Elringklinger Ag

Ladies and gentlemen, welcome to the Erling Klinger AG Q1 2026 earnings conference call. I'm Vicky, the call school operator. I would like to remind you that all participants will be in listen-only mode and the conference is 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 your telephone. For operator assistance, please press star then 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, I welcome you to our earnings call in the first quarter of 2026. Today, Isabel and I will provide a detailed look into the results from the first quarter. With today's publication, we confirm the guidance for 2026 in the medium term, which we have published with the annual report end of March. At the end of the presentation, as usual, you will have the opportunity to ask questions, and we're pleased to answer them. At the outset, I would like to present a brief overview of the key developments from the past three months. Let me start with a brief overview of the external environment, which remains challenging for the global automotive industry. Rising global tensions, including the military escalation in Iran, are increasing regional spillover risks and posing threats to energy security and global stability. Imperial sanctions, trade restrictions, and regulatory fragmentation continue to weigh on cross-border business. These risk factors, combined with volatile energy prices and ongoing logistics disruptions are increasing and certainty for investment and production planning. At the same time, the industry remains in a profound transformation. In Q1, 2026, global light vehicle production declined by 3.4%. Despite the cyclical pressure, electrification momentum remains intact. E-mobility continues to be the dominant long-term trend, even as regulatory requirements are being eased in Europe partially rolled back in the U.S. China continues to act as the global pace setter, driven by strong local ecosystems, technology leadership, and customer proximity. Against this backdrop, Aaron Klinger is well positioned. Our global footprint enables localized production close to customers and supports further optimization of supply contracts. At the same time, we continue to strengthen our profile and supported by a solid position in established markets and growing auto intake in new drive technologies. The next slide summarizes the company's overarching strategic framework, outlining its purpose, vision, and mission. Our purpose underscores our commitment to innovative technologies that contribute to a sustainable future. Our vision is to remain the preferred partner in advancing technological innovation To translate this vision into reality, we have defined five key success factors that will enable the organization to fully realize its potential. Let me briefly walk you through the progress of Shape 30. Starting with growth, our e-mobility business shows strong momentum. Sales increased by 42% year-on-year from €27 million in Q1 2025 to €38 million Euro in Q1, 2026, underlining the commercial traction of our strategic focus area, e-mobility. At the same time, we have made visible progress on profitability, particularly in the OE segment. The adjusted EBIT margin excluding e-mobility improved by 3.1 percentage points, reaching 5.5% in Q1, 2026, driven by operational improvements and disciplined cost management. E-mobility remains a ramp-up phase. Adjusted EBIT in this business stood at minus 16 million euro compared with minus 15 million euro in the prior year quarter. Importantly, this development is fully aligned with our roadmap and we expect improvements will be realized in the course of the year. The classical business excluding e-mobility continues to be profitable and serves as the financial backbone of the transformation. At the same time, we are systematically reducing the cost base in e-mobility step by step with a clear objective of bringing this business into a profitable range by 2028 on a full year basis. We expect 50 million Euro in cost savings and ramp up contributions. Improving efficiency and contributions to margin by ramping up the major orders are crucial levers for reaching our midterm profitability targets. Overall, these figures clearly demonstrate that Shape 30 is progressing as planned. Turning to the next slide, we illustrate how Erring Klinger is well positioned for changing market landscape. At group level, we're actively shaping our portfolio and shortening our strategic profile. Through continuous and systematic market analysis, we are deliberately discontinuing low margin activities and focusing our resources on value creating businesses. At the same time, our powered by people approach underlines our strong corporate culture, creating the conditions for employees to perform at their best. The key element of this context is our new organizational structure, shape to empower. This structure is fully aligned with our strategy and is designed to strengthen accountability, accelerate decision-making, and enhance customer proximity across the group. Shape to Empower builds on clear and consistent principles for action. Roles and responsibilities are clearly defined, interfaces in the organization simplified, and management structures standardized globally. The organization is fully aligned with shape 30 with a stronger focus on speed, market, and customer proximity and efficiency. As part of this transformation, existing business units will evolve into business areas, strengthening entrepreneurial accountability. In addition, we are establishing a new business area, sealing solutions and engineered metal components, by merging two business units into one. And as a result, we create a new business area with focus on metal and pure metal applications in a market that largely consolidates. The objective is to further accelerate decision-making, enhance customer focus, and improve efficiency across the group. Overall, everything is actively shaping the group, and reorganizing its structure to sustainably strengthen competitiveness in a rapidly changing environment. With having said all this, I now hand over to my financial colleague on the board, Isabel. Thank you, Thomas.

Hello, and good afternoon from me as well. Starting with sales and the organic revenue on slide number eight, In a challenging market environment, Elden Klinger generated revenue of €430 million in the first quarter of 2026, representing a year-on-year increase of 1.6% according to reported figures. But figures have been affected by M&A as well as FX this quarter. In the prior year quarter, the UK subsidiary that has been divested effective November 30, 2025, had contributed €3.1 million. with the corresponding reference value for the previous amounting to €420 million. Additionally, revenue was diluted by currency effects equivalent to €9.7 million. All in all, when excluding currency and M&A effects, revenue increased organically by 4.7% in the first quarter of 2026, and the companies remained fully on track to meet its fully-year guidance as communicated in March, Notably, this growth represents a clear outperformance of the underlying automotive market. While global automotive production declined by 3.4% year-on-year in the first quarter, Europe, Erling Klinger's core market, recorded only a modest decrease of 1%, excluding Russia, and Germany declined by 1.6%. Against this backdrop, Erling Klinger achieved solid organic growth, clearly demonstrating its resilience and competitive positioning in a contracting market environment. The sales mix presented on slide 9 provides a more detailed breakdown. Within the segment breakdown, the original equipment segment remains the largest contributor, accounting for 65% of total group's revenue, which corresponds to €280 million in sales. Compared to the same quarter last year, revenue in this segment was only slightly below the prior year level. Within the early segment, immobility generated sales of €38 million in the first quarter of 2026. The ramp-up phase of large-scale serial orders for self-contacting systems is further progressing. Compared to the previous year's first quarter, revenues increased by 42%. highlighting the business unit's strategic importance for the group's transformation. The aftermarket segment continued its strong performance, increasing sales from €102 million in Q1 2025 to €110 million in the first quarter of 2026. In addition, the NGS plastic business was able to slightly increase revenue in the first quarter of 2026, rising from €39 million to €40 million, driven primarily by an improved product mix. Growth was achieved in the European region, North America and South America and the rest of the world, while revenues in Asia-Pacific declined year on year. Adjusted EBITDA of the group rose to €59 million, compared to €42 million in the last year's first quarter. Including one-off items, reported EBITDA stood at €58 million. The increase in adjusted EBITDA was driven by a compensation received for an asset that was depreciated at the same time. In Q1, adjusted EBIT reached €29 million, corresponding to a margin of 6.8%, which is in line with our full-year target guidance of 6-7% of sales. Adjustments totaling an amount of less than €1 million were related to exceptional items from the streamlined program. reported EBIT amounted to €28 million, corresponding to a margin of 6.6%. This is a noticeable increase to last year's figure, which stood at €20 million. Both the streamlined program and the Shape 30 measures aimed at annual savings of €50 million in total. Around €10 million of these savings are realized in Q1. The full impact of these measures are expected for 2027. The adjusted group EBIT of €29 million already includes the adjusted EBIT of the immobility business unit, which came in at €-60 million, compared to €-50 million in the prior year's quarter. The planned improvements here will be realized in the upcoming quarters, according to the REMBO. Thanks to the strategic measures implemented under our transformation strategy, we are strongly positioned and operate from a more profitable base. enabling the group to sustain a solid adjusted EBIT margin at this level. These actions referred to an EBIT improvement of €10.5 million compared to the prior year's first quarter and created a more resilient foundation for sustainable performance. In addition, product mix effects contributed to better earnings. These improvements have been partly compensated by tariffs, totaling €2 million, and ramp-up costs for the large skills orders of almost €2 million. In the first quarter, the R&D ratio decreased to 5%, while absolute R&D spending edged down year-on-year slightly from €25 million to €22 million. Ellington as net working capital stood at €383 million in the first quarter of 2026. The ratio amounted to 23%, thereby achieving the group's short- and medium-term target of keeping the figure below 25%. The development illustrates the group's continuous focus and optimization of capital efficiency and expanding operational flexibility in line with ramp-up related sales activities. Following a capex intense fourth quarter in 2025, capital expenditure declined significantly and returned to a markedly lower level in the first quarter. As anticipated, this figure was quite stable in absolute numbers in Q3, with CapEx at 21 million euro and a CapEx ratio of 5%. This figure is purely in line with the full year guidance which calls for a ratio of four to 6% of sales. In the first quarter of 2026, operating free cash flow was in a negative territory at minus 109 million euro. This development was driven by a higher networking capital requirements due to the ramp up of the large scale orders and in addition, cash-effective restructuring expenses of around €20 million related to the Streamline program. Overall, the cash flow development followed largely the same seasonal pattern as last year, while still showing a slightly year-on-year improvement. Net debt stood at €430 million, corresponding to an adjusted net debt-to-event ratio of 2.1, which is stable compared to prior year's quarter. And last but not least, Group equity totaled 686 million euro by the end of the first quarter, slightly above the 666 million euro recorded at the close of Q4 2025 and on the same level of prior year's figure. Coming to the segment performance on slide 13. In the first quarter of 2026, the OE segment generated sales of 280 million euro. When comparing this to the prior year's figure, we have to consider the sales contribution of €3 million from the divested entity in the UK. The adjustment segment EBIT margins to 0.9% and improvement to prior year's figure. The aftermarket segment continues to successfully execute its growth strategy, once again posting a quarter-on-quarter increase in revenue. In the first quarter of 2026, sales reached €110 million, which implies a growth of roughly 8% compared to previous year's quarter. With an adjusted EBIT margin of 24.3%, the segment once again delivered a strong level of profitability. The Engine and Plastic segment demonstrated a robust performance in the first quarter of 2026, reported by a wide and diversified industry footprint. The segment recorded sales of €40 million, compared to €39 million in the first quarter of last year. With an adjusted EBIT margin of 10.6%, the segment demonstrates its resilience under challenging market conditions. We remain firmly committed to our Shape 30 group strategy, which continues to serve as the overarching strategic framework guiding our decision-making and positioning Erling Klinger for the long-term success. We are confident that Shape 30 defines the right strategic priorities to effectively navigate market dynamics while further strengthening the group's long-term competitiveness. We remain focused on driving profitable growth for further strengthening the group's competitiveness. Our priorities include realizing growth on the basis of large-scale contracts in e-mobility, further improving the profitability, particularly in the OE segment, generating sustaining operating free cash flow, and further reducing net debt to enhance the group's financial resilience and damage heat strength. I will now turn the floor over to Thomas to provide concluding remarks on the market environment and the outlook.