Aki Vesikallio: Welcome to Hiab's Q3 2026 Results Call. Our comparable operating profit grew strongly through executing our strategy. My name is Aki Vesikallio. I am from Investor Relations. Today's results will be presented by our CEO, Scott Phillips, and CFO, Mikko Puolakka. As a reminder, please pay attention to the disclaimer in the presentation as we will be making forward-looking statements.
Aki Vesikallio: Before handing over to Scott and Mikko, let's take a look at the highlights of the quarter. Orders received continued to grow in EMEA, while acquisitions boosted orders received in the Americas. Comparable operating profit increased to EUR 69 million, corresponding to 14.2% of sales, while comparable EBITDA margin was 15.5% in the quarter. Cash flow was again strong at EUR 98 million. We keep our outlook for 2026 unchanged.
Aki Vesikallio: Environmental Vehicle Solutions' acquisition was completed in the beginning of the quarter, hence it had a significant impact on many of the key figures in the quarter. Let's then view today's agenda. First, Scott will present the group-level topics. Mikko will go through reporting segments, financials in more detail, and then the outlook. After Mikko, Scott will join the stage for key takeaways before the Q&A session. With that, over to you, Scott.
Scott Phillips: Thank you, Aki. Greetings from my side, everyone. I would like to start today by highlighting some of our recent new product innovations, three of which we introduced within the quarter. Sorry about that. I surprised myself with that. We continue to shape the essential industries with pioneering innovations, and the three that I wanted to highlight from the quarter are as follows.
Scott Phillips: First, on the left-hand side of the slide, we introduced our next generation ProCare agreements. This is designed in order that we can help our fleet owners keep the equipment working by securing better uptime. This will help secure lower total life cycle cost and certainly help our customers to improve value from each and every asset.
Scott Phillips: Then moving to the right, the second new product that I'd like to highlight are a combination of two new updates to our Moffett M8 series, primarily focused for the North American market, both of which were designed to increase our weight to payload by increasing capacity nearly 20% to 2.5 and 3 metric tons each.
Scott Phillips: In addition to the increased weight to payload ratio, we also come out with a proprietary technology which allows for single side offloading, and this provides both enhanced safety, we have enhanced connectivity, and the new models will enable much faster delivery, improved productivity, and of course lead to lower total cost of ownership.
Scott Phillips: The third innovation I'd like to highlight, and really proud to say for the first time then with Environmental Vehicle Solutions within the Hiab portfolio, I'd like to highlight a new innovation that was introduced for our Leach brand series, which is a smaller 3 cubic yard tailgate. This tailgate delivers high density packing of up to 600 kilograms per cubic meter, additionally allowing for a faster cycle time of 17 seconds.
Scott Phillips: The combination of the lighter weight and shorter rear overhang will improve weight distribution and payload capacity on smaller chassis. This will help some of our operators work much more efficiently while enabling a wider access reach for Leach within the market. So really excited about all three of these innovations. Now turning your attention to the group financials, starting with orders.
Scott Phillips: As always, our orders received, as well as our order book, grew significantly within the quarter. Of course, this was largely supported by acquisitions in the Americas, and I'll take you through those details in the following two slides. Starting on the left-hand side of the slide, you see where our order book has come from two years prior, with a slight dip going into last year, and of course, boosted this year, as mentioned from our acquisitions within the Americas.
Scott Phillips: Within the period, our orders received were EUR 441 million against the comparison period of EUR 351 million. That's 26% variance, which brings our year-to-date order intake at EUR 1.28 billion versus EUR 1.1 billion for the same period last year. That's 16% overall variance. Now, of which of the EUR 441 million, EUR 87 million came from our Environmental Vehicle Solutions business, as well as EUR 14 million from ING.
Scott Phillips: Overall, the two acquisitions contributed to EUR 101 million of order intake, which had a 30 percentage point positive impact within the quarter. Currencies, however, did not have a significant impact on orders received. However, our organic orders received decreased by 4% within the period. Year to date, however, is up 5%. One of the big drivers for the impact for order intake in the period was the fact that we, versus the comparison period, did not book sizable key account orders.
Scott Phillips: That's especially visible in the Americas as we booked no orders above EUR 10 million within the quarter. As mentioned previously, our order book has increased significantly with the inclusion of the Environmental Vehicle Solutions business. Now turning your attention to the regional perspective on orders received. Our orders received grew in EMEA as well as in Asia Pacific.
Scott Phillips: However, the negative organic development in the Americas was a reflection of the key account orders situation versus the comparison period, as I mentioned previously. Diving a bit more into the regional composition, you see that we came from 56% of orders in the prior year comparison period to 46% this year. Going clockwise around the donut chart, we increased from 38%, of course, to 48% in the Americas, all driven by the acquisitions.
Scott Phillips: Asia Pacific then decreased the consequence by one percentage point from 7% to 6%. Orders in the period were EUR 201 million for EMEA versus the comparison period of EUR 195 million for 3% positive variance. Year to date, the variance is up 7%, EUR 627 million versus comparison period of EUR 587 million.
Scott Phillips: In the Americas, order intake increased to EUR 214 million versus EUR 132 million in the prior year, or 62% variance. Year to date, order intake in the Americas is EUR 571 million versus EUR 435 million in the same period last year or 31% positive variance. In APAC, we have a good stable situation with a slight increase in orders within the period versus comparison period of EUR 2 million or up 8%.
Scott Phillips: Year to date, however, we are slightly negative 3% or EUR 82 million versus EUR 84 million year to date. Taking a look into the environment, we still see a steady continued market recovery within EMEA against quite a mixed picture, of course. At the same time, through the quarter, we saw a good gradual improvement sequentially in our refuse collection vehicle orders, so that bodes nicely for future prospects.
Scott Phillips: On the other end, in terms of the negative side, of course, we still have this elevated uncertainty in terms of overall global growth outlook. We have, of course, the price situation as well as the interest rates that certainly are delaying decision-making and moving those decisions to the right, as well as encouraging the sweating of assets as well, so quite a mixed picture in terms of the negative part of the environment. Quite stable from Q2 to Q3 in terms of the positive picture here.
Scott Phillips: Turning your attention to sales. Happy to report that sales grew organically by 5% within the quarter. As you can see, compared to the prior two years, we have a nice improvement compared to where we were last year at EUR 346 million. So in the period this year, we are at EUR 481 million or a positive variance of 39%.
Scott Phillips: That brings us year to date to a little bit under EUR 1.3 billion versus last year, a little bit less than EUR 1.2 billion, or a 9% variance year to date. Organically, we have grown 5% within the period, down unfortunately 2% year to date versus 2025. Our share of services in the period was 28% versus 34% last year. This is primarily due to the fact that the percentage of sales in both the acquired businesses are smaller relative to the continuing Hiab business. Quite in line with our expectations there.
Scott Phillips: As I mentioned from the order intake period, we give the specific details in terms of our acquired businesses in the Americas. So sales from our Environmental Vehicle Solutions business was EUR 103 million. Sales from our ING Cranes were EUR 13 million, which overall EUR 116 million had a 35 percentage point positive impact within the quarter.
Scott Phillips: Now looking at that on a regional level. Much like our order intake, sales within the EMEA region decreased due to the structural changes that we made in the business. They are going from 51% to 39% in the period this year versus last year. The Americas, however, increased from 40% to 56%. Then that mix change, of course, impacted the percentage of sales in the APAC region from 8% to 5%.
Scott Phillips: Looking into the numbers, EMEA represented EUR 187 million of sales versus EUR 178 million in the comparison period or a 5% change. Then year to date, much the same, EUR 606 million versus EUR 573 million. In the Americas, however, we see the big shift, EUR 268 million versus comparison period of EUR 140 million or a 92% change. Then year to date, EUR 584 million versus EUR 508 million or 15% change.
Scott Phillips: In APAC, we had a decrease slightly in the quarter of EUR 3 million, EUR 26 million versus EUR 29 million, which of course is reflective of converting order book in prior period. Year to date, we are EUR 2 million below last year comparable period or 2 percentage point change. Our Eco portfolio sales within the quarter represented EUR 161 million of sales versus EUR 140 million or 15%.
Scott Phillips: Year to date, EUR 518 million versus EUR 473 million. Now as a percentage, in the period, it represented 33%. However, excluding our Environmental Vehicle Solutions in the period was 43% versus the prior year period of 40%. So like for like business, had a 3 percentage point improvement versus prior year period. Then year to date, we are at 41% versus 38% in the Eco portfolio percentage of sales. So nicely on track with our targets there.
Scott Phillips: Now from the top-line development, turning your attention to the earnings picture. We had a significant improvement in the comparable operating profit as well as our EBITDA. Turning your attention first to EBITDA, we, in this year's period, delivered EUR 75 million or 15.5 percentage points versus EUR 40 million or 11.7% in the comparison period, look for a change of 85%.
Scott Phillips: In year to date, that brings our EBITDA to EUR 189 million versus the prior year of EUR 168 million, or a 13% positive variance. So 14.9% on a relative basis versus 14.5%. In terms of our comparable operating profit, as Aki Vesikallio had mentioned earlier, we delivered EUR 69 million or 14.2% of sales versus last year's period of EUR 40 million and 11.4% for a 73% change.
Scott Phillips: Year to date, that is EUR 181 million versus EUR 166 million, or a 9% positive variance. On a relative basis, the same 14.3% versus 14.3% last year. Operative return on capital employed our last 12 months is at 20.2%.
Scott Phillips: Now, this decrease is mainly due to the higher operative fixed assets stemming from our acquisition, that is now represented in our Environmental Vehicle Solutions business. So that is versus the comparison period of 29.8%. Now, certainly our acquisition of the Labrie business that is now Environmental Vehicle Solutions boosted our comparable EBITDA nicely to the 15.5%. Then drilling into or providing a bit of color in terms of the Environmental Vehicle Solutions business, our comparable EBITDA was in the high teens.
Scott Phillips: Now giving a little bit more detail relative to our Environmental Vehicle Solutions. As we mentioned when we made the announcement, we believe that relative to our investment profile that we seek across the six dimensions, there is no doubt that the Environmental Vehicle Solutions represents perfect fit to our strategy, and it certainly supports both our top line as well as bottom-line growth ambitions.
Scott Phillips: Our integration process, I am happy to report, is progressing nicely according to plan. We have a couple of factors that are balancing our focus area for the integration. On the one hand, we want to make sure that we protect the ongoing business and add to the ability of this high-quality business to continue to deliver, make sure that we support and secure the focus of our distribution network, and ensure that the team is able to continue to execute on delivering the significant backlog.
Scott Phillips: At the same time, we of course have a keen focus on being able to deliver the synergies that have been called out, and I will talk about that in just a few minutes. As I took you through earlier, the financial performance is enhancing our results, both in terms of the top-line orders received as well as sales.
Scott Phillips: With the strong comparable EBITDA, which was in the high teens, as I mentioned on the prior page, it overall supports our profitable growth ambitions nicely. We think there is significant further upside potential in the business, and we will take you through some more details about where we see ourselves in terms of the demand cycle. But certainly, we view this as an essential industry with long-term attractive market growth prospects.
Scott Phillips: As highlighted earlier, we expect the overall market to progress out for the next 5 years in the low single-digit CAGR, and certain parts of the business even slightly higher than that. At the same time, as we pointed out when we made the announcement, I think what we called out at that time was low double-digit levels of synergies that we were seeking.
Scott Phillips: So far through the first 100-ish days or so of the integration process, we are getting a bit more granular in terms of where we think the run rate will end up in 2029. So at this point, we are pretty comfortable from a combination of procurement, cost synergies, as well as sales synergies, both in services and a bit in the equipment side to represent an above EUR 12 million run rate in 2029.
Scott Phillips: As always, I will wrap up on how are we doing relative to our long-term strategy target profile. We added a bit of a different twist here in terms of the arrows, so that we do a better job then of indicating whether we are trending positive or negative.
Scott Phillips: Starting from left to right, in terms of our CAGR, we had a slight increase sequentially versus what we shared with you in Q2, so our rolling 10-year average has increased 5%. From the comparable operating profit side, our last 12 months has increased slightly to 13.7%.
Scott Phillips: On the other hand, in terms of return on capital employed, our last 12 months return on capital employed has decreased to 20.2%, and we expect that trend to continue for a couple of periods to come. With that, I will turn it over to Mikko Puolakka.
Mikko Puolakka: Thank you, Scott, and good morning, ladies and gentlemen, also from my side. Before going into the segment numbers, just a reminder that EVS, formerly Labrie group numbers, have been now included in our equipment and service segment financials from 1 July onwards. As Scott already mentioned, despite the inorganic growth, it is good to note also that there has been a really nice solid improvement, both also in our equipment and services segments.
Mikko Puolakka: Let me start with the equipment segment's financial performance. The equipment segment had a strong improvement across all line items during Q3. Order intake was boosted by the EVS acquisition as well as growth in the lifting equipment. Delivery equipment orders declined slightly. As Scott mentioned, there were fewer key account orders in the US versus the comparison period.
Mikko Puolakka: The order book increased by EUR 310 million. This is thanks to the EVS acquisition. The organic order book was on last year's level. Sales was EUR 347 million, and here both lifting and delivery equipment sales grew. On top of that came the EVS and ING inorganic equipment sales growth. Q3 saw a strong improvement in profitability. Comparable operating profit margin improved from 8.8% to 12.6% for equipment.
Mikko Puolakka: The underlying organic profitability improvement was boosted by the sales growth, but also combined with lower fixed costs coming from the EUR 20 million overall cost savings program what we initiated some quarters ago. The EVS equipment contributed also to equipment segment profitability improvement. If we look the profitability trends in equipment segment, the last five quarters have demonstrated a very solid improvement in profitability, improving from last year's 8.8% to this quarter's 12.6%.
Mikko Puolakka: As the bridge illustrates, the sales growth of 50%, or in euros, EUR 117 million, that was the biggest contributor for the profitability improvement. This growth was both organic and inorganic, as mentioned earlier. We did not have any notable head or tailwinds from tariffs or price increases during Q3, so the gross profit margin was fairly stable during the quarter.
Mikko Puolakka: The other contributor to the profitability improvement was also the fact that our fixed costs increased roughly 25%, while sales grew 50%. This fixed cost increase is solely coming from the EVS acquisition, while the organic kind of legacy higher costs have been coming down, thanks to the cost savings program. Let me then have a look on the services profitability. Services organic performance improved, and it was also complemented by the EVS acquisition.
Mikko Puolakka: Service orders were EUR 130 million, sales EUR 134 million, so these were up by 16% and 15% respectively. Services grew nicely organically, and this growth was complemented by the EVS services. Like we have seen in the previous quarters, we continued to see really nice growth in the services, recurring type of services, like spare parts and maintenance-related services.
Mikko Puolakka: The installation services revenues were flat year on year. The number of connected equipment and maintenance contracts continued to increase, and this is in line with our strategy to reach 90,000 connected equipment and 50,000 maintenance contracts by 2028. The services profitability improved by EUR 6 million to EUR 33 million during the quarter, and this represents a margin of 24.6%. Services profitability improvement was driven by organic and inorganic sales growth.
Mikko Puolakka: Services has delivered a steady profitability margin over the past years, as you can see also on the picture on the left-hand side. The 15% sales increase is the main driver for the EUR 6 million or 110 basis points improvement in profitability. The organic gross profit margin improved thanks to higher sales, and it was also complemented by EVS services. Very nice development in services.
Mikko Puolakka: Let me highlight a couple of financials then on total Hiab level. As Scott already referred, our sales was EUR 481 million. This was growing 39%. The organic growth with constant currencies was 5%. The comparable EBITDA margin increased by 380 basis points to 15.5%. Comparable operating profit was EUR 69 million, i.e., 14.2% of sales.
Mikko Puolakka: The EBITDA and comparable operating profit improvement is driven by sales increase and, as mentioned earlier, also successfully executing the cost reductions actions, thanks to the actions we have put in place in the previous quarters. We are proceeding well towards the EUR 20 million full year 2026 cost savings, so the year-to-date September organic higher costs were EUR 12 million lower than in 2025.
Mikko Puolakka: Our Q3 comparable operating profit of EUR 69 million includes also now EUR 5 million purchase price amortization or allocation amortization, and this is related to the EVS customer relationships, technologies, and brands. Our items affecting comparability were EUR 15 million during Q3, and basically EUR 6 million of this is related to the EVS order book amortization, and this amortization will take place during the next two years, and then it is completed.
Mikko Puolakka: The rest of the items affecting comparability, EUR 9 million, was related to the cost savings program, as well as the EVS integration. Our year-to-date items affecting comparability was EUR 37 million, and our full year estimate is EUR 60 million. Our year-to-date September tax rate was exceptionally high at 30%. We have treated some of the EVS acquisition-related costs as non-tax deductible, and resulting then to this higher tax rate. But I would say that our normalized tax rate would be on the level of 24%, 25%, as we have communicated earlier.
Mikko Puolakka: We had a really strong cash flow in Q3, representing 180% cash conversion. Reduction in inventories and accounts receivables were the main contributors to the high cash generation. I would like to also highlight here that EVS also contributed to the above 100% cash conversion during the quarter.
Mikko Puolakka: Let us then have a look on some of our balance sheet metrics. Our gearing increased to 67% at the end of September, and this is solely driven by the EUR 900 million debt, what we raised in the beginning of the quarter for the EVS acquisition. Our cash balance was EUR 324 million at the end of September. This 67% gearing is in line with our projections made before the EVS acquisition.
Mikko Puolakka: Actually, this is slightly better than originally projected, thanks to the solid cash flow in Q3. Also going forward with the solid organic, as well as inorganic cash flow profile, we should see a gradual reduction in gearing in the coming quarters. We repaid the last bond of EUR 150 million during September.
Mikko Puolakka: And basically now the rest of the outstanding debt is related to the EVS acquisition, as well as the normal IFRS 16 lease liabilities. We have kept our full-year outlook unchanged and expect to deliver over 14.5% comparable operating profit margin for the full year. This outlook is based on the following assumptions.
Mikko Puolakka: Firstly, our year-to-date September comparable operating profit margin was 14.3%. Secondly, certain orders we have booked during the H1 of this year will be delivered in Q4. Then, as mentioned already earlier, we have progressed well on the EUR 20 million cost savings program. With that, then I would like to hand over back to Scott.
Scott Phillips: Thank you, Mikko. Wrapping up, I would like to leave you with four key takeaways. Firstly, we are excited about the fact that Q3 was our first quarter in 3 years with organic sales growth 5%, as Mikko pointed out earlier. Number 2, I think we are well on track to deliver our strategy, and the execution is going quite nicely despite the market uncertainty and turbulence that we have experienced.
Scott Phillips: We estimate that by the end of the year, we will reach our highest profitability in Hiab's history, so we are quite pleased about that. As I mentioned earlier, the integration with Environmental Vehicle Solutions business is progressing quite nicely and according to plan. To reiterate that we expect to achieve a run rate of synergies above EUR 12 million on the operating profit level basis. With that, I would like to invite Aki back on stage.
Aki Vesikallio: Thank you, Scott. Let us also get-
Scott Phillips: Mikko.
Aki Vesikallio: ... Mikko back to the stage so that we can get ready for the questions. Operator, please, we are ready.
Operator: 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 Panu Laitinmäki from Danske Bank. Please go ahead.
Panu Laitinmäki: Thanks for taking my questions. I have three. Firstly, starting from the EBIT contribution of Labrie. You said that on EBITA level it was high teens. Has it declined from what it was a year ago? Is the PPA higher? As I remember we discussed in July that it would be consolidated at around 17% margin.
Scott Phillips: You want to take that?
Mikko Puolakka: Yeah. I would say that the EVS profitability in Q3 was a bit lower than in the past quarters. This is actually due to some conscious decisions what we made during the quarter. We took over, with the EVS acquisition, roughly EUR 87 million of inventories, and we wanted to conduct a full stock take in all EVS manufacturing locations. Due to this, there has been some production stoppages during the quarter, and this has impacted our volumes during the quarter as well as the profitability.
Mikko Puolakka: Overall, we see no reason why the EVS profitability would be very different what we have been communicating earlier. During the quarter, as mentioned, we have basically booked EUR 5 million PPA amortization above the comparable operating profit. Then EUR 6 million below the comparable operating profit in items affecting comparability. This 6 million is related to the order book amortization, which takes place during 2 years' time.
Aki Vesikallio: To add, the PPA amortization was in line with what we disclosed in the Q2 interim report.
Panu Laitinmäki: Yes. Thanks. My second question was on guidance, which implies that the margin in Q4 will be higher, and you already partly answered that. I was going to ask whether there is seasonality in Labrie, but you indicated that Q3 was a bit softer due to temporary reasons. Can you give any more color on the Q4 expectations, why it should be clearly better?
Scott Phillips: Yeah, I can start with that, Panu. Q4, as Mikko highlighted earlier, we booked some nice orders earlier in the year that we anticipate to convert within Q4. Due to that conversion, we expect a nice sequential development on the top line that should, with our operating leverage, translate nicely from an operating profitability perspective. Of course, I think you asked a question related to the seasonality in Labrie.
Scott Phillips: I would say that, yes, there is some seasonality on the order side. I do not think that necessarily translates, however, into the way that the order book as a consequence is executed. So the execution is largely stable. It is more of a consequence of the mix of the units and then the lead times that result as consequence, which are quite variable.
Scott Phillips: Overall, you see the normal Hiab seasonality, where, of course, as we have highlighted in all of our prior discussions, we tend to have 10% to 15% seasonality in Q3, and that is due to the number of working days that hits us both in equipment as well as services. Then, of course, we recover some of that in Q4 in terms of working days, and then we have this additional benefit of the backlog.
Panu Laitinmäki: Thanks. Is it possible to quantify the negative impacts on Labrie in Q3 that you described?
Mikko Puolakka: We have not disclosed that, but I would say that we are talking still a fairly, let's say, visible impact. We are talking about some weeks of production stops and that impacts, of course, the top line. But we have not quantified the exact amount.
Scott Phillips: Yeah, I would just reiterate, as Mikko said earlier, Panu, if you think about on a normal delivery basis, then the EBITA percentage should be well in line with what we communicated previously.
Panu Laitinmäki: Thanks. My final question is on the Americas orders. It seems that they were down 15% organically without the acquisition. I understand there is timing of the large orders, but what are you seeing in the market overall? Is the recovery postponed? Are there new headwinds due to interest rates, or what should we expect going forward?
Scott Phillips: Yeah, we still see a market that is impacted largely by the same factors that we have discussed before. So of course, you still have the uncertainty around where cost levels will settle out, so that still has an impact. I know there is a lot of visibility in terms of the truck OEM production levels and, of course, the mix of the changes in production level as well as sales levels have not necessarily translated into increased volume uptake on our side.
Scott Phillips: Combination of a couple of factors. One is the timing-wise, so there is certainly the lag. Two, if you look at the mix, then if the increases in production have very little causality, if you will, in terms of volume impact on our side. So in that regard, that stayed quite stable.
Scott Phillips: I would say then three, it is largely a combination of the higher interest rates, the impact that that has had on housing, as well as refinancing driven renovations and remodeling that has created a bit of softness. You do see, however, some pickup on the rental side of the business and utilization rates, but that is probably largely driven by the proactive management that they are doing in terms of the fleet volumes.
Scott Phillips: So that has not necessarily translated into faster decision-making or an uptake in our volume levels as well. Then most importantly would be the fact that versus the comparison period, we did not realize any larger key account orders within the quarter period. So those are often hard to call in terms of timing.
Panu Laitinmäki: Okay. Thank you. That is all from me.
Operator: The next question comes from Mikael Doepel from Nordea. Please go ahead.
Mikael Doepel: Thank you. Good morning, gentlemen.
Scott Phillips: Good morning.
Mikael Doepel: Just a couple of questions to start off with, or continuing on Panu's question there. I am just wondering how you think about the outlook there overall. We have seen truck orders improve. We are hearing truck OEMs increasing production. I would assume that that should start to show in your orders as well at some point in time.
Mikael Doepel: How do you think about that relationship? Also, how do you think about the overall fleet that you see out there in terms of the age of the fleet? Do you see increase in replacement needs, or how would you think about the dynamics here?
Scott Phillips: Yeah. We will have to stick with our storyline that we have in the past in terms of the truck chassis development. Of course, I think the first contextual attribute that is important to note is, of course, compared to 2024, the volume levels are still a bit muted in most of the classifications of the truck chassis with the exception overall of the Class 8 chassis.
Scott Phillips: Then within Class 8, you have the many types of applications, if you will. The applications that have been most positively impacted are those that are more on the tractor-type chassis and different applications as compared to the use cases for our type of product. Having said that, though, then there also is this time lag between the impact of the volume on the truck side versus when we might see that materialize in our demand. My apologies, you asked a second part of that question.
Mikael Doepel: Yeah.
Scott Phillips: Mikko, can you-
Mikael Doepel: That is kind of-
Scott Phillips: ... can you address that question?
Mikael Doepel: Yeah. Sure. I was just asking about how you view the fleet age, if you think about-
Scott Phillips: There you go. Yeah.
Mikael Doepel: ... your kind of target.
Scott Phillips: Yeah. If I think about that both from the continuing or the legacy Hiab business as well as the Environmental Vehicle Solutions business, the fleet age is, of course, at a point where we have a high level of confidence that the replacement cycle will have to pick up in both parts of the business. That bodes well long term, and I think more midterm and long term, no question about that. It is a matter of timing when we start to see a better pickup from the fleet replacement. The economics are still quite attractive for our customers to do that.
Mikael Doepel: Okay. All right. Okay. Just continuing on the EVS and the refuse market overall. You saw a pickup in orders there. How do you think about the outlook there into the end of the year into 2027? Is there anything in terms of the market dynamics there that you would like to flag?
Scott Phillips: Yeah. I would say a couple of key factors to note here. I will try to be careful as I am still relatively new here, but a couple of key factors that I can share and highlight. One, as pointed out earlier, sequentially through the quarter, there was a bit of pickup and there has been a consistent, nice level of, let us say, inquiries.
Scott Phillips: A similar story that we have been talking about from time to time in the legacy Hiab business. That bodes well always. Secondly, talking about the market dynamics and what we have seen here in the past year, maybe a little over a year. You have got three key factors that have influenced the market dynamics, 2 of which created a bit of a unusual inventory situation.
Scott Phillips: On the one hand, you had the supply chain bottlenecks and the subsequent lengthening of lead times from all refuse collection vehicle OEMs, as well as the truck OEM suppliers. That created a bit of bottleneck in terms of order backlog. That order backlog now has been delivered nicely, not only by Environmental Vehicle Solutions, but other competitors within the industry, which then causes a catch-up on the inventory side.
Scott Phillips: The second factor that is at play here is there is an impending regulatory change in terms of emissions. There was an anticipation of pre-buy effect relative to the emissions change that was pending the beginning of 2027. Some of which materialized, some of which has not materialized. The net effect of the 2 factors are a bit of inventory buildup that needs to be worked through the system.
Scott Phillips: Thinking more longer term, mid to longer term, we still stand by the fact that within this industry, the structural characteristics are quite attractive. Waste per household is still expected to continue to rise. The trend towards multi-stream and more recycling versus general waste, we expect to continue to develop over the next 5 years.
Scott Phillips: The mid to low single digit CAGR still seems to be quite relevant. It is consistent with what the competitors are saying as well, all of which are soon to report, as I understand it, in the US market. It would be interesting for you to be able to get additional data points there as well.
Scott Phillips: Overall, we expect in the mid to long term, a nice, consistent growth picture, especially given the fact that in the future, as the market gets a bit more certain or we get more stability around the cost and interest rate picture, then a combination of working through the inventory levels that have been built up from these two, let's say, ordering bubbles, if you will. Relative to the current cycle, you could say 2024 was a bit of a peak year, but we see this as just a short-term development once inventory levels get to a more normal level.
Mikael Doepel: Just to follow up on that's a very good color. Thanks for that. Just to follow up on the inventory comment there, do you have any visibility now on where we are? Have the inventories been cleared? I'm just listening to some of the peers actually saying that the markets have or kind of the overcapacity has already been absorbed, but would you still see some inventories that needs to be taken down, or how do you view the market?
Scott Phillips: Yeah. We just see that there's still inventory that's being worked through on the distributor side, and we can only assume that the same is true for our industry peer group as well.
Mikael Doepel: Okay. That's clear. Thank you. Just finally, a couple of housekeeping questions to Mikko Puolakka. I just wanted to ask on the amortization, first of all, how should we think about that on a kind of quarterly or yearly basis going into 2027, the levels that we should assume for that?
Mikael Doepel: Also if you could repeat what you said on the cost savings impact, I didn't quite hear that. Sorry about that. Then what kind of incremental effect do you expect from that in Q4 and also into 2027? Thanks.
Mikko Puolakka: Yes. Thanks for the question. If we start from the amortization. Like I said, during Q3, we had EUR 5 million above the comparable operating profit, and this is related to the longer-term amortization. We are talking here about 15 years, and this EUR 5 million per quarter is related to trademarks, brands, technologies.
Mikko Puolakka: Then in items affecting comparability, we reported EUR 6 million per quarter during Q3. This is related to the order book amortization. Here the amortization period is two years. Mid-2028 it would be then fully amortized. These are the preliminary purchase price allocation calculations. According to the accounting rules, we have the 12 months time to complete it. I don't anticipate that it will dramatically change from these numbers, what we have now reported here in Q3.
Aki Vesikallio: Maybe to add to that, we have also some PPA related to ING Cranes acquisition and other former acquisitions. In total, it was EUR 12.6 million within the quarter as reported.
Mikko Puolakka: Then what comes to the cost savings. Year to date, September, our organic costs excluding ING Cranes and EVS, were EUR 12 million lower than in 2025. We anticipate that the full year fixed costs, organic fixed costs, will be EUR 20 million lower.
Mikael Doepel: Okay. All right. Thanks. Is there a year-over-year effect still from that coming into? Is that a EUR 20 million run rate, or is it fully in the books, in 2026 to EUR 20 million? How should we think about that in 2027?
Mikko Puolakka: Some of these actions were not implemented from 1 January 2026 onwards, so we anticipate that the impact for 2027 will be somewhat higher than this EUR 20 million.
Mikael Doepel: Right. Exactly. Good. Thank you very much.
Operator: The next question comes from Antti Kansanen from SEB. Please go ahead.
Antti Kansanen: Hi, guys. Thanks for taking my questions. Unfortunately, I missed part of your presentation, so bear with me if I ask you to repeat some of the stuff. But coming back to the Environmental Vehicle Solutions orders on Q3, I wanted to understand better. Scott, you mentioned that it probably has a similar type of order seasonality than your business, but then again you flagged out a sequential increase in the order intake.
Antti Kansanen: Perhaps a bit color on that, and is this kind of an 80, 90 million order level something that we should now think about as a run rate where you then grow whatever the market and your actions help in the next coming years?
Scott Phillips: Yeah. Thanks for the question, Antti. The seasonality piece is probably in the EVS business, much more related to the composition of the customers, which are largely municipalities, so around budgeting. We are still learning how that will look going forward.
Scott Phillips: Having said that, then on the sales execution side, you shouldn't see as much of an impact on seasonality as you do in the legacy Hiab business because of the difference in perhaps the days that we lose in Q3 compared to Northern Europe, if you will. Then you asked about the level of orders on a go-forward basis. That's something where what I can say is, as stated earlier, we expect over the mid to longer term, so thinking about from 2026 to 2030, at low single digits overall.
Scott Phillips: As shared previously, we think that the automated side loader piece is an opportunity to grow slightly faster than that. Therefore, we will stick to that type of guidance relative to expectations moving forward.
Antti Kansanen: All right. Then maybe a question on the country split in Labrie or EVS segment. Could you open up a little bit about the share of sales coming from US versus Canada? Then maybe a follow-up on then, if you look at Labrie's distributor network in the US. How do you feel about that, and what type of actions would you imagine to do to maybe expand that or replace some of their distributors that might have been lost in the past years?
Scott Phillips: Yeah. You want to take the mix?
Mikko Puolakka: Yeah, the country mix, I do not have now that in my head. Actually, I do not think we have provided-
Scott Phillips: We have not provided, yeah.
Mikko Puolakka: ... provided that, but of course, the main markets are Canada and US, and that has been in the past the stronghold of EVS.
Scott Phillips: Yeah, I would say that as you would assume, the majority of the sales are in the US, but still a nice balance between both Canada and the US. The market share positions are higher in Canada versus the US, also as you might anticipate.
Antti Kansanen: Then on the distributor network?
Scott Phillips: Yes, on the distributor network. Some of the numbers are, we have roughly 33 distributors at this point in time. As needed, it would be wonderful to add more as the need materializes. At this time, we do not anticipate any change in mix of distributors. Similarly, we really are focused on doubling down on the existing distributors' ability to maximize the potential within the Labrie or the Environmental Vehicle brand portfolio.
Scott Phillips: At this time, no plans to start cross-selling the brand portfolio within Environmental Vehicle Solutions with the existing Hiab dealers, if that is part of the question. Something that we will evaluate over time.
Scott Phillips: Probably the more near-term opportunity would be examining would it make sense to do so in the inverse where perhaps it would make sense, as already happens on a limited basis, to have the Galfab brand, let us say more accelerate the scale of sales of Galfab brand through the existing Environmental Vehicle Solutions distribution channel.
Scott Phillips: Then, of course, the big opportunity for us as well is to grow the services business from the existing low double-digit level to up to double that level, and getting that business more in line both with industry peer as well as the legacy Hiab business.
Antti Kansanen: Okay. Then the last question for Labrie is that my understanding is that, you mentioned that there was a bit of a peak years in demand and very helpfully provided some reason why it is so. But I have also understand that in certain key provinces in Canada, there has been some regulatory changes on the refuse collection side, which has created a bit of a tailwind for orders and sales in, let us say, 2024, 2025, especially on the area segment. Has this been supporting that business in Canada in the past few years?
Scott Phillips: We will have to come back to you on that. That I cannot say that it has had a material impact.
Antti Kansanen: Yeah.
Scott Phillips: I think I am pretty safe to say not a material impact, but there could be slight tailwinds in that regard.
Mikko Puolakka: Yeah, definitely the biggest driver or contributor has been this COVID-driven supply chain bottlenecks, which have been then kind of the ketchup bottle has then opened after the supply chains have been normalized.
Scott Phillips: That and combined with the 2027 emission changes.
Mikko Puolakka: Yes.
Scott Phillips: Which I think is more south of the border in the US.
Mikko Puolakka: Yes.
Antti Kansanen: All right. Thank you very much.
Scott Phillips: Yep.
Operator: There are no more questions at this time, so I hand the conference back to the speakers.
Mikko Puolakka: Thank you for your questions, and thank you for answers and the presentations. We will come back with our Q4 results on 12 February 2027. We published our finance calendar yesterday evening, so you can find out our publication date for the upcoming year now. Thank you so much, and have a good day.
Scott Phillips: Thank you.
Antti Kansanen: Thank you.
Operator: The host has ended this call. Goodbye.
