Kendrion N.V.

Good morning, everyone. Welcome to Kendrion's Q3 2025 results conference call. My name is Joep van Beurden, CEO of Kendrion, and I'm joined today by our CFO, Jeroen Hemmen. We appreciate your time and interest in our company. Today, we will review our performance in the third quarter of 2025, discuss the financial results for the group and our key business segments, and share our outlook for the remainder of the year and beyond. We will post a recording of this call and of the Q&A on Candrion's corporate website as soon as it's 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, 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. which could cause actual results to differ materially from such statements. Before we begin, I would like to highlight that Q3 2025 marks a significant milestone for Kendrion. With the completion of our China business sale, we have finalized our transformation into a pure play industrial company. This strategic shift allows us to focus exclusively on industrial activities positioning us for sustainable and profitable growth. Our results this quarter reflect strong operational discipline, margin enhancement, and a robust balance sheet. We are pleased to announce a special dividend and a share buyback program, both made possible by our strengthened financial position. Let us begin with a review of our financial performance. In Q3 2025, Candrion delivered solid results. Revenue from continuing operations reached €60.6 million, representing a 2% increase compared to €59.7 million in Q3 2024. Normalized EBITDA grew by 24% to €9.4 million, up from €7.6 million last year. The EBITDA margin improved significantly to 15.5% compared to 12.7% in the same period last year, reflecting our ongoing focus on operational efficiency and margin improvement. For the first nine months of 2025, group revenue from continuing operations was 184 million euro, down 3% from 190.5 million euro in the prior year. Despite this slight decline, profitability improved. Normalized EBITDA from continued operations increased by 3% to 28.4 million euro, and the EBITDA margin rose to 15.4% up from 14.5% last year. Moving down to P&L, depreciation charges for Q3 decreased slightly to 3.2 million euro, resulting in a normalized EBIT R of 6.2 million euro and a margin of 10.2% compared to 7.2% a year earlier. And this is an increase in EBIT R of 44%. For the year to date, normalized EBIT R from continued operations was 18.8 million euro with a margin of 10.2%, 4% higher than the same period in 2024. Year-to-date finance charges were 2.8 million euro, slightly higher than last year due to unfavorable currency results. And looking at net profit before amortization from continued operations, this was 3.9 million euro, or 44% higher than last year. On the back of these solid results, our financial position has further strengthened. Free cash flow in Q3 was €10.1 million, supported by our healthy profitability, disciplined working capital management, and lower capital expenditure. As a result, net debt decreased to €88.4 million, down from €104.5 million at the end of Q3 2024. The leverage ratio improved to 2.1 compared to 2.5 last year, and additionally in October, so after the quarter ended, we received approximately 70 million euro in proceeds from the divested China business, further reinforcing our balance sheet. Turning to our industrial brakes business, IB reported revenue of 23.5 million euro in Q3, a 4% decrease from 24.4 million euro in the same quarter last year. And this reflects continued weakness in European manufacturing activity. Our focus remains on enhancing added value margins and maintaining strict cost control. Longer term, IB is well positioned to capitalize on the growing demand for electromotors and electrified applications in industries such as inter-logistics, robotics, and wind energy. The industrial actuators and controls business group recorded revenue of €26.7 million in Q3, slightly below last year's €27.2 million. IAC offers a broad portfolio of products, and we continue to invest in innovative products, including inductive heating systems, industrial locking mechanisms, and beverage dispensing valves. Mobility revenue came in at 10.4 million euro, a strong increase from 8.1 million in the previous year, driven by price adjustments, robust demand, and a favorable comparison base. The long-term cooperation with Knorr Bremse announced on the 29th of September 2025 strengthens cash generation at CBU's mobility facility through optimized capacity utilization. It also proactively manages the anticipated phase out of mobility programs over the coming years, and importantly, provides employment stability for the CBU workforce. Reflecting our significantly improved financial position, the supervisory board has approved the distribution of a special dividend of one Euro per share. The 18th of November, 2025 is the ex-dividend date and the 19th of November, the dividend record date. The dividend payout date will be on the 25th of November 2025, and in addition, a share buyback program of up to 10 million euro will commence one day after the dividend has been paid out, so on the 26th of November 2025. More information about this buyback program is available in a separate press release issued earlier today and on our website. Let us go to outlook. Looking ahead, global economic conditions remain uncertain, with higher US tariffs, persistent policy uncertainty, and shifting supply chain dynamics impacting economic activity. In the near term, recognizing the reality of the current economic landscape we will continue to prioritize added value margin improvement, strict cost control, and operational efficiency. Following the sale of our Chinese activities and the cooperation with Knorr Bremsen, our attention is fully on our industrial business group. And while a portion of the proceeds from the China divestment will be returned to shareholders, the remainder will be used to strengthen our balance sheet and reinvest in new product opportunities. So how do we decide where to invest? Chemrion is a global niche leader with deep expertise and intellectual property, involves actuators, breaks, and control technology. Before we invest in new opportunities, we are asking ourselves three important questions. Firstly, do we have a clear and unique differentiator to be able to protect our business and our margin based on our expertise and our intellectual property? Secondly, does this product-market combination offer superior profitability with an EBITDA margin of at least 15% and preferably more? And finally, does the opportunity support healthy revenue growth of 5% or more through the cycle? If we cannot answer positively to any of these three questions, we will not invest. For the longer term, based on this disciplined approach to investment, our clear focus on selected industrial markets, strong niche leadership and alignment with long-term trends such as electrification, automation and clean energy, we are confident that we will drive sustainable and profitable growth. We reaffirm our commitment to achieving our strategic financial objectives, including an EBITDA margin of between 15 and 18% from 2025 onward, a return on investment of 23 to 27% by 2027, and annual dividend payouts of at least 50% of a normalized net profit, also starting in 2025. In summary, Candrion's transformation into a pure play industrial company is now complete. I point to our solid Q3 performance, improving profitability and strong balance sheet, which in my view provides a robust foundation for future profitable growth. Thank you for your attention and we are now happy to take your questions. Mel?

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 Clarson from DeGroof Petercam. Please go ahead. Your line is open. Frank Clarson, your line is open. Please go ahead with your question. Once again, the line of Frank.

Oh, sorry. Yes, here I am. I had a mute button. Good morning. Hi, Frank.