Lamor announced its Q3 earnings release today, and we will go through it next with the company's CEO Fred Larsen. Just for the listeners' information. We have some minor maintenance work going on at this office. A little knocking might be heard throughout the video, but let's not let it bother us. Fred, welcome to the interview!

Thank you very much.

Hi, starting from the big picture, how did this Q3 go for Lamor?

Q3 has been quite interesting. We have a lot of operations around the world. This is visible in the results. It was challenging, I must admit. But as I said, there is certainly plenty of activity in the pipeline and otherwise.

Right, right, from an analyst's perspective. Your relative margin was under quite heavy pressure, and I think the clearest factor compared to my own expectations at least was this raw material margin. Is there a key factor explaining its weakening during this Q3?

There are certain projects we are involved in that have been ongoing for a long time, and we are in a challenging situation with them. It will still take some time before we can improve the earnings. That is the reason why this Q3 looks the way it does.

Okay, is this specifically related to the projects' billing timing factors?

That as well. But... We are indeed working on it all the time, and we are seeing improvement continuously.

Yeah, we will get to the pipeline and outlook later, but before that, let's discuss the order book revision made in Q3. You had an order of just over seven million EUR that you recorded in Q2, but which is now being retendered and which you have consequently removed from your order book. What is the background to that?

The background is an old customer in South America, which is a state entity and a very bureaucratic body, and there, for various reasons... It was then removed, even though it was already directed at us. I would say that sort of thing can happen in South America. Well, these things happen. Cultures there are what they are. So we learn from this again and move on. We have indeed had other projects with this customer for a long time, and we expect to have projects with them in the future as well.

Right. Do I interpret correctly that you intend to participate in this retendering for it?

Yes.

Good, let's move on from that. You have this upcoming share issue that you are planning, so what are the next steps to advance it and what will the share issue enable for Lamor?

Yes, now there is November 13th. That is when... A decision will be made within the framework of the general meeting, and we will act accordingly and move forward as quickly as possible, meaning we will then execute this.

Right, as background one could mention that we are doing what was updated earlier. Financing necessitates that this share issue is carried out. The support of anchor investors has already been secured in it, so in that sense we have a good starting point. But what specifically do you plan to use the raised funds for?

They are definitely needed for our operational activities and of course for Kilpilahti as well. So those are the areas they will be directed towards.

I see. Continuing on Kilpilahti, which you already brought up. After the end of the reporting period, you announced that Kilpilahti has produced its first batches of recycled oil, but in connection with that you also announced that there was a small incipient fire. What is the situation at Kilpilahti right now, and did this incipient fire affect the ramp-up of production?

Not really. There was a seal leak there. It has now been renewed, and after that we have been able to ramp up the process again. It is ongoing work, meaning we are running it, improving efficiency and ramping up these processes all the time. And that is of course a very positive thing. Yeah.

Is there anything else regarding Kilpilahti that would be good to note? I can imagine we are now at the stage where the process is specifically being ramped up and efforts are being made to increase the capacity utilization rate.

That is precisely the case. So those are the exact measures, and Johan and the teams there are working on it.

Right, moving on to the outlook. You made a revision at the end of the reporting period and decreased your guidance for the current year. What was behind this decrease in guidance?

Of course the fact that this global environment is challenging, that this geopolitical situation and also this situation especially around the Strait of Hormuz has been challenging, and decision-making has been postponed by customers. We certainly see that there is a huge need for our operations out there in the world. That is for sure.

Right, I can imagine that the current situation kind of only increases that need for your solutions as well. But what does it necessitate for that kind of ketchup bottle effect to be released, so that these projects can actually be started?

Yes, I personally visited the Middle East in the spring. I just returned to Finland from there recently. You actually have to understand what this dynamic is in our industry. Meaning that now when there are damages going on and there is oil in the sea and on the shores. The process itself is such that they rely on the existing plan first, and after that... They consider that... So they use those existing resources as much as possible.

How things proceed then, when it is noted that there is still a massive oil spill on the shores and in the sea, that is where our expertise comes in, and we come along in this wave, meaning we see that our know-how... Well, and we have already talked about these things there, about how we can support them. We are present locally. In several places in the Middle East. We have people there who are then able to support this activity, but the market is not quite prepared for a situation like this.

Meaning we are talking about oil tankers that are part of the shadow fleet and have no insurance. This has not really been prepared for in this industry. As to what is done then, meaning how these projects are financed or who finances them then. Recovery operations there. This has been discussed with many, with customers and with states, that a viable solution must be found for this. Indeed.

Is finding the right financier and securing it the central bottleneck right now? Or does it require that the extraction of this oil from the sea and shores is initiated? Does it also necessitate a de-escalation of the current conflict?

No. It. There is definitely an operation fully underway there. And now we are talking about certain. Projects where this shadow fleet is involved. Then there are other vessels there that are then. Covered by these normal insurances. Meaning the financing there is already secured up to one billion, and operations are underway in this regard. Efforts are now being made to help them with that. So... The need is huge there, and these certain ones have these special features that we must now... As a result, find a solution for how these will be financed in the future. Yes.

And how have these geopolitical tensions generally shown in your demand environment? Has it also led to a situation elsewhere in the world where decision-making is somewhat protracted among customers?

Naturally we see that all around the world, meaning in Europe and also then a variable situation. For example in South America, where there is then again a slightly different situation, meaning political revision and then also the opening of Venezuela. That is of course a very interesting new market where we have been before. Right, right, right. All of these do have an effect, but operationally we have a lot of activity all over the world right now. So we certainly see that there is a huge need there. And what was delightful to see, is that long-term customer relationships appreciate our expertise.

Indeed, you have an impressive reference list in those countries, but generally speaking? Does the globally increased interest rate level affect customers' willingness to invest in your projects?

Not really for us. That is not it for us. What is the key factor is rather how we can best support your customer relationships out there in the world.

Right, the year is ending. Let us return to the original question regarding the outlook. When you talked about how the competitive bidding processes and decision-making for these projects have been protracted and you expect some of them to take place early next year contrary to earlier, what does the sales pipeline look like right now? Are those same projects actually still there, but postponed to early 2027? Or have some also dropped out?

There is a record number of projects there, we have these cases. There are some that have dropped out, but the majority have moved forward. We have evaluated whether we have lost them, what the situation is with competitors, and we see that it has simply been postponed. The prospects are still there and have increased tremendously now because of these particular issues.

I see, I see. And when you said that you also evaluate competitors' behavior, are your competitors behaving rationally right now in your opinion? Or are there those who try to win projects at any cost now that the demand environment is somewhat softer?

Let us put it this way, our strength is that we are present in these countries. Meaning our strategy is to be in these countries for the long term. We are long-term-oriented. At Lamor, meaning we have invested in those country units and operations, and that model certainly appears to still work and be appreciated. So we are perhaps slightly unique in that regard when talking about other competitors globally.

Thank you Fred for the interview and good luck for the rest of the year!

Thank you. Thank you very much for the interview!