Gurit Holding AG

Thank you very much and good morning. I welcome you to the presentation of our first half 2023 results. I'm here in GURT's corporate office in Zurich together with my colleague Philipp Wirt, our CFO. You have seen that we announced a change in the board of directors this morning, so I'm happy to have both Rudolf Hardon and Philipp Royer here with us in the room as well, providing additional background and be ready to answer questions during the Q&A session. Let's start and I have a look at today's agenda first. I will start the presentation by providing you a business update, highlighting the key activities and achievements of the first half of this year, and comment on the most recent events. Philip Wirt will provide details on the financials before I will spend a bit more time explaining our view on the markets and our full year outlook. Following the presentation, we have scheduled the Q&A session. So let's start with a review of the first half of this year. And I think I can say that this was overall a successful first half for GURIT. Our legacy businesses, so excluding the structural profiles business, were performing much better than last year. Our Western wind customers started to order blade molds again, driving sales and profitability of our manufacturing solutions business. Our new PET extrusion sites in India and Mexico increased their operational performance after a period of ramping up. The marine and industrial business saw continued strong demands, in particular for our recycled PET foams, as well as our high-performing core cell products. And the multitude of cost-out and profitability improvement measures, which we initiated last year, started showing the expected results. Strategically, we are progressing with the implementation of our long-term strategy, executing in different work streams according to our plans. I will highlight a few examples later, but let's have a deeper look at the first half of 2023 first. Overall, GURID achieved a revenue of about 245 million Swiss francs in the first half of the year. We increased our adjusted operating profit margin to 5.6%, coming from 2% in 2022. Excluding the newly acquired structural profiles business, the adjusted operating profit came in slightly above 10%, which again underlines the good performance of those businesses. Still, the structural profiles business yielded a significant loss in the first half of this year, I will comment later on our plans and activities to turn this business around. Another positive element I want to highlight is our cash and liquidity situation. We improved our free cash flow performance quite significantly versus last year, driven by higher profit and the stringently applied network and capital management. That helped us to significantly reduce net debt and to leverage our balance sheet. Philip will comment in detail about the financial performance in his part of the presentation. A few more first half highlights related to our activities in the wind business. I mentioned already, we see Western wind customers order blade molds again after one and a half years with almost a standstill in new projects. This has two different elements. One, it helps our manufacturing solutions business to drive sales and profitability. The other, that this is a positive signal and an early indicator that Western wind customers start investing again in new blade generations and incremental capacity after a period of stagnation. We see the trend of PET as dominating core material in wind blades to continue and are happy with the fact that we are able to increase our PET market share, leveraging our new PET extrusion sites in Mexico and India. And focusing on India, our new site in Chennai is now fully up to speed. We are running PET and kitting on maximum capacity and successfully manufactured the first mold for one of our Indian customers fully locally. We keep our strong position as core material supplier in China and our partner of choice to support Chinese customers on the expansion projects outside of China. At the beginning of the year, we concluded the restructuring of our European kitting footprint by fully relocating the Danish kitting operation to Spain and Turkey. The structural profits business is still loss making and was impacted by operational issues in Denmark and the delayed ramp up of our lead customer in India. This led to a substantial negative profit impact in the first half of the year. We are convinced that the strategic rationale of the acquisition remains intact, but a different approach is needed to turn the business towards profitability. So we concluded with the minority shareholder that GURID will take over full control of the business with immediate effect. Consequently, we reached an agreement to acquire the remaining 40% of the company. The joint venture will be dissolved and the company fully integrated into GURID. With the full integration of the structural profits business, we will be able to accelerate the turnaround of the business. Further cost optimizations in all operational areas are needed. We will fully utilize the synergies of the GURID group by bundling procurement activities and leveraging the GURID footprint and customer access. In China, for example, we see first positive results in the business development of high-performing root connection parts for local blade manufacturers. We teamed up with Owens Corning to develop and sell high-modulus glass-pultruded profiles to wind customers, offering a cost-competitive alternative to carbon fiber and utilizing the strong R&D capabilities of the structural profiles team. Further extensions of GURIT's product portfolio for wind blades can be expected, since we are in advanced engineering discussions with customers about modular and more integrated product solutions. where we will build on the full set of competencies our combined teams can offer. I highlighted at the beginning, we are very happy with the development of our marine and industrial business. The marine business saw another year and year growth driven by continued strong market environment for production and pleasure boats as well as sailing yachts. Our teams did an excellent job in executing strongly and were able to mitigate inflation impacts through solid price management. Due to our strong regional presence and our diverse product portfolio, we booked new business with new customers in Europe and North America. In the industrial markets, we see growing demand for recycled PET as an alternative fully sustainable material for applications, especially in the construction and transportation segment. Concluding, the marine and industrial business continues to deliver and GURID will strengthen our market position and global reach. I emphasized in my introduction that we are on track with the execution of our strategy. Highlighting our ESG performance, we progressed well with the implementation of our sustainability strategy. We are operating multiple ESG-related work streams, and it's encouraging to see that the dedicated work of our teams has been recognized with continuously improving rating results. We received the silver rating from Eguavadis. We have just been awarded with an A rating by MSCI, and most recently, our in-rate governance rating improved by another 7%. In addition to that, we are actively participating in industry-wide initiatives, focusing on recyclability and increased bio-content of new products and solutions. With this, I conclude the business update and hand over to Philipp Wörth for the half-year financials.

Thank you, Mitja. Let me start with the P&L and here with a quick summary on sales. Sales in materials include 47.5 million from structural profiles in the first half of 2023 and 27.4 million Swiss Franc in the same period in 2022. Excluding these sales, materials grew 6.1% at constant exchange rate. The growth is mainly coming from wind materials in Europe and Americas and from solid results in marine and other industrial markets. Structural profiles ended below expectation in the first half of 2023 due to delayed orders in India. Kitting grew 10.4%. Like in materials, this growth came from Europe and Americas. Manufacturing solutions increased 5.1% compared to the first half of last year, with a mixed shift to more molds for our Western customers. In total, this led to an increase in sales of our continued operations of 17.6%. And if we exclude structural profiles and error in both years, Gurit grew 8.6% in the first half of 2023 at constant exchange rates. When we look further down to P&L, Operating results benefit from the Western wind market with increased demand for our core material and the pickup of orders for molds. Gross profit margin is 3.9 percentage points or 10.9 million Swiss francs above prior year. The increase is mainly coming from an improved product mix in tooling with more Western sales, which accounts for an increase of 7.9 million Swiss francs. Lower material and freight costs, including sales price changes, adds 4.6 million Swiss franc profit compared to last year. This means, and we talked about this in the past, how important this is for Gurit. Our profit is increasing because Western blade manufacturers have bought molds again. And with a lot of effort in our sourcing strategy, This trend of increasing material and freight costs combined with a time lag until we can adjust sales prices has now started to reverse. These positive impacts, however, are partially offset by a reduction of structural profitability. EBITDA, for the first half, amounts to 20.3 million Swiss francs including restructuring expense of 0.6 million mainly related to structural profiles. This compares to 28.1 million last year which included a gain of 18.3 million Swiss francs from our sale of the aero business. Excluding this gain on sale, ABTA improved more than 10 million Swiss francs. Adjusted operating profit excludes the gain on aero in 2022 restructuring and impairment charges. It amounts to 13.6 million Swiss franc in the first half of this year compared to 4.6 million last year in the same period. The next slide summarizes the key drivers for this increase again. So last year we had an adjusted operating profit of 4.6 million Swiss franc. Compared to prior year, we gained 7.9 million Swiss francs due to a favorable product mix, mainly of our manufacturing solution business. In addition, we benefited 4.6 million from lower material prices. Big emphasis has been put on our sourcing strategy over the last year. Savings from restructuring, mainly our footprint adjustment in Kitting Europe, plus other smaller items added 3 million to the adjusted operating profit. On the negative side, we incurred a decreased profit of 6.5 million Swiss francs due to the acquisition of structure profiles last year. The actions that we are taking there have been discussed by Mithio. Okay, now let's move to cash flow. For those of you that follow us regularly may remember how in the last two earning calls I was talking, I was talking about the challenges we had with networking capital caused by longer payment terms in the wind business and the inefficiencies in our inventory levels due to long lead times. Much more volatile demand and the ramp up of the production in India. To counter these trends, we have put several initiatives and measures in place with the target to bring the networking capital back to approximately 22% of sales. As you can see on the left chart, this work is bearing fruit and we were able to reduce net working capital below the targeted level on average over the last 12 months. Capital expenditures amounted to 5.5 million Swiss francs in the first half. 4.4 million or approximately 80% of it is related to capacity increases mostly to our footprint expansion in India. The full year 23, we expect capex between 10 and 15 million Swiss francs. Free cash flow, which equals to net cash flow from operation of the capital expenditures, amounted to 6.5 million Swiss francs. Compared to the previous year, we benefited from higher EBITDA, excluding the gain on error, and improved working capital. To conclude on the financials, a couple of comments on the June balance sheet. Net debt decreased by 6 million Swiss franc to 78 million since December and 26.2 million since last year, June. The equity ratio is 33.8%, and this is a slightly better number than in December 2022. We experienced a 7.4 million currency loss on equity, which more than offsets the earnings. The gross debt to EBITDA ratio remains stable at 2.8 times with underlying two opposing effects. On the positive side, we were able to reduce gross debt by 21.1 million since December 22. On the other side, the gain of the sale of the aero business from last year is not anymore included in EBITDA. We expect this number to further reduce by the end of the year. The acquisition of the remaining 40% of Fiberland will only have a small impact on debt as the majority of the cash flow or the cash outflow goes out over an extended turnout period. Our return on net assets is positive again, coming from our significantly improved legacy business. So financial summary. Strong first half in the legacy business with margins back to normal levels. Free cash flow generation helps to deleverage by lowering the debt. Unfortunately, the structure profile business did not develop as initially expected. This modifies a little bit the overall picture, but as you have heard from Mitya, we are addressing this issue. And with this, I hand back to Mitya.

Thank you, Philipp. I will share our view on the wind market outlook and reference to the latest market outlook data we use from Brinkmann here. Short-term uncertainties in the wind industry will remain, with customers announcing negative impacts related to quality issues. As you know, We are not talking about our customers in public, but I want to highlight that GURID is not directly involved in those quality issues recently announced by two of our customers. But naturally, we will be impacted indirectly when customers delay projects or postpone new product introductions. We anticipate further plate stock depletion since customers still sit on sizable inventories, which is impacting short-term demand. The recently announced offshore project cancellations in the UK and the US are a worrying signal that there is a need for more flexible auction designs and pricing schemes to enable the long-term feasibility of wind projects. Looking at the regions and beginning with Europe and North America, 2023 and 2024 are expected to be on similar activity levels. before positive impacts resulting from the Inflation Reduction Act in the US and offshore growth will lead to higher installation numbers from 2025 onwards. New plate models for larger wind turbines will drive mold demand, but also regional proximity needs, since geopolitical considerations becoming more important. In China, we have seen a solid market so far this year, but anticipate lower installation numbers for the full year on the level of 50 to 60 gigawatts instead of the 70 plus gigawatts shown on the chart. Market remains highly competitive with plenty of underutilized capacity. GURID sees growth potentials with Chinese customers winning projects outside of China. One of our customers has been awarded the largest order pipeline for onshore turbines in India and the Middle East, and Gurit strategically supplies and services those projects from our sites in China and India. Considering relatively low order intakes in the last 12 months, but a stable ASP development of our Western customers, we expect that our customers will focus on recovery and earnings improvement in the next 12 to 18 months. Mid-term growth projections are above 6% per year, so the industry will need to scale and set up the investments needed to produce the expected gigawatt levels of new wind turbines. Let me conclude today's presentation. We had a successful first half of the year 2023. H1 sales was within the expected range, highlighted by a positive product mix in wind with more western mold projects and a strong marine industrial business. This and the cost out measures launched improved our profitability and cash flow performance. We acquired the remaining 40% shares in FiberLine composites to accelerate the turnaround of the business. Strategy execution remains on track with a steadily improved ESG performance. For the full year outlook, we narrow our net sales guidance to 460 to 490 million Swiss and we increase our operating profit margin outlook to 3 to 6%. Before we now start with the Q&A, we would like to provide a bit more background on the organizational changes in the GURID Board of Directors, which we communicated this morning. For that, I hand over to Rudolf Hardon and Philippe Royer.