Earnings call transcript: Talaris Q1 2025 results show revenue drop

Talaris reported a challenging first quarter of 2025, with revenue falling to €8.6 million from €17 million in the same quarter last year. Earnings per share dropped to €0.02 from €0.26, reflecting a significant decline in profitability. Despite these results, InvestingPro data shows the company maintains a GREAT financial health score of 3.01, supported by strong fundamentals. The company’s stock reacted negatively, falling 5.61% to €7.07, amid broader market uncertainties and a conservative investment strategy.

Key Takeaways

• Revenue decreased sharply from €17 million to €8.6 million in Q1 2025.
• Earnings per share declined to €0.02, down from €0.26 in the previous year.
• Stock price fell by 5.61%, reflecting investor concerns.
• Renewable Energy segment showed improved performance.
• Market uncertainties and conservative investment strategy weigh on sentiment.

Company Performance

Talaris faced a difficult start to 2025, with significant declines in both revenue and operating profit. The company’s revenue halved compared to the same period last year, while operating profit dropped from €9.6 million to €0.5 million. According to InvestingPro analysis, the company maintains robust financial metrics with a current ratio of 5.45, indicating strong liquidity. Despite these challenges, the Renewable Energy segment showed resilience, with increased revenue and operating profit. For deeper insights into Talaris’s financial health and future prospects, investors can access comprehensive Pro Research Reports available on InvestingPro.

Financial Highlights

• Revenue: €8.6 million, down from €17 million year-over-year.
• Earnings per share: €0.02, down from €0.26 year-over-year.
• Operating profit: €0.5 million, down from €9.6 million year-over-year.
• Liquidity: €27.5 million, indicating strong financial reserves.

Market Reaction

Talaris’s stock price fell by 5.61% following the earnings announcement, closing at €7.07. This decline reflects investor concerns over the company’s financial performance and broader market uncertainties. According to InvestingPro analysis, the stock appears undervalued based on their Fair Value model, trading at an attractive P/E ratio of 7.02. The stock is trading closer to its 52-week low, indicating a cautious market sentiment despite maintaining a significant dividend yield of 6.68% and a 13-year track record of consistent dividend payments.

Outlook & Guidance

Despite the challenging quarter, Talaris remains optimistic about its future prospects. The company expects continued growth in its continuing earnings and is targeting a mid-year close for its SolarWinds III Fund fundraising. InvestingPro analysts have identified multiple positive factors, including strong cash flows to cover interest payments and liquid assets exceeding short-term obligations. However, profitability in the investment segment will depend on fair value changes, and Carantia’s earnings are expected to remain slightly below the comparison period.

Executive Commentary

CEO Ilkka Laurila emphasized the company’s focus on maximizing shareholder return and exploring investment opportunities. He noted, "We are continuously looking for best possible opportunities to maximize the shareholder return." Laurila also highlighted the market uncertainties, stating, "It increases the uncertainty in the market, and that will always have a negative impact for the investment operations."

Risks and Challenges

• Market volatility and uncertainty could impact investment operations.
• Decline in revenue and operating profit may affect investor confidence.
• Conservative investment strategy may limit short-term gains.
• Dependence on fair value changes for investment segment profitability.
• Potential challenges in expanding the Renewable Energy segment.

Q&A

During the earnings call, analysts inquired about the Canadian biomass plant investment, which is still under feasibility study. The company confirmed no urgent need for major structural changes and expressed openness to potentially extending the SolarWinds III Fund fundraising.

Full transcript - Taaleri Oyj (TAALA) Q1 2025:

Linda Tiarella, Investor Relations, Talaris: Good morning and welcome to the presentation of Talaris results for the first quarter of twenty twenty five. My name is Linda Tiarella, and I’m heading Investor Relations here at Talari. Presenting today, we have our CEO, Ilkka Laurila. And you will also have an opportunity to ask questions throughout the presentations. You may submit your questions through the chat box in the webcast platform.

And you can submit questions at any time during the presentation, and we will take all the questions at the Q and A session after the presentation has finished. And with that, I welcome Ilkka to open the presentation.

Ilkka Laurila, CEO, Talaris: Good morning on my behalf as well. My name is Ilkka Laurella. I’m CEO of Thaleri since January. And as usually, it’s now it’s time to go through some of the operational development highlights and as well as the financial development of the first quarter in Thaleri’s twenty five development. The presentation comprises of a few sections.

The first part is that we will go through the quarterly highlights. The second part is that we will go through the segment reporting change, which we published during the quarter and the kind of the rationale behind it. And the third part is then is that we will go through kind of the overall uncertainty in the market and its impact to our business and our operational and financial development, followed then by the, let’s say, usual operational and financial development of our segments and our businesses. Starting with the highlights of the first quarter. Our continuing earnings in Private Asset Management business grew, and profitability improved positively in that segment.

It was obviously boosted by the positive development in the Renewable Energy business, in which the growth continued and the profitability development also continued positively. In renewable energy business, SolarWind III Fund is still on a fundraising phase. It’s already a biggest and infrastructure focused fund in Finland, although it is quite likely that we will fall short of our initial target size given the market conditions where we are at the moment. In the bioindustry, the projects have continued development. First of all, we are in a ramp up phase in our torrefied biomass plant in Jornsu.

The plant has secured its first test batch orders from the customers secondly, our Fintoils peer refinery in Haminno is growing. It has been able to secure new clients. And therefore, the operational development is forecast to and the financial development is forecast to develop positively, given the fact that they are able to make a production higher production and higher capacity utilization in 2025. In our real estate business, they were able to secure a strategic partnership with Keva during the first quarter. Obviously, the impact on the P and L can be only seen after we have they have been able to deploy the capital according to its mandate.

The team is continuously looking for targets and potentially potential targets and to how to find and enter to the market. Carantia strengthened its market share during the first quarter. The numbers itself is looking actually quite negative, but we will go through some of the line items there and a bit deeper what is driving the numbers on current year side. But overall, in the operational from the operational perspective, it has been able to increase the market share, and it’s developing positively. And finally, as explained, we updated our reporting structure and included now investment segment to our reporting.

And there’s maybe three main rationale why we entered in this kind of reporting change. The first one is that this now actually follows better how we actually lead the business. The second one is that now private asset management, both revenue and the profitability development, is more transparent after this new segment reporting. And thirdly, obviously, we are able to demonstrate and to illustrate better the potential of our investments and our balance sheet. Then if we take a bit closer look on these segments.

On the right hand side, you can see the Carantia, which remained as it was already earlier. It’s insurance company. And obviously, the revenue is coming from the investments as well as the insurance income. Then on the left hand side, there’s this private asset management business comprising of renewable energy and other funds. There, the revenue and the top line and the profitability is driven by the management fees and the performance fees.

But then the new segment is the investment segment, which comprises of fund investments, co investments, our project development, like the project in Canada at the moment and other direct investments. And clear majority of the P and L impact is coming from the investment income in this segment. And all these three combined, obviously, result a shareholder return. Then going forward with the uncertainty in the markets. So I think we all know how the operating environment has fluctuated quite significantly during the first quarter and has continued to do so also during the second quarter of this year.

This page is only to kind of illustrate. I will not go through these line by line items, but this is only to illustrate how widely the uncertainty in the market is actually reflected in our operations. The arrows there in the slide is only an illustration of the, let’s say, the main impact of the each line item. Obviously, in many of those, if you take a closer look on those, also have an impact for the other direction. But despite of that, this kind of illustrates quite nicely the operating environment and where we are and how difficult it is to kind of maneuver in this kind of environment.

It has a lot of impact in different parts of our businesses. And clearly, that is reflected in our first quarter numbers, in which all the key figures have developed actually quite negatively. Revenue declining from €17,000,000 to €8,600,000 operating profit declining from €9,600,000 to 500,000.0 and earnings per share declining from €0.26 to €02 But if we if you scratch surface a bit deeper on the behind the numbers. You can actually see in this graph, if you take a look at the left hand side, you can see the operating profit during the first quarter last year. On the right hand side of the graph is the operating profit during the first quarter this year.

And you can actually see that the clear majority of the decline in the operating profit is actually coming from Carantia’s investment operations, so EUR 5,400,000.0 coming from there, and actually quite evenly distributed between the debt and equity related asset classes. Carantia’s continuing earnings also declined by €900,000 having a negative impact in the operating profit. And obviously, that is exactly coming from the delay of the poor performing housing market in Finland during the previous years. And now, as said, during the first quarter, the market share and the market development in there looks positive. But however, it will take time before you can see the impact in the numbers.

And this is due to the fact that the insurance companies, the IFRS calculations are such that it will have a quite significant time delay, the actual impact for the P and L. Third part in this graph is changes in other investment operations, again, coming mainly from the different kind of fair value changes in AKTIA shares, in impact coming from the Toriparki and some translational impact coming from the balance sheet investments through the FX changes, not the transactional, but the translational impact. Other changes, 0.8% is the clear majority of that is actually related to CEO change during the first quarter. So overall, if you take a look at this picture, like typically in this kind of business, nothing dramatic will happen during in the time period of one quarter, But it’s the impact is can be explained with quite kind of, let’s say, overall market environment development. But however, if you take a look at the longer time horizon of the market, especially in the private capital markets, the market overall is forecast to continue its growth also in the future with the 10% KCOR, as shown in this picture.

So overall, market conditions have remained rather stable, but turbulence you can see on development. Then the next section is that we will go through some of the financial as well as the operational highlights of each of the segments and businesses. First one is the Renewable Energy. On the table, you can see that the revenue actually increased from €5,000,000 to 5,200,000.0 followed by the operating profit improvement from €1,500,000 to €1,700,000 And that is explained by the increase in the continuing earnings by 8.2%. Operationally, maybe highlighting that the Fund decided the SolarWinds III Fund decided to invest in a solar power project in Joroinen here in Finland.

So in total, five investment decisions have been made from the Fund. Then in the other private asset management business, revenue declined a bit from 1,500,000.0 to €1,400,000 but operating profit developed positively from negative 0 point 4 million euros to negative 300,000.0 And as said and explained already earlier, both the bio industry and the fund operations there as well as the real estate operations and the real estate partnership with Keva, Both businesses are looking for and sourcing new investments and are ready to deploy capital when the opportunities arises. And this is kind of the good picture that illustrates why we actually did the or one of the factors why we did the reporting or the segment changes. Now you can actually quite clearly see that the continuing earnings in the Private Asset Management business continued its growth on a LTM basis by 6.9%. And operating profit develops quite positively, 51.7% on the LTM basis and is now €7,700,000 Obviously, quite natural is that if the exit projects that we are in the middle of in a especially in the renewable energy will have an impact on these numbers then going forward.

Then on the Investment segment. Like I said, the Investment segment continued its ramp up in plant terrified biomass plant in Joensu, secured its first dispatch orders from the customers. We continued our development project in Canada to looking for the next site and operations for the terrified biomass plant in Canada. And the Fintoils development, pure refinery in Khamene is looking for looking quite positive, and you can see the pickup in demand based on the new customers that they have been able to achieve. And as said, they broke the production record in monthly refining capacity.

But then if you take a look at the financial development of the Investment segment, first of all, on the left hand side, you can see that the clear majority of the revenue is coming from other than continuing earnings, meaning, in practice, mostly deriving from the investment income, which of which fluctuation can then be seen quite directly in the operating profit development. Obviously, it has a big impact of the fair value changes as well as the exit timings has a big impact for this segment. And also in the future, we are most likely going to see quite significant fluctuations between the quarters, how this segment’s revenue and the operating profit will develop. But then on the other hand, more stable and more transparent picture on the private asset management and then obviously, the other segment and the cost structure and the development in there as well. Finally, the Carantia.

As already went through in the waterfall pictures, the net income from the investment operations declined from €4,800,000 to negative €600,000 ending up having a revenue decline from 8,700,000.0 to 3,400,000.0 which is quite straightly linked to the operating profit development from 8.5% to 2.1%. However, like said, current share in the residential mortgage guarantees for new mortgages in Finland has grown. And obviously, we will see in the near future whether that is that will sustain and how the housing market is developing here in Finland. And that will have a delayed impact for the profitability development of the Carantea’s operations. This picture here is just to kind of remind you of the investment portfolio and the current insurance portfolio of the current operations so that the investment portfolio split is such that roughly 74% of the investments are debt instruments, and then 25% is equity or real estate related investments.

So quite conservative allocations, if you would like to take it that way. The insurance portfolio split is comprising mainly from the consumer exposure, 85%, and corporate exposure is 15%. Then following by some of the highlights and key numbers in the financial development. First of all, this longer horizon picture, twenty four months picture of the operating profit development, the four sources of revenue, again, on the left hand side. Continuing earnings has had a biggest impact, 58,200,000.0 in the operating profit development historically, followed then by the net investment operations of the whole group, 48 point 4 And then current year is quite stable.

Net result development from the insurance operations, EUR 26,300,000.0. Performance fees only having a EUR 3,300,000.0 impact during the last twenty four months. And then if you take a look at the LTM development in the whole group, the growth in the continuing earnings has been 2%, so quite stable development in the continuing earnings on the LTM basis. But then based on the fluctuations in the other than and continuing earnings, the profitability fluctuates much more so that the operating profit has had a declining of 27.6% on an LTM basis. Then on the balance sheet side, the assets in total is now €291,000,000 approximately, comprising so that if you combine Carantia’s investment portfolio, our nonstrategic and direct investments as well as the net debt situation in our balance sheet, you already are on a roughly €230,000,000 And then the other assets, the noncurrent and current assets, comprises mainly of accounts receivable as well as the accrued receivables of the performance fees.

And like I said, the investments and the cash, net cash position is already at €230,000,000 And the liquidity remains strong, euros 27,500,000.0. The first installment of the dividend paid in 04/00/2025, followed then the similar amount of dividend later in the year. And finally, outlook for ’25. Starting from the Private Asset Management business growth and continuing earnings from the renewable energy will be clarified only after we are able to secure the final size of the SolarWind refund. And then on the other hand, what would be the exit timing of the Talare, Wind and two funds.

And operating profit is also obviously dependent on the how the performance fees are estimated and what kind of P and L impact those will have during the year. In Bioindustry and Real Estate and other funds businesses, the profitability the operating profit is expected to remain negative. However, it is forecasted to develop positively compared to previous period. And as explained, the profitability and the revenue development in the Investment segment is highly dependent on the changes in the fair values as well as the final timing of the exits. In the Carantia and the Carantia’s operations, the continuing earnings is are expected to remain slightly below the comparison period, explaining mainly from the previous development of the Finnish housing market.

And the income from the investment operations is expected to decrease compared to the previous year, which was an exceptionally strong investment year in debt related instruments, especially as well as the equity related instruments. And in Other Group, the cost level is expected to remain rather stable versus the year ago and the comparison period. With that, I will close my first quarter presentation. Now we have time for the Q and A.

Linda Tiarella, Investor Relations, Talaris: Yes. Thank you, Ilkka, for a great presentation. So again, I would like to remind you, if you would like to ask a question, you may do so through the webcast platform. And we have some questions here from the studio as well. Sauli Vilem from Inderes.

Please go ahead.

Sauli Vilem, Analyst, Inderes: Yes. Thank you. So about the strategy process, Ilkka, you opened it up kind of in the CEO remarks there. So is it the right interpretation that you are not planning any like bigger structural changes, but instead, are more, you could say, streamlining the current strategy around the current segments?

Ilkka Laurila, CEO, Talaris: Well, let’s put it that way. There, obviously, we will open it more closely in the autumn, where we will have our Capital Markets Day. But yes, in such a way that, obviously, like I explained, the rationale behind the segment reporting change is that we are more better able to kind of illustrate the development of all these three segments. But having said that, obviously, Talleres you well know the Talleres history. It has always included different kind of quite sizable transformational changes as well.

But those are difficult to, let’s say, budget in a way. And we all know what is the overall market environment at the moment. So we are continuously looking for best possible opportunities to maximize the shareholder return. But obviously, we are quite cautious when it comes to the timing of the different major structural changes in our operations.

Sauli Vilem, Analyst, Inderes: Okay. That’s more clear than I expected. Then about the your Canadian, the torrefied biomass plant there. At when are you in a position that you need to make like the, let’s say, the final call that either you invest or then you withdraw? Like can you put us on the time line there?

Ilkka Laurila, CEO, Talaris: Well, let’s put it that way, that we are not in a position that we are urged to make a final decision to invest. It’s really based on our own judgment that whether we would do it or not. Currently, we are doing feasibility study there, and that’s what we are in the middle of. And obviously, it depends quite significantly what kind of conditions and what is the operating environment there. The logic and the rationale behind the kind of the development company and the kind of the opportunity is based on the raw material availability and the pricing of the raw material in Canada.

And that’s the logic. And that has not changed based on the geopolitical situation. But obviously, it’s the kind of putting this everything in a timeline, it’s actually quite, let’s say, dangerous at this stage when obviously you have to secure a lot of things before you are able to do the final decision. And that’s why it still most likely takes some time. But we are not in a kind of position that we need to make a decision.

We have our time.

Sauli Vilem, Analyst, Inderes: Okay. Continuing on that. Let’s say that at some stage, you would be in a position that you would decide that you want to invest on the plant. Would we be talking about the same size of investment, what you have done in Jonsu? And secondly, would you rather do it from your own balance sheet fully?

Or would you maybe try to create a vehicle around it like you did in Jonsu?

Ilkka Laurila, CEO, Talaris: The structure is still open, and that is obviously very much dependent, again, on the market development and the development in the operating environment. So the final structure of the financial instrument is still open. The size of the one line is pretty much on the same level that it’s in the Johansson. The total amount obviously depends on how many lines we will open in Canada. Whether that is a if there is two lines in one factory, obviously, the investment size of one factory is almost double, not quite because some there are some synergies.

And then it depends on how many factories you will build up in ending building up in Canada.

Sauli Vilem, Analyst, Inderes: Okay. Then a couple of more detailed ones. Do you still book some management fees from the old wind funds, the two and three? I guess, Yes. Okay.

Then about the receivables. When do you expect to get the rest of the receivable? And then you have the development portfolio is the bigger chunk there. Any time line when you probably could realize those cash?

Ilkka Laurila, CEO, Talaris: Again, like I said, it depends on the market conditions and the exact timing of the exit, well, let’s put it that way, that we are hopeful that those will happen during this final, so yes.

Sauli Vilem, Analyst, Inderes: Okay. That’s very clear. Thank you.

Linda Tiarella, Investor Relations, Talaris: Thank you so much. And now we have a question from Juukka Pekka Peissonen from Nordea. So he’s wondering about the SolarWinds Free Fund and the total commitments now stand at EUR481 million. So what’s your best estimate for the Fund’s final size based on your commitment pipeline? Are you still targeting to close around the half year mark?

Ilkka Laurila, CEO, Talaris: For the latter part, yes, we are targeting to close the fund in the midyear. The first part, the final size, it’s there’s still ongoing few due diligence processes with the investors. And obviously, the end result of those due diligences remain still open. And at this stage, it’s really difficult to put an exact number. But like we said, it’s quite likely at this stage that it will fall below our target size, which we have stated earlier.

Sauli Vilem, Analyst, Inderes: And then a couple of questions from the other business about the other business units. So in real estate,

Linda Tiarella, Investor Relations, Talaris: has anything and then how much been invested already from the Keva mandate?

Ilkka Laurila, CEO, Talaris: Nothing yet. Okay. So that’s a simple answer.

Linda Tiarella, Investor Relations, Talaris: And then moving on to Garantia. So first of all, what’s the expected allocation for Garantia’s investments going forward? It’s been quite bond heavy so far, but is this the plan also in the future?

Ilkka Laurila, CEO, Talaris: There is the current kind of split is quite close to, let’s say, neutral position that they have in their investment portfolio. So most likely, there’s not going to be dramatic changes. Obviously, they are making their own decisions based on the market environment, but it will be it will remain debt heavy also in the future because that is the kind of the base allocation in their investment portfolio.

Linda Tiarella, Investor Relations, Talaris: Okay. Then there’s a question about this the bond that Garantia has raised. So what’s the fee structure on this? And how much will Thaleri earn from the bond?

Ilkka Laurila, CEO, Talaris: That we have not actually opened, but it’s we have said that it’s guaranteed by Garantia. And obviously, that comes with the fee. And then there is some part of the transactional fee as well.

Sauli Vilem, Analyst, Inderes: And then let’s move on to some of the bio industry projects. So

Linda Tiarella, Investor Relations, Talaris: do you have a target IRR? And what kind of IRR have you been able to achieve with Fintoil and with Joensu so far?

Ilkka Laurila, CEO, Talaris: The fund have their own IRR targets. I don’t have those numbers from the top of the head. And obviously, it’s actually not quite reasonable to take a look at the IRR in the middle of this kind of ramp up processes and the middle of the investments. The final kind of IRR then kind of can be seen after the investments all the investments have been done and the ramp up is ready, and it’s ready to kind of, for the next phase, the investments.

Sauli Vilem, Analyst, Inderes: All right. And then we have

Linda Tiarella, Investor Relations, Talaris: a question about the current macroeconomic environment. So what’s the impact of tariffs on Talaris business? How do you think about this?

Ilkka Laurila, CEO, Talaris: It will not have a direct impact for Talaris operations, but it might have an indirect impact for Talaris operations like in, I think, almost all businesses. First of all, it increases the uncertainty in the market, and that will always have a negative impact for the investment operations, all kinds of investment operations. Secondly, obviously, in our Canadian project development company, if there’s going to be tariffs between The U. S. Market and Canadian market, it might have an impact for the investment decision when the time arises, but that remains to be seen.

But like I said, obviously, the tariffs itself and the macroeconomic development has a lot of different kind of impacts to our operations when it increases the uncertainty in the market.

Sauli Vilem, Analyst, Inderes: Thank you. Do we have any further questions from the floor? Yes, we do. Just out of curiosity, you said that you will probably close the fundraising for during the summer. Let’s say that you still would have some good leads or discussions going on.

Do you would you be able to postpone the final close of the fund for, let’s say, six months or so if you if hypothetically

Ilkka Laurila, CEO, Talaris: Hypothetically, technically, yes, we are able to do it. But our current plan is to close it during the summer.

Sauli Vilem, Analyst, Inderes: All

Linda Tiarella, Investor Relations, Talaris: right. As there are no further questions, let’s conclude this webcast. And I wish you a pleasant day and, yes, a nice week. Bye bye. Thank

Ilkka Laurila, CEO, Talaris: you.

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