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

uh more relevant and uh more profitable uh that's a perfect transition point to oliver talking about numbers and i will be back in a second thank you very much sebastian good morning welcome also from my side let's deep dip into the numbers immediately and we heard it was a good year um even though we are not receiving that much of support from the engine market at least was a good year and good year also means we met our guidance that is where we are committed to same as we are committed to our 2030 guidance targets we are committed to our yearly guidance and on the revenue side we guided the roughly 2.1 billion we achieved it on the adjusted even last guidance was midpoint of the middle range of the guidance range expected we made it straight on the point with 5.5 percent adjusted ebit and also the free cash flow mid double digit euro amount guided before m1a we met it was 44.2 million so very positive information on this slide Moving ahead, what was driving the results and one topic we continuously report on as it's addressing directly our structural cost structure is our FutureFit program. Just to remember, we have a target of 50.5 million euros cost reduction, structural cost reduction, 2026 compared to the baseline year 2024. We are absolutely well on track there. So we have more than 25 million euros already fully VULN effective in the accounts. All measures are identified implemented running so effects are ramping up continuously into the results and that will continue throughout the year 2026 as well cost related to the future fit program 25 million was booked as you know already in q1 last year so q1 2025. Looking a bit on the key figures of fiscal year 2025, we see, first of all, new orders ramping up 13.7% plus. That is a book-to-bill ratio, once again, higher than one, which is good, a trend which seems to continue also in the current quarter. The order backlog at roughly 500 million euros, so positive sign there. There on the revenue side, 12.7% increase. Application errors, especially construction, 14%. Agriculture, machinery, plus 10% compared to the year before. Those areas particularly benefited from the contribution of the Daimler truck industrial engines, while material handling, which is mainly on the engine side in the US, was a bit weaker due to the overall economic situation in the United States. Service business, very positive news, continuous growth path, plus 9% year over year. So continuously contributing both in top and bottom line. Coming to the bottom line, talking about earnings, 5.5% adjusted EBIT margin, which is a 46% increase year-over-year. So cost-saving from the FutureFit program supported the results, but also the portfolio measures. And this was somehow offsetting missing fixed-cost absorption due to the overall lower production volume. On the net income side, 54.1 million euros. This is a bit lower, higher than last year, but a little bit lower due to the future fit provision that was booked in Q1. On the next slide, we see further KPIs or the same KPIs basically on the quarterly development. And we see that new orders, revenue and EBIT increased significantly. and showed the strongest quarter in q4 especially nice the trend on the ebit side with a very strong q4 at the modern level of 6.8 percent several factors that were supporting us there on one and of course the future of its savings which continuously grow and grew over the year but also higher sales volume on the engine side roughly 35 million higher volume than the quarters before so that also helped a very stable production with a good shift model And, of course, also M&A activities like Zobeck or service acquisitions, which were kicking in in September last year or throughout the last quarter of 2025. Looking a bit in the segment reporting, it's the last time we're going to see the traditional segmentation. So here we look at engines and services. We see also here all KPIs growing. Purely looking at the business unit engine side, we sold 133 units. thousand units. So total sales volume was a bit lower, five percent, five and a half percent lower year over year. Also, in-house production was four point five percent lower than the previous year. So they were kind of negative economies of scale. These were, however, offset from time the truck of hybrid engines and also especially from the future of it cost reduction program. very successful also HJS emission technology, the turnaround case we acquired and we turned it positively, so also contributing a positivity with the results. On the business unit service side, Revenues at 545 million, 9% year over year. And also besides this year, slightly lower organic growth, especially inorganic growth. So the US acquisitions on-site diesel doubled down, which we reported early on in Q4 we're supporting, but of course also the Daimler truck service business we acquired, which is developing very well and nicely. Looking into the second segment, Deutz Solutions, combining, as you know, energy and the business unit NewTek, two quite different businesses. On the energy side, order intake remains strong, 165 million. That's a book-to-bill ratio of around one. Order intake here is not naturally distributed equally throughout the quarter, so there are some peak quarters. That's why it's overall growing, even though book-to-bill is around one in the entire fiscal year. On the revenue side, strong 170 million and a 15 million EBIT. Important to know here, this is an EBIT after these technical accounting purchase price allocation effects you can see in the footnote. So purely operational, it was even better, 23.7 million, which is a 14% EBIT margin on the energy side and supports a strong growth and that was the group financials. New tech, still low on the new order level and also on the revenue level, it was only 14 million euro. um revenue on the other hand 34 million losses same level as 2024 on one end r d expenses came down of course as you know due to the future fit program but we also build up a bit of a structure to be prepared and properly address the market side to be ready once orders are kicking in and of course also to ensure that orders are kicking Looking a bit more in the financial KPIs, R&D, CapEx, working capital, all KPIs go in the right direction. R&D spending reduced to a level of 85 million, so 9% reduction, direct consequence of the FutureFit program. CapEx coming down to 95 million. This is including leasing. So among others, some assembly lines and test benches, logistic facilities, but also this year a bit of IT infrastructure. And on the working capital side, in absolute terms, it remained almost exactly on the same level as in 2024. However, the ratio significantly reduced. So the trend is definitely going in the right direction. And also inventories wise, we only saw a slight increase, even though we had several acquisitions in. So there was an efficient inventory management in place as well. Looking at the cash side and net debt, so cash flow from operating activities up by 33 million euros to a level of 143 million euros. That results in a free cash flow before M&A of 44 million, so also here an increase compared to 2024. And net debt position then going up slightly, going up, of course, mainly due to the um m1a activities which uh where we spent between 160 and 170 million euros last year while on the other hand the capital increase we conducted in september was of course contributing in the other direction That brings us to the balance sheet and the financing side. Balance sheet remains strong. Equity ratio remains strong. 51.3% equity ratio. Also leverage here, including leasing at a level of 1.3. If you exclude leasing, you are slightly below 1 in the leverage. And this combination of the figures we present here, of course, shows that we continue to have strong financial firepower also for further acquisitions. So, for example, the... Acquisition of the FRAC group, which we closed beginning of February and which was financed via debt completely. Dividend proposal is going to be 18 euro cent per share. That's a proposal supervisory board and management board will propose to the annual general meeting that takes place on the 13th of May. Last but not least, just a quick outlook on the change of reporting structure. Structure follows strategy. So also reporting structure follows strategy. We're going to report beginning Q1 2026 in the new logic here alongside our business units, thereby increasing again transparency towards the capital market. And also, of course, considering the differences in the business units, the different focus points and structures and challenges and opportunities those business units are having. Then I hand over to Sebastian.

for the guidance 2026 yeah thank you very much uh oliver for the numbers and for the uh also you know all the details on capital structure and funding um i mentioned it earlier we're building the next deutz um you see the next deutz again and left part of that chart um i'd like to also translate it a bit in what are the levers that will create value for the shareholders here And it's very traditional. We've got a couple of important levers. So we see growth. Selective. What do I mean with selective? Not at any cost. It has to be profitable, structural in areas which are ready for growth and resilient. We want to build something which is there for the long run and not just for a hype. And what I mean with that in terms of our portfolio, we can scale up, we will further scale up our energy and defense business that is clearly backed up by market growth, not much cyclicity. We want to further gain market share and service. Service is also resilient and it's there for the long term. Even in the engine business, the engines will remain in the field for decades. And we will grow very focused also in our engine business, particularly in terms of using larger, more powerful engines. Then secondly, the margins. Quality before volume. We like volume, but we like quality even more. So quality before volume, ideally both. We will increase the share of our margin accretive businesses. Service is clearly margin accretive. Energy clearly margin accretive. And defense is clearly margin accretive. And there will be a focus on performance, especially on engine. Not limited, but especially on engine. These are here. The big levers is the big levers in terms of margin. And then, of course, cash is king. Discipline, orientation on ROSI. We've continued to allocate capital in a profit optimized way. We will obviously put a focus on working capital. I mean, keep the focus, let me put it that way. especially when there's a market uptick in the traditional engine business. Managing working capital is key here, not being filled up too much, but also be there when the customer orders. And of course, there is integration potential in our new business as well. And then last but not least, There is strategic upside on top of gross margins and cash. It's an option approach on leverage, really partnership options, which may appear on the road. And new tech certainly is a market driven strategic upside. We are there. We invest in a limited but focused way. But once the market is picking up, we are there and then we will benefit. So that's an extremely important perspective on our next doors. And when we look at 26, the outlook we will be giving in a minute, I mean, that's clearly driven by our strategic value transformation. Of course, you all know that macro geopolitical volatility and uncertainty is there and will likely remain. However, The end markets and all of the end markets are improving. Some of them are already on a good shape, like energy, defense. Others are cautiously improving. The engine business is picking up, has been picking up already in the first days and weeks of 2026. So these signs are very, very good. So time will tell how strong we will continue here there. But we are very positive right now. The first time, quite frankly, in let's say 15, 16 months, I'm really, really positive in that outlook of the energy market. And then, of course, the DoS perspective, you know, the more resilient structure we have been building, the benefits will increase. They're already there, but they will increase. We see in 2026 the full P&L impact of our acquisitions, which we concluded in 2025 and we We closed February 2026, so it's almost a full year effect, which will support our numbers here. And of course, also other portfolio matters, as well as, of course, efficiency and cost improvements, like we just heard from Oliver, the FutureFit program. We wanted to achieve 50 million P&L effective. We are above that. So that's one of the clear points where we talk to our investors as well. We make announcements which we will deliver. And with that, we are positive to grow and to also grow in 2026. Let me give you the numbers now. So, of course, let me start with revenue. We're expecting here a range between 2.3 billion and 2.5 billion. We provide here also the midpoints for the business units. I will not read them in detail. We see a margin range between 6.5% and 8%. Also, again, midpoints in engines, midpoints in the business units. And free cash flow, we expect to be high double-digit millennials. i mean there are certain um important points which i show you on the left hand side there is good positive momentum right now in energy service and defense and also most recently in engine so um i would be a bit more bullish than what's written here on the chart this sounds a bit like oh let's see what happens um actually first quarter order intake shows in a very good direction uh that gives us confidence already for the second quarter and also leading into the third quarter And so that's what we have somehow expected here. A bit of a stronger second half. It's actually well supported by the KPIs we're following here right now. So, yeah, that's the look ahead. And we hope that you feel a bit the confidence we have coming out of a strong-ish 2025 with a new setup, with building the next Doids. And looking ahead or looking forward to lead this great company, not only through 2026, but beyond with our ambitious but yet realistic targets. In that sense, Thank you very much for your attention. And of course, as usual, we are open for questions.

Thank you very much for guiding us through here, for giving the outlook, which is quite promising, if I may say so. Of course, we're happy to take your questions now. We would like to start with, in this room, to make it a bit easier, I guess. If there are any questions here, please go ahead. And afterwards, of course, we will also give all the colleagues a dive into the opportunity to ask additional questions.

i want to go ahead yes um you need to please use my friends with on thank you okay it's very i don't need to go close no it's okay um so thank you for the presentation sebastian and congratulations on the on the on in the in the mdax it means a great milestone um regarding the guidance if i may um I see that the target in terms of engines is more or less the same result than this year, I think, making the maths myself. So this means that you are quite cautious even in the midpoint, or is there any reason to be cautious? These courses apart obviously of the geopolitical events that we are we are suffering these these days.

That will be my first question, please Yeah, I mean I and we really Rather give an outlook and then slightly over deliver That's what I believe we've shown in the last three four years So it takes some time to build up trust. It takes a second to destroy it and we want to remain within that sort of mindset and And of course, you know, as I said, February order intake in engines has been promising. March is not over yet, but it's also promising. So I look quite forward to Q1, but especially Q2. And I'd rather wait until the end of Q2 when we have auto intake numbers for Q2 and then to potentially be a bit more optimistic right now. At the moment, we see, and you're almost right, in the guidance for engines, it's a slight recovery expected, but certainly not a moderate or even large recovery. And the operating leverage, you know that very well, and the engine business is extreme. So we're coming from that, you know, 130, 135,000 engines. And once this is going up, we'll be certainly moving not only in revenue towards and potentially beyond what we have here as the upper end, but especially profitability will benefit significantly. But let me be a bit cautious with that guidance right now and then see what happens. And I mean, the war in Iran, that's obviously we as Doids do not feel any negative impacts right now, as terrible as that obviously is from a personal perspective. However, we all know that a higher oil price is not good for the economy. So that's why we're a little bit cautious. I believe this is not the moment with that geopolitical uncertainty to say, all right, you know, there's only sunshine and sparkles in the second half of the year. And that's a bit the background for providing that. I would still say actually quite positive guidance. I mean, in a year like that, six and a half to eight percent, Deutz has never shown numbers of eight percent, even in boom phases. So don't make me feel too bad about being slightly optimistic.

No, no, don't take me wrong, but I feel also that the year has started in the right direction. So, yeah, I was curious to know how this was fitting into... into the optimism that you have or not. And so maybe following up with this, can you give us a little bit of feedback of your conversations these days with the OEMs, how they see the investment plans in Europe, if this is something that Is it still not driving really the demand or do you think that we can see at some point some good boost to the demand, maybe end of the year or next year or something that is going to happen?

Yeah. I mean, I always don't want to talk about individual customers yet at this point in time. I think... that they are they those who are listed obviously provide their their numbers um their numbers also publicly what we see at the moment is a couple of customers um and a couple meaning more than two um ordering quite relatively large quantities and this boast comes from the us it's one customer who's quite optimistic in the united states but also a group of customers in construction uh quite optimistic in in europe we still have to bear in mind we're starting with attacking from a low level yeah um you know we're talking about numbers on a monthly basis maybe 13.5 14 000 engines uh what we see recently on a monthly basis and that's significantly more than what we've had through last year but again it's one month right it's it's one month but what i take positive is that this is happening not or this has not happened before the beginning of the year around more, but during or after and during. And that means that we will see some recovery. And so, yeah, so it fits probably very much to what these customers particularly in construction say openly. Bear in mind, wait until we release the Q1 numbers because then we've got the Q1 in the books and we've got already a good indication what's happening in April and also towards May.

Okay, maybe a last one from my side. And regarding defence, the target for 2030 is really strong. And it's interesting that you have already a number in your mind about it. Also, you mentioned that the pipeline looks quite nice. How do you feel or see Deutsch being recognized in the market? Are you positioning all your different products together or how you are managing these products?

uh growth in in the defense that would be interesting to know yeah our defense business unit um it's a small but pretty fast moving uh fast acting units you know the guys a bit from several interactions and um I would describe them a bit as a market-oriented business unit. So they don't have their own products, but they market the products we have in the portfolio towards defense customers. And that's extremely important because the go-to market in defense is extremely different than the go-to market in industry. So let me give you an example. When it's about placing a diesel engine into a military vehicle, Typically, the go to market takes not just weeks and months, but can take years because it has to be sort of baked into the specifications. And there's a bit of lobbying sometimes as well, as we all know. All right. And that's why. And of course, on our side, also, the application engineering is different and we do not talk about. volumes as high in terms of units as in industrial applications. If we manage to place, let's say, an order of 300 or 400 engines to a defense customer, because margins are higher and justified because there's more work to be done. But if that happens, our engineering teams need to obviously do the work on the machine and they need to do the work pretty quickly. and under normal circumstances you would always you know prioritize the industrial customer who wants five thousand or six or seven thousand units but their margin level is different so it's a bit also managing internally the resources and that's actually proven to be quite successful to have a dedicated team who work dedicatedly with a defense customers but also who manage the internal complexity in a different way And that is just the example for the ICE, but the same applies for products for power, for gensets, for example, because there's also increasing demand by defense customers, as well as in the whole dev tech field with our battery electric products. So go-to-market business unit, fit for market, and also managing the internal complexity. It's a proven recipe, which pays off every day more. Thank you very much. Please go ahead.

Yeah. Hi. Thank you. Good morning. And thanks for taking my questions. Actually, we'll start with the guidance for this year. And if you could remind us of the unfolding of the remaining cost savings of this more than 50 million and connected to this. Last year, we saw a rather linear development of profitability through the year in terms of margins quarter by quarter. Would you expect the same picture or something like a seasonality through the quarter? So that's...

Yeah, on the cost savings, so that 50 million, I call it 50 million plus, so it's going to be rather 55 or even slightly higher. 25 to 30 are already in the P&L. The rest will then come 26. So that is fully P&L effective. Then it's not like coming only in 27. This measures being in the last second, but it's really like we want to see the full P&L impact 26 versus 24. And the ramp up curve, I would expect that rather linearly. So part of those savings are related to employees. Majority are out already. Some are still to come through the year. So that's a bit more front loaded then. But on the other hand, there are certain other measures included. So linear ramp up is a fair assumption. Yes. Thanks for this.

And the second one would be on the, let's say, 2030 targets for the business units you in the future will report on. You gave us the sales figures you're targeting. Can you remind us also of margin ambitions?

We gave the overall ambition level of a 10% adjusted EVIT margin.

And that's going to be distributed accordingly. But what we can say is that, you know, service and energy will be accretive. Engines will be probably below the 10%, but also not at zero. Thank you.

Thank you. Any additional questions in the room? Thank you very much for taking my questions. Lars von Kleff, Deutsche Bank. New kid on the block here. Welcome to the show. And looking at your target of a high single, sorry, high double digit euro million free cash flow, I saw the working capital to sales ratio coming down from 21 ish to 18.7. Is that the new normal or do you have a specific target ratio in mind to improve cash flow even further?

On the cash flow side, I wouldn't consider that as a new normal. I would consider that as a rather careful guidance on that end. So free cash flow generation was not the strongest KPI of DOI's over the past years. So we are a bit more cautious on that, but we are working on the right things. Working capital, you mentioned, is exactly one of those where we are getting continuously better. Also new business models changing it towards a bit less working capital efficient. So we are targeting more towards 15% in the midterm there. And on the cash flow side, we are overall see continuous improvement.

15% target? The midterm.

Midterm, sorry. Not for the year 26 that we gave the specific guidance in the report.

Perfect.

Thank you. And I mean, also on the different business models or business units, I mean, the engine business typically comes with a very traditional sort of serial production or serial business model terms, whereas we have other business models which work with down payments or with milestone payments. So it's even more difficult to purely say, all right, it's between, let's say, 15% or 20% because the business mix changes as well. but we want to and that's the positive thing about that obviously we want to also utilize this this is one of the strategies in the group as well you know um mixing different business models uh also that's what one of them meant when i talked about the cash lever um to hear um a mix and match in a better way perfect thank you and then your service business was continuously mentioned as one of the growth pillars um high margin of course we appreciate that if it grows um

How do you intend to grow that? Is it digitization, predictive maintenance offerings, or are you also trying to take market share or convince your customers to do less and let you do more?

It's many growth levers. One lever is simply winning market share, mainly when I talk about the engine business, service comprises of pretty much three levers. One is parks, and we have already a good market share, still a bit room to grow, but not unlimited room to grow, of course. The other lever is work at the machine. So like labor technician work. There we have a still fairly low market share over the last years. I mean, 10 years ago, we were not doing that at all. We were just selling parts. And now we're already doing much more work at the machine. So that's one of the focus points to grow. And then thirdly is indeed digital offerings like telematics solutions with quite a few promising opportunities in that. And the fourth point is also a series of small-ish M&A buying former external dealerships in order to increase the footprint and bring that margin in-house. And of course, last but not least, also offering or utilizing our footprint for the new business models. And that's why we're pretty confident on that growth, the number you just mentioned, because they're supported by at least four pillars.

Maybe last question, staying with M&A, you said smallish in service, completely understood. You were quite successful with your recent bolt-on acquisitions, also targeting higher margin product offering services. Where would you see remaining white spots? I guess it's rather products or technologies than regions. And thinking about your leverage ratio of 1.3 times, what would be the maximum to accept in this regard?

Let me start with the areas and then Oliver will talk on funding. So first of all, I mean, as you said, service will continue to work on that. These are not large acquisitions. So with... be able to do quite a lot of them on an annual basis. We are certainly open to grow also more in both energy and defense business. And we have quite a good overview of what could happen in the next years. But you will understand that this is exactly the field where transparency has very strong limitations. And we can just say we are working on a lot of opportunities and options. But with M&A, you never know. It always takes two to tango. And we will see. We'll keep you updated as soon as we can.

on the leverage question well we have a strong balance sheet we have a decent leverage with a level of 1.4 leasing without using even below one so we have that capacity that also means um and as you saw it was a frag transition recently we added additional debt because with the balance sheet supports that with the increasing resilience of our business model growing energy growing defense growing service volatility gets out of the results that means we can support higher leverage specific numbers it depends a bit on if you ask the ceo or the cfo the cfo is always a bit more careful so i can easily imagine i can easily imagine a leverage of two yeah two 2.5 but of course it needs to fit to the development of the business

Perfect. Thank you very much. Thank you so much for your questions, and I hope you got the answers that you were looking for. There's one more in the room, and I think afterwards we're going to move into the virtual world, please.

Yes. You mentioned that your book-to-bill ratio in your new energy unit was below the threshold of 1%. You painted out a clearly growth path until 2030. Can you give us an indication how this order intake is currently developing, where you stand at the book-to-bill ratio? Yes. In energy, you mean? In energy, yeah. Yeah.

Yeah, I mean, first of all, the book to bill in engines is more an indicator of growth if it's above one. In energy, we talk about a bit more or less sort of lumpy orders. So there is a lumpy order, and then you suddenly have in a quarter potentially even a book to bill of two. And then in the next, you have a book to bill of 0.4, 0.5. So that's why I would not put too much emphasis on the book to bill in energy. Again, in engines and service, it's highly relevant. So here, what we can say is that with our two larger assets in energy, which is Bluestar and FREAC, we do see very solid perspective on growth in both in the United States as well as in Europe and also in our smaller asset in Morocco. Here, the book to build is actually above one, but... But the same applies to what I just said earlier. So that's why, you know, we see here based on the sales funnel. So here we rather think in a sales funnel. Typical logic, you know, you start with a fairly large sales funnel. You put in, go and get probabilities on there. You calculate them. And so here we see quite a good of supporting information for the growth we put in here into the numbers.

Once again, thank you very much. And with that, I would hand it over to Sarah, to the virtually died-in colleagues. I don't know why my microphone is a bit of a weird noise. I hope you can still understand me, but Sarah, please take it.

Absolutely. Sound is good, Lars. Thank you for handing over. So ladies and gentlemen, we have a couple of minutes left for you in the virtual line to ask your questions in person by the audio line. So to do so, please raise your virtual hand. And unfortunately, forgive us, we cannot cover all the questions in the chat today, but we will take them and come back to you afterwards. And in the meantime, we have a virtual hand from Stefan Augustin. So please go ahead and ask your questions.

Yes, thank you very much. The question is actually on the guidance and the new business unit guidances. So there is defense and it says defense and others. Could you remind us what else is in others in there? And possibly also if there is a huge differentiation between the profitability of these businesses and maybe a technicality, but to understand the rest a bit better, if you sell a Genset to the Bundeswehr, is it then accounted for under defense or... on their energy and maybe also then connected here if i look at these business units guidances is there any one where you include m a perspective or shall we take these separate bu guidances as organic growth opportunity guidances for 26

Yeah, let me start with your first question on the defense and other segment. So basically it's defense, but we also will allocate our recent acquisition, HJS, which we acquired beginning of January 2025. So from a margin perspective, obviously defense business is way more profitable than HJS, which is also slightly profitable. And that is in the combination of how we derived it overall guidance. But that is basically the only relevant part, which is covered by other. And the second question, if you sell a genset to the Bundeswehr, for example, yes, that's defense. And on the third question, to which degree M&A is impacting the guidance here? Naturally, we see some M&A activities on the service side where we have a good track record of two, three or more M&A transactions per year. That is also what we are expecting. Then, so a certain M&A contribution on the service side along what we achieved over the last years, while the other business units are not M&A driven in the guidance.

Which doesn't mean we're not doing that. It doesn't mean we're not doing that, but we do not put unlaid acts into the guidance.

It's just very clear, but it gives a better picture of what you think is organically happening. Lastly is on new tech. And how do you feel about the loss allowance here? So you outlined that some of the costs is for setting up structures in case there would in first half or so 26, nothing materially happened on the opportunity side. How quickly could you reduce the cost space and how willing would you be to do so?

Yeah, first of all, we couldn't reduce it to zero, obviously. I mean, we could, but that would not be wise because I talked about an option value and that would destroy the option value also to zero. But in fact, we are obviously always evaluating here the cost base and the structures, because in the end, cost is structure or structure is cost. So in case and I'm not saying it is happening, but in case we wouldn't see the first sort of serial or small serial order, we obviously would be able to. and we're well prepared to do so. But we are actually quite optimistic that this will not be necessary. But it's important to be always ready for both potential developments.

All right. Thank you very much.

Thank you so much for your questions. So in the meantime, we did not receive any further virtual hands. So... We therefore come to the end of today's conference call. So thank you, everyone, for joining and your shown interest. And also a big thank you to you, Sebastian and Oliver, for guiding us through the presentation and for answering all those questions. From my side, it was a pleasure to be your digital host today. And I hand back to Sebastian for some final remarks, which concludes our call for today.

Thank you very much for dialing in. Thank you very much for asking all these very valuable questions. Thank you very much for accompanying us as Deutz. it's really a great time in a way to, you know, guide and lead this company through this transformation. It's also great to see how our measures are paying off. And that's also bear in mind, you know, it's been a challenging year in 2025 given the environment and the We have managed quite successfully through that. And we are, you know, with a bit of caution, as we just heard also in the Q&A here, we're going with a bit of caution into 2026. But everything is set up to make this another success. That's extremely important. We need a bit of support from the end markets, from the traditional end markets. But we are ready to also grow both in terms of top line and profitability, even if that support is not as strong as we all hope for. So we're looking forward to a great year, 2026, and looking forward to the continuous dialogue with all of you throughout the year. And the financial calendar is here put on the chart. I mean, we'll release Q1 in May 7th. AGM in Cologne, this time a physical AGM again on May 13. We're happy to welcome as many as possible for you who are also physically in Cologne. And then we'll be by H1, IEQ2, beginning of August. And obviously, looking forward to talk to many of you through the, I don't know, more than 2025 investor relations opportunities throughout the year. Thanks for your attention. Stay tuned. There will be more to come.