Aker Horizons (Stuttgart:7QF) Q3 2026 Earnings Call

0:01 Good morning and welcome to Aker's third quarter 2026 results presentation. I'm Cecilia Langenbecker, head of media relations. I am joined today by Aker's president and CEO, Eivind Eriksson, who will take you through the key highlights and the portfolio developments in the quarter. Aker's CFO, Svein-Oskar Soknes, will lead you through the financial results in more detail. And after the presentation, we will open for questions. You may submit your questions at any time using the chat function in the webcast player. With that, I hand it over to Eivind Eriksen. Thank you, Cecilia, and good morning, everyone.

0:46 Before we go into the third quarter, let me take a step back and look at the bigger picture. We are living through a period of profound change. Geopolitics, Energy Security and Technology are reshaping industries and shifting capital flows. In this environment, the Nordics are uniquely positioned with abundant energy, strong industrial capabilities and political stability. For Aker, that creates significant opportunities across the industrial themes where we have chosen to invest. At the same time, Markets will remain volatile. We have seen that in recent weeks. Not least in AI technology and AI infrastructure.

1:37 Sentiment will come and go. At Aker, we measure our sales over time. Our job is to stay disciplined on capital, focused on execution, and mitigate risks. and we encourage our portfolio companies to be prepared for market volatility and to be transaction ready when opportunities arise. Aker has maneuvered steadily and safely year to date. Aker net asset value increased by 44 billion Norwegian kroner during the course of the first three quarters. reaching 111 billion at the end of Q3 after paying 2.2 billion kronor in dividends.

2:27 Total shareholder return was 83% year-to-date, including dividends, significantly outperforming both the Oslo Stock Exchange benchmark index and the Brent oil price. Market volatility has reduced the return so far this quarter, but it is still North of 50%. That's not an achievement happening by chance. Three drivers stand out. First, energy. RKBP and our other listed energy holdings added 22 billion Norwegian kroner through higher share prices and dividends.

3:12 Second, end scale. It added also 22 billion kroner and is now our second largest asset. Our net asset value reflects the 14.6 billion USD valuation from the Series C funding round in March. Third, Cognite. The sale added 7 billion kroner to Akku. Closing is expected this quarter, and the proceeds will significantly strengthen our net asset value, liquidity, and financial flexibility. That is what ARCA is about. Building value as an active owner, and crystallizing it when the timing is right.

4:00 With that, let me turn to the third quarter. As mentioned, ARCA's net asset value ended the quarter at 111 billion Norwegian kroner. This was up from 106 billion in the second quarter, and the highest quarter-end net asset value in ARCA's history. The main driver in the period was ARCA BP. The total shield return in the quarter as such was 20.2%. Across the portfolio, our companies continue to develop, strengthen their positions, and build a solid foundation for further growth. And in line with Arcus' dividend policy of paying a predictable and growing dividend, the board has approved a second dividend of 29 kroner per share, bringing the total for the year to 58 kroner per share, or 4.3 billion Norwegian kroner.

5:01 To sum up, yet another solid quarter for Accu. Let me now turn to the portfolio and the key drivers behind our performance. Starting with energy, still Accu's largest segment at around half of gross asset value. At the end of the quarter, our listed energy holdings were valued at 64 billion kroner, including 5 billion in dividends. They have added 22 billion kroner to our net asset value so far this year. RKBP alone added around 14 billion kroner this year, including 2.5 billion in dividends. Operationally, RKBP continues to deliver. Production has been solid, realized prices strong, and free cash flow is now expected to be well ahead or what we anticipated at the start of the year.

5:59 RKBP has also announced a new executive management team from January 1st, 2027, aimed at reducing complexity, improving execution and strengthening collaboration. The market backdrop is also supportive. The physical oil and gas market is exceptionally tight. Achieved crude prices On VSA NCS, it knew all-time highs above 150 USD a barrel in October, while jet fuel and diesel have traded about 200 USD per barrel in Europe. And this is not a spot price story.

6:46 The Hormuz crisis has lifted the whole forward curve, Since January 2027, prices are up around 50%. 2028, around 30%. And 2029, around 20%. That supports RKBT's value and cash generation well beyond 2026. Energy security matters. Europe needs reliable supply, and the Norwegian continental shelf delivers. Norwegian oil and gas has never been more valuable, economically or politically, as Europe faces low gas inventories and continued competition with Asia for LNG.

7:38 This fall, the Norwegian continental shelf passed 100 fields in production for the very first time. Our belief in the shelf remains strong, but unlocking the increased complex resources will require greater scale, collaboration, and better use of software and AI. RKDP is adapting to that reality. The strategy remains unchanged, but the company is strengthening execution through partnerships. Technology and AI to unlock more resources and create more shareholder value. That's why AKBP's two new partnerships matter. One with Equinor and Vore Energy, targeting some of the largest remaining opportunities on the Norwegian continental shelf, and one with Equinor using technology to unlock resources in tight reservoirs.

8:38 Which thing is the largest known undeveloped oil discovery on the Norwegian continental shelf for the time being? Through Aker BP's 27.5% stake, Aker is well positioned for its development. For Aker Solutions. The first Wisting Award was not the outcome we had hoped for. As several large projects are completed in 2027, engineering and fabrication activity will normalize. At the same time, Arcus Solutions has a substantial backlog in lifecycle services and a strong track record of adapting to changing markets.

9:23 As an active owner, Aqua will support Aqua Solutions in adapting and developing new industrial and commercial opportunities. Solskjaer Maritime and Solskjaer Offshore have also delivered. Their combined market value is up more than 3 billion Norwegian kroner this year and they have paid more than half a billion kroner in dividends. Across the board, has contributed another 241 million kroner in dividends this year. In short, energy remains Arke's industrial backbone. It generates cash today and gives us optionality for decades ahead.

10:09 Over to real estate. This year shows the benefit of having a diversified portfolio. Higher commodity prices have benefited our energy holdings. While higher inflation and interest rates have put pressure on real estate. The sector has largely been driven by interest rates rather than company performance. As long-term owners, we see three reasons why this is an attractive time to own high-quality real estate. First, valuation. The sector trades at around 13 times cash earnings. Close to 30% below its 10-year average, while listed shares trade below net asset value.

10:58 Second, private transactions support these values, with deals at or around book value despite the discount in listed markets. Third, higher interest rates trade upside if rates come down, while rents linked to inflation support earnings below. In the meantime, what matters most to us is what the companies deliver. Public Property Invest, Svea Fastigheter and SBB have been transformed since we became owners in May 2025. Public Property Invest has grown its portfolio from 15 to 53 billion Swedish kronor.

11:45 It's now listed in Stockholm, rated triple B plus by Fitch, and cash earnings per share is up 37% year on year. The underlying market remains attractive, supported by an aging population and growing demand for care. Sveafossetet completed its merger with Klarabo, creating Sweden's largest listed residential company, with more than 45 billion Swedish kronor in property value and twice the size of its closest peer. The merger also removed expensive financing for SPD, costing 13% a year, and earned Svea an upgraded credit rating from BBB- to BBB.

12:38 SBB has also changed fundamentally since we became owners. It has continued to strengthen its balance sheet, including through property sales of more than 8 billion Swedish kronor. It has gone from an operational property company with a complex structure to a simplified real estate investment company with attractive stakes in market-leading platforms. Aker has been instrumental in reducing its debt by around 14 billion Swedish kronor over the past year. So, how do we view this from an Aker perspective?

13:23 Real estate is counter-cyclical to much of our portfolio. It provides stable, inflation-protective cash flows, that balance our more cyclical energy exposure and make our portfolio less prone to volatility. We own market leaders with investment-grade balance sheets and remain focused on discipline growth, low leverage and shareholder distribution. In short, energy gives us strong cash flow when commodity prices are high, Real estate gives us stability through the cycle. Together, they make Aker more resilient.

14:12 Now, let me take you through what is happening in AI infrastructure and why it matters. Markets have been volatile in recent weeks, and AI stocks have been at the center of it. Views on AI investments will shift over time. But one thing is certain. Compute is becoming the engine of our future society. Whoever leads this race will shape the future. Today, the race is dominated by the US and China.

14:57 Europe simply has to move faster. We must build the infrastructure, secure the power, and increase capacity. We need to wake up to that reality. And we need to speed up. Ocker is not allowed to comment on Enskia's ongoing IPL process. Hence, everything on this slide is based on the public S-1. But what I can say is that N-Scale has developed significantly in recent months. During the quarter, the company signed major contracts with Anthropic and Figure AI, bringing total contract value to more than 100 billion US dollars.

15:45 N-Scale also raised 3.36 billion US dollars in convertible financing. further strengthening its funding position as the company continues to scale. And it agreed to acquire AnyScale, adding software orchestration to its full-stack offering. So where does EndScale stand today? EndScale has around 461,000 GPUs under contract. Most of which are on the latest NVIDIA Vera Rubin platform. It also has line of sight to more than 10 gigawatts of power, with contracts averaging close to six years.

16:35 Josh Payne, NCF founder and CEO, has brought together an exceptional team with some of the best people in the industry. Most recently, N-Scale has strengthened its organization and governance with Hidji Simo, Frank Slutman and Amy Vance joining the board, Justin Osofsky as COO and Adam Rosman as Chief Legal Officer. For me personally, it's incredibly inspiring to be part of this as an N-Scale board member and to follow the development of AI from the inside. at a time when the industry is moving at extraordinary speed.

17:22 Last month, Killing and I visited both N-scale Komdal here in Norway and N-scale Monarch in West Virginia. We were both blown away by the scale of the projects, the speed in execution and the quality of the N-scale team. So what makes N-scale different? Three things. First, it's purpose-built for AI, not a general-purpose cloud that has been retrofitted. Second, N-Scale offers everything in one integrated platform, from power to token. N-Scale designs, builds, owns and operates the whole chain.

18:10 Energy, data center, compute and software. This full-stack platform means control over cost, speed and delivery, and long-lived assets rather than lease liabilities. Third, large hubs in low-cost power markets, mainly behind the meter. Here, Arcus Industrial DNA matters. Access to low-cost power at huge scale is the main bottleneck in AI. And building energy infrastructure is what Akker has done for decades. Monarch in the US is another differentiator and a true game-changer.

18:58 It shows the scale of the opportunity. About 8 gigawatts of gross power capacity at one single site, anchored by the 45 billion US dollar contract with Antropic. And that's just for building one at Monarch. The opportunity is significant, and delivering on it will require capital, operational discipline, and execution at scale. So, to sum up, as an industrial investment company, Aquaris today focused around a few high-conviction themes, and more diversified as a result. and we remain committed to our target of delivering stable and growing dividends.

19:52 Energy continues to be at the core, representing about half of our gross asset value and delivering solid cash flows. At the same time, we have invested in new pillars for growth, mainly AI infrastructure and real estate. Markets will move up and down. This fall has shown just that. However, the global trajectory and the industrial rationale for our investments remains firm. Our job is not to get distracted by market volatility. In fact, for an active owner like Aker, it may lead to opportunities. Our focus remains long-term thinking, active ownership and building great companies with high-quality assets, Value Creative Contracts and Strong People Looking ahead, we stay committed to active ownership, disciplined capital allocation and a solid balance sheet set to improve further with the closing of the Cognite transaction. This gives us the flexibility to act when opportunities arise.

21:08 Acure has never stood still for long. The portfolio will change But our approach will not. The opportunities ahead are significant, and so are our ambitions. That concludes my part. I will now hand it over to Svendalsberg, who will take you through the numbers in more detail. Thank you, Eivind, and good morning. I will start with our three asset categories, listed investments, unlisted investments, and cash and other assets, and then go through the financial results in some more detail. At the end of the third quarter, AUKUS listed equity investments were valued at 64 billion kroner. 50% of total assets or 869 kroner per share.

22:06 The value of the listed portfolio fell by 1.8 billion kroner in the quarter. The decline is mainly technical. Occupy Marine moved from listed to unlisted investments ahead of the Take Private merger, which reduced the listed portfolio by 6.6 billion from the previous quarter. I will come back to that on the next slide. However, underlying market values developed positively. Aker BP increased by 5 billion kroner and the Solstad companies by 1.5 billion. Together, largely offsetting the mentioned reclassification. This was partly countered by a 1 billion kroner decline in Aker Property Group's listed real estate holdings.

22:56 Dividends from listed investments totaled 1.2 billion kroner in the quarter, mainly from Aker BT with 855 million and Solstam Maritime with 233 million. Turning to our unlisted equity investments, at the end of the quarter, these were valued at 60 billion kroner, 47% of total assets or 820 kroner per share. The value increased by 7.5 billion kroner in the quarter. As mentioned, the main driver was Auker Biomarine. Ahead of the Take Private merger, Auker's 78.7% stake moved from listed to unlisted investments, valued at the merger price of 105 kroner per share.

23:49 The merger was completed in October, and Auker today owns 100% of the company. Our 22.7% stake in N-scale is valued at 32.1 billion kroner, unchanged from the previous two quarters. The value is based on the Series C round in March at 14.6 billion US dollars and excludes any future dilution, for example from the convertible financing or from a potential IPO. Our stake in Cognite is valued at the agreed sale price to Schneider Electric of 14.7 billion kroner and we continue to expect closing in the fourth quarter. Finally, cash and other assets.

24:36 At quarter end, cash and other assets are valued at 3 billion kroner. That is 2% of total assets or 41 kroner per share. Cash inflows in the quarter were 2.5 billion. Debt drawdowns contributed 1.3 billion and dividends contributed 1.2 billion from Aker BP, Solsta Maritime, Akastur and Solsta Offshore. Cash outflows were 2.2 billion. We invested 976 million in equity and loans to portfolio companies. This includes 367 million to Aker Property Group and 172 million to ACE.

25:22 Share buybacks were 766 million. These shares will be used to settle the share conservation in the Aker Biomarine Take Private merger. Operating expenses and net interest came to 353 million, and other items net to negative 139 million. As a result, the cash balance rose from 0.7 to 0.9 billion at quarter end, that is 1 billion including liquid funds. With that, let's turn to the third quarter finances for Aker Asa and holding companies. Starting with the balance sheets. In line with our accounting principles, investments are recognized at the lower of historical cost and market value.

26:15 At the end of the quarter, the book value of Akers Investments was 55.8 billion kronor. This was an increase of 503 million compared with the previous quarter. The increase mainly reflects the conversion of Aker's 459 million receivable from Aker Property Group into equity during the quarter. The book value of equity at quarter end was 42.5 billion, down 112 million from the previous quarter. The decrease reflects share buybacks in the quarter, partly offset by profit before tax. Adjusting investments to fair value adds 68.7 billion, up from 63.5 billion last quarter.

27:06 On a fair value adjusted basis, AUKUS gross asset value was 127.5 billion. After deducting liabilities, net asset value amounted to 111.2 billion, or 1,509 kroner per share. An increase of 5% from the second quarter. The fair value adjusted equity ratio was 87%. Of total liabilities, 15.9 billion kroner is related to bond debt and bank loans. Aker maintained a strong financial position at quarter end with modest leverage and ample debt capacity.

27:52 The loan-to-value ratio was 12%. The liquidity reserve amounted to 4.8 billion kronor, including undrawn credit facilities, cash and liquid funds. The all-cash covenant transaction, expected to close in the fourth quarter, will considerably lift our available liquidity and further strengthen the balance sheet. Net interest-bearing debt increased to 13.8 billion from 13.1 billion in the previous quarter. The increase was primarily driven by higher bank debt to fund the quarter's investments and share buybacks. AUKUS rated average debt maturity was 2.6 years at quarter end.

28:38 Including available options to extend credit facilities and loans, the effective maturity is up toward 5 years. Income Statement Operating expenses for the third quarter amounted to 129 million in line with the previous quarter. Dividend income totaled 1.2 billion kroner. This mainly came from Aker BP with 855 million and Solstam Maritime with 233 million. The net value change for the quarter was negative 36 million. Net of the financial items were negative 351 million. This mainly reflects a write-down of receivables of 269 million and net interest expenses of 172 million, partly offset by a foreign exchange gain of 129 million.

29:38 As a result, Akers' profit before tax for the quarter was 655 million kroner, Up from 460 million in the third quarter last year. Thank you. That concludes today's presentation. We will now move to Q&A. We then open up for questions, and the first question is to Aiden. and Scale has become AQ's second largest asset and a major contributor to the net asset value growth this year. What keeps you confident in the investments and where do you see the main risks? Well, first and foremost, due to the S1 filing process and the cooling and quiet period, there are limitations on what I can say about the companies specifically.

30:34 But the sector, is continuing to develop, the speed of innovation, the amount of investments, the capital available and the adoption of the technologies continues to grow. So there is no doubt in my mind that new winners and losers are about to be defined and ultimately history tells that the best performance, the best execution will win. And ARCO is here to support EndScale as we do with all portfolio companies to succeed in that competition. And we have a follow-up also on EndScale. Can you tell me how significant the setback Microsoft pulling out of EndScale is?

31:23 I'm just going to contract in the UK. How big of a setback was that? Since we did the theory C, N-scale has more than doubled its activity and contract portfolio. That was one relatively speaking minor contract in a bigger portfolio and how N-scale has responded to that termination, which was, by the way, expected. and will be answered by the company in the S1 process. Okay, then we have a question on energy, which represents half of Aake's growth asset value and has been a major driver of value creation this year.

32:10 How do you see the role of energy as Aake builds new growth platforms in AI, infrastructure and real estate? Well, what has happened this year is that Aake has continued to develop and grow in energy. and by the rank of high investments in RPPT to get new production capacity which will come on stream this and next year at RPPT. So we have combined continued significant investments in energy with more diversification not only by investing in N-scale but also by investing in real estate. So, we are still exposed to multiple volatility. That creates opportunities we would like to stay in volatile industries.

32:56 But more diversification will also make coffee more predictable longer term. Okay, and then we have a question for Sanna Oscar. With the Cognite proceeds coming in during the fourth quarter, AUKUS cash position is very strong. Do you have any concrete plans for the use of cash, given that there are no plans for an extraordinary dividend? Well, starting out, we already have a very strong balance sheet, very strong position. We have a loan-to-value below 12%, solid liquidity, investment grade rating. So closing cognate is not going to change anything in terms of how we act, how we operate, but it will give us flexibility to act. So, you know, Aker as an investment company, We will continue to allocate capital to where we see the best potential to create long-term shareholder value. We're going to remain disciplined.

33:51 We have our investment criteria and that's what we're going to stick to. Okay, and then we have another question. While you cannot comment on N-scale, the IPO process, can you comment on your positioning on the IPO? How much, how far would you participate in that? Would you try to keep your stake unchanged in the post IPO? And I think I know the answer to that. Well, I think Sven has already answered that question. ARCA will, generally speaking, allocate capital where we see the best opportunities for return on investment. So, we benchmark the investments in AFI BP, N-scale, real estate, not only based on the short-term expected returns, but also the longer-term opportunities for return on the individual investments, but also on the portfolio at large.

34:47 So, that's a decision AFI is prepared to make when we know the specifics. And this is probably the last question. Has the recent decline in market value of new cloud companies and the increasing opposition to data centers changed your perception of your investment in N-scale in any way? Well, one of ARCA's advantages is that we're used to volatile industries. Energy in general and oil and gas in particular has been exposed to geopolitics and changes in supply demand for decades. So that's core business and part of our method of work.

35:34 As far as AI infrastructure is concerned, some kind of market correction was expected by us and other investors. But the longer-term trajectory has not changed, the fundamentals have not changed, and hence it fits well with our longer-term perspective on active ownership. Okay, thank you Sanoska and Eivind and we have no further questions here so that concludes our Q&A and we hope you have a great day.