Elringklinger Ag

Ladies and gentlemen, welcome to the Edwin Kringer AG Q3 2025 earnings conference call. I am Moira, the chorus call operator. I would like to remind you that all participants will be in listen-only mode and the conference has been recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Thomas Yesulat, CEO. Please go ahead.

Ladies and gentlemen, welcome to our earnings call for the third quarter of 2025. Also, on behalf of my colleague on the board here, our CFO, Ms. Isabel Daun. Today, I will start with some highlights also from a strategic perspective, and my colleague Isabelle will walk you through the key results for Q3. With this publication, we reaffirm our guidance for 2025 as well as our medium-term outlook originally communicated in the annual report in March. As always, We will conclude the presentation under the Q&A session, and we look forward to addressing your questions. We advance the implementation of our Shape 30 transformation strategy as a top priority. Since its launch last year, we have made significant process in reshaping the Erlen-Klinger group and further measures on process. Another measure is the streamline program, which aims to reduce personnel costs. Initial savings are expected to take effect in 2026, with full savings realized by 2027. In addition, our organic sales performance during the first nine months of 2025 grew by 2.2% compared to the previous year, outperforming the European market, which recorded a decline of 1.7% over the same period. We're making significant process in the field of e-mobility. Operations have started at our e-mobility hub Americas in Easley, South Carolina, which is in preparation for production ramp up. At the same time, we're gearing up for production chart also in China. After a phase of substantial investments, our capex level is expected to normalize to a more moderate level going forward. Shape 30 represents our roadmap for transforming the group, given the profound changes in our industry. Our transformation strategy is designed to improve profitability and cash flow. We have already taken significant steps along this path, including the sale of two companies in the US and Switzerland, the discontinuation of the electric drive systems, and with a reinforced focus on profitable components. In this context, measures to strengthen the balance sheet have also been implemented. These actions are now complemented by a strict cost reduction plan. One of its elements is the streamline program, which targets at least 30 million euro in global staff cost savings. Shaping the profile of the group summarizes one dimension of the Shape 30 activities. The other dimension encompasses the preparation for future growth based on the received nominations of the past quarters. And in this context, we have successfully initiated the ramp up of major e-mobility projects. Currently, we're completing the final steps for the start of production, focusing on cell contacting systems and battery components. As part of the product transformation at Erwin Klinger, we have made initial investments in production and space and equipment. At present, we're getting closer to the end of the investment cycle. Along this, we'll return to a more disciplined CAPEX level according to our midterm target of 2% to 4% of group sales. With having said this, now I hand over to my CFO colleague on the board, Ms. Isabel Daun.

Thank you, Thomas. I will now provide you with some more details on our financial performance in the third quarter of 25. At the first glance, the order intake appears to have declined by around 3%. However, we reported slight growth in operating terms compared to the prior year period. This is primarily due to the fact that last year's figures still included contributions amounting to €21.1 million from the divested entities, which have not been part of the group since December 31, 2024. Despite the challenging market environment, we see a positive development in the underlying business. Organically, which means adjusted for the M&A effects and exchange rates development, order intake increased by 16.6 million euro, or 3.6% to 477 million euro. The order backlog, representing customers' cumulative short-term co-ops not yet realized, stood at 1.1 billion euro at the end of the third quarter of 2025. For comparison, the previous year's reporting period showed 1.3 billion euro, a figure that still included the backdrop from the two growth entities divested, which amounts to 136 million euro. Starting with the sales and its organic change on slide number five. In a challenging market environment, Elden Klinger generated revenue of 396 million euro in the third quarter of 2025. representing a year-on-year decline of 10% according to reported figures. But figures have been affected by M&A as well as FX for this quarter. The two entities in Switzerland and the United States had contributed revenue of €34.1 million in the third quarter of 2024. This means the relevant basis for a year-on-year comparison will be €407 million. Additionally, revenue was diluted by currency effects equivalent to 8.1 million euro. All in all, when excluding currency and M&A effects, revenue declined organically by 0.6% in the third quarter of 2025, remaining at a relative stable level compared to the previous year. While global automotive production in the third quarter was 4.4% higher than the prior year level, Europe , posted only a modest increase of 1.2% in the third quarter, and Germany declined by 3.6%. When considering year-to-date sales figures, prior year's numbers included €123 million from the divested entities. With this in mind, sales in the first three quarters amounted to 1.2 to 8 billion euros in line with the first nine months of this year. When taking into account ethics effects, organic sales even increased by 2.2% year-to-date. The global production market grew by 3.8% over the first nine months, mainly driven by China. Elden Klinger's poor market, Europe, even contracted by 1.7% the first nine months. This disparity underscores the challenging conditions in Elding Klinger's primary market, where limited momentum contrasts with stronger global trends. The sales mix presented on slide 7 provides a more detailed breakdown of the factors behind organic sales. Within the segment breakdown, the original equipment segment remains the largest contributor, accounting for 66% of total group revenue, which corresponds to €262 million in sales. Compared to the same quarter last year, revenue in this segment declined, mainly due to the assessment of the two entities in the USA and Switzerland, as well as ongoing challenging market conditions. Within the OE segment, e-mobility generated sales of €26.3 million in the third quarter of 2025. This business unit is currently in a ramp-up phase for upcoming large-scale series orders, underlying its strategic importance for the group's transformation. The divestment of the two entities has also been reflected in a decline in the metal-forming and assembly technology business units. The aftermarket segment continues its strong performance, increasing sales from €32.8 million in Q3 2024 to 37.4 million euro in the third quarter of 25. Growth was achieved in the Asia-Pacific region, South America, and the rest of the world, while revenues in Europe and North America declined year on year. In addition to currency headwinds and a general weak market environment, the primary factor behind this trend was the divestment of the two entities in the US and Switzerland. Adjusted EBITDA of the group declined to 41.1 million euros compared to 51.4 million in the last year's third quarter. In Q3, adjusted EBIT reached 21.2 million euro, corresponding to a margin of 5.4%, which is even above the full-year target of around 5%. Adjustments totaling 16.7 million euro almost exclusively relate to exceptional items from the streamlined program to structurally reduce personal costs in the context of Shape 30 transformation strategy. Reported EBIT amounted to 4.5 million euro corresponding to a margin of 1.1%. This is a noticeable improvement to the same quarter last year when EBIT reported stood at minus 35.2 million euro. Thanks to the strategic measures implemented as part of the company's transformation strategy, the group is well positioned to maintain a solid adjusted EBIT margin at a comparable high level. These actions refer to an EBIT improvement of €4 million and created a more resilient foundation for sustainable performance. All that has been more than compensated in the third quarter by FX.carats, totaling €2 million, or others amounting to €2.7 million, such as ramp-up costs for the large-scale orders in South Carolina and China. In addition, the release of provisions of €1.1 million in Q3 2024 has to be considered. In the third quarter, the R&D ratio rose to 5.9%, while absolute R&D spending edged down year on year slightly from 24 million to 23.5 million euro this keeps the company comfortable within its target range of five to six percent of group revenue in the third quarter of 25 ellen klinger reported net working capital of 389 million euro the corresponding ratios to 23.2 percent bringing the group to its short and medium-term goal of maintaining the figure below 25%. This development highlights ongoing initiatives to improve capital efficiency and enhance operational flexibility in parallel to sales activities relating to November. Following elevated expenditures around the turn of the year in Q4-24 and Q1-25, CAPEC has been lowered in the second quarter. As anticipated, this figure was quite stable in absolute numbers in Q3, with capex at 27.8 million euro and a capex ratio of 7%. It is expected to lower this level starting next year and realize a capex ratio level of around 2% to 4% in the midterm at last. Regarding the cash flow in the third quarter in 2025, the group maintained a positive level of performance as in Q2, and achieves an operating free cash flow of €18 million. This underscores the continued benefits of disciplined financial management and the sustained impact of working capital measures, even in a challenging market environment. And it is the basis for reaching our target range of 1% to 2% of sales with a strong fourth quarter, as we had last year. This is what we are currently working hard on. Net financial debt slightly increased to 389 million euro corresponding to a net debt added by ratio of 2.2. And last but not least, group equity totaled 653 million euro by the end of the third quarter of 25. Slightly below the 659 million recorded at the close of Q2 25. Coming to the segment performance on slide 11. In the third quarter of 2025, the OE segment generated sales of €262 million. When comparing this to the prior year figure, it's important to account for a sales contribution of €34.1 million from divested entities. The adjusted segment EBIT margins stood at minus 0.8%. The aftermarket segment is successfully advancing its growth strategy, delivering yet again a quarterly increase in revenue. In the third quarter of 2025, sales reached 96.1 million euro, which implies a growth of 13.2% compared to a previous year's quarter. With an adjusted EBIT margin of 18%, the segment once again delivered a strong level of profitability. The engineered plastic segment delivered a strong performance in its third quarter of 2025, supported by its broad and diversified industry mix. The segment recorded sales of 37.4 million euro, marking an increase of 4.6 million euro compared to the same quarter last year. With an improved adjusted EBIT margin of 13.4%, the segment demonstrated its resilience in a challenging market environment. Now I'll hand back to Thomas Jessela from concluding works on the market and the outlook.