Good morning, ladies and gentlemen. Welcome to the teleconference for the first quarter results of TeraP last Group. I'm joined for this teleconference by Bogdan Crăciunaș, TeraPlast Group's CFO, and Alexandra Herișanu, TeraPlast Group Director for Marketing and Investor Relations. It has been a complex first quarter, with Sorry. With mixed evolution throughout the segment, and an overall negative impact that we are going to explain and also give you a few perspectives on the for the rest of the year.
As you know, TeraPlast Group operates under four segments: the installation segment, the flexible packaging, compounds, and windows, with production facilities in Republic of Moldova, Romania, Hungary, and Croatia, and a trading company in Austria responsible especially for the DACH markets. First quarter has been very challenging on a lot of levels. First of all, it was the first, let's say, real winter that we had in Europe in the last few years, which impacted the sales of January and February, where we were consistently below budget. You have the elections in Hungary, which basically slowed down a lot the infrastructure projects. You had also challenges in Romania regarding the late approval of the state budget.
This all resulted in less than optimal circumstances in which we evolved during the first quarter. On top of everything, but with limited impact in the first quarter, the start of the war in the Middle East, in Iran, which impacted raw materials, raw material prices especially, has come to add up to all these complexities that we faced during the first quarter. The impact of all these factors has been felt by a 6% decrease in revenue, a 7% decrease in volumes, which in turn resulted to a 50% decrease in EBITDA and a negative net result of EUR 10 million.
Furthermore, as I said, because the situation in Hungary was quite frozen due to the elections, we also had a decrease in sales outside Romania, again, mostly generated by Hungary, which represent 35% of the consolidated turnover, give or take, in line with what happened last year. With the base effect of a very good 1st quarter of last year, the gap seems more significant. However, we feel that in the long run, especially what happens in Hungary, is going to have a positive impact in the group's business as we expect from the 3rd quarter onwards, for Hungary to have again, for the 1st time in many years, European money to invest in sewage, water, and gas networks.
The evolution was mixed throughout segments. As I said, most impacted from the factors that were manifested during the first quarter were the installation business, which had a decrease from 72% of the consolidated turnover to only 70%. Granules also had a 2% decrease from 10% to 8%, which was partially compensated by the increase in sales that we had in packaging, which has had a much better quarter than previous quarters. In terms of volumes also, the windows increased, but the profitability of that segment is still lagging behind expectations, which is the reason we decided to have a management change there.
Starting in May, the management of the windows division was taken over by Mr. Attila Beer, who's a well-known name in the window and door market as he was for more than 20 years Managing Director of Alukönigstahl / Schüco in Romania. He has a vast market knowledge and also huge experience in our field. All this resulted in honestly underwhelming results. However, we still have a good feeling about what's coming in the next quarters. Considering the dynamic of last year's sales, I think that by the fourth quarter, we will be able to catch up the gap that has been created in the first quarter due to the reasons I explained so far.
Of course, there are a lot of uncertainties that are in the market, especially regarding the raw material generated, but by what's going on in Iran and in the Strait of Hormuz. Overall, the revenue decrease of 5.5% is generated by the volumes and price decrease because in the first quarter we did not see the impact on raw materials of the war in the Middle East and a slightly positive impact, an increase from the M&A activities from our subsidiaries. Overall, we have the 7% decline versus 2025 and a big hit on profitability.
We are again confident that this can be overcome in the next quarters as the packaging division has proven in the first quarter that somehow due to the activities carried on late last year regarding new customers. We have an increase in volumes, and for the first time we have a quarter that has a positive EBITDA, and I think that at least in the future, we'll continue this positive trend in packaging, which is somehow rewarding a lot of efforts that have gone on in the past in the past few years.
For a deep dive into the numbers, I will hand over to Bogdan , who will give you a more insight into the numbers of the first quarter, and I will be back here for the Q&A. Thank you very much.
Hello to everybody. Okay. Just a second. Sorry. We continue the presentation with details in respect of quarter one 2026 results. We start by with a comparison with the similar period in 2025. As an overall information, this comparison between the two periods are impacted by two main factors. The first one is the M&A in quarter two 2025, we have acquired the Aquatica Experience Group. This acquisition, it's impacting the first quarter of 2026, especially in the line revenue from services and the other operating expenses. This is the main impact.
The second impact in M&As is the start of the production in Zsámbék production facility in Hungary. The second factor is the negative evolution of the market due to the meteorological factors, the bad weather in the first quarter 2026, the lack of the state budget and the negative impact in the Hungarian market. All of this impacted significantly the 2026 quarter one results. As you can see in the slide, we are closing the first quarter with RON 236 million consolidated net sales versus RON 249 million in 2025. This represents a 6% decrease.
In terms of costs, the raw material expenses have decreased by 10%, which is a higher percentage compared to the decrease in sales. This generated a higher gross margin, which is an important factor, a good factor. We have increases in salaries, utilities, but these are in line with the budget, mainly because of the salary increases we incurred in 2025, which are generating the impact on the entire 2026 financial year. We have an increase of 27% up to RON 31 million in other operating expenses. I was explaining that here we have the impact of Aquatica Experience operations.
All of this generated an EBITDA of RON 8.9 million, a decrease of 58% against the similar period in 2025. The net profit, the net result is a loss of RON 10.6 million against RON 1.2 million incurred in quarter one 2025. We continue the presentation with the comparison against the budget for this first quarter. As you can see, we are with 16% under the budget in terms of net sales. Basically, this is the impact of the reduced level of public investment projects. The raw materials have decreased with a higher percentage, with 20%. This generated a gross margin of 40%.
We have increases in also in the salaries and benefits line, but we compensate with a decrease in utilities and in other operating expenses. All of these generated an EBITDA of 8.9% against a budgeted EBITDA of 14.9%, a decrease of 40%. A significant impact against the actual 2025 we have in financial result. Here we have an expense, a loss of RON 5 million, but comparing to the budget, we are under the budget. Here we have the impact of the increase in interest and the depreciation of Romanian leu against Euro.
The net result, it's a loss of 10.6% against a loss of a budgeted loss of 6.7% generated by all the factors that I have highlighted before. We go forward with the presentation on each activity segment. Obviously, the installation segment remains the most important. We present net sales of RON 165 million against net sales of RON 179 million in the previous year, quarter one, 2025. The EBITDA, it's equal to RON 9 million against RON 18.1 million in the similar period of 2025, a decrease of 50%.
Here we have, on one hand, a positive impact from German markets, Slovakia and Croatia, where we have higher sales, but these are compensated by a decrease in Hungarian market, France and Italy. The compounds segment presents a turnover of RON 19 million against a turnover of RON 25 million in the previous year. An EBITDA of RON 1.3 million against RON 2.7 million in the quarter one 2025. This is due to uncertainty, mainly due to uncertainty in the cables market, which is putting pressure on prices on the entire cable market. The next segment are the windows. Here, on one hand, we have an increase in the turnover, RON 12.4 million, 13% increase compared to similar period in 2025.
Due to the increase in the raw material costs, especially the glass cost, we are generating an EBITDA of a negative EBITDA of RON 763,000 against basically a zero EBITDA in the previous period. The last segment is the flexible packaging segment. The turnover has increased to RON 39 million comparing to RON 34.8 million in 2025, an increase of 12%. Here, all the measures that we are taking to make the operations in this segment more efficient are paying off.
We are presenting a negative EBITDA of only 693 lei, comparing to 110 lei, almost 200,000 lei in the similar period in 2025. The good information here is that in March, we have generated a positive EBITDA, and we are confident that all the measures taken will pay off in the next months. Moving forward to the balance sheet elements. Here, we have an increase of the non-current assets, we invested this quarter. We have paid, I will present in the cash flow. We have paid for non-current assets almost 25 million lei.
We also present an increase in the trade working capital, especially in the trade receivables. This is basically an impact of Hungarian, mostly the Hungarian operations. In order to finance this need of working capital, we have drawn from our credit lines. We have financed these acquisitions. We are consequently we are presenting an increase also in the net debt. In terms of leverage ratio, we have increased to 5.1 against four at the end of 2025. This is normal, explained by the normal seasonality of our business. Moving forward to the cash flow. As I was explaining, we are using working capital.
We have RON 10.7 million, RON10.6 million increase in working capital. We also present the payments towards the acquisitions of fixed assets. All of these are compensated by the increase in bank debt we have drawn from our credit lines in order to finance this. An important factor in 2026, we are expecting to collect from subsidies, RON 14.6 million. Here we have two projects. On one hand, the Optiplast investment, and the photovoltaic power plant, where we were expecting the subsidy in 2025. Unfortunately, this was moved to 2026, and we are waiting for the reimbursement of this subsidy.
This was the information regarding the financial performance in quarter one 2026. I hand over to Alexandru for the Q&A session.
Thank you very much. Please, feel free to ask any questions, either in the Q&A or in the chat, or by simply raising your hand. Yes, please.
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Great. Just a question on, Hi, Cristian Petre. A question on how do you plan to manage leverage in the coming quarters? Also, if you can comment a little bit on how closure of Hormuz influence you in terms of raw materials and access to raw materials. How you diversify away from, if you're exposed to this, to this risk? Thank you.
Yes. Let's take it piece by piece. First of all, regarding the leverage, I don't think that what we see for the first quarter is quite relevant for the whole year, because as profitability will increase, I'll say naturally in the coming quarters, then leverage should again, mathematically decrease. So, we don't have any, or we don't worry too much about the leverage aspect for now. On the other hand, the other question regarding the impact of the Middle East conflict is a much more complex one.
What we could see, starting from the end of last quarter, is a hike in raw material prices, somehow, which its impact did not manifest in the first quarter due to the inventory levels that we had both in raw materials and finished products. As input prices have dramatically risen in the last, starting with the start of the conflict, that influenced both our pricing strategy and our the validity of our offers. We give out offers. In the past, we had validity of offers, let's say on average of one month. Now we are talking about days of validity for price offers.
We are trying to pass through as much as possible of the price increase to our customers. Of course, when this happens it's always a matter of the inventory position of our competitors as well. We have, depending on the business line, both positive and negative effects. I would say that so far It comes with mixed effects what's going on in the Middle East. We were fortunate on one hand that for some of our business lines where that's technically feasible, we have started to develop some very close connections with the United States as a source of material, which is somehow the least affected.
What I can tell you is that Asian chemical producers are the most affected due to the lack of raw materials. Europe is somewhere in between with price hikes, limited availability, but still there is availability of raw materials. Also the Gulf players in petrochemistry have tried to diversify somehow their logistic routes. We have goods incoming from that area via road to Egypt and from there on, through the channel, through the Mediterranean, they come to us. This, of course, prolongs the lead times and impacts delivery terms of the raw materials. Again, we have the buffer stock which provides for that. This would be a brief overview on the impact of what's going on in the Middle East.
Okay, of course, We would have been better without it, but it is what it is. We are here to manage the situation, there. I think that I answered also the pricing strategy with these comments on the situation. Regarding the appetite for M&A, as I announced, we have ongoing discussions which we did not stop. We are extremely careful and extremely picky with what we do in this field. Again, we have ongoing discussions that we did not stop. Yes, please.
Just another question. Thank you for the answers. How is EUR/RON affecting you in terms of loans, leverage, and also in terms of your profitability overall? How do you plan to address it? That's it. Thank you.
Our pricing strategy, of course, takes into account, besides the cost of raw material, also the exchange rate. Some of our products, group prices, are denominated in euros, some of them are not. Most of our product groups are not denominated in euros, there we take into account or we update the estimated exchange rate. We are taking into account what's going on with the EUR/RON currency exchange. We have exposure, net exposure in euros, which is going to generate a loss from Forex in the second quarter. We'll see by the end of the second quarter how much it is, depending on the devaluation of the RON.
However, I would like to emphasize that, although us in Romania are not used to EUR/RON hikes, I would say that Maybe it's a little bit strong, but I would say that, considering what's going on macroeconomically in Romania, the stability of EUR/RON would have been a surprise. I think that this depreciation is somehow natural. Considering that 35% of the group sales are outside Romania, I think for the component of the 35%, the one that leaves Romania and goes abroad, the increase in competitivity given by the devaluation of the RON, is a marginal boost for our activity. Yes, please.
The last question, if you can comment a little bit on Hungary's situation, if you see some pickup in infrastructure and in works after the elections. Thank you.
Yes. We are quite confident that the positive outcome of the Hungarian election, and I say positive outcome, I mean in terms of Hungary's relation to the European Union, is going to be a boost for Hungary's access to European money. That also happened, if you remember, a while back in Poland when the government in Poland changed from a fairly autocratic one to a pro-European one. Therefore, we expect to see positive impact, a lot of positive impact in Hungary from access to the E.U. funds. However, this is not going to happen overnight. We expect the effect of this access to European money to be somewhere in the third quarter, starting from third quarter of this year. If there are any other questions.
I don't see any other questions. Thank you very much. We'll see each other in roughly three months for the second quarter results. I'm quite sure that the news are going to be much better then. Thank you and all the best. Bye-bye.
Thank you. Bye.