Kendrion N.V.

Good morning everybody here in the Holiday Inn Arena Towers and on the webcast.

I apologize for the delay, we had a fire alarm here in the Holiday Inn. Luckily it turned out to be false, so we can proceed safely. Today we will discuss two announcements that we made earlier this morning. our Q2 and first half 2025 financial results and the divestment of our Suzhou-based business including the implications for Kendrion's strategic repositioning as a pure play industrial company. My name is Joep van Beurden, Kendrion's CEO and with me here is Jeroen Hemmen, our CFO. This morning's agenda. I will start with reviewing the divestment of our China franchise to local management. to complete our strategic repositioning as a pure play industrial company. Jeroen will then discuss the financial impact of that transaction and review our Q2 and first half 2025 results, after which I will give you an update of the progress that we've made operationally over the past half year. Next, I will discuss the outlook for the remainder of the year and we'll go to Q&A. Before we start, I would like to draw your attention to the following. Certain statements contained in this presentation constitute forward-looking statements and 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 that could cause actual results to differ materially from such statements. First, I would like to present the divestment of our China business. A sale that completes our strategic repositioning as a pure play industrial company. A company that will focus exclusively on high potential niches within our industrial breaks and industrial actuators and controls business group. A company that is a global niche leader in selected industrial market segments and that will sustainably grow its revenues through the economic cycle with the goal of achieving a profitability of at least 15% EBITDA. First, the key terms of the transaction. The enterprise value is set at 70 million euro on a cash and debt free basis. The transaction will be completed once condition precedents are fulfilled and Candrion receives payment in full which is anticipated within three months. We envisage to reduce our central service cost and other related overheads by approximately 3.5 million euro, which should fully compensate for the dis-synergies. And these cost savings are expected to be fully effective from January the 1st, 2026. The related one-time restructuring expense and deal related expenses will be approximately 1.5 million euro, and these one-time costs will largely fall in Q4 2025. Before going into a bit more detail on the specifics of the China divestment, let's look at Candrion's strategic intent, first announced post the sale of the majority of our automotive factories to Celero roughly one year ago. We are a global niche leader in selected industrial market segments and we aspire to a profitability of at least 15% EBITDA with strict criteria for the market segments that we invest in. First and most importantly, it needs to be a product opportunity with a clear so-called unique selling point or USP, a clear differentiator. The USP is based on our deep expertise involves actuators, brakes or control technology. Second and related, the product market combination offers superior profitability with at least 15% EBITDA. And finally, we're looking for healthy growth potential, typically 5% and preferably more. In other words, no USP, we will not engage. Not enough profitability, we will not engage. And no visibility to at least 5% average revenue growth per year, we will also not engage. I want to emphasize the importance of the USP, the differentiator. The uniqueness of our industrial products allows us to protect our added value margin and our profitability. In fact, as we will discuss later, in the first half we have managed to improve the added value margin. That is a big driver of profitability and only possible with a differentiated product. So we are looking for opportunities in the sweet spot in the middle of this diagram. At our Capital Markets Day a year ago, we have presented many concrete examples of these opportunities. and later in the operational update, I will present a few more. Each opportunity is different. Each has its own dynamic, its own competitors, its own leading customers, its own USP, and in some cases also its own roadmap. But each opportunity shares the characteristics just mentioned. Some may be relatively small, but added together, they represent a substantial and tangible opportunity for growth of at least 5% through the cycle at an EBITDA of 15% or more. Which brings me to the strategic rationale of the China divestment. Over the past years, we have seen significant and relatively fast changes in the automotive market. These have led to strategic changes at Kendrion, such as putting more emphasis on industrial through the acquisitions of Intorq and 3T. The automotive industry is in a major transition and to make full use of the opportunity that creates requires substantial and ever more investments in R&D and in production equipment. Looking at China, the growth we realized there and the future opportunity is primarily driven by the automotive segment, which does not correspond to our strategic priorities. The transaction reflects this at an attractive valuation. After completion of the transaction, Candrion will return around €25 million to its shareholders through a special dividend of €1 per share and by a share buyback program of up to €10 million. The remainder of the proceeds will be used to strengthen the balance sheet and to reinvest in the industrial business. So why not carve out the China-based automotive business and keep the rest, you may ask? The reason is straightforward. Our Suzhou facility tightly integrates both automotive and the industrial operations at a single site, which favors a unified transaction. In other words, selling the entire business reflects the local operational reality. In summary, This transaction completes Candrion's transformation into a pure-play industrials company with deep expertise in valves, actuators, brakes and control technology and a focus on selected high potential profitable niches. Before I hand over to Jeroen for the financial implications of the divestment, Let's look at the impact of the transaction on our business and geographic mix based on 2024 actual revenues. As you can see, Candrion post-transaction will have around 84% of its business in Europe, 7% in Asia, and 8% in the US. In terms of our business mix, the further focus on IB and IAC is clear. All remaining mobility products are produced in CBU with some engineering support based in Malente. This CBU-based business will be the only exposure to mobility we have left. We will continue to run this for cash and we expect that over the coming years revenues here will slowly decline. The CBU mobility business is integrated into IAC and is managed separately. We will also continue to report the numbers of this mobility segment separately as we did before. Next, Jeroen will review the financial impact of the China divestment and will then proceed to review Q2 and the first half of 2025. Jeroen.

Thank you Joep. So today I will present the financial impact of the announced divestment of Kenyon China, followed by our financial results for the second quarter and the first half year. Based on our 2024 results, the pro forma and indicative KPIs after the transaction would have looked like this. Our pro forma revenue would have been around 252 million compared to 301.5 million realized in 2024. Normalized EBITDA would have ended up at 33.1 million against 37 million for the group, including China. Therefore, the investment would have been accretive to EBITDA margins in 2024 by 0.9%. Also, when looking at the half-year results, taking out the China results would have been margin-accretive. The 14.9% normalized EBITDA margin that we disclosed today would have been 15.4 on a pro forma basis. Return on investments would have been 400 basis points higher, excluding China, in 2024, and our leverage ratio would have decreased significantly from the reported 2.7 to 1.0. This, however, excludes any distribution to shareholders. Based on the planned distribution of 25.8 million euros, to which I will come back later, our leverage ratio would have been 1.7. Then an important part of our rationale for divesting China is, of course, the attractive value that this transaction allows us to realize. Based on the 2024 results, we realize an EBITDA multiple of close to 18, and given China's solid last 12 months performance, the transaction reflects an EBITDA multiple of 9.5. The proceeds of the transaction will be used to strengthen the balance sheet and reinvest in the industrial business. In addition, we intend to return part of the proceeds to the shareholder after completion of the transaction. The intended capital return includes a one-off dividend of one euro per share, which is a total amount of 15.8 million euros. In addition, we intend to launch a share buyback program of 10 million euros. This program will be initiated after the divestment of Kenyon China has been completed and the proceeds have been received. Once initiated, the program is expected to run for roughly nine months, although the actual pace will depend on market conditions and trading volumes. then to the financial review. Our revenue increased 3% in Q2 at constant rates of exchange. Growth was driven by 15% revenue increase in mobility. This increase was on the back of the ramping projects in China as announced earlier. Industrial revenues were stable. Profitability increased significantly and is progressing in line with our goal of achieving 15% EBITDA by the end of the year. Normalized EBITDA increased 20% in the second quarter and with 14% in the first half year. In Q2, the EBITDA margin improvement to 15.9% and to 14.9% in the first six months was fully driven by a higher added value margin. Product margins improved significantly in both industrial groups and mobility, primarily as a result of positive pricing initiatives. Operating expenses increased 4% in Q2 and 5% over the first six months. However, this increase was almost entirely offset by higher other operating income as we charge on certain operating expenses as rent and IT income to our former automotive activities. Then a bit more detail on the business groups. We witnessed stable market circumstances in industrial. The 2% lower revenue in IAC in Q2 mainly related to specific customer segments, in particular the textile machinery segment. Revenue in mobility increased 15% as the projects in China continued to ramp up. Despite the stable revenues, we were able to improve profitability in industrial. As I mentioned, profitability improved thanks to a stronger added value margin, a clear sign of the strength of our market position in our selected segments. Profitability in mobility more than doubled on a like-for-like basis, with the EBITDA margin improving from 7.9% to 14.2%. The improvement reflects, on the one hand, growth in China, but mainly the substantial margin improvement at our electronics plant in Sibiu, Romania. Then to cash flow. Cash flow was strong in the first six months, leading to a 6.1 million reduction in net debt. And together with the higher EBITDA, contributed to the improved leverage ratio of 2.4. Reported free cash was 9.5 million and includes the final 8.6 million euros payment related to the sale of automotive and 4.8 million euros paid restructuring charges related to the 9 million cost savings announced last year. Our normalized free cash flow therefore was 5.7 million. Free cash flow was supported by comparably low capital investments at 4.2 million, well below the depreciation level of 8.1. We do expect CAPEX to pick up in the second half year, also driven by our ERP implementation project and the realization of some delayed investments, but still ends up well below depreciation, around 10 million euros. And with that, I hand over to Joep.