Zumtobel Group AG

Good morning ladies and gentlemen and welcome to Zumtobel Group's conference call on our first nine months and third quarter results for our 2025-26 financial year. With me on the call today are Alfred Felder our CEO and Thomas Errath our CFO. Alfred will walk you through the highlights of the quarter while Thomas will discuss the financial performance. After the presentation both gentlemen will be available to answer your questions. In case you have not a copy of the report and the presentation, you may find both documents for download on our webpage. After the call, a playback of this conference call will be available on our webpage as well. And with this, I hand over to Alfred.

Thank you, Eric. Good morning and welcome ladies and gentlemen. Thank you for joining us today for our Q3 call. The third quarter was once again a challenging period for our business as market condition and the broader economic environment remained difficult, impacted by the geopolitical tensions, particularly now since last week, also the latest developments in the Middle East. However, in Europe, we begin to see signs of demand in new construction. but the recovery remains rather modest. The market climate continues to be shaped by the global uncertainty, and therefore still we are having, as we discussed also last time, longer decision-making cycles and reduced investment appetite. Before we move into the details of the financial side, as always, I would like to give you an update on a couple of Key projects, what we did in the last quarter, starting from the left side, that's the European Patent Office in Munich, where we also completed next to the first phase, the second phase in close collaboration with our strong network and lighting designers. Below that, an example of the office here in Barcelona, where we once again have demonstrated our expertise in creating high quality and contemporary work environments. So if you look at the right side, then you see here the Festhalle in Bern, Switzerland. That's the new Festhalle, a venue that has been created for the BAM Expo site that moves people culturally, economically and socially. And here Zumto will deliver the complete lighting solutions as the overall lighting partner for Bern, covering all areas from the concert hall and the foyer to the conference rooms. And data center remains a key growth driver for us. And you see it here on the example of Amazon, where we did again a tailor made facility for Amazon with our tailor made product. And finally, to conclude an example of a store here, the Levi's store in Paris, this project. Again, demonstrates the competence in our retail, creating really this brand enhancing retail environments that combines visual comfort, efficiency and architectural integration. Before we go into the numbers, just as we have passed now the Olympics in Italy, I would like to highlight what we did over there, because there's really something where technology, sustainability and the brand comes together. And I can proudly say out of the seven events or the seven places and venues, we as the Zumtobel Group have been involved in four. You see it here on the picture. One is the Pradazzo Ski Jumping Stadium. The other one is the Sliding Center in Cortina. And then in South Tirol, in Südtirol, in Anterselbe and Antholz, the arena for the biathlon. And then in the fourth one, the arena of Santa Giulia. For the Zumtobel Group, These games are more than a project. They are the opportunity to showcase how advanced lighting can enhance performance and improve the spectator and broadcast experience. and set new benchmarks in efficiency and sustainability. And the strategic impact extends well beyond the event itself. Visibility on such a global stage strength us in the brand positioning and open store for new projects around the globe in the years to come. On slide five now, let me give you an overview before Thomas goes into the details on the financial performance of the first nine months. A period that was characterized by, as I said already, the uncertainty in the economy and a weak market environment across the board. And you see this reflected also in the performance. The revenue for the group declined by 6.4% to $828 million to $775 million. On the segment level, the picture is as follows. Lighting segment generated 618 million euros, while the revenue of the components segment remains weak at the amount 200 million euros. The adjusted EBIT at 32.2 million euros, which corresponds now to an EBIT margin of 4.2%. The figures clearly show that we are still facing the variety of challenges, which makes it particularly important to focus on the resilience and sustainability within the Zoom Double Group. And that, of course, also includes what we reported, the ongoing review of our cost structures. This picture you know, we are continuing to work on these three pillars, the lean organization, the streamlined processes, the shared service center for the next year budget, We have also a quite substantial increase of function in the shared service, you know, that are both in Porto, in Portugal, and also in Serbia in two locations, Belgrade and in Nice. And we do target to save 40 to 50 million by 28, 29, with a portion coming in within this fiscal year and then basically the next two years to come. But the issue is that we are now building up the structure in the shared service center before we can transfer all this. But I also wanted to emphasize this is not just a cost cutting issue. exercises about optimization and improving of our separate in the future to get leaner, more customer focused. So in our overall commercial organization, we are convinced, ladies and gentlemen, that this measures, but we have introduced will strengthen our company in the future, especially hopefully within the next Yeah, quotas, the better market environment so that we are positioned here for the future. And with that, I would like to hand over to Thomas, who will then go through the Q3 results in detail.

Thank you, Alfred. Good morning, ladies and gentlemen. Let me start with the lighting segment. Q3 revenues in the lighting segment amounted to 190 million euros and were 3% below the previous year. Germany, Austria, France and UK recorded lower volumes coupled with price pressure. However, positive volume contributions were recorded in the Southern and Eastern Europe region, highlighted by Italy and Hungary, along with positive growth in Switzerland. Adjusted EBIT in the lighting segment increased from 1.9 million euros to 7.2 million euros. Our adjusted EBIT margin increased to 3.8%. Lower material costs and the decline in personal expenses more than offset the decline in revenues. Please keep in mind for comparative purposes that this year's research subsidy of 1.7 million euros was recorded in Q2 whereas last year this was recorded in Q3. Let me move to the component segment. Revenues in the component segment declined by 10.4% to 62 million euros in the third quarter. The difficult economic and geopolitical environment led to declining sales and also increasing pressure on prices. Adjusted EBIT in the component segment totaled minus 2 million euros. The adjusted EBIT margin stood at minus 3.2%. Lower material and transportation costs as well as lower personal expenses were unable to offset the decline in revenues. Again, please keep in mind for comparative purposes that this year's research subsidy of 1.8 million euros was recorded in Q2, whereas last year's Q3 figures included this research subsidy of the same amount. Slide 9 shows the Q3 result for the group. Revenues in the third quarter declined by 5.2% to 237.4 million euros, mainly as a result of declining volumes and price pressure. Adjusted EBIT stood at 0.6 million euros compared with minus 0.2 million euros in the third quarter last year. Adjusted EBIT amounted to 0.3%. Overall, lower material costs, lower personal expenses more than offset the negative impact from declining volumes. As already mentioned, for the segments, this year's research subsidy of 3.5 million euros at group level was recorded in Q2, whereas last year's figures included the research subsidy in Q3. Let's move to the EBIT bridge. Looking at the adjusted EBIT bridge, we start with the prior year adjusted EBIT of 41 million euros. The negative revenue impact totaled 38.5 million euros with the decline primarily caused by volume reductions, which is about two thirds and to a lesser extent by price pressure around about one third. Looking at our COGS, lower material costs and lower personal expenses had positive impact of 22.3 million euros. SG&A and research costs made a positive contribution to results, mainly due to lower personal expenses. As a result, adjusted EBIT decreased to 32.2 million euros. Slide 11 provides you with the information on our income statement. As I mentioned before, our adjusted EBIT stood at 32.2 million euros. Special effects were negative at 12.7 million euros. They include restructuring costs, mainly in connection with the closure of our US production site and our efficiency program. In addition, the special effects recognized in component segment reported in the second quarter include the impairment of goodwill, which was about 2 million euros impairment losses of capitalized development projects, 2.7 million euros. And on the other side, an investment premium of positive 1.4 million in Portugal. After the deduction of these special effects, our EBIT totaled 19.5 million euros. Our financial results amounted to minus 9.5 million euros and net financing costs amounted to minus 6.9 million euros. Other financial income and expenses totaled minus 2.6 million euros and included the interest expense for pension obligations, FX and hedging valuation. After the reduction of income taxes, our net profit for the first nine months amounted to 9 million euros as a consequence earning per shares equaled 22 euro cents let's now move to the next slide the cash flow statement Cash flow from operating results fell year on year from 69.2 million euros to 64.6 million euros, mainly due to decline in sales. The change in other operating items amounted to minus 36.4 million euros and resulted mainly from lower provisions for variable salary components and restructuring. Cash flow from operating activities stood at 36.8 million euros in the first nine months versus 48.8 million euros last year. Cash flow from investing activities amounted to minus 31.4 million euros in the reporting period. In addition to investments in property, plant and equipment, capitalized development costs of 11.5 million euros are also included. And as a result, free cash flow equaled 5.4 million euros versus 15.6 million euros last year. Cash flow from financing activities amounted to 10 million euros for the first nine months versus minus 36.3 million euros last year. The change compared to the prior year is primarily related to two factors. First, the increased utilization of the syndicated loan agreement and second, the loan from the European Investment Bank. A reduced dividend distribution also contributed to this effect. Let me finish with slide 13 and some comments on our balance sheet. The balance sheet structure remains stable. The equity ratio increased to 43.4%. Net debt rose in comparison with the year-end close to 131 million euros. Our debt coverage ratio is at 1.59. And with this, I hand back to Alfred.

Before turning to our outlook, let me again show you the picture on the latest developments on the Euroconstruct data. The overall picture remains consistent with that what we have outlined in the last quarter. And really after several very challenging years, Europe's non-residential construction sector is stabilizing. with 2026 still expected to mark the beginning of the gradual recovery you see it here on the on the picture with a new belt of two percent growth and the renovation of 1.5 and looking ahead we will anticipate improving the momentum particularly in the field of education and healthcare while the segments like office and logistics remain comparably comparatively weaker The expect recovery continues to support by the rebound of new build activities following the prolonged period of contraction completed by the structural resilient renovation demand. But at the same time, regional disparities persist, growth dynamics vary across the different countries where we are operating and the sub-sectors and the visibility in some segments remains limited. Renovation, however, continues to benefit from the energy-efficient initiatives, the ESG-related requirements and ongoing modernization needs. In summary, the market environment has not changed since our last update, but the direction is gradually improving, even if the pace of recovery remains moderate and uneven across the different countries. Against this backdrop, our strategic priorities remain unchanged. We are focusing on capturing renovation opportunities with our products and the positioning of the zoom double group to benefit from the anticipating upturn in one residential construction. As you know, and we say this every time, the lighting industry typically lacks in the construction cycle, so we expect any sustained market recovery will translate into an increased demand by our solution within a certain time delay. This brings me now to the outlook. The overall market environment remains challenging and the geopolitical instability continues to create uncertainty, especially after last weekend in a market where we are quite intense. We are seeing customers adopt a more cautious approach with longer decision cycles and more frequent project delays. With the measures what we have taken and the efficiency program now in place, we have set a clear course to position the company for sustainable growth and continued innovation. And with a focused strategy and decision execution, we are responding to the ongoing shifts in the markets and creating the foundation for resilient performance in the years ahead. With reference to these uncertainties, we are maintaining our guidance for the revenue development. We continue to expect a revenue decline in a single-digit percentage for the entire financial year. Previously, we expected the adjusted EBIT margin to range between 1% and 4%, and we are now providing more precise guidance from 2.5% to 4%. We outlined in the quarter two that the current performance trend suggests the tracking more towards the upper third, but obviously with the now arising crisis in the Middle East, where typically the months February, March, and April, so our last fiscal year quarter, are the strongest one and creates additional uncertainty. The planned capex for the year amounts approximately to 50 million euros, as indicated already in the last quarter. Before we conclude the presentation and are listening to your questions, I would like to once again extend the invitation to our investor event, what we have planned during the Light and Building Fair on March 12 in Frankfurt. We will provide an update on the current market situation, outline how we are operating with this environment, and share our outlook for the market going forward. Furthermore, you will then have the opportunity to visit all three of our stands from the three brands, so Credonic, Thornton and Zumthor, where we showcase our latest solutions, products and innovations. Afterwards, you will be able to discuss key topics directly with Thomas and myself on the stands. So if you have time and are interested in the event and haven't signed up yet, please feel free to do so by clicking just the link or scanning the QR code. So with that, we would like to thank you for your attention. Now Thomas and myself are happy to take your questions. Thank you for listening.

We will now begin the question and answer session. Anyone who wishes to ask a question from the webinar may click the Q&A button on the left side of the screen and then click the raise your hand button. If you are connected via phone, please press star followed by one on your telephone keypad. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press the lower your hand button from the webinar or press star and two on your telephone. Anyone who has a question, make you up now. The first question comes from the line of Michael Marschallinger from Erste Group. Please go ahead.

Yes, good morning. Thanks for the presentation. I have two questions, please. Firstly, on the components of quarter development. Could you please provide us a breakdown of volumes pricing and also in terms of price pressure, what you are seeing currently on the market and how does it compare to the previous quarters? And what are your expectations for fourth quarter? And this already brings me to my second question, to your new revised adjusted EBIT guidance. This guidance still leaves a wide range for the fourth quarter, from minus to positive fourth quarter. Could you maybe walk us through your assumptions for the last quarter? And did I understand correctly that the lower end assumes a longer Middle East conflict?

Let me start with the second question. You are absolutely right. Obviously, from the development, the 2.5 would be on the lower end of the quarter four results. We have a couple of special effects in there. As you know, we are in the middle of the fair time. We have participated now in two fairs. This one, where we extended again the invitation, the light and building is coming. is basically having the costs in quarter four. But the main reason is really the situation what we are having in Middle East. Michael, as you know, that's quite a significant market for us, the Emirates and Saudi Arabia especially. And the March and April typically calls for something like 60% of the turnover what we do. And obviously here we have the huge uncertainty. What happens to that? Because currently the products, what we do not know when they will be accepted and more is to come. And that basically led us to this guidance. Maybe the first one, Thomas, can answer the pricing.

You know, the revenues in the component segment declined by 10.4%. 4% percentage point out of this 10.4% are price pressure. The rest comes from volume mix and FX. And the price pressure in the component segment was over the year 5%. Nearly the same. Nevertheless, we see that the price pressure goes down a little bit as competitors are starting to raise prices. They had lowered their prices more than Tridonic before, and now they are raising prices again. So we expect that the price pressure declines.

Okay, Anders, go ahead.

As a reminder, for questions from the webinar, please click the Q&A button on the left side of the screen and then click the raise your hand button. If you are connected via phone, please press star followed by one on your telephone keypad. The next question comes from the line of Emanuele Sartori from Kepler-Chevreux. Please go ahead.

Hi there. Thanks, Harfred and Thomas, and congrats for the results. I have just one question for now from my side. I'm just interested on the verticals here. Obviously, you mentioned education and healthcare, which might be a positive for you. I'm just wondering if you're seeing any other verticals holding up. I'm just thinking that you are now at the London Fair, of course, focused on data centers. So I'm just interested to see the pipeline into Q4, but also in the next fiscal year. Thank you.

No, Emanuele, you're absolutely right. Obviously, education and healthcare is one of the verticals where we expect growth, because I maybe was not 100% clear, but when it comes to investments where we see it, a lot of it is coming currently from the push programs from the government in the, let me say, government sector. And obviously, that's then something where we are very well positioned to do so. But of course, we have other verticals. One, I think we mentioned it in one of the previous calls, is the whole sports illumination. We are now FIFA qualified as one of the few suppliers. Obviously, that's why I intentionally mentioned that what we have done in Italy. because that's of course a lot of reference growth projects for stadium and that's a very very global business so we are not so dependent only on the trends that we are seeing from most of other businesses in Europe. Data center that's still booming where we are especially in Middle East for example we are also going in this whole tunnel illumination what goes in. I forgot to mention, I think last time we had it on the picture, we have now all launched on our portfolio for our trunking system, which is the most successful product for Zumtobel going into retail and into industry, so like warehouses. with the best price performance ratio. And we expect that this will have quite a significant impact in 26, 27. So a couple of products. And obviously, Emanuele, I think if you're coming to visit us at the show, then you'll see first time how we are launching this and positioning this. And there are a couple of promising growth drivers moving forward. Yeah, great. I'll be there. Thank you. Perfect. Looking forward to meeting in person then. Thank you.

Once again, for questions from the webinar, please click the Q&A button on the left side of the screen and then click the raise your hand button. If you're connected via phone, please press star followed by one on your telephone keypad. Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Alfred Felder for any closing remarks.

Yeah, thank you very much, ladies and gentlemen, for listening. I'm looking forward for those of you to meet you personally in Frankfurt together with Thomas and with Eric. I think we have a couple of extremely interesting things to show where you will learn that we have driven our innovations and we are ready for the, let me say, ramp up again if the economies change.