Hello all. Suominen reported their Q2 this morning, and we have the company's CEO Charles Héaulmé for the interview as usual. Hi, Charles.

Hi. Good afternoon, good morning, Rauli.

Hi. So let's start with the typical question. Can you go through the main points of Q2 from your perspective?

Sure, my pleasure, and thank you for the invitation. Key points for the second quarter is to start with the business performance, that our sales have been increasing almost 6% compared to the same period of last year. Also, we have improved the comparable EBITDA to 4.3 million euro compared same period last year, 3.2 million, so that is linked particularly to improved margins in Q2 versus the first quarter of this year, but also production efficiency. We may come back to this, particularly in factories where we took actions already, and the impact from the fixed-cost reduction that we engaged now quite five quarters ago. I'd say the highlight of the quarter is the capital raise.

We have raised capital to strengthen our balance sheet, but also to enable the execution and the acceleration of our Full Potential programme, a programme that we announced at the end of January this year. Now we are at full speed in execution, and we need of course some capital to be able to execute it, and we have been able to have an oversubscribed capital raise, so this was very reassuring, and I take the opportunity of this channel. If you allow, to thank all our shareholders, but also other investors, for believing in our plan, in our company, in the management, and our commitment to make the transformation.

Thanks, and just note for the viewers that we had an interview also in June ahead of the rights issue, kind of going through that and also the use of proceeds and the Full Potential program. You can look more regarding those and that if you're interested in that, so, but let's continue with more of the Q2 topics then. So, like you said, the volume increased, and you alluded to that already in the spring, that you had a good order book for Q2, but how do you see the demand? Is it kind of sustainable now at this level for you? Or was there some impact of customers pre-buying or restocking ahead of the price increases, which are coming due to the raw material cost hike?

What I would say, the price increases due to the raw material, they have mostly come through already during the second quarter, but back to your question, yes, volume has increased, and your question is, is this sustainable. So the key fact is the volume has increased if we compare to the same period Q2 last year by 10%, which is good news. However, when you put things in perspective, first semester basically it is flat, it's a growth of 0.3% of volume, and to interpret this, of course one way to say. Q1 was weak, Q2 was strong, but we need to give a little bit more granularity for the understanding. It is not completely comparable because in end of 2024, beginning of 2025, we had one additional line which has been closed in our factory in Finland during the second quarter, which means that Q2 to Q2 are comparable, but the year-on-year comparison is not fully comparable. Therefore the conclusion is yes, we are delivering volume growth year on year, and in particular in. Q2.

Now your question is, is this. Sustainable? I'd say not only. It is sustainable because it is not, let's say, polluted, defined like this, by positive factors like stock building on our customer side. And why am I saying that is because the market demand. The demand is solid, it's not terrific. It is solid, in line with the previous quarters. Second, we have undersupplied the demand. And why have we undersupplied the demand? Because our production efficiency is not where it should be at. We have continued to have some breakdowns in our most critical lines during the second quarter, meaning that when we will be in full swing of implementation of our Full Potential program.

Executing the improvement in each and every single line, then we would have more output, being able to deliver the demand, to potentially allow some stocking by customers, but also allow some stocking for us, because this has not been the case in Q2. We have been lowering our stocks to be able to deliver on the demand. So yes, it is in a nutshell. It is sustainable, and we will see also. More growth. I was going to forget one important point is we have a new line that is just starting now in terms of production, and that will give us more capacity, more differentiation, and therefore more growth going forward.

Going forward, great, that is very clear. Then on the price mix side, you said that the impact from the price mix was actually negative to your figures, driven by the negative mix change. Can you elaborate a bit on that? What is driving that? Is that a permanent thing or just some. Quarterly variation?

It is more than a quarterly variation, so I need to explain there. One way to look at it is pricing and mix. Versus 2025. And there it is clearly negative, and the reason is we entered 2025, the company has lost some volume of high-value, high-margin customers, and this has been compensated by gaining some other business, but with lower margin. So that is a very clear negative mix impact, which is not temporary, but it is not permanent, meaning that of course, we don't stand still and do nothing, and we work, of course, on rebuilding a more solid foundation in terms of margin and customer portfolio. So that's the first perspective versus entering 2025.

Now if we look at it more short term versus Q1, we've increased our margins by two points, and that's the result of very specific actions from our Full Potential program, being pricing, being portfolio management, and being fixed-cost reduction. So there are two sides to the coin here when you look at mix, and more to come in the future because the negative side versus entering 2025. We are working on it to further improve it.

Clear. And then regarding the dynamics between the raw material cost hike, which we have seen in the spring from the higher oil price in particular, and your price increases kind of offsetting that. You mentioned that there has been some lag as usual, even if you're kind of transitioning to a monthly pricing. So can you give any quantification for that, what was that negative impact to your earnings in Q2, and do you expect that to be basically repaired then for Q3?

Yes, so pricing in Q2 has been extremely complex because, for obvious reasons, and it's not only Suominen, it's across industries because of the disruptions that we all know. The precise answer to your question is roughly in the morning. We have a negative one million in price. The other part of your question, which is, are we going to get it back in Q3? The answer is not completely, but we hope partly, but we hope to get it completely back until the end of the year. The question, not completely, but we hope partly, but we hope to get it completely back until the end of the year.

That's clear. Then we actually had one question from the investor forum, a bit broader thing, and the person was wondering this: do you have some innovations in the company in the pipeline, kind of on the technological or circular material side, that would kind of drive new growth, as the person described. So I guess this means some kind of maybe new revenue streams. I know you're innovating kind of in the current business. The products all the time, but is there anything kind of maybe more, more kind of now. Revolutionary, but maybe some more new things brewing somewhere, which could open up some kind of completely new possibilities?

So new possibilities, we are not at this point talking about other categories. We are particularly into baby wipes. Beauty, which is mostly, or tissue, and then home and life care kind of wipes. Also, but this is a lower part of our portfolio. The one thing I would like to say is the market is shifting towards a stronger demand for non-plastic solutions, non-plastic. If you think about background in history, all wipes were polymer-based, plastic-based. Now there is a lot of demand for non-plastic. This is not easy to produce. It is more complex to produce than plastic-based wipes, and this is where Suominen can win the game. Not many nonwovens producers are able to get ahead of the game in terms of innovation for non-plastic. We are leading that trend in its early days.

So it is challenging from a production point of view, challenging on our hand, but also it is changing for the customer because when you involve natural resources, natural fiber, then it does not react in the same way as. As. Polymer plastics in general. It can be also economically challenging. And that is of course a potential slowing factor in a very competitive market. However, the positive side is that there is demand for it. It's early days, but when we're talking about the new line. We are starting now in Alicante in Spain, in our factory. This is a line that is fully dedicated and designed for sustainable solutions, fiber and pulp-based. So Suominen is leading thanks to this line. We will grow that business. There is high demand, so the conclusion in a way is Suominen has differentiation and will grow. With this differentiation and will grow not only in volume, but also in value.

Okay, that's so good to hear. Then going to your outlook, you maintained guidance of improving adjusted EBITDA, and you were still somewhat behind for the first half, so that obviously indicates that you should be improving, but in kind of relative and absolute terms compared to the first half. So. Is there anything new kind behind the assumptions, or is it just again the Full Potential program moving forward and getting benefits from that?

Exactly, so the answer is in the question. You say it almost all, yes. When you look at the first semester, we're just on the edge of delivering the same as last year, if you just multiply by two, obviously. We are planning a better second semester than the first semester when you look now at the first semester and put in perspective Q2 and Q1. This is very different performance, so obviously Q1 is hampered. Significantly by Q2. We plan better performance in H2, better output also, and therefore we're confident. We are not adding anything to our assumptions, and the Full Potential plan implementation, as it is usually the case, may be slightly slower than we anticipated.

It is more complex than we anticipated, particularly on the manufacturing side, but it is happening. So if I give granularity on our Full Potential program, one area where we have been faster than I would say the plan is on the fixed-cost reduction and also the organization, because it is never easy to make cuts in the organization. We have done it well. Where it is slower than anticipated is on the manufacturing upgrade, but it is coming, and we are absolutely determined to make it happen. And we have proof from the first lines where we made it happen already. We have absolutely proof with facts and figures that it is working. So there is no reason. Not to make what we have done on one line happen on, let's say, the 50 lines we have over time, and it will not be done in the second semester, of course. So it is by, as I usually say internally, step by step. We have to progress, and this is what we're doing, but being confident, yes, but I am not giving you an overconfident message either. It will take some time, present to you. It will take a couple of years.

That is understandable. And just finally, this one detail you mentioned, that the line. Start-up or ramp-up was delayed or will be delayed somewhat. Did that have any meaningful financial implications for this year?

Yes, so clearly we are delayed compared to our plan. We believed that we were going to start the production earlier. We really started technically at the end of Q2, and our first qualifications are actually positive. That's just recent news from customers, so things. Will unfold positive, but delayed. So to your question, what is that meant financially for the line? You are looking at the outlook and Q1 not being at the level of the outlook and H1.

I would say, not getting into too many details, roughly half a million is the negative impact of the cost of the line not producing. If you would, you know, it would be more if you say, well, had the line been producing in H1, then it is more than half a million, obviously, it's more than one million. Okay, so, but the real cost is half a million in the first semester. What will be the case in H2 at a minimum? We would like to have a break-even on that line, meaning that the fixed cost of the line would be compensated by the volume we're planning to produce, 1,500 tons in the second semester. To put things in perspective, that's where we're planning to produce, let's say, then probably a bit more than 10% of the capacity of the line. The capacity of the line is fully found, and we are planning up to 1,500 tons and then ramping up much faster in 2027, so the real impact. We should be thinking about it in 2027.

Great, that was good color. All right, thank you very much, Charles, for the interview, and good luck for the second half of the year. Thank you, thanks for.

Invitation, thank you, bye.