Kendrion N.V.

Good morning, everybody. Welcome to Kendrion's Q1 2025 results teleconference. My name is Joep van Buurden, Kendrion's CEO, and with me on the call here is Jeroen Hemmen, our CFO. I will start the meeting with some remarks regarding our Q1 results, after which we'll have time for Q&A. We will post a recording of this call and of the Q&A on Kendrion's corporate website as soon as is practicable. I would like to draw your attention to the fact that certain statements contained in my remarks and in the answers to your questions constitute forward-looking statements. These forward-looking statements rely on several assumptions concerning future events and are subject to uncertainties and other factors, many of which are outside the company's control, which could cause actual results to differ materially from such statements. We will start with the financial review. We are pleased to report a solid start to 2025 with first quarter revenue rising 4% to 78.1 million euro despite global economic challenges. Revenue in industrial breaks increased by 7% to 30.4 million euro in Q1 2025 following the gradual market recovery that began in the second half of last year. Revenue in industrial actuators and controls declined by 8% to 29.6 million euro, primarily due to ongoing weakness in the machine building markets. This was partially offset by growth in segments such as circuit breakers for electricity distribution and safety valves for nuclear power plants. Of course, the IAC revenue is compared to Q1 2024 when IAC trading was relatively strong. In the mobility segment, revenue amounted to €18.4 million in Q1 2025, which is 25% higher than a year ago. This growth was driven by the ramp-up of projects in China. We are making steady progress towards our 15% EBITDA target by the end of 2025. our EBITDA reached €10.8 million, which is 7% higher on a like-for-like basis compared to Q1 2024. This means an EBITDA margin of 13.8% compared to 13.4% a year ago. Profitability improved due to the increase in the added value margin across all business groups, IAC, IB, and in China. All actions to mitigate the synergies following the sale of automotive were implemented before the start of the year. Please note that the total savings of the synergies are €9 million, of which €7 million were already effective in Q4 2024. So in Q1 2025, we realized an additional €2 million in annual savings. Net operating costs and depreciation remained stable compared to a year ago, resulting in a normalized EBIT A from continuing operations of 6.9 million euro, which is 11% higher than last year. Net finance charges were 1.6 million euro, increasing 0.3 million euro due to negative currency results. The effective tax rate on normalized income was 29.5%. All this resulted in a normalized net profit before amortization of 3.7 million euro compared with 3.6 million euro in Q1 2024. Reported net profit increased by 19% to €3.2 million as the previous year's first quarter was affected by a net loss from discontinued operations. Looking at the balance sheet, we completed the divestment of our automotive business, receiving €8.6 million from Soliro. This resulted in a net debt of 97 million euro compared to 103.0 million euro at year end, of course supported by the Soliro payment, but also by the better profitability and by our disciplined working capital management. The leverage ratio improved to 2.5 compared to 2.7 at the end of 2024. Kendrion is focused on further reducing its net debt. Let us talk about the outlook. We are currently in a period of what I would call COVID-like uncertainty because of the global trade war. As you have seen from our solid results over Q1, so far the impact on Kendrion has been limited. And so far, trading in Q2 has mostly been business as usual as well. We started the second quarter well. The 90-day reduction in tariffs between the U.S. and China, as announced yesterday, is welcome and may help Q2. But as with all these announcements, this may change. Of course, as is the case for all other globally operating companies, a slowdown in the world economy would affect Cambrian's trading. However, I do want to emphasize the benefit of our so-called local for local strategy. Over the past years, we have implemented a strict local for local supply chain in our operations in Europe, China, and the United States. It means that our suppliers of raw materials, sub-assemblies, and also production equipment originate in the region where our factory operates. This is also true for our customers. A European customer gets supplied by a European factory. And as an example, the China-based factory of that same European customer gets supplied from a factory in Suzhou. Therefore, the flow of goods between regions when it comes to Candrion products is limited. There is no need for us to reconfigure the supply chain, which is costly and takes years. We started our Local for Local initiative in 2017. In summary, the Local for Local supply chains in the US, China and Europe help mitigate tariff impacts. Longer term, despite potentially reduced economic activity in the short term, our industrial focus and leading position in the niche markets we operate in will stay. Our local for local supply chain will stay, and this strengthens our ability to navigate potential challenges. At this point, we anticipate trading conditions in Q2 2025 will be similar to Q1, despite the aforementioned global uncertainties. Kendrion will focus on further improving margins, maintaining cost discipline and enhancing efficiency to meet our financial goals of an EBITDA margin of between 15% and 18% from 2025 onwards, and a return on invested capital of 23% to 27% by 2027. And Melanie, we are now ready for questions.

Thank you. As a reminder, to ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. Our first question comes from the line of Frank Plassen from Digroof. Pieter Kam, please go ahead. Your line is open.

Yes, good morning Joep and Jeroen. Good morning. Good morning. Two questions, please. First of all, your added value margin went up. Could you elaborate what were the main drivers? Was it higher pricing or lower raw materials? So that's my first question. And then secondly, on the cost savings, could you also elaborate What is still to come and the phasing of new cost savings? Thank you.