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Nicholas Teh: Okay. Hi, everyone. Welcome to the first quarter '26 DBS Analyst Briefing. As usual, you've heard the media briefing, so you've gone through the decks. We can go straight to Q&A. Nicholas Teh: So first question from Jayden from Macquarie. Jayden Vantarakis: I just had 3 points I wanted to ask on. The first is just to clarify on the general allowances. So I think you made it pretty clear during the media briefing that it's unclear if we could have write-backs now. But we've sort of said that the GP allowance is appropriate for the current sort of situation. Just wanted to know, did you change any of the macro assumptions that go into the MEVs like the view on growth, inflation, any potential impacts on the economies in where you operate? Obviously, I realize that there's a lot of judgment that goes into that, would be interested for your thoughts, if I could start there. Tan Shan: Well, I can take the sort of the way we think about this part and then maybe Sok Hui can go through the MEV platform numbers. And we've done this quite a few times, right, from COVID to Ukraine to now Iran. We stress test for oil at $120 going all the way up to $200. We stress test for some of the markets that we work in, currencies depreciating by 20%, 30%. We stress test for demand disruption as well, or we stress test also for inflation on the cost of goods, be it fuel oil or chemicals or fertilizers, et cetera. So all that stress test goes into all our modeling and then we identify companies that are at risk and then we put them into the watch list depending on how far -- how bad they look. So that's the rigor and discipline that we do it, do it both top down and bottom up. And as I said, when we did that against this war for Iran, the numbers were actually pretty okay. We realized we have more than sufficient buffer, ample coverage for the worst-case scenarios that we factored and stress tested. So that's why we don't feel that we need to do any more. Sok Hui Chng: Yes. So Jayden, I think I would say that we can put in the sort of macroeconomic variables, we can make assumptions. But I think the more important point is the transmission mechanism, which is much harder to get right on how sort of these oil prices, how the transmission will work, whether there's a lag effect. So I think we do the best with the models that we have but we want to be prudent. And while our stress testing numbers are coming in lower than the stack of general provisions that we have, we want to be watchful and see how it will pan out in the subsequent quarters before we talk about GP release. Jayden Vantarakis: Yes. That's very helpful. I realize that there's a fair amount of uncertainty but I think the bottom-up process is very helpful. Tan Shan: Yes. And Jayden, we talk to all the big clients, right? So obviously, you talk to airlines, you talk to oil and gas players. You talk to fertilizer players, food and agri players, talk to everyone and find out, hey, when are you going to run off inventory? Hey, how much are you pricing up? Hey, have you got force majeure on this? Are you allowed to have force majeure on this based on your documentation and all that? Once it's FOB, technically, the seller -- only the seller can -- the seller sold it, right? The buyer can't do FM on once the goods are FOB. But the truth is it's very nuanced and it's very bottom-up because you might have someone that just declared force majeure. And then guess what, they jack-up their prices so much, actually, they have record profits, right? Or you might have someone who says, "Oh my God, I can't hedge my -- I'm long spot and short forward but I can't get my spot out of the Strait of Hormuz." So you think, okay, discount that. But then suddenly, they made tons of money in their trading room, right? So it's very single client dependent. You have to talk to everyone. You've got to get input from everyone. And you have to stress test for all the very large gaps and that's what we're doing. Talking to the big clients and getting input on the industry is crucial and that's what we're doing. Jayden Vantarakis: And that's really helpful. And then speaking of hedging, you've obviously done a good job in the first quarter and obviously maintain the fixed and the hedging portfolio at similar levels. I remember in prior quarters, you said that there'd be about a 50 basis points gap if you were to roll those off and then move to floating. Any sort of updated thoughts on where that is now and what you've been able to achieve? Because you sound a lot more sort of confident on the net interest income side. Tan Shan: I can kick off and I'll get Phil to amplify. So yes, we are a little bit more confident now because the market volatility has given us opportunities to do this better. When I last spoke to you, we said we'll probably have to renew our hedges at 50 bps below. It's now looking like 40 bps below the last price. So we're better now. Phil? Philip Fernandez: Yes. I mean, Su Shan basically summarized it quite well. We had a good first quarter. We basically managed to over replace the maturities. So there isn't as much left for the rest of the year. It's about SGD 60 billion for the rest of the year but we're maintaining the duration of that portfolio at fairly healthy levels. Jayden Vantarakis: Okay. That's really helpful. And then maybe just a final question I wanted to ask, the wealth activity looks really strong in terms of the fee momentum in the first quarter. Any sort of views on how it's panned out for April? Has client activity remained robust? What are your sort of thoughts? What you're seeing now? Shee Tse Koon: Tse Koon here. On the wealth numbers, it's generally made up of both investments as well as insurance, right? And so in April, as we know, the market has gotten to be a lot more volatile. So therefore, we did see some volatility in the first 2 weeks of April. But then from third week onwards, we started to see again good momentum coming back. So I think over this period, again, it's anybody's call. But suffice to say, we've got a strong foundation of customers. We've got customers that have got dry powder. And therefore, it's one of those things as we take a portfolio approach to advise our customers, we do think that we still stand in a good position. The rest is really the market, which is anybody's guess. Having said that, we do also have a very robust bancassurance pipeline and we've seen the momentum very strong in Q1. So we do have a very diversified, I would say, stream of revenue in this space. Nicholas Teh: Next question from Melissa from Goldman. Melissa Kuang: Maybe I just on -- go back on some of the points you just made, just a bit quickly. In terms of the hedging, you mentioned that you have done most of it but you have SGD 60 billion to go for the year. Wasn't it at the last quarter, you mentioned that only the roll-off or the ones that roll off this year was only SGD 80 billion? So why -- so have you done all and then you're doing more? Or what's going on there? Also just in terms of just getting around, again, like you mentioned that now your SORA assumption is much lower but yet you're not expecting more impact. So how have you managed that? Because in terms of the SORA sensitivity, you're now saying it's SGD 11 million. But before the last quarter, I know it's very small. You were saying only SGD 10 million. So just wanted to understand that a little bit better. That's the first question. And I'll just hop on to the next one after you answered that. Philip Fernandez: Yes, sure, Melissa. So I said we over replaced in the first quarter. I didn't say we've done most of the work. So we over replaced what matured and we have about SGD 60 billion left to do in the rest of the year. So we'll look for spikes and we look for opportunities to replace that. And it's what Su Shan... Tan Shan: I think there was a -- I think there was a misunderstanding because [Technical Difficulty] we over replaced, actually what happens is the book is SGD 80 billion that matures this year and it's over the first half of the year. So for the first quarter, we did a little bit more than [Technical Difficulty]. Nicholas Teh: Sorry, your typing is coming through on our side. Melissa Kuang: Oh, sorry, sorry. Philip Fernandez: Yes. Yes, that's right. So I think Su Shan summarized it pretty well there. So that's the piece. On the SORA sensitivity, the Sing dollar rate sensitivity, essentially, as the CASA comes in, the sensitivity goes up. So it's directly correlated with the deposit growth that we've just talked about and that's really where the sensitivity comes in minus what we're able to hedge. So that's the net number you see, which has gone up about SGD 1 million per basis point over the quarter. Tan Shan: So it's a double -- I mean, it's funny, right, because we actually want to have more CASA but that makes us more NIM sensitive but it helps our NII, which is why we keep saying, look at the NII, don't look at the NIM because we want to have more CASA. We want to have more low-cost CASA, right? It's good for us. Melissa Kuang: Right. So we are still of the view... Sok Hui Chng: Right. Yes. So Melissa, to your point, maybe the -- you're asking why is it that SORA has gone down and how we managed it? If you think about it, it's the deposit growth. We said we are changing our guidance for deposit growth. We -- last quarter, we are thinking of mid-single digit. Now we are really talking about high single digit. And with more deposits coming in and remember, we guided that we can make 1, 1.2 percentage point for all the deposits that come in, that has actually -- the additional deposits that are coming in has actually helped to mitigate the effect of the lower SORA. In fact, we can get to fairly resilient numbers despite the down drift in the rates. Melissa Kuang: So can I just check, in terms of -- when you say resilient numbers and you missed out the guidance that NII is slightly down. Are we still NII slightly down or NII flattish? Sok Hui Chng: NII is still slightly down but it's a big -- I think it's a big deal to be able to say we are still slightly down despite further drift in the rates environment that we have seen and that's because we can mitigate it through the sort of deposit that comes in. Tan Shan: Deposits and hedging. Melissa Kuang: Right. Okay. Then just lastly, in terms of dividends, given where your new outlook for ROE and your strong returns, are we still very confident at the end of this year, we can still do the SGD 0.06 up in terms of the DBS? Tan Shan: Well, it's hard to predict what will happen in -- through end of this year just because we can't predict the geopolitics. So I think we'll need to have a couple more quarters of clarity before we commit to anything. But this is a broad level discussion and we'll definitely keep you posted. Nicholas Teh: Thanks. Next question, Yong Hong from Citi. Yong Hong Tan: I just have 3 questions, 2 on wealth and 1 on NII. So firstly, on wealth, just wondering how much of that net new money was driven by private banking? And any thoughts on the sustainability of this SGD 10 billion? Some color on the net new money prospect by geography will also be helpful. Yes. This is my first question. Tan Shan: Okay. So the SGD 10 billion, SGD 6 billion was for the high net worth and SGD 4 billion was for treasures. The geography was actually very wide. So no single concentration. I think we should be able to hopefully maintain the momentum. I don't want to overpromise but what do you think Tse Koon? Shee Tse Koon: Yes, yes. So as we've discussed earlier on, given that our Treasures franchise is actually pretty much onshore and therefore it's, 4 out of 10 is from there. So by nature, it is already very well diversified, right? And then the 6 is PB/TPC, which is more a global kind of a business. So it's very, very broad-based. Now as to whether we are able to -- as to whether we are able to sustain, I do believe we can for simple reason that we have talked about it, it's a macro trend that wealth is continually being generated out here in Asia. We continue to be onboarding new customers. We've got a strong pipeline. And so if anything, I would say these kind of numbers is what we have consistently seen now over the last 4 years -- 4, 5 years. So I don't see a reason why this should not continue. Tan Shan: Yong Hong, I think what is pleasing for me is that the One Bank is working, both IPG and wealth connectivity across all the markets is happening. We bank the business, we bank the family. We talk about succession planning. They do their key man risk insurance with us. We look after their kids, their grandkids. So it's very sticky and it's also focused on the future, not just this generation but the next one and the next one. So we're building a sticky franchise. The wealth AUM is going to be lumpy, right, especially at the high end because you get one big client, yes, you know, it goes up, then if the guy needs to send money out somewhere to do something, it goes out. So it goes in, goes out, it's quite lumpy. The key is, we must keep having a cadence of new-to-bank and next generation and then bank -- set them -- engage them and lock them down with trust, estate planning and banca and that's exactly what we're doing. Yong Hong Tan: Okay. Okay. My second question is, what is the proportion of AUM in investment products in the first quarter? And where are we in the month of April? Yes. So I'm just wondering what is keeping you from upgrading your commercial noninterest income guidance for the year? Tan Shan: Okay. So 58% of the AUM is in investment products. Your second question was what? Yong Hong Tan: And how does that compare with the month of April? Because you were saying potentially April, we are seeing a little bit less upbeat in terms of equity market sentiments. So just wondering what has been the trend in April for this ratio? Shee Tse Koon: Are you talking about the wealth side or... Yong Hong Tan: The proportion of the AUM in investment products. Basically, just some color on the wealth momentum in April. Shee Tse Koon: So okay. So the wealth momentum in April, basically, wealth management is made up of I&I, right? So both insurance and investments. On the investment side, in April, first 2 weeks, there was, as we can see all in the market, is pretty public, generally quite muted. But the third week, again, it started to bounce back. So it's kind of pretty volatile during this time. But having said that, within the whole investment arena, we have a broad base of different instruments, right? It's not just about equities but there are also various structures involved in there. At the same time, we have a very broad range of funds, both public and private, which customers continue to gain exposure in. So it's very, very broad-based. On the insurance front, the momentum has been exceptionally strong and that has continued into April. Yong Hong Tan: Okay. Okay. Got it. And so would you say that your wealth or your clients in the wealth segment, they are still basically putting their money into use and basically deploying their deposits into investments. So basically no slowdown in that from what we have been seeing since the first quarter. Shee Tse Koon: Yes, I would say in a broad sense, yes, because the advice that we give to our clients has always been to stay invested. We do not believe in timing the market. So we always tell our clients time in the market is far better than timing the market. And therefore, we take a portfolio approach. And it is in these times that we also would, in some cases, where relevant, help our clients or work with them to rebalance their portfolio. So there are opportunities actually in these times for them to build a portfolio. Tan Shan: And I've always said, right, Yong Hong, that I think the role of capital as a source of passive or active income is going to rise for young people and for retirees because the velocity of money in Main Street is going down but the velocity of money in Wall Street is going up, right, if you want to use an analogy. And therefore, we want to start them young. So Tse Koon is not just building the high net worth, right? We're going down the chain to do digital wealth, so digiWealth, our digi portfolio is doing really well. I mean the AUM has doubled or something like that, right, over the last few months. And we want to promulgate concept of regular savings plans, easy, save as you earn and easy sort of risk-adjusted portfolios to suit retail wealth life cycle needs for longevity and for retirement and for active income if you're in the gig economy, right? So don't just focus on that top end sliver. Look at it holistically, look at wealth starting from retail wealth all the way up the wealth continuum, especially in some of our key markets like Singapore, Taiwan. And then for other fee, recurring fee, look also at GTS, look also at loan fees because we're trying to build the snowballing effect of more flow, more sticky transactions, more operating accounts and more fees. So the loan fees is being hard fought but won, you can see it's consistently strong because we're winning key mandates now. We're the lead for a lot of the syndicated loan structures that we do because of our industry focus. As for GTS, we're winning more and more cash operating mandates, right? We're winning because we are a dependable bank with digital. We know how to tokenize deposits. We are safe. So we are also a diversifier bank for many of these MNCs that hitherto only bank with global banks but now they want to diversify risk, so they come to us. So we're winning operating mandates as well. So what we're trying to build is a nice cadence of recurring fee income across the board. So wealth is one, GTS is one, loan fees is one, payment fees is one. So using AI, using smart models, using customer engagement, et cetera, to build that sort of fee engine. Yong Hong Tan: Okay. Got it. Maybe just one final question on NII. I think there was some -- you sounded a bit -- a little bit more optimistic from deposits. Just wondering, given the April bond yield trends, does that even give you more opportunity to do more hedging and that potentially also is another driver why you sounded more optimistic on NII? Tan Shan: I guess in a word, yes. Phil, do you want to say any more? Philip Fernandez: Yes. Tan Shan: You know what, yes. But I don't want to overpromise and underdeliver, right? So I -- so you know our -- we're using 1% on SORA and we're expecting no U.S. rate cuts now. And so we're ready for -- if times are bad and the war turns out to be even worse than we anticipated, then it drags on and the stagflation, then we are building a fortress balance sheet just to prepare for the worst. So if it's really bad, we're ready for it, right? So if things all go pop, we're ready for it. We've got enough reserves. We fight for deposits. We invest in HQLA, we play safe, we take off risk on SMEs and CCUL. So I think from a risk and a CASA perspective, we're good. Then if the markets pick up, the war ends early, hey, then we can go forth and conquer more fee. Hopefully. less volatility on the downside and more also alpha on the upside. Nicholas Teh: All right. Let's move on to Aakash from UBS. [Operator Instructions] Aakash Rawat: Congrats on a pretty solid quarter. If I can just start off the first question with understanding the net interest margin a bit better. So can you break it down how much was the impact of rates on the net interest margin? So SORA coming down, SOFR coming down, HIBOR coming down? And how much was the HQLA deployment impact separately? Tan Shan: [indiscernible] really unpack the impact. So you want us to unpack the impact of SORA, HIBOR. We can give you the sensitivity, which I thought we did. Aakash Rawat: Yes, sorry, not by rate separately. I'm just saying what was the rates impact and what was the HQLA impact? If I look at the slide where you break down the commercial book NIM and the group NIM, so commercial book was down 5 basis points, group was down 4 basis points. Is it fair to say that HQLA impact was plus 1 basis points on the NIM? That's the only number that we're looking for. Philip Fernandez: Yes. So Aakash, maybe I'll try and give -- this is Phil. Maybe I'll try and give a bit of color there, right? So bear in mind that the average group NIM is in the 180s, right? When we deploy surplus deposits, we typically get 1% to 1.2%, depending on which currency you're talking about. So there's a dilutive impact on NIM. But as we've always said, our guidance is on NII, right? Because NII in dollar terms is what we're targeting. And Su Shan was talking about 17% ROE and so on. Really, the ROE and the NII are what we are focused on. So it's not easy to tear apart exactly how much was created by this particular slice of deposits versus that. So I'd encourage you to look at the NII line and that's where the sensitivities that Su Shan mentioned. Aakash Rawat: Yes. I totally understand that. I understand it's positive for NII and it's a good business to do. But I'm just thinking from a NIM perspective because it makes the calculation a bit easier. Out of the 4 basis points, can you say minus 2 basis points was HQLA impact, minus 2 basis points was rates impact? Or any -- like what was that -- because some of the other banks... Nicholas Teh: We will come back to you after. Tan Shan: It's quite hard because it depends on how much we get, how much we can do. We'll come back to you later. Aakash Rawat: Okay. That would be great. The second question is just on wealth management. If you think about your guidance last year, right, it was kind of implying like SGD 800 million per quarter revenue for wealth management. This quarter, we obviously did SGD 900 million plus, which is very strong. But you're still not changing the guidance for the full year. So I'm just trying to understand like what drove this strength in Q1? Was there anything exceptional which you're looking at and saying we shouldn't change the guidance for now? And what would also be very helpful here is if you can break down this SGD 900 million by month? Like how was Jan and Feb and how is March? I'm guessing March was slower than Jan and Feb but please correct me if I'm wrong. Tan Shan: Yes. So yes, we I think what we are seeing is, as Tse Koon said, right, I mean, banca did very well, and banca tends to be countercyclical. Investments tends to be cyclical. So the markets are up, investments are up, markets are down, investments are down. So because that part is hard to predict, we're not raising or changing any of our guidance on wealth. I mean we obviously don't -- we don't hold ourselves to our budget, right? If the markets are good, we do our best. If the markets are bad, we hunker down. But I think what has been a pleasant surprise is the banca side has been really outstanding. And that's because, as I said, right, I think customers are seeing us as a long-term wealth manager of choice for their next generation and that's why they're coming to us to do these long-term plans. And these long-term plans take time to hatch. They don't happen overnight. It takes months, right? You've got to get the guy in, the wife, their children, they've got to do health checks, you've got to discuss estate planning, all very sensitive things. And these take months, if not years, to hatch. But it's hatching now, right? So -- but that's based on our years of investments in the team, the family office team, even in the SME team. So what's pleasing for me on banca is we're starting to see also my SME teams, my corporate bankers discussing key man risk with their key man clients, the family-owned businesses because they should and they have to. It's a great solution for our clients. And so that's also pleasing for me. So I think Tse Koon already gave some guidance on April. So just expect that when the markets are down, the fees for investments will be down and we hope to mitigate that with banca fees and we hope to mitigate that with new-to-bank customers. Shee Tse Koon: Yes. And at the same time, as I also guided, also mitigate that with actually the approach we have taken to wealth management, which is not one of just trading in and out but really taking the opportunity to build a portfolio. So I've also mentioned that it's not just about equities, just for discussion sake, we have also onboarded a whole series of funds, including hedge funds. So in some volatile times, actually the hedge funds can do really, really well. And we have seen customers also starting to put their money to work through hedge funds. So there are -- there is a full suite of solutions that we have to kind of navigate through these volatile times, right? So the first primary impact, of course, overnight, things happen, you might see the market move. But along the way, we have, I do believe, what it takes from a strong customer base to a full suite of solutions. Sok Hui Chng: Aakash, where you're coming from, I think the words -- we guided to high single digits for the commercial book noninterest income. High single digits is a range. So I would say it's gone up a bit now. It's not just high single digits, if that satisfies your kind of curiosity on why you did a SGD 900 million plus, very strong and you're still not changing your guidance. Nicholas Teh: And just bear in mind, Aakash, because seasonality, you usually can't take 1Q times 4. Aakash Rawat: Sorry, the last question -- that's very helpful color. The last question is just on Hong Kong CRE. So you also mentioned that how property market seems to be bottoming out, recovering. Residential property prices have been up for like 11 months in a row. Are you starting to expect recoveries from this book? Or are you still expecting NPLs this year? Tan Shan: So I am more constructive on Hong Kong CRE now but it is very much location specific. So Central Grade A office properties like the U.S., right, New York, Grade A, Manhattan, Grade A, London Grade A, is all doing well. The fringes are not, less so. So we don't have -- Hong Kong CRE, our exposures are really just to the top quality blue-chip names. And they're actually seeing a nice recovery. Some of the CEOs have told me their rentals in Central have gone from HKD 90 to HKD 130 per square foot. So that's real recovery. And you see the big hedges, hedge funds, NII and even the big tech companies have come back to Hong Kong Central and taken up floors, right, some taken up buildings. So I am constructive. I'm pleased to see also that the West Kowloon side is seeing quite a lot of movement, people taking more space, helped by the strong capital markets in Hong Kong, helped by the growth of wealth management in Hong Kong and helped by the strong support that Hong Kong is seeing from the Mainland for both its capital markets and its investments in new manufacturing and biotech, et cetera, and tech, et cetera. So yes, I'm more constructive on Hong Kong based on that. Aakash Rawat: Can this result in any GP write-backs or any overlays that you have earmarked for the Hong Kong portfolio freeing up? Sok Hui Chng: We'll continue to assess such a split already. Nicholas Teh: Okay. Thanks, Aakash. We move on to Harsh from JPMorgan. Harsh Modi: Okay. Great. So just to understand the NII guidance, if Sing dollar appreciates and your constant currency balances go down, is that the main risk between flat NII and a slightly lower NII year-on-year? Tan Shan: If the Sing goes up? Normally... Harsh Modi: Your constant currency deposits are pretty strong, right? Philip Fernandez: Yes. it's a fairly -- this is Phil here. It's a fairly second order effect, probably low tens of millions. That's the translation impact of the U.S. dollar NII stack back into the Sing dollar functional reporting currency. That's what you're asking, right? Harsh Modi: I'm trying to understand what are the moving parts because it seems like your language has become more positive on NII between fourth quarter and first quarter. So what are the more -- I'm guessing one is the SGD 60 billion of hedging and second is Sing dollar. Is there anything else which would be... Tan Shan: Harsh, actually that's not -- we might sound more positive but honestly, it was tough, right? Q1, SORA went down how much year-on-year? 150 basis points. SORA was down 150 basis points. Remember what I said about our sensitivity, right? It was SGD 11 million per basis point. So it's not easy, right? It's tough. So you see that. So the big driver for NIM is still SORA. It still beats everything else hands down. But the team did a great job in getting more deposit growth. The team did a great job in hedging. And the market is offering more opportunities for hedging because the market is so volatile, right? So from that perspective, because we're seeing the volume growth, we're seeing the hedging opportunities, we're seeing the fee growth. We're seeing the new-to-bank. That's mitigating the massive SORA headwinds that was upon us. When we looked at the markets last year, right, at the end of last year, the SORA headwinds were real and they still are real, right? But on the balance sheet, right? And then keep growing, keep your NTBs, keep your CASA grab and keep your focus on all the growth cylinders that we're doing and all the credit sort of stress testing that we're doing. So we're standing firmer. I think we're on terra firma and terra is firma. Harsh Modi: All right. If I could just understand that hedging bit, Su Shan, thanks for that. And it's incredible how well NII is despite all of these. So kudos to your team. But what exactly are you hedging? I'm just trying to understand the mechanics of it because if it is consensus that this is how, let's say, the Sing dollar rates are going to be, or U.S. dollar rates are going to be, like some peek into your secret sauce, what exactly are you doing to get to this outcome? Philip Fernandez: Okay, Harsh, Phil here again. So we use a variety of hedging strategies. So there'll be funded, unfunded, some deployment to HQLA. But also the loan book itself, right, also gives us certain opportunities to put on hedges. And some of those can be single currency, some can be cross currency. So we -- some can be basis swaps. So there's a variety of hedging strategies that we employ. That's probably what I would say on the matter. Harsh Modi: There's nothing one big thing which we can point to that, like this worked very well because the cross-currency swap spreads went down. So it's nothing like, it's across the board. So there's nothing that we can monitor, is what I'm trying to get to. Philip Fernandez: We are very opportunistic. And on particular periods, we will see opportunities in one market, in other periods, we will see opportunities in other markets. But overall, look at the outcome of the hedging strategies, look at the margin we're able to get on deposits. Those are the numbers you can kind of look at and get a sense of how we're doing to mitigate the very, very large sort of headwind that Su Shan just mentioned. Harsh Modi: Perfect. And final question is on capital. Under what conditions will the bank not increase the dividend by SGD 0.06 in fourth quarter? Tan Shan: Wow. Under what circumstances? [indiscernible] Yes. I mean, if the war continues, the markets melt down, the taxation, demand disruption. So it depends on the macros, Harsh. So I don't want to overcommit now because we still have 3 quarters ahead of us and it's a very difficult environment to predict, which is why the team and I just focus on fortress balance sheet, focus on growth, focus on credit and build a strong foundation. Then by Q2, Q3, we should have more visibility. Sorry, I can't give you any guidance because I really don't know, to be honest. Harsh Modi: I understand that. So is it fair to say unless there is a reasonably bleak outcome, we should probably get that SGD 0.06 pickup. Tan Shan: Hope so. Harsh Modi: No, no, that is all. I understand. You can't commit and I understand world is a difficult place. Final question is on buyback. The capital set aside for buyback. What are the uses of that capital? How long will you wait for the stock to come back -- to come down? And if it continues to go up, if it is up SGD 5 or SGD 10 12 months from now, what do we do with that capital set aside for buyback? Tan Shan: Well, we've done 12%, right? Philip Fernandez: SGD 400 million. Tan Shan: Yes, we've done SGD 400 million, got SGD 2.6 billion left. We said that we have up to 2027. So we've still got 1.5 years more to decide. So we will definitely keep you posted. As of now, because we can't predict whether the markets will crash or not, don't want to commit either way. But we will be prudent with the use of it and we will keep to our promises. Harsh Modi: Okay. So -- sorry, Nick, I know I'm overstepping here but just final thing. If we do not use this capital, is there a possibility that some of it can be paid back by end of '26? Or will you wait till the end of '27 to pay back that SGD 2.6 billion, in whatever form and shape? Sok Hui Chng: We said it's 2027, the buyback. So yes, so we would still wait until 2027. If we don't actually do the buyback quantum in the -- in what we have committed, we will do it in the form of some kind of dividend. Tan Shan: As you've seen, it's there, right? So it's there to support -- at least you have that sort of comfort that if all hell breaks loose and the markets tank, you've got that support there potentially. Nicholas Teh: Next question from Nick from Morgan Stanley. Nicholas Lord: First, just on -- coming back to just balance sheet growth actually. I wonder if you could just make any comments on sort of appetite to borrow from your customers. I mean, is it sort of that we're seeing working capital-driven lending because prices are going up? Or is it that there is sort of still appetite for CapEx and any view you have on how that continues? And just linked to that, I know you've mentioned lots of reasons why you are getting deposits but was there anything particular in Q1 that drove that deposit growth? And I've got a couple of other questions afterwards. Tan Shan: Okay. Nick, I'll take the balance sheet growth question first and you were asking about loan growth. I'm actually quite happy to see that the non-trade corporate loan growth pipeline is quite decent. First Q was driven by all the growth industries, right? So tech, TMT, data centers, tech platform, metals and mining, some real estate in Singapore for the government land sales. Although Hong Kong surprisingly, I guess that speaks to the recovery in the Hong Kong property market, Hong Kong, we saw quite a lot of repayments in the real estate sector because they managed to sell a lot more and they could repay us. For second quarter, we continue to see decent growth. We've got a couple of big deals in the pipeline that I hope will go through. And it's in energy and renewables, some real estate and some acquisition financing and again, TMT as well. So fairly decent. In terms of the large -- these are all mostly large corporates. We're not really growing in the midsized or SMEs right now, neither are we growing in the consumer unsecured side. Then it depends, right? The couple of deals that I mentioned, I hope to see them through. It's almost at the last stages but anything can happen, right? So don't want to change that. And then trade loans as well, that thing tends to be quite end of quarter type of trade loans. But again, a lot of it around the AI server value chain, working capital for energy and renewables and supply chain for chips. So again, that comes in normally at the third month of each quarter. Your second question was around deposits. What was the question on deposits? Nicholas Lord: Yes. You've given obviously lots [Technical Difficulty] anything specific in Q1 that had driven that deposit. Tan Shan: Sorry, you are breaking up. Nicholas Lord: Sorry, yes, I was... Tan Shan: I lost you for a bit. Nicholas Lord: Yes. No, my question was, you obviously saw good deposit flow in the first quarter and you've mentioned lots of reasons why deposits are coming in generally. But I just wondered if there was any one factor that had driven deposit flows in the first quarter. Tan Shan: It's broad-based [indiscernible] grow. And there were some -- first quarter, there was some retail seasonal bonus inflows. There was corporates operating balances. There was -- we had a couple of successful FD campaigns as well. And I think the work that we're doing around our AI models, around our campaigns, whether it's for the multiplier or for bundled products for corporate, for SMEs is working. I think a lot of it is just focus, right? We told the team, hey, focus on growing operating accounts, focus on winning mandates, focus on new-to-bank. So whether it's SME, CASA, whether it's large corporate operating balances, whether it's wealth, new accounts, whether it's retail CASA bonus, it's just all cylinders firing for cash. Nicholas Lord: Okay. Perfect. And then my second question, just on banca. I mean you've mentioned how it's grown and how it's important as a driver of wealth. Can you give us any disclosure on roughly how much of your wealth management is coming from banca and how that changed Q-on-Q? Tan Shan: Well, how much is banca versus -- it's roughly about 20% of total fees -- total fee income. Nicholas Lord: Total fees or total wealth fees? Tan Shan: Total wealth fees. Nicholas Lord: Okay. Tan Shan: I think it was [indiscernible] Sok Hui Chng: Yes. Yes. That's right. That's right. No, we, so far, we don't give details on banca but it's about 20% of total wealth fees and that's seen a substantial increase from last year. Tan Shan: But it's lumpier, Nick. So if you have one big policy, sometimes it's lumpy. But as I mentioned, a lot of it depends on new-to-bank customers. And also we're getting some success around SME key man policies as well. Nicholas Lord: Okay. And sorry, just one final one. CBG Wealth Management net new NPA formation in 1Q was 61%, which just looks like a bit of an outlier. I know it's small in the group context. Is there anything that drove that? Tan Shan: Yes, it's fully secured. So it should be okay. It's a one lumpy situation that's fully secured. Nicholas Teh: Last question, Sukriti from Bank of America. Sukriti Bansal: Congratulations on a good set of results. So just keeping it short to 2 questions. One, just wanted to understand, you said loan growth should broadly track GDP but given the ongoing macro uncertainty, is there a risk that you see that loan growth surprises to the downside in the second half if corporates turn more cautious? And what are some of the pockets where you'd be most watchful? Tan Shan: Yes. Well, I think we we're very focused on where we want to grow our loan book. So we're very nuanced on what we're avoiding as well. So as I said, the team knows that we want to go where there's growth. And so that's TMT, there's FIG, there's the whole semiconductor supply chain and avoiding the riskier credit. So I think -- and also renewables, of course. And then there's quite a lot of M&A deals in the pipeline. So I think we're good. Will it be canceled in the second half? So it really depends. So if the war continues, then there is going to be downside risk, I think, on the asset book growth as deals get canceled. So -- but so far, from the pipeline that we're seeing, it looks okay. What has surprised me on the downside, people are repaying also, right? It's not a bad thing. As I said earlier on, I said, I didn't anticipate Hong Kong real estate loans to be repaid so quickly but they were all repaid quite quicker than I anticipated. So in a way, it's good for credit but it's less good for my asset book. But I think there is enough -- certainly in the TMT pipeline, there's enough around the corporate trade loans for the foreseeable future this year. But let's see. I mean, if the second half looks bad because of Iran, then we might have to shave a couple of billion off our budget. But it's okay. I mean we'll continue to grow deposits and we'll continue to redeploy the excess deposits. So my NII, hopefully, we will still be in line with our own budget projections. Sukriti Bansal: And actually, a follow-up there on the deposit side. You did mention all deposits are accretive. But at what level do we see that excess deposits become ROE dilutive? And how do we think about continued deposit growth if there's a risk that loan growth is not as high? Tan Shan: It doesn't matter. You want to go all out for deposit growth, right? Cash is king. Cash is clean. Cash is everything. So just go all out for deposit growth. Your loan growth, you'll be instructed by the creditworthiness and the ROE and the cross-sell and all that and we are very careful about avoiding the bad credits and being instructive on stress testing, et cetera. But deposit growth, just go all out and win market share. It doesn't matter whether your loan growth is muted or not, you just go all out for deposits because you can redeploy them in HQLA, it's high ROE, it's liquid, it's good credit. Sok Hui Chng: Yes, it will be NIM dilutive. It could be NIM dilutive. Tan Shan: It could be NIM dilutive. Sok Hui Chng: This will not be ROE dilutive. Tan Shan: Yes. But don't worry about the NIM, look at the NII and look at the ROE. Nicholas Teh: Okay. Thanks, Sukriti. That's all the time we have. So thanks, everyone, for dialing in. We will speak to you again next quarter. Tan Shan: Thank you. Nicholas Teh: Thank you.
Operator: Welcome to the OMV Results January to March 2026 Conference Call and Webcast. [Operator Instructions]. Please be advised that today's conference is being recorded. At this time, I would like to refer you to the disclaimer, which includes our position on forward-looking statements. These forward-looking statements are based on beliefs, estimates and assumptions currently held by and information currently available to OMV. By their nature, forward-looking statements are subject to risks and uncertainties that will or may occur in the future and are outside the control of OMV. Therefore, recipients are cautioned not to place undue reliance on these forward-looking statements. OMV disclaims any obligation and does not intend to update these forward-looking statements to reflect actual results, revised assumptions and expectations and future developments and events. This presentation does not contain any recommendation or invitation to buy or sell securities in OMV. I'd now like to hand the conference over to Mr. Florian Greger, Senior Vice President, Investor Relations and Sustainability. Please go ahead, Mr. Greger. Florian Greger: Thank you. Good morning, ladies and gentlemen. Welcome to OMV's earnings call for the first quarter 2026. With me on the call are OMV's CEO, Alfred Stern; and our CFO, Reinhard Florey. Alfred and Reinhard will walk you through the highlights of the quarter and will discuss OMV's financial performance. Following their presentations, the 2 gentlemen are available to answer your questions. And with that, I'll hand it over to Alfred. Alfred Stern: Thank you, Florian. Ladies and gentlemen, good morning, and thank you for joining us today. Let me start with the extraordinary and challenging environment being faced by global energy markets. The closure of the Strait of Hormuz at the end of February following the escalation in the Middle East has had far-reaching repercussions not only for oil and LNG flows, but for global energy security as a whole. Our thoughts are with all those affected by the ongoing conflict, and we will continue to prioritize the safety and security of our people and assets in the region. Despite the current circumstances, we delivered a solid clean CCS operating result of more than EUR 1 billion and cash flow from operations, excluding net working capital of more than EUR 1.6 billion. Turning to the macro environment. International energy markets in the first quarter were characterized by extremely volatile price developments. Prior to the crisis, around 20% of total oil and gas supply transited the Strait of Hormuz. Following the closure of the Strait, the price of Dated Brent experienced a significant upward momentum. The Brent price climbed from less than $70 per barrel in January and February to over $120 per barrel by the end of March, resulting in a quarterly average above $80 per barrel. More than 25% higher than the previous quarter and 7% higher year-on-year. European natural gas markets have also been severely impacted. The initial reaction to the closure of this trade was even more pronounced in early March. Roughly 20% of LNG supply was stuck in the Persian Gulf and Qatari volumes were offline, causing the average THE gas price to rise by 32% quarter-on-quarter. Despite this, the THE gas price for the first quarter averaged EUR 41 per megawatt hour and was 13% below the exceptionally high prior year quarter. Refining margins were also very volatile. Market shortages caused by the conflict in the Middle East drove prices and margins higher in March. The OMV refining indicator margin averaged $13.9 per barrel and was thus at a similar level to the previous quarter, but substantially above the prior year quarter, driven by tight middle distillate and gasoline supply in the region. In Chemicals, olefin and polyolefin indicator margins posted varied developments. Olefin margins declined by 17% compared to the prior year quarter as margins in March got squeezed due to the conflict in the Middle East. Naphtha prices rose more strongly over the course of the month than olefin contract prices set at the beginning of March. Polyolefin margins increased by 28% as polyolefin contract prices could be raised strongly in March, reflecting concerns regarding the security of supply following the breakout of the conflict in the Middle East. Although the extreme market volatility and ongoing conflict in the Middle East presented significant challenges, OMV achieved a solid performance and once again demonstrated resilience, thanks to its integrated business model. In Energy, hydrocarbon production came in 7% lower than the prior year quarter as the Middle East conflict impacted output. We increased our fuel sales volumes, thereby reinforcing our position as a supplier of choice in the downstream sector. And in Chemicals, total polyolefin sales volumes, which included the joint ventures decreased only slightly year-on-year despite logistical constraints in a challenging environment. Our Clean CCS operating result came in at more than EUR 1 billion, though this was down 12% year-on-year. The stronger Chemicals result could not offset the lower energy contribution, while the Fuels segment set a similar level to the prior year quarter. Clean CCS earnings per share amounted to EUR 1. Cash flow from operating activities reached almost EUR 800 million. The decrease year-on-year and compared to the previous quarter was predominantly attributable to the significant net working capital build of around EUR 850 million. Excluding net working capital effects, the operating cash flow was substantially higher than in both periods, largely driven by a higher pricing environment while also benefiting from timing effects. Before I discuss OMV's results in more detail, I would like to turn to the Borouge International transaction. which represents one of the most significant strategic steps in OMV's history and a pivotal move in the implementation of our Strategy 2030. On March 31, OMV and XRG, ADNOC's international investment arm announced the successful creation of Borouge International. The combination of Borealis and Borouge and the subsequent acquisition of NOVA Chemicals has resulted in the formation of the fourth largest polyolefin player worldwide, posting substantial scale and reach across the Americas, Europe, the Middle East and Asia. These regions are pivotal in determining future demand growth and long-term industrial relevance. Borouge International will be jointly owned by OMV and XRG with each holding a 50% share. To balance the shareholding, OMV injected EUR 1.5 billion into the new company. Our partnership is founded on clear governance, shared responsibilities and most importantly, a shared ambition to create long-term value and future growth. It is also a reflection of our belief in the value of this platform, which repositions OMV's Chemicals segment to deliver substantial global potential. We recently also announced the executive leadership team, which invites decades of senior leadership experience across the international chemicals, commodities and refining sectors with deep commercial and operational knowledge and a proven track record of strategic execution. The combined businesses have historically delivered average pro forma EBITDA of approximately $4.5 billion despite recent years being more challenging. We expect EBITDA to increase significantly and reach more than $7 billion through the cycle. This will represent a significant enhancement in terms of earnings quality and cash flow generation, thereby also substantially strengthening OMV's long-term value creation. It will be achieved primarily by growth projects where we see strong progress and near-term execution, but will also be supported by considerable synergies and the expected normalization of the chemicals markets. The Asset Usage Agreement announced last month further underpins this growth path. It enables Borouge PLC to operate and market the substantial Borouge 4 volumes, which will add 1.4 million tons of polyethylene once fully online. Lastly, the new company achieved strong investment-grade credit ratings, demonstrating substantial confidence in the balance sheet and the sustainability of future cash flows. Borouge International is a leader in operational excellence. The strong results of Borouge International are also the result of the disciplined and consistent approach to managing its assets. Recent years showed that Borouge International is among the best operators in the industry, proven by both asset availability and plant utilization. The company has consistently operated at utilization levels above the industry average, supported by high asset availability and the use of advanced technologies to optimize maintenance costs and production planning. Over the past 5 years, this focus has yielded significant outcomes bringing the pro forma average utilization rate close to 90% compared with an industry average of just over 80%. This is supported by a modern, well-maintained asset base underpinned by substantial past investments. This higher utilization rate directly translates into stronger operational leverage, better customer service levels, more resilient cash flows and better financial outcomes through the cycle. But one thing also has to be clear. Operational excellence does not stop at asset level. It is also founded on an unwavering commitment to health, safety and asset integrity. Product quality and pricing are of paramount importance to the strength of Borouge International. Borouge International's innovative positioning, consistently high quality of its products and substantial share of specialty products in its portfolio are clearly recognized by its customers, which directly impacts commercial outcomes. Over the past 5 years, pro forma price premiums of almost 20% have been consistently achieved when compared with local market benchmarks. This is a structural advantage and not just a cyclical one. It forms a solid foundation and contributes significantly to the strength and resilience of the company's margins, which has demonstrated stability across various market conditions in previous years. It is crucial that this premium pricing remains consistent throughout the entire cycle. And Borouge International has consistently demonstrated its ability to maintain premiums even at the bottom of the cycle. This underscores the technological innovation capabilities and the vital function of its products as well as substantial customer trust. This commercial strength is closely linked to the aforementioned operational excellence. Reliable supply, consistent product performance and strong customer relationships all reinforce the ability to price sustainably at a premium. Let me turn to the historical earnings performance of Borouge International. Margins at Borouge International have been structurally higher than those of competitors, both when markets were strong and when conditions turned out to be more challenging. When comparing the pro forma EBITDA margins with those of specialty chemicals category leaders and global chemical players, the difference becomes clear. In strong market environments, Borouge International's margins are ahead of its peer group. But most importantly, in weaker market conditions, EBITDA margins remain high and close to 20%, well above the broader industry level. For 2025, the margin level of Borouge International remained twice as high as above the industry average across global chemical players. Specialty Chemicals leaders were in the same ballpark despite their materially different business models. Between 2021 and 2025, Borouge International proved to be the most profitable player through the cycle. And even at the bottom of the cycle, the margin profile were comparable with the very best in the specialty chemicals industry. This performance reflects everything we have already mentioned, operational discipline and advantaged feedstock, premium product positioning based on proprietary technologies and scale. It is the core reason why this platform delivers sustainable value no matter the market environment. Let me now turn to OMV's performance in the first quarter of 2026. The clean operating result of the Energy segment declined year-on-year by 21% to EUR 723 million. The main driver of this was a lower result in Exploration and Production, which primarily reflected negative market effects and reduced sales volumes. In addition, the prior year quarter was supported by a positive onetime effect of EUR 48 million as a result of an arbitration award. The realized crude oil price remained virtually unchanged year-on-year, averaging $72 per barrel, while Brent increased by 7% to $81 per barrel. This was largely attributable to different pricing mechanisms that in some countries have a delay of 2 months. OMV's average realized natural gas price fell by 19% to EUR 31 per megawatt hour. The stronger decline than the European benchmark, the THE, which decreased by 13% was mainly due to the composition of the portfolio. Hydrocarbon production declined by 7% to 288,000 barrels of oil equivalent per day. This was predominantly due to the temporary shut-ins caused by the conflict in the Middle East and natural decline in New Zealand and Romania. Production in Libya was slightly higher, which partially offset the declines elsewhere. Absolute production costs decreased as a result of various cost reduction measures. However, unit production costs rose to $11.6 per barrel. This increase resulted mainly from unfavorable exchange rate effects and lower production volumes. Sales volumes decreased by 31,000 to 252,000 barrels of oil equivalent per day to a large extent due to lower production caused by the conflict in the Middle East and the lifting schedule in other countries. The Gas Marketing and Power result decreased by EUR 30 million to EUR 72 million. The main driver of this was the missing positive effect of the arbitration award received in the first quarter of 2025. Gas West was further impacted by a lower storage result following decreased summer winter spreads. The contribution of Gas East rose strongly, supported by the power market deregulation in Romania effective from July 2025. The Clean CCS operating result of the Fuels segment remained largely constant at EUR 113 million. Substantially stronger refining indicator margins were offset by several factors. Amongst them, were operational one-off hedging losses amounting to around EUR 100 million related to equity production due to global disruptions in crude flows. Lower utilization and a lower contribution from the Marketing business were also offsetting. The European refining indicator margin more than doubled to $13.9 per barrel in the quarter. However, planned shutdowns, particularly in March, limited the ability to capitalize on the high March margins. Because of these maintenance activities, the refinery utilization rate declined from 92% in the prior year quarter to 87%. The marketing business contribution declined substantially as retail performance was impacted by lower fuel unit margins due to higher oil product quotations triggered by the conflict in the Middle East. Increased fuel sales volumes could only partly offset this. The commercial business result also decreased because of lower margins, though higher sales volumes and a slightly improved contribution from the aviation business mitigated this to a certain extent. The contribution from ADNOC Refining and ADNOC Global Trading improved to EUR 7 million, mainly attributable to a better trading result. However, this was partly offset by impacts resulting from the conflict in the Middle East. The Clean Operating Result of the Chemicals segment rose sharply to EUR 245 million, driven by improved polyolefin margins and the stop of Borealis depreciation. In our European business, we recorded unfavorable market effects totaling EUR 20 million, reflecting lower olefin indicator margins partly compensated for by higher polyolefin margins. Inventory effects were positive. The utilization rate of our European crackers was stable at 91%. Nevertheless, the result of OMV-based chemicals decreased due to weaker olefin margins and lower butadiene results. The contribution from Borealis, excluding joint ventures rose to EUR 223 million to a large extent driven by the stop of depreciation. In addition, the results of Borealis-based chemicals and polyolefins increased. Borealis-based chemicals benefited from higher light feedstock advantage and positive inventory effects. The contribution of polyolefins grew because of better margins and increased sales volumes driven by improved specialty sales volumes in the energy and mobility sector. Earnings from our joint ventures decreased by EUR 10 million, mainly due to a lower contribution from Borouge. Borouge performance was impacted by low pricing in January and February as well as logistics disruptions and cost increases in March caused by the conflict in the Middle East. Thank you for your attention up to here, and I would like to now hand over to Reinhard. Reinhard Florey: Thanks, Alfred. Good morning, and welcome also from my side. Let's turn to some more financial details of OMV's first quarter. Starting with cash flows. Our first quarter operating cash flow, excluding net working capital effects, was very strong at EUR 1.6 billion, considerably higher than the previous quarter and the prior year quarter. The main drivers were substantially stronger refining margins and improved Gas and Power Eastern Europe contribution as well as higher prices in fuels, which are not visible in the Clean CCS that came up to the CCS adjustment. Cash flow further benefited from realized gas derivatives. It is important to note that the higher prices also affected net working capital with the opposite effect. Higher prices, together with increased inventory levels led to substantial net working capital build of approximately EUR 850 million. As a result, cash flow from operating activities for the quarter was around EUR 800 million. Organic cash flow from investing activities in the first 3 months of the year was around EUR 900 million related to ordinary ongoing business investments and major growth projects such as Neptun Deep, the PDH plant in Belgium, the SAF/HVO plant in Romania and green hydrogen in Austria. As a result, the organic free cash flow before dividends for the first quarter of 2026 came in at minus EUR 125 million. Our balance sheet remains very strong. The impact of the Borouge International transaction on our leverage ratio was fairly limited. It rose from 14% to 17% at the end of the first quarter. This was mainly attributable to the impact of the Borealis deconsolidation on our equity and net debt as well as the capital injection of EUR 1.5 billion into Borouge International to equalize OMV's and XRG's shareholdings. I think it is worth highlighting that even after this game-changing transaction, our leverage ratio remains well below the mid- and long-term threshold of 30%. This reflects our commitment to maintaining a robust capital structure and healthy balance sheet. At the end of March, OMV had a cash position of EUR 3.5 billion and EUR 3.1 billion in addition in undrawn committed credit facilities. Given the significance of Borouge International transaction, I'd like to briefly explain the impact on reported numbers. Clean CCS net income amounted to EUR 495 million in the first quarter of 2026, only slightly lower compared with the EUR 561 million a year before. The deconsolidation of Borealis led to a gain in the amount of EUR 886 million, which reflects the difference between the fair value and the book value of Borealis at the time of deconsolidation. This gain is recognized in net income and reported as a special item. As a result, it is not included in the Clean CCS net income or the Clean CCS result. Thus, reported net income rose to more than EUR 1.6 billion in the first quarter of 2026, largely impacted by the gain from the consolidation. In the prior year quarter, reported net income was EUR 288 million. Let me now briefly walk you through the general financial implication of the Borouge International transaction going forward. In the first quarter, most financial metrics have been reported under the previous group structure, in line with the previous quarters. This applies to the clean operating results, net income and operating cash flow. At the same time, the balance sheet already captures the technical effect of closing. This includes the EUR 1.5 billion capital injection into Borouge International and the deconsolidation of Borealis cash balances. From the second quarter 2026 onwards, Borealis will be fully deconsolidated and the new company, Borouge International will be accounted for as equity. This means in operating results and net income, we will report or least share of Borouge International's net income. In operating cash flow, we will reflect dividends received from Borouge International. And on the balance sheet, Borouge International will be shown as an equity accounted investment as it is already shown at the end of the first quarter of 2026. This structure results in cleaner financials, stronger cash generation visibility through dividends and a more resilient earnings profile going forward. In addition, in the appendix, we provided high-level pro forma figures for the years 2024 and 2025, which show OMV excluding Borealis and Borouge that should help you with modeling. Let me end with the outlook for this year. Recent escalations in the Middle East, including military activities and restrictions on shipping for the Strait of Hormuz have significantly increased volatility in global energy markets. While we are constantly monitoring the latest developments, it remains difficult to predict the environment as the trajectory of the regional conflict is highly uncertain. In light of these events, we currently forecast an average Dated Brent price for 2026 of between $85 and $95 per barrel. The average THE gas price is estimated to be around EUR 45 per megawatt hour, while the OMV average realized gas price is expected to be in the region of EUR 35 to EUR 40 per megawatt hour. In energy, we expect average oil and gas production for 2026 of between 280,000 and 290,000 barrels of oil equivalent per day, reflecting the current situation in the Middle East and subject to the timing and extent of the lifting of restrictions on shipping through the Strait of Hormuz. Unit production cost is now expected to be around $11 per barrel. In Fuels, the refining indicator margin is projected to be between $10 and $15 per barrel, a range that reflects current market disruptions and uncertainties. These disruptions are also leading to a significant widening of crude oil differentials to dated Brent, which are not reflected in the OMV refining indicator margin or in the full year sensitivities and thus could have a material adverse impact on the fuels business. We anticipate the utilization rate of our European refineries to be above 90% with no major maintenance turnarounds planned at our refineries in the remainder of the year. Total fuel sales volumes are expected to be higher than last year, while retail and commercial margins are projected to be below the levels seen in 2025. Moreover, several European countries have implemented or are considering implementing initiatives to limit or reduce margins in the Fuels business as a means of mitigating the surge in fuel prices. In Chemicals, we expect the ethylene indicator margin to be above EUR 550 per tonne and the propylene indicator margin to be above EUR 420 per tonne. This increase reflects the current market situation in Europe with inherent supply disruptions and increases in restocking activities. The utilization rate of the olefin cracker is expected to be around 90% in 2026. There are no major turnarounds planned for the rest of the year. The clean tax rate for the full year is currently expected to be at the same level as in the first quarter of 2026, so slightly below 50%. Thank you for your attention. Alfred and I will now be happy to take your questions. Florian Greger: Thank you, Reinhard and Alfred. Let's now come to your questions. [Operator Instructions]. We start the Q&A session with Gui Levy from Morgan Stanley. Guilherme Levy: If we could start talking a little bit about refining, perhaps if you could tell us about the refining margins that you're seeing at the moment? And also looking at the remainder of the year, the company highlighted risks to the Fuels segment on the back of the volatility of crude differentials. I wondered what can you do in adjuvant to hedge or protect yourself against those type of risks? And then secondly, if you on refining, thinking about storage, could you perhaps say a few words about current storage levels, your ability to procure crude over the coming months? If you could just remind us how much of your crude supplies come from spot transactions vis-a-vis long-term agreements that you might have, that would be great. Alfred Stern: Okay. Thank you, for your question. Let me start a little bit with the refining margins. And as you could see, right, the refining indicator margins, in particular, in Europe, we saw after the closure of the Strait of Hormuz that they went up dramatically, I would say. And then after that some normalization happened, but continuing at a high level. We have seen April now to start at about $16 per barrel. I think there's a couple of different things, I think, that probably play into this basket of crudes and crude pricing, of course, is quite a volatile thing. At OMV, we had very limited exposure -- physical exposure to crudes coming out of the Strait of Hormuz. Our crude baskets were more focused on other crudes with a significant amount actually from Kazakhstan and then other crudes. So we -- our expectation, we have now for the rest of the year given a pretty broad range of $10 to $15 per barrel because we see really a significant volatility on the way forward around kind of an average assumption in that range maybe to the storage of the crudes for the production to the refineries is actually rather limited, right, to a few weeks of storage as you -- so then if you look at our refineries, we are actually here in the Austrian refinery connected through a pipeline to the Adriatic Sea, also the refinery in Germany is connected to that pipeline here in Austria. We also have some equity production, which makes about 10% of the feed. And then in Romania in the refinery, we are about integrated with 70-plus percent into equity production from the oil production in Romania with the oil there. I don't know on hedging, if Reinhard has anything to add. Reinhard Florey: Yes, very briefly. Of course, in the downstream area, we do apply some hedging in order to mitigate risks. Of course, we also need to keep some flexibility in order to take also advantages. And then we also suffered from hedge in March, a loss of around EUR 100 million, and that was simply due to the situation that oil that was going to be lifted and transported to the Strait of Hormuz was physically not available while the hedge was on there. And therefore, one leg of the hedge disappeared, which had to be covered in the situation of rising oil prices. However, that's not uncommon situation. On the other hand, some of the hedges also protected us from further damage. Florian Greger: Thank you, Gui, for your questions. We now move on to Michele Della Vigna, Goldman Sachs. Michele Della Vigna: Congratulations on the very good results given the unstable situation. There were 2 areas I wanted to concentrate on. First of all, on Borouge, I was wondering, is there a simple way to think about how the new ownership and reported structure would affect net income, let's say, how much higher or lower that would be if the new reporting structure had already been in place in Q1 for OMV? And then secondly, I wanted to ask about jet fuel availability. This is certainly a concern going into the summer. Austria actually seems to be better prepared for it than some of the other European countries. But what is your view on the visibility, especially as we go into the late summer on the availability of jet fuel and the potential for dealing with relatively low amount of inventory days? Alfred Stern: Yes. Thank you, Michele, for your excellent and your good question. I will start with the excellent one because I can answer it, and then I will ask Reinhard for help on the good question about the net income reflection. Jet fuel, it is indeed like this, Michele, that in Austria, we -- so maybe let me start differently. We can say at the moment, we can supply all our contract customers with jet fuel, also including the required mandate of 2% renewable fuel addition, SAF addition. And that covers big airports, of course, in Munich, in Austria and then in Bucharest and a couple of smaller airports across that thing. So our contract customers, we are covered. And because we are able to actually produce the most part of that by ourselves. In general, we do, of course, see in particular in Europe, but also globally that there is a shortage of jet fuel. There was significant amount of jet coming out of the Strait going to Asia, but also Europe heavily depends on imports of jet fuel. So from an OMV perspective, we can supply and provide security of supply to all our contract customers. And we, of course, try then to also maximize our business around those airports that I just mentioned before. And now for the good question. Reinhard Florey: Yes, Michele, it's not so difficult. So far, what we have shown in a net profit is a fully consolidated net profit of Borealis that also included the net profit of 36% of Borouge. Now in the net profit attributable to stockholders, we, of course, only showed the 75% of Borealis. So 75% of that full consolidation because 25% were minorities of ADNOC. Now the situation with Borouge International changes that we consolidate at equity, which is 50% of the net profit of Borouge International. And that consists of 50% of Borealis, so a little bit less of Borealis, 50% of Borouge that is more than we had and 50% of NOVA, that's completely new. And that plays a role because what we currently see in the current environment, NOVA has a positive business environment at the moment. So we can also expect that there is a good contribution of NOVA now for the rest of the year. Florian Greger: And the next question will come from Josh Stone, UBS. Joshua Eliot Stone: Two questions. One on Chemicals margin outlook. Curious what you're seeing in the U.S. market in particular, given your now ownership of NOVA. And also, is this a path of Baystar to finally make some money. So curious what you're thinking there. And then secondly, on UAE, your net production capacity is around 50,000 barrels a day in the upstream and something like that. If you are asked to, do you think you can actually produce more from these fields? And obviously, I'm asking given the headline recently about the UAE leaving OPEC. Alfred Stern: Yes. Thank you, Josh, for your questions and all the best for getting better there soon. I try to answer the questions. Hopefully, I understood everything correctly. So the margin -- the Chemical margins in the U.S., as Reinhard just explained, right, with NOVA being in there with 50%, but then there's also Baystar that was previously bought in the Borealis results. These entities benefit, let's say, of the current crisis of the Middle East. What we have seen because of the closure of the Strait, right. It's not just oil and gas and oil products. It is also a significant amount of chemical products that came through there, in particular, also polyolefin products, but it's also been a significant amount of naphtha. So chemical feedstock that has come out and mainly went to Asia for the production there. So there's shortage on this. And in our view, the markets of Borouge International products have switched from being somewhat long to being short now. And with this, we have seen significant price increases across the globe actually and so also in the U.S. The prices for the products have gone up. And with this the margins have also expanded for those products. And in the U.S., in particular, what I think is maybe slightly different there is that, of course, U.S. gas on Henry Hub that is also a reference for ethane pricing, then that has not moved as much as gas prices in other regions. So there will be some benefit of this move will benefit from this with better margins, but also the Baystar joint venture will be able to benefit from these better margins. And also there is, of course, the opportunity or the potential opportunity that the global shortfall in volumes then can be supplied from some of this production. The second -- I hope that answers your question. The second question that you had on the production in the UAE, I would confirm that last year, the average production there was about 50,000 barrels per day. We -- of course, in March, as we reported here, this was affected by the supply chain issues with lower production coming out of the asset there. And at the moment, this is back online into production. How this will continue exactly, I think, is a bit volatile depending on the situation in the Middle East. Hence, also our guidance for the full year of the total production between 280 and 290. Florian Greger: We now come to Ram Kamath from Barclays. Ramchandra Kamath: My question is largely on the chemicals. As polyolefin prices have recovered strongly at the end of the first quarter and feedstock tied to polyolefin rates have also rising in a market where supply drives pricing and volumes are softer, how should we assess the effect on the margins? And the second one, possibly on Borouge 4 ramp-up, whether the current situation in the Middle East has impacted the ramp-up phase? And if you can comment also on the feedstock pricing mechanism, particularly for Borouge 4, as I understand, it would be a new price mechanism that possibly the company will be entered into with the suppliers. So if you can comment on that. Alfred Stern: Thank you for your question, Ram. Maybe I just start with the polyolefin price environment or maybe let me expand this a little bit because it's an integrated supply chain. So there's olefin and polyolefin prices. And what we have seen in March is that naphtha prices went up quite significantly. Feedstock prices went up significantly, while at the same time, olefin prices were then to a large degree, locked in from price discussions at the beginning of the month. Now this has changed significantly in April because olefin prices have rose strongly in April, they have gone up by like EUR 400 to EUR 500 per tonne and that is leading to a significant price expansion. The polyolefin prices, they reacted a little bit faster already in March and the margins expanded there. But again, in beginning of April, so let me say, in March, also the contract prices have gone up, which helped that situation to expand the margins. In April, we have now seen additional price increases also in polyolefins with further expansion of the margins. So it's -- at the moment, we have seen still continuing good demand, and it's more a question now of supply capability to make sure to be able to supply that demand. We have -- with Borouge International, they are actually in a very strong position with this -- with the assets distributed quite well globally and with more than 70% of their production in advantaged feedstock position. As I also presented, so this is the situation now. We will see how this is on the way forward. I do want to highlight again, I don't want to go into all the same again. But as you could see the EBITDA margins, the margin capability of Borouge International is really exceptional. We are with -- Borouge International is significantly ahead of the competitors in their own field, but they are more playing from a margin level in specialty chemical kind of margin environment. So that we anticipate to continue reason the combination of good technology platform that gives innovative products that can get price premiums plus the good feed stock position. On the Borouge 4 ramp-up, I can explain that throughout the year. So there's multiple production assets that are there. And the plan has been and continues to be that throughout the year, we are bringing online the different assets to then have all of the assets online before the end of the year. As it is with all these huge assets there can always be some delays, but currently our plan stays the same. And I can also report that the first asset in XLPE line has already been brought online for this. On the feedstock, I want to emphasize again that about 70% of the feedstock in Borouge International is based on advantaged feedstock that will continue to be in this way with some modification on the Borouge assets on the way forward where there will be some adjustments, but this will be compensated with additional capacities that are coming on stream with Borouge 4 on the way forward. Florian Greger: We now move to Sasi Chilukuru from Jefferies. Sasikanth Chilukuru: I've got 2 left. The first was coming back to your refining margin indicator guidance. You've raised it to $10 to $15 per barrel, but have highlighted the widening of the crude oil differentials to have a material adverse impact. I was just wondering if you could quantify the level of these adverse impacts you have seen in April so far or currently? The second one was regarding the dividends from your JVs. Are you expecting any dividends from ADNOC Refining and Trading this year and from Borouge International. I was just wondering if there was any risk to that updated dividend payments and also the timing for these payments to OMV. Reinhard Florey: Thanks. I can start with the question on the dividend. In terms of the dividends from JVs, of course, we are expecting also a dividend from ADNOC Refining and specifically also ADNOC Global Trading. This is 2 entities where we have participation in. And while we are seeing that ADNOC Refining, of course, also bears some of the burden of the conflict, we are seeing for the rest of the year rather a stabilizing development in that. Whereas ADNOC Global Trading is doing a great job and is earning very good money, and we're expecting also dividends from that side. On the Borouge International dividends, we have announced that the anticipated dividends were in that way that we are taking only 50% of the anticipated minimum dividend in 2026. Why is that? Because the uncertainty around the situation in Middle East provided some safety measures of safeguarding the balance sheet, making sure that also this excellent rating that we have in the group stays in that way. However, we are not expecting that there are any further modifications to that. So we are expecting, of course, the other 50%, and we are expecting that for the second half of the year. Alfred Stern: And let me take the -- your question on the refining indicator margins were as we -- as I described, right, we saw in the first quarter, let's say, January, February quite different than March, we saw significant increase in refining indicator margins, but important, and I think that's your question then to realize this is a very crude measure, right, a very rough measure of taking the fuel prices. It's a little bit more complicated in reality how we see this and the market distortions are also quite significant on the way forward. For the second quarter, we expect some, let's say, adverse effects one from increased crude differentials that will depend on how the geopolitical issues and risks continue. We do definitely see tighter supply conditions, which we, of course, are continuously optimizing to make sure that we get ourselves in the best possible position. In addition, we do see local supply dynamics working out and increasingly also in Europe, in particular, regulatory interventions and price caps that are affecting then also the results. And for this reason, we have also left the gap of the 10% to 15% to reflect this. And we will, of course, be managing to optimize our results in that volatile environment. Florian Greger: And the next question will come from Matt Lofting, JPMorgan. Matthew Lofting: Appreciate the update. Two things, if I could. First, I mean, you highlighted through the update that the strength of the balance sheet, which is quite right. And I guess lots of volatility, but the outlook for cash flows is better net-net than was expected at the beginning of the year. So going back to the update that was provided sort of last month on BGI and sort of the revisions to the next steps. I just wanted to understand the thinking in terms of the feed-through on the lower BGI dividend payment to OMV and that impacting, I think, the dividend that you expect to pay to your shareholders by EUR 0.6 to EUR 0.7 per share for FY '26 and why that perhaps couldn't be protected more strongly through the higher cash flows on the rest of the business and whether there is still scope to revise that view and take a more positive sort of stance on that? And then second, I think there were some reports earlier this month on Austria being one of the countries that was pushing the EU to look at revised EU windfall tax measures on the energy sector in the context of sort of the price shock. Could you just share your understanding of the sort of the current status and situation there? Reinhard Florey: Yes. Thanks, Matt. Maybe let me take the first question regarding the outlook on dividends. The question that you raised was whether our improved outlook on cash flows would somehow put the [ EUR 0.6 to EUR 0.7 ] -- EUR 0.60 to EUR 0.70 lower dividends into question. And I would say "why not, " but it's too early to say. This is something where we believe that with the higher dividends that we could pay from operating cash flows. If the operating cash flows move up, then there is a part of the compensation of that EUR 0.60 to EUR 0.70 that we will miss from Borouge International. So I wouldn't be too pessimistic to say the view of the first quarter or from the beginning of the first quarter on overall OMV dividends could not improve over the time. But nevertheless, there will be a little bit shift if we are lucky from dividends coming from the BGI, which will be EUR 0.60 to EUR 0.70 lower to dividends coming from our operating cash flow where we dividend out 20% to 30%. And that could be a part mitigation compared to the view from the beginning of the year. But of course, the structure, as we have described it, stays exactly the same. Alfred Stern: And let me try on the windfall tax. Maybe I stick with the facts a little bit here. Indeed, Austria was one of the signatories of a letter that was sent to Brussels up until this point that our information is that not more than that has actually happened than a letter being sent. And hopefully, also in Europe, we will continue to pursue free market economy kind of principles with the possibility to manage this difficult supply and demand situation that we have around this. So at this point, I have no additional information about this... Florian Greger: We now move to Oleg Galbur from ODDO BHF. Oleg Galbur: I have one question, which includes -- which has 2 parts. So investors are keen to understand the overall impact of the Middle East crisis on OMV, and I hope you can help us provide them with a bit more detail. So firstly, could you please update us on the current status of the oil production in the [ UAE ] and capacity utilization at Borouge, specifically to what extent is the closure of the Strait of Hormuz affecting OMV's ability to produce and more importantly, to sell crude oil and petrochemicals products producing the [ UAE ]. And secondly, while you mentioned that NOVA Chemicals is benefiting and is expected to positively contribute to these results. I hope you can tell us how are Borealis results being affected by the current market environment, which is characterized by significantly higher feedstock costs, particularly for Borealis. Alfred Stern: Okay. Oleg, thank you for your question. And let me maybe pick up here and try and go through your questions. As you say, we also participate in assets in the Middle East and we are a joint venture owner in the oil production there together with ADNOC. The production there was reduced in March, but it is now back in production and also then supplying the local demand there. And we expect that this will also be optimized in the month before. On Borouge, I can tell you that in the first quarter, we had an asset -- Borouge had an asset utilization of high 90%, close to 100% and continues to also be able -- so they had preexisting contingency plan on exporting products in case of the waterways not being available and they activated this mechanism. And with this in March, they were able to export more than 90% of the production in March through these alternative logistics channels. And -- sorry, no more than 60% -- I think I misspoke, more than 60% through those alternative logistics channels. The additional production volumes, they put in storage for shipment then in the second quarter of this year. And of course, they will continue to maximize their production levels as well. So there's alternative evacuation routes in order to keep up and storage capability to keep up the high production levels. On NOVA Chemicals and Borealis, maybe let me focus a little bit on the European market here because also that has quite -- has developed accordingly. There was very significant price corrections in the European market. We actually see that monomers, ethylene, propylene are quite short and that there is significant demand. We have seen modest price increase in ethylene and propylene in March, but then a significant step-up of EUR 400 to EUR 500 per tonne in April now. I've also reported that our utilization of our crackers was about 91% the Borealis and OMV crackers together, which is about more than 10% higher than the European average utilization rate. That's because all the crackers are either integrated into the OMV refineries or they have a light feedstock advantage on the Borealis side. So that's for the olefins. But then also on the polyolefins, we have seen that the contract prices have gone up. We have actually seen also some closing of the gaps between spot and contract prices, which is always an indicator of tight markets. And now in April, again, the prices have gone up around EUR 1,000 per tonne for both polyethylene and polypropylene in the prices. So that is significant increases in the prices reflecting the market tightness. And we have also seen the demand levels to be good so that Borealis and Borouge International is able to take advantage of the better market environment. Florian Greger: Next is Adnan Dhanani from RBC. Adnan Dhanani: Two for me, please. Just the first one on the European gas market. Can we just get your latest views? Obviously, we're now facing the second crisis in the LNG market in 4 years. And presumably, there's going to be more focus on domestic energy security in Europe. As a major producer of gas in Europe, how do you see that opportunity set for you in the coming years? And then related to that, any update on your search on Neptun Deep look like? And then just a question for Reinhard, maybe just on the results this morning, significant timing effects in your cash flow that benefited and drove quite a material beat versus market expectations. Just wondering what the moving parts are there? And do you expect those some effects to revert going forward? Alfred Stern: Thank you, Adnan. I will start with the gas, and then I will ask for help from Reinhard on the timing effect on the cash flows. The gas market, indeed, it's also quite volatile kind of market environment. We are now giving an outlook of an increased average price for THE for the German market benchmark of about EUR 45 per megawatt hour, in the first quarter was around EUR 41, EUR 42 per megawatt hour that was -- that consisted of lower January and February and then significantly increased March versus the bump that we got in March. It has come down a little bit again to EUR 45, EUR 46 in the beginning of April. But then yesterday's announcement, again added -- increased the price again up. So a very volatile situation. As you know, the QatarEnergy represented a significant amount of LNG coming to the global markets. Most of the shipments here did go to Asia. But as it is a global market, we have seen an increase in the prices. We have seen that after '24, '26, sorry, '24, '25 was slightly higher than '24 in the average annual price for the [ PNG ] but now it's gone up again back to more like the '23 type of levels. European storages are on the low side, and we do see some intermittent windows where we can lock in some summer winter spread and increase the storage. So we have seen a little bit over the last week increases of the storage, but it's still on the low side, and we see the forward curves, they are more on the flat side to making that refilling of the storage is more complicated. And I see certain risk that's towards the winter then will potentially enter with lower storage levels and the demand in the coming winter goes up, prices will then also strengthen in the market. From an OMV perspective, on the storage levels Austria is in a special situation because Austria has about -- in total about 1 year of demand storage capacity. And with this the storage requirement is a bit lower at 35% and we are already above that storage requirement. So from that perspective on the way forward, we will commercially optimize what we are doing here. And then Neptun Deep, you asked, of course here on the project, we continue to be on plan on executing on the project. As we have reported previously, the first 4 wells on the more shallow and they have been drilled. And we have now started the drilling on the further 6 wells on the deeper end of things and advancing also with the platform and all the things are on plan so that we are still looking at the original time plan 2027 start-up. I do think that is the right moment to come because we see the wedge of import requirements into Europe opening up year-over-year on the way forward. So that Neptun Deep will come into a good time to improve security of supply and the market that will be priced mainly from LNG import differentials. Reinhard Florey: Yes. And Adnan, regarding timing effects in cash flow, let me start with saying OMV has once again shown that we have a very strong and resilient cash flows. We have come up with EUR 1.6 billion, a little bit above EUR 1.6 billion of operating cash flow excluding net working capital and almost EUR 800 million of operating cash flow, including the net working capital effects. Now the timing effects, you can more or less differentiate 3 different factors. One, of course, is the net working capital. This net working capital is an effect that came with a sudden increase of the prices where we both had on the inventories, but also in the netting of the payables and receivables, a significant negative impact, so a buildup of net working capital that negatively influenced the cash flow in the first quarter. However, that's a little bit of a savings account. And according to the development of the prices, this will come back if prices normalize again. So therefore, I see that there is a positive timing effect. On the other hand, there's a little bit of an opposite effect in the CCS in the valuation effects regarding our inventories. There, we have seen a gain from the CCS in the result that, of course, then also is visible in the cash flow. And if we see then prices going down again, this time difference effect also will go away. We are talking here about EUR 250 million positive from the first quarter. And the third element actually is gas derivatives. This is really a timing effect where we have seen a positive effect, so something between EUR 100 million and EUR 150 million in the first quarter. And this, over time, when these derivatives then can be resolved, will have the adverse effect coming a little bit over the 3 quarters distributed. So yes, it will come back, but it will have a smaller impact on this. But in total, again, the basis cash flows have been resilient and strong. And I think this is what we will also keep for the rest of the year. Florian Greger: And now we come to Sadnan Ali from HSBC. Sadnan Ali: The first one, I just wanted to ask, I see for the first time, it looks like for country-level production split that you've grouped together the UAE and the Kurdistan region of Iraq. I just wanted to get a sense of your decision behind making that. And secondly, just overall, it's been 2 months since the conflict started. Just kind of your thoughts on what you think you've managed well and what you think you could have done better? Reinhard Florey: Sadnan, maybe let me start with the first question of why we grouped together Middle East simply because this is a region that breathes and lives with geopolitical situations in that region. So if we would do that asset by asset, it would still have the same kind of volatility. So therefore, we have grouped that together. We are talking here about our assets participations in Kurdistan region of Iraq, KRI, on the one hand side and our participations in the SARB and in the Umm Lulu fields in Abu Dhabi that together had a volume of around 60,000 barrels altogether. And you have seen in the past, it's 50,000 from UAE, it's 10,000 from KRI. And we still see that putting that from a region together makes more sense to look at the volatilities that we have. Just to give you an example, temporarily, we have been impacted in both of these regions from the Gulf War. And as soon as these things is improving and being resolved, both will come back to full volumes. The real difference is KRI is gas and the Emirates volumes are oil. Otherwise, for the impact that we will show with that, they are very easily connected. Alfred Stern: Yes. And let me maybe try and follow up on what we think we have done well and what we could have done better. Maybe we -- so I think it was really timely to close on Borouge International transaction. And as we try to describe, this is transformative for OMV. It will be very important on the way forward. It is a very strong company that we put forward. If we had -- if we could have done that even earlier, that would have been good, but I think it's a fantastic step on the way forward that will be important for our integrated business model in the future to come. I also -- we have not talked about this specifically, but I do want to remind you, we have our cash flow efficiency program that we are executing on. And part of that is also our cost reduction program. This is good online, and we continue to move forward because we believe this is still efficiency. Productivity is a key driver that we need to do on the way forward even if prices have gone up and higher today. On what we could have done better. I would say that hedge that Reinhard described before, where we -- where one leg was missing in the end. If we had somehow the information that the Strait would close, I would have loved to forgo that piece, quite honestly. But this is part of our normal business. And as Reinhard said, it's not unusual and was also compensated on some positive effects on the other side. And the last but this is only half serious, quite honestly. If you remember, a few years ago, we -- Borealis divested their fertilizer business. And I still think that was a very important strategic move at the time and will continue to be so because it was mainly a European focus -- it was only a European-focused production for ammonia or nitrogen-based fertilizer. But at this moment, of course, fertilizer globally is quite short and the prices are high, that would be something that at this moment could be quite fun. Florian Greger: Thanks, Sadnan, for your questions. We now are at the end of our conference call and would like to thank you for joining us. If you have any further questions, please contact the Investor Relations team. We will be happy to help. Goodbye, and have a nice day. Alfred Stern: Thank you very much, and have a great day. Reinhard Florey: Thank you. Bye-bye. Operator: That concludes today's teleconference call. A replay of the call will be available for 1 week. The replay link is printed on the invitation or alternatively, please contact OMV's Investor Relations department directly to obtain the replay link.
Operator: Ladies and gentlemen, welcome to the adidas AG Q1 2026 Conference Call and Live Webcast. I am Moira, the Chorus Call operator. [Operator Instructions]. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Sebastian Steffen, Head of Investor Relations. Please go ahead. Sebastian Steffen: Yes. Thanks very much, Moira, and hello, everyone, and welcome to our Q1 results conference call. Along with me here today are our CEO, Bjorn Gulden; and our CFO, Harm Ohlmeyer. You know the drill. First, Bjorn and Harm will take you through the puts and takes of the quarter and our outlook. And then, of course, we will open up the floor to your questions. Before we kick it off, there's actually one more thing I would like to mention. I guess we all witnessed a very historic sports moment on Sunday at the London Marathon. I have to say I still get goosebumps when I think about it and when I think about the visit of these fantastic athletes here at our campus yesterday, and Bjorn is actually going to talk about it in more detail in a second. But what I wanted to share with you is that there will actually be a documentary about the sub-2 journey going live tomorrow afternoon. And it shows in a very impressive way that these huge achievements have not been reached by luck, but that there's actually a lot of hard work by a lot of great people behind it. And of course, we wanted to make sure that you get a sneak preview of it, and that's why we put together a trailer very quickly yesterday that we're going to show you now. So enjoy. [Presentation] Bjorn Gulden: I hope you enjoyed it, and I hope you accept that we brag a little bit because as you probably understand, for us, the achievement of the weekend meant a lot. It's the result of many, many months, if not years of work from a product point of view, from a marketing point of view and from an athlete's training. And just for you, we have doping tested in twice a week for the last 26 weeks. So there shouldn't be any doubt that this is very, very serious. And when you see what the 3 did, it becomes even more impressive. Just also commerciality, of course, this is not a shoe where we expect to sell thousands of pairs, but the demand is actually thousands of pairs. So if you go on StockX, I think the last price that I saw was $5,000. So of course, that tells you there is a curiosity what this is. I think for the business, you should also be a little bit impressed when you look at what happened after the race. There are some visuals here, and we were able to -- in London 2.5 hours after the race to be, I think, at 350 spots with outdoor advertising with even the time. And all over the world, like you see here, I think it's Shanghai, you see here with big visuals with the time and of course, a visual of the athlete or the athletes. And again, in my life, when it gets to planning something, when it gets to executing something and then actually enjoying it, I think this is a highlight because it's, of course, historic. Good is also, and we should never forget that, that the company is also having a great reputation in many, what should I say, target groups being employers or future employees or being reputation of the brand. You see some of them here. And again, this is not because we're doing something great today, but it's, of course, accumulated to what adidas has done over many, many years. And it is a fantastic place to work, and we also hope it's going to be a fantastic place again to invest, but that's up to you guys. We have -- and I know some of this is repetitive, but we have talked about that this is the fourth year of our 4 years plan. We defined the '26 to be a healthy company. I think we have had it successful. And I do think when we look into this year, we've had a great start, not only the numbers that we will get to in a second, but the achievements of our athletes, the visibility of our athletes, the way we have been in marketing, in social media, and I think also the energy that we have internally is at least the highest that I have seen at the time that I have been in my 2 phases in the company. And the numbers, you have probably seen and analyzed them, growth in Q1 around 14% is, I think, very strong. I think it proves that the product we have in the marketplace is in demand of the consumer. You will see that also in the gross margin. And then I will remember -- remind you again that to accelerate our receipts early to make sure that we had the right amount of product and maybe a little bit too much for the sales, but to have, what should I say, reserve in the issues now of supply again was very, very smart. So in World Cup soccer, if it was balls or it was home and away jerseys, we front-loaded. And I think with all the issues right now in the world, that was actually a good strategy instead of trying to optimize the working capital. The profit also of EUR 705 million, I'm sure Harm can comment on it, must be one of the highest that we ever had and adding EUR 100 million operating profit compared to last year is very, very nice to actually achieve. If you then look at the P&L, top line, we talked about 14% growth, currency neutral. It's the first time you don't see anything that this is only for the adidas brand. Remember, this is the first time there's no easy comparison in the numbers. That's why you have one simple number, and that is up 14%. Gross margin of 51.1% is, yes, down 100 basis points. The underlying gross margin is actually up, but the currency and the tariffs are working against it. And my friend, Harm will take you through that more in the details. But from a sell-out and an achieved gross margin, very, very healthy in Q1. And that gives you then the 10.7% operating margin and EUR 705 million operating profit. If you then look where the growth is coming from, you know our map, 12% out of America, again, in a very, I would say, nervous market when it gets to consumer demand, oil prices being high. And of course, also a lot of discounting, we are very happy with that number. You know that we admit that America is for us, of course, the biggest opportunity over a long period because we're so far behind our competitor. But again, for this quarter, we say this is good. Europe, probably a market that is currently not growing at all. Also here with plus 6, we are happy. You have to remember, we had a 20% growth in Q1 last year. And it's the same thing here, especially in lifestyle footwear, the market is over inventoried and a lot of discounts. So it's hard right now to grow on full price. But great growth on apparel and also good growth in performance. Greater China, no change, great momentum, great energy, great sell-through, and we have proof that our concept and our team works. Same with South Korea and Japan, great first quarter. I have to say that especially South Korea is leading on trend, actually having strong growth in both footwear and apparel. I don't think the discount area is so high in this part of the world. So a very positive development on all counts. LatAm, still on fire, now fueled also by the World Cup, fantastic reaction to everything in the LatAm countries. You know that we are now #1 in the region. And that is, of course, not only because of the business model, but also because of a great team, and we think that the World Cup will make it even greater. And then finally, emerging markets, which also includes the Middle East, needless to say, 10 of the markets involved in the conflict. Of course, we are losing business in these countries, mainly in the last 4, 5 weeks. There are still issues that are very volatile. Sometimes stores are closed. There are some problems getting products in. And I do think we can discuss that later what this could mean going forward, depending on how long this conflict would last. But as you know, all the numbers that we have shown you includes the issues in the regions. So also here, a great job by the team. And that gives you then the 14% growth and almost EUR 6.6 billion top line. If you look at channel, 8% growth in the B2B or wholesale, 19% in our own stores and 25% in e-com. This is fully in line with what we told you a quarter ago that in this market, especially in Europe and America, where it is over inventoried, having a strong discipline in how we actually flow products and how much we sell into the trade has been important. Therefore, the growth in both our stores, which are double-digit up like-for-like, both in factory outlets and concept stores is then, of course, important and also e-com. This is not a strategy for us that D2C should grow faster than wholesale, but it is a result right now of how the market is and that might change. We would love, again, to have a less volatile wholesale business, but it shows you that the brand when it's presented full price or discounted as a brand works very well and D2C being extremely strong. And I would also say the e-com business, I said it last time, we feel now that we are a good e-com player, both from a system and an app point of view, but also, of course, from the flow of product and the way we present it. That gives you the 62-38 split. And as you can see, own retail being 22% and e-com 16%, surely a healthy split. And again, not huge changes because it's only the changes of a quarter. We continue to spend quite some energy and money on our retail environment. You see some of them here. Very important for us to have freshness in our products, very important for us that we target the consumer in the different areas with the right product. And as you can see there, even in the store layout and the way we actually are making the front, there are big regional differences depending on what the market is. So we still believe very, very strongly to adapt to the local culture and not try to have one store design all over the world look the same. Same is in e-com. As I said many times, the frame and the system are the same. We have a very, very good global e-com team that works on that. But how we are then fronting the consumer with what programs on the front page and the sort of the different concepts are then, what should I say, targeting the consumer in different markets. So here, you see some of the differences from the left side where we very much target the World Cup in the U.S., the retro product to in the right corner where you have a typical Japanese approach. And again, of course, this is a dynamic process. But I think we have optimized the way we do it in a way that we feel it's really, really working. And you also see that in the digital growth we have. I would also say that in apparel, where you see the fantastic growth, it's also obvious that it's easier today to sell a lot of new fresh apparel digital than it is in a brick-and-mortar just because of the fact that you can bring newness both in your own e-com and in your digital product quicker than you can do on a normal brick-and-mortar concept. When you then get into the division, yes, footwear only growing 4%, apparel growing 31% and accessory growing 13%. You might think that the 4% is weak. I would say it's not. It tells you that footwear right now is in process of being more discounted and especially in the lifestyle area, there is a lack of newness and lack of energy and the stores, especially in Europe and America are, what should I say, I would say, merchandised with a lot of discounts, so it's difficult to get the energy that we've had before. Therefore, it's great to see that the performance categories then are actually taking off, and we clearly see that there is a big demand for many categories, including running and also soccer for the time being. Apparel, we told you 6 months ago that we expect a huge growth in apparel because we know that the apparel team has developed new trendy concepts, used new materials and been, in many cases, leading. And as I also said, especially our digital partners had a huge sell-through success with our apparel. And then when you then add all the World Cup products and the soccer cultures into it, it starts to be a substantial growth. I also like to tell you that both training and running as performance categories are also starting to grow in apparel, which, of course, is very important for the future. The accessory numbers has been volatile and very negative in the U.S. because of the delivery problems we had into them. You remember, we had a China issue. As you can see, now we have healthy growth again, of course, fueled also by World Cup product. But the problems we've had, especially in the U.S. accessories are starting to be fixed. And I hope and believe that these numbers then will continue to grow also in the U.S. That gives you the 56/37/7 split, which is not very different than we had before. And again, I think under the current market environment, this is a very healthy split. If you then look at performance, we are showing a 29% growth. I think this is the second quarter where we have a huge growth in performance. And of course, those of you who said this is not dangerous to grow only in lifestyle. Now you have the answer. The plan was then to shift the growth also into performance. And of course, there is always the goal of having balance between the 2. But now having such a growth in performance is, of course, a great, great, what should I say, feedback for us that we have spent time on financing growth in lifestyle and brand heat to put it then into development of the right product and better distribution of our performance categories. Football, of course, great growth as expected. And again, also probably helped that we have been very, very good in supply. running continuing at almost 30%, again, and this is before the success in London. We see that we're getting both in retail and wholesale, a great momentum in running. And as you know, there is a globally running boom. Training also starting and continuing to get 12% or double-digit growth. And the only negative number here is the basketball number. Now we have to remember that Q1 is a small basketball quarter. And you also know that we have told you that we need time to turn that business to make it better. And you also probably know that basketball culture right now, especially in the lifestyle area is not hot in demand. So actually according to what we planned. The other thing you need to note here is, of course, the great number in motorsports. That, of course, has to do that a year ago, we had 1 team in Mercedes, now we have 2 added Audi. But I think it's fair to say that motorsports so far is more than hitting our expectation, a, I think because we've done a decent job; and b, we clearly see that there is a great demand in fan gear and also culture wear coming out of Formula 1. Also a very positive number for us in the golf market that has been stagnating. So again, very, very happy with the performance side of it. We have for a while said that we want to be like Adi Dassler, invest in many sports and be visible in many sports, but there are 4 categories that is important for us to win globally. That is football, DNA of the brand. It's running because it's the biggest. It's training because it's relevant all over the world. And then basketball because it is culturally really relevant, especially in the U.S. And although the category is struggling a little bit currently, it is, of course, important for us in the future. I hope you agree and see that we are very, very good on the road in football. I would say, in all elements of it, we bring innovation. You see here the first printed additive soccer shoe that has been on the market. You see soccer cleats that has the elements of fashion. You see culture wear and you see the lightest speed shoe on the market. And in general, I think our sports marketing have done a great job finding the right players. And those of you who saw Bayern against Paris yesterday, it is a fantastic sport, and we look forward to the return game next week. Running -- we have talked about the importance. We have worked for 3 years with very, very good teams on innovation. It's not only for the top of the market, but also for the everyday running market. And we have new technologies that are starting to break through. So there are many elements that now is helping us on the performance side. Then training, we have, for the first time, also a hybrid shoe in the market that is doing extremely well, not only in competition, but now also building a huge order reserve. And we believe in this category and are putting quite some innovation to build the best product available. And so far, we see actually success in all regions in this area, which is very interesting coming from a training area. And then basketball, where we told you we need to reset the business. We are working on new signature shoes. We are working on signing new players. You will see that when we get to the NBA draft. We are working on a bigger presence in women's basketball. And you will also see that we're signing clubs and Federations outside of the U.S. So basketball, although it will take some time, it's clearly in our priority. Motorsport, we talked about. I don't need to explain any of the success of Mercedes. They're back where they belong. I hope you see that both Kimi and George are extremely loyal to our brand. We also do a lot for them. Here, you see when they were in Japan, they were actually racing in Y-3 suits and Toto Wolff even was willing to be a model for our Y-3 show and the relationship to Mercedes Formula 1 is just fantastic. I have to say the same about Audi, of course, not as good on the track yet, but our neighbor 100 kilometers from here, looking great in merchandise. We also run their e-com site. So we are a business partner on a wider scale than just doing merchandise and selling it. And we believe that this relationship is going to be a great one, and it's already way ahead of the commercial plans that we had. And then in the what should I say, Soul of Dassler, we are back again focusing also on the smaller sports, on the local sports. Some of them commercial, others not. I would like to mention padle, which you see here. I think we're now a market leader in paddle, also in rackets. And it's a booming sport that, of course, is attracting athletes female and male kids and adults in a way that we didn't believe would happen. So a great new segment. The mirror to that in the U.S. is pickle, where we are not that successful yet, but we see the same trend. And then we talked about other sports like cricket, important for us. You see a new signing of volleyball in Turkey. Our sports marketing and business teams are very, very agile, looking for the opportunity to both build the credibility, authenticity and also commercial businesses. The ones we have talked most about is, of course, America. We bragged about that we had bought a college team in the NCAA final, which we then, of course, won. We can now brag that Mendoza, our quarter back was the first draft pick, which, of course, normally indicates a new superstar. And I think we had 15 players in the first and second round, showcasing a much better activity in the NFL draft that we ever have had. But it's not only NFL, it's also NBA -- and it's softball, it's volleyball, it's baseball. Our local team is invested in credibility to be a real sports brand again in the U.S. also for the kids. I told you many times that it will take some time. But I think we are able now to sign because we have the resources, and it should give us a little bit of time I think we will grow to be a much, much, much more visible sports brand also in the U.S., which, of course, is the midterm target. We have, every time we've spoken, talked a lot about innovation. I think many of you thought we were lacking innovation. I think I've told you that I disagree. But of course, to bring ideas and concepts to commercial product takes some time. You see some of them here. We talked about the Evo 3, world's fastest shoe for Marathon. We have told you that we need a foam for comfort, that's Hyperboost, which has just been launched and running and that you will see extension on. We'll have the F50 Hyperboost hitting the market next week, which is the lightest soccer shoe on the market. We have the Adizero Prime X EVO UltraCharge, which is a technology that people have never seen before. We have the hybrid training shoe. And then we have something that we're really proud of. We have built the first adaptive shoe, which is a running shoe for the adaptive athlete or some would call it athletes with disabilities. And again, the reaction to this from parents, for example, with the Down syndrome has been fantastic. And we are working very, very close with these athletes then to make them better athletes and also give them much, much, much more comfort when they do sport. And then the whole printed technology, you know we have a Climacool printed shoes there for the leisure wear, cool stuff that should work or that works. Now we are taking the technologies also in the stadium and on the on the arena. So you will see basketball shoes and soccer shoes now being printed for the athlete, which is a very, very cool concept and I think just the start of what you will see for the future. So again, the whole performance footwear is, of course, important for us. And I do think that you will see that the pipeline is really, really good. And that many of the things that are coming out of innovation pipeline for the athlete is also then going commercial, which, of course, at the end of the day, is the reason why we're doing it. But it's not only footwear, it's also apparel. Yes, I think innovation in apparel has been smaller in general in the industry. But if you watched the Marathon in London, you would have seen that our athlete was either running in the Climacool what you see here with kind of the bubbles in the material, which helps them keep cool longer or in the Techfit suit or combinations, which you see here with -- these are all technologies that we have developed together with the athletes to make them better. And of course, they will also then show up in commercial products. For other sports, it's the combination of cooling or heating, depending on what sports you are. And if you watch Formula 1, you must have seen the coolness system that George and Kimi is using. And I think you will see some of that also even we get into World Cup, which we know will be very, very, very, very Hot. So innovation was important. I think the visibility of what we did in the weekend will, of course, also help us when it gets to the commerciality. And we feel that we have a great pipeline, and that's why we are going to invite you in September. I think it's the 23rd and the 24th, where we will show you from the lab to the commerciality, what we're working on and not hide anything because you will not tell anybody. But we will show the confidence we have also after the World Cup to be present at all sports events going forward with very innovative and competitive products. One thing that we have not been good at, we've talked about this before, is comfort. I think that all the brands have been much, much better in actually translating comfort into performance and lifestyle. We talked to you that Adi did that great 10, 15 years ago with Boost, which was the most comfortable mid-sole material. Remember, Adi Boost, you remember NMD. You also remember that [indiscernible] all successful running silhouette had Boost in them. Problem with Boost was that it was too heavy. That's why the brief was make a boost that is light, and that's Hyperboost. We launched the first generation of Hyperboost Edge 4 weeks ago, smaller volumes, but great reaction. And you will start to see colors and more models with Hyperboost coming to the market as we go, both in the performance area and in the lifestyle area. And then finally, when it gets to comfort, an area that no one is really talking about, but as activity is huge and that is walking, we will now build walking shoes, and I'm not talking about competitive walking. I'm talking about what people normally do and build specific products for the needs of that activity and make sure that walking becomes a category, a, that builds product at the high end, but also, of course, also on the commercial end, and you see some examples on it on the screen behind me. That was performance. And then lifestyle, then in your area, saying growing then probably only 6%. We are actually happy with that. You see the split between Originals and Sportswear almost the same, 7% and 5%. We clearly see that lifestyle footwear has a more difficult time, and I explained it with probably a lack of newness too much inventory of certain brands and high discounting. But therefore, we see a boom in apparel, and we are extremely happy with that development. We still feel that we, in combination of what you know, Terrace and the extension of court and all the work we have done on running lifestyle have the best lifestyle offer out there. And we still have great sell-throughs, and we feel that we have the pipeline what we need. But we also then have to manage inventory according to what we see in the market and try not to jump on the discount wagon. And that's why the -- what should I say, growth rate probably is a little bit limited by that. If you then look into extension of franchises, I think we've been good at that or the team has been good. You see here that the Samba has gone into Mary Jane constructions, which are flying, and that's an area where we don't have enough. We talked about low profile, and you see here Ballerina constructions that are low profile are flying. We know the whole retro running side in Adistar Control, also the takedowns. And then you know that our most successful running shoe in volume now is the SL which started out as a performance shoe, extremely comfortable with a very fast look, has become a double-digit volume pairs that we're now extending into, I would say, different closure system like slippers into different materials, also waterproof and that is becoming a whole franchise of a group of shoe. And then to the right side is what we have done with soccer culture. We are putting soccer uppers on, I would say, different technology bottoms. This has not been a major commercial side yet, but we clearly start to see that as we go to the World Cup, the interest for this is getting more and more, and they will be included now in many campaigns. So the visibility will be bigger. Then apparel, I'm extremely proud of what the team has done. If you think about how we looked in apparel 3 years ago, it was basically cotton and polyester and I would say, boring. That's why we also said that the industry was lacking interest and there was, I would say, competitors from fast fashion, and there was a lot of price battles on commodities like the black hoodie with your logo on. So the investment here has been in materials. It's been in, I would say, silhouettes. It's been a combination of global concepts and local concepts and bringing them across the globe. And also here, clearly leading the different looks and the different trends, digital and then commercialize them also into brick-and-mortar as we go. And you see some of those looks. It's also clear that she is leading in this area with her fashion eye and that we have targeted her very, very, very clearly in our communication. Collaborations be made mostly for footwear, but now also in apparel and not license that you see it, but also with partners when it gets to looks. We have a great process with ASOS, where we launched ideas together and then launch them to fashion shows and then commercialize them. We have also in the U.K. with Molly-Mae fantastic success. And then we have many global/local cooperations where we do either very exclusive looks, exclusive collections or we combine in line with different partners. And this model is bringing a lot of freshness in the different marketplaces. We talked about the lack of number of footwear trends in the market. Therefore, the need to do takedowns. I know some people dislike it, but I don't see an alternative, and I'm proud of it. And we're continuing doing that. And we now are also merging the product teams in a way that the access from the top to the bottom is seamless, so we can much, much quicker agree upon what the segmentation and the distribution are from different sites. It's like that in footwear, but it's also the same in apparel. You see here examples what we're doing in originals and then we take it down to what we call Essentials. -- but also in materials. When we started with denim, it was maybe a couple of thousand pieces and then it was extended in originals. And then to get that look wider in the globe, it's also been taken down into the sportswear range. And of course, then you get the multiplier. And we all know that trends goes much faster today than they used to do. Not only do we do this in product, but also in marketing. Here, you see a beautiful Thomas Muller doing a culture wear thing for DFB, Originals. But then at the same time, he's part of a campaign exclusive for Deichmann because of his popularity and is playing this being Thomas Muller in both areas, and it works very, very fine. So to summarize, we're very happy with the first quarter. We are very happy with the team's work, both globally in the machine, but also in the marketplaces. We think we delivered to you what we have promised. And what that all is in more details is now up to Harm. So I'm handing the clicker over to you. Harm Ohlmeyer: Thank you, Bjorn, and good afternoon, good morning from my side as well. And as always, I want to continue with some puts and takes of the financial update when it comes to the P&L and to the balance sheet. And as always, I'll start on the top of the P&L with the net sales. And again, 14% currency neutral or reported 7% in nominal terms. It's a great quarter. And as I said earlier, there's headwind from the currencies, but that headwind should ease quarter-by-quarter as we believe for the full year, it's probably more like 3% to 4% for the full year. But I also want to reiterate the quality of that 14%. Of course, there's a lot of World Cup business in there. But at the same time, if you're growing 22% in D2C, that also shows you what the quality of that top line is. And when we go to the gross profit, I want to give you some more details. This time, it's a very, very easy bridge because we can get lost in a lot of details on the green bar. At the end of the day, the underlying business is improving compared to last year because pricing is still slightly up, discounting is under control. And in the business mix, overall, you have category mix, you have market mix, you have channel mix. You have product mix, everything is in there, but everything is going up there as well. And then when it comes to product cost and freight, it's pretty much flat and normalized. And then it comes down to the 2 elements that we also mentioned in the full year results when we gave our guidance, it's FX. And yes, U.S. dollar is positive, but there are other currencies. And luckily or from that point of view, not so good. These businesses are pretty big, meanwhile, whether it's in Turkey or in Argentina or in Japan, and we are growing nicely. So that has a negative impact. And of course, the U.S. tariffs did not exist in Q1 last year. Both these red or pink bars are amounting around EUR 50 million to give you an idea, and that nets up to 100 basis points lower on the gross margin, resulting to 51.1% gross margin, which again shows the quality of our quarter and is definitely a very good result. When we go further down the P&L, we look first at marketing. And yes, very clearly, we're not saving ourselves to profitability with 11.5% on marketing and only a growth of 1%. But we actually -- if we save something, we save for the next quarter because we want to make sure that we are showing up very, very well during the World Cup that we win that event and use it as a platform for the brand overall, but definitely also for the North American business. So I expect that marketing is definitely going up in the second quarter, and we're not saving ourselves to profitability. Where we will continue to be disciplined is on the operating overheads, only going up 3%, and that 3% is credit to being very disciplined in every cost item, and it's very much attributed to an annualized effect of retail stores that we opened last year or some expansion in Q1. And then as we are growing volume as well, not just growing through prices, we need to move more volume and some supply chain costs that are going up as well. So pretty much annualized retail and supply chain cost is the only increase. The rest of the business is run very, very disciplined and pretty happy how we are moving forward there. Then we go -- and of course, we talked about the operating profit, the EUR 705 million or 10.7%. So again, good progress with almost EUR 100 million, up in absolute terms compared to last year. When we go below the line, yes, financial expenses in net are up. The main reason for that is that we have less interest income because our cash is reduced. That was planned. Of course, the share buyback has something to do with that one as well, but that is also something that will normalize over the next couple of quarters. There's some seasonality in there. Income taxes have normalized. I talked about it at the end of last year already. It is around 25% exactly in Q1 '26, and that leads to a net income of EUR 484 million or 11% up to last year, the same quarter and basic earnings per share is pretty much the same. When it comes to the inventories, I want to click -- do a double-click on this one. Yes, it's up 13% or 17% currency neutral. But as Bjorn indicated already, we made a conscious decision and in hindsight, definitely the right decision to invest our cash into our working capital and primarily in inventory to have availability. Without that availability and the early deliveries in inventory, we would not have been able to grow 14% in the first quarter, and we would not have been able to grow 22% in our direct-to-consumer business. So definitely in hindsight, the right decision to do that. And of course, we will work through that number through the next couple of quarters, and I was on record on the last quarter that this will stabilize, and it will definitely further go down in the second half as the World Cup is hopefully getting successfully behind us in the third quarter. Linked to our business also in our wholesale accounts, our receivables are up by 11% on currency with 16%, a little bit more than the business growth that you have seen. There's also some timing in there and accounts payable are definitely under control linked to what we are sourcing with our factories. So overall, investment into the working capital. You see it up 21% or currency neutral 26%. When we double-click on this one as well. I think the ratio is more important than the absolute number. You see that we are building up and we have invested in our working capital, primarily in the inventory. Yes, I'm not concerned about it. That was a strategic decision that we made. But rest assured, over time, we will get that below 23%. And of course, looking into next year, I'm pretty sure we will approach something around 21% again, which is linked to what I always said being a healthy company. Most importantly, some of the inventory, of course, is very, very healthy when it comes to the aging. When it comes to cash and cash equivalents, of course, linked to investment into the working capital and also the share buyback of EUR 500 million is reflected in our cash position in the balance sheet, but also there, no surprises. And of course, when I talk about the share buyback, which is my last chart, we have completed the EUR 500 million of the share buyback. We bought back 3.3 million units of share, whether it was a perfect timing or not, but that's what we have contributed, and we are planning to contribute another EUR 500 million for the quarters to come. And of course, we are planning and proposing for the Annual Shareholders Meeting around EUR 500 million in dividend. So overall, just in '26, we'll return to shareholders EUR 1.5 billion in cash. And with that, I hand over to Bjorn again for an update on where we're heading into the future. Bjorn Gulden: Thanks, Harm. I think what I'm showing you now will be a little bit repetitive. But as I said, continuity is good. We clearly say we want to be a global brand with a local mindset. That is very, very, very important for us. I hope you agree that everything we should do should focus on the athlete or the consumer. This has been the strength of adidas in many areas, and it should be it again. To be close to the consumer, it is important that the markets today are not all the same. And we have different opportunities in different markets, both from a sourcing point of view, from a marketing point of view, but also physically of what product is trending and what sports are happening. And we strongly believe that we need to put even more responsible close to the consumer, meaning into the market, and that means that they also have to be accountable for the commercial success in a much, much stronger way. Included in that is then to have creation centers who can create products for the market where that makes sense. And that is especially the case in some of the Asian markets, especially in China, but also in Japan. And of course, it is very important to have a creation sense in the U.S. because we all know that the differences between the U.S. and Europe are bigger than people would like it to be. There will always be a global headquarter in Herzogenaurach, rumors of people trying to tell that, that's not the case. That is bulls***. This is the home of the brand, and this is where headquarter will sit. There will be the center for innovation, for global concept for systems and the strategy and the senior management. But I do hope that the time when you're sitting in an office in Herzogenaurach of deciding everything, what should happen, that is not possible for a brand that is currently EUR 25 billion. This means that we don't only need the best people in headquarter. We also need extremely strong teams in the local markets. And I do think I can report to you that the teams we're currently having both from a knowledge, from an experience, from an energy is I would say, the best that you can get. So we feel we are on a very, very good way of executing this strategy. Needless to say, should the trends and the sports merge to be the same, then, of course, we will not hinder that. And to the people that are afraid of efficiencies, I think efficiencies in product you measure on gross margin and not on a spreadsheet, which you can't. So I would just like to put that on record. We have the vision to be the #1 sports brand in all markets, of course, knowing that we will not achieve that, but all our country managers and market leaders should have that ambition with one exception that is in the U.S., where, of course, the market leader is so far ahead of us that we should first focus to get to EUR 10 billion, which I think you agree upon, and I know that our local management agrees upon. The locally relevant products that you see here showcases in apparel some of these differences. And I'm happy to report that all these products that were designed and initially launched locally have then gone globally, which is the beauty of having creativity happening based on different cultures because some of these cultures then actually move across regions. And our system puts all these concepts up on a platform so all markets can buy whatever they want out of different regional concepts, which again is the beauty of this. It's the same when it gets to activations. Of course, there are global activations. You would see World Cup being activated brand-wise globally, but even there, then taken down to the different markets on a more local basis. And I think you agree, different markets and different consumers are being motivated by different things. And we are allocating resources from globally to the local so that we can again activate closer to the consumer. And again, the energy that we have achieved with this kind of thinking compared to what we had before is really, really, really high. That was a lot of positive things. And then we also have to admit that when you read the news, there is a lot of negative things. Of course, global conflicts, there has been many things happening over the last years and also this year that we would have hoped it would not happen. But you also see that the industry is reacting to different things, and there's quite some changes in management and also in layoffs in many companies. And on top of all that, we know that AI will come in and actually be a major change driver for how we are going to do business. And the reason I'm saying this is that agility and the willingness to adopt your model based on what's happening in the world, I think, is going to be crucial, not only for us, but I think on any global company that is working on consumer goods. And I hope you agree because I don't see any other alternative. And I do think when you see what we're doing, we have been able to generate this attitude, and I think the resistance is getting less and less to this road. 2026 is a great year of sports, of course, especially because of World Cup, it's the first time that I have seen a real culture coming around World Cup when it gets to the product side, not only from the fans. The games will be great. You probably have counted the different teams. We will have 14 teams playing in the tournament. I think we've been very, very lucky with the product that we have designed, at least the reaction is great, both for home and away. I guess around 1/3 of the players in the World Cup will bear our shoes. And as you know, we have the ball, so all the players will play with our ball. So the brand will be exceptionally visible during the tournament on the pitch. But as I said, not only on the pitch, the fan, you will see the jerseys, you start to see it already. You also see a lot of bring backs. That's what I mean by the culture, a lot of fans, but not fast, even not fast, are buying into all soccer looks. So there's a lot more football on the different streets than you've ever seen before. And as I said, we did a big investment in both design and development of product, both within soccer, but also in originals. And we did bring a lot of this newness into our warehouses. So we have a great, what should I say, group of product ready to go, and you will have newness in the market every week from now until the tournaments end. We live under the spirit of You Got This. We are adding We Got This for the World Cup because we feel we are very well prepared and really looking forward to it. That means also with the first quarter being as it is and everything that we can see, we will keep our guidance currently for the year. We talked about the time after the 4 years, and we said that '27 and '28, we would like to be a successful company that will continue to improve our business model and our setup to this new world. That means trying to decrease complexity in the way we go to market. and of course, optimize the processes, the systems and our organization and also, I think, be very, very conscious on where we can put AI into the business. That means that we needed to showcase that we're successful short term because if not, you get upset with us, but then also make sure that the platform that we're building with what we do short term also works for the long term. And that means that when you look into the future, we believe that we continue to add around EUR 2 billion in sales every year and that we can take some of that growth and put it into the bottom line, which then will give you a 10%, 10% plus EBIT. I would like to make one comment about the '26 numbers that we haven't written about, and that is the tariffs where you know that the Supreme Court have made a ruling that certain of the tariffs that were not bilateral should be paid back. I think we have told you before that, that is around EUR 300 million that we can account for. There are some uncertainties in some of these numbers. We have not put that into neither our numbers. So we haven't booked any or we have not put anything into our guidance. So just so you know that, and then we will see how things develop. The last thing is a beautiful picture of the German Bundesliga. We did a deal yesterday that's not in the package. We signed an agreement with the German League, Bundesliga until 2034, where we'll be their partners on many, many things, including the ball. And that's done not normally with a payment, but it's actually done with the credit that we've given to them. So it's a new way of working together. And as you know, the Bundesliga plays every week. It's maybe the highest quality league when it gets to the stadiums, the attendance and maybe together with the Premier League, the best league also in the quality, at least now when you look at Champions League. And that's why we are extremely proud that we were able to do that. Harm and the finance people have worked on this model for a while. And yesterday, we were then able to actually sign it. So another addition to our commitment to sports and to also soccer. So with that, I hand back to Sebastian. Sebastian Steffen: Yes. Thanks very much, Bjorn. Thanks very much, Harm. Mara, we're now ready to take questions. Operator: [Operator Instructions] The first question comes from the line of Aneesha Sherman from Bernstein Societe Generale. Aneesha Sherman: I have two, please. So Bjorn, I want to start with your very last slide. You expect to grow high single digits in '27 and '28. And so that would be above-market growth for 5 years in a row and double digit and then high single digit for 5 years in a row. So I understand there's a low base benefit as you're recapturing lost share, but equally, the competitive environment is getting more intense. Can you talk about what drives your confidence that you can continue to gain share for the next 3 years, making it 5 years in a row of share gains? And then one for Harm, please. So your Q1 margin came in at the high end of that high single-digit guidance. And as you go through the remainder of the year, some of those Q1 headwinds are either going to roll off or disappear tariffs, FX, and you've said underlying margins are improving. So how do you think about the remainder of the year? Should we expect a gradual improvement in margins versus where you are in Q1? Bjorn Gulden: Yes. I think that when we analyze the market, we go market by market, category by category, we identify this potential. And again, the potential is, of course, there in a world that stabilizes a little bit. But we see growth potential both in the performance side, apparel and footwear and the same in lifestyle in all the markets we talk about. And then there are certain markets that we think will grow much faster than maybe you think. And then there are markets where we see that we can take more share maybe quicker by doing some changes. So again, you never guarantee to get a EUR 2 billion growth every year, but this is a bottom-up approach from the markets. And I think this is also a change that this is not us sitting with a strategy group doing a spreadsheet, but it is the potential that the market leads see based on they getting the resources that they need. So again, you, of course, have never a guarantee that all these things will happen. There are volatility in many things, but we think that the brand we have the awareness we have, everything that we can measure on the upper and the mid-funnel when it gets to how people see our brand and then the pipeline of product we have, of course, not knowing what competition has, I agree with you. That's why we come up with these numbers. The other thing where I disagree, I know there are some colleagues of you that have said that sneakers are over and everything will be formal, and that's why the industry will go down. I don't think that gentleman is traveling a lot because the markets with the biggest populations are those who will grow the fastest because they are not even close to the saturation that maybe some of the Western markets are when it gets to the using sneaker in all, what should I say, aspects. And then I do think that the whole comfort area, don't forget that there aren't that many footwear brands in the world that are delivering, I would say, comfort. And with many Western population having an older consumer that wants very comfortable footwear, which means cushioning, which means breathability, which means comfort in general, I do think that our industry actually have even a bigger potential targeting that. That's why we even now dare to talk about walking as a category to also target that group. There's more people walking that are running, but nearly no one talks about it. So there's many, many pieces into this, what should I say, calculation. And then, of course, we are aware of that we need to do a good job. But at the same time, we don't think that we are doing a great, great job so that we don't see improvements, but we see a big opportunity in both categories, markets and the way we actually work with what we have. So we feel that this is the right way of indicating where we think we should land. Harm? Harm Ohlmeyer: Yes. On the gross margin or operating margin, very quick, Aneesha. First of all, we are not really managing every quarter perfectly or whatsoever, but we want to make sure that we are doing the right things, and that's also the reason why we are refraining from a quarterly guidance. But to answer your question, for sure, with the World Cup, we always said that the top line definitely will come in with higher growth rate in the first half versus the second half given the World Cup. Secondly, we always said that the gross margin will improve towards the second half, especially when it comes to the hedging that we have in the currencies. And then when it comes to the operating margin, yes, we had a very, very good start in Q1. You might know that Q1 and Q3 are always our bigger quarters. As I indicated earlier, we definitely want to make sure that we invest into the World Cup. So marketing will definitely go up in the second quarter. And then we all know that the fourth quarter is not the most profitable quarter. So this is where we are. But clearly, top line more in the first half, gross margin will improve in the second half. And then it depends quarter-on-quarter. We want to do the right thing. And the right thing is investing into the World Cup in the second quarter. That's pretty much where we are. Operator: Next question comes from the line of Adam Cochrane from Deutsche Bank. Adam Cochrane: I think it's almost fair to say great quarter on this occasion. Two questions from me. First of all, can you give any idea on how big the impact from Jersey football and the World Cup-related sales were in Q1? And are we still expecting 2Q to have a bigger impact on the top line than we saw in the first quarter? And then the second question is, you talked about maintaining tight inventory to your retail partners. Do you think that their sell-through has remained strong. And do you think there's been any limit on the sales that they could have generated by you sort of maintaining a tighter inventory position with your retail partners? And just to make sure, you're not keeping some of the best-selling products to sell via DTC rather than giving them to the wholesale partners. Bjorn Gulden: Well, your second question, do I think certain retailers could do more full price sales if they had more of our inventory? I would definitely say yes. But now you know there's a lot of deals in the marketplace, and I think many retailers have bought deals that have been discounting because people have been worried about not having a price aggressive enough offer and price aggressiveness in many markets means discounts. So there's always a, what should I say, wish, how you would like retailers to act. I think the proof is in our DTC numbers. When we have double-digit like-for-like growth in our own stores, I doubt that multi-branded retail has the same number. So that is obvious that if you had the right adidas product in your stores and have more of it instead for discounted, then you could have done more sales. But this sounds maybe arrogant and it's not meant to be it. It's just that's the way it is. And I guess any brand right now that feels they have a heat would say the same thing. To the issue of do you hold back some inventory and models DTC first, that would normally not be our strategy at all because we want to be the friend of the retailer. But it is true today that in the discounted environment, you might start to do that because you don't want to put a new shoe that has a full price launch and then put it into an environment where everything is minus 20 and especially if big brands having the best franchise is discounted, then it pulls everything down. So there is some truth to it. I wouldn't say this is substantial. But of course, we would, what should I say, defend the newness now in a different way than we would have done 18 months ago. The sales of World Cup product and now we need to be careful because I know your spreadsheet has all that is World Cup in addition and on top. I would say that the World Cup product that has been sold in our bookings in Q1 is around EUR 250 million ballpark plus/minus. I assume it will be the same in Q2. But now you have to remember, there's a lot of soccer culture product that is not World Cup product, but are still the lifestyle product or even performance products. So the soccer impact or the football impact as a trend is much bigger than the World Cup product. And of course, the math is not that, okay, you sell EUR 250 million World Cup products in Q2 and then next year, you do 0. That's not how it works. The idea in this is that we are establishing now a trend and a way of working with apparel, especially, but also a little bit shoes that builds over time a business that goes far beyond just an event. I think you agree that basketball did this for a long time. The basketball lifestyle coming out of America became a normal, I would say, almost commodity in the lifestyle side of sports fans and young people. We start to see that in football. And although some of this is an additional revenue right now that, yes, more Mexicans are buying the Mexican jersey than ever, and you can do those parallels in many markets, the soccer inspiration is going much, much wider than that. And you could just go back to Oasis last year when we did the merchandise with Oasis, it looked almost like it was a soccer program, but it wasn't, right? So the impact of football that you see is not booked only as World Cup and it's not a onetime wonder. So that's why we are not sitting being nervous saying that we cannot replace the sales next year, but it won't be -- it will probably be less Mexican jerseys unless they won the World Cup, but there will be enough soccer-inspired product and lifestyle and performance product to carry the ball also in the future. That is the plan, and we weigh into these plans. Operator: The next question comes from the line of Ed Aubin from Morgan Stanley. Edouard Aubin: So two questions for me, Bjorn, on the footwear and the sequential deceleration you mentioned. So maybe to start with the market dynamics, which you already talked about. And I think you mentioned lack of innovation and from your peers and elevated inventory, which led to discounting. You don't have a crystal ball, but you talk to a lot of people in the market, the retailers and you kind of, I assume, track the inventory of your competitors. So for how long, if you look at the next 9 to 12 months, how do you see the situation in terms of the competitive landscape, particularly in footwear? And then the second question related to that. So one thing, I guess, is the market dynamics. The other thing is the life cycle of some of your franchises in footwear? And would it be fair to say that performance was obviously up in footwear in Q1 and then lifestyle kind of flattish to down? And for how long, again, you don't have a crystal ball, but would you expect the drag from lifestyle footwear to continue? Bjorn Gulden: Well, the -- as to the visibility into competitors' inventory and the next 6 to 9 months, I wish I had that. I think that will be legal, so I don't. And I think this has to do with the attitude of competitors and are you going for your top line, or are you trying then to get more profitability? And I think that goes for the whole industry. I do think as a defense, I think all of us competitors also and retailers, of course, with the instability in the world with wars and conflicts and all that and supply chain issues and tariffs, of course, this uncertainty has also not helped. And I do think that people have guarded their top line by then making deals. I think the unfortunate thing by the deals is that if a supplier gives a discount to a retailer and it does it to more than one, they will start to discount because that's the competition and people are afraid and not selling. If one discount, we need to discount and then it's a spiral, it's always in the interest of all of us to try to avoid that. And I'm not saying that we have been or are perfect on it, but we've been very conscious about it, and you see that in our gross margin. And I do hope -- and I also believe that the big brands will get out of this because it doesn't bring anything, to be honest, neither on the retail side nor on the brand side over time. And if it gets a little bit of stability, so we actually know what the tariffs will be, then I think U.S. will also recover pretty quickly. I think the issues in Europe is a little more complicated because the European economy is currently not growing. And then depending on the oil price, I think demand by the consumer is down. And therefore, of course, then you need to adjust your offer so that you have enough, I would say, more commercial price points in your range. I think the uncertainty, actually, Europe is bigger than in the U.S. When it gets to our life cycle, we have on court. I think, as I said before, that, of course, Terrace, those 3 models that we talked about very often, Samba, Gazelle and Spezial has, of course, been the backbone, but we have extended that into the campus into the superstar. And we have talked very openly that we believe that the Stan Smith will get a lot of demand with the plans that we have for it. So we are not afraid of that we will not continue to grow on the court side. And you see the innovation stream we have on -- if it's silhouettes with the Mary Jane or Ballerinas or materials. I think we have a setup right now with a great team, both in the markets, especially here in Herzo and in L.A., but also in the factories that can turn very quickly around depending on what is selling. So we feel we are in good shape, at least compared to competitors. I think in the running lifestyle area, we are dependent on 2 things. We have not been leading there because other brands have done an earlier and better, what should I say, job than us. And of course, our success in court has, of course, hindered us a little bit in getting the same momentum in running lifestyle. But we have tried now with everything that comes in retro. And then now we have 3 beautiful things. We have the EVO SL that also goes on the street, which is a huge money bringer, not only for us, but also for the trade, and we're building around that. So it's a whole group of shoes. We have the introduction of Hyperboost, which again is the most comfortable foam, which we will develop into many, what should I say, models. And because comfort is so important, we feel very, very, what should I say, sure that we're on to something at least from the mid- to the high price that will be successful. And then we do hope, to be very honest with you, that the success we're having in high-end running, and you don't see it only that we're winning marathons, but the usage of adidas shoes in races, if it is the Boston Marathon or Long Marathon has in the last 3 years, almost tripled, I think. And of course, there is a hope that, that consumer and that look is also then going more on the street. So there's many elements right now that makes us feel optimistic. And of course, the 30% growth in running is also coming from that these things are happening. So again, we feel that we're doing, or our people are doing a lot of good stuff in a market that right now, I think, is peaking on volatility, to be honest. And then as always in life, sometimes there is some good news and then everybody can breathe a little bit. I don't remember that we had supply issues in Vietnam, I think just after COVID, there was a supply issue. So everybody had too little newness and then suddenly no one discounted and we all made money. And I do think when I look at least at our purchasing, we have reacted to it. When I hear the factories, I think orders are down with most brands. So it looks to me that there is a discipline on the way that would help a little bit. But again, I don't have a crystal ball because then I would probably sell and buy shares, right, like you do. Operator: The next question comes from the line of Jurgen Kolb from Kepler Cheuvreux. Jurgen Kolb: And obviously, big congrats to the performance in running. The Sub2 was a major breakthrough and obviously widely covered very strong performance. Two question areas, really, first one on the whole cost situation. Maybe you could talk about the individual cost lines, the whole cocktail of being it raw material prices, transport costs, tariffs, obviously, what do you see in terms of coming towards you for maybe the second half or then even 2027? Do you see maybe the first issues on lack of availability of raw materials on the producer side? And secondly, recently, you obviously added soccer teams, you expanded in Formula 1, added additional U.S. universities, the new partnership with the Bundesliga now. Where do you see additional white spots, Bjorn, for adidas? You touched on it a little bit, basketball, obviously, both in the U.S., but apparently also outside of the U.S. But maybe additional thoughts on where you think you need to bring adidas even more to the forefront in performance. Bjorn Gulden: Well, on the cost side, it's a little bit looking into that crystal ball again. There is no doubt that the current oil price and the issues there are driving discussion about price on materials, components and also on transportation. We haven't seen any increase on product prices yet because you have to remember, we negotiate this way upfront and the material sourcing of the factories are also happening on a longer base than the end product. And then everybody is, of course, hoping that the oil comes down to a different level. So there is no certainty on this. The only certainty we have is that there are certain off charters on transportation, especially, of course, on sea for us. Air, you can almost forget because you wouldn't fly things now and you have. You remember that most air transport was going through Middle East. So it's not really that easy anymore to move air at all. We have for the Middle East region, where we have 10 markets that are affected by the war, of course, problem also with deliveries, I mean, to deliver product in. And then, of course, we also have issues in the marketplaces with depending on how the activities are that stores are closed and of course, also that consumers are not actually walking in the streets and shopping. So there is a negativity in that area that is double, a, from a transportation point of view; and b, from a real business point of view. And again, we, of course, all hope that the change in the world power or improvement in the world power will cause these conflicts to end. So I'm not sure. I assume that when we talk to you the next 4, 8 weeks, we will have more the different possible variances when it gets to cost prices because I think we will start then to price products in a buying price based on what happens if the oil price is $200 and what happens if it's $100 and then start to build a fair relationship with our suppliers because that is, of course, what we have to do. We were together with all our factories in Vietnam 2 weeks ago. And of course, this was a topic. And as always, I think the strategy for both them and us is then to find common solutions that are transparent like we did with the tariffs. And -- but we're not at the stage yet where this is specific. And in the product that have hit our warehouse until now, there is no increases except for certain upcharges on transportation because of contracts where there is a possibility to raise oil charges. That's the only thing. White spots, I think in general, I would have liked to connect more to the male consumer in lifestyle footwear, especially in the U.S. I think we have connected with her, I think, all over the world in a very good way, lifestyle wise. I think we're connecting to her now both in footwear and apparel, and there's almost no blind spots, I think, from a geography. I think in the U.S., it's obvious that that's where we have most blind spots and the blind spots are bigger on the male side than on the female side. And I think that's back again that we have not qualified over time to be in the American sports. So there is a natural move for the kid and the family to go to our brand. It's much easier for them to go to more American brand, and I think you know who I'm talking about. And of course, that will take time. When it gets to sports, our clear, clear challenge has been to improve our running. You know this. We talked about it 3 years ago, and we admitted that we had a long way to go. I think we have been successful in what is visible, but it's obvious that from a distribution and connecting to the running community and building our business into not only the top end, but also to the everyday runner and into the comfort runner, there's still plenty of room to grow, and it's also a growing market. So of course, it has focus for many, but I don't think we need to hide for competition. And then the comfort area also into maybe boring area like walking is an area that we dare to talk about because we see a huge demand and that will also continue. I think that's how we have to leave it. And then there is so many areas, if it's in teamwear for teams in all kinds of sports, if it's in specialty sports, if it's distribution in some markets in golf. I mean, the list of opportunities that we have is much longer than the growth that we are trying to achieve. So there's a lot of white spot still. But currently, it is to focus on what we currently focus on and then adjust that as we go. Of course license gear. Jurgen Kolb: Big sales generator. Bjorn Gulden: I know. Operator: The next question comes from Geoff Lowery from Rothschild & Co Redburn. Geoff Lowery: Just one question for Harm really. I was really struck by the very tight control of overhead, particularly in the context of how strong your DTC growth was and presumably the incremental costs that come from servicing online growth. Can you help us understand how far you are along this journey of being able to leverage your overhead and how much there is more to go for in terms of jaws between cost and sales growth in 2027 and 2028, please? Harm Ohlmeyer: Geoff, good question. I mean, first and foremost, we always said that we will not be declining in absolute numbers on the cost side. We always talked about leverage, right? And that's why I said there's an annualization of retail stores. Of course, we are moving more volume, so there are supply chain costs. But we also always said we have an infrastructure in place that was built for a EUR 30 billion business. So yes, we add a warehouse here and there. But we also believe from an organizational point of view, we have what it needs. And now with an operating model that is more local, it's more like empowering the teams to make the right decisions and avoiding to aligning and being in circles, right? And that's why I believe we also did some changes in a very quiet way also in the headquarter in the last couple of years, and we see the benefits of that now how we control the cost. So you should continue to see in '27 and '28 that in absolute terms, we are growing, but we want to see more leverage. And the main reason for that is that we have the infrastructure from an organizational point of view, also from a from a digital infrastructure to leverage that, we see high single-digit growth, and that's what you should expect. It will not be linear every quarter the same because it depends on the shape of the business. But we are very confident that also the '27, '28, we will be able to leverage our operating overhead line. Operator: The next question comes from the line of Warwick Okines from BNP Paribas. Alexander Richard Okines: I'm going to ask a short-term question, please. Given that the Middle East conflict started midway through the quarter, it would be very helpful if you could comment on the quarter exit rate or what you've seen in April, please? And the second one is that in those trade partners where your competitors are selling in aggressively using discounts, what are you actively able to do to maintain shelf space and market share? Bjorn Gulden: Well, I do think that if many people are aggressively making deals that, of course, you cannot protect shelf space. So that is the trade-off that you're having. But I do think as far as we can grow like we are currently doing with the gross margin, then there's an argument not to jump on that boat, right? So that's the argument. And hopefully -- and I assume this will happen. I don't think people will continue to do this because I don't think it helps neither the retailers doing it, to be honest, nor the brands. And we've all been in situation here or in other brands where we had that choice either in the marketplace or maybe even globally. And you know that it is a difficult decision. So it's obvious that in certain areas, we would have lost shelf space. But the good thing is that then we have catched that sale ourselves in DTC by having more consumer than buying our brand at full price or with a less discount than neither digital or brick-and-mortar. So, so far, the brand heat and the offer has kind of balanced it. But there, of course, is no guarantee for that, to be honest. When it gets to the Middle East, it's, of course, difficult to do anything linear, but I think we could say we have lost around EUR 30 million in sales in the quarter, up and down. And of course, that's mainly in the last month. So if you take that as an indicator of how it could be, you could lose EUR 100 million in sales in next quarter if there's no change. And of course, you're losing then the full margin on that and the cost of doing business is expensive. So there is some pressure, although not huge, huge, huge, but it could easily be EUR 50 million, EUR 60 million loss or profit in next quarter should we not get out of this. But again, don't take that number and put it into the spreadsheet because it's not -- there's not any proof that this is a number, but that could happen, right? Because it's kind of obvious if you had sales there last year and no sales in the store this year, then that's a loss. And it's also needless to tell that when the government telling you to not run the stores or your management says it's not safe, then we will close it. And it's also obvious that it's more expensive now to get products into the region. So there are negativities, but in the big scheme of thing, the emerging markets group are then focusing first on the safety of our people, which is important. And then secondly, then to get growth and profitability out of those regions that are not affected. So there's always ways of counter negative things. But this one was, of course, not planned. And of course, we are mainly concerned every morning that everybody is well, and we will continue to do that, which is more important. Harm Ohlmeyer: I'll probably add a little bit to that, Warwick. First of all, we need to summarize what Bjorn talked about is, of course, the gross impact when you talk about the Middle East, but the Middle East is part of the overall emerging markets. And of course, there's other opportunities outside of the Middle East. And then just for -- whether you put in a spreadsheet or not and don't do it, just as a percentage of the total business, we are talking in the low single digit when it comes to the Middle East, right? So as sad as it is and as much as we hope that it comes to an end very quickly to normalize our business, the low single digit of our total business. And again, the emerging market is not just the Middle East. There are more opportunities outside of the Middle East. Operator: The next question comes from the line of Robert Karkonski from UBS. Robert Krankowski: Two questions from me, please. So first one will be on EBIT margin. You reiterated your target of around 10% by 2027, which implies significant gross margin expansion. When we think about this gross margin ambition and then paying this target and applying similar framework that you did in Q1, so underlying gross margin expansion, do you assume to see it, so excluding any FX hedge benefits that you're assuming in 2027? And the second question would be just a follow-up on the current trends. We talked about the Middle East, but what do you see in other regions, Europe, North America, LatAm and in your DTC, but also in the wholesale, like I appreciate that probably your momentum is so strong that some of the wholesalers might plan to put some reorders, I guess, getting closer to Q2? Or do you see maybe some level of cautiousness from them given the volatility in the market? Bjorn Gulden: I think when it gets to the wholesalers, it's very different from region to region and also different from the different categories. So of course, we hope for reorders on things that are selling well. But as I said to you, in a market that is uncertain because of the general economy and oil prices, it is, of course, also important for us to be, I would say, conservative in the way we plan that. And as I said, as long as the DTC demand is so high, we are not pressuring any retail partners to take more that they want to take. And I think, again, that any retail partner now in their buys are trying to shorten their open to buy to clean their inventory and then do a new start at the point in time depending on where they're sitting. And it's also obvious that the issue with discounting and what should I say, not great sell-throughs for many retailers is mostly in Europe and in America. I think any other market that we look upon are much more optimistic for different reasons. So I think we will leave it with that. The beauty of having a wholesale business, brick-and-mortar retail and e-com is, of course, that if you have something good, then you can market it, there are 3 ways of actually selling it. And I do think as much as I would like to take more share with many retail partners, of course, it's just sometimes it doesn't make sense to push for it because starting to discount is almost like a drug because if you start with it, how do you get out of it. And again, we are not market leader in all categories. And of course, we need to follow what is then happening in certain markets. So I think that's the only answer I can give you. I don't know if you want to talk about the EBIT, Harm? Harm Ohlmeyer: Yes. On the EBIT, of course, it's not such a steep increase from '26 to '27. But rest assured, we are fully on plan to hit the 10% EBIT in '27. And we're not going to count just on what we're hedging in the U.S. dollar whatsoever because we don't know what's happening with the oil price, as Bjorn said. So the margin is not the main driver. we have a non-World Cup event next year. And of course, as I said earlier, we will spend significantly more in the second quarter than we did in the first quarter. That's why we don't need to repeat next year. And as I said to Jeff as well, we keep leveraging the operating overhead infrastructure that we have. So what you should expect in '27 over '26, of course, the solid top line that we can leverage the marketing line without the World Cup and more growth, we're leveraging operating overheads again. And then hopefully, we have a less promotional environment also on the lifestyle footwear, as Bjorn talked about, as other competitors have ordered apparently less. So let's see how we're getting into '27, but we are definitely not relying on the currencies because they come and go as you learned in the last 15 months, and we need to have a sustainable business regardless of currencies. Of course, as you know, the dollar will help going into next year. We are well hedged, and we will use it in the right way. Operator: Next question comes from the line of Monique Pollard from Citi. Monique Pollard: Just a couple for me, if I can. The first one was just if you could give us an update potentially Bjorn, on how you're doing in the North American running specialty stores. I know this was a key area of focus and just given how strong that running business has been doing and the halo effect, I'm sure you'll get from the sub-two-hour London Marathon Times, how that's progressing. And the second question was just on product pricing, probably more one for second half this year into 2027 for you, Harm. Just given that 99% of your polyester is actually recycled, what I was trying to understand is, does the pricing for the recycled polyester move one for one with the virgin and move with the oil prices or not so much? Bjorn Gulden: I started answering you without a microphone. So I said something brilliant. I hope I repeat it. The question about running specialty in U.S. is a good one because we were basically gone. I think 3 years ago, we were measuring a market share below 1%. And of course, to build that business back again is not only depend on the product, but it's to get back in the running community, having people on the road and all that. So we have a huge job to do still, but all the fundamentals are now in place. We have top shoes, and you're absolutely right. Of course, the demand for having us in the store with our best product is now fueled by the success. And that started already, I would say, 2 years ago with the success of the Auto models, but now it's being fueled even more. I think what we were missing was an offer in the comfort running that was competitive with some of our other competitors. Now we have it. So I can assure you that the interest from running specialty is at a complete different level. But if you go into many areas of the U.S. and you see stores, the visibility is not close to what it should be. So a huge potential and accept that we have not done a great job for a long period of time, but also accept that it takes time to build back the trust and, of course, the relationship, and I have the full what should I say trust also that the local teams are doing that. Your second question on pricing, I mean, yes, we try to use 100% recycled polyester. And we even in the future, are trying to use polyester coming from polyester, meaning textile for textile, which is the new way of recycling, not from bottles and other plastic product. And I think it's fair to say that when oil prices and I would say, new polyester is going up in price, the market coincidentally for recycling goes up the same amount. You know how the mechanics work. So we don't think there will be any price, what should I say, advantage on recycled compared to virgin. It could even be the opposite, to be honest with you, because that's how sellers work. So I think that's the answer to it. I think we all hope, and I think we all know that the world needs that oil prices comes down, right? Because I think that is now fueling even more conflicts and frustration around the world. So let's hope that the smartest people on the planet gets together and find solution to the conflicts because then we will not have this issue. And I think also the good thing is that because people believe that there are solutions, the price increases that you would maybe have seen 5, 6 years ago immediately also on components and materials are now currently more on a -- this could happen if A, B, C, D and there is more hypothetical different scenarios. But again, we are running very, very close to time lines where prices will actually start to get into the product. So I think that's all I can say. Operator: The next question is from Andreas Riemann from ODDO BHF. Andreas Riemann: Two questions, one for Harm on the free cash flow. Actually, you didn't mention it in the presentation, but it looks like free cash flow was up. Maybe you can shed more light on the free cash flow in Q1. And what would be your free cash flow guidance roughly for full year '26, assuming EBIT of EUR 2.3 billion and assuming inventory improvement? And the second one on your top line guidance actually for full year '26. So we saw 14% growth in Q1. Was it actually in line with your own plan and you expect mid-single-digit growth in H2? Or was Q1 above and you now want to keep this buffer for the remainder of the year? These would be my two questions. Bjorn Gulden: There is no buffers in our industry. I think the 14% to be very honest with you, is above what we planned initially. But then I also told you that we did take product into the markets early. So there was, of course, a possibility to deliver if there was demand. But we haven't pulled everything -- anything forward to make it look better than it is. The growth that has been in addition has not been on the wholesale business. It's been on DTC, right? So if you have product in the store and it's being bought, then planning retail is difficult. And I can assure you that we didn't plan the like-for-like as high as it is. So that is, of course, again, an assurance that we're doing something right, and that is above what we expected. I would say the wholesale business, I think we told you a while ago that in the middle of last summer when there was a lot of uncertainty, the order book for the beginning of this year was low. But that order book actually built into a decent level. And I think the 8% you saw in wholesale was pretty much where we expected to land. So the upside has been on DTC, both in brick-and-mortar and especially on e-comm. I think that would be the best answer. And then harm, cash flow is your area. Harm Ohlmeyer: Yes, Andreas, good question. And yes, indeed, we have been slightly down in the first quarter when it comes to the free cash flow, and it's improving quarter-by-quarter, but it's a story of 2 halves, definitely much, much better in the second half as we had to and was the right thing to invest into our working capital that will flip for the second half. And then for the full year, you should assume that we convert our net income that we're generating EUR 1.3 billion profit guidance by a factor of 1. So I would say around EUR 1.5 billion is probably a good number, whether it's EUR 100 million more, EUR 100 million less, we don't know. But assume that we are converting roughly the net income that we're generating for the full year. Operator: Today's last question is from Nick Anderson from Berenberg. Nick Anderson: Just one question from me then, please. It's just a question on the store closures. Assuming my data is correct, it looks like there was net store closures for the first time in about 3 years. And I just wonder what was driving that, what the outlook is and how that squares with the DTC opportunity you've been talking about on the call. Bjorn Gulden: I think we had a bad sound on the store closings over the last 12 months is positive, meaning that we opened about 65 to 70 more stores than we closed. And the number from... Nick Anderson: My question is on the sequential closure. So Q-on-Q, it was the first net closure in stores in 3 years. I just wonder if we should read much into that. Bjorn Gulden: No, no, nothing. nothing. Nothing. To be very honest with you, right now, we haven't opened as many stores because what we have done is that we have renovated a lot of stores. But the opening plans -- and again, we're trying to open bigger stores that we closed. So the addition is actually bigger than the number. But I think in the last 12 months, we opened around the last 12 months, 65, and that is negative just in the first quarter as that's just coincidence. There's nothing to read into it. Harm Ohlmeyer: No, Bjorn is absolutely right. And there's one anomaly from quarter-to-quarter Q1 '26 to Q1 '25 because we started to have some temporary factory outlet clearance stores in the U.S. that we needed because of too much inventory, but we started to close them already last year. That's probably what you have seen in Q1. But don't read anything into it. We will keep expanding our store fleet, both on concept stores and also on factory outlets. Sebastian Steffen: Thank you very much, Bjorn. Thanks very much, Harm. Ladies and gentlemen, thanks very much for joining our Q1 call today. This concludes the call. As always, if you have any questions today, tomorrow or over the next couple of weeks, please feel free to reach out to Adrian, Philip, Kara, myself or anyone else from the IR team. We will also be on the road. So hopefully, going to see you there. And again, before we go, I want to remind you, enjoy watching the documentary on the Sub2 journey. It's definitely worth it. And with that, thanks very much again. Have a lovely day. Talk to you soon. Bye-bye.
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