Kemira Stock

Good morning, everyone, and welcome to Kemira's Q2 results webcast. My name is Kiira Froberg, and I'm the Head of Investor Relations at Kemira. We published our half year financial report today, while revenue remained stable year-on-year, our profitability was burdened by cost inflation.

Here with me today, I have our President and CEO, Antti Salminen; and our CFO, Tuomas Makipeska.

Before we start the actual presentation, I would just like to kindly remind you that our presentation today contains forward-looking statements. We have our usual agenda for the day, and Antti will start by covering the Q2 highlights, and he will also discuss the group level performance. After that, Tuomas will discuss the financials in a bit more detail, and his part of the presentation includes also the business unit performance. In the end, we will have Q&A. As always, and questions can be asked either in the webcast chat function or by phone.

But with that, it's now time to keep the stage to Antti. Please go ahead with the presentation.

Thank you, Kiira, and good morning to everybody. On my behalf as well, it's my great pleasure to present Kemira's Q2 '26 results even if the results themselves are not that pleasant. Let's start with the market environment. So market continued to be extremely soft and weak. And that we, of course, witnessed already last year. So basically, the geopolitical turmoil in the world is causing the great uncertainty and predictability businesses, we as consumers don't have the confidence, we don't consume -- the overall run rate of the industries are low. And it's good to remember that our product is consumable in our customers' processes.

So basically, when the customers' processes are running with low utilization, there's less demand for our product and that we have now witnessed already for quite some time. And that these conditions seem to be continuing and continued well into the quarter 2 of this year. And that is then visible in the weak top line performance. However, due to the continuous investments to grow our water business we have been able to maintain year-on-year the revenues on the same level. That's really driven by the acquisition performance. Organic performance due to the soft market was weak.

Now of course, the bad news of the quarter is the weak profitability. So 16.1% group level EBITDA performance is far from satisfactory. The main reason behind that was the cost inflation caused by the war in Iran. So the Iran war impacts our input costs, both raw materials and logistics. And that's kind of a perfect storm on top of the already weak demand. And that's what you see in the quarter 2 results of Kemira. I will talk later a bit more about the more detailed level of impact of the war in Iran and our mitigation actions. But of course, immediately when the war broke out, we started price increases and as we have explained earlier, the fact is that these price increases only take effect with the delay.

So the real impact in our results of the price increases will be visible only towards the end of the year. And thus, the short-term outlook and this quarter performance is what it is. We increased, of course, then our efforts in efficiency improvement, cost cutting, portfolio streamlining that we mitigate the impact both of the soft demand and the increased input costs to the extent that we can. The positive thing is, of course, that our balance sheet continues to be solid. So we've been continuing to execute on our strategy. We have been kind of in a very decided manner, growing the order business via programmatic M&A, an example of that was the Clearwater Technologies acquisition in Q2 in U.S.

We continue to invest in innovation, opening up new adjacent markets. We continue to increase -- actually a very healthy growth in the services business, but as we start from a small base, it's not visible in the group level numbers yet. But really, the strategy execution continues with the full speed. And in quarter 2, we also completed actually ahead of our original schedule share buyback program. And yesterday, the Board decided to cancel those shares. So looking at the revenue in a bit more detail. Of course, the revenue development has not been satisfactory for several quarters. So the soft markets have been impacting us already a long time. The organic growth was minus 2% in the quarter 2. But the overall revenue year-on-year, as I mentioned already, remained stable, mainly due to the acquisitions bringing and thus, the Water Solutions revenue actually grew.

Now in Packaging & Hygiene Solutions, the revenue remained stable. And then we saw the decline in Fiber Essentials part of the business. And in Fiber Essentials, it's good to remember that last year, the quarter 2 was still so-called normal in terms of demand. We only started to see the temporary shutdowns and prolonged maintenance breaks of the pulp mills in -- at this time of the year, so for quarter free. So basically, the comparison period was still quite normal. But now we clearly see this situation, and you've seen the announcements by our customers. So we expect that this weak demand will continue later on into the year. And basically, that's what's causing the decline in the Fiber Essentials part.

Then if we look at the profitability, of course, very unsatisfactory results for this quarter 2 with the 16.1% operative EBITDA performance. And as mentioned, this is really mostly driven by the cost inflation due to the war in Iran. But there was also a price impact in the profitability. And that price is again an example of this delay in the pricing effect. So this kind of a pricing-driven profitability decline you'll see in quarter 2 is actually pricing decisions that we made in quarter 4 last year, where we basically saw that the demand environment weak, so basically to maintain the volumes, we gave some price concessions to customers with the outlook to this year, which was basically showing that the overall weak economy will bring down the input costs.

So against those forecasted downward input costs we gave some price concessions. But now then when they actually realize at the same time, we have the Iran war impact and increased input costs. So basically a perfect storm in a sense hitting this part quarter 2 here. The profitability improved in Fiber Essentials where we've been now kind of running the profitability improvement program already for the year. It was 11.6%. The increase, of course, is against last year's extremely weak quarter 2. So that's good to remember, but step to the right direction there.

Then if we look at our long-term financial targets, at least, of course, as we have been communicating are kind of guide rails within which we are confident that we can long term operate. I've been saying already earlier that there may be quarters or even several quarters where we are below this in 1 or the other of the metrics. Now due to the weak market environment, we've been below the organic growth target already for quite some time. But now this weakness in profitability, of course, shows that then in the latest 12 months, EBITDA being also slightly below the lower end of the EBITDA target range and lower EBITDA performance, combined with the acquisitions that we have made, then has caused also the return on capital employed being under the guide rail.

But again, let's remember, these are long-term targets where basically long term, we are confident that we will return to this and we can operate within these brackets. Then as promised, a couple of words about the war in Iran and the impacts of that. So the war in Iran impacts us via logistics costs, so the transportation via fuel price increases, which is passed on to us and then via the raw materials. We saw the impact of the logistics cost coming in already early in the quarter, that is quite quick chain kind of passing those through and hearing us. Then the raw material impact, we really started to see kind of a mid-quarter and increasing towards the end of the quarter.

And it's good to remember that our 1/3 roughly of our raw material base is oil derivatives. So basically, the oil price impacts directly, those raw materials, and it's coming through. But we also have impact on Fiber Essentials, which doesn't really consume oil derivative raw materials. But sulfur is an important element -- sulfur is an important raw material for Fiber Essentials. And the -- more than 40% of global sulfur comes via Strait of Hormuz. So that is out of the question. Then we have been getting some elementary sulfur from Kazakhstan. But as a result of iron war, Russia stopped all the land transportation through the Russian territory, so we don't get the Kazakhstan material either. And that means that more than 2/3 of the global sulfur supply is out of the game. And it's easy to see what that means then to the demand supply balance and as pricing the sulfur prices have several folded during the past 12 months.

And that hits the Fiber Essentials business. And even if the Strait would be open tomorrow for good, the value chains are so long that we would still see the impact burdening our Fiber Essentials business going forward to the year as well. So I'm not expecting any great release on that respect from there.

Now when looking at the impacts of war in Iran, somebody may be looking at the chemical industry overall and seeing that there are several companies that actually are giving positive profit warnings. It's good to remember that some chemical companies operate in the upstream where they actually benefit from this higher prices of oil derivatives and then companies like us operate in downstream, where it's only a cost burden for us. We, of course, started immediately price mitigation actions when we saw the war breakout because we knew that it's going to be impacting us. The -- what as mentioned, this kind of come through with the delay that we knew already to begin with. But then what actually surprised us negatively is that in this soft market condition, our capability to execute those price increases was lower than we expected. So -- and that basically then led to the profit warning that we gave a few months -- a few weeks back. So basically, a negative surprise to us as well, how this balance overall works. And really, the main driver for the profit warning was the raw material inflation caused by the war in Iran.

Our current estimate, just to give you a magnitude, our current estimate of the gross impact of the war in Iran is roughly EUR 100 million for this 2026 for us. And then we currently estimate that we can mitigate roughly half of that by price increase actions. Of course, we fight every day to get the mitigation percentage up and have more price increases implemented. But this is the current view as we speak today. And there you get the kind of magnitude of the kind of financial impact of the situation for us. So then updated the outlook for the year as well. The current outlook is that we expect revenue to be between EUR 2.6 billion and EUR 3 billion, and we expect the operative EBITDA to be between EUR 400 million and EUR 500 million.

Of course, some assumptions behind this outlook have been updated as well. We currently see that this geopolitical situation will not very easily kind of vanish anywhere. So the markets will continue to be soft and weak for the remainder of the year. So we don't see any miracle support coming from there. Also, this uncertainty in the world is causing that the raw material markets are volatile. But then also the -- now that the Iran war is continuing and the Strait of Hormuz is not open at midyear means that even if it opens tomorrow, then the impact on the raw material markets will continue for the remainder of the year.

So basically, that means that against this, we have estimated this annual EUR 100 million gross impact of the cost increases. Now that said, so I'm not happy with the results. We are fighting hard to get us back on the track. But I'm really happy with the fighting spirit in our organization. The team is really doing utmost and focusing on this everybody has understood the severity of the situation. So we are working on efficiency improvement programs on price increase actions and all the possible levers to improve the situation. I'm also happy with our organization's capability to focus at the same time on the short-term profitability challenges and the long-term strategy execution.

So really diligent work on growing the water business, working on the acquisition pipeline, coming out with new solutions and services to our customers to help them solve their problems and opening up new markets. So really good work by the organization, and I'm confident that we will get back on track. It will just take some time. So basically -- not immediate because of this delay effect that I explained already. But really confident that longer the -- midterm, long term, the future will be very good for us. Short term, we will be suffering.

And with this, I will hand it over to Tuomas, who will explain in more detail the numbers, finances and how the performance was.

All right. Thanks, Antti, and thanks, Kiira. Good morning all on my behalf as well. As I said, so I will cover the Q2 financials in more detail and also the business unit performance review in my part as well. So let's start with the drivers behind our second quarter overall performance. Revenue remained stable year-on-year at EUR 693 million. The main positive contributor was the completed acquisitions, which increased the revenue by EUR 17 million. and this offset lower sales prices as well as slightly lower volumes and some negative currency impacts as well. Year-on-year organic revenue growth was minus 2%. Compared to the first quarter, volumes improved while pricing remained stable. Operating EBITDA declined to EUR 112 million.

And the main drivers behind the decline were lower sales prices and significantly higher variable costs. The cost inflation had a clear impact across the businesses particularly in raw materials and logistics. And as a result, our operative EBITDA margin decreased to 16.1% as Antti explained. The war in Iran has a major impact on our variable cost and pricing. So let's take a look -- a closer look at these dynamics on the next slide.

In this graph, it's illustrated the relationship between pricing and variable costs over time. As we explained earlier, the sharp increase in raw material and logistic costs has put pressure on profitability during the quarter. While we reacted quickly by implementing price increases after the iron-related market disruptions started. There is always the time lag before these increases are visible in our financial results. On average, depending on contracts and business mix, the impact takes up to 2 quarters to materialize. Consequently, the margin pressure from cost inflation was clearly visible in the second quarter, while the benefit from pricing actions is expected to come through more gradually in the second half of the year.

Net impact from variable costs and price changes was EUR 21 million in Q2 and close to EUR 30 million year-to-date.

Let's then move on to the business units and start with the Water Solutions. Market conditions for Water Solutions remained mixed in the quarter. Demand from municipal customers was stable, while volatility continued among industrial customers due to the uncertain economic environment. As expected, the second quarter was seasonally stronger than the first one following the warm weather in the Northern Hemisphere. Revenue increased year-on-year to EUR 326 million primarily driven by acquisitions. Organic growth was positive at 1% with stable volumes and higher prices compared to last year.

Q2 was, in fact, the first quarter since Q4 '24, achieving positive organic growth. Profitability, however, was impacted by cost inflation and operative EBITDA margin declined to 17.4%. The decline was mainly driven by higher raw material and logistics costs which were only partially offset by pricing actions during the quarter. In Water Solutions, the logistics costs have increased significantly despite surcharges to customers. Despite the short-term profitability pressure, Water Solutions continues to benefit from resilient municipal demand and remains our strongest business area in terms of return on capital employed.

Turning next to Packaging & Hygiene Solutions business unit. The market environment remained challenging, particularly in packaging and paper markets where economic uncertainty and weak consumer confidence continue to affect demand. Revenue was stable year-on-year at approximately EUR 240 million with organic growth close to 0. Compared to the first quarter, both volumes and prices improved modestly. The positive highlight in the quarter was profitability. Operative EBITDA margin improved to 11.6% and the improvement was mainly driven by cost savings resulting from the operating model changes we implemented in the beginning of the year.

And we continue to execute our profitability improvement initiative and have accelerated performance measures in China to further strengthen our competitiveness and efficiency there.

Let's look at the Fiber Essentials business unit next. The market environment remained weak throughout the quarter. Demand for bleaching chemicals in the Nordic market was seasonally lower following a strong first quarter. Our bleaching demand follows the capacity utilization at our customers' pulp mills. In addition, as Antti explained, sulfur availability and pricing were negatively affected by supply chain disruptions linked to the Iran conflict, since the large part of global sulfur volumes is transported through the trader farmers.

Revenue declined year-on-year to EUR 127 million. Organic growth was negative 12%, reflecting lower volumes and lower prices compared to the Q2 last year. Volumes and prices also declined sequentially from the strong first quarter. As a result, profitability weakened clearly. Operating EBITDA margin declined to 21.4% and the decrease was directly driven by lower volumes and weaker pricing.

Last year, the Q2 was the last fairly normal quarter for Fiber Essentials in terms of customer demand. The market environment weakened significantly in Q3 when many of our Nordic customers had downtime in their pulp mills. And customers have scheduled maintenance breaks for the second half of this year again and the visibility of coming months and quarter remains low. So the -- so this concludes now the part of the business unit review, and let's now get back to the group level figures.

Our balance sheet remains strong, and it continues to provide flexibility for strategic investments and growth initiatives. Our net debt increased year-on-year to EUR 622 million, primarily reflecting acquisitions and the share buyback. During the quarter, we completed the share buyback program repurchasing a total of 5 million shares between February and June. Gearing increased to 39%, while leverage remained at 1.3x, still at a comfortable level. Both buybacks and acquisitions are something that have been high on our agenda, intentionally resulting in a higher net debt and leverage ratio.

Operative return on capital employed decreased to 13.5%, mainly due to the lower earnings level and the impact from acquisitions on the capital employed. Among the business units, as I said, Water Solutions continued to generate the highest return on capital at 18.2%, although the Water Solutions ROCE has decreased as a result of the acquisitions. Overall, we remain well positioned a solid financial profile.

Let's finally look at the cash flow and working capital. Net working capital increased to EUR 316 million, corresponding to 11.6% of rolling 12-month revenue. And the increase was driven mainly by acquisitions as well as higher inventories resulting from raw material inflation. Operating cash flow in the quarter was EUR 59 million, while rollover profitability weighed on cash generation. But overall, the cash flow remained on a solid level. CapEx, excluding acquisitions, was EUR 41 million during the quarter, broadly in line with last year. And looking ahead, we continue to expect full year CapEx, excluding acquisitions, to be slightly above 2025 level. Overall, our cash generation remains healthy and continues to support our growth investments and shareholder returns.

So finally, summarizing the Q2. Demand remained broadly stable compared to the recent quarters, although the overall market environment continues to be soft and characterized by uncertainty. The main challenge during the quarter was the sharp increase in raw material and logistics costs. And while we have taken pricing and productivity measures to offset these impacts the benefits will materialize gradually over the coming quarters. As Antti mentioned, we are not expecting the customer price increases to fully cover the inflation impact. And on top of them, we have profitability improvement initiatives ongoing. At the same time, cost efficiency, operational excellence and long-term growth investments.

Supported by a solid balance sheet, we continue to strengthen Kemira's competitiveness and position the company for sustainable value creation.

And with that, I'll conclude the presentation and hand it over to you, Kiira. Thank you.

Thank you to Tuomas, and thank you, Antti. Maybe we can all stay here. So now it's time for the Q&A after the presentations. We have already received several questions through the webcast chat. So those will be covered here as well. But I would now kindly ask the operator to open the line, please, for the telephone questions. So please, operator, let's go ahead.

[Operator Instructions]

The next question comes from Anssi Raussi from SEB.

[indiscernible] couple of questions from my side. And firstly, on your volumes. So did you see any recovery when we had these maybe thin hopes of these in Iran or was the demand situation basically the same throughout the quarter?

Well, thank you, Anssi. We don't really comment intraquarter things. And basically, that's it. So -- and these are so quick these movements that even if we would comment I couldn't say anything because it's 1 day up and 1 day down. And these are really kind of a quite, I would say, slow value change to move. So these kind of very quick movements don't typically sell through.

Yes, I understand. And my second question is on your price, sales prices. And I think the impact on earnings was something like EUR 25 million, EUR 26 million negative during the first half of the year. So just to double check that that's your guidance on the impact of raw mats and prices mean that the earnings impact of sales prices will turn sharply positive in the second half despite the pricing cycle now being longer than before? And is it fair to assume that this will happen in -- mostly in Q4? Just thinking about the starting point going into 2027.

Yes. So as I mentioned, basically the delay typically is up to 2 quarters. And basically, you would see the full impact of the price increase actions done now in quarter 4. Of course, we started some of those already early in the in this quarter and then accelerated towards the end of -- so there's not a given date that you can count from, but they would be kind of fully impacting the quarter 4. And similarly, like results, as I explained, that's mainly due to pricing decisions made in quarter 4 last year, and that you see now then.

Okay. Got it. And my last question is on your water treatment segment. So could you give us any more in detailed view like which industrial subsegments are especially under pressure in this segment right now?

Yes. So just good to remind that the water business. And basically, we serve any industry that consumes water and practically any industry consumes water. So it's a really wide variety of different industries that we serve. And like when the overall economy is down, then of course, all of these are impacted. Now like the car industry in Europe, for instance, very good example of an industry that is still kind of struggling a lot and will continue to struggle.

Now it would be probably easier to kind of pinpoint a couple of industries within the portfolio, which are doing better than the rest of the economy. And there, you see really the kind of data centers, which are using a lot of order, which is 1 of the kind of still emerging things or not the big thing, but basically, that would be 1 of the benefiters of the current economic situation. You see some positive signs on the mining side because, again, this kind of data boom consumes a lot of kind of minerals and so forth. So there are a couple of examples, which you can read from the newspapers every day that are doing well. But really, the rest of the economy is quite subdued at the moment.

The next question comes from Martin Roediger from Kepler Cheuvreux.

Yes. I will ask them 1 by one. In total, 3, if I may. In packaging and hygiene, you mentioned cost savings explaining the earnings increase in that segment. Can you quantify these cost savings in that segment? And if there are cost savings in the other segments, if you -- can you quantify them as well? That's my first one.

Yes. I mean we don't go to the business unit level, quantifying the cost saving impacts. But we've been doing several different changes in the structure, reducing the overstaffing in certain areas to match the demand and so forth. So those are relatively significant on the Packaging & Hygiene Solutions level. And then on the group level, the only thing that we have openly communicated is about workforce reductions now during the spring time, where we communicated the -- roughly EUR 15 million impact of those. So these are...

Second question is the delta between selling prices and input cost costs and EBITDA drag of minus EUR 21 million in Q2. You said that the Iran war will cause a drag of EUR 100 million in the full year 2026, and you expect to compensate half of that with price hikes? Does a net effect of minus EUR 15 million in 2026. That means another 29 million drag is to come in the second half. Is that math correct? Or is it wrong because the EUR 8 million drag in Q1 is also related to the Iran war.

That's kind of, give or take, right, you have your math correct there. So basically, of course, there are always other things that move around. So it's not a clean-cut case and I said these are approximate numbers. But ballpark-wise, yes, I mean, your math is correct.

Okay. And finally, is the border between Russia and Finland closed? And to which extent has that impacted your sourcing, your selling activity? I understood that you mentioned sulfur supply from Kazakhstan is also now interrupted. I guess that is also coming via land. Is there other items, other effects also from that potential closure.

The border between Finland and Russia has been closed for years now and continues to be so. And we basically walked away from any business in Russia at the second day after they attacked Ukraine, and we remain solid on that. We will not be returning during the current regime in the Russian markets. We don't get any raw materials from Russia. So basically, the impact is just the transportation via their territory. So -- and basically, as I mentioned, they have now stopped all the energy and raw material-related deliveries via their territory because they are partly short of those materials themselves. So this is the situation.

Thank you, Martin. We are ready to take the next question, please.

The next question comes from Joni Sandvall from Nordea.

Starting maybe with the PHS in APAC. I'm just wondering what changes or actions are you taking there on top of the changes that you have already done? So you mentioned the acceleration of profit measures there.

Yes. So again, without going to too much detail, we are reviewing the whole business kind of operating model and also the kind of the products and services we offer to our customers, looking at where we can be profitable, we are not looking at the asset network we have there. So basically, all the angles of the business are evaluated. And we aim to draw the conclusions and start the kind of definitive actions still this year to kind of fundamentally improve the profitability.

Okay. Okay. That's clear. Then still 1 question on the pricing actions. Has there been any difference between the segments? I understand the water solutions is more on the fixed side, but how customers have taken the price increases, any difference between segments.

There's, of course, always some variation and difference and basically how the customers accept those. But you can pretty much, I think, draw the conclusion if you look at the customer industries and how they are doing themselves. So the better the customer industry is doing, the easier it is to pass through the raw material increases and the worst the customer industry is doing, then obviously, they are more strict on kind of less capable of accepting the cost increases. So I will not lift any industry kind of from the back here.

Okay. Okay. That's clear. And then lastly, on the EUR 100 million cost headwind, which you mentioned 50% to be covered by the price increases. Just to clarify this, is this your assumption based on pricing actions already negotiated, I mean, is there downside risk on this assumption?

Well, at least there's upside opportunity that because, as I mentioned, we continue to push for those. So basically, of course, our aim is to cover a big part of the cost increase are possible. But this is our best estimate at the moment for the year.

It's realistic.

That's a realistic estimate at the moment.

I guess we don't have any more questions on the line at the moment. So we could take a couple ones in the chat. And there are a few that are very similar, so I try to bundle them now. And they are related to the cost impact of the Iran situation.

So you expected cost inflation to have approximately EUR 100 million negative impact and about EUR 50 million of that mitigated by price increases. Did the price increases had a positive impact already now in Q2? Or will it come with a lag in later quarters? And then also a question on impact to '27.

Well, as I explained, it will come with the lag. And there's -- again, there's probably kind of a tiny bit of impact already on the quarter 2, but not material. And naturally of the impact will come through the Q3 and Q4 then?

Yes. And I guess that we are not yet commenting on '27, so that was then something where we will come back later. Then there is a question on Fiber Essentials and negative growth numbers. So could you elaborate on the clearly negative growth number in Fiber Essentials. What is driving the decline in Q2? And is there differences in growth between geographies, especially in bleaching chemicals, the trend seems to have changed clearly worse in Q2. Is this the right conclusion?

It is, and it is not. So as we explained, the comparison period, '25 quarter 2, the market conditions in the pulp market, we're still relatively normal, so to say. So the comparison period is kind of normal demand environment. We really saw the downtimes at the pulp mills only taking place this time of the year last year. So basically, that kind of weak demand has continued now for the past 12 months. Thus, the comparison means that basically the delta to the previous year is relatively high.

And now do we see some differences in the market? Yes, we do. I mean it's a long-term trend that basically the pulp markets are doing pretty well actually in the southern hemisphere in APAC where we are not so much exposed but really in the Latin America. And our business in Latin America is doing really well, whereas the Northern Hemisphere, pulp assets, as you've seen from our customers announcement, both in North America and here in Europe. They are taking downtime, extending the maintenance break. So the demand is really kind of demand pattern is dual in the sense that the demand is weak in the Northern Hemisphere, but a solid and strong in the Southern Hemisphere.

And then there would be a question or ROCE as M&A in Water Solutions will continue, can 1 expect ROCE percent to decline to continue as it has done steadily since the second quarter '24.

I can take this one. So of course, the nature of M&A when you get the capital employed impact right away on the balance sheet and then the future earnings comes over time. So from that perspective, of course, the M&A activity has kind of a decreasing impact on ROCE in the short term. But of course, we are doing M&A deals that are value creating in the long term. So in the long term, we are definitely supporting our ROCE going forward in the water solutions, and that's, I think, self-evident. But of course, the nature of ROCE as a metric in M&A has that kind of impact, yes.

Thank you. Those were now all the questions from the chat function. I'm just going to check the operator if there are any more questions in the line, please.

There are no more questions at this time, so I hand the conference back to the speakers.

Great. Thank you. As there are no more questions, so I think it's time to conclude our Q2 webcast. And of course, I mean, like if there are any questions, feel free to contact the Investor Relations team at Kemira. Happy to help you. And maybe before we are heading to summer holidays, it's time to remind that our Q3 interim report will be published on October 23. So if we don't see before that, then at the latest back then, we will be here back in the studio. And now I would like to thank everyone for the active participation and of course, wish everyone a very lovely and relaxing rest of summer. Thank you.

Good morning, and welcome, everyone, to Kemira's Q1 Results Webcast. My name is Kiira Froberg, and I'm the Head of Investor Relations at Kemira. We published our Q1 interim report today. Both revenue and profitability declined year-on-year in a weak market.

Here with me today, I have our President and CEO, Antti Salminen; and our new CFO, Tuomas Makipeska. Before we start the actual presentation, just a kind reminder that the presentation today includes forward-looking statements. Next, Antti will cover the group level performance and will also discuss the Q1 highlights. After that, Tuomas will go into a bit more detail with the financials and will also cover the business unit level performance. In the end of the event, we will have Q&A as usual, and you can ask questions through the webcast chat or by phone. But I guess now it's time to hand over to you, Antti. Please go ahead.

Thank you, Kiira. Good morning on my behalf as well. As mentioned, I will be presenting Kemira's quarter 1 2026 results. And after me, Tuomas will have his first moment in spotlight in his current role as CFO of Kemira, and Tuomas will go a bit deeper into the financials of the quarter. The quarter was really kind of described or dominated by the really weak global economy and towards the end of the quarter with the even increased geopolitical tensions and turbulence. That was the name of the game, and that caused really strong headwinds for our business. As we stand here today, the Brent oil trades at $105. The consumer confidence index on our main markets has been steadily below 100 points for the quarter. So very tough environment to execute the business.

And as a result, our -- maybe better with the slides. As a result, our revenue declined. So there was a clear decline. Organic growth as well, minus 3%. And the profitability was declining as well, 17.3% operative EBITDA performance, which is still a profitable business. So basically, I have to thank the Kemira organization for making and keeping this business profitable despite the really strong headwinds and the tough market that we are competing in at the moment.

The profitability decline was most clear in Packaging & Hygiene Solutions, but also Water Solutions, especially the industrial side, suffered from the weak demand. And as a consequence of the weak demand, our pricing power is weakened. So basically, capability to execute was difficult in this quarter, whereas we saw improvement in the Fiber Essentials part. So that's maybe the highlight of the quarter in terms of profitability.

As a result of a weaker than anticipated or weaker quarter than we wanted to have, we have decided to accelerate our performance improvement actions and do some further cost cuttings as well as we have done this far, we want to constantly improve and adapt the cost structure to the weaker top line. That's our responsibility, and that's what we are doing. Also, the increased raw material cost that, of course, was visible towards the end of the quarter and especially the transportation costs that come through very quickly from these kind of prices had an impact already on this quarter, and we started promptly to implement price increases to mitigate the impact of these cost increases.

The result of those increases will be visible a bit later in the year. And I will actually later in my part, talk a little bit more about the impacts of the Iran war to Kemira's business and how do we mitigate it. Balance sheet continues to be strong and the combination of strong balance sheet and good profitability means that we continue to execute on our growth strategy. So we continue to build the future Kemira so that we are ready when the markets are better.

We executed 2 acquisitions in the Water Solutions area during the first quarter. First, the AquaBlue in U.S., a small bolt-on acquisition to build on the industrial water services platform that we created by acquiring the water engineers business late last year. Secondly, we signed the deal on the SIDRA Wasserchemie in Germany. This is strengthening our core in the profitable urban water treatment coagulant area in Europe. So basically investing both to strengthening the core and to the higher growth Water Solutions market in the industrial water services in U.S.

We also announced our plans to build an activated carbon reactivation facility at our existing site in Tarragona, Spain. So that's another growth area that we have in our strategy and have clearly communicated the emerging fast-growing micropollutants removal market. So this when finalized, will complement nicely our network -- European network of the reactivation facilities.

So all in all, strong balance sheet and profitable business enable us to continue executing on the growth strategy despite of the weaknesses of the market that we saw in the quarter 1. Then I look a bit more on the revenue development. So revenue clearly declined as mentioned. There was, of course, the mentioned market weakness as the main driver, but also there was a quite significant exchange rate impact on the revenues in the first quarter.

Revenue declined in Packaging & Hygiene Solutions and Fiber Essentials. Those are the markets that get the most direct hit from the weak economy as we have been talking about earlier as well, whereas the Water Solutions revenue stayed pretty close to the previous year level. It has to be mentioned as well that quarter-on-quarter, so the quarter 4 '25 compared to this first quarter of '26, both the sales volumes and prices actually increased.

Then looking at the profitability. Again, EBITDA percentage declined. Main drivers, again, being the weaker demand and the impact of that in the pricing. The biggest hit we took in the Packaging & Hygiene Solutions, where clearly the profitability was far below our targets and expectations. As you remember, we have been progressing quite well in our improvement -- profitability improvement actions in the Packaging & Hygiene Solutions area. This was a clear setback, but we are still on the course with that program. There was a nonrecurring item of quite significant inventory write-offs during the first quarter, which partly explained the shortfall there, but not completely, of course.

Also the Water Solutions profitability declined, but it's still very healthy. But again, as a bright moment, as mentioned, Fiber Essentials profitability actually improved to 26.7%. And as a result of this on group level, of course, then the earnings per share also declined, earnings per share being EUR 0.29 per share.

Then if we look at the long-term financial targets, and it's good to remember, these are long-term financial targets. So we are still constantly because of the soft market environment tracking below our growth target. That's clear. We are still last 12 months within our long-term targets of profitability despite the first quarter being below, again, we've been communicating earlier as well that there will be worse quarters, there will be better quarters. This is the long-term target that we have. And with the actions that we are taking, we are confident that we will be returning back to that bracket.

Then as mentioned, let's talk a little bit about Iran or War in Iran and its impacts to Kemira business. The direct impacts of the Iran War to our business are very limited. We don't really have meaningful business on that area nor are there meaningful trade flows, I mean, end products that we would ship via the Strait of Hormuz. So the direct impact is very limited. But it's good to bear in mind that 1/3 of our raw material base is oil derivatives. And that part of the raw material pool will get the impact from the increased oil prices.

So that impact will come in some material groups faster, in some material groups slower through. So that is an additional headwind for our business. And of course, the logistics costs impacted by this. Everybody has seen the gas prices going up and diesel prices going up. So those come through really quickly, and we saw that already in the Q1.

As mentioned, we have started firm price increase actions to mitigate those impacts. We executed very well during the couple of last crisis. We have a very capable organization, both during COVID and then the Russian attack to Ukraine. We could mitigate the inflation on those situations very well. So I'm confident that we can do it this time as well. Of course, this time, the market environment is softer. So it will not be as easy and as straightforward. But with the good customer relationships we have and the way we run the business, I think we are -- we'll be able to mitigate largely the increased cost impact.

And it's good to bear in mind that the price increase impact typically is visible in our P&L with the delay of 1 to 2 quarters depending on part of the business. Then finally, outlook, we retain our outlook. So the full year revenue is expected to be between EUR 2.6 billion and EUR 3 billion and the EBITDA between -- operative EBITDA between EUR 470 million and EUR 570 million. However, we sharpened a bit or changed a bit the assumptions behind this due to the situation now in quarter 1. So the end market demand has weakened and is expected to stay weak this year.

So basically, this weakening is very clear, particularly in the packaging and pulp markets, which take the hit typically most quickly. But also, as mentioned, in the industrial part of the Water Solutions business, clear volatility in the market is seen. We, as mentioned, expect to be largely capable to mitigate the raw material cost increases. But of course, the assumptions don't include any major shock or disruption into any meaningful important material flows. So these are maybe good to highlight a bit the assumptions behind the outlook as well.

But with this, I will hand it over to Tuomas, who will walk you through in more detail the financials for the quarter. Go ahead, Tuomas.

All right. Thank you very much, Antti. So this is essentially my new -- my first webcast as Kemira's CFO, and I am naturally happy to have started in the position in April now. And I'm also pleased to meet some of the new analysts and all the familiar ones in this session as well. So hello, everybody there. I will add a bit of more financial data to Antti's overall summary of the quarter's development and cover also the business unit performance here in this section.

Let's start with the Q1 revenue and EBITDA development there. Revenue declined altogether EUR 32 million, most of which was caused by the negative currency effect of EUR 26 million, primarily in the USD. Revenue was, on the other hand, supported by EUR 14 million from the completed acquisitions. So the organic revenue growth was minus 3%, driven by the lower prices and volumes. In the profitability bridge, it's visible that the impact of cost inflation was limited in Q1. And in fact, we were able to partly absorb it in variable costs. Instead, the lower prices and volumes came through to operative EBITDA.

The operative EBITDA margin was 17.3%, which is obviously a disappointment. While the market continues uncertain and volatile, we are taking actions related to our cost base to ensure that it is aligned with the current market environment. This is something that we continually do in the company and decided to accelerate these measures as we announced this morning. We have now entered an environment where cost inflation has accelerated following the War in Iran. We are increasing prices accordingly, but the delta is now negative, as you can see in the graph.

In the past, we have been fairly successful in passing on the effects to our sales prices. And also this time, we are taking determined measures on it. As Antti already explained, so in our case, it usually takes up to 2 quarters before the customer price increases are fully visible in our financials. So there is most likely some headwind from this time lag in Q2.

Next, moving forward to the business unit financials. Let's start with the Water Solutions. The demand environment is impacted by the economic uncertainty, and it's more visible in the industrial side of the business, whereas the urban market continues stable. There is also some seasonality in the Water Solutions business, and Q1 is usually a weaker quarter compared to the Q2 and Q3. This is driven by, for example, the weather conditions as in the summer months, there is, in general, more need for water treatment versus winter time.

Excluding FX impact there in Q1, the total revenue remained stable and organic revenue declined 2% against the good comparison period. The operative EBITDA was 18.4%, which was below previous year's level, and the decline was mainly driven by pricing and higher costs. The costs included also a couple of one-off like items that happened to take place in Q1.

Let's have a look at the Packaging & Hygiene Solutions next. Packaging & Hygiene Solutions continued to be impacted by the economic uncertainty and low consumer confidence. But on the positive side, the market did not weaken further from the previous quarters. Our volumes remained stable and sales prices declined only slightly quarter-on-quarter. Year-on-year, volumes were flat, but the prices were lower. APAC and there, especially China, continued weak in Q1, mainly driven by very competitive environment and overcapacity in the region. EBITDA declined to 10.1%, mainly driven by pricing.

Our profitability improvement initiative continues and the implementation of the new operating model progresses as planned. We have already achieved cost savings from them, but in Q1, the negative top line development more than offsets their impact. We haven't completed all the identified profitability improvement measures yet. As we stated also earlier, this is more of a gradual process, and we continue to drive improvements also going forward.

Then finally, covering Fiber Essentials business. Market environment continued soft in the pulp industry, although there was sequential improvement driven by the cold winter and related high electricity prices in the Nordics. Despite a better Q1, overall visibility to the market development remains low and the market continues subdued. Market prices for some base chemicals like caustic and sulfur continued low. Organic revenue declined 2% versus a strong comparison period. The decline was driven by volumes, partly offset by positive pricing development in our bleaching business.

Sequentially, volumes and prices actually increased. In operative EBITDA margin improved to 26.7% as Antti already mentioned, driven by the higher prices. But let's then return to group level and look at the balance sheet a bit. As Antti said, we continue to have a strong balance sheet, which enables investments in long-term profitable growth. As you can see, there was basically no change in the net debt versus the Q4. Year-on-year, the net debt has increased to its current level due to the completed share buybacks and acquisitions.

During the Q1, we bought back almost EUR 38 million worth of shares. And we started the buyback program in February and have progressed as planned. The current program is limited to maximum 5 million shares or EUR 100 million. Return on capital employed has come down a little bit with lower EBIT as profitability has been impacted by the challenging market environment. Also, the acquisitions have impacted the capital employed. That explains part of the development there. The net working capital continues stable. It increased slightly both year-on-year and sequentially. But at the same time, we were able to manage our inventory well and reduce the levels during the period.

Cash flow from the operations was EUR 92 million during the quarter, a significant improvement over the last year's Q1. Also, the last 12 months cash flow from the operations increased clearly from Q4 last year, being now at the level of EUR 415 million. When it comes to the CapEx spend, there is no change to our guidance. So we will still expect our CapEx to increase slightly over the last year's level.

Finally, to conclude the key points from the Q1. So although the market environment continues to be challenging, there was really no sequential decline in demand in any of our business units. So our demand continued stable. Cost inflation has increased, but its impact on our Q1 results was still quite limited. And we started immediately to implement price increases to mitigate the impact of the increased costs, but it takes some time before the price increases impact is visible in our P&L. And finally, we are taking measures to lower our cost base to ensure it is aligned with the current market environment. We have today announced also that we start cooperative negotiations and aim to reduce some 150 roles globally.

So this concludes our presentations. And Kiira, I would hand it over to you.

Thank you. Let's maybe click the Q&A slide here. So thank you, Tuomas, and thank you, Antti. And now it's then time for the Q&A. So operator, we are ready for the questions. Please, let's go ahead.

[Operator Instructions] The next question comes from Martin Roediger from Kepler Cheuvreux.

Three questions actually. One is a clarification question. Can you quantify the inventory write-down in Q1 and in which segment did that occur. Was it in Water Solutions or anything else? Secondly, is there any input material regardless of its organic or inorganic or sulfur-related or metal related, where you see a risk of limited availability for this input. And thirdly, regarding top line, you mentioned that the volumes have been flattish in Q1. Some other chem companies talked about some prebuying activities or restocking done at clients in March. Why is it different at Kemira? Why don't I see any restocking at clients in your volumes in Q1?

All right. I'll start, and I'll let Tuomas comment on the inventory write-off question. So I'll start from the end. So the last question, i.e., the demand. So yes, I mean, it depends, of course, on the markets that you serve, how much capability there is in the value chain to stock the materials. So that's one thing. The other thing is that we were actually very prompt on the day 1 of Iran War to announce order controls in all of our major product lines as we were anticipating this kind of restocking. I mean it may look good in terms of inflating the top line for 1 quarter. But in the end, I mean, that's customers buying with the old prices when everybody knows that the raw material costs will go up. So we try to manage the situation so that there would be as normal kind of in these market conditions as normal demand pattern for the quarter as possible. Then the second question was -- remind me again, related to the...

The first one was the inventory.

It was about the input material. Limited availability.

Yes. So yes, our operations are managing the situation very well. We are covered for several months in all of our main or even less important raw materials. So short term, I don't see a risk. Of course, if the situation prolongs, there will be certain material flows that will be impacted. There are some of our key raw materials, alpha olefins, for instance, where Qatar is roughly 1/3 of global production. So at some point, the world will run out of this. But short term, for several months, we are quite well covered. And then the inventory write-down.

Yes. If I may continue there. So the inventory write-down that Antti you mentioned in your presentation, so that was really related to the Packaging & Hygiene Solutions. And we are not disclosing the exact number there. But anyway, so it was not, in a way, on a company level, material, but of course, it's visible in the business unit numbers. So no drama there, but still an effect on the business unit numbers.

The next question comes from Joni Sandvall from Nordea.

Maybe starting with the PHS question on the new organizational structure you are driving new structure all around the geographies. So could you give any indication how this has been developing on different geographies? And is the problems now what we are seeing, is it purely driven by APAC.

Yes. So the implementation of the new operating model is progressing very well. We are roughly 80% there. We are measuring it in different dimensions of the customers transferred to the new channels and so forth. So we are roughly 80% there now as we speak at the end of the quarter 1, so progressing well. Then the softness, yes, I mean, yes and no. Overall, the Packaging & Hygiene Solutions market globally is soft. So the demand softness we see in all geographies. But when it comes down to then kind of combination of soft demand and really fierce competition, which drives down the prices and thus profitability, then that impact is clearly the most kind of clear in APAC and especially China. So we are not, of course, disclosing the business unit geographic unit numbers. But as previously, I can say that both the Americas and Europe are producing healthy profits in Packaging & Hygiene Solutions.

And maybe to continue there a little bit. So of course, in the Americas, there is then more FX impact compared to the 2 other regions.

Okay. Okay. Second question on water and especially industrial side of that. Have you seen any pickup on demand during the quarter. Or any sequential comments inside the quarter of the demand situation?

Yes. First of all, we, of course, don't comment within the quarter things. But overall, on the industrial side, I mean, as I've explained earlier, so basically, the demand for our chemicals for industrial water treatment is dependent on the level of industrial activity in various different industries. And we haven't really seen any major pickup of the economic activity, especially in Europe, but also China is subdued and even U.S., which typically has been driving is not doing that well. So the overall economic activity is still down, and that is reflected on the demand in the Industrial Water Solutions side.

Okay. Then a short question on the logistics side. Do you have any index clauses for the logistics costs.

Yes. We have all the possible arrangements like with the sales prices as well. We have those that are purely spot where there is no indexes. We have some where we have indexes in the contracts. It depends on the nature of the business. So some, yes, but not overall everywhere.

Okay. And lastly, around the guidance and -- or the long-term target to remain within the 18% to 21% EBITDA margin level. Is there anything else than seasonality supporting the profitability now going into Q2 where we know that costs are still increasing. I'm just thinking you are speaking about reaching the bracket on a quarterly basis. So should we expect this already in Q2.

Well, I surely hope. But of course, we don't -- I mean, this is again the situation where you really don't know how long does the Iran War last? How long does the impact -- how quickly do the material costs get normalized or do they get normalized at all? Or will the situation even worsen? We are -- as Tuomas explained, we are really promptly acting on our cost base and impacting those areas that we can impact.

We have gone out and are executing price increases. We basically started that on a day 2 or day 1 after the Iran War started. So basically, we are doing everything that we can impact to get as quickly as possible back to the -- within the brackets. But do I have a crystal ball? Can I promise you that quarter 1 will be there within the brackets. No, I can't.

If I may continue there. So just like that and normally and also now, so we are not commenting on the in-year kind of quarterly guidance. But in general, we can say that, as I already explained in my part of the presentation, so in the Water Solutions business. So in general, and looking at the historical seasonality of our business, so the Q2 and Q3 are stronger ones than the Q1.

And maybe regarding the M&A, so currently, the expectations related to the SIDRA Wasserchemie acquisitions are that it will be completed during the second half of the year. So that's just to be clear with that as well.

The next question comes from Tomi Railo from DNB Carnegie.

It's Tomi from DNB Carnegie. A couple of questions, if I may. Starting with the overall cost increases, what level of percentage increases are you seeing in the oil derivatives and maybe also in the logistics costs?

Again, not commenting the percentages, but basically, if you want to do the math, you can do the math. The oil price typically in chemical value chain, if the end product is oil derivative, comes through quite straight. And you know that 1/3 of our cost base is oil derivatives and you see kind of oil coming from 65 to 100 or whatever rough numbers you want to use. So you get the percentage impact from there. Of course, there are other impacts. So it's not exactly directly, but you get -- the impacts are expected to be in kind of over 10% increase in that cost base.

Okay. That's very good. So it's pretty straightforward. And I mean, there are obviously polymers and others, but kind of the oil price gives good indication.

Yes.

And then maybe on the price increases. I know it's difficult, but what kind of price increase attempts have you made overall. And maybe kind of what is the reaction among the customers?

Yes. So as mentioned, we started the price increases immediately when we saw that the raw material costs and logistics costs will go up. There are several different mechanisms for that depending on the customer contracts. So as a result of the previous crisis, we have typically tried to shorten the price validity in our contracts. So basically, we are faster to react than we maybe were some years ago. So basically, the natural way is when there's a price update point in the contract. So you do that there in a normal manner. Then there are surcharges and adders, especially for the mitigation of transportation costs that can be used in several cases. Those can be implemented immediately.

And then there are, of course, some contracts where basically we need to discuss deeply with the customer and negotiate whether the kind of basis on which the original contract was done is valid anymore in this new world. So all of these mechanisms apply. Some of them are quicker to impact, some of them are slower to impact. And basically, the overall situation, as mentioned, will be then visible as we move forward because there is a lag before we see this in our P&L.

But just a follow-up, is it kind of low single digit, mid-single digit, double digit.

We will not comment that, but I forgot to answer the latter part of your previous question. So basically, what is the reaction from the market. So the reaction -- nobody likes the price increases, but the reaction has been, in that sense, quite reasonable that everybody lives in this same world. Everybody sees the same cost increases, not only in our chemicals, but in other areas. Everybody sees the logistics cost increase. Everybody sees it when they drive home in the gas pump. So basically, the environment in that sense is, in a sense, understanding of this situation that we have.

Then on the savings, can you say something about the time line and potential costs. But would you expect any savings to materialize already this year? Or is it mostly '27?

Maybe I'll let Tuomas answer that.

Thanks, Tomi, for the question. And regarding the savings, so of course, it's in a way, too early to conclude since we just today, this morning kind of started the process. So It, of course, depends on the process and how it goes and what are the final decisions made there as a part of the process. But anyway, as we disclosed also on a yearly basis, EUR 15 million. And then you can use the calendar time in a way as a proxy there in estimating the impact for this year. So that we can say that we expect positive impacts already this year.

Then maybe on the seasonality, it's a bit tricky just to estimate kind of -- and think you're messaging seasonally stronger second and third quarter, but then again, bigger impacts from the increased costs in the second and third quarter. What is kind of your assumption that you are kind of assuming that the second and third quarter are better in terms of earnings than the first quarter. That's how I read keeping your guidance intact.

Well, your lead to the question kind of answered that. So basically, we are living in the world where we know that we have seasonally stronger quarter 2 and quarter 3, especially in the Water Solutions. And that is caused by the type of demand that there is, I mean, kind of a warmer season in Northern Hemisphere, more water consumption. So basically, that pattern doesn't get impacted by the world economy.

And then on top of that, we have then now the War in Iran and nobody knows how long the shock will last in the raw material market. So that will, to some degree, of course, eat the benefit of the better quarters. But then again, our price increase actions take also forced in the -- during the second and third quarter. So basically, with this -- everything that is going on, I just can't precisely answer your question.

And maybe, Tomi, related to the Water Solutions seasonality. So the Q2 and Q3 are stronger versus Q1, it's more related to the volumes, so the actual demand and the use of water treatment. And then you have the other elements on top of that.

Final question if I can still. Caustic soda price has been jumping, especially in the Asia. And of course, that had an impact in a couple of years ago, a substantial impact in the profitability. Anything you can comment on that. Are you seeing the increased price potentially impacting you? Or how does the dynamic work again, if you can remind us.

Yes. I think the dynamics are unchanged. So basically, we are producing caustic soda and selling it so for our own production. And it's a commodity. So there's a world market price for that. So basically, when the caustic soda commodity prices go up, we get the benefit from that share of our caustic business where we are producing it ourselves. We are trading it as well. So basically, for the traded part of the business, it will increase the top line. But typically, there is not similar margin impact as there is from the own production side.

And then, of course, in many of our production facilities, we are also using small amounts of caustic soda as a raw material. So there, we have the cost increase impact then. So -- but overall, as you mentioned, and as we have earlier been commenting, our scope of usage or selling caustic soda has not changed. So similar impact as -- if you go back to your files and you see previously, it's basically the same impact you can expect to happen in the current environment if and when the caustic prices go up.

Thank you. We have also received some questions through the webcast chat. So I will now take them here in between. And we could start with Packaging & Hygiene Solutions in APAC. So there is a question that the challenges in Packaging & Hygiene Solutions in APAC seem rather structural than cyclical. Would you consider some structural changes in your operations? Or do you see that operational changes will change the profitability here enough.

That's a correct conclusion. So basically, the -- and now we have to then be more specific, especially the China part of the APAC market, Chinese market, the situation or the challenges are structural. So definitely not seasonal. So basically, there's increased competition. There's been more capacity added to the already oversupplied market as in many chemicals in China. And that is a structural challenge that we need to tackle. So obviously, we are analyzing the situation and working on that and structural solutions are not out of the question.

And then maybe next question related to the kind of like one-offs. So here is the Packaging & Hygiene Solutions inventory write-off. But then also you mentioned one-offs in Q1 for Water Solutions. Could you please estimate the combined effects from both inventory write-down and one-offs. Could you please also update us on the situation and the impact from the tolling business in Water Solutions for Q1?

Well, I'll let Tuomas calculate in his head and see what he says about the combined impact. I'll talk about the tolling business. So basically because that has been impacting last year, especially big changes quarter-to-quarter. So basically, again, let's remind everybody that simplified, we have 3 different parts on that business. And kind of one is normal market type of business. So we have several chemicals going to several end customers via that kind of tolling customer. That's roughly 1/3 of the business, roughly 1/3 is one customer that they have in oil production and 1/3 is another customer they have in kind of other part of the value chain in different geographies. So basically -- and these 2 big single accounts were the ones that were impacting having these problems last year. Now we see normalized situation in both. So basically -- and no further disruptions. So we would basically expect from Q2 onwards a more normalized situation with this tolling partner business. So that's maybe...

And then the one-offs.

Yes, continuing on the one-off type of items there in Water Solutions. So it's -- they were type of items that are part of the business, and they just happened to be a bunch of them during the Q1. It's not about the calculating. It's about putting a number on it. So it's -- they're kind of a combined impact. So it's -- we're not putting a number on it, but let's not exaggerate on that on its impact on our financials. But that we can say that it's -- in any way, the combined impact is in single-digit numbers in millions. So that gives you a ballpark at least.

And then there was a question related to logistics costs. I think that this was partly replied already, but let's still take this. So how much you had headwind from logistics costs in Q1 sequentially. And how much you expect is still to come through in Q2?

Again, we don't comment the logistics cost separation from the other costs. So let's just reiterate the earlier thing that basically the impact on quarter 1 from these impacts of Iran War were relatively limited because it really kind of the raw materials didn't get through yet the cost increases. It was mostly the logistics cost. And again, I presented the cost structure where you see which part of the logistics costs play in our thing. You can look at the diesel prices, if you want to get the proxy from that, how much potential change has been. So relatively easy to get a reasonable estimate, if you want.

And then there was one last question related to pricing in Water Solutions. So why are the prices decreasing in Water Solutions?

Well, of course, there are several reasons for that, not one single thing. And mostly, it's really driven by the industrial side again, where we commented that the overall demand is weak because the industrial activity is down. Now that, of course, then means that all of the suppliers have idle capacity. So basically, it is more difficult to push through any changes in the raw materials. And then at the same time, if you look at the raw material development, which Tuomas presented, the raw material costs were decreasing in the first quarter. So basically, then customers are pushing us hard to get their share of that. And then in an environment where basically the demand is really weak, it is more difficult to hold on to your prices than it is in a situation where the demand is strong.

Thank you. I think that we have now covered all the questions that we have received either through the chat or by operator line. So it's time to conclude the webcast. And I would like to thank everyone for the active participation and questions. And if there are any other questions, so you know where to find Kemira's Investor Relations team. We are here to help you. And just as a reminder, so we will be back in the results studio in July with our half year financial results and the date is July 17. So see you then at the latest. And finally, I wish everyone a great day and also a good weekend. Thank you.

Thank you.

Thank you.

Good morning, and welcome to Kemira's Q4 and Full Year '25 Earnings Conference. My name is Kiira Froberg, and I'm the Head of Investor Relations at Kemira.

Here with me today, I have our President and CEO, Antti Salminen; and our CFO, Petri Castren. This will be actually Petri's last and 50th earnings webcast as Kemira's CFO.

Before we start the actual presentation, I would like to remind you that our presentation today includes forward-looking statements. Next, Antti will cover our full year '25 and Q4 highlights, after which he will discuss Kemira's group level performance. After that, Petri will talk about business unit performance and cover financials in a bit more detail. And then in the end, before the Q&A, Antti will discuss Kemira's strategic focus areas in 2026 and also talk about our financial outlook for the year.

But now Antti, the stage is yours. Please go ahead. Thank you.

Thank you, Kiira. Good morning on my behalf as well. It's great pleasure to present Kemira's '25 results as well as, of course, in a bit more detail the Q4 results.

And the year was challenging for us. Markets were soft and uncertain, which is visible in the numbers. So really challenging market environment, which then resulted in a clear revenue decline for the full year as well as for the Q4.

But I'm very proud of the organization. We managed to maintain our profitability in a very healthy level. Operative EBITDA being over 19% for the full year, which I think is a really good achievement under these market conditions. And it enabled us to continue to invest into our strategy execution. So building the future growth for the company.

And basically, in water business, we announced earlier in the year the acquisition of Water Engineering in North America, which is a really good platform investment into a fast-growing water services market in North America.

We also invested or started an investment project in Helsingborg, Sweden for building an activated carbon reactivation capacity, which is part of our strategy to step into the fast-growing micropollutants removal market.

And we have now been working for more than 6 months with the Cambridge U.K.-based AI material science company, CuspAI to significantly accelerate and basically change the way innovation is done on this area. And also that work is focusing on this fast-growing micropollutants area. So soft markets, but good profitability performance, which enables us to continue to invest into our growth initiatives.

Also, our customers have been very committed, and I have to thank all the customers for the long-term partnership and commitment. We had all-time high Net Promoter Score, which I think tells about our capability to be dependable and trustworthy also in the volatile uncertain market environment.

And our employees continue to stay very engaged, which, again, is the platform on which we can build the strategy execution going forward. So despite of the challenging environment, putting a lot of stress and pressure on the organization, the organizational changes that we've been going through, the organization is committed and engaged.

We also made good progress on our sustainability targets. This is in the heart and core of what we do and our strategy. So we increased our score in the CDP, both in Water Security and Climate Change. reaching the A- level, which is -- which has been our target.

We increased our score in EcoVadis rating, and we continue to reduce the CO2 emissions exactly according to our SBTi commitments. Again, really solid improvement there. And on February 20, when we will publish our Sustainability Statement, we will publish the new positive water impact target, which will be then guiding our way forward in terms of water stewardship.

Then if we look at the Q4 in a bit more detail. So as mentioned already, the markets were soft and this market softening and uncertainty actually accelerated towards the end of the year. As a result, the Q4 revenues were 8% below the previous year, and the revenues declined in all the 3 business units.

Operative EBITDA margin, however, solid at over 18% and actually increasing in Packaging & Hygiene Solutions, where basically we have continued the self-help program to improve the underlying profitability of the business and results are visible there.

The strategy execution continued, as I already mentioned, and actually accelerated during the Q4. So the Water Engineering acquisition happened in Q4.

And then we were working during Q4 on the first bolt-on acquisition on this platform, AquaBlue, company, which we then finalized the acquisition in early January. So this is first in the row of several such bolt-ons that we are planning to build on the platform of Water Engineering. And we have a really healthy pipeline, which we are working on. So basically kind of executing a programmatic acquisition-driven growth in the water business there.

And then the latest announcement just a couple of days ago, announcing the acquisition of SIDRA Wasserchemie in Germany. And this is then strengthening our position in the most profitable and resilient part of the business, i.e., the coagulant business in the Europe. So basically building on the core, strengthening the Water Solutions business core part, strengthening our position in Western and Central Europe.

So market softness accelerated in Q4, but we accelerated also our actions to continue to invest in the future growth of the company.

Revenue, as you see, basically, again, just the numbers kind of proving the acceleration of the softening of the market towards the end of the year here. And it's good to remember here that there's also quite significant FX impact in these numbers, and Petri will soon elaborate a bit more on that.

And then looking at the profitability, healthy, over 18% profitability, as I mentioned in the Q4. Q4 typically is the weakest quarter for us. There's the underlying seasonality of the businesses you'll see it in the previous years as well.

So under these conditions, I'm happy with -- happy about the ability of company to maintain this level of profitability.

And especially happy to see that our self-help actions in the Packaging & Hygiene Solutions are bearing fruit, and we have been improving the profitability of that business.

There's quite some items affecting the comparability in the Q4, totaling more than EUR 30 million, mostly coming from the restructuring and streamlining costs. So working actively to basically balance the softer top line and keep the profitability on a healthy level. And those costs are there.

And again, Petri will soon elaborate a bit more on those. And it also included then the transaction cost of the Water Engineering transaction. And then as a result of this -- all this, the full year '25 earnings per share totaled EUR 1.18.

And if we then look at, finally, the financial long-term targets that we have set. So clearly, we are below the organic growth target, driven by the soft demand from the markets, but we are within our target range, both in terms of operative EBITDA and return on capital employed. Of course, the capital employed going closer to the target threshold. There you see clearly the impact of the acquisition of the Water Engineering, which is then basically increasing the capital employed there.

But with this, I will pass it on to Petri, who will elaborate a bit more on the financials for the very last time for Kemira.

Let's assume that my voice is audible. So as Antti said, we made good progress in our strategy execution during the year and also during the first quarter.

The other headline, I think, from this report, of course, is that the market has been weak, but we have been able to defend and protect our profitability quite well. I'll go directly to the variance analysis next.

Headline revenue declined 8%, really 3 components that Antti already mentioned. It's the -- all negative now. Volumes were declining. Negative FX impact, mostly it's the weakening of the U.S. dollar, which is -- everybody knows about it and everybody has paid attention to it. But yes, it has been impacting us quite severely. And also a little bit on the product pricing as well about 1% on average for the quarter.

Of course, these are the same components that impact profitability. In addition, there was a little bit of a higher variable costs impacting primarily our Fiber Essentials, and I will come back to that when I talk about the business unit comments.

Fixed cost savings that Antti already alluded to regarding Packaging & Hygiene Solutions, where we really have had headcount reductions. But obviously, there have been fixed cost saving actions throughout the company that we have been doing to really protect the profitability during the quarter and for the year.

Full year story, same component again. Of course, there, you have the addition that there is still the tail in the comparison period of the oil and gas business. So if you eliminate that part, the comparable decline 5%. And again, biggest contributors being the volume development and the U.S. dollar weakening.

Then if we look at the year in totality, and we look at sort of the various components. Obviously, it's clear that the volume decline is more impactful during the second half of the year. So there was an acceleration in the business decline. And again, I will come back to those during the business comments.

Sales prices actually have been relatively stable for the year. But in the first part of the year, the year-on-year comparison was quite negative. But if you look at the 1-year comparison, meaning Q4 '25 to Q4 2024, it's 1% decline. So overall, we are in a pretty stable pricing environment. It's really a volume issue that we are dealing with.

And of course, this slide actually tells the same story. Prices and variable costs have significantly stabilized during the last 4 or 5 quarters. So you'll see that there's a fairly flat line when we had this huge peak during the COVID and supply chain problem years. Energy costs were sky high in '21, '22, but we are sort of putting that period of time into history, and we are now in a much more stable environment. And our crystal ball as far as we can say or see doesn't really indicate much of changes to this.

I mentioned this comment after Q3, but I do it again. So it's really a volume game now for us. Volume increase the key to driving our profitability now and for us that is largely market dependent and it applies to all of our business units. We have capacity available in most of our plants and so any additional volume we can process without really adding any fixed costs for infrastructure.

This means that if and hopefully when the markets improve, the operating leverage will help us with the bottom line. Having said that, you'll see that in the assumptions we are not yet foreseeing really a market recovery at this time.

Antti mentioned the items affecting comparability. It's really -- we are also -- we are taking action because of the lower volumes. So we're taking action on our manufacturing assets. We're ramping down our production entirely in our Teesport U.K. site, resulting in an asset write-down, restructuring and closing provisions.

We're also making an efficiency and automation investment in our Botlek site, resulting in a reduction of manual work and the related -- restructuring costs related to that as well. Fortunately, we had EUR 12 million environmental provision for a site that has been closed long time ago -- many years ago. More than decade ago in Finland where we actually disagree with the authorities of how the land remediation should be done.

The land has been remediated and the polluted land impacted soil has been taken away, but there is a difference of opinion how that soil should be treated. We'll probably continue that dispute for a while. But we have now taken a provision for that -- for the worst-case scenario, least put it this way.

All-in-all, this restructuring, streamlining and transaction costs add up to EUR 32 million within EBITDA and EUR 43.8 million within EBIT. And of course, the impact of that is driving EPS down for the quarter to just EUR 0.07 per share. And for the year, EUR 1.18, below previous years of EUR 1.61.

Next, I'll go to the business unit commentary, as I promised, and I'll start with the Water Solutions. So first of all, let's start with a reminder of the basics. So in Water Solutions, we do have seasonality. So our particular municipal customers do treat less wastewater during the winter months and they require less of our chemicals. So that creates the seasonality that is within our Water Solutions business.

Having said that, revenue was weak, particularly it was weaker in the industrial side. The revenue was down 9%. That's quite a significant decline. But more than half of that is attributable to our contracting volumes that we received from our oil and gas business acquirer. And their customer has had an operational issue. So it's not a loss of customer, it's a loss of -- its not a loss of business, but an operational issue that has dragged on longer than anybody expected.

There was also some general weakness on the industrial side. Industrial production, in general, has been weak, in particular in Europe, and there are many processes where there are some wastewaters created that impact us in the industrial side.

Urban water service in Europe was very stable. It is a very resilient business. There was a 4% organic decline in North America. And of course, in euro terms, clearly bigger in our numbers.

So lower volumes impact the overall profitability, so that the operative EBITDA declined by 7%. Still operative margin at 18.5% for the business unit, slightly below the level of that last year.

Next comments on PHS, Packaging & Hygiene Solutions. So challenging market continued. And year-on-year, the market was clearly softer and volumes impacted. Organic revenue declined 6%. Profitability has been protected by the measures that we have taken. We also have received and gained some new customer wins. So that has been helpful, but the market -- underlying market has been really soft.

But the important point is that the market has now seems to it has bottomed up. It has not gotten any worse since Q3. It is not any better either. We saw, in fact, very little volume or very little price changes from Q3 to Q4.

Profitability in Q4, slightly lower than in Q3, mainly due to product mix type of issues. I think, I commented that the product mix in Q3 was favorable. Now it was less favorable than in Q4. Q4 was less favorable than in Q3.

And we're not done with the profitability improvement actions. So we are just implementing the new operating model as of beginning of this year, and we will be seeing benefits of that in the coming quarters as that is being implemented.

Regarding regions, fair to say that APAC continues to be the biggest challenge. We see a particularly weak market in China with weak demand and with the local oversupply situation leading to much depressed prices and volumes.

Regarding Fiber Essentials, environment has been weak for pulp chemicals, particularly here in the Nordics, which is a key market to us. Also market prices for base chemicals have remained low. For example, caustic soda is relatively important for us.

For Fiber Essentials, there we have seen some price -- I'm sorry, variable cost increases -- raw material cost increases in the second half of the year. So it's really isolated to our sulfur products, but the increase has been quite significant. And that's the sort of one area where there is significant inflationary pressures. And it's enough that it's visible in the Fiber Essentials margins to some extent in the second half of the year.

So again, looking at the full year, the volume decline, it's really in the second half of the year. And you see that the quarterly revenues have been -- have fallen to EUR 132 million, EUR 134 million range, whereas before that, we were clearly in the EUR 145 million, EUR 150-ish million per quarter run rate.

And as the drop-through impact is quite significant, these are good gross margin products, but high fixed cost operating plans. So the volume -- any volume increase would have, obviously, positive impact to our profitability should -- and if and when that hopefully happens.

All right. Moving to balance sheet. Now during '25, our net debt level has increased due to the acquisition of the Water Engineering and of course, the share buyback program that we had on the second half of the year. Then the smaller addition is that we actually inaugurated our new R&D facility in Espoo, here in Finland, with a 15-year lease. So that's added to our lease liabilities and reported as a part of debt obligations.

ROCE that Antti was already talking about, return on capital employed, has come down to 16.5% due to this Water Engineering acquisitions. But of course, it's also heavily impacted by the reported EBIT or operative EBIT that we have, and those 2 components clearly impacting there.

Cash flow from operations, EUR 127 million during the quarter and EUR 373 million for the year. Maybe a comment on the cash flow component. So our net working capital increased from previous year. We perhaps were not quite successful in reducing our inventory levels with the reduced volumes as the business was -- that business was experiencing.

So obviously, trade payables are coming down, but if inventory levels remain roughly at the same level, it reflect as an increase in net working capital. And therefore, inventory levels will now need to be and are in the focus for us going into '26. There is some opportunity to tighten inventory rotation.

CapEx fell just about where we expected and how we guided, slightly below EUR 200 million in '25. And now estimated '24, '26, it will increase slightly. We have some growth investments ongoing. And then, we are doing these modernization investments. I mentioned, the Botlek, but we have a few others as ongoing as well.

Dividend, we have a strong track record of increasing our dividend. And now we are proposing increasing our dividend to EUR 0.76 to our Annual General Meeting. This increase is consistent with our dividend policy of paying a competitive dividend as well as increasing the dividend over time. And in recent years, the dividend has been paid in 2 installments, and we'll continue that practice.

In addition to increasing our dividend, we're continuing to return capital to our shareholders through share buyback program. The purpose is to continue to optimize our capital structure. We have received almost universally positive feedback for the program that we initiated last year, and we feel that it's important that we continue to serve the interest of our diverse shareholder base.

However, this is not limiting our desire or our ability to continue to execute our growth strategy. And again, it's evidenced by the 2 acquisitions that we have already done or announced -- and well, the first one is already completed. But the second one that we announced yesterday, we will continue to invest into organic growth opportunities when they are -- as well as inorganic growth opportunities. And again, this acquisition of SIDRA Wasserchemie for EUR 75 million approximately is a proof point of that.

I will turn next to Antti, but before I do, I reflect a little. So this -- as Kiira said, it is my 50th and it's my last quarterly announcement. As announced, I will leave my position as Kemira's CFO at the end of March. So March 31, will be my last day of work.

Looking back, I'm very proud of what Kemira has been and what Kemira has become during those 12.5 years. Kemira is much stronger, much better company, and I believe that Kemira has a really bright future.

In this forum with you, our analysts and investors, there's one group of Kemira employees that I want to thank, and it's the IR officers. I had the privilege of working with during the years. So when I joined, started working with Tero Huovinen, then continued to work with Olli Turunen. Then up to quite recently with Mikko Pohjala, and now most recently with Kiira.

Kemira's IR team has always been top-notch, and it's been my intention only to recruit the best that I can find in the market and been successful with that. And we've been able to maintain a top-notch IR practice for Kemira. And I'm really proud of that. And besides, the team has always been fun to work with. So thank you all.

With that, now I'll turn to Antti.

Thank you, Petri. Yes. So then I'll finally say a couple of words about the strategy execution a bit more.

Petri already quite nicely talked about the kind of the latest announced investment and how we are really committed to grow the company via both organic and inorganic investments.

I'll elaborate a bit more on that. But just to remind everybody that these 3 cornerstones are the focus areas of the strategy. So expanding the water business, there's plenty of evidence of that, and we continue to work on that.

Then building our presence as the leading provider of renewable chemistry in our target markets and even more widely. So clearly, we have been recognized as one of the big leaders in the world on this area, and we continue to work on that.

We have a lot of good progress on innovation projects, both in-house and with external partners on that domain and solutions that have been proven not only in lab, but in extensive customer trials. So I'm expecting quite a lot of positive things to come back for the future growth in coming years.

And then thirdly, investing kind of into these new adjacent high-growth market areas, tapping or unlocking the growth potential from those areas where we have clear right to win, which are part of kind of our domain, but where we have been historically out of.

And the NVS, New Ventures & Services, unit has been actively working on this, and there's a lot of good stuff in the pipeline there as well for the future growth.

Then looking at a bit on a time line, basically the time since '22 when we have been executing the growth strategy, which we then sharpened 2 years ago a bit more. But basically, we've been constantly investing into the focus growth areas stated in the strategy. It started from the acquisition of the SimAnalytics, which basically has strengthened our position in the digital services area for the water business, so being present and growing our position in there.

Then continued with organic investments into coagulant capacity, so that's the core -- the resilient core of our water business, so we continuously invest in there. And as Petri said then, we have capacity, we are able to benefit from the market recovery when it happens without adding fixed costs as we are -- have been building the capacity for that.

Then entering into the micropollutants removal area, so small first acquisition in the U.K. and then continuing with organic investments for that area. So clear commitment to grow in that area as well.

And then lately, the entry into the fast-growing industrial water services market in North America via Water Engineering. And as I already mentioned, that's a platform acquisition. So we have a really healthy pipeline of small and also some bit bigger bolt-on acquisitions and first example already happened in the first week of January. So progressing very well on that area.

And then the last announcement 2 days ago regarding SIDRA. So again, strengthening the core, increasing our position -- improving our position in the water business and basically on the path to grow the significance of water business in our portfolio.

So lot of things have happened, and our aim is to further accelerate the execution of strategy, so working on these growth initiatives, which is enabled by our strong financials and strong profitability despite the weak market. So I think this is exactly the time when the markets are soft, when basically we need to continue to believe in our strategy and invest in these growth activities to make us able to capitalize on the growth when the markets get healthier. So this is clearly essential for us, and we continue to be committed to that.

So the 3 business units have clearly separate, different roles in the strategy execution, as mentioned already, Water Solutions being the growth engine. We will continue to invest both organically and inorganically to growth in Water Solutions.

Short-term Packaging & Hygiene Solutions, the profitability improvement is the key target. But then also the packaging board markets which we serve are now in the basically historical low point and the world will need packaging materials. So that business unit has growth potential when the market ultimately recovers.

And then Fiber Essentials, clearly a profitable cash flow generation unit, enabling us to invest into growth in other areas.

So to close this with our outlook for '26, amid the uncertainty and fussiness of all the possible crystal balls, our -- we expect the revenue to be between EUR 2.6 billion and EUR 3 billion and the EBITDA -- operative EBITDA between EUR 470 million and EUR 570 million. So clearly, kind of you will see from here as well that it's very difficult to predict the market, but this is our outlook to the year.

It assumes this continuation of global economic uncertainty and the softer volumes and basically, especially the impact being heavy on pulp and paper, but also on the industrial water markets.

We assume stable raw material environment, as Petri already alluded to, so basically no big swings from there. And thus, this is the outlook that we give for this ongoing year.

So with this, thank you very much. And finally, once more big thanks to Petri. He's been elementary in this growth journey and making the company the good company it is today, completely different compared to 12 years ago, as he mentioned already.

But I have to personally thank Petri for the past 2 years because he's been the kind of a brick wall that I could always lean on as a new CEO and giving me the confidence that no matter if I miss some details here or there, he will always be there to support me and correct me. So very big thanks, Petri, for these past 2 years.

And then with this, we move on to Q&A.

Okay. Thank you, Antti, and thank you also, Petri. And now we are then ready for the questions. So I think we could start from the line. So operator, please go ahead. And we will, of course, also take questions through the chat. So those will be coming also.

[Operator Instructions] The next question comes from Andres Castanos from Berenberg.

Petri, first of all, best of wishes for the future. And also congratulations to the company and to you on all the bold actions on the finance side, M&A, buybacks, dividend increase, the full lot. So well done there.

My question will be first one on M&A, please. Can you please put some numbers to the U.S. pipeline, the water pipeline there? How much money can you possibly deploy there in the next year ahead? Also, I would love a comment on the Germany deal that you announced yesterday. It seems like a rare opportunity. Do you think this could be replicated similar deals like this one?

Well, I'll start, and then I'll let Petri comment on the kind of -- especially how much we can allocate to this. But as I mentioned, the pipeline is very healthy. And we've already mentioned that these kind of small bolt-ons like -- the AquaBlue is a very good example of roughly size of a single deal. So they are in the range of EUR 10 million annual revenue type of -- hovering a bit lower, a bit higher typically.

And I've also mentioned earlier that we have a solid pipeline, and the aim is to execute several of those every year going forward, so that's basically giving you the basic -- the idea. And then there are couple of bigger ones also in the pipeline, which then would change the pattern. But basically, it's a solid programmatic growth ambition that we have there.

And then regarding the SIDRA type, so we've -- all the time, we have said that we actively look at the base business, coagulant market and look for opportunities. There are not too many, but each and every one, we will act on. You already saw that Thatcher in North America earlier. And then we have now the SIDRA, which is, I think, really good strengthening of our Central European business.

So we will -- we are actively monitoring the market. We know all the players there. And when something is suitable becomes available, we will promptly act on that.

Yes. I don't know if I have much to add. But the AquaBlue type companies, there are probably a couple of hundred or a few hundreds in North America. And theoretically, almost everyone -- not everyone, but -- so it's the beginning of the pipeline. Then as the pipeline is progressed. But I have seen long lists that have 20, 30 names in it. Currently, short list is obviously shorter. It needs to be shorter.

But like Antti said, these type of deals is really where we have the strong natural platform executing the EUR 10 million, EUR 20 million type revenue companies, and there are multiple those cases. And of course, from the finances point of view, balance sheet point of view, we have no restrictions on executing on that one. And so that certainly continues.

Obviously, if we are looking at the Water Engineering pipe, which was well over EUR 100 million type of investment, then those would be looked at little bit differently. There's -- that's progressed in a different way in our M&A process.

A second question, if I may, please, on margin trajectory in the water business. You mentioned some seasonality, and I wonder is that it? Should we see a rebound in Q1 versus Q4 on margins? And also, can you comment on the margins of the acquired companies that you have acquired so far? Are they accretive to the current water business margins?

Well, I can start with...

With the seasonality...

Yes, in water business.

And then again pass on to you. So basically, the water business has this natural seasonality because big part of the water business is especially on the urban municipal side is weather dependent. And -- but there are also other things, and I will talk a little bit more about them.

But basically, typically, the summer months are the strongest or the summer quarters are the strongest quarters. And then the winter quarters are always a bit weaker, and especially Q4 being typically historically and especially in North America, the weakest one.

So it's partly weather dependent. There's less water in the systems, but especially kind of entering into this water -- industrial water services business, there's also the industrial patterns because a lot of that business is in cooling towers, for instance. And when you have cold months, you have less need for cooling in industrial applications.

Also, there's a lot of business in the services part business, which has to do with the -- there's a lot of pools in U.S. So basically, again, pools are not used in winter time and so forth. So it will only strengthen the seasonality, I think, in the water business, this entry into the services area.

And so Andres, if your question was really regarding the pipeline of these services companies, they actually vary quite a bit. They vary from the low teens to 40% EBITDA margin in the business. And it often depends on how much product and possibly equipment sales they have in it or whether it's pure services where the margins tend to be higher. So I don't think I can give you an universal answer on the types of margins that you see.

But philosophically, we don't want to dilute our profitability with these acquisitions. So even if the coming in margin is lower than ours, there needs to be synergies that get to our sort of at least average group margins.

The next question comes from Tomi Railo from DNB Carnegie.

It's Tomi from DNB Carnegie. And thank you also Petri from my side it's been absolutely a pleasure to present a short while...

Now we can't really hear you, Tomi. Could you please repeat your question?

Can you hear me now better?

Yes, we can hear you now. We heard the thank you part. But then when you started to ask your question, we lost you.

Okay. Maybe that's a signal. But the question is simply, was there something still extraordinary in the water clean that you booked kind of in the clean EBITDA? You mentioned some of the items, but or was it just a very clean, clean number what you reported?

I would say that it's clean. And of course, during the Q4, you always tend to look at your inventories and you tend to get some invoices from your customer -- suppliers that hadn't been accrued for small amounts. So we have a fondness of talking about 13th month, it's not 13th month. But there is typically some new expenses that come in December time frame we usually plan for -- or we plan for that, but there's a little bit of unknown. But I would call that in -- put that in the level of noise, particularly for Water Solutions.

Okay. And the second question on the outlook. I'm just trying to make a sense. You mentioned that kind of the softness accelerated in the fourth quarter from the third quarter. But then when I'm reading your kind of outlook commentary, it doesn't really sound that the market has changed for worse. Actually, you also mentioned yourself that it's stable. So kind of is the market now stable, what you believe? Or is there still some further weakening?

Let me correct first -- correct me first and then I think it's more appropriate that Antti talks about the outlook. I probably may have miscommunicated a bit poorly. What I meant to say that the volume decline was higher in the second half versus the first half. And this was clearly driven in Nordics by the pulp mill, not closures, but...

Downtime.

Downtime -- thank you for the word -- as well as the contracting volume decline in industrial. And then perhaps there was some more industrial decline in water service in second half.

But if you sort of -- I recognize accelerate is probably the wrong word. So it was not accelerating. So third quarter to fourth quarter, there was no acceleration. So let me correct that if I communicated that poorly. But then I'll let Antti talk about the outlook.

Yes, yes. And as I said when I introduced the outlook, so basically, if anything, the visibility is really poor. So commenting to this or that direction, whether we see kind of an improvement or declining, it is -- the visibility is really poor.

But as Petri mentioned, I think many indicators from the market show that this -- we believe that this is kind of the bottom level. We haven't seen any significant further weakening, but we haven't seen really any kind of bright signs for -- at least for the first half of the year either.

And there, I would, again, as we discussed earlier, so Tomi, I would recommend to look at what our big key customers have stated about market because, of course, they see it first and we get hit in kind of upper in the value chain of those phenomenon. So basically, you can read that, and that's the kind of crystal ball we have.

Of course. Just a follow-up. If you could give kind of price and volume assumptions into '26, what you are saying? I hear you that kind of it's a volume game, but would you assume that pricing is down or stable in this environment? Or what's kind of price and volume assumption, maybe if there's something.

I already offered my view of the crystal ball, and it's pretty stable, and it has been stable for the last 4 or 5 quarters, and we don't see changes to that. And that applies both to pricing environment and the variable cost environment.

Thank you. Let's now take the next question from the line, please.

The next question comes from Joni Sandvall from Nordea.

A couple of questions from my side. In BHS, you mentioned the continued improvement, what you have started now with the new operating model kicking in from '26. So if I remember correctly, you maybe have mentioned around 15% EBITDA margin target by end of '26 is still valid with the current market environment?

Market environment, of course, plays a role there, but that's the ambition level that we have been talking about. So I mean, if you look at from the group perspective, that's the expectation. Now whether the market support reaching that exactly during the last quarter of '26 or later in '27, that depends, but that's the ambition level that we have set for.

Okay. That's clear. Then maybe a question on the energy prices have been spiking both in the Nordics and in Europe. Are you seeing any support for yourself through the pricing now in H1?

Well, the weather forecast, I was looking for it to be snowy for the weekend, but then I heard that the weather forecast changed. It's not getting more snow. I'm looking for the cross-country skiing next weekend.

Honestly, let's not get excited about -- too excited about a 1 month of cold weather in Finland and Europe. So I think we have to look at the bigger picture and longer period of time. It is true that in the Fiber Essentials, typically, our customers do benefit -- also customers benefit of high energy because they do produce energy, electricity while their pulp mills are operating. So that's sort of an ongoing market commentary that I can say. But really regarding a crystal ball for the weather, for the remaining of the year, don't know -- we don't have that.

Okay. That's clear. Then maybe on the Fiber Essentials, also a question on -- because your sales were declining now in Q4, so could you give any indication how large part of this was driven by lower utilization ratios of the Nordic pulp mills in Q4, which is -- it's not typical that those are curtailed during Q4?

It's not typical, but they were. So Latin America, there's no change. There's, obviously, some currency impacts year-on-year from North America. But honestly, I would -- I don't have the data now, the breakdown in my head. But it's mostly Europe. It's mostly Nordic.

It is really mostly Europe. So basically, the -- as Petri said, the Latin America, there was no change quarter-on-quarter in terms of our delivery volumes. In North America, we actually improved a bit in quarter 4, if anything. So it's really coming predominantly from the Nordics.

Okay. And then maybe lastly, quickly and for Petri about your supplementary pension fund returns expectations for '26?

Well, we are expecting to receive another EUR 10 million of return from capital because the fund is roughly EUR 100 million overfunded. So we are unwinding the overfunding slowly and gradually. Obviously, continue to invest smartly. And I trust my successors will continue to do that. So the pension fund is in good shape. So no issue there.

Thank you, Joni. We now have a few minutes time to take some questions from the chat. And I think that we could start with the Fiber Essentials team.

So the question is, do you expect volume recovery in Fiber Essentials in early '26, given that pulp wood prices in the Nordic area are clearly down, supporting profitability of pulp mills in the region?

Well, I mean, again, I would refer back to what our customers in that business have announced and said. But clearly, I mean, as Petri already mentioned, it's favorable for the Nordic pulp mills to run as full as possible in the cold winter months as they produce electricity as well. So basically, typically, the first quarter is volume-wise a strong one.

And then, of course, the kind of decreased wood prices should be supporting the business of our customers also going further into the year. So of course, we dearly and truly hope that the volumes are improving as a result of this phenomena. But it's really up to our customers.

Yes. There's another question, which is related to the Water Solutions business, and I think that we've covered the seasonality part yet. But this is related now to the measures or the kind of like items affecting comparability. That's how I read this.

So could you come back on the measures to increase production capacity in the Water division and why these measures make sense despite the lower volumes and lackluster demand in water. So maybe kind of like why these sites and...

So let me -- I'll cover the 2 items affecting comparability. So Teesport U.K. has been a site with low-capacity utilization for quite some time. Let's be honest about that one. And we have reviewed -- and now what we have made a decision that it's sort of now falling below the threshold, and we are moving the production from particularly some deformers from that site to another site in Europe. So we are closing that site entirely. So we are obviously reducing fixed cost significantly with the closure of that site. So I think that's fairly obvious.

Then in Botlek, Netherlands, we are not closing a site. We're actually investing into a site. But it's a site with a relatively high fixed cost because -- I mean, it's Netherlands. The salaries are relatively high there. And we are doing an automation investment. So what has been a fairly manual process, we are automating and, in the process, we are eliminating manual work and its fairly significant or big enough number of employees that it actually makes a difference.

And so it's -- there, we -- I'm not sure if we are investing into capacity addition. I think it's, we call it improvement and automation investment. So it's not capacity constrained that particular site. It's really an efficiency improvement with a quite decent payback period.

Exactly. And then if I continue on the -- if you look at the kind of couple of years' timeline and the coagulant investments that we have been doing into Water Solutions. So we have been there. I mean, the growth -- the population in Europe is not growing. The per capita water consumption is not growing, but the regulation is getting tighter.

So basically, we have been doing this investment or initiating them when we see the regulation on certain part of Europe changing. It's not same even if the EU regulation is the same, but the application in jurisdictions is different. So that's why we have twice expanded the coagulant capacity in U.K. The first one, we sold immediately to practically full utilization, that's why we did the second capacity expansion.

Same goes for the Iberia, the Tarragona site. So there are certain factors in the regulation and the market that drive the demand. And we do kind of very targeted, relatively small add-on capacity investments on existing site to capitalize on those pockets of market that we see the growth potentially.

Thank you. Let's now take one last question from the chat, and it's about the Packaging & Hygiene Solutions profitability program or profitability improvement program.

So can you comment on the progress? How much more work is there to be done? And when are you expecting the full impact to kick in?

Well, I'll start and then if there's something that Petri wants to add. But basically, I mean, it has progressed in phase. So what we did last year is that we basically found the kind of so-called low-hanging fruit in terms of cost both in the business unit itself and then on the operations side that are supporting it, and those we kind of had implemented. So the run rate should be kind of built into this year's numbers.

We similarly found some kind of new add on top line, which basically was realized. Those contracts were negotiated and closed last year. So basically, again, us, the customers change suppliers, we should see the revenues in this year's numbers.

But then the next phase of that is the new operating model, which we have implemented where we basically changed also the structure and basically how we serve the customers, giving better service for our key customers, the key accounts and then streamlining the service levels for the kind of tail end. That work, the implementation is going -- ongoing as we speak. So that happens during the Q1 and then the results would be visible later in the year.

And then the business unit management has in pipeline the next round as well because this is a kind of continuous process of when we kind of put something in the shape, then we realize that there are other things that can be further improved. So we will continuously work on that. But gradually during the year those benefits will be visible. And some of them in '27 only also. So this is a long process.

Yes. Thank you. Unfortunately, we are running out of time. So we will start to conclude the conference. And if there are any other questions you know where to find the Investor Relations. So please be in touch.

And we have a pretty full roadshow agenda coming in now after the earnings. So we will start with Petri next week in Geneva. So there are still plenty of opportunities to meet also Petri.

And Antti and myself, we will be back here in our results studio in connection with our Q1 report, which will be published on April 24. And we, of course, hope that Petri will be cheering for us maybe from the golf course or I don't know. Thank you all. Have a great day.

Thank you.

Thank you.

Good morning, everyone, and welcome to Kemira's Q3 Earnings Webcast. My name is Kiira Fröberg, and I'm the Head of Investor Relations at Kemira. We reported our Q3 interim report today and maintained good profitability in the weakened market environment.

Here with me today, I have our President and CEO, Antti Salminen; and our CFO, Petri Castren. Antti will start by covering our group level performance and our progress on the strategy as well as the outlook. After that, Petri will discuss the business unit performance, and will also share some more details on the financials. In the end of the presentation, before the Q&A, Antti will also give a short introduction to our new CFO, Tuomas Mäkipeska.

But now, Antti, please, the stage is yours.

Thank you, Kiira, and good morning, and welcome on my behalf as well. So happy to report here on our strong profitability in the weakened market environment. And market indeed has been quite subdue for a long time already. We saw that first already in the beginning of the year or at the end of the previous year, hitting the performance of our Packaging & Hygiene Solutions business unit as that is the one that gets most directly the impact from the weakened market as the consumers are not consuming, trade is not flowing globally. So less packaging material is consumed, thus less Kemira chemicals go into the production of packaging material.

Then in the Q2, we mentioned that we clearly see now the impact of the weaker economy trickling up the value chain to the pulp producers, our customers in that area. And now it's visible in the Q3 clearly. We have seen a lot of prolonged maintenance break and curtailments in that industry. So that is hitting the Fiber Essentials unit. And we've also now started to see the kind of a prolonged slow global economy impacting the overall industrial activity. Lower run rates at any industrial segment, especially here in Europe, which is then translated into less water consumption by industry, and thus, less consumption of our water treatment chemicals in the industrial side of our Water business.

So all this has led to the situation where basically now the revenues declined 5% year-on-year, 3% in terms of organic development decline. So you see that there's quite a significant amount of foreign exchange rate impact there as we have significant business in U.S. And this decline, as mentioned now in Q3, was hitting all of three of our business units.

Nevertheless, we keep the outlook unchanged as we changed the outlook in the Q2. But the good news is that profitability is good in Q3. So we maintained the 20% operative EBITDA performance, which I think kind of comparing to the chemical industry in Europe, comparing to the -- looking at the environment that we operate in and the decline -- top line is a good performance, and I'm really thankful for the whole organization for pulling it together.

We maintained high profitability in the backbone of our business, i.e., Water Solutions unit, but we managed to improve also the profitability in the Packaging & Hygiene Solutions. Impact coming both from favorable product mix, but also from the cost management program or profitability improvement program that we launched in the springtime for the Packaging & Hygiene Solutions.

Now even if the markets are soft, we continue to invest into our strategy execution. So we have a clear growth strategy, and the megatrends that are supporting the strategy stay intact. So longer-term viability and growth potential of the fiber economy and the need for clean water are there. So thus, we continue to invest into the execution of strategy. We also continue to have a strong balance sheet, which enables that. And I will talk later a little bit more about a couple of key steps in terms of continuing the strategy execution.

But as mentioned, the revenues were weak in Q3. The U.S. dollar had a significant impact, but overall, the demand also was weaker. We retained our market position in all the business units. So basically, this is overall a decline in demand that is impacting the top line here. Year-on-year, we saw decline in volumes, as I mentioned, but prices remain stable. So that is the kind of good news and showing again our pricing power there. Sequentially, sales volumes actually increased from Q2. That is mainly driven by the Water Solutions unit, and Petri will talk more about it later. We saw some decline in sales prices from Q2 to Q3.

Then looking at the profitability, which I mentioned, it is fair to say is on a good level. So the 20% operative EBITDA margin, we actually are very close to '24 EBITDA margin levels, which were the all-time high for Kemira. So really good performance in terms of profitability. Profitability remained strong in Water Solutions, especially the urban air side of the Water Solutions, which is the resilient, steady profitable backbone of our business. But we, as mentioned, managed to improve in Packaging & Hygiene Solutions quite significantly. The profitability of Fiber Essentials unit declined as a consequence of the clearly declining volumes from the market.

This kind of a weakness of the market and the weaker demand, of course, puts a lot of pressure on us. So we need to continue to focus on profitability improvement, the operational excellence, cost containment so that we can continue to operate on this good healthy profitability level. Those actions we have defined. We have started as we communicated in spring from the Packaging & Hygiene Solutions. So we have a clear program there which aims to impact both the top line and bottom line items, and we are progressing really well with that program. And some of the impacts of it are visible in the good result of the Packaging & Hygiene Solutions, which also was helped by the favorable product mix in this quarter.

Now we are stepping into next phase in that profitability improvement program. So we are starting to -- as of today to assess the operating model that we have in Packaging & Hygiene Solutions. And the aim there is to differentiate the service levels so that we can better serve the global and regional key customers that we have, introduce faster new innovations to the marketplace and provide better service for our key customers and at the same time, optimize the cost to serve levels for the more transactional customer base. So that program will start and the impacts of that will be visible in '27. So no impacts expected for the last quarter of this year. The earnings per share came out at EUR 0.38 per share.

Now as I mentioned, we continue to invest into our strategy execution. The megatrends are there, and we are in a really good position to also maybe capitalize on a bit weaker market environment because a big part of our strategy is based on M&A-driven inorganic growth. There's a couple of key cornerstones for our strategy, and I will touch three of them here when I talk about the strategy execution. So first of all, our aim is to grow significantly in the Water business. And there are two subdomains which are really important for this. Micropollutant removal, PFAS, pharmaceutical residuals and so forth, microplastics. This is a fast-growing subsegment of the water market, which is just developing as we speak. And we have a clear strategy of how do we enter that part of the market.

The other part which we have been relatively weak historically is the industrial water services, and that is also a subsegment of water market that is growing much faster than the base business. And we have taken now clear steps regarding entering both of these lucrative growth market areas. And then I will talk a little bit about our kind of progress with the renewable chemistry, which is another key area of our strategy execution.

Now during Q3, we announced the investment into our site in Helsingborg, Sweden for reactivation facility for activated carbon. That is the first reactivation facility in Nordics, serving the whole Nordic market and helping us to enter via the activated carbon service into this micropollutant removal, because activated carbon is the kind of a well-tested predominant method for capturing micropollutants and PFAS from wastewaters, but especially from the raw waters for drinking water production. And that's kind of a key part of our entry to there. But we need to amend that with other more specific innovative technologies. So there, our partnership with CuspAI, Cambridge U.K.-based AI start-up is of a key importance.

So we started in June, a joint development project, to develop new-to-the-world type of absorbent materials, and we are progressing very well with the project. The aim is to come up with completely new solutions, very specific targeted solutions for PFAS capture. So these both are on the kind of micropollutant removal area of the water strategy.

Then before I go to the industrial water services, our earlier announced joint venture with IFF, the world leader in the area supporting us with development of -- via enzymatic route with development of new-to-the-world bio-based polymers. So we announced this JV. We are currently working on the project. Engineering phase is ongoing. We are looking at different engineering options regarding the manufacturing site itself. There is some delay anyhow to the project. So unlike we earlier informed that the production would be up and running by the end of '27, it's rather on the side of '28 that we now plan to be up and running.

That said, we have industrial level volumes available from our toller in Finland, and we are currently running several industrial scale test trials with our customers, both in Water Solutions area and in Packaging & Hygiene Solutions. And many of these application tests actually look very promising at the moment. So we are confident that when we actually have the new joint venture manufacturing facility up and running, we have a good existing customer base already for those solutions.

And then as mentioned, the second area within the Water Solutions, which is one of our key growth drivers is the entry to the industrial water services. And we announced this morning that we closed the transaction on acquiring Water Engineering in United States of America. That's our first significant step into that area. Water Engineering is a water service specialist with expertise in boiler and cooling tower water treatment as well as wastewater treatment in industrial facilities. They're mostly focusing on food and beverage, manufacturing and health care industries.

They're based out of Nebraska, and they have built a really strong presence in the middle states in U.S. grown quite quickly during the past years. And this provides us a good platform for future growth, both organically but also inorganically because their growth method has largely been a kind of programmatic bolt-on M&A path. And I think we can capitalize and continue on that path and continue growing that business.

Business itself, as I said, the rationale of entering that is that it is faster-growing market than the base water treatment market, plus it is asset-light in terms of business model. So there's not a consequent significant CapEx going into maintenance and improvement and expansion of the production facilities. We can largely utilize also our existing product portfolio to serve these customers. So there's good cross-selling opportunities with this acquisition.

The expected pro forma revenue of the company is north of USD 60 million. And the purchase price, as we have communicated, was roughly USD 150 million. So I warmly welcome all the new colleagues from the Water Engineering to the big global Kemira family. I think we will have a great future together.

Now then to close this off, we have introduced a new slide here, which should be providing a bit more transparency and trackability in terms of our long-term financial targets. Now it is very clear that we are disappointed with the performance in terms of organic growth. So the aim is long term on average to grow more than 4% organically a year. Now clearly, the markets have proven to be much softer than we anticipated when we set out this target and communicated in the CMD a year ago. So -- but I still believe and we are confident that the long term, this growth potential is there as the megatrends are supporting and as we are entering these faster-growing new domains within the Water. So it will provide us acceleration. But clearly, the start on that journey has been slower than we anticipated.

In terms of operative EBITDA, we are operating comfortably within the 18% to 21% EBITDA performance range that we communicated as a target. And also in terms of return on capital employed, we are above the 16% target that we set. That said, of course, the kind of a declining trend on both of these is not satisfactory, and we are having diligent actions and programs in place in terms of improving the profitability and making sure that we hit these long-term targets as we progress with our strategy execution.

Now then the outlook for the rest of the year remains unchanged. So no reason to comment that further. And with this, I will then hand it over to Petri, who will comment in more detail the business units specific performance and some other financial ratios. Petri, floor is yours.

Thank you, Antti. So I'll do, as Antti said, and I think I'll usually start with the sort of key points. And I think really our ability to support and defend the profitability as well as the PHS business unit profitability improvement are indeed the key points in this report. And as Antti said, clearly, the Water Engineering acquisition is an important step.

So let's start. Top line is almost an -- development is almost an exact repeat from Q2, EUR 40 million decline, half of which is driven by FX changes. And again, mostly, it's the U.S. dollar that has continued to weaken year-on-year. Organic growth also 3%, exactly as it was negative in Q2. We have been able to maintain prices well, again, considering the weak market environment. Indeed, prices and actually variable costs have pretty much been stable throughout the year. So the change is, in essence, a 0.

Also, what I think is important from the profitability point of view that in essence, we have been able to kill inflation. So the fixed cost change is 0. And again, we all know that there is a salary inflation ongoing. There's an inflation in many other areas. So this is part of the way how we have been able to defend profitability, and this is very good. Obviously, we cannot be happy about the top line development or the absolute level of profit generated.

The net impact from the variable cost is really flat. And as you can see, almost last 4 quarters, it has been pretty much, much flat. So now the focus is really much more driving the volume compared to period between '21 and '23 when really a lot of our profitability was at how can we defend against the inflation, how we are coping with inflation and how we are passing the inflatory raw material costs to our customers. But now it's really about volumes.

Again, I'll start the business unit comments with Water Solutions. So excluding the FX impact, there was a 2% decline against a pretty strong last comparison period. You noticed that in the comparison period, we had 5% organic growth. So it was a stronger comparison period. And regarding the water treatment markets, Antti already mentioned that the urban market continues to be really strong. And even in this -- while the business unit is declining, urban market is stable and it continues to grow. So the growth in Europe, EMEA is more than offsetting the small decline in Americas urban market.

Then the weakness was on the industrial side. And there, like Antti was talking about, it's both the general industrial activity, the weakness in it, but it's also the fact that we have this one large tolling customer and their volumes were reduced compared to a year ago. Sequentially, from Q2 to Q3, both volumes and revenues increased despite a modest FX impact. Again, operative EBITDA, very strong at 23.1%, very close to last year's level.

On Packaging & Hygiene Solutions. So challenging market continued to impact the unit. Antti already covered the sort of underlying or behind the factors impacting the business unit, but I think the key point is it wasn't actually getting any worse in Q3. So year-on-year volumes, essence, flat. And sequentially, they even increased modestly, very modestly. The market looked a bit more positive in Americas, and there was positive development in APAC as well. However, weakness continued in Europe, in EMEA, and you may have seen some of our customers' reports yesterday, which were sort of indicating that. Year-on-year, we saw some price decline, but sequentially, prices were flat.

Profitability improved to 13.6%, which is actually quite a sequential improvement from below 10% in Q2. This was driven by cost containment topics like Antti was talking about. We also had a very good mix of product in Q3. So that helped there as well. And also, I'd like to remind that we did have an extended maintenance break in one of our key facilities in China in Q2, which depressed the Q2 results even more.

Regionally, both Americas and EMEA are at 15% EBITDA or above. So it is the APAC that is still diluting the overall business unit margin. And we'll continue those profitability improvements. Antti talked about the business unit -- business model change that we will be implementing now. And again, this implementation will take well through to the next year.

On Fiber side, market was weak. And we already -- we updated our business assumptions in Q2, and then we highlighted that we are seeing some additional weakness in the pulp industry. And indeed, this is what happened. So the market -- the softness was really driven by the Nordics softness here. So a lot of market-related downtime by our customers. Volumes declined year-on-year and sequentially, whereas prices were up year-on-year. However, on this area, we did see some pressure on variable cost as well. So that did not help the margin either. We do have some base chemicals in our product portfolio, caustic soda, sulfuric acid and some of the global market prices of these products were also declining during the quarter, and that depressed profitability more.

Now I move to balance sheet. Again, not a whole lot of change in our balance sheet. Net debt at exactly year-end level and approximately at the same level as in June of '25. During the quarter, which is noteworthy is that we implemented or started our share buyback program, and we were able to buy back almost EUR 40 million worth of our shares during the quarter. As a reminder, this program, when it was approved and initiated, it's at a maximum of 5 million shares that we will buy back or EUR 100 million. And at the current level, which is, of course, limited by our daily liquidity, we will be hitting the end of the program around the year-end. So maybe in December, maybe some early days in December. So that's sort of at the current level, what it looks like.

And Antti already showed the trend reports on return on capital and regarding our financial targets. So yes, the lower EBIT, which is the impact -- with the result of the weaker market is impacting our capital efficiency. Cash flow from operations, EUR 132 million, improvement from the year ago. We did have a net working capital decline. I think I mentioned in Q2 that we had a little bit of a buildup in net working capital. And this, indeed, we've been able to address that to a large extent during Q3.

I'd like to remind that typically, our cash flow is more weighted towards the second half of the year, particularly towards the Q4, as you can see from the previous 3 years, which we have here on the quarterly breakdown. So I hope to -- expect to see that sort of a seasonal pattern this year as well. No change to our CapEx guidance. We expect our CapEx to increase over last year. So again, you do the math, you'll see that the CapEx will increase significantly from the quarterly run rate during Q4.

With that, I'll stop my comments, and we'll turn to Antti. Antti will be able to announce my successor. So Antti, there you go. I'll stay here for the Q&A.

Okay. So yes, indeed, a happy day for both of us probably that we have now been able to announce Petri's successor. Tuomas Mäkipeska will start latest some day in May as our CFO. Tuomas has a strong background, both in terms of business unit leadership and of CFO position. Now last position with YIT, the Finnish construction company. And before that at Lassila & Tikanoja, so brings us plenty of experience and good positive energy as well. So I warmly welcome Tuomas to Kemira Groups and look forward to working with him in the future.

Thank you, Antti, and thank you, Petri as well. And now I think it's time for the Q&A, and you can ask your questions either through the telco or then you can send them to us through the webcast formula or chat function. So maybe we can start then to take the questions. So operator, please go ahead.

[Operator Instructions] The next question comes from Martin Roediger from Kepler Cheuvreux.

Three questions, and I would like to ask them one by one to make it easier for you. Antti, the first question is for you, it's about the strategy. After the acquisition of Water Engineering, will you continue with acquisitions with a similar size in the next couple of months? Reason I'm asking is that you target midsized deals with an enterprise value of EUR 200 million to EUR 250 million, which enables you to finance the deals from your cash flow, but Water Engineering is clearly below that price tag.

Well, first of all, what I have communicated when I've indicated the size kind of we target mostly small and midsized targets because that's the kind of, I think, the most credible way to build the growth in M&A. And as you mentioned, so I just indicatively given that they have to be below EUR 250 million to qualify for this. EUR 150 million is below EUR 250 million, so it's in that range. And we have a strong pipeline of different targets, which we are working on. And yes, we will, of course, tell about them when the time comes.

Okay. The second question is for Petri, regarding the Packaging & Hygiene Solutions business. You mentioned the reasons for the strong earnings increase year-over-year, sales mix and cost savings. Can you provide more color on that? How big were the cost savings in that segment? And where did the mix effect come from?

Well, we don't specifically give out product line and product line profitability. So I think I'll shy away from giving exact guidance on that one. And I think it's also sort of what you compare against. So please don't compare to Q2 because Q2 top -- bottom was sort of a, I would say, it was arbitrary too low because the maintenance break in China actually impacted it quite a fair amount. But if we sort of say that last quarters of average is somewhere between 11% and 12% EBITDA, so from that, it's probably equal split between the three areas. So mix and some market recovery, particularly in North America, and then also cost saving actions.

Okay. And the final question is about Fiber Essentials, which was below market expectation. I wonder, did you have also cost savings here? And related to the comparison to last year, was there any -- did you overearn last year so that we should be aware that last year's high margin in Fiber Essentials, especially for Q4 is not a good proxy for Q4 this year?

I don't think that there was any sort of overearning in '24 in Fiber. There was overearning in particularly in the high electricity cost years and high caustic price years, '21, '22 and '23 but really not throughout the year. Now memory serves me badly in terms of individual quarters, but there tends to be a little bit of a seasonal pattern that electricity costs are higher during the winter months. And as you can see that there is a link of -- we benefit of this higher electricity costs. So we tend to have some seasonal pattern of Q4 being stronger in terms of profitability for our pricing of our electricity-dependent products, mostly sodium chlorate.

So I think, Martin, I encourage you to rather look at sort of a trend lines and through the year and not individual quarters because each quarter, there can be some minor -- some sort of one-off impacts, whether it's product mix or some cost item came through that may impact the cost of -- margin of a business unit point or this way or that way. So rather encourage you to look at the trends because that's -- our customers are also, they are the same customers, and particularly in Fiber. So it's a very solid track record of maintaining customers. And so I encourage you to look over the longer period of time, not individual quarters.

And if I may build on that a bit, so you referred to the kind of a shortfall of Fiber Essentials compared to the expectations. So maybe we were not clear enough in Q2 when we communicated the expectations to be lower because we already saw then the announcements from our key customers, especially in Nordics about taking downtime at their pulp mills. So that translated now to weaker performance in our Fiber Essentials clearly in Q3 as we expected already in Q2.

Yes.

But the downtimes are now over?

Well, you should not talk to us about that, but rather look at our customers and what they announced. So I'll leave it to that.

Yes. And sometimes we know a little bit more than our customers openly communicate. So that's why we need to be mindful that we respect and talk about our position only.

Thank you, Martin. Let's now take next question, please.

The next question comes from Anssi Raussi from SEB.

I continue on the Water Solutions segment. So seasonality there has changed a bit last year. So how should we think about it now going into the last quarter of the year? And also on Q4 last year as a comparison period, anything to highlight or worth of reminding there?

Thank you. If I start from the seasonality. So I mean, if you look at the Water Solutions as such, I don't think there's any major change in the typical seasonality over the year. So basically, that remains. So fundamental phenomena that impact the demand of water chemicals is not changing. And thus, typically, the first and last quarter are the weakest and the mid-quarters are the strongest in that business. Now then if you remember what we have communicated, so now we have this one big tolling customer within the Water Solutions whose demand -- has quarter-to-quarter comparison quite significant impacts if they take less or more material than we have expected. And that can then distort the kind of reported typical seasonality pattern. But the underlying base water treatment business, the seasonality is as it is because even if the climate is changing, it has not changed that dramatically in that short period.

Okay. Got it. And maybe continuing on this Packaging & Hygiene segment and this change in product mix. So how would you describe the current mix in Q3, like you mentioned that it improved, but is it like normal now or maybe a bit too positive for your EBITDA? Or how should we think about that one?

Yes. Well, again, and as Petri said earlier, so you should not really look at one individual quarter in isolation because there will always be fluctuation in terms of demand, but in terms of product mix as well. So certain product lines are more profitable than others for us, and there might be this fluctuation between the quarters. Now the third quarter happened to be very positive in terms of mix for us. And as order patterns kind of level out week by week, even if we would want to be, could not comment on what to expect for the Q4.

Yes. So Anssi, maybe addressing your question a bit differently. So the profit improvement need is not over in PHS business unit at all. That's why we are doing the business model change there now. And this will actually take, like I said, well into next year as we are implementing it. So actually, it's a fairly fundamental change. So yes, we'll continue to drive that to get the business unit profitability sustainably to the level where it actually ought to be. So don't take that Q2 to Q3 improvement and put a linear stick on it and expect that to continue. Maybe that's another way of saying it bluntly.

Thank you, Anssi. Let's now then take the next question, please.

The next question comes from Andres Castanos-Mollor from Berenberg.

I was thinking, do you expect lower raw materials to have a positive effect in Q4 in your -- in the cost side for you? And I was wondering if you had seen already something in Q3, maybe potentially affecting being a positive factor in your Packaging & Hygiene Solutions result in Q3.

Well, I showed the raw material development year-on-year, and it was sort of a boring flat line, so I didn't even talk about it all that much. So as a group, it looks pretty flat, but there are individual areas where we have cost pressures, and we have some cost pressures in some areas of our water services business, we have some areas in our fiber. I mentioned some -- and that was already visible in their sort of profit bridge as we talk about it. So consequently, there was perhaps a slight improvement on the variable cost environment in PHS. But again, these are fairly small changes. So I can't really -- I think really the focus is much more on what can we do and how can we drive more volume.

A follow-up, a different question, if I may. On Water Engineering, I wanted to ask about the rate of acquisitions they have been doing in the past. Can you comment on that? Can you kind of give us an idea of how much capital this platform could deploy going forward?

We will not comment on how much capital, but just that you get the idea. So typically, they have done several a year of this kind of small acquisitions, and that's kind of what we plan to do. Of course, with our bigger muscle, we can also then look at bigger targets to add on to that platform, not only the small ones that they have been thus far doing.

I think it's very logical to say when Antti described Water Engineering as a platform. So it is a platform to continue on this sort of smallish type of deals and maybe increase the size, which they have been really doing like EUR 10 million revenue type of deals or even smaller, some smaller. So maybe increase that a little bit so that for the same effort, you can get a bit more meaningful impact. But this platform wouldn't be something hugely bigger on top of this. That's not the idea.

Thank you, Andres. Let's now take the next question, please.

The next question comes from Joni Sandvall from Nordea.

A couple of questions also from my side. You mentioned the uncertainty in the industrial side of the solutions. So could you give any more color? Has this intensified during the Q3? Which sectors are most affected? And does this have any impact on your mix?

Well, first of all, like if you look at the industrial side of the Water Solutions, so we are basically serving all the possible industries that you can think of that use water, which is basically all the industries. So in that sense, kind of pinpointing which industry is exactly more kind of in decline than some other, it's impossible. It's really, as I started my presentation with, it's the kind of overall kind of slowness of the global economy and then the less global trade that happens, which both are kind of not only now impacting then the Packaging & Hygiene Solutions, but really all the industries. Especially here in EMEA, we all see it all around us every day.

And then when the industries run with lower utilization rates, they consume less water and that is impacted. And that impact typically is gradual because you have some industries doing a bit better than others, and they are offsetting each other. So typically, we don't see it in industrial water treatment if there's some short-term nods in the economy. But when it's this kind of a longer kind of degrade of the industrial activity, it then starts to be visible for the water treatment chemicals demand as well. And there's no particular step from Q2 to Q3. So you should really look at it kind of a longer-term continuum of what happens to the economy, especially here in Europe.

Maybe it helps if I remind you that a lot of these industrial customers, we actually don't address direct, so we go through distributors. So these are, for us, smallish or the end customers would be so small for us that it don't make sense for us to cover them direct. We cover the urban customers, the municipal customers, we cover them all direct. But this is sort of an indirect channel. And like Antti said, that's why it gets a little bit diluted the impact of what happens at sort of in the economy.

Okay, that's clear. Maybe still digging into Packaging & Hygiene Solutions and the improvement, let's say, potential for '26. You mentioned that Americas and EMEA are in the -- at 15% or above level. So should we expect in '26 about to reach mid-teens levels on, let's say, run rate on profitability?

Well, we are working as hard as we can to improve it as much as we can as quickly as we can.

Yes. So clearly, we're not happy with and satisfied with the run rate of profitability in PHS through 2025. So yes, we want to improve that, and there are efforts ongoing towards that. So yes, I think it's going towards the mid-teens range. And when we will get there, let's -- we're not giving an exact quarterly guidance. It also depends what happens in the market, is there any recovery in '26? And if yes, when it will happen?

Yes. Okay. That's clear. Last question from me. Given the weak pulp and paper market that we are currently in, have you seen any increase on pressure on pricing from the companies?

Well, it's obvious that this kind of a situation leads to more pressure. But our customers are quite really professional and well educated. And regardless of the cycle, they are tough negotiators. So we have all the time pressure on our prices. Of course, it is a bit more harsh in this kind of environment when you have seen all the savings programs of our customers. But as I mentioned, I think, in Q2 webcast as well, our approach has been to try to turn it around to kind of collaboration efforts where we look together how can we help them to save more so that it's not about the per tonne price of the chemicals, but our application and solution, which is helping them to consume less virgin raw materials, less energy and so forth.

So it's also an opportunity, even if there is some more pressure on the pricing, but it's also an opportunity because we have some of these solutions. For instance, some of our digital services are exactly aimed for these kind of improvements in the customers' processes. And thus, I see it kind of both, of course, a pressure, but also a really good opportunity to help our customers.

Thank you, Joni. Let's now then take the next question, please.

The next question comes from Tomi Railo from DNB Carnegie.

This is Tomi from DNB Carnegie. First question, Fiber. Do you expect or are you initiating any actions on the Fiber side now that you see the impacts of weaker demand there, something similar as in PH?

We're, of course, all the time looking at the profitability of each of the business units. It's good to remember with the Fiber that it is slower turning both than for example, PHS, where basically we have relatively lean organization. It's not that easy to look at the kind of organizational model, and cost to serve is very low because we have this kind of a typically, tightly connected supply to our customers. So it's a slower turning ship, and you need to be more careful in analyzing what are the potential actions. And you need really kind of a prolonged downturn from the customer side in order to start some kind of a more radical actions on that business unit. But obviously, we are all the time looking at how can we manage in this environment with a good profitability.

Just a follow-up. If it's slower, can it also be deeper? How do you see that kind of if it's slower, but does it kind of then also decline more relative to PH? Or how does it work if we were to assume longer, prolonged weakness?

Yes, that's a really complex question. And of course, I mean, that you should, again, predominantly ask from our customers to understand kind of what is happening at the global pulp markets. But the global word is here actually very important. So the pulp markets are global and our customers are not only kind of playing on the geographies where they produce, but there's global trade flows. A lot depends on how China economy will develop and so forth. So it's kind of a complex question to answer and difficult to say whether it would be any deeper. Pulp and the packaging materials are in the same value chain ultimately. So basically, you can't really separate. The timing effect is different, but the value chain is the same. So really, I think it's an impossible question to answer as such.

But in a sense, it's easier in PH side to do your self-help actions than it is at the Fiber side?

Tomi, the cost structures are quite different, so because we have a few small number of customers on Fiber Essentials. So each customer buys a lot. So there's a very small sort of sales and application team, whereas in the Packaging & Hygiene Solutions, we have lot more customers. There's a lot more applications. There's a lot of application and salespeople. So the mix -- when you -- total fixed cost, sorry, the mix between manufacturing and what we call business overhead, where we lump both the sales and application and technical support people, it's totally different. So there's a fairly little of this business overhead in Fiber, whereas there's a lot more in PHS. And with that, of course, you can play with.

And that's why we are implementing this business model change. So how we are supporting our customers with this team of not only the technical support people, the application people, the salespeople, but also the support organization that is managing the whole supply chain.

Yes. Okay. Second question, just starting the fourth quarter, have you seen any kind of a change? Do we continue on a similar kind of situation as in the third quarter kind of up or down or any positives, any negatives, any further negatives or?

Tomi, you know our practices. We never comment on the ongoing quarters, and you almost always try.

Thank you, Tomi. Let's now then take the next question, please.

The next question comes from Andrew Noël from chemicalESG.

I've got two. I wanted to ask about PFAS and how you see that market developing. When I talk to some people, they seem to think that when it comes properly, it will come quickly and big, if you see what I mean. So I'm wondering about your investment plans. Say, Helsingborg is sort of EUR 10 million. Are you going to sort of invest heavily ahead of this? Or how do you see that PFAS market growing in terms of timing and whether you're going to sort of scale up, whether you can scale up? And what -- have you done a forecast on what perhaps you may need to invest to stay ahead of the market when it does sort of gather a bit more momentum? That's the first question.

And just the second one on valuations in M&A. In some other -- not particularly in water perhaps, but some chemical distributors are talking about valuations coming down. And I just wondered, as owners are a bit worried about the outlook and so on, I just wondered what you are seeing in your particular sector.

Thanks. So I will take the first question and let Petri comment on the second one. So the PFAS removal market indeed is a really interesting market, which is developing as we speak. And as it's a kind of a new market, there's a lot of unknowns. We have clearly stated that we will be playing in that market and are developing our approach there. It's also interesting from the perspective that there is not one dominant solution that will be used by our customers for removing of PFAS. So it will always be a combination of the good old warhorse, the activated carbon, which is not enough and which will not solve the problem. So other technologies are needed. Some of them are chemicals, some of them are nonchemical. And it's this combination within which we need to find our playing field, so which parts of that we play.

And we have clearly started our approach by entering the activated carbon market. So we purchased a small facility in U.K. That's actually kind of we have filled it up very nicely, and it's working well as a first step. We have announced now the investment project in Helsingborg, Sweden for the reactivation. So those are all the small steps that we are taking into the market as it continues to develop. And we are also looking at bigger steps, but that all depends on how the market develops and what we can do there. But we are really kind of determined about that.

But then also, as I said, I mean, this will not be enough. So we are working with different external partners and our own research and innovation area to develop new, more specific solutions, which will be complementing then the activated carbon on this fight. So we are serious about the market. Market will grow. And as you said, some are expecting it to explode, some are expecting it to have a kind of a more linear type of growth. Nobody knows today. We are taking our steps according to our strategy. We have, I think, a very clear plan, how do we enter it. And our benefit on that area will be that we are serving already all of these customers with our coagulant and polymer solutions.

So basically, we have the supply chains ready and we are there with these customers. So whatever the new prevailing technologies will be, we are in a really good position to globalize them and capitalize on that market presence that we have.

Andrew, that was a good question to ask Antti. And I think the valuation question is also a fair and good question. I think very few sellers would actually acknowledge that their expectations of multiples are coming down. But when you look at what's going on in the market, there is a number of private equity funds that own assets that they have -- they are holding towards their maturity. So clearly, there is still a discrepancy on valuations and maybe the seller expectations at times are still higher. I think in generally, at least I wouldn't say that they are going up anymore. So clearly, we've sort of maybe moderated from the zero cost financing that was available some couple of years ago in that sense.

So perhaps you're right that there is an expectation and realization of some moderation on the valuations. And of course, this would be a development that we would welcome very much because some of the actions -- some of the things we've been sitting on the sidelines because we could not make the ends meet.

Thank you. I think we start to actually run out of time here with our webcast. So we had a couple of questions through the webcast question formula. They were related to the Packaging & Hygiene Solutions profitability improvement program, and I think that they were covered in the other questions. So we don't need to take them now here.

But I would like to thank all the participants for the active participation and good questions. And as a reminder, we will report our financial statements bulletin on February 12, and that's already next year, so '26. And I hope to see as many investors as possible on meetings during the next quarter. We will be actively on the road. And of course, have a great day, everyone, as well as a great weekend. Thank you so much.

Thank you.