Accelleron Inds Ag

Ladies and gentlemen, welcome to the Acceleron half-year results 2025 webcast. I am Mathilde, the chorus call operator. I would like to remind you that all participants will be in listen-only mode and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and 1 on your telephone. Webcast viewers may submit their questions in writing via the related field. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Michael Daiba, Head of Investor Relations. Please go ahead.

Hello everyone and a warm welcome to the Acceleron half-year results 2025 investor and media webcast. Thank you for joining us today. Today we'll walk you through our performance in the first six months of 2025, provide a detailed financial review and share our updated outlook for the remainder of the year. We'll also discuss how we are navigating current geopolitical challenges, including the new US tariff on Swiss goods, and how our strategic investments are positioning us for the long-term growth. Before we dive into the results, please take a note to the safe harbor statement. This presentation contains forward-looking statements based on current expectations and assumptions. These statements are, of course, subject to risks and uncertainties. All figures presented today are in US dollars and prepared according to US GAAP. For definition of non-GAAP financial measures, please refer to our investor website. The link is also provided in the presentation. After the presentation of Daniel and Adrian, there will be a Q&A session. You will be able to ask questions via the chat tool or the telephone. I will now hand over to our CEO, Daniel Bischofberger.

Hey, Michael. Thanks for the introduction. And good morning and welcome, everyone, also from my side. And thanks for joining. So besides Michael Diver, you already heard, and our well-known head of investor relations, I'm, as usual, joined by Adrian Grossenbach, our chief financial officer. And I would say let's move. Here is our agenda for the next hour. I will start with the key highlights of the first half of the year. Adrian will then take over for financial review of H1 2025. I'll return to give you an update on the marine and energy markets and an outlook here. including comments that are already mentioned by Michael on the current situation with US tariffs and the updated guidance. And we will conclude with a Q&A session, as Michael mentioned already and managed by Michael. So then let's begin the move on to the highlights. So in the first six months of 25, we continued on our growth trajectory, achieving high revenue growth and strong profitability. Revenues in the first half year reached $608 million, increasing by more than 20% year on year. The operational EBITDA was up by almost 21%, to $155 million, and the corresponding EBITDA margin increased by 0.1 percentage points, to 25.5%. So the net income grew by almost 30% to $115 million. And the free cash flow conversion stood at 70% compared to 34% in the same period of last year. Looking at the big picture, the markets have not cooled down in the first half year, despite geopolitical disruptions. And we've been firing in all cylinders to meet the demand. So what propelled our growth in the first six months of 25? Well, the product business was a key driver, but not only. The product business grew by more than 35% and the service business by more than 10%. The product business growth even surpassed service business growth in absolute dollars. And our impressive revenue growth was streamed by further gains in market share for turbocharger. This is especially true for merchant marine and data centers, as well as strong market demand for marine services, especially retrofits, and for backup balancing and prime power application. We also saw sustained high demand for fuel injection systems and above average orders in the rail sector. The demand for gas compression remained in line with expectation. The 10% U.S. tariffs that was in effect for Switzerland on other geographies impacted the half-year results only marginally. And here we are essentially talking about April to June here. However, we expect the current 39% tariff on Swiss goods in effect since August 7 to impact our EBITDA margin in the second half of 2025. More to this topic a little bit later in the presentation. On the next three slides, I'd like to highlight the role of Retrofits in marine services, our program in Italy, and the continued success of our high-speed turbochargers for backup power solution. So let's take a look first at Retrofits. As we explained in the past, decarbonization increases market interests in upgrades and retrofits. We differentiate between upgrades and retrofits. A turbocharger upgrade affects, as its name implies, only the turbocharger, while a retrofit also includes, besides the turbocharger, other components and systems, for example, the main propulsion engines. Hence, the scope of a retrofit tends to be larger, and consequently, the technical efficiency improvement potential for the ship bigger. Demand for these retrofits picked up significantly in the first half of 2025, driving growth in the marine services. There are two main types of retrofits we are offering, engine part load optimization on the left side, or in short, EPLO, and FIT2 on the right side. I will not bother you with the technical details of these solutions, but what they have in common is that they provide tangible fuel savings and reduce greenhouse gas emissions immediately for marine engines operating at varying loads and speeds. Other advantages of both EPLO and FITS2 are easy implementation, easy operation, and easy maintenance. They are also commercially viable for our customers. They are considered low investment, high returns retrofits. While the reduced fuel consumption positively impacts the ship owner's bottom line, the reduced emissions support regulatory compliance, which very often means as well a commercial benefit due to the lower emission charges and or penalties. So it's no wonder retrofits are gaining traction. Our revenues from upgrades and retrofits, including from projects on large container vessels, grew by 60% in the first half of 2025 compared to the first half of 2024. Overall, the annual upgrade and retrofit revenues in the past years were between 20 to 25 million US dollars per year. I would say moving on to the next slide. As you know, besides turbocharger, we also offer future fuel-ready fuel injection systems. And fuel injection plays a key role in decarbonizing the maritime industry. And we see high demand for advanced dual fuel systems, which can inject two different fuels. The market demand is higher than what we can meet with our current capacities. To meet the high demand, we have launched an $18 million multi-year investment program in Italy consisting three pillars. The aim is to expand production capacities and strengthen our technological leadership in fuel injections. On the left side, the first pillar of this growth strategy is the organic capacity increase at the existing OMT factory in Turin. Investments in new machinery have already been made and we plan to hire around 150 new employees within the next three years. Another important pillar is the construction of a new technology center in Turin by mid-2028. Construction for this $27 million project is well underway. The technology center, by the way, in walking distance from the existing factory, will offer more than 1,200 square meters for testing, assembly and prototype production, as well as new space, office space for about 100 employees. This will provide OMT with the necessary space for increasing OMT activities in new fuels such as ammonia and methanol. Crucially, it will also free up additional space in the nearby factory for further plant capacity increases in 27 and 28. The third pillar of the growing strategy is based on the acquisition of OMC2 last summer. The acquisition brings OMT additional production capacities. They are using free space in the factory and investing in new machinery. In the medium term, an extension of the factory building is also planned to be completed by 28, with the goal of tripling the production of the current OMC2 factory by 29. You can see a rendering of this factory extension in darker gray in the image on the right side. With our growth strategy consisting of these three pillars, we are well positioned to meet increasing market demand. This year already, the measures we have taken so far, including the acquisition of OMC2, allowed us to increase our output by 30% and to ensure the timely customer delivery of fuel injection systems. Our goal is to double the revenues from fuel injections to 150 million US dollars by 29 compared to 24. Let us move now to another product of ours, which is in very high demand, the TPX high-speed turbocharger. The continued success story of the TPX44 high-speed turbocharger used for data centers and to protect other critical infrastructure like hospitals remains impressive. Developed in close collaboration with an engine manufacturer and launched in 2019, it has quickly gained significant market share in the diesel market. Our dedicated product for standby generators offers substantially higher power density, resulting in a lower CapEx per kilowatt compared to competitors' solutions. Furthermore, the development of the second generation product is already underway and promises even greater advancements. We are well on track in 2025 to set new records, again in both production volumes and sales. As a reminder, in 24, we delivered 2,600 units of this model. This was already 100% growth versus 23 with 1,300 units delivered. In the first six months of 25, we already delivered 3,900 units. That's three and a half times more than in the same period of last year when we delivered 1,100 units. So many more data centers requiring turbochargers for backup power will come online in the years to come. The big question is how many? One recent study estimates that data center capacity, as defined by electrical power demand, will more than triple by 2030 compared to 2023. And this is only the low-range scenario, which would correspond to a compound annual growth rate of 18%. This is not to say that demand for our turbochargers will increase at the same rate, but it gives you an idea of the dynamics in these markets. And we are well positioned to continue to benefit from the data center boom. And with those remarks, I conclude my first part and I will now hand over to Adrian for the financial review. Adrian, it's yours. Thank you, Daniel.

And a very good day as well from my side. Let us now take a closer look at our H1 2025 financials, starting with the group performance. As we already communicated in July, half-year revenues reached $608 million, or plus 20.3%, respectively an additional 102.5 million US dollars year on year. At constant currency, we grew by 20.1%, which is why we increased our guidance for constant currency growth for the full year to 16% to 19%, up from 4% to 6% earlier in the year. Organically, we recorded the growth of 18.5%, largely volume driven. Our expansion was driven by persistent market share gains in turbochargers and the robust market demand for marine services. particularly retrofit, as Daniel already explained. Additionally, there was significant demand for backup balancing and prime power applications. We also experienced consistently high demand for fuel injection systems and above average supporters in the rail sector. Fuel injection contributed 46.9 million US dollars to total revenues in H1. Operational EBITDA increased by 20.8% compared to the same period of last year, reaching 154.9 million US dollars. Operational EBITDA margin rose by 10 basis points to 25.5%, which is very solid in view of the strong product business growth, strategic investments, for example, in Italy and in our digital capabilities. and additional cost along the value chain. The next slide depicts the performance of the medium-low speed segment. Overall, the marine business performed strongly. We further increased our market share in new builds and demand for retrofits and upgrade services picked up significantly. We also continue to expand full cover service agreements, reinforcing them as an important strategic pillar to further increase service penetration around the world. As already mentioned by Daniel, demand for fuel injection systems was high too. In the power plant market, new build activity in the US from medium speed power generation has picked up again. The first projects for larger power plants with acceleron turbochargers have been contracted. Overall demand for gas-fired power application increased across multiple regions. The segment's revenues increased by 73 million USD or 18.9% to 458.8 million USD. The incremental revenue contribution by OMC2 and TNM amounted to 8 million USD in the first half of 2025. Operational EBITDA increased by 19.1 million USD or 19.7% to 116.2 million USD compared to the previous year. The margin increased by 10 basis points to 25.3%. It is important to highlight that the operational leverage resulting from the additional lifecycle volume was absorbed by strategic investment and to a lesser extent impacted by additional cost along the value chain. Let us now have a look at the high-speed segment. Revenues in the high-speed segment increased by 29.5 million US dollars or 24.6% to $149.2 million to the first half of 2024. We continue to seize opportunities in data center backup and increasingly prime power solutions, particularly in the US, while demand for gas compression remained in line with expectations. Operational EBITDA increased by $7.6 million or 24.4% to $38.7 million, again compared to the prior year. Due to the fast-growing new business and additional cost along the value chain, the operational EBITDA margin minorly decreased by 10 basis points to 25.9%. Let us now go through the bridge from operational EBITDA to net income to highlight the few specific effects in H1. As always, we start here on the left-hand side. Operational EBITDA amounted to 155 million US dollars. Next to it, you can see the one-off and non-operational cost, which amounted to 9 million US dollars compared to close to 10 million US dollars in the same period of 2024. Of these 9 million US dollars, almost 5 million US dollars can be attributed to a temporary unrealized ethics loss resulting from the strength of the Swiss franc and timing differences between payables and receivables. The remaining four-plus million US dollars were linked to residual build-up activities, M&A and operational pension costs. Moving on, we had acquisition-related amortization costs of four million US dollars, including a charge for phasing out the OMC2 customer base. Consequently, income from operations amounted to 142 million US dollars. The finance and interest expenses amounted to net 1 million US dollars. Finally, we have the income taxes, which amounted to 28 million US dollars, and the tax rate stood at 19.6%, which is fairly similar to the one of H1 2024. And with all of that, you get to a net income of 115 million US dollars, 29.5% higher than in the first half of 2024. Lastly, let's have now a look at the free cash flow. The cash conversion in the first half of 2025 stood at a solid 70%. compared to 34% in the first half of 2024. The change in net working capital and other was mainly due to an increase in volume driven receivables, a normalization of trade payables, and increased income tax accruals. Further down, the increased capital expenditure reflects our investments in the fuel injection business in Italy, and continued investments in the Swiss and Chinese factories. We expect our capital expenditure to increase further to approximately four to five percent of revenues this year. We are currently not only investing in expanding the capacity of the fuel injection business, but similarly in our turbocharging business. Two key investments are the upgrade of our intra logistics in the Baden factory, as well as a new small turbocharger testbed to support future innovation and growth. The line up there reflects payments of 3 million US dollar to former OMT and OMC2 owners. So let me conclude. Despite the Xeleron's impressive growth, Free cash flow generation increased by 50 million to 81 million US dollar in H1. Great accomplishment. With this, I'm now handing back to Daniel.

Thank you, Adrian, for giving us more detailed insights into our strong financial performance in the first half of 2015. So now it's about looking forward. So I will continue with the market update and outlook for 2025. This is what we showed in March 13. This is the outlook for 2025 and our business, as I said, on status on the March 13. So you see. Most of the arrows pointing up, we have one arrow being flattish, the medium speed. So let's click on this now and let's see how we see the outlook now for this year. So two arrows that have pointed sidewards are now pointing up. So the cruise ship. cruise ship and ferries and the medium speed power. And two errors, the high speed gas and the backup power are now pointing up even more. Those four errors are highlighted in green to mark the improvement in our outlook. All other errors remain the same. Compared to our expectation in March, we see a much stronger demand now for maintenance as well as for upgrades and retrofits. We also are quite successful in signing a service agreement with cruise ship operators. So we expect both upgrades and retrofits and service agreement to drive top line growth in the cruise ship segments. On the energy side, we expect the demand for prime power application to increase for both high speed and also medium speed engines. While we have already been Optimistic about the high speed, we now observe that the demand for medium speed engines for power generation is finally picking up too. And for the backup power application, we have been optimistic all along. But seeing the data center market dynamics and signals from our customers, our outlook here is even more bullish. In summary, everything is trending upward. Our core markets remain resilient despite ongoing geopolitical uncertainty, which brings me to the next point. Let me share some thoughts on the topic I'm sure you're all keenly interested in. The new 39 US tariff on Switzerland, meaning on Swiss goods imported in the US. The tariff has been in effect since August 7, 25, Up to that date, the tariff was 10% in line with the tariff for many other countries and geographies, which only marginally affected our profitability. So the current 39% tariff affects a little bit more than 10% of our revenues, involving products with significant Swiss content shipped to the U.S., This tariff is much higher than what other marketplaces currently face in other key geographies like Europe, Japan or Mexico. Under the current circumstances, we expect an impact on our profitability for 2025. We are therefore lowering our operational EBITDA margin corridor by 100 basis points compared to what we originally guided. But we are determined to secure our growing US business by reviewing our pricing strategy, reconfiguring value chains, and enhancing operational efficiency to maintain our competitive advantage and to protect our profitability. Having said that, let's look at the complete financial guidance for 2025. As already announced in July, we expect to increase our revenues in 2025 by 16% to 19% compared to last year, with stronger growth in product business than in service. The increased tariff on Swiss goods, including mitigation measures to maintain our competitive advantage, led us to lower the operational EBITDA margin corridor to 24% to 25%. The rest of the capital framework remains unchanged. This brings us to the end of our presentation. With that, thank you for your kind attention. We are happy to take your questions via chat or telephone. Michael Deiber, our head of investor relations, will moderate the Q&A session.

Thank you very much, Daniel and Adrian. And welcome to the Q&A session. Please note that if we receive similar questions in the chat, we may combine them into one. And please kindly make sure to state your name and your affiliation when writing in the chat or asking a question on the telephone. Thank you very much.

We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from a question queue, you may press star and 2. Questioners on the phone are requested to disable the loudspeaker mode and eventually turn off the volume from the webcast while asking a question. Webcast viewers may submit their questions in writing via the relative field. Anyone who has a question may press star and 1 at this time. The first question comes from the line of John Kim from Deutsche Bank. Please go ahead.

Hi. Good morning, everybody. John from Deutsche. Thanks for the opportunity. I'm wondering if you could give us some color on how you perceive your customers' ability to absorb these higher tariffs that we expect in H2. I understand you're reviewing your pricing strategy, but I'm interested to understand, as it stands today, how your base of contractual agreements works on pass-through on tariffs. Thanks so much.

Okay, thank you, John. Definitely an important question. You know, on the 1st of August, when we were informed about the 39% tariffs, we more or less immediately informed our customers that we will raise prices. And since then, we had discussion with the customers. I mean, it's not that we are not allowed to increase prices, but it was also to see what we have to do, because in the end, we also want to make sure that they are able to absorb and move ahead and they are not too much affected on that one. And look, in some markets, there's such a high demand. And the U.S. is a lot about power generation. You have heard about the The increasing demand for medium speed, but also high speed power, speed for prime power, also for backup power. So they have definitely a very good position to pass on. I'm not in a position now to disclose because we are still in a discussion with our customer, but they have a lot of power and now it's about... continuing our long-term relationship with them and finding a good solution that doesn't hurt them too much, but also doesn't hurt us too much. And at the same time, you know, since the 1st of August, we are also reviewing our options, how to reconfigure our value chain. With that, we mean, you know, how can we move some value out of Switzerland and move into areas where they enjoy lower than our 39%. And to be honest, that's almost most of the country on this planet that are lower besides some countries that definitely are not in interest to move on. So here we also, again, we are confident that there's enough mitigation potential to whatever finally sticks with us, we are able to substantially reduce over time. I hope that helps a little bit on the end, John.

No, that's very helpful. As a quick follow-on, did you experience any abnormal demand towards the end of H1 in anticipation of these tariff increases? Any pull forward?

The short answer, no. It's not so easy to see that, but the demand is so high on all one, whether there was a slightly higher demand because the customer, but I would say at best, it would have been marginally.

Okay, thank you.

You're welcome, John.

The next question comes from the line of Daniela Costa from Goldman Sachs. Please go ahead.

Hi, good morning. Thank you for taking my question. I have two questions. The first one is just regarding your statements on increasing market share on turbochargers. I guess the starting point was already very high. Can you tell us where does your market share stand now? And how can you win? Who do you win from? In which regions? Any particular highlights there? Now, let's the second one just right after.

Okay, thank you, Daniela. Market share, as you correctly said, I think we were at around 40% when we separated from ABB. Now we are closer to 50%, especially on the merchant marine. And so this is across the board for all merchant marine. I mean, we already mentioned, I think last year, that the new fuels are definitely of a big help. So new fuels, dual fuels, LNG, methanol, ammonia, where we are normally the first choice. So you can assume that's across all the boats, on all ships, and especially with a strong focus on new fuels. So then it's clear the merchant marine is mainly Asia. Cruise ship is just picking up. Here we have already also strong market share. And, you know, in the high-speed gas, we have an 80%, close to an 80% market share. Where we definitely see a strong growth as well is on the data center because we started more or less with nothing in 2023, where we gained the first 1,300 units. And this year, already half year, we are at close to 4,000. So that's the data center piece where we see strong growth.

Thank you. The second question relates... Sorry. No, just go ahead, Daniela. The second question was related to your comments on what offsets the operating leverage. And you mentioned the increased, I guess, fixed costs for the capacity expansions. And you also mentioned value chain costs. And I wanted to ask on both, I guess, the full ramp-up of some of these new capacities only some years ahead of us. Do you expect these under absorption basically to carry on? Is this going to be a continuing headwind in the bridge for a little bit longer? And then what are the value chain costs?

Yeah, I can take that. And hello, Daniela. On the cost of the ramp up, right? This is phasing in people, increasing the efficiency level. And as we keep growing, we need to bring in more people, right? So you have... The teams which you phase in, those become more efficient, but you then have potentially a new team, a new machine you're ramping up. So as long as we keep growing strongly, we would expect a certain level of headwind. But most probably that is and we are committed to optimise that as well over the foreseeable future. In respect to the value chain cost, there are different positions to it. One is the strong ramp up of the demands. We sometimes have as well to rely on, let's say, suppliers, which are a bit more expensive than others. and and we again focus there on ramping up as well always our best source but with this significant 30 plus gross on the product business um in order to deliver time into our customer we sometimes have to rely on let's say not the most um cost effective source additionally we have seen as well and daniel has highlighted we we had some minor cost for for tariffs These were two of the elements we wanted to highlight there.

But I would say timing-wise, the value chain, I would say, on the suppliers died this year, marginally next year, while definitely on increasing the capacity in fuel injection might take a bit longer. But also here, I mean, the big ramp-up is now in Turin, where I would say from a people point of view, we have done already – More than half. And there might be something, there will be something still coming next year. But then that's, I would say, the first phase on the ramp up. And so I hope this helps you, Daniela.

Yeah, thank you. So this year was the bigger hit on the headwind from ramp up or would it accelerate next year?

No, definitely not accelerating. No.

Okay, very clear. Thank you.

Thank you.

We now have a question from the line of Uma Samlin from Bank of America. Please go ahead.

Hi, good morning, everyone. Thank you so much for taking my question. I have two, please. So first one is a follow-up on the tariff impact. I remember when we talked about the tariffs to the U.S. before, that was mostly on energy, on the energy side, and it's mostly on OE. Is that the same with the Swiss tariffs? Also, you talked about the mitigation effort. How long do you think that will take? Do you see the margins to return to the more pre-tariff levels in 2026? That's my first one. Thank you.

The first one, I'm not 100% clear. The impact on, is this namely energy and or we business? Yeah, I mean, what's the US? I mean, we said it's about slightly more than 10%. And with that one, we mean power generation. not marine because marine service that's not part of the, that's exempted from the terrace or can be moved to another port outside. So it's mainly power generation. It's data center, energy backup, or now prime power because of the weak grid, they have to strengthen the grid. and the time of mitigation. Look, we have now our auction. The challenge is definitely there's all moving targets. If the tariffs remain, then I would say we can get fast during the course of next year, the mitigation on that one. And then I would say we are almost close back on cruising altitude. And if you find a good deal, as I said, we'll definitely not take the bigger burden. When it comes to the customer, we are willing to participate, but we expect the customer to take the bigger burden. As I already mentioned, they have a chance to pass it on to their customer. Because their markets are really a seller market, not a buyer market for the time being.

Thank you very much. That's super clear. My second one is on the data center opportunities. If I remember correctly, you already doubled your data center revenues this year, and I think you expect to somewhat double that next year as well. So how does that kind of situation impact the volume growth in data centers for you, and what's your expectation now?

As already said, we are doing everything to secure our mid-term business and that means also the top line. And that's why we are willing to make small hits this year on the profitability, just to reposition ourselves, make sure we secure the volume. And then we will work on our value chain and also on efficiency to reduce, again, the impact on the profitability. So as you said, in 2003 to 2004, we doubled. 2004, half year to this year, we are tripled. You know how much the growth will be next year? That also depends on the platform we are on. And what we see, our OEM customers, they are all struggling with capacity. So I would say it's very much depending how fast are they able to ramp up and increase their capacity. But the good thing, really, we are on the winning platforms that really gain market share and the backup power.

That's very clear. Thank you very much.

You're welcome. Thank you. Before having the next questions from the telephone, I would take the opportunity to take questions from the chat. The first questions are from Janne Grief from ZKB. Question one is about Wärtsilä that announced in their Q2 results that they secured data center orders in the U.S., 15 engines with 282 megawatt base load power based on natural gas. Could this be a new area of growth for acceleron in the future?

Yeah, I mean, Yannick, 100 percent. It's not only for the future. It's already today. And we always said the only power generation segment that was not really moving on is the medium term, medium speed. And that's now picking up. So and especially in the U.S., Because the data center are requiring so much more demand. I mean, just there's now a pipeline of data centers that require about more than 130 gigawatts of additional power. And they cannot be hooked up or they cannot start it because there's not enough power. And so number one, the grid needs a lot of power. Number two, the grid is not strong enough. So you have to build the power generation very close to the data center. And since gas turbines are sold out, now it's really the medium speed powers are kicking in and taking a big share of that one. And that's where we are benefiting. And I expect this to stay here and for at least the next foreseeable future.

Second question is how much of the total revenue comes from retrofits and where do you see what's the growth potential you see?

As I already mentioned in my presentation that this retrofits and upgrades more or less mainly for marine is about used to be 20 to 25 million. First half year, we have seen 60% growth. Don't expect this growth to stay with 60%, but we expect the substantial growth from that one. If everything works fine, if the regulation kicks in, there's a chance that we might have something close to 10% growth on retrofits year by year. But that can swing around because what we had now in the past, very large shipowner customers, I can't name them, But they are now really upgrading their existing fleet because they want to be ready. But we have not seen so many medium-sized or small operators because they don't have the deep pockets like the large ones. And they want to have security and certainty that the regulation comes in and they need this security. But as I said, we are well positioned. They are low investment, high return. And that's normally the first thing what the customers are doing. Get for this low hanging fruits. And these are definitely the things we are offering here.

One third question. Are there updates on the medium-term guidance? Are the 2-4% revenue growth still accurate?

I can take this one. I think, pro memoria, when we formulated our mid-term guidance, we said this is in a low to no inflation environment, so this 2-4% is first and foremost volume. We continuously review our mid- and long-term business prospects. That's clear. And if needed, update our guidance. For the time, we do not see there a need. But as said, we keep reviewing. What is clear, short, mid-term, we have very good growth catalysts outlined by Daniel. That's what we can state at this point. Okay.

One question from Rainer Weyhofen from Finanz und Wirtschaft. What are your plans for capacity increases in turbocharger business?

I take that one. Hi, Rainer. Yes, definitely now after the big investments we are doing now on fuel injection, definitely also turbocharger is in the focus. So, for example, we are investing here in Switzerland, we are investing in China. We're also building up together with Palmer in career capacity. But here we have to say it's much easier to ramp up because we can work on shifts. We have enough technical capacity. It's very often just to run more shifts. And here we are in a good position and we move already ahead in anticipation that the market will further grow. But I think, as already mentioned by Adrian, that we see now is an increase in capex. You know, we originally were between 2% to 3%. Now we tend to move more to 4% to 5%. That's also related not only to fuel injection, but also we see the need now on the temperature segment to further improve. Good.

Back to the phone.

The next question from the phone comes from the line of Sebastian Vogel from UBS. Please go ahead.

Hello, good morning. I have three questions. I would ask them one by one. The first one is with regard for context, your current exposure or sales exposure to data center. Can you give us a sort of a ballpark figure there? What was that one in H125, and how would that compare to the last year? That would be my first question.

Good. Last year we were double-digit, I think slightly above 10 million. Now if you do the math now, half year we were triple, that you get a feeling. So we are talking clearly above, significantly above 20 million. We might get closer to 30 million.

Got it. Second question is, is there a chance to sort of try to split this number into what is the share that is coming from emergency power related to data center and what is related to baseload demand related to data center? Is there a chance to give an indication?

Yeah, I mean, what the figures I just mentioned, that's all emergency chance. So that's not normally for prime power or whatever. Normally power plants that are here to produce power. So they are here more as a backup in case the normal power doesn't work. And all the rest is then related to power. To prime power, balancing power, you know, cycling power, whatever. But I think we already mentioned once we have about we have the energy business and which we split up in 15 percent high speed power, then 15 percent. in medium speed power and 10% in gas compression so that you get a feeling and from the high speed gas power, this 30 million R parts, then the emergency chain set. So you get a feeling how much is normally running power.

Got it. And the third question is with regard to the IMO regulation and the net zero fund. In that regard, do you see that as a potential material safe driver going forward, which can impact your top line already, for example, let's say in late 2026? Or what are your views on this regulation and the potential impact on your business?

So probably let's first talk about the new business. I mean, there's now the shipyards are pretty loaded already. and i would say for the time being that's not driven by imo or in anticipation of imo because we don't see that you know they build now new ships to reduce the age of the ship because all the ships now coming online there's hardly any scrapping so everything that's built is increasing and they are fully loaded so from there i think what we see is definitely that more and more ships are dual fuel And that's definitely an impact of IMO or in anticipation of decarbonisation of new fuels. So here I would say that IMO might help to keep the high loading on the shipyards. But as I said, they are anyway fully loaded until 29, almost 2030. So this will be beyond that we can keep this additional growth from new build. On the service side, I mean, the good thing is that already mentioned the large ship owners already anticipating and investing. some when they have done more or less their ships the existing ships that imo would then help to keep this trend of upgrades and retrofits that the medium size and small ship owners would kick in and take over the load so do i expect much more load no i would say i i i would say it helps to continue the growth got it many thanks that were all my questions

We now have a question from the line of Charlie Fehrenbach from AWP. Please go ahead.

Good morning, gentlemen. Just to be sure, I'd like to come back to the pricing strategy. Did I got this correct? It means you will raise the prices to push the higher tariffs to the customs. but that you will accept a little lower margins to make customers happy as well. Is it about that?

Yeah, Charlie, 100% right. I mean, we informed the customer originally by how much we will increase the price to protect us from the additional tariffs. And that was the base to discuss. So we definitely will increase the price. The question will be increase the price to 100% cover the additional tariffs. That's now part of the discussion we have.

Okay. And this affects just 10%, around 10% of your total sales?

Yes, correct.

Switzerland, US business. Okay, thank you very much. You're welcome, Charlie.

The next question comes from the line of Adrian Pehl from Otto BHS. Please go ahead.

Yes, good morning, everyone. Thanks for taking my question. Actually, just very quickly on tariffs again, most, I think, has been said, but I want just to make sure, phrasing the question this way, if Mr. Trump wakes up tomorrow and all of a sudden you only have 10% to 15% tariffs, would that ultimately mean you move back to your old guidance? Actually, I'm asking this because, on the other hand, Obviously, we saw some impact on your gross profit line coming from Mix, as obviously, fortunately, your new business is growing quite nicely, which nevertheless, however, means there should be some headwind to the group margin and service should have a higher margin here. So any thoughts on that would be helpful. And a question linked to that, how can you react? Obviously, you already said that you're contemplating some relocations of the business, if that is prevailing. So should we assume that there could be an option actually to produce more from the EU, i.e. would that mean Italy probably not doing only injection in the medium term, but also components for turbochargers, or how should we think of it? And then I probably have one or two follow-ups.

I can take the first part and then hand over to Daniel for the relocation part, respectively, the reconfiguration of the value chain. In terms of margin, you're right. Shall we call that impact or not? I mean, we are increasing our installed base, right, which is per se good news. So, yes, it has a little bit of headwind then to the Gross margin, but not the absolute profit as we still keep growing. And as I said, we keep as well investing into various strategic pockets and the capacity as such. In terms of tariffs, I think we all know it's a volatile market. or there are volatile times, it is important that we stay agile and adopt to the latest situation. What we currently have at hand is reflecting the current state of tariffs. And that's what we have factored in. Not more, not less. So the answer evolves to reverse. Yes, then one would have upside potentials, but I think it's far too volatile to do any guessing. We have taken what is the current state and have reflected that accordingly. And with this, over to you, Daniel, then for the relocation value chain question.

As I said, I mean, as you pointed out correctly, things can change daily. But we now assume this 39% are here to stay. And the other countries where our incumbents are, they are benefiting from that one. Now, if things are changing, we will review again what we are doing. And that's why we don't only have one option. That's why I don't want to go into detail where we might move the value at and whatever. Here we have different options and we view and some are very fast. They might not have the biggest potential. Some might take one or two years that have more potential but needs more investment, so we are carefully watching them. Definitely, we need to have more certainty, but I think the one we have now is an option on the table and we might be able to transition in the near future. They are more robust. But again, if Trump now puts us on 0% tariffs and EU to 40% because of digital tariffs or whatever, you know, I mean, life is exciting. Sometimes I wish it would be differently exciting. I mean, the market is great. And this is just something that keeps us a bit busy and be more busy than normal. And we will react differently. Again, we have a good footprint globally with also our service station that can also be used for anything. So I think we have good option on the table if we move and Trump wakes up tomorrow. And we'll see. But again, it's not only the Swiss service. We always have to compare us with the with the terrorists our incumbents enjoy or not enjoy. You see, it's a relative gap and that the gap is a bit too much. We can't just push through. I mean, short term, we could push through. Because it takes one to two years to replace us on the engine. But we are now setting more as the future. I mean, we can play short term. We keep that one without adjusting pricing, not doing anything. But in two years, we would see the hit. So please bear with us. We have some options on the table and we will decide then. And if Trump decides differently, we will review again.

Right, I will bear with you, I promise. So two housekeeping ones, actually on the adjustments. So if you want to the delta between reported EBIT and operational EBITDA, which was actually a bit higher in the quarter than I thought. I just was curious to hear any thoughts how that will develop in the second half. And another question is on translational ethics. I mean obviously you already pre-released and was surprised to see that the effect on currency was nearly non-existing in H1. But I guess there must be some impact or otherwise they are wrong here so that you have different currency movements that may not be, let's say if you want so, a tailwind for reported P&L numbers.

I mean let's start with the adjustments and obviously you need to understand that we do not and cannot guide on this as we see there basically a normalization nevertheless a big position was basically the unrealized ethics coming from the approved strengthening of the Swiss franc respectively the devaluation of the dollar position And there, I would say, assuming rates stay stable, that this would at least not grow respectively, roll back into the operational results. I think that is as much as I can say in terms of residual buildup activities. We consciously called it residual because it's really ramping down and that chapter could be closed. doesn't mean you do not have potentially then new topics to come we are looking for instance into an erp transformation on the swiss side and but that's over the midterm so so i can there highlight namely the fx piece um which resulted from the um depreciation of the dollar the abrupt one In terms of translation effects, you are correct. Constant to nominal for the time doesn't show a big gap. Nevertheless, we do have certain plus and minuses, which for the time have offset. Assuming, again, stable rates and not here to interpret the future in terms of ethics. Nevertheless, we would see on the current ethics situation that gap widening definitely that there will be a translation difference in our H2 numbers and consequently as well for the year.

Okay. And very lastly, before I jump back into the queue, I dare to ask, I mean, usually it's not been a topic you have been very close on, but just to give us an idea, and I'm very grateful for some volume numbers that you have been providing in the presentation. So, In general, maybe on a more higher level, how should we think of your pricing capabilities and the strong growth that you had? Is it like, I don't know, two-thirds is coming from volume, rest from pricing? I mean, pricing must be on your side, given the markets are so dynamic, or how should we think of this in general?

Usually, let us take the 18.5% organic growth, which is constant without obviously the acquisition effect. And there we can say that we are close to 3% is pricing, thereof close to 2% really increasing prices, while one minus percent is basically the indirect effect of invoicing in Swiss franc, for example. Consequently, we are talking about roughly 15% of volume, and the rest are set, two-thirds direct pricing, one-third the indirect effect going economically through the Swiss franc. I hope this provides a bit of light.

Yeah, very helpful indeed. Very good. Thank you.

Welcome. Let's continue with one question from the chat tool from Dominic Cross from VP Bank. With regards to the net leverage rate of 0.8, which was down from last year, can we expect net leverage for the full year reaching the lower end of the midterm target of 0.5 to 1.5? And if so, would we have to expect to see higher distributions to investors, dividends or diebacks? After all, in the absence of an acquisition and if markets continue to be as strong as 2025, would you not otherwise expect or go below the 0.4 in the near-term future?

I think first and foremost, we remain committed to the framework. We have been re-emphasizing and sharing with you in respect to the net leverage. You're right, it came down by 0.1 turn from H124 to H125. We surely usually expect a good cash conversion in H2. Nevertheless, yes, you need to earn the dividend at the end to distribute it then in H1 of the following year. Ultimately, we remain committed to a stable to growing attractive dividend, first and foremost. And secondly, if there is excess cash, which we do not have currently, and there is no M&A, that the share buyback is definitely a viable option, an instrument we would

We have a follow-up question from the line of John Kim from Deutsche Bank.

Please go ahead.

Hi. Thanks for the opportunity. I wanted to spend a little time, get a little more color on kind of the shape of the U.S. market. I know you've seen very strong growth there. But what I'm interested in is what sort of behavior you're seeing out of clients on final investment decisions on the larger projects. And if you could comment on your distributed businesses as well. I understand you have exposure to kind of fracking and gas compression. Thanks.

Good. I mean, as I already said, I would say onshore U.S. business, it's power generation and gas compression. If you take a look on power generation, it's all depending on the capacity. So there's huge investments already when you read any paper. The biggest bottleneck to build new data center, I think it's not NVIDIA, to get the semiconductor. conductor, it's really about getting the power. And so we know that our customers are investing a lot in increasing their capacity, either in the US, but also their suppliers from Europe to the US. So it's really about the demand is here. It's all about capacity to provide all the electrons to run the data center. Gas compression You know the history. I mean, we had a very strong year in 23, but then we realized a big portion of this growth was not directly related to the demand. It was more inventory at the OEM also, but also at their distributors. That's why we saw a slight dip last year. They are just adjusting the inventory to a normal level. And now we see more or less a kind of similar growth to last year or similar level to last year. But the dip last year was more in the second half. But we see now a clear uptick in the second half for the gas compression. That's why it was also shown positively in that one. We see a good growth. So here, again, it's very much depending now really on the capacity of the OEMs to deliver and the demand for data center and the corresponding demand for power generation is huge.

Great. Thank you.

You're welcome.

Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Daniel Bischofberger, CEO, for any closing remarks.

No, thank you. As I said, it was an exciting first half. We are confident for the second half, definitely on the top line. And the good discussion we have already with the customer, I'm sure we find a good solution that's acceptable for both and also securing our long-term growth. And we work on the mitigation because definitely pricing means some adjustments, helping the customer and some moving things out of value-add in Switzerland. So I'm confident it might not happen today. But midterm, I see the chance. Definitely, that's always subject to changing regulation and new tariffs around the world. But I'm confident and I'm really thankful for the great work of all our people helping there and being agile. Thanks for all your good questions and I wish us all a good day. Thank you. Thank you. Bye.

Ladies and gentlemen, the conference is now over. Thank you for choosing Coruscall and thank you for participating in the conference. You may now disconnect your lines. Goodbye.