Jost Werke Se

Ladies and gentlemen, thank you for standing by. Welcome and thank you for joining Joost Werke Q1 2022 Results Conference. Throughout today's recorded presentation, all participants will be in a listen-only mode. The presentation will be followed by a question and answer session. If you would like to ask a question, you may click the Q&A button on the left side of your screen and then raise your hand. If you are connected via phone, please press star followed by one on your telephone keypad. For operator assistance, please press the star key followed by zero on your telephone or press the operator assistance button on the bottom left side on your screen. Our speakers today are Joachim Dürr, CEO of Joostwerk AG and Christian Terlinde, CFO. I would now like to turn the conference over to Joachim Dürr. Please go ahead.

Yeah, thank you very much and a very good morning. Welcome to the Joost Werke AG Q1 2002 conference call. Christian Terlinde, who is at the different sites today, and myself will guide you through the presentation and are happy to take your questions afterwards. So let's look at the highlights of what I think has been a very strong start into the year 2022. The highlights of the Q1 just has achieved a new sales record of 312 million euros. That's plus 21% with a strong growth in transport, 14% and agriculture, 46% in the first quarter. Our adjusted EBIT margin remained robust at 11% despite rising costs and we achieved a new record for the adjusted EBIT of 34 million euros in one quarter. Our high operational flexibility and our proactive cost and price management were the key success factors to manage the volatile market demands. We needed those factors because we're operating in low visibility. We have supply chain constraints, the war in Ukraine, ongoing pandemic lockdowns on top of the existing problems with semiconductors and global transport. So based on that strong start, we confirm our positive outlook for 2022, despite a more challenging market environment. Let's look at the markets for Q1 2022. And if you look at it regionally, region by region, you can see that the market in Europe for trucks actually somewhat contracted. That's due to supply chain issues that our truck customers had, mainly due to the war in Ukraine. So we had truck production a little bit down in Q1 2022. Trader production and trader markets were up by 8%. And the tractor market was also impacted a little bit by the Ukraine war and also by some semiconductor shortages so that that market also contracted slightly versus the Q1 of 2021. However, just benefited from the overall strong demand also in the aftermarket. And with the price increases that we've put into the market, we outperformed the European markets by market share gains, some price impact, and also with our strong aftermarket position. North America, very strong market, continued to grow in trucks 4% over an already strong Q1 2021, 13% in trailers, and more or less the same level for tractors but there we have a mixed effect the higher value tractors actually grew and the compact tractors actually went down a little bit so it was an overall quite strong market environment However, we had an extremely strong performance in that environment with a growth of 66% on sales. We achieved further market share gains and outperformed the market. And we also benefited somewhat from the product mix effect. APA, a very differentiated picture. China, extremely weak compared to an extremely strong Q1 2021. We all remember 2021 after the COVID shutdowns in 2000, there was an immense increase in production, an extremely strong market that has dropped and that actually dropped below the normal level. So the total APAR region, therefore, on the truck side is down 47% and on the trader side with plus 11% just dropped only 14%, so we were able to recover a big portion of that drop from the Chinese market with our other strong markets, namely Australia, India, South Africa, and also other markets in that region. So overall, I think we have a very strong performance in a supportive market, but that shows already some signs that leads in China and a little bit on the European truck side of a more stable development rather than continued growth. With that, let's go to more details and I hand over to Christian.

Thank you very much, Joachim, and also a very warm welcome from my side. Pleasure to be able to present to you the Q1 results for our group. And as always, let's start with the different regions. So we start with Europe. In Europe, you can see a tremendous sales growth, up to 180 million in the first quarter. That is up 16% compared to the prior year. Organically, it's even 18%, so a strong development, despite already some initial negative impacts of supply chain interruptions and also, of course, the war in Ukraine. Overall, JOST grew very strongly in both sides of the business, so agriculture as well as transport, and we believe we were able to outperform the underlying markets quite well, and this was certainly supported by prices negotiations and therefore achieved price adjustments with our customers that we already started last year and continue to do so this year. Overall, the FX headwinds amounted to minus 2.2%. When you look at the result, I'm quite happy that we are back from the 2.6% that we reported for Europe in Q4 last year. We're now back to 9.7%. That is, of course, slightly below the 10.6% margin that we achieved a year ago. But we need to bear in mind that Q1 2021 was still a quite unaffected year or quite unaffected quarter by price increases or material price increases and inflation at all. So I believe the Q1 last year was probably the last normal quarter that we had seen. So overall, the margin went down to 9.7%, but we see a 5.8% growth in EBIT in absolute terms. That is 17.5 million, and that is significantly more than the 4.1 million we achieved a quarter ago in Q4 2021. We did also here have some negative FX effects of roughly half a million included here. So overall, the result would have been better had the euro been slightly stronger. With this, I would like to go over to the next region, and that is North America. North America, the growth story continues. This is all I can say. I need to say, if you look at the result, or first of all, look at the sales numbers, you see a growth of 65.5% compared to Q1 2021. And also an absolute figures from 55 million, we're now up to 91 million within one year. And even if you take out the strong appreciation of the US dollar, it's still a 54% growth. So this is already a significant indication that we have further increased our market share in North America. And this is already challenging on the landing leg side where we already command a very high market share of above 80%. But now we're also we will continue and we are continuing to grow on the fifth wheel side. So this is also very nice. Aside from that, we see some growth also in the Exide business. So there we are no longer significantly impacted by supply chain disruptions. So that was very helpful in both business lines. If you compare it also to Q4 last year, you'll see there a 20 million gain in sales as well. So overall, a very successful quarter for the region North America. And that is also visible if you look at the result, a 91% increase of the adjusted EBIT from 4.1 million to 7.9 million and now an adjusted EBIT margin of 8.6%. Certainly the much higher capacity utilization and therefore an operating leverage always support that development. But as I mentioned already before, the X side was significantly supported by the higher or the better logistical situation, no longer so terrible logistics disruptions. And therefore, we could benefit on both parts of the business, agriculture as well as transport. Let's move to Asia-Pacific Africa. And Asia-Pacific Africa, Joachim already mentioned that basically, and I had said it already during the two previous calls about in Q3 and Q4 last year, it's a two-sided developments. On the one hand, we have the rest of Asia Pacific, and that is India, the Pacific region, which is Australia, New Zealand, but also South Africa, and last but not least, Southeast Asia with Indonesia, Singapore, Taiwan, and so on. Those countries are continuously developing very, very nicely and very strongly. On the other hand, China, China, where we had a tremendous Q1 and Q2 2021. And with the significant pre-buy effects due to the new emissions regulation, China 6 going into effect 1st of July 2021. And then we had the sudden drop, the expected sudden drop in the Chinese truck market, where it just significantly contracted. And just to give you an overall idea, while in 21 China made up 55% of our sales in the region, in 22 it's down to 30% of the sales. But that again, it shows how balanced and how well balanced our portfolio is and how important it is not to be in one country alone, Yes, China is the biggest economy, but still for us, the other countries are just as important and they're now pulling the weight for the region. So this is very, very helpful to have that balanced exposure there. In terms of profitability, Asia-Pacific Africa remains our stronghold with 18.2% margin despite China going down so much. It's a very, very positive development. Obviously, with such a decline in sales, it's not possible in absolute terms to remain on the same level. But we are still with 7.3 million, extremely profitable. It's the best region that JOST has and therefore a very positive development from our end. Of course, this is something we said several times, but let me stress it again. The countries outside of China have a significantly higher share of off-duty applications, off-highway applications, which means heavy-duty applications. And these typically come at a much, much higher rate of return. And therefore, we were able to even increase the margin compared to prior year. So for the group, what does that mean? If we move to that slide, yes, first of all, a 21.2% increase in sales on paper, 19.3% organically. And very happy to say that we are continuing to grow our agricultural exposure. With the acquisition of ALO, of course, there was a significant boost. The ag sales have been somewhere between 20% to 25% for the group. In Q1, ag sales make up 28% of the group and therefore it's balancing our portfolio even more also on the industry side. So positive development. I am also extremely happy to report that we've achieved three consecutive months of over 100 million in sales. And Joachim mentioned that this is a new sales record for Joost. So 312 million in sales, three consecutive months, over 100 million in sales. Very, very positive, of course. Also supported by the sales price increases that we were able to, where we were able to pass on our costs to our customers. Also, we have a slightly better balance between OE first fit and aftermarket sales. Aftermarket make up now 27% of our sales in Q1. And the regions, very, very much again, and you hear me say that quite a bit, also there is a nice balance. Europe made up 52%, Asia-Pacific 24%, North America 24% of our sales. And therefore, we are much less influenced by negative developments in one region, which, of course, is positive for us as a group. Still, the Europe exposure certainly is significantly higher than in the other regions. So in terms of profit, also their new profit record, 34.4 million in sales and an 11.0 margin. It's a 15.5% increase in adjusted EBIT. And again, I will now just repeat what I already said. The very high operational flexibility means that we are able to react on quickly changing market environments. On the other hand, high sales mean also high operating leverage. And on the other hand, we cannot neglect the fact that rising material costs, rising energy costs, rising costs for certain parts and components that we use will have a negative or have a negative impact on the result. And this will be our focus for the remainder of the year to fight those price increases on the purchasing side. Now, let's also speak about the bottom line, because I believe this is also very important for you as our investors and also the analysts. The net income for the year amounts to 22 million. Then you have the usual development from net income to EBIT to adjusted EBIT of 34 million and then down to the adjusted net income. What I would like to point out and that I think also gives you a very good indication that the number of adjustment is quite limited. So 22 million of reported net income compares to 23 million of adjusted net income. And you see the main adjustments are non-cash adjustments. So it's the positive adjustments is the appropriate purchase price amortizations. And the other one is the much, much higher than actual performer tax rate of 30%, which is negative. But comparing that to 4 million of actual taxes paid, you see that the 30% is something that we need to report on. But it's nothing that we are paying. And therefore, this is also a quite positive development. Adjusted earnings per share went up by almost 20 euro cents, up to 1.54 euro per share. And the reported earnings per share went up by also here up to 1.44 euro cents. per share, also quite positive development. So with that, I would like to go quickly through some balance sheet related items. Return on capital employed slightly down to one year ago, to year end, 16.6. It was at year end, 16.3. But compared to prior year, Q1, where we recorded 14.2% earnings per share, return on capital employed were up 2.1 percentage points. The equity ratio increased further from the 31.2 at year end. We're now at 32.7. So that's a 1.5 percentage point gain. And also here, I like to make the comparison to Q1 2021. where we had an equity ratio of 29.7. So we have three percentage points better in equity ratio. And this is just entirely driven by the positive result of the last year, the last four quarters, where we had continuously positive earnings. Net debt increased compared to the year end number of 1.45 times, now at 1.51 times, so slightly worse. Still significantly better than the 1.76 times at Q1 2021. But still not very happy about this development. I mean, with this growth in business, we do see also an increase of working capital and working capital increase means lower cash flows and therefore a burden on our net debt. And that brings me straight to cash flow. If we look at the cash flow development and here you see probably the only negative point of our results, we did have a negative free cash flow. And this negative development is basically entirely driven by the development of working capital, which increased compared to a year ago, compared to last quarter. And therefore, it's negative. The good thing about investments in working capital is that they are typically not lost money. It's just stored money, cash stored in a different place. And at this time, I would say it's stored in our inventory where we have a significant increase compared to a year ago. now at 208 million, which is 60 million higher than one year ago. Basically, there are two reasons. One, of course, is more mathematical. With all the price increases we're seeing on the supply side, obviously, the value of our working capital increases too. The other one is the uncertainty in the supply chain. The ports of Shanghai are now closed for about three weeks in a row. And all these supply chain disruptions do have a negative impact on our working capital. And we're trying the best we can to combat that. But on the other hand, it is important for us to be able to deliver. Being able to deliver to our valued customers is key and crucial for a good future of the company. And therefore, we are balancing cash flow and being able to deliver. And in this case, you see, we invested 60 million in networking cap, or rather in inventories. And we'll turn those inventories sooner or later, rather sooner than later into cash again. So overall, networking capital has percent of sales up to 21.4%. Quick word also on our capital expenditures, which are at 5.6 million or 1.8% of sales. This is actually, even though we have the 2.5% of sales goal, The 1.8 for Q1 is quite high. Typically, the investment starts somewhat later this year. We are trying to speed up the investments a little bit so that we can take use of those newer machines, better equipment earlier. And therefore, you see already 1.8%, which is much more than 1.5% we had last year. And with this, I would like to hand it over to Joachim Dürer for his outlook and some closing remarks.