Kendrion N.V.

Good morning everybody here in the NovoTel and on the webcast. And welcome to Candrion's Q4 and full year 2025 results presentation. My name is Joep van Beurden, Candrion's CEO, and with me here is Jeroen Hemmen, our CFO. This morning's agenda, I will start with summarizing the highlights of 2025, after which I will spend some time on the strategic position of Candrion as a pure play industrial company. Jeroen will then review our Q4 and full year 2025 results, including ESG, after which I will give you an update of the progress we have made operationally over the past year. Next, I will discuss the outlook for 2026 and beyond and go to Q&A. Before discussing the strategic repositioning, 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. Let us look at the operational and strategic highlights of 2025. 2025 was a pivotal year for Canvrion. Normalized Q4 EBITDA increased by 73%, reflecting higher volumes, continued margin expansion, and solid cost control. Importantly, we achieved our long-term financial targets ahead of schedule, ending 2025 with 15.5% EBITDA margin and a return on invested capital of 24.6%. Cash generation was robust. Normalized free cash flow reached €25.6 million, and this, together with the proceeds from the China divestment, enabled us to reduce net debt to €30.3 million, down from €103.5 million last year. In addition, we paid a special dividend of €1 per share and launched a €10 million share buyback program. We are proposing a cash dividend of 70 cents per share for 2025, which is a 56% increase from the 45 cents over 2024. Strategically, we completed the automotive divestment, marking our transition to a pure play industrial company. Our project pipeline has expanded to the highest level on record, which is a reliable leading indicator for growth and, Shorter term, the strong momentum in Q4 provides a solid foundation for our 2026 outlook. Let us look in more detail at our strategic position. I'd like to start with a reminder. Why leaving automotive? Our decision to exit automotive is about focus and financial returns. Automotive demands heavy, ongoing capex and R&D investment while delivering structurally lower margins. In our industrial brakes and industrial actuators and controls, we expect to achieve stronger growth and better returns at lower investments. We executed an exit path in three steps. In the first step, we sold six automotive factories in Europe and the US to Soliro. The China MBO completed the strategic shift and strengthened our balance sheet, while the capacity sharing agreement with Knorr Bremse lets us wind down remaining mobility activities efficiently while preserving cash generation. The result, a simpler pure play industrial portfolio, improved capital allocation and stronger financial resilience to drive sustained value creation. This slide depicts the journey Kendrion has made over the past 10 years. As you can see, in 2015, Kendrion was mostly an automotive tier 1-2 with a bit of industrial business on the side. Initially, we improved the balance between the two divisions by acquiring Intorq in 2020 and 3T in 2021. And after those transactions, our revenue was roughly 50-50 This turned out to be a powerful help when starting in 2020, the automotive market came under significant, and as we later concluded, structural pressure. We decided that we needed to exit automotive in the summer of 2023 and completed that divestment at the end of last year. We are smaller now and in a more focused, and Stronger positioned. Looking at the financial implications, please remember this is a comparison with 2015 before all the disruption of the automotive market by diesel gate, electrification, Chinese competition, COVID, high inflation, the war in Ukraine and continued geopolitical uncertainty. We are 45% smaller in revenue but our EBITDA margin is 40% higher, return on invested capital 140% higher and net debt almost 70% lower. Before we get to Candrion's plans for the next years, let us drill down on the 70% mobility in our CBU facility. The cooperation between Kendrion and Knorr Bremse is structured in two distinct phases, designed to ensure continuity, stability, and a smooth long-term transition of the CBU plant. In phase one, Kendrion remains the full owner of the plant and continues all existing operations exactly as today, producing fuel pump controllers, BLDC controllers, and sound ECUs. Initially, Kendrion will manufacture small volume Knorr Bremse prototypes and pilot batches planned carefully so that they do not affect current customer commitments. All CBU employees stay with Kendrion. The flip to phase two occurs once KB's CBU revenue surpass Kendrion's or on the 31st of December, 2028. At that moment, plant ownership transfers to Knorr Bremse and employees will be offered roles at that company. Equipment will transfer and KB will manufacture both companies' products until Kendrion's programs phase out. This ensures continuity and long-term stability for the CBU team. In summary, the corporation secures factory continuity and profitability as Kendrion volumes decline We expect a cash flow contribution of the corporation of around 7 million euro and at the flip we will transfer around 190 employees to Knorr Bremsen.

Let's talk about Kendrion as it is today.

Our mission at Kendrion is to help industrial machines and systems move safely, precisely and reliably We do this by providing high quality valves, actuators, brakes and motion control technologies. These components make our customers' machines work exactly the way they are supposed to, every time. In short, we help our customers' products and machines perform at their best. It's a simple mission, but of course not so simple to live up to. and we are exceptionally good at it, which is why we have an excellent reputation at our customers. We're active in many market segments, which can be grouped in four main categories. Around 50% of our revenue is related to robotics and automation, a quarter to integrated safety systems, around 10% to healthcare and medtech and 7% to renewable energy and transmission infrastructure. And these numbers exclude mobility. In all these segments, we stand to benefit from significant and long-term secular growth trends. Chemrion enters 2026 at the center of a major technological shift that is transforming how industrial machines are designed and operated. This shift is helped by artificial intelligence that is accelerating the move towards smarter, faster, and more autonomous systems and machines. And while AI can calculate, design, and optimize, it cannot generate physical motion, and that is precisely where Kendrian's strength and opportunity lie. Our mission remains to enable safe, precise and reliable motion in industrial machines, and our strategy focuses on powering the next generation of intelligent equipment through advanced motion control technology. As our customers innovate in robotics, automation, machine safety, renewable energy and medical technology, The systems demand increasingly higher level of functional safety, precision and reliability. At the same time, global needs for electricity and energy security are driving investment in wind, nuclear and broader electrification infrastructure. We are aligning our product portfolio with these trends, product by product, customer by customer, project by project, building solutions that serve markets where demand for high performance motion continues to accelerate. So let us look a bit closer at these trends. We are well positioned across the four strategic markets, each driven by clear and accelerating long-term trends. First, robotics and automation at roughly 100 million in revenue in 2025. This is our largest market, also fueled by AI-driven automation towards the next generation of intelligent equipment and customers demanding components for those machines optimized for safety and reliability. At the same time, we're benefiting from ongoing supply chain resilience efforts and reshoring initiatives. Second, integrated safety systems contributing about 50 million. This business is expanding as customers adopt automated safety solutions where machines interact directly with humans. For these applications, strict regulatory approvals are critical and ever more difficult to obtain. Third, healthcare and medtech at around 20 million. Growth here is shaped by demographic and structural shifts and aging population, An increase in robotic procedures, again helped by AI, and a push for more home-based treatment solutions. These dynamics continue to create attractive opportunities for our medical products. And finally, energy and distribution infrastructure at approximately 15 million today. Fast growth in electrification, investments in AI data center infrastructure, and the global need for energy security and resilience are driving demand in this segment. Together, these four markets form a robust future-oriented revenue base aligned with global trends where our technology plays an essential role. In fact, today, our industrial pipeline is larger than we have ever seen. and the number of additional product opportunities is larger than our R&D capacity. So let us look at our investment criteria. Given our focus on the industrial markets as just discussed, the secular growth trends driving them and our strong existing position, we want every project to move us closer to our long-term goal. building high-value motion control solutions for the next generation of intelligent machines. To do that, we use a clear decision framework that guides where we invest with three simple rules. First, strong financial performance. The new business opportunity must support revenue growth of at least 10% per year, ideally higher, and driven by specific innovation in segments that we know well. The project should also achieve steady-state, fully-costed EBITDA margin exceeding 20%. If it does not meet this, we do not invest. Second, clear and protected differentiation. We choose projects where we have something unique that cannot be easily copied. They can be patents, required regulatory approvals, or special know-how. And third, we want the product to be mission critical to our customers, where our product has an excessive cost of failure for the customer and the low share of their overall product cost. This typically results in low replacement incentives and drive durable customer relationships. If a project meets all three criteria, financial strength, uniqueness, and is mission critical for our customers, We move forward. And these criteria are not new. We have used them in our industrial franchise for years. And this means that today we have quite a few products that satisfy these criteria and are designed to make full use of the trends just discussed. This slide highlights some of the key innovations driving profitable growth in robotics, automation and integrated safety. Starting top left, our Slimline PM brake. We launched this product in the fall at the SPS in Nuremberg. We have full patent protection and it is compact, high performance design, makes it ideal for cobots, humanoid robots and other forms of automation, where high performance and a small form factor is key. The product is designed with a so-called platform approach, which allows for easy portfolio expansion. Top right, our ultra compact lock. This lock has a low power motor free mechanism, perfect for solar power units like parcel lockers. We have filed for patent protection and we are actively evaluating the product with major EU customers. Bottom left, automated guided vehicle wheel drives. This brake is optimized for the fast-growing warehouse automation market. Our early integration into customers' wheel hub designs strengthens long-term partnerships. The brake is critical to the drive's performance, even though we represent a small share of the overall bill of material. And bottom right, are functional safety module. This TUV certified PLC helps customers meet strict European safety regulations such as the European Machine Directive. It's exceptionally reliable and already being evaluated by major customers in Europe and Asia. As more and more automation interacts directly with humans, a PLC with the necessary approval is critical for our customers. I want to emphasize these are just a few examples, and in our annual report published earlier today, you will find a more complete product overview, including finger grippers, linear vibrating and rotary solenoids, and a full range of control and safety electronics.