Translation: Original published in Finnish on 05/11/2026 at 08:05 am EEST

Norrhydro's Board of Directors has decided to pay a return of capital of  EUR 0.02 per share from the invested unrestricted equity fund, based on the AGM's authorization to the Board to distribute EUR 0.04. Although the total capital return is small (around 0.22 MEUR), we consider it a questionable capital allocation decision, given the price the company pays for its debt financing (e.g., the convertible bond interest rate is 10%). Considering this, we would have preferred to see the company focus on maximizing debt reduction.  We will add the return of capital to our forecasts in the next update.

The upward trajectory in earnings and revisions to the terms of the convertible bond enabled profit-sharing

Norrhydro started 2026 significantly better than our expectations, with Q1 revenue growing by 21% to 7.2 MEUR and EBIT rising to 0.59 MEUR. In addition, the earnings converted well into cash flow, which enabled the repayment of interest-bearing loans by over 1 MEUR already during Q1. At the end of Q1, the company's net debt to EBITDA ratio decreased to a tolerable level of 2.6x. In addition to the strengthened financial position, the capital distribution was made possible by the revision of the convertible bond terms announced on Friday, which will ease the company's debt repayment burden from the end of this year. In light of the decision, we also estimate that Q2 has started at least moderately for Norrhydro, even though, based on the Q1 report, the Iran crisis will at least increase the company's costs in Q2. 

We would have preferred to see the capital go towards debt reduction

Norrhydro's balance sheet has been tight in recent years due to significant factory investments and NorrDigi development efforts. At the end of Q1'26, the company had a net debt of approximately 8.4 MEUR. Although the company's financial position has significantly improved over the past year due to a rapidly improving earnings trend, financing costs, mainly stemming from interest-bearing debt and the sale of trade receivables, still weigh quite heavily on Norrhydro's earnings (actual financing costs for 2025 and estimated for 2026 are around 1 MEUR). The company's total capital return is small, at around 0.22 MEUR, but considering interest expenses, we would still have found debt reduction and balance sheet strengthening to be a better capital allocation option than profit distribution at this stage. We will include the capital repayment in Norrhydro's estimates in connection with the next update.