Jost Werke Se

Yes, thank you very much and a very warm welcome to our Q1 2024 investor relations and analyst call here in Nuremberg. And let me go through the financial highlights. At first, the markets were softer, but we still reached the result of 299 million euros in sales in the first quarter. That includes a contribution of 21 million from the M&As that we have recently closed. The adjusted EBIT margin remained strong on the prior year's level at 11.6%, despite this drop in sales, and our adjusted EBIT reached a total of 35 million euros. We're very happy with the cash flow development, where we also generated 35 million, and that's more than double of what we had in the Q1 of last year. And with that, our leverage could be improved down to 0.09, to a factor of 0.09. Our adjusted earnings per share came in at 1.70, also a very strong result, and the net earnings adjusted net earnings to sales are at 8.5%. So based on those numbers and the outlook that we have from our customers and from the markets, we can confirm the outlook for 2024 that we've already given. Yeah, let's look at the markets that we've seen in Q1. And as I already mentioned, we see a normalization and a drop from the record levels that we had, especially in Europe and in North America in the last year. So in that year-on-year comparison, we're now comparing an extremely strong Q1 2023 to a much more normal Q1 2024. On the truck markets in Europe, we saw a decline of 18% against that previous year's level. On trailers of 19% and in the tractor markets of 20%. We more or less followed that market trend with a minus 18% that we've seen in our numbers. And the JOST numbers, they are organic. So here we have excluded the M&A effects so that we get the fair comparison. North America, the drop was even stronger. We've seen 15% on trucks versus last year, 25% on traders versus last year, and also 25% on the compact and low horsepower tractors versus last year. Our sales came in at minus 28%, so we had probably a little bit of a destocking effect also at some of our dealers, especially in the trailer and in the tractor market. Asia-Pacific, stronger than last year, plus 5% on truck, plus 4% on trailers, minus 12% on tractors. We're not very exposed on tractors in Asia-Pacific, so we also here followed the market with sales of plus 5%.

Okay, with that, I hand over to Oliver for the key finance.

Thank you, Joachim, for the overview. Let's jump now a little bit more into the details, starting with the segment region Europe first. And Joachim already took the wording normalization or normal, and that's exactly what we see with regards to the demand in Europe. We see this as a normalization after a very strong quarter one of last year, which was supported by strong pent-up effects. Nominal rise, that means minus 7.9% in sales for Europe organically as... Yeah. Joachim just showed minus 18%. The difference here is mainly driven by the consolidation of Jaxa, the business that we bought in quarter three last year, formerly known as Crenlodo Brasil. That's consolidated in Europe still and supported that reported increase. F-Inks impact didn't have a big impact in sales in quarter one this year. So let's jump now to the adjusted EBIT. Absolute loss following the organic numbers, not 200%. So we were able by adjusting fixed costs, by having a good flexibility, especially in our Eastern European plants, to somehow mitigate the minus 18% in organic sales growth down to an only minus 13% decline in absolute EBIT. And this results then in an adjusted EBIT margin of 8% versus 8.5% in last year's quarter. You always have to be in mind that the vast majority of the group headquarter costs are allocated into the region. This is why the fixed cost portion is a little bit higher here in Europe than compared to the other regions. And that for sure has a scaling effect when it comes to sales decline in that region. Overall, the share of aftermarket and agricultural business in Europe stabilized and for sure helped to keep the margin on a very healthy level with 8%, as I mentioned before, in Europe. Then let's go to North America on the next slide. Despite the minus 28% driven by the market, as Joachim showed before, we had again a very strong profitability in North America. The sales were burdened, like shown, especially driven by the decline in the trailer market in North America. And so far, we hadn't backwind from the agricultural market. That's still down. And it's also comparing here to a very strong first quarter 2023. But on the other side, with the measures that we have taken in last year, portfolio optimization, we mentioned a couple of times before in other conferences, we were really able to keep the margin at a very good level and indeed increased it from 10.5%. to 11.0% and we are very happy with that. And the current momentum is still very healthy from a profitability point of view in our North American segment and underlines the flexibility that we have there. So very good profitability contribution there. And then let's go to the Asia Pacific Africa segment. Here we are reporting a reported growth of 3.1% in sales. Organically, that's even a little bit higher, 4.9%, so almost 5%, because we had some FX effects in sales in that region. We have basically still robust markets in all of the region, India, Australia, New Zealand, and South Africa, and surpassing the strong basis even of prior year there as well. The Chinese market was quite good in the first quarter and we see here a step-by-step recovery of the truck and trailer market. Despite the overall situation in the Chinese economy, it seems to be that we are in a favorable situation here. And we also had a small contribution from the company LH Lift, which we acquired last year. This company has a plant and a business in China as well, so not only in Finland, and that's allocated to that region here. When we look into the EBIT and EBIT margin, also, again, a very strong profitability result. The margin came a little bit down from 22.5% in first quarter 2023 down to almost 21%, but that's only driven by mixed effects. Now, as I said, the Chinese market for us was quite good in the first quarter. And the Chinese EBIT margin is a little bit lower than compared to the other countries in the region because of the different product mix here. Overall, the proportion also of the agricultural business is step by step increasing. We have a very successful ramp up of our plant in Chennai in India. We are quite happy of that. That plant already contributed to sales in the first quarter and is already in terms of adjusted EBIT ahead of our budget and business case planning for that plant for 2024. So that's the three regions now consolidating to the group. What does that mean? As Joachim pointed out, driven by the market and cyclical declines, especially in transport in North America and Europe, we had to deal with a reported growth of minus 12.7% in sales. from 342 down to 299 organically that's almost 18 down which is fully in line uh with the reported numbers that we get from the market associations and informations there um The point is also that the agricultural market remains on a low level. There is a stabilization scene, but it's not enough at the moment to give us really support for the overall company. That is somehow expected for the second half. But at the moment in that numbers, it is what it is, so to speak. FX headwinds account for minus one percent points in reported sales. And the overall contribution of the ramp up of the M&A effects in sales is almost 21 million in the first quarter of 2024. Regarding EBIT, also again, like you pointed out, a very strong margin. So we were able, despite the decline in sales, to keep the prior year's margin at a level of 11.6%, underlying the resilience of our business, for sure supported also by a strong aftermarket business in both business lines. but also benefiting from measures that we have taken in 2023. Again, as I said, especially in North America, we see clear positive effects from portfolio optimizations we did there. And we are still at the moment in favor of a good price level, healthy price level, and a good level of material costs that we can keep down, so to speak. So that's... Then for the group, coming now to our standard adjusted net income and adjusted EPS bridge, relatively plain vanilla this quarter. So we end up with a reported EBIT of 28 million. If we then add up again our typical normalizations, especially from the PPA in this quarter, exceptions with only 1 million this quarter, we come to the adjusted EBIT of 35 million. And then deducting again the finance result and also our adjusted tax rate, we end up with an adjusted net income of 25 million compared to 30 million in first quarter last year. We have to take here into account that These 25 million versus the 30 million even include a 1.4 million rise in interest rates due to the Eurobore. So that makes it even more impressive from our point of view. And if you go to the very last comment on that slide here, impressive is also the net earning sales ratio was 8.5%, still on a very, very high record high level from a Yoast perspective here. Okay, next page. Our main KPIs we are tracking. ROSI still on a level above 20%, almost 21%. So very close to the record level we had in first quarter last year, showing the efficient use of capital. And this, in light of the sales decline, we believe is a very good result. Equity ratio also stayed very strong and well above our threshold of 35%, where we always want to be somehow, and supports for sure the DV leveraging of our company, which you also then see in the net debt figures. Joachim already mentioned that's due to the strong free cash flow we generated. so to speak second half of last year and now again in first quarter this year we were able to push that down to 0.93 times EBITDA and this for us is very important at the moment it helps us especially to keep the interest costs down and very competitive for the full year of 2024. And please to the next page, some cash flow and working capital figures. Free cash flow I already mentioned, more than doubled in first quarter. There are a couple of effects, but more or less they are a wash. So we have some support from a factoring program that we started and implemented in first quarter on the one side. So that's a positive impact. On the other side, and you are all aware of this, we had to pay the final earn-out payments for the acquisition of Elo Group. And all in all, more or less, this is a wash. So the 35 should give us a good flavor of the real performance in terms of free cash loan first quarter. And we believe this is a very good one, to be honest. CapEx still under control. There's 2.2% fully in line with our target range of 2.5% for the year. And also working capital, you can see for sure we are here benefiting also from the factoring program. But even on top of that, we are carefully looking about our inventories, especially in an environment when sales decline, you need to do that. And also our payables development compared to last year, I think was very good at the end of the quarter. So that... means all in all we were able to push the networking capital ratio down to 17.8%, so even below the 18% mark. So from that point of view, giving us support again also for audio leveraging at the moment. Then let's go to the next page. I think that's from my side. And with that, I will hand over again to Joachim for the outlook. Yeah, thank you, Oliver.

Let's come to the market outlook. This is how the main institutions and ourselves also see the market development for the full year. And as you can see, it's still a decline, a considerable decline versus last year, but it's not as pronounced as we've seen in the first quarter. Mainly, this is because of the effect that we will in later quarters compare already to a more normalized market level and not to the record levels that we're comparing to in Q1. So let's go through it in detail. For Europe, we expect truck, trailer and tractors to be down high single digits between 5 and 10%. North America will be more pronounced 10 to 15% on trucks, 20 to 25% on trailers and tractors 10 to 15%. Asia Pacific Africa, we expect to be up by 5 to 10%. in trucks and trailers and around zero, I would say, for tractors. So as I mentioned, still a much softer year than last year, but not as pronounced as you've seen it in Q1 because the comparable base will be a different one for the remainder of the year. So with that, we confirm our outlook based on Q1 numbers and the high profitability. We expect sales to decline single digit year over year from last year's 1.25 billion. Adjusted EBIT, we also see a single digit decline from last year's 141 million euros in adjusted EBIT. Our margin will decline but will remain in the strategic corridor that we have posed between 10% and 11.5%. And I already mentioned last time that we target to be in the upper half of this corridor. CapEx you can expect to be somewhere between 2.5% and 2.9% of sales and working capital below 19% of sales. Last year we had 18%. So we are confirming the outlook that we've given based on the Q1 numbers. Also, I would like to inform you that we are using these more normalized markets and we will continue to invest in the future of our company in many regards. And one that is kind of new, and that's why we're showing it here, is that we are also investing in strategic partnerships, in this case with a company called Itonomy from Switzerland. And ITONOMY is developing autonomous electrically powered transfer systems and software. They're integrating our products and we are now strengthening our partnership with them with also a financial partnership. We are investing a single digit million amount into a convertible loan to support the growth of ITONOMY. And we will, of course, continue the already existing R&D partnership where we integrate our products and our autonomous systems into their vehicles and into their products. So this is for us an important step in the roadmap to drive the technological change, the technological transformation to highly automated and autonomous vehicles. To sum it up, we've had the opportunity to demonstrate our strong flexibility in the market environment that we've discussed. In this first quarter, we were able to defend our high adjusted EBIT margins despite the drops of sales and confirm our outlook for 2024. The further improvement in working capital and the operational excellence boosts the free cash flow and has accelerated our leveraging down to a level of 0.93. And we continue to invest in the strategic opportunities to pave the technological roadmap for transport and agriculture and to strengthen our offering for the customers. The strong shareholder value... Can you go back, please? Strong shareholder value is, you have seen it in the return on capital employed that remains almost at 21% and the cash conversion rate of 1.4 that we've had in Q1 2024. And we see this current market environment as a window of opportunity to continue to invest and to strengthen our market position in mid and long-term organic and inorganic growth. I also would like to use the opportunity for you to pencil in our Capital Markets Day on September 10th of this year. So there we will be able to inform you a bit more about our strategy for the future and about more details of our company. So that will be September 10th of 2024. With that, thank you very much for your attention and we're looking forward to your questions.

Ladies and gentlemen, at this time we will begin the question and answer session. Anyone who wishes to ask a question may click the Q&A button on the left side of your screen and then raise your hand or submit a text question. If you are connected via phone, please press star followed by 1 on your telephone keypad. If you wish to remove yourself from the question queue, you may press star followed by 2 or please lower your hand. For written questions, please click the Q&A and the text button and type in your question. One moment for the first question, please.

The first question is from Nicolai Kemp from Deutsche Bank.

Please go ahead.

Yes, good morning. Nicolai Kemp here, Deutsche Bank. Thank you for taking my questions and congrats to a strong start. Can we just have a bit more highlights on the input prices? I think it has been a major headwind over last year, but seems to come down. Can you give more color if that's going to help you or if you have to pass them on and what kind of impact you would expect of that?

Okay. Thanks, Nikolai. I will take that question. And you are right, Nikolai. For sure, it was a benefit in last year. We are still benefiting from that now. So what we see is we are able, always backward looking, I cannot say anything about the future. to keep a good and healthy price level at the moment. And on the other side, in general, material costs are at least stable like 2023 or even go further down. And that gives us headwind. We still believe that this is a benefit for the margin of 2024. And you might have seen that in the press release, our guidance was always that we want to stay within the strategic margin quality of 10.0% up to 11.5%. At the moment, we are seeing very good chances to keep the final margin for 2024 in the upper half of it. And one effect is just what you described, the benefit that we have. So at the moment, I think we are happy with that development and we don't expect here a material negative deviation, at least on the short term.

Yeah, maybe just to add to that. Our pricing, we have variable price components with some customers, and it's like a floater where these prices are then adjusted based on the material prices and some indexes. And where we have those, typically... their trailing impacts. So if the prices have been up and they're going down, then we have a little bit of a benefit because we enjoy the higher prices a bit longer before they really come down to the level. And when it goes up, then we have a little bit of a negative because we have to invest already in higher cost and we don't get it in the prices yet. So it's probably a true statement. We're still benefiting a little bit on that trading effect of the variable price components in our prices with some of the global OEs.

Got it. Thank you. And one follow-up on the pricing, given that end markets, for example, in trucks, are normalizing and you have some truck manufacturers like a big German one stating that especially the market in Europe is getting a bit softer. Are they trying to do push you on prices and try to lower prices here?

That's constantly happening. The motivation is always a different one. If it goes up, it's the higher volume. If it goes down, it's the more competitive prices. Our customers are continuously asking for a higher level of competition. They always find reasons why we should do that. And then we negotiate like we always do. So I don't consider this a special situation. Of course, now the reason is a price drop that they have also in their products. But as I mentioned, sometimes it's the higher volume that should generate lower cost for us. And that's the ongoing business. And of course, as a tier one supplier to the OEMs, you have to be competitive all the time. That's how you keep the market share.

Got it. Thank you.

The next question is from Pierre Castella from Font Avenue. Please go ahead.

Yes, good morning, Oliver. Good morning, Joachim. I've got three questions, if I may. The first one is with the stocks in the channel. Are you aware of any significant stocks, either in trucks and trailers or in agricultural in the channel, in the distribution channel? Second question is on the agricultural business. Did you expect this activity that you're quite new into to be so cyclical? A 32% drop seems to me like quite a step. And on the other hand, could we expect to see agricultural in the coming quarters bouncing by a number of that magnitude, i.e. 50%. And the last question is to do with the net working capital. Congratulations on this amazing number. But is it a one-off or do you think that you will be able to maintain working capital there in the coming quarters? Thank you.

Okay. Yeah. Thank you very much. I will take the first two questions and then the working capital, I will hand over to Oliver. The stocks and the channels, that's always a good question, and it takes a little bit of discussion. On trucks and trailers, we produce the products, and they go to the assembly plant of our OEM customers. And if there is a stock on their yards or on the dealer yards, then that includes our products, and they have already been sold. In ag, that's a little bit different, but I come to that. So... What we hear is that our, especially our truck OEMs, they have higher stock levels than they've had in the past. And that's also one of the reasons why they are producing less right now because they cannot produce as much into stock because the stock levels are already very high. And the same is true for the trailer manufacturers. But I see that already reflected in the numbers that they're showing to us and that they have in their call-offs. On agriculture, it's a little bit different. We still have a lot of tractors in the stock, but there they don't necessarily have our loaders already because only some of them are delivered to the assembly plant. Others will be fitted in. at the dealers. And the dealers have already been reducing their stock levels on loaders, knowing that the market would be somewhat softer, versus the OEMs have continued to produce. And that's why we've seen this big drop in the tractor production, because last year they have continued to produce, but the sales have already gone down. So that's the answer to the stock levels. We have stock levels in trucks and trailers on the dealer sites, but they are already reflected in the call-offs that we see and also in our prognosis for this year. And on ag, we believe that we will actually be have a little bit of an early start because when the market comes back, then they will need loaders and they don't have very high stocks on loaders. They only buy them when they sell the tractor. On your question about cyclicality, we of course knew that ag markets would be cyclical. I think we have one special effect and that's maybe not even a cyclical, but a one-off effect that we've had in 2021 and 2022. And that is that we are very strong in that segment of these compact small tractors where they have the loader and the digger in the back. And after COVID, especially in North America, a lot of people wanted this equipment because they wanted to be autonomous and they wanted to be able to do everything around their house, do small construction works and so on in there. in their large gardens or on their small farms. And we had a really special effect of these small products being purchased in very high numbers in 2021 and 22. And the stock levels that have, and also in 23, we still had some of that. So we're now comparing to, you know, a one time, once in a lifetime bubble that we've had there. On the normal agricultural business, we also have fluctuations, but they're not as pronounced as you would see them in the numbers that we are showing compared to last year and especially to 2022 because that included that special effect. With that, I would hand over to the network and capital question.

Yeah, Pierre, somehow you are right, no, for sure. There is a one-off impact there. As I said, we implemented factoring as part of a diversifying our financing structure. And that helped us for sure in that working capital ratio a little bit. The overall impact here, as you could say, is something between 0.5 and 1.0 percent points. But for me, it's important, even if it's just that, so adding that up back on the 17.8%, we are well below the guidance that we gave for 2024. And that's what we are watching, what we are trying to achieve, and what we can confirm at the moment. So yes, there is a little bit of an impact, but somehow this will stay until the end of the year.

Thank you.

Ladies and gentlemen, if you would like to ask a question, please click the Q&A button and raise your hand, or press Start followed by 1 at this time. Written questions can be submitted by clicking on the Q&A and then Text button.

For the greeting questions, we have five questions from Jorge from Hawk on Alphalizer. His first question regards the outlook given for the trailers in Europe for the full year, where volumes are expected to drop according to the numbers that we've given by five to 10%. However, Volume development in Q1 was worse than that. And the question is, do you expect the markets to improve in the second half of the year? Or is it due to the comparable basis being lower in the second half? And following that question, there are talks about new subsidies for energy efficient trailers coming into place in Germany in the second half of the year. And is that the reason you expect trailers to do better in the second half? What kind of impact do you expect from those subsidies incentive for the trailer markets in Germany, but also in Europe?

Yes, the question concerning the market, I think I've answered a little bit in the presentation that the outlook for the year is not as pronounced as the Q1 and that is mainly because of the comparable days. believe that the level of production that we're having right now will more or less be the level for the remainder of the year. Maybe in some segments we see a little improvement, but the reason why the overall number for the year is smaller than what we've seen in Q1 is mainly that the comparable base is going to change. Especially on trailers, that is true because trailers last year already in Q3 and Q4 had a fairly soft market. So we saw the decline in trailers in Europe already in Q3 and Q4 versus in trucks, we're only seeing it now. And that is the main driver. On the subsidies for energy efficient traders in one country, in Germany, we usually don't put too much attention on that because these programs that are individual for countries on a global effect with our footprint that we have today, they don't really have a huge impact on us. And with this specific one, I also don't believe that we will have a huge impact in the European market. Of course, it helps for a certain segment, but the segment is still very small and it's more driving technology than it would have a major impact to our numbers. Of course, everything helps, but I wouldn't overestimate that impact.

Okay, the next question from Jorge is regarding the agricultural market. Can you please give a bit more color on what you're seeing now? Are there any positive signs coming from the market? How is the stock levels of dealers and OEMs? And also here, Q1 had a rather strong comparable basis. Do you expect the market to improve in the second half despite the typical seasonality?

When I drive around in my car, I see the crops growing. And actually, at least here in Germany, it's growing quicker than any other year because we had such warm weather. And that makes me very positive that we will need all this agricultural equipment and that it needs to be replaced and that it's going to be in use. And that is the main driver for our market. And so with that, of course, I expect that we've seen Farmers being a little bit hesitant for two reasons. One is interest rates are high. There may be three reasons. Their equipment is not very old that they are operating with. And on top of that, the OEMs had increased their prices very strongly due to the high energy costs, the high material costs and so on. And I think the farmers are just waiting and using their old equipment a little longer until they see a little bit of movement in the pricing or in the interest rates. And I'm positive that throughout the year or during the course of the year, when they start operating more in the fields, then that market will come back. And the impact of that I've already described a little bit. If it is a loader, we will feel that impact earlier because the stock levels that are at the dealers when they are sold, it's not necessarily new production. But on the loader, it could be for us because the dealers don't have very much loaders in stock. On the remainder of the components, probably that would not have the same impact. So yes, I'm positive that the market will come back. And if you look at the overall market and you take out, and if you look at our agricultural numbers, they're still much higher than what we had in 2019. So we're still at a very good level worldwide and also in Europe. But as I said, there will be a positive impact based on the fact that the farmers have been hesitant.

The final two questions from Jorge are regarding the new production plant in India. Did the new plant already contributed to sales in the first quarter? How is the ramp up going? And are you able to give some color on what type of contribution do you expect from the new plant for the full year? And also the last question, are there any current M&A opportunities in the pipeline that you're looking into?

The Chennai question. So regarding sales contribution first quarter, yes, there was a sales contribution. It's a low single digit euro number, but fully in line or even, let's say, at the upper edge of our business case for 2024. We are quite happy from the volume point of view. Operationally, the team is doing a great job there. We already mentioned that last week on our annual shareholders meeting, a great ramp up. We don't have any issues so far. Even with that strong catch-up that is now starting, we were able to achieve 100% delivery rate. So from that point of view, doing quite well in terms of contribution. Even with a low single-digit euro number, which again is fully in line with our budget for 2024, we were now able to cover not only all the variable costs, but also the fixed costs of the plant. So that's quite a success story. And for the full year, we definitely expect that at least the run rate of the first quarter is going to continue, should be definitely higher when it goes forward.

I think it has been an impressive project and a good start. But I can also tell you there's a lot of interest from other customers that know that we have this facility and that's also helping. So if that leads to sales this year, I cannot guarantee, but we are in a lot of very positive discussions with customers that are very interested. in the fact that we now have a plant in Brazil, in India, in China, and of course in the Northern Hemisphere. And that should mid-term generate certain sales on agriculture. Concerning M&A opportunities, we are constantly interested in analyzing the market for M&A. To us, there's three things that are important. One is, are we capable of doing that from an organizational setup? And I think we've proven with the integration of our ag business and also with the two M&As that we've done last year that we have that capability. We are making very good progress with the two M&As, with the project of integrating those two companies. There's, of course, still some work that needs to be done. But overall, we're very happy with the way this is running and how well this integration is going. And so we feel fit to be able to do it. And when we have completed that, then I think we should have a capacity, an organizational capacity to do that. The other question is, do we have the firepower to do that? And you've seen the balance sheet, and I think there we feel very well positioned with the cash generation and the balance sheet overall, the strength that we have in equity. We're very well positioned to do that. And then the third one is, is there the right opportunity? And that's something that, of course, we continuously analyze, but we are also very... very detailed in that analysis and make sure that there is a good strategic fit that really can bring our business to another level and to the best level for our shareholders and for our employees and for our customers. And if there are the right opportunities, as I said, we feel that we have the organizational and the financial capability to do it. And we are continuously looking for opportunities.

Are there any other questions?

No more questions from the phone now.

I would like to close the meeting.

Thank you very much for your attention and see you all in the Q2 call and in our Capital Markets Day on September 24th. No, September 10th, 2024. That was it.

Thank you very much for your attention.