Andritz Ag Graz Akt

Gentlemen, welcome to the Android Q3 2025 results conference and live webcast. I'm Sergan, the Chorus Call Operator. I would like to remind you that all participants will be in listen-only mode and the conference 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 the screen and then click the Raise Your Hand button. If you are connected via phone, please press star 1. Operator assistance, please press the operator assistance button on the bottom left side on your screen or star zero on your telephone keypad. At this time, it's my pleasure to hand over to Mr. Pfeifenberger. One second, Mr. Pfeifenberger.

Please go ahead, sir.

Good morning and warm welcome from hundreds from Vienna. I'm Matthias Pfeifenberger from Investor Relations. It's my pleasure to host with you the Q3 earnings call this morning and also I have with me our CEO Dr. Joachim Schönbeck and our CFO Vanessa Helving. We'll start the call as usual with the CEO highlights and the headline figures followed by a financial overview. and then go back to the developments in the business areas and the outlook followed by the Q&A session. Make sure you register for the Q&A with full name. Thanks a lot and it's my pleasure to hand over to Dr. Schoenbeck.

Thank you, Matthias. Good morning, ladies and gentlemen. Thank you very much for spending your Thursday morning with us. We are happy that we can report rather good results. We had a strong order intake in the fourth quarter. We could now benefit from the increasing project activity. The order intake in Q3, I would say like in the entire years, was driven by continuing strong demand for power generation and that materialized in the business areas, pulp and paper, hydropower and environment and energy. Although we had a slight decrease in the revenues compared with the previous year and the previous quarter, but we could protect the bottom line at stable comparable EBITDA margins as we have, I would say, early enough initiated the cost reduction measures to adjust our capacities to the slowing market demands. We had a negative foreign exchange revenue translation, which basically is in line with what it was in the second quarter, very strong Euro against the main currencies. we are trading in, there's still no direct tariff impact on our business. Very good. The project execution improved and we have seen a continuing margin progress in hydropower. Both definitely helped us to save our profitability. We made significant forward movement on sustainability. We achieved two major milestones. Ecoval lifted our rating from bronze to gold. Now we are in the top five percentile in that arena, which is very good. and in summer we got SPTI approval for our greenhouse gas emission targets, now fully in line with the targets of the Paris Agreement. So I think that is very good. If we look to the numbers, itself, major KPIs. Let's go first Q1 to Q3 at 25 order intake now is at 6.9 billion euro. That's up 20% from previous year. The revenue at 5.5 down 8%. to the previous year on a backlog nearly on a record high, €10.8 billion, nicely building up. Also a good cushion for the next months to come. That's up 15% from the previous year. If we look at the comparable EBITDA margin, we kept that constant at 8.5%. And that's a 471 million euro. And the reported margin drops to 8.1%. That's 449 million euro. The difference is basically the restructuring cost to severance, mainly the severance payments that were included there. Net income is stable at 5.5%, 303 billion euro. If we look at Q3 alone, the order intake went nicely up 15% from last year, Q3, to 2.2 billion euro, dropped by 8% to 1.2 billion euro. backlog we just reported and the comparable EBITDA margin is at 8.9%. Nice, solid figure. Same level as the previous year, €168 million and the reported EBITDA margin dropped to €160 million. That's 8.5%. That's on the same level as last year. Net income also here stable. 5.9%, 111 million euro. We see project activity is increasing. We have here, you see this on the rolling level, you can see a strong growth now for the fifth consecutive quarter. And order intake is significantly above 2 billion for the last four quarters with contribution from all business areas and also book to build above one for the fourth consecutive order. So we feel that is in the, I would say, difficult environment we are facing at the moment. That is a good sign, gives us a good view towards what is coming in the next months. Going to the details of the order intake, you can see if we start with Q3 that all business areas contributed contributed to the growth in order intake, except metals, which had a significant drop by more than 50% compared to last year. But this quarter and the last year contained a significant large orders. So we are at a run rate without any large orders in Q3 with 300 million. We are, I would say, online with with the volume we can expect from without any significant orders. In pulp and paper, we jumped by 94% to above 900 million in the Q3. Excellent result. Hydropower was growing on an already very high level to 525 million euro. And we were also very happy that now environment and energy started to grow again, 25% up from the Q3 last year to 424 million. That is very good. If we look to Q1, Q3, you see a mixed picture, pulp and paper strongly up 36% hydropower very strongly up by 50% to almost 2 billion in three quarters. That's very good. Metals is down by 10% to almost 1.2 billion and also at 1.2 billion is environment and energy down by 4%. We are very happy that the pulp and paper market response is very good. Even without large pulp mill orders in South America, we can make that business grow. In the metals, definitely we see a particular uncertainty. You know that steel and aluminum is one of the main targets of the tariffs that definitely creates uncertainty about investment plans. And the automotive industry is really, I would say, in a critical situation. on where to go, where to invest and where the markets will be for the next years. Hydropower are definitely supported by strong demand on energy, strong demand on green energy, but also grid stability, energy storage and turbo generator business for the for the data centers is definitely lifting up our business. Environment and energy, the strongest growth here comes from flue gas treatment businesses and that again is originating in demand for power generation. If we have a quick look to the regions, You can see that might be a bit of a surprise, the strong growth in Europe growing to 37%, North America is stable at 23% and China and Asia both are up. Significant drop in South America and I think that reflects what is happening in the world today. On the revenue side, As I already mentioned, we see a drop in revenue by 8% on the quarter and on Q1 and Q3. We have several reasons for that. We have a foreign exchange translation impact coming from the strong Euro. That's the currency we are reporting on to you. But a lot of the businesses, as you know, we are doing local for local. in the other currencies which weakened. So it's basically not taking any business or any market share from us. In pulp and paper, the increase in order intake started in Q4 last year. And now we are in, I would say, very in the project cycles. We are at a very early stage. So the revenue growth is not there, but backlog is building up nicely. Projects are on track. So that's not a major concern. That's not a major concern at the moment. In metals, we saw some decline and we saw also some delays in the projects because of tariffs going on and off. So deliveries have been switched back and forth. Hydropower is apparently not affected. It's a continuous growing business and the energy sector is basically not affected at all by any of these economical uncertainties. Environment and energy is is slightly growing also in the revenue. So it's a mixed picture. The foreign exchange translation impact is almost 60 million Euro in Q3 and amounting to almost 140 million in Q1 to Q3. And we do not see that this trend will change in Q4. So backlog, as I said, is building up nicely. Now for the fourth consecutive quarter building up, majority as you know from our business in pulp and paper and hydropower, we expect that two-thirds of that backlog can be converted to revenue within the next 12 months and one-third after that. Iberta development, as I told you on a Profitability, comparable EBITDA margin remains stable at 8.5% and the reported EBITDA margin dropped down to 8.1%. The gap are the restructuring costs, which we had mainly in the metal sector and in pulp paper. What did support the margin and protected our bottom line was definitely the improved project execution. We could see that a certain amount of the low margin legacy projects in hydropower are phasing out and that the restructuring efforts Now bearing first fruits, which definitely helped us a lot. So we have, as I told you, we have been uplifted on our ESG rating from bronze to gold. We basically had achieved our ESG targets for 2025. So we announced in the summer, we announced new ESG targets. And you have an overview here. They are in some areas, they are quite different in some areas, they are basically continuing what we have already been targeting for. The e-impact revenue higher than 50%, that's basically the revenue with our green products. On the greenhouse gas emissions we are now have set the SPTI targets are now our new targets for 2030. That's a reduction in our own operations of 42% and on the value chain of minus 25%. We will keep our former KPI this greenhouse gas emission on related to our sales because we believe that is a very good indicator and probably much more feasible to handle for you than the absolute values and then we returned our water usage. We concentrate on water use in water stressed areas. That was recommended and we have plans to reduce that by 25%. Same as for the residual waste. Our accident frequency rate, the LTIFR, we want to keep below one over that time. We want to increase our women in leadership positions lifted above 15%, voluntary return over below 4% and the employee engagement index above 75%. The governance side, we concentrate on supplier pre-qualification, supplier social audits and sustainability rated sub-suppliers. And then we also have the Certified Sustainability Management Index. That's basically an index that reflects how well our operations are covered by certifications like the ISO 9000, ISO 14000 and so on. So that's, I would say, a new set. We are very confident that we can reach these targets. I already said we could get improved ratings from, I would say, the biggest tab in Ecovadis, but also the other rating auditors had improved their view on UNDREADS. I believe we are in a good way there. So we are continuing our successful M&A strategy. We made some four very good acquisitions this year. Excellent fit to our businesses that we are doing. Two acquisitions in the USA, LDX and Diamond Power, strengthening our local footprint there. with local for local and also local manufacturing and service teams available. And then we have made two acquisitions in Italy, one to support our paper business and one to support our metals business. We trust that there might be more M&A on the way. Service business is has a good development and it's at 41% of the total revenue in 24 in the last four months, it even jumped up to 44%. And in Q1, Q3, we moved it up to 44%. So I would say we see a bit of a mixed development on the service side, while the revenue is growing more slowly. We could see a good jump in order intake in service in Q3, but also in Q1 to Q3, and that gives us a good good indication that we are on a right track to keep our target to continuously increase our service revenue and keep our, let's say, the fluctuations in our P&L small. So that's a short overview from myself. I'm happy to hand over to to Vanessa, who will explain to you and lead you through our financial performance in the first three quarters. Vanessa, please.

Yes, thank you Joachim. And hi everybody. Also a very warm welcome from my side here from Vienna. Before going into the financial details of the third quarter results, let me shortly highlight again the key cornerstones of our strategy of long-term profitable growth. I really love this long-term chart that you can see in a minute, yeah, that you can see. as it reflects that hundreds is growing well across the cycles with only a few down years with rather moderate revenue declines like you see currently, but also the performance trajectory of 400 basis points margin expansion over the last two decades and quite a low margin variance from peak to trough in these respective mini cycles. As outlined last time, this resilience is basically achieved by our well-balanced portfolio, our asset light and flexible cost base, our strong service growth, as well as our successful M&A strategy. I would not like to present the same slide to you without at least one additional aspect. So if you focus on the last five years only, our compound annual growth rate of 5.6% on revenue compares to 12% on comparable EBITDA. So that proves profitable growth is really a cornerstone of our strategy. Let me now walk you through the key components of our EBITDA to net income bridge for the first nine months of 25. Our EBITDA margin remained stable at 10.4% despite higher non-operational items while the absolute EBITDA decreased by 9% in line with a temporary decrease in revenue that we are undergoing in the first nine months of this year. Depreciation was marginally higher, resulting in a reported EBITDA of 449 million, with reported EBITDA margins declining slightly year over year to 8.1%. This is on the back of the higher NOI, while on a quarterly comparison, the margin remains at the same level with 8.5%. Purchase price allocations from the recent acquisitions have lifted IFRS 3 amortization to €51 million. This will normalize again somewhat in the fourth quarter. due to the final phase-out of PPA amortization for Xerium that was acquired in 2018. Xerium is contributing to IFRS 3 terms with €18 million in 2025 so far, but will be zero from October onwards. And that comes in addition now, our recent acquisitions show a higher PPA amortization usually in the first year, and leveling down thereby by next year, especially LDX, which is part of 100 since Q1 impacts that number with about 11 million as of September. In the financial results, we see a big swing to positive 9 million this year from minus 10 million last year. Obviously the reduced interest gains again stages that picture with an impact of about 20 million due to lower interest rates on the one hand and on the other hand reduced liquidity generating interest. Furthermore, we see the effect from the deconsolidation of Autoria last year with a negative impact of 20 million and the recent fair value adjustment of Armist shares accounting for plus 21 million euro this year. As a reminder, Andritz has sold its stake in Notorio to Armis, a leading supplier of cyber exposure management and security. And Andritz received a consideration in Armis equity that generated the fair value gain that I just mentioned. And to complete the picture of net income here, the tax rate decreased by 0.2 percentage points to 25.4%. Summing up the net income for the first nine months of 2025 at 303 million is reflecting the revenue and the consequential EBITDA decline, as well as a higher non-operating items. While our net profit margins actually remain solid at 0.5%. On the next slide, Let me walk you through our free cash flow calculation and start again with EBITDA at 578 million euro year to date nine. Outflows from net working capital have continued at 86 million in the first nine months of 25 and you will see more details later on our working capital slides. Cash outflows from income taxes were a bit higher than last year. This raise is in the first place attributable to foreign tax related to project execution. As mentioned already with the swing in the financial results, also here we have a cash related negative net effect from interest gains and expenses. Provision releases deducted from the operative results were higher than last year and many reflect personal related payouts of almost 30 million for pensions, severance payments and termination, while the remaining impact is project related. The personal accrues released were mainly built last year in Q3 for restructuring reasons in metal and pulp and paper. So that also explains the year over year big swing that we see. Adding up all items mentioned here brings us to a cash flow from operating activities of 314 million Euro for the first nine months. Deducting somewhat higher capex of 164 million Euro for the first nine months, 25, we arrive at a free cash flow of almost 150 million Euro down from 248 last year. As Joachim already mentioned, our M&A delivery exceeded last year's level with four larger deals signed so far in 25, increasing our M&A spend significantly to more than 300 million Euro within this year. compared to 61 million euros last year. So talking about capital allocation, here you can see a clear focus this year is on acquisitions, further feeding our remarkable ROIC on a long-term perspective. At this cash bridge, you can also see easily deduct the sum 250 million dividend payments from April this year and will almost get to the liquidity development that you will see at one of the following slides. I would now like to turn your attention to more details on the development of our operating cash flows. Operating cash flow amounted to 145 million euro in the third quarter, 25 and 314 million for the first nine months. We are gradually improving our operating cash flow quarter by quarter, not reaching the high last year's levels. In general, we are still seeing the usual volatility in operating cash flows on a quarterly basis, which is typical in the project business. and also driven by the actual processing of large and mid-sized orders. However, please keep in mind that we are still running high levels of order intake close to the all-time high order backlog without mega projects and respectively also without mega down payments that have often boosted our cash flows in the past years. Important also to emphasize here again is the overall high level of operating cash flows we are maintaining compared to the historic level, driven by higher top line levels, better margins, and improved cash conversion. That becomes evident when we look at the right side of the chart showing the three years rolling average. And as you know, two to three years actually reflect the average execution cycle of our capital business. Let me now turn from cash generation to liquidity and walk you through the changes in our net liquidity profile. Over the last three years, we have steadily increased We have steadily decreased our liquid funds by termination of bonds and permissionary notes. We still continue a strong financial position, especially when including our 500 million revolving credit facility, which is not added here to the gross liquidity. In 2025, our net liquidity declined further from 905 million euros at the end of 2024 to 413 million euros by September 25. As outlined during the Q2 call, this further reduction was expected and is driven by ongoing purchase price payments related to our recent acquisitions. The dividend payment of 254 million deducted in the second quarter was also a major part of the €402 million reduction in lead liquidity during the first nine months of this year. Again, our reduced operating cash flow at €314 million, we had outflows for slightly higher normal capex of €170 million, as well as significantly increased M&A spendings of €305 million paid out for the acquisitions until Q3, and maybe some more to come in Q4. Despite that, Andres continues to hold a strong financial position with sufficient liquidity as part of our DNA. Now let's turn to the networking capital development on the next slide here. And here we focus on the quarterly development of the operating networking capital. As you can see, we are still pretty lean overall with current run rates of some 12 to 13% of revenue. Just to recall once more, for a project engineering company like Andretz, the operating networking capital consists of the typical trade working capital, means inventory receivables and payables, as well as contract assets and liabilities including prepayments related to POC orders. What you can take from that picture is that operating networking capital has increased slightly following the period in 2022 when we received several large projects and therefore large prepayments. A general increase in operating networking capital also results from the structural exposure of UNDRITS. We have increased our service business and therefore also our inventories to provide an optimum of service and spare parts availability to our customers. During 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 as percentage of sales. And to discuss the renewed increase in Q3 that you can see, let me turn to the next slide for more details. As you already saw, we have split the operating networking capital into its two components, trade working capital, as you can see on the upper blue part of the chart, and contract asset and liabilities and advance payments. And those are displayed at the bottom of the chart, reflecting here our project cash flows. This is a typical management element for us at the project engineering company, as you might know. The trade working capital remains relatively stable at about 16% of revenue on a long-term average. And our net contract liabilities and prepayments usually fluctuate between 3% to 10% of revenues, depending on where we stand actually with the execution of several thousands of our projects. This fluctuation is especially driven by large projects where we typically receive significant down payments. To discuss the easy part of the slide first, the bottom gray on the prepayments received side, we have seen a constant improvement over the last few quarters, which created additional contract liabilities. The increase in our trade working capital in Q3, but also after the first nine months in 2025, the drivers here are In general, we have a typical seasonal trade working capital build up in the first three quarters of the year, which is typically followed by a flow down in Q4. And we have higher levels of inventories, like I just mentioned, for supporting the expansion of our service activities. certain payables decreased in large projects from the past years that are getting closed out now. Lastly, but most importantly, the net increase in our trade working capital was impacted by our acquisitions this year. especially also in relative terms, the target's revenue are only accounted for on a pro rata basis, resulting from the individual date of the first time consolidation, while on the other side, the assets of the acquisitions are accounted for in full. And this is why you also see a relative jump in the related percentage numbers from 18 to 21%. So we can say broadly, we have the full working capital of the M&A targets included, but only a part of their revenues, which clearly has an impact here in this overview. Following the details on our capital allocation, let me provide a quick update on our ROIC performance. To recall, ROIC is our main metric quantifying value generation over the long run, and it has been increasing since 2020 and stands at a substantial margin to our cost of capital. and above 20% is actually an industry leading level. So you can see our IC has declined in the first half of 25 and now also further in Q3 to just under 19%. On the one hand, this is obviously driven by the organic EBITDA decline, but more important, this is because of our recent acquisitions again. with purchase price allocation leading to higher goodwill and intangibles, but EBITDA from the acquisitions is still only included on a pro-rata basis. As mentioned before, also relevant for the working capital ratios. So this is a very typical effect that comes along with a first-time consolidation of acquisition targets. in the case that closing happens into a year and not to a year start. At the end of my presentation, let me quickly summarize the development of our headline financials. Our main leading indicator is still pointing upwards. Order intake significantly increased by plus 15% in Q3 and plus 20 year-to-date. Again, with highlighting once more, we now delivered growth in order intake and book-to-bill ratio above one for the last four consecutive quarters, as already mentioned by Joachim before. Order backlog missed the all-time high of Andret's history by only 23 million. It was only higher in 2022 when the large pulp and paper orders Oakey and Bruxelles were booked. The significant increase in order backlog over the last few quarters to this record level already secures the material part of the next year's revenue recognition. And in margin development and order intake, this is very positive and strict risk management is improving project execution. As a consequence of high revenue recognition from completion of larger orders last year, our revenue trajectory is still pointing downwards on a comparison base. But we are gaining ground and especially when adjusting for negative FX translation effects. So please keep in mind, even we are an Austrian company, we have major local currencies. And when reporting globally in Euro, this obviously has some reporting effects when FX rates are changing. And that's what we can see here and also referring to what Joachim said before. So along with lower revenues and restructuring impact from capacity adjustments in pulp and paper and metals, our absolute operating and net profit decreased dramatically. but we were able to maintain our comparable EBITDA and net profit margins on a stable level as you can see here. Operating networking capital and ROIC remain in high focus going forward with the development in Q3 obviously impacted by the recent acquisitions we have made. Our enhanced capital allocation and higher M&A delivery support value creation and has reduced our net liquidity position consequentially. And last but not least, the number of employees is quite steady at group level, but with variances, of course, across the business areas. While restructuring measures significantly reduced headcount numbers, specifically in pulp and paper and metals, this effect was offset by hires on the one hand in growing business areas, but especially with 780 employees who joined hundreds this year through our acquisitions. And as mentioned, FX has been headwind in the first nine months, but tariffs have still not impacted our key end markets. And we will provide further details on that later in the presentation. And with this, for now, I would like to thank you for your kind attention and hand back over to Joachim, who will now present the key developments across our business areas.

Very good. Thank you, Vanessa.

And if you allow me having a quick look on the business area, starting with pulp and paper. We are happy with the business development in pulp and paper, looking at the order intake, looking on the well acceptance of the market of our offerings in a, I would say, definitely difficult time for our customers, in particular for our customers in Europe, but partially also in North America. Demand clearly driven by power generation, so the hunger of the world for electricity is definitely driving it on the one side. And there is also a trend in the Chinese paper industry to backward integrate in order to better prepare themselves for the fierce competition in the market. And so we could book in total now in the last 12 months, we could book, we received order for four complete pulp mills, all technological islands supplied by hundreds in the Chinese market. So that's a really strong sign of the customer confidence in our technology. On the revenue side, We are down compared with the previous year. As I said, especially here in pulp and paper, we are in a very early stage of the project execution. You could see on the other side the order backlog increased by 500 million. Projects are stable and so this volume will definitely and securely turn into revenue. and deliver also. To the bottom line, we have initiated a restructuring program, but as I explained that a bit, that is on its way and we are now in the budgeting phase for the next year, having a very close look to what we can expect to the markets to see whether we really are on the right side or whether we need to take some further actions. On the metal side, as I mentioned, the situation is definitely more challenging as both major industries, automotive and steel industry, are facing severe economic uncertainties. The order intake, I would say, with 300 million is on the low side, but from a steady business alone, nothing to be too concerned about. But customers do not invest, they do not spend money, they need to keep their spending low as both markets are a bit down and the high energy costs in Europe definitely pose also, I would say, strategic questions for our customers in the metals industry in Europe. restructuring is going on. You can nicely see already, I would say, positive effects of that if you look to the comparable EBITDA margin at, we are now in Q3, we are at 6.4%. So within our target range, which shows that the restructuring has already shows effect and particularly here we know that the market will not recover and we will continue our right sizing and further look that we adjust the capacities to the level to keep, to maintain competitive. Hydropower provides a good, I would say a good view, happy news across all KPIs, strong growth in order intake, 50% in the first three quarters, very, I would say solid growth in revenue, and over-proportional growth in the bottom line. You see that we are in a comparable EBITDA margin. We are at 7% now. That's within our targets. In Q3, EBITDA increased by 48% while the revenue in the third quarter increased only by 8%. So strong working, better margins, better prices hit the bottom line, good project execution and particularly phasing out of the old legacy projects. And I would say the trend for renewable energy strong demand for grid stability, energy storage and also turbo generators, we have quite a positive outlook for the next years to come. What's also very good is that this growth is not only attributed to the capital project, but the service is growing in line. So we see a nice development in the service, both on the revenue side, but even more on the order intake. Profitability, I already commented on that, very positive. Development on environment and energy, we see several effects. We are happy that we could turn around the order intake now in Q3 by a solid growth of 25%. In total full year, we are still down 4%. Growth is driven by mainly by several midsize orders in flue gas treatment. So that originates also in power generation, while we are positive that this is a trend continue for some time to come. Slight growth in revenue to an all-time high. We also could grow service revenue and that's on a good way and the EBITDA is on a very stable on a, I would say, good high level. If we come to the outlook on the trade barriers, no news on the left side of that chart. That's basically what we explained to you last year. The negative for an exchange translation impact now on the Q3 is 58 million euro. And on the right side on the pie chart, you see how the total negative impact to 173 million is split by the various currencies. We are doing business and largest portion from the Brazilian Rai followed by the US dollar, the Chinese renminbi, Mexican peso, and then one third is to the others. So the strong Euro here really plays the major role. We confirm the guidance that we presented to you at the beginning of the year and we repeat that on the revenue side we will be at the low end. So we expect the total revenue at 8 billion for 2025. And on the margin side, we are positive that we will be in the range. Mid-term targets also confirmed. On the margin side, we have with the restructurings we are currently having underway and with the increase in the service business, we definitely can protect that. On the revenue side, we are definitely depending on also the markets. So we are careful, but we think we can confirm the 9 to 10 billion. I think you know that. That also includes some acquisitions. On the comparable EBITDA margin targets for 2027, we at least can report that we are in the target ranges for the Q3 results now for hydropower and for metals, which have been below our targets for a very long time. Please take that as a positive sign and we trust it's a trend and it's not a one-off. Environment and energy is also with a 10.3% comparable within the targets and pulp and paper in Q3 with 10.8 is just very short of their target for 2027. So I would say If we look in total where the global economies are, we are not unhappy with where we stand and we see also good opportunities to improve from where we are. So that's from my side. Thank you very much for your attention. And I hand over to Matthias to moderate the Q&A. Thank you very much.

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 raise your hand button. If you are connected via phone, please press star followed by one on the telephone keypad. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press the lower your hand button from the webinar or press star two on your telephone. Anyone who has a question, make you up now. And we have the first question coming from Sven Weyer from UBS. Please go ahead.

Yeah, good morning and thanks for taking my questions. They are largely around the pop and paper business. The first question being if you could give us an update on the large greenfield contracts given, you know, latest developments in pulp pricing and demands, whether you still see, you know, bigger tickets going ahead maybe in the next 12 months. And let's maybe start there. Thank you.

Thank you, Sven, for the question. I mean, we don't know. We don't know on the decision matrix of our customers. We are working several projects are under preparation. We are not for our business. We are not planning with the decision in the next 12 months. But we are working on engineering to prepare the projects.

And I mean, of course, part is not the only business with big tickets. I mean, how do you see it? Maybe on the hydro side, you see scope that in this business, you have some really bigger projects in the pipeline that could go ahead.

Yeah. Hydro is a I would say is a definitely a strong driver. We have several large projects on the way under negotiation and we can expect larger orders also for next year. Yeah that's very clear.

And then maybe coming to the Service business that you to thankfully outlined in the presentation I was more wondering about pop and paper specifically here again because your your peer yesterday reported about you know further softening of pop and paper service revenues In the quarters ahead. I mean are you observing? Similar trends or are you better off because you're maybe not so exposed to the board market I?

I believe you hit the point right away. Paper and board is definitely hard hit by the low utilization of the assets. We also see that, but our exposure is not that big. So we do not see a decrease in service. On the contrary, overall, we see a strong growth in order intake and service in the first three quarters of this year.

And for the pulp and paper business specifically?

What I said now was for the group, but even in pulp and paper, we see a growth in order intake, yes.

Okay. Good to hear. And the final question from my side is just on pricing because here again, you know, Weimert said yesterday that they will reinvest some of the cost savings out of their program into gaining share. I mean, is that something you observe in the capital equipment decision that there's more pricing pressure from your peers?

Yeah, I can confirm that observation.

And I mean, what's your position on that? Do you rather walk away from the business? Do you think your technology is better anyhow so you don't have to compromise on price? What's your strategy there?

We fight for orders. We believe a low investment is a huge benefit for our customers. So I think that's good. That is what competition is made for. and we take it on and this is why also we need to look to our cost base constantly. So, we do not walk away from any opportunity.

Understood. Thank you, Dr. Schönberg.

Thank you. The next question comes from Daniel Line from Erste Group. Please go ahead.

Hi, good morning. Thanks for letting me on. Can you maybe outline a little bit your expectations now in the environment and energy markets? Do you think we've seen a turnaround, a sustainable turnaround on demand in the third quarter? Maybe now especially supported by another rate cut, potentially good talks between the US and China on solving trade issues. How do you see the development going on there?

On environmental energy, I would say our largest hope for growth is clearly related to the green products and to the products that Europe is planned to use for the energy transition, green hydrogen, also carbon capture, recycling and all of that. Some of that we could see with some of these flue gas orders, they go in that direction. I believe that this red three directive from the EU is significantly hurting the green hydrogen market in Europe. All the investments are basically stuck there. It's basically regulation. Carbon capture, we give a positive future. Specifically in the Nordic countries, there is a huge interest and they are moving a bit faster than Central Europe in the regulations. I would say on the mid-term I have no concerns there. I cannot give you satisfying guidance on the timing but that has not so much anything to do with interest rates but with regulations that is in the hands of the politicians, I would say here specifically in Europe.

Okay, maybe digging a little bit deeper. Austria wants to actually invest quite heavily in green hydrogen in the coming years. There are several projects ongoing. How are you reflecting on these investments? What would you expect in terms of volume that could fuel your business part? And yeah, leave it like this.

Yeah, so I'm happy to hear that. And I'm embarrassed that I'm not aware of that. So thank you for that information, because I should know rather than you about these investments. We have one project under execution in Austria. I believe there is more. And we feel good positions with the technologies we have. Next year we will have industrial plants in operation, which gives our customers a good feeling and security that they will invest in a rather mature technology with us. So I think if these investments will come, I believe that we will have a fair share of that.

Okay, perfect. And maybe a last one. You just published a few days ago, I guess, a bigger order on synchronous condensers. Could you maybe put some kind of a volume tag on that?

Northern Ireland, I would say that's in the lower to mid double digit million range. if we take several orders from an island, a northern island, if you refer to that. So it's a good volume, but these are not these megaprojects, at least not in Europe.

Perfect. Thank you very much. The next question comes from Christoph Bielefert from BNP Powerbus Exane. Please go ahead.

Yes, good morning and thank you for taking my questions. I have two, please. The first one is on hydropower. Given that your order backlog is growing nicely, can you give us some insight into workload and capacity utilization in the division as well as on pricing to get a better idea about the revenue growth potential for 2026?

So I think we can say that all capacities are loaded and pricing is that we are trying to push prices up, which is in the bidding structure of the highly regulated areas, not as easy as it's usually done in, I would say, private markets. But you can see, and I think that is what we are reporting for the last quarters, you can see a constant improvement on the margins. So the better prices also reach the bottom line, but also over absorption contributes to that.

Okay, thanks a lot. The second question is on type and paper service revenues, and I have to come back to Sven's question. According to my math, service revenues are down mid-single digit in the first nine months. Can you maybe walk us through the reasons behind that and can explain how you want to grow service revenues in Pipe and Paper in 26 and also maybe elaborate a little bit on potential health-help measures.

Thank you. The service revenue is correctly calculated by you. It's down in the first three quarters. The main driver is the low paper and board consumption. I would say the overall utilization in that area of our customers is not higher than 60%. So then service and parts are not needed. So that is driving us down. What gives us a good feeling is that the order intake on the service is up compared with the previous year. that will give us some workload for the next year. We expanding our service offerings on the pulp side. We just made this acquisition with Diamond that will contribute, that's basically 80 to 90% service business that will contribute to the pulp and paper service. And we have ongoing restructuring in paper service because the low market demand does not require these capacities that we have. So capacity reduction in the market areas where there is no demand and expanding our service offerings on the pulp side, that is basically our recipe for going forward.

Many thanks for that. And one follow-up question. Can you give us a brief idea or rough idea about the revenue split in services between pulp and slash board paper?

I cannot. Sorry for that. Not that I'm not willing to, but I don't have these numbers.

It doesn't matter. Thanks a lot.

Sorry for that.

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 raise your hand button. If you are connected via phone, please press star followed by one on the telephone keypad. There are no more questions at this time. I would now like to turn the conference back over to Matthias Feifenberger.

From JP Morgan, who was not able to join the call. The question is, can you tell us about activity you're seeing in synchronous condensers for the first nine months? What is the book to build in the business? At the last Capital Markets Day, you said this is about a 100 million euro business. How fast do you see this growing? And can you talk about investments in this business?

So synchronous condenser hook-to-bill is significantly above one. I would say a very solid pipeline of projects to come. That's across all regions. The more renewable, especially the more solar and wind is installed, The higher the demand on synchronous condenser, I would say the market outlook we gave the capital market day of a 100 million share of hundreds, I would say is probably rather on the low side.

Perfect. I think if there are no more questions, this concludes our today's Q3 earnings call. And I'd like to hand back once more to Dr. Schoenberg for concluding remarks. Thanks a lot for joining.

Yeah, so thank you very much for attending the call. I appreciate your detailed view to our business. uh the questions that you ask uh point out that you uh probably know hundreds even better than i do it yeah so thank you for um for that attention and uh looking forward to deliver to you also a solid and um and good q4 and see you then next year thank you very much