Glaston Oyj : Interim Report Q1/2024

Q1

2024

Glaston Corporation

Interim Report

1 January - 31 March 2024

GLASTON CORPORATION

INTERIM REPORT 1 JANUARY - 31 MARCH 2024

Glaston's interim report January─March 2024: Net sales and comparable EBITA improved, markets remained challenging

January─March 2024 in brief

• Orders received totaled EUR 46.6 (56.9) million.
• Net sales totaled EUR 55.8 (51.3) million.
• Comparable EBITA was EUR 3.6 (3.0) million, i.e. 6.4 (5.8)% of net sales.
• The operating result (EBIT) was EUR 1.9 (1.9) million.
• The comparable earnings per share were EUR 0.019 (0.019).

GLASTON'S OUTLOOK FOR 2024 REMAINS UNCHANGED

The cautious development in the architectural glass processing equipment markets continued in the first quarter of the year. Despite the slow start, Glaston expects the architectural glass processing equipment markets to start recovering at some point in 2024. For mobility glass processing equipment, the positive development in China is expected to continue. Amid global economic uncertainty and increased geopolitical tensions, higher-than-normal uncertainty exists concerning customers' decision-making.

Glaston started the year with a lower order backlog than the previous year. However, given the expected slowly improving market activity during the year, Glaston Corporation estimates that its net sales and comparable EBITA will stay at the same level or increase slightly in 2024 from the levels reported for 2023. In 2023, Group net sales totaled EUR 219.7 million and comparable EBITA was EUR 14.9 million.

Interim report January 1 - March 31, 2024

GLASTON CORPORATION

Interim CEO Antti Kaunonen:

"We had a good first quarter despite the challenging market environment. Glaston's markets saw a cautious start to the year. Demand for tempering and laminating equipment continued to soften, whereas demand for insulating glass technologies, supported by climate-related drivers, was stable. The good demand for pre-processing technologies in China continued.

Glaston's order intake was down 18% year-on-year. In addition to the sluggish market, the timing of some projects also affected the outcome. The order intake for tempering and laminating technologies and for mobility, display, and solar technologies fell compared to the comparison period. Despite the softer market, the order intake for insulating glass technologies increased slightly. Services' order intake also had a small increase. The geographical breakdown of the

order intake was not typical for Glaston as APAC, driven primarily by China, for the first time emerged as the largest region followed by EMEA and the Americas.

First-quarter net sales were up 9% to EUR 55.8 million, primarily due to the good order intake for pre-processing equipment in China in the second half of 2023. Comparable EBITA improved and was EUR 3.6 million. The higher volume in Mobility, Display, and Solar was the main contributor to the outcome.

Due to the significant changes in the global economy and Glaston's addressable markets starting to soften in 2023, we announced in February that the timeframe for achieving our strategic targets had been adjusted from 2025 to the medium-term (3−5 years). The net sales and ROCE targets were also slightly updated. We expect annual average net sales growth to exceed the addressable equipment market growth and the target for comparable return on capital employed (ROCE) is above 16%. The target for comparable operating margin (EBITA) of 10% remained unchanged. It is very clear to us that these targets cannot be met through machine sales alone and the role of the Services business is crucial in reaching the operating margin target. We continue to develop our service portfolio and the capabilities of the global service network.

Currently, activity in the Architectural market has slowed down. We have already initiated cost-saving actions and will take further measures according to the situation. Glaston has a broad and versatile product and services portfolio, and our markets consist of many different market areas and countries, which provides stability. Our ongoing product development will increase our competitive position, and the industry trends, especially automation and the focus on energy-efficient glass products will support our strategic direction.

Safety continued to be a key focus area. In the January−March period, no lost time accidents were reported. However, zero accidents do not automatically mean operations are completely safe. We must continue to further develop the safety culture and e.g. be more observant of near-missesand unsafe conditions. This also applies to activities outside Glaston's premises, such as employees working at customers' sites.

The recruitment process to hire the company's new CEO was completed in the quarter and Toni Laaksonen was appointed as Glaston's new President and CEO. He will take up his new position at the latest at the end of September 2024. We warmly welcome Toni to Glaston!"

Interim report January 1 - March 31, 2024

GLASTON CORPORATION

GLASTON GROUP'S KEY FIGURES

MEUR

1-3/2024

1-3/2023

Change%

1-12/2023

Orders received	46.6	56.9	-18.0%	220.3
of which service operations	18.9	18.5	2.2%	74.4
of which service operations, %	40.5%	32.5%		33.8%
Order book at end of period	101.4	139.0	-27.1%	106.5
Net sales	55.8	51.3	8.8%	219.7
of which service operations	17.8	18.0	-1.2%	76.0
of which service operations, %	31.8%	35.0%		34.6%
EBITDA	4.1	3.7	10.1%	15.7
Items affecting comparability (1	0.6	0.3	69.2%	3.3
Comparable EBITDA	4.6	4.0	15.0%	19.0
Comparable EBITDA, %	8.3%	7.8%		8.7%
Comparable EBITA	3.6	3.0	18.5%	14.9
Comparable EBITA, %	6.4%	5.8%		6.8%
Operating result (EBIT)	1.9	1.9	1.9%	8.1
Profit/loss for the period	0.8	1.1	-21.5%	5.0
Comparable earnings per share, EUR	0.019	0.019	-2.5%	0.104
Cash flow from operating activities	-7.5	-0.5	-1,515.0%	13.8
Return on capital employed (ROCE), %,	10.4%	7.3%		8.1%
(annualized)
Comparable return on capital employed	12.3%	8.9%		12.7%
(ROCE), %, (annualized)
Equity ratio, %	44.9%	45.6%		45.2%
Net gearing, %	28.1%	23.2%		15.8%
Number of employees at end of period	800	800	0.0 %	802

1. + cost, - income

Interim report January 1 - March 31, 2024

GLASTON CORPORATION

OPERATING ENVIRONMENT

Architectural glass equipment

The Architectural glass processing equipment market closely follows the residential and commercial glass market development. In a high-interest environment, investment hesitation among customers and the customers' customers has increased and, as a result, the Architectural market's first quarter was very slow. The architectural glass end-use segments' new building activity has declined strongly in many regions whereas renovation activity has been more stable supported by investments in energy- efficiency.

Due to customers' lower machinery utilization and overcapacity in the market for basic tempered glass, the tempering equipment market activity decreased. The laminating equipment market also remained at a low level. The importance of features such as energy efficiency and automation were highlighted even further.

For Insulating Glass (IG) equipment, many investments are capability-driven and market activity continued at a reasonable level despite the overall Architectural market being in a waiting mode. TPS© technology continued to gain traction. There was also demand for IG technologies that help customers produce better-performing and lighter IG units.

For Services, customers' lower utilization rates affected demand for spare parts, while demand for upgrades varied between regions.

Operating environment in the regions

In the EMEA region, the overall slowdown continued. In Europe, uncertainty in the Architectural market increased mainly due to higher financing costs. In addition, demand in Europe was also affected by commercial and residential glass processing customers' lower machinery utilization, affecting especially the capacity-driven tempering investments. In the Services markets, steady demand for spare parts and field services was noted. Demand for upgrades was satisfactory.

In the Americas, market activity was slow. Demand among residential glass processors slowed down, whereas demand among commercial glass processors continued at a good level. In the US, demand was driven by the need for new capabilities to meet future energy regulations, and positive market traction was noted for Insulating Glass technologies, enabling better insulation properties. For Services, demand remained at a modest level.

In China, the Architectural glass market continued to be soft with low demand for tempering and laminating lines. Despite the cautious market conditions, demand for high-end Insulating Glass equipment was good. Elsewhere in the APAC region, the markets for new machines picked up compared to the previous quarter. Demand for upgrades improved compared to the previous quarter, whereas field services and spare parts were in line with the comparison period.

The supply chain situation continued to improve, with better availability in most supply categories.

Mobility, Display & Solar glass equipment

The ongoing transition to electric vehicles and the replacement needs of older lines drove demand for Glaston's pre-processing equipment. During the quarter, the Chinese mobility market developed strongly. In the rest of the world, investment behavior was modest.

In the solar market, glass processors' overcapacity with corresponding holdback for investments affected demand.

The Services market had a slow start to the year; however, the CNC96 upgrade for the conversion of older cell generations to the latest technology gained traction.

The supply chain situation improved further and lead times for previously critical components were almost back to normal.

Operating environment in the regions

In Europe, the market continued to be slow as the automotive glass industry continues to consolidate.

In North America, the market saw a slow start to the year.

In Asia, and China mainly, the move to electric vehicles supported market growth.

Interim report January 1 - March 31, 2024

GLASTON CORPORATION

FINANCIAL DEVELOPMENT OF THE GROUP

Orders received and order book

Glaston's markets had a slow start to the year. The Group's orders received were EUR 46.6 (56.9) million, down 18% compared to the same quarter in 2023. Services' order intake was at the same level as in the previous year.

Orders received, EUR million		1-3/2024		1-3/2023	Change%		1-12/2023
Architecture	34.7	42.0	-17.2%	165.8
Mobility, Display & Solar	11.6	14.6	-20.5%	53.5
Total segments	46.4	56.6	-18.1%	219.2
Unallocated and eliminations		0.3		0.3	0.7%		1.0
Total Glaston Group		46.6		56.9	-18.0%		220.3

The order book at the end of the period was 27% lower than in the corresponding period in 2023 and stood at EUR 101.4 (139.0) million. The Architecture segment's order book totaled EUR 81.3 (123.7) million, representing 80% of the Group's order book, while the Mobility, Display & Solar segment's order book totaled EUR 20.1 (15.4) million or 20% of the Group's total.

Net sales and profitability

The Group's net sales were up 9% from the corresponding period of the previous year and totaled EUR 55.8 (51.3) million mainly driven by the good project performance in the factory locations. The Architecture segment's net sales were at the same level as in the corresponding period in 2023 and totaled EUR 42.5 (42.6) million. Net sales in the Mobility, Display & Solar segment were up 57% and were EUR 13.2 (8.4) million. Services' net sales were at the same level as in the comparison period.

Of total net sales, the Architecture segment accounted for 76% and the Mobility, Display & Solar segment for 24%. Geographically, the EMEA region accounted for 49%, the Americas for 33%, and the Asia-Pacific (APAC) for around 18% of first- quarter net sales.

Comparable EBITA was EUR 3.6 (3.0) million, i.e. 6.4 (5.8)% of net sales. Both segments improved EBITA and EBITA margin.

The Group's comparable operating result was EUR 2.5 (2.2) million, i.e. 4.4 (4.3)% of net sales. The first-quarter operating result was EUR 1.9 (1.9) million. Items affecting comparability amounting to EUR -0.6 (-0.3)million were recognized in the first quarter and were mainly related to legal costs related to a patent dispute in the US and restructuring costs. Financial income and expenses were EUR -0.5 (-0.3)million. The result before taxes was EUR 1.3 (1.4) million. The result for the first quarter was EUR 0.8 (1.1) million and earnings per share were EUR 0.010 (0.013). The comparable earnings per share were EUR 0.019 (0.019).

Interim report January 1 - March 31, 2024

GLASTON CORPORATION

Reporting segment Architecture

Architecture segment's first quarter in brief:

• Low market activity. Uncertainty in Europe
• Order intake down 17%; steep decline for Tempering and Laminating Technologies, Insulating Glass Technologies slightly up
• Net sales at the previous year's level, profitability improved from previous year

Architecture

KEY RATIOS

EUR million			1─3/2023	Change%	1−12/2023
1─3/2024
Orders received		34.7		42.0	-17.2%		165.8
of which service operations		14.0		13.4	4.6%		55.0
of which service operations, %		40.4%		32.0%			33.2%
Order book at end of period		81.3		123.7	-34.2%		89.61)
Net sales		42.5		42.6	-0.3%		175.1
of which service operations		12.8		13.2	-3.6%		56.8
of which service operations, %		30.0%		31.0%			32.4%
Comparable EBITA		3.4	3.3	3.0%		15.1
Comparable EBITA, %		7.9%		7.7%			8.6%
Operating result (EBIT)		2.1		2.5	-14.2%		10.4
Operating result (EBIT), %		5.0%		5.9%			5.9%

1. The order backlog for Insulating Glass Technologies was adjusted in 2023 for the partial cancellation of orders with one customer, totaling EUR 19.4 million.

Orders received and order book

The slowdown in the Architectural market was reflected in the segment's order intake, which was down 17% compared to the same period in 2023 and was EUR 34.7 (42.0) million. As in the previous quarter, Tempering and Laminating Technologies were impacted the most by the growing market uncertainty, and the order intake for these technologies was down 69%. Supported by the increasing demand for energy efficiency and automation, the order intake for Insulating Glass Technologies was up 3%. Additionally, new window technologies like thin triple-insulating glass raised interest. In China, demand for high-end insulating glass lines continued. Services' order intake increased by 5% and orders were received, among others, for the largest-ever FC- zone upgrade.

The order book decreased by 34% and stood at EUR 81.3 (123.7) million at the end of the period.

Financial development

The segment's net sales were at the same level as in the comparison period at EUR 42.5 (42.6) million. Architectural Tempering and Laminating Technologies' net sales were down and Insulating Glass Technologies' net sales were up strongly. Services' net sales were down 4%. Comparable EBITA was EUR 3.4 (3.3) million, i.e. 7.9 (7.7)% of net sales and was mainly due to higher margins both in the machines and services businesses.

Interim report January 1 - March 31, 2024

GLASTON CORPORATION

Reporting segment Mobility, Display & Solar

Mobility, Display & Solar segment's first quarter in brief:

• Chinese markets developed strongly
• New orders were down 21%; demand outside China low
• Net sales up 57%, profitability improving
• Various measures ongoing for increased efficiency

Mobility, Display & Solar

KEY RATIOS

EUR million			1−3/2023	Change%
1−3/2024	1−12/2023
Orders received		11.6		14.6	-20.5%		53.5
of which service operations		4.8		5.1	-4.3%		19.3
of which service operations, %		41.6%		34.5%			36.2%
Order book at end of period		20.1		15.4	30.7%		16.9
Net sales		13.2		8.4	56.7%		43.6
of which service operations		5.0		4.7	5.4%		19.2
of which service operations, %		37.9%		56.4%			44.0%
Comparable EBITA		0.1	-0.3	127.6%		-0.5
Comparable EBITA, %		0.7%		-3.9%			-1.1%
Operating result (EBIT)		-0.3		-0.7	51.8%		-2.5
Operating result (EBIT), %		-2.5%		-8.2%			-5.7%

Orders received

The Mobility, Display & Solar segment's order intake was down by 21% compared to the corresponding period in the previous year, totaling EUR 11.6 (14.6) million. Driven by the strong demand in China, several automotive pre-processing line orders from Chinese customers were received. Services' orders were down 4%.

The segment's order book increased by 31% and stood at EUR 20.1 (15.4) million at the end of the period.

Financial development

The Mobility, Display & Solar segment's net sales were up 57% and were EUR 13.2 (8.4) million as both pre-processing and heat treatment machines net sales grew strongly. Services' net sales increased by 5% driven by upgrades and spare parts volumes. Comparable EBITA was EUR 0.1 (-0.3) million. Profitability improvement was mainly due to a volume increase and margin improvement in machines as the impacts of the localizing supply chain in China starts to have an impact.

Interim report January 1 - March 31, 2024

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GLASTON CORPORATION

Interim report 1 January - 31 March 2024

Financial position, cash flow and financing

At the end of March, the balance sheet total was EUR 190.9 (193.4) million. Intangible assets amounted to EUR 76.5 (76.3) million, of which goodwill was EUR 58.3 (58.5) million. At the end of the period, property, plants, and equipment amounted to EUR 22.8 (22.8) million and inventories to EUR 37.1 (36.4) million.

The comparable return on capital employed (ROCE) was 12.3 (8.9)%. At the end of March, net gearing was 28.1 (23.2)% and the equity ratio was 44.9 (45.6)%. Net interest-bearing debt totaled EUR 19.6 (16.1) million.

The first-quarter cash flow from operating activities, before the change in working capital, was EUR 4.0 (2.6) million. Cash flow from operating activities was EUR -7.5(-0.5) million mainly due to typical seasonal fluctuation and the low order intake. Cash flow from investing activities was EUR -0.7(-1.7) million.

Capital expenditure and product development

Gross capital expenditure totaled EUR 0.7 (1.7) million and was primarily related to product development. Depreciation and amortization of property, plant, and equipment, and intangible assets totaled EUR -2.2(-1.8) million.

Automation and digitalization continued to be the leading themes in product development, with a focus on projects and innovations related to the automation of the core products and further development of robotic and operator-free machine operations.

Research and product development expenditure, excluding depreciation, totaled EUR 2.5 (2.5) million, of which EUR 0.5 (0.9) million was capitalized. Research and product development expenditure amounted to 4.4 (4.9)% of net sales.

Personnel

Glaston Group had a total of 800 (800) employees on March 31, 2023. The Architecture segment employed 604 (641) and the Mobility, Display & Solar segment employed 195 (157) people.

Changes to the Executive Leadership Team

On March 22, 2024, Toni Laaksonen was appointed President and CEO of Glaston Corporation. He joins Glaston from Metso Corporation. The new CEO will assume his position at the latest at the end of September 2024. Interim CEO Antti Kaunonen will continue in this role until Toni Laaksonen takes office.

STRATEGY

Due to the significant changes in the global economy and Glaston's markets starting to soften in 2023, Glaston announced in February that the timeframe for achieving the strategic targets had been adjusted from 2025 to the medium-term (3−5 years), except for the emissions reduction targets with a timeframe up to 2032. The net sales and ROCE targets were also slightly updated. Glaston expects annual average net sales growth to exceed the addressable equipment markets' growth. The updated target for comparable return on capital employed (ROCE) is above 16%. The target for the comparable operating margin (EBITA) of 10% remained unchanged. More information is available in the stock exchange release published on February 15, 2024.

GOVERNANCE

Shares and shareholders

Glaston Corporation's shares are listed on the Nasdaq Helsinki Small Cap list. The trading code is GLA1V and the ISIN code is FI4000369657. Each share entitles its holder to one vote and a voting right. Glaston Corporation's share capital on March

31, 2024, was EUR 12.7 (12.7) million.

				Share turnover,
			No. of shares and votes	EUR million
GLA1V			84,289,911	1.0
	Highest	Lowest	Closing	Average price *)
Share price	0.88	0.73	0.85	0.79
			31.3.2024	31.3.2023
Market value			71.5	85.1
Number of shareholders			7,413	7,822
Foreign ownership, %			26.8	26.8

*) trading-weighted average

Interim report 1 January - 31 March 2024

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GLASTON CORPORATION

Interim report 1 January - 31 March 2024

Share-based incentive plan

For key employees, Glaston has a share-based incentive plan for the period 2022−2026. The Performance Share Plan comprises three performance periods: the calendar years 2022−2024, 2023−2025, and 2024−2026. The Board of Directors decides on the plan's performance criteria and the performance levels at the beginning of each performance period.

Performance Period 2024−2026

The potential reward for the performance period 2024−2026 is based on the Glaston Group's cumulative comparable EBITA, cumulative services net sales, and cumulative earnings per share during January 1, 2024−December 31, 2026. In total, 18 key employees, including the company's key executive leaders, belong to the plan's target group in the performance period 2024- 2026.

SHORT-TERM RISKS AND BUSINESS UNCERTAINTIES

The ongoing uncertainty in the global business environment with its impact on the Architectural market continues to constitute the main short-term risk for Glaston. Demand for Glaston's products in the Architecture Business Area is impacted by general economic cycles and especially the level of activity within the construction industry. The construction market is expected to develop unevenly. Cautious development is predicted to continue in Europe and China. In the Americas, and particularly in North America, the prospects are better.

Internationally, businesses are impacted by increased inflationary pressure. The tightening of monetary policy by central banks to tackle inflation has led to higher financing costs for investments, thereby leading to increased consideration for new investments or operating cost savings. Due to increasing market uncertainty and higher financing costs, customers may also wish to postpone or cancel their orders. Furthermore, the softening market conditions could adversely affect customers' payment capabilities. Geopolitical risks and uncertainties have increased and could lead to polarization and unexpected trade restrictions and disturbances, thereby representing a risk to Glaston's business.

Glaston continuously monitors the development outlook of the global economy and its impact on the progress of its markets. The short-term risks are mainly linked to the development of global investment demand. If the weaker demand environment continues, this would affect Glaston's net sales and earnings in the machines businesses with a delay of four to nine months. Any material slowdown in the demand for services would have a faster impact. Tighter availability and the higher cost of financing may also increase customer-related credit risks.

Glaston delivers projects which involve risks related to engineering, project execution, and installation. A failure to plan or manage these projects could lead to higher-than-estimated costs, revenue recognition delays, or disputes with customers.

To accelerate the strategy execution, Glaston's new organization came into effect on October 1, 2023. Despite close follow-up and monitoring, there could be a risk of not being able to harness the planned financial and strategy execution benefits. Leadership and change management are key in mitigating the risk.

Major supply chain disruptions may impact the company's performance as component scarcity may cause revenue recognition delays, whereas heavily increasing prices of raw materials may add to short-term profitability pressure.

Labor shortages and rising employee turnover are concerns in the market. Glaston's ability to maintain a high level of job satisfaction among its employees and also attract new employees is further emphasized.

Glaston's long-term strategic and operational risks and uncertainties are described in detail in the Annual Review 2023 in the Report of the Board of Directors.

EVENTS AFTER THE REPORTING PERIOD

The Annual General Meeting was held on April 4, 2024, in Helsinki. The AGM adopted the financial statements and discharged the members of the Board of Directors and the President & CEOs from liability for the financial year 2023. The AGM resolved to approve the Board of Directors' proposal to pay a return of capital of EUR 0.05 per share.

The AGM adopted the Remuneration Report and the Remuneration Policy for governing bodies. The resolutions of the aforementioned are advisory. The AGM decided to elect seven members to the Board of Directors. The AGM re-elected as members of the Board of Directors the current members of the Board of Directors: Veli-Matti Reinikkala, Sebastian Bondestam, Antti Kaunonen, Sarlotta Narjus, Arja Talma, Tero Telaranta and Michael Willome. The AGM resolved that the annual remuneration of the Members of the Board of Directors is as follows: the Chair of the Board of Directors EUR 74,000, the Deputy Chair EUR 45,000 and the other members of the Board of Directors EUR 35,000.

The AGM re-elected KPMG Oy Ab as the company's auditor. The auditing firm has announced that the auditor in charge of the audit is Authorised Public Accountant Lotta Nurminen. The resolutions of the Annual General Meeting are available in the stock exchange release dated April 9, 2024.

On April 5, 2024, Glaston received a notification pursuant to chapter 9, section 5 of the Securities Market Act from OP- Rahastoyhtiö Oy, according to which the ownership of OP-Suomi Pienyhtiöt fund had decreased below the threshold of 5 percent.

Interim report 1 January - 31 March 2024

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