Hello, and welcome to BEWI's presentation of the results for Q1. My name is Christian Bekken. With me today, our CFO, Marie Danielsson, and Stein Inge Liasjø, who leads the strategic functions at BEWI. Today, I want to draw your attention to three things. Our key priority is to improve profitability. This is the sixth consecutive quarter with improved EBITDA. We have strengthened our earnings capacity and the impact of the measures we have taken will increase from here. We have promised to make Circular profitable. This quarter, Circular delivered positive EBITDA, and this will continue going forward. Based on our stronger earnings capacity and the market developments we are seeing, we expect a strong second quarter. We have a clear path to move from today's margin level to a sustainable 15% EBITDA margin.
This is driven by specific operational initiatives, combined with return from strategic investments and the choices we have made. On the operational side, we have re-negotiated supplier agreements and secured significantly better terms. In addition, we have implemented several other measures to improve operational efficiency. We have also made organizational adjustments, including leadership changes in units that were underperforming. We are capitalizing on the strategic investments we have made over the last couple of years. One example is the expansion of our own production of EPP raw materials, the fish box facilities at Hitra and Senja, and increased capacity in paper packaging and HVAC components, all end markets where we now experience growth. My key point is that we have a clear roadmap with specific actions already implemented to support the step-up to 15%. Let's move on to the highlights for the quarter.
The operational improvements we have implemented across our business areas make us more cost-efficient and form the foundation for our strengthened earning capacity for the group. We see continued volume growth in all our key end markets. The activity in the building and construction industry had a slow start this year, but picked up in March. Growth accelerated further in April beyond normal seasonality. Group sales increased by 6% compared to Q1 last year. This is driven by the Packaging and Components and the Circular segments. EBITDA increased by 44% versus Q1 last year, with an EBITDA margin of 11.2% in the quarter, up from 8.2%, which is significant improvement. While EBITDA in Insulation and Construction was flat in the quarter, we see underlying progress from initiatives already implemented on both cost and margins, supporting a substantially margin expansion going forward.
In the Packaging and Components segment, the strong momentum continues across product groups. The strategic investments we have made over the last three to four years are now paying off. We have established a structurally stronger earnings baseline. When it comes to Circular, we are happy to deliver a positive EBITDA. Here, we have made structural and operational improvements, and the Q1 result reflects what you should expect as a baseline going forward from Circular. As we explained in Q4, we have made an active choice to build inventory when raw material prices were low. In Q2, we will reduce inventory, so you should expect a substantial working capital release. With that, I'll hand over to you, Stein Inge, to go through the segments.
Thank you, Christian. Our business model is integrated and Circular. As you know, we report on three segments. Insulation and Construction see continued volume growth. However, there is still room to improve the financial results. Packaging and Components grow in all its markets and are now delivering results on a structurally stronger base. We expect to continue delivering financial results to this level. We make particularly strong progress in Circular, both operationally and financially. We see positive EBITDA in the segment. We expect current levels to be the new normal. For RAW, Marie will touch upon the improvement we have seen from Q4 to Q1. We expect positive seasonal volume development in Q2. Combined with significantly increased EPS prices, we expect substantial improvements in the results from RAW going forward. Q1 is a seasonally slow quarter for insulation.
As you know, our Q4 and Q1 are the weakest quarters, and Q2 and Q3 are our strongest. Typically, Q2 is between 10 and 25% stronger in volumes. This year we had a really cold winter impacting January and February activity. Volumes in March accelerated and led to an overall volume growth of 4% compared to last year. The start of Q2 has continued the strong trend from March. Net sales are slightly down with 1.9%, mainly due to higher growth in Nordics impacting product mix and in turn, product prices and also margins. Another way to look at our sales, you know, in Q1, 75% of our sales were for new builds and 25% to renovations. We have adjusted cost and capacity to the current market level, and we have improved operations, which we expect to yield long-term sustainable results.
This includes acting on best practice, improving the end products, and reducing energy consumption in the production process. We have also actively managed margins in all our markets. We have adjusted our prices in the market because of the rapid and high fluctuations in the raw material and energy costs following the conflict in the Middle East. We expect full effect of this to become visible in the Q2 results. Combined with a de-stocking plan, we expect a significantly stronger Q2. In Packaging, net sales increased by approximately 14% to EUR 88 million in Q1 compared to last year, and delivers a strong EBITDA margin of 15.8%. Food packaging is the biggest market segment, guided by strong salmon volumes in Norway. Automotive accounts for one-third of the revenues and delivers satisfactory results in line with our targets.
We see solid growth for deliveries to the HVAC market segment, where we see that the heat pumps again are gaining traction. Growth in volumes, solid operational performance, and increased contribution from our automotive units leads to an EBITDA of EUR 13.9 million, up almost 50% from last year. Structurally, we are now delivering close to our targeted and expected level for this segment. We are very pleased to see that the measures we've taken in Circular are having the expected financial impact. For the first time in 12 quarters, we show black figures, and we expect this to be the level going forward in the existing market situation. Sales prices for recycled EPS correlate to virgin material, and prices were declining in 2025 and increasing at the start of 2026, with a sharp price hike in March and into April.
This, combined with higher inventory levels at the end of March, is expected to have an extraordinary effect in the months to come. We collected close to 10,000 tons of EPS for recycling, an increase of 12% from 2025. Higher utilization of our recycling units gives us higher operational efficiency and lower cost per kilo. Net sales amounted to EUR 18 million, an increase of 26%, driven by higher volumes of sold rGPPS. We are saving money by using this raw material in insulation instead of virgin material, and we are also increasing the profits in Circular through higher prices than we have achieved historically. Adjusted EBITDA improved with EUR 2.3 million to +EUR 1.2 million for the quarter, explained by strong volumes, increased gross margin, the improved operational efficiency, and reduced overhead cost. Marie, over to you for the financials.
Thank you, Stein Inge. If we aggregate the segments figure that Stein Inge has guided us through, the group can be summarized as follows. The positive trend continues, the volume are increasing in all the segments. Net sales is up by 5.7% compared to last year, this is driven by the Packaging and Circular segment. Lower EPS prices this year in average explains why the volume increase in insulation is not visible on the top line. EBITDA for the group increases EUR 6.7 million. It's up from EUR 15.5 - EUR 22.2, this corresponds to 44%. The margin then is up from 8.2% - 11.2%. The increase in EBITDA is also driven by Packaging and Components and Circular, where the insulation segment is rather flat for reason explained by Stein Inge. Turning into the income statement.
Cost for goods sold accounts for approximately 39% on net sales versus 42% last year. This is explained by a higher share of Packaging and Components sales. Personnel expenses goes up, besides then annual salary increases, this is related to severance costs, and we also have cost for ramp-up in automotive. In the report in note five, you find information regarding depreciations between the different categories, that is then between operation IFRS 16, that is the building rent, and fair value adjustments in business combination. EUR 8 million is related to depreciations in operating assets. We have share of income from associated companies. This is related to BEWI's share of net income in our joint ventures. The larger one is then, of course, BEWI RAW and HIRSCH in Germany and in France.
While the contribution on net income level from BEWI RAW still is negative, profitability has improved significantly from the previous quarter. On EBITDA level in BEWI RAW's financial, you can find that BEWI RAW has improved its EBITDA with approximately EUR 5.5 million compared to Q4. This is a positive trend that now continues and is then partly explained by the market consolidation that now starts to become visible. Details around this you will find in note 11. We have the net financials, and that came in at EUR 10.2 for the fourth, for this quarter, and that is to compare with EUR 10.5 last year, so rather flat. Then you should note that net interest cost has decreased from EUR 6.3 million - EUR 5.1 million, so close to 20% decrease. The interest cost related to IFRS 16, which then is related to the leased assets, is flat.
The difference, that is actually FX, which moves in different directions. This year, negative impact, last year, positive impact. In the end, profit and loss for continuing operation ends at a - EUR 7.4 to compare with a - EUR 10.4 last year. Moving into the cash flow. In the quarter, we have a operating cash flow of EUR 1.9 million. With the focus on capitalizing on the investments that we have done and our limited CapEx need, we have reduced CapEx significantly in the quarter to EUR 4 million. This is in line with our previous communication and is, as always, a combination between the maintenance CapEx and the growth CapEx that we have. That brings us to the free cash flow, starting, of course, with the adjusted EBITDA, we deduct the lease payments, maintenance CapEx.
Those two are rather stable, quarter-by-quarter. We do have a working capital increase of EUR 5.2. It comes from normal seasonal pattern as well as price increases, but it has been offset by increasing the utilization of the factoring scheme. If you recall from Q4, we mentioned that we have been stocking up extra raw materials and approximately one month of extra stock to a value of around EUR 10 million. Following the raw material price development now in Q1, we have kept the volumes high. This means that when we go into the second quarter, and in a quarter where the prices have continued to increase significantly, we do that with high stock, and we have a destocking strategy. This is not only impacting our margins positively, but it also means that we will release cash that we have tied into our inventory in both Q4 and in Q1.
In the weakest quarter from a seasonality perspective, both impacting, of course, EBITDA and working capital, free cash flow ends at EUR 2 million. Last, just looking into the capital structure. We have a net debt that ends at EUR 202 million to compare with EUR 197 million at year-end. We have a leverage that goes down slightly, positively impacted by improved EBITDA, negatively impacted by the higher net interest-bearing debt. However, referring to comments made earlier in this presentation, you should expect a leverage that decreases markedly, following both the earnings trend and also that we now expect a cash release from working capital. Cash at hand ends at EUR 59 million, and in addition to this, we have the RCF of EUR 75 million that is not utilized at all at this point in time. With that, I leave the word back to Christian.
Thank you, Marie. I'll close with a summary and our key priorities going forward. We have a clear plan to lift EBITDA to a sustainable 15% level. We have executed as planned, and that is delivering real results. We have a simplified business model focusing on areas with higher margins, stronger growth potential, and less volatility. We are seeing tangible results from the operational measures we have implemented. Circular is now profitable, and that will continue, and we are capitalizing on investments and measures we have made and will continue to do so as volume increases. Here, I'd like to point out that our plan for 15% EBITDA is based on current market conditions. In addition, we believe in growth. Our expectation for growth is based on market analysts, forecast, and guidance from key customers and, of course, also dialogue with customers.
According to EUROCONSTRUCT, an annual growth for residential new builds is expected in our key markets in 2026-2028, with higher growth in Nordics. We are still in ramp-up for deliveries to some large car volumes with m-models as Neue Klasse from BMW. Our two or all of our largest seafood customers have guided growth in harvest volumes and good biology. In HVAC, the growth is steady, and we experience growth in line with the 6% expected going forward by the industry. In summary, these data points indicate an annual growth of 5%-7%. We will focus on delivering good results in current markets. I will also take the opportunity to say thank you to Marie, which has been together with us for 10 years and done a tremendous job. Stein Inge, we will congratulate with a new job as CFO.
He has some shoes to fill. I will also take the opportunity to thank all my colleagues for a job well done, and we will continue. By that, I leave the word to you, Charlotte, for questions.
Thank you, Christian. We open for questions from the webcast. Please post your questions through the webcast console, and we will try to answer. We have received a couple of questions. The first one is about Circular. Christian, Circular is delivering very good results and positive results. Could you please elaborate on what structural changes, what makes Circular positive going forward also?
The thing with Circular is that we have spent a lot of time and a lot of investments on Circular. We have invested in all parts of the value chain to consume the recycled content we are taking into our facilities. When you reach some certain kind of volumes internally, then you can use and utilize all the recycling content internally, and therefore, you can also then match the market externally. Basically, what I'm saying is that we have now invested so much in Circular that we are on a utilization rate that does it possible for us to earn money by saving it when we use it inside our own production. Of course, we sell some of it externally. We don't need to do that, but we do that when the market points to that.
As I've said multiple times in the presentation, we see that next coming quarter, of course, we have solved our issue for many, that we can supply external also with a better margin. We will continue to have this business model where we use a lot of the Circular content internally.
Thank you, Christian. another one, also, about the Packaging and Components segment. I think today Packaging and Components is many end markets. The question relates to, "What margins are you running at for the automotive business?
Maybe I take that. Of course, we don't go specific margins on the different end markets. You can naturally understand that when automotive is one-third of the revenue in Packaging and Components, the margins in automotive is healthy and we are delivering more or less in line with our targets for the segment.
Thank you, Stein Inge, and welcome as our new CFO. Any other questions? We don't have more questions now, we wait for a few more seconds. If you have a question, please post it. We look forward to seeing you in August when we present the Q2 results. Thank you very much for listening in.
Thank you.
Thank you.