Welcome to the Financial Reporting Q1 2024 of Aspo. We have had quite a hectic start of year 2024. A lot of strategy execution actually in all the businesses. When it comes to ESL Shipping, we have now on board two minority investors: OP Infra and Varma. We have also signed a transaction to sell the Supramax vessels. Both of these actions will free up capital to invest in the next wave of environmentally friendly vessels. Telko has made acquisitions. Entered into France and Benelux via the acquisitions of Optimol and Greenfluid. And then during April, we announced signing of share purchase agreement of Swed Handling, which is a considerable acquisition in Sweden. Making actually, or doubling Telko's revenue in chemicals. Part of the Swed Handling acquisition is also Kebelco, which then will belong to Leipurin. A very good strategic fit, basically technical products to the food industry.
Also Leipurin's transformation has continued successfully during the start of this year. Result-wise, EUR 4.8 million compared to EUR 8.4 million last year for Q1, impacted by the exceptional ice conditions as well as the political strikes here in Finland. Sustainability. First, emission intensity, a bit of a challenging quarter considering the ice conditions in particular. So those impacted both topline development as well as increased the emissions due to longer distances, etc. And hence, the emission intensity increased compared to last year. And we need to work to reach the full year target of this year. Strong development when it comes to safety. I think this is a record level, 3.8 as injury frequency for Q1, well better than the target of 6.0 for the whole year. The political strikes as well as the exceptional ice conditions impacted Aspo quite severely during the Q1.
Total impact of EUR 3.7 million on profit level. This particularly then belongs to ESL Shipping. Total impact of EUR 3.5 million. Basically, this relates to lower production volumes of our clients. Some harbors were closed. A lot of waiting, rescheduling, etc. Longer distances, more fuel consumptions. Basically an overall decline in cargo flow, let's say, efficiency. On the Telko and Leipurin side, fairly small impact. That's due to higher logistics costs and then also some lost volumes. Unfortunately, this is something which will continue also into Q2. Basically looking at the April numbers, we still recognize and forecast a negative profit impact of EUR 0.7 million. Before all the flows are kind of normalized, that's EUR 0.5 million for ESL Shipping and then EUR 100,000 each for Leipurin and Telko.
If you then look at the numbers - net sales development -6% compared to last year quarter one. EUR 133 million was the net sales. Looking first at ESL Shipping - negative impact again by the political strikes and winter conditions. But the good news is that we had very healthy and strong demand - kind of underlying demand despite this challenging environment. Telko. Lower price levels, soft demand if you compare to last year Q1. But if you compare to the previous quarter - basically it's stable development which is kind of positive. Also positive is that we were during Q1 this year able to take market share. Then also positive impact on net sales gradually building up from acquisitions. Leipurin -6%. Basically a strong inflation in the environment last year turned into deflation.
And then we also continued to shift the product mix away from commodity categories which also hit the topline. Then over to comparable operating profit. As said, EUR 4.8 million. ESL Shipping hit by the EUR 3.5 million of additional kind of costs, strikes and ice conditions. Telko then. Negative impact from M&A related costs, approximately EUR 1 million from due diligence costs and then also from the fact that we value the acquired inventories according to market prices. We though got full effect from cost efficiency improvement efforts from implemented last year. And Leipurin, I would say that the transformation is positively on its way. And also the kind of developed product mix improves profitability of Leipurin. Aspo Group level cost on a fairly stable level compared to last year. We did an impairment of the Supramax vessels. They are now part of the assets to be sold.
And hence we got a one-time effect of close to EUR 8 million out of that. Partly that also costs related to the minority investments. Cash flow EUR 5.5 million. Basically the decline came from ESL Shipping. Some change in working capital. Basically Telko's inventories building up since end of last year during these three months that had a negative impact, total change in working capital impact of close to EUR 4 million. And then if you look at free cash flow, actually taking the cash flow to a negative level driven by the fact that we acquired Optimol and Greenfluid in France and the Benelux. If we look at cash flow from financing activities, we got the EUR 45 million of additional equity into ESL Shipping. And hence our balance sheet was very much strengthened. Return on equity 5% if you look at the comparable figures.
The decline due to ESL Shipping. Then if you look at the reported figures, clearly minus due to the loss related to the Supramax vessels. Then if I dig into the strategic actions done, already mentioned OP Infra's and Varma's investment into ESL. Basically investing EUR 45 million against an equity value of EUR 165 million. Taking then Varma's and OP's ownership stake up to 21%. I think this is very important for Aspo and ESL to get this additional equity into ESL, that will enable us to pursue growth from the green transition offered by the Nordic industrials, investing in even fossil-free production and kind of gradually building up the market of ESL Shipping. Sales of the Supramax vessels, $37.1 million, which then generated a loss of approximately EUR 7 million. I think this was a very good strategic move.
The Supramax vessels have not been over the past 10 years very profitable in comparison to our coasters and Handysize vessels. In addition, they are less resilient compared to our smaller vessels, more in the spot market where they are allocated. And this then will also free up capital to invest in the green transition of ESL. Telko. Acquisition of Optimol and Greenfluid. Very interesting companies. Close to EUR 20 million of net sales. Very profitable. EUR 2.2 million of EBIT. And this is, I think, a very kind of textbook example of a good acquisition for Telko. In the specialty segment, meaning high-performance lubricants, industrial lubricants, and entering into new markets, France Benelux, which will enable us to at a later stage build presence also in a kind of wider product mix in these markets.
And then also we expect some synergies here, particularly top-line synergies, from clients who are already familiar to us in Telko. Then Swed Handling, as said, the purchase agreement has been signed. Swed Handling, a leading player in chemicals in Sweden. And the net sales, if we look at the chemicals part of the business, is approximately, let's say, SEK 600 million. And it's a very profitable business, basically EBIT on a SEK 55 million level over the past two years. This is a very exciting transaction for us. Telko is already present in Sweden. A very small chemicals business. A quite strong lubricants business. And we see significant supply chain synergies here. And in addition, we see opportunities to sell across the borders and benefit from the new competences and product mix of Swed Handling going forward.
Part of the Swed Handling acquisition, Kebelco, it's basically an approximately net sales EUR 10 million and an approximately close to 10% EBIT level. Fairly small company but with a perfect fit to Leipurin. So basically here we have Kebelco selling technical products, flavors, colors, etc., to the food industry. And this will enable us to sell these types of products both to the existing customer base in Sweden but also into Finland. And again, a perfect match from the perspective that we want to invest in Leipurin in such segments which will give us good profitability going forward. And this is well represented by Kebelco. Then I would like to ask Erkka Repo, our CFO, on the stage to go through the business-specific numbers. Please, Erkka.
Thank you, Rolf. On ESL, the political strikes and the winter conditions affected negatively our cargo volumes.
We also had less opportunities for spot market volumes as our vessels were tied into a much slower execution of the contractual volumes. On the contract volumes, we saw healthy demand in steel, in fertilizers, and in limestone. In forest products, we experienced still low to moderate demand. In the energy co-shipments, they decreased significantly compared to the previous year. ESL comparable operating profit was EUR 2.7 million. Without the EUR 3.5 million negative impact coming from the strikes and from the exceptional winter conditions. We expect those strike impacts to continue on the Q2 with the EUR 0.5 million impact for our Q2 profits. We consider these negative impacts very exceptional and one-time in nature. So as these types of events occur very seldom. In Telko, the Q1 was challenging in a fairly soft market.
We experienced low demand and significantly lower prices when compared to the quarter one last year. However, sequentially, when we compare to the previous quarter, Q4 , the volumes and prices were flat. In plastics and in chemicals, prices were significantly lower than last year. In lubricants, our sales increased with the good demand in industrial lubricants. And also the price level in lubricants was on a good level. In lubricants, also the Optimol and Greenfluid acquisition contributed positively on sales in March. Telko's comparable operating profit was EUR 2.2 million. It includes EUR 0.9 million of acquisition-related costs. As acquisitions are part of Telko's compounder strategy, we do not separate acquisition-related costs as comparable items, but they are part of our comparable operating profit. Typically, we expect that acquisitions start to contribute positively to our result about two to three months after the closing.
At the closing, we value the inventory to the expected sales value. Then after the closing, we reverse that valuation. That leads to this 2-3 months lag for the positive earnings contribution after the closing. In Leipurin, the sales decreased by 6% compared to the Q1 last year. It was mainly driven by the decrease in market prices. But also our actions to improve the sales mix resulted in decreased volumes in the low-margin categories. We managed to increase our comparable operating profit to EUR 1.1 million with 0.5% improvement in the profit margin. This is a really good achievement in a deflationary market, which typically is the most challenging market for us. Therefore, I consider this as a really really great achievement. Leipurin continues to execute profit improvement actions in commercial supply chain and in sourcing areas.
Also in Leipurin, the Kebelco is expected to start contributing positively two to three months after the closing. Our balance sheet has significantly strengthened by the EUR 45 million minority investment into ESL Shipping. Our group equity ratio is at 38.6%, which is a high level compared to the long-term history in Aspo. Also, we have a strong liquidity with EUR 68 million cash and EUR 40 million unused revolving credit facilities. And our liquidity is expected to remain strong after the announced transactions, assuming they are closed as planned. With the Supramax vessels contributing about EUR 30 million. And the purchase price of Swed Handling being about EUR 40 million. So a strong balance sheet and strong liquidity expected to continue. Thank you. And handing over back to Rolf.
Thank you. Then basically summarizing this quarter: strong strategic implementation and profit impacted by the political strikes and the exceptional winter conditions.
If we then look forward, starting with ESL, as already mentioned, already during Q1, we see strong underlying demand. We see that also going forward for the steel industry in particular and also gradually picking up in the forest industry. Then it's good to understand that typically ESL Shipping during the summer, the volumes typically would have been in decline compared to the beginning of the year. Longer term, we see a very positive outlook. There's a tighter supply and demand situation. Basically, our customers investing a lot in the green transition, in new production. And then we see our forecast is based on the fact that vessel capacity will be in decline in the region in this area. If we then look at Telko, we look forward, basically stable market development going forward.
Prices and volumes, demand gradually picking up, particularly during the second half of this year. Leipurin modest volume growth, particularly in a deflationary market where prices go a bit down. However, we see a significant growth opportunity in the food industry where our position still is kind of minor. And this is a market which is multifold compared to the current bakery market where Leipurin is particularly present today. Guidance: we estimate the comparable operating profit to exceed EUR 30 million this year compared to the EUR 26.5 million last year. There are basically four drivers to this improvement compared to last year. One is market conditions. We expect them to pick up particularly during the second half of the year. Secondly, we will get, or ESL Shipping will get Green Coaster vessels on board.
Basically, we have the first one already in the market and it will start producing profit during the Q2 of this year. This is important to understand. Basically, the investment decisions done in 2021, they will start contributing now this year in our profit. Then Telko's acquisitions also to contribute to this year's operating profit. Then throughout the group, Aspo, all of its businesses, we have a lot of development activities going on being monitored, being executed to drive up the profitability of all the businesses and Aspo. Finally, I want to take the opportunity to welcome you to our Capital Markets Day next week on Tuesday. And you will be able to access the link via our webpage and to hear on our, listen into our strategic updates. I would like to ask Erkka to join me here on the stage.
And then we are ready for any questions that you may have. Maybe starting here on the floor. Please, Pasi.
Great. Thanks. Thanks for the presentation, Pasi from Nordea. I have a couple of questions. Maybe I just take those one by one. Easy to remember. So starting with your guidance. So you kept actually your guidance kind of unchanged. But does it still include the acquisition made recently, this Swed Handling? So in terms of including that, so what's the expected kind of earnings effect in terms of EBIT for the second half then when looking at the guidance?
When we came out with the Q4 results and guidance, which now is kept unchanged, we said that the Telko acquisitions are included in this guidance. And that goes also for Swed Handling.
If we then look at the Q1 comparable operating profit of EUR 4.8 million compared to our guidance above EUR 30 million for the whole year, it's fully understandable that, which Erkka also mentioned in his presentation, that Q1 does not in any way represent the run rate profitability of Aspo currently. So that means that the result of the second half of this year is a significant improvement compared to the first half.
And then maybe if continuing that, we expect Swed Handling closing to be during Q3. And then the positive earnings contribution starting two to three months after that. So the positive earnings contribution for 2024 is still fairly minor.
Yeah, I understand. When looking at the kind of the run rate for your profitability in terms of EBIT margin, you have now sold loss-making Supramax vessels and acquired Swed Handling. So what's the kind of run rate for the operating profit then by excluding this timing effect and the kind of other issues?
I can enlighten it a bit. If we look at the Supramax vessels during the Q1, I would say that the profitability of these are aligned with last year's profitability of the Supramax vessels. So fairly moderate. So kind of fairly limited impact when deducting these. If you look at the Telko profitability and try to understand the run rate, there's a couple of aspects. One is that you need to exclude the M&A costs, kind of the due diligence costs, etc. And that will already take Telko's operating profit above 6%. And then basically one needs to add kind of longer-term acquisitions made plus potential synergies. And then you get the run rate.
And finally, Leipurin, as said, we're aiming for the 5%+ EBIT. And currently, the path has been taken in that direction.
Yeah, I see. When looking at these Green Coasters and especially next year, when the effect is actually more visible coming from the new vessels, so are these new Green Coasters going to kind of support your 14% EBIT margin target on the segment? So should we still expect that they improve or kind of decline to kind of the run rate for your operating profit margin?
The Green Coasters , there are basically two folds. So half of them go into the pool and half of them are part of our balance sheet. And it's actually every second one. In average, these will, according to our plan, support the 14% EBIT target.
Okay, that's understood. Well, I have 2 more questions here. When looking at the Leipurin segment, I mean, if I remember right, over 10 years, Leipurin has tried to reach the 5% margin and we are not still there. So is there truly something you have not made yet how to get to kind of the target profitability in the segment in Leipurin?
Good question. So it's very true that Leipurin's profitability over the past years have been dissatisfying. We've done a lot of actions. One is kind of focus of the business model, selling non-core assets and non-core businesses. Then I think it's a renewal of the management model, very much focusing on the country-specific profit and loss. And then on upgrading and capability across all the entire value chain. I think this now has taken us well beyond 3% of EBIT. Then is it possible to go beyond 5%?
I think the answer is, from my perspective, fully clear yes. I think looking at Kebelco gives us an understanding of what can be done. Basically, of course, Kebelco is a much smaller business, size-wise approximately EUR 10 million. But here, Kebelco is doing an operating profit in the magnitude of, let's say, 7%-9%. The ingredient there to drive that type of performance is to focus on technical products, driving growth in the food industry, and not growing and investing in the commodity sector. That does not mean that we will kind of depart from the current business, but all the growth investments will be made in the more lucrative segments. That should be the driver for the improved profitability. Yes, thanks. I see.
And the last one from my part is related to the Telko segment and the contracts you have made with your customers. So if the raw material prices are down, is it so that your operating profit is down respectively? Or is there any kind of other items including these contracts? So is it truly kind of coming through from the raw materials directly to your operating profit to effect?
There are some kind of back-to-back deals, but in practice, it functions as you describe. And that means that it's no problem if there are low price levels or if it's high price levels. And there's no problem or challenge if it's kind of gradually shifting price level.
But what happens when kind of prices decline very rapidly, and that happened in Q2 last year when it comes to volume plastic, then basically we run the risk of selling expensive inventory at cheaper price levels. So this is very much about inventory management and that we are putting a lot of focus on. Thanks. That was all from my side. Thank you. Hi. This is Kasper from Inderes. I would like to hear more about the ESL's investment plans. So how many vessels are you expecting to acquire with your new investment of EUR 45 million? Could you give us any guidance on how to think about that? Maybe a couple of thoughts. One is that the first Green Coaster has just arrived. And we will get one incremental Green Coaster on a quarterly basis over the next approximately two and a half years.
So I would say that during this time frame, we will make at least the final decision of investing going forward. How many ships, it's still a question mark. I would say that we are now looking more into the Handy segment since we have already invested in the coaster segment. And we are looking for the kind of best technology to be as competitive in this green transition as possible.
What would you say that, for example, EUR 120 million to 150 million would be kind of an appropriate range to assume as the total investment capacity regarding them? Assuming the LTVs are probably around 60%-70%.
I would say that the investments that we are planning, it's of larger size than the Green Coaster investment made. And that was basically EUR 75 million + EUR 75 million. So partly them pooling, adding up to EUR 150 million.
And if you look at depth opportunity, basically it's equity to depth. That's 1 to 2 basically, which could be possible in this type of investments.
Okay, thanks. No more questions.
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Thank you very much for attending this Q1 reporting of Aspo. And once again, welcome to the Capital Markets Day next week on Tuesday. Thank you.