Zumtobel Group AG

Ladies and gentlemen, welcome to the earnings call of Zumtobel Group on the Q4 and full year 2025 and 2026 numbers. I would like to welcome the company's CEO Alfred Felder, CFO Thomas Erath and Head of Investor Relations Dr. Eric Schmiedchen. The gentleman will guide you through the figures in a moment, followed by a Q&A session for institutional investors and analysts via the audio line only. There will be time for questions from journalists and retail investors during today's Zumtobel Group roundtable, approximately at 3 o'clock this afternoon. And with that, I hand over to you, Mr. Schmiedchen.

Thank you, good morning ladies and gentlemen and a warm welcome from my side as well to our figures for the Q4 and pool year 2025-26 results. As said, with me on the call is Alfred Felder, our CEO, and Thomas Erath, our CFO. Alfred will walk you through the highlights of the co-op and the year, 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.

Good morning and welcome ladies and gentlemen and thank you for joining us today for this call. The financial year 25-26 was again a challenging one for our business. The market conditions and the broader economic environment remained difficult and were further impacted by, as we all know, the geopolitical tensions. around the globe. In Europe, however, we began to see early signs of the demand in the new construction, especially during the fourth quarter. However, the recovery remains modest. With the AHOC announcement on July 1st, we already provided some preliminary information on our full-year figures. But before we move into the strategy update and the financials, I would like to do, as usual, share with you a couple of highlights what were driving us over the last quarters, including also here the first one, the Light and Building, where we, in the biggest light fair every three years, we have been showcasing with all the three brands an impressive program also according to the feedback of the Zumtobel's capabilities. We were able to meet numerous customers, especially a lot of new customers in Dortmund conversations and develop new partnerships and one of this is the collaboration with Legro. So that's our third partner in the building infrastructure next to ABB and Signify, which we announced. What you see here in the middle is the APOBank, a typical refurbishment project where we really gain momentum, where it was a renovation package versus the existing products with a lot of control know-how, what made us this as a success. Benni on the right side is a test pilot. Typically it's in Austria where we have been doing a combination of high system efficiency, optimal glare control. So we're here, the entire lighting solutions is designed to permanently minimize the energy consumption. A very iconic project, I reported also one and it's now completed, is this fish market in Sydney, where again, the commitment on sustainability The project minimizes the environmental impact through responsible construction practices and innovative energy solutions. And the roof here is an architectural feature that includes built-in luminaires to provide the special illumination after the sunset. We are very proud that we have been able to contribute here. and last but not least a project the American University in Cairo in Egypt which was founded in 1919 one of the leading educational institutions in the Middle East and here 136 smart classrooms and 200 laboratories on a seven kilometer campus in 12 building zones have been equipped and here Tridonic with a partner was established in the network with 20 controllers which precisely control and monitor 1100 LED escape signs. For this project, Drydonic received the International DALY Award in 2026 in the Best Emergency Lighting Integration category. Let me now give you an overview on our financial performance in the last fiscal year. Thomas, of course, will go and then into the details. We published the Group FIB series in our ad hoc announcement on July 1st, and compared with the same period of the previous year, the revenue declined by 5.2%, from 1 billion 97 million to 1 billion and 40 million euros. If you look at the segment level, the picture is as follows. Lighting segment, at 832 million euros, while the revenues of component segment amounted to 266 million euros. The adjusted Group EBIT at 42.4 million, which corresponds an adjusted EBIT margin of 4.1%. Our lighting segment remained stable in a difficult market environment and further improved its profitability The component segment, however, was confronted with the ongoing weakness in construction, as well as the increasing pressure, especially from the Far East competition. As explained in our ad hoc announcement, the net profit was significantly affected by considerably higher income taxes compared with the previous year. And here again, Thomas will explain this in more detail later on. and in view of the slightly positive net profit of only 1 million euro for the entire financial year compared to 15.5 billion euros last year, we in the management board recommended to the supervisory board and subsequently we also make this recommendation to the annual general meeting not to pay a dividend. It was not an easy decision, but taking all relevant factors into account, we believe it was the right one for us. Looking forward, our priorities are clear. Our operational excellence, a strategic focus and the profitable growth. And one of our central growth drivers is in the digital transformation of the buildings. into energy efficient, integrated and intelligent infrastructure. This is also, as I explained in one of the last calls, the main reason why we are having these cooperations with the building infrastructure providers such as Legro, such as ABB and such as Siemens. In addition, legal regulations strict energy efficiency standards and the demand for database solutions are sustainably changing our customer requirements and so we are continuously strengthening our position in this market with our intelligent lighting solutions. On this slide here you see how we in the Zumtobel Group are responding to the structural changes in our market and how this strategy is already reflected in tangible customer solutions. The bigger picture you know these five trends are reshaping our industry from moving from product to solutions, including the sustainability, including the connected data. And we are all witnessing this fundamental shift also from our customers who are more and more not asking products anymore, but complete solutions. So the key message is here. We are moving from products to integrated solutions. And this is not Merlin Observations, the direction which we are evolving our entire portfolio and the complete organization. And how does it look like in practice? Let me give you some examples. One is The value shift here in the data center sector. Data center we started to be engaged five years ago and now we are seeing and earning the fruits. Here we have to deliver more than just the illumination, the lighting solution. We support our customers from the earliest planning stages with specialized lighting design, including solutions that are tailored to the terminally demanding environment of data halls as you know this data hole still with all the energy they use to cool this down are still having temperatures up to 40 degree in there our portfolio covers here the entire family from the external areas and the data hall itself to the technical rooms the emergency lighting and the office spaces for us This is a high margin, very fast growing segment in which we are positioning ourselves as a system provider rather than a simple component supplier. In smart and connected, this transformation is evident in the way buildings are optimized. Using sensor data, we help manage visitor flows, prevent overcrowding, and create the data foundation for company-wide standards in the building environment. Air Quality and Lighting. Our Light Monitor Platform enables facility managers to monitor and control entire lighting installations centrally. The next page, when it comes to sustainability and well-being, will let our actions speak for themselves. Our continued inclusion Our Phonics Index as well as this year the Ecovaris Platinum Rating which places us among the top 1% of the companies assessed worldwide provide independent recognition of our progress. Product wise, here you see an example of the Avenue Luminaire 68% recycled material, completely disassembly for repair and recycling and 80% recyclability and a guaranteed maintenance and repair upgrade availability through the entire lifecycle. This is circular economy in action, not just as a commitment on paper. With these products, We are advancing sustainability in helping our customers meet their sustainability goal while creating new business model, especially a refurbishment after the first lifetime into a second lifetime and automatically moving from a pure product business into a solution business and potentially with a business model also in a light leasing. Considering these key trends reflect the strategic logic underpinning our business. We are systematically evolving our business model here. from really selling one time the products towards a recurring higher margin revenue stream generated through services, software, and also data monetization. And at the same time, our focus on sustainable, long-lasting products and partnerships strengthen the customer loyalty and reinforces our competitive differentiation. On slide eight, Views, I would like to provide you an update where we stand with the achievements what we have announced a couple of quarters ago of our efficiency program. As we reported in recent quarters, we have already delivered substantial cost savings and in total we realized cost savings of around 16 million euros for the entire 25-26 financial year with roughly 6 million euros in associated restructuring costs. This then translates into a net impact of around 10 million euro in the first year. And let me briefly explain once more the three levels. One is the lean organization, where especially in the big departments being in sales, we have optimized the footprint, reducing hierarchical layers. And this will continue also in the other departments. Second one, Streamlining the processes. This is a continuous effort. One example is in procurement where we are reducing complexity and increasing automation. This will allow us now to lower spending, improve our transparency and manage our purchasing process more efficiently. And that is now going on in all aspects of our business. and thirdly the establishment of the shared service centers too. In Serbia we have two locations, one close to our factory or in our factory niche and one in Belgrade for more the international jobs who need international airport nearby and Portugal. And as previously communicated here our objective is to structurally improve our cost position over the next four years and by the year four and that's here in the case 28 29 we are targeting annual cost savings of 40 to 50 millions and plan to match this level in the following years importantly around 80 percent of these savings are expected to realize by year three because currently as you know we are building this up we are training the people and once this is ready we are transferring this knowledge from high-cost countries to our Global Business Centers. Obviously, we are fully aware that these steps and measures are not always easy and that they also affect our employees. We take this responsibility very seriously and are supporting the transformation process as carefully and responsible as possible. And as just said, the further development of our business model also required a consistent adjustment of our organization. My colleague Bernard Motzko, who has served as a Chief Operating Officer at Zumtobel Group since 2018, will resign from the management board and retire by the end of September 26. Going forward, we will reduce the management board to three members and anchor operational responsibility within the existing business areas. My colleagues and I are convinced that the measures we have introduced and executed will strengthen our company in the future. In this way, we are addressing the current challenges in the market. Let me give you, before I hand over to Thomas, an update on our component segment. As I mentioned earlier, this segment has now been under pressure for the third consecutive years. The revenue declined by 11% year-on-year basis and the adjusted EBIT fell to 4.6 million euros. We take this development very seriously and we have acted here on that. As reported over the past few quarters, we carefully evaluated potentially three options, selling of the segment, a joint venture with a partner or a fundamental repositioning under our own steam. And we came to the conclusion that the market is currently not prepared to offer a price reflecting the true value of our business. We have also not found yet a joint venture partner so far with whom we think we can run the combined business and create additional value. So we have therefore chosen the third one in our most value creating path. We are actively rebuilding the component segment by itself. Our strategy follows here a clear three-part approach. Keep and stabilizing our core business, the OEM business consisting of LED drivers, sensors and LED modules, extended in new markets and new applications, so remaining into the lighting. Develop also new business opportunities beyond the light. And that means the following. If we keep and Stabilize the Core, we are securing our existing core business by rigorously driving cost efficiency. Extending the core, we are pursuing new applications closely related to our existing business. And one concrete example is our rail signal project, where together with a partner, we aim to refurbish existing signal system from halogen lamp to LED for rail networks with our solutions. And in parallel, We are strengthening our capabilities in and leveraging the control business. Developing new business opportunities beyond light. We are here identifying new business areas. As you know, one of the core competences of Tridonic is power electronics. So we are perfect in converting AC to DC in thermal management and especially when it comes to monitorization for high-end applications. You see here a couple of examples. Renewable energy, the general high-power semiconductors, obviously with data center, with artificial intelligence energy and energy consumption is exploding. and everything what helps to make this transfer of energy more efficient is saving cost and here Tridonic with its competence plays a key role where we engage with data centers with power conversion here and that is making interesting applications what go beyond the lighting. We are also addressing this transformation on the leadership level. The previous CEO of the component segment has left the company and the successor will drive this strategy forward as I just have outlined. We will keep you updated as this project has started a couple of weeks back and latest with the result presented in December. I'm very confident that this clear roadmap will put the component segment on sound and future-proof footing with an increased volume and margins. So with that, I would now like to hand over to Thomas who will take you through the quarter four and also the all four quarter results in detail.

Thank you, Alfred. Good morning, ladies and gentlemen. Let me start with the lighting segment. Q4 revenues in the lighting segment amounted to 213.7 million euros and were 0.8% above the previous. Positive volume contributions were recorded in the Americas and the Maya region, along with positive growth in the Netherlands and Switzerland. France, Germany, Italy and the UK recorded lower volumes, as well as a couple of other countries having price pressure in the market. Adjusted EBIT in the lighting segment increased from Our adjusted EBIT margin increased to 6.4%, lower material costs and a decline in personal expenses also contributed to the higher result. Slide 11 shows the component segment. Revenues in the component segment declined 8.8% to 66.4 million euros in the fourth quarter. The difficult economical and geopolitical environment led to declining sales and also still some price pressure. Adjusted EBIT in the component segment totaled €0.4 million negative in the fourth quarter. The adjusted EBIT margin stood at minus 0.7%. Lower material costs and lower personal expenses were unable to offset the decline in revenues. Slide 12 shows Q4 results for the Group. Revenues in the fourth quarter declined by 1.4% to €265.4 million as a result of the decline in the component segment. Adjusted EBIT increased to €10.2 million compared with €6 million in the fourth quarter of last year. Adjusted EBIT margin amounted to 3.9%. Overall, lower material costs and lower personal expenses more than offset the negative impact from declining volumes. Slide 13, looking at the adjusted EBIT bridge, we start with prior year's result of 46.9 million euros. The negative revenue impact totaled 44 million euros with the decline primarily caused by price pressure, volume reductions and to a lesser extent ethics. Looking at our COGS, lower material costs and lower personal expenses had a positive impact of 32.4 million euros. SG&A made a positive contribution to results mainly due to lower personal expenses. As a result, adjusted EBIT decreased to 42.4 million euros. Slide 14 provides you with information on our income statement. As I mentioned, our adjusted EBIT stood at 42.4 million euros. Special effects were negative at 90.3 million euros. They include restructuring costs mainly in connection with our efficiency program and the closure of US production site in Highland. For individual claims, minus 1.4 million euros were recorded in the component segment and minus 0.6 million euros in the lighting segment. In addition, the special effects recognized in the component segments reported in the second quarter include impairment of goodwill, which was 2 million euros, impairment losses to capitalized development projects, 3.2 million euros. And on the positive side, an investment premium received from the Portuguese government After the deduction of these special effects, our EBIT totaled 23.1 million euros. Our financial results amounted to minus 12.4 million euros and net financing costs amounted to minus 9.8 million euros. Other financial income and expenses totaled minus 2.5 million euros and included the interest expense for pensions, obligations, FX and hedging valuations. Profit before tax totaled 10.7 million euros versus 16.1 million euros last year. Income taxes amounted to minus 9.7 million euros compared to minus 0.6 million euros. The year-on-year increases in income taxes resulted primarily from value adjustment to deferred tax assets in the US, UK, and Austria, as well as some non-recurring effects. As a consequence, net profit fell to Minus 1 million euros, earnings per share equaled 3 cents per share. Let's move to the next slide, the cash flow statement. Cash flow from operating results fell year on year from 86.4 million euros to 82.6 million euros, mainly to the decline in sales. The change in other operating items amounted to minus 26.7 million euros and resulted mainly from the reduction of provisions for pensions and termination benefits and the reduction of restructuring and bonus provision. Cash flow from operating activities stood at 61.8 million euros versus 72.3 million euros in the last year. Cash flow from investing activities amounted to minus 45.7 million euros in the reporting period. As a result, free cash flow equates 16.2 million euros versus 19.6 million euros the year before. Cash flow from financing activities amounted to minus 6.9 million euros versus minus 37.9 million euros the year before. The change compared to prior year is primarily related to the increased utilization of the loan from the European Investment Bank and the reduced dividend distribution. Let me finish with slide 16 and some comments on our balance sheet. The balance sheet structure remains stable. The equity ratio increased to 43%. Net debt growth in comparison with the last year end closed to 128.5 million euros. Debt coverage ratio is at 1.56. And with this, I hand back to Alfred.

Thank you, Thomas. Before turning into our outlook, let me briefly reflect on the latest sector development based on the Euroconstruct data, what we received in June. On 2026, the forecast downgrade from Euroconstruct was expected, so the data confirms what we already anticipated. In that sense, no surprises to us. for 2027 however the picture looks much more encouraging the forecast is stable compared to the last november so they are always publishing this data in november then in june and it is steadily reflects growing confidence that obviously the conflicts especially this one in middle east is moving towards an end but once that optimization sets in we expect It will support construction activities across our market. The key headline for today is that the sector is coming out of the recession and the numbers confirm it. The cycle has turned finally. With the recovery, we expect new build growth will take the lead from 2027 onwards, outpacing the renovation for the first time in several years. But however, the renovation remains a structural pillar, particularly in non-residential construction. Why is this the case? Because environmental requirements have made it non-optimal. Building owners are not renovated because conditions are favorable. They are renovated because regulations require it. And that makes the segment resilient and it will stay that way. So to sum up, 2026 is as anticipated and communicated, 2027 will bring stabilization of recovery, new build will lead the growth and renovation will remain anchored by energy transition. Meaning the direction is gradually improving even if the pace of the recovery remains moderate. With this, our strategic priorities remain unchanged. We are focusing on capturing renovation opportunities on one side and positioning the Zumtobel Group to benefit from the anticipated return in non-residential construction. And as the lighting industry typically lags behind the construction side, we are expecting that any sustained market recovery will translate into an increased demand for our solution within a certain time delay. This brings me now to the outlook for this fiscal year. The overall market environment remains challenging. However, as mentioned in the previous slide, construct activity is expected to pick up. With the measures that we have taken on the efficiency program, and we continue to take, we have set a clear course to position our company for sustainable growth and continued innovation. With a focused strategy and decisive execution, we are now responding to the ongoing shifts in our market and creating the foundation for resilient performance in the years ahead. On margins, we expect an adjusted EBIT margin of 3% to 5% for the year. And let me here be transparent about what's pulling in each direction. On a positive side, our efficiency program continues to deliver. The contributions are real, they are measurable and they will support the margin improvement going forward. But on the other side, we are facing headwinds we cannot ignore. We see already higher raw material prices, also partly higher prices for semiconductors, a sustained price pressure in the market and rising wage costs. This is not short term, nor is it requires active management. As we outlined earlier, 2026 remains a transition year. The recovery is confirmed, but it's still early. We expect the margin tailwinds from our efficiency work will strengthen as we move into 2027 when new build momentum picks up. Planned capex for the year amounts to approximately 50 million euros. And with that, we are closing our presentation and Thomas and myself are now ready to take your questions. Thank you for listening.

Yes, thank you very much, Mr. Felder and Mr. Erath. Ladies and gentlemen, we are now opening the audio Q&A session for analysts and institutional investors. So if you like to ask a question via the audio line, please click on the raise your hand button. If you are dialed in by phone, please press star 9 and wait for the instructions. So I'll wait for the people raising their hands. We start with Mr. Steiner. Mr. Steiner, you should be able to unmute yourself and place your question, please.

So you should be able to place your question, Mr. Steiner. All right. Good morning, Patrick Steiner, WBHF. Thank you very much for your presentation. I would have two questions from my side. First of all, could you maybe share your thoughts with us on your data center business revenue share in terms of group revenue, expected growth rates for the next few years, and maybe give us some margin corridors. As you've mentioned, this is a profitable high margin business.

that was the first one and the second one is could you also give us some more information on potential restructuring one-offs baked into your three to five percent adjusted EBIT margin guidance for this year thank you all right thank you for the question I will take the first one so with the data center our we are basically having meanwhile a very broad customer base So Microsoft, Amazon and all these big guys are our customers. We have a double digit million revenue here with the data centers and participating in the exponential growth. So we are expecting, especially across Europe, but also into the Middle East, India, more momentum. The products that are going in are the high end products, especially the cranking systems. For example, our Tecton 2, the flagship product, what we just launched a year ago is one of this. And here we are in the margin range between 45 and 55%. And the second one on the construction, Thomas will answer.

With regard to the restructuring cost, we are not in a position to disclose how many restructuring costs we have factored in, as this is subject to discussions with the workers' council and different plans. That's why we want to show our operative performance and not only EBIT numbers. During the year, this will be clearer what we can do and what we can't do.

All right, understood. Thank you very much.

Thank you, Mr. Steiner, for your question. And I am waiting for participants raising their hands. Mr. Marschallinger, you should be able to speak now and place your question if you unmute yourself.

Good morning, can you hear me? Yes, we can hear you. Perfectly. Yeah, good morning, everybody. So just one question left on the top line guidance. Would you say this statement holds true for both divisions? Could you maybe walk us through your volume and price assumption for Lightning and Tritonic for 2627, please? Yeah.

So as you have seen from the numbers, what Thomas shared, when it comes to the to the lighting segment over the last four quarters we have been able to improve when it comes to the top line and with the fact that we have run the efficiency program and streamlining the processes we do see that in the last let me say quarter and now moving forward price pressure coming especially for the big projects which is always the case But on the other hand, a relatively stable price environment on the lighting segments. And honestly, we are now monitoring very carefully how the material cost will go and obviously also consider the option that in autumn we will need to increase our prices here to keep our margins. So in that sense, the lighting segment is more stable in terms of pricing. on the components level however we are seeing with the oversupply here the usual price erosions in the range of three to four percent also here we see especially from chinese competition who are currently in quite difficult environment when when it comes to the bottom line that they are have started to increase the prices also here this is already ongoing so Tridonic is increasing the prices to mitigate this price erosion so carefully optimistic it might be that over the next six to eight months our prices on the components level will become more stable and maybe I can add one comment for PCBs you know we have experienced price increases of 25%

and one of our biggest revenue drivers in the component segment of about 70 million are LED modules and material costs consist primarily of PCBs in this segment so we will need to increase the prices as well in this segment and this will lead to higher revenues.

Okay, that's very helpful, thank you.

and maybe just to say the whole market of course is reacting to this. It's at the beginning. Most likely everything will be happening after the summer break, September, early October.

Well, thank you very much and we move on to the next participant, Mr. Satori.

You should be able to speak now and unmute yourself. Hi there. Good morning. Thank you for the presentation and taking my questions. I just have two questions, please. The first one, touching again on your guidance and the broadly flat revenue and the 3% to 5%, just a little bit margin. I appreciate your mention about the efficiency and the higher raw material prices, but I will just I'm wondering if there is a level of revenue growth or organic and volume growth that could lead potentially to that 5% adjusted EBIT margins on the top end of the guidance there. And my second question is that, apologies, I've missed the first part. I have some technical issues, but I wanted to ask on the end markets and geographic exposure. beyond the data center maybe. So just understanding the most resilient, if you would like, within Lightning, education, healthcare, retailing, infrastructure, outdoor, and if there are any main regions to call out here. Thank you.

Yeah, thank you for your question. Let's see if we can cover this all, but if I understand your questions right. So, obviously, we do have a couple of very promising businesses that deliver high margins or what potentially could lead to the upper level of our guidance. One I said already, we are benefiting on the data centers. Yeah, I also have to say, in combination with our partners like ABB and Legrand who are heavily engaged in data centers we are expecting that we have access to larger volume the second one we have a fantastic competitive product portfolio when it comes to sports illumination this is really we are fifa qualified so this is really gaining momentum in building stadiums and sports infrastructure this is the second one The third one is our new Tecton flagship, where first time we do have a product portfolio that is not only addressing the high end, but also addressing performance applications when it comes to warehouses, industrial halls. who do not require 100,000 hours lifetime and 15 bowls but a good bit 9 with a little bit lower efficiency and with 50,000 hours and we have the product here and we are seeing a clear momentum what will help us to grow. It will be a little bit more difficult on the components level as obviously the OEM customers are also struggling in the market when it comes to We are seeing nice momentum across several countries in Europe, obviously the dark region, but also Italy, also the Eastern Europe. Middle East, we need to monitor very closely I think we need to look carefully because we had quite some challenges when the war started in delivering currently more or less stable but obviously we need to monitor whether the investment let me say appetite is coming back to the levels before the war so I think that are the key drivers what we have in the different markets Topic, what we are currently suffering is the wholesale business across Europe, the wholesale business of lighting. Fortunately for us, not the big portion is very, very weak, especially in the two big countries, Germany and France, where the big distributors like Rexel and Sunepa have more or less shrunk by between 15 and 20 percent in the 25, 26 fiscal year.

Thank you so much.

Yes, thank you very much for the questions. And I'm waiting for participants raising their hand, using the opportunity to ask a question. If this is not the case, the brief information that there will be a roundtable today at three o'clock. So ladies and gentlemen, you can use this opportunity as well, especially for journalists and retail investors during this call to place their questions there. and by now there are no more questions and due to that fact we come to the end of today's earnings call. Thank you very much for your interest in Zumtobel Group. A big thank you to Mr. Felder and Mr. Erath for the presentation and the time you took to answer the questions and for some closing remarks I hand back over to you Mr. Felder.

Ladies and gentlemen, thank you very much for listening, for joining us today. And for the questions, in a nutshell, obviously, we are slightly a little more optimistic for this fiscal year, despite all the geopolitical turbulences that we have. Stay tuned and we hear each other again in September with our Q1 results. Thank you very much and have a nice day. Thank you.