Deutz Ag Akt

Good morning ladies and gentlemen and a warm welcome to the full year 2025 conference call of the Deutz AG. Please note that this call is being recorded and a replay will be available on deutz.com later today and your participation in the call implies your consent to this. I'm pleased to welcome Deutsche CEO Sebastian Schulte and CFO Oliver Neu. So Sebastian will begin the presentation with the key figures of the financial year 2025 and then walk you through the progress made in the business units. Oliver will then provide you with the financial details and Sebastian again will conclude the presentation with a look on the guidance after which we will move over to the Q&A session. And then as always, Please note our disclaimer, especially regarding forward-looking statements. But before we start the presentation, I'm handing over to Lars Berkel, the new Head of Investor Relations, Communications and Marketing of Deutz. So Lars, this stage is yours.

Thank you very much, Sarah, and a warm welcome from my side as well, both to the guests joining here physically in the room, as obviously also virtually participating here. Yeah, we had a very exciting bell ring ceremony this morning. We enjoyed it a lot and we are delighted to present to you our business results, the latest developments, obviously, and last but not least, the outlook for 2026 in more detail. However, before I hand over to Sebastian Oliver to kick it off, Let me take quickly the opportunity to introduce myself. I'm Lars Birke. I'm very delighted to be part of the Deutz family since mid-March. And I'm leading with a great team behind, obviously, the communication, investor relations, and marketing. Please feel free to reach out to me and the whole team at any time if you need anything. We're happy to be at your service. And obviously, I'm very much looking forward to an exciting time ahead in the MDAX now because Deutz has a great team. A convincing strategy and fantastic products and services in place. And I would think it's a perfect timing to be here. Deutz is back in MDAX. Deutz is successfully transforming. And Deutz is growing. How? This for sure will be presented to you by our CEO and CFO, who will guide you through today's presentation. Afterwards, we are of course more than happy to take your questions. So let's kick it off. Sebastian, over to you.

Yeah, thank you very much, Lars and Sarah, and also welcome to the team, Lars, in this exciting phase of our transformation. Yes, so first of all, first things first, this morning was a great moment for us. Celebrating here in Frankfurt, entering the Amdux, ringing the bell, opening the daily trading here. And you see a picture of Oliver and myself, Katarina, our HR boss, as well as three of our business unit heads who were with us celebrating because it's a team effort, as we say, with a lot of pride. But let's move on. And, you know, before looking ahead, let me look back because that's the purpose of today's annual results conference. I want to guide you through what we achieved as a company in 2025 with a bit of an executive summary. And the headlines shows it actually pretty nicely. We managed to achieve growth and we managed to achieve profitable growth. without the support of our core markets you know our long-term core markets so obviously we are we'll guide you through that later now now presenting or represented in many many attractive markets but the core markets which were extremely relevant for deutz like mainly between 20 2000 and 2021 2022 uh they certainly didn't help but um even more importantly that we actually managed to sail through quite successfully um but let me guide you through that step by step New orders went up almost 14% year over year to a level of almost 2.1 billion euros. And of course, the changes, the growth, the additions of our portfolio, they did help to compensate our weak engine demand. I'll come to that later. Revenue slightly below new order, some $2.044 billion, but also growth of almost 13% year over year. And here the driver was clearly our new business areas as well as, and let's not underestimate that, our service business, which continues to grow in a healthy way. And we'll also give you more flavor on that later. More important from my point of view than only the top line growth is the bottom line growth, the 5.5%. So that's 1.3 percentage point better year over year. For that increase in profitability, our margin-inclusive M&A and also our cost reduction program, Oliver will talk about that a bit in his part, did help. And so that's a good result given the circumstances in our core markets. And last but not least, We also managed to significantly improve, increase free cash flow before M&A to 44.2 million euros. That's also a significant increase of almost 50% year over year, especially driven by a strong cash flow in the final quarter of the year. Important. And, you know, we'll give you a bit of a mixed view between purely sort of revenue, but also units. I know that many of the analysts and investors covering and following us for years have always been looking at number of engines as a key driver. And it is still an important driver, but mainly and only for the engine business. If you see that, and that's in this ellipsis in a way, you know, you see that, you know, from 161,000 engines 2021 and then up 181, 187, down 142, down 133 in 25. And you see that sort of this core market, and that was exactly the point I was referring to earlier, there was no much support from the industrial activity, particular construction equipment, agri and so on. So that means engine business becomes in relative terms less relevant to the group, 64% out of that 2.044 million euro revenue. In turn, the service business continues to be in relative terms on a level a bit above 25%. But important is also that our new business units, particularly at this point in time, energy, is becoming more and more relevant. I'll guide you through that later. But let me summarize that. Despite these lower volumes in the engine business, we actually managed to deliver one of the strongest results in our recent history of the company. Performance quality improved, margins became more and more solid and strong. And that's mainly because across our business units, we were actually executing with a high degree of discipline. the broader business mix increasingly pays off. You know, we are not as dependent on the traditional engine cycle anymore. And that's, as I said, it's driven by the service business, by the energy business, and most recently also by the defense business. We are building based on what we already have shown in the last month. We are building a significantly more diversified and also resilient setup. And we call that, you know, our new strategy or strategy up Let me put it that way. We're building here the next Deutz. And the next Deutz, let me summarize that. That's both our ambition and our strategy. And as we show later, also our structure, which in an ideal world, and that's what we're trying to achieve here, follows the strategy. So the next Deutz will comprise and is already comprising of five business units and also five business models. On the one hand, the defense business, that's still in absolute terms one of the smaller units, but with a high growth. So here we're building an ecosystem. Then the energy business, which we have grown also with acquisitions over the last years. We'll come to that later. It's about really building a global business, moving from a fairly regional focused business to a global business. And Enjin, of course, still... When we talk about revenue, when we talk about headcount, that's still the largest business, but the profit pools are shifting. The new business has become more relevant. So here it's about streamlining the business, driving performance, but still growing. New tech is driving innovation. It's a bit for me an option value in a way. The markets are not yet picking up as we would like to, but it's important to be in that business in order to be ready when the market is picking up. So that's here about innovation. And last but certainly not least, our service business, that's really a global setup, our footprint, extremely strong asset of the company where we want to broaden our position and the service business traditionally or historically helped the engine business or the customers of the engine business. But we are ideally set up to also support our new business units, defense and energy and new tech. So that's our vision and strategy. And in that, let us move on. So I said it already. Structure needs to follow strategy. Since the beginning of this year, January 26, we are also we have reorganized the self formally. So since 1st of January, we have introduced five business units, defense business led by Marco Herre. The energy business led by David Evans out of the United States. The engines business led by Marcus Villinger. The new tech business led by Bert van Hasselt. And last but again, not least, the service business led by Andreas Schmidt. And group-wide leadership, you will see here at this conference called Oliver as CFO, myself as CEO. And last but not least, Katharina, who focuses on human resources, strategy and transformation services. So that's a nice mixture between, let's say, a lean group-wide setup, group-wide leadership topic, and very clearly P&L-responsible business leaders in their respective business areas. Let me walk you through the units, item by item. So first of all, when I look back at defense, the contribution we had hoped for, we had planned for out of defense, we managed to exceed. Because there is, and I think that's not a surprise, strong momentum in that business. We established our initial footprint now also in the DevTech area. We acquired Zobeck, as you all know. We sealed partnerships with Arx Robotics for unmanned ground vehicle systems. And we secured and also executed first direct orders. And that's very, very, very promising, both in sort of the traditional field, i.e. we are delivering Deutz diesel engines to defense customers, but also in this field of the industry. And defense tech companies where we talk mainly about battery electric systems in military drones. So we managed to establish ourselves as a player. And I can tell as much that we work on that and we continue on that because here profitable growth lies ahead of us. The outlook. And that's, you know, a number which we have in mind for 2030, 300 million revenue, step by step with high growth rates. We want to further expand our footprint in DevTech, a lot through partnerships, potentially joint projects. Every now and again, we're also considering investing. But it's always important for us, you know, when we enter into a partnership that we have a right to play and a right to win, that we bring something to the table to the partners. And important is, of course, there is an extremely promising sales pipeline, both in traditional drive systems as well as in the DevTech drive systems. And it's about strengthening the execution in here, but we're on good track here. And of course, there will always be opportunities around because that field is developing quickly. Budgets are there. Budgets are growing. Everyone is aware that this is a field which is important to also support for from the government side. So we're always open for partnerships and also M&A. Energy, really a highlight looking back in 2025. Blue Star Power Systems, our US, our American footprint, has delivered above planned growth and also profitability, expanding the network in the United States, improving in terms of growing, but also execution, the operations. Our Moroccan asset serving mainly northern but also Central Africa. It's a completely different market. But the turnaround we had to initiate here after this asset was a bit left at the side for many, many years within Deutz. The turnaround is progressing. Leadership has been set up. Great guy. We've got there leading that business now. And we already see now in the first weeks and months of 2026 that it's paying off. Order intake is increasing. So that's great. And we concluded the acquisition of FRERK. I mean, technically speaking, the closing was this year, but the signing was in December last year. And with FRERK, I will speak about that also later. We are establishing our presence in Europe, out of Germany, but also growing into neighboring countries, particular in the field of emergency power supply for data center and creating here momentum for further growth outlook is here very clear um our objective our target is achieving 500 million revenue by 2030. it's 20 kegger not a low number um but we're very very optimistic to achieve that we've got dedicated plan on that. And we're certainly ahead of the plan that we initially put in here. We're driving the organic growth with the companies and the operations we've got in the business footprint right now. Bluestar, Maggi, of course, now we have to execute the integration of FRAC. a light integration because these companies, you know, they have developed very well without the support of corporate. So we want to continue enabling them, obviously, their agility and their freedom. But on the other hand, we will bring what we really have to support the business, such as our service network to the table. in order to achieve that the equation one plus one is above two. That's what I also mean with synergies across the business unit, because we've got engines in the portfolio, as I will point out later, we've got the service footprint. So here, everything is set up for profitable growth. Moving on to engines. Looking back at 2025, I said earlier, the market has been challenging. Demand has been challenging across the regions. As you know, our main regions, our main sales regions is Europe and the United States. So still, you know, the recovery, which we were waiting for, hadn't picked up in 2025. I will speak about the outlook in a minute. But from a portfolio and strategic point of view, we did launch a new engine, the 3.9, 4.0 liter engine. The customer response is extremely promising. A lot of orders we already caught and secured. So that's fantastic. Also, our engines, which come from Daimler Truck, the so-called hard-up and M-Deck, heavy-duty and medium-duty engines, we've successfully integrated them both in our sales product portfolio as well as our service portfolio. And that's important because it's crucial for us that we are expanding our portfolio towards higher power ranges, like that one, because particular and medium and higher power ranges, the And in that internal combustion engine will play a significant role in the next not only years, but potentially decades to come. So here we are extremely well set up. We did right size, i.e. reduce our R&D capital capacities. Oliver will talk about the future program later. We're ahead of plan here as well. And market consolidation efficiency plays an important role. if i look ahead um for 25 and beyond um you see we foresee a growth here we foresee a growth um and why is that uh because we want to integrate we will integrate more of our partner engines large engines engines like a 24 liter engine it's a v12 engine in our portfolio we have already first orders from power generation customers so that's great We're driving further performance. We're now with a business unit structure under the leadership of Marcus Filling set up really strongly in a way that we have now a strong focus on performance, also both in sales, but also in operations. Like we haven't had that always. So that's a great progress going forward. And let me give a bit of a glimpse as well. We're talking here. of course, about the long-term outlook. But we started quite well into the financial year 2026. So we see a good order momentum, both from the United States as well as from Europe, despite the geopolitical uncertainty. So order intake is quite promising. And that makes us also confident even in that field, which was under pressure in the last years going into 2026 and beyond. NewTek, we acquired UMS in Holland, in the Netherlands. We initiated integration. We managed first shifts from sort of small one-offs to small series, still not into large series, but that's not because we are not successful. It's just because there's nothing like that happening. in large series on the market, but we are continuously strengthening our portfolio and also our production capabilities. So important is when, and that brings me to the outlook, we are able to convert a pipeline into revenue. We are also able to scale up the projects, bring our production excellence into force, into play. and deliver to the needs of the customers. We want to be also more efficient in terms of R&D, faster, more cost effective using artificial intelligence here. So this is an interesting and very promising field to simply become better and faster. And that's also needed in that field where the change and shift of technology is certainly faster than in our traditional fields. Last but not least, Moving to service. And as always, in the last year, service is really a business where we're extremely proud of looking at the development. We further expanded our network. We integrated also the larger engines coming from DynamoTruck, the HDAP and the MDEX engines. We completed further acquisitions in Turkey and in the United States. Because in terms of service, it's extremely important to be there where the customer is. particularly in rural areas when I think about the United States. So we are growing our U.S. footprint in a very good way and focusing now also on Europe, including the DACH region, Germany as well. Going ahead, looking ahead. No, no. One back piece looking ahead, we're continuously driving this growth, especially American Europe, as I said, but also expanding your portfolio exchange, the remanufacturing where we are able to where we are able to to bring new engines into a new life. That's something extremely important. And now making use of our portfolio also for the new business units, expanding our offering in service business for the PowerJet business with the focus of Europe and the United States. Yeah, let me conclude that we want to obviously confirm, reconfirm, give the confidence that we as a management team remain more than committed to our 2030 revenue target. And we've got plans. laid out in very much detail that every all of the business units uh has to make it will make their contribution um to bring the status quo up to the target um and this um so yeah we are we are good on we're good on track well on track here um the support of defense business energy business engines with new tech business and service business to bring up to that bring us to the target to become