For those who haven’t heard of Aspo before, can you tell us a bit more about your business, what you do, and which markets you address?

Aspo has a history of more than 90 years and has been listed on the Helsinki Stock Exchange since 1999. Aspo creates value by owning and developing businesses sustainably in the long-term. Our companies aim to be market leaders in their sectors respective sectors, Aspo’s business portfolio consists currently of three businesses:

ESL Shipping is the leading dry bulk sea transport company operating in the Baltic Sea area. At end of Q3 2024, the shipping company’s fleet consisted of 43 vessels.

Telko, a leading supplier of plastic raw materials, industrial chemicals, and lubricants. The business operates in 16 countries, bringing well-known international principals and customers together.

Leipurin operates as a part of the food supply chain by sourcing raw material from both global and domestic suppliers. The business manages logistics to deliver these materials to its customers, which include bakeries, food manufacturers, and food service providers across the Nordic and Baltic regions.

Can you talk more about your revenue model, through which streams do Aspo generate revenue?

ESL Shipping: ESL’s revenue is largely based on long-term customer contracts, making it less susceptible to short-term market fluctuations. Revenue is generated by transporting cargo, primarily dry bulk, over agreed routes, calculated as tonnages times distances. This infra-like model ensures a steady earnings stream, moreover, specific costs, such as bunker fuel, are transparently passed on to customers at market prices, further insulating ESL from cost volatility. In addition to long-term contracts, ESL Shipping occasionally operates in the spot market when capacity is available, ensuring it maximizes operational efficiency. By leveraging data analytics and innovative vessel technologies, the company is improving fleet utilization and optimizing costs.

Telko: Telko’s revenue model revolves around procuring raw materials like plastics, chemicals, and lubricants from global suppliers and distributing them to over 7,000 local customers. The company prioritizes specialty and technical products, which tend to have more stable demand and higher margins compared to bulk commodities. Revenue is further supported by Telko’s value-added services, including technical consultancy and logistical expertise. Acquisitions are also a major growth driver, enabling Telko to expand its footprint in niche markets.

Leipurin: Leipurin generates revenue through its core offerings of raw materials and logistics solutions for bakeries and food service providers. The revenue model is equivalent to the revenue model of Telko and therefore both business models are based on long-term principal and customer relationships. Both Telko and Leipurin aim to grow organically supported by acquisitions. Investments are done in growing market segments, with a focus on specialty or technical products, and therefore supporting stable financial performance.

Could you tell us more about your business, what advantages your solution offers, and how it stands up against competing players with alternative solutions?

Aspo’s subsidiaries each leverage unique competitive advantages to stand out in their respective markets:

ESL Shipping: ESL Shipping’s core advantage lies in its commitment to green transition initiatives. The company has made significant investments in environmentally friendly vessels, including LNG-powered ships, electric hybrid coasters, and fossil-free handy-sized vessels running on e-methanol. These innovations not only meet, but exceed, upcoming regulatory standards, giving ESL Shipping an edge as customers increasingly prioritize sustainability within logistics. Additionally, ESL Shipping’s operational expertise in managing local challenges, such as navigating ice-laden Nordic waters, ensures reliability that competitors may lack. The competitive advantage is based on having vessels that meet the local needs; ice class, cranes, maximum shallow, etc.

Telko: Telko excels in its ability to provide high-quality technical support and tailored solutions to customers. Its emphasis on specialty products reduces exposure to price volatility, enabling stable growth. Furthermore, Telko’s scalable business model and ability to operate across borders make it a reliable partner for both global suppliers and local customers. Strategic acquisitions have allowed the company to strengthen its market presence and diversify the portfolio.

Leipurin: Leipurin differentiates itself by going beyond raw material supply to include value-added services like R&D and recipe innovation. This ability to help customers develop tailored products that align with local market preferences has solidified its reputation as a trusted partner in the food industry. Over the past few years, Leipurin has also implemented efficiency measures, improving supply chain performance and enabling scalability.

With the recent acquisitions, including Swed Handling AB and other firms, how does Aspo plan to ensure smooth integration and achieve the expected synergies?

 Telko and Leipurin have completed acquisitions, representing total net sales of close to 100 m€. During the screening and due diligence phases of the acquisitions, focus lies on developing business plans of the targeted companies as part of Telko or Leipurin.

The acquisitions are approached case by case, and we adjust our integration approach as well as timing considering the acquired company’s position, financial performance and synergy potential.

A lot of effort is put into people, company culture and communication, throughout the acquisition and integration process. With the acquisitions, synergies primarily consist of top line opportunities, for example cross-selling, as well as scaling and upgrading the combined operations, which places a positive twist on the integration set-up.

With ongoing challenges in crude oil prices affecting the Telko segment and potential softness in ESL Shipping volumes, what specific cost management strategies is Aspo deploying to safeguard margins while awaiting broader market recovery?

ESL Shipping aims to generate stable operating cash flow independently of overall macro level financial development or cyclicality in specific customer industries. Bunker costs are heavily influenced by crude oil prices, but these costs are transferred to the customer at market price. ESL Shipping also drives cost efficient operations via investing in next generation vessel technologies, introducing new operating models to efficiently manage its fleet (for example virtual arrivals).

Crude oil prices impact on the market prices of Telko’s product range, for example in polymers of the Plastics business line. Telko is focused on specialty products, which market prices show a lot less volatility, compared with more commonly used volume or bulk products. Telko’s ambition is to generate strong and stable financial performance both in an environment of increasing and declining market prices. This ambition is supported by efficient working capital management.

How do you foresee the investment in four new fossil-free handy-sized vessels impacting margins over time?

ESL Shipping decided in October 2024 to build a series of four new, fossil free handy sized vessels. These new 1A ice class vessels can be operated entirely fossil free by use of green hydrogen-based E-fuel, namely e-methanol. The total value of the four ships is approximately EUR 186 million, which will be invested during the years 2024–2028. This investment combined with the investment in twelve electric hybrid coaster-sized vessels, which we already in year 2021, will enable ESL Shipping to reach its financial ambition to reach net sales of above 300 m€ and an EBITA of 14% in the year 2028.

When evaluating the investment case of the green handies, the green transition goes hand in hand with pure economical realities, and both of these contribute to ESL Shipping’s competitiveness short- and well as longer-term. The competitiveness of these vessels is a function of market leading energy efficiency, efficient and flexible cargo space design and lower costs to operate, making them very competitive compared to traditional handy-sized vessels already in a situation where traditional bunker fuel is used. Over time increasing customer preference towards fossil free cargo solutions, also driven by EU-level regulation will furthermore increase the competitiveness of the green handy vessels, when utilizing e-methanol.

Where do you see Aspo in three years? 

We have a vision to form two separate companies considering the differences in business models. The vision is built on recognising that the business models and ESG agendas of Aspo’s three businesses differ significantly.

“Aspo Infra”, consisting of ESL Shipping, has heavy capex investments, builds industrial partnerships and is a forerunner in new sustainable technologies and operating models, which aims to achieve resilient high return levels on equity invested.

“Aspo Compounder”, consisting of Telko and Leipurin, focuses on organic growth supported by acquisitions, via partnering with principals and customers, and building sustainable and efficient value chains. These companies aim for resilient high return of capital employed.

The approach and timing of the transformation to the portfolio vision are still to be defined, in order to maximize value to the shareholders. Different possible approaches will be considered, e.g. demerger, IPO, and full or partial sales. Ultimately, the ambition is to create a clear and transparent investment profile of Aspo to the market.

Can you name three reasons why Aspo is a good investment today?

Evidence of strong strategy execution, already positively impacting the H2 2024 financial performance of Aspo, and in addition giving strong evidence of a long-term financial run rate that is significantly above the current financial performance. The future higher run rate profitability is based on the acquisitions lately completed by Telko and Leipurin and ESL Shipping heavily investing in new green coaster and handy sized vessels.

Aspo’s successful transformation from East to West. Today Russia is fully exited and Telko’s and Leipurin’s acquisitions combined with investments in new environmentally friendly vessels capacity by ESL Shipping, more than fully compensate for the lost financial performance. The exits from East have freed-up management capacity to further focus on growth investments in West.

Aspo’s strong ambition when it comes to future financial performance and future portfolio vision

• Ambition of 1 bn € net sales and 14% EBITDA in year 2028
• Vision of forming two separate companies of Aspo: “Aspo Infra” and “Aspo Compounder”