Welcome to the Q3 2024 reporting of Aspo. We had a successful strategy execution combined with profitability improvement during Q3. In a fairly soft market, we were able to grow top line with 13%, and we had an EBITA of EUR 8.7 million during Q3. Good to see that the investments that we've done, particularly the Green Coasters, as well as the acquisitions of Telko, they already impacted positively the Q3 result. We've done major investments during this year, particularly Telko's acquisition, specifically Swed Handling, the largest one, Kebelco for Leipurin, and then ESL Shipping's investments, first in the Green Coasters, and then also now lately in the Green Handys, an investment commitment.
These will naturally long term then impact Aspo's financial performance going forward. The transition of Aspo has been really major during the past three years. Now, we've fully exited Russia, and in parallel, as said, made major investments in West, fully compensating for the lost revenues and profitability in East. If we then look into sustainability before going into the numbers, overall strong development. We had reduced emission intensity. We are now at target level. Basically, after nine months, we're at 0.32, compared to a target level of 0.33. A couple of drivers behind these figures, we had a bad start in the year due to the bad ice conditions of ESL's business environment.
But then, on the positive side, top-line growth, and then also the actions done by ESL, basically eco drive, adjusting the speed of the vessel, and then also ESL's investments in new fleet, in this case, then particularly the Green Coasters. If you look at the number of accidents reported, divided by million working hours, really strong development, so best ever for Aspo during the first nine months of the year, 2.2 as an accident frequency, compared to the target of six. I think this is a gradual work, and we see improved results from renewing, improving the operating models, and gradually developing our safety culture.
If we then go into the financials and start with the top-line development, 13% growth, as said, very much driven by Telko. If you look at the first nine months of this year, we have a 7% top-line growth. ESL, slight decline in net sales. If you disregard the Supramax vessels, you have a small growth, both for the coaster as well as the handy segment. We had good contract volumes, for our contract customers, compensating for the weak spot market. Fairly soft market, which is very typical during the summer months of ESL, and then, fairly stable fuel prices, not really impacting the growth rate in this case. Telko, 34% of growth. It's twofold.
It's the acquisitions that have been made, particularly during this year, and then also some organic, volume growth. Sales prices, if you look at the market, are still below the level of last year. Leipurin, pretty much flat development, a slight deflation, then our strategic ambition to shift product mix, towards more high-margin products, and then Kebelco also contributing to the net sales growth. Over to profitability, EUR 8.7 million of EBITA, then cumulative for this year, EUR 21.1 million. ESL, negatively impacted by the soft spot market, during the summer months. Contract customers performing better than the market in general. Then on the coaster side, we had, additional costs, both due to dockings as well as kind of unplanned maintenance of the vessels. And then also in this, market—
Part of the time charter, the fleet is fairly expensive compared to the market prices, and these will be renegotiated by year-end when the contracts are renewed. If you look at Telko acquisitions, positively contributing to the profitability, also improved sales margins, and then reduced M&A costs if you look at Q3 versus the previous quarters this year. Only some EUR 700,000 of M&A costs during Q3. All the integrations, all the acquisitions are progressing well, and also the synergy capture is eventually proceeding. Leipurin continued strong profitability. A lot of activities going on, successful management of prices versus kind of procurement activities. Kebelco very much contributing to the positive profitability, and then gradual development of product mix as well, contributing to the profitability.
One-off items limited during Q3, actually a positive development of approximately EUR 500,000 from sales of real estate on an Aspo group level. Then if you look at the whole year, we have EUR 8 million of one-off items. Major part of this is the sales of the Supramax vessels, and in addition, some costs from the minority stake in ESL Shipping. Basically, the background of OP Infra and Varma injecting some new equity into ESL. Free cash flow on the negative side, if you start looking at operating cash flow, some EUR 17 million negatively impacted by working capital. Two major drivers behind that: Telko's inventories have been increasing during the year. That is approximately EUR 10 million of impact to working capital.
And then these Green Coaster vessels, which will be sold to the pool, that also contributed to a change in working capital, and that actually explains the remainder of the minus EUR 16 million . Free cash flow, minus EUR 17 million , and the major items impacting that, positive, the sales of the two Supramax vessels, EUR 33 million . Then the acquisitions, so far some EUR 55 million . And then we had to have the Green Coaster investments, and these are the CapEx Green Coasters into our own balance sheet. That's approximately EUR 17 million impacting free cash flow. Return on equity, reported, approximately 1%, heavily impacted by the impairment loss of the Supramax vessels.
Then if you look at comparable return on equity, that's on an 8% level for the first nine months. These figures, both reported and comparable, are also impacted by the poor profitability of ESL during the Q1, due to the bad ice conditions as well as due to the political strikes. If you look at the strategy overall, and you're familiar with this, ESL Shipping, basically green transition, Telko compounding, and then Leipurin full profit potential, we're making good progress here, and all the actions listed here on this slide will benefit Aspo long term, if you look at profitability development.
What has then happened during the Q3 and the last weeks or the first weeks of Q4 already quite major events, so the investment decision in Green Handys, EUR 186 million , the Swed Handling acquisition in beginning of Q3, and that also then related to Kebelco, which will be integrated in Leipurin. Then also during the beginning of Q4, we had the full exit of Russia, finally also for Leipurin. If we dig into these major events a bit more, I assume that this investment in the Green Handys is the largest investment done by Aspo, EUR 186 million for four vessels. This is an investment in the green transition. These vessels can use maritime diesel, but also e-methanol.
But important to understand that this is kind of both/and. So if you use sea diesel in these vessels, ordinary bunker, these vessels are still extremely competitive compared to old handy vessels. And that is based on the fact that they are very energy efficient, they have efficient usage of the cargo space, and also flexible usage of the cargo space. And then the operating costs, including personnel costs, are lower in these vessels compared to old vessels of similar size.
Then in addition to this, we believe that the customer preference will shift more and more towards fossil-free cargo solutions, benefiting these investments, and partly that will be driven by legal restrictions and these emission certificates, which will in our forecast cost more over time if you use fossil fuel. And these new vessels we will get end of 2027 and Q1 2028. So that's again a showcase of kind of the long-term impact on this investment decision. Then the acquisitions of Telko during Q3, Swed Handling, the largest acquisition so far, it's in a company in Sweden, a leading chemicals distributor in Sweden.
It has a net sales of some SEK 600 million , and a very good profitability, approximately SEK 55 million, reported in 2023. We paid for this company, including Kebelco, which I will come back to, a fixed amount of SEK 500 million , and then there's an earn-out on top of that. We see huge potential synergies here, cross-sales to Swed Handling's customers, using Telko products, or and also vice versa. We also see great opportunities when it comes to the supply chain, and I'm glad to say that based on the experience during the past three to four months, the integration and profit generation of Swed Handling is excellent. Kebelco, then part of Swed Handling, being integrated into Leipurin, approximately SEK 100 million company.
Also very good profitability. What I said for Swed Handling is also very relevant for Kebelco. Excellent financial performance over the past couple of months. I see great synergies here, so the Kebelco being focused on technical products and the food industry, we want to expand in this area, and now we get a kind of product range which we can utilize also outside Sweden, and partly also to Kobia's customers in Sweden. Good opportunity here. As mentioned, Leipurin was finally, after more than two years of work, able to exit Russia. We already in two thousand twenty-three made the write-downs of some EUR 5.4 million. We have not consolidated the figures into Aspo's profit and loss during this year.
This is a major step for Aspo, finally being able to fully exit Russia, freeing up our time and resources to focus on West. And as said, we have already made such heavy investments in Telko, in Leipurin, in ESL, that we more than fully compensated for what we lost in East, particularly when it comes to Telko and Leipurin. Then I would ask Erkka Repo, Aspo's CFO, to come on the stage and go through the business-specific financials.
Thank you, Rolf. On ESL, we saw a soft market demand during the summer months. And the summer typically is the lowest softest season for us. And now, when the market also was soft at the same time, we saw soft spot market volumes or limited spot market volumes, and then the spot market pricing was also weak. In the handysize vessels, the contract volumes were quite solid, especially in the steel industry, but in the coaster segment, coaster vessels, we saw some decline in contract volumes, especially in the forest industry and minerals sector. On the-...
On the Q2, we had EUR 12.8 million of sale of the vessel to the investor pool. That was there as a one of the main impact there on the high sales there on the Q2. We should expect to see a similar sale of a pooling vessel in the Q4 this year of the same roughly on the same magnitude. The soft demand also had an impact to our profitability on the Q3. We also had unusually high maintenance and repair costs during the quarter. Especially in the coaster segment, we were negatively impacted by the high cost level of the chartered vessels in the current market conditions, where the profitability was negative on those. We are either negotiating or ending some of those contracts at the end of this year.
In Telko, we saw very significant sales growth, 34% growth, driven by a good organic volume growth in Telko, and especially on the acquisitions that we have done during this year. The sales prices were lower than last year in plastics and chemicals. In lubricants business, slightly increased compared to last year. In plastics, the sales grew 5%, partly driven by the Polymer acquisition earlier this year. In chemicals, we saw very significant increase, 86%, driven by the Swed Handling acquisition, and in lubricants, 35% increase, mainly driven by Optimol and Greenfluid acquisition, but also the organic net sales grew in the lubricants business. We now start to see the profit potential of Telko after the acquisitions. We are now in... From the profitability on a different level than in the past. We still had EUR 700,000 acquisition-related costs in our figures.
We do not expect them to be significantly present in the Q4, when we are focusing on integrating this year's acquisitions. The profitability was also improved by the improved margins in Telko organically, and the acquisitions also had a significant impact on the profit improvement there. In Leipurin, we saw fairly stable revenue development over the last quarters. The Kebelco acquisition increased our sales to food industry by 48%, and then we see a big potential there on the further growing in the food industry. That's a big segment that where we are still fairly small, and there's a good growth potential there also going forward, utilizing now the Kebelco platform that we have acquired.
The sales were also negatively impacted by the margin management that we have done, where we have deliberately kind of exited some of the low margin categories, and that way improved our product mix and profitability. The profitability in Leipurin continued on a same level than on a previous quarter. We have done a really good work on improving the sales mix and on the sales margin management. We saw really good potential going forward with the further improvement in the Leipurin profitability with the coming from the Kebelco acquisition that will be fully visible in the Q4, but also next year with the strong pipeline of profit improvement actions, especially in the supply chain further on the commercial activities, and then improving the volumes. Our balance sheet remains strong.
Our net debt was increased by the acquisition of Swed Handling as expected. Our cash levels are now more on normalized level after the high cash there, and at the end of the previous quarter, just prior to paying the Swed Handling acquisition. Our gross debt decreased. We paid out the maturing GBP 15 million that we had maturing in September, and then the gross debt decreased with the impact of that. Handing over back to Rolf.
Thank you, Erkka. And then over to Aspo's dividend policy. So as you very well know, we launched in May this year a new dividend policy of Aspo, saying that we will pay up to 50% of net profit as dividend. And the goal is still to gradually increase the amount of dividends, considering financing needs of the growth initiatives with kind of key strategic priority. And this year, we have invested or made commitments of more than EUR 250 million . Approximately EUR 80 million in acquisitions, and then the Green Handys of EUR 186 million . So major commitments into the strategic growth of the company, and that's really long-term strategic growth.
That then combined with the renewed dividend policy, and then also looking at the profitability of 2023, which was harmed by the write-downs in Russia, when exiting Russia, where you see the difference between the comparable figures of EPS compared to the reported EPS, which was slightly negative. We have already paid out dividends of EUR 0.24 this year, which equals approximately a 4% return for the share owners of Aspo. And hence, these all issues combined, it was decided that no further dividends will be paid based on the 2023 profitability. Then summarizing the Q3 and year to date this year, fairly soft market for ESL and Telko.
However, in this market, we were able to develop growth and growing profitability, 13% growth, and EUR 8.7 million of EBITA. Good to see that this result was positively impacted by the strategic measures done, Green Coasters, as well as the acquisitions done, both in Telko as well as Leipurin. If you then look at all the strategic activities going on in Aspo currently, also the Green Coasters, where we have three vessels already operating, and a fourth one planned for commercial traffic still during this year. We have the major investment in the Green Handys. We have three very big acquisitions in Telko, Germany, France, Benelux, and then Sweden.
The acquisition of Kebelco related to Leipurin, with a strengthening market position in food, and then a very kind of positive transformation across actually all of our business segments. This then should boost the long-term financial performance of Aspo. These are not investments that are, particularly the ones in ESL, are not seen in the next quarter results. They are long-term investments. Assumptions behind the guidance, not much changes here. For ESL, we still see fairly good volumes in the steel industry. The forest industry recovery is slow. We, when we go out of the summer months into fall, typically the volumes of ESL would pick up.
If you look at Telko, we envision a stable market development also here, kind of gradually, slowly picking up of demand and market prices. Then as also Erkka mentioned, we will have less acquisition-related costs for the Q4, and again, then positive impact from all the acquired companies, both when it comes to kind of pure profitability and gradually synergies building up. For Leipurin, a very stable market, with slight deflation. Also our strategy, kind of driving modest top-line development when we focus on the higher-margin products. We see extremely good opportunities to grow in the food industry, partly, of course, due to the acquisition of Kebelco. And there's a lot of opportunities still remaining for improving the profitability of Leipurin.
For example, we're currently very much in execution phase when it comes to supply chain efficiency in Sweden. Guidance for this year is unchanged. We expect the group-level EBITA to exceed EUR 32 million this year, and there are basically four drivers behind this: the Green Coaster vessels generating profitability, Telko with the completed acquisitions adding to the profitability with also reduced M&A costs, and then these profit improvement opportunities across the group, all business segments, and also as per group level. We do not expect a lot of help from the market still during Q4. The market will remain fairly soft. Thank you. Then I would ask also Erkka to join me on the stage, and we are happy to take any questions from the floor or online. Please, Kasper.
Hi, this is Kasper from Inderes. First of all, how would you describe the outlook for ESL's demand in the last quarter? How does it seem at this moment?
As said, so the summer months, typically for ESL, are fairly soft, and we expect demand to gradually pick up during the Q4, which is a very typical trend for ESL. So the Q4 is typically a strong quarter.
Just to be clear, you expect a seasonal change for the better, not in—
Exactly.
— overall market?
Exactly. So more seasonal positive change. And if you look at kind of customer industries, steel industry is expected to kind of remain on a fairly good level. But if you look at, for example, the forest industry, it will be fairly soft still during Q4.
Then you said that you will end some of the contract of the some time charter vessels. Does this mean that the number of vessels will decrease, or are you planning to find new contract with better terms?
There are approximately four to eight Green Coaster time charter contracts that we will renegotiate, and pending on the results of these negotiations, we will determine will we continue with these time-chartered vessels or not, and that will then kind of size our fleet for next year in the coaster segment.
Have you been able to sell already the new capacity from the new Green Coasters?
The Green Coasters, we have so far we have three in commercial traffic, and the fourth will enter into commercial traffic during December, as planned, and these are basically all fully booked. So how it works is, of course, that we utilize fully the most efficient vessels that we have, and then in this case, they are clearly the Green Coasters. And, as mentioned, so some of the time-chartered coaster fleet is not very competitive at the moment.
Sounds reasonable. My last question is, what are your plans about your hybrid loan? Any plans to redeem it?
I guess, this is not yet time to comment on that. So, once it is getting closer, then we will duly inform about it.
Okay. Thanks very much.
Any further questions on the floor or then online?
If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Joonas Ilvonen from Evli. Please go ahead.
... Hi, it's Joonas from Evli. Just coming back to the ESL Q4, a little question. I guess, so the coaster segment was still rather soft in Q3, so do you expect this, the ESL Q4 earnings gain to be driven mainly by the coaster segment? Or, and how do you see, like, current handy-size performance compared to where it should be?
I would expect, due to seasonality, that the demand both in the handy size as well as in the coaster segment will improve. And then, as mentioned in the coaster segment, we had unexpected costs during Q3 due to maintenance and dockings, which I would not forecast as on a high level anymore during Q4.
Right. That's clear. And, what about Telko? I mean, you already achieved a rather high run rate, EBITDA in Q3. And you're probably not going to do any further acquisition in Q4, so. But, I mean, can you just comment on the current level of synergies, and how have you already, like, achieved the short-term, like, run rate potential, including synergies? And especially now that market is kind of stable, and I mean, it's not really great, but it's also, like, going slightly maybe improving a bit more in Q4. So how do you see it?
We still had some EUR 700,000 of M&A costs during Q3, and during September, these were actually zero. And if I look at Q4, we are not planning at least no major acquisitions during this quarter. We are very much focused on profitability improvement. So basically, I would expect the M&A costs to be reduced in Q4 compared to Q3. Then at the same time, for Telko, typically December month is a bit weaker compared to the other months, which has a negative impact on profitability. But there's still overall room for improvement in Telko. So far we have integrated the acquired companies. We have a good kind of run rate profitability, but there has been limited time to capture synergies so far.
These are not really any major figures are not seen yet in the profit and loss of Telko.
And then we have also seen organic volume growth also in Telko overall.
That's clear. That's all from me.
Any further questions online?
There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.
A big thank you for everyone joining, this Q3 financial reporting of Aspo. Thank you very much.
Thank you.