Earnings call transcript: Elopak ASA sees steady Q2 2025 growth amid market challenges

Elopak ASA reported a steady performance in Q2 2025, with total revenue growth adjusted for currency effects at 2.4% and a group EBITDA margin of 15.8%. The company, which maintains a "GOOD" Financial Health Score according to InvestingPro, continued its focus on innovation and sustainability, introducing new products and expanding its operational footprint in the U.S. While the stock saw a decline of 3.95% following the earnings release, closing at 49.4, it has demonstrated impressive momentum with a 62% year-to-date return as investors weighed competitive pressures and market dynamics.

Key Takeaways

• Elopak achieved a 2.4% revenue growth, with strong performance in the Americas segment.
• The company launched innovative products, focusing on sustainability and efficiency.
• A new plant in Little Rock, Arkansas, is nearing breakeven, highlighting operational progress.
• Market share growth in the Purepac segment was recorded, despite competitive pressures.
• The stock price fell by 3.95% post-earnings, reflecting investor concerns over market challenges.

Company Performance

Elopak’s Q2 2025 performance was marked by a 2.4% increase in total revenue, driven by a 14% organic growth in the Americas segment. The EMEA region showed stable revenue development. The company’s focus on sustainability and innovation, including the introduction of the "Natural Whiteboard" and the PureFill modular filling machine, underscored its commitment to future growth.

Financial Highlights

• Total revenue growth: 2.4% (adjusted for currency effects)
• Group EBITDA: €45.1 million (15.8% margin)
• Net revenue mix improved to 44.4%
• Investment in U.S. plant: $80 million, with $18 million remaining for the second line

Market Reaction

Elopak’s stock closed down by 3.95% at 49.4 after the earnings announcement. According to InvestingPro analysis, the stock appears slightly undervalued based on its Fair Value calculations, with analysts maintaining a strong buy consensus. The decline reflects investor apprehensions about the competitive landscape and consumption trends in key markets like dairy and juice. The stock’s performance is within its 52-week range, with a high of 53.2 and a low of 34.55, showing relatively low price volatility - one of several positive indicators identified by InvestingPro’s comprehensive analysis.

Outlook & Guidance

Elopak remains optimistic about meeting its midterm targets, projecting revenue growth of 4-6% and an EBITDA margin of 15-17%. The company anticipates continued strong performance in the second half of the year and has revised its dividend policy to semi-annual payments. This commitment to shareholder returns is reflected in the company’s track record of raising dividends for three consecutive years, as highlighted by InvestingPro analysis, which reveals several additional positive indicators for potential investors.

Executive Commentary

CEO Thomas Kirmendi highlighted Elopak’s sustainable packaging initiatives, stating, "We are in the world of sustainable packaging." He also expressed confidence in reaching midterm targets. A customer lauded the PureFill machine, calling it "flexible, efficient, and built for the future."

Risks and Challenges

• Declining consumption in dairy and juice markets poses a challenge.
• Intense competition in the roll-fed segment may pressure margins.
• Macroeconomic factors could impact raw material costs and supply chains.
• The success of new product launches and plant operations in the U.S. remains pivotal.

Q&A

During the earnings call, analysts inquired about the PureFill machine’s design and cost benefits, as well as the customer qualification process for the new U.S. plant. Executives confirmed effective cost pass-through mechanisms in the Americas market, addressing concerns about potential margin impacts.

Full transcript - Elopak ASA (ELO) Q2 2025:

Erika Von Nixvoeg, Investor Relations and Treasury Officer, EloPac: Good morning, everyone, and welcome to the Second Quarter twenty twenty five Results Presentation for EloPac. My name is Erika Von Nixvoeg, and I am the Investor Relations and Treasury Officer. Today’s presentation will be held by our CEO, Thomas Kirmendi and our CFO, Bent Oxelzen, and will last for about thirty minutes, followed by a Q and A session where the people here in the audience and the people watching online will be able to ask questions. So with that introduction, I will hand it over to you, Thomas.

Thomas Kirmendi, CEO, EloPac: Good morning. Thank you, Erik. Good morning to everyone here in Oslo and everywhere else you may be watching this webcast. We are presenting Q2, and we are happy actually to present yet another strong result for EloPac both in terms of our development, strategic development, but also in terms of our profitability. So let’s go through it.

And just to set the scene, for those of you who are not so familiar with us, we are in the world of sustainable packaging. What we do is we produce packaging to protect essential commodities such as, but not only, milk. And with that, we also see it as our role to enable world nutrition while always on the road to reduce plastics. This is what we do, and this is what we have been doing for many, many, many years, and this is the performance we are having for this quarter. So we are presenting a quarter with good growth and a very solid EBITDA result of 15.8.

The growth is around 2.4%, which is very much impacted by continued solid development in Americas, which is now also impacted by the opening of our brand new plant in Little Rock, which we opened in April, so during the quarter, and which is now ramping up and starting to produce in bigger numbers. During the quarter, we also announced that we changed the dividend policy to pay out twice a year. So we did the first installment already back in May, and we are now of EUR 21,000,000, we are now doing the second installment of the EUR 24 dividend in October together with the 2025, which will also be in October and which the board has decided declared a dividend of €03 to be paid then. All in all, of course, we are then paying all of ’24 plus ’25 in October, and we’ll then continue in line with our policy to do semiannuals also next year. So let’s have a little let’s have a look at the performance.

And as you can see here, in revenue terms, when we correct for the impact of the dollar effect, we have 2.4 in revenue growth, and that’s why you have the 0.4 here. This revenue is mainly driven by the continued development we have on Purepac. We see that in U. S, of course, where we are currently selling various sizes and formats in Purepac. And we also see a revenue growth in India, but in that case, more so in the RolledFed side.

It’s also clear for those of you who’ve been following us in Q1 that on a quarter on quarter basis, we have a deviation versus Q1. And that is really driven by a couple of factors. One is production of finished goods. From an accounting point of view, we that has an impact in the figures now. We have customers who were building stock back in Q1 because of the tariff risk, we can call it like that, at least uncertainty.

And also, we have an impact in these figures of the weakening of the US dollar. So all overall, if you compare it from a business point of view, we are continuing the the progress in business terms and are delivering pretty much in line with what we had hoped and planned. The margin level on for the group is, as you can see here, 15.4 without the correction of The US plan cost. But 15.8 is the actual EBITDA level, and that corresponds to around 15.4% if you correct it on a year to date basis as well. Overall, a good level and also a level that is in line with our midterm targets as we have declared them.

Now just a little recap on the priorities we’ve set in the group and how we’re delivering on our strategic goals. So back at the Capital Markets Day, we announced our repackaging tomorrow strategy, which essentially consists of three area. One is realizing global growth. Clearly, the Americas movement, the opening of the new factory, the development we see in Americas is a very, very significant part of that. The other one we had was strengthening the core, which relates to our core business in Europe.

It relates to the sustainability drive we have around this core business. And the third one was replacing plastics, the ongoing shift. And during these presentations, we tend to show different examples of where we’re how we’re doing in the various parts of the strategy. Today, I’d like to focus on the second box, namely strengthening the core. And during the quarter, we have a couple of new innovations that we’ve announced, and that is part that is part of building our position as a sustainability front runner.

The first one is on the left of the screen, and you will see we call it natural whiteboard. And we have been talking for a while about the natural brown board. This is the natural whiteboard. And the main purpose of doing this is actually to help our customers to reduce their CO2 footprint By introducing a board type, which has been developed together with our suppliers, we have the opportunity to reduce the CO2 footprint by around 14%, which is, of course, very significant and is continuing to strengthen the position of cotton versus plastics, which in itself already now would be around 70 60 to 70% lower CO2 versus a plastic bottle. So adding another 14% by engineering the board and having a more sustainable board, of course, is a big, big, big advantage for our customers and also part for us in reducing our CO2 footprint in line with our science based target.

The other one is also a development that we have targeted now, the what we call the nonfood business. And nonfood is the area we have with the Deepak cartons targeting the household chemical areas, detergents, soaps, softeners, where we have now introduced a polymer, a recycled polymer in that kind of category. That means together with the board, the recycled polymer, and the polymers made out of renewables, we have the opportunity of another 20% reduction in CO2. Again, comparing that to the classical plastic packaging used in that industry, it’s and it delivers yet a significant difference for our customers who want to reduce their CO2 footprint. This is now available.

It’s being used by Opla here in Norway and in Scandinavia, and we are rolling that out to more customers in the coming period. It’s a system that is developed in close cooperation with our suppliers, and it is also a system that is significant that is important because it’s part of our commitment to deliver on the regulations that are coming, the PPWR, the packaging and packaging waste regulation, which requires that plastics being used have a higher level of recycled material. The next example I’m just going to highlight is our innovation around the machinery. So all as you know, what we do, we supply filling machines. We supply the technical services, the innovation around that, and, of course, with that, the consumables, the packaging material.

In our aseptic technology center in Munchen Glatbach, we have developed the PureFill filling machine, which is a modular filling machine. We have announced it a couple of years ago, but what we now see is that it’s entering the market successfully. We are seeing that this filling machine is unique in the way it operates. It allows for high level of modularity at production, allowing it for different for extending into different capacities, different formats at a lower cost and at a higher speed versus a traditional way of billing filling machines. And I just like to read the the quote from one of our customers.

This is the customer Fana. Fana is Europe’s biggest iced tea manufacturer and a very significant big juice manufacturer. And I’m just quoting him. EloPac’s PureFill has exceeded Flexible, efficient, and built for the future.

A game changer for our production line. Thank you. But the very positive news we have is, of course, that the customers who have ordered and have installed the first lines are now, several of them, also ordering or installing more lines. So that is the best testament to success in our industry when you start with one and you move on to next ones. It is a system that is unique, and we are actually very, very happy that it is the world’s best performing large size two liter carton filling machine.

I think with this, I will hand over to Pint.

Bent Oxelzen, CFO, EloPac: Thank you, Thomas. So the financials for second quarter, I think we can say it’s categorized by a stable development in the EMEA segment and continued growth in America. Let’s then start with EMEA. Here we see a stable revenue development both for the quarter and for the first half year. And it is characterized by steady performance despite continued observed consumption decline both for dairy and juice and also an intense competition in roll fed.

So Purepac is only impacted by the consumption because we are strengthening our relative positions. We are increasing our market share by winning new customers and increasing share of wallets among existing ones. On Rolled Food, we are losing volumes because of the intense competition in Europe. In India, we are continuing to grow, albeit at a lower pace compared to first quarter, 9%, and this is linked to a softer juice season in the market. The equipment sales is up around 9,000,000, and we are commissioning continue commissioning the same amount of machines as last year, but more of these projects are sold instead of rented out and that is inflating our revenues.

If we move to the EBITDA, we are delivering $34,000,000 for the quarter and 71,000,000 year to date. Building on what I started on is that the equipment sales, which is SEK 9,000,000 growth in revenues, they have limited margins. The roll for the growth in India has traditionally lower margins than pure pack. So the impact of equipment in India is diluting the EBITDA measured in percentage. The R and D activity is increasing in line with the strategy.

On a good note, the pure pack margins in Europe are strengthening and that is mainly a result of our price increases and also attractive product mix. If we move to Americas, where we see a growth supported by closures, carton pricing and also the beginning of the ramp up of our U. S. Plant. The growth is 7.4% as reported.

But if we adjust for the euro dollar, the organic growth is 14%. If we move to the EBITDA, we are reporting €17,000,000 That is up six percent compared to same quarter last year. And Thomas pointed out the impact of the ramp up. And if you look at the America figures, 22% becomes 23.6% if we adjust for that ramp up effect. And as Thomas mentioned, the plant was close to breakeven in the quarter.

If we look at the year to date figures, the EBITDA margin is 21%. So if you adjust for the ramp up for the first half year, then the EBITDA margin is 23.2%. What we also report is a lower net income from our joint ventures. So that is driven by two effects. One thing is the softening of local currencies for the sales in the local markets.

And we also have some softer volumes in Mexico because of increased competition. And the way we report joint ventures in our EBITDA is the share of net income. So when you get the result, whenever you get a profitability loss of the joint ventures, you don’t have any revenue loss. So percentage wise, it also has a great impact on the EBITDA margin. So that is just one thing to note, which is more technical.

Let’s take the group perspective where we go from forty four forty five, 44.7 and then 45.1. I think if you start with the big pictures, this is a story of improved quality of earnings that more than compensates for increased costs. Net revenue mix is 44.4% combined with positive raw materials impact. So what is happening? We have our price increases in Europe.

We do have some price increases in America. We are growing with high margins in America, as you know and that contributes to the positive mix. As we report, we are reducing some in Rolledfed and Rolledfed has a lower margin than Purepek. So the average margin for our carton enclosures then also increasing because of that impact. The operating costs are up €1,700,000 and we already mentioned the wanted R and D increase.

And then we have other cost increases driven by FTE increases and inflation. I think it’s to note that the inflation of the cost base is around €2,000,000 in this quarter, which means that we are beating the inflation. When it comes to joint venture and FX, we already mentioned the joint ventures which are down 1.6, but we also have the translation effects mainly between U. S. And dollar, which is 1,000,000.

Then we have taken one more bridge element and that is just to illustrate the impact of the ramp up of U. S. Plant. So without that the margin is then 15.8. So a solid result in the second quarter.

Let’s move to the cash flow. So we are generating cash flow from operations that enables us to reinvest in both our new plant and to pay the dividends in the quarter. So if we start with the left hand side with an EBITDA of 45, we have a slight improvement on working capital that is mainly improvement of inventory and account receivables. We have some reduction in AP, but that is a quite volatile number in our balance sheet and that will go up and down according to the payment schedule of the raw materials. We pay our taxes.

And if we move to cash flow from investments, we have a CapEx of €21,000,000 That is mainly driven by the investment in the second plant and it’s also the investment program to replace converters in Europe. Maintenance is at normal level. Filling machine investments are slightly lower because we are selling more machines than renting out machines and that has a positive impact on the CapEx. We have an order of SEK1 million and that is because we have received SEK1.2 million for the sales of Russia in this quarter. So that was the sales that we did back in 2022.

And so million in the quarter, very pleased to get that. If we look at the cash flow from in financing activities, that is minus 34. That consists of normal lease payments interest but also the first installment of the dividends. Let’s move to our balance sheet and ROCE. So what we can say is that our leverage ratio remains stable, so there is no change of the leverage ratio between first and the second quarter.

Then net interest bearing debt is only up $4,000,000 despite the heavy investment program and the dividends paid. And combined with then a stable last twelve months on EBITDA, that gives us the steady leverage ratio development. On the capital return on capital employed side, we are obviously getting ready for the ramp up and look forward to a more ROCE by the end of the year. And we look forward to see an upwards trend in the years to come. Maybe it’s good to add a little few words on The U.

S. Plant. We for the whole project, we have invested $80,000,000 and we have around $18,000,000 left for the second line. The amount is slightly higher because we expect the tariffs to give us an additional 2,000,000 to $3,000,000 in CapEx because we are using equipment from the EU. That concludes the financial section.

So I will bring it back to you, Thomas.

Thomas Kirmendi, CEO, EloPac: Thank you, Bent. And in terms of summary, see this beautiful picture here highlighting where we are going. We look at a quarter of 15.8%, EBITDA quarter. We look at it as a continued development of the strategic focus we’ve had on Americas for years with the 14% growth. We are looking at a plant now that is in operation, that is very close to breakeven, and where we are now saying we are going to ramp up and we are looking at a year end with a fully ramped up plant in Little Rock.

Secondly, we also the Board, declare a dividend payout for the first half of EUR $0.03 to be paid out together with the remainder of the dividends from ’24 in here in coming October. All of that in line with the dividend policy that we announced during Q1. And moreover, we expect that the strong performance we’ve had during first half will continue during second half of the year, and hence, we expect to deliver in line with our midterm targets, which you recall is on a revenue level 4% to 6% and EBITDA 15% to 17%, in line with what we announced during the Capital Markets Day. So this concludes this quarter. Thank you very much for your attention, and I’m going to hand over again to Erika.

Erika Von Nixvoeg, Investor Relations and Treasury Officer, EloPac: Thank you, Thomas. Thank you, Ben, for your presentation. And we will now move on with the Q and A session, starting with the audience here first. So please raise your hand, and I will bring you the microphone. And also please state your name and the company that you represent.

Okay. No questions from the audience? Okay. Then I think we’ll move on with the questions that we have received online. This first one about the PureFill machine.

Can you please elaborate more on the futures and improvements, speed increase and cost decrease?

Thomas Kirmendi, CEO, EloPac: The improvements in the machine and the cost increase cost decrease I assume on the machine.

Erika Von Nixvoeg, Investor Relations and Treasury Officer, EloPac: Yes.

Thomas Kirmendi, CEO, EloPac: I can do it in a little bit more general term. I cannot give you exactly what is going to happen, but the PureFill machine is built on a set of modules. We started out doing this with two targets and two specific changes in how you build filling machines. From a target point of view, it was about reducing cost for a new filling machine per individual machine, but also cost reduction in how you bring a new format to the market. So the development cost of machines, That was number one.

The second target related to time to market. The existing or then existing way of producing filling machines resulted in a rather slow time to market. And by introducing this new technology, we could reduce that to a significant faster one. So the technologies that allow this is on one hand modularity. So you construct the machine in such a way that you can change modules and do reuse the same modules depending on both capacity and size.

And that to do that, the it’s the structure of the machine, the heart of the machine has to be a transport system that is not based on the traditional chain based system, but is based on a different magnetic system that allows for much, much more flexibility. That’s the structure, and that’s the beginning of the machine. We have then, when we started developing this back in ’nineteen, actually experienced issues not the least related to COVID, which did actually delay our development and our way of testing it and suppliers and and all the rest that we all know of and think of, thankfully, is now years ago, but we, I think, recall it as well. That did have a delay. And for that reason, all of the value engineering activities that are needed to drive down the cost of this and ensure that we can build on the key drivers, I.

E, the modularity, the using the modules produced in different places, that is something that we are embarking on now. It’s a long answer, but I think it’s it’s more or less accurate.

Erika Von Nixvoeg, Investor Relations and Treasury Officer, EloPac: Thank you. And we have received a couple of questions from Charlie in BNP Paribas. I will take them one by one. Can you elaborate on the delays to ramping up new customers in The U. S.

Mentioned in the report?

Thomas Kirmendi, CEO, EloPac: Yes. So this to give you a little background on how this works. When you have new customers, they typically will have or actually almost always will have, particularly when they’re very big customers, a number of manufacturing plants. These manufacturing plants will have different equipment types, some of them older, some of them newer. And for that reason, you need to qualify the plants to ensure that the material will work on that specific plant, not on only on something else.

That takes a little while together with the planning and production of designs needed for the various SKUs that the customer would have. And in some cases, the transition in actually ensuring that you move, in our case, from another supplier into EloPac and secures that it works on the various plants takes longer than, in this case, some of our customers anticipated themselves. So that is the background. In fact, from an operational manufacturing point of view, our performance in Little Rock is good. We do not see today that there are significant delays in in how we are performing the factory, but we there is this time issue of getting things ready in time.

Erika Von Nixvoeg, Investor Relations and Treasury Officer, EloPac: Thank you. And also from Charlie, can you say something about expectations for the full year CapEx?

Bent Oxelzen, CFO, EloPac: I think I will refer to the Capital Markets Day where we shared some figures. We haven’t updated those figures, but the way the CapEx is progressing is according to the plan and in line with the Capital Markets Day presentation. Since I don’t have that number exactly in my head right now, I refer to the Capital Markets Day presentation.

Erika Von Nixvoeg, Investor Relations and Treasury Officer, EloPac: You have mentioned Rollsat competitive share losses for several quarters now. Are you still sequentially losing business? Or should this affect annualized or be better soon?

Thomas Kirmendi, CEO, EloPac: I I think you can it’s we are not sequentially losing business, but the role fed market is is characterized with very, very tough competition. You actually have new entrants. You have very depressed price level. And in our case, it this the simple fact is that we back off in the cases where we find this is not at a level where we want to do business. That has meant for us that we have backed off contracts in Europe while also gaining other contracts where we think we can add more value than these in Europe.

It’s not that we, every quarter, lose new business. That’s not the case.

Erika Von Nixvoeg, Investor Relations and Treasury Officer, EloPac: And last one from Charlie. Susano has talked of a second round of increased prices at its Pine Bluff. Do you see this? And do you expect this to pass on?

Thomas Kirmendi, CEO, EloPac: Yes. Well, it’s you know, when it comes to specifics on the pricing and cost level and our our suppliers, we we are a little bit more opaque than than in in other cases. The case with Americas, as you know, we have a system in Americas where we pass on we have a mechanism where we pass on the cost increases, which is a mechanism that is built in in the market. In the case of increases of the board, we also pass these on when they happen in the market. So there are some mechanics in The U.

S. That have a little bit more specifics on how that worked this year. But in generally speaking, we are passing on the cost increases we are needing.

Bent Oxelzen, CFO, EloPac: I think maybe one thing to add is that we do have inventory turns. We have different contracts. You will never find in a situation like that kind of a clinical one to one inside a quarter. So that just is a comment that I would like to add.

Erika Von Nixvoeg, Investor Relations and Treasury Officer, EloPac: So I think that was the last question. So if there is not any further questions from the audience here, I think we will round off today’s results presentations. Thank you, everyone.

Thomas Kirmendi, CEO, EloPac: Thank you very much.

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