Deutz Ag Akt

Good morning ladies and gentlemen and a warm welcome to today's Deutz conference call on the first half year 2026. Please note that this call is being recorded and a replay will be available on deutz.com later today. Your participation in the call implies your consent to this. As always, please note the disclaimer regarding today's presentation including the FFG transaction covered in this call. To get started right away, I'm pleased to welcome Deutz CEO Sebastian Schulte, the CFO Oliver Neu and Lars Boelke, Head of Investor Relations and Communications, who are joining us from Cologne today. After the presentation, we will be happy to receive your questions in person via the audio line. And with this, I will hand over to Lars Boelke. Lars, the stage is yours.

Thank you very much and a very good morning from our site here in Cologne. Thanks for joining today's call. It's a kind of special call for us, not only that Deutz grew double digit in the first half, as you all know, but also that we, as you all know, recently announced our transaction that will also give a little glimpse in this call. I'd also like to take this opportunity to thank all of you whom we had the opportunity Thank you very much.

Thank you very much Lars and also from my side a good morning to everyone. Great that you're all joining. Let me start giving a general overview on our first half year results before I will then as usual not only go through the business units and the details before handing them over to Oliver but also as Lars indicated will I'll mention again a bit of content on our FFG transaction. Looking back at the first six months in 2026, we can say we are pretty pleased in how the year not only started, but how we actually moved through the first six months. So new orders, the trend is still very positive. 1.3 billion new orders, that is a 29% year-over-year improvement. Revenue was also up 1.1 billion, 11% over the respective period of last year, and the margin in the first six months at 7.1%. So on a very, very decent level, particularly, and I will explain that later, given that in our sort of legacy business, the business unit engines, We are still seeing a fairly low demand compared to historical standards. But with that in mind, 7.1% margin is actually an extraordinary development we've seen so far. If I just break that down to the second quarter, as you see in the bottom part of the page, new orders 560, revenue 585. So slightly, new orders slightly below revenue. that's not a point of concern I will see later because we had a very very decent Q1 in terms of order intake so we're growing here across all business units and all regions and the margin in the end that's I mean most of the most important thing that on the margin so the bottom line second quarter was up a bit again 7.2 percent a little above the first quarter and 1.4 percentage points year over year Highlights, and there were quite a few. So just to keep that back in mind, and most of you have been following us over the last six months. So we further increased our global footprint in energy with an acquisition in Latin America. We acquired the company Maxitrust in Coitiba in Brazil. Closing happened in the second quarter as well. The profitability of engines rebounded. And again, as I just said a couple of minutes ago, in spite of the still not perfect market environment but we'll see later when we look on the margin how well we're developing here and very important our business unit service pushes on for further growth so that was also extremely pleasing and and I will work I will elaborate a bit further the landmark transaction with regard to the acquisition of FFG was signed at the beginning of July Look, we announced this acquisition of FFG, Flensburger Fahrzeugbaugesellschaft, on July 9th. And since then, myself, but also Oliver, we had the chance to speak to many of you. We spoke in London, Frankfurt, and last week I spent a couple of days in New York. And the reception on all these, virtually all these investor talks was extremely positive, not only constructive, but very, very positive. And that gives us a lot of confidence as we move forward to our extraordinary general meeting later this month on August 24th. But let me use today also to build on the picture a bit further. I mean, we are, and I believe everyone who listened to us and spoke to us will feel that probably in every conversation. We are generally excited about what this combination will become. And that, so to speak, is what I want to leave today with. So there are three things that matter. So first of all, FFG is generally an exceptional asset. It generated approximately 760 million euro revenue in 2025, a CAGR of around 50% per year since 2023. And that makes it one of the fastest growing businesses in all of European defense. and the trajectory from here going forward is actually what really matters because we expect FFG to generate revenues above 1 billion euro in the coming years starting next year at an EBITDA margin we write here, now we are very specific here, on above 20%. So that is really a best-in-class asset as you can see. and that is the destination this growth profile is heading towards and the order backlog at the moment standing above 1.9 billion euro is what underwrites here this path. And we expect in the coming months and years obviously this order backlog to significantly increase. So more than 1,100 employees across nine locations and more than 90% of the revenue comes from NATO customers as well as Ukraine with at this point in time less than 20% from the Bundeswehr alone. important is FFG is not a German government contractor exclusively as many other assets are it's a generally alliance-wide defense industrial platform and that's one of the reasons why it perfectly fits to Deutz second The program network behind those numbers is the single most important non-financial asset in this transaction. FFG holds certified positions across more than 30 NATO platform types, including the Leopard 2, the Boxer, the Puma, the Marder, the Fox, the Fennec, the M113, serving more than 15 NATO nations and the Ukraine. And these are not just commercial relationships, they are formally certified, technically embedded program positions built over decades. and that kind of institutional depths that cannot be replicated quickly by no one. And certainly not in time to capture this outstanding procurement cycle that is opening right now. So from the moment this deal closes, that entire network becomes part of Deutz. and third ffg is not just an mo operator that happens to be growing that itself would be exciting but ffg is more than that it is a systems integrator with his own proprietary platform pipeline the vcent2 a multifunctional Leopard 2 based armoured recovery and engineering vehicle, the ACSV, a modular armoured combat support vehicle already delivered across NATO nations, and the next program waves, the TA and the CAFs, representing substantial additional volume potential. So this OA, this original equipment pipeline, is what gives the order backlog its duration and what gives the growth profile its structural character. Let me now turn to the structure, because it tells you something about the nature of this partnership. The total consideration, as you will already know, is approximately 1.6 billion Euro. And around 1 billion Euro will be paid in cash, financed through a secured debt from a consortium of international banks. All secured, all signed, all without remaining risk. and the remaining around 0.6 billion Euro will be paid in newly issued Deutz AG shares which the seller family receives, the families, the more receive and will hold as long-term shareholders in the combined group. And third, strategic alignment, further variable performance link components, long-term focused investment agreement and a supervisory board representation for the FFG families. And that last element was not incidental to this deal. It was central to it, quite frankly, because we did not want the seller who just disappears at closing. We wanted anchor shareholders who literally have skin in the game and will keep skin in the game and because then the incentives from day one are totally aligned with every other Deutz shareholder and that makes it actually not only exciting it makes it also extremely trustworthy and built for the medium and long run. So the FFG families as I outlined they will join at a 29.9% stake and that is a structure I'm extremely proud of because it serves as I just explained our shareholders it serves the interest of the combined Let me now turn to the earnings profile because I want to be as precise as possible about how the accretion picture will build. So the share issuance creates initially a dilution of approximately 65 million euro new shares. But FFG's standalone earnings contribution on a revenue base of approximately 760 million, taking the 25 numbers, and at the best-in-class margins provides already a very strong starting point and offsets that dilution on a pro forma basis pretty much immediately. From there, the accretion picture compounds in two further stages. So the early cross-business synergies, such as engines, service network, logistics, they will add further earnings uplift. But more importantly, The conversion of FFG's already contracted order backlog and the ongoing MAO business. So that backlog as I just explained stands give or take about 1.9 billion euros and it is awarded, it is contracted, it's signed and it is converting. So that is the near-term earnings engine which will support this combined business. It does not depend on integration, execution or qualification cycles. That's important and that's a message we kept sharing in all our investor talks. This business, this acquisition makes already commercially, financially sense without additional synergy potential. Obviously, it doesn't mean we're not going for that, but it's important. It makes sense without the synergy. The synergy add on top of that. And longer term, the conversion of FFGs brought a program pipeline into contracted revenue. The CAFs, as I mentioned, the ACSV expansion, VZ2 growth beyond the current three nations extend the profile considerably and well beyond 2030. We do expect revenue growth in line with double digit NATO defense budget growth rates. And that is a structural tailwind, not a cyclical one. And that adds to the resilience of Deutz. So what I can say today is that the direction on earnings, on cash and on leverage is clearly positive from the point of close. The headline is this. We did not do a dilutive deal and we hope for synergies to catch up. So the equation is there from the start, from the very beginning, grounded in contracted revenue, and it compounds from there. And we will, of course, provide further guidance once we are through to closing. Right. Having said that, let me now move on to the development of our business units. Let me start with the business unit engines. Headline is very clear. Profitability recovery accelerates. We are continuing here with an outstanding team to implement our portfolio and footprint strategy. And just a few highlights. So at our POTS plant, the largest DEUTZ plant here in Cologne, the performance program shows already first savings. There's a lot of efficiency improvement, double digit efficiency improvement on the assembly line five. We do see higher cost savings due to a quicker relocation of products from Cologne Calc that's a bit of a satellite plant here which we just closed literally last week was the last last week Friday we finally closed it and we moved the products from Calc here in Cologne to Spain at much much better cost base that went in line or that goes in line both aspects here with the voluntary leave program for the Cologne site production but also production overheads and non-value adding positions here where we'll see around 100 to 120 FTEs leaving to further improve efficiency at conditions which are fair but for the employees but also favorable for the business. Then moving a bit on portfolio and the new G-Drive program. Here we talk about a couple of new engines, including actually a 24 liter engine for Genset customers. So here we're starting already with the first fixed orders. The next year we'll see further growth in that. But important is it works. Customers are ordering these products. Very, very structurally strong demand. and a very very good cost base to the use of partners here. Partner is a good point and we are bringing a very long lasting but long sort of hibernating partnership with Chinese FAW. We bring that back on track. and here for the best-cost country supply of some of the legacy engines which does not make sense to deliver them from high-cost Germany anymore but there is still a structural demand all over the world and we do that together with a partner in China. China is the next point here as well. Our joint venture with Sani in China in Changsha It's progressing quite well now. First time I can really truly say we're making really good progress here. In particular, not only compared to the previous years, and it's also because we made a bit of a change there. We're using also more engines there for power generation, rather than what it was initially designed for, for the use in heavy duty trucks. So things are moving quite well, despite and the fact that the order intake is not on the level we'd like to have it going forward. But it's important to focus on what we can influence and we're doing that here pretty well. But bring that to numbers as well. So the demand in the second quarter slightly increased year over year. Market is still a bit under pressure, but this is really not to be seen with a point of concern. It's moving pretty well. We also now have a fairly healthy order backlog of 385 million euros that's significantly higher than the 315 million we had a year ago and the profitability I just gave I just gave sort of the qualitative information on that cost savings from our future fit program that was not the program I was just mentioning with the efficiency and ports and the closure and the closure of the facility in Kalk that was taking out mainly engineering resources last year here in Cologne as well. That program is pretty much not only fully on track, it's completed. All the savings we had aspired to achieve have been realized, so that's very, very successful. Then, obviously, there are always cost increases, labor costs, material prices, but we manage pretty well to offset these cost increases with respective price increases as well. And you see here, and I will not go through all the numbers in detail, but you see that we moved significantly up from 25 to 26 in the first quarter already, with 3.7% margin. Now in the second quarter, 3.8%. that is still you know far away from seven or eight percent but again given the occupation of the factory that's pretty good and important news going forward as soon as there will be an uptick in new orders Grossmargin in this business will immediately kick in at double digit level and then we'll actually see a perspective which we will enjoy very much. Let me move on to the next business unit, which will be service. So it's about growth. It's about growth and performance. And we have also and we'll show the numbers in a bit. a very very healthy order backlog. So we're expanding here as Deutz Service as an authorized service partner also for machine manufacturers and service partners beyond the Deutz engine, particularly in the United States and the Nordics as well as with the implementation of our service business for the Daimler truck engines because we exclusively sell to off-highway customers. The expansion in particular has continued in the United States. We made another acquisition in California, GMT Truck Repair, that we acquired in June 26, so the footprint in the US and in this case in California, which was a bit of an untapped area beforehand, is now improving. The Deutz Power Centers in the United States, they grow quite nicely, solid, solid field service growth. and very important also that we are realigning our dealer organization in the DACH region, particularly in Germany. Those who follow us for longer know that we've been working in the last four or five years quite successfully on insourcing or in-housing external dealers, but we didn't really touch the German network here. We're changing that now. We did actually terminate quite a few contracts and are now renegotiating them. And that's what we mean when we're talking about realignment of the dealer organization here. So we see a very, very good progress as well. Parts trading business, traditionally the one, the part of service with the highest margin is continuously expanding as well. and and that's really but going forward obviously thought service is that what is that asset what will in our ambition going forward not only support engines but more and more actually support also the other business units most notably energy as well as defense and we're working here quite nicely particularly on the genset service expansion with FRAG in Europe but also in the US with Bluestar. Let me go to numbers as well. So new orders are up. You see in the second quarter, focus on the second quarter now, new orders 152 million, revenue for the first time above 150. So obviously you're showing or benefiting from all the growth initiatives I've just mentioned earlier. and the order intake in the first half is now a 16.1% increase year over year and that is exactly the level we would like to see in growing this important business. Order backlog is not as relevant of a number like in engines because the because the through time of the business is as you can see by 57 million. I mean, it's much, much quicker. So but important is compared with the number from June 25, where it was only 42 million. So you see also here a healthy development. and very nice and we're celebrating every record of course to keep the team motivated in June was the so far highest monthly revenue of 55 million euro so that means obviously the entire team is aspiring to beat that number at the next possible Thank you very much. focus more and more also on efficiency, on technician utilization. So that's why it's not a point of concern that the margin is slightly diluted, but also bear in mind on a very, very high level. And on top of that, obviously, we grow more in working on the machine than selling spare parts. So that also contributes to that slight dilution of the business. But bear in mind on a group level, whatever we do here is always margin accretive. So let me move on to the next business unit which is energy. I mentioned it in the highlight page at the beginning already. We acquired Maxitrust in Brazil with that acquisition expanding the coverage to Latin America as well and also very important growing market. There's further diversification of our US customers with Bluestar distributor orders on record high. We like direct orders as much as we like distributor orders, of course, but it's always good, you know, to improve, increase both. Both foots were standing on here, both legs were standing on here. The ramp up of FRAG for the second half is going quite well and the new assembly facility in Schwerin and in Niedersachsen is well on track, the commissioning here. And now, obviously, very important that this great business unit we have been creating over the last three years is now showing and proving that the equation one plus one equals more than two will hold true. Our teams working together, the international teams working together pretty well here to really expanding and building a global business. And this year, We are already targeting and when I say targeting it's actually we're planning and we're clearly building on achieving more than 300 million very profitable revenue and the team's been super excited to grow that number to above 1 billion in the next five years. The market is supporting that, teams are excited to do that, so that's another great growth story here developed. and a little bit also an exciting outlook. We are working here and elaborating a pilot case for the use of Agendic AI in the business development in sales in actually two facilities. There will be something probably we can present in the next month is because obviously it's important to support this strong growth without adding proportionally human resources on that because we want to ensure that more growth gives extraordinary more profitability. Let me turn into the numbers for energy already. And here you see an ever growing business. So new orders in the second quarter at 55 million euros. And that includes 10 million euros from the Maxitrust consultation. But there's also now an extremely strong order backlog, now 220 million euros. So that shows sort of the forecastability, planability, reliability, in this business model is one of the strongest in our portfolio, particularly if you compare to the first half of last year. Across our five business units, energy is the strongest growth contributor. Up 37 million Euro year over year, driven obviously by the companies who joined us throughout this year, FREG in Germany and MaxiTrust in Brazil, but also organic growth, especially in the United States and also in Morocco and China. There is now, speaking on the margins, a significant recovery in the second quarter compared to the first quarter. So we're now at 13.7% in the second quarter. We explained that when we showed the first quarter numbers that the first quarter was a bit of an outlier. due to the consolidation effects and some seasonality and here you clearly see that we're moving already significantly up and the outlook for the rest of the year is also even higher than that both obviously in terms of revenue I mentioned the 300 earlier but also the margin level so the good thing is here As you can take that from the strong order backlog, the predictability not only in terms of revenue, but also in terms of profitability is extremely solid here. Let me move on to business unit NewTek. Revenue nearly doubles. That sounds super exciting, but it's still on a fairly moderate level. We do however work here obviously on our presence. Deutz will now act under the brand Deutz New Tech. Urban Mobility Systems as well as Futavis have been renamed and are now operating under the Deutz New Tech brand. It's important to position ourselves here with the strong brand we have. We're now in this business converting the pipeline into revenue, scaling further projects, scaling production delivery capabilities, enhancing also efficiency and R&D. It's all about focus, focus, focus. And there are many, many market opportunities, but we are always, as you know, very transparent on The outlooks in the different business areas. This is obviously the business unit which is most difficult to predict because it depends a lot on sort of overarching market and industry trends. Important for Deutz is that we have to be here, we have to be ready when the market, when the demand picks up. Then we are there and it's a bit of an option value. You know, if at some point the engines business gets under more pressure from conversion to battery electric products, important is to be ready. And that's exactly what we achieve with our new tech business. So in terms of numbers, new orders in the first half, you see already we talk about completely different levels, about 7 million a year new order. And that is still reflecting that muted demand, which I just mentioned. Backup is at 6.5. It's even a little lower than what we had last year. But again, with these sort of single digit or low double digit numbers, sort of percentage improvements or deteriorations are not as meaningful as obviously in other more established business units. The revenue in the first half nearly doubled, particular from the delivery of a few electrified excavators. Those go with solid gross margins, but obviously not strong enough. The business is not strong enough to bring the EBIT into breakeven. But you can also see profitability has been improving compared to previous years because again, focus, focus, focus on R&D activities as well as cost discipline. That brings me now to Deutz Defense. Deutz Defense becomes really like a core pillar of the business. We are continuously committed and working on the DevTech ecosystem. You all know about our investment and partnerships in ARX as well as in Titan. With Agkt we launched the first series production of the Gereon ground system in Ulm at our facility. It's not a huge series, but it's more than just a proof of concept, so that's great. There's more we are developing, particularly also in terms of resilient energy solutions. We introduced at the EuroCentury in Paris a partnership with HTC Solutions. We do also further ramp up the Sobeck activities. We're talking Sobeck, as you know, we're talking about battery electric drive systems for unmanned drones. And we're working also continuously with R&D and new powertrain solutions. There is a lot of interest. There are also, after the EuroCentury, quite promising orders. Not all of them we can disclose for confidentiality reasons, The vector is here clearly positives. Also new orders from a drone package for the German army for one of the three suppliers of the German army they built on our Sobeck drives. and, as I've just mentioned, Eurostudio was a success for us. Many, many, many leads for military engines, power packs and hybrid systems. And of course, as I mentioned earlier, the FFG acquisition was signed. However, in terms of numbers, we see substantial order growth in the second quarter of 26 versus the previous year. The order backlog is now at 43 million euros compared to 27 beforehand. also the revenue is 47% above above previous year now to 52 million and the growth is primarily coming from defense and not from others bear in mind we have also Hyot S the engine after treatment specialist part of this of this sub-segment here for which by the way the successful turnaround continues results are moving very much in the right direction but that is certainly not the focus of what I'm mentioning here and the EBIT is also developing as expected in a nice way. It's a bit lumpy, both revenue and EBIT is always a bit lumpy because we don't talk about serial business. So one quarter you have more, one quarter you have less. Important is obviously to look in the trend together. However, before moving on, what you've just seen here is Deutz Defense as it stands right now. Obviously, FFG, the acquisition of FFG will change the scale of that picture totally. Our defense business will then exceed, as I mentioned earlier on the call, one billion in revenue already in next year, 2027. And with that becoming a really, really not only an integral part of the strategy, but a very, very relevant part of the business in all aspects, revenue, profitability, number of employees and so on. FFG will operate as a standalone unit within our defense business unit. Its management, its workforce, its customer relationships, they will be fully preserved. So we will create one strong defense business unit around FFG. and what Deutz adds is industrial manufacturing scale, propulsion technology across the full power range relevant obviously to FFG's platform portfolio and that's extremely important a NATO-wide service network. So together and we can be quite proud of that. Together this defense business unit will become the only European domicile platform covering the full land vehicle lifecycle, propulsion, integration, MRO and modernization and that under one roof. So that opportunity exists in European defense today and we together with FFG, we are able to capture it. Right. Thanks for listening so far. I will hand over now to Oliver, who will focus on the financials a bit more detail.