Aspo

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

Aspo today consists of two businesses. ESL Shipping is a dry bulk shipping company providing sea transportation primarily in the Baltic Sea region, while Telko is a chemicals distributor. This structure reflects a deliberate focused strategy. Aspo was previously a traditional conglomerate with a broad range of businesses, but over the past few years, several operations have been divested, most recently a relatively large business, i.e. Leipurin providing the food industry with raw-materials, in March this year at an enterprise value of EUR 63 million. At the same time, Aspo has invested heavily in the two remaining businesses, with more than EUR 300 million invested in ESL Shipping and seven acquisitions completed in Telko. The next step, planned for year-end, is to demerge the two businesses into two separately listed companies, each with a clear focus and growth strategy.

What is the rationale of splitting Aspo into two listed companies create more value than keeping ESL Shipping and Telko together?

ESL Shipping and Telko are two fundamentally different companies with no operational synergies. Unlike a typical Swedish compounder, where businesses tend to share similar business models, the two companies differ entirely.

ESL Shipping is an infrastructure-like business with heavy capex, strong cash flows and a long time horizon, as the life cycle of a vessel may exceed 30 years.

Telko is a specialty products distributor with a light balance sheet, good margins and an inventory that turns over within weeks.

The ESG agendas also differ: ESL focuses on emissions from company-owned vessels, while Telko focuses on emissions across the value chain. As standalone companies, both are better positioned to grow and execute respective strategies. The demerger also removes overlapping costs, enables financing tailored to each company’s leverage, maturity profile and lender base, and increases transparency. Few investors seek exposure to a combined shipping and chemicals distributor; after the demerger, each investor has the option to decide where to allocate capital.

How firm is the year-end timeline, and what needs to happen at the December 7 EGM and thereafter for the demerger to be completed?

The timeline is well prepared, and I see no direct hurdles to meeting it. Aspo’s board approved the demerger plan in early August, and preparations for the prospectus are currently ongoing alongside discussions with investors. Aspo also plans to host a capital markets day on November 24. The final decision rests with Aspo’s shareholders at the extraordinary general meeting on December 7, and my understanding is that support from key owners is strong. If the meeting approves the demerger, execution is scheduled for December 31, with trading in the shares of the two companies expected to begin in early January. A demerger is essentially a technical and legal process, and the separation of Aspo’s businesses has been in preparation for some time. Work is progressing according to this timetable, and I am confident that the schedule is achievable.

Telko just reached a record 9,8 % EBITA-margin, but approximately €2–2.5m of EBITA stemmed from selling old inventory at higher prices. How much of this profit level is sustainable going forward?

Telko generated EUR 8.2 million in EBITA in the second quarter, of which EUR 2–2.5 million stemmed from supportive market conditions, as rising prices for volume chemicals increased the value of inventory. Excluding that effect, an EBITA-margin of 8 % is a very realistic level for Telko. Telko has surpassed this level during the first half of this year as well as in previous periods, while some peers operate at 10–12 %, illustrating the potential. The improvement is structural. Over the past few years, Telko has gradually shifted its focus towards specialty products and value-added services while reducing relative exposure to volume products. At the same time, Telko has built scale, further supporting profitability. The ambition is to deliver an EBITA-margin of at least 8 % under any market conditions.

As a standalone company, how does ESL Shipping increase the EBITA-margin from 8 % toward the 14 % target while also funding approximately EUR 158m of new vessels?

There are three main drivers behind ESL Shipping’s profitability improvement. The first is the new fleet, ESL Shipping now has twelve electric hybrid vessels, with the twelfth arriving in the Nordics within a couple of weeks, after which all vessels are expected to be in commercial traffic. ESL Shipping has also invested in four e-methanol vessels, which are scheduled to enter operation at the turn of 2027–2028. These next generation vessels carry more cargo than traditional vessels, are highly energy efficient, offer flexible use of cargo space and have lower operating costs than older vessels, whilst also providing organic growth. The second driver is the profit improvement programme, focused on better capacity utilisation through higher fill rates and fewer miles sailed without cargo. The third is market recovery – demand, particularly from the pulp and paper industry, has been weak, and a recovery would further support profitability.

Where do you see Aspo in one year, and what are the most important steps to get there?

In one year, I see two successful standalone companies, ESL Shipping and Telko, each with a distinct and focused growth strategy. If the extraordinary general meeting approves the demerger, the Aspo brand ceases to exist, and the two companies are instead built under separate brands. The most important near-term step is completing the demerger, with trading in the shares of the two companies starting in early January. Thereafter, the focus shifts to execution: for Telko, continued growth in specialty products while delivering an EBITA-margin of at least 8 %, and for ESL Shipping, capturing the full benefit of the new fleet on the path towards the 14 % target.

Could you name three reasons why Aspo is an attractive investment today?

Firstly, Aspo is in the midst of a major transformation. The shift from a conglomerate structure to two focused, separately listed companies creates an opportunity for investors to reassess the value of each business on a standalone basis.

Secondly, ESL Shipping offers exposure to what is essentially floating infrastructure. Significant fleet investments generate solid cash flows and provide good debt capacity, which in turn supports an attractive return on equity.

Thirdly, Telko has a compounder profile. In addition to organic growth, Telko creates value through acquisitions and associated synergies, while combining a light balance sheet with EBITA-margins of approximately 8 %. Together, these characteristics support a strong return on invested capital.