Andritz Ag Graz Akt

Ladies and gentlemen, welcome to the UNREACH Q1 2025 Results Conference and Live Webcast. I am George, the chorus collaborator. I would like to remind you that all participants will be listen-only mode and the conference is being recorded. The presentation will be followed by a Q&A session. If you would like to ask a question from the webinar, you may click the Q&A button on the left side of your screen and then click the Raise Your Hand button. At this time, it's my pleasure to hand over to Matthias Feinberger. Please go ahead.

Thanks a lot, George. It's Matthias Pfeifenberger. A warm welcome from Andritz this morning. I'm in charge of investor relations, and I would like to welcome you to today's call on the Q125 financial results. It's a big pleasure for me to have our CEO, Dr. Joachim Schönbeck, and our CFO, Vanessa Helving, with me in the call. I'd like to show you the disclaimer for a second. and then remind you of the agenda today. So we'll start the call with the CEO key messages and the Q1 highlight, followed by the financial performance, an update on the business areas, and then finally an outlook and the targets in the medium term. And with that, it's my pleasure to hand over to the CEO, Dr. Joachim Schönbeck.

Good morning, everybody.

Welcome to our conference call. Thank you very much for spending your time with us and your interest in our performance. If we... If we conclude on the first quarter, we would say we are quite happy with the business performance in that quarter, considering what's happening besides us in the world. We had a significant increase in order intake. We had a big step up in pulp and paper hydropower year on year. We could record quite stable development in metals and we could see further growth in our service business. The revenue declined, you know that order intake particularly in the first half of last year was rather low. but we could increase the service revenue, which is good and in line what we strategically have planned. The EBITDA remains stable on the profitability side on comparable EBITDA and on reported EBITDA level. It's, I would say, a mixture of a quite solid project execution and an improved mix that increased service share. We also could see in the first quarter already the first fruits of our restructuring efforts we've done last year, which is then in total quite good. We had a decline in the net income margin And that's more seasonal impact, more or less beyond what was is following on the sales decline. If you go to the next page, we see some of the The main KPIs in more detail on an intake at 2.3 billion euro, up 20% from last year. Revenue, as I said, dropped by 7% to 1.8 billion euro. Happy that the order backlog.

Can you hear me still? Yes.

Okay. I was informed that I'm in silent mode. Okay, so order backlog heavily increased to 10.2 billion euro, which is to look for the outlook, quite stable, quite stable cushion. Comparable EBITDA margin at 8.2%, slightly up from 8.1 at a total of 145 million euro and the reported EBITDA margin at 8.1% stable to last year at 142 million euro. Net income dropped to 89 million euro and the one 5.1%. We look to the order intake in more detail. You can see that we have the growth is clearly driven by pulp and paper up by 52% from last year, 900. 75 million euro. So I would say a good quarter metals and environment and energy rather stable compared to last year and hydro power up 14% to 570 million euro. So I would say quite a good development. You can see that the Europe, North America increased while emerging market decreased a bit from 45 now to 38%. We were happy in pulp and paper. We got another complete pulp mill in China awarded in the first quarter. And you might remember that we had been awarded two complete pulp mills in China in Q4 last year. So it's quite a positive sign towards us regarding our technology. Also, I would say a good signal for the Chinese market in total. On top of that, we have two large orders, one from Japan and one from the USA. So quite good, constant growth in service supports our more stable business. In metals, I would say globally, as I said, it's rather stable, minus 1%. Good to see also here, we could see a significant growth in China. where I would say the automotive industry has maybe a bit different cycle than what we see in Europe and US with the traditional OEMs. In hydropower, it's a good development driven by rather many medium-sized orders and further growing in the service rehab business, but also grid stability played a role. Environment and energy, we had a, I would say, slight decline, but I would say on a very high level, 443 million euro is quite good. We had a In separation and pumps, slow start in the year while biofuel and clean air had a rather good start in the year. If you look to the revenue, we happily see that the revenue in service could increase. We have a decrease overall by 7%. That's mainly driven by our pipe and paper and metals. And here again, we have in pipe and paper, the decline mainly relates to the, or completely relates to the capital business driven by the low order intake a year ago. while we could grow the service. In metals, we have a decrease in Europe and North America. We could see an increase in China. In hydropower, you see we are up 23%. That's clearly driven by the good order intake we have now basically for the last five to six quarters. As I told you previously, the execution time in hydro project is a bit longer. So the start was rather slow, but now we see the sales coming, project execution is solid. So nicely 23% of environment energy is up by 6% good development across all industries. That leads to a backlog of 10.2 billion euro. which is a good stable cushion for our sales for the remaining part of the year. And as usual, approximately two-thirds of the backlog is attributed to hydropower and pulp and paper. With a share of hydropower now at 40%, clearly improved. clearly supported by the excellent order intake they had now for the past quarters. We move to the EBITDA. We can see that EBITDA dropped along with the revenue. However, profitability remained at a good level, 8.1% on a reported EBITDA margin. And on a comparable EBITDA margin, we even moved up from 8.1 to 8.2 percentage. On the revenue, that's a drop of 6%. That's definitely attributed to good execution of the projects and also first effects on our overall capacity reduction and restructuring efforts that we have started effectively last year. That was mainly in the areas of of metals and pulp and paper where we have made these capacity reductions. And if we conclude that in total, we have reduced head count in pulp and paper and metals in the last, in 24 and the first quarter, 25 in total, approximately 1300 people that's counterweighted by an increase in particularly in environment and energy and in hydropower and of course the acquisitions we have made. But at least in metals and in pulp and paper, we could really protect the margins by timely executed restructuring measures. Just to recap on the ESG, that's the status end of 24. Nothing, you know, that I think we are well on track to reach our 25 ESG targets. If we have concluded in the two weeks, Two important acquisitions, the one in the supporting us for our decarbonization efforts, that's LDX solution will be part of our clean air business, which is resting inside environment and energy. It's an acquisition. It's a complementary acquisition to what we do. It's complementary and it's regionally because their business is mainly focused in North America and they're mainly in the U.S. where we have not a very large presence for clean air. And they have some complementary technology that could also support us in the rest of the world. So we are quite, we are quite happy sizes about a hundred, a hundred billion, a hundred million US dollars. And we, we see good, good market potential. And we see in particularly a good growth perspective for them inside, inside the hundreds environment. Then in, in Italy, we have acquired a jelly paper. It's a, a, a manufacturer of paper machines, specialized for tissue paper and board grades. So we could strengthen our role as full line supplier. They have a good winder technology that we historically often used anyhow. They are located in Italy and China. Sales revenue is approximately 70 million. We expect closing that deal within Q2. As I said, we could grow the service business. We have it on an all-time high now of 44%, but more importantly, we could grow in absolute terms. We again could grow the service revenue, and that is good and helps us in stabilizing our business. financial performance, which will now be presented to you in more detail by Vanessa.

Yes, thank you, Joachim. And good morning and afternoon, everybody listening. I'm now going to give you an update on the financial development of the Andres Group for the first quarter in 2025 and then provide also a summary of the financial KPIs. As mentioned by Joachim, due to lower revenue generation, the absolute EBITDA came in about 9 million euro behind last year, while EBITDA margin slightly increased from 10.3% to 10.5% year-on-year. With absolute EBITDA down in the quarter, as mentioned, margins have remained stable in percentage compared to the previous year period. IFRS 3 related amortization has increased mainly due to the acquisition of LDX solutions, which led to an EBIT margin 0.2 percentage points below Q1 last year. The financial result is driven by the decrease of interest rates applied on a reduced gross liquidity and a slightly more negative FX impact also played a role. Our tax rate remains stable at 25.6% compared to 25.5% of Q1 last year, and we arrived at a net income of €89.2 million at a net income margin of 5.1%, which is 0.4 percentage points lower than last year. Looking at the free cash flow bridge, you can see networking capital is the major driver of our operating cash flow. However, while the bridge here also shows the year-on-year comparison, the networking capital change in Q1 2025 compared to the year end 2024 is not that significant, especially if we look at our operating networking capital. The roughly 60 million increase is in essence triggered on the one hand by higher service activities and thereby increasing inventory by 40 million euro, and on the other hand by the slowdown in project revenue which triggers a temporary reduction in payables by 103 million euro. Based on the cash flow from operating activities and after our continuous in-house investments of roughly already 50 million in the first quarter, we arrive at a free cash flow of slightly positive €23 million for Q1. This slide illustrates on the left side that we are well funded for the constantly broad variance of liquidity needs from our business to finance the typical project execution cycles. Usually, we have significant advance payments early in the project phase being followed by heavier ramp up of costs at the later stages of the order execution. However, as you can see in the right chart, we have achieved a substantial operating cash flow in the recent years, further improving cash conversion. Now, taking a look at our strong financial position. We managed to keep a solid liquidity over the years that allows us to not only adequately finance our project business, but also to constantly invest in our own assets like service workshops that are close to our customers and also gradually increase the dividend payout. Having digested the payment of the acquisition of LDX Solutions in Q1, we continue to stay flexible for further acquisitions. whenever we spot opportunities that meet our M&A criteria and add long-term value to hundreds. As you can see in this slide, the dividend was constantly increased over the last five years and increased by 27% since 2020, resulting in a €2.60 dividend per share for 2024, with a payout ratio of almost 52%, that we have just paid in April. At the same time, we can show a constantly positive development of our return on invested capital, which again increased in Q1 2025, while WACC remained on a stable level and still far below the ROIC. The increase in ROIC is mainly driven by the reduction of invested capital. So let's conclude with a summary of our financial KPIs. In a nutshell, it was a good quarter. Even though revenue continued on a lower level similar to Q4 last year, we recorded the second consecutive quarter of recovery in our order backlog. We are extremely happy about the 20% increase in order intake in Q1-25. sustaining the trend from last year, especially for power and paper and hydropower. The financial stability of our business and the resilient development of our profitability is driven by also our broad diversification. In detail, this means Even though the pulp and paper business currently undergoes some capacity adjustments due to the lack of large projects in the recent past, hydropower is developing positively, volume and profitability-wise. Also due to new technology fueled by our constant R&D spend in cooperation with our customers. Some years ago, we could see the performance of these two business areas being quite the opposite as compared to today. With the respective cycles in these business areas being faced, our level of diversification is a stabilizing factor. While this is considered a weakness by some capital market participants, we think it is in fact our clear strengths, supporting EBITDA margins at a sustainable level. On the cash side, we have highlighted the increase in operating networking capital driving our operating cash flow. Higher capex leading to free cash flow of 23 million euro, and furthermore, the cash out of acquisitions, mainly LDX solutions, affecting of course our liquidity. The number of employees has in essence increased by acquisitions, just mentioned by Joachim, despite also there are variances across the different business areas as well as some restructuring measures ongoing. And yeah, well, with this, Joachim is now going to guide you through the details of the business areas. And I hand back to Joachim.

Thank you, Vanessa. For the insights, let's move to the business areas and start with pulp and paper. We are happy to have... Pipe and paper market back with an excellent order intake of 975 million euro, up 50%. That is really good. The revenue is declining, was declining in the first quarter, driven by capital business. which had a low order intake last year, as you know. The service business reached a record level of 60% on the revenue, but that's clearly driven rather by, even though it's growing, it's clearly driven by the drop in the capital sales. In total, the combination of a favorable mix and a good project execution and early capacity reduction on the capital side, we could keep the EBITDA stable at 10.1%, which we believe is quite good. As I said, another new complete pulp mill awarded in China is a good strong recommendation of our technology. The third one in a row, two larger orders in the pulp area from Japan and the USA definitely is a good sign that these markets are in good shape. I think on the profitability side, I had already explained what was driving it. We moved to metals where the order intake is stable on a, I would say, moderate, on a quite moderate level. Revenue has been declined a bit, 6%. What is here, I would say, really Remarkable is the EBITDA margin. On a comparable EBITDA, we could increase compared to last year, 5.3%, showing that despite the, I would say, the moderate volumes, that profitability improvements are on the right track. Project execution is clearly improved compared to the previous years. And the first fruits of the restructuring measures also could be harvested. Reported EBITDA margin also slightly increased from 4.8 to 4.9%. So we would confirm that we are on the right track there. On the market side, we definitely have a, I would say, reserved investment position in Europe and North America, but we could see good growth in China. And that is really something we also see growing. for the next quarters to continue. So I would say we see quite active markets across automotive and also steel and aluminum. So hydropower is continuing the good development. I'm reporting now for several quarters and we really see that this hydropower will take its place in this shift of the energy towards the renewables. The significant role of hydropower is recognized, and now we also see it in the orders. And it's a... There is a good mix of modernizations of existing plants and also new plants, which makes the business very well balanced regionally, as well as from the operational side. Order intake nicely up by 14%, revenue up by 23%. EBITDA up by 54% to 24 million for the first quarter. The margin, comparable EBITDA margin up from 5.1 to 6.4%. And here we can also see that we can grow profitability over proportional with a business, which is good. Order execution clearly has improved. So we are more stable. We are confident that we can deliver the revenues of the good order intakes. And we could also get some price increases implemented in this good market. So we are quite optimistic. Besides the hydropower capacities installed, we have successfully built up this business for grid stability where we deliver our synchronous condensers too. And they also see a big demand on the market. not only in what has been booked, but also what is in the project lists looking out. Looking into environment and energy, I would say a moderate on the market side, slight decline 4%, but still on a very good level with a 443 million euro order intake. Revenue nicely up by 6% to 332 million. EBITDA, EBITDA margin very stable, very solid 10.1%. We had an excellent start of the year for feed and biofuel and for clean air. while we have in separation and pumps, it was a bit muted markets. But we are happy that we could get the profitability very stable and that despite the rather high R&D spendings we have in this area where we have this green hydrogen, the carbon capture activities, where the buildup of our value proposition takes a bit more of R&D money than we usually have in our business. So that was for the business areas. We will confirm and can confirm our guidance for 2025. So we see the revenue between 8.0, 8.3 billion Euro for year end and a comparable EBITDA margin from 8.6 to 9%. So that remains our guidance. And you might ask, what is about the tariffs? Are we not affected? And I can tell you, we do not see adverse impact on the markets yet. We keep our financial guidance unchanged. But of course, we are monitoring the situation closely. Maybe to elaborate a bit on that, our business model is based on a system where Usually our customers pay the tariffs applied and on the laws that apply when we are exporting the goods to these countries. And that's mainly the case for our capital business. Our service business is to a widest extent local for local. So usually there only tariffs basically do not apply. So we checked on our backlog and potential financial impact on the tariffs on our business. We can consider small tariffs. Uncertainty on the global tariff scheme, especially with frequent changes on a daily and weekly basis, definitely can slow down decision-making for investments. But here we have not seen anything, so therefore we can keep our guidance unchanged. That's also the case for the mid-term targets. We confirmed the 2027 targets revenue between 9 and 10 billion euro comparable EBITDA margin higher than 9%. That's basically what we could tell you by now. And we are open for any questions you might have. Thank you.

Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question from the webinar may click the Q&A button on the left side of the screen and then click the rise your hand button. If you wish to remove yourself from the question queue, you may press the lower your hand button from the file. Our first question comes from Sven Viren from UBS. Please go ahead.

Yeah, good morning and thanks for taking my question. It's just, you know, coming back to the current demand and ordering activity, obviously you had a really good start. I was wondering on pulp and paper specifically, I mean, that's been a tough market for the last one or two years or so. So is it fair that despite the recessionary fears that are out there, that this market had reached such a low level? that the incremental downside would actually be quite limited. And some of the pop and paper guys are now moving ahead on strategic projects kind of nevertheless. That's my first question. Thank you.

Yeah, it looks like that we have gone through the trough now. It's good that... that the market came back and that we could see regionally quite distributed Asia and North America. All of that is without any of these giant projects that you sometimes see in South America. So we are happy that this market is back to normal. And that is not too surprising because if you have low investment for a certain amount of time, then you need to do some to get your assets up in shape and running. I would say that is very normal on the long run. We still believe that the growth in pulp and paper is sustainable. Demand in pulp remains strong worldwide. And we still firmly believe in the potential of pulp and paper to replace plastics and other material in packaging as well as in textile. So I would say both on the short term and the long term, we are not too concerned and happy that this market is back in good shape now.

This sounds like Q1 should not have been like a big blip, and then in Q2 you go back to a much lower level. I mean, it was high, of course, so we probably shouldn't expect that to be every quarter, but you're probably not going to go down drastically sequentially either. Is that fair?

Yeah, we see solid projects in this medium-sized range, yeah. And this, I would say, I cannot, I don't expect that we now book a billion in every quarter. That's very clear. But we have, I think we have a solid project lists. And it's, I would say it's a bit better in pulp than it is in paper.

And have you seen any behavioral changes of your clients since April or is the decision-making still kind of the same that you saw in the first quarter?

I mean, they are all serious people who are definitely affected by the tariffs and they need to sit down and think I would say, adjust their supply chains and operational models to the reality of the new tariffs. So we expect, like with all of our business partners, that decision-making will slow down, but definitely the tariffs will not change the fundamentals of the demand side. That's for sure not the case.

Yeah, and I think it would seem to me that when I look at pulp and paper, I mean, it looks to me a little bit less into the epicenter of the terrorists than maybe other things. When you look between, you know, South America, exports to China, it's not immune, right, but it's maybe not the worst bit, and probably the same could be said for what you do on the hydro side and on the environmental side.

Yeah, I would say that's not targeted. And we also need to remember that we are not producer of pulp or any other products. We are machinery supplier. And one of the, of at least the communicated goals of the politics in the US is the reshoring of a manufacturing base in the US. And that definitely would support our business on the long run because we are delivering the machinery to reinstall that manufacturing base. And to the largest extent of our product portfolio, we do not have US competitors. So from that, I would say we are definitely not in the main target of these activities.

Makes sense. Thank you, Dr. Schoenberg.

Thank you. Our next question comes from Lars von Kleff in Deutsche Bank. Please go ahead.

Thank you very much. Good morning. Lars von Kleff, Deutsche Bank. Thanks for taking my questions. Two, and this would be following Sven's questions on the order intake I mean, partner paper order intake was really strong in Q1. I guess momentum is holding up well. Is that already enough to make you optimistic that we could see revenues in partner paper for this year even increasing year on year, or is it too early to say? I mean, you also remarked that you see further growth in the service business, which should then materialize as revenues this year already, I would assume.

Yeah, let's see. I would be... we could book these orders early, a growth, I would be rather cautious as the, I would say the normal cycle of the project would not predict that. And we do not see that acceleration of these projects that this is now very likely to happen. So I would say we will have definitely stabilized and we have a much better outlook now in pulp and paper than we had half a year ago. And the restructuring capacity adjustments, they come into place. So we also protect profitability there.

Perfect. Understood. Thank you very much. And then maybe quickly focusing on metals, order intake in Q1 rather flat, minus 1%, give or take. And you're talking about quite active markets. So you're seeing momentum coming back? Or is it too early to say?

Yeah, we see quite active market in Asia. We see, I would say, muted markets in North America at the moment and in Europe. We know that the large customers we have in North America in that area, they are all in one discussions with the authorities for tariff exemptions. that is now going on. Because if they wanna make a reshoring of manufacturing, if they wanna make it viable, usually you need steel, you need aluminum, it doesn't work without. So therefore, we are on the midterm, we are not too pessimistic there.

Understood. Thank you very much. I'll go back into the line.

Our next question comes from Daniel Leon with Erster Group. Please go ahead.

Yeah, good morning. Thanks for letting me on as well. Actually, I'd like to follow up on the audio intake in PALP. Do you see the recent awards that we saw in Latin America and also Asia and US, Japan?

uh does it influence the investment decisions for further larger greenfield projects in latin america i cannot connect that no okay i would say i would say the um what has been but that has been true the last year that in brazil With the size of the projects that we are now talking about around two and a half to three and a half million tons per year, the size of the project is that big that basically the country cannot support two of these projects in parallel, or at least it would be quite a stress. So therefore, you could say that the investment in South America last year has an impact, but this impact will be gone by end of this year. The other projects in Asia and North America are not affected by the decisions in South America. That's at least my view. And also not the other way around. No, I don't know. not also not the other way around, no.

And then one related to the intake, have you already received the down payments for these bigger orders, bigger contracts signed?

I would assume so because otherwise we don't book them. Vanessa, you have, you can provide any additional insights there.

As far as I know, we have received for two of these three mentioned orders, but I have to check on this.

Is there anything, does the amount change, the share? Usually it's like 10, 20% down payment, right? Is this still the case?

That's a right order of magnitude, yeah.

Perfect. Thank you very much.

You're welcome. As a reminder, for questions from the webinar, please click the Q&A button on the left side of the screen and then click the rise your hand button.

We have another set of questions from Akash Gupta from JP Morgan, who could not attend the entire call. I will read it to them. I think the first one is about large projects that we mentioned in Dr. Schönberg's elaborations. It's one bigger order in Japan, one bigger order in the U.S., and both in pulp and paper. And the second one is to give us a feeling about the underlying service growth. And I would ask Dr. Schönberg to give more color on that, please.

Yeah, so we had large orders, as you already said, one from Japan, one from US, both for pulp assets and both with an order value above 100 million. So that is quite substantial and we see it as a good sign for these markets because these markets have locally have some impacts on other regional investment decisions. On the order intake service mix, we We have a nice grow in service revenue. We grew by 5% compared to Q1 of the previous year of 24, which is very good. That growth was driven by hydropower and by environment and energy. why it was rather flat for pulp and paper 1% change and a small decline in metals by 3%. So, but overall, it's a good share, it's a record high, it's a 44%, I would say it's a good development.

Thank you. I think we have one more question in the queue.

The next question comes from Peter Rothenheimer with Badr Bank. Please go ahead.

We cannot hear you. Okay. Can you hear me now? Now we can hear you. Thank you.

Okay. Thank you. First, a question on environment and energy. So how it looks as a project pipeline on the one hand for hydrogen and on the other hand for carbon capture. Do you see here some bigger projects coming up?

Yeah, basically the situation has not changed since last year. We see quite significant projects, high market activity, and I would say a good interest in feed studies, in preliminary decisions, final investment decisions. I would say the climate has not changed and we do not expect to have that. So we... We see activities, we see high interest in these technologies, but we do not see a change that everybody is now placing orders. The announcement in Germany for infrastructure investment extraordinary of 500 billion helped for the situation in Germany. So I would say we keep on there and we improve our offerings and we expect it to change, but we cannot give definite dates when it will be. It is for sure slower than we hoped for two years ago when we started that journey. But we are confident that it will materialize.

My second question would be for Vanessa regarding the financial results. So Mr. Nettersheim said in recent calls that Andres would expect significant improvement in the net financial results in 2025. now financial result in the first quarter was relatively weak. What is your expectation now for the full year? Do you still expect positive financial results for the full year?

Yeah, well, thank you for the question. This is specifically also difficult to judge on the the interest rate development that we might expect also throughout the year. So we have undertaken already some actions in terms of tax optimization globally to foster the result improvement. But yeah, so I mean, you know, it has a lot of parameters that are not always under our control.

Can you confirm that the first quarter, the financial result was extraordinarily high compared to what we expect for the upcoming quarter?

No, it was not extraordinarily high. That's not the case. We actually expect improvement throughout the year towards the end of the year. So you saw a decline on this? from last year, end of last year, at least on the margin, as well on the absolute figure, of course, and we expect further improvements throughout the year.

That doesn't answer your question, so maybe I don't get your point.

Yeah, so the point was from the financial result, I would have expected overall positive net financial result for the full year. And therefore, I was a little bit surprised about minus 6.7 million net financial result in Q1.

Okay, yeah. Okay, great.

Thanks for the interest in ANRITS and for our management team for the elaborations. I think there's no further questions and I would like to hand the call back to Dr. Schönberg for any concluding remarks.

Thank you, Matthias. Yeah, thank you very much for attending the call. We are happy with the first quarter. We are looking forward with solid project activities to continue on that path for the second quarter and the rest of the year. But we are prepared for anything else that the macroeconomic environment is delivering to us. So thank you very much for your attention and see you back in three months. Thank you very much.

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