Deutz Ag Akt

Good morning, ladies and gentlemen, and a warm welcome to the nine-month 2025 conference call of the Deutz AG. Please note that this call is being recorded in a replay, will be available on deutz.com later today. Your participation in this call implies a comment to this. And please welcome Deutz CEO Sebastian Schulte and CFO Oliver Neu. So Sebastian will begin the presentation with the key figures of the nine-month 2025 and then walk you through the progress made in the business units. Oliver then will provide you with the financial details of the nine-month financials 2025. And Sebastian again will conclude the presentation with a look on the guidance, after which we will move over to our Q&A session. And as always, please note the disclaimer, especially regarding forward-looking statements. And having said this, Sebastian, I hand over to you.

Yeah, thank you very much, Azara, and also good morning, everyone, and thanks a lot for joining us for this nine-month earnings call here. So let me start, actually, with a lot of confidence and optimism because our numbers show clearly that we as Deutz continue to deliver double-digit growth in revenue and new orders, rising profitability, EBIT margin now. Year-to-date, it's 5%, and I will show later, quarter-by-quarter improving. And most importantly, a business that's proving more resilient and dynamic, again, quarter-by-quarter. Our product portfolio is paying off, and the transformation towards really innovative and sustainable mobility and energy solutions is clearly gaining momentum. As I said right now, we went through this first three quarters of the year and actually following the second half of last year, every quarter an improvement. Let's bear in mind we came out of a very strong 23, driven at that point by the strong demand in our sort of heritage core markets, construction, agricultural equipment. But then there was the slowdown in demand which brought the which made our numbers in the second half of 24 in particular going down. But since then, we are on an upward trend. First quarter, 4.3% margin. Second quarter, 5% margin. And third quarter, now 5.8% margin, which is actually even more impressive given the fact that typically the summer quarter, the Q3, is seasonally A little difficult because most of our customers have at least two, three, four weeks of vacation and so do we in our engine factories in Cologne and Ulm. So, clearly year-on-year improvement and continuous momentum in margin uptake. If you look at the markets, and I mentioned earlier our sort of previous core markets, now we've been broader, we're becoming broader. So we're talking about construction, agricultural material handling, defense as the most recent addition, but also energy for our gensets. And what we see here is in construction equipment in Europe, well, the activity is still somehow muted. In the U.S., the infrastructure demand is stable, but overall, the outlook, let me put it that way, is resilient. Agri, still in the short term, fairly weak outlook because inventories have been high, financing costs have been high. have been slightly negative on the customer side, but structurally it's very, very solid. Material handling, the megatrend is helping us. Commercial logistics, e-commerce, that demands here quite stable activity in the material handling. Forklift CapEx remains robust, so that's why we see also the left-hand side positive projection going forward. And defense, of course, very strong momentum in Europe, driven by the increasing budgets and also the NATO programs in the European Union. And energy, the gensets, I mean, this is another megatrend. Girls in data centers, backup power application, and we here see a supporting expansion in all regions, but particularly the regions which are relevant for us in this segment as of now, the United States with our Blue Star business and also going forward, Europe. So, in total, we see that, you know, nine months, year over year, we've been growing 15%. That's growing above all relevant markets here, given that we're also entering into these new markets, defense and energy. If we look at, let me start with defense, I mean here really the headline is that we have been strengthening our footprint in the defense tech ecosystem. When we talk about defense tech ecosystem, I mean particular military drones, I mean military autonomous land vehicles. You will all remember our most recent acquisition of Sobeck Group. Sobeck is the leading manufacturer of electric drives, very high performance electric drives for not only military drones, but obviously that is the factor which is growing most significantly right now. We signed and closed that transaction at the beginning of September, and the purchase price was financed by a capital increase. using the 10% ABB procedure, which Oliver will elaborate on later. And the business has been developing pretty well since then, so all expectations that we placed into Silvex so far have been fulfilled. The momentum continues to be strong. Then we entered into a strategic partnership with ARCS Robotics, that's a Munich-based defense tech scale-up. Here we're not talking about drones, we're talking about vehicles, autonomous vehicles on the ground, as you see on the picture also on that page. And the idea of that partnership is that going forward we will, on one hand, supply drive systems for these vehicles, and also make our mobile energy infrastructure products and, of course, the global production network available because assembly of those products, I mean, that's something where we have with our facilities in this case in Wülfen, southern Germany, where we've got actually competency which help ARX Robotics in the scale-up of their production. And almost, well, as a nice side effect, we're also intending to participate as one of the lead investors in the next ARX funding round. That's going to happen over the next weeks. If you move on to engines, we are quite proud to be able to announce that we extended our product portfolio. We brought a new product to the market. It's the Deutz TCV24 V12 GDUL engine. That's a large engine. It's the largest engine we now have in our portfolio. It delivers some 780 kilowatts, so really on the upper end of the portfolio. It's optimized for use in gensets. That's why it's future-proof in a way that the power gen market is expected to grow very, very strongly in the next years. And obviously the diesel engine for backup power is a very crucial component in such gensets. And we were able to develop that product very, very quickly using our international partnerships, our international supply chains. And currently, this is the first product is being tested in a pilot customer, by a pilot customer in Italy, in a Gensot operation. And we also already received the first small series order very, very recently. We have planned a broader market launch of that 24 liter engine. the beginning of 2026. On top of that, partnerships becoming more important for us on a broader scale as well, because we have, over the last years, industrial engines also developed together with joint venture partners in Asia, and we're currently undergoing, or these engines currently undergoing the testing in our test benches, our test center in Cologne, in order for us to allow these engines to be offered in the future on a global scale with a very strong focus on price and performance as well. And we want to develop, or we will develop a new six liter engine, the DOTS TCD 6.0, and we will launch sort of the premiere of this very, very powerful six-cylinder engine in the Agritechniker, the leading trade fair for agricultural equipment, which is starting this Sunday in Hannover, and then being there for the coming next week. So we're pretty excited about this expansion of our engine portfolio, where we are broadening the portfolio. We're bringing particularly upper-end, more powerful engines to the market. And, of course, also sort of in the mid-end, we're utilizing our global footprint to become also more cost-comparative on a global scale. If you look at service, a very important backbone for our growth, for our very profitable growth, and here we can also proudly announce that we continue or we have continuously been growing our global service network over the last weeks and months as well. We concluded three acquisitions. Our long-lasting Turkish service partner, Çatal Kaya Makina. We closed that acquisition beginning of October. And on top of that, We widened our service network and also the capabilities in the United States most recently by achieving two mergers or two acquisitions. One is a company called Onsite Diesel and the Texas acquisition happened October 2025. With on-site diesel, we are offering to mobile and stationary full services. The customer focus here is on waste management, construction and rail, so all segments where the combustion engine, the diesel engine in particular, will particularly in the United States be relevant for quite some time to come going forward. So that's why that was the rationale behind the acquisition of on-site. More recently, just a couple of days ago, we acquired a company with a fantastic name of Double Down Heavy Repair. It's in Nevada, and it's a service company which is extremely experienced and well-positioned in repair and maintenance of heavy equipment and engines in the mining, really gold mines and other mines in Nevada, also railway construction and transport industries. And on top of that, We complement these inorganic growths with also our strong organic United States growth paths, where we opened two new Deutz Power Centers in 2025. And the plan, which is totally on track, is to open another four new DPCs throughout 2026. On top of that, I mean, that's the footprint in the market, but on top of that, obviously, we need to really work on our backbone as well, because all the parts that we deliver through our footprint to the customers, They have to come in time and, you know, the right quantity and quality out of our very, very modern global logistics center in Cologne. We modernized that with an auto store system, AI-driven auto store system, which helped us really increasing the efficiency in the management of these parts. So we're talking about more than 25,000 parts and increasing the efficiency up to 50%. So that means not only are we going to be faster, but we'll also have more space in order to grow and to really support our global footprint out of our global logistics. Let me continue then with our solutions business. Particular Energy continues with a very, very strong solid performance. The business unit Energy driven by Bluestar Power Systems in the North American market. The market is continuing to be extremely favourable and there are more and more growth opportunities. So, you know, our index is strong, very strong, bottom line most importantly. with a very high cash conversion is strong, strategically strong at Blue Star. We're also beginning to realize more and more synergies with our U.S. business. So the service operations, that's what ties it into what I said just a couple of minutes ago on our DPC growth path in the United States. So obviously with Blue Star, we're bringing products into the market with our service center, throughout the nation, we are serving them when they are in operation. And on top of that, our North African business, which operates under the name of Maggie Deutz, got a new managing director and played a new team, and they're working quite successfully on really restructuring it and repositioning it for Maggie Deutz to be really one of the backbones for Europe. And on top of that, we're looking to continue is looking here also at an organic growth within energy. New tech is increasing traction. UMS, a company we acquired earlier this year, the onboarding of the company is progressing pretty well. Lars Kohl, the former owner and one of the guys leading the business operationally, has also been named as head of technology at NewTek. We merged now the existing, sort of the formerly known as eDoids product portfolio with the product lines of UMS. So we've got a very, very clearly defined product portfolio now, and we're following literally dozens of promising leads with very, very relevant customers also throughout the world. So the momentum is improving. is increasing here, is improving here, so there is more to come in terms of positive news throughout the remainder of the year, and of course, in particular, the next year as well. And with that, highlights on our operational and strategic developments, I would hand over to Oliver before I come back later to give an outlook for the rest of the year.

Good morning. Welcome also from my side to our investor call. And let me start with the capital increase we recently conducted. So as Sebastian said, we are in the execution phase on our strategy. We successfully conducted the capital increase to finance further growth. We have an exciting M&A pipeline. So we decided to do that capital increase, even though additional debt load would have been possible as well. But considering the exciting M&A growth and keeping strategic flexibility, we conducted a capital increase. We saw strong demand, very strong demand. investors from Europe, but also from the US, and that shows that the equity story is convincing and investors are trusting in Dois and are continuously improving performance. Books were filled after a few minutes, the capital increase was several times oversubscribed, and it really was a successful event that made a lot of fun from a CFO perspective as well. Talking about execution, our Futurebit program is absolutely well on Just to remind you, we are intending here to achieve at least 50, 5-0 billion euros savings to 2026 compared to the 2024 baseline structural cost reduction savings we are talking about. We are absolutely well on track with a good pipeline, more than 50 million in terms of ideas, so we are expecting even an overachievement here of 10 or 20 percent in terms of savings, and that also applies to the current year, 2025. where we will end up more than 25 billion rather towards 30 of the savings side. Measures are implemented, measures are on track, negotiations with the workstores have been successfully conducted. Around 180 people already left the company. So that is a good sign that it was a good example of a positive execution. Going a bit more to the details of the figures, we see an increase in the order intake, 11.8% year over year. So that is basically driven due to the portfolio development. Book to bill ratio is around On the revenue side, even 15 million – sorry, 15% increase there. So, we see that application areas like construction and agriculture have a slight increase. That's, of course, also driven by the fact that we have the Daimler truck engines, which we acquired last year, which are mainly in those areas. So, the M&A activity is driving up revenue compared to the previous year. On the earnings side, cost savings are paying off. We are at 75.5 million or 5.0% adjusted EBIT margin year to date. We see that the third quarter was the strongest of the quarters and typically third quarter is driven by cyclicity rather than weak quarters, so that was very good and shows and proves that our portfolio matters but also our cost reduction matters are really paying off and that we see that continuously in our results. Talking about the different segments, covering here, firstly, the segment engines and services. So we see here order intake increasing, revenue increasing, and especially good signaling that the margin is increasing from 6.1% last year to 6.6% this year. We need to keep in mind that last year, beginning of the year, we still were in a stronger market situation with the three shift operations. So overall, we see that volume went down a bit, 8% compared to last year, production was 10%, but nevertheless we managed to increase the model, which is a very positive sign because it means that our measures, our strategic measures, our cost measures are overcompensating the negative economies of scale, residing from a weaker production due to weaker market conditions. Also, HJS, the initial after-approval producer, which we acquired beginning of the year, successfully managed to turn around, is profitable, is contributing positive EVIT as well. On the service side, revenue is year-to-date at $406.6 million. That is a 9.4% increase compared to last year. So even in the current market environment, we are continuously growing both organically, but especially, of course, also inorganically via the acquisitions we recently saw. Coming to the segment Deutz Solutions, we see overall an increase in the revenue. This is due to the fact that we acquired Blue Star Power Systems last year in August, but also the adjusted EBIT improved significantly. In order to understand the segment, the figures, we need to keep in mind that we combine the two business units with a different financial profile. On one end, we have the business unit energy. So especially Blue Star, Muggy Dolls are smaller entity in China as well. We see here the business is absolutely well on track. Order intake is on track. It's not totally like linear over the year, but it's absolutely on track. We just recently received another big order, which is not reflected in the figures yet. Also revenue is organically growing, a little bit offset by the US dollar. hidden in the footnote, but there is a purchase price allocation effect. If I take that out, my EBIT would even be at 18.8% or a margin level of 15%. So operationally, the margin is even better than what we showed you on the figures driven by that technical accounting purchase price allocation effect. On the business unit new technology, we are making progress as well. So new orders at 15 million, first time consolidating this Consolidating the product portfolio and good talks with customers, so we're expecting some increase going forward there, of course. The EBIT improved and still negative value driven by R&D expenses, but the run rate is getting better here as well. Coming to a few more KPIs, R&D spending. We had 4.3% of revenue, so that's a direct consequence improvement, that's a direct consequence of the future bit matters where R&D people are continuously getting out as part of the agreements we conducted with the Works Council. So that is showing a very positive trend here. Same for CapEx, we remain on a low CapEx level of 3.3%, more or less as of the year before. But of course we are also structurally targeting for continuously improved capex ratios, considering that the business profile of our group is changing towards less capex-intensive businesses. Working capital, we see a slight improvement there. We are at 19.9%. So 1.2 percentage points better than in the year before. We are not overdoing it on the inventory side here. We are pushing, but we are not overly pushing inventories down just to be prepared because we are convinced that the market and this engines part of our business is picking up at one point in time. And then we want to be prepared with all the restrictions on the supply chain. So that is why we are sitting on a 20%. we are working capital level. Talking about cashflow, operating cashflow improved as well. So also here good signals, direct development of a better cash generation capability, better operational performance. Also a lower increase in working capital compared to the increase you saw in the year before. That is positive on the free cash flow before M&A. We guide a mid-double-digit million-euro amount. That's absolutely on track here. We are, even though the Q3 is typically the weakest quarter in terms of cash flow due to summer breaks and so on, we are here at 2.4 million year-to-date, so that's a 31 million better development than the year before, also showing positive impacts of our transformation. And the debts likely increased among others due to the M&A financing. Last but not least, balance sheet that remains strong, 49% equity ratio and also solidly financed. Our leverage is at 1.4. That gives us sufficient headroom for the further M&A transactions we are working on. So only positive signals from the M&A. financial figures. With that, I hand over to Sebastian.