Elringklinger Ag

Ladies and gentlemen, welcome to the conference call on the preliminary reviews for the year 2025. I am Sergan, the chorus call operator. I would like to remind you that all participants will be in listen-only mode and the conference being 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 the telephone. For operator assistance, please press star and zero. The conference must not be recorded or broadcast. At this time, it's a pleasure to talk to you.

Ladies and gentlemen, hello and good afternoon, and thanks for being available today. I welcome you to our conference call on the preliminary and unordered figures of the fiscal year 2025. I'll start with some remarks on today's release. Afterwards, I will hand over to our CFO, Isabelle Dahmen, who will walk you through the financials down to the EBIT level. As usual, you will then have the opportunity to ask questions. Please note that the outlook as well as the financial details will be published together with the final and audited figures on March 26. The company closed the year in an environment still marked by considerable uncertainty and volatility. At the same time, the group continued to prepare for the next phase of its transformation, reflected in high levels of investments to launch additional serious projects in the field of cell contacting systems. Despite these upfront costs, the year-end performance was strong, with operating free cash flow reaching 2% of sales. The ramp up of battery component projects progressed further, driving significant sales growth in the e-mobility business unit. In addition, the group successfully implemented its streamlined program, achieving a sustainable reduction in personnel costs. Overall, the company mainly met, or in some areas even slightly exceeded, its full year guidance targets. Let us have a quick look on the markets. Across major automotive regions, the powertrain mix shows clear structural differences. In North America, internal combustion engine vehicles continue to hold a dominant share, supported by market preferences and comparatively slower electrification dynamics. Europe, by contrast, sees a higher share of all electric vehicles as well as hybrid vehicles. Within the second half of the decade, There will be a significant shift towards all electric. A lot of new programs of the established players are going to ramp up. However, long-term forecasts point to a decisive shift. By 2030, all major auto regions are expected to accelerate strongly toward fully electric vehicles. Projections indicate that Europe and China will experience some of the fastest growth in battery electric vehicles, while North America is also set for a substantial increase by the end of the decade. In summary, although today's powertrain landscape varies widely between regions, the trajectory toward fully electric mobility by 2030 is clear and consistent around the globe. Let us have a closer look on the pure electric mobility, because this will be our core growth market with regard to cell contacting systems, or other components from our broad range of e-mobility solutions. Across all major automotive regions, including China, Europe, and North America, the shift toward electric mobility is firmly underway with strong growth projected through 2030. When considering our large-scale projects, you will see that we are covering quite a good share of those vehicles, especially in Europe and also North America. China continues to lead the global transition to electric vehicles and shows a different market development with regard to the rising importance of pure local players. Overall, the market of all electric mobility is expanding across all major regions and significant growth is expected throughout the coming years. The shift towards e-mobility is well underway and continues to accelerate. Let me now hand over to our group CFO, Ms. Isabelle Damo.

Thank you for handing over, Thomas. Let me first come to the preliminary and audited figures on slide number five. Summing up, we have successfully concluded the 2025 financial year and laid the foundation for our future transformation. We have generated sales revenue of 1.6 billion euro, which is a decrease to previous year's figure on a reported level. But there have been M&A effects from the divestment of our entities in Severland and Beaufort amounted to €159 million. In addition, we have been faced with headwinds from the exchange rate of €40.4 million. Excluding these effects, we achieved an organic sales of 2.1%, which likely exceeded our guidance given in March 25. The group reported adjusted EBIT of 88.6 million euro in the financial year under review, which corresponds to an adjusted EBIT margin of 5.4%. Therefore, the group achieved a level at the upper end of the guidance range, which was around five. If you take into account that the earnings of the e-mobility business unit currently remain in negative territory, with an adjusted EBIT of minus 62 million euro, It shows that Ellen Klinger's classical business generates reliable cash flows and creates sufficient financial room for strategic investments. All in all, adjusted EBIT margin is fully on track to continuously improve profitability of the group in the medium term. Regarding the other metrics, we've seen strong effort in the fourth quarter. Due to an active working capital management, we achieved a level of 285 million Euro in the financial year 2025. At 17.4% of the group revenues, net working capital ratio was even lower than prior years figure. The target set in March 25 to maintain a net working capital ratio of under 25% of group revenue was therefore clearly fulfilled. In line with the lower level of working capital and despite the high level of investments for the ramp up of the large scale immobility projects, we have generated an operating fee cash flow of 32.6 million Euro in the financial year 2025. With a ratio representing 2% of sales, we have achieved our target range of 1 to 3% of group revenue. As a result, net financial debt was kept at a low level. It amounts to 288 million euro. As a result, the net debt to EBIT ratio stood at 2.0 and fulfilled the guidance given in March 25, when we had appointed to a figure of around two. When adjusted EBITDA for the one of the section shape 13 streamline measures that adjusted net EBITDA ratio would even amount to 1.5 compared to 1.2 in the previous year. Let me briefly reconnect these results to our transformation strategy, Shape 30. Shape 30 outlines our roadmap for transforming the group in response to the profound changes shaping our industry. The strategy is focused on enhancing our profitability and strengthening cash flow performance. To ensure long-term success, we continuously monitor global market developments. and align our product portfolio accordingly. This enables us to remain well positioned for the future and to act with maximum flexibility as market dynamics evolve. This includes terminating non-performing products, divesting capex-intense business areas, and consolidating our global footprint. In an effort to position a group effectively for the future, Alvin Klinger implemented Streamline, a global program to scale back staff costs in 2025. The measures on a streamlined NCF30 will translate into a significant reduction of the group's cost level. As planned, the initial benefits of these measures will be seen as early as the current financial year. The measures will take full effect from 2027 onwards. In parallel, we enter the next steps of transformation by ramping up several large-scale immobility orders. With the ramp-ups, we return to our normalized capex spending after an intense investment cycle, as main investments have been done. The full and audited figures for fiscal 2035 will be released on March 26th in the morning. A press conference is scheduled for the morning, followed by an analyst conference call in the afternoon. The then released figures will include the full set of financial statements and therefore more details on the financial KPIs. Moreover, we'll provide you with an outlook on the fiscal year 2026. The invitations for the calls will be sent out in due time. Ladies and gentlemen, thank you for your attention and now Thomas and I are happy to answer your questions.

Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and then 1 on your telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use only handsets while asking a question. Anyone who has a question may press star and 1 at this time. And we have the first question from Michael Pundit from DZ Bank. Please go ahead.

Thank you for the call. I will start with some questions with regard to the development in Europe with regard to the transformation to immobility. I think we have seen a lot of changes in the strategy of the big German and other OEMs, as well as we have seen that the European Commission decided to, yeah, to soften the rule for 2035. And when I look to the presentation, I look at the slide on page three, your data you've shown there are based on the S&P Global Mobility Outlook based on October 2025. Do you think this will have an impact, these changes, as well as this decision by the European Commission on your... or the forecast for the e-mobility. And the second question is, will this have any impact on your plan to break even for the business e-mobility in 2027?

Yeah, thank you for your initial questions, Mr. Punzert. I think when we look at the likely shift now after the change of the EU legislation, there is, I think, some change to be expected. It's not necessarily a adverse change to our strategy. That means that the strategy that Elvin Klinger has is sound. The growth market within the auto business here, in particular in Europe, will be e-mobility with battery electric vehicles. I think that's not gonna change. The quantities may change, and therefore, it may have an impact on our initial assumption that we will see a 50%, 50% share of known IS versus ICE in our portfolio in 2030. that may be impacted, yeah? But it's not meaning on the other side that we need to change our strategy because then it would be merely a change in quantities to the Erwin Klinger product portfolio, yeah?

Yes, and towards your second question on the breakeven point. So we don't expect a huge impact because of the measures you mentioned on 26 and 27. And I think we discussed before, we expect in 27 to realize a break-even point on immobility.

Okay, thank you.

As a reminder, if you wish to register for a question, please press star and the one on your telephone. There are no more questions at this time. I would now like to turn the conference back over to Thomas for any closing remarks. I will have a last-minute question from Klaus from OdoBHS.

Please go ahead. Yeah. I need to ask for the special items and I had expected, so can you give a bit insight what was the driver here? And let's say if you have pulled forward some of the measures that you might have planned for 26 or for later, which now gives you a clean sheet to start in 2026.

Thank you. So thanks for your question. On your first question, the adjustments we've booked in the fourth quarter are partially related to streamline our personal cost reduction program. So there's about 6 million euros we booked in the fourth quarter versus 21.5 for the full year. Furthermore, we booked some adjustments on the consolidation of our global footprint of 9.2 million in the fourth quarter, about 12 million every year. And on non-performance assets, there we booked about 35 million euros for the year, of which 19.4 in Q4. So that's for the adjustments we booked in this quarter and for the year. And we did not really pull ahead anything of 26. So we still expect some effect in 26. The intention is in 27, we will no longer have any impact in adjustments for related to streamline or shape 30.

Also in regard to the measures. We indicated that we wanted to have a $50 million cost improvement in the group. When we head into 2026 now, I would say we're half through of it. As part of the streamline program, there is still, in particular in Germany here, contracts that will run out at the end of Q1, so that the full impact here, in particular in Germany on the streamline program, will be measurable starting in Q2, 2026, like Isabel is saying. Most of the contracts the accounting items in terms of impairments and also changes to footprint, most of the items were already carried out. We're not fully complete yet in that regard. But the expectation is that there is, from an accounting perspective, little left that would be a difference between reported items and adjusted items. so that we expect more improvements to be seen in the course of 2026. And like Isabel said, that we, you know, shoot for a clean 2027 with our activities.

Okay. Thank you very much. That's very helpful. And have a good afternoon.

Okay. Thanks for your question. Once again, to ask a question, please press star and turn on your telephone. And we will follow up question from Michael from VZBank. Please go ahead.

Yes, Michael, again, I have several questions on the business unit e-mobility. First, I would like to thank you very much for publishing the business division, and I hope this was not a one-time effect, so that we will see that figure on a quarterly basis going forward. I have two questions with regard to the business unit. First one is, can you give us any kind of guidance for the revenues you expect in 2027 to reach in that division?

Yeah, let me ask or let me give you some information here on your first remark. I mean, the transformation here is a key activity for us within our strategy . And we are dedicating significant resources, including CapEx, into this process, as we have done throughout the last couple of years. And we approach, as you say rightly, the revenue cycle now. And I think and we think that it's the right point here to share this information with shareholders of Irving Klinger to show the financial progress in this transformation here for Irving Klinger. This is a background for that and yes, we'll continue to report on that because again, it shows the progress that we make in regard to this transformation process. When we look at your second question here in terms of the top line, it's expected that through 2028, you would say roughly that we will double revenues here. And you have also to take into account that the loss situation here, part of it is one-off, you know, as part of this, and part is, you know, part of startup. So it's not a full amount that we have shown here in regard to, you know, recurring loss-making, but there's also part of it that is one of the amounts. And I think that's important to understand. So with the contribution margin that will come in through the doubling of sales, we think that will generate sufficient contribution margin in order to reach break even in the area of 2027. Okay?

Okay. That means doubling revenues compared with the figure for 2025.

Yeah.

Okay. And a second question on the business unit. Is it right to assume that the new technology business is fully included in that figure on a 100% base ETPO?

Yeah, that is included in there. No, but it's included here.

So it's not adjusted for the minority stakes, so that is included on a 100% base?

Yeah, exactly, no, because EKPO here is fully consolidated within our figures, and therefore is 100% considered, no? Yeah. Okay, thank you. Okay, Mr. Punzett, thank you very much.

Thank you. Ladies and gentlemen, that was the last question. I will now finally hand over the conference back to Thomas for any closing remarks.

Yeah, ladies and gentlemen, together, My colleague Isabel Dahmen and I thank you for your attendance here during this call. On March 26, we will release our full and audited figures on the 2025 fiscal year and host a press conference as well as an investor conference call. We're looking forward to welcoming you again and wish you a good rest of the week. Thank you very much. All the best.