Dürr Aktiengesellschaft

Welcome to the DER Conference Calls. Dr. Johan Weyroff, CEO and Dietmar Heinrich, CFO of DER AG, will present the DER Group figures for the second quarter of 2023, followed by a Q&A session. I will now hand over to Andreas Schaller, Head of Investor Relations of DER AG.

Thank you very much, Alan. Ladies and gentlemen, good afternoon and good morning to those of you in the U.S., Welcome, everybody, to our half-year and second-quarter earnings conference call. With me on the call, as you just heard, today are our CEO, Jochen Weihrauch, and our CFO, Dietmar Heinrich. They will present the results for the second quarter and the first half of 2023, as well as the outlook, and we'll be happy to answer your questions afterwards. As always, our earnings presentation is available on our investor relations website, and we assume that you have it in front of you. Please be aware of our disclaimer regarding forward-looking statements on slide two. And now, it's my pleasure to hand over to our CEO, Jochen. Please, go ahead.

Thank you, Andreas, for the short introduction and a very warm welcome also from my side to all participants on this call. As usual, I will start with the review of our performance in Q2. Thereafter, I will quickly recap the acquisition of BBS Automation followed by some news about sustainability. Then, I will briefly comment on the performance of our divisions before Dietmar will go into more details regarding the financials. At the end, we will have a look at the guidance for 23 before we enter our Q&A session. The highlights of Q2 are on slide four. On group level, demand continues to look solid. However, there are remarkable differences between the automotive and the woodworking business. Overall, we saw strong sales and margin improvement in Q2. After the record first quarter, the order intake remained above €1.1 billion in Q2. This was mainly driven by continued strong demand for automotive and immobility production equipment. On the other hand, order intake for HOMAG stabilized at a low level. Sales revenues grew by 9% year-on-year and 10% quarter-over-quarter to more than 1.1 billion euros. The book-to-bill ratio for the quarter came in slightly above 1.0 and for the first half year we are at 1.2. As a result, the order backlog remained high at 4.4 billion euros. The composition of the backlog however, shifting more towards automotive and environmental. The backlog at HOMA continues to decline from the record level of last year. The EBIT margin before extraordinary effects rose to 5.6%. All divisions improved sequentially. Main drivers were the execution of projects at a more advanced execution stage and with higher margins. The removal of supply chain bottlenecks and our continued focus on efficiency improvements. Pre-cash flow developed similar to last year, and we expect solid cash generation in the coming quarters. Based on the developments of the second quarter, we confirm our outlook for 2023. On slide five, we see the key financial indicators for the first half of 2023. Order intake was almost on the record level of last year. Sales revenues grew by 9% as more projects entered more advanced execution phases. EBIT before extraordinary effects increased by 23% and the margin improved from 4.3% to 4.9%. Net income rose by 38% accordingly. Finally, free cash flow came in at minus six million, which is not far from last year's level. We expect solid cash generation in the second half of the year and remain on track to reach the guidance. Let's look at the order intake on slide six. Automotive demand continued to be strong and we recorded a triple digit million order for highly sustainable immobility production equipment from a customer in Asia. In addition, we recorded some follow-on orders for production equipment for batteries. With respect to margins, we can clearly see a positive development, especially for services. On slide seven, we see the geographical distribution of order intake. Orders from China declined from the very high levels we saw in the past years. At the same time, other regions have been picking up or remained at their high levels, like for example, the Americas. Our global footprint is a clear advantage for capturing demand. Now, let's turn to our recent M&A activity. On June 12th, we announced the acquisition of BBS Automation. After HOMAC in 2014, this is one of the most relevant acquisitions that we have done so far And I would like to quickly recap why this is the case on slide nine. Together with TeamTechnik and Hekuma, which were acquired in 2021, we now create a truly global automation player. All businesses together are expected to generate sales of about 500 million euros in 2023 on a performer level. As such, we are reaching our target size for the automation business already with the closing of this transaction, which is expected at the end of Q3 or the beginning of Q4. With the acquisition of BVS Automation, we do not only broaden our product portfolio in the high growth sectors, immobility, medtech, and consumer goods, but we also add highly efficient engineering and production footprint in Asia, Europe, and North America. All in all, this acquisition is clearly in line with our growth and profitability ambitions. On slide 10, we can see the complementary footprint of BBS with locations in North America, Asia, and Europe. This clearly improves our market reach and brings us closer to our customers and provides us access to efficient engineering resources worldwide. Slide 11 highlights the market growth potential over the next years and the most important drivers. Increasing labor shortages and the need for near or onshoring to develop nations. New assembly lines for EVs, including self-driving, safety, and comfort features, and the growing and aging world population with increasing demand for high-grade medical care. All in all, we believe that the automation market will remain very attractive for years to come. To sum it up on slide 12, the acquisition of BBS Automation is a strategic driver of the transformation of the Dürer Group towards a broad-based capital goods player. It is highly synergetic with Team Technica Nekuma, creates a leading automation platform for assembly and testing, provides access to high-growth markets, and contributes positively to our growth and profitability targets. Let's continue with a quick update on sustainability. One of the drivers of our order intake is demand from automotive customers that want to reduce their carbon footprint or even become carbon neutral with their paint jobs. We've talked about our role as enabler of nearly carbon neutral society before. Today, I would like to give a brief update on the progress with the reduction of our own CO2 emissions. On slide 14, we can see that we reduced our CO2 emissions by 51% in 2022 compared to the base year of 2019. Main drivers were the switch to green energy purchases, the buildup of own photovoltaic systems, and the modernization of heating. And there's more to come. In 2023, we target to reach a reduction of more than 60% compared to 2019 by completely switching to green electricity. At the same time, we continue to invest into photovoltaic and increase our capacity to 6 MW peak. From then on, one of the key drivers will be the transition to emission-free vehicles in our company fleet. The CAR policy was already changed accordingly in 2022. All the measures we have implemented and the high level in reporting transparency are also reflected in ESG ratings. On slide 15, we can see an overview of a number of important ESG ratings and how we as a company have been rated over the past two years. The improvement is clearly visible. Going forward, we will especially focus on ISS ESG and Sustainalytics as we believe that not all our efforts are reflected there yet. Our ambition clearly is to be among the best rated companies in our industry for all key ESG ratings. On slide 16, we would like to refer you to our recent sustainability report, 2022. It was published on June 20th and includes all the details about our actions and performance in the area of sustainability. Now, let's have a look at the divisional development. We start with paint and fine assembly systems on slide 18. We continue to see high demand for our paint shops and received another large order from an EV startup in Asia. In addition, we reached a really groundbreaking agreement for long-term cooperation with Mercedes to establish carbon-neutral paint shops. The cooperation agreement is a real milestone as it underscores two things. Our role as a key enabler for decarbonization of production and the long-term orientation of our customers who are looking for a stable partnership with Dürer when it comes to manage sustainable transformation. The first project will be the sustainable conversion of the large paint shop in Sindelfingen, Germany, starting next year. Sales revenues are picking up as expected as the project volume in execution increases. In addition, we have seen solid service growth with strong margins. Both factors drove up margins in Q2. All in all, we're on a very good track based on strong demand and improving order backlog margins. Let's turn to application technology on slide 19. Similar picture here. Order intake continues to be strong and was also driven by the sustainable EV project in Asia. Revenues grew at a comparable pace like at PFS. Main growth drivers were projects in Europe and China. EBIT margin before extraordinary effects improved quarter on quarter and was well above last year's level that was impacted by the lockdowns in China. We're on track for further profitable growth and will focus on increasing service sales. Next is Clean Technology Systems on slide 20. This division strongly improved compared to last year. Demand continued to be high, resulting in a 15% growth in incoming orders. A key driver were orders in North America for environmental technology. In addition, we also won two smaller follow-on projects in the area of battery production technology in Europe. Germany and the US remain the main contributors to revenue growth in the first half. Service sales was growing in line with overall sales. Margins improved significantly year on year. Cost inflation was successfully compensated by price increases. Demand in North America has picked up considerably and service margins went up. Overall, we're very pleased with the development at the division CTS and see potential for further profitable growth. On slide 21, we can see the summary of developments at the measuring and process systems division. Order intake was close to the high level of the prior year. Demand was driven by North America and Asia. Sales revenues and EBIT margins strongly recovered as supply chain bottlenecks eased and utilization improved. The service share was above 30% and the margin is very solid. Within NPS, the filling appliance business is running very well. The supply equipment that fills liquids into heat pumps during the production process. As demand for heat pumps is currently very high, demand and margins of this business are very good. All in all, MPS is on a clear recovery path with the normalization of the supply chain and solid demand. Last but not least, let's take a look at HOMAC on slide 22. During our Q1 conference call, I mentioned the trade fair Liegner in Hanover. I was there to get an impression of the interest and the mood of the customers. I was very impressed by the exhibition stand of HOMAC, Weinmann, and our Danish subsidiaries SystemJM and Kalischer. Customers were very interested to learn about the innovations that HOMAC as the market leader was presenting. I'm sure the innovations shown will additionally drive capex spending when the macro picture will become more favorable again. In our view, the underlying demand is not too bad, driven by the need for more automation and the lack of skilled workforce. However, orders are still muted as customers delay investment decisions in light of the subdued demand for furniture and houses due to inflation and high interest rates. We are confident that the market will pick up again, but the timing and speed is still unclear. Our order intake in the second quarter reflected the situation I just described and stabilized on a lower level. Sales revenues reached a level close to the prior year driven by the still very high backlog. The EBIT margin before extraordinary effects improved quarter on quarter. The service share and margin remained muted as production volumes at our customers are at low levels. In order to strengthen our resilience in this slow demand environment, we are implementing strict cost saving measures and are ready to use available flexibilities such as overtime accounts to balance potential lower utilization. Overall, we consider the demand weakness as temporary. We will continue to focus on margin improvements and resilience of the business while keeping the long-term growth potential in mind. Now, let's move on to the service business on slide 23. Service sales grew sequentially, but a bit slower than the overall sales level. As such, the service share declined slightly to 27.3%. The good news is that the service margin continues to increase. Our clear focus for the rest of the year is to increase service sales as a driver for further margin development. And now, Dietmar, I hand over to you for the financials.