BELIMO Holding AG

Well, good morning, everyone, and a warm welcome from my side. It's a great pleasure that we can have this earnings call this Monday morning. I'm here together with Annabelle Lehner. She will later on moderate the question and answer. Before we start, a couple of logistics remarks. You've all been muted and your camera has been turned off. We'll remain that until we'll start with the question and answer, and then you will have the opportunity to raise the hand and ask your question. Without any further ado, let's go into the main content of today. So we'll start with a short overview of the first half here, then we will go into the business highlights. and start with the financial overview and then have a brief view into the outlook before we will hand over to the questions and answer. So the first half year of 2025 was extremely successful. We had a very strong net sales growth of 21% in local currency or almost 19% in Swiss francs in our reporting currency. So an overall amount of 562 million. That's ahead of the five year average. Especially strong was the Americas with sales growth of more than 30% in local currency. that's also very much supported by the favorable overall business but obviously also by the strong data center business from an operating point of view also the strong growth led to strong increase of our ebit performance so we had an ebit of 128 million that corresponds to an ebit margin of 22.8 percent So that's despite some headwinds from the FX development and there the main drive was obviously the operational leverage we enjoyed in the first half year. Also from a free cash flow point of view, very successful and very strong operational cash flow and then some elevated CapEx requirements due to our capacity expansion program. We'll come to that. In a more broader part, we see a further acceleration of our control valve business that was contributing with 23% growth. That just shows the importance of this important business line and the increasing presence and market share we're gaining on the control valve business. Overall, we had a very strong performance across all regions, so all regions contributed significantly to the strong results. and we had their strong contribution from the data center and the renovation mark. If you look a bit broader into what happened in the first half year, obviously the main highlights of the first half year was the celebration of the 50th anniversary of our company. So we are now around for 50 years and that was reason for various festivities activities and the strong presence we enjoyed in the market. From a more broad perspective, what happened in the first half here, obviously, the discussion around tariffs were very important in especially the beginning of the second quarter. So there were a lot of uncertainty from the U.S. tariffs, how that will impact the market. So far, very minimum set up or impact to our business. So we're able to deal with the tariffs. We see a very strong demand in the Americas and in Asia Pacific, and also some early signs of a European recovery with a strong boost also there from the OEM business that are supporting the EMEA business. And then across all region, we see a high growth in the data center business, and that is positioning a significant support of our business, mainly there from the liquid cooling and there from the cold plate technology. Internally, based on the strong sales growth, we are accelerating our capacity expansion programs and investing in all our major sites to increase the capacity and cope there with the volume growth. We're also very proud that we were able to rank seventh among European's top employers and have been selected as a top company to work for. And that's obviously very important for us also to attract new talents and to be able to cope and increase our workforce. Also, that shows how attractive Belimo is as an employer and that is helping us going forward. And also we made a significant step forward in our long-term succession planning. We were able to announce Sarah Benchik as the new head of Americas. So there also we have got a very long-term approach to the succession planning and are able there also to secure the success for the long run. I've mentioned we were able to celebrate our 50th anniversary. We celebrated that during several trade shows. We had customer events, we had events with our partners. We also had a great exhibition here at the main location in Hinville and more than 2,000 visitors joined this exhibition with overwhelming positive feedback. I think many of the participants in the call had the opportunity to join this exhibition. Now, very important in the first half year was obviously the data center business. Just looking how it looks inside the data center, you see there's a lot of orange that is required to cool the data center down. We can see that on the top left side with the air-based cooling. So a lot of air-based actuators are required. Or then when we come to liquid cooling, a lot of actuators and valves are required to secure the flow of liquid towards the server racks. Why is that so important? That is in conjunction with the significant higher heat density that is happening in high-performance data centers. That means that the heat that is produced per rack is constantly increasing, and that requires new cooling technology. And there, especially, the changeover from a purely air-based cooling to a liquid-based cooling, be it rear door cooling or then cold plate cooling, is showing and giving a big business opportunity for Belimo where we can sell our control valve and send this into data centers. Now, how does that reflect to our business opportunity? The most important driver there is the installed capacity or the newly installed capacity. And the way to think about the market in our view is to look at the installed capacity in a way of electrical capacity. So in megawatt or gigawatts that are being installed. because all the electric power that goes inside the data center needs to be removed as heat later on at the at the at the other end of the data center and that's where our technology is in there and there's a good correlation about every gigawatt of additional installed capacity provides a market of about 40 to 60 million of our products 40 million more for the air-based solution, so when the heat is removed with air, and 60 million plus more when we go into the liquid cooling. And on top of that, there's an increasing opportunity for retrofitting data center, be it that data centers are are upgraded from an air-based into a liquid-based or also that all the data centers are upgraded. Those data centers needs to be renewed after about five to seven years as the technology is becoming old and then require new installation. If you look how that constitutes our business. So here we can see always the half year turnover starting with the first half year 2024 and 2024 second half year as a performer and then the first half year of this year. So you can see that the share of data center is increasing from about 10 to 11 percent in the first half year of the last year to about 16 percent in the first half year of 2025. Now that's significantly different across the different region. So the lowest share of data center turnover is in EMEA, where the deployment of new data center is still relatively small. And we have got much higher figures in the Americas or the Asia Pacific, where the data center share is about 20% and more. Now also, if you look at the data center growth, We can see that compared to the first half here in 2024, data center is growing about 60 percent, a bit more, and compared to the second half here of 2024, it's more than 40 percent growth. So a significant share of the growth is coming from data center. I've mentioned we are a high-growing company and that's also the reason why we need new capacity. We were able to inaugurate our new capacity extension, our new building in Shanghai in China in the early stage of the first quarter. There's a picture of the building, looks very modern with a solar facade. That's also from an ecological point of view, a high-end building and is also ranked platinum and the highest standards on the Chinese part. We were also able to finish the raw shell construction of our capacity expansion here in Switzerland and the building will be ready to put into operation in summer next year and we're making good progress there. At the moment we're in the planning phase of the expansion project also in our US based in both our sites in Danbury, Connecticut and in Sparks, Nevada. but will also increase the capacity and are starting now there with the expansion projects. So that's in a nutshell what were the key business highlights in the first half here and we will go now into more details on the financials. We've mentioned a very strong sales performance with 561.5 million of net sales turnover a sales growth of 18.6% in Swiss francs or 20.6% in local currency. From a regional breakdown, the Americas were 50% of turnover in the first half year, about 40% coming from EMEA and 12% from Asia Pacific. Also looking at the breakdown by business line, the control valve now is 50% business, the majority and the most important business line. 45% damper actuator and 5% sensor and meter, so our youngest business line significantly gaining traction over the past couple of years. If you look at the composition of our growth, we can see that about 18% is driving from volume and mix, so the majority is volume and mix, with a price contribution of 2.3% in the first half year, a little bit of others giving us to this 20.6%. And then an adverse ethics effect of 2%, so probably only 2%. Now we know the dollar significantly devaluated, especially in the second quarter, while in the first quarter that was still relatively strong, which gives us then the reported sales of 18.6%. If you look a bit closer into the various regions, we can see here EMEA with about 10% gross contribution, so really a stellar performance there given the economic conditions that we're in there. We can see there we've outperformed the commercial construction sector in all our key markets. And what you can see in there is also an early recovery of the business. And now we see significantly increasing OEM business. That shows there that also some recovery is happening in EMEA. Obviously, the strongest growth contributions come from the Americas, so with 30% growth, leading to a 50% overall contribution of the Americas. So there we can capture on an overall favorable HVAC market and a very strong contribution of our data center vertical. Also, Asia-Pacific with 21% growth, also very strong, and there especially was the focusing on high-end and attractive verticals and growing segments. A bit closer look into the different regions. So in DEMEA, we were able to generate 216.3 million net sales in Swiss francs, a growth of 8.2% in Swiss francs or 9.9% in local currencies. As mentioned there, despite some headwinds from the from the economy we're able to outperform there in our all our key markets we see some some small recovery also in in germany and especially there an increasing oem business is also helping the fire and smoke business and the damper actuate the business line That's also very much still driven by the retrofit initiative or the retrofit business, where a lot of businesses coming from upgrading and renovating business. A bit more view of the America, so very strong growth there to 280 million Swiss francs or a growth of 27.7% in Swiss francs or 30.1% in local currency. So very strong contribution from the overall market and then especially strong contribution from the data center business. So, in absolute terms, the data center business contributed to about a third of the absolute growth. That also means that two-thirds of the growth was generated outside of the data center business. That just shows also the strong performance of the overall HVAC market and especially our strong performance and some additional market share gains were able to generate there in the Americas in the first half year. Looking into Asia-Pacific, also there a very strong growth of 19.3% in Swiss francs to 65.3 million Swiss francs or 21.3% growth. So there, all our key markets have contributed significantly, and we're especially proud also from our strong results in China, where we were able to grow more than 20%, and that was mainly coming from our strong focus on the attractive verticals. Also there, data centres across the entire Asia-Pacific market are very strong contributors to the overall growth of the region. A bit more into the breakdown of our different business lines. So 18% growth of damper actuators. Certainly the recovery of the OEM business was an important driver, aside the general strong performance across all the region with this 18% growth in damper actuators. I've mentioned Control Valve, the main contributor of the growth with the 23% growth. There, obviously, a lot came from data centres, but also from the broader market. It is our largest market segment, and we are also getting a more dominant position in there and are able to grow significantly ahead of the market growth. Centres and metres were 16% growth. Also, they had a very strong performance, and they're also gaining significant traction with now contributing 5% of the overall turnover. If you go a bit further down the profit and loss statements, so an EBIT of 128 million or an EBIT margin of 22.8%, despite an adverse FX effect that is impacting our margin. So there we were able to capture operation leverage and significantly increase our profitability and increase our margin quality. In line with the higher EBIT margin, also our net income increased significantly to 101.3 million Swiss francs turnover, or an earning per share of 8.23 Rappen per share. We had a significant impact of the financial results by the impact of the Forex losses, So the financial results were impacted with 10.6 million FX losses. Cash flow, also an extremely strong performance from an operational cash flow perspective. Free cash flow a bit lower than in the first half here. There, two effects were mainly contributing to these results. On one hand, there was a significant increase of working capital, mainly from trade receivables in line with the strong sales growth. And we've also had our capacity expansion program with total investments of 41 million in the first half year. That is going to continue as we're continuing to expand our capacity and continuing our capacity expansion program. A short look at our balance sheet. So still there, a very strong balance sheet with an equity ratio of 72%. So net liquidity and cash and cash equivalents obviously reduced with the payment of the dividend in late March, and that also impacting there slightly the equity ratio. We also had a significant impact from currency translation adjustments with the devaluation of the US dollars that were impacting there also the equity ratio. With that, I will come now to the outlook. We've upgraded our outlook in April, so we can confirm the outlook at this stage. So we project our sales growth to be 15 to 20% with the current trading more at the upper end of the corridor. So that's on the sales growth sides. Obviously, everybody is aware that there are still significant risks from a global economy point of view. It's unclear how the tariff discussion will evolve. But at the moment, we're confident that we will be able to mitigate those effects and generate those sales growth. From a profitability point of view, based on the current exchange rate, we'll be able to generate an EBIT margin ahead of 20%. That's under the assumption that there is no major changing or devaluation of the US dollar going forward. And the FX rate changes remain at roughly the current stage. So that means we can clearly confirm our upgraded and increased outlook that we've published in April. Now the regional breakdown. So we don't expect a major change of the dynamics in the various regions. So America will remain the strongest growing region going forward with a lot of growth coming from the general economic, from the growth in the HVAC market and the continuing strong contribution from the data center. EMEA roughly has a similar performance in the second half year expected with also their strong gross contribution from the OEM business and the retrofit renovation market. Asia Pacific also they are expected continuing strong momentum. They are also very much supported by the data center business. Now, overall, the key trends are still in place or accelerating. So urbanization, climate change, and digitalization, those are the key trends that are driving the HVAC business, that are supporting the growth of our business. They're continuing and accelerating. And therefore, also from a mid- and long-term perspective, we're very confident we can continue to perform and deliver the growth trajectory. Now before we go into the question and answer, an announcement also from our side. So we're very happy to be able to announce that Stefan Kiek will start here at the 1st of September. He will be our investor relations manager and then we'll be able to answer your question and coordinate the requests from an investor relation point of view. Stefan is probably known to most of the participants in the call. He's at the moment in head of investor relations at Aussie Oerlikon and as a former analyst has their broad know-how and is certainly a great addition to the team. As mentioned, from early September on you will be able to contact him via the IR contact or directly by phone. So the next key dates, so we'll publish our sales results on January 19th and then the full set of results and the annual report on February 23rd and the annual General Assembly is scheduled for March 23rd. The ex-dividend date is March 25 and then the dividend payment is on March 27. So with that, we are at the end of the presentation. We'll start now with the question round. Just a quick reminder how that works. Please raise your hand and then Annabel will ask you to speak. Then please unmute your microphone and switch on the camera and you can ask a question and we'll hopefully answer it. So with that, I will hand over to the question and answer session.

Okay, thank you, Markus. Let's start with the question from Mr. Markus. Please go ahead.

Yeah, morning all. Thanks so much for taking my questions. I'll start off with two and then go back into the queue. First one is, if I understood you correctly, Markus, And please correct me if I'm wrong. Roughly one third of organic growth in the Americas is attributable to the data center business. Now, I was wondering how much is that for the group across all three regions? So data center contributions to organic sales growth for the group, and also how much did retrofit initiatives contribute in H1 and what do you think is going to be, you know, the end result for the full year 2025? That's my first question. Maybe I'll go at one at a time.