Half Year 2026 NKT AS Earnings Call

August 14, 2026

Speaker #1: Welcome to the NKT Interim Report for the first half of 2026 conference call. For the first part of this call, all participants will be in listen-only mode.

Operator: Welcome to NKT Interim Report for the H1 2026 Conference Call. For the first part of this call, all participants will be in a listen-only mode. Afterwards, there will be a question and answer session. To ask a question during the Q&A, please press five star on your telephone keypad. Today's call is being recorded. I will now hand it over to the speakers, CEO Claes Westerlind and CFO Michael Yong. Please begin.

Operator: Welcome to NKT Interim Report for the H1 2026 Conference Call. For the first part of this call, all participants will be in a listen-only mode. Afterwards, there will be a question-and-answer session. To ask a question during the Q&A, please press five star on your telephone keypad. Today's call is being recorded. I will now hand it over to the speakers, CEO Claes Westerlind and CFO Michael Yong. Please begin.

Speaker #1: Afterwards, there will be a question-and-answer session. To ask a question during the Q&A, please press the five-star key on your telephone keypad. Today's call is being recorded.

Speaker #1: I'll now hand it over to the speakers, CEO Claes Westerlind and CFO Michael Young. Please begin.

Speaker #3: Good morning, everyone, and welcome to the presentation of NKT's interim report for the first half of 2026. My name is Claes Westerlind, the CEO, and here in the room together with me, I also have our CFO, Michael Young.

Claes Westerlind: Good morning, everyone, and welcome to the presentation of NKT's Interim Report for H1 2026. My name is Claes Westerlind, the CEO, and here in the room together with me, I also have our CFO, Michael Yong. I will take you through the key developments, business highlights, and performance for Q2 and H1 of the year. Then I will hand over to Michael, who will walk you through the financials, and we will conclude the call by looking at the updated outlook for the year and open up for Q&A. Please turn to slide number 3. Before we begin, please take a moment to study this disclaimer concerning that the presentation and our related comments contain forward-looking statements, and actual developments and results may differ from expectations due to uncertainties and risks, including factors which are beyond our control.

Speaker #3: As usual, I will take you through the key developments, business highlights, and performance for the second quarter and first half of the year. Then I will hand over to Michael, who will walk you through the financials, and we will conclude the call by looking at the updated outlook for the year and opening up for Q&A.

Speaker #3: Please turn to slide number 3. Before we begin, please take a moment to study this disclaimer, noting that the presentation and our related comments contain forward-looking statements.

Claes Westerlind: Please turn to slide number 3. Before we begin, please take a moment to study this disclaimer concerning that the presentation and our related comments contain forward-looking statements, and actual developments and results may differ from expectations due to uncertainties and risks, including factors which are beyond our control.

Speaker #3: Actual developments and results may differ from expectations due to uncertainties and risks, including factors which are beyond our control. Now, let's move on to the key messages for the quarter on slide 4.

Claes Westerlind: Now, let's move on to the key messages for the quarter on slide 4. Let me start with the key messages for Q2 2026. Overall, Q2 was another quarter with solid financial and operational execution. Activity remained high across the business, and we continued the diligent execution of our strategic priorities under our new strategy, Charging Forward. This includes both execution of the product portfolio and the ongoing investment projects to expand capacity and capabilities. As expected, organic growth was negative, driven by the transmission business line. This was due to the lower revenue on the Champlain Hudson Power Express project, where we in Q2 last year had a high activity level on the project, including subcontracted work. Despite this revenue development, operational EBITDA level was maintained at EUR 104 million, and the operational EBITDA margin improved to 15.7%.

Speaker #3: Let me start with the key messages for the second quarter of 2026. Overall, Q2 was another quarter with solid financial and operational execution. Activity remained high across the business, and we continued the diligent execution of our strategic priorities under our new strategy, Charging Forward.

Speaker #3: This includes both execution of the product portfolio and the ongoing investment projects to expand capacity and capabilities. As expected, organic growth was negative, driven by the transmission business line.

Claes Westerlind: This includes both execution of the product portfolio and the ongoing investment projects to expand capacity and capabilities. As expected, organic growth was negative, driven by the transmission business line. This was due to the lower revenue on the Champlain Hudson Power Express project, where we in Q2 last year had a high activity level on the project, including subcontracted work. Despite this revenue development, operational EBITDA level was maintained at EUR 104 million, and the operational EBITDA margin improved to 15.7%.

Speaker #3: This was due to the lower revenue on the Champlain Hudson Power Express project, where we, in the second quarter last year, had a high activity level on the project, including subcontracted work.

Speaker #3: Despite this revenue development, operational EBITDA level was maintained at €104 million, and the operational EBITDA margin improved to 15.7%. A major milestone in the quarter was that the Champlain Hudson Power Express project reached commercial operation.

Claes Westerlind: A major milestone in the quarter was that the Champlain Hudson Power Express project reached commercial operation. This is an important achievement for NKT and for the energy transition in New York City. The cable system enables the transmission of hydropower from Canada to New York City and can supply electricity equivalent to approximately 1 million households. We also maintained a high transmission order backlog, which stood at EUR 13 billion at the end of Q2, only slightly down from the record high level at the end of Q1, driven by product execution during the quarter. In parallel, the high voltage expansions in transmission remained on track to become operational in 2027, while the additional medium voltage capacity in Denmark was completed towards the end of the quarter. Based on the performance so far in 2026 and our expectations for the remainder of the year, we have updated the financial outlook.

Speaker #3: This is an important achievement for NKT and for the energy transition in New York City. The cable system enables the transmission of hydropower from Canada to New York City, and can supply electricity equivalent to approximately one million households.

Speaker #3: We also maintained a high transmission order backlog, which stood at €13 billion at the end of Q2, only slightly down from the record-high level at the end of Q1, driven by project execution during the quarter.

Claes Westerlind: We also maintained a high transmission order backlog, which stood at EUR 13 billion at the end of Q2, only slightly down from the record high level at the end of Q1, driven by product execution during the quarter. In parallel, the high voltage expansions in transmission remained on track to become operational in 2027, while the additional medium voltage capacity in Denmark was completed towards the end of the quarter. Based on the performance so far in 2026 and our expectations for the remainder of the year, we have updated the financial outlook.

Speaker #3: In parallel, the high-voltage expansions in transmission remained on track to become operational in 2027, while the additional medium-voltage capacity in Denmark was completed towards the end of the quarter.

Speaker #3: Based on the performance so far in 2026 and our expectations for the remainder of the year, we have updated the financial outlook. Revenue at standard metal prices is now expected to be in the range of €2.65 to €2.75 billion, and operational EBITDA is expected to be between €400 and €430 million.

Claes Westerlind: Revenue at standard metal prices is now expected to be in the range of EUR 2.65 to EUR 2.75 billion, and operational EBITDA is expected to be between EUR 400 and EUR 430 million. We are narrowing the ranges for both revenue and operational EBITDA, and we are also lifting the EBITDA range. Let's turn to slide number 6 for a look at the overall financial performance in the quarter. Revenue at standard metal prices declined to EUR 657 million from EUR 723 million in the same quarter last year, corresponding to an organic growth of -9%. This negative development was expected and driven by transmission, where revenues declined due to lower revenue from the Champlain Hudson Power Express project as it reached commercial operation during the quarter. Operational EBITDA was stable at EUR 104 million compared to EUR 105 million in Q2 2025.

Speaker #3: We are narrowing the ranges for both revenue and operational EBITDA, and we are also lifting the EBITDA range. Let's turn to slide number 6 for a look at the overall financial performance in the quarter.

Speaker #3: Revenue at Standard Metal prices declined to €657 million from €723 million in the same quarter last year, corresponding to an organic growth of minus 9%.

Speaker #3: This negative development was expected and driven by transmission, where revenues declined due to lower revenue from the Champlain Hudson Power Express project, as it reached commercial operation during the quarter.

Claes Westerlind: This negative development was expected and driven by transmission, where revenues declined due to lower revenue from the Champlain Hudson Power Express project as it reached commercial operation during the quarter. Operational EBITDA was stable at EUR 104 million compared to EUR 105 million in Q2 2025. This was a solid performance considering the lower revenue level, and the operational EBITDA margin improved to 15.7%, up from 14.5% in Q2 2025, supported by solid execution and a favorable product mix in Transmission and Grid Solutions and Accessories. In Transmission, organic growth was -20%, while operational EBITDA increased to EUR 67 million.

Speaker #3: Operational EBITDA was stable at €104 million, compared to €105 million in Q2 2025. This was a solid performance, considering the lower revenue level, and the operational EBITDA margin improved to 15.7%, up from 14.5% in Q2 2025.

Claes Westerlind: This was a solid performance considering the lower revenue level, and the operational EBITDA margin improved to 15.7%, up from 14.5% in Q2 2025, supported by solid execution and a favorable product mix in Transmission and Grid Solutions and Accessories. In Transmission, organic growth was -20%, while operational EBITDA increased to EUR 67 million. Grid Solutions and Accessories delivered strong organic growth of 15% and operational EBITDA of EUR 20 million, driven by high activity levels and satisfactory execution. Distribution delivered organic growth of 1% and operational EBIT of EUR 27 million, supported by continued robust demand in the power distribution grid segment, although profitability was affected by higher material costs and ramp-up costs related to the capacity expansion in Denmark. Now I will take a deeper look at each of the business lines, starting with Transmission on slide 7.

Speaker #3: Supported by solid execution and a favorable project mix in Transmission and Grid Solutions and Accessories. In Transmission, organic growth was minus 20%, while operational EBITDA increased to €67 million.

Speaker #3: Grid Solutions and Accessories delivered strong organic growth of 15% and operational EBITDA of €20 million, driven by high activity levels and satisfactory execution.

Claes Westerlind: Grid Solutions and Accessories delivered strong organic growth of 15% and operational EBITDA of EUR 20 million, driven by high activity levels and satisfactory execution. Distribution delivered organic growth of 1% and operational EBIT of EUR 27 million, supported by continued robust demand in the power distribution grid segment, although profitability was affected by higher material costs and ramp-up costs related to the capacity expansion in Denmark. Now I will take a deeper look at each of the business lines, starting with Transmission on slide 7.

Speaker #3: Distribution delivered organic growth of 1% and operational EBITDA of €27 million, supported by continued robust demand in the power distribution grid segment, although profitability was affected by higher material costs and ramp-up costs related to the capacity expansion in Denmark.

Speaker #3: Now, I will take a deeper look at each of the business lines, starting with Transmission, on slide number 7. Looking at Transmission, the business line maintained a high activity level and had solid execution in Q2.

Claes Westerlind: Looking at Transmission, the business line maintained a high activity level and had solid execution in Q2. As in Q1, revenue was lower relative to last year, where we had a high activity level in the Champlain project. Revenue at standard metal prices amounted to EUR 334 million, down from EUR 419 million in Q2 2025. This corresponds to an organic growth of -20%. As mentioned, the decline was driven by lower revenue in Champlain, including a lower level of subcontracted work compared to the relatively high level in Q2 last year, fully in line with our expectations. Operational EBITA increased to EUR 67 million from EUR 64 million Q2 2025, corresponding to an operational EBITA margin of 20.2%, which is a historical high margin for the business line.

Speaker #3: As in Q1, revenue was lower relative to last year, when we had a high activity level in the Champlain project. Revenue at standard metal prices amounted to €334 million, down from €419 million in Q2 2025.

Speaker #3: This corresponds to an organic growth of negative 20%. As mentioned, the decline was driven by lower revenue in Champlain, including a lower level of subcontracted work compared to the relatively high level in Q2 last year, fully in line with our expectations.

Speaker #3: Operational EBITDA increased to €67 million from €64 million in Q2 2025, corresponding to an operational EBITDA margin of 20.2%, which is a historically high margin for the business line.

Speaker #3: The margin improvement was driven by solid execution across the portfolio, a slightly improved project mix, and good utilization of our assets, including NKT Victoria.

Claes Westerlind: The margin improvement was driven by solid execution across the portfolio, a slightly improved product mix, and good utilization of our assets, including NKT Victoria. I would like to remind that in a product business like Transmission, quarterly profitability will vary depending on the products and execution, and in this quarter, we benefited positively from this. During the quarter, we continued to progress and execute on several large projects, including Biscay Gulf, BorWin3, Emmeloord, Spittal to Peterhead, SydVästlänken, and Sydostlänken. In addition, Champlain Hudson Power Express reached commercial operation, marking a significant milestone after extensive engineering, manufacturing, and installation work across both onshore and offshore environments. Please go to the next slide and the Transmission market and order backlog. Market activity in Transmission remained at a high level during H1 2026.

Speaker #3: I'd like to remind you that in project-based businesses like transmission, quarterly profitability will vary depending on the project and execution. In this quarter, we benefited positively from this.

Speaker #3: During the quarter, we continued to progress and execute on several large projects, including Biscay Gulf, Form C3, Imuden Veer, Spittel to Peterhead, Südlink, and Südostlink.

Claes Westerlind: During the quarter, we continued to progress and execute on several large projects, including Biscay Gulf, BorWin3, Emmeloord, Spittal to Peterhead, SydVästlänken, and Sydostlänken. In addition, Champlain Hudson Power Express reached commercial operation, marking a significant milestone after extensive engineering, manufacturing, and installation work across both onshore and offshore environments. Please go to the next slide and the Transmission market and order backlog. Market activity in Transmission remained at a high level during H1 2026.

Speaker #3: In addition, Champlain Hudson Power Express reached commercial operation, marking a significant milestone after extensive engineering, manufacturing, and installation work across both onshore and offshore environments.

Speaker #3: Please go to the next slide, and the transmission market and order backlog. Market activity in transmission remained at a high level during the first half of 2026.

Speaker #3: We estimate that around €10 billion of projects were awarded in our addressable transmission power cable market during H1, with the majority based on DC technology.

Claes Westerlind: We estimate that around EUR 10 billion of products were awarded in our addressable Transmission power cable market during H1, with the majority based on DC technology. This underlines the continued strong demand for high voltage production and installation capacity where NKT remains well-positioned. At the end of Q2, the Transmission order backlog amounted to EUR 13 billion, to be compared to EUR 13.5 billion reported at the end of Q1, driven by product execution during the quarter. The backlog remains at a high level, notably above the level from previous years, and continues to provide strong visibility for the business in the coming years. From a customer perspective, more than 95% of the backlog relates to European TSOs, while the remaining shares relate to other types of customers.

Speaker #3: This underlines the continued strong demand for high-voltage production and installation capacity, where NKT remains well-positioned. At the end of Q2, the transmission order backlog amounted to €13 billion, to be compared to €13.5 billion reported at the end of Q1.

Speaker #3: Driven by project execution during the quarter, the backlog remains at a high level— notably above the level from previous years— and continues to provide strong visibility for the business in the coming years.

Speaker #3: From a customer perspective, more than 95% of the backlog relates to European transmission system operators, while the remaining share relates to other types of customers.

Speaker #3: From an application perspective, the backlog remains balanced across the long-term priorities in the market, with around 70% related to interconnectors and around 30% to offshore wind projects.

Claes Westerlind: From an application perspective, the backlog remains balanced across the long-term priorities in the market, with around 70% related to interconnectors and around 30% to offshore wind projects. Looking ahead, we continue to anticipate that our average addressable transmission market will exceed EUR 10 billion per year between 2024 and 2030. We still expect short-term variations given the volatile geopolitical and macroeconomic environment, but the overall supply and demand balance is expected to remain healthy throughout the decade. As the market approaches the 2030s, we, everything else equal, expect the high voltage markets to be more balanced. Please turn to slide 9 for Grid Solutions and Accessories. Turning to Grid Solutions and Accessories, the business line delivered a good quarter with growth in revenue and improved profitability.

Speaker #3: Looking ahead, we continue to anticipate that our average addressable transmission market will exceed €10 billion per year between 2024 and 2030. We still expect short-term variations, given the volatile geopolitical and macroeconomic environment, but the overall supply and demand balance is expected to remain healthy throughout the decade.

Claes Westerlind: We still expect short-term variations given the volatile geopolitical and macroeconomic environment, but the overall supply and demand balance is expected to remain healthy throughout the decade. As the market approaches the 2030s, we, everything else equal, expect the high voltage markets to be more balanced. Please turn to slide 9 for Grid Solutions and Accessories. Turning to Grid Solutions and Accessories, the business line delivered a good quarter with growth in revenue and improved profitability.

Speaker #3: As the market approaches the 2030s, we, everything else equal, expect a high-voltage market to be more balanced. Please turn to slide 9 for grid solutions and accessories.

Speaker #3: Turning to Grid Solutions and Accessories, the business line delivered a good quarter with growth in revenue and improved profitability. Revenue at standard metal prices amounted to €129 million, an increase from €112 million in Q2 2025, corresponding to an organic growth of 15%.

Claes Westerlind: Revenue at standard metal prices amounted to EUR 129 million, an increase from EUR 112 million in Q2 2025, corresponding to an organic growth of 15%. The growth was driven by higher revenue in both Grid Solutions and Accessories. In Grid Solutions, the activity level remained high and was supported by offshore repair projects, installation work, and delivery of high voltage AC onshore cable projects. In Accessories, revenue increased in both high and medium voltage accessories, supported by satisfactory order execution and continued ramp-up in additional production capacity. Operational EBITA increased to EUR 20 million compared to EUR 16 million in Q2 2025, and the operational EBITA margin improved to 15.6% from 15.0% last year. This reflects higher activity levels, satisfactory execution as profitability improved in both parts of the business line.

Speaker #3: The growth was driven by higher revenue in both Grid Solutions and Accessories. In Grid Solutions, the activity level remained high and was supported by offshore repair projects, installation work, and delivery of high-voltage AC onshore cable projects.

Speaker #3: In accessories, revenue increased in both high- and medium-voltage accessories, supported by satisfactory order execution and continued ramp-up in additional production capacity. Operational EBITDA increased to €20 million in Q2 2025, and the operational EBITDA margin improved to 15.6% from 15.0% last year.

Claes Westerlind: In Accessories, revenue increased in both high and medium voltage accessories, supported by satisfactory order execution and continued ramp-up in additional production capacity. Operational EBITA increased to EUR 20 million compared to EUR 16 million in Q2 2025, and the operational EBITA margin improved to 15.6% from 15.0% last year. This reflects higher activity levels, satisfactory execution as profitability improved in both parts of the business line.

Speaker #3: This reflects higher activity levels and satisfactory execution, as profitability improved in both parts of the business line. Also worth highlighting is that the power cables site in Nordenham became our first zero-carbon factory during the quarter.

Claes Westerlind: Also worth highlighting is that the power cable accessory site in Nordenham became our first zero carbon factory during the quarter. This is an important milestone for our sustainability agenda and supports our target of reaching zero emission operations across our sites. Let's go to slide number 10 and Distribution. Moving on to Distribution, the business line continued to benefit from robust demand in the power distribution grid segment. Revenue at standard metal prices reached EUR 239 million in Q2 2026 compared to EUR 234 million in Q2 2025, corresponding to an organic growth of 1%. The development was mainly driven by continued robust demand for medium voltage cables in the power distribution grid segment, where volumes and revenues increased relative to the same quarter last year. Revenue growth in the quarter was, however, limited by capacity constraints.

Speaker #3: This is an important milestone for our sustainability agenda and supports our target of reaching zero-emission operations across our sites. Let's go to slide number 10, and distribution.

Speaker #3: Moving on to Distribution, the business line continued to benefit from robust demand in the power distribution grid segment. Revenue at standard metal prices reached €239 million in Q2 2026, compared to €234 million in Q2 2025, corresponding to an organic growth of 1%.

Claes Westerlind: Revenue at standard metal prices reached EUR 239 million in Q2 2026 compared to EUR 234 million in Q2 2025, corresponding to an organic growth of 1%. The development was mainly driven by continued robust demand for medium voltage cables in the power distribution grid segment, where volumes and revenues increased relative to the same quarter last year. Revenue growth in the quarter was, however, limited by capacity constraints.

Speaker #3: The development was mainly driven by continued robust demand for medium-voltage cables in the power distribution grid segment, where volumes and revenues increased relative to the same quarter last year.

Speaker #3: Revenue growth in the quarter was, however, limited by capacity constraints. In the construction-exposed segment, the development varied between segments and local markets, and it led to revenue being marginally down from Q2 2025.

Claes Westerlind: In the construction exposed segment, the development varied between segments and local markets, and it led to revenue being marginally down from Q2 2025. Operational EBITDA amounted to EUR 27 million relative to EUR 31 million in the strong Q2 last year. The decline was mainly due to increased cost of materials, which was only partly offset in the quarter, as well as costs related to the ramp-up of the additional capacity in Denmark. Despite these effects, the business line sustained a double-digit operational EBITDA margin of 11%, a sequential improvement compared to Q1. The construction of the additional medium voltage capacity in Denmark was completed towards the end of the second quarter. This includes a new production hall, production machines and test facilities, and improvements to the overall production flow. These assets will continue ramping up into Q3 and will contribute to organic growth in the coming quarters.

Speaker #3: Operational EBITDA amounted to €27 million, compared to €31 million in the strong Q2 last year. The decline was mainly due to increased cost of materials, which was only partly offset in the quarter, as well as costs related to the ramp-up of additional capacity in Denmark.

Speaker #3: Despite these effects, the business line sustained a double-digit operational EBITDA margin of 11%, a sequential improvement compared to Q1. The construction of the additional medium-voltage capacity in Denmark was completed towards the end of the second quarter. This includes a new production hall, production machines, and test facilities, as well as improvements to the overall production flow.

Claes Westerlind: The construction of the additional medium voltage capacity in Denmark was completed towards the end of the second quarter. This includes a new production hall, production machines and test facilities, and improvements to the overall production flow. These assets will continue ramping up into Q3 and will contribute to organic growth in the coming quarters.

Speaker #3: These assets will continue ramping up into Q3, and will contribute to organic growth in the coming quarters. The capacity expansion in Portugal also progressed according to plan and is still expected to become operational at the end of 2026.

Claes Westerlind: The capacity expansion in Portugal also progressed according to plan and is still expected to become operational at the end of 2026. Please turn to the next slide. Across the major capacity investment projects, execution continued according to plan during Q2. In transmission, the new high voltage capacity in Karlskrona remains on track to become operational in 2027. During the quarter, installation and testing of machinery intensified in both the new extrusion tower and surrounding buildings. NKT Eleonora also reached an important milestone during the quarter as the vessel was launched into the water in Romania, and during July, she started the journey to Norway, which was actually completed yesterday, where the final equipment, technical installation, and onshore commissioning will be done. The vessel will strengthen our installation capabilities, and it is also expected to become operational in 2027.

Speaker #3: Please turn to the next slide. Across the major capacity investment projects, execution continued according to plan during Q2. In Transmission, the new high-voltage capacity in Kastruna remains on track to become operational in 2027.

Speaker #3: During the quarter, installation and testing of machinery intensified in both the new extrusion tower and surrounding buildings. NKT Eleonora also reached an important milestone during the quarter, as the vessel was launched into the water in Romania and, during July, she started the journey to Norway—which was actually completed yesterday—where the final equipment, technical installation, and onshore commissioning will be done.

Claes Westerlind: NKT Eleonora also reached an important milestone during the quarter as the vessel was launched into the water in Romania, and during July, she started the journey to Norway, which was actually completed yesterday, where the final equipment, technical installation, and onshore commissioning will be done. The vessel will strengthen our installation capabilities, and it is also expected to become operational in 2027.

Speaker #3: The vessel will strengthen our installation capabilities and is also expected to become operational in 2027. In Cologne, the investment in additional high-voltage capacity and capabilities also progressed according to plan, with installation and testing of production machinery and test equipment continuing during the quarter.

Claes Westerlind: In Karlskrona, the investment in additional high voltage capacity and capabilities also progressed according to plan, with installation and testing of production machinery and test equipment continuing during the quarter. In distribution, the medium voltage expansion in Denmark was completed towards the end of Q2, as said, while the expansion in Portugal remains on track to become operational at the end of 2026. Overall, we are satisfied with the continued execution of our major investment projects, which, as you know, are essential to support future growth and strengthen NKT's position in the market. This concludes my part of the presentation, and I will now hand over the word to Michael, and he will walk you through the financials. Operators, please turn to slide 12 and please go ahead, Michael.

Speaker #3: In Distribution, the medium-voltage expansion in Denmark was completed towards the end of Q2, as said, while the expansion in Portugal remains on track to become operational at the end of 2026.

Speaker #3: Overall, we are satisfied with the continued execution of our major investment projects, which, as you know, are essential to support future growth and strengthen NKT's position in the market.

Claes Westerlind: Overall, we are satisfied with the continued execution of our major investment projects, which, as you know, are essential to support future growth and strengthen NKT's position in the market. This concludes my part of the presentation, and I will now hand over the word to Michael, and he will walk you through the financials. Operators, please turn to slide 12 and please go ahead, Michael.

Speaker #3: This concludes my part of the presentation, and I will now hand over the word to Michael, and he will walk you through the financials.

Speaker #3: Operators, please turn to slide 12. Please go ahead, Michael.

Speaker #1: Thank you, Claes. Good morning from me as well. On the next couple of slides, we'll take a closer look at the financial development in the quarter.

Michael Yong: Thank you, Claes, and good morning from me as well. On the next couple of slides, we will take a closer look at the financial development in the quarter. Let us start on slide 13 with the income statement. In the quarter, profitability improved despite the expected lower revenue. Revenue at standard metal prices amounted to EUR 657 million in Q2 2026, compared to EUR 723 million in Q2 2025. This corresponds to a negative organic growth of -9%. As Claes described, this development was as expected and driven by the Champlain Hudson Power Express Project, reaching commercial operation compared to a high activity level in the comparison quarter. Operational EBITDA of EUR 104 million was stable from Q2 2025. Despite the expected decline in revenue, the operational EBITDA margin improved to 15.7% from 14.5% in Q2 last year.

Speaker #1: Let's start on slide 13 with the income statement. In the quarter, profitability improved despite the expected lower revenue. Revenue at standard metal prices amounted to €657 million in Q2 2026, compared to €723 million in Q2 2025.

Speaker #1: This corresponds to a negative organic growth of minus 9%. As Claes described, this development was as expected and driven by the Champlain Hudson Power Express project reaching commercial operation.

Michael Yong: This corresponds to a negative organic growth of -9%. As Claes described, this development was as expected and driven by the Champlain Hudson Power Express Project, reaching commercial operation compared to a high activity level in the comparison quarter. Operational EBITDA of EUR 104 million was stable from Q2 2025. Despite the expected decline in revenue, the operational EBITDA margin improved to 15.7% from 14.5% in Q2 last year.

Speaker #1: Compared to a high activity level in the comparison quarter, operational EBITDA of €104 million was stable from Q2 2025. Despite the expected decline in revenue, the operational EBITDA margin improved to 15.7% from 14.5% in Q2 last year.

Speaker #1: The margin improvement was mainly driven by Transmission and Grid Solutions and Accessories, supported by solid execution and a slightly more favorable mix of projects and activities.

Michael Yong: The margin improvement was mainly driven by transmission and grid solutions and accessories, supported by solid execution and a slightly more favorable mix of projects and activities. Depreciation and amortization were basically flat relative to last year, and thereby, EBIT amounted to EUR 69 million, compared to EUR 71 million in Q2 2025. Net financial items amounted to a cost of EUR 3 million, mainly driven by non-cash exchange rate fluctuations, and thereby, the net result was EUR 52 million compared to EUR 54 million last year, with tax also slightly lower than last year. The average number of employees increased by more than 650 since Q2 2025 average, driven by high activity levels and the ongoing investments across the business. Please turn to slide 14 and the cash flow development. Cash flow from operating activities amounted to -EUR 145 million in Q2 2026, compared to -EUR 1 million in Q2 2025.

Speaker #1: Depreciation and amortization were basically flat relative to last year, and thereby EBIT amounted to €69 million, compared to €71 million in Q2 2025.

Speaker #1: Net financial items amounted to a cost of €3 million, mainly driven by non-cash exchange rate fluctuations, and thereby the net result was €52 million, compared to €54 million last year.

Speaker #1: With tax, also slightly lower than last year. The average number of employees increased by more than 650 since the Q2 2025 average, driven by high activity levels and ongoing investments across the business.

Michael Yong: The average number of employees increased by more than 650 since Q2 2025 average, driven by high activity levels and the ongoing investments across the business. Please turn to slide 14 and the cash flow development. Cash flow from operating activities amounted to -EUR 145 million in Q2 2026, compared to -EUR 1 million in Q2 2025.

Speaker #1: Please turn to slide 14 and the cash flow development. Cash flow from operating activities amounted to minus €145 million in Q2 2026, compared to minus €1 million in Q2 2025.

Speaker #1: The positive EBITDA contribution was more than offset by an outflow from changes in working capital, which amounted to minus €225 million in the quarter.

Michael Yong: The positive EBITDA contribution was more than offset by an outflow from changes in working capital, which amounted to -EUR 225 million in the quarter. The working capital development was driven by phasing between milestone payments and project execution and transmission, but also an increase in inventories and trade receivables. Inventories rose slightly due to the strategic stock buildup of materials in response to the conflict in the Middle East, and trade receivables rose as a consequence of increased activity level. As we have mentioned previously, working capital will vary from quarter to quarter, depending on the timing of customer payments and project execution across the high voltage portfolio. Cash flow from investing activities was -EUR 104 million in Q2 2026, relative to -EUR 174 million in the same quarter last year. Investments were driven by the ongoing investments to increase capacity and capabilities in transmission and distribution.

Speaker #1: The working capital development was driven by phasing between milestone payments and project execution, as well as transmission. There was also an increase in inventories and trade receivables.

Speaker #1: Inventories rose slightly due to the strategic stock buildup of materials in response to the conflict in the Middle East, and trade receivables rose as a consequence of increased activity levels.

Speaker #1: As we have mentioned previously, working capital will vary from quarter to quarter depending on the timing of customer payments and project execution across the high-voltage portfolio.

Michael Yong: As we have mentioned previously, working capital will vary from quarter to quarter, depending on the timing of customer payments and project execution across the high voltage portfolio. Cash flow from investing activities was -EUR 104 million in Q2 2026, relative to -EUR 174 million in the same quarter last year. Investments were driven by the ongoing investments to increase capacity and capabilities in transmission and distribution.

Speaker #1: Cash flow from investing activities was minus €104 million in Q2 2026, compared to minus €174 million in the same quarter last year. Investments were driven by the ongoing initiatives to increase capacity and capabilities in transmission and distribution.

Speaker #1: Activity levels across the investment programs remained high and continued to progress according to plan. The actual spend in the quarter was slightly lower than in preceding quarters, but this was a result of timing of payments.

Michael Yong: Activity level across the investment programs remained high and continued to progress according to plan. The actual spend in the quarter was slightly lower than preceding quarters, but this was a result of timing of payments. As a result, free cash flow was -EUR 249 million in Q2 2026, compared to -EUR 175 million in Q2 2025. This reflects both the continued high investment level and the working capital development during the quarter. Please go to the next slide, where we will look at the balance sheet. Moving to the balance sheet, NKT maintained a robust financial position at the end of Q2 2026. Working capital remained negative at EUR 1.2 billion at the end of the quarter. This was lower than three months ago, mainly driven by the phasing between milestone payments and project execution and transmission, but better than the working capital balance one year ago.

Speaker #1: As a result, free cash flow was minus €249 million in Q2 2026, compared to minus €175 million in Q2 2025. This reflects both the continued high investment level and the working capital development during the quarter.

Speaker #1: Please go to the next slide, where we will look at the balance sheet. Moving to the balance sheet, NKT maintained a robust financial position at the end of Q2 2026.

Michael Yong: Moving to the balance sheet, NKT maintained a robust financial position at the end of Q2 2026. Working capital remained negative at EUR 1.2 billion at the end of the quarter. This was lower than three months ago, mainly driven by the phasing between milestone payments and project execution and transmission, but better than the working capital balance one year ago.

Speaker #1: Working capital remained negative at €1.2 billion at the end of the quarter. This was lower than three months ago, mainly driven by the phasing between milestone payments and project execution and transmission.

Speaker #1: But better than the working capital balance one year ago. Capital employed increased to almost €1.7 billion at the end of Q2 2026, up from €1.4 billion at the end of Q1.

Michael Yong: Capital employed increased to almost EUR 1.7 billion at the end of Q2 2026, up from EUR 1.4 billion at the end of Q1. This was driven by the working capital development and continued investments in capacity and capabilities. Return on capital employed was 20% at the end of Q2, down from 22% at the end of Q1. The net cash position was reduced by EUR 251 million during the quarter, mainly reflecting the negative free cash flow development. At the end of Q2, the net cash position amounted to EUR 591 million compared to EUR 842 million at the end of Q1. Financial leverage was -1.5 times operational EBITDA on a last 12-month basis. Available liquidity reserves was more than EUR 1.3 billion at the end of the quarter.

Speaker #1: This was driven by the working capital development and continued investments in capacity and capabilities. Return on capital employed was 20% at the end of Q2, down from 22% at the end of Q1.

Speaker #1: The net cash position was reduced by €251 million during the quarter, mainly reflecting the negative free cash flow development. At the end of Q2, the net cash position amounted to €591 million, compared to €842 million at the end of Q1.

Speaker #1: Financial leverage was minus 1.5 times operational EBITDA on a last 12-month basis. Available liquidity reserves were more than €1.3 billion at the end of the quarter. This provides NKT with a strong financial foundation as we continue to execute on our growth journey and deploy capital into the announced investment programs over the coming quarters.

Michael Yong: This provides NKT with a strong financial foundation as we continue to execute on our growth journey and deploy capital into the announced investment programs over the coming quarters. Let's turn to slide 16 and the updated outlook for 2026. Based on the solid financial performance so far in 2026 and the expectation for the remainder of the year, we have updated the outlook for the full year. Revenue at standard metal prices is now expected to be approximately EUR 2.65 to EUR 2.75 billion, compared to previously EUR 2.63 to EUR 2.78 billion. Operational EBITDA is now expected to be approximately EUR 400 to EUR 430 million, from previously EUR 360 to EUR 410 million. With the update, we are narrowing the ranges from both revenue and operational EBITDA. The revenue range is now around the previous midpoint, while we are lifting the EBITDA range with the new top-end being EUR 20 million above the previous range.

Speaker #1: Let's turn to slide 16 and the updated outlook for 2026. Based on the solid financial performance so far in 2026, and the expectation for the remainder of the year, we have updated the outlook for the full year.

Speaker #1: Revenue at Standard Metal prices is now expected to be approximately €2.65 to €2.75 billion, compared to previously €2.63 to €2.78 billion. Operational EBITDA is now expected to be approximately €400 to €430 million, from previously €360 to €410 million.

Michael Yong: Operational EBITDA is now expected to be approximately EUR 400 to EUR 430 million, from previously EUR 360 to EUR 410 million. With the update, we are narrowing the ranges from both revenue and operational EBITDA. The revenue range is now around the previous midpoint, while we are lifting the EBITDA range with the new top-end being EUR 20 million above the previous range.

Speaker #1: With the update, we are narrowing the ranges for both revenue and operational EBITDA. The revenue range is now centered around the previous midpoint, while we are raising the EBITDA range, with the new top end being €20 million above the previous range.

Speaker #1: The update is driven by solid project execution, as we have seen and expect to see in the remainder of the year. This is the case across the business lines, with the main contribution coming from Transmission and Grid Solutions and Accessories.

Michael Yong: The update is driven by the solid project execution, as we have seen and expected to see in the remainder of the year. This is the case across the business lines, with the main contribution coming from Transmission and Grid Solutions and Accessories. The underlying revenue expectations are unchanged. In Transmission, we still expect slightly lower revenue with an expected mid-single-digit percentage organic decline. This is due to a combination of a lower level of subcontracted revenue compared to 2025, and an expected normal level of variation orders, as production and installation capacity available in 2026 is unchanged from 2025. Grid Solutions and Accessories is still expected to benefit from the general high activity level in the market, but as always, the development is dependent on the amount of offshore repair jobs, which is difficult to predict.

Speaker #1: The underlying revenue expectations are unchanged. In Transmission, we still expect slightly lower revenue with an expected mid-single-digit percentage organic decline. This is due to a combination of a lower level of subcontracted revenue compared to 2025, and an expected normal level of variation orders, as production and installation capacity available in 2026 is unchanged from 2025.

Michael Yong: This is due to a combination of a lower level of subcontracted revenue compared to 2025, and an expected normal level of variation orders, as production and installation capacity available in 2026 is unchanged from 2025. Grid Solutions and Accessories is still expected to benefit from the general high activity level in the market, but as always, the development is dependent on the amount of offshore repair jobs, which is difficult to predict.

Speaker #1: Grid Solutions and Accessories is still expected to benefit from the generally high activity level in the market, but as always, the development is dependent on the amount of offshore repair jobs, which is difficult to predict.

Speaker #1: In the second half of the year, Distribution is expected to benefit from the additional capacity coming online, mainly in Denmark, but also in Portugal towards the end of the year.

Michael Yong: In the H2 of the year, Distribution is expected to benefit from the additional capacity coming online, mainly in Denmark, but also in Portugal towards the end of the year. In total, they are still expected to contribute with up to 10% growth to the business line, and unchanged Distribution is expected also to contribute positively to the EBITDA development in 2026. The expected margin dilution of up to 2 percentage points from increased costs to support the ongoing investments and production ramp-up remains unchanged. The outlook continues to be based on several important assumptions, and they are listed on the right-hand side of the slide. Please turn to slide number 17 now. Before we conclude the call, I will just briefly recap the key messages of the quarter. Q2 2026 was characterized by solid financial performance and continued diligent execution of our strategic priorities.

Speaker #1: In total, they are still expected to contribute with up to 10% growth to the business lines, and unchanged Distribution is expected also to contribute positively to the EBITDA development in 2026.

Speaker #1: The expected margin dilution of up to 2 percentage points from increased costs to support the ongoing investments and production ramp-up remains unchanged. The outlook continues to be based on several important assumptions, and they are listed on the right-hand side of the slide.

Michael Yong: The outlook continues to be based on several important assumptions, and they are listed on the right-hand side of the slide. Please turn to slide number 17 now. Before we conclude the call, I will just briefly recap the key messages of the quarter. Q2 2026 was characterized by solid financial performance and continued diligent execution of our strategic priorities.

Speaker #1: Please turn to slide number 17 now. Before we conclude the call, I will just briefly recap the key messages of the quarter. Q2 2026 was characterized by solid financial performance and continued diligent execution of our strategic priorities.

Speaker #1: Organic growth was negative, as expected, driven by the lower revenue in Transmission following the commercial operation of Champlain Hudson Power Express, while operational EBITDA remained stable at €104 million.

Michael Yong: Organic growth was negative, as expected, driven by the lower revenue and Transmission following the commercial operation of Champlain Hudson Power Express. Our operational EBITDA remained stable at EUR 104 million. The Transmission order backlog remained at a high level at EUR 13 billion at the end of Q2, providing strong long-term visibility. Market activity also remained high during the H1 of the year, and we continue to see a healthy demand environment for high voltage power cable solutions. In Transmission, the Champlain Hudson Power Express project reaching commercial operation was a major milestone for NKT and for the energy transition. The project demonstrates the role NKT plays in enabling renewable energy to be transported across regions and into major consumption centers, such as New York City. Our major capacity expansion projects continue to progress according to plan.

Speaker #1: The transmission order backlog remained at a high level at €13 billion at the end of Q2, providing strong long-term visibility. Market activity also remained high during the first half of the year, and we continue to see a healthy demand environment for high-voltage power cable solutions.

Speaker #1: In transmission, the Champlain Hudson Power Express project reaching commercial operation was a major milestone for NKT and for the energy transition. The project demonstrates the role NKT plays in enabling renewable energy to be transported across regions and into major consumption centers, such as New York City.

Michael Yong: In Transmission, the Champlain Hudson Power Express project reaching commercial operation was a major milestone for NKT and for the energy transition. The project demonstrates the role NKT plays in enabling renewable energy to be transported across regions and into major consumption centers, such as New York City. Our major capacity expansion projects continue to progress according to plan.

Speaker #1: Our major capacity expansion projects continue to progress according to plan. The high-voltage expansions in transmission remain on track to become operational in 2027, and NKT Lenora is now arriving in Norway for final installation.

Michael Yong: The high voltage expansions and Transmission remain on track to become operational in 2027, and NKT Eleonora is now arriving in Norway for final installation. The medium voltage expansion in Denmark was completed towards the end of Q2, and the expansion in Portugal remains on track for completion at the end of this year. Finally, we have updated the outlook for the year, as I just described. We are narrowing the ranges both for revenue and operational EBITDA. The outlook for revenue is narrowed around the previous middle point, while we are lifting the EBITDA range. Let's go to the next slide. Before we move to Q&A, I would like to briefly remind you of our upcoming Investor Day, which will take place on 29 September in Karlskrona, Sweden.

Speaker #1: The medium voltage expansion in Denmark was completed towards the end of Q2, and the expansion in Portugal remains on track for completion at the end of this year.

Speaker #1: Finally, we have updated the outlook for the year as I just described. We are narrowing the ranges both for revenue and operational EBITDA. The outlook for revenue is narrowed around the previous midpoint, while we are lifting the EBITDA range.

Michael Yong: The outlook for revenue is narrowed around the previous middle point, while we are lifting the EBITDA range. Let's go to the next slide. Before we move to Q&A, I would like to briefly remind you of our upcoming Investor Day, which will take place on 29 September in Karlskrona, Sweden. At the event, we will present our Charging Forward strategy in more detail, provide additional insights into the new business line structure that became effective on 1 January 2026, and you will also have the opportunity to meet the group leadership team of NKT.

Speaker #1: Let's go to the next slide. Before we move to Q&A, I would like to briefly remind you of our upcoming Investor Day, which will take place on 29 September in Karlskrona, Sweden.

Speaker #1: At the event, we will present our Charging Forward strategy in more detail, provide additional insights into the new business line structure that became effective on January 1, 2026, and you will also have the opportunity to meet the Group Leadership Team of NKT.

Michael Yong: At the event, we will present our Charging Forward strategy in more detail, provide additional insights into the new business line structure that became effective on 1 January 2026, and you will also have the opportunity to meet the group leadership team of NKT. The day will also include a visit to our production facilities in Karlskrona, where participants will have the opportunity to see the progress on our high-voltage subsea cable expansion and gain a deeper understanding of the capabilities we are building for the future. If you are interested and have not yet registered for the day, further information is available on our investor relations website. This concludes today's presentation, and I will now hand over the word to the operator, who will guide us through the Q&A session. Operator, please.

Speaker #1: The day will also include a visit to our production facilities in Karlskrona, where participants will have the opportunity to see the progress on our high-voltage subsea cable expansion and gain a deeper understanding of the capabilities we are building for the future.

Michael Yong: The day will also include a visit to our production facilities in Karlskrona, where participants will have the opportunity to see the progress on our high-voltage subsea cable expansion and gain a deeper understanding of the capabilities we are building for the future. If you are interested and have not yet registered for the day, further information is available on our investor relations website. This concludes today's presentation, and I will now hand over the word to the operator, who will guide us through the Q&A session. Operator, please.

Speaker #1: If you're interested and have not yet registered for the day, further information is available on our Investor Relations website. This concludes today's presentation, and I will now hand over the word to the operator, who will guide us through the Q&A session.

Speaker #1: Operator, please.

Speaker #2: Thank you. We'll now start the Q&A session. If you wish to ask a question, please press five-star on your telephone keypad. To withdraw your question, you may do so by pressing five-star again.

Operator: Thank you. We will now start the Q&A session. If you wish to ask a question, please press five star on your telephone keypad. To withdraw your question, you may do so by pressing five star again. There will be a brief pause while questions are being registered. Our first question will be from the line of Kristian Tornøe Johansen from SEB. Please go ahead. Your line will now be unmuted.

Operator: Thank you. We will now start the Q&A session. If you wish to ask a question, please press five star on your telephone keypad. To withdraw your question, you may do so by pressing five star again. There will be a brief pause while questions are being registered. Our first question will be from the line of Kristian Tornøe from SEB. Please go ahead. Your line will now be unmuted.

Speaker #2: There will be a brief pause while questions are being registered. Our first question will be from the line of Christian Torner from SEB. Please go ahead—your line will now be unmuted.

Speaker #3: Yes, thank you. I have three questions. I'll just do them one by one. So, the first one goes to the transmission margin in the quarter.

Kristian Tornøe Johansen: Yes. Thank you. I have three questions. I will just do them one by one. So first one goes to the transmission margin in the quarter, which was above 20%. I understand that this can vary between quarters, but obviously with your guidance upgrade, this was also better than you expected. So maybe if you can elaborate a bit on what more exactly went better than you had expected, and whether the guidance upgrade for the transmission part is predominantly a reflection of what happened in Q2, or whether it is also what you see into the second half of the year.

Kristian Tornøe: Yes. Thank you. I have three questions. I will just do them one by one. So first one goes to the transmission margin in the quarter, which was above 20%. I understand that this can vary between quarters, but obviously with your guidance upgrade, this was also better than you expected. So maybe if you can elaborate a bit on what more exactly went better than you had expected, and whether the guidance upgrade for the transmission part is predominantly a reflection of what happened in Q2, or whether it is also what you see into the second half of the year.

Speaker #3: Which was above 20%. I understand that this can vary between quarters, but obviously, with your guidance upgrade, this was also better than you expected.

Speaker #3: So maybe, if you can elaborate a bit on what exactly went better than you had expected, and whether the guidance upgrade for the transmission part is predominantly a reflection of what happened in Q2, or whether it's also based on what you see into the second half of the year.

Speaker #4: Good morning, Christian. Klaus here. Thank you for your question — not unexpected, of course. Well, you know, I think you're pointing to part of the explanation for it.

Claes Westerlind: Good morning, Kristian. Claes here. Thank you for your question. Not unexpected, of course. I think you are pointing to part of the explanation for it. It was a solid execution and performance in transmission in Q2. I will remind us all that the profitability in the transmission business line is driven by a couple of factors. One thing is, of course, the absorption of our assets and our people. One aspect is the margin mix, which is had in the incumbent quarter. A third component is the way we execute, meaning the way we manage both risk and opportunities. Temporarily, for the moment, we have a fourth component, which is also the OpEx drag with the ramp-up that Michael talked earlier about.

Speaker #4: It was a solid execution and performance in Transmission in the second quarter. And I'll remind us all that the profitability in the Transmission business line is driven by a couple of factors.

Speaker #4: One thing is, of course, the absorption of our assets and our people. One aspect is the margin mix, which was had in the incumbent quarter.

Speaker #4: A third component is the way we execute, meaning the way we manage both risk and opportunities. And temporarily, for the moment, we have a fourth component, which is also the OPEX drag with the ramp-up that Michael talked about earlier.

Speaker #4: And if we leave aside the last component, it is a good combination where all three aforementioned components contributed positively to the margin in the given quarter.

Claes Westerlind: If we leave aside the last component, it is a good combination where all the three aforementioned components contributed positively to the margin in the given quarter. That gives us then the overperformance versus our expectation, which also further then gives us some confidence in then upgrading the guidance. It is also the reason for why we are saying that the profitability will vary, and we would like more to talk about nominal earnings than the margin in itself. It was a strong quarter indeed.

Speaker #4: And that gives us, then, the overperformance versus our expectation, which also further gives us some confidence in upgrading the guidance. But it's also the reason why we are saying that the profitability will vary, and we'd prefer to talk more about nominal earnings than the margin itself.

Speaker #4: But it was a strong quarter indeed.

Speaker #3: Understood. Second question is on the Champlain Hudson project. You highlight several times that it has reached commercial operation, but that doesn't necessarily mean it's fully completed from your side?

Kristian Tornøe Johansen: Understood. My second question is on the Champlain Hudson project. You highlight several times that it has reached commercial operation. That does not necessarily mean it is fully completed from your side. Just some comments on the exposure you still have to the project, whether you still have provisions for this project and when full completion on your side should be expected.

Kristian Tornøe: Understood. My second question is on the Champlain Hudson project. You highlight several times that it has reached commercial operation. That does not necessarily mean it is fully completed from your side. Just some comments on the exposure you still have to the project, whether you still have provisions for this project and when full completion on your side should be expected.

Speaker #3: So, just some comments on the exposure you still have to the project—whether you still have provisions for this project, and when sort of full completion on your side should be expected.

Speaker #4: Yes. We have physically completed, of course, obviously, most of the works to the extent that the product could go into commercial operation. But why we make the distinction is, of course, that there is also, let's say, a formal closure of all our projects.

Claes Westerlind: Yes. We have physically completed, of course, obviously most of the works to the extent that the product could go into commercial operation. Why we make the distinction is, of course, that there is also, let us say, a formal closure of all our projects. There can be some physical works remaining between COD and actual close of a project. Of course, there can also be certain things to be worked out between ourselves, our subcontractors, but also ourselves and the customer. That typically takes some time after the project has reached COD. As to how much or whether we have provisions left, et cetera, I think I am unable to comment on a specific project, which I am sure you understand.

Speaker #4: There can be some physical works remaining between COD and actual closure of product. And of course, there can also be certain things to be worked out between ourselves, our subcontractors, but also between ourselves and the customer.

Speaker #4: And that typically takes some time after the product has reached COD. As to how much or whether we have provisions left, etc., I think I'm unable to comment on a specific project, which I'm sure you understand.

Speaker #3: Fair enough. But on the timing—I mean, when should we expect it to be fully closed?

Kristian Tornøe Johansen: Fair enough. On the timing, when should we expect it to be fully closed?

Kristian Tornøe: Fair enough. On the timing, when should we expect it to be fully closed?

Speaker #4: I don't dare to give you an exact timeline, but we are talking months instead of years.

Claes Westerlind: I don't dare to give you an exact timeline, but we are talking months and not years.

Speaker #3: That's okay, excellent. Third and last question here is just on the $2.5 billion in booking commitments—whether there is any update to when you expect that to convert into firm orders.

Kristian Tornøe Johansen: That's clear. Excellent. Third and last question here is just on the EUR 2.5 billion in booking commitments, whether there is any update to when you expect that converted into firm orders.

Kristian Tornøe: That's clear. Excellent. Third and last question here is just on the EUR 2.5 billion in booking commitments, whether there is any update to when you expect that converted into firm orders.

Speaker #4: Thank you. No, no fundamental major update since last quarter. There have been plans, as you’re well aware, when we booked these back in 2023.

Claes Westerlind: Thank you. No fundamental major update since last quarter. There has been plans, as you're well aware, when we booked these back in 2023. We have said previously that some of these projects have been slipping in time, also from that the boundary conditions are not available, that there are also ongoing discussions in Germany as to when what will be built. So we don't have any major updates to give. We have said that part of that may be converted this year and may also slide into next year. So, no big news since last quarter.

Speaker #4: We have said previously that some of these projects have been slipping in time, also from that the boundary conditions are not available, and that there are also ongoing discussions in Germany as to when and what will be built.

Speaker #4: But so, we don't have any major updates to give. We have said that part of that may be converted this year and may also slide into next year.

Speaker #4: So, no big news since last quarter.

Speaker #3: Understood. That was all from me. Thank you.

Kristian Tornøe Johansen: Understood. That was all from me. Thank you.

Kristian Tornøe: Understood. That was all from me. Thank you.

Speaker #2: Thanks, Christian. Our next question will be from the line of Klaus Alma from Nordea. Please go ahead; your line will now be unmuted.

Michael Yong: Thanks, Christian. Our next question will be from the line of Claus Almer from Nordea. Please go ahead. Your line will now be unmuted.

Operator: Thanks, Christian. Our next question will be from the line of Claus Almer from Nordea. Please go ahead. Your line will now be unmuted.

Speaker #5: Oh, yeah. Hi, I have a few questions on my side as well. The first question goes to the Transmission division. This 20% EBITDA margin we saw in Q2—how does that compare to the projects in the backlog you are going to deliver in the coming quarters?

Claus Almer: Yeah. Hi. A few questions from my side as well. The first question goes to the transmission division. This 20% EBITA margin we saw in Q2, how does that compare to the projects in the backlog you are going to deliver in the coming quarters? That will be the first one.

Speaker #5: That would be the first one.

Claes Westerlind: Thank you, Claus, and good morning. We have earlier said that over a couple of years and quarters, we will see a gradually improved project mix. That is still the anticipation. That is what we saw. I think we also put that in writing in the report. That is what we saw from a couple of quarters ago, now coming into Q2, and we can expect that journey to continue. But then you have to see it over a couple of quarters. So it is more difficult to promise anything from quarter to quarter, because things can also vary in and out of the incumbent execution. But seen over many quarters, the mix has improved since a couple of quarters ago and will continue to improve a couple of quarters from now.

Speaker #4: Thank you, Klaus, and good morning. We have previously said that over a couple of years and quarters, we will see a gradually improved project mix.

Speaker #4: And we will— that is still the anticipation. That is what we saw. I think we also put that in writing in the report. That is what we saw from a couple of quarters ago, now coming into Q2.

Speaker #4: And we can expect that journey to continue. But then you have to see it over a couple of quarters, so it's more difficult to promise anything from quarter to quarter, because things can also vary in and out of the incumbent execution.

Claes Westerlind: So it is more difficult to promise anything from quarter to quarter, because things can also vary in and out of the incumbent execution. But seen over many quarters, the mix has improved since a couple of quarters ago and will continue to improve a couple of quarters from now. When we look at the more radical change in mix, we remain with our earlier communication that this will happen during 2027.

Speaker #4: But seen over many quarters, the mix has improved since a couple of quarters ago, and it will continue to improve a couple of quarters from now.

Speaker #4: And when we look at the more radical change in mix, we remain with our earlier communication that this will happen during 2027.

Claes Westerlind: When we look at the more radical change in mix, we remain with our earlier communication that this will happen during 2027.

Speaker #5: Sure. I just noticed that some of the projects you are working on in the quarter are some of the first ones in Germany, which, as I understand, didn't come with the most impressive margins.

Claus Almer: Sure. Because I just noticed that some of the projects you are working on in the quarter are some of the first ones in Germany, which, as I understand, didn't come with the most impressive margins. That must have a very good read for the coming quarters when the mix is improving.

Speaker #5: So that must have a very good read for the coming quarters when the mix is improving.

Speaker #4: Yeah, I think on the one side, of course, I understand the comment and the implied question. On the other side, also keep in mind that we don't give the, let's say, the size of exactly those mentioned projects in relation to the full mix executed.

Claes Westerlind: Yeah. I think on the one side, of course, I understand the comment and the implied question. On the other side, also keep in mind that we don't give the, let's say, the size of exactly those mentioned products in relation to the full mix executed. Also, I give reference to what I said earlier about what drives the profitability of the full business line. It is about cost absorption, it is about the margin mix, and the third component is not unimportant also, how well do we execute? Of course, there is something to be expected from execution, and then expectations can, of course, go below that or outcome can go below, but it can also come above.

Speaker #4: And also, I refer back to what I said earlier about what drives the profitability of the full business line. It is about cost absorption.

Speaker #4: It is about the margin mix. And the third component is not unimportant—also, how well do we execute. And, of course, there is something to be expected from execution.

Speaker #4: And then expectations can, of course, go below that, or outcome can go below, but it can also come above. And I think we had a combination of strong performance, or strong outset, in all of these three buckets in the second quarter.

Claes Westerlind: I think we had a combination of three strong performance or strong outset in all of these three buckets in Q2, but also especially the last one.

Speaker #4: But also, especially the last one.

Speaker #5: That's excellent. Then, because Corner Factory is soon to be ready, does that mean you're more confident about your capacity for the rest of the decade? In other words, maybe your appetite for adding more projects is a little bit higher than it was, say, one year ago.

Claus Almer: That's nice. Then, because Karlskrona factory, soon to be ready, does that mean you're more confident about your capacity the rest of the decade? In other words, maybe your appetite for adding more projects is a little bit higher than it was maybe one year ago. Is that a fair way to look at it?

Speaker #5: Is that a fair way to look at it?

Speaker #4: I think, in general, confidence grows as we progress towards the completion of the project. I think this is the right way to look at it.

Claes Westerlind: I think in general, confidence grows as we progress towards the completion of the project. I think this is the right way to look at it. We use, let's say, deterministic planning. So, either we have the capacity or we don't, and then it is a matter of risk-taking in some cases, but we would not do, let's say, an overbooking, feeling comfortable that we will be able to resolve that as we go. But if we see that we have the capacity and we don't include, of course, float in that, then we acquire a project. If we don't, we don't capture it. The closer we come, I think, to your point, obviously, when we have also finally made up our mind for when these assets will go into operation, then we would have to calibrate the available capacity at that point in time.

Speaker #4: Of course, we use, let's say, deterministic planning. So either we have the capacity or we don't, and then it is a matter of risk-taking in some cases.

Speaker #4: But we would not do, let's say, an overbooking, feeling comfortable that we will be able to resolve that as we go. But if we see that we have the capacity, and we don't include, of course, float in that, then we acquire a project.

Speaker #4: If we don't, we don't capture it. The closer we come, I think to your point, obviously, when we have also finally made up our mind for when these assets will go into operation, then we will have to calibrate the available capacity at that point in time.

Speaker #5: Okay, that makes a lot of sense. And then my final question is about the guidance upgrade. Once again, that's a very impressive long tail of guidance upgrades.

Claus Almer: Okay. That makes a lot of sense. My final question is as to the guidance upgrade. Once again, that's a very impressive long tail of guidance upgrades. Looking at the H2 of this year, have you still included some, being conservative as to things are not developing as hoped for? If you do a smooth execution like you did in the H1, there could be additional upside to 2026.

Speaker #5: Looking at the second half of this year, have you still included some being conservative, in case things do not develop as hoped? So, if you do a smooth execution, like you did in the first half, that could be an additional upside to 2026.

Michael Yong: Let me try to tackle that question, Claus, and good morning to you. This is Michael. Yes, I think what you should read in our guidance is obviously the confidence that we have, based on how the year has progressed and how the operational performance and high activity level in both transmission and grid solutions is expected to develop. But we will remain with the same perspective of caution, of diligence and managing our risks and opportunities, and that is part of the guidance.

Speaker #4: Let me try to tackle that question, Klaus, and good morning to you. This is Michael. Yes, I think what you should read into our guidance is obviously the confidence that we have based on how the year has progressed.

Speaker #4: Regarding the operational performance and high activity level in both Transmission and Grid Solutions, we expect these to continue. However, we will maintain our cautious perspective, remain diligent, and carefully manage our risks and opportunities.

Speaker #4: And that is part of the guidance.

Speaker #5: So, just to be sure—so that is, you are doing your guidance as you always do. So, if there is a smooth execution, it could be better than even the high end of the range, right?

Claus Almer: Just to be sure, that is, you are doing your guidance as you always do. If a smooth execution, it could be better than even the high end of the range, right? That's how I should understand your reply.

Speaker #5: That's how I should understand your reply.

Speaker #4: Yeah, I think also, let me just confirm what Michael said there. I think there is, of course, always room for variability of performance, also within the guidance.

Claes Westerlind: Yeah. I think also, let me just confirm what Michael said there. I think there is, of course, always room for variability of performance also within the guidance. There is an expectancy from our side how we will end, and that is clearly within the guidance. There can also be variance in that performance, both up and down. And still we end up within the guidance, so to speak. Then it is a question about magnitude. Can we rule out that we could perform even so much better so we could come out the guidance? I do not think we can say that there is no chance for that.

Speaker #4: There is an expectancy from our side regarding how we will end, and that is clearly within the guidance. However, there can also be variance in that performance, both up and down.

Speaker #4: And still, we end up within the guidance, so to speak. And then it's a question about magnitude. Can we rule out that we could perform even so much better, so we could come out above the guidance?

Claes Westerlind: Then it is a question about magnitude. Can we rule out that we could perform even so much better so we could come out the guidance? I do not think we can say that there is no chance for that. But with the best visibility we have of our performance and of the outlook for the remainder of the year, we estimate that from an EBITA perspective, it is EUR 400 to EUR 430 that we believe will be the range where NKT ends up.

Speaker #4: I don't think we can say that there is no chance for that. But with the best visibility we have of our performance and of the outlook for the remainder of the year, we estimate that from an EBITDA perspective, it is 400 to 430 that we believe will be the range for NKT ends up.

Claes Westerlind: But with the best visibility we have of our performance and of the outlook for the remainder of the year, we estimate that from an EBITA perspective, it is EUR 400 to EUR 430 that we believe will be the range where NKT ends up.

Speaker #5: Good, understood. Thank you so much, and well done.

Claus Almer: Good. Understood. Thank you so much, and well done.

Speaker #4: Thank you, Klaus.

Claes Westerlind: Thank you, Claus.

Speaker #2: Thank you, Klaus. The next question will be from the line of Daniela Costa from Goldman Sachs. Please go ahead. You are now unmuted.

Operator: Thank you, Claus. The next question will be from the line of Daniela Costa from Goldman Sachs. Please go ahead. Your line will now be unmuted.

Speaker #6: Hi. Good morning. Thank you for taking my questions. I have a couple of questions, but I'll ask them one at a time. The first one is just to follow up on some of these topics about clarifying the guidance and just asking you about it.

Daniela Costa: Hi. Good morning. Thank you for taking my questions. I have a couple of questions, but I will ask them one at a time. The first one is just to follow up on some of these topics about clarifying the guidance and just asking you about it. I think last quarter you mentioned that transmission for the year, you saw it down mid-single digits, if I am not mistaken. Obviously you declined a bit more now, but I just wanted to clarify within your revenue guidance, that expectation is still mid-single digit decline in transmission, so a stronger pickup in the second half. Is that what then drives your higher confidence on margin, or should we ascribe the higher confidence on margin to the other divisions as well?

Speaker #6: I think last quarter, you mentioned that for the year, you saw transmission down mid-single digits, if I'm not mistaken. And obviously, you've declined a bit more now.

Speaker #6: But I just wanted to clarify within your revenue guidance that the expectation is still for a mid-single-digit decline in Transmission, and so a stronger pickup in the second half.

Speaker #6: And is that what then drives your higher confidence on margin? Or should we ascribe the higher confidence on margin to the other divisions as well?

Speaker #4: Hi, good morning, Daniela. Let me tackle this question. I think you are leaning into the answer. There is no change in the revenue profile for the transmission business.

Michael Yong: Hi. Good morning, Daniela. Let me tackle this question. I think you are leading into the answer. There is no change in the revenue profile for the transmission business, so that mid-single digit year-over-year decline remains constant. So it is also to indicate there has been no material change of mix of the projects that were planned and part of the execution profile of the year. I think what you need to read into it is that with now seven months behind us, the activity level and the execution level is at a very high level that gives us looking towards the end of the year, a lower risk and contingency profile for the projects that were, if you compare what you view at the beginning of the year, as you progress through the projects, you reach certain milestones, you reach certain amount of completion, that then that risk is behind you.

Speaker #4: So that mid-single digit year-over-year decline remains constant. It's also to indicate there has been no material change in the mix of the projects that were planned and part of the execution profile for the year.

Speaker #4: I think what you need to read into it is that, with now seven months behind us, the activity level and the execution level are at a very high level. That gives us, looking towards the end of the year, a lower risk and contingency profile for the projects than if you compare with what you viewed at the beginning of the year.

Michael Yong: I think what you need to read into it is that with now seven months behind us, the activity level and the execution level is at a very high level that gives us looking towards the end of the year, a lower risk and contingency profile for the projects that were, if you compare what you view at the beginning of the year, as you progress through the projects, you reach certain milestones, you reach certain amount of completion, that then that risk is behind you. I think this is how you have to read our indication here.

Speaker #4: As you progress through the projects, you reach certain milestones. You reach a certain amount of completion, but then that risk is behind you. I think this is how you have to read our indication here.

Michael Yong: I think this is how you have to read our indication here.

Speaker #6: That's very clear, thank you. And then I wanted to ask you a little bit about how you see—it's kind of a two-part question.

Rachel Smith: That is very clear. Thank you. I wanted to ask you a little bit about, how do you see, it is kind of a two-part question, but do you think backlog will grow in 2026 and 2027? How are you seeing the tendering pipeline right now? Some of your competitors talk about the restart of another wave of contracts in 2027 on the HVDC side. From another side, we saw yesterday, another player, which is not one of the normal three, gaining a large HVDC contract. Is the competitive environment if we have these extra waves different than it was perhaps before? How are you viewing this changing in environment?

Daniela Costa: That is very clear. Thank you. I wanted to ask you a little bit about, how do you see, it is kind of a two-part question, but do you think backlog will grow in 2026 and 2027? How are you seeing the tendering pipeline right now? Some of your competitors talk about the restart of another wave of contracts in 2027 on the HVDC side. From another side, we saw yesterday, another player, which is not one of the normal three, gaining a large HVDC contract. Is the competitive environment if we have these extra waves different than it was perhaps before? How are you viewing this changing in environment?

Speaker #6: But do you think backlog will grow in '26 and '27? How are you seeing the tendering pipeline right now? Some of your competitors talk about the restart of another wave of contracts in '27 on the HVDC side.

Speaker #6: And from another side, we saw yesterday another player, which is not one of the normal three, gaining a large HVDC contract. Is the competitive environment, if we have this extra wave, different than it was perhaps before?

Speaker #6: How are you viewing this change in environment?

Speaker #4: Yeah, thank you, Daniela. Good morning also from my side. Klaus here. We continue to see high market activity, and I think the first half is also a testament to that.

Claes Westerlind: Yeah, thank you, Daniela. Good morning also from my side, Claes here. We continue to see high market activity, and I think the H1 is also a testament to that. In accordance with what I said earlier, with around about EUR 10 billion in awarded orders. The tender activity also remains on a satisfactory level, and we can see that there are good prospects also for the coming years. I would not maybe go as far as to say that there is another round or another big activity level, and I do so not out of disbelief, but just out of caution from timing effects. This is also one of the reasons where we started to talk about average market volumes instead of talking about individual years.

Speaker #4: And according to what I said earlier, with the roundabout €10 billion in awarded orders, the tender activity also remains at a satisfactory level.

Speaker #4: And we can see that there are good prospects also for the coming years. I would not maybe go as far as to say that there is another round or another big activity level.

Speaker #4: And I do so not out of disbelief, but just out of caution from timing effects. This is also one of the reasons why we started to talk about average market volumes instead of talking about individual years.

Speaker #4: But we have a strong expectation for the market going forward and remain, in essence, consistent with the statements and opinions that we shared in the first quarter as well.

Claes Westerlind: But we have a strong expectation on the market also going forward and remain in essence with the statements and opinions that we came out also from the Q1 with. With some short-term volatility also being imposed in some markets, some positive and also some maybe a little bit more constructive discussions. To your point about the award yesterday also, we of course note the same, and I think this is nothing that has surprised us, if we put it like that. The market has grown significantly over the years, measuring over a 10-year period. The established players have added capacity, and also we have had some established players on the AC now, with the announcement yesterday, also taking a step into the DC territory.

Speaker #4: With some short-term volatility also being imposed in some markets, some positive and also some, maybe, a little bit more constructive discussions. To your point about the award yesterday also, we, of course, note the same, and then I think this is nothing that has surprised us, if we put it like that.

Speaker #4: And the market has grown significantly over the years, measuring over a 10-year period. The established players have added capacity, and also, we have had some established players on the AC now, with the announcement yesterday, also taking a step into the DC territory.

Speaker #4: And that is well in line with the expectations, and it does not materially change our view on the supply-demand balance situation in the market.

Claes Westerlind: That is well in line with the expectations, and it does not materially change our view on the supply, demand balance situation of the market.

Speaker #6: Very clear. Thank you.

Rachel Smith: Very clear. Thank you.

Daniela Costa: Very clear. Thank you.

Speaker #2: Thanks, Daniel. The next question will be from the line of Lars Top from DNB Carnegie. Please go ahead, you're now unmuted.

Operator: Thanks, Daniela. The next question will be from the line of Lars Bjerning from DNB Carnegie. Please go ahead. Your line will now be unmuted.

Operator: Thanks, Daniela. The next question will be from the line of Lars Topholm from DNB Carnegie. Please go ahead. Your line will now be unmuted.

Speaker #5: Yeah, thank you. And also from me, congrats on a spectacular quarter. First, a housekeeping question: on slide nine, for which solution and accessories, you mentioned that you had a 15.0% margin in Q2 last year.

Lars Bjerning: Yeah. Thank you. Also from me, congrats with a spectacular quarter. First, a household question on Slide 9 for grid solution and accessories. You mentioned that you had a 15.0% margin in Q2 last year. If I take EUR 16 million on EUR 112 million revenue, I get 14.3%, so I wonder how you derived at 15. The related question, of course, is if my math is correct and you have 130 pip margin expansion despite startup cost, then Okay, that is of course not here, but 130 pip margin expansion, is that sustainable or just a quarterly blip?

Lars Topholm: Yeah. Thank you. Also from me, congrats with a spectacular quarter. First, a household question on Slide 9 for grid solution and accessories. You mentioned that you had a 15.0% margin in Q2 last year. If I take EUR 16 million on EUR 112 million revenue, I get 14.3%, so I wonder how you derived at 15. The related question, of course, is if my math is correct and you have 130 pip margin expansion despite startup cost, then Okay, that is of course not here, but 130 pip margin expansion, is that sustainable or just a quarterly blip?

Speaker #5: If I take €16 million on a €112 million revenue, I get 14.3%. So I wonder how you derived at 15. And the related question, of course, is if my math is correct, and you have a 130 bps margin expansion, despite start-up costs, then okay, that's of course not here.

Speaker #5: But a 130 basis points margin expansion, is that sustainable or just a quarterly blip?

Speaker #4: Lars, I have not done the math like you did just for the moment—looking to my CFO, who is, I think, also looking at that for the moment.

Claes Westerlind: Lars, I have not done the math like you did just for the moment. Looking to my CFO, who is, I think, also looking at that for the moment. What I will say is that grid solution and accessories did have a strong quarter. We had a strong quarter with high activity levels across, let us say, the running business, so to speak. So the expected business, both in HVAC onshore projects and the delivery of the same, in the planned maintenance engagements that we have, but also in the accessories business, both across HVDC, HVAC, and also the medium voltage plant in Nordenham. Also what added to the good progression was the mix of repairs that we were able to attain during the quarter, and that put some uplift on the profitability.

Speaker #4: But what I will say is that Grid Solutions and Accessories did have a strong quarter. We had a strong quarter with high activity levels across, let's say, what you would call the running business, so to speak—so the expected business, both in HVAC onshore projects and the delivery of the same in the planned maintenance engagements that we have.

Speaker #4: But also in the accessories business, both across HVDC, HVAC, and also the medium voltage plant in Nordenham. But also, what added to the grid progression was the mix of repairs that we were able to attain during the quarter.

Claes Westerlind: Also what added to the good progression was the mix of repairs that we were able to attain during the quarter, and that put some uplift on the profitability. I think that is what you need to keep in mind, this last component, as we reflect about the profitability in coming quarters. That is something which is not a given one every quarter.

Speaker #4: And that put some uplift on the profitability. So I think that is what you need to keep in mind—this last component—as you reflect on the profitability in the coming quarters.

Claes Westerlind: I think that is what you need to keep in mind, this last component, as we reflect about the profitability in coming quarters. That is something which is not a given one every quarter.

Speaker #4: That is something which is not a given in every quarter.

Speaker #5: Thanks. Then a follow-up from the previous question about the contract won by Hellenic Cables yesterday. They also got a certification for 525 kV HVDC a couple of weeks ago.

Lars Bjerning: Thanks. Then a follow-up from the previous question about the contract won by Hellenic Cables yesterday. They also got certification for 525 kV HVDC a couple of weeks ago. Why is it that you don't see that changing the competitive landscape? Is it because you anticipated it, or is it because you are convinced the TSOs that are your core customers will still focus on track record and then still select you, Prysmian, and Nexans?

Lars Topholm: Thanks. Then a follow-up from the previous question about the contract won by Hellenic Cables yesterday. They also got certification for 525 kV HVDC a couple of weeks ago. Why is it that you don't see that changing the competitive landscape? Is it because you anticipated it, or is it because you are convinced the TSOs that are your core customers will still focus on track record and then still select you, Prysmian, and Nexans?

Speaker #5: Why is it that you don't see that changing the competitive landscape? Is it because you anticipated it, or is it because you are convinced the CSOs that are your core customers will still focus on track record and then still select you as self, which makes sense?

Speaker #4: Very relevant and good question, Lars. I think the answer is twofold. Number one, I think you can read into it that it's not unexpected.

Claes Westerlind: Very relevant and good question, Lars. I think it's twofold, the answer. Number one, I think you can read into it that it's not unexpected. That's the first part of the answer. Number two, you should read into our confidence about our own abilities to secure orders and our own ability to compete effectively. I think these two things, both in combination, makes us comfortable that this would not, to a major extent, change the supply-demand balance as far as NKT is concerned.

Speaker #4: So that's the first part of the answer. And number two, you should read into our confidence about our own abilities to secure orders and our own ability to compete effectively.

Speaker #4: I think these two things, both in combination, make us comfortable that this would not, to a major extent, change the supply-demand balance as far as NKT is concerned.

Lars Bjerning: That's very clear, Claes. Then a question on the change in project mix. If I look from Q1 to Q2, I think the notable thing is that Spittal to Peterhead comes in as a project you execute on. If I look at, let's just say, the contract value relative to the cable length, this has by far the highest value of any project you won. How much of the margin expansion is a function of that specific project coming in?

Lars Topholm: That's very clear, Claes. Then a question on the change in project mix. If I look from Q1 to Q2, I think the notable thing is that Spittal to Peterhead comes in as a project you execute on. If I look at, let's just say, the contract value relative to the cable length, this has by far the highest value of any project you won. How much of the margin expansion is a function of that specific project coming in?

Speaker #5: That's very clear, Claes. Then a question on the change in project mix. So if I look from Q1 to Q2, I think the notable thing is that Spital Peterhead comes in as a project you execute on.

Speaker #5: And if I look at what you say, the contract value relative to the cable length—this has, by far, the highest value of any project you've won.

Speaker #5: How much of the margin expansion is a function of that specific project coming in?

Speaker #4: It's a relevant question, and I think I could guess that you also would guess how much detailed answer you will get here. So I think it's difficult for us to give the exact component of an individual project.

Claes Westerlind: It's a relevant question. I think I could guess that you also will guess how much detailed answer you will get here. I think it's difficult for us to give the exact component of an individual project. What I can say is two things. Number one, as you start a project, you can expect that the revenues are not large in the beginning. Often when you start something, you're talking about engineering efforts in the beginning and hours spent by people and less so manufacturing or installation or other aspects. I would also like just to comment on the value, let's say, per kilometer, and draw your attention to, and as you well know, Lars, a lot depends, of course, what conductive material you use, but also the level of installation complexities, land force, burial types, et cetera.

Speaker #4: But what I can say is two things. Number one, as you start a project, you can expect that the revenues are not large in the beginning.

Speaker #4: Often, when you start something, you're talking about engineering efforts in the beginning and hours spent by people, and less so about manufacturing or installation or other aspects.

Speaker #4: I would also like just to comment on the value, let’s say, per kilometer and draw your attention to, as you well know, Lars, a lot depends, of course, on what conductor material you use, but also the level of installation complexities, landfalls, burial types, etc.

Speaker #4: So, we should not deduce that pricing, so to speak, is the only metric that makes the value change from project to project. But I know you know—just wanted to mention it anyway.

Claes Westerlind: We should not deduce that pricing, so to speak, is the only metric that makes the value change from product to product. I know you know, but I just want to mention it anyway.

Lars Bjerning: That's fair enough. One final question from me is on the current tender activity and the likelihood of major projects being awarded next year. Are you aware of, or can you confirm that tenders are ongoing for Eastern Green Link 6 and 7 and LionLink?

Lars Topholm: That's fair enough. One final question from me is on the current tender activity and the likelihood of major projects being awarded next year. Are you aware of, or can you confirm that tenders are ongoing for Eastern Green Link 6 and 7 and LionLink?

Speaker #5: That's fair enough. One final question from me is on the current tender activity and the likelihood of major projects being awarded next year. So, are you aware of, or can you confirm, that tenders are ongoing for ETL 6 and 7 and Lion Link?

Claes Westerlind: I don't think I can confirm actually, because the tenders we partake in, a lot of it is also under NDA. I don't think it's a secret that there are projects like LionLink and Eastern Green Link 5 and 6. But I would avoid to confirm whether active or non-active, et cetera.

Speaker #4: I don't think I can confirm, actually, because the tenders we partake in—a lot of it is also under NDA. But I don't think it's a secret that there are projects like LionLink and EGL 5 and 6.

Speaker #4: But I would avoid confirming whether active or non-active, etc.

Lars Bjerning: But in your view, Claes, is it realistic these projects become contracts to you or someone else in 2027?

Lars Topholm: But in your view, Claes, is it realistic these projects become contracts to you or someone else in 2027?

Speaker #5: But in your view, Claes, is it realistic these projects become contracts to you or someone else in 2027?

Speaker #4: I think it's realistic, with high market activity culminating in large orders in 2027. Yes.

Claes Westerlind: I think it is realistic with a high market activity culminating in large orders in 2027. Yes.

Speaker #5: Amazing. Thank you so much, guys. And again, congrats.

Lars Bjerning: Amazing. Thank you so much, guys. Again, congrats.

Lars Topholm: Amazing. Thank you so much, guys. Again, congrats.

Speaker #4: Thank you, Lars.

Claes Westerlind: Thank you, Lars.

Speaker #1: Thanks, Lars. Our next question will be from the line of Chris Leonard from UBS. Please go ahead—your line is now unmuted.

Operator: Thanks, Lars. Our next question will be from the line of Chris Leonard from UBS. Please go ahead. Your line will now be unmuted.

Speaker #2: Yeah, hi guys. Hopefully you can hear me. Could I just follow up on the transmission segment and maybe try to speak through Q2 in terms of the negative impacts that you spoke to for Champlain Hudson and in the quarter?

Chris Leonard: Yeah. Hey, guys. Hopefully you can hear me. Could I just follow up on the transmission segment and maybe try to speak through Q2 in terms of the negative impact that you spoke to for Champlain Hudson in the quarter, and whether or not there was any sort of further negative impact from variation orders, because I think there was a harder comp coming in from last year. If not, should we expect variation orders to be more of a headwind into the H2 of the year? So that's the first question. Then the second question would just be to elaborate on the ramp-up costs that you experienced for the Karlskrona expansion, whether or not those were visible and material in Q2 at sort of the average you've spoken to of 200 basis points for the year.

Speaker #2: And whether or not there was any sort of further negative impact from variation orders, because I think there was a harder comp coming in from last year.

Speaker #2: And if not, should we expect variation orders to be more of a headwind into the second half of the year? So that's the first question.

Speaker #2: And then, the second question would just be to elaborate on the ramp-up costs that you experienced for the Carls Krone expansion—whether or not those were visible and material in Q2 at the average you've spoken to of 200 basis points for the year, or should we actually expect those accelerators in the second half?

Chris Leonard: Then the second question would just be to elaborate on the ramp-up costs that you experienced for the Karlskrona expansion, whether or not those were visible and material in Q2 at sort of the average you've spoken to of 200 basis points for the year. Should we expect actually that those accelerate into the H2? Thank you.

Chris Leonard: Should we expect actually that those accelerate into the H2? Thank you.

Speaker #2: Thank you.

Speaker #4: Thank you. Let me at least try, and then I will also allow, of course, the CFO to comment further. If we start with the transmission revenue, just to give you a couple of the moving components—and I mean, you are also having the answer basically yourself.

Claes Westerlind: Thank you. Let me at least try and then I will also allow, of course, the CFO to comment further. If we start with the transmission revenue, just to give you a couple of the moving components, and you are also having the answer basically yourself. The Q2, when you look at the comparison period last year, then we had a significant volume, on top of, let's say, the steady-state normal volume coming from the Champlain project, which we did not have in the Q2 of this year. On top of that, we will all remember that we were also speaking about extraordinary variation orders during the H1, if my memory is correct, last year. That also added to that comparison period. For the Q2, you can note on our revenue guidance that that's being narrowed but not lifted.

Speaker #4: In the second quarter, when you look at the comparison period last year, we had a significant volume on top of, let's say, the steady-state normal volume coming from the Champlain project.

Speaker #4: Which we did not have in the second quarter of this year. On top of that, we will all remember that we were also speaking about extraordinary variation orders during the first half, if my memory is correct, last year.

Speaker #4: That also added to that comparison period. For the second quarter, you can note on our revenue guidance that that's being narrowed, but not lifted.

Speaker #4: Also implying a more normalized level of variation orders, and that we are basically executing from a revenue perspective as planned. So, I think these are the two components when it comes to how revenue is shifting, and also how the organic growth has taken place in the second quarter for transmission.

Claes Westerlind: Also implying a more normalized level of variation orders, and that we are basically executing from a revenue perspective as planned. I think these are the two components when it comes to how revenue is shifting and also how the organic growth has taken place in Q2 for transmission. To your second question about ramp-up costs. Last year, we talked about roughly 1 percentage point of OpEx drag on group level. And we have said for this year that this will further continue to ramp up during the year to culminate around 2 percentage points for the full year. And here we have not given discrete components, how much in what quarter, and also not exactly how much per business line, but I think it is known by all of you where we are conducting the expansions.

Speaker #4: To your second question about ramp-up costs, last year we talked about roughly 1 percentage point of OPEX drag at the group level. We have said for this year that this will continue to ramp up during the year, to culminate at around 2 percentage points for the full year.

Speaker #4: And here we have not given components—discrete components—how much in what quarter, and also not exactly how much per business line. But I think it's known by all of you where we are conducting the expansions.

Speaker #4: The primary part of the expansions is in transmission, and then there is a smaller part of expansion being carried out in distribution. And we left last year with a 1 percentage point drag.

Claes Westerlind: The primary part of the expansions is in transmission, and then there is a smaller part of expansion being carried out in distribution. And we left last year with 1 percentage point drag. We will end this year with around 2 percentage point drag. So I think based on these data points, you should be able to estimate a little bit, or make reasonable estimates for your analysis.

Speaker #4: We will end this year with around a 2 percentage point drag. So I think, based on these data points, you should be able to estimate a little bit or make reasonable estimates for your analysis.

Speaker #3: Yeah, I would just add we're in that journey between the one and the two. And also, I think it remains relevant data points considering that the revenue guidance is narrowed but at the same midpoint.

Michael Yong: Yeah. I would just add, we are in that journey between the 1 and the 2. Also, I think it remains a relevant data point considering that the revenue guidance is narrowed but on the same middle point. So the frame of reference is still the same.

Speaker #3: So the frame of reference is still the same.

Speaker #4: Yeah.

Claes Westerlind: Yeah.

Speaker #2: Thank you. And actually, if I could just ask an additional question on distribution: In the second half of the year, with Portugal coming online, should we be expecting that to be helpful to the margins, or will we see, as we saw in Q2, that you have to absorb some of these ramp-up costs?

Chris Leonard: Thank you. Actually, I focused to ask an additional question on distribution. H2 of the year with Portugal coming online, should we be expecting that that is helpful into the margins? Or will you see that as you saw in Q2, you have got to absorb some of these ramp-up costs? But equally, hopefully, you will also have some of the raw material inflation being passed on. So can you speak to the drivers of what you are seeing in the distribution segment for H2 of this year, at least? That would be super helpful.

Speaker #2: But equally, hopefully you all also have some of the raw material inflation sort of being passed on. So, can you speak to the drivers of what you're seeing in the distribution segment for the second half of this year, please?

Speaker #2: That would be super helpful.

Speaker #4: Sure. I'll take that.

Michael Yong: Sure. I will take that question, Chris. If you look at the growth that will happen in the H2 for the distribution segment, it is going to come primarily out of the medium-voltage capacity of which the project has just been completed in Q2. While the Esbjerg project will complete and come online towards the end of the year, obviously from a volume point of view, it is going to be a lot less meaningful to the total picture than the one coming online right now. In terms of the ramp-up costs associated with both of these projects, they are overlapping. We have been ramping this up in Denmark, and we are also ramping them up now. We are more or less at a peak point of that combination of ramp-up costs.

Speaker #3: That question, Chris. If you look at the growth that will happen in the second half for the distribution segment, it is going to come primarily out of the Ausness capacity, of which the project has just been completed in the second quarter.

Speaker #3: So, while the Esposenda project will complete and come online towards the end of the year, obviously from a volume point of view, it's going to be a lot less meaningful to the total picture than the one coming online right now.

Speaker #3: In terms of the ramp-up costs associated with both of these projects, they are overlapping. We have been ramping this up in Denmark, and we are also ramping them up now.

Speaker #3: So, we are more or less at a peak point of that combination of ramp-up costs. But as the volume comes online, then obviously the contribution from these volumes will start improving the margin.

Michael Yong: As the volume comes online, then obviously the contribution from these volumes will start improving the margin. That said, I think I could also qualify that at the moment, there is a bit of extra cost in the distribution segment from some of the Middle East supply chain costs that we have had to absorb, and that will be mitigated to a certain extent, to a large extent, in the H2 of the year, through also pushing this down also towards the customers. I would caution in taking a specific margin of the quarter and doing an extrapolation for that because it will be recovering and absorbing the cost. I think with those data points, that is how I would color the evolution of distribution in the H2 of the year.

Speaker #3: That said, I think it also qualifies that, at the moment, there is a bit of extra cost in the distribution segment from some of the Middle East supply chain costs that we've had to absorb.

Speaker #3: That will be mitigated to a certain extent, or to a large extent, in the second half of the year, through also pushing this down towards the customers.

Speaker #3: But I would caution against taking the specific margin of the quarter and extrapolating from that, because it will be a period of recovering and absorbing the costs.

Speaker #3: So, I think with those data points, that's how I would characterize the evolution of distribution in the second half of the year.

Speaker #2: Thanks for the answer. Thank you, guys.

Chris Leonard: Thanks for the answer. Thank you, guys.

Speaker #1: Thanks, Chris. The next question will be from the line of Lucas Farhani from Jefferies. Please go ahead. Your line will now be unmuted.

Operator: Thanks, Chris. The next question will be from the line of Lucas Ferhani from Jefferies. Please go ahead. Your line will now be unmuted.

Speaker #5: Hello, good morning, and thanks for your time. I have a few questions as well, if you can take them—one at a time. The first one is just on free cash flow and the transmission part.

Lucas Ferhani: Hello, good morning, and thanks for the time. I have a few as well, if you can take them one at a time. The first one is just on free cash flow and the transmission part. I just wanted to confirm. Did you get down payments for EGL3 and Sa.Co.I.3 orders this year, and do they come with down payments? As that gets solved, do you have an improvement in performance? Just on working capital more generally, where do you see that circling towards year-end? Thank you.

Speaker #5: I just wanted to confirm, did you get down payments for, kind of, EGL and ACC orders this year, and do they come with down payments?

Speaker #5: And so, as that gets, let's say, solved, you'll see an improvement in performance. And just on working capital more generally, where do you see that settling towards year-end?

Speaker #5: Thank you.

Speaker #3: Hi Lucas, good morning to you. Yeah, good question on the prepayments, and I think we also had a question last quarter, particularly about the awards that we got in the first quarter.

Michael Yong: Hi, Lucas. Good morning to you. Yeah, good question on the prepayments. I think we had also a question last quarter, particularly about the awards that we got in Q1. We can confirm that we have received a prepayment on EGL3. Of course, I will not comment as we will not ever comment on any specific amounts for contracts. So there is a prepayment that has come into the planned flow of the working capital development for the transmission line in Q2. That said, it was within plan, and the evolution of the working capital is also as expected. It is more what is driving the negative working capital or the negative evolution of the working capital in the quarter has to do with the phasing of. It is a timing topic, the phasing of milestones of costs and of incoming cash on receivables. I would say nominal.

Speaker #3: We can confirm that we have received a prepayment on EGL3. Of course, I won't comment, as we won't ever comment on any specific amounts for contracts.

Speaker #3: So, there is a prepayment that has come into the plan flow of the working capital development for the transmission line in the second quarter. That said, it was within plan, and the evolution of the working capital is also as expected.

Michael Yong: That said, it was within plan, and the evolution of the working capital is also as expected. It is more what is driving the negative working capital or the negative evolution of the working capital in the quarter has to do with the phasing of. It is a timing topic, the phasing of milestones of costs and of incoming cash on receivables. I would say nominal.

Speaker #3: And so it's more what's driving the negative working capital or the yes, the negative evolution of the working capital in the quarter is has to do with the phasing of it's a timing topic.

Speaker #3: The phasing of milestones of costs and of incoming cash on receivables. So, I would say nominal. If your question is also asking for an indication towards the end of the year, I think where we're ending the first half of the quarter, we are on our operational plan.

Michael Yong: If your question is also asking for an indication towards the end of the year, I think where we are ending the H1, we are on our operational plan, so I would expect that we will land at a similar level towards the end of the year. So that would be the indication we give today. That is also indication, not just for the transmission line, but in general for the company.

Speaker #3: So, I would expect that we will land at a similar level towards the end of the year, so that would be the indication we give today.

Speaker #3: And that is also an indication not just for the transmission line, but in general for the company.

Speaker #5: Similar level to Q2.

Lucas Ferhani: Similar level to Q2?

Speaker #3: Similar level to Q2. Civil balance in Q2.

Michael Yong: Similar level to Q2. Similar balance than Q2.

Speaker #5: Yeah, okay, perfect. And then the second one was just on distribution. I just wanted to confirm if there was a change of language or not.

Lucas Ferhani: Yeah. Okay, perfect. The second one was just on distribution. I just wanted to confirm if there was a change of language or not. I think now it was up to 10% growth in distribution. I think before it had something more like around. It is minor, but just the point is, was this very kind of H2-weighted ramp up expected or maybe a bit more slightly delayed in seeing the volumes coming through?

Speaker #5: I think now it was up to 10% growth in distribution. I think before I had something more like around—I mean, it's minor. But just, the point is, was this very kind of H2-weighted ramp-up expected, or maybe a bit more slightly delayed in seeing the volumes coming through?

Speaker #4: Yes, thank you, Lucas. Also, good morning from my side. I think—I don't know if you perceive a different tonality, but it's not intentional from our side.

Claes Westerlind: Yes. Thank you, Lucas. Also good morning from my side. I think I do not know, if you perceive the different tonality, then it is not intentional from our side. We remain with our earlier opinion, and it is more that things are, of course, always approximate as you look into a potential revenue growth for a year. Also with that, of course, also when we look at in-operation taking of a plant and of an asset that has been invested in, there is also a lot of moving parts that there will always be a natural variance. Of course, looking at a plant like Asnæs, machinery installation placed into it, capabilities build up, product qualification, output optimization, planning of the commercial volumes into the factory, et cetera.

Speaker #4: We remain with our earlier opinion, and it's more that things are, of course, always approximate as you look into potential revenue growth for a year.

Speaker #4: And also with that, of course, also when we look at in operation, taking off the plan that has an asset that has been invested in, there are also a lot of moving parts, so there will always be a natural variance.

Speaker #4: Of course, looking at a plant like Ausness, machinery installation placed into it, capabilities build-up, product qualification, output optimization, planning of the commercial volumes into the factory, etc.

Claes Westerlind: Of course, looking at a plant like Asnæs, machinery installation placed into it, capabilities build up, product qualification, output optimization, planning of the commercial volumes into the factory, et cetera. There is some variability there, and while we could have maybe expected even more volumes in Q2, from a full year perspective, we remain with the expectation that the organic growth in the business line will be 10% or up to 10%, depending on the uncertainties, of course, that always exist.

Speaker #4: So there is some variability there. And while we could have maybe expected even more volumes in Q2, from a full-year perspective we remain with the expectation that organic growth in the business line will be 10%, or up to 10%, depending on the uncertainties, of course, that always exist.

Claes Westerlind: There is some variability there, and while we could have maybe expected even more volumes in Q2, from a full year perspective, we remain with the expectation that the organic growth in the business line will be 10% or up to 10%, depending on the uncertainties, of course, that always exist.

Speaker #5: Perfect. I mean, sorry, the last one was just on coming back on adding cables and potential changes in the competitive environment. I mean, the first question I had was one, if you do a project with 320 or 400 kV, let's say XLP, HVDC versus going to 525 kV in your opinion, is there a kind of meaningful step up in complexity or changes in the way you approach the project that kind of would bring issue for a player to kind of move up that value chain?

Lucas Ferhani: Perfect. The last one was just on coming back on adding cables and potential changes in the competitive environment. The first question I had was one, if you do a project with 320 or 400 kV, let's say XLPE HVDC versus going to 525 kV, in your opinion, is there a kind of meaningful step up in complexity or changes in the way you approach the project that would bring issue for a player to move up that value chain? Also maybe how do you think about owning the vessel? How does that bring and so doing more scope in installation and at sea, how does that kind of bring an advantage or not for you versus a player that maybe doesn't have those capabilities in-sourced?

Speaker #5: And also maybe how do you think about owning the vessel? How does that bring, and also doing more scope in now installation and at sea, how does that kind of bring an advantage or not for you versus a player that maybe doesn't have those capabilities in source?

Speaker #4: Yeah, thank you. That’s a highly relevant growth observation and question. So, if you look at the technology initially, and if I put it into the perspective of NKT’s history, we invented the HVDC XLPE cables back in the '90s. We started at 80 kV and gradually increased—I remember the East-West project between Ireland and the UK at 200 kV, then coming to the 320 kV projects in the German territorial waters.

Claes Westerlind: Okay, thank you. Highly relevant, both observation and question. If you look at the technology initially, and if I put it to perspective of NKT's history, we invented the HVDC XLPE cables back in the 1990s. Started at 80 kV, gradually increased. I remember the EWIC project between Ireland and UK of 200 kV coming through the 320 kV projects in the German territorial waters. Now here we are somewhere around 2014 or so. Then launching the 525 kV in 2014, commercializing it initially on land in 2020. So you can see it's a long period of stepwise technology improvements. I will say that we have learned a lot on that journey, where every step in voltage, every step in terms of conducting material sizes, every specific product circumstance gives you learnings, caution, and reflections for the future.

Speaker #4: Now, here we are somewhere around 2014 or so. And then launching the 525 kV in 2014, commercializing it initially on land in 2020. So, you can see it's a long period of stepwise technology improvements, and I will say that we have learned a lot on that journey.

Claes Westerlind: Now here we are somewhere around 2014 or so. Then launching the 525 kV in 2014, commercializing it initially on land in 2020. So you can see it's a long period of stepwise technology improvements. I will say that we have learned a lot on that journey, where every step in voltage, every step in terms of conducting material sizes, every specific product circumstance gives you learnings, caution, and reflections for the future.

Speaker #4: Where every step in voltage, every step in terms of conductor material, sizes, every specific project circumstance gives you learnings, caution, and reflections for the future.

Speaker #4: And there is a significant step up both from 150 to 320, and also from 320 to 525—both from a dielectric perspective, from a material compatibility perspective, from a production cleanliness perspective, and many, many other aspects.

Claes Westerlind: There is a significant step up, both from 150 to 320 and also from 320 to 525, both from a dielectric perspective, from a material compatibility perspective, from a production cleanliness perspective, and many, many other aspects. I think our hopes are, and Michael Yong was doing some commercial for our investor day, is also to take you through that journey of a large factory in terms of QA/QC, the importance of that. The importance of having a diligent and long history of doing these kind of things in order to be able to produce and deliver successfully these projects. A big part of the delivery of these projects is also the EPCI concept, in reference to your second part of the question. Here I imagine it's different perspectives.

Speaker #4: And I think our hopes are—and Michael was doing some commercial for our investor day—is also to take you through that journey of a large factory in terms of QA/QC, the importance of that, the importance of having a diligent and long history of doing these kinds of things in order to be able to produce and deliver these projects successfully.

Speaker #4: And a big part of the delivery of these projects is also the EPCI concept, as in reference to your second part of the question.

Speaker #4: And here, I imagine it is different perspectives, and I think our journey that I just described goes even back to the '50s if you include MI cables. It has taught us that the right way, from both the value creation and the risk management perspective, is to have the EPCI breadth, including also full control over your vessels.

Claes Westerlind: I think our journey that I just described, it goes even back to the 1950s, if you include MI Cables. It has taught us that the right way from both the value creation and the risk management perspective is to have the EPCI breadth, including also full control over your vessels, both from a, let's say, technical compatibility perspective, but also from an execution certainty perspective. We remain with that opinion. But we also respect different views, of course, how this should be done. But we have our view and our setup for a good reason, and we will remain with that. I hope that was a little bit helpful, Lucas Ferhani.

Speaker #4: Both from a, let's say, technical compatibility perspective, but also from an execution certainty perspective. And we remain with that opinion. But we also respect different views, of course, on how this should be done.

Speaker #4: But we have our view and our setup for a good reason, and we will remain with that. I hope that was a little bit helpful, Lucas.

Speaker #5: Yes, great. Thank you.

Lucas Ferhani: Yes. Great. Thank you.

Speaker #2: Thanks, Lucas. I'll now hand it back to the speakers for any closing remarks.

Operator: Thanks, Lucas. I will now hand it back to the speakers for any closing remarks.

Speaker #4: Thank you, and thank you everybody, for calling in and showing interest in the second quarter results. These are results that we are proud of, needless to say.

Claes Westerlind: Thank you. And thank you everybody for calling in and showing interest in the Q2 results. It is results that we are proud of, needless to say, and I think it is a result that is yet another testament to where we are as a company and also where we are heading, both next year but primarily towards our guidance in 2028 and also 2030. With those words, I thank you for the attention, and I wish everybody a good weekend when you get there.

Speaker #4: And I think it is a result that is yet another testament to where we are as a company and also where we are heading, both next year but primarily towards our guidance in 2028 and also 2030.

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