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Pierre Anjolras: Ladies and gentlemen, good morning. Thanks for joining us for the presentation of Vinci's full year results. So you'll see -- you will have noticed that our performance is once again outstanding. Today, I'm joined by the members of the executive committee, several changes of late, the appointment of Thierry Mirville, Deputy CEO, who follow-on from Christian during the course of the year. We're also with the Investor Relations team, who you know well and will be available to answer your questions. So first of all, on this first photograph, we're heading for the Bay of Biscay where VINCI Energies, Cobra and VINCI Construction are working together on the new electricity interconnection project between France and Spain, the INELFE project set to be completed by 2028. It's the largest DC interconnector line between France and Spain, the 400,000 submarine cable with 2 conversion plants. It's a fine example in Europe and elsewhere, future exponential investments in power grids. Electrical infrastructure, we, first of all, think of production infrastructure, nuclear power as well as renewable power and equally essential infrastructures, which are the power, transmission and distribution grids that require as much investment, if not. And these electrical infrastructure projects are key components of the energy transition, but to a growing extent of energy security and sovereignty; a powerful driver, possibly the most powerful driver for Vinci's business developments. Other photographs now in the Concessions business on the left, London Gatwick airport managed by VINCI Airports, a major milestone reached last autumn with the final approval by the U.K. government of the transformation plan of the Northern Runway to allow for dual use with the main runway. This will increase the airport's capacity by 20 million passengers at the turn of the decade, increasing it to 80 million. Through this decision, the British Airways pragmatic implementing the key role of air traffic in the country's economic development as well as its capital. On the right, in Brazil, Entrevias highway, 600 kilometers crossing the state of Paulo. We own 55% of Entrevias now fully consolidated in early March 2025. We resumed operations on the highway of BR-040, 600 kilometers long and the Belo Horizonte Brazil route, managing over 1,200 km of highway. It's our largest highway network outside France and Brazil to give you an order of magnitude, 1,200 kilometers, slightly longer than the Cofiroute network that we manage in France. Energy Solutions now on the left, a fine shot of the Cadiz yard from the North Sea in Germany of the offshore wind plant BorWin5, 900 megawatts for TenneT, the second such platform installed successfully by Cobra. It's a feat of engineering, not always easy to implement Cobra teaming up with Siemens Energy constitute an unparalleled tandem in the world. Cobra has 8 other contracts in its order book for a cumulative capacity of 14 gigawatts gives us visibility on the activity and profitability through to the next decade. These offshore converter platforms are strategic also for Germany's energy transition and sovereignty and more broadly, that of Europe, as was reminded recently last week in Hamburg, a joint declaration of 10 European countries that want to make the North Sea the largest hub of offshore wind, targeting 300 gigawatts by 2050 back to Germany, the second largest VINCI market internationally and will become a leading international market this year through acquisitions by VINCI Energies in that country. And growth opportunities in infrastructure. VINCI Energies isn't just expanding in Germany. On the right, EnergoBit, that's a company acquired by VINCI Energies at the end of last year in Romania. This acquisition fits fully with our plan to strengthen our leadership in electrical infrastructure. For Construction, on the left, this is Auckland, the City Rail Link, the first underground rail link of the economic capital country. Work began in 2019. This design build project will be delivered in 2026 by VINCI Construction. It's a powerful lever for social integration and also sustainable development as a rail infrastructure for Auckland. Staying in New Zealand, let me remind you that VINCI Construction announced a fortnight ago that it signed an agreement with a view to acquiring Fletcher Construction with an annual revenue of over EUR 600 million. Next ahead. Construction, this acquisition will allow VINCI Construction to strengthen its position on the very dynamic infrastructure market in New Zealand and to increase the group's annual revenue to about EUR 1.5 billion in that country. We can say that as rugby fans, we've always converted our tries in that country, both in VINCI Energies and VINCI Construction, and we hope that will continue for the current highway PPP project being looked at by the teams of VINCI Concessions and VINCI Construction. Right back to France, heading for Nantes, shown here is the construction of the new University Hospital Center by VINCI Construction and VINCI Energies. This worksite is the largest hospital construction project in Europe. VINCI Construction is deploying ultra-low carbon concrete and this worksite illustrates one of the many hospital work sites currently being executed by the group. There are some dozen such projects at VINCI Construction France, Monaco, another 10 in the U.K. and 6 in Poland. VINCI Energies, many technical work packages in hospitals and not forgetting all the contracts in the health care sector for the pharma industry. So both these projects are fine illustrations of vital infrastructure with mega trends, the environmental transition with rail or health generating countless opportunities for VINCI Construction worldwide. And I'll return to that in greater detail when I discuss the group's exposure to major mega trends. Moving to the results proper. The takeaway of 2025 for VINCI, as I said, outstanding performance in line with previous years, outstanding performance in spite of the macroeconomic and global geopolitical context that you know of the highlights. Next slide, revenue growth driven by Concessions and Energy Solutions. Revenue growth with an increase in EBITDA and operating income across all our businesses. That's what counts for us more than volume growth. What counts for us is profitable growth, net income is up and that in spite of a very significant increase in taxation in France in 2025. Free cash flow reaches another all-time high at EUR 7 billion. We'll return to that in due course. For 2026, we're banking on a further increase of activity and the group's results. And lastly, the Board proposed a dividend in respect of FY 2025 EUR 5 per share. That's an increase in excess of 5% over 2024. This outstanding performance indicates that the group's decentralized and multi-local organization of the group has demonstrated its relevance once again, it reflects the group's culture, unique culture, more about that later. On this slide, the main financial indicators. Christian will return to that in detail. At constant taxation, the net income group share would have grown 10% at EUR 5.4 billion and free cash would have reached EUR 7.4 billion. On this slide, you see that our share of revenue international outside France is close to 60% proportion increases year-over-year. It's not that revenue in France is declining on the concrete activity in the country has grown 2%. It's international that's growing faster. You see also that at 5 countries accounted for total revenue, France, U.K., Germany, of course, which tomorrow, as I said, well, our leading international market as well as Spain and the United States. You will have noted that our net income is achieved over 50% outside France. This internationalization strategy, we've been rolling it out consistently for some 15 years now, and we'll continue to do so. Some key figures by business in Concessions. Revenue growth is 5% plus 4% like-for-like EBITDA margin comes in at 66.9%, up 10 basis points (sic) [ 14 basis points ] over 2024, driven by solid tariff increases, both in airports as well as highways, both in France and international, driven by the successful integration of our recent developments; well done to our teams led by Nicolas. Concessions accounted 60% of the group's EBITDA this year. In greater detail for VINCI Airports, the momentum is sustained. VINCI Airport passenger traffic continued to grow across almost all 14 countries of the network. That's down to several factors, increased capacity of low-cost carriers, the development of long-haul routes in several airports and more generally stemming from customer demand that remains robust. Even if the post-COVID rebound is dwindling, the demand for mobility is a vital need. In total, 334 million passengers used our airports, an increase of 5% over last year, in particular remarkable progress achieved in Japan, notably a consequence of the Universal Fair in Osaka last year and recently acquired airports, Budapest, Edinburgh, the OMA airports in Mexico, Cabo Verde. All this demonstrates the discipline with which M&A is undertaken, our serious analysis as well as the momentum that we can in part to the new airport. This dynamism of passenger traffic in VINCI Airports is due to our own capacity, thanks to the network effect, our unique network of airports to offer new routes, offer new routes to airlines, 400 in 2025, and I can't resist the pleasure of just an invitation to travel to mention a few, Porto Montreal, Gatwick, Bangkok, Edinburgh, Boston, Budapest, Nantes and from Mexico, Monterey, Paris. Once again, we have collectively demonstrate that this portfolio of unique airport assets achieved many operational, technical and commercial successes throughout 2025. Autoroutes, highways in France, VINCI Autoroutes traffic posted a growth of close to 1%. VINCI Highways EBITDA continues to grow, whilst remain penalized by the tax on transportation infrastructure since 2024. We continue to challenge that before the courts. But we've renewed constructive and calmer engagement with the state as illustrated by the ESCOTA works program to ensure the good maintenance of the structure between now and the end of the Concession contract in 2032. That program was approved by the government early 2025. We just owned a new planning contract for Cofiroute with more about that later. For VINCI Highways in Denver, united States. We're doing what we said we wouldn't, faster than expected. A year ahead of time, we put in place the toll modulation system with tariffs vary depending on the time of day. That has a positive upside on revenues. In Brazil, we reviewed resumed operations of the Via Cristais and we now fully consolidate the Entrevias accounts in the group accounts. As you know, we are the leading private airport manager worldwide and handful where the leading private highway manager in the world with 8,200 kilometers of network gives us great pride and it's a fine responsibility. Energy Solutions remaining very dynamic, revenue of Energy Solutions at VINCI. Okay, let's round it off, let's say, EUR 30 billion. That's an increase of some 8% at actual structure, plus 6% like-for-like. Strong momentum in Q4. This revenue is driven by international business that represents over 60% of the revenue. This growth is accompanied by further progress in margins over 20 basis points at 7.6% positions as once again and without challenge, one of the most efficient players of the industry globally. Well done to VINCI Energies and Cobra. Energy Solutions represent almost 1/4 of our EBIT. This year confirms the excellent positioning of Energy Solutions, rate dynamic markets driven by the energy transition, the digital transformation as well as by defense and sovereignty issues. In greater detail, you can see top right that the 4 areas of activity of VINCI Energies that represent an unparalleled range of expertise. We're all posting revenue growth. You can see that VINCI Energies continues its crop in terms of external growth with about 30 a year. That's one acquisition every fortnight. Internationally, VINCI Energies revenue is up 8%, notably in Germany, the leading market, the Netherlands and also in Belgium, and in France, growth comes in at 3.4%, that's way above GDP growth. Turning to COBRA. Flow business activities remain well oriented, particularly in key markets such as Spain, Portugal and Brazil. Overall, this segment grew by nearly 5%. In large EPC projects, which happens to be Cobra's area of excellence, the strong increase in activity, plus 24% was driven by the construction in Germany of offshore electrical converter platforms for the North Sea. And also in Germany, the development of LNG regasification terminal. In Brazil, high-voltage power transmission line. And of course, we talked about that very much in July, the launch of the major PPP project in Australia. These are all strategic projects that contribute to the energy sovereignty of the regions concerned. In the Construction business revenue increased slightly. As you know, selectivity is our guiding principle in this business. And the lower revenue observed on a like-for-like basis is evidence that this selectivity policy is effectively being implemented. However, our teams successfully improved profitability by nearly 30 basis points compared with last year. So once again, excellent work the VINCI Construction and VINCI Immobilier teams. At VINCI Construction, revenue increased by 1.1% to EUR 32.1 billion despite a significantly negative ForEx impact, minus 1.5%. Market conditions vary across regions and business segments. Activity in major projects declined reflecting the phasing of progress on a number of large infrastructure projects, core flow business activities remained at a solid level, both internationally and in France, where activity increased, thanks to sustained demand for road, rail and hydraulic works as well as building refurbishment projects. Specialty activities at [ Soletanche Freyssinet ] also remained at a good level, particularly in the nuclear sector. Let me also remind you, you can see the pie chart on the screen that the vast majority in Construction revenue is generated from smaller scale projects delivered for recurring local customers, what we call our core flow business activities. And that is unusual among our top competitors. In other words, the share of major projects in our overall activity is deliberately limited representing around 10%. In the property development sector, in France, market conditions remain extremely challenging. VINCI Immobilier's teams are demonstrating our ability to stay the course despite headwinds as illustrated by the return to positive earnings in 2025. Order intake reached a high level in 2025, EUR 63 billion. Our key takeaways include flow business activities, which account for the vast majority of growth revenue in Energy Services Solutions and Construction, that remains well oriented, increasing by 3%. So order intake overall remains higher than revenue, particularly in Energy Solutions. And this means that the backlog continues to grow. I will now hand over to Christian Labeyrie, who will present the group's financial performance for the year in detail. Christian Labeyrie: [Interpreted] Thank you, Pierre as Pierre explained, our 3 businesses delivered very different growth rates; plus 8% for Energy Services or Solutions, plus 5% for concessions, plus 1% for construction, resulting in overall group revenue growth of plus 4%. And these trends reflect differing market dynamics and geographic mixes across our businesses. This is not by chance. It's the outcome of a long-standing diversification strategy designed to reduce the group's exposure to economic cycles and geopolitical risks. This strategy enables us to grow in a sustainable manner, delivering solid results and steadily increasing cash flows year after year. To achieve this, M&A growth is a key pillar of our strategy. In 2025, changes in scope contributed plus 2.5% to group revenue growth. And for international operations, the contribution was higher at 4.1% as most acquisitions were completed outside France, and this represents close to EUR 2 billion in additional revenue. Full year impact of 2024 acquisitions, EUR 700 million, including over EUR 400 million for VINCI Energies. And the consolidation of Edinburgh Airport mid-2024 to the tune of EUR 162 million. And the 2025 acquisitions contributed EUR 1.2 million -- actually EUR 1 billion, including Conway EUR 664 million, VINCI Energies, EUR 278 million; and VINCI Highways EUR 93 million, so nearly EUR 100 million. By contrast, ForEx impact had a negative effect on group revenue of minus 1% or EUR 686 million with a significant share, EUR 462 million or minus 1.5% attributable to VINCI Construction. So the euro appreciated year-on-year against several currencies, including the U.S. dollar, 4.4%; the Canadian dollar, plus 6.5%; Australian dollar, 6.9%; and New Zealand dollar, plus 8.6%; the Brazilian real, 8.3%; and sterling, plus 1.2%. On a like-for-like ForEx basis, group revenue growth would have exceeded 5%, while international revenue growth would have reached plus 7.4%. Now the geographic breakdown. France accounts for 41% of total revenue, which means a 2% increase in line with domestic growth and inflation. Europe, excluding France, 38% of total revenue, up 9% or plus 3.7% on an organic basis. The U.K., 10% of total revenue, up 10% organic growth of 1.2%. Germany, close to 9% of total revenue, so EUR 6.5 billion in revenue, up 17% or plus 11% on an organic basis. Spain, 5% of total revenue, broadly stable. The Americas, EUR 10 billion, 13% of total revenue, organic growth plus 2.2%. The U.S., EUR 3.4 million, up 4.6%, but up 7.2% on an organic basis. Canada, EUR 2 million; Latin America, EUR 4 billion, up 6%; Brazil, 1.8%, plus 18% or plus 13.6% organically. Australia and New Zealand, over EUR 2 million, but down 10% due to an unfavorable ForEx impact. And Africa is back to growth, EUR 1.8 million, up 14%. If we look at operating profit from ordinary activities, 2025, EUR 9.558 million, representing 12.8% of revenue. So plus 6.2% versus -- that's an increase of 6.2%, exceeding revenue growth of plus 4.2%. Now comments on margin trends of VINCI Concessions. There's an impact from higher depreciation charges of VINCI Autoroute, mainly reflecting the commissioning of the A57 widening project in the Toulon area. So for VINCI Airports, there is a mix effect between the different platforms with the end of the [ Pumping ] concession. Highways, you're not seeing the impact on the slide, but we're seeing a strong increase in [indiscernible] VINCI Highways due to the consolidation of Entrevias and Denver. For Energy, VINCI Energies is seeing a margin that's up 20 basis points. And you've got to understand that this margin rate is rather homogeneous between the different divisions and business lines of VINCI Energies. It's also true for Cobra. We're seeing an improvement of 20 basis points, so 8% margin and margin levels are broadly comparable between flow business activities and EPC projects. VINCI Construction, margin up 10 basis points to 4.2%. Again, the impact is quite clustered. We're seeing that the U.K. is back in the lead. The U.K.'s profit margin is close to 4%, and this has never happened before. And this is in part due to Conway being consolidated. Now in real estate, this business was making loss last year due to restructuring and impairments for commercial housing projects. Now we're seeing an increase in the IFRS 2 expense, and this reflects the impact of the PEG employee shareholding project and an increase in employee subscription. And because the share price has increased, this has led to an impact that was higher than in 2024. And this is offset by the improved contribution from the equity accounted affiliates as well as the airports in Japan. Also Cobra's stakeholding in electrical transmission lines in Brazil. Recurring operating income, 6.2%, but we're seeing differences from one segment to another, plus 5% for concessions, plus 1%. And if we look at the breakdown, we find that there are 3 equivalent blocks, VINCI Airports and other Concessions, 31% and Energy Solutions and Concessions, 35%. Now if we look at the situation the previous several years ago, we were highly dependent on French motorways. Now there's a much better balance between the different contributions of the different segments to the group's financial performance. Previous slide, please. Now if we look at nonrecurring items, there are positive impacts of disposals in 2025, particularly the pullout from our Russian auto route activities and also our participation in access and also divestments for Cobra, including a pullout from offshore wind farm development. Now there's an increase in net financial expense because we paid over EUR 7 billion for new acquisitions in 2024, but the impact is rather limited. It's much lower than expected because of the volume impact due to the growth in debt because of the acquisitions has been offset by cash flow better than expected. And we've been -- we've enjoyed a favorable ForEx impact in particular, thanks to our strategy, partially floating rate debt. So we've been able to curb the increase in financial expense. Now if we look at our P&L, this comes as no surprise, but tax is up significantly, plus EUR 560 million, including EUR 449 million related to the [ surtax ] on large corporate profits introduced in France in 2025 and extended to 2026. As a result, we're leading -- we're seeing an effective tax rate of close to 35% versus 29% in 2024. If we restate, for that, the effective tax rate would have been 29%, broadly in line with 2024. The corporate tax rate in France increased from 25.83% to 36%. So net income, EUR 4.9 billion despite the higher tax burden in France was slightly above the 2024 level, which came to EUR 4.86 billion. Earnings per share increased by 2.6%, reflecting share buybacks that reduced the number of shares outstanding. The number of shares outstanding decreased from 562.4 million to 556 million at the end of 2025, and that's a 1.1% reduction, and this continued through 2026. As you can see, we have a new share buyback program, which will cover Q1 2026. On a constant tax basis, net income would have reached EUR 5.35 billion. So that's a 10% increase and earnings per share would have reached EUR 9.44 per share, so up 12%. Now if we look at the cash flow statement and analysis of the change in debt net for -- during the year, consolidated net financial debt decreased in 2025 from EUR 20.4 billion to EUR 19.1 billion at the end of 2025. Why? Well, first of all, because our EBITDA improved by EUR 800 million, increased more than our revenue, so up 6.4%. Also a positive change in working capital requirements and current provisions causing contribution in cash of EUR 2.5 billion, which is higher than the already very strong 2024 level, EUR 2.3 billion. What we can say is that over 2 years, thanks to strong control of working capital in 2024, we're talking plus -- we're looking at plus EUR 1.8 billion, which is comparable with 2024. And also, we have a prudent provisioning policy. So plus EUR 0.7 billion versus EUR 0.5 billion in 2024. So the group generated an additional EUR 4.8 billion in cash. Contrary to what some of you expected, this remains a strength for the group. And this reflected sustained efforts across all divisions, particularly at VINCI Construction to structurally improve our collection process for customer receivables and also our billing process, which delivered results beyond our expectations. You got to understand that Vinci's business is 90% flow business. I'm talking about construction, of course, in energy. So contingencies pertaining to major projects have much less of an impact than they used to when it comes to changes in working capital requirements. Now I'm not going to back to tax. Tax is up, financial expense is up. CapEx remained broadly stable year-on-year, EUR 4.9 billion, although there are different trends across divisions. Concessions, EUR 1.3 billion versus EUR 1.4 billion last year. Energy, EUR 2.3 billion versus EUR 2.2 billion last year; and construction, EUR 1.3 billion, same as last year. Financial investments made in 2025 amounted to nearly EUR 1.8 billion. That's the difference between disposals and acquisitions, but there's a sharp decrease compared with the EUR 7 billion in 2024 when we consolidated Edinburgh, Budapest and also the Denver Highway project. This year, what are we seeing? Well, we've seen the consolidation of FM Conway, EUR 0.5 billion, VINCI Energies acquisitions, so about EUR 400 million. And this includes 3 important affiliates in Germany. We dealt with ACS to finalize the EUR 300 million project and also integration of Entrevias. We have a 55% stake in this project in Sao Paulo in Brazil, which didn't use to be fully consolidated. And following renegotiations on governance, we're now going to integrate the debt for this project. Now the divestments amounted to BRL 300 million to BRL 400 million following the disposal of a corporate stake, in particular, in this project in Brazil, offshore activities in Brazil, the sale of access and also the sale of VINCI Highways' Russian assets. So cash return to shareholders is significant, BRL 3.8 billion, including BRL 2.7 billion in dividends paid to VINCI S.A. shareholders and also the dividends paid by Gatwick, Edinburgh and OMA to minority shareholders. Now we bought Edinburgh over 1 year ago. And this is the first year that we've been able to extract cash from that entity. Share buybacks, I talked about that, EUR 2 billion. So share issuances, EUR 0.8 billion, representing 7.5 million shares -- and we need to look at the difference between gross debt and net cash. And this is increasing over a year. Seasonality of free cash flow, that's the next slide. Nothing new under the sun. VINCI's businesses are characterized by strong seasonality in contracting activities, business volumes are lower during the winter months and I am assuming the obvious year. In Concessions, activity is particularly strong during the summer period. Fixed costs, however, remain largely stable throughout the year. So most of the group's cash flows generated in H2, particularly the last quarter of the year as illustrated by the chart. This is why it's difficult to have a reliable forecast. We did go out on the limb this year, but we were dragging our feet for that very reason previously. An additional challenge in producing reliable full year free cash flow forecastings from the group's highly decentralized organization. So over 4,000 business units, over 3,000 businesses consolidated and our BUMs, Business Unit Managers who are the core of our business, usually adopt a cautious approach when communicating the forecast. And that prudence is understandable, but the cumulative effect can result in significant variances at year-end as layers of conservatism add up. Now 10-year trend in free cash flow and net income cash conversion, we're seeing that we generated close to EUR 50 billion over 10 years, including over EUR 30 billion over the last 5 years. And this illustrates the effectiveness of the group's business model and the relevance of its -- and the power of its decentralized management organization. Secondly, and this in spite the fact that we weathered as many others, a lot of extraneous crisis during that period, thanks to the diversity of our activities and our geographical footprint and a prudent financial policy, we've been able to deliver year after year solid results. We've improved them as well as free cash flow generation. It's the fruit of the work of our business units, our thousands of BUs, all efficient companies, very customer-focused, responsive, fleet footed to take account of market changes to end our financial policy. It's not revolutionary what I'm going to say. I tend to repeat myself every time. Financial policy rests on several pillars. Firstly, it's key for us to have considerable liquidity. It's the price of liquidity, EUR 15 billion cash. That's EUR 2.4 billion increase, a credit line, EUR 6.5 billion by our banks, maturity extended to January 2031. In spite of the cyclical variations in market conditions at all times, we can generate resources to continue to invest in our businesses, seize development opportunities that form part of our strategic plan and return to our shareholders. We have to manage significant debt, EUR 34.5 billion that is actively managed. It must be refinanced regularly and its cost must be optimized. 2/3 of the debt are housed in infrastructures that we managed for long-term contracts. That's about EUR 10 billion for ASF and Cofiroute and as much on our airports. So debt service with the concession -- debt service is insured by cash flow generated by projects to calibrate fully our capital injections and optimize return on investment debt housed on projects is fixed rate, whereas corporate debt has a variable rate. At the end of 2025, fixed rate debt accounted for 46% and 34% and variable debt, 54%. We've been able to reduce the average cost of our debt by 60 bps in 2025, bringing it down to around 4.3% despite of the fact that 60% of the debt is not denominated in euros, the euro where we arrive at very low rates. It's not the case when we borrow in real. So Colombian currencies, dollar or sterling. And lastly, we're preserving our excellent credit ratings. As you know, minus A3 S&P, Moody's, they're periodically reviewed, but they're confirmed year after year. And thanks to all that, we're able to issue in 2025, EUR 5.7 billion additional debt to refinance EUR 4.2 billion. Excellent conditions. Our signature is widely appreciated by bond investors as we demonstrated successfully in January with a new ASF issue, EUR 500 million over 8 years that have cost below 3.5%. Thank you. Pierre Anjolras: [Interpreted] Thank you, Christian, for those very clear explanations. In terms of outlook now, our outlook reflect our value creation strategy in both our long-term and short-term activities, long-term activities, mobility infrastructure. This year, VINCI has signed with competent authorities, major agreements that strengthened visibility and offer promising growth prospects in airports. I'd like to emphasize the expansion potential of the airports that we operate in addition to our M&A growth. In this complex world, one of the great strengths of VINCI is to forge relations based on trust throughout the world. And thanks to this constructive dialogue, several major agreements were signed these past few months. A few examples. London Gatwick, I mentioned we have the approval of the Northern Runway in Lisbon, Portugal. Our teams in January 2025 at the request of Portuguese authorities began to study the development of a new airport at Alcochete, Lisbon. A major milestone was reached after consultation of the stakeholders with the receipt of a favorable response from the grantor regarding the launch of the preliminary design phase. Let's cross the Atlantic. In Mexico, OMA subsidiary signed at the end of December, a new 5-year economic regulation contract defines investments over the period, around EUR 800 million as well as the associated tariff increase in Cape Verde, further investments in excess of EUR 140 million over and above those already launched early 2026, increase the airports of the island state to boost their traffic, but above all to maintain the economic and tourist dynamism in the country. We can mention the start of the launch by VINCI Airport in close conjunction with VINCI Construction, VINCI Energies, the new terminal of the Santo Domingo Airport in the Dominican Republic. In France, following a constructive and confident dialogue with the state, VINCI has just signed a new rider to the concession contract for Cofiroute. Through moderate tariff increase, it allows the application of the court decision on the composition of the increase on the regional development plan and an investment of some EUR 350 million on the network. These are essentially shared mobility investments, regional development and use of e-vehicles for electromobility. 100% of the VINCI service areas have charging stations as well as some 40 service areas, making it the best equipped highway network in the country for 2,400 charging points, that's 54 every 100 KM. Thanks to that, the number of charging stations could double. Through all these examples, our infrastructure is vital, but also changing, evolving, being renewed and needs development, many opportunities for value creation by VINCI for VINCI, both in our airports and the highways that we manage. In terms of energy infrastructure, long term. In 2025, the group decided to combine the energy production activities, essentially PV developed by Cobra Zero.e. That's the dedicated subsidiary to better nurture performance to optimize financing arrangements and asset rotation if need. Zero.e has a total capability for renewable power production of 5 gigawatts. 1.2 gigawatts in operation and 4.2 gigawatts under construction already to build to date. Cobra has invested EUR 2.3 billion in that portfolio. This investment policy is selective, targeted on limited number of geographies, Spain, Brazil, the United States and also Australia. We plan to strengthen the value of these assets with battery projects. And on the basis of this current portfolio, we're banking for this activity by 2030 on an EBITDA in excess of EUR 400 million. So furthermore, still long-term energy assets, Cobra benefits, as does VINCI Energies of long-standing expertise to implement construction and maintenance projects for high-voltage power lines, Cobra is currently in charge of 4 PPPs for over 200 kilometers of lines in Brazil and Australia. This is the beginning of an asset portfolio in the field of energy transmission lines where opportunities are numerous in Brazil. They're developing in Australia. And we believe that they will also expand elsewhere, notably in the United States. Short-term activities, all our businesses are driven by the world's mega trends. And on this slide, we're presenting a selection of 6 megatrends that we view as dynamic, both short and long term. For electrical infrastructure, the group generates over EUR 10 billion revenue with the backlog of close on EUR 20 billion. We're one of the world leaders, if not the world's largest utility, rail works, EUR 6 billion with a backlog of EUR 11 billion. Defense and sovereignty, EUR 2 billion in revenue and EUR 3 billion by way of backlog. Water infrastructure, EUR 3 billion revenue with similar backlog; digital infrastructure, we assess our revenue at EUR 7 billion, backlog EUR 6 billion; healthcare, EUR 2 billion in revenue and equivalent backlog. All these vital assets are already reflected in our figures, account for half of the revenue and 2/3 of our order intake in Energy Solutions, and that's set to continue to grow. Our order build continues to grow reaching an all-time high of some EUR 70 billion. That's over 14 months of activities. Offices visibility, we can view the future with confidence without departing from our selectivity policy margin over volume. On the right, the share of France, 29%; Germany, 20% share; and the rest of the world, 51%. Shown here is our guidance, 2026 by business. VINCI Airports' passenger traffic should continue to increase overall in line with global economic growth with various situations across region. VINCI Autoroutes in France, traffic growth should follow French economic output and that of its neighbors, including Spain and Italy. Energy Solutions are expected to see their revenue growth in a mid- to high single digit range, expected improvement of the operating margin already at the highest level in the sector. Total capacity of Zero.e in operation and construction ready-to-build could go from 5 gigawatts currently to about 6 gigawatts at the end of '26. Construction revenue, excluding ForEx impact, is likely to be broadly similar to the 2025 level with at least the same operating margin. Based on these expected developments, assuming no change in taxation, similar corporate tax rate as in 2025, VINCI will deliver further growth in its revenue in 2026, increase in its operating earnings. And further increase in its net income and as initial estimate of free cash flow, which could reach EUR 6 billion. The dividend on the basis of the remarkable performance in 2025, the free cash flow generated and confident in the prospects, the Board will propose at the upcoming shareholders' meeting a dividend of EUR 5 per share, EUR 1.05 has already been paid as an interim dividend. This would be an increase of 5% over 2024, and that would be a payout ratio of 58%. A word to remind you of our capital allocation strategy, consistent strategy for their shareholder on the right, the dividend with the payout ratio target, 60% of net income and share buybacks over and above the prime aim to offset dilution brought about by the issuance of shares to employees. The group will undertake opportunistic share buybacks based on our financial leeway taking into account M&A and the share price performance whilst seeking to maintain, as Christian said, a solid financial structure to maintain the excellent financial ratings. In terms of development on the left, we'll continue to invest in long-term infrastructure concessions, be it auto routes or airports through M&A or investing in our existing assets as well as in long-term assets for the production of renewable power storage and transmission lines. Short-term activities, the group strategy is to go all out on Energy Solutions for 20 years now. We've demonstrated our know-how when it comes to acquiring and integrating successfully new companies and the group remains open in the construction field to opportunistic acquisitions. Shown here is a summary of our capital allocation strategy over the past 3 years. Free cash flow totaled some EUR 32 billion, 3 broadly similar segments. EUR 11 billion, EUR 2.7 million for developing energy assets and PPP transmission lines, EUR 10 billion in M&A to prepare confidently our future. There are main deals over the 3 years. The equity IRR and EUR 12 billion in dividends and share buybacks. Shown here is a recap of the major acquisitions in 2025 already discussed, and I'd like to emphasize what Christian said, we regularly undertake disposals so as to optimize our ROE and improve clarity. The portfolio reviews are regularly undertaken leading possibly to an increase in investments in some assets or disposals in others. With Christian, we've just presented VINCI's financial performance for the year. It's remarkable. This ability to generate long-term value rests on a very strong VINCI culture that is shared by all that makes VINCI unique. This culture is shown on screen, is the long-term mind-set, the quest for all-round performance. We consider both financial and nonfinancial performance inextricably linked. That's the all-around performance. Our Group culture is decentralized, multi-local, agile organization, which is particularly relevant in this polarizing world. Our culture is its trusted management with common principles across its 1,400 BUs, unmatched execution policy, focus on cash generation and great discipline and cash allocation. This culture characterizes VINCI in all its businesses, in all its geographies and characterize its -- all its global assets. It's this synergy, the shared values that make VINCI a rare precious value. At least for us, it's the only way of continuing to create value long term, and we once again demonstrated in 2025, and as we'll continue to demonstrate. Thank you for listening. I'd also like to warmly thank Christian today with some emotion. Christian, you've been Group CFO, if I'm not mistaken. since January 1999. It means that VINCI duration and long term is also present in its executives and management. And if I'm not mistaken, you've just presented for the 28th time the group's financials since you were appointed, I haven't taken into account the share price performance today. 1,100% and over 3,000% with the dividends, that's an average 14% a year on behalf of the almost 300,000 employees of the Group, majority of whom are shareholders. Thank you. Well done. Pierre Anjolras: [Interpreted] You can do just as well. Even better. Let's go with the bank. Together with Christian and the rest of the Executive Board, we are at hand to answer any questions you may have. Eric Lemarié: [Interpreted] Eric Lemarie, CRC. I have 3 questions for starters, if I may. Question number one, future potential calls for tender as part of renewing concession contracts in France. What about the timetable following the presidential elections? The press talked about 2028. Do you have additional information on that? Question number two, the rider to the Cofiroute contract, could you please give us some color regarding how things worked out? Who approached who? We often bear in mind the political risks, but maybe those risk are lower than what we'd expect. Could we expect a similar amendments to Escota contracts or ASF contracts? Do you intend to proceed similarly? And also the EUR 300 million in CapEx, could you give us the sequencing year-on-year and also the return on capital employed for this particular plan? And 1 last question regarding free cash flow. The guidance stands at EUR 6 billion. So what are your assumptions when it comes to working capital requirement fluctuation? Pierre Anjolras: [Interpreted] Regarding the first 2 questions, I'm going to hand over to Nicolas. Nicolas Notebaert: [Interpreted] Now on a more short-term basis, the investment program contract with Cofiroute and also prospects for investments. As Pierre rightly said, what's important when it comes to concessions, particularly when there are legal contract disputes, always maintain dialogue. And that's what we did. And we now have a constructive dialogue. So what is disagreement all about? It's about transferring investments. In the life of a contract, a certain type of investments were not being made. So mechanically, we were able to transfer them to new types of investments, particularly for decarbonizing motorways, multimodal exchanges, reserved lanes, et cetera. So one important factor, compensation. The Court of Appeals issued a ruling in 2025 and so the increase in the TAT divisional development tax which was specific to motorways was supposed to be offset for Cofiroute. Since May 2025, the government orders for the past increase in tax and also for the future increase in tax, and this generated additional investments. And as a result, the court ruling in May 2025, plus our partnership-driven approach meant that we were able to find common ground. So you also referenced other companies. We have submitted a new joint project together with the government regarding Escota. So that's work in progress. The investigation is underway. And of course, we're not ruling anything out when it comes to ASF, but it will be a different approach. As Pierre rightly said, we have completed Stage 1 when it comes to the end of the concession contract because 7 years ahead of time, concession contracts require an agreement when it comes to residual investment we made, and that's what we did for Escota for future competitive bidding. You know that the government believes in dialogue, that's part of the France transport ambition. And they've recognized the merits of infrastructure concession contracts and also tolling for the future because when a country such as ours is heavily in debt, you got to understand that 20% to 25% of tolling proceeds come from international operations. Spain's economic growth outperforms the European average. As you know, VINCI Autoroutes, Highway -- highways are connected to our Spanish highways. So parliament will be discussing that. We will be discussing the framework legislation to prepare for future contracts now that the current -- once the current contract lapse around 2030. So we lay the groundwork for 2028, 2029. And of course, we will continue to be selective and disciplined. We will look at the terms and conditions of these contracts and see to what extent we can take part in those efforts. But we will look at the terms and conditions of those contracts in a couple of years. Eric Lemarié: [Interpreted] Now the CapEx sequencing between 2027 and 2030. In the meantime, still CapEx underway when it comes to networks. I'm talking about new contracts. Were you talking an additional EUR 350 million in CapEx? Nicolas Notebaert: [Interpreted] Could you please repeat the question? Eric Lemarié: [indiscernible] Nicolas Notebaert: [Interpreted] Well, you can do the math easily enough. There's a difference between the EUR 6 billion and the slight increase in revenue. Now that assumption is worth whatever it's worth. But there's a breakdown between working capital requirements on the one hand and the recurring provisions. As you know, we externalize our results, but we do it cautiously. There are 4,000 business units. Everybody provisions for risks that may or may not materialize. And -- it's a structural thing as far as we're concerned. So that's where part of the gap comes from and working capital requirement is managed as close to the field as possible by our operations teams and our administrative managers. And that's been a strong focus in a number of years. And the COVID period served to reveal the issue because we used to choose the path of least resistance, then we start rolling up our sleeves and now it's paying off. It's been 5 years now. And we're still reaping the benefits of those efforts, maybe not along the same proportions of the past few years because there was a catch-up effect. But this means that the EUR 6 billion estimated assumption is pretty reasonable considering the other parameters that we discussed in the press release. Yes, this affects Cobra, Construction and VINCI Energies. This was particularly true for the Construction business this year because the Construction was lagging behind the other businesses when it comes to improving its customer receivable collection processes and billing processes. Now from an operational point of view, because the global environment is trapped with increasing uncertainty, this means that our managers business unit managers are much more cautious when it comes to cash predictions. We usually estimate cash predictions throughout the project. But from this get-go, we try to be in a cash plus in a cash positive situation from the get-go because of the growing uncertainty of the global environment, irrespective of the contracts or the relationship with the customer by definition. The customer is always smarter when their cash is already in our pocket. So from an operational point of view, many talks and working capital requirement talks as well. And so our entire reporting structure is -- has been made aware of that. Now we went through a period of low interest rates. Remember, in Italy, there were 0 interest rates, sometimes even negative interest rates. And so good habits were taken back then to collect as quickly as possible. But when it comes to our vendors, the best thing we can do is pay them in due course. So it's a good thing. It's a good thing, those good habits have continued to prevail. And this explains in part the improvement in working capital requirement. And to our minds, that is a structural thing to a great extent. Sven Edelfelt: [Interpreted] Sven Edelfelt, ODDO. Congratulations for your excellent results. And thank you, Christian, for your contributions. I have a couple of questions. Number one, regarding ANA rate, the ANA output. Could you give us some idea of the CapEx and also the phasing of the initial investments into the Alcochete Airport if you have some idea already. Question number two, Pierre, you talked about the handover between Thierry and Christian. Sometime this year, maybe at the beginning of next year, maybe you'll be willing to share your vision, your 10-year vision of the growth, maybe during a CME, Capital Markets Day. Won't that be an opportunity to add color? Pierre Anjolras: [Interpreted] Nicolas, would you like to take this question on ANA? Nicolas Notebaert: [Interpreted] It's a little early to give you an economic guidance. Now there are contract milestones. We are crossing those milestones and is proceeding at pace. We have an order of magnitude, EUR 8.5 billion. That's been published. Now we're going through an important phase and that's the environmental assessment. As you know, in all Western European countries, the period during which we secured that environmental authorization is an important one. So that's Phase I. That's the environmental phase. And meanwhile, we're working on the final design of the airport, so we can optimize it considering renewed air traffic constraints, which are different now than they were a couple of years ago. And we are also looking at financial mechanisms. So the figure I'm giving regarding Portugal is already 1 year old, and it will shift further based on how we optimize the projects and also based on the outcome and the environment assessment. But it's not going to start right away. This is a project that will take several years to achieve. But the order of magnitude for this airport in Portugal is EUR 8.5 billion, as I said. Now in terms of financial reporting, that's something we pay close attention to because it is important. And that's why we all gathered here today. If we look at the timetable and the content of the Capital Markets Day, we don't have a clear guidance yet, but we've put our heads together, but I can't make any promises as to the outcome. Pierre Anjolras: [Interpreted] Other questions? Unknown Analyst: [Interpreted] I have a couple of questions, more anecdotal questions. You talked about BESS, Battery Energy Storage Systems. Do you -- are you thinking of signing a similar contract between Cobra and Tesla, for example, regarding the EUR 6.4 billion, you gave us some idea regarding EBITDA. You gave us a figure during the presentation, but the EUR 2.3 billion when it comes to current operations, is that generating EBITDA? And when it comes to M&A, you talked about the Fletcher acquisition in New Zealand, I think, and also FM Conway. Now in terms of mergers and acquisitions, I have in mind VINCI Energies, VINCI Construction is also making acquisitions. What should we expect? Should we expect regular acquisitions internationally from VINCI Construction? Or do you have countries that you prefer when making acquisitions? And also, you talked about the EUR 7 billion in revenue for digital infrastructure. So how much -- what's the share of data centers out of the EUR 7 billion? Pierre Anjolras: [Interpreted] Regarding the BESS, Battery Energy Storage Systems, your question is twofold. First of all, you're asking about our design and build contracting activities, VINCI Energies and Cobra are doing that. Arnaud can tell you more. Jose Maria can tell you more. And then there are investments being made in terms of long-term assets, and we are planning to invest into Battery Energy Storage Systems so as to further enhance the value of our solar PV facilities. Arnaud, anything you'd like to add? Arnaud Grison: [Interpreted] Yes, it's true. For a number of years, we've seen a roll-up in those BESS installations and facilities for various customers in Europe. So we have an EPC positioning. We don't have a framework agreement with any battery provider or even Tesla, but most of those batteries are Chinese batteries. China is a major provider of battery technology. So it's up to the developer and to the -- it's up to the investor to decide what kind of battery they want. Pierre Anjolras: Jose Maria? Jose Maria Lacabex: [Interpreted] [indiscernible] Invest only for supply our projects. We are not going to do or invest in a standalone capacity. And we expect to invest at least 5 gigawatts hour for our own projects in the next 3 years. And this allows us to increase our equity IR in around 200 basis points. Pierre Anjolras: And to add to that, we are considering, as I said in the presentation, a new investment on the renewable plants in Australia and actually an investment in a plant includes the investment in BESS. [Interpreted] Now in terms of construction, as we said before, our investment policy is an opportunistic one, usually designed to strengthen our existing strong positions where we're already feeling comfortable. Now as it happens, 2 years in a row, we had an opportunity to make the Conway acquisition in the London area. And back to back, there was another opportunity for another acquisition, Fletcher. And before that, the latest significant acquisition by VINCI Construction was back in 2018, Lane. So just because we make 2 major acquisitions back to back in 2025, 2026 means that we will do the same in 2027. It will depend on opportunities. If the opportunity arises, we'll go for it. Otherwise, we'll abstain. Now VINCI Energies, however, is more of a continuum because we have a recurring bumper crop of 30 acquisitions per annum. We're talking hundreds of millions in annual revenue, thanks to M&A. And that's part of our modus operandi. And we do it so often that it's almost akin to organic growth. But like I said, it all depends on what opportunities arise as indicated when I talked about our capital allocation policy. When it comes to digital infrastructure, I did emphasize the fact that regarding construction, flow business against 90% in major projects remaining 10%, but we could be saying the exact same thing regarding Energy Solutions. If you look at the share of EPC contracts for all Energy Solutions at Cobra, it's about 10%. For digital infrastructure, we have pretty much the same take. Now I don't have the exact figure top of mind to try and answer the question you posed, but we have major projects and there's a lot of visibility there. I'm talking data centers. And there's a lot of activity, a lot business around digital infrastructure between anything that happens between the hyperscaler and your smartphones. We're talking a lot of networks, a lot of assets. A lot of installation and maintenance contracts, a lot of cybersecurity aspects. So we have to factor it all in, into that EUR 7 billion figure. Now I said the flow business accounts for 90% of the mix. And that's much more -- that's much more recurring business than data centers. So data centers, we're talking major contracts, Cobra's EPC contracts, whenever they do want such a contract, there's a lot of visibility, and it's easy to understand. But you've got to bear in mind the recurring repeat flow business, which accounts for 86% of our contracting activities. And I know, I believe that this is a major differentiating factor when it comes to construction for VINCI. And this also explains the high quality for results. But whatever is happening around the data centers is going to fuel our business throughout the digital infrastructure segment. So yes, we do have a presence in data centers, but we mostly have a presence in the recurring multiyear flow business, what VINCI Energies calls Axians. I mean that accounts for 25% of VINCI Energies. And digital infrastructure can also be found in Energy Solutions because you can find it within a building, that's what we call [ sport ] building. You'll find that in electrical grid as well. That's what we call smart grids. Digital infrastructure is everywhere, smart grids, smart buildings, microphone please, regarding the contribution, no forecast yet. We have tentative figures only in 2023 where we have a full over 1 gigawatt on a full year basis when it comes to operations. So I can't -- I prefer not to give you a figure, first of all, because it wouldn't be significant, not even at Cobra scale, let alone at VINCI scale. But yes, this will start to generate EBITDA as early as 2026. We started generating EBITDA in 2025 a little bit because, Jose Maria, correct me if I'm wrong, operations began in June, July, started generating earnings, but I don't know how significant that is. So that is why I prefer to wait until '27 before I give you the guidance. That's how long it takes for the asset development pipeline to actually reach cruising speed. Unknown Analyst: [Interpreted] Well done for your results. Just following up on Zero.e, 1 giga for this year, we report the figures separately as of '26. A question on airports. We see slight margin erosion, traffic increase. Could you maybe just rehearse the reasons for that? And Gatwick specifically, could you give us some color and a time horizon? And final question, you mentioned a bit more portfolio rotation going forward. Could you enlighten us as to the criteria that will be applied? Pierre Anjolras: [Interpreted] On the Zero.e figures, I won't answer immediately, when it becomes significant, we'll report. But there's no point giving overly small numbers that can be misread. I think we'll be still in that situation in 2026. So it's preferable for us to give you an indication once these assets are in operation in -- reach cruising speed, it's far more significant. Question on the airports. A couple of questions on the airports, Nicolas. Nicolas Notebaert: [Interpreted] So your question on the airports. Well, firstly, we regularly make acquisitions that don't necessarily have the same EBITDA EBIT margins. The annual comparisons are not always like-for-like. Secondly, that we had some one-off high turns EBITDA and EBIT in 2024 versus 2025 and EBITDA EBIT margin, very high, that's grown significantly. And final point mentioned in the presentation, I believe it was Christian, we're going to change the motor contract on Phnom Penh Airport through September. We were in full concession. We were compensated, that was a one-off of the earnings. But today, we have an operation contract for Phnom Penh Airport, which obviously doesn't have the same EBITDA or EBIT margin. Those are the prime reasons that justify this consolidation and margin on VINCI Airports. Gatwick. Color on Gatwick -- Gatwick, as we said, we have a plan that we're now rolling out the CapEx, same to that's being development, about GBP 2.2 billion for that with the latest legal challenges are underway that approval was given. But as I said, we have to follow the latest rulings. But without delay, we're launching the design and works phase, 45 million is Gatwick capacity that will grow to 80 million passengers. So with that investment, we can up the capacity significantly. On portfolio revenues, just to reaffirm that we're doing that. And Christian drawn up an inventory. I mean there are a number of significant disposals. Those are amounts in the P&L and cash. Yes, we're active. We're developing and we're active to focus and we've done that, but we've always done and we'll continue to do. Pierre Anjolras: [Interpreted] If there are no further questions in the room, we can take questions on the call. Questions in French first. [Operator Instructions] First question, Patrick Creuset from Goldman Sachs. Patrick Creuset: [Interpreted] Christian, congratulations for the great numbers. In your release, you mentioned the strategic review of the portfolio through your businesses with the goal of optimizing the return on capital. Could you tell us what type of asset will be involved? What will be the criteria, the potential scale of this review. And also in terms of capital allocation, how you currently assess opportunities for M&A business, region and also size? Christian Labeyrie: [Interpreted] As I've just indicated, this principle of reviewing our portfolio concerns all our businesses, all our geographies, we do it. We'll continue to conduct that review. I'm incapable of saying to produce -- or depends what the ROE asset by asset, how to improve the Group's clarity. That would guide us, but we are not saying that these are times where we're going to increase the capital -- the volume did for M&A. There's a pipeline of M&A at VINCI Airports an M&A pipeline at VINCI Highways, at VINCI Energies and VINCI Construction that remains active for opportunities. We do that across our businesses, and we remain open to all geographies as long as we're comfortable there. And with stronger reason, we're more comfortable in geographies where we're already present, where we're already strong to do the various deals that we've mentioned. But if we go back further, without being present in Japan, we had the smart idea was from Nicolas to go to the Osaka and Kansa Airports. And Christian mentioned that. So we remain very open and very opportunistic. And similarly, we have no M&A investment targets per year. You've seen it's far lower this year than last year. And on average, that is pretty much the same thing, 3-year average. I presented that on the reflection over the past 3 years of M&A CapEx. But we're disciplined when we need to be disciplined, that is we don't do any old things. And if there are 3 or 4 deals to be sealed, Christian has the wherewithal, the munitions to strike a good deal or several good deals when we believe the time is right. And what we could add on that, says, Christian, that across our businesses, I mean we're not an investment fund. So we're not in the business of buying assets for the pleasure of buying. When we buy something, it's to nurture it, manage it to extract value through management that is a position of control even 100% in Energy, Cobra, VINCI Construction and in Concessions to be in control or co-control. If it's just to be a passive partner, not really in terms of the revenue that we contribute extensively through our work. The idea is to have a hope of improving receipts if it's a pure PPP with a fee paid linearly over the duration of the contract. It's a less interest. Cobra did in 2025 to seed its stake in a project acquired in Brazil, for which there was no upside on the traffic. It was clearly a financial deal. Once the development and construction risk is behind it can be -- can make sense to sell the asset to a pure financial player, an investment fund. Patrick Creuset: [Interpreted] So the minority stakes that might be sold or disposed of as your portfolio rotation? Christian Labeyrie: [Interpreted] It's possible. Look at the disposals of the year. There weren't just minority stakes or investment. Pierre Anjolras: [Interpreted] Next question. Elodie Yvonne, JPMorgan, over to you. Elodie Rall: [Interpreted] Yes. Sorry not to be with you this morning. Best wishes, Christian. Just to start, we sense that you're more ambitious regarding your return to shareholder policy. You mentioned opportunistic share buybacks to what level could you go and notably regarding the dividend 5%. I mean that's a priority. So clearly, that we're moving away from a payout policy so with things possible in terms of a dividend increase going forward, perhaps more dynamic, the net income. And maybe another question, if I may. Would you have a comment on the German contract, you're beginning to see the fruits of that and also highway traffic year-to-date? Are you seeing an inflection on the residential -- French residential market that you lost at '25. You see some green shoots of hope there. And I see on the portfolio review, you mentioned that at a great length, but how -- where does ADP feature in your thinking? Pierre Anjolras: [Interpreted] On the dividends, I've spoken about that, our goal down the road was 60%. I mean if the payout ratio is to head to 60%. On the share buybacks, in fact, we're pretty much the end of the catch-up of the dilution several years. generating new shares for the group savings scheme. So we're not ruling out the possibility of going beyond that. But once again, it will be opportunistically, as I indicated, based on the capital that we have to allocate on the expansion, be it M&A or developing existing assets and depending on the share price performance. I can't give you more guidance than that. But you can say is that the dividend policy. We don't want to change it every other day. But to give some guidance that we've always done on the share buyback, there we can be more opportunists I suppose you look at the Americans who're massively buying back shares when it suits them. depending on their CapEx plan, the GAFA is spending hundreds of billions in CapEx, maybe they'll do a bit less share buyback. That's part of the financial strategy. Highly complementary dividends and share buyback, we do both. In the CAC 40, same return to shareholders in terms of its market cap as VINCI today. Next, on highway, auto route traffic, they're significant. I mean January is never significant month of January. Not much to say what to draw from that. On residential housing construction with the exception of VINCI Real Estate, that's a fine company and the impact is limited on VINCI as a whole, notably construction is not at all very little dependent on the building of new homes. It's negligible share. And so the impact of residential property development aside from VINCI Real Estate has a little impact on the Group financials. What we can say Virginie, what the market is challenging. The housing stimulus plan announced to [indiscernible]. So that hasn't yet been placed on the statute. But so we wouldn't really see the effects of that before the coming months and that we're in a year of local municipal elections that are never times that are propitious to the dynamic launch of new projects. But whatever the housing stimulus plan is a good signal for the sector to kickstart the momentum after 3 years of crisis. There's a question about Germany. Well, in Germany, there are 2 major stimulus plans. There's one for defense and stimulus package for infrastructure. From what our German teams tell us and when we ask them, we need to question them several times to get a sense of what's happening between the EUR 500 billion at federal level and twice EUR 500 billion and how it percolates down to contracts. It's not easy to read. But the sense, yes, it's beginning to be visible in defense. I remind you that in defense, VINCI Energies made an acquisition of a company SAN last year that primarily works in German shipyards for the German Navy and has very sustained activity and growth prospects. And so that momentum is part and parcel of the defense stimulus package. So for the infrastructure stimulus German teams have great difficulty in seeing a significant shift to date on that front. Arnaud? Well, what we can say is we indicated ahead of phase on energy infrastructure stimulus package, there are major needs, but they're not fast-track projects because they need authorizations, there are appeals, et cetera, a lot of design work. So it's positive over the long term, but they're not hyper growth rates short term in defense, it's production capacity. So it's positive for one sector, but it's not hyper activity, either short or medium term. But what is, however, clear is that these announcements have generated a climate of confidence and that weighs heavily in the economy of the country. And -- the Germans are fortunate in that respect. That's why it's good to be in Germany. It's good to continue to expand in Germany. And as you saw these past few acquisitions, as you saw in the contracts, be it VINCI Energy, of course, but also Cobra with the major Cobra projects in Germany, VINCI construction there for a long time. Also VINCI Highways, which is the leading operator of German highway PPPs, and we haven't seen nothing yet in terms of project launch, but that could form part of the stimulus package. We're very well positioned to benefit from that. Questions in English. If you want, you've got the translation headsets. Okay. Let's have the first one. Operator: Our very first question from the English conference is coming from Harishankar of Deutsche Bank. Harishankar Ramamoorthy: I have a few. Maybe the first one would be around order inflows. When I look at your outlook for 1C Energies, solid mid-single digits to high single-digit growth. But in Q4 -- till Q4, we have not seen inflows improve a lot. So does the outlook imply that you are expecting inflows to turn the corner pretty soon? The second one on the German side of things. Any time line by which that could overtake U.K. And lastly, on the working capital, I do see you referencing better customer payments and so on. But when we look at the balance sheet, it looks like trade receivables are broadly flat, whereas it's the payables that have increased significantly. So is it a question of delayed payments to vendors? And if that is the case, then is that structural? Unknown Executive: [Interpreted] Quick answer to the second part of your question. The answer is no. It's been a long-standing policy for us to pay our vendors in due course. I don't know what it is like in other countries, but in France, the authorities pay close attention to that and Vinci has never been named or shamed with that kind of thing. we don't artificially prolong paying our vendors. Pierre Anjolras: As for the order inflow, it's complicated to look at quarter-by-quarter. And I think what you have to do is in the 12 months rolling. And another thing is the order inflow of SCNG was impacted also by a very large project in the past years. And when you restate that of the very large project, over EUR 50 million, the order inflow is still increasing. I think it's plus 4% this year. So yes, there's no worry. And as the guidance is supported by the -- what we see in the order inflow. Unknown Executive: We need to be very vigilant when it comes to analyzing the order inflow because VINCI has a lot of multiyear contracts, a lot of recurring business. So usually, we input the contracts at the beginning of the year. So during the year, we burn through the contracts that came in the year before, and we generate business for the year after. And this is true for VINCI Energies as well as other players. Now regarding the question on Germany, these are our estimates. Next year, revenue for VINCI in Germany will be higher than VINCI's revenue in the U.K. I'm not saying that the U.K. revenue will go down, but we will simply grow ours faster. In 1 year's time, things will have been reversed. Germany will be our second international contributor to revenue after France. That's our prediction. Next question. Operator: Our next question is from Ruairi of RBC. Ruairi Cullinane: Congrats on the results. One question on tax. So do you think the tax targeting large French corporates specifically needs to be exceptional to be constitutional? Would you challenge this tax if it became an even more regular feature of French budgets? Yes, I'll leave it there. Arnaud Grison: [Interpreted] Don't ask me, ask the government and ask parliamentarians. We can answer that question, particularly since last year, the surcharge was presented as a one-off thing that would apply just that year. And we're almost at the end of the budget approval process because it's been through parliament. So without too much surprise, that surcharge, that surtax is going to be approved and this means that a promise was made to us last year, but they're not keeping it. So I can't possibly tell you what will happen in a year's time. We do realize that for a while now, SME leaders and corporate leaders in France, major corporation CEOs are making statements to the effect that this goes on for too long. Tax-wise, France will be less competitive than the rest of the EU member states, and this could actually hurt the French economy. I think as the Head of Total Energies, who said that if corporations have a choice between 2 countries where the tax rate is 15% to 30%, what do you expect them to do? Where do you expect them to go? So -- and there's also an impact on the surrounding ecosystem, the employees, the vendors, suppliers, et cetera. So reason should prevail at some point. You can't continue to hurt the French economy's competitiveness compared with Spain, Italy, the U.K., Germany, et cetera. So we can hope that eventually reason will prevail. Who knows... Let's move on to the next question. Operator: We have a question from Nick Mora, Morgan Stanley, a question in French. Nicolas Mora: [Interpreted] Congratulations, Christian. I'm sure you're looking forward to retirement. [Indiscernible] To sell shares here. Now profit margin, let's start with that. Could you please give us an update on the upside for construction, Energies, Cobra, AS. So 2025 went pretty well overall. Profit margin was driven by M&A in construction and also profit margin for Cobra is being driven by renewables. So -- is that just a medium-term thinking? Or are you expecting that the improvement of 20 basis points to continue year after year? Now regarding airports, profit margin is under pressure -- was under pressure in 2025. If we look at '26 and '27, what should we expect? We're seeing an increase in costs. We look at the U.K. business rates. Prices are being moderated. Now the traffic situation is so so. So do you think that profit margin has already passed its peak? Arnaud Grison: [Indiscernible] Nick Mora -- regarding our contracting business, there's still potential. But we've been seeing it for a while now and yet people struggle to believe us. And this is true for construction as well. Thierry Mirville gave us a chart regarding the past 10 years, showing a regular steadfast increase in construction EBIT and also a cash conversion pattern that is as good as VINCI Energies and Cobra. So yes, those are value contributors and the value should be assessed properly. And needless to say, VINCI Energies and Cobra, you heard this several times in the course of the presentation is actually being supported by all customer requirements. There's so much to be done. So obviously, we're not going to double the profit margin, but there's still room for margin to continue to thrive. And the guidance has been set accordingly. Now how long will that last? It's hard to say. But yes, over the short term, we expect that trend to continue. When it comes to airports, that's slightly different. Nicolas can tell you more about that. We have a mixture of different platforms and each platform has its own trajectory. Nicolas, why don't you go ahead? Nicolas Notebaert: [Interpreted] And sometimes it takes a while for the effect to be fully felt. Now we have a new economic regulation contract in Mexico, as we said before. And -- so we're talking 6% to 7% above inflation over the 5-year period, which is good enough already because usually, our method is based on regular capitalization. And clearly, this platform has been outperforming the sector. Obviously, we've got London Gatwick and we've got the Lisbon Airport. So there will be regulatory discussions as well. So we haven't yet set the course in terms of tariffs, but we are aligned with inflation. So future expectations in terms of profit margins from airports have yet to reach the peak. But the situation is highly fragmented geographically, so is growth. But the recent news regarding Mexico is showing that these 5-year contracts are helping us to renegotiate so as to renew our profit margin prospects in the future. Operator: [Interpreted] Very well. If there's nothing further, if there are no other questions. Over to you, Pierre, for the conclusion. Pierre Anjolras: [Interpreted] Well, thank you so much for attending. Enjoy the rest of the day. Enjoy the rest of the year and see you very soon.
Operator: Good afternoon, and welcome to the MGM Resorts International Fourth Quarter and Full Year 2025 Earnings Conference Call. Joining the call from the company today are Bill Hornbuckle, Chief Executive Officer and President; Ayesha Molino, Chief Operating Officer; Jonathan Halkyard, Chief Financial Officer; Gary Fritz, Chief Commercial Officer and President of MGM Digital; Kenneth Feng, Chief Executive Officer of MGM China Holdings; and Howard Wang, Vice President, Investor Relations. [Operator Instructions] Please note, this conference is being recorded. Now I would like to turn the call over to Howard Wang. Please go ahead. Howard Wang: Thanks, Marco. Welcome to the MGM Resorts International Fourth Quarter and Full Year 2025 Earnings Call. This call is being broadcast live on the Internet at investors.mgmresorts.com, and we have also furnished our press release on Form 8-K to the SEC. On this call, we will make forward-looking statements under the safe harbor provisions of the federal securities laws. Actual results may differ materially from those contemplated in these statements. Additional information concerning factors that could cause actual results to differ from these forward-looking statements is contained in today's press release and in our periodic filings with the SEC. Except as required by law, we undertake no obligation to update these statements as a result of new information or otherwise. During the call, we will also discuss non-GAAP financial measures when talking about our performance. You can find the reconciliation to GAAP financial measures in our press release and investor presentation, which are available on our website. Finally, this presentation is being recorded. I will now turn it over to Bill Hornbuckle. William Hornbuckle: Thank you, Howard. To everyone dialing in, we truly appreciate your flexibility in joining us this earlier-than-expected call and look forward to providing you with some important color in detail about our fourth quarter and full year performance. Before I get started, I'd like to introduce everyone on today's earnings call to Ayesha Molino, our new Chief Operating Officer. Ayesha was previously our Chief Public Affairs Officer and President and Chief Operating Officer of ARIA and Vdara, which flourished under her leadership, and we are thrilled to have her in the COO role. I also want to congratulate Kenny Feng, who has been leading the MGM China as President and Executive Director since 2020 and is no stranger to these earnings calls on his recent promotion to Chief Executive Officer of MGM China. And finally, I'd like to congratulate Tian Han on his promotion to Chief Operating Officer. Tian has also been integral to the success of MGM China in recent years, and I'm extremely excited to see the great things the entire Macau team does going forward. MGM Resorts is the leading global integrated resort operator across physical and digital channels, converging gaming and hospitality with entertainment and sports, and this diversity helped us once again to achieve consolidated growth for the fourth quarter and the full year 2025. It's worth noting some of our key accomplishments last year: achieving record 4Q and full year EBITDAR in Macau while maintaining margins and outsized market share throughout the year, accomplishing a nearly $470 million EBITDA turnaround at our BetMGM North America venture, which commenced distribution to its parents in 4Q; breaking ground in MGM Osaka, which we believe will be the world's largest integrated resort upon opening; and investing in upgrading experiences across our portfolio from dining to enhanced VIP gaming environments in Las Vegas to our regional operations and most notably in Macau. These, along with other successes throughout the year drove growth in consolidated net revenues of 6% and positioned us well for further progress into 2026. Last year marked the return to a more balanced environment after several years of exceptional growth in Las Vegas. And even with the Las Vegas-specific headwinds, we were able to achieve record full year slot win in 2025 driven by our luxury offerings. From this reset baseline, we see a path to grow in Las Vegas for the full year of 2026. First off, we will benefit from a full year contribution from the various capital projects completed last year, including and notably MGM Grand's room renovation. We had anywhere from 700 to 1,000 rooms offline per day for most of last year, but that will not be in the case in 2026. We've received tremendous positive feedback on the refreshed product and are excited to have the full complement of rooms available this year. Other projects completed mid- to late '25 included the high-limit slot rooms at Bellagio and additions to our already deep roster of elite dining experiences with CARBONE RIVIERA here at Bellagio and Gymkhana at ARIA. Within the group and convention channel, we are experiencing mid-single-digit revenue growth in 2026. This year's mix will be closer to 20%, and the quality of the groups, I feel, has improved because of meticulous action carried out last year focused on improving profitability. To date, we've had solid performances during city-wide events, including CES in January, and we're excited for the return of CON/AGG with expectations of getting back to 2023 attendance and achieving more than our fair share among the 140,000 attendees arriving into Las Vegas. Even more exciting is the fact that we have group and convention room nights on the books for future years that we've had more -- group and convention nights on the books for future years than we've ever had in our history. While 2026 event calendar continue to fill out, we are seeing comparable arena capacity city-wide events relative to last year, which will help provide stabilization levels of business given the proximity of our properties to the golden triangle of venues, Allegiant, T-Mobile and MGM Grand Garden Arena. Tent-poling events such as Formula 1 also continue to drive visitation this year, and our Strip properties saw higher room rates and increased cash ticket sales at the Bellagio Fountain Club, which remain the premier ultra-luxury hospitality venue to watch the race. We are continuing to invest where we see the greatest growth potential in our luxury offerings. This includes casino operations. We are out to improve on the success of last year's first one-of-a-kind invitation-only gaming experiences, bringing previously unheard of prize purses into a $5 million slot tournament and a $10 million baccarat tournament. We will be hosting both of those tournaments again this year. We're also busy continuing to innovate especially around the opportunities provided by the geographic proximity of major sports events including this weekend's Super Bowl in Northern California and the international visitation accompanying the upcoming World Cup given several matches taking place in Los Angeles and Southern California. We know these programs are working as our 2 top luxury offerings, Bellagio and ARIA, together saw a 7% increase in EBITDAR in 2025. We also continue to build on efficiencies driven by our technology innovation, which drove an 18% increase in digital check-ins that have resulted in a significant improvement to check-in speed, which now averages 1.5 minutes versus the 6.5 minutes while checking in through traditional front desk, not including your wait time in line. We also saw 1 million chats through our digital concierge last year as we utilized AI to both transform guest engagement and accelerate productivity. And finally, we are busy at work creating programming that will target and highlight the great value MGM has to offer. We'll share more of that and have exciting news and announcements soon. At the end of the day, there's nothing comparable to Las Vegas. People are visiting to have unforgettable experiences and their exceptional value is the optionality of what our guests can enjoy and discover on any particular visit. There's also value in the unmatched energy and excitement that surrounds everything you do in this town. That's why Las Vegas was selected to host the College Football Playoff National Championships in 2027 and the Final Four in 2028. Las Vegas is where the NBA's exploring expansion and Major League Baseball is now establishing operations. We've also extended our relationship with F1 for 5 years. And there has always been and always will be extraordinary value here in Las Vegas. Our regional operations continue to deliver solid results regardless of the macroeconomic, thanks to their outstanding asset quality, their strong demographic placement and experienced operating teams. During the quarter, they reported not only record fourth quarter slot win but also the best full year slot win ever. MGM China remains a strong outperformer, ending the year with a record high quarterly and full year segment adjustment in EBITDAR. We achieved a 16.5% market share during the fourth quarter and impressively maintained share of over 16% for the full year, a record market share level for an annual period as our operating team continues to command a strong understanding and relationship with the premium mass customer driving the market. Considering our execution, reflecting in our ability to maintain an over-indexed market share and solid EBITDA margins, MGM China's trading value is at sub 7x forward EBITDA multiple versus an industry average of over 8.5x, seems significantly discounted to us. Yesterday, we heard impressive results from Adam and Gary on our BetMGM North America venture. BetMGM beat 2025 guidance during the year where they started by inflecting positive and ending by turning annual EBITDA around by nearly $470 million. The strong performance resulted in a $135 million distribution of MGM during the fourth quarter. And during 2025, monthly player volumes increased 24%, while active player days increased 14. This momentum remains positive, highlighted by the plan outlined on the earnings call to reach $500 million of adjusted EBITDA in 2027. MGM Digital also continues to see encouraging momentum. We are excited by the scaling of the BetMGM brands in key international markets, where Sweden continues to be our top market. We exited 2025, making significant headway in Brazil, particularly after the December launch of our in-house sportsbook. The Brazilian market is new, robust and evolving, and we are confident that our product and our JV with Globo and the value Globo marketing assets have created funding opportunities that are worthy of sustained investment in the coming year. Progress also continues with our development projects, setting long-term growth pipeline for our business. Construction remains on schedule in Dubai with Bellagio, ARIA and MGM Grand Hotel towers scheduled to open in 3Q of '28. And in Japan, construction remains on time and on budget for MGM Osaka. Currently, about 20% of the foundation piles have been installed or completed, and the project remains on track to open in 2030. The outlook for the coming year is encouraging. With a more constructive backdrop and a stabilizing environment, our message last quarter holds true. We are optimistic that growth in Las Vegas can be achieved this year. There are also potential macro catalysts that could benefit both Las Vegas and MGM more broadly, including lower trending interest rates, certain tax regulations including no tax on overtime and tips and other stimulus benefiting consumers and further progress at the Las Vegas Airport as about 50% of the lost capacity left by value airlines and select international carriers have been backfilled by other airlines. Beyond the macro drivers, MGM is driving convention and group nights with more future room nights on the books than we've ever had. We also continue identifying opportunities to operate more efficiently and make further progress on our AI and technology initiatives, all while our improved liquidity and cash flow generation allows us to pursue innovative ideas and strategic investments that can and will deliver meaningful value. With that, I'll now turn this back to Jonathan to provide additional details on our performance for the quarter. Jonathan Halkyard: Thanks very much, Bill, and thanks to all of our employees who stepped up throughout a challenging year, strengthening the foundation we have today and allowing us to take advantage of the growth opportunities in 2026. Consistent with our third quarter commentary surrounding Las Vegas, we saw stabilization in the fourth quarter. Las Vegas EBITDAR declined 4% year-over-year, an improvement versus the declines experienced earlier this year, driven by the completion of the MGM Grand room remodel in October, a year-over-year improvement in convention mix and holds settling in above our normal range. Luxor and Excalibur continued to have a disproportionate impact to this quarter's decline in Las Vegas, though keep in mind, these 2 properties only represent about 6% of Las Vegas segment adjusted EBITDAR in 2025. While we do not see immediate changes to value customer habits, we are seeing strength in the south end of the strip when we have robust programming at Allegiant and as Bill referenced, we're working towards some creative concepts on marketing our value proposition to these customers. Additionally, the comparisons just become more favorable toward the end of the first half of 2026. The return of the MGM Grand room inventory has been a benefit. And it's worth noting upon completion, the average age of our Las Vegas rooms since renovation is about 6 years. We have a strong maintenance capital program to reinvest in our properties regularly, and I would argue that we have the best maintained portfolio of assets on the strip, which is recognized in the positive feedback from customers and of course, the outsized room occupancy share that we command in the market. Our regional operations had another strong quarter to close out a record-breaking year. Not only did they achieve best-ever fourth quarter slot win, but they accomplished the best-ever annual slot win performance for 2025, resulting in a 2% rise in net revenues in the fourth quarter and stable EBITDAR. I'd also highlight that the sale of the Northfield Park operations remain on track for the first half 2026 close. MGM China just crushed it this quarter. During the fourth quarter, net revenues grew 21% and segment adjusted EBITDAR grew by 31%, a new fourth quarter record. A relentless competitive environment is the norm there, but our team has consistently maintained mid-, high-20s margins with their focus on maintaining high service levels while anticipating evolving customer tastes and preferences. MGM China recently announced new terms for its branding fee, which will increase this year from 1.75% to 3.5% and secures the MGM branding through the life of the concession and auto renews for up to 20 years upon a concession renewal. The rate is comparable to the only other U.S.-based Macau operator and is sensible, given the strength of MGM's brand, its market size and global reach. The brand has proven its value over time, helping drive MGM China's market share and EBITDAR, both of which have almost doubled since 2019. The renewal terms also result in greater cash flow generated for MGM Resorts, which, if we use 2025 results, would represent over $50 million in incremental cash flow to our company. We remain highly confident in the long-term growth prospects in Macau and remained aligned with the MGM China shareholders and our desire to increase profitability and ultimately, the enterprise value of MGM China. Our BetMGM North America venture had a tremendous year with growth in fourth quarter net revenue from operations up 39% and EBITDA improving by $176 million to $71 million in the quarter. As reported on their recent earnings call, MGM -- BetMGM provided 2026 adjusted EBITDA guidance of $300 million to $350 million and $50 million of expected CapEx, along with the expectation of regularly distributing excess cash to its parents. MGM Digital saw impressive 35% growth in net revenues due to continued momentum across the various international geographies, including our legacy LeoVegas markets and Brazil. We plan to continue investing in growth initiatives throughout 2026, including integration of our sportsbook platform that we expect to launch in several of our key markets, including Sweden, as well as continued investment in Brazil. We anticipate another year of solid top line growth and an improvement in 2026 EBITDAR that we expect to be approximately half the losses that we had in 2025. In Japan, we're expecting our 2026 funding commitment to be approximately USD 350 million to USD 400 million. Much of it will be addressed with proceeds from the yen-denominated credit facility we closed last October, which we upsized to approximately $350 million during the quarter at a low single-digit cost of capital. We bought back over 15 million shares during the fourth quarter for $516 million, bringing our total 2025 share repurchase activity to 37.5 million shares for $1.2 billion, and that represents an average price of $32.43. And over the last 5 years, we've decreased our share count by almost 50%. Finally, I want to remind everyone of our various sources of cash flow spanning the business, including cash generated from our Las Vegas and regional operations our MGM China branding fees and distributions, and now our BetMGM distributions. The cash sources from MGM China and BetMGM, in particular, are high-margin, recurring sources of income and should be assessed accordingly when valuing our company. We've augmented these recurring sources of cash with other actions, including raising a low cost of borrow yen-denominated facility to fund most of our Japan commitments this year; selling our Northfield Park operations, which will close in May; and reallocating capital previously earmarked for our pursuit of a table games license in New York. In aggregate, these growing sources of cash flow enable us to fund growth opportunities, including the entirety of our MGM Osaka commitment and any future CapEx projects we choose to pursue. It also covers share buybacks, maintenance CapEx, interest expense and rent expense. And keep in mind, not all leases are created equally. None of our triple net real estate leases allow for rent to escalate above 2% in the first 10 years, and the most aggressive lease terms cap our rent escalators at 3% for the next 10 years after that. As a result of our aggregate cash flow sources, we can convert our diverse operating strength in a meaningful, durable free cash flow to drive shareholder value. I'll turn it back to Bill. William Hornbuckle: Thanks, Jonathan. A couple of thoughts before we go to questions. We exited 2025 with Las Vegas showing signs of stabilization and an improving trajectory. We continue to see those positive trends as we begin 2026 and expect to make even greater progress from a reset baseline in Las Vegas when we lap earlier leisure comparisons in the second half of the year. Our diversity supported consolidated growth in 2025 and has proven to support our growth in almost any environment. Everywhere we operate, we have the best portfolio of brands, physical assets, leadership and employees who once again set a new annual record for Gold Plus NPS scores. We have a growth pipeline that includes digital in the near to medium term and arguably the greatest global integrated resort opportunity with MGM Osaka opening in 2030. We have a solid balance sheet, low relative leverage and favorable lease structures with reasonable rent escalators. We generate substantial and growing cash flow that provides us with the ability to pursue any opportunities that may drive value creation. We have a massively shrinking share count, and we are reverting to growth in Las Vegas. Operator, if we could open it up for questions now, we'd be happy to take them. Operator: [Operator Instructions] Our first question today comes from Dan Politzer with JPMorgan. Daniel Politzer: Bill, I wanted to just pick up -- pick back up on your last comment there on the path to reverting back to growth in Las Vegas. I think you laid out certainly a big -- a number of factors with group and convention pacing up mid-single digits, CON/AGG and obviously, strong OpEx control with some of those technology benefits. So I mean, other than the second half comparisons getting easier, I guess, how do you think about the path forward in terms of the first quarter and second quarter in terms of getting back to normalized EBITDA growth in Las Vegas here? William Hornbuckle: Look, I'll kick this off and maybe Ayesha can pipe in here as well. This current quarter we're in, as compared to the first year, you know there are some differentiators that I think we will intend and should go through. As it relates to occupancy, it has clearly stabilized. Obviously, we have CON/AGG coming up. We have seen and have demonstrated the ability to continue to drive the high-end luxury pieces of our business, and that will continue, I think, all the way through 2026. We've seen, and particularly in gaming, the high end, and I don't mean premium, super high end. I mean, high-end business led by things like our holiday gift shop, which was the second highest holiday gift shop, I think, we've ever had. And so it's fair to say the K economy is alive and well, but given the positioning of our assets, the programming, I think as we get through into April, particularly May and beyond, I think you're going to see some really strong performance. Obviously, the MGM piece is a big piece for us. I've never seen a remodel impact of property the way that one did, only because we had so many rooms out at the same time. And so all of those things, I'm thinking, are looking favorable, and generally, I think things will stabilize. I think we've begun to see it. The convention authorities are expecting 1 million more visitors. And so '24 was an amazing year. And so '25 was difficult. Yes, we need to solve for Canada and leisure travel, but generally speaking, we feel very positive, positive enough to think that we're going to exit '26 on an up. Ayesha, I don't know if you want to add. Ayesha Molino: Yes, just a couple of thoughts. Certainly, I think, as Bill noted, as we look at CON/AGG, we're certainly looking at that favorably for our business. When we think about CON/AGG and we think about that combined with our own convention base, especially as we head into the latter part of Q2 and into Q3, I think we have reason to have a very favorable outlook. I'd also note, in the near term, we have events like the Super Bowl that are continuing to drive a lot of excitement among our meaningful customer base, and so we continue to see that base turn out, as Bill noted, particularly at the high end but with a lot of excitement for our business. Daniel Politzer: Got it. That's helpful. And then just for my follow-up, in the fourth quarter, obviously, we saw that the table hold was a bit higher and we can kind of triangulate on the math there. But were there any other one-offs in particular in the fourth quarter, either in Las Vegas or any of the other segments you would call out just for modeling purposes? Jonathan Halkyard: Yes. The hold was a little bit above average for us and a little bit above prior year. We consider that impact in the fourth quarter to be kind of $20-ish million to the bottom line in Las Vegas. The only other really onetime items would be some in corporate expense. And so for modeling purposes, the corporate expense number is around $110 million, $115 million per quarter. We had some unusual expenses in the fourth quarter and some in the first quarter of last year that should not recur this year. Operator: And our next question comes from John DeCree with CBRE. John DeCree: Maybe to continue the discussion in Las Vegas, Jonathan, I think in your prepared remarks, you've mentioned the value customer a little bit. I think I heard you say there isn't really any change there. But as we think about value customer or leisure more broadly, can you elaborate on some of the things that you might be able to do, the city is doing as a whole to kind of help get that customer kind of stabilized throughout 2026? Jonathan Halkyard: Yes. And I certainly didn't mean to minimize the contribution of our Luxor and Excalibur properties. We love those properties, but I do think they are the ones that cater most to that value-conscious customer, and they do represent about 6% of the EBITDA for our properties here in Las Vegas. That being said, we're -- we've done a number of initiatives already, both on the revenue driving and the cost side to address those customers, and we have more planned this year. I may invite Ayesha if she wanted to add anything else. Ayesha Molino: Yes, sure. Just a couple of things. When we think about the leisure customer, in particular, like a lot of companies in the hospitality industry, I think over the last year or so, we did see that shortening of the booking window. But that being said, we're paying close attention to that customer, and we are starting to see a response, particularly to sort of large-scale events, that feels positive to us. In terms of some of the broader initiatives, the city late last year ran a city-wide sale that was very well received, and so I think there is constant effort at coming together to make sure that we are driving visitation to the city. John DeCree: That's helpful. Maybe one more as a follow-up on Vegas. The gaming revenue volumes, the win, even outside of some favorable table holds, I think volumes were quite good and have been all year. Can you talk a little bit about your casino room night mix or what you might attribute some of the resilient or better gaming volumes to in spite of lower occupancy on the Strip? Obviously, you've mentioned the high end is doing well. But anything you can add to give us some color on why you think the casino business, the table slots is doing so well in spite of lower occupancy? William Hornbuckle: John, this is Bill. I'll kick it off, and Ayesha can finish it in terms of the mix. Look, I think we mentioned it throughout our comments, and we've done this and seen it work. If I think about Bellagio, we've reinvested in the high-end slot room by way of example. We've reinvested actually in almost all of our high-end slot rooms across the company. I was just at National Harbor over the weekend and saw that one. It's paid dividends. That market, which, obviously, those are high-end customers but not to the extreme you get into some of our table games customers, it is working. So we've picked, I think, the right things to invest in. I think it's working in Macau of note. I think Kenny and the team there have particularly picked the right things. And then the activity case -- we have this dialogue around value. There are value in high-end activity. When people come to Las Vegas for whatever the event is, we've got a bunch of stuff coming up, as we mentioned, they're not afraid to spend money. And so we need to be value-conscious. We need to understand that mix and how we price certain things to be sure. But when you think about the top end of our business and the experiences people continue to seek and want, we think we're doing a rational and a good job both marketing to them and ultimately provide -- and we've pushed hard on BetMGM, by way of example. I think one of the reasons for the success of holiday gift shop was our ability to provide omnichannel into that program and those people. And so we continue to do that, so that's been an added nice channel and I think the Marriott channel, underlying a lot of this. Those customers, many of them come having -- not have to pay for their room per se, meaning in cash. And so I think the opportunity to enjoy Las Vegas and all that we do, I think, has been paying off. And so I think it's a combination of a lot of things, really. Ayesha Molino: Yes. The only thing that I'd add is we have a very strong database, and we've been fortunate to see the resiliency of that database over time. And I think even as we think about forward-looking casino bookings, those are remaining strong for us and so -- especially from the medium to the high end. And so again, I think that the strength of that database continues to pay dividends. Operator: And our next question today comes from Shaun Kelley at Bank of America. Shaun Kelley: Bill or Jonathan, just kind of wanted to think about some scenario analysis around Las Vegas, specifically. And if I could, margins have been down the last 3 years, I think, as businesses kind of normalized a little bit post-COVID. And just kind of trying to think about what you're seeing on the expense side of the ledger. So I think we now know some of the drivers and what you're looking forward to, to drive '26 on the top line. But help us think about, yes, 2 things. Like one would be just run rate, operating expense growth and any internal initiatives you have to sort of kind of manage that. And then secondarily, remind us on the room renovation cadence, what was the disruption for MGM Grand in this past year, if you could put it in EBITDA dollars. I you know you talked about room nights. More importantly, relative to, I think, ARIA was slated for this year, is that still the case? And any other major projects for this year that could be a little disruptive? Jonathan Halkyard: Okay. Thanks a lot, Shaun. I'll take those in turn and certainly invite Ayesha to comment as well. In terms of expense growth, we'll be able to hold our overall expense growth to the very, very low single digits this year. Wage -- of course, wages are an important part of our cost structure, and we have been able to largely offset wage growth, unit labor cost growth with the labor complement that we have, even adjusting for modest occupancy declines in 2025. So we had FTEs down slightly in Las Vegas regions and in the corporate office during 2025. In terms of the renovation impact for the MGM Grand last year, it was about $65 million in EBITDA during the year. And that is -- of course, that's already completed, so we'll not only not suffer that this year but hopefully enjoy some benefit from those remodeled rooms. There's not going to be much renovation impact at all in rooms in Las Vegas. We are starting the ARIA project, but that won't be until midway through the fourth quarter. So that will be a more -- more of a 2027 discussion for us in terms of room renovation disruption from ARIA in Las Vegas. Anything you want to add on the cost structure? Ayesha Molino: Just a couple of thoughts on that. I think the teams have done a really excellent job with FTE management throughout the year, and they're constantly looking for ways to improve upon that through technology or otherwise. And so we've certainly seen the dividends of that -- of those actions over the course of the year. And as Jonathan noted, a couple of major differences between ARIA and MGM Grand. MGM Grand, of course, we did the bathrooms, which are not slated to be done at ARIA, which will cause significantly less disruption in terms of the number of rooms that have to be taken out at any given time. And as Jonathan noted, we very thoughtfully scheduled this so that the vast majority of the disruption will take place over slower periods. And so we're looking to mitigate revenue impact there as well. Operator: And our next question today comes from Chad Beynon with Macquarie. Chad Beynon: Wanted to shift to Macau, really strong quarter, particularly compared to what we've seen in terms of market growth and some others experiencing some cost creep. So can you maybe touch on that, what the margin environment is like if you believe that the Macau margins can remain in this area? And then anything that you're seeing in terms of early bookings for Lunar New Year? William Hornbuckle: Kenny, all yours. Xiaofeng Feng: Yes. Thank you. Thank you for the question. We do see very rational competition in the current marketplace in the past few quarters. Particularly if you look at our reinvestment rate over the GGR trend, that could be a little bit of volatility due to the mix of business, but in general, it's fairly, fairly stable. MGM China margin has always been in mid- to high 20s as we guided. We always delivered what we said for the past few years. As to Chinese New Year, we are very optimistic. We see very, very encouraging booking trend for Chinese New Year. We have -- we even have a long waiting list for our top tier, the hotel products. The player quality is very high. MGM China here, I mean, we do have a limited room inventory, but we are good in premium mass. We are very focused on quality over quantity. And yield management is always our strength. We are confident about the demand. We will make sure that we yield our products wisely. And we will make sure what we are doing to serve customers what we want. There's a new phenomenon. These days, even ahead of holiday, there's no slow period. So we are -- we feel good about it in general. Thank you. Operator: And our next question today comes from Brandt Montour with Barclays. Brandt Montour: So a couple on Vegas for me. You guys gave us a lot of helpful details. Bill, you talked about stabilization and you sound pretty confident about the stabilization you're seeing. I was hoping that we could sort of dig into that because if you look at the fourth quarter from a KPI perspective, right, RevPAR was down a decent amount, but then casino revenue was up a lot. And so when you think about monthly October, November, December to January, what does the stabilization look like from a KPI perspective? And maybe said another way, can you get back to growth with RevPAR, yes, with RevPAR declines like you're seeing or even maybe less so but still material? William Hornbuckle: Go ahead. Go ahead, Jonathan. Jonathan Halkyard: Yes. So I would say the general cadence in the fourth quarter was October was -- and I'm talking about kind of ADRs. October was down more than December was. November was pretty stable, and it was driven a lot by special events and F1. And then as we started to look into the first quarter, we saw, again, moderating declines versus prior year in ADR. We are confident about the casino's ability to drive revenue growth through events and through omni-channel marketing and just through more effective casino marketing. And it's interesting to note that RevPOR, so overall revenue per occupied room was actually up slightly for MGM Resorts in the fourth quarter. And so we're constantly doing this shifting between the different pockets of demand and different revenue channels in order to optimize revenue. And as we look into the first quarter, we're just seeing some of this continued stabilization that we saw developing in the [ forward ]. Brandt Montour: Jonathan, that's really helpful. And also in Vegas, you made a comment, Jonathan, about hold -- table hold settling in and the level that you guys are achieving, yes, it's been pretty consistent on an annual basis for the last couple of years in the '24 and change area. That is above pre-COVID average. So the question is what structurally has changed for the hold. And is this the new CO that we should be forecasting? William Hornbuckle: I wouldn't agree to the last comment, but I would say more relative. Look, we see a lot of high-end activity, so the premium, premium customers [ that we were able to accommodate ], you can see it in our baccarat share. If you think about our baccarat share, we're well into the high 40s, I think, this last couple of months. So that, more than anything, is driving it, but we continue and consistently do that. And while that business can -- is volatile at times, I think our market share of that is what's been continuing to lift that number more than almost anything else. Operator: And our next question today comes from Steve Pizzella with Deutsche Bank. Steven Pizzella: Just pivoting to the regional segment. Any color you can give us on how the year started off for the regional portfolio and if you have any thoughts on a range of outcomes for the regional business this year? Ayesha Molino: Our regional business has continued to be really steady over time, and certainly, we're seeing that steadiness continue into the first quarter. And as Bill noted earlier, there have been some real meaningful pockets of excitement for our regional properties. I'd point here to Borgata and the investment in the high-limit table rooms there, which has paid really nice dividends for us, and we're continuing to invest, as Bill noted, in that product at various of our regionals. So we're proud of how steady that -- those assets have remained and continue to see that steadiness. William Hornbuckle: And I would remind us, I don't think that baccarat product and those high-limit rooms came on until May. When did they come on? It was later in the year is my point. So we'll have the benefit of the first couple of quarters there. And then you probably all saw and we're excited by -- we'll see if this comes to fruition or not, but we believe it will based on conversations I've had. But the notion of a Sphere coming to Maryland is very compelling and very exciting, I think, for the project, the region and ultimately, National Harbor. If it's executed as thought about, it could deliver a couple of million more customers a year there. And so we remain very excited by some of our regional properties. They're well placed, and they're great assets, and that, we think, will continue to grow over time. Steven Pizzella: Okay. And just real quick for my follow-up. You mentioned the World Cup in your prepared remarks. Are you expecting incremental visitation to Las Vegas as a result from people visiting. And have you seen any kind of advanced bookings indicated increased demand from that? William Hornbuckle: We are expecting, yes. It's a unique opportunity to particularly bring high-end customers who will be in the region to Las Vegas, potentially in and out of L.A. or on their way to New York or any place else for that matter. And so we're highly focused on that. I think it's a little early on the overall mix to tell. But I think when it relates to particularly the high end of the market, we're pretty excited by what may come out of South America and some other markets as we would all understand them. Operator: And our next question today comes from Barry Jonas with Truist. Barry Jonas: One narrative on the Vegas softness has been that perhaps there's trade down where some folks aren't going to Vegas but perhaps gaming closer to home. Curious if you've seen that dynamic as you look at your database. William Hornbuckle: No. This becomes the constant is digital gaming offsetting brick-and-mortar gaming. I think the closest analogy we have is Michigan, where we have a robust sports and iGaming business, yet our property continues to gain share. And so no, we think, ultimately, it's additive. When you think about the opportunity for database for omnichannel, people come here. They get to go home loaded up, if you will, with BetMGM app and continue the experience. And so no, it's nothing that has shown itself as a significant issue. To the contrary, we see it still as a benefit. Barry Jonas: Great. And then just for a follow-up. Bill, what's the latest on the 90% gaming loss tax deductibility? I guess what are next steps there? And how impactful could this be to your business if it unfortunately would stand? William Hornbuckle: I'm going to let the expert handle this. Ayesha? Ayesha Molino: We're continuing to see significant strength in our slot handle into the first quarter, even as that has taken effect. So we are watching it closely, but we are partnering closely also with our industry, our fellow colleagues in the industry to advocate for a fix on that. Operator: And our final question today comes from Stephen Grambling at Morgan Stanley. Stephen Grambling: Apologies if I missed this, but it looks like you ramped up the buyback in the quarter and talked through some of the sources of liquidity from here. So how should investors think about the right level of potentially parent-level buyback versus MGM China maybe buying back there where I think you mentioned you saw value? And as a related follow-up on that, if MGM China is part of the direction you want to go, are there any limitations in terms of how high you can take that share? Jonathan Halkyard: Okay. I'm a little unclear on the final part of the question. But as it relates to buybacks at MGM Resorts, it really is a -- it's a constant evaluation we do around the value that we see in our shares versus the other uses of cash that we have that we think are high priorities. In the last 6 months, of course, we made the decision not to proceed with the New York license. That was $500 million at least that had already -- had been previously earmarked for that. We see great value in the shares, and so we began share repurchases again in the fourth quarter. I think share repurchases are always going to be in our capital allocation mix because, fortunately, we can -- with our level of free cash flow now that the distributions we're getting from MGM China and BetMGM, we can afford to invest in our properties, invest in MGM in Osaka and as well as repurchase shares. I didn't go through the multiple math that we all know very well on MGM Resorts right now, but suffice to say, it's a really compelling investment, we believe, and that's why we're doing it. I'm not going to speak for the... William Hornbuckle: Stephen, on the China question as I think I understand it, there's about 22% float in the company. We have to keep that. And so the idea that we would buy back from the open market is -- we've got to keep that float, and frankly, the exchange is pushing to have more. So that's not what was implied there. The simple implication was the multiple value seems cheap. Stephen Grambling: No, that's exactly what I was saying. That's helpful. So it sounds like, again, the parent, you get that cheapness through buying back at that level rather than directly anyway. William Hornbuckle: Correct. Operator: Ladies and gentlemen, this concludes our question-and-answer session. I'd like to turn the conference back over to Bill Hornbuckle for any closing remarks. William Hornbuckle: Thank you, operator. Just a couple of quick comments before you all go, and we appreciate your time given the time of day. Look, diversification is clearly working. Our consolidated EBITDA growth was up 20% in the fourth quarter, and I think we have proved it. You've heard us stress signs of stabilization in Vegas, and obviously, we believe that. We've seen it in various segments, whether it's group, the MGM discussion. We see stimulus coming in helpful, both in leisure and particularly in our regionals. We see Macau continuing to perform at the performance level it is. We've all been challenged with, yes, but how do you do this in the market conditions. We've been doing this for a couple of years now, and so hopefully, we've built some faith and credibility in that. And then BetMGM had a remarkable year, and it sets itself up for when we think and say, in 2027, we think we can be at $500 million, we believe that. And we didn't say that until recently, and we are now saying it with belief. And so we think we're in great shape as we think about '26 and the things in the immediate future. And with that, operator, I will end the call, and I thank everybody for their time. Operator: Thank you, sir. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful evening.
Essi Nikitin: Hi, everyone. Welcome to YIT's Financial Statements Bulletin 2025 Webcast. My name is Essi Nikitin, and I'm heading the Investor Relations at YIT. The results will be presented to you by our CEO, Heikki Vuorenmaa; and Interim CFO, Markus Pietikainen. Without further ado, I will hand over to Heikki to go through the latest developments in the company. Please go ahead, Heikki. Heikki Vuorenmaa: Thank you very much, Essi, and welcome, everyone, to today's webcast. Today, we will have a comprehensive agenda ahead of us. First, we review our full year '25 performance. Then we will take the deep dive into the fourth quarter and following up on providing some additional details regarding the news related to earlier today. But let's begin with the overview of the full year. So the first year of our strategy that we introduced 2024 is now behind. We made progress across the several targets, areas, including our adjusted operating profit margin, return on capital employed, gearing and the customer and employee NPS levels. Our financial position continued to strengthen. It was supported by improved financing terms and EUR 120 million reduction in the net debt. The business segments delivered different types of performance throughout the year. In the Residential Finland, the inventory of unsold completed apartments declined, and we initiated new consumer projects in response to market demand. However, the activity in the primary market remained limited. Within the Residential CEE, our apartment sales grew by over 30% as the market conditions strengthened. We launched a record level of new project starts. Both of these will further establish this region as our principal residential market within the company. The Infrastructure segment achieved robust results. Revenue increased by more than 30% and the positive trend across all the key performance indicators continued throughout the year. In the Building Construction, we secured multiple new contracts with both public and private sectors and continue to focus on capital release from non-strategic assets. For the full year of '25, our revenue decreased, while the adjusted operating profit increased. Full year revenue amounted at close to EUR 1.8 billion, and adjusted operating profit increased to EUR 54 million, representing 3.1% of the total revenue. The profitability continues to improve. However, as our strategic objective is to exceed 7%, further progress and actions are required. Our full year operating profit improved to EUR 45 million. That is approximately EUR 100 million more than in 2024. This improvement was primarily driven by improved operational performance and significantly reduced adjusting items compared to the previous year. Adjusting items in 2025 amounted to EUR 9 million, which were associated, for example, to our operations in Sweden. In contrast, transformation-related adjusting items in '24 were substantially higher at EUR 86 million, even including the gains from selling of our equipment at the beginning of 2024. But let's close the full year results now and move to the Q4 '25 overview. And we start with some key highlights from the quarter. Revenue and adjusted operating profit both increased. The net debt and gearing continued to decline, and it's reflecting the good progress in the capital efficiency initiatives as well as the strong operational cash flow during the quarter. Our order books increased in both contracting segments, supported by a robust industrial construction activity. Residential CEE delivered a solid quarter with a higher revenue and profits. Market conditions remains favorable for us. The revenue growth for the quarter was driven by the Residential CEE and Infrastructure segments, while the revenue from Building Construction and Residential Finland declined year-over-year. This was actually a first quarter since second quarter 2023 in which the group's revenue increased. Adjusted operating profit increased from EUR 13 million to EUR 25 million during the period, resulting in adjusted operating profit margin of 4.5%. Overall, quarterly performance aligned with our internal expectations. But now it's the time to double-click on the segment performance, and we start from the Residential Finland. Market conditions continue to influence the performance of this segment. And that is, of course, reflected across all the key performance indicators. Also, there has been improvements in the segment performance during '25, it is evident that the additional measures are necessary given the financial results relative to our established strategic targets. I will discuss some of these actions in more detail later. During the quarter, our unsold completed apartments inventory continued to decline in the Helsinki Metropolitan Area. Several projects reached the full occupancy. However, overall inventory in the capital region remains higher than we prefer. We achieved a total of 211 completions during the quarter, primarily outside of the capital area. While the inventory levels in those regions have increased slightly, they continue to be within normal or low ranges. On the full year comparison, our unsold apartment inventory declined approximately 25%. It is again important to note that there are no scheduled completions in the Residential Finland business over the next 6 months. And when we look at our starts, sales and the inventory levels, we have now achieved balance between those three different elements. We have been reducing approximately 50% of the unsold inventory what we observed in 2024 from those levels. Initiation of a new project is guided by the consumer demand and the current product portfolio has also experienced a significant transformation in the past year. We remain to commit to launch new developments in accordance with the evolving market requirements. Completions in '26 will be again back-end loaded, mostly focused on fourth quarter. Overall, there is a moderate increase in projected completions from 2025. However, it is important to highlight that the 450 units that we are expected to complete during 2026 still falls significantly below the typical levels what we have had in this business on historical terms. But leaving the Residential Finland behind and moving to our business here at the Central Eastern European countries. We achieved a significant number of project completions in the fourth quarter, and that resulted increase in revenue and profit compared to the same period last year. The profitability margin for the full year was temporarily affected by the upfront investments and our ongoing regional expansion, which are part of our strategic initiatives. Project gross margins have remained at targeted level and the market conditions continue to be favorable. And also despite increased investments in the new project starts and plots in '25, capital employed remains well managed and under control. In the fourth quarter, we sold a total of 873 homes within the Residential CEE market. Out of these, 286 were sold directly to consumers, while the remainder were sold to investors or cooperative housing companies. The sales performance remained strong across all operating countries. So following of that, there has been a significant acceleration in the project starts last year, and we started construction on a total of 1,600 apartments in '25. Our current plot inventory is sufficient to support the development of approximately 15,000 additional homes. However, in selected cities, we are seeking opportunities to accelerate growth and further invest in the plot reserves to secure our future development pipeline. For the 2026, we are anticipating an approximately 50% increase in completion compared to 2025. The business continues to demonstrate significant seasonality, as you can observe from the slides. The residential completions are expected primarily in the fourth quarter. And as our financial reporting adheres to IFRS standards, both revenue and profits are recognized exclusively upon completion. Sales from our joint venture projects are also progressing well. During the quarter, we sold a total of 220 YIT homes and are particularly pleased with the launch of sales in our new KALEVALA project in Czech. This year, the completion targets with the joint venture business model is set to increase to 650 units, which then will bring additional 40% volume next to our stand-alone project. We will continue to utilize these SPV structures for selected projects in the residential CEE region. It provides us a flexibility on the project starts and minimizes our own equity investment requirements for those selected projects. And as always, all equity commitments are fully disclosed in our annual reports. But leaving the Residential segments now behind and moving to Infrastructure. Our Infrastructure segment delivered a revenue increase of over 30% in 2025, exceeding EUR 500 million for the full year. The growth was primarily driven by the successful tendering across the various Infrastructure Construction segments and higher volumes within the industrial construction. The profitability remained consistently above the 4% throughout the year, and the team continues to seek further internal efficiencies to achieve the strategic targets established for the segment. The improvement in the capital employed during the fourth quarter was largely connected to our operations in Sweden, where several projects were successfully completed at the year-end. Our order book also is strong and has grown compared to the previous quarter. It is on a robust level of 20 months work and level is nearly EUR 900 million. When we look at the infra market here in Finland, so the market remains dynamic, both in private as well as in the public sector. In early 2026, we announced strategic investments to acquire rail construction capabilities, further strengthening our position within the Finnish Infrastructure market. Notable highlights from Q4 include the order of excavation works for the Vantaa Energy project and the data center development in Kouvola, both which are already now under production. Moving on to the Building Construction. Then the main news from this segment during the Q4 was the capital release from Tripla Mall, totaling of EUR 51 million. It reduced the capital employed on this segment significantly. For the full year, the profitability increased despite the decline in the revenue. The adjusted operating profit over the past 12 months stands at 2.5%, indicating that the additional efficiency improvements are necessary to achieve the segment strategic targets. The order book has increased compared to the previous quarter, with the team achieving notable success in tendering activities, particularly during the fourth quarter. The order book represents approximately 18 months of work and approaches EUR 1 billion in value. Few highlights from the quarter include the school project in Espoon, swimming and sports hall in Helsinki, and the implementation phase of the Kupittaa project in Turku. It is important to note that the certain project value is added to the order book in full only after the development phase is completed. Then when we look at our key operational metrics, we can say that the homes currently under the production is about 3,700 units. 80% of the production is concentrated within the Residential CEE area. Project margin deviations remained well managed and implemented measures to enhance the productivity are evident throughout the project portfolio. The status of the overall supply chain remains robust. Then when we look at the overall market and our assessment of the market situation, it remains unchanged. The Central Eastern Europe, residential sector continues to demonstrate favorable conditions, whereas in Finland, primary market sales volumes are not expected to increase in 2026. The Infrastructure market is performing well and Building Construction, which includes several types of construction activities, remains stable. This concludes my remarks for now, and I will hand over to Markus to you to provide more detailed overview of our financial performance. Markus Pietikainen: Thank you, Heikki. I will walk you through the financials. This is a Q4 2025 summary slide. Return on capital employed was at 3.9% at the end of Q4, up year-on-year from 2.1%. Operating cash flow after investment was in line with Q4 2024 at EUR 111 million. Gearing at 71%, which is close to the strategic target of between 30% to 70%. Net debt, down EUR 120 million year-on-year at EUR 560 million. Guidance, EUR 70 million to EUR 100 million adjusted operating profit for continuing operations in 2026. Let's look at each of these topics in more detail in the following slides. Capital release and capital efficiency in the business operations are top priorities for us. And during the Q4, we released almost EUR 100 million of capital. This was especially supported by the successful refinancing of Tripla, which enabled Tripla to pay us EUR 51 million as return on capital and profit distributions. Our return on capital employed improved by 1.8 percentage points from 2024 to 3.9%. We will continue to drive profits and capital turnover to reach our financial target of at least 15% by end of 2029. Some highlights regarding capital employed from the segments. In Residential CEE, we were able to release EUR 30 million of capital during the year, even though at the same time, our apartments under production have increased by over 60%. This is mainly thanks to our apartment sales and strong portfolio. The Infrastructure segment continues to operate with negative capital employed, supporting the whole group's financial performance. Let's move on to the cash flow development. The operating cash flow after investment has been positive for the last 2 years. Here, we can see strong seasonality with most of the positive cash flow being realized in Q4, just like in 2024. The seasonality reflects the timing of the residential completions. The operating cash flow after investment was EUR 65 million for 2025. We will continue the work to improve cash generation. Gearing decreased to 71%, down by 17 percentage points year-on-year, supported by positive operating cash flow and hybrid bond issuance in Q2 2025. Net interest-bearing debt was EUR 560 million at the end of Q4. This is a decrease of EUR 120 million from the end of 2024 and EUR 235 million from the end of 2023. The net interest-bearing debt include IFRS 16 lease liabilities of EUR 258 million as well as housing company loans of EUR 130 million. The housing company loans decreased by some EUR 50 million year-on-year. This is an overview of the main components of assets and liabilities. YIT had EUR 712 million worth of plots, enabling a pipeline of some 15,000 apartments, both in Finland and CEE countries. This is down by EUR 81 million year-on-year. The book value of the completed inventory amounted to EUR 322 million. This is down by EUR 72 million year-on-year. Production has increased by around EUR 60 million as we have accelerated our production, especially in the favorable residential markets of the CEE countries. The book value of Tripla is now EUR 136 million, reflecting the EUR 51 million capital return received during the quarter. The adjusted net debt was EUR 173 million, and this excludes the operational IFRS 16 lease liabilities and housing loans. The maturity structure remains also in balance. When comparing interest-bearing debt to our key assets, we can see that our underlying asset base is 2x the gross debt number. When we announced our strategy in November 2024 for the next 5 years, we said that our strategic focus in capital allocation is to only employ capital to our residential projects during the construction period. Today, we announced that we have defined non-strategic items that are not part of the company's strategic core operations in line with our strategy and which we intend to dispose during the strategy period. These non-strategic items are in the Residential Finland and Building Construction segments and include, for example, our investment in the Mall of Tripla, equity investments in long-term property development and completed self-developed commercial projects with sales risk. The total value of these non-strategic items was EUR 340 million at the end of 2025, which is 2x our adjusted net debt. This also brings changes to our financial reporting. Going forward, the profit impact from non-strategic items is excluded from the adjusted operating profit. Also, capital employed will be presented as operative capital employed, which includes assets and businesses aligned with the company's strategy. Return on capital employed will be calculated based on the operative capital employed. As a result of the change, the reported adjusted operating profit and operating capital employed will more clearly reflect the profitability, capital usage and capital efficiency of the company's strategic business operations. The changes will take place starting from the beginning of 2026. The changes do not have any impact on the company's financial targets. Then on to the guidance. We expect the group adjusted operating profit for continuing operations to be between EUR 70 million and EUR 100 million in 2026. The guidance is aligned with the new adjusted operating profit definition, which was discussed in the previous slide. The residential market in the Baltic countries and Central Eastern Europe is expected to continue favorably, contributing positively to Residential CEE segment's capability to generate profit. In Finland, the primary apartment market volumes are not expected to increase in 2026. In Residential Finland segment, low amount of completions during 2026 will limit the segment's capability to generate profit. In Building Construction, the operational performance is expected to improve. In Infrastructure, the operational performance is expected to remain stable. Heikki Vuorenmaa: Thank you very much, Markus. And there are also several important topics remaining, like I said in the beginning of the webcast that we need to address. And those are primarily regarding the news released earlier today. But before going there, so let's take a look on how did we do the progress against our strategic targets now on the full year basis. We achieved improvements in our adjusted operating profit margin and return on the capital employed despite the ongoing revenue decline still in 2025. Each segment advanced in line with its respective plans given the prevailing market conditions and the internal performance and efficiency indicators are trending positively. This gives us a good foundation to enter second year of our strategy execution. And as a result of the progress, we are increasing the growth targets previously communicated for our contracting segments. The Industrial Construction business pipeline has exceeded the expectations, supporting us to double the revenue growth targets for both the Infrastructure and Building Construction segments throughout the strategy period. Accordingly, we will -- we intend to reorganize our Energy and Industrial Construction operations into a new Digital Infrastructure business unit. In external reporting, we continue to share both revenue and profits under both contracting segments for now. Over the past 12 months, we have strengthened our team by recruiting additional talent, and we will continue to do so to enhance our capability to deliver the comprehensive turnkey solutions for our customers in the Digital Infrastructure space. But while we are witnessing a faster-than-expected progress in the Digital Infrastructure business, it remains essential to pursue additional operational efficiencies to align our operations with the current market conditions, both in Residential Finland and Building Construction segments. We intend to transition from a regional line management structure to function-based organization. And this shift will enhance our focus on core capabilities and provide greater flexibility to scale the business in response to the market demand. In connection to this change, we are also evaluating our internal management processes, how we are following up the performance and evaluating if we would move to percent of completion management system. This could also then impact on the external segment reporting principles as well. Today, we have initiated change negotiations in Finland to plan for these needed changes. The estimated cost savings are projected at EUR 15 million with full realization expected by end of '27. Our forthcoming quarterly reports will include updates on the progress towards these targets. But this is all for now. And operator, it is time for the questions. Operator: [Operator Instructions] The next question comes from Svante Krokfors from Nordea. Svante Krokfors: A couple of questions. First one regarding the slow apartment sales in Finland. What kind of measures are you taking to continue to reduce the number of unsold apartments going forward? Heikki Vuorenmaa: Thank you, Svante. And of course, when we look at the demand picture and the activities are taken. So we have been applying different type of campaigns during the past couple of years to significantly reduce the inventory levels from, let's say, the highest level that what we had in 2024. Those have been quite effective when we look at certain cities outside of the capital area, where we see that we are actually operating in a relatively normal levels and achieving our fair share of the market. The inventory level remains elevated here in the capital region, and we need to look then project-by-project selectively what type of actions are needed in order to boost the sales there. Svante Krokfors: Okay. That's quite clear. Then a question regarding the EBIT guidance for 2026. What kind of assumptions do you have for the high end and low end of the guidance? I guess you mentioned that Residential Finland will have difficulties to generate positive results this year. So, where will the EUR 30 million to EUR 50 million -- sorry, EUR 20 million to EUR 50 million increase from the EUR 50 million baseline come from? Heikki Vuorenmaa: If you look at the overall different segments, so what is quite notable is amount of completions that will take place in our Residential CEE business this year compared to the previous year. So we expect the completions to increase by 50% compared to 2025. We also, like I said, so we expect our operative performance in the contracting -- both contracting segments to improve while we do not expect the market conditions in the Residential Finland to improve in 2026. As usual, so there is -- at this point in time, so there are uncertainties in the market picture, which is then reflecting the range of our guidance that we have given today. Svante Krokfors: Okay. And could you tell something about the timing of the EUR 50 million cost savings announced by the end of '27. Will that have an impact on '26? Heikki Vuorenmaa: So we have initiated the change negotiations or kind of communicated that we will initiate the change negotiations today. So we will come back to the further details as well as the specific outcomes then on the following quarterly results as we have made a progress against the target. Operator: The next question comes from Anssi Raussi from SEB. Anssi Raussi: Just one question from me, and it's regarding your financing expenses. So how should we think about financing items in 2026, like, let's say, if we compare it to Q4 run rate or what kind of impacts or factors you see here? Heikki Vuorenmaa: Thank you, Anssi, for the question. We do not specifically provide a guidance on that specific element. But Markus, if you want to maybe give a bit flavor on that topic. Markus Pietikainen: Sure. Thank you, Anssi, for the question. I think it will be an equation of part our capital release program, how that will progress. As you've seen, we've now announced that the EUR 340 million is non-strategic in the balance sheet. And obviously, this will be disposed by the end of the strategy period 2029. So very much that depends the financing cost based on the timing of those disposals. Otherwise, I think that that's the biggest delta, if you will, for that item. Operator: [Operator Instructions] There are no more questions at this time. So I hand the conference back to the speakers for any closing comments. Essi Nikitin: As there are no more questions, we thank you all for participating and wish you a great rest of the day. Heikki Vuorenmaa: Thank you. Markus Pietikainen: Thank you.
Allison Chen: Hi. Good morning. Thank you for joining us today. I'm Allison. Happy to host you for CICT's for your results briefing. So apologies about the minor delay. We are very excited to have you with us today, whether you are with us in person or tuning in from your desk. So as per usual, today, we will start off with a presentation by our CEO, Choon Siang, who will walk us through his key highlights. After that, we'll move on to the Q&A where the management team will join us on to the stage to address your questions. So if there some good ones, please save them for later. We'll try to get to as many as we can. And with that, I would like to invite Choon Siang on to the stage. Choon-Siang Tan: Hey. Hi. Good morning, everyone. Thank you for joining us today. So we just announced our results this morning. Quite happy with the overall outcome of how last year went. A lot of things to go through today. So bear with us. I will spend just maybe about 10, 15 minutes just walking through the highlights, and then we can move on to Q&A, as Allison has mentioned. Okay. So first on the numbers. I think CICT delivered a very strong performance for the year FY 2025. Full year NPI, we grew by about 3.1% year-on-year to $1,189.7 million. Second half NPI grew at a faster pace at 6.8% year-on-year to about $610 million. The strong growth was due to strong quite a few factors across the board, strong asset performance across the portfolio and the step-up acquisition of the 100% interest in CapitaSpring, which was completed on 26th August last year. Full year distributable income rose 14.4% year-on-year, while second half distributable income expanded 16.4%. Unitholders will be pleased to know that CICT's full year DPU increased 6.4% year-on-year to $0.1158 despite an enlarged unit base from a private placement in August last year. This was supported by a very strong second half, which provided uplift with a 9.4% year-on-year growth in DPU to $0.0596. On the capital management front, we have been proactive putting CICT in a very favorable position in terms of cost of funding. At the end of 2025, our aggregate leverage has improved to 38.6%, down 0.6 percentage points from 30th September, giving us greater financial flexibility. Our average cost of debt has declined to 3.2% from 3.3% 3 months ago versus the end of 2024, we are down by about 0.4 percentage points from 3.6%. This was supported by the easing interest rate environment and our refinancing efforts. Our current portfolio property value is at $27.4 billion, an increase of 5.2%. Operationally, our portfolio remains strong. Overall occupancy 96.9%, WALE 3.0 years. Rent reversions for both retail and office, 6.6%. Tenant sales per square foot, up by 14.9% year-on-year, largely due to the inclusion of ION. Shopper traffic up 20.5% year-on-year. Excluding ION, tenant sales per square foot would have grown by about 1.2% year-on-year while shopper traffic will be up 4.6%. The momentum was stronger in the second half with tenant sales rising 1.9% year-on-year excluding ION Orchard. In 2025 and year-to-date January 2026, we continue to execute our value creation strategy across acquisitions, divestments, AEIs and even development. These have strengthened the quality of our portfolio, enhance income resilience and position CICT for sustainable long-term growth. I will cover more on the newly announced initiatives in the next few slides. In January 2026, we announced the divestment of Bukit Panjang Plaza for $428 million. The price is a 10% premium to the latest valuation and 165% uplift over our purchase price in 2007. The exit yield was around mid-4% level if we were to complete the divestment in end 2026, gearing would have fallen 1% to 37.6%. We expect to complete this divestment by the first quarter of this year. We'll be embarking on the development project this year. We won the Hougang Central Site through a joint bid, which includes CapitaLand development. This is the first major GLS site in the precinct since 2019. We will own and develop the commercial component. The site is in a prime location served by the existing Northeast line and upcoming Cross Island line and will be seamlessly integrated with a new bus interchange. Surrounding the site, there are established amenities, including schools, sports center, community club and parks. We see this as a compelling opportunity to address the underserved demand in the precinct and to curate a retail environment that meets the needs of both residents and commuters. The total development cost for this project is about $1.1 billion, which translates to approximately $3,600 per square foot and an expected yield on cost of over 5%. This compares very well with the recent retail transactions at a low to mid-4% level. And this will be a brand-new mall built to our specifications. Taking into account inflation, the sites prime location and the integration with the 2 MRT lines and the bus interchange, we believe the total development cost is reasonable for a high-quality brand-new mall. For reference, the capital value for our Bedok Mall is about 3,700 psf, while some of the recent market transactions were done at 4,000 psf. We will be financing the development through both internal funds and external borrowings. Target completion is expected to be in 4 to 5 years. The development is strategically important for a few reasons. Firstly, it increases our exposure to Singapore, which remains our core market and a key source of stable long-term income. Secondly, the site is in a prime location in the heart of Hougang with excellent connectivity as I have articulated earlier and a large residential catchment. Thirdly, this is a rare opportunity as well located suburban malls at transport nodes in Singapore are tightly held and rarely available. Through this development, we can establish a strategic foothold in the Northeast region and expand our retail footprint in Singapore. The development sits within a strong population catchment, one of the top highest in Singapore. There is also likely spillover demand from neighboring towns like Kovan, Punggol, Sengkang and Serangoon. Our JV partners will further expand this catchment by introducing 830 residential units to the mixed-use development. Hougang has only 2.8 square foot of private retail space per capita, far below the national average of 11.4. This presents an untapped potential, supporting the development's long-term prospects. Next, moving on to AEI. This year, we'll be starting a new AEI at Capital Tower. Essentially, this is to -- what we are doing is basically reposition our Level 9, which is this floor. Some of the amenity space into a community space and create a higher-yielding F&B space at the ground floor of the Urban Plaza. On Level 1, we'll be introducing a 2-story multi-tenanted pavilion with F&B offerings. On Level 9, the space will be reconfigured to become the first workplace mental wellness center in the CBD. The AEI works will be from third quarter 2026 to the fourth quarter 2027. An update on our ongoing AEIs, Gallileo have completed -- has completed a progressive handover of Phase 1, the office tower to ECB. The target handover of Phase 2 is expected by this quarter. AEIs at Tampines Mall and Lot One and Raffles City are progressing well. On valuations, the key assumptions remain largely unchanged and cap rates remain fairly stable. Our portfolio property value grew 5.2% to $27.4 billion, largely driven by the step-up acquisition of CapitaSpring and the strength of our Singapore portfolio. Germany's valuation went up after factoring in Gallileo's AEI. I'll conclude my presentation here. Happy to take your questions after this. Thank you. Allison Chen: Thank you, Choon Siang. Can we invite the management team to the stage? Okay. Now we have come to the Q&A segment. Before we dive into it, let me introduce the management team. So on Choon Siang's right, we have Wong Mei Lian, our CFO. And to his left, we have Jacqueline Lee, Head of Investment. And to Jacqueline's left, we have Lee Yi Zhuan, Head of Portfolio Management. Okay. A few housekeeping rules before we start. We'll take questions one person at a time. We kindly ask that you keep your questions to 2 per turn. If you have more questions, we'll come back to you as we know, some of you always do. [Operator Instructions] If you have questions, please raise your hands, and we'll bring the mic to you. So I see, Mervin. Go ahead. Mervin Song: I'm Mervin from JPMorgan. Congrats Choon Siang, very strong results. Glad to see you keep doing Tony's very strong legacy. I would say this is probably the best results amongst the S-REIT season. If I annualize the second half DPU, it looks like you're hitting the pre-COVID 2019 level already. I know you're not supposed to annualize it given the second half is very stronger -- is much stronger. But why you're excited about this year in terms of growth drivers, maybe you can share that with us? And second question is divestments. I think previously you mentioned about asset rejuvenation, is Germany something you want to be in. Choon-Siang Tan: Thanks, Mervin. Okay. So yes, this year, well, on your DPU question, yes, so we don't typically provide forecast. And typically, second half is stronger than first half, seasonally speaking. So while we hope to improve on our results for this year, but let's see. I think the -- maybe we will just break it out into what are the potential growth drivers in terms of our DPU, right? I think underlying performance for the organic portfolio still remains healthy. I mean we're still reporting positive rental reversions and the positive rental reversions from last year will also continue to contribute to the organic growth because as you know, we calculate rental reversions based on average to average. So in fact, the last 2 years, rental reversions will also still be figuring into next year's -- this year's growth drivers. So that's one for organic -- on the organic side. Second thing on the AEI. This year, we have Gallileo completing. So Gallileo will fully contribute for this year. Last year, it started contributing towards the end of the year, probably not significantly. So that would definitely be one of the cost drivers as well and one of the growth drivers as well. Third, of course, there are some of the other AEIs, like Lot One and Tampines Mall that will progressively contribute as they -- but those are likely to happen closer to second half of the year. So the contribution for this year will probably be slightly smaller. Third thing on the AEI front is that last year, we also completed I mean IMM towards the middle of the year. So there will be a full year contribution. But last year, they started contributing probably from the middle of last year. So those are some of the incremental growth drivers from AEIs. On the third growth driver, I would say, while we had the benefit of a full year ION already. So that's -- so the base has already included 12 months of ION income. So whatever we get from ION going forward will be the incremental organic growth. But last year, we acquired CapitaSpring in August, and that's a fairly accretive transaction. So that contributed about 4 months last year and this year will fully contribute for 12 months. So some of the improvement in the second half was actually attributable to CapitaSpring as so we're likely to see this flow through to this year. And of course, last but not least, very importantly, interest cost savings. We know that there's a big swing factor when for REITs. Every time interest rates come down, we will see a significant benefit. But of course, I think I mean, nobody knows what the direction is going to be this year. It looks like SORA has kind of found a footing. But of course, a lot of our rates are -- a lot of our loans are still fixed at higher rates. On average, it's 3.2%. Marginal rate is probably closer to the mid-2 handle. So there is still some room but it all depends on -- we don't have a lot of loans for refinancing this year, to be honest. I think we did a lot of refinancing last year. But of course, we still have a large proportion of loans in floating. So that will benefit from the drop in floating rates. And it also means that it will help with our ability to continue to grow and acquire going forward. So I think those are the growth drivers. So hopefully, that should -- if the economy remains nice and chugging along nicely, that should help us. I spent a lot of time on answering your first question. I forgot your second question. Allison Chen: Divestments. Choon-Siang Tan: Divestments. Okay. So we just announced one divestment. Take it easy, man. Give us some breathing room. We haven't actually closed the Bukit Panjang. So I think we'll as be focused on closing Bukit Panjang first, and then we will think about the next step in terms of divestment. But we do have -- I mean there are a few possibilities. As you rightly pointed out, we will start looking -- reviewing some of our assets outside of Singapore as well. But of course, those will always depend on the market conditions in the respective markets. But I think -- I mean you brought out Germany, which I'm sure is something that's on quite a few people's mind. But I think Germany is it's -- the way I see it, it's slightly de-risked now because we have Gallileo that has already been handed over to the tenant. So from this year onwards, you will start contributing income. So there's not as much urgency. So we can actually benefit from the uplift in NPI from the asset in any case, whether we divest or not. But of course, if you divest, then you probably have to worry less in a sense. But actually, the asset itself has a long-term tenure lease. So it's pretty much de-risked. But we have another asset in Germany that is not of the same tenancy structure, of course, so there will be some -- so we potentially can look at that as well. Allison Chen: Rachel, please? Lih Rui Tan: Congrats on the very strong results. My first question is probably, if you could -- I think you spoke a little bit on interest cost. You have done very well in 2025. Could you guide us a little bit on the 2026 interest cost? And my second question is on -- since Mervin have asked divestments. I will ask acquisitions. Are you still keen on Singapore retail, like, say, your sponsor pipeline Jewel? Or are you keen to buy the office assets that's out in the market? Choon-Siang Tan: I'll take the second question and then maybe Mei Lian can take the first question later. In terms of acquisitions, no, I think we continue to look at our portfolio reconstitution. I think the current environment in terms of our cost of funding, actually, is very conducive for us. Interest cost is low. Our cost of equity is fairly reasonable, but I think we have always been quite selective about what we look at in terms of acquisitions. There are not that many opportunities in the market. I mean, on the retail, you talked about retail and office. So let's maybe look at retail. Retail, I think there aren't that many opportunities in the market. You mentioned Jewel, which is our sponsor pipeline. I think that potential -- I mean that has been there for a while. I think it needs to -- it needs -- it might take some time because I think the financials need to match our pricing expectation as well before there can be a transaction. So we'll have to see how that goes. And also, the vendor needs to be willing to sell at some point first. We don't know what's the thinking there. On the office front, there are a few assets that has been out in the market. The challenge, I guess, is the pricing expectation and the yield expectations for some of those assets, whether they can make it work. I think safe to say we are unlikely to acquire an asset that is -- doesn't contribute financially or doesn't really help unitholders. If it's not accretive, it will be quite challenging. So if you're talking about those chunky assets, if it needs equity funding, it's even more challenging. I don't know. I think it depends on -- probably not answering your question, but taking a long time to not answer your question. But I think it's quite difficult for some of those assets that are trading at fairly low use. Yes. Mei Lian Wong: On interest rate, like what Choon Siang mentioned earlier, the amount of loans that is due for refinancing is not that big. So given where current interest rate levels are. In terms of interest rate guidance, I think we could be in the range of 3% to 3.1% level. Yes. Allison Chen: Geraldine? Geraldine Wong: Congrats on the very strong set of results. My first question will be on valuation. I think foreseeing the lower bound of the value cap rates, seems to have tightened a little bit, are you able to share what has changed? Is it because of the market transactions? And second question is on really if we are looking forward, the picture looks very rosy. I was just thinking a lot what are the kind of concerns that you have in mind for 2026? And anything further that you like to de-risk in 2026? Choon-Siang Tan: Okay. Maybe I'll take the second question first. First question, I will refer to Yi Zhuan. But our cap rate lower bound move, I don't recall it moved. Geraldine Wong: Retail. I think 4.35. Choon-Siang Tan: Last year it was 4.35 also, right? Geraldine Wong: Last year, I believe it's 4.5. No. Yes. I think 4.35 is the first time I'm seeing such a tight cap rate. And for office, also was 3.15. Last year, I'm not sure. I think it's closer to 3.25, a very slight movement. Choon-Siang Tan: I believe it's the same. Yes. I think it's the same as last year. Okay. Maybe, Yi Zhuan, you can double check, and then we can get back later. What's the second question? Allison Chen: Our concerns for 2026. Choon-Siang Tan: Risk. Yes. Yes. Okay. To me, the biggest risk is actually interest rates because we have come down quite a bit over the last 1 to 2 years. And there is always this fear that we might start reversing the trend. Australia just high rates last week. So there's always this pressure. But I think Singapore is in a fairly stable environment. So hopefully, we will be -- I think and also from most people's perspective, SORA has come down to low 1%. How much lower can it go, right? So -- but I think there's a lot of liquidity still in the system. There's still a lot in flow. So hopefully, SORA remains at the current levels. And it doesn't look like -- I don't -- I think the risk to SORA going out is if the U.S. rate starts going up. It doesn't look like that's happening anytime soon. But it's always the risk at the back of my mind. Secondly, obviously, it will be the economy, general economy. Last year, we have a lot of good things going for us. I mean at the start of the year, we were forecasting a recession in Singapore. And we ended the year at, what, 4.8% GDP growth. So there's a big swing from beginning of the year to the end of the year. Whether we are able to repeat last year's performance in the general economy, I don't know. So that could be a big risk. I think last year, there was also a lot of pump priming, right? I mean, CDC vouchers and all that. So that could be -- we'll see what the budget brings next week. So there could be some effect there. Third, I don't think it's a big risk, but people in The Street will always put it as a risk, of course, is the completion of RTS this year, whether that will have an impact. I think we have talked about this at length many times with many of you. Different people have different opinions. So we'll see what happens. So -- but we can't rule it out as a risk yes. Maybe we'll go back to the first question on cap rates. Yi Zhuan. Lee Yi Zhuan: Yes. The range compared to last year, year-end is the same range for both the office and the retail at least for the lower bound. Allison Chen: Okay. Can we go to Joy, please? Qianqiao Wang: Joy from HSBC. congrats. Two questions from me. First on development on Hougang. So if I look at the lower end of your cap rate is 4.35%, do you think roughly about 70 to 100 basis points of spread is sufficient to compensate for development risk? And with Hougang, can we assume you won't look at redevelopment of your existing assets in the near term? So that's one. Second question is on NPI margin. So I think historically, Q4, your retail NPI margin usually is lower. If I look at the quarterly trend, this quarter, you actually bucked the trend. Your NPI margin is very strong. Can I understand what has -- is there -- what's the swing factor? And can I take this as the base for next year? Choon-Siang Tan: Okay. So I think on the development premium front, I mean there's always a judgment, right? And when we say it's at least 5%, we didn't say it's 5%. So that's one. But if you look at 70, 80 bps, it sounds small, but it's 20% of the value. When you move when you have a compression of 80 bps is at 4% is 20% of the value. So I don't know, is that enough for a development premium? When developers do residential development, I think the pricing typically a 10% to 15% margin for -- so but let's just think of it, if we don't do this and somebody is developing and we had to buy from them 5 years later at 4.3%, would investors have preferred that? I don't know. I mean it's a tough call. I think there's no right answer. It also depends on how we manage the cost. I think if we are able to manage the cost well. Of course, when we plan -- it's all about execution on the development and how it turns out in 5 years. Nobody knows what the market is going to be like in 5 years. I mean even if you assume the inflation of a certain rate, rent should theoretically go up by then. So if you're able to get entry of 5-plus percent, then $3,600 per square foot, to us, that's reasonable. Yes. So it's a bit of a judgment call. But the reality is there's -- I think it's hard to find an asset at the kind of yield in this market as we have found out in the last few months. But of course, we also go the safe -- go down the safe path and buy a core asset at maybe 4.2%, 4.3%. Yes. So -- but we think that this, but I think for the calculation for this is also a bit different. It's not just simply comparing an asset to another asset. I think we like the location. I think the location in this -- but this precinct is very underserved. in terms of retail demand. I mean I don't know for those who stay around the area, you know that there is not that much in the neighborhood. I think neighborhood is tough of a retail mall, a big retail mall, which is -- which there's been quite a lot of new neighborhoods in the area. That's a very new from Hougang all the way to Sengkang, Punggol. There's a lot of new flats that have come up. And I don't think the growth of the retail space have been commensurate with the growth of population there. Okay. I think second question on NPI. I believe the NPI margin is partly because we have also added CapitaSpring, which obviously is a higher NPI margin. So it may not be a like-for-like when you compare year-on-year, a specific retail. I think for retail, we did have some cost savings, I think. Utilities costs have come down. I think we have entered into better contracts last year. So there were some utilities cost savings. So that has improved our margins. Yi Zhuan, anything else to add in terms of margin? Lee Yi Zhuan: Largely in part your utilities savings is one. And then there's a bit of rebates on electrical front. For 2026, probably, you can see a little bit of that continuing. But I will say that this is slightly a slightly improved NPI margin that we can expect for 2026 also. Redevelopment. Choon-Siang Tan: I think AEIs to us is BAU. So whether we did Hougang or not, we will continue to go ahead with AEIs. That's the -- I mean, yes, so it's not. And I think Hougang actually -- doesn't really see the rationale of spreading out AEIs is that it tends to create a drag on our cash flows. Because when you do AEI, you have to sacrifice some NPI because you have to shut down some of the spaces to rejuvenate. The difference with Hougang is that you don't give up any NPI because you're not carrying out anything. There is definitely balance sheet consumption, but interest cost is capitalized during construction. So there is no drag on DPU as well. So the only cost to this, I guess, is gearing. So gearing will go up, but I think we are quite comfortable with the divestment of Bukit Panjang, we are gearing at 37.6%. So that gives us a very comfortable position. So in a way, we are not sacrificing any DPU to go into Hougang. So it shouldn't affect our other BAU initiatives. So if a redevelopment comes along and it makes sense, it shouldn't matter whether we have done Hougang a lot. But of course, the only thing is if we whether we had the balance sheet to do the redevelopment, but we -- I think we are fairly comfortable at 37.6%, gives us a lot of debt headroom. Every 1% for us is about how much $27.200 billion. Yes. So we are about maybe just under $1 billion from debt headroom. Unknown Analyst: Just one quick question on the Hougang site. Does $1.1 billion include capitalized interest costs? And secondly, on Bukit Panjang Plaza divestment proceeds, would you set that aside for development? Or is there a chance that you could actually redeploy during the next 1 to 2 years? Choon-Siang Tan: Okay. I think the short answer to the first question is, yes, it includes the capitalized financing costs. I mean it includes all of our construction costs and all the contingencies that we have provided as part of our normal planning purposes as well. Bukit Panjang proceeds, I mean money is fungible. You can see as whether we had -- I mean, last year, we made some acquisitions. You can see it stopping up the balance sheet. We can also use it to fund future acquisitions, you're right? In a way, selling at mid-4% is no different from -- in fact, slightly cheaper than raising equity at -- currently, we are -- our cost of equity probably 4.8%, 4.9%. So yes, so we do -- we can use it to redeploy into future acquisitions, definitely. Unknown Analyst: Next is on forward guidance. Maybe just a comment REITs P&L is probably one of the easiest to forecast. As Jack has said that forward guidance is encouraged. So maybe next time we meet you, you can be the first brief. Choon-Siang Tan: Noted. Allison Chen: Thanks, Shen. Derek, do you a have question. Derek Tan: Maybe just a follow-up on Hougang. Don't mean to flog this, but how did this come about? I mean I don't think we generally don't participate in GLS sites even as a joint venture partner. So how did this come about? Do you volunteer or... Choon-Siang Tan: Yes. Okay. So yes, that's an interesting one. So if you had asked us a year ago, we -- whether we will do a pure development project, probably the answer might be closer to no than yes, probabilistically speaking. How did this come about? So I think one is I mean we have always been quite focused on growing over the last -- and we have looked at many opportunities along the way. And we have also found that it's quite difficult to do acquisitions in Singapore, as you might appreciate. And a lot of assets that are available for sale have been sold at very aggressive pricing. I mean I wouldn't say aggressive, maybe it's fair pricing. Five years later, we could go back and think that, wow, that's cheap. So okay -- so then this Hougang site came about and it was -- it has a fairly large commercial component. I think if it was a small commercial component, we probably won't look at it. So then we think -- and I think if it's not a big project, we also are less likely to look at it. The reason why we wanted to do Hougang, I think one is very sizable enough, right, billion, $1.1 billion of deployment. Secondly, competition. I think because not many people out there can do a residential come commercial project. I mean we have seen from, say, for example, the Clementi Mall bid, the competition was quite tough. When you have 10, 15 people bidding for the same project, the value gets competed away. We know that there probably won't be that many people who can bid for such a huge project. I mean if you add in the residential and the commercial component, the total development value is north of $2 billion. I mean there aren't that many parties in Singapore that can do that. And in a way, true to that, it's -- there were only 3 parties that bid it. Of course, we know there are likely 2 or 3 parties that are likely to bid. I mean -- so actually, we look at it for a while since the site was announced. But of course, we didn't really want to invite competition, so we didn't really put it out there, obviously. The alternative was for -- I mean the other consortium which are CLD and UL consortium to bid. I mean the earlier conversation was that they will bid, win it or not. But if they win it, we can potentially just buy over from them, which is our normal process. But if they were to do that, then they have to then we will have to buy at a different price, which is fine because it's de-risked. Not that a higher price -- higher price doesn't always mean worse, obviously, because it's a de-risked product. But the difference this time is that if they were to do that, then they can bid as high as well because they have the price in the margin, right? So they can only bid -- maybe -- because when they sell it to us, they also have to they have to hold it for 5 years and then sell it to us. They probably have to bid in a certain margin. So then we thought that, okay, if you come in directly, then we can get rid of that, that safety net for them and then we will be able to bid a little better than if they would do it themselves. So I mean we debated that maybe that's the better outcome for everyone. It also means that we have a higher probability of securing a win. If we are able to -- if the REIT is able to come in directly. And we know that very few other REITs can do that because $1 billion because there's a limit to how much development headroom you can do. So for us, our total AUM is $27 billion. 10% of that is $2.7 billion. So it gives us a very comfortable headroom and still able to do other projects. For some of the other REITs, probably we know that they are more limited by that. So we know that -- so that is our thinking. And that was a strategy that we went in with. And fortunately, for us, that worked up relatively well. And despite that, we only won by a relative margin. So we really needed that competitive pricing. But even though you won by a small margin, but I think that pricing is generally -- I mean, we are quite happy with the outcome. We think that buying at that price is fairly reasonable. It's probably no worse off than buying a brand-new retail mall that is de-risked at mid- to low 4%, say, for example. Derek Tan: But some of the malls are like Choon-Siang Tan: Sorry? Derek Tan: Some of these malls, low 4% are better locations also, strong catchments. Choon-Siang Tan: Depending on how we -- yes, it depends -- location -- more central doesn't mean a better location, I guess. I think location to us means it depends on the catchment and the scarcity in the area as well. Yes. So. Derek Tan: Okay. And just one last question on reversion outlook, especially for retail. How does that look like and how does it stack up against your occupancy costs? Choon-Siang Tan: I think last year, we have about a 6.6% reversion. This year, I think we'll probably -- I would say that we'll probably stay at moderate to about that level, mid-single digits for retail reversions. Yes, I think that's the guidance we will give. Yi Zhuan, anything to add? Lee Yi Zhuan: For office retail, probably looking at now, I mean, 12 months later, a lot of things can change, but I think we are pretty much looking at our mid-singles kind of reversion. How it's backed up against for the retail out cost? I think if you look at the year-end occupancy cost, it's relatively okay, 17%, right? And downtown, if I look at the suburban is actually on the 16-ish kind of percent. So I would say our cost perspective, we are still quite healthy. Of course, along the broader market, you see on and off, there's pockets of the retailers having some of these challenges. On a like-for-like basis, we probably have to tackle some of the localized kind of specific issues across the different trades, right? Like, for example, we talk about cinemas, whether or not there's an immediate replacement to cinemas or we are taking a short-term kind of extension to some of them. So that will play out a little bit, in fact, in terms of rent reversion, but I would say, by and large, we should be okay in terms of the our cost and reversion. Allison Chen: Can we pass the mic to Gola, please? Unknown Analyst: [ Gola ] here from the edge. Okay. I've got a couple of questions on the office front because your occupancy fell. And in terms of the expiring rents, which is on this slide -- slide 34 because they're a bit high for -- next year, they're a bit high. So I'm just wondering for this year and as well as this year. So I'm just wondering whether you said mid-single-digit reversions for this year, but I'm just wondering what you think is the outlook? And why did your occupancy fall for that's the office front? And then for the retail, there's another retail question. I just wondered, what is the F&B percentage of the just the retail portion? Because I think you put it as 17 -- 16% or 17% for the whole portfolio. But I noticed that your peers that only do retail very, very high retail portions by GRI and by NLA. Lee Yi Zhuan: Okay. Yes. I'll take the office one first. So okay, if we look at the expiring rents, right, it's true that if you look at this to 2025 and 2024, actually, the expiring rent versus the market rent, right, we are kind of closing up, right? So actually it's a much tighter now. So how do we then actually explain the kind of outlook? I said a lot of things can change in the next 12 months. And we are looking at some of the leases that were in discussion for the office side. If we look at the consultants, actually, they are a lot more bullish than us in terms of rental growth in '26 as well as '27 given that there's actually a little bit of tightness in supply, especially for good quality assets in centralized location. So they do expect the market rents to actually go up quite substantially. And then if you look at the expiring rents, naturally, we are -- the growth in expiring rent is not going to grow as fast as how the outlook of consultants market rent growth. So that kind of supports a little bit of hope that some of these things that we set out. Because if I give a very low guidance in terms of reversions, you all will think that I'm being conservative about it. So I think it's just realistically how we are looking at this. And the next thing I would look at is actually the expiry profile for our assets, right? So if you look at how our expiry profile is like for office in the '26, '27, '28, the kinds of the '27, '28 kind of is in the window where there's actually tightness in terms of supply again. So hopefully, we can take advantage of the tightness in supply that supports a higher rent, right, to again negotiate for better outcomes for office portfolio. Choon-Siang Tan: I think there's a second question on retail. I didn't really quite understand your question. When you say are you talking about retail portion of office? Unknown Analyst: I'm talking about retail portion, F&B. What is the percentage of F&B in your retail malls because there's so much F&B will all grow fat the next few years because and because they have a lot higher rents than your cinema or your supermarket? Choon-Siang Tan: You don't necessarily have... Unknown Analyst: And they keep on opening and closing. I mean the -- these food places keep on opening and closing. Yes. I'm just wondering. And is it a risk for you? Choon-Siang Tan: We have a slight right on the percentage of our F&B. I think it's about 30-odd percent. Okay. It's say 17.8% here, but this is overall our entire portfolio. But overall, our retail space is typically around depending on which mall probably about 30-odd percent. Your question is whether how are they doing? Unknown Analyst: Whether there's too much F&B especially when the RTS comes and everybody goes up to Malaysia. So that's the point. Choon-Siang Tan: But I think actually, people who go to Malaysia are less likely to be consuming -- I mean, they will continue F&B, but I don't think that's the trade that will get affected most because everyone can only eat 1 lunch a day. So if you go to Malaysia, you can only eat 1 lunch. But you go there and buy groceries, you can buy like 10 detergents. So actually, F&B is probably the least at risk to the RTS opening although there will be some leakage, but it will be very small. So we're not so worried about that. Actually -- so in a way, having more F&B is likely to be more defensive. Yes. So I mean, I think, F&B opening and closing has actually been part of retail trade for the longest time. I think it's -- I mean it's been a bit more on the news lately, but I think a lot of the closures are also not really in our malls. A lot of this opening closings, you tend to find them in shop houses because the rent variance tends to be a bit higher because some of these shop houses can be very low rent for a long time. And then suddenly, when the owner wakes up one day or a new owner comes in and then you can have a rent adjustment. Whereas in malls, you are less likely to see that, right? I mean our contract, most of our rent escalations are 2%, 3%. We're seeing like average rental reversion of 6.6%. We never ever see it 40% in our rental reversion. So you don't really see that. So -- and 6% rental reversion actually means 2% per annum, which is not significant. So most of the F&B that are in our malls, it tends to be able to survive as long as the business model is sensible and is sustainable. So those that are not able to survive typically means that they are not able to survive even if the rents don't increase because 2% is not idly to make a difference to your business model and your sustainability, right? Unknown Analyst: So can I just ask a question on Clarke Quay as well because I think when you mentioned opening and closing, I mean, Haidilao is closed. Have you decided what's going to come in its place and how you're going to -- because Clarke Quay, we've been to it, and my colleagues have been to it, not me so much. But there's not much I mean it's not as buzzy as other some places? Choon-Siang Tan: Yes. Haidilao closure does draw headlines but I wouldn't say it's one of those that open and close. Actually, Haidilao has been there from day 1, and it's one of the first stores that opened. But while we have rented out the space, maybe Yi Zhuan can elaborate. Lee Yi Zhuan: Firstly, I mean, thanks for coming to Clarke Quay. Please do come more. It's -- I will say that actually it's a little bit -- I can understand why people are saying now Clarke Quay less busy, but I think there's also a change in the type of crowd that we are seeing in Clarke Quay where previously a very -- to almost some like extend route part of certain our kind of crowd, right now, you kind of disperse the crowd across the day rather than just concentrated at night and then you have a lot of tourists because a lot of them tons by to the other [indiscernible] and stuff like that. So for the [indiscernible] we already have a replacement. And of course, I would say that it's not a finished product yet because a lot of things is also when -- if I say that actually, I have exactly what Clarke Quay has to be for the market today, it's probably not true, right? It's a product that is evolving as we try to also find where is the threshold of the market's preference when it comes to your day and night trade mix. And then, of course, the other part that will be important for us is when eventually Canning Hill is completed, then we will see when the whole precinct kind of be a bit enlightened where there's residential, hotel, tourism and all these things, we can again fine tune that trade mix a little bit. So that's an evolving process. And in fact, actually, as I shared previously, there's also an element of experiment that we are trying to take with Clarke Quay. So some of the tenants are deliberately CapEx short-term or temporary, right? Because we didn't want to sign on a tenant, not sure whether that concept -- they can promise you a lot of things, right? But eventually, you want to see the execution. We don't see the market acceptance towards it. And that's why we will try out some of these concepts and see how all these things pan out. So it's a work in progress. I would say that there's a few good things that's happening. I mean, [ Zum ] is going to do a renovation. And like all brands for a long time, when everything is doing stabilized, nobody really go. When you say it's going to do close down for renovation, everybody starts to go [ hooters ] -- nobody went to hooters for probably a while, but there's some day everybody is asking what is going to happen to this. So I think that it's very inherent that all these things catch like the headlines. But at the end of the day, when we see it's really that when you look at occupancy costs of all the retailers. We know some that works. We know some that don't. And that's why we will talk to tenants, either we help them to grow their sales. If not, then we will have to look at replacements. So I think if you see across some of the closures across, I think recently, there's another one about some of the closures in malls, right? Oftentimes, it's not just about the rents. It's really about manpower constraints. So some of the retailers that we spoke to previously, they did share that they have overexpanded and they're looking at how to rightsize because they don't -- simply the manpower constraint, manpower cost, all these makes a lot of the operating costs not sustainable. And then that's why, naturally, then we will feel the pressure because at the end of the day, they want to protect their margins, right, and something else goes up, they will try to find to cut from other place. So I think there's all these things that's ongoing. But I'll say F&B, it's one that we do see a shift in the consumer patterns, right, where now actually they go to something that's not overly pricey, but they like something innovative, experiential and everything. So when it opens, right, the first month is very good. So she done very good. And the challenge is that when we bring all these new to market in, right, we are not here to do a tenant for 1 or 2 months. We want to make sure that, that kind of product that they do is actually something that can sustain their sales going forward. And that's why I think there are a lot of challenges for some of the F&B operators. It's not difficult to open F&B. But when they start to open F&B, that is offering something that pretty much everybody is offering without something that's differentiating and still without the scale of operation efficiency -- operational efficiency, that's where they are under pressure in terms of their survivability. Unknown Analyst: We passed my 2 questions. Just one more, Australia. What are your views on your Australian assets given that the [ RBA ] moved cash rates up 25 basis points. Yes, the third of the... Choon-Siang Tan: Thanks for the question on Australia. Actually, Australia is generally doing quite well. If you look at -- if you -- the market consensus on Australia is that things have bottomed up probably last year. And rents are actually going up in at least in the core CBD. Core CBD actual occupancy is quite strong. There's been quite -- unlike some of the other cities in Australia, Sydney is holding up quite well and there's a bit of a flight to quality, right? So supply is getting tighter. Rents are going up. Vacancies are coming off and the incentives in Australia are also coming off. So actually, it's -- which is the reason why if you look at Australia, today, they are actually quite a bit of capital market transactions going on. So people are actually getting a bit more optimistic in terms of what's happening in Australia. If you look at our occupancy in Australia, it's also picked up slightly across our properties. Allison Chen: Perhaps now we'll turn to the online audience. Thank you for being with us virtually. We have four questions. First one is actually from Andy, DBS -- sorry, OCBC. Can you provide the debt breakdown schedule for the Hougang development project? Choon-Siang Tan: What do you mean by that? Allison Chen: The drawdown. Choon-Siang Tan: As in how much money is debt. Is it maybe [indiscernible]? Mei Lian Wong: Well, I don't have the exact amount, but a large part of it will be in this FY, given that we will be paying for the land acquisition. Choon-Siang Tan: Yes. I don't know what's the -- I'm guessing the question actually is not about debt. It's about the how much is needed per year. The deployment schedule -- the cash deployment schedule for the next few years, whether it's debt or otherwise. Jacqueline Lee: Mei Lian said, of course, the land cost that will be paid this year. So I mean, we will be paying within 90 days, I think the 100% of the land cost and then, of course, there's stamp duty as well. But for construction costs and the rest of it, right, it will be progressive because construction will probably begin only in 2027 after the planning period, which I think probably it's going to be like about 1.5 years. So construction will really in 2027. And then that construction cost will be drawn down progressively. Allison Chen: Another question we have from Helen CBRE. Will CICT's consider another development project before Hougang completion as we are still debt headroom available? Choon-Siang Tan: I think I mean, it's a hard question because it depends on what's the opportunity, right? But I think quite -- less slightly, but I mean, like I mentioned earlier, AEIs continue to go on. So depending on how you view what's development. To us, AEIs is BAU. Whether we will -- if the question is whether we will bid for another development project, which I think is what the question is driving at, probably less slightly. I mean we try to not manage too many projects on an ongoing basis. Let's do this really well first and build a track record of doing executing development projects well before we look at subsequent projects. But of course, never say never, is something that's very attractive, that comes up, who knows. But I think the current thinking now is quite unlikely. Allison Chen: Okay. The next question we have from Derek UBS and Mr. Yap. What is the status of the ION tax transparency? Choon-Siang Tan: I think no new updates on that. So as I mentioned in the last earnings update -- so this is unlikely to come anytime soon. Yes. Allison Chen: Okay. And then last question from Frasier. We have -- he is congratulating us on the strong results. The like-for-like revenue growth seems low versus the strong reversion. What is the cost? Is It due to AEI? Choon-Siang Tan: What's the like-for-like growth? I think it was about... Allison Chen: 1.4%. Choon-Siang Tan: 1.4%. Okay. So I think 1.4%, I guess a little bit of that -- I mean if you look at our reversions, it's about, call it, 6%, average 2%. So should we be tracking closer to 2%? It could possibly -- some of it could be possibly due to the AEI, but maybe we can break down the details and then get back to you, Frasier. Allison Chen: Yes, Frasier, we'll get back to you. Thank you for the question. Okay. Now we turn our attention back to the physical audience. Jovi? Unknown Analyst: Jovi also from Singapore. Just one small question here also about retail. Combining a few threats mentioned here with the new Hougang with the line from the slide is about establishing a strategic foothold in the Northeast region. And reading that along with your comments on the lack of retail offering for debt catchment, also your comments on RTS, just broadly, what is your thinking about the entire North of Singapore right now? Would there be a catchment of interest to CICT, perhaps somewhere near like the [ Turf Club Crunchy ] area away from the more crowded established areas now? Choon-Siang Tan: I don't think we have a specific view in terms of -- I mean we went into -- in Singapore is always and in real estate in general, it's always very localized. I mean to talk about North in general, it's very hard. You can have 2 more things with each other and the performance will be quite different. So it always depends on the actual location, right? I think generally, we are Singapore-centric. We like Singapore in general. If there's an opportunity in Singapore, we will definitely look at it. And when we look at it, we will evaluate, obviously, holistically in terms of whether that particular location makes sense for us. But definitely, we did mention that one of the reasons why we went to Hougang was because we don't have anything in the North-East, because it always helps us to expand our customer base. I mean, we have a loyalty reward program. The more malls we have across, it gives our customer base a wider selection and offering as well, right? Because then we can then access the database and customer base in the Northeast, because people naturally always shops somewhere near their residence. Yes. So I think we are not -- we are fairly agnostic in terms of whether it's North-East. Obviously, I think there is market talk about how the northern part of Singapore is going to be more affected by RTS. I guess, partly true, but you will also benefit from the inflow. So there will be a certain vibrancy at the entrance too. So maybe more leakage than less, but I don't know. I mean for us, fortunately, we don't have that much exposure in that area. Whether we see that as a -- I don't -- I think I said, we will look at it specifically on each individual location on its own merits. Allison Chen: Okay. Pass the mic to Vijay. Vijay Natarajan: Congrats on a good set of results. I think most of my questions are asked. Just two questions from me. In terms of office, Singapore office occupancy drop during -- seen during this quarter, maybe can I know the reason why? And specifically, with office rents hitting multi-year high, do you think -- do you see pushback from tenants in terms of increasing it higher, some tenants moving to out of CBD areas? That's my first question. Second question is in terms of retail sales, I think if I look at your tenant sales, overall tenant sales looks a bit soft. I think it's in line with broadly with market while I expect you to outperform. Any specific reasons? And with this level of sales, do you still see pushing up rents possibility in the next few years? Choon-Siang Tan: Okay. Maybe I will take the second question and then Yi Zhuan can take the first question. I think tenant sales -- we are up about maybe -- yes, I think it's on the [ Board ] now, call it, just slightly over 1% for the year. But I think we also have to be mindful that the first half of the year was a slightly more cautious environment. So if you strip out the effects of the first half, if you look at it on the second half alone, which was -- I think I mentioned it earlier in my presentation as well, we are up close to 2% year-on-year, which I guess is -- I mean, sales growing at inflationary rates, I guess, it's business as usual, whether we should be outperforming that. I think it's okay. I think we are quite happy we have 2% growth on a year-on-year basis. if anything else -- if nothing else, it's in line with our rental reversions of about 6% per annum, which then allows us to maintain the same occupancy cost. But as we have also mentioned a couple of times, our occupancy cost is actually not super demanding at the moment. We are at 17-odd percent. Pre-COVID, we are about 19%. And our sales have gone up quite significantly, probably much faster compared to our rentals over the last few years. Sales always lead rents, right? I mean your sales have to go up before your rents can go up. So we have already had the benefit of sales going up quite strongly the last few years. So we do have rooms, I think, for rents to grow up to catch up with the occupancy cost. But if nothing else, at least if you continue to grow at 2%, 3% sales per annum, at least you are able to maintain the same occupancy cost as this year. So I wouldn't call it weak growth rates. Maybe the first question on drop in office occupancy. Lee Yi Zhuan: Yes. Okay. So for fourth quarter, actually the main reason for the drop in occupancy actually some transitional vacancies that we see in the Singapore office portfolio. So of course, we have one -- I think previously, I mentioned that one of the City tenants actually left. So that one on its own is quite a big void. And Six Battery Road, we have a few of the kind of smaller kind of tenancies that expire. So these are kind of things that we are aware of ahead of time. And so actually, there are already some of the space has actually backfilled. So for example, the one in Capital we got what, 20-plus percent backfilled. And then it's fortunately had a positive rent reversion and the ones at Six Battery Road, we have also backfilled some of the spaces. Some of the spaces in these in part this drop in occupancy. So we have to set aside for some of the things like, for example, fire compliance for Six Battery Road before we can put it back out under the market yes. So it's largely that -- I would say that if -- so we are aware that -- I will even say that going forward in the next quarter so we probably will see a little bit of volatility in a little bit of these occupancies because some of these movements in the market is quite natural, especially at a point in time where we see movements in the market as there's flight to quality, there's people consolidating expansion, and then there will be natural downtime to some of these things. I think there's a second part of that question where you talk about where the tenants push back on rents. I would say actually, not really at this point. Of course, naturally, everybody is a bit cautious in terms of with all these go by uncertainty, market uncertainty, then, of course, they try it a bit more prudent when it comes to rent negotiations, right? But by and large, I'd say the broader themes that is still happening, right, flight to quality because ultimately is about talent attraction, talent retention. So centrality is actually a key theme, not just in Singapore and Australia as well. As we see the core CBD markets are the one that always recover and grows faster. So there's actually companies are prepared to pay for the right space given that in the view of the broader business, actually, real estate cost is just one function of the other parts that they are concerned about. In fact, actually, right now, the challenge for a lot of them is not so much the ongoing rent in a monthly payment perspective, but it's actually more the initial CapEx that is involved in moves. So that's the reason why you can see in many cases, right, some of the landlords are starting to do fitted out offices to help companies bring down the initial setup costs and all these things then becomes rentalized into the rents. So that's gaining a little bit of popularity across quite a few buildings in CBD. But by and large, I think that the companies are aware that ultimately, there's only so much space that's available and they had to make a choice on whether all these ESG central location fits their business banner or cost efficient. And the delta between a decentralized and CBD is still not wide enough for them to then say that actually a decentralized location is a better way to go for just pure cost reasons. Allison Chen: Do we have any more questions? Unknown Analyst: [indiscernible]. Can I ask -- I know to hop back on this point. On the RTS, do you have actually done any modeling to kind of talk about leakage or modeling in terms of how much leakage you would see on that front? And also on the retail side, again -- sorry to hop on this point, but what kind of demand are you seeing now in terms of tenants for your retail malls? Is it still largely coming from overseas, the usual suspects? And on the office side, obviously, there has -- capital market seems to be improving like how you can pointed to. Is there any -- if you guys approach to sales over assets, will you be considering that? Choon-Siang Tan: Okay. If we have -- your question is if we approached to sell some of our assets, will we contemplate the... Unknown Analyst: On the office side. Yes. Choon-Siang Tan: Yes, on the office side. I mean we have sold off [indiscernible]. So we are not adverse to selling assets. We sold off 21 Collyer Quay, which is an office asset. So we are not adverse to selling office asset. So I think between office or retail, I wouldn't say we have a preference over either, right? Because I think the cycle always changes. So for us, it always depends on what is the proposition in hand. If someone offers us -- I mean, never say never. If someone offers us a price that is very attractive, I think we will always take a look. We are not -- I mean, if it's attractive enough, we will definitely always take a look, is I would say. Yes. So that's on the office and retail front. I think the first part of your question is on RTS leakage, whether we have done some modeling. I think we did before. I think there are 2 parts to this, right? Question is the existing leakage, which has already happened and the incremental leakage as a result of RTS. I think existing leakage -- I think when people talk about leakage, there's some confusion about the truth because actually, existing leakage doesn't affect the numbers anymore. They have already leaked. So it forms a new base. So whatever delta from a year-on-year basis does not make a difference. So what we should concern about is the incremental leakage from the RTS which I think is a bit hard to model, I think. If you look at it from a pure -- I mean, if you look at it from -- today, the people who drive are likely to remain drivers into JV because you cannot substitute that away. You drive because you want to be able to move around from point to point because you spend a whole day there and you want to be able to -- if you have the ability to drive most likely, you drive. So I don't think that will substitute a way to RTS. So RTS is likely to create the additional demand from people who used to take the Causeway bus. I think there is an existing Causeway bus, which I have taken to test it out and see how convenient it is. It is already very convenient because just from one side of the Causeway to the other side, it only takes like 10, 15 minutes. But of course, there's that additional time that you have to take from your house to the -- each of the Causeway. But just crossing the Causeway itself actually is already quite convenient. But of course, with the RTS, it makes it even more convenient. Maybe 15 minutes can cut down to 5 minutes. So likely, you will take away the demand from the -- those who are currently taking bus and move it over to RTS, but that's not incremental leakage. The incremental leakage is the people who are currently not going to Johor and then suddenly decide to go to Johor. So if you are currently not going to Johor, why is that? And why would RTS make you go to Johor? -- must be because of the added convenience and a slightly shorter time line. But actually, it doesn't take that much of a long time today anyway. So if you are the type that will go to Johor to shop for cheap goods, you're probably already doing it today. So I think the incremental effect to me is not as big, but I could be wrong. But to me, people who have the propensity to shop for cheaper products in Johor are probably already doing it. But what RTS will also do is that it allows Malaysians to then more easily come into Singapore. And this facilitates cross-border labor flow, right, which then allows us to tap into incremental demand in terms of labor flow both ways. And you also -- and RTS also -- I mean, the whole Johor is booming, right? And there will likely to be greater population growth in Johor, either organic or -- I mean, you can't have economic activity without people, right? So you are likely to attract people from other parts of Malaysia coming out to Johor. So there are a lot of things that Johor doesn't have that Singapore has. Some of these people will likely want to come to Singapore, over weekends, et cetera. And then you have expats and all that moving to Johor because of all the development of industrial activity. So there's also the incremental benefit. And previously, these people probably may or may not drive into Singapore. And then RTS now creates an avenue for them to come to Singapore. So I don't think it's all bad. It's not all doom and gloom. So there could be some incremental leakage as what I mentioned earlier. But I think it's probably not as big as it is because it's -- because all the leakage that started to happen has really probably happened, but it also facilitates flow back to Singapore. So that's how I would think about it, but it remains to be seen. So let's see how that goes. Was there another question on the RTS? I think that's about... Unknown Analyst: So can I -- would you have a number on that point? Because you seem like a net negative in the sense from a Johor plan. And on the retail side, again, can I also ask, right, in terms of the just adding right, in terms of softness, I think which popped up about just now, are you seeing change in consumer habits in terms of, obviously, the footfall seems to be increasing, but spending seems to be coming down. Have you seen that in your malls as well? Lee Yi Zhuan: Sorry. You are asking if we have a number for the sales leakage. Unknown Analyst: Yes. Lee Yi Zhuan: Okay. So, have we done the modeling? Yes, we have done the modeling. We won't be [indiscernible]. So whether it's there a number I can share with you I only can say that it's not a number that I worry and lose sleep over there. Then if anything, I will refer you to the DBS report, probably that was a good reference point. I hope that I address that question. Unknown Analyst: And on the previous occupants. Lee Yi Zhuan: So on the retail consumer pattern, I would say that generally, I think, for example, some of the -- it's very hard to just use a single line to kind of capture the whole market shift. But of course, what we see is a little bit of at risk of generalization, we do see that people are moving away from very, very big ticket items. So you'll start to see people are trying to spend on experiential dining, experiential entertainment lifestyle elements. Of course, there's a little bit of a shift towards mall like sports and healthy kind of living things. But the shift in trend also does not always reflect in the kind of sales that you see because, for example, we talk about year-on-year, if you compare it, for example, sports equipment and then you I mean, just using Brompton by example, right? You see it coming down. It doesn't mean that less people are cycling compared to 3, 5 years ago. It's just that on a year-on-year basis, because it grew a lot in the prior year and the base is high and then it came off subsequent. But by and large, that trend and inherently directionally is still going a certain way. We also see that actually, for example, IP is doing -- IP collectibles are doing very, very well. Like everybody, I'm not sure -- we used to ask who are buying blind boxes. Now as we have not bought one before. right? And I don't know if any of you have not bought one. But even if you don't really believe in it, people will still try and buy. And in fact, we do also see like some of the traditional like operators that sell toys to kids are now also trying to pivot a little bit into this adult kind of thing. So toys, games, all these things no longer become something that used to be for kids. And nowadays actually the one that's spending a lot of all these things. Fortunately, for us -- I won't say unfortunately, but it's actually the end up. So that's the kind of shift that we do see in some of these consumer patterns. And that's also the kind of things that we always say that the retail products are evolving. Then we talk about all these closures and whatnot, are we seeing a lot of brands from overseas, right? In the past, right, the comment has always been that malls are cookie-cutter malls. So then, of course, when we start to bring in overseas brands, we start to say, there's too many overseas brands, new-to-market brands. And then what does it mean for local, it's finding the right balance. I don't think in any of our malls, I can't say for the rest, but I don't think in any of our malls, you can see that our malls are predominantly tenants from one particular location. It's not a local versus foreign thing. It's really getting the right mix, right, that when somebody goes to our mall, they can buy things that is from local fashion, they can buy a local F&B. They can also -- if they choose to do something else, even Chinese food is very, very good. Today, you have options. And I think that's important when people come to the mall, because especially the mall nearest to you, right, it's all one style, one pattern, one product line, right? I don't think you want to go back there even though it's the nearest mall to you all the time. So overseas exposure, we do see continued interest from Chinese brands, of course. But that aside, we also see a lot from the Western part, right? So like, for example, again, I bring back Chick-fil-A, I bring back like new concepts from -- we see like permutations, right. For example, certain things that tend to be high-cost items, now they try to make it more mess pricing. So people can still experience the same thing for a much cheaper price. So we see some of these things evolving along the way. Allison Chen: Yes. I'm just mindful of time. Maybe we'll take one last question from John. Can we pass the mic to John, please? Unknown Analyst: Congrats on the very strong DPU growth. My question relates on growth and how that changed your view on country allocation. So for example, would you be open to expand into retail in Hong Kong? Would you be open to expand into office in Japan? So right now, locally, asset prices are quite high. And given that you're already the largest REIT in Asia Pac, would you be a bit underrepresented overseas? And would this be the right time to expand more overseas? Choon-Siang Tan: Interesting. Thank you. Thank you. No. So I think question is whether if one day -- I guess I mean you prefer your question because of the new growth mindset, whether we will look at overseas. I guess the assumption is that if we want to continue to grow, but we run our opportunities in Singapore because at the end of the day, if we have to -- if you are able to find something in Singapore, we'd rather spend the money in Singapore and continue to grow in Singapore. The question is, have we run out opportunities because you're asking if this year is the right time to look at overseas. No, I think we have shown in our track record that we are still able to find opportunities and decent sizable opportunities that continue to be accretive financially makes sense for us and puts our portfolio in a good position. I mean we did -- this outcome is also another way that we deploy capital in Singapore as well. And that also is another reason why we also look at it because it offers us another way to grow in Singapore. I don't think we have run our opportunities. I mean there are still so many assets in Singapore that we can look at without going into details and names. So I think the short answer is if we are able to deploy the next dollar in Singapore, we'd rather do that than going overseas. Do we like Hong Kong and Japan exposure? I think Hong Kong is probably going through quite a bit of challenges as we can see in some of the other -- our sister REITs that have assets there. Rental reversions are still on a negative trend. I don't think it's something that we will keen to look at, if you ask me. And as I mentioned, I think it's -- I mean as -- most of our investors, I think, prefer us to still be predominantly Singapore. I think we have also addressed some of these questions in previous. I think, in fact, if we have a choice, I guess, we may even look at reconstitute things out of our overseas portfolio, if possible, before we look at growing if possible. Japan wasn't on my mind, so I guess I forgot about that. I guess that was indirectly answering your question. Allison Chen: Okay. I think that's all the time we have. Before we conclude, Choon-Siang, would you like to share some closing remarks. Choon-Siang Tan: No -- I think this is a very good set of results, and I think I really want to thank all of you for continuing to support us. We know that this sets the bar even higher for us, makes it 2026 bigger hurdle to climb over, but we will continue to work hard, push for results and stay disciplined in terms of what we do. I think our team is -- we have a very strong team. I think credit to everyone sitting here and everyone sitting there. That's the reason why we are able to deliver on so many fronts. I think it's not just the acquisition front, although that's the things that people -- a lot of people are focused on, but actually, organically. The organic assets still make up 98% -- 95% of our portfolio. And if we are able to deliver performance from organic assets, that will make our job a lot easier actually looking -- in terms of looking for growth. So hopefully, we continue to deliver, but we know it gets much harder and harder each time. Okay. Thank you. I think we have some tea right outside, right? Allison Chen: Yes. If you have further questions, please feel free to reach out to us. Otherwise, have a great day, and those in person and join the refreshments outside. Thank you. Choon-Siang Tan: Thank you. Lee Yi Zhuan: Thank you.
Frank Maao: Good morning, and welcome to Telenor's Q4 2025 Results Presentation. I'm Frank Maao, Head of Investor Relations, and our Group CFO, Torbjorn Wist, will take you through the presentation today. As previously communicated, our CEO, Benedicte Schilbred Fasmer, is not here due to a planned surgery. And as you can see, we've a packed agenda, including an update on dividends and capital allocation. Before we get started, a few quick notes. All service revenue and EBITDA growth rates are organic and made on a constant currency basis as always. When we mention EBITDA, we're referring to adjusted EBITDA. Note that this time, Telenor Pakistan has been booked as discontinued business and is thus excluded from the P&L figures that we show you today. And with that, I'll hand you over to Torbjorn. Torbjorn Wist: Thank you, Frank, and good morning, everyone. Now let me start by saying that Benedicte is recovering well from her surgery, and she sends her warm regards to all of you. We certainly look forward to welcoming her back. Now knowing Benedicte, I wouldn't be surprised if she has joined us online to follow this exciting results presentation. Now what a year we have behind us. We closed 2025 with strong operational momentum and disciplined execution across the Nordics and Asia. Our results underline some clear messages. First, we delivered a strong Q4 that brought our full year financial performance in line with the outlook we communicated earlier in the year. Our customer first approach and disciplined operation enabled us to deliver EBITDA growth of close to 9% in the Nordics despite brisk competition, particularly in Finland. Our full year free cash flow before M&A reached NOK 12.9 billion for the year, in line with our around NOK 13 billion outlook and financial ambitions since 2022. The free cash flow, including M&A, was NOK 17.3 billion in '25. Secondly, consistent with the strategy we outlined at our recent Capital Markets Day, we continue to simplify the group portfolio, reinforcing the group's Nordic center of gravity. We remain committed to long-term value creation in our remaining Asian assets. The third message today is that we propose to make the 16th consecutive increase in dividends per share and prepare for a NOK 15 billion buyback program. And I will come back and talk more about the capital allocation and distribution later in the presentation. Now 1 year ago, right after Benedicte and I stepped into our roles, we outlined our priorities for the first year. These included strengthening customer centricity and reinforcing our people and execution culture, sharpening our focus on return on capital, and delivering on our 2025 financial ambitions, including our strong commitment to shareholders on dividends. One year later, I'm pleased to say this is exactly what we have done. During the year, we evolved and refreshed our strategy, which we presented along with the detailed financial ambitions to the investment community at the CMD in November. Over the last months, we have also stepped up on execution on portfolio simplification, closing the clean, and I underline the word clean, exits from Pakistan and Allente, and last but not least, with the agreement to sell Telenor's ownership in True announced on the 22nd of January. The True transaction represents significant value creation for our shareholders as we will be exiting Thailand at more than 3x the NOK 12 billion market value we had in dtac at the time we started the merger talks with True 5 years ago. All in all, we are pleased with these steps to further sharpen the group's focus. Now as mentioned, delivering on the '25 outlook was a top priority, and I am happy to confirm that we delivered on all parameters. During the year, we saw solid operational performance in the Nordics, in line with the outlook provided for all three parameters and an EBITDA growth of 5.8% for the group compared to the outlook of 5% to 6%. Note, however, that the 5.8% excludes Telenor Pakistan, as Frank mentioned initially, while our outlook included Telenor Pakistan. If Pakistan had been included in the actuals, EBITDA growth for the group would have been 1 percentage point higher. As such, we outperformed the outlook on this metric. And as mentioned in the highlights, free cash flow before M&A ended at NOK 12.9 billion, in line with our guidance. Then moving to the highlights for the group financials. Group service revenues reached NOK 15.3 billion, up 2.6% year-on-year. Adjusted EBITDA increased 11.7% to NOK 8.6 billion, driven by the strong performance in the Nordics, while being helped 3 percentage points by effects related to accounting adjustments and reversals. In Q4, adjusted EPS was NOK 2.21, a material uplift from last year. Free cash flow before M&A came in at NOK 4.1 billion, up 33% year-on-year. The group CapEx to sales ratio was 15.5%, 4 percentage points lower than in the same period last year. For the Nordics, the ratio was 17.2% for the quarter and 14.3% for the full year. The leverage ratio closed the year at 2.2x, returning to its target range, mainly driven by positive year-on-year effect in total free cash flow. Now as we repeatedly stated, driving return on capital employed, return on investment and the like over time remains a top priority for us. We are pleased to note that for the last 12 months, ROCE came in at 9.2%, up 1 percentage point over the previous quarter. If you exclude the associated companies, the group ROCE would have been 13.6%. Then zooming in on the top line. The group service revenue growth of 2.6% year-over-year remained constrained by macro conditions in Bangladesh. If you exclude a VAT adjustment in Norway and a revenue correction in Grameenphone, both in Q4 last year, the underlying growth for the group would have been 1.8%. Our Nordic business area was the main contributor, as usual, while underlying growth was flat in Asia. Now turning to OpEx. OpEx declined by close to 2% in Q4, helped by relentless cost focus throughout the group, a NOK 75 million withholding tax reversal related to Telenor Pakistan in other group OpEx and OpEx adjustments in the Nordics in the same quarter last year. Adjusted for these effects, OpEx was practically flat year-over-year for the group and for the Nordics. In the Nordics, OpEx in Norway increased by 3.4%, mainly caused by high activity related to robustification and transformation, as previously flagged, as well as reparation expenses following the Storm Amy. Now sales and marketing expenses also increased in the Nordics, in line with the expectations we shared with the market early last year. Moving to group EBITDA, which grew strongly at 11.7% in Q4. As you can see from the chart to the right, all business areas contributed to this growth, even though the main part came from the Nordics. Amp delivered significant improvements across most of its businesses and Infrastructure continued its stable EBITDA growth. EBITDA contracted in Asia. However, this was due to timing of internal cost allocations between the Asia headquarters and the Telenor Group. Then regarding the reporting segment called Other, which mainly consists of our corporate functions, in Q4 '24, a retroactive true-up was made for internal charges from Asia to the Other segment, while in '25, these charges were more evenly spread out through the year. On the chart to the right, we have visualized this effect. As you can see, the negative year-on-year in Asia from these timing effects offset the similarly positive year-over-year effect in the other segment. Finally, excluding this effect, the other segment also contributed meaningfully year-over-year, largely explained by external revenues in Telenor Procurement Company, which tends to vary significantly between quarters. The positive growth contribution from group eliminations was due to the mentioned NOK 75 million reversal. Now clearly, 11.7% is a significant number compared to recent quarters. In this regard, note that 3.2 percentage points is a result of the mentioned effects I talked about earlier. Adjusted for this, EBITDA growth for the group would have been 8.5%. Then turning to revenues in the Nordics. The Nordics continued to deliver top line growth in line with recent trends. This quarter, we reported 2.8% organic growth, driven by our more-for-more strategy. Adjusted for the reversal effects I mentioned pertaining to Q4 last year, the service revenue growth would have been 2.5%. Norway was the largest contributor but we did see solid execution and solid contribution from across our Nordic markets. We grew mobile service revenues 4% driven by ARPU uplift across all markets in addition to customer growth in Sweden. Fixed service revenues grew only marginally with growth in both Norway and Finland being offset by active base management with focus on profitability in Sweden, as we've talked about in previous quarters. Across markets, churn continued to rise. We also expect a significantly sharpened price competition in Finland. We nevertheless added 59,000 new postpaid customers in Sweden and Denmark during the quarter, while seeing a total of about 24,000 prepaid -- sorry, postpaid subscribers leave us in Norway and Finland amid high promotional seasonality. I'll now take you through each market in some more detail. Norway remained the strongest contributor at 2.9% growth, underpinned by healthy ARPU trends with 5% for mobile and 6% on fixed broadband. In Sweden, mobile service revenues rose 4.5%, offsetting a 5% managed decline in fixed service revenues as talked about. And we posted strong mobile net adds of 45,000 in Sweden, helped by a successful Black Month with strong traction in 5G broadband. In Denmark, service revenues grew by 3.6%. A new development is that all Danish operators have increased list prices over the last months. Still, the market remained highly promotional in Q4. In the Finnish market, we saw a more visible presence of the new MVNO as well as deep promotional discounts led by one of the network operators. While DNA defended its customer base well amid elevated market churn, the price level on incoming subscriptions was significantly dilutive compared to DNA's back book ARPU. Still, DNA grew mobile service revenues by 4.3%, driven by upselling, solid commercial execution and a larger mobile subscriber base compared to last year. As a result, DNA kept its postpaid smartphone base steady during the quarter as the negative net adds were driven by a prepaid cleanup and some decline in mobile broadband. Total service revenues rose by 3.9%. Overall, Nordic's 2.8% service revenue growth reflects continued strong performance of our value-driven commercial strategy, despite broadly pronounced seasonality and increased competition in Finland. Now moving to EBITDA. EBITDA growth in the Nordics came in at 8.7% for the quarter. Gross profit was up more than 4%, supported by upselling, pricing, product mix, wholesale revenues and the fixed transformation in Sweden. Ongoing transformation programs helped reduce OpEx by 0.7% despite higher commercial activities and increased spending on robustification. Yet again, Norway remained our top contributor with 9.3% EBITDA growth, helped by the VAT reversals in the same quarter last year. An additional 5 percentage points of growth came from the national roaming agreement, and adjusted for these factors, EBITDA growth would have been about 3% in Norway. In Sweden, the continuation of the mentioned fixed transformation had a positive impact on gross profit, which grew 3.4%, contributing to the 11% growth in EBITDA. Further helped by disciplined OpEx and customer service transformation efforts, this brought EBITDA to the 40% margin, which is a milestone for Telenor Sweden, which just surpassed the incumbent on this metric on a last 12-month basis. Even when excluding the VAT-related reversal last year, EBITDA growth was still rock solid at 7.6%. Telenor Denmark continued to execute commercially while relentlessly tweaking cost, leading to an EBITDA growth of 5.8%. The small OpEx increase was mainly due to higher commissions from external retail. DNA both grew its top line while cutting back on costs, resulting in a 6.6% organic growth in adjusted EBITDA. This is quite impressive result given the demanding market conditions just described in Finland. Now in summary, we are pleased with the continued strong execution in the Nordics. Now then let's move over to Asia. Before enjoying the fireworks on New Year's Eve, we closed the sale of Telenor Pakistan, which is now out of the books. As a consequence, our Asia revenues and EBITDA, as charted on the left side of this slide, are nominal NOK amounts that only reflect Grameenphone in addition to the cost of regional Asian hub in Singapore. Grameenphone delivered organic service revenue growth of 3.4% in the quarter. But as you can see, the NOK amounts came down due to a weakening -- a 14% weakening of the Bangladeshi taka. Note that when adding back the accounting corrections last year, Grameenphone revenues and EBITDA were basically flat year-over-year amid cautious consumer spending environment and continued tough price competition on data. Grameenphone was just recently awarded important spectrum resources in the 700 megahertz band at the reserve price, which will be key to improve indoor and outdoor coverage for our customers going forward. As for the associated companies, the major event was the recent announcement of the True exit, which will be a two-stage deal, as mentioned earlier. This transaction is a major value creation milestone for Telenor as it concludes our 25-year history in Thailand. Benedicte and I would like to thank both current and previous employees that have contributed a big part of their lives to this fantastic journey. Note that we expect to close the first sale of the first tranche before True will pay its Q4 '25 dividend. CelcomDigi managed to improve commercial execution in its third quarter, swinging back to top line growth. While Q3 EBITDA declined due to higher data costs and bad debt, the company paid out a stable dividend in Q4. We continue to work with partners to support CelcomDigi in strengthening its associated 5G company, DNB, whose financial situation was, as described in their own report, distressed. Our goal is to ensure a setup with more efficient use of spectrum resources and network assets to the benefit of customer and society in Malaysia. DNB is expected to secure an additional 100 megahertz of key mid-band spectrum ahead of the government's planned exit in Q2 '26, which will be a helpful step for the company. Now finally, we have noted a lot of speculation about our other Asian assets in the wake of the recent announcement of the sale of True. As such, let me be clear, as an active owner, Telenor is a committed partner for long-term value creation in both Grameenphone and Celcom Digi. And the sale of True should not be interpreted as signaling any imminent or near-term plans to sell our other Asian assets. Now then let's turn to Amp, which delivered a strong quarter. At our recent CMD, we presented a focused approach to portfolio management in Amp. Part of that is to develop companies close to core within security and IoT, and we saw meaningful progress in several business units but would highlight two here. Firstly, KNL made a strong contribution on both revenues and EBITDA. Now KNL offers mission-critical services for defense, more precisely software-based and ultra-secure tactical defense communication solutions for use over long distances. Crucial to this progress were deliveries on contracts with the Swedish and Finnish national defense forces announced earlier in the year. This is a truly scalable business with telco margins but far higher growth, and we look forward to see what the future holds for KNL. Secondly, the largest -- Connexion, the largest single contributor to Amp's EBITDA and cash flow on a yearly basis. This company is the #5 IoT player in Europe and #10 globally within managed IoT connectivity. In Q4, Connexion delivered 9% organic revenue growth, thanks to its solid volume growth, achieving 24% year-over-year growth in its global SIM base. EBITDA in Connexion was, however, affected negatively as FX and OpEx growth weighted on the margins. Overall, we are pleased with the development of the Amp portfolio, which is seeing continued value uplift from a net asset value perspective. Further details on this, including a portfolio overview, can be found on our website. Then moving on to the profit and loss highlights for the group. We're pleased to report that strong growth in adjusted EBITDA and net profit from associated companies drove adjusted EPS to an 89% increase in the fourth quarter while growth reached a solid 24% for the full year '25. In terms of special items and notable swing factors this quarter, other income and expenses was higher than last year due to increased scrapping of IT equipment as well as workforce reductions. The NOK 0.5 billion fourth quarter fluctuation in net financial items was due to fair value changes related to True. And finally, there was a NOK 3 billion loss on the discontinued line in addition to a NOK 0.4 billion tax expense in conjunction with the divestment of Telenor Pakistan. Next, let me walk you through the main variables behind our free cash flow before M&A of NOK 4.1 billion in the fourth quarter. In addition to our EBITDA of NOK 8.6 billion, we need to add back the discontinued contribution from Pakistan of NOK 0.5 billion since this was part of our cash flow in the quarter. As indicated, we had a solid contribution from working capital, including about NOK 900 million from the use of handset financing. We received NOK 1.3 billion in dividends from associates and CapEx paid amounted to NOK 2.9 billion, of which NOK 2.2 billion came from the Nordics. Telenor Sweden made a scheduled NOK 390 million prepayment on its share of the multiband spectrum license won in '23, bringing the total spectrum spend for the group to NOK 0.5 billion in Q4. On the M&A side, net cash proceeds included NOK 4.6 billion for the sale of Telenor Pakistan, along with NOK 0.6 billion for the sale of Allente on top of the pre-closing dividend the company paid. And this led to a total free cash flow of NOK 9.1 billion this quarter. Now then let us take a look at our leverage ratio. Our leverage ratio edged down to 2.2x, within our target band of 1.8 to 2.3. The net debt reduction happened despite a NOK 1 billion increase due to NOK weakening during the quarter and the NOK 6.3 billion payment related to the second tranche of our dividend paid out in '25, which was now more than by the mentioned NOK 9 billion free cash flow in the quarter and the deconsolidation of NOK 1.8 billion in net debt relating to Telenor Pakistan. Then let me move on to shareholder remuneration. Telenor has a 16-year track record on delivering on our dividend policy of year-on-year growth in ordinary dividends per share despite significant structural divestitures in the same period. The group has changed over time, as you know. Over time, this ordinary dividend has been complemented by extraordinary dividends and share buybacks when appropriate. As you may recall, we reconfirmed our strong commitment to our dividend policy at our CMD in November. Adding another year to our track record, the Board has proposed a dividend for '25 of NOK 9.7 per share for approval at the upcoming AGM with payments happening in June and October 2026. Now then let me move on to the use of proceeds from True once the transaction has been completed. At the recent CMD, we explained our capital allocation priorities and our return mindset as part of the value creation engine of Telenor. How we distribute capital back to shareholders is a very important part of our capital allocation priorities. We need to ensure that we are effective and targeted in how we allocate capital to the best projects to create and compound value over time expanding the return on capital employed. This includes organic reinvestments, but also value-accretive inorganic investments that help us strengthen our customer proposition and enable us to drive further scale and efficiencies. We are now preparing to allocate the first NOK 32 billion of proceeds to be received from the first tranche of the sale of 25% in True. And we plan the following use of proceeds: NOK 15 billion will be allocated to a share buyback program, and I'll give you more details on that in a minute; NOK 11.5 billion will be allocated to repayment of the EUR 1 billion bond, which matures now in May; and NOK 6 billion will be allocated to finance the closing of our announced acquisition of GlobalConnect's Norwegian consumer fiber division likely due in the second quarter. The remaining NOK 7 billion to be received from the second tranche of True in a couple of years, we will deal with the use of proceeds at that point in time. We will be retaining some extra financial flexibility near term to consider further value-creating acquisitions in the Nordics. We will be looking at opportunities that offers attractive long-term return on capital by driving customer reach and satisfaction, scale and efficiencies. Now to the extent that sufficient inorganic investments would not materialize, we will, of course, consider further return on capital to shareholders to ensure balance sheet efficiency while protecting our credit rating. Now then let me talk a little bit more about the buybacks. The Board has stated its intention to initiate a share purchase program over 3 years once the first sale of shares in True is completed. The buybacks are to be confirmed each year by the AGM. The objective is to support per share value accretion and dividend coverage by reducing the number of shares over time. As in the past, our stock exchange repurchases will be executed by a broker on an arm's length basis and will be made in full compliance with market abuse regulations. The exact time to completion may therefore depend a little bit on the liquidity of our shares on the Oslo Stock Exchange. As usual, the Norwegian state is expected to participate with its proportional share of ownership in line with historical practice. So then if I move on to the financial outlook. The financial outlook is in line with our indications at the Capital Markets Day. Our mid- and long-term ambitions remain unchanged and are shown here only for context. For 2026, we expect a low single-digit growth in service revenues in the Nordic. As for Nordic's EBITDA, we see mid-single-digit growth while we forecast CapEx to sales, excluding leases, of around 14% in the Nordics. Please note that we do foresee quite significant variations between quarters in '26. While we have solid momentum into the start of the year, in Q2, the Nordics is facing a particularly tough comparable period. Firstly, we benefited from particularly favorable timing of back book price increases in Q2 last year. Secondly, the year-on-year uplift from the national roaming contract in Norway will be lapped in mid-March. We had around NOK 550 million in national roaming revenues from Lyse in '25, which was more than originally expected. We have said we would expect these wholesale revenues to start fading during '26 and particularly in '27. Following this week's news from our competitors, this remains our view. Our best estimate is currently that these revenues will be around the same level in '26 as last year, although quite low, if at all present, in 2027. I might add on this that in terms of the financial ambitions for '28 and '30, there are no national roaming revenues. In Bangladesh, we are, of course, hoping for a gradual macro upswing following the February elections, but we find it prudent to have modest expectations. For the group, we anticipate adjusted EBITDA to grow in the low to mid-single digits. A key sensitivity for the outcome will be the shape and strength of a potential macro recovery in Bangladesh. Finally, we forecast free cash flows before M&A, excluding dividends from associates and incremental spectrum, to come in at between NOK 10 billion and NOK 11 billion. We expect to see a somewhat back-end loaded profile on this metric in '26, similar to '25. All in all, outlook for the current year reaffirms our overall traction and long-term trajectory. To conclude, in '25, we delivered on our financial ambitions. We are executing on the strategy of top line growth through customer excellence, efficiency through transformation and overall simplification, including becoming more of a Nordic-centric group over time, and we are executing on our long-standing commitment to capital distribution to our shareholders. With this, I would like to hand the word back to Frank. Frank Maao: Thank you, Torbjorn. Good presentation. We will go through then to the analyst Q&A. And as usual, please limit yourself to only one question and, if needed, a quick related clarification follow-up to give your colleagues a chance to ask their question as well. So operator, please go ahead. Operator: [Operator Instructions] Our first question will come from Sofija Rakicevic with Goldman Sachs. Sofija Rakicevic: Just one question for me, and that is, what potential headwinds are you factoring in your medium-term Nordic EBITDA outlook given that underlying 2025 growth for this year is around 5% and a bit more than that if we exclude Ice and one-offs? And you're guiding for mid-single-digit growth in 2026. So what do you expect to deteriorate on an underlying basis over the medium term? Torbjorn Wist: Yes. As far as our outlook is concerned, the -- of course, the market will continue to be competitive as it has been in all our Nordic markets. And we expect this to continue, whilst at the same time, we will, of course, do what we can to strengthen our competitive position with our leading network position in Norway and a strong network position in the other areas to ensure that we compete on a normal basis. So we don't have any particular headwinds over and above the normal competitive behavior. Competition has always been tough and will continue to be tough. And those are normal assumptions that we have into our overall ambitions going forward. So in terms of the forecast for '26, we have been clear on that there will be step-ups on sales and marketing spend to ensure that we defend our positions. At the same time, we will continue to push forward on our strong transformation program as we have over many years now to ensure that we offset these effects. So that gives us comfort that the forecast for '26 in terms of our Nordic expectations is something that we believe we can deliver on well. Operator: Our next question comes from Ondrej Cabejsek from UBS. Ondrej Cabejšek: That took a while. And let me join Torbjorn in wishing Benedicte a speedy recovery, if indeed she is listening. I just wanted to follow up on the point that you made in terms of capital allocation opportunities in the Nordics as a key focus area for you going forward. And I just wanted to understand from where we are standing today, what in your view are some of the key hurdles preventing you from moving ahead? And when do you expect these to be cleared? Torbjorn Wist: Sorry, which hurdles are you referring to then, Ondrej? Ondrej Cabejšek: So some of the -- well, there are clearly hurdles, I guess, when you're looking at the capital allocation opportunities in the Nordics, which you mentioned, which Benedicte mentioned in the summer, et cetera. Torbjorn Wist: Yes. No, look, we -- first of all, we obviously don't comment on specifics. But clearly, we've been very clear at the Capital Markets Day that we see ourselves becoming more of a Nordic-centric group over time. That means, of course, that we will be looking at value-accretive opportunities that will help strengthen our footprint in this region. And the regulatory hurdles that you may allude to will, of course, depend on whichever transaction would be considered. What is key for us is to ensure that any transaction is value accretive, will strengthen our customer offering, ensure that we get scale and efficiencies that will help drive return on capital employed. And we will, of course, have a good process with the regulators, as we do in any particular deal, to ensure that we maximize the chance of success for whatever we decide to pursue. But if we don't find appropriate opportunities, then we will, as mentioned in my presentation, of course, consider further returns of capital to shareholders. Ondrej Cabejšek: And if I may follow up on this. So obviously, we've had the development in Norway, where Telia is now signing the RAN with challenger Ice, which you are now hosting. Is this something that is placing a bit more urgency on you to kind of do anything in the Nordics? Torbjorn Wist: Not this deal in and of itself. Just a couple of comments on this one. We are, of course, used to network cooperation, and we have that in some of our other Nordic markets. As I mentioned in my presentation, the revenue effect, we do expect revenues from this agreement to be similar to last year in '26, but then taper off. We don't have any NRAs into the future plan. I think what this deal really brings to the forefront is that Norway is the only market that we remain regulated in. We believe it's long overdue that this regulation is removed and particularly now with the creation of a strong second network. So our strong message to the authorities will be now is the time to take away this regulation for the future. As far as them pulling together their network assets or whichever structural form they do it, we're used to competition. We've had competition here for a long time. We are the leading network in our way, both on scale, coverage, quality. And we will, of course, continue to defend that position and, of course, invest in services, whether it be cyber or entertainment in order to reinforce the strong customer relationship and the market position we have here in this wonderful country. Operator: Our next question comes from Christoffer Bjornsen with DNB Carnegie. Christoffer Bjørnsen: Can you hear me? Torbjorn Wist: Yes. Christoffer Bjørnsen: Great. Yes. Congrats on all the exciting news over the last period. I just wanted to kind of follow up on the Telia JV thing and trying to ask a question without asking the question. But given that, I would expect it's fair to assume that they are a decent customer both Lyse and Telia in the tower business, can you maybe help us understand a bit like what the exposure is there? Like are there significant overlaps where they could consolidate? I think I saw in the local accounts of the TowerCo in Norway that the external revenues was about NOK 650 million in 2024. So just trying to gauge in the longer term for that 2030 target of NOK 14 billion to NOK 15 billion of free cash flow, what kind of effects could be there in like a base and a bear case scenario or -- yes. Torbjorn Wist: Yes, on our towers we have been working consistently to, of course, raise the tenancy ratio, which, of course, is other operators using our infrastructure. As far as -- if there should be, call it, an effect from this -- the recently announced agreement between our two competitors, we estimate that we have about NOK 120 million to NOK 160 million potential negative revenue impact from 2027, which is about 4% to 5% of the towers revenue. I think -- so it's not something that we deem substantial. There are other parties like emergency network, et cetera, that is on our infrastructure. So it's about 4% to 5% or NOK 120 million to NOK 160 million. And we don't anticipate that to hit before maybe '27 at the earliest. I would like to add that using infrastructure, co-locating on towers is, of course, a capital-effective way. So whether or not they will decide to remove this NOK 120 million to NOK 170 million remains to be seen. Frank Maao: NOK 160 million. Torbjorn Wist: NOK 160 million. Thank you. Frank Maao: And mind you, that's due to the overlap that is present in the colocation of the towers between the two parties. Christoffer Bjørnsen: All right. That's helpful. And then just finally to follow up on the Bangladesh, you mentioned the spectrum award there and so on. Still there are material parts of the portfolio coming up for like renewal or expiry later this year. Can you give any indications of how confident you are that there will be timely auctions and whenever they could end up being? Torbjorn Wist: I don't have any new information on that. These will be renewals, and I'm sure that there will be an orderly process there. We were satisfied with the 700 auction and the result of that. And so we'll deal with the renewals when the time comes. Operator: Our next question comes from Felix Henriksson with Nordea. Felix Henriksson: The question is on Finland, where you saw a tough competition in Q4. The market leader, last week commented that they've seen some easing in the environment in January with one of the MVNOs becoming a bit more passive and also the market leader raising prices also followed by the peers. Do you sort of agree with this? And have you seen easing in the competitive environment in Finland into Q1? Torbjorn Wist: Yes, we see the same or have the same observations of what's happening in the Finnish market. It was a very competitive December, but that seems to have normalized then into January. Felix Henriksson: Okay. Fair enough. And then if I may, just with a quick follow-up, partly unrelated, apologies for that, but I noticed that Bangladeshi CapEx in Q4 were still quite low. I think you've commented that you plan to ramp that up a bit into 2026. So can you sort of confirm that, that is still the plan? And if you have anything to share about the expectations regarding the spectrum renewals in Bangladesh as well? Torbjorn Wist: As I think I've covered the spectrum renewal in Christoffer's question. But as far as the CapEx is concerned, we've been very clear that Bangladesh is a country where there is a voice to data transition going on. We have, of course, now secured low-band spectrum, which is critical for excellent indoor and outdoor coverage of data in the country. So that will, of course, entail some CapEx. We have -- due to the macroeconomic situation in the country, we have been very prudent in how we release CapEx into the country so that we're not pushing in a lot of CapEx when the market environment is very muted. So we continue to release CapEx on a quarterly basis. And that is also to ensure that we help protect the cash flows in the business. Top line has been challenging. I think the team has done an excellent job in terms of managing costs there. So of course, we are very mindful to ensure that we release CapEx on a staged basis, but that there will be some increase in CapEx to ensure that we strengthen our data position is something that we have clearly flagged, but we will always do this in a very disciplined manner. Frank Maao: Yes. And I might add that we're not going to see a big surge in the CapEx even in case of a decent macro upswing. It's a more normalization to what you've seen in the past. Thank you, Felix. For the coming questions, I would remind you to please stick to one question and potentially a related follow-up. Thank you. Next question, please. Operator: Our next question comes from Keval Khiroya with Deutsche Bank. Keval Khiroya: You're still waiting for the GlobalConnect deal to be approved in Norway. Do you see merits of exploring other fixed deals in the Nordic footprint? Or do you think mobile is the main focus for Nordic M&A? Torbjorn Wist: Yes. Look, I'm sure you would love for me to answer detailed on that question, but which areas and which companies we will be looking at is something that you would hear about along with everyone else at the same time. But we have, of course, now taken a step in strengthening our fiber position in Norway with the proposed acquisition of GlobalConnect. And it's, of course, natural that we will look at both mobile and fixed in the years ahead, given that both are an important part of the critical infrastructure we provide. Keval Khiroya: Great. And just by way of follow-up. You mentioned that you will explore Nordic M&A. And if not, if that doesn't -- if that's not available, you could return additional capital to shareholders. I appreciate you can't be precise on timing of M&A, but is there any form of time line by which you want to decide whether to still leave that capacity for M&A or actually explore giving additional returns back? Torbjorn Wist: Well, I think we've obviously announced a significant return of capital to our shareholders today with the proposed ordinary dividend as well as the NOK 15 billion buyback. So we will have to come back and update you as and when we see potential for additional return on capital in the absence of any value-accretive opportunities. Operator: Our next question comes from Fredrik Lithell with Handelsbanken. Fredrik Lithell: I would like to listen a little bit to you digging into your OpEx and what your plans are for OpEx in 2026 in the Nordics, not maybe so much on the actual numbers, but on the operational work you intend to do or that you have ongoing that will sort of give you effects in '26 would be interesting to hear. Torbjorn Wist: Yes. I think we obviously spent quite a lot of time on the transformative efforts and initiatives at our recent Capital Markets Day. So sort of to -- could be a very long answer, if I'm going to go dig into all those details. But clearly, we continue to work on getting rid of what I refer to as technology debt, which, of course, ties up a lot of costs. These are important aspects of managing down operations and maintenance costs. It is ensuring we drive down the cost of procurement, using common products to ensure we get scale benefits. It is deploying AI in the consumer side, the networks and IT. We've talked about use of shared services where we have added additional elements into shared services. And then, of course, local markets will also have some specific -- market-specific transformations ongoing. So that kind of gives you a flavor. We have extensive programs running that are being coordinated and are being very well run, and they will continue full force into '26 as well. Frank Maao: And I may add, as we said on the Capital Markets Day, '26 will be kind of on a peak level when it comes to the implementation costs related to some of these transformative efforts, particularly in Norway and Denmark. Fredrik Lithell: Okay. So it's fair to assume that you see in front of you a slight sort of OpEx decline sort of on fixed FX figures in '26. Torbjorn Wist: Well, as Frank said, in '26 there are still costs related to the transformation efforts, which we'll carry out through the year. As we've been clear on the past, in Denmark, we have a big BSS project on the go. So it is -- but of course, the transformation program will continue with some local variances, depending on where they are in their relative transformation efforts. But the areas that I touched on, whether it be shared services, getting rid of technology debt, procurement, those are things that will span across. Operator: Our next question comes from Ulrich Rathe. Torbjorn Wist: Ulrich, are you there still? Operator: I believe we have lost Ulrich. So we will take our final question from Ajay Soni with JPMorgan. Ajay Soni: Yes. So the question was just on Sweden. You mentioned that some of your growth there came from 5G broadband net adds. So just wondering what the contribution was from that and what that currently represents within your mobile base? And then I'll just ask a follow-on now, which is that is this going to be an area of growth, given that you've been phasing out maybe some of the less profitable fixed lines in the last year or so? Torbjorn Wist: Yes, I don't think we're going to go into sort of trying to break out what contribution that we'll give. But clearly, focusing on our sort of the mobile broadband effort, as you talked about. It will definitely be key. We added, I believe it was about 12,000 5G broadband in the quarter in Sweden. And that, of course, is an important contribution to the growth in this particular area. And I think Telenor Sweden is doing a phenomenal job in pushing this product going forward. And I think that's -- the great thing is to see that in combination with the cleanup of the fixed portfolio that they have been working on, which has contributed so strongly to the growth in gross profit and hence, EBITDA in the country. Okay. If that -- that was the last question, operator? Operator: There are no further questions. Torbjorn Wist: Okay. All right. Well, in that case, let me use this opportunity to thank everyone for listening in, and I wish you all a very good day. Thank you.
Kazumi Tamaki: Now, we'd like to start the full year financial results briefing for FY '25 for AGC. The moderator is myself. My name is Tamaki of Corporate Communications and IR. Let me introduce the participants from AGC. We have Mr. Yoshinori Hirai, the President and CEO; Executive Vice President and CFO, Yoshio Takegawa; General Manager of Finance and Control Division, Tomoyuki Shiokawa. So today, first, our CFO, Takegawa, will present the financial results for the full year 2025. And then our CEO, Mr. Hirai will talk about toward profitability improvement, and then we take questions. We plan to end this session around 04:45 p.m. So I'd like to ask for your cooperation. Now I would like to invite Mr. Takegawa for you. Yoshio Takegawa: This is Takegawa, CFO. Thank you very much for joining us today. So let me get started. Please go to Page 3. So this shows the key points of FY '25 results and FY '26 outlook. For the FY '25 full year results, net sales were flat and operating profit rose slightly year-on-year. Improvement of automotive contributed the operating profit increase. Profit attributable to owners of the parent improved significantly. ROE improved to 4.7%. Outlook for FY '26. Operating profit is expected to increase driven by a recovery in Life Science. Profit attributable to owners of parent is also expected to improve. ROE is expected to improve to 5.2%. Please go to Page 6. So I'd like to explain further on the results. Net sales were JPY 2.0588 trillion, down JPY 8.8 billion year-on-year. Net sales increase factors include product mix improvement and pricing policies affecting automotive, pricing policies effect and higher shipments in Performance Chemicals and pricing policies affecting Architectural Glass in Europe and Americas. Decrease factors include lower sales price of PVC, decrease in shipments of EUV mask blanks and lower sales prices in architectural glass in Asia. Operating profit was JPY 127.5 billion, up JPY 1.6 billion. Despite the higher raw materials and fuel prices and deterioration in manufacturing costs and others, the realization of the earnings improvement measures in Display and others pushed up the profit in addition to the earlier mentioned factors. Profit before tax was JPY 124.8 billion, up JPY 174.8 billion, significant increase. In addition to the earlier mentioned factors, disappearance of the losses on share sales in connection with the Russian business transfer and large impairment losses related to biopharmaceutical CDMO booked last year. Please go to Page 7. This is the performance by segment. Sales and profit of Architectural Glass and Automotive increased, while the sales and profit of the Electronics, Chemicals and Life Science declined. Regarding operating profit, I would like to explain the factors contributing to the difference year-on-year. Sales volume, price and product mix contributed positively, JPY 19.9 billion Y-o-Y. PCB price and shipments of semiconductor-related materials were down, but the product mix for automotive glass improved. Pricing policy had positive impact and also pricing policy for architectural glass in Europe and America and Performance Chemicals contributed. Raw materials and fuel costs of JPY 4.6 billion and other costs of JPY 13.7 billion, both had negative impacts. Resulting OP increased by JPY 1.6 billion year-on-year to JPY 127.5 billion. Please turn to Page 9. This is our balance sheet. Total assets amounted to JPY 2.9501 trillion, an increase of JPY 60.4 billion from the end of last year. D/E ratio stood at 0.37. Please turn to Page 10. Operating cash flow was JPY 274.5 billion. Investment cash flow was minus JPY 178.4 billion, and resulting free cash flow was JPY 96.1 billion. Please turn to Page 11. To explain CapEx, depreciation and R&D expenditure on this page. CapEx amounted to JPY 251.3 billion; depreciation, JPY 179.8 billion and R&D expenses, JPY 60.3 billion. Main CapEx projects are listed on this slide. We will now move on to the explanation by segment. Please turn to Page 13. Starting with the Architectural Glass segment. Net sales increased by JPY 3.2 billion to JPY 441.1 billion, while OP rose by JPY 0.9 billion to JPY 17.3 billion. In Asia, net sales decreased by JPY 4.4 billion due to lower shipments and lower sales prices in Indonesia and other regions. In Europe and Americas, although shipments declined in Europe, and there was a revenue reduction impact due to the transfer of the Russian business in February of the previous fiscal year, net sales increased by JPY 7.6 billion, benefiting from the effects of pricing policy and weaker yen. OP increased by JPY 900 million despite higher costs, such as labor costs due to the aforementioned sales growth factors. Subsegment ratio of OP was approximately 20% for Asia and 80% for Europe and Americas. Please turn to Page 14. Next is the Automotive segment. Net sales increased by JPY 21.8 billion to JPY 520.6 billion, and OP increased by JPY 15.3 billion to JPY 29.3 billion. Shipments declined in Europe but increased in Japan. In addition to improvements in product mix and the pricing policies impact, the weak yen also contributed. OP increased by JPY 15.3 billion, driven by the revenue growth factors, which was mentioned before, despite increases in costs such as raw materials and labor expenses. Page 18. Next is the Electronics segment. Net sales decreased by JPY 9.5 billion to JPY 355.1 billion, and OP decreased by JPY 6.9 billion to JPY 47.5 billion. The Display segment saw a JPY 5.5 billion increase in net sales due to higher shipments in LCD glass substrates. Electronic Materials saw a JPY 15.1 billion decrease in revenue due to the transition period towards higher functionality of optoelectronics, coupled with a decrease in shipments in EUV mask blanks. OP decreased by JPY 6.9 billion, reflecting the negative drivers that was explained and the costs associated with the withdrawal from the specialty glass for chemical strengthening business. The breakdown of OP was approximately 70% from Electronic Materials and 30% from displays. Please turn to Page 16. Next is Chemicals segment. Net sales were JPY 584.2 billion, down JPY 9.4 billion. Operating profit was JPY 53 billion, down JPY 3.7 billion. Essential Chemicals net sales were down by JPY 28.4 billion due to lower PVC sales price. In Performance Chemicals, pricing policies effects and higher shipments of fluorine-related products for electronics and mobility applications contributed to the net sales increase of JPY 18.2 billion. Operating profit was down by JPY 3.7 billion due not only to the lower Essential Chemicals sales, but also to manufacturing cost deterioration related to the facility repairs and others. Subsegment ratio to operating profit is 20% from the Essential Chemicals and 80% Performance Chemicals. Please go to Page 17. This is the Life Cycle segment. Net sales were JPY 133.1 billion, down JPY 8.1 billion. Operating loss, JPY 22.3 billion, down JPY 1.1 billion. Sales of the small molecule pharmaceuticals and agrochemical CDMO remained steady. Net sales of biopharmaceutical CDMO were affected by disappearance of one-off revenues associated with the settlement of contracted projects booked last year and the negative impact of the closure of U.S. Colorado sites. Although fixed cost reduction measures taken at the biopharmaceutical CDMO in the U.S. have shown positive effects, fixed costs increased due to the facility expansion in Europe, which started operation last year in addition to the negative factors on the sales mentioned before. Please go to Page 18. Strategic businesses net sales were JPY 501.5 billion, down JPY 1.8 billion year-on-year. Operating profit was JPY 58.7 billion, down JPY 8.6 billion. Overall, operating profit decreased year-on-year due to the lower shipments of electronics and decreased net sales of Life Science, although the net sales of Performance Chemicals and mobility increased. Please go to Page 20. This is the outlook for FY 2026. Let me explain the assumptions for the major economies and markets in '26. While some markets continue to face challenging conditions and despite the uncertain geopolitical situation, global economy is expected to grow moderately with expanding AI-related investments and monetary easing of major economies is expected for Europe and China, while the U.S. economy will trend strongly. Looking at the market environment, auto, smartphone, TV, we cannot expect the production growth. However, we expect that the shift to high function and larger size will continue. Caustic soda, PVC prices in Southeast Asia remain low. And the semiconductor market is continuing to grow, driven by AI-related demand. Biopharmaceutical CDMO market is expected to gradually recover. Please go to Page 21. I would like to explain the outlook for the full year. Although the business environment remains challenging, we forecast net sales of JPY 2.2 trillion, an increase of JPY 141.2 billion Y-o-Y and OP of JPY 150 billion, an increase of JPY 22.5 billion. ROE is forecast to improve to 5.2%. Exchange rates are assumed to be JPY 155 to the U.S. dollar and JPY 180 to the euro. Please turn to Page 22. Outlook breakdown by segment is shown on this slide. Improvements in Life Science are expected to contribute. Further details will be explained on the following pages. Please turn to Page 23. Starting with Architectural Glass. In Asia, shipments are expected to increase due to recovering demand in Thailand and Indonesia. We will continue our pricing policy and productivity improvement initiatives. In Europe and Americas, the economic downturn is expected to continue with only limited recovery in shipments anticipated. We will focus on maintaining price levels and reducing costs. Next is automotive glass. Shipments are expected to decline due to decrease in automotive production. In addition to improving product mix and pricing policy, we will continue our efforts towards structural reform and productivity improvements. Moving on to Electronics. In display, shipments of LCD glass substrates are expected to decline slightly. We will continue our profit improvement measures. Within electronic materials, shipments of semiconductor-related materials such as EUV mask blanks are expected to increase. Shipments of optoelectronic materials are expected to remain at the same level as the previous year. Please turn to Page 24. Moving on to Chemicals. Integrated Chemicals is expected to increase the shipment of fluorine-related products for electronics and chlor-alkali products. Essential Chemicals, Southeast Asia is expected to see increased shipments due to the full operation of expanded facilities. Moving on to Life Science. Sales for synthetic pharmaceuticals and agrochemical CDMO are expected to increase by launch of expanded facility. This is an increase of net sales. In addition to the increased sales, the biopharmaceutical CDMO is expected to see a significant reduction in losses due to the closure of the Colorado site in the United States. Please turn to Page 25. This is the full year performance outlook for strategic businesses for 2026. Net sales is projected to reach JPY 560 billion, driven by growth across all strategic businesses. OP is forecast to reach JPY 80 billion, primarily driven by profit improvement in Life Science. Please turn to Page 26. CapEx for 2026 is forecast to be JPY 190 billion; depreciation, JPY 183 billion and R&D expenditure, JPY 62 billion. CapEx will be smaller in 2026 as the major capacity expansion investment concluded in 2025. So this is '26 and beyond. That concludes my explanation. Thank you very much for your kind attention. Kazumi Tamaki: Thank you very much. Next, I would like to invite Mr. Hirai. Yoshinori Hirai: As Takegawa-san explained, last year, a slight increase, the 3 years in a row, the profit declined, but we turned it around. So as a result of the various initiatives, I think we have hit the bottom to some extent. However, what is important is that how can we go to the full-fledged recovery. So from our side, from my side, I'd like to talk about how drastically we try to improve the profitability. That will be the major part of my part of presentation. Let's look at the business performance, the operating profit. At the beginning of the year, we did not achieve the forecast, and we revised it downwards. That's one of the major requests. Last year, finally, we increased the profit. However, our expectations were not good enough. So that was one of the major issues. And the major issue is that the stability of earnings. There was a major impairment display in '22 and biopharmaceutical CDMO in '24. So those major impairments made us fail to increase the ROE. Now what about ROCE? This is last year's results. ROE of 8%. ROCE is considered to be around 10%. So that is the basic level. Electronics on the left and the Performance Chemicals, which is strategic and the integrated chemicals. Electronics Integrated Chemicals have had high profitability, so 15% or higher ROCE. Last year, among the core businesses, automotive achieved higher than 10% ROCE. So that's the result of the initiatives that we have taken. The major impairment was booked in '22 in display. And we have also taken the initiatives to improve the profitability, and we are seeing the improvements. And the major challenge that we see is the Essential Chemicals Southeast Asia. The stagnation continues and the Life Science still is in red. So we want to turn it around, and we are still not able to do so. Now for this fiscal year, financial targets is 5% of ROE. We will make sure that we achieve that '27 and onwards as soon as possible, we would like to achieve 8% or higher ROE above the shareholder capital cost. So operating profit of JPY 150 billion, strategic business operating profit, JPY 80 billion. And as a result, 5.2% or higher ROE is something that we would like to achieve. Now ROCE improvement, what kind of measures? In all the businesses, the way of thinking is the same. So first, it's to increase our -- that's shown on the left. So to lower the cost, clearly. And it's not just cost cutting, but because that is not sustainable. So we want to have a stable production and improve the productivity. And then we would like to reduce cost. That is important. And the next is the pricing policy. a price which is suitable for the value is something that we like to offer to the customers and agree with the customers. I think that's very important. The third clearly is to increase the value of products. And at the same time, denominator side, that is the CE operating asset. We want to be meticulous in selecting investments and also the major portion is the inventory. So we want to reduce the inventory level as much as possible. And another thing is to consider the exit from some of the businesses. And we want to make sure that if there are any questions about the growth potential, we will make a big decision to exit or sell such businesses. On the right-hand side, in 2025, those are the major exits that were announced. Now earlier, I talked about the ROCE chart from the left, I showed the electronics integrated chemicals with a high level and the Life Science on the right-hand side. Let me explain each one of them. And first, about the electronics. Last year, unfortunately, optoelectronics was changing one generation of the product to another. So the growth was stagnant. And EUV mask blanks, the demand was coming down for us. So because of those reasons, there was a negative growth in terms of the profit. But from now on, optoelectronics, the new generation will be starting, and we intend to expand our added value. As for the semiconductor, EUV mask blanks compared to last year will become positive. So last year, it was down for both, but we think that we can go back to the growth trajectory. The key for that is the EUV mask blanks. Leading-edge node, we would like to make sure that we can deliver our products, which are suitable for them to the customers. So the 2 nano, we have already completed the development and moving toward mass production and also the next 0.7 nano is what we are focused upon. As for the integrated chemicals, mainly the performance chemicals, the upstream, the chlor-alkali in Japan were integrated to the integrated chemicals. So here, in the chain of the production or the chemical chain, there are upstream and downstream, and we should really not separate them clearly. We want to have an integrated operation to have a total optimization. So that's why we made this organizational change. Now highly profitable performance chemicals, electronics, energy, mobility, those are the 3 major areas, especially electronics, as you're shown on the right-hand side, one of them is the semiconductor manufacturing equipment use and another is semiconductor process application. So those are high value that we can offer to have a high profitability. Now moving on to the automotive. 2020, because of the pandemic due to the lockdown, it almost stopped in Western markets. So it came down and it could not recover. So we struggled for about 3 years. But we have taken various measures to improve. So profitability has been increasing. ROCE of 10% is something that we achieved last year. So, so far, we have taken the measures to improve the profitability, and we will continue to make those initiatives and achieve 15% ROCE. And to set the pricing policy is important and also to improve the productivity, we need to look into the structural reform and to have higher functionality and higher added value. So through those, we would aim for ROCE of 15%. And what becomes important is to increase the percentage of the high-function mobility products. So it's not just shifting to the EVs, but the next-generation cars, the autonomous driving at different levels are being promoted. And it's not just the EV, but hybrid and plug-in hybrid various cars are emerging. So new technologies need to be deployed. As for the architectural glass, this is really the regional businesses. So in Europe, the market condition is not very good right now, but the supply is being controlled. So supply-demand balance is good and the price has been kept at a high level. The South American market is strong. Now the Japanese market is not growing, but the refurbishment or renovation is strong. And with that, a certain level of the demand exists. Southeast Asia is the most difficult region. So the price competition is happening right now. And in each region, we have to look into the different strategies. For Europe and Japan, we need to increase the percentage of the highly value-added products so that we can have stable prices. And as for the Southeast Asia, we have to enhance the competitiveness so that we need to work on the structural reform. We have been implementing measures that we decided in 2020 when we had a major impairment and ROCE is improving every year. And we expect ROCE to exceed 10% by 2027. stopping low productivity line and the large glass substrate, G11 line, we want to concentrate on this high-performance line. And we also want to present a price that is proportional to the value that we provide. So this is pricing policy, a new attempt in display industry. And thirdly, by introducing new technologies, we want to improve productivity of manufacturing as well. Now this third part, the technology part will start contributing fully from this fiscal year. So ROCE, 10% is the target for 2027. Now in terms of challenges, we have Essential Chemicals, Southeast Asian situation. Capacity expansion in Thailand has been finished and it started operation in fourth quarter last year and fully operational this year. In Southeast Asia, the markets themselves are growing continuously. There is strong demand. And the PCB and caustic soda, we can basically sell as we produce because we manufacture. The problem -- the challenge is the Chinese economic stagnation, especially surrounding real estate. So whatever is not sold in China is coming out of that country at a very low price. So there is demand in Southeast Asia, but the price is being pushed down because the products are coming in from outside of these Southeast Asian countries. So demand is strong. And within this region, we have 50% share and that's our strength. Including logistics, we will be trying to reduce the cost and increase the margin through better relationship with our customers so that we can achieve higher profitability. Lastly, Life Science, current status. Please look at the left-hand side. This is the AGC status by modality. 70% on the right-hand side, this is biopharmaceutical. And then we have small molecule pharmaceuticals and agrochemicals, 30%. And half of the biopharmaceuticals is a mammalian antibody business. And then within bio, there is microbiome, bio and also cell gene therapy, leading-edge modality as well. Now microbials and cell and gene therapy and small molecule pharmaceuticals, these are stable and always producing profit. And the biggest challenge is mammalian cells, which is about half of this total. So what has been challenging about mammalian cells? As you can see at the bottom left, our cost was big, and it was generating huge losses. Majority of this JPY 20 billion loss was generated from mammalian business. And as for last year, Colorado large SUS-based mammalian production was the biggest challenge. We were basically running loss of more than JPY 10 billion. So we announced last August to withdraw from this business and also the fact that we were entering the divestiture process. The production is completely suspended. There is no more fixed cost being generated basically. So this loss should be resolved in '26. As for the divestiture, we wanted to conclude this before the end of last year, but still this is ongoing. Now cost reduction. So we stopped Colorado. And also, we reorganized the headcount dramatically. And using the AGC Group's capabilities, we stabilized the production. And as was mentioned before, in Copenhagen in Europe, capacity was increased. And there was increased fixed costs related to the facility. So we want to increase the orders and improve the utility -- utilization of this line. This is very important for profitability improvement. So we stopped Colorado, we stopped the major bleeding. The production is now stable. And now we want to make sure that the utilization of the expanded capacity will increase. well, we wanted to be profitable before the end of '26, and we made such announcement. But unfortunately, after we take the order and the actual production starts and that's reflected into the profit, it takes time. So we get inquiry and something was in the pipeline and the actual manufacturing starts maybe 1.5 years later. So for the full year, we will not be profitable for this business in '26. We have to wait until 2027. Now R&D investment policy. So we have market and technology perspectives. We have existing market and customers. We want to innovate the production engineering capabilities and basic technology. We also want to create the next-generation products. We also are focusing on new markets, introducing new technologies, creating new businesses. So these are 2 different directions. And in terms of R&D investment breakdown, since I was the CTO of this organization, we have been always been focusing on the scope of the strategic business. And we have an example of automotive mobility at the top. In January this year, CES was held in Las Vegas, and we received the innovation award at that conference. This is a new type of head-up display. And example at the bottom, this is drilling really, really tiny holes on the glass at a very high speed. And this is a joint research with the University of Tokyo. And this is actually 1 million times. It's hard to believe that it's 1 million times faster than the conventional methodology. It's really, really fast. And on the next page, you can see the semiconductor-related, especially back-end process technologies. And this is where this new technology can be leveraged. In semiconductor business, Well, we have electronics and also performance chemicals. And in both, we are providing the latest leading-edge materials as a strategic business to semiconductor. So not just the front end, but the back end is now attracting a lot of attention these days. As you can see at the bottom of the slide, multiple chips can be mounted on top of each other in order to increase the density because each chip is as dense as they can be. So now the idea is to mount multiple chips on a single substrate so that they can increase the density. And our organic materials and inorganic materials can be effectively leveraged in this effort. Accurately processed and also stably produced, we have this technology. And this is the new area of industry, semiconductor packaging. We can provide solutions to this industry and contribute to the semiconductor industry as a whole. So I talked about making tiny holes. Substrate basically means glass. And you need to drill multitude of holes, very long wears on these glass substrates and how fast you can do would determine that cost reduction. Now in terms of CapEx, in '25, we have basically completed major investments for capacity expansion. So '26 and beyond, our new expansion will be dramatically shrunk. So we will focus on collecting the return for investment. And as for shareholder return policy, ROE of approximately 3%, which we announced in '24, we are still maintaining this. And in '26, we will keep the dividend level flat from '25. But from '27 and beyond, going into the future, depending on the level of recovery of performance, we may take another look at our shareholder return policy. Moving on to corporate governance. We want to further enhance corporate governance. And to that end, we will become a company with Audit and Supervisory Committee. And this will be -- is expected to be approved at the AGM at the end of March. So we started inviting outside director, 2 of them in 2002. This is how the corporate governance reform started. And then we started -- established a voluntary Nominating and Compensation Committee. And now Chairman of the Board as well as the Chairman of the Nomination and Compensation Committee are external directors. And by transitioning to a company with Audit and Supervisory Committee, majority of the Board will be outside directors, which will strengthen the supervisory function -- overseeing function of the Board. In line with the change of this governance, we have redefined the role of Board of Directors. First of all, setting the overall direction of management from a long-term perspective. So this is policy direction. And another is to encourage appropriate risk taking by the management. So this is a supporting function. And further overseeing the management to the realization of value creation and evaluating and appointing executive officers. This is the oversight function. Board would have these 3 functions to help support the management. And also we will endeavor to further enhance our corporate value based on a competitive advantage. Thank you. Kazumi Tamaki: Now I would like to take questions. So first, we take questions from those people who are here with us. And then after that, we would take questions which were asked beforehand. And if we still have time, we will come back to this room. So at the beginning, we will get the questions from this room, but we would like to ask you to ask 1 question per person. Thank you very much for your cooperation. So any questions? The person sitting in the first row, is it Maeda-san? Takuya Maeda: Yes, Maeda from SMBC Nikko. One question, ROE, ROCE, current situation and other challenges in future were explained. So I have a question on that point. Life Science and essential chemicals, those are some of the challenges that you are faced with. So drastic review of the business is also possible. So what is the time frame or the size? And what kind of options or menus are you considering? And also, looking at your forecast, the pretax profit or operating profit is probably a little bit weak. So before going -- moving on to the next medium-term plan, are there any actions that you'll be taking? Thank you. Kazumi Tamaki: So I would ask Hirai-san, CEO, to respond. Yoshinori Hirai: So first of all, those Essential Chemicals and Life Science on the right-hand side, those are the challenges. As for Life Science, if it becomes normal condition, ROCE of 15% to 20% is possible because in the past, we had those numbers. So that's the type of business. So that's why it is included in the strategic businesses. But the issue is what is the time frame? So fiscal '26 by the end will be difficult. But by closing the Colorado sites, there was a major reduction of the fixed cost. So we'd like to see the higher orders, and it would take 1.5 years to 2 years before we see that impacting our performance. So maybe within 2027, we should be able to recover to some extent. Otherwise, that will become a very serious matter. Another is the essential chemicals. In terms of the time line, it will probably take longer. Now right now, I think it is the bottom and China -- the product coming via China, I think that they are lower than the cash cost. So currently, we are at the bottom. And with the improvement initiatives, we can take advantage of the relationship with the customers and increase the margin and to improve the profitability. But it will take time. That's the key here. 50% share is what we have. And even the market condition is so poor, it is the business that will give us some kind of a profit. But going beyond the shareholder capital cost, how do we make sure that we can maintain such profitability will be the key. FY '26 pretax profit you mentioned. Yes. Fiscal '25, other revenue, other expenses, there were some sale of the assets, net plus was the condition. And the foreign exchange fluctuation also was quite volatile. And it was slightly profitable. So this would be the plus side, the positive side. But FY '26, as of now, other expenses, we do not expect any major ones. So normal fixed asset depreciation and also the removal and so forth. So in some cases, the FX loss will emerge, but we do not expect any specific ones, but it's just the normal factors or the items. Kazumi Tamaki: Any other questions from the floor? Yuta Nishiyama: This is Nishiyama from Citigroup Securities. I have a question about Life Science. For the new top line net sales increase of 20% is forecast. So this seems to be quite aggressive. In the United States, bio-related financing is getting better, I heard. However, in Europe, your peers are struggling. What is the likelihood of you achieving this top line target? And also your assumption for the profit change, I think you're just looking at the increase in marginal profit only. But what about cost? Are there any changes, differences year-over-year? Can you please supplement? And on Page 55, when I look at this graph, '27 OP is expected at JPY 5 billion or so. But -- so sales -- net sales grows at the market pace and then depreciation cost increase is may be incorporated. Is that the correct way of reading this? Kazumi Tamaki: Thank you. Hirai-san, our CEO will explain. Yoshinori Hirai: This year's top line, as you have mentioned, industry recovering in the United States. However, the interest rate cut is slow. So this is still uncertain, but we believe that our Seattle site can be recovered this year. So last year, we increased the capacity, and we now have fixed cost in Copenhagen. And how much recovery can we see in terms of order and production in Copenhagen. I think this is going to be the key for profitability improvement. And with the existing pipeline, it's not just Seattle, but it's also Copenhagen that we need to see recovery in and the sales increase. So that's part of the plan. However, we are not achieving overall profitability in '26 because compared to the increase in fixed cost, we have not been able to show a difference just by a higher level of top line. I hope you understand the situation. Rather than looking at the overall growth, we are doing this bottom-up of what's happening at each site. And as you may know, the marginal profit is quite big. And once you cross the threshold, the profit that can be generated can be quite huge. So profitability improvement is totally dependent on the order recovery, order expansion. So we are really focusing on the order expansion. Kazumi Tamaki: Any other questions from this room? No? Okay. So let's move on to the questions that we received beforehand. First, Q4 results. How were they in comparison to your expectations? Could you comment on that? That was one of the questions that we received. So we would ask Takegawa-san, CFO, to respond. Yoshio Takegawa: Yes, '25 fourth quarter, our expectations compared to that, the sales and operating profit, overall company base, it was higher. That was the results. The reasons for that, basically, first of all, in terms of net sales, automotive the volume were higher and the product mix was also another factor. And another is electronics. Optoelectronic products volume increased in Q4. So higher sales, those 2. And as for the profit, the major ones is the architectural, auto and chemicals. First of all, about the architectural Europe price policy effect, it was one of them. And also in the architectural, the raw materials cost was lower than what we expected. So the cost came down. And with that, profit was positive. And also about auto said that the higher sales led to higher profit. And lastly, the Chemicals, the Performance Chemicals demand was stronger than what we expected. So that contributed to the profit. So as a whole, sales and profit both were positive or higher than expected. Kazumi Tamaki: Next question, 2026 full year forecast, how does it compare against 2025? What are some of the key differences? Takegawa-san will answer this question. Yoshio Takegawa: 2026 forecast, how does it relate to the actual '25? For the overall company, sales increase and profit increase and with specific factors, in terms of net sales, architectural glass, chemicals and life science would contribute positively. Architectural Glass, Japan, Asia pricing policy and also demand in Asia will increase from the second quarter onwards, and we believe that will push up the sales. For chemicals, fluorinate-related product shipment is expected to increase and also alkali capacity increase in Thailand. Now this is operational. So therefore, we can increase the shipment there. And as for Life Science, bio CDMO sales is expected to increase. And also in Spain, small molecule pharmaceuticals and agrochemical CDMO capacity was increased, and it will become operational, contributing to increased sales. With regard to profit, some of the factors -- positive factors will come from Architectural Glass, Science and Life Science. Architectural Glass, we have a pricing policy in Europe, and also we expect to see the demand in Asia to grow. And the cost reduction in Europe will continue to progress. As for auto, structural reform and productivity improvements are the key points. And in Europe and Americas, we should be able to recover from the lower production and profit-wise, this should be a positive contributor as well. For chemicals, shipment will increase. And in Thailand, chlor-alkali expanded capacity has started operating, contributing to profitability. And we also expect fluorine-related products to increase in shipment. And life improvement of profitability due to the closure of Colorado and also overall sales increase. Kazumi Tamaki: So about the future investments, the policies is the next question. So I would ask Hirai-san to respond. Yoshinori Hirai: About the materials investment, it's difficult to understand. But after making one investment, maintaining and updating would also require investments. So roughly speaking, half of the investment is for the maintenance and updating. So it does not lead to the capacity expansion. So after making an environment, in order to maintain it, half of that investment needs to be kept or maintained. Up to last year, up to '25, what we did was expansion investment that was higher than the maintenance and the updating. But from this year, we would only focus on the expansion investment to only the necessary ones. So high productivity of the auto electronics investment will continue, but the major investment for expansion have already been done. So from now on, we will focus on the updating and maintaining. So roughly speaking, our future investments will be within the depreciation and amortization and half of that will be for the maintenance and updating. Kazumi Tamaki: Next question. [ OP ] of JPY 150 billion. Is this the company's commitment? Is it the right way to understand it? This will be responded by Hirai, our CEO. Yoshinori Hirai: Whenever we announce a number externally, we intend the number to be a commitment, but I know that we have not achieved our commitments for several years in a row. So we have to really apologize. And this year, based on our past experience of not meeting the target, we believe that this is a level that the market would require us at the minimum level. And also, this is the level that we believe that we can achieve. So yes, it is okay to see this as commitment line. I know that we have failed in the past, but it is high this year. Kazumi Tamaki: Related question. So for this year, operating profit of JPY 150 billion, are there any upside potential or downside risks? If there are, could you talk about what they are? So I would ask Mr. Shiokawa to comment. Tomoyuki Shiokawa: Upside and downside were the questions. So we have various businesses in each one of them, there are both upside and downside risks usually. But among them, this fiscal year expectations, as Hirai-san mentioned, this is a commitment and especially about the downside, as of now, what we can are already factored in. So in that sense, the further upside or rather downside is not something that we expect as of now. Kazumi Tamaki: The next question is about electronics. OP forecast for this year, well, JPY 2.5 billion down in profit. This is the plan. Can you please explain the drivers, factors behind this? And this is going to be answered by Mr. Takegawa. Yoshio Takegawa: So we believe that we will have reduced profit in Electronics. This is for display and digital materials, both for display, slight decline in shipment is the general factor. It's not that the total market is coming down, but there is a slight decline overall. So this is one factor and also impact of weaker yen. And this is why we have lower profit in display. And Electronic Materials is the same. Optoelectronics had an impact. Optoelectronics materials is currently in a transitional period moving into higher value-added products. So there is a flattening and this is why there is a slight decline in profit. It's not that the whole market is declining or our production is disappearing. This is due to some transitional period, and there is only a slight decline within the normal range of slight decline or increase. Kazumi Tamaki: Next is about the EUV mask blanks from '25 to '26, the shipment outlook is the question. I would ask our CEO, Hirai-san, to respond. Yoshinori Hirai: Yes. Before talking about '25, I'd like to look at '24. We expected JPY 40 billion sales in '25, but we were -- it was brought forward to '24. Last year, in comparison, the sales came down. In terms of percentage, I cannot give you the details, but the double-digit decline in percentage was what we saw. But for this year, it's not the lower profit, but the higher profit is what we expect. And is this going to happen very quickly? The recovery would be moderate or weak. So the major customers recovery and also other expansion of the customer base. But the profit is going to increase year-on-year, but it's not going to be a big growth. So that is our view. Kazumi Tamaki: Moving on to the next question. Life Science, Bio Colorado site divestiture. Can you please update us on the progress? Hirai-san will answer this question. Yoshinori Hirai: In the middle of last year, we announced the withdrawal and the sales of this business. And since then, we have been discussing with multiple candidates -- by our candidates, but it hasn't been concluded. We're still discussing with multiple potential partners. And hopefully, within the first quarter, we want to conclude the deal. So please understand that the negotiation is still underway. Kazumi Tamaki: Next question, Southeast Asia, PVC and caustic soda market conditions. Could you talk about the outlook from the AGC's perspective? And also, what would change or turn the market condition around? Takegawa-san will respond. Yoshio Takegawa: First of all, as of now, the caustic soda and PVC '26 expectations. Right now, the market, we believe, is at the bottom. So at the beginning of -- or in Q1 '26, it was the bottom. And in Q2 and onwards, a gradual recovery is what we expect. But for the full year, it will be much higher than the year before. We do not think that it will be much higher than the year before. But what could trigger the turnaround of the market? As of now, there are some uncertainties, but the major ones would be the exports from China to Southeast Asia. What would happen to that flow? I think that would be one of the keys. It is not definite, but April this year and onwards, export from China, there will be an evolution of some of the tax-related matters and also the production cost of China is increasing. We have that information. So from China to Southeast Asia, the flow will come down or the price will go up. If that happens, our chemicals market, Southeast Asia for us, that will be a positive impact on us. Kazumi Tamaki: Now we want to come back to the venue and receive questions from the audience. Maeda-san, please. Takuya Maeda: This is Maeda from SMBC Nikko. Question about electronics over the mid- to long term. Page 57, Page 58 show strategy for semiconductor and multiple items. So in 2026 and beyond or thinking about 2028 or 2030, right now, it's mask blanks and optoelectronics being the key. But over the mid- to long term, do you think the drivers will change, for example, glass substrate or maybe the laser that you have shown us today? And how soon will they ramp up? And what kind of size should we expect? Kazumi Tamaki: Yes, this will be answered by Hirai-san. Yoshinori Hirai: We believe that the back-end process centering on packaging will definitely grow, but it doesn't mean that the front end will disappear. EUV mask blanks and the CMP slurry demand are expected to grow over time. So this is -- these are still growth drivers. What's important is what will be the next pillar? Glass interposers or glass cores, yes, we do have some additional expectations there, but not just that. Because if you look at the packaging materials, you can see that a whole variety of different materials are used in the packaging process for semiconductor. So we want to get in there based on the relationship that we have with the customers. Now glass core and glass interposer is attracting the most attention right now. But in the beginning, we expect this to actually materialize in 2027. But you cannot do this alone. All the different companies need to get aligned. So there is a possibility that it could be later than '27. But clearly, 2030 and beyond, this is going to be one of the pillars of the materials for the next generation of semiconductors. Kazumi Tamaki: Yes. Next question, Nishiyama from Citi. Yuta Nishiyama: Nishiyama from Citi. Capital allocation is my question. So a year ago, you showed us cash allocation slide, and we did not see that this time. So is there any change? And the strategic framework, JPY 100 billion, M&A and share buyback. Could you talk about your views on that? And on Page 60, shows that '27 and onwards, it says that the return policy could be revisited. So what is the direction? Cash allocation and the shareholder return policy? Kazumi Tamaki: Okay. So I would ask Takegawa-san, CFO, to respond. Yoshio Takegawa: First of all, about the cash allocation, strategic investments, we had that until now, the repayment of the loan and the shareholder return, strategic investments, there are different applications. But as of now, the destination or allocation have not been finalized. But in comparison to the cash in, it is being declining and the strategic -- total strategic framework is becoming smaller. So we need to wait and see what happens. As for the share buyback, we would like to look at the potential investments and also the cash situation to make a comprehensive decision. We have not yet decided whether to do the buyback or not. We'd like to look into the situations. But we do not plan to buy or repurchase our own shares just to push up the share prices. That is not something that we plan to do because that would only have a short-term impact. So in any way, we would like to look at the total picture comprehensively before making a decision. Kazumi Tamaki: Any further questions from the room? Yes, please. Yuta Nishiyama: This is Nishiyama from Citi. Electronics assumptions for the new fiscal year, I would like to get more information. Display shipment is expected to go down, but Page 20 shows that the size will be larger according to the market outlook. So is the market share going to go down? Is that your outlook? And Page 52 shows you will continue to implement pricing policy in '26. So are you expecting price increase? And for optoelectronics, you said that profit will go down. But on Page 23, I can see that the shipment of optoelectronics is actually flat. So is there a downward pressure on the price? And also high value-added products. You mentioned that the product is a transitional period. So foldable, mechanical aperture, I know that there are many changes happening. So can you please elaborate a little bit more? Kazumi Tamaki: Yes. This is going to be answered by CFO, Takegawa-san. Yoshio Takegawa: Yes. With regard to display, shipment slightly down, but the profit decline will not be very big. Basically, we will be promoting larger size more and more. The profit looks down slightly. This is due to product mix. So this is a transitional period to larger size. So this is just due to product mix. And Optoelectronics is in the same situation basically. It's not the question of the volume going up or down. Well, there's going to be a slight increase and slight decline and that cycle gets repeated. So this is not a big drastic decline in profit or increase in profit. Now we want to connect this to the next high functionality product. So right now, we are in a transitional period. So the number is not going up or down dramatically. In other words, it's a little bit on the stagnant side. I hope that's how you can interpret it. Kazumi Tamaki: [Operator Instructions] The questions that we already received, I would like to introduce rare metal procurement risk, the higher precious metal price, the impact from it. And those are not -- are they factored into the forecast of the performance. So I would ask Shiokawa-san to respond. Tomoyuki Shiokawa: Well, it is true that recently, the precious metal prices are at high level. And so the procurement risk exists. But in our case, as of now, we do not expect that this becoming the major risk or major issue. If it becomes a long-term issue, it is possible that we will be impacted. But as of now, we do not expect this to be a major factor. Kazumi Tamaki: [Operator Instructions] We have already received another question. You mentioned that the 2-nanometer level of EUV mask blanks has been developed -- development is completed. What about the status of certification? This is going to be answered by our CEO, Hirai-san. Yoshinori Hirai: Development is completed. And with some customers, certification is also completed. And with other customers, we are in the middle of being certified. We cannot really comment on the specific status of each customer. So 2-nanometer already completed. And next is 1.4 nanometer. So this is the development process that we have just entered. Kazumi Tamaki: Questions from the online participants, we have already covered all the questions. Are there any other questions from the participants in the room? Nishiyama-san? Yuta Nishiyama: Nishiyama from Citi. Life Science, the top line 20% increase in the new fiscal year. I think that's the sum of each site. And based upon the backlog, is it likely to get to that level? And you mentioned that the deficit is likely to continue for the fiscal year, but it will be higher in the second half. So when do you think that you can expect to turn it around? Kazumi Tamaki: Our CEO will respond. Yoshinori Hirai: About the top line with the CapEx, the line investment is done in CRO and Copenhagen. As for Copenhagen, as mentioned, right now, we are starting it up, and we will plan to increase the orders. So from this year, it will start to contribute, but the major contribution is expected for CRO. So that's about top line. As you said correctly, for the full year, turnaround will start from fiscal '27. But for that, second half of this year, I don't know whether it will be monthly or quarterly, but we need to turn it around based on that. So cost reduction and expansion of the orders will be something that we'll be working on. So border, the handling of that is over. So the regular order expansion and the regular production phase will be starting. So we would like to make sure that we do this well. Kazumi Tamaki: It's time to close the Q&A session at this point in time. If there are further questions, please contact the IR representative or contact us at the following phone number 03-3218-5096, 03-3218-5096. [Operator Instructions] And that concludes full year earnings call for 2025. Thank you very much for joining us despite your very busy schedule.
Natalia Valtasaari: Good morning, and welcome to KONE's fourth quarter results call. My name is Natalia Valtasaari. I'm Head of Investor Relations here at KONE. I'm joined today by Philippe Delorme, our President and CEO; and our CFO, Ilkka Hara. So as usual, Philippe will start by talking about the highlights of the quarter of the year, particularly focusing on what's going on in terms of strategy execution and our progress there. Ilkka will then continue by running through the financials and the outlook, both market and business outlook for the full year. And then Philippe will wrap up, and we'll be ready for your questions. [Operator Instructions] Hopefully, we'll get very active dialogue, and that will enable as many people as possible to participate. With that, Philippe, please. Philippe Delorme: Thank you, Natalia, and good morning, everyone. I'm very pleased to be here today presenting our full year results. Let me start by saying that our success in 2025 was a result of determined and disciplined strategy execution. Order growth was one of the key highlights of the year. Our ability to capture the modernization opportunity together with our focused efforts to grow in the residential space were important contributors. We also delivered consistently on our profitable growth ambition. Central to this was the continuous strength and improved performance of our service business. This year, service became our largest business at over 40% of sales, making KONE more resilient than ever. Supported by our solid operational performance and strong cash generation, the Board is proposing a dividend of EUR 1.80 per Class B share, which represents a dividend yield of nearly 3%. Last but not least, I'm very pleased to report tangible results of our work in all our strategy shifts. I will share some more concrete example in a moment, but let's first look at our financial performance in more detail. Let's start with orders. So as I said, growth momentum was strong throughout the year, and Q4 was no exception. Comparable growth of 12% is a very good outcome. I'd like also to take a moment to highlight Asia Pacific, more specifically India and the Middle East. The team has done an excellent job positioning KONE as a leader in these markets, capturing growth opportunities while also driving meaningful operational improvements. Turning to sales. We grew just over 4% at comparable currencies, supported by roughly 10% combined growth in service and modernization. Modernization continued its strong trajectory with growth of around 15%. Service growth was somewhat moderated by the actions we are taking to strengthen performance and margin in China. And with that in mind, 6% growth is a good outcome. Our adjusted EBIT margin expanded by 60 basis points, thanks to a richer sales mix. And finally, cash generation in the fourth quarter was solid, though lower than the exceptionally strong comparison period in 2024. So all in all, we had a good finish to the year, very much in line with our expectation. Let's now look at our strategy execution has progressed this year. First, I want to highlight the excellent progress we've made in accelerating our digital transformation. The share of connected units in our maintenance base now exceeds 40%, up 7 percentage points from the previous year. For me, this step change in pace reflects our ability to better articulate the value of transparency and real-time data to our customers and their growing recognition of the benefits. We also significantly expanded the reach of our productivity-enhancing tools. With the U.S. about to go live, dynamic maintenance planning is effectively covering 2/3 of our installed base. This is starting to deliver measurable improvements in field efficiency, which can be seen in the expansion of our service margin. It has also supported service growth, particularly through increased repair sales. Moving now to modernization. I'm really pleased with the great customer response to our partial modernization offering. This is clearly visible in its rapid growth, now making it the largest part of our modernization portfolio. The modular concept resonates strongly with customers because it directly addresses their biggest concern, minimizing disruption to daily life during the elevator upgrade. Commercial traction in the residential market has also been very strong this year, and this reflects the success of our efforts to improve offering competitiveness, especially from a cost perspective. Achieving double-digit residential order growth in all regions except China, where market challenges are well known is a very, very strong accomplishment. And we all know why this matters. Strong residential orders today secure future service business and residential is a highly attractive service market for us. Now let's take some example of our strategy in action with customers. Let's start with China, where we are providing a full scope of digital service solution to Nanjing Golden Eagle World, a landmark multi-use complex in East China. Transparency, actionable insights and the ability to elevate tenant experience with proactive communication were cited by the customer as a key benefit. Turning to the Americas. We have recently won a partial modernization project for 22 units at the American Airlines Center, a premier sports and entertainment arena in Dallas, Texas. Our ability to adapt the installation work to minimize disruption during the busy game season was key in the world. So staying with modernization and turning to Europe, where we have a great example of how sustainability is influencing customer decision. In this project, the original plan was a full-scale modernization. However, by highlighting the opportunity to reduce emissions and energy use by grinding only the outdated components, the customer chose a partial modernization instead. And last but not the least, India, where, as mentioned, the team has delivered an outstanding quarter, very much supported by our focus on driving growth in residential. We have one particular prestigious win with the order to supply a wide range of equipment to DLF premium residential development, Privana, under construction in Gurgaon near New Delhi. Let's now turn to sustainability, where we have a lot to be proud of. As you know, we track our performance with the sustainability index, and I'm happy to share that we exceeded our targets in 2025. A key driver was a stronger-than-anticipated increase in regenerative drive sales, which contributed to a reduction of nearly 13% in Scope 3 emission from the previous year. Another important contributor was a step-up in cybersecurity performance, a core strategic priority as digitalization accelerates across our products and services. One measure of our progress is our Bitsight rating, which this year placed us in the top 1% of our global engineering peer group of over 24,000 companies. This is a fantastic achievement and testament to the dedicated work of our cybersecurity team. I'm also very pleased with the external recognition we have received, most notably our inclusion in the Corporate Knights ranking of the world's most sustainable companies. I want to highlight that sustainability is not just a set of commitments for KONE, it directly drives our business performance. Our impact revenue grew over 20% last year, and today, it represents over half of our overall sales. This is an excellent indicator of how our strategy is progressing. Digital service solutions, partial modernization and regenerative drives all contribute to climate impact mitigation and thereby to our impact revenue. So as said, we have a lot of great example of strategy progress from 2025. And now, of course, our focus is on maintaining this momentum. Let me next hand over to Ilkka, who will go through the market development and financials. Ilkka Hara: Thank you, Philippe, and also a warm welcome on my behalf to this fourth quarter result webcast. Let's start by taking a look at how our markets have developed during the past few months. The elevator and escalator markets were again resilient in the fourth quarter. In services and modernization, the market environment was very positive, and we saw growth in all areas. In New Building Solutions, the picture is more polarized. The well-known challenges in China construction once again drove significant decline in elevator and escalator market activity. In contracts, the activity increased in all other regions. Looking at the chart, Americas growth stands out. This is largely due to the last year's relatively low comparison point. What is more relevant is the sequential trend, which remained quite stable, a solid outcome given the broader geopolitical environment. Let me next go through our financials in more detail, starting as usual with our orders received. As Philippe highlighted, the positive momentum seen in previous quarters continued in the fourth quarter. Overall, the orders received increased by 12.2% at the comparable currencies, and growth was broad-based across the portfolio. With the exception of New Building Solutions in China, all business lines and regions contributed. We also had a very strong quarter in major projects across several geographies. From a geographical perspective, growth was strong in Asia Pacific, Middle East and Africa. The over 20% growth in both modernization and NBS in this area highlights our ability to effectively capture opportunities in this rapidly expanding market. From a business line perspective, modernization continued to grow at a healthy double-digit rate. New Building Solutions followed the market trends with pressure in China and growth elsewhere. Our orders received margin remained stable year-on-year. Pricing conditions in China continued to be challenging, but this was offset by more stable orders margin in other regions and our product cost reductions. In terms of sales, we had a good end to the year with a 4.3% comparable growth in the fourth quarter. Looking at the development by business, continued good growth -- good order book rotation in modernization was the highlight. This delivered 15% sales growth in the quarter. In New Building Solutions, China remained a drag, although this was partly offset by growth in other regions. Service sales grew by 6%. Outside of China, growth was in line with our targets. While in China, sales were slightly below last year. We also saw some negative impact from separation of our doors business. Shortly on China. As discussed in previous quarter, our priority there is to safeguard margin and cash flow across all of our businesses. In service, this has meant reassessing our contract base and taking targeted actions to strengthen the performance. I'm pleased that these actions have delivered the intended results. Looking at growth tailwinds. Our maintenance base continued to expand and pricing developed favorably. Here, we saw support from sales and operational excellence performance initiative, where we have focused on professionalizing our pricing and driving repair sales. This is closely linked to our digital transformation. As Philippe explained, by improving field efficiency, we free up time that can be proactively directed towards repairs. For me, this is an excellent example of tangible benefits of digitalization. Then moving to adjusted EBIT and profitability. Let me start by saying that I'm pleased that we have continued to consistently deliver profitability improvement, moving steadily toward our midterm target of 13% to 14% adjusted EBIT margin. Our margin expanded by 60 basis points in the quarter, taking adjusted EBIT to EUR 402 million. Looking into details, our biggest headwind continued to be margin pressure in China. On the positive side, the business mix continued to be favorable. What I'm happy about is that service margins continued to improve, supported by repairs growth and our efforts to take more strategic approach to pricing. Product cost reductions has also continued to -- contributed to profitability and will continue to be supportive in the coming year. Then turning finally to cash flow. We had a strong year in terms of cash generation, supported by growth in operating income and changes in working capital. For the full year, cash flow from operations rose to nearly EUR 1.8 billion with a solid quarter-by-quarter development. Looking at the working capital in more detail, FX swings had a bigger-than-normal impact to this year. If we adjust for negative currency impact of approximately EUR 60 million, working capital improved moderately. A key driver was the increase in advances, and I'm also pleased with the work the teams have done in driving collections. Then let's look at how we are thinking about '26, starting with the market environment. Our outlook for the year is very consistent with how activity developed in '25. We see attractive opportunities in all parts of the world. This is particularly true in modernization and services, where we expect markets to remain very active in every region. In New Building Solutions, we expect the decline to continue in China. The lower rate of decline is mainly due to the comparison period rather than the meaningful easing of the underlying pressures. Outside of China, we expect growth, slight in Europe and North America and clearly stronger in Asia Pacific, Middle East and Africa. So overall, operating environment looks to be favorable this year. Of course, the geopolitical environment continues to be a risk, and we're keeping a close eye on how this could be reflected into market activity and potentially our financial performance. That's a good bridge to our business outlook for the year. Let's start by going through the headwinds and tailwinds. As mentioned, the market conditions in China remain under pressure. So this is burdening our performance as is the wage inflation. At the same time, our order book, combined with a strong outlook for service and modernization provides a healthy foundation for growth. Beyond the resulting positive mix effect, we also expect tailwinds from increased contribution from our performance initiatives and from the product cost reductions achieved during '25. So with all this in mind, our guidance for '26 is for the sales to grow 2% to 6% at the comparable currencies and adjusted EBIT margin to be in the range of 12.3% to 13%. This keeps us firmly on track towards achieving our midterm financial targets. With that, let me hand back to Philippe to close the presentation and open the Q&A. Philippe Delorme: Thank you, Ilkka. So before I move to the summary, let me take a few moments to highlight our priority for 2026. First, we will continue driving the excellent progress we've made in digital. We'll push for even higher maintenance-based connectivity and focus on further leveraging the productivity gain we are seeing in the field. In modernization, it will be important to build on this year's strong momentum in partial modernizations with a particular emphasis on reducing installation time. We've made very good progress in our initiative to drive performance through sales and operational excellence and improved procurement efficiency. The first results are already visible in our financials, as you heard from Ilkka, now we must maintain and, in some way, accelerate this momentum to ensure we deliver the intended bottom line. And finally, to support all of these priorities, we will continue to strengthen a high-performance culture across the organization. This will help us drive greater precision and discipline as we drive our business transformation forward. So to wrap up, we can be pleased with what we achieved in 2025. For me, most important was the great progress we've made in strategy execution. This was especially visible in the acceleration of our transformation to an even more service and modernization-driven KONE, supporting our performance and further strengthening our resilience. Finally, both last year's results and our guidance for 2026 show that we are advancing well towards our midterm financial targets. So a big thank you to all KONE teams for an outstanding commitment once again. Thank you all for your attention, and I suggest we now move on to your questions. Operator: [Operator Instructions] We will now take our first question from Daniela Costa of Goldman Sachs. Daniela Costa: But maybe we can start, you talked about the tailwinds from the operational actions that you're doing. Can you help us out thinking in 2026, the balance between how much should we expect in savings versus what we will have in, for example, raw materials? Will that be a headwind? Where -- how should we think about that balance? That's the first one, and then I'll ask a quick one afterwards. Ilkka Hara: Okay. Maybe I'll take at least the start of it, and Philippe is quite excited about this, so I think you will add. So we are expecting a slight headwind from raw materials in '26. And -- then separately, so we have, as we said, been pleased how we've been able to now get both the performance initiatives ongoing. So the focus on purchasing as well as on the sales and operational excellence. And actually, in '25, we did see both contributing positively. But like we said already when we started the new strategy that we expect an increasing impact from the performance initiatives through '25, '26 and '27 contributing increasingly in those years. And we are guiding for improvement in profitability. So it's also visible in our guidance. Daniela Costa: Okay. So we will exceed any raw material. And then the second question is, why haven't you increased the dividend this year given you obviously have earnings growth, you have strong balance sheet. Can you elaborate a bit on how you're thinking about shareholder payback and priorities there and yes. Ilkka Hara: Well, first, it is, in my mind, a strong dividend that the Board decided for the year or a suggestion for dividend for the AGM. And we've had a strong performance, and we also do value a strong balance sheet. So at the end, this was a decision this year. And I think it's a strong dividend and a good yield as a dividend yield as well. Operator: Nick your line is open. Nicholas Housden: The first one is just some clarification on the guidance. I mean the low end of the growth guidance is at 2%, and we had 4% growth in 2025. And this year, it feels like you've got some very good growth tailwinds, modest, very strong and a bigger share of sales. NBS outside of China looks good. NBS in China is an ever-declining share of sales. Service growth is strong. So it just seems very unlikely that you would kind of end up anywhere near that 2% growth number. So I was just hoping you could maybe give some comments and some sensitivity around the growth guidance there, please. Ilkka Hara: So of course, like I said already in my remarks on the guidance that the uncertainty in geopolitics continues to be high. Then if I look at KONE business, we have a good order book in our NBS business, like you said. Uncertainty is more around how our customers are taking the projects forward. And it's good to note that one part of the good growth in '25 was related to major projects, which clearly have a lower order book rotation than the volume business. In modernization, we still are accumulating orders throughout the first half that we will deliver in the year. So it's more a question of how good are we executing against our target of more than 10% growth in modernization. And indeed, in services, it's more of a consistent good growth business. So those are the moving parts in the guidance as we see it. It's early in the year, and we see that this is a good range of outcomes for the business. Philippe Delorme: And it's aligned with our long-term targets -- or midterm targets, sorry. Nicholas Housden: Great. And then just a related follow-up regarding service growth. So 6% in the quarter, still a solid number, but a little bit slower than the dynamics that we've been seeing before. So I was hoping you could, a, just comment on what you're seeing in the quarter; and b, obviously, you've done a really good job over the past couple of years of aligning pricing with the customer value that you've been delivering. So I'm just curious to hear your thoughts about how you see this pricing dynamic going forward and whether there was almost a one-off element in the past couple of years as you sort of raise prices on existing contracts and whether it might be a little bit less of a tailwind over the next 2 to 3 years? Ilkka Hara: I'll try to comment on all of the components. But first, on the growth of services. So we target close to 10% growth in services business. And if you look at the full year, we're actually quite well in line with what we have guided. Then in the fourth quarter and maybe also in the second half, we had an impact from actions we took in China. As I said, we are prioritizing all of the businesses around cash flow profitability. And we reassessed our service base based on those priorities. And that's something where we saw a good impact to our performance, but it did slow our service growth as an overall down. And we also have been very explicit that we want to separate our doors business to a separate business. And as that separate doors business is reported under the services. And during the separation, of course, it takes some management bandwidth as well as system changes, which impacted the growth as well. So all in all, I think it's quite in line what we targeted, excluding these 2 actions we've taken. Then on pricing, so I'm actually very pleased that we've now been able to take much more strategic, much more analytical approach to pricing. And we've seen both pricing as well as our repair volumes growing very nicely as a result. And I don't see that this work has been done yet. I think there's further opportunities going forward. I don't know if you want to comment on services more. Philippe Delorme: No, I would say more broadly on services, there is no reason for us to change the strategic direction we're having, which is we want to differentiate with digital, both on the efficiency side and the customer value. We see it working very well. We were planning -- we are growing very well in 3 of our 4 areas. We made a choice in '25 to prioritize differently in China to privilege cash margin. And then picking the right customers. We've done exactly what we wanted. We were expecting this pruning of the portfolio and therefore, the impact on the top line. We see a very strong momentum in the 4 other area. Now we are back in China much more on the growth side, but growth and profit, and we've delivered better profit in China in service. So we are sticking to the plan, and we are very confident in where we want to go. Operator: And we'll now take our next question from Vivek Midha of Citi. Vivek Midha: Hope you can hear me well. My question is really following up on the China service story. Within the slight decline you have in the fourth quarter in China, would you be able to indicate whether you saw units under service still growing in the quarter with the decline driven by price mix? Or did you see a decline in the quarter in units under service? And the follow-up is you commented that the actions in China have seen the intended results. I'm curious to understand, should that effect then not continue in 2026 and onwards? Or given that you took the actions in the second half, should we expect some carryover effect on the China service growth rates in the first half of '26 before the comps ease up a bit again? Philippe Delorme: Do you want to start? Ilkka Hara: I can start. So in services in China, so there's 2 things that you need to take into account. One, yes, there is still an add-on. The market is growing as we -- as there are NBS units being installed and that's adding to the maintenance base. And we take a fair share of that with our good NBS business there. At the same time, we really took these targeted actions to look at our customer base with these 2 targets. And we continue to do so, but I don't expect a similar one-off impact going forward. It is more about working with each of the customers like we've done in other regions to find the right strategic pricing approach, drive repairs and so forth. So it is more of a one-off impact. But then as we see the market in NBS declining, so that is having an impact on the growth rate of the service unit base in the market. Philippe Delorme: And just to complement, every time you think about our service business, it's not as simple as number of LIS x the price. So that's one part of the business. The other part is really the repair business everywhere, including in China. And we believe that in China, specifically, we can do much better when it comes to our spare and our repair business. And we are working on packaging repair that will feed the customer demand, plug this with much more digital marketing to be responding to our customer request, and we see actually a very good traction here. So it's -- and for the rest, I would not repeat what Ilkka said on doing 1 year of really pruning our portfolio, which was much needed and which we believe has been largely done. Ilkka Hara: One more addition. So if I still take a larger content -- context, and it's also true in China, the modernization as a source of new elevators, the maintenance base is increasing its impact. So the more we go, especially on the parcel modernization, modernized equipment, which is not in our elevator base. It is maintained by somebody else. Those units actually then convert to our maintenance base with a very high conversion as a result. And as we grow the modernization business, this will be more and more important source of new elevators to the maintenance base compared to the NBS business. Vivek Midha: I don't know whether I might be able to do a quick follow-up on that. But just on that last point, we know that there's been some pressure on conversion rates in China given the competitiveness of the market. Within the modernization business that you had in China and the growth there, is the conversion rate on those modernizations still holding up relatively well? Ilkka Hara: Yes. Yes. Simple answer. Operator: And we'll now take our next question from Vlad Sergievskii. Vladimir Sergievskiy: If I can follow up on service growth. Would you be able to give us some idea of what your 2026 growth guidance implies in terms of service growth? Does it imply an acceleration versus 7.6% growth you did last year? And also, how should we think about this 10% -- or close to 10% growth over the strategy period? Does it mean that to achieve this growth, you would need to go to low double-digit growth in 2027? Ilkka Hara: Sorry, Vlad, can you repeat the last sentence? I failed to capture that. Vladimir Sergievskiy: Absolutely, Ilkka. In terms of your target for the strategy to grow that close to 10% your service business, does it imply that 2027 number should then be low double digits to achieve this close to 10% growth? Ilkka Hara: Got it. So first, I think this close to 8% rate that we got for the '25 year is actually a good number. We took some targeted actions and -- but in other areas, we actually saw the growth to be very much in line with targets. Then going forward, we don't give guidance by business line, but we repeat what we've said, we target to grow on close to 10% rate in services. And for example, this China action, we don't expect that to continue as one-off impact. So maybe that's implicit answer to your question. Philippe Delorme: Or the best answer we have. Operator: And we'll now take our next question from Andre Kukhnin of UBS. Andre Kukhnin: Can we start with just helping us to size the China business in terms of profit contribution? Could you give us some idea where it sits overall now versus the group or where the kind of margin level is for China? And within that, clearly, New Building Solutions margin has declined. Are we kind of still positive over around mid-single digits? If you could help with that, that would be great. Ilkka Hara: So indeed, I think the first comment is that the contribution of China is declining as the revenue has declined last year and also margin declined slightly last year -- declined further slightly in last year. And our NBS business in China continues to be profitable, and we aim to continue that. At the same time, we see the movement to services and modernization, which is now 40% of the business, continuing to happen. And the target is to get to 50-50 as soon as possible. And both services and modernization are with a higher profitability than NBS in China. And that's why the move -- strategically, that's a growing market, but also it has a positive impact to our mix -- profitability mix. Andre Kukhnin: Sorry, but is that service and modernization of China has a positive mix effect to the group? Ilkka Hara: So I was talking -- you asked about China and about China. So in China profitability, the move to services and modernization has a mix -- positive profitability mix impact for China. Andre Kukhnin: Got it. And if I may just follow up on the pricing questions that have been asked specifically for the, I think, price increases that you're seeing from suppliers that are based on copper and silver and a few other component inflation. Do you have price escalation clauses that you can action to pass that through on the new equipment? Or does that require a specific kind of pricing action one by one with the customers? Ilkka Hara: So now we see a slight headwind in our raw materials, and it's those base metal copper being the #1 for the year '26. And it's not a bigger headwind, and that's why I'm not calling out the number. It's a slight -- some tens of millions of headwind. And then -- it is, of course, relevant information when we price our new orders for our customers, and we take it into account. And with some of the contracts, we have escalation clauses for bigger raw material swings. I would not say that in the grand scheme of things, this is a bigger swing and would trigger those clauses. And a material part of our orders that we have booked don't have those clauses in place. But right now, I think the mix between product cost actions as well as the raw material impacts is something that is still a positive. So we are able to see more product cost reductions than the raw material increases. And I said orders that we booked in fourth quarter had stable margins more because of the price impact in China versus the product cost. In other places, it was more neutral. Operator: And we'll now take our next question from Delphine Brault of ODDO BHF. Delphine Brault: We'll go one by one. First, in your comment, you said that partial modernization now represents the majority of your modernization activity and that it grew twice the rate of full replacement. Can you help us understanding by how much this mix contributed to your margin improvement? And are we right in assuming that the modernization margin is not that far away from the group margin? Ilkka Hara: Before I let you go on partial modernization, just on the fact. So yes, the movement to partial modernization has a positive impact to our profitability within modernization. And the aim for modernization is to continue improving its profitability. And as I said in the strategy, the aim is that it's not dilutive to our margins while it grows and becomes a bigger and bigger business. But do you want to comment the partial modernization? Philippe Delorme: Yes. It's -- I mean I'm somewhat new to this industry. I've been only 2 years in this industry, but I'm fascinated to see that actually the industry was not responding to the customer needs, which is when you have a running building, the first point that matters is time. And what we are doing is just responding to customer needs and say, you know what, instead of having this project in 3 months, we are going to make that project in 1 to 2 weeks. We are not going to do everything, but we're going to do what matters. And once that work is done, the elevator is connected, and we can actually guide for the coming 5 years what really will be essential for you, Mr., Mrs. customers. This value proposition is working very well. By the way, from a financial standpoint, the other benefit is that it brings a very good order book rotation, fast order book rotation and the conversion rate to service is very good. So from a model standpoint, it's a great business. And what I like is that it's a business that corresponds to what our customers are asking for. So we are pushing as fast as we can to really organize ourselves to be extremely efficient in delivering this so that we -- success drives success, and we really make our name, and this has been working very well in the past 2 years as being the best company to drive fast and partial modernization. Delphine Brault: And then it's now -- no, coming back on your margin guidance. What do you need to reach the upper end of your range this year? What are the main assumptions between your 12.3% and your 13%? Ilkka Hara: Of course, a big part of the margin is related to the revenue guidance as well. So the more we are able to deliver the revenue on the top end, the more we will get also leverage on the profitability part. Then second part is around the revenue mix. So again, the more services contribute, the higher end we are at the guidance and modernization will help. And of course, the mix is more on NBS, then it is something we need to tackle. And -- that's number one. Number two is related to our performance initiatives that are, of course, contributing positively to our margins. And I would want to emphasize the fact that in sales and operational excellence, really what we're looking for is the lowest level, the branch, the region that is close to our customer, how they're able to deliver to our customer needs and how are they able to manage the business to produce profitability, pricing going forward. And I think there, we are seeing very good -- the best branches that have really adopted it first, very good outcomes. So that's naturally contributing to the profitability positively. Maybe those are the key variables, I would say. Philippe Delorme: So the question is how fast we can strike on all these cylinders to make them all align and contribute to the upper part of our guidance. Operator: And we'll now take our next question from James Moore of Rothschild & Co Redburn. James Moore: I wondered if I could circle back to Andre's question about Chinese profitability. Would it be possible to quantify where we really are on the overall Chinese margin now or the difference versus the group and to try to quantify the difference between NBS and service and maintenance numerically so we can think about, a, the effect to the group that is now less as China declines; and b, the impact of the positive mix within China? That's really the first question. Ilkka Hara: Well, first, over 90% of our profits are services and modernization. So it is really if you -- we look at the profitability of the company, it is how we are able to grow and manage those businesses. And that's really why we talk so much about services and modernization. So that's a big change in the last years. In China, now the share of revenue has declined for the total company and its profitability is below the group average. And I said already that it declined further in '25. And the more we can make services and modernization be a bigger part of the revenue in China, that's the way for us to then turn the margin also towards stable and growing again going forward. And we don't do segment reporting. So it's more the qualitative comments we're giving, but it's clearly below. And NBS is the lowest margin business we have in China and services and modernization are not that different in margin in China. Philippe Delorme: And the last point I would complement is our cash generation is China is extremely healthy, which is a point where we think we really stand out competition, which is a point that actually leads us to move away from customers. But in the end, we believe cash is key. And we want to make sure that we translate all the hard work we are doing on the ground to money in the bank or in our bank. And we are actually on that side, looking at profitability and EBIT level, but also in cash generation. And that part is actually very, very healthy. James Moore: Maybe I could just go back to the service growth and say it, I didn't really understand the answer you gave earlier about the pruning being a single quarter impact, having covered companies for 30 years. Typically, when revenues drop on pruning, you've got 4 quarters of impact before it comps out. Can you help me understand why that's not the case? And is it possible to talk about what the speed of asset under management percentage growth in units was in the quarter, please? Philippe Delorme: That's not what I said. So I said -- so I think Ilkka and I said that we worked in 2025 on pruning our portfolio, but we worked on the full year 2025. So we started in Q1, and we've seen the impact coming as we were working on it. But -- and we think we've done the essential work to move away from customer either would have low profitability or negative profitability or customers where we believe we had no chance to be paid. So we think we've done the biggest chunk of the work that's needed. Then we've worked within our pricing priorities everywhere in the company looking at our lower profit margin risk profile on cash, but we think that the biggest chunk of the cleaning work that needs to be done in China has been done. James Moore: That's great. And anything on the asset unit growth speed in maintenance? Ilkka Hara: So we see in maintenance, the growth. So I've said it earlier. So we have 3 components when we look at the growth. First is really the repair volumes. How can we continue to drive repair volumes. And that's why the digital part is so important that we can free up capacity to drive that repair volumes to be both sold and installed. Second is related to pricing and value. And value to me is including the digital offering we have facing our customers. So how do we differentiate to get the maximum price and actions we take. And then third one is the units. In units, last year, we had lower growth mainly due to China. In other regions, we've actually seen quite a good development. And we don't see that our strategic direction in terms of unit growth is changing. Philippe Delorme: The only thing we could say as a change is stronger contribution coming from mold and partial mod and a bit less coming from NBS. So in that regard, the whole model of our business, which was a lot of selling elevators and driving the service is changing a bit to actually trying to get a better retention with digital and moving actually a part of our modernization business towards lift in service and expanding our service base. Ilkka Hara: And then lastly, I just wanted to comment because we started with China. You see that China service market is growing at a low single-digit speed. It is also a good signal that we are seeing and are expecting going forward that our service growth is higher in the 3 other areas as a result. And yes, we will grow in China as well, but really the growth rate is higher in the 3 others given the dynamics. Operator: And we'll now take our next question from Tomi Railo of DNB Carnegie. Tomi Railo: This is Tomi from DNB Carnegie. Two questions, if I may. Coming back to the NBS profit contribution, you mentioned over 90%. Any further comment? Is it 95% or is NBS contribution, how much less than 10%, if I can formulate it that way? Ilkka Hara: It's less than 10%. That's -- I won't go to more details, but it's less than 10% and it's -- the modernization service is more than 90%. Tomi Railo: And then another follow-up. If you could just still state clearly if China NBS is lower than global or above than elsewhere? Ilkka Hara: It's slightly above elsewhere. Operator: And we'll now take our next question from Aron Ceccarelli of Bank of America. Aron Ceccarelli: I have a question on modernization, specifically in Europe. At your CMD in 2024, you highlighted the European market for modernization to be probably the largest opportunity in terms of units. And I think today, you're guiding for slower growth compared to other regions. So I was wondering why that. And also if you can discuss a little bit the role of subcontractors in modernization business as the modular strategies speeds up would be useful. And I will go with a follow-up after your answer. Ilkka Hara: I just clarify before you take the modernization. So we said the market is expected to be growing at 5% to 10%. It does not mean that we could not grow faster than that, and that's what... Philippe Delorme: Then I mean, we are -- in Europe, as everywhere, we are ramping up our actions on modernization. We are doing actually pretty well on at this point, full modernization and partial modernization of our own installed base. And now we need to do better on partial modernization on our -- not on our installed base. So the market -- we have a lot of questions like what is the limit of the modernization market. And my answer is always the same. There is -- frankly, at this point, it's such a big ocean that there is very little limit. Now on your point about subcontractors/ISPs, independent service providers, we see them, frankly, as much as competitors and in some case, partners because actually, they cover markets that we don't always very well covered. So we actually see an opportunity to work with them in a targeted manner in places where we don't have the geographic coverage to actually bring our technology. Very often, these companies are not very good in digital, where actually we bring the whole digital gear very well. So we still see an opportunity of plenty of new business model, leveraging more companies that are not strictly KONE to address much better this very vast market. Aron Ceccarelli: And my follow-up would be on your cost structure. Clearly, when I look at one of your competitors have done a very remarkable job on cutting costs. And I believe you have a fairly new head of procurement. And when I look at your SG&A on the other hand, you also have higher SG&A as a percentage of sales compared to other peers. I was wondering, could you perhaps provide a little bit more granularity on what you can actually do on the procurement side now and what opportunities are on SG&A as well. Ilkka Hara: Well, I think on procurement, indeed, we have a new -- not so new. Michelle has been with us now for 6 months. But clearly, what we see is we have an opportunity to professionalize our teams, upskill our team and put purchasing at the right level of attention within the company, which is exactly what we are doing. We actually started this work like before Michelle came in, but we see now an acceleration. And therefore, there is an opportunity to drive better purchasing productivity. On SG&A, you're right. We are -- we have more costs relative to sales than many of our competitors, and we have to do a stronger job of driving efficiency, and we are working on it. Operator: And we'll now take our next question from Antti Kansanen of SEB. Antti Kansanen: It's Antti from SEB. I have 2 questions, both on the service growth. So I'll start with the mention that the modernization, partial modernization is emerging as a driver to the maintenance base growth taking over from the NBS. Is this something that you have already been [indiscernible] on a significant manner in, let's say, '24, '25? Or was this a question more going forward that it will start to accelerate as an impact? And how does it work? Is it elevators that are too old to be relevant in your maintenance space? Or are you converting non-KONE brands through this modernization? Philippe Delorme: Maybe I can take it. So just correction, I've not said that partial mod is taking over NBS. I'm saying, I love competition, and I'm telling to the modernization team, raise the bar so that you become a stronger contributor to service. Now in size, today, this is already significant to very significant. Now are we at the level of what's coming from our NBS business? No. But when you look at the big parameters, if we keep doing the good job we are doing on partial modernization, this indeed will become very mainstream into driving more LIS. And on your question, is it more KONE unit, non-KONE units? My assessment today that we do a decent job on our KONE units. Are we perfect? No. So it's okay to be perfect and raise the bar. On non-KONE units, we can really do much better. And by the way, I don't think the industry is very good overall. So the point about responding with time to do the job and really compress the time by being very optimized is one thing where the industry is average. It's up for us to be very good. Antti Kansanen: Would you guys say that in the past few years, which of the contribution has been, let's say, more relevant on offsetting the decline impact from NBS, your increased acquisitions or conversions from the modernization side? Ilkka Hara: I don't -- so we'll come back to this partial modernization in more detail, but it is starting to be more and more relevant. And of course, for us, it is very compelling. So we don't put capital in play and actually get a modernized -- modern digital elevator as a result of the partial modernization. And actually, it's quite a fast turnaround business. So it is -- from that perspective, return on capital is very good. Antti Kansanen: Okay. And then the second was just a clarification on the pruning work you talked about in China having been over. So do I understand correctly that starting from Q1 this year, there will not be any more negative sales growth headwind in terms of the actions have done and the impacts have already been seen on the P&L? Ilkka Hara: So we took the actions throughout the year. And I said it was more visible, and that's why I called it out in second half of last year. And we expect now a more normal business. It doesn't mean that we would not be focused on profitability and cash flow going forward as well. But I think this was more of a targeted action. Operator: And we'll now take our next question from Rizk Maidi of Jefferies. Rizk Maidi: I just want to go back to this modernization conversion into sort of new installed base, I think, was the previous question. I was wondering if you could -- I thought this was a '27, '28 sort of impact, but you start to see it in China, if I heard you correctly. Maybe can you help us sort of quantify this perhaps in the last few quarters, when you look at your modernization sort of growth, how much was it on KONE units on non-KONE service units or perhaps even on the installed base growth, whether you could actually have a contribution from modernization conversion, if I could call it this way, I'll stop here. Ilkka Hara: So first, the conversion rate of modernization is actually very high. So that's why it's such a compelling place. Philippe Delorme: And maybe to explain why because when you sell a new construction elevator, you sell it to the contractor. And then the building goes on, there is all kind of things that can happen up to someone who is now in charge of dealing with elevator, which is very often not the contractor. When you deal with the modernization and even more a partial modernization, the person who is buying the partial modernization is a person very often will operate the service. So if you do a good job and actually, if you really go beyond what's possible in terms of time and customer satisfaction, there is little reason that, that customer is not going to stay with you for service, especially when we at KONE bring in the package the connectivity that gives transparency, predictive, remote capabilities. So sorry, close the bracket, but I think it's important for all of us to really understand what's going on here. Sorry I cut you. Ilkka Hara: That's fine. And then it's -- we've increased our modernization business, grown it. We've also increased the proportion of partial modernization. So it's in China, but also outside of China, more and more meaningful contributor. But still NBS is a bigger contributor. But in the future, it could be other way around. Rizk Maidi: But at this stage, you're not willing to quantify how much of your mod growth is on KONE units versus now? Ilkka Hara: Most of them are still KONE units at this stage. Philippe Delorme: I think it's -- I'm repeating on modernization. It's a blue ocean. So it's a place where -- I mean, there are 10 million units in front of us, and the industry is modernizing a fraction of this, a real fraction. If we look at the number of -- I think we've released that figures, a couple tens of thousands of units every year. So we are -- every time the team is coming saying, "Oh, we are so happy we did that grow, yes, you can -- I mean, we can do better. And it starts by listening to our customers and responding to their needs. Rizk Maidi: The second one is we've seen -- if you think about connectivity, it started quite slow, I think, back in 2015, '16. Then you ramped it up quite quickly. I think the number this morning was above 40% of the installed base being connected and you improved that by 7 percentage points. Just thinking what's the blue sky here? How we should we think about this improvement over the coming years? The installed base is still quite old and my understanding, if you want to have good readership or good value from connectivity, you have to force modernization or partial modernization. Just thinking about the blue sky here, basically. And the benefits as well to your business. Philippe Delorme: It's one of my favorite topics. But when you say, okay, we started, we increased and then we plateaued and now we are reincreasing. What has been the difference, focus and leadership. And very easy to say, very hard to do. And I think where I'm very happy with the team is we've managed to mobilize the company and make it clear for everyone in the company that this thing is a game changer and therefore, a sense of urgency. It's very hard to copy. And I think we've managed to bring that focus in mind. So what is our ambition to have all our elevators and escalators connected. So is it possible tomorrow next quarter? No. But I think everyone at KONE understand that this becomes the norm that we want to be digitally enabled on the field with apps that make us more efficient and that once an elevator is connected, it brings transparency, meaning everyone knows and is on equal base to understand what's going on. We get predictive. We get 800,000 elevators connected where our AI is scrolling and sending service need to our field technician to correct the problem before they will happen. We think we can filter up to 80% of the issues before they would happen. And then when the code allows us, we can actually remote rescue people who are being entrapped, which is a big difference. So where is the limit? At 100%. Are we going there next quarter? No. Is it hard to do? Absolutely, yes, because it touches the DNA and the culture of the company, but I'm really happy to see that step up, and we are very committed to that transformation. Operator: And we'll now take our next question from Martin Flueckiger of Kepler Cheuvreux. Martin Flueckiger: I've got 2, and I'll start off with the U.S. According to your assessment, market in the Americas was up significantly in Q4, which seems counterintuitive given the fact that we had the longest U.S. government shutdown in history, but also if you look at indicators like ABI and so on, I was just wondering -- and also, by the way, your outlook for 2026 is still positive, but clearly much slower than it was in Q4. Just wondering what the issue was or what the narrative was for the strength in Q4? That's my first question, and I'll come back with the second one. Ilkka Hara: Yes. So as I said, Q4 market in the U.S. was impacted by the low comparison point the previous year. If you look at it sequentially, it's more stable and the full year is a slight growth for the market. We're expecting similar environment to continue in '26. And yes, there are many uncertainties also in U.S., also outside of U.S., but that's our best forecast for the market activity. Martin Flueckiger: Great. And then my second question is on some of the financials. I guess that's for you, Ilkka. I was just wondering, net financial results seemed weaker than expected. Is that FX related? And what is the reason for what seems to be a higher-than-expected income tax provision in Q4? Ilkka Hara: Yes. Thanks for asking. So we actually had a one-off item in taxes in the fourth quarter related to our intercompany legal structuring. And we don't expect that to repeat. So it's -- the expected tax rate is fairly similar, this 23.5% going forward. So it is a one-off impact that caused it. Martin Flueckiger: Okay. And in the net financial result, how large was the FX impact? Ilkka Hara: The FX impact -- let Natalia come back to you on that. I think we have it also in the deck -- behind the deck, so I don't say incorrectly. Operator: That's all the time we have for Q&A. I will now hand it back to the host for closing remarks. Natalia Valtasaari: Excellent. So thank you, Philippe. Thank you, Ilkka. A special thanks to everybody who followed us online. Great questions, lots of interaction there. So we appreciate that, your interest and your time. And if there are follow-ups, I'm happy to answer them. I will certainly come back to you, Martin. And with that, yes, have a great rest of the day and weekend ahead. Philippe Delorme: Thank you, everyone. Ilkka Hara: Thank you. Operator: This concludes today's call. Thank you for your participation. You may now disconnect.
Antonia Junelind: Good morning, and a warm welcome to the presentation of Skanska's Fourth Quarter and Year-End Report. I'm Antonia Junelind. I'm the Senior Vice President for Skanska's Investor Relations. And joining me on stage here in our studio today is our President and CEO, Anders Danielsson; and EVP and CFO, Pontus Winqvist. Shortly, they will take you through an update as of the last quarter, provide you with some further insights on the business operations, financial performance and our market outlook. And after their initial presentation, we will open up for questions. And there is an opportunity for you to ask questions either if you're joining us here in the room or you can use the telephone conference number provided, and then the operator will put you through to us here in the studio. But more information on that will follow later. So with that brief introduction, let's take a look at the fourth quarter performance. Anders, please take it away. Anders Danielsson: Thank you, Antonia. And good to see everyone here in the room, and welcome to you on the web as well. Before we start the presentation, I wanted to look at the picture here on the slide to the right. We had a very successful divestment quarter when it comes to commercial property development. And one of the deals was in Port 7, as you can see here on this slide in Prague, Czechia. That was 3-office building that was divested in deal. If you look at the fourth quarter report, so we had a very good construction margin in the quarter and also the full year. It is on all-time high levels. So very good performance by the whole organization, and we will come back to that. But all geographies, all units are performing on a very high level. So that's very encouraging and good. Mixed performance in Residential Development. We continue to have a strong market in Central Europe, weaker in the Nordic. So we have divested some unsold completed in the quarter with lower -- that was started before the market went down. And by that, we also have a lower profitability on those. But it's good that we are able to divest completed homes. Good divestment activity in Commercial Property Development. We managed to divest 8 real estate in the quarter and also solid performance in investment properties. Operating margin in Construction, 5.6% in the quarter, very, very high, strong. And for the full year, we managed to beat our new targets in Construction of 4%. So we managed to deliver 4.1% for the full year. Return on capital employed in Project Development, lower 1.8% due to the weaker market, rolling 12. And return on capital employed in Investment Properties is stable, stable result, 4.7% on the rolling 12 and slightly up from last year here. Return on equity, 10.2%, rolling 12, and we continue to have a robust financial position. So we are able to maintain that. The Board has proposed a dividend of in total SEK 14 per share, which is SEK 8.5 in ordinary dividend and SEK 5.5 in extra dividend. And we also managed to reduce the carbon emission in our own operations, Scope 1 and 2 with 65% since the baseline year 2015. Here, we have a target of 70% reduction in 2030. I will go into each and every stream now, start with Construction. Revenue close to SEK 44 billion, and we have some slightly up from last year, if you look at local currencies. Order bookings, SEK 43.5 billion, and we have a good order intake. And you can see that we have a book-to-build of 105% for the rolling 12 months, which means we are able to fill up the order backlog compared to how much we produce here. And the order backlog is continued to be on a high level, historically high level, close to SEK 258 billion. Operating income, SEK 2.5 billion, and we have an operating margin, as I said earlier, 5.6% in the quarter. So strong quarter result and all markets, all geographies are delivering very good results. So great work by the whole organization and being consistent with the strategy and also able to execute the projects in a very good way. We -- as you know, we have raised our target. We did that -- communicated that in the Capital Markets Day in Q4. The target is at or above 4% operating margin, and we have beaten that for the full year. Order intake was good and remains on a high level. Going to the Residential Development. The homes -- sold homes has been lower than last year. We have a revenue of SEK 1.7 billion. And you can also see that we started fewer homes compared to the same period last year. And you can see that we started -- the project we have started is in the Nordic countries. We haven't -- in the quarter, we haven't started any project in Central Europe. But that's a single quarter. You should look at the full year or rolling 12, and it's still a good market in Central Europe. And also, it's very encouraging to see that we are managing to sell the unsold completed and reducing that inventory to 358 homes. Commercial Property Development. Operating income of SEK 670 million gain on sale, SEK 758 million, and that includes the divestment, of course, of the 8 properties, but it's also some release of provisions of already completed project. Return is on a low level, far below our targets on a rolling 12-month basis. So we are working hard with that and both to increase the capital turnover and also to divest the completed assets we have. We have 16 ongoing projects, which corresponds to SEK 14.4 billion in total investment upon completion. And we have 21 completed projects, which correspond to SEK 19 billion in total investment. Of those, we have a reasonably high leasing ratio of 72%, which means we are -- we can see that we have a positive cash flow from those assets. It's good asset, high quality in good location. So I'm confident that when the investor market comes back in U.S., we can see -- we have a good product to offer the investors. Again, 8 projects divested in Q4, 12 during the year, 2 projects handed over and 2 projects started in the quarter. We started the projects in Central Europe and the Nordics. And we can see a good leasing activity and strong average leasing ratio in the portfolio of both ongoing projects and the completed projects. Moving on to Investment Properties. Stable result, SEK 83 million operating income. We have increased the occupancy rate to 85% compared to 83% in the Q3. And portfolio consists of 7 high-quality office buildings properties with a total property value of SEK 8.3 billion. Very solid performance in Q4 and for the full year. We go back to the Construction and show you some order bookings here and the order backlog. Here, you can see the blue bars are the order backlog development 5 years back, and you can see the lines rolling 12 on the book-to-build, the yellow revenue, development on the green and order bookings on rolling 12, the gray one here. So you can see that we have a historically high level of the order backlog, and there's also some currency effect there. So if you compare Q4 2025 to the same quarter the year before, it's actually increasing somewhat in local currencies, around 3% increase. So we have a good position here, 19 months of production. So you can see that on -- if you look at the different geographies as well. All geographies has over 100% book-to-build, and that's also encouraging for the future. We have 19 months of production. So a solid position here when it comes to our order backlog. And we can continue to follow our strategy to be selective in the market and go for projects where we can see competitive advantage and a good track record as well. With that, I hand over to Pontus. Pontus Winqvist: Thank you, Anders. So let's dig in a little bit deeper into the numbers. And you can see that we had a revenue of SEK 43.9 billion here in the fourth quarter. That's actually an increase with 1% if you take local currencies. If you then, at the same time, look to the revenue for the full year of SEK 171.1 billion, that's an increase of 7% year-on-year. The operating income in the quarter increased from SEK 2.1 billion to SEK 2.5 billion. That's an increase of 25% in local currencies. So quite a good increase here in Construction. And as you heard earlier, we had an operating margin of 5.6% in the quarter, which is good. But even better, I would say, is the margin for the full year of 4.1%, in line with our just raised targets. And if you look into the different geographies here, you can see that we are actually delivering a higher profit in all of the geographies and also a higher margin if we compare to the quarter -- or to the fourth quarter last year. Worth to mention is that there is a release of a claim provision in the U.S. impacting with around SEK 400 million. But you should also remember that this is how we are recognizing our claims. We are very conservative, and we are releasing them when we are sure that there are no outstanding risks. So in total, I think what you see here is a very strong delivery from our Construction business in the fourth quarter and for the full year. Going then into Residential Development, is maybe not as good as Construction, impacted by the market. You can see also that the revenue in the fourth quarter is quite much lower than it was the fourth quarter last year. That's because we are selling less than we have done the fourth quarter last year. And that is, of course, some reflection of the market and also it comes a little bit different when we are starting projects. What you can see is though that the S&A costs has went down in the quarter from SEK 138 million to SEK 122 million, but even more for the full year from SEK 605 million to SEK 460 million. So I think that is a sign that we gradually has, what you say, adjusted the organization according to the current market standards. We have also sold quite many of the previously unsold completed properties, and that has an impact of the gross margin because we -- it's good to be out of that stock of unsold residentials, but of course, impacting the gross margin and then the operating profit. So you see in the quarter, 1.8% in operating margin. That's, of course, not where we want to be. For the full year, 6.5%. That's better. But as you know, we have a target for this business to reach 10% or better. Then if you look into different geographies within Residential Development, you can see that the Nordic operations is where we have a weak quarter. And the European operation is delivering a solid quarter, but we have a lower sales rate than we have been used to during the previous quarter. And that's not dependent on the market. That's dependent because we haven't had any projects actually to launch during this quarter, which means that we cannot have any new sales start, which then takes down the number of sold units and impacting the profit somewhat also in the European part of the residential business. And here, you can see how this -- that started, then is 376 compared to 620 last year. And that's a result then also of -- sorry, now I mixed, but it's around the same. You see that we sold 379, and we started 376 units here in the quarter. And if you look then into the homes in production, you can see that the top of the bar here in the fourth quarter, the unsold completed, as I explained, has reduced. So we reduced from the end of last year from 477 to 358, and we have also decreased that during the fourth quarter as such. And as I said, when we are selling those residential units, that is impacting the gross margin for the quarter for the Residential business. Going then into the Commercial Development business. As you heard earlier here, we divested 8 different projects, representing a revenue -- or a divestment of SEK 4.6 billion. And here, it's also worth to mention that these divestments is positively impacted from release of previous -- release of provisions from previous projects. So if you are looking into the Commercial Development portfolio, I would say a more representative profit content is looking into our unrealized values that we have than to take what we actually delivered this quarter. So it's good, but it's also very good to see, I would say, that we were able to divest in such a good manner in the fourth quarter. So it's the highest number of divestments in a single quarter for quite a long time. If you're then looking into the unrealized gains, you can see here that what I just explained regarding how you should forecast the coming gains from this business that the top of the bar here has decreased, which means that the unrealized gain within the completed properties is quite low right now. Then if you look into the completion profile of when our properties in Commercial Development will be completed, and you see that in the different bars here. And at the same time, you see the leasing ratio on the green dots. You can see that then we have around SEK 17 billion of completed properties with a 72% occupancy rate. It's one quite big property that has been ready in the fourth quarter. So it's taking down the total leasing ratio in the completed properties somewhat. But if you're looking into the total profile here and if you would -- are interested and compare it with earlier Qs, you can see that it's actually quite a positive development in many of these different assets. So do that. That's quite fun. And then here, you can see that we had a leasing in the quarter of 46,000 square meters. And you can also see that we have a higher leasing ratio in the ongoing projects than the completion ratio, which is always a good sign that we have -- we are leasing in the same tempo as we are continuing our projects. So that is good, I would say. IP, Investment Properties, I would say, quite a calm quarter. We have a representative operating net here. We haven't added any properties. We haven't done anything with the values. So SEK 83 million is very representative for, I would say, that portfolio that we currently hold here. What is good, though, is that we increased the occupancy rate from 83% by the end of quarter 3 to now when we have 85% leased. So a good development there. And then if we are going into the total group and the income statement here, you can see that we had an operating income of SEK 3.3 billion. Then we have central costs of SEK 281 million. Those are impacted of that we have a little bit less of income from our combined portfolio of asset management and BoKlok UK. And we also have a negative impact of periodization effect from insurances, that actually was positive in the same quarter last year. I would say, though, that the full number of central costs of SEK 712 million is quite representative for what you could expect going forward if there is no special things that is happening. Going a little bit further down, you see a financial net of SEK 141 million for the quarter and a tax of SEK 653 million. That's a tax rate of 21%, same tax rate that we are showing for the full year. And I will also say that this is reasonable, representative with the current business mix that we see right now. Of course, if we have 1 quarter where we have more divestments of properties, that could impact. And if we have more -- another geographical composition of the profit, that could impact somewhat. But I would say that this is representative. Going then into the cash flow. Here, you can see that we had a strong cash flow here in the fourth quarter, SEK 2.5 billion, actually the same as we delivered in net profit. So I would say, a continued good and stable cash flow generation from the business. And an important part of that cash flow is, of course, coming from our working capital development within the Construction. And here, you can see that the working capital came up from SEK 30.1 billion in September to SEK 31.7 billion here for the full year. And even though it looks like it's a decrease compared to the fourth quarter last year, if you were looking into real cash flow, it was actually an increase with SEK 1.4 billion. But then we have a currency effect, a negative currency effect of SEK 4 billion for the working capital. So you can also see if you're looking to the average free working capital compared to the revenue that, that is stable with a slight increase. So solid cash flow generation from our Construction operations. Looking into investments and divestments, you can see that we are actually now in some net investments territory. We have, for a couple of quarters, been in net divestments, but it's also so that we divested a couple of those Commercial Development properties here in the fourth quarter, but they will be transferred to the buyer and paid of the buyer during the first half of this year. So that will improve then the cash flow from divestments during Q1 or Q2. If you look into the capital employed, you can see that, that has decreased somewhat from SEK 66 billion to SEK 63.8 billion. Also here, you have, of course, a currency effect. So I would say, without currency, it's relatively stable. And this cash flow then takes us into, I would say, a very stable situation when it comes to our ability to use funds. We have available funds of SEK 28.6 billion. And here, you can also see that we have a quite balanced maturity profile of our outstanding debt. And this takes us then to the financial position, where you can see that we have our adjusted net cash position of SEK 11.5 billion. And you also remember that here, we have a target to below -- to be above the net debt position of minus SEK 10 million. So the delta there is SEK 21.5 billion. And you can also see that we have had quite a stable development of the financial position here during more than a year. We ended last year with SEK 12 billion. We have now SEK 11.5 billion. And it's also then actually taking up our equity to asset ratio from 36.6% to 39.9% by the end of the fourth quarter. So by that, Anders, some comments regarding the markets? Anders Danielsson: Sure. So if we look at the overall market outlook, it's unchanged overall compared to the last quarter. But if I comment on the different streams here. Construction, the civil market in U.S. and Sweden is -- we expect it to continue to be strong. On the building sector -- in the building, its -- the market outlook is stable. We could see a good inflow of data centers in the fourth quarter, close to SEK 10 billion, which is encouraging, and we expect that market to continue to be stable. The civil market in the rest of Europe is pretty much stable, which is good, driven by infrastructure, defense, investment and so on. So weaker in U.K., however. And the building market in Nordics are weaker due to the less residential construction and commercial property construction, but stable in Central Europe. Residential Development, very good activity in the Central Europe. We believe it's going to continue to be a strong market and weaker in the Nordics. And we can see some improvement when it comes to interest rates decrease. We can see amortization rules are easing up in Sweden. But I believe it will take some time. And we -- even though it's underlying need for homes in the market we are operating in, it will take some time. It requires economic growth. So the consumer confidence increases. But we are ready to start. We already start project today where we see that we can deliver according to our targets. And Commercial Property Development, stable in Central Europe and in the Nordics. You have seen the divestment activities here. We also have a good leasing activity. Weaker -- continues to be weaker in the U.S. market. Recovery is lagging compared to Europe. But there is a clear trend that flight to quality, so to say, in all markets. And we have very attractive building to offer the market. And we can see that we have a healthy leasing ratio. But the investors in the U.S. are still hesitating before they go on and invest in properties. Investment Properties, polarized occupier market. We have a healthy leasing ratio. And also here, we can see a polarized market. You have to offer Class A building in a very good location, high quality, and that's exactly what we can offer. So I'm confident in that. But it's a competitive market, but we believe that the rents will remain mostly stable. So if I ending up this presentation, we're looking into how we're doing compared to our targets and limits here. 4.1% in Construction margin, above our recently increased target, very encouraging to see. Return on capital employed, 1.8%. We were not satisfied with that, obviously. So we are working hard to increase that return for the project development. Investment Properties, 4.7% is on a good level to reach. Be able to reach the 6%, we need to see some market increase -- market value increase in the properties we have. So that's an ambitious target for the future. Return on equity, 10.2%, also below our target. And we have a very strong financial position of net cash -- adjusted net cash of SEK 11.5 billion. And the payout ratio, as you can see, we have 40% to 70%, but that goes for the ordinary dividend. And we have proposal, is SEK 8.5 in ordinary dividend, increase from last year, before was SEK 8. And then we have this extra dividend, which gives us an outcome if the AGM approves that of 93%. With that, I hand over to Antonia to open up the Q&A. Antonia Junelind: Very good. Thank you for that. So yes, now it's time for your questions. If you are joining us online, please use the telephone conference number provided and follow the instructions by the operator, and he will put you through to us here in the studio, and you will be able to ask your questions to us. If you are here in the room with us, then you can just raise your hand. We will bring a microphone, and I will ask you to start by stating your name and organization. So looking out into the room and checking with our external guests here, it doesn't seem like there are any raised hands at the moment. Or yes, we have one over here. Yes. Thank you. Unknown Attendee: Yes. [ Oscar Sandstrom ], entrepreneur. Regarding Construction, you're growing in the Nordics, but do you see any bottlenecks that could hinder further growth? Anders Danielsson: I see good opportunities when it comes to the civil market, if you're asking about the Swedish market. So we see increasing investment in infrastructure. The need is very high on that. And we also see increasing investment in defense. So that's -- I'm encouraged by that. Then on the lower side in Sweden is Residential construction. It's not only our development that is on the low side here. It's all, very few new homes that are coming out in the market, and that goes for the Commercial Property Development. So we are dependent on economic growth as an industry. So I would like to see some GDP growth, and that will absolutely help us. But we are in a good position. Antonia Junelind: Excellent. So I will then move over to the online audience, and I will ask you to please introduce the first caller. Operator: The first question comes from the line of Keivan Shirvanpour with SEB. Keivan Shirvanpour: I have just 2 questions. And the first question is on capital allocation. So you have about SEK 11 billion in net cash, and you expect nearly SEK 6 billion in cash flow in the first half of the year from -- transfer from property projects. So that equates to the size of the dividend that you are proposing. Given that, what can you say about opportunities here in terms of capital allocation? How should you allocate your capital in 2026? Anders Danielsson: Yes. We don't give any forecast of that. We have a dividend policy to 40% to 70%. Our ambition is, of course, to continue to deliver good results and be able to be a predictable dividend provider for shareholders. But we don't give any forecast for this year, obviously. Keivan Shirvanpour: But would you consider increasing investments in CD projects or potentially evaluate buybacks would be an alternative? Anders Danielsson: We said in the Capital Market Day that we have -- right now, we have enough capital for the project development operation, and that, we have the same view right now. Keivan Shirvanpour: Okay. Good. And the second question is then related to commercial property development and the completed portfolio that you have. So you made quite a lot of divestments in Q4, but you also have this completion in the U.S. So if I'm not mistaken, your completed property portfolio should be about 80% to 90% in the U.S., including some residentials. What can you say about the prospects for divestment of these assets? And do you consider residentials to be potentially easier to divest than the commercial buildings in the U.S. Pontus Winqvist: First, I would say, regarding our portfolio in the U.S., you are right. It's reasonably big, and it's both commercial offices and some rental residentials. But you can say we are evaluating each and every project as such, working with leasing the properties in order to receive a decent operating income from those. Then if we think that we get the price that they actually are worth, we are absolutely ready for divestments. But because we have a very solid financial situation, we are not interested in any kinds of fire sales, but we are interested in reasonably good deals. Keivan Shirvanpour: Okay. And you have previously mentioned that when the bond -- 10-year bond yield is about 4%, you see that divestment prospect is quite weak. Do you continue to have that view? Pontus Winqvist: We continue to have the view that we are following the market. And if someone, as I said, is interesting to buy and pay a decent price, we are interested to negotiate. Antonia Junelind: Thank you very much. And we will move to our next person in line here to ask questions. I think it is from Jefferies. Operator: [Operator Instructions] Our next question comes from Graham Hunt in Jefferies. Graham Hunt: I'll ask 2. Maybe I'll just come back to the capital allocation and try in a different way. Just on the special that you have announced, would you be able to just provide some color on the thinking around why you felt that was appropriate to propose? And should we take it as a signal that you're relatively comfortable with now the level of net cash that you have on the balance sheet and this is a signal that you're limiting any further buildup there? And then the second question, I think just back on Construction. I wondered if you could comment on sort of what you're seeing in the early stages of Q1, how you're seeing particularly on the data center segment where, as you mentioned, you had a flurry of good orders in Q4. We've seen some enormous CapEx numbers from some of the hyperscalers this week. I just wondered if you could comment a little bit on how the outlook for those types of projects in the U.S. is looking and whether we could expect -- if you're seeing anything in the pipe already for 2026 on that front? Pontus Winqvist: Okay. Thank you, Graham. I'll start with the first one, and I think Anders take the second question. And regarding the capital allocation, and as I understand your question, it's about our reasoning -- or actually the Board's reasoning when it comes to the special dividend and the ordinary dividend. I think it's clear, as you see, we rose the ordinary dividend from SEK 8 to SEK 8.50. And then we think that, yes, we have a stable financial position, which allows us to also distribute some extra dividend. And having said that, that is, of course, taking in consideration to be able to be active in our market and take the opportunity for potential deals that may occur both in CD and RD. So I think it's a balanced adjustment of where we are and what we know right now. Anders Danielsson: Graham, I will take the last question on the data center. We have been talking about the data center market for quite some -- few quarters now. And it's a good opportunity, important part of our operation as well, especially in the U.S., but we also see some investment in data center here in Europe. We believe it will continue. So we have a good pipeline. We have repeat customers, and we saw that the order intake in Q4 was really good, close to SEK 10 billion. So I'm confident in that, and we are well positioned to take advantage of that market going forward as well. Graham Hunt: And maybe just one quick follow-up on the capital allocation. Are you considering any other investment opportunities given your flexibility on the balance sheet beyond your core business lines around Commercial and Residential Property, whether that's in -- you have been in the past in PPPs or some of your peers are looking at data center development itself. I just wondered what your thinking was around that. Anders Danielsson: Yes, I wouldn't rule it out, but our main focus is on the core operation, Residential and Commercial Property Development and also that we will continue to invest in the -- our own portfolio within Investment Properties. That's for sure, to build that portfolio just above SEK 8 billion today, and the target is between SEK 12 billion to SEK 18 billion over time. So that's the focus. Antonia Junelind: Thank you, Graham. So we will now continue with the next caller. Operator: The next question comes from Albin Sandberg with SB Land Markets (sic) [ SB1 Markets ]. Albin Sandberg: Sorry, SB1 Markets that would be. But a question on the reversal of the U.S. provision. Pontus, you mentioned that -- you said it was business as usual when you reverse this kind of provisions when you feel sure enough about it. So the question is if you could quantify if there are substantial left of these provisions? And how long are they dated? Are we going back to the 2017, 2018 issues? Or that is too long to go back? That would be my first question. Pontus Winqvist: Okay, Albin. So I'll try to answer. When it comes to provisions or potential, this was actually a claim settlement. And you -- what is happening here is that we were not taking any kind of profits when there were claims there that was connected with some uncertainty. Then when this was solved, this situation, then we released that part of the claim. And there are, of course, other potential claims out in the project portfolio, but it's nothing that we can comment also for the future. They can happen, and they will probably happen from time to time when we have some kind of issues with our clients. So I would say it's a part of the regular business. But this was, of course, quite big. Normally, they are smaller amounts, and then we don't think that there are any reasons to comments on those. But when we have this $43 million, it's substantial, and therefore, we think it's worth for you to know. Albin Sandberg: Great. And any comment about how old project this was related to? Was it a new one or older one? Pontus Winqvist: It's completed, I can say. Albin Sandberg: Okay. And my second and final question was on the starts in Residential. And you mentioned that we should look upon it on a rolling 12-month basis, still see you have a quite positive market outlook for that business. So I just wondered were there any specific reasons for no starts in Q4? I don't know what that could have been or -- because maybe I would have expected a little bit higher number for starts. And whether there's a sort of, I don't know, if you can call it, a catch-up effect heading into 2026 because of the fact that there were no starts in Q4? Anders Danielsson: Yes. I would say that the lack of start in Central Europe in Q4 is not any signs of lower market outlook. We believe, in that market, we have a good pipeline, but it's -- if you look at a single quarter, we didn't have any project, was ready to start in the fourth quarter, but we are working with the pipeline, and I'm confident in our position going forward. Antonia Junelind: Thank you, Albin. And I will just check now with the operator here. It looks like we've come to the end of the list of people that want to ask questions for us here. Can you please confirm that? Operator: There are no more questions over the phone. Antonia Junelind: Perfect. Thank you very much. So that means that we have answered all the questions that were here for us today. So I would like to first say thank you, Anders and Pontus, for your presentations here. And I would like to say thank you for all of those that joined us here in the studio in Stockholm. And lastly, thank you to those of you that watched us online. A recorded version of this webcast will be available on our web page shortly after this. And we will be back with more comments and presentations when we release our first quarter report in May. Thank you very much, and have a lovely day.
Operator: Welcome to Balder Q4 Report 2025. [Operator Instructions]. Now I will hand the conference over to IR Jonas Erikson. Please go ahead. Jonas Erikson: Good morning, everyone, and welcome to this call for Balder's Q4 and Full Year Results 2025. With me in the room, I have Erik Selin, CEO; and Ewa Wassberg, CFO. And we will run through some slides as usual, and then open up for questions. Erik Selin: Erik here. If we look at Balder at a glance by year-end, we have a portfolio value of SEK 229 billion, and the composition is 54% resi and 46% commercial. Occupancy rate at 95%. We have good liquidity, SEK 24 billion, debt to assets, 48.1% and NAV is SEK 94 in this quarter. Looking at the Q4 numbers specifically, we have rental income and NOI up 4%, and it's important to bear in mind that this is in Swedish krona that has been pretty strong lately. Profit from property management in earnings capacity goes down 7%, and that is connected or explained by our proposed distribution of Norion share as a dividend to the shareholders. And also important to just bear in mind that if we look at year-end figures, the dividend is roughly SEK 5.25 per Balder share, but NAV will decrease SEK 4 per share. And like-for-like rental growth is in the positive territory of 2.7%. And here, we have the earnings capacity then updated in more detail. And there you can see Norion effect is on profit from associated companies that goes down, but that is totally explained by the Norion distribution that we will most likely do after the AGM. So now it's the balance sheet booked as another asset that will be distributed, and that's why it will not be included in earnings from this year. So with that, we end up with SEK 6 billion and SEK 5.06 per share ex-Norion. The portfolio is 80% in larger city and capital, as always, and we have the usual one, Helsinki, Stockholm, Gothenburg, Copenhagen. And you can see the split also residential, 54%, as I mentioned, and then you have office 15%, retail, 12% and logistics, 7%. The longer-term trend is that we have been having quite a good increase over the long time period in profit from property management. This curve is only 10 years. But if we look back another 11 years, we have a long good trend. The latest year has been sort of flattish, and that is, of course, interest rates moving from 0 and upwards. And in our case, we more or less compensated with higher income. And we also had a lot of fixed interest rates. So the effect came gradually. But then having said that, if interest rates are flat, then the long-term trend will be that this curve will start to go upwards again. And here, we can also see development for property value and LTV and occupancy. So LTV, 48.1% and occupancy now is 95% is rough -- it's almost always 96%, but every now and then it happens with 95%, and this is whole percentage points. So behind that is actually sometimes that move up or down, and then we round it up to 2%. So we think this is an okay result, and thanks to our organization for achieving this stable development year after year after year after year. Ewa Wassberg: Looking at the financing, the current mix of funding is largely where we want to be, which is 50-50 split between bank and bond financing. The level of available liquidity is in line with last quarter, which is a little bit higher than usual. And we will also continue to have slightly higher liquidity during '26 due to higher concentration of maturities in the beginning of '27. The interest rate fixing and hedging ratio is stable and the average interest rate is unchanged since last quarter at 2.9%. Yes. So here, you can see the long-term trend of the portfolio value in relation to the net debt to total assets. As you can see here, net debt to total assets continue to go down a little bit. And the current encumbrance level is at 23.4%, which also is a reasonable expectation for the future given our funding mix that is somewhere between 20% and 25%. So over to the maturity structure. If we start with the bank loans, the maturity structure is a result of the Swedish bank financing. It's typically quite short, even though we have bank financing in other countries as well. So on the bank side, it has been business as usual, rolling maturities. If you look at the bond side, we have more maturities in '27, which is the reason for the higher liquidity position. The funding market is very strong. And in such a situation, we might maintain a slightly higher level of liquidity as the cost of additional liquidity is small relative to the security it provides. And here is more sort of a structural overview of the funding and capital side. As we have said before, we will continue to have a balanced capital allocation until reaching our target of 11x net debt to EBITDA, even if the distribution of the Norion shares as a dividend will temporarily work in the opposite direction. Here's also an updated calculation on the convertible bond, which when that is converting, assuming that we are above strike price, obviously, will have a very positive effect on the indebtedness number as well. And in terms of funding strategy, there is really no change compared to previous quarters. And that was actually all from us. And on that note, I will leave the floor and open up for questions. Operator: [Operator Instructions] The next question comes from Stefan Andersson from Danske Bank A/S, Danmark, Sverige Filial. Stefan Erik Andersson: A couple of questions -- sorry, a couple of questions from me. Starting on Norion there. Just a little bit curious on the technique on that one. Earlier distributions we've seen, there's an -- just before the distribution, there is an adjustment of the value to market value. So like it was a write-up made when Anaheim was distributed. Now I guess 2 questions in one here. I guess the valuation right now after the drop here is similar to what you have in the books on group level. But will you have such an adjustment of value before distributing? Or are you going to net it out somehow? That's the first question. And the second question is when you say distributing SEK 5.50 and the NAV drop is 4%, is that based on the year-end valuations? Or is that based on today's valuation? Jonas Erikson: Yes. So there won't be any sort of value change before the distribution. So the distribution is sort of separated as of year-end. And now it's booked as an asset that will be available for distribution and the NAV will be adjusted sort of accordingly. It's not going to be any value increase or realization gain booked through the P&L. And the numbers are per year-end. Stefan Erik Andersson: Perfect. Then secondly, B shares. I'm a little bit curious if you could maybe mention a little bit about why are you thinking about issuing B shares? Is it -- is this something you need for the Norion distribution? Or is it has anything to do with the hybrid? Or is there anything else? Erik Selin: No, we don't need it for Norion or hybrid. It's just to have optionality going forward. So it's a practical way to be able to do it. And then we add that when we have the AGM instead of potentially if we need it later, have an EGM. Stefan Erik Andersson: Okay. Then I'm a little bit curious about your thinking about repurchasing your shares. I mean the -- with the NAV growth and the stock flat, the discount is increasing even further. I've seen that you made some acquisitions, and I guess you have to evaluate the capital allocation on that. So right now, do you see actually any good options or alternatives to the Balder share actually? Erik Selin: Difficult to tell beforehand. But I think we can do both, as we said last quarter. So it's possible that we buy some shares and do some investments at the same time. But the split between those is a bit depending on share price and what possibilities comes around. Stefan Erik Andersson: Yes. On the co-ops, the apartments business there, with the loss that came through and has come through the year, what is your thinking there? Have you started to discount stuff? Or is it more a volume issue that makes those unprofitable? Erik Selin: No, we have running cost, and we took over some apartments in Karlatornet that was slightly negative when we sold them. So it's highly likely that, that figure turned positive this year. Stefan Erik Andersson: Okay. Good. And then I guess I won't get an answer, but I answer anyhow. I mean, I hear what you're saying with the liquidity that you've had now for a while on a relatively high level versus history and even though you say it's cheap, but it's still costing you a little bit. Is that something that you use to have some maneuvering room to do some bigger transactions? Or is it purely just to wait to pay out in '27? Jonas Erikson: The majority of it is because we have a lot of maturities in Q1 '27. We have 2 euro benchmark bonds maturing in the same quarter. So that in itself will lead to a liquidity position that is sort of SEK 5 billion, SEK 6 billion higher than usual up until we've had those maturities. Then I think you also have to look at how the pricing in the funding market is from time to time. If you see attractive pricing, if you have a lot of incoming interest from investors, you might issue a little bit more or you do it a quarter or 2 before you have planned. If you issue a bond 1 or 2 quarters, ahead of schedule, and you can do that at attractive pricing that might still make sense even if you actually carry a little bit higher liquidity cost. We're trying to optimize and think sort of 24 months ahead in terms of maturities, liquidity needs and how the market is currently and what we see on the horizon. And we try to optimize it from there. Operator: The next question comes from Jan Ihrfelt from Kepler Cheuvreux. Jan Ihrfelt: A couple of questions from my side. I start off with rental agreements on your resi here in Sweden. How have that developed? And are you able to give any guidance on maybe a possible range where it could land? Jonas Erikson: So most of them are finalized. So we landed at slightly below 3.5%, 3.2%, 3.3%, I think. Jan Ihrfelt: Okay. Okay. And my second question relates to Finland. There has been a quite heavy oversupply in the market there for some years. We see some early signs on maybe lower vacancies, but could you give a short -- I mean, put a little bit more flavor on that market just in terms of vacancies and rents? Jonas Erikson: I think there's no change to our sort of outlook for the medium term. There's been quite a drop-off in new supply coming -- de facto coming to the market. And with that, we know that occupancy should go up steadily. And at some point, there will be an increased sort of pricing tension in the market as well. It's very difficult to find this, I think, on a quarterly basis. What we can see in the later part of 2025 is that it actually has slightly less impact on the occupancy compared to what we had expected. But that might also be temporary issues in terms of how migration flows move. So the official statistics in terms of people moving into the urban areas is still very strong actually. So we feel that the picture is very similar to what we've said all along, and it's difficult to time it from a quarterly perspective. But if you think about the big picture, I mean, we've had in the last 7 or 8 years, hardly any rent increases. At the same time, disposable incomes are up by 25-plus percent. There's no issue with affordability. We know that new supply is falling off a cliff. And we see that in some of the cities where that has already happened, you see pretty quick recoveries in occupancy actually. And at the same time, you have a sort of unabated movement of people to the urban areas. So from a pure mathematical standpoint, something new needs to happen for this not too many recovery in the coming couple of years is our view. And let's see when and how and in which order things happen. Jan Ihrfelt: Okay. If I interpret, you're right that the lower vacancies hasn't impacted the rent levels to any extent or. Jonas Erikson: No. I mean there's always some seasonality in the Finnish market. So we can't see any sort of trend shift yet. That's a little bit too early, I think. Jan Ihrfelt: Okay. And my last question regards your key ratio net debt to EBITDA, which is currently at 12x. You have a target of 11x. And my question is really how eager are you to bring it down to 11x for 2026? Jonas Erikson: We've said that's a long-term target. And obviously, the Norion distribution will deteriorate that number slightly. So we set us back a little bit. So I think you need to look at it. I think we've said for a few quarters now that we care more about the direction and the pace of change in the current market conditions. We also know that we have in 2028, the convertible presumably converting into shares, which will obviously support that number slightly as well. So I think you should see it as a directional statement and in terms of where we want to end up, but it's not the 2026 target. Operator: The next question comes from John Vuong from Van Lanschot Kempen. John Vuong: On the Class B shares, so hypothetically, if you were to issue those today, what would you do with the proceeds? Jonas Erikson: I mean there are no such plans. I think it becomes very speculative. We haven't sort of made this disclosure because we have any plans of doing a new issue of the shares. We want to get it into the docks so that we have the opportunity and possibility to do so. So there are no plans currently at all. So you shouldn't see this as a preparation for raising more capital. John Vuong: Okay. That's clear. And then if you -- given that you're looking into this flexibility, how do you think about dividend distributions on Class A and B shares? Jonas Erikson: I think we -- I mean, we have had a capital allocation that has been very flexible for a very long time. And I think that we will be eager to remain flexible on that. If we, hypothetically speaking, should have the shares outstanding, we obviously need to change the dividend policy to accommodate that. But I wouldn't expect that you shouldn't draw the conclusion that, that also means that we will become a regular dividend distributor on the B shares. And we will pretty much, in that case, do what is required to cover the coupon or the dividend for the B shares. And then the rest will be a capital allocation decision as per usual where we really will always prioritize investing in the business and/or doing share buybacks as a means of employing capital, then if we sort of really find no attractive ways of employing capital in an accretive way, then obviously, at some point, the distribution of a dividend becomes the remaining choice. But that principle will still stand in regards to the B shares. And there might always be a little very small dividend because from a rounding error perspective because you can't pay exactly the amount to cover the B shares only, but it's not going to be any material numbers as a default. Operator: The next question comes from Lars Norrby from SEB. Lars Norrby: A couple of questions on the earnings capacity. Now focusing on the profit from property management line, SEK 6 billion. It was SEK 6.6 billion in the Q3 report. And obviously, you're now excluding Norion. What would the number have been in the Q3 report, excluding Norion? Is it -- we see the change in the associated company line some SEK 700 million lower. So would it have been SEK 5.9 billion? Is that the way to interpret it? Jonas Erikson: Honestly, I don't actually have the exact numbers we have in the model. I mean they're always -- given that we give rounded numbers to equal or sort of rounded SEK 100 million, I don't want to say which side of that we would end up if we hadn't had Norion in Q3. But mind you also, there's quite a lot of FX movement that has taken place in the last couple of quarters, and that's obviously impacted the total profit from property management side as well. So I think that's worth keeping in mind, you've had some weakening, especially year-over-year, you've had some pretty noticeable weakening of the NOK, which impact the associate line in terms of you also have obviously the strength vis-a-vis the euro, which will impact everything we have in Denmark and Finland. So that's part of the development that you need to factor in as well. But I think if you just look at the way things are accounted for, Norion is accounted for as a proportion of their -- it's pretty easy to the precise contribution for last year. Lars Norrby: Okay. Second question on the earnings capacity. What type of impact and to what extent have CPI indexation on the commercial side from the 1st of January and for that matter, new rents in particular are in the Swedish resi portfolio, how much has that affected rental income in the earnings capacity since it's unchanged compared to Q3? Jonas Erikson: We always factor in all negotiations discounting and all the indexations that we know of when we cross the year-end. That is being factored in. I would say the unchanged part is more of an FX movement. It's currency who lowered down the number actually. So in constant currency, it would be higher, of course. Operator: The next question comes from Fredrik Stensved from ABG Sundal Collier. Fredrik Stensved: I just have one follow-up. On the occupancy rate, specifically for the industrial and logistics segment, it looks to be down 3 percentage points Q-on-Q. In the same time, rental income is up. So I'm trying to sort of understand the sequential move. Is it Balder acquiring vacant properties in this segment? Or is there something else happening here in between Q3 and Q4? Jonas Erikson: I actually need to dig into that number a little bit further. I don't quite recognize it. But I know we've done some acquisitions that has impacted the number, as you say. But I can't say whether that is the full explanation. Can I get back to you, Fredrik, on that? Fredrik Stensved: Yes, absolutely. Operator: The next question comes from Pranava Boyidapu from Barclays. Pranava Boyidapu: You mentioned that Norion Bank is no longer included in the profit. So it's not in the P&L numbers. Does it mean that it's also not in EBITDA and hence, the net debt-to-EBITDA 12x leverage is already excluding Norion. So upon distribution, it shouldn't change on that basis? Jonas Erikson: No. So sorry for being unclear there. So it is included in the reported numbers for Q4 and the full year 2025. But in our report, we have something called the earnings capacity, which is more of a snapshot as of the 31st of December as a proxy for annualized earnings given the portfolio we have at the 31st of December. And in there, we have excluded Norion. So if you want to look at that as some kind of forward-looking earnings capacity, there, Norion is already excluded. But the 12x net debt to EBITDA still includes Norion shares. So that will be impacted by 0.89%, something like that negatively. Pranava Boyidapu: And you also -- you're doing your share buyback presumably, but also you talk about the convertible in 2028. Would you say that taken together, the impact on leverage should be broadly neutral? Jonas Erikson: I think the major impacting factors between now and if you take a 2-, 3-year perspective is obviously that we have an underlying growth in our earnings and EBITDA. We have a cash flow annually that improves the balance sheet position as well. So I think those are sort of probably more impacting in that time horizon compared to the buybacks that we've done so far at least and compared to the conversion of the convertible. So the convertible would be corresponding to roughly 1 year's free cash flow for the company. So it more depends on how we sort of steer the balance sheet from here in terms of growth opportunities and potential buybacks depending on where we find the most value really. Pranava Boyidapu: Sure. That makes sense. And then just one final thing for me. There is a small amount left on your hybrid, which -- who have a first call in 2026. So I was wondering, is that included in your bond maturities as 2026? Jonas Erikson: No. So that's recorded at the formal maturity, which is longer. So we think we have sort of a couple of billion SEK to SEK 3 billion outstanding remaining of that, but it's not recorded in the '26 maturities. Operator: The next question comes from Andres Toome from Green Street. Andres Toome: A couple of questions from my side. Firstly, just maybe on Finland residential. I was just wondering what are the sort of implications you're seeing in the market from the housing allowance rolling off and then sort of stricter rules also on permanent residency coming in, in January. Is that sort of impactful for the rental market as you see it? Erik Selin: It's difficult to know exactly what is doing exactly what it should have some effect, but it's -- for us, it's impossible to quantify it. But I mean, it's happened. So from now on, it's already -- I mean, it's there. Andres Toome: Right. And then I guess the housing allowances, they already were coming off. So is there, I guess, some sort of a demand impact you're seeing maybe on smaller apartments because I guess students would have used them a lot as well in the past. Erik Selin: Most likely, but I mean, it's impossible to know exactly right. I mean -- but most likely, that have been the effect, most likely. It must have some effect if you take away subsidies. But for us, it's impossible to quantify it. But could explain some of the weakness, absolutely. Jonas Erikson: There is a tendency in 2025 that the population growth does not fully correspond to the occupancy increase. There's a slight dispersion between the 2. So that suggests that there, on average, should be slightly higher number of people living in each apartment compared to the previous year. That might be one such impact. But I think the important thing from our perspective when we both sat around the business and we think about it strategically is that, as I said before, you've had a number of years with too high supply into the market. There's one of the best affordability situations that we've ever seen. And we all know that the Finnish economy has been pretty weak in the last few years, but it doesn't take away the fact that there is a large need for housing in the urban areas. We have that available. We feel pretty good about the sort of medium-term perspective in that sense. Then you might always have some of these more technical factors impacting the quarterly development from time to time. But I wouldn't say it changes our view on a couple of years horizon. Andres Toome: Understood. And then maybe on Denmark residential as well. I guess there was quite a lot of noise in Copenhagen with municipal elections around rent controls and things of that nature. But I guess what are your views around that in the sense that could this become sort of a national debate? And could it be the case that buildings built after 1992 could become sort of strictly regulated as well? Jonas Erikson: I think there's already a regulation in place in Denmark, which basically stipulates that when you first move into an apartment, then there's a market rent setting from there on, the property owner can only index by CPI. That's sort of fair model that is transparent and easy to sort of understand for all parties, definitely protects the tenant. And in some cases, you obviously have buildings where tenants have been staying for a very long time. So -- but let's see what happens. It's impossible, I think, for us to speculate on potential regulatory changes. But there's even been discussions in -- by some of the political parties in Sweden to adopt the Danish model into the Swedish system because it is balanced between having on one hand, the market economy at the same time protecting tenants. But let's see. I don't have any sort of great insights into what might happen to the Danish regulation. Andres Toome: Got it. And then final question, just on capital allocation. I just wonder where do you see sort of best opportunities right now if you look across sort of your own portfolio, where would you like to add exposure also being cognizant of what's available in the market? And I guess, adjacent to that, for hotels, you have some exposure and there's this large portfolio from Pandox on the market. Is that something of interest perhaps? Erik Selin: I don't think we will be buying from Pandox, if I'm guessing. I don't think so. But otherwise, we're very happy with the hotels, and it's been a good year in -- especially Copenhagen, if you look at RevPAR and occupancy and stuff. Otherwise, we do, as always, we look at the -- basically in the Nordic market and try to see what makes sense to add to the portfolio. to increase the shareholder value over time. We don't decide before what's good or bad. It's all about pricing. Operator: The next question comes from Othman El Iraki from Fidelity International. Othman El Iraki: Just a follow-up on previous question on the hybrid. Just taking your latest thinking, are you still thinking that you don't need the instrument in your capital structure and that you would call this year? That's my first question. Jonas Erikson: We haven't announced that we will make an announcement before we call it and say, but in the past, we always call it first call date. We felt -- and we've said this before as well, we felt that the hybrid instrument is a bit complex as it says. It tends to be very attractive cost of equity in good times and less good times in the credit market, it becomes a bit more cumbersome to roll the outstandings forward. And you also have an optionality in there that is embedded that you pay for, but in practice, you can't really utilize. So far, we've come to the conclusion that we are not looking to issue any new hybrid at this point. And obviously, things might look different, I guess in the last, let's take that in. Othman El Iraki: Okay. And my next question is on the Norion distribution. Have you been in touch with S&P? And are they fully involved in that? Jonas Erikson: Yes. I mean we've been -- this has been announced quite a long time ago, and the growth informed even before it was announced as well. So this is already sort of part of the plan and should be part of their modeling for the future since -- well since 6 months back basically. Othman El Iraki: Okay. So you don't expect a negative reaction from S&P? Jonas Erikson: No, that would be immensely surprising. Othman El Iraki: Okay. Okay. And my last question is, given where the bond markets are at the moment, pretty hard to say the least, how does that compare to your bank funding at the moment? Jonas Erikson: A little bit depends on how you look at it. It's always difficult to compare side by side because one is secured, the other is unsecured. You might have slightly different tenor structures, et cetera. But I would say, currently, we are roughly on par between bond financing and bank financing, a little bit depending on which market and tenors you look at it. Bonds might actually be slightly higher than the bank financing in the short-term. Operator: The next question comes from Pierre-Emmanuel Clouard from Jefferies. Pierre-Emmanuel Clouard: Yes. Just coming back on the Class B share that you may want to issue. Just to fully understand how you are seeing it. So you said that you want to streamline and simplify Balder with the Norion disposal, which is a fair assessment in my view. But you want to add a new class action that would, in my view, further complexify the structure. So just to understand how do you view this item? Is it equity or perpetual debt for you first? And if that's equity, would you keep your current internal metrics unchanged as like net debt to total assets of 65%? Jonas Erikson: Yes. So there's no change in our view on the financials or credit metrics at all. Class B shares -- sorry, we should probably have specified that in the report. So the Class B share is an instrument that is pretty common in the Swedish market, which is a fully -- it's an ordinary common equity class of shares. The differential is between the B shares or the current outstanding shares is only in terms of the dividend distribution. So that's the difference. And in the Swedish market, the custom is that you always pay a dividend, which is enough to cover the dividend coupon on the B shares at least. So it's actually from a credit metric standpoint, capital standpoint, there is literally no change. There's no difference in -- compared to ordinary shares in a liquidation situation. There's no difference from an S&P perspective. There's no difference from an accounting perspective. It's all part of the same common equity. The only thing is that you differentiate between 2 share classes and who gets a dividend first. Pierre-Emmanuel Clouard: Okay. I'm asking the question because as you know -- as you may know, some investors could classify the Class B shares as perpetual debt, but it's open to debate. And my second question. Jonas Erikson: Sorry to interrupt you. I think there are instruments that might be open to debate. I don't think Class B shares is one of those that might be open for debate because there is no -- in the past, there's been quite a lot of companies that used and ourselves included actually a number of years ago, they use pref shares of various kinds. Those had in addition to the dividend preference, they also had a differentiation in a liquidation situation and they also had accumulation of unpaid coupons. So the difference here and the reason why S&P credits this as a fully 100% equity and why it's accounted for as equity is that there is no such thing. So if the company can afford to pay a dividend, these guys would, in theory, then get their dividend first. But there is nothing binding the company to -- in a stressed situation, leaking cash flow. So this is actually not one of the instruments that is difficult to interpret in that sense. Pierre-Emmanuel Clouard: Okay. I understand. And my second question is on your top line growth expectations. So can you guide us through the like-for-like rental growth for 2026? And what is your estimated indexation and occupancy changes for this year? Jonas Erikson: No, we don't give any outlook in that sense. So in 2025, we had a like-for-like of 2.7% for the full group. This year, we will have -- if you just look at the delta, this year, we will have slightly lower indexation for the Swedish resi portfolio. Then I think in Denmark, there shouldn't be a large change. The Danish inflation and CPI indexation has been pretty low for some time now already. So that should be pretty similar to what we saw last year. There's not been any dramatic changes in the Swedish CPI numbers either on the commercial side. It will more be a matter of what pricing tension you will see in the market based on how occupancy moves. And then the Finnish resi market, as I alluded to before, we see that occupancy is going up. And at some point, we should have slightly better pricing tension in that market. It hasn't happened so far. Let's see when that starts happening. It's difficult, I think, to give a precise prediction of that. But the trend, I think, is in our favor there. So I think that's broadly what I can give you. So it should be fairly similar, slightly lower probably due to the Swedish resi on a pure like-for-like basis, then obviously, you will have the reported numbers being impacted by everything from transactions to FX movements, et cetera. Pierre-Emmanuel Clouard: Okay. I see. And maybe a final question, as a follow-up on Swedish resi. Do you see a lot of opportunities currently on the market? And do you have any clue on the pricing? Jonas Erikson: Do you mean sort of final transactions in the property. Pierre-Emmanuel Clouard: Yes, on portfolios that could be on the market currently, actually. Jonas Erikson: If you look at the transactions that we have done in the last 12 to 18 months, and we tend to like do transactions where we can get an accretion in terms of yield compared to what we already own. I mean the first test is obviously that it needs to be in a location where we want to be and where we have our property management organizations in place. But other than that, we want to have an accretive impact on the full portfolio when we do incremental transactions. And we have been extremely tilted to the commercial side in the last 18 months and the transactions we've done on the Swedish side. SATO did an acquisition of 1,000 apartments last summer in Finland. We've done 1 or 2 smaller resi transactions in Sweden as well in particular cases where we already have a decent footprint in some area and then another property comes out for sale. If we can get a decent yield on that, that might be worth doing. But there's no -- I think the pricing is actually fairly both on centrally located commercial and on resi in Sweden, it's not that easy actually to go out and buy things that are accretive compared to our back book yields. Operator: There are no more questions at this time. So I hand the conference back to the speakers for any closing comments. Jonas Erikson: Okay. Thank you very much, everyone, for listening in. You know where to find us if you have any follow-up questions during the day. And just feel free to reach out. Thank you.
Operator: Welcome to the Boozt Q4 2025 Report Presentation. [Operator Instructions] Now I will hand the conference over to CEO, Hermann Haraldsson; and CFO, Michael Bjergby. Please go ahead. Hermann Haraldsson: Thank you, and welcome all to our Q4 [Technical Difficulty]. We will have the usual agenda for the presentation. I will present the highlights of the quarter and the business update before handing over to Michael for the financials. So next slide, please. Well, 2025 has been a defining and transformative year for Boozt. It's no secret that it was a challenging period where we faced a continued tough market environment. However, we have not been idle. We used the year to trim the organization to carry out excess inventory and make a deliberate shift in strategy between our 2 platforms, Boozt.com and Booztlet, focusing more on our premium side. And finally, we're also moving to a new headquarters in Copenhagen, and this is a major step that gives us better access to talent and position us in one of the capitals of the Nordics. Looking at the fourth quarter, net revenue grew 4% in constant currency. This is a slight acceleration compared with Q3. Growth was driven entirely by Boozt.com, which is already benefiting from a strategic shift towards a more premium in-season sales. On the profitability side, our focus on efficiency continues to pay off. And despite a competitive market and a high promotional intensity, we managed to improve our underlying EBIT margin. This was supported by efficiency gains across the entire value chain, proving that our leaner technology-driven structure is working and driving tangible results. The highlight of the quarter and also the full year is our cash generation. We delivered a record high free cash flow of over SEK 1 billion in the quarter, supported by our disciplined effort to rightsize our inventory. Basically, we have essentially derisked the balance sheet, leaving us in a very strong position as we enter the new year. Because of this strong cash position, we intend to continue returning capital to the shareholders through a new share buyback program later this spring. We are currently completing the SEK 800 million capital return we promised at our last Capital Markets Day, and we plan to continue distributing excess cash to the shareholders. Looking into 2026, our focus shifts from defense to offense. We are ready to start expanding our market share again as we target a gradual return towards double-digit growth levels. We have several growth drivers in place that I will cover in the following slides. So please turn to Slide #5. I would like to start my presentation by looking at the journey we've been on so far. Since our launch in 2011, the industry and Boozt as well has moved through distinct phases. from early expansion and price leadership to the surge in online penetration we saw during the COVID years. The last 2 years have been a period of deceleration for the industry, marked by a decline in consumer confidence and the stalling of the post-pandemic online growth. On top of this, we at Boozt have also had currency headwinds due to the strengthening of the SEK. However, as we enter 2026, we are moving into a new phase that I would like to call a rejuvenation. The next wave of growth will be driven by our leadership in service and convenience and AI is the engine that will drive this, making the customer journey more seamless, faster and more personal than ever before. This push should then be supported by a healthier Nordic consumer as market conditions are likely to improve gradually throughout the year. Next slide, please. To fuel our return to growth in 2026, we have several engines running in parallel. We see small signs of market conditions beginning to turn with fiscal support for the Nordic consumer and likely some pent-up demand coming through. We are meeting this with a stronger assortment. This means bringing in new premium brands and ramping up our inventory to make sure that we have the right products for the market. We're also pushing forward with personalized shopping using targeted curation and personal prices to make sure that every customer feels that the experience or shopping journey, if you will, is built just for them. Another big milestone is the relaunch of the Club Boozt in April. It's based on a new concept designed to be much more commercial focused and drive direct sales. Finally, supporting all of this is our AI integration, which is driving both the consumer journey and our overall operational effectiveness. So next slide, please. Technology has always been the engine at Boozt, and we are now moving fast to embed AI into the core of our operations. The projects I'll highlight here are just examples as AI is already a part of our daily operations across the board. Broadly speaking, AI is a primary lever for our efficiency from optimizing the warehouse and forecasting demand to automate routine tasks like invoice handling and product categorization. By letting technology handle the heavy lifting, we're able to operate a much leaner and much more efficient organization. This is also changing how our customers shop. We've just gone live with AI-powered search on Boozt.com, delivering much more intuitive and relevant results. Along with the visual search and AI generated inspiration, we are making product discovery faster and more personal. This, at the same time, as our service bots already handle 35% of inquiries, letting us scale without compromising quality. And finally, we have just recently launched a virtual shopping assistant to act as a personal shopper through natural conversation. Looking ahead, we intend to stay at the forefront of this development. We are already in talks with Google and OpenAI about agentic commerce and how AI agents will shop in the future. Our approach is quite simple. We want AI to help customers find the right products, but we stay disciplined about how the actual buying happens. This ensures that we neither lose the curated feel nor the high average order value that makes Boozt unique. So you might say that we are, in just following these new standards, we are positioning Boozt to lead through them. So now let's move on to the next slide, where we continue to see the department store model prove its worth, especially in a year where fashion demand remains soft. By offering a true department store experience, we create a natural hedge. When one category is muted, others step in to support the overall business. In 2025, 44% of our revenue on Boozt.com was generated from categories outside of fashion, and this is up from 42% last year. Our goal remains to move this towards 50% in the near term. The diversification, of course, is not just about risk management. It's also about the bottom line. As we have stated on earlier occasions, multi-category shoppers stay with us longer, return fewer items and spend more per order. Today, 54% of our customers on boozt.com shop from more than one category. This is a clear step-up from 52% last year, showing that our efforts to encourage cross-category discovery are paying off. Next slide, please. And if we look closer at how our customers shop, the trend is actually quite encouraging. We are seeing robust growth across the board for customers buying into multiple categories. As you can see on the slide, we saw an increase of between 6% and 9% in every group of customers shopping from 2 to 6 different categories. And this is exactly what we want to see. It shows that once we get customers into the Boozt ecosystem, they find value across our different departments. Overall, our active customer base on Boozt.com stands at 2.8 million, which is a 2% increase over the last 12 months. While we always want to grow faster, the stability in a tough market really shows the strength of the department store model in building deep customer loyalty. So with that, I would like to hand over now to Michael and the financial review. Michael Bjergby: Yes. Thank you, Hermann, and good morning from my side as well. I will start out by presenting our financials for the quarter, which were characterized by solid profitability and also record free cash flow. Afterwards, I'll go through the details of our outlook for 2026. Please go to Slide #11. So we grew 4% in constant currency, which was just slightly above our growth in Q3, but it is important for us that we continue to improve our growth momentum. And across the value chain, we are laser-focused on accelerating growth even further as we move ahead. The incremental growth improvement was, to a large extent, driven by an increase in activity in women's fashion, which is our largest product category. As previously announced, we have created a sharper distinction between Boozt and Booztlet, and we saw the results in September, but it really came to full effect here in Q4. As planned, we have generated solid growth at our more premium side and negative growth on Booztlet. The change of strategy between the 2 sites was a tough decision because we knew it will impact our growth short term, but it is the right long-term strategy and will support both growth and margins going forward, but it's also accretive to our relationship with our brands. From a country perspective, the growth was relatively stable across our key markets, but I want to highlight double-digit growth both in Boozt and Booztlet in Norway, which is a market where we see continued great potential and where we are heavily underrepresented. Now please go to the next slide and some comments on our profitability. The profits were strong in Q4 with an improvement of 0.9 percentage points on the EBIT margin if you exclude the effect from last year where there was a positive one-off of customs from Norway. Q1 to Q3 benefit was included in Q4. So in that sense, Q4 was distorted, but the year is comparable. The gross margin was under pressure from 2 external headwinds: one, the continued SEK appreciation; and two, our promotional environment driven by price-sensitive consumption and especially in the Black Friday period. This is not specific for Boozt, but something that has been communicated consistently also by peers on the stock exchange and particularly related to the Swedish market. The FX impact contributed by a bit more than half of the decline in gross margin. Even with the negative development on the gross margin, we delivered almost 10% EBIT margin driven by operational efficiencies really across the value chain, and this is even without any material leverage from higher revenue because net revenue only increased by 1%, but rather, it's really true cost increases across fulfillment and marketing and administrative costs. It illustrates the strength of our business model and how scalable it is. And overall, we delivered a small EBIT improvement for the year, even with some FX headwind. Now please move to Slide 13 and our cash development for the year. We delivered record free cash flow in 2025, and the cash conversion was far above 100%. And needless to say, this is not sustainable in the long term. But the year and the cash really reflects that in an inventory business model like ours, where working capital swings far outweigh cash generation from profit, then there will be fluctuations. And fundamentally, Boozt has a very strong cash flow generation, easily above 70% of EBIT over the cycle. 2025 was a year of consolidation and improving the health of our inventory and working capital really was a driver of the free cash flow. So in rough terms, 50% of the cash flow was driven by normal profit cash, which is sustainable long term and 50% was driven by working capital improvements. Please go to the next slide. We ended the year with a net cash position above SEK 1 billion, and it should be noted that year-end is the time of the year where working capital requirements are the absolute lowest. So this is not reflective of the excess cash available. But we want to be disciplined in returning excess cash back to shareholders, which is why we are today announcing a new share buyback program. And with that, we commit to distributing SEK 300 million back to shareholders in 2026, which comprises more than 5% of our market cap based on yesterday's closing. We will continue to generate and optimize cash and return it to shareholders and combined in '25 and '26, share buybacks are now expected to amount to around SEK 750 million or 14% of the market cap based on yesterday's closing as well. So with this, I have finished my financial review for 2025, and we will now look forward and turn to the outlook for 2026. Because as Hermann described, we believe that we are going into 2026 in a position of strength. And we have the right quality and quantity of our inventory. The organization is strengthened, and we have lined up a number of commercial initiatives that can drive growth, not least within AI. As such, we have created an expansion plan, I think a growth plan to deliver this growth acceleration during the year, and we are putting capital behind it, which is why we invest both in inventory, people and commercial initiatives to drive that growth. Our outlook reflects the plan. And while we do not want to focus on what is out of our control, I will, before we jump into the details, consider the implications of the FX development on Slide #16. Firstly, related to the FX, I think it's important to understand why we are sensitive to FX movement. Boozt is a highly centralized business, and that makes a difference. We don't have subsidiaries across the globe where revenue and cost exposures offset each other. We do everything from Sweden. And as such, we have our inventory recorded in Swedish krona, fulfillment costs, administrative costs, all in Swedish krona, and we get revenue in many other currencies. As an example, when we lose revenue from NOK depreciations against SEK, then there's around 90% drop-through to EBIT because we have very limited cost in Norway, only a bit of distribution and marketing cost. So in 2025, we lost more than SEK 160 million in revenue from changes in currency and with a relatively high drop-through to EBIT. And with the recent development in December and January, currencies will remain a headwind in 2026, even though our Danish kroner exposure will be much lower for March after our headquarter move. As such, you can see the rates here on the slide to the right-hand side, and it's based on yesterday's fixing from this [indiscernible] and implies more than 2% negative impact on revenue. This can be calculated from the table to the right because euro and DKK represents, as you can see, almost 50% of revenue and has declined by 4% if you compare the spot to the average of 2025, which means that 4% time 50% implies 2 percentage points on group revenue alone from these 2 currencies. On top of this comes depreciation of smaller currencies against the SEK. So with the estimated drop-through, then this has an effect of 0.6 percentage points on EBIT margin at the current FX rates in 2026. Now please go to Slide #17. So we plan to accelerate growth and increase margins and thereby growing profit by double-digit amounts even despite of this currency headwind. We are guiding constant currency growth of 3% to 8% and an adjusted margin of 5.3% to 6.5%, which includes the negative impact from currency. It is important to highlight that we expect growth momentum to accelerate through the year, and we will continue to look at the acceleration, thereby gradually building towards very strong growth in the second half. This is driven by an offensive inventory buying plan, and that's particularly the [ AV26 buy ], but also our commercial initiatives, which gradually will have effect. One of these initiatives is the launch of our Club Boozt in April. And the new concept is more commercially incentivizing and designed to drive growth. From a technical perspective, please note that this will temporarily impact reported figures because there will be deferred revenue recognition related to the programs' unused discounts. This may impact timing of revenue, but for the full year, the impact of both revenue and margins is expected to be very limited. This brings me to the margin where we implicitly are underlying delivering minimum 20 basis points improvement for the low end of our revenue range and for higher revenue, there is significant potential for further operational leverage. It should be noted that the drivers of the margin are different from 2025 because we expect to drive profitability through gross margin, while we continue to be more effective also on marketing and fulfillment cost ratios. The admin cost ratio is expected to increase. As we move to Copenhagen, the conversion of salaries from SEK to DKK will increase costs by approximately SEK 10 million to SEK 15 million, but this will be fully offset by lower costs related to social charges on the LTI program. But from an adjusted EBIT perspective, it will have a negative impact because the social charges for LTIPs are today booked as an adjustment. So from reported EBIT and from a cash perspective, it will be neutral. We also see a double-digit SEK amount related to our people and organization. This is new commercial initiatives, but it's also increased running cost of our headquarter in Copenhagen compared to our headquarter in Hyllie. We consider these important investments for both talent acquisition and our organizational development. CapEx is expected to amount to SEK 165 million to SEK 185 million, which is a bit higher than in 2025. The CapEx includes SEK 40 million one-off investment that we have already started at the warehouse, which relates to insurance compliance and does not really give any other benefit than improved compliance and the fact that we can have insurance at reasonable prices. On top of this, we have real, I would say, CapEx investments at the warehouse of SEK 40 million to SEK 50 million that support efficiencies and will create savings on the fulfillment line. And this year, our CapEx projects are focused on the return handling, but also the handling of what is classified as dangerous goods such as some beauty products. And these combined is very, very attractive investments. So with our continued underlying margin improvement, we are firmly committed to reach our 10% EBIT margin target in the midterm. Since we announced our target of 10%, we have had significant FX headwind, and we've also seen muted consumer spend. But regardless of the label, our focus is on delivering continued margin expanding every single year towards the 10% mark. Please move to my final slide of the day. So looking at cash flow in 2026, then as we also saw in 2025, we can easily deliver cash conversion of around 70%, and this includes even inventory increasing in line with revenue. But 2026 will be impacted by timing factors, which will be a benefit in the following years, particularly the exit tax and the inventory buildup with the cash outflows in 2026 will be beneficial to the cash flow in 2027 and beyond. Now with the inventory buildup, we're also able to overperform compared to what we have guided today if there is demand in the market. The one-off moving cost has been recognized from the income statement in 2025, but we have cash effect during 2026, and this relates to double rent, cost of restoration of the old headquarter and practical handling of the move, et cetera. Consequently, our free cash flow in 2026 is expected to be relatively moderate. As we continue to drive our margin, we will drive cash generation further, and this will create capital both for investments and further distribution back to shareholders in future years. That concludes my prepared presentation for the day, and I will now turn to Hermann for the closing remarks. Hermann Haraldsson: Thank you, Michael. And yes, to conclude, I would like to leave you with the mindset that is driving us into 2026. 2025 was a year of consolidation. We focused on strengthening the foundation through necessary and tough decisions, meaning cleaning up our inventory, trimming the organization and sharpening the distinction between Boozt and Booztlet. We did the heavy lifting to ensure the business model is as scalable and lean as possible. So now we are playing offense. We are in the process of moving into a new headquarters in Copenhagen. The move is all about top-tier talent access, adding even more specialized depth to our already strong team as we scale. So with this new energy, we're actually quite bullish. We are ramping up inventory to meet demand, adding new brands and targeting a broader and more inspirational assortment. Tech will be a catalyst, utilizing AI as our copilot to deliver an ultra-personalized shopping experience and maximize customer value. The foundation is solid. The talent is coming on board, and we are very ready to execute. So with this, I would like to conclude our part of the presentation and open up for questions. So operator, please go ahead. Operator: The next question comes from Niklas Ekman from DNB Carnegie. Niklas Ekman: Can I ask you a little bit about the reason for your increased optimism on the market and your sales in '26? And more specifically, I'm thinking that the market has been challenging for several years now, and yet you delivered very strong growth in '23, and it slowed a little bit in '24, it slowed considerably further in '25. So what is the main reason for your optimism in '26? Because I mean, we've already seen the market picking up in '25, at least the online market has picked up in '25. So why should your performance be much better in '26? I guess that's my first question. Hermann Haraldsson: I'm not sure how much the market picked up actually in '25, to be honest. But the reason why we're optimistic is, on the one hand, external factors where you see fiscal stimulus, both Sweden and Denmark should kind of give a more optimistic and consumers feeling that they have more in their purse. And then on the other hand, kind of internal factors, we are in a very good shape. We are being more bullish on our inventory buy, as we said, buying more broadly and inspiration of Boozt.com. And this combined means that we are actually relatively optimistic. We have been going into probably especially '25, where we had a bit too much stock and we're a bit negative. We were too cautious on our buying and too narrow. So we are seeing good receipt. We're seeing that our core customer, the women is coming back and they're buying more. So we are actually seeing a gradual improvement. And if you look at local currency, we are accelerating, albeit slow growth, Q3 and Q4 with 4% in local currency growth in Q4. So we are actually heading and aiming towards getting back to double-digit growth towards the end of the year and going into '27. Niklas Ekman: Very clear. And Booztlet, you mentioned here a sharp slowdown in the second half because of deliberate moves. Is this something that will continue to hamper your performance in H1? And is that a contributing factor to why you expect slower growth for the group in the first half? Hermann Haraldsson: You might say that kind of the Booztlet mission accomplished, Booztlet was supposed to help clear excess inventory during 2025. They managed to do so. And also, we also had too much kind of in-season inventory where we allowed Booztlet to clear that as well. We stopped that. And of course, this comes at the expense of Booztlet growth. But then on the other hand, we can see that the mothership Boozt.com is again growing healthy, 7% local currency growth in Q4. So you will see Boozt.com growing and Booztlet being a bit more muted because there is not that much inventory to clear for them. So you're right, Niklas, that it will come a bit at the expense of Booztlet. Niklas Ekman: Okay. Fair enough. And just last question, just the formality. The SEK 180 million exit tax payment, is this a pure cash flow effect? Or will that also impact your P&L? Michael Bjergby: Yes. Thank you, Niklas. This is a pure cash flow impact. And so it will not impact the tax on the P&L. And I just want to emphasize that the SEK 180 million is the full amount, which were only SEK 112 million will be paid in 2026. And it will be offset by benefits on Danish kroner tax, which is why we expect that the net tax effect from this in 2026 will be SEK 140 million. Niklas Ekman: Very clear. And then you will get that repaid in the coming 4 years as well? Michael Bjergby: Yes, exactly. So the exit tax payment creates a tax asset on the balance sheet, and this can be used for the following 5 years in Denmark. Operator: The next question comes from Benjamin Wahlstedt from ABG Sundal Collier. Benjamin Wahlstedt: I'll start by saying that, yes, I sort of agree with Niklas that your optimism is sort of back and refreshing to see. But you also mentioned bringing in a couple of new brands in the quarter. I was wondering, could you give some examples of this? Hermann Haraldsson: Benjamin, that's a difficult question. We have some new brands. So I don't think I would like to highlight any more because we're getting big stock back among other brands and Hunter Boots, some kind of -- it might not be kind of huge brands, but they are kind of adding some flavor to the shopping experience and then a lot of kind of local brands within different price points. So it's kind of across the board in general. So we're going from being too much data focused and too much depth to also providing more inspiration going in 2026. Benjamin Wahlstedt: All right. And I was also interested in hearing your comments on the competition in the beauty segment, especially, [ please ]. Obviously, there has been some competitors really struggling here. So what's your read on the market? Hermann Haraldsson: It's very red, if you ask me. We have a lot of players that want to take the market and want to grow. So our kind of strategy for the Beauty segment is to basically tag along and get our customers to just add a beauty item into baskets, so maintaining a high average order value. So this is why even our beauty baskets are actually quite profitable. But it's not going to be beauty that's driving our category growth. It's more like it's kids, especially sports and then home. So the beauty is -- I think beauty is a very tough market, especially in Sweden at the moment. Benjamin Wahlstedt: Perfect. And a question on Denmark. You previously said or commented that you did not expect any like cost lift up or cost ramp-up from moving the staff to Copenhagen and that message has somewhat changed in this quarter. Could you elaborate a bit on that, please? Michael Bjergby: Yes. So I think what is -- the difference is probably what we see from -- if you look at the salary, then salary conversion has led to some increase, but this will be fully offset by lower payments of social charges. So I think that was the message from that. And then on the location change of the headquarter, then the rent is actually exactly the same in Hyllie as in Copenhagen, but it's the operational cost that is more expensive, such as property tax, we have the canteen running and as well as maintenance of the building, which is more expensive. So there is a bit more cost related to running in Copenhagen compared to Sweden. Benjamin Wahlstedt: Perfect. You also mentioned running quite a few commercial initiatives during the year. How should we think about that in relation to your admin costs or personnel costs, looking into 2026? Hermann Haraldsson: When you say commercial initiatives, are you talking about marketing or what do you mean, sorry? Benjamin Wahlstedt: Well, commercial initiatives, I believe that was the word you used. So yes, are you adding any marketing staff or are you adding any sales staff and... Hermann Haraldsson: Sorry. We are improving the organization being considerably more localized. It has been kind of a challenge for us to attract local marketeers to our office in Sweden, meaning when we talk about local marketeers, it could be marketeers from Finland, Norway, even from Sweden, where you have some people from Stockholm. But now that we're moving to Copenhagen, we're able to build a kind of a community of local marketeers sitting in Copenhagen. So we actually kind of strengthened the commercial organization considerably by moving to Copenhagen and being a bit more kind of localized at the same time as we're getting the benefits from sitting together. So we're actually ramping up on hiring commercial people to be able to be even stronger in the different local markets because currently, Denmark has been a strong market because we have a lot of things, to be honest, that are driving that and partly Sweden, but a lot of the strong markets here in Sweden are sitting in Stockholm and we have had difficulty in attracting them to Malmo, but they would like to work come to Copenhagen and the same for Finns and Norwegian. So I think that is kind of a big part that will strengthen the commercial organization of that. Michael Bjergby: Just to add to that, there are also other initiatives that we don't disclose where we also add some employees. And when we add marketing employees, then it actually goes under the admin cost line because all it seems they are in admin, just to be clear. Benjamin Wahlstedt: Perfect. Do you mind putting a number on that as well? Michael Bjergby: No. So we don't disclose the effect of that. But I think what we have said is that the admin cost ratio could increase by, let's say, in rough terms, 0.5 percentage point, and this includes both the salary conversion, the additional relocation costs and the additional FTEs. Operator: The next question comes from Daniel Schmidt from Danske. Daniel Schmidt: Just back to what you talked about in terms of Boozt.com and the increased focus on premium sales. Did this trend that you talked about or the shift that you've conducted, did it trend favorably into '26? Did you see sort of an underlying pickup of that shift that you conducted in terms of the sort of the customer picking that up basically into '26. Sort of could you shed some more light on that? Hermann Haraldsson: Daniel, actually, you can see that from the numbers where you can see that Boozt.com grew 7% in Q4, where we kind of slightly started to be a bit more premium, expand our range and actually do a little less discounting. And we're not going to be a luxury store. So we are still going to be mid- to premium, but we want to kind of elevate Boozt.com a bit more. And we actually can see that consumers are picking up, and we see quite a good sell-through of the more premium brands that we have introduced during the quarter. Daniel Schmidt: Okay. I was just more referring to where are you in that process? Are you adding more and more of that premium assortment as we go into '26? Or has that been sort of done now, you're happy where you are as you leave '25? Hermann Haraldsson: We are relatively happy. I think we will always be kind of trying to add more brands, and we are seeing some attractive brands in the pipeline, but it's more to do with that we are broadening the assortment. buying more width, maybe also buying slightly more expensive price points than we did in 2025. And then, of course, there's going to be less promotional activity on Boozt.com. So we're kind of trying to -- it sounds kind of a bit [ cheesy ], but we're trying to elevate the experience on Boozt.com and being less discounted than we were kind of exiting '24 and the beginning of '25. And we actually see encouraging signs of that, especially because the women are actually also coming back. Daniel Schmidt: But it sounds like you've sort of neglected inspirational part of the assortment over the past couple of years, like you said, and been quite data-driven and now you're getting your head around that going into '26. But if you compare where you were in terms of the level of premium that you catered like 5 years ago, are you higher now than you used to be? Or are we back to where you were? Or how does it compare? Hermann Haraldsson: I would say that we're higher now than we were in 5 years back. And we will be higher going at least when we exit 2026. So I think that we're in a good part. But again, you have to be careful because we're not going to be a luxury brand. We like kind of a position of the mid- to premium, as you know, where we get the good basket size, but we want to stay out of the luxury segment because that's not very profitable to be. Daniel Schmidt: But do you feel that it has been sort of a trend in the market where maybe players like Zalando and yourself have become too much -- too similar basically? Hermann Haraldsson: I still think that we have a more premium experience. We have higher price points. And I think you can read it directly through the difference in basket size. I believe that our basket size is some 70% higher than our German friends. But of course, there's a considerable overlap between the 2 shops, but we're still kind of focusing on the Nordic consumers having -- being regarded as a more curated and probably a more premium experience than other in our market. Daniel Schmidt: And then just you touched upon Norway. And I didn't see any numbers specifically for Norway, but you do sort of give the numbers of Sweden and Denmark and then the Nordics. But it looks like Norway, I don't know what Finland did, of course, but I guess Finland was still quite weak. Did Norway grow double digit in the quarter in local currency? Hermann Haraldsson: Yes, it did and more than 10%. So it was actually quite a good quarter for Norway, and we are seeing strong growth. We are investing in Norway and not -- of course, we are investing in profitable growth in Norway, but actually Norway was a very good market for us in Q4 and Finland was quite weak, actually, almost very weak. So yes, high growth environment. Daniel Schmidt: And it sounds like that comes back to you being liberated of the import duties maybe and you're in a better position now to push ahead in Norway rather than the market being much stronger than a year ago. Is that correct? Hermann Haraldsson: That is correct. We have reinvested some of the savings that we have gotten from the customs for the duties. So we've put that back to the market and investing in marketing, and we'll continue to do that. Daniel Schmidt: And could you sort of give us a guesstimate of what your sort of fair share should be in Norway given where you are in Sweden and Denmark compared to where you are now in Norway? Hermann Haraldsson: It's difficult, but Norway should be twice the size as it is today. Because Norway is -- the assortment that we have on Boozt is very well suited for the Norwegian market. And I think we have good consumer insight. So it's like -- it's all to double and do that within the next 3 to 5 years. Daniel Schmidt: And today, it's 12% of sales or something like that? Hermann Haraldsson: Yes. You're not far off, I think. Michael said, we don't disclose. So I can't say anything. Daniel Schmidt: Okay. And then just lastly, you scrapped the CapEx expansion plan a year ago. You are more optimistic today. You talk about ambitions to grow double digit towards the end of '26. You have guided for CapEx for '26, but it sounds -- looks a little bit like any sort of normal CapEx year. What are you sort of thinking when it comes to that plan you had? Michael Bjergby: Yes, I agree. It is more of a normal CapEx. I would say the SEK 40 million that we are doing for insurance compliance reasons is a bit of an extraordinary. But other than that, it is a normal year. With the growth that we have, we still expect that we will have to expand, but it will probably be a project that is required during '27, '28 with also CapEx split between the 2 years. So there's no sort of a big amount coming, which is far from what we have today in 2027. You shouldn't expect that. Operator: [Operator Instructions] There are no more questions at this time. So I hand the conference back to the speakers for any closing comments. Hermann Haraldsson: Okay. Thank you for listening in and for some very good questions. And I guess that we will see you over the next weeks and wish you all a good day. Thank you.
Hong Sung Han: Good afternoon. I am Han Hong Sung, the Head of IR at Woori Financial Group. Let me first begin by thanking everyone for taking time to participate on this earnings call for the Woori Financial Group. On today's call, we have the Group CFO, Kwak Seong-Min; the Group CTO, Oak Il-Jin; and the Group CRO, Park Jang-Geun. We will first start with the Group CFO, Kwak Seong-Min's presentation on the earnings performance and then also present the corporate value enhancement plan, after which we will have a Q&A session. Please note that the call is being conducted with simultaneous interpretation for our overseas investors. Now let us start our presentation on the earnings for the full year of 2025. Seong-Min Kwak: Good afternoon. This is Kwak Seong-Min, the CFO of Woori Financial Group. Let me go over the 2025 full year performance. Please turn to Page 2 of the material, which is available on our website. The group's 2025 net income was KRW 3,141.3 billion, representing a Y-o-Y increase of 1.8%. The ROE was similar to last year at 9.1%. Amid uncertainties in the financial market regarding interest rates and FX rates and concern about a slowdown, balanced top line growth and the insurance acquisition enabled the group to achieve a high -- record a -- record high net operating revenue and stable profits. In particular, we set sizable reserves for future loss factors, including payoff projects with completion guarantee of trust company and adjust uncertainties such as fully provisioning against LTV-related fines, further solidifying the group fundamentals. In addition, we completed the insurance acquisition without any negative impact on our capital ratios and established a growth foundation for the securities business by acquiring the final license and launching MTS Group, completing the portfolio as a comprehensive financial group. Using this, we are starting to generate group synergies such as investment banking joint underwriting, open integrated wealth management branches and expanding bancassurance operations. Another noteworthy achievement of 2025 is the significant improvement in our capital ratios. As of 2025 end, the tentative group CET1 ratio is 12.9%, up 77 basis points versus 2024 and exceeding the 2025 target of 12.5%. Across higher macro volatility, the insurance acquisition and the higher year-end dividends, the group will still be able to improve its capital ratio through asset rebalancing to stabilize our financial structure, and we are able to show our strong capital management capabilities to the market. Based on this, the BOD today has decided on year-end dividends of KRW 760 and share buybacks and cancellations of KRW 200 billion. Next, let me provide more detail about specific areas. Please turn to Page 3 of the material. First, let me go over net operating revenue and NIM. The 2025 net operating revenue was 5% year-over-year at KRW 10,957.4 billion. Due to stable profit generation from more diversified revenue sources and the inclusion of the insurance business, we posted a record high performance. Interest income for the year was KRW 9,030.8 billion, and top line growth was moderate, but NIM improved quarter-over-quarter throughout the year, which led to better asset quality and growth. On noninterest income, we recorded a record level of fee income and balanced growth across securities, FX trading and insurance income, which led to a jump of 24% year-over-year at KRW 1,926.6 billion. In addition, Woori Bank's 2025 NIM was 1.46% and the group NIM, including the credit card business, was 1.73%, each representing an increase of 2 and 3 basis points, respectively. Though there were 2 base cut rates during the year, NIM grew on the back of asset origination focused on profitability and asset quality and funding cost efficiencies. The recent movement in the equity market has led to money movements and market rates are rising, which is creating a more challenging funding environment. But the group will continue to expand its core deposit base, rebalance its portfolio to focus on profitable, high-quality assets and actively manage ALM to secure stable margins in the future. Next, let me go over the loan book. As of 2025 end, the bank's loans totaled KRW 334 trillion, flat year-over-year and around 1% higher quarter-over-quarter. In terms of corporate loans, they were slightly declined versus 2024 end at KRW 180 trillion. Loan demand from large corporates was strong throughout the year, but the decrease came from the efforts to decrease SME sector business exposures and actively rebalancing assets to focus on new growth and high-quality companies. On the retail side, the portfolio grew around 0.5% quarter-over-quarter or 4% year-over-year to KRW 150 trillion, mainly driven by real demand such as policy mortgages. Last year, against an uncertain business environment, including a weak one, the group was able to achieve profitable growth via prudent RWA management with a focus on capital adequacy. This year, as discussed in our future core growth project planned last September, we will leverage the group's corporate finance competitiveness to increase financial support for more productive areas of the economy. In addition, for retail loans, fully reflecting the government's policy stance, we will focus on the real demand to manage our assets in a stable manner. Next, let me talk about the group's noninterest income area. In 2025, noninterest income was KRW 1,926.6 billion, a record high level and a large increase of 24% year-over-year. In particular, core fee income showed balanced growth across bank and nonbank businesses, totaling more than KRW 500 billion each quarter. In addition, against market -- increased market volatility in interest rates and FX rates, the insurance income contribution from the comprehensive financial group portfolio provided more stability to our noninterest income profile. Leveraging this portfolio, we will strengthen the core competitiveness of our nonbank subsidiaries, such as our securities and insurance business and generate stronger synergies across businesses in areas like wealth management, investment banking and also asset management to gradually expand our noninterest income contribution. Next, let me go over expenses and costs. Please turn to Page 4 of the presentation. So to discuss SG&A, in 2025, SG&A totaled KRW 5,180.5 billion. When excluding the ERP and the insurance business, it grew 10.8% year-over-year, representing a cost/income ratio of 45.7%. During the year, the group spent to strengthen its business portfolio by building out the securities infrastructure and acquiring the insurance business. In addition, there were other upfront costs such as ordinary wage labor costs. We believe these investments for portfolio expansion were essential for sustainable future growth, and we will look at the cost increase from ordinary wage as a one-off expense, which we will try to minimize the impact by increasing future productivity. In addition, going forward, we will continue to engage in general cost-saving efforts like leveraging AI-based operation efficiencies to lower cost and achieve our mid- to long-term CI ratio target of below 40%. Next, let me move on to credit cost and asset quality. In 2025, the credit cost was KRW 2,086.2 billion, and the credit cost ratio was 0.53%. Although the base rate was cut place, market rates have remained high and any concern about a slower economy continues. The group recognized around KRW 430 billion in one-off credit cost, including preemptive provisioning related to completion guarantee of trust company projects and strengthened its loss absorption capabilities. So when excluding these one-off factors, the group's credit cost ratio was 0.42%. For the past 2 to 3 years, we have preemptively managed weak assets such as real estate project finance and completed an asset cleanup of the nonbank side, including the previous merchant banking business, savings bank and asset trust. Thus, we expect any additional costs to be limited. And this year, we are targeting a credit cost that is 20% or around KRW 420 billion lower on a year-over-year basis. In addition, for Woori Bank, the corporate prime asset ratio stands at 84.1%. It is increasing loans to new growth sector manufacturing companies and continues to rebalance assets with a focus on asset quality. Quality indicators are recently improved, but since uncertainties still persist, we will focus more on asset quality management based on preemptive buffers created last year to maintain the credit cost ratio within the 40 basis point range. Next, let me go over capital adequacy and shareholder return. Please turn to Page 5. The 2025 year-end tentative group CET1 ratio is 12.9%. When we launched in 2019, the group started with a CET1 ratio of 8.4%, and it has improved it each and every year. In 2025, even though we had a large M&A, i.e., the insurance acquisition, solid profit growth and asset rebalancing, a reduction in FX-sensitive assets and RoRWA linked KPI systems, we -- this all resulted in a significant reduction of 80 basis points year-over-year. Thus, we have been able to achieve our promise of reaching a CET1 ratio of 12.5% and prove our commitment to enhance our corporate value. At the BOD today, in light of the 2025 financial performance and our shareholder return policy, the Board decided on a year-end dividend of KRW 760 per share and a KRW 200 billion share buyback and cancellation. The full year total dividend per share increased 13.3% year-over-year to KRW 1,361, which meets the qualifications of a high dividend company. In particular, the year-end dividend will also be in the form of a nontaxable dividend, the first of its kind from a bank-led financial holding company. The KRW 200 billion share buyback and cancellation also increases a 33.3% increase year-over-year and the group's total TSR ratio, including the nontaxable dividends will stand at 39.8%. Other details of our shareholder return will be discussed when we present our 2026 corporate value enhancement plan in more detail. Next, I will go over the productive finance strategies of the future co-growth project announced in September. For the next 5 years, we plan to provide support of about KRW 73 trillion, excluding inclusive finance of KRW 7 trillion. KRW 17 trillion will be allocated to investments, including the National Growth Fund, KRW 56 trillion will be supplied as loans to advanced strategic industries such as AI, semiconductors and defense. To secure growth momentum, we are operating the Advanced Strategic Industry Financial Committee as a task force. And recently, with Hanwha Group, we signed a financial support agreement for building an advanced strategic industry ecosystem, which shows that we are already delivering meaningful results. We are also leveraging our competitiveness in corporate finance and network to preempt high-quality clients and efficiently expand funding support. To this end, with the financial authorities capital regulation rationalization policy and by promoting the group's internal efforts such as asset rebalancing, we plan to secure sufficient capital headroom. Also, we will establish an AI-based risk management system that encompasses the entire process from loan review to post-loan management to build a strong growth foundation without undermining capital ratios and asset quality. That was the end of the 2025 annual earnings presentation. We will now move on to the next section. Hong Sung Han: Today, Woori Financial Group disclosed the 2026 corporate value enhancement plan on KRX. Kwak Seong-Min, CFO, will continue to go over the main elements of the 2026 corporate value enhancement plan. Seong-Min Kwak: Today, we announced the corporate value enhancement plan to review the progress made in 2025 and share with the market our new strategies for 2026. The value enhancement plan has incorporated feedback from the market and shareholders. And after thorough discussion, it has been reported to the Board of Directors to be announced today. We especially thought long and hard about how to effectively use the significantly improved capital ratios as basis for growth and shareholder return. So let me go through the material on our corporate value enhancement program, which has also been distributed today through the disclosure. I will first go over the financial indicators for 2025. Please refer to Page 4. ROE, thanks to balanced top line growth and the acquisition of the insurance company was maintained at above 9%. However, as the cleanup at nonbank subsidiaries caused ROE to slightly decline. The CET1 ratio despite the acquisition of insurance, LTV penalties and higher shareholder return is expected to annually improve by 77 bps to 12.9% to comfortably exceed the 2025 target of 12.5%. Annual DPS for this year should increase by 13.3% Y-o-Y to KRW 1,361, which is similar to high dividend company levels. Of this amount, the year-end dividend of KRW 760 is nontaxable. When considered, dividend payout reaches 35%, which is top notch in the industry. The size of share buyback and cancellation have also increased by 9.7% since 2024 to KRW 150 billion. The 2025 TSR of Woori Financial Group when considering nontaxable dividends reaches 39.8%. Page 5 is on nonfinancial indicators. In 2024, we launched the securities companies. And in 2025, we successfully incorporated the insurance company, thereby completing the group business portfolio. Synergy is the fundamental reason why we exist as a financial group. Based on the completed portfolio, wealth management, CIB, capital markets and other key areas will be the focus as we concentrate our efforts to create synergies. Meanwhile, for financial consumer protection, we are the first financial group in Korea to appoint a dedicated Chief Consumer Officer to take the lead in delivering social value. Also advancing the CEO succession program and establishing a new decision-making support process for the Board of Directors to protect shareholder interest are some examples of our efforts to improve corporate governance, which is the key focus in today's capital markets. I'll now move on to the 2026 corporate value enhancement plan on Page 6. In 2026, we plan to achieve a CET1 ratio of 13% ahead of schedule and then maintain it stably at around 13.2% or higher. While continuing the RoRWA-based asset rebalancing efforts, quarterly flexible RWA management and selective resource allocation across sectors and businesses, these are some sophisticated and strategic efforts we are making to manage the CET1 ratio. In addition, we will be disposing idle real estate held by the bank and insurance company to reduce RWA. We will also be deploying diverse methods to efficiently manage and use real estate from a financial perspective to enhance capital ratios. Regarding the pioneering future co-growth project, assuming approximately KRW 80 trillion of productive and inclusive financial support across 5 years, we expect about 40 bps annual impact on our capital ratios. We believe this impact is fully manageable by strengthening the RWA management process, quality enhancement of investment and loan portfolios and utilizing the lending capacity secured from the rationalization of capital regulations. By executing the future co-growth project in a balanced manner within the scope of rigorous capital management, we will work to achieve harmony between capital stability and mid-long-term growth. I will move on to Page 7 on the group's sustainable ROE enhancement strategy. As repeatedly mentioned, for this year, based on the group's complete portfolio, we will focus on cementing the competitiveness of each subsidiary within their respective sectors. And the 3 pillars: Bank, securities and insurance, will start to generate synergy in earnest, which should boost nonbank profit contribution to about 20%. With the continuous capital injection plan, the securities firm will elevate its position in the industry. For insurance, given the business environment, we will prioritize financial stability and focus on laying the foundation for mid- long-term profit. The asset management arm will launch a productive finance-related fund and with the transfer of LDI insurance funds should realize economies of scale and climb the industry rankings. Also on top of traditional methods such as cross-selling and client referral, we are planning to implement diverse synergy strategies such as CIB joint underwriting, wealth management integrated centers and strengthening LDI. In addition, by transforming into productive finance centered around advanced strategic industries, we aim to secure growth momentum. We will move beyond the traditional interest income-driven profit structure and invest in innovative companies to share its profits. Also, we will move the pillar of financial support from household and real estate to corporate finance in order to contribute to the recovery of dynamism in the Korean economy. Also with large-scale transformation into an AI-based management system, corporate loans, wealth management, customer consultations, internal control and other key areas will experience elevated productivity, thereby structurally improving ROE and achieving quality growth at the same time. Lastly, I'll go over the shareholder return policy on Page 8. Traditionally, Woori Financial Group has shown a high dividend payout and a competitive dividend yield, making us one of the leading financial dividend stocks. We will solidify our competitiveness as a dividend stock while diversifying shareholder return methods to lead the expansion of the investor base in the Korea's capital market. First, we will introduce nontaxable dividends from year-end 2025. The related resources as of year-end 2025 is around KRW 6.3 trillion, which we expect to use across 5 years. The nontaxable dividends will boost dividend payout by around 6 percentage points. For retail individual shareholders, the real impact will be an 18.2% increase of dividend income. In both 2024 and 2025, dividend payout was at least 25% and total dividend payment increased by more than 10%. As such, the company effectively satisfies high dividend stock requirements pursuant to the act and restriction on special cases concerning taxation. We will continue to increase EPS every year by at least 10%. The share buyback and cancellation policy has been gradually expanding since its first introduction in 2023. However, it was still about mid-4% of profits. We fully understand that the impact of treasury stock policy is maximized when the PBR is below 1x. Therefore, we will increase the buyback and cancellation portion to about 10% in a speedy manner. Today, we announced share buyback and cancellation of KRW 200 billion, which is a 33.3% increase from the previous year. If we expect the CET1 ratio to exceed 13% this year, we are planning to implement additional buyback and cancellation in the second half. In the future, if the CET1 is maintained stably at over 13.2%, we will review exercising a balanced shareholder buyback and cancellation program twice a year once each half. To ensure that we remain a flagship financial dividend stock, we will stay one step ahead of competitors and implement diverse measures to strengthen shareholder return in a sincere manner. Lastly, in 2025, we acquired an insurance company to complete our nonbank portfolio to become a comprehensive financial group. Company-wide efforts, including all of our employees have led to the highest improvement of the CET1 ratio in the industry to reach almost 13%. Thanks to these achievements, we have received strong interest from investors from home and abroad and have been positively recognized by the market. Our share prices outperformed the KOSPI and market cap has more than doubled since early 2025. In 2026, Woori Financial Group will move beyond the period of management and maintenance to take a leap forward to enter a period of great transformation. While combining core competitiveness and group synergy to advance as a complete comprehensive financial group, we will leverage our key strength, which is corporate finance to deliver the great transformation towards productive finance. In addition, we will continue to communicate with the market and carry on differentiated efforts as a leading financial dividend stock. This will conclude the earnings presentation of Woori Financial Group for 2025. Thank you. Hong Sung Han: Yes. Thank you very much. Now we will start the Q&A session. [Operator Instructions]. So today, the first question will come from Hanwha Investment Securities, Kim Do Ha. Do Ha Kim: So for 2026, for this year in terms of your margin and growth in terms of your profits, if you could provide some guidance on that and in terms of the overall direction and why you believe that this would be possible, that would be appreciated. And in addition, for the dividend, I do believe it's larger than market expectations. And I do think that the competitive outlook is also good. However, I don't think I can fully understand your dividend policy. So going forward, with regards to your corporate value up plan. If you look at Page 8 of the presentation, right now for 2026, is the target to increase your DPS by 10%. If that is so, then in terms of your quarterly dividend for each quarter and also in terms of the year-end dividend, what would be the breakdown? Would it be similar to what you have done to date? Or do you actually believe that there will be any changes? If you could explain that in more detail, that would be appreciated also. Hong Sung Han: Yes. Thank you for your question. And if you give us a minute, then we will try to prepare your answer. Seong-Min Kwak: Yes, this is Kwak Seong-Min, the CFO, and maybe I can address your question. So if we look at 2025, as mentioned before, in terms of our CET1 ratio, there was a significant improvement. And as a result of that, we did have a stance to try to have more moderate growth. In addition to that, according to the overall government household debt policy, there was a lower household growth that we also see. But on the Korean won side, there was only a 0.2% growth in that area. In 2026, on the Korean won loans, in terms of the risk-weighted assets, we want to have it at around 0.5%. So that would be the business plan for this year. In addition, if we look at the nominal GDP growth rate and then also take into consideration the factor of the inclusive financing that we will have, we do think that there will be around 5% growth. And even in 2024 there was around 3% in terms of the plans that we had for the year. But on the corporate side, because there was asset rebalancing and other effects, in terms of the corporate loan growth as a whole, it was a bit more sluggish and retail was a bit more sluggish. So as a result of that, in 2026 as a whole, we want to secure growth potential. So on a Y-o-Y basis, we want to have around 5% growth in total for our assets. If we look at our margins, I think that the stance would be is that for 4 quarters consecutively, we will actually be able to see a NIM increase. And for the full year, it was around 2 basis points. So on the margin side, we do think that we have defended ourselves very adequately. And at the Research Institute side, if you look at the forecast that they have set out for this year, we do actually think that the BOK will cut rates at least this year. So that was one of the assumptions. And also in 2026, we think that our margins will, on a Y-o-Y basis, be slightly weaker in terms of the business plan assumptions. However, then thereafter, if you look at the recent side, market rates are being maintained at a high level. The BOK also might cut rates in the second half rather than the first half. So it's going to be pushed back in terms of the timing. And there's also, I think, that conflicting views about rate cut possibilities going forward. So if market rates were not to fall, then we do believe that on a Y-o-Y basis, that NIM will be maintained at, at least this year's level. And in terms of our profitability and asset rebalancing that we're taking, also increasing our core deposits, if this all comes into play, then we do think that there is a possibility that there could be a slight upside to what we're planning and seeing today. In terms of our noninterest income, this is an area that we were very focused on. There was a lot of growth that we had achieved. And we do think that this year, the growth will be similar so that on the noninterest income side, we think that we will be able to see around 20% growth. The insurance company being acquired also. On the security side, we have a final license, and we started business in March of 2025. So we do think that we will actually have a higher contribution coming from the nonbank side. So going forward, in 2026, we think that we can actually see an increase at around 18% on the noninterest income side also. On the SG&A side, in 2025, this was an area in which I do think that we left a bit. However, SG&A, as mentioned before, is also reflecting the insurance acquisition and also the securities firm, we did beef up the IT investments and also increase the headcount there. So on the nonbanking side, there was some concentration of cost increase factors that did take into play. So for this year, again, this is another factor that we will have to take in consideration. So we do think a dramatic decrease on a Y-o-Y basis will not be possible. However, if we look at the other areas outside of these business areas, we are going to be more prudent in terms of management, whether it be the number of branches, the headcount and also other SG&A-related items. I do think that this year, again, not only for the 2026 business plan, but also according to our mid- to long-term plan. In formulating those plans, we will take a fundamental rereview. So in terms of our mid- to long-term target of reaching a CI ratio of 40%, we will try to look at initiatives to enable us to achieve that and actually execute that in 2026 so that at least in terms of the SG&A side that there could be a decrease on a Y-o-Y basis. In terms of our credit cost in 2026, in actuality for 2026, the target would be to maintain a normalized CCR of around 40%. And therefore, that would mean that around -- we have decreased the overall credit cost by around KRW 420 billion or around 20%. So this is the business cost that we will execute and also maintain our CI ratio at 40%. And in terms of the outlook, maybe that could be the overall answer to the question. And then I think that you talked about our capital adequacy ratio and capital policy. In '24 and '25, again, in terms of the total dividends, it did increase by a total of 10% year-over-year in terms of the total amount. And so for this year, if you look at the high-growth qualifications that the actual government has laid out, we would be qualified. However, because our dividends are nontaxable, there are more benefits that we give to our shareholders. But with regards to the DPS target, we do want to have 10% targets going forward. So this is something that we will apply for 2026 and also continuously target going forward. However, that have been said, in terms of the 10% DPS in order to reach that level, if we do a simulation about how we can achieve that, on the net income side, if we increase it by 10%, that itself would enable us to reach a 10% DPS target. So therefore, I think that for the target of having a DPS of 10%, it's not going to be a difficult target to achieve. And therefore, that's why we have set the target at that level. And in addition to that, if we look at our dividend policy, I think that when we talked about this before, we did say that in terms of the quarterly dividend, we would equally distribute it across the first, second, third quarter. And then for the year-end, we would look at our capital ratio and then set the year-end dividend. That's what we did this year. And then for 2026, I think that, that approach will remain the same. As of now, that would be our stance. And in terms of the year-end dividend, I do think that it will be KRW 1,361 per share. So if we look at the same situation, I think that for Q1, Q2 and Q3, you can expect in general, where the dividends will sit. And then in terms of the year-end dividends for 2026, again, we would look at whether the CET1 ratio is above 13% as our general target is. And assuming that is the situation, we would determine what the year-end dividends are. So in terms of our quarterly dividends and our year-end dividends in terms of the approach that we take, that will not in itself change. So for this year, if our CET1 ratio does maintain a level that is comfortably above 13%, then based upon that, then from 2027, I do think that we will be able to see equal contributions across the first to fourth quarter or each and every quarter, similar to our competitors. However, rather than splitting it out across all quarters, we don't necessarily believe that, that is the most efficient manner. We do believe it's more important to satisfy the commitments that we had made to the market. And in terms of the CET1 ratio that we have, being able to satisfy the needs that our customers have in light of where our capital ratios sit. So up until 2026, we're going to maintain the stance that we currently have. Hong Sung Han: And we'll move on to the next question from KIS, Baek Doosan. Doosan Baek: I am Baek Doosan from KIS, and I also have a question regarding dividends. You talked about the nontaxable dividends and the relevant resources amount to KRW 6.3 trillion. Last year, we brought in around KRW 3 trillion. So I would like to know how the size of the resources increased. Seong-Min Kwak: Thank you for the question. I'm Kwak Seong-Min, CFO. And let me answer your question. In 2025, in our corporate value up plan at the shareholder meeting in 2025 March, we transferred KRW 3 trillion of capital surplus to retained earnings. So that is all publicly available information. But lesser known is that is another aspect of the shareholder meeting agenda. So 4 years ago, in 2021, we transferred KRW 4 trillion from capital surplus to retained earnings. And the reason we did that back then was because in 2019, the financial group was relaunched. And according to the IFRS accounting standards, we relaunched the financial group with share exchange. And so the separate and consolidated financial statements need to be integrated. And unlike the competitors, the capital structure of the separate and consolidated financial structure was there. But in reality, there was no reason for it to be different. It was only because of accounting standards. And as you know, the resources will come from the separate financial statements according to commercial code, not the consolidated financial statements. So in conclusion, so we had an unreasonable situation at that time where we needed to normalize the situation. So in 2021, KRW 4 trillion of capital surplus was transferred to retained earnings, and then we increased the payable resources. And then from 3 years ago, since we have been making efforts to increase the dividends. So out of the KRW 4 trillion, KRW 700 billion we already used. So we have about KRW 3.3 trillion as outstanding balance. So to make sure we satisfy all of the legal requirements and the tax requirements to ensure that we do not have any issues that pop up in the future, this we received legal interpretation and tax interpretation that we can use this resource for nontaxable dividends. So out of the KRW 4 trillion, we still have KRW 3.3 trillion. And then in 2025 March, we put in KRW 3 trillion. So total KRW 6.3 trillion is the available resources. So after KRW 5,580 dividends, we believe that around KRW 5.7 trillion will remain. In 2026, we will be using the KRW 5.7 trillion for the quarterly dividends and all of the dividends. So it will all be nontaxable. So in 2025, nontaxable dividend was only for the year-end dividend. So the impact would have been relatively small. But from 2026 onwards, the quarterly dividend will also be nontaxable. So the actual impact will increase in 2026. Hong Sung Han: Yes. The next question will come from Daishin Securities, Park Hye-jin. Hye-jin Park: This is Park Hye-jin from Daishin Securities. And I would like to ask about the KRW 189 billion nonoperating loss that you have, if you could break it down for this. And also in your corporate enhancement -- value enhancement plan, I do think that the nonbank side contribution is around 20%. What do you look about -- how do you see the outlook going forward? Because it does seem to be that on the brokerage side that there is a more favorable environment. So maybe in terms of your mid- to long-term plan, there could be an acceleration of the realization of that. So in general, if you look at the overall business outlook, including your nonbanking business, if you could discuss that, that would be appreciated. Hong Sung Han: Yes. Thank you for your question. If you give us some time, we will answer. Seong-Min Kwak: Yes, talking about the nonoperating income side and the overall line item there. So for the competitors, I do think that this was mentioned already. With regards to the bad bank, there was a KRW 50 billion contribution. And in addition to that, on the LTV fine, we have around KRW 52 billion, another minus or deducting side there. So in terms of the KRW 52 billion, this is fully provisioned against, and we do set aside at other provisions. So it's fully provisioned against already. And our competitors, we understand there could be various legal views. We didn't do a partial recognition. We fully provisioned. So I think that if we do take in consideration what their view would be in terms of the fines on this side and also according to how the litigation plays out, we actually believe that there could be a reversal. So we do think that there's a possibility that we would be able to see some upside from that taking place. And in addition to that, on the security side, to talk about any rights offerings, I do think that, that was something that was mentioned, and I did see the press reports. So if you look at the situation right now, the overall total capital base is around KRW 2.2 trillion. And so for the securities side, according -- different from the insurance business strategy, we do want to grow this business ourselves. So over the mid- to long term, to be a mega IB and also to be mega securities, we do think that it's inevitable that there will have to be capital increases that take place. For the license periods and taking all things into consideration, we do think that it is inevitable. So this is something that is under review. But for the company as a whole, we are going to look at the mid- to long-term capital management plan and then gradually implement any increases that are necessary. So over the mid- to long term to become a mega IB, we do understand that we will have to make more contributions. So in terms of the application, in terms of the licensing itself, this is all something that takes time. So again, it will be a gradual process. And according to that process, we will take gradual action. So we don't have any specific size or timing that we're thinking about as of now. But in terms of becoming a mega IB, according to that schedule, it is under review as of now. So on the securities side, if there is a capital increase, Then, of course, in light with the support for productive financing and also in terms of the future co-growth program, we do want to have more support for venture capital. So even if we do make capital increases; on the security side, it will not have an impact on our CET1 ratio. And we also believe that we have more room to put in more capital versus our competitors. There's no legal restrictions. So through doing so, we will try to pursue the top line growth of the securities firms so that we can have a contribution on our top line from the nonbank side. So over the midterm horizon, we will set a business plan forth to this aim and try to achieve it. Hong Sung Han: We will move on to the next question from NH Investment Securities, Jung Jun-Sup. Jun-Sup Jung: I am Jung Jun-Sup Jun from NH Securities. I have a question regarding CET1 ratio, and it improved significantly this year. 2026, you are working to achieve 13% ahead of schedule. So you talked about the shareholder buyback, and I think it's up to June. So I think you are looking to conduct the share buyback program in the second half. When do you think that will actually happen? When do you think you can actually achieve 13%? If you have the guidance for CET1 in the second half, I think I'll get a better idea of the size of the share buyback. And can you also give us more color on the different strategies that you have? For example, you'll be disposing the marketable securities? Or are there plans to have a paid-in capital increase and so on? Hong Sung Han: Thank you for the question. And just give us 1 minute while we prepare the answer. Seong-Min Kwak: I am CFO, Kwak Seong-Min. Regarding the CET1 ratio, we mentioned earlier today, as of 2025 year-end, it was 12.9%. Those are preliminary numbers. So we are close to 13% at the moment. So in 2026, we feel that like mentioned earlier, I think I was a little bit more cautious, but we do believe we can comfortably achieve 13% in 2026. In terms of the timing, probably we will be able to achieve that in the first half, and our financial business plan is based on that assumption. The government is improving the overall institutional framework to encourage productive finance. And I think that can contribute to our own efforts as well. On top of that, we have internal efforts that we are making. We are developing those plans for 2026. So it's a little bit too early to share that with you today, but we are currently developing the plans. For example, you have the idle real estate disposal that was included in the corporate value enhancement plan, but we are making multifaceted efforts to ensure that we can reach early 13%. And if we progress as expected, we are quite confident that we can reach and go over 13% in the first half. That is why, like you said, the KRW 200 billion that we announced is a 4-month trust contract. So it's from February to June, the purchasing will happen during that period. And by the end of June, we plan to cancel those shares. And the details are in the disclosure. Then if -- we mentioned that if we expect CET1 to go over 13%, we can review additional shareholder buyback in the second half. So I think that is quite a realistic plan that we have. So in Q1 or in first half earnings call, I think we may be able to share some positive news regarding that topic. Hong Sung Han: So the next question will be from HSBC, Won Jaewoong. Jaewoong Won: Thank you for your strong performance amidst a challenging environment. And with regards to TSR, also, it does seem that you have given a lot of thought about this and have come up with a detailed plan. So thank you for that. However, in terms of the news reports, because it's already out and also because there's a question, this is a question that inevitably, I think I have to ask. If you look at the news reports; on the security side, right now, there is talk about a KRW 1 trillion capital increase each and every year so that you would be able to fill in your capital base. So in terms of the CET1 ratio, you said that it would not have an impact there. However, if you do make a KRW 1 trillion contribution in terms of the CET1 ratio targets that you have, is it possible to do so without impacting your CET1? So how should we look at these 2 numbers because I think that we would need a bit more comfort about this issue? And second, I think that if you look at ABL, if you look at their core capital ratio, maybe it's around 30% or 40% right now. And in the case of Tongyang also, it's being maintained at around 53%. So for Tier 1, if this is something that is introduced, then I do think that you will actually have to take more additional action. So this also would it not have an impact on your CET1 ratio? If you could elaborate a bit more about that, that would also be appreciated. Hong Sung Han: Yes, thank you very much. And while we prepare, if you could just wait for a minute. Seong-Min Kwak: Yes. On the security side and the capital increases, I do understand that there was an article by a press outlet. So we did talk to them about that. But I do think that it was over exaggerated somewhat. So in terms of the article in itself, I think that you should just understand it's a news article. And in terms of our organic growth, we want to grow our overall securities firm. And according to that strategy, on a step-by-step basis, of course, there will be a capital increase. In terms of that, that's the principle that we have. So from this year, whether it will start this year or whether it will start next year is something that we're still reviewing. Once we have made a determination and according to the size, then it could be subject to disclosure, maybe not. But we will fluidly communicate with the market, so the market can recognize the situation and be aware of it. And as mentioned before, right now, it's not only being designated as a mega IB because, of course, that would be something that we would be pursuing under the process that we want. There is a preliminary license that is required. There's a 2-year grace period. So as mentioned before, it's KRW 1.2 trillion. So even if it goes to KRW 2 trillion, KRW 3 trillion, going step by step, there are time requirements that you need to fulfill. So according to that and according to the government's overall rules, we need to follow that process. So it's not a short-term situation. It's more of a midterm type of situation and the capital increases cannot help but take place in a gradual manner because of that. And therefore, once the capital increases are decided, then through our IR department or through other outlets, we will try to communicate as much as possible. And I did mention that it would not hit the CET1 ratio. And what that's making is that the action in itself does not have an impact on our CET1 ratio at the holding company level. However, if the securities company does engage in S&T businesses or investment banking businesses, as they utilize that capital, of course, there will be asset growth that will take place. And because the asset growth would increase our RWA, we do think that the impact of that from the capital increase that they do enjoy, we do think that they would be able to engage in activities that would offset the increase in the RWA from the profitability that they enjoy from doing so. So at the end of the day, we do think that there would not be an impact on the CET1 ratio in itself. And I think that if they are able to generate an ROE, then that should not be a situation that would be negative at the group level. And on the insurance side, it's not the K-ICS ratio, but there is going to be a core capital ratio or maybe Tier 1 ratio that's going to be introduced. In terms of the timing of that, it's not '26, but it's 2027. And at the government level also, they are trying to look into avenues that giving maybe a brief period until 2030, so that it would not impact the insurance company's operations. So because it's not a disclosure factor yet, I can't go into the details because the K-ICS ratio in itself is official while other numbers are not. But I think that internally, if you look at the situation, we are preparing for this. And at the insurance company level also, of course, from 2027, they will be managing their core capital ratio. So for the 50% ratio in itself, we do think that as of now, as of the end of '25, if we do our own calculations, we actually are comfortably above that in our insurance businesses. So in terms of this core capital ratio, as of now, I don't think that there would be any request that we would have to make for an exemption or a delay. Even with what we have right now in terms of the operations, both companies, we do believe we'll be able to maintain a ratio that would be above the required amount. Hong Sung Han: Thank you for that. We do not have any further questions at the moment. For this quarter, we have also received questions on our website, especially regarding shareholder return. But I think our presentation today regarding our corporate value enhancement plan and the Q&A session have supplied sufficient information on that topic. So we will not go through the individual questions right now. If there are no further questions, we will end the Q&A session here. This will conclude the annual earnings call for 2025 of Woori Financial Group. Thank you for your time today.
Operator: Good morning. This is the Chorus Call conference operator. Welcome, and thank you for joining the FinecoBank 4Q 2025 Results Conference Call. [Operator Instructions]. At this time, I would like to turn the conference over to Mr. Alessandro Foti, CEO and General Manager of FinecoBank. Alessandro Foti: Thank you. Good morning, everyone, and thank you for joining our fourth quarter 2025 results conference call. In 2025, net profit was flat year-on-year at EUR 647 million and revenues at around EUR 1,317 million, supported by our nonfinancial income, investing up by around 10% year-on-year, thanks to the volume effect and the higher control of the value chain by Fineco Asset Management and brokerage is up by around 18% year-on-year, thanks to the enlargement of our active investors and stock of assets under custody. Operating costs well under control at around EUR 356 million, increasing by around 6% year-on-year by excluding costs related to the growth of the business. Cost/income ratio was equal to 27.1%, confirming operating leverage as a key strength of the bank. Moving to our commercial results. The underlying step-up in our growth dynamics gets crystal clear month by month. This is underpinned by the positive tailwinds from structural trends, and we are leveraging on this solid momentum through and more efficient marketing. The results of this acceleration has been clearly visible in our most recent numbers. First of all, recorded our third record year in a row for new clients at around 194,000 new clients, up by 27% year-on-year. In January, new clients were 22,000, hitting the best month on record, up more than 70% year-on-year. Second, our net sales recorded a new high at EUR 13.4 billion in the year, up by a strong 33% year-on-year. In January, total net sales saw a further continuation of this trend at around EUR 1.1 billion, up by 21% year-on-year. The mix was, as usual, characterized by the monthly seasonality for assets under management with around EUR 260 million, net sales up by 16% year-on-year, assets under custody at EUR 1.1 billion and deposits at around minus EUR 207 million as our brokerage clients were active on the platform, given market volatility, thus resulting in solid brokerage revenues estimated at around EUR 22 million, up by 7% year-on-year. Our capital position confirmed to be strong and safe with a common equity Tier 1 ratio at 23.3% and the leverage ratio at 5.07%. We are very pleased to propose to the next Annual General Meeting a dividend per share of EUR 0.69, increasing by 7% year-on-year. On our 2026 guidance, this year, we expect all the businesses areas to contribute to the revenues growth, thanks to the acceleration of structural growth underlying our business. We expect a further acceleration in both total net sales and new clients, another record year for brokerage revenues, a cost income comfortably below 30%. More details will be provided during the Capital Market Day on March 4, 2026, together with the multiyear plan 2026-2029. Let's now move to Slide 5. Before moving in the details of the presentation, let me stress that month after month, Fineco is recording a continuous acceleration of its growth dynamics, supported by very sound underlying quality. As you know, our business model relies on a diversified and quality revenue stream, allowing the bank to deal with any market environment. the banking revenues, our net financial income is a capital-light one with lending being only an ancillary business, and it's driven by our clients' valuable and sticky transactional liquidity. Let me remind that deposits are joining our platform for the quality of our banking services and not due to aggressive commercial campaign on short-term rates. That's why our deposits are so valuable and our cost of funding is close to 0. Our investing revenues are recording a sound and future-proof expansion as they are already aligned with clients' rising demand for transparency, efficiency and convenience. This approach is mirrored in the quality of our revenues mix, which is almost entirely recurring with a very low percentage of upfront fees and no performance fees at all. Finally, our brokerage is clearly experiencing a step-up in the floor of the business, thanks to the capability of our platform to structurally have a higher number of active investors, leading to structurally higher stock of assets under custody. This is driven by an increase in clients' interest to be more active on the financial market and is building a bridge between the brokerage and investing, which we are the only platform able to scope given our market position. The net financial income was up 3.1% quarter-on-quarter, led by our valuable positive deposit net sales and the higher reinvestment yield of our bonds running off. Let me quickly remind you that the quality of our net interest income, which is capital-light and driven by our clients' sticky transactional liquidity. That's why our deposits are so valuable and will be the driver going forward for the growth of our net financial income. Let's now move to Slide 8. Investing revenues increased by around 10% year-on-year on the back both of growing volumes, thanks to our best-in-class market positioning and of the higher efficiency of the value chain through Fineco Asset Management. Let me remind you the great quality of our investing revenues, mirroring our transparent and fair approach towards clients. Our revenues are mostly driven by recurring management fees with very low upfront and no performance fees at all. Let's now move to Slide 9. In this slide, we are representing the 2 main sources of growth for our investing business going forward. On one hand, Fineco Asset Management is progressively increasing the control of the investing value chain. Its contribution to the group net sales has been consistent over the cycle, thanks to its incredible time to market in delivering new investment solutions aligned with clients' needs. The contribution of Fineco assets under management out of the total stock of assets under management has been steadily growing, and it's now equal to 39.3%. On the other hand, being a platform, Fineco is the best place to catch the latest trends in terms of clients' investment behaviors. There is a clear change underway in the structure of the market with clients increasingly looking for efficient, transparent and convenient solutions. All of this is channeling a strong demand towards advanced advisory services with an explicit fee, where Fineco is by far the best positioned in Italy, as you can see down in the slide. Let's now move on Slide 10 for a focus on brokerage. Brokerage registered a record year with around EUR 256 million revenues, driven by our larger active investor base and growing stock of assets under custody. January further builds on this with EUR 22 million estimated revenues. Let me stress that the revenues of our assets under custody are expected to grow as we roll out our new initiatives on securities lending, out FX, ETFs and systematic internalizers. Average revenues in the year are around 10% higher versus 2020, with much healthier underlying dynamics. This is driven by the structural increase in clients' interest to be more active on the financial market and building on a clear bridge between the brokerage and the investing world. The brokerage business represents the best sign of how fast the structure of financial market is evolving as technology is driving a swift change in clients' behaviors, thanks to higher transparency. For these reasons, we consider the brokerage Italian market still very underpenetrated, and we see a strong opportunity to grow despite already being the market leader. Let's now move to Slide 12 for a focus on our capital ratios. Fineco confirmed once again a capital position well above requirements on the wave of a safe balance sheet. Common equity Tier 1 ratio at 23.3% and leverage ratio at a very sound 5.07% while risk-weighted assets were equal to EUR 6.2 billion, total capital ratio at 31.37%. As for liquidity ratios, the coverage ratio is over 950% and net stable funding ratio over 400%, while the ratio of high-quality liquid assets and deposits is at 80%. Going forward, we confirm that we will continue to generate capital structurally and organically, thanks to our capital-light business model. Given the strong acceleration in our growth, we are taking more time to have a clear view on deposit net sales going forward as the underlying dynamics are strongly improving. If despite the strong acceleration of our growth, there will remain excess capital, we will decide on the best way to return it back to the market. Let's now move to Slide 18. Fineco enjoys a unique market positioning to catch the long-term growth opportunity resulting by the huge Italian household wealth and the fast-changing client behaviors. The graph that we are now representing our market share on the addressable market on the stock of financial wealth of Italia households. As you can see, our market share is still small and the room to grow is huge. We are very positive on our future outlook as we have no competition on our market positioning. Fineco is the only big player with a service model truly based on efficiency, transparency and convenience. Moving now to Slide 19. The step-up of our growth trajectory is clearly materializing as you can easily see in our recent clients' acquisition. On top of the slide, you can see the impressive acceleration of new clients, which in 2025 recorded a third record year in a row and saw a record month in January just before the launch of our most recent marketing campaign. This acceleration is very sound because it's based on the quality of our offer and not on aggressive marketing campaign with short-term rates remuneration. As a result, all our new clients are improving the metrics of the bank by bringing more deposits or more business for brokerage and investing. This value is recognized by our clients as shown by our client satisfaction of 96% and on our Net Promoter Score way above the industry average. Let's now move to Slide 22. Let's now focus on our assets under custody, a component of our business that is sometimes undervalued by the market, but that is the real cornerstone of our fee-driven growth. This is true for investing as assets under custody remains the main source fueling our assets under management net sales. As you know, around 90% of our growth is organically driven. As a consequence, new clients tends to show in asset allocation more skewed towards assets under custody and the job of our financial adviser is to improve the mix into assets under management. For brokerage, the expansion of assets under custody and the growing base of active investors are key factors leading to a structurally higher flow in our revenues, which we expect to grow as we roll out our new initiatives on securities lending, out FX, ETFs and systematic internalizers. Finally, the fast-growing ETF space, we are exploring new revenues opportunity, which we explain moving on the Slide 23. Fineco is uniquely positioned to capture the strong client-driven shift towards more efficient investment solutions such as ETFs. The stock is quickly on the rise and now exceeds EUR 16 billion with ETFs accounting for half of the assets under custody fees. Thanks to our focus on efficiency, transparency and convenience, we are the only player capable of fully recognizing and monetize the structural trends with no harm on our profitability. First of all, the growing interest in ETFs is generating a positive volume effect for our investing business. Thanks to our advanced advisory wrappers made of ETFs, we can move in the investing world clients that are not interested in traditional mutual funds with no cannibalization risk on the existing fund business. At the same time, our leadership in ETF retail flows make us the main gateway for issuers in the Italian retail market. While we currently manage all costs to handle clients without recurring fees -- recurring revenue for ETFs, talks are underway with our partners to find a fair balance. Finally, Fineco's management is going to play a big role in ETFs world. Our Irish firm already launched active ETFs and more are going to be introduced. Thank you for your time. We can now open the call to questions. Operator: [Operator Instructions] The first question comes from Enrico Bolzoni with JPMorgan. Enrico Bolzoni: I wanted to start with Private Banking, if possible. You're clearly growing very nicely. I noticed, however, that the average asset per private banking client is at EUR 1 million, which is roughly the same level it was 1 year ago, even if clearly 2025 was a period of very strong market rally. So in a way, I would have expected maybe a growth in the average asset balance per private banking client. Can you please maybe explain a bit the dynamics there? There's a bit of dilution, maybe new private banking clients that are coming in that are a bit less wealthy offsetting the growth in assets of the others or anything else that would be helpful. And also related to Private Banking, would you be able to give us an indication of how much of the growth is coming from recruiting. So the new adviser you're bringing in, how many of them are particularly strong in the Private Banking segment. And then if I may go on the other end of the spectrum. So can you just give us an update on the trading-only platform, how many clients you have? And perhaps if you can attribute the very strong growth in customer this month to this feature, to this offering? Alessandro Foti: So let me start by the Private Banking average assets per clients. This is clearly -- it's perfectly current with the distribution of the Italian wealth because Italy is characterized by a significantly high median wealth. So this means that the most part of the wealth is extremely -- is much more broadly distributed than with respect to what we have in other regions. And so this is absolutely consistent with that. So there is no dilution, it's absolutely [indiscernible]. So this is the main reason. And so we don't expect any significant change in the short term in terms of average assets per client exactly driven by this because this is -- the juice of the Private Banking business is in an area of probably between EUR 0.5 million up to, let me say, EUR 5 million, EUR 10 million, but clearly, this is bringing to an average portfolio for clients that is this. And as probably is very well known, our growth is mostly organically driven. So for us, recruiting is playing a small role because during 2025, recruiting in terms of gathering new assets has accounted for not more than 10% overall and this is absolutely current with our long-term strategy. So our strategy is to keep on getting more clients that are interested in our services instead of buying clients throughout recruiting. We think that is a much more healthy approach. And so this is going to continue. On the trading-only clients, the growth is keeping on accelerating, is extremely robust. I don't know if Paolo wants to make a few comments on this point. Paolo Grazia: Yes. Brokerage-only account is a great product. So we have a large amount of clients that are entering. And so it gives us a good contribution to the revenues of the brokerage. We don't give usually the number of brokerage-only account, but it's a very strong inflow of new clients. Enrico Bolzoni: And sorry, if I might go back once again to the private banking aspect in terms of the recruiting because recruiting is growing nicely 88%, I think, adviser experience over this year. Do you see any change in the quality of advisers that are coming to Fineco? I appreciate that you don't pay them to join, they join because they like the proposition. I was just keen to know if you see maybe more private banking adviser that are joining Fineco or if the mix remains roughly the same? Alessandro Foti: So in terms of -- which are the financial -- the new financial planners joining Fineco, we have 2 clusters. There is a cluster -- so the cluster for which we have preference is, number one is regarding the senior financial planner is represented by experienced financial planners, but characterized by an evident and significant room for keeping on increasing their productivity. So we are not interested in taking on board financial planners that are not giving any interesting future evolution in terms of growing productivity. So we -- because, again, we don't need to recruit the financial planners just for sustaining the net sales because the net sales are building up incredibly strongly, thanks to the positioning of the bank. And so clearly, the reason -- the senior financial planners has to be clearly senior financial planners that they are truly interested in the business model of Fineco. And so this means that they are really interested -- that they are interested in keeping on their business for still many years to come and also they have the ambition to grow. So this is the driver. If there is a large big financial planner that is only interested in getting an upfront premium and moving, we are not interested in hiring that kind of financial planner. The second cluster is represented by the young people that we are onboarding in the bank. We are preparing for the future activity. This is an investment initially because before any young person becomes productive, it takes usually 4, 5 years, but it's paying off because the new generation of financial planners that we brought in the bank in the past years is now performing incredibly well. Also because these young people are incredibly perfectly aligned with the values of the bank that, again, characterized by efficiency, transparency and convenience. Operator: The next question is from Elena Perini of Intesa Sanpaolo. Elena Perini: The first question is about your leverage ratio because, yes, it is well above the 3% requirement, but it is slightly down versus previous periods. So I would like you to elaborate a bit more on it. And then I have another question about your direct deposit outflow in January. Probably it is linked to negative month seasonality, which is quite common at the beginning of the year. But I would like just you to confirm it. And if you can say something about your expectations for direct deposits trend this year? And finally, a question on systemic charges. Would you expect an increase in systemic charges probably relating to some specific case within the banking sector? Alessandro Foti: Yes. Thank you. On the leverage ratio, clearly, this has gone slightly down, driven by the increase of deposits because the increase of deposits by the year-end has been very strong. And so this is the reason why we are maintaining the same wording on the evolution of our capital position because on one hand, we are expected to keep on generating additional organic capital, thanks to this incredibly capital-light business model. At the same time, clearly, the bank is more and more entering a new dimension of growth. We are more and more moving throughout, let me say, very positive unchartered waters, thanks to the positioning. And so clearly, we prefer to keep on waiting in order to look how it's going to evolve the growth that we expect as we were reiterating during the guidance, we expect to keep on accelerating. And so we prefer to take our time. So it's -- so this is our thought on that. So it's -- regarding the deposit outflows in January, this is absolutely perfectly aligned with the seasonality of the month because just consider that during the month of January, you have all the expenses made by the clients through the credit cards during the month of December, it is a month of expenditures, are clearly charged on January. So we are not -- it is even better with respect, for example, last year because last year, the seasonality has been definitely stronger than this year. So we are not absolutely surprised by this. It's perfectly aligned with the seasonality. And our expectation for deposits during the full year is clearly they are going to keep on growing. This is going to be clearly driven by the continuous client acquisitions because as we explained during the presentation, the clients that are entering the bank are clients that are not attracted throughout aggressive campaign and short-term proposal are clients that they are truly interested in using the platform. So this means that every single additional client we are adding to the platform, also a small client is contributing and increasing the transactional liquidity of the bank. So the liquidity that is there for functional reasons. And so for this reason, deposits are going to keep on growing throughout 2026, clearly, according with the usual seasonality that I characterized. And clearly, you can have also temporary effect caused by the activity of clients on the brokerage platforms. So this is -- but overall, the trend is up. On the systemic charges, I'm leaving the floor to Lorena, our CFO, for a little bit more color there. Lorena Pelliciari: Thank you, Alessandro. Good morning to everybody. So on 2026, our expectation regarding the systemic charges that we are estimating a contribution around in the region of EUR 10 million, EUR 15 million because we have to consider possible additional contribution in case of the increase of guaranteed protected deposits or in the event of bank's failure. We have to take into consideration that based on the most recent news flow regarding one small Italian bank under special administration, we have to take a prudent approach on that. Elena Perini: Just a follow-up on this. We expect this to occur only in 2026 or to go on in the next years, too? Lorena Pelliciari: We have to expect the final decision elaborated by the [indiscernible], but we expect a distribution along 5 years, distribution of the contribution in 5 years. Operator: The next question is from Luigi De Bellis with Equita. Luigi De Bellis: Just one question for me. On the AI that is rapidly reshaping operating models across the financial sector. So from your point of view, what do you see as the most material opportunities AI will create for models like Fineco in terms of productivity, client engagement, advisory and risk management? And what are the key risks you are monitoring? And how do you expect the AI to reshape the competitive scenario in Italian wealth management and brokerage over the next 3, 5 years? Alessandro Foti: AI is going to be an absolutely game changer in what's going on in our industry. Fineco, as we explained, is by far the best positioned player for exploiting the huge advantage by artificial intelligence for a very simple reason because I don't want to spend too much time because this is going to be a section that is going to be extremely very well in-depth treated during the Capital Market Day because this is a very important chapter. But Fineco is -- because in AI world, what is key are 2 components. One, you have to be able to get easily access to a high-quality base of data. Second, you have to be in the position to really build up your hedges in order to create something that makes sense. And clearly, this is much, much easier for -- and less and less expensive for an organization that is a tech company in full control of the technology. It's a different story, for example, if you are relying on outsourced services or your processes managed by external system integrators. But we are asking you to be a little bit patient because on the AI space, we are going to bring something very interesting presentation during the Capital Market Day. Operator: Mr. Foti, there are no further questions registered at this time. Back to you for any closing remarks. Alessandro Foti: Thank you, everybody, for attending to our financial presentation. So as usual, if you have some more interest or you want to deep dive in some numbers and concepts, please call us any time for a follow-up. Thank you again, and see you on March 4 for the Capital Market Day. Thank you again. Operator: Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones.
Antonia Junelind: Good morning, and a warm welcome to the presentation of Skanska's Fourth Quarter and Year-End Report. I'm Antonia Junelind. I'm the Senior Vice President for Skanska's Investor Relations. And joining me on stage here in our studio today is our President and CEO, Anders Danielsson; and EVP and CFO, Pontus Winqvist. Shortly, they will take you through an update as of the last quarter, provide you with some further insights on the business operations, financial performance and our market outlook. And after their initial presentation, we will open up for questions. And there is an opportunity for you to ask questions either if you're joining us here in the room or you can use the telephone conference number provided, and then the operator will put you through to us here in the studio. But more information on that will follow later. So with that brief introduction, let's take a look at the fourth quarter performance. Anders, please take it away. Anders Danielsson: Thank you, Antonia. And good to see everyone here in the room, and welcome to you on the web as well. Before we start the presentation, I wanted to look at the picture here on the slide to the right. We had a very successful divestment quarter when it comes to commercial property development. And one of the deals was in Port 7, as you can see here on this slide in Prague, Czechia. That was 3-office building that was divested in deal. If you look at the fourth quarter report, so we had a very good construction margin in the quarter and also the full year. It is on all-time high levels. So very good performance by the whole organization, and we will come back to that. But all geographies, all units are performing on a very high level. So that's very encouraging and good. Mixed performance in Residential Development. We continue to have a strong market in Central Europe, weaker in the Nordic. So we have divested some unsold completed in the quarter with lower -- that was started before the market went down. And by that, we also have a lower profitability on those. But it's good that we are able to divest completed homes. Good divestment activity in Commercial Property Development. We managed to divest 8 real estate in the quarter and also solid performance in investment properties. Operating margin in Construction, 5.6% in the quarter, very, very high, strong. And for the full year, we managed to beat our new targets in Construction of 4%. So we managed to deliver 4.1% for the full year. Return on capital employed in Project Development, lower 1.8% due to the weaker market, rolling 12. And return on capital employed in Investment Properties is stable, stable result, 4.7% on the rolling 12 and slightly up from last year here. Return on equity, 10.2%, rolling 12, and we continue to have a robust financial position. So we are able to maintain that. The Board has proposed a dividend of in total SEK 14 per share, which is SEK 8.5 in ordinary dividend and SEK 5.5 in extra dividend. And we also managed to reduce the carbon emission in our own operations, Scope 1 and 2 with 65% since the baseline year 2015. Here, we have a target of 70% reduction in 2030. I will go into each and every stream now, start with Construction. Revenue close to SEK 44 billion, and we have some slightly up from last year, if you look at local currencies. Order bookings, SEK 43.5 billion, and we have a good order intake. And you can see that we have a book-to-build of 105% for the rolling 12 months, which means we are able to fill up the order backlog compared to how much we produce here. And the order backlog is continued to be on a high level, historically high level, close to SEK 258 billion. Operating income, SEK 2.5 billion, and we have an operating margin, as I said earlier, 5.6% in the quarter. So strong quarter result and all markets, all geographies are delivering very good results. So great work by the whole organization and being consistent with the strategy and also able to execute the projects in a very good way. We -- as you know, we have raised our target. We did that -- communicated that in the Capital Markets Day in Q4. The target is at or above 4% operating margin, and we have beaten that for the full year. Order intake was good and remains on a high level. Going to the Residential Development. The homes -- sold homes has been lower than last year. We have a revenue of SEK 1.7 billion. And you can also see that we started fewer homes compared to the same period last year. And you can see that we started -- the project we have started is in the Nordic countries. We haven't -- in the quarter, we haven't started any project in Central Europe. But that's a single quarter. You should look at the full year or rolling 12, and it's still a good market in Central Europe. And also, it's very encouraging to see that we are managing to sell the unsold completed and reducing that inventory to 358 homes. Commercial Property Development. Operating income of SEK 670 million gain on sale, SEK 758 million, and that includes the divestment, of course, of the 8 properties, but it's also some release of provisions of already completed project. Return is on a low level, far below our targets on a rolling 12-month basis. So we are working hard with that and both to increase the capital turnover and also to divest the completed assets we have. We have 16 ongoing projects, which corresponds to SEK 14.4 billion in total investment upon completion. And we have 21 completed projects, which correspond to SEK 19 billion in total investment. Of those, we have a reasonably high leasing ratio of 72%, which means we are -- we can see that we have a positive cash flow from those assets. It's good asset, high quality in good location. So I'm confident that when the investor market comes back in U.S., we can see -- we have a good product to offer the investors. Again, 8 projects divested in Q4, 12 during the year, 2 projects handed over and 2 projects started in the quarter. We started the projects in Central Europe and the Nordics. And we can see a good leasing activity and strong average leasing ratio in the portfolio of both ongoing projects and the completed projects. Moving on to Investment Properties. Stable result, SEK 83 million operating income. We have increased the occupancy rate to 85% compared to 83% in the Q3. And portfolio consists of 7 high-quality office buildings properties with a total property value of SEK 8.3 billion. Very solid performance in Q4 and for the full year. We go back to the Construction and show you some order bookings here and the order backlog. Here, you can see the blue bars are the order backlog development 5 years back, and you can see the lines rolling 12 on the book-to-build, the yellow revenue, development on the green and order bookings on rolling 12, the gray one here. So you can see that we have a historically high level of the order backlog, and there's also some currency effect there. So if you compare Q4 2025 to the same quarter the year before, it's actually increasing somewhat in local currencies, around 3% increase. So we have a good position here, 19 months of production. So you can see that on -- if you look at the different geographies as well. All geographies has over 100% book-to-build, and that's also encouraging for the future. We have 19 months of production. So a solid position here when it comes to our order backlog. And we can continue to follow our strategy to be selective in the market and go for projects where we can see competitive advantage and a good track record as well. With that, I hand over to Pontus. Pontus Winqvist: Thank you, Anders. So let's dig in a little bit deeper into the numbers. And you can see that we had a revenue of SEK 43.9 billion here in the fourth quarter. That's actually an increase with 1% if you take local currencies. If you then, at the same time, look to the revenue for the full year of SEK 171.1 billion, that's an increase of 7% year-on-year. The operating income in the quarter increased from SEK 2.1 billion to SEK 2.5 billion. That's an increase of 25% in local currencies. So quite a good increase here in Construction. And as you heard earlier, we had an operating margin of 5.6% in the quarter, which is good. But even better, I would say, is the margin for the full year of 4.1%, in line with our just raised targets. And if you look into the different geographies here, you can see that we are actually delivering a higher profit in all of the geographies and also a higher margin if we compare to the quarter -- or to the fourth quarter last year. Worth to mention is that there is a release of a claim provision in the U.S. impacting with around SEK 400 million. But you should also remember that this is how we are recognizing our claims. We are very conservative, and we are releasing them when we are sure that there are no outstanding risks. So in total, I think what you see here is a very strong delivery from our Construction business in the fourth quarter and for the full year. Going then into Residential Development, is maybe not as good as Construction, impacted by the market. You can see also that the revenue in the fourth quarter is quite much lower than it was the fourth quarter last year. That's because we are selling less than we have done the fourth quarter last year. And that is, of course, some reflection of the market and also it comes a little bit different when we are starting projects. What you can see is though that the S&A costs has went down in the quarter from SEK 138 million to SEK 122 million, but even more for the full year from SEK 605 million to SEK 460 million. So I think that is a sign that we gradually has, what you say, adjusted the organization according to the current market standards. We have also sold quite many of the previously unsold completed properties, and that has an impact of the gross margin because we -- it's good to be out of that stock of unsold residentials, but of course, impacting the gross margin and then the operating profit. So you see in the quarter, 1.8% in operating margin. That's, of course, not where we want to be. For the full year, 6.5%. That's better. But as you know, we have a target for this business to reach 10% or better. Then if you look into different geographies within Residential Development, you can see that the Nordic operations is where we have a weak quarter. And the European operation is delivering a solid quarter, but we have a lower sales rate than we have been used to during the previous quarter. And that's not dependent on the market. That's dependent because we haven't had any projects actually to launch during this quarter, which means that we cannot have any new sales start, which then takes down the number of sold units and impacting the profit somewhat also in the European part of the residential business. And here, you can see how this -- that started, then is 376 compared to 620 last year. And that's a result then also of -- sorry, now I mixed, but it's around the same. You see that we sold 379, and we started 376 units here in the quarter. And if you look then into the homes in production, you can see that the top of the bar here in the fourth quarter, the unsold completed, as I explained, has reduced. So we reduced from the end of last year from 477 to 358, and we have also decreased that during the fourth quarter as such. And as I said, when we are selling those residential units, that is impacting the gross margin for the quarter for the Residential business. Going then into the Commercial Development business. As you heard earlier here, we divested 8 different projects, representing a revenue -- or a divestment of SEK 4.6 billion. And here, it's also worth to mention that these divestments is positively impacted from release of previous -- release of provisions from previous projects. So if you are looking into the Commercial Development portfolio, I would say a more representative profit content is looking into our unrealized values that we have than to take what we actually delivered this quarter. So it's good, but it's also very good to see, I would say, that we were able to divest in such a good manner in the fourth quarter. So it's the highest number of divestments in a single quarter for quite a long time. If you're then looking into the unrealized gains, you can see here that what I just explained regarding how you should forecast the coming gains from this business that the top of the bar here has decreased, which means that the unrealized gain within the completed properties is quite low right now. Then if you look into the completion profile of when our properties in Commercial Development will be completed, and you see that in the different bars here. And at the same time, you see the leasing ratio on the green dots. You can see that then we have around SEK 17 billion of completed properties with a 72% occupancy rate. It's one quite big property that has been ready in the fourth quarter. So it's taking down the total leasing ratio in the completed properties somewhat. But if you're looking into the total profile here and if you would -- are interested and compare it with earlier Qs, you can see that it's actually quite a positive development in many of these different assets. So do that. That's quite fun. And then here, you can see that we had a leasing in the quarter of 46,000 square meters. And you can also see that we have a higher leasing ratio in the ongoing projects than the completion ratio, which is always a good sign that we have -- we are leasing in the same tempo as we are continuing our projects. So that is good, I would say. IP, Investment Properties, I would say, quite a calm quarter. We have a representative operating net here. We haven't added any properties. We haven't done anything with the values. So SEK 83 million is very representative for, I would say, that portfolio that we currently hold here. What is good, though, is that we increased the occupancy rate from 83% by the end of quarter 3 to now when we have 85% leased. So a good development there. And then if we are going into the total group and the income statement here, you can see that we had an operating income of SEK 3.3 billion. Then we have central costs of SEK 281 million. Those are impacted of that we have a little bit less of income from our combined portfolio of asset management and BoKlok UK. And we also have a negative impact of periodization effect from insurances, that actually was positive in the same quarter last year. I would say, though, that the full number of central costs of SEK 712 million is quite representative for what you could expect going forward if there is no special things that is happening. Going a little bit further down, you see a financial net of SEK 141 million for the quarter and a tax of SEK 653 million. That's a tax rate of 21%, same tax rate that we are showing for the full year. And I will also say that this is reasonable, representative with the current business mix that we see right now. Of course, if we have 1 quarter where we have more divestments of properties, that could impact. And if we have more -- another geographical composition of the profit, that could impact somewhat. But I would say that this is representative. Going then into the cash flow. Here, you can see that we had a strong cash flow here in the fourth quarter, SEK 2.5 billion, actually the same as we delivered in net profit. So I would say, a continued good and stable cash flow generation from the business. And an important part of that cash flow is, of course, coming from our working capital development within the Construction. And here, you can see that the working capital came up from SEK 30.1 billion in September to SEK 31.7 billion here for the full year. And even though it looks like it's a decrease compared to the fourth quarter last year, if you were looking into real cash flow, it was actually an increase with SEK 1.4 billion. But then we have a currency effect, a negative currency effect of SEK 4 billion for the working capital. So you can also see if you're looking to the average free working capital compared to the revenue that, that is stable with a slight increase. So solid cash flow generation from our Construction operations. Looking into investments and divestments, you can see that we are actually now in some net investments territory. We have, for a couple of quarters, been in net divestments, but it's also so that we divested a couple of those Commercial Development properties here in the fourth quarter, but they will be transferred to the buyer and paid of the buyer during the first half of this year. So that will improve then the cash flow from divestments during Q1 or Q2. If you look into the capital employed, you can see that, that has decreased somewhat from SEK 66 billion to SEK 63.8 billion. Also here, you have, of course, a currency effect. So I would say, without currency, it's relatively stable. And this cash flow then takes us into, I would say, a very stable situation when it comes to our ability to use funds. We have available funds of SEK 28.6 billion. And here, you can also see that we have a quite balanced maturity profile of our outstanding debt. And this takes us then to the financial position, where you can see that we have our adjusted net cash position of SEK 11.5 billion. And you also remember that here, we have a target to below -- to be above the net debt position of minus SEK 10 million. So the delta there is SEK 21.5 billion. And you can also see that we have had quite a stable development of the financial position here during more than a year. We ended last year with SEK 12 billion. We have now SEK 11.5 billion. And it's also then actually taking up our equity to asset ratio from 36.6% to 39.9% by the end of the fourth quarter. So by that, Anders, some comments regarding the markets? Anders Danielsson: Sure. So if we look at the overall market outlook, it's unchanged overall compared to the last quarter. But if I comment on the different streams here. Construction, the civil market in U.S. and Sweden is -- we expect it to continue to be strong. On the building sector -- in the building, its -- the market outlook is stable. We could see a good inflow of data centers in the fourth quarter, close to SEK 10 billion, which is encouraging, and we expect that market to continue to be stable. The civil market in the rest of Europe is pretty much stable, which is good, driven by infrastructure, defense, investment and so on. So weaker in U.K., however. And the building market in Nordics are weaker due to the less residential construction and commercial property construction, but stable in Central Europe. Residential Development, very good activity in the Central Europe. We believe it's going to continue to be a strong market and weaker in the Nordics. And we can see some improvement when it comes to interest rates decrease. We can see amortization rules are easing up in Sweden. But I believe it will take some time. And we -- even though it's underlying need for homes in the market we are operating in, it will take some time. It requires economic growth. So the consumer confidence increases. But we are ready to start. We already start project today where we see that we can deliver according to our targets. And Commercial Property Development, stable in Central Europe and in the Nordics. You have seen the divestment activities here. We also have a good leasing activity. Weaker -- continues to be weaker in the U.S. market. Recovery is lagging compared to Europe. But there is a clear trend that flight to quality, so to say, in all markets. And we have very attractive building to offer the market. And we can see that we have a healthy leasing ratio. But the investors in the U.S. are still hesitating before they go on and invest in properties. Investment Properties, polarized occupier market. We have a healthy leasing ratio. And also here, we can see a polarized market. You have to offer Class A building in a very good location, high quality, and that's exactly what we can offer. So I'm confident in that. But it's a competitive market, but we believe that the rents will remain mostly stable. So if I ending up this presentation, we're looking into how we're doing compared to our targets and limits here. 4.1% in Construction margin, above our recently increased target, very encouraging to see. Return on capital employed, 1.8%. We were not satisfied with that, obviously. So we are working hard to increase that return for the project development. Investment Properties, 4.7% is on a good level to reach. Be able to reach the 6%, we need to see some market increase -- market value increase in the properties we have. So that's an ambitious target for the future. Return on equity, 10.2%, also below our target. And we have a very strong financial position of net cash -- adjusted net cash of SEK 11.5 billion. And the payout ratio, as you can see, we have 40% to 70%, but that goes for the ordinary dividend. And we have proposal, is SEK 8.5 in ordinary dividend, increase from last year, before was SEK 8. And then we have this extra dividend, which gives us an outcome if the AGM approves that of 93%. With that, I hand over to Antonia to open up the Q&A. Antonia Junelind: Very good. Thank you for that. So yes, now it's time for your questions. If you are joining us online, please use the telephone conference number provided and follow the instructions by the operator, and he will put you through to us here in the studio, and you will be able to ask your questions to us. If you are here in the room with us, then you can just raise your hand. We will bring a microphone, and I will ask you to start by stating your name and organization. So looking out into the room and checking with our external guests here, it doesn't seem like there are any raised hands at the moment. Or yes, we have one over here. Yes. Thank you. Unknown Attendee: Yes. [ Oscar Sandstrom ], entrepreneur. Regarding Construction, you're growing in the Nordics, but do you see any bottlenecks that could hinder further growth? Anders Danielsson: I see good opportunities when it comes to the civil market, if you're asking about the Swedish market. So we see increasing investment in infrastructure. The need is very high on that. And we also see increasing investment in defense. So that's -- I'm encouraged by that. Then on the lower side in Sweden is Residential construction. It's not only our development that is on the low side here. It's all, very few new homes that are coming out in the market, and that goes for the Commercial Property Development. So we are dependent on economic growth as an industry. So I would like to see some GDP growth, and that will absolutely help us. But we are in a good position. Antonia Junelind: Excellent. So I will then move over to the online audience, and I will ask you to please introduce the first caller. Operator: The first question comes from the line of Keivan Shirvanpour with SEB. Keivan Shirvanpour: I have just 2 questions. And the first question is on capital allocation. So you have about SEK 11 billion in net cash, and you expect nearly SEK 6 billion in cash flow in the first half of the year from -- transfer from property projects. So that equates to the size of the dividend that you are proposing. Given that, what can you say about opportunities here in terms of capital allocation? How should you allocate your capital in 2026? Anders Danielsson: Yes. We don't give any forecast of that. We have a dividend policy to 40% to 70%. Our ambition is, of course, to continue to deliver good results and be able to be a predictable dividend provider for shareholders. But we don't give any forecast for this year, obviously. Keivan Shirvanpour: But would you consider increasing investments in CD projects or potentially evaluate buybacks would be an alternative? Anders Danielsson: We said in the Capital Market Day that we have -- right now, we have enough capital for the project development operation, and that, we have the same view right now. Keivan Shirvanpour: Okay. Good. And the second question is then related to commercial property development and the completed portfolio that you have. So you made quite a lot of divestments in Q4, but you also have this completion in the U.S. So if I'm not mistaken, your completed property portfolio should be about 80% to 90% in the U.S., including some residentials. What can you say about the prospects for divestment of these assets? And do you consider residentials to be potentially easier to divest than the commercial buildings in the U.S. Pontus Winqvist: First, I would say, regarding our portfolio in the U.S., you are right. It's reasonably big, and it's both commercial offices and some rental residentials. But you can say we are evaluating each and every project as such, working with leasing the properties in order to receive a decent operating income from those. Then if we think that we get the price that they actually are worth, we are absolutely ready for divestments. But because we have a very solid financial situation, we are not interested in any kinds of fire sales, but we are interested in reasonably good deals. Keivan Shirvanpour: Okay. And you have previously mentioned that when the bond -- 10-year bond yield is about 4%, you see that divestment prospect is quite weak. Do you continue to have that view? Pontus Winqvist: We continue to have the view that we are following the market. And if someone, as I said, is interesting to buy and pay a decent price, we are interested to negotiate. Antonia Junelind: Thank you very much. And we will move to our next person in line here to ask questions. I think it is from Jefferies. Operator: [Operator Instructions] Our next question comes from Graham Hunt in Jefferies. Graham Hunt: I'll ask 2. Maybe I'll just come back to the capital allocation and try in a different way. Just on the special that you have announced, would you be able to just provide some color on the thinking around why you felt that was appropriate to propose? And should we take it as a signal that you're relatively comfortable with now the level of net cash that you have on the balance sheet and this is a signal that you're limiting any further buildup there? And then the second question, I think just back on Construction. I wondered if you could comment on sort of what you're seeing in the early stages of Q1, how you're seeing particularly on the data center segment where, as you mentioned, you had a flurry of good orders in Q4. We've seen some enormous CapEx numbers from some of the hyperscalers this week. I just wondered if you could comment a little bit on how the outlook for those types of projects in the U.S. is looking and whether we could expect -- if you're seeing anything in the pipe already for 2026 on that front? Pontus Winqvist: Okay. Thank you, Graham. I'll start with the first one, and I think Anders take the second question. And regarding the capital allocation, and as I understand your question, it's about our reasoning -- or actually the Board's reasoning when it comes to the special dividend and the ordinary dividend. I think it's clear, as you see, we rose the ordinary dividend from SEK 8 to SEK 8.50. And then we think that, yes, we have a stable financial position, which allows us to also distribute some extra dividend. And having said that, that is, of course, taking in consideration to be able to be active in our market and take the opportunity for potential deals that may occur both in CD and RD. So I think it's a balanced adjustment of where we are and what we know right now. Anders Danielsson: Graham, I will take the last question on the data center. We have been talking about the data center market for quite some -- few quarters now. And it's a good opportunity, important part of our operation as well, especially in the U.S., but we also see some investment in data center here in Europe. We believe it will continue. So we have a good pipeline. We have repeat customers, and we saw that the order intake in Q4 was really good, close to SEK 10 billion. So I'm confident in that, and we are well positioned to take advantage of that market going forward as well. Graham Hunt: And maybe just one quick follow-up on the capital allocation. Are you considering any other investment opportunities given your flexibility on the balance sheet beyond your core business lines around Commercial and Residential Property, whether that's in -- you have been in the past in PPPs or some of your peers are looking at data center development itself. I just wondered what your thinking was around that. Anders Danielsson: Yes, I wouldn't rule it out, but our main focus is on the core operation, Residential and Commercial Property Development and also that we will continue to invest in the -- our own portfolio within Investment Properties. That's for sure, to build that portfolio just above SEK 8 billion today, and the target is between SEK 12 billion to SEK 18 billion over time. So that's the focus. Antonia Junelind: Thank you, Graham. So we will now continue with the next caller. Operator: The next question comes from Albin Sandberg with SB Land Markets (sic) [ SB1 Markets ]. Albin Sandberg: Sorry, SB1 Markets that would be. But a question on the reversal of the U.S. provision. Pontus, you mentioned that -- you said it was business as usual when you reverse this kind of provisions when you feel sure enough about it. So the question is if you could quantify if there are substantial left of these provisions? And how long are they dated? Are we going back to the 2017, 2018 issues? Or that is too long to go back? That would be my first question. Pontus Winqvist: Okay, Albin. So I'll try to answer. When it comes to provisions or potential, this was actually a claim settlement. And you -- what is happening here is that we were not taking any kind of profits when there were claims there that was connected with some uncertainty. Then when this was solved, this situation, then we released that part of the claim. And there are, of course, other potential claims out in the project portfolio, but it's nothing that we can comment also for the future. They can happen, and they will probably happen from time to time when we have some kind of issues with our clients. So I would say it's a part of the regular business. But this was, of course, quite big. Normally, they are smaller amounts, and then we don't think that there are any reasons to comments on those. But when we have this $43 million, it's substantial, and therefore, we think it's worth for you to know. Albin Sandberg: Great. And any comment about how old project this was related to? Was it a new one or older one? Pontus Winqvist: It's completed, I can say. Albin Sandberg: Okay. And my second and final question was on the starts in Residential. And you mentioned that we should look upon it on a rolling 12-month basis, still see you have a quite positive market outlook for that business. So I just wondered were there any specific reasons for no starts in Q4? I don't know what that could have been or -- because maybe I would have expected a little bit higher number for starts. And whether there's a sort of, I don't know, if you can call it, a catch-up effect heading into 2026 because of the fact that there were no starts in Q4? Anders Danielsson: Yes. I would say that the lack of start in Central Europe in Q4 is not any signs of lower market outlook. We believe, in that market, we have a good pipeline, but it's -- if you look at a single quarter, we didn't have any project, was ready to start in the fourth quarter, but we are working with the pipeline, and I'm confident in our position going forward. Antonia Junelind: Thank you, Albin. And I will just check now with the operator here. It looks like we've come to the end of the list of people that want to ask questions for us here. Can you please confirm that? Operator: There are no more questions over the phone. Antonia Junelind: Perfect. Thank you very much. So that means that we have answered all the questions that were here for us today. So I would like to first say thank you, Anders and Pontus, for your presentations here. And I would like to say thank you for all of those that joined us here in the studio in Stockholm. And lastly, thank you to those of you that watched us online. A recorded version of this webcast will be available on our web page shortly after this. And we will be back with more comments and presentations when we release our first quarter report in May. Thank you very much, and have a lovely day.
Essi Nikitin: Hi, everyone. Welcome to YIT's Financial Statements Bulletin 2025 Webcast. My name is Essi Nikitin, and I'm heading the Investor Relations at YIT. The results will be presented to you by our CEO, Heikki Vuorenmaa; and Interim CFO, Markus Pietikainen. Without further ado, I will hand over to Heikki to go through the latest developments in the company. Please go ahead, Heikki. Heikki Vuorenmaa: Thank you very much, Essi, and welcome, everyone, to today's webcast. Today, we will have a comprehensive agenda ahead of us. First, we review our full year '25 performance. Then we will take the deep dive into the fourth quarter and following up on providing some additional details regarding the news related to earlier today. But let's begin with the overview of the full year. So the first year of our strategy that we introduced 2024 is now behind. We made progress across the several targets, areas, including our adjusted operating profit margin, return on capital employed, gearing and the customer and employee NPS levels. Our financial position continued to strengthen. It was supported by improved financing terms and EUR 120 million reduction in the net debt. The business segments delivered different types of performance throughout the year. In the Residential Finland, the inventory of unsold completed apartments declined, and we initiated new consumer projects in response to market demand. However, the activity in the primary market remained limited. Within the Residential CEE, our apartment sales grew by over 30% as the market conditions strengthened. We launched a record level of new project starts. Both of these will further establish this region as our principal residential market within the company. The Infrastructure segment achieved robust results. Revenue increased by more than 30% and the positive trend across all the key performance indicators continued throughout the year. In the Building Construction, we secured multiple new contracts with both public and private sectors and continue to focus on capital release from non-strategic assets. For the full year of '25, our revenue decreased, while the adjusted operating profit increased. Full year revenue amounted at close to EUR 1.8 billion, and adjusted operating profit increased to EUR 54 million, representing 3.1% of the total revenue. The profitability continues to improve. However, as our strategic objective is to exceed 7%, further progress and actions are required. Our full year operating profit improved to EUR 45 million. That is approximately EUR 100 million more than in 2024. This improvement was primarily driven by improved operational performance and significantly reduced adjusting items compared to the previous year. Adjusting items in 2025 amounted to EUR 9 million, which were associated, for example, to our operations in Sweden. In contrast, transformation-related adjusting items in '24 were substantially higher at EUR 86 million, even including the gains from selling of our equipment at the beginning of 2024. But let's close the full year results now and move to the Q4 '25 overview. And we start with some key highlights from the quarter. Revenue and adjusted operating profit both increased. The net debt and gearing continued to decline, and it's reflecting the good progress in the capital efficiency initiatives as well as the strong operational cash flow during the quarter. Our order books increased in both contracting segments, supported by a robust industrial construction activity. Residential CEE delivered a solid quarter with a higher revenue and profits. Market conditions remains favorable for us. The revenue growth for the quarter was driven by the Residential CEE and Infrastructure segments, while the revenue from Building Construction and Residential Finland declined year-over-year. This was actually a first quarter since second quarter 2023 in which the group's revenue increased. Adjusted operating profit increased from EUR 13 million to EUR 25 million during the period, resulting in adjusted operating profit margin of 4.5%. Overall, quarterly performance aligned with our internal expectations. But now it's the time to double-click on the segment performance, and we start from the Residential Finland. Market conditions continue to influence the performance of this segment. And that is, of course, reflected across all the key performance indicators. Also, there has been improvements in the segment performance during '25, it is evident that the additional measures are necessary given the financial results relative to our established strategic targets. I will discuss some of these actions in more detail later. During the quarter, our unsold completed apartments inventory continued to decline in the Helsinki Metropolitan Area. Several projects reached the full occupancy. However, overall inventory in the capital region remains higher than we prefer. We achieved a total of 211 completions during the quarter, primarily outside of the capital area. While the inventory levels in those regions have increased slightly, they continue to be within normal or low ranges. On the full year comparison, our unsold apartment inventory declined approximately 25%. It is again important to note that there are no scheduled completions in the Residential Finland business over the next 6 months. And when we look at our starts, sales and the inventory levels, we have now achieved balance between those three different elements. We have been reducing approximately 50% of the unsold inventory what we observed in 2024 from those levels. Initiation of a new project is guided by the consumer demand and the current product portfolio has also experienced a significant transformation in the past year. We remain to commit to launch new developments in accordance with the evolving market requirements. Completions in '26 will be again back-end loaded, mostly focused on fourth quarter. Overall, there is a moderate increase in projected completions from 2025. However, it is important to highlight that the 450 units that we are expected to complete during 2026 still falls significantly below the typical levels what we have had in this business on historical terms. But leaving the Residential Finland behind and moving to our business here at the Central Eastern European countries. We achieved a significant number of project completions in the fourth quarter, and that resulted increase in revenue and profit compared to the same period last year. The profitability margin for the full year was temporarily affected by the upfront investments and our ongoing regional expansion, which are part of our strategic initiatives. Project gross margins have remained at targeted level and the market conditions continue to be favorable. And also despite increased investments in the new project starts and plots in '25, capital employed remains well managed and under control. In the fourth quarter, we sold a total of 873 homes within the Residential CEE market. Out of these, 286 were sold directly to consumers, while the remainder were sold to investors or cooperative housing companies. The sales performance remained strong across all operating countries. So following of that, there has been a significant acceleration in the project starts last year, and we started construction on a total of 1,600 apartments in '25. Our current plot inventory is sufficient to support the development of approximately 15,000 additional homes. However, in selected cities, we are seeking opportunities to accelerate growth and further invest in the plot reserves to secure our future development pipeline. For the 2026, we are anticipating an approximately 50% increase in completion compared to 2025. The business continues to demonstrate significant seasonality, as you can observe from the slides. The residential completions are expected primarily in the fourth quarter. And as our financial reporting adheres to IFRS standards, both revenue and profits are recognized exclusively upon completion. Sales from our joint venture projects are also progressing well. During the quarter, we sold a total of 220 YIT homes and are particularly pleased with the launch of sales in our new KALEVALA project in Czech. This year, the completion targets with the joint venture business model is set to increase to 650 units, which then will bring additional 40% volume next to our stand-alone project. We will continue to utilize these SPV structures for selected projects in the residential CEE region. It provides us a flexibility on the project starts and minimizes our own equity investment requirements for those selected projects. And as always, all equity commitments are fully disclosed in our annual reports. But leaving the Residential segments now behind and moving to Infrastructure. Our Infrastructure segment delivered a revenue increase of over 30% in 2025, exceeding EUR 500 million for the full year. The growth was primarily driven by the successful tendering across the various Infrastructure Construction segments and higher volumes within the industrial construction. The profitability remained consistently above the 4% throughout the year, and the team continues to seek further internal efficiencies to achieve the strategic targets established for the segment. The improvement in the capital employed during the fourth quarter was largely connected to our operations in Sweden, where several projects were successfully completed at the year-end. Our order book also is strong and has grown compared to the previous quarter. It is on a robust level of 20 months work and level is nearly EUR 900 million. When we look at the infra market here in Finland, so the market remains dynamic, both in private as well as in the public sector. In early 2026, we announced strategic investments to acquire rail construction capabilities, further strengthening our position within the Finnish Infrastructure market. Notable highlights from Q4 include the order of excavation works for the Vantaa Energy project and the data center development in Kouvola, both which are already now under production. Moving on to the Building Construction. Then the main news from this segment during the Q4 was the capital release from Tripla Mall, totaling of EUR 51 million. It reduced the capital employed on this segment significantly. For the full year, the profitability increased despite the decline in the revenue. The adjusted operating profit over the past 12 months stands at 2.5%, indicating that the additional efficiency improvements are necessary to achieve the segment strategic targets. The order book has increased compared to the previous quarter, with the team achieving notable success in tendering activities, particularly during the fourth quarter. The order book represents approximately 18 months of work and approaches EUR 1 billion in value. Few highlights from the quarter include the school project in Espoon, swimming and sports hall in Helsinki, and the implementation phase of the Kupittaa project in Turku. It is important to note that the certain project value is added to the order book in full only after the development phase is completed. Then when we look at our key operational metrics, we can say that the homes currently under the production is about 3,700 units. 80% of the production is concentrated within the Residential CEE area. Project margin deviations remained well managed and implemented measures to enhance the productivity are evident throughout the project portfolio. The status of the overall supply chain remains robust. Then when we look at the overall market and our assessment of the market situation, it remains unchanged. The Central Eastern Europe, residential sector continues to demonstrate favorable conditions, whereas in Finland, primary market sales volumes are not expected to increase in 2026. The Infrastructure market is performing well and Building Construction, which includes several types of construction activities, remains stable. This concludes my remarks for now, and I will hand over to Markus to you to provide more detailed overview of our financial performance. Markus Pietikainen: Thank you, Heikki. I will walk you through the financials. This is a Q4 2025 summary slide. Return on capital employed was at 3.9% at the end of Q4, up year-on-year from 2.1%. Operating cash flow after investment was in line with Q4 2024 at EUR 111 million. Gearing at 71%, which is close to the strategic target of between 30% to 70%. Net debt, down EUR 120 million year-on-year at EUR 560 million. Guidance, EUR 70 million to EUR 100 million adjusted operating profit for continuing operations in 2026. Let's look at each of these topics in more detail in the following slides. Capital release and capital efficiency in the business operations are top priorities for us. And during the Q4, we released almost EUR 100 million of capital. This was especially supported by the successful refinancing of Tripla, which enabled Tripla to pay us EUR 51 million as return on capital and profit distributions. Our return on capital employed improved by 1.8 percentage points from 2024 to 3.9%. We will continue to drive profits and capital turnover to reach our financial target of at least 15% by end of 2029. Some highlights regarding capital employed from the segments. In Residential CEE, we were able to release EUR 30 million of capital during the year, even though at the same time, our apartments under production have increased by over 60%. This is mainly thanks to our apartment sales and strong portfolio. The Infrastructure segment continues to operate with negative capital employed, supporting the whole group's financial performance. Let's move on to the cash flow development. The operating cash flow after investment has been positive for the last 2 years. Here, we can see strong seasonality with most of the positive cash flow being realized in Q4, just like in 2024. The seasonality reflects the timing of the residential completions. The operating cash flow after investment was EUR 65 million for 2025. We will continue the work to improve cash generation. Gearing decreased to 71%, down by 17 percentage points year-on-year, supported by positive operating cash flow and hybrid bond issuance in Q2 2025. Net interest-bearing debt was EUR 560 million at the end of Q4. This is a decrease of EUR 120 million from the end of 2024 and EUR 235 million from the end of 2023. The net interest-bearing debt include IFRS 16 lease liabilities of EUR 258 million as well as housing company loans of EUR 130 million. The housing company loans decreased by some EUR 50 million year-on-year. This is an overview of the main components of assets and liabilities. YIT had EUR 712 million worth of plots, enabling a pipeline of some 15,000 apartments, both in Finland and CEE countries. This is down by EUR 81 million year-on-year. The book value of the completed inventory amounted to EUR 322 million. This is down by EUR 72 million year-on-year. Production has increased by around EUR 60 million as we have accelerated our production, especially in the favorable residential markets of the CEE countries. The book value of Tripla is now EUR 136 million, reflecting the EUR 51 million capital return received during the quarter. The adjusted net debt was EUR 173 million, and this excludes the operational IFRS 16 lease liabilities and housing loans. The maturity structure remains also in balance. When comparing interest-bearing debt to our key assets, we can see that our underlying asset base is 2x the gross debt number. When we announced our strategy in November 2024 for the next 5 years, we said that our strategic focus in capital allocation is to only employ capital to our residential projects during the construction period. Today, we announced that we have defined non-strategic items that are not part of the company's strategic core operations in line with our strategy and which we intend to dispose during the strategy period. These non-strategic items are in the Residential Finland and Building Construction segments and include, for example, our investment in the Mall of Tripla, equity investments in long-term property development and completed self-developed commercial projects with sales risk. The total value of these non-strategic items was EUR 340 million at the end of 2025, which is 2x our adjusted net debt. This also brings changes to our financial reporting. Going forward, the profit impact from non-strategic items is excluded from the adjusted operating profit. Also, capital employed will be presented as operative capital employed, which includes assets and businesses aligned with the company's strategy. Return on capital employed will be calculated based on the operative capital employed. As a result of the change, the reported adjusted operating profit and operating capital employed will more clearly reflect the profitability, capital usage and capital efficiency of the company's strategic business operations. The changes will take place starting from the beginning of 2026. The changes do not have any impact on the company's financial targets. Then on to the guidance. We expect the group adjusted operating profit for continuing operations to be between EUR 70 million and EUR 100 million in 2026. The guidance is aligned with the new adjusted operating profit definition, which was discussed in the previous slide. The residential market in the Baltic countries and Central Eastern Europe is expected to continue favorably, contributing positively to Residential CEE segment's capability to generate profit. In Finland, the primary apartment market volumes are not expected to increase in 2026. In Residential Finland segment, low amount of completions during 2026 will limit the segment's capability to generate profit. In Building Construction, the operational performance is expected to improve. In Infrastructure, the operational performance is expected to remain stable. Heikki Vuorenmaa: Thank you very much, Markus. And there are also several important topics remaining, like I said in the beginning of the webcast that we need to address. And those are primarily regarding the news released earlier today. But before going there, so let's take a look on how did we do the progress against our strategic targets now on the full year basis. We achieved improvements in our adjusted operating profit margin and return on the capital employed despite the ongoing revenue decline still in 2025. Each segment advanced in line with its respective plans given the prevailing market conditions and the internal performance and efficiency indicators are trending positively. This gives us a good foundation to enter second year of our strategy execution. And as a result of the progress, we are increasing the growth targets previously communicated for our contracting segments. The Industrial Construction business pipeline has exceeded the expectations, supporting us to double the revenue growth targets for both the Infrastructure and Building Construction segments throughout the strategy period. Accordingly, we will -- we intend to reorganize our Energy and Industrial Construction operations into a new Digital Infrastructure business unit. In external reporting, we continue to share both revenue and profits under both contracting segments for now. Over the past 12 months, we have strengthened our team by recruiting additional talent, and we will continue to do so to enhance our capability to deliver the comprehensive turnkey solutions for our customers in the Digital Infrastructure space. But while we are witnessing a faster-than-expected progress in the Digital Infrastructure business, it remains essential to pursue additional operational efficiencies to align our operations with the current market conditions, both in Residential Finland and Building Construction segments. We intend to transition from a regional line management structure to function-based organization. And this shift will enhance our focus on core capabilities and provide greater flexibility to scale the business in response to the market demand. In connection to this change, we are also evaluating our internal management processes, how we are following up the performance and evaluating if we would move to percent of completion management system. This could also then impact on the external segment reporting principles as well. Today, we have initiated change negotiations in Finland to plan for these needed changes. The estimated cost savings are projected at EUR 15 million with full realization expected by end of '27. Our forthcoming quarterly reports will include updates on the progress towards these targets. But this is all for now. And operator, it is time for the questions. Operator: [Operator Instructions] The next question comes from Svante Krokfors from Nordea. Svante Krokfors: A couple of questions. First one regarding the slow apartment sales in Finland. What kind of measures are you taking to continue to reduce the number of unsold apartments going forward? Heikki Vuorenmaa: Thank you, Svante. And of course, when we look at the demand picture and the activities are taken. So we have been applying different type of campaigns during the past couple of years to significantly reduce the inventory levels from, let's say, the highest level that what we had in 2024. Those have been quite effective when we look at certain cities outside of the capital area, where we see that we are actually operating in a relatively normal levels and achieving our fair share of the market. The inventory level remains elevated here in the capital region, and we need to look then project-by-project selectively what type of actions are needed in order to boost the sales there. Svante Krokfors: Okay. That's quite clear. Then a question regarding the EBIT guidance for 2026. What kind of assumptions do you have for the high end and low end of the guidance? I guess you mentioned that Residential Finland will have difficulties to generate positive results this year. So, where will the EUR 30 million to EUR 50 million -- sorry, EUR 20 million to EUR 50 million increase from the EUR 50 million baseline come from? Heikki Vuorenmaa: If you look at the overall different segments, so what is quite notable is amount of completions that will take place in our Residential CEE business this year compared to the previous year. So we expect the completions to increase by 50% compared to 2025. We also, like I said, so we expect our operative performance in the contracting -- both contracting segments to improve while we do not expect the market conditions in the Residential Finland to improve in 2026. As usual, so there is -- at this point in time, so there are uncertainties in the market picture, which is then reflecting the range of our guidance that we have given today. Svante Krokfors: Okay. And could you tell something about the timing of the EUR 50 million cost savings announced by the end of '27. Will that have an impact on '26? Heikki Vuorenmaa: So we have initiated the change negotiations or kind of communicated that we will initiate the change negotiations today. So we will come back to the further details as well as the specific outcomes then on the following quarterly results as we have made a progress against the target. Operator: The next question comes from Anssi Raussi from SEB. Anssi Raussi: Just one question from me, and it's regarding your financing expenses. So how should we think about financing items in 2026, like, let's say, if we compare it to Q4 run rate or what kind of impacts or factors you see here? Heikki Vuorenmaa: Thank you, Anssi, for the question. We do not specifically provide a guidance on that specific element. But Markus, if you want to maybe give a bit flavor on that topic. Markus Pietikainen: Sure. Thank you, Anssi, for the question. I think it will be an equation of part our capital release program, how that will progress. As you've seen, we've now announced that the EUR 340 million is non-strategic in the balance sheet. And obviously, this will be disposed by the end of the strategy period 2029. So very much that depends the financing cost based on the timing of those disposals. Otherwise, I think that that's the biggest delta, if you will, for that item. Operator: [Operator Instructions] There are no more questions at this time. So I hand the conference back to the speakers for any closing comments. Essi Nikitin: As there are no more questions, we thank you all for participating and wish you a great rest of the day. Heikki Vuorenmaa: Thank you. Markus Pietikainen: Thank you.
Operator: Welcome to the Boozt Q4 2025 Report Presentation. [Operator Instructions] Now I will hand the conference over to CEO, Hermann Haraldsson; and CFO, Michael Bjergby. Please go ahead. Hermann Haraldsson: Thank you, and welcome all to our Q4 [Technical Difficulty]. We will have the usual agenda for the presentation. I will present the highlights of the quarter and the business update before handing over to Michael for the financials. So next slide, please. Well, 2025 has been a defining and transformative year for Boozt. It's no secret that it was a challenging period where we faced a continued tough market environment. However, we have not been idle. We used the year to trim the organization to carry out excess inventory and make a deliberate shift in strategy between our 2 platforms, Boozt.com and Booztlet, focusing more on our premium side. And finally, we're also moving to a new headquarters in Copenhagen, and this is a major step that gives us better access to talent and position us in one of the capitals of the Nordics. Looking at the fourth quarter, net revenue grew 4% in constant currency. This is a slight acceleration compared with Q3. Growth was driven entirely by Boozt.com, which is already benefiting from a strategic shift towards a more premium in-season sales. On the profitability side, our focus on efficiency continues to pay off. And despite a competitive market and a high promotional intensity, we managed to improve our underlying EBIT margin. This was supported by efficiency gains across the entire value chain, proving that our leaner technology-driven structure is working and driving tangible results. The highlight of the quarter and also the full year is our cash generation. We delivered a record high free cash flow of over SEK 1 billion in the quarter, supported by our disciplined effort to rightsize our inventory. Basically, we have essentially derisked the balance sheet, leaving us in a very strong position as we enter the new year. Because of this strong cash position, we intend to continue returning capital to the shareholders through a new share buyback program later this spring. We are currently completing the SEK 800 million capital return we promised at our last Capital Markets Day, and we plan to continue distributing excess cash to the shareholders. Looking into 2026, our focus shifts from defense to offense. We are ready to start expanding our market share again as we target a gradual return towards double-digit growth levels. We have several growth drivers in place that I will cover in the following slides. So please turn to Slide #5. I would like to start my presentation by looking at the journey we've been on so far. Since our launch in 2011, the industry and Boozt as well has moved through distinct phases. from early expansion and price leadership to the surge in online penetration we saw during the COVID years. The last 2 years have been a period of deceleration for the industry, marked by a decline in consumer confidence and the stalling of the post-pandemic online growth. On top of this, we at Boozt have also had currency headwinds due to the strengthening of the SEK. However, as we enter 2026, we are moving into a new phase that I would like to call a rejuvenation. The next wave of growth will be driven by our leadership in service and convenience and AI is the engine that will drive this, making the customer journey more seamless, faster and more personal than ever before. This push should then be supported by a healthier Nordic consumer as market conditions are likely to improve gradually throughout the year. Next slide, please. To fuel our return to growth in 2026, we have several engines running in parallel. We see small signs of market conditions beginning to turn with fiscal support for the Nordic consumer and likely some pent-up demand coming through. We are meeting this with a stronger assortment. This means bringing in new premium brands and ramping up our inventory to make sure that we have the right products for the market. We're also pushing forward with personalized shopping using targeted curation and personal prices to make sure that every customer feels that the experience or shopping journey, if you will, is built just for them. Another big milestone is the relaunch of the Club Boozt in April. It's based on a new concept designed to be much more commercial focused and drive direct sales. Finally, supporting all of this is our AI integration, which is driving both the consumer journey and our overall operational effectiveness. So next slide, please. Technology has always been the engine at Boozt, and we are now moving fast to embed AI into the core of our operations. The projects I'll highlight here are just examples as AI is already a part of our daily operations across the board. Broadly speaking, AI is a primary lever for our efficiency from optimizing the warehouse and forecasting demand to automate routine tasks like invoice handling and product categorization. By letting technology handle the heavy lifting, we're able to operate a much leaner and much more efficient organization. This is also changing how our customers shop. We've just gone live with AI-powered search on Boozt.com, delivering much more intuitive and relevant results. Along with the visual search and AI generated inspiration, we are making product discovery faster and more personal. This, at the same time, as our service bots already handle 35% of inquiries, letting us scale without compromising quality. And finally, we have just recently launched a virtual shopping assistant to act as a personal shopper through natural conversation. Looking ahead, we intend to stay at the forefront of this development. We are already in talks with Google and OpenAI about agentic commerce and how AI agents will shop in the future. Our approach is quite simple. We want AI to help customers find the right products, but we stay disciplined about how the actual buying happens. This ensures that we neither lose the curated feel nor the high average order value that makes Boozt unique. So you might say that we are, in just following these new standards, we are positioning Boozt to lead through them. So now let's move on to the next slide, where we continue to see the department store model prove its worth, especially in a year where fashion demand remains soft. By offering a true department store experience, we create a natural hedge. When one category is muted, others step in to support the overall business. In 2025, 44% of our revenue on Boozt.com was generated from categories outside of fashion, and this is up from 42% last year. Our goal remains to move this towards 50% in the near term. The diversification, of course, is not just about risk management. It's also about the bottom line. As we have stated on earlier occasions, multi-category shoppers stay with us longer, return fewer items and spend more per order. Today, 54% of our customers on boozt.com shop from more than one category. This is a clear step-up from 52% last year, showing that our efforts to encourage cross-category discovery are paying off. Next slide, please. And if we look closer at how our customers shop, the trend is actually quite encouraging. We are seeing robust growth across the board for customers buying into multiple categories. As you can see on the slide, we saw an increase of between 6% and 9% in every group of customers shopping from 2 to 6 different categories. And this is exactly what we want to see. It shows that once we get customers into the Boozt ecosystem, they find value across our different departments. Overall, our active customer base on Boozt.com stands at 2.8 million, which is a 2% increase over the last 12 months. While we always want to grow faster, the stability in a tough market really shows the strength of the department store model in building deep customer loyalty. So with that, I would like to hand over now to Michael and the financial review. Michael Bjergby: Yes. Thank you, Hermann, and good morning from my side as well. I will start out by presenting our financials for the quarter, which were characterized by solid profitability and also record free cash flow. Afterwards, I'll go through the details of our outlook for 2026. Please go to Slide #11. So we grew 4% in constant currency, which was just slightly above our growth in Q3, but it is important for us that we continue to improve our growth momentum. And across the value chain, we are laser-focused on accelerating growth even further as we move ahead. The incremental growth improvement was, to a large extent, driven by an increase in activity in women's fashion, which is our largest product category. As previously announced, we have created a sharper distinction between Boozt and Booztlet, and we saw the results in September, but it really came to full effect here in Q4. As planned, we have generated solid growth at our more premium side and negative growth on Booztlet. The change of strategy between the 2 sites was a tough decision because we knew it will impact our growth short term, but it is the right long-term strategy and will support both growth and margins going forward, but it's also accretive to our relationship with our brands. From a country perspective, the growth was relatively stable across our key markets, but I want to highlight double-digit growth both in Boozt and Booztlet in Norway, which is a market where we see continued great potential and where we are heavily underrepresented. Now please go to the next slide and some comments on our profitability. The profits were strong in Q4 with an improvement of 0.9 percentage points on the EBIT margin if you exclude the effect from last year where there was a positive one-off of customs from Norway. Q1 to Q3 benefit was included in Q4. So in that sense, Q4 was distorted, but the year is comparable. The gross margin was under pressure from 2 external headwinds: one, the continued SEK appreciation; and two, our promotional environment driven by price-sensitive consumption and especially in the Black Friday period. This is not specific for Boozt, but something that has been communicated consistently also by peers on the stock exchange and particularly related to the Swedish market. The FX impact contributed by a bit more than half of the decline in gross margin. Even with the negative development on the gross margin, we delivered almost 10% EBIT margin driven by operational efficiencies really across the value chain, and this is even without any material leverage from higher revenue because net revenue only increased by 1%, but rather, it's really true cost increases across fulfillment and marketing and administrative costs. It illustrates the strength of our business model and how scalable it is. And overall, we delivered a small EBIT improvement for the year, even with some FX headwind. Now please move to Slide 13 and our cash development for the year. We delivered record free cash flow in 2025, and the cash conversion was far above 100%. And needless to say, this is not sustainable in the long term. But the year and the cash really reflects that in an inventory business model like ours, where working capital swings far outweigh cash generation from profit, then there will be fluctuations. And fundamentally, Boozt has a very strong cash flow generation, easily above 70% of EBIT over the cycle. 2025 was a year of consolidation and improving the health of our inventory and working capital really was a driver of the free cash flow. So in rough terms, 50% of the cash flow was driven by normal profit cash, which is sustainable long term and 50% was driven by working capital improvements. Please go to the next slide. We ended the year with a net cash position above SEK 1 billion, and it should be noted that year-end is the time of the year where working capital requirements are the absolute lowest. So this is not reflective of the excess cash available. But we want to be disciplined in returning excess cash back to shareholders, which is why we are today announcing a new share buyback program. And with that, we commit to distributing SEK 300 million back to shareholders in 2026, which comprises more than 5% of our market cap based on yesterday's closing. We will continue to generate and optimize cash and return it to shareholders and combined in '25 and '26, share buybacks are now expected to amount to around SEK 750 million or 14% of the market cap based on yesterday's closing as well. So with this, I have finished my financial review for 2025, and we will now look forward and turn to the outlook for 2026. Because as Hermann described, we believe that we are going into 2026 in a position of strength. And we have the right quality and quantity of our inventory. The organization is strengthened, and we have lined up a number of commercial initiatives that can drive growth, not least within AI. As such, we have created an expansion plan, I think a growth plan to deliver this growth acceleration during the year, and we are putting capital behind it, which is why we invest both in inventory, people and commercial initiatives to drive that growth. Our outlook reflects the plan. And while we do not want to focus on what is out of our control, I will, before we jump into the details, consider the implications of the FX development on Slide #16. Firstly, related to the FX, I think it's important to understand why we are sensitive to FX movement. Boozt is a highly centralized business, and that makes a difference. We don't have subsidiaries across the globe where revenue and cost exposures offset each other. We do everything from Sweden. And as such, we have our inventory recorded in Swedish krona, fulfillment costs, administrative costs, all in Swedish krona, and we get revenue in many other currencies. As an example, when we lose revenue from NOK depreciations against SEK, then there's around 90% drop-through to EBIT because we have very limited cost in Norway, only a bit of distribution and marketing cost. So in 2025, we lost more than SEK 160 million in revenue from changes in currency and with a relatively high drop-through to EBIT. And with the recent development in December and January, currencies will remain a headwind in 2026, even though our Danish kroner exposure will be much lower for March after our headquarter move. As such, you can see the rates here on the slide to the right-hand side, and it's based on yesterday's fixing from this [indiscernible] and implies more than 2% negative impact on revenue. This can be calculated from the table to the right because euro and DKK represents, as you can see, almost 50% of revenue and has declined by 4% if you compare the spot to the average of 2025, which means that 4% time 50% implies 2 percentage points on group revenue alone from these 2 currencies. On top of this comes depreciation of smaller currencies against the SEK. So with the estimated drop-through, then this has an effect of 0.6 percentage points on EBIT margin at the current FX rates in 2026. Now please go to Slide #17. So we plan to accelerate growth and increase margins and thereby growing profit by double-digit amounts even despite of this currency headwind. We are guiding constant currency growth of 3% to 8% and an adjusted margin of 5.3% to 6.5%, which includes the negative impact from currency. It is important to highlight that we expect growth momentum to accelerate through the year, and we will continue to look at the acceleration, thereby gradually building towards very strong growth in the second half. This is driven by an offensive inventory buying plan, and that's particularly the [ AV26 buy ], but also our commercial initiatives, which gradually will have effect. One of these initiatives is the launch of our Club Boozt in April. And the new concept is more commercially incentivizing and designed to drive growth. From a technical perspective, please note that this will temporarily impact reported figures because there will be deferred revenue recognition related to the programs' unused discounts. This may impact timing of revenue, but for the full year, the impact of both revenue and margins is expected to be very limited. This brings me to the margin where we implicitly are underlying delivering minimum 20 basis points improvement for the low end of our revenue range and for higher revenue, there is significant potential for further operational leverage. It should be noted that the drivers of the margin are different from 2025 because we expect to drive profitability through gross margin, while we continue to be more effective also on marketing and fulfillment cost ratios. The admin cost ratio is expected to increase. As we move to Copenhagen, the conversion of salaries from SEK to DKK will increase costs by approximately SEK 10 million to SEK 15 million, but this will be fully offset by lower costs related to social charges on the LTI program. But from an adjusted EBIT perspective, it will have a negative impact because the social charges for LTIPs are today booked as an adjustment. So from reported EBIT and from a cash perspective, it will be neutral. We also see a double-digit SEK amount related to our people and organization. This is new commercial initiatives, but it's also increased running cost of our headquarter in Copenhagen compared to our headquarter in Hyllie. We consider these important investments for both talent acquisition and our organizational development. CapEx is expected to amount to SEK 165 million to SEK 185 million, which is a bit higher than in 2025. The CapEx includes SEK 40 million one-off investment that we have already started at the warehouse, which relates to insurance compliance and does not really give any other benefit than improved compliance and the fact that we can have insurance at reasonable prices. On top of this, we have real, I would say, CapEx investments at the warehouse of SEK 40 million to SEK 50 million that support efficiencies and will create savings on the fulfillment line. And this year, our CapEx projects are focused on the return handling, but also the handling of what is classified as dangerous goods such as some beauty products. And these combined is very, very attractive investments. So with our continued underlying margin improvement, we are firmly committed to reach our 10% EBIT margin target in the midterm. Since we announced our target of 10%, we have had significant FX headwind, and we've also seen muted consumer spend. But regardless of the label, our focus is on delivering continued margin expanding every single year towards the 10% mark. Please move to my final slide of the day. So looking at cash flow in 2026, then as we also saw in 2025, we can easily deliver cash conversion of around 70%, and this includes even inventory increasing in line with revenue. But 2026 will be impacted by timing factors, which will be a benefit in the following years, particularly the exit tax and the inventory buildup with the cash outflows in 2026 will be beneficial to the cash flow in 2027 and beyond. Now with the inventory buildup, we're also able to overperform compared to what we have guided today if there is demand in the market. The one-off moving cost has been recognized from the income statement in 2025, but we have cash effect during 2026, and this relates to double rent, cost of restoration of the old headquarter and practical handling of the move, et cetera. Consequently, our free cash flow in 2026 is expected to be relatively moderate. As we continue to drive our margin, we will drive cash generation further, and this will create capital both for investments and further distribution back to shareholders in future years. That concludes my prepared presentation for the day, and I will now turn to Hermann for the closing remarks. Hermann Haraldsson: Thank you, Michael. And yes, to conclude, I would like to leave you with the mindset that is driving us into 2026. 2025 was a year of consolidation. We focused on strengthening the foundation through necessary and tough decisions, meaning cleaning up our inventory, trimming the organization and sharpening the distinction between Boozt and Booztlet. We did the heavy lifting to ensure the business model is as scalable and lean as possible. So now we are playing offense. We are in the process of moving into a new headquarters in Copenhagen. The move is all about top-tier talent access, adding even more specialized depth to our already strong team as we scale. So with this new energy, we're actually quite bullish. We are ramping up inventory to meet demand, adding new brands and targeting a broader and more inspirational assortment. Tech will be a catalyst, utilizing AI as our copilot to deliver an ultra-personalized shopping experience and maximize customer value. The foundation is solid. The talent is coming on board, and we are very ready to execute. So with this, I would like to conclude our part of the presentation and open up for questions. So operator, please go ahead. Operator: The next question comes from Niklas Ekman from DNB Carnegie. Niklas Ekman: Can I ask you a little bit about the reason for your increased optimism on the market and your sales in '26? And more specifically, I'm thinking that the market has been challenging for several years now, and yet you delivered very strong growth in '23, and it slowed a little bit in '24, it slowed considerably further in '25. So what is the main reason for your optimism in '26? Because I mean, we've already seen the market picking up in '25, at least the online market has picked up in '25. So why should your performance be much better in '26? I guess that's my first question. Hermann Haraldsson: I'm not sure how much the market picked up actually in '25, to be honest. But the reason why we're optimistic is, on the one hand, external factors where you see fiscal stimulus, both Sweden and Denmark should kind of give a more optimistic and consumers feeling that they have more in their purse. And then on the other hand, kind of internal factors, we are in a very good shape. We are being more bullish on our inventory buy, as we said, buying more broadly and inspiration of Boozt.com. And this combined means that we are actually relatively optimistic. We have been going into probably especially '25, where we had a bit too much stock and we're a bit negative. We were too cautious on our buying and too narrow. So we are seeing good receipt. We're seeing that our core customer, the women is coming back and they're buying more. So we are actually seeing a gradual improvement. And if you look at local currency, we are accelerating, albeit slow growth, Q3 and Q4 with 4% in local currency growth in Q4. So we are actually heading and aiming towards getting back to double-digit growth towards the end of the year and going into '27. Niklas Ekman: Very clear. And Booztlet, you mentioned here a sharp slowdown in the second half because of deliberate moves. Is this something that will continue to hamper your performance in H1? And is that a contributing factor to why you expect slower growth for the group in the first half? Hermann Haraldsson: You might say that kind of the Booztlet mission accomplished, Booztlet was supposed to help clear excess inventory during 2025. They managed to do so. And also, we also had too much kind of in-season inventory where we allowed Booztlet to clear that as well. We stopped that. And of course, this comes at the expense of Booztlet growth. But then on the other hand, we can see that the mothership Boozt.com is again growing healthy, 7% local currency growth in Q4. So you will see Boozt.com growing and Booztlet being a bit more muted because there is not that much inventory to clear for them. So you're right, Niklas, that it will come a bit at the expense of Booztlet. Niklas Ekman: Okay. Fair enough. And just last question, just the formality. The SEK 180 million exit tax payment, is this a pure cash flow effect? Or will that also impact your P&L? Michael Bjergby: Yes. Thank you, Niklas. This is a pure cash flow impact. And so it will not impact the tax on the P&L. And I just want to emphasize that the SEK 180 million is the full amount, which were only SEK 112 million will be paid in 2026. And it will be offset by benefits on Danish kroner tax, which is why we expect that the net tax effect from this in 2026 will be SEK 140 million. Niklas Ekman: Very clear. And then you will get that repaid in the coming 4 years as well? Michael Bjergby: Yes, exactly. So the exit tax payment creates a tax asset on the balance sheet, and this can be used for the following 5 years in Denmark. Operator: The next question comes from Benjamin Wahlstedt from ABG Sundal Collier. Benjamin Wahlstedt: I'll start by saying that, yes, I sort of agree with Niklas that your optimism is sort of back and refreshing to see. But you also mentioned bringing in a couple of new brands in the quarter. I was wondering, could you give some examples of this? Hermann Haraldsson: Benjamin, that's a difficult question. We have some new brands. So I don't think I would like to highlight any more because we're getting big stock back among other brands and Hunter Boots, some kind of -- it might not be kind of huge brands, but they are kind of adding some flavor to the shopping experience and then a lot of kind of local brands within different price points. So it's kind of across the board in general. So we're going from being too much data focused and too much depth to also providing more inspiration going in 2026. Benjamin Wahlstedt: All right. And I was also interested in hearing your comments on the competition in the beauty segment, especially, [ please ]. Obviously, there has been some competitors really struggling here. So what's your read on the market? Hermann Haraldsson: It's very red, if you ask me. We have a lot of players that want to take the market and want to grow. So our kind of strategy for the Beauty segment is to basically tag along and get our customers to just add a beauty item into baskets, so maintaining a high average order value. So this is why even our beauty baskets are actually quite profitable. But it's not going to be beauty that's driving our category growth. It's more like it's kids, especially sports and then home. So the beauty is -- I think beauty is a very tough market, especially in Sweden at the moment. Benjamin Wahlstedt: Perfect. And a question on Denmark. You previously said or commented that you did not expect any like cost lift up or cost ramp-up from moving the staff to Copenhagen and that message has somewhat changed in this quarter. Could you elaborate a bit on that, please? Michael Bjergby: Yes. So I think what is -- the difference is probably what we see from -- if you look at the salary, then salary conversion has led to some increase, but this will be fully offset by lower payments of social charges. So I think that was the message from that. And then on the location change of the headquarter, then the rent is actually exactly the same in Hyllie as in Copenhagen, but it's the operational cost that is more expensive, such as property tax, we have the canteen running and as well as maintenance of the building, which is more expensive. So there is a bit more cost related to running in Copenhagen compared to Sweden. Benjamin Wahlstedt: Perfect. You also mentioned running quite a few commercial initiatives during the year. How should we think about that in relation to your admin costs or personnel costs, looking into 2026? Hermann Haraldsson: When you say commercial initiatives, are you talking about marketing or what do you mean, sorry? Benjamin Wahlstedt: Well, commercial initiatives, I believe that was the word you used. So yes, are you adding any marketing staff or are you adding any sales staff and... Hermann Haraldsson: Sorry. We are improving the organization being considerably more localized. It has been kind of a challenge for us to attract local marketeers to our office in Sweden, meaning when we talk about local marketeers, it could be marketeers from Finland, Norway, even from Sweden, where you have some people from Stockholm. But now that we're moving to Copenhagen, we're able to build a kind of a community of local marketeers sitting in Copenhagen. So we actually kind of strengthened the commercial organization considerably by moving to Copenhagen and being a bit more kind of localized at the same time as we're getting the benefits from sitting together. So we're actually ramping up on hiring commercial people to be able to be even stronger in the different local markets because currently, Denmark has been a strong market because we have a lot of things, to be honest, that are driving that and partly Sweden, but a lot of the strong markets here in Sweden are sitting in Stockholm and we have had difficulty in attracting them to Malmo, but they would like to work come to Copenhagen and the same for Finns and Norwegian. So I think that is kind of a big part that will strengthen the commercial organization of that. Michael Bjergby: Just to add to that, there are also other initiatives that we don't disclose where we also add some employees. And when we add marketing employees, then it actually goes under the admin cost line because all it seems they are in admin, just to be clear. Benjamin Wahlstedt: Perfect. Do you mind putting a number on that as well? Michael Bjergby: No. So we don't disclose the effect of that. But I think what we have said is that the admin cost ratio could increase by, let's say, in rough terms, 0.5 percentage point, and this includes both the salary conversion, the additional relocation costs and the additional FTEs. Operator: The next question comes from Daniel Schmidt from Danske. Daniel Schmidt: Just back to what you talked about in terms of Boozt.com and the increased focus on premium sales. Did this trend that you talked about or the shift that you've conducted, did it trend favorably into '26? Did you see sort of an underlying pickup of that shift that you conducted in terms of the sort of the customer picking that up basically into '26. Sort of could you shed some more light on that? Hermann Haraldsson: Daniel, actually, you can see that from the numbers where you can see that Boozt.com grew 7% in Q4, where we kind of slightly started to be a bit more premium, expand our range and actually do a little less discounting. And we're not going to be a luxury store. So we are still going to be mid- to premium, but we want to kind of elevate Boozt.com a bit more. And we actually can see that consumers are picking up, and we see quite a good sell-through of the more premium brands that we have introduced during the quarter. Daniel Schmidt: Okay. I was just more referring to where are you in that process? Are you adding more and more of that premium assortment as we go into '26? Or has that been sort of done now, you're happy where you are as you leave '25? Hermann Haraldsson: We are relatively happy. I think we will always be kind of trying to add more brands, and we are seeing some attractive brands in the pipeline, but it's more to do with that we are broadening the assortment. buying more width, maybe also buying slightly more expensive price points than we did in 2025. And then, of course, there's going to be less promotional activity on Boozt.com. So we're kind of trying to -- it sounds kind of a bit [ cheesy ], but we're trying to elevate the experience on Boozt.com and being less discounted than we were kind of exiting '24 and the beginning of '25. And we actually see encouraging signs of that, especially because the women are actually also coming back. Daniel Schmidt: But it sounds like you've sort of neglected inspirational part of the assortment over the past couple of years, like you said, and been quite data-driven and now you're getting your head around that going into '26. But if you compare where you were in terms of the level of premium that you catered like 5 years ago, are you higher now than you used to be? Or are we back to where you were? Or how does it compare? Hermann Haraldsson: I would say that we're higher now than we were in 5 years back. And we will be higher going at least when we exit 2026. So I think that we're in a good part. But again, you have to be careful because we're not going to be a luxury brand. We like kind of a position of the mid- to premium, as you know, where we get the good basket size, but we want to stay out of the luxury segment because that's not very profitable to be. Daniel Schmidt: But do you feel that it has been sort of a trend in the market where maybe players like Zalando and yourself have become too much -- too similar basically? Hermann Haraldsson: I still think that we have a more premium experience. We have higher price points. And I think you can read it directly through the difference in basket size. I believe that our basket size is some 70% higher than our German friends. But of course, there's a considerable overlap between the 2 shops, but we're still kind of focusing on the Nordic consumers having -- being regarded as a more curated and probably a more premium experience than other in our market. Daniel Schmidt: And then just you touched upon Norway. And I didn't see any numbers specifically for Norway, but you do sort of give the numbers of Sweden and Denmark and then the Nordics. But it looks like Norway, I don't know what Finland did, of course, but I guess Finland was still quite weak. Did Norway grow double digit in the quarter in local currency? Hermann Haraldsson: Yes, it did and more than 10%. So it was actually quite a good quarter for Norway, and we are seeing strong growth. We are investing in Norway and not -- of course, we are investing in profitable growth in Norway, but actually Norway was a very good market for us in Q4 and Finland was quite weak, actually, almost very weak. So yes, high growth environment. Daniel Schmidt: And it sounds like that comes back to you being liberated of the import duties maybe and you're in a better position now to push ahead in Norway rather than the market being much stronger than a year ago. Is that correct? Hermann Haraldsson: That is correct. We have reinvested some of the savings that we have gotten from the customs for the duties. So we've put that back to the market and investing in marketing, and we'll continue to do that. Daniel Schmidt: And could you sort of give us a guesstimate of what your sort of fair share should be in Norway given where you are in Sweden and Denmark compared to where you are now in Norway? Hermann Haraldsson: It's difficult, but Norway should be twice the size as it is today. Because Norway is -- the assortment that we have on Boozt is very well suited for the Norwegian market. And I think we have good consumer insight. So it's like -- it's all to double and do that within the next 3 to 5 years. Daniel Schmidt: And today, it's 12% of sales or something like that? Hermann Haraldsson: Yes. You're not far off, I think. Michael said, we don't disclose. So I can't say anything. Daniel Schmidt: Okay. And then just lastly, you scrapped the CapEx expansion plan a year ago. You are more optimistic today. You talk about ambitions to grow double digit towards the end of '26. You have guided for CapEx for '26, but it sounds -- looks a little bit like any sort of normal CapEx year. What are you sort of thinking when it comes to that plan you had? Michael Bjergby: Yes, I agree. It is more of a normal CapEx. I would say the SEK 40 million that we are doing for insurance compliance reasons is a bit of an extraordinary. But other than that, it is a normal year. With the growth that we have, we still expect that we will have to expand, but it will probably be a project that is required during '27, '28 with also CapEx split between the 2 years. So there's no sort of a big amount coming, which is far from what we have today in 2027. You shouldn't expect that. Operator: [Operator Instructions] There are no more questions at this time. So I hand the conference back to the speakers for any closing comments. Hermann Haraldsson: Okay. Thank you for listening in and for some very good questions. And I guess that we will see you over the next weeks and wish you all a good day. Thank you.
Allison Chen: Hi. Good morning. Thank you for joining us today. I'm Allison. Happy to host you for CICT's for your results briefing. So apologies about the minor delay. We are very excited to have you with us today, whether you are with us in person or tuning in from your desk. So as per usual, today, we will start off with a presentation by our CEO, Choon Siang, who will walk us through his key highlights. After that, we'll move on to the Q&A where the management team will join us on to the stage to address your questions. So if there some good ones, please save them for later. We'll try to get to as many as we can. And with that, I would like to invite Choon Siang on to the stage. Choon-Siang Tan: Hey. Hi. Good morning, everyone. Thank you for joining us today. So we just announced our results this morning. Quite happy with the overall outcome of how last year went. A lot of things to go through today. So bear with us. I will spend just maybe about 10, 15 minutes just walking through the highlights, and then we can move on to Q&A, as Allison has mentioned. Okay. So first on the numbers. I think CICT delivered a very strong performance for the year FY 2025. Full year NPI, we grew by about 3.1% year-on-year to $1,189.7 million. Second half NPI grew at a faster pace at 6.8% year-on-year to about $610 million. The strong growth was due to strong quite a few factors across the board, strong asset performance across the portfolio and the step-up acquisition of the 100% interest in CapitaSpring, which was completed on 26th August last year. Full year distributable income rose 14.4% year-on-year, while second half distributable income expanded 16.4%. Unitholders will be pleased to know that CICT's full year DPU increased 6.4% year-on-year to $0.1158 despite an enlarged unit base from a private placement in August last year. This was supported by a very strong second half, which provided uplift with a 9.4% year-on-year growth in DPU to $0.0596. On the capital management front, we have been proactive putting CICT in a very favorable position in terms of cost of funding. At the end of 2025, our aggregate leverage has improved to 38.6%, down 0.6 percentage points from 30th September, giving us greater financial flexibility. Our average cost of debt has declined to 3.2% from 3.3% 3 months ago versus the end of 2024, we are down by about 0.4 percentage points from 3.6%. This was supported by the easing interest rate environment and our refinancing efforts. Our current portfolio property value is at $27.4 billion, an increase of 5.2%. Operationally, our portfolio remains strong. Overall occupancy 96.9%, WALE 3.0 years. Rent reversions for both retail and office, 6.6%. Tenant sales per square foot, up by 14.9% year-on-year, largely due to the inclusion of ION. Shopper traffic up 20.5% year-on-year. Excluding ION, tenant sales per square foot would have grown by about 1.2% year-on-year while shopper traffic will be up 4.6%. The momentum was stronger in the second half with tenant sales rising 1.9% year-on-year excluding ION Orchard. In 2025 and year-to-date January 2026, we continue to execute our value creation strategy across acquisitions, divestments, AEIs and even development. These have strengthened the quality of our portfolio, enhance income resilience and position CICT for sustainable long-term growth. I will cover more on the newly announced initiatives in the next few slides. In January 2026, we announced the divestment of Bukit Panjang Plaza for $428 million. The price is a 10% premium to the latest valuation and 165% uplift over our purchase price in 2007. The exit yield was around mid-4% level if we were to complete the divestment in end 2026, gearing would have fallen 1% to 37.6%. We expect to complete this divestment by the first quarter of this year. We'll be embarking on the development project this year. We won the Hougang Central Site through a joint bid, which includes CapitaLand development. This is the first major GLS site in the precinct since 2019. We will own and develop the commercial component. The site is in a prime location served by the existing Northeast line and upcoming Cross Island line and will be seamlessly integrated with a new bus interchange. Surrounding the site, there are established amenities, including schools, sports center, community club and parks. We see this as a compelling opportunity to address the underserved demand in the precinct and to curate a retail environment that meets the needs of both residents and commuters. The total development cost for this project is about $1.1 billion, which translates to approximately $3,600 per square foot and an expected yield on cost of over 5%. This compares very well with the recent retail transactions at a low to mid-4% level. And this will be a brand-new mall built to our specifications. Taking into account inflation, the sites prime location and the integration with the 2 MRT lines and the bus interchange, we believe the total development cost is reasonable for a high-quality brand-new mall. For reference, the capital value for our Bedok Mall is about 3,700 psf, while some of the recent market transactions were done at 4,000 psf. We will be financing the development through both internal funds and external borrowings. Target completion is expected to be in 4 to 5 years. The development is strategically important for a few reasons. Firstly, it increases our exposure to Singapore, which remains our core market and a key source of stable long-term income. Secondly, the site is in a prime location in the heart of Hougang with excellent connectivity as I have articulated earlier and a large residential catchment. Thirdly, this is a rare opportunity as well located suburban malls at transport nodes in Singapore are tightly held and rarely available. Through this development, we can establish a strategic foothold in the Northeast region and expand our retail footprint in Singapore. The development sits within a strong population catchment, one of the top highest in Singapore. There is also likely spillover demand from neighboring towns like Kovan, Punggol, Sengkang and Serangoon. Our JV partners will further expand this catchment by introducing 830 residential units to the mixed-use development. Hougang has only 2.8 square foot of private retail space per capita, far below the national average of 11.4. This presents an untapped potential, supporting the development's long-term prospects. Next, moving on to AEI. This year, we'll be starting a new AEI at Capital Tower. Essentially, this is to -- what we are doing is basically reposition our Level 9, which is this floor. Some of the amenity space into a community space and create a higher-yielding F&B space at the ground floor of the Urban Plaza. On Level 1, we'll be introducing a 2-story multi-tenanted pavilion with F&B offerings. On Level 9, the space will be reconfigured to become the first workplace mental wellness center in the CBD. The AEI works will be from third quarter 2026 to the fourth quarter 2027. An update on our ongoing AEIs, Gallileo have completed -- has completed a progressive handover of Phase 1, the office tower to ECB. The target handover of Phase 2 is expected by this quarter. AEIs at Tampines Mall and Lot One and Raffles City are progressing well. On valuations, the key assumptions remain largely unchanged and cap rates remain fairly stable. Our portfolio property value grew 5.2% to $27.4 billion, largely driven by the step-up acquisition of CapitaSpring and the strength of our Singapore portfolio. Germany's valuation went up after factoring in Gallileo's AEI. I'll conclude my presentation here. Happy to take your questions after this. Thank you. Allison Chen: Thank you, Choon Siang. Can we invite the management team to the stage? Okay. Now we have come to the Q&A segment. Before we dive into it, let me introduce the management team. So on Choon Siang's right, we have Wong Mei Lian, our CFO. And to his left, we have Jacqueline Lee, Head of Investment. And to Jacqueline's left, we have Lee Yi Zhuan, Head of Portfolio Management. Okay. A few housekeeping rules before we start. We'll take questions one person at a time. We kindly ask that you keep your questions to 2 per turn. If you have more questions, we'll come back to you as we know, some of you always do. [Operator Instructions] If you have questions, please raise your hands, and we'll bring the mic to you. So I see, Mervin. Go ahead. Mervin Song: I'm Mervin from JPMorgan. Congrats Choon Siang, very strong results. Glad to see you keep doing Tony's very strong legacy. I would say this is probably the best results amongst the S-REIT season. If I annualize the second half DPU, it looks like you're hitting the pre-COVID 2019 level already. I know you're not supposed to annualize it given the second half is very stronger -- is much stronger. But why you're excited about this year in terms of growth drivers, maybe you can share that with us? And second question is divestments. I think previously you mentioned about asset rejuvenation, is Germany something you want to be in. Choon-Siang Tan: Thanks, Mervin. Okay. So yes, this year, well, on your DPU question, yes, so we don't typically provide forecast. And typically, second half is stronger than first half, seasonally speaking. So while we hope to improve on our results for this year, but let's see. I think the -- maybe we will just break it out into what are the potential growth drivers in terms of our DPU, right? I think underlying performance for the organic portfolio still remains healthy. I mean we're still reporting positive rental reversions and the positive rental reversions from last year will also continue to contribute to the organic growth because as you know, we calculate rental reversions based on average to average. So in fact, the last 2 years, rental reversions will also still be figuring into next year's -- this year's growth drivers. So that's one for organic -- on the organic side. Second thing on the AEI. This year, we have Gallileo completing. So Gallileo will fully contribute for this year. Last year, it started contributing towards the end of the year, probably not significantly. So that would definitely be one of the cost drivers as well and one of the growth drivers as well. Third, of course, there are some of the other AEIs, like Lot One and Tampines Mall that will progressively contribute as they -- but those are likely to happen closer to second half of the year. So the contribution for this year will probably be slightly smaller. Third thing on the AEI front is that last year, we also completed I mean IMM towards the middle of the year. So there will be a full year contribution. But last year, they started contributing probably from the middle of last year. So those are some of the incremental growth drivers from AEIs. On the third growth driver, I would say, while we had the benefit of a full year ION already. So that's -- so the base has already included 12 months of ION income. So whatever we get from ION going forward will be the incremental organic growth. But last year, we acquired CapitaSpring in August, and that's a fairly accretive transaction. So that contributed about 4 months last year and this year will fully contribute for 12 months. So some of the improvement in the second half was actually attributable to CapitaSpring as so we're likely to see this flow through to this year. And of course, last but not least, very importantly, interest cost savings. We know that there's a big swing factor when for REITs. Every time interest rates come down, we will see a significant benefit. But of course, I think I mean, nobody knows what the direction is going to be this year. It looks like SORA has kind of found a footing. But of course, a lot of our rates are -- a lot of our loans are still fixed at higher rates. On average, it's 3.2%. Marginal rate is probably closer to the mid-2 handle. So there is still some room but it all depends on -- we don't have a lot of loans for refinancing this year, to be honest. I think we did a lot of refinancing last year. But of course, we still have a large proportion of loans in floating. So that will benefit from the drop in floating rates. And it also means that it will help with our ability to continue to grow and acquire going forward. So I think those are the growth drivers. So hopefully, that should -- if the economy remains nice and chugging along nicely, that should help us. I spent a lot of time on answering your first question. I forgot your second question. Allison Chen: Divestments. Choon-Siang Tan: Divestments. Okay. So we just announced one divestment. Take it easy, man. Give us some breathing room. We haven't actually closed the Bukit Panjang. So I think we'll as be focused on closing Bukit Panjang first, and then we will think about the next step in terms of divestment. But we do have -- I mean there are a few possibilities. As you rightly pointed out, we will start looking -- reviewing some of our assets outside of Singapore as well. But of course, those will always depend on the market conditions in the respective markets. But I think -- I mean you brought out Germany, which I'm sure is something that's on quite a few people's mind. But I think Germany is it's -- the way I see it, it's slightly de-risked now because we have Gallileo that has already been handed over to the tenant. So from this year onwards, you will start contributing income. So there's not as much urgency. So we can actually benefit from the uplift in NPI from the asset in any case, whether we divest or not. But of course, if you divest, then you probably have to worry less in a sense. But actually, the asset itself has a long-term tenure lease. So it's pretty much de-risked. But we have another asset in Germany that is not of the same tenancy structure, of course, so there will be some -- so we potentially can look at that as well. Allison Chen: Rachel, please? Lih Rui Tan: Congrats on the very strong results. My first question is probably, if you could -- I think you spoke a little bit on interest cost. You have done very well in 2025. Could you guide us a little bit on the 2026 interest cost? And my second question is on -- since Mervin have asked divestments. I will ask acquisitions. Are you still keen on Singapore retail, like, say, your sponsor pipeline Jewel? Or are you keen to buy the office assets that's out in the market? Choon-Siang Tan: I'll take the second question and then maybe Mei Lian can take the first question later. In terms of acquisitions, no, I think we continue to look at our portfolio reconstitution. I think the current environment in terms of our cost of funding, actually, is very conducive for us. Interest cost is low. Our cost of equity is fairly reasonable, but I think we have always been quite selective about what we look at in terms of acquisitions. There are not that many opportunities in the market. I mean, on the retail, you talked about retail and office. So let's maybe look at retail. Retail, I think there aren't that many opportunities in the market. You mentioned Jewel, which is our sponsor pipeline. I think that potential -- I mean that has been there for a while. I think it needs to -- it needs -- it might take some time because I think the financials need to match our pricing expectation as well before there can be a transaction. So we'll have to see how that goes. And also, the vendor needs to be willing to sell at some point first. We don't know what's the thinking there. On the office front, there are a few assets that has been out in the market. The challenge, I guess, is the pricing expectation and the yield expectations for some of those assets, whether they can make it work. I think safe to say we are unlikely to acquire an asset that is -- doesn't contribute financially or doesn't really help unitholders. If it's not accretive, it will be quite challenging. So if you're talking about those chunky assets, if it needs equity funding, it's even more challenging. I don't know. I think it depends on -- probably not answering your question, but taking a long time to not answer your question. But I think it's quite difficult for some of those assets that are trading at fairly low use. Yes. Mei Lian Wong: On interest rate, like what Choon Siang mentioned earlier, the amount of loans that is due for refinancing is not that big. So given where current interest rate levels are. In terms of interest rate guidance, I think we could be in the range of 3% to 3.1% level. Yes. Allison Chen: Geraldine? Geraldine Wong: Congrats on the very strong set of results. My first question will be on valuation. I think foreseeing the lower bound of the value cap rates, seems to have tightened a little bit, are you able to share what has changed? Is it because of the market transactions? And second question is on really if we are looking forward, the picture looks very rosy. I was just thinking a lot what are the kind of concerns that you have in mind for 2026? And anything further that you like to de-risk in 2026? Choon-Siang Tan: Okay. Maybe I'll take the second question first. First question, I will refer to Yi Zhuan. But our cap rate lower bound move, I don't recall it moved. Geraldine Wong: Retail. I think 4.35. Choon-Siang Tan: Last year it was 4.35 also, right? Geraldine Wong: Last year, I believe it's 4.5. No. Yes. I think 4.35 is the first time I'm seeing such a tight cap rate. And for office, also was 3.15. Last year, I'm not sure. I think it's closer to 3.25, a very slight movement. Choon-Siang Tan: I believe it's the same. Yes. I think it's the same as last year. Okay. Maybe, Yi Zhuan, you can double check, and then we can get back later. What's the second question? Allison Chen: Our concerns for 2026. Choon-Siang Tan: Risk. Yes. Yes. Okay. To me, the biggest risk is actually interest rates because we have come down quite a bit over the last 1 to 2 years. And there is always this fear that we might start reversing the trend. Australia just high rates last week. So there's always this pressure. But I think Singapore is in a fairly stable environment. So hopefully, we will be -- I think and also from most people's perspective, SORA has come down to low 1%. How much lower can it go, right? So -- but I think there's a lot of liquidity still in the system. There's still a lot in flow. So hopefully, SORA remains at the current levels. And it doesn't look like -- I don't -- I think the risk to SORA going out is if the U.S. rate starts going up. It doesn't look like that's happening anytime soon. But it's always the risk at the back of my mind. Secondly, obviously, it will be the economy, general economy. Last year, we have a lot of good things going for us. I mean at the start of the year, we were forecasting a recession in Singapore. And we ended the year at, what, 4.8% GDP growth. So there's a big swing from beginning of the year to the end of the year. Whether we are able to repeat last year's performance in the general economy, I don't know. So that could be a big risk. I think last year, there was also a lot of pump priming, right? I mean, CDC vouchers and all that. So that could be -- we'll see what the budget brings next week. So there could be some effect there. Third, I don't think it's a big risk, but people in The Street will always put it as a risk, of course, is the completion of RTS this year, whether that will have an impact. I think we have talked about this at length many times with many of you. Different people have different opinions. So we'll see what happens. So -- but we can't rule it out as a risk yes. Maybe we'll go back to the first question on cap rates. Yi Zhuan. Lee Yi Zhuan: Yes. The range compared to last year, year-end is the same range for both the office and the retail at least for the lower bound. Allison Chen: Okay. Can we go to Joy, please? Qianqiao Wang: Joy from HSBC. congrats. Two questions from me. First on development on Hougang. So if I look at the lower end of your cap rate is 4.35%, do you think roughly about 70 to 100 basis points of spread is sufficient to compensate for development risk? And with Hougang, can we assume you won't look at redevelopment of your existing assets in the near term? So that's one. Second question is on NPI margin. So I think historically, Q4, your retail NPI margin usually is lower. If I look at the quarterly trend, this quarter, you actually bucked the trend. Your NPI margin is very strong. Can I understand what has -- is there -- what's the swing factor? And can I take this as the base for next year? Choon-Siang Tan: Okay. So I think on the development premium front, I mean there's always a judgment, right? And when we say it's at least 5%, we didn't say it's 5%. So that's one. But if you look at 70, 80 bps, it sounds small, but it's 20% of the value. When you move when you have a compression of 80 bps is at 4% is 20% of the value. So I don't know, is that enough for a development premium? When developers do residential development, I think the pricing typically a 10% to 15% margin for -- so but let's just think of it, if we don't do this and somebody is developing and we had to buy from them 5 years later at 4.3%, would investors have preferred that? I don't know. I mean it's a tough call. I think there's no right answer. It also depends on how we manage the cost. I think if we are able to manage the cost well. Of course, when we plan -- it's all about execution on the development and how it turns out in 5 years. Nobody knows what the market is going to be like in 5 years. I mean even if you assume the inflation of a certain rate, rent should theoretically go up by then. So if you're able to get entry of 5-plus percent, then $3,600 per square foot, to us, that's reasonable. Yes. So it's a bit of a judgment call. But the reality is there's -- I think it's hard to find an asset at the kind of yield in this market as we have found out in the last few months. But of course, we also go the safe -- go down the safe path and buy a core asset at maybe 4.2%, 4.3%. Yes. So -- but we think that this, but I think for the calculation for this is also a bit different. It's not just simply comparing an asset to another asset. I think we like the location. I think the location in this -- but this precinct is very underserved. in terms of retail demand. I mean I don't know for those who stay around the area, you know that there is not that much in the neighborhood. I think neighborhood is tough of a retail mall, a big retail mall, which is -- which there's been quite a lot of new neighborhoods in the area. That's a very new from Hougang all the way to Sengkang, Punggol. There's a lot of new flats that have come up. And I don't think the growth of the retail space have been commensurate with the growth of population there. Okay. I think second question on NPI. I believe the NPI margin is partly because we have also added CapitaSpring, which obviously is a higher NPI margin. So it may not be a like-for-like when you compare year-on-year, a specific retail. I think for retail, we did have some cost savings, I think. Utilities costs have come down. I think we have entered into better contracts last year. So there were some utilities cost savings. So that has improved our margins. Yi Zhuan, anything else to add in terms of margin? Lee Yi Zhuan: Largely in part your utilities savings is one. And then there's a bit of rebates on electrical front. For 2026, probably, you can see a little bit of that continuing. But I will say that this is slightly a slightly improved NPI margin that we can expect for 2026 also. Redevelopment. Choon-Siang Tan: I think AEIs to us is BAU. So whether we did Hougang or not, we will continue to go ahead with AEIs. That's the -- I mean, yes, so it's not. And I think Hougang actually -- doesn't really see the rationale of spreading out AEIs is that it tends to create a drag on our cash flows. Because when you do AEI, you have to sacrifice some NPI because you have to shut down some of the spaces to rejuvenate. The difference with Hougang is that you don't give up any NPI because you're not carrying out anything. There is definitely balance sheet consumption, but interest cost is capitalized during construction. So there is no drag on DPU as well. So the only cost to this, I guess, is gearing. So gearing will go up, but I think we are quite comfortable with the divestment of Bukit Panjang, we are gearing at 37.6%. So that gives us a very comfortable position. So in a way, we are not sacrificing any DPU to go into Hougang. So it shouldn't affect our other BAU initiatives. So if a redevelopment comes along and it makes sense, it shouldn't matter whether we have done Hougang a lot. But of course, the only thing is if we whether we had the balance sheet to do the redevelopment, but we -- I think we are fairly comfortable at 37.6%, gives us a lot of debt headroom. Every 1% for us is about how much $27.200 billion. Yes. So we are about maybe just under $1 billion from debt headroom. Unknown Analyst: Just one quick question on the Hougang site. Does $1.1 billion include capitalized interest costs? And secondly, on Bukit Panjang Plaza divestment proceeds, would you set that aside for development? Or is there a chance that you could actually redeploy during the next 1 to 2 years? Choon-Siang Tan: Okay. I think the short answer to the first question is, yes, it includes the capitalized financing costs. I mean it includes all of our construction costs and all the contingencies that we have provided as part of our normal planning purposes as well. Bukit Panjang proceeds, I mean money is fungible. You can see as whether we had -- I mean, last year, we made some acquisitions. You can see it stopping up the balance sheet. We can also use it to fund future acquisitions, you're right? In a way, selling at mid-4% is no different from -- in fact, slightly cheaper than raising equity at -- currently, we are -- our cost of equity probably 4.8%, 4.9%. So yes, so we do -- we can use it to redeploy into future acquisitions, definitely. Unknown Analyst: Next is on forward guidance. Maybe just a comment REITs P&L is probably one of the easiest to forecast. As Jack has said that forward guidance is encouraged. So maybe next time we meet you, you can be the first brief. Choon-Siang Tan: Noted. Allison Chen: Thanks, Shen. Derek, do you a have question. Derek Tan: Maybe just a follow-up on Hougang. Don't mean to flog this, but how did this come about? I mean I don't think we generally don't participate in GLS sites even as a joint venture partner. So how did this come about? Do you volunteer or... Choon-Siang Tan: Yes. Okay. So yes, that's an interesting one. So if you had asked us a year ago, we -- whether we will do a pure development project, probably the answer might be closer to no than yes, probabilistically speaking. How did this come about? So I think one is I mean we have always been quite focused on growing over the last -- and we have looked at many opportunities along the way. And we have also found that it's quite difficult to do acquisitions in Singapore, as you might appreciate. And a lot of assets that are available for sale have been sold at very aggressive pricing. I mean I wouldn't say aggressive, maybe it's fair pricing. Five years later, we could go back and think that, wow, that's cheap. So okay -- so then this Hougang site came about and it was -- it has a fairly large commercial component. I think if it was a small commercial component, we probably won't look at it. So then we think -- and I think if it's not a big project, we also are less likely to look at it. The reason why we wanted to do Hougang, I think one is very sizable enough, right, billion, $1.1 billion of deployment. Secondly, competition. I think because not many people out there can do a residential come commercial project. I mean we have seen from, say, for example, the Clementi Mall bid, the competition was quite tough. When you have 10, 15 people bidding for the same project, the value gets competed away. We know that there probably won't be that many people who can bid for such a huge project. I mean if you add in the residential and the commercial component, the total development value is north of $2 billion. I mean there aren't that many parties in Singapore that can do that. And in a way, true to that, it's -- there were only 3 parties that bid it. Of course, we know there are likely 2 or 3 parties that are likely to bid. I mean -- so actually, we look at it for a while since the site was announced. But of course, we didn't really want to invite competition, so we didn't really put it out there, obviously. The alternative was for -- I mean the other consortium which are CLD and UL consortium to bid. I mean the earlier conversation was that they will bid, win it or not. But if they win it, we can potentially just buy over from them, which is our normal process. But if they were to do that, then they have to then we will have to buy at a different price, which is fine because it's de-risked. Not that a higher price -- higher price doesn't always mean worse, obviously, because it's a de-risked product. But the difference this time is that if they were to do that, then they can bid as high as well because they have the price in the margin, right? So they can only bid -- maybe -- because when they sell it to us, they also have to they have to hold it for 5 years and then sell it to us. They probably have to bid in a certain margin. So then we thought that, okay, if you come in directly, then we can get rid of that, that safety net for them and then we will be able to bid a little better than if they would do it themselves. So I mean we debated that maybe that's the better outcome for everyone. It also means that we have a higher probability of securing a win. If we are able to -- if the REIT is able to come in directly. And we know that very few other REITs can do that because $1 billion because there's a limit to how much development headroom you can do. So for us, our total AUM is $27 billion. 10% of that is $2.7 billion. So it gives us a very comfortable headroom and still able to do other projects. For some of the other REITs, probably we know that they are more limited by that. So we know that -- so that is our thinking. And that was a strategy that we went in with. And fortunately, for us, that worked up relatively well. And despite that, we only won by a relative margin. So we really needed that competitive pricing. But even though you won by a small margin, but I think that pricing is generally -- I mean, we are quite happy with the outcome. We think that buying at that price is fairly reasonable. It's probably no worse off than buying a brand-new retail mall that is de-risked at mid- to low 4%, say, for example. Derek Tan: But some of the malls are like Choon-Siang Tan: Sorry? Derek Tan: Some of these malls, low 4% are better locations also, strong catchments. Choon-Siang Tan: Depending on how we -- yes, it depends -- location -- more central doesn't mean a better location, I guess. I think location to us means it depends on the catchment and the scarcity in the area as well. Yes. So. Derek Tan: Okay. And just one last question on reversion outlook, especially for retail. How does that look like and how does it stack up against your occupancy costs? Choon-Siang Tan: I think last year, we have about a 6.6% reversion. This year, I think we'll probably -- I would say that we'll probably stay at moderate to about that level, mid-single digits for retail reversions. Yes, I think that's the guidance we will give. Yi Zhuan, anything to add? Lee Yi Zhuan: For office retail, probably looking at now, I mean, 12 months later, a lot of things can change, but I think we are pretty much looking at our mid-singles kind of reversion. How it's backed up against for the retail out cost? I think if you look at the year-end occupancy cost, it's relatively okay, 17%, right? And downtown, if I look at the suburban is actually on the 16-ish kind of percent. So I would say our cost perspective, we are still quite healthy. Of course, along the broader market, you see on and off, there's pockets of the retailers having some of these challenges. On a like-for-like basis, we probably have to tackle some of the localized kind of specific issues across the different trades, right? Like, for example, we talk about cinemas, whether or not there's an immediate replacement to cinemas or we are taking a short-term kind of extension to some of them. So that will play out a little bit, in fact, in terms of rent reversion, but I would say, by and large, we should be okay in terms of the our cost and reversion. Allison Chen: Can we pass the mic to Gola, please? Unknown Analyst: [ Gola ] here from the edge. Okay. I've got a couple of questions on the office front because your occupancy fell. And in terms of the expiring rents, which is on this slide -- slide 34 because they're a bit high for -- next year, they're a bit high. So I'm just wondering for this year and as well as this year. So I'm just wondering whether you said mid-single-digit reversions for this year, but I'm just wondering what you think is the outlook? And why did your occupancy fall for that's the office front? And then for the retail, there's another retail question. I just wondered, what is the F&B percentage of the just the retail portion? Because I think you put it as 17 -- 16% or 17% for the whole portfolio. But I noticed that your peers that only do retail very, very high retail portions by GRI and by NLA. Lee Yi Zhuan: Okay. Yes. I'll take the office one first. So okay, if we look at the expiring rents, right, it's true that if you look at this to 2025 and 2024, actually, the expiring rent versus the market rent, right, we are kind of closing up, right? So actually it's a much tighter now. So how do we then actually explain the kind of outlook? I said a lot of things can change in the next 12 months. And we are looking at some of the leases that were in discussion for the office side. If we look at the consultants, actually, they are a lot more bullish than us in terms of rental growth in '26 as well as '27 given that there's actually a little bit of tightness in supply, especially for good quality assets in centralized location. So they do expect the market rents to actually go up quite substantially. And then if you look at the expiring rents, naturally, we are -- the growth in expiring rent is not going to grow as fast as how the outlook of consultants market rent growth. So that kind of supports a little bit of hope that some of these things that we set out. Because if I give a very low guidance in terms of reversions, you all will think that I'm being conservative about it. So I think it's just realistically how we are looking at this. And the next thing I would look at is actually the expiry profile for our assets, right? So if you look at how our expiry profile is like for office in the '26, '27, '28, the kinds of the '27, '28 kind of is in the window where there's actually tightness in terms of supply again. So hopefully, we can take advantage of the tightness in supply that supports a higher rent, right, to again negotiate for better outcomes for office portfolio. Choon-Siang Tan: I think there's a second question on retail. I didn't really quite understand your question. When you say are you talking about retail portion of office? Unknown Analyst: I'm talking about retail portion, F&B. What is the percentage of F&B in your retail malls because there's so much F&B will all grow fat the next few years because and because they have a lot higher rents than your cinema or your supermarket? Choon-Siang Tan: You don't necessarily have... Unknown Analyst: And they keep on opening and closing. I mean the -- these food places keep on opening and closing. Yes. I'm just wondering. And is it a risk for you? Choon-Siang Tan: We have a slight right on the percentage of our F&B. I think it's about 30-odd percent. Okay. It's say 17.8% here, but this is overall our entire portfolio. But overall, our retail space is typically around depending on which mall probably about 30-odd percent. Your question is whether how are they doing? Unknown Analyst: Whether there's too much F&B especially when the RTS comes and everybody goes up to Malaysia. So that's the point. Choon-Siang Tan: But I think actually, people who go to Malaysia are less likely to be consuming -- I mean, they will continue F&B, but I don't think that's the trade that will get affected most because everyone can only eat 1 lunch a day. So if you go to Malaysia, you can only eat 1 lunch. But you go there and buy groceries, you can buy like 10 detergents. So actually, F&B is probably the least at risk to the RTS opening although there will be some leakage, but it will be very small. So we're not so worried about that. Actually -- so in a way, having more F&B is likely to be more defensive. Yes. So I mean, I think, F&B opening and closing has actually been part of retail trade for the longest time. I think it's -- I mean it's been a bit more on the news lately, but I think a lot of the closures are also not really in our malls. A lot of this opening closings, you tend to find them in shop houses because the rent variance tends to be a bit higher because some of these shop houses can be very low rent for a long time. And then suddenly, when the owner wakes up one day or a new owner comes in and then you can have a rent adjustment. Whereas in malls, you are less likely to see that, right? I mean our contract, most of our rent escalations are 2%, 3%. We're seeing like average rental reversion of 6.6%. We never ever see it 40% in our rental reversion. So you don't really see that. So -- and 6% rental reversion actually means 2% per annum, which is not significant. So most of the F&B that are in our malls, it tends to be able to survive as long as the business model is sensible and is sustainable. So those that are not able to survive typically means that they are not able to survive even if the rents don't increase because 2% is not idly to make a difference to your business model and your sustainability, right? Unknown Analyst: So can I just ask a question on Clarke Quay as well because I think when you mentioned opening and closing, I mean, Haidilao is closed. Have you decided what's going to come in its place and how you're going to -- because Clarke Quay, we've been to it, and my colleagues have been to it, not me so much. But there's not much I mean it's not as buzzy as other some places? Choon-Siang Tan: Yes. Haidilao closure does draw headlines but I wouldn't say it's one of those that open and close. Actually, Haidilao has been there from day 1, and it's one of the first stores that opened. But while we have rented out the space, maybe Yi Zhuan can elaborate. Lee Yi Zhuan: Firstly, I mean, thanks for coming to Clarke Quay. Please do come more. It's -- I will say that actually it's a little bit -- I can understand why people are saying now Clarke Quay less busy, but I think there's also a change in the type of crowd that we are seeing in Clarke Quay where previously a very -- to almost some like extend route part of certain our kind of crowd, right now, you kind of disperse the crowd across the day rather than just concentrated at night and then you have a lot of tourists because a lot of them tons by to the other [indiscernible] and stuff like that. So for the [indiscernible] we already have a replacement. And of course, I would say that it's not a finished product yet because a lot of things is also when -- if I say that actually, I have exactly what Clarke Quay has to be for the market today, it's probably not true, right? It's a product that is evolving as we try to also find where is the threshold of the market's preference when it comes to your day and night trade mix. And then, of course, the other part that will be important for us is when eventually Canning Hill is completed, then we will see when the whole precinct kind of be a bit enlightened where there's residential, hotel, tourism and all these things, we can again fine tune that trade mix a little bit. So that's an evolving process. And in fact, actually, as I shared previously, there's also an element of experiment that we are trying to take with Clarke Quay. So some of the tenants are deliberately CapEx short-term or temporary, right? Because we didn't want to sign on a tenant, not sure whether that concept -- they can promise you a lot of things, right? But eventually, you want to see the execution. We don't see the market acceptance towards it. And that's why we will try out some of these concepts and see how all these things pan out. So it's a work in progress. I would say that there's a few good things that's happening. I mean, [ Zum ] is going to do a renovation. And like all brands for a long time, when everything is doing stabilized, nobody really go. When you say it's going to do close down for renovation, everybody starts to go [ hooters ] -- nobody went to hooters for probably a while, but there's some day everybody is asking what is going to happen to this. So I think that it's very inherent that all these things catch like the headlines. But at the end of the day, when we see it's really that when you look at occupancy costs of all the retailers. We know some that works. We know some that don't. And that's why we will talk to tenants, either we help them to grow their sales. If not, then we will have to look at replacements. So I think if you see across some of the closures across, I think recently, there's another one about some of the closures in malls, right? Oftentimes, it's not just about the rents. It's really about manpower constraints. So some of the retailers that we spoke to previously, they did share that they have overexpanded and they're looking at how to rightsize because they don't -- simply the manpower constraint, manpower cost, all these makes a lot of the operating costs not sustainable. And then that's why, naturally, then we will feel the pressure because at the end of the day, they want to protect their margins, right, and something else goes up, they will try to find to cut from other place. So I think there's all these things that's ongoing. But I'll say F&B, it's one that we do see a shift in the consumer patterns, right, where now actually they go to something that's not overly pricey, but they like something innovative, experiential and everything. So when it opens, right, the first month is very good. So she done very good. And the challenge is that when we bring all these new to market in, right, we are not here to do a tenant for 1 or 2 months. We want to make sure that, that kind of product that they do is actually something that can sustain their sales going forward. And that's why I think there are a lot of challenges for some of the F&B operators. It's not difficult to open F&B. But when they start to open F&B, that is offering something that pretty much everybody is offering without something that's differentiating and still without the scale of operation efficiency -- operational efficiency, that's where they are under pressure in terms of their survivability. Unknown Analyst: We passed my 2 questions. Just one more, Australia. What are your views on your Australian assets given that the [ RBA ] moved cash rates up 25 basis points. Yes, the third of the... Choon-Siang Tan: Thanks for the question on Australia. Actually, Australia is generally doing quite well. If you look at -- if you -- the market consensus on Australia is that things have bottomed up probably last year. And rents are actually going up in at least in the core CBD. Core CBD actual occupancy is quite strong. There's been quite -- unlike some of the other cities in Australia, Sydney is holding up quite well and there's a bit of a flight to quality, right? So supply is getting tighter. Rents are going up. Vacancies are coming off and the incentives in Australia are also coming off. So actually, it's -- which is the reason why if you look at Australia, today, they are actually quite a bit of capital market transactions going on. So people are actually getting a bit more optimistic in terms of what's happening in Australia. If you look at our occupancy in Australia, it's also picked up slightly across our properties. Allison Chen: Perhaps now we'll turn to the online audience. Thank you for being with us virtually. We have four questions. First one is actually from Andy, DBS -- sorry, OCBC. Can you provide the debt breakdown schedule for the Hougang development project? Choon-Siang Tan: What do you mean by that? Allison Chen: The drawdown. Choon-Siang Tan: As in how much money is debt. Is it maybe [indiscernible]? Mei Lian Wong: Well, I don't have the exact amount, but a large part of it will be in this FY, given that we will be paying for the land acquisition. Choon-Siang Tan: Yes. I don't know what's the -- I'm guessing the question actually is not about debt. It's about the how much is needed per year. The deployment schedule -- the cash deployment schedule for the next few years, whether it's debt or otherwise. Jacqueline Lee: Mei Lian said, of course, the land cost that will be paid this year. So I mean, we will be paying within 90 days, I think the 100% of the land cost and then, of course, there's stamp duty as well. But for construction costs and the rest of it, right, it will be progressive because construction will probably begin only in 2027 after the planning period, which I think probably it's going to be like about 1.5 years. So construction will really in 2027. And then that construction cost will be drawn down progressively. Allison Chen: Another question we have from Helen CBRE. Will CICT's consider another development project before Hougang completion as we are still debt headroom available? Choon-Siang Tan: I think I mean, it's a hard question because it depends on what's the opportunity, right? But I think quite -- less slightly, but I mean, like I mentioned earlier, AEIs continue to go on. So depending on how you view what's development. To us, AEIs is BAU. Whether we will -- if the question is whether we will bid for another development project, which I think is what the question is driving at, probably less slightly. I mean we try to not manage too many projects on an ongoing basis. Let's do this really well first and build a track record of doing executing development projects well before we look at subsequent projects. But of course, never say never, is something that's very attractive, that comes up, who knows. But I think the current thinking now is quite unlikely. Allison Chen: Okay. The next question we have from Derek UBS and Mr. Yap. What is the status of the ION tax transparency? Choon-Siang Tan: I think no new updates on that. So as I mentioned in the last earnings update -- so this is unlikely to come anytime soon. Yes. Allison Chen: Okay. And then last question from Frasier. We have -- he is congratulating us on the strong results. The like-for-like revenue growth seems low versus the strong reversion. What is the cost? Is It due to AEI? Choon-Siang Tan: What's the like-for-like growth? I think it was about... Allison Chen: 1.4%. Choon-Siang Tan: 1.4%. Okay. So I think 1.4%, I guess a little bit of that -- I mean if you look at our reversions, it's about, call it, 6%, average 2%. So should we be tracking closer to 2%? It could possibly -- some of it could be possibly due to the AEI, but maybe we can break down the details and then get back to you, Frasier. Allison Chen: Yes, Frasier, we'll get back to you. Thank you for the question. Okay. Now we turn our attention back to the physical audience. Jovi? Unknown Analyst: Jovi also from Singapore. Just one small question here also about retail. Combining a few threats mentioned here with the new Hougang with the line from the slide is about establishing a strategic foothold in the Northeast region. And reading that along with your comments on the lack of retail offering for debt catchment, also your comments on RTS, just broadly, what is your thinking about the entire North of Singapore right now? Would there be a catchment of interest to CICT, perhaps somewhere near like the [ Turf Club Crunchy ] area away from the more crowded established areas now? Choon-Siang Tan: I don't think we have a specific view in terms of -- I mean we went into -- in Singapore is always and in real estate in general, it's always very localized. I mean to talk about North in general, it's very hard. You can have 2 more things with each other and the performance will be quite different. So it always depends on the actual location, right? I think generally, we are Singapore-centric. We like Singapore in general. If there's an opportunity in Singapore, we will definitely look at it. And when we look at it, we will evaluate, obviously, holistically in terms of whether that particular location makes sense for us. But definitely, we did mention that one of the reasons why we went to Hougang was because we don't have anything in the North-East, because it always helps us to expand our customer base. I mean, we have a loyalty reward program. The more malls we have across, it gives our customer base a wider selection and offering as well, right? Because then we can then access the database and customer base in the Northeast, because people naturally always shops somewhere near their residence. Yes. So I think we are not -- we are fairly agnostic in terms of whether it's North-East. Obviously, I think there is market talk about how the northern part of Singapore is going to be more affected by RTS. I guess, partly true, but you will also benefit from the inflow. So there will be a certain vibrancy at the entrance too. So maybe more leakage than less, but I don't know. I mean for us, fortunately, we don't have that much exposure in that area. Whether we see that as a -- I don't -- I think I said, we will look at it specifically on each individual location on its own merits. Allison Chen: Okay. Pass the mic to Vijay. Vijay Natarajan: Congrats on a good set of results. I think most of my questions are asked. Just two questions from me. In terms of office, Singapore office occupancy drop during -- seen during this quarter, maybe can I know the reason why? And specifically, with office rents hitting multi-year high, do you think -- do you see pushback from tenants in terms of increasing it higher, some tenants moving to out of CBD areas? That's my first question. Second question is in terms of retail sales, I think if I look at your tenant sales, overall tenant sales looks a bit soft. I think it's in line with broadly with market while I expect you to outperform. Any specific reasons? And with this level of sales, do you still see pushing up rents possibility in the next few years? Choon-Siang Tan: Okay. Maybe I will take the second question and then Yi Zhuan can take the first question. I think tenant sales -- we are up about maybe -- yes, I think it's on the [ Board ] now, call it, just slightly over 1% for the year. But I think we also have to be mindful that the first half of the year was a slightly more cautious environment. So if you strip out the effects of the first half, if you look at it on the second half alone, which was -- I think I mentioned it earlier in my presentation as well, we are up close to 2% year-on-year, which I guess is -- I mean, sales growing at inflationary rates, I guess, it's business as usual, whether we should be outperforming that. I think it's okay. I think we are quite happy we have 2% growth on a year-on-year basis. if anything else -- if nothing else, it's in line with our rental reversions of about 6% per annum, which then allows us to maintain the same occupancy cost. But as we have also mentioned a couple of times, our occupancy cost is actually not super demanding at the moment. We are at 17-odd percent. Pre-COVID, we are about 19%. And our sales have gone up quite significantly, probably much faster compared to our rentals over the last few years. Sales always lead rents, right? I mean your sales have to go up before your rents can go up. So we have already had the benefit of sales going up quite strongly the last few years. So we do have rooms, I think, for rents to grow up to catch up with the occupancy cost. But if nothing else, at least if you continue to grow at 2%, 3% sales per annum, at least you are able to maintain the same occupancy cost as this year. So I wouldn't call it weak growth rates. Maybe the first question on drop in office occupancy. Lee Yi Zhuan: Yes. Okay. So for fourth quarter, actually the main reason for the drop in occupancy actually some transitional vacancies that we see in the Singapore office portfolio. So of course, we have one -- I think previously, I mentioned that one of the City tenants actually left. So that one on its own is quite a big void. And Six Battery Road, we have a few of the kind of smaller kind of tenancies that expire. So these are kind of things that we are aware of ahead of time. And so actually, there are already some of the space has actually backfilled. So for example, the one in Capital we got what, 20-plus percent backfilled. And then it's fortunately had a positive rent reversion and the ones at Six Battery Road, we have also backfilled some of the spaces. Some of the spaces in these in part this drop in occupancy. So we have to set aside for some of the things like, for example, fire compliance for Six Battery Road before we can put it back out under the market yes. So it's largely that -- I would say that if -- so we are aware that -- I will even say that going forward in the next quarter so we probably will see a little bit of volatility in a little bit of these occupancies because some of these movements in the market is quite natural, especially at a point in time where we see movements in the market as there's flight to quality, there's people consolidating expansion, and then there will be natural downtime to some of these things. I think there's a second part of that question where you talk about where the tenants push back on rents. I would say actually, not really at this point. Of course, naturally, everybody is a bit cautious in terms of with all these go by uncertainty, market uncertainty, then, of course, they try it a bit more prudent when it comes to rent negotiations, right? But by and large, I'd say the broader themes that is still happening, right, flight to quality because ultimately is about talent attraction, talent retention. So centrality is actually a key theme, not just in Singapore and Australia as well. As we see the core CBD markets are the one that always recover and grows faster. So there's actually companies are prepared to pay for the right space given that in the view of the broader business, actually, real estate cost is just one function of the other parts that they are concerned about. In fact, actually, right now, the challenge for a lot of them is not so much the ongoing rent in a monthly payment perspective, but it's actually more the initial CapEx that is involved in moves. So that's the reason why you can see in many cases, right, some of the landlords are starting to do fitted out offices to help companies bring down the initial setup costs and all these things then becomes rentalized into the rents. So that's gaining a little bit of popularity across quite a few buildings in CBD. But by and large, I think that the companies are aware that ultimately, there's only so much space that's available and they had to make a choice on whether all these ESG central location fits their business banner or cost efficient. And the delta between a decentralized and CBD is still not wide enough for them to then say that actually a decentralized location is a better way to go for just pure cost reasons. Allison Chen: Do we have any more questions? Unknown Analyst: [indiscernible]. Can I ask -- I know to hop back on this point. On the RTS, do you have actually done any modeling to kind of talk about leakage or modeling in terms of how much leakage you would see on that front? And also on the retail side, again -- sorry to hop on this point, but what kind of demand are you seeing now in terms of tenants for your retail malls? Is it still largely coming from overseas, the usual suspects? And on the office side, obviously, there has -- capital market seems to be improving like how you can pointed to. Is there any -- if you guys approach to sales over assets, will you be considering that? Choon-Siang Tan: Okay. If we have -- your question is if we approached to sell some of our assets, will we contemplate the... Unknown Analyst: On the office side. Yes. Choon-Siang Tan: Yes, on the office side. I mean we have sold off [indiscernible]. So we are not adverse to selling assets. We sold off 21 Collyer Quay, which is an office asset. So we are not adverse to selling office asset. So I think between office or retail, I wouldn't say we have a preference over either, right? Because I think the cycle always changes. So for us, it always depends on what is the proposition in hand. If someone offers us -- I mean, never say never. If someone offers us a price that is very attractive, I think we will always take a look. We are not -- I mean, if it's attractive enough, we will definitely always take a look, is I would say. Yes. So that's on the office and retail front. I think the first part of your question is on RTS leakage, whether we have done some modeling. I think we did before. I think there are 2 parts to this, right? Question is the existing leakage, which has already happened and the incremental leakage as a result of RTS. I think existing leakage -- I think when people talk about leakage, there's some confusion about the truth because actually, existing leakage doesn't affect the numbers anymore. They have already leaked. So it forms a new base. So whatever delta from a year-on-year basis does not make a difference. So what we should concern about is the incremental leakage from the RTS which I think is a bit hard to model, I think. If you look at it from a pure -- I mean, if you look at it from -- today, the people who drive are likely to remain drivers into JV because you cannot substitute that away. You drive because you want to be able to move around from point to point because you spend a whole day there and you want to be able to -- if you have the ability to drive most likely, you drive. So I don't think that will substitute a way to RTS. So RTS is likely to create the additional demand from people who used to take the Causeway bus. I think there is an existing Causeway bus, which I have taken to test it out and see how convenient it is. It is already very convenient because just from one side of the Causeway to the other side, it only takes like 10, 15 minutes. But of course, there's that additional time that you have to take from your house to the -- each of the Causeway. But just crossing the Causeway itself actually is already quite convenient. But of course, with the RTS, it makes it even more convenient. Maybe 15 minutes can cut down to 5 minutes. So likely, you will take away the demand from the -- those who are currently taking bus and move it over to RTS, but that's not incremental leakage. The incremental leakage is the people who are currently not going to Johor and then suddenly decide to go to Johor. So if you are currently not going to Johor, why is that? And why would RTS make you go to Johor? -- must be because of the added convenience and a slightly shorter time line. But actually, it doesn't take that much of a long time today anyway. So if you are the type that will go to Johor to shop for cheap goods, you're probably already doing it today. So I think the incremental effect to me is not as big, but I could be wrong. But to me, people who have the propensity to shop for cheaper products in Johor are probably already doing it. But what RTS will also do is that it allows Malaysians to then more easily come into Singapore. And this facilitates cross-border labor flow, right, which then allows us to tap into incremental demand in terms of labor flow both ways. And you also -- and RTS also -- I mean, the whole Johor is booming, right? And there will likely to be greater population growth in Johor, either organic or -- I mean, you can't have economic activity without people, right? So you are likely to attract people from other parts of Malaysia coming out to Johor. So there are a lot of things that Johor doesn't have that Singapore has. Some of these people will likely want to come to Singapore, over weekends, et cetera. And then you have expats and all that moving to Johor because of all the development of industrial activity. So there's also the incremental benefit. And previously, these people probably may or may not drive into Singapore. And then RTS now creates an avenue for them to come to Singapore. So I don't think it's all bad. It's not all doom and gloom. So there could be some incremental leakage as what I mentioned earlier. But I think it's probably not as big as it is because it's -- because all the leakage that started to happen has really probably happened, but it also facilitates flow back to Singapore. So that's how I would think about it, but it remains to be seen. So let's see how that goes. Was there another question on the RTS? I think that's about... Unknown Analyst: So can I -- would you have a number on that point? Because you seem like a net negative in the sense from a Johor plan. And on the retail side, again, can I also ask, right, in terms of the just adding right, in terms of softness, I think which popped up about just now, are you seeing change in consumer habits in terms of, obviously, the footfall seems to be increasing, but spending seems to be coming down. Have you seen that in your malls as well? Lee Yi Zhuan: Sorry. You are asking if we have a number for the sales leakage. Unknown Analyst: Yes. Lee Yi Zhuan: Okay. So, have we done the modeling? Yes, we have done the modeling. We won't be [indiscernible]. So whether it's there a number I can share with you I only can say that it's not a number that I worry and lose sleep over there. Then if anything, I will refer you to the DBS report, probably that was a good reference point. I hope that I address that question. Unknown Analyst: And on the previous occupants. Lee Yi Zhuan: So on the retail consumer pattern, I would say that generally, I think, for example, some of the -- it's very hard to just use a single line to kind of capture the whole market shift. But of course, what we see is a little bit of at risk of generalization, we do see that people are moving away from very, very big ticket items. So you'll start to see people are trying to spend on experiential dining, experiential entertainment lifestyle elements. Of course, there's a little bit of a shift towards mall like sports and healthy kind of living things. But the shift in trend also does not always reflect in the kind of sales that you see because, for example, we talk about year-on-year, if you compare it, for example, sports equipment and then you I mean, just using Brompton by example, right? You see it coming down. It doesn't mean that less people are cycling compared to 3, 5 years ago. It's just that on a year-on-year basis, because it grew a lot in the prior year and the base is high and then it came off subsequent. But by and large, that trend and inherently directionally is still going a certain way. We also see that actually, for example, IP is doing -- IP collectibles are doing very, very well. Like everybody, I'm not sure -- we used to ask who are buying blind boxes. Now as we have not bought one before. right? And I don't know if any of you have not bought one. But even if you don't really believe in it, people will still try and buy. And in fact, we do also see like some of the traditional like operators that sell toys to kids are now also trying to pivot a little bit into this adult kind of thing. So toys, games, all these things no longer become something that used to be for kids. And nowadays actually the one that's spending a lot of all these things. Fortunately, for us -- I won't say unfortunately, but it's actually the end up. So that's the kind of shift that we do see in some of these consumer patterns. And that's also the kind of things that we always say that the retail products are evolving. Then we talk about all these closures and whatnot, are we seeing a lot of brands from overseas, right? In the past, right, the comment has always been that malls are cookie-cutter malls. So then, of course, when we start to bring in overseas brands, we start to say, there's too many overseas brands, new-to-market brands. And then what does it mean for local, it's finding the right balance. I don't think in any of our malls, I can't say for the rest, but I don't think in any of our malls, you can see that our malls are predominantly tenants from one particular location. It's not a local versus foreign thing. It's really getting the right mix, right, that when somebody goes to our mall, they can buy things that is from local fashion, they can buy a local F&B. They can also -- if they choose to do something else, even Chinese food is very, very good. Today, you have options. And I think that's important when people come to the mall, because especially the mall nearest to you, right, it's all one style, one pattern, one product line, right? I don't think you want to go back there even though it's the nearest mall to you all the time. So overseas exposure, we do see continued interest from Chinese brands, of course. But that aside, we also see a lot from the Western part, right? So like, for example, again, I bring back Chick-fil-A, I bring back like new concepts from -- we see like permutations, right. For example, certain things that tend to be high-cost items, now they try to make it more mess pricing. So people can still experience the same thing for a much cheaper price. So we see some of these things evolving along the way. Allison Chen: Yes. I'm just mindful of time. Maybe we'll take one last question from John. Can we pass the mic to John, please? Unknown Analyst: Congrats on the very strong DPU growth. My question relates on growth and how that changed your view on country allocation. So for example, would you be open to expand into retail in Hong Kong? Would you be open to expand into office in Japan? So right now, locally, asset prices are quite high. And given that you're already the largest REIT in Asia Pac, would you be a bit underrepresented overseas? And would this be the right time to expand more overseas? Choon-Siang Tan: Interesting. Thank you. Thank you. No. So I think question is whether if one day -- I guess I mean you prefer your question because of the new growth mindset, whether we will look at overseas. I guess the assumption is that if we want to continue to grow, but we run our opportunities in Singapore because at the end of the day, if we have to -- if you are able to find something in Singapore, we'd rather spend the money in Singapore and continue to grow in Singapore. The question is, have we run out opportunities because you're asking if this year is the right time to look at overseas. No, I think we have shown in our track record that we are still able to find opportunities and decent sizable opportunities that continue to be accretive financially makes sense for us and puts our portfolio in a good position. I mean we did -- this outcome is also another way that we deploy capital in Singapore as well. And that also is another reason why we also look at it because it offers us another way to grow in Singapore. I don't think we have run our opportunities. I mean there are still so many assets in Singapore that we can look at without going into details and names. So I think the short answer is if we are able to deploy the next dollar in Singapore, we'd rather do that than going overseas. Do we like Hong Kong and Japan exposure? I think Hong Kong is probably going through quite a bit of challenges as we can see in some of the other -- our sister REITs that have assets there. Rental reversions are still on a negative trend. I don't think it's something that we will keen to look at, if you ask me. And as I mentioned, I think it's -- I mean as -- most of our investors, I think, prefer us to still be predominantly Singapore. I think we have also addressed some of these questions in previous. I think, in fact, if we have a choice, I guess, we may even look at reconstitute things out of our overseas portfolio, if possible, before we look at growing if possible. Japan wasn't on my mind, so I guess I forgot about that. I guess that was indirectly answering your question. Allison Chen: Okay. I think that's all the time we have. Before we conclude, Choon-Siang, would you like to share some closing remarks. Choon-Siang Tan: No -- I think this is a very good set of results, and I think I really want to thank all of you for continuing to support us. We know that this sets the bar even higher for us, makes it 2026 bigger hurdle to climb over, but we will continue to work hard, push for results and stay disciplined in terms of what we do. I think our team is -- we have a very strong team. I think credit to everyone sitting here and everyone sitting there. That's the reason why we are able to deliver on so many fronts. I think it's not just the acquisition front, although that's the things that people -- a lot of people are focused on, but actually, organically. The organic assets still make up 98% -- 95% of our portfolio. And if we are able to deliver performance from organic assets, that will make our job a lot easier actually looking -- in terms of looking for growth. So hopefully, we continue to deliver, but we know it gets much harder and harder each time. Okay. Thank you. I think we have some tea right outside, right? Allison Chen: Yes. If you have further questions, please feel free to reach out to us. Otherwise, have a great day, and those in person and join the refreshments outside. Thank you. Choon-Siang Tan: Thank you. Lee Yi Zhuan: Thank you.
Operator: Good morning. This is the Chorus Call conference operator. Welcome, and thank you for joining the FinecoBank 4Q 2025 Results Conference Call. [Operator Instructions]. At this time, I would like to turn the conference over to Mr. Alessandro Foti, CEO and General Manager of FinecoBank. Alessandro Foti: Thank you. Good morning, everyone, and thank you for joining our fourth quarter 2025 results conference call. In 2025, net profit was flat year-on-year at EUR 647 million and revenues at around EUR 1,317 million, supported by our nonfinancial income, investing up by around 10% year-on-year, thanks to the volume effect and the higher control of the value chain by Fineco Asset Management and brokerage is up by around 18% year-on-year, thanks to the enlargement of our active investors and stock of assets under custody. Operating costs well under control at around EUR 356 million, increasing by around 6% year-on-year by excluding costs related to the growth of the business. Cost/income ratio was equal to 27.1%, confirming operating leverage as a key strength of the bank. Moving to our commercial results. The underlying step-up in our growth dynamics gets crystal clear month by month. This is underpinned by the positive tailwinds from structural trends, and we are leveraging on this solid momentum through and more efficient marketing. The results of this acceleration has been clearly visible in our most recent numbers. First of all, recorded our third record year in a row for new clients at around 194,000 new clients, up by 27% year-on-year. In January, new clients were 22,000, hitting the best month on record, up more than 70% year-on-year. Second, our net sales recorded a new high at EUR 13.4 billion in the year, up by a strong 33% year-on-year. In January, total net sales saw a further continuation of this trend at around EUR 1.1 billion, up by 21% year-on-year. The mix was, as usual, characterized by the monthly seasonality for assets under management with around EUR 260 million, net sales up by 16% year-on-year, assets under custody at EUR 1.1 billion and deposits at around minus EUR 207 million as our brokerage clients were active on the platform, given market volatility, thus resulting in solid brokerage revenues estimated at around EUR 22 million, up by 7% year-on-year. Our capital position confirmed to be strong and safe with a common equity Tier 1 ratio at 23.3% and the leverage ratio at 5.07%. We are very pleased to propose to the next Annual General Meeting a dividend per share of EUR 0.69, increasing by 7% year-on-year. On our 2026 guidance, this year, we expect all the businesses areas to contribute to the revenues growth, thanks to the acceleration of structural growth underlying our business. We expect a further acceleration in both total net sales and new clients, another record year for brokerage revenues, a cost income comfortably below 30%. More details will be provided during the Capital Market Day on March 4, 2026, together with the multiyear plan 2026-2029. Let's now move to Slide 5. Before moving in the details of the presentation, let me stress that month after month, Fineco is recording a continuous acceleration of its growth dynamics, supported by very sound underlying quality. As you know, our business model relies on a diversified and quality revenue stream, allowing the bank to deal with any market environment. the banking revenues, our net financial income is a capital-light one with lending being only an ancillary business, and it's driven by our clients' valuable and sticky transactional liquidity. Let me remind that deposits are joining our platform for the quality of our banking services and not due to aggressive commercial campaign on short-term rates. That's why our deposits are so valuable and our cost of funding is close to 0. Our investing revenues are recording a sound and future-proof expansion as they are already aligned with clients' rising demand for transparency, efficiency and convenience. This approach is mirrored in the quality of our revenues mix, which is almost entirely recurring with a very low percentage of upfront fees and no performance fees at all. Finally, our brokerage is clearly experiencing a step-up in the floor of the business, thanks to the capability of our platform to structurally have a higher number of active investors, leading to structurally higher stock of assets under custody. This is driven by an increase in clients' interest to be more active on the financial market and is building a bridge between the brokerage and investing, which we are the only platform able to scope given our market position. The net financial income was up 3.1% quarter-on-quarter, led by our valuable positive deposit net sales and the higher reinvestment yield of our bonds running off. Let me quickly remind you that the quality of our net interest income, which is capital-light and driven by our clients' sticky transactional liquidity. That's why our deposits are so valuable and will be the driver going forward for the growth of our net financial income. Let's now move to Slide 8. Investing revenues increased by around 10% year-on-year on the back both of growing volumes, thanks to our best-in-class market positioning and of the higher efficiency of the value chain through Fineco Asset Management. Let me remind you the great quality of our investing revenues, mirroring our transparent and fair approach towards clients. Our revenues are mostly driven by recurring management fees with very low upfront and no performance fees at all. Let's now move to Slide 9. In this slide, we are representing the 2 main sources of growth for our investing business going forward. On one hand, Fineco Asset Management is progressively increasing the control of the investing value chain. Its contribution to the group net sales has been consistent over the cycle, thanks to its incredible time to market in delivering new investment solutions aligned with clients' needs. The contribution of Fineco assets under management out of the total stock of assets under management has been steadily growing, and it's now equal to 39.3%. On the other hand, being a platform, Fineco is the best place to catch the latest trends in terms of clients' investment behaviors. There is a clear change underway in the structure of the market with clients increasingly looking for efficient, transparent and convenient solutions. All of this is channeling a strong demand towards advanced advisory services with an explicit fee, where Fineco is by far the best positioned in Italy, as you can see down in the slide. Let's now move on Slide 10 for a focus on brokerage. Brokerage registered a record year with around EUR 256 million revenues, driven by our larger active investor base and growing stock of assets under custody. January further builds on this with EUR 22 million estimated revenues. Let me stress that the revenues of our assets under custody are expected to grow as we roll out our new initiatives on securities lending, out FX, ETFs and systematic internalizers. Average revenues in the year are around 10% higher versus 2020, with much healthier underlying dynamics. This is driven by the structural increase in clients' interest to be more active on the financial market and building on a clear bridge between the brokerage and the investing world. The brokerage business represents the best sign of how fast the structure of financial market is evolving as technology is driving a swift change in clients' behaviors, thanks to higher transparency. For these reasons, we consider the brokerage Italian market still very underpenetrated, and we see a strong opportunity to grow despite already being the market leader. Let's now move to Slide 12 for a focus on our capital ratios. Fineco confirmed once again a capital position well above requirements on the wave of a safe balance sheet. Common equity Tier 1 ratio at 23.3% and leverage ratio at a very sound 5.07% while risk-weighted assets were equal to EUR 6.2 billion, total capital ratio at 31.37%. As for liquidity ratios, the coverage ratio is over 950% and net stable funding ratio over 400%, while the ratio of high-quality liquid assets and deposits is at 80%. Going forward, we confirm that we will continue to generate capital structurally and organically, thanks to our capital-light business model. Given the strong acceleration in our growth, we are taking more time to have a clear view on deposit net sales going forward as the underlying dynamics are strongly improving. If despite the strong acceleration of our growth, there will remain excess capital, we will decide on the best way to return it back to the market. Let's now move to Slide 18. Fineco enjoys a unique market positioning to catch the long-term growth opportunity resulting by the huge Italian household wealth and the fast-changing client behaviors. The graph that we are now representing our market share on the addressable market on the stock of financial wealth of Italia households. As you can see, our market share is still small and the room to grow is huge. We are very positive on our future outlook as we have no competition on our market positioning. Fineco is the only big player with a service model truly based on efficiency, transparency and convenience. Moving now to Slide 19. The step-up of our growth trajectory is clearly materializing as you can easily see in our recent clients' acquisition. On top of the slide, you can see the impressive acceleration of new clients, which in 2025 recorded a third record year in a row and saw a record month in January just before the launch of our most recent marketing campaign. This acceleration is very sound because it's based on the quality of our offer and not on aggressive marketing campaign with short-term rates remuneration. As a result, all our new clients are improving the metrics of the bank by bringing more deposits or more business for brokerage and investing. This value is recognized by our clients as shown by our client satisfaction of 96% and on our Net Promoter Score way above the industry average. Let's now move to Slide 22. Let's now focus on our assets under custody, a component of our business that is sometimes undervalued by the market, but that is the real cornerstone of our fee-driven growth. This is true for investing as assets under custody remains the main source fueling our assets under management net sales. As you know, around 90% of our growth is organically driven. As a consequence, new clients tends to show in asset allocation more skewed towards assets under custody and the job of our financial adviser is to improve the mix into assets under management. For brokerage, the expansion of assets under custody and the growing base of active investors are key factors leading to a structurally higher flow in our revenues, which we expect to grow as we roll out our new initiatives on securities lending, out FX, ETFs and systematic internalizers. Finally, the fast-growing ETF space, we are exploring new revenues opportunity, which we explain moving on the Slide 23. Fineco is uniquely positioned to capture the strong client-driven shift towards more efficient investment solutions such as ETFs. The stock is quickly on the rise and now exceeds EUR 16 billion with ETFs accounting for half of the assets under custody fees. Thanks to our focus on efficiency, transparency and convenience, we are the only player capable of fully recognizing and monetize the structural trends with no harm on our profitability. First of all, the growing interest in ETFs is generating a positive volume effect for our investing business. Thanks to our advanced advisory wrappers made of ETFs, we can move in the investing world clients that are not interested in traditional mutual funds with no cannibalization risk on the existing fund business. At the same time, our leadership in ETF retail flows make us the main gateway for issuers in the Italian retail market. While we currently manage all costs to handle clients without recurring fees -- recurring revenue for ETFs, talks are underway with our partners to find a fair balance. Finally, Fineco's management is going to play a big role in ETFs world. Our Irish firm already launched active ETFs and more are going to be introduced. Thank you for your time. We can now open the call to questions. Operator: [Operator Instructions] The first question comes from Enrico Bolzoni with JPMorgan. Enrico Bolzoni: I wanted to start with Private Banking, if possible. You're clearly growing very nicely. I noticed, however, that the average asset per private banking client is at EUR 1 million, which is roughly the same level it was 1 year ago, even if clearly 2025 was a period of very strong market rally. So in a way, I would have expected maybe a growth in the average asset balance per private banking client. Can you please maybe explain a bit the dynamics there? There's a bit of dilution, maybe new private banking clients that are coming in that are a bit less wealthy offsetting the growth in assets of the others or anything else that would be helpful. And also related to Private Banking, would you be able to give us an indication of how much of the growth is coming from recruiting. So the new adviser you're bringing in, how many of them are particularly strong in the Private Banking segment. And then if I may go on the other end of the spectrum. So can you just give us an update on the trading-only platform, how many clients you have? And perhaps if you can attribute the very strong growth in customer this month to this feature, to this offering? Alessandro Foti: So let me start by the Private Banking average assets per clients. This is clearly -- it's perfectly current with the distribution of the Italian wealth because Italy is characterized by a significantly high median wealth. So this means that the most part of the wealth is extremely -- is much more broadly distributed than with respect to what we have in other regions. And so this is absolutely consistent with that. So there is no dilution, it's absolutely [indiscernible]. So this is the main reason. And so we don't expect any significant change in the short term in terms of average assets per client exactly driven by this because this is -- the juice of the Private Banking business is in an area of probably between EUR 0.5 million up to, let me say, EUR 5 million, EUR 10 million, but clearly, this is bringing to an average portfolio for clients that is this. And as probably is very well known, our growth is mostly organically driven. So for us, recruiting is playing a small role because during 2025, recruiting in terms of gathering new assets has accounted for not more than 10% overall and this is absolutely current with our long-term strategy. So our strategy is to keep on getting more clients that are interested in our services instead of buying clients throughout recruiting. We think that is a much more healthy approach. And so this is going to continue. On the trading-only clients, the growth is keeping on accelerating, is extremely robust. I don't know if Paolo wants to make a few comments on this point. Paolo Grazia: Yes. Brokerage-only account is a great product. So we have a large amount of clients that are entering. And so it gives us a good contribution to the revenues of the brokerage. We don't give usually the number of brokerage-only account, but it's a very strong inflow of new clients. Enrico Bolzoni: And sorry, if I might go back once again to the private banking aspect in terms of the recruiting because recruiting is growing nicely 88%, I think, adviser experience over this year. Do you see any change in the quality of advisers that are coming to Fineco? I appreciate that you don't pay them to join, they join because they like the proposition. I was just keen to know if you see maybe more private banking adviser that are joining Fineco or if the mix remains roughly the same? Alessandro Foti: So in terms of -- which are the financial -- the new financial planners joining Fineco, we have 2 clusters. There is a cluster -- so the cluster for which we have preference is, number one is regarding the senior financial planner is represented by experienced financial planners, but characterized by an evident and significant room for keeping on increasing their productivity. So we are not interested in taking on board financial planners that are not giving any interesting future evolution in terms of growing productivity. So we -- because, again, we don't need to recruit the financial planners just for sustaining the net sales because the net sales are building up incredibly strongly, thanks to the positioning of the bank. And so clearly, the reason -- the senior financial planners has to be clearly senior financial planners that they are truly interested in the business model of Fineco. And so this means that they are really interested -- that they are interested in keeping on their business for still many years to come and also they have the ambition to grow. So this is the driver. If there is a large big financial planner that is only interested in getting an upfront premium and moving, we are not interested in hiring that kind of financial planner. The second cluster is represented by the young people that we are onboarding in the bank. We are preparing for the future activity. This is an investment initially because before any young person becomes productive, it takes usually 4, 5 years, but it's paying off because the new generation of financial planners that we brought in the bank in the past years is now performing incredibly well. Also because these young people are incredibly perfectly aligned with the values of the bank that, again, characterized by efficiency, transparency and convenience. Operator: The next question is from Elena Perini of Intesa Sanpaolo. Elena Perini: The first question is about your leverage ratio because, yes, it is well above the 3% requirement, but it is slightly down versus previous periods. So I would like you to elaborate a bit more on it. And then I have another question about your direct deposit outflow in January. Probably it is linked to negative month seasonality, which is quite common at the beginning of the year. But I would like just you to confirm it. And if you can say something about your expectations for direct deposits trend this year? And finally, a question on systemic charges. Would you expect an increase in systemic charges probably relating to some specific case within the banking sector? Alessandro Foti: Yes. Thank you. On the leverage ratio, clearly, this has gone slightly down, driven by the increase of deposits because the increase of deposits by the year-end has been very strong. And so this is the reason why we are maintaining the same wording on the evolution of our capital position because on one hand, we are expected to keep on generating additional organic capital, thanks to this incredibly capital-light business model. At the same time, clearly, the bank is more and more entering a new dimension of growth. We are more and more moving throughout, let me say, very positive unchartered waters, thanks to the positioning. And so clearly, we prefer to keep on waiting in order to look how it's going to evolve the growth that we expect as we were reiterating during the guidance, we expect to keep on accelerating. And so we prefer to take our time. So it's -- so this is our thought on that. So it's -- regarding the deposit outflows in January, this is absolutely perfectly aligned with the seasonality of the month because just consider that during the month of January, you have all the expenses made by the clients through the credit cards during the month of December, it is a month of expenditures, are clearly charged on January. So we are not -- it is even better with respect, for example, last year because last year, the seasonality has been definitely stronger than this year. So we are not absolutely surprised by this. It's perfectly aligned with the seasonality. And our expectation for deposits during the full year is clearly they are going to keep on growing. This is going to be clearly driven by the continuous client acquisitions because as we explained during the presentation, the clients that are entering the bank are clients that are not attracted throughout aggressive campaign and short-term proposal are clients that they are truly interested in using the platform. So this means that every single additional client we are adding to the platform, also a small client is contributing and increasing the transactional liquidity of the bank. So the liquidity that is there for functional reasons. And so for this reason, deposits are going to keep on growing throughout 2026, clearly, according with the usual seasonality that I characterized. And clearly, you can have also temporary effect caused by the activity of clients on the brokerage platforms. So this is -- but overall, the trend is up. On the systemic charges, I'm leaving the floor to Lorena, our CFO, for a little bit more color there. Lorena Pelliciari: Thank you, Alessandro. Good morning to everybody. So on 2026, our expectation regarding the systemic charges that we are estimating a contribution around in the region of EUR 10 million, EUR 15 million because we have to consider possible additional contribution in case of the increase of guaranteed protected deposits or in the event of bank's failure. We have to take into consideration that based on the most recent news flow regarding one small Italian bank under special administration, we have to take a prudent approach on that. Elena Perini: Just a follow-up on this. We expect this to occur only in 2026 or to go on in the next years, too? Lorena Pelliciari: We have to expect the final decision elaborated by the [indiscernible], but we expect a distribution along 5 years, distribution of the contribution in 5 years. Operator: The next question is from Luigi De Bellis with Equita. Luigi De Bellis: Just one question for me. On the AI that is rapidly reshaping operating models across the financial sector. So from your point of view, what do you see as the most material opportunities AI will create for models like Fineco in terms of productivity, client engagement, advisory and risk management? And what are the key risks you are monitoring? And how do you expect the AI to reshape the competitive scenario in Italian wealth management and brokerage over the next 3, 5 years? Alessandro Foti: AI is going to be an absolutely game changer in what's going on in our industry. Fineco, as we explained, is by far the best positioned player for exploiting the huge advantage by artificial intelligence for a very simple reason because I don't want to spend too much time because this is going to be a section that is going to be extremely very well in-depth treated during the Capital Market Day because this is a very important chapter. But Fineco is -- because in AI world, what is key are 2 components. One, you have to be able to get easily access to a high-quality base of data. Second, you have to be in the position to really build up your hedges in order to create something that makes sense. And clearly, this is much, much easier for -- and less and less expensive for an organization that is a tech company in full control of the technology. It's a different story, for example, if you are relying on outsourced services or your processes managed by external system integrators. But we are asking you to be a little bit patient because on the AI space, we are going to bring something very interesting presentation during the Capital Market Day. Operator: Mr. Foti, there are no further questions registered at this time. Back to you for any closing remarks. Alessandro Foti: Thank you, everybody, for attending to our financial presentation. So as usual, if you have some more interest or you want to deep dive in some numbers and concepts, please call us any time for a follow-up. Thank you again, and see you on March 4 for the Capital Market Day. Thank you again. Operator: Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones.
Natalia Valtasaari: Good morning, and welcome to KONE's fourth quarter results call. My name is Natalia Valtasaari. I'm Head of Investor Relations here at KONE. I'm joined today by Philippe Delorme, our President and CEO; and our CFO, Ilkka Hara. So as usual, Philippe will start by talking about the highlights of the quarter of the year, particularly focusing on what's going on in terms of strategy execution and our progress there. Ilkka will then continue by running through the financials and the outlook, both market and business outlook for the full year. And then Philippe will wrap up, and we'll be ready for your questions. [Operator Instructions] Hopefully, we'll get very active dialogue, and that will enable as many people as possible to participate. With that, Philippe, please. Philippe Delorme: Thank you, Natalia, and good morning, everyone. I'm very pleased to be here today presenting our full year results. Let me start by saying that our success in 2025 was a result of determined and disciplined strategy execution. Order growth was one of the key highlights of the year. Our ability to capture the modernization opportunity together with our focused efforts to grow in the residential space were important contributors. We also delivered consistently on our profitable growth ambition. Central to this was the continuous strength and improved performance of our service business. This year, service became our largest business at over 40% of sales, making KONE more resilient than ever. Supported by our solid operational performance and strong cash generation, the Board is proposing a dividend of EUR 1.80 per Class B share, which represents a dividend yield of nearly 3%. Last but not least, I'm very pleased to report tangible results of our work in all our strategy shifts. I will share some more concrete example in a moment, but let's first look at our financial performance in more detail. Let's start with orders. So as I said, growth momentum was strong throughout the year, and Q4 was no exception. Comparable growth of 12% is a very good outcome. I'd like also to take a moment to highlight Asia Pacific, more specifically India and the Middle East. The team has done an excellent job positioning KONE as a leader in these markets, capturing growth opportunities while also driving meaningful operational improvements. Turning to sales. We grew just over 4% at comparable currencies, supported by roughly 10% combined growth in service and modernization. Modernization continued its strong trajectory with growth of around 15%. Service growth was somewhat moderated by the actions we are taking to strengthen performance and margin in China. And with that in mind, 6% growth is a good outcome. Our adjusted EBIT margin expanded by 60 basis points, thanks to a richer sales mix. And finally, cash generation in the fourth quarter was solid, though lower than the exceptionally strong comparison period in 2024. So all in all, we had a good finish to the year, very much in line with our expectation. Let's now look at our strategy execution has progressed this year. First, I want to highlight the excellent progress we've made in accelerating our digital transformation. The share of connected units in our maintenance base now exceeds 40%, up 7 percentage points from the previous year. For me, this step change in pace reflects our ability to better articulate the value of transparency and real-time data to our customers and their growing recognition of the benefits. We also significantly expanded the reach of our productivity-enhancing tools. With the U.S. about to go live, dynamic maintenance planning is effectively covering 2/3 of our installed base. This is starting to deliver measurable improvements in field efficiency, which can be seen in the expansion of our service margin. It has also supported service growth, particularly through increased repair sales. Moving now to modernization. I'm really pleased with the great customer response to our partial modernization offering. This is clearly visible in its rapid growth, now making it the largest part of our modernization portfolio. The modular concept resonates strongly with customers because it directly addresses their biggest concern, minimizing disruption to daily life during the elevator upgrade. Commercial traction in the residential market has also been very strong this year, and this reflects the success of our efforts to improve offering competitiveness, especially from a cost perspective. Achieving double-digit residential order growth in all regions except China, where market challenges are well known is a very, very strong accomplishment. And we all know why this matters. Strong residential orders today secure future service business and residential is a highly attractive service market for us. Now let's take some example of our strategy in action with customers. Let's start with China, where we are providing a full scope of digital service solution to Nanjing Golden Eagle World, a landmark multi-use complex in East China. Transparency, actionable insights and the ability to elevate tenant experience with proactive communication were cited by the customer as a key benefit. Turning to the Americas. We have recently won a partial modernization project for 22 units at the American Airlines Center, a premier sports and entertainment arena in Dallas, Texas. Our ability to adapt the installation work to minimize disruption during the busy game season was key in the world. So staying with modernization and turning to Europe, where we have a great example of how sustainability is influencing customer decision. In this project, the original plan was a full-scale modernization. However, by highlighting the opportunity to reduce emissions and energy use by grinding only the outdated components, the customer chose a partial modernization instead. And last but not the least, India, where, as mentioned, the team has delivered an outstanding quarter, very much supported by our focus on driving growth in residential. We have one particular prestigious win with the order to supply a wide range of equipment to DLF premium residential development, Privana, under construction in Gurgaon near New Delhi. Let's now turn to sustainability, where we have a lot to be proud of. As you know, we track our performance with the sustainability index, and I'm happy to share that we exceeded our targets in 2025. A key driver was a stronger-than-anticipated increase in regenerative drive sales, which contributed to a reduction of nearly 13% in Scope 3 emission from the previous year. Another important contributor was a step-up in cybersecurity performance, a core strategic priority as digitalization accelerates across our products and services. One measure of our progress is our Bitsight rating, which this year placed us in the top 1% of our global engineering peer group of over 24,000 companies. This is a fantastic achievement and testament to the dedicated work of our cybersecurity team. I'm also very pleased with the external recognition we have received, most notably our inclusion in the Corporate Knights ranking of the world's most sustainable companies. I want to highlight that sustainability is not just a set of commitments for KONE, it directly drives our business performance. Our impact revenue grew over 20% last year, and today, it represents over half of our overall sales. This is an excellent indicator of how our strategy is progressing. Digital service solutions, partial modernization and regenerative drives all contribute to climate impact mitigation and thereby to our impact revenue. So as said, we have a lot of great example of strategy progress from 2025. And now, of course, our focus is on maintaining this momentum. Let me next hand over to Ilkka, who will go through the market development and financials. Ilkka Hara: Thank you, Philippe, and also a warm welcome on my behalf to this fourth quarter result webcast. Let's start by taking a look at how our markets have developed during the past few months. The elevator and escalator markets were again resilient in the fourth quarter. In services and modernization, the market environment was very positive, and we saw growth in all areas. In New Building Solutions, the picture is more polarized. The well-known challenges in China construction once again drove significant decline in elevator and escalator market activity. In contracts, the activity increased in all other regions. Looking at the chart, Americas growth stands out. This is largely due to the last year's relatively low comparison point. What is more relevant is the sequential trend, which remained quite stable, a solid outcome given the broader geopolitical environment. Let me next go through our financials in more detail, starting as usual with our orders received. As Philippe highlighted, the positive momentum seen in previous quarters continued in the fourth quarter. Overall, the orders received increased by 12.2% at the comparable currencies, and growth was broad-based across the portfolio. With the exception of New Building Solutions in China, all business lines and regions contributed. We also had a very strong quarter in major projects across several geographies. From a geographical perspective, growth was strong in Asia Pacific, Middle East and Africa. The over 20% growth in both modernization and NBS in this area highlights our ability to effectively capture opportunities in this rapidly expanding market. From a business line perspective, modernization continued to grow at a healthy double-digit rate. New Building Solutions followed the market trends with pressure in China and growth elsewhere. Our orders received margin remained stable year-on-year. Pricing conditions in China continued to be challenging, but this was offset by more stable orders margin in other regions and our product cost reductions. In terms of sales, we had a good end to the year with a 4.3% comparable growth in the fourth quarter. Looking at the development by business, continued good growth -- good order book rotation in modernization was the highlight. This delivered 15% sales growth in the quarter. In New Building Solutions, China remained a drag, although this was partly offset by growth in other regions. Service sales grew by 6%. Outside of China, growth was in line with our targets. While in China, sales were slightly below last year. We also saw some negative impact from separation of our doors business. Shortly on China. As discussed in previous quarter, our priority there is to safeguard margin and cash flow across all of our businesses. In service, this has meant reassessing our contract base and taking targeted actions to strengthen the performance. I'm pleased that these actions have delivered the intended results. Looking at growth tailwinds. Our maintenance base continued to expand and pricing developed favorably. Here, we saw support from sales and operational excellence performance initiative, where we have focused on professionalizing our pricing and driving repair sales. This is closely linked to our digital transformation. As Philippe explained, by improving field efficiency, we free up time that can be proactively directed towards repairs. For me, this is an excellent example of tangible benefits of digitalization. Then moving to adjusted EBIT and profitability. Let me start by saying that I'm pleased that we have continued to consistently deliver profitability improvement, moving steadily toward our midterm target of 13% to 14% adjusted EBIT margin. Our margin expanded by 60 basis points in the quarter, taking adjusted EBIT to EUR 402 million. Looking into details, our biggest headwind continued to be margin pressure in China. On the positive side, the business mix continued to be favorable. What I'm happy about is that service margins continued to improve, supported by repairs growth and our efforts to take more strategic approach to pricing. Product cost reductions has also continued to -- contributed to profitability and will continue to be supportive in the coming year. Then turning finally to cash flow. We had a strong year in terms of cash generation, supported by growth in operating income and changes in working capital. For the full year, cash flow from operations rose to nearly EUR 1.8 billion with a solid quarter-by-quarter development. Looking at the working capital in more detail, FX swings had a bigger-than-normal impact to this year. If we adjust for negative currency impact of approximately EUR 60 million, working capital improved moderately. A key driver was the increase in advances, and I'm also pleased with the work the teams have done in driving collections. Then let's look at how we are thinking about '26, starting with the market environment. Our outlook for the year is very consistent with how activity developed in '25. We see attractive opportunities in all parts of the world. This is particularly true in modernization and services, where we expect markets to remain very active in every region. In New Building Solutions, we expect the decline to continue in China. The lower rate of decline is mainly due to the comparison period rather than the meaningful easing of the underlying pressures. Outside of China, we expect growth, slight in Europe and North America and clearly stronger in Asia Pacific, Middle East and Africa. So overall, operating environment looks to be favorable this year. Of course, the geopolitical environment continues to be a risk, and we're keeping a close eye on how this could be reflected into market activity and potentially our financial performance. That's a good bridge to our business outlook for the year. Let's start by going through the headwinds and tailwinds. As mentioned, the market conditions in China remain under pressure. So this is burdening our performance as is the wage inflation. At the same time, our order book, combined with a strong outlook for service and modernization provides a healthy foundation for growth. Beyond the resulting positive mix effect, we also expect tailwinds from increased contribution from our performance initiatives and from the product cost reductions achieved during '25. So with all this in mind, our guidance for '26 is for the sales to grow 2% to 6% at the comparable currencies and adjusted EBIT margin to be in the range of 12.3% to 13%. This keeps us firmly on track towards achieving our midterm financial targets. With that, let me hand back to Philippe to close the presentation and open the Q&A. Philippe Delorme: Thank you, Ilkka. So before I move to the summary, let me take a few moments to highlight our priority for 2026. First, we will continue driving the excellent progress we've made in digital. We'll push for even higher maintenance-based connectivity and focus on further leveraging the productivity gain we are seeing in the field. In modernization, it will be important to build on this year's strong momentum in partial modernizations with a particular emphasis on reducing installation time. We've made very good progress in our initiative to drive performance through sales and operational excellence and improved procurement efficiency. The first results are already visible in our financials, as you heard from Ilkka, now we must maintain and, in some way, accelerate this momentum to ensure we deliver the intended bottom line. And finally, to support all of these priorities, we will continue to strengthen a high-performance culture across the organization. This will help us drive greater precision and discipline as we drive our business transformation forward. So to wrap up, we can be pleased with what we achieved in 2025. For me, most important was the great progress we've made in strategy execution. This was especially visible in the acceleration of our transformation to an even more service and modernization-driven KONE, supporting our performance and further strengthening our resilience. Finally, both last year's results and our guidance for 2026 show that we are advancing well towards our midterm financial targets. So a big thank you to all KONE teams for an outstanding commitment once again. Thank you all for your attention, and I suggest we now move on to your questions. Operator: [Operator Instructions] We will now take our first question from Daniela Costa of Goldman Sachs. Daniela Costa: But maybe we can start, you talked about the tailwinds from the operational actions that you're doing. Can you help us out thinking in 2026, the balance between how much should we expect in savings versus what we will have in, for example, raw materials? Will that be a headwind? Where -- how should we think about that balance? That's the first one, and then I'll ask a quick one afterwards. Ilkka Hara: Okay. Maybe I'll take at least the start of it, and Philippe is quite excited about this, so I think you will add. So we are expecting a slight headwind from raw materials in '26. And -- then separately, so we have, as we said, been pleased how we've been able to now get both the performance initiatives ongoing. So the focus on purchasing as well as on the sales and operational excellence. And actually, in '25, we did see both contributing positively. But like we said already when we started the new strategy that we expect an increasing impact from the performance initiatives through '25, '26 and '27 contributing increasingly in those years. And we are guiding for improvement in profitability. So it's also visible in our guidance. Daniela Costa: Okay. So we will exceed any raw material. And then the second question is, why haven't you increased the dividend this year given you obviously have earnings growth, you have strong balance sheet. Can you elaborate a bit on how you're thinking about shareholder payback and priorities there and yes. Ilkka Hara: Well, first, it is, in my mind, a strong dividend that the Board decided for the year or a suggestion for dividend for the AGM. And we've had a strong performance, and we also do value a strong balance sheet. So at the end, this was a decision this year. And I think it's a strong dividend and a good yield as a dividend yield as well. Operator: Nick your line is open. Nicholas Housden: The first one is just some clarification on the guidance. I mean the low end of the growth guidance is at 2%, and we had 4% growth in 2025. And this year, it feels like you've got some very good growth tailwinds, modest, very strong and a bigger share of sales. NBS outside of China looks good. NBS in China is an ever-declining share of sales. Service growth is strong. So it just seems very unlikely that you would kind of end up anywhere near that 2% growth number. So I was just hoping you could maybe give some comments and some sensitivity around the growth guidance there, please. Ilkka Hara: So of course, like I said already in my remarks on the guidance that the uncertainty in geopolitics continues to be high. Then if I look at KONE business, we have a good order book in our NBS business, like you said. Uncertainty is more around how our customers are taking the projects forward. And it's good to note that one part of the good growth in '25 was related to major projects, which clearly have a lower order book rotation than the volume business. In modernization, we still are accumulating orders throughout the first half that we will deliver in the year. So it's more a question of how good are we executing against our target of more than 10% growth in modernization. And indeed, in services, it's more of a consistent good growth business. So those are the moving parts in the guidance as we see it. It's early in the year, and we see that this is a good range of outcomes for the business. Philippe Delorme: And it's aligned with our long-term targets -- or midterm targets, sorry. Nicholas Housden: Great. And then just a related follow-up regarding service growth. So 6% in the quarter, still a solid number, but a little bit slower than the dynamics that we've been seeing before. So I was hoping you could, a, just comment on what you're seeing in the quarter; and b, obviously, you've done a really good job over the past couple of years of aligning pricing with the customer value that you've been delivering. So I'm just curious to hear your thoughts about how you see this pricing dynamic going forward and whether there was almost a one-off element in the past couple of years as you sort of raise prices on existing contracts and whether it might be a little bit less of a tailwind over the next 2 to 3 years? Ilkka Hara: I'll try to comment on all of the components. But first, on the growth of services. So we target close to 10% growth in services business. And if you look at the full year, we're actually quite well in line with what we have guided. Then in the fourth quarter and maybe also in the second half, we had an impact from actions we took in China. As I said, we are prioritizing all of the businesses around cash flow profitability. And we reassessed our service base based on those priorities. And that's something where we saw a good impact to our performance, but it did slow our service growth as an overall down. And we also have been very explicit that we want to separate our doors business to a separate business. And as that separate doors business is reported under the services. And during the separation, of course, it takes some management bandwidth as well as system changes, which impacted the growth as well. So all in all, I think it's quite in line what we targeted, excluding these 2 actions we've taken. Then on pricing, so I'm actually very pleased that we've now been able to take much more strategic, much more analytical approach to pricing. And we've seen both pricing as well as our repair volumes growing very nicely as a result. And I don't see that this work has been done yet. I think there's further opportunities going forward. I don't know if you want to comment on services more. Philippe Delorme: No, I would say more broadly on services, there is no reason for us to change the strategic direction we're having, which is we want to differentiate with digital, both on the efficiency side and the customer value. We see it working very well. We were planning -- we are growing very well in 3 of our 4 areas. We made a choice in '25 to prioritize differently in China to privilege cash margin. And then picking the right customers. We've done exactly what we wanted. We were expecting this pruning of the portfolio and therefore, the impact on the top line. We see a very strong momentum in the 4 other area. Now we are back in China much more on the growth side, but growth and profit, and we've delivered better profit in China in service. So we are sticking to the plan, and we are very confident in where we want to go. Operator: And we'll now take our next question from Vivek Midha of Citi. Vivek Midha: Hope you can hear me well. My question is really following up on the China service story. Within the slight decline you have in the fourth quarter in China, would you be able to indicate whether you saw units under service still growing in the quarter with the decline driven by price mix? Or did you see a decline in the quarter in units under service? And the follow-up is you commented that the actions in China have seen the intended results. I'm curious to understand, should that effect then not continue in 2026 and onwards? Or given that you took the actions in the second half, should we expect some carryover effect on the China service growth rates in the first half of '26 before the comps ease up a bit again? Philippe Delorme: Do you want to start? Ilkka Hara: I can start. So in services in China, so there's 2 things that you need to take into account. One, yes, there is still an add-on. The market is growing as we -- as there are NBS units being installed and that's adding to the maintenance base. And we take a fair share of that with our good NBS business there. At the same time, we really took these targeted actions to look at our customer base with these 2 targets. And we continue to do so, but I don't expect a similar one-off impact going forward. It is more about working with each of the customers like we've done in other regions to find the right strategic pricing approach, drive repairs and so forth. So it is more of a one-off impact. But then as we see the market in NBS declining, so that is having an impact on the growth rate of the service unit base in the market. Philippe Delorme: And just to complement, every time you think about our service business, it's not as simple as number of LIS x the price. So that's one part of the business. The other part is really the repair business everywhere, including in China. And we believe that in China, specifically, we can do much better when it comes to our spare and our repair business. And we are working on packaging repair that will feed the customer demand, plug this with much more digital marketing to be responding to our customer request, and we see actually a very good traction here. So it's -- and for the rest, I would not repeat what Ilkka said on doing 1 year of really pruning our portfolio, which was much needed and which we believe has been largely done. Ilkka Hara: One more addition. So if I still take a larger content -- context, and it's also true in China, the modernization as a source of new elevators, the maintenance base is increasing its impact. So the more we go, especially on the parcel modernization, modernized equipment, which is not in our elevator base. It is maintained by somebody else. Those units actually then convert to our maintenance base with a very high conversion as a result. And as we grow the modernization business, this will be more and more important source of new elevators to the maintenance base compared to the NBS business. Vivek Midha: I don't know whether I might be able to do a quick follow-up on that. But just on that last point, we know that there's been some pressure on conversion rates in China given the competitiveness of the market. Within the modernization business that you had in China and the growth there, is the conversion rate on those modernizations still holding up relatively well? Ilkka Hara: Yes. Yes. Simple answer. Operator: And we'll now take our next question from Vlad Sergievskii. Vladimir Sergievskiy: If I can follow up on service growth. Would you be able to give us some idea of what your 2026 growth guidance implies in terms of service growth? Does it imply an acceleration versus 7.6% growth you did last year? And also, how should we think about this 10% -- or close to 10% growth over the strategy period? Does it mean that to achieve this growth, you would need to go to low double-digit growth in 2027? Ilkka Hara: Sorry, Vlad, can you repeat the last sentence? I failed to capture that. Vladimir Sergievskiy: Absolutely, Ilkka. In terms of your target for the strategy to grow that close to 10% your service business, does it imply that 2027 number should then be low double digits to achieve this close to 10% growth? Ilkka Hara: Got it. So first, I think this close to 8% rate that we got for the '25 year is actually a good number. We took some targeted actions and -- but in other areas, we actually saw the growth to be very much in line with targets. Then going forward, we don't give guidance by business line, but we repeat what we've said, we target to grow on close to 10% rate in services. And for example, this China action, we don't expect that to continue as one-off impact. So maybe that's implicit answer to your question. Philippe Delorme: Or the best answer we have. Operator: And we'll now take our next question from Andre Kukhnin of UBS. Andre Kukhnin: Can we start with just helping us to size the China business in terms of profit contribution? Could you give us some idea where it sits overall now versus the group or where the kind of margin level is for China? And within that, clearly, New Building Solutions margin has declined. Are we kind of still positive over around mid-single digits? If you could help with that, that would be great. Ilkka Hara: So indeed, I think the first comment is that the contribution of China is declining as the revenue has declined last year and also margin declined slightly last year -- declined further slightly in last year. And our NBS business in China continues to be profitable, and we aim to continue that. At the same time, we see the movement to services and modernization, which is now 40% of the business, continuing to happen. And the target is to get to 50-50 as soon as possible. And both services and modernization are with a higher profitability than NBS in China. And that's why the move -- strategically, that's a growing market, but also it has a positive impact to our mix -- profitability mix. Andre Kukhnin: Sorry, but is that service and modernization of China has a positive mix effect to the group? Ilkka Hara: So I was talking -- you asked about China and about China. So in China profitability, the move to services and modernization has a mix -- positive profitability mix impact for China. Andre Kukhnin: Got it. And if I may just follow up on the pricing questions that have been asked specifically for the, I think, price increases that you're seeing from suppliers that are based on copper and silver and a few other component inflation. Do you have price escalation clauses that you can action to pass that through on the new equipment? Or does that require a specific kind of pricing action one by one with the customers? Ilkka Hara: So now we see a slight headwind in our raw materials, and it's those base metal copper being the #1 for the year '26. And it's not a bigger headwind, and that's why I'm not calling out the number. It's a slight -- some tens of millions of headwind. And then -- it is, of course, relevant information when we price our new orders for our customers, and we take it into account. And with some of the contracts, we have escalation clauses for bigger raw material swings. I would not say that in the grand scheme of things, this is a bigger swing and would trigger those clauses. And a material part of our orders that we have booked don't have those clauses in place. But right now, I think the mix between product cost actions as well as the raw material impacts is something that is still a positive. So we are able to see more product cost reductions than the raw material increases. And I said orders that we booked in fourth quarter had stable margins more because of the price impact in China versus the product cost. In other places, it was more neutral. Operator: And we'll now take our next question from Delphine Brault of ODDO BHF. Delphine Brault: We'll go one by one. First, in your comment, you said that partial modernization now represents the majority of your modernization activity and that it grew twice the rate of full replacement. Can you help us understanding by how much this mix contributed to your margin improvement? And are we right in assuming that the modernization margin is not that far away from the group margin? Ilkka Hara: Before I let you go on partial modernization, just on the fact. So yes, the movement to partial modernization has a positive impact to our profitability within modernization. And the aim for modernization is to continue improving its profitability. And as I said in the strategy, the aim is that it's not dilutive to our margins while it grows and becomes a bigger and bigger business. But do you want to comment the partial modernization? Philippe Delorme: Yes. It's -- I mean I'm somewhat new to this industry. I've been only 2 years in this industry, but I'm fascinated to see that actually the industry was not responding to the customer needs, which is when you have a running building, the first point that matters is time. And what we are doing is just responding to customer needs and say, you know what, instead of having this project in 3 months, we are going to make that project in 1 to 2 weeks. We are not going to do everything, but we're going to do what matters. And once that work is done, the elevator is connected, and we can actually guide for the coming 5 years what really will be essential for you, Mr., Mrs. customers. This value proposition is working very well. By the way, from a financial standpoint, the other benefit is that it brings a very good order book rotation, fast order book rotation and the conversion rate to service is very good. So from a model standpoint, it's a great business. And what I like is that it's a business that corresponds to what our customers are asking for. So we are pushing as fast as we can to really organize ourselves to be extremely efficient in delivering this so that we -- success drives success, and we really make our name, and this has been working very well in the past 2 years as being the best company to drive fast and partial modernization. Delphine Brault: And then it's now -- no, coming back on your margin guidance. What do you need to reach the upper end of your range this year? What are the main assumptions between your 12.3% and your 13%? Ilkka Hara: Of course, a big part of the margin is related to the revenue guidance as well. So the more we are able to deliver the revenue on the top end, the more we will get also leverage on the profitability part. Then second part is around the revenue mix. So again, the more services contribute, the higher end we are at the guidance and modernization will help. And of course, the mix is more on NBS, then it is something we need to tackle. And -- that's number one. Number two is related to our performance initiatives that are, of course, contributing positively to our margins. And I would want to emphasize the fact that in sales and operational excellence, really what we're looking for is the lowest level, the branch, the region that is close to our customer, how they're able to deliver to our customer needs and how are they able to manage the business to produce profitability, pricing going forward. And I think there, we are seeing very good -- the best branches that have really adopted it first, very good outcomes. So that's naturally contributing to the profitability positively. Maybe those are the key variables, I would say. Philippe Delorme: So the question is how fast we can strike on all these cylinders to make them all align and contribute to the upper part of our guidance. Operator: And we'll now take our next question from James Moore of Rothschild & Co Redburn. James Moore: I wondered if I could circle back to Andre's question about Chinese profitability. Would it be possible to quantify where we really are on the overall Chinese margin now or the difference versus the group and to try to quantify the difference between NBS and service and maintenance numerically so we can think about, a, the effect to the group that is now less as China declines; and b, the impact of the positive mix within China? That's really the first question. Ilkka Hara: Well, first, over 90% of our profits are services and modernization. So it is really if you -- we look at the profitability of the company, it is how we are able to grow and manage those businesses. And that's really why we talk so much about services and modernization. So that's a big change in the last years. In China, now the share of revenue has declined for the total company and its profitability is below the group average. And I said already that it declined further in '25. And the more we can make services and modernization be a bigger part of the revenue in China, that's the way for us to then turn the margin also towards stable and growing again going forward. And we don't do segment reporting. So it's more the qualitative comments we're giving, but it's clearly below. And NBS is the lowest margin business we have in China and services and modernization are not that different in margin in China. Philippe Delorme: And the last point I would complement is our cash generation is China is extremely healthy, which is a point where we think we really stand out competition, which is a point that actually leads us to move away from customers. But in the end, we believe cash is key. And we want to make sure that we translate all the hard work we are doing on the ground to money in the bank or in our bank. And we are actually on that side, looking at profitability and EBIT level, but also in cash generation. And that part is actually very, very healthy. James Moore: Maybe I could just go back to the service growth and say it, I didn't really understand the answer you gave earlier about the pruning being a single quarter impact, having covered companies for 30 years. Typically, when revenues drop on pruning, you've got 4 quarters of impact before it comps out. Can you help me understand why that's not the case? And is it possible to talk about what the speed of asset under management percentage growth in units was in the quarter, please? Philippe Delorme: That's not what I said. So I said -- so I think Ilkka and I said that we worked in 2025 on pruning our portfolio, but we worked on the full year 2025. So we started in Q1, and we've seen the impact coming as we were working on it. But -- and we think we've done the essential work to move away from customer either would have low profitability or negative profitability or customers where we believe we had no chance to be paid. So we think we've done the biggest chunk of the work that's needed. Then we've worked within our pricing priorities everywhere in the company looking at our lower profit margin risk profile on cash, but we think that the biggest chunk of the cleaning work that needs to be done in China has been done. James Moore: That's great. And anything on the asset unit growth speed in maintenance? Ilkka Hara: So we see in maintenance, the growth. So I've said it earlier. So we have 3 components when we look at the growth. First is really the repair volumes. How can we continue to drive repair volumes. And that's why the digital part is so important that we can free up capacity to drive that repair volumes to be both sold and installed. Second is related to pricing and value. And value to me is including the digital offering we have facing our customers. So how do we differentiate to get the maximum price and actions we take. And then third one is the units. In units, last year, we had lower growth mainly due to China. In other regions, we've actually seen quite a good development. And we don't see that our strategic direction in terms of unit growth is changing. Philippe Delorme: The only thing we could say as a change is stronger contribution coming from mold and partial mod and a bit less coming from NBS. So in that regard, the whole model of our business, which was a lot of selling elevators and driving the service is changing a bit to actually trying to get a better retention with digital and moving actually a part of our modernization business towards lift in service and expanding our service base. Ilkka Hara: And then lastly, I just wanted to comment because we started with China. You see that China service market is growing at a low single-digit speed. It is also a good signal that we are seeing and are expecting going forward that our service growth is higher in the 3 other areas as a result. And yes, we will grow in China as well, but really the growth rate is higher in the 3 others given the dynamics. Operator: And we'll now take our next question from Tomi Railo of DNB Carnegie. Tomi Railo: This is Tomi from DNB Carnegie. Two questions, if I may. Coming back to the NBS profit contribution, you mentioned over 90%. Any further comment? Is it 95% or is NBS contribution, how much less than 10%, if I can formulate it that way? Ilkka Hara: It's less than 10%. That's -- I won't go to more details, but it's less than 10% and it's -- the modernization service is more than 90%. Tomi Railo: And then another follow-up. If you could just still state clearly if China NBS is lower than global or above than elsewhere? Ilkka Hara: It's slightly above elsewhere. Operator: And we'll now take our next question from Aron Ceccarelli of Bank of America. Aron Ceccarelli: I have a question on modernization, specifically in Europe. At your CMD in 2024, you highlighted the European market for modernization to be probably the largest opportunity in terms of units. And I think today, you're guiding for slower growth compared to other regions. So I was wondering why that. And also if you can discuss a little bit the role of subcontractors in modernization business as the modular strategies speeds up would be useful. And I will go with a follow-up after your answer. Ilkka Hara: I just clarify before you take the modernization. So we said the market is expected to be growing at 5% to 10%. It does not mean that we could not grow faster than that, and that's what... Philippe Delorme: Then I mean, we are -- in Europe, as everywhere, we are ramping up our actions on modernization. We are doing actually pretty well on at this point, full modernization and partial modernization of our own installed base. And now we need to do better on partial modernization on our -- not on our installed base. So the market -- we have a lot of questions like what is the limit of the modernization market. And my answer is always the same. There is -- frankly, at this point, it's such a big ocean that there is very little limit. Now on your point about subcontractors/ISPs, independent service providers, we see them, frankly, as much as competitors and in some case, partners because actually, they cover markets that we don't always very well covered. So we actually see an opportunity to work with them in a targeted manner in places where we don't have the geographic coverage to actually bring our technology. Very often, these companies are not very good in digital, where actually we bring the whole digital gear very well. So we still see an opportunity of plenty of new business model, leveraging more companies that are not strictly KONE to address much better this very vast market. Aron Ceccarelli: And my follow-up would be on your cost structure. Clearly, when I look at one of your competitors have done a very remarkable job on cutting costs. And I believe you have a fairly new head of procurement. And when I look at your SG&A on the other hand, you also have higher SG&A as a percentage of sales compared to other peers. I was wondering, could you perhaps provide a little bit more granularity on what you can actually do on the procurement side now and what opportunities are on SG&A as well. Ilkka Hara: Well, I think on procurement, indeed, we have a new -- not so new. Michelle has been with us now for 6 months. But clearly, what we see is we have an opportunity to professionalize our teams, upskill our team and put purchasing at the right level of attention within the company, which is exactly what we are doing. We actually started this work like before Michelle came in, but we see now an acceleration. And therefore, there is an opportunity to drive better purchasing productivity. On SG&A, you're right. We are -- we have more costs relative to sales than many of our competitors, and we have to do a stronger job of driving efficiency, and we are working on it. Operator: And we'll now take our next question from Antti Kansanen of SEB. Antti Kansanen: It's Antti from SEB. I have 2 questions, both on the service growth. So I'll start with the mention that the modernization, partial modernization is emerging as a driver to the maintenance base growth taking over from the NBS. Is this something that you have already been [indiscernible] on a significant manner in, let's say, '24, '25? Or was this a question more going forward that it will start to accelerate as an impact? And how does it work? Is it elevators that are too old to be relevant in your maintenance space? Or are you converting non-KONE brands through this modernization? Philippe Delorme: Maybe I can take it. So just correction, I've not said that partial mod is taking over NBS. I'm saying, I love competition, and I'm telling to the modernization team, raise the bar so that you become a stronger contributor to service. Now in size, today, this is already significant to very significant. Now are we at the level of what's coming from our NBS business? No. But when you look at the big parameters, if we keep doing the good job we are doing on partial modernization, this indeed will become very mainstream into driving more LIS. And on your question, is it more KONE unit, non-KONE units? My assessment today that we do a decent job on our KONE units. Are we perfect? No. So it's okay to be perfect and raise the bar. On non-KONE units, we can really do much better. And by the way, I don't think the industry is very good overall. So the point about responding with time to do the job and really compress the time by being very optimized is one thing where the industry is average. It's up for us to be very good. Antti Kansanen: Would you guys say that in the past few years, which of the contribution has been, let's say, more relevant on offsetting the decline impact from NBS, your increased acquisitions or conversions from the modernization side? Ilkka Hara: I don't -- so we'll come back to this partial modernization in more detail, but it is starting to be more and more relevant. And of course, for us, it is very compelling. So we don't put capital in play and actually get a modernized -- modern digital elevator as a result of the partial modernization. And actually, it's quite a fast turnaround business. So it is -- from that perspective, return on capital is very good. Antti Kansanen: Okay. And then the second was just a clarification on the pruning work you talked about in China having been over. So do I understand correctly that starting from Q1 this year, there will not be any more negative sales growth headwind in terms of the actions have done and the impacts have already been seen on the P&L? Ilkka Hara: So we took the actions throughout the year. And I said it was more visible, and that's why I called it out in second half of last year. And we expect now a more normal business. It doesn't mean that we would not be focused on profitability and cash flow going forward as well. But I think this was more of a targeted action. Operator: And we'll now take our next question from Rizk Maidi of Jefferies. Rizk Maidi: I just want to go back to this modernization conversion into sort of new installed base, I think, was the previous question. I was wondering if you could -- I thought this was a '27, '28 sort of impact, but you start to see it in China, if I heard you correctly. Maybe can you help us sort of quantify this perhaps in the last few quarters, when you look at your modernization sort of growth, how much was it on KONE units on non-KONE service units or perhaps even on the installed base growth, whether you could actually have a contribution from modernization conversion, if I could call it this way, I'll stop here. Ilkka Hara: So first, the conversion rate of modernization is actually very high. So that's why it's such a compelling place. Philippe Delorme: And maybe to explain why because when you sell a new construction elevator, you sell it to the contractor. And then the building goes on, there is all kind of things that can happen up to someone who is now in charge of dealing with elevator, which is very often not the contractor. When you deal with the modernization and even more a partial modernization, the person who is buying the partial modernization is a person very often will operate the service. So if you do a good job and actually, if you really go beyond what's possible in terms of time and customer satisfaction, there is little reason that, that customer is not going to stay with you for service, especially when we at KONE bring in the package the connectivity that gives transparency, predictive, remote capabilities. So sorry, close the bracket, but I think it's important for all of us to really understand what's going on here. Sorry I cut you. Ilkka Hara: That's fine. And then it's -- we've increased our modernization business, grown it. We've also increased the proportion of partial modernization. So it's in China, but also outside of China, more and more meaningful contributor. But still NBS is a bigger contributor. But in the future, it could be other way around. Rizk Maidi: But at this stage, you're not willing to quantify how much of your mod growth is on KONE units versus now? Ilkka Hara: Most of them are still KONE units at this stage. Philippe Delorme: I think it's -- I'm repeating on modernization. It's a blue ocean. So it's a place where -- I mean, there are 10 million units in front of us, and the industry is modernizing a fraction of this, a real fraction. If we look at the number of -- I think we've released that figures, a couple tens of thousands of units every year. So we are -- every time the team is coming saying, "Oh, we are so happy we did that grow, yes, you can -- I mean, we can do better. And it starts by listening to our customers and responding to their needs. Rizk Maidi: The second one is we've seen -- if you think about connectivity, it started quite slow, I think, back in 2015, '16. Then you ramped it up quite quickly. I think the number this morning was above 40% of the installed base being connected and you improved that by 7 percentage points. Just thinking what's the blue sky here? How we should we think about this improvement over the coming years? The installed base is still quite old and my understanding, if you want to have good readership or good value from connectivity, you have to force modernization or partial modernization. Just thinking about the blue sky here, basically. And the benefits as well to your business. Philippe Delorme: It's one of my favorite topics. But when you say, okay, we started, we increased and then we plateaued and now we are reincreasing. What has been the difference, focus and leadership. And very easy to say, very hard to do. And I think where I'm very happy with the team is we've managed to mobilize the company and make it clear for everyone in the company that this thing is a game changer and therefore, a sense of urgency. It's very hard to copy. And I think we've managed to bring that focus in mind. So what is our ambition to have all our elevators and escalators connected. So is it possible tomorrow next quarter? No. But I think everyone at KONE understand that this becomes the norm that we want to be digitally enabled on the field with apps that make us more efficient and that once an elevator is connected, it brings transparency, meaning everyone knows and is on equal base to understand what's going on. We get predictive. We get 800,000 elevators connected where our AI is scrolling and sending service need to our field technician to correct the problem before they will happen. We think we can filter up to 80% of the issues before they would happen. And then when the code allows us, we can actually remote rescue people who are being entrapped, which is a big difference. So where is the limit? At 100%. Are we going there next quarter? No. Is it hard to do? Absolutely, yes, because it touches the DNA and the culture of the company, but I'm really happy to see that step up, and we are very committed to that transformation. Operator: And we'll now take our next question from Martin Flueckiger of Kepler Cheuvreux. Martin Flueckiger: I've got 2, and I'll start off with the U.S. According to your assessment, market in the Americas was up significantly in Q4, which seems counterintuitive given the fact that we had the longest U.S. government shutdown in history, but also if you look at indicators like ABI and so on, I was just wondering -- and also, by the way, your outlook for 2026 is still positive, but clearly much slower than it was in Q4. Just wondering what the issue was or what the narrative was for the strength in Q4? That's my first question, and I'll come back with the second one. Ilkka Hara: Yes. So as I said, Q4 market in the U.S. was impacted by the low comparison point the previous year. If you look at it sequentially, it's more stable and the full year is a slight growth for the market. We're expecting similar environment to continue in '26. And yes, there are many uncertainties also in U.S., also outside of U.S., but that's our best forecast for the market activity. Martin Flueckiger: Great. And then my second question is on some of the financials. I guess that's for you, Ilkka. I was just wondering, net financial results seemed weaker than expected. Is that FX related? And what is the reason for what seems to be a higher-than-expected income tax provision in Q4? Ilkka Hara: Yes. Thanks for asking. So we actually had a one-off item in taxes in the fourth quarter related to our intercompany legal structuring. And we don't expect that to repeat. So it's -- the expected tax rate is fairly similar, this 23.5% going forward. So it is a one-off impact that caused it. Martin Flueckiger: Okay. And in the net financial result, how large was the FX impact? Ilkka Hara: The FX impact -- let Natalia come back to you on that. I think we have it also in the deck -- behind the deck, so I don't say incorrectly. Operator: That's all the time we have for Q&A. I will now hand it back to the host for closing remarks. Natalia Valtasaari: Excellent. So thank you, Philippe. Thank you, Ilkka. A special thanks to everybody who followed us online. Great questions, lots of interaction there. So we appreciate that, your interest and your time. And if there are follow-ups, I'm happy to answer them. I will certainly come back to you, Martin. And with that, yes, have a great rest of the day and weekend ahead. Philippe Delorme: Thank you, everyone. Ilkka Hara: Thank you. Operator: This concludes today's call. Thank you for your participation. You may now disconnect.
Kazumi Tamaki: Now, we'd like to start the full year financial results briefing for FY '25 for AGC. The moderator is myself. My name is Tamaki of Corporate Communications and IR. Let me introduce the participants from AGC. We have Mr. Yoshinori Hirai, the President and CEO; Executive Vice President and CFO, Yoshio Takegawa; General Manager of Finance and Control Division, Tomoyuki Shiokawa. So today, first, our CFO, Takegawa, will present the financial results for the full year 2025. And then our CEO, Mr. Hirai will talk about toward profitability improvement, and then we take questions. We plan to end this session around 04:45 p.m. So I'd like to ask for your cooperation. Now I would like to invite Mr. Takegawa for you. Yoshio Takegawa: This is Takegawa, CFO. Thank you very much for joining us today. So let me get started. Please go to Page 3. So this shows the key points of FY '25 results and FY '26 outlook. For the FY '25 full year results, net sales were flat and operating profit rose slightly year-on-year. Improvement of automotive contributed the operating profit increase. Profit attributable to owners of the parent improved significantly. ROE improved to 4.7%. Outlook for FY '26. Operating profit is expected to increase driven by a recovery in Life Science. Profit attributable to owners of parent is also expected to improve. ROE is expected to improve to 5.2%. Please go to Page 6. So I'd like to explain further on the results. Net sales were JPY 2.0588 trillion, down JPY 8.8 billion year-on-year. Net sales increase factors include product mix improvement and pricing policies affecting automotive, pricing policies effect and higher shipments in Performance Chemicals and pricing policies affecting Architectural Glass in Europe and Americas. Decrease factors include lower sales price of PVC, decrease in shipments of EUV mask blanks and lower sales prices in architectural glass in Asia. Operating profit was JPY 127.5 billion, up JPY 1.6 billion. Despite the higher raw materials and fuel prices and deterioration in manufacturing costs and others, the realization of the earnings improvement measures in Display and others pushed up the profit in addition to the earlier mentioned factors. Profit before tax was JPY 124.8 billion, up JPY 174.8 billion, significant increase. In addition to the earlier mentioned factors, disappearance of the losses on share sales in connection with the Russian business transfer and large impairment losses related to biopharmaceutical CDMO booked last year. Please go to Page 7. This is the performance by segment. Sales and profit of Architectural Glass and Automotive increased, while the sales and profit of the Electronics, Chemicals and Life Science declined. Regarding operating profit, I would like to explain the factors contributing to the difference year-on-year. Sales volume, price and product mix contributed positively, JPY 19.9 billion Y-o-Y. PCB price and shipments of semiconductor-related materials were down, but the product mix for automotive glass improved. Pricing policy had positive impact and also pricing policy for architectural glass in Europe and America and Performance Chemicals contributed. Raw materials and fuel costs of JPY 4.6 billion and other costs of JPY 13.7 billion, both had negative impacts. Resulting OP increased by JPY 1.6 billion year-on-year to JPY 127.5 billion. Please turn to Page 9. This is our balance sheet. Total assets amounted to JPY 2.9501 trillion, an increase of JPY 60.4 billion from the end of last year. D/E ratio stood at 0.37. Please turn to Page 10. Operating cash flow was JPY 274.5 billion. Investment cash flow was minus JPY 178.4 billion, and resulting free cash flow was JPY 96.1 billion. Please turn to Page 11. To explain CapEx, depreciation and R&D expenditure on this page. CapEx amounted to JPY 251.3 billion; depreciation, JPY 179.8 billion and R&D expenses, JPY 60.3 billion. Main CapEx projects are listed on this slide. We will now move on to the explanation by segment. Please turn to Page 13. Starting with the Architectural Glass segment. Net sales increased by JPY 3.2 billion to JPY 441.1 billion, while OP rose by JPY 0.9 billion to JPY 17.3 billion. In Asia, net sales decreased by JPY 4.4 billion due to lower shipments and lower sales prices in Indonesia and other regions. In Europe and Americas, although shipments declined in Europe, and there was a revenue reduction impact due to the transfer of the Russian business in February of the previous fiscal year, net sales increased by JPY 7.6 billion, benefiting from the effects of pricing policy and weaker yen. OP increased by JPY 900 million despite higher costs, such as labor costs due to the aforementioned sales growth factors. Subsegment ratio of OP was approximately 20% for Asia and 80% for Europe and Americas. Please turn to Page 14. Next is the Automotive segment. Net sales increased by JPY 21.8 billion to JPY 520.6 billion, and OP increased by JPY 15.3 billion to JPY 29.3 billion. Shipments declined in Europe but increased in Japan. In addition to improvements in product mix and the pricing policies impact, the weak yen also contributed. OP increased by JPY 15.3 billion, driven by the revenue growth factors, which was mentioned before, despite increases in costs such as raw materials and labor expenses. Page 18. Next is the Electronics segment. Net sales decreased by JPY 9.5 billion to JPY 355.1 billion, and OP decreased by JPY 6.9 billion to JPY 47.5 billion. The Display segment saw a JPY 5.5 billion increase in net sales due to higher shipments in LCD glass substrates. Electronic Materials saw a JPY 15.1 billion decrease in revenue due to the transition period towards higher functionality of optoelectronics, coupled with a decrease in shipments in EUV mask blanks. OP decreased by JPY 6.9 billion, reflecting the negative drivers that was explained and the costs associated with the withdrawal from the specialty glass for chemical strengthening business. The breakdown of OP was approximately 70% from Electronic Materials and 30% from displays. Please turn to Page 16. Next is Chemicals segment. Net sales were JPY 584.2 billion, down JPY 9.4 billion. Operating profit was JPY 53 billion, down JPY 3.7 billion. Essential Chemicals net sales were down by JPY 28.4 billion due to lower PVC sales price. In Performance Chemicals, pricing policies effects and higher shipments of fluorine-related products for electronics and mobility applications contributed to the net sales increase of JPY 18.2 billion. Operating profit was down by JPY 3.7 billion due not only to the lower Essential Chemicals sales, but also to manufacturing cost deterioration related to the facility repairs and others. Subsegment ratio to operating profit is 20% from the Essential Chemicals and 80% Performance Chemicals. Please go to Page 17. This is the Life Cycle segment. Net sales were JPY 133.1 billion, down JPY 8.1 billion. Operating loss, JPY 22.3 billion, down JPY 1.1 billion. Sales of the small molecule pharmaceuticals and agrochemical CDMO remained steady. Net sales of biopharmaceutical CDMO were affected by disappearance of one-off revenues associated with the settlement of contracted projects booked last year and the negative impact of the closure of U.S. Colorado sites. Although fixed cost reduction measures taken at the biopharmaceutical CDMO in the U.S. have shown positive effects, fixed costs increased due to the facility expansion in Europe, which started operation last year in addition to the negative factors on the sales mentioned before. Please go to Page 18. Strategic businesses net sales were JPY 501.5 billion, down JPY 1.8 billion year-on-year. Operating profit was JPY 58.7 billion, down JPY 8.6 billion. Overall, operating profit decreased year-on-year due to the lower shipments of electronics and decreased net sales of Life Science, although the net sales of Performance Chemicals and mobility increased. Please go to Page 20. This is the outlook for FY 2026. Let me explain the assumptions for the major economies and markets in '26. While some markets continue to face challenging conditions and despite the uncertain geopolitical situation, global economy is expected to grow moderately with expanding AI-related investments and monetary easing of major economies is expected for Europe and China, while the U.S. economy will trend strongly. Looking at the market environment, auto, smartphone, TV, we cannot expect the production growth. However, we expect that the shift to high function and larger size will continue. Caustic soda, PVC prices in Southeast Asia remain low. And the semiconductor market is continuing to grow, driven by AI-related demand. Biopharmaceutical CDMO market is expected to gradually recover. Please go to Page 21. I would like to explain the outlook for the full year. Although the business environment remains challenging, we forecast net sales of JPY 2.2 trillion, an increase of JPY 141.2 billion Y-o-Y and OP of JPY 150 billion, an increase of JPY 22.5 billion. ROE is forecast to improve to 5.2%. Exchange rates are assumed to be JPY 155 to the U.S. dollar and JPY 180 to the euro. Please turn to Page 22. Outlook breakdown by segment is shown on this slide. Improvements in Life Science are expected to contribute. Further details will be explained on the following pages. Please turn to Page 23. Starting with Architectural Glass. In Asia, shipments are expected to increase due to recovering demand in Thailand and Indonesia. We will continue our pricing policy and productivity improvement initiatives. In Europe and Americas, the economic downturn is expected to continue with only limited recovery in shipments anticipated. We will focus on maintaining price levels and reducing costs. Next is automotive glass. Shipments are expected to decline due to decrease in automotive production. In addition to improving product mix and pricing policy, we will continue our efforts towards structural reform and productivity improvements. Moving on to Electronics. In display, shipments of LCD glass substrates are expected to decline slightly. We will continue our profit improvement measures. Within electronic materials, shipments of semiconductor-related materials such as EUV mask blanks are expected to increase. Shipments of optoelectronic materials are expected to remain at the same level as the previous year. Please turn to Page 24. Moving on to Chemicals. Integrated Chemicals is expected to increase the shipment of fluorine-related products for electronics and chlor-alkali products. Essential Chemicals, Southeast Asia is expected to see increased shipments due to the full operation of expanded facilities. Moving on to Life Science. Sales for synthetic pharmaceuticals and agrochemical CDMO are expected to increase by launch of expanded facility. This is an increase of net sales. In addition to the increased sales, the biopharmaceutical CDMO is expected to see a significant reduction in losses due to the closure of the Colorado site in the United States. Please turn to Page 25. This is the full year performance outlook for strategic businesses for 2026. Net sales is projected to reach JPY 560 billion, driven by growth across all strategic businesses. OP is forecast to reach JPY 80 billion, primarily driven by profit improvement in Life Science. Please turn to Page 26. CapEx for 2026 is forecast to be JPY 190 billion; depreciation, JPY 183 billion and R&D expenditure, JPY 62 billion. CapEx will be smaller in 2026 as the major capacity expansion investment concluded in 2025. So this is '26 and beyond. That concludes my explanation. Thank you very much for your kind attention. Kazumi Tamaki: Thank you very much. Next, I would like to invite Mr. Hirai. Yoshinori Hirai: As Takegawa-san explained, last year, a slight increase, the 3 years in a row, the profit declined, but we turned it around. So as a result of the various initiatives, I think we have hit the bottom to some extent. However, what is important is that how can we go to the full-fledged recovery. So from our side, from my side, I'd like to talk about how drastically we try to improve the profitability. That will be the major part of my part of presentation. Let's look at the business performance, the operating profit. At the beginning of the year, we did not achieve the forecast, and we revised it downwards. That's one of the major requests. Last year, finally, we increased the profit. However, our expectations were not good enough. So that was one of the major issues. And the major issue is that the stability of earnings. There was a major impairment display in '22 and biopharmaceutical CDMO in '24. So those major impairments made us fail to increase the ROE. Now what about ROCE? This is last year's results. ROE of 8%. ROCE is considered to be around 10%. So that is the basic level. Electronics on the left and the Performance Chemicals, which is strategic and the integrated chemicals. Electronics Integrated Chemicals have had high profitability, so 15% or higher ROCE. Last year, among the core businesses, automotive achieved higher than 10% ROCE. So that's the result of the initiatives that we have taken. The major impairment was booked in '22 in display. And we have also taken the initiatives to improve the profitability, and we are seeing the improvements. And the major challenge that we see is the Essential Chemicals Southeast Asia. The stagnation continues and the Life Science still is in red. So we want to turn it around, and we are still not able to do so. Now for this fiscal year, financial targets is 5% of ROE. We will make sure that we achieve that '27 and onwards as soon as possible, we would like to achieve 8% or higher ROE above the shareholder capital cost. So operating profit of JPY 150 billion, strategic business operating profit, JPY 80 billion. And as a result, 5.2% or higher ROE is something that we would like to achieve. Now ROCE improvement, what kind of measures? In all the businesses, the way of thinking is the same. So first, it's to increase our -- that's shown on the left. So to lower the cost, clearly. And it's not just cost cutting, but because that is not sustainable. So we want to have a stable production and improve the productivity. And then we would like to reduce cost. That is important. And the next is the pricing policy. a price which is suitable for the value is something that we like to offer to the customers and agree with the customers. I think that's very important. The third clearly is to increase the value of products. And at the same time, denominator side, that is the CE operating asset. We want to be meticulous in selecting investments and also the major portion is the inventory. So we want to reduce the inventory level as much as possible. And another thing is to consider the exit from some of the businesses. And we want to make sure that if there are any questions about the growth potential, we will make a big decision to exit or sell such businesses. On the right-hand side, in 2025, those are the major exits that were announced. Now earlier, I talked about the ROCE chart from the left, I showed the electronics integrated chemicals with a high level and the Life Science on the right-hand side. Let me explain each one of them. And first, about the electronics. Last year, unfortunately, optoelectronics was changing one generation of the product to another. So the growth was stagnant. And EUV mask blanks, the demand was coming down for us. So because of those reasons, there was a negative growth in terms of the profit. But from now on, optoelectronics, the new generation will be starting, and we intend to expand our added value. As for the semiconductor, EUV mask blanks compared to last year will become positive. So last year, it was down for both, but we think that we can go back to the growth trajectory. The key for that is the EUV mask blanks. Leading-edge node, we would like to make sure that we can deliver our products, which are suitable for them to the customers. So the 2 nano, we have already completed the development and moving toward mass production and also the next 0.7 nano is what we are focused upon. As for the integrated chemicals, mainly the performance chemicals, the upstream, the chlor-alkali in Japan were integrated to the integrated chemicals. So here, in the chain of the production or the chemical chain, there are upstream and downstream, and we should really not separate them clearly. We want to have an integrated operation to have a total optimization. So that's why we made this organizational change. Now highly profitable performance chemicals, electronics, energy, mobility, those are the 3 major areas, especially electronics, as you're shown on the right-hand side, one of them is the semiconductor manufacturing equipment use and another is semiconductor process application. So those are high value that we can offer to have a high profitability. Now moving on to the automotive. 2020, because of the pandemic due to the lockdown, it almost stopped in Western markets. So it came down and it could not recover. So we struggled for about 3 years. But we have taken various measures to improve. So profitability has been increasing. ROCE of 10% is something that we achieved last year. So, so far, we have taken the measures to improve the profitability, and we will continue to make those initiatives and achieve 15% ROCE. And to set the pricing policy is important and also to improve the productivity, we need to look into the structural reform and to have higher functionality and higher added value. So through those, we would aim for ROCE of 15%. And what becomes important is to increase the percentage of the high-function mobility products. So it's not just shifting to the EVs, but the next-generation cars, the autonomous driving at different levels are being promoted. And it's not just the EV, but hybrid and plug-in hybrid various cars are emerging. So new technologies need to be deployed. As for the architectural glass, this is really the regional businesses. So in Europe, the market condition is not very good right now, but the supply is being controlled. So supply-demand balance is good and the price has been kept at a high level. The South American market is strong. Now the Japanese market is not growing, but the refurbishment or renovation is strong. And with that, a certain level of the demand exists. Southeast Asia is the most difficult region. So the price competition is happening right now. And in each region, we have to look into the different strategies. For Europe and Japan, we need to increase the percentage of the highly value-added products so that we can have stable prices. And as for the Southeast Asia, we have to enhance the competitiveness so that we need to work on the structural reform. We have been implementing measures that we decided in 2020 when we had a major impairment and ROCE is improving every year. And we expect ROCE to exceed 10% by 2027. stopping low productivity line and the large glass substrate, G11 line, we want to concentrate on this high-performance line. And we also want to present a price that is proportional to the value that we provide. So this is pricing policy, a new attempt in display industry. And thirdly, by introducing new technologies, we want to improve productivity of manufacturing as well. Now this third part, the technology part will start contributing fully from this fiscal year. So ROCE, 10% is the target for 2027. Now in terms of challenges, we have Essential Chemicals, Southeast Asian situation. Capacity expansion in Thailand has been finished and it started operation in fourth quarter last year and fully operational this year. In Southeast Asia, the markets themselves are growing continuously. There is strong demand. And the PCB and caustic soda, we can basically sell as we produce because we manufacture. The problem -- the challenge is the Chinese economic stagnation, especially surrounding real estate. So whatever is not sold in China is coming out of that country at a very low price. So there is demand in Southeast Asia, but the price is being pushed down because the products are coming in from outside of these Southeast Asian countries. So demand is strong. And within this region, we have 50% share and that's our strength. Including logistics, we will be trying to reduce the cost and increase the margin through better relationship with our customers so that we can achieve higher profitability. Lastly, Life Science, current status. Please look at the left-hand side. This is the AGC status by modality. 70% on the right-hand side, this is biopharmaceutical. And then we have small molecule pharmaceuticals and agrochemicals, 30%. And half of the biopharmaceuticals is a mammalian antibody business. And then within bio, there is microbiome, bio and also cell gene therapy, leading-edge modality as well. Now microbials and cell and gene therapy and small molecule pharmaceuticals, these are stable and always producing profit. And the biggest challenge is mammalian cells, which is about half of this total. So what has been challenging about mammalian cells? As you can see at the bottom left, our cost was big, and it was generating huge losses. Majority of this JPY 20 billion loss was generated from mammalian business. And as for last year, Colorado large SUS-based mammalian production was the biggest challenge. We were basically running loss of more than JPY 10 billion. So we announced last August to withdraw from this business and also the fact that we were entering the divestiture process. The production is completely suspended. There is no more fixed cost being generated basically. So this loss should be resolved in '26. As for the divestiture, we wanted to conclude this before the end of last year, but still this is ongoing. Now cost reduction. So we stopped Colorado. And also, we reorganized the headcount dramatically. And using the AGC Group's capabilities, we stabilized the production. And as was mentioned before, in Copenhagen in Europe, capacity was increased. And there was increased fixed costs related to the facility. So we want to increase the orders and improve the utility -- utilization of this line. This is very important for profitability improvement. So we stopped Colorado, we stopped the major bleeding. The production is now stable. And now we want to make sure that the utilization of the expanded capacity will increase. well, we wanted to be profitable before the end of '26, and we made such announcement. But unfortunately, after we take the order and the actual production starts and that's reflected into the profit, it takes time. So we get inquiry and something was in the pipeline and the actual manufacturing starts maybe 1.5 years later. So for the full year, we will not be profitable for this business in '26. We have to wait until 2027. Now R&D investment policy. So we have market and technology perspectives. We have existing market and customers. We want to innovate the production engineering capabilities and basic technology. We also want to create the next-generation products. We also are focusing on new markets, introducing new technologies, creating new businesses. So these are 2 different directions. And in terms of R&D investment breakdown, since I was the CTO of this organization, we have been always been focusing on the scope of the strategic business. And we have an example of automotive mobility at the top. In January this year, CES was held in Las Vegas, and we received the innovation award at that conference. This is a new type of head-up display. And example at the bottom, this is drilling really, really tiny holes on the glass at a very high speed. And this is a joint research with the University of Tokyo. And this is actually 1 million times. It's hard to believe that it's 1 million times faster than the conventional methodology. It's really, really fast. And on the next page, you can see the semiconductor-related, especially back-end process technologies. And this is where this new technology can be leveraged. In semiconductor business, Well, we have electronics and also performance chemicals. And in both, we are providing the latest leading-edge materials as a strategic business to semiconductor. So not just the front end, but the back end is now attracting a lot of attention these days. As you can see at the bottom of the slide, multiple chips can be mounted on top of each other in order to increase the density because each chip is as dense as they can be. So now the idea is to mount multiple chips on a single substrate so that they can increase the density. And our organic materials and inorganic materials can be effectively leveraged in this effort. Accurately processed and also stably produced, we have this technology. And this is the new area of industry, semiconductor packaging. We can provide solutions to this industry and contribute to the semiconductor industry as a whole. So I talked about making tiny holes. Substrate basically means glass. And you need to drill multitude of holes, very long wears on these glass substrates and how fast you can do would determine that cost reduction. Now in terms of CapEx, in '25, we have basically completed major investments for capacity expansion. So '26 and beyond, our new expansion will be dramatically shrunk. So we will focus on collecting the return for investment. And as for shareholder return policy, ROE of approximately 3%, which we announced in '24, we are still maintaining this. And in '26, we will keep the dividend level flat from '25. But from '27 and beyond, going into the future, depending on the level of recovery of performance, we may take another look at our shareholder return policy. Moving on to corporate governance. We want to further enhance corporate governance. And to that end, we will become a company with Audit and Supervisory Committee. And this will be -- is expected to be approved at the AGM at the end of March. So we started inviting outside director, 2 of them in 2002. This is how the corporate governance reform started. And then we started -- established a voluntary Nominating and Compensation Committee. And now Chairman of the Board as well as the Chairman of the Nomination and Compensation Committee are external directors. And by transitioning to a company with Audit and Supervisory Committee, majority of the Board will be outside directors, which will strengthen the supervisory function -- overseeing function of the Board. In line with the change of this governance, we have redefined the role of Board of Directors. First of all, setting the overall direction of management from a long-term perspective. So this is policy direction. And another is to encourage appropriate risk taking by the management. So this is a supporting function. And further overseeing the management to the realization of value creation and evaluating and appointing executive officers. This is the oversight function. Board would have these 3 functions to help support the management. And also we will endeavor to further enhance our corporate value based on a competitive advantage. Thank you. Kazumi Tamaki: Now I would like to take questions. So first, we take questions from those people who are here with us. And then after that, we would take questions which were asked beforehand. And if we still have time, we will come back to this room. So at the beginning, we will get the questions from this room, but we would like to ask you to ask 1 question per person. Thank you very much for your cooperation. So any questions? The person sitting in the first row, is it Maeda-san? Takuya Maeda: Yes, Maeda from SMBC Nikko. One question, ROE, ROCE, current situation and other challenges in future were explained. So I have a question on that point. Life Science and essential chemicals, those are some of the challenges that you are faced with. So drastic review of the business is also possible. So what is the time frame or the size? And what kind of options or menus are you considering? And also, looking at your forecast, the pretax profit or operating profit is probably a little bit weak. So before going -- moving on to the next medium-term plan, are there any actions that you'll be taking? Thank you. Kazumi Tamaki: So I would ask Hirai-san, CEO, to respond. Yoshinori Hirai: So first of all, those Essential Chemicals and Life Science on the right-hand side, those are the challenges. As for Life Science, if it becomes normal condition, ROCE of 15% to 20% is possible because in the past, we had those numbers. So that's the type of business. So that's why it is included in the strategic businesses. But the issue is what is the time frame? So fiscal '26 by the end will be difficult. But by closing the Colorado sites, there was a major reduction of the fixed cost. So we'd like to see the higher orders, and it would take 1.5 years to 2 years before we see that impacting our performance. So maybe within 2027, we should be able to recover to some extent. Otherwise, that will become a very serious matter. Another is the essential chemicals. In terms of the time line, it will probably take longer. Now right now, I think it is the bottom and China -- the product coming via China, I think that they are lower than the cash cost. So currently, we are at the bottom. And with the improvement initiatives, we can take advantage of the relationship with the customers and increase the margin and to improve the profitability. But it will take time. That's the key here. 50% share is what we have. And even the market condition is so poor, it is the business that will give us some kind of a profit. But going beyond the shareholder capital cost, how do we make sure that we can maintain such profitability will be the key. FY '26 pretax profit you mentioned. Yes. Fiscal '25, other revenue, other expenses, there were some sale of the assets, net plus was the condition. And the foreign exchange fluctuation also was quite volatile. And it was slightly profitable. So this would be the plus side, the positive side. But FY '26, as of now, other expenses, we do not expect any major ones. So normal fixed asset depreciation and also the removal and so forth. So in some cases, the FX loss will emerge, but we do not expect any specific ones, but it's just the normal factors or the items. Kazumi Tamaki: Any other questions from the floor? Yuta Nishiyama: This is Nishiyama from Citigroup Securities. I have a question about Life Science. For the new top line net sales increase of 20% is forecast. So this seems to be quite aggressive. In the United States, bio-related financing is getting better, I heard. However, in Europe, your peers are struggling. What is the likelihood of you achieving this top line target? And also your assumption for the profit change, I think you're just looking at the increase in marginal profit only. But what about cost? Are there any changes, differences year-over-year? Can you please supplement? And on Page 55, when I look at this graph, '27 OP is expected at JPY 5 billion or so. But -- so sales -- net sales grows at the market pace and then depreciation cost increase is may be incorporated. Is that the correct way of reading this? Kazumi Tamaki: Thank you. Hirai-san, our CEO will explain. Yoshinori Hirai: This year's top line, as you have mentioned, industry recovering in the United States. However, the interest rate cut is slow. So this is still uncertain, but we believe that our Seattle site can be recovered this year. So last year, we increased the capacity, and we now have fixed cost in Copenhagen. And how much recovery can we see in terms of order and production in Copenhagen. I think this is going to be the key for profitability improvement. And with the existing pipeline, it's not just Seattle, but it's also Copenhagen that we need to see recovery in and the sales increase. So that's part of the plan. However, we are not achieving overall profitability in '26 because compared to the increase in fixed cost, we have not been able to show a difference just by a higher level of top line. I hope you understand the situation. Rather than looking at the overall growth, we are doing this bottom-up of what's happening at each site. And as you may know, the marginal profit is quite big. And once you cross the threshold, the profit that can be generated can be quite huge. So profitability improvement is totally dependent on the order recovery, order expansion. So we are really focusing on the order expansion. Kazumi Tamaki: Any other questions from this room? No? Okay. So let's move on to the questions that we received beforehand. First, Q4 results. How were they in comparison to your expectations? Could you comment on that? That was one of the questions that we received. So we would ask Takegawa-san, CFO, to respond. Yoshio Takegawa: Yes, '25 fourth quarter, our expectations compared to that, the sales and operating profit, overall company base, it was higher. That was the results. The reasons for that, basically, first of all, in terms of net sales, automotive the volume were higher and the product mix was also another factor. And another is electronics. Optoelectronic products volume increased in Q4. So higher sales, those 2. And as for the profit, the major ones is the architectural, auto and chemicals. First of all, about the architectural Europe price policy effect, it was one of them. And also in the architectural, the raw materials cost was lower than what we expected. So the cost came down. And with that, profit was positive. And also about auto said that the higher sales led to higher profit. And lastly, the Chemicals, the Performance Chemicals demand was stronger than what we expected. So that contributed to the profit. So as a whole, sales and profit both were positive or higher than expected. Kazumi Tamaki: Next question, 2026 full year forecast, how does it compare against 2025? What are some of the key differences? Takegawa-san will answer this question. Yoshio Takegawa: 2026 forecast, how does it relate to the actual '25? For the overall company, sales increase and profit increase and with specific factors, in terms of net sales, architectural glass, chemicals and life science would contribute positively. Architectural Glass, Japan, Asia pricing policy and also demand in Asia will increase from the second quarter onwards, and we believe that will push up the sales. For chemicals, fluorinate-related product shipment is expected to increase and also alkali capacity increase in Thailand. Now this is operational. So therefore, we can increase the shipment there. And as for Life Science, bio CDMO sales is expected to increase. And also in Spain, small molecule pharmaceuticals and agrochemical CDMO capacity was increased, and it will become operational, contributing to increased sales. With regard to profit, some of the factors -- positive factors will come from Architectural Glass, Science and Life Science. Architectural Glass, we have a pricing policy in Europe, and also we expect to see the demand in Asia to grow. And the cost reduction in Europe will continue to progress. As for auto, structural reform and productivity improvements are the key points. And in Europe and Americas, we should be able to recover from the lower production and profit-wise, this should be a positive contributor as well. For chemicals, shipment will increase. And in Thailand, chlor-alkali expanded capacity has started operating, contributing to profitability. And we also expect fluorine-related products to increase in shipment. And life improvement of profitability due to the closure of Colorado and also overall sales increase. Kazumi Tamaki: So about the future investments, the policies is the next question. So I would ask Hirai-san to respond. Yoshinori Hirai: About the materials investment, it's difficult to understand. But after making one investment, maintaining and updating would also require investments. So roughly speaking, half of the investment is for the maintenance and updating. So it does not lead to the capacity expansion. So after making an environment, in order to maintain it, half of that investment needs to be kept or maintained. Up to last year, up to '25, what we did was expansion investment that was higher than the maintenance and the updating. But from this year, we would only focus on the expansion investment to only the necessary ones. So high productivity of the auto electronics investment will continue, but the major investment for expansion have already been done. So from now on, we will focus on the updating and maintaining. So roughly speaking, our future investments will be within the depreciation and amortization and half of that will be for the maintenance and updating. Kazumi Tamaki: Next question. [ OP ] of JPY 150 billion. Is this the company's commitment? Is it the right way to understand it? This will be responded by Hirai, our CEO. Yoshinori Hirai: Whenever we announce a number externally, we intend the number to be a commitment, but I know that we have not achieved our commitments for several years in a row. So we have to really apologize. And this year, based on our past experience of not meeting the target, we believe that this is a level that the market would require us at the minimum level. And also, this is the level that we believe that we can achieve. So yes, it is okay to see this as commitment line. I know that we have failed in the past, but it is high this year. Kazumi Tamaki: Related question. So for this year, operating profit of JPY 150 billion, are there any upside potential or downside risks? If there are, could you talk about what they are? So I would ask Mr. Shiokawa to comment. Tomoyuki Shiokawa: Upside and downside were the questions. So we have various businesses in each one of them, there are both upside and downside risks usually. But among them, this fiscal year expectations, as Hirai-san mentioned, this is a commitment and especially about the downside, as of now, what we can are already factored in. So in that sense, the further upside or rather downside is not something that we expect as of now. Kazumi Tamaki: The next question is about electronics. OP forecast for this year, well, JPY 2.5 billion down in profit. This is the plan. Can you please explain the drivers, factors behind this? And this is going to be answered by Mr. Takegawa. Yoshio Takegawa: So we believe that we will have reduced profit in Electronics. This is for display and digital materials, both for display, slight decline in shipment is the general factor. It's not that the total market is coming down, but there is a slight decline overall. So this is one factor and also impact of weaker yen. And this is why we have lower profit in display. And Electronic Materials is the same. Optoelectronics had an impact. Optoelectronics materials is currently in a transitional period moving into higher value-added products. So there is a flattening and this is why there is a slight decline in profit. It's not that the whole market is declining or our production is disappearing. This is due to some transitional period, and there is only a slight decline within the normal range of slight decline or increase. Kazumi Tamaki: Next is about the EUV mask blanks from '25 to '26, the shipment outlook is the question. I would ask our CEO, Hirai-san, to respond. Yoshinori Hirai: Yes. Before talking about '25, I'd like to look at '24. We expected JPY 40 billion sales in '25, but we were -- it was brought forward to '24. Last year, in comparison, the sales came down. In terms of percentage, I cannot give you the details, but the double-digit decline in percentage was what we saw. But for this year, it's not the lower profit, but the higher profit is what we expect. And is this going to happen very quickly? The recovery would be moderate or weak. So the major customers recovery and also other expansion of the customer base. But the profit is going to increase year-on-year, but it's not going to be a big growth. So that is our view. Kazumi Tamaki: Moving on to the next question. Life Science, Bio Colorado site divestiture. Can you please update us on the progress? Hirai-san will answer this question. Yoshinori Hirai: In the middle of last year, we announced the withdrawal and the sales of this business. And since then, we have been discussing with multiple candidates -- by our candidates, but it hasn't been concluded. We're still discussing with multiple potential partners. And hopefully, within the first quarter, we want to conclude the deal. So please understand that the negotiation is still underway. Kazumi Tamaki: Next question, Southeast Asia, PVC and caustic soda market conditions. Could you talk about the outlook from the AGC's perspective? And also, what would change or turn the market condition around? Takegawa-san will respond. Yoshio Takegawa: First of all, as of now, the caustic soda and PVC '26 expectations. Right now, the market, we believe, is at the bottom. So at the beginning of -- or in Q1 '26, it was the bottom. And in Q2 and onwards, a gradual recovery is what we expect. But for the full year, it will be much higher than the year before. We do not think that it will be much higher than the year before. But what could trigger the turnaround of the market? As of now, there are some uncertainties, but the major ones would be the exports from China to Southeast Asia. What would happen to that flow? I think that would be one of the keys. It is not definite, but April this year and onwards, export from China, there will be an evolution of some of the tax-related matters and also the production cost of China is increasing. We have that information. So from China to Southeast Asia, the flow will come down or the price will go up. If that happens, our chemicals market, Southeast Asia for us, that will be a positive impact on us. Kazumi Tamaki: Now we want to come back to the venue and receive questions from the audience. Maeda-san, please. Takuya Maeda: This is Maeda from SMBC Nikko. Question about electronics over the mid- to long term. Page 57, Page 58 show strategy for semiconductor and multiple items. So in 2026 and beyond or thinking about 2028 or 2030, right now, it's mask blanks and optoelectronics being the key. But over the mid- to long term, do you think the drivers will change, for example, glass substrate or maybe the laser that you have shown us today? And how soon will they ramp up? And what kind of size should we expect? Kazumi Tamaki: Yes, this will be answered by Hirai-san. Yoshinori Hirai: We believe that the back-end process centering on packaging will definitely grow, but it doesn't mean that the front end will disappear. EUV mask blanks and the CMP slurry demand are expected to grow over time. So this is -- these are still growth drivers. What's important is what will be the next pillar? Glass interposers or glass cores, yes, we do have some additional expectations there, but not just that. Because if you look at the packaging materials, you can see that a whole variety of different materials are used in the packaging process for semiconductor. So we want to get in there based on the relationship that we have with the customers. Now glass core and glass interposer is attracting the most attention right now. But in the beginning, we expect this to actually materialize in 2027. But you cannot do this alone. All the different companies need to get aligned. So there is a possibility that it could be later than '27. But clearly, 2030 and beyond, this is going to be one of the pillars of the materials for the next generation of semiconductors. Kazumi Tamaki: Yes. Next question, Nishiyama from Citi. Yuta Nishiyama: Nishiyama from Citi. Capital allocation is my question. So a year ago, you showed us cash allocation slide, and we did not see that this time. So is there any change? And the strategic framework, JPY 100 billion, M&A and share buyback. Could you talk about your views on that? And on Page 60, shows that '27 and onwards, it says that the return policy could be revisited. So what is the direction? Cash allocation and the shareholder return policy? Kazumi Tamaki: Okay. So I would ask Takegawa-san, CFO, to respond. Yoshio Takegawa: First of all, about the cash allocation, strategic investments, we had that until now, the repayment of the loan and the shareholder return, strategic investments, there are different applications. But as of now, the destination or allocation have not been finalized. But in comparison to the cash in, it is being declining and the strategic -- total strategic framework is becoming smaller. So we need to wait and see what happens. As for the share buyback, we would like to look at the potential investments and also the cash situation to make a comprehensive decision. We have not yet decided whether to do the buyback or not. We'd like to look into the situations. But we do not plan to buy or repurchase our own shares just to push up the share prices. That is not something that we plan to do because that would only have a short-term impact. So in any way, we would like to look at the total picture comprehensively before making a decision. Kazumi Tamaki: Any further questions from the room? Yes, please. Yuta Nishiyama: This is Nishiyama from Citi. Electronics assumptions for the new fiscal year, I would like to get more information. Display shipment is expected to go down, but Page 20 shows that the size will be larger according to the market outlook. So is the market share going to go down? Is that your outlook? And Page 52 shows you will continue to implement pricing policy in '26. So are you expecting price increase? And for optoelectronics, you said that profit will go down. But on Page 23, I can see that the shipment of optoelectronics is actually flat. So is there a downward pressure on the price? And also high value-added products. You mentioned that the product is a transitional period. So foldable, mechanical aperture, I know that there are many changes happening. So can you please elaborate a little bit more? Kazumi Tamaki: Yes. This is going to be answered by CFO, Takegawa-san. Yoshio Takegawa: Yes. With regard to display, shipment slightly down, but the profit decline will not be very big. Basically, we will be promoting larger size more and more. The profit looks down slightly. This is due to product mix. So this is a transitional period to larger size. So this is just due to product mix. And Optoelectronics is in the same situation basically. It's not the question of the volume going up or down. Well, there's going to be a slight increase and slight decline and that cycle gets repeated. So this is not a big drastic decline in profit or increase in profit. Now we want to connect this to the next high functionality product. So right now, we are in a transitional period. So the number is not going up or down dramatically. In other words, it's a little bit on the stagnant side. I hope that's how you can interpret it. Kazumi Tamaki: [Operator Instructions] The questions that we already received, I would like to introduce rare metal procurement risk, the higher precious metal price, the impact from it. And those are not -- are they factored into the forecast of the performance. So I would ask Shiokawa-san to respond. Tomoyuki Shiokawa: Well, it is true that recently, the precious metal prices are at high level. And so the procurement risk exists. But in our case, as of now, we do not expect that this becoming the major risk or major issue. If it becomes a long-term issue, it is possible that we will be impacted. But as of now, we do not expect this to be a major factor. Kazumi Tamaki: [Operator Instructions] We have already received another question. You mentioned that the 2-nanometer level of EUV mask blanks has been developed -- development is completed. What about the status of certification? This is going to be answered by our CEO, Hirai-san. Yoshinori Hirai: Development is completed. And with some customers, certification is also completed. And with other customers, we are in the middle of being certified. We cannot really comment on the specific status of each customer. So 2-nanometer already completed. And next is 1.4 nanometer. So this is the development process that we have just entered. Kazumi Tamaki: Questions from the online participants, we have already covered all the questions. Are there any other questions from the participants in the room? Nishiyama-san? Yuta Nishiyama: Nishiyama from Citi. Life Science, the top line 20% increase in the new fiscal year. I think that's the sum of each site. And based upon the backlog, is it likely to get to that level? And you mentioned that the deficit is likely to continue for the fiscal year, but it will be higher in the second half. So when do you think that you can expect to turn it around? Kazumi Tamaki: Our CEO will respond. Yoshinori Hirai: About the top line with the CapEx, the line investment is done in CRO and Copenhagen. As for Copenhagen, as mentioned, right now, we are starting it up, and we will plan to increase the orders. So from this year, it will start to contribute, but the major contribution is expected for CRO. So that's about top line. As you said correctly, for the full year, turnaround will start from fiscal '27. But for that, second half of this year, I don't know whether it will be monthly or quarterly, but we need to turn it around based on that. So cost reduction and expansion of the orders will be something that we'll be working on. So border, the handling of that is over. So the regular order expansion and the regular production phase will be starting. So we would like to make sure that we do this well. Kazumi Tamaki: It's time to close the Q&A session at this point in time. If there are further questions, please contact the IR representative or contact us at the following phone number 03-3218-5096, 03-3218-5096. [Operator Instructions] And that concludes full year earnings call for 2025. Thank you very much for joining us despite your very busy schedule.
Hong Sung Han: Good afternoon. I am Han Hong Sung, the Head of IR at Woori Financial Group. Let me first begin by thanking everyone for taking time to participate on this earnings call for the Woori Financial Group. On today's call, we have the Group CFO, Kwak Seong-Min; the Group CTO, Oak Il-Jin; and the Group CRO, Park Jang-Geun. We will first start with the Group CFO, Kwak Seong-Min's presentation on the earnings performance and then also present the corporate value enhancement plan, after which we will have a Q&A session. Please note that the call is being conducted with simultaneous interpretation for our overseas investors. Now let us start our presentation on the earnings for the full year of 2025. Seong-Min Kwak: Good afternoon. This is Kwak Seong-Min, the CFO of Woori Financial Group. Let me go over the 2025 full year performance. Please turn to Page 2 of the material, which is available on our website. The group's 2025 net income was KRW 3,141.3 billion, representing a Y-o-Y increase of 1.8%. The ROE was similar to last year at 9.1%. Amid uncertainties in the financial market regarding interest rates and FX rates and concern about a slowdown, balanced top line growth and the insurance acquisition enabled the group to achieve a high -- record a -- record high net operating revenue and stable profits. In particular, we set sizable reserves for future loss factors, including payoff projects with completion guarantee of trust company and adjust uncertainties such as fully provisioning against LTV-related fines, further solidifying the group fundamentals. In addition, we completed the insurance acquisition without any negative impact on our capital ratios and established a growth foundation for the securities business by acquiring the final license and launching MTS Group, completing the portfolio as a comprehensive financial group. Using this, we are starting to generate group synergies such as investment banking joint underwriting, open integrated wealth management branches and expanding bancassurance operations. Another noteworthy achievement of 2025 is the significant improvement in our capital ratios. As of 2025 end, the tentative group CET1 ratio is 12.9%, up 77 basis points versus 2024 and exceeding the 2025 target of 12.5%. Across higher macro volatility, the insurance acquisition and the higher year-end dividends, the group will still be able to improve its capital ratio through asset rebalancing to stabilize our financial structure, and we are able to show our strong capital management capabilities to the market. Based on this, the BOD today has decided on year-end dividends of KRW 760 and share buybacks and cancellations of KRW 200 billion. Next, let me provide more detail about specific areas. Please turn to Page 3 of the material. First, let me go over net operating revenue and NIM. The 2025 net operating revenue was 5% year-over-year at KRW 10,957.4 billion. Due to stable profit generation from more diversified revenue sources and the inclusion of the insurance business, we posted a record high performance. Interest income for the year was KRW 9,030.8 billion, and top line growth was moderate, but NIM improved quarter-over-quarter throughout the year, which led to better asset quality and growth. On noninterest income, we recorded a record level of fee income and balanced growth across securities, FX trading and insurance income, which led to a jump of 24% year-over-year at KRW 1,926.6 billion. In addition, Woori Bank's 2025 NIM was 1.46% and the group NIM, including the credit card business, was 1.73%, each representing an increase of 2 and 3 basis points, respectively. Though there were 2 base cut rates during the year, NIM grew on the back of asset origination focused on profitability and asset quality and funding cost efficiencies. The recent movement in the equity market has led to money movements and market rates are rising, which is creating a more challenging funding environment. But the group will continue to expand its core deposit base, rebalance its portfolio to focus on profitable, high-quality assets and actively manage ALM to secure stable margins in the future. Next, let me go over the loan book. As of 2025 end, the bank's loans totaled KRW 334 trillion, flat year-over-year and around 1% higher quarter-over-quarter. In terms of corporate loans, they were slightly declined versus 2024 end at KRW 180 trillion. Loan demand from large corporates was strong throughout the year, but the decrease came from the efforts to decrease SME sector business exposures and actively rebalancing assets to focus on new growth and high-quality companies. On the retail side, the portfolio grew around 0.5% quarter-over-quarter or 4% year-over-year to KRW 150 trillion, mainly driven by real demand such as policy mortgages. Last year, against an uncertain business environment, including a weak one, the group was able to achieve profitable growth via prudent RWA management with a focus on capital adequacy. This year, as discussed in our future core growth project planned last September, we will leverage the group's corporate finance competitiveness to increase financial support for more productive areas of the economy. In addition, for retail loans, fully reflecting the government's policy stance, we will focus on the real demand to manage our assets in a stable manner. Next, let me talk about the group's noninterest income area. In 2025, noninterest income was KRW 1,926.6 billion, a record high level and a large increase of 24% year-over-year. In particular, core fee income showed balanced growth across bank and nonbank businesses, totaling more than KRW 500 billion each quarter. In addition, against market -- increased market volatility in interest rates and FX rates, the insurance income contribution from the comprehensive financial group portfolio provided more stability to our noninterest income profile. Leveraging this portfolio, we will strengthen the core competitiveness of our nonbank subsidiaries, such as our securities and insurance business and generate stronger synergies across businesses in areas like wealth management, investment banking and also asset management to gradually expand our noninterest income contribution. Next, let me go over expenses and costs. Please turn to Page 4 of the presentation. So to discuss SG&A, in 2025, SG&A totaled KRW 5,180.5 billion. When excluding the ERP and the insurance business, it grew 10.8% year-over-year, representing a cost/income ratio of 45.7%. During the year, the group spent to strengthen its business portfolio by building out the securities infrastructure and acquiring the insurance business. In addition, there were other upfront costs such as ordinary wage labor costs. We believe these investments for portfolio expansion were essential for sustainable future growth, and we will look at the cost increase from ordinary wage as a one-off expense, which we will try to minimize the impact by increasing future productivity. In addition, going forward, we will continue to engage in general cost-saving efforts like leveraging AI-based operation efficiencies to lower cost and achieve our mid- to long-term CI ratio target of below 40%. Next, let me move on to credit cost and asset quality. In 2025, the credit cost was KRW 2,086.2 billion, and the credit cost ratio was 0.53%. Although the base rate was cut place, market rates have remained high and any concern about a slower economy continues. The group recognized around KRW 430 billion in one-off credit cost, including preemptive provisioning related to completion guarantee of trust company projects and strengthened its loss absorption capabilities. So when excluding these one-off factors, the group's credit cost ratio was 0.42%. For the past 2 to 3 years, we have preemptively managed weak assets such as real estate project finance and completed an asset cleanup of the nonbank side, including the previous merchant banking business, savings bank and asset trust. Thus, we expect any additional costs to be limited. And this year, we are targeting a credit cost that is 20% or around KRW 420 billion lower on a year-over-year basis. In addition, for Woori Bank, the corporate prime asset ratio stands at 84.1%. It is increasing loans to new growth sector manufacturing companies and continues to rebalance assets with a focus on asset quality. Quality indicators are recently improved, but since uncertainties still persist, we will focus more on asset quality management based on preemptive buffers created last year to maintain the credit cost ratio within the 40 basis point range. Next, let me go over capital adequacy and shareholder return. Please turn to Page 5. The 2025 year-end tentative group CET1 ratio is 12.9%. When we launched in 2019, the group started with a CET1 ratio of 8.4%, and it has improved it each and every year. In 2025, even though we had a large M&A, i.e., the insurance acquisition, solid profit growth and asset rebalancing, a reduction in FX-sensitive assets and RoRWA linked KPI systems, we -- this all resulted in a significant reduction of 80 basis points year-over-year. Thus, we have been able to achieve our promise of reaching a CET1 ratio of 12.5% and prove our commitment to enhance our corporate value. At the BOD today, in light of the 2025 financial performance and our shareholder return policy, the Board decided on a year-end dividend of KRW 760 per share and a KRW 200 billion share buyback and cancellation. The full year total dividend per share increased 13.3% year-over-year to KRW 1,361, which meets the qualifications of a high dividend company. In particular, the year-end dividend will also be in the form of a nontaxable dividend, the first of its kind from a bank-led financial holding company. The KRW 200 billion share buyback and cancellation also increases a 33.3% increase year-over-year and the group's total TSR ratio, including the nontaxable dividends will stand at 39.8%. Other details of our shareholder return will be discussed when we present our 2026 corporate value enhancement plan in more detail. Next, I will go over the productive finance strategies of the future co-growth project announced in September. For the next 5 years, we plan to provide support of about KRW 73 trillion, excluding inclusive finance of KRW 7 trillion. KRW 17 trillion will be allocated to investments, including the National Growth Fund, KRW 56 trillion will be supplied as loans to advanced strategic industries such as AI, semiconductors and defense. To secure growth momentum, we are operating the Advanced Strategic Industry Financial Committee as a task force. And recently, with Hanwha Group, we signed a financial support agreement for building an advanced strategic industry ecosystem, which shows that we are already delivering meaningful results. We are also leveraging our competitiveness in corporate finance and network to preempt high-quality clients and efficiently expand funding support. To this end, with the financial authorities capital regulation rationalization policy and by promoting the group's internal efforts such as asset rebalancing, we plan to secure sufficient capital headroom. Also, we will establish an AI-based risk management system that encompasses the entire process from loan review to post-loan management to build a strong growth foundation without undermining capital ratios and asset quality. That was the end of the 2025 annual earnings presentation. We will now move on to the next section. Hong Sung Han: Today, Woori Financial Group disclosed the 2026 corporate value enhancement plan on KRX. Kwak Seong-Min, CFO, will continue to go over the main elements of the 2026 corporate value enhancement plan. Seong-Min Kwak: Today, we announced the corporate value enhancement plan to review the progress made in 2025 and share with the market our new strategies for 2026. The value enhancement plan has incorporated feedback from the market and shareholders. And after thorough discussion, it has been reported to the Board of Directors to be announced today. We especially thought long and hard about how to effectively use the significantly improved capital ratios as basis for growth and shareholder return. So let me go through the material on our corporate value enhancement program, which has also been distributed today through the disclosure. I will first go over the financial indicators for 2025. Please refer to Page 4. ROE, thanks to balanced top line growth and the acquisition of the insurance company was maintained at above 9%. However, as the cleanup at nonbank subsidiaries caused ROE to slightly decline. The CET1 ratio despite the acquisition of insurance, LTV penalties and higher shareholder return is expected to annually improve by 77 bps to 12.9% to comfortably exceed the 2025 target of 12.5%. Annual DPS for this year should increase by 13.3% Y-o-Y to KRW 1,361, which is similar to high dividend company levels. Of this amount, the year-end dividend of KRW 760 is nontaxable. When considered, dividend payout reaches 35%, which is top notch in the industry. The size of share buyback and cancellation have also increased by 9.7% since 2024 to KRW 150 billion. The 2025 TSR of Woori Financial Group when considering nontaxable dividends reaches 39.8%. Page 5 is on nonfinancial indicators. In 2024, we launched the securities companies. And in 2025, we successfully incorporated the insurance company, thereby completing the group business portfolio. Synergy is the fundamental reason why we exist as a financial group. Based on the completed portfolio, wealth management, CIB, capital markets and other key areas will be the focus as we concentrate our efforts to create synergies. Meanwhile, for financial consumer protection, we are the first financial group in Korea to appoint a dedicated Chief Consumer Officer to take the lead in delivering social value. Also advancing the CEO succession program and establishing a new decision-making support process for the Board of Directors to protect shareholder interest are some examples of our efforts to improve corporate governance, which is the key focus in today's capital markets. I'll now move on to the 2026 corporate value enhancement plan on Page 6. In 2026, we plan to achieve a CET1 ratio of 13% ahead of schedule and then maintain it stably at around 13.2% or higher. While continuing the RoRWA-based asset rebalancing efforts, quarterly flexible RWA management and selective resource allocation across sectors and businesses, these are some sophisticated and strategic efforts we are making to manage the CET1 ratio. In addition, we will be disposing idle real estate held by the bank and insurance company to reduce RWA. We will also be deploying diverse methods to efficiently manage and use real estate from a financial perspective to enhance capital ratios. Regarding the pioneering future co-growth project, assuming approximately KRW 80 trillion of productive and inclusive financial support across 5 years, we expect about 40 bps annual impact on our capital ratios. We believe this impact is fully manageable by strengthening the RWA management process, quality enhancement of investment and loan portfolios and utilizing the lending capacity secured from the rationalization of capital regulations. By executing the future co-growth project in a balanced manner within the scope of rigorous capital management, we will work to achieve harmony between capital stability and mid-long-term growth. I will move on to Page 7 on the group's sustainable ROE enhancement strategy. As repeatedly mentioned, for this year, based on the group's complete portfolio, we will focus on cementing the competitiveness of each subsidiary within their respective sectors. And the 3 pillars: Bank, securities and insurance, will start to generate synergy in earnest, which should boost nonbank profit contribution to about 20%. With the continuous capital injection plan, the securities firm will elevate its position in the industry. For insurance, given the business environment, we will prioritize financial stability and focus on laying the foundation for mid- long-term profit. The asset management arm will launch a productive finance-related fund and with the transfer of LDI insurance funds should realize economies of scale and climb the industry rankings. Also on top of traditional methods such as cross-selling and client referral, we are planning to implement diverse synergy strategies such as CIB joint underwriting, wealth management integrated centers and strengthening LDI. In addition, by transforming into productive finance centered around advanced strategic industries, we aim to secure growth momentum. We will move beyond the traditional interest income-driven profit structure and invest in innovative companies to share its profits. Also, we will move the pillar of financial support from household and real estate to corporate finance in order to contribute to the recovery of dynamism in the Korean economy. Also with large-scale transformation into an AI-based management system, corporate loans, wealth management, customer consultations, internal control and other key areas will experience elevated productivity, thereby structurally improving ROE and achieving quality growth at the same time. Lastly, I'll go over the shareholder return policy on Page 8. Traditionally, Woori Financial Group has shown a high dividend payout and a competitive dividend yield, making us one of the leading financial dividend stocks. We will solidify our competitiveness as a dividend stock while diversifying shareholder return methods to lead the expansion of the investor base in the Korea's capital market. First, we will introduce nontaxable dividends from year-end 2025. The related resources as of year-end 2025 is around KRW 6.3 trillion, which we expect to use across 5 years. The nontaxable dividends will boost dividend payout by around 6 percentage points. For retail individual shareholders, the real impact will be an 18.2% increase of dividend income. In both 2024 and 2025, dividend payout was at least 25% and total dividend payment increased by more than 10%. As such, the company effectively satisfies high dividend stock requirements pursuant to the act and restriction on special cases concerning taxation. We will continue to increase EPS every year by at least 10%. The share buyback and cancellation policy has been gradually expanding since its first introduction in 2023. However, it was still about mid-4% of profits. We fully understand that the impact of treasury stock policy is maximized when the PBR is below 1x. Therefore, we will increase the buyback and cancellation portion to about 10% in a speedy manner. Today, we announced share buyback and cancellation of KRW 200 billion, which is a 33.3% increase from the previous year. If we expect the CET1 ratio to exceed 13% this year, we are planning to implement additional buyback and cancellation in the second half. In the future, if the CET1 is maintained stably at over 13.2%, we will review exercising a balanced shareholder buyback and cancellation program twice a year once each half. To ensure that we remain a flagship financial dividend stock, we will stay one step ahead of competitors and implement diverse measures to strengthen shareholder return in a sincere manner. Lastly, in 2025, we acquired an insurance company to complete our nonbank portfolio to become a comprehensive financial group. Company-wide efforts, including all of our employees have led to the highest improvement of the CET1 ratio in the industry to reach almost 13%. Thanks to these achievements, we have received strong interest from investors from home and abroad and have been positively recognized by the market. Our share prices outperformed the KOSPI and market cap has more than doubled since early 2025. In 2026, Woori Financial Group will move beyond the period of management and maintenance to take a leap forward to enter a period of great transformation. While combining core competitiveness and group synergy to advance as a complete comprehensive financial group, we will leverage our key strength, which is corporate finance to deliver the great transformation towards productive finance. In addition, we will continue to communicate with the market and carry on differentiated efforts as a leading financial dividend stock. This will conclude the earnings presentation of Woori Financial Group for 2025. Thank you. Hong Sung Han: Yes. Thank you very much. Now we will start the Q&A session. [Operator Instructions]. So today, the first question will come from Hanwha Investment Securities, Kim Do Ha. Do Ha Kim: So for 2026, for this year in terms of your margin and growth in terms of your profits, if you could provide some guidance on that and in terms of the overall direction and why you believe that this would be possible, that would be appreciated. And in addition, for the dividend, I do believe it's larger than market expectations. And I do think that the competitive outlook is also good. However, I don't think I can fully understand your dividend policy. So going forward, with regards to your corporate value up plan. If you look at Page 8 of the presentation, right now for 2026, is the target to increase your DPS by 10%. If that is so, then in terms of your quarterly dividend for each quarter and also in terms of the year-end dividend, what would be the breakdown? Would it be similar to what you have done to date? Or do you actually believe that there will be any changes? If you could explain that in more detail, that would be appreciated also. Hong Sung Han: Yes. Thank you for your question. And if you give us a minute, then we will try to prepare your answer. Seong-Min Kwak: Yes, this is Kwak Seong-Min, the CFO, and maybe I can address your question. So if we look at 2025, as mentioned before, in terms of our CET1 ratio, there was a significant improvement. And as a result of that, we did have a stance to try to have more moderate growth. In addition to that, according to the overall government household debt policy, there was a lower household growth that we also see. But on the Korean won side, there was only a 0.2% growth in that area. In 2026, on the Korean won loans, in terms of the risk-weighted assets, we want to have it at around 0.5%. So that would be the business plan for this year. In addition, if we look at the nominal GDP growth rate and then also take into consideration the factor of the inclusive financing that we will have, we do think that there will be around 5% growth. And even in 2024 there was around 3% in terms of the plans that we had for the year. But on the corporate side, because there was asset rebalancing and other effects, in terms of the corporate loan growth as a whole, it was a bit more sluggish and retail was a bit more sluggish. So as a result of that, in 2026 as a whole, we want to secure growth potential. So on a Y-o-Y basis, we want to have around 5% growth in total for our assets. If we look at our margins, I think that the stance would be is that for 4 quarters consecutively, we will actually be able to see a NIM increase. And for the full year, it was around 2 basis points. So on the margin side, we do think that we have defended ourselves very adequately. And at the Research Institute side, if you look at the forecast that they have set out for this year, we do actually think that the BOK will cut rates at least this year. So that was one of the assumptions. And also in 2026, we think that our margins will, on a Y-o-Y basis, be slightly weaker in terms of the business plan assumptions. However, then thereafter, if you look at the recent side, market rates are being maintained at a high level. The BOK also might cut rates in the second half rather than the first half. So it's going to be pushed back in terms of the timing. And there's also, I think, that conflicting views about rate cut possibilities going forward. So if market rates were not to fall, then we do believe that on a Y-o-Y basis, that NIM will be maintained at, at least this year's level. And in terms of our profitability and asset rebalancing that we're taking, also increasing our core deposits, if this all comes into play, then we do think that there is a possibility that there could be a slight upside to what we're planning and seeing today. In terms of our noninterest income, this is an area that we were very focused on. There was a lot of growth that we had achieved. And we do think that this year, the growth will be similar so that on the noninterest income side, we think that we will be able to see around 20% growth. The insurance company being acquired also. On the security side, we have a final license, and we started business in March of 2025. So we do think that we will actually have a higher contribution coming from the nonbank side. So going forward, in 2026, we think that we can actually see an increase at around 18% on the noninterest income side also. On the SG&A side, in 2025, this was an area in which I do think that we left a bit. However, SG&A, as mentioned before, is also reflecting the insurance acquisition and also the securities firm, we did beef up the IT investments and also increase the headcount there. So on the nonbanking side, there was some concentration of cost increase factors that did take into play. So for this year, again, this is another factor that we will have to take in consideration. So we do think a dramatic decrease on a Y-o-Y basis will not be possible. However, if we look at the other areas outside of these business areas, we are going to be more prudent in terms of management, whether it be the number of branches, the headcount and also other SG&A-related items. I do think that this year, again, not only for the 2026 business plan, but also according to our mid- to long-term plan. In formulating those plans, we will take a fundamental rereview. So in terms of our mid- to long-term target of reaching a CI ratio of 40%, we will try to look at initiatives to enable us to achieve that and actually execute that in 2026 so that at least in terms of the SG&A side that there could be a decrease on a Y-o-Y basis. In terms of our credit cost in 2026, in actuality for 2026, the target would be to maintain a normalized CCR of around 40%. And therefore, that would mean that around -- we have decreased the overall credit cost by around KRW 420 billion or around 20%. So this is the business cost that we will execute and also maintain our CI ratio at 40%. And in terms of the outlook, maybe that could be the overall answer to the question. And then I think that you talked about our capital adequacy ratio and capital policy. In '24 and '25, again, in terms of the total dividends, it did increase by a total of 10% year-over-year in terms of the total amount. And so for this year, if you look at the high-growth qualifications that the actual government has laid out, we would be qualified. However, because our dividends are nontaxable, there are more benefits that we give to our shareholders. But with regards to the DPS target, we do want to have 10% targets going forward. So this is something that we will apply for 2026 and also continuously target going forward. However, that have been said, in terms of the 10% DPS in order to reach that level, if we do a simulation about how we can achieve that, on the net income side, if we increase it by 10%, that itself would enable us to reach a 10% DPS target. So therefore, I think that for the target of having a DPS of 10%, it's not going to be a difficult target to achieve. And therefore, that's why we have set the target at that level. And in addition to that, if we look at our dividend policy, I think that when we talked about this before, we did say that in terms of the quarterly dividend, we would equally distribute it across the first, second, third quarter. And then for the year-end, we would look at our capital ratio and then set the year-end dividend. That's what we did this year. And then for 2026, I think that, that approach will remain the same. As of now, that would be our stance. And in terms of the year-end dividend, I do think that it will be KRW 1,361 per share. So if we look at the same situation, I think that for Q1, Q2 and Q3, you can expect in general, where the dividends will sit. And then in terms of the year-end dividends for 2026, again, we would look at whether the CET1 ratio is above 13% as our general target is. And assuming that is the situation, we would determine what the year-end dividends are. So in terms of our quarterly dividends and our year-end dividends in terms of the approach that we take, that will not in itself change. So for this year, if our CET1 ratio does maintain a level that is comfortably above 13%, then based upon that, then from 2027, I do think that we will be able to see equal contributions across the first to fourth quarter or each and every quarter, similar to our competitors. However, rather than splitting it out across all quarters, we don't necessarily believe that, that is the most efficient manner. We do believe it's more important to satisfy the commitments that we had made to the market. And in terms of the CET1 ratio that we have, being able to satisfy the needs that our customers have in light of where our capital ratios sit. So up until 2026, we're going to maintain the stance that we currently have. Hong Sung Han: And we'll move on to the next question from KIS, Baek Doosan. Doosan Baek: I am Baek Doosan from KIS, and I also have a question regarding dividends. You talked about the nontaxable dividends and the relevant resources amount to KRW 6.3 trillion. Last year, we brought in around KRW 3 trillion. So I would like to know how the size of the resources increased. Seong-Min Kwak: Thank you for the question. I'm Kwak Seong-Min, CFO. And let me answer your question. In 2025, in our corporate value up plan at the shareholder meeting in 2025 March, we transferred KRW 3 trillion of capital surplus to retained earnings. So that is all publicly available information. But lesser known is that is another aspect of the shareholder meeting agenda. So 4 years ago, in 2021, we transferred KRW 4 trillion from capital surplus to retained earnings. And the reason we did that back then was because in 2019, the financial group was relaunched. And according to the IFRS accounting standards, we relaunched the financial group with share exchange. And so the separate and consolidated financial statements need to be integrated. And unlike the competitors, the capital structure of the separate and consolidated financial structure was there. But in reality, there was no reason for it to be different. It was only because of accounting standards. And as you know, the resources will come from the separate financial statements according to commercial code, not the consolidated financial statements. So in conclusion, so we had an unreasonable situation at that time where we needed to normalize the situation. So in 2021, KRW 4 trillion of capital surplus was transferred to retained earnings, and then we increased the payable resources. And then from 3 years ago, since we have been making efforts to increase the dividends. So out of the KRW 4 trillion, KRW 700 billion we already used. So we have about KRW 3.3 trillion as outstanding balance. So to make sure we satisfy all of the legal requirements and the tax requirements to ensure that we do not have any issues that pop up in the future, this we received legal interpretation and tax interpretation that we can use this resource for nontaxable dividends. So out of the KRW 4 trillion, we still have KRW 3.3 trillion. And then in 2025 March, we put in KRW 3 trillion. So total KRW 6.3 trillion is the available resources. So after KRW 5,580 dividends, we believe that around KRW 5.7 trillion will remain. In 2026, we will be using the KRW 5.7 trillion for the quarterly dividends and all of the dividends. So it will all be nontaxable. So in 2025, nontaxable dividend was only for the year-end dividend. So the impact would have been relatively small. But from 2026 onwards, the quarterly dividend will also be nontaxable. So the actual impact will increase in 2026. Hong Sung Han: Yes. The next question will come from Daishin Securities, Park Hye-jin. Hye-jin Park: This is Park Hye-jin from Daishin Securities. And I would like to ask about the KRW 189 billion nonoperating loss that you have, if you could break it down for this. And also in your corporate enhancement -- value enhancement plan, I do think that the nonbank side contribution is around 20%. What do you look about -- how do you see the outlook going forward? Because it does seem to be that on the brokerage side that there is a more favorable environment. So maybe in terms of your mid- to long-term plan, there could be an acceleration of the realization of that. So in general, if you look at the overall business outlook, including your nonbanking business, if you could discuss that, that would be appreciated. Hong Sung Han: Yes. Thank you for your question. If you give us some time, we will answer. Seong-Min Kwak: Yes, talking about the nonoperating income side and the overall line item there. So for the competitors, I do think that this was mentioned already. With regards to the bad bank, there was a KRW 50 billion contribution. And in addition to that, on the LTV fine, we have around KRW 52 billion, another minus or deducting side there. So in terms of the KRW 52 billion, this is fully provisioned against, and we do set aside at other provisions. So it's fully provisioned against already. And our competitors, we understand there could be various legal views. We didn't do a partial recognition. We fully provisioned. So I think that if we do take in consideration what their view would be in terms of the fines on this side and also according to how the litigation plays out, we actually believe that there could be a reversal. So we do think that there's a possibility that we would be able to see some upside from that taking place. And in addition to that, on the security side, to talk about any rights offerings, I do think that, that was something that was mentioned, and I did see the press reports. So if you look at the situation right now, the overall total capital base is around KRW 2.2 trillion. And so for the securities side, according -- different from the insurance business strategy, we do want to grow this business ourselves. So over the mid- to long term, to be a mega IB and also to be mega securities, we do think that it's inevitable that there will have to be capital increases that take place. For the license periods and taking all things into consideration, we do think that it is inevitable. So this is something that is under review. But for the company as a whole, we are going to look at the mid- to long-term capital management plan and then gradually implement any increases that are necessary. So over the mid- to long term to become a mega IB, we do understand that we will have to make more contributions. So in terms of the application, in terms of the licensing itself, this is all something that takes time. So again, it will be a gradual process. And according to that process, we will take gradual action. So we don't have any specific size or timing that we're thinking about as of now. But in terms of becoming a mega IB, according to that schedule, it is under review as of now. So on the securities side, if there is a capital increase, Then, of course, in light with the support for productive financing and also in terms of the future co-growth program, we do want to have more support for venture capital. So even if we do make capital increases; on the security side, it will not have an impact on our CET1 ratio. And we also believe that we have more room to put in more capital versus our competitors. There's no legal restrictions. So through doing so, we will try to pursue the top line growth of the securities firms so that we can have a contribution on our top line from the nonbank side. So over the midterm horizon, we will set a business plan forth to this aim and try to achieve it. Hong Sung Han: We will move on to the next question from NH Investment Securities, Jung Jun-Sup. Jun-Sup Jung: I am Jung Jun-Sup Jun from NH Securities. I have a question regarding CET1 ratio, and it improved significantly this year. 2026, you are working to achieve 13% ahead of schedule. So you talked about the shareholder buyback, and I think it's up to June. So I think you are looking to conduct the share buyback program in the second half. When do you think that will actually happen? When do you think you can actually achieve 13%? If you have the guidance for CET1 in the second half, I think I'll get a better idea of the size of the share buyback. And can you also give us more color on the different strategies that you have? For example, you'll be disposing the marketable securities? Or are there plans to have a paid-in capital increase and so on? Hong Sung Han: Thank you for the question. And just give us 1 minute while we prepare the answer. Seong-Min Kwak: I am CFO, Kwak Seong-Min. Regarding the CET1 ratio, we mentioned earlier today, as of 2025 year-end, it was 12.9%. Those are preliminary numbers. So we are close to 13% at the moment. So in 2026, we feel that like mentioned earlier, I think I was a little bit more cautious, but we do believe we can comfortably achieve 13% in 2026. In terms of the timing, probably we will be able to achieve that in the first half, and our financial business plan is based on that assumption. The government is improving the overall institutional framework to encourage productive finance. And I think that can contribute to our own efforts as well. On top of that, we have internal efforts that we are making. We are developing those plans for 2026. So it's a little bit too early to share that with you today, but we are currently developing the plans. For example, you have the idle real estate disposal that was included in the corporate value enhancement plan, but we are making multifaceted efforts to ensure that we can reach early 13%. And if we progress as expected, we are quite confident that we can reach and go over 13% in the first half. That is why, like you said, the KRW 200 billion that we announced is a 4-month trust contract. So it's from February to June, the purchasing will happen during that period. And by the end of June, we plan to cancel those shares. And the details are in the disclosure. Then if -- we mentioned that if we expect CET1 to go over 13%, we can review additional shareholder buyback in the second half. So I think that is quite a realistic plan that we have. So in Q1 or in first half earnings call, I think we may be able to share some positive news regarding that topic. Hong Sung Han: So the next question will be from HSBC, Won Jaewoong. Jaewoong Won: Thank you for your strong performance amidst a challenging environment. And with regards to TSR, also, it does seem that you have given a lot of thought about this and have come up with a detailed plan. So thank you for that. However, in terms of the news reports, because it's already out and also because there's a question, this is a question that inevitably, I think I have to ask. If you look at the news reports; on the security side, right now, there is talk about a KRW 1 trillion capital increase each and every year so that you would be able to fill in your capital base. So in terms of the CET1 ratio, you said that it would not have an impact there. However, if you do make a KRW 1 trillion contribution in terms of the CET1 ratio targets that you have, is it possible to do so without impacting your CET1? So how should we look at these 2 numbers because I think that we would need a bit more comfort about this issue? And second, I think that if you look at ABL, if you look at their core capital ratio, maybe it's around 30% or 40% right now. And in the case of Tongyang also, it's being maintained at around 53%. So for Tier 1, if this is something that is introduced, then I do think that you will actually have to take more additional action. So this also would it not have an impact on your CET1 ratio? If you could elaborate a bit more about that, that would also be appreciated. Hong Sung Han: Yes, thank you very much. And while we prepare, if you could just wait for a minute. Seong-Min Kwak: Yes. On the security side and the capital increases, I do understand that there was an article by a press outlet. So we did talk to them about that. But I do think that it was over exaggerated somewhat. So in terms of the article in itself, I think that you should just understand it's a news article. And in terms of our organic growth, we want to grow our overall securities firm. And according to that strategy, on a step-by-step basis, of course, there will be a capital increase. In terms of that, that's the principle that we have. So from this year, whether it will start this year or whether it will start next year is something that we're still reviewing. Once we have made a determination and according to the size, then it could be subject to disclosure, maybe not. But we will fluidly communicate with the market, so the market can recognize the situation and be aware of it. And as mentioned before, right now, it's not only being designated as a mega IB because, of course, that would be something that we would be pursuing under the process that we want. There is a preliminary license that is required. There's a 2-year grace period. So as mentioned before, it's KRW 1.2 trillion. So even if it goes to KRW 2 trillion, KRW 3 trillion, going step by step, there are time requirements that you need to fulfill. So according to that and according to the government's overall rules, we need to follow that process. So it's not a short-term situation. It's more of a midterm type of situation and the capital increases cannot help but take place in a gradual manner because of that. And therefore, once the capital increases are decided, then through our IR department or through other outlets, we will try to communicate as much as possible. And I did mention that it would not hit the CET1 ratio. And what that's making is that the action in itself does not have an impact on our CET1 ratio at the holding company level. However, if the securities company does engage in S&T businesses or investment banking businesses, as they utilize that capital, of course, there will be asset growth that will take place. And because the asset growth would increase our RWA, we do think that the impact of that from the capital increase that they do enjoy, we do think that they would be able to engage in activities that would offset the increase in the RWA from the profitability that they enjoy from doing so. So at the end of the day, we do think that there would not be an impact on the CET1 ratio in itself. And I think that if they are able to generate an ROE, then that should not be a situation that would be negative at the group level. And on the insurance side, it's not the K-ICS ratio, but there is going to be a core capital ratio or maybe Tier 1 ratio that's going to be introduced. In terms of the timing of that, it's not '26, but it's 2027. And at the government level also, they are trying to look into avenues that giving maybe a brief period until 2030, so that it would not impact the insurance company's operations. So because it's not a disclosure factor yet, I can't go into the details because the K-ICS ratio in itself is official while other numbers are not. But I think that internally, if you look at the situation, we are preparing for this. And at the insurance company level also, of course, from 2027, they will be managing their core capital ratio. So for the 50% ratio in itself, we do think that as of now, as of the end of '25, if we do our own calculations, we actually are comfortably above that in our insurance businesses. So in terms of this core capital ratio, as of now, I don't think that there would be any request that we would have to make for an exemption or a delay. Even with what we have right now in terms of the operations, both companies, we do believe we'll be able to maintain a ratio that would be above the required amount. Hong Sung Han: Thank you for that. We do not have any further questions at the moment. For this quarter, we have also received questions on our website, especially regarding shareholder return. But I think our presentation today regarding our corporate value enhancement plan and the Q&A session have supplied sufficient information on that topic. So we will not go through the individual questions right now. If there are no further questions, we will end the Q&A session here. This will conclude the annual earnings call for 2025 of Woori Financial Group. Thank you for your time today.