Friedrich Vorwerk Group

Welcome, ladies and gentlemen, to the earnings call of Friedrich Vorwerk Group SE regarding the full year figures of 2025. The company's CEO, Torben Kleinfeld, and CFO, Tim Harmeiser, will guide you through the presentation and the figures shortly, followed by a Q&A session via audio line and chat box. Having said this, Torben, the stage is yours.

Yeah, thank you very much, and also a warm welcome from my side. Welcome to the Friedrich Vorwerk earnings call 2025. I will, for everybody who is not in detail familiar with Friedrich Vorwerk, run you very quickly through the main topics of our company and then give you a short market update. about the latest developments in our main markets. Then I will hand over to Tim for, of course, the financial figures, which are key to this meeting here. And then I will give you a business update about our current projects we are running at the moment, at least the last ones. So, yeah, Friedrich Vorbeck has been active since founding in 1962, so with more than 60 years of experience in the business of engineering and constructing energy infrastructure here in Germany mainly. we can look back at numerous very successful projects in our highly attractive main market, which is natural gas transition, electricity transition, clean hydrogen transition, and, of course, adjacent opportunities where we sum up our activities in district heating, CO2 treatment and transport and treatment of biomethane. Today, we are operating from 14 locations within the north, mainly in the north of Germany, with more than 2,200 well-trained employees. And, yeah, due to... The energy transition, which is still going on here in Germany, we can look back at a very strong order intake already also in 2025. So, we were able to acquire projects in a total volume of almost a billion euros in 2025, which is an increase of 27% compared to the figures of the year 2024. Yeah, where do these order intake come from? Main customers here in our three markets are, of course, the large TSOs operating the energy transport grids, not only in Germany, but also in the middle of Europe. So it could be in terms of electricity transition companies called Tenet and Amprion in Germany. Looking at the market in clean hydrogen transition and natural gas transition, we have customers like Open Grid Europe, Gas Uni and others. But of course, you can also find petrochemical companies and cable manufacturers within our customers. Yeah, so what's the latest market update? First, I want to focus on the development of, since German government has agreed with the EU Commission to set up new power plants in Germany. These very flexible power plants are necessary to support the production of renewable energy, mainly driven by wind and solar farms. And in times you don't have wind and solar available you need to have an energy source which can be ramped up very quickly. So Germany is planning to install roughly 10 gigawatts of capacity in terms of gas driven power plants and that of course is an opportunity also for Friedrich Vorwerk Group both in pipeline construction to run new natural gas pipelines and later on also hydrogen pipelines towards these gas-fired power stations, but also we have a division in our plant construction department, which can supply the necessary fuel gas systems to supply those turbines delivered by companies like Siemens, GE or others. Other latest developments, since we have all heard that the hydrogen economy has been struggling a bit over the last month, German Parliament has passed a so-called Hydrogen Acceleration Act. Main part of that is of course to install the so-called core grid for hydrogen transport in Germany. which could be the nucleus to develop the hydrogen industry in Germany because it will cut off costs for transport of hydrogen when the core grid is available and consumers and also producers of hydrogen can be easily connected to this grid. but also they want to secure and make investments in hydrogen production here locally in Germany easier and more reliable for the investors. And, of course, all of our other businesses like Natural gas transition is also still ongoing since new LNG terminals are still developed on the coast of Germany. So, the Bundesnet Agentur has just published the first draft of the new grid development plan combining the investments in natural gas grid development and hydrogen grid development. And this plan looks out to the year 2035 with still investments in the natural gas grid of roughly 3 billion euros. And they also found out that probably developing the core grid for hydrogen will be more costly than predicted two years ago. So the revised plan for setting up the hydrogen core grid roughly sketches out investments of 25 billion euros instead of 20 billion, which was estimated before. So also here in the market of

natural gas and hydrogen huge potential for our company's group and therefore i would like to hand over to tim for last year's financial figures thanks a lot tom and also one welcome everyone from my side today's earnings call overall 2025 was a fantastic year for friedrich forwerk we achieved record-breaking results across all KPIs, successfully completed two acquisitions, secured numerous new major projects, and last but not least, we launched our proprietary welding robot in collaboration with our subsidiary 5CTech. Therefore, I'm very pleased to now present these strong results in detail. In terms of revenue, we've steadily increased over the course of the financial year and delivered a fantastic final quarter which, despite the seasonal nature of the business, nearly matched the strong performance of Q3. Overall, we benefited from favorable weather conditions in fiscal year 2025, not only in Q4, but especially in the first quarter, when we were able to resume work after a short winter break on many projects as early as mid-January. This point I would also like to briefly note that the first quarter does not always benefit from good weather conditions. This year, for example, in 2026, we've seen a harsher winter again after a long time, with plenty of ice and snow, particularly in northern Germany, resulting in equational production stoppages, even in February. However, depending on weather conditions in the next quarter, that are more relevant in terms of revenue and earnings, we expect to be able to offset at least parts of this effect over the course of the year. For the full year 2025, we generated revenue of €704 million, representing a remarkable 41% increase over the previous year. This was primarily due to our continued success in recruiting new employees, which led to a 15% increase in the average number of employees, as well as an increase in productive hours per employee, higher equipment utilization, and of course, some pricing effects. The electricity segment share of revenue has continued to rise, now standing at 52%, making it the primary driver of growth in 2025. While this is largely attributable to A North, we are simultaneously working on several medium-sized projects in this segment, such as Bowden 6, the Biltrom HD project, and several converter stations as well. Two-thirds of the current order backlog is attributable to this segment, so continued growth is expected here. At the same time, we anticipate a significant growth momentum from the clean hydrogen segment, as larger sub-projects on the hydrogen core grid are also expected to be put out of tender in the foreseeable future. Furthermore, we expect additional growth in the adjacent opportunity segments in 2027 and the following years, due to the German government's special fund. The development of probability was particularly impressive in the fourth quarter, with an EBITDA margin of almost 29% and EBIT margin of almost 25%, even taking into account the dilutive effect of the cost plus fee contract in our major A North project. In addition to the favorable weather conditions already mentioned in Q4, our success in claim negotiations, which typically take place in the fourth quarter, was a key factor in the exceptionally high margin, along with higher earnings from joint ventures, which increased by nearly €10 million compared to the same quarter of the previous year. Accordingly, we also concluded the 2025 financial year as a whole, thanks to our high-quality order backlog and a flawless project execution, very successful. We increased the EBITDA margin by 7 percentage points, from 16.2% to 23.2%, and more than doubled EBIT from 59 million euros to 137 million euros. Despite the tremendous 40% growth, we still managed to further reduce trade working capital, which, along with the higher profitability, plays a significant role in improving the net cash position. As a result, we were able to increase net cash by more than €100 million compared to previous year, bringing it to €262 million at year's end. It should be noted, however, that the trade work in capital is always at its lowest level at the end of the year and rises as the construction season progresses. These swings between summer and winter can amount up to 80 or even 90 million Euro. With regards to capital allocation, our top priority remains investing in organic growth, specifically in the purchase of new pipe layers, drilling rigs, cranes and excavators, and of course our welding robots. We've budgeted approximately 50 million euro for this in 2026. Furthermore, we will certainly be open to pursuing a larger M&A deal again, provided we find the right target and of course at a reasonable price. And finally, we would like to share the company's success with shareholders in form of a significantly high dividend payout consisting of 70 euro cent base dividend and a 40 euro cent special dividend. Let's now take a look at the development of order intake. In addition to the conventional order intake figure, we've already introduced a new KPI last year, the total project volume acquired. This new KPI also includes the proportionate project volume from the joint ventures in which Vorwerk is involved. And therefore, in our opinion, provides a more transparent view of the actual order situation, regardless of the structure of the contract. The total project volume acquired rose by 29% to €991 million in 2025, while conventional order intake at €538 million is around 20% below previous year. The main reasons for this are, on the one hand, the shift in the order structure towards more joint ventures, especially in H1 2025, and on the other hand, already well-filled order book combined with a limited capacity of all resources. The order backlog, which corresponds to the conventional order intake figure declined, therefore slightly to 1 billion euro for the reasons stated before. We've learned from several investors that the communication regarding order intake and the contract structure is not yet clear enough. Therefore, we are currently working on reporting an order backlog KPI that includes our share of joint venture projects as well, starting with the Q1 report. I expect that this additional metric will provide a transparent picture for all shareholders by the end of the latest. Then based on our consistently high quality order backlog, we expect our growth trajectory to continue in 2026 with revenues in the range of 730 to 780 million euro. It should be noted that following two years of very high employee growth, we intend to slow down the expansion of our workforce somewhat in 2026 to give the organization and the administrative functions the opportunity to grow at the same pace, while simultaneously focusing our recruiting efforts on attracting senior construction and project managers. At the same time, revenue growth is somewhat slower in 2026 due to the higher proportion of joint ventures. This change in the project mix also means that we are now forecasting absolute EBITDA instead of EBITDA margin. specifically in the range of 160 to 180 million euros for 2026, as this number is unaffected by the order structure. This guidance also takes into account the slightly softer Q1 2026 due to the adverse weather conditions. With that, I'd like to turn it back to Tom for the business update.

Yeah, Tim, thank you very much. And, of course, we did pick for this meeting our most outstanding projects at the moment. Please remember that during a year we are operating on more than 500 smaller midsize and also large projects, so we can in this meeting only give you a glance of the most outstanding projects. And I would like to start with the natural gas business here. It's a project we've already been working on last year. It's the so-called EWA pipeline, which is a 48-inch pipeline running from the caverns of Edsel towards the compressed station of Wadenburg. This pipeline will continue in size of 40 inch towards the station of Drohne, which is more to the Rhein-Ruhr area, so in the south of the area. We have already finished the construction on EWA last year with a pressure test and the handover to the customers, so there's already gas on this pipeline. and the WAD pipeline is construction progress at the moment. We have already started in January with the first wells on site using our new welding robot PX2 developed by our subsidiary 5CTec. We have completed roughly 400 wells on the project this year. And again, with very, very low mistakes in the wells. So, the repair rate is definitely under 2%, which is very good in terms of fully automatic welding. Yeah, I'm changing actually over to the next natural gas pipeline project, which is at the moment our still largest project executed in the joint venture between the Habau Group and the Friedrich-Vorwerk Group. compromises of two pipelines, first the ETL182 with a diameter of 56 inch and the ETL179.200, which is a 36 inch pipeline, all together emit three digit million euro project and both pipelines are being executed by the same joint venture combination. As you can see in the picture below, we have already started some civil works to erect the pipe yards. That has been done already in 2025 and we have already received Most of the project pipes which are purchased by our customer gas unit and we've actually started in the latest weeks to make preparations for the first loading procedures, so for the tunnel crossings and for the horizontal directional drilling operations are already in place and will be executed in due course of this year. And then maybe next slide. We're not only active in pipeline cable laying, but our plant division construction is also very busy with a new project at the gas metering station called Großkörbis. This is the main metering and supply station for the company Ontras. Here we have a project to renew the full installation at Großkörbis with a volume of mid 2 million digit range. And we have to deliver the full scope of engineering and also construction activities and will then commission the new plant as is foreseen at the moment in 2028. and the system will already be constructed in a hydrogen-ready way. So, later on, once the usage of natural gas in the system is over, it can be easily converted to use for clean hydrogen and meter and also regulate the hydrogen being transferred in the grid. Next project is also a hydrogen project, which We have already been working for one and a half years. This is the so-called AHA-BIN project. So the city of Hamburg is trying to set up a hydrogen grid in the port of Hamburg. Key figures here is an electrolyzer plant, which is located at the former electrical power station of Moorburg, where about 100 megawatts the quality of hydrogen is being produced and then fed into the harbor grid. So, the HAHA wind grid and Friedrich Vorwerk has already executed three lots of this newly established hydrogen grid. And we've been recently awarded with two new lots to set up this hydrogen grid. The first lot involves actually a micro tunnel of almost 200 meters where we later on install the piping DN300 for the transfer of hydrogen and the following lot compromises of roughly 1500 meters of new built hydrogen pipeline. But besides those existing projects where we've already started execution, we are, of course, still busy in our estimation department, working on new estimates for new projects. Just to give you a small idea what could be coming up over the next years, in terms of pure natural gas transition, we are at the moment working on estimation for the so-called Spessart-Odenwald-Leitungen, which is also a DN1000 pipeline about 115 kilometers long for Terranet and also other projects coming up from Open Grid Europe setting up the core grid for hydrogen here in Germany and Also for gas uni, new projects like ETL 187, which is directly in conjunction with the current project ETL 182, is at the moment in tendering phase, and execution and commissioning would then be in 27-28. But also still very attractive is the electrical market, where we are now facing the so-called second wave of large-scale electricity highways, projects like Nord-Ostling Section 2, Süd-Ostling and Süd-Ostling Plus are being tendered out over probably end of this year and beginning of next year. And these projects will be commissioned in the mid-2030s. So also here, huge potential also after 2030 for our companies group. And under adjacent opportunities, we were able to already win one lot of the Rhine water transport pipeline. This is a very large diameter pipeline, 2.2 meters in diameter, that will later on transfer water from the river Rhine to flood the coal mines of RWE. And at the moment, we are working on the next lot to establish this water transfer pipeline. And also a very new business for our company, the transport of CO2 is ongoing. So the first tender we have received is the CO2 link from Legardorf, where Holcim is operating a cement factory towards the port of Brunsbüttel is on the table at the moment. Commissioning is foreseen for 2029 and tendering phase ongoing and probably construction phase will be 28 to 29. So, this, of course, can only be done if we can establish to grow our headcount and our number of employees. Where we were very successful last year, So today, we can look at a workforce of more than 2,200 employees. Of course, the labor market within Germany, especially due to the low capacity in building construction, we were able to employ a lot of new blue-colored workers we could integrate in our projects. And probably during this year, we'll definitely have a focus on growing our engineering staff and our overhead staff on the construction sites. So challenge will be also to look for well-educated project managers and construction managers to manage all the blue-collar employees who are able to attract over the last month. Yeah, that's it from our side. We are happy to receive your questions either by phone or by chatbot and happy to answer them.

Thank you very much for your presentation. Ladies and gentlemen, as already mentioned, we are opening the Q&A session. If you would like to ask your questions via audio line, please click on the raise your hand button. If you are dialing in by phone, please use the key combination star nine to raise your hand, followed by star six to unmute yourself. And additionally, you can also place your questions in our chat box. And the first hand is up from Lasse Stüben. You should be able to talk now.

Hi, good afternoon. I wanted to ask just on the Q1, is there any more color you can give roughly in terms of what we should expect in a year-on-year comparison, just to avoid any sort of nasty surprises. The second question would be, what should we expect for headcount growth broadly in 26? And then the third question is, you mentioned sort of slowing down headcount growth, but then you also said that you would be willing to do a larger M&A or potentially do a larger M&A transaction. So how do we kind of square those two? kind of comments because I guess a larger M&A deal would also involve many new employees. So just any color there would be great.

Well, we've seen compared to the year before some weeks of weather related production stoppages in February. combined with the growth of the headcount could be possible to see a rather flat Q1 in 2026 in terms of revenue growth. And as I said, which could potentially partly be offset by stronger quarters in Q2 and Q3 as the overall share of Q1 on the full year revenue isn't that relevant. Regarding the headcount growth, when we talk about slowing down recruiting efforts, this is only in terms of organic growth, meaning directly hiring people, not including any M&A. On the organic growth side, we expect to grow the headcount by 5% to 8% in 2026, and any M&A would be an add-on on that. And, of course, usually we also acquire project managers and the respective engineering and administrative functions when doing a larger M&A deal.

Thank you.

Thank you, Mr. Stüben, for your questions. And additionally, and slightly regarding question in the chat, Friedrich Vorwerk is guiding for a slightly lower margin in 2026 compared to a strong 2025. midpoint of 2026 guidance at 22.5% versus 23.1% in 2025, despite continued revenue growth. Could you provide a margin bridge for 2026 versus 2025 and outline the key driving factors?

Well, we've always communicated that we see the margin potential in the mid to long term at our company between 20% and 22%. However, in particularly strong years, as in 2025, it's also possible to achieve an even better margin, e.g. more than 23%, due to basically a flawless project execution, good weather conditions, and so on. But on the long run, we feel pretty confident with 21%, 22%.

Thank you very much. And the follow-up from the person. Could you please provide more details on the Nord A project, specifically regarding the recent delays and their potential impact on bonus malus payments? Additionally, is there any bonus or malus effect already factored into the 2026 guidance?

As we already communicated last year, a NORD project is expected to be slightly delayed with completion now anticipated in summer 2027 instead of end of 2026 due to missing permits. We are still in discussions regarding adjustments to the bonus related milestones. These discussions have been ongoing for some time. We do not yet have a definite outcome on these discussions. but we remain still confident and hope to sign their respective contract amendments in the course of the second quarter 2026 and based on this information at least a portion of the contract books since it accrued over the project duration. Part of that could be reversed once this amendment is signed in the second quarter. However, we did not factor in any positive impacts from that amendment as it is not signed yet.

Thank you very much. And for now we have no further questions. Ladies and gentlemen, I will hold the room for another moment in case someone might be typing right now. And there is a hand up from Lasse Strüben again. You are already unmuted.

Right. Just to follow up on sort of you mentioned kind of the JV, you know, share of projects is obviously going up. Should we expect that kind of level of the JV income you saw in 25 to be roughly the same in 2026? Or how should we think about that?

We have all the new GVs we entered into last year. We expect that the net earnings of the GVs will even increase compared to 2025. Okay, thanks. Thank you very much.

And another hand up from Leon Mühlenbruch. The stage is yours.

Hello, Mr. Hammeister. Hello, Mr. Kleinfeld. I have a quick question regarding to the current geopolitics situation. With the energy crisis already on the way and inflation likely to rise similarly to 2022, which had a significant impact on Friedrich Vorwerk, how are you prepared for such a scenario?

Well, first of all, we were able to have a better negotiation position in most of the contracts that are in the order backlog at the moment. So most of the contracts have included price escalation clauses. So we can, on the most bigger projects, we can forward the price escalations to our customers. Although, of course, not to 100% because they are mainly bound to indexes which are more general, for example, the steel index or the crude oil index, which is not always 100% equivalent to the products we are actually using in our products. But in the end, we are at least in a way better position this year than in 2022. Also in 2022, most impact was from a plant construction project where we had to bring a lot of material to the projects. If we look at the current large-scale projects we are operating on, it's mainly the pipeline projects where the pipe is supplied by our customers. So we are mainly supplying equipment and personnel, so services, which are at the moment not that much affected as back in 2022.

Okay, thank you.

Another hand up from Lida Schumacher.

Hi, good afternoon. I've got a few questions on margins. One is, are there any kind of older projects which have lower margins in them, which are running out and should be supportive to the group margin outlook once they do? And what about the margins implied in the order intake? can we assume that there should be added premium to the margins you've seen in 2025 or should it more be in the region of the long-term potential of 20 to 22 percent you've been hinting at well there are currently no such legacy projects in the current order backlog although we still have the dilutive effect

from our major project A North, which will run until summer 2027, where the base margin is definitely lower than the group average. Apart from that, there are no legacy projects with low margins. And well, I mean, we have already seen such strong margins in 2025. We do not expect that we can further increase this margin profile. and therefore rather to suggest that you can assume the long-term potential at around 21-22% for the next years.

In your order intake you had in 2025, We should already assume this or is this still at the margins you've seen in 2025?

Well, the margin profile calculated in those projects is roughly on the same level as we've seen the year before. However, on the one hand side is the calculated margin, on the other hand side is the actual project execution on the fields. And this has also a major impact on the earnings in the end. Okay, excellent.

Thank you. And we're moving on to two questions in our chat. Are you planning any buybacks? What are the key impacts for the Iran war for you? And what are you doing to hedge against it? For example, natural gas, inflation, diesel?

At the moment, there are no plans for any share buybacks. We've decided instead to increase the dividend and to also pay out this special dividend of €0.40 per share. um adding on the answer from tom regarding iran the major impact for us at the moment is of course the higher cost for fuel especially diesel um to give you some color on that the total cost of diesel last year was around 12 million euro so it's not the largest position on our p l statement and we've of course already hatched some of the amounts needed already before the war So there will be, of course, some effect, but not a significant one.

But on the other hand, the crisis also has a positive impact on the market because at the moment, customers are really pushing the projects and trying to get more energy receiving capacity in Germany, which then, of course, also means constructing new pipelines and constructing new plants, which is then also good on the market side for us.

Thank you. Can you discuss your appetite to revisit medium to long-term guidance and what milestones would trigger an upgrade?

Well, that's definitely a thing to consider this year as we are pretty well on track on the older mid to long-term outlook. So maybe we can expect to see a new outlook in the second half of this year.

Thank you very much. Ladies and gentlemen, we still have a minute for your questions left. And if there should be no further ones, you can always get in contact with Investor Relations. This is it. With no further questions, we come to the end of today's earnings call. Thank you very much for your interest in Friedrich Vorbeck Group SE. A big thank you also to you, Torben and Tim, for your presentation and your time. I wish you a successful day around the world and giving the last words to Torben again.

Thank you very much for listening. Especially this year, we can look at some very, very interesting projects we can execute for our customers. And please stay with us and hear the latest news from our projects in the future. Have a good time around the world. Bye-bye.

Bye.