volumes and deliverability in regards to these prospects? Secondly, appraisal. You pointed out your contingent resources on Preowei on Ekija in South in Nigeria, but also the existing Gardenia discovery in Equatorial Guinea. Obviously, these discoveries have been around for a while. You've had capacity in nearby facilities and they haven't been developed. What's the key hold up, the key contingent reason behind these resources not being developed to fully utilize their respective FPSOs? And just lastly, on scale, I mean it's quite kind of observable to any analyst and investor that the market wants fewer oil and gas companies with greater scale, broader portfolios, more ability to finance their own developments and that they reward effectively higher cash flow with lower debt levels and with greater liquidity. Now having gone through the process of combining in Prime, that's clearly the next step forward for you. And I just want to kind of get your thoughts around what scale is enough or what your investor base is really looking for you to bring you up to the next level. Oliver Quinn: Yes, thanks for the questions. I think we start with the first one, the exploration point and kind of split that up. Akpo Far East is exploration. So that is prospective resource, let's say, it's kind of 1 in 3, 1 in 4 chance of success geologically. I think -- the commercial chance of success on the back of that is extremely high because it's very close to the existing infrastructure. It's within the kind of field physical ring fence, if you like. So the economics are extremely compelling. So it wouldn't take a huge volume there to reach commerciality. So that one is about geological chance of success. I think the others, just to segue that. So Ekija Egina South are appraisal. So those are contingent resource for us today. So the discoveries that we think, again, are strong candidates for tieback and development, but they do need some appraisal drilling to confirm volumes and technical parameters. And then Preowei is slightly different again because that is actually reserves for us, that's 2P reserves. And that really reflects the fact that Preowei has been very advanced as a project. It was delayed in COVID as many things in terms of CapEx contracting costs, but it stayed in 2P reserves for us because it's very advanced as a tieback to Egina, and that's a project that we are pushing with the operator and our partners to mature this year towards a final decision. So they're all slightly different. I think the only pure exploration one in that set is Akpo Far East. The others are really about appraisal and again, just rightsizing, improving commercial volumes. I think the second question, the wider point on Gardenia and some of the other resources. Look, I think there's a timing point to a lot of this stuff. So in two respects, one, the projects themselves and actually the second one, the market, which I'll come back to because I think it also addresses your third point. But if you look at our three FPSOs in Nigeria, huge fantastic facilities, huge capacity. They've been full for most of their life, of course, and their varying ages. They are in this natural decline phase, which you see in the base production. But what that means is there's an optimal timing point here of saying, well, actually, when is the right time to develop resource to backfill those facilities. And that's now because you don't just want to be able to bring a small amount of resource in. And of course, you want -- for the economic development, you want to be able to maximum development of something like a Preowei. So I think the timing point is partly on the infrastructure and when is that infrastructure available, when is the right time to backfill. I think specifically, again, on EG, look, we've had that block for a couple of years, '31, but having worked that through, matured it, particularly Gardenia as a discovery. Again, that's a timing point in that the monetization is through the existing EG LNG brownfield facility. And so it's the optimal timing of doing the project, knowing that there's capacity in the brownfield infrastructure, which you will use to produce LNG off the back of it. So I think that timing is now. So again, we'll make decisions on all of those through the coming period in terms of the right thing for capital allocation. But certainly, the project aspect has unlocked. I think more broadly, again, the second point on that, where is the industry? And I think you alluded to it again in your third question, but the industry is back in a kind of growth mode. I think a lot of bigger companies are short of resource. And so there's a lot more support for the right type of project, the right type of CapEx. Now again, from our perspective, we are super disciplined on the balance sheet. So lots of good opportunities, but what we're not going to do is overleverage the balance sheet, expose ourselves to CapEx overruns, et cetera. So we'll do it in a prudent way, but I think it's a good time to be maturing contingent resource and pushing that into reserves and ultimately monetization. So there's a macro backdrop, I think, is important there as well. I can move on to the third question, David, or if that covers your first two. David Mirzai: Sorry, I was just being unmuted there. Yes. No, just to dig down on Akpo Far East, what is the geological risk, sorry? Oliver Quinn: Geological sorry, specifics. Yes, it's trap really. So the reservoir is same as the Akpo field. So we understand it well. It's a phenomenal in the detailed kind of type permeability reservoir, super good fluids. So the thing on Akpo Far East is the trap. Is there an updip trap that works? And then I think there's a secondary more commercial risk on fluid. But that's secondary in two senses, one that we have a good handle on the seismic. So we think we understand that fluid and it's oily and we can characterize that. And actually, the second part of that, Akpo, of course, is a very gassy field, and we export that gas. And as Aldo just talked about earlier, we've got improved pricing on that gas as well. So I'd say that's a secondary risk, but the geological -- fundamental geological risk is trap, yes. David Mirzai: That's great the first two. Obviously, question three around scale. You've talked in your first two answers that you're being prudent with the balance sheet because cost overruns. Obviously, there's that argument that if you are twice as large as you are now, you have to be a lot less risk averse. Oliver Quinn: Yes. No, I think it's a great question. And I think in terms of the strategic position of the company, again, I'll take a step back. 25 years ago, we were Africa Oil as it was, a completely different company, much, much smaller in scale. You roll forward through that period, we've doubled reserves, production, et cetera, which has been a big step forward in the scale sense. I think that has allowed us to mature some of these projects in a better way with more confidence because of the scale. So I think it speaks to your point. As we then look forward, look, I think there's a balance here because I recognize and agree with the points you make about the industry. I think it is overdue this space within the industry, let's say, the international independents. It is overdue some consolidation, some capital efficiency, G&A efficiency, et cetera, absolutely. And we see that. I think when you come to execute around that, I think, again, our message is disciplined. So yes, the ultimate prize does all the things that you described, again, agree with that. So for us, it's not so much that fundamental principle. It's the pathway to get there. So again, we look at the business today, it's incredibly strong balance sheet. We have some natural decline in production this year, but it's arrested and we go back into kind of growth through the end of the decade. We didn't, for example, in this call, talk about Venus and Namibia, but Total have signaled very publicly that it's FID this year that adds barrels for us in 2030 on their time line. So we go back into that mode. So I think great. But what we're saying is, look, we protect that. That's always the #1 job is to protect that business, make sure it's robust. But equally, go and look at inorganic transactions that are accretive to that. And then they really have to be. We don't want to dilute that business just for the sake of scale, but we recognize there are steps that we could make that give us both scale and they are accretive. And those are the things that we are kind of narrowing our focus to. But I think short answer is yes, we are still active in that world. We still look at things. But again, we do it with rigor and discipline. Operator: There are no further questions at this time. I will now hand back to Mussannah to read through your written questions. Mussannah Chowdhury: Thank you, operator, and thank you once again, everyone, for joining today and submitting your questions. I'll go straight into the questions. So I think one for you, Oliver, is given the transformative potential of the Venus discovery, we currently have 3.8% effective interest through our stake in Impact. While this free option structure is highly capital efficient, does management view this level of exposure as sufficient to capture the full value creation potential of the Orange Basin? And is there potentially a pathway or a world where we increase that exposure? Oliver Quinn: Yes. Look, I think it's obvious question on Namibia and Impact. And again, for the third time on this call, take a step back. I mean, if you go to where we were a few years ago with this, Impact has done a fantastic job over a decade of driving Venus as a target at play, attracted TotalEnergies in, got the well drilled, made a great discovery. As co-owners of Impact, we're faced with the kind of interesting dilemma here that this huge world-class discovery, but of course, it quickly needs capital funding and capital funding of a big scale. I think as we've outlined many times on these calls, we've got a funding solution in place. We're not exposed to the capital, and we transformed that into a kind of CapEx demand that we couldn't fulfill into one that becomes a growth is a growth opportunity, adding barrels in 290. I think that then takes you to a place that says, well, it looks great. We'd like to have more. But I think with respect, we have another large shareholder in Impact. It's really the two of us own kind of 97%, 98% of that company now. And so we both see that. So I think, yes, in principle, of course, we'd like more exposure to a project with no CapEx or risk exposure and lots of barrels coming. But recognize that equally our fellow shareholder also sees the same attraction. So yes is the short answer, but the execution path on those things is a bit trickier. Mussannah Chowdhury: And then one for Aldo. Aldo, could you please give some more detail on the Agbami impairment and the increased costs expected going forward? Aldo Perracini: Yes. Of course, I think in Agbami was what we tried to explain throughout the materials that was not just related to one single item, right? So it was a combination of lower oil price and an increase in costs, mainly in relation to the life extension of the FPSO. So in terms of oil prices, I think that's obvious, right, throughout 2025 in relation to the decline. And then more specifically in relation to the Agbami FPSO life extension, Agbami will continue to produce beyond 2044, which is currently our license -- next license renewal period. So there's a significant amount of reserves already as 2P to be recovered from the field. However, what the life extension allow us to do not only to recover these additional reserves in a safe and reliable way, but at the same time, allow us to continue to invest or to develop or to plan for bringing contingent resources as 2P, right? And the 2P numbers are the ones we use for the impairment calculation, the recoverable value, but the 2C numbers, so the additional few wells that Oliver mentioned beyond the campaign 27, 28, [ Ika ], which is a to the Agbami FPSO, as well as other nearby opportunities outside our blocks -- those will all -- would all be produced through the Agbami FPSO. However, we need to make this investment upfront to extend the life of the facility and make sure that we comply with all the requirements and certification as well as having a reliable FPSO. So I think it's just a reflection of that. And when we get to mature midlife fields that we have to go through this exercise. So that's the detail behind the impairment on Agbami. Mussannah Chowdhury: And just two more, I suppose, for you is can you give us some thoughts on the percentage of total hedging for 2026? And I think the second from this investor was can you just give us some color on our plans for the RBL going forward? Aldo Perracini: So first of all, in relation to hedging, we have a policy where we hedge between 70% to 100% of our post-tax net entitlement production on a rolling 12-month basis. So what does that mean? It means that we check first, the amount of barrels that are exposed to oil prices, right, as we have cost recovery, for example, in our agreements in Nigeria, that means that not all barrels are exposed to oil prices, right? So we first calculate the post-tax and net entitlement and out of that, we hedge between 70% to 100% on a rolling 12 months basis. Now we make a combination of either physical port sales or swaps where we lock in the price that's close to the forward curve at the moment that we enter into the hedge. But we also have a mix of solar and food structures where we keep some participation on the upside as well for a certain percentage of these hedges. So that being said, at the end of 2025, we had approximately 3.5 million barrels of oil for 2026 sales that were hedged through a combination of physical and financial instruments. Out of that, 2.3 million are on the first half of 2026, which those are primarily hedged through the physical for sales, so through the physical offtake agreement with an average floor price of around $62 per barrel. And in the second half of the year, we have 1.3 million barrels hedged using a mix of swaps and collar structures. So we provide good downside protection, but we also retain some exposure to the upside. So that's in relation to the hedging part. For the RBL, I mean, as we saw through the presentation, our numbers, we -- it was very important for us in 2025 to pay down a substantial amount of the RBL facility, right? We had -- we started the year 2025 with substantial large cash position and to reduce financing costs, it made total sense for us to pay that down and reduce the financing costs. As we mentioned throughout the presentation, we estimated that we save around $12 million in financing costs just by doing that. Now the next step in relation to debt management, the last time we refinanced the RBL was in 2023 on the back of the license extensions in Nigeria. So we are now getting to that period where to keep a substantial headroom in the RBL facility, not necessary to utilize the money, but to have the flexibility to do so. We are in the process of refinancing the current RBL and we expect to finalize that sometime soon in the first half of 2026. So with that, we increased the RBL capability. But at the same time, we will continue to be very disciplined of how much we draw from the facility to reduce financing costs. Mussannah Chowdhury: Thanks, Aldo. And then Oliver, I'll put this one to you, and it's something you briefly touched on a little earlier. How much risk do you see when it comes to securing the Nigeria drill rigs this year? And if you could just give us some more color on that? Oliver Quinn: Yes. No, I think we're not concerned about that. I think we're very advanced, both joint ventures in the recontracting process. So I think we'll -- we're very confident those rigs will come this year that we'll get back to drilling. And again, I think what's been a quiet period for us, and that reflects our production, but actually, we're going to turn that around with those rigs coming towards the end of the year. And again, a combination of infill drilling, short-term barrels and getting back to testing some contingent resource and long-term growth and value. So look, I think first part of the year operationally quiet while we finalize the campaign. But then as we move into the latter half, it's pretty exciting for us to have two drill rigs again active for a prolonged period on our major assets. So I think that's quite a positive view to the year overall. Mussannah Chowdhury: Oliver -- and just keeping on Nigeria, as a question, our reserves have dropped from 2024 to 2025. Of course, there's been a portion of production in there as well, but maybe you can give some color on that and how we're arresting that decline. Oliver Quinn: Yes. And again, I think if you look at the shift in 2P, that is dominantly the produced resource. I mean every year, you're going to get some minor ups and downs on your kind of existing well stock and fields based on latest performance. But again, when you look at the year, it's really around the fact that we've had this, again, longest period in the kind of history of the fields without active drilling and adding new wells. And so you see that in the sense that you produce 2P reserves faster than you're replacing it in that context. But I think again, the two key points are, you look at our contingent resource, that has grown significantly through '25. So again, in terms of options for future value and growth of the business, that's good. And secondly, again, to the prior question, we're very confident that we're getting back to drilling here, not just with 1 rig, but with 2 and sustained campaigns starting end of '26 through '27. And therefore, we'll start to grow again on that time period, which I think is really positive as we look at the cycle, oil price cycle in particular. Mussannah Chowdhury: And just two more before we close off. So when we speak about capital allocation, balance sheet strength and organic opportunities are the first 2 that we speak about. Just what should everyone read from this? And then shareholder returns, of course, and M&A coming third or inorganic opportunities, I should say. Oliver Quinn: Yes. I think we've been very focused on the balance sheet, and we talked about that a lot on this call. And I think, again, that's important as a base to the business. Aldo talked about the moves we made last year. We paid down debt. We've got a lot of liquidity. We've got low leverage. And I think the way people should look at that is it's prudent. It's, of course, a volatile world, and I think our view is it will remain so. So we just have to deal with that. But starting with a strong balance sheet opens up a lot of options for us. It opens up options to allocate capital for organic growth, options to, as we are doing, returning cash to shareholders. And again, we've touched on it, the inorganic growth. It puts us in a very strong position to test from that kind of balance sheet, is there an organic transaction out there that makes sense for us? And is it better than the kind of organic growth capital allocation options we've got in the portfolio today. But that balance sheet gives us choices. And I think that's what's really key in this message is strong balance sheet, strong hedging in place for this year, very, very good foundation to grow the business, right? And there are a number of choices to do that, and we're always seeking to have those choices. And in parallel, again, we've been very strong on shareholder returns to recognize that we want to grow the business, but equally, we're not going to grow it at any cost. Mussannah Chowdhury: Perfect. And just lastly, and one on EG. Given the size of the prospects in EG, would it be possible to go into EG-31 alone? Or how much are we willing to give away farming to a partner? Oliver Quinn: We're definitely not going to give anything away if I put my commercial heart. But look, I think we're 100% in those licenses. Our partner is GPetrol a state national oil company. And so they have 20%, but they're carried in the early stages here. So it's 100% funding. So look, it's just -- it's a risk allocation and capital allocation that we're not going to do a project at 100%. That's not a statement of view of risk or value on the project at all. It's a point of saying, again, it's a portfolio effect, it's risk sharing and it's bringing in strong partners helps any project, and that's our focus. I think the important point on 31 is, again, we need to be really clear that the Gardenia discovery itself is something that could become a short-cycle fast track development with the right partnership in place. So it's not high-risk exploration dollars. It's lower risk short-cycle brownfield LNG, which could be incredibly low-cost resource for us as a company. So look, we wouldn't do 100%. But equally, we want to hold a material position in the project, recognizing the potential value it can bring to us. And again, I'll go back to the theme of it's around prudent capital allocation and discipline within that. Great growth options, we'll pursue them, but we'll do it in the right way that doesn't jeopardize the company. Unknown Executive: Okay. Thanks, Oliver. That's all the questions we have for today. So operator, I'll hand back to you to bring us to a close. Operator: This concludes today's call. Thank you for joining. You may now disconnect.

39天前Insight Analytics约5分钟阅读

BPPPF 2026 Q2 财报电话会议

Bernard Berson: Good morning, good evening, everybody. Thanks for joining the Bidcorp results for the Half year ended December 31, 2025. I'm Bernard Berson, the CEO of Bidcorp. Joining me will be David Cleasby, our CFO. I promise to make this shorter than Donald Trump's State of the Union address a little bit earlier. And I promise I'm not going to award myself any Bidcorp medals of honor, although I definitely deserve quite a few. I definitely do. Let's get straight into these results. I'll just take you through the high level of them. David will then take you through the financial detail. I'll come back and talk a little bit about the past 10 years. 2026 marks 10 years since the unbundling of Bid Corp from Bidvest. We'll talk a little bit about the outlook. Q&A, which will be the normal format, but please send your questions in through the normal mechanism, and we'll get to those at the end. And then hopefully, we can wrap up and I can go have my dinner. So let's go straight into it. You know who Bidcorp is. If you don't know who Bidcorp is, you're probably on the wrong call. We are a global food service business. We like to update the market on a regular basis. So you know as much about the business as possible. Our last update was towards the end of November. So we really are just filling in only a few gaps over here, which I find very interesting that -- yes, we're only filling in a few months' worth of differential, yet there's still some commentary that we overachieved on certain things and underachieved on certain things. So I think there's way too much micro analysis that goes on over a very short period of time. And what I would like to stress, particularly later when we look at the 10 years is this is a marathon, it's not a sprint. And sometimes, you can't look at the results just in the isolation of the last 3 months since our last update or even of 6 months. You need to take a longer view on certain things, and it's about the longer-term trajectory, not necessarily what transpired in 6 months. However, we're very happy with the performance of our business over 6 months. I'm not trying to make any excuses. I think we've performed exceptionally well in a pretty tough environment. Globally, in the markets we operate, it's certainly not strong. Economic activity isn't strong. There's a lot of uncertainty a lot of the jurisdictions, and we can go through them individually in a while, are negative, not positive. So for us to deliver revenue growth of 7.1% in rands, which is 6% in constant currency, I think, is a very solid result. Bearing in mind food inflation is maybe 1% to 2% of that 6%. It is very difficult to get a handle on what inflation actually is across the portfolio of countries and across the basket of product that we sell, which doesn't run the same as published inflation numbers. So we're very happy that we are seeing real growth in an environment that we don't think is growing by much. So constant currency revenue up 6%. Gross margins are relatively stable. There are a few environments where they are a little bit down for certain reasons, competitive reasons, some that they're up. But overall, we've maintained our GP margins. Our trading profit is up over 8% in rands, 7% in constant currency. Once again, we're very happy with that. Trading margin has trended up slightly from 5.3% to 5.4%. I'd say slightly, it's -- 5.4% is probably at world-class levels anyway. So every 10 bps that you can get out of this are hard sport. It's not an easy -- we're not coming off a low base. We're coming off a really very well-developed, well-defined strong historical base. So to increase off that base, we are very satisfied with and believe our teams have done a great job to get us there. So the result of all of that is, we've got HEPS up by 8.5% in rands, which is 7% up in constant currency, which is a little bit better than we indicated in November when we spoke to you more or less in line with our expectations. And like I say, economic conditions out there aren't favorable. They're not terrible. I don't think we should be over-negative about them, but they certainly aren't running hot. It is just tough going in most geographies. So overall, we're very satisfied with these results. Our teams have done a great job around the world. Almost every business has performed well, there are 1 or 2 that haven't for various reasons, and we're happy to talk about those. But we are a portfolio of 34 -- 32 countries, 20 businesses, I believe, over those countries. And obviously, in any period, you're going to get 1 or 2 that don't perform for certain reasons and 1 or 2 that are going to shoot the lights out for various different reasons. So my thanks do go out to the team. We do have a very stable management team, which I believe is part of our success. It's a team we bought into our strategy, who are all firmly aligned with the path that we're on, who understand what our offering is. And we've stuck to the path. We've elaborated the path that we're on. And that's what we're doing. And I think the teams have delivered upon that and executed once again very admirably. So my thanks go out to the 31,000 team members around the world, ably led by our very small management team, a very top management team who once again have done a great job. So thank you to all of those on the call, all those not on the call. It doesn't happen because of me or because of David, sometimes it happens despite me and David, and it's very much because of the great team that we have around the world, who are passionate and enthused, and have bought into the strategy of how we grow this business. If we move on to the segmental analysis of the business. First off, we have Australasia. Now you may recall over many, many, many, many, many, many years, Australasia was the star performer and certainly led the charge and certainly supported the group through many years. And I guess, over the last year or 2, that's taken a little bit of a breather. And for what was our largest segment to be flat, I think under the circumstances is a remarkable achievement that it hasn't gone backward, bearing in mind some of the conditions out there. So the two businesses have performed very satisfactorily in constant currency. And once again, we look at constant currency, the rand moves as the rand moves. We have no control over that. Revenue between Australia and New Zealand is up 4.5%. And we're very happy with that. In that, New Zealand's revenue growth is very minimal and Australia's revenue growth is approaching about 5%. From a profitability point of view, New Zealand had a very tough start to the year, and we've spoken about that. However, we did see conditions there change in about October, and we've seen, I'm going to say, a strong performance from our New Zealand business, which matches our expectations from about October onwards and hopefully, that trend continues. That's a two-pronged issue. Tourism has returned. I think the consumer is in a bit of a better place that bounced off the bottom. But also, we did take some measures when things weren't so great in the business, and we have looked at our margins and who we're selling to and the pricing we're selling to and are we -- do we need to sell to certain customers that does it just make sense to have those relations. And also, we looked at our cost base and trimmed the cost base down a little bit. So the New Zealand business is now looking at a very strong recovery. We're optimistic about that. The Australian business is doing fine. We are seeing revenue growth. Profitability growth is a little bit slow. Once again, when you look at the trend over a number of years, that business is double the size of what it was pre-COVID. It's probably more than double the size of what it was pre-COVID. So to maintain that and to wait for the next growth phase is the position we're in, in Australia at the moment. And I have no doubt that will come. The Australian economy is probably flat at best. It's not terrible, but it's certainly not great out there. What we are seeing in, not only Australia, but a lot of markets, is the consumer is under pressure. And as a result of that, there's a lot of downtrading into the QSR segment. And by design and by choice, we service very little of the QSR segment. So we're not benefiting from that, and we have no regrets about that. Because as soon as the economy does improve a little bit, we have no doubt that the pendulum swings back towards the type of business that we're heavily engaged with and invested in, and we'll see the strong benefits of that. So from an Australasian point of view, profitability is basically flat year-on-year in the 6 months. We're pretty confident about the look forward. Particularly in New Zealand, we think we'll be pretty buoyant and Australia will follow within 6 months, maybe a year. Moving across to the United Kingdom. We are seeing sequential improvement there. I noted sequential is the new buzzword that everybody uses. I'm not actually sure what it means. But we're definitely seeing sequential improvement with our margins ticking up from 3.4% to 3.5%. Now before all of you say, "Well, only 0.1%, when are you going to get to 5%? When are you going to get to 6%?" The answer to that is we'll get there when we get there. That's really hard game in the U.K. There's very little positive news that comes out of the economy. We don't operate in isolation. We don't operate in a bubble. We're not magicians. We very much operate in the reality of the market we're in. And I think under the circumstances of the U.K. market and those of you who cover the other U.K. stocks will understand this, I think our business has performed very, very well. Revenue up 5.8% in constant currency, profitability up almost 10%, off a reasonable base last year. And yes, it's not where we want it to be yet, but we are making progress. In all the business pillars we do have in the United Kingdom, we are making some progress. We definitely are seeing improvement. And actually, to my point earlier about the QSR channel, the U.K. business is probably the one that we are most heavily skewed towards the QSR channel. We do have a few of those customers. So we are getting the benefit of that. But once again, that doesn't overly excite us because long term, that's probably not going to be sustainable. That growth won't be sustainable, and it's not where we want to position our businesses for the long term. And like I say, we don't measure things on a week-to-week basis and make decisions on a week-to-week basis. That's a much longer view. So we're happy with where the U.K. is. From our business point of view, I'm still hearing lots of very negative news about the U.K. economy, about the consumer, about the sentiment out there. The hospitality industry is really under pressure. We are seeing that in our hospitality type of numbers. Fortunately, we've got a large nondiscretionary type of business as well with health care, aged care, government, education, et cetera. So we're very satisfied with the U.K. It is tough going, but we are making progress and seeing improvements. Europe had another great performance, and that's following on from a few years of strong performance. So we have a trading margin there, almost at 6%, which is wonderful. The question now is, how we get back to 7% in a period of time, but it all becomes much more difficult. The low-hanging fruit has been picked and now it becomes more difficult. So we've got a revenue growth of 7.6% in constant currency and profitability -- trading profit up nearly 12%. Europe's a combination of many different businesses at different stages of development, and it's a microcosm of a portfolio within itself. The Western European, the Benelux businesses, I guess, performed very stably, reliably, gave us good growth, but in reasonable numbers. Spain and Portugal remain work in progress and will remain work in progress for quite a few years. We're still building the base there. We're still getting the foundation correct. We're still looking for suitable acquisition. We're still building the team and building our regional presence. So those will take time. They're not causing us any stress. They are going the way they need to go. They just haven't scaled up to the extent that we expect them to quite yet. Italy was a standout performer, which probably was expected. We put the investment in the year or 2 before. We've made a few changes, and we're very pleased with the outcome of that, and that business has grown very strongly. The Czech Slovak Hungary business continues to perform very well for a mature business and both top line and bottom line growth. Poland remains a very exciting market for us with good growth. We are going to have to reinvest in Poland. Many years ago, we spoke about having to grow into our skin. We made that investment. We grew into it and now it's too tight. Yes, we've grown to that capacity plus we're operating at max, and we are going through that investment phase again to expand our presence in Poland, but it's a very strongly performing market, it's a strongly growing market, and we're very enthused about that. And the Baltics continue to perform very adequately, relatively small market. I think the addressable population is only 4 million or 5 million, but the business is stable, profitable and is a nice business now performing the way it should. Emerging markets is a mixed bag, very difficult to look at the overall numbers. We have revenue up 4.1% and profitability up 5.2%. Standout performance of South Africa once again. I think we're at about 15% profitability growth in South Africa across the Bidfood business and the Crown business. The bakery business, which is equity accounted, also performed very satisfactorily. So in a not great market, the teams have once again delivered fantastically well, which does create a blueprint for us around the world that notwithstanding the fact that economies might not be fantastic, there's still opportunities out there to be explored. And we don't have dominant market share in any market. We don't sell all products to all customers. There are levers we can pull in all countries and certainly, South Africa shows us how that can be done. South America was very pleasing as well. We're starting to see some good growth come out of that. I think the economies there have generally improved. And all 3 of them, Brazil, Argentina and Chile performed relatively well. Those businesses still aren't at the scale we'd like. And we don't know which ones we'll scale up first. Somewhere like Argentina is a little bit more tricky or contentious than maybe a Chile or a Brazil. Brazil might be more attractive because it's a bigger market. Chile, we've been there longer and have a very established business that's now starting to perform very well. Middle East is going through a little bit of an adjustment phase. There was a large customer that exited Saudi and went to a logistics model. It was great for us to ride the wave with them, but we always knew that was going to come to an end. And we are now reengineering our business to be a more sustainable type model that more closely resembles the UAE market. In the UAE, we're doing very, very nicely. It's a very stable, strongly performing business and now we need to get Saudi to that. Turkey remains a very challenging market. We're seeing good revenue growth. But from a macroeconomic point of view, it's tough. You've got very high inflation. You've got very big increases to the cost base. You've got government interference in a lot of things. We have a very small business, and small businesses require investment to get them to scale, and we're still going through that trauma. Moving over to Asia. I'll start with the good. In Asia, Malaysia is performing very well. We're very enthused about Malaysia and the prospects there. We did make an acquisition beginning of the financial year, which expanded our portfolio into ambient products, moving a little bit away from premium chilled and frozen to broaden the range, broaden the customer base and change the nature of the business to be a more broad line foodservice distributor, and that performed very well. We're very enthused about that. Singapore remains a work in progress. We are making progress. There's still some restructuring going on. The business is performing satisfactorily, but not to its potential, and that will take another year or 2 or 3. Singapore as a country, I think, is probably struggling a little bit. I think they've lost a little bit of that tourism stopover airline hub type of business, although when you look at the expansion plans of Changi Airport, you wouldn't believe that. But there is definitely some local pressure in the short term there, but the business is doing fine. Greater China continues to be tough going, particularly Mainland China. Very quickly, and I think I might have spoken about it before, we were an importer of expensive foreign Western type product, mainly dairy type of product, and beef and protein out of Europe, Australia, New Zealand, America, South America. And China has very much decided to go to a more local procurement type of model from a country point of view. There have been quite a few retaliatory tariffs put in, particularly on European dairy. And it's very difficult now to import that product into China. And not only have we seen the price of the product go up and the import of it become very difficult, but the principles, our suppliers have also tried to protect their position and moved away from an exclusive distributor type model, which they had before and have opened up to multiple distributors to try and maintain their volumes. It's a very short-term strategy because all they're doing is they're filling the pipeline of multiple wholesalers with inventory. And then you've got multiple wholesalers trying to give the stuff away because it's got a date having an expiry and the clock is ticking. So we've seen our margins being crushed quite significantly in China on imported product. We have shifted a little bit to local product and have been relatively successful in that, but we can't do that quick enough to replace the lost volume of imported product. The Hong Kong business is relatively stable in a very flat Hong Kong market. And the Hong Kong market then was also impacted by that high-rise tower fire, which caused the cancellation of a lot of Christmas type parties and festivities. So they had a really flat December. So that had an impact there. So I think I've gone through the segments. Overall, our team have done great. We're very happy with it. I'm going to hand over to David to talk about the financial highlights. David Cleasby: Thanks, Bernard, and good morning to everyone. Thanks for taking the time to listen to us. First up, obviously, thanks to all our people around the world in terms of delivering the results. And thanks, I guess, more in particular from my perspective to the finance teams as well as the corporate team who have put it all together. So thanks. As usual, in terms of IFRS, there are no changes. The accounting policies are consistent and they're consistently applied, so no issues there. The constant currency, just to remind you, we use it as the true measure of the performance of the businesses. We don't have a dominant currency. So it's every currency or results of that particular business in the currency, but at last year's rate. So it does give us a like-for-like comparative. And that's obviously how we measure the business and how we judge performance in the business in their home currencies. And the result, obviously, will fluctuate. And as you've seen, I'll talk a little bit about that later. And hopefully, I don't repeat too much of what Bernard sort of alluded to already. I think from my perspective, the quality of the result is particularly good. They're very clean. I think you can see from the difference between earnings per share -- headline earnings per share, there's very little extraneous issues in the group, some, I guess, cleanups of some businesses in terms of rationalizations within countries and within portfolio. So that's obviously an ongoing basis -- ongoing issue and will continue. But there's very little from that perspective. A little bit of inflation accounting, but really doesn't account too much. So from a quality of earnings perspective, we are happy. Just some of the highlights, I guess, revenue growth up 7.1% in rands, gross profit stable at 24%, trading profit up 8.1% and 7% in constant currencies. I'll talk a little bit about that later. 8.5% of HEPS growth and nearly 7% in constant currency. Dividend up 10% almost, and I'll talk a little bit about that because that's basically ahead of our normalized earnings growth as well as a little bit low cover. Pleasingly, returns have stabilized, I guess, from where they were a year ago. So we are starting to see the benefits of the investments that have been made over the past while, and that's always something that is going to happen. As one invests, who takes a bit of time to utilize the capacity and at the throughput and therefore, you've got the cost base, but you haven't got the revenue coming through as yet. Free cash flow is an odd. I think what we've seen is basically a balanced free cash flow period where cash generated by operations has been offset by the investments into working capital, into acquisitions and into capital investments. So I'll talk a little bit about that later. And our net debt to EBITDA is slightly below where it was a year ago. In terms of the more detailed P&L, revenue up 7%, nearly 6% in rands and Bernard has spoken about Australasia's contribution. So just to bear in mind, that's nearly 20% of the group. So I think for the rest of the businesses, they've done particularly well. Gross profit at 24%, largely stable. I think the issue is that the businesses have to trade. We are a trading business. They will make calls depending on trading conditions that they see in their markets. And you're going to get a little bit of sometimes trading margin for volume. And that's just a reality, I guess, of the trading environment, but we're very happy. I mean you can see that some businesses are slightly down. Bernard spoke about particularly China where margins have come up significantly. So overall, we're very happy that the rest of the businesses have made up some of those shortfalls. Expenses have been well managed. You see the cost of doing business from our perspective has fallen. And I think that's more than offset the slight decline in the gross profit. And if we look at the constant currency, OpEx growth of 5%, we can still see we're getting some leverage because gross margins have grown by slightly more than that at 5.4%. Group trading profit at 8.1% in rand, nearly 7% in constant currency. And I spoke, the margins have increased a little bit, and we managed to trade through the costs and offset that against the slightly lower gross margins. For those things slightly below the trading profit line, the non-IFRS net interest in constant currency is up a little bit. I'm hopeful that we are seeing the top of the interest rate cycle from our perspective at this particular point in time. I think as we go forward, our expectation is good cash generation. And therefore, we should see that moderating and hopefully, come down a little bit. Effective tax rate, it is mix dependent, but it's absolutely within guidance at 26.7%. And just to note that I think we noted at the end of 2025, the results, the Pillar 2 detailed tax exercise has really had a negligible impact on the group. We pay full taxes in almost every jurisdiction around the world. So those from SARS who are listening, unfortunately, there's not a big take from Bidcorp. A couple of items, as I said, were really comprised some asset impairments relating to sort of almost in-country portfolio rationalizations and no big issues there. HEPS is up 8.5%, but EPS 16.6% and that's really largely attributable to the prior year impact of the exit of Germany. So that's really just to note. Currency volatility at 1.6%. Benefit in this period, obviously, the currencies and what you get is a little bit all over the place at the moment. The P&L is done on average, and that's obviously looking back over the last 6 months, whereas the balance sheet is measured on a closing period end number. And in the P&L's case, there was a slight benefit. But certainly in the balance sheet impact, there was a decline or an appreciation from a rand perspective in the balance sheet. On the cash flows, yes, I think just generally a pretty strong result from our perspective. Cash generated by operations was up 8% before working capital. If you take that after working capital of 9%, was up somewhere around 27%. So the business continues to generate really good cash flows. Working capital, I think, overall, a pretty good performance, not perfect, but in a group on a decentralized basis, you're never going to get a perfect result. And when you do, you've got no real opportunity to improve. I mean we measure working capital across 3 measures, firstly, an absolute impact. And in this period, the absorption, which is typical of our first half of the year, we had ZAR 2 billion of absorption, but against ZAR 2.7 billion last year. So give that a tick. On a days basis, they've come down from 12 days to 10 days. So that's also positive from our perspective. And the last one is our sort of internal measure, which is working capital as a percentage of revenue. It's really just measures how much working capital we've got invested in terms of the growth we're achieving, and that's also come down in the period versus the prior period. So I think the businesses have done a good job in this space. Investing activities, we've indicated that these will taper off, obviously not going to naught, but they have come down a little bit. A lot of it is still going into new capacity, but there's also quite a lot of maintenance CapEx in this period. And a lot of that is -- or some of that is actually replacement depots where yes, there is some additional capacity, but the majority of it is replacing facilities that we have. Our intention remains to own our facilities where it's feasible, where we can. And I guess we're strategic and we still own around 73% of the property portfolio. Acquisitions, four in the period. The cash cost in this period was about ZAR 0.8 billion. Contribution to revenue 1.3% and 1.2% to trading profit. So not a great contribution; some contribution, obviously, but we'll see the benefit of that as we do as the businesses are integrated and become more efficient. Net debt is slightly down. I think if we look at it in pound terms, it's basically flattish. We definitely are seeing the cash generation starting to improve against the prior period on a day-to-day basis. And I'm sure we'll see that improve even further as we go into the second half of the year. In terms of the balance sheet, I won't dwell on this too much. It's still strong and conservative, as I say, as we like it. Solvency and liquidity ratios are all good. In fact, they're very good and, obviously, well within all our covenants. There are no real issues with the debt maturity profiles. We do have an RCF, which is, I guess, standby facility, and we're renewing that and that will hopefully conclude in the next month or 2 or 3. But generally, from a balance sheet perspective, we're very happy. And this is what we think a very competitive advantage from a group perspective to have the balance sheet as strong as we've got it. In terms of financial guidance, I think I'm not going to go through all of this, but I think things to note, rand depreciation has obviously accelerated a little bit in the last 2, 3 months, and that is likely to have some impact on the rand results. But once again, we look at these businesses and the group results on a constant currency basis because we've really got no control over what happens to the rand. It's either good or it's bad or it's indifferent. Cash generation into the second half of the year, that's consistent with our normal trading cycle, and that's our expectation going forward. Our capital investments, we have guided to 1.5% to 2% over the next 12 to 18 months, that's still our expectation. Bernard, I know, will argue and say, well, that's not good, but that's the reality. We have been through a period of investment. And I'm sure that we're going to see the benefits of that coming forward. And at some point in time, I guess we are going to see the investment cycle start again as we absorb the capacity we've recently created. Returns, I've spoken a little bit about. They have stabilized, and our expectation is that they will get a little bit better going into the second half and into the period ahead. Our January results were as expected and following the normal annual pattern. And just to remind everyone, we do have winter in the Northern Hemisphere. So it's not a great period from that perspective, and it was particularly cold this year. Cash generation as we go forward, I think I've alluded to our expectation is it should be good. We are seeing a slightly reduced levels of capital investments. At this point in time, one can't talk about the acquisitions pipeline. But as we sit here today, that is what it is. My expectation is we should reduce debt levels a little bit further. And this obviously gives the group an opportunity to return excess capital to the extent we generated to shareholders in a structured and sensible way. With that, we obviously need to -- we're conscious of the need to balance the returns -- the reinvestment into the group as well as shareholder returns, which is obviously important. So from our perspective, the businesses are in great shape and certainly our expectation of further real constant currency growth into the second half of the year. And on that note, I'll hand back to Bernard for going with the presentation forward. Bernard Berson: Thank you. Thanks, David. I thought it's a good idea just to dwell on this for a few moments because, as I said at the beginning, I think it's a point of exercise looking at issues on a 2 monthly basis or a 3 monthly basis and saying we're 0.2% in the forecast and we are 0.1% ahead of consensus and all these other wonderful very short-term targets that you look at. And you need to take a longer-term view, you need to step back and say, what does the overall long-term reality look like? And I think we've delivered on what we said we would. And that's I call it boring. I get criticized for that, and I'm being told to call it stable and consistent and reliable, et cetera. But when you look at it from 2016 to 2025, bearing in mind, we went through COVID, which was particularly evident in our business. And we don't need to go through that other than we're not trying to look for sympathy here. The reality is, we did have 2 years that were just totally out of sequence, and we then had to regroup and move forward again. But when you look at all the metrics, almost all the metrics over that period, yes, there's very little you can criticize now. I know some of you saw, but it looks like your ROFE is tracking a little bit lower. And yes, it is at 25% and almost probably track up again at 26%. And then you look at the return on equity, the return on invested capital, they're improving again. The distribution to shareholders, a 19% compound annual growth over the 9 years. Earnings, 10% compound growth, a ROFE of over 50%. Yes, the graphs are all heading the right way. They're good looking, longer-term trends, and that's what we're focused on. It's absolutely not on what the next 3 months are going to do despite the fact that there is this pressure to always report. And you've always got this unrealistic what's happening on a quarter-by-quarter, month-by-month, 6-month by 6-month basis. Like I say, and I can't emphasize it too much, it's a much longer cycle than that, and we're very well on that path. And when you look at the trends, they're all absolutely heading the right way, and we're thrilled with the outcome of what our teams have achieved since the unbundling in 2016. The business is in great shape. We've got a strong portfolio around the world. We've still got opportunities for growth. We've got some wonderfully stable businesses that are strongly cash generative. We've got some great opportunities for growth in some of the smaller businesses. So we're very happy with that. Just talking a little bit about the strategic outlook, and then we'll get to the Q&A. We're not going to tell you anything radical. We're not going to tell you anything amazing. I know you people, financial analyst type people, you get very excited about chip stories and the announcement of new chips. We could say we're announcing a new chip, but it will just be a 10-millimeter straight cut deep fry chip that's not really going to change the world, unlike NVIDIA's chips, which will change the world. So sorry about that. Our chips aren't the same type of chips. We do what we do. We continue to move our businesses along the continuum. That's a continual movement on the continuum. Each business is at a different phase. Each business is committed to moving along that. And that journey takes however long that journey takes. There's not a predictable path to it. You have to get the building blocks in place correct and then you move along that journey. And I think our results, when you compare us to our peers, when you look at the consistency and the predictability and reliability of our numbers, I think it validates what we're doing. What we really don't do is show you all this pro forma adjusted normalized stuff. Whatever happens, happens, it's all in the numbers. We're not trying to extract things and say that they're not normal. And if it didn't happen this way and if that had happened and if the sun had shown a little bit more and if we hadn't relocated that and if we hadn't opened that, then our profitability would have been a certain number. We are where we are with whatever moving parts are moving out there at the moment. So these numbers are as normalized as they ever are because with every business, not everything goes according to plan all the time. So you're always going to have these extraneous things happening. You're always going to have some costs that are extraneous. That's just part of life. And I think it's a little bit disingenious to try and justify what your business would look like in an ideal world because there is no such thing as an ideal world. We operate in reality. So we're confident where we are. We expect things to continue more or less along the same path, if the world continues on the same path as well. There is volatility. There is geopolitical volatility. We can't control that. We can't control economics. We can't control what governments do. One of the issues that we are noticing is some of the cost pressures we are seeing in our businesses are government imposts, particularly coming through the labor line, where there's increasing social securities and postretirement benefits and minimum wages and employee entitlements, et cetera, which aren't offset by productivity gains. So all that government is doing is finding the lazy way of making good on their shortfalls and passing the cost on to business. And we see that happening in many jurisdictions. So when we look at our labor costs on a per unit basis, they're going up. But it's actually not because we're paying our people that much more. It's because you've got all these on costs that government are unilaterally transferring to business in many, many jurisdictions, which I think is lazy and inefficient. But it is what it is, and we can only do what we can do. Bernard Berson: What I am going to do is run through the questions, which we'll then hopefully answer a whole lot of other things. Let me just find them all. I'm just going to go through them in the order that I got them here. Are there any larger acquisitions in the pipeline and what geographies and sectors are of particular interest with respect to M&A? At this point in time, there's nothing of major consequence that we're considering. And even on the smaller bolt-ons at this particular point in time, the pipeline is relatively small and constricted. There's a disconnect at the moment between vendor expectations and what we think things are valued at. So until there's a change in that and either we're prepared to pay more or vendors are prepared to accept less, there's a little bit of a standoff. And we don't have a huge number of bolt-ons. That's a temporary basis. That's a temporary situation. It will rectify itself in some point in time. We're certainly not chasing anything. If something is exceptionally strategic, we'll look at it. If it's opportunistic, we'll only pursue it at a correct value accretive price. I mean what is interesting is as our share prices has moderated, and it's not only ours, it's our peers as well, and obviously, that's changed over the last few weeks, our multiples have come down. So clearly, the multiples we're prepared to pay for businesses, all that our competitors, our peers are prepared to pay for businesses is coming down as well. And the vendors need to factor that into their thinking that takes a little bit of time. Can you quantify the impact on margin from new large U.K. contract and infrastructure investments? Well, I think it's pretty self-evident that we've seen an improvement in the U.K., some of it which must be attributable to the Whitbread contract that we activated at the end of September. One of the interesting things is, we brought on new infrastructure in the U.K. in about September in Worcester. And because we had a new contract that was rolling out at the same time, it had no negative impact. If you recall 2 or 3 years ago, we must probably had a GBP 5 million to GBP 10 million negative as a result of rolling out additional infrastructure, whereas this year, we've absorbed it with the new contract wins in the rollout. So I think it's been a very positive, and we have greater infrastructural capability now in the U.K. What are the value-added opportunities being evaluated in Australia? I'm not sure why you're picking on Australia because we're looking at value-added opportunities around the world. One of the things we do, do is we see what's working in other businesses and copy. The other side of that is these things take time. It's not all that easy to start a factory and start manufacturing something, know what you're doing, take on the volume and for it to be profitable. So these things all have a ramp-up period. They have an investment phase. They might take a year, they might take 2 years, they might take 3 years before they come to fruition. So in Australia, in particular, because you asked the question, we are looking at a few. I'm not going to give you the detail because that is strategic benefit to us as to what we're doing. But we certainly do look at what works very well in other markets around the world and see how we can roll that out in each of our markets, and that's part of our continuum. That's part of the IP that we have where our businesses share things that work and don't work. What is the CapEx expectation for the full year and going forward, does Bidcorp need higher capital intensity versus history to keep growth rates at similar levels? We'll definitely see our CapEx this year lower than the prior year, the prior few years. And I really think what happened over the last few years is, there was a catch-up after COVID. There was minimal investment made for 2 or 3 years. And then you just have to catch it up. And some of that was in fleet, some of it was in infrastructure, some of it was in MH&E, but we don't see elevated levels for a while. So I think we're in a phase now where the CapEx will probably run between 1.5% to 2% of revenue on an ongoing basis. There might be spikes in that, bearing in mind, there's infrastructure spend. Infrastructure spend is lumpy and it's over a number of years. If you want to put up a new facility, you think about it now and you might open it in 3 or 4 years' time. Interestingly, in Portugal, we actually occupied our new facility extension a week ago. We started building that thing, I think, 4 years ago. But through council planning and bureaucracy, we've only just got in. So these things are long term. You talked to Australia improving on a 6- to 12-month view. Any concerns around the impact of inflation ticking higher again and interest rate hikes? Of course. Of course, we're concerned. We have seen there was a 0.25 point hike a month ago. There's probably going to be another one based on the inflation reading today. Energy prices are out of control, insurance prices are out of control. So of course, there's a downside risk, but we remain the eternal optimist. We still think the Australian business has many other levers to pull, and we've got a great business there, which will be fine. Can you provide some color on the turnaround in New Zealand between Q1 '26 and Q2 '26 and specifically how margins trended relative to the H1 '26 reported level? That's a way too complicated question. It happened in about October, and we saw a revenue improvement on a week-by-week basis of about 5% that just suddenly spending increased. And of course, we'd love to attribute it also to our teams and everything we've done, and some of it is attributable to our teams. But obviously, some of it is just macroeconomic. But our New Zealand business went backward last year slightly and went backward in the first few months of this year, and we're now seeing it operating at the levels it was before, plus a little bit more. So we're very confident that the New Zealand business at this point in time has seen a very strong recovery back to its traditional margins and possibly even a little bit better. Dare I ask about the future of China in the portfolio? You can ask, you won't necessarily get an answer. Does the strong cash generation, given you are moving past the U.K. CapEx and consistency of your earnings, not warrant having a capital structure with more debt? It's something we're looking at. We're looking at buybacks when our share price was running at ZAR 400, it made sense to look at buybacks. We are looking at the best structure. What we do with dividends, what we do with capital returns? So that's very much an active work stream, and it is getting attention. What is the group's preference for returning excess capital to shareholders? Do you favor special dividends or share buybacks? I actually don't favor special dividends at all because I think they are one-off sugar hits. So I think it needs to be in a sustained high dividend payout or share buybacks or a combination of both. Share buybacks have to be accretive, and that depends on the share price and also the tax treatment of the debt that you're going to use for the share buybacks. So we're still in a debt position. We're not in a cash positive position. We're in a net debt position. Obviously, you want to be in a net debt position. So you have to make sure it's tax effective in order for it to be accretive. So if it's accretive and at the right share price, buybacks absolutely make sense. You mentioned there are more headwinds and tailwinds, which implies weaker second half constant growth. How does one read this together with Jan, Feb running slightly ahead of 1H? This is Arena. I'm going to be in big trouble however I answer this. I think you're picking on our words and you're being a little bit pedantic about the semantics. There are more headwinds and tailwinds. That's just the reality of the geographies, the economics that we operate in. However, we are confident that we, all things being equal, will maintain the momentum that we have run with in the first half. So I wouldn't read too much into those wordings saying that we're negative about the second 6 months. All we're saying is, it's not party time out there. It's not all beer and skittles and sun and games. It's tough work. It's a slog, but we're confident that we've got the right ammo and the right teams in place doing the right thing that will continue the trajectory. Maintenance CapEx ZAR 2 billion versus D&A ZAR 1.2 billion previously. You've guided to ZAR 1.25 billion business. Will this normalize or are we in a new normal as a result of ESG investment, PPE inflation, et cetera? I think the reality is we're in 1.5% to 2%. And building costs are probably 50% to 70% more than they were pre-COVID for the same building. And certainly, we haven't seen food price inflation on the top line of that, which runs through to MHE and everything else. Yes, ESG does add a whole lot of cost. Electric trucks are 3x the cost of ICE vehicles. We don't know what the long-term total cost of ownership is because nobody does. So yes, that impacts your CapEx upfront. But realistically, it's 1.5% to 2%. Will you consider share buybacks? Spoken about that. Great result, but I'd like to ask if net profit margins will reach 5% or more in the future? I'm actually not sure what the net profit margin is. Actually, that's not a number I'm familiar with. I know our trading margin is 5.4%. I'm not sure what the net is. David, put you on the spot. David Cleasby: 3.5%, I think. Bernard Berson: It's 3.5%. So we've got to get to 5% after tax. Well, that's an anonymous attendee. If you want to help us achieve that, we're very willing to hear how we can do it. I'm not sure how you get from 3.5% to 5% after tax. Do you have an outlook on food inflation in South Africa in particular? I'm actually going to give that one to David because I don't have a granular view on the food inflation outlook in South Africa. David Cleasby: I mean, we're seeing somewhere around 4% in some businesses. And certainly, in the Crown space, we've seen actually deflation in the space. I mean I think it's in that 3% to 4% range, but it depends. Foot and mouth had some impact on certain categories like meats and the like, which are 30% to 40%. So it really depends on the basket reselling and how that impacts us. But those are the 2 sort of spaces, I guess, that we're seeing from our businesses. Bernard Berson: European region margins saw a strong uptick this period. Is this trend sustainable into the second half? Can you call out, which regions aided this improvement? I think we went through that. Strong performance from Italy, very acceptable performance from Netherlands and Belgium, strong performance from Poland, strong performance from Czech, Slovakia, Hungary. So we do think it's sustainable. We don't think there are one-offs in there that won't be repeated. But once again, it goes to the macroeconomic environment. And are there any events out there that we don't know about that are going to impact the European environment? At this point in time, we're very comfortable with where the business is tracking. You noted that February sales to date have been tracking above the H1 constant currency run rate, excluding New Zealand, which are the markets there is currently that H1 trajectory? Once again, please don't read too much into the short term. You've got Chinese New Year, was a few weeks later this year than last year. That obviously has an impact. It has an impact in February because it was -- Chinese New Year was in January last year and in February this year. And Chinese New Year is not only an impact on the Chinese business, but it also does impact the other Asian businesses. Ramadan is at a different time this year. I think it's a month earlier to what it was last year. That has an impact. You've got the Winter Olympics that happened, and that had a bit of an impact in Italy. It's not hugely material, but it had a bit of an impact. So please don't read too much into that comment. Broadly, our sales growth is tracking where our sales growth has been tracking. There's no major deviation either up or down on a longer-term trend basis. How much operational capacity do you have absorbed any rising fuel price? How much of your current margin is benefiting to a lower fuel price? The direct cost of fuel, diesel, actually isn't a major driver in the business. Obviously, it has some type of impact, but it's actually very small. Electricity is a far greater impact. But labor is still 60% to 70%, I think it's about 70% of our input is labor. And then you've got occupancy cost, rental and then you've got electricity and then you've got motor vehicle costs. So it really isn't a major swing factor either way. And that's why we don't really talk about it when fuel prices go up or fuel prices come down. It's not something that has a material impact, particularly that it's not materially moving. So yes, pricing is 10% or 20% lower, but it's not 10% of what it was. So it really isn't making a differential. Should we expect the usual seasonality for this year's results? Absolutely. There's nothing that's changed in the structure of the business. What we do see in the second half of the year is Easter. And I think Easter might be a week or 2 later this year than it was last year. And you also see the start of the European summer. If that weather doesn't kick in, that has an impact. But once again, that's an uncontrollable. If they have a strong start to summer, we see the benefit of that in May and June. If they don't, we don't get the benefit in May and June. I guess the other big kicker that happens every year in the second half is in the Australasian division, and that's just the accounting for rebates and customer rebates and supplier rebates, et cetera, which is very consistent from year-to-year. So there's no reason that won't be the same this year in terms of the seasonality effect. Plans to enter any new countries, geographies, Scandinavia, Canada, for example? If the right opportunity arises, we'll look at it. What we have learned is that if you're going to go into a new market, you want to go in of significant scale. Greenfields or very small businesses are very difficult in new geographies. It's a long road to travel. So we are looking for -- if a new country does present itself, it needs to be an acquisition of reasonable scale, and those just haven't happened. We did have a look at something, and I'm not going to specify where. We did have a look at a business which is relatively large in a new geography. And we didn't pursue that. We did a lot of work on it. We didn't pursue it. And in hindsight, it was the correct call to have not pursued it for a number of reasons and don't ask for details because I'm not going to give you any details, but we're very happy with our decision not to feel pressurized to make acquisitions. At the time, it looked okay. It was a market that theoretically was okay. But in hindsight, at this point in time, I think we made the right decision. Maybe in 5 years' time, we'll say it wasn't the right decision. But right now, where we sit, that was correct. So to answer the question, we will only get into new geographies with the correct start-up. You can even see in somewhere like Hungary, where we're doing greenfields supported by our Czech business. That's a tough, tough game. It's profitable, but it's scaling up exceptionally slowly. It's hard work. Would you say that Bidcorp is mostly the same business now as it has been over the last 10 years? That's a very interesting question because the answer to that is yes and no. It's a very similar business, but we absolutely have changed our strategic focus in terms of that continuum of where we see the business and where our aspirations are and how we're going to get there. So we very much moved away from just being a carton mover and a volume mover. And 10 years ago, we had a very large business in the U.K., selling to the logistics, the QSR operators, which we got out of. It was a huge amount of revenue, a huge amount of work and not a lot of contribution. Over the years, we've spoken about the rebalancing of the customer portfolio. And so when you look at our portfolio now, it's very different to what it was 10 years ago. We're still selling the same things. We're still selling baked beans and salmon, but to a far more focused defined customer grouping. The value-add opportunity is significantly more important to us now than it was 10 years ago. So a much more prominent part of our profit portfolio and the drivers of growth than it was 10 years ago. The investment in infrastructure means that we're able to deliver on these other strategic imperatives because we have this philosophy of being 30 minutes away from 90% of our customers, whereas a lot of our competitors take a more traditional approach and more, I don't know what you'd call it, a financial consultant approach of having very big facilities, which are theoretically more economically efficient than multiple smaller depots. But we've moved to that model of having multiple smaller ones close to the customer, which we think is giving us the correct return and giving us the growth trajectory. So we're a very similar business with the same people who were here 10 years ago. The team is fundamentally the same. But I think our strategy is far more laser-focused and far more refined. And I also think there's a much larger emphasis on technology than there was before. And a lot of that technology sits behind what we do. So we're not a technology company. But a lot of what we're doing and a lot of the efficiencies that we get, a lot of the ability to manage this business comes about because of the technology we have embedded in the business and continue to invest in and to spend money on and to experiment with and to develop on a global basis. And that's going to become more and more important. However, this isn't a technology business. It's not going to be a technology business because it's very much one of those good old-fashioned physical businesses, which maybe the investor community realized over the last few weeks that these businesses are what they are. But they are reliable, stable businesses that do adapt to technology. And absolutely, you need technology. But hopefully, they're not going to be totally disrupted by technology because you still need product and you still need to trade and you still need to buy and sell and you still need to service the customers' requirements. Would you say your market share gains are mainly from geographic expansion, eg, Italy or taking share in existing areas of focus? The growth has been almost in every market. So the revenue growth has been in every market. Yes, New Zealand, I think, was one of the few large markets that didn't have revenue growth, but they will start seeing that. So we believe we're gaining market share in most markets that we operate in. So it's not one market or another that's totally screwing the numbers. It's balanced across the portfolio, offset by 1 or 2 markets. In fact, there's one market that's going back, which is the Greater China market, where our share definitely is going back and our volumes are going backward. But everywhere else, we're seeing growth. I think that's everything. Let me just check. No more questions. That's great. Thank you, everybody. We'll give you an update again in May. And I will tell you once again, not to worry about each 3 months in isolation that this is a marathon, not a sprint. We need to look at 10-year trends, not 1 month, 2 months, 3 months deviations from Alpha estimates. I've got no clear what people are talking about, but clearly, it's very important. And it's more about the longer-term trend of what we're doing, the sustainability of what we've built, the quality of the underlying business and how that's going to continue to grow in the future as it has over the last 10 years. So a big shout out to our teams around the world. Thank you very, very much. Fantastic results. Thank you for all your hard work, efforts and achievements. Thank you to everybody for joining the call, and we will catch up again in May. So thank you very much, everybody.

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GLNG 2025 Q4 财报电话会议

Operator: Welcome to the Golar LNG Limited 2025 Q4 Results Presentation. After the slide presentation by CEO, Karl Fredrik Staubo; and CFO, Eduardo Maranhao, Tor Olav Troim will have some closing comments prior to a question-and-answer session. [Operator Instructions] I will now pass you over to Karl Fredrik Staubo. Karl, please go ahead. Karl Staubo: Thank you, operator, and welcome to Golar's Q4 2025 Earnings Results Presentation. My name is Karl Fredrik Staubo, the CEO of Golar and as the operator said, I'm accompanied today by our CFO, Eduardo Maranhao, to present this quarter's results, and our Chairman, Tor Olav Troim , to give some closing remarks. Before we get into the presentation, please note the forward-looking statements on Slide 2. Starting on Slide 3 and an overview of Golar today. Golar owns 3 FLNG vessels, all with 20-year charter backlog. Starting on the top left, the Hilli is the best-performing FLNG globally and delivered another quarter of 100% economic uptime. The FLNG Gimi started its 20-year contract for BP offshore Mauritania and Senegal in June '25 and is now producing above the contracted volume. The Mark II FLNG is under construction and on schedule for delivery by year-end '27 and thereafter to start a 20-year charter in Argentina alongside the Hilli. We have 3 growth designs ranging from 2 million to 5 million tonnes per annum, and we have obtained yard availability and pricing for all 3 designs during Q4. We're listed in NASDAQ with a market cap of approximately $4.5 billion. And pre year-end, we had a cash balance of $1.2 billion and a net debt position of $1.5 billion. We have an EBITDA backlog standing at $17 billion before commodity-linked earnings and inflationary adjustments. Our adjusted EBITDA for '25 was $232 million, and we expect this to grow to about $800 million once the fleet is fully delivered and under long-term contracts. Turning to Slide 4. This is just an illustration of the overview of the long-term cash flow visibility of our 20-year charters. Hilli will end her existing contract for Perenco in Cameroon in July this year and go via Seatrium shipyard in Singapore for upgrades and life extension work before starting her 20-year charter in Argentina during the second half of '27. Gimi is producing under a 20-year charter for BP Offshore Mauritania and Senegal, and the Mark II is on schedule to start her 20-year contract during first half '28. On Slide 5, we build up the adjusted EBITDA contribution from the existing fleet. Golar's 70% ownership of the Gimi provides us with an annual EBITDA of $150 million based on the contracted volume. Hilli will contribute $285 million once on contract in Argentina. And similarly, the Mark II will contribute $400 million once operational in Argentina. If we then net off our G&A of around $35 million, we foresee long-term EBITDA generation of $800 million a year before commodity upside, inflationary adjustments and any incremental FLNG units. The embedded commodity upside comprised of 2 components. It's the profit sharing mechanism in the FLNG contract as well as our 10% shareholding in Southern Energy. The commodity upside provides Golar with an incremental upside of approximately $100 million for every dollar the offtake price is above $8 Argentina and a downside of approximately $28 million for every dollar the FOB price in Argentina is below SESA cash breakeven. We believe the skewed risk reward of these commodity exposure will contribute meaningful earnings over the 20-year life of our Argentina contracts. Illustratively, if LNG prices return to 2022 levels, the incremental earnings from the commodity upside would be an annual addition of $2.7 billion. Or if LNG prices remain at current levels, we see an additional commodity upside of approximately $200 million per year. Turning to Slide 6, highlighting some of the key characteristics of our FLNG charter agreements. We aim to structure our LNG contracts at solid infrastructure cash flow with meaningful contractual protections. Some of the key attributes of these protections include that all of our contracts are paid in U.S. dollars. All cash flows are paid offshore net of any local taxes in the countries where we operate. The contracts are made under English law. And for all the long-term contracts, our operating costs and maintenance CapEx is either passed through or reimbursable by our counterparties. Moving to the next session and the business update starting on Slide 8. Starting on the left-hand side, Q4 was another active quarter for Golar, concluding '25 as a record year of execution. During the quarter, all conditions precedent for the 20-year contract for Mark II in Argentina were successfully met. We concluded 2 financing transactions totaling $1.7 billion in the quarter, comprising of a new $1.2 billion bank refinancing, increasing from $630 million to $1.2 billion. The new facility has improved terms compared to Gimi's initial financing facility and the new facility proves the bankability of our FLNG assets once operational under long-term contracts. We also entered the rated U.S. unsecured bond market with a $500 million bond offering with a coupon at 7.5%. During the quarter, SESA signed a letter of agreement for an 8-year offtake deal for the first 2 million tonnes of production in Argentina. The LOI was signed with SEFE, which stands for Securing Energy For Europe, a subsidiary of the German government. They are also the existing offtaker for Hilli in Cameroon today. So it's an offtaker we know and cooperate well with. The terms of the offtake agreement is 1 million tonnes is linked to Brent prices and 1 million tonnes is linked to Henry Hub plus a premium. We expect these LOIs to be formed into a letter of agreement within Q1 of this year, at which point the details of the commercial terms will be disclosed. During Q4, we bought back and canceled 1.1 million shares at an average share price of $37.76. We're also very pleased with commercial progress made in the quarter for a contemplated fourth FLNG project. We'll describe this in greater detail later in the presentation. Turning to the right-hand side for the full development for the year. '25 was truly a record year of execution, securing $14 billion in EBITDA backlog across the two 20-year contract in Argentina. We took new financing facilities of $2.275 billion across the mentioned Gimi bank refinancing and the U.S. rated bond as well as a $575 million convertible bond issued in June '25. We obtained the commercial operations date of Gimi and doubled our operating fleet of FLNGs. We continue to perform according to our market-leading operational uptime, and we're especially pleased to see the Gimi join the operational excellence of our sister Hilli and both vessels produced above their contracted amounts, providing extra value to our stakeholders. In total, during '25, we bought back 3.6 million shares, confirming the Board's and management's view that we see attractive value in our own stock. We fully exited LNG shipping after 50 years in the business with the sale of the Golar Arctic and our investment in Avenir Shipping. So all in all, we're very pleased with the year that passed and hope to keep the same progress in the year we have now started. Turning to Slide 9 and a snapshot for the Hilli. Hilli continued her market-leading track record. For the year, we generated a slight overproduction, recognizing $2.5 million of excess earnings over the 1.4 million tonnes contracted capacity. In December, we had a major production milestone, producing our 10 millionth tonne of LNG since startup of contract in 2018. At the end of the current charter in July this year, the vessel will sail from Seatrium -- from Cameroon to Seatrium Shipyard in Singapore for vessel upgrades and life extension work. The required long lead items and equipment needed for the work at Seatrium have been ordered and the prefabrication of certain work scopes has started at the shipyard. During first half of next year, Hilli will sail from Singapore to Argentina to start a 20-year contract expected to start during the summer of next year. She will then contribute $285 million of annual EBITDA or $5.7 billion of adjusted EBITDA backlog over the 20-year period. Slide 10 focuses on Gimi. As mentioned, Gimi achieved its COD in June '25. The unit is still optimizing operations in close collaboration with the upstream partners of the GTA project. Production is ahead of schedule and solid optimization has been achieved to date. In Q4, we invoiced day rate 3% above the contractual day rate, and we are now frequently producing at volumes that on an annualized basis would significantly surpass even nameplate capacity. It's worth to note that the throughput capacity of any liquefaction plant is sensitive to gas quality and ambient temperatures. Throughput variation between winter and summer months should therefore be expected where colder ambient temperatures during winter benefit the production levels. However, our contracted rate is based on 90% of nameplate and any production over and beyond that number is a pro rata increase to our earnings. Based on operations to date, we expect Gimi to produce above her contracted volumes on an annual average basis, and we'll continue to improve how meaningful that can be in the months to come. Turning to Slide 11 and the Mark II FLNG. The construction of the unit remains on budget and on schedule for delivery by year-end '27. Construction is now close to 50% complete, and we have spent approximately $1.1 billion of the total $2.2 billion conversion scope. The full $1.1 billion spent to date has been equity financed. As you can see from the pictures on the right-hand side, meaningful construction progress is now advancing. The midship manufacturing, which will house the liquefaction plant is now well underway, and the new midsection will be approximately 63 meters wide and approximately 80 meters long. We've now also surpassed 6 million man hours without any lost time injuries. On Slide 12, SESA is also making strong progress on the infrastructure required to facilitate for the gas grid connection of the FLNG Hilli as well as the required land-based infrastructure to support FLNG operations in Argentina. SESA has now awarded approximately $500 million of investments to date, including the pipeline connection to the existing grid, support vessels such as tanks and supply vessels and construction of the land-based warehouse to facilitate spare parts and operational support for our operations in Argentina. On Slide 13, SESA is also moving ahead with a designated pipeline from Vaca Muerta to the Gulf of San Matias. The pipeline comprised of 3 key components. The first component is the turbo compressors, and the contract for those was awarded in December '25. The second component is the line pipes, which will then bring the gas, the approximate 500 kilometers from Vaca Muerta to San Matias. Those were also awarded in December last year. The remaining component is the EPC for the actual construction of the line pipes and the compressor, where we have received 8 proposals and expect to have an award within the first half of this year, upon which construction will ramp up. Turning to Slide 14. During the quarter, we confirmed yard availability and price for the 3 growth designs that we have in question, ranging from Mark I to be built at Seatrium in Singapore, Mark II at CIMC Raffles in China or a 5 million tonne unit that could be built at Samsung in Korea. We're pleased to see that we still obtain attractive CapEx per tonne and around 3-year construction time for the conversion candidates and north of 4 years for the Mark III. This is helpful input in developing our commercial pipeline and the price point and delivery is confirmed interest with our clients. Turning to Slide 15. We see multiple discussions for FLNG deployments. We see an increasingly strong demand for FLNG tonnage, driving positive development of our commercial pipeline. We're currently in discussions for deployment of projects in Africa, Middle East and South America. Based on the pace of the commercial developments and differences in vessel design requirements of the projects, that will dictate the design that we will order in the end. We do not foresee any meaningful CapEx expenditure until the commercial terms for the next project have matured. We will revert to the market once we have a meaningful update on our fourth unit. Turning to Slide 16 and some of the overarching developments of the LNG market. Last year, the LNG market was around 434 million tonnes, expected to grow approximately 50% in the next 5 years, mainly driven by supply out of the U.S. We note with interest that U.S., which is already the largest producer in the world, will take the vast majority of incremental growth. That's particularly interesting as the U.S. is already the incremental producer on the cost curve of LNG. We see strong demand development driven by volumes out of the Far East, where China is currently the most active buyer in the market. Going forward, we need to see additional LNG FIDs to cater for the demand that's coming, and this fits well with the delivery schedule that's just been confirmed by the shipyards and for the commercial discussions under negotiations. I'll now hand the call over to Eduardo to take us through the group results for the quarter. Eduardo Maranhao: Thank you, Karl, and good morning, everyone. I'm happy to share an overview of Golar's financial performance for the fourth quarter of 2025. If we move to Slide 18, let's review some of the key highlights of the quarter. Total operating revenues significantly increased in 2025, reaching $133 million for the quarter and $394 million during the full year, an increase of over 52% when compared to 2024. This quarter, we report a net income of $23 million and a total of $113 million for the full year of 2025, an increase of 40% compared to 2024. Our Q4 adjusted EBITDA came in at $91 million, reaching a total of $265 million for the year. Some key drivers of this performance were Hilli, as Karl mentioned before, has maintained its commercial uptime level of 100% and recognized an additional $2.5 million of production in Q4 '25, while Gimi also saw increased earnings in Q4, largely driven by higher production volumes resulting from technical improvements and also improved ambient conditions on site. This quarter, we declared a dividend of $0.25 per share with a record date of March 9 and the payment scheduled for March 18. In November, we approved a new $150 million buyback program, of which approximately $41 million was spent during Q4 at an average price of $37.76 per share. Across the full 2025, we have been consistently active on buybacks and repurchased and canceled a total of 3.6 million shares. I'll provide some further information on this in the next slide. Moving to Slide 19. We continue to improve our balance sheet flexibility and Q4 was a very active quarter in terms of transactions. In October, we issued $500 million under our first U.S. rated 5-year senior unsecured notes with a coupon of 7.5%. And at that time, we repaid $190 million of our previous outstanding 2021 bonds. In November, we closed a new $1.2 billion commercial bank facility for Guinea, equivalent to just over 5.6x its annual contracted EBITDA. This allowed us to release approximately $400 million in liquidity net to Golar. Our cash position remains strong with $1.2 billion of cash in hand at year-end. Our total gross debt stood at $2.7 billion, leaving us with a net debt position of $1.5 billion. On a fully delivered basis in 2028, once all FLNGs are in operation in Argentina, our net debt-to-EBITDA ratio is set to reduce significantly to just over 3.4x. When it comes to the Mark II, we continue to fund its CapEx commitments. And so far, we have spent just over $1.1 billion to date. All of that amount has been funded with equity. So we continue to evaluate further debt optimization alternatives, which may include the refinancing of Hilli's current facility and a new long-term debt facility backed by the Mark II. This will allow us to continue to release significant liquidity to continue to support our fund -- our growth projects. Now moving to Slide 20. We continue to focus on accretive growth while maintaining a sustainable quality of shareholder returns. Our plan is to allocate most of operating cash flow after debt service to shareholders, while continue to recycle capital through asset level financings and existing debt optimizations to fund growth. In 2025, we returned approximately $250 million in the form of dividends and buybacks, of which $103 million were paid in dividends over the course of the year and $144 million in buybacks as explained before. During that same period, we continued to grow, and we've invested over $750 million on CapEx for our FLNG units. Moving to Slide 21. We can see that our share count has been significantly reduced over time with a total of just over 101 million shares outstanding as of today. Over the course of last year, we bought back and subsequently canceled 3.6 million shares, as explained before. We currently have a remaining allowance of up to $190 million under our buyback program, and we plan to continue our active approach to accretive buybacks from time to time. Moving to Slide 22. When our 3 FLNGs are in full operations in Argentina, we expect our EBITDA to grow to over $800 million before further commodity upside. This can grow even more, subject to further upside from LNG prices under the contract for Hilli and Mark II. Based on that, our free cash flow generation could reach around $500 million per year or approximately $5 a share before commodity upside. This could represent a total increase of over 5x our current dividend level of $1 per share, which we were currently paying. Incremental free cash flow could also be resulting under the SESA contracts and can be estimated at approximately $100 million per year for every dollar per million Btu increase in FOB prices above $8. Moving to Slide 23. I just wanted to recap that there are many ways that investors can get exposure to Golar. We are listed in NASDAQ and our market cap was just over $4.5 billion with an average daily volume of over $50 million per day. We currently have $800 million on the 2 unsecured bonds issued in '24 and '25 and also an existing convertible bond of $575 million, which was issued last year. So there are many different ways that investors can gain exposure to Golar, and this is a summary of how you can play that. I'll hand now the call back to you, Karl. Karl Staubo: Thank you, Eduardo. And turning to Slide 25 and a look ahead at what's our focus on continued value creation. Near term, we see increasing commodity prices that will boost the commodity-linked earnings for Hilli until end of contract in July this year. Based on the strong performance of Gimi, we also expect to see increased capacity utilization payments that will somewhat improve the adjusted EBITDA from Gimi. We believe one of the most or least understood parts of Golar is the commodity upside of our Argentina contracts. And within this quarter, we expect the commercial terms for the SESA offtake to be announced. And hopefully, that can ease the market's understanding of those -- of that potential offset. We have done -- we've proven to do accretive buyback and cancellation of Golar shares, and we have more capacity under the existing buyback program. Through last year, and we'll continue to look for asset level debt optimization, and there's plenty of opportunity to do so across Hilli and the Mark II that could release significant liquidity to fund a fourth FLNG unit and enhance equity returns. The start-up of the Hilli and the Mark II contract in Argentina these are obvious step changes in earnings growth as well. The commercial pipeline of new projects -- new FLNG projects remains under strong development, and we see the terms in which we believe we can obtain to be highly accretive to our platform value. The commodity exposure on the SESA contract will come into fruition as the 2 units become operational. As Eduardo just explained, the dividend capacity and the capacity to multiply increase that is evident once we're fully operational. We continue to see structural strong LNG demand beyond 2030 onwards. And our focused FLNG strategy with proven FLNG conversion expertise and the recently reconfirmed price and delivery schedule from the conversion shipyards is a further testimony to our business model. Another interesting thing to note is that the net present value of Golar is increasing daily until both FLNGs are operational in Argentina as a function of time. Turning to Slide 26. Golar remains the only proven service provider of FLNG globally. We have an adjusted EBITDA backlog of $17 billion before commodity upside and inflationary adjustments. We remain with strong balance sheet flexibility of around 3.4x net debt to EBITDA once fully delivered. This enables growth whilst still increasing shareholder returns. I'll now hand the call over to our Chairman, Tor Olav Troim, for some closing remarks before we open up for Q&A. Please go ahead, Tor. Tor Trøim: Yes. Thanks, Karl. First of all, I want to give some thanks to management for a good execution in the year we have behind us to effectively secure $14 billion in EBITDA backlog and do more than $2 billion in financing, pay more than $1 billion in debt -- in installment on the Mark II and end the year with more than $1 billion in cash. It puts us in a very strong position to execute what we think should be an aggressive growth strategy being the world's leading FLNG player in the market. We see today significant more demand for products than we ever have seen. And it's more a question about concentrating our efforts into the projects we think can give the highest possible overall return. It's one of the Board's mission to maximize the value of the company for all shareholders, both on a long and short-term basis. To have an effectively priced equity is a major condition for growing this business. The value of Golar today, as Karl alluded to, is linked to 3 things. It's the value of the existing contract. It's the value of the options agreement we have, which is pretty much a one-sided call on gas for the next 20 years, and it's effectively the value of the Golar franchise. I know everybody is pretty good in calculating the value of the existing contracts. I don't think anybody really pay attention to the value of the options, but I'd like to focus a little bit about the third thing, the value of the Golar franchise. It's 26 years since Fredriksen took over Golar, and we effectively started the venture to build a massive LNG company. It's now 16 years since we effectively started the work on the FLNG activities, which started in 2010. In '14, we ordered the fourth vessel -- the first vessel. It was in operation in 2018, and we now have 8 years of extremely successful operation. That franchise, I don't think anybody fully understands the value of. But to illustrate a little bit, we have been approached by one of the largest oil companies in the world who effectively said we cannot do this. Can you be your service arm to deliver FLNG activities going forward? I think that's a question to take those kind of things is probably a limited return compared to a lot of the other things we can do. But I think in many ways to illustrate the value of the franchise we have built, which I think people are grossly estimating when they're trying to do the value. When it comes to the way we and the Board look at the value, I think so far, it's represented by the fact that we're buying back stocks, and that's a reflection of the fact that we don't think the value -- we think that it's almost better to buy back our own stock at an undervaluation than to effectively do anything else. We have also decided to push out the investment #4 and maybe also investment #5 a little bit not because of lack of projects, but we go into 2 years in '26 and '27, where we have limited cash flow because the Mark II has not started and we lease in for repair. So I think what we want to do is to push the investment phase closer to the period where we are effectively running with an $800 million EBITDA and are actually self-serviced with capital for growth purposes. I was on the call in connection with the Q1 numbers, and I said then that if an undervaluation compared to the real value exists over time, then the Board will kind of start processes, which try to take out part of that benefit. Even if the share price in the latter weeks have shown some signs of recovery, the Board still feels that the value of this company, including the value drivers I just mentioned, particularly #2 and #3, should mean that the share price should have been higher than where it is today. What we have seen in other situations in this industry is that the valuation typically come when the cash is coming. It doesn't come when the contract is signing. I'm referring to companies like Cheniere, where you actually saw that the share price started to move when the cash finally came from the discussions. So in order to kind of look at what we can do in the meantime, we have to explore alternative ways to enhance the value for the period under the cash flow come in 2028. We have, as the Board started a process where we go and seek external advice to consider several ways to improve this -- the value for our shareholders. This thing includes processes, which includes talk to shareholders and includes talk to industrial and financial potential partners, which can help us in enhancing the value of the company on a more shorter-term basis. The market should be aware that we several years ago, received unsolicited offer for the company, several ones. We structured that into a process and then all the offers were at that time, significantly higher than the share price. The Board decided, however, not to recommend the sale of the company, which I think in retrospect has been the right decision to see how we later have built the company. The Board of Golar today consists of Board members, including myself, which represent significant capital invested in the company. And you should be assured that the Board have no other consideration than to do what we believe is the best interest for all shareholders. There is no other agendas here. The outcome of such a strategic process, which kind of we are in the process of starting, combined with the Board's internal discussion is too early to be expected, but we'll keep the market updated if these processes are likely to lead to material changes in Golar's operational or corporate structure. I hope this confirm the commitment I gave to the shareholders in connection with the Q1 report last year. where I said that we intend to do things if you don't see a material improvement of share price. We have seen some, but I think we still feel with $17 billion of EBITDA backlog and an industry-leading position, including a derivative, which is significant value that there are rooms for improvement. And I genuinely hope that you all guys kind of give us some time to go through this process. And as I said, no outcome is given, but I can assure you that the commitment we gave a year ago to explore alternative way to extract value is kind of on the agenda for the Board. That's the only thing I want to say about this thing, and we will report back to shareholders as we make progress on this thing. In the meantime, as Karl said, the value of the company should increase day by day as closer we get to the window in 2028. What I want to end with is that the venture we started 16 years ago, which was to effectively become a dominant FLNG player pays off. I'm very proud of the performance of the Hilli contract. I'm equally proud that we now can deliver to BP and probably be the only part of the [indiscernible] project, which have delivered on time and on budget and effectively now delivering more than we should according to the contract. So thanks. I hope that was enough to confirm that what we're saying in earlier calls are lived up to by the Board. Thank you. Karl Staubo: Thank you, Tor. So operator, we are now ready for Q&A. Operator: [Operator Instructions] Our first question comes from the line of John Mackay from Goldman Sachs and Co. John Mackay: I appreciate all the thoughts around the strategic review. I just want to drill into the details a little bit. I understand it's kind of a multifaceted process. But can you walk us through what the specific process you're focused on right now looks like? What could timing be? What are you watching to decide how to move forward? And maybe to put a bow on it, you mentioned you were approached. Is one of the options on the table here a potential sale of the company? Tor Trøim: I think in view of the discussion we have had in the Board, how we want to orientate the market around this, I don't want to give any further comments than what I've effectively already said. I think hopefully, the shareholders have some respect for the fact that these kind of processes kind of needs to be kept a little bit close to the Board and not effectively be a public process. John Mackay: Okay. Maybe asking it a different way. You highlighted the current value of the company, your desire to push maybe some of the next vessels to the right a little bit to reallocate capital. Is the message here that the focus right now should be on further buybacks specifically? And I guess, at what point do you decide to switch from maybe investing in the base business to -- buying effectively the base business to commercializing the next vessel? Karl Staubo: I can answer that one. So there's no change in our committed focus to develop attractive FLNG projects and none of the actions taken today will pause the pace of the commercial evolvement of the contracts in discussion. That said, an FLNG project, if it's just to agree commercial terms with the counterpart, that would be fairly easy. These are very large infrastructure projects that require significant regulatory, governmental, tax and environmental approvals, including LNG export laws. And most of the -- or some of the countries we're in discussions for didn't export LNG before we started it. That's true for Cameroon, that's true for Mauritania, that's true for Senegal, and it's true for Argentina. So there is absolutely no change whatsoever in Golar's committed focus for accretive FLNG growth. What we're saying is some of the projects in discussion have different vessel design requirements. Hence, instead of going on speculation, number one, because of the different requirements from the various commercial discussions; and number two, for the cash flow profile reasons mentioned by Tor, we've decided to not go on speculation as speculatively as we have previously done and then continue to mature the commercial pipeline before we commit significant capital, both because we believe that's right from a vessel design selection point of view and also for the cash flow profile that Tor alluded to. Tor Trøim: Let me add a little bit to that, Karl. I think kind of just have one thing in mind, the process, which we're talking about now where we're seeking some external advice for what the kind of options is for the future of Golar is not in any way influencing the day-to-day business. What the Board has given a clear mandate to management is run the business as we run it to the best interest of things and don't let any kind of strategic discussions influence what we do in short term. I think any kind of strategic discussion will benefit from building -- continue to building the company like we do. So I think that's the most important thing. This is business as usual and nothing else happening, but I think we're looking at some other alternatives. If there are cheaper access to capital, for instance, than effectively we have today. So I think that's important. I think when Karl -- what Karl says about '27 and '28 is -- or '26 and '27 is that if we push the kind of cash back a little bit, maybe half year to a year, we will be in a very different situation because in the end of the period when we have the heavy installments on ship 4 and potential 5, you will also meet that with a massive cash flow coming out from the business. So I think it's a pretty thought out decision, which I also know is supported by some of our major shareholders who have given us the same input. We have been through a history here in this company where we've done $3 billion projects or more than $1 billion project with a pretty tiny balance sheet that had put the balance sheet under stress in some of the cases. I don't think we want that. We want to have a very, very strong and solid balance sheet to execute on multibillion-dollar projects, which we're talking about here. Operator: Our next question comes from the line of Chris Robertson from Deutsche Bank Securities, Inc. Christopher Robertson: Just given the strong operational performance of the Gimi over the last several months, it's producing slightly above nameplate, as you say here. How are the counterparties now thinking about the future of expansion at GTA? What other data points do they need to see or evaluate to make a decision around that? And what's the current thinking potentially around if an expansion would include a floating asset? Karl Staubo: That question is probably better placed to BP and Kosmos, but the fact -- what BP has consistently said is that they want 12 to 18 months of well data before a decision is made on expansion, but it has to do with how the wells perform. Given that we are now producing above the contracted amount suggests that the -- not only the FLNG, but the flow from the upstream and the other infrastructure is also working at least as expected, if not better, and that should help a decision for expansion. And given that the incremental cost of expansion should be significantly lower than the initial phase, any growth should be accretive to the project economics. Christopher Robertson: My follow-up question here is, Karl, you mentioned getting quotes at the yards recently. This is kind of a 2-part question. One, what's the current thinking around the cost for Hilli upgrade and redeployment work? Has that range narrowed at all as we get kind of closer here to the summer months? And then two, could you clarify kind of where things are shaking out in terms of where you're getting quotes at in terms of a dollar per metric ton? Have we seen any cost inflation since the Fuji project? Any commentary around that would be helpful. Karl Staubo: Sure. So on Hilli, the conversion budget, when we say conversion budget, that includes everything from disconnecting in Cameroon, towing and bunkering the vessel from Cameroon to Singapore, the yard stay and sailing back to Argentina and connecting and commissioning, OpEx, training, spares and upgrade work, all in, we estimate $350 million, including a certain level of contingencies. We -- as we continue to execute on the Hilli redeployment as most of the equipment is now ordered, we feel comfortable with that budget, and we'll try not to eat into all of the contingencies built into the $350 million, but that's the budget. But it's important to highlight that, that includes everything, not just the upgrades to the ship. And then the second part of the question, do we see price inflation? Yes. The price inflation is not so much on the yard scope. It's more on the top side and in particular, the long lead equipment on the top side. The primary driver of that cost inflation is competition for the equipment, mainly from AI data centers. We're using the same gas turbines and some of the other critical components. And the massive surge in such developments has caused lead times to go out and prices for that equipment to go meaningfully up. If we then look across an FLNG, we see a very limited cost inflation of the Mark II compared to where we ordered last time. We do see a higher cost inflation on the Mark I compared to where we ordered, but that's obviously a function also of it's a longer time since we ordered the Mark I. And the biggest cost inflation is without a doubt on the Mark III and that for the Mark III, it's also driven by competition at the shipyard, namely Samsung. So that's how we see it, but we still see that we can obtain a cost advantage compared to land-based of up to 40% lower CapEx per ton for Mark I and II, not so much for Mark III. Operator: Our next question comes from the line of Alexander Bidwell from Webber Research & Advisory. Alexander Bidwell: With the performance thus far on Gimi, how should we think about production above contractual base going forward? You had mentioned ambient temperature and gas composition are both key drivers. Are there any other factors such as maintenance, which would impact production quarter-over-quarter? Karl Staubo: Sure. So maintenance is built into the difference between nameplate of 2.7 and the contractual amount of 2.4. So that's already taken into account scheduled maintenance. When it comes to the ambient temperature effects, you will see a level of seasonality over and above the 2.4. We don't expect to go under the 2.4 in the summer months, and we expect to be meaningfully higher in the winter months. So if you smooth it out on average, we expect to be well above the contracted amount for -- in the case of Q4, that amount was 3%, but we're still undergoing optimization, and we think more than 3% is fair to assume across the year. Exactly percentages we don't want to commit to right now as we are in the midst of these optimizations. To have this type of production this early in the project exceeds the expectation both of Golar and of the charter. Alexander Bidwell: All right. Great color there. Turning over to Argentina. Could you walk us through the start-up and commissioning cadence for Hilli and the Mark II once the assets are actually on site? And are there any lessons learned from Cameroon and GTA that you plan to apply for the deployments? Karl Staubo: Yes. So when it comes to -- they will be slightly different because Hilli has obviously operated for 8 years, whilst the Mark II will be -- has never operated. So we expect the commissioning process of Hilli to be quicker than the Mark II. And for simplicity, we expect commissioning of Hilli to be around 3 to 4 months, and we expect up to 6 months for the Mark II simply because the equipment hasn't been running in December. The actual process is that we arrive on site, we connect to the mooring system and then we start commissioning through gas, gas in production. The key learning effect that we are debating with setup but are likely to adopt is that we do expect to arrive cold. What that means is that we will arrive or likely will arrive with some LNG on the tanks that allows us to start commissioning before we are reliant on gas flowing through the pipeline. Hence, we can save any time that it would take to connect to the grid. And secondly, the cooldown process itself. That has a slight cost, but in the scheme of FLNG CapEx, almost negligible. But this can save significant time and it's the same as what we did both for Hilli and Gimi commission. Operator: Our next question comes from the line of Sherif Elmaghrabi from BTIG. Sherif Elmaghrabi: Maybe to start off, sticking with the Gimi, are project partners -- given production has been surprised to the upside, are project partners still interested in debottlenecking? And what needs to happen to debottleneck given Gimi is already capable of exceeding nameplate by a fair margin? Karl Staubo: Again, it's a question for the upstream partners more than us, but it's in everybody's interest. to debottleneck provided you can do so and at, call it, CapEx accretive to the CapEx -- to the unit economics of the project. And we do expect that such debottlenecking will be at a very meaningful accretion to unit economics and as such is in the interest of all stakeholders, including Golar. Sherif Elmaghrabi: Okay. And then turning to a fourth or fifth unit. Can you elaborate on these Middle Eastern opportunities? That's not something that was on my radar, but it's interesting. And I'm wondering if that's linked to ramping unconventional gas production in the region. Karl Staubo: You are right that, that is a region that has, call it, saved up as more and more actively pursuing FLNG. And it's one of the regions where we like the pace of progress in our commercial -- or in the project development of a potential FLNG project. So for that one, you are right, that one we haven't spoken as much about previously, but what we are hopeful that we can continue to develop at pace. Operator: Our next question comes from the line of Spiro Dounis from Citi. Spiro Dounis: I wanted to go back to demand. I think I heard you guys say several times that you're seeing more demand than ever before for this LNG infrastructure. I was just wondering if you could expand on that. Is that macro related? Or is that specific to more of an FLNG solution or maybe both? Karl Staubo: I think it's twofold. One of it is the increasing industry recognition of the efficiency of FLNG versus alternative liquefaction solutions. The fact that you can construct this unit at up to 40% discount to land-based and the flexibility a movable FLNG provides versus land-based is one key driver. The other key driver is that the vast majority of incremental production of LNG will come out of the U.S. and all U.S. projects or the vast majority of U.S. projects source at Henry Hub. So the attraction is when you can find reserves that you can source in addition to the CapEx saving, but significantly cheaper gas sourcing than Henry Hub. That's the other component that drives the interest. So for us, it's increasing industry recognition and the attraction of sourcing cheaper [indiscernible]. Spiro Dounis: Got you. That's helpful color. Second one, maybe for you, Eduardo. Just you mentioned on this latest refinancing or financing that it sort of proves out the bankability of these structures. Could you maybe expand on that as we think about the go forward here? You obviously have a lot more financings to do. Does this latest one prove as a blueprint? What lessons did you learn during this last go around? Eduardo Maranhao: Yes, that's a great point, Spiro. So you're absolutely right when it comes to the data point that we had on the latest financing. So when we look at the Gimi deal that we closed in November, we raised $1.2 billion, which is just over 5.6x Gimi's annual EBITDA. So if we try to apply and we are in discussions of potential similar transactions to that one. If we were to apply the same multiple to both Hilli and/or the Mark II, we could be looking to raise in excess of $1.5 billion for Hilli and over $2 billion for the Mark II. So that really shows the whole potential of financing capacity that we have under these contracts. These are long-term 20-year agreements, and we really believe on the bankability of these contracts that we have signed up to. Operator: Our next question comes from the line of Liam Burke from B. Riley Securities. Liam Burke: Karl, you talked about a lot of interest in potential negotiations for future FLNG projects. Does shipyard capacity ever come into the negotiation? Or does that -- I mean, Chris touched on cost. But shipyard capacity, does that ever come into future discussions? Karl Staubo: Absolutely, yes. That is why it's been critical as part of this commercial pipeline development to have confirmed yard availability and updated yard pricing in continuing such discussions because delivery is obviously a key part of this. What we see is that for the conversions Mark I and II, we are still able to maintain a very, very competitive conversion period of somewhere between 36 and 40 months, whether or not we go Mark II or Mark I. What we see is that if you go bigger on the Mark III, it's meaningfully pushed out even since we had the update with the shipyard 6 to 9 months ago. So on that one, we see the yard availability as a negative. On the first two, we still see it as attractive. Liam Burke: Great. And then other FLNGs out there mostly operated by the major energy companies. Has there been any potential competition on the FLNG as a service only from any other providers? Karl Staubo: Nobody else in the world has done vessel conversions, FLNG vessel conversions. We think that the CapEx and delivery time is better obtained in the current yard and long lead situations for vessel conversion than it is for newbuilds. As part of the update we've had with the shipyards, we have also explored newbuilds on the smaller sizes that reconfirms that conversion is the cheapest and most efficient way to do, but obviously comes with significant engineering complication that Golar has built up over time. So we do see that there are more and more majors going for this type of technology, but there are significant advantages doing it with us as a service provider as opposed to replicating this through a new build because you cannot obtain the same benefit. Operator: There are no further questions at this time. So I'll hand the call back to Karl for closing remarks. Karl Staubo: Thank you all for dialing in and listening to the Q4 presentation. Have a great day. Operator: This concludes today's presentation. Thank you for participating. You may now disconnect.

39天前Insight Analytics约5分钟阅读

EVH 2025 Q4 财报电话会议

Operator: Welcome to the Evolent Earnings Conference Call for the Fourth Quarter ended December 31, 2025. As a reminder, this conference call is being recorded. Your host for today's call are Evolent -- are Seth Blackley, Chief Executive Officer; and Mario Ramos, Chief Financial Officer. This call will be archived and available later this evening and for the next week via the webcast on the company's website in the section titled Investor Relations. This conference call will contain forward-looking statements under the U.S. federal laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially from historical experience or present expectations. A description of some of these risks and uncertainties can be found in the company's reports that are filed with the Securities and Exchange Commission, including cautionary statements included in our current and periodic filings. For additional information on the company's results and outlook, please refer to our third quarter press release issued earlier today. Finally, as a reminder, reconciliations of non-GAAP measures discussed during today's call to the most directly comparable GAAP measures are available in the summary presentation available in the Investor Relations section of our website or in the company's press release issued today and posted in the Investors Relations website, ir.evolent.com and the Form 8-K filed by the company with the SEC earlier today. In addition to reconciliations, we provide details on the numbers and operating metrics for the quarter in both our press release and supplemental investor presentation. And now I will turn the call over to Evolent's CEO, Seth Blackley. Seth Blackley: Good evening, and thank you for joining us. Earlier today, we released strong Q4 results with revenue and adjusted EBITDA both landing in the upper half of our guidance range. Our performance reflects disciplined execution and continued momentum across our 3 value-creation pillars of strong organic growth, expanding profitability and disciplined capital allocation. Before I get into detailed updates on each pillar, I want to comment on our outlook for 2026 and the overall state of the union at Evolent. First, Evolent is retaining and growing its customers. In addition, we're adding market share through new partners, and we're forecasting the business will grow by approximately 30% in 2026. These factors point to a large market opportunity and validate that we believe Evolent is the leading solution to support payers as they balance quality and affordability in specialty care. Oncology, in particular, remains a challenge for health plans seeking to balance affordability and quality with very high trends expected for many years to come. For 2026, we expect that approximately 65% of our company revenue will come from oncology, up from 36% in 2025, and we expect our oncology product to continue to be the core of our growth in years to come. If you think about why our oncology product is growing so rapidly, we believe it's the combination of very high annual trend that our health plans are experiencing and the incredible opportunity to reduce clinical variability. As an example of clinical variability in oncology, our analysis suggests that for one tumor type, which is second line treatment for non-small cell lung cancer, oncologists today follow more than 200 different prescribing patterns. Variation is we believe it's not supported by the evidence and that can result in substandard outcomes for patients and unwarranted cost for the system. Evolent's value to our customers is our proven ability to engage with treating oncologists and guarantee the quality and cost benefits from reducing this variability. This market dynamic as well as our large new business pipeline makes Evolent well positioned to see outsized growth in the years ahead. Further, we've been able to successfully renegotiate contracts and convert them into the new enhanced Performance Suite model, which includes revenue rate adjustments for certain medical expense factors outside of our control as well as MER corridors to protect the downside. When we embarked on the effort to move our contracts to the enhanced Performance Suite model, there were a lot of questions from investors about our ability to successfully achieve this change while retaining customers and continuing to grow. The fact that we now have approximately 90% of the Performance Suite revenue under this new model, have retained all of our key customers and have signed 2 major new customers this past year under the enhanced model, answers that question in an emphatic way. As we mentioned at the outset of this renegotiation process, our expectation for margins for the enhanced Performance Suite model will be approximately 10% and as opposed to 15% under the old model. As we've rolled out this model, we're seeing opportunities to target margins higher than 10% in some cases, if we feel comfortable with the additional downside exposure. And in other contracts, there are opportunities to eliminate almost all the downside exposure if we will accept a lower maximum margin. While we will make these trade-off determinations as part of a disciplined underwriting process around each contract, our existing mature contracts will tend to run above 10%. But as we expand, we'll target future Performance Suite opportunity for the entire book around a range of 7% to 10% as we continue to prioritize adjusted EBITDA and cash flow predictability over maximum margin. Still, as Mario will discuss, getting to a target margin of 7% to 10% would create a very significant tailwind for the business in the years to come. Turning to the outlook for 2026 specifically, we're forecasting $2.5 billion of revenue at the midpoint, representing revenue growth of approximately 30%, and our adjusted EBITDA guide is $125 million at the midpoint. The adjusted EBITDA outlook has 2 significant impacts embedded for '26 ahead of the potential tailwind I described earlier. Both of these impacts hit primarily in the first half of 2026, and we believe that our run rate adjusted EBITDA in the fourth quarter of 2026 will be over $150 million. Those 2 factors impacting 2026 adjusted EBITDA are as follows: first, our 2026 Performance Suite launches are expected to generate approximately $900 million of 2026 revenue with go-live dates in Q1 and Q2, representing 37% of total 2026 revenue. The 2026 Performance Suite cohort revenue estimate has increased from our previous estimate a few months ago, $550 million, driven by large shifts in our customer membership and by scope expansion of one of the new contracts. At the same time, we saw several of our legacy cohort Performance Suite partners lose significant membership and open enrollment, so our total revenue forecast continues to center around $2.5 billion despite outsized growth from the 2026 cohort. In addition to the increase of new revenue, we decided to take a more conservative guidance approach given the size of these new contracts in 2026. Mario will provide further color on the impact and the timing of those contracts in his comments. The second major factor impacting adjusted EBITDA for 2026 is that the One Big Beautiful Bill has eliminated approximately $40 million of contribution from expected exchange membership disenrollment and customer plan closures. That impact is at the very highest end of the range we estimated at the end of last year. And with one of our largest customers seeing reduced exchange membership up to 60% and our next largest exchange membership book down approximately 40%. Some of this reduction is as a result of the lost subsidies, but we're seeing more of it from decisions the specific plans in our customer base made to shrink exposure to the exchange risk pool. You can see the combined effect of these 2 items on Page 8 of the pack. Finally, we've been aggressive on efficiency by getting the benefits of AI and other automation across 2025. As we previously communicated, we did slightly exceed the $20 million Q4 2025 annualized savings number we had talked about on previous earnings calls. And we're continuing our cost efforts in 2026, now targeting SG&A, AI and other automation savings. These efforts included a large RIF already announced just a few weeks ago. Our 2026 cost structure efforts modestly improved H1 2026 EBITDA, but ramped fully by the second half of the year. Mario will share more details on the 2026 cost point in his section. Despite these aggressive cost actions, we decided to budget the year and guide around a multiyear opportunity. Accordingly, we have protected a number of product, technology and sales investments in the P&L that weigh on 2026, but we believe will have a positive impact over time. While we're pleased with our revenue growth, we understand our first half 2026 EBITDA is disappointing on the surface due to the One Big Beautiful Bill impact as well as the addition of our new contracts. But as I mentioned, we're confident in the ramp across 2026, and we believe we'll have a very large multiyear tailwind for the business as our 2026 contracts mature and the exchanges likely return to growth over time. Now let me turn back to give you a few more detailed updates on each pillar, starting with our first pillar of organic growth. Today, we're sharing the expansion of a previously announced partnership, and we're disclosing another new contract signing. First, we're excited to share that the large oncology partnership we announced in November is with Highmark. We're obviously thrilled to have been selected by such a marquee plan. Since November, we have also expanded the partnership to additional geographies and capabilities. This contract is expected to go live on May 1, and we expect it will contribute over $550 million of revenue in 2026 and over $800 million in 2027. As we will discuss in more detail later in the call, the structure for this contract is like Aetna, under our enhanced Performance Suite model. Finally, we feel there are several exciting expansion opportunities with Highmark across these lines of business for oncology and across all lines of business for new specialties, and we look forward to earning that opportunity through strong performance with this initial launch. And second, we're announcing today that we have launched our Performance Suite in oncology in an additional state with an existing national partner. Beyond these signings and the robust pipeline I mentioned earlier, we're seeing very high renewal rates as well. Across 2025, we've retained specialty T&S logos covering over 98% of 2025 revenue, and through a turbulent industry cycle, we have successfully moved our key Performance Suite relationships to the enhanced Performance Suite model. Said simply, our current customers are opting to stay and expand with us even as we require more protective terms, and we're adding market share through new logo signings. We feel all of this data points to the value we can create and to the durability of our company. Turning to our second pillar of profitability. We continue to focus on both medical and operating expenses as described earlier. I did want to add several additional pieces of data here. In 2025, our medical expense ratio, or MER, came in slightly better than expectations at 89%, excluding our Evolent Care Partners business, representing an improvement of just under 700 basis points versus 2024, even amid another year of high trend. We believe this performance reflects strong execution and pathway management, physician engagement and alignment with our partners. Mario will walk you through how we're thinking about our 2026 MERs for both new business and the legacy cohort. But I think you'll see that we're making 2 basic assumptions for the year. First, we estimate the 2026 cohort will run at 103%, inclusive of new reserves and the total cohort will run at approximately 93%. We're assuming that 2026 oncology trend will remain high, in line with the 2025 trend. In total, we believe these assumptions are conservative and set us up to meet or beat our numbers across the year. In our final pillar of capital structure, I'm pleased that we ended the year with strong cash generation. That, combined with the strategic divestiture of our Evolent Care Partners asset enabled us to end the year with net debt of $782 million, below our expected range of $805 million to $840 million. With no maturities until late 2029, we believe our balance sheet strength supports near-term leverage and a clear path to long-term delevering. Before I hand it to Mario, let me say a few words about the macro environment. We've been saying for several quarters now that demand for Evolent services has never been greater. We believe this is borne out in our new business wins as we take share and grow our customer footprint. And this reality continues to be true. The managed care industry, our core customer base is in the middle of a multiyear margin recovery cycle. To manage their own profitability targets, we see health plans are turning to companies like Evolent that have proven solutions to lower cost while improving quality for their members. At the same time, as we're expanding our business with new partners, the industry is navigating through a period of contracting membership, which presents near-term headwinds for our business as well. We believe we have a clear strategy for navigating through this dynamic moment. First, we will use this moment to seek to capture share, expanding our customer footprint under strong terms. Demand for our product is such that we can be selective in our partnerships and highly disciplined in our underwriting. Second, we will use our scale and customer volume to drive operating efficiency within our products, enabling us, we believe, to deliver margin expansion over time. We've committed to using technology and AI from our Machinify asset acquisition to get to our long-term goal to automatically approve 80% of baseline authorization volume across our products, an outcome that we believe will improve patient and provider experience while driving down our cost structure. We made great progress on this front in 2025, seeing our imaging auto authorization rates in key test areas go up dramatically in areas where we deploy this technology. For example, through this optimization, our real-time auto authorization rate for chest CT scans rose by over 11 points and cervical spine MRI rose by 16 points. In 2026, we'll be deploying additional AI capabilities that will provide additional auto authorization increases. Third, we'll continue to innovate our product and its value for our customers to ensure that we are the leading specialty platform in the market. As an example of our product investments, one of our Blue Cross partners recently published data showing an approximately 40% reduction in hospitalizations and ER visits for patients who use our new cancer navigation solution. And fourth and finally, we will achieve these goals within the context of our current balance sheet, continue to prioritize debt paydown as our primary capital allocation focus. I do believe we have the right plan and incredible Board and team and the right product to meet this moment, and I remain highly confident in Evolent's future. As I hand it to Mario to go over the numbers, I would just note that Mario has been at, at Evolent across the last 90 days. He's already had a huge positive impact on the company, and I'm highly confident in his leadership and approach going forward. Mario? Mario Ramos: Thank you, Seth. I'm excited to be here and energized by the opportunity ahead. Let me begin with Q4 2025 financial performance. Q4 revenue totaled $469 million and adjusted EBITDA was $37.8 million, which exceeded the midpoint of guidance. After adjusting for our ACO divestiture, baseline fiscal year 2025 revenue was $1.77 billion and adjusted EBITDA would have been approximately $141 million. Next, let's review our 2025 medical expense ratio, or MER, which represents Performance Suite claims as a percentage of Performance Suite revenue. For the full year, MER was 89%, excluding ECP, with oncology trend tracking in line with expectations. In the fourth quarter, MER was 95%, excluding ECP, driven primarily by out-of-period true-ups as we recognized a full year of savings shared with clients. While these timing items temporarily elevated MER, underlying medical trend remained stable throughout the year, demonstrating the consistency of our results and reinforcing our strong momentum heading into 2026. I know we have not discussed MER in great length in the past. However, given that Performance Suite revenue will represent more than 2/3 of our business in 2026 and beyond, MER will become the most transparent and consistent way to evaluate performance, but we will provide you with greater visibility into changes in MER going forward. Turning to 2025 expenses. Outside of the MER calculation, such as non-claims cost of revenue and SG&A, non-claims expenses totaled approximately $765 million for the year and approximately $190 million for the quarter. Our quarterly non-claims cost was lower as a result of cost initiatives and lower expense accruals and more than offset the elevated MER for the quarter. We expect non-claims costs to be meaningfully lower in 2026 as efficiency initiatives continue to materialize. More detail on that shortly. Turning to cash flow and the balance sheet. Our cash flow from operations was $39 million and total net change in cash and cash equivalents increased by $48 million, bringing year-end cash to $152 million. We finished the year with net debt of $782 million, below the range we discussed during the last call. Please note that this did include a $15 million overpayment from a client, which when repaid, will negatively impact 2026 cash flow. Finally, we recorded a large noncash goodwill impairment due to market valuation declines, which has no impact on EBITDA or cash flow. Let me now turn to our outlook where there are 4 main topics shaping 2026. First, we expect strong Performance Suite growth, with revenue reaching an all-time high. While this increase in revenue creates a powerful foundation for EBITDA acceleration, it also creates a temporary headwind in 2026 due to our reserving methodologies and the timing of implementation of the new contracts. Second, Specialty T&S 2026 performance is experiencing a significant headwind from exchange membership declines consistent with the entire industry. Excluding this impact, we expect the Specialty T&S business to deliver modest underlying growth in 2026. Finally, I will also discuss administrative services as well as the impact of our cost reduction efforts. With these items in mind, let me dive into our revenue and adjusted EBITDA guidance for the year. Overall, our revenue outlook is $2.4 billion to $2.6 billion, driven primarily by new Performance Suite launches, reflecting both higher membership and a more favorable PMPM mix towards Medicare. We have a bridge on Page 7 of the earnings deck showing the key drivers of 2026 revenue compared to 2025. The significant Performance Suite revenue increase from new contracts to be launched during the year is partially offset by approximately $100 million of lost revenue from existing Performance Suite clients due to exchange-related membership contraction and some plans exiting unprofitable markets. We also continue to see solid T&S revenue growth across both existing and new accounts. However, this growth was more than offset by the decline in exchange membership associated with the implementation of the One Big Beautiful Bill. As Seth noted, while we did experience sufficient organic growth to offset the decline from a membership standpoint, there was unfavorable mix shift within these members, which contributed to a reduction in blended PMPM and total revenue. Finally, we did experience some churn in our administrative services business, notably related to one customer who was acquired by a large national plan that subsequently in-sourced our services. As we've noted before, the administrative services business represents a legacy portion of our portfolio, and we continue to manage it efficiently while focusing our strategic efforts on the higher growth Performance Suite and Specialty T&S businesses. We do not believe our remaining administrative services contracts have that same acquisition-related risk that impacted us in 2025. Let's now turn to our 2026 adjusted EBITDA guidance. Our adjusted EBITDA outlook for the year is $110 million to $140 million. Page 8 of the earnings deck provides a bridge summarizing the key drivers of the year-over-year changes in adjusted EBITDA at the midpoint of guidance, and I will walk through each of the components now. Starting with the Performance Suite and assuming the midpoint of guidance, we expect the existing Performance Suite business to contribute $35 million of additional profitability despite the decline in revenue discussed earlier. This improved performance is driven by the continued realization of savings from our clinical programs, our clients' rationalization of underperforming markets and the impact of the contract amendments Seth described earlier. On the other hand, while our new launches will drive meaningful adjusted EBITDA acceleration over time as they scale, they are creating a $25 million headwind to 2026 adjusted EBITDA at the midpoint of guidance, reflecting the timing of implementation and our conservative reserving approach. This represents a shift from our prior expectation of roughly breakeven performance in 2026 and is driven by 2 key factors. First, we have an appropriately conservative approach to reserving for new contracts despite our significantly improved processes and new contract protections. Over time, we expect this headwind to dissipate as reserves are released, but this does create some pressure in the first few months of the new contracts. Second, the losses of the midyear launches are higher than expected because of higher-than-expected membership volumes. This is offsetting some of the positive lift from other new contracts that are launching very early in the year. As you can see on Page 9 of the earnings deck, the new contracts will temporarily raise our 2026 medical expense ratio. As a result, we expect MER to be approximately 93% at the midpoint of 2026 guidance compared to 89%, excluding ECP in 2025. We do expect MER to rise at the start of the year due to higher reserve requirements associated with new contracts being implemented on January 1. We then see MER continuing to climb and peaking in the third quarter as we onboard Highmark and further strengthen claims reserves as well as experience normal seasonality. From there, we expect MER to steadily improve through year-end as we realize modest in-year savings from our clinical programs and realize other favorable accruals in Q4. Overall, this progression provides a clear and positive path towards sustained margin expansion as our new contracts mature. It is important to note that our underlying medical claims are expected to remain roughly consistent throughout the year. We're not assuming a rapid clinical improvement in 2026 even as our teams work to drive performance gains. Due to our new contract reserving methodology and the expected progression of MER throughout the year, we anticipate that EBITDA will be 70% weighted towards the back half of 2026. In addition, at the midpoint of our guidance, we expect $20 million in adjusted EBITDA in the first quarter with a $10 million to $15 million sequential improvement per quarter in both Q3 and Q4. This pattern is fully aligned with the timing of our contract implementations, the reserve dynamics in the early part of the year and the growing benefit of our operating initiatives as the year progresses. As our newly launched contracts mature and our clinical and operational programs take hold, we believe we are well positioned to deliver this earnings trajectory with increasing momentum across 2026 and beyond. It is also worth noting, as we discuss 2026 guidance, that our new contracts include significant downside protections. And because we are reserving these contracts at elevated MER levels, we believe our downside exposure in 2026 is very limited. Our Performance Suite MER is the most direct indicator of how the business is progressing throughout the year and how we are tracking relative to expectations despite some occasional in-year volatility. While MER can already be derived from our 10-K, we will be introducing enhanced disclosures to provide even greater transparency for investors. Moving on to Specialty T&S. One of the major factors affecting 2026 EBITDA is the contraction in exchange membership resulting from the One Big Beautiful Bill. This creates a onetime $40 million headwind to Specialty T&S revenue in 2026, consistent with the high-end possibility of a 40% decline in exchange membership we discussed on our last call, net of acuity shifts. While future changes in subsidies or exchange enrollment, either before or after the midterms could provide upside, our current outlook reflects the full impact of this contraction. Excluding the impact of exchange membership, T&S at the midpoint of guidance is expected to contribute $5 million of incremental revenue and margin in 2026, driven by growth in membership. Unfortunately, this new membership growth is unfavorable from a revenue mix standpoint, so it is not sufficient to offset exchange-related membership losses. However, this does show how demand continues to grow for our Specialty T&S solutions. Finally, Administrative Services churn, as mentioned earlier, is meaningful, but is being more than offset by a $50 million year-over-year workforce reduction and efficiencies gained across the enterprise. This includes the $20 million saving we realized by Q4 2025 that Seth mentioned earlier. Speaking of expense reductions, let me provide additional clarity on those ongoing efforts, which is a big area of focus for our team going forward and discuss how they will flow through our 2026 financials. With the previously mentioned expectation of 93% MER for Performance Suite, we project approximately $1.7 billion of medical claims expense for the year. The remaining expense base, which includes cost of revenue, excluding medical claims, but including medical device costs and SG&A is expected to be approximately $675 million at the midpoint of guidance. This $675 million reflects a $90 million reduction from 2025 levels. Approximately $40 million of the decrease is driven by the divestiture of Evolent Care Partners, while the remaining $50 million reflects the impact of our efficiency initiatives already in motion, including targeted cost actions taken across the organization. So if I put it all together, I expect our Q4 run rate EBITDA to be at least $150 million. Should we achieve the Performance Suite 7% to 10% target margin on the forecasted $2.2 billion annualized Performance Suite revenue exiting 2026, we expect to generate roughly $160 million to $220 million in total margin. This is roughly $30 million to $100 million higher than the approximately $125 million of Performance Suite contribution that is in the midpoint of the 2026 guide. We believe this potential tailwind is the most important factor that will drive shareholder returns over the coming years. Finally, as you can see on Page 6 of the pack, the enhanced Performance Suite contract structure can create asymmetric upside for shareholders over time. Specifically, if you look at the new launches for 2026, we are forecasting these new contracts to run at 103% MER for the year at the midpoint of the guidance. In the event of a 7% MER degradation to 110% MER, that would drive a negative $13 million EBITDA impact. However, a 7% improvement to just 96% MER or getting less than half of our target margin would drive a $57 million EBITDA improvement. Please note that because we expect adjusted EBITDA to build throughout the year, our leverage ratios will be higher earlier on and should begin to decline meaningfully in the second half. It is important to note that we are confident our current balance sheet and debt terms provide ample flexibility to manage this temporary dynamic as we ramp these large new contracts. Turning to cash flow, an item we're watching very closely. We anticipate generating at least $10 million to $20 million in cash flow from operations after paying approximately $60 million in cash interest expense. Part of the decrease from 2025 is the client overpayment from Q4 that we mentioned earlier as well as $11 million of previously classified dividends, which are now reclassified as interest expense and moved into cash flow from operations. We also expect to invest between $25 million to $30 million in software development and CapEx in 2026. With these financial considerations in mind, let me close with a brief comment on the organization. I want to acknowledge the exceptional work of the Evolent team and where we stand as a company. While there is a significant amount of work ahead, I believe we're well positioned to execute at a high level and accelerate growth as our new partnerships come online throughout 2026. We have a strong foundation, a disciplined financial plan and a team fully aligned around delivering for our partners and driving sustainable value for our shareholders. I'm confident in our ability to navigate the near-term challenges and to capitalize on the substantial opportunity in front of us. With that, operator, we can open the line for questions. Operator: [Operator Instructions] The first question will come from Charles Rhyee with TD Cowen. Lucas Romanski: This is Lucas on for Charles. Can you help us understand a little bit more about the rationale and what's driving the conservative approach to reserving? Presumably, this is for the CVS contract. It's our understanding that initially, you guys are reserving for a 0% MER because your fees match the expected acuity of the population you're about to serve. But here, we're looking at an MER of 103%. I guess, can you help us understand what's driving this? You said new membership is expected to drive this MER higher. It's also our understanding that the enhanced contract allows you to retrospectively adjust the fees for this change in acuity. I guess why is that still driving a loss here, if that makes sense? Mario Ramos: Yes. So the first thing I'll point out is when we have new contracts, we do reserve, and we have a different level of reserves and ongoing business. So that's a big part of what you're seeing with the ramp-up, and we have $900 million of new business revenue this year. So it's a very meaningful part of our profitability. These initial reserves are more conservative. In the beginning, there are lots of new data flow implementation that could impact the profitability and the claims coming through. So this framework is not new. It's something we've developed over the last couple of years. So -- and follows GAAP. The other piece, as you can see on the EBITDA bridge is when we do that and we ramp up IBNR, there is an explicit margin that's added. It's about $13 million. And that's just again, good reserve accounting that we have, and that's why the new contracts typically have that impact. Operator: The next question will come from John Stansel with JPMorgan. John Stansel: I wanted to quickly hone in, I know it's early, but given kind of some of your early indicators, what you're seeing with the new membership early on this year behavior, or anything kind of different than you saw last year? I know last year kind of progressing in line with your trends. Seth Blackley: Yes. John, it's Seth. I'll take that one. So let's start with exchanges. I think I mentioned on the call, we're assuming about a 40% reduction. And the early indicators we're getting from our client base are consistent with that. And we're obviously in touch -- close touch with our clients. That number is obviously very different than if we had a different footprint of clients. I think more of that decline is from our clients proactively choosing to step away from risk pools as opposed to numbers not renewing because the subsidy changes or something like that. And I think, again, that one feels like a reasonably conservative assumption. We won't know for sure until in Q2 how the members fully enroll or not. But I think that's it on exchanges. We're trying to be quite conservative. On MA, I'd say it's mixed. We have a couple of clients who exited a bunch of markets and lost membership materially. We have a couple of clients who gained a lot of membership net. It was sort of a push for us across the year and then Medicaid has been kind of status quo and not much change there. Operator: The next question will come from Daniel Grosslight with Citi. Daniel Grosslight: Just a housekeeping question to begin with. It looks like stock-based comp has been pretty variable over the past few quarters. I'm just curious how we should be modeling that? And then my real question is on capital deployment for '26, just given the limited free cash flow that you do have available, and it does seem like you are focused on deleveraging. If you just look at the debt markets right now, especially for you guys, you seem to be particularly dislocated, let's call it. And you're trading -- your debt is trading at a significant discount. So I'm curious what your propensity is to go into the open market and buy down debt. Obviously, you have to be careful about messaging all that, but curious on how you're thinking about liability management, given how steep of a discount your debt is trading at? Mario Ramos: Yes. So on the stock comp, I wouldn't change your assumptions. I think we're going to be in line with what you guys have seen in the past for the year. It's a good question. We see the same thing. We're obviously very aware of how our convert is trading. It's not -- right now, we're focusing on deleveraging by making sure we can execute. We also have, as I said, a very good, strong, flexible balance sheet, even though leverage is higher than we would like. And we also have some cash and undrawn capacity. So we feel like we're in a good position, but it is difficult just given the dynamic of the ramp up this year to go out and do much other than what we're doing, which is focused on the business. Obviously, if there are any opportunities to do good liability management and add shareholder value that way, we will look at it and weigh that against other things like cash on the balance sheet. But we are very aware of that dynamic, Daniel. Operator: The next question will come from Jailendra Singh with Truist Securities. Jailendra Singh: First, a quick clarification. Just trying to reconcile your comment about second half. At one point, you said that you expect fourth quarter run rate to be around $150 million, but you're also expecting 70% of '26 EBITDA to come in second half, which would imply a much higher run rate. Is there something a dynamic between Q3 and Q4, we should be aware of? Or are there some nonrecurring items in second half which should not be part of annual run rate? So that's a quick clarification, if you can. But my main question is around, can you talk about your oncology cost trend expectations for '26? And if you can update like how did you end up on 25% compared to your 12% expectation you had for the year. Mario Ramos: Sure. Yes, that's a very good question. Yes, there are some reversals in the reserve in the fourth quarter and contractual impacts. Not a huge amount, but that's why there's a little bit of a difference between the implied Q4 number that you may be calculating and what Seth said is the implied run rate at that point. So that's part of the reserve requirement process this year with the new business. So there is a little bit of that happening. On your second question, yes. So we are seeing sort of very stable trend on the oncology side on both really across the board. And we have looked at 2026 in a very similar trend level as 2025. I will say given one of the things that we -- that Seth talked about and we have in the earnings deck, our contracts now work in such a way that not every point of trend is the same. We have a number of different mechanisms to adjust trend for things out of our control. So a 15% trend as long as it's being caused by the change event metrics that we have in our contracts, may not be a big headwind for us. So we will continue to provide flavor with trend because that will impact MER, but we just want you guys to keep that in mind. The way our contracts work now. There are some very specific things that accrue to us on the trend side, and it really depends where the change is coming from. Seth Blackley: Yes. And Jailendra, the last thing I'd add on the oncology trend side, I think the baseline that we saw across '25 and what we're expecting for '26, again, is consistent, not up or down in '26 relative to '25. And we -- again, '25 came in roughly where we thought. Operator: The next question will come from Jared Haase with William Blair. Jared Haase: Appreciate all the details as it relates to the EBITDA outlook. Maybe I'll ask one on the pipeline. And I think there was a bullet point in the earnings deck you mentioned the late-stage contract opportunities that could provide additional upside here in 2026. And so I just wanted to sort of flesh that pipeline opportunity out a bit more, kind of understand how that's weighted to Performance suite versus T&S. And then I guess a specific part of the question here would be, if that is weighted to larger Performance Suite deals, could that potentially lead to an additional drag in the back half of the year if those do come to fruition? Seth Blackley: Yes. Thanks for the question, Jared. So a couple of things on the pipeline. I'd say, I think I've been saying this for maybe 1 year, 1.5 years about the challenges that managed care companies have do translate into pipeline activity for us. And it's definitely bearing out, growth rate this year, the size of the pipeline. It continues to be really balanced, Jared, to be honest, between Performance Suite and Tech and Services. We have some very significant Tech and Services opportunities. We haven't announced and talk about 2 big Performance Suite opportunities today, but there are a number of both that could affect the growth rates over time. I think we feel really good about the growth rates over time. I would not worry about announcing a new Performance Suite deal that creates a new drag on '26. That is not something that we're going to be doing this year with the new Performance Suite contract. I think there are some go-lives on the Tech and Services side that could provide some modest upside. But I think the thing you should take away is that the '26 framework is pretty well locked down at this point. We don't have go-gets that really that we need to go figure out on the revenue side. And so really, all of this I'm talking about is for '27, and it's a nice blend of Tech Services and Performance Suite. Operator: The next question will come from Jessica Tassan with Piper Sandler. Jessica Tassan: Mario, congrats on the first official earnings call. So we appreciate all the new disclosure, but obviously, we've been kind of burned by the Performance Suite business before. So just why should we be confident that the 103% MLR on new contracts in '26 reflects conservatism versus inadequate pricing on new business? And then just I think your 2025 results kind of imply about a 9% OpEx burden on Performance Suite revenue to get to approximately a 2% Performance Suite EBITDA margin. Just what is the MLR and OpEx combo to get us to those 7% to 10% long-term target margins in the Performance Suite? Seth Blackley: Jess, I'll take the first one. So look, I think the main thing that I would focus on with respect to the new business is the structure of the contract. And we have a slide in the pack that shows you the asymmetry of how that works, number one. Number two, at 103% we're definitely underwriting out of the gates, we think at a very conservative place. And being able to apply the combo of conservative underwriting and a good contract does create that asymmetry that we talked about and the third -- last factor that Mario will comment on his run is I think we've taken all that and also applied it to how we guided for the year, meaning you got accounting policies and reserving and 103% does a certain set of things and then just generally how we land on the guide across all the factors of the business. We tried to orient towards conservatism and new CFO, part of that, I think, is a good and healthy dynamic in terms of being conservative. So that's how I'd start. And then on the OpEx thing. I think the thing you got to think about is flow-through economics, that 2%. I didn't totally track all the math. But each incremental dollar of care margin in the Performance Suite disproportionately going to fall to EBITDA, Jess, because there is some variable OpEx, but it's not -- it's more of a fixed cost investment on a lot of that. And so I think the 7% to 10%, we feel really good about. I think we're achieving that today on the legacy cohort as, for instance, and feel really good about being able to get there with the whole book over time. Operator: The next question will come from Jeff Garro with Stephens. Jeffrey Garro: I'll stick on the MER front and trying to think about that 89% actual performance for 2025? And then the 93% expectation for the full book of business for 2026 that has the drag of $900 million at that 103%. And my implied math is there's -- on the remaining Performance Suite business from '25 to '26, there's some improvement, pretty modest, but would love to hear you explain more about the specific drivers of improvement and opportunity even beyond what's kind of underwritten in that 93% full year '26 expectation for the remaining Performance Suite business, much of which is already on those new contract structures. Mario Ramos: Sure. I think it's just along the same things we've talked about. It's -- because we have so much new business upwards of $900 million we expect this year in new Performance Suite business, and as typical, we're not unusual. We are reserving. We have to build up reserves. We have to build up IBNR over the first few months. And because, as I said, the new relationships, new data flow, just the teams working together, we do have a framework that tends to be more conservative on the reserving side. That doesn't last all that long, before -- especially contracts that start in the middle of the year. Once you get over that initial reserving, you actually start looking at some benefits. And so part of what you're seeing in the fourth quarter, is reversal of some of that. And the base business has continued to perform well. That's why the blend is at 93%, which is worse than last year. It's primarily the new business driving up MER, offset by continued good performance on our existing cohort. Seth Blackley: Yes. And Jeff, I think part of the question too is, okay, how does the existing cohort get a little bit better? And there's some ongoing clinical initiative, but there's also some contractual things. I'd say the majority of the improvement is what I would call contractual in nature, which gives us a lot of confidence in it as opposed to go get on the clinical side. Operator: The next question will come from Matthew Gillmor with KeyBanc. Matthew Gillmor: Just following up on some earlier questions. I'd be curious if you could just orient us around some of the swing factors in terms of the high end of the EBITDA guide versus the low end. Is trend on oncology costs are the main one to think about? Or are there other sort of factors that you'd orient us around? Mario Ramos: I think it's MER to start with, which is why we've started talking more about it, why we're disclosing it in a different way in our financials really is about MER, especially as we sit here, we have -- we think we have a good view of membership aside from any other exchange issues. We feel very good about where we are. And then it's the evolution of can we accelerate the savings that we're projecting. Again, as I said, trend can be a factor. We feel like we're being appropriately conservative on those metrics, especially given the new contract provisions where not every 1 percentage of trend is the same. We have a lot of levers to protect us in case trend is heading the wrong way for things that we don't control. So that is the biggest swing factor by far. Operator: The next question will come from Richard Close with Canaccord Genuity. Richard Close: A couple of questions. Seth, earlier on, when you talked about exchanges, you said something about return to growth over time. And I'm just curious what goes into that comment? And then a follow-up with Mario. Just your thoughts, you've been here 90 days, I guess, on the ground. It sounds like your fingerprints are on the guidance and some of the new disclosures. Just curious maybe your thoughts in terms of any changes you're thinking about going forward, that would be helpful. Seth Blackley: Yes. I'll start on the exchange and then pass it to Mario. So Richard, what I'd say there's 2 things on exchange. One is, if you go just look at how consumers have bought that product, in the marketplace. It has had growth to it that go outside of subsidy swings, and there is interest in the product generally. So we have this dislocation from subsidies being pulled back and risk pools are getting shifted. I think over time, the idea of consumers using it to buy product probably will come back over some time period. And whatever the growth rate that will be, that will be. Second factor is more of a wildcard, but should there be a change in the midterms or legislation or anything like that to adjust how subsidies work that could be more of a step-up in membership, which we're obviously not counting on either of those 2 things in the '26 number, but it could be something in the out years. Mario Ramos: Yes. And it's been a great 90 days or a long 90 days. I'm just -- if anything, I'm more excited to be here than I thought I'd be. The team is amazing. I think what we do is at the heart of what we need more of to fix what's wrong in health care. So all that feels really great. I've tried to partner with Seth and figure out a way in how we communicate with all of you and our other investors with more clarity, transparency and how it directly correlates to what you're seeing in the financial statement. So I think if anything, I will try to continue to do that. The MER, in my mind, gets us quite a bit of the way to a place where we're doing that. But we will continue to look at new and improved ways to try to communicate with you guys so you can understand how our business is performing and holding us accountable. Operator: The next question will come from David Larsen with BTIG. David Larsen: Can you talk about what your mature Performance Suite EBITDA margins look like? What is that percentage? How long does it take to get there? And then just over time, like in 2027, 2028, 30% revenue growth, that's high, that's great. But it seems like it's coming at the cost of margin degradation and free cash flow. So why not grow revenue, let's call it, like 10% or 15% year-over-year and focus on more EBITDA growth, EBITDA margin growth and free cash flow and debt pay down? Mario Ramos: I think on the -- we're not going to talk -- we don't talk about EBITDA margin, but we can talk generally about our sort of existing book of business. And when you look at the MERs that we're disclosing today around the new cohort and what we had at the end of 2025, you're getting to a pretty good care margin. We've talked around 7% to 10%. The existing book is doing a little bit better than that, partly because of what Seth said, we're getting some contractual adjustments that improve our base rate, which aren't temporary, but they won't happen every year. They'll stay there. They just won't happen every year. So for the whole book of business, I think we're feeling very good about how it's performing. And I think I'll let Seth comment on the focus profitability versus growth. I just -- to me, coming in, understanding the Highmark relationship, some things are just -- they're great for the business, and it may create short-term pressure. But long term, we want to create value. We know that we can lay this out for you guys, so you see the huge opportunity we have in front of us with that partnership with the current revenue this year, even though from a profitability standpoint, we will have to execute to get it to the point that we know we can like the rest of the business that we have. Seth Blackley: Yes. And David, I'd add just one other thing, which is the Performance Suite we think, is the best way to create value for our partners, which we got to start with them. And we think it's more economically attractive on a per life basis for us as well. And so I think, particularly when you have the enhanced model, more predictability and the like, you're willing to go through a period of investment to get there. It's kind of what Mario just said. But I do think it's important that the pie of value is bigger under the Performance Suite than Tech and Services. And so when you choose between those 2 products, we've -- the enhanced Tech and Services, we think is the better of the 2 products. If the client wants Tech and Services, we'll obviously do that. We'll do whatever they are interested in doing. And then in terms of the investment ramps and the like, again, I think to Mario's point, you find a partner who's a great partner and they're interested in creating a partnership together. You do that because it's going to create value over time. And so I think we're making the right decisions to maximize the value of the company. Operator: Next question will come from Matthew Shea with Needham. Matthew Shea: I appreciate the update that 90% of the Performance Suite contracts now have the enhanced protections and MER corridors. But of the 10% that have not migrated, you noted the scope is limited and protections are not economically warranted. Could you just update us on what is in that 10%? And it sounds like that will stay without protection. So how are you thinking about those contracts longer term? Would you eventually look to migrate or sunset those? Or do you have confidence in them even without the protections? Seth Blackley: Matthew, I would expect almost all of those to move to the enhanced as well. And maybe there's a couple of percent of the 100 that never migrate, but I think it's going to be high 90s at some point would be my guess. I can't guarantee that. I think that's where it's headed. And I think it's the right call for our partners and the right call for us. It kind of gets everything into a standard structure. So that's how I think about it. Operator: The next question will come from Sean Dodge with BMO Capital Markets. Sean Dodge: Maybe just on the cost efforts you mentioned, Mario, for 2026. You said you expect $50 million of that to be captured within the year. Just the time line on those? Are those going to unfold pretty ratably across the year? Are they more kind of early year or later year kind of more heavily weighted? And then I guess, just how should we think about the run rate benefit of those going into 2027? Mario Ramos: Yes. And those are baked, obviously, in the adjusted EBITDA guidance into the cost base that is implied by the guidance. I would say, Seth talked a lot about getting $20 million last year in AI and automation initiatives. Those already happened at the end of 2025. So of the $50 million, $20 million were done then. We did another big portion of the remaining $30 million in early this year. And there will be a piece that we will continue to get throughout the year. So it's largely running through. And as I said, when you look at what we've guided to and the cost base implied by that, the $50 million is in there. There isn't a ton of wrap or additional run rate because they were mostly -- they will almost be done early in the year. Operator: The next question will come from Kevin Caliendo with UBS. Kevin Caliendo: I appreciate the downside protection of your new contracts, but I really want to understand when you are signing new business, what kind of IRR or ROIC are you modeling out or shooting for? And I guess maybe it's not as high as it used to be because you have lower downside. Obviously, there's risk-reward here. But when you're modeling this out, what are you aiming to achieve? Like what's the target return? And how do you think about when that return is going to come about? Year 1, year 2, year 3, et cetera? Just trying to understand from a modeling perspective, how to think about it, how do you guys think about it, and how we should think about it in terms of total returns. Seth Blackley: And -- let me add a little bit more color to how we think about these contracts, which I think will partly answer your question. There's a spectrum from Tech and Services, right, where it's -- there's no investment and no downside all the way to the Performance Suite enhanced model where you might have 10% margin, but you have some downside. There are things in between. And we are underwriting around our cost of capital at Evolent. You don't want to be over 20% cost of capital return, which gives you space in between our cost of capital and a good return. And again, you have to look at how much downside exposure is there in the opportunity versus how much upside is. But that's how we would think about it as clear at a 20% hurdle rate at least. Operator: The next question will come from Ryan Halsted with RBC. Ryan Halsted: Just my question is, again, focusing on the MER, Obviously, a key KPI and oncology cost trends is also clearly a big contributor to that. I mean is there -- for the portion of the risk that you are controlling or at risk for, is there a good way of looking ahead at kind of what would be the swing factors into that portion, whether it be -- is it prescribing patterns of higher costs therapeutics? Is that sort of the piece of the oncology cost trends that you're still most exposed to, I guess, or in control of? Seth Blackley: Yes. Great question. So yes, we think about it as follows: probably 80% of what we're exposed to are in charge of managing would be the therapeutic. And 20% would be other costs, which might be radiation therapy or things like that. Within the therapeutic exposure that we have, we carve out new drugs and indications or things that are not in our control. So things that would be in our control would be for a given cohort of patients that are receiving similar types of treatment, what is the average cost of the therapeutic in that case, plus the 20% of other. And that's really how we think about it. I think that's our unique value proposition is being able to manage the therapeutic dosing selection, timing et cetera. You guys know -- I'll use checkpoint inhibitors as an example that everybody understands, have been very high cost drugs like KEYTRUDA or OPDIVO or others. The duration of that is the patient on it for 90 days, 120 days, 150 days? If it's not working, are you able to get on to a new therapy quicker? What's the number of vials or dosage that are open, et cetera. It's all of those decisions, which again are very tied to the patient profile and the genome and deeply clinical decision-making, which is really the core of the clinical work we do. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Seth Blackley for any closing remarks. Seth Blackley: Thank you for joining tonight. It's great to have Mario and the team, and I just want to say a big thank you to the entire Evolent team. It's been a lot going on over the last 1.5 years. Our team is highly committed to the mission of this company, I'm really proud of them, and I'm very confident that the team and I and the Board are going to deliver for our shareholders, and I'm excited about that. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

39天前Insight Analytics约5分钟阅读

GAPB.MX 2025 Q4 财报电话会议

Operator: Good morning, everyone, and welcome to GAP's Fourth Quarter 2025 Conference Call. [Operator Instructions] Now it's my pleasure to turn the call over to GAP's Investor Relations team. Please go ahead. Maria Barona: Thank you, and welcome to GAP's Conference Call. I'd like to take a few moments to review the forward-looking statements as described in the financial disclosure statement. Please be advised that statements made today may not account for future economic circumstances, industry conditions, the company's future performance or financial results. As such, any information discussed is based on several assumptions and factors that could change causing actual results to materially differ from current expectations. For the complete note on forward-looking statements, please refer to the quarterly report. Thank you for your attention. It is my great pleasure to introduce Mr. Raul Revuelta, GAP Chief Executive Officer; and Mr. Saul Villarreal Chief Financial Officer. The gentlemen will be our speakers today. At this time, I will turn the call over to Mr. Revuelta for his opening remarks. Raul Musalem: Thank you, Maria. Good morning, everyone, and thank you for your time here today. I'm pleased to share with you the company's operational and financial highlights for the fourth quarter of 2025 which concludes a solid year despite the several external challenge that I will discuss today. I will begin with the quarterly passenger traffic and then move on the financial results, followed by a brief review of the full year. Passenger traffic decreased 0.9% during the fourth quarter compared to the same period of 2024. These first 4 months stems from the 2 clear separate dynamics within our portfolio. The first, in Mexico, traffic trends remained relatively stable despite varying performance across the different airports. While passengers growth was 2.9% of revenue was primarily supported by the implementation of the new maximum tariff approved and applied during 2025 as well as the expansion of the works in select markets. Secondly, as you are aware, Hurricane Melissa struck Jamaica on October 28, leading to the temporary suspension of operations at Montego Bay as well as Kingston Airports. This resulted in a traffic decrease of nearly 35% during the quarter. Although, there was no material damage to either airports, passenger traffic did significantly decline in November and December, mainly in Montego Bay. The main factor was the hurricane impact of the surrounding area as well as the hotel infrastructure were around 70% of the total capacity effect. On a positive note, the recovery of total capacity or total capacity as well as tourist infrastructure across the region has been better than expected. While the actual timing of a full normalization remain unclear, the Minister of Touring has indicated that hotel capacity is expected to return to 100% by the upcoming 2026 winter season. We remain confident in the long term fundamentals of the Jamaican market and its overall structural growth potential. Now moving on to the revenues. Combined aeronautical and aeronautical service revenues increased by 12.8%, reflecting the sustained structural strength of our business model. Aeronautical revenues grew by 12.6%, primarily driven by the aforementioned maximum tariff that were approved and applied during 2025 in Mexico as well as the continued expansion of our routes. New aeronautical revenues increased by 13.3% quarter-over-quarter. In Mexico, particular, commercial revenues were strong, mainly supported by the performance of the cargo and bonded warehouse business and the opening and renegotiation of commercial spaces under improved market conditions. The most dynamic segment includes Food & Beverage, Retail, Ground Transportation and Leasing Activities. EBITDA increased by 7.5%, reaching MXN 5.1 billion. EBITDA margin, excluding IFRIC 12, stood at 53.8%, a decrease compared to the fourth quarter '25 as a result of the higher concession fees in Mexico, additional head count and increase in maintenance costs due to the new operations of the jet bridges and Airbuses, a path that must now be operated directly by GAP, but was previously managed by the third party. In addition, this includes the impact of lower traffic and therefore, lower revenues in Jamaica in the aftermath of the Hurricane Melissa. Net income declined compared to the fourth quarter '24, mainly due to the higher financial expense and decrease in the interest income due to a lower cash average balance the FX effect as well as the lower interest rate. This is in addition to the provision of the deferred tax adjustment in the aggregate balance of the year. Now let us review the full year performance. 2025 was a year of a strong structural growth for GAP. Aeronautical revenue grew by 19.4% driven mainly by the new tariff applied during 2025 and a 2.7% increase in passenger traffic in Mexico. Non-aeronautical revenue increased by 26.5% for the year, further underscoring the strategic importance of our commercial platform. Non-aeronautical revenue per passenger increased to MXN 152 in 2025 compared to the MXN 123 in 2024, reflecting improved commercial execution, product optimization and a stronger contribution from cargo among the warehouse operations. The consolidation of the business has become a meaningful contributor to our revenue diversification strategy and strengthen the long-term sustainability of our income streams. EBITDA increased by 17.8% year-over-year, reaching MXN 21.3 billion with an EBITDA margin, excluding IFRIC 12 of 65.6% despite higher concession fee and our cost pressure, profitability remains solid and operational will remain disciplined. From a balance sheet perspective, as of December 31, 2025, we closed the deal with MXN 10.5 billion in cash and cash equivalents. During the year, we strengthened our capital structure throughout the issuance of bond certificates, while reducing certain bank loans pressures maintaining flexibility to fund our long-term commitments. In terms of CapEx, throughout 2025, we invest MXN 12.4 billion. This was comprised by the first year of execution under the 2025–2029 Master Development Program. CapEx in our Jamaican airports and the commercial investments. The CapEx for the 5 years period in Mexico will be focused on major terminal expansion and capacity enhancements, positioning us strongly for the future passenger growth and expanded commercial opportunities. Additionally, in December at the Extraordinary Shareholders Meeting the business combination between CBX and Terminal Assistant Agreement was approved. This strategic transaction will allow us to further integrate and strengthen the Cross Border Xpress platform, enhancing operational efficiency, expanding services capabilities and reinforcing our position in the Cross Border Passenger segment. The transaction is currently in the formalization process, and we expect this to contribute possibility to GAP's long-term value creation strategy. Let me touch on international expansion opportunities. The Parks & Cope standard process was ultimately canceled by the government. And as has been our track record, we remain disciplined in our capital allocation decisions and our remaining focus on projects that meet our strategic and financial return criteria. Therefore, we continue allowing growth opportunities that complement our existing portfolio strength over our shareholders' value. Before I continue with the presentation, I want to address the recent events concerning to the state of Jalisco, namely Guadalajara and Puerto Vallarta. Certain incidents were prepared throughout different locations of the state of Jalisco on February 22. And I just want to assume that gas facilities, the Guadalajara and Puerto Vallarta Airport remain fully operational on weekend and up until this moment. As many of you may be aware, the terminals rely on the protection of the Mexican National Guard as well as the Ministry of National Defense as part of the permanent coordination and security measures with the Federal Authorities. From an operational standpoint, we experienced flight cancellations, including 171 flight in Guadalajara and 134 flights in Puerto Vallarta during February '22 and '23. However, this February, February '24, we only had 4 cancellations in Puerto Vallarta and 11 in Guadalajara. And today, all the operations are back to normal. Thus, it has been a steady and consistent improvement from the weekend, as we work to regain normally after the events of the last weekend. The rest of the -- our portfolio continued to operate without disruption at this stage. We don't anticipate any additional impact. We are monitoring the situation, and we'll update the market as necessary. Back to the results and outlook, I would like to continue with a discussion on guidance. We do not include the CBX business combination and the Technical Assistance Agreement Internalization, which remain the formalization process. Once the final timing of the consolidation is confirmed, we will update you on the results. That being said, we expect 2026 to be another year of moderate growth, supported by the established structural drivers across our portfolio. Passengers traffic is expected to grow between 2% and 5%, reflecting the consolidation of routes developed to date, estimated load factors and the potential increasing frequencies and ship capacity across our network. On the revenue side, Aeronautical revenues are projected to increase between 9% and 12%, driven by the implementation of current maximum tariff in Mexico and Kingston airports in Jamaica, combined with traffic performance, inflation assumptions and projected exchange rates. Non-aeronautical revenues are expected to continue expanding from 6% to 9%, driven by improved contract condition and traffic growth. As a result, total revenues are expected to grow between 8% and 11% year-over-year. We expect EBITDA to grow between 8% to 11%, while the EBITDA margins will remain solid and approximately 65% or minus 1% reflecting continued operational discipline, while maintaining flexibility to observe external volatilities. Looking ahead, we remain confident in our strategic direction as we focus on our 4 growth pillars. The strengthening connectivity, expanding commercial revenues, disciplined execution of our infrastructure program and maintaining long-term leverage strategy. While external factors such as exchange rate volatility, natural events and global uncertainty may generate temporary expectations, cap diversified airport portfolio's strong domestic demand base, disciplined capital structure position us solidly to continue generating sustainable long-term value. We appreciate your continued growth and support in GAP. Thank you for joining us today, and we now open the floor to your questions. Operator: [Operator Instructions] Our first question comes from Gabriel Himelfarb of Scotiabank. Gabriel Himelfarb Mustri: Just can you give us a bit of color on Guadalajara and Puerto Vallarta, any cancellations seen or any lower bookings? And my second question is also -- is there -- can you give us a bit of color on -- do you think you might be expanding your footprint on the U.S. besides the CBX. Raul Musalem: Thank you, Gabriel. In the case of Guadalajara and Puerto Vallarta as we noted, I mean, we saw on the Sunday an important number of cancellations more than 100 in both airports. For the Monday, we began to see an important recovery. Just yesterday, we only had 4 cancellations in Puerto Vallarta and 11 in Guadalajara. And today, we are expecting that all the operations are back to normal. So what we are seeing for sure has a -- I mean, a major impact for -- on Sunday, but after that, the services from the airlines have gradually normalization process. Saying that, we are expecting that there will not be any additional impact for our airports in the coming days. Making like a big number of the impact of these 2 days, almost 3 days of impact. We are forecasting that -- or we are seeing that the possible impact was around of 50,000 passengers in these both airports. Jumping to the second question, the footprint in the U.S. beside the CBX, for sure, they align with our discipline for capital allocation, we will continue to looking for other opportunities. And for sure, with the platform, the CBX in the U.S., it opens the possibility for new investments in the U.S. we were still looking for opportunities that we -- that generates value to our shareholders and be completely accretive for the company. But yes, it will open the opportunity for additional -- or review additional projects in the U.S. Gabriel Himelfarb Mustri: And are you expecting the coming months, a decrease in traffic on Guadalajara and Puerto Vallarta from international passengers? Raul Musalem: I mean we are expecting that the trends that we have seen in the last months continue. For the case of Guadalajara, as you know, we have a positive number with all the openings of new routes from Canadian market, mainly, and also recompression or recovery from the classic VFR market, so Guadalajara, Los Angeles and South California in general terms. But also in the coming months, we will have the first 2 matches for the last elimination of this for the World Cup. So yes, we are expecting some additional passengers for sure in the coming months. And I mean, in general terms, connecting with this terrible news of the weekend, we are not expecting any further impact on the traffic. Operator: Our next question comes from Enrique Cantú of GBM. Enrique Cantú: So regarding the pending tariff adjustments, could you provide more detail on expected timing and visibility around their implementation? Raul Musalem: Yes. And then just going back on that. Last year, as you remember, in March of the last year, we have -- we increased 15% of general passengers fee in all of our airports. In September 1, we had another 7.5%, and in January -- on January 1, we increased around 5% to 6% depending on the airport. For all of that, we are seeing that the maximum tariff for the year, for sure, depending on the FX effect of the peso on dollar, we are growing around 95% of fulfillment. And in the summer, we will have 2 additional increases for our 2 airports Vallarta and Cabos. With all these put in place, we think that we could achieve the 95% of fulfillment on time. Operator: We will now move to questions submitted to the webcast platform, and I'll turn the call over to Alejandra Soto, Investor Relations Officer, to read the questions. Please go ahead. Alejandra Soto Ayech: We have one question from Andressa Varotto from UBS. And he's asking regarding your guidance. Can you break down traffic increase expectations for Mexico and Jamaica and how you are seeing a recovery from the Hurricane Melissa in Jamaica and the World Cup impacts in Mexico. Also -- well, and the other question, it was already explained. Raul Musalem: In terms of traffic, we are seeing, in our guidance, an increase on traffic that goes from 2% to 5%. In the other terms that we are seeing for Jamaica is, we are seeing at continuous recovery on the hotel capacity for Montego Bay, mainly. What we are seeing is for the end of the year, could be around minus 2% to 0% on increase of passengers. Why is it important to have in mind is that, the 2 main peaks of the terminal of Montego Bay or the 2 moments of increase of passengers for -- is -- the spring season and the winter season. . On this spring season, I will say that there will be a lack an important impact of the number of available hotel rooms in Jamaica. So we will expect that in this spring, winter -- spring season, the decrease of passengers continue. But for the winter season, that is the second big high season for Montego Bay, we are expecting that a full recovery of the total capacity of hotels on the island. With that in mind, we are expecting that minus 2% to 0% on Jamaica. Alejandra Soto Ayech: Thank you, Raul. It is the only question on the webcast. So I will turn the call again to the questions on the floor. Operator: We do have a question from Julia Orsi of JPMorgan. Julia Orsi: So just a question on capital allocation. So now that the Turks and Caicos process is pretty much over. Can you comment a bit on what's the priority on the capital allocation side? And that's it. Raul Musalem: Julia, I will say that in the first half of this year, we will be focused on all what means CBX and bring in all the efficiencies to our company, but that would be, I think, one of the biggest new projects bring into the company. But parallel to that, we are working in other projects and looking for other projects that could be interest for us. We will continue reviewing opportunities on the cargo facilities business. But I would say with the discipline that is like the part of the DNA of the company, we will continue only on projects that are completely accretive for our company. With that in mind, we will always continue within different projects. But for the moment, the only focus that we will have to brings additional value is all the process to bring CBX and the synergies to the company. Julia Orsi: Got it. And just a follow-up on the CBX. What is the expected timeline for the deal to be fully integrated into GAP? And I mean do you have any updates on let's say expected synergies throughout the year? How much should we capture this year. Raul Musalem: Yes. I mean, in general terms, what we are talking about the formalization process, we are in the middle of that. We are expecting that in the second quarter, of the year, we could fully consolidate all the transactions. In terms of the efficiency, it will be gradually on the year. I will say that if we begin with the consolidation in the second quarter, for the fourth quarter, we could show important efficiencies on the CBX consolidation process. I would say that the full program of what we think that could be the synergies of the company, we're going to fully implement it for the half of this year of '27. That would be -- I mean -- our first view of what we think that could happen for on all these project of CBX. Operator: There are no further questions at this time. I will turn the call back over to Mr. Raul Revuelta for closing remarks. Raul Musalem: Thank you once again for joining us today. Please contact our Investor Relations team with an additional questions you may have. Have a great day, and thank you for your attention. Operator: That concludes our meeting today. You may now disconnect.

39天前Insight Analytics约5分钟阅读

PAC 2025 Q4 财报电话会议

Operator: Good morning, everyone, and welcome to GAP's Fourth Quarter 2025 Conference Call. [Operator Instructions] Now it's my pleasure to turn the call over to GAP's Investor Relations team. Please go ahead. Maria Barona: Thank you, and welcome to GAP's Conference Call. I'd like to take a few moments to review the forward-looking statements as described in the financial disclosure statement. Please be advised that statements made today may not account for future economic circumstances, industry conditions, the company's future performance or financial results. As such, any information discussed is based on several assumptions and factors that could change causing actual results to materially differ from current expectations. For the complete note on forward-looking statements, please refer to the quarterly report. Thank you for your attention. It is my great pleasure to introduce Mr. Raul Revuelta, GAP Chief Executive Officer; and Mr. Saul Villarreal Chief Financial Officer. The gentlemen will be our speakers today. At this time, I will turn the call over to Mr. Revuelta for his opening remarks. Raul Musalem: Thank you, Maria. Good morning, everyone, and thank you for your time here today. I'm pleased to share with you the company's operational and financial highlights for the fourth quarter of 2025 which concludes a solid year despite the several external challenge that I will discuss today. I will begin with the quarterly passenger traffic and then move on the financial results, followed by a brief review of the full year. Passenger traffic decreased 0.9% during the fourth quarter compared to the same period of 2024. These first 4 months stems from the 2 clear separate dynamics within our portfolio. The first, in Mexico, traffic trends remained relatively stable despite varying performance across the different airports. While passengers growth was 2.9% of revenue was primarily supported by the implementation of the new maximum tariff approved and applied during 2025 as well as the expansion of the works in select markets. Secondly, as you are aware, Hurricane Melissa struck Jamaica on October 28, leading to the temporary suspension of operations at Montego Bay as well as Kingston Airports. This resulted in a traffic decrease of nearly 35% during the quarter. Although, there was no material damage to either airports, passenger traffic did significantly decline in November and December, mainly in Montego Bay. The main factor was the hurricane impact of the surrounding area as well as the hotel infrastructure were around 70% of the total capacity effect. On a positive note, the recovery of total capacity or total capacity as well as tourist infrastructure across the region has been better than expected. While the actual timing of a full normalization remain unclear, the Minister of Touring has indicated that hotel capacity is expected to return to 100% by the upcoming 2026 winter season. We remain confident in the long term fundamentals of the Jamaican market and its overall structural growth potential. Now moving on to the revenues. Combined aeronautical and aeronautical service revenues increased by 12.8%, reflecting the sustained structural strength of our business model. Aeronautical revenues grew by 12.6%, primarily driven by the aforementioned maximum tariff that were approved and applied during 2025 in Mexico as well as the continued expansion of our routes. New aeronautical revenues increased by 13.3% quarter-over-quarter. In Mexico, particular, commercial revenues were strong, mainly supported by the performance of the cargo and bonded warehouse business and the opening and renegotiation of commercial spaces under improved market conditions. The most dynamic segment includes Food & Beverage, Retail, Ground Transportation and Leasing Activities. EBITDA increased by 7.5%, reaching MXN 5.1 billion. EBITDA margin, excluding IFRIC 12, stood at 53.8%, a decrease compared to the fourth quarter '25 as a result of the higher concession fees in Mexico, additional head count and increase in maintenance costs due to the new operations of the jet bridges and Airbuses, a path that must now be operated directly by GAP, but was previously managed by the third party. In addition, this includes the impact of lower traffic and therefore, lower revenues in Jamaica in the aftermath of the Hurricane Melissa. Net income declined compared to the fourth quarter '24, mainly due to the higher financial expense and decrease in the interest income due to a lower cash average balance the FX effect as well as the lower interest rate. This is in addition to the provision of the deferred tax adjustment in the aggregate balance of the year. Now let us review the full year performance. 2025 was a year of a strong structural growth for GAP. Aeronautical revenue grew by 19.4% driven mainly by the new tariff applied during 2025 and a 2.7% increase in passenger traffic in Mexico. Non-aeronautical revenue increased by 26.5% for the year, further underscoring the strategic importance of our commercial platform. Non-aeronautical revenue per passenger increased to MXN 152 in 2025 compared to the MXN 123 in 2024, reflecting improved commercial execution, product optimization and a stronger contribution from cargo among the warehouse operations. The consolidation of the business has become a meaningful contributor to our revenue diversification strategy and strengthen the long-term sustainability of our income streams. EBITDA increased by 17.8% year-over-year, reaching MXN 21.3 billion with an EBITDA margin, excluding IFRIC 12 of 65.6% despite higher concession fee and our cost pressure, profitability remains solid and operational will remain disciplined. From a balance sheet perspective, as of December 31, 2025, we closed the deal with MXN 10.5 billion in cash and cash equivalents. During the year, we strengthened our capital structure throughout the issuance of bond certificates, while reducing certain bank loans pressures maintaining flexibility to fund our long-term commitments. In terms of CapEx, throughout 2025, we invest MXN 12.4 billion. This was comprised by the first year of execution under the 2025–2029 Master Development Program. CapEx in our Jamaican airports and the commercial investments. The CapEx for the 5 years period in Mexico will be focused on major terminal expansion and capacity enhancements, positioning us strongly for the future passenger growth and expanded commercial opportunities. Additionally, in December at the Extraordinary Shareholders Meeting the business combination between CBX and Terminal Assistant Agreement was approved. This strategic transaction will allow us to further integrate and strengthen the Cross Border Xpress platform, enhancing operational efficiency, expanding services capabilities and reinforcing our position in the Cross Border Passenger segment. The transaction is currently in the formalization process, and we expect this to contribute possibility to GAP's long-term value creation strategy. Let me touch on international expansion opportunities. The Parks & Cope standard process was ultimately canceled by the government. And as has been our track record, we remain disciplined in our capital allocation decisions and our remaining focus on projects that meet our strategic and financial return criteria. Therefore, we continue allowing growth opportunities that complement our existing portfolio strength over our shareholders' value. Before I continue with the presentation, I want to address the recent events concerning to the state of Jalisco, namely Guadalajara and Puerto Vallarta. Certain incidents were prepared throughout different locations of the state of Jalisco on February 22. And I just want to assume that gas facilities, the Guadalajara and Puerto Vallarta Airport remain fully operational on weekend and up until this moment. As many of you may be aware, the terminals rely on the protection of the Mexican National Guard as well as the Ministry of National Defense as part of the permanent coordination and security measures with the Federal Authorities. From an operational standpoint, we experienced flight cancellations, including 171 flight in Guadalajara and 134 flights in Puerto Vallarta during February '22 and '23. However, this February, February '24, we only had 4 cancellations in Puerto Vallarta and 11 in Guadalajara. And today, all the operations are back to normal. Thus, it has been a steady and consistent improvement from the weekend, as we work to regain normally after the events of the last weekend. The rest of the -- our portfolio continued to operate without disruption at this stage. We don't anticipate any additional impact. We are monitoring the situation, and we'll update the market as necessary. Back to the results and outlook, I would like to continue with a discussion on guidance. We do not include the CBX business combination and the Technical Assistance Agreement Internalization, which remain the formalization process. Once the final timing of the consolidation is confirmed, we will update you on the results. That being said, we expect 2026 to be another year of moderate growth, supported by the established structural drivers across our portfolio. Passengers traffic is expected to grow between 2% and 5%, reflecting the consolidation of routes developed to date, estimated load factors and the potential increasing frequencies and ship capacity across our network. On the revenue side, Aeronautical revenues are projected to increase between 9% and 12%, driven by the implementation of current maximum tariff in Mexico and Kingston airports in Jamaica, combined with traffic performance, inflation assumptions and projected exchange rates. Non-aeronautical revenues are expected to continue expanding from 6% to 9%, driven by improved contract condition and traffic growth. As a result, total revenues are expected to grow between 8% and 11% year-over-year. We expect EBITDA to grow between 8% to 11%, while the EBITDA margins will remain solid and approximately 65% or minus 1% reflecting continued operational discipline, while maintaining flexibility to observe external volatilities. Looking ahead, we remain confident in our strategic direction as we focus on our 4 growth pillars. The strengthening connectivity, expanding commercial revenues, disciplined execution of our infrastructure program and maintaining long-term leverage strategy. While external factors such as exchange rate volatility, natural events and global uncertainty may generate temporary expectations, cap diversified airport portfolio's strong domestic demand base, disciplined capital structure position us solidly to continue generating sustainable long-term value. We appreciate your continued growth and support in GAP. Thank you for joining us today, and we now open the floor to your questions. Operator: [Operator Instructions] Our first question comes from Gabriel Himelfarb of Scotiabank. Gabriel Himelfarb Mustri: Just can you give us a bit of color on Guadalajara and Puerto Vallarta, any cancellations seen or any lower bookings? And my second question is also -- is there -- can you give us a bit of color on -- do you think you might be expanding your footprint on the U.S. besides the CBX. Raul Musalem: Thank you, Gabriel. In the case of Guadalajara and Puerto Vallarta as we noted, I mean, we saw on the Sunday an important number of cancellations more than 100 in both airports. For the Monday, we began to see an important recovery. Just yesterday, we only had 4 cancellations in Puerto Vallarta and 11 in Guadalajara. And today, we are expecting that all the operations are back to normal. So what we are seeing for sure has a -- I mean, a major impact for -- on Sunday, but after that, the services from the airlines have gradually normalization process. Saying that, we are expecting that there will not be any additional impact for our airports in the coming days. Making like a big number of the impact of these 2 days, almost 3 days of impact. We are forecasting that -- or we are seeing that the possible impact was around of 50,000 passengers in these both airports. Jumping to the second question, the footprint in the U.S. beside the CBX, for sure, they align with our discipline for capital allocation, we will continue to looking for other opportunities. And for sure, with the platform, the CBX in the U.S., it opens the possibility for new investments in the U.S. we were still looking for opportunities that we -- that generates value to our shareholders and be completely accretive for the company. But yes, it will open the opportunity for additional -- or review additional projects in the U.S. Gabriel Himelfarb Mustri: And are you expecting the coming months, a decrease in traffic on Guadalajara and Puerto Vallarta from international passengers? Raul Musalem: I mean we are expecting that the trends that we have seen in the last months continue. For the case of Guadalajara, as you know, we have a positive number with all the openings of new routes from Canadian market, mainly, and also recompression or recovery from the classic VFR market, so Guadalajara, Los Angeles and South California in general terms. But also in the coming months, we will have the first 2 matches for the last elimination of this for the World Cup. So yes, we are expecting some additional passengers for sure in the coming months. And I mean, in general terms, connecting with this terrible news of the weekend, we are not expecting any further impact on the traffic. Operator: Our next question comes from Enrique Cantú of GBM. Enrique Cantú: So regarding the pending tariff adjustments, could you provide more detail on expected timing and visibility around their implementation? Raul Musalem: Yes. And then just going back on that. Last year, as you remember, in March of the last year, we have -- we increased 15% of general passengers fee in all of our airports. In September 1, we had another 7.5%, and in January -- on January 1, we increased around 5% to 6% depending on the airport. For all of that, we are seeing that the maximum tariff for the year, for sure, depending on the FX effect of the peso on dollar, we are growing around 95% of fulfillment. And in the summer, we will have 2 additional increases for our 2 airports Vallarta and Cabos. With all these put in place, we think that we could achieve the 95% of fulfillment on time. Operator: We will now move to questions submitted to the webcast platform, and I'll turn the call over to Alejandra Soto, Investor Relations Officer, to read the questions. Please go ahead. Alejandra Soto Ayech: We have one question from Andressa Varotto from UBS. And he's asking regarding your guidance. Can you break down traffic increase expectations for Mexico and Jamaica and how you are seeing a recovery from the Hurricane Melissa in Jamaica and the World Cup impacts in Mexico. Also -- well, and the other question, it was already explained. Raul Musalem: In terms of traffic, we are seeing, in our guidance, an increase on traffic that goes from 2% to 5%. In the other terms that we are seeing for Jamaica is, we are seeing at continuous recovery on the hotel capacity for Montego Bay, mainly. What we are seeing is for the end of the year, could be around minus 2% to 0% on increase of passengers. Why is it important to have in mind is that, the 2 main peaks of the terminal of Montego Bay or the 2 moments of increase of passengers for -- is -- the spring season and the winter season. . On this spring season, I will say that there will be a lack an important impact of the number of available hotel rooms in Jamaica. So we will expect that in this spring, winter -- spring season, the decrease of passengers continue. But for the winter season, that is the second big high season for Montego Bay, we are expecting that a full recovery of the total capacity of hotels on the island. With that in mind, we are expecting that minus 2% to 0% on Jamaica. Alejandra Soto Ayech: Thank you, Raul. It is the only question on the webcast. So I will turn the call again to the questions on the floor. Operator: We do have a question from Julia Orsi of JPMorgan. Julia Orsi: So just a question on capital allocation. So now that the Turks and Caicos process is pretty much over. Can you comment a bit on what's the priority on the capital allocation side? And that's it. Raul Musalem: Julia, I will say that in the first half of this year, we will be focused on all what means CBX and bring in all the efficiencies to our company, but that would be, I think, one of the biggest new projects bring into the company. But parallel to that, we are working in other projects and looking for other projects that could be interest for us. We will continue reviewing opportunities on the cargo facilities business. But I would say with the discipline that is like the part of the DNA of the company, we will continue only on projects that are completely accretive for our company. With that in mind, we will always continue within different projects. But for the moment, the only focus that we will have to brings additional value is all the process to bring CBX and the synergies to the company. Julia Orsi: Got it. And just a follow-up on the CBX. What is the expected timeline for the deal to be fully integrated into GAP? And I mean do you have any updates on let's say expected synergies throughout the year? How much should we capture this year. Raul Musalem: Yes. I mean, in general terms, what we are talking about the formalization process, we are in the middle of that. We are expecting that in the second quarter, of the year, we could fully consolidate all the transactions. In terms of the efficiency, it will be gradually on the year. I will say that if we begin with the consolidation in the second quarter, for the fourth quarter, we could show important efficiencies on the CBX consolidation process. I would say that the full program of what we think that could be the synergies of the company, we're going to fully implement it for the half of this year of '27. That would be -- I mean -- our first view of what we think that could happen for on all these project of CBX. Operator: There are no further questions at this time. I will turn the call back over to Mr. Raul Revuelta for closing remarks. Raul Musalem: Thank you once again for joining us today. Please contact our Investor Relations team with an additional questions you may have. Have a great day, and thank you for your attention. Operator: That concludes our meeting today. You may now disconnect.

39天前Insight Analytics约5分钟阅读

BID.JO 2026 Q2 财报电话会议

Bernard Berson: Good morning, good evening, everybody. Thanks for joining the Bidcorp results for the Half year ended December 31, 2025. I'm Bernard Berson, the CEO of Bidcorp. Joining me will be David Cleasby, our CFO. I promise to make this shorter than Donald Trump's State of the Union address a little bit earlier. And I promise I'm not going to award myself any Bidcorp medals of honor, although I definitely deserve quite a few. I definitely do. Let's get straight into these results. I'll just take you through the high level of them. David will then take you through the financial detail. I'll come back and talk a little bit about the past 10 years. 2026 marks 10 years since the unbundling of Bid Corp from Bidvest. We'll talk a little bit about the outlook. Q&A, which will be the normal format, but please send your questions in through the normal mechanism, and we'll get to those at the end. And then hopefully, we can wrap up and I can go have my dinner. So let's go straight into it. You know who Bidcorp is. If you don't know who Bidcorp is, you're probably on the wrong call. We are a global food service business. We like to update the market on a regular basis. So you know as much about the business as possible. Our last update was towards the end of November. So we really are just filling in only a few gaps over here, which I find very interesting that -- yes, we're only filling in a few months' worth of differential, yet there's still some commentary that we overachieved on certain things and underachieved on certain things. So I think there's way too much micro analysis that goes on over a very short period of time. And what I would like to stress, particularly later when we look at the 10 years is this is a marathon, it's not a sprint. And sometimes, you can't look at the results just in the isolation of the last 3 months since our last update or even of 6 months. You need to take a longer view on certain things, and it's about the longer-term trajectory, not necessarily what transpired in 6 months. However, we're very happy with the performance of our business over 6 months. I'm not trying to make any excuses. I think we've performed exceptionally well in a pretty tough environment. Globally, in the markets we operate, it's certainly not strong. Economic activity isn't strong. There's a lot of uncertainty a lot of the jurisdictions, and we can go through them individually in a while, are negative, not positive. So for us to deliver revenue growth of 7.1% in rands, which is 6% in constant currency, I think, is a very solid result. Bearing in mind food inflation is maybe 1% to 2% of that 6%. It is very difficult to get a handle on what inflation actually is across the portfolio of countries and across the basket of product that we sell, which doesn't run the same as published inflation numbers. So we're very happy that we are seeing real growth in an environment that we don't think is growing by much. So constant currency revenue up 6%. Gross margins are relatively stable. There are a few environments where they are a little bit down for certain reasons, competitive reasons, some that they're up. But overall, we've maintained our GP margins. Our trading profit is up over 8% in rands, 7% in constant currency. Once again, we're very happy with that. Trading margin has trended up slightly from 5.3% to 5.4%. I'd say slightly, it's -- 5.4% is probably at world-class levels anyway. So every 10 bps that you can get out of this are hard sport. It's not an easy -- we're not coming off a low base. We're coming off a really very well-developed, well-defined strong historical base. So to increase off that base, we are very satisfied with and believe our teams have done a great job to get us there. So the result of all of that is, we've got HEPS up by 8.5% in rands, which is 7% up in constant currency, which is a little bit better than we indicated in November when we spoke to you more or less in line with our expectations. And like I say, economic conditions out there aren't favorable. They're not terrible. I don't think we should be over-negative about them, but they certainly aren't running hot. It is just tough going in most geographies. So overall, we're very satisfied with these results. Our teams have done a great job around the world. Almost every business has performed well, there are 1 or 2 that haven't for various reasons, and we're happy to talk about those. But we are a portfolio of 34 -- 32 countries, 20 businesses, I believe, over those countries. And obviously, in any period, you're going to get 1 or 2 that don't perform for certain reasons and 1 or 2 that are going to shoot the lights out for various different reasons. So my thanks do go out to the team. We do have a very stable management team, which I believe is part of our success. It's a team we bought into our strategy, who are all firmly aligned with the path that we're on, who understand what our offering is. And we've stuck to the path. We've elaborated the path that we're on. And that's what we're doing. And I think the teams have delivered upon that and executed once again very admirably. So my thanks go out to the 31,000 team members around the world, ably led by our very small management team, a very top management team who once again have done a great job. So thank you to all of those on the call, all those not on the call. It doesn't happen because of me or because of David, sometimes it happens despite me and David, and it's very much because of the great team that we have around the world, who are passionate and enthused, and have bought into the strategy of how we grow this business. If we move on to the segmental analysis of the business. First off, we have Australasia. Now you may recall over many, many, many, many, many, many years, Australasia was the star performer and certainly led the charge and certainly supported the group through many years. And I guess, over the last year or 2, that's taken a little bit of a breather. And for what was our largest segment to be flat, I think under the circumstances is a remarkable achievement that it hasn't gone backward, bearing in mind some of the conditions out there. So the two businesses have performed very satisfactorily in constant currency. And once again, we look at constant currency, the rand moves as the rand moves. We have no control over that. Revenue between Australia and New Zealand is up 4.5%. And we're very happy with that. In that, New Zealand's revenue growth is very minimal and Australia's revenue growth is approaching about 5%. From a profitability point of view, New Zealand had a very tough start to the year, and we've spoken about that. However, we did see conditions there change in about October, and we've seen, I'm going to say, a strong performance from our New Zealand business, which matches our expectations from about October onwards and hopefully, that trend continues. That's a two-pronged issue. Tourism has returned. I think the consumer is in a bit of a better place that bounced off the bottom. But also, we did take some measures when things weren't so great in the business, and we have looked at our margins and who we're selling to and the pricing we're selling to and are we -- do we need to sell to certain customers that does it just make sense to have those relations. And also, we looked at our cost base and trimmed the cost base down a little bit. So the New Zealand business is now looking at a very strong recovery. We're optimistic about that. The Australian business is doing fine. We are seeing revenue growth. Profitability growth is a little bit slow. Once again, when you look at the trend over a number of years, that business is double the size of what it was pre-COVID. It's probably more than double the size of what it was pre-COVID. So to maintain that and to wait for the next growth phase is the position we're in, in Australia at the moment. And I have no doubt that will come. The Australian economy is probably flat at best. It's not terrible, but it's certainly not great out there. What we are seeing in, not only Australia, but a lot of markets, is the consumer is under pressure. And as a result of that, there's a lot of downtrading into the QSR segment. And by design and by choice, we service very little of the QSR segment. So we're not benefiting from that, and we have no regrets about that. Because as soon as the economy does improve a little bit, we have no doubt that the pendulum swings back towards the type of business that we're heavily engaged with and invested in, and we'll see the strong benefits of that. So from an Australasian point of view, profitability is basically flat year-on-year in the 6 months. We're pretty confident about the look forward. Particularly in New Zealand, we think we'll be pretty buoyant and Australia will follow within 6 months, maybe a year. Moving across to the United Kingdom. We are seeing sequential improvement there. I noted sequential is the new buzzword that everybody uses. I'm not actually sure what it means. But we're definitely seeing sequential improvement with our margins ticking up from 3.4% to 3.5%. Now before all of you say, "Well, only 0.1%, when are you going to get to 5%? When are you going to get to 6%?" The answer to that is we'll get there when we get there. That's really hard game in the U.K. There's very little positive news that comes out of the economy. We don't operate in isolation. We don't operate in a bubble. We're not magicians. We very much operate in the reality of the market we're in. And I think under the circumstances of the U.K. market and those of you who cover the other U.K. stocks will understand this, I think our business has performed very, very well. Revenue up 5.8% in constant currency, profitability up almost 10%, off a reasonable base last year. And yes, it's not where we want it to be yet, but we are making progress. In all the business pillars we do have in the United Kingdom, we are making some progress. We definitely are seeing improvement. And actually, to my point earlier about the QSR channel, the U.K. business is probably the one that we are most heavily skewed towards the QSR channel. We do have a few of those customers. So we are getting the benefit of that. But once again, that doesn't overly excite us because long term, that's probably not going to be sustainable. That growth won't be sustainable, and it's not where we want to position our businesses for the long term. And like I say, we don't measure things on a week-to-week basis and make decisions on a week-to-week basis. That's a much longer view. So we're happy with where the U.K. is. From our business point of view, I'm still hearing lots of very negative news about the U.K. economy, about the consumer, about the sentiment out there. The hospitality industry is really under pressure. We are seeing that in our hospitality type of numbers. Fortunately, we've got a large nondiscretionary type of business as well with health care, aged care, government, education, et cetera. So we're very satisfied with the U.K. It is tough going, but we are making progress and seeing improvements. Europe had another great performance, and that's following on from a few years of strong performance. So we have a trading margin there, almost at 6%, which is wonderful. The question now is, how we get back to 7% in a period of time, but it all becomes much more difficult. The low-hanging fruit has been picked and now it becomes more difficult. So we've got a revenue growth of 7.6% in constant currency and profitability -- trading profit up nearly 12%. Europe's a combination of many different businesses at different stages of development, and it's a microcosm of a portfolio within itself. The Western European, the Benelux businesses, I guess, performed very stably, reliably, gave us good growth, but in reasonable numbers. Spain and Portugal remain work in progress and will remain work in progress for quite a few years. We're still building the base there. We're still getting the foundation correct. We're still looking for suitable acquisition. We're still building the team and building our regional presence. So those will take time. They're not causing us any stress. They are going the way they need to go. They just haven't scaled up to the extent that we expect them to quite yet. Italy was a standout performer, which probably was expected. We put the investment in the year or 2 before. We've made a few changes, and we're very pleased with the outcome of that, and that business has grown very strongly. The Czech Slovak Hungary business continues to perform very well for a mature business and both top line and bottom line growth. Poland remains a very exciting market for us with good growth. We are going to have to reinvest in Poland. Many years ago, we spoke about having to grow into our skin. We made that investment. We grew into it and now it's too tight. Yes, we've grown to that capacity plus we're operating at max, and we are going through that investment phase again to expand our presence in Poland, but it's a very strongly performing market, it's a strongly growing market, and we're very enthused about that. And the Baltics continue to perform very adequately, relatively small market. I think the addressable population is only 4 million or 5 million, but the business is stable, profitable and is a nice business now performing the way it should. Emerging markets is a mixed bag, very difficult to look at the overall numbers. We have revenue up 4.1% and profitability up 5.2%. Standout performance of South Africa once again. I think we're at about 15% profitability growth in South Africa across the Bidfood business and the Crown business. The bakery business, which is equity accounted, also performed very satisfactorily. So in a not great market, the teams have once again delivered fantastically well, which does create a blueprint for us around the world that notwithstanding the fact that economies might not be fantastic, there's still opportunities out there to be explored. And we don't have dominant market share in any market. We don't sell all products to all customers. There are levers we can pull in all countries and certainly, South Africa shows us how that can be done. South America was very pleasing as well. We're starting to see some good growth come out of that. I think the economies there have generally improved. And all 3 of them, Brazil, Argentina and Chile performed relatively well. Those businesses still aren't at the scale we'd like. And we don't know which ones we'll scale up first. Somewhere like Argentina is a little bit more tricky or contentious than maybe a Chile or a Brazil. Brazil might be more attractive because it's a bigger market. Chile, we've been there longer and have a very established business that's now starting to perform very well. Middle East is going through a little bit of an adjustment phase. There was a large customer that exited Saudi and went to a logistics model. It was great for us to ride the wave with them, but we always knew that was going to come to an end. And we are now reengineering our business to be a more sustainable type model that more closely resembles the UAE market. In the UAE, we're doing very, very nicely. It's a very stable, strongly performing business and now we need to get Saudi to that. Turkey remains a very challenging market. We're seeing good revenue growth. But from a macroeconomic point of view, it's tough. You've got very high inflation. You've got very big increases to the cost base. You've got government interference in a lot of things. We have a very small business, and small businesses require investment to get them to scale, and we're still going through that trauma. Moving over to Asia. I'll start with the good. In Asia, Malaysia is performing very well. We're very enthused about Malaysia and the prospects there. We did make an acquisition beginning of the financial year, which expanded our portfolio into ambient products, moving a little bit away from premium chilled and frozen to broaden the range, broaden the customer base and change the nature of the business to be a more broad line foodservice distributor, and that performed very well. We're very enthused about that. Singapore remains a work in progress. We are making progress. There's still some restructuring going on. The business is performing satisfactorily, but not to its potential, and that will take another year or 2 or 3. Singapore as a country, I think, is probably struggling a little bit. I think they've lost a little bit of that tourism stopover airline hub type of business, although when you look at the expansion plans of Changi Airport, you wouldn't believe that. But there is definitely some local pressure in the short term there, but the business is doing fine. Greater China continues to be tough going, particularly Mainland China. Very quickly, and I think I might have spoken about it before, we were an importer of expensive foreign Western type product, mainly dairy type of product, and beef and protein out of Europe, Australia, New Zealand, America, South America. And China has very much decided to go to a more local procurement type of model from a country point of view. There have been quite a few retaliatory tariffs put in, particularly on European dairy. And it's very difficult now to import that product into China. And not only have we seen the price of the product go up and the import of it become very difficult, but the principles, our suppliers have also tried to protect their position and moved away from an exclusive distributor type model, which they had before and have opened up to multiple distributors to try and maintain their volumes. It's a very short-term strategy because all they're doing is they're filling the pipeline of multiple wholesalers with inventory. And then you've got multiple wholesalers trying to give the stuff away because it's got a date having an expiry and the clock is ticking. So we've seen our margins being crushed quite significantly in China on imported product. We have shifted a little bit to local product and have been relatively successful in that, but we can't do that quick enough to replace the lost volume of imported product. The Hong Kong business is relatively stable in a very flat Hong Kong market. And the Hong Kong market then was also impacted by that high-rise tower fire, which caused the cancellation of a lot of Christmas type parties and festivities. So they had a really flat December. So that had an impact there. So I think I've gone through the segments. Overall, our team have done great. We're very happy with it. I'm going to hand over to David to talk about the financial highlights. David Cleasby: Thanks, Bernard, and good morning to everyone. Thanks for taking the time to listen to us. First up, obviously, thanks to all our people around the world in terms of delivering the results. And thanks, I guess, more in particular from my perspective to the finance teams as well as the corporate team who have put it all together. So thanks. As usual, in terms of IFRS, there are no changes. The accounting policies are consistent and they're consistently applied, so no issues there. The constant currency, just to remind you, we use it as the true measure of the performance of the businesses. We don't have a dominant currency. So it's every currency or results of that particular business in the currency, but at last year's rate. So it does give us a like-for-like comparative. And that's obviously how we measure the business and how we judge performance in the business in their home currencies. And the result, obviously, will fluctuate. And as you've seen, I'll talk a little bit about that later. And hopefully, I don't repeat too much of what Bernard sort of alluded to already. I think from my perspective, the quality of the result is particularly good. They're very clean. I think you can see from the difference between earnings per share -- headline earnings per share, there's very little extraneous issues in the group, some, I guess, cleanups of some businesses in terms of rationalizations within countries and within portfolio. So that's obviously an ongoing basis -- ongoing issue and will continue. But there's very little from that perspective. A little bit of inflation accounting, but really doesn't account too much. So from a quality of earnings perspective, we are happy. Just some of the highlights, I guess, revenue growth up 7.1% in rands, gross profit stable at 24%, trading profit up 8.1% and 7% in constant currencies. I'll talk a little bit about that later. 8.5% of HEPS growth and nearly 7% in constant currency. Dividend up 10% almost, and I'll talk a little bit about that because that's basically ahead of our normalized earnings growth as well as a little bit low cover. Pleasingly, returns have stabilized, I guess, from where they were a year ago. So we are starting to see the benefits of the investments that have been made over the past while, and that's always something that is going to happen. As one invests, who takes a bit of time to utilize the capacity and at the throughput and therefore, you've got the cost base, but you haven't got the revenue coming through as yet. Free cash flow is an odd. I think what we've seen is basically a balanced free cash flow period where cash generated by operations has been offset by the investments into working capital, into acquisitions and into capital investments. So I'll talk a little bit about that later. And our net debt to EBITDA is slightly below where it was a year ago. In terms of the more detailed P&L, revenue up 7%, nearly 6% in rands and Bernard has spoken about Australasia's contribution. So just to bear in mind, that's nearly 20% of the group. So I think for the rest of the businesses, they've done particularly well. Gross profit at 24%, largely stable. I think the issue is that the businesses have to trade. We are a trading business. They will make calls depending on trading conditions that they see in their markets. And you're going to get a little bit of sometimes trading margin for volume. And that's just a reality, I guess, of the trading environment, but we're very happy. I mean you can see that some businesses are slightly down. Bernard spoke about particularly China where margins have come up significantly. So overall, we're very happy that the rest of the businesses have made up some of those shortfalls. Expenses have been well managed. You see the cost of doing business from our perspective has fallen. And I think that's more than offset the slight decline in the gross profit. And if we look at the constant currency, OpEx growth of 5%, we can still see we're getting some leverage because gross margins have grown by slightly more than that at 5.4%. Group trading profit at 8.1% in rand, nearly 7% in constant currency. And I spoke, the margins have increased a little bit, and we managed to trade through the costs and offset that against the slightly lower gross margins. For those things slightly below the trading profit line, the non-IFRS net interest in constant currency is up a little bit. I'm hopeful that we are seeing the top of the interest rate cycle from our perspective at this particular point in time. I think as we go forward, our expectation is good cash generation. And therefore, we should see that moderating and hopefully, come down a little bit. Effective tax rate, it is mix dependent, but it's absolutely within guidance at 26.7%. And just to note that I think we noted at the end of 2025, the results, the Pillar 2 detailed tax exercise has really had a negligible impact on the group. We pay full taxes in almost every jurisdiction around the world. So those from SARS who are listening, unfortunately, there's not a big take from Bidcorp. A couple of items, as I said, were really comprised some asset impairments relating to sort of almost in-country portfolio rationalizations and no big issues there. HEPS is up 8.5%, but EPS 16.6% and that's really largely attributable to the prior year impact of the exit of Germany. So that's really just to note. Currency volatility at 1.6%. Benefit in this period, obviously, the currencies and what you get is a little bit all over the place at the moment. The P&L is done on average, and that's obviously looking back over the last 6 months, whereas the balance sheet is measured on a closing period end number. And in the P&L's case, there was a slight benefit. But certainly in the balance sheet impact, there was a decline or an appreciation from a rand perspective in the balance sheet. On the cash flows, yes, I think just generally a pretty strong result from our perspective. Cash generated by operations was up 8% before working capital. If you take that after working capital of 9%, was up somewhere around 27%. So the business continues to generate really good cash flows. Working capital, I think, overall, a pretty good performance, not perfect, but in a group on a decentralized basis, you're never going to get a perfect result. And when you do, you've got no real opportunity to improve. I mean we measure working capital across 3 measures, firstly, an absolute impact. And in this period, the absorption, which is typical of our first half of the year, we had ZAR 2 billion of absorption, but against ZAR 2.7 billion last year. So give that a tick. On a days basis, they've come down from 12 days to 10 days. So that's also positive from our perspective. And the last one is our sort of internal measure, which is working capital as a percentage of revenue. It's really just measures how much working capital we've got invested in terms of the growth we're achieving, and that's also come down in the period versus the prior period. So I think the businesses have done a good job in this space. Investing activities, we've indicated that these will taper off, obviously not going to naught, but they have come down a little bit. A lot of it is still going into new capacity, but there's also quite a lot of maintenance CapEx in this period. And a lot of that is -- or some of that is actually replacement depots where yes, there is some additional capacity, but the majority of it is replacing facilities that we have. Our intention remains to own our facilities where it's feasible, where we can. And I guess we're strategic and we still own around 73% of the property portfolio. Acquisitions, four in the period. The cash cost in this period was about ZAR 0.8 billion. Contribution to revenue 1.3% and 1.2% to trading profit. So not a great contribution; some contribution, obviously, but we'll see the benefit of that as we do as the businesses are integrated and become more efficient. Net debt is slightly down. I think if we look at it in pound terms, it's basically flattish. We definitely are seeing the cash generation starting to improve against the prior period on a day-to-day basis. And I'm sure we'll see that improve even further as we go into the second half of the year. In terms of the balance sheet, I won't dwell on this too much. It's still strong and conservative, as I say, as we like it. Solvency and liquidity ratios are all good. In fact, they're very good and, obviously, well within all our covenants. There are no real issues with the debt maturity profiles. We do have an RCF, which is, I guess, standby facility, and we're renewing that and that will hopefully conclude in the next month or 2 or 3. But generally, from a balance sheet perspective, we're very happy. And this is what we think a very competitive advantage from a group perspective to have the balance sheet as strong as we've got it. In terms of financial guidance, I think I'm not going to go through all of this, but I think things to note, rand depreciation has obviously accelerated a little bit in the last 2, 3 months, and that is likely to have some impact on the rand results. But once again, we look at these businesses and the group results on a constant currency basis because we've really got no control over what happens to the rand. It's either good or it's bad or it's indifferent. Cash generation into the second half of the year, that's consistent with our normal trading cycle, and that's our expectation going forward. Our capital investments, we have guided to 1.5% to 2% over the next 12 to 18 months, that's still our expectation. Bernard, I know, will argue and say, well, that's not good, but that's the reality. We have been through a period of investment. And I'm sure that we're going to see the benefits of that coming forward. And at some point in time, I guess we are going to see the investment cycle start again as we absorb the capacity we've recently created. Returns, I've spoken a little bit about. They have stabilized, and our expectation is that they will get a little bit better going into the second half and into the period ahead. Our January results were as expected and following the normal annual pattern. And just to remind everyone, we do have winter in the Northern Hemisphere. So it's not a great period from that perspective, and it was particularly cold this year. Cash generation as we go forward, I think I've alluded to our expectation is it should be good. We are seeing a slightly reduced levels of capital investments. At this point in time, one can't talk about the acquisitions pipeline. But as we sit here today, that is what it is. My expectation is we should reduce debt levels a little bit further. And this obviously gives the group an opportunity to return excess capital to the extent we generated to shareholders in a structured and sensible way. With that, we obviously need to -- we're conscious of the need to balance the returns -- the reinvestment into the group as well as shareholder returns, which is obviously important. So from our perspective, the businesses are in great shape and certainly our expectation of further real constant currency growth into the second half of the year. And on that note, I'll hand back to Bernard for going with the presentation forward. Bernard Berson: Thank you. Thanks, David. I thought it's a good idea just to dwell on this for a few moments because, as I said at the beginning, I think it's a point of exercise looking at issues on a 2 monthly basis or a 3 monthly basis and saying we're 0.2% in the forecast and we are 0.1% ahead of consensus and all these other wonderful very short-term targets that you look at. And you need to take a longer-term view, you need to step back and say, what does the overall long-term reality look like? And I think we've delivered on what we said we would. And that's I call it boring. I get criticized for that, and I'm being told to call it stable and consistent and reliable, et cetera. But when you look at it from 2016 to 2025, bearing in mind, we went through COVID, which was particularly evident in our business. And we don't need to go through that other than we're not trying to look for sympathy here. The reality is, we did have 2 years that were just totally out of sequence, and we then had to regroup and move forward again. But when you look at all the metrics, almost all the metrics over that period, yes, there's very little you can criticize now. I know some of you saw, but it looks like your ROFE is tracking a little bit lower. And yes, it is at 25% and almost probably track up again at 26%. And then you look at the return on equity, the return on invested capital, they're improving again. The distribution to shareholders, a 19% compound annual growth over the 9 years. Earnings, 10% compound growth, a ROFE of over 50%. Yes, the graphs are all heading the right way. They're good looking, longer-term trends, and that's what we're focused on. It's absolutely not on what the next 3 months are going to do despite the fact that there is this pressure to always report. And you've always got this unrealistic what's happening on a quarter-by-quarter, month-by-month, 6-month by 6-month basis. Like I say, and I can't emphasize it too much, it's a much longer cycle than that, and we're very well on that path. And when you look at the trends, they're all absolutely heading the right way, and we're thrilled with the outcome of what our teams have achieved since the unbundling in 2016. The business is in great shape. We've got a strong portfolio around the world. We've still got opportunities for growth. We've got some wonderfully stable businesses that are strongly cash generative. We've got some great opportunities for growth in some of the smaller businesses. So we're very happy with that. Just talking a little bit about the strategic outlook, and then we'll get to the Q&A. We're not going to tell you anything radical. We're not going to tell you anything amazing. I know you people, financial analyst type people, you get very excited about chip stories and the announcement of new chips. We could say we're announcing a new chip, but it will just be a 10-millimeter straight cut deep fry chip that's not really going to change the world, unlike NVIDIA's chips, which will change the world. So sorry about that. Our chips aren't the same type of chips. We do what we do. We continue to move our businesses along the continuum. That's a continual movement on the continuum. Each business is at a different phase. Each business is committed to moving along that. And that journey takes however long that journey takes. There's not a predictable path to it. You have to get the building blocks in place correct and then you move along that journey. And I think our results, when you compare us to our peers, when you look at the consistency and the predictability and reliability of our numbers, I think it validates what we're doing. What we really don't do is show you all this pro forma adjusted normalized stuff. Whatever happens, happens, it's all in the numbers. We're not trying to extract things and say that they're not normal. And if it didn't happen this way and if that had happened and if the sun had shown a little bit more and if we hadn't relocated that and if we hadn't opened that, then our profitability would have been a certain number. We are where we are with whatever moving parts are moving out there at the moment. So these numbers are as normalized as they ever are because with every business, not everything goes according to plan all the time. So you're always going to have these extraneous things happening. You're always going to have some costs that are extraneous. That's just part of life. And I think it's a little bit disingenious to try and justify what your business would look like in an ideal world because there is no such thing as an ideal world. We operate in reality. So we're confident where we are. We expect things to continue more or less along the same path, if the world continues on the same path as well. There is volatility. There is geopolitical volatility. We can't control that. We can't control economics. We can't control what governments do. One of the issues that we are noticing is some of the cost pressures we are seeing in our businesses are government imposts, particularly coming through the labor line, where there's increasing social securities and postretirement benefits and minimum wages and employee entitlements, et cetera, which aren't offset by productivity gains. So all that government is doing is finding the lazy way of making good on their shortfalls and passing the cost on to business. And we see that happening in many jurisdictions. So when we look at our labor costs on a per unit basis, they're going up. But it's actually not because we're paying our people that much more. It's because you've got all these on costs that government are unilaterally transferring to business in many, many jurisdictions, which I think is lazy and inefficient. But it is what it is, and we can only do what we can do. Bernard Berson: What I am going to do is run through the questions, which we'll then hopefully answer a whole lot of other things. Let me just find them all. I'm just going to go through them in the order that I got them here. Are there any larger acquisitions in the pipeline and what geographies and sectors are of particular interest with respect to M&A? At this point in time, there's nothing of major consequence that we're considering. And even on the smaller bolt-ons at this particular point in time, the pipeline is relatively small and constricted. There's a disconnect at the moment between vendor expectations and what we think things are valued at. So until there's a change in that and either we're prepared to pay more or vendors are prepared to accept less, there's a little bit of a standoff. And we don't have a huge number of bolt-ons. That's a temporary basis. That's a temporary situation. It will rectify itself in some point in time. We're certainly not chasing anything. If something is exceptionally strategic, we'll look at it. If it's opportunistic, we'll only pursue it at a correct value accretive price. I mean what is interesting is as our share prices has moderated, and it's not only ours, it's our peers as well, and obviously, that's changed over the last few weeks, our multiples have come down. So clearly, the multiples we're prepared to pay for businesses, all that our competitors, our peers are prepared to pay for businesses is coming down as well. And the vendors need to factor that into their thinking that takes a little bit of time. Can you quantify the impact on margin from new large U.K. contract and infrastructure investments? Well, I think it's pretty self-evident that we've seen an improvement in the U.K., some of it which must be attributable to the Whitbread contract that we activated at the end of September. One of the interesting things is, we brought on new infrastructure in the U.K. in about September in Worcester. And because we had a new contract that was rolling out at the same time, it had no negative impact. If you recall 2 or 3 years ago, we must probably had a GBP 5 million to GBP 10 million negative as a result of rolling out additional infrastructure, whereas this year, we've absorbed it with the new contract wins in the rollout. So I think it's been a very positive, and we have greater infrastructural capability now in the U.K. What are the value-added opportunities being evaluated in Australia? I'm not sure why you're picking on Australia because we're looking at value-added opportunities around the world. One of the things we do, do is we see what's working in other businesses and copy. The other side of that is these things take time. It's not all that easy to start a factory and start manufacturing something, know what you're doing, take on the volume and for it to be profitable. So these things all have a ramp-up period. They have an investment phase. They might take a year, they might take 2 years, they might take 3 years before they come to fruition. So in Australia, in particular, because you asked the question, we are looking at a few. I'm not going to give you the detail because that is strategic benefit to us as to what we're doing. But we certainly do look at what works very well in other markets around the world and see how we can roll that out in each of our markets, and that's part of our continuum. That's part of the IP that we have where our businesses share things that work and don't work. What is the CapEx expectation for the full year and going forward, does Bidcorp need higher capital intensity versus history to keep growth rates at similar levels? We'll definitely see our CapEx this year lower than the prior year, the prior few years. And I really think what happened over the last few years is, there was a catch-up after COVID. There was minimal investment made for 2 or 3 years. And then you just have to catch it up. And some of that was in fleet, some of it was in infrastructure, some of it was in MH&E, but we don't see elevated levels for a while. So I think we're in a phase now where the CapEx will probably run between 1.5% to 2% of revenue on an ongoing basis. There might be spikes in that, bearing in mind, there's infrastructure spend. Infrastructure spend is lumpy and it's over a number of years. If you want to put up a new facility, you think about it now and you might open it in 3 or 4 years' time. Interestingly, in Portugal, we actually occupied our new facility extension a week ago. We started building that thing, I think, 4 years ago. But through council planning and bureaucracy, we've only just got in. So these things are long term. You talked to Australia improving on a 6- to 12-month view. Any concerns around the impact of inflation ticking higher again and interest rate hikes? Of course. Of course, we're concerned. We have seen there was a 0.25 point hike a month ago. There's probably going to be another one based on the inflation reading today. Energy prices are out of control, insurance prices are out of control. So of course, there's a downside risk, but we remain the eternal optimist. We still think the Australian business has many other levers to pull, and we've got a great business there, which will be fine. Can you provide some color on the turnaround in New Zealand between Q1 '26 and Q2 '26 and specifically how margins trended relative to the H1 '26 reported level? That's a way too complicated question. It happened in about October, and we saw a revenue improvement on a week-by-week basis of about 5% that just suddenly spending increased. And of course, we'd love to attribute it also to our teams and everything we've done, and some of it is attributable to our teams. But obviously, some of it is just macroeconomic. But our New Zealand business went backward last year slightly and went backward in the first few months of this year, and we're now seeing it operating at the levels it was before, plus a little bit more. So we're very confident that the New Zealand business at this point in time has seen a very strong recovery back to its traditional margins and possibly even a little bit better. Dare I ask about the future of China in the portfolio? You can ask, you won't necessarily get an answer. Does the strong cash generation, given you are moving past the U.K. CapEx and consistency of your earnings, not warrant having a capital structure with more debt? It's something we're looking at. We're looking at buybacks when our share price was running at ZAR 400, it made sense to look at buybacks. We are looking at the best structure. What we do with dividends, what we do with capital returns? So that's very much an active work stream, and it is getting attention. What is the group's preference for returning excess capital to shareholders? Do you favor special dividends or share buybacks? I actually don't favor special dividends at all because I think they are one-off sugar hits. So I think it needs to be in a sustained high dividend payout or share buybacks or a combination of both. Share buybacks have to be accretive, and that depends on the share price and also the tax treatment of the debt that you're going to use for the share buybacks. So we're still in a debt position. We're not in a cash positive position. We're in a net debt position. Obviously, you want to be in a net debt position. So you have to make sure it's tax effective in order for it to be accretive. So if it's accretive and at the right share price, buybacks absolutely make sense. You mentioned there are more headwinds and tailwinds, which implies weaker second half constant growth. How does one read this together with Jan, Feb running slightly ahead of 1H? This is Arena. I'm going to be in big trouble however I answer this. I think you're picking on our words and you're being a little bit pedantic about the semantics. There are more headwinds and tailwinds. That's just the reality of the geographies, the economics that we operate in. However, we are confident that we, all things being equal, will maintain the momentum that we have run with in the first half. So I wouldn't read too much into those wordings saying that we're negative about the second 6 months. All we're saying is, it's not party time out there. It's not all beer and skittles and sun and games. It's tough work. It's a slog, but we're confident that we've got the right ammo and the right teams in place doing the right thing that will continue the trajectory. Maintenance CapEx ZAR 2 billion versus D&A ZAR 1.2 billion previously. You've guided to ZAR 1.25 billion business. Will this normalize or are we in a new normal as a result of ESG investment, PPE inflation, et cetera? I think the reality is we're in 1.5% to 2%. And building costs are probably 50% to 70% more than they were pre-COVID for the same building. And certainly, we haven't seen food price inflation on the top line of that, which runs through to MHE and everything else. Yes, ESG does add a whole lot of cost. Electric trucks are 3x the cost of ICE vehicles. We don't know what the long-term total cost of ownership is because nobody does. So yes, that impacts your CapEx upfront. But realistically, it's 1.5% to 2%. Will you consider share buybacks? Spoken about that. Great result, but I'd like to ask if net profit margins will reach 5% or more in the future? I'm actually not sure what the net profit margin is. Actually, that's not a number I'm familiar with. I know our trading margin is 5.4%. I'm not sure what the net is. David, put you on the spot. David Cleasby: 3.5%, I think. Bernard Berson: It's 3.5%. So we've got to get to 5% after tax. Well, that's an anonymous attendee. If you want to help us achieve that, we're very willing to hear how we can do it. I'm not sure how you get from 3.5% to 5% after tax. Do you have an outlook on food inflation in South Africa in particular? I'm actually going to give that one to David because I don't have a granular view on the food inflation outlook in South Africa. David Cleasby: I mean, we're seeing somewhere around 4% in some businesses. And certainly, in the Crown space, we've seen actually deflation in the space. I mean I think it's in that 3% to 4% range, but it depends. Foot and mouth had some impact on certain categories like meats and the like, which are 30% to 40%. So it really depends on the basket reselling and how that impacts us. But those are the 2 sort of spaces, I guess, that we're seeing from our businesses. Bernard Berson: European region margins saw a strong uptick this period. Is this trend sustainable into the second half? Can you call out, which regions aided this improvement? I think we went through that. Strong performance from Italy, very acceptable performance from Netherlands and Belgium, strong performance from Poland, strong performance from Czech, Slovakia, Hungary. So we do think it's sustainable. We don't think there are one-offs in there that won't be repeated. But once again, it goes to the macroeconomic environment. And are there any events out there that we don't know about that are going to impact the European environment? At this point in time, we're very comfortable with where the business is tracking. You noted that February sales to date have been tracking above the H1 constant currency run rate, excluding New Zealand, which are the markets there is currently that H1 trajectory? Once again, please don't read too much into the short term. You've got Chinese New Year, was a few weeks later this year than last year. That obviously has an impact. It has an impact in February because it was -- Chinese New Year was in January last year and in February this year. And Chinese New Year is not only an impact on the Chinese business, but it also does impact the other Asian businesses. Ramadan is at a different time this year. I think it's a month earlier to what it was last year. That has an impact. You've got the Winter Olympics that happened, and that had a bit of an impact in Italy. It's not hugely material, but it had a bit of an impact. So please don't read too much into that comment. Broadly, our sales growth is tracking where our sales growth has been tracking. There's no major deviation either up or down on a longer-term trend basis. How much operational capacity do you have absorbed any rising fuel price? How much of your current margin is benefiting to a lower fuel price? The direct cost of fuel, diesel, actually isn't a major driver in the business. Obviously, it has some type of impact, but it's actually very small. Electricity is a far greater impact. But labor is still 60% to 70%, I think it's about 70% of our input is labor. And then you've got occupancy cost, rental and then you've got electricity and then you've got motor vehicle costs. So it really isn't a major swing factor either way. And that's why we don't really talk about it when fuel prices go up or fuel prices come down. It's not something that has a material impact, particularly that it's not materially moving. So yes, pricing is 10% or 20% lower, but it's not 10% of what it was. So it really isn't making a differential. Should we expect the usual seasonality for this year's results? Absolutely. There's nothing that's changed in the structure of the business. What we do see in the second half of the year is Easter. And I think Easter might be a week or 2 later this year than it was last year. And you also see the start of the European summer. If that weather doesn't kick in, that has an impact. But once again, that's an uncontrollable. If they have a strong start to summer, we see the benefit of that in May and June. If they don't, we don't get the benefit in May and June. I guess the other big kicker that happens every year in the second half is in the Australasian division, and that's just the accounting for rebates and customer rebates and supplier rebates, et cetera, which is very consistent from year-to-year. So there's no reason that won't be the same this year in terms of the seasonality effect. Plans to enter any new countries, geographies, Scandinavia, Canada, for example? If the right opportunity arises, we'll look at it. What we have learned is that if you're going to go into a new market, you want to go in of significant scale. Greenfields or very small businesses are very difficult in new geographies. It's a long road to travel. So we are looking for -- if a new country does present itself, it needs to be an acquisition of reasonable scale, and those just haven't happened. We did have a look at something, and I'm not going to specify where. We did have a look at a business which is relatively large in a new geography. And we didn't pursue that. We did a lot of work on it. We didn't pursue it. And in hindsight, it was the correct call to have not pursued it for a number of reasons and don't ask for details because I'm not going to give you any details, but we're very happy with our decision not to feel pressurized to make acquisitions. At the time, it looked okay. It was a market that theoretically was okay. But in hindsight, at this point in time, I think we made the right decision. Maybe in 5 years' time, we'll say it wasn't the right decision. But right now, where we sit, that was correct. So to answer the question, we will only get into new geographies with the correct start-up. You can even see in somewhere like Hungary, where we're doing greenfields supported by our Czech business. That's a tough, tough game. It's profitable, but it's scaling up exceptionally slowly. It's hard work. Would you say that Bidcorp is mostly the same business now as it has been over the last 10 years? That's a very interesting question because the answer to that is yes and no. It's a very similar business, but we absolutely have changed our strategic focus in terms of that continuum of where we see the business and where our aspirations are and how we're going to get there. So we very much moved away from just being a carton mover and a volume mover. And 10 years ago, we had a very large business in the U.K., selling to the logistics, the QSR operators, which we got out of. It was a huge amount of revenue, a huge amount of work and not a lot of contribution. Over the years, we've spoken about the rebalancing of the customer portfolio. And so when you look at our portfolio now, it's very different to what it was 10 years ago. We're still selling the same things. We're still selling baked beans and salmon, but to a far more focused defined customer grouping. The value-add opportunity is significantly more important to us now than it was 10 years ago. So a much more prominent part of our profit portfolio and the drivers of growth than it was 10 years ago. The investment in infrastructure means that we're able to deliver on these other strategic imperatives because we have this philosophy of being 30 minutes away from 90% of our customers, whereas a lot of our competitors take a more traditional approach and more, I don't know what you'd call it, a financial consultant approach of having very big facilities, which are theoretically more economically efficient than multiple smaller depots. But we've moved to that model of having multiple smaller ones close to the customer, which we think is giving us the correct return and giving us the growth trajectory. So we're a very similar business with the same people who were here 10 years ago. The team is fundamentally the same. But I think our strategy is far more laser-focused and far more refined. And I also think there's a much larger emphasis on technology than there was before. And a lot of that technology sits behind what we do. So we're not a technology company. But a lot of what we're doing and a lot of the efficiencies that we get, a lot of the ability to manage this business comes about because of the technology we have embedded in the business and continue to invest in and to spend money on and to experiment with and to develop on a global basis. And that's going to become more and more important. However, this isn't a technology business. It's not going to be a technology business because it's very much one of those good old-fashioned physical businesses, which maybe the investor community realized over the last few weeks that these businesses are what they are. But they are reliable, stable businesses that do adapt to technology. And absolutely, you need technology. But hopefully, they're not going to be totally disrupted by technology because you still need product and you still need to trade and you still need to buy and sell and you still need to service the customers' requirements. Would you say your market share gains are mainly from geographic expansion, eg, Italy or taking share in existing areas of focus? The growth has been almost in every market. So the revenue growth has been in every market. Yes, New Zealand, I think, was one of the few large markets that didn't have revenue growth, but they will start seeing that. So we believe we're gaining market share in most markets that we operate in. So it's not one market or another that's totally screwing the numbers. It's balanced across the portfolio, offset by 1 or 2 markets. In fact, there's one market that's going back, which is the Greater China market, where our share definitely is going back and our volumes are going backward. But everywhere else, we're seeing growth. I think that's everything. Let me just check. No more questions. That's great. Thank you, everybody. We'll give you an update again in May. And I will tell you once again, not to worry about each 3 months in isolation that this is a marathon, not a sprint. We need to look at 10-year trends, not 1 month, 2 months, 3 months deviations from Alpha estimates. I've got no clear what people are talking about, but clearly, it's very important. And it's more about the longer-term trend of what we're doing, the sustainability of what we've built, the quality of the underlying business and how that's going to continue to grow in the future as it has over the last 10 years. So a big shout out to our teams around the world. Thank you very, very much. Fantastic results. Thank you for all your hard work, efforts and achievements. Thank you to everybody for joining the call, and we will catch up again in May. So thank you very much, everybody.

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EOAN.DE 2025 Q4 财报电话会议

Iris Eveleigh: [Audio Gap] our full year results. As with every occasion, we will leave enough room at the end for your questions. With that, over to you, Leo. Leonhard Birnbaum: Yes. Good morning, everybody. Thank you, Iris, for the introduction also from my side. The past financial year has once again proven one thing. We at E.ON deliver on our promises, and we at E.ON are exceptionally well positioned to not only be the playmaker of the energy transition, but also a beneficiary of this transition. In a year that has been characterized by geopolitical instability and macroeconomical challenges, E.ON is a safe haven. One has to admit that our business is facing a secular growth opportunity. It has no U.S. dollar exposure. It's largely inflation protected. It's unaffected by U.S. tariff policy, and it's even largely shielded against the latest fear of an AI disruption. What more can you ask for in terms of resilience. But that doesn't mean that we are without challenges. And so let me now move to our -- my 4 messages before handing over to Nadia. First, we have delivered strong financial results for the year 2025. again. Second, we have not only delivered financially, we have also delivered operationally. And our focus on outstanding operational excellence means that we are at the forefront of the energy transition, and this enables us to execute our growth plan successfully now and also in the future. Third, our growth case is based on a secular growth trend, and this trend is extremely robust. It's driven actually by a broad set of structural drivers and not only by one thing changing. And it's largely independent of short-term economic and -- economical and political fluctuations. And fourth, we are committed to long-term shareholder value with a disciplined focus on value creation. We will grow our investments until 2030 and are ready to pursue further growth opportunities, but only once the parameters for RP5 in Germany are set. So on my first message, we have delivered on our financials with an adjusted EBITDA of EUR 9.8 billion and adjusted net income of EUR 3 billion, both actually reaching the upper end of our guidance range. In 2025, we have on top, executed, increased our group CapEx for the fifth consecutive year, and we have completed a record level of investments into Energy Networks up to 20% up year-over-year, supported by successful project executions across Europe. And this demonstrates again the continuous progress of our growth strategy driven primarily by our Energy Networks business. We are operationally well set up. Nadia will talk you through the details of the financial performance later. To my second message, we have not only delivered financially, we have also delivered operationally. In August 2025, we crossed a major milestone, around 110 gigawatts of renewable energy sources are now connected directly to our grids in Germany. Let me just give you some perspective. We operate around 1/3, if you calculate it in grid length of the German grid, but we have 70% of Germany's total onshore wind power capacity and around 50% of its solar capacity. We have 58% of the installed battery capacity, you name it. It's like the energy transition is happening and taking place in our grids. At the end of January 2026, just last month, we hit another milestone. We connected the 2 million renewable energy source to our German grid. For perspective, we celebrated 1 million somewhere in October 2023. So it took us 15-plus years to reach -- to do the first million, it took us 2.5 years to deliver the second million. The third million will happen in less than 2 years. That's the scale of acceleration that is currently just being driven by us. And in parallel, we are delivering on the smart meter rollout. All E.ON DSOs in Germany have met the mandatory 20% rollout target for smart meters with an increase of, on average, 60% in rollout volumes versus 2024. For us, at E.ON, this makes one thing clear, the energy transition is now an operational task on an industrial scale. And aside from massive investments, operational excellence is a prerequisite, not only to scale the business, but to stabilize also an increasingly complex system. Regarding operational excellence, let me share a few highlights from 2025 regarding standardization and digital transformation as well as some innovation examples. Within Energy Networks, we have successfully concluded our component standardization project in Germany. This gives our EU-based manufacturers visibility and builds the basis for long-term supply agreements on key components well into the 2030s. And it contains enough flexibility and scope to support a CapEx envelope beyond what we have in place right now. We are now rolling out this approach across our European DSOs as well to further strengthen supply chain planning and improve component quality across all our DSOs. And in these less standardized markets, we have already achieved a 20% reduction in technical specifications across key categories. Beyond standardization, we actively pushed the digital energy transformation by embedding digital capabilities deeply into our operations. Obviously, you can't integrate 2 million feed-in points without digitization. So in Energy Networks, for example, our new field assistant app in Germany provides technicians real-time visibility of the power grid real time. I emphasize real-time visibility. Early results show up to 45% less effort for circuit planning, up to 40% less documentation, enhancing both safety and productivity. In Energy Retail, we continue to invest into digital capabilities that improve efficiency and performance. Based on that, our U.K. business was able to increase digital sales by 30% in Q4 2025 compared to the same period 2024. And finally, as a playmaker, we do, as you would expect, also innovate. In Energy Networks, we are rethinking grid expansion. We developed a feed-in grid socket as we call it, that bundles renewable energy sources at a single grid connection point. The simplicity, speed and cost effectiveness of the feed-in grid socket means that developers can access capacity faster through online booking and achieve a quicker and cheaper route to grid connection. For our retail customers, we continue to rapidly expand our innovative offerings, and we now have around 16 flexible energy propositions across 6 markets, including the world's first bidirectional charging proposition launched with BMW in September 2025. So standardization, digitization, innovation, the message is clear. This is part of operational excellence, and this is how we deliver and build the foundation for future success. Let me get to my third message regarding the extremely robust secular growth trend that we are in. On our Capital Markets Day in 2021, which was the last one we did, we set a clear strategic course, focusing the business on energy networks and investing decisively in grid infrastructure. Since then, we have continuously ramped up our investments. When we compare the year 2021 to 2025, the level of energy networks investments has doubled. And many of the emerging growth drivers have not yet reached their full potential. Let me touch upon a few ones. Continued grid expansion and modernization. It's clear that grid reinforcements are necessary to deal with the integration of renewable energy sources associated -- and the associated increase in volumes. But that's also true for other drivers like data centers. In the south of Frankfurt, for example, we planned upgrades to the high-voltage lines, and that will increase transmission capacity by 2.5x replacing 170 old mass with 135 new ones. In data centers, we have last year committed to connect an additional 12 gigawatt of data centers to our grid in future years. And just as one example, we will build the connection for 700-megawatt data center in Nierstein, close to Frankfurt, which will be one of the largest grid connections for data center within Europe. E-trucks, 5 years ago, when we did a Capital Market Day, we were still assuming that hydrogen is going to take a large part of truck transportation. But right now, actually, this is not looking like it. We are moving towards electrification also here, and we are reaching the tipping point with the total cost of ownership approaching parity, if not having being already beyond parity. And the EU-wide CO2 fleet standards require manufacturers to reduce new fleet emissions. This is an emerging opportunity, but also a big commitment of E.ON for the green mobility transition. In Germany alone, we will be adding more than 160 new grid connections for high-performance electric truck charging infrastructure. That represents roughly half of the nationwide fast charging network for electric trucks as initiated by the German government. So to summarize, our growth case is robust, supported by diverse growth drivers that accelerate well into the decade ahead. And if one driver turns out to be less than in the past, always others have turned out to overcompensate for that. So we are extremely confident on that trend. And that brings me to my final message for today, the further upgrade of our networks investments that we will do. So we have rolled forward our guidance to 2030, and we will increase our 5-year CapEx envelope from EUR 43 billion to EUR 48 billion for the years 2026 to 2030. We continue to invest at a run rate of close to EUR 10 billion per year from 2027 onwards, which translates into a 10% power RAB growth in Germany. As said, we are operationally ready to invest more. Our processes and capabilities fully would support a higher investment pace that is also potentially really needed. As highlighted today, it is our continued operational excellence that enables us to capture and convert this growth into strength and value for our shareholders. And our attractive combination of organic growth with a continued dividend growth target of up to 5% per year offers attractive long-term value with an opportunity for more. Now a successful energy transition requires significantly more network investments. They are essential from a macroeconomic perspective to avoid cost. They are good for our customers. They are politically supported in the business case in itself crucial for industry. Therefore, our confidence that final RP5 package will be attractive enough to actually deliver on those CapEx envelopes remains unchanged. We need more infrastructure. More infrastructure is good for German customers. Therefore, we assume that the prerequisites will be in place. What we need as a prerequisite is the necessary regulation that gives us the long-term planning certainty and financial attractiveness to support this further expansion. With that, let me hand over to Nadia. Nadia? Nadia Jakobi: Thank you, Leo, and a warm welcome to all of you from my side. I'm pleased to share with you the details of our 2025 financial performance and our new guidance for 2026 and outlook to 2030. My 3 key messages for today are: first, we delivered a strong performance in 2025. Once again, our steady execution translated into strong full year results and record high investments, providing growth despite ongoing geopolitical and macroeconomic uncertainty. We achieved an adjusted EBITDA of EUR 9.8 billion and an adjusted net income of EUR 3.0 billion, both reaching the upper end of our guidance range. Our investments increased by 13% year-over-year to EUR 8.5 billion, supporting continued growth in our regulated asset base. Second, we introduced our 2026 guidance and provide an outlook to 2030. We expect to deliver more than 6% earnings growth, while shareholders continue to benefit from a reliable dividend growth commitment of up to 5% per year. This represents an attractive total shareholder return. We maintain strong investment momentum, increasing our 5-year CapEx plan by over 10% to EUR 48 billion, while strictly adhering to our value creation framework. And third, our strong balance sheet provides further opportunities to pursue additional investments beyond the current guidance once regulatory visibility on key RP5 parameters in Germany improves. At the same time, it provides us with a prudent buffer against potential risk. On my first message regarding our strong 2025 delivery. As we already anticipated earlier this year, our adjusted EBITDA came in at the upper end of our guidance range with EUR 800 million year-over-year growth. We saw a significant EBITDA increase in our Energy Networks business through accelerated investments in our regulated asset base across all our regions. Our annual network investments increased to EUR 7 billion in 2025. As is well known, the result was also driven by value-neutral timing effects. Further effects in Q4 bring the total amount to around EUR 400 million. Most of the effects came from our Energy Networks Europe business, driven by volume effects and recovery of network losses. The remainder is with our German Networks business, where higher volumes and lower redispatch costs added a high double-digit million euro amount. Our Energy Infrastructure Solutions business grew by around 5% year-over-year to EUR 588 million. The growth was driven by higher volumes compared to previous year and improved asset availability in the U.K. and Nordics. Additionally, we saw investment-driven organic growth as well as continued smart meter installations in the U.K. Moving to Energy Retail business. Here, we landed as expected at the midpoint of EUR 1.8 billion. The earnings development in the U.K. progressed as anticipated with the well-known effects continuing. In our B2C segment, customers continue to switch from SVT into fixed-term tariffs. In our B2B segment, contracts from previous years continue to roll off. Price adjustments in Germany from earlier in the year had a positive compensatory effect. Just for completeness, we had a negative high double-digit million euro one-off effect from efficiency programs in our Energy Retail and ICE business. This brings our total one-off effects to around EUR 300 million, resulting in a total underlying EBITDA in 2025 of EUR 9.5 billion. Our adjusted net income came in at EUR 3.0 billion at the upper end of our guidance range. We continued to see slightly higher depreciation costs caused by the increased digital investments with shorter useful lifetimes. At the same time, our interest cost rose due to the higher net debt level compared to last year and the higher refinancing cost for maturing bonds. On an underlying basis, this converts into EUR 2.84 billion of adjusted net income. We maintain a strong balance sheet. Economic net debt decreased by EUR 200 million quarter-over-quarter to around EUR 43.2 billion at full year 2025 despite the continued investments in Q4. Our investment increased by 13% year-over-year to EUR 8.5 billion, extending our track record of 5 consecutive years of annual increases following our strategic repositioning in 2021. Our strong operating cash flow of EUR 3.6 billion was the main driver of the debt reduction in line with the typical pattern. As a result, we closed the period with a comfortable debt factor of 4.4. This shows that we remain fully committed to a capital structure staying below our up to 5x promise to maintain a strong BBB/Baa rating. This balance sheet strength is further supported by 100% cash conversion rate, reflecting disciplined working capital management and the high quality of our earnings. Turning now to my second message, our new attractive guidance framework. For 2026, we are guiding an EBITDA of EUR 9.4 billion to EUR 9.6 billion and an adjusted net income of EUR 2.7 billion to EUR 2.9 billion. For 2026, we expect a broadly stable EBITDA development. In the Energy Networks segment, continued investments into the regulated asset base will be largely offset by cost for further growth in our Networks business. Our Energy Retail segment is expected to remain broadly stable at EUR 1.6 billion to EUR 1.8 billion with operational improvements, including increased stabilization of our procurement, largely offset by the structural deconsolidation of one of our participations, moving it to at equity accounting. In Energy Infrastructure Solutions, continued investments are expected to drive earnings growth in 2026. This development feeds through into our adjusted net income. Looking out to 2030, we expect our underlying earnings to grow by more than 6% on average per year. In absolute terms, that means adjusted EBITDA increasing over EUR 3 billion to around EUR 13 billion by 2030. Over the same period, we expect our underlying adjusted net income to grow at the same pace by 6% per year on average. This takes us to around EUR 3.8 billion by 2030, an increase of around EUR 1 billion. Let me now outline how each of our 3 business segments contribute to our growth story. In Energy Networks, we are stepping up investments in all our markets, which translates into underlying EBITDA growth of around 6% per year to 2030. Germany is by far the largest contributor, driven by continued investments in the power RAB. In addition, Sweden and Czechia are key contributors. In Energy Infrastructure Solutions, we expect to see a CAGR of 12% by 2030, turning into an EBITDA of approximately EUR 1.1 billion. The largest business drivers are B2B solutions, including on-site generation, battery opportunities and district heating and cooling. In Energy Retail, we expect to ramp up our EBITDA to EUR 2.1 billion by 2030. The growth is primarily driven by innovative products such as flexibility and e-mobility offerings as well as higher efficiencies stemming from the centralization of our procurement and further digitization. This translates into exceedingly strong cash generation. By 2030, our Energy Retail business is expected to generate a cash contribution of around EUR 7 billion, almost 3x what we plan to invest. Therefore, Energy Retail plays an important role in funding our investment program. Let me now outline the CapEx envelope that underpins our growth story. Since our strategic repositioning in 2021, we have consistently increased our CapEx envelope, and we are doing so again. We raised our CapEx to EUR 48 billion for the 5-year period to 2030. We have rolled forward our CapEx for another 2 years. Our CapEx amounts to around EUR 10 billion per year in 2027 and 2028. We will maintain this level in 2029 and 2030. This translates into a 10% power RAB CAGR in Germany, reflecting investments of more than twice our depreciation. This also increases the power share of our total WAP from 88% in 2025 to 94% by 2030. This expansion is fully aligned with our strict value creation framework, ensuring that each segment delivers a business-specific value creation spread. By far, the largest portion of the investment budget, around EUR 40 billion is allocated to our Energy Networks business. Most of this capital is allocated to power grids. In our Energy Infrastructure Solutions business, we plan to invest around EUR 5 billion over the 5-year horizon. These investments are mainly allocated to our district heating network, our industrial and commercial customers for decarbonized energy and heating solutions as well as to opportunities for data centers and batteries. Within Energy Retail, our investment focuses on innovative products and -- advancing our digital capabilities to service our customers in an efficient way. Let's move to our financing outlook. Our balance sheet capacity remains unchanged at EUR 5 billion to EUR 10 billion, even with a higher investment budget. We retain flexibility for selective value-accretive portfolio opportunities while benefiting from high cash contributing of our energy retail business. Hence, our strong balance sheet provides a solid foundation for additional investments while keeping a prudent risk buffer to preserve financial resilience. As Leo mentioned earlier today, the growth opportunities we have are robust and long term, particularly for power grids. And we stand ready to invest more, considering what is still necessary for a successful energy transition. We are operationally and financially prepared to increase our CapEx run rate in the outer years and invest an additional EUR 1.5 billion to EUR 2 billion per year, considering what is still necessary for a successful energy transition. But for that, we first need the necessary regulatory visibility for improved RP5 parameters. This brings me to my final message. With our new attractive outlook to 2030, we are fully committed to deliver sustainable earnings growth of more than 6% per year and grow our dividend up to 5% per year. And we have optionality for more based on the structural growth of power grids that is still needed. Our combination of organic growth alongside growing dividends offers attractive long-term value for our shareholders with an opportunity for more. And with that, back to you, Iris. Iris Eveleigh: Thank you, Nadia. And with that, we will start our Q&A session. Let me remind you all please stick to 2 questions each. And the first question for today comes from Wanda from UBS. Wierzbicka Serwinowska: Hopefully, you can hear me. Two questions, one for Leo, one for Nadia. Maybe let's start with Leo. Today, at the Bloomberg interview, you said you are quite confident that you will get a regulation that will allow high CapEx program in Germany. But at the same time, you didn't really raise your 5-year CapEx program. So what makes you confident? How the talks with the German regulator have been going so far? And when do you expect to have enough visibility to basically make up your decision on the financial headroom? And the question to Nadia, could you please talk about the assumptions behind your 2030 German network EBITDA? What allowed return did you assume? And what is the cost outperformance cut versus today that you assume in your 2030 numbers? Leonhard Birnbaum: So there is no new information that has emerged over the last months that has changed our position. So the confidence that I've shown is just a repetition of what I've said in the past. And what I also tried to say this morning it's absolutely clear that we have a structural shortage of infrastructure. It's actually not a German issue, it's a European issue, it's actually even in the U.S. It's a general issue. It's number one. Number two, bottlenecks in infrastructure are extremely expensive, and we see that they are especially expensive in Germany, but they're actually expensive all over the place. The third one, the acceptance, the fact that the energy transition becomes a business place -- business case depends on somehow solving this structural need. And therefore, like I think it has been acknowledged now by everybody that we need more infrastructure. It has been acknowledged by everybody that we need private capital for that. And therefore, I'm saying, well, then I'm confident that there will be a regulation in place that allows for private capital to be invested via E.ON into infrastructure. And therefore, I'm saying, I can't see why we would not get something like that with all the ongoing discussions. But clearly, it's not that I can point to a big revolutionary development since we last time met. Now on the question until when will we have visibility? This depends on the news that we get. Like this year, we have RP5 in Germany, we have RP5 in Sweden. But in Germany, actually, we have the OpEx adjustment factor we are expecting eventually, let's say, in the first half, some news what it really is and what it could mean so that we could potentially quantify it. We are expecting regulation on the gas side that would give us potentially a cross read. And we are expecting then the OpEx regulation in the next year with the cost base based on the cost audit that's being done right now. So it depends a little bit on the news that we are getting in the next -- let's say, in the next month. Nadia Jakobi: Yes. And regarding the assumption that we took, we -- please understand that we not disclose the single individual regulatory parameters. What we say and what we have said in the past, our goal is to reach our value creation spread of 150 to 200 basis points ROCE over WACC. And we would assume that we have included that. You can assume that we have included that in our guidance. Yes, full stop. Wierzbicka Serwinowska: So in that case, can I ask another question because I didn't really get anything about the 2030 German network EBITDA. Nadia Jakobi: Yes. So again, when it comes to the 2030 EBITDA, we are disclosing at this point in time that our overall networks result is at EUR 9.8 billion as long as I remember that correctly. And we are not disclosing what share of that is now within Germany or in the international business. Because if we were to do that in the end, we would sort of give -- I think we are giving quite some insights, but we don't -- also in the past, haven't given the further drill down into the subsegments. Wierzbicka Serwinowska: So you can't disclose the allowed return, which was baked into Germany in 2030? Nadia Jakobi: So what we are saying is our goal is that we aim to get the same value creation spread the 150 to 200 basis points. And our expectation is that all our Networks businesses live up to that. Iris Eveleigh: Thank you, Nadia. The next question comes from Julius Nickelsen from Bank of America. Julius Nickelsen: Yes, I have 2. And the first one is kind of a follow-up on the timing. So as you mentioned, there is the OpEx adjustment factor and then there's the gas draft determination. But let's assume those come out and the outcome is favorable. Is there scope to already do like a CMD or so after the summer to raise the CapEx? Or do we have to wait until basically 1 year, full year '26 until there's another opportunity for you to fully open the CapEx envelope? That's the first question. And then the second one is maybe a little bit cheeky, but if in your absolute bull case scenario, if regulation comes out, how you like and you can raise the CapEx, do you feel comfortable to give any kind of indication where EPS in 2030 might land in that scenario? That would be quite useful. Leonhard Birnbaum: Yes. So you rightly pointed out that timing is, let me call it a bit path dependent. And I would, at this point in time, not like to now say it's like let's revisit on the whatever day X in months Y because then we think the timing is too unclear. I would say the following. If we only get good news, then we will react to that. If we only get bad news, then we will react later to that. So sincerely, I can't give you a specific timing right now. This is in the hands of the regulator who now needs to first give us additional information so that we have something additional to say. And on the bull, I don't want to speculate now on bull, because I think we have given you a guidance what we expect. If -- and if the word would be a paradise, I would try to figure out what makes sense for my customers because then I would know that if I do something which is beneficial for my customers, it will be honored that I have done it. If I do something which is stupid for my customers just because I got a lucky strike somewhere, this will come back at me. So we more have a perspective to do. We do what is needed, and we are confident that the regulation will be good enough. We don't bank on bull's cases. Nadia Jakobi: Yes. Maybe adding to that, we have deliberately chosen that we just keep our annual run rate of CapEx at this level overall, E.ON, approximately EUR 10 billion from 2027 onwards because we have got very positive signs from politics, from what is needed from macroeconomic, also what regulator has been saying that he appreciates that there are higher returns and higher revenues needed, but then we haven't seen anything black on white. And that's why we neither increased our run rate nor decreased our run rate. And you need to bear with us, of course, as we don't know anything more, what we also said in Q3 that we would have hoped, we would know more by this time, but we don't. We cannot also now not guide for a specific EPS increase. On top of what we -- we would say we've already demonstrated, of course, quite a significant EPS increase with a very attractive 6% CAGR up til 2030. Iris Eveleigh: And the next question comes from Alberto from Goldman. Alberto Gandolfi: I think you already provided quite a good picture, so I'll avoid talking about returns. But I wanted to ask you one point on the assumption of the power networks, which is maybe 2 parts. The first part is, can we get a feel for how saturated is the German network? We are hearing that network is at capacity around Frankfurt. You're talking about all this gigawatt of data center demand. So do we know with this investment plan, what is the saturation level today? Is it running at 90%, 95% capacity? What will it be in 2030? And as a second part on the assumption, would you be able to tell us of the CapEx upgrade you presented today, how much is perimeter, how much is equipment cost inflation and how you think about that? And the second question is actually totally different. Your supply... Iris Eveleigh: I would say it's the third one. Alberto Gandolfi: Should I stop here, Iris? I will face the police. Iris Eveleigh: No, no, no. Alberto Gandolfi: Sorry. Sorry. Sorry. I will not do follow-ups. So in terms of cost savings, your supply retail business was originally created as a people business, but we are seeing companies putting out there recently big cost savings program, AI-driven facilities and software, natural attrition. So I wonder, is this target including a significant cost reduction effort? I noticed in your guidance, your holding costs are going down quite a bit, but I suspect there's much more to go. Am I right? Leonhard Birnbaum: Okay. Since the second question was the third one, I'll give a very short answer. Cost reductions are baked in. But I'm sure we will actually see much more opportunities for much further cost reductions, which we might not have baked in. But on the other side, we will see also pressure, which we might not have baked in. So in that sense, AI will change, will clearly change the retail business. But I think that's maybe a good point to make. It's like your colleagues came up with the Halo suggestion. I really think that the advantage which we have in the majority of our business in the ICE and energy networks is actually that we can't really be disintermediated because the disintermediation of the physical grid doesn't work because it's a physical grid in the end. So AI will completely change. Also ICE business will completely change Networks business, the way we run our processes, but it will not disintermediate us. So that's maybe a nice point to make here. Now on the add capacity, I think overall, we are in a better situation in Germany than a number of other markets, which we observe across Europe. We have taken note of the load, for example, in the Netherlands or we have taken note of what Endesa presented yesterday or what we have seen in the U.K. I think we are not there yet. But it's clear, whilst we had massive bottlenecks on the TSO level in the past, these bottlenecks are trickling down into the -- from the extremely high voltage into the high voltage and where we have solar also in medium voltage, not yet on a kind of like complete level as in other markets, as I just mentioned. Now 2 comments. I think we can't give a general statement. It really depends on the region. For example, in Eastern Germany, where we have massive additions of renewables, we are in many places, clearly at capacity already. In others, this is different. So we have to look at it on a regional basis. That is number one. Number two, it will depend massively on the upgrade, the revision of the grid connection regime, which is under current -- under discussion right now in Germany. I would say if the proposals which are on the table right now for a new grid connection regime, use it or lose it, something else than a first come, first serve, if that materializes, we can achieve much more with the same capacity. Whilst if we do not change the current picture, then I would think that the grid would run to full usage -- to being fully blocked very fast because we have, let's say, a speculative run for connections. So it depends a little bit on the political debate. And on the inflation and growth, we are continuously looking at that. I'm not sure, did we do in the context of the budgeting a new exercise then? Or is it still the 1/3 or whatever inflation that we... Nadia Jakobi: I think there was more that what we communicated like 1.5 to 2 years ago, when we look now at the higher level, we say from this level that we have been communicating our price inflation is at this point, moderate and it's primarily volume growth. But we, of course, as Leo has said, we have seen a step change of higher inflation when we last spoke about that. Iris Eveleigh: Thank you, Nadia. With that, we come to the next question. Thank you, Alberto. The next question comes from Pavan from JPMorgan. Pavan Mahbubani: I have 2, please. So firstly, and it's following up from Julius' question, Leo, but maybe in a different frame. Can you give us an indication of the quantum of which you think you can accelerate the CapEx to 2030? And should we be taking the EUR 5 billion to EUR 10 billion headroom as an indication of the upside you can see there? That's my first question. And secondly, related to that, are you able to talk about or give investors comfort on your readiness, as you mentioned in your opening remarks, to accelerate on CapEx? Do you already have the supply chain capacity that you need, your workforce? I appreciate the acceleration is not coming today, but given it's a big focus, I would appreciate some color around that. Leonhard Birnbaum: Okay. So I'll take the second one, and then Nadia will follow up on what you said in your speech on the additional quantum. So I would say, first, E.ON, we have put in the last 5 years, a big focus on operational excellence. I tried to say that in the speech. So -- and we are -- we have been building up a workforce. Again, in the last year, we had a net increase of the workforce. So we have built up in the networks around 7,000 additional people over the last years. So we have the workforce, number one. Number two is we have the supply chain contracts for the critical equipment. I cannot exclude that we will have a bottleneck here or there. But I think actually, overall, for the critical components, switchgear equipment, power electronics, transformers, cables, we are actually well set up. So we should be able to manage that. On the permitting side, we would need faster permitting that would be -- but we are -- actually, we are set up for the 8-year processes. If we would get an acceleration, we should have absolutely no problem there as well. And on the digitization side, I think we have now pushed the envelope really with the transformation programs that we have done. By the way, the last point is the one where I usually never get a question is the one that I find personally the most challenging one to deliver large-scale IT transformations at -- on time, on budget. So having said that, with the confidence that I have is we have achieved it year-over-year over the last 5 years. We have always achieved what we said that we would do with a few small exceptions from which we have learned. This year, we have achieved every single operational target that we have set for ourselves. I have absolutely no reason to believe that my organization would not be able to repeat that going forward also with a higher volume. But again, it doesn't come by itself. It's the result of very hard work on all of these topics. I hope that gives you enough color. We can obviously detail that in more afterwards. So Nadia on... Nadia Jakobi: Yes. So regarding the potential for additional CapEx. So when you look at total envelope being like easy to remember, EUR 10 billion per annum overall E.ON CapEx, out of that, approximately EUR 6.3 billion is for Energy Networks Germany. Out of that, approximately EUR 5.3 billion is dedicated to WAP effective -- power RAB effective Germany. So if you then take the EUR 4.3 billion, we would have an additional EUR 1.5 billion to EUR 2 billion per annum, where we could invest more at the -- in the outer years when we look at our network build-out plan that we did in 2024. Of course, these network build-out plans are, of course, also -- we will have -- we see no new network build-out plans, but the data that we've got compared to this network build-out plan that was issued in 2024, that would be this EUR 1.5 billion to EUR 2 billion more in CapEx from -- in the outer years. Leonhard Birnbaum: So operationally, we can. And financially, it depends on regulation. Iris Eveleigh: Thank you, Pavan. With that, next question comes from Harry. Harry Wyburd: This is Harry Wyburd from BNPP Exane. So 2 ones for me. So first, can we focus a bit on this grid connection regime reform because it's actually quite significant and it's actually hit seemingly quite a lot of resistance from certain political parties and lobbies. So if you -- maybe you could just remind us a little bit for those who aren't familiar, what has been proposed here and sort of locational reform and so on. How do you think that's going to end? And is that actually going to impact you because it could theoretically shift around where you're investing? And is that something that feeds into your CapEx deployment or operations and so on? And then the other one is on affordability. So we've had all these headlines on carbon, all these headlines on EU power market reform. I guess you're, in some ways, a sort of neutral observer here given you're not exposed explicitly to power prices. So I value your independent view on how you think this is going to end. So do you think we are going to get power market reform. Is that going to cut baseload power prices in Europe? And do you see this as something that's actually relevant for you if we end up with lower electricity prices via regulatory change and that triggers higher power demand? Leonhard Birnbaum: Harry, good seeing you. Two tricky questions as a price for seeing you. Now on the grid connection regime, first, let me just repeat. What we're currently seeing in terms of request is completely unsustainable. There's no question. We are seeing connection requests at E.ON only, we actually published those numbers, 500 gigawatts for batteries, 70 gigawatts for data centers. It's just absolutely unfeasible that we can deliver on that. Even what we only agreed to deliver is already stretching the limits in the envelope massively, 12 gigawatts on batteries, 16 gigawatts on data center or the other way around, I always mix, that doesn't matter. 28 gigawatts data centers plus batteries in 2025 only, plus 20 gigawatts, nearly 20 gigawatts in renewables. So there is a limit for that. Now what we are seeing is, we clearly see that there is speculation for grid connection because grid connection is scarce, so it must have a value. If I can secure it, then I have something which I can sell expensively. And since we have the first come first serve and no use it or lose it, actually, this is pretty cheap speculation. And therefore, I think something needs to happen. So this grid package, I think, is just a reaction to an absolute unsustainable situation that needs to be changed. Now for us as E.ON, it's like don't we -- I mean, it's like if we don't change it, we have to invest like hell and if we change it, we have to invest like hell. So it doesn't really make a difference. But it makes a difference whether we can actually connect customers. And what I'm really afraid of, if you ask me what's the biggest impact of E.ON is that the biggest impact on us would be if we don't get changes and we need to tell consumers that we can't connect them because the grid is full with solar farms, which we have to redispatch. That would make no sense. And that would be then very detrimental for our perception. So this is what I -- so I'm not concerned financially because I mean it's like the CapEx opportunity is just too big. But I'm concerned that we don't do an efficient energy transition and then we get an affordability backlash at the whole energy transition. So that's the point that I would really like to make here. Now what is materially in the package? I think you can differentiate 3 buckets of discussion. One bucket is, should we philosophically change the approach, not the first come, first serve, not -- should we introduce something like use it or lose it. And I think there is broad consensus that something needs to change in that direction. That's not contentious. Then the second one is we have many innovations that we could do to just be more efficient in how we connect, for example, renewables. We have technical innovation. That's not contentious either. It depends what the regulation we do, et cetera. For example, do we get combined connections between solar and PV? Do we -- your 100 megawatt of PV, do you always get your peak or you get 97%. So there are technical details. And then there's a third one, which I would call how do we achieve locational signals so that the expansion of the feed-in happens not in grid-constrained areas. That's one really contentious point because obviously, the renewable players, especially renewable players here have a big interest in getting only locational signals that they can calculate and which don't bite them too hard. But if they don't bite, as we say in Germany, then they are meaningless. So -- and that is now depending on the details. If you ask me what's going to happen, I think bucket #1 is going to change. Bucket #2 is going to change. Bucket #3 is something is going to happen. Whether it's going to be enough, we will see from the discussion. But I think it's absolutely the right discussion that we are having at this point in time. Now on the switch, that was regulation on grids. Now on the wholesale power, we obviously have looked -- I have also looked with interest at what was proposed in Italy or what will happen now in Italy. So I'm certainly not the best experts to talk about that. But actually, I would say it's not an economic consideration which has taken place. This is a political -- these are political actions. You are trying to achieve somehow a politically -- a target which you see necessary politically and then you just taking whatever tool works. I personally think that marginal pricing and the pricing is coming from that will be needed, but the position is weak because we know that if we go to 300 gigawatts of renewables in Germany, marginal pricing won't be the one that is going to incentivize investments anyway. So there will be -- there will need to be a change in the power market design. But what we see here is not building something which is sustainable in 2050 in a 100% renewable world. What we're saying here is a political intervention to achieve a political goal. Whether this is done efficient? I think the only debate that you can have is, is this more or less efficiently, but I think it's inevitable that we will see this more and more. Personally, I think the discussion will never go away on market design. But luckily, I'm not in this commodity volatile business on the generation side. For me, regulation on the grid side is already enough. Iris Eveleigh: Okay. Thank you, Leo. With that, next question comes from Deepa from Bernstein. Deepa Venkateswaran: So I had 2 questions. One on the data center opportunity. Can you quantify how much of the EUR 40 billion network CapEx is for connecting data centers? Just trying to get a feeling for how meaningful it is or it is not? So that's the first question. And secondly, maybe moving away from Networks. Your Customer Solutions business, you've had ambitions to improve your revenues from selling solar panels, batteries, maybe exploiting flexibility. I wanted to check how that development is going. Are you seeing the necessary uptake from consumers for these low-carbon solutions? Is it ahead of plan, in line? Just directionally, how is that going? I know it's a much smaller part, but obviously, you are projecting earnings growth in that business to 2030, and I'm assuming that this would be a part of that. So those are my 2 questions. Leonhard Birnbaum: I cannot quantify, maybe Nadia can, but I can't quantify how much of the EUR 40 billion is data centers. But I would say there is a remarkable difference between the data center boom in the U.S. and in Europe. So in our case, the infrastructure growth is really driven by multiple simultaneous factors that we're seeing, truckloading, data centers, renewable connections, heat electrification. So the growth trend is extreme -- or batteries and so on. So the growth trend is extremely robust. because it's driven by multiple factors. And we have not quantified how much of the million goes into batteries, into data centers and into renewables. I think the situation is different in the U.S. where data centers -- in some parts, at least must be the overwhelming driver. So sorry for that. On the Customer Solutions side, I think I can answer it. So yes, we have combined the flex, let me call it, non-commodity retail products that you alluded to. They're part of our retail business -- customer solutions business, I would say. We are seeing a tick up. We are seeing a nice tick up. It's number-wise irrelevant. You said that yourself rightly so. And we would like to see even more aggressive tick up operationally. There, we are actually readjusting every month, so to say. But it's moving. Iris Eveleigh: Thank you, Leo. With that, we move to -- we still have quite a few hands up. Maybe if someone just has one question so to get everyone the chance to actually still ask the question. Louis from ODDO is the next. Louis Boujard: Actually, the second one will be very fast. So I think it's going to be okay. So the first one, regarding the capital allocation, I was wondering, in case it's not going exactly in the right direction for you regarding the CapEx expansion, do you have any leeway in your capital allocation to eventually adjust and increase your CapEx envelope in the other geographies? Or eventually, would you consider higher payout or share buyback program in order to allocate maybe better your current financing capacities? That would be my first question. How would you do in a worst-case scenario? And the second question, which is quite fast, I guess, is regarding the underlying assumptions that you could have taken in your cost of debt by 2030. When I look at your guidance for the EPS, the EPS does not look highly demanding considering the EBITDA. So I was wondering if you were taking into consideration some increasing interest cost of debt in your assumptions for 2030. Leonhard Birnbaum: I take the first one. So we have a clear plan A, and we are pursuing this plan A. I don't want to speculate on a plan B. Nadia Jakobi: And as you know from us, we are always committed to value creation and to balance sheet efficiency. Leonhard Birnbaum: So I'm sorry, that sounds like now we don't want to treat you badly, but it's really as short and crisp. Nadia Jakobi: So the second one was cost of debt or sort of why we didn't increase the dividend? Leonhard Birnbaum: Cost of debt. Iris Eveleigh: Cost of debt assumptions, higher interest. Nadia Jakobi: Yes. On the cost of debt, we have -- when you look at -- we have been just issuing some of our new bonds at the beginning of the year. And when you look at that, we had an 8-year bond, we had a 12-year bond. And if you combine the 2, they were of an average of 3.7%, that is sort of actual numbers we had. I don't know, I think, 95 basis points credit spread on the 12-year duration bond, that is sort of one sign of guidance that I can give to you that also, I think we are communicating later in our pack some of the maturing bonds. So it's fair to say, as you would anticipate that some of the very low interest bonds are maturing up until 2030 and that need to be then refinanced at these levels that we have been seeing now in January this year. And that is also, as we have been highlighting, when you are confronted with a cost of debt for existing assets, which is just backward-looking 7 years and includes the low interest years, then of course, you cannot assume that you can still refinance at these low levels because everybody of us would love to still do the -- buy a house and finance it on the terms of 2020. Unfortunately, that's not possible. So I think that's kind of the indication that I can give to you. Iris Eveleigh: Thank you, Louis. And with that, we move on to Rob from Morgan Stanley. Robert Pulleyn: I have one question. We've spoken a lot about the regulatory terms to increase CapEx and guidance. But could we just dive into specifically which areas are you looking for from the regulator to improve versus the rest of draft materials we got towards the end of last year? Nadia Jakobi: I think, Rob, there is something -- one of that is what we have just discussed, i.e., being the cost of debt, both the level and also the fact that there is no mark-to-market for the cost of debt on all those assets that are built up until end of 2026. That's something where you cannot refinance at the levels in the market even as we do it in a very proficient way. Second one, I think we also debated that in this round when it comes to cost of equity, there is just some high-level explanations. We don't have clarity yet. Also this look-back period for the risk-free rate is important. MRP, even if we are going to a higher level, where we appreciate the arithmetic mean you can see that the market clearly demands an MRP of 6% plus. And there, we are still quite a gap apart. And then there are quite some other elements also regarding the benchmarking that are open and as Leo has just said, so far, we only know that there will be an OpEx adjustment factor, but that's about it. There hasn't been any specification how that's going to work. In principle, this is something that we clearly value and we are welcoming that this has been appreciated that when you grow your CapEx, you also, of course, will grow your OpEx. But so far, we don't know which kind of magnitude this is going to have. Iris Eveleigh: Thank you, Nadia. With that, we move on, thank you, Rob, to James from Deutsche Bank. James Brand: I've got one -- kind of one straight two questions. One question and clarification. So the question is on the benchmarking actually, the efficiency assessment. I think you talked about in the past as being quite tough or certainly getting tougher than it has been in the past, but then we had some new proposals come out before Christmas. So I was wondering whether you could just give us an update on whether the proposals there have moved in a more positive direction or whether you still think they're very challenging. And then the clarification is just on the timing. So obviously, we've got the paper on the OpEx adjustment factor and then the determination of the cost of capital for the gas networks. I think you mentioned you'd have visibility in the next month. Was that for both of those or just for the OpEx adjustment factor? Because I think the paper on the OpEx adjustment factor is due fairly soon, but it was less clear when the cost cuts of gas was due. Leonhard Birnbaum: So I'm always careful to say it will come out in March because my experience is then it turns out April, and I need to explain all the time where it was in March. So I would say OpEx adjustment factor first half, the gas side, second half of the year. So -- and rather go to the back end and be surprised if it happens earlier. So that on the timing. Second, in the final papers, there were no real substantial improvements. Therefore, the criticism on the benchmarking is still very clear. We actually have seen that it will be harder to achieve top efficiency, which is okay. That's fine. That's the challenge that the regulator should put in front of us. But we have still seen that redispatching costs are included in the operational benchmarking as influenceable cost. And since when it -- I mean, clear, 90% of the redispatching costs are with the TSOs, but out of the 10%, which are with the DSOs, we at E.ON get 90%. Why? Because we are the rural guys, which are connecting the renewables and basically putting redispatching into the picture just punishes exclusively E.ON, which has done the most investments, kind of like to achieve an energy transition. I repeat my word, 1/3 of the networks, 70% of the wind, 50% of solar, and then we get redispatch -- and then no agreement on localization signals and then we get the redispatching cost allocated on top of us. Still the same criticism. Really no changes in the final paper versus what we explained to you in the second half of last year. Iris Eveleigh: Thank you, James. And with that, we move to the 2 last questions, while the first one comes then from Ahmed from Jefferies and then Piotr from Citi. We'll then close the call. Ahmed Farman: I guess just a very quick follow-up question. You just mentioned -- gave us some sort of time lines, right? You said the OpEx adjustment factor and I think it's the draft for the gas distribution that you mentioned. Are there any other data points or milestones that are required from your side to get the clarity? Or are these the 2 critical data points? I just want to make sure sort of just for completeness that if there is a full -- there are other elements as well that we are just aware of what other regulatory updates are required. So that's my first question. My second question is on retail. This is a follow-up to an earlier question. So retail, if I look at the last couple of years of results, it sort of hasn't really delivered much growth, and you are guiding to growth going forward. I just wondered if you would explain a little bit -- you already talked a little bit about the drivers, but a more profile of this growth as to where the growth will come through. Obviously, you're sort of talking about a sort of flattish profile to 2026. But do we expect to see this growth profile already in '27? Or is this more back-end loaded? Leonhard Birnbaum: Yes, I'll take the timing question. So I understand from all of your questions that you would ideally want us to give a precise time line when is what materializing so that we can give you a further update. But -- I mean, this is really where I would need to say you need to raise those desires somewhere else, I'm afraid. I can only repeat what I just said. It depends a little bit what information we got. Look, last year, I told you, I am confident about the outcome because I still believe that if something needs to happen, eventually, it happens because the alternative is just unattractive. So I truly believe we are going to get a regulation which is sufficient to make the necessary investments because the investments are good for Germany, good for our customers. But having said that, it's kind of like I did not get anything positive last year that actually really helped me to say, I -- now look at this. This is why I'm right to believe that. Now if the next news that come out would clearly show in the direction that, let me say, a basic optimism is okay, then I can be bolder going forward and say, look, this works out, it will come to the right result. Let's make a judgment call. But if the same thing happens this year that happened last year that I get negatively surprised, like, for example, by this redispatching cost, which you all know annoyed me like hell, if something like that happens again or if whatever details come out on the OpEx adjustment factor make it irrelevant, then it's kind of like then I don't have something. So it's a bit past dependent. But clearly, like the people who can influence that time line are less us, I'm afraid. We can only do operational great work and show that what we are doing is beneficial for our customers and then expect that others will honor that. Nadia Jakobi: Yes. So coming to your energy retail question. So when you refer back in the past years, there were past years also from the energy crisis where we took on a lot of risk when it comes to revenues. So we had high prices. And now we have seen some normalization. We have still stuck to our 3% to 5% B2C margins. But of course, when you had a far higher revenue level, then that sort of meant that the absolute amounts reduced. So that's basically the reduction that you have been seeing coming from -- when you take sort of 2022 and '23 as a basis here. When you sort of go further back into the year 2020 or '21, you see that we've actually seen some significant increase also in our energy retail business. Second, I guess you are less interested in the past, but more into the future. We're very much aware that we are projecting stable EBITDA from 2025 to 2026. There's one technical effect in there, i.e., we are deconsolidating one of our entities and the equity contribution to that is then because of the joined up grid and retail business, that's now portrayed in the grid business, but going from EBITDA to only a net equity contribution. And then the second one, so we see some operational growth, but it's fair to say that some of the digital foundations that we need for future flexibility products and the ramp-up that we are seeing will be also late in 2026. And then when it comes to how near term the progression is, I think we have been guiding to an energy retail business in 2028. And then we see some further increase in 2030. So as you say, first stable, laying the foundations, and then we would expect to see some increases in 2027 going forward. Iris Eveleigh: And with that, we come to Piotr with the very last question then for today. And obviously, we're happy on the IR side to follow up on any further questions that you might have. Piotr? Piotr Dzieciolowski: I have just one big picture question to Leo actually about -- how do you think about the grid fee structures going forward in the context of affordability and the need of CapEx, in a sense that a lot of the growth comes from the data centers and therefore, the cost when it goes into the RAB, the connection it's being socialized and therefore, all of the consumers have to pay for it. Likewise, there are a lot of consumers that really have a lot of self-consumption and also pay less than for the infrastructure. How do you think -- in the context of affordability, would charging for infrastructure differentiated prices to different consumers would not be a solution? And likewise, when you think about the investments, there are certain investments like releasing redispatch costs and so on. So what is the return on the investments from the consumer perspective on this extra EUR 5 billion to EUR 10 billion CapEx that you propose to the regulator? Because if it's about the data center connection, I agree why the regulator may not be willing to give you the higher rate. But if it's about really saving cost for consumers, then he should be more than willing to spend -- for you to spend this money. Leonhard Birnbaum: Yes. I think actually, there is a misperception on the impact that data centers have on consumers. If -- now we take the German example and then we -- like in Germany, you have actually -- you pay grid fees and you can pay a lump sum for your connection... Nadia Jakobi: Construction grant. Leonhard Birnbaum: Construction grants. That's the word, okay. So you have construction grants and grid fees. Now data centers, the overarching target is to get fast access. So they are perfectly fine to pay high construction grants. That's number one, which means actually that the cost really socialized in the grid fees are not that big. Second is they are actually pretty big consumers. And we have energy-related and capacity related, I mean, fees in Germany. So what happens actually if a data center gets added into your DSO area, you as a consumer, a B2C customer, you see lower grid fees because then the same -- basically the same cost base is spread on a larger volume. So -- and that's actually the whole way how the energy transition can work. We need to increase electricity volumes so that we can allocate the higher cost base on a higher volume basis. And so specific costs stay constant or even decline. So data centers in a DSO area reduce the grid fees. Now on the generation side, they need additional power stations. That's what's being discussed in the U.S. right now. Obviously, if you have like in Tennessee, a 5 gigawatt, whatever data center, you don't want to put that into the rate base and then have the consumers pay for the 5 gigawatts of additional generation capacity. But if the data center comes with its own PPAs and new assets, then it's actually fine. So in our case, data centers in Germany would reduce the grid fees and actually would be beneficial. Now on the wholesale market side, they would need -- they would require more baseload capacity probably, which is why we think generation capacity needs to be added. But so for us, data centers are beneficial for us at E.ON, data centers are beneficial from an affordability standpoint. They make our life easier. Iris Eveleigh: Thank you, Leo. Thank you, Piotr. With that, we come to an end. Thank you all very much for participating and the interest in E.ON. And if there's anything else you would like to discuss, the IR team is happy to follow up with you. Thank you, Leo and Nadia. With that, I close the call for our full year '25 presentation. Take care. Bye-bye. Leonhard Birnbaum: Thank you. Nadia Jakobi: Bye-bye.

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SWX 2025 Q4 财报电话会议

Operator: Welcome to the Southwest Gas Holdings Fourth Quarter and Full Year 2025 Earnings Conference Call. Today's call is being recorded, and our webcast is live. A replay will be available later today and for the next 12 months on the Southwest Gas Holdings website. [Operator Instructions] I will now turn the call over to Tyler Franik Manager of Investor Relations of Southwest Gas Holdings. Unknown Executive: Thank you, John, and hello, everyone. We appreciate you joining the call today. This morning, we issued and posted to Southwest Gas Holdings website our Fourth Quarter and Full Year 2025 earnings release and filed the associated Form 10-K. The slides accompanying today's call are also available on Southwest Gas Holdings website. We'll refer to those slides by number throughout the call today. Please note that on today's call, we will address certain factors that may impact 2026 earnings and discuss longer-term guidance. Information that will be discussed today contains forward-looking statements. These statements are based on management's assumptions on what the future holds but are subject to several risks and uncertainties, including uncertainties surrounding the impacts of future economic conditions, regulatory approvals and a significant capital project at Great Basin Gas Transmission Company. This cautionary note as well as a note regarding non-GAAP measures is included on Slides 2 and 3 of this presentation, in today's press release and in our filings with the Securities and Exchange Commission, all of which we encourage you to review. These risks and uncertainties may cause actual results to differ materially from statements made today. We caution against placing undue reliance on any forward-looking statements, and we assume no obligation to update any such statement. As shown on Slide 4, on today's call, we have Karen Haller, President and CEO of Southwest Gas Holdings; Justin Forsberg, Chief Financial Officer and Treasurer of Southwest Gas Holdings; and Justin Brown, President of Southwest Gas Corporation as well as other members of the management team available to answer your questions during the Q&A portion of the call today. I will now turn the call over to Karen. Karen Haller: Thanks, Tyler. Good morning, everyone, and thank you for joining us today. Last year, we turned the page on our transformational strategy with the successful disposition of Centuri in September. The important milestone that completed our transition to a fully regulated natural gas business. This strategic step enabled us to fully pay down the remaining holding company debt strengthened our balance sheet and unlocked meaningful capital to reinvest in our core operations. With our focus now fully centered on our regulated natural gas business, we are approaching 2026 with a stronger foundation and greater flexibility to execute on our strategic priorities and the opportunities ahead. As a result of our full separation of Centuri, termination of the [ Icahn ] Cooperation agreement and strong strategic position, I determined that after nearly 3 decades with the company, it is the right time for me to retire. One of the most significant responsibilities of the CEO and Board of Directors is to plan for the CEO succession. The Board was prepared for this milestone and appointed Justin Brown, a Southwest Gas' next CEO effective May 8. As President of our Utility Operations over the last few years, Justin has played a critical role in executing on our strategy and positioning the company for future success. He has a proven track record leading our utility operations, and the Board has full confidence in him as Southwest Gas' next Chief Executive Officer. Justin and I have worked closely together for many years, and I'm confident that he is the right leader to guide the company in its next phase. I will remain involved as an adviser to the company through the end of this year to ensure a smooth transition. With that, let's turn to Slide 5. In 2025, we delivered strong financial performance with Southwest Gas adjusted net income finishing above the top end of our previously stated guidance range. This performance drove Southwest Gas adjusted return on equity to 8.3% for the year and was supported by our ongoing utility optimization efforts, effective cost management and constructive regulatory outcomes. Together, these results demonstrate the strength of our regulated business and our commitment to driving consistent, sustainable value for our customers and shareholders. We also remain optimistic about the future as we introduce 2026 and long-term guidance ranges, which we will cover in more detail later. We are initiating a $4.17 to $4.32 per share, 2026 adjusted earnings per share guidance range from continuing operations. We expect to see significant earnings per share growth of 12% to 14% from 2025 to 2030, driven by anticipated improvements in our regulatory environment with the inclusion of Arizona's formula rates and alternative ratemaking in Nevada, along with the opportunity we project to materialize at Great basin in Northern Nevada. Because of these opportunities, this growth is expected to be front-end loaded over the first 3 years. So we expect the earnings growth rate to be even higher through 2028 to 2029. And Jay Forsberg will walk you through the guidance in a few minutes. As we move to 2026, our strategy is anchored in operational excellence, financial discipline and regulatory progress. The work we accomplished in 2025 positioned us to focus on the priorities that we believe matter most in the year ahead, continuing to improve returns, advancing customer-focused investments, strengthening our regulatory frameworks and capturing growth opportunities across the service territories. Of note, we were pleased to announce earlier today that the Board of Directors approved a 4% increase in our annual dividend, beginning with the second quarter 2026 payout. We intend to maintain a disciplined strategy focused on investing in the company's capital plans, while sustaining responsible annual dividend growth. On the next slide, I will outline the key priorities that will guide our efforts throughout 2026. As you can see on Slide 6, we achieved a lot in 2025 with an active regulatory calendar, the introduction of and progress made on the 2028 great Basin expansion project, the completion of our financing plan and of course, the simplification of our business model through the full separation of Centuri. We are initiating our 2026 strategic priorities for the first time in decades as a fully regulated natural gas business. We are excited to direct our attention entirely to executing our regulatory strategy, achieving the next steps of the Great Basin project and preserving our balance sheet strength by implementing our 2026 financing plan. On Slide 7, I'd like to highlight that following the completion of our Centuri disposition, S&P upgraded Southwest Gas Holdings issuer and Southwest Gas Corporation's senior unsecured long-term debt credit ratings each to BBB+ with stable outlooks. This enhanced corporate risk profile further demonstrates the positive impact of our simplification strategy. As of the end of 2025, our cash balance was nearly $600 million, which we expect to utilize to fully fund current year dividend payments and to redeploy during 2026 into the utility business, and we have more than $1.3 billion of liquidity across the business, which enabled us to make strategic investments that are expected to generate stable, long-term returns. I'd also like to highlight the utility's substantial net income growth, which was primarily driven by positive regulatory outcomes and strong economic activity in our service area and further enhanced by cost optimization efforts. We are enthusiastic about the company's future, and we are confident in the promising opportunities ahead. With that, I'll turn the call over to Justin for a regulatory and economic update. Justin Brown: Thank you, Karen, for your generous words. And more importantly, thank you for your leadership and contributions to Southwest Gas over the past 29 years. I'm grateful for both our friendship and your continued partnership during this transition. It is both an honor and a responsibility to step into this role. I'm energized by the opportunity ahead and I look forward to continuing to work alongside our extraordinary team as we strive each day to exceed the expectations of our customers and our regulators and delivering safe, reliable and affordable natural gas service. . We have a strong foundation, a clear strategy and the right team to deliver. I'm confident in our ability to execute our plan with discipline and create long-term value for our stockholders. While simultaneously driving meaningful outcomes for all our stakeholders. Let me begin my portion of the presentation by turning your attention to Slide 9, where I'd like to begin with key regulatory developments in both Nevada and Arizona, as we prepare to file rate cases and what we anticipate will be catalysts for better aligning capital recovery with our investments, thereby improving long-term earnings visibility. In Arizona, we anticipate filing our rate case this week with new rates next year, and we plan to file our Nevada rate case next month and under the statutory 210-day process, new rates would become effective in the fourth quarter of this year. Importantly, both states now allow for potential alternative ratemaking adjustments following approval of a general rate case. While any mechanism remains subject to regulatory approval, we view these frameworks as constructive steps toward reducing regulatory lag and better aligning capital recovery. This slide provides a potential time line for how our alternative ratemaking opportunities in Nevada and Arizona could develop over the next few years, and we remain confident in our ability to work collaboratively with all stakeholders on meeting these milestones. While any mechanism remains subject to regulatory approval, we view these developments as constructive steps toward reducing regulatory lag and enhancing capital recovery alignment. In Nevada, Senate Bill 417 signed into law in June of 2025 by Governor Joe Lombardo authorizes alternative rate-making plants. The Public Utilities Commission of Nevada has continued its rule-making workshops to implement the legislation with recent sessions focused on draft policy language and stakeholder consensus. We are encouraged by the progress, and we continue to work collaboratively with all stakeholders. We currently expect the rulemaking to conclude in the coming months, which could allow alternative ratemaking adjustments to begin as early as 2028. In Arizona, the Arizona Corporation Commission adopted a policy statement in December of 2024, signaling their openness to having regulated utilities, proposed formula rate plans as part of future rate cases and the commission recently approved its first formula rate plan last week. We have developed a formula rate plan that will be included in our rate case filing, which I will discuss in more detail on the next slide. Overall, we believe these regulatory developments represent meaningful progress toward a modernized regulatory construct in both jurisdictions. Turning to Slide 10. As mentioned, we expect to file our Arizona rate case this week with rates anticipated to become effective in April of next year. Key elements of our filing include a revenue increase of over $100 million with a proposed rate base of $3.9 billion and a requested ROE of 10.25% plus a fair value return on rate base of 20 basis points relative to our equity ratio of approximately 50%. This case is primarily driven by the need to start recovering on the nearly $900 million in capital investments we've made for the benefit of our Arizona customers to ensure safe and reliable natural gas service. These investments result in a proposed increase in rate base of roughly $700 million, including post test year adjustments of approximately $360 million through November of 2026. As I mentioned previously, we will also be including a formula rate adjustment proposal. The proposal resembles the guidelines established in the commission's policy statement as well as some of the other recent utility proposals currently pending in front of the commission, including the mechanism the commission approved last week. We are looking forward to working with all stakeholders to effectuate a constructive outcome that minimizes bill impacts to customers and allows us to more timely recover our capital investments. On average, the proposed revenue increase in our case, translates to an expected bill impact of approximately $5 per month for our residential customers. We believe our proposal reflects a balanced approach that enhances safety and infrastructure reliability while maintaining customer affordability and as always, the outcome remains subject to commission review and approval. Moving to Slide 11. We are initiating 2026 as long-term capital guidance, which now incorporates the 2028 Great Basin expansion project. This marks the first time we have included the Great Basin project in our forward outlook, and this represents an important evolution in our capital plan. While our capital plan remains anchored in utility distribution investments, underpinned by our commitment to safety, reliability, system modernization and meeting the needs of our growing customer base, in 2026, we anticipate early stage spending related to -- Great Basin expansion, including engineering, environmental reviews, permitting and other preconstruction activities necessary to support an efficient project time line. Over the next 5 years, we expect to invest approximately $6.3 billion with roughly 73% directed towards Southwest Gas and 27% toward Great Basin. This capital mix positions Great Basin as a growing contributor to the company's growth story and long-term earnings platform. These investments support an expected 5-year rate base CAGR of approximately 9.5% to 11.5%. The inclusion of Great Basin provides incremental upside and diversification beyond our distribution system investments that we believe will maintain a sustainable growth trajectory of nearly 7% over the same period. We believe the combination of our distribution investments, coupled with new opportunities emerging through Great Basin provide a compelling long-term capital framework for the company and offer meaningful earnings and cash flow growth for our investors. Turning to Slide 12. We continue to advance the 2028 Great Basin expansion project and remain on schedule across engineering, regulatory preparation and commercial milestones. In December, we executed binding precedent agreements following a successful open season, resulting in nearly 800 million cubic feet per day of incremental capacity commitments. This supports an estimated $1.7 billion capital investment opportunity and reflects strong market demand for expanded transmission capacity. Upon placing the project in service we estimate incremental annual margin of approximately $215 million to $245 million, representing a significant step-up in our Great Basin earnings profile. We expect to file our formal CPCN application before the end of this year following the completion of our engineering design, environmental and cultural field work. The FERC and NEPA review processes are expected to occur during 2027 with construction to begin following FERC approval and with anticipated in-service date near the end of 2028. We recently achieved an important milestone with prefiling approval from the FERC. The FERC also encouraged evaluation of potential eligibility under Title 41 of the FAST Act, which is designed to streamline federal permitting through enhanced interagency coordination. We are currently assessing that pathway and its potential implications for project timing. As with any large scale infrastructure project, timing remains subject to regulatory approvals, permitting outcomes and supply chain dynamics. That said, we are proactively managing contractor engagement and procurement planning to mitigate execution risk and preserve schedule integrity. Capital deployment will ramp up as we move from engineering and permitting into construction in late 2027 and early 2028. We expect to accrue AFUDC on pre-service capital moderating near-term earnings impacts. From a financing standpoint, we are targeting a balanced 50-50 debt-to-equity structure. Debt is expected to be funded through Southwest Gas bond issuances, while equity requirements will be supported through a combination of holding company leverage capacity and modest equity issuances, including use of our existing ATM program. This approach supports project execution while preserving credit quality and long-term financial flexibility, preserving the strength of our balance sheet. We will continue to provide updates as we achieve key milestones throughout the course of this year. And with that, I'll turn the call over to Jay For who will review our financial performance for the year. Justin Forsberg: Thanks, Justin. Turning to Slide 14. While consolidated GAAP earnings per diluted share for 2025 were $6.08, this included discontinued operations. During the year, the company completed the sale of its remaining shares of Centuri on September 5, 2025, representing a full exit and qualifying Centuri for discontinued operations reporting. The transaction generated a net gain of approximately $260 million, which when combined with the Centuri performance throughout our period of ownership during the year contributed $2.83 per diluted share to consolidated GAAP earnings. . You can refer to Slide 32 in the appendix for a detailed breakdown of consolidated earnings for the year. Here, we present adjusted earnings per share from continuing operations, so you can clearly see the underlying business performance. As shown on the slide, adjusted earnings per diluted share from continuing operations increased nearly 19% from $3.07 in 2024 to $3.65 in 2025 and representing a $0.58 improvement year-over-year. This increase was driven by focused execution in our natural gas distribution business as well as significantly lower financing costs at Holdings. Southwest Gas earnings benefited from rate relief and continued customer growth, contributing approximately $0.30 per share to EPS. These margin benefits were partially offset by increased depreciation and amortization tied to ongoing capital investment, higher interest expense primarily related to regulatory account balances from overcollected purchased gas costs and modestly higher operations and maintenance expense. Lower overall expenses in the holding company were driven by a significant reduction in interest expense following the full repayment of prior holdco debt using proceeds from the Centuri transactions. This payoff was the primary driver of the improvement in earnings shown on the table. Turning to Slide 15. You'll see the year-over-year walk from 2024 to 2025 adjusted net income for Southwest Gas. Adjusted net income increased by 8.7% from $261.2 million in 2024 to $283.9 million in 2025, representing an improvement of nearly $23 million year-over-year. These results were nearly $9 million above the high end of our net income guidance driven largely by higher than forecasted COLI results, higher interest income from elevated cash balances and some delayed in-service dates, which resulted in D&A coming in modestly lower than anticipated. The primary driver of the year-over-year increase was a nearly $120 million improvement in operating margin. This reflects approximately $95.2 million of combined rate relief, primarily from the outcome of our Arizona rate case, $11.5 million of margin from continued customer growth as well as approximately $8 million related to recovery and return mechanisms and $5.9 million from the variable interest expense adjustment mechanism in Nevada associated with the IDRBs. These last 2 margin improvements are each wholly offset within operating income through D&A and interest expense, respectively. O&M increased $16.8 million compared with the prior year. Excluding incentive compensation expense that came in above target, the increase was approximately 1.9% over the prior year. Other drivers included higher employee-related labor costs, higher cloud computing expenses and higher outside services costs. These cost increases were partially offset by reductions in leak survey and line locating expenses. Overall, O&M finished the year close to budget, reflecting our efforts to manage costs while safely and reliably delivering natural gas service to our customers. Depreciation and amortization increased $27.6 million, driven by a 7% increase in average gas plant in service as we continue to invest in pipeline replacement, system reinforcement and new infrastructure for the benefit of customers, along with an approximately $8 million higher amortization related to regulatory account balances that I mentioned being offset in margin a moment ago. Other income declined by a net $1.9 million. Several offsetting items contributed to this decrease with an expected $12.6 million decline in interest income related to carrying charges on deferred PGA balances being the largest. This decline was partially offset by an increase in company-owned life insurance asset values gains on the sale of miscellaneous assets and the timing differences and contributions to the Southwest Gas Foundation compared with 2024. Net interest deductions increased $19.4 million, driven largely by the anticipated interest incurred on overcollected PGA balances and higher variable interest expense adjustment mechanism amount in Nevada associated with IDRBs. As I mentioned a moment ago, the impact of operating margin -- operating income of variable interest associated with the Nevada IDRBs is wholly offset in margin. Taxes other than income taxes made up largely of property taxes increased $5.1 million, while income tax expense was also higher year-over-year due to increased pretax income. You'll note that partially offsetting GAAP net income was a $16.4 million state income tax apportionment benefit associated with certain onetime events, and we have adjusted that income tax benefit for non-GAAP presentation to reflect the true run rate net income at Southwest Gas. In summary, the year-over-year improvement in adjusted net income is a clean, regulated utility story driven by strong operating margin growth from rate relief and customer additions, partially offset by modestly higher O&M and by higher D&A, interest expense and the impact of taxes. Moving on to Slide 16. We outline our expected near-term financing plan, which reflects disciplined funding supported by a strong liquidity position. We entered 2026 with a significant beginning consolidated cash balance of nearly $600 million, largely representing the remaining proceeds from the Centuri separation completed in September 2025 after having utilized a portion of those excess proceeds to pay dividends to stockholders during the second half of 2025. The liquidity at the holdco provides meaningful financial flexibility as we execute our capital program and we plan to fully fund stockholder dividends in 2026 using that holding company cash while also planning to infuse nearly the same amount of equity into Southwest Gas to fund our 2026 capital plan. The execution of this plan is projected to result in a nominal amount of cash on hand at Southwest Gas Holdings at year-end 2026. During 2026, we expect approximately $325 million of net Southwest Gas bond issuances, along with modest revolver usage to the operating company. Importantly, we do not anticipate any equity issuance needs during the year under the existing ATM program. Across the company, our $1.25 billion capital plan is the primary use of funds. This investment includes approximately $925 million of natural gas distribution system infrastructure expenditures with the balance of the plan supporting our planned 2028 Great Basin expansion project. Overall, our 2026 plan reflects balanced funding, strong internal cash generation, disciplined capital investment and a clear path to executing our growth strategy without the need for incremental external equity. Looking further out and turning to Slide 17, we highlight how our credit strategy is intentionally aligned with our long-term capital plan and why we believe maintaining a solid BBB+ profile is the optimal position for Southwest Gas Holdings during this investment cycle. For 2025, we calculate S&P adjusted FFO to debt of approximately 19.7% at Southwest Gas Holdings and 18.6% at Southwest Gas Corporation. These levels sit well above S&P's 13% downgrade threshold for each entity and above our targeted long-term operating range of greater than 17%. This long-term credit metric strategy is targeted to provide more than 300 basis points of cushion above the downgrade trigger at any point in our forecast period, which we believe is an appropriate level of planned headroom to absorb potential exogenous events such as volatility in weather, commodity prices, interest rates and the timing of regulatory outcomes. This disciplined credit positioning supports a balanced 50-50 capital structure at Southwest Gas and preserves efficient access to debt markets as we execute the more than $6 billion of planned investment through 2030. Due to our strengthened balance sheet and credit cushion, we believe we can forgo high-volume equity issuances, while utilizing the ATM for modest equity needs as well as the reestablish holdco leverage capacity as financing levers. Just as importantly, this approach directly supports our stockholder value framework. By maintaining visible headroom above downgrade thresholds, we believe this discipline will preserve lower cost capital access and create the foundation for consistent annual dividend growth while retaining important flexibility during peak investment year. In short, our objective is not to maximize a single credit metric but to intentionally manage the balance sheet to sustain BBB+ through the capital cycle. That discipline allows us to fund growth efficiently, protect our investment-grade profile and deliver durable long-term value to stockholders. As we highlighted on the prior slide, maintaining strong credit metrics is a core priority for both Southwest Gas Holdings and Southwest Gas Corporation. Slide 18 reinforces how our current capital structure, liquidity position and ratings profile support that commitment and provide flexibility as we execute our plan. On a consolidated basis, total net debt at year-end 2025 was approximately $3.2 billion after adjusting for the nearly $600 million of cash on hand, and the roughly $300 million of purchased gas costs or PGA balances. Notably, all of our outstanding debt is held by the utility. You'll see all of our current credit ratings on the right-hand side of the slide, both entities maintain solid investment-grade profiles with stable outlooks from all 3 major agencies. Turning to Slide 19, returning value to stockholders through consistent dividend growth remains a core component of our long-term strategy. The company has paid a dividend every year since 1956, reflecting the durability of our regulated utility model. Today, we announced that our Board approved a 4% increase in the annual dividend, bringing it to an annualized $2.58 per share for 2026, up from $2.48 previously. We intend to recommend future annual dividend increases to the Board, while maintaining a disciplined strategy focused on investing more than $6 billion in the company's capital plans and sustaining responsible annual dividend growth. Looking further ahead, as earnings and cash flows strengthen, particularly as the planned 2028 rate basin project comes into service and as projected regulatory outcomes improve, this disciplined framework creates meaningful upside potential for larger dividend increases over time as cash earnings grow. Moving now to Slide 21, I'll walk through our newly initiated 2026 and forward-looking financial guidance. We are initiating both 2026 guidance and long-term targets that reflect our current expectations for improvement in the regulatory construct in both Arizona and Nevada as well as the projected contribution from the potential 2028 Great Basin expansion project. Building on strong 2025 performance as a base year, we are initiating 2026 EPS guidance to land in the range of $4.17 to $4.32 per share. We expect the primary drivers of our projected performance to be continued operating margin expansion at Southwest Gas, supported by ongoing customer growth and rate relief across all our jurisdictions. In addition, we expect meaningfully lower interest expense related to holdco debt following the elimination of all debt outstanding at that level. I'll further outline the underlying assumptions supporting our plans on the next slide. Overall, the combination of strong core utility fundamentals and a more solid capital structure supports our confidence in the 2026 earnings outlook. Looking further out, we are targeting a 5-year adjusted EPS compound annual growth rate of 12% to 14% through 2030. This growth trajectory using an adjusted 2025 base year reflects continued customer additions, expected improvement in rate relief mechanisms and disciplined cost management along with incremental earnings from the expansion project at Great Basin as we currently expect it to come into service in late 2028. As Karen mentioned earlier, we currently expect our growth rate to be front-end loaded through 2028 and 2029 with about a 15% to 17% EPS growth rate over those periods, depending on how you model the timing of construction spending and associated AFUDC earnings as well as the anticipated improvement in earned ROEs from 2026 to 2028. As Justin Brown mentioned a moment ago, large projects are always subject to regulatory approvals, permitting outcomes and supply chain dynamics and our robust plan is also contingent on regulatory outcomes. We expect robust rate base growth supported by capital expenditures of approximately $1.25 billion in 2026, with a total of approximately $6.3 billion for the 5 years ending in 2030. This capital plan is focused on safety, system integrity, reliability and new business distribution system growth in the utility, along with the incremental investment required to support the growing transmission business. We are also initiating a 5-year rate base CAGR of 9.5% to 11.5%, also starting from a 2025 base, which is approximately $6.7 billion. Notably, when excluding the 2028 Great Basin expansion project, our run rate utility rate base growth is expected to be about 7% annually over the same period. Now turning to Slide 22. We show additional detail on the fundamental drivers and financing assumptions that underpin our guidance outlook through 2030. Beginning with margin, our plan reflects a clear regulatory cadence across our jurisdictions. As Justin previously outlined, the potential implementation of formula and alternative-based rate mechanisms in both Arizona and Nevada are expected to meaningfully impact margin as we refresh rates and implement the expected regulatory improvements. Further out, we expect incremental contributions from our other jurisdictions. Supporting this regulatory roadmap, we expect steady customer growth of approximately 1.4% annually across our service territories. For O&M, we remain focused on operational discipline with our target to keep O&M flat on a per customer basis, excluding the nonservice component of pension costs. We assume approximately $6 million to $7 million annually from company-owned life insurance, and we plan for normal natural gas price fluctuations based on current forward pricing curves over the planning horizon. With respect to income taxes, we expect that utilizing existing net operating losses should minimize cash tax payments and result in an effective tax rate in the high teens, barring any future corporate income tax policy changes. We utilize currently anticipated forward corporate debt curves as we model interest expense when incorporating future bond issuances. The timing of bond issuances is consistent with the capital plan we outlined earlier. As I mentioned, our strategy is designed to preserve balance sheet strength and flexibility while funding our elevated capital plan. Back to you, Karen. Karen Haller: Thank you, Jay Fors. Before we move into the Q&A portion of the call, I'd like to draw your attention to Slide 23, where we highlight our commitment to delivering exceptional customer service, disciplined financial management maintaining a constructive regulatory engagement and preserving strategic flexibility while advancing our strategic priorities and achieving strong financial performance. I am confident in our trajectory as a leading pure play fully regulated natural gas business. . The team is focused on ensuring we safely, reliably and affordably meet the needs of our customers every day in order to deliver value to our stockholders. With that, let's open the call for questions. Operator: [Operator Instructions] We will take our first question from Julien Dumoulin-Smith from Jefferies. Julien Dumoulin-Smith: Just really nicely done. I got to say at the outset, this is an incredible update, lots. To ask here, but really got acknowledged at the outset. And obviously, Karen, Justin congrats to each of you, respectively here. Really great high note here. If I can pivot into the questions real quickly, though, just to kind of start at the top, I'm sure others will have a bunch. Just talk about the equity, right? I mean big plan, big chunk that you guys are biting off here. How do you think about the timing of equity? Have you engaged with the rating agencies? To what extent are you going to get some latitude or give yourselves latitude in the [indiscernible] metrics through the construction cycle here. Just trying to gauge, obviously, you've disclosed '26 equity or lack thereof, but how are you thinking about the ramp '27, '28. And that's the first question. I've got a follow-up. Karen Haller: Thank you, first of all. I appreciate it. And I'll let Jay Fors answer that question. Justin Forsberg: I appreciate the question, Julien. I think it's a good question. When you think about the -- I'll start with kind of the credit metrics, things like obviously, we have more than 500 basis points above our downgrade threshold at this point. And and we are committing to targeting that up greater than 300 basis points in the plan. So when you think about our anticipated equity needs for our capital plan at the utility, we think we can utilize some pretty significant leverage capacity in the holding company first to sort of offset those with really minimal equity needs. I think a way to think about it. Obviously, as you mentioned, we don't anticipate anything -- needing anything in this year. But when you -- on a go-forward basis, I think the way I would put it is when you think about we have a shelf that expires at the end of 2026. We'll be renewing and extending that shelf. We don't anticipate upsizing our existing $340 million ATM. Julien Dumoulin-Smith: Yes, I suppose that's a signaling in and of itself as to how you think about the total equity needs you'll need through the plan, right? Justin Forsberg: Yes, we think so. Julien Dumoulin-Smith: Excellent. And then -- yes, indeed. And then look, let's talk about the project itself, right? I mean you talked about this capacity subscribed of nearly 800 MCF. Can you elaborate a little bit about the total scope of the project here? I mean Obviously, you got some incremental interest above that. Just talk a little bit about what the customer interest was and to the extent that the [ 1.7 ] could have ever go larger. I just want to try to tackle that here at the outset as well, just in terms of like the total eventual opportunity here and/or any other interests that does emerge [indiscernible]. You talked about data centers in Nevada, and ultimately serve that kind of customer load. What are you seeing on that front just to hit that as well. Justin Brown: Julien, it's Justin. And Yes, to your point, we went through kind of elongated multi open season process last year, and a lot of that was driven by just different inbound inquiries we received. And I think as we've described in the past, at some point in time, we had to kind of coalesce around an in-service date that the majority we're focused on. And so we picked the 2028 number. And that's really kind of what we locked in on those customers that were interested in service by kind of end of calendar year '28, we had to kind of draw the line. And so I think to your point, when we think about kind of future demand, future interest, I think there's definitely some there because we had received much more inbound requests than what actually signed up. But again, I think you have to look at it in terms of kind of the timing of the different interests and people's projects and kind of what they anticipate timing. So I think a couple of things as we move forward that I would encourage you to think about is, one, we continue to work on the design aspects. Obviously, when we have signed up capacity at a certain dekatherm a day, when you design the system, it doesn't come in at that exact number, it's virtually impossible. So we're going to -- when we complete the design, we'll compare that design, kind of efficient design to what capacity it actually hold. If there's an opportunity to do a supplemental open season to fill up any remaining capacity based on the design, we'll do that. I think we feel confident that there is demand there and interest that people would take that. And then I think when we think about dates beyond 2028, we'll continue to work with prospective shippers on kind of what their interest is, what their timing is and we can always look to evaluate, again, kind of maybe another open season for a different date down the road. Julien Dumoulin-Smith: Right. Last nuance here, if I can squeeze it in. Just the cadence of earnings uplift. I mean obviously, it's back-end weighted here. But can you speak to that as well as the -- what you're thinking on closing the gap on lag here in Arizona and Nevada as well as part of this updated plan. Justin Brown: Yes. I'll start with kind of the regulatory construct and kind of how we're looking about our continued effort and focus on reducing regulatory lag in our jurisdiction. So obviously, as I mentioned in my prepared remarks, this next couple of years is going to be very big for us in terms of we've got 2 sizable rate bases. We're getting ready to file. We think they're really going to be a catalyst moving forward in terms of being able to request formula rate adjustments as part of the rate case or in Nevada's case, using this rate case as kind of the springboard for that. . And so I think when we think about kind of those mechanisms and how they're going to be designed, obviously, each state is going to be a little bit different. But I think you can look at the [ UNS Gas ] decision from last week. And I think that's a pretty good proxy when you think about the facts and circumstances of UNS Gas kind of triangulating that with the policy statement and then some of the other proposals that are pending. I think we've always said we kind of look at hopefully being able to reduce kind of what has been kind of our historical gap of 160 basis points pertaining on any time. I think in combination with Nevada and Arizona, we're hoping to cut off about 100 basis points is what our goal is. Justin Forsberg: Julien, I can hit -- talk a little bit more about cadence like Karen and I both mentioned, right, the guidance, yes, it's really more front-end loaded, which I think is not what you're getting at, right? We have the run rate rate base growth [indiscernible] underlying [ LPC ] of about 7%, which really supports something that you kind of sort of model, if you will, through the whole 5-year plan is that earnings trajectory because as we tighten up that lag, it should be aligned pretty well with rate base growth. The earnings, the EPS growth should be, especially with the minimal equity issuances expectations. But I think when you think about these other things that Justin just mentioned plus the in-service anticipated at Great Basin that's where I pointed to that we see about 15% to 17% EPS growth rate over sort of that '28 to '29 from now. Operator: Your next question comes from the line of Elias Jossen from JPMorgan Chase. Elias Jossen: Maybe just thinking about the kind of post Great Basin and service earnings contribution. I know you've talked quite a bit about the back half versus the front half of the earnings CAGR. But can you just talk about maybe in 2030 when we start to see the full benefit of Great Basin what that earnings contribution could look like on a run rate basis? And because I think about some real inflection sort of in that 2030 time period based on those earnings contributions. Justin Forsberg: Yes, Elias. I think that's where we can point to the margin that we -- Justin mentioned, right, the $215 million to $245 million expected margin that we will get out of Great Basin. And with the sort of end of the year, toward the end of the year in service date in 2028. That margin contribution expected fully in '29 and in '30 because I'll just remind you and everybody on the call that we are expecting once we -- prior to in service that we would execute a minimum 20-year transportation service agreements that we would be bringing in that margin. And so that's kind of the Great Basin Contribution, if you will, for those outer 2 years to margin. And then you've got, as I mentioned a moment ago, the 7% kind of rate base growth of the underlying utility. Elias Jossen: Got it. And then I think you touched on a bit in the previous response, but just -- if we think about sort of the language in the slides that discuss rate case outcomes in line with historical experience, can we just bifurcate that between sort of percentage of ask in the rate case outcomes themselves, but then if the formula rate adjustments would be incremental to that and just think about the earnings contributions from those in that language specifically? Justin Brown: Elias, it's Justin. Yes, I think that's a fair way to look at it in terms of kind of just our historical success, if you will, in terms of the spread between our ask and what we receive. And I think that's a reasonable way to look at it. Operator: Your next question comes from the line of Chris Ellinghaus from Siebert Williams Shank. Christopher Ellinghaus: Congratulations, Karen and Justin. Have a great retirement, Karen. I really appreciate the new disclosures, by the way. Justin, can you talk about the progress in the Nevada workshops thus far? And any thoughts you have? Justin Forsberg: Chris, yes, you bet. So the legislation was passed last summer. They held their first workshop in September, held another one in January and February. And again, it's just kind of working through, putting together kind of draft language draft regulations. I think the -- the good thing about the commission is they really kind of put an emphasis on trying to get consensus among the stakeholders. So there's a lot of work around kind of just evaluating kind of the competing interest different language people want, what's required by the legislation. So there's just a lot of back and forth on working on that consensus. We had -- our last workshop was just last week, last Friday, I believe. And I think we feel pretty good about we're getting there at the end. And so we anticipate probably getting some kind of draft consensus regulations out from the commission here over the next month or two Christopher Ellinghaus: Okay. That helps. vis-a-vis the UNS Gas outcome, have you got any thoughts about ROE and relative to your discussion about the 100 basis point improvement target, does that incorporate your thoughts about where their head is on ROE? Justin Brown: Yes, Chris, this is Justin again. I think, generally speaking, I mean, that decision obviously just came out last week, but I think we've always kind of looked at that. And I think one of the things that we're going to see is that was, I think, one, the very first decision the commission came out with, and I thought that it was very much kind of directionally positive, generally constructive. And I think we're going to -- and I think they've said this all along that they want to kind of get cases in and kind of evaluate what they look like for each utility for larger gas, smaller gas electrics. So I think we're going to learn a lot more as APS and TEP kind of go through their process. And then as we continue to work with stakeholders on ours. But I think the good thing is, I think the parameters are kind of there when you look at the different proposals, when you look at the policy statement, when you look at the recent UNS Gas case that I think the fairway is kind of defined for everybody. And so we'll be able to kind of all work and see where we end up with the different utilities. Christopher Ellinghaus: Okay. And I guess this is somewhat of a difficult question, but the 7% sort of longer-term base Southwest Gas rate base growth that you talked about. I assume that's not necessarily consolidated in maybe the 2030 sort of endpoint is part of it. But that doesn't include any kinds of upsides that you see for Great Basin longer term. Is that right? Justin Brown: Yes, Chris, Justin again. Yes, you're spot on. That's just kind of when we think about the historical and kind of the current investment in the utility. That's really what that was designed as to kind of -- we expect kind of consistent strong growth at the utility, and that's what that reflects. So it doesn't include anything that would be kind of a one-off or any additional Great Basin opportunities that may come down the road and may materialize over time. Christopher Ellinghaus: Okay. Lastly, when you're talking about utilizing parent leverage for the Great Basin funding. Do you expect that to be permanent? Do you ever expect to push down any of the financing costs into Great Basin? Justin Forsberg: Yes, I think it's a great question, Chris. From our perspective, I think one way to look at that is we don't expect it to be permanent, I'll say that because we do expect -- I think what I'll where I'll go with this is we sold Centuri, which is an asset that was not contributing to the dividend, and we have these dollars to deploy, redeploy into an asset, which is expected to really throw off a lot of cash. earnings at the back end once it goes into service. And so Great Basin we'll have the capacity to give a pretty sizable dividend to the parent, which will help us eat into whatever leverage we put on the parent at that point in time. Christopher Ellinghaus: Okay. Let me ask you one more thing. Can we -- you talked about maybe having some larger upside to the dividend growth later. Can we presume that once Great basins in service? Justin Forsberg: Yes, I think that's fair. Kind of along the same lines, what I just mentioned. Operator: [Operator Instructions] Your next question comes from the line of Gabe Moreen from Mizuho. Gabriel Moreen: Just congrats again to Karen and Justin. I just had one question around Great Basin, although it's a little bit multipart. I wanted to dig down a little bit deeper in terms of locking down or squaring away some of the variables here around cost, whether it's E&C compressors, pipe, just kind of where you really stand in that process and how you might be thinking about derisking some of that at this moment. So maybe if I could -- if you can address that, that would be great. Justin Brown: Yes, Gabe, it's Justin. Yes, as I indicated in my remarks, I mean, I think we're working -- we're trying to be very proactive from a supply chain standpoint, working -- going through the prefiling process with FERC to just really kind of mitigate any of those kind of typical project risk, if you will. Obviously, shipper risk is another one in terms of -- and that's why we went through kind of an elongated process to kind of make sure that we have firm precedent agreements signed up in order to kind of, again, try to mitigate risk associated with the project. We'll continue to kind of work through those processes. I think to your point on kind of where we sit right now, we feel like that's a pretty good estimate of what the cost is. Obviously, working through with our EPC contractor and different things. I think one of the things that I would say is when we make the anticipated filing with FERC at the end of this year for the formal application, we'll have an updated cost at that point in time. So I think that's a good marker for kind of -- we're going with what we believe is kind of our best estimate right now. When we go through this process, we're going to know more in 9 months. And when we make that filing with FERC, we'll be able to dial that in even a little bit more. And so that's kind of a good mile marker, if you will, to kind of to keep a look out on in terms of kind of what we anticipate the final project cost to be. Justin Forsberg: Gabe, I can just add something. I think you're getting at as well. It is a balance, which I think it's what you're kind of pointing to between trying to minimize the spending prior to getting a certificate from the FERC with making sure that we're mitigating some of these supply chain issues that Justin talked about. And so from that perspective, the precedent agreement is just as a reminder, I think you guys know this, but it does require a certain amount of surety that the shippers have to put up as we spend as we carefully spend dollars in this early time period. Gabriel Moreen: I know I had 1 question, but 1 minor follow-up. To the extent you're going through the open season and you've got 800 million a day of capacity. To what extent were not further upstream constraints on procuring gas or capacity constraint on some of your customers here signing up for capacity? Justin Brown: Yes, Gabe, this is Justin again. I think that's really -- our understanding is our customers haven't expressed any restrictions in that regard. Obviously, that's something that they're responsible for, where we provide the pipeline for them to flow the gas supply that they purchase through. But yes, we're not aware of that. I think our understanding is there's sufficient capacity on the upstream suppliers as well to meet those needs. Operator: Your next question comes from the line of Ryan Levine from Citigroup. Ryan Levine: I had a couple of questions around just your guidance. In your -- by 2030, are you assuming that you're going to be at that 300 basis point distance from the [ 13% ] downgrade threshold? Is that embedded in plans? Or any color you could share around what's actually in your 2030 estimate? Justin Forsberg: Yes, I think that's a good question. I think the way you should look about -- folks should look at the greater than 300 basis points sort of target that we have out there really is kind of in the trough as we hit the maximum leverage at the holdco as we're -- whatever we have in our plan, right, as far as offsetting the equity needs using some holdco leverage. So it's not necessarily by 2030. I think based on kind of what I mentioned earlier in one of the Q&As around what Great Basin be able to -- is that permanent debt at the holdco, which I said it's not, right? So you'd actually see some -- I think some improvement in our -- in the current plan we have out there, we've seen some improvement in the FFO to debt metrics above that trough year, which is likely that 2028 year. Ryan Levine: Okay. And then similarly, around the regulatory lag improvement in your plan. Is the 100 basis points embedded in the 13% EPS growth rate? Or is that if you exceed that, would you be above that or kind of conversely, if you underperform? Is that -- are those the key drivers of the outlook? Justin Brown: Ryan, it's Justin. Yes, I think the guidance that we provided, we've made some reasonable assumptions around kind of the timing of formula rates and kind of what that might look like. So that's embedded in that range. Ryan Levine: Okay. Well, congratulations to Karen and Justin and appreciate the comprehensive update. . Operator: Your next question comes from the line of Paul Fremont from Liebenberg. Paul Fremont: Congratulations on the update and best wishes to Karen and also to Justin. Really 2 questions. One, if I go back to Justin's earlier comment of 15% to 17% through sort of Great Basin which, I guess, the first full year would be 2029. If I use that, I would come up with 2029, somewhere between [ 640 and 680 ]. Am I thinking about that correctly? Or am I missing something there? Justin Forsberg: Yes. Paul, I appreciate the question. Obviously, we can't give you a sort of guidance on that precision when you get out that far. But I think you are thinking about the run rate in terms of how I mentioned it. And meaning that -- and also the 2029 is that first full year of in-service? So obviously, it depends on how you think about the timing of modeling construction spending and associated EDC earnings as far as the ramp-up when you look at that. But I think the -- in terms of that full in-service year, that would be expected in the plan in 2029. Paul Fremont: Great. And then my other question relates to the RUCO challenge to the policy statement, which had initially been turned down by the courts. But I understand that at a higher level, there's now a hearing that's been scheduled on their complaint. Any comments on that update and what you're expecting to come out of that? Justin Forsberg: Paul, it's Justin. Yes, I think our thoughts are kind of consistent. I don't think anything has changed from how we viewed the challenge from [ RUCO ] from the beginning through the process where the court kind of denied it and then decided the Superior Court decided to give them kind of their day in court. So we -- this is kind of part of the normal process. They have an opportunity to make their argument. I think we we feel pretty strongly that there's a long precedent of the commission being able to have exclusive jurisdiction over ratemaking and doing things as part of a rate case. And I think you look at all the different regulatory mechanisms and that have withstood judgment over time. So I think from our perspective, we're not overly concerned, I haven't seen anything that causes us to be overly concerned about that challenge or kind of the procedural posture that it's currently in. Paul Fremont: And I guess if I look at the initial court ruling, I mean, I thought it was more sort of a technical issue in terms of having a certain amount of time to file and they missed that deadline. When the Superior Court opened that up, I mean, did they just sort of disregard that time limit? Justin Forsberg: Yes. My recollection, Paul, was there was kind of a couple of different aspects, but you're right. It was kind of initially denied on a technicality, which is why they appealed it. And then the court ultimately said, no, they need to have their opportunity to be heard, and that's kind of my understanding of the posture of the case right now is that they have an opportunity to make their arguments with the appellate court. Operator: This concludes the Q&A portion of today's conference. I would now like to turn the call back over to Tyler Franik for closing remarks. Unknown Executive: Thanks again, John, and thank you all for joining us today and for your questions. This concludes our conference call. We appreciate your interest in Southwest Gas Holdings and look forward to speaking with many of you soon. Operator: This concludes the Southwest Gas Holdings Fourth Quarter and Full Year 2025 Earnings Call and Webcast. You may now disconnect your line at this time. Have a wonderful day.

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INVZ 2025 Q4 财报电话会议

Operator: Ladies and gentlemen, thank you for standing by, and welcome to Innoviz' Fourth Quarter 2025 Earnings Call. [Operator Instructions] I must advise you that this call is being recorded. I would now like to hand over the call to our first speaker, Ada Menaker, Head of Investor Relations. Please go ahead. Ada Menaker: Good morning. I would like to welcome you to Innoviz Technologies' Fourth Quarter and Full Year 2025 Earnings Conference Call. Joining us today are Omer Keilaf, Chief Executive Officer; and Eldar Cegla, Chief Financial Officer. I would like to remind everyone that this call is being recorded and will be available on the Investor Relations section of our website at ir.innoviz.tech. Before we begin, I would like to remind you that our discussion today will include forward-looking statements that are subject to risks and uncertainties relating to future events and the future financial performance of Innoviz. Actual results could differ materially from those anticipated in the forward-looking statements. Forward-looking statements made today speak only to our expectations as of today, and we undertake no obligation to publicly update or revise them. For a discussion of some important risk factors that could cause actual results to differ materially from any forward-looking statements, please see the Risk Factors section of our Form 20-F filed with the SEC on March 12, 2025. Omer, please go ahead. Omer Keilaf: Thank you, Ada, and good morning to everyone joining us today on the call. 2025 was a pivotal year for Innoviz in terms of customer engagements, production readiness and end market expansion. We achieved the financial and operational goals that we set for ourselves at the start of the year, growing our market presence and strengthening our financial foundation. Since the last earnings call, we announced that the major commercial vehicle OEM with whom we have an agreement for series production of Level 4 trucks is Daimler Truck and its subsidiary, Torc Robotics. We also announced our next generation InnovizThree with a smaller form factor and lower power consumption for behind-the-windshield integration, the holy grail for automotive applications. Combined with an RGB camera, the InnovizThree is a compact sensor-fusion model that simplifies integration and deployment. The InnovizThree is also more affordable than the InnovizTwo, which increases its potential TAM. You can actually see right now, we are being filmed using our InnovizThree LiDAR. I'll tell you more about it later on. Our InnovizSMART, which we introduced last summer for nonautomotive applications, is available for shipment, and we are seeing excellent traction with a variety of customers. We are very pleased with the inroads the InnovizSMART is making in the security market, and we recently announced that an InnovizSMART-based solution has been deployed across several sites in critical infrastructure as an off-the-shelf system comprising the LiDAR, cameras and analytics software. At CES, we demonstrated the InnovizSMARTer, integrated with NVIDIA Jetson Orin Nano to enable edge compute deployments in bandwidth constrained areas, simplified installation and cloud applications. To meet the demand of our automotive and nonautomotive customers, we have continued to ramp capacity at Fabrinet and expect production this year to be 3x to 4x higher than last year. On the financial front, in 2025, we grew revenue to $55.1 million, more than double the level achieved last year. Our gross margin for the year was 23% versus approximately minus 5% in 2024. OpEx for the year was $80.6 million versus $100.8 million in 2024, a 20% decrease. As we kick off 2026, our NRE payments plan stand on approximately $111 million versus $80 million at the start of 2025. We've recognized approximately $45 million of revenues of these NREs agreements in 2025. We have $66 million remaining. We expect to recognize almost all of our existing NREs in 2026 and 2027. And we expect to sign additional NRE payment plans in 2026. As our current programs reach SOPs and we win new programs across automotive and nonautomotive, we expect to see significant growth in LiDAR revenue over the coming years. Longer term, as sales of LiDARs expand, we expect them to make a growing proportion of revenues versus NREs. We believe that sales of LiDARs into the nonautomotive physical AI applications will grow from approximately 1% to up to 10% of our annual revenues in 2026, accelerating further in the coming years. In all, we believe Innoviz is in a very strong position for 2026 and the years ahead as we expect to play a significant role in what could be one of the most important technological advances of the future. After transforming digital workflows through software and large language models, AI is moving into the physical world. It will power vehicles, robots, infrastructures and machines that must perceive, reason and act under real-world constraints and real time. This transition, often referred to as physical AI, represents one of the largest and longest duration technology opportunities of the coming decades. Physical AI must function in safety critical environments, tolerate environmental variability and scale at infrastructure level. As a result, it requires a fundamentally different foundation with perception at its center. Perception powers world models, models grounded not in text or images, but in physics. And they are meant to emulate complex real-world systems. LiDAR is emerging as the most reliable method for digitizing the physical world into accurate real-time 3D representations, creating trusted world models that can drive machine decisions. Earlier this week, we published Part 1 of a white paper on the role Innoviz is playing and will continue to play in the rise of physical AI and how we bring world models to life. I invite you to read it on our website. Part 2 will be out soon. And in March, we will also host a webinar on the subject with Q&A. Please stay tuned for details. As the need for LiDAR as part of this new phase of physical AI becomes better understood and as the technical [Audio Gap] become more stringent, many players have been driven out of the market. We expect additional fallout in the future, with the market consolidating around just a few players. Automotive OEMs need behind-the-windshield solutions with lower power and smaller form factors. Nonautomotive applications, especially in the areas of industrial and security, demand enhanced reliability and safety. Innoviz stands ready to meet these challenging customer requirements. With the maturity and production readiness of our InnovizTwo and the smaller size, lower power consumption and lower cost of InnovizThree, we believe we are well positioned to become the world's premier large-scale supplier of LiDAR solutions, enabling autonomous driving and the rise of physical AI. And now let's jump into the details. Starting with our trucking customer win. Back in September, we announced that we were selected for series production of Level 4 autonomous trucks by a major commercial vehicle OEM. In December, we were very pleased to be able to name the customer, which is Daimler Truck and its subsidiary, Torc Robotics. Under the terms of the engagement, Innoviz will provide multiple LiDARs per vehicle for the customer's L4 Class 8 Freightliner Cascadia platform. We have already begun shipping units to support Daimler's trucking fleet. This partnership positions Innoviz' technology as a critical component in Daimler's truck strategy to bring autonomous trucks to the market. Deployment is planned across highway and regional routes in North America to help fleet operators improve operational efficiency and enhance road safety. Having met the requirements of one of the world's largest commercial OEMs, we believe we are well positioned to gain additional wins in the trucking space. And as we roll out new technologies, including an upcoming ultra long-range solution, we will continue to work with Daimler to explore additional opportunities based on our full portfolio of products. The agreement with Daimler that we just discussed underscores the traction we are seeing in Level 4 applications. As we said before, the case for Level 4 has become very clear to the automakers. They see the benefit of adding content to a vehicle, eliminating the driver and deploying the vehicles in fleets. Waymo's success in pushing others forward, and at CES, about 2/3 of the customers and potential customers we met were focused on Level 4 applications. We are working towards Level 4 SOPs with Mobileye, Volkswagen and Daimler Truck, and we believe we are the LiDAR company with the most significant Level 4 Western SOPs. I just recently toured the VW ID. Buzz production line in Germany, and it was truly impressive. This is the first automotive series production of a Level 4 robotaxi in the world. And it was very exciting to see our suite of 9 LiDARs being installed on each vehicle as part of the automated process. We expect fleets of these vehicles in 6 cities in the U.S. and in Europe this year, targeted to ramp in the second half of the year. We are also progressing on our Level 3 SOPs with the Mobileye Chauffeur and programs such as Audi expected in 2027. In terms of new programs, in addition to the strong interest in Level 4, we are also very excited about the increase in Level 3 activity as well as our continued work with NVIDIA. Level 3 is now viewed as a KPI for upcoming car designs. And there are multiple RFQs for programs aiming for 2028 and beyond. Many of these programs are targeting behind-the-windshield deployments. Several OEMs have recently discussed their Level 3 efforts, specifically mentioning LiDAR as a key component. With significant progress in LiDAR designs and the availability of mature technologies, automakers are exploring their options, and we are poised to compete and win on new RFQs with our solutions. To support our customers' efforts, we've introduced the InnovizThree. Over the last 10 years, the LiDAR space went through 2 phases. And we are now entering a third phase. In the first phase, there were many players, and the devices were largely proof of concepts. In the second phase, the automotive OEMs needed a mature, durable working product, and the number of players declined. As far as we are aware, there are only 2 companies that were able to launch a Level 3 product during the second phase, and Innoviz was one of them. The time, development and effort that Innoviz invested in the first 2 phases are the foundation of the InnovizThree, designed to enable us to meet the elevated requirements of this next phase. Here, the holy grail of automotive LiDARs is behind-the-windshield installation that doesn't compromise vehicle design or in-cabin environment. The InnovizThree has been designed to meet these challenges with a smaller form factor and lower power consumption. The InnovizThree also offers a lower price point. While the InnovizTwo cost approximately 70% less than the InnovizOne, the InnovizThree offers an incremental 35% cost reduction. This could make it a compelling solution for L2+ applications as well. At CES, we even showcased the InnovizThree combined with the camera. This solution simplifies OEM sensor integration and sensor fusion, streamlining packaging and enabling faster deployment. The LiDAR+ camera can also be used in applications such as drones, microrobotics and humanoids, further enabling physical AI. And by the way, as I said at the first of the call, we are using InnovizThree to make this call. I think you'll agree with me that this is unlike any other LiDAR image out there. By adding color capabilities directly into our LiDAR, we are giving OEMs a cleaner, more efficient, lower-cost path to multi-sensor perception without compromising vehicle design. While the automotive space remains our primary area of focus, let me touch on our progress with the InnovizSMART, which is now available to order and the newly announced InnovizSMARTer. The InnovizSMART is based on the InnovizTwo platform and optimized for nonautomotive applications such as security, smart city, robotics and others. One example is an InnovizSMART-based perimeter security solution which has already been deployed in several locations. This is an off-the-shelf system for protecting critical infrastructure and municipal areas. It combines our LiDARs with our partner's PTZ cameras and analytics software. Unlike radar and camera systems, the solution can detect movement behind obstacles such as trees and fences, maintains performance in harsh conditions and deliver reliable detection of slow-moving or camouflaged targets. The InnovizSMARTer integrates InnovizSMART LiDAR with an NVIDIA Jetson Orin processor that -- to deliver a one-box edge solution for real-time 3D perception, enabling wireless deployment of LiDARs in bandwidth constrained environments. At CES, we showcased the InnovizSMARTer by live streaming a point cloud of the Las Vegas Strip, which was compressed at the edge. The video you've been seeing in the recorded output, as you can see, it flawlessly show the landmarks, people walking, moving cars and even the textures of buildings. These are all great examples of what LiDAR can do in terms of helping build a world model for physical AI, and we are seeing a lot of interest in our smart products for a variety of end markets. Now let's talk about our outlook for 2026. Driven by ongoing NRE payments and the ramp of LiDAR shipments, we expect to grow revenues by approximately 27% to $67 million to $73 million. In 2026, we expect up to 10% of our revenues to come from nonautomotive physical AI applications, up from 1%. We expect new NRE payments plan of $20 million to $30 million in addition to our existing plans. We expect to add 2 to 3 new programs this year. And now I will turn it over to Eldar to discuss our financials. Eldar Cegla: Thank you, Omer, and good morning, everybody. Innoviz experienced significant growth and operational momentum in 2025. Revenues were at $55.1 million, a record year for Innoviz. We ended the year with approximately $72.1 million in cash, cash equivalents, short-term deposits and marketable securities on balance sheet. And we have no long-term debt. Cash used in operation and capital expenditure in the year was approximately $49.3 million. For the quarter, cash used in operation and capital expenditure was the single digit at $7.3 million, which included proceeds from sales of machinery. This was the second quarter of a single-digit burn in the year, demonstrating our commitment to lowering cash burn over time. We believe that our strong balance sheet and continued focus on operational excellence will provide us with the runway to reach customer SOPs into 2027. Now turning to income statement. Our 2025 revenues of $55.1 million more than doubled year-over-year, supported by NREs as well as sales of LiDAR units. Gross margins in the year was approximately 23%, an important step towards profitability. Going forward, we expect that we will continue to see quarter-to-quarter variability in margins due to the revenue mix and customer timing. Our operating expenses in 2025 were $80.6 million, a decrease of approximately 20% from $100.8 million in 2024. This year's operating expenses included $10.7 million of share-based compensation compared to $17 million in 2024. Research and development expenses for 2025 were $56.5 million, a decrease from $73.8 million in 2024. The decrease is primarily related to the allocation of costs related to sales of NRE and to operational realignment in Q1 of 2025. The year's R&D expenses included $6.2 million of share-based compensation compared to $11.2 million in 2024. 2025 was truly a pivotal year for Innoviz, and I look forward to what is ahead as we ramp the new product and secure additional program wins across the automotive and nonautomotive space. With that, I'll turn the call back to Omer for his closing remarks. Omer Keilaf: Thank you, Eldar. Before I wrap up the call and open for Q&A, I want to recap some of our recent developments. In 2025, we reported record revenues of $55.1 million, more than twice the previous year. We improved our gross margin and reduced our cash burn. We were selected to supply LiDARs to Daimler Truck for their autonomous trucking platform and made significant progress on our L3 and L4 programs. We continue to see a lot of interest in L4 and see a step-up in engagements in Level 3. We introduced the InnovizThree, which we believe meets the holy grail of automotive requirements for behind-the-windshield installation. We are building a strong presence in smart applications with our InnovizSMART and InnovizSMARTer. 2025 was a truly pivotal year for us, and we look forward to continued momentum in 2026. The transition to physical AI has begun, and perception is a foundational layer in bringing world models to life. Physical AI cannot tolerate ambiguity, and LiDAR is critical to the establishment of ground truth. LiDAR offers accurate, reliable data, and critically, it meets privacy requirements. We believe Innoviz is uniquely positioned at this inflection point. I look forward to telling you more about this later in March, when I will host a webinar to discuss our technology and its role in the implementation of physical AI. Please stay tuned for details. And with that, operator, let's begin the Q&A. Operator: [Operator Instructions] Mark Delaney with Goldman Sachs. Mark Delaney: Yes. I was hoping you could give more color on the guidance for 2 to 3 new wins in 2026? And in particular, I'm hoping for color on where you think those wins could come from and how close you think Innoviz is on converting on those new opportunities. Omer Keilaf: Yes, sure. So Mark, there are several programs that we are currently active on that are on Level 4, actually, that we expect to converge. On top of that, there are a few Level 3. So those are the ones that we are, I would say, more tangible, and we see good cadence and progress, and generally, we're in a good position for. Other than that, there are Level 3 programs which we are competing on. And they are split between InnovizTwo and InnovizThree. The InnovizTwo is based on programs that are trying to launch earlier. They kind of give advantage to an already automotive grade product that is going to production. And there, obviously, the InnovizTwo is a very mature product that we can offer. For those that are -- they need a product that is for behind-the-windshield. This is where we are offering the InnovizThree. And there, I believe that we are also in a good position, but those decisions probably will take a bit more time, maybe towards the second half of the year. But overall, those are the activities that we were pointing at. Mark Delaney: And could you also speak specifically to where Innoviz stands at converting on the SoDW with a top 5 auto OEM and the potential for that to convert into a series production award? Omer Keilaf: So we completed the SoDW, and we're in discussion with the OEM about the next steps. It's unclear yet what is -- how it will convert and when. Mark Delaney: Okay. And then lastly, guidance for revenue for 2026, I believe, assumes that 10% of the revenue comes from the nonauto market. Could you talk about how well covered that is in terms of bookings? In other words, have you already secured the design wins and orders to support that revenue outlook outside of the auto market this year? Or is there still work to do to achieve that? Omer Keilaf: So part of it is booked through our ongoing effort in the security market. This is where we're seeing quite high demand and a good fit. We went through several RFQs competing on different opportunities and came out with the upper hand due to the very impressive performance that our LiDAR offers. While many LiDARs that are active in the nonautomotive market, they are relatively low resolution and range, and therefore, were not really suitable for that market, our LiDAR, due to its unique high resolution and long range, we were able to unlock that market. And those are very premium market in terms of its safety level applications. So basically, everywhere we're going, we see a very, I would say, good appetite for what we're showing. We're also working on an ultra long-range LiDAR that I hope to be able to share a bit more soon. That will even take us even further in that market. And of course, we are still also in discussion with a very wide range of applications where are already being served by different LiDARs. But see the benefits of using a LiDAR which is automotive grade with high resolution and resilience to dirt, et cetera. So it's growing. It's growing fast. It's also, I would say, it's fun in a way, after working only with automotive customers, it's some -- fresh of -- fresh air sometimes. But it's -- generally, it brings a good vibe also to the team seeing the -- really, the variety of different opportunities and the excitement that we're seeing from our customers. Operator: Jash Patwa with JPMorgan. Jash Patwa: Congratulations on all the progress this quarter. I was having a hard time distinguishing between the LiDAR and camera feeds, so appreciate that intuitive demo. I wanted to start with a high-level question on the technology landscape. With AI disintermediation risk front and center for many investors, could you share your perspective on how LiDAR technology might be insulated from or even benefit from AI advancements? Relatedly, like do you see any risk that AI-driven improvements in alternative sensing solutions could ultimately limit the longer-term TAM for automotive LiDAR? And I have a follow up. Omer Keilaf: Sure. More than happy to talk about. Physical AI was practiced already in the last 10 years when it comes to autonomous driving using LiDARs in order to practice and develop AI to allow the car drive autonomously. It is actually only in the last couple of years where AI made a lot of progress and availability to many other sectors. And what we're seeing is that while for a very long time, AI was practiced on digital content, whether it's text or images where the generative AI was only trying to predict the next pixel or the next word, you see a desire to go into the physical world, where you can use AI to understand the world better, to analyze it and also possibly even predict it by being able to train those world models. The missing factor or the missing link, as I try to point that in my white paper, is related to the fact that all of those world models are based on simulation data that are also generated by AI. That creates a big problem when your AI is trained by data that is also provided by AI, you are creating a very big error that is inflated and you create a bias in your models that are targeted to create models that try to predict how the real world acts. What we're trying to point at is that by using a high-resolution LiDAR, you can actually connect to those world models and those digital twins that companies like NVIDIA are talking about with the SOC, where you connect those digital twins to life. The LiDAR will bring life to those models and will enable development of AI on the real world. And this is where we're seeing today AI being practiced in different industries, whether it's industrial or security or maritime. And basically, everywhere, you'll see -- in the future, you will have LiDARs that are going to be operated, whether it's outside our houses, and by cars or by infrastructure or by robots that are going to use LiDAR within our houses. So that data is going to allow AI to understand better, how the world really acts. There's obviously a lot of sensitivity when it comes to collecting all of that data. But I see the LiDAR as if we are connecting the world model to the Internet in a way that we are feeding it with real-time accurate information. And we see that more and more people are aware of AI capabilities and how it can be deployed in many applications, not only autonomous driving. And that's what we are currently working with, with different partners. And we'll elaborate more on our AMA, Ask Me Anything session. Jash Patwa: Awesome. I appreciate all the color there. Just as a quick follow-up. Congratulations on the Daimler Truck announcement. I think you already touched on this in your prepared remarks, but I'm curious if you could peel the onion further on why Innoviz was selected as the preferred short-range solution, but not for the long range variants. Could you provide any feedback from the negotiation process? And were there specific technology considerations or limitations that led the OEM to pursue a dual sourcing strategy? Omer Keilaf: Sure. With the full transparency at the time that Daimler Truck were evaluating for a long range, we were not even in the process, for whatever reasons that was. And only when the short range opportunity came up, they became aware of our solution. I can share with you that the relationship is very strong, and we are currently discussing about further expansions where Innoviz technologies can benefit Daimler and Torc on their mission. As we were mentioning earlier also, we are working on an ultra-long-range LiDAR that would actually be very efficient and valuable, not only for the security market, but also to the truck market. So this is the first -- this is only our first engagement, and I believe it will grow. Operator: Colin Rusch with Oppenheimer. Colin Rusch: As you get deeper into the physical AI space, can you talk a little bit about any sort of need to invest in incremental sensor fusion capabilities as well as functional safety and what the demand for functional safety might look like for you guys and how long you would -- it would take for you guys to bring that to market? Omer Keilaf: So actually, the requirements we're seeing from customers in regards to functional safety, they are well aligned with what we have already achieved for the automotive market. What we get people very excited about is our resilience of the sensor. The sensor -- the InnovizTwo sensor, for example, is very resilient to weather conditions and dirt. Those are the situations where an autonomous truck or car or taxi, you wouldn't want it to be in a blind spot whenever something happens, such as dirt on the window. That's a very unique proposition that Innoviz is providing. And that's part of those that want to install LiDARs on different infrastructure, they want to see available. Other than that, as I was referring to at the beginning of the talk about the InnovizSMARTer, that's our, I would say, next-generation InnovizSMART where we embed processing power to the edge, which helps in equipping the LiDAR in different end points that allow us to transmit the data with compression and connection into the cloud. Once you are able to connect the LiDAR into the cloud from different points and create a world model, it's actually quite easy to connect it to the other platforms such as the one that NVIDIA is developing in order to train your models and develop on top of it. So we understand the requirements for that flow. We're developing the tools that are needed. It does not require changes on the LiDAR design itself. And as you saw, we are also offering a LiDAR and camera fusion out of the box. So basically, we have all of the design already set up for such an infrastructure. Colin Rusch: Great. And then my follow-up is really around customer engagement. Certainly, there was an enormous amount of activity at CES. And I'm sure there's a lot of folks sampling. I just want to get a sense of the scope and scale of the customer engagement for you guys right now. Like working with the distributor is helpful, but I'm sure you've got a wide range of folks that you're engaged with directly. I just want to get a sense of how that's grown over the last year and really in the last couple of quarters from a kind of numbers perspective. Any color you can provide us in terms of the sampling activity would be helpful. Omer Keilaf: Sure. So obviously, the answer is split between automotive and nonautomotive. In the automotive market, we are well connected with all of the customers and engaged, I would say, periodically on a weekly basis with all of the customers, most, if not all. When it comes to the nonautomotive, this is where we'll see a huge step-up in our leads and engagements. Just to give you a reference. So 2 weeks ago, we were in -- we had a big conference at Innoviz, where we invited around 80 security consultants from Israel when it comes to the airports, harbors, train stations, et cetera. And we did some kind of an exposure visit where we showed them the technology. And I think we probably left that event -- only that event with tens of opportunities. The following week, we visited a defense conference and left the conference with, I think, a few tens of leads. So this is a market where we are growing our awareness, I might say, where we are getting in touch with customers that still require some exposure to the capabilities of the technology. Right now, we feel that in the defense market, security market, we actually are already having quite nice exposure as we are getting leads already, I would say, passively reaching out to us. We are growing our business development in the States, while we already have a nice position in Europe and Asia. So we are growing our, I would say, footprint in this domain. I think that this is why we are expecting 10x growth between last year and this year. And I actually think it's a modest assumption on what I believe our opportunity within this market, having that we have a good product in production, automotive grade, that is actually solving problems that others don't. Operator: Itay Michaeli with TD Cowen. Itay Michaeli: Great. Just wanted to dig in further into the comments on increased L3 activity on Slide 9. And specifically, we've seen a few announcements where the Level 3 hardware is going to be equipped standard fit across all vehicles. I'm curious if in your discussions and your pipeline, are you seeing a similar trend there? Or is generally, Level 3 still going to be sort of at initially low attach rate and then growing from there? Omer Keilaf: No. Actually, what we're seeing -- and this is also something that -- I think it's already in Part 1, but I'm probably going to touch that more deeply on our second part of the white paper. We're going to go deeper on the Level 3 automotive competition, et cetera. So we -- the LiDAR space over the last 10 years went through 2 phases, where the first phase was mostly prototyping and customers were becoming educated of what they need. In the second phase, you've seen several programs already going into production, but only actually eventually only 2 of them. I think the third phase, which we are -- that we see that we are -- the automotive space is entering is where the programs are targeting higher volumes. They see that the pricing of LiDARs have come down where it can enable it. The installation behind-the-windshield removes one of the last frictions as far as I see it. Because I saw a lot of friction in the past where LiDARs either in the grill were not optimized in terms of the height or on the roof in terms of the design of the vehicle. And I saw back and forth between the design team and the engineering team of the car company, where they were really struggling on how to make it work across all of their models. Being able to deploy it behind-the-windshield removes quite a big friction in that regard. Bringing a LiDAR to behind-the-windshield requires a very significant size reduction, power reduction because your -- the flux of sun that you need to absorb behind-the-windshield is quite high. The temperatures that you need to be operating is higher. And obviously, you need the performance that you need to offer is higher due to that innovation that is slightly expected from the window. So that's -- I see it as another notch where the complexity, or I would say, the moving target of the LiDAR requirements is kept moving. Over the last 8 years, you've seen 200 LiDAR companies don't meet the requirements of the first phase. The last 50 didn't meet the requirements of the second phase. And now we see the third phase where the requirements are elevated again to be behind-the-windshield. And to be honest, I'm not familiar with any technology other than the one that we're using that is a better fit for that with some of the other technologies just are not valued for that. So I'm actually excited about behind-the-windshield because I know that Innoviz is able to serve that market. And I believe that we'll be able to position ourselves as the leader here. Itay Michaeli: Terrific. And as a follow-up and I apologize if I missed it earlier in the call, on Slide 5, with the growth in non-auto LiDAR and physical AI, can you just mention how we should think about the impact to gross margins and ASPs for the company over the next few years? Omer Keilaf: Sure. I mean, obviously, those markets, just to give you some perspective, when it comes to the defense market or the security market, the technologies are priced at around $10,000 per sensor. Obviously, the sensor that we are offering is significantly better than the ones that are used today due to our ability to see beyond trees, beyond fences, small objects, and obviously offer many more features that were not even possible to even ask for. So the ASPs in these markets are higher. Since it's related to safety, then the need is clear, of course, in the landscape of the world that we live in. So this is why we focused on those markets early on because we also saw that, that's a market that other LiDARs are challenged with because they don't meet the range, they don't meet the resolution, and that's where we can come in without too much resistance. And of course, we can also penetrate other markets that are served today by LiDARs, such as the ITS, airports and the trains. Today, I had a discussion with someone from the team, which was talking with me about discussions with the electricity company, with the water company. I told him it fells like monopoly, like that we are starting to cover all of the infrastructure around us. It's a world of opportunities when it comes to physical AI. And what we're seeing is that the market that is today in opposed to automotive, where we are not displacing the radar or the camera, we're just coming on top, this is where you see the analysis talk about $10 billion of market size in a few years. When we talk about physical AI, we are looking at the TAM of cameras and radars because we believe we can replace them. And those TAMs are quite big. Meanwhile, we are providing a better value than them. Operator: Casey Ryan with WestPark. Casey Ryan: Thank you for a really great update, Omer and Eldar. Maybe one quickly for Eldar. And maybe you said this on the call, what do we think about OpEx kind of the run rate? Are we sort of going to be in the same level as we move forward? Or should we expect some meaningful changes for any reason, up or down, I guess, in '26? Eldar Cegla: So until now, the company has shown its ability to be very, I would say, efficient and modest in the way it conducts itself. Going forward, I think we will continue with this method of running the company. So I'm not expecting any dramatic change in that respect. Casey Ryan: Okay. And then more broadly, maybe Omer can talk about this, too. Does the drivetrain matter? If you look at automotive and trucking, it feels like a lot of the innovation for L3, L4 robotaxis have been on EV drivetrains. I'm not sure if that matters. Maybe that's just newer designs and they're more willing to integrate new technologies. But are the opportunity sets different in sort of ICE vehicles and sort of ICE production plans? Omer Keilaf: No, I'll say the following. So several years ago, the OEMs when they had to pick or design their future vehicle, they don't develop it on a yearly basis. They do it on a cadence of 4 to 5 years when they set a certain design, start working on it and eventually cut out of its different brands, but eventually, the platform itself serves multiple vehicles. Now several years ago, many of them have picked Level 3 and EV as kind of like what they need to do on their next vehicle. And in a way, I believe that the LiDAR market or the Level 3 market in the Western market was suffering due to the challenges that came up with the EV transition. And some of those platforms were delayed or even canceled. And I think that part of the reason, and I would say even my surprise, beginning of the year when we were meeting several OEMs that came up and we were talking about RFQs for Level 3, it became clear that their strategy related to EV or ICE is behind them in terms of like they've made their decisions, and that turmoil is kind of settled. And from that sense, Level 3 is back on the table because there are now, again, discussions on what exactly would be their platform. And they want to launch it because they eventually -- Level 3 was always on their map, but because of issues that they had with the platform of the EV, I think the LiDAR market was slightly delayed. So -- on the technology part, there is no correlation between EV or ICE to a LiDAR. You can operate autonomous driving on any type of vehicle. You just need that the platform would be developed. Casey Ryan: Got it. Okay. That's helpful. And so it sounds like '26 is setting up great for maybe a meaningful jump in terms of commercial revenues versus its percentage contribution in '25. I think in your initial comments, you said that production would double or triple, Omer? I missed that. I wanted to get... Omer Keilaf: The production is going to be up 3x to 4x. Our production site at Fabrinet is ramping up. We are prepared -- preparing towards the SOP of the Volkswagen and Mobileye, where we are expecting fleets of vehicles in 6 cities in the U.S. and Europe. And on top of that, there are Mobileye, other customers that are going to follow that in terms of SOP. So definitely, our production ramp-up is going to increase our sales of LiDARs, and that would also add in our sales in the nonauto market. Casey Ryan: Yes. Well, that's a very exciting outlook, I think, and a great trend point. Just one last point on the NREs that you have, the $111 million in total. Could you just give us a count on how many people made up that group of NRE contributors, if it was -- say, if it was double digits or single digits in terms of the number of customers? Omer Keilaf: So we're currently supporting multiple programs. I'm not sure what you mean about people, but they are currently in parallel -- we are supporting 4 or 5 programs in parallel, whether it's different programs within Volkswagen, different programs with Mobileye and Daimler Truck. So this is kind of like the number of programs that we are currently committed to and working towards an SOP. Casey Ryan: Okay. And then last question. Of the new NRE opportunities, would any of those be outside of automotive or trucking? Do you think they could fall into the physical AI category? Omer Keilaf: I think that our assumption right now is that, that still would come from the automotive market. That's our assumption right now. Casey Ryan: Thank you. It's a very exciting outlook for '26. So thanks for the update. Operator: There are no further questions. I'm handing the call over to Omer for closing remarks. Omer Keilaf: So thank you very much for taking the time to listen to our end of year earnings. We are experiencing a very exciting time where we're seeing LiDARs being used on so many different opportunities. As I was saying earlier during the Q&A, the vibe within the team is very high due to, I would say, the excitement that we see in our customers eye. So thank you very much, and see you soon. Operator: Thank you very much for your participation. This concludes our call. The session will now be closed.

39天前Insight Analytics约5分钟阅读

HNI 2025 Q4 财报电话会议

Operator: Hello, and thank you for standing by. My name is Bella, and I will be your conference operator today. At this time, I would like to welcome everyone to HNI Corporation Fourth Quarter and Fiscal Year-End 2025 Conference Call. [Operator Instructions]. After the speaker's remarks, there will be a question-and-answer session. [Operator Instructions]. I would now like to turn the conference over to Matt McCall. You may begin. Matthew McCall: Good morning. My name is Matt McCall. I'm Vice President, Investor Relations and Corporate Development for HNI Corporation. Thank you for joining us to discuss our Fourth Quarter and fiscal year 2025 results. With me today are Jeff Lorenger, Chairman, President and CEO; and VP Berger, Executive Vice President and CFO. Copies of our financial news release and non-GAAP reconciliations are posted on our website. Statements made during this call that are not strictly historical facts are forward-looking statements, which are subject to known and unknown risks. Actual results could differ materially. The financial news release posted on our website includes additional factors that could affect actual results. The corporation assumes no obligation to update any forward-looking statements made during the call. I'm now pleased to turn the call over to Jeff Lorenger. Jeff? Jeffrey Lorenger: Good morning, and thank you for joining us. 2025 was a seminal year for HNI Corporation. Our members delivered excellent results as we reported a fourth straight year of double-digit non-GAAP EPS growth despite persistent soft and uncertain macro conditions. The positive momentum of our strategies, the benefits of our diversified revenue streams, our ongoing focus on items within our control, and the merits of our customer-first business model continued to deliver strong shareholder value. And late in the year, we completed the acquisition of Steelcase. This combination will not only transform our company, but also the Workplace Furnishings industry. On today's call, we will review our fourth quarter and full year 2025 results and provide some commentary around our expectations for 2026 and beyond including the benefits of the Steelcase acquisition. Before I discuss our recent performance, I want to reflect on the fundamental improvements we have driven at HNI. Our transformation has taken multiple steps in years. I will begin with Workplace Furnishings where margins have been reset. Three years ago, our legacy Workplace Furnishings business launched a profitability improvement initiative that was instrumental in expanding operating margin nearly a 1,000 basis points. In 2023, price/cost recovery following the period of elevated inflation drove the first phase of expansion. Since then, multiple portfolio management moves, ongoing network optimization efforts, KII synergies and the benefits of ramping our Mexico facility have supported consistent profitability improvement. Based on the initiatives already underway, including the recently announced plans to close our Wayland New York manufacturing facility, we have line of sight to continued operating margin expansion in the coming years. And our margin expansion story is increasingly supported by affirming macroeconomic picture in our Workplace Furnishing segment. I will provide more macro commentary later in the call. Shifting to our Residential Building Products segment, our evolution started with the strategic shifts following the great financial crisis. Since then, we have adjusted our cost structure, fully embraced lean manufacturing and continue to pursue a vertically integrated business model with the leading brands in all product categories. The result was more than a 1,000 basis points of operating margin expansion over the decade post 2009. In addition, since 2019, the efficiency, nimbleness and uniqueness of our Building Products business have supported consistently strong profitability with sustained operating margins in the mid- to high teens. This consistency of both margins and cash flow, our foundational elements to HNI's financial strength. We expect this profitability and cash generation to continue into 2026 and beyond. More recently, our focus in Residential Building Products has shifted to the front end of the business and on driving top line growth. Structural changes have been implemented to organize around the customer and ensure we have laser-focused go-to-market strategies to support our growth initiatives. These front-end investments are paying off in the absence of cyclical support. In 2025, we reported segment revenue growth of 6% despite continued weakness in the new home market. We expect to outperform again in 2026. This historical context helps set the stage as we enter the next exciting chapter of the HNI story. The acquisition of Steelcase unites two industry leaders to meet the dynamic marketplace and evolving needs of the workplace and accelerating in office work trends. We have brought together two highly respected companies with shared values, talented teams, strong financial profiles and highly complementary capabilities, innovation, thought leadership and operational excellence, chief among them. This strong foundation combined with expected synergies will accelerate our ability to invest in long-term operational enhancements, digital transformation, customer-centered buying experiences and products to meet evolving customer needs. Our integration efforts are underway, and we are leveraging a disciplined and proven approach informed by recent experience, while continuing to build on the iconic brands for which both companies are widely respected. HNI will now have total revenue of more than $5.8 billion, including all synergies, total adjusted EBITDA will be nearly $750 million and annual free cash flow will approximately be $350 million. We are now the market leader in both of our industries, Workplace Furnishings and hearth products. I can report that the integration of the Steelcase acquisition is off to a strong start. Six months following the announcement, we're even more confident in our move to add Steelcase to the HNI family. The complementary go-to-market nature of the two businesses from a capability, product, brand, customer and cultural perspective, has been reinforced as we have begun to work together. We also remain confident in our ability to deliver the targeted synergies of $120 million and drive margin expansion at Steelcase. Our current synergy projections are focused on the Americas business and do not include any revenue synergies. And importantly, we are laser-focused on minimizing any front-end disruption across our Workplace Furnishings businesses. As we have consistently stated, there are no plans to change dealer partnerships, sales forces or brand distribution. And as I've been traveling and engaging with our teams, it is clear that this continuity is being received positively by customers, industry influencers and our dealers. Now I will turn the call over to VP to provide some additional detail about 2025, discuss our outlook for the first quarter of 2026 and give some thoughts on how we see the full year playing out. I will then provide a longer-term perspective on the opportunities surrounding our businesses before we open the call to your questions. VP? Vincent Berger: Thanks, Jeff. I will start with some additional comments about 2025. Fiscal 2025 non-GAAP diluted earnings per share for our legacy business was $3.74, which increased 22% from 2024 levels. Again, this was our fourth consecutive year of double-digit earnings growth with the average annual growth rate exceeding 15%. Total net sales for the year increased 12% overall and 6% on an organic basis. Excluding all impacts from Steelcase, full year adjusted operating margin for HNI expanded 80 basis points, reaching 9.4%. The improvement was driven by volume growth, productivity gains, Kimball International synergy capture and price cost benefits. From a segment perspective, in our legacy Workplace Furnishings business, full year organic net sales increased 6% year-over-year, fueled primarily by the strength of our contract brands and the benefit of an extra week in fiscal 2025. Full year profitability, excluding the Steelcase stub period benefit from volume growth, our profit transformational efforts, KII synergy capture while we continue to invest in future growth initiatives. Full year non-GAAP operating profit margin expanded a 100 basis points year-over-year to 10.5%, as we delivered on our previously stated goal of achieving double-digit operating margin. Non-GAAP operating margin has expanded nearly 900 basis points over the past three years. Looking ahead, we expect revenue growth and margin expansion in our legacy Workplace Furnishing business for the full year 2026 even as we continue to invest to drive growth. In Residential Building Products, fourth quarter revenue grew more than 10% versus the same period of 2024. Driven by the strength in the remodel retrofit market and the benefits of the extra week. For the full year, revenue increased nearly 6% versus 2024. New construction revenue was flat with the remodel retrofit up a double-digit pace with solid volume improvement. Segment non-GAAP operating profit margin in 2025 expanded 60 basis points year-over-year to a strong 18.1%. We remain encouraged about the long-term opportunities tied to the broader housing market, and we continue to invest and grow our operating model and revenue streams. As we look to 2026, we expect modest segment revenue and profit growth despite ongoing challenges in the new construction market. Overall, as Jeff mentioned, 2025 was an outstanding year for HNI. Before I move to our outlook, a couple of comments about Steelcase's impact on the quarter. We completed the acquisition of Steelcase on December 10. Thus, we consolidated Steelcase's performance for the final three weeks of December into our reported results. The second half of December is a lower shipment and production period for our industries. Consequently, that stub period included seasonally lower levels of daily shipment activity while were more than offset by the recognition of full cost and expenses for the period. We excluded this impact from our adjusted results as it does not provide any fundamental insight into our performance. And as Jeff mentioned, the expected timing and magnitude of our projected $120 million of synergies and $1.20 of accretion are unchanged and unimpacted by the stub period. For the fourth calendar quarter, Steelcase generated strong results. Revenue grew approximately 5% year-over-year, and earnings grew about 9% from the fourth quarter 2024 levels, absent purchase accounting, restructuring and acquisition-related costs. Now I'll transition to our outlook. For 2026, as Jeff mentioned, we expect a fifth year of double-digit non-GAAP EPS growth. Revenue growth is expected to continue while we drive bottom line improvement. In addition, our network optimization efforts continue to support our ongoing earnings visibility story we've been discussing with you. Our favorable fourth quarter '25 results included accelerating the benefits of these efforts. Looking forward, these initiatives, which include KII synergies, the ramp-up of our Mexico facility, the closure of Hickory and the planned closure of Wayland are expected to yield an incremental $0.25 to $0.30 over the next three years. Approximately $0.10 of this will be recognized in 2026. Finally, we now are expecting modest EPS accretion from Steelcase in 2026, excluding the impact of purchased accounting. Finally, a few additional comments to assist you with your 2026 modeling. Combined, depreciation and amortization is expected to be approximately $175 million to $180 million. Interest expense is expected to be between $75 million and $80 million, and our tax rate should be approximately 25%. For the first quarter of 2026, we expect total net sales to increase by more than 130% year-over-year. Non-GAAP EPS is expected to decrease slightly from 2025 levels. Temporarily, first quarter earnings pressure is expected to be driven by revenue and expense recognition timing and the increased investment. Modest year-over-year revenue pressure in workplace is expected to be limited to the first quarter and we expect mid-single digits for the full year. Building Products revenue is expected to be up low single digits for the first quarter and the full year, and we expect year-over-year adjusted earnings per share to return in the second quarter and accelerate as the year progresses. Finally, a comment on cash flow and the balance sheet. Post the closing of the Steelcase acquisition, our balance sheet ended the year with a net debt-to-EBITDA ratio of 2x. We expect our cash flow strength to continue and accelerate with the addition of Steelcase. As a result, leverage is expected to return to pre-deal levels in the 1 to 1.5x range in the next 18 to 24 months. Finally, we remain committed to payment of our long-standing dividend and continue to invest in the business to drive future growth. I will now turn the call back over to Jeff for some long-term thoughts and closing comments. Jeffrey Lorenger: Thanks VP. Our fourth quarter and 2025 results demonstrate the strength of our strategies and our ability to manage through uncertain macroeconomic conditions, while we remain focused on investing for the future. We expect strong results to continue in 2026 driven by our margin expansion efforts, synergy recognition and continued revenue growth. As we look forward, the timing was right for the acquisition of Steelcase from a strategic, financial and cyclical perspective. We are increasingly bullish about the Workplace Furnishings demand dynamics as the macroeconomic picture continues to firm. Return to office continues to be a positive driver of activity with levels of remote work expected to continue to fall in 2026. Office leasing activity established a new post-pandemic high in the fourth quarter with annual leasing activity up more than 5% for the full year 2025 and net absorption of office space, which has historically been a leading indicator of future industry demand was meaningfully positive in the second half of 2025. In fact, JLL believes a new expansionary cycle in the office space has begun. While new supply of office space will remain a headwind, we see multiple cyclical drivers of growth outside of new construction. Moving to housing. Headlines continue to point to ongoing softness, especially in the new build space. Interest rates remain relatively elevated, prices remain high and affordability remains low. As a result, we expect continued new construction weakness in 2026. However, our structural changes and growth investments should allow us to continue to outperform the market. In remodel retrofit, we are assuming modest growth in 2026. This is consistent with the LIRA projections. In addition, we expect continued market outperformance in our R&R business. And importantly, we expect ongoing margin and cash flow consistency in this segment. Finally, our optimism continues to build around the addition of Steelcase to the HNI family. As I stated earlier, we are confident in our projected synergies of $120 million and accretion of $1.20. And as VP mentioned, we now expect modest accretion in 2026. We entered 2026 a transformed and fundamentally stronger organization. Upon recognition of all targeted synergies, the profile of HNI will include substantially higher earnings, stronger margins, greater cash flow and a continued strong balance sheet. This will enable us to deliver exceptional value to our shareholders, customers, dealers, members and communities. Thank you again for joining us. We will now open the call to your questions. Operator: [Operator Instructions] Your first question comes from the line of Reuben Garner with The Benchmark Company. Reuben Garner: Maybe to start just the clarification about the outlook for the year, given the stub period and your efforts to kind of show what the underlying business in the fourth quarter. Are the revenue and double-digit earnings growth comments for next year? Are they off of the base without Steelcase or the base with Steelcase? Jeffrey Lorenger: Perfect, Reuben. I'll kind of walk through the pieces. I think if you look at the -- on the face of the [ $346 million ], that's including the Steelcase stub as well as all the purchase accounting, which is close to $4.6 million headwind, if you take out the purchase accounting, it's $3.53. That's what you're going to want to compare to for the future years, because that's what's ran through the P&L. And if that specific number is going to actually be up 16% if you talk about the growth. And then if you look at the $3.74, that's excluding purchase accounting and the Steelcase stub period. Reuben Garner: And the double-digit growth for '26 would be off of which 1 of those 3 numbers. Jeffrey Lorenger: $3.53. Reuben Garner: Perfect. Okay. And then your comments about Workplace Furnishings in the first quarter. I don't think I heard you mention weather just seeing what's happening in some of the major cities in the Northeast and knowing that New York in particular is playing a role. Is that in the recovery? Is that driving the kind of flattish, I think you said first quarter? And what gives you confidence about the acceleration that you're expecting as the year progresses in the mid-single-digit full year guide, is there any kind of backlog or order numbers from Steelcase and HNI legacy that kind of gives you confidence in a pretty meaningful acceleration as the year moves on. Jeffrey Lorenger: Yes, Reuben, that's a good question. I mean, weather is always can be a impact. We don't really hang our hat on that. I mean I think it probably has some impact. It's been a little choppy. Even in the fireplace business, the hearth business, because they are outside and getting the homes to install. So there's a little pent-up there probably at a little headwind. But the bottom line is both when you look at legacy and Steelcase we've got really strong, healthy activity, bid counts, both number and dollars, particularly in the contract side or in the high teens. The funnel, our funnel metrics are up in count and in dollars and particularly in large projects, over $5 million. And I'd say these are consistent across what I would call both legacy and the Steelcase business, if you look at it. And that's what's kind of driving our confidence in addition to the macro topics that I talked about firming up on office and net absorption and things like that. So you got that going on macro and micro internally, we see these big numbers and presale activity numbers all trending nicely positive. Reuben Garner: And then, Jeff, you've had a little over 60 days, I think, if my math is right, since the deals closed as you've been able to kind of get in and meet with people, see how they do things. What have you learned? What kind of has surprised you to the upside or downside? What opportunities do you think you've kind of developed or seen over the last couple of months? Jeffrey Lorenger: Yes, it's a good question, Reuben. I spent a lot of time with the teams in Grand Rapids and a lot of time -- a lot of time in the market. And I would say first of all, confidence continues to grow on why we did this transaction. If you look at the customer reach and the complementary nature of the brands and the geographies go to markets, the talented teams are working well together. We're out of the gates quick. And then I would tell you that the positive response we've seen from customers, dealers, sales force, influencers, basically, people in the value chain as I've gone out in the market and talk to them are very positive on this combination. And so that's -- that's been a real -- I mean, we predicted that to be the case, but actually going to talk to customers in their locations. And here in the questions they ask and the enthusiasm they've shown for this. It's been really strong. Reuben Garner: All right. And I'm going to sneak one more in. I'm not going to count that first one as a full question. So the Building Products space. Your outlook for low single-digit growth is super encouraging, very impressive given how you performed in '25. It looked like you've changed some things up about how you're selling or displaying the product down at the builder show a couple of weeks ago. I guess, talk about what's driving your outperformance of the industry. There's not a lot of categories in building products, talking about kind of even flattish volume environments for this year. So for you guys to do it on top of what you did in '25, something has to be working for you. Can you just kind of dig into what you're doing there? . Jeffrey Lorenger: Yes, we can -- VP can comment on us as well. I mean I think we've started to talk about this a while ago, Reuben, which is really getting closer to the builders and the customer engaging in the market being laser-focused on what we can bring to the table for our customers. And it's been -- it's early days, but it's being really well received. I mean, we've got a great product lineup. We hit all price points, all fuel types. And as we get in and engage more specifically from a manufacturer side alongside our industry best-in-class distribution partners, the two things are really starting to have an impact. And combine that with the service model that we have in our large installing distributors, independent and our [ FHH ]. What I would tell you is it's, it's moving the needle. And so we got a good product pipe we're talking about in the electric category. And all these things are really starting to catch hold. And I think that's really what's going on. I mean it's, it's nothing more than really customer intimate focus where customers want to be met, whether it be in the R&R segment or in the new home segment. I don't know VP if you've got any other... Vincent Berger: Yes, Jeff, I'd add and the way we measure this, Reuben, is you can -- everybody sees the news of permits down 7% year-to-date, and they see contracting markets. We actually measure market by market and the initiatives that Jeff is talking about the intimacy, we can see that we're seeing better results on that. So those are share gains and in some cases, get more fireplace spec. So it's the controlling the controllables. And on the remodel side, we've done a nice job on the [ spoke ] side of our business. We've gone to a single brand to consolidate it. We've been able to get a lot more reach a lot more reach into the retail in the big box. So that was an area for growth that's inside the numbers as well. So the long-term investments are paying off. We still have a lot more to do to get to more markets and more builders, but we certainly are not pulling victim to a down 7% permit number. Reuben Garner: Great. Thanks for the detailed guys. Congrats on the strong close to the year and the strong outlook, the stock markets been a bit rational today, but I assume all this will work itself out and good luck in '26. Operator: Your next question comes from the line of Steven Ramsey with Thompson Research Group. Steven Ramsey: Good morning, everyone. I wanted to start on the synergy number, $120 million being Americas focused. A couple of things on that. First, I would -- given your past execution, I think there could be upside to that. I'm curious kind of what points or targets you would need to reach to potentially raise that down the road? And then secondly, it being America's focused seems to imply that Steelcase International is still projected to be a negative offset -- could that be a source of upside in the future? Vincent Berger: Perfect, Steven, I'll take it kind of in two pieces. The first, the $120 million that we originally announced is through our disciplined approach that we've learned through the KII process. You heard Jeff say we're still comfortable with that number. It takes every bit of three to six months to get the team working on the specific projects of how we're going to go execute it, which is why I've talked about accretion of $0.60 in the second year once these projects are up and running. And so to your question about timing, six months in, if we've learned more, we'll share more. But right now, we're focused on making sure we understand the buckets between procurement, logistics, SG&A and network optimization, and that we'll share with you as we learn more as we go. But I think the key thing from the last time we talked is we expected it to be neutral in year one. And now that we're in there, this is actually going to be modestly accretive in year one. And that's really good considering the capital structure and the additional shares that were issued that, it doesn't change our total target, but it shows that we'll start seeing the benefits of a little quicker. That's kind of question one. Question two, on International, that is not offsetting anything. This $1.20 stands on its own. The international business has very good assets. As Jeff said, with the business and the teams working together, we're getting up to speed on that business, whether it's APAC or EMEA, we're getting lots of insight of how the businesses in their go-to-market and their advantages. And I'd tell you the teams are energized right now to drive profit improvement plans. They're in place in all of those areas, and that will not be a drag on the $1.20. Steven Ramsey: Okay. That's great color. Wanted to think about the resi growth investments, and you talked about that being a consistent margin. Is the implication that 2026 resi margin is flattish with sales up? And is there a cadence for the year on the resi margin profile? Vincent Berger: Yes. I think that's the right way to think about it, Steven. That business is extremely flexible in profitability as you've seen it from whether it's $500 million or $850 million, it tracks between the 17% 18%. We are going to continue to make the investments Jeff was talking about with builder and getting closer to the builder. So we would expect those margins with the revenue growth to stay right around the same area. Steven Ramsey: Okay. And then maybe you can share a bit more on the resi growth investments and if those have shifted in the last year or so as you've started making those, it's clearly working and your -- it sounds like you're saying it's geared towards builders yet R&R is the growth drivers. Maybe you can kind of connect the dots there on the investments being more to builders, but the growth being from R&R. Vincent Berger: Yes. I think there's a couple of things on this one, Steve. One, when we talk about investments, this has been a three-year journey. The operational excellence of this business is what's allowed us to deliver the results. In the last three years, we've moved to a front-end structure. We brought in leaders running each of these business units that bring those front-end points of view. And they're the ones leading the charge in each of the intimacy models in both new home and existing home. We've also made a significant amount of investments in product and innovation. Part of this success and our offset against the market is we are entering new categories and new areas. Specifically, an example would be wood stoves and DIY. That's a large market. We didn't have a place in. So we're making investments with go-to-market there. It's allowing us to do it as well as what Jeff said on the electric side. So I think you're seeing investments on the new home and the remodel side as well, and they just pace to how they come in through the revenue streams are not always at the same time. Jeffrey Lorenger: Yes, I think it's a great point. I also would -- we're getting really good. I think someone else mentioned at the IBS show is a different look from what we've had in the past. We're connecting more to designers, interior designers. I mean there's a lot of focus there relative to design as well, Steven. So it's kind of across the board -- and I lump it all back to getting much closer and intimate with our geographic areas, design trends, customer intimacy in all the while working that with the changes VP talked about. It's been a couple, three-year run, and it's starting to pay dividends, and we're going to keep investing. Operator: Your next question comes from the line of Greg Burns with Sidoti & Company. Gregory Burns: I was just hoping to get a little bit more color on the profit headwinds in the first quarter. What exactly are they? And why are they going to be rolling off as we move through the balance of the year? Vincent Berger: Yes, Greg, it first starts with just some timing of the revenue. It's a little choppy on kind of how some of the contract side of the business, everything that Jeff talked about on the backdrop is all good and favorable for us. And if I look at even how orders came in, in the fourth quarter, the workplace was actually up 5% and Steelcase's actually showing up good order trends as well. It's just the timing of when that stuff is going to shift. So -- the revenue is the first piece, and we have a couple of comps just from last year that we're up against. That's why we do believe it's a short-term issue and the full year is more important. I think on the expense side, there's really two things happening bringing in the Steelcase family, there's a comp timing that's hitting in the first quarter that would have hit in the second quarter under their P&L. So that's a little bit of expense pressure. And we're still balancing our investments. We're still making sure that we're thinking about the long game and the macroeconomics tells us still to keep investing. So I think the revenue growth, the timing of the expense and that's continuing investment puts the short-term pressure, but more importantly, as we go through the year, you're going to see the double-digit EPS growth accelerate in Q2, Q3 and Q4 based on not only volume but the visibility story we're talking about. Gregory Burns: Okay. Great. I think last quarter, you called out some hospitality orders or the timing on hospitality orders. Could you just maybe update us on the hospitality market and if there's any any change there? Jeffrey Lorenger: Yes. No, there is not. The hospitality market is solid. We were up against the comp. But look, say similar to the contract market, pipeline is strong. Our business is making investments performing well. They have a market leader position in in-room furniture. And so we like that business a lot, and we expect that it will perform at or above prior year so. Operator: Your last question comes from the line of David MacGregor with Longbow Research. David S. MacGregor: I guess from our dealer conversations this quarter, it's pretty clear that demand for design support has accelerated pretty dramatically. And so just wondering if you can talk about the amount of work that you believe is developing in the pipeline, but maybe not yet in the order backlog -- and how you're thinking about the timing of that were converting to orders and then to sales dollars? Jeffrey Lorenger: Yes, that's the question, isn't it, David. I think you're hearing the same stuff that we're seeing, which is there's a lot of activity. It's -- I believe it's real. And we're actually -- just to get upstream on that a little bit, a lot of our businesses are deploying additional resources to help dealers and customers get things through the pipe, because that does become a backlog area relative to the ability to get things designed. We're also working on some AI tools and some other digital tools to be able to help that as well for the long game. But look, we -- historically, this business has had a pretty stable conversion kind of spec to order cycle. And post-COVID, it's been a little bit all over the map, and it hasn't really settled down. But I would tell you that once these things start and you see the commitment, particularly on the larger projects, they come in. It's just sometimes they don't fall perfectly in the areas. And the other thing that we're seeing with the Steelcase acquisition is their exposure to the large stuff that once it gets lit, it goes, it's robust. Now we're still working with them on how they view their timing and predict the order to revenue cycles and the spec to order cycles. So I can't really give you a great answer on -- it's 90 days or 60 days or it's 30 days. But it's real and it's volatile relative to when it gets put in. But we're bullish. David S. MacGregor: Yes, it's out there. There's no doubt about it. Second question, really just around the discussion around synergies and you talked about the $120 million -- it seems like you're bumping the '26 expectation a little bit. And I'm mindful that you haven't any change to the $120 million. But I guess the question is, is the better outlook on '26 a function of maybe incremental synergies that you've identified? Or is it really timing? And then I guess, related to that is the whole discussion on commercial synergies, which I fully understand why you don't want to get into too much detail around that at this point. But I'm wondering if you can just discuss it at a very high level kind of the actions you're taking to facilitate the eventual capture of those commercial synergies. Vincent Berger: Yes, I'll take the first part of that, David. The timing and the dollar of year one actually hasn't changed as it relates to the synergies. We had predicted a little bit more transition costs and some offsets in our original accretion analysis as you put the businesses together. So it's just -- as a result, we'll just get a little bit more of that that 2-year look of $0.60 a little bit earlier. So I would tell you that our philosophy hasn't changed, and our approach hasn't changed as we've set that number. Jeffrey Lorenger: Yes, David. And then on the synergies, yes, you're right, it's early days. And we -- what I would tell you, though, as I've traveled, we're seeing some nice, what I would call, organic connections between our networks to support revenue synergies, particularly with some of our open line brands. And so that when that formalizes more and gets more structured to it. We're going to kind of let it play out a little bit and see kind of how the natural system works, and then we can look more at that. But look, I mean it's going to -- we see some organic pull for some of that revenue. And it's early days, but we'll probably be talking about that down the road. But right now, it's -- I'm encouraged by what I see. . David S. MacGregor: Can I squeeze maybe one more in. And just maybe for the model, if you will, working capital in 2026 and how we should be modeling working capital. . Vincent Berger: We're going to -- we benefited with the pooling on the Steelcase balance sheet. We're actually sequentially improved a little bit. And just with the timing of expenses, we're going to need to make a little bit of an investment, David, but not significant when you think about the net working capital as we go into 2026 and beyond. . Jeffrey Lorenger: So -- but I think one more comment there, though. The operational discipline inside of the HNI piece as we bring into that balance sheet, I would tell you there's opportunity as we get into the out years. Operator: That concludes our Q&A session. I will now turn the call back over to Mr. Lorenger for closing remarks. Jeffrey Lorenger: Thank you for joining us today and your interest in HNI. We look forward to speaking with you again in April. Have a great day. Operator: Ladies and gentlemen, that does conclude our conference call for today. Thank you all for joining, and you may now disconnect. Everyone, have a great day.

39天前Insight Analytics约5分钟阅读

NRXXY 2025 Q4 财报电话会议

Operator: Ladies and gentlemen, welcome to the Q4 2025 Results Conference Call. I'm Moritz, your Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Anja Siehler. Please go ahead. Anja Siehler: Thanks, Moritz, and also a very warm welcome from the Nordex team in Hamburg. Thank you for joining the Q4 2025 and full year results management call. As always, we take -- we ask you to take notice of our safe harbor statements. With me are our CEO, Jose Luis Blanco; and our CFO, Dr. Ilya Hartmann, who will lead you through the presentation. Afterwards, we will open the floor for your questions. And now I would like to hand over to our CEO, Jose Luis. Jose Luis Blanco: Thank you very much for the introduction, Anja. As said, on behalf of the Management Board, a very warm welcome to all of you joining us today for the Q4 and full year 2025 results. Results that conclude a transformational period and a transformational year for Nordex. 2025 has been a landmark year. We delivered and exceeded our medium-term margin target ahead of schedule, generated positive free cash flow, achieved record order intake and strengthened our balance sheet. This very much sets the tone for the years ahead of us. Let's now walk you through what drove this performance and how it prepared Nordex for the next phase of profitable growth. Let's start with a short recap of how we were able to deliver as promised or on the upper end of the promise. Over the past 3 years, we have made consistent progress in strengthening the business and our profitability. 2025 is the year in which Nordex demonstrated that the operational and financial improvements we have been working on over the past 3 years are now full translating into our numbers. We delivered robust growth across all major KPIs, increased profitability substantially, generated strong free cash flow and strengthened our financial foundation. Combined, these achievements set a strong tone for our longer-term strategic ambitions. Moving on, 2025 was a milestone year for Nordex. We delivered record order intake of 10.2 gigawatts, reached an 8.4% EBITDA margin and generated EUR 863 million of free cash flow, all well above last year and ahead of our original plan. These results show that our strategy is working and that our business is now consistently delivering strong margins and is cash generative. Based on this track record, we now aim to set the tone for what is ahead of us. First, 2026 guidance, continued sustainable improvement, capital allocation, the introduction of our first shareholders' return policy; and third, our new strategic midterm target and upgraded EBITDA margin of 10% to 12%. Before we go into more details on the mentioned aspects, let's look at how we performed in terms of market position in 2025 first. 2025 was also a year in which our market position strengthened further. We were again able to keep our #2 position globally, improving, not in the relative position, but in the market share of the global position. In Europe, we continue our strong momentum and achieved leadership position for the fourth year in a row. And this clearly reflects our competitive product range and our strong customer relationship and ability to deliver in our core region. The Americas, we continue to rebuild our market position, mainly driven that year by Canadian orders reaching an 11% market share in 2025, a solid step forward after the reset in previous years. Let's now start the usual chapters regarding the operational and financial highlights. Let me start with an overview of the fourth quarter and the full year. Q4 was another strong quarter operational. Our combined order book grew to EUR 16 billion with the turbine order book up 30% year-on-year to over EUR 10.1 billion and the service order book rising 20% to nearly EUR 6 billion. Financially, we closed the year with EUR 307 million EBITDA in Q4, an increase of 188% compared to the same period of 2024. Our EBITDA margin in Q4 reached 12.1%, up more than 7 percentage points year-on-year. Service EBIT margin increased further to 19%, marking another quarter of consistent increase. Free cash flow in Q4 reached EUR 565 million, more than doubling last year's level. And finally, our net cash position exceeded EUR 1.6 billion at year-end. We also successfully reached our medium-term EBITDA margin target of 8% already in 2025 and we believe we can deliver further margin improvements based on the levers we see. And with this, let me walk you through the operational performance in more detail. In Q4, we record EUR 3.2 billion of turbine order intake, an increase of around 10% compared to Q4 last year. This corresponds to 3.6 gigawatts, representing 9% growth versus Q4 2024. A few important aspects to highlight. First orders came from 12 different countries, demonstrating continued strong diversification. ASP remained stable at EUR 0.89 million per megawatt comparable to last year level. The largest markets in Q4 were Germany, Canada and France, supported by steady demand in our focus regions and countries. On a full year basis, turbine order intake reached 10.2 gigawatts, representing a record EUR 9.3 billion in order value, an increase of 25% year-on-year. Let's move to the next slide, the order book. Our turbine order book ended the year at EUR 10.1 billion, up 30% versus the same period of 2024. On the service side, our order book increased to almost EUR 6 billion, up 20% year-on-year. We now have almost 14,000 turbines covered by long-term service contracts, representing 48.3 gigawatts under term service contracts. And the combination of structurally larger projects order book and a steadily growing service base provides a strong visibility for revenue and margin delivery in 2026 and beyond. Let's talk about the service business. Our service business continued its predictable trajectory in 2025. In Q4, service revenue reached EUR 240 million. Service EBIT reached EUR 46 million, corresponding to 19% EBIT margin. This marks the eighth consecutive quarter of margin expansion in the service business, driven by improved efficiency, strong availability levels in our installed base and disciplined execution. Let me also highlight a few key operational KPIs. The average availability of our wind turbines under service remain high at around 97% and the average tenure of our service contracts continues to be around 13 years. Let's move to the next slide, our installation and production figures. Installations were up by 25% year-on-year, reaching around 2.1 gigawatts in the fourth quarter of 2025. In Q4, we installed 376 turbines, up from 283 in the same period of 2024. Full year installations reached 7.663 megawatts -- or gigawatts, compared to 6,641 megawatts in 2024. Turbine production increased to 519 turbines in Q4 compared to 445 last year. Paid production remained stable despite temporary delays at one of our suppliers in Turkey. And now I would like to hand over to Ilya for the financials. Ilya Hartmann: Thank you, Luis, and a warm welcome also from my side. So before I start with my usual slides, let's take a brief look at the past fiscal year and the achievements of our goals or targets. So the slides on the screen illustrates the highlights of the past year. Following the initial publication of our guidance for 2025, we made strong progress in our operational performance throughout the year. Jose Luis has talked about that. And as a result, we were able to further strengthen our profitability, which led us to upgrade our full year EBITDA margin guidance in last October. By year-end, we achieved and in some areas, even exceeded all of the targets we had. So let me use this opportunity to thank Team Nordex for their tireless efforts worldwide. We're very proud of you. And with that, let's move on to the next page, where I would like to share a few insights on the development of our income statement. After sales were temporarily affected by project mix and scheduling effects earlier in the year, we saw a significant rebound in the fourth quarter. Sales increased by 16% to around EUR 2.5 billion compared with EUR 2.2 billion in Q4 of the year before. Main contributors were Germany, Turkey, North America and Spain. For the full year, sales reached approximately EUR 7.6 billion, and so fully in line with our internal planning and almost right in the middle of our guided range despite some impacts from Turkey that we discussed with you last year. We continue to strengthen our gross margins, reaching 27.8% in the fourth quarter, up from 23% in the same period last year. For the full year, gross margin improved to 27% compared with 21% in the previous year. This corresponds to an EBITDA margin of 12.11% in Q4 2025, up from 4.9% in Q4 of 2024 and of 8.4% for the full year '25 compared to the 4.1% in the year before. Building on this operating performance, we ended the quarter with a net profit of EUR 184 million, compared to EUR 18 million in the fourth quarter of 2024. For the full year 2025, the net profit amounted to EUR 274 million, a significant improvement over the EUR 9 million recorded in 2024. With this, let's move on to the balance sheet. As we can see, our overall financial position at year-end remained solid and has further strengthened compared to the end of 2024, a reflection of the operational and financial performance throughout the year. Cash position at the end of the fourth quarter was around EUR 1.9 billion. Working capital came in at minus 12.4%, significantly better than our guided number of below minus 9%. Equity ratio improved steadily through the year and reached 19% at the end of the fourth quarter compared with 17.7% at the year-end 2024. This positive development is largely driven by the strong increase in our net profit. And now let's have a closer look how the other balance sheet KPIs have developed in the last quarter. Overall, all balance sheet figures continue to develop positively in the fourth quarter, continuing the trend we had already seen throughout the entire year. The operating performance in the fourth quarter led to a further increase in our net liquidity, which reached a record year-end level of EUR 1.625 billion. Again, the working capital ratio at the end of the fourth quarter was minus 12.4% or minus EUR 935 million in absolute terms. This improvement is largely attributable to the very strong order momentum we experienced in the final month of 2025. And now let's go to the cash flow and CapEx slide. Cash flow from operating activities amounted to EUR 631 million at the end of the fourth quarter, previous year was EUR 318 million and to over EUR 1 billion for the full year, previous year, EUR 430 million. And one more time, this development reflects our consistently robust operational performance throughout the year and especially the very strong fourth quarter. So in the fourth quarter of 2025, positive free cash flow totaled EUR 565 million compared to Q4 of the prior year of EUR 271 million. Full year, we closed with a positive free cash flow of EUR 863 million versus the EUR 271 million in 2024, supported, of course, by our order intake and further improvements in working capital. CapEx increased to EUR 72 million in the fourth quarter compared with EUR 42 million in the prior year quarter. And for the full year, CapEx totaled EUR 169 million, higher than last year's EUR 153 million, though still below our full year guidance of around EUR 200 million. And with that, I would now like to hand back to Jose Luis for the final chapter, our guidance and strategic outlook. Jose Luis Blanco: Thank you very much, Ilya, for walking us through the financials. Based on the strong foundations we established in 2025, we expect profitable growth to accelerate in 2026. Our guidance for '26 is as follows: sales will be between EUR 8.2 billion and EUR 9 billion, meaning a top line growth between 9% to 19% year-on-year. EBITDA margin is in the range of 8% to 11%. Again, as in previous years, we believe the midpoint is the most likely outcome as of today. Working capital ratio below minus 9% and CapEx approx EUR 200 million. This reflects continued margin expansion, steady volume growth and disciplined capital allocation. Regarding free cash flow, we don't provide formal guidance. However, based on the building blocks we have shared, you can likely conclude that we are positioned to deliver another solid free cash flow year. As mentioned at the beginning, today is not only about presenting our 2025 results and guidance, it's also about setting the tone for the years ahead of us. With that in mind, let me now walk you through the capital allocation policy we are introducing. Over the past years, many of you have asked for greater clarity on how we think about capital deployment once Nordex returns to a more normalized financial position. Let me summarize our approach. First, we remain fully committed to maintaining financial flexibility and a strong balance sheet and ample liquidity are essential to navigate market cycles in our industry. And this discipline will not change. Second, we continue to prioritize operational and strategic growth opportunities. That includes funding core organic investments across our supply chain, product enhancements and key research and development initiatives. We also want to retain the ability to pursue selective strategic opportunities, enhance our supply chain resilience and leverage opportunities to look in turbines via supporting our customers in advancing their project development pipeline. Third, with these foundations in place, we will consider returning cash to shareholders in a sustainable way. Today, we are introducing Nordex's first shareholder return policy. Under this framework, Nordex will target a minimum annual shareholder return of EUR 50 million to be delivered either through dividends or share buybacks and always subject to regulatory approvals, our capital structure priorities and stable market conditions. As many of you know, under German HEV rules, distributable profits sit within the stand-alone Nordex SE entity, and this will catch up in 2026 due to difference in local GAAP and IFRS. Therefore, we plan the first payout in 2027. This policy reflects our commitment to a disciplined, predictable and sustainable approach to capital allocation, balancing the needs of the business with attractive returns for our shareholders. And importantly, this is a first step. We remain open to refining the framework over time, always guided by the principle of maximizing shareholders' return. And moving on, let me now talk about our core markets and why we remain confident about the overall environment and our position within it. According to third-party researchers, onshore wind installation are expected to grow steadily throughout the decade. This growth is driven by 3 main factors: one, strong fundamentals in Europe and North America, which remain the core regions for Nordex; second, increasing electrification and industrial demand, which supports long-term renewables build-out. And third, selective upsides in markets such as Australia. And with this, given the structural improvements in our business and the visibility provided by our order book and the service portfolio, we are upgrading our midterm EBITDA margin ambition to 10% to 12%. The key levers here include: first, continued volume growth in Europe and the Americas and operating leverage from revenue growth. Second, higher service profitability with EBIT margin crossing the 20% mark. And third, further margin improvement via efficiency measures across production, logistics and fixed costs due to the bigger volume. As we had mentioned before, we have been working tirelessly to make this company much stronger over the last 3 years and 2025 shows the results of these efforts. And like Ilya, I really like to take this opportunity to thank our people for their tremendous efforts. Of course, our customers for their trust, support, banks and analysts and shareholders for the continued trust in Nordex, especially in difficult times. We believe we now have a good platform to deliver more profitable growth with the support of all of our stakeholders and remain committed to further strengthening the business in the years to come. And with this, let me hand over to Anja for Q&A. Anja Siehler: Thank you, Jose Luis, and thank you, Ilya, for leading us through the presentation. I would now like to hand over to the operator to open the Q&A session. Operator: [Operator Instructions] And the first question comes from John Kim from Deutsche Bank. John-B Kim: One question and a follow-up, if I may. First, congrats on the numbers. I wanted to understand when you think about capacity expansion and investment, I'd like you to speak a little bit about how we should think about factory loads. Any pinch points on supply chain? And I have a quick follow-up, if I may. Jose Luis Blanco: Yes. No, thank you very much for the question, John. I think we have provided you a view of EUR 200 million CapEx that should be sufficient to deal with the volume growth, even with the upper end of the volume growth considering in the guidance, and keeping our supply chain diversification strategy. We plan to keep Europe, eventually small growth. We plan to keep and grow India, and we plan to keep and grow China. At the same time, we are ramping up and growing U.S. So we don't plan major disruptions in supply chain, keeping the flexibility to shift volumes from region to region if needed. And we are confident and well equipped and provided for in the guidance. John-B Kim: Okay. And as a quick follow-up, can you just update us on the situation in Turkey, please, with blade supply? Jose Luis Blanco: Yes. I think we made substantial progress in derisking our situation in Turkiye. And we are, as we speak, ramping up blade production in Turkiye. We are committed with long-term investments in the market. We have been very successful in [GECA 4]. We hope to be equally successful or almost equally successful in [GECA 5] and we are ramping up the capacity to deliver our commitment to our customers and the government is, of course, happy with our commitment to the country. Operator: And the next question comes from Alex Jones from Bank of America. Alexander Jones: Two, if I can. The first one on the new capital return policy. Could you outline for us why you chose the EUR 50 million number rather than something smaller or bigger? I guess when I think about the midterm profits and therefore, cash flow of the group, I imagine they'll be substantially larger. So is there something constraining that number in the short term, be that German GAAP profits or whatever else? Jose Luis Blanco: No, thank you for the question. I think we try to share with you what our view is about the priorities, which is having a balance sheet fortress, if you will, to deal with cycles, but as well to deal with opportunities. And we think we will find opportunities to deploy capital at reasonable return, supporting our customers to make their projects through and consequently helping the company to grow further in the top line and in the profitability and achieve our midterm EBITDA target. And this is what we are -- where we are focusing now. Ilya? Ilya Hartmann: I think you said -- I would add maybe 2 thoughts. One is, first, this is an idea of a minimum EUR 50 million. So we'll always then decide in the given year if a different number if appropriate. And other than the point you mentioned of deployment is not only a fortress of the balance sheet, which I think is one of the key priorities, but also the flexibility of Jose Luis to help execution, derisking supply chain changes whenever needed to react that we have also the resources to do that. I think that's our set of priorities. Alexander Jones: That's very clear. Understood. And then if I can, on the installations in 2026. Can you give us any idea? The order intake has been very strong, above 10 gigawatts in '25. Some of that will take a while to come through, but could we see a year with installations above 9, for example, growing from the 7.6 you did last year? Jose Luis Blanco: I think we prefer to guide you in revenue and margin without going too much specific into the underlying operational figures. But definitely, we see growth in production and installation in '26. But remain that the year is very young, so we still need to sell a lot to contribute to PoC revenue and margin for 2026, and we need to grow the company in production and installation. Hopefully, the customers will not delay. Hopefully, we will not see major disruptions. We are prepared for that within a reasonable range. And I will say this is as far as I can go today. But growth is definitely expected in production and installation. Operator: And the next question comes from Sebastian Growe from BNP Paribas. Sebastian Growe: My 2 questions would be around Germany and then also the margin trajectory that you have updated. So let's start on Germany then. Apparently, we are seeing the German Economy Ministry planning to make changes to the support scheme for renewables, both from a grid access point of view, but also then from a pricing perspective with the move to CFDs. Can you comment on how that might impact turbine pricing? And what is your most important single market at this point? How has your customer base reacted to the current draft that has been linked to the public. If we could start there and then continue on the margin part later. Jose Luis Blanco: Let's do this together with you. So I know that there is a lot of -- or a slight unrest about the situation in Germany. I tend to see it quite positive. I mean the German market is going to deliver 10 years -- 10 gigawatts a year for the years to come. And this is amazing. This is record high historical volumes for the next couple of years ahead of us. Yes, 10 is not 13 or 14, fine, but it's 10. It's going to be maybe the biggest worldwide market second to China. And we have a fantastic market positioning in this market, just to set our view. Then like in any changes in system, this is -- could bring uncertainty and could slow down the market. We had a very bad experience in 2017 in Germany. So hopefully, all stakeholders learn from the mistakes, and we do the transition in a smart way that the volumes are not affected. Third, regarding the new system, I think wind onshore is by far the cheapest energy solution for Central Europe. And so we are part of the solution. We can help countries and societies to deal with affordability with energy independence, if they procure Western with technology independence and to foster electrification. Of course, the enabler for all those things is grid deployment. So I tend to think that we are in a great momentum, in a great momentum for our sector and for our company within the sector in a very important market despite some challenges that policymakers need to address in order to make this transition in the best possible way. And regarding the leak, I don't think we should comment on leaks. But my take is that wind onshore and our customers, we are part of the solution to lower electricity prices and to deliver society needs. And electrification is a must to deal with the competitiveness of Europe and Germany. And grid is the bottleneck that governments across Europe needs to address to make electrification a really powerful tool to address competitiveness. Ilya Hartmann: Yes. I mean, had anything to add, and that's really not much, I would say, agreeing with you, Jose Luis, not to comment on leakages of draft. However, I would probably remind all of us that this is a government of 2 parties. And 1 of the 2 parties was part of the previous government and has heavily supported the Wind industry. And that also led to what you were saying, Jose Luis, to the reconfirmation by this current government of the 10 gigawatt annual target in Germany. So let's see what comes out of the process. To the broader question, Sebastian, I'd say, for me, Germany with that is becoming a more normal market because now auctions from a system perspective start to work. And Germany will find a new normal across the value chain, the auction tariffs, the land leases, the developer fees, the equipment of BOP turbines. So after all, we're going to deal with a market that is very, very similar to many other markets in the world with similar economics. And then I think if anything to add, Jose Luis, that is something we have been considering when giving you this new midterm target. That is already considered. Sebastian Growe: That's a good segue indeed to my next question. In that chart on the margin walk to the 10% to 12% in the midterm, you haven't touched on the impact from price. So the question that I then would have around this is, am I right to assume that this very 10% to 12% range is a through cycle ambition? And as such, the strong volume visibility at attractive gross margin that you are enjoying right now might even result in a higher margin than this 10% to 12% range in a given moment. And it would rather than cater for if we did see this structural transition towards what is then a market price and not so much, say, determined price by a system, that this would then sort of be a normalized margin, but you would exclude at this point that you might even come out at a higher level. Is that the right way to think about it? Jose Luis Blanco: The way to think -- of course, we have made our view of what midterm prices could be and what the midterm market shares could be and what midterm volumes could be for our sector. And we are sharing with you our view and you are spot on. So we think that across the cycle, across the cycle margin. And let's not forget that the volume in Germany is going to be massive and the Central European price forward-looking 10 years for electricity are in the 70s. So -- and the best tool for lowering electricity is more wind onshore. So we are operating in a region that has certain price level in the -- for the final electricity pool. So I don't expect or we don't expect that the Central European electricity prices will drop like Finland or like any other countries like Spain in the medium term. And based on that, what we have from our view and guided you to that midterm target across the cycle. Ilya Hartmann: And maybe to the second question of Sebastian, I think your answer is perfectly in my view that this is exactly what we want to calibrate you for. Could it be better in a given year? I would not exclude it. Operator: Then the next question comes from Richard Dawson from Berenberg. Richard Dawson: Two from me. Firstly, on the U.S. market, I'm just wondering if your view in that market has changed at all. You secured the contract at the end of '25 for over 1 gigawatt. So it suggests that order momentum is picking up. But how do you see the opportunity in 2026? And where could your market share go in the U.S.? And then second question is on the EBITDA margin bridge up to that 10% to 12%. You mentioned in the presentation an opportunity to streamline costs further. You've obviously done a lot of this in the past, but could you provide some more details just on specific initiatives you have in mind for streamlining those costs? And I ask this against the backdrop of a business which is clearly growing both on the project side and the service side. Jose Luis Blanco: Thank you very much, Richard, for the questions. The U.S., let me share with you. I was 2 weeks ago there meeting customers. And I'm very pleased with the turnaround of the brand in the U.S. market after facing certain difficulties that you were aware with the former legacy platforms and quality issues. This is all behind us. So we managed to turn around this quality situation. We managed to turn around the stakeholders' relationships of the brand. Nordex brand is amazingly well perceived now by U.S. stakeholders. Current Delta for housing platform in U.S. is delivering market availability. And the team did a terrific job as well in restarting the West Branch facility and start to produce certain turbines for reservation orders we have. So we see momentum in the U.S. market. So customers are willing to keep investing in developments. Unfortunately, projects are pending, permits from the federal government. And this is something that honestly, nobody has a view of when those permits are going to flow. It's not that the permits or the determinations will not get to our customers to make their projects, it's a question of when. So there is no structural issue to reject those permits. It's a question of when those permits will be cleared, which reinforces our strategic decision to invest in that market long term. That market is facing a super cycle energy electricity increase demand cycle. And yes, maybe most of it is going to be delivered by gas, but wind plays a fantastic role to fit more with the demand profile of data centers, which is what is mainly driven electricity demand increase in U.S. So I'm without having firm orders, without having a clear view of when the firm orders are going to land to Nordex, I'm convinced that this was a very good strategic decision for Nordex. And I'm very pleased with the positioning of the plan in the marketplace. Second, talking about the EBITDA bridge margin regarding cost further improvements. I mean the key thing here is stay lean and let's make sure that we keep our overhead as lean as possible and definitely grow substantially less the overhead than the revenue to untap profitability improvement, number one. And number two, the volume brings always efficiencies, a little bit on the cost side, but as well in the underutilization. So we still run the company with certain level of underutilization. We want to have optionality to have 3 or 4 supply chain options. And the more volume we grow, the more we reduce the underutilization, the more we support the profitability improvement. Operator: The next question comes from Constantin Hesse from Jefferies. I'm sorry, it looks like the question was just withdrawn, then we go on with Ajay Patel from Goldman Sachs. Ajay Patel: Congratulations on the results. I have 2 questions, please. Firstly, I just want to focus on capital allocation again. I'm not sure I'm fully appreciating everything here. So it looks like over the course of '26, you're going to be towards EUR 2 billion in net cash. And you're not going to be really distributing too much on the dividend side until '27 and then that will ramp. It therefore, still implies there's going to be a lot of cash on the balance sheet. And I just wonder how should we be thinking about that? Like when you talk about the potential for opportunities to invest, are we talking manufacturing sites? Are we talking maybe adjacent types of business activities? I'm just trying to understand how that capital allocation thought works. And then if the cash is not being utilized maybe for distributions in at least the shorter term, could it be paying down debt or reducing use of facilities that we see a meaningful impact to interest costs? And if that's the case, what kind of improvement could we see? And then the second sort of set of questions is around the midterm target, the one on Page 23. The chart set up in a way that it looks at these 3 variables that gets us to the new midterm target, and it has it evenly distributed. And I'm wondering in my head, well, how much is actually in your own hands already and that you have enough visibility of auctions that have gone through Germany that eventually will convert to orders. You have enough of a pipeline in the U.S. You have a viewpoint on the efficiencies you're taking out of the business that are good amount of the targets under control? Or how much is it just dependent on market activity going forward? So I was just trying to understand how robust this is. Jose Luis Blanco: So let's start with the second question, Ajay. And so the year '26 is still very young. And we haven't sold what we need to sell to make the '26 guidance. So we still need to sell a lot of volume in Q1 and Q2. So definitely, this midterm target is subject to volume. Our assumption in this midterm target is that we will grow with the market. Some markets will grow, some markets will decrease. Germany long term will be an amazing market, but will be an amazing market of 10 gigawatts, not an amazing market of 14 gigawatts. Eventually, this will be compensated by U.S. picking up or other geographies. So this is a long-term view across the cycle, taking into account that we will grow with the market. So we are not taking the assumptions that we will grow market share. But of course, before talking midterm, we need to still deliver the '26 guidance for which we still need to sell. So we are exposed to the market dynamics for the midterm. With that being said, I think things don't change radically year-on-year. I mean the old product, if it's super competitive today, should remain at least competitive in the next year. So the market shares don't change dramatically over time year-on-year and markets given the capillarity we have and the number of countries where we operate, we should be able to compensate some markets with us. Regarding capital allocation, let's put this together, Ilya, I think the first priority, I mean, we need to have sufficient headroom to deal with situations like the one in Turkey last year or eventually more to come. We don't want to lose any opportunity to derisk the company, to further grow the company, to further improve the profitability of the company and some of those potential opportunities might require investments above the guidance that we have given to you, and we want to be prepared for that. Not saying that we have a concrete plan for that. Otherwise, we should share it with you, but we want to retain the option. And the first and foremost important thing is support our customers to make the projects reality. I think Germany, we heard that there are difficulties, and we want to use the liquidity of our shareholders because this company is the company of our shareholders to further invest this liquidity, supporting our customers, helping the company to further grow and to further improve profitability. Ilya Hartmann: Yes. And this is -- I think the recount of the priorities, maybe just -- I mean, very good question, Ajay. The point here is there is not much debt to pay for the company because there's only really a convert out there. And our interest is largely determined by the bond line, which is not debt that you repay with cash. And we've been working a lot on bringing the interest on the bond line down. So we will have positives there, but that's not done with the cash. And maybe to kind of support Jose Luis, thinking there is, I mean, for Nordex, that's the first time ever that in the history when it's as a listed company of more than 3 decades that it moves into the territory of those shareholder returns. And I think we should not forget that and where the company comes from. And on the other side, I'll repeat what I said maybe 10, 15 minutes ago, we're setting here a minimum. So when seeing the actual cash levels, the other opportunities that Jose Luis was describing, I think we will then come back with a more specific number. But that was to set the tone and introduce that shareholder return policy for the first time. So that would be my comment. Ajay Patel: May I just follow up on something? Just talking about the cash profile. Is it fair to say, look, these are very broad numbers, and I'm not asking you to sort of say these are right. But I think previously, we talked about 9 gigawatts of installations in the future, which effectively would move about EUR 10 billion of revenue on these types of margins, it would broadly imply EUR 1 billion to EUR 1.2 billion of EBITDA. And actually massive increase in EBITDA relative to what you've just delivered in '25. I just wonder if CapEx follows or actually the pace of which CapEx increases in this type of picture in broad terms isn't going to be as fast. And therefore, there's a much stronger picture of free cash flow developing. Jose Luis Blanco: Yes. I think the CapEx is going to depend a lot if we need to do one-off things, which we are not planning to do, and the rest building blocks, you can do the math of cash to EBITDA conversion more normalized levels than this exceptional year. But it's fair to say that '26, we expect to generate a good cash flow. Ilya? Ilya Hartmann: I will only add -- and I think, Ajay, your rough math is fully right when you say that in our core business, provide the unforeseen CapEx growth rate might be slower than the other building blocks you gave us. So yes. But then, of course, again, Jose Luis, listed a few priorities on where money might be deployed, always strengthening the core business, strengthening the balance sheet and helping our customers where needed to get projects over the hurdle in a bit of a difficult environment in some markets like the U.S. and others. And then second, yes, on the cash flow -- on the free cash flow, I probably to calibrate you, yes. If you plug an EBITDA to cash conversion rate of 50% to 60% into your models without guiding and the caveat and all that, I think then you get a -- you get a good picture of what we expect. Operator: Then the next question comes from Constantin Hesse from Jefferies. Constantin Hesse: Sorry, guys before I had some technical issues. I've got 3 questions on my side. One is, look, I think there's obviously one question mark that is basically being created around this potential risk of Germany updating their renewable energy target. But thinking about the order intake outlook into 2026, if you could maybe just provide some commentary on what you're seeing in Q1. And then I'm trying to think about the building blocks for '26. And unless -- I haven't seen any markets that have announced any kind of slowdown. I mean, Italy confirmed their numbers. Germany is doing 11%. U.K. is accelerating. Baltics continue to be good. Australia, Canada relatively fine. So is there -- are there any markets currently that you see as potential risks that could slow down orders? That's my first question. Jose Luis Blanco: Thank you, Constantin. Great to get your questions. Regarding order intake in '26, I think you know we don't guide for order intake and the year is starting. So it's very young. The quarter is not that so young. So we see a weaker quarter compared to the same period of last year. Let's see. But so far, we are presenting to you a guidance and a midterm target with our view. And on a quarterly basis, it could be changes depending timing, but we don't see substantial disruptions altogether. And markets that might be [indiscernible] which for us is important, is U.S. that this might or might not come. And we have certain contribution from U.S. in our order intake planning, not from a guidance perspective and P&L, but from an order intake planning for midterm target. Other than that, I tend to agree with you. I don't see any major crisis in markets for order intake. Constantin Hesse: Understood. And second question, just around the medium-term margin. I mean, most of my questions have been answered there, but one that remains is, I just saw an article that came out about 30 minutes ago, so Luis, where you comment on potentially having to negotiate prices down in Germany if auctions continue to come down. So when we look at the medium-term margin outlook, the 10% to 12% that you gave, are any potential cuts to pricing in Germany already included in that? Jose Luis Blanco: I think how can I phrase it? We don't plan or I think it's advisable to enter here into a price war. That's not the point. I think -- and we need to see this from a different angle. I think it's a huge volume in Germany and prices for Central Europe are at high levels, which might be reduced the more renewables you introduce. And this is what we consider into our midterm target. Of course, we need to support our customers to make the projects through. And this might somehow have a slight effect where, as Ilya mentioned, everybody needs to contribute their part to develop the land leases, the construction work and the turbine. I think we have sufficient action plan in-house to be able to contribute our part without deteriorating the margin. Constantin Hesse: Understood. But any price decreases are still -- I mean, some decreases are still included in the medium-term target is what I understood. Lastly, on capacity. I mean, you just booked 10.2 gigawatts of orders. Looking at installations over the next couple of years, it's pretty obvious that things continue to move up quite significantly. What is the current nameplate capacity of Nordex? Where do you get to the point where you would have to start building more space, more capacity? Jose Luis Blanco: That depends a lot product to product. And of course, on the 175, which is the product that over time will take over 163, we are building up capacity, and we might need to do more or less depending the timing of the installations on 163, I think we have sufficient capacity. It depends a lot about what type of capacity, assembly capacity. I think we are well -- we are running with flexibility and overcapacity structurally because of 2 reasons. First reason is derisking single geography dependency. Second is having optionality. Third is managing working capital. If you run too short in capacity, then you need to preproduce a lot and then you need a lot of working capital investment there, which we don't want to do. So we run with overcapacity. It means higher underutilization cost, which I think is the right investment to do versus flexibility and risk. In blade this is slightly different. But long history short, for this volume and for this additional volume that we put in the building block for the midterm target, I think we can do that within the range of CapEx that we gave to you in the guidance. Operator: And the next question comes from William Mackie from Kepler Cheuvreux. William Mackie: A couple of larger picture and some specific. First of all, focusing on supply chain and gross margin, but supply chain broadly, I think that ahead of the Chinese 15th 5-year plan, they have announced or declared a grand intention for wind installation domestically, which sort of looks in the region of a 40% increase in installation volumes. The impact of that, of course, is on their -- or the local manufacturing and supply chain. You have always been flexible and seeking partnership and qualifying suppliers from around the world to optimize your cost base and gross margin. So within the longer-term thinking and perhaps in the context of your chancellor in Germany, what is your thinking about the future relationship with China and how you can leverage that supply base to your benefit? Jose Luis Blanco: Thank you very much, William. I think that's a super, super good question. And we thought a lot about that many years ago. I think we -- as an industry, we need to leverage and as a company, we need to leverage on hardware economies of scale of Chinese supply chain. Software, we want to keep in Europe. Software and control, we want to keep in Europe. And within the hardware despite Europe is -- cannot be competitive in the current setup, we decided to keep a foot in Europe and support the policy about made in Europe and Net-Zero Industry Act. So depending how geopolitics works, we might need to ramp up Europe or not, but we want to have the possibility to do so. And we want as well to grow India as a balancing act for our supply chain strategy. So -- but fully committed with China, with our team in China, with our suppliers and partners in China, and they are part of our trajectory. And if geopolitics play a different role, we will adapt accordingly. William Mackie: You put together in your assumptions, input costs, tariffs, changing supply base, how do you see gross margins developing? Your gross margins, I think, exclude your direct labor costs. So it's effectively a direct input cost impact. So they seem to be plateauing. Is this a normalized level for your business? Do you envisage the scope for growth or expansion? Jose Luis Blanco: It's going to depend a lot of make or buy strategy, how much you do internal, how much you procure. But all things being equal, in the make or buy strategy or in the make or buy share on the make or buy strategy, that's a fair assumption. plateauing is a fair assumption. William Mackie: My second, I know we've been trying to understand your capacities from your internal capability. My question is more thinking about installation capability. I think historically, you've delivered maybe above 1,600 turbines or installed over 1,600 turbines in a year in the recent past, but with a different geographic mix. As we look forward, the mix is biased towards Western Europe and Germany and your installation partners, do you see sufficient capacity, whether it's crane lift, install, EPC completion, which enables you to run at higher rates as Germany and these other markets begin to increase their installation rates? Jose Luis Blanco: I think that's a super good question. And the answer is we have a plan for that but is not without risk, let's put it that way, because the record levels is going to put challenges everywhere from police escorts, to transportation permits, to building permits to all the supply chain needs to stay tuned and in focus and all government, federal and states and municipalities needs to support the journey, which so far, I think it's the case because it's a country mission, what we are discussing here, but it's not without challenges. I mean the volumes that we are going to install in Germany are massive and the number of special permits and the disruption in the highways at night, and this is going to be a challenge for the whole industry indeed. William Mackie: Super. The final question maybe for Ilya is financial. Just rounding back on an earlier question for clarification. I mean you're running an increasing level of bonding lines or project bonding lines. I think historically, you've used a number of sources for that capital, but your historic weak capital structure has resulted in higher costs. I think you were in negotiations to syndicate with new banks. Looking forward, as your capital structure increases, how could we expect your bonding line costs to change? Ilya Hartmann: Yes. Thank you. That's indeed a very good question. I alluded to it earlier a bit also when I was answering to Ajay's third question. I mean, without going to these other structure. Right now, we have been in the past year '25 ramping up a lot of bonding lines already on a bilateral basis with banks, whether that goes into syndication or continues to be bilateral. I think that is a matter of choice and terms and conditions. But for both concepts, fortunately, true is that now the costs for those bonds have come down significantly from those high levels you were talking about in the times of a weaker financial standing of Nordex. So in a like-for-like volume, at the end of this ride, they could almost half from the peak. So we could talking about half the cost, maybe even better than that. Of course, we're doing now more volumes. So we're using more bonds. Germany requires more bonds than other countries. So in absolute terms, the decrease might not be that much. But in relative terms, it would be almost 50% of the peak values. And if you want to do this for '26, and we've traditionally given you values of something like EUR 90 million to EUR 100 million of those interest costs. I think if you plug in for this year, again, we're still on the journey to recycle all those bonds. If you're talking more 70-ish number, I think this year, it's a good calibration. And then we hope to improve this further, as I said, during this year and then for the years to come. Operator: And the next question comes from Sean McLoughlin from HSBC. Sean McLoughlin: Congratulations from me also. Just coming back to German auctions, it sounds from your comments like we have seen pressure on turbine pricing as a result of the price compression in the latest onshore bids. So it sounds like this is not all getting competed out at the developer level. Just to understand what kind of change are you seeing in conversations with your developer customers in thinking of bidding at the next auctions? And how you're planning on remaining margin neutral? That's my first question. Jose Luis Blanco: I think our take there is -- and let's do this together, Ilya, is that Wind is an amazing part to solve the problem of competitiveness of Europe and Germany and lower electricity prices. The floor price of the auction is substantially lower than the 10-year forward prices of Central Europe. So we somehow wish that our customers take that into consideration. And we can support equally the German ambition without doing unnecessary or unsustainable changes in that. Ilya Hartmann: I subscribe to that. I think the one and probably many people here on the call as well have been following this industry for quite some time, and you and I have been in this industry for 20 or in some cases, 20-plus years. And we've seen a few cases where systems start to get into auctions. And Germany has officially started that in 2017, but since it was undersubscribed, it never really was an auction system. Now with the oversubscription really taking only place since '24 and really since last year, I probably see that '26 is one of those transition years. And in those markets we've been working with [indiscernible] in the past, be it in the U.S., be it in Latin America or South Africa, people need to find a new normal. And sometimes they take somewhat irrational decisions. But after a not so long time, markets normalize. And I would say, Jose to your point about the electricity pricing in Europe, sooner or later, we will see that new normal. So I wouldn't take the '26 auctions for too much. Let's see 3, 4 auctions down the road where the final pricing of electricity in these auctions has leveled out. Jose Luis Blanco: And especially after the new policy next year, let's figure out. I think I tend to see it positively in a way that is big volume, 10 gigawatts for the foreseeable future is big volume and the ultimate price in Central Europe is a decent price for everybody to be profitable. Sean McLoughlin: Just another question, just to understand a little bit the bottom end of the guidance range. You're implying a margin fall despite roughly 8% higher revenue. So just to understand what are your bearish assumptions to get to that bottom end of the range? Jose Luis Blanco: The biggest -- I mean, there are 2 or 3. I mean, one is substantial delay on the order intake. We still need to sell order intake this year for percentage of completion of products that we plan to manufacture this year. If the order intake doesn't come, we don't produce to stock. We produce to orders. Even if we produce to stock, if we don't have the orders, we cannot recognize revenue and margin. So this is the biggest risk. Second bigger risk is delays, either due to us or to our customers or to permits, installation delays, construction delays. And the third is disruptions in supply chain that we have factored certain minor disruptions if there is -- this will depend how much this disruption will affect your supply chain. Ilya Hartmann: And I think it's a very good question. We haven't mentioned it before because if we give you a range for both revenues and for EBITDA margin, of course, we shouldn't fail to calibrate you and also to mention it here, we would like to calibrate you for both those ranges from what we see today in the midpoint on the revenues. And in the EBITDA margin, it's a midpoint view and Jose Luis -- looking at you... Jose Luis Blanco: Midpoint plus. Ilya Hartmann: Midpoint plus. If you ask something, it's midpoint, but if you ask us is it's another midpoint minus or midpoint plus. I think our answer is this is a midpoint plus view on the EBITDA margin guidance. Jose Luis Blanco: And the rest is the scenarios, scenarios that we need to plan for. Hopefully, those downside scenarios will not materialize. But in case those materialize, we don't want to surprise you. Operator: And the next question comes from Vivek Midha from Citi. Vivek Midha: Congratulations again for myself as well. I have a few follow-ups, if I may. The first on the market. You mentioned that the U.S. is contributing to your order intake assumptions underpinning the midterm guidance. Could you help us understand what you have to share your assumption around that U.S. market volume within that guidance? Jose Luis Blanco: I mean you know that we don't discuss order intake guidance nor distribution of the markets within that, even in the year. So I feel we cannot be very specific there. But our ambition for U.S. was returning to our previous market share. And our view, and we might be completely right or wrong is that we don't see reasons why U.S. medium term is not a sizable market as Germany. Do we see that short term? We don't. But that's our assumption medium term that U.S. should be a sizable market as Germany and that we should be able to deliver there in our traditional 20% market share. Vivek Midha: Helpful. My other follow-up was on the cash flow side, following up on your comment, Ilya, around the sort of cash conversion, how we can think about that going into free cash flow. If I look at the key building blocks of EBITDA, working capital and the CapEx, that would appear to imply around EUR 450 million, in line with that view of 50%, 60%. That doesn't include any changes around the warranty provision topic. Should we expect any cash outflows from that? Is that material at all? Ilya Hartmann: Thanks. Very good question. I'm afraid I do my caveat one more time that I don't want to guide you for the free cash flow. But if I was accepting your number for a second, and you're always doing very well, the building blocks for us, then I would say that includes all potential outflows from anything on our provisions. Operator: And we do have a follow-up question from John Kim from Deutsche Bank. John-B Kim: More of a conceptual question. I'm wondering if you had a view as to longevity of the Delta4000 platform. As the market evolves, you tend to need to refresh. How should we think about a new platform in the next 3 to 5 years? Jose Luis Blanco: Let me see how I think our current platform with minor evolutions are very good to deliver what the market needs in the markets where we operate in Europe, where you have no restriction, logistical challenges, same applies to Canada, to U.S. So we are not going to be the ones first to launch a new platform to the marketplace. So in the horizon of what we see in the medium term, we don't see the need. Nonetheless, we need to be prepared in case our competitors do so. But I don't see the need because we can deliver the cheapest electricity source of energy in Central Europe with the current products, and there is no need for that. So let's see what the market does. And in our view, the best way for all stakeholders in the marketplace is reliable products. And reliability comes from testing, from field experience for operational platform and from taking the time to ramp up and staying at nominal capacity as many years as reasonably possible. That's the key for profitability and sustainability. So hope that the market remains that way as this has happened with Delta4000. John-B Kim: Okay. Helpful. If I can ask an unrelated question. Can you just comment on price cost dynamics in your service business? You had very strong sales. You have a very strong backlog here. But I'm wondering how we should think about cost to serve given the growth in the fleet and what levers you're throwing to kind of optimize that? Jose Luis Blanco: I mean, on our midterm target, we are considering that the service business should contribute with the growth and with slightly profitability improvement and the profitability improvement comes especially from more reliable turbines with less problems in the field to replace and repair. And then if the growth is coming as is expected in areas where you have a strong service business fleet, you don't need to grow up overheads and new capacity, but you take certain efficiency from the growth in existing geographies. And those are the levers. Our target, I mentioned in the speech, we should hit someday the 20%. Is this going to be a profitable business as the market leader? No, because we don't have the size of that business for the time being. Long term, maybe. But medium term, no, but definitely crossing the 20% is something that we are ambitioning. Operator: And we do have one more follow-up question from Constantin Hesse from Jefferies. Constantin Hesse: Just one quick follow-up on tax. Ilya, can you just remind us, I mean, after so many years of pretty substantial losses, you must have built quite a good portfolio of some tax loss carryforwards. How do you think about tax over the next few years? Ilya Hartmann: Yes, good question. As a company now that makes profit, so we need to think about taxes even in a more intense way than before. So of course, ultimately, the applicable tax rate, and that's what we're giving you on the P&L side is that German 30% rate. But when you think about cash taxes, you should more think about a 15% to 20% cash tax rate. I mean we're working on this. So take it as a very early nonguided number, but to give you an order of magnitude, that's where we're going using the losses from the past, and let's see how optimal we can get that. Constantin Hesse: And can I just ask you in terms of how long can this last for in terms of that range that you just discussed? Ilya Hartmann: I mean it will depend. I mean, according to our midterm target and now we're really entering a territory where we're typically on a public call. But of course, if we go at that rhythm and we're talking midterm, maybe of a common understanding here in 3 to 4 years, we might have absorbed and consumed all of those past losses. Operator: So it looks like there are no further questions at this time. So I would like to turn the conference back over to Jose Luis Blanco for any closing remarks. Jose Luis Blanco: Thank you. Thank you very much for the very good and intense Q&A session. Let us conclude with our key messages for today. First, '25 was a record year with a strong operational performance and major financial and operational improvements. Second, strong free cash flow and net cash position above EUR 1.6 billion, strengthening our strategic flexibility. Third, we are well positioned for 2026 and beyond. Fourth, our shareholder return policy is an important milestone in Nordex development in its first time ever. And finally, we reached our midterm EBITDA target ahead of plan, and now we are setting up to improve it further towards 10% to 12% across the cycle. Thank you very much for your time and wish you a wonderful day ahead. Operator: Ladies and gentlemen, the conference is now over. Thank you for joining, and have a pleasant day. Goodbye.

39天前Insight Analytics约5分钟阅读

EONGY 2025 Q4 财报电话会议

Iris Eveleigh: [Audio Gap] our full year results. As with every occasion, we will leave enough room at the end for your questions. With that, over to you, Leo. Leonhard Birnbaum: Yes. Good morning, everybody. Thank you, Iris, for the introduction also from my side. The past financial year has once again proven one thing. We at E.ON deliver on our promises, and we at E.ON are exceptionally well positioned to not only be the playmaker of the energy transition, but also a beneficiary of this transition. In a year that has been characterized by geopolitical instability and macroeconomical challenges, E.ON is a safe haven. One has to admit that our business is facing a secular growth opportunity. It has no U.S. dollar exposure. It's largely inflation protected. It's unaffected by U.S. tariff policy, and it's even largely shielded against the latest fear of an AI disruption. What more can you ask for in terms of resilience. But that doesn't mean that we are without challenges. And so let me now move to our -- my 4 messages before handing over to Nadia. First, we have delivered strong financial results for the year 2025. again. Second, we have not only delivered financially, we have also delivered operationally. And our focus on outstanding operational excellence means that we are at the forefront of the energy transition, and this enables us to execute our growth plan successfully now and also in the future. Third, our growth case is based on a secular growth trend, and this trend is extremely robust. It's driven actually by a broad set of structural drivers and not only by one thing changing. And it's largely independent of short-term economic and -- economical and political fluctuations. And fourth, we are committed to long-term shareholder value with a disciplined focus on value creation. We will grow our investments until 2030 and are ready to pursue further growth opportunities, but only once the parameters for RP5 in Germany are set. So on my first message, we have delivered on our financials with an adjusted EBITDA of EUR 9.8 billion and adjusted net income of EUR 3 billion, both actually reaching the upper end of our guidance range. In 2025, we have on top, executed, increased our group CapEx for the fifth consecutive year, and we have completed a record level of investments into Energy Networks up to 20% up year-over-year, supported by successful project executions across Europe. And this demonstrates again the continuous progress of our growth strategy driven primarily by our Energy Networks business. We are operationally well set up. Nadia will talk you through the details of the financial performance later. To my second message, we have not only delivered financially, we have also delivered operationally. In August 2025, we crossed a major milestone, around 110 gigawatts of renewable energy sources are now connected directly to our grids in Germany. Let me just give you some perspective. We operate around 1/3, if you calculate it in grid length of the German grid, but we have 70% of Germany's total onshore wind power capacity and around 50% of its solar capacity. We have 58% of the installed battery capacity, you name it. It's like the energy transition is happening and taking place in our grids. At the end of January 2026, just last month, we hit another milestone. We connected the 2 million renewable energy source to our German grid. For perspective, we celebrated 1 million somewhere in October 2023. So it took us 15-plus years to reach -- to do the first million, it took us 2.5 years to deliver the second million. The third million will happen in less than 2 years. That's the scale of acceleration that is currently just being driven by us. And in parallel, we are delivering on the smart meter rollout. All E.ON DSOs in Germany have met the mandatory 20% rollout target for smart meters with an increase of, on average, 60% in rollout volumes versus 2024. For us, at E.ON, this makes one thing clear, the energy transition is now an operational task on an industrial scale. And aside from massive investments, operational excellence is a prerequisite, not only to scale the business, but to stabilize also an increasingly complex system. Regarding operational excellence, let me share a few highlights from 2025 regarding standardization and digital transformation as well as some innovation examples. Within Energy Networks, we have successfully concluded our component standardization project in Germany. This gives our EU-based manufacturers visibility and builds the basis for long-term supply agreements on key components well into the 2030s. And it contains enough flexibility and scope to support a CapEx envelope beyond what we have in place right now. We are now rolling out this approach across our European DSOs as well to further strengthen supply chain planning and improve component quality across all our DSOs. And in these less standardized markets, we have already achieved a 20% reduction in technical specifications across key categories. Beyond standardization, we actively pushed the digital energy transformation by embedding digital capabilities deeply into our operations. Obviously, you can't integrate 2 million feed-in points without digitization. So in Energy Networks, for example, our new field assistant app in Germany provides technicians real-time visibility of the power grid real time. I emphasize real-time visibility. Early results show up to 45% less effort for circuit planning, up to 40% less documentation, enhancing both safety and productivity. In Energy Retail, we continue to invest into digital capabilities that improve efficiency and performance. Based on that, our U.K. business was able to increase digital sales by 30% in Q4 2025 compared to the same period 2024. And finally, as a playmaker, we do, as you would expect, also innovate. In Energy Networks, we are rethinking grid expansion. We developed a feed-in grid socket as we call it, that bundles renewable energy sources at a single grid connection point. The simplicity, speed and cost effectiveness of the feed-in grid socket means that developers can access capacity faster through online booking and achieve a quicker and cheaper route to grid connection. For our retail customers, we continue to rapidly expand our innovative offerings, and we now have around 16 flexible energy propositions across 6 markets, including the world's first bidirectional charging proposition launched with BMW in September 2025. So standardization, digitization, innovation, the message is clear. This is part of operational excellence, and this is how we deliver and build the foundation for future success. Let me get to my third message regarding the extremely robust secular growth trend that we are in. On our Capital Markets Day in 2021, which was the last one we did, we set a clear strategic course, focusing the business on energy networks and investing decisively in grid infrastructure. Since then, we have continuously ramped up our investments. When we compare the year 2021 to 2025, the level of energy networks investments has doubled. And many of the emerging growth drivers have not yet reached their full potential. Let me touch upon a few ones. Continued grid expansion and modernization. It's clear that grid reinforcements are necessary to deal with the integration of renewable energy sources associated -- and the associated increase in volumes. But that's also true for other drivers like data centers. In the south of Frankfurt, for example, we planned upgrades to the high-voltage lines, and that will increase transmission capacity by 2.5x replacing 170 old mass with 135 new ones. In data centers, we have last year committed to connect an additional 12 gigawatt of data centers to our grid in future years. And just as one example, we will build the connection for 700-megawatt data center in Nierstein, close to Frankfurt, which will be one of the largest grid connections for data center within Europe. E-trucks, 5 years ago, when we did a Capital Market Day, we were still assuming that hydrogen is going to take a large part of truck transportation. But right now, actually, this is not looking like it. We are moving towards electrification also here, and we are reaching the tipping point with the total cost of ownership approaching parity, if not having being already beyond parity. And the EU-wide CO2 fleet standards require manufacturers to reduce new fleet emissions. This is an emerging opportunity, but also a big commitment of E.ON for the green mobility transition. In Germany alone, we will be adding more than 160 new grid connections for high-performance electric truck charging infrastructure. That represents roughly half of the nationwide fast charging network for electric trucks as initiated by the German government. So to summarize, our growth case is robust, supported by diverse growth drivers that accelerate well into the decade ahead. And if one driver turns out to be less than in the past, always others have turned out to overcompensate for that. So we are extremely confident on that trend. And that brings me to my final message for today, the further upgrade of our networks investments that we will do. So we have rolled forward our guidance to 2030, and we will increase our 5-year CapEx envelope from EUR 43 billion to EUR 48 billion for the years 2026 to 2030. We continue to invest at a run rate of close to EUR 10 billion per year from 2027 onwards, which translates into a 10% power RAB growth in Germany. As said, we are operationally ready to invest more. Our processes and capabilities fully would support a higher investment pace that is also potentially really needed. As highlighted today, it is our continued operational excellence that enables us to capture and convert this growth into strength and value for our shareholders. And our attractive combination of organic growth with a continued dividend growth target of up to 5% per year offers attractive long-term value with an opportunity for more. Now a successful energy transition requires significantly more network investments. They are essential from a macroeconomic perspective to avoid cost. They are good for our customers. They are politically supported in the business case in itself crucial for industry. Therefore, our confidence that final RP5 package will be attractive enough to actually deliver on those CapEx envelopes remains unchanged. We need more infrastructure. More infrastructure is good for German customers. Therefore, we assume that the prerequisites will be in place. What we need as a prerequisite is the necessary regulation that gives us the long-term planning certainty and financial attractiveness to support this further expansion. With that, let me hand over to Nadia. Nadia? Nadia Jakobi: Thank you, Leo, and a warm welcome to all of you from my side. I'm pleased to share with you the details of our 2025 financial performance and our new guidance for 2026 and outlook to 2030. My 3 key messages for today are: first, we delivered a strong performance in 2025. Once again, our steady execution translated into strong full year results and record high investments, providing growth despite ongoing geopolitical and macroeconomic uncertainty. We achieved an adjusted EBITDA of EUR 9.8 billion and an adjusted net income of EUR 3.0 billion, both reaching the upper end of our guidance range. Our investments increased by 13% year-over-year to EUR 8.5 billion, supporting continued growth in our regulated asset base. Second, we introduced our 2026 guidance and provide an outlook to 2030. We expect to deliver more than 6% earnings growth, while shareholders continue to benefit from a reliable dividend growth commitment of up to 5% per year. This represents an attractive total shareholder return. We maintain strong investment momentum, increasing our 5-year CapEx plan by over 10% to EUR 48 billion, while strictly adhering to our value creation framework. And third, our strong balance sheet provides further opportunities to pursue additional investments beyond the current guidance once regulatory visibility on key RP5 parameters in Germany improves. At the same time, it provides us with a prudent buffer against potential risk. On my first message regarding our strong 2025 delivery. As we already anticipated earlier this year, our adjusted EBITDA came in at the upper end of our guidance range with EUR 800 million year-over-year growth. We saw a significant EBITDA increase in our Energy Networks business through accelerated investments in our regulated asset base across all our regions. Our annual network investments increased to EUR 7 billion in 2025. As is well known, the result was also driven by value-neutral timing effects. Further effects in Q4 bring the total amount to around EUR 400 million. Most of the effects came from our Energy Networks Europe business, driven by volume effects and recovery of network losses. The remainder is with our German Networks business, where higher volumes and lower redispatch costs added a high double-digit million euro amount. Our Energy Infrastructure Solutions business grew by around 5% year-over-year to EUR 588 million. The growth was driven by higher volumes compared to previous year and improved asset availability in the U.K. and Nordics. Additionally, we saw investment-driven organic growth as well as continued smart meter installations in the U.K. Moving to Energy Retail business. Here, we landed as expected at the midpoint of EUR 1.8 billion. The earnings development in the U.K. progressed as anticipated with the well-known effects continuing. In our B2C segment, customers continue to switch from SVT into fixed-term tariffs. In our B2B segment, contracts from previous years continue to roll off. Price adjustments in Germany from earlier in the year had a positive compensatory effect. Just for completeness, we had a negative high double-digit million euro one-off effect from efficiency programs in our Energy Retail and ICE business. This brings our total one-off effects to around EUR 300 million, resulting in a total underlying EBITDA in 2025 of EUR 9.5 billion. Our adjusted net income came in at EUR 3.0 billion at the upper end of our guidance range. We continued to see slightly higher depreciation costs caused by the increased digital investments with shorter useful lifetimes. At the same time, our interest cost rose due to the higher net debt level compared to last year and the higher refinancing cost for maturing bonds. On an underlying basis, this converts into EUR 2.84 billion of adjusted net income. We maintain a strong balance sheet. Economic net debt decreased by EUR 200 million quarter-over-quarter to around EUR 43.2 billion at full year 2025 despite the continued investments in Q4. Our investment increased by 13% year-over-year to EUR 8.5 billion, extending our track record of 5 consecutive years of annual increases following our strategic repositioning in 2021. Our strong operating cash flow of EUR 3.6 billion was the main driver of the debt reduction in line with the typical pattern. As a result, we closed the period with a comfortable debt factor of 4.4. This shows that we remain fully committed to a capital structure staying below our up to 5x promise to maintain a strong BBB/Baa rating. This balance sheet strength is further supported by 100% cash conversion rate, reflecting disciplined working capital management and the high quality of our earnings. Turning now to my second message, our new attractive guidance framework. For 2026, we are guiding an EBITDA of EUR 9.4 billion to EUR 9.6 billion and an adjusted net income of EUR 2.7 billion to EUR 2.9 billion. For 2026, we expect a broadly stable EBITDA development. In the Energy Networks segment, continued investments into the regulated asset base will be largely offset by cost for further growth in our Networks business. Our Energy Retail segment is expected to remain broadly stable at EUR 1.6 billion to EUR 1.8 billion with operational improvements, including increased stabilization of our procurement, largely offset by the structural deconsolidation of one of our participations, moving it to at equity accounting. In Energy Infrastructure Solutions, continued investments are expected to drive earnings growth in 2026. This development feeds through into our adjusted net income. Looking out to 2030, we expect our underlying earnings to grow by more than 6% on average per year. In absolute terms, that means adjusted EBITDA increasing over EUR 3 billion to around EUR 13 billion by 2030. Over the same period, we expect our underlying adjusted net income to grow at the same pace by 6% per year on average. This takes us to around EUR 3.8 billion by 2030, an increase of around EUR 1 billion. Let me now outline how each of our 3 business segments contribute to our growth story. In Energy Networks, we are stepping up investments in all our markets, which translates into underlying EBITDA growth of around 6% per year to 2030. Germany is by far the largest contributor, driven by continued investments in the power RAB. In addition, Sweden and Czechia are key contributors. In Energy Infrastructure Solutions, we expect to see a CAGR of 12% by 2030, turning into an EBITDA of approximately EUR 1.1 billion. The largest business drivers are B2B solutions, including on-site generation, battery opportunities and district heating and cooling. In Energy Retail, we expect to ramp up our EBITDA to EUR 2.1 billion by 2030. The growth is primarily driven by innovative products such as flexibility and e-mobility offerings as well as higher efficiencies stemming from the centralization of our procurement and further digitization. This translates into exceedingly strong cash generation. By 2030, our Energy Retail business is expected to generate a cash contribution of around EUR 7 billion, almost 3x what we plan to invest. Therefore, Energy Retail plays an important role in funding our investment program. Let me now outline the CapEx envelope that underpins our growth story. Since our strategic repositioning in 2021, we have consistently increased our CapEx envelope, and we are doing so again. We raised our CapEx to EUR 48 billion for the 5-year period to 2030. We have rolled forward our CapEx for another 2 years. Our CapEx amounts to around EUR 10 billion per year in 2027 and 2028. We will maintain this level in 2029 and 2030. This translates into a 10% power RAB CAGR in Germany, reflecting investments of more than twice our depreciation. This also increases the power share of our total WAP from 88% in 2025 to 94% by 2030. This expansion is fully aligned with our strict value creation framework, ensuring that each segment delivers a business-specific value creation spread. By far, the largest portion of the investment budget, around EUR 40 billion is allocated to our Energy Networks business. Most of this capital is allocated to power grids. In our Energy Infrastructure Solutions business, we plan to invest around EUR 5 billion over the 5-year horizon. These investments are mainly allocated to our district heating network, our industrial and commercial customers for decarbonized energy and heating solutions as well as to opportunities for data centers and batteries. Within Energy Retail, our investment focuses on innovative products and -- advancing our digital capabilities to service our customers in an efficient way. Let's move to our financing outlook. Our balance sheet capacity remains unchanged at EUR 5 billion to EUR 10 billion, even with a higher investment budget. We retain flexibility for selective value-accretive portfolio opportunities while benefiting from high cash contributing of our energy retail business. Hence, our strong balance sheet provides a solid foundation for additional investments while keeping a prudent risk buffer to preserve financial resilience. As Leo mentioned earlier today, the growth opportunities we have are robust and long term, particularly for power grids. And we stand ready to invest more, considering what is still necessary for a successful energy transition. We are operationally and financially prepared to increase our CapEx run rate in the outer years and invest an additional EUR 1.5 billion to EUR 2 billion per year, considering what is still necessary for a successful energy transition. But for that, we first need the necessary regulatory visibility for improved RP5 parameters. This brings me to my final message. With our new attractive outlook to 2030, we are fully committed to deliver sustainable earnings growth of more than 6% per year and grow our dividend up to 5% per year. And we have optionality for more based on the structural growth of power grids that is still needed. Our combination of organic growth alongside growing dividends offers attractive long-term value for our shareholders with an opportunity for more. And with that, back to you, Iris. Iris Eveleigh: Thank you, Nadia. And with that, we will start our Q&A session. Let me remind you all please stick to 2 questions each. And the first question for today comes from Wanda from UBS. Wierzbicka Serwinowska: Hopefully, you can hear me. Two questions, one for Leo, one for Nadia. Maybe let's start with Leo. Today, at the Bloomberg interview, you said you are quite confident that you will get a regulation that will allow high CapEx program in Germany. But at the same time, you didn't really raise your 5-year CapEx program. So what makes you confident? How the talks with the German regulator have been going so far? And when do you expect to have enough visibility to basically make up your decision on the financial headroom? And the question to Nadia, could you please talk about the assumptions behind your 2030 German network EBITDA? What allowed return did you assume? And what is the cost outperformance cut versus today that you assume in your 2030 numbers? Leonhard Birnbaum: So there is no new information that has emerged over the last months that has changed our position. So the confidence that I've shown is just a repetition of what I've said in the past. And what I also tried to say this morning it's absolutely clear that we have a structural shortage of infrastructure. It's actually not a German issue, it's a European issue, it's actually even in the U.S. It's a general issue. It's number one. Number two, bottlenecks in infrastructure are extremely expensive, and we see that they are especially expensive in Germany, but they're actually expensive all over the place. The third one, the acceptance, the fact that the energy transition becomes a business place -- business case depends on somehow solving this structural need. And therefore, like I think it has been acknowledged now by everybody that we need more infrastructure. It has been acknowledged by everybody that we need private capital for that. And therefore, I'm saying, well, then I'm confident that there will be a regulation in place that allows for private capital to be invested via E.ON into infrastructure. And therefore, I'm saying, I can't see why we would not get something like that with all the ongoing discussions. But clearly, it's not that I can point to a big revolutionary development since we last time met. Now on the question until when will we have visibility? This depends on the news that we get. Like this year, we have RP5 in Germany, we have RP5 in Sweden. But in Germany, actually, we have the OpEx adjustment factor we are expecting eventually, let's say, in the first half, some news what it really is and what it could mean so that we could potentially quantify it. We are expecting regulation on the gas side that would give us potentially a cross read. And we are expecting then the OpEx regulation in the next year with the cost base based on the cost audit that's being done right now. So it depends a little bit on the news that we are getting in the next -- let's say, in the next month. Nadia Jakobi: Yes. And regarding the assumption that we took, we -- please understand that we not disclose the single individual regulatory parameters. What we say and what we have said in the past, our goal is to reach our value creation spread of 150 to 200 basis points ROCE over WACC. And we would assume that we have included that. You can assume that we have included that in our guidance. Yes, full stop. Wierzbicka Serwinowska: So in that case, can I ask another question because I didn't really get anything about the 2030 German network EBITDA. Nadia Jakobi: Yes. So again, when it comes to the 2030 EBITDA, we are disclosing at this point in time that our overall networks result is at EUR 9.8 billion as long as I remember that correctly. And we are not disclosing what share of that is now within Germany or in the international business. Because if we were to do that in the end, we would sort of give -- I think we are giving quite some insights, but we don't -- also in the past, haven't given the further drill down into the subsegments. Wierzbicka Serwinowska: So you can't disclose the allowed return, which was baked into Germany in 2030? Nadia Jakobi: So what we are saying is our goal is that we aim to get the same value creation spread the 150 to 200 basis points. And our expectation is that all our Networks businesses live up to that. Iris Eveleigh: Thank you, Nadia. The next question comes from Julius Nickelsen from Bank of America. Julius Nickelsen: Yes, I have 2. And the first one is kind of a follow-up on the timing. So as you mentioned, there is the OpEx adjustment factor and then there's the gas draft determination. But let's assume those come out and the outcome is favorable. Is there scope to already do like a CMD or so after the summer to raise the CapEx? Or do we have to wait until basically 1 year, full year '26 until there's another opportunity for you to fully open the CapEx envelope? That's the first question. And then the second one is maybe a little bit cheeky, but if in your absolute bull case scenario, if regulation comes out, how you like and you can raise the CapEx, do you feel comfortable to give any kind of indication where EPS in 2030 might land in that scenario? That would be quite useful. Leonhard Birnbaum: Yes. So you rightly pointed out that timing is, let me call it a bit path dependent. And I would, at this point in time, not like to now say it's like let's revisit on the whatever day X in months Y because then we think the timing is too unclear. I would say the following. If we only get good news, then we will react to that. If we only get bad news, then we will react later to that. So sincerely, I can't give you a specific timing right now. This is in the hands of the regulator who now needs to first give us additional information so that we have something additional to say. And on the bull, I don't want to speculate now on bull, because I think we have given you a guidance what we expect. If -- and if the word would be a paradise, I would try to figure out what makes sense for my customers because then I would know that if I do something which is beneficial for my customers, it will be honored that I have done it. If I do something which is stupid for my customers just because I got a lucky strike somewhere, this will come back at me. So we more have a perspective to do. We do what is needed, and we are confident that the regulation will be good enough. We don't bank on bull's cases. Nadia Jakobi: Yes. Maybe adding to that, we have deliberately chosen that we just keep our annual run rate of CapEx at this level overall, E.ON, approximately EUR 10 billion from 2027 onwards because we have got very positive signs from politics, from what is needed from macroeconomic, also what regulator has been saying that he appreciates that there are higher returns and higher revenues needed, but then we haven't seen anything black on white. And that's why we neither increased our run rate nor decreased our run rate. And you need to bear with us, of course, as we don't know anything more, what we also said in Q3 that we would have hoped, we would know more by this time, but we don't. We cannot also now not guide for a specific EPS increase. On top of what we -- we would say we've already demonstrated, of course, quite a significant EPS increase with a very attractive 6% CAGR up til 2030. Iris Eveleigh: And the next question comes from Alberto from Goldman. Alberto Gandolfi: I think you already provided quite a good picture, so I'll avoid talking about returns. But I wanted to ask you one point on the assumption of the power networks, which is maybe 2 parts. The first part is, can we get a feel for how saturated is the German network? We are hearing that network is at capacity around Frankfurt. You're talking about all this gigawatt of data center demand. So do we know with this investment plan, what is the saturation level today? Is it running at 90%, 95% capacity? What will it be in 2030? And as a second part on the assumption, would you be able to tell us of the CapEx upgrade you presented today, how much is perimeter, how much is equipment cost inflation and how you think about that? And the second question is actually totally different. Your supply... Iris Eveleigh: I would say it's the third one. Alberto Gandolfi: Should I stop here, Iris? I will face the police. Iris Eveleigh: No, no, no. Alberto Gandolfi: Sorry. Sorry. Sorry. I will not do follow-ups. So in terms of cost savings, your supply retail business was originally created as a people business, but we are seeing companies putting out there recently big cost savings program, AI-driven facilities and software, natural attrition. So I wonder, is this target including a significant cost reduction effort? I noticed in your guidance, your holding costs are going down quite a bit, but I suspect there's much more to go. Am I right? Leonhard Birnbaum: Okay. Since the second question was the third one, I'll give a very short answer. Cost reductions are baked in. But I'm sure we will actually see much more opportunities for much further cost reductions, which we might not have baked in. But on the other side, we will see also pressure, which we might not have baked in. So in that sense, AI will change, will clearly change the retail business. But I think that's maybe a good point to make. It's like your colleagues came up with the Halo suggestion. I really think that the advantage which we have in the majority of our business in the ICE and energy networks is actually that we can't really be disintermediated because the disintermediation of the physical grid doesn't work because it's a physical grid in the end. So AI will completely change. Also ICE business will completely change Networks business, the way we run our processes, but it will not disintermediate us. So that's maybe a nice point to make here. Now on the add capacity, I think overall, we are in a better situation in Germany than a number of other markets, which we observe across Europe. We have taken note of the load, for example, in the Netherlands or we have taken note of what Endesa presented yesterday or what we have seen in the U.K. I think we are not there yet. But it's clear, whilst we had massive bottlenecks on the TSO level in the past, these bottlenecks are trickling down into the -- from the extremely high voltage into the high voltage and where we have solar also in medium voltage, not yet on a kind of like complete level as in other markets, as I just mentioned. Now 2 comments. I think we can't give a general statement. It really depends on the region. For example, in Eastern Germany, where we have massive additions of renewables, we are in many places, clearly at capacity already. In others, this is different. So we have to look at it on a regional basis. That is number one. Number two, it will depend massively on the upgrade, the revision of the grid connection regime, which is under current -- under discussion right now in Germany. I would say if the proposals which are on the table right now for a new grid connection regime, use it or lose it, something else than a first come, first serve, if that materializes, we can achieve much more with the same capacity. Whilst if we do not change the current picture, then I would think that the grid would run to full usage -- to being fully blocked very fast because we have, let's say, a speculative run for connections. So it depends a little bit on the political debate. And on the inflation and growth, we are continuously looking at that. I'm not sure, did we do in the context of the budgeting a new exercise then? Or is it still the 1/3 or whatever inflation that we... Nadia Jakobi: I think there was more that what we communicated like 1.5 to 2 years ago, when we look now at the higher level, we say from this level that we have been communicating our price inflation is at this point, moderate and it's primarily volume growth. But we, of course, as Leo has said, we have seen a step change of higher inflation when we last spoke about that. Iris Eveleigh: Thank you, Nadia. With that, we come to the next question. Thank you, Alberto. The next question comes from Pavan from JPMorgan. Pavan Mahbubani: I have 2, please. So firstly, and it's following up from Julius' question, Leo, but maybe in a different frame. Can you give us an indication of the quantum of which you think you can accelerate the CapEx to 2030? And should we be taking the EUR 5 billion to EUR 10 billion headroom as an indication of the upside you can see there? That's my first question. And secondly, related to that, are you able to talk about or give investors comfort on your readiness, as you mentioned in your opening remarks, to accelerate on CapEx? Do you already have the supply chain capacity that you need, your workforce? I appreciate the acceleration is not coming today, but given it's a big focus, I would appreciate some color around that. Leonhard Birnbaum: Okay. So I'll take the second one, and then Nadia will follow up on what you said in your speech on the additional quantum. So I would say, first, E.ON, we have put in the last 5 years, a big focus on operational excellence. I tried to say that in the speech. So -- and we are -- we have been building up a workforce. Again, in the last year, we had a net increase of the workforce. So we have built up in the networks around 7,000 additional people over the last years. So we have the workforce, number one. Number two is we have the supply chain contracts for the critical equipment. I cannot exclude that we will have a bottleneck here or there. But I think actually, overall, for the critical components, switchgear equipment, power electronics, transformers, cables, we are actually well set up. So we should be able to manage that. On the permitting side, we would need faster permitting that would be -- but we are -- actually, we are set up for the 8-year processes. If we would get an acceleration, we should have absolutely no problem there as well. And on the digitization side, I think we have now pushed the envelope really with the transformation programs that we have done. By the way, the last point is the one where I usually never get a question is the one that I find personally the most challenging one to deliver large-scale IT transformations at -- on time, on budget. So having said that, with the confidence that I have is we have achieved it year-over-year over the last 5 years. We have always achieved what we said that we would do with a few small exceptions from which we have learned. This year, we have achieved every single operational target that we have set for ourselves. I have absolutely no reason to believe that my organization would not be able to repeat that going forward also with a higher volume. But again, it doesn't come by itself. It's the result of very hard work on all of these topics. I hope that gives you enough color. We can obviously detail that in more afterwards. So Nadia on... Nadia Jakobi: Yes. So regarding the potential for additional CapEx. So when you look at total envelope being like easy to remember, EUR 10 billion per annum overall E.ON CapEx, out of that, approximately EUR 6.3 billion is for Energy Networks Germany. Out of that, approximately EUR 5.3 billion is dedicated to WAP effective -- power RAB effective Germany. So if you then take the EUR 4.3 billion, we would have an additional EUR 1.5 billion to EUR 2 billion per annum, where we could invest more at the -- in the outer years when we look at our network build-out plan that we did in 2024. Of course, these network build-out plans are, of course, also -- we will have -- we see no new network build-out plans, but the data that we've got compared to this network build-out plan that was issued in 2024, that would be this EUR 1.5 billion to EUR 2 billion more in CapEx from -- in the outer years. Leonhard Birnbaum: So operationally, we can. And financially, it depends on regulation. Iris Eveleigh: Thank you, Pavan. With that, next question comes from Harry. Harry Wyburd: This is Harry Wyburd from BNPP Exane. So 2 ones for me. So first, can we focus a bit on this grid connection regime reform because it's actually quite significant and it's actually hit seemingly quite a lot of resistance from certain political parties and lobbies. So if you -- maybe you could just remind us a little bit for those who aren't familiar, what has been proposed here and sort of locational reform and so on. How do you think that's going to end? And is that actually going to impact you because it could theoretically shift around where you're investing? And is that something that feeds into your CapEx deployment or operations and so on? And then the other one is on affordability. So we've had all these headlines on carbon, all these headlines on EU power market reform. I guess you're, in some ways, a sort of neutral observer here given you're not exposed explicitly to power prices. So I value your independent view on how you think this is going to end. So do you think we are going to get power market reform. Is that going to cut baseload power prices in Europe? And do you see this as something that's actually relevant for you if we end up with lower electricity prices via regulatory change and that triggers higher power demand? Leonhard Birnbaum: Harry, good seeing you. Two tricky questions as a price for seeing you. Now on the grid connection regime, first, let me just repeat. What we're currently seeing in terms of request is completely unsustainable. There's no question. We are seeing connection requests at E.ON only, we actually published those numbers, 500 gigawatts for batteries, 70 gigawatts for data centers. It's just absolutely unfeasible that we can deliver on that. Even what we only agreed to deliver is already stretching the limits in the envelope massively, 12 gigawatts on batteries, 16 gigawatts on data center or the other way around, I always mix, that doesn't matter. 28 gigawatts data centers plus batteries in 2025 only, plus 20 gigawatts, nearly 20 gigawatts in renewables. So there is a limit for that. Now what we are seeing is, we clearly see that there is speculation for grid connection because grid connection is scarce, so it must have a value. If I can secure it, then I have something which I can sell expensively. And since we have the first come first serve and no use it or lose it, actually, this is pretty cheap speculation. And therefore, I think something needs to happen. So this grid package, I think, is just a reaction to an absolute unsustainable situation that needs to be changed. Now for us as E.ON, it's like don't we -- I mean, it's like if we don't change it, we have to invest like hell and if we change it, we have to invest like hell. So it doesn't really make a difference. But it makes a difference whether we can actually connect customers. And what I'm really afraid of, if you ask me what's the biggest impact of E.ON is that the biggest impact on us would be if we don't get changes and we need to tell consumers that we can't connect them because the grid is full with solar farms, which we have to redispatch. That would make no sense. And that would be then very detrimental for our perception. So this is what I -- so I'm not concerned financially because I mean it's like the CapEx opportunity is just too big. But I'm concerned that we don't do an efficient energy transition and then we get an affordability backlash at the whole energy transition. So that's the point that I would really like to make here. Now what is materially in the package? I think you can differentiate 3 buckets of discussion. One bucket is, should we philosophically change the approach, not the first come, first serve, not -- should we introduce something like use it or lose it. And I think there is broad consensus that something needs to change in that direction. That's not contentious. Then the second one is we have many innovations that we could do to just be more efficient in how we connect, for example, renewables. We have technical innovation. That's not contentious either. It depends what the regulation we do, et cetera. For example, do we get combined connections between solar and PV? Do we -- your 100 megawatt of PV, do you always get your peak or you get 97%. So there are technical details. And then there's a third one, which I would call how do we achieve locational signals so that the expansion of the feed-in happens not in grid-constrained areas. That's one really contentious point because obviously, the renewable players, especially renewable players here have a big interest in getting only locational signals that they can calculate and which don't bite them too hard. But if they don't bite, as we say in Germany, then they are meaningless. So -- and that is now depending on the details. If you ask me what's going to happen, I think bucket #1 is going to change. Bucket #2 is going to change. Bucket #3 is something is going to happen. Whether it's going to be enough, we will see from the discussion. But I think it's absolutely the right discussion that we are having at this point in time. Now on the switch, that was regulation on grids. Now on the wholesale power, we obviously have looked -- I have also looked with interest at what was proposed in Italy or what will happen now in Italy. So I'm certainly not the best experts to talk about that. But actually, I would say it's not an economic consideration which has taken place. This is a political -- these are political actions. You are trying to achieve somehow a politically -- a target which you see necessary politically and then you just taking whatever tool works. I personally think that marginal pricing and the pricing is coming from that will be needed, but the position is weak because we know that if we go to 300 gigawatts of renewables in Germany, marginal pricing won't be the one that is going to incentivize investments anyway. So there will be -- there will need to be a change in the power market design. But what we see here is not building something which is sustainable in 2050 in a 100% renewable world. What we're saying here is a political intervention to achieve a political goal. Whether this is done efficient? I think the only debate that you can have is, is this more or less efficiently, but I think it's inevitable that we will see this more and more. Personally, I think the discussion will never go away on market design. But luckily, I'm not in this commodity volatile business on the generation side. For me, regulation on the grid side is already enough. Iris Eveleigh: Okay. Thank you, Leo. With that, next question comes from Deepa from Bernstein. Deepa Venkateswaran: So I had 2 questions. One on the data center opportunity. Can you quantify how much of the EUR 40 billion network CapEx is for connecting data centers? Just trying to get a feeling for how meaningful it is or it is not? So that's the first question. And secondly, maybe moving away from Networks. Your Customer Solutions business, you've had ambitions to improve your revenues from selling solar panels, batteries, maybe exploiting flexibility. I wanted to check how that development is going. Are you seeing the necessary uptake from consumers for these low-carbon solutions? Is it ahead of plan, in line? Just directionally, how is that going? I know it's a much smaller part, but obviously, you are projecting earnings growth in that business to 2030, and I'm assuming that this would be a part of that. So those are my 2 questions. Leonhard Birnbaum: I cannot quantify, maybe Nadia can, but I can't quantify how much of the EUR 40 billion is data centers. But I would say there is a remarkable difference between the data center boom in the U.S. and in Europe. So in our case, the infrastructure growth is really driven by multiple simultaneous factors that we're seeing, truckloading, data centers, renewable connections, heat electrification. So the growth trend is extreme -- or batteries and so on. So the growth trend is extremely robust. because it's driven by multiple factors. And we have not quantified how much of the million goes into batteries, into data centers and into renewables. I think the situation is different in the U.S. where data centers -- in some parts, at least must be the overwhelming driver. So sorry for that. On the Customer Solutions side, I think I can answer it. So yes, we have combined the flex, let me call it, non-commodity retail products that you alluded to. They're part of our retail business -- customer solutions business, I would say. We are seeing a tick up. We are seeing a nice tick up. It's number-wise irrelevant. You said that yourself rightly so. And we would like to see even more aggressive tick up operationally. There, we are actually readjusting every month, so to say. But it's moving. Iris Eveleigh: Thank you, Leo. With that, we move to -- we still have quite a few hands up. Maybe if someone just has one question so to get everyone the chance to actually still ask the question. Louis from ODDO is the next. Louis Boujard: Actually, the second one will be very fast. So I think it's going to be okay. So the first one, regarding the capital allocation, I was wondering, in case it's not going exactly in the right direction for you regarding the CapEx expansion, do you have any leeway in your capital allocation to eventually adjust and increase your CapEx envelope in the other geographies? Or eventually, would you consider higher payout or share buyback program in order to allocate maybe better your current financing capacities? That would be my first question. How would you do in a worst-case scenario? And the second question, which is quite fast, I guess, is regarding the underlying assumptions that you could have taken in your cost of debt by 2030. When I look at your guidance for the EPS, the EPS does not look highly demanding considering the EBITDA. So I was wondering if you were taking into consideration some increasing interest cost of debt in your assumptions for 2030. Leonhard Birnbaum: I take the first one. So we have a clear plan A, and we are pursuing this plan A. I don't want to speculate on a plan B. Nadia Jakobi: And as you know from us, we are always committed to value creation and to balance sheet efficiency. Leonhard Birnbaum: So I'm sorry, that sounds like now we don't want to treat you badly, but it's really as short and crisp. Nadia Jakobi: So the second one was cost of debt or sort of why we didn't increase the dividend? Leonhard Birnbaum: Cost of debt. Iris Eveleigh: Cost of debt assumptions, higher interest. Nadia Jakobi: Yes. On the cost of debt, we have -- when you look at -- we have been just issuing some of our new bonds at the beginning of the year. And when you look at that, we had an 8-year bond, we had a 12-year bond. And if you combine the 2, they were of an average of 3.7%, that is sort of actual numbers we had. I don't know, I think, 95 basis points credit spread on the 12-year duration bond, that is sort of one sign of guidance that I can give to you that also, I think we are communicating later in our pack some of the maturing bonds. So it's fair to say, as you would anticipate that some of the very low interest bonds are maturing up until 2030 and that need to be then refinanced at these levels that we have been seeing now in January this year. And that is also, as we have been highlighting, when you are confronted with a cost of debt for existing assets, which is just backward-looking 7 years and includes the low interest years, then of course, you cannot assume that you can still refinance at these low levels because everybody of us would love to still do the -- buy a house and finance it on the terms of 2020. Unfortunately, that's not possible. So I think that's kind of the indication that I can give to you. Iris Eveleigh: Thank you, Louis. And with that, we move on to Rob from Morgan Stanley. Robert Pulleyn: I have one question. We've spoken a lot about the regulatory terms to increase CapEx and guidance. But could we just dive into specifically which areas are you looking for from the regulator to improve versus the rest of draft materials we got towards the end of last year? Nadia Jakobi: I think, Rob, there is something -- one of that is what we have just discussed, i.e., being the cost of debt, both the level and also the fact that there is no mark-to-market for the cost of debt on all those assets that are built up until end of 2026. That's something where you cannot refinance at the levels in the market even as we do it in a very proficient way. Second one, I think we also debated that in this round when it comes to cost of equity, there is just some high-level explanations. We don't have clarity yet. Also this look-back period for the risk-free rate is important. MRP, even if we are going to a higher level, where we appreciate the arithmetic mean you can see that the market clearly demands an MRP of 6% plus. And there, we are still quite a gap apart. And then there are quite some other elements also regarding the benchmarking that are open and as Leo has just said, so far, we only know that there will be an OpEx adjustment factor, but that's about it. There hasn't been any specification how that's going to work. In principle, this is something that we clearly value and we are welcoming that this has been appreciated that when you grow your CapEx, you also, of course, will grow your OpEx. But so far, we don't know which kind of magnitude this is going to have. Iris Eveleigh: Thank you, Nadia. With that, we move on, thank you, Rob, to James from Deutsche Bank. James Brand: I've got one -- kind of one straight two questions. One question and clarification. So the question is on the benchmarking actually, the efficiency assessment. I think you talked about in the past as being quite tough or certainly getting tougher than it has been in the past, but then we had some new proposals come out before Christmas. So I was wondering whether you could just give us an update on whether the proposals there have moved in a more positive direction or whether you still think they're very challenging. And then the clarification is just on the timing. So obviously, we've got the paper on the OpEx adjustment factor and then the determination of the cost of capital for the gas networks. I think you mentioned you'd have visibility in the next month. Was that for both of those or just for the OpEx adjustment factor? Because I think the paper on the OpEx adjustment factor is due fairly soon, but it was less clear when the cost cuts of gas was due. Leonhard Birnbaum: So I'm always careful to say it will come out in March because my experience is then it turns out April, and I need to explain all the time where it was in March. So I would say OpEx adjustment factor first half, the gas side, second half of the year. So -- and rather go to the back end and be surprised if it happens earlier. So that on the timing. Second, in the final papers, there were no real substantial improvements. Therefore, the criticism on the benchmarking is still very clear. We actually have seen that it will be harder to achieve top efficiency, which is okay. That's fine. That's the challenge that the regulator should put in front of us. But we have still seen that redispatching costs are included in the operational benchmarking as influenceable cost. And since when it -- I mean, clear, 90% of the redispatching costs are with the TSOs, but out of the 10%, which are with the DSOs, we at E.ON get 90%. Why? Because we are the rural guys, which are connecting the renewables and basically putting redispatching into the picture just punishes exclusively E.ON, which has done the most investments, kind of like to achieve an energy transition. I repeat my word, 1/3 of the networks, 70% of the wind, 50% of solar, and then we get redispatch -- and then no agreement on localization signals and then we get the redispatching cost allocated on top of us. Still the same criticism. Really no changes in the final paper versus what we explained to you in the second half of last year. Iris Eveleigh: Thank you, James. And with that, we move to the 2 last questions, while the first one comes then from Ahmed from Jefferies and then Piotr from Citi. We'll then close the call. Ahmed Farman: I guess just a very quick follow-up question. You just mentioned -- gave us some sort of time lines, right? You said the OpEx adjustment factor and I think it's the draft for the gas distribution that you mentioned. Are there any other data points or milestones that are required from your side to get the clarity? Or are these the 2 critical data points? I just want to make sure sort of just for completeness that if there is a full -- there are other elements as well that we are just aware of what other regulatory updates are required. So that's my first question. My second question is on retail. This is a follow-up to an earlier question. So retail, if I look at the last couple of years of results, it sort of hasn't really delivered much growth, and you are guiding to growth going forward. I just wondered if you would explain a little bit -- you already talked a little bit about the drivers, but a more profile of this growth as to where the growth will come through. Obviously, you're sort of talking about a sort of flattish profile to 2026. But do we expect to see this growth profile already in '27? Or is this more back-end loaded? Leonhard Birnbaum: Yes, I'll take the timing question. So I understand from all of your questions that you would ideally want us to give a precise time line when is what materializing so that we can give you a further update. But -- I mean, this is really where I would need to say you need to raise those desires somewhere else, I'm afraid. I can only repeat what I just said. It depends a little bit what information we got. Look, last year, I told you, I am confident about the outcome because I still believe that if something needs to happen, eventually, it happens because the alternative is just unattractive. So I truly believe we are going to get a regulation which is sufficient to make the necessary investments because the investments are good for Germany, good for our customers. But having said that, it's kind of like I did not get anything positive last year that actually really helped me to say, I -- now look at this. This is why I'm right to believe that. Now if the next news that come out would clearly show in the direction that, let me say, a basic optimism is okay, then I can be bolder going forward and say, look, this works out, it will come to the right result. Let's make a judgment call. But if the same thing happens this year that happened last year that I get negatively surprised, like, for example, by this redispatching cost, which you all know annoyed me like hell, if something like that happens again or if whatever details come out on the OpEx adjustment factor make it irrelevant, then it's kind of like then I don't have something. So it's a bit past dependent. But clearly, like the people who can influence that time line are less us, I'm afraid. We can only do operational great work and show that what we are doing is beneficial for our customers and then expect that others will honor that. Nadia Jakobi: Yes. So coming to your energy retail question. So when you refer back in the past years, there were past years also from the energy crisis where we took on a lot of risk when it comes to revenues. So we had high prices. And now we have seen some normalization. We have still stuck to our 3% to 5% B2C margins. But of course, when you had a far higher revenue level, then that sort of meant that the absolute amounts reduced. So that's basically the reduction that you have been seeing coming from -- when you take sort of 2022 and '23 as a basis here. When you sort of go further back into the year 2020 or '21, you see that we've actually seen some significant increase also in our energy retail business. Second, I guess you are less interested in the past, but more into the future. We're very much aware that we are projecting stable EBITDA from 2025 to 2026. There's one technical effect in there, i.e., we are deconsolidating one of our entities and the equity contribution to that is then because of the joined up grid and retail business, that's now portrayed in the grid business, but going from EBITDA to only a net equity contribution. And then the second one, so we see some operational growth, but it's fair to say that some of the digital foundations that we need for future flexibility products and the ramp-up that we are seeing will be also late in 2026. And then when it comes to how near term the progression is, I think we have been guiding to an energy retail business in 2028. And then we see some further increase in 2030. So as you say, first stable, laying the foundations, and then we would expect to see some increases in 2027 going forward. Iris Eveleigh: And with that, we come to Piotr with the very last question then for today. And obviously, we're happy on the IR side to follow up on any further questions that you might have. Piotr? Piotr Dzieciolowski: I have just one big picture question to Leo actually about -- how do you think about the grid fee structures going forward in the context of affordability and the need of CapEx, in a sense that a lot of the growth comes from the data centers and therefore, the cost when it goes into the RAB, the connection it's being socialized and therefore, all of the consumers have to pay for it. Likewise, there are a lot of consumers that really have a lot of self-consumption and also pay less than for the infrastructure. How do you think -- in the context of affordability, would charging for infrastructure differentiated prices to different consumers would not be a solution? And likewise, when you think about the investments, there are certain investments like releasing redispatch costs and so on. So what is the return on the investments from the consumer perspective on this extra EUR 5 billion to EUR 10 billion CapEx that you propose to the regulator? Because if it's about the data center connection, I agree why the regulator may not be willing to give you the higher rate. But if it's about really saving cost for consumers, then he should be more than willing to spend -- for you to spend this money. Leonhard Birnbaum: Yes. I think actually, there is a misperception on the impact that data centers have on consumers. If -- now we take the German example and then we -- like in Germany, you have actually -- you pay grid fees and you can pay a lump sum for your connection... Nadia Jakobi: Construction grant. Leonhard Birnbaum: Construction grants. That's the word, okay. So you have construction grants and grid fees. Now data centers, the overarching target is to get fast access. So they are perfectly fine to pay high construction grants. That's number one, which means actually that the cost really socialized in the grid fees are not that big. Second is they are actually pretty big consumers. And we have energy-related and capacity related, I mean, fees in Germany. So what happens actually if a data center gets added into your DSO area, you as a consumer, a B2C customer, you see lower grid fees because then the same -- basically the same cost base is spread on a larger volume. So -- and that's actually the whole way how the energy transition can work. We need to increase electricity volumes so that we can allocate the higher cost base on a higher volume basis. And so specific costs stay constant or even decline. So data centers in a DSO area reduce the grid fees. Now on the generation side, they need additional power stations. That's what's being discussed in the U.S. right now. Obviously, if you have like in Tennessee, a 5 gigawatt, whatever data center, you don't want to put that into the rate base and then have the consumers pay for the 5 gigawatts of additional generation capacity. But if the data center comes with its own PPAs and new assets, then it's actually fine. So in our case, data centers in Germany would reduce the grid fees and actually would be beneficial. Now on the wholesale market side, they would need -- they would require more baseload capacity probably, which is why we think generation capacity needs to be added. But so for us, data centers are beneficial for us at E.ON, data centers are beneficial from an affordability standpoint. They make our life easier. Iris Eveleigh: Thank you, Leo. Thank you, Piotr. With that, we come to an end. Thank you all very much for participating and the interest in E.ON. And if there's anything else you would like to discuss, the IR team is happy to follow up with you. Thank you, Leo and Nadia. With that, I close the call for our full year '25 presentation. Take care. Bye-bye. Leonhard Birnbaum: Thank you. Nadia Jakobi: Bye-bye.

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VPK.AS 2025 Q4 财报电话会议

Operator: Good day, and welcome to the Royal Vopak Full Year Results 2025 Update Conference Call. [Operator Instructions] Please be advised that today's conference call is being recorded. I would now like to hand you over to your speaker of today, Fatjona Topciu. Please go ahead. Fatjona Topciu: Good morning, everyone, and welcome to our full year 2025 results analyst call. My name is Fatjona Topciu, Head of IR. Our CEO, Dick Richelle; and CFO, Michiel Gilsing, will guide you through our latest results. We will refer to the full-year 2025 analyst presentation, which you can follow on screen and download from our website. After the presentation, we will have the opportunity for Q&A. A replay of the webcast will be made available on our website as well. Before we start, I would like to refer to the disclaimer content of the forward-looking statements, which you are familiar with. I would like to remind you that we may make forward-looking statements during the presentation, which involve certain risks and uncertainties. Accordingly, this is applicable to the entire call, including the answers provided to questions during the Q&A. And with that, I would like to hand over the call to Dick. D.J.M. Richelle: Thank you very much, Fatjona, and a very good morning to all of you joining us in the call today. I would like to start with the key highlights of the year. 2025 was another year of disciplined strategy execution and sustained momentum for Vopak. We delivered record financial results, executed our growth strategy and showed our commitment to create and distribute value to our shareholders. Demand for our services remains strong, which is reflected in a healthy occupancy rate of 91.4%. Despite currency headwinds, we delivered a record level EBITDA in 2025. We further optimized the portfolio, divesting our terminals in Korea, in Barcelona and Venezuela, while establishing our footprint in Oman and completing the IPO of AVTL in India. We also made good progress on executing our growth strategy. Some of our largest projects like REEF LPG terminal in Canada and Gate 4th tank in the Netherlands are progressing well. We have now committed around EUR 1.9 billion to growth projects since 2022 and are well positioned to reach our ambition of investing EUR 4 billion through 2030. We see this not as a target to spend, but rather as an opportunity to invest in attractive growth opportunities. Finally, we showed our commitment to distribute value to our shareholders. In line with our disciplined capital allocation priorities, we are announcing a shareholder distributions program of around EUR 1.7 billion through year-end 2030. Before we dive deeper into the results, let's have a look at where we stand in the execution of our strategy. In 2022, we launched our improve, grow and accelerate strategy. And in the first phase, we significantly strengthened our foundation, applying strategic portfolio management while increasing the exposure to gas and industrial terminals that led to an improvement of the operating cash return from 10.2% in 2021 to 15.6% in 2025. Our strengthened foundation positions us well to increase the pace of our investment commitments and growth CapEx in 2025. We are focused on executing our major projects, delivering them both on time and on budget. As these assets come online from 2027, we expect them to positively contribute to our return profile. And this will further accelerate our growth strategy execution as we look for continued ways to accelerate our investments in attractive growth projects. As we execute our growth strategy, we remain committed to distribute value to our shareholders. Since 2021, we have distributed around EUR 1.2 billion in dividends and share buybacks. And in line with our disciplined capital allocation priorities, we're making a step change now by announcing a shareholder distributions program of around EUR 1.7 billion through year-end 2030. Now back to our results. As mentioned, 2025 was a strong year in terms of strategy execution. We continue to improve the performance of our portfolio, generating a record level of operating free cash flow, leading to an operating cash return of 15.6%. In addition, we completed the IPO of AVTL in India, and we added additional investment commitments during 2025, of which the majority is allocated to grow our base in gas and industrial terminals. With regards to the accelerate strategic pillar, the developments of new supply chains for CO2 and ammonia as hydrogen carrier are moving at a slower pace than we initially anticipated. At the same time, we're pleased with the investments in the Netherlands and Malaysia on low-carbon fuels and sustainable feedstock infrastructure as well as the early stages of battery developments. Now let's look at our sustainability performance, where we have safety always as our top priority. And while these metrics demonstrate best-in-class performance, they fall short of our ultimate safety ambitions. Looking at the emissions, we're making good progress in achieving our long-term goals. With regards to diversity, despite our ongoing efforts, we've not yet realized the level of gender representation to which we aspire and are committed to improving this. Looking at the financial performance for the different terminal types we operate, we see an overall strong performance with higher results compared to last year despite currency headwinds. LNG markets remained well supplied while global LPG trade was marginally higher than 2024. Mainly due to some planned out-of-service capacity and a positive one-off last year, 2024, the results of the gas segment went down year-on-year. In the Industrial segment, growth is contributing and together with the one-off in the second quarter in 2025, we see a 15% increase, notwithstanding the uncertainty in the macro environment. Chemical markets were challenging for our customers in 2025, while our terminals continue to perform relatively stable despite some locations seeing lower occupancy rates. Energy markets, which we serve with our oil terminals continue to see strong demand and performance is driven by increased throughputs, higher rates and contract indexation. All in all, this has led to an increased proportional EBITDA to EUR 1,184 million and a strong operating cash return of 15.6%. Now let's move to the execution of our growth strategy. Since the start of our Improve, Grow and Accelerate strategy, we've committed a total of EUR 1.9 billion. Around EUR 550 million of this EUR 1.9 billion has been committed since the beginning of 2025. We're well positioned to achieve our ambition of investing EUR 4 billion by 2030, supporting our long-term operating cash return ambition of 13% to 17%. During 2025, we made good progress in expanding our capacity. The construction of our LPG export terminal in Western Canada and the 4th tank at our Gate terminal in the Netherlands are progressing as planned. Also, we're expanding our capacity in Asia with multiple FIDs taken in China, India, Malaysia and Thailand. In the Latin America region, we're expanding our capacity in Brazil and in Colombia. As mentioned, we've realized strong momentum in executing our growth strategy. We've already commissioned around EUR 650 million, and these projects are contributing to our results. Around EUR 1.3 billion is still under construction, and we expect to commission around EUR 775 million around year-end 2026, and that's related mainly to Gate 4th Tank and LPG in Canada. In the period '27, '28, we expect to commission around EUR 325 million and around EUR 175 million in 2029 and beyond. The already commissioned growth projects as well as the growth CapEx under construction will further reinforce our long-term stable return profile. 70% of our revenues are generated from contracts longer than 3 years, a 10% point increase from around 60% in 2021. Currently, around 40% of our EBITDA is generated by assets in gas and industrial. Looking ahead, we expect continued strong momentum. We've shown strong business performance in the recent years. The market indicators for storage demand remain firm, supporting the delivery of our growth projects and the resilient performance of our existing business. We expect this momentum to continue, and this is reflected in our long-term ambitions. We've raised our long-term operating cash return ambition to an annual range of between 13% to 17% and are well on track to invest EUR 4 billion growth CapEx through 2030. So let's wrap it up on this slide. We have an unparalleled global infrastructure portfolio, proven to be resilient in uncertain times. We expect a robust energy demand through 2030. And through our strategic locations and the critical link they provide will support further growth opportunities leading to long-term stable returns. With our ambition to allocate EUR 4 billion growth CapEx through 2030, of which EUR 1.3 billion currently under construction, we deliver clear tangible levers for growth. And last but not least, we have a strong focus on creating and distributing value to our shareholders through cash dividends and share buybacks. With that, I'd like to hand it over to Michiel to give more details on the full year and fourth quarter numbers. Michiel Gilsing: Thank you, Dick. And also from my side, good morning to all of you. As mentioned by Dick, 2025 was a strong year for Vopak with record results. We reported a record level of operating free cash flow, driven by our continued strong profitability and EBITDA to cash conversion. On a per share basis, proportional operating free cash flow increased by 7% to EUR 7.13. We reported a 68% increase in earnings per share, driven by higher net income and a lower share count. Net income increased by EUR 228 million, mainly due to a dilution gain of EUR 113 million resulting from the listing of our AVTL joint venture and an impairment reversal of EUR 181 million in cash-generating unit of the Europoort terminal. These results highlight the strength of our well-diversified portfolio, particularly in times of increased uncertainty and volatility. Simultaneously, we continue to ramp up our investments in attractive and accretive growth projects while returning value to our shareholders, which we will discuss in more detail later in the presentation. Let's take a closer look at the performance of the portfolio. Our operating cash return improved to 15.6%, driven by an increased operating free cash flow of EUR 823 million and a slightly decreased capital employed. Demand for our services remained healthy. Adjusted for currency movements and divestments, the proportional EBITDA increased by 4.3%, which we will detail further in the next slide. Moving on to our business unit performance overview. Excluding negative currency exchange effects of EUR 33 million and EUR 2 million divestment impact, the proportional EBITDA increased by 4.3% compared to 2024. A large part of this growth can be explained by the strong EBITDA contribution of EUR 20 million from our growth projects, particularly in China and the Netherlands. The results in our Asia and Middle East business unit were primarily driven by the results of a commercial resolution in the second quarter. Across the remaining business units, the performance was relatively stable. We are continuously focused on generating predictable growing cash flows to create value for our shareholders. We achieved this by growing our revenues while improving our profitability and cash conversion. In 2025, we improved on both our EBITDA margin, reaching 58% and our cash conversion reaching 70%. Driven by revenue growth, increased profitability and increased cash conversion, we have grown our operating free cash flow by 49% since 2021. As we have funded a fair share of our growth investments by divesting assets with lower cash generation abilities, the amount of capital employed has not significantly changed since then. The significant improvement in cash generation with a stable capital employed has led to a 5.4 percentage point increase in our operating cash return. Let's take a closer look at the drivers of improvement with regards to our cash flow per share. We can clearly see that the increased profitability is the main driver of improvement since 2021, driven by strong contributions from our growth projects and the resilient performance of the existing assets, our proportional EBITDA increased by EUR 184 million. This has had a net impact of around EUR 1.50 per share. Also, our cash conversion has significantly improved, primarily driven by a decrease in operating CapEx of 28%. This has had a net impact of around EUR 0.70 per share. Finally, we have executed 2 share buyback programs since 2021 with a total value of EUR 400 million, reducing our share count by around 8%. And adding these drivers together, we increased our proportional operating free cash flow per share by 62% since 2021. Shifting from proportional figures to consolidated figures, we get a good picture of the cash flow that became available for capital allocation on the holding level in 2025. Our cash flow from operations, which includes a healthy upstreaming of dividends from our joint ventures remains strong, showing a 2% increase compared to 2024. After deducting operating CapEx and IFRS 16 lease payments from CFFO, we arrive at the consolidated operating free cash flow of EUR 691 million, an improvement of 5% versus 2024. Factoring in the taxes paid and the financing cost, we arrive at a levered free cash flow of EUR 506 million. This represents the available cash before debt financing that we can strategically allocate to pay dividends, invest in growth or buy back our own shares. Our capital allocation framework consists of 4 distinct pillars, aiming to maintain a robust balance sheet, distribute value to shareholders, invest in attractive growth opportunities and yearly evaluate share buyback programs. In the next part of the presentation, I will highlight our key capital allocation achievements. Starting at our first priority, the balance sheet. Proportional leverage, which reflects the economic share of the joint venture's debt decreased to 2.6x compared to the end of 2024 when it was at 2.67x. If we exclude the impact of assets under construction, which do not contribute yet to EBITDA, the proportional leverage is at 2.06, which is the lowest level in the last 5 years. Our ambition for the proportional leverage range is still between 2.5 and 3x. To facilitate the development of growth opportunities that enhance our operating cash return, Vopak's proportional leverage may temporarily fluctuate between 3x and 3.5x during the construction period, which can last 2 to 3 years. Additionally, we maintain control of our financing expenses by limiting the exposure to volatility in interest rates. And we achieved this by borrowing predominantly at fixed rates. As mentioned, we have the long-term ambition to generate reliable and attractive returns for our shareholders. This is why we have announced a shareholder distributions program of around EUR 1.7 billion through the year-end 2030. This program will enhance our dividend policy while introducing a multiyear share buyback program. With regards to the dividend, we have the ambition to grow our payments by 5% or more per year. Also, we will increase our dividend payment frequency to semiannual. We propose a dividend per share of EUR 1.80 over 2025, representing a 50% increase compared to the payment made in 2021. To be clear, the proposed EUR 1.80 will still be paid in full in April of this year, subject to AGM approval. The first interim payment will be announced at the publication of our 2026 first half year results. Looking at the second component of the shareholder distribution program, the share buybacks, we have the ambition to buying back EUR 500 million through the year-end 2030, of which we expect to execute the first tranche of up to EUR 100 million over the next 12 months. As shown in the graph on the right, we have distributed around EUR 1.2 billion in dividends and share buybacks in the last 5 years. The announced shareholder distribution program of around EUR 1.7 billion through the year-end 2030 marks a significant step change. Moving on to the growth. Investing in growth opportunities is a key part of our capital allocation policy. We have the ambition to invest EUR 4 billion on a proportional basis by 2030 to grow our base in gas and industrial terminals and to accelerate towards energy transition infrastructure. At this point, we have already committed around EUR 1.9 billion to growth investments since 2022, of which EUR 650 million has been commissioned and is already contributing to our results. Around EUR 1.3 billion of growth projects are currently underway with the majority of them being delivered by the end of 2026. Once these projects become operational, we expect them to further contribute to the increasing free cash flow of our portfolio. This is why we feel confident in raising our long-term ambition for the OCR to between 13% and 17%. We continue to see attractive growth opportunities in the market that we will pursue in order to grow the cash generation of the portfolio. Our ambition remains unchanged to actively support our customers with infrastructure for the ongoing energy transition and to invest when opportunities arise at returns in line with our portfolio ambition. Let's bring it together in this slide. Since 2021, we have made significant improvements. Our financial performance improved with a double-digit increase of revenue and EBITDA. On the back of increased cash conversion, this growth has boosted our cash generation. The operating free cash flow per share, our main KPI for assessing value creation has increased by 62%. It is, of course, equally important that this increased cash flow is allocated in a way that is creating long-term value for our shareholders. And as you can see, that has been clearly the case. We decreased our leverage while significantly ramping up our growth investments. At the same time, we raised our dividend and reduced our share count. All in all, we're proud of the results that we have achieved. Before we move to the outlook 2026, let's take a brief moment to address our exposure to foreign exchange. If we look at the proportional EBITDA split by currency, we can see that 28% of our EBITDA is generated in euro, which means that for the remainder of the EBITDA, we face translation risk in our P&L. To be a bit more specific, we show on this slide the sensitivity of our proportional EBITDA to changes in U.S. dollar, Sing dollar and Chinese renminbi on an annual basis. For example, a 0.10 change in euro to U.S. dollar has a full year impact on an annual EBITDA of around EUR 32 million. The translation impact that arises from recent currency volatility is something we take into account in our outlook for the remainder of the year. We have updated the currency rates at the end of the year. Based on these updated rates, we expect a negative foreign exchange impact of around EUR 20 million in 2026 compared to 2025. Furthermore, taking into account the positive one-off in the first half year of 2025, we arrived at a rebased proportional EBITDA of around EUR 1.14 billion as a base for the outlook of 2026. For 2026, we expect EBITDA to be between EUR 1.15 billion and EUR 1.2 billion, reflecting an autonomous growth rate between 1% and 5%. We also expect a proportional operating free cash flow of around EUR 800 million for 2026. Operating free cash flow is a driver of value and distribution, and hence, we will start guiding on it. For the longer term, our ambition remains unchanged with regards to our leverage and growth projects. As mentioned, we are raising our ambition for OCR to between 13% and 17%. For shareholder distributions, we have announced a shareholder distribution program of around EUR 1.7 billion through the year-end 2030. Bringing it all together in this slide, 2025 was a strong year for Vopak. We reported a record level of operating free cash flow driven by our continued strong profitability and cash conversion. We have realized a significant step change, increasing our proportional operating free cash flow per share by 62% and increasing our OCR from 10.2% to 15.6%. Simultaneously, we continue to ramp up our investments in attractive and accretive growth projects while returning value to our shareholders. And with that, I hand it over back to you, Dick. D.J.M. Richelle: Thank you, Michiel. And with that, I'd like to ask the operator to please open the line for question and answers. Operator: [Operator Instructions] And the first question is coming from Jeremy Kincaid from Van Lanschot Kempen... Jeremy Kincaid: Congrats on the results. Three questions from me. The first 2 on the share buyback. Firstly, has HAL indicated what it plans to do with regards to the share buyback? Secondly, you've obviously kept your long-term CapEx ambitions, but obviously, you've talked to some larger potential CapEx programs in the future like South Africa or Australia. I was just wondering if you could provide us a bit of an update on either of those projects and how they fit into the outlook given this new share buyback and shareholder distribution framework. And then my third question is on REEF. There's been a couple of articles recently about a dispute with the First Nations community there. I was just hoping if you could provide an update and your thoughts on that dispute and whether it could impact your REEF development. D.J.M. Richelle: Thank you, Jeremy. First question, what we announced this morning is we do not have any agreement with any of the shareholders related to the share buyback program. That's been a standard language that we've used in the last 2 programs. So that's what we know for now. So no further news on the HAL position. But obviously, we know that if we were to have an agreement with HAL, that would have been noted in the press release. An agreement, meaning that they would like to sell as part of the share buyback program. That agreement is not in place. So I think that's one related to HAL. Then the second one, the long-term CapEx outlook, I think we're pretty clear in the confidence that we have in our ability to execute our growth ambition of the EUR 4 billion. Australia and South Africa are developing, I would say, in line. So maybe first, a few things on Australia, where we moved into definitive phase to prepare for an FID hopefully in the later part of 2026. That means the FSRU is secured. That means that the permit application is submitted, that all the technical details related to the location and environmental impact assessment has all been done and is currently subject to review questions and further due process. So we're well on track, I would say, for the Australia project. South Africa, I would say, in general, an environment that is a bit more complicated in terms of the permit process. It will take -- it's always hard to make the full estimate of how long that permit process is going to take. We're here dependent as well on power plant development in the area of Richards Bay, where we are planning the site. So we are still confident on the need for the country on our role that we can play on the location. But as you can see with these projects in an early development stage, it takes a bit of time to see how they will unfold. I think whether -- there are obviously big projects in our portfolio, both especially, I would say, Australia, but also South Africa. At the same time, we can also see that the pipeline of projects that we have is a healthy pipeline and the development is healthy. And on that basis, we are indicating and guiding the market on our confidence that we have for the EUR 4 billion in 2030. I think that's hopefully giving you a bit of background on that long-term CapEx plan and where and why the confidence is. And then towards your last question related to REEF and the news on some of the First Nations comments that have been made. We are obviously aware of what's happening. We are, at the moment, focusing on delivering the project, and that is going well. So the delivery of the project to be in service end of this year within the time line that we originally set and also within the budget that we originally set that is well underway. We continue dialogue with the relevant First Nations and all the relevant stakeholders. This is not only the First Nations, but it's local court, it's the federal government to engage in a very constructive manner to see how we can find a solution that works for everyone involved, while at the same time, also protecting our legal rights. And those are linked to the fact that we are currently constructing the terminal in line with the contracts and the permits that we have. And it's based on a contract with our customer, AltaGas, who is also our partner in the development of the REEF terminal. So that's probably the best I can say for now on this. Operator: And this question is coming from Thijs Berkelder from ABN... Thijs Berkelder: Congrats on the cash return announcement. Happy to see those. First question, yes, maybe more geopolitical. Can you indicate what is currently happening at your terminals in Fujairah? Looking at the JV result in Q4, it was clearly higher and also your proportional occupancy in Middle East, Asia has jumped to 96%. Secondly, can you maybe describe what 1 year with the Trump government. Can you describe what's the impact on your U.S. terminals business of the governmental change maybe? And thirdly, what grip can we have on the timing of, let's say, the new contracts for EemsEnergy? And what kind of costs are you assuming for EemsEnergy in '26? D.J.M. Richelle: Thanks, Thijs. Maybe first on VHFL -- on Fujairah, results overall continue to be healthy. The reason that the fourth quarter was significantly better than the third had to do with a contract that we started in the fourth quarter, in tanks that were empty in the third quarter. So that -- and it was quite a large capacity. It was planned to be taken up by the customer, but that was the reason that the results went up, but also occupancy-wise, it was sizable and therefore, had an immediate impact on the occupancy. I wouldn't say it's something that is linked to a structural change that happened from the third to the fourth quarter. You should look at it much more as a, I would almost say, a natural rollover from one party to another party that takes up capacity. And sometimes it's a few months without occupancy and then it's picked up again by the customer. So this was more or less planned and has nothing to do with geopolitical developments in that area. In general, as you know, Fujairah is -- has a very strategic location outside of the Strait of Hormuz. And that's one of the reasons that it remains a very attractive location, and that's what we expect also going forward. Your second question, we could spend the rest of this call on probably, but not related to the Vopak position, but just in more generic terms. Let's stick maybe to the pure Vopak position. Zooming in, I would say, on the U.S., just to put it in perspective, our U.S. position currently is 8 terminals and roughly, give or take, 15% of our EBITDA. And that continues to be relatively stable going forward. You have to kind of dive into the detail of it. The role of the terminals is either industrial, Corpus Christi or the Via terminals, ex Dow sites. So that's 4 out of the 8, and that's long-term contracts, yes, with a bit of variability, but long-term contracts and relatively stable. Then we have Deer Park that has a strong position and also quite some industrial connectivity to the production sites around. And a lot of what Deer Park is doing is actually local distribution in the U.S. There's not so much import happening over there. So yes, there's a bit of export that happens, but we haven't seen a big impact in 2025 on our Deer Park facility. And last but not least, we have a position on the West Coast, and that is supporting very specifically trade and bunker fuels with airports, or air travel in Los Angeles and the environment. So also there, we see a relatively normal demand for our services. So by and large, I would say, specifically to your question on what the impact of the Trump administration in the U.S. has been, this is the picture. I think if you look at it from a more broader perspective, obviously, the uncertainty that especially the tariffs are creating does not necessarily help create stability for investment and big investment decisions does not necessarily create a lot of stability around product flows around the world. So we've seen changes, and we've commented on that also during 2025 that we sometimes see changes in product flows. But I think the strength of our global portfolio and the diversification of the portfolio means that sometimes you see a bit of a drop in one location being picked up at another location. So I would almost say, by and large, it has -- it did not have in the short term, a big impact on what we see. For the longer term, it's probably -- well, you see how our outlooks are for the investment program, but also the return profile of the company towards 2030 and the announcement we make today. So we feel our position, strategic locations, diversified strong resilient network gives us confidence that the demand for our services will remain quite healthy in the coming period. Then your last comment on EET, a few things to mention over there. We indicated in '25 that we were working on that technical solution related to minimum send-out capacity of the terminal. That solution is now in place, still runs into the first quarter with minimum compensation to the impact of our customers, but then we run into a steady-state situation until '27. That's one. And then second, we're currently going -- as we are indicating in the press release, we're currently going through the process of the renewal of the terminal in 2028, and that process is ongoing. And that's too early to comment on it, but we expect in the coming months to be able to indicate what the next steps are going to be. And that's -- we're just in the middle of all of that at the moment. So I hope that gives you a bit of sense, yes. Thijs Berkelder: Yes. One add-on question on Asia and Middle East results. So the JV results and the proportional occupancy rates spiked because of what you described. But why is the proportional EBITDA then in Q4 down versus Q3? Is that something in Malaysia or so or India? D.J.M. Richelle: It's probably an element in Australia. It's a claim that we booked in Australia. That's the only thing I can probably indicate, Thijs. There's nothing fundamental. So it's more of a one-off element that we saw in Q4 in our oil terminal in Sydney coming up. But that has been. Thijs Berkelder: How large was that claim? Michiel Gilsing: Yes, that was quite sizable, so around EUR 2 million. And then we had in Darwin, we had the long-term contract came to an end in end of September. And then you see effectively, we have a drop in income in Darwin of around EUR 2 million as well. So those 2 together. So one is structural and the other one is more incidental. Operator: [Operator Instructions] And the next question in the queue is coming from David Kerstens from Jefferies. David Kerstens: I've got 3 questions as well, please. Maybe first of all, you indicated the phasing of the commissioning. And I think you said that in 2026, you expect EUR 775 million of growth projects to be commissioned. What is baked into your guidance in terms of EBITDA contribution for 2026? And what do you expect this EUR 775 million will start contributing in 2027? And I think you said EUR 650 million has so far already been committed. What is the EBITDA contribution related to what's currently already operational? And then my second question is on the oil storage market in the Port of Rotterdam. Can you explain what's happening there that triggered such a large reversal of the impairment? And is this only limited to the Port of Rotterdam? Or do you see the market conditions improving elsewhere as well? And then finally, maybe also a follow-up on the HAL question. I think HAL so far has not participated in the share buyback program. And as a result, their stake has increased. Can you update us on the ownership percentage following the latest share buyback that you carried out in 2025, please? Michiel Gilsing: Sure. Yes, on the phasing of growth CapEx, indeed, we don't disclose all the EBITDA contributions in terms of, let's say, exactly what has been contributed by which project, so not on an individual basis. We have given indications to the market on what gas infrastructure and infrastructure energy is going to contribute. So this 5x to 7x EBITDA then on new energy infrastructure, 6x to 8x, and on conversions of existing capacity, 4x to 6x. So the EUR 650 million, which has been commissioned is contributing in line with those multiples. So -- but we don't disclose each and every project. So you could take an average and think EUR 650 million, well, divided by whatever you think would be the average. That's one. And then the contributions going forward, yes, obviously, we don't give any specific guidance, but at least what we do is we give guidance on the strength of, let's say, the cash flow of the company by also announcing, let's say, confidence in our shareholder distribution program. So that means that these projects have to start contributing in line with, let's say, the expectations we have given to the market. Part of it indeed '26, but the bigger part of it in '27 because then the REEF project and the Gate project here in Rotterdam are going to contribute in full. So that is the guidance we're giving. And we're also giving guidance that by bringing these projects on stream, our cash return is not going to be diluted. So effectively, we've now upgraded the above 13% range to 13% to 17%. There's obviously always a bit of volatility in our existing business. But with bringing growth projects on stream, we should be able to be in that bracket of 13% to 17%. So that's what you may expect from us. And you also know, let's say, which kind of capitals we are allocating to the growth CapEx. So -- so in other words, things could be worked backwards from a lot of numbers we have given to the market, but we don't give any specific indications on the projects. That's on the first question. The second question, yes, the oil market in Rotterdam is much stronger than we thought a few years ago. And remember, when we took the impairment, it was the Russian invasion into Ukraine. The business was really down at that moment in time. We had quite a hard landing in the first half of 2022. Since then, we have recovered quite well in the Europoort. So we continuously look at the performance. We have updated our business plans for the Europoort, you see effectively in the coming years, we still expect strong results there. In the long, long, longer run, so obviously, there will be an energy transition impact, but we still think that the Europoort is well positioned to also be a viable terminal in an energy transition world. So overall, we came to the conclusion there is no other way than that we should reverse this impairment. And effectively, that means that all impairments, the significant impairments we took in 2022, which were related to SPEC, the Botlek terminals and Europoort are all being reversed now because we had a book profit on the Botlek. We reversed the SPEC one last year, and we reversed now the Europoort. So that's an indication that the business is relatively strong, and you see that back, obviously, in our cash flows of the company. And then the third question, yes, the ownership of HAL is presently at 52%. There is no -- as I said, there's no agreement, like Dick already mentioned, there's no agreement with anybody related to the upcoming EUR 100 million tranche. So you may expect that as a result of that, the HAL percentage will increase above the 52%. And then to be seen what will happen for the rest of the share buyback program because we will announce it tranche by tranche. Operator: Okay. We're going to carry on with the next question in the queue. And this question is coming from Kristof Samoy from KBC. Kristof Samoy: Yes. Congrats on the results and the improved cash distribution policy. A few questions, if I may. Regarding alternative energies, the fact that you've been revising your cash distribution policy considerably, can we read into that, that we shouldn't expect any major FIDs there in the coming years? And then I had also a question on Antwerp. We saw the news that Maersk will not continue with it plans to open a green plastic factory in Antwerp. Does this have any impact on your business plan for Vopak Antwerp Energy? And then finally, on REEF, could you elaborate a little bit deeper into the court ruling that has been made? And was it a ruling in substance, and is there still now a court case running or is there potential to open up a new case? D.J.M. Richelle: Thanks, Kristof. Maybe first one on the alternatives. So on the Accelerate pillar, I think we made it very clear in the release today, and I can only reconfirm it now that for the overall program of EUR 4 billion that we announced, we are confident that we can execute that program and to realize that ambition between now and 2030. I think that's the first part. The second part is related then, and we are also vocal about that. We see that in the -- our Accelerate bucket, so that's the infrastructure investments to support the energy transition that consists of 4 elements. It's low carbon fuels and feedstocks -- it's the CCS value chain and supply chain and it's the hydrogen supply chain, mainly with ammonia investment. And the fourth one is batteries. So if you take the second and the third, so CO2 and ammonia, we definitely -- well, we continue to see a slowdown in some of the developments over there and delay in some of the major decisions that we are dependent on to set up those supply chains. At the same time, we are still confident that batteries as well as low carbon fuels and feedstocks give us sufficient opportunities to realize the ambition that we set for ourselves in the Accelerate bucket. So it's a bit of a long answer, but the conclusion is the fact that we come up with an increased share buyback program or a share buyback program over the period of time is independent of the developments that we see in a specific segment where we identified growth opportunities. So confident with the overall growth portfolio and pipeline that we have and that we can execute that side-by-side the share buyback program that we announced today. I think that's the first part. And the second is related to Antwerp and Vioneo that is backed by A.P. Moller.So disappointing to see that they were not able to make a case for their big investment in Antwerp, disappointing for us, but I think even more so for Antwerp and to a bigger extent to Europe. It's a product that is in need in Europe, green plastics. There's a whole lot of logic on why it would make sense to do it over there, but they couldn't make it work despite the fact that they put a lot of effort in it had a lot of discussion with all the relevant stakeholders, but they unfortunately could not make it work and now are potentially shifting the production to China, which is a pity to say the least. I think for our plans in Antwerp, we had hoped that this would be a start in the Antwerp development, but we're not singly or single-handedly dependent only on the Vioneo development. We're happy with the developments on the land, making it ready for construction. We have a few other leads that we have been vocal about that we are following, and we're confident that, that location and the plans that we have will lead to an attractive development in the middle of the Port of Antwerp. So we will continue to inform you about the main steps there. And then last but not least, on REEF, I think the court ruling has been an interim ruling to get something dismissed in the court and the court basically said, no, it's not going to be dismissed. So the court case will still be held as originally planned, and that will have its course in '26 and '27. So only if the court would have said we would dismiss the case, then the whole case would have been gone now. That is not the case. So the court has basically said, as originally planned, we will hear the case in '26, '27. It will take some time. I think that's a bit more detail on the court case itself. Operator: Okay. And maybe as a follow-up, can you give us an update on Veracruz? D.J.M. Richelle: In what sense of the capacity over there? Kristof Samoy: Yes. And the reconversion plans. D.J.M. Richelle: Well, maybe a few things that we're still looking for parties to fill up the capacity in Veracruz. In 2025, second part of 2025, we've not been able to find that particular customer. We're working through getting the permits of making the change from the fuel distribution capacity to fill it up with chemicals. That is going according to plan, but will take some time in '26. I don't expect any capacity to be filled from the conversion in '26, and we continue to engage with a number of parties in this year to find someone that will occupy the tanks in -- for fuel distribution. There's definitely a logic for it, but it's not that easy. So we continue to push for that. Operator: We're now going to the last question in the line, and this line is coming from Quirijn Mulder from ING. Quirijn Mulder: So I have a couple of questions. My first question is about chemicals in China. You're now traveling on in this country for, I think, for 4 years now in the suffering from the chemical decrease or whatsoever, how you call it. So what are your plans with regard to Zhangjiagang for example, and your, or let me say, trading terminals? That's my first question. And my second question is about Eemshaven. So you expect for Eemshaven to have somewhat better results in 2026 compared to 2025. And the open season was closed, as we understand, there is a consideration to expand the capacity with an FLNG conversion of an FLNG transport vessel into an FSRU. Can you maybe comment on that sort of message we have heard about this? And then my final question about the share buyback program. If I make a comparison with SBM, for example, they have also a program, but they have left some room depending on the growth and the developments there with regard to the cash flow. Is that something you have also taken into account into your program? Or you -- let me say you are saying this is EUR 500 million, that's it, we don't have any upside here left. D.J.M. Richelle: All right. Maybe Zhangjiagang, specifically, no big change indeed in the situation of the terminal, relatively low occupancy in Zhangjiagang. Remember, that's the only wholly owned terminal. So that's the one that is in the occupancy also coming up and therefore, is being flagged. In terms of pure result and result contribution, it's minimal because let's not forget our China business, all the other terminals is in joint venture and is ITL, so industrial terminals with long-term contracts have developed strongly. So we've divested a few of the relatively smaller distribution facilities in that area, we've now also divested, although not China, but South Korea, we've divested Ulsan terminal at the end of '25. So the dependency on, as you call it, the distribution facilities has been reduced. And yes, we need to continue to look at Zhangjiagang and do everything that we have in our ability to make Zhangjiagang more attractive for the group. But again, it's not the one who has the main impact on our China business. I think the second question, EET, does it have better results expected to be in 2026? The answer is yes, probably because the MSO impact in '25 was there, and that is expected to be much less in 2026. The expansion and the fact that we've announced an agreement to change an LNG vessel and FSU into an FSRU basically allows us to -- for the expansion in -- or the expansion, I should say, in Eemshaven to basically have 2 FSRU vessels from the same FSRU owner and to actually adjust that second new vessel better to what the market services are that we want to offer. So it's actually a bit of an upgrade of the terminal, and we're happy with that opportunity. And as I said earlier to one of the earlier questions, we're currently going through the motions of the results from the open season and follow-up discussions that we're having with customers. So more to follow in the course of '26. And on the [indiscernible], Michiel will comment. Michiel Gilsing: Yes. On the share buyback, yes, we're confident that we can combine the share buyback, the dividend distributions with our growth ambition at the EUR 4 billion proportional CapEx, we would like to invest up to 2030. What we have tried to do is at least show that confidence by also announcing the shareholder distributions up to and including 2030 so that there is a good match. Yes, what there might always be reasons to change, let's say, the share buyback program, of course, but that wouldn't be the case if the EUR 4 billion is becoming the EUR 4 billion. But it could, for example, be the case if we do a major acquisition, but then we still need to prove to the market that, that acquisition is better than buying back our own share. And similar, if we would go far beyond, let's say, the EUR 4 billion, if we find growth opportunities, which are reaching a next level, but then obviously, we also need to update the market on a revised growth plan going forward. And we don't see that yet. But yes, those might be reasons to change our share buyback program over time. But as long as we stick to the EUR 4 billion, we will also have -- we also are confident that we can execute the share buyback program. Quirijn Mulder: However, if I look at what you said about your leverage at 3, 3.5x in periods of construction, if you look at 2026, then the construction of REEF is finished, and that means, of course, that you need something for 2027 quite big when you -- or '28 is quite big if you're going to reach that 3 to 3.5x in my view. Michiel Gilsing: Yes. But if you would think about an Australia project, that's going to be a sizable project. So that will drive up the leverage again. And obviously, we will have -- this year, we will do an increased dividend, but we also do an interim dividend, which is also going to increase the leverage. Then obviously, you have a few more investments which we could take maybe on the energy transition infrastructure, maybe on the battery side. So there's definitely new investments coming into play. And there's always a bit of volatility, of course, in our existing business. So it's not like -- of course, our cash flows are much more sustainable than what they were. But there's still volatility in the business, and that's what we also take into account. So yes, we still may reach, at a certain moment in time, somewhere between 3x and 3.5x for a certain time. And we gave an indication like up to maybe 2 or 3 years. But yes, that is to be seen still. That's also very much dependent on timing of growth -- big growth CapEx projects. Operator: Okay. Thank you very much. This concludes today's conference call. Thank you for participating. You may now disconnect. Thijs Berkelder: Thank you. Michiel Gilsing: Thank you.

39天前Insight Analytics约5分钟阅读

MOS 2025 Q4 财报电话会议

Operator: Good morning, and welcome to The Mosaic Company's Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded. And now I'll turn it over to Jason Tremblay. Jason Tremblay: Thank you, and welcome to our fourth quarter 2025 earnings call. Opening comments will be provided by Bruce Bodine, President and Chief Executive Officer. Luciano Siani Pires, Executive Vice President and Chief Financial Officer, will review financial results and capital allocation progress. We will then welcome Jenny Wang, Executive Vice President, Commercial, to join Bruce and Luciano as we open the floor for questions. We will be making forward-looking statements during this conference call. The statements include, but are not limited to, statements about future financial and operating results. They are based on management's beliefs and expectations as of today's date and are subject to significant risks and uncertainties. Actual results may differ materially from projected results. Factors that could cause actual results to differ materially from those in the forward-looking statements are included in our press release published yesterday and in our reports filed with the Securities and Exchange Commission. Please note in today's presentation and in our press release and performance data, we will refer to and provide various financial measures, including adjusted EBITDA, adjusted earnings per share, free cash flow, cost per tonne and adjusted effective tax rate, either on a total company or segment basis. Unless we specifically state otherwise, statements regarding these measures refer to our adjusted non-GAAP financial measures. Reconciliations of these measures to our most directly comparable GAAP financial measures can be found in our earnings release. Now I'd like to turn the call over to Bruce. Bruce Bodine: Good morning. Thank you for joining our call. As we look back on 2025, I want to start by recognizing the work our teams delivered across Mosaic throughout the year. We asked a lot of our people, and they responded with tremendous effort. The other members of the executive team and I are grateful for their dedication. I will start today's call with a high-level review of the markets and our business. Then Luciano will provide some details on our financial expectations for 2026, and Jenny is here to address your market-related questions. Our key messages for today are: first, while the fourth quarter was weaker than we expected due to phosphate demand in the United States, U.S. demand is emerging as farmers prepare for spring planting in North America and global ag fundamentals are solid. Second, we are on track to improve phosphate production performance, and we have posted consistently good potash production throughout 2025. The work we have completed has restored our operational foundation and positioned Mosaic for a strong 2026. Third, we delivered meaningful cost and efficiency progress in 2025, and we have committed to achieve further reductions in 2026. Fourth, our extensive market access continues to provide a powerful platform for growth, especially in our Mosaic Biosciences business. And finally, in our capital allocation program, we have divested several noncore assets, Patos de Minas and Taquari as well as a pending transaction to sell Carlsbad that will allow us to focus attention and capital where it matters. Before I get into a more detailed review of the business and our outlook, I will turn to a high-level view of the market conditions and explain why despite the tough ending to 2025, our long-term outlook remains constructive. U.S. demand, especially for phosphate, fell sharply in the fourth quarter, pressured by affordability challenges and uncertainties surrounding government support. Recently, we have seen an increase in spring inquiries as growers look to nourish their soil, especially after last year's big crop and corresponding nutrient removal. As we enter the buying season across several key geographies, a compressed demand time frame is possible and could place additional strain on logistics capabilities. While overall North America potash and phosphate shipments declined in 2025, Mosaic's North America sales volumes proved more resilient, indicating we captured additional market share. Looking ahead, phosphate supply and demand dynamics are supportive as China continues to restrict exports to prioritize domestic demand and lithium iron phosphate battery demand continues to consume an even larger share of the world's phosphoric acid. Potash markets remain balanced with prices that appeal to the world's farmers and fertilizer producers alike. As we look at 2026, we expect global potash shipments to approach record levels driven by broad-based demand across most key geographies. And as a result, we expect to continue producing at high operating rates. While credit constraints remain a challenge in Brazil, expanding planted acreage and rising crop yields bode well for long-term Brazilian fertilizer demand. Demand also remains strong in other key growing regions of the world, including China and India. Now I'll move on to discuss our business and outlook. In phosphate, we delivered strong rock production last year with Florida reaching its highest level in three years and record mining production at Miski Mayo. Our top strategic priority in 2025 was to restore stability in our operations and normalize costs. While the recovery of our production volumes has taken longer than expected, we accomplished a great deal toward that goal. In our U.S. Phosphate business, we invested time and money across our assets to set ourselves up for reliably strong production, and we are seeing positive results. The key measure of our success is P2O5 output because acid gives us the ability to flex grades and products to meet demand and P2O5 production improved during the year. Our phosphate fertilizer production also rose through the year, and we expect consistently good production in 2026. We produced 1.7 million tonnes in the fourth quarter even with an extended turnaround at our Bartow facility as well as deliberate steps to adjust production amid soft U.S. demand. We are off to a strong start this year, and we expect to produce at least 7 million tonnes of phosphate in 2026. In potash, we are back at full operating rates at Esterhazy since the tragic fatality in December, and our HydroFloat project is ramping up. We expect to achieve record production at Esterhazy in 2026. International sales volume set a record last year, and we anticipate continuing strong demand in 2026. In fact, we expect to produce around 9 million tonnes of potash this year, a level similar to 2025, even after we complete the Carlsbad transaction. On the cost front, we are maintaining disciplined cost management through all market conditions. In 2025, we faced significant market volatility. When sulfur prices spiked at the end of the year, which we expect will significantly compress margins in our Phosphate and Mosaic Fertilizantes segments well into the first half of 2026, we moved quickly to protect margins and profitability. We have idled Araxa and Fospar in Brazil, our lowest margin operations until further notice. Turning to managing our controllable costs and driving operating efficiency. We made excellent progress on this front last year. We executed our mine optimization plan, improved our fixed labor costs, consolidated suppliers where possible and managed corporate costs well. Our business in Brazil was a standout, delivering cost improvements through increased mine production and the elimination of high-cost imported rock. In fact, rock output in Brazil reached near record levels in 2025. In phosphate, we began to reverse the cost pressures that arose from extensive maintenance activities in the first half of the year. Fourth quarter cash cost of conversion was $112 per tonne, which is an improvement of approximately $20 per tonne compared with a high watermark earlier in the year. This improvement is structural, not one-off. In potash, our cash cost of production averaged $75 per tonne in 2025 and would have been within our Analyst Day target range, if not for the extension of Colonsay, which carries higher costs. At Mosaic Fertilizantes, blended rock cost per tonne reached $97, the lowest level since 2021. We achieved our $150 million cost savings objective ahead of schedule in 2025. As we enter the new year, we are advancing a broad set of technology-enabled initiatives to drive the next wave of efficiencies from optimizing supply chains in North America and Brazil to improving how we manage contracts and vendors to enhancing productivity. These efforts have positioned us to deliver another $100 million in savings in 2026. Our other strategic pillars are leveraging our market access and redefining our growth. And here, too, we have made important strides. In 2025, we expanded our Brazil distribution capacity with the completion of a 1 million tonne blending facility in Palmeirante in the fast-growing agriculture region in Northern Brazil. The facility positions us to better serve customers in the area and to meet rising demand as credit conditions normalize. One of our most promising growth stories is Mosaic Biosciences. Our global market access, the strength of our brand and our long-term customer relationships provide significant strategic advantages for us. We launched five new products in 2025 and expanded commercialization in the Americas, China and India. Mosaic Biosciences is capitalizing on previous investments in R&D by expanding registrations of current products to our core markets and new geographies, now reaching 60-plus registrations and selling into 16 countries. The business consistently delivers stable gross margins in the 40s and future product launches should provide a pathway to higher margins over time. In 2025, Mosaic Biosciences doubled net sales to $68 million. Looking ahead to 2026, our expectation of continued adoption across our current portfolio, along with 8 to 10 anticipated new product launches positions us to achieve another year of doubling net sales. Mosaic Biosciences is delivering on the promise we saw from the start. It has become a truly scalable growth platform. The final element of our strategy is reallocating capital in pursuit of stronger returns. We continue to reshape our portfolio and strengthen our financial foundation last year. On the capital reallocation front, the transactions announced in 2025, including Carlsbad, are expected to generate approximately $170 million in proceeds over time and also allow for a reduction of $60 million in asset retirement obligations. More importantly, we will avoid significant capital expenditures that these assets would have required. While the proceeds from the transactions announced last year are modest, this continues the process that began three years ago and has already generated significant value. As an example, our position in Ma'aden equity is currently valued at about $2.1 billion. Looking ahead to 2026, we expect progress on multiple fronts. We're pursuing strategic alternatives for selected Brazilian assets, including unlocking incremental value from co-products, niobium and other critical minerals. We also expect to generate value through monetization of some of our Florida land holdings. A note on capital expenditures. We expect CapEx in 2026 to come in around $1.5 billion, higher than 2025 due to mine, gyp stack and clay settling area expansions in Florida. At the same time, cash spending on asset retirement obligations and environmental reserves are expected to decline by roughly $50 million, partially offsetting the increase as much of our closure work, particularly at Plant City is complete. Looking further ahead, we continue to expect capital expenditures to trend down, reaching approximately $1 billion by 2030, with ARO and environmental reserve cash spending also declining to about $200 million by 2030. Now I'll turn the call over to Luciano. Luciano? Luciano Pires: Thank you, Bruce. Good morning, everyone. 2025 was a challenging year for Mosaic from a cash flow perspective. Inventory builds in both finished products and raw materials weighted on cash flow for much of the year and intensified as demand weakened significantly in the fourth quarter. The impact was significant. Working capital reduced cash flow by $960 million for the year and contributed to an $829 million increase in net debt. The buildup in working capital changed our plans for the balance sheet. In November 2025, we successfully raised $900 million through three-year and five-year notes. While the original intent was to refinance a portion of the 2027 maturity, the fourth quarter demand downturn and the resulting increase in debt led us to reassess and to redirect the proceeds towards retiring short-term commercial paper. Our next maturity isn't until the end of 2027, and we continue to monitor markets for opportunity. Looking forward, how do we see '26 cash flows, debt and shareholder returns. In the near term, cash flow remains constrained by lower EBITDA. a result of the sharp increase in sulfur prices since December. Phosphate stripping margins are under pressure. Every $10 increase in sulfur prices adds approximately $10 million of quarterly expense. Compared with the prior year first quarter, we thus expect a roughly $250 million headwind to Q1 '26 EBITDA. This margin pressure also led us to idle Araxa and Fospar in Brazil until further notice. And given the uncertainty surrounding our production plans in Brazil, we're not providing full year 2026 Mosaic Fertilizantes sales volumes guidance. But we expect cash flow to improve progressively as the year unfolds. We expect our own phosphate production to improve, supporting better fixed cost absorption and higher profitability on incremental volumes. Phosphate prices are rebounding from recent lows in Brazil, and working capital release is expected to drive a significant cash flow uplift this year. On working capital, we exited 2025 with about 240,000 tonnes of excess inventory in phosphates versus the prior year. At current inventory values, this represents roughly $140 million of potential working capital release over the next few quarters from demand recovery alone. While the typical seasonal inventory build in Mosaic Fertilizantes will offset part of this capital release in the first quarter, it will set up a more pronounced working capital benefit in the second and third quarters. But beyond demand recovery, higher phosphate production provides another source of working capital release as we currently hold excess phosphate rock and stockpiles. In addition, movements in sulfur and ammonia could provide some relief. And taken together, we believe a $300 million to $500 million working capital release is highly possible, supporting meaningfully higher cash flow generation in 2026. EBITDA to cash flow from operations conversion rate reached a low point in the mid-30s range in 2025 versus a more normalized level of 70%. As working capital unwinds, we expect a meaningful improvement in this conversion rate. Now how should we think about capital allocation in 2026? We will continue to invest in our business. Capital expenditures are expected to be higher in 2026 than in 2025, driven primarily by required investment in new gyp stacks at multiple sites. The positive offset, though, is that asset retirement obligations and environmental reserve spending is expected to trend down. Taken together, as Bruce mentioned, total cash outlays for CapEx, ARO and environmental reserves are expected to be modestly higher than the prior year. This is a way of thinking that we suggest you to adopt going forward as ARO and environmental reserve spending will trend down for the next few years. We continue to see opportunities to reduce CapEx towards $1 billion by the end of the decade with ARO and environmental reserves steadily edging down to approximately $200 million. Overall, we expect to generate free cash flow after CapEx and other cash spend above the minimum dividend in 2026. This will allow us to prioritize debt reduction and subsequently pave the way to resume extraordinary returns to shareholders. I'll stop here and turn the call back to the operator for questions and answers. Operator: [Operator Instructions] And today's first question comes from Duffy Fisher at Goldman Sachs. Patrick Fischer: First question is just on phosphate or DAP. Can you triangulate what you're thinking? I mean, obviously, Q4, you're telling us that pricing was too high and farmers kind of balked at that. Pricing has come down now, but so have your margins pretty significantly in a relatively tight market, you'd argue you should be able to get margin expansion. So do you think you'll be able to price for that higher sulfur as we go through this planting season? And if you do, do you think farmers will actually buy? Or will they forgo DAP applications this year? Or do you think they just pushed it to the spring? Bruce Bodine: Duffy, thanks for the question. So, on DAP, definitely recognize that affordability for the farmers is still challenged, although better. And I say we see that improving in 2026 versus 2025, just given the dynamics on the ag commodity side. But to your point about pass-through on sulfur price, I don't know that we'll be able to pass through as much as maybe historically in a tight market given the affordability issues. But we do see, at least for us, anything above a stripping margin above $300, we still see very constructive being in the middle of the cost curve. And that's kind of how we're looking at that. So it will be interesting to watch what happens to sulfur coming out of Q1. We do see things looking to improve. I don't think that sulfur will revert back to some three-year-old, two-year-old number with a one handle or two handle on it. But we do see sulfur getting better, which should help on stripping margins. And then in addition to how we're thinking about that is that the more we push on getting to our full capacity on phosphate fertilizer production, it's just going to continue to expand with that fixed cost absorption, our margin to insulate us even more from some of the uncontrollables on the raw material side. So, farmer affordability, I think, is going to cover it. How much we can pass through, there probably is a limit. But we've got still a lot of room to go before we feel a lot of pressure on margin -- stripping margin standpoint for profitability around phosphate. I don't know, Jenny, any comments to it? Jenny Wang: Yes. I probably just want to add one point, Bruce. DAP price in North America, especially in the U.S. market has been pretty stable, and that is basically impacted by the farm affordability issues very acute in the U.S. market. If you look at the international market, we see very different dynamics. And you have major DAP consuming countries between China and India. And these two countries, the government basically subsidized their farmers. Therefore, we are seeing the price increases over the last five weeks for DAP in the international market. In fact, today, international market price for DAP netback is actually at higher -- at a premium than the NOLA price. So I understand the concerns on affordability. This is probably more severe in the U.S. market than the rest of the world. Bruce Bodine: Yes. I think that's a great point, Jenny, for everyone is the international market is a little bit disconnected from an affordability and constructiveness standpoint than maybe just the U.S. which is great given our distribution access, we will pivot as necessary to take advantage of that. Operator: And our next question today comes from Chris Parkinson of Wolfe Research. Christopher Parkinson: Bruce, when we take a step back and we just look at 2026 versus your Capital Markets Day expectations in terms of turnarounds, can you just kind of give us a walk-through of the phosphate production or asset portfolio, where we were, where we kind of were trending towards the end of the fourth quarter and where you expect to be in '26. You're back down to $112 in terms of conversion costs. How should we think about that as it relates to your greater than 7 million tonne production guidance for '26? Bruce Bodine: Yes, Chris, thanks for the question. I think our guide is based on -- and we talked about this the last quarter, kind of trailing demonstrated. But by no means does that mean that is where the status is going forward. So I can see where there's some disconnect and confusion, and Chris, and I'm happy to try to give you some color. So, in fourth quarter -- well, first, let me back up. To get to kind of the 8 million tonne rate, you need an operating factor of 80 -- low 80s, 81% of our overall fertilizer assets in North America. We were there in Bartow for much of 2025. We got there in Louisiana in the fourth quarter. We were in the mid-70s at Riverview in the fourth quarter. New Wales was a little behind with some issues that they were facing, still working through some operating consistency. As we've moved into -- so good quarter, saw improvements, particularly on P2O5 production from quarter 3 to quarter 4, and we're continuing to see that going into quarter 1. Bartow continues to run at its plus 80% operating factor. Louisiana is running also at that 80% threshold. Riverview is also approaching that 80%. So when you look at those three facilities in aggregate, kind of already at kind of that 80% operating factor, and we're seeing more and more days strung together at all facilities where they're at or above kind of that ultimate aspiration that we want to get back to. New Wales is in a turnaround as we speak. And we expect as they come out of turnaround into quarter 2 that they will be approaching that 80%. And again, New Wales is our biggest facility at 3 million tonnes of granular capacity. So we expect in the first half of the year to get through some of these turnarounds. Bartow has no more turnarounds for the year. New Wales will get through this major turnaround. Riverview has a turnaround in second quarter of this year. We expect even coming out of that turnaround to be better than they have been. So we're feeling very optimistic about production in the back half of the year. Hence, we said 7 plus, 7 is kind of where we've been over the last two quarters, but we see some upside, Chris, to your point. Luciano has got something to say. Luciano Pires: Yes. May I comment on the cost side. The $112 per tonne in phosphates is where it should be given the current production volumes. The $131 of Q3 was actually very abnormal because of lots of repairs done outside of turnarounds. And the rule of thumb is every 100,000 tonnes per quarter should represent kind of a $7 to $8 decline through cost absorption on this $112. So therefore, if the path from 1.7 to 2.0 would imply kind of between $20 and $25 per tonne decline over current levels of phosphate conversion costs. Bruce Bodine: Yes. So, Chris, we remain confident in our ultimate objective we talked about in Analyst Day, both on volume and cost to Luciano's point, getting below $100 conversion cost. And then we're continuing to focus on some of the last things of talent and training, discipline around our operations management system, better asset predictive maintenance and analytics, which continue to take us kind of to that next frontier. Operator: And our next question today comes from Jeff Zekauskas with JPMorgan. Jeffrey Zekauskas: I can see where your capital expenditures comes through your cash flow statement. Where does your ARO and environmental reserves cash spend come through? Is that part of operations? Or is that a capital cost, the $400 million in cash spend you talked about $408 million? Bruce Bodine: Thanks, Jeff. I'm just going to put this over right to Luciano. He's got that. Luciano Pires: Jeff, it actually is spread around a few lines. There's a little bit that comes through -- it all comes through the operational part of cash flows, nothing on the capital expenditures, but it's in between a few lines. You have accrued liabilities. For example, the current portion of ARO, when you spend on that, you decline accrued liabilities. You have a little bit on the net income line itself, the part of -- that offsets the accretion expenses. So it's a little complicated, but it's in the operational part of the cash flow statement. Operator: And our next question today comes from Vincent Andrews at Morgan Stanley. Vincent Andrews: Just to follow up on the CapEx, maybe the inventory a little bit. I think the Street had CapEx coming down about $300 million from '25 to '26. So I know you called out why it's going up. But could you talk about sort of what changed and what triggered the need to do this in '26 and your confidence that this will not leak into '27 and beyond? And then secondarily, you called out on the inventory line that you have excess phosphate rock inventory. So I'd just be curious if you could help us understand, is that because you thought you were going to produce more last year. So you bought excess rock where you thought rock prices were going to go up, so you bought ahead of that increase. Just trying to understand how you're going to work that number down. Bruce Bodine: Vincent, no, thanks for the question. On CapEx, as Luciano and I talked about, we had an interesting confluence this year of a number of waste disposal projects in gyp stacks and clay settling areas and tailings dam in Brazil as well that have all kind of hit from a timing standpoint at the same time. That is unusual. But I would tell you that the $1.5 billion that we've said is, I would say, is really the ceiling. We probably see that as a worst-case outcome and actually have some upside to that. But just to give you an example, you don't know exactly how much a gyp stack, for example, is going to cost until you do some of the ground survey work. And then you find that out and have to tweak the estimates. So those are type of things that happen. It's just clarification of what those waste costs are and then the timing of those given the exhaustion of existing capacity. So we have a gypsum stack at New Wales, a gypsum stack at Bartow, a gypsum stack in Louisiana, all happening in 2026. We have a tailings dam at Tapira, and then we have two clay settling areas, one winding down and another one being built at Four Corners. The good news is, is once you get beyond these, and that's why we have confidence that this number will come down in time, you don't build another gyp stack for another 4, 6, 8, even 16 years depending on the facility. And then clay settling areas last anywhere from two to five years. So these are lumpy when they do come through. It's unfortunate that they've all lined up together. It's not by choice, it's by necessity. And then once we're through this, we're very confident that the tail down to $1 billion towards the end of the decade is definitely possible. On the rock side, just a little bit, we don't buy rock on the external market like maybe other nonintegrated producers do. Our production of rock, I'm not going to say it's decoupled from the consumption, but there are largely two processes and then you manage rock production, rock inventory because we have millions of tonnes of available storage for rock inventory to kind of manage through the near term, the next two to three years. But given that production on the fertilizer side, with all the work that went into asset reliability in the first half and into the second half of the year, actually, we didn't consume as much. We built some of that rock inventory. But as I just talked about with two questions ago, we're seeing very good run rates. We'll start to more balance that out and actually start to reduce that rock inventory as we pull through more of that into finished goods. Luciano, do you want to add something? Luciano Pires: There's a slide on the presentation that shows a $346 million increase in raw materials. That includes both sulfur ammonia and also the rock inventories work in process. And it's about half and half the increase. So the potential is with increased production rates to release that roughly $170 million, $180 million of excess rock inventory. Bruce Bodine: And the other thing that inventory allows us to do on the rock side, particularly in Florida, is as we move into new areas, which we're going through a major area relocation right now at South Fort Meade, it gives us even some buffer to make sure that we don't run out of rock or the ability to blend our rock for consistency to our acid facilities. So it serves that purpose as well, Vincent. Operator: And our next question today comes from Lucas Beaumont with UBS. Lucas Beaumont: Just going to [ Fertilizantes ]. I just wanted to kind of ask about the volume outlook there. So you guys talked about the continued kind of challenges on the credit issues in Brazil and that your first quarter volumes are going to be down year-on-year. So if we assume that means maybe sort of 1.7 million tonnes or so and then your phosphate production is curtailed at least through sort of the first half with the cost challenges there. I mean that probably gets us to something flattish around 9 million tonnes for the year again. So, I mean, last year, coming into the year, you guys were sort of looking at 10 million to 10.8 million tonnes in volumes. You've added the capacity there. So you clearly have room to grow. So, I guess, could you just kind of help us frame how should we think about the volume outlook there for 2026? And then how we should sort of see your leverage to the upside to grow going forward? Bruce Bodine: Yes, Lucas, I appreciate the question. I'm going to ask Jenny to talk a little bit about the market side of Brazil. But we are still very much a believer in being in Brazil. As we've talked about before, we've been there for well over two decades and know how to navigate in that environment. The credit issues that are being faced in Brazil have caused headwinds to the type of market capture that we were hoping for when we put those 10.8 kind of million tonne numbers out there to not take risk in what you see maybe with some of our competitors have experienced, we have not had as much problems there. So we've taken a more conservative approach, but we do have as you've said, that kind of buffer to grow as the market rebounds and more stabilizes, not only in our existing facilities, but to your point, our new Palmeirante facility as well. So, Jenny, maybe you want to talk about how the market looks in '26 and then even beyond. Jenny Wang: Sure. Thanks. The market has been, as everyone knows, challenged by the high interest rate and the credit issues. We have really seen some major shift in the industry, both at the retailer side and also at the farmer side. The number of the filing of Chapter 11, the U.S. equivalent of Chapter 11 cases have increased over the last two years. The positive part of those challenges are the consolidations started to happen as well, both at the retailer side and also at the grower side. For 2026, we foresee this is going to be a challenging year as we go through this process. Therefore, if you think about the overall fertilizer shipment in the country, we may see some uncertainties, which, a, related to the farm economics and affordability; b, probably also related to the supply availability, especially on phosphate with the restriction of the Chinese export. So overall market is likely going to be flat and our own distribution volume, we will make a prudent decision on how much we want to sell, which customers we want to sell. We are not going to take credit risk, and we're not going to compete in the market where the business quality is not really good. Lastly, I would say, last year was a significant application of low-quality phosphate and key products out of China. And we have started to see the official report on the yield impact. And if there's any further under application of fertilizer in the current crop year, the ongoing safrinha corn or the coming sur season, the Brazilian farmers will have a very clear decision to make on what application rate they need to manage. So, in midterm, we are very optimistic to this market. Brazil is growing, it's expanding and yield is very important for the farmers. But before the market turned high, we need to manage through this process, especially in this year. Bruce Bodine: Lucas, I'm going to ask Luciano to talk a little bit on the cost side and the resiliency of kind of Fertilizantes from an interesting perspective. But no doubt, the raw material prices have provided some headwinds in that business, and we've made some moves. We're going to watch that closely before we decide on what to do next for maximizing shareholder value. And a lot of that depends on what happens with sulfur price and what happens with fertilizer price. And probably, hence, why we didn't guide in this regard is there's a lot to unfold in the next, say, month to 3 months for us to watch to get more comfortable on how things are going to come out. But regardless of that, I think it's worth Luciano talking about kind of the financial performance of that business. Luciano Pires: Yes, there has been some reactions notes with some disappointment about the performance of design in the fourth quarter. But I'd like to offer a different perspective. So because of high sulfur prices, we actually curtailed production. We removed 30% of our SSP production in Brazil. We also put our major site in turnaround, which was Uberaba. We anticipated a turnaround. We're not expecting. So it became stopped for -- so we produced significantly less. Our distribution margins because of the credit issues, they narrowed quite significantly. Sales dropped precipitously at the end of the quarter. And with all of that, still the business generated almost $50 million on EBITDA. And so that would be, I would say, a phenomenal performance for the set of circumstances that we faced and that we actually decided to impose to the business in the fourth quarter. So the platform is there. And as soon as the market conditions improve, you're going to see results rebounding pretty quickly. Operator: And our next question comes from Andrew Wong at RBC Capital Markets. Andrew Wong: I just had a couple of questions on the U.S. First, on the phosphate demand, it's been down pretty significantly for the past four years, but yields, the crop yields have still been pretty strong. So what should we take away from that dynamic? Are the just extremely, extremely depleted? Have farmers just been really efficient with applications? And then secondly, on the U.S. countervailing duties, I think that's up for review this year. Can you just go over that process? And how does the current high-priced phosphate market affect that review? Bruce Bodine: Thanks, Andrew, for your question. Let me start with your latter one, and then I'm going to turn it over to Jenny to talk about the lower phosphate in North America and any yield impacts or response to answer the first part of your question. On the countervailing duties, there really is no correlation to that on the process itself. But this process this year enters into its sunset review, which will kick off in April. And we're evaluating our needs to participate in that process as we speak. So a lot more to come there. And just to remind, as that process unfolds, duties do stay in place until an ultimate decision is made on the countervailing duties from the sunset review. I'll turn that over to Jenny now to talk about yields in North America. Jenny Wang: Sure, Andrew. We just want to remind ourselves on the shipment of phosphate in North America. Basically, the changes is really in the U.S. market. That was down to below 9 million tonnes in 2022, recovered in '23 to 10 million tonnes, '24, 10 million tonnes. And then we see a major drop last year, 8.5 million tonnes. So whether we should see yield impact, it is going to come in from the coming season, the current season. So, last year, the drop of this 14%, 15% of shipment of phosphate in the North American market, majority of them happened in fall application, meaning that is the tonnes go to the field in this spring for the spring crop. So the yield impact likely going to -- if there are major impact, it is likely going to be the current crop, the crop going to be going into the field. I would also see, say, the precision ag has made a lot of farmers make their decisions on cutting rate in the same time, looking for products that they are able to improve the use efficiency where that is the biologicals coming in play. Biologicals like our PowerCoat and BioPath, are not able to increase the supply of phosphorus. But in the time in one year or two, when the rate is not going to be applied as high as normally they do, the efficiency effect will come into play. So, in short, whether we will see a yield impact in North America in the U.S., like we see in Brazil, it is going to be this crop, we will watch. Operator: Our next question today comes from [ Evan McCall ] at BMO Capital Markets. Unknown Analyst: Evan McCall on for Joel Jackson. Just wondering what changed with this 2 million per tonne -- 2 million per quarter phosphate. That was the expectation for now a year later at the end of the year targeting 1.7 to 1.8. Operator: Evan, this is the operator. I apologize [indiscernible] Bruce Bodine: Sorry, we did not understand the question, it was pretty garbled. I don't know if it's your connection or where you are. If you want to -- I don't know, drop and try to get back in. Unknown Analyst: Okay. Operator: [indiscernible] your question now, sir? Unknown Analyst: Yes. Sorry about that. Just wondering what changed with the 2 million per tonne -- sorry, 2 million per quarter in phosphate and now the expectation is a bit lower at 1.7 million to 1.8 million tonnes a quarter. Is that just the turnaround in the first half and you'd expect to be higher after that? Or what are your thoughts on that? Bruce Bodine: Yes. No, we -- as we've talked about in, I think, prior quarters where we started, our guide is going to be on actually demonstrated prior trailing three months, which means that there's likely upside to the numbers, Evan. But until we see them, we're just being more cautious on that as we probably got ahead of our skis in the past. So, by no means have we lost confidence. And I think, hopefully, the proof points that I gave earlier to, I think, the second question on where we are from an operating factor alludes to the progress that we are making and the confidence that we have in ultimately getting to that full utilization to hit 8 million tonnes. Operator: And our next question today comes from Kristen Owen at Oppenheimer. Kristen Owen: Two brief ones for me. First is on mix. Just given some of the netback comments that you made, Jenny, can you help us in terms of how you're thinking about product mix and geographic mix in 2026? And then my second question just relates to the working capital. Can you give us a sense of how much of that working capital is tied up in Brazil? Bruce Bodine: Thanks, Kristen. I'll start with the working capital one and maybe turn it over to Luciano to give you a little more color on that one. Luciano Pires: Okay. So we're thinking about a release of $300 million to $500 million through a combination of factors through some release of rock inventories, the sales above production in the faucet business, Brazil as well, which ended up with slowed down sales at the end of the quarter. And therefore, we had to pay a lot of accounts payable for purchased nutrients that we didn't repurchase. So that dragged down working capital as well. So all these factors with normalization of demand should -- and production should come down. And our estimate is $300 million to $500 million of contribution for cash flow this year. Bruce Bodine: And then, Kristen, on product mix and geographic mix, I'm just going to turn it over to Jenny to give you the latest thoughts on that. Jenny Wang: Kristen, I think your question probably more towards to phosphate. Usually, our phosphate production goes around 55% to 60% stay in North America and the rest for the export market. This year, we are going to watch the market trend and demand very closely, especially in the U.S. market. I wouldn't be surprised to see increased sales of phosphate to the international market and the less percentage in North America. It is really market demand driven. Bruce Bodine: And I think, Kristen, what's driving that to Jenny's point, is how disciplined China stays to their export constraints. If it goes beyond the first half of the year, there may be even more opportunities on the international side. But we are getting reach out from customers who are traditionally may be served more by the Chinese export market looking for tonnes. And I think it's important to understand that from our view anyway, that the phosphate market is a supply-constrained market. So, people are out there, particularly in India, Southeast Asia, looking for tonnes that would otherwise more traditionally have been supplied through China. And given their discipline and policy announcements, there could be meaningful reduction again this year on exports available from China. Luciano Pires: And one of the reasons why the corporate segment is actually improving performance is because of our sales through China and India, which are accounted for in that segment. So there's increased contribution, EBITDA contribution, but within the corporate segment, which is the negative amount is declining. Operator: Our next question today comes from Benjamin Theurer with Barclays. Rahi Parikh: This is Rahi on for Ben. So just a couple of questions. From the $300 per tonne in sulfur cost in your cost of goods sold in 4Q and the benchmark levels hitting about $500 in late last quarter, is it reasonable to assume some average around $400 per metric ton for sulfur cost in 1Q? Or would this boost automatically, you think already in 1Q to $500 per metric ton for sulfur? And then also for Fertilizantes, is the $50 million EBITDA the go forward per quarter if production stays curtailed? Bruce Bodine: Thanks for your question. Let's start with your first one, sulfur. I'll probably ask Jenny to weigh in on this as well. But that sulfur price, as you've well noted, does flow through inventory. We do see in our current forecast, but more to come through that sulfur will moderate in price as the year goes on. But sulfur and COGS through quarter 1 to quarter 2 may actually increase as that higher cost sulfur that we negotiated in quarter 1 flows through inventory. Jenny, anything to add to that? And then on the second part of the question, what was the second part? I'll turn it over to Luciano. Sorry. $50 million is not -- I mean there's a lot of factors that go into quarter-by-quarter EBITDA. One is product mix. Seasonally, quarter 4, quarter 1 are always kind of low just given product mix, more nitrogen products and volume less on -- lower volume, less on our performance products like Mosaic Fertilizantes, which pull through a margin premium as an example. So there's a lot of things that depend on that. But $50 million is not the new normal. Luciano Pires: Yes, it's definitely going to be better than that, first and foremost, because Uberaba coming back and normalizing its level of production will uplift this. And we should expand our distribution margins as well. So we should expect a much higher EBITDA on a quarterly basis going forward. The wildcard is continued to be Araxa, which right now is idle. And currently, the expenditures are hitting -- although we are saving on CapEx and other things, the expenditures are continuing to hit EBITDA at a rate of around $10 million per month. But yes, but still with that, performance should improve. Operator: Our next question today comes from Edlain Rodriguez with Mizuho. Edlain Rodriguez: I mean this is a question for Jenny. So we saw the demand deferral or destruction in phosphates in Q4. Like are you surprised that farmers took a holiday in phosphate, but not on potash, especially given the two mineral fertilizers tend to be applied in tandem. Bruce Bodine: Yes. Go ahead, Jenny. Jenny Wang: Yes. I guess your question is probably more referred to U.S. Edlain Rodriguez: Yes. Jenny Wang: Am I surprised to the demand destruction on phosphate? I would say when we had this earnings call back in October for Q4, we did mention there were some uncertainties on the demand in Q4 on both phosphate and potash. One is related to when the U.S. government payment is going to be made. And the second part is really weather. Eventually, the weather didn't really come through that basically cut off some of the applications, which could have been in November and December. The demand destruction on phosphate are far greater than potash big part of the reason is potash affordability. The price are much more affordable than phosphate and nitrogen. Last question that you asked, that was a very interesting one because I thought the same. The U.S. farmers, they wouldn't go to the field only put down potash without getting nitrogen and phosphate in and indeed happened in December and in November. Some of the farmers, they basically -- they decided to wait until phosphate price getting reset, which, of course, we all know it is unlikely going to happen given the tight supply situation. But yes, indeed, there are farmers, they went to the field for potash application without phosphate. It is not very common. Operator: Our next question today comes from David Symonds at BNP Paribas. David Symonds: Just a couple of modeling ones left. So you mentioned that Faustina will be 50% more available in 2026 than it was in '25. I don't know how low we got in 2025, but can you just confirm if you did 7 million tonnes of phosphate production, how much of that is -- or how much of your ammonia requirement is served by Faustina in 2026? And then the second one, I'm not totally clear how you accounted for the increased value of your sulfur inventory. So could you just tell me, was there an inventory gain in your EBITDA, in your adjusted EBITDA in the phosphate business for the increase in the sulfur value? Bruce Bodine: Yes. On the ammonia one, just to confirm, David, we will -- given the turnaround we just did in quarter 4, and the upgrades that we've made at that facility. We expect 50% -- up to 50% more production out of that facility going into 2026 now that it's up and running. That will consume a larger percentage of our portfolio as consumed -- as produced ammonia. And that is going to be 35% to 40% of the portfolio versus much less than that, which we would have been exposed to market on. So the biggest component still remains kind of our strategic contracts, which are cost-based-ish. Then we've got 35% to 40% at times, maybe a little bit more from Faustina. Not only will Faustina consume its own ammonia fully, we'll have enough to ship into the Florida system. And then we'll be much less exposed with the remainder to spot. Luciano Pires: David, so there's absolutely no revaluation of inventory. There are no gains recorded on the EBITDA. The reason why prices affect inventory is mostly in Brazil because in Brazil, you have purchased nutrients. So if prices go up, you need to pay higher prices, and therefore, your inventory is recorded at a higher value. But in North America, which is everything is produced, inventory is recorded at cost of production and is not revalued, and there's no gain or loss. Operator: And our final question today comes from Mike Sison with Wells Fargo. Michael Sison: Just one quick one. You all said there was a $250 headwind in the first quarter given where stripping margins are at. If on Slide 14, the February '26 metrics don't change, is that a similar headwind for the rest of the quarters? And I understand sulfur is supposed to come down, hopefully. And any sensitivity on how that $250 goes away and what the important variables are as the year unfolds? Bruce Bodine: Yes. Thanks, Mike. Obviously, if sulfur price persists at that level, the component of margin erosion or to the stripping margin erosion for that sulfur would play would stay constant. We also see ammonia prices coming down throughout '26 as well. So there is some offset to that. And then ultimately depends on what we talked about earlier in the call is how much can be passed through on price and what ultimately happens with price to the realization on stripping margin. The other benefit that we will see is we'll see better -- from '25 to '26, better turnaround and idle cost. And we'll also see, as production improves, better fixed cost absorption on conversion cost that will buffer out some of that time. So not all is static. There's a lot of moving parts, but those are the variables -- the key variables that go into that. Luciano, anything else to add? Luciano Pires: Yes. So realized stripping margins in the fourth quarter were $444 per tonne. And so if you correct for the current sulfur prices compared to the $306 that was recorded in the fourth quarter, you would have somehow $400 per tonne of stripping margins. And so what would be the impact to the bottom line? So just to give you an example, today, at $444, the EBITDA margin per tonne was $108. That per se suggests if you just take $444 less $108 that $330 would have been the breakeven point at Q4. However, there's about a $50 penalty just because of turnaround expenses and other SG&A expenses divided by a very small sales volume. So I would say these two lines are kind of $50 above what they should be. So that puts us at $280 breakeven. And if you add the cost dilution that we expect in going for 8 million tonnes, like we should be around $250 per tonne of 3P margin breakeven. So in a normalized world at a $400 3P margin, we should be making $150 per tonne approximately. Just a ballpark for you to reason around the phosphate performance. Operator: That concludes our question-and-answer session. I'd like to turn the conference back over to Bruce Bodine for any closing remarks. Bruce Bodine: Thank you, everyone, for joining us. To conclude our call, I'd like to reiterate our key messages for today. Clearly, the second half of 2025 was challenging for Mosaic and the agriculture business, especially in the U.S. We saw demand drop significantly as farmers dealt with tough economics and uncertainty around government payments. That said, our outlook for 2026 is positive, in part because demand is emerging in the U.S. and remains strong in other key areas of the world, but also because of the progress we've made to strengthen Mosaic. We're on track to improve phosphate production, and we expect a strong year for potash production. We've made good progress on cost and efficiency, and we expect further strides this year. Our Mosaic Biosciences platform is growing quickly and holds meaningful promise for the future. And our capital allocation program continues to produce results with several divestitures of noncore assets in 2025. So, overall, Mosaic is well positioned to weather the storm and deliver strong earnings as business conditions improve. Thank you very much, and have a safe day. Operator: Thank you. That concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.

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ORBIA.MX 2025 Q4 财报电话会议

Operator: Good morning, and welcome to Orbia's Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Diego Echave, Orbia's Vice President of Investor Relations. Please go ahead. Diego Echave: Thank you, operator. Good morning, and welcome to Orbia's Fourth Quarter and Full Year 2025 Earnings Call. We appreciate your time and participation. Joining me today are Sameer Bharadwaj, CEO; and Jim Kelly, CFO. Before we continue, a friendly reminder that some of our comments today will contain forward-looking statements based on our current view of our business, and actual future results may differ materially. Today's call should be considered in conjunction with cautionary statements contained in our earnings release and in our most recent Bolsa Mexicana de Valores report. The company disclaims any obligation to update or revise any such forward-looking statements. Now I would like to turn the call over to Sameer. Sameer S. Bharadwaj: Thank you, Diego, and good morning, everyone. Before we begin discussing this quarter's results, I would like to thank our global employees for their ongoing efforts through 2025 and their continued focus on solving our customers' challenges in difficult market conditions. I would also like to thank our customers for their ongoing partnership and trust. Turning to Slide 3. I will share a high-level overview of our fourth quarter and full year 2025 performance. Full year revenues of $7.6 billion increased 2% year-over-year and EBITDA of approximately $1.02 billion decreased by 7% compared to the previous year. Full year EBITDA included onetime items of approximately $90 million. Excluding these onetime items, full year adjusted EBITDA was $1.11 billion. Overall, global market conditions across Orbia's businesses were mixed but remained generally challenging in 2025, particularly across construction and infrastructure-related activities and regionally in much of Europe and Mexico. We did, however, see favorable trends emerge during the year in our Fluor & Energy Materials, Connectivity Solutions and Precision Agriculture businesses. In this environment, we remain relentlessly focused on exercising strong financial discipline. We continue to strengthen our leading market positions and to drive results through effective commercial and operational execution with a focus on both earnings and cash generation. Our cost optimization programs are on track and making important contributions as is our initiative to generate cash from noncore asset sales. We continue to look for more opportunities to simplify our business, further strengthen our balance sheet and drive cash generation to support our long-term strategic objectives. As we begin 2026, we expect market dynamics to remain challenging in some businesses with continued improvements in others. I will now turn the call over to Jim to go over our financial performance in further detail. Jim Kelly: Thank you, Sameer, and good morning, everyone. I'll start by discussing our overall fourth quarter results. Turning to Slide 4. Net revenues of $1.9 billion increased by 5% year-over-year, with growth coming from all business groups except Polymer Solutions. The increase was led primarily by higher volumes in Connectivity Solutions and better product mix in Fluor & Energy Materials. I'll provide a more comprehensive description of these factors in the business-by-business section. EBITDA of $227 million for the quarter increased 2% year-over-year, primarily driven by higher volumes and lower onetime costs in Fluor & Energy Materials and in Building and Infrastructure, partially offset by a decrease in Polymer Solutions. Adjusted EBITDA of $236 million declined 14% compared to last year, primarily driven by Polymer Solutions. Operating cash flow of $349 million increased by $67 million or 23% compared to the prior year quarter, driven by efficient working capital management and the absence of last year's unfavorable currency impacts, partially offset by net interest paid and higher taxes. The operating cash flow conversion rate for the quarter was 154%. Free cash flow in the quarter was $204 million, an increase of $80 million year-over-year, driven by an increase in operating cash flow and a decrease in capital expenditures. Turning to Slide 5. I'll now review our full year results for 2025. On a consolidated basis, net revenues were $7.6 billion, an increase of 2% year-over-year. Higher revenue came from all business groups with the exception of Polymer Solutions. The increase was led primarily by higher volumes in Connectivity Solutions and better product mix in Fluor & Energy Materials. EBITDA of $1.02 billion decreased 7% year-over-year with an EBITDA margin of 13.4%, a decrease of 124 basis points. These decreases were primarily due to lower volumes and prices in Polymer Solutions and onetime costs for Building and Infrastructure. These were partially offset by the absence of prior year onetime costs in Fluor & Energy Materials and higher revenues in Connectivity Solutions and Precision Agriculture. Excluding onetime items, adjusted EBITDA was $1.11 billion for the full year, representing a 7% decrease from the prior year and an adjusted EBITDA margin of 14.6% for the year. Operating cash flow and free cash flow were $645 million and $111 million, respectively, reflecting strong working capital performance and lower cash impacts from accruals, partially offset by lower EBITDA and higher taxes and net interest paid. The operating cash flow conversion rate for the full year was 63%. Free cash flow increased by $175 million year-over-year, driven by higher operating cash flow and lower capital expenditures. Capital expenditures of $405 million declined by approximately 15% compared to the prior year. Spending for 2025 included ongoing maintenance and investments to support the company's targeted growth initiatives. Orbia invested $144 million in strategic growth primarily dedicated to expanding capacity for medical propellants and custom electrolytes within our Fluor & Energy Materials business as well as advancing high-value product initiatives in Building and Infrastructure. The remaining $251 million was deployed to ensure operational safety and asset integrity. Net debt of $3.78 billion included total debt of $4.82 billion less cash of $1.04 billion. The net debt-to-EBITDA ratio was 3.70x at the end of the year, which decreased from 3.85x at the end of the prior quarter, driven by a decrease in total debt of $82 million and an increase in cash and cash equivalents of $49 million and an increase in the last 12 months EBITDA of approximately $5 million during the quarter. The leverage ratio increased by 0.4x compared to 3.30x at the prior year-end due to an increase of $162 million in net debt of which $147 million was due to the appreciation of the Mexican peso against the U.S. dollar and a decrease of $76 million in the last 12 months EBITDA, partially offset by an increase in cash and cash equivalents of $31 million. On an adjusted basis, net debt to EBITDA at the end of 2025 was 3.40x, which was a slight reduction from the level of 3.42x at the end of the prior quarter. For the full year, we recognized an income tax expense of $291 million compared to an income tax benefit of $127 million in the prior year. The change in the tax expense was primarily driven by the geographic mix of earnings, appreciation of the Mexican peso relative to the U.S. dollar, inflation-related adjustments and discrete items, including nonrecurring dividend repatriation and impairment charges. Adjusted for these items, the effective tax rate for the year would have been approximately 25%. Turning to Slide 6. I'll review our performance by business group. In Polymer Solutions, fourth quarter revenues were $558 million, a decrease of 6% year-over-year driven by lower operating rates in derivatives and lower prices in resins. This was partially offset by higher volumes in resins and higher prices in derivatives. Fourth quarter EBITDA was $33 million, a decrease of 55% year-over-year with an EBITDA margin of 5.9%, driven by lower prices and higher input costs. For the full year, Polymer Solutions had revenues of $2.4 billion, a 4% decline, driven by lower volumes in derivatives and lower prices in resins, partially offset by higher general resins volumes. Full year EBITDA declined 30% versus the prior year to $248 million with an EBITDA margin of 10.2%, driven primarily by lower resin prices, operational disruptions in derivatives and a key raw material supply disruption during the first half of the year. This was partially offset by lower fixed costs from cost savings initiatives. Excluding onetime items, adjusted EBITDA was $39 million in the quarter and $279 million for the full year, representing a decrease of 53% and 26%, respectively. Adjusted EBITDA margin was 7% for the quarter and 11.5% for the year. In Building and Infrastructure, fourth quarter revenues were $600 million, an increase of 4% year-over-year, driven primarily by higher volumes in Western Europe, Mexico and other portions of Latin America, favorable currency fluctuations and better pricing. This was partially offset by the impact of divestments of the India and Clay Pipe businesses that were completed earlier in the year. Fourth quarter EBITDA was $71 million, an increase of 34% year-over-year with an EBITDA margin of 11.9%. The increase was driven by lower onetime restructuring costs, better margins favorable product mix and continued benefits from cost-saving initiatives. For the year, Building and Infrastructure revenues were $2.5 billion, a decline of 1% year-over-year. The decrease was driven by the impact of completed divestments and weak demand in Mexico, partially offset by growth in Brazil and EMEA. Full year EBITDA of $246 million declined 10% year-over-year with an EBITDA margin of 10%, driven primarily by lower results in Mexico and Western Europe, higher material costs and higher onetime restructuring costs compared to last year. This was partially offset by better performance in the U.K. and Brazil and the benefit of cost savings initiatives. Excluding onetime items, adjusted EBITDA was $78 million in the quarter and $286 million for the full year, representing an increase of 20% and a decrease of 2%, respectively. Adjusted EBITDA margin was 13.1% for the quarter and 11.6% for the year. Moving to Precision Agriculture. Fourth quarter revenues were $279 million, an increase of 5%, driven primarily by strength in Brazil, Europe and Israel, partially offset by India and Mexico. Fourth quarter EBITDA of $33 million was slightly lower year-over-year with an EBITDA margin of 11.8%. The slight decrease in EBITDA year-over-year was driven by lower performance in the U.S., Mexico and Central America, partially offset by better performance in EMEA, Brazil and Turkey. For the year, Precision Agriculture reported revenue of $1.1 billion, an increase of 6%, driven by growth in Brazil, Peru and the U.S., partially offset by soft demand in Mexico. Full year EBITDA increased by 9% to $136 million with an EBITDA margin of 12.4%, primarily driven by Brazil, the U.S., Turkey and Peru, partially offset by negative impacts from currency fluctuations and Mexico. Excluding onetime items, adjusted EBITDA was $35 million in the quarter and $142 million for the full year, representing a decrease of 3% and an increase of 7%, respectively. Adjusted EBITDA margin was 12.5% for the quarter and 12.9% for the year. In Fluor & Energy Materials, fourth quarter revenues were $268 million, an increase of 21% year-over-year. The increase was primarily driven by higher volumes from pharma and upstream minerals and favorable prices across most of the product portfolio, partially offset by lower volumes in refrigerants. Fourth quarter EBITDA was $68 million, an increase of 107% year-over-year due to higher revenue in the absence of prior year onetime legal expenses, partially offset by higher raw material costs. EBITDA margin was 25.2%. For the full year, Fluor & Energy Materials revenues were $958 million, an increase of 11%, driven primarily by strong results across the product portfolio. EBITDA for the full year increased 14% to $267 million and an EBITDA margin was 27.8%. The full year increase in EBITDA was primarily driven by the absence of prior year onetime legal expenses, partially offset by higher raw material costs and higher operating costs in Mexico, driven by the appreciation of the Mexican peso against the U.S. dollar. Excluding onetime items, adjusted EBITDA was $68 million in the quarter and $267 million for the full year representing an increase of 3% and a decrease of 1%, respectively. Adjusted EBITDA margin was 25.2% for the quarter and 27.8% for the year. Finally, in our Connectivity Solutions segment, fourth quarter revenues were $226 million, an increase of 32% year-over-year. The increase in revenues for the quarter was driven by strong volume growth across all end markets and a favorable product mix, partially offset by lower prices. Fourth quarter EBITDA increased 61% year-over-year to $21 million with an EBITDA margin of 9.5%. The increase was primarily driven by higher revenues, higher capacity utilization and continued benefits from cost reduction initiatives, partially offset by lower prices. For the full year, Connectivity Solutions revenues were $918 million, an increase of 9%, driven by strong volume growth and favorable product mix, partially offset by lower prices. For the full year, EBITDA of $131 million increased 21% and EBITDA margin was 14.2%, primarily due to higher revenues, higher capacity utilization and the continued benefits from cost reduction initiatives, partially offset by lower prices. Excluding onetime items, adjusted EBITDA was $33 million in the quarter and $144 million for the full year, representing an increase of 105% and 23%, respectively. Adjusted EBITDA margin was 14.8% for the quarter and 15.7% for the year. Turning to Slide 7. I'd like to provide an update on our plan to improve operating performance, strengthen our balance sheet and reduce leverage as first outlined in our October 2024 business update. First, our cost reduction program continues on track, having delivered cumulative annual savings of approximately $200 million by the end of 2025 relative to the end of 2023 cost base. We've achieved approximately 80% of our targeted $250 million in savings per year by 2027. Second, the contribution from recently completed or close to complete organic growth initiatives, which are primarily focused on new product launches and capacity expansions, reached approximately $59 million of EBITDA during 2025. The goal is to achieve $150 million in incremental EBITDA from these investments by 2027. We expect an acceleration of these benefits in 2026, especially in Building and Infrastructure. We have signed agreements that generated proceeds of approximately $90 million from noncore asset divestments as of the end of 2025. We anticipate reaching our targeted $150 million or more by the end of 2026. Finally, as we indicated in the second quarter of 2025 results presentation, we have successfully extended all material debt maturities to 2030 and beyond, raising approximately $1.4 billion to refinance existing obligations. This proactive capital structure management enhanced our financial flexibility and helped to reduce near-term financial risk. With that, I'll now turn the call back over to Sameer. Sameer S. Bharadwaj: Thank you, Jim. On Slide 8, I will cover a few key milestones regarding our efforts on sustainability. In 2025, we remain focused on expanding and delivering sustainable solutions across all our businesses, staying aligned with our long-term strategy and customer needs. In Fluor & Energy Materials, we expanded our custom electrolyte facility in the U.S. and continued growing our portfolio of low global warming potential refrigerant gases and medical propellants. We also advanced construction of our new facility for next-generation medical propellant 152a in the U.K., which we expect to start production in early 2027. Within Building and Infrastructure, we enhanced our offering in urban water resilient solutions to address environmental challenges. We exceeded our 2025 sustainability-linked sulfur oxide emissions reduction target. Our progress was recognized once again by leading sustainability benchmarks in 2025. We maintained our standing in the S&P Dow Jones best-in-class MILA Pacific Alliance, the S&P Sustainability Yearbook, the FTSE4Good Index and the BMV ESG Index. Finally, we will publish our 2025 impact report on March 9, where we will provide further detail on sustainability performance. Turning to Slide 9. I will now discuss our outlook for 2026. The outlook for the year presents 2 distinct dynamics. We expect continued positive market momentum in Precision Agriculture, Fluor & Energy Materials and Connectivity Solutions. Meanwhile, Polymer Solutions and Building and Infrastructure end markets are expected to remain relatively weak. We expect growth in EBITDA from these segments due to the absence of the operational disruptions experienced in 2025 in the Derivatives business as well as from commercial initiatives and new product introductions in Building and Infrastructure. For 2026, the company expects that full year EBITDA will be in the range of $1.1 billion and $1.2 billion with capital expenditures expected to be approximately $400 million. The primary focus of capital expenditures will be investments to ensure safety and operational integrity as well as selective strategic growth projects, particularly in the Fluor & Energy Materials business group. Now looking ahead in each of our business segments for the year. Beginning with Polymer Solutions, the global PVC market is expected to experience continued excess supply. However, prices have recovered modestly compared to the trough levels seen in the second half of 2025. Recent governmental policy shifts, particularly in China and announcements of capacity rationalization in Europe and the U.S. should help support a firmer global pricing environment. The focus remains on maximizing production, maintaining strict control over fixed costs and cash and growing profitability. In Building and Infrastructure, market conditions are expected to remain subdued in Europe and moderate growth is anticipated in Latin America. Orbia anticipates incremental growth driven by greater adoption of new products, contribution from value-added solutions and ongoing benefits from cost optimization initiatives. In Precision Agriculture, we expect continued strong momentum across key markets led by robust demand in Brazil, solid project execution in Africa and the Middle East and sustained strength in U.S. permanent crops. The business will also advance growth initiatives through its new digital farming platform and new projects while capturing additional benefits from ongoing operational efficiency efforts. In Fluor & Energy Materials, we expect positive fluorine market trends to continue with strong demand to help offset the impact of raw material and mining cost inflation. Our operating philosophy is to ensure safe and stable mining and chemical operations and maximize the value of fluorine across minerals and chemical intermediates, refrigerants and medical propellants. Growth investments will focus on battery materials, next-generation medical propellants and mining infrastructure. And finally, in Connectivity Solutions, we anticipate growing demand driven by broadband expansion, new data center investments and the modernization of the U.S. electric power grid. Profitability is projected to improve, supported by these incremental volumes, higher plant utilization and the ongoing implementation of cost control initiatives. Consistent with our top priority to strengthen the balance sheet and the company's Board of Directors has resolved to approve and intends to propose to shareholders at Orbia's Annual General Meeting that no ordinary dividend be declared for 2026. In summary, our near-term priorities are to deliver on our commitments, delever the balance sheet, simplify operations and focus on our core business. We aim to improve EBITDA and cash flow through cost savings initiatives and growth from recently completed project investments, complemented by cash generated from noncore asset sales. These actions will enable us to improve our leverage and strengthen our balance sheet by the end of 2026 without relying on potential market recovery or further benefits from business simplification. We remain committed to meeting customer needs and generating long-term value for our shareholders. We are aware of recent media reports and market speculation concerning a potential divestiture of our Precision Agriculture business. We continually engage in assessing opportunities to optimize our portfolio and create value for our shareholders. As a matter of policy, we do not comment on market speculation or rumors. We are committed to providing material information to the market in accordance with our disclosure obligations and regulatory requirements. Any official announcements regarding Orbia's strategy, operations or financial structure will be made through press releases and filings in accordance with applicable law and stock exchange rules. Before we move to Q&A, I would like to share an important leadership update. After nearly 5 years of dedicated service as Chief Financial Officer, Jim Kelly has decided to retire from Orbia. Since joining us in 2021, Jim has reinforced financial and capital allocation discipline, enhanced reporting and internal controls and guided the company through a complex global environment with a clear focus on balance sheet strength, cash generation and long-term value creation. Importantly, Jim also built a high-performance finance function, developing leadership depth that positions us well for the future. He has been a trusted partner to our executive team and our Board. And as many of you know, he has played an outstanding role in engaging our external stakeholders, including debt and equity investors, analysts and ratings agencies. We are truly grateful for his contributions. He will remain with us through midyear to ensure a seamless transition internally and externally. Following a structured Board-led succession process, I am pleased to announce that Cristian Cape Capellino, a senior leader within a global finance organization has been appointed Chief Financial Officer effective March 15, 2026. Cape is a seasoned executive with over 23 years of experience, spanning public accounting and finance leadership roles within global industrial and manufacturing organizations. Since joining Orbia in 2020, he has held senior leadership roles across controllership, tax, financial planning and analysis and finance transformation within the finance leadership team. He worked in close partnership with Jim to strengthen governance, sharpen capital allocation rigor and modernize our global financial systems across more than 40 countries. Prior to Orbia, Cape spent more than a decade at Tenaris, an NYSE-listed global industrial company, where he held multiple senior finance and business leadership roles. Earlier in his career, he worked at Deloitte in audit and tax. He holds an MBA from the MIT Sloan School of Management and a public accountant degree from the National University of Cordoba. Cape understands our portfolio, our capital framework and our performance drivers. He is highly regarded by our global teams. His appointment ensures continuity and execution. Our strategic priorities and capital allocation plans remain unchanged. The Board and I are confident that this transition positions us well for our next phase of performance and value creation. Operator, we are now ready to take questions. Operator: [Operator Instructions] The first question today comes from Andres Cardona with Citi. Andres Cardona: Before I ask my question, I want to thank Jim for the partnership over the last 5 years and wish you very good luck in your next step. Sameer, the natural question at this point is the simplification idea of the business. Could you help us to understand the reach of this program if it is limited to noncore assets, relatively small divestitures? Or how can we think about this concept that seems to be at the center of the strategy of Orbia for the last year or so? Sameer S. Bharadwaj: Thank you, Andres. Let me address that question. As we've said before, our focus at Orbia, first and foremost, is to deliver on our results with a focus on EBITDA and cash generation and use the proceeds to delever and then simplify and focus our portfolio. So in that context, as we've shared before, the outcome of our strategy session late last year is that we will focus on our core value chains, okay? And there are potentially businesses that we see may not be directly linked with our value chains or not the best strategic fit, we will look for simplification opportunities. And as I have commented earlier, we continue to explore such opportunities in earnest. And if and when there is something material to report in accordance with our disclosure obligations, we will do so. Operator: The next question comes from Joao Barichello with UBS. Joao Pedro Barichello: I have 2 from my side here. So could you provide an update on [ Cora's ] new facility in the U.K. regarding how has been the project execution time line? What is the EBITDA contribution that you're expecting from it? And also, could you provide a little bit more of color on the main adjustments made in your adjusted EBITDA for the 4Q, but also for the full year of 2025? I mean, what were the main one-off events and how materially were they? That's it from my side. Sameer S. Bharadwaj: Very good, Joao. Let me take the first question, and I'll let Jim answer the second question. The investment that we are currently making in the U.K. is to build a large-scale industrial scale medical-grade 152a plant to support the commercialization of this next-generation global warming -- lower global warming potential medical propellant. As we've disclosed before, we already have a 600 tonne per year pilot reactor running, supporting the industry at this time with their qualifications and their scale up. And we have customer commitments to -- starting off early of 2027, where we will scale up this facility to 6,000 tonnes a year. And over time, as the industry transitions away from medical grade 134a to medical grade 152a, we have the asset required to serve the industry needs. So all the qualifications and scale-up is on track. We expect to complete construction of the facility towards the end of this year in time for the scale up at our customers. And the EBITDA contribution of this business, I do not want to talk about specific numbers right now, but is expected to grow very significantly over the next 2 or 3 years, okay? Jim Kelly: Thank you, Joao, for the question regarding the onetime items, the nonoperating items, we're strict in our definitions of what those are. And I'd say the definition really typically falls into 3 categories, one being particularly given the initiatives that we have on our delevering at this point in time, the restructuring costs that we incur in order to execute on those plans then as well any legal settlement or extraordinary legal costs that we have in defending historical cases that exist around the company. And then if there are any other true nonoperating impacts in any of the businesses that occur over the course of the year from an operational perspective. So let me go through in a little bit of detail on each of those. So for the full year, first of all, the number, as you would have seen, was $90 million. So that got us from the [ $1,020 million to $1,110 million ] going from reported EBITDA to adjusted EBITDA. The largest of the adjustments was in the restructuring area. That was about $45 million, and a lot of that was within our B&I business, where you've heard us speak about the footprint rationalization in Europe. So that -- we're in the middle of that process at this point in time. It's ongoing. And for that reason, we've incurred a number of restructuring charges there. And then smaller ones across some of the other businesses. There was a little bit in Polymer Solutions, et cetera, but the vast majority in B&I. Next after that was about $30 million of legal related. And of that, about $20 million was related to a settlement that took place during the year and the remainder is legal costs that were incurred to address outstanding cases that are -- that generally have long histories, go back in time and have nothing to do with what's taking place in the business right now. So again, in total, those were about $30 million and then on top of that, we had about $20 million that related to operational disruptions in one of our key suppliers in the Polymer Solutions business. We reported this back in the first quarter of the year. It was a little bit in first and second quarters that we incurred this. And again, that was about $20 million. So in total, those comprise the $90 million. If you're asking as well about Q4, the number was about $9 million in Q4, so not that material in the quarter. It was much more material in the earlier part of the year. Operator: The next question comes from Hernan Kisluk with MetLife. Hernan Kisluk: Congratulations to your career, Jim. So my question is on the revolving credit facility. I understand it has spring covenants that are not very far from being reached. So I'd like to understand if you are in conversations with the group of banks to amend waive or change the terms of the RCF, so you can maintain the availability? Jim Kelly: Thank you for the question. So you're correct in terms of the commitments that we have to meet. So in terms of the net debt to EBITDA, it's 3.5x or below and then interest coverage above 3.0. We are within those covenants at this point in time. So -- and also, remember, as you said, they are springing covenants. So they don't come into effect until or unless we have 2 of the 3 rating agencies saying that we are not investment grade. So with 2 of the rating agencies still supporting an investment-grade rating, the covenants are not in force. So right now, we are in a good situation. We have ongoing discussions with the banks that are part of the RCF. And should we get to a position where there is potential risk to the investment-grade rating, we would have discussions with them as to whether they would be willing to waive these covenants or not. Keep in mind, we do not draw on the RCF. We view it as, call it, an insurance policy for liquidity if or when we need it. But at this point, and it's been a while, a couple of years now since the last time we drew on the RCF. Sameer S. Bharadwaj: Yes. The only other thing I would add, Jim, is we have a highly focused plan to delever with or without portfolio simplification opportunities. And so we feel confident in our ability to do so over time. And portfolio simplification just allows us to get there sooner. Operator: The next question comes from Nicolas Barros with Bank of America. Nicolas Barros: I have 2 questions, right? The first one on your projects. Could you share the latest developments regarding the PVDF project and the same for the LiPF6, right, on time line, CapEx and EBITDA? And secondly, on tax reconciliation, right? So I would like just to clarify here the tax line, right? So taxes paid in 2025 were roughly $30 million, right, above 2024 despite your negative EBT, right? So should we interpret this as taxes coming from businesses that still generate positive EBT or I don't know, any further impact from the Mexican peso? And could you share expectations for cash taxes disbursement in 2026, please? Sameer S. Bharadwaj: Thank you, Nicolas. Let me take your first question, and I will let Jim answer the second question. Specifically with respect to the PVDF project that is in partnership with Syensqo. That project is currently on hold, subject to market conditions, and we will reevaluate the merits of those projects as we go along. With respect to the LiPF6 project, that project continues to proceed on track. And keep in mind, this is supported by a $100 million grant from DOE and close to $90 million in tax incentives from the state of Louisiana and federal tax credits. The total capital investment for the project, as we have said before and disclosed in our DOE grant materials is of the range of $400 million. And so the DOE grant as well as the tax incentive significantly reduce our upfront investment. The EBITDA contribution of the project with conservative pricing is in the range of $100 million to $120 million, okay? Now the market conditions remain quite favorable. Even in the last 6 months, the market dynamics for LiPF6 have tightened and pricing has gone up significantly to the tune of $25 per kg. Chlorine is also on the list of critical minerals. And so from a security of supply standpoint, the facility that we are working on the engineering of at this moment is going to be very well positioned to be successful when the plant is built. The market dynamics continue to strengthen with growth in energy storage, supported by the needs for stationary storage as well as EVs and hybrids. And given the fact that the industry is moving towards LFP-based cathodes, the amount of LiPF6 required for LFP-based cathodes is 50% higher than NMC-based cathodes. So all the dynamics are favorable for that project. And as I said, we are currently in the engineering phase, and this project will take about 3 years to execute. Jim, do you want to take the other question? Jim Kelly: Sure. So in terms of reconciliation of the tax rate, so as I discussed in my comments, you'd look at it on a normalized basis, you would look at a tax rate of about 25%. Now needless to say, the numbers you see are quite different from that, and there are a couple of factors that drive that. Operationally, where we earn income, so what we would call the geographic mix, of our earnings has a relatively material impact. And in fact, the issue there is that we have a lower share of our income in low tax jurisdictions. So that tends to have an upward effect on the rate. The more dramatic impact, I would say, and you see this on a year-to-year basis is the impact of the change in the Mexican peso to the U.S. dollar. So there's an FX and inflationary impact based on that. And that is largely driven by the fact that we have a U.S. dollar debt. And when there is a change in the Mexican peso rate, the reductions or increases in the debt balance are essentially treated as being taxable in Mexico. So with depreciation of 20% of the peso in '24 and an appreciation of 11% in '25, you see a dramatic swing in the effective tax rate year-to-year as a result of that. And then also internally, we had some cash movements, et cetera, some repatriations from other countries into Mexico, et cetera, that caused some rate implications as well. So that's the explanation on the rate. You also asked about cash taxes. So I would expect that for 2026, our cash taxes wouldn't change significantly from where we were in 2025, maybe some increase as we see increases in our overall EBITDA that we mentioned. But there are a lot of factors there that one would have to forecast, whether that be the change in the Mexican peso, the geographic split of the earnings, et cetera. But I'd say I would not expect a dramatic change in the cash outflows from taxes during the year. I hope that addresses your question. Operator: [Operator Instructions] Sameer S. Bharadwaj: If there are no further questions, let me try and wrap up the key messages. So first and foremost, we ended 2025 despite being a challenging year, we ended the year on guidance. And even though we were short on EBITDA, the company did extremely well from a cash standpoint. And with all of the initiatives that we said we would deliver on from a cost reduction standpoint, realizing benefits from growth initiatives and noncore asset sales and the reduction of working capital, we were able to end the year strong from a cash standpoint. Now looking into the year, even though Q4 was very challenging from a PVC pricing standpoint, we have seen a material change in Q1, and we will hopefully begin to see benefits in Q2 with China's elimination of VAT on PVC exported from certain types of facilities. And we've already seen the pricing of the various indexes go up by $60 to $70 a tonne. And eventually, that should start flowing through in our results as well. We are also hopeful of antidumping duties being imposed in Mexico and Brazil, which should also benefit the Polymer Solutions business. The Building and Infrastructure business continues to suffer from weakness, particularly in Northern and Western Europe and in Mexico. And with the reduction in interest rates and resumption of building and construction activity, and especially infrastructure projects, the operating leverage that we have created in that business should begin to benefit us. The other 3 businesses are bright spots. We are completely sold out in our Connectivity Solutions business running at very high utilization as demand from the telecom carriers as well as the growth in AI data centers and the power sector continue to drive demand growth. Fluor & Energy Materials, the supply chain is tight. The fluorine item is expected to remain tight over the course of the decade, and we are doing our best to optimize our production from the mine as well as place the fluorine into the highest value applications. And the pricing environment in that business continues to strengthen during -- over the course of the year. And then finally, the Precision Agriculture business ended the year strong and continues to have very positive momentum, especially in areas like Brazil and many of the excellent projects that we are doing in Africa, the business is on a continued improvement trajectory and should deliver stronger earnings year-over-year as well. So in summary, we are doing everything we can in terms of driving the top line, having strong discipline on our manufacturing costs as well as SG&A costs, driving lots of initiatives to optimize cash through working capital initiatives and noncore asset sales so that we can deliver the results, delever the company and then simultaneously have a continued focus on portfolio simplification so that Orbia can be more focused going forward. So with that, I'd like to wrap up the call and look forward to talking to you again on the April's earnings call. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

39天前Insight Analytics约5分钟阅读

VOLARA.MX 2025 Q4 财报电话会议

Operator: Good morning, everyone. Thank you for joining Volaris' Fourth Quarter and Full Year 2025 Financial Results Conference Call. [Operator Instructions] Please note that today's event is being recorded and webcast live on Volaris website. At this time, I'll turn the call over to Liliana Juarez, Investor Relations Manager. Please go ahead. Unknown Executive: Welcome to our fourth quarter 2025 earnings call. Joining us today are our President and CEO, Enrique Beltranena; our Airline Executive Vice President, Holger Blankenstein; and our CFO, Jaime Pous. They will be discussing the company's results followed by a Q&A session. This call is for investors and analysts only. Please note that this call may include forward-looking statements under applicable securities laws. These are subject to several factors that could cause the company's results to differ materially as described in our filings with the U.S. SEC and Mexico CNBV. These statements speak only as of the date they are made, and Volaris undertakes no obligation to update or modify them. All figures are in U.S. dollars compared to the fourth quarter of 2024, unless otherwise noted. And with that, I'll turn the call over to Enrique. Enrique Javier Beltranena Mejicano: Good morning, everyone, and welcome to our fourth quarter 2025 earnings call. As ever, I'm proud of the disciplined execution, operational agility and commitment demonstrated across our organization throughout the past year. I especially want to thank our ambassadors for their hard work and resilience in what was a demanding environment. 2025 was both busy and historic for Volaris. We executed with precision across our network and operations, delivering measurable progress despite a complex industry and macroeconomic backdrop, including engine constraints, FX volatility and geopolitical developments that temporarily influenced cross-border travel sentiment. Through disciplined network management, focused pricing strategy and operational flexibility, we continued strengthening the foundation of our business. In the fourth quarter, we delivered 5.6% capacity growth and drove TRASM towards the levels recorded in the same period of 2024. At the same time, we strengthened revenue quality with ancillary revenues comprising 56% of total operating revenues, reinforcing the structural advantages of our ultra-low-cost carrier model. We also initiated targeted capacity growth in the U.S. with routes maturing as planned, all while maintaining a healthy level of cash as a percentage of revenues of 25.5% and strong cost discipline. During 2025, we kept CASM ex fuel in line with plan at $0.0558 while proactively adjusting ASM growth from an originally planned mid-teens increase down to 6.3%. These actions ensured our seat offering remained aligned with demand while prioritizing profitability. Equally importantly, we delivered on our guidance, finishing 2025 with a full year EBITDAR margin of 32.5%. Performance strengthened as the year progressed, reinforcing the improving trajectory of the business as we move into 2026 and demonstrating that our strategic and operational initiatives are gaining traction. More specifically, in the cross-border market, travel sentiment continued to improve sequentially, in line with our expectations. We matched demand with disciplined capacity deployment and the Mexico-U.S. capacity added in the second half of the year generated positive results as routes continued to mature. Fourth quarter international load factor reached 79%, up from 77.5% recorded in the first 9 months of the year. In the domestic market, load factor reached 89.8%, reflecting disciplined supply adjustments to align with demand across the network. As the best-in-class carrier operating in a structurally growing and underpenetrating emerging market, we remain focused on stimulating demand through our low fare model, supporting profitable growth, capital efficiency and long-term value creation by continuing to connect families, communities and business across Mexico and beyond. As we enter 2026, the Mexican economy is showing earlier signs of improvement, supported by recovering consumption trends and better-than-expected inflation performance. The economy-wide wage bill has recovered part of the ground lost during most of 2025, supporting improving consumer confidence and household expectations around purchasing durable goods and making travel plans in the coming months. For the year, we are expecting ASM growth of approximately 7%, fully aligned with our disciplined deployment strategy. Most of the incremental capacity will be allocated to international markets where we have seen sequential improvement in TRASM since last August, supported by encouraging first quarter booking trends. Domestically, we continue to support a balanced supply-demand environment, scaling capacity in line with improving demand indicators. Our 2026 growth will be managed through 3 levers: the first one scheduled Airbus deliveries, the second one, AOG reduction and the third one, aircraft lease returns. Together, they enable a balanced and controlled fleet profile that supports disciplined growth with flexibility and enhanced asset productivity. Importantly, we are now at an inflection point in aircraft on ground or AOGs, and we expect this trend to improve progressively toward year-end. We expect more meaningful acceleration in grounded aircraft returning to service as we move into the summer and the second half, and Jaime will discuss this in greater detail. To support this recovery, we are proactively advancing certain maintenance events and inducting roughly twice as many engines as in 2025 with a significant improvement in turnaround times. While this implies higher temporary near-term costs and a little bit more CapEx, we view it as a disciplined investment that accelerates inspections, shortens downtime and allow us to restore fleet availability sooner. We're focused on increasing the share of productive aircraft in our total fleet as doing so allows us to generate greater productivity from our existing asset base without adding leverage. This, in turn, strengthens our earnings profile and improves free cash flow conversion. Many of you have asked about our strategy to return capacity to service without creating excess supply in the market. I want to be very clear that our capacity decisions have been and will remain firmly anchored in customer demand and sustained profitability. Our flexible fleet and engine management framework allows us to dynamically adjust deployment as conditions evolve. We are fully in control of our growth trajectory, not only for 2026, but also for 2027 and 2028 when we expect to have the engine availability constraints normalized and fully behind us. Against this backdrop, the setup as we move into the back half of the decade presents a compelling opportunity for Volaris to drive long-term shareholder value. Our ultra-low-cost customer remains the main source for our growth. As you know, in December, we entered into an agreement with Viva to create an airline group to accelerate our carriers' expansion of air travel penetration in Mexico and beyond. Strategically, the proposed airline group represents a natural next step to broaden access to low-fare travel in the domestic and cross-border markets while preserving our unique brands and passenger choice. As both carriers share a common ultra-low-cost carrier foundation and compatible fleets, the formation of the airline group is consistent with Volaris' commitment to low-cost, low-complexity growth for all stakeholders. The regulatory process is moving forward as expected, and we remain in active dialogue with the relevant authorities. We have filed with Mexico's National Antitrust Commission and have already responded to the first round of information requests. In parallel, on March 5, alongside the call for the extraordinary shareholders' meeting to be held on March 25, we will publish the transaction's prospectus or [Foreign Language]. At this stage, we continue to expect the overall regulatory review processes to take up to 12 months from the merger announcement date. We will provide updates on our earning calls as we advance throughout the process and reach new milestones. Now -- I will now turn the call over to Holger to continue to discuss our fourth quarter commercial and operational performance as well as our commercial plans and outlook for 2026. Holger Blankenstein: Thank you, Enrique. Our fourth quarter operations reflected disciplined planning and strong execution across the network, supporting solid operational and revenue performance. As Enrique highlighted, our cross-border market continued to demonstrate stable recovery even as northbound flows moderated year-over-year during the holiday period. We were particularly encouraged by the 79% load factor on international routes in the fourth quarter, a solid outcome given the more challenging backdrop earlier in the year, particularly in the second quarter. This marks a clear improvement versus the first 9 months of the year that exceeded our expectations and brings us closer to our historical low 80s median load factor for this market. In the domestic market, our 89.8% load factor reflected steady demand in a balanced supply environment. Weather-related disruptions, including persistent severe fog in Tijuana and other stations during December led to temporary cancellations and resulted in lower quarterly capacity growth of 5.6% versus our guidance of approximately 8%. We estimate the P&L impact of this extraordinary weather-related operational disruption was approximately $7 million. At the same time, rebookings deep into the holiday season affected the take-up of higher-yielding close-in demand. Nevertheless, we delivered fourth quarter TRASM of $0.0935, in line with our guidance and consistent with the strong results from the fourth quarter of 2024. By actively managing our capacity and remaining responsive to demand trends across our network, we drove TRASM to converge year-over-year toward the level of a strong fourth quarter of 2024. Our top line resilience continues to be supported by outstanding ancillary performance with ancillary revenues per passenger increasing 6% versus 2024, along with emerging benefits from our segmentation initiatives. As we enhance our product suite, capture more diverse customer base and customize our pricing strategy, we are seeing structural tailwinds emerge from fare mix, yields and margins as our revenue grows. A clear example of this is Premium+. Introduced in October last year, our blocked middle seat product in the first 2 rows of the cabin is designed to better address needs of more diverse customer segments. By the fourth quarter, despite still being in its ramp-up phase, performance has exceeded our expectations, supported by strong uptake and positive customer feedback. The key to our success remains low-cost, low-complexity development of ancillaries that generate high returns on investment. In 2026, we anticipate a compounding effect across our affinity portfolio as we drive enrollments and channel our customers into our loyalty program, altitude, where we have already achieved an encouraging base of approximately 800,000 enrollments in just 7 months. We are on track to integrate altitude with our co-branded credit card by the end of the second quarter, allowing all card transactions to earn loyalty points. Demand for our higher-value products remains strong. In the domestic market, approximately 60% of our traffic already consists of leisure, business and multi-reason travelers who choose Volaris for our strong value proposition. At the same time, our VFR customers are increasingly adopting our broader product suite, supporting more stable yields across cycles. With this diversified demand profile, we continue to differentiate our network and selectively expand where fundamentals are attractive. Earlier this month, we announced 33 new routes that will start this summer, offering a balanced mix of domestic and international services from Guadalajara, including the U.S. destinations of Detroit and Salt Lake City as well as new operations from 3 strategically attractive secondary cities, Puebla, Queretaro and San Luis Potosi. These markets have demonstrated solid demand growth in recent years, supported by rising income levels and meaningful state-level investment, making them compelling opportunities for disciplined network expansion and sustainable profitability. These launches build upon the success we have achieved in Guadalajara and Tijuana. As we explained on our October call, Guadalajara has become a strong market for multi-reason customers, representing roughly 20% of traffic in that market, and we are extending this proven playbook to new regions to support profitable growth. In parallel, we continue to optimize our slots and schedules, shifting certain flights to earlier times to better serve business and leisure travelers, improving customer experience and potential yields. The financial benefits of these adjustments are already beginning to materialize in our TRASM results. We are also expanding connectivity beyond our network. In recent months, we activated our codeshares with Copa and Hainan, complementing our existing agreements with Frontier and Iberia and providing customers with broader global connectivity while enhancing revenue opportunities across our network. Revenues from codeshare partners increased more than 30% in 2025 and many are still in the ramp-up stage. For our international market, we observed an inflection point in the third quarter of 2025, which continued to materialize in the fourth quarter and as we start 2026. Our U.S. routes are recovering nicely. We are planning to deploy roughly 2/3 of our total capacity growth this year to the cross-border market, consistent with our broader international strategy, which now represents approximately 42% of our total capacity and supports a more diversified and resilient network. As we broaden our competitive positioning with new destinations, we are well positioned to capture cross-border demand as recovery continues. Booking trends so far in 2026 have been very healthy with momentum building into Semana Santa and the spring season. As we lap favorable comparisons in the first quarter of this year, the demand environment gives us confidence in sustained strong performance. Now I will turn the call over to Jaime to cover our financial results and 2026 guidance. Jaime Esteban Pous Fernandez: Thank you, Holger. In the fourth quarter, we continued to act nimbly, leaning into our variable cost structure to manage short-term headwinds. We also remain prudent and proactive with managing our capacity to support demand and fleet availability trends. This diligence is reflected in our financial results for the quarter and the full year. For the fourth quarter of 2025, total operating revenues were $882 million, a 5.6% increase versus the comparable prior year quarter. This increase was driven by a substantial TRASM recovery in the back half of the year, as Holger explained, pointing to continued diversification of our revenues and early strength of segmentation efforts. Our top line also benefited from a strengthened peso, which appreciated 8.7% versus the U.S. dollar despite providing an incremental cost headwind. We continue to diminish the impact of FX volatility on our business through increased cross-border flying and U.S. dollar-denominated sales. On the cost side, CASM was $0.0829, an increase of 3.2% despite average economic fuel costs rising 5.5% to $2.65 per gallon. CASM ex fuel was $5.76, aligned with our guidance and up just 1.4% year-over-year. For the fourth quarter and full year, we achieved CASM ex fuel results in line with our planning despite flying materially fewer than originally planned ASMs in both periods. Looking down our P&L, the impact from our grounded fleet and engine maintenance and our actions to manage the related interim capacity deficit is reflected in several lines. Our depreciation and amortization, right of use and maintenance items continued to reflect cost of our total fleet, including the grounded aircraft. Additionally, as we approach elevated aircraft lease returns scheduled for 2026, our aircraft and engine variable lease expense line continued to reflect redelivery accruals, including reserves for aircraft maintenance on returns. Meanwhile, in the other operating income line, we booked sale and leaseback gains of $10.4 million related to the Airbus deliveries of 5 new aircraft. This line also includes our aircraft grounding compensation from Pratt & Whitney. For the fourth quarter, we generated EBITDAR of $328 million with a margin of 37.2%, aligned with the guidance provided for the quarter. EBIT was $100 million for a margin of 11.3%. Finally, we generated a net profit of $4 million, translating into an earnings per ADS of $0.04. Moving briefly to our P&L for the full year 2025 compared to full year 2024. Total operating revenues were $3 billion, a 3% decrease. CASM was $0.0804, a 0.1% increase with an average economic fuel cost of $2.59 per gallon, 6% lower. CASM ex fuel was $0558, 3.5% higher than last year. EBITDAR totaled $988 million, a 13% decrease with an EBITDAR margin of 32.5%. EBIT was $135 million, representing an EBIT margin of 4.4%. Over the next several years, we expect to meaningfully reduce the spread between EBITDAR and EBIT margins as we reverse the impact of capacity reductions related to engine-related AOGs. Prior to these issues and the resulting groundings, the spread between EBITDAR and EBIT margin hovered between 18% and 19% of revenues, but reached 28% in 2025. In 2026, we expect this EBITDAR to EBIT spread to tighten to 24% and to return to historical levels in 2028. Net loss was $104 million or a loss of $0.91 per ADS. Turning now to cash flow and balance sheet data. For the fourth quarter, cash flow generated by operating activities was $252 million. The cash outflows provided by and used in investing and financing activities were $2 million and $280 million, respectively. CapEx, excluding fleet predelivery payments, was $56 million for the fourth quarter and $251 million for the full year of 2025, in line with guidance. Volaris ended the quarter with a total liquidity position of $774 million, representing 25.5% of the last 12 months' total operating revenues. We continue to target liquidity of at least 20% of the last 12 months' revenues as part of a disciplined and conservative approach to cash management. At fourth quarter end, our net debt-to-EBITDAR ratio stood at 3.1x, unchanged from the third quarter. We expect deleveraging in the second half of the year, supported by improving earnings and fleet productivity as AOG levels decline, finishing 2026 with a ratio of approximately 2.6x. We continue to have no material near-term debt maturities and have already financed all predelivery payments for the aircraft scheduled for delivery through mid-2028. We remain focused on our core financial priorities of cost control, profitability and conservative cash management to preserve the strength and value of our business. Now turning to our fleet plan and engine availability. As of December 31, our fleet consisted of 155 aircraft with an average age of 6.6 years with 66% of the fleet being fuel-efficient new models. During the fourth quarter, we averaged 36 aircraft on ground due to engine-related issues. As Enrique discussed, we are at an inflection point in aircraft on ground, which peaked at 41 aircraft in January. We expect a steady reduction from here on with more meaningful improvement in the second half and towards year-end. We anticipate closing 2026 with approximately 25 AOGs. This trajectory implies a full-year average of approximately 33 AOGs, representing 3 additional aircraft returning to service versus 2025. The reduction in AOGs is supported by concrete manufacturer actions, including durability upgrades to the hot section of the engine, expanded MRO throughput across the global network and the rollout of enhancements and certifications. Together, these initiatives are extending time on wing and reducing shop turnaround times such that the number of engines being induced into MROs and returning to service are expected to be consistently larger than those being removed. As we gradually narrow the gap between our total and productive fleet while remaining disciplined in aligning capacity growth with demand, we expect to unlock meaningful financial benefits, particularly from the second half of the year onward. As grounded aircraft return to service, we will be able to generate ASM growth and earnings from essentially the same asset base. Our fleet in absolute numbers of aircraft will somewhat decline in the next couple of years, but the available of productive fleet will increase and close the gap between our total and available productive aircraft, providing adequate ASM growth to meet our guidance without the need for incremental fleet-related debt for the remainder of the decade. This will improve the EBITDAR to EBIT conversion and translate directly into a stronger free cash flow and return on invested capital. We have aligned our fleet plan to prioritize disciplined growth in productive capacity rather than total fleet size. Looking ahead, our base case assumes a roughly stable total fleet until 2030 with growth driven by the increasing share of productive aircraft. To preserve flexibility, we continue to actively manage the multiple levers we have, including managing lease approaching expiration and adjusting our order book. Given these moving parts, rather than viewing them in isolation, we recommend focusing on our guided ASM growth, which already incorporates aircraft deliveries, engine returns and aircraft redeliveries. Despite engine availability headwinds over the past 30 months, Volaris has consistently demonstrated a strong operational resilience. As fleet productivity improves, we are excited about the next phase of our growth as we evolve our network and products, maintain operational focus and continue strengthening our already world-class cost structure and margin profile in the years ahead. Turning now to guidance. For full year 2026, we are expecting ASM growth of around 7% year-over-year, EBITDAR margin of around 33% and CapEx, net of finance fleet predelivery payments, of approximately $350 million. Double clicking on this CapEx, we expect higher major maintenance activity due to the number of aircraft scheduled for delivery and a pull-forward of major maintenance activities to support accelerated engine inductions into Pratt shops. It is important to note, we expect this strategy to also support a more stable maintenance profile in the years ahead. Our full year 2026 outlook assumes an average foreign exchange rate to be approximately MXN 17.7 per U.S. dollar. We also assume an average U.S. Gulf Coast jet fuel price to be in the range of $2.1 to $2.2 per gallon. For the first quarter of 2026, we are targeting an ASM growth of approximately 3% year-over-year, TRASM of around $0.085, CASM ex fuel of approximately $0.06 and an EBITDAR margin of around 25%. As the AOG trend reverses, as I previously mentioned, we expect improved EBITDAR to EBIT conversion to support a stronger underlying profitability. We, therefore, expect first quarter EBIT margin to remain broadly flat, in line with our historical margin seasonality and implying a year-over-year improvement over the minus 1.5% margin reported in the first quarter of 2025. Our first quarter 2026 outlook assumes an average foreign exchange rate of around MXN 17.5 per U.S. dollar and an average U.S. Gulf Coast jet fuel price of approximately $2.2 per gallon, consistent with the realized prices for January and February and the forward curve for March. Separately, the recent appreciation of the Mexican peso has created near-term translation effect as approximately 40% of our cost base is peso-denominated. For reference, at the MXN 17.5 per dollar rate embedded in our guidance, FX translation alone will represent approximately a $0.004 impact on first quarter CASM ex. On top of the expected peso appreciation, the CASM ex fuel increase in our guidance is explained by nonrecurring factors. First, as I just mentioned, to achieve our target reduction in AOGs throughout the year, we accelerated engine inductions to Pratt & Whitney shops, which increases maintenance expenses in the near term. Second, we are projecting secure onetime expenses related to the proposed merger with Viva. Taken together, these nonrecurring items account for approximately $0.22 in unit costs in the quarter. These fleet actions strengthen our operational trajectory and support margin expansions, not only this year, but over the medium term. We have clear visibility on our fleet normalization and remain firmly in control of our growth and execution plans through 2026 and beyond. As the engine situation progressively moves behind us, we believe Volaris is entering a period where improved productivity, disciplined growth and structural cost advantages position the company to generate meaningful long-term shareholder value. Now I will turn the call back over to Enrique for closing remarks. Enrique Javier Beltranena Mejicano: Thank you, Jaime. I'd like to conclude our remarks with a few takeaways. First and foremost, Volaris continues to demonstrate the strength and adaptability of our ultra-low-cost model and our command over our markets and cost structure. A highly flexible, low-cost operating framework is especially well suited to an emerging market like Mexico, allowing us to manage unit costs effectively across any level of capacity growth. This operating discipline has enabled us to adapt quickly to changing macroeconomic and industry conditions, preserve affordability for our customers and continue operating profitably through periods of disruption. Our experience demonstrates that in this market, a disciplined ultra-low-cost carrier model is not only resilient, but a key driver of long-term value creation. Second, travel sentiment in the cross-border market continues to improve, and we are well positioned as the recovery progresses. Our evolving segmentation strategy gives us greater ability to capture profitable demand while remaining disciplined in how we deploy capacity. Third, we remain committed to delivering low-cost, high-value service across our customer base, including our core VFR segment. Our expanding product suite and network allow us to address diverse customer preferences while maximizing TRASM among higher-yielding segments. Fourth, we are not changing our DNA. Our proven low-cost, low-complexity development of ancillary and affinity offerings is enabling higher revenue per passenger and improved fare mix while preserving our cost efficiency and long-term profitability. Finally, Volaris is advancing from a position of strength. As we narrow the gap between our available and total fleet, we expect meaningful financial tailwinds, including further improvement in our already world-leading cost structure. Before opening the call to Q&A, I would like to briefly reiterate the strategic rationale behind the proposed transaction with Viva. As outlined in our announcement, we believe this transaction has the potential to create value for all stakeholders. In the case of the passengers through affordable access to an expanded network, in the case of communities through increased service and local economic development, in the case of our employees or ambassadors through enhanced stability and job opportunities across new markets and in the case of Mexico, through improved regional connectivity. Together, these benefits support a stronger and more inclusive future for ultra-low-cost air travel in Mexico. At this stage, there is nothing further we can share beyond what has already been disclosed. We will continue to provide updates as we progress through the process. As we move into the Q&A session, I kindly ask that questions focused on Volaris' operating and financial results. In sum, we believe Volaris is exceptionally well positioned to generate strong sustainable value for our shareholders in 2026 and beyond. I'll now turn the call over for questions and answers. Operator: Our first question comes from Michael Linenberg with Deutsche Bank. Unknown Analyst: This is [ Angela Adal ] on for Mike. You reported a tax rate of 89% in the quarter. Could you help us understand the key drivers behind that? Jaime Esteban Pous Fernandez: This is Jaime. When you talk about the tax rate, remember that during the first 3 quarters of the year, we used the legal tax rate of 30%. Then normally, in the fourth quarter, we adjust to apply the actual tax rate of the year considering the numbers. So the full year effective tax rate for Volaris was 11.8%. Normally, we will include the 30% over the first 3 quarters of the year. And in the last one, we will apply the actual number of taxes that we are going to pay. For Modeling, we strongly recommend everyone to continue to use a 30% effective tax rate. Unknown Analyst: Got it. Another question on the 7% capacity growth for 2026. How should we think about it in terms of the domestic versus international mix? Holger Blankenstein: This is Holger. As we mentioned in our prepared remarks, first of all, I'd like to mention that our capacity decisions are firmly anchored on customer demand and on profitability. If we look at the breakdown that you're referring to, we plan an overall capacity growth of 7%, and that is consistent with an emerging market and an emerging customer base that we are observing in our customers. We are going to be more skewed towards the international market, and we're expecting domestic growth to be in the low to mid-single digits for 2026. And then if you look at it on a quarterly basis, in the first half, ASM growth will be relatively lower to the lower base in 2025, where we made tactical adjustments to capacity in 2025 given the cross-border environment at that time in 2025. The overall growth rate of 7%, we do have flexibility to move up and down within the range of a few percentage points as we move forward in the year and observe demand trends. Operator: Our next question comes from Duane Pfennigwerth with Evercore ISI. Jacob Gunning: This is Jacob Gunning on for Duane. First question, just as you talk about the flat fleet count through 2030, could you perhaps talk about what that means for the multiyear capacity growth outlook and potential CapEx? Jaime Esteban Pous Fernandez: This is Jaime, Jake. In terms of capacity, I think that we are going to be growing in that 7% even in the midterm of our 5-year program, but with the availability to increasing capacity or lower capacity by 2, 3 percentage points. So if you look at total number of aircraft, the number that we finished in 2025 should be at the same level in 2030. And all of that growth is going to be coming from the unproductive fleet, putting them into production. We have the leverage that we mentioned in the call, which is aircraft redeliveries during the period. We have a high number, which provides flexibility, Airbus deliveries. And that's why we will be managing capacity, matching the capacity to the demand we observe in the market. Jacob Gunning: Great. And then can you just remind us on how many planes are being returned this year and what the associated redelivery expense is? Jaime Esteban Pous Fernandez: We are returning 14 aircraft this year, Jake. And the increase in the CapEx of the year is in connection to redelivery of the planes. And in addition to that, in the investment that we are doing in major maintenance events to reduce the number of AOGs. The CapEx that we are estimated for this year is around $350 million to accomplish that. Operator: Our next question comes from Rafael Simonetti with UBS. Rafael Simonetti: My question is about leverage. So leverage went from 2.6x to 3.1 from the fourth quarter '24 to '25. And with higher CapEx ahead and only marginal margin improvement guidance, what's the path back towards deleveraging? And there is a leverage target that the Board is working towards? Jaime Esteban Pous Fernandez: Rafael, this is Jaime again. You should think that deleverages have been sequentially improving towards [ the range ]. As I mentioned during the call, we expect the 3.1 that we started in the year to go to 2.6x during the year. It's also going to be a result from the improvement in reductions of AOGs of the fleet. Operator: This concludes today's question-and-answer session. I would like to invite management to proceed with his closing remarks. Please go ahead, sir. Enrique Javier Beltranena Mejicano: [Audio Gap] as well as our Board of Directors, investors, bankers, lessors and suppliers for their support through a historic 2025. I look forward to demonstrating what Volaris can deliver in 2026 and beyond. Thank you very much for all your support. Operator: This concludes the Volaris conference call for today. Thank you very much for your participation. Have a nice day.

39天前Insight Analytics约5分钟阅读

VLRS 2025 Q4 财报电话会议

Operator: Good morning, everyone. Thank you for joining Volaris' Fourth Quarter and Full Year 2025 Financial Results Conference Call. [Operator Instructions] Please note that today's event is being recorded and webcast live on Volaris website. At this time, I'll turn the call over to Liliana Juarez, Investor Relations Manager. Please go ahead. Unknown Executive: Welcome to our fourth quarter 2025 earnings call. Joining us today are our President and CEO, Enrique Beltranena; our Airline Executive Vice President, Holger Blankenstein; and our CFO, Jaime Pous. They will be discussing the company's results followed by a Q&A session. This call is for investors and analysts only. Please note that this call may include forward-looking statements under applicable securities laws. These are subject to several factors that could cause the company's results to differ materially as described in our filings with the U.S. SEC and Mexico CNBV. These statements speak only as of the date they are made, and Volaris undertakes no obligation to update or modify them. All figures are in U.S. dollars compared to the fourth quarter of 2024, unless otherwise noted. And with that, I'll turn the call over to Enrique. Enrique Javier Beltranena Mejicano: Good morning, everyone, and welcome to our fourth quarter 2025 earnings call. As ever, I'm proud of the disciplined execution, operational agility and commitment demonstrated across our organization throughout the past year. I especially want to thank our ambassadors for their hard work and resilience in what was a demanding environment. 2025 was both busy and historic for Volaris. We executed with precision across our network and operations, delivering measurable progress despite a complex industry and macroeconomic backdrop, including engine constraints, FX volatility and geopolitical developments that temporarily influenced cross-border travel sentiment. Through disciplined network management, focused pricing strategy and operational flexibility, we continued strengthening the foundation of our business. In the fourth quarter, we delivered 5.6% capacity growth and drove TRASM towards the levels recorded in the same period of 2024. At the same time, we strengthened revenue quality with ancillary revenues comprising 56% of total operating revenues, reinforcing the structural advantages of our ultra-low-cost carrier model. We also initiated targeted capacity growth in the U.S. with routes maturing as planned, all while maintaining a healthy level of cash as a percentage of revenues of 25.5% and strong cost discipline. During 2025, we kept CASM ex fuel in line with plan at $0.0558 while proactively adjusting ASM growth from an originally planned mid-teens increase down to 6.3%. These actions ensured our seat offering remained aligned with demand while prioritizing profitability. Equally importantly, we delivered on our guidance, finishing 2025 with a full year EBITDAR margin of 32.5%. Performance strengthened as the year progressed, reinforcing the improving trajectory of the business as we move into 2026 and demonstrating that our strategic and operational initiatives are gaining traction. More specifically, in the cross-border market, travel sentiment continued to improve sequentially, in line with our expectations. We matched demand with disciplined capacity deployment and the Mexico-U.S. capacity added in the second half of the year generated positive results as routes continued to mature. Fourth quarter international load factor reached 79%, up from 77.5% recorded in the first 9 months of the year. In the domestic market, load factor reached 89.8%, reflecting disciplined supply adjustments to align with demand across the network. As the best-in-class carrier operating in a structurally growing and underpenetrating emerging market, we remain focused on stimulating demand through our low fare model, supporting profitable growth, capital efficiency and long-term value creation by continuing to connect families, communities and business across Mexico and beyond. As we enter 2026, the Mexican economy is showing earlier signs of improvement, supported by recovering consumption trends and better-than-expected inflation performance. The economy-wide wage bill has recovered part of the ground lost during most of 2025, supporting improving consumer confidence and household expectations around purchasing durable goods and making travel plans in the coming months. For the year, we are expecting ASM growth of approximately 7%, fully aligned with our disciplined deployment strategy. Most of the incremental capacity will be allocated to international markets where we have seen sequential improvement in TRASM since last August, supported by encouraging first quarter booking trends. Domestically, we continue to support a balanced supply-demand environment, scaling capacity in line with improving demand indicators. Our 2026 growth will be managed through 3 levers: the first one scheduled Airbus deliveries, the second one, AOG reduction and the third one, aircraft lease returns. Together, they enable a balanced and controlled fleet profile that supports disciplined growth with flexibility and enhanced asset productivity. Importantly, we are now at an inflection point in aircraft on ground or AOGs, and we expect this trend to improve progressively toward year-end. We expect more meaningful acceleration in grounded aircraft returning to service as we move into the summer and the second half, and Jaime will discuss this in greater detail. To support this recovery, we are proactively advancing certain maintenance events and inducting roughly twice as many engines as in 2025 with a significant improvement in turnaround times. While this implies higher temporary near-term costs and a little bit more CapEx, we view it as a disciplined investment that accelerates inspections, shortens downtime and allow us to restore fleet availability sooner. We're focused on increasing the share of productive aircraft in our total fleet as doing so allows us to generate greater productivity from our existing asset base without adding leverage. This, in turn, strengthens our earnings profile and improves free cash flow conversion. Many of you have asked about our strategy to return capacity to service without creating excess supply in the market. I want to be very clear that our capacity decisions have been and will remain firmly anchored in customer demand and sustained profitability. Our flexible fleet and engine management framework allows us to dynamically adjust deployment as conditions evolve. We are fully in control of our growth trajectory, not only for 2026, but also for 2027 and 2028 when we expect to have the engine availability constraints normalized and fully behind us. Against this backdrop, the setup as we move into the back half of the decade presents a compelling opportunity for Volaris to drive long-term shareholder value. Our ultra-low-cost customer remains the main source for our growth. As you know, in December, we entered into an agreement with Viva to create an airline group to accelerate our carriers' expansion of air travel penetration in Mexico and beyond. Strategically, the proposed airline group represents a natural next step to broaden access to low-fare travel in the domestic and cross-border markets while preserving our unique brands and passenger choice. As both carriers share a common ultra-low-cost carrier foundation and compatible fleets, the formation of the airline group is consistent with Volaris' commitment to low-cost, low-complexity growth for all stakeholders. The regulatory process is moving forward as expected, and we remain in active dialogue with the relevant authorities. We have filed with Mexico's National Antitrust Commission and have already responded to the first round of information requests. In parallel, on March 5, alongside the call for the extraordinary shareholders' meeting to be held on March 25, we will publish the transaction's prospectus or [Foreign Language]. At this stage, we continue to expect the overall regulatory review processes to take up to 12 months from the merger announcement date. We will provide updates on our earning calls as we advance throughout the process and reach new milestones. Now -- I will now turn the call over to Holger to continue to discuss our fourth quarter commercial and operational performance as well as our commercial plans and outlook for 2026. Holger Blankenstein: Thank you, Enrique. Our fourth quarter operations reflected disciplined planning and strong execution across the network, supporting solid operational and revenue performance. As Enrique highlighted, our cross-border market continued to demonstrate stable recovery even as northbound flows moderated year-over-year during the holiday period. We were particularly encouraged by the 79% load factor on international routes in the fourth quarter, a solid outcome given the more challenging backdrop earlier in the year, particularly in the second quarter. This marks a clear improvement versus the first 9 months of the year that exceeded our expectations and brings us closer to our historical low 80s median load factor for this market. In the domestic market, our 89.8% load factor reflected steady demand in a balanced supply environment. Weather-related disruptions, including persistent severe fog in Tijuana and other stations during December led to temporary cancellations and resulted in lower quarterly capacity growth of 5.6% versus our guidance of approximately 8%. We estimate the P&L impact of this extraordinary weather-related operational disruption was approximately $7 million. At the same time, rebookings deep into the holiday season affected the take-up of higher-yielding close-in demand. Nevertheless, we delivered fourth quarter TRASM of $0.0935, in line with our guidance and consistent with the strong results from the fourth quarter of 2024. By actively managing our capacity and remaining responsive to demand trends across our network, we drove TRASM to converge year-over-year toward the level of a strong fourth quarter of 2024. Our top line resilience continues to be supported by outstanding ancillary performance with ancillary revenues per passenger increasing 6% versus 2024, along with emerging benefits from our segmentation initiatives. As we enhance our product suite, capture more diverse customer base and customize our pricing strategy, we are seeing structural tailwinds emerge from fare mix, yields and margins as our revenue grows. A clear example of this is Premium+. Introduced in October last year, our blocked middle seat product in the first 2 rows of the cabin is designed to better address needs of more diverse customer segments. By the fourth quarter, despite still being in its ramp-up phase, performance has exceeded our expectations, supported by strong uptake and positive customer feedback. The key to our success remains low-cost, low-complexity development of ancillaries that generate high returns on investment. In 2026, we anticipate a compounding effect across our affinity portfolio as we drive enrollments and channel our customers into our loyalty program, altitude, where we have already achieved an encouraging base of approximately 800,000 enrollments in just 7 months. We are on track to integrate altitude with our co-branded credit card by the end of the second quarter, allowing all card transactions to earn loyalty points. Demand for our higher-value products remains strong. In the domestic market, approximately 60% of our traffic already consists of leisure, business and multi-reason travelers who choose Volaris for our strong value proposition. At the same time, our VFR customers are increasingly adopting our broader product suite, supporting more stable yields across cycles. With this diversified demand profile, we continue to differentiate our network and selectively expand where fundamentals are attractive. Earlier this month, we announced 33 new routes that will start this summer, offering a balanced mix of domestic and international services from Guadalajara, including the U.S. destinations of Detroit and Salt Lake City as well as new operations from 3 strategically attractive secondary cities, Puebla, Queretaro and San Luis Potosi. These markets have demonstrated solid demand growth in recent years, supported by rising income levels and meaningful state-level investment, making them compelling opportunities for disciplined network expansion and sustainable profitability. These launches build upon the success we have achieved in Guadalajara and Tijuana. As we explained on our October call, Guadalajara has become a strong market for multi-reason customers, representing roughly 20% of traffic in that market, and we are extending this proven playbook to new regions to support profitable growth. In parallel, we continue to optimize our slots and schedules, shifting certain flights to earlier times to better serve business and leisure travelers, improving customer experience and potential yields. The financial benefits of these adjustments are already beginning to materialize in our TRASM results. We are also expanding connectivity beyond our network. In recent months, we activated our codeshares with Copa and Hainan, complementing our existing agreements with Frontier and Iberia and providing customers with broader global connectivity while enhancing revenue opportunities across our network. Revenues from codeshare partners increased more than 30% in 2025 and many are still in the ramp-up stage. For our international market, we observed an inflection point in the third quarter of 2025, which continued to materialize in the fourth quarter and as we start 2026. Our U.S. routes are recovering nicely. We are planning to deploy roughly 2/3 of our total capacity growth this year to the cross-border market, consistent with our broader international strategy, which now represents approximately 42% of our total capacity and supports a more diversified and resilient network. As we broaden our competitive positioning with new destinations, we are well positioned to capture cross-border demand as recovery continues. Booking trends so far in 2026 have been very healthy with momentum building into Semana Santa and the spring season. As we lap favorable comparisons in the first quarter of this year, the demand environment gives us confidence in sustained strong performance. Now I will turn the call over to Jaime to cover our financial results and 2026 guidance. Jaime Esteban Pous Fernandez: Thank you, Holger. In the fourth quarter, we continued to act nimbly, leaning into our variable cost structure to manage short-term headwinds. We also remain prudent and proactive with managing our capacity to support demand and fleet availability trends. This diligence is reflected in our financial results for the quarter and the full year. For the fourth quarter of 2025, total operating revenues were $882 million, a 5.6% increase versus the comparable prior year quarter. This increase was driven by a substantial TRASM recovery in the back half of the year, as Holger explained, pointing to continued diversification of our revenues and early strength of segmentation efforts. Our top line also benefited from a strengthened peso, which appreciated 8.7% versus the U.S. dollar despite providing an incremental cost headwind. We continue to diminish the impact of FX volatility on our business through increased cross-border flying and U.S. dollar-denominated sales. On the cost side, CASM was $0.0829, an increase of 3.2% despite average economic fuel costs rising 5.5% to $2.65 per gallon. CASM ex fuel was $5.76, aligned with our guidance and up just 1.4% year-over-year. For the fourth quarter and full year, we achieved CASM ex fuel results in line with our planning despite flying materially fewer than originally planned ASMs in both periods. Looking down our P&L, the impact from our grounded fleet and engine maintenance and our actions to manage the related interim capacity deficit is reflected in several lines. Our depreciation and amortization, right of use and maintenance items continued to reflect cost of our total fleet, including the grounded aircraft. Additionally, as we approach elevated aircraft lease returns scheduled for 2026, our aircraft and engine variable lease expense line continued to reflect redelivery accruals, including reserves for aircraft maintenance on returns. Meanwhile, in the other operating income line, we booked sale and leaseback gains of $10.4 million related to the Airbus deliveries of 5 new aircraft. This line also includes our aircraft grounding compensation from Pratt & Whitney. For the fourth quarter, we generated EBITDAR of $328 million with a margin of 37.2%, aligned with the guidance provided for the quarter. EBIT was $100 million for a margin of 11.3%. Finally, we generated a net profit of $4 million, translating into an earnings per ADS of $0.04. Moving briefly to our P&L for the full year 2025 compared to full year 2024. Total operating revenues were $3 billion, a 3% decrease. CASM was $0.0804, a 0.1% increase with an average economic fuel cost of $2.59 per gallon, 6% lower. CASM ex fuel was $0558, 3.5% higher than last year. EBITDAR totaled $988 million, a 13% decrease with an EBITDAR margin of 32.5%. EBIT was $135 million, representing an EBIT margin of 4.4%. Over the next several years, we expect to meaningfully reduce the spread between EBITDAR and EBIT margins as we reverse the impact of capacity reductions related to engine-related AOGs. Prior to these issues and the resulting groundings, the spread between EBITDAR and EBIT margin hovered between 18% and 19% of revenues, but reached 28% in 2025. In 2026, we expect this EBITDAR to EBIT spread to tighten to 24% and to return to historical levels in 2028. Net loss was $104 million or a loss of $0.91 per ADS. Turning now to cash flow and balance sheet data. For the fourth quarter, cash flow generated by operating activities was $252 million. The cash outflows provided by and used in investing and financing activities were $2 million and $280 million, respectively. CapEx, excluding fleet predelivery payments, was $56 million for the fourth quarter and $251 million for the full year of 2025, in line with guidance. Volaris ended the quarter with a total liquidity position of $774 million, representing 25.5% of the last 12 months' total operating revenues. We continue to target liquidity of at least 20% of the last 12 months' revenues as part of a disciplined and conservative approach to cash management. At fourth quarter end, our net debt-to-EBITDAR ratio stood at 3.1x, unchanged from the third quarter. We expect deleveraging in the second half of the year, supported by improving earnings and fleet productivity as AOG levels decline, finishing 2026 with a ratio of approximately 2.6x. We continue to have no material near-term debt maturities and have already financed all predelivery payments for the aircraft scheduled for delivery through mid-2028. We remain focused on our core financial priorities of cost control, profitability and conservative cash management to preserve the strength and value of our business. Now turning to our fleet plan and engine availability. As of December 31, our fleet consisted of 155 aircraft with an average age of 6.6 years with 66% of the fleet being fuel-efficient new models. During the fourth quarter, we averaged 36 aircraft on ground due to engine-related issues. As Enrique discussed, we are at an inflection point in aircraft on ground, which peaked at 41 aircraft in January. We expect a steady reduction from here on with more meaningful improvement in the second half and towards year-end. We anticipate closing 2026 with approximately 25 AOGs. This trajectory implies a full-year average of approximately 33 AOGs, representing 3 additional aircraft returning to service versus 2025. The reduction in AOGs is supported by concrete manufacturer actions, including durability upgrades to the hot section of the engine, expanded MRO throughput across the global network and the rollout of enhancements and certifications. Together, these initiatives are extending time on wing and reducing shop turnaround times such that the number of engines being induced into MROs and returning to service are expected to be consistently larger than those being removed. As we gradually narrow the gap between our total and productive fleet while remaining disciplined in aligning capacity growth with demand, we expect to unlock meaningful financial benefits, particularly from the second half of the year onward. As grounded aircraft return to service, we will be able to generate ASM growth and earnings from essentially the same asset base. Our fleet in absolute numbers of aircraft will somewhat decline in the next couple of years, but the available of productive fleet will increase and close the gap between our total and available productive aircraft, providing adequate ASM growth to meet our guidance without the need for incremental fleet-related debt for the remainder of the decade. This will improve the EBITDAR to EBIT conversion and translate directly into a stronger free cash flow and return on invested capital. We have aligned our fleet plan to prioritize disciplined growth in productive capacity rather than total fleet size. Looking ahead, our base case assumes a roughly stable total fleet until 2030 with growth driven by the increasing share of productive aircraft. To preserve flexibility, we continue to actively manage the multiple levers we have, including managing lease approaching expiration and adjusting our order book. Given these moving parts, rather than viewing them in isolation, we recommend focusing on our guided ASM growth, which already incorporates aircraft deliveries, engine returns and aircraft redeliveries. Despite engine availability headwinds over the past 30 months, Volaris has consistently demonstrated a strong operational resilience. As fleet productivity improves, we are excited about the next phase of our growth as we evolve our network and products, maintain operational focus and continue strengthening our already world-class cost structure and margin profile in the years ahead. Turning now to guidance. For full year 2026, we are expecting ASM growth of around 7% year-over-year, EBITDAR margin of around 33% and CapEx, net of finance fleet predelivery payments, of approximately $350 million. Double clicking on this CapEx, we expect higher major maintenance activity due to the number of aircraft scheduled for delivery and a pull-forward of major maintenance activities to support accelerated engine inductions into Pratt shops. It is important to note, we expect this strategy to also support a more stable maintenance profile in the years ahead. Our full year 2026 outlook assumes an average foreign exchange rate to be approximately MXN 17.7 per U.S. dollar. We also assume an average U.S. Gulf Coast jet fuel price to be in the range of $2.1 to $2.2 per gallon. For the first quarter of 2026, we are targeting an ASM growth of approximately 3% year-over-year, TRASM of around $0.085, CASM ex fuel of approximately $0.06 and an EBITDAR margin of around 25%. As the AOG trend reverses, as I previously mentioned, we expect improved EBITDAR to EBIT conversion to support a stronger underlying profitability. We, therefore, expect first quarter EBIT margin to remain broadly flat, in line with our historical margin seasonality and implying a year-over-year improvement over the minus 1.5% margin reported in the first quarter of 2025. Our first quarter 2026 outlook assumes an average foreign exchange rate of around MXN 17.5 per U.S. dollar and an average U.S. Gulf Coast jet fuel price of approximately $2.2 per gallon, consistent with the realized prices for January and February and the forward curve for March. Separately, the recent appreciation of the Mexican peso has created near-term translation effect as approximately 40% of our cost base is peso-denominated. For reference, at the MXN 17.5 per dollar rate embedded in our guidance, FX translation alone will represent approximately a $0.004 impact on first quarter CASM ex. On top of the expected peso appreciation, the CASM ex fuel increase in our guidance is explained by nonrecurring factors. First, as I just mentioned, to achieve our target reduction in AOGs throughout the year, we accelerated engine inductions to Pratt & Whitney shops, which increases maintenance expenses in the near term. Second, we are projecting secure onetime expenses related to the proposed merger with Viva. Taken together, these nonrecurring items account for approximately $0.22 in unit costs in the quarter. These fleet actions strengthen our operational trajectory and support margin expansions, not only this year, but over the medium term. We have clear visibility on our fleet normalization and remain firmly in control of our growth and execution plans through 2026 and beyond. As the engine situation progressively moves behind us, we believe Volaris is entering a period where improved productivity, disciplined growth and structural cost advantages position the company to generate meaningful long-term shareholder value. Now I will turn the call back over to Enrique for closing remarks. Enrique Javier Beltranena Mejicano: Thank you, Jaime. I'd like to conclude our remarks with a few takeaways. First and foremost, Volaris continues to demonstrate the strength and adaptability of our ultra-low-cost model and our command over our markets and cost structure. A highly flexible, low-cost operating framework is especially well suited to an emerging market like Mexico, allowing us to manage unit costs effectively across any level of capacity growth. This operating discipline has enabled us to adapt quickly to changing macroeconomic and industry conditions, preserve affordability for our customers and continue operating profitably through periods of disruption. Our experience demonstrates that in this market, a disciplined ultra-low-cost carrier model is not only resilient, but a key driver of long-term value creation. Second, travel sentiment in the cross-border market continues to improve, and we are well positioned as the recovery progresses. Our evolving segmentation strategy gives us greater ability to capture profitable demand while remaining disciplined in how we deploy capacity. Third, we remain committed to delivering low-cost, high-value service across our customer base, including our core VFR segment. Our expanding product suite and network allow us to address diverse customer preferences while maximizing TRASM among higher-yielding segments. Fourth, we are not changing our DNA. Our proven low-cost, low-complexity development of ancillary and affinity offerings is enabling higher revenue per passenger and improved fare mix while preserving our cost efficiency and long-term profitability. Finally, Volaris is advancing from a position of strength. As we narrow the gap between our available and total fleet, we expect meaningful financial tailwinds, including further improvement in our already world-leading cost structure. Before opening the call to Q&A, I would like to briefly reiterate the strategic rationale behind the proposed transaction with Viva. As outlined in our announcement, we believe this transaction has the potential to create value for all stakeholders. In the case of the passengers through affordable access to an expanded network, in the case of communities through increased service and local economic development, in the case of our employees or ambassadors through enhanced stability and job opportunities across new markets and in the case of Mexico, through improved regional connectivity. Together, these benefits support a stronger and more inclusive future for ultra-low-cost air travel in Mexico. At this stage, there is nothing further we can share beyond what has already been disclosed. We will continue to provide updates as we progress through the process. As we move into the Q&A session, I kindly ask that questions focused on Volaris' operating and financial results. In sum, we believe Volaris is exceptionally well positioned to generate strong sustainable value for our shareholders in 2026 and beyond. I'll now turn the call over for questions and answers. Operator: Our first question comes from Michael Linenberg with Deutsche Bank. Unknown Analyst: This is [ Angela Adal ] on for Mike. You reported a tax rate of 89% in the quarter. Could you help us understand the key drivers behind that? Jaime Esteban Pous Fernandez: This is Jaime. When you talk about the tax rate, remember that during the first 3 quarters of the year, we used the legal tax rate of 30%. Then normally, in the fourth quarter, we adjust to apply the actual tax rate of the year considering the numbers. So the full year effective tax rate for Volaris was 11.8%. Normally, we will include the 30% over the first 3 quarters of the year. And in the last one, we will apply the actual number of taxes that we are going to pay. For Modeling, we strongly recommend everyone to continue to use a 30% effective tax rate. Unknown Analyst: Got it. Another question on the 7% capacity growth for 2026. How should we think about it in terms of the domestic versus international mix? Holger Blankenstein: This is Holger. As we mentioned in our prepared remarks, first of all, I'd like to mention that our capacity decisions are firmly anchored on customer demand and on profitability. If we look at the breakdown that you're referring to, we plan an overall capacity growth of 7%, and that is consistent with an emerging market and an emerging customer base that we are observing in our customers. We are going to be more skewed towards the international market, and we're expecting domestic growth to be in the low to mid-single digits for 2026. And then if you look at it on a quarterly basis, in the first half, ASM growth will be relatively lower to the lower base in 2025, where we made tactical adjustments to capacity in 2025 given the cross-border environment at that time in 2025. The overall growth rate of 7%, we do have flexibility to move up and down within the range of a few percentage points as we move forward in the year and observe demand trends. Operator: Our next question comes from Duane Pfennigwerth with Evercore ISI. Jacob Gunning: This is Jacob Gunning on for Duane. First question, just as you talk about the flat fleet count through 2030, could you perhaps talk about what that means for the multiyear capacity growth outlook and potential CapEx? Jaime Esteban Pous Fernandez: This is Jaime, Jake. In terms of capacity, I think that we are going to be growing in that 7% even in the midterm of our 5-year program, but with the availability to increasing capacity or lower capacity by 2, 3 percentage points. So if you look at total number of aircraft, the number that we finished in 2025 should be at the same level in 2030. And all of that growth is going to be coming from the unproductive fleet, putting them into production. We have the leverage that we mentioned in the call, which is aircraft redeliveries during the period. We have a high number, which provides flexibility, Airbus deliveries. And that's why we will be managing capacity, matching the capacity to the demand we observe in the market. Jacob Gunning: Great. And then can you just remind us on how many planes are being returned this year and what the associated redelivery expense is? Jaime Esteban Pous Fernandez: We are returning 14 aircraft this year, Jake. And the increase in the CapEx of the year is in connection to redelivery of the planes. And in addition to that, in the investment that we are doing in major maintenance events to reduce the number of AOGs. The CapEx that we are estimated for this year is around $350 million to accomplish that. Operator: Our next question comes from Rafael Simonetti with UBS. Rafael Simonetti: My question is about leverage. So leverage went from 2.6x to 3.1 from the fourth quarter '24 to '25. And with higher CapEx ahead and only marginal margin improvement guidance, what's the path back towards deleveraging? And there is a leverage target that the Board is working towards? Jaime Esteban Pous Fernandez: Rafael, this is Jaime again. You should think that deleverages have been sequentially improving towards [ the range ]. As I mentioned during the call, we expect the 3.1 that we started in the year to go to 2.6x during the year. It's also going to be a result from the improvement in reductions of AOGs of the fleet. Operator: This concludes today's question-and-answer session. I would like to invite management to proceed with his closing remarks. Please go ahead, sir. Enrique Javier Beltranena Mejicano: [Audio Gap] as well as our Board of Directors, investors, bankers, lessors and suppliers for their support through a historic 2025. I look forward to demonstrating what Volaris can deliver in 2026 and beyond. Thank you very much for all your support. Operator: This concludes the Volaris conference call for today. Thank you very much for your participation. Have a nice day.

39天前Insight Analytics约5分钟阅读

MXCHY 2025 Q4 财报电话会议

Operator: Good morning, and welcome to Orbia's Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Diego Echave, Orbia's Vice President of Investor Relations. Please go ahead. Diego Echave: Thank you, operator. Good morning, and welcome to Orbia's Fourth Quarter and Full Year 2025 Earnings Call. We appreciate your time and participation. Joining me today are Sameer Bharadwaj, CEO; and Jim Kelly, CFO. Before we continue, a friendly reminder that some of our comments today will contain forward-looking statements based on our current view of our business, and actual future results may differ materially. Today's call should be considered in conjunction with cautionary statements contained in our earnings release and in our most recent Bolsa Mexicana de Valores report. The company disclaims any obligation to update or revise any such forward-looking statements. Now I would like to turn the call over to Sameer. Sameer S. Bharadwaj: Thank you, Diego, and good morning, everyone. Before we begin discussing this quarter's results, I would like to thank our global employees for their ongoing efforts through 2025 and their continued focus on solving our customers' challenges in difficult market conditions. I would also like to thank our customers for their ongoing partnership and trust. Turning to Slide 3. I will share a high-level overview of our fourth quarter and full year 2025 performance. Full year revenues of $7.6 billion increased 2% year-over-year and EBITDA of approximately $1.02 billion decreased by 7% compared to the previous year. Full year EBITDA included onetime items of approximately $90 million. Excluding these onetime items, full year adjusted EBITDA was $1.11 billion. Overall, global market conditions across Orbia's businesses were mixed but remained generally challenging in 2025, particularly across construction and infrastructure-related activities and regionally in much of Europe and Mexico. We did, however, see favorable trends emerge during the year in our Fluor & Energy Materials, Connectivity Solutions and Precision Agriculture businesses. In this environment, we remain relentlessly focused on exercising strong financial discipline. We continue to strengthen our leading market positions and to drive results through effective commercial and operational execution with a focus on both earnings and cash generation. Our cost optimization programs are on track and making important contributions as is our initiative to generate cash from noncore asset sales. We continue to look for more opportunities to simplify our business, further strengthen our balance sheet and drive cash generation to support our long-term strategic objectives. As we begin 2026, we expect market dynamics to remain challenging in some businesses with continued improvements in others. I will now turn the call over to Jim to go over our financial performance in further detail. Jim Kelly: Thank you, Sameer, and good morning, everyone. I'll start by discussing our overall fourth quarter results. Turning to Slide 4. Net revenues of $1.9 billion increased by 5% year-over-year, with growth coming from all business groups except Polymer Solutions. The increase was led primarily by higher volumes in Connectivity Solutions and better product mix in Fluor & Energy Materials. I'll provide a more comprehensive description of these factors in the business-by-business section. EBITDA of $227 million for the quarter increased 2% year-over-year, primarily driven by higher volumes and lower onetime costs in Fluor & Energy Materials and in Building and Infrastructure, partially offset by a decrease in Polymer Solutions. Adjusted EBITDA of $236 million declined 14% compared to last year, primarily driven by Polymer Solutions. Operating cash flow of $349 million increased by $67 million or 23% compared to the prior year quarter, driven by efficient working capital management and the absence of last year's unfavorable currency impacts, partially offset by net interest paid and higher taxes. The operating cash flow conversion rate for the quarter was 154%. Free cash flow in the quarter was $204 million, an increase of $80 million year-over-year, driven by an increase in operating cash flow and a decrease in capital expenditures. Turning to Slide 5. I'll now review our full year results for 2025. On a consolidated basis, net revenues were $7.6 billion, an increase of 2% year-over-year. Higher revenue came from all business groups with the exception of Polymer Solutions. The increase was led primarily by higher volumes in Connectivity Solutions and better product mix in Fluor & Energy Materials. EBITDA of $1.02 billion decreased 7% year-over-year with an EBITDA margin of 13.4%, a decrease of 124 basis points. These decreases were primarily due to lower volumes and prices in Polymer Solutions and onetime costs for Building and Infrastructure. These were partially offset by the absence of prior year onetime costs in Fluor & Energy Materials and higher revenues in Connectivity Solutions and Precision Agriculture. Excluding onetime items, adjusted EBITDA was $1.11 billion for the full year, representing a 7% decrease from the prior year and an adjusted EBITDA margin of 14.6% for the year. Operating cash flow and free cash flow were $645 million and $111 million, respectively, reflecting strong working capital performance and lower cash impacts from accruals, partially offset by lower EBITDA and higher taxes and net interest paid. The operating cash flow conversion rate for the full year was 63%. Free cash flow increased by $175 million year-over-year, driven by higher operating cash flow and lower capital expenditures. Capital expenditures of $405 million declined by approximately 15% compared to the prior year. Spending for 2025 included ongoing maintenance and investments to support the company's targeted growth initiatives. Orbia invested $144 million in strategic growth primarily dedicated to expanding capacity for medical propellants and custom electrolytes within our Fluor & Energy Materials business as well as advancing high-value product initiatives in Building and Infrastructure. The remaining $251 million was deployed to ensure operational safety and asset integrity. Net debt of $3.78 billion included total debt of $4.82 billion less cash of $1.04 billion. The net debt-to-EBITDA ratio was 3.70x at the end of the year, which decreased from 3.85x at the end of the prior quarter, driven by a decrease in total debt of $82 million and an increase in cash and cash equivalents of $49 million and an increase in the last 12 months EBITDA of approximately $5 million during the quarter. The leverage ratio increased by 0.4x compared to 3.30x at the prior year-end due to an increase of $162 million in net debt of which $147 million was due to the appreciation of the Mexican peso against the U.S. dollar and a decrease of $76 million in the last 12 months EBITDA, partially offset by an increase in cash and cash equivalents of $31 million. On an adjusted basis, net debt to EBITDA at the end of 2025 was 3.40x, which was a slight reduction from the level of 3.42x at the end of the prior quarter. For the full year, we recognized an income tax expense of $291 million compared to an income tax benefit of $127 million in the prior year. The change in the tax expense was primarily driven by the geographic mix of earnings, appreciation of the Mexican peso relative to the U.S. dollar, inflation-related adjustments and discrete items, including nonrecurring dividend repatriation and impairment charges. Adjusted for these items, the effective tax rate for the year would have been approximately 25%. Turning to Slide 6. I'll review our performance by business group. In Polymer Solutions, fourth quarter revenues were $558 million, a decrease of 6% year-over-year driven by lower operating rates in derivatives and lower prices in resins. This was partially offset by higher volumes in resins and higher prices in derivatives. Fourth quarter EBITDA was $33 million, a decrease of 55% year-over-year with an EBITDA margin of 5.9%, driven by lower prices and higher input costs. For the full year, Polymer Solutions had revenues of $2.4 billion, a 4% decline, driven by lower volumes in derivatives and lower prices in resins, partially offset by higher general resins volumes. Full year EBITDA declined 30% versus the prior year to $248 million with an EBITDA margin of 10.2%, driven primarily by lower resin prices, operational disruptions in derivatives and a key raw material supply disruption during the first half of the year. This was partially offset by lower fixed costs from cost savings initiatives. Excluding onetime items, adjusted EBITDA was $39 million in the quarter and $279 million for the full year, representing a decrease of 53% and 26%, respectively. Adjusted EBITDA margin was 7% for the quarter and 11.5% for the year. In Building and Infrastructure, fourth quarter revenues were $600 million, an increase of 4% year-over-year, driven primarily by higher volumes in Western Europe, Mexico and other portions of Latin America, favorable currency fluctuations and better pricing. This was partially offset by the impact of divestments of the India and Clay Pipe businesses that were completed earlier in the year. Fourth quarter EBITDA was $71 million, an increase of 34% year-over-year with an EBITDA margin of 11.9%. The increase was driven by lower onetime restructuring costs, better margins favorable product mix and continued benefits from cost-saving initiatives. For the year, Building and Infrastructure revenues were $2.5 billion, a decline of 1% year-over-year. The decrease was driven by the impact of completed divestments and weak demand in Mexico, partially offset by growth in Brazil and EMEA. Full year EBITDA of $246 million declined 10% year-over-year with an EBITDA margin of 10%, driven primarily by lower results in Mexico and Western Europe, higher material costs and higher onetime restructuring costs compared to last year. This was partially offset by better performance in the U.K. and Brazil and the benefit of cost savings initiatives. Excluding onetime items, adjusted EBITDA was $78 million in the quarter and $286 million for the full year, representing an increase of 20% and a decrease of 2%, respectively. Adjusted EBITDA margin was 13.1% for the quarter and 11.6% for the year. Moving to Precision Agriculture. Fourth quarter revenues were $279 million, an increase of 5%, driven primarily by strength in Brazil, Europe and Israel, partially offset by India and Mexico. Fourth quarter EBITDA of $33 million was slightly lower year-over-year with an EBITDA margin of 11.8%. The slight decrease in EBITDA year-over-year was driven by lower performance in the U.S., Mexico and Central America, partially offset by better performance in EMEA, Brazil and Turkey. For the year, Precision Agriculture reported revenue of $1.1 billion, an increase of 6%, driven by growth in Brazil, Peru and the U.S., partially offset by soft demand in Mexico. Full year EBITDA increased by 9% to $136 million with an EBITDA margin of 12.4%, primarily driven by Brazil, the U.S., Turkey and Peru, partially offset by negative impacts from currency fluctuations and Mexico. Excluding onetime items, adjusted EBITDA was $35 million in the quarter and $142 million for the full year, representing a decrease of 3% and an increase of 7%, respectively. Adjusted EBITDA margin was 12.5% for the quarter and 12.9% for the year. In Fluor & Energy Materials, fourth quarter revenues were $268 million, an increase of 21% year-over-year. The increase was primarily driven by higher volumes from pharma and upstream minerals and favorable prices across most of the product portfolio, partially offset by lower volumes in refrigerants. Fourth quarter EBITDA was $68 million, an increase of 107% year-over-year due to higher revenue in the absence of prior year onetime legal expenses, partially offset by higher raw material costs. EBITDA margin was 25.2%. For the full year, Fluor & Energy Materials revenues were $958 million, an increase of 11%, driven primarily by strong results across the product portfolio. EBITDA for the full year increased 14% to $267 million and an EBITDA margin was 27.8%. The full year increase in EBITDA was primarily driven by the absence of prior year onetime legal expenses, partially offset by higher raw material costs and higher operating costs in Mexico, driven by the appreciation of the Mexican peso against the U.S. dollar. Excluding onetime items, adjusted EBITDA was $68 million in the quarter and $267 million for the full year representing an increase of 3% and a decrease of 1%, respectively. Adjusted EBITDA margin was 25.2% for the quarter and 27.8% for the year. Finally, in our Connectivity Solutions segment, fourth quarter revenues were $226 million, an increase of 32% year-over-year. The increase in revenues for the quarter was driven by strong volume growth across all end markets and a favorable product mix, partially offset by lower prices. Fourth quarter EBITDA increased 61% year-over-year to $21 million with an EBITDA margin of 9.5%. The increase was primarily driven by higher revenues, higher capacity utilization and continued benefits from cost reduction initiatives, partially offset by lower prices. For the full year, Connectivity Solutions revenues were $918 million, an increase of 9%, driven by strong volume growth and favorable product mix, partially offset by lower prices. For the full year, EBITDA of $131 million increased 21% and EBITDA margin was 14.2%, primarily due to higher revenues, higher capacity utilization and the continued benefits from cost reduction initiatives, partially offset by lower prices. Excluding onetime items, adjusted EBITDA was $33 million in the quarter and $144 million for the full year, representing an increase of 105% and 23%, respectively. Adjusted EBITDA margin was 14.8% for the quarter and 15.7% for the year. Turning to Slide 7. I'd like to provide an update on our plan to improve operating performance, strengthen our balance sheet and reduce leverage as first outlined in our October 2024 business update. First, our cost reduction program continues on track, having delivered cumulative annual savings of approximately $200 million by the end of 2025 relative to the end of 2023 cost base. We've achieved approximately 80% of our targeted $250 million in savings per year by 2027. Second, the contribution from recently completed or close to complete organic growth initiatives, which are primarily focused on new product launches and capacity expansions, reached approximately $59 million of EBITDA during 2025. The goal is to achieve $150 million in incremental EBITDA from these investments by 2027. We expect an acceleration of these benefits in 2026, especially in Building and Infrastructure. We have signed agreements that generated proceeds of approximately $90 million from noncore asset divestments as of the end of 2025. We anticipate reaching our targeted $150 million or more by the end of 2026. Finally, as we indicated in the second quarter of 2025 results presentation, we have successfully extended all material debt maturities to 2030 and beyond, raising approximately $1.4 billion to refinance existing obligations. This proactive capital structure management enhanced our financial flexibility and helped to reduce near-term financial risk. With that, I'll now turn the call back over to Sameer. Sameer S. Bharadwaj: Thank you, Jim. On Slide 8, I will cover a few key milestones regarding our efforts on sustainability. In 2025, we remain focused on expanding and delivering sustainable solutions across all our businesses, staying aligned with our long-term strategy and customer needs. In Fluor & Energy Materials, we expanded our custom electrolyte facility in the U.S. and continued growing our portfolio of low global warming potential refrigerant gases and medical propellants. We also advanced construction of our new facility for next-generation medical propellant 152a in the U.K., which we expect to start production in early 2027. Within Building and Infrastructure, we enhanced our offering in urban water resilient solutions to address environmental challenges. We exceeded our 2025 sustainability-linked sulfur oxide emissions reduction target. Our progress was recognized once again by leading sustainability benchmarks in 2025. We maintained our standing in the S&P Dow Jones best-in-class MILA Pacific Alliance, the S&P Sustainability Yearbook, the FTSE4Good Index and the BMV ESG Index. Finally, we will publish our 2025 impact report on March 9, where we will provide further detail on sustainability performance. Turning to Slide 9. I will now discuss our outlook for 2026. The outlook for the year presents 2 distinct dynamics. We expect continued positive market momentum in Precision Agriculture, Fluor & Energy Materials and Connectivity Solutions. Meanwhile, Polymer Solutions and Building and Infrastructure end markets are expected to remain relatively weak. We expect growth in EBITDA from these segments due to the absence of the operational disruptions experienced in 2025 in the Derivatives business as well as from commercial initiatives and new product introductions in Building and Infrastructure. For 2026, the company expects that full year EBITDA will be in the range of $1.1 billion and $1.2 billion with capital expenditures expected to be approximately $400 million. The primary focus of capital expenditures will be investments to ensure safety and operational integrity as well as selective strategic growth projects, particularly in the Fluor & Energy Materials business group. Now looking ahead in each of our business segments for the year. Beginning with Polymer Solutions, the global PVC market is expected to experience continued excess supply. However, prices have recovered modestly compared to the trough levels seen in the second half of 2025. Recent governmental policy shifts, particularly in China and announcements of capacity rationalization in Europe and the U.S. should help support a firmer global pricing environment. The focus remains on maximizing production, maintaining strict control over fixed costs and cash and growing profitability. In Building and Infrastructure, market conditions are expected to remain subdued in Europe and moderate growth is anticipated in Latin America. Orbia anticipates incremental growth driven by greater adoption of new products, contribution from value-added solutions and ongoing benefits from cost optimization initiatives. In Precision Agriculture, we expect continued strong momentum across key markets led by robust demand in Brazil, solid project execution in Africa and the Middle East and sustained strength in U.S. permanent crops. The business will also advance growth initiatives through its new digital farming platform and new projects while capturing additional benefits from ongoing operational efficiency efforts. In Fluor & Energy Materials, we expect positive fluorine market trends to continue with strong demand to help offset the impact of raw material and mining cost inflation. Our operating philosophy is to ensure safe and stable mining and chemical operations and maximize the value of fluorine across minerals and chemical intermediates, refrigerants and medical propellants. Growth investments will focus on battery materials, next-generation medical propellants and mining infrastructure. And finally, in Connectivity Solutions, we anticipate growing demand driven by broadband expansion, new data center investments and the modernization of the U.S. electric power grid. Profitability is projected to improve, supported by these incremental volumes, higher plant utilization and the ongoing implementation of cost control initiatives. Consistent with our top priority to strengthen the balance sheet and the company's Board of Directors has resolved to approve and intends to propose to shareholders at Orbia's Annual General Meeting that no ordinary dividend be declared for 2026. In summary, our near-term priorities are to deliver on our commitments, delever the balance sheet, simplify operations and focus on our core business. We aim to improve EBITDA and cash flow through cost savings initiatives and growth from recently completed project investments, complemented by cash generated from noncore asset sales. These actions will enable us to improve our leverage and strengthen our balance sheet by the end of 2026 without relying on potential market recovery or further benefits from business simplification. We remain committed to meeting customer needs and generating long-term value for our shareholders. We are aware of recent media reports and market speculation concerning a potential divestiture of our Precision Agriculture business. We continually engage in assessing opportunities to optimize our portfolio and create value for our shareholders. As a matter of policy, we do not comment on market speculation or rumors. We are committed to providing material information to the market in accordance with our disclosure obligations and regulatory requirements. Any official announcements regarding Orbia's strategy, operations or financial structure will be made through press releases and filings in accordance with applicable law and stock exchange rules. Before we move to Q&A, I would like to share an important leadership update. After nearly 5 years of dedicated service as Chief Financial Officer, Jim Kelly has decided to retire from Orbia. Since joining us in 2021, Jim has reinforced financial and capital allocation discipline, enhanced reporting and internal controls and guided the company through a complex global environment with a clear focus on balance sheet strength, cash generation and long-term value creation. Importantly, Jim also built a high-performance finance function, developing leadership depth that positions us well for the future. He has been a trusted partner to our executive team and our Board. And as many of you know, he has played an outstanding role in engaging our external stakeholders, including debt and equity investors, analysts and ratings agencies. We are truly grateful for his contributions. He will remain with us through midyear to ensure a seamless transition internally and externally. Following a structured Board-led succession process, I am pleased to announce that Cristian Cape Capellino, a senior leader within a global finance organization has been appointed Chief Financial Officer effective March 15, 2026. Cape is a seasoned executive with over 23 years of experience, spanning public accounting and finance leadership roles within global industrial and manufacturing organizations. Since joining Orbia in 2020, he has held senior leadership roles across controllership, tax, financial planning and analysis and finance transformation within the finance leadership team. He worked in close partnership with Jim to strengthen governance, sharpen capital allocation rigor and modernize our global financial systems across more than 40 countries. Prior to Orbia, Cape spent more than a decade at Tenaris, an NYSE-listed global industrial company, where he held multiple senior finance and business leadership roles. Earlier in his career, he worked at Deloitte in audit and tax. He holds an MBA from the MIT Sloan School of Management and a public accountant degree from the National University of Cordoba. Cape understands our portfolio, our capital framework and our performance drivers. He is highly regarded by our global teams. His appointment ensures continuity and execution. Our strategic priorities and capital allocation plans remain unchanged. The Board and I are confident that this transition positions us well for our next phase of performance and value creation. Operator, we are now ready to take questions. Operator: [Operator Instructions] The first question today comes from Andres Cardona with Citi. Andres Cardona: Before I ask my question, I want to thank Jim for the partnership over the last 5 years and wish you very good luck in your next step. Sameer, the natural question at this point is the simplification idea of the business. Could you help us to understand the reach of this program if it is limited to noncore assets, relatively small divestitures? Or how can we think about this concept that seems to be at the center of the strategy of Orbia for the last year or so? Sameer S. Bharadwaj: Thank you, Andres. Let me address that question. As we've said before, our focus at Orbia, first and foremost, is to deliver on our results with a focus on EBITDA and cash generation and use the proceeds to delever and then simplify and focus our portfolio. So in that context, as we've shared before, the outcome of our strategy session late last year is that we will focus on our core value chains, okay? And there are potentially businesses that we see may not be directly linked with our value chains or not the best strategic fit, we will look for simplification opportunities. And as I have commented earlier, we continue to explore such opportunities in earnest. And if and when there is something material to report in accordance with our disclosure obligations, we will do so. Operator: The next question comes from Joao Barichello with UBS. Joao Pedro Barichello: I have 2 from my side here. So could you provide an update on [ Cora's ] new facility in the U.K. regarding how has been the project execution time line? What is the EBITDA contribution that you're expecting from it? And also, could you provide a little bit more of color on the main adjustments made in your adjusted EBITDA for the 4Q, but also for the full year of 2025? I mean, what were the main one-off events and how materially were they? That's it from my side. Sameer S. Bharadwaj: Very good, Joao. Let me take the first question, and I'll let Jim answer the second question. The investment that we are currently making in the U.K. is to build a large-scale industrial scale medical-grade 152a plant to support the commercialization of this next-generation global warming -- lower global warming potential medical propellant. As we've disclosed before, we already have a 600 tonne per year pilot reactor running, supporting the industry at this time with their qualifications and their scale up. And we have customer commitments to -- starting off early of 2027, where we will scale up this facility to 6,000 tonnes a year. And over time, as the industry transitions away from medical grade 134a to medical grade 152a, we have the asset required to serve the industry needs. So all the qualifications and scale-up is on track. We expect to complete construction of the facility towards the end of this year in time for the scale up at our customers. And the EBITDA contribution of this business, I do not want to talk about specific numbers right now, but is expected to grow very significantly over the next 2 or 3 years, okay? Jim Kelly: Thank you, Joao, for the question regarding the onetime items, the nonoperating items, we're strict in our definitions of what those are. And I'd say the definition really typically falls into 3 categories, one being particularly given the initiatives that we have on our delevering at this point in time, the restructuring costs that we incur in order to execute on those plans then as well any legal settlement or extraordinary legal costs that we have in defending historical cases that exist around the company. And then if there are any other true nonoperating impacts in any of the businesses that occur over the course of the year from an operational perspective. So let me go through in a little bit of detail on each of those. So for the full year, first of all, the number, as you would have seen, was $90 million. So that got us from the [ $1,020 million to $1,110 million ] going from reported EBITDA to adjusted EBITDA. The largest of the adjustments was in the restructuring area. That was about $45 million, and a lot of that was within our B&I business, where you've heard us speak about the footprint rationalization in Europe. So that -- we're in the middle of that process at this point in time. It's ongoing. And for that reason, we've incurred a number of restructuring charges there. And then smaller ones across some of the other businesses. There was a little bit in Polymer Solutions, et cetera, but the vast majority in B&I. Next after that was about $30 million of legal related. And of that, about $20 million was related to a settlement that took place during the year and the remainder is legal costs that were incurred to address outstanding cases that are -- that generally have long histories, go back in time and have nothing to do with what's taking place in the business right now. So again, in total, those were about $30 million and then on top of that, we had about $20 million that related to operational disruptions in one of our key suppliers in the Polymer Solutions business. We reported this back in the first quarter of the year. It was a little bit in first and second quarters that we incurred this. And again, that was about $20 million. So in total, those comprise the $90 million. If you're asking as well about Q4, the number was about $9 million in Q4, so not that material in the quarter. It was much more material in the earlier part of the year. Operator: The next question comes from Hernan Kisluk with MetLife. Hernan Kisluk: Congratulations to your career, Jim. So my question is on the revolving credit facility. I understand it has spring covenants that are not very far from being reached. So I'd like to understand if you are in conversations with the group of banks to amend waive or change the terms of the RCF, so you can maintain the availability? Jim Kelly: Thank you for the question. So you're correct in terms of the commitments that we have to meet. So in terms of the net debt to EBITDA, it's 3.5x or below and then interest coverage above 3.0. We are within those covenants at this point in time. So -- and also, remember, as you said, they are springing covenants. So they don't come into effect until or unless we have 2 of the 3 rating agencies saying that we are not investment grade. So with 2 of the rating agencies still supporting an investment-grade rating, the covenants are not in force. So right now, we are in a good situation. We have ongoing discussions with the banks that are part of the RCF. And should we get to a position where there is potential risk to the investment-grade rating, we would have discussions with them as to whether they would be willing to waive these covenants or not. Keep in mind, we do not draw on the RCF. We view it as, call it, an insurance policy for liquidity if or when we need it. But at this point, and it's been a while, a couple of years now since the last time we drew on the RCF. Sameer S. Bharadwaj: Yes. The only other thing I would add, Jim, is we have a highly focused plan to delever with or without portfolio simplification opportunities. And so we feel confident in our ability to do so over time. And portfolio simplification just allows us to get there sooner. Operator: The next question comes from Nicolas Barros with Bank of America. Nicolas Barros: I have 2 questions, right? The first one on your projects. Could you share the latest developments regarding the PVDF project and the same for the LiPF6, right, on time line, CapEx and EBITDA? And secondly, on tax reconciliation, right? So I would like just to clarify here the tax line, right? So taxes paid in 2025 were roughly $30 million, right, above 2024 despite your negative EBT, right? So should we interpret this as taxes coming from businesses that still generate positive EBT or I don't know, any further impact from the Mexican peso? And could you share expectations for cash taxes disbursement in 2026, please? Sameer S. Bharadwaj: Thank you, Nicolas. Let me take your first question, and I will let Jim answer the second question. Specifically with respect to the PVDF project that is in partnership with Syensqo. That project is currently on hold, subject to market conditions, and we will reevaluate the merits of those projects as we go along. With respect to the LiPF6 project, that project continues to proceed on track. And keep in mind, this is supported by a $100 million grant from DOE and close to $90 million in tax incentives from the state of Louisiana and federal tax credits. The total capital investment for the project, as we have said before and disclosed in our DOE grant materials is of the range of $400 million. And so the DOE grant as well as the tax incentive significantly reduce our upfront investment. The EBITDA contribution of the project with conservative pricing is in the range of $100 million to $120 million, okay? Now the market conditions remain quite favorable. Even in the last 6 months, the market dynamics for LiPF6 have tightened and pricing has gone up significantly to the tune of $25 per kg. Chlorine is also on the list of critical minerals. And so from a security of supply standpoint, the facility that we are working on the engineering of at this moment is going to be very well positioned to be successful when the plant is built. The market dynamics continue to strengthen with growth in energy storage, supported by the needs for stationary storage as well as EVs and hybrids. And given the fact that the industry is moving towards LFP-based cathodes, the amount of LiPF6 required for LFP-based cathodes is 50% higher than NMC-based cathodes. So all the dynamics are favorable for that project. And as I said, we are currently in the engineering phase, and this project will take about 3 years to execute. Jim, do you want to take the other question? Jim Kelly: Sure. So in terms of reconciliation of the tax rate, so as I discussed in my comments, you'd look at it on a normalized basis, you would look at a tax rate of about 25%. Now needless to say, the numbers you see are quite different from that, and there are a couple of factors that drive that. Operationally, where we earn income, so what we would call the geographic mix, of our earnings has a relatively material impact. And in fact, the issue there is that we have a lower share of our income in low tax jurisdictions. So that tends to have an upward effect on the rate. The more dramatic impact, I would say, and you see this on a year-to-year basis is the impact of the change in the Mexican peso to the U.S. dollar. So there's an FX and inflationary impact based on that. And that is largely driven by the fact that we have a U.S. dollar debt. And when there is a change in the Mexican peso rate, the reductions or increases in the debt balance are essentially treated as being taxable in Mexico. So with depreciation of 20% of the peso in '24 and an appreciation of 11% in '25, you see a dramatic swing in the effective tax rate year-to-year as a result of that. And then also internally, we had some cash movements, et cetera, some repatriations from other countries into Mexico, et cetera, that caused some rate implications as well. So that's the explanation on the rate. You also asked about cash taxes. So I would expect that for 2026, our cash taxes wouldn't change significantly from where we were in 2025, maybe some increase as we see increases in our overall EBITDA that we mentioned. But there are a lot of factors there that one would have to forecast, whether that be the change in the Mexican peso, the geographic split of the earnings, et cetera. But I'd say I would not expect a dramatic change in the cash outflows from taxes during the year. I hope that addresses your question. Operator: [Operator Instructions] Sameer S. Bharadwaj: If there are no further questions, let me try and wrap up the key messages. So first and foremost, we ended 2025 despite being a challenging year, we ended the year on guidance. And even though we were short on EBITDA, the company did extremely well from a cash standpoint. And with all of the initiatives that we said we would deliver on from a cost reduction standpoint, realizing benefits from growth initiatives and noncore asset sales and the reduction of working capital, we were able to end the year strong from a cash standpoint. Now looking into the year, even though Q4 was very challenging from a PVC pricing standpoint, we have seen a material change in Q1, and we will hopefully begin to see benefits in Q2 with China's elimination of VAT on PVC exported from certain types of facilities. And we've already seen the pricing of the various indexes go up by $60 to $70 a tonne. And eventually, that should start flowing through in our results as well. We are also hopeful of antidumping duties being imposed in Mexico and Brazil, which should also benefit the Polymer Solutions business. The Building and Infrastructure business continues to suffer from weakness, particularly in Northern and Western Europe and in Mexico. And with the reduction in interest rates and resumption of building and construction activity, and especially infrastructure projects, the operating leverage that we have created in that business should begin to benefit us. The other 3 businesses are bright spots. We are completely sold out in our Connectivity Solutions business running at very high utilization as demand from the telecom carriers as well as the growth in AI data centers and the power sector continue to drive demand growth. Fluor & Energy Materials, the supply chain is tight. The fluorine item is expected to remain tight over the course of the decade, and we are doing our best to optimize our production from the mine as well as place the fluorine into the highest value applications. And the pricing environment in that business continues to strengthen during -- over the course of the year. And then finally, the Precision Agriculture business ended the year strong and continues to have very positive momentum, especially in areas like Brazil and many of the excellent projects that we are doing in Africa, the business is on a continued improvement trajectory and should deliver stronger earnings year-over-year as well. So in summary, we are doing everything we can in terms of driving the top line, having strong discipline on our manufacturing costs as well as SG&A costs, driving lots of initiatives to optimize cash through working capital initiatives and noncore asset sales so that we can deliver the results, delever the company and then simultaneously have a continued focus on portfolio simplification so that Orbia can be more focused going forward. So with that, I'd like to wrap up the call and look forward to talking to you again on the April's earnings call. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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