Kendrion N.V.

Good morning everyone and welcome to Kendrion's Q1 2026 results conference call. My name is Joep van Beurden, CEO of Kendrion and with me here today is our CFO Jeroen Hemmen. Thank you for taking the time to join us and for your continued interest in Kendrion. Today we will review our performance in the first quarter of 2026. We will discuss the financial results for the group and our key business segments, and share our outlook for the remainder of the year and beyond. A recording of this call and the Q&A session will be made available on Candrion's corporate website shortly after the call. Before we begin, I would like to note that certain statements made during this call may be considered forward-looking statements. These statements are based on current expectations and assumptions and involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied. Let me start with a brief overview. We delivered a strong first quarter with continued growth in both revenue and profitability. Group revenue increased by 5% year on year to 65.2 million euro, entirely driven by our industrial business groups. Profitability improved across all business groups, so IAC, IB, and mobility, resulting in a normalized EBITDA of €11.0 million and an EBITDA margin of 16.9%. Return on invested capital increased to 25.3%, reflecting both improved earnings and a better asset utilization. Despite ongoing macroeconomic uncertainty, our industrial business performed well, supported by pricing discipline, operational focus, and a healthy order book. Let me now walk you through the financial performance in more detail. As mentioned, in Q1 2026, the Candrion Group delivered revenues of 65.2 million euro compared to 62.0 million euro in Q1 2025. This represents 5% growth and at constant exchange rates revenue increased by 6%. Revenue growth was entirely driven by the industrial business groups supported by improving demand conditions in Europe. Normalized EBITDA increased by 21% year-on-year to 11.0 million euro and the EBITDA margin expanded to 16.9% an improvement of 220 basis points compared to last year. This profitability improvement reflects a combination of volume growth, disciplined pricing, and strict cost control. The added value margin remains stable at 56.2%, demonstrating the resilience of our business mix and continued pricing discipline. Moving down to P&L, Depreciation charges decreased slightly to €3.0 million, resulting in EBITDA of €8.0 million, up 33% year-on-year. Net finance charges declined to €0.8 million, while the effective tax rate on normalized income was 25.4%. Normalized net profit before amortization increased to €5.2 million compared to €3.7 million in Q1 2025, an increase of 53%. Free cash flow in the first quarter was negative €3.0 million, reflecting typical seasonal working capital movements and the timing of tax payments. Capital expenditure was 1.1 million euro in the quarter and is expected to normalize over the remainder of the year while remaining well below depreciation for the full year. Net debt increased to 40.9 million euro at the end of Q1, primarily due to the share buyback program and seasonal working capital effects. The leverage ratio improved from 2.5 a year ago to 1.0. Moving on to the business groups, industrial breaks delivered revenue growth of 9% in Q1, reaching 26.4 million euro. Performance was supported by strengthening demand in Europe and continued success in higher value industrial applications, including robotics and automation related markets. Our focus remains firmly on margin quality and disciplined execution. Revenue in industrial actuators and controls increased by 4% to 28.3 million euro. We continue to invest in innovative products and applications, including induction heating solutions, advanced locking systems, and next generation motion control technologies. These products are well aligned with long-term trends toward automation, safety, and intelligent machinery. Mobility revenue amounted to 10.5 million euro, broadly in line with Q1 last year. Profitability, however, improved significantly, reflecting the tangible financial benefits of the corporation with Knorr Bremse at our CBU mobility facility. This corporation continues to strengthen cash generation and supports a controlled, profitable, and predictable runoff of mobility activities over the coming years. As we enter 2026, Candrion is positioned at the heart of a major technological transition in industrial markets. While artificial intelligence is enabling smarter and more autonomous machines, motion remains mission critical, and this is where Candrion plays a key role. Our strategy is focused on enabling safe, precise, and dependable motion across applications such as robotics, industrial automation, integrated safety systems, medical technology, and energy infrastructure. Our investment decisions continue to follow a strict framework. Each opportunity must demonstrate, first, strong financial attractiveness with 10% growth potential at a fully costed EBITDA of at least 20%. Second, clear competitive differentiation based on intellectual properties or expertise. And finally, mission critical relevance in customer applications. If an opportunity does not meet these criteria, we will not invest. Looking ahead, Micronomic visibility remains limited, including uncertainties related to geopolitical tensions and trade conditions. That said, we remain cautiously optimistic. Short-term, we are supported by a healthy order book and medium to long-term by a full project pipeline and accelerating demand driven by AI-enabled industrial investment. In the short term, we remain focused on margin expansion, strict cost control, and continued improvements in operational performance as a 100% industrial company. Over the longer term, Candrion is well positioned to benefit from powerful structural growth drivers, particularly in robotics, automation, integrated safety, and medical technology. We reaffirm our strategic financial targets, an EBITDA margin of 15% to 18%, return on investment of 23% to 27%. We expect annual revenue growth of 5% to 8% and annual dividends of at least 50% of normalized net profit. In summary, we delivered a strong start to 2026 with solid revenue growth, rising profitability, and an improved return on invested capital. Our focused industrial profile, disciplined execution, strong balance sheet provide a robust foundation for sustainable and profitable growth. Thank you for your question. And we are now happy to, sorry, thank you for your attention. We are now happy to take your questions.

Thank you, dear participants. As a reminder, if you wish to ask a question, please press star, one, one, on your telephone keypad and wait for your name to be announced. To withdraw a question, please press star, one, and one again. Please stand by, we'll compile the Q&A queue. This will take a few moments. And now we're going to take our first question. And the question comes in the line of Frank Klassen from De Groove, Petacom. Your line is open. Please ask your question.

Yes, good morning, gentlemen. Good morning. Question on the added value margin. It's been stable around 56%. What can we expect going forward, certainly given all the cost inflation which is coming up on raw materials and logistics? So how are you going to handle that? That's my first question. And secondly, maybe related to that, of the 6% organic growth in Q1, how much was roughly driven by price and how much by volume? Thank you.