Deutz Ag Akt

Good morning, ladies and gentlemen, and a warm welcome to the Q1 2026 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, so your participation in that call implies your consent to this. I'm pleased to welcome Deutsche CEO Sebastian Schulte and CFO Oliver Neu. And as always, please take a note at our disclaimers, especially regarding forward-looking statements. So with this, we start the presentation and I'm handing over to the Head of Investor Relations, Communications and Marketing, Lars Böcke.

Thank you, Sarah. And a very good morning from my side as well, from Cologne. Thank you for participating in our today's conference call. I'm glad to welcome you. as it is the first time we report in our new structure with five business units, reflecting the different markets and thus providing even more transparency and clarity. At the beginning of the presentation, Sebastian Schulte will share views on key figures of Q1 and then provide an implementation update or strategy along these five new business units. Obviously, next, our CFO Oliver will give a detailed overview on the Group's financial performance. With a look at the guidance and how the strong Q1 momentum is pushing financial year performance, Sebastian will wrap up the course and move forward to your questions.

Sebastian, please go ahead. Thank you very much, Lars, for the introduction of words. And from my side, a very warm welcome as well to our Q1 earnings call 2026. And, you know, we started really, really positively into this exciting but also challenging year 2026. So Deutz 26 is all in the light of transformation, but also in the light of growth, profitability and successful start, as I said. A couple of highlights which are behind us or where we are in the middle of it. Let me be more precise. So first of all, and that was really an exciting moment for all of us. We were promoted from the S-DAX to the M-DAX, which is a nice milestone, a nice recognition of successful work the teams at Deutz have been performing. And obviously that's a result also of an above market share price performance. We see it here for the last For the last half a year where we compare our stock performance with the MDAX performance, we're clearly ahead of the index. And if you look, if you were to look back at 24, the gap is even more significant. So that's a sign that our work's paying off. Frerk acquisition in our energy business unit, I'll come to that later, gave us an order intake impact of almost 150%. contributing to the growth, but it's not the only contributor to the growth. And what I find particularly encouraging, quite frankly, is that next to all the successful ramp up of new business units, also the sort of heritage business unit, our engine business unit, but also supported by service, sees quite positive momentum in very relevant markets, namely construction and agriculture. So all in all, A lot of positive points in our transformation. And no surprise that with all these positive points, we also see that reflected in the numbers. New orders have been up significantly, 41% year over year, 771 million euro order intake, new orders. That's great. Revenue at 530 million, it's also up 8%. So one of the highest numbers on a quarterly basis has delivered, well, in the company's history. And the same applies for the EBIT margin. We are now at 7% EBIT margin, which is also 1.8 percentage point better year over year. And we always need to bear in mind that the first quarter of the year is typically not the seasonally strongest quarter of Lloyd's. And in fact, that's also underlined by the fact that since the start of the downturn, the end of 23, that is the best quarter we have achieved. So very encouraging news. Important, I'd like to repeat that we've shown that at the annual results call earlier this year. We've also started, Lars said it in his introductional words, into the new year with a new structure, and a structure which clearly follows the company's strategy. So we introduced a business unit set up in January 26, and next to the group-wide management, Oliver, the CFO, Katarina, EVP for HR, strategy transformation. We have now in charge, dedicated business unit leads, Marco for defense, David for energy, Marcus for engines, Bert for new tech, and Andreas for services. And that's more than just an organigram. It just shows that we take our strategy seriously. We've implemented the structure to have a responsibility on a P&L basis for each of the business units, even though they are at this point in time still different in size, but all extremely relevant. So that's why we needed this clear responsibility. And I can tell you the setup is working extremely well since we implemented it. Well, let me now walk you through the business unit by business unit. And I start with the largest business unit, with the business unit engines. And what happened at engines in the first quarter? It's positive again. Back in black, that is great. And we also see very positive momentum in order intake. I'll show that here on these numbers. We'll not go through this all in detail, but what you see here is particular if you compare Q126 with Q125. In terms of revenue, only slightly up, 5.3%, but we'll see where we were in Q3, for example, but in terms of new orders, up 26%. So that means the fundamentals become stronger. There is a certain recovery in certain sectors, particularly very important construction and agri sectors for us. And we also see the growth dynamics in all regions. There's even a particular momentum in China. That's the smallest region for us. But that was contributing here with high margin business as well. Profitability went up significantly. You see that. But at that point last year, we were slightly negative. This is a like for like comparison. So you will not see these numbers in the presentations of last year, Q125, because we're bringing here the numbers into place so that we compare apples with apples. So profitability went up significantly. Yes, of course, high utilization, but also the cost savings of FutureFit program. We will hear from Oliver later, as well as obviously the positive order momentum. Sales growth with new products, there is a significant strong interest also in our new engines. We introduced a couple of weeks ago our G-Drive initiative, like engines for power generation. We hosted that here in Cologne. After an important trade fair in Dubai was cancelled, so we hosted that here, we received strong interest, more than 30 potential customers were there. And this is something we do not even see in the new orders yet, but we expect that to materialize in new orders in the coming quarters. And of course, very important strategic work we're doing with the team, Markus and his team are doing. We are streamlining, aligning here our portfolio and also the footprint in order to further push the profitability because obviously 3.7% is a great development compared to previous years, but that should not be the end of what is possible. We're working also on efficiency here in our main assembly plant in Cologne Ports. The noticeable savings potential has been identified and is being implemented. So here we clearly see that the new responsibility we put in place is beginning already to pay off. So all in all, engines on a good development, both from a top line market driven, but also obviously from what we have under control in our internal measures. Let me move on to service. And service, you see here a picture. It's a great picture, actually. This is our material, our logistics center, also here in Cologne, where we implemented an outdoor store that's AI-driven storage management, which significantly reduces costs but also increases capacity for our spare parts. Most is extremely relevant, given that in service we are on a growth path. And in March, and I'll come to the quarterly numbers in a bit, but in March, the service business for the first time yielded revenue significantly above 50 million euros. And that's great. I mean, two years ago, three years ago, we were always around the 40 million. Now we're at 50 million. And that shows that on a monthly basis, we are proving here the run rate is significant. You see that here also in the numbers. In the last year, we were always between 130, 138. Now in Q1, we're at 148 million euros. And that's particularly driven by February and March, given January is always a bit of a weak month. And also the... Also, this growth came across all regions, both driven by parts, but also after sales business and integration of our acquisitions. We did a few acquisitions in the United States as well as in Europe. I mentioned the 50 million revenue already. The traction we're improving is also by our international network expansion. the logic is very simple the more services that we have the more profit uh we we achieve right we do have uh we do follow further growth investment in our regional infrastructure particular in europe and the americas we're opening uh new power centers across the nation in the us and that um for that is the only sort of um the only sort of uh critical point we'll see at this point in time is that the ramp up reduced the margins a little bit, but on a very, very high level. And also the margin Q125 was a little higher than normal because at that point we had a very high share in spare part business. We expect normalization across 2026. So by no means this is a problem with margins. It's actually a very healthy, profitable growth going forward. Let me move on to energy. Besides to defense, our sort of biggest growth case at this point in time, and I showed it, I said it initially, growth momentum comes obviously in particular from the new acquisition of FRAC, which is, as you know, active, particularly the data center business, which is a market which enjoys not only now, but also in the next three, four, five years, at least a very high growth momentum. Looking at numbers, Q1 was also the first time here. The revenue was at 50 million. Obviously, a bit driven already by the anorganic effect from the acquisition of Frerk, which joined us. The closing happened in the middle of the first quarter. So that's why here it's not really a like-for-like comparison if I compare Q1 26 with Q1 25. So 145 million of order intake was contributed by Frerk. And now we have a new orders of just above 200 million and we have an order backlog of 240 million in the business unit energy. So that means the visibility of this business is extremely strong and that applies to both top line as well as bottom line. I will come to that in a minute. We're making extremely positive progress with the business unit energy to really create a global unit. FIAC is obviously supporting in Germany, but also in neighboring countries, DPX, our Chinese setup. is supporting out of China to also drive growth in Europe and of course in Asia. We do have a little margin dilution in the first quarter, particular driven by ethics in the United States, as well as changing the product mix. But we expect a significant improvement in the second quarter. So the numbers we see here, you want 25. That's more the level of profitability we expect throughout the year. So that's why this is a temporary thing. And we will come later in this presentation also on the guidance for the full year, where we will also give you a little bit of details on the guidance for the business unit. So the guidance we provide you for energy is very safe and sound at this point in time. And the growth perspective, as I said already, is continuing to remain extremely dynamic, particularly because of that data center opportunities we have in Europe. But also, Blue Star continues to grow above what we initially had foreseen. And on a smaller scale, but very encouraging, our North African genset business in Casablanca and Morocco, Magidoid's, We always explained that was a bit of a turnaround case. The turnaround has now been achieved. The company is EBIT positive and also enjoys growth, obviously on a smaller scale with an annual top line in the mid-20 millions of euros. And of course, one important aspect of creating a global energy business is obviously that we are now implementing more and more synergies, not only within the business unit energy, but because we're building really something global, applying the capabilities, data centers we have with FRAC. in also other parts of the planet, but also utilizing our service footprint, which historically has been created for combustion engines, but now we're beginning to utilize this for our energy business. Let me move on to the business unit NewTek. So I call it internally and also externally at this point in time, a bit like a growth option. A growth option with very, very positive dynamics and outlook. But at this point in time, it's still rather an option than already secured top line. And you see that in the numbers here, the revenue is still on a low level. I mean, it's growing, but growth here from Q125 to Q126, that is not a relevant number, of course. 64% is not much better than it is. It is still a small business. We do see new orders coming in. We have obviously also an order backlog. But that is still on a sort of prototype on a small, serious scale. We do, in this point in time, work particularly to improve the earnings because it is obviously still a lot of upfront investment, R&D activities. And that's why we managed here to significantly reduce the quarterly losses. We cut them in half, pretty much coming from minus 12 to minus 6%. And a big focus in this business unit is obviously converting the very promising large pipeline into actual revenue. And we're working here with a couple of promising large customers. But part of the truth is also that we have not yet secured a large order. But we're working on that. And why I consider this a bit of an option value, because obviously as soon as we see or we would see pressure from electrification in particular into the lower power ranges in, let's say, our construction business, then obviously this business here will start to pick up speed. So that's why it's an important option value. It's an important business to be involved in. And we can and will further support, obviously, the growth in new tech. That brings me to the last but certainly not least business unit defense, and to be very accurate, defense as well as others. So we also include here the business of IOTS, the Emission After Treatment Specialist. And defense, you see here that fantastic picture where our Ulm plant has shown that we have the capabilities of assembling here unmanned vehicle systems from our partner arcs robotics that's an exciting project we're working on together with arcs and here it's about increasing relevance and really really building a strong and strong business model looking at numbers um here this is a business unit which has only been created uh by the end of last year pretty much uh so before and it was more rather a collection of own businesses of own of own projects but latest with the acquisition of the sovic group we really created that business unit that's why we don't have a meaningful quarter over quarter comparison in terms of profitability but what we see here is that the business becomes more and more relevant q425 was driven by a few large-ish orders, very, very strong with almost 30 million euros. Now we're at 22.1 million in Q1. We enjoy a lot of new orders, 26 million order intake. So here also gross dynamics is in place. The order backlog is at almost 40 million right now. And without, at this point here, being able to release names of the customers, but we did receive in the first quarter first significant or relevant orders relating to the loitering drone package that the German army ordered at a couple of drone OEMs. And in one of them, we are the supplier of the drive systems. That relates to the ramp up of Sobeck because that's the part of Deutz which actually provides here the drive systems and we are also continuing to invest R&D in particular in new car train solutions and that applies especially also to the field of the diesel engines where we are enhancing our current product portfolio to make it sort of defense ready. Also the The Hyadessa I mentioned earlier, Hyadessa Emission, it's been bought by us as a turnaround case. Now it's working actually quite successful. We were able to integrate some of their production into our supply chain. That's important. And we're continuously committing also to that DevTech ecosystem with, I mentioned it earlier already, the investment in ARX Robotics, but also the investment and the supplier relationship to Titan Technologies. So What's about here? It's a conversion really of an extremely strong pipeline into sense. We'll have a lot of very promising conversations, project negotiations, discussions. Obviously, the Ukraine plays an important role here. And we're continuously working on exploring more and more opportunities, both in terms of drive systems, but also in terms of military energy solutions. And that will always include partnerships and M&A. So there's certainly more interesting news in the making throughout this year. So 13% margin level, I think that's a fair margin quality, given the combination here of the traditional sort of defense business, as well as the higher S contribution. So we have created here a pillar which is attractive to the business and which is enjoying significant growth in the next month to come. Right. With that short run through the business units, I will hand over to Oliver, who will bring some more light on the financial aspects of our first quarter.

Thank you, Sebastian, and good morning. Warm welcome also from my side. So let me start with some figures that show quite nicely the strategic development Deutz has achieved. undergone over the last years. And you see here the quarterly EBIT development of Deutz since beginning of 2024. So just to remember, that was a year where the crisis in the traditional core business, the angel market, was kicking in quite heavily. So we see here on the one hand, on a yearly basis, significant EBIT improvements starting from a bit more than 4% to a bit more than 5.5% to 7% in Q1. but also on a quarterly basis. So this chart basically shows the increased resilience of the Deutz business. Just to remember, in Q3-24, that was where we acquired the Daimler truck engine portfolio, where we acquired Bluestar Power Systems, entered into the energy business. In Q3-25, we additionally acquired Zobeck as a strong entry point into the defense business. And overall, of course, a continuous growth on the service side, organically as well as inorganically, and the FutureFit program with cost reductions then driving that profitability up. And that's nice to see that we see here a record result in Q1. And as we heard initially from Sebastian, that is typically a seasonally rather weaker quarter. So that's why we are proud to having achieved that. Let me come to a bit more detail on the key figures. We see a new order development increased by 41% or 225 million euros. 145 out of that increase is related to the first time consolidation of FERC, so our recent energy acquisition. and 80 million then organically so the growth on the new auto side is proven organically as well as inorganically on the revenue side lower increase to a level of 530 million euros so that is typically a weaker q1 on the revenue side so you cannot just take it times four to derive the yearly values we have to take into consideration first the high order intake and second of course also simplicity effects within the year um growth here on the revenue side mainly in absolute terms with similar contributions from the engine service and energy business while new textile remains on a low level On the earnings side, also here we see a substantial increase of 45%, 46% compared to the first quarter last year. So ending up at the 7%, driven by various factors, cost savings from future food coming into place again, especially on the R&D side, but also improved plant utilization. And that is also what brings us to higher net income, 21.8 million. That is 10 compared to minus 10 million last year. But last year, Q1 was also impacted by the future FIT provision. But even adjusted for that, there was a significant increase. So EBIT logically is also turning to higher net income. Looking at some more key figures on the R&D side, we see a decrease of 4%. That is a consequence of our FutureFit program. We gave some more details in the text line here on the split between the different business units. We see a very strong cost discipline on the engine side. We see our cost discipline also as announced on the FutureFit program on the new tech side to tailor the R&D plans a bit more to what the market is demanding. And of course, we are not saving on the R&D side. When it comes to defense, there are some first R&D expenses here in order to get our portfolio ready and even more attractive on that defense side. When it comes to CapEx, it's predominantly here. It's a slight increase predominantly for IT infrastructure, production equipment and software. So as I mentioned last time, they said S4HANA transformation ongoing, which requires a bit of CapEx. um but we are overall on a rather rather low level on the capex side so q125 was exceptionally low on the working capital side we see an increase that has two effects on the one hand it's the acquisition of first-time acquisition of GERK or consolidation of GERK which contributes roughly 25 million euros to that working capital increase and on the other hand there is also a slight increase in the remaining working capital basically also driven by inventories where we are getting ready for delivering on the orders which we achieved and realized and so ensuring delivery in the future. That brings me to cash flow. Cash flow for operations went down by 25 million There we need to keep in mind that the cash flow in operating cash flow in Q1 25 was extraordinary high driven by some effects at that point in time. So that explains basically the decrease. On the free cash flow side here before M&A, we are slightly negative. Basically, I would say we are coming back to a more normal season pattern where Q1 is on the free cash flow side, typically the weakest quarter. After M&A, we have been ended up at roughly minus 100 million euros because we acquired FREAK, we had those investments in ARX Robotics and Titan. So that's also the reason why overall net debt went up to a level of 385 million, including roughly 80 million leasing. brings me to the chart on equity leverage and dividend proposals so equity ratio remains very strong 47.3 percent it came down slightly driven by the debt finance acquisition of the leverage remains moderate 1.7 Keep in mind that this leverage includes leasing, so taking leasing out would bring us 0.3, 0.4 or lower on that level. So still on a good and absolutely solid level. Dividend proposal has already announced a slightly increase to 18 Eurocent per share for our annual general meeting next week. So follow the figures and then I hand over to Sebastian again for guidance and outlook.

Thank you, Oliver, for the view and the numbers. So, yeah, let me speak a bit about the guidance first. So first of all, Some context. We gave the guidance initially with, obviously, as always, the beginning of the year, fairly limited market visibility, particularly given the geopolitical challenges. But what we can say, I mean, the growth we've given or we've implemented in our guidance is clearly supported by the momentum we have, the positive momentum in energy service and defense that is strengthening the overall resilience. And when we gave the guidance initially, we said we expect a bit of a recovery in the engine. Markets also over the course in 2026 with a stronger H2. And we were a bit sort of taken by positive surprise that already in the first quarter, as we've shown in the numbers earlier, the order intake's been picking up speed. So let's see in which speed that will continue. Obviously, geopolitically, there's still a bit of a challenge out there. But so far, so good. Also, what we've seen in April so far, preliminaries. Let's look at it. So let me reiterate here, revenue 2.3 to 2.5 billion. We see that very much also from our bottom up planning right now. And obviously the business units contribute as stated here, the midpoint 1.33, service 635, energy almost 300 with a bit of luck and further movements potentially even above. New tech 35, defense and others 110. And all of them will see obviously a bit of potential up, but obviously also a bit of risks. But in the end, that's a good thing of having a portfolio of business models and business units. So all in all, it's a very solid view on the future, which we have here right now. On the margin, we provided in March fairly Wide range, 6.5% to 8%. We got feedback from many analysts and investors that was perceived as a bit too broad. We will take that point, but the visibility we had at that point really didn't allow us to be more specific. However, it seems like we're narrowing that down on a positive side right now. engines i mean you can just compare what we've shown earlier um for the last half an hour compared with the midpoints here so we are um well above that at the large engines business so as we are already at that level energy i well in the q1 we were slightly below but the view we have on q2 to q4 is actually um very much on that number we see here a defense will also probably expect a number slightly above that so um that's actually um that actually confirms uh not only the guidance but gives me personally optimism that will narrow down here um on that corridor on the other better side and free cash flow we heard all this work from oliver review on cash flow right now we expect high double digits million euro amount positive so um yeah i mean i said a bit about the outlook for 26 but um confidence is extremely important uh which we have right now the transformation of the company is paying off. I mean, we've shown already in the first quarter a very decent level of profitability, 7%, given where we come from at Deutz and given that in engines, despite the recovery we are seeing, we're still way below what the factories can deliver. So economies of scale are paying off, but only on a low level. So if the recovery continues, we will see massive contributions from economies of scale. The other good thing is we have a lot of positive contributions from pretty much all business units. I mean, in engines, we are doing our homework. Cost cutting, you heard it earlier on the FutureFit program, but also new initiatives in the factory. And we're growing, you know, step by step in service. The team's doing a fantastic job here, particularly in the United States and in Europe, really growing step by step. hundreds of initiatives, but they're being implemented with tenacity, tenacity, tenacity. And we're growing in defense and energy. It's a growth case. It's exciting. Yes, the business units are not massive yet, but they are significantly growing and they are improving profitability and resilience, which is extremely important. And last but not least, we've got the option value of new tech. And of course, the market perspective is a challenge. It certainly doesn't provide much tailwind, that geopolitical situation where every day we seem to have a new development. But it's our conviction as management team of Deutz here not to complain. There's no reason to complain. There's only one thing to control what you can't control. And that's what we're focusing on. And there's a lot we can control to navigate strongly through that difficult environment. And the results we've achieved in the last years and now obviously paying off with this really solid quarter just confirm that it's the right approach. Stop complain and rather act because there's so much opportunity out there. And that's why what makes brings us, me in particular, myself also, to have a very positive view on the future. We're creating something we call here the next Deutz. I mentioned it before, the more resilient business units, the structure, but also the business models behind that, you know, they pay off, the benefits pay off. We see already now a lot of positive P&L impact from acquisitions and other portfolio measures. And as I said, the efficiency and the cost. So we're creating an industrial platform, industrial business, the Deutz, which with a strong heritage, but a lot of upsides and potentials in growing markets supported by macro trends, defense and energy in particular. And with that, we feel more than confident to achieve our growth, which is significantly above the market and also bring the margin performance not only on that level, the 7% we are right now, but step by step also further increase the performance and thus increase also shareholder value. Yeah. Next, Deutz. I mentioned it. Strong growth across the businesses. organic as well as inorganic. We are working very structured on M&A projects. And we have delivered in the past, we have shown that we can deliver. Margin will increase further. One important thing, quality before volume. That applies particularly to engines. Five years ago, Deutz was more volume before quality. And now we change that around. And so we rather We rather sell less, but at high margin. In the end, well, effectively, we'd rather sell much at high margin. But if we need to make a compromise, it's always quality before volume. And obviously, cash is relevant. We are very sort of comfortably set up, but this should not give us a false sense of security. We're working here on discipline. ROSI is an important KPI also for the executive board. And that's at least a reason to take that extremely seriously. We are very much on track for the free cash flow guidance. for 2026. And I mentioned already more than once that we have here, we follow a prudent option approach that we continue to support or to grow in the new tech business, even if that is at this point in time, the only unit which is not profitable. But given where we are right now in other parts of the group, that is something we not only can afford, but we must afford in order to be ready when the market dynamics eventually will change in this business. Right. That brings me to the end of our presentation, and we will play back, obviously, and we're looking forward to receive and answer questions.

Thank you so much for the presentation, Sebastian, and for Oliver, and for the dive into your first quarter. So, ladies and gentlemen, we're now happy to take your questions in person by the audio line. To do so, just raise your virtual hand. And if you have dialed in by phone, you can raise your hand by pressing the key combination star key followed by number nine. And we received the first question from Lasse Stüben. So you should be able to unmute yourself and ask your questions.

Morning. First question would be on the order intake and the engines, which you mentioned is up very nicely in the first quarter. You mentioned construction and agri is better, but can you just give more color on what's going on and maybe how that's looked into Q2? Just thinking about higher oil prices generally not great for for some of these sectors. So just generally what you're seeing from customers. And then just on the same point in terms of the margins and engines, as you said, you're already above kind of where the midpoint guide is for this year. So I guess my question is, should we expect kind of that to flatline from here in terms of the margin? Or should we expect further operating leverage in the remaining quarters of the year? And I'll ask my questions one by one.

Sure. Yeah, let me start. Thanks for the question. Let me start with the order intake. And the order intake in engines was around, sorry, the book to build was just shy of 1.2 in engines. So that's first of all, the pure numbers, and it's driven by orders as well from the United States, from Europe, and as I mentioned in the presentation, also from China. So there were a couple of individual customers, and I don't want to disclose the names here for confidentiality reasons, but it's been driven by a particular one customer in the United States, two European customers, larger customers in the construction sector, and then, and that's rather... a larger number of customers with smaller individual orders out of China for fairly special equipment. So not the sort of bread and butter business, but special equipment, which also typically has the advantage of being quite high margin. So that was particular February, March. January, as I said, was a slow start as usual. April, May, we expect further Order intake, at least probably on that level, what we've seen in the last couple of months. Do we expect now a further increase? At the moment, I would be a bit more cautious here for exactly the reasons you mentioned. High oil prices are never great for economy. But on the other hand, and I didn't mention that earlier. We did not see any negative impact on the portfolio from the conflict so far. So the Iran war is terrible as it is, but it has not impacted our business, neither of the business units negatively. So we didn't see any cancellations. It's more like one customer shifting ahead, someone else is shifting forward. So we're pretty resilient at this point in time. That's on the order intake. On the margin level, we do expect a bit of purely operational leverage, given that the current outlook on the second quarter in engine production is, in terms of numbers here at the German facilities, a bit above what we've seen in the first quarter. So that's on a quarterly level. mainly because of the seasonally very weak January. So the second quarter, yes, I do expect operational leverage, mainly driven by volume. I also expect further improvements in profitability due to the efficiency measures we've taken in the assembly line here in Cologne, but that I do not yet expect significantly in second quarter, that's more something for the third or the fourth quarter. I mean, what we do here is very simple measures. You know, we increased the so-called tucks, so how many engines we bring out on an hourly basis. And we obviously want to do that with less personnel. We don't talk about massive restructuring, don't get me wrong, but it is a difference when I, on one shift, you know, I can produce more with, let's say, two, three, four FTE is less, and that's currently what we're working on. But it obviously has quite a significant and nice impact on production cost and thus on operational leverage. And then on top of that, but that's more a question for the end of the year, we're working with our Indian partner on the on the setup of the facility for smaller, for subproliter engines in India. But that only will go live in production in 27. But we expect the first components to be sourced from India. Also for some of our products here in Germany, the first components we expect to be shipped in the fourth quarter. So that's not a game changer in this year. But step by step, it will help boost profitability as well. So that's a bit sort of the high-level view on profitability as well as order volume in engines.

Super. I might have missed it in the report, but are you willing to share the unit number on engines for Q1? I'm not sure if you've given that this time around.

I think we should have this number in the detailed. We don't, but I'm happy to give it. It was around 30,000, 32,000 engines.

Okay, perfect. Very helpful.

Yeah, and if you take that number and, you know, 32,000, multiply that with four, and then you see the utilization is still fairly low. And that's what I meant earlier when I was saying there's still a lot of upside potential if you bring that up from 32 to, say, 36, 37. And that's a bit of, you know, the development we're expecting in the next month or so.

Yeah, makes sense. Very good. And then on energy, I think if I'm working it out correctly, if I kind of adjust for the FRAC order intake in Q1, the consolidation, I think orders are roughly down 10%. Is that the right number? And if so, can you give some color just on what's going on here? I know you sometimes have bigger orders from customers at Blue Star. So maybe it's some lumpiness, but just some color around the organic development on order intake and energy. Yeah.

Yeah, I mean, that's exactly the point. You answered the question almost by yourself. So the orders at Energy, they're always a bit lumpy because if I look at Blue Star, there's a lot of business goes via dealers to sort of individual orders. But there's one larger customer that's a company setting up microgrid in the supermarket network. themselves for a large supermarket customer in the United States. And this customer is our premium customer in the United States. And in Q1, we sold a little less to this guy, but compensated that with a female business. That's what diluted the margin a bit. That's one of the explanations. But also the order intake. These guys order, and when they order, they order for the next six months. And so that's why sort of the order intake blue star on a quarter by quarter it doesn't have too much explanatory impact.

And maybe just adding to that point also Q1 last year with exactly the opposite effect. There was a large one time

in the q1 so q1 25 was artificially low so there's not a big relevant okay okay understood uh and then final question uh you partially answered this but just on on the outlook for the ebit margin for the fall year i mean last year you kind of you started below the range in q1 and then you kind of worked your way into the range throughout the year this year you're starting you know in Yeah, within the range and based on kind of operating leverage, should we expect a similar sequential development? I understand maybe not quite as aggressive as last year, but generally, should we expect margins to improve sequentially through the year?

I guess, Lars, here you've got to interpret a bit on what I'm saying, because obviously we're You know, we are following a very structured forecasting process. We're in the middle of the first update of our annual budget. And, of course, if we would see substantial support for really narrowing down the margins or even increasing, we would have to update the guidance. We haven't updated the guidance today, so that's why we're still in the process of putting it out. But I'm not pessimistic.

Okay, very good. Thanks a lot.

Thank you for your questions, Mr. Stüben. So by now, ladies and gentlemen, we have no further virtual hands. So if you would like to ask a question, just let us know. And if you have dialed in by your phone, you can raise your hand by pressing star key and number nine. But we received two questions from Mr. Ringel. And Mr. Ringel would like to know, what's your view and visibility on growth momentum in the remaining quarters of this full year? And when will the strong new bookings convert into sales and earnings?

Yeah, it's a bit what I said already, right, Klaus? So, I mean, sort of the order intake in energy, the bit coming from FRERK, That also relates to the fact that we first time consolidated the business. And we're talking about 145 million euros. And that's pretty much the entire audit backlog for the rest of the year and beyond. So that explains that. So the range of audit intake in energy is typically a bit longer, especially when we talk about larger projects relating to the data center business, because this is, I mean, to build these products, That's also not a question of a day. That's a question of weeks build and implement and install. It's a question of months partially. So here the conversion is really for the throughout the end of the year and even beyond. It's different in engines and difference in engines to conversion in Europe is typically below three months due to the short shipping times. The part which applies to China and America typically ranges rather four to six months. So that's everything is for, let's say, Q2 and Q3. On the other business units, I mean, step by step on service, we have a fairly flat, fairly stable book to build on a high level. But here the conversion is typically only 30 days. new tech is no material order intake at this point in time and in defense the order intake also spends throughout the year that's sort of the most lumpy business especially the order i mentioned when when walking you through defense the order coming from the german army regarding the the loitering ammunition drones you know that's an order which has been placed i believe it was in march And the delivery is expected throughout the rest of the year. We rather expect a potential follow up order throughout the year, which then would also be delivered throughout the end of this year, potentially the beginning of 27. So that's and we appreciate, obviously, the question from you guys on that. Because the business model of Deutz is changing. And also when Lasse asked earlier about the unit sizes up to, let's say, two or three years ago, you could explain the business performance of Deutz very simple by ordering book to bill and unit size. And now with different business units, we have obviously different business models and different relationships of the KPIs. And we want to also do that together with you guys to help you building up your models on that by providing the transparency on a business unit by business unit level.

All right. Thank you. And the second question from Mr. Ringe, but I guess we touched already that as well. Looking at your guidance for financial year 26, where are you seeing yourself currently in the respective ranges?

Yeah, I think that was basically answered throughout the call, I think.

Great. So thank you, Mr. Ringer, for that question. And let me take a quick look into our system. But by now, there are no virtual hands. So final call, ladies and gentlemen. If there are questions, just let us know. Otherwise, we would come. to the end of today's conference call. So thank you for joining. You showed interest. And also a big thank you to you, Sebastian and Oliver, for your presentation. And with that, I hand back to Sebastian or Lars. Not sure. No, that's fine.

I can take that. I just can repeat what you just said. Thank you very much for joining. It's been a pleasure talking to you on that quarterly numbers and particular with good numbers and good outlook. We look forward to see hopefully many of you next week in our AGM here in Cologne. For those who haven't realized, it's not in the trade fair show as usual. It's in the Götzenich. It's normally a carnival location, but we do something far more serious than carnival this time. We're doing AGM there. We're looking forward to that. It's the first physical AGM since COVID pretty much. So that's going to be good. We'll also provide an update on our brand because the transformation of Deutz will become visible to the outside. We're extremely excited about that. And then obviously the next steps, as we currently foresee, is the first half interim report in August, Q3 in November. And of course, along the way, as many ideally also physical meetings with investors and analysts through various roadshows and conferences, which we look very much forward to. Thanks for staying with us. Thanks for following us, for supporting us. And obviously, thanks for buying our shares.