Gea Group Ag Ord

Thank you for standing by. Welcome to the Gear Group AIG second quarter 2025 conference call and webcast. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be the question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone keypad. You will then hear an automatic message advising your hand is raised. To withdraw a question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to our first speaker today, Oliver Luckenbach, Head of Investor Relations. Please go ahead.

Thank you very much and good afternoon, ladies and gentlemen, and thank you for joining us today for our second quarter 2025 earnings conference call. With me on the call are Stefan Klevert, our CEO, and Bernd Brinker, our CFO. Stefan will begin today's call with the highlights of the second quarter. Bernd will then cover the business and financial review before Stefan takes over again for the Outlook 2025. Afterwards, we open up the line for the Q&A session. Please be aware of the cautionary language that is included in our safe harbor statement as in the material that we have distributed today. And with that, a hand over to Stefan.

Thank you, Oliver, and a good afternoon, everybody. It's my pleasure to welcome you to our conference call today again. In the second quarter of 2025, GEA has once again delivered a very good performance and continues to improve all major key figures. Autointel grows year over year by 5% in organic terms to 1.3 billion euros. Sales rose organically by 1.5%. As already mentioned in the previous quarter, the slower sales generation in the first half of this year is due to the order backlog composition at the end of 2024. We expect an acceleration in sales in the second half of this year. EBITDA before restructuring expenses increased by 8.1% year-over-year to €217 million. The corresponding EBITDA margin improved significantly from 15.2% in the prior year quarter to 16.5% in the second quarter of 25. This marks a new record level. Return on capital employed increased strongly and exceeded the 35% mark for the first time. We have achieved an outstanding ROCE of 35.3% in the quarter. Due to the very positive operating performance in the first six months and confident expectations for the remainder of the year, we had to raise our guidance for the financial year 2025 as announced last Thursday. We are now guiding organic sales growth to be between 2% and 4% for the full year 2025, up from the prior range of 1% to 4%. EBDA margin is expected to be in the range of 16.2 to 16.4%, considerably up from the prior guidance of 15.6 to 16%. The new guidance for return on capital employed is between 34 and 38%, clearly above the prior range of 30 to 35%. And we are also having another reason to be optimistic about the second half of this year. As most of you have probably seen, Ea signed one of its largest single orders to date. We expect to book this order in the second half of this year. Together with Palatnam, we will construct the world's largest integrated dairy farm and milk powder facility in Algeria. The new facility will significantly enhance food security and drive economic development in Algeria. The project will contribute to producing about 50% of Algeria's national milk powder needs. Here we cover the entire value chain of milk powder production, from dairy farming, to processing, to packaging of the final product. Milk powder production is scheduled to start in late 27, with gradual ramp up of production over subsequent years. Once completed, the facility will have the capacity to produce 100,000 tons of milk powder per year. The largest share of the order is assigned to our liquid and powder and farm technology divisions, but also our other divisions will contribute to this project. This lighthouse project underlines the attractiveness of GIA's integrated state-of-the-art technologies under one roof. But we are not only making progress in our traditional food markets. Three weeks ago, GIA opened its new food application and technology center in Janesville, Wisconsin, right in the heart of the Midwest, in the U.S. I had the honor of cutting the ribbon at this state-of-the-art facility, which focuses on alternative proteins and sustainable food. Here, we are offering an infrastructure for leading-edge food technologies, such as cell cultivation or precision fermentation. This center is a launchpad for the next generation of food and a major step towards our commitment to sustainable food solutions. This new facility expands the food technology hub at GEA's changeable campus which has served as a site for production, repair, logistics and training, power division, separation and flow technologies since 2024. With this campus, we are strengthening our North American footprint where demand from our US customers for local testing and development is growing. The center will give startups and all food innovators access to industrial grade equipment and together with gear experts, they learn how to efficiently scale their processes. After the test phase, GIA will be the first choice for helping customers produce sustainable food on a large scale. And once again, our sustainability efforts have been recognized. The Time Magazine and Statista identified the world's most sustainable companies of 2025. Over 5,000 companies were evaluated globally to identify the top 500 companies. And once again, GEA not only made it into the top 500, but we are now ranked number 12 globally, up from rank 33, which was already a fantastic position, in 24. And in Germany, we are even number two. This achievement underscores our position as a frontrunner in sustainability. Let me also give you some updates on the U.S. tariffs. We already provided an overview of how U.S. tariffs are affecting GEA in the last quarter. At this point, I would just like to add that we are even more confident than before that we do not expect any material impact from tariffs. First of all, we were able to pass through the additional costs to our customers. And secondly, all of our relevant competitors are also based in Europe and mainly produced outside the U.S. Therefore, GEA does not have any competitive disadvantage here. With that, I hand over to Bernd. Thank you, Stefan. Good afternoon, ladies and gentlemen. Let's start with order intake. Order intake rose organically by 5.0%, although we had no large order this quarter, a clear indicator of the robustness of our business model. In comparison, the prior year quarter contained four large orders totaling 98 million euros. Organic sales growth of 1.5% in Q2 was an improvement versus Q1 and was driven by solid growth in service sales, while new machine sales saw a slight decline. EBITDA before restructuring margin increased considerably by 130 basis points to 16.5% because of higher gross profit. The higher profitability also supported the return on capital employed development, which further improved to a new record level of 35.3%. Net liquidity decreased year over year by €92 million to a minor net debt position of €60 million, mainly due to the cash outflow of €415 million for the share buyback program and the dividend payment. As the share-by-back program has been completed, it won't have any further impact here, so that we would expect Cateris Paribus to return to a net cash position in the second half of the year. Looking a bit deeper into the group performance, order intake rose organically by 5.0% year over year, particularly on the back of a continued positive development of base orders and mid-sized orders between 5 and 15 million euro. From a customer industry perspective, dairy farming, dairy processing, pharma, and oil and gas were the main growth drivers. Other customer industries contributed as well, indicating a broad-based positive development in order intake. On a reported basis, order intake was negatively impacted by a €31 million translational FX effect this quarter. Sales grew organically by 1.5%, driven by solid organic service sales growth of 4.6% year-over-year, to which all divisions contributed. This marks the 19th consecutive quarter of organic service sales growth. New machine sales declined slightly by 0.6% year-over-year in organic terms. As already mentioned before, new machine sales are expected to accelerate in the second half of 2025. The service sales share increased year-over-year from 38.9% to 40.1%. When looking at the sales development on a reported basis, an adverse translational FX impact of 27 million euro needs to be considered, mainly driven by the US dollar and the Chinese renminbi. EBITDA before restructuring expenses rose by €16 million to €217 million, resulting in a corresponding year-over-year margin expansion of 130 basis points to 16.5%. This is an outstanding profitability improvement, marking a record EBITDA margin. Now, I will continue with the figures for the separation and flow technologies division, which reported strong order intake growth and a record EVTA margin. Order intake increased organically by 8.2% year-over-year, which was mainly driven by base orders below €1 million in size. From a customer industry perspective, dairy processing, pharma, and oil and gas were the main growth contributors, but Also, other customer industries, such as environmental applications, contributed here. So, overall, a quite broad-based order intake strength. When looking at the order intake development on a reported basis, an adverse translational FX impact of 10 million euro needs to be considered. Organic sales grew by 2.9% year-over-year, driven by a 5.7% increase in organic new machine sales. Organic service sales remained flat year over year due to a base effect. As you might recall, service sales in Q1 last year were impacted by a change of our logistics provider, leading to a one-off catch-up effect in Q2 last year. Given the pronounced impact of this catch-up effect in the prior year quarter, the flat development this quarter is a very good achievement. As new machine sales grew stronger than service sales this quarter, the service sales share decreased slightly on a high level from 50.6% to 49.2%. The better gross margin resulted in a significant year-over-year improvement of the EBTA margin by 300 basis points to 30.3% in the second quarter, exceeding the 30% threshold for the first time. Let's move on to liquid and powder technologies, where we have expanded our service business and further improved the EVTA margin. Order intake for the quarter was down organically by 10.7% year-over-year, as no large order has been booked this year. In comparison, three large orders totaling €83 million were booked in the prior year quarter. As two out of these large orders came from the customer industry beverage and one from chemicals, it is not surprising to see that those customer industries showed a decline this quarter. Despite the positive development in the customer industry's food, new food and dairy processing, they could not offset the decline in beverage and chemicals. And as Stefan said at the beginning of this call, the large order signed with Balatna recently is expected to be reflected in the order intake in the second half of this year. This quarter, an adverse translational FX impact of €11 million needs to be considered when looking at order intake. Sales declined by 6.6% year-over-year on an organic basis. Service sales continued its growth trajectory since Q4 2021, growing organically by 2.4% year-over-year. At the same time, organic new machine sales decreased by 9.7%, resulting from the lower order intake in the first half of 2024. As already mentioned, new machine sales are expected to improve in the second half of 2025 due to the higher expected conversion of large orders into sales which have been received in Q4 2024. EVTA before restructuring expenses declined slightly by €2 million year-over-year to €40 million. However, EVTA margin increased by 40 basis points to 10.6% in the quarter due to an increase in gross margin because of the positive product mix and better project execution. Operating costs remained stable year-over-year. Moving to food and healthcare technologies, which generated strong top-line growth and continued its sequential profitability improvement. Organic order intake increased by 10.0% year-over-year, although no large order was booked in this quarter. The prior year quarter included one large order of €15 million from the pharma industry, which led to a decline in this industry this quarter. However, growth in the customer industry's food and new food were able to offset the decline in pharma. When looking at the order size brackets, mid-sized orders between 5 and 15 million showed a strong development. Sales grew organically by 12.2% year over year, with contributions from both new machine and service business. New machine sales showed an extraordinary organic growth rate of 15.3%, while service sales grew also well by 6.9% organically. The service sales share decreased slightly from 35.8% to 34.5% on the back of the strong increase in the new machine business. The EBITDA margin continued its quarter-on-quarter improvement since its low point of 6.1% in Q2 2023. EBITDA before restructuring expenses reached €35 million, with a corresponding margin of 13.2% in the quarter, significantly up from 9.8% in the prior year quarter. Main drivers behind this profitability expansion are a significantly better gross margin and higher sales volume. Continuing with farm technologies, which recorded significant order intake growth this quarter. But let me give you some more details here. Order intake increased organically by 34.3%, 34.3% year over year. This marks the highest growth rate since Q2 2021. The pickup in the new machine business, and here especially in automated and conventional milking systems, were the key drivers behind this remarkable growth. The market improvement, which began in December 2024, continued steadily throughout the first half of 2025. This was largely driven by robust milk prices and the introduction of new product features. This favorable environment contributed to the notable increase in order intake, which is expected to remain on a high level for the remainder of the year. Organic sales decreased slightly by 1.6% year-over-year, still reflecting the impact of a low starting order backlog in the new machine business at the beginning of this year. New machine sales experienced an organic decline of 8.9%, which could not be fully offset by the strong organic growth of 6.3% in the service sales year over year. As a result, the service sales share rose from 47.7% to 51.1% in the quarter. EVTA before restructuring expenses declined slightly by €2 million to €26 million due to lower sales volume. The corresponding margin decreased by 50 basis points to 14.4% in Q2 2025. And finally, let us turn to heating and refrigeration technologies. This division delivers strong sales growth combined with further EBITDA margin expansion. Order intake declined slightly by 2.2% organically year over year, mainly due to lower volume of orders in the ticket size between 1 and 5 million euro. The customer industry's beverage, energy, and oil and gas were the end markets with the strongest demand development, which was, however, offset by the decline in food. Sales rose strongly by 5.8% organically, mainly driven by a significant organic increase of 12.8% in service sales. The new machine business grew by 1.4% organically at a lower rate than the service business, so that the service sales share increased from 38.2% to 40.8% in the quarter. EVTA before restructuring expenses rose by 13.4% to €20 million due to an improved gross profit resulting from higher sales volume and a positive mix. The corresponding margin of 13.6% showed an expansion of 110 basis points compared to the margin in the prior year quarter. Closing the divisional chapter with the overview on the EVTA contribution in the first half and in the second quarter of 2025. There are two important messages. Firstly, we have been able to increase our EVTA before restructuring expenses in those time periods considerably, despite facing stable or even higher operational costs in most cases. Almost all divisions contributed to this positive development. The very strong performance of separation and flow technologies as well as food and healthcare technologies were the main contributors in Q2 and also in the first half of 2025. And secondly, we have managed to improve or at least to keep gross profit stable in most divisions. This is due to a strong service business and better margin quality in the new machine business. But it also reflects GEA's price and cost discipline, as well as savings from our procurement and production optimization efforts. Coming now to another important topic, which is networking capital. In a year-over-year comparison, networking capital declined by 64 million euro to 422 million euro. This reduction results from the continuous focus on working capital optimization and includes structural improvements showing a positive impact in the quarter. Lower inventories, higher trade payables, and lower trade receivables. The reduction in contract liabilities was partly compensated by lower contract assets. The resulting net working capital to sales ratio of 7.8% puts us comparatively below the midpoint of our guided corridor of 7 to 9%. Free cash flow has been solid for the second quarter, but let's have a look at the details. Operating cash flow of 82 million euro was driven by a net working capital outflow of 42 million euro and a 64 million euro outflow in what is summarized as the bucket others. which mainly results from miscellaneous balance sheet movements like VAT and non-cash translational FX effects. Main reasons for the networking capital outflow were higher quarter-on-quarter inventories and trade receivables. The capex-related outflow of 59 million euro has been in line with our full year 2025 guidance of around 235 million euro. As a result, free cash flow stands at 38 million Euro, leading to a net cash flow of 14 million Euro after deducting these payments and interests paid. When looking at the quarter-on-quarter net cash development, the cash out for the recently concluded share buyback program, as well as the dividend payment, need to be considered. As a result, the quarter ended with a minor net debt position of 60 million euros. This leaves us plenty of headroom to do M&A once we identify the right targets in terms of strategic fit and value creation potential. The cash flow generation over the last four quarters has been strong, reaching 468 million euros. The corresponding cash conversion ratio, which indicates how much of the EBITDA before restructuring expenses has been converted into free cash flow before restructuring expenses, landed at a solid 55%. With that, I hand back to Stefan for the outlook. Thank you, Bernd. Before talking about the fiscal year guidance, let me share with you our view on the current order intake situation. As you know, large orders can be lumpy and we cannot perfectly forecast when orders will be signed. This quarter we saw a perfect example for this. Although we negotiated several projects, we did not even book a single large order in Q2. However, four weeks later in July, we signed one of the largest single orders for GEA to date and there is more to come. Therefore, it makes more sense to look at our order intake development on a rolling last four quarters perspective. Here it becomes clearly visible that the second quarter of last year marked the lowest point, and that we have seen good order intake developments since then. This trend also continued in the second quarter this year, and we are quite optimistic that it will persist in the coming quarters. As already mentioned at the beginning of today's call, we have increased our guidance for 2025 based on the very positive performance in the first half of this year and the promising expectations for the second half of 2025. Despite the volatile environment, IA's positive journey continues. Our improvements are broad-based, supported by a healthy order situation, accelerating revenue growth and margin improvements across the group. Also going into 26. Once again, we are proving our strength in executing our plans. Finally, our roadmap for 25. The next important date will be the release of our third quarter results in November 6th. In the meantime, we look forward to seeing many of you at the upcoming roadshows and conferences. Bernd, the investor relations team, and I will be meeting investors until the end of September. This concludes my presentation, and I hand back to Oliver for the Q&A session.

Yeah, thank you very much, Stefan and Bernd. So we will now start the Q&A session. So please, operator, open up the lines.

Thank you. Dear participants, as a reminder, if you wish to ask a question, please press star 1-1 on your telephone keypad and wait for a name to be announced. To withdraw a question, please press star 1-1 again. Please don't bother to compile the query on the queue. This will take a few moments. And now we're going to take our first question. And it comes from the line of Clark Bergelin from Citi. Your line is open. Please ask your question.

Thank you. Hi, Stefan and Bernd, Class of 50. First, I just wanted to check if you can hear me okay.

It's a little bit better than last time.

That is good. That's good to hear, Stefan.

Thank you for that.

My first question is on SFT, and I'm trying to understand if you see more cost coming back into the business to deliver on the solid orders. Otherwise, I struggle to see why the new machine sales growth here into the second half shouldn't improve the margin further into year end. I mean, you're growing orders nicely. The lead times in SFT are pretty short. You've raised the SFT margin guide for the year, but it largely reflects the strong second quarter performance. So the margin guide looks a bit conservative. I will start there. Thank you.

Yeah, I mean, obviously, this is what you can see. We are improving performance further. SST is, like you all know, one of our ground tools, and there are many, many activities going on which lead to this situation, which you can see here now. So let's see where it will end at the end of the year, but SST will remain an important contributor.

All right. Okay. Fine. Yeah, it looks conservative. Fine. My second one is on the comment you made on 2026 in the pre-release, Stefan, that you expect to significantly accelerate your revenue growth while further increasing profitability. You probably expected this question. I'm going to ask what does significant mean. You're going from two to four. Is it perhaps over six? Are you doubling at the midpoint? And is it just timing of deliveries out of the backlog, including the very big order from Algeria in LPT and FT? Or do you see that the pipeline is strong enough to perhaps drive quarterly orders here back to above the 1.5 billion level? And if you could comment on the order pipeline by end market, that would be very helpful. Thank you.

Yeah. Thanks for this question, Klaas, as well. I mean, what we see is I mean, first of all, Baladna is not yet booked. You know, this will be booked. This will help us significantly also to accelerate our growth next year. As I indicated, we have some more interesting, really large projects in the orbit where we are quite optimistic and hopeful that we can close some of them. That will also help us. And like you also could see in Q2, we have a very good base baseload business. So despite we did not book any single large order in Q2, we could exceed the Q2 order intake from last year. So this all makes us optimistic. It's too early to give a clear guidance. for 26 in terms of sales growth. But you know, our mission 30 target is to grow above 5% with a CAGR of more than 5%. And I'm very optimistic that this is also from today's perspective. And also, if we have to catch up a little bit, let's say from 25, we will make it.

Good. My final one is on the margin progression into 2026, and obviously, Stefan, I'm not expecting you to give any level, but you alluded to continued margin expansion, and I get the better utilization from higher machine sales like we have here in SFT, but SFT is a product business. When you look at those larger orders that now sit in the backlog and upcoming orders, I'm trying to understand to what extent perhaps the gross margin should level off here if the margin expansion into next year should come more from the G&A savings. At the C&D, you said that G&A savings are back and loaded to 2030. So my math here, unless your COG savings are greater than planned, it sort of could be that the gross margin started to level off. I don't know if you could comment on that. Thank you.

Yeah, I mean, there might be different effects. I mean, of course, larger orders normally have a lower direct margin compared to smaller ones or medium-sized ones. On the other hand, we are doing a lot in terms of COGS programs, optimizing further our efficiency in production and in manufacturing costs and material costs. So I'm very optimistic that we can also improve further our direct margins. And on top, like you mentioned, and that's also what we promised, we are working also on our G&A costs, and that all together will help us to improve further like promised.

Got it. Thank you, Stefan.

Thank you. Now we're going to take our next question. And it comes from Max Yates from Morgan Stanley. Your line is open. Please ask your question.

Thank you and good afternoon. So just my first question is around the services growth and not really focusing on the quarter, but focusing on kind of the journey since you started talking about this. I remember at the Capital Markets Day you talked, I think it's the prior one, sorry, you talked about getting a higher share of the install base on service contracts, kind of increasing the the revenues per machine. And I guess I just wanted to understand kind of where do you think you are in that journey? Are you still finding kind of parts of your installed base that you can attach to service contracts? Are there still more opportunities? And are you still able each year to drive kind of more revenues per machine? I guess what I'm trying to understand is you've had some pretty kind of outsized and very impressive service growth rates would we kind of expect those to normalize down to low single-digit, or do we think we can keep seeing these size maybe high in services?

Understood. Thanks for your question, Max. Also, with the latest Capital Markets Day and with our Mission 30, we are guided that we expect the growth in service, which is above the growth of new installations. That also means very clearly we see still a lot of potential, how we can outperform in terms of sales growth in the service organization, service department. It's a mix of many, many activities which are going on, starting with mobilizing installed base, which is not buying from us today. It also has something to do with intelligent pricing models we applied. It has something to do with more and more digital products we are releasing, introducing with different pricing models. for digital solutions and, and, and. So to sum it up, I'm very optimistic that the growth rate of service will remain above average driver for our total growth.

Okay, perfect. And maybe just to follow up, I guess when you gave your mission 30 targets, implicitly there wasn't the assumption that margins would be going up 100 basis points every year. But if I look at kind of last year, I look at this year, effectively we are seeing margins going up around 100 basis points per year. And you're doing it on organic growth rates that are below what you thought. So I guess my question is, I mean, firstly, what is actually going much better than you thought? Because I assume if you're doing more margin expansion than you planned on lower growth, something specifically is better. And then secondly, when you look at kind of the makeup of the business and look forward, I mean, it doesn't look to me and maybe us from the outside any reason why that margin progression should slow down. But is there anything particular that's unique to these years that we should maybe think about as sort of not repeating or that's not normal when we think about the business moving out on a two to three year view?

Well, you are right. We are now in the second year where it looks like that we can really improve margins by 100 basis points, which is really, I would say, outstanding because we are not coming from a kind of turnaround or restructuring. We have been on a very quite high level where a lot of machine building companies would be more than happy to have this kind of level, which we had two years before. So what we always want to do, we always want to deliver what we promise. That's very clear. Failure is no option for us. We want that you can trust on what we promise. And this is the situation how you should see also our guidance for Mission 30. We have no doubt to believe that this is not achievable. If we are lucky, we can achieve it again earlier than originally expected. But I also have to say, of course, it will not continue 10 years long that we improve year by year by 100 basis points. Sometimes it will slow down. I think it's natural. So we are really very active here. We have a lot of things we do. Yeah, and this is how you have to see it. So we will continue, but it's not a God-given, let's say, that we also might improve during the next two or three years with 400 basis points.

Sure, but just conceptually, there's nothing in the last couple of years which have massively flattered the margins, which is strange. and we should be very conscious of going forward. It's just good execution, better pricing, better services, a number of different smaller things rather than one big thing we should be very cognizant of.

Absolutely, absolutely. I think it's a lot of activities and measurements. which we always talk about, a lot of operational efficiency, a very clear performance-driven culture, a lot of great teams, good project execution. We also consolidated some footprints. in the past which are now kicking in and in the full full full year effect those are many many things but there is not one single item where we have or would need to have some fear that it might collapse it's really on a very broad base and i also would say extremely sustainable meanwhile okay that's great thank you very much thank you now we're going to take our next question

And it comes to the line of Akash Gupta from TP Morgan. Your line is open. Please ask a question.

Yes. Hi. Good afternoon, and thanks for your time. I got a few as well. The first one I have is on SFT, and I wanted to dig a bit deeper on the margin and surprise we saw in the quarter. So we had two years of decline in new equipment revenues, and I think you did see growth in Q4, but you saw new equipment revenues returning to growth in the quarter. while aftermarket was flat, and despite somewhat weaker mix than last year and sequentially, your margins improved quite significantly. I mean, is it fair to say this is all driven by pricing in new machines where, like, the market structure is quite consolidated and you have high market share, or is this driven by any other factors of wanted to get your thoughts on what led to this strong margin beat when the mix was less favorable and why we shouldn't expect the same going forward.

Yeah, I mean, thanks for the question, Akash. I mean, SFT is also a mix of different products. It's not only separators, which are normally in mind. It's, for instance, also the Kanda business where we invested heavily during the last three years to improve the performance. We moved things to India. We consolidated production. We upgraded, invested in production. So, there are many, many shades of grey within SFT where we optimise production, where we optimise engineering to have a kind of better modularization. We developed new lines for valves, for instance, which we exclusively sell to Asian markets. Many, many things are going on, and we also now see that all these effects are kicking in. Of course, it always depends also on the mix of the projects you have, and this water was really a very good one. But what you can see, the underlying trend is not based in the new equipment, not based on pricing. There might be a little impact, but not significantly. It's more in the new installation coming out of a lot of measurements which we did during the last years here.

Thank you. That's very helpful. The second question I have is on geographic split of your orders in the first half. And I wanted to ask particularly if you saw high growth in one particular region like the U.S. ahead of these tariffs kicking in. And maybe on the U.S., you said that one-third of the revenue there is imports. Can you tell us how much of that is spare parts and how much of that is new machines?

I mean, first of all, when we talk about region, it's always, especially when we talk about a quarter, it's really risky because you can imagine if we now book a project like Nigeria in Africa, it doesn't mean that the market in Africa is booming because this is simply based by one large project. And therefore, we always have to be very cautious in thinking about or interpreting that there are special trends in special regions. or segments just because we booked a bigger order in some segments. That's what I would need to say. If I want to make a general statement, of course, Europe is nothing where we expect the biggest growth rates. We see large growth rates also in the medium to long term, and I already want to avoid to focus on a quarter only. in countries like India or in Asia. We also think that U.S. is an interesting area for us, and this is what we see. But as I said, it's very often depending on larger projects. So if you would book tomorrow a large project in the U.S., it doesn't necessarily mean that U.S. has a booming economy, and that is always what we have to consider. But all in all, if I need to summarize it, we are very well positioned in many of our market segments. We see interesting activities in many fields. And if you ask me about the regions, this is also not a surprise. Europe might not be in the medium to long-term run at the forefront of the growth in the world.

Just to double-check, there was no pre-buy or anything you saw in the U.S. in the quarter?

No.

Thank you. And my last one is for Bernd. So when I look at your free cash flow chart, you have a big 64 million negative line. Can you elaborate how much of that was translation effect and how much is VAT? I mean, I'm particularly surprised about translation effect because I see you also have a very large item in your comprehensive income statement, some 97 million euros in the quarter. And normally these translation items are part of EBDA, so... I'm just, like, a bit confused why we have another line in cash flow. I mean, it should be any items that you have in comprehensive income on exchange rates, usually they are non-cash. So I'm a bit surprised why you have this other line in cash flow from your EBITDA. Thank you.

Akash, what we can do, we can have a follow-up on this very specific element, but in general, the feedback is out of the 64 million, which we have summarized under the bucket of us, we have roughly 40 million as a FX translation effect, and the remainder, the majority of the remainder goes into VAT.

Okay, I'll follow up separately on this 40 million. Thank you.

Okay. Thank you. Dear participants, as a reminder, if you wish to ask a question, please press star 1-1 on your telephone keypad and wait for an answer to be announced. Once again, if you would like to ask a question, please press star 1-1. And now we're going to take another question. And it comes from Adrian Pell from OdoBHF. Your line is open. Please ask your question.

Yes, hi, everyone. Good afternoon. Thanks for squeezing me in. Actually, first of all, two quick ones. One is on the CapEx outlook that you increased by €20 million. When I saw this correctly, I was just wondering where you saw additional need for investments And how should this pay out? Second question is on FX again, more on a general basis. So the effect that we saw on the segments and for the group in the second quarter, is that something that we should also expect to reoccur in Q3 most likely, or maybe for H2? And then, Mr. Klebert, you were saying in your presentation that the order... trends should persist, pointing to the nice chart with a curve on how order intakes have been moving. Just to get more kind of qualitative statements on the customer sentiment, I mean now after let's call it the first wave of tariff discussions is over, How has that influenced, or maybe some customers have become more positive, your client base And a question a little bit linked to that, just to get an idea or an example, obviously you have been talking about Baladna quite a lot and congrats to this nice deal. Can you give us a sense on how long has this been in the making and if that was kind of not influenced from any kind of tariff discussions or have there been some postponements on worries about global macro? Thank you.

So, Adrian, let me start with the first two questions on CapEx. First of all, our CapEx spending for Q2 is fully in line with what we indicated for the full year, so the 235. Then we've just updated our guidance to 255, and this predominantly reflects additional capitalization related to our ERP project, which is running full steam. The second question on foreign exchange impacts, whether we and you should expect uh the same pattern in q3 or even beyond q3 as we've seen in q2 i can only give the question back to you so we might start to guess so we don't have the crystal ball here you are aware of our profile in terms of footprint in different countries but honestly we don't have a clue what will happen what we can clearly state is that we continue to communicate FX translation and that we continue to hedge FX transaction in order to mitigate this. The last question, I think, will hand over to Stefan. Thanks. So concerning the tariffs and the overall situation, I think even if nobody likes the tariffs and if we have now this 15% here, it is at least, I would say, something where customers know what they expect. It was the most horrible thing when all the discussions were going on and nobody knew what will happen because you know that all contracts we are signing, it's very clear that the customer is in charge of the tariffs because we can't take that risk. And that's also clear in what we can achieve in 99.9% of all cases, I would say. Therefore, I think it's good because our customers, they can now rely on something, hopefully, and they have a clear picture. I think it will rather help compared to the last month. The question, how long does it take to close a project like Balatna? In that case, it's about two years since we have been working on that project. Personally, I was in a discussion and negotiation with this customer 11 months ago where we had the feeling we are very close to sign. I can tell you that we originally expected to book this order already last year, which did not materialize. And this is a clear example and a very good example how things are sometimes delaying or postponing in that case. It's also that the Algerian state is involved in all the business. And so some things take long time. Then we also hope to book it in Q1, which did not materialize. Then we were optimistic to book it minimum in the first half year, which we did not do. But we have now meanwhile the signed order. We have the celebration. We wait for the down payment, and then we will book it. We hope that we can get the down payment in Q3, but it also might be that it is postponed and comes later. somewhere in Q4. But if I tell you this story, it gives you maybe an example how long projects of this magnitude are sometimes into negotiation and discussion. And what I wanted to point out, Alatna is not the only large project we are talking to. We have some others which also can materialize in two weeks or in three months or in one year. And this is the nature of our business, but what is important for you to understand and what my message is clearly, we have an interesting pipeline and therefore I'm quite optimistic also about the remainder of the year and also next year.

It was very helpful indeed. So maybe to also ask a follow-up on how the business is going short-term. I mean, one of your peers gave an example that at least when those U.S. discussions led to this 15%, as you rightfully said, hopefully staying where they are, this triggered the release of some larger order. So is that something that you would agree on in general? And then also following up on the comments from Bern, actually just I just wanted to make sure the question, maybe I wasn't precise, to say are there any kind of subsequent effects or different phasing of FX effects in the quarter? So saying that on the ceteris paribus level, the same rates and obviously same exposure, should we see something similar in Q3 compared to Q2? That's it then from my side. Thank you.

So I will address the last letter element you asked again. So there is no structural thing which we expect to change in the course of the second half. So therefore, this should be basically same level or same methodology without any surprise given the underlying currency environment.

All right, and on the order trends again?

Yeah, I think there's nothing specific what I can add here. As I said, if I understood you right, the tariff, I feel, will make it rather more likely that customers are now doing larger investments than before because now they can clearly calculate what they might expect. But I don't see such a spontaneous impact, let's say, because all the big orders are normally discussions which go on many, many months or years for our customers. All right. Thank you. Yeah. And what is maybe also what I mentioned before, but what I can stress again, our big advantage is that the vast majority of our customers main competitors are based in europe mainly germany or north of italy this is typically the cluster where you can find the excellent machine building companies for food pharma and beverage uh you know them all uh also the the typical german middle stand is here involved, and they all have no production in the US, they produce all out of Europe, and they will, I'm quite sure, like we, add all the tariffs which come, and therefore, if customers in the US have a clear and solid base of calculations, they know now it's 15%, they can make the business case, and then they make a decision. The most horrible thing is if it is every week in a discussion, might it be 15 or 50, then we have an environment where customers normally postpone decisions.

Fully agree. Many thanks.

Thank you.

Thank you. Dear participants, as a final reminder, if you would like to ask a question, to make any comment, please press star 1 1 on the telephone keypad. Dear speaker, just give a moment to our participants. Dear speaker, sir, okay, just give us a moment. We have one person come through. And the question comes from the line of Adrian Pearl from OdoBHF. Your line is open. Please ask your question.

Yeah, but I used the time to ask another one. So, actually, on farm technology, just to understand obviously you have increased your revenue guidance for this segment and also the margin guidance by one percentage point on the lower end and the high end. Nevertheless, the increase in the segment itself that you did was quite substantial and you have been talking about the effect there. Shouldn't we have assumed that there could be more potential from this change on the top line for the margin side of things?

Well, what should I say? I hope so, too. But we guide always where we feel comfortable, what we can achieve. That's what I said. This is our general sentiment. Of course, especially in farm technology, when we have volume, when we have a big workload in the factories, that will help us to overachieve our targets. because then we have all this overabsorption in the factory, which kicks in. So let's see. But, yeah, we believe in what we guide.

Okay. Conservative again, probably. All right. Thank you.

Thank you. There are no further questions for today. I would now like to hand the conference over to Stefan Klebet for any closing remarks.

Thank you, operator, and thank you, everybody, for listening and for your great questions. Let me try to summarize our situation, our state of the union. I think it's important to mention again that we improved all major KPIs in CO2 and in the first half year, and especially in the light of the overall economy, and if you look at other machine-building companies, i would say this is really remarkable here walks the talk we are performing we are delivering water bike water and this is i think uh and i hope what comes across Yeah, given the overall strong performance which we had in the first half year, and also the positive outlook and expectations we see, we are very optimistic for the remainder of the year, and that's the reason why we increased our guidance for the full year, and which also brings us at the end of the year to, again, a different level than we had already last year. And, yeah, on top, we continue to see a very strong auto pipeline, which makes us very optimistic, not only achieving a good 25. We also expect that there is a good 26 ahead of us. With that, I close the presentation and the discussion, and I thank you very much