Kendrion N.V.

Good morning, everybody here in the NovoTel and on the webcast, and welcome to Kendrion's Q2 and first half year 2026 results presentation. My name is Joep van Beurden, Kendrion's CEO, and with me here is Jeroen Hemmen, our CFO. First this morning's agenda. I will start with summarizing the key highlights of the first half of 2026 and the strategic position of Kendrion after our move away from automotive as an industrial motion control specialist. I will then give you an update of the progress we have made operationally over the past half year. Jeroen will review our Q2 and first half 2026 results. Next, I will discuss the outlook for 2026, look at our 2027 financial targets, preview our capital markets day planned for the 17th of September 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 highlights of the first half of 2026. Starting with the financials, normalized EBITDA margin was 18.1% in the second quarter and 17.5% for the first half, at the upper end of our target range of 15 to 18%. Normalized return on invested capital increased to 26.3% from 13.9% in the first half of last year, on the back of a strong EBITDA and much reduced capital base. That means we have met or exceeded our 2027 financial targets ahead of schedule. We also returned 17.9 million euro to shareholders in the first half. The order book is healthy, which supports a positive outlook for the second half. Strategically, we've completed the pivot to four carefully selected growth markets, robotics and automation, healthcare and medtech, Energy and Transmission Infrastructure and Industrial Safety. The project pipeline for these markets is at record levels. And mobility, which we are gradually exiting, continues to deliver a stable cash contribution with no further investment. Let us move to the strategic and operational update. Kendrion is an industrial motion control specialist. One focus, one set of end markets, one investment case. We specialize in actuation, fluid control, braking and the control electronics that go with them, all for industrial applications. These four capabilities sit closely together technically. They share engineering, they share customers and they are increasingly sold as systems rather than as components. We have deliberately concentrated on four end markets. Robotics and automation, healthcare and medtech, energy and transmission infrastructure and industrial safety. These are secular growth markets driven by automation, by AI, by electrification and by demographics, not by the industrial cycle. That selection was a choice and we made it early. Now to the character of the products, because this is where the economics come from. Our products are what we call mission critical and built for durability. If a brake were to fail in a wind turbine or an actuator were to fail in a kidney dialysis machine, the impact for the customer and for the end user can be severe. At the same time, our products typically represent a small share of total system cost. High cost of failure, small share of cost, that is the combination that gives us pricing power and keeps us designed in. We believe the position is defensible. It rests on customer relationships measured in decades, on advanced IP, on product quality, on long cycle co-development where we sit with the customer from the first specification and on regulatory certifications that take years to earn. Those are high barriers to entry and they are why our designed-in positions are stable and why this business earns the margins it does. Let us look in more detail at where we focus our advanced motion control products. The previous slide described what we are. This shows where we have pointed the company and the revenue already sitting behind each choice. These are 2025 numbers. Robotics and automation represents our largest revenue segment at around 120 million euros in 2025. Three forces drive it. The shortage and rising cost of manual labor, the retooling of strategic industries to keep those costs in check, and the reshoring of supply chains. The products needed for this market demand precision, efficiency and reliability, which is exactly where our industrial brakes compete. Healthcare and medtech is around 20 million euro. Aging populations, a shortage of expert clinical labor and the AI driven shift towards personalized medicine and diagnostics drive significant market growth over the coming years. We have a lot of traction in brakes for surgical robots. These robots need permanent magnet brakes as the requirement is so demanding. The robotic arm needs to stay exactly where the surgeon left it. Zero backlash, no drift, fail safe under all circumstances. The segment carries a high barrier to entry and the traction we have is large and growing. Energy and transmission infrastructure around 25 million euros. The global shift to electrification as a result of unprecedented growth in electric power demand from data centers, AI compute and automobiles. That build-out needs high performance critical motion control components like brakes for wind power and high voltage circuit breakers for current switching. On a fault in the network, the switch needs to open in milliseconds, also when it hasn't been used for years. and Industrial Safety around 30 million euro. Machines and people increasingly work side by side and strict regulatory frameworks govern that interaction. It calls for high precision components combined with safety control electronics and it sits directly adjacent to robotics with largely the same customer base. Four markets close to 200 million euro in revenue 2025 served from a single technology base. The same actuation, braking and control electronics competences run through all four. And the drivers behind them are structural, not cyclical. We will drill down on these segments in more detail at the capital market today and we will also be displaying some of the products we have launched recently. Let us go to the operational update starting with IAC. IAC revenue in the first half was 1% higher at €56.4 million. Behind that number, market demand continued to grow. The offset came from customer-specific volumes at a limited number of accounts, not from underlying market conditions. The order book is healthy, and we're seeing improved demand from the European machine building industry. We are running a high number of development projects for customer-specific products across all of our markets of focus. In summary, order intake points to continuing growth in the second half. How about the longer term? Looking further ahead, I want to highlight products in three areas. First, actuators. Beverage dispenser valves are growing and we expect more demand in the coming quarters. The automation and robotics market is showing high and increasing demand for oscillating rotary solenoids. And in medical, our medical grade valves and pressure regulators have significant market traction. Our shape memory alloy based lock development is finished and we are ready to enter the parcel locking business. We will demo this lock on the 17th of September. Second, inductive heating. We have a high number of projects in the implementation phase. Our low power induction generator is in the testing phase at the customer side. And on the high power side, we have won a dryer project requiring up to 1.5 megawatts. Third controls. We won an important project with our new 48 volt drive controller, the Viper platform. Viper is a highly efficient motor control platform, enable to run the motor with up to 98% efficiency. It's used in battery power tools and devices where the motor can be designed smaller and the duration of the battery until reloading is longer. Together, these are some of the building blocks of IAC's growth beyond this year. Next, IB. IB revenue in the first half was €51.5 million, up 8% on last year. That growth is driven by secular growth in our markets of choice, sustained demand in automation and robotics, and an encouraging ramp-up in medical application. Profitability and cash flow were both well above the prior year. Looking ahead, the order book is healthy and the secular growth trends in robotics and automation and in healthcare and medtech are expected to drive further growth in the second half and beyond. How about the longer term? First robotics and automation. We have delivered our so-called perfect duo servo motor brake prototypes. A small form factor slim permanent magnet brake and a high performance slightly larger high torque version. Together they form a platform for industrial robots, for co-bots and ultimately for humanoids. We have on customized servo line brakes for a new AGV motor platform in warehouse automation and it's now in ramp up. And our new spring applied brake line for intra logistics is meeting strong interest as the IE5 top efficiency motor rollout gains momentum. We also see strong interest in our heavy rare earth free brakes across servo motor and robotics applications. Heavy rare earth elements like dysprosium and terbium is where the supply chain bottleneck is. And we develop PM brakes that do not use that heavy rare earth. Second, healthcare and medtech. We have a significant traction and ramping revenue in surgical robots and related equipments. And our new Halo line is under evaluation for a surgical robot with potential of up to 20,000 units per year. Next, mobility, starting with a short reminder about the Knorr-Bremse deal. 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, where we are now, Kendrion remains the full owner of the plant and continues all existing operations exactly as today. Kendrion is manufacturing small volume Knorr Bremse prototype and pilot batches, planned carefully so they do not affect current customer commitments. All CBU employees stay with Kendrion. We expect the flip ownership of the plant on the 31st of December 2028 and at that moment the model reverses and KB produces Kendrion. This ensures continuity and long-term stability for the CBU team and the corporation secures factory continuity and profitability as Candrion volumes decline. So let us talk about how Mobility has been doing in the first half. Revenue in the first half was €20.9 million, up 4% compared to the first half of 2025. The fuel pump controller business is running well, while sound is below expectation. But more importantly, This was an excellent six months on profitability. EBITDA was up 44% in the first half and the margin rose to 24.9% from 17.9% last year. That reflects execution of the segment's cash generation strategy and it reflects the corporation agreement. That corporation is working very well. Contractual milestone payments are on schedule. and one such payment of 1.3 million euro was recognized in the first half. This agreement has made the cost base of CBU largely variable. So as the existing programs gradually phase out, mobility continues to contribute positive cash flow with no further investment from us. I now hand over to Jeroen for the financial review.

Thank you, Joep. So let me take you through the financials. Starting with the second quarter, revenue came in at 63.6 million euros, up 4% on the 61.4 million we reported in Q2 last year. Growth was led by automation and robotics, our largest selected growth market, driven by both a market recovery and a conversion of pipeline into revenue. The more important line is below that. Normalized EBITDA ended at 11.5 million, up 16%, which translates into a margin of 18.1% against 16.1% a year ago. That is a 200 basis point improvement, and it's a record quarter for the company in margin terms. So the drivers of the EBITDA expansion were positive pricing, operating leverage on the higher volumes, lower staff costs as a result of the cost savings initiated at the end of last year, and our cooperation agreement signed into mobility, adding 0.9 million contractual milestone contributions in the second quarter. EBITDA ended at 8.4 million, up 27%, with a margin of 13.2% against 10.7% in the previous year. And net profit before amortization from continuing operations was 5.9 million, up 37%. Then moving to the half year in the lower table. So revenue of 128.8 million was up 4% reported and up 5% at constant currency. All three business units contributed to the increase. EBITDA for the first half was 22.5 million, up 18%, with the margin expanding 210 basis points to 17.5%. That puts us at the upper end of our target range at the half year mark, Our added value margin remained essentially flat at 57.2% with positive pricing effects offset by sales mix effects. EBITDA increased 30% to 16.4 million, up 30% and net profit before amortization 26% to 11.1 million. Our return on invested capital almost doubled to 26.3% on a 12-month rolling basis, which is a reflection of EBITDA growth in the numerator and a significantly reduced invested capital base in the denominator following the transformation. On cost, our operating expenses were up 2% in the half year, driven by stranded costs that were previously borne by the divested Chinese entity. These increased costs were, however, largely offset by increased other operating income. Then to the developments by segments. The chart on the left shows quarterly revenue over the past five quarters. The one next to it shows the same split for the half year. Industrial breaks grew 8% in the quarter and 8% in the half year to 51.8 million. The demand is mainly coming from automation and robotics and from medical, the two markets where we have deliberately concentrated. Growth here is partially economic, economic recovery, but as well clearly pipeline conversion to new revenue. Industrial actuators and controls was down 2% in the quarter and up 1% in the first half year at 56.4 million. The quarterly decline is not a market signal. Underlying demand in our main segments is good. European machine building is improving and robotics and automation demand is improving as well. What we are seeing is reduced volumes at a limited number of specific accounts and it does not change our view of the market. The order book in IAC is healthy and we have a record number of customer-specific development projects running. Mobility revenue was up 8% in the quarter and 4% in the half year at 20.8 million. Project ramp-ups more than offset the phase-out of existing programs. This business is running down by design, but it's running down profitably. Industrial EBITDA rose from 15.4 to 17.3 million, with a margin improving around 120 basis points on pricing, volume, and cost discipline. And mobility EBITDA rose from 3.6 to 5.2 million, with the margin stepping up to around 25%. This reflected good volumes plus the contribution from the cooperation agreement with Knol Bremse. So the mobility phase-out is doing what we told you it would do. It is generating cash and margin on the way out without absorbing further investments. Then finally cash flow and financial position. Our normalized free cash flow in the first half was 4 million euros. Year-to-date cash flow is affected by the seasonal build-up of working capital that we see in every first half year. I would expect the usual unwind in the second half. The bridge on the left walks you from the net debt of 30.3 million at the end of 2025 to 48.1 million at the half-year mark. Normalized cash flow from operations contributed 7.5 million positive, and against that we had 3.5 million one-off cash out, and 3.4 million of capital investments and the largest bar, 18.1 million of capital returned to shareholders through the dividend and the share repurchase program following the transformation to an industrial motion control specialist. On CAPEX, 3.4 million against a depreciation of 6.1. The reduced invested capital base I mentioned on the first slide is a direct consequence of this discipline and it's also part of the ROI increase. Our balance sheet is in good shape. The leverage ratio is 1.2 against 2.4 a year ago. And on our refinancing, we have agreed on key terms for a new 70 million euros committed credit facility to refinance the facilities that mature in 2027. So to summarize our financial position, we realized broad-based growth, we have a healthy order book, Our EBITDA margin is at the top of the target range. Our ROI close to doubled and our leverage halved. And that is the basis that we go into the second half year with. And with that, I hand back to Joep.

Thank you, Jeroen. So before we go to Q&A, we'll talk about the outlook. Macroeconomic visibility remains limited and geopolitical and trade uncertainty persists. Against that backdrop, Kendrion expects its strong performance to continue in the second half, supported by a healthy order book and a strong pipeline. Over the longer term, we are well positioned to benefit from structural growth in the high-value segments of robotics and automation, healthcare and medtech, energy and transmission infrastructure and industrial safety. As industrial systems become smarter and more autonomous, the need for safe, precise and reliable motion solutions is increasing. And we see these trends as important drivers of sustainable and profitable growth for Kendrion in the years ahead. Our markets of focus are structural growth markets, and we are confident in delivering further profitable growth in 2026 and beyond. We will set out our strategy and financial targets for 2027 to 2030 and will present them at our Capital Markets Day on the 17th of September here in the Novertel in Amsterdam. Next are 2027 financial targets. This slide shows these targets unchanged against where we stand after the first half. Revenue growth or expectation is 5-8% annually over 2024-27 and in the first half we grew 5% at constant currency. EBITDA margin, the target is 15-18% from 2025 and we delivered 17.5% in the first half, so at the upper end. Return on invested capital, the target is 23-27% from 2027 and we are at 26.3% today So a year and a half early and at the upper end here of the range 2. And dividend, at least 50% of normalized net profit and our payout was 61%. So we've met or exceeded our 2027 financial targets ahead of schedule. In our view, this is unmistakable evidence that the transformation is paying off. But it also means that these targets have served their purpose. And at the Capital Markets Day on the 17th of September, we will present Our strategy and new financial targets for 2027 to 2030. And talking about that capital markets day is a preview of what we will discuss. The key topics. We will open with the Candrion Strategy, a focused industrial specialist in motion control. And we will then go into more detail into the four markets of choice, the key application segments, and where we see the secular growth opportunities. Third, technology. Why our content is mission critical and performance enhancing for our customers. Fourth, commercial traction. This is where we will give you more detail on key customers and on the project pipeline that I've referred to several times this morning. Fifth, we'll do a short update on mobility and the managed runoff with secured cash generation, and we will close with the financial section, how we are invested for growth, and as just mentioned, our financial targets for 2030. Of course, we will also demonstrate some products and we look forward to seeing you here in the Novertel in Amsterdam. And with that, I would like to go to Q&A.