Huhtamäki Stock

Good morning, everyone, and welcome to Huhtamaki Quarter Three Results Presentation. My name is Ilja Orre. I'm the VP of Investor Relations. Today's presentation will be a management discussion followed by a Q&A session. With that, I will hand it over to our President and CEO, Ralf Wunderlich.

Thank you, Ilja. And look, great to have you on board with us. For those who don't know Ilja yet, Ilja is with Huhtamaki 5 years now, Ilja, started in strategy, then went to North America and worked in our business segment in North America, first also in strategy and then followed in a business role there. So again, great to have you. Welcome, Ilja.

From a quarter 3 perspective, I'd like to report that we are very pleased with another quarter of comparable net sales growth at 4% in the quarter, and that's in a very soft demand environment. We also delivered a very strong EBIT with a 10.9% margin. That's supported by solid performance in Flexible Packaging and Fiber Packaging. Additionally, the quarter was impacted positively by EUR 23 million revenue recognition from a commercial contract, which was concluded in foodservice packaging in our smooth molded fiber operations. North America and Foodservice Packaging were negatively impacted by weak demand, operational challenges and inflation-driven cost increases. However, we have taken actions to address those issues to support our profitable growth agenda.

Now how are we going to address those challenges? And as I said, specifically in North America and Foodservice. We'll do that with exactly the same playbook, which we introduced 1.5 years ago in flexible packaging. That playbook is focusing on 3 main areas: number one, commercial excellence; secondly, procurement and last but not least, cost-out initiatives. Primary objective is to secure our long-term 10% to 12% adjusted EBIT ambition.

Let me give you some more details around those activities and actions. Let me start with commercial excellence first. First, it's important for us to fill our growth pipeline and to have the resources to support that growth pipeline delivery. And secondly, we're going to take even more pricing actions to preserve the leakage, which we are seeing from cost inflation, especially in freight and distribution. We have to make sure we pass those on.

Secondly, procurement. We have had a year we have had significant direct and indirect input cost increases. Those are accelerating, and we need to push against those and mitigate those inflationary impacts. And those are stemming largely from the Middle East crisis, which we have seen since end of February this year. And then last but not least, cost out. All cost levers will need to be addressed. Potential restructurings and productivity need to occur. All those levers are important to us.

Let me just give you a couple of examples of what we have done now already. We have suspended our production in smooth molded fiber in our Sacramento facility in the U.S. We're doing a lot of work, as you know, in our start-ups. And here, I'm really pleased to report that especially in Hammond, we are seeing great progress on that start-up at the end of the quarter already. So there's a lot going on. And hence, I'm very confident that we will execute these actions with the playbook, which we have introduced 1.5 years ago, and we continue to fine-tune.

Let's move over to the business performance, first in the quarter. It is the second quarter in a row with comparable growth. In the quarter itself, we see 4% comparable growth. Year-to-date, we are seeing 2% comparable growth, especially pleasing to see that both our flexibles and our fiber businesses continue to show good volume growth. It's also a quarter where we see first time that currency FX has started to turn positive. However, year-to-date, you still see a 67% negative currency impact on the top line.

Let's have a look at the P&L in a bit more detail. Strong EBIT margin, as I reported in on the first slide of 10.9% and EUR 110.5 million in absolute euro terms, respectively. EPS did grow 10% to EUR 0.68 per share. CapEx is in line with last year in the quarter. Our disciplined capital allocation continues. It's really important, and it's the sixth quarter in a row where we are showing and posting positive cash flow. Year-to-date, it's a similar picture. Strong margin over 10%, landing at 10.4%, EPS is up 3%. And on the free cash flow, as I said, we are having 6 quarters in a row positive. We are setting us up for a strong finish to the end of the year as well.

Let me move to Foodservice Packaging. Demand is again very weak and it's below last year's level. That's not a great starting point. However, the business continues to take significant cost out so that the underlying are performing still at the around 8% margin. And that is, of course, taking out the revenue recognition from a commercial contract, which was concluded in the quarter. So I'm taking that out when I talk about the 8% for the year-to-date margin of the segment. Actions to support the commercial excellence, procurement and cost out, which I talked about before, are being implemented also in Foodservice. Track record shows that the segment is able to take cost out. Now we have to start being much more successful on the top line and find areas to grow and fill our pipeline in foodservice as well.

Let me move over to North America. Clearly, the performance in the quarter is disappointing. We have had challenges. They are really focused on 2 areas. First one is a weak top line. Second one is that cost inflation, mainly in freight and distribution did hit us even more than we thought it would. Now on the top line side, we see particularly weak in foodservice and in the quarter itself in retail. Good progress though in Hammond, as I mentioned before, and I mentioned before that we suspended Sacramento. There are now also actions in place to attack the cost inflation, which I talked about in freight and distribution that we will make sure that we pass those on to our customers swiftly.

Year-to-date, top line is also negative, but it's 3% negative versus the significant decrease in the quarter itself. Of course, that is having a strong impact on the EBIT reduction in North America, coupled with the inflationary pressure, which we are seeing, again, mainly on freight and distribution, we come to a year-to-date performance of 8.2% margin. In the quarter, we delivered better operating cash flow, and that is translating then also in better operating cash flow for the year-to-date in our North American business.

Now look, the playbook is in place. The playbook is proven. We have done it before in Flexibles. We will do this again here in North America. There's no doubt that we will get this business back to where it needs to be, which is above 10% EBIT margin. And I feel very confident that our North American team will get there. It's an attractive market. We have a strong team there. So we'll get this back on track.

Let me move to Flexible Packaging. Flexible sustained its good momentum. I'm really proud of the segment's performance here. Healthy volume growth, also good on passing on the raw material price increase, which we have seen in -- sorry, in Flexible Packaging, and we have had also a very positive mix effect. Continuous focus in the segment on their cost management and the turnaround activities. They were the ones where we implemented the playbook, which we are now using in North America and in Foodservice. That's, of course, supporting their performance again. All their regions are up both in top line and in EBIT. So again, really proud of the performance there. Also proud of what they are doing on cash flow. For the year-to-date, they are ahead of last year. You see the impact of the raw material price increases in the quarter itself, but they are defending the year-to-date performance on cash as well.

Last but not least, our Fiber Packaging segment. Steady growth with a good profitability continues here. It is another very strong quarter for our Fiber segment with improved profitability again. Comparable growth in the quarter was 3%. Year-to-date, it's even 5% with volume growth, again, all over the regions which we are playing in, in our Fiber segment. Stable and improving demand in our ag and food markets. Our foodservice markets, which we are serving with the cup carrier was weaker, but it's the smallest of the 3 segments we are serving within fiber.

We will continue to invest in this business, and we are looking forward to hopefully another strong finish to the year with our fiber. Let me pass on and hand over to our CFO, Thomas Geust.

Thank you, Ralf. In the quarter, the currency turned positive, as Ralf already alluded to here earlier. We had roughly EUR 11 million positive translation in the net sales and EUR 2 million -- EUR 1.6 million on EBIT. However, when you look at the year-to-date numbers, you see the significant negative still of roughly EUR 67 million negative impact on net sales, while the impact on EBIT was still negative EUR 4.7 million. Of the currency translation, a big part alludes to the USD currency. And when you look at the development of the USD, you can see that we have an average rate still of 1.16 in the quarter and 1.14 at the end of the quarter, so the closing rate. If you look at the currency yesterday, it was at 1.11. So the trend has continued positive throughout the quarter.

Maybe highlighting a few of the other currencies also on that slide, we have British pound, Chinese renminbi and Australian dollar also trending positively. Turning over to the profit and loss. Here, we see that the growth of 5% on top line is nicely converting into EBIT growth of 10%, and that then delivering an EBIT margin of 10.9% in adjusted terms. The strongest operational improvement we see in our Flexibles and Fiber Packaging segments, while then the conclusion of commercial contract in Foodservice provide additional support to the top line and adjusted EBIT.

Looking at the finance cost of roughly EUR 70 million in the quarter. That is slightly elevated. But here, I consider that the year-to-date numbers represent a good assumption for our run rate. That, combined with the efficient tax rates delivers adjusted EPS of $0.68, which is up 10% to prior and also the year-to-date EPS of EUR 1.88 is improving versus prior year.

In the cash flow, as said by Ralf, we have now 6 consecutive positive cash flow quarters coming in with year-to-date free cash flow of EUR 79 million, down versus previous year. However, I would conclude this more on timing as well as some of the elements, which I will allude to when going through the bridge. On the EBITDA, the main reason for the decline is a positive IAC booked in 2025. So the comparability being impacted by that one. Our working capital is inflated mainly related to the inflated raw material coming out of the Middle East crisis. That one is obviously stabilizing as time goes along. And then we have our capital expenditures, which is roughly EUR 20 million lower than previous year and really reflecting the disciplined capital allocation that we have been applying while at the same time, allowing for investments in the growing businesses.

When looking at the net debt leverage and liquidity, I would conclude that with EUR 1.2 billion of net debt, we continue to deleverage. Our net debt-to-EBITDA ratio is now 1.9x, which is below our ambition corridor of 2 to 3. We also improved our gearing, which is now 0.58. And looking at the liquidity position at the end of the quarter, we had EUR 364 million of cash equivalents and EUR 450 million available of unused committed credit facilities. So we conclude that our balance sheet remains strong.

Also on the debt structure, you can see our continuous work on maintaining a healthy loan maturity, and that combined then with efficient financing terms. Our average maturity has now been extended to 3.9 years versus 3.6 end of Q3 '25. And we have also continued with refinance throughout 2026 with the extension of the RCF as the latest example.

Continuing to the more detailed balance sheet. As already mentioned earlier, our balance sheet remains strong with equity roughly EUR 2 billion. Beyond the already highlighted topics, I would also like to highlight the improved adjusted return on investments, which is now 12.3% versus 11.9% prior year as well as the adjusted return on equity of 13.8%. Additionally, I would like to highlight that the balance sheet is impacted by currency movements alone on the equity, roughly EUR 186 million of negative currency translation differences.

Looking at the progress towards our long-term ambitions, I would conclude that we are currently meeting our ambition for 3 of the parameters, adjusted EBIT margin, net debt to EBITDA as well as dividend payout. For the adjusted return on investments and comparable growth, we are still trailing behind, however, seeing some positive development in that one lately. Looking forward, we have no changes to our outlook nor to our short-term risks and uncertainties. So with that one, I would actually hand back to Ralf for his concluding remarks.

Yes. Thanks, Thomas. And look, you have seen the slide before from Thomas, where he was showing the trend towards our ambition. And I'm specifically proud to say that after years of negative or no growth, which we have seen, we are seeing this year over the first 3 quarters, positive growth of 2%. So really proud of the team to deliver in a very soft market that growth. Also really proud to continue -- or to see continuing over 10% EBIT margin. In the quarter, 10.9%, clearly supported by flexible fiber and the commercial conclusion of a contract, but still it is clearly above the 10% for the year-to-date numbers, which is, of course, very, very good news for us.

And it's great that in the segments where we have work to do, we have a playbook in place, which will help us to turn those into the right direction. So with that, I'd like to hand over to all of you for your questions. So please go ahead.

[Operator Instructions] The next question comes from Hai Huynh from UBS.

I guess, first of all, in North America, the 9% comparable sales decline, how much is that is due to end market weakness? And in terms of pricing, are you not able to pass on prices anymore from raw material costs? And where are you seeing changes in market share over the past quarter?

Yes. Thanks for your questions. So let me go one by one. So the market, really the market in foodservice specifically was very weak in North America in the quarter. We did not lose market share in -- with any of our customers during the quarter compared to the same quarter last year at all. Retail was weak as well, but retail in Q3 is normally weak. So it's the softest quarter which retail has. So it was specifically weak this year. Again, we did not lose any market or any customer in any of the markets, but we are seeing a very weak -- unexpectedly weak market with consumer confidence in North America at a low point. So hopefully, that helps a bit to question 1 and 3.

Question 2 in the middle was with regards to passing on cost increases. And here, I would like to highlight, this is mainly due for freight and distribution. So that's really what we are talking about. The strong increases in fuel prices, the availability of truck drivers in the North American market is really the issue here for us. We are negotiating typically freight and distribution prices in the beginning of the year. And then it's during the year, very difficult to pass them on. We are doing it now in an exercise which is very tough, but I'm really proud of the North American team that they are going to customer by customer to have those discussions earlier than January where it typically happens to make sure that we get those hopefully passed on and see the benefit already in the next quarter.

Yes, sorry, just a follow-up on that. In North America, so I realize that the demand is weak, but how much of the underperformance is also the existing issue of ramping up the factories at the sites. Do you expect utilization or site efficiency to get to a good level by Q4? Or is that going to be more of a half 1 '27 story?

We have seen at the end of the quarter, significant progress in Hammond. So that's 1 of the 2 start-ups, if you remember, and that's frankly, the larger of the 2. So very, very pleased with the end of the quarter performance in Hammond. That's, of course, only really 6 weeks, but we are expecting this to continue. And then, of course, in the half 1, it will get stronger and stronger. But pleased with the progress. And we are -- as I said a couple of quarters ago, we have implemented a task force specifically to address the start-ups in North America. We see the progress in the quarter. We will see more in the next quarter and then more in H1. So looking forward to those achievements.

And my last one is on the contract for foodservice. So when -- so now that you have terminated that smooth motor fiber contract, how should we think about the kind of normalized or going forward type of EBIT for the segment? Has this traditionally added anything in terms of the EBIT or it's actually dilutive to the margins for the segment itself?

No, it has added EBIT to the segment. So you could think on a 2026 year-to-date, you would think about anywhere between maybe EUR 4 million to EUR 6 or so million EBIT impact on that one, which, of course, we will not see going forward.

The next question comes from Maria Wikstrom from SEB.

I have 3 questions. I will take them one by one. So first, I wanted to get a feeling for the volume growth across different segments. I mean you had 4% organic growth for the group level. But if you could talk about it on a volume terms across the different segments, please?

Yes. Maria, you know we are not disclosing specific volume numbers, but I can -- I'm very happy to give you a feel around how we are doing. So you would have in Flexibles and Fiber positive volume in a year-to-date perspective. And you would have specifically in Flexibles very good volume growth year-to-date and in the quarter as well. But you know that we don't report on specific volume numbers, Maria. But hopefully, the flavor helps.

Then I wanted to get a bit of the bridge for the North American EBIT trend as you are EUR 21 million below the last year level. So if you could provide a bridge that how much is in Paris, Texas, I mean, how much is this distribution cost to get a little bit of a flavor, I mean, how this -- what is behind this EUR 21 million drop?

So the 9%, which we are down on top line, I would help you by saying this comes at a healthy margin. So call it, more than half of the shortfall in the quarter would be due to that. And to help you with the P&L and distribution and freight costs are 2% of the P&L, up this year versus last year. So it's a significant 2% on a year-to-date. So if you think just on the freight one, if you see our 8.2% year-to-date, it's a 2% on freight and distribution. And then the rest would be top line. The start-ups have an impact. But as I mentioned already in the quarter, we are seeing a positive development in Hammond and then the other start-up in Paris, Texas, we will also get right over the next couple of quarters.

And then my final question is on the discontinued food service, I don't know, should I call it, project or the client contract. And just to get a flavor, I mean, if this is a kind of saying as well that this plastic to paper trend is -- I mean, it is taking either in the current economic situation? Or what would be the reason behind for the discontinuation?

Yes. The reason behind is, I think, a couple of reasons. First, of course, various materials compete with each other. So if you see paper, smooth molded fiber, plastics, aluminum, so all those different substrates compete with each other. And there is always a question for the customer, how is the consumer taking on my product? Are they taking it because of pricing? Are they taking it because of performance? Are they taking it for any sustainability reasons? What's really the reasoning? And those decisions, the customer take whenever they take them. For us, it's really good that we are material agnostic. So we can serve various materials to the customer. So obviously, we aren't happy sometimes with some of their decisions. But then other segments where we can use other materials are benefiting. So we see this as our focus is not just one material, not just smooth molded fiber, but it's material agnostic, Maria.

The next question comes from Pallav Mittal from Barclays.

A couple of questions. I'll take them one by one. You have highlighted potential restructuring alongside your operational efficiencies and cost reductions. Do you think the challenges in North America and foodservice in particular, warrant a more sort of fundamental reassessment of your manufacturing footprint rather than the incremental efficiency measures that you are talking about?

Yes. It did break up a little bit. But if I get the question correct, you are asking about restructuring and maybe a more comprehensive analysis of the footprint. And I would -- if that was the question, then I agree with you. It is not just working a little bit on productivity and just taking some costs out. It's a wider question. You heard me saying already last year that we are looking at plant-by-plant performance. We have closed nothing to do with what we are now doing in foodservice or North America. We have closed also last quarter factory in Flexibles in India, so in Badi specifically. So we are doing this because when we don't see a way forward for a plant, then we do this. If we are revisiting now the overall footprint in foodservice in North America, then it's a bigger work, but we are doing this because we want to have the footprint, which has the right capacities in the right locations to serve our customers.

So that's really important. Of course, we want to have a competitive platform here, not just to react at the moment, but to have a platform which serves us going forward. Hopefully, that was your question. I struggle to really understand it. I hope I answered it.

Yes. If I can ask one on capital allocation. So your EBITDA is around 1.9x below the sort of target that you have, 2 to 3x. How should we think about capital allocation? Is there, I mean, more thought given to share repurchases, especially given where the shares are trading? Or you are still focused on bolt-on M&A.

Yes. Look, same answer as before. We're really on our 3 value drivers. If you think about them and you think about our profitable growth, capital allocation and then the means of getting there by clear accountability. We want to drive profitable growth. In profitable growth, we absolutely want to do inorganic, but we will stay very disciplined. There's just no way that we will get out of our strategic and financial requests for any M&A. But we want to do it, and we are in the market when there is a right opportunity, we want to have a strong balance sheet, which allows us to do it. If you won't find it, that's the moment where my Board will definitely, definitely consider doing share buybacks. For the time being, we are optimistic that there is opportunity for us on the inorganic side as well.

The next question comes from Kevin Fogarty from Deutsche Numis.

Two, if I could, please. First, just in terms of North America and potential there. Could you quantify the extent of the cost actions you intend to take there? And in terms of the timing, we might see those kind of realized? If you can sort of help on that, that would be quite useful. And the second point, just, I guess, sort of going back to the one-off kind of boost, I guess, in foodservice. Obviously, if we adjust for that, it's clearly sort of reasonably weak performance there. I just wondered if you could help us with any kind of near-term outlook you can see foodservice, what are customers kind of saying about the near-term demand outlook? Is there anything you can point to any improving underlying trends there in terms of end markets, that would be quite useful.

Hi, Kevin, and thank you for your 2 questions. So North America, specifically, our target is to get the segment back to 10-plus percent EBIT performance. That's our clear target and our ambition. Our ambition is to be between 10% to 12%. But our clear target, now were at 8.2% year-to-date. We need to bring this back to double digit. That's the target which we have. We feel confident that with the actions which we have identified, we'll get there. So that's on North America and hopefully gives you some flavor there.

On foodservice specifically, the market is weak and the market is soft. So for us, it is really important that we get our pipeline filled all the time. We have seen before, and Maria had that question before with regards to various materials and our customers look at that. That can also play in our advantage. We are also in foodservice material agnostic. We do, of course, paper, we do smooth molded fiber, but we also do plastics, especially RPET, recycled PET we do. So we've got to play our card on material agnostic side even better than we did so far. And our pipeline needs to focus on that one even stronger. I'm again confident that we will get this one right in Foodservice.

This will take a bit of time. I don't think the pipeline will be executed in the short term, but it will be. So we're optimistic on that side. We are working. And in the meantime, they continue to focus on self-help. We just don't sit back and wait for the market to turn. And in foodservice, it might take with consumer confidence a bit of time. So we have to work on the self-help side to make sure that we deliver on the bottom line.

The next question comes from Cole Hathorn from Jefferies.

I'd just like to follow up on North America and particularly kind of the volume side of things. Foodservice being weak is easy to understand with kind of the footfall data and kind of the China consumer. But I'd like a little bit of color on the kind of the retail paper plates side of the business. Is 3Q more a bit of a destock, restock? Just trying to think about that retail plates business because it's higher margin for you and how we should think about it into the fourth quarter? Will there be kind of a seasonal improvement into 4Q? And is the underlying volumes just more temporary weakness?

Yes, of course. So look, it is exactly the way you are describing it. We had a quarter without any festivals -- so we had a strong finish in the last quarter. So there's really a quarter-over-quarter impact between Q2 and Q3. And then if you think about Q4, you, of course, are spot on. You will have Halloween, you will have Thanksgiving, you will have Christmas. So we are, of course, expecting Q4 seasonality to be significantly stronger than we've had it in the third quarter, which is normal seasonality over the year. So we are not expecting anything different there. Quarter 3 was weaker than we thought, but that has the impact of the quarter-over-quarter performance there.

And then I'd like to move on to the positive, which is flexibles. I mean, in a very volatile raw material environment, the team has done very well. So I'm just wondering, can you give any color of what is supporting this performance? I know you talked about better volume growth in flexibles. I mean is this -- do you think this is consumers downtrading to kind of cheaper plastics business? Can you give us a little bit of help of what is supporting the flexibles volumes and performance?

Yes. So on -- Cole, on the first, happy that we are talking about the positives. Let me start with that comment, which is really, really a standout performance here. And it is -- I think it's due to a couple of things. Firstly, the segment started implementing a new operating model early on last year. They went very decentralized. And with that approach, they were able to attack and win local and regional customers very early on, serve them well, so they could gain a lot of momentum with local and regional customers. That's why I mentioned also that they are growing in every single market where they are playing. So that's extremely encouraging to see. That is supporting the overall growth.

The second one, of course, is also then the cost out, which they have said. So the performance is supported by the playbook, which was implemented last year. That is one of the reasons why I feel so confident about using the same playbook now in North America and Foodservice. But that playbook allowed the segment to get to a very different cost base. That different cost base, again, is benefiting us in twofold. One is it enables us to gain more customers because we can share some of those costs with our customers and gain some of them with that. And on the other side, of course, a part of that is also flowing to the bottom line. So it has an advantage both directly to the bottom line, secondly, enabling us to be more competitive in the market and gain volumes with that. So very pleased, very proud of the performance, which we are seeing in flexibles.

And then finally, if you allow me, it's probably a little bit more difficult one to answer. But when I think about the operational challenges of ramping up Paris and Hammet, you've talked about this and kind of a plan in place. But are there any specifics that you can give? I mean, is this the layout of the factory that is being challenged? Is it kind of the distribution? Is it the P&L management, actual the sales? Could you give a little bit of color of what are the -- like the operational challenges and how are you addressing those?

Yes. Maybe to give you -- maybe that helps, give you an example about Hammond. In Hammond, we installed 6 machines. Those 6 machines were or are supposed to be used for relatively straightforward products. North American market on the egg side is having big volumes on standard formats, typically either 12 or 18 counts for egg packaging. Now we also tried to go into a higher value-added mix there by having many different colors, many different labels, but that's not what the U.S. market is. So we are currently working hard on getting the mix into the factory, which we can run very efficiently with the machines which we have installed. So that shift towards a different mix is taking some time.

And as I mentioned, we have seen significant progress by changing that mix and now running the machines at the speed they are supposed to run with the right mix of 18 or 12 count eggs and not having too many color changes, label changes or print changes. So more straightforward, more using what the U.S. market is all about, which is long runs and using the machines, which are very efficient with regards to the mix, which is there in the North American market. That's an example. There's a similar example if it helps you also on Paris. Similar example, we have installed a very, very significant print line, which can do more colors than we had before, which can do wider prints than we had before. But again, also here, we have to adjust together with our customers, the mix of the products which we are running.

Think about a machine which is significantly wider. So you need to change all the specs which you have had, all the formats which you have had. That takes time and of course, also for the operators, it's a big adjustment of running a very different type of machinery. So maybe those 2 simple examples help you to understand the issues, Cole.

That concludes our presentation. Thank you for those that called in. Thank you for your time.

Good morning all, and welcome to the Results Call for Huhtamaki Second Quarter of 2026. My name is Kristian Tammela, VP of IR. We will now present our development in the second quarter, starting with the presentation by President and CEO, Ralf Wunderlich; followed by our CFO, Thomas Geust. After the presentation, we have time for Q&A. With that, let's get started and handing over to Ralf.

Thank you, Kristian. Thanks for opening the call and really good to be back here. And today, of course, I'm very happy to report to you a very good outcome for both the quarter as well as the half for Huhtamaki, and especially in a market which is still very volatile, where we see a lot of uncertainties. And let me start with that one because most importantly is that even though there is a strong crisis in the Middle East with the war in Iran, we were able to secure the safety of our coworkers in all our factories. And I'm also happy to say that we were able to secure raw materials and supply and deliver to our customers what they needed to ensure continuous supply of those.

Now let me move to some of the outcomes. We had seen growth in the quarter, 2% comparable sales growth, and we were able to pass on the very steep raw material cost increases. We saw volume growth in a couple of our segments, namely Flexibles and Fiber and our adjusted EBIT did increase by 1% with a strong margin of 10.3% despite a EUR 2 million negative currency impact in the quarter. We are continuing to be very disciplined when it comes to capital allocation.

Now it is very important, if you go to the next slide, to also say a few words about the situation in the Middle East. And let me start with the facts. Facts are that we have 6 operations, 2 in Dubai, 1 in Saudi Arabia and 3 in Egypt. We are seeing a very, very strong impact in oil price increases in general, which, of course, then has an impact on the very strong increases on resin, on films, solvents, inks, other liquids and chemicals in general.

The main segment involved is Flexible Packaging, even though all segments are, of course, seeing the impact. Availability of raw material varies by the region. And of course, there are risks of falling short. But you will see this later when I talk about the actions, we were able to secure raw materials in all regions to ensure continuous supply. We are also seeing steep increases in energy and logistics costs. With the Middle East crisis, there are congested logistics chains and again, increase in energy and logistics costs, which we needed to manage.

Now what are the actions which we took into place. First and foremost, as mentioned before, safety and security of our coworkers. That is our highest priority. Also, all of our sites continue to operate throughout the crisis. And that was possible because of our close collaboration with both our suppliers and our customers. We were able to secure the raw materials even in the regions where it was very difficult. There was a lot of hard work done to reduce the impact to our customers and to ensure that they can supply to their customers all the time, and we were able to do that.

Now the strong focus on growth and customer intimacy will continue and is absolutely needed to ensure that we can continue to deliver to our customers. At that point, I would also like to mention that the war in Europe in the Ukraine continues to go on. And of course, safety and security of our coworkers there is as well our first priority.

Let me move on with an update on the team. I'm very happy to report that we were able to attract Thomas Morin to our management team. He is now starting -- he is now part of the executive team, and he will start with us in September. Thomas' previous job was as President and CEO of Transcontinental, a Toronto-listed packaging company and of course, it's very, very good to have him with us on the global executive team, and he will help us to continue to drive this very important segment forward in the future.

As in all our quarterly meetings, I will update you on our value drivers, which we implemented 18 months back, namely profitable growth supported by all levers; secondly, disciplined capital allocation; and thirdly, accountability with speed of execution. If I go to the first one, profitable growth supported by all levers. What we really want to make sure is that we grow organically by being very close to our customers, both global key accounts as well as regional accounts and small accounts. All of them are very important to us, and we want to improve our relationship and make sure that they win in their respective markets. And as previously mentioned, we also are looking -- continuously looking at inorganic growth. We had, in April last year, the announcement of an acquisition in North America, and we are not stopping there. We are continuously looking at inorganic options, but we will do it in a very disciplined manner.

Second point on disciplined capital allocation. We are moderating our CapEx spends, but we are not jeopardizing the growth opportunities which we are having. In fact, we are always looking at best-yielding projects, and we are allocating capital more or less equally amongst the 3 dimensions of maintenance, efficiency and growth. So think about this of 30% in each of those categories. And we are allocating approximately 10% to what we call license to operate. So things such as safety, regulatory requirements, sustainability and so on.

So that will continue, and we are very disciplined when it comes to our capital allocation. Also when it comes to working capital, so it's not just about CapEx, it's also about working capital and especially important in times like now where we have an extreme increase in raw material costs. So we, of course, see that on the inventory side, and on the receivables side. So it's even more important now to be very diligent and very disciplined.

Last point, how are we enabling those? We are enabling it with accountability and speed of execution. So we are empowering the segments. We are empowering the teams within the segments very, very clearly to drive their performance to be close to customers, markets and the regions they are operating in. And from a group perspective, we are the center of expertise, we govern, we coordinate, we support value creation. So whatever the segments need, we will provide to the segments.

Now today, I would like to give you a bit more taste of what that really means. So if you go to the left side of the slide, and what I really would like to talk about is how are we going to help the segments. First of all, of course, we are -- when it comes to business as usual, we are following up on their performance. We are supporting their performance whenever they need that support.

We are also looking at acceleration. How can we increase scrutiny, how can we set targets which are really ambitious for them. And then, of course, and you have seen this last year, when we had a couple of turnarounds, one in India and one in Turkey where we openly talked about, we are also having a playbook on how to improve performance when it is needed. And then we implemented with task forces existing from external teams and internal teams. So we combine those and then we go with our task force to support turnarounds.

Now also important is the M&A side. So the inorganic growth side. Whenever there is a project which we like and which is in our pipeline, we will make sure that it is in businesses where we have strong teams, in regions where we have already a good presence, with products and technologies, which we know and we understand. And of course, with management teams that fit our culture, and we always want to make sure that we have a clear synergy plan and clear synergy opportunities and they must be financially sound. Then we accelerate them, and then we go after them.

Let me remind you of our value creation model and the way we are thinking about capital allocation and the priorities. So first and foremost, of course, we are running a business and we want to grow our business, which we have profitably. So we have announced that we have an ambition, and we understand we are not yet there, but we have an ambition to have a strong annual growth. And we also have an ambition to be between 10% and 12% adjusted EBIT margin, which we are already now since a couple of years.

That business will require CapEx to continue to grow organically. And it will need also CapEx and capital for bolt-on acquisitions for inorganic growth or any other acquisition type. That money will then provide us solid cash flows. That solid cash flow will be used again to invest into the business, as described before, or it will be used to be returned to our shareholders. We will aim to continue to pay dividends in the range of 40% to 50% payout ratio. As a reminder, we have increased our dividends in 17 years in a row or we will find other ways of returning money to shareholders if we do not find better means to invest the money back into growing our business profitably. All of that is underpinned by our leverage and we want to stay between 2 to 3x net debt. As you know, we are currently at the lower end of that leverage range.

Sustainability is very important to Huhtamaki and I'm very, very happy to report that we continue to make very good progress in advancing our ambition. You have seen those 6 different metrics as before, and I'm very happy to report today that we have made good progress in all 6 of those. So recycled fiber. We are now over 99% already at recycled fiber, which is certified. We are making good progress also on renewable electricity. We are now over 61%. We are at almost 84% on nonhazardous waste. We are making good progress on greenhouse gas. And here, we are looking at Scope 1 and 2 as well as reducing our overall total waste to landfill where we are now at 3.6% and we are getting closer to our ambition there as well. So in all dimensions, we are making good progress. So very proud of what we are doing here.

Let me move on to business performance. And of course, as mentioned before, if we start at net sales, then I'm really, really happy to say that we were able to grow our business in the quarter. And if you look at our comparable sales, we did grow it by almost 2%. That's very, very exciting for us as a business. It's also exciting to see that we did grow comparably in the half. So it's a 1% growth in the half 1 of this year. As you can also see on that slide is that the currency impact is getting lower, so whereas there was a very strong almost EUR 80 million impact for the half, in the quarter itself, we only had EUR 15 million impact.

Let's move to some more details. So as mentioned before, we saw growth in the quarter on the top line, but we also saw growth on the adjusted EBIT line. And that is even before we take the impact of the currency into account here. So we were at a margin of 10.3%, which is stronger than at the same period last year, where we had a margin of 10.2%. A very strong adjusted EPS number of EUR 0.64 in the quarter, again, outperforming same period last year by 2%.

If you look at capital expenditure and free cash flow together and you see the delta there and that delta which you see is explained by if you go back to the quarter 2 last year by a contractual compensation, which we got in Q2 last year, which is explaining most of the difference which you have here. The rest is explained by what I mentioned in the very early stage of my presentation by the higher raw materials and hence, the higher inventory and receivables, which we have seen. So a very strong quarter performance for Huhtamaki. And also, if you go to the right side of the slide, a very strong performance in the half. So also here from a comparable perspective, as mentioned before, excluding the FX, we have growth in the quarter of 1%. Really important to see also the EBIT line increasing in the quarter if you take back the impact of the ForEx.

In the quarter, as mentioned as well, where we had a stronger margin, we also have it for the half year. So we are now over 10% also for the half, which is very encouraging. Very similar on adjusted EPS, EUR 1.20 to the EUR 1.21, so flat on the EPS line. And then as explained before in the quarter, the same picture is true also for the half that the delta between this half and last year's half is explained by the contractual compensation, which we got last year in Q2. So a strong message also for you is that we have had now 5 quarters in a row with positive cash flow, which we are very proud of. So our focus on very disciplined capital allocation is clearly showing the benefits already.

Let me now go to the 4 segments in more detail. First, I would like to start with Foodservice. Foodservice in the quarter has seen a negative growth of 1% in a still very challenging market and, of course, with an impact from the Middle East. They were still able to deliver strong margin with 8.6% due to their continuous strong work on taking costs out of the system. And we are very proud to see them delivering very strong operating cash flow, in fact, slightly ahead of last year's performance, which already was a very strong performance.

A very similar picture for the half. Also in the half, we are seeing negative growth of 4% for Foodservice. We are seeing a similar margin of 8.3% in the quarter, where we had 8.6% and also on the cash flow side, we see a similar picture where they are outperforming same period last year by EUR 13 million, achieving EUR 53 million of operating cash flow.

Let me go over to our North American segment. And I think it's important to think about North America because of its very strong seasonality more with regard to the full half. So let me actually start with the half in making my comments. And they are very true for the quarter then as well. We were able, in the half, to see volume growth in our North American business. So you see comparable growth looks flattish, but in fact, it has some positive volume effects here. We were able to deliver double-digit margin in North America, both in the half as well as in the quarter. And it's important to point out, as we did already last quarter, that we are seeing still operational challenges, which we are working on. They are focused on a few of our plants which, again, we have a task force to support the North American business to get those under control. But they are also focused on some of the cost increases like distribution and energy costs, which we need to work with the teams on for the overall North American segment.

Let me move from North America to our Flexible Packaging segment. Flexible Packaging saw in the quarter volume growth, very strong cost management and continuous good progress on its turnarounds, which we have focused on last year. So in the quarter, we saw comparable growth of 14%. Of course, a lot of that is driven by the raw material pass on. But I would like to highlight again that we also saw volume growth in the quarter in Flexible Packaging. They ended up with a very strong margin of almost 11% and also delivered very strong operating cash flow, more than double of what they delivered the same period last year.

A similar picture also for the half. Also in the half, we saw comparable growth of 5%. We saw a strong adjusted EBIT improvement, both in absolute as well as in relative terms. And also here, we see a very, very strong operating cash flow delivery. So very happy with the performance of our Flexible Packaging segment during the quarter and, in fact, the half.

Now let's move to our Fiber Packaging segment. In Fiber, we see the first time in a quarter more than EUR 100 million of sales. That's a comparable growth of a very strong 7% coming from both volume, price and mix. Adjusted EBIT did grow to EUR 15.4 million, so a strong improvement versus same period last year and a very strong margin of over 15% for the quarter with a strong operating cash flow delivery in the quarter.

Very similar picture also for the half. Here, almost EUR 200 million net sales with comparable growth of 6%, strong margin for the half of over 15%, very strong operating cash flow as well, double of what we have delivered last year with still a lot of capital expenditure because we want to, of course, invest as we have capital allocation in a very disciplined way behind our Fiber Packaging segment.

With that, I would like to hand it over for the financial review to our CFO, Thomas Geust.

Thank you, Ralf, and I will try to bring some more flavor to the financial numbers, starting with the slide on the currency, which still continues to burden our P&L result, however, moderating versus what we saw in the first quarter. What that in reality means is that our impact in the second quarter is EUR 15 million on -- roughly on net sales, EUR 1.6 million on EBIT. However, if you look at the year-to-date numbers, it's as high as roughly EUR 78 million on top line and EUR 6.4 million on EBIT.

The story remains very much the same as communicated in earlier quarters. The U.S. dollar is the currency impacting the most, also the Indian rupee impacting our results. But if you look on the average rate, you can conclude that versus first half 2025, it's only 3 currencies trending favorably for us. However, when you are looking at the closing rate which is the one measuring the balance sheet, then we see already an improving trend on many of the currencies. So if we maintain this level, we hopefully will see in the second half of the year an improving trend also on the currency side.

With that one, I will move onwards to the financial result and a bit of more detailing here. Here, I would really say that the accountability of our businesses are taking now is turning into strong results. The challenges or the opportunities are slightly different in each of the businesses and all of them are adapting to the reality, be it then higher raw material costs, be it operational challenges or be it then challenges with the volume. Thanks to that one, we are actually able to deliver a strong EPS. So the result really flowing through to the bottom line. EUR 0.64 is the strongest Q2 in history, according to my understanding or at least the recent history, and that we are, of course, very satisfied with. If you are looking at the net financial items, we have a small tailwind there with mainly lower net debt levels helping us. And then tax rate being slightly lower compared to previous year.

If we turn to the next slide, we come to the cash flow, which has already been described quite in detail by Ralf. So really on the profitability side, the onetime gain we received last year helping us with the cash flow in 2025. So on a comparison basis, we are actually operationally on quite the same level as previous year. The working capital where cost is coming through on inventory and payables is obviously a drag for us and then the timing of receivables also burdening the working capital. Still, when looking at the other parameters, capital expenditures lower than previous year. And then taxes mainly a timing thing as well as for the net financial items. So I would say, operationally doing quite well on the cash flow with the discipline we have now introduced to our business performances.

With that one, we are improving on all the important balance sheet ratios and starting here with the net debt side. On the net debt side, we are now down to flat 2. And as you can see, we are decreasing our net debt by EUR 87 million versus previous year same period. So we have continued the strong deleveraging story that we have started on and continued already for a few years. If you look at the gearing level, we are down to 0.62. So also improving on that one from 0.71 in previous year, and also from a cash and cash equivalent point of view, we have a good situation.

And maybe on that note, moving to the loan maturities. We did a renewal of our bonds. So we issued a EUR 300 million bond during the quarter under our EMTN program with an interest rate of 3.875%. At the same time, we set out a voluntary offer for the repayment of EUR 250 million bond maturing in 2027. And with that one, we have managed to prolong, with an efficient finance rate, our loan maturity to 4.1 years, while it was 2.9 years previous year same period. So well positioned also when it comes to the loan maturity structure.

With that one, we come to the financial position. On the working capital, it's really the raw material and all the things we have been discussing here earlier, impacting the situation. Net debt, as said, strong -- improved versus previous year. And then as Ralf already alluded to, going over 12% on return on investment, something to be proud about.

With that one, turning to the long-term ambitions. Here, we are seeing a positive comparable net sales growth in the first half. Happy with that one, although being far below our long-term ambition, but at least the trend is the right one, looking at the adjusted EBIT margin, maintaining above 10% level is where we want to be and then the return on investments creeping closer and closer to the lower level of the ambition level, which is 13% to 15%. So now passing the 12%, I said here earlier, and net debt to EBITDA being on the lower end of the corridor. Dividend payout for 2025, 46%, so also that one matching the dividend ratio.

Looking forward, on the outlook side, we have maintained our outlook on previous communicated level as well as the short-term risks and uncertainties. And with that one, I would open up for Q&A.

[Operator Instructions] The next question comes from Hai Huynh from UBS.

The first one is on North America. How do you see the segment evolving over the second half? And is -- what specifically caused operational challenges? And when do you expect the recovery to be? Is that going to be second half or more into next year? That's my first question.

Thanks for the question. So we have started talking about our North American operational issues over the last couple of quarters. Our new President, Sara Engber, is absolutely on the issues. And as you know, we have established already last year with our turnarounds in Flexibles, a standard procedure on how to address those. So between our North American operational team and our global team, we have formed teams -- task force teams to address the operational issues, which are mainly, not only but mainly coming from our start-ups in Hammond and Paris. They are addressed.

We have taken year-over-year now 140 employees out. So there's going to be significant cost savings on that side. So making progress, but as you know, Hai, these things always take time. We'd like them to come quickly, but we are realistic and we know how it works. We will fix it. But I'm not expecting this to be fixed very quickly. So working on it. Sara is on it. We are supporting her and her team will be done as we did it in Flexibles. So -- but bear with us, it will take a bit of time.

Understood. My second question on Flexibles. So could you give us an idea of how much contribution on the comp sales growth and also the margin improvement come from the pricing pass-through? And how much is the underlying progress?

Yes. So look, we were able to pass on the increases which we got. And the team did an outstanding job in being on this very early on. And I have to say, we worked very closely together with both suppliers and customers with the #1 objective really to ensure continuous supply and making sure that our customers can support the consumer. That was #1 target. #2, because of this very steep increase, you remember pre-war, the barrel oil was somewhere around, call it, $60 per barrel and it went up to a high of $112. So it was a very steep increase in a very short period of time. So everybody in the market understood that price pass-through needed to happen very quickly to sustain operations. So that happened. There's no benefit on that side for us, but it was just a pure pass on the increased cost.

The Flexibles improvement, which we have seen over the last couple of years now is really due to the fact that they are working really hard on getting the portfolio right, making sure that they deliver and serve what they can do best, number one. Number two, working on their cost position, taking costs out of the system being much more efficient, working on the turnarounds. We talked India and Turkey quite a bit. But now we see volume and I think that's really important. But we have talked about last year when we were some of us together in Turkey to see the factory, and we have also talked here on the call about a few of the contracts, which were coming our direction.

So the work they did on supplying and serving big accounts, regional accounts and small accounts is now taking fruit and is showing benefits. So the volume growth is, of course, helping the Flexible team on top of the cost -- good cost management quite a bit. So the margin range, which we have given for Flexibles, which is somewhere between 9% and 11%, we have now delivered 3x in 3 quarters on that range. And I think that is the right range to think about when you talk Flexible Packaging high.

My third one is on demand exiting Q2 versus the first half average. Are you seeing improvements in any markets?

Look, we see and we are, of course, super proud and happy that we see volume growth in the quarter in Fiber and Flexibles. For the half, we even see volume growth in North America. I think that's also really important. You asked about North American operations before, but I think it's important to realize that over the half, North America was able to grow its volume. So that's, of course, encouraging. And we all know that there is a huge impact of seasonality there. So you will see a big discrepancy between the quarters, depending on how the festive season falls. But overall, we are starting to see that our efforts on organic growth are going in the right direction.

So we are really happy to see what we are doing internally. Now there is an internal side and there's an external side. So internally, we are doing all we can. And yes, we would like to see it faster and more, but we are proud of what we are seeing. Externally, the market is very dynamic. It's -- geopolitical issues are still there. You have 2 wars happening as we speak. And of course, consumer confidence is at a low point. So that part is, I think, something we can't influence. But we know that our customers are doing quite a bit. And our customers are doing promotions. Our customers are trying to get their volume growth through as well.

So being close to them ensuring that they win in their markets will help us to win as well. So look, I look at demand internal perspective, I'm confident that we are doing the right thing. And I'm looking at the external market, and here, I count on our customers that they are doing the right thing as well. And then let's hope for all of us that geopolitically, things will calm down, hopefully.

The next question comes from Maria Wikstrom from SEB.

This is Maria Wikstrom from SEB. I had few questions. I wanted to touch upon the Flexible, the volume growth that you saw over the Q2. That more broadly, like from which product -- which client segments or products, I mean this volume growth is coming from as, I mean, alluding to the big FMCG volume, what they reported during the Q1, we didn't really see much volume growth. So has this really changed the whole story now or during the Q2 that I mean we're actually seeing volumes coming back again? Or is this more like a company-specific that you are currently seeing?

Yes. Thank you, Maria. So Flexibles, it's really paying out that we are focusing on both FMCG. So the big global accounts, the regional accounts and the small accounts. So that change of track, which we did a year ago is showing, and it's showing in all of their regions. So that's not a single region for Flexibles, which is going in the wrong direction. So we see that internal work that being very close and supporting the customer is showing clear benefits. That's number one. Number two, Maria, as I mentioned also to Hai before, we had successfully concluded a couple of nice contracts with customers, which are now showing also its benefits.

So that one is also helping us on the volume side. And that is also helping us in what we call blueloop in going into new specifications, which are recyclable. So only PE structure. So that's also helping us to now starting to see some gains on that side.

So Flexibles, all regions, all customers really doing well. And especially happy I have to say on how strong Turkey and India was. So India especially had a very strong start into the year on the volume side. After, frankly, years of negative volume growth, they were able to have significant volume growth in the first half and in the second quarter, specifically. So very happy with what we see in Turkey, India, but all over in all regions in Flexible, Maria.

Perfect. And then my second question is currently the free capacity or is there a free capacity in Fiber Packaging, given that you were first time exceeding EUR 100 million revenue during Q2. So do you really have -- do you have more free capacity going forward? Or would it need more investments in the near term?

Yes. Yes. So like -- I'm glad you have noted the EUR 100 million. So first time ever to break the EUR 100 million, which, of course, is, for us, a really important mark. We are, in Fiber, very, very close to max capacity. We are investing heavily in Fiber and you have seen also last year, but this year will be a similar picture that that's really the segment as it is our most profitable segment, where we are putting most of our CapEx in with our very strong capital discipline approach in investing into the highest value driving projects. So currently not a lot, but we are, of course, taking all the actions which we can to give them more capacity and also to internally see whether we can find other ways of increasing productivity, which will give us then some more capacity.

And then my final question is on North America and maybe we should now look at the first half on the volume development. But if you could give a little bit more color on the different customer segments? I mean, how they are currently performing in North America when it comes to volumes?

Yes. So look, overall, as I mentioned, we have seen volume growth in the first half and thanks for looking at the half. That makes a lot of sense. So what we are seeing is that we are having a really good growth in consumer goods. We are seeing growth in Retail. We don't see growth in Foodservice. So for the half, Foodservice is slightly down, but the 2 other segments improving with consumer goods being the best performer here. Retail also slightly up. So that gives maybe some color.

Look, of course, driven by, again, very strong seasonality. Even now in June, we were surprised at the end of the quarter in June, how strong actually our retail business and our foodservice business did at the very end of the quarter with, of course, 4th of July, 250 years U.S. and World Cup, both helping us at the very end of the quarter quite nicely. So -- which brings the half then to a positive volume growth.

The next question comes from Pasi Väisänen from Nordea.

This is Pasi from Nordea. And congrats regarding the very good second quarter earnings. And maybe I'll start with the North America and -- I mean the segment was quite weak. So what is actually the root cause here in the segment? Because you have been in North America for decades and this ramp-up should actually not come as a surprise for you?

And maybe secondly, could you also kind of indicate that with these good volumes in Flexible segment, so whether related to rising price environment or the plastic prices. So could it be possible that customers were buying a bit extra in the second quarter, and these volumes cannot be repeated in the second half of this year?

And maybe lastly, also when looking at the kind of the price-related growth and volume growth on the group level, could you actually share some info regarding the outlook for the second half on a group level?

Thanks, Pasi. Thanks also for your nice comment about our performance in Q2. So let me address one by one. North America, if you remember when I came in 1.5 years ago, I already, very early on, commented on the margin of overall, which was, from my perspective, artificially high at the 14% by a couple of percentage points, really driven by after-COVID pricing. So that one, I think, was to me, at least pretty obvious. So the range in our ambition for North America is between 10% and 12%. That one is our ambition. We stick to that one. And I think there's no reason to believe it shouldn't be in that range. We are in that range. Yes, we are at the lower point of that range, but we are in that range, even though we are clearly having operational issues. So I think that's a starting point.

Next one is we know where we have the operational issues. We have identified them. We know exactly what we need to do about them and we are on it. Sara Engber, our new President, with her team are clearly on it. We are supporting her from a group perspective. We have done that before. We will succeed in getting these operational issues right again. And that's really what we are on. As I mentioned before, we have to realize that those operational issues won't be solved overnight, but you've got to start. And we started a few months back, addressing them really strongly and we will continue to do that. So I'm very confident that we'll get it done. As I said to Hai, I don't expect this to happen quickly, but I'm very confident that we'll get the operational issues right.

Look, of course, another dimension is that it is important in an environment where overall the market in North America isn't growing a lot that we need to stay close to the customers, make sure that they win in their market and we choose the right customers. So having volume growth in the first half to us is clearly an indicator that we are doing the right thing. And of course, it would help us if the market would grow faster and we would get the leverage of the volume growth as well.

But again, I think we have now found the right customer base, the right pricing points for the market, and we are on the operational performance. So North America, within the communicated range, no reason to believe that we shouldn't be in that range.

Second question was on Flexibles, if I remember correctly. Flexibles volume is -- the good news is driven by volume growth in all our regions. It's not one specific, of course, the 2 turnarounds and especially India but also Turkey are the star performers. But the nice thing is that all our regions are growing. And all our regions are taking cost out and all our regions are improving their margins. So it's not driven by one, but it's driven by all because management is doing a really nice job in making sure that they get the operational efficiency right. They are close to customers, and they are driving their business in an environment. Which is very dynamic as well as it is globally, of course.

So the price pass-through, which we did is purely on the increase in raw material prices, which we have seen. And I talked about this, everything related to oil for us, resin, for us, films, solvents, inks, frankly, all liquids, all chemicals, but also then transport and logistics very affected by that and that pass-through, which happens so steeply and so quickly, also from an internal work, the team was on immediately and got together with suppliers and customers, a clear understanding that this needed to be done. So that's really important.

And of course, it was essential for us to make sure that we are not waiting too long, and we are losing a quarter or longer by waiting. So that's the work they did. And of course, volatility is still there. Just looked up this morning before the call, oil is now back to $97. It was at a high at $112. It went back to mid-$60s, but now it's going up steeply again. So again, $96.88, almost $97. And unfortunately, that will drive pricing of raw materials again in the wrong direction. So that work is not stopping here. We need to do this together with customers and suppliers.

Third question was -- remind me, Pasi, it was around cash flow?

Yes. And just to specify the second question. So were customers buying extra in the second quarter into Flexibles due to price increases and this extra volumes cannot be repeated in the second half?

No, not for the quarter. So maybe we have seen a bit of that, Pasi, what you are talking about in April straight after the war started. But then over the quarter, that is not the case that they know our inventories. We are, of course, very transparent with what we are holding on inventories for our customers. We are -- we have bespoken products, so we produce our prints and flexibles for customers very specifically. So they know what we have in inventory. So that over the quarter is not impacting.

Okay. I hear you. And the last one was related to kind of a mix coming from the price and volumes in terms of kind of organic growth expectations for the second half?

Yes. Look, for the second half, we believe that -- as I mentioned before, that our internal work will continue to help us being close to the customers, looking at all customer levels, the local, the regional, the global players being close to them, executing on our promises, our contracts will help us. So the internal work, I feel good about our customers' activities in the market and their promotions and all their efforts to grow volume. So I feel good about that.

What I don't know and I guess no one really knows what's happening geopolitically and whether the world will be calmer and there will be consumer confidence coming back. Clearly, and Pasi, you know this, if there is no consumer confidence, people buy as little as they can and at the lowest price they can. So from a mix perspective, that potentially is not helpful, but that's something to be seen. What we can influence, we are influencing and our customers are doing the same.

Yes. I fully understand. But by assuming kind of a 1% volume growth and a 3% price-related growth for the second half, then the kind of organic growth could be 4% to 5%. Would that be kind of a bit too positive or negative estimate for the second half?

Yes. So look, first answer, Pasi, you know we are not giving any guidance on volume nor on pricing for any period ahead of us. So I'm giving you our current view on what we are doing internally and what we are seeing from our customers. So that's number one. I think what is important with the increase in oil and hence also the increase in raw material, which we are expecting, of course, we would continue to pass this on to our customers. That's pretty obvious. So that work will not stop. But it would go the other direction. The moment, of course, prices are going down, we would, of course, also give this back to customers. This is for us a game which from an absolute perspective, has no impact whatsoever. So I can't give you any guidance on H2 on volume also. And I know you understand that, Pasi.

Yes. I truly fully understand.

The next question comes from Morayo Adesina from Barclays.

Morayo here on behalf of Pallav Mittal. So we just had a question. Flexible Packaging comparable sales were around 14% in Q2. Is that going to be recurring? Or was there sort of a prebuying and temporary price cost boost? And if so, how sustainable do you see that being?

Yes. Thanks, Morayo. It's very similar to what I was talking to Pasi about. So we have seen, if at all, then immediately after the war in the Middle East started in Iran, so call it maybe April, we have seen a little bit of that effect of people being super nervous and maybe prebuying a bit. That for the quarter is not impacting our results for the quarter. The volume growth in Flexibles, which we have seen, which we are really proud of is not due to the fact of any prebuying or stocking up. So that one, I can ensure you is not impacting the quarter.

The next question comes from Kevin Fogarty from Deutsche Bank.

I have got 2, please. The first was on Foodservice. Just in terms of -- if you could provide any color in terms of the backdrop you see there, I guess, in terms of demand profile, what people might be thinking of for Q3 and Q4. At this point, given you mentioned geopolitical issues and just given the sort of delivery in first half, any sort of thoughts there on how that might develop into Q3 and what you're seeing there would be good.

And then I guess, overall, in terms of your kind of stable outlook, I just wondered if you could -- this is for the full year, I guess, is there any color you can put on that in terms of -- you've obviously had sort of a strong pricing action. You've had a quarter that probably sort of did better than we all expected. But your outlook is stable for the full year. Just if you could put any thoughts in terms of what that stable outlook actually means would be very good. And if there's any sort of self-help potential in the second half of the year to drive that?

Yes. Thanks, Kevin. So let me try to give you some more color on Foodservice. So Foodservice, you will have seen that we have had a very disappointing volume in Q1. Q2, even though it's slightly negative, it is significantly better than what we have seen in the first quarter. So that's message number one. Message number 2 is, of course, Foodservice was also impacted by the Middle East war as well. There's a bit of an echo in the line. I hope it's getting better now. So Middle East had an impact into Foodservice in the quarter as well.

Generally speaking, we are getting good traction with our big global accounts on Foodservice. So I think that's really encouraging to see that relationship and that work together is helping us to follow them and support them and make them win in the market. We are not -- and that's opposite to what we are seeing in Flexibles. We are not yet seeing the traction with the smaller and regional accounts. So that's a work which we have started. And as I mentioned in previous calls, those customers we have to convince and we have to win back those customers as we weren't close to them at all. So that's something where we were clearly hoping that we would get that trust and that chance back much quicker, which we are currently not yet getting. So we have to continue to work on that, continue to convince them with good service, good delivery, delivery in full, in spec all the time, helping them on innovation to get that trust and that chance.

So we are working on that currently. We are not at this point. So that's not helping us in our Foodservice business. And we are convinced that we will get there eventually. So team is working hard on that side. I can link this also to then your last question on self-help and then I'll give you a bit of overview on Q3 and Q4. On the self-help side, that continues and you have seen that even with weak top line, Foodservice specifically, but frankly, everybody is benefiting. We have started after our cost-out program, which we concluded Q2 last year. We have not stopped there. We are continuously working on cost out. It's part of who we are. We are doing this all the time to take cost out and making sure that we stay efficient and we have a chance to cover inflation. So that will continue. It's not just Q3, Q4. It is there all the time and especially even more so in Foodservice when you have volume decline. Of course, even more so, it is important to adjust your cost base to that one.

Q3, Q4, rest of the year, I mentioned a few times before. We are seeing benefits from a lot of the work which we are doing coming through. On the one side, we are seeing a lot of work from our customers as well. And we are also seeing geopolitical issues, and we are seeing very dynamic outlook in the market. So hence, it is a relatively stable market. It's a relatively stable industry. We are in an industry which is super resilient even if there is a global crisis. People still eat, people still drink and that's very important for us and for you, I think, as well to realize that we are not cyclical.

We are in a resilient environment. We are a resilient company and we are working on this, not for the short benefit but for the long run.

All right. That was all the questions we had for today. Thank you for all the questions and interest. And with that, we wish you a great day. Thank you.

Good morning, all. Welcome to Huhtamaki's Q1 2026 Results Call. My name is Kristian Tammela, VP of IR. We have today released the Q1 report and are hosting our AGM later today. We will now have a presentation first by President and CEO, Ralf Wunderlich; and then by CFO, Thomas Geust. And after that, we, as usual, have time for Q&A.

And with that, let's get started and handing over to Ralf.

Thank you very much, Kristian, and welcome, and good morning to all of you listening into this results call today. I'm, in fact, very pleased to report that we had comparable net sales growth in what you know is a very challenging market. And of course, our growth was supported also by volume growth, which is also very pleasing. Negative currency impact, which we have seen last year in 3 of the last 3 quarters already continued into the first quarter this year, which is giving us a negative impact both on the net sales side as well as on the EBIT side. However, our adjusted EBIT margin increased versus last year and is at 10%. So we are again very pleased with that outcome. Our focus on capital discipline also continued and enabled us to show a very strong cash flow in the first quarter, significantly up on last year. Again, we are, and that's the news of February, end of February now, ask to navigate the challenges which we are seeing from the war in the Middle East. So the team is on that, and that's clearly a very important task for us going forward. You have seen the latest changes of the management team, and I'm really happy to now say that we have a very strong management team in place, which will help the company going forward.

Let me dive in into the macroeconomic and geopolitical situation after the war in the Middle East started. And let me first go to some of the facts. Fact number 1 is that -- and you know this, but it's important to repeat it, that approximately 4% of our sales is coming from that region. And if I talk about the region, I really mean the UAE with our 2 factories in Dubai, our Foodservice factory in Saudi Arabia and our 3 factories in Egypt. So this is approximately 4% of our sales. What happened, of course, driven by the oil price increase, which was very steep and very sudden. It's today an increase of 75% of pre-war times. And we, of course, see all of that impacting our materials, be it resin, chemicals, solvents, adhesives, everything which is related to oil, but also on energy and logistics side, we see a clear impact. So the actions we are undertaking to mitigate this. Action number 1 and most important is the safety of our people. Really important that we take care of our people, and we are doing that, and I'm really happy to report that up to now, no 1 got hurt because of the situation in the Middle East. All our sites in the regions, the 6 I reported before, are operating. But of course, initially, we had lots of closures, and then we started with single shifts, and then now we are back to running the operations. It's very important to report that so far, we have been able to secure raw materials. But of course, there's a risk of availability in the market. So our procurement team is working very hard on making sure that we are not running out of any raw material. So we are able to continue to support our customers and reduce the impact to our customers to ensure that they continue to win in their respective markets. We have implemented appropriate actions to pass on rising costs, both with regards to our contractual terms. But also when needed, we had to talk to customers to make sure that we pass on earlier such cost increases. There is a possibility that the situation will have an impact on demand. We are very closely monitoring this and we are staying on top of what it would mean to Huhtamaki if demand would drop.

Let me swiftly move on to the actions which we started taking last year to drive value for the company. And you remember the 3 value drivers which we have implemented: profitable growth supported by all levers; capital discipline; and allocation to best projects, which we find at Huhtamaki and accountability with speed of execution. We have done that early last year, and I'm again very pleased to see that it's now really working in all our segments very well. Let me give you some examples of what we see. We see that we have now initiated with our strong sales initiatives growth. And as I mentioned before, we see comparable growth growing in the quarter, which makes us, of course, very pleased. We see that 2 of our segments continue to see also volume growth, which is, again, another very exciting thing for us. The mix improvement and the turnaround actions which we did in Flexibles are continuing to progress very well, and you can see this with our outcome in the Flexible segment. And pretty much exactly 1 year ago, we bought Zellwin Farms. Integration is going very well. It's getting close to a 1-year anniversary now. And again, very happy with that acquisition, which we did. So we are using all levers, organic and inorganic to drive growth for Huhtamaki, and we start seeing the outcome. And yes, it doesn't happen overnight. We knew this, but we also knew that we needed to start that journey.

Capital discipline. We did spend significant money before 2025, and we needed to be much more rigorous and disciplined how we allocate capital to the various segments, which we have. You know that we are splitting it in 3 parts, equal parts for maintenance, for efficiency and for growth, and that plays out really well. And of course, we are always reserving approximately EUR 10 million for what we call the license to operate. So safety, sustainability initiatives, which is very important. We are not jeopardizing any potential growth opportunities for the company, but we are much more disciplined. That is one of the reasons why we had a very strong cash flow outcome last year and, in fact, in the quarter this year, which I will talk about in a second, and then Thomas will dive in into more details later on.

Accountability and speed of execution is something which was very important to the global executive team because in a market which is so volatile, which is changing so quickly, we needed to get faster, we needed to get closer to our customers and the end markets we are playing in. And we did a number of initiatives, which we concluded last year, and we are again now seeing that those changes are helping our business segments to be faster, be closer to customers and then see the outcome.

Let me now go into more details of the quarter, and let's start with the top line, where I said that I'm really proud of seeing comparable growth growing. So you'll see the EUR 947 million outcome for the quarter, and a very, very big impact of more than EUR 60 million -- EUR 63 million of currency. So adding those 2 numbers together, you can see that we did grow 1%, which is coming from the organic side of the business and a small impact still in the quarter for acquisitions. It's the last quarter where we will see that impact. So really pleased, and as I mentioned before, North America and our Fiber Packaging business did see growth for the quarter again.

Going to the P&L. In the P&L, as just reported, we see the 1% comparable growth. So we ended up on a reported basis at EUR 947 million. Our adjusted EBIT margin did grow from 9.8% to 10%, you see the EUR 94.5 million reported EBIT -- adjusted EBIT there. If you add back the EUR 4.8 million currency impact, we would have been at EUR 99.3 million, which would compare to EUR 98.5 million so we would increase our adjusted EBIT on a comparable way.

Adjusted EPS landed at EUR 0.56 and capital expenditure was EUR 27 million, below last year, but not significantly low because we believe that we have now found the right level to continue to invest in the business, maintain the business and get efficiency out of the business. But very pleased to say and to report that our free cash flow increased by EUR 32.5 million and was positive in the quarter with EUR 10 million.

Let me walk you through the segments specifically. And let me start, as always, with Foodservice. The demand in Foodservice continued to be soft. And it's especially the smaller accounts, which are very soft for us in the quarter. That's partially driven by the Middle East impact, which is an important region for our Foodservice business, which had very weak top line. But overall, as I mentioned, smaller customers are very soft in the quarter for us. So we see a comparable 8% decline because of the weak demand, but also driven by currency on that side. So 8% comparable declined, 11% on a reported number decline.

The segment did a great work and continue to do good work on taking cost out. So we were able to manage our adjusted EBIT, and we came in at 8% margin with EUR 16.7 million in absolute EBIT for the quarter.

Capital expenditure, absolutely in line with last year, but very good work on the working capital side enabled the segment to deliver a very strong operating cash flow of EUR 17.7 million. So EUR 10 million ahead of the same quarter last year. Very pleasing to see the focus on the cost side, the focus on the cash side, and of course, working hard to get the small customers back to Huhtamaki and to make them win and then also benefit on the back of that.

Let me move to North America. And you heard us saying in the last report that we had a very significant weather impact in North America in January. In fact, we had it in 5 of our factories for multiple days. So we saw significant cost increases there, which, of course, we see in the quarter. However, what we also see in the quarter is a very strong net sales number. We see a comparable growth of 8%, which is fantastic. But I need to be clear that this is supported by an early Easter this year. Last year, Easter was a few weeks later. So we had the impact in April. This year, we have the impact, as Easter was early April, we have the impact for us in the first quarter. That clearly detailed our comparable growth. And still, we are very proud to report the 8% comparable growth in North America.

On the margin side, we ended up double-digit 10% and of course, impacted again by currency. And the big part of the just shy of EUR 5 million currency impact for the group is coming from North America, just shy of EUR 4 million from a currency perspective. And of course, we had, as I mentioned early on, we had the impact of the weather. So if you would put those 2 things together, we would have ended up on the adjusted EBIT side in North America at par or even slightly ahead of what we reported last year. So pleased with the outcome of the North American business after a very difficult start due to the weather in January.

Capital expenditure discipline continues, EUR 9 million versus the EUR 12 million last year. So again, capital discipline implemented in all of our segments, and you see it here also in North America really strongly implemented with a positive cash flow in the quarter for our North American business, which is very pleasing to report.

Let me swiftly move over to Flexible Packaging. And the story continues in Flexible Packaging that with the focus of margin improvement, that one continued also into the quarter. And we would put a lot of emphasis again on our mix. So you see even though comparable growth was down 3%, we continue to improve our mix. We continued to win with the customers which are focused for us. And so we're very pleased with the outcome on that side. Of course, that is translating with an amazing cost management and in an adjusted EBIT increase to 7% to EUR 28.6 million, with a margin of 9.5%. So they are well in the range of where we want to see our Flexible Packaging business.

Capital expenditure, absolutely in line with last year, but a very strong focus on working capital, which enabled the segment to end up on the cash flow side at EUR 20.9 million, significant increase versus the same quarter last year, so well done to the Flexible Packaging team.

And then we go to Fiber Packaging. And here, we also see a continuation of what I have reported to you last year, continue to see strong comparable growth, both driven by pricing and volume. And as you know, on the Fiber side, we are running at capacity. We are investing quite a bit in Fiber to enable us to increase capacity as this is a business running flat out as we speak today.

Adjusted EBIT increased by EUR 2.5 million and 15.2% margin, which is a very pleasing margin to see for that segment. In Fiber, we continue to invest significantly. We did it already in Q1 last year. We continued the same number this year, so a significant investment in our very well-performing Fiber business. So we spent in our Fiber Packaging business. And still, they were able to deliver a very strong cash flow, just shy of EUR 6 million, so EUR 5 million more than in the same quarter last year with high capital expenditure clearly driven by a very strong EBIT/EBITDA delivery of the number.

Let me hand over to Thomas, who will give you more details on the financial side, please.

Thank you, Ralf. Starting off with the currency impact, which still is trending negative for us. No surprise on that one, I believe, to any one of you listening into this call. However, maybe pointing on some of the biggest moving parts here. If you look at the average rate for the biggest impact, currency U.S. dollar, you see that we had in the beginning of -- in the quarter last year, a $1.05 average rate, but we now had $1.17. So despite the U.S. dollar slightly strengthening, we had a significant negative impact of that currency in the quarter. You will also see that most of the other currencies are also trending negatively. But maybe focusing a bit on the impact from the U.S. dollar. So if we take a few data points out of last year, we had an average rate of the U.S. dollar of $1.09 in the first half of the year and landing end of year at $1.13. And as you said now, we are at $1.17. This means basically that the headwind will continue still in the second quarter, although then if continuing on the current slightly flattening out then towards the end of the year. So less currency impact in the second half of the year, hopefully.

But as said, EUR 63 million almost of net sale impact translating to EUR 4.8 million in overall EBIT impact. So similarly, despite the currency headwind, I'm very pleased to say that we are maintaining our margin or actually improving our margin slightly to 10% from 9.8% previous year, and that's very much supported by still the very focused cost-out activities, so around both taking the accountability, but also continuing on that playbook, we introduced when we ran our efficiency program, which we stopped reporting mid last year, but our activities are still going on, also supported by a stable value add. Looking at the finance costs, you can see that we are approximately on previous year's level, slightly up. Here, I would say one could assume a EUR 5 million to EUR 5.5 million monthly run rate costs for that item. So we are still on the low side there for the first quarter. And then on the tax rate, we now reported [ 23.6% ETR ]. That's slightly below previous year when we were around 24% and year-end 22% -- 22.4%. So tax rate is roughly in line with where we are. And obviously, depending on where the profits are collected, tax rate is slightly fluctuating. Then looking at the EPS with all the parameters just reported here earlier, the adjusted EPS coming in at EUR 0.56 versus EUR 0.59 previous year.

Moving on to the cash flow. Ralf already mentioned that the cash flow was positive. This is not very typical actually for Huhtamaki. We are normally very strong in the fourth quarter and then coming in -- with a low free cash flow number in the first quarter, in many cases, actually a negative number. So from this perspective, we are very pleased to deliver a positive cash flow. You will see from this graph that the main contributor here is working capital. We are slightly down also on capital expenditure. And as you see, the taxes or paid taxes are higher than previous year, which is really around the timing of when the taxes come to payment. Continuing on a healthy net debt-to-EBITDA level of 1.9%. So our efforts to maintain a strong balance sheet has been delivered. The gearing is down slightly from fourth quarter. So also a positive development. And as stated on this slide, we have a significant cash and cash equivalents available. And on top of that, we also have the unused committed credit facility of EUR 450 million available. Despite that said, we are working on our loan maturities. You'll see from this slide that in 2027, we have a significant board maturing. As you've seen from previous efforts from refinancing, we are continuously and diligently working on maintaining a healthy structure when it comes to maturity. So activities around that one can be expected.

Looking at our balance sheet. On the balance sheet side, as I have mentioned so many times before, we are having translation differences on our equity, although it's slightly improved versus the year-end level of roughly EUR 34 million. The drag is still coming through on currency. And as said, I said that the working capital helped us to improve on the cash flow side. Our return on investment is still lagging our ambition, but we believe once we are getting more top line in that, that we will see -- start to see that one improving as well. And that one, then how we progress on our long-term financial ambitions. You will see that our comparable net sales is significantly below the long-term ambition. However, given the last year's trend, we are very pleased to see a positive number on the comparable net sales in the first quarter.

Adjusted EBIT margin continuing now on the double-digit level, although we normally see some weakness in the first quarter. We are very pleased to see now the double digit coming through also in the first quarter, similar to year-end '25 and '24. And then as said earlier, the return on investment is still lagging our ambition. And if approved today, then we will have the dividend payout in line with our long-term ambitions. Looking forward on the outlook, we -- the outlook remains unchanged. However, on the short-term risk and uncertainties, we have added the sentence ability to pass on increased input costs. Just to highlight the importance of now managing this exceptional cost escalation situation we are seeing in the market as Ralf was so well presenting on the Middle East situation.

And with that one, I would hand over for Q&A. So please feel free to address your questions.

[Operator Instructions]

I have a few questions. I wanted to start with North America and on currently, the volume growth outlook in the different segments because if we look at the reports -- the Q4 reports from different Foodservice names from Q4, I think the data was quite mixed. So if you could educate us a bit what you're currently seeing in the different segments in terms of volumes in North America? So that was the first question.

Maria, thanks for the question. So we were very, very pleased to see that in North America, in fact, all our 3 different segments did show volume growth in the first quarter. So retail Foodservice, which you're referring to and consumer goods as well. So we see that very strong trend, of course, especially driven on the retail side by Easter. But in general, we see this continuing. Our customers, most of them certainly are winning in their markets. So we are very pleased on the Foodservice side. You do remember that we are in North America on the Foodservice side serving especially Tier 2 customers. So yes, there is a mixed outcome for our customers in general, but in particular, for us, we had a strong quarter and we don't see any signs that, that would go in a different direction in the short term in North America on the volume side for Foodservice in particular.

And then was there anything specific on the volume development in the retail side?

Yes. The retail side is very much driven by holidays in general. So if you think Easter, you think Thanksgiving, Christmas, so there are certain parts of the year where the retail side for us in North America has very significant peak. So as I was trying to explain in the beginning, North America, Maria, we had Easter last year a few weeks later. So it clearly had an April impact for us last year. This year, it was much earlier, so it was early April. So we had a March positive impact, which, of course, helped us specifically on the retail side. But that's very normal. That's our seasonality in North America and of course, very much depends on when those states fall. We see the impact either in Q1 or Q2 for Easter specifically. And then in general, you see that our China products are keeping a very good position in North America. So we are really fortunate that we have a strong brand. We're fortunate that consumers like our brand a lot. So we see China still traveling really strongly. And again, Q1 specifically, of course, driven by early Easter on the retail side, if that helps.

Yes. Perfect. I had 2 more questions. If I take them one by one. The first one of those is still on the Foodservice, but more on the European perspective, which were declining in Q4, and we saw declines in now in Q1 as well. So if you look at month by month, I mean, do you see now the trends still deteriorating? Or are we currently seeing like some type of a bottom here?

No. We clearly see that this trend continued now for a few quarters. So we -- if there is not a specific month impact for Foodservice, it's more like the initiatives which we started last year of really going to the smaller, more local regional accounts is something which we needed to do. And you could say we should have done this much earlier. But we started it last year and we start seeing that we have good discussions, promising discussions, but we need those discussions to come to fruition. So and this will not happen overnight, but it will happen. We are absolutely confident that it will happen and that we will get back to growing smaller and regional accounts.

On the big account side, so take our largest customers, doing very well. In fact, you can see that we got the Supplier of the Year award from our largest customer that was published just I think, a few days ago. So we are doing extremely well with our largest customer in Europe and Asia Pacific. So very happy about that. Look, the one caveat, I need to tell you is we're going to see how the Middle East crisis will play out, how long this will take. As I mentioned, we have approximately 4% of our net sales -- Huhtamaki's net sales in that region. And we clearly had an impact of the Middle East after the war started on the 28th of February in March. So there was an impact to be seen how long that war and that impact will take. We clearly currently believe it will take some time. And we are making supply chain arrangements that we can supply from other plants into the region. And we are, of course, making also lots of agreements with suppliers to ensure that we get raw material. So that one is more difficult for me to tell you any timing on. I am confident that we will get the regional and smaller customers back to be selected by Huhtamaki. But I'm not telling you that this is going to happen overnight. It's a journey which we started and we will play it until we will win this.

Perfect. And then finally, I wanted to touch up on the raw materials, mainly on the plastic prices that have doubled within the last month. And here, I wanted to see that, I mean what kind of effect you will have on the profitability on doubling of the plastic prices? And how quickly do you see -- you can see -- you can transfer these prices on to your clients? And if you see any availability issues when it comes to the plastic raw material prices, please?

Very relevant question, Maria, from where we currently sit. So you're spot on with your assumption, we have a 75% increase in oil prior war and today. And of course, everything which is related to oil, and that's not just resin, but it's also for solvents, adhesives, inks but then it goes into transport logistics is impacted. And it is impacted in such a strong way that we could not just wait to tell our customers that we go with the normal lag and the normal contractual, which is typically a 3-plus month lag. But we went to our customers immediately, and we clearly had a very good partnership discussion with them to say, number one, it is important for us to secure -- that was part of your question, secure raw materials. So we are out talking with our customers and then our suppliers to ensure that we get the raw materials that we don't have shortages. So task number one, we are secured for the next couple of months, but this is really a month-to-month work now. This is not that you can secure for the long term as even our suppliers don't know exactly how to forecast and allocate volumes than at the midterm. So that's a day-to-day work. We are on it. We were on this one from day one. Second one is, of course, then the pass-through. We want to make sure that the impact to our customers is minimized. We want to make sure that they continue to win in their markets. And that has, first and foremost, to do with ensuring that we have availability of our materials for them. So that's what we are working in partnership with our customers on very hard. But we were clear from day 1 on because it was an unprecedented steep increase. It was not a small partial increase. It was an unprecedented steep increase on a very short time frame that we told our customers from day one, we have unfortunately new prices for you, which we have to pass on to you immediately, we can't just wait for the lag, which we usually do. So we are on it. We were on it from day one. This is especially for our Flexible business relevant. That's where we have most of those materials. In fact, 80% of the impact is for our Flexible business. I'm very proud of what the team is doing. They are on it. Daily -- we have daily calls. They are daily in contact with customers and suppliers. So the team, procurement team on the 1 side, sales team on the other side and then business team overall is on this. So I have a very good feel about the activities they are doing on that side, Maria.

Next question comes from Hai Huynh from UBS.

Next question comes from Cole Hathorn from Jefferies.

I have 3 on my side. The first is just trying to put some quantifications at the EBIT level. You've been very clear that you're passing on prices faster than normal to offset the polymer costs. I'm just wondering, are you giving any kind of rough guidance. Is this kind of a EUR 5 million or so EBIT impact into 2Q before it's recovered and margins are sustained from 3Q onwards.

And then similarly, in North America, you had a few different impact you had timing of Easter, which was positive, but you also had the weather. Is there any way that you could kind of quantify how those move into the second quarter, just so we can think about a run rate for the second quarter?

And then the third one is more of a difficult one to answer, but the cost increases for polymer are clear, but we are seeing logistics costs increasing globally. And I'm just wondering how you are discussing with your commercial teams to try and recoup that from a pricing perspective because we haven't necessarily seen the folding carton prices move, but logistics are a cost that you will need to recover or at least get some efficiencies. So I'm just wondering how you're thinking about pricing for the business from here?

Thanks, Cole. Look, so 3 questions. Let me start with the first one on the raw material impact for the quarter. So we are really looking at this from a full year perspective. And if you go back to 2022, so post-COVID, where we had a very similar issue. The difference was it was not as steep and maybe also not as big. But we have the system in place. We have a very systematic system in place to ensure that we are passing on, on the one side. On the other side, as I mentioned also to Maria before, we are making sure that we have the raw material available. And number three, we make sure that we are not upsetting customers. So if we always take those 3 points, is our target here to make sure that we deliver. We have a very, very strong feel that for the year, this will clearly help. The reorganization of our procurement organization last year to have a global organization is also extremely helpful here because they have an overview, not about just one region or certain suppliers, but they have the global overview, and they are well aware and well trained on how to do this on the supplier side as well because it's not just that we are accepting any price supplier is giving us. Of course, we are making everything we can to, number one, get the materials and number two, make sure that we have the lowest negative cost impact as we can. So that's a general answer. So I'm very positive for the year. And I'm also positive, I have to say that there will not be a short-term significant hit for us, Cole, because of the daily work the team is doing, because of the daily work the team is doing and they did not wait after the 28th of February for a few weeks, but they went on to it immediately on all fronts, as I said before. So I'm very confident, number one, with the experience which we have after COVID. Number two, with the experts and professionals we have in procurement and in sales that we are able to do a good job in passing on and making sure that we are making our customers continue to win in their markets. That's point number two. Point number two, I think you asked me about North America and how Easter plays in. And let me start by giving you a bit more flavor about Q1. So if you think about our reported number for Q1 in North America, I would encourage you to add what I said in my presentation, the approximately EUR 4 million of currency impact into North America. So if you do that, you go from EUR 34 million to EUR 38 million. And then I mentioned to you without giving a number that we had a significant impact of the weather in North America in January. And I mentioned too, I don't give you a number for that, but I give you a flavor that we would have ended up the quarter ahead of last year's quarter. So you can make your assumptions and that it was a good quarter, which, of course, was positively driven by additional volumes from Easter, which we will not see in April. But then we will see in May and June, we will see 250 years North America coming, and we will see a World Cup coming. So for the quarter for North America, we see, of course, an Easter, which is gone, but we see a couple of things at the end of the quarter, which should help our retail business, which is the one which is mostly impacted by Easter seasonality.

So overall, North America Q2, I think, of course, we will have the April Easter impact, but I see a May and June impact, which with the 2 factors I mentioned, 250 years North America and World Cup, which should help our business there. So that's my answer to your second question.

And the third question is also very relevant. That was all about logistics, transport, other raw materials impact there. And first thing first, other raw materials. Yes, you're right. We don't see that impact yet. We stay tuned if it comes that we are -- again, like we are doing on the resin, adhesive solvent side, inks side now that we will be on it very early on. And in a very clear way to make sure that we get availability, that we satisfy the customers and that we pass on our costs. Logistics, transport, that's happening. And it's happening in 2 fronts. One front is it's partially very difficult to get logistics and to get transports because that of the street still being closed, even although there is a ceasefire, the streets are still closed, and there's a lot of logistics and transport currently not available. That's one. And the other one is that those costs, as we see ourselves when we go to a filling station, prices are going up significantly or book a flight ticket today, prices are going up significantly. So we see that. And what we do, of course, also, like, on the raw material side, we talk to our customers that we need to have surcharges and to pass on those costs as much as possible as there is a clear increase, very visible, Cole. Hopefully, that was answering your 3 questions.

That was very helpful. And on the logistics side, that includes actions on just the fuel charges even for kind of North America. Are you doing some kind of surcharges there on any of that to just logistics?

Absolutely, Cole, we do.

And then I've got one from an investor just asking on potential for M&A considering the world is more uncertain. You do have a good balance sheet. How are you thinking about opportunities if they arise and someone is under pressure here in an uncertain world.

Yes, thanks for asking that one very relevant question. And absolutely, yes. So when we talk about our value drivers, I always -- and I know that Thomas and Kristian do the same, we make sure that we are very clear that we are looking at organic and inorganic at all levers. And we are very active on the M&A side. It doesn't look like that because we did only one deal last year or more or less exactly one year ago. But it's because we are so disciplined and we do not want to fall into the trap of doing a deal just because we want to deal, but we want to do it when it fits, when it's financially value accretive to our shareholders. And when we can actually run it with the management team, which we know and which we have in place with a culture which fits to Huhtamaki's culture, only then we do it. We could have done a number of deals but we didn't do it. We choose not to do them because of either one or more of the factors I just mentioned wasn't fulfilled. So we are very clear on that. We are still out there actively looking at that. And to your specific point, we believe that the uncertainty which we currently have might help us to get deals which are going to tick the 4 boxes I just mentioned. So we are working on it. We continue to be disciplined, but it's high on our agenda and our strong balance sheet will enable us to do it.

The next question comes from Hai Huynh from UBS.

Just checking if you can hear me now?

Yes.

Sorry, I ran to some trouble earlier. So my question is on working capital. Q1 was much less negative than last year. So can you unpack what drove the improvement, especially on the payables and whether this is mainly timing, does that change anything in the cash flow dynamics seasonally for 2026?

No. Look, we are with our 3 value drivers and the second one, so we just talked with Cole, about the first one, growth. But let me then talk to the second one, capital discipline. We are continuously making good progress on that value driver. So for us, cash delivery is super important in all times, but specifically in times like now, so -- and we are also here looking at all the various drivers for cash and CapEx is one, and that's the easiest one to see, but working capital is another one, which is super important for us. So we believe that if you specifically talk payables, we always look at payables and receivables together, and we believe that we should have similar days outstanding for either the payable or the receivable side. And of course, we will have to ensure when we talk raw materials, Maria and Cole had questions about the impact of raw material. Of course, there's the one work, which is the passing through and making sure customers win but there's the other side of it, which is that there will be a negative impact on our working capital because of the increase. I think that's obvious and understood by you, Hai, but I just wanted to make sure that I make this point not to confuse you when we have Q2, Q3 calls going forward. So if that continues, we will see that impact -- that will be a negative impact on the working capital side. But generally, if you take this on to the site. Generally, we are clearly improving our working capital management. It's high on our agenda as CapEx is and as other points in our capital disciplines are.

I have 2 left, you don't mind. One on Flexible and one on Fiber. And apologies if this is repetitive as I've been dropped off the call a couple of times. But firstly, on Fiber, how sustainable is this current growth in Fiber ag and food packaging, what does the order book look like? And are there signs that pricing may normalize after the recent run?

So look, on Fiber, we feel very good about our position. We have a really good quality, very good contact with our local and regional customers. We were on, if you think about our operating model and again, when I talk value drivers. The third one. So I answered Maria really and Cole on the growth. So the first bucket of it, I answered then Cole specifically also on the second bucket and also for you on working capital, second bucket, capital discipline. And now if I think about the accountability model. Of course, the Fiber segment was the first one on -- into that bucket, working really on making sure that the local and regional accounts are served very diligently, and we have made significant progress on that side over the last 12, 15 months. So kudos to the team on that one. That is why we are so strong on both the volume and the pricing side on the Fiber part. I make sure that in every call and I did it today, but let me stress that one high again. We are investing quite a bit behind our Fiber segment. We've done it last year, it was the only segment where we increased CapEx last year significantly. We have again matched our CapEx in the first quarter to last quarter. So again, we are investing behind Fiber because we need more capacity. We are investing in a number of regions. We are investing in Egypt. We're investing in the U.K. We are investing in Czech. We're investing in a number of our regions to ensure that we get more capacity because our Fiber business is traveling strong and more capacity would enable us to get to even more exciting growth numbers for our Fiber business. If you think Fiber and maybe a point, I'm sure you know this high from former discussions, but I can't resist telling you. Of course, for us, that's mainly ag, but it's not only the ag business. We are starting to really focus also on fruit. And a lot of our investments and a lot of our activities are going also into fruit packaging, which is going to use the same raw materials, the same machineries, but it's a market where we are currently very small in, and we believe we can grow the food packaging market with our rough molded fiber products nicely as well.

That's on the Fiber side. Did you have a question on Flexibles? Maybe I missed that question, if you wouldn't mind repeating it, Hai.

Yes, sorry, I got dropped again, but I managed to catch your answer. And then just on Flexible. You mentioned a few big contract wins a few quarters ago. When does that start to meaningfully at? Is that within this year or that's more of a longer-term point of view?

We are pretty confident that it will start happening this year. So we have successfully trialed. We have successfully now qualified. So we will start seeing this in 2026 already, Hai.

That was all we had time for today. Thank you so much for attending. And again, as normal, should you have any further questions, please feel free to reach out. With that, we wish you a great day. Thank you.

Good afternoon, everyone. Welcome to Huhtamäki's Annual Sustainability Results Call. My name is Kristian Tammela, VP of Investor Relations. With me, I have Rahul Nene, our Head of Sustainability Center of Expertise. He will first present today our sustainability performance in 2025 and then talk and present more in detail the strategy and next steps for us. After that, we have time for Q&A.

And with that, I'm handing over to Rahul.

Thank you, Kristian, and hello to everyone who is dialing in. As shared by Kristian, I'm Rahul, and I head the Center of Expertise for Sustainability at a group level for Huhtamäki. And I would like to begin today's call by going through a few highlights on our 2025 sustainability performance. As you can see, across various pillars of sustainability, we have seen good progress happening. And I would like to first emphasize on something that I'm personally excited by, which is our updated climate targets.

In 2025, we updated our climate targets on Scope 1 and 2 short term to be aligned with the 1.5-degree trajectory on Scope 1 and 2. What this means is that we are becoming more ambitious on our GHG reduction targets in absolute terms. While we did this on Scope 1 and 2, we also updated our targets on Scope 3 and I'll talk about this a bit more as we go through the presentation.

While this is more in terms of the targets, the actual performance, we increased also renewable electricity to 60.6% at a group level which also impacted a reduction in terms of our Scope 1 and 2 emissions by 4.5%, again, something that I will deep dive a bit later on.

Moving to other topics and KPIs and the environment, something that we are proud of, which is the waste management that we have, about 84.6% of our non-hazardous waste went to recycling. That's again an improvement over our 2024 numbers. And that also helped us reduce our waste to landfill. Earlier, it was 5.5%, and we have reduced it to 4.7% in 2025.

Moving to our social pillar. We have a strong performance on safety with 4% reduction in our total recordable engineeries and we also have a higher employee engagement participation, again, an uptick from our 2024 performance. Moving to product sustainability. We increased the percentage of raw materials that were either renewable or recycled to 67.9%. This helps in moving our products to a more sustainable structure, but also helps reduce our Scope 3 emissions. So it is also one of our decarbonization levers on Scope 3, and I will also talk about it briefly a bit later.

Talking about the G of ESG, that is the governance. This is something that we really focus on and is one of our value systems in the company, taking one indicator, which is our code of conduct for our employees. So 98.5% of our employees completed the new updated code of conduct training, which again was an improvement over the 2024 performance. So this is more or less a high-level highlight on our performance across ESG. And what I'll do is now I'll do a bit of deep dive on each of the topics.

Starting with Climate and Environment. As shared earlier, while we updated our climate targets, we also continued on our progress on our GHG reductions, focusing mainly on Scope 1 and 2. As you can see, Scope 1 plus 2 as compared to 2024, we reduced by about 4.5%. So that continues our progress on absolute GHG reductions independent of the production growth. In terms of renewable electricity, which is one of our key levers for decarbonization, we improved our performance from 59.1% to 60.6% in 2025. And that, of course, you can see reflected in the Scope 2 reductions. In terms of waste, from 81.6% to we moved to 84.6% of non-hazardous waste being sent for recycling. All of these actually also help our scope 3 reductions, which helps finally on our targets that we have now taken on Scope 3.

Again, I'll discuss on the next slide. From a percentage of fiber, that is dependent on forestry, which is the virgin fiber or then the fiber that we used, which is recycled waste, about 98.8% of our fiber use was either certified or recycled. There's a slight change as compared to 2024, but that's more coming from the product mix.

Going a bit more in depth on our climate targets, as I was speaking earlier. Earlier, we had climate targets that were aligned with the well below 2-degree trajectory. So they were slightly less ambitious. And if you could -- if you can see our performance till 2024, we had been doing really well. And now we have updated our climate targets to a 1.5-degree trajectory aligned for Scope 1 and 2 for the short term. At the same time, we have committed to setting a net 0 target for 2050 and we will be setting this target by October 2027. On Scope 3, we have committed to reducing absolute Scope 3 emission by 25% by the year 2030. And for both Scope 1, 2 and Scope 3 we have a new baseline, which is a 2022 baseline. The good news about this is these targets were validated by the science-based target initiative at the end of December.

Now while this validation definitely seems like just a tick mark, actually, those who are aware of it, this process is quite cumbersome and quite in-depth. We know companies that are stuck in the validation process for months and months together, but we were able to quite sail through the validation process, and that's actually a testimony to the robustness of our data management around emissions and the decarbonization levers that we have. So that's a good news that's coming from us. And then we are looking forward now to engaging with our suppliers to reduce our Scope 3 and then, of course, working on our own operations to reduce our Scope 1 and 2 emissions further. To just give a flavor on the kind of projects and initiatives that we are taking to reduce our Scope 1 and 2 in line with business realities, I would just like to highlight one project, which is coming out of India. In India, we are investing in a solar farm through a model, which is called as a group captive model, where we, along with a developer, we form a legal entity, which is a special purpose vehicle.

And we invest in a solar farm that's around about 100 kilometers from our existing plant in Khopoli. This plant generates solar energy to the tune of 50% of the renewable -- sorry, 50% of the total electricity requirements of Khopoli plant, and it replaces it by solar energy. While it replaces it with renewable energy because we have invested in this kind of a model, it also gives us a certain leeway on the grid electricity charges so that the investment actually has a return of less than 1 year. As you can see from the slide, the total investment amounts to about 320 KEUR, but whereas the annualized savings are about 600 KEUR. And this is something that we want to highlight that these are the kind of initiatives that now we are looking out where we can reduce our GHG impact. We can transition to renewable energy, but also support the business.

For example, the total benefit out of such a project is that we will reduce our annual emissions by about 9,000 tonnes, which is about 2% Scope 1 plus 2 emissions of the entire group. So in one action, we are reducing this impact with a return on investment that's less than 1 year. Moving to other topics, which is people and product, starting with people and health and safety. We have a lost time injury rate on a 12-month rolling basis at 1.23. This performance is more or less in line with what we had in 2024. And if you look at the total recordable injury rate, we achieved 2.57, which was a reduction against our target, which was of 2.66.

Moving to product. As I shared earlier, we improved the percentage of renewable and recycled materials as part of our total raw materials. We moved from 66% to 67.9%. And as shared earlier, this helps us reduce our Scope 3 emissions as well. Specifically talking of product sustainability. And as you would know, our company's North Star is to be the first choice of sustainable packaging solutions. We have a wide array of sustainable products that are available to our customers. And here on this slide, I just want to present a few of such examples, which we present to our customers as potential sustainable solutions. As a company, we have options across various materials.

So we say that we don't really focus on one material, but we choose a material that is sustainable as per data and as per infrastructure and regulations in a particular region. But you can see across our flexible food service, North America and Fiber Packaging segments, we have a wide array of potential solutions that could be presented to the customers.

Starting with our blueloop solutions with high barriers on PE as well as paper-based in flexibles to our egg cartons in fiber-based packaging, to our icon packaging in North America to our foodservice packaging, an example is ProDairy. This is what we bring to the table, where we deliver functionality, sustainability as well as financial commercial benefits to our customers.

Specifically talking of 2025. I would like to highlight a few examples where we have been successful in delivering on the customers' requirements when it comes to sustainable packaging solutions. An example is ProDairy product range. This is more for our yogurt and dairy applications. This kind of application is quite tricky because it requires stiffness in terms of being able to stand on the shelves and having a good fit with the lead, it needs to have good moisture barrier to -- especially in chilled conditions because they are stored in, say, refrigerated environments. And then that generally pushes the plastic content of such solutions to more than 10%.

But to comply with the regulatory requirements in EU, we have been able to develop a product range targeted on this application with less than 10% plastic content is 100% recyclable, but still delivers on functionality.

Moving to flexibles. We have had some success cases with our recyclable flexible packaging solutions made out of polyolefins. Typical applications where we have been successful are hair color, pet food and soup packaging and that helps us meet our customers' ambitions of transitioning to recyclable packaging solutions. Fiber Packaging, which 100% uses recycled paper as a raw material, that's a business segment that we have grown, and that actually pushes our actual supplies to our customers on sustainable solutions quite up. These solutions are recyclable or home compostable, take away literally newspaper waste away from what could be a landfill or composting and then make usable packaging out of it. So applications such as eggs, fruits and berries, these are typical applications that we find use of with these solutions, but that also helps us deliver a strong performance on our sustainable packaging solutions.

All in all, putting this all performance together, we are widely recognized by the most popular ESG disclosure agencies across CDP, EcoVadis, MSCI, Sustainalytics are examples where we disclose voluntarily and you can see the performance. I will not read through everything, but quickly going through it. On CDP, on climate, forest and water, we are rated B throughout EcoVadis, we are rated gold for the fifth year in a row now. And if you can see, even within being rated as gold, we have moved from a score of 75 to 79, so we have progressed. MSCI, we continue to be rated at A. And under Sustainalytics, we continue to be rated as a low-risk company. So this was just of our overall performance on sustainability, some of the key KPIs that we have progressed and how this is getting perceived even by the disclosure agencies.

Next, I would just like to speak a bit on our sustainability ambition, how we are planning to implement sustainability in the years to come and then across the business segments. However, before I go into the exact sustainability ambition and go into typical KPIs and sustainability-related indicators, I would like to start with the overall profitable growth strategy of the company. As shared earlier, our 2030 ambition is to be the first choice of sustainable packaging solutions. And how we deploy this is through our value drivers, which is profitable growth, disciplined capital allocation and accountability and speed of execution. Now it is in these growth levers that we work with sustainability. So the way we look at sustainability, sustainability needs to support all of these growth value drivers, which ultimately supports the growth of the company.

Now starting with profitable growth. Of course, our entire sustainability performance across climate, deforestation-free supply chain, product sustainability and social sustainability helps us deliver on our customers' requests and expectations on sustainability. That ultimately helps us support our profitable growth with them. From a perspective of disciplined capital allocation, an example, like I shared of the Khopoli project, these are the kind of projects that we are trying to implement so that we have a disciplined financial allocation in terms of our resources. We get the maximum return on them, but also are able to progress on our sustainability ambitions. And coming to the accountability and speed of execution, this is something that we have spent time clarifying in terms of our internal ways of operating on sustainability.

It is absolutely the business segments that are accountable to drive sustainability prioritized basis the impacts that they have. This is absolutely critical for success on delivering sustainability because sustainability no longer is seen as something that is external to the business but has to be integrated well into the business planning. And that's why we are excited by ensuring that the accountability lies in the businesses. With this background, I would just like to recap how our ambition is placed at a group level.

As shared earlier, focusing on climate, our 2030 targets are now aligned with the 1.5-degree trajectory on Scope 1 and 2. And then we also have Scope 3 targets of 25% reduction by 2030 and a commitment to set net-zero targets for 2050. From an environment perspective, critical topics that we focus on are deforestation-free supply chain, waste reduction, waste disposal and the use of water, specifically in certain technologies that we have. Talking of social responsibility, we want to act as a responsible employer, and we continue to strengthen our processes to manage human rights across the value chain. From a product sustainability, this speaks directly to our North Star to develop solutions that are circular.

Overall, in terms of the way we do the governance and processes, it's a framework that we -- that is based in our value system and our ethics and compliance to ensure that we mitigate any risks, and we don't have any negative impacts. Now this -- while this looks at the overall group picture, if you go into a bit more detail especially in each of the business segments that we have, one can imagine that the production technologies that we have in each of the segments are very different from one another. A very quick example for you to understand this is, for example, in our fiber packaging. We use 100% recycled paper. We use water in our production, whereas if you look at flexible packaging, there is absolutely no water usage in our operations. So having a common objective, a common target across technologies does not make sense for us.

And so we spent time in 2025 to really prioritize and focus the topics that are most important for each of our business segments. And then these priorities have been now built up to form what we are seeing as a sustainability ambition for the entire group. And this is what I would like to discuss in the next slides. As you can see, these are some of our priorities at a group level, starting with climate, deforestation-free supply chain, traceability on fiber, human rights, 0 accidents. And then you can see a few words which are saying as minimizing and maximizing. And the reason they are there in this manner is because these are the topics which have differing impacts the basis the technology that we have. And I'll discuss this in a couple of slides.

So what we have tried to do is we have to -- we have tried to separate our sustainability ambition into 3 parts, which we call as core common and distinct. We see that there are certain topics like climate, where all of our production technologies, all our business segments have an impact, and we need to have a group approach and a group target on those topics. Whereas there are other certain topics like water consumption, where only a specific set of technologies and specific business segments have an impact, and we want to focus our actions on those topics only in those segments. So we don't have overarching targets on these KPIs for all business segments, but on certain topics that are very relevant to a particular business segment, then we have only a segment relevant KPI and a target setting. What this helps us to really do is focus and prioritize our financial human resources on actions that are most relevant to the technology rather than having a common top-down approach on sustainability.

And this is what I'm trying to emphasize. While looking at the group picture, if you refer to the couple of slides earlier, where I spoke about climate, environment product, you would not see much of a difference because at a group level, we are still focusing on all those topics. But the way we are implementing is very much closer to the business. The priorities that you see over here are agreed in our bottom up, starting from a factory level to a business segment and from the segment to a group. The target setting has been done in terms of what is relevant to that particular technology and not necessarily having a common group target across all technologies. And I think I have emphasized this earlier, but again speaking, the accountability to deliver on these KPIs on these targets is very much close to the operations with a central team that is acting as a center of expertise to guide the segments on technical topics and overall direction to take.

With this background, I just wanted to share how this ambition is now distributed across segments. I will go through environmental, social and governance topics. As you can see, some of the topics have been marked as core. And as shared earlier, these are the topics where we see that there is impact and relevance to all technologies, all segments within the group, whereas some of the other topics have been nominated as common or distinct. And these are the topics where we see that only specific segments have an impact or have a potential to improve. So I'll just go through what they mean for us. On the environmental side, product sustainability and climate are topics which we see as relevant across our group and hence, they are core, and they will have group targets and they will have a group approach which is relevant and applicable to all segments.

On the social, health and safety, being a responsible employer and human rights are topics that we see have relevance across our segments. And then from a governance, conducting business responsibly and then managing impacts and risks in the value chain and in our operations from a way of business -- way of doing business perspective is something that we see relevant across our technologies. However, if I go into specific segments and technologies, all the places where we use raw materials, which are dependent on forest, which is basically virgin fiber, that is where we have a strong focus on deforestation free and conversion-free supply chain. So in brackets, you can see certain names of our segments. So our Fiber technology, our Foodservice and North America, these are the segments that use virgin fiber or recycled fiber and need to have a focus on this work stream whereas waste generation and disposal, we see that our major challenge is coming from fiber technology and certain factories in North America.

So we have a focus from a waste generation disposal in these places, whereas we are focusing on water consumption in our fiber technology plants where -- which is the only technology in our group, which uses water for production. So that's where we are really focusing our efforts in terms of reducing our water consumption. Just to clarify, this does not mean that these are topics that are not at all relevant for other technologies or businesses, but this is where our attention in terms of improving our progress -- progressing or improving our footprint is. While other segments, they continue to monitor and report on these KPIs and all of these numbers are still taken together at a group level for reporting.

And last but not the least, there are certain priorities that have been considered as absolutely segment priorities relevant to a specific technology, which we have called out as distinct. And as an example, you can see the solvent use in flexible packaging. This is something that we use only in flexibles and has a relevance over there. So while the group may not have a target on solvent use, flexible packaging as a segment is highly focused on reducing our origin solvent consumption and recovering our solvents. So all in all, this is how we have set up our sustainability ambition. And we hope that with this prioritization, clear accountabilities and focused resources, we are able to progress further on all our KPIs and indicators.

With this, I stop my presentation and now I open up for any question and answers that you may.

[Operator Instructions] There are no more questions at this time. So I hand the conference back to the speakers.

All right. There seems to be no questions today. And again, reminding you if you have any follow-up questions, you can always reach out to the IR team. With that, we'd like to thank you for your attention and wish you a great day. Thank you.

Good morning all, and welcome to Huhtamaki's results call for the fourth quarter of 2025. My name is Kristian Tammela, VP of IR. Today, we have a presentation, as usual, first, by our President and CEO, Ralf Wunderlich; and then by our CFO, Thomas Geust. After that, we will take Q&A.

And let's get started handing over to Ralf.

Thank you, Kristian. Good to be back, and good morning also from my side. Look, I'm going to give you the high-level overview about the business also by segment. And then Thomas, as always, will walk you through the financials.

Look, the volatile market environment continues. Geopolitical issues, tariffs, very strong ForEx movements over the year was continue, so you name it, we had it during the year and unfortunately, also in the quarter. I am, however, really proud to say that 2 of our segments continued to see volume growth in the quarter and for the full year. That's really encouraging for us to see and hopefully we'll get the rest of the 2 other segments to follow in the future.

Look, I mentioned already the FX impact, which we have seen, just to give you an idea that in the quarter -- last quarter '24 before we started '25, the U.S. dollar to the euro was at EUR 1.04, it finished the year at $1.17. So you can imagine how much only the impact on the U.S. is, and Thomas will walk you through later on also on the other currencies impact. We are really, really proud to see that our adjusted EBIT margin improved second time in our history, above 10%, both in the quarter and the full year at record highs. So really pleased to see that. I'm also really pleased to report that our adjusted EPS at EUR 2.48 is a repetition of last year and with that also at all-time high levels. The Board of Directors will propose at the AGM a dividend increase and it will be a dividend increase if approved at the AGM to EUR 1.14 per share.

We started the year when I talked to you exactly a year ago, about our 3 value drivers because we wanted to be simple, pragmatic about what is really impacting us going forward and we have defined them and presented a year ago, and we followed through those 3 value drivers during the year. I can tell you now they are well established and really helping us to deliver shareholder value. Number one, and that's always going to be important, but especially important in a volatile market, which we are currently seeing is our focus on profitable growth. And we want to support it by using all levers, organic and inorganic levers. And it's an approach which is going to be very much linked to our customer relationships. We've got to strengthen the intimacy with our customers and drive their partnership forward with us.

On the inorganic side, we are looking at bolt-ons, which makes sense for us, either because they're exactly in the geographies we want to win, in the markets, the substrates we want to play in and with management teams where we have a great cultural fit. So we had one last year. We announced on the 24th of April, our acquisition of Zellwin Farms and I'm proud to say that, that acquisition and integration is well on track and delivering as we were expecting it. I mentioned before, that we saw volume growth in 2 of our segments, that's, of course, very pleasing to see in the current environment. But it's also good to see if you talk about profitable growth, that our Flexibles segment is progressing really well, and we have launched turnarounds, and I'll cover that later when I talk about the Flexibles business. But to preempt, we are really proud with what we are seeing happening on the Flexibles segment side.

Moving on to capital discipline and how we allocate capital to the segments. We made it a point last year that after a few years of heavy investments, more than EUR 300 million, EUR 320 million per year, we needed to actually be much more disciplined on how we allocate capital and making sure that we allocate it to projects which can deliver growth, can deliver efficiencies. And of course, we will continue to support our businesses when it comes to maintenance. And then remember, our formula 30%, 30%, 30%, 10%, and then there's a 10%, which we will continue to invest in safety and sustainability to ensure that we have our license to operate always in place. Now the outcome of this year is really, really good to see. We have significantly lowered our CapEx. We have still invested in growth projects, which we needed to, especially on the Fiber side, and we continue to be very, very disciplined with a very strong focus in this area.

Now third one is more on how do we get there, and that is about accountability and speed of execution. We wanted to empower the segments that they have a very clear accountability and drive their segments in the way they need to and still offer from the center, language, coordination, expertise whenever it's needed. That is going really well. We have implemented this now globally in all our segments, slight differences in the segments depending on what they need in their regions or segments overall, but it's going really well. The one area where we said we're going to leverage much more the power of Huhtamaki is procurement. We've put first of April a global procurement organization in place and again, also here, we see great achievements and a really good start to that new operating model in procurement.

Changes are now completed. The businesses are empowered and we are really proud to see good progress on that side. You can't do anything without a very strong global executive team. And there was a lot of change and a lot of new people coming into the team last year. Today, I'd like to introduce you to 2 new members of the team. After waiting for a long time of Katariina, 6 months, we waited for her. She joined us first of January comes with a very strong background and we are extremely happy to have Katariina now with us on the global executive team. And now we are waiting for Riikka. Riikka will join us not later than June this year. Riikka comes with a very strong background again, and she's got to be our EVP Sustainability, Corporate Affairs, Legal and our General Counsel. So that's our team, super happy about our team, and we are ready to go forward.

You know that sustainability is important. We want to be the leader in sustainable packaging solutions, and we are moving clearly in that direction. We made really good progress in most of our areas which we are focusing on to take renewable and recycled materials. We went up 2 points to now almost 68. Renewable electricity, same thing. We also moved up on renewable electricity, we are now almost at 61%. Waste recycled, non-hazardous waste, we went up even 3 points and now almost at 85%. Certified recyclable fiber, we are flattish, just down actually here, which is very much driven by a mix of our different geographies. We improved our greenhouse gas emissions and we improved our total waste to landfill.

Last but not least, and I'm really proud to see that we are at a record with regards to our health and safety. So we are looking at total recordable incidents and lost times and on TRIR, we again improved, and we are now at an all-time best here for the company. We will give you more details in our sustainability results call, which we offered you first time last year. So this time, it's going to happen on the 23rd of March and Rahul, our Head of Sustainability, will present and update you there. Hopefully, many of you can join us for that call.

Now let's go to the business performance. And I mentioned currency before, and that's, of course, a big driver during the year. So first thing, if you look at net sales, we can see that almost 6% in the quarter headwind of currency. And here again, main one, the U.S. dollar, which in the quarter was at $1.18 million. So if you look at the organic part, we are approximately 2% down in the quarter, but again, the big hit comes from the currency to end up at EUR 981 million for the quarter. Similar picture, but not as accelerated as in the quarter, is there for the full year. Full year, the currency, it was 3.2%. So you see again the acceleration in the quarter to 6%, but of course, it's a significant hit of EUR 125 million for us. Overall, organically, we are down 1.3%. Give you an indication, over the year, the average rate for the U.S. dollar, as an example, is $1.13.

Now looking at some of the key financials here. If you look at net sales, and we saw it on the slide before, so comparable net sales down a couple of percentage points. Adjusted EBIT finished with EUR 103 million. Now if you add up the EUR 4 million impact from ForEx, we would have ended up comparable to last year at EUR 107 million. Very strong margin performance 10.5%. So that's a really strong margin performance and stronger than last year as well and a very strong free cash flow in the quarter, significantly up versus last year.

Similar picture for the full year. As I mentioned on the slide before, from a comparable net sales perspective, we are down 1.3%. Adjusted EBIT EUR 405 million, but you add the -- sorry, the EUR 9 million FX, so EUR 405 million plus the EUR 9 million FX, we would comparably end up at EUR 414 million, so very much in line with last year's number and a margin of 10.2%, even higher than last year, second time in our history above 10% and the highest ever. So really happy to see that margin improvement. Our adjusted EPS was EUR 2.48. So the EUR 2.48 again, is same level as last year and the highest in our history. Very strong cash flow with our focus on capital discipline, we achieved EUR 311 million, that's EUR 95 million up on last year.

Let me go to the 4 segments now, and let me start with Foodservice. Foodservice, we saw solid margin performance with a very strong cash delivery, albeit a soft top line. First, the quarter, as I mentioned, it is a soft top line, but we were able to grow in Middle East Africa, and we were able to grow in Eastern Europe. Overall, we see a decline on a comparable growth perspective because Western Europe and the U.K., which are big markets for us, were weak. The segment worked really hard on cost management, and that enabled us to still deliver a very strong margin of 9.8%, which is in line with last year's quarter margin of 9.9%, and it delivered EUR 46 million of cash. So double the cash of last year, so strong cash performance of the segment in the quarter.

If I look at the full year for Foodservice, very similar picture on net sales and very similar pictures on actions to improve profitability, so call it self-help activities. Raw material was stable. But again, very, very good outcome from the cost-out projects, the segment did launch and execute on. And we saw a margin which improved over the full year to 9.3%. So even though we had a very soft top line, we were able to improve margin to a healthy 9.3% in Foodservice. Especially happy to see that the focus on cash also for Foodservice really played out EUR 131 million, that's EUR 30-plus million stronger than the year before.

Moving swiftly on to North America. And North America is one of the two segments where we see volume growth. In a market where consumer confidence was very low, it's extremely pleasing to see that we were able to continue to have volume growth, not just in the quarter but also for the full year. You might remember Q3, so we had a very weak Q3 and we were hoping and we were seeing then that we saw operational improvements. We saw strong volumes coming in the quarter. So we were happy to see that our margin bounced back to 12%, 12.1% in the quarter. So volume up. We continue to see, as mentioned during the year, pressure on price. So pricing was down. And also North America in the quarter had a lot of focus on cash and delivered a very strong operating cash flow outcome in the quarter.

Moving to the full year. Same thing I mentioned before, volume growth for the full year, that's encouraging, but negative impact overall on comparable growth because of the pricing impact. So just negative here overall on comparable growth. Now operational costs increased, and we continue to focus on taking cost out in North America to make sure that we keep our margin profile, which we promised to you between 11% and 12% going forward as well. Now our RONA is still at a very healthy 15% margin, even though it's down on last year's record performance of 19.6%.

Let me move to Flexible Packaging. We have seen a significant margin improvement in Flexible Packaging during the full year and also during the quarter. With the lower volumes, which we see during the quarter and during the full year, are offset by better pricing and better mix. So really, really strong focus on getting our mix right in Flexible Packaging. Lots of activities on the cost side. And you will remember that we put 2 of our units there under turnaround activities. We talked about India and Turkey. And I'm happy to report that we have very, very strong positive impact from our turnaround activities in those 2 units. That enabled us to deliver a very strong margin in the quarter and a very strong cash flow in the quarter.

For the full year, it's a similar picture. Lower volumes, but great improvement on the overall product mix, which we are selling, turnarounds going absolutely in the right direction. So as does the cost-out projects which we are running there. That enabled us to come with the best ever performance in Flexible Packaging, over 9.2% EBIT margin, also the absolute number of EUR 115 million is an all-time high as RONA is and as the cash delivery. So we are very pleased to see Flexibles going in the right direction.

Last but not least, let me jump to our Fiber Packaging segment. Clearly, a very strong profitability performance in the quarter and in the full year for our Fiber segments. Net sales, just shy of last year in the quarter. But if we look at the overall product which we sell, that is, in fact, increasing comparably by 4%. Machine sales is down slightly, but overall comparable growth up 4% which enabled us to come to an adjusted EBIT of 15.4%. So very, very strong performance and a margin of 15.9%, which is stronger than last year as well.

For the full year, we were able to grow comparably at 8% in the Fiber business and improving adjusted EBIT in absolute by 16% and growing the margin to 13.3% for the full year. That enabled us to grow our RONA to a very strong 18.4% in the Fiber business. You will have noted that we spent more money on the Fiber side than last year. And we did this because we see lots of opportunities to continue our growth story in the Fiber Packaging segment. So with our approach on capital discipline, putting money behind very profitable projects, we are aligned, so we are super happy to continue to invest.

Let us move on to the financial review. And Thomas, if you could take over from here, please?

Thank you, Ralf. I will take over now. Yes. And if I look at the big story of the year, which is really the currency movements, highlighting the fact, again, that it's a translational impact for us as a company, but given the big exposure to the U.S. dollar, obviously, the movements have been very significant.

If I take the quarter alone, roughly 47% of the impact on the full year top line came in the quarter alone. And Ralf already alluded to the fact that Q4 2024, we still had a U.S. dollar at $1.04. And if you look at the average rate for the full year, it was at $1.08. Average rate for 2025 is $1.13 and as you see from the slide, we had a closing rate of $1.18 on the U.S. dollar at the end of 2025. Today, I think or yesterday, though, currency was at roughly $1.19.

Highlighting also the fact that we account for the balance sheet on closing rate, while then the P&L is being translated on average rates. But as you can also see from this slide, all -- basically all other currencies were also trending negatively throughout the year. So explaining that, it's not only North America getting the currency, it's also the other segments, but as said, translational. The transactional, we are taken care of by our hedging policies.

If I take a bit of a deeper dive into the P&L, I would say that the positive side of the year is our very, very continued -- strongly continued management of costs. So with that one, we were offsetting some of the negative development of top line, value-add remained strong. On the operations side, we were able to offset a lot of the salary inflation, but not fully. So without a growth, we still have a negative impact out of salary increases despite having done significant work on that topic as well.

You see from this slide also that our finance cost is at EUR 60 million versus EUR 71.4 million previous year. This is the outcome of a continued debt decrease as well as the benefits from having become investment grade rated, and therefore, having a more favorable position when it comes to interest rate negotiations. The adjusted income tax at 22.4%, so roughly 22%, quite similar to previous year's levels, so maintaining that one. And then obviously, as an outcome, our adjusted EPS, as Ralf already said, we are happy to see it remain on previous year's level EUR 2.48, which as he mentioned, is an all-time high.

Cash flow is something I'm significantly proud of for the year. We had a very strong EBITDA conversion to cash. You will see that the capital expenditure obviously contributed well. We said already that it doesn't impact our future growth. So we have stayed very capital disciplined when it comes to how we manage that part of the story without compromising the future. You will also see that taxes had a significant positive impact when it comes to this one. This is mostly timing related and also one on some treatment of losses. Then if we have -- then we see the net financial items basically close to previous year's level. And as you see from this slide, we had a negative full year impact of working capital. However, also here, looking at Q4, we had a good development from Q3, where we were still at a very significant lower level compared to previous year. So Q4 development, all in all, one can only conclude that the cash flow generation was really strong.

And with that one, obviously, we get the benefit of a continued deflation of our net debt. So we are down at roughly EUR 1.2 billion, down versus previous year, with a net debt-to-EBITDA of 1.9x, so we have come down from the high of 2021 when we were at 3.1x and with a net debt of roughly EUR 1.5 billion. So we have delivered on the promise to after an acquisition make sure that we take care of the cash flow generation in a way that maintains the balance sheet on a strong level.

When it comes to loan maturities, you can conclude from the previous slide and this one that our liquidity and combined renewal of financing puts us in a very strong position when it comes to managing our future balance sheet when it comes to debt. We did a number of transactions during 2025. And with that one, we landed at an average interest rate of roughly 4% when it comes to gross debt. So good development and a good position when it comes to maturity, good position when it comes to ability to also act on future capital needs with the EMTN program that we launched in 2025. So quite happy with our financial position all in all.

And looking then at the balance sheet. Here, again, the currency impact has a significant impact on the asset development. Here highlighting here what I didn't mention on the previous one that our gearing is now at 0.61. The return on investment is slightly down versus previous year, mainly actually due to the asset levels in Q1. And as we calculated the return on investments on a 12-month rolling, it comes with a lag. You see, however, the return on equity slightly improving versus previous year. So also here a favorable development.

As mentioned earlier here today, our Board of Directors is proposing a continued increase on a year-on-year basis in our dividend. With EUR 1.14, we would have a payout ratio of 46%. You can compare that to the previous year's levels so remaining on -- just in the middle of our payout ratio guidance. And with EUR 1.14, we would have increased our dividend for 17 consecutive years, which I believe is the longest for companies listed on in Finland.

Track record when it comes to delivering towards our ambitions in this market environment, we have, unfortunately, not been able to meet the expectations when it comes to growth. We have been, however, done a very diligent job on the other elements. So profitability for second year in the lower end of the corridor and return on investments, I would say, despite a slightly lower level versus 2024, moving in the right direction. Those still being below. And then our net debt-to-EBITDA really at the low end of the corridor or even slightly below. And then as said, continuing to deliver dividend in proportion to our ambitions.

Finalizing here with the outlook, the outlook is for 2026, basically, the same as for 2025 and also the short-term risks and uncertainties remain, from a content point of view, unchanged.

So with this one, I would hand over for Q&A.

[Operator Instructions] The next question comes from Lewis Merrick from BNP Paribas.

Starting just on Foodservice packaging. From a top line perspective, growth was quite soft during the quarter. I mean, you mentioned the softness in Western markets and specifically the U.K. being the driver of that in the statement. Can you just elaborate on whether you think this would destocking or simply just soft underlying demand? I just got 1 follow-up.

Yes, thanks, Lewis, and good morning to you too. Yes, look, it is mainly a really soft market. Our customers tried with promotion to bring traffic back. Some of them did achieve that. And in fact, with those, we saw good numbers, but most of them did not. And that clearly impacted us, as I mentioned, especially in Western Europe, and in the U.K. In the other markets, we saw good growth. But we were hoping for more promotions to bring people back into the restaurants, which did only actually occur in a couple of our customer cases. So a bit disappointing with how the promotions ended up at the end of the year. But look, they will fight as we know, and they will continue to fight our customers, and we will continue to support them.

And just on North America, one of your peers has been quite challenging competitive dynamics right now. Just wondering, are you seeing any increased competition at the moment in some of your North American end markets?

Yes, nothing now stronger than what I reported to you before in our quarterly calls, Lewis. So we see clearly that with the overall consumer confidence levels going down, volumes not being there. Many of our competitors and suppliers also not seeing volumes. We clearly see pressure on pricing, but we saw that during the year, and that obviously was a decision we had to make on whether we are going to fight for the volumes or just let them go. We decided that the high level of margin, which we have seen in the years -- a couple of years before, they were artificially high from a time where it was exactly the opposite direction. So we decided to stay in the market. That's why we did grow volume in North America, but we had to give price for that. That will flow on year-over-year perspective into 2026, but we are not seeing more fight now than we have seen during the year 2025.

The next question comes from Robin Santavirta from DNB Carnegie.

Yes, I have 2 questions. First of all, if we look at your margin and cash flow in Q4, you had again a very strong performance, but the comparable sales is still in negative territory. So my question is, first, what is the comparable sales outlook for the Flexible Packaging and Foodservice business going into H1? And the second question I have is related to North America. We see some of your customers complaining about adverse weather patterns or snow storms in January, is that something that will impact your business in January?

Robin, thank you for the 2 questions. So as you will appreciate, we don't give outlook numbers on volume for any of our businesses. So let me just tell you on especially Flexibles, which was core of your questions. In '25 and the quarter, very similar picture. The segment decided to go after profitability rather than any volume was important for us after years of 6% or last year 7% EBIT margin to make sure that we bring this up. One of the activities out of 3 really was mix improvement. So a strong focus on mix on products, which makes sense for us going into what we call blue loop more sustainable products. where we have capacity built.

So that was really important for us from a mix change. A lot of that mix change came with substitution from prior non-sustainable products to now blue loop products and a better overall margin level. So that's one of the activities mentioned, the other one was our cost initiative taking cost out. And the third one was really the turnaround activity. So overall, Flexibles did focus on that. Look, that focus is not over. You know my words on that, one year doesn't actually give you a trend. So that focus will continue to make sure that we deliver and deliver on what we have now achieved in 1 year in Flexibles.

Second question was about the weather in North America. Look, it's a timely question because, frankly, we did experience very severe weather conditions in North America in January, which absolutely impacted our business. We had to close temporarily 5 of our sites and 2 of our distribution centers. So for days, those were shut. So of course, that is going to give us an impact. We are assessing the impact currently. But as you will appreciate, it's a one-off impact and the weather is happening fortunately, onetime, but there will be clearly an impact for our North American business in January due to that. We're now back running in all our sites, Robin.

That is very clear. Can I just try on Flexibles and Foodservice? Just to get a feel and some color on order intake. Just trying to get to the point, are you seeing any signs of a bit better order intake bit better volume outlook? Or is it still a bit more of the same in terms of volume outlook? If you can share some color on that?

Yes, Robin. So a very similar question than before. So very similar answer rather than going into specifics, guidance of outlook, don't want to go there. Let me answer in, as I tried for Flexibles. So the picture on what we are trying to do with our overall product mix, which we did in '25 or started in '25, we don't see any reason why we would change that. And on Foodservice, we are so much dependent on the traffic and our customers winning with their promotions and their activities. So that's really what we are doing there.

Our activities, if I may just add one word, on both, but frankly, also for the other 2 segments on winning customers, new customers, new -- more local, more regional customers are starting really to pay out. We are -- it's a long process, of course, if you don't supply them, but we are starting to see that impact. As an example, in Foodservice, Middle East Africa, we did see really good progress with local and regional customers, even more so in Eastern Europe, where we saw really some great improvements. To give you an example in Poland, we saw with 1 specific local customer, some really good traction.

The next question comes from Hai Huynh from UBS.

I have a couple. The first one is on North America. Are you starting to see any benefits from tariffs, meaning competitors having pricing pressure and they have to pass on prices and volume coming to you? Are you seeing any signs of that yet?

Look, the tariff situation is going in so many different directions currently. What we are seeing is that clearly, if you also look at Q4, our retail business, we had, as expected, a good quarter on retail. So it came back into the season, Thanksgiving as well as Christmas clearly was good for us. And a lot of that is because, first, the seasons were good for retail, but secondly, there was a shift from some of the Chinese imports and the shift of some of the extended polystyrene imports towards products, which we do.

Overall, on the tariff situation, Hai, if I may answer a bit more general, overall, as we really produce and sell, so we buy, we produce, we sell all in the U.S., we don't really have so much of an impact. Competitors coming from the Far East who have currently a huge trouble on tariffs, are absorbing a lot of that currently as they are waiting for the final outcome or we see a bit of a shift from, for example, China to Vietnam. So I would say, overall, the impact on tariffs during the year for us not significant.

I meant more in terms of the benefit from competitors having pressure, but it's clear that you mentioned some of the shift happening in Q4. On the free cash flow, could you help me a little bit on how I should think about it in 2026? I see some negative working capital impact in '25. So what are the building blocks, I guess, to help us think about next year? So CapEx, I guess, will remain moderated. How do you think about working capital?

Yes. So focus on both CapEx and working capital was significantly increased during '25, and there is no reason to believe it would not continue. We are, of course, seeing some of our customers putting pressure on us with regards to payment terms. So we are, of course, now having actions in place also to look at inventory and payables to offset or hopefully more than offset that. So we are pretty positive with the overall development during '25 on how we are managing working capital. Thomas alluded before that we have had some really good progress in Q4 already. So that's very encouraging.

And you are spot on. No reason to believe that we would have a different view on CapEx. That allows me maybe to stress one important point. We are not saying no to CapEx, which doesn't make sense, where we see profitability improvements where we see efficiency improvements, where we see growth opportunities, we are investing. The examples I gave, Fiber is a great example where we are growing, where we need capacity, we are putting it back in. So don't feel like we are just cutting CapEx for the sake of doing it. We're doing it because that's good management of a disciplined approach.

And my final question. So 1.9x EBITDA now, your CapEx remain moderated, you are focusing on working capital. So free cash flow, I see a strong free cash flow, but then you're below your target of 2 to 3x. So what are the avenues here that you might explore for the next year in terms of spending cash?

Thank you for that question. So we have been very clear on our ambition to be in the range of 2 to 3x. And we have also in our profitable growth bucket being very clear around the M&A agenda. So I would say it's quite clear with the organic side, we are more on a continued deleveraging path. So clearly, for that sake, we are continuously looking into the M&A field as well. And of course, seeing that M&A landscape is quite favorable at the moment.

The next question comes from Cole Hathorn from Jefferies.

The first is just on understanding how your raw materials and costs are developing. Would you mind talking about Foodservice and then North America separately, because I imagine besides labor inflation you should be benefiting from lower paperboard and polymer prices? I'm just like some color on how you're thinking about that into 2026. And then secondly, maybe on the commercial side following on after the cost is we have seen promotional activity. And how do you make sure that you don't concede price if you are getting a raw material tailwind? What are you commercially doing to try and minimize that price giver?

Thanks, Cole. So look, overall, on the raw material side, I think it's important to remember that other than in Fiber, in our 3 other segments with most of our customers, we have an automatic pass-through. So you would see this an impact of that maybe on the top line, but not really on the bottom line. There's a bit of timing impact here, but there's no real impact. So if we see paperboard prices going down, you would also see that we have to pass them to our customers. So the impact, again, other than a bit of timing advantage or disadvantage, you wouldn't really see.

And maybe the advantage on the advantage is then taken out with regards to your inventory valuation. So we don't see this as a big impact at all. We have had a few raw material substrates, which went the other direction, just giving you an example, aluminum, which is also a substrate, which is quite important to us, went in the other direction. So we don't see currently any significant move for 2026 from what we have seen and what was negotiated in the last quarter. So on that side, no real impact.

And then the one on promotional activity. Customers have done a lot of promotional activity. I know you mentioned it for Western Europe that we hadn't quite seen that benefiting volumes. But are you seeing any of that in North America? And how could that potentially benefit you and your footprint there?

Yes. So both promotions happened in both North America and in Europe. In North America, we saw more of a positive impact for us on the Foodservice side. I have to say, so we participated and did win more of those promotions than in Europe. And you're spot on, we've got to be super disciplined on pricing with these promotions because temptation to say we win the promotion and we afterwards might also get them the volumes following that temptation is there. It doesn't always work that way. So for us, with regards to promotions, it's important we want to participate, but we've got to be disciplined on pricing. Otherwise, it's super, super difficult for us to maintain. Our take Foodservice, Global Foodservice, really difficult for us to keep our margin profile, which, as you have seen, we have improved during '25 to 9.3%.

And then finally, just on your retail plates business, you've obviously got the premium Chinet brand, which is well regarding the U.S., but there has been some capacity additions in the lower price point levels from Georgia Pacific. So I'm just wondering how is that development been in retail plates. Have you seen any down trading from consumers or any disruption in that market, considering it's a higher-margin business for you?

Yes. So we have seen that for us because, as you're rightly saying, the premium Chinet wasn't really impacted by the Georgia Pacific/Dixie investments, which we have seen. They are more competing with the imports. So they would be more competing with what I mentioned before, imports and/or the transformation from extended polystyrene towards paper. So that's more where you would see an impact going from left to right for Georgia-Pacific volume we assume. For Chinet on the other side, don't really have that. So Chinet more premium. So who wants to buy a Chinet consumer will go with Chinet. So we didn't see that impact there.

The next question comes from Pasi Vaisanen from Nordea.

This is Pasi from Nordea. To start with the market. So could it be even a realistic scenario that your organic volume growth would be a positive in the second quarter of this year, mainly due to kind of investments you have made and also do the easier comps coming from the last year? So the question is that is the underlying market stable or still declining?

Yes. Thanks, Pasi. So look, we have invested in the past, but we have also invested this year. Even if CapEx is lower, we still have invested, and we have invested for a reason. We have invested because we believe that we can generate growth with those investments. We were with our operational issues in North America, we were hoping to be at a better point with some of the investments which we did in prior year. So no reason to believe that we wouldn't see a positive impact from that going forward. And then, of course, we -- I guess, not just us, but we are all hoping that the huge headwinds which we are seeing in the consumer, low consumer confidence levels are starting to turn.

So of course, that would give us a tailwind. And you're, of course, right with lower comp in the second half that would help, I guess, the overall market and us. So we are positive that the investments which we did clearly in '25 and the progress we are making on investments made in prior years will start showing us positive impacts going forward.

Yes. Excellent. I hear you. And secondly, when looking at the crude oil price, that has actually stepped down roughly 2 years in line. So is the plastic price is actually the reason for an improvement you have seen in Flexible segment?

Yes. Pasi, I think question very similar to what we got before. We would see with the impact on oil, we would see, of course, that some of the resins will be impacted and would be impacted to go down a bit lower. But in Flexibles specifically, most of our contracts actually have an automatic pass-through. So whatever we would see here now maybe on a slightly positive side and in other years, slightly on the negative side is only an impact of a very short period because then it's passed through. So you might see it in value, but you don't see it in margin even on value add.

So I think on that side, we've got to be clear that, again, Fiber is the exception here where we don't have pass-through automatic clauses, but for the others, impact of raw material timing, yes. But overall, I would say, there are clearly not the reason why we have had flexible packaging advantages in '25 versus the prior year.

Okay, I see. And maybe lastly, so have you seen any progress in India? Or are you going to make a kind of decision regarding your presence in India during this year? So is it going on track according to plans?

Yes. So it is, in fact, outperforming what we were hoping to achieve. So we are super proud with our 2 turnarounds. Our colleagues from India, I think, have announced their results a couple of days back. So I would encourage you to have a look at that. So India specifically, you can see. We are seeing significant improvements in our Indian, never say significant, I mean, significant improvements in our overall Indian performance. So very happy with the turnaround activities in India and Turkey, just to add, even if you didn't ask about Turkey, and Turkey.

The next question comes from Pallav Mittal from Barclays.

So firstly, can you talk a bit more about your Foodservice operations? Your comparable sales were down 7% and you have highlighted weakness in Western Europe and U.K. It seems like you're losing market share because I don't think the underlying demand is down 7%. So any comments on that would be very helpful.

Yes. Thanks, Pallav. As I mentioned, Western Europe and U.K. down, and those are our largest markets, so the impact of them is greater, and we can't offset with the growth which we have had in Middle East Africa and Eastern Europe that decline. Look, it depends on who your customers are. So with our largest customers, we in fact did grow. But then with a number of our not as large customers in Western Europe and the U.K., unfortunately, their promotion activities did actually not play out as good as they wanted and/or we -- because we wanted to be disciplined, we didn't participate in the promotions for the right reasons that we need to maintain our margin level. Once it's down, it's super difficult to bring it up again.

So some of those decisions were our decisions, some of those decisions were our customers' decisions. But if you look at the bigger picture, market share perspective, I don't see that. I don't see us losing over -- maybe in a quarter, but over a medium to longer term, I don't see us losing market share with our customer base. So don't look at the overall Foodservice market, but really look at what we are doing, our product ranges and our customer base.

Sure. And secondly, if you could talk a bit more about your market conditions across segments so far in the quarter? And I appreciate your comments around the winter storms in the U.S. But if you could quantify whether it is likely a EUR 10 million impact or a EUR 20 million impact, any sort of quantification would be very helpful.

Yes. So we are -- so getting back to what I -- I think it was Robin asking that question about the weather in North America, we are still evaluating, but we know it will hurt our January results in North America. And that's a one-off. We understand that. Clearly, in some of our markets, cold weather is not helpful. Of course, if you come to summer times, that's where we have, of course, more interest in beverage as an example than in wintertime. So cold winters in general, aren't super helpful, but we are in early February now. So giving you an idea how the quarter is looking would first be wrong because we don't give outlooks. And secondly, I just really don't have any facts to support anything stronger here.

And I know that -- sorry, just to just allude to, you will appreciate that Q4 proved to be a very, very strong quarter for us. So we are, of course, really happy with the outcome of Q4 overall.

Sure. And if I can just ask 1 follow-up on the capital allocation. So you did say you could look at some bolt-on M&A, but given your net debt EBITDA at 1.9x, is share repurchases on the table? Or that is not a discussion point at the moment?

Yes. So we are -- I think Thomas made the point, of course, and we started the journey last year where we wanted to drive profitable growth with all levers. We are actively looking at bolt-on opportunities for us. We did one last year, why one and not two, three or four because we got to be super disciplined. We're only going to do them for bolt-on if they are accretive in year 1. That's clearly what we are striving to get to and we continue to work. We have a very healthy pipeline, and we are actively looking at that. But we are only going to execute if it is the right thing from a returns perspective for us.

So -- and of course, the discussion on how do we return capital to share shareholders is one which the Board is always entertaining. And the one thing the Board is now proposing to the AGM is another dividend increase. As Thomas said, it's the 17th year in a row, if approved by the AGM that we are increasing dividends. That doesn't mean that the Board is not discussing and evaluating other opportunities to return capital to shareholders.

The next question comes from Cole Hathorn from Jefferies.

I'd just like to follow up on the commentary around the M&A landscape is attractive. How do you think about M&A when you think about the Huhtamaki business because you have over time rationalized some capacity where you had too much supply. So I'm just wondering what segments are attractive to you? And how do you think about M&A to make sure that M&A is accretive, and you don't buy any excess or all the technology for the business?

Yes. Thanks, Cole. Of course, super relevant question because we have -- and you know that, we have free capacity in a number of our segments and factories. So we would not and never entertain a discussion to add to free capacity, idle capacity, even more idle capacity. So we wouldn't do that. So when we look at M&A, other than the strategic fit, other than the fit of the products, the substrates and the geography, we are, of course, looking on what do we have already on the ground, what could we do by investing organically. So that's always something which we are analyzing before we come up with the decision.

So take the one we did last year, as an example, that was in egg fiber packaging in Florida. So it was interesting because in Florida, in that state, we didn't have any egg fiber production but it was something which was already very profitable and fast growing in that region. So even though we had free capacity in Hammond, we couldn't deliver from Hammond into Florida. So it made absolutely sense for us to take that on. And again, it proved to be the right steps. So summarizing Cole, we are, of course, analyzing what capacity do we have. Could we invest organically? Or does it make sense for us to add with an acquisition capacity in certain areas.

And then maybe just following up on that, it's clear to say that it's a buy versus build market when you look at kind of upstream in the paper and packaging space, but in your landscape on the downstream converting, I imagine that the competition is still a little bit more competitive for those converting assets. Is it a buyer's market out there? Or are people still looking for decent prices for their assets?

No, it's currently, I would say, it's a buyer's market currently. Look, there is, of course, now since a couple of years or certainly during the whole of '25, a very low volume market. It's clear that whether it's destocking, whether it's consumer confidence, but it's a market which is not growing and not just for us but for everybody. So of course, there are competitors out there, which are struggling. Our margin is super healthy. Our EPS is at an all-time high. Our cash flows are very healthy. So of course, we are in a good position here, but we will continue to be disciplined. Let me repeat this because it's an important message internally and externally. Only because it's a buyer's market and there might be opportunities, if they don't come with the right return profile, we are going to pass on them.

All right. That was all for the questions for today. As always, if you have any follow-up questions, please feel free to reach out to us here at the IR team. And with that, we would like to wish you a great day, and thank you for attending.

Good morning, all, and welcome to Huhtamäki's Q3 2025 Results Call. My name is Kristian Tammela, VP of IR. Today, we have, as usual, a presentation first by President and CEO, Ralf Wunderlich; and then followed by our CFO, Thomas Geust. And after the presentations, we will have a lot of time for Q&A. So without further ado, let's get started and handing over to Ralf.

Thank you, Kristian, and good morning also from my side. Thank you for dialing in. And I'm starting with an overview of higher level of the group. Very happy to share with you today that we saw profit improvements for the group, specifically driven by 3 segments: Flexibles, Fiber and Foodservice in a what we see as still pretty volatile and soft market environment.

Also happy to share that we have both, in the quarter as well as year-to-date, seen strong volume growth in 2 of our segments, namely Fiber and North America. The margin improved to now 10.3% in the quarter. And for the first time, all of our 4 segments delivered greater 9% EBIT margin.

Headwinds from FX, especially the U.S. dollar, persisted, impacting our top and bottom lines. We have seen a weak quarter in North America, and we'll further comment on this in a bit when we come to the segment presentations. I'm also proud to see that our 3 value drivers continue to progress very well and are showing impacts.

Let me use that as a bridge then to the drivers. Driver number one is growth. And we want to use all levers, which we have to drive profitable growth. First one, organic. Initiatives which we kicked off are very focused, and they are focused on both the JKAs, our global key accounts as well as small and medium customers, especially the later one where we have a very small share with, are in focus, and we are starting to build good relationships in all our segments.

As I mentioned before, we have seen volume growth, both in the quarter and year-to-date in Fiber North America. And of course, that's in a volatile and soft market, very encouraging. On the inorganic side, we are proud to say that the integration of Zellwin Farms is tracking very well, and it's delivering both top line as well as bottom line as by promise.

We're also managing our pipeline actively. It's a long pipeline. And as you know, we are focused on small bolt-ons. So that will take some time, and we will do that in a very disciplined way.

Second point and second driver is capital discipline. After significant investments over the last years and with very disappointing growth after those investments, we have started to be much more disciplined already at the back end of last year.

We continue to be very disciplined, and we are going ahead with the guideline of 80-80-80-10, which is EUR 80 million approximately for growth; EUR 80 million for productivity; EUR 80 million for maintenance; and EUR 10 million for, what we call, license to operate. That context will continue. But we are ahead of our target, and we might end this year at a lower number, as you can see from the Q3 track, which we have.

Third driver for value for us is accountability. We have changed to now empower our segments. We will have faster decision-making and faster speed of execution. We have also decided that tax and treasury will remain in the center and now procurement is also handled directly from the center for all our segments.

The reason for that is that we will see direct bottom line impact by those 3 functions. All other functions are supporting the segments and are guiding our reporting, our coordinating, our controlling and ensuring that at Huhtamäki, we have one language.

Let me swiftly go to the business performance. And let's start with net sales. As mentioned, similar market conditions in Q3 as we had in H1, pretty volatile and very soft demand. With the FX impact now accelerating in the quarter and now over 4% or EUR 44 million in the quarter alone, we have a very, very negative impact just from FX alone. And you see the acceleration by comparing quarterly numbers to year-to-date numbers, where year-to-date, we are at approximately 2%, but in the quarter, it was more than 4%, as mentioned just a second ago.

Our organic growth continues to be impacted and stands now at minus 0.9%, just under 1% year-to-date. Again, I would like to stress that we are seeing volume growth in North America and Fiber, and we are actively working also in the other segments to come back to volume growth. Good to see that [indiscernible], and that's what we call the acquisition line here is delivering on the top line, as I mentioned before, also on the bottom line.

Now looking at the profits. And we see that the adjusted EBIT was standing at the quarter at EUR 100.3 million. If we add the EUR 4 million FX impact, then we would be, in fact, 2% above last year quarter and spot on year-to-date, if again, including the FX impact, which for year-to-date is over EUR 5 million. Our quarterly margin increased now to 10.3%. And even year-to-date, we are double digit at 10.1%, which is again slightly ahead of year-to-date last year's margin.

We are very proud to see our EPS growing 2% year-to-date. On a side note, if you would adjust the quarterly EPS by the currency, we would also have a 3% EPS growth in the quarter. Capital discipline is allowing us to have a very strong support from capital expenditure, which, of course, is impacting -- positively impacting our cash flow. So you see that we are 26% down quarter-over-quarter on capital expenditure and 18% down year-over-year.

Now going to the segment specifically. And as always, let's start with Foodservice. The demand in Foodservice remained unchanged versus H1. On a comparable FX, we are spot on last year. And I want to stress that because it's after 8 quarters of decline, it's the first quarter that we are now back on being spot on with the prior. The increase in net sales came especially from Western Europe and Middle East, Africa, supported by price and mix improvements.

Adjusted EBIT is above 9% margin again, both in the quarter and year-to-date. This is, of course, also driven by cost focus, cost management and margin management, and that will remain key. Our adjusted EBIT is 5% ahead of prior in the quarter and just at minus 2% year-to-date. And Foodservice continues to focus on cash flow. And again, here, capital discipline is supporting a very strong operating cash flow delivery.

Now North America. North America had another strong volume quarter, and I want to stress that even though the North American numbers are disappointing that the volume was strong in North America, and that was driven by mix, by pricing and by volume. But pardon me, the mix impact in the quarter was negatively as the price impact was negatively. So volume positive and price/mix negatively. So the total comparable growth in the quarter stands at minus 3%.

Year-to-date net sales stands at minus 1%. So the disappointing EBIT was impacted by, as I mentioned before, by price, by mix and by cost headwinds, specifically operating cost increases, transport, energy cost increases. I encourage you to look at the full year margin as, again, the quarter was impacted by those very high impacted on the transport, energy and other operational cost increases.

So we are running at a margin of 11.4% year-to-date, which, as anticipated already earlier in the year, is driven -- clearly driven by pricing, which we were holding on for 2 years after the spike of raw material prices in '22. So this is now the more normalized EBIT percentage, which we are seeing.

Moving on to Flexible Packaging, where we have a much stronger story to tell. Even though the volume side continues to be soft, we continue to focus on price, mix and turning around our underperforming units. And we are seeing in the quarter and year-to-date encouraging results on all of those elements. We have had unfavorable FX, but again, strong price and margin management.

We were able to increase the EBIT in the quarter versus last year by 28% with a very strong double-digit margin for Flexibles in the quarter. However, here, the EBIT absolute and relative was impacted by raw material decreases, which we will need to pass on, on Q4.

Hence, also here, I would encourage you to look at the year-to-date EBIT margin, which is more what we see our business currently traveling at. But even that one is 2 points ahead of what we have seen last year. So we are now at 8.8% margin. Flexibles also delivered very strong cash flow, and we also were very disciplined on the capital expenditure side.

Let me move on to Fiber Packaging now. Fiber Packaging continues to show very strong performances as they have done in the 2 quarters prior to that. Net sales was driven by volume, price and mix and resulted in a strong quarter with 9% growth and year-to-date, even a double-digit 10% growth. Net sales growth, combined with cost management, drove also a very strong EBIT improvement, again, both in the quarter and year-to-date.

Our margin stands now at 12.6% for the quarter and similar at 12.4% year-to-date. As Fiber is performing very well, we continue to invest. In fact, Fiber is the only segment where we have seen growth in capital expenditure. This is again totally in line with our capital discipline, where we want to invest behind those segments, which are performing very well.

Thomas, would like to pass on to you to give us an update on the financials.

Thank you, Ralf. And I'm starting off with the main topic actually for the quarter, and that is the currency. Currency and its negative translation impact to our results is visible clearly in both top line and in EBIT. You can see it accelerating to EUR 44 million net sales impact in the quarter, EUR 4 million in EBIT; and year-to-date, EUR 66 million and EUR 5 million on EBIT.

I would like to remind you here that our P&L is valued at average rates, while the balance sheet is valued at closing rates. So we see the impact immediately in the balance sheet while we come with a lag in to the P&L. Of course, the biggest currency impact will come from the USD. There, we have a drop now of the USD to a $1.12 average rate, while we, in the closing rate, already see the $1.17. Looking at the currency last -- yesterday and today, we are roughly at $1.16.

So USD, obviously, being a very important currency, but you can see that we are trending negatively on basically all currencies in the closing rates and only Thai baht and British pound is positive in the average rates. I would like to remind you also about that in our top 10 country revenues, we have only Germany and Spain denominated in euros. So currencies are and will remain one of the core topics when it comes to translation of profits. So the main impact in North America, but also in Flexibles, you will see significant currency -- negative currency impacts.

Then moving on to the more detailed P&L and adding on top of what Ralf said, we are still seeing tailwind in value add. Otherwise, I would say the core of our continued positive profit development operationally really comes from the activities we have done ourselves. You will find that on personnel costs, we are still up year-to-date. But actually in the quarter, we were trending already positively compared to prior year, just as one example.

The EBITDA is progressing ahead of EBIT, indicating that we are seeing a strong operational performance in our profitability, but also showing that we still have assets available for delivery. Other items in the P&L to address is the net financial items where we had a few one-offs last year, partly explaining the significantly lower finance cost; however, we are also moving downwards on finance cost from a structural point of view.

The tax rate remains at roughly previous year's level. So we are at 23.4% of tax rate. So also there, a consistent delivery. So if you look at the EPS, I would claim that despite the hit from the currency, we have made a good job at maintaining the EPS at roughly previous year's level on the quarter and actually improving year-to-date on EPS.

Moving to the cash flow. Cash flow progress since the low Q1 has been good. We have now -- you will also find in this bridge that the sort of abnormal or nonoperational items, proceeds from selling assets and the CapEx part are balancing each other off.

So one could say that the cash flow development comes purely from the operative activities as well as from lower taxes. So progress on cash flow is good. We are anticipating also quarter 4 to be a positive cash flow quarter. So good development based on our capital discipline also in the cash flow -- on the cash flow side.

Net debt to EBITDA, you recall that we got an upgrade from S&P on our rating. We are nowadays a BBB- company. That is really driven from the discipline we have seen on deleveraging our net debt. We are at 2 in the end of the quarter. So similar level as previous year and staying very focused on this key parameter.

Gearing is at 0.65. And as you can see, we have sufficient cash and cash equivalents available at the amount of EUR 328 million at the end of the quarter. On top of that, we obviously have our revolving credit facility available. Another element, which we have been focusing on in order to be a predictable company is obviously working around our loan maturity structure. We have highlighted on this page the key events we have been going through this year.

So in June, we signed a EUR 150 million Schuldschein. You recall that we entered an EMTN program for bond issuance program. And under that one, we issued our first bond in the quarter. And in connection to that one, we also set out a voluntary tender offer for repurchase of some of the outstanding bonds. So a disciplined approach in order for us to have a predictable maturity available in our loan facilities.

Moving over to the balance sheet. In the balance sheet, obviously, the translation impact of currencies has a significant impact. You can see that alone in the equity line, we have a EUR 232 million negative impact. I would also highlight that on the working capital, we are up roughly EUR 67 million. And with that one, I would highlight that core items come from, for instance, receivables. So working through this balance sheet towards the end of the year will be core, including delivery of the inventory.

Looking at then the return on investments, you remember me highlighting that this comes with a significant lag. So we are slowly but surely moving towards our long-term ambition, which is a 13% to 15% ambition on return on investments, adjusted return on investments. Beyond that one, we are continuing now in the threshold of the 10% to 12% on adjusted EBIT.

We are in line with our net debt-to-EBITDA ambition. And as you recall, we have paid the dividend this year in line with our ambition as well. So the only part we are really still lagging is the comparable growth. And with the comparable growth, we would also see a positive development into our return on investments. Our outlook and short-term risks remain unchanged.

And with that one, I will then open up for Q&A.

[Operator Instructions] The next question comes from Lewis Merrick from BNP Paribas.

Just starting with North America. As you went through a somewhat disappointing quarter for profitability, you mentioned pricing and costs. Can you just explain those various parts in tad more detail? And equally, what gives you confidence in the margin bouncing back to the year-to-date levels as you spoke of? And I've got one more to follow.

Very relevant question, Lewis. Thanks for asking that. So let me start on the pricing side. You will recall that in 2022, the raw material prices spiked and then we saw reductions of those over the last few years. We were able to hold on, on those advantages, those pricings for quite a while. With now a softer market, that was just not possible anymore. So we had to go back and pass on those benefits back to customers. We anticipated this the whole year. So that happened.

Now as you can also see, and I mentioned that we benefited from getting more volume, not just maintaining, but growing volume in North America, which is a soft market currently. So we are very convinced that, that was the right move for us to do going forward. So that's now at the level which it should be, so I'm confident on the pricing side going forward.

On the second point, on cost, there are a few points I'd like to mention, which might give you some comfort. Number one is there were some costs: energy cost, transport costs, which did hit us in the quarter quite a bit, but we see those getting more in line in Q4 and then going forward, number one. Number two, we did prebuild quite a lot of inventory in the quarter for the seasonality. Seasonality is now again much stronger in North America. We saw at Easter already, when we had the Easter seasonality, and we are seeing this with the order intake now also for North America Q4 already.

So seasonality is strong. We had to build inventory, which increased our cost as well. As did and part of that was, of course, also building inventory for our new -- or our 2 start-ups, which I mentioned, Paris and Hammond, and the additional volumes, which is great news, unfortunately, came with increased cost as we are ramping it up. We had to increase our cost to make sure that we are ramping it up correctly those 2. So those were costs which, again, we will manage going forward, which gives me also confidence.

And then lastly, again, with the seasonality, I think the way to look at this really is if either you look at the year-to-date margins or, in fact, you say it's H1 and H2, where Easter can vary between 2 quarters impact and the same then, of course, Q3, Q4 with a very strong Thanksgiving seasonality, which can or cannot impact the end of Q3 strongly or the beginning of Q4 strongly, depending on when you start building your inventory. So with other words, when our customers are then ordering from us.

That gives me the confidence that I see Q3, Q4 together, and I see the year-to-date numbers that we will get the cost back under control, especially in Paris and Hammond, the 2 start-ups that we have the pricing now at a level, which we think is the new level going forward and that we will manage, again, the demand of the seasonality better.

Very clear. And then just on Flexible Packaging, clearly, great to see the improvements in profitability in that division. My math puts that -- at least part of that down to improvements in the Indian entity, but it would seem there is improvements elsewhere also. I know you mentioned cost tailwinds, which will then need to be passed on in the next quarter. But can you just give a bit of extra color on what drove the improvement there this quarter and also equally on the sustainability of that going forward?

Yes. Also, that's a very relevant question, Lewis. So I think on Flexible, there are a number of points. Really, it's not just India or Turkey, the turnarounds, which are, of course, helping us, especially if you compare this to, frankly, the years before, not just prior. So that's helping us, and that's -- we are seeing this now in every quarter. Q1, we saw a bit; Q2, we saw more; Q3, we see that. So that's helpful.

But we are seeing also the same in other units. Flexibles, because of soft demand started cost-out programs early in the year everywhere, not just in those 2 where we have the turnaround teams, but in every unit. And that's now giving us the benefit on the cost side on Flexibles. They are very stringent on managing margin. They don't take any more negative margin orders. So they are very stringent and diligent and disciplined, I should say, on the management of their margin. So that's really great to see.

And as I mentioned, we had in the quarter specifically a very positive impact from raw material where we saw a decline. And you know that Flexible is, in fact, the segment where we have to pass on most with automatic clauses. So we will see that impact now reversing in Q4. So we think, again, it's the other direction than North America, but we think the way to look at Flexible is more like the year-to-date margin, which we are super proud of because it's a 2 point ahead of what we have seen in prior year.

The next question comes from Samu Wilhelmsson from Nordea Markets.

Maybe only one question for me. Given now that the inflation is now, of course, waiting on end demand for branded products. And according to my understanding, customers for you are most like big brand companies. So I was wondering that could you comment on your -- either your willingness on or your ability to try to gain these like smaller local customers to combat these kind of problems arising from...

Yes, that's great. Thanks for that question. Look, we -- on the smaller and medium-sized customers, which are under focus, we have lots of activities kicked off, and we see good discussions. I got to be transparent that those discussions will take time before we see the benefits. This is not -- never going to be a quick win. We just needed to start it, knowing that they are, of course, supported by competitors since years. So we know it's a starting point, and we know that those discussions will end up in better relationships and then eventually, we will get our chances.

So we have started that knowing that we will not get a small or a short-term impact, knowing it will be relatively small this year, and then we will see this ramping up over the next years. So -- but it was important to start. And yes, you are right, with the global key accounts, of course, they are seeing and you have seen their numbers, and you will see more reports coming out shortly. They are having similar issues on relatively soft demand as well, which is then what we are seeing as with most of them, we have long-term contracts.

So there is -- a quick share win is always going to be, again, difficult. So we are supporting them. We believe that they will come back, and we are sure that demand will come back, but we don't see it coming back at short term.

The next question comes from Maria Wikstrom from SEB.

This is Maria Wikstrom. I wanted to touch upon the North America, given that I think the kind of soft guidance, I mean, earlier have been that the margins on North America around 12-ish level, and now we were a bit above 10% in Q3. So how should we -- I mean, see, is this around -- I mean, if we talk about like annual EBIT margins in the coming years, I mean, is this still valid? Or has something changed in the profitability of North America?

Yes. Thanks, Maria. So I think we are very consistent to how we guided after the Capital Markets Day a few years back, the North American profitability, which was between 11% and 12%. So we are at 11.5% now. We think, again, if you take -- which will be seasonality driven a strong Q4, that we will be in that range of 11% to 12%, and that's the way we are thinking about North America going forward.

The 13.9%, which we have seen last year as the highest was clearly impacted by a pricing, which we were holding on after the raw material spikes a few years back. So the 11% to 12% guidance, which we have given some time back is how we see this, and we are very confident that we will deliver on that.

Okay. And then I wanted to touch upon, given that the North America is kind of like 3 different businesses. So if you could talk about the volume development, I mean, in Retail Tableware and Foodservice and then the Retail Packaging, please?

Yes. So we don't give specific volume guidance, but I give you a flavor. And the flavor is that from a volume perspective, we are doing well in all our different segments, which we are driving in North America, specifically well in Foodservice. But again, also on the Retail side, we are pretty happy with positive volumes, and we are seeing seasonality. So the next quarter is the big quarter as a reminder. So we don't have huge variations. We have volume growth year-to-date and in the quarter in North America, I'm pretty proud of that.

All right. And then my final question on CapEx, I mean, which was down year-over-year in Q3. I mean, is this kind of the quarterly run rate we should expect, I mean, for the Q4 as well? Or is this something specifically why the guidance -- why the CapEx figure was lower in Q3?

No, you should always expect in packaging that the last quarter is the highest quarter with regards to CapEx. So there's always a ramp-up over the year on CapEx projects coming and then, of course, also being paid to our suppliers. So that one, you should expect a stronger Q4. But I think our overall capital discipline is showing clear improvements year-over-year. So that would be the flavor I would give you.

Significantly down towards previous year though.

The next question comes from Hai Huynh from UBS.

I have a couple of questions, please. So on Foodservice, are you seeing any early signs of demand stabilization for -- within Q4 in the U.K. and Northeastern Europe? And on Fiber Packaging, how sustainable do you think the strong volume growth in egg and food packaging is?

Yes. Thank you, Hai. So we see early signs that take our largest customer that the promotional activities are showing impacts. So how sustainable that one is, the next quarters will show, but we see that, again, who is doing promotions sees traffic coming back and sees there an uptick. So that we have clearly seen in the quarter, specifically in the 2 markets you mentioned, and there specifically in Western Europe. But also in the U.K., promotions are showing first results, but Western Europe even stronger. So it's a quarter we are super proud of the quarter being flat versus prior.

As I mentioned, 8 quarters in a row negative. But it's too early to tell that this is going to continue. So I would say we think it's still going to be relatively soft before demand really comes back, but we also see that promotions are increasing and increasing. And towards the end of the year, again, we are hopeful that our customers will do their promotions. And of course, we will support those.

On Fiber, so the strong growth, which is really driven by all 3 elements: by volume, by price and by mix. We see this now not happening in 1 quarter, but we see this now happening for the whole year quarter after quarter, in fact, month after month. So we are very confident that our segment is strong, well prepared, very close to their customers. They are working, as a reminder, not with global key accounts. They are working pretty much with local small accounts.

And they know how to build relationships with those. They know how to serve them well, and that's clearly showing the benefit now. And I mentioned also that we are investing behind Fiber. So we are confident of the Fiber performance, that's one. I wanted to mention on Fiber as well that we -- wasn't a big impact, but we had a fire in one of our 3 South African plants at the end of the quarter. So this is going to be back in Q4. That plant, it's not material, but just as a factual update on you on the Fiber side, as you are asking, Hai.

Sorry, and I forgot one last question, if you don't mind. So net debt EBITDA now 2x at the bottom end of the range. And you mentioned capital discipline. So are you planning to deleverage further then? Or are there other spending or returns that you're considering?

Yes. Thank you again for that one. So you might remember, Hai, we presented our model on how we are thinking about allocating capital to shareholders. So we have a number of things we are considering. Number one, where we think we have the biggest impact is how can we invest the capital back into the business to continue to grow profitably in our business.

Second one, and we have now opened again up the lever of M&A. So we are actively looking at M&A. We did one in April this year, but we are continuing to look at other opportunities. And again, we will be very disciplined. It's super difficult to predict if and when something will happen, but we are prepared if it does. And then we are considering, of course, returning money to shareholders via dividends, which we always did. We are very proud of our long track record of increasing dividends year-over-year. So that's extremely important for us.

And of course, we are not excluding other means, which, of course, are up to the Board to discuss, but we are not excluding anything here. So the target is not to be at lower than 2x. We are now at that very bottom end. The target is to be between 2 and 3x, and we are considering all levers. Thomas, anything you want to add from your side?

No, I think you covered it all. So organically, we are still moving towards a continued deleveraging. So we want to use the capital wisely.

The next question comes from Calle Loikkanen from Danske Bank.

I have a couple of questions. And firstly, I mean, it sounds like you're not expecting any major improvements or major changes in demand in Q4. But what are you kind of seeing for 2026 in terms of demand? Are you kind of optimistic for next year? Or what kind of discussions do you have with your customers and so on?

Yes. Calle, thanks for looking ahead. Yes, we -- of course, we see the market being soft on the one side, the market being volatile on the other side. We are seeing that the -- look, the geopolitical issues didn't all go away. So that's still, of course, impacting everybody. Of course, we are seeing that the tariff discussions, even though they don't impact us directly in the U.S. are not improving consumer confidence at all yet. So we are seeing those headwinds. And we -- until the world is changing, we don't see those really helping us.

But on the other side, we see that our 3 value drivers are starting to help us. So I made the point about in a soft market, we are having 2 of our segments improving volume, growing. That's really important. We see the other 2, of course, working really hard on making sure that they get closer to customers, new customers, which, of course, this year was always going to be a difficult one to have an impact. But of course, we are super optimistic that this will start showing an impact going forward.

We have started, and I mentioned that over the year to really kickstart our investments in the U.S., Hammond and Paris, which is now already showing impacts on the volume side, unfortunately, with increased costs in the quarter. But of course, we are seeing those volumes going to help us going forward into 2026. We have invested, Calle, as you know, in lots of blue loop investments where we still have capacity, and we are actively out in the market selling them.

We have a couple of multinationals, which gave us already contracts where we see increased volumes for next year. So yes, are we optimistic for next year? We are. But on the other side, just to make sure I don't lose that point, we are seeing still a market, which is soft, and we are still seeing geopolitical issues in many places, which aren't helpful at all.

Yes. That's very helpful. And my second question was actually on the capacity ramp-up in the U.S. I was wondering that are there any kind of numbers or anything that you can provide in terms of what sort of help you've got from the new capacity in Q3? Anything of the impact in Q4 and perhaps onwards as well? So any kind of additional numbers or anything on that would be helpful.

Carl, we are not giving numbers on those specifically. As mentioned over the year, and I continue to make sure I mentioned that we started at a very low point early this year. We are nicely ramping this up, and we are, of course, getting quite a bit of help. So Hammond is now contributing in the quarter. Paris will start contributing then next quarter onwards.

The next question comes from Morayo Adesina from Barclays. Can you hear me?

Yes, Morayo here on behalf of Gaurav Jain. Just 2 questions to clarify some things on North America. So you mentioned the seasonality in Q4 that is upcoming. Does that mean that you're then expecting an uptick in volume performance in Q4 in North America versus the volumes that are already improving in Q3? And then I just wanted to touch upon the unfavorable sales mix that you highlighted in the report in North America. Could you just clarify, which of the subsegments are making up this unfavorable sales mix?

Yes. Thanks, Morayo. Yes, happy to answer those 2. Let me start with the first one. Yes. Clearly, for us, Easter, number one, and Thanksgiving, even more so are the very -- the 2 very big seasonalities in North America. Thanksgiving is going to drive retail sales, specifically in North America in Q4 as it does in every year, and we have no reason to believe that it wouldn't in Q4 this year. So we are optimistic on that side. There's no doubt about that.

On the mix side, I think it's important to see that retail is our largest segment in North America. And as retail is also a high-margin business. That's, of course, with being the largest with regards to volume and the highest margin with regards to the margin side, it will impact positively the mix in Q4 for our North American business. And the focus on branded products also will help us because also there, we see higher margin. So both of those questions, I think, we can give you some comfort.

Thank you for attending this event. There seem to be no further questions. But as always, we remind you that if you have any follow-up questions, feel free to reach out to the IR team. And with that, we hope you have a great day, and thank you from our side.

Thank you.

Thank you.