Q2 2026 Borgestad ASA Earnings Call

August 14, 2026

Speaker #1: Morning. welcome to Borgestad Group's first quarter presentation for '26. My name is Pål Fenn Larsen, and I'm the CEO of Borgestad ASA. And with me today I have Bendik Pers Andersen, the group CEO of Høgums Borgestad.

Speaker #1: We'll together take you through this first quarter, presentation. Start with some highlights. For first quarter '26, Borgestad Group delivered a result before tax of -28 million NOK, compared to a -21.6 million in first quarter 2025.

Speaker #1: First quarter is a quarter where the activity is low due to Nordic refractory market in general. Mostly due to climate and seasonality within maintenance business for Høgums Borgestad.

Speaker #1: For Høgums Borgestad, market conditions have been increasingly challenging across the Nordics. As part of the global steel value chain, the Norwegian Faroe Alloy sector has been affected both by the international steel demand and by specific developments in the Norwegian market.

Speaker #1: Trade measures introduced by the European Union on imports from Norway, combined with persistently high electricity prices in Northern Norway, have led to temporary shutdowns and reduced activity at several Faroe Alloy plants.

Speaker #1: These factors have had negative impact on revenue and margins, during the period. Also, a general slowdown in Sweden and the Finnish market has intensified competition and increased price pressure, negatively affecting both revenue and margins for the group.

Speaker #1: Despite a challenging market environment, it's important to emphasize that Høgums Borgestad has a solid underlying operational performance. The Høgums Borgestad Group has initiated comprehensive internal improvement initiatives aimed at further adapting and professionalizing the organization.

Speaker #1: These measures include improved project execution and cost discipline. As well as focus on organizational development and competence building. Together, these efforts have strengthened and will continue to strengthen the group's resilience in a volatile market environment and have established a stronger platform for profitable growth and market conditions to improve.

Speaker #1: For Agora Bytom, first quarter is considered strong, considering several tenant changes during the period. The changes include temporary reductions in rental income related to the onboarding of new tenants.

Speaker #1: Let's continue implementing initiatives aimed at strengthening governance, improving project execution, enforcing cost discipline, and further professionalizing the organization. These measures are designed to improve profitability, increase resilience, and position the business for continued value creation over the long term.

Speaker #1: Based on the changes within the center, to increase year-on-year both for revenue and EBITDA, is a good performance. At first glance, the cash and net interest-bearing debt can be viewed as weaker than last year, but this is due to timing effect of paid dividend.

Pål Feen Larsen: Continued implementing initiatives aimed at strengthening governance, improving project execution, cost discipline, and further professionalizing the organization. These measures are designed to improve profitability, increase resilience, and position the business for continued value creation over the long term. Agora Bytom has continued its positive development during this period. The shopping center has achieved its highest occupancy rate ever at 97.4%, reflecting the attractiveness of the property and the strengthening of its tenant mix. At the same time, the total leasable area within the center is higher than any other period in the history, making the achievement particularly noteworthy. This development demonstrates the continued attractiveness of Agora Bytom as a commercial destination and provides a strong foundation for future cash flow growth and value creation. Interest-bearing debt decreases per end of June 2026 compared to the same date in 2025, and Borgestad remains solid and fully financed.

Speaker #1: In 2025, dividend was distributed to shareholders in second quarter, while in 2026, dividend was distributed in first quarter. Borgestad Group remains solid and fully financed.

Speaker #1: Agora BITUM has continued its positive development during this period. The shopping center has achieved its highest occupancy rate ever, at 97.4%, reflecting the attractiveness of the property and the strengthening of its tenant mix.

Speaker #1: At the same time, the total leasable area within the center is higher than at any other period in history, making the achievements particularly noteworthy. This development demonstrates the continued attractiveness of Agora BITUM as a commercial destination and provides a strong foundation for future cash flow growth and value creation.

Speaker #1: Before going into details, we'll start with a brief introduction to Borgestad. Borgestad is a company with a lot of history, with industrial and shipping routes dating back to early 1900s.

Speaker #1: Over the years, we have now involved into an industrial investment company currently invested in real estate and industrial refractory industry. Our current main priority is to improve and maximize the value for existing holdings.

Speaker #1: We are interested to bring debt decreases by the end of June 2026 compared to the same date in 2025, and BORGESTAD remains solid and fully financed. Before we go into details, we'll start with a brief introduction of BORGESTAD for those who are not familiar with who we are and what we do.

Speaker #1: But looking ahead, we aim to take positions in niche segments with consolidation potential, where we see that we can make a difference. We operate as active owners, meaning that we work closely and support our portfolio companies to drive operational improvements.

Pål Feen Larsen: Before we go into details, we will start with a brief introduction of Borgestad, to those who are not familiar with what we are and what we do. Borgestad is a company with a lot of history, with industrial and shipping roots dating back to the early 1900s. Over the years, we have now evolved into an industrial investment company currently invested in commercial real estate and the refractory industry. Our current main priority is to improve and maximize the value of existing holdings. Looking ahead, we aim to take positions in niche segments with consolidation potential where we see that we can make a difference. Our current portfolio consists of two key assets, Agora Bytom, a fully owned shopping center, and the refractory supplier, Höganäs Borgestad, in which we hold a 69.7% ownership in. Let's go into details for Agora Bytom.

Speaker #1: Borgestad is a company with a lot of history, with industrial and shipping routes dating back to the early 1900s. Over the years, we have evolved into an industrial investment company, currently invested in commercial real estate and the refractory industry.

Speaker #1: In addition to profitability, capital efficiency is always a priority. Ensuring resources are deployed effectively. We take a data-driven approach. Continuously measuring everything we do.

Speaker #1: Our current main priority is to improve and maximize the value of existing holdings. But looking ahead, we aim to take positions in niche segments with consolidation potential, where we are seeking to make a difference.

Speaker #1: Additionally, M&A has been and will continue to serve as a tool to strengthen the competitive position of our portfolio companies. Our current portfolio consists of two key assets.

Speaker #1: Our current portfolio consists of two key assets: Agora BITUM, a fully-owned shopping center, and refractory supplier Höganäs Borgestad, in which we hold a 69.7% ownership.

Speaker #1: Agora Bytom are fully owned shopping center and refractory supplier Høgums Borgestad, which we hold a stake of 69.7% ownership in. Agora Bytom is a modern shopping center located in the city center of Bytom in Poland.

Speaker #1: Let's go into details for Agora BITUM. Agora BITUM is reporting a weaker quarter than the previous year, with a decrease in revenue by 5%.

Speaker #1: The center is 52,000 square meter large, of gross area, with nearly 34,000 square meters of leasable area. With close to 5 million visitors annually, Agora Bytom holds a leading position in its primary catering area.

Speaker #1: The revenue and EBITDA decrease is mainly due to ongoing changes within the center due to tenant changes and currency effect. The currency effect is due to a stronger NOK against the euro in the first half of 2026 compared to the same period last year.

Pål Feen Larsen: Agora Bytom is reporting a weaker quarter than previous year, with a decrease in revenue by 5%. The revenue and EBITDA decrease is mainly due to ongoing changes within the center due to tenant changes and currency effect. The currency effect is due to stronger NOK against EUR in the H1 of 2026 compared to the same period last year. Agora Bytom has a positive momentum in signing leases and had, by end of Q2 2026, an occupancy rate of 97.4%. As part of the increase in occupancy, also the total area for commercial square meters is increased by converting common areas to leasable areas. The occupancy level is the highest ever achieved for Agora Bytom. The new tenants will open during the H2 of 2006 and mostly in the beginning of Q4. New leases is expected to have full effect from 2027 and onwards.

Pål Feen Larsen: Agora Bytom is reporting a weaker quarter than previous year, with a decrease in revenue by 5%. The revenue and EBITDA decrease is mainly due to ongoing changes within the center due to tenant changes and currency effect. The currency effect is due to stronger NOK against euro in the H1 of 2026 compared to the same period last year. Agora Bytom has a positive momentum in signing leases and had, by end of Q2 2026, an occupancy rate of 97.4%. As part of the increase in occupancy, also the total area for commercial square meters is increased by converting common areas to leasable areas. The occupancy level is the highest ever achieved for Agora Bytom. The new tenants will open during the H2 of 2026 and mostly in the beginning of Q4. New leases is expected to have full effect from 2027 and onwards.

Speaker #1: Høgums Borgestad is a manufacturer and supplier of high-quality refractory products, and installation services, serving industries that rely on high temperature processes such as steel, cement, and pulp and paper.

Speaker #1: Agora BITUM has positive momentum in signing leases, and ahead of the second quarter, the 2026 occupancy rate is 97.4%. Part of the increase in occupancy is also due to the total area for commercial square meters increasing.

Speaker #1: With a strong presence in Norway, Sweden, and Finland, Høgums Borgestad is the market leader in the Nordic region. Let's go into some details for first real estate and Agora Bytom.

Speaker #1: By converting common areas to leasable areas, the occupancy level is the highest ever achieved for Agora BITUM. The new tenants will open during the second half of the second quarter of 2026, and mostly at the beginning of the fourth quarter.

Speaker #1: Agora Bytom continued its positive trend with improvement driven by revenue growth by 5.2% in the quarter. EBITDA for first quarter increased from 10.3 million NOK in 2025 to 10.7 million NOK in first quarter 2026.

Speaker #1: New leases is expected to have a new leases is expected to have full effect from 2027 and onwards. As stated before, going forward, BORGESTAD will focus on increasing rent levels and by replacing tenants with low rent levels.

Speaker #1: First quarter was a quarter with a lot of changes of new tenants and a new tenants open mostly at the end of the quarter and beginning of second quarter.

Speaker #1: Agora Bytom has a positive momentum on signing leases, and had by end of first quarter an occupancy rate of 96.4%. As part of the increase in occupancy also the total area for commercial square meters is increased by converting common areas to leasable areas.

Pål Feen Larsen: As stated before, going forward, Borgestad will focus on increasing rent levels and by replacing tenants with low rent levels. At the end of June 2026, debt stands at EUR 28.5 million, maintaining a substantial financial position. As before, due date for the debt is 31 December 2028. Tenant turnover at Agora Bytom decreased by 2.4% in Q2 2006 compared to the same period in 2025. Number of visitors is stable in the same period. It's estimated that the decrease in turnover among the tenants is due to changes among tenants in Q1 and Q2. The trend month by month is increasing, especially in Q2. Agora Bytom benefits from a diverse tenant base and a healthy weighted average unexpired lease term of about four years, ensuring low contract duration risk and high visibility for years ahead.

Pål Feen Larsen: As stated before, going forward, Borgestad will focus on increasing rent levels and by replacing tenants with low rent levels. At the end of June 2026, debt stands at EUR 28.5 million, maintaining a substantial financial position. As before, due date for the debt is 31 December 2028. Tenant turnover at Agora Bytom decreased by 2.4% in Q2 2026 compared to the same period in 2025. Number of visitors is stable in the same period. It's estimated that the decrease in turnover among the tenants is due to changes among tenants in Q1 and Q2. The trend month by month is increasing, especially in Q2. Agora Bytom benefits from a diverse tenant base and a healthy weighted average unexpired lease term of about four years, ensuring low contract duration risk and high visibility for years ahead.

Speaker #1: At the end of June 2026, debt stands at €28.5 million, maintaining a substantial financial position. As before, the due date for the debt is 31 December 2028.

Speaker #1: Based on the occupancy rate and the most that most changes have been implemented for new tenants in first quarter, the remainder of the year is expected to be relatively stable for on operations, but with increase increased performance for revenue and EBITDA quarter by quarter going forward.

Speaker #1: Tenant turnover at Agora Bitum decreased by 2.4% in the second quarter of 2026 compared to the same period in 2025. The number of visitors remained stable during the same period.

Speaker #1: It's estimated that the decrease in turnover among the tenants is due to changes among tenants in the first and second quarters. The trend month by month is increasing, especially in the second quarter.

Speaker #1: Agora Bytom obtained a BREEAM in use certification during first quarter, the certificate confirms a solid standard of environmental performance energy efficiency and sustainable building management.

Speaker #1: Agora BITUM benefits from a diverse tenant base and a healthy weighted average unexpired lease term of about four years, ensuring low contract duration risk and high visibility for years ahead.

Speaker #1: Going forward, Borgestad will focus on increasing rent levels by replacing tenants with low rents. As of March 2026, debt stands at 28.9 million euros, maintaining a sustainable financial position.

Speaker #1: The vault has been relatively stable over a longer period, as a result of a combination of new leases and the renewal of existing leases as we go.

Speaker #1: Its worst mentioning that Agora Bytom started amortization in April 2026 after amortization-free period over two years. This is according to the agreed schedule with Bank Paco, as we agreed when we refinanced the center in end of 2023.

Pål Feen Larsen: The WAULT has been relatively stable over a longer period, a result of a combination of new leases and renewal of existing leases as we go on. Contract durations are well spread over time, with first due date for top tenants in Q1 2028. More than 58% of the contract measured by number of square meters is due in 2030 or later. This is a good position for Agora Bytom. As communicated before, local management is actively engaged in ongoing negotiations with both existing and potential new tenants to first strengthen the tenant mix and stabilize occupancy levels going forward. Let's go into your part.

Speaker #1: Contract durations are well spread over time, with the first due date for top tenants in the first quarter of 2028. More than 58% of the contracts, measured by number of square meters, are due in 2030 or later.

Speaker #1: And the debt is due at 31st of December 2028. Tenant turnover at Agora Bytom decreased by 3% in first quarter compared to the same period in 2025.

Speaker #1: This is a good position for Agora BITUM. As communicated before, local management is actively engaged in ongoing negotiations with both existing and potential new tenants to further strengthen the tenant mix and stabilize occupancy levels going forward.

Speaker #1: Number of visitors are stable at in the quarter. It's estimated that the decrease in turnover among the tenants is due to changes of tenants in the first quarter.

Speaker #1: Let's go into your part, Höganäs Borgestad.

Speaker #2: Thank you, Paul. As Paul said, it's a pleasure reporting the figures for the same quarter, also for Höganäs Borgestad. Despite revenues coming slightly down from 296 in last year's second quarter to 290 million this quarter, EBIT improved significantly from 22.3 in the second quarter 2025 to 36.8 million in this year's second quarter.

Speaker #1: The Polish economy growth has been resilient and above the EU average growth, despite the trade turmoil and ongoing war in neighboring Ukraine. Borgestad expects to continue positive development in consumer spendings in Poland.

Bendik Persch Andersen: Thank you, Paal. As Paal said, it's a pleasure reporting the figures for the second quarter, also for Höganäs Borgestad. Despite revenues coming slightly down from NOK 296 million in last year's Q2 to NOK 290 million this quarter, EBIT improved significantly from NOK 22.3 million in Q2 2025 to NOK 36.8 million in this year's Q2. This improvement reflects the positive impact of cost reduction measures, improved operational efficiency, and ongoing internal improvement initiatives, but also the fact that we concluded several successful projects in the quarter, thanks to great project management and efforts by everyone involved. Market conditions remained challenging through the quarter, as Paul mentioned, with continued uncertainty across several industrial segments affecting customer activity, production levels, and investment decisions. While overall demand remained below historical levels, there are early signs that activity is gradually improving in certain segments after an extended period in which customers have delayed investment decisions.

Bendik Persch Andersen: Thank you, Pål. As Pål said, it's a pleasure reporting the figures for the second quarter, also for Höganäs Borgestad. Despite revenues coming slightly down from NOK 296 million in last year's Q2 to NOK 290 million this quarter, EBIT improved significantly from NOK 22.3 million in Q2 2025 to NOK 36.8 million in this year's Q2. This improvement reflects the positive impact of cost reduction measures, improved operational efficiency, and ongoing internal improvement initiatives, but also the fact that we concluded several successful projects in the quarter, thanks to great project management and efforts by everyone involved. Market conditions remained challenging through the quarter, as Paul mentioned, with continued uncertainty across several industrial segments affecting customer activity, production levels, and investment decisions.

Speaker #1: And this should lead to better performance for the shopping center going forward. Agora Bytom benefits from a diverse tenant base and a healthy weighted average unexpected expired lease term of about four years.

Speaker #2: This improvement reflects the positive impact of cost reduction measures, improved operational efficiency, and ongoing internal improvement initiatives, but also the fact that we concluded several successful projects in the quarter thanks to great project management and the efforts of everyone involved.

Speaker #1: Ensuring low contractor duration risk and high visibility for the years ahead. Contract duration are well spread over time, with the first due date for top 10 tenants at first quarter 2028, and more than 55% of contract measured by number of square meters is due 2029 or later.

Speaker #2: Market conditions remained challenging throughout the quarter, as Paul mentioned, with continued uncertainty across several industrial segments affecting customer activity, production levels, and investment decisions.

Speaker #1: Local management is actively engaged in ongoing negotiations with both existing and potential new tenants to further strengthen the tenant mix and occupancy levels. I leave the word to you, Bendik.

Speaker #2: While overall demand remained below historical levels, there are clearly signs that activity is gradually improving in certain segments after an extended period in which customers have delayed investment decisions.

Speaker #2: Thank you, Paul. Før jeg går ned til Borgestad, reported a first quarter revenue of 181 million NOK, down from 186 in the same quarter last year.

Bendik Persch Andersen: While overall demand remained below historical levels, there are early signs that activity is gradually improving in certain segments after an extended period in which customers have delayed investment decisions.

Speaker #2: Although a full market recovery is not expected in the near term, the medium-term outlook suggests a positive development going forward. The quarter also states that many of the measures that were initiated over the past few years are delivering results.

Speaker #2: EBIT for the quarter came in at minus 18.3 million NOK, compared to minus 11.5 in the same quarter last year. This is largely reflecting the general slowdown in the European and Nordic refractory markets.

Bendik Persch Andersen: Although a full market recovery is not expected in the near term, the medium-term outlook suggests a positive development going forward. The quarter also demonstrates that many of the measures that were initiated over the past few years are delivering results. While further measures definitely remain necessary, profitability has developed favorably, and we maintain a positive outlook. That said, our quarterly results are naturally affected by the timing and execution of individual projects, and we do not expect a quarter-on-quarter improvement continuously. However, we remain focused on what's within our control and believe that the implemented and also planned measures are moving the business in the right direction, supporting a positive underlying trend. As highlighted in a previous presentation, the Nordic refractory market is highly seasonal, with activity typically concentrated around the second and third quarter as customers carry out planned maintenance during the summer period.

Speaker #2: While further measures definitely remain necessary, profitability has developed fairly, and we maintain a positive outlook. That said, our quarterly results are naturally affected by the timing and execution of individual projects, and we do not expect a quarter-on-quarter improvement continuously.

Speaker #2: In addition to some challenges in our own project execution. As Paul mentioned, in the introduction, market conditions remain demanding with several customers within multiple industries.

Speaker #2: However, we remain focused on what's within our control and believe that the implemented and planned measures are moving the business in the right direction, supporting a positive underlying trend.

Speaker #2: Having temporary shutdowns or delaying projects, which in the short term is resulting in lower overall utilization across Nordic refractory players, which inevitably is impacting us as well.

Speaker #2: This has been particularly visible in Sweden, and also now in February and March, also among Faro Alloy producers in Norway. Which have been affected by both the recently introduced tariffs on Norwegian Faro Alloys into the EU, and by unusually high electricity prices during the winter in the northern parts of Norway.

Speaker #2: As highlighted in the previous presentation, the Nordic factory market is highly seasonal, with activity typically concentrated around the second and third quarters, as customers carry out planned maintenance during the summer period.

Speaker #2: Historically, Q2 and Q3 each accounted for 26% of annual revenue, respectively, while levels are generally lower than Q4. Given the high operational leverage of our business, this is clearly affecting the quarterly results.

Speaker #2: While the weaker performance is clearly driven by the broader market downturn with similar trends being reported by refractory players across Europe, it's also evident that we have internal improvements to make.

Bendik Persch Andersen: Historically, Q2 and Q3 accounted for 26% and 31% of annual revenue respectively, while activity levels are generally lower in Q1 and Q4. Given the high operational leverage of our business, this is clearly affecting the quarterly results. Following a very good H2 2025, we entered 2026 with a weaker-than-normal first quarter, reflecting both the challenging market conditions, but also internal project issues described in the first quarter presentation. As highlighted in the previous slides, performance improved significantly in the second quarter. It's also important to remember that our business has relatively long lead times, often 6 to 12 months or even years, from initial discussions with customers to project execution. As a result, many of the implemented and ongoing commercial efforts are expected to have an increasing impact as we move through 2026, 2027, and 2028.

Speaker #2: Following a very good second half of 2025, we entered 2026 with a weaker than normal first quarter, reflecting both the challenging conditions, but also internal project issues described in the first quarter presentation.

Speaker #2: In particular, there is a need to further professionalize parts of the organization to address this. We have initiated a range of measures both at the group level and within each single subsidiary.

Speaker #2: But as highlighted in the previous slides, performance improved significantly in the second quarter. It's also important to remember that our business has relatively long lead times, often 6 to 12 months, or even years, from initial discussions with customers to project execution.

Speaker #2: As highlighted in previous presentations, the Nordic refractory market is characterized by pronounced seasonality. With lower activity levels, during the winter months, as the activity level is typically picking up in first part of second quarter and peaking in third quarter.

Speaker #2: As a result, many of the implemented and ongoing commercial efforts are expected to have an increasing impact as we move through 2026, 2027, and 2028.

Speaker #2: This year's first quarter has been no exception, with limited project activity throughout the quarter. Looking ahead, we expect a substantial pickup in both revenues and profitability in the second and third quarter.

Speaker #2: Looking at our trailing 12 months' performance, the adjusted EBIT margin has improved to 7%, compared to 5.6% at the end of the first quarter and 6.2% for the full year 2025.

Speaker #2: To mitigate some of these seasonal slowdown during winter, we are also further intensifying our focus on securing projects for execution in Q4 2026 and Q1 2027.

Speaker #2: Looking ahead, our priorities remain unchanged: delivering sustainable revenue growth, improving capital efficiency, and realizing the benefits of closer cross-group collaboration. While quarterly performance will continue to be influenced by project timing, we remain committed to our mid-term ambition of an EBIT margin of 10%.

Bendik Persch Andersen: Looking at our trailing 12 months performance, the adjusted EBIT margin has improved to 7%, compared to 5.6% at the end of Q1 and 6.2% for full year 2025. Looking ahead, our priorities remain unchanged: delivering sustainable revenue growth, improving capital efficiency, and realizing the benefits of closer cross-group collaboration. While quarterly performance will continue to be influenced by the project timing, we remain committed to our midterm ambition of EBIT margin of 10%. Finally, a brief update on the Borgestad sale-leaseback process, as there have been no material developments since our Q1 presentation, and the transaction therefore remains subject to the legal review. We remain confident about the underlying merits of the transaction and continue to view the sale-leaseback as an important step in creating flexibility for the group's long-term development.

Speaker #2: See, okay. And finally, a brief update. On the Bureau of Sale Leaseback agreement, where we do not have any meaningful updates since our Q4 2025 report.

Speaker #2: Planning a brief update on the BUV sale-leaseback process, as well as noting no developments since our Q1 presentation. The transaction therefore remains subject to legal review.

Speaker #2: But for those less familiar with the background in late 2023, Høganes Borgestad signed an agreement to divest two properties in Bjuv to the local municipality.

Speaker #2: As part of the structure, we secured the option to lease the properties back for up to five years, giving us the necessary flexibility while planning for relocation of production.

Speaker #2: We remain confident about the underlying merits of the transaction and continue to view the sale-leaseback as an important step in creating flexibility for the group's long-term development.

Speaker #2: And once the legal process is concluded, which we do expect to be in the near future, we will be in a position to move forward with the next phase of planning for future production.

Speaker #2: Following a complaint from a local resident regarding the transaction price, the administrative court in Malmö set aside the agreement in March 2025, referring to insufficient documentation supporting the valuation.

Speaker #1: Tuning into the financials and starting with the P&L for BORGESTAD Group. Revenue decreased by 2.1% in second quarter 2026, but the positive news is that EBIT in second quarter and that 42.4 million compared to adjusted EBIT at 27.8 in second quarter 2025, reflecting improved profitability within Höganäs Group.

Speaker #2: The municipality appealed this ruling in April and provided additional supporting material, and in June, 2025, the court agreed to reopen the case. And in December 2025, the court of appeal ultimately ruled in favor of the transaction, clearing the way for the sale of to proceed.

Bendik Persch Andersen: Once the legal process is concluded, which we do expect to be in the near future, we will be in a position to move forward with the next phase of planning for future production.

Speaker #2: In January, this year, however, the same individual filed a further appeal and the case is now being being reviewed by the Supreme Court. Based on typical timelines, we expect a final decision prior to the summer or just after this summer.

Speaker #1: EBIT in first half 2026 ended at NOK 24.9 compared to adjusted first half 2025 at 19.5 million. Included in the EBIT in first half 2026, our write-down of fixed assets in connection with tenant change in Agora Bytom is included.

Pål Feen Larsen: Turning into the financials and starting with the P&L for Borgestad Group. Revenue decreased by 2.1% in Q2 2026. The positive news is that EBIT in Q2 ended at NOK 43.4 million, compared to adjusted EBIT at NOK 27.8 million in Q2 2025, reflecting improved profitability within Höganäs Borgestad Group. EBIT in H1 2026 ended at NOK 24.9 million compared to adjusted H1 2025 at NOK 19.5 million. Included in the EBIT in H1 2026, a write-down on fixed assets in connection with a tenant change in Agora Bytom is included. Net financials are stable year-over-year, both for the quarter and year to date. Looking at the balance sheet, the working capital stands at NOK 263 million, compared to NOK 321.1 million as of 30 June 2025, mainly driven by decreased trade receivables and inventory within Höganäs Borgestad. It is positive to review a decreased working capital compared to last year.

Speaker #2: We remain confident in the outcome and once the transaction is finalized, intend to resume planning of future production, which has been put on hold while waiting for the legal process.

Speaker #1: Net financials are stable year over year, both for the quarter and year to date. Looking at the balance sheet, the working capital stands at 263 million, compared to 321.1 million as of June 30th, 2025, mainly driven by decreased trade receivables and inventory within Höganäs Borgestad.

Speaker #1: Going to financials. Turning to the financials for Borgestad Group, we start with the P&L. Revenue is stable in first quarter 2026. EBIT decreases in first quarter compared to same period 2025 due to increased depreciation in Høganes Borgestad and a write down of fixed asset in connection with the tenant change in first quarter 2026 for Agora Byton.

Speaker #1: It's positive to review a decreased working capital compared to last year. Decreasing working capital is a priority within the group, and especially within Höganäs Borgestad.

Speaker #1: And the fact that Høganes Borgestad has a weaker start of the year net financials are stable year over year. Looking at the balance sheet, working capital stands at 199.1 million NOK, a decrease from 216.6 million as of March 31st, 2025.

Speaker #1: As of June 30th, total interest-bearing debt stood at NOK 494.4 million, while net interest-bearing debt was NOK 374.6 million. The property in BUV remains classified as held for sale, pending the expected court decision in the near-term future, as Bendik communicated.

Pål Feen Larsen: It is positive to review a decreased working capital compared to last year.

Speaker #1: Mainly driven by decrease decreased trade receivables and inventory within Høganes Borgestad. Per December, per March, 31st, total interest spring debts to that 456.4 million NOK, while net interest spring debt was at 335 million NOK.

Pål Feen Larsen: Decreasing working capital is a priority within the group and especially within Höganäs Borgestad. Per 30 June, total interest-bearing debt stood at NOK 494.4 million, while net interest-bearing debt was at NOK 374.6 million. The property in view remains classified as held for sale, pending the expected court decision in near term future, as Bendik communicated. Of course, we expect a positive feedback. The transaction is closed in 2026, but that is conditional of a positive Supreme Court decision. Net cash flow from operating activities for a period was negative with -NOK 4.6 million, compared to -NOK 92.7 million the same period last year. The positive change is mainly driven by decreased working capital and better operational performances. Cash flow from investment activities was negative with -NOK 16.6 million, and it is still a 50/50 split between investments in Agora Bytom and Höganäs Borgestad.

Speaker #1: Of course, we expect positive feedback. But, of course, 2026 is conditional on a positive Supreme Court decision. Net cash flow from operating activities for the period was negative NOK 4.6 million, compared to a negative NOK 92.7 million for the same period last year.

Speaker #1: As communicated, the debt in connection with Agora Byton has an April 2026 started amortization according to plan and agreement with the Bank Pacal. The property in Bjuv remains classified as held for sale, pending the expected court decision in near term future.

Speaker #1: The positive change is mainly driven by decreased working capital and better operational performance. Cash flow from investment activities was negative NOK 16.6 million, and it's still a 50/50 split between investments in Agora Bytom and Höganäs Borgestad.

Speaker #1: Borgestad expect that the process will be finalized in 2026 with closing of the transaction. Of course, conditional of the positive Supreme Court decision. Net cash flow from operating activities for the period was positive at 11.8 million NOK, cash flow from investing activities was negative with 8.4 million, and it's a 50-50 split between in investments between Agora Byton and Høganes Borgestad.

Speaker #1: Net cash flow from financial activities is negative at NOK 11.6 million, compared to positive NOK 14.7 million year to date in 2025. The main difference is the utilization of overdraft, which is lower at the end of the first half.

Speaker #1: As of June 30, available liquidity stood at NOK 144.8 million, including a NOK 36.4 million undrawn credit facility, meaning that Borgestad has a good liquidity situation. Borgestad remains confident in the long-term prospects of the assets.

Speaker #1: Net net cash flow from financial activities is negative with 34.5 million NOK compared to negative 9.8 in first quarter 2025. The main difference is timing of the dividend payment.

Pål Feen Larsen: Net cash flow from financial activities is negative with NOK 11.6 million compared to a positive NOK 14.7 million year to date in 2025. The main difference is the utilization of overdraft that is lower at the end of H1. Per 30 June, available liquidity stood at NOK 144.8 million, including NOK 36.4 million undrawn credit facility, meaning that Borgestad has a good liquidity situation. Borgestad remains confident in long-term prospects of the assets. In addition to continuing the operational development of Höganäs Borgestad and Agora Bytom, the group will actively evaluate consolidation opportunities within the refractory sector. Borgestad believes that the selective acquisition may strengthen market positions, expand capabilities, increase scale, and contribute to long-term shareholder value creation. The fragmented nature of parts of the refractory market may present attractive opportunities from strategic growth through consolidation.

Speaker #1: Dividend was paid in first quarter in 2026 and second quarter in 2025 as earlier mentioned. Per March 31st, available liquidities to that including NOK 25 75.3 million undrawn credit facilities, credit facility for Høganes Borgestad.

Speaker #1: In addition to continuing the operational development of Höganäs Borgestad and Agora Bytom, the group will actively evaluate consolidation opportunities within the refractory sector. Borgestad believes that selective acquisition may strengthen market positions, expand capabilities, increase scale, and contribute to long-term shareholder value.

Speaker #1: Meaning that Borgestad have a good cash situation going into high season. To summarize, Borgestad delivered a as communicated and expected in first quarter 2026.

Speaker #1: The fragmented nature of parts of the refractory market may present attractive opportunities for strategic growth through consolidation. BORGESTAD remains committed to executing its strategy for both Höganäs BORGESTAD and Agora Bytom, which hold strong positions in their local markets.

Speaker #1: Borgestad expects expect the group to deliver improved online results and stronger cash cash flow with continued positive margin development in both refractory and property segments over time.

Speaker #1: To be a bit more specific, Borgestad expects Høganes Borgestad to deliver the coming quarters as mainly in 2025 quarter by quarter. While for Agora Byton, we expect a small decrease both in revenue and EBITDA quarter by quarter going forward compared to 2025.

Speaker #1: The group's ongoing focus is on improving profitability and strengthening operational performances. We will also inform that from third quarter 2026, BORGESTAD will change reporting format and only publish group reporting group presentation and not financial statements except for second quarter.

Pål Feen Larsen: Borgestad remains committed to executing its strategy for both Höganäs Borgestad and Agora Bytom, which holds strong market positions in their local markets. The group's ongoing focus is on improving profitability and strengthen operational performances. We will also inform that from Q3 2026, Borgestad will change reporting format and only publish a group presentation and not financial statements except for Q2. This is in line with market trends and practice. Let's head over to questions.

Speaker #1: Cash flow remains solid and net debt at a sustained sustainable level. Borgestad expects to continue the good development going forward on a longer term.

Speaker #1: This is in line with market trends and practice. Let's head over to questions.

Speaker #2: Yes, we have three questions so far, starting with a question regarding Agora Bytom. When are the tenant transitions and temporary discounts at Agora Bytom expected to be completed?

Speaker #1: We got any questions, Bendik?

Speaker #2: Yeah, we have got two questions. Starting with the first. What caused the increase in rights of use assets and lease liabilities?

Speaker #1: Yeah, both both items on the balance sheet increase quite heavily and is due to the fact that Høganes Borgestad signed one or two leases with quite a long long timing effect.

Speaker #2: And what rental income and effect should we see once the tenant opens in the second half?

Speaker #1: The tenant transitions will probably be finalized in the first part of the fourth quarter, and we will see the full effect from January 2027 onward.

Speaker #2: Then we have a question regarding the sale lease back in Bjuv. Is the cash receipt expected immediately in the case of a favorable ruling in the Bjuv case?

Bendik Persch Andersen: Yep. We have three questions so far, starting with a question regarding Agora Bytom. When are the tenant transitions and temporary discounts at Agora Bytom expected to be completed? What rental income and effect should we see once the new tenants open in H2?

Speaker #1: So, first quarter time, the discounts for those who are in transition or will be influenced by the changes are due, but there will always be some parts of tenants that have separate discounts.

Speaker #2: I can I can start answering. So as I said, we do expect to have a decision either just before the summer or or in August.

Speaker #2: And we intend in in close dialogue with the with the municipality to close the transaction as soon as possible following a favorable ruling. And then the the we do expect the cash proceed so the first tranche of of three to be distributed after closely after transaction.

Pål Feen Larsen: The tenant transitions will probably be finalized, as communicated, in first part of Q4. We will see the full effect from January 2027 and onwards, so Q1 2027. At the same time, the discounts for those who are in transition or will be influenced by the changes are due, but it will always be some parts of the tenants that has separate discounts. What kind of revenue increase we will review is nothing that we will go out with public.

Speaker #1: What kind of release we'll review is nothing that we will go public with.

Speaker #2: Next question, regarding Höganäs Borgestad. You reported a 12.6% higher backlog and early signs of improving activity, while at the same time stating that the market condition remains challenging and that a full recovery is not expected in the near term. What separates the segments where you see improvements from those still lagging, and has the improvement continued into the start of Q3?

Speaker #2: But we will do some debt amortization whereas most of the cash proceeds will be distributed as as dividend.

Speaker #1: Yeah.

Speaker #2: Presumably.

Speaker #1: Yeah.

Speaker #2: Yeah. No, no other questions.

Speaker #2: Starting with the segment split, I would say that we see a clear difference across the three Nordic countries in which we are present. So in Norway, aluminum and ferroalloy are the two largest segments.

Bendik Persch Andersen: Next question regarding Höganäs Borgestad. You reported a 12.6% higher backlog and early signs of improving activity, while at the same time stating that the market condition remains challenging and that the full recovery is not expected in the near term. What separates the segments where you see improvements from those still lagging, and has the improvement continued into the start of Q3?

Speaker #2: Aluminum has been in a low cycle for our part, as the aluminum prices have been skyrocketing and the production at all aluminum plants has been peaking.

Speaker #2: Therefore, due to the high aluminum prices, they have also postponed maintenance projects. On the other hand, for the ferro alloy segment, most plants in Norway were shut down temporarily through February, March, and partly April due to the imposed tariffs on ferro alloys to the EU and the high electricity prices.

Pål Feen Larsen: Starting with the segment split, I would say that we see a clear difference across the three Nordic countries in which we are present. In Norway, aluminum and ferroalloy is the two main largest segments. Aluminum has been in a low cycle for our part as the aluminum prices have been skyrocketing and the production at all aluminum plants have been peaking. Therefore, due to the high aluminum prices, they have also postponed maintenance projects. On the other hand, for the ferroalloy segments, most plants in Norway were shut down temporarily through February, March, and partly April due to the imposed tariffs on ferroalloys to the EU and the high electricity prices. In Norway, we have had definitely a lower activity, but not for the same reason across aluminum and the ferroalloys.

Bendik Persch Andersen: Starting with the segment split, I would say that we see a clear difference across the three Nordic countries in which we are present. In Norway, aluminum and ferroalloy is the two main largest segments. Aluminum has been in a low cycle for our part as the aluminum prices have been skyrocketing and the production at all aluminum plants have been peaking. Therefore, due to the high aluminum prices, they have also postponed maintenance projects. On the other hand, for the ferroalloy segments, most plants in Norway were shut down temporarily through February, March, and partly April due to the imposed tariffs on ferroalloys to the EU and the high electricity prices. In Norway, we have had definitely a lower activity, but not for the same reason across aluminum and the ferroalloys.

Speaker #2: So in Norway, we have had definitely a lower activity, but not for the same reason across aluminum and ferroalloys. In Sweden and Finland, on the other hand, where steel, pulp and paper, waste, and energy are more leading for our part, there's been generally lower activity, and maintenance in general has been postponed.

Speaker #2: If you look at the work that we are conducting, you could split it into three parts—one being daily maintenance and material consumption.

Speaker #2: So, consumption of refractory materials. The other being operational required maintenance to keep the factory running. And the third being larger upgrades and larger investment projects.

Pål Feen Larsen: In Sweden and Finland, on the other hand, where steel, pulp and paper, and waste and energy is more leading for our part, there has been a generally lower activity, and maintenance in general has been postponed. If you look at the work that we are conducting, you could split it into three parts. One being daily maintenance and material consumption, so consumption of refractory materials. The other being operational required maintenance to keep the factory running, and the third being larger upgrades and larger investment projects. Even in a low cycle, the daily maintenance and partly also operational required upgrades will always be done. But what we have seen through 2025 and also parts of 2026 is that the daily maintenance and the refractory consumption has been rather stable, whereas the operational required upgrades have also been postponed.

Bendik Persch Andersen: In Sweden and Finland, on the other hand, where steel, pulp and paper, and waste and energy is more leading for our part, there has been a generally lower activity, and maintenance in general has been postponed. If you look at the work that we are conducting, you could split it into three parts. One being daily maintenance and material consumption, so consumption of refractory materials. The other being operational required maintenance to keep the factory running, and the third being larger upgrades and larger investment projects. Even in a low cycle, the daily maintenance and partly also operational required upgrades will always be done. But what we have seen through 2025 and also parts of 2026 is that the daily maintenance and the refractory consumption has been rather stable, whereas the operational required upgrades have also been postponed.

Speaker #2: So, even in a low cycle, the daily maintenance and partly also operationally required upgrades will always be done. But what we have seen through 2025 and also parts of 2026 is that the daily maintenance and refractory consumption have been rather stable.

Speaker #2: Whereas the operational required upgrades have also been postponed, we now see somewhat of a catch-up effect from that. But what we mean by saying we don't expect a full recovery in the near term is that we still see that larger upgrade projects, which are essential also for our business, are still being postponed.

Speaker #2: So that's—so daily maintenance and operationally required upgrades, we are seeing clear signs that that's being prioritized now. Larger projects are generally still lagging behind, and full realignments.

Speaker #2: Next, you delivered a gross margin of around 56% in the quarter, clearly above the recent history. How much of this reflects temporary project mix versus structural improvements?

Bendik Persch Andersen: But we now see somewhat of a catch-up effect on that. But what we mean by that we do not expect a full recovery in the near term is that we still see that larger upgrade projects, which is essential also for our business, those are still being postponed. So daily maintenance and operational required upgrades, we are seeing clear signs that is being prioritized now. Larger projects are generally still lagging behind on full relinings. Next, you delivered a gross margin of around 56% in the quarter, clearly above the recent history. How much of this reflects temporary project mix versus structural improvements, and what is a reasonable level to assume going forward? For Höganäs Borgestad, if we start with that before the group as a whole.

Speaker #2: What is a reasonable level to assume going forward? For Höganäs Borgestad, if we start with that before the Group as a whole, the gross margin for Höganäs Borgestad is— you should look at the last 12 months to have a good view on the sustainable level.

Speaker #2: There will definitely be influence by the project mix, and it can have quite a substantial impact on the quarterly gross profit margins.

Speaker #1: Yeah, and I think for Borgestad as a whole, we have already mentioned that Agora will probably have higher margins going into 2027. But we expect more or less the same margins, same results for the second half for Agora Bytom as in 2025.

Bendik Persch Andersen: The gross margin for Herøya and Borgestad, you should look at the last 12 months to have a good view on the sustainable level. They will definitely be influenced by the project mix, and it can have quite a substantial impact on the quarterly gross profit margins.

Speaker #2: And then we have the last question so far: Congrats on a great result. Any plans for a dividend this year?

Speaker #1: That remains to be seen. Of course, the board has received a proposal for distributing up to NOK 1.45 per share. No decision is taken, but let's see and follow the development both on the sales back and operational performance for the third quarter.

Pål Feen Larsen: Yeah. I think for Borgestad as a whole, we have commented already that Agora will probably have higher margins going into 2027. But we expect more or less the same margins, same results for H2 for Agora Bytom as in 2025.

Speaker #1: So, we will not promise anything, but we'll come back to it after the third quarter. No further questions?

Bendik Persch Andersen: We have the last question so far. Congrats on the great results. Any plans for dividend this year?

Speaker #2: No further questions.

Speaker #1: Thank you for listening in, and enjoy the rest of your day and the coming weekend. Thank you.

Pål Feen Larsen: That remains to be seen. Of course, the board has received a potential for distributing up to NOK 1.45 per share. No decision is taken, but let's see and follow the development both on the service pack and operational performances for Q3. We will not promise anything, but we will come back to it after Q3. No further questions?

Bendik Persch Andersen: No further questions.

Pål Feen Larsen: Then thank you for listening in and enjoy the day and the coming weekend. Thank you.

Bendik Persch Andersen: Thank you.

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Q2 2026 Borgestad ASA Earnings Call

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