Andritz Ag Graz Akt

Good morning, ladies and gentlemen, and welcome to the Android Q2 2025 Result Conference Call and Live Webcast. My name is Yusuf, the Chorus Call Operator. I would like to remind you that all participants will be in listen-only mode and that this 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 Head button. If you are connected via phone, please press star followed by one on your telephone keypad. For operator assistance, please press star, zero, or the operator assistant button. At this time, it's my pleasure to hand over to Matthias Pfeifenberger. Please go ahead.

Welcome to our Q2 earnings call from Graz. I would like to present your hosts today. With me are our CEO, Dr. Joachim Schönbeck, and our CFO, Vanessa Helving. We will start the call with the key highlights, followed by the financial performance review, and then go into an update on the business areas, followed by the outlook and 2027 targets. We will then conduct the Q&A. Please make sure you register with your full name for the Q&A. In the end of the presentation, I would point you at the disclaimer. Please read it carefully. And now I'd like to pass over to Joachim.

Thank you very much. Good morning to everybody. Thank you for attending our call, spending the time with us and jumping right into the details. We are very pleased that we can report another very strong quarter in order intake. We had a um extremely high order intake in q2 and also first half of this year we did not see any significant impact of the tariffs growth was mainly driven by our business areas metals and hydropower we had a i would say a very satisfactory level and pulp and paper and we had a decline in environment and energy. The book to bill was again above one for the third consecutive quarter. We saw a decrease in revenue, though, that results from the low order intake we recorded last year, and we had a moderately negative FX impact due to the strengthening of the euro against major currencies we have in our portfolio. We have a stable comparable EBITDA margin that's based on a very solid improved order execution and selectively also better pricing. We could increase the service share increasing in a year-to-year basis. If you look to the numbers themselves, order intake for the second quarter was at 2.4 billion Euro, revenue 1.9. Order intake was up 26%. And as revenue declined, the order backlog also rose by 7% to 10.4 billion Euro. So a very solid backlog to generate the revenue to come. EBITDA margin comparable was at 8.4% compared with the 8.3 in Q2, 2024. The reported EBITDA margin though dropped to 7.8% down from 8.6. And that was mainly driven by severance expenses for restructuring needs. The net income margin is at 4.5% down from, sorry, 5.4% down from 5.7 at 102 million Euro. A quick look to the First half financials, order intake very strong at 4.7 billion euro, up 23% compared to the previous year. Revenue, as I said, for the second quarter down by 8% to 3.7 billion. Backlog is the same, and the EBITDA margin at 8.3%. compared to the 8.4 and the reported margin a bit down due to the restructuring costs that we had. We could see a very good and continuously increasing project activity. It's reflected in the momentum in the order intake that we see. And we are very happy that apparently we have the right offerings for our customers in these challenging times and are happy that they are staying with us with a lot of confidence and trust to our solutions. If we have a closer look to order intake in the first half and in the second quarter, we can see in the total second quarter up by 26%. That's mainly driven by hydropower and metals. Hydropower jumped by 173% from 284 to 700. 77 million euro metals jumped by 200 million from 321 to 527 so that's uh that is that's really good part and paper decreased slightly against the q2 but we have what we see a strong growth in the uh in the first half of the year and it's uh basically only um environment and energy where the markets are extremely cautious at the moment to place orders. Project pipeline is quite good, but decisions are awaiting. However, what we could see in environment energy is a good growth in feed and engineering studies, especially for the for our new products like carbon capture and green hydrogen. The revenue, as I already mentioned, decreased in the second quarter and in the first half. We would see an increase compared to these figures for the second half of the year. But the low order intake that we had in 2024 drove this decline, especially in pulp and paper and in metals. In both areas, we had the necessary capacity reductions have been started. And I would say to a majority already implemented. Hydropower gets a strong momentum. It's increasing revenue and executing the large backlog. And we could see in hydropower a very nice growth in the service business. Environment and energy, we have the revenues at an all-time high and a very solid growth in the service revenue. The backlog is again solidly up at 10.4 billion Euro. It's usually two-third of that is driven by pulp and paper and hydropower. And you can, we expect about two-third to be executed in the next 12 months. EBITDA development, we have a stable comparable EBITDA margin, and we are falling on the EBITDA along with a decrease in revenue. On the reported EBITDA margin, we are dropping from 8.4 to 7.9%, and that's mainly driven by the one due to the capacity reductions. in pulp and paper and in metals on our esg program we are i would say we are well on track the majority of the targets for the 2025 have already been reached it's the share of sustainable solutions and products where we are lagging behind and the share of women in the workforce where we are below the target everything else we have reached the targets already and are preparing for new ones which will be communicated within the next couple of months we had a very good run on our acquisition strategy in the um in the first half of this year we completed four major acquisitions very important very perfect complementary fit to our product offerings in our various areas the ldx we already reported in q1 that that was closed in february then we acquired a jelly paper a specialist for paper and tissue machine machines especially in the winder and rewinder business filling a a product that we had in our portfolio. They have locations, they're based in Italy, but have a strong location also in China. Revenue is approximately 70 million. We are strengthening our customer service for the energy business, for boiler cleaning equipment, diamond power, more than 120 years of experience to clean boilers. We are working together with Diamond Power for many years, so we know them. And I would say it's a perfect fit to our product offerings. And it is a, I would say, significant step forward to serve the customers for the outages out of one hand. we received good feedback from the market for this acquisition. Same applies for acquisition of Salico Group. It's a small Italian machine maker for finishing equipment for strip and plate, exactly located in between our metals processing and metals forming part because they are uh providing the equipment to further um to further partition the strips and the plates for the um as the incoming products for the press lines in our shooter business so that makes makes a lot of sense to uh to close that gap review is approximately 100 and very complimentary to our current business. Service is steadily increasing. The revenue is increasing to an all-time high of 44%. So we are continuing on that track. With the acquisitions we made, we will strengthen that further. So that's, I would say, that is on the right track. And with that, I would like to pass on to Vanessa to give us some more details on the financial performance.

Thank you, Joachim. Hello and good morning to everybody listening. Before I go into the financial details of Q2, let me take a moment to reiterate the cornerstones of our strategy. of long-term profitable growth. And also it illustrates how focus diversification and risk conscious expansion has made all that possible. This chart is a 25 years performance snapshot that does not only show the absolute growth with 400 base points margin expansion. It also shows that Andres is growing well across the cycles. with in fact only a few down years with rather moderate revenue declines and quite a low margin variance from peak to trough. This resilience is achieved by various factors, which mainly are the following. We are exposed to different sectors with generally phased economic cycles. We have increased our service business to 44% share of revenue with good margins. Our long-term track record with Volt on M&A contributes to growth and value generation. Our asset-light business model supports flexibility. We benefit from synergies across the four business areas with limited dependencies. Our internal focus is on cost consciousness, flexible cost base, improved project execution and detailed risk management. We manage our global supply chain effectively with local for local and multi-source strategies and also have manufacturing corporations. Furthermore, we focus on digitalization, reduction of structural complexity, and we are also implementing global shared services. So your key takeaway from the slide should be unrisks, Long-term performance demonstrates that we have delivered consistent, profitable growth across cycles through the right mix of sector exposure, a resilient operating model, and disciplined execution, resulting in both margin expansion and long-term value creation. Let me now walk you through the key components of our EBITDA to net income bridge for the first half of 2025. Our EBITDA margin remains stable at 10.3% despite higher non-operational items, while absolute EBITDA decreased to 374 million euro due to the temporary decrease in revenue that we are undergoing in the first half of this year. Depreciation was slightly lower at 86 million due to asset devaluation in the metals restructuring in the first half last year. This results in a reported EBITDA of 289 million, and the purchase price allocation from recent M&A, mainly LDX solution, lifts the RFIS re-amortization to 31 million euros. The financial result improved from minus 8.6 million Euro in the first half, 24, to minus 0.5 million Euro in the first half, 25, due to the deconsolidation of Otorio last year and the recent fair valuation of Amish shares. The tax rate remained flat at 25.5%, leading to a lower absolute tax charge. Summing up the net income for the first half 25 at 192 million Euro is actually reflecting the temporary revenue softness and elevated non-operating items. Just as a reminder, Android has recently sold its stake in Notorio to Amis. That was a leading supplier of cyber exposure management and security. So UnREITs received a consideration in Armis equity that generated the fair value gain that I just mentioned and fosters thereby a corporation that will strengthen UnREITs digital solution offering in cybersecurity. Turning to cashflow, let me outline the key movements from EBITDA to free cashflow in the first half 25. We start with EBITDA at 374 million Euro. Well, outflow from net working capital increased from minus 31 million Euro in the first half 24 to minus 114 million in the first half 25 due to bonus payments to our employees, but also due to higher inventories basically supporting our service activities. Also, we had lower trade tables and prepayments resulting from missing large scale projects. Cash outflows from income taxes were basically on the same level as last year. The net interest received decreased from 18 million in the first half 24 to 8 million in the first half 25 due to lower interest rates and reduced net liquidity. Changes in provisions and other are nearly at the same level as last year and mostly comprise outflows from provisions. Summing up these items brings us to a cash flow from operating activities of €169 million for the first six months, mainly driven by lower revenue and working capital outflows. Then deducting the capex at a similar level as last year with 98 million euro, we arrive at a free cash flow of 70 million euro. As Joachim mentioned, our M&A delivery exceeded last year's level with four deals signed in the first half 2025. LDX was closed in Q1 and the other three were signed in Q2 and will trigger further cash outflow in the second half of 2025 after closing of the deals. So M&A spent thereby increased to 99 million Euro in the first half of 2025 compared to 58 million Euro last year. To summarize here, the working capital build was the single biggest drag on operating cash but it is set to unwind as service and project revenues convert. Our core CapEx discipline is preserved while keeping the free cash flow positive despite the volume dip. And continued bold on M&A supports strategic priorities. The corresponding purchase price payment will of course impact the cash flow of the second half of this year, but balance sheet capacity remains ample. I would now like to turn your attention to our operating cash flow generation. Operating cash flow amounted to 96 million Euro in the second quarter, 25 and 169 million for half year. Following a decline in Q1, Q2 actually showed already an improvement in the operating cash flow year on year. In general, still seeing the usual volatility in operating cash flows on a quarterly basis, which is typical in the project business and driven by an actual processing of large and mid-sized orders. It's worth to emphasize here that the overall high level we are maintaining in operating cash flow compared to the history. That becomes evident if we look at the right side of the chart at the annual three years rolling average. Three years rolling actually reflects the average execution cycle of our capital business. Let me turn from cash generation now to liquidity. and walk you through the changes in our net liquidity profile. Over the last three years, we steadily decreased our liquid funds by termination of bonds while maintaining a stable net liquidity as you can see here. In 2025, our net liquidity together with the liquid funds further decreased from 905 million Euro by end of 24 to 516 million by the end of June 25. Hence, the total change in net liquidity in the first half of 25 amounted to minus 389 million Euro. This decrease in net liquidity in the first half of the year is actually not unusual and results mainly from payment of the dividend typically conducted in the second quarter. Based on a lower operating cash flow of 969 million, as explained before, The dividend payout amounts to a total outflow of €254 million. Furthermore, and now I'm repeating here, our liquidity was spent for usual CapEx in the amount of €98 million and our enhanced M&A delivery, which led to an increase in M&A spent to €99 million in the first half of 2025. As shown before, also working capital needed funding in the usual amplitude of our business. Despite what we call enhanced capital allocation, which I will address later, Andres continues to hold a strong financial position with sufficient liquidity as part of Andres' DNA. Not included in this picture here is our undrawn revolving credit facility of 500 million Euro provided by our core banks, which implies further headroom for ongoing M&A. With this slide here, we provide further transparency on networking capital. You know, our total networking capital remains part of our financial disclosure. We decided to increase granularity on changing the working capital by presenting now also the operating networking capital. The quarterly development of the operating networking capital is shown here. As you can see, we are still pretty lean overall with current run rates of some 12% of sales. As a project engineering company, our operating net working capital consists of the typical trade working capital means inventory receivables and payables, as well as contract asset and liabilities with prepayments. What you can see here at the operating networking capital that we increased somewhat following the period in 2022, where we received several large projects and therefore large prepayments. Following the increase throughout last year, the operating networking capital has been slightly reduced in Q2 25 after the all-time high in Q1. In absolute terms, but also in percentage of sales, the decrease from Q1 to Q2 is visible. So, and to even enhance transparency further, we have split the operating networking capital into its two components. Trade working capital, that's the upper blue part in this chart, and contract assets and liabilities and advance payments. Those are reflected in the gray at the bottom of this chart. It's a typical management element for us as a project engineering company, and it is used to set and control targets for project execution. The trade working capital remains relatively stable at about 16% of revenues on a long-term average. and our net contract liabilities and prepayments typically fluctuate between 3% to 10% of revenues, depending on where we stand in the execution of our several thousands of projects. This fluctuation is especially driven by large projects where we typically receive significant down payments, as you might know. On the prepayment side, we have seen a sequential improvement over the last few quarters along with our increased order intake. The orange line in the middle of the chart shows the two items combined again resulting in operating networking capital as shown on the previous slide. This has recently improved slightly to 12% of revenues, normalized on a 12-month basis, and generally shows a stable development between seven and 13% of sales. So I hope you appreciate the improved financial disclosure, which makes the drivers behind our working capital development more tangible for you. Some further background. With regards to our liquidity decrease, you know, we paid the dividend of €2.60 per share for the business year 2024 in April this year, totaling to €254 million. The payout ratio was 51.8%. And at UnRitz, we aim for a gradual and sustainable increase in dividend payments. This commitment is reflected in our track record. We have raised the dividend for the last five years and the target payout of more than 50% of net income. So being committed to generally enhance our financial disclosure, here's another slide providing better insights into the capital allocation and explaining our liquidity development. Since 2020, we have progressively increased our capital allocation to support strategic growth and value creation from, as you can see, €238 million to €679 million. Next to increasing capex spend, you can see continuous strong spending on M&A, which represents the cornerstone of our strategy of long-term profitable growth. As just mentioned, we have also significantly increased dividend payments in the last five years. And in addition, share buybacks are a flexible tool with our capital allocation framework. As you can see in the pie chart on the right side, in the period of 2018 to 2024, we have achieved a quite balanced capital allocation mix with roughly one third each devoted to CapEx, M&A and dividends. 34% CapEx, 31% M&A, 29% of dividends and 5% share buyback. So important to mention here as well, is that operating cash flow has covered, as you can see, 95% of our capital allocation in this period of the past seven years on average. Following these details on our capital allocation, let me briefly also show you how effectively we are putting that capital to work and how profitable our operations truly are. ROIC is our main metric quantifying value generation over the long run. It has been increasing since 2020 and stands at a substantial margin above our cost of capital. Above 20% is actually an industry-leading level. Return on invested capital is calculated on a post-tax basis, so fully comparable with BAC, and as it includes the goodwill and intangibles, it also gives a good picture of how value-generative our CAPEX and M&A initiatives are. Our RIC slightly declined in the first half of 25 compared to year end 24, driven by the decrease in EBITDA. However, at 20.7%, our RIC is still significantly above our buck at 7.9%. This clearly outlines the substantial value we generated Andres. So with this, I'm coming to the end of the part of my presentation. Let me just also quickly summarize the drivers behind the key financials. Our leading indicators are positive. Our order intake significantly increased by plus 26% in Q2 and plus 23% year to date and a book to bill ratio of 1.3 for the first half compared to less than one from last year. The high order backlog already secures a material part of next year's revenue. The margin development in order intake is positive and strict project management is improving the execution. Lagging indicators, on the other hand, are rather negative, but not surprising. Revenue declined by 8%, coming from a high comparable sales basis and low order intake of the last year. Along with lower revenue and restructuring impact from capacity adjustments in part of paper and metals, our profit decreased by double digits. This has the effect that several non-PNL indicators are behind last year as well, all impacted by lower revenue and thereby absolute returns like cash flow, networking capital, and RIC as just explained. The operating net working capital remains in high focus going forward. Again, to outline, Lower order intake from 2024 is now materializing in sales figures. No surprise and no concern. Our enhanced capital allocation and higher M&A delivery is supporting value creation and has reduced our net liquidity position. Last but not least, the numbers of our employees is steady and overall the group level, but with variances, of course, across the business areas. ASX has been headwind in the first half, but tariffs have still not impacted our operations and we will provide further details on that later in the presentation. For now, I would like to thank you for your kind attention and handing the right back to Joachim who will present the developments of the business areas.

Thank you very much for the detailed insights. Let's turn quickly to the business areas. Starting with pulp and paper, I see we can see good development in the market driven by large pulp mill orders and as well as single line orders. Majority of the investments are in the US and in Asia, not so much in Europe and in South America at the moment, but project activities are going on there as well. It's very good that it's not only the pulp, but also the paper business that could grow compared to the previous year, which is a good sign for the months to come. The revenue declined. That's, as I said, that is driven by the low order order intake we had last year capacity reductions in pulp and paper i would say have been basically completed and we are we have set our cost base adjusted to the new to the to the volumes that we see the profitability could be on a comparable basis increased We improved project management a lot and could also lift the service share. In the metals area, we could see a strong growth in order intake. And that's, again, driven by the U.S., U.S. business and China business. And also, the metals forming, the Schuller business in China continues to grow exceptionally. The decline in revenue is driven by the low order intake last year. Also here, the capacity reductions have been implemented. The processes that the majority of the capacity reductions are in Germany takes a bit longer to have all negotiations done with the unions, but it's on the way. and we can see everything will be implemented by q4 this year the on a comparable basis the the ebitda remains remains stable and the service share has has increased has increased a bit even though it is still compared with other unrest businesses at a rather low level. Hydropower for sure is the highlight. And I can tell you this is not a one-time event. We see a structure. We are in the beginning of, I would say, significant upturn of the entire market. That is what the project discussions and the plans that our customers reveal show. So we will see a very good market in the years to come. Increase in Q2 by 173% on the order intake. The revenue grew by 11%. We already discussed it last year when basically the order intake started to pick up in hydro. The execution time in hydro are even longer than we have it, for example, in pulp and paper or metals. So we often talk two to five years. So the revenue grows a bit slower, but it grows continuously. The good market condition also allowed us to moderately increase the prices. And with the fading out of the old projects, we are first of all seeing improvement on profitability here already in the Q2. And we also see that this trend will continue. Environment and energy. Here we see a decline in the order intake. We had, I would say, several special effects in markets where decisions have not been taken. And in this area, we also depend a bit on the new developments. We have made the green hydrogen development power to X, but also carbon capture. Here we had a good growth in the engineering studies, feed studies for these areas, but final investment decisions have not been taken in the first half of this year, and this is why order intake remains low. Revenue is on a record high, 703, and the service in environment energy is growing very nicely. Where we have quite a good development is in clean air technology, and that's especially in Europe, but also in China. A lot of pollution control, flue glass cleaning systems are looked after, and apparently our offerings are the right ones. So if we target our look to the future, I would say on the trade, we do not see any change from what we told you three months ago. So basically, we have not seen a direct impact. Of course, we have seen some indirect, but nothing so much material. The strengthening of the euro, which... started already beginning of the year but which accelerated from April onwards was hitting our revenue and will most probably further hit our revenue development for the second half of the year because we do not see from the experts that the Euro will weaken over the second half. So we see that trend continue. And you see, for us, it's not only the U.S. dollar, it's the Brazilian real, it's the Mexican peso, but it's also the Canadian dollar. And again, against these currencies, the Euro has strengthened. So we are... It's not a concern. We are protected there, but, of course, we cannot impact that, and the revenue will move accordingly. This is why we see that the revenue will drop. and we will be in the guidance more on the lower end of our revenue guidance compared to what we told you last time. The mid-term targets on revenue and profitability are confirmed 9 to 10 billion Euro for 2027 and more than 9 I would say that all the targets for the business areas remain the same. I don't need to repeat it. That's more added for. sake of completeness to make it easier for you and not to dig out your old presentations. Thank you very much for attending and I pass over to Matthias to further guide us through the Q&A.

Thank you Joachim and Vanessa and we can now start the Q&A session.

Ladies and gentlemen, we will now start the Q&A session. Anyone who wishes to ask a question may press star and 1 on their telephone. If you're listening from the webinar, you may click the Q&A button on the left side of the screen and click the Raise Your Hand button. If you wish to remove yourself from the question queue, you may press the Lower Your Hand button or star 2 on your telephone. Anyone who has a question may press star 1 at this time. The first question comes from Akash Gupta, JP Morgan. Please go ahead.

Yes, hi, good morning, everyone, and thanks for your time. I've got two to start with. The first one is on order intake. We had another strong quarter for orders in Q2, and I'm wondering if you can talk about pipeline at a group level and your expectations for second half, particularly on book-to-bill, when we will see some uptake in revenues. So maybe your comments on book-to-bill expectations for second half to start with.

So we see strong project pipelines in all business areas. So we believe that the markets will remain intact. The demand is there. We also see that a lot of the hesitation that came in beginning of Q2 with the tariff discussion now calmed down because people better understand what it means precisely for their business, how many exemptions are from tariffs, and that not everything is written in the newspaper is really becoming material. So we, despite the increasing revenue, we would not expect that book-to-bill would drop below one. Did this answer your question?

I mean, yes, it does, but maybe I was wondering if you can provide a bit more color at high level that where this, because you said earlier in your prepared remark that you expect strong hydro, but just any color outside of hydro in terms of expectations for the second half in order intake.

Yeah, I would say from, as I said, good project pipeline is supported by all business areas. But for sure, hydro, I would say from a market point of view, is the strongest, yes.

Thank you. And my second question was on your margin guidance. So I completely get it that due to exchange rates, you are now seeing lower end of the revenue outlook. But when it comes to margin, I think you also indicating lower end of margin guidance, which would imply full year margins could be down about 30 basis points while we are up 10 basis points in the first half. So maybe for Vanessa, like if you can elaborate what is driving this, how much of this is exchange rates and how much of this is maybe some, some of these cost saving measures coming with some delay or maybe anything on execution, which is driving this weakness in second half margin. Thank you.

Well, I mean, first of all, as you could see with the margin stable, even though with the lower revenue that we have currently seen, and we see that for the total year, Of course, also FX will slightly impact the margin as such. But as mentioned, we have a very good development in hydro business. So also the mix might impact. As you know, we have a lower margin in general in hydro than in the other areas. And this mix, of course, is affecting the margin slightly also for this year already.

Just to clarify, this lower indication is mostly due to mix outside of exchange rates, nothing unusual that you have seen in other businesses.

But, Akash, I think we are not, on the margin side, we have not decreased in the, we have increased from 8.2 to 8.3% on the comparable EBITDA margin. That is our guidance. And so we did not decline in the first half, and we do not expect that for the second.

Sorry, my question was for the full year, because you're indicating full year margins towards the bottom end, which would be around 8.6%, and last year you did 8.9, and H1 was up 10 basis points. So I was trying to get why you are indicating second half margins to be down year on year.

Okay.

Thank you.

Thank you. The next question comes from . Please go ahead. Your line is open.

Sorry. Yeah, thank you very much. Good morning. Thanks for taking my question. A quick one regarding health and paper. I mean, we saw this decline 10% year-on-year in Q2. I know, yeah, this order intake tends to be volatile from time to time, and looking at the first quarter, I was hopeful that we would see an improvement now. Any view on, you said the pipeline is good for all divisions. that also affects part of the paper, I assume. So, you're expecting part of the paper to also positively contribute to order intake going forward? Yes. I can confirm that. Okay, perfect. And then, secondly, I'm scratching my head a bit looking at the flat development of your contract assets while we saw this revenue or seen this revenue decrease. And if my mark is correct, the ratio even is at an all-time high currently. which normally is not a good sign. Anyhow, giving you the benefit of the doubt, does that imply for us that we should expect a very strong revenue and profitability generation in the second half? And that would also be helpful for your free cash flow, I would say, because your H1 free cash flow, comparing it to the Bloomberg's consensus figure, so far only is a fraction. So I guess a lot more needs to come now. Thank you.

I take this question, Lars. Thank you for this. I mean, you know, we have just talked about the guidance for the revenue. So this is, of course, also affecting our contract assets as such and the networking capital overall. I mean, you can do the math your own, but of course we also go for further business and hope that we continue with the good order intake coming from the pipeline that we see. So cannot promise anything. We firstly do business, but of course we also convert into revenue as it goes through the year.

But I guess the contract assets, are not necessarily related to the upcoming order intake. It's rather the business you're doing currently.

Yes, of course. But if we have the order intake, it will revert into contract assets sooner or later. And since we see that we have rather mid-sized orders instead of large orders, this happens sooner than later now, currently. So that's also because of the mix. So with the large orders, of course, we had some tailwind on this. in the past. And since we see, since last year, we are more going into mid-sized or smaller orders. This has an impact also on the part of the networking capital, the developers. Okay. I also have to say, I mean, we have like, as you might know, 60% only POC orders.

Mm-hmm.

Okay, perfect. Thank you.

The next question comes from Daniel Leon. Ask the group. Please go ahead.

Hi, good morning. You mentioned that, of course, the demand and pipeline look good, but obviously, especially in environmental energy, there's uncertainty on the market. potentially also for large investment decisions, so larger projects might be impacted. Do you think that this is already changing now with sort of tariff deal in place with US and EU and Japan, or would we need to see more tariff deals happening, especially with China as well, in order to have more settled situation with better visibility or what do you see as a driver for investment decisions to be again taken instead of pushed out?

Now we see that the deals that have been reached take out the momentum of uncertainty, which usually is the worst for an investment decision. Now that the deals are in place, investments can be made more clearly, and I believe that is really supporting. I mean, we also have to make sure U.S. is a very important economy, but many of the projects we are delivering, U.S. only takes a part of the share. we can see that the trade within the rest of the world is not so much affected by the tariffs. So the uncertainty is out, and we believe that this will drive decision-making again to a good level in Q3 and fall.

Okay, thanks. And then you mentioned that capacity adjustments should be finalized towards the end of the year on Q4. I think this is true both for metals and pulp and paper. So would you expect to see a reported margin pickup then already in Q4 or rather starting in Q1? Maybe also tied with this question, when would you see, or maybe also based on the order intake and order book level, when would you see the turnaround in revenues on a quarterly basis for this year or next year as well?

So we expect, we already see that the, that the cost base in pulp and paper where we had the reductions already implemented, we can see already in the third quarter. Maybe in metals we will start to see that in the fourth quarter. And full year effect for both will be in next year. And guidance on revenue on a quarterly base, we cannot provide that. We are not prepared for that.

Okay. Can I ask a last question? How would you see the M&A, the announced M&As, to add to profitability going forward? Overall, are these margins accretive?

They are.

And that's... Perfect.

Thank you. The next question comes from Elias New, Kepler Chevreux. Please go ahead.

Yes, good morning. I hope you can hear me. I would just have a question on the sort of pulp and paper market dynamics and outlooks. Just sort of given the current geopolitical uncertainties and declining power prices, do you see customers delaying investment decisions? And what are your expectations of the market environment going forward, particularly with regard to Greenfield project? Do you expect customer activity to improve going forward or hold at the current level? So any colour you could provide on that would be very helpful.

I mean, investment decision in last pulp assets, I would say it's a complex decision-making process. On the one side, you have the current pulp price, but everybody knows that the current pulp price, you cannot... sell anything on that price. So you need to have a clear view where is your pulp price in three to five years. I would say that's one element. Psychologically, the current pulp price is affecting, yeah, but that's only one element. The second is that if you want to build a pulp mill, you need to have forest. And the forest, once you have secured, is growing. and this gives you a certain timeline when you have to make a decision because if the forests become overdue, then it's again very costly. The third element is the demand side, and what we can see talking to our customers, what we can see when we talk to the gurus of the industry, pipe demand is growing and it will grow for long term. So I would say in these elements, the decisions will be made and discussions are ongoing, but decision making is definitely not predictable.

Very helpful, thank you. And just a second question on environment and energy and the demand development there. So you've seen a relatively muted investment activity lately, particularly in pumps and separation, I believe. Could you just comment on what is driving this weakness, particularly in pumps and separation, and maybe give a little bit of a demand outlook for the different sort of businesses within environment and energy?

very good question thank you very much and i would be happy to share it with you if i would have the answer and we would we see we see projects we see a good project level um but we do not we do not see decisions we also do not lose a lot yeah so i'm it's for us it's a it's a question yeah so unfortunately i cannot i cannot uh I cannot provide the clarity you like to have and I like to have.

As a reminder, for questions from the webinar, please click the Q&A button on the left side of your screen and then click the Raise Your Hand button. If you're connected via phone, please press star followed by one. The next question comes from Patrick Steiner, OdoBHF.

Please go ahead. Good morning. Patrick Steiner speaking. Two questions from my side. Firstly, looking at the metals business, especially the service part, what are, in your view, the main drivers, but also the challenges to increase the metals service business going forward? And what number is realistic in terms of service revenue share in the division over the mid to long term?

So there is a... At the moment, we have two challenges on everything related to automotive. All factories, all companies have a very strict cost control as they see a declining business and they only go for very necessary investments in modernization repairs. On the metal processing side, The main challenge is that historically the maintenance has been done by the customers ourselves and this is where we have to take a lot of the business away from and this is what takes a bit longer. This is why we are not growing with the pace we like to see. we know there is an value add from our service offerings and we are persistent and patient.

Okay, thank you very much. Second question, could you give us some more information on your current M&E pipeline? What are you looking at in terms of size, product, geography wise?

Yeah, I mean, I presented four acquisitions and they very much fit the ideal profile that we are looking for. Right size, complimentary to our product portfolio, good profitability and good regional fit. So I would say they are exactly the blueprint role model we are looking for and we will continue supporting our strategy on service, on digitalization, and on decarbonization.

All right. Thank you very much.

Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Matthias Pfeifenberger.

Yes, thank you for interest and your participation in our Q2 earnings call. And I'd like to hand back the word one more time to Joachim for concluding remarks.

Also, thank you very much from my side. And we will continue to work hard that all the opportunities we explained to you will materialize and we can mitigate the risk. to give you good numbers when we meet again in three months from now. Thank you very much. Have a good summer break, vacation if you can take it, and then looking forward to seeing you again at the end of September. No, end of October, sorry. Thank you very much. Bye-bye.

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