Bekaert Sa Unsp/Adr

Good morning all, and welcome to Bekaert's Q3 Trading Update. Delighted to have with me Yves Coessens, CEO, and for the first time, Seppo Parvi, new CFO. Before I hand over to them, I'll just take you quickly through the Seppo button. This presentation may contain forward-looking statements. Such statements reflect the current views of management regarding future events and involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Bekaert is providing the information in this presentation as of its date and does not undertake any obligation to update any forward-looking statements contained in it in light of new information, future events, or otherwise. Bekaert's claim to any liability for statement made or published by third parties does not undertake any obligation to correct inaccurate data, information, conclusions, or opinions published by third parties in relation to this or any other publication issued by Bekaert. With that out of the way, I'd like to hand over to Yves, please. Thanks, Guy.

First of all, a warm welcome from our side here in the first couple of days, more winter environment. And also, welcome to Seppo Barvi, who is joining us from the 1st of November as the CFO for Bekaert Group after a smooth transition period in September, October. Some of you will have the opportunity to meet Seppo in the upcoming weeks and months to have a more personal connection with Seppo. So let me pivot to the trading update for the third quarter. We've seen from the month of July and then continued in August, September, a much more weakened market outlook globally based on the overall economic situation, the different dynamic per region, but we see basically the regions and across our businesses. Sa Unsp-Adr Sa Unsp-Adr Sa Unsp-Adr Sa Unsp-Adr Sa Unsp-Adr Sa Unsp-Adr Sa Unsp-Adr Sa Unsp-Adr Sa Unsp-Adr Sa Unsp-Adr In this overall market situation, we still see some pockets where we have a nice order book, and we'll come back to that later. In that context, we've been proactive in managing our costs at the different levers, meaning overhead costs, the manufacturing input material costs, basically to deliver on stable margins for 2024, but also moving further in competitiveness beyond 2024. We continue to deliver good cash flow generation by the business operationally, but also by discipline in our capex allocation. And we keep on having a very low financial leverage. The board also decided to restart the share buyback that we posted at the beginning of the year with the share buyback up to 200 million over the period of the next two years. Some perspectives and color of the different businesses, which gives a mixed performance and a mixed outlook. And Zeppo will go into a little bit more details about the top line evolution for the businesses. Let me start with our rubber reinforcement, tire reinforcement segment, where we've seen a weak Q3 in terms of demand, mainly in China and Europe, with some good silver performance in the other regions. In these two regions, The demand was mainly impacted by the truck tire sales, compensated by an increased demand and opportunity for us on the passenger tire reinforcement. Steel Wire Solutions continued a strong performance after H1, which we reported in July. They of course have seasonality in the yearly calendar, but despite the lower volumes and some delays in the energy and utilities market in North America, we see a continued good trading in this segment with some strong segments in automotive in China and also some good growth and businesses in this energy and utilities market both in Europe and as well in America. PBRG, our steel ropes and synthetic ropes business and our advanced course business. We reported that during the first half of the year going into Q3, we had some operational challenges in our locations in the US and in the UK. We presented in July the turnaround plan. We can confirm that we are on track to deliver on that turnaround plan operationally, so improved performance. and that on year four, we'll continue that journey to be back on track by the end of this year. Specialty business, different business with different dynamics. So first of all, in sustainable construction, on a year-to-date basis, showing a growth in terms of business and volume. Despite that we see some project delays in some areas, but we keep on having a project pipeline and developing new offerings moving forward. Important to mention there is that we are focusing on the impact of TCO, meaning square meters reinforced in flooring and number of kilometers of mining reinforcements. The energy transition segment and specifically the hydrogen, I think we all have followed what happened globally in this segment of energy transition, where we are in a period where we can call for the moment is a little bit paused and all policymakers including companies and key stakeholders are looking how to further, let's say, develop the energy transition. And because from a climate perspective, we're all convinced we need to continue the journey. So this, as explained in July, has been paused, or not paused, let's say, slowed down with one, two years. So we keep on developing these activities with some nice growth this year. We'll talk about next year later. and we aligned our expectations moving forward. As you know, we did moderate capacity increases, so we are flexible to flex towards how the market is dropping. Two other segments in energy transition are the combustion technology, where we have a weak amount of stabilizing, which is the business with our gas burners. After the policy change in Germany two, three years, this is stabilized and performing at that level. and we've seen a decline in ultrafine wires, mainly in the solar panel segment, with some overcapacity and overstocking, while in the silicon we still see a strong demand. If you look at some of the highlights on further development, first of all is the cost management, where we continue an intensified initiative to reduce the overheads moving forward, in line with the strategy to have the BU-centric organization, taking end-to-end responsibility from strategy to delivery. And also in there, optimizing our footprint based on the latest market outlook and opportunities. Secondly, in terms of sustainability, impact and offerings and recognition in the market, nice progress further with DRAMIX with special applications where we want both in China as well in Europe, Awards recognizing the sustainability impact of ceramics. And positive news from the EU Innovation Fund, where Bekaert has been qualified for 24 million funding to further scale up the upcoming years. Sa Unsp-Adr Sa Unsp-Adr Sa Unsp-Adr Sa Unsp-Adr I would like to spend some time on the BBRG update because this is compared to the performance of 23, one of the segments where we've been underperforming due to internal operational challenges. So as mentioned, the issue is mainly in the US or was mainly in the US and UK, not in the other regions where business continue and operation continue to trend positively. So we made, certainly in the US, progress in Q3 on the operational improvements of our processes and our equipment. And so we remain on track to be back on track by the end of the year. We see in the US, from a market perspective, we still see a good order book, but we see in some segments a softer demand, mainly in the mining sector, in the coaling segment, where there has been an over, same terms of supply chain, high stock levels. So we see some correction there. On the synthetic part and the more wider play in synthetic ropes, we successfully integrated Paxco and is delivering in line with expectations and is basically from a synergies point of view, but is trading ahead in terms of outlook from the business. So positive integration of this business in the portfolio of Pekkaert. And on top, we have the Flintstone Connectus acquisitions and the combination of PepsiCo and Flintstones gives us nice offerings in the market, which are appreciated by the customer base. As mentioned, by the end of the year, we expect to be fully returned to normal operations and sales and order books. However, we continue to look into investments to upgrade, let's say, the equipment in these locations beyond 24 into 25. So after that, Deep Dive, I would like to let Novo to step up for a more financial review on the top line overall and the different segments.

Thanks, Yves. And let's look at the sales pitch first. And there you can see that top line development has been mainly driven by lower volumes as well as post-development effect on selling prices on here under raw material inflation. Proactive portfolio management earlier led to neutral price and mixed impact despite lower volumes in weaker demand environment as already described by Yves. Lower volumes are a result of weaker demand, but we have been very proactive on cost management to protect profitability and margin. That is also visible in the outlook for 2024 that we also have today published. and there you can see that our underlying EBIT margins are broadly in line with 2023, despite the declining sales. Let's then look at the consolidated sales in different business units and at the group level. In the group, we are down 8% and in the various business units from 2% in EBRG up to 10% in steel wire solutions. Like I said, earlier product in portfolio management and selection has led to neutral price and mixed impact, despite lower volumes in the peak demand environment. And raw material energy input cost effect on pricing was about 3%. This is, as you know, more pass-through when it has limited or no margin effect as such. In rubber enrosment, volumes were down 4.4%. This is mainly driven by truck tire faults in China and EU. And raw material and energy price mix was about negative 3.6%. In steel wire solutions, we have had strong performance, but volumes are down 7.7%. Here it's worth to notice and remember that last year we had closures in Indonesia and India that is having a large effect on the volume development in But we had some weaknesses in Latin America and some order delays from energy and utility customers in North America having an effect in the volumes. In the specialty businesses, we have a strong performance from construction up 3% if you look at the volumes for the first nine months, despite having some customer project delays. And what we have seen is stronger adaptation in flooring in the broad regions like India, Turkey and Middle East, and also better wind rates in EU countries. That has been supported by FalconX engineering services. Hydrogen, if you look at the Q3 growth, there was growth year on year. Outlook remains positive and positive results are more and more projects are reaching final investment decisions. Also important to repeat and mention this qualified certification for up to 24 million euros EU funding that he mentioned. I think it's important step and recognition for our energy transformation platform. But there has been some delays in short term when it comes to projects and growth, but we have been able to be respected well thanks to our modular capacity expansion approach. But important to note is that the fundamentals for this business and growth opportunities remain. There is no change in the fundamentals. These are rather short-term trend issues. Then look at the other sub-segments. They are a bit mixed. Combustion technologies have been further down in the code. The filtration and phytomarkets are having similar demand challenges, but they have been relatively resilient versus last year. and then also Conveyor Belt and Ultrafine Vibe markets have further weakened also in the third quarter, translating into lower sales and order books. In PBRG, oppressor issues in Europe, in US and UK are mitigated and we see already improvement in the business and we expect that to continue towards the near end. And we also expect that sales volumes and margins are back on track and planned run rate level by year eight. Price mix was negative by 7.4% in the quarter beyond year and volumes down 2%. Given the challenges in our end markets and businesses, we are focused on productive cost management to support the margins, as well as putting more and more focus on working capital management to take care of the cash flow part. This is important. These are the things that we can control. Markets are what they are, but when it comes to costs and cash flow and operating working capital management, those are in our hands. That's where we have been focusing since the summertime already, being very proactive there. And we have closed initiatives in place to reduce overheads, as well as we are looking at operating efficiency improvements. And as there is overcapacity on the market, we also obviously need to look at the footprint. Sa Unsp-Adr Sa Unsp-Adr