Jost Werke Se

Welcome to the Joost Werke Q1 2025 earnings conference. I'm Moritz, the chorus call operator. I would like to remind you that all participants will be in a listen-only mode and the conference is being recorded. The presentation will be followed by a question and answer session. If you would like to ask a question from the webinar, you may click the Q&A button on the left side of your screen and then click your raise your hand button. For written questions, please click the Q&A button on the text button on the tab near your questions. If you are connected via phone, please press star followed by one on your telephone keypad. For operator assistance, please press the operator assistance button on the bottom left side of your screen or star zero on your telephone keypad. At this time, it's my pleasure to hand over to Joachim Dürr, CEO. Please go ahead, sir.

Thank you very much and a warm welcome to the Joost Werke SA earnings conference for the quarter one 2025. You will see Oliver and myself today separated. There's about 16,000 kilometers between us because I'm speaking from the Brisbane Truck Show. But I hope that technology will not let us down and can give you a good overview of what we think was a good start in the year 2025. Going through the Q1 highlights, we were closing the HUVA transaction on January 18th. 31st, 2025, and we were able to get already some positive contributions of that merger on an adjusted EBIT earnings per share level in the first quarter. The post-merger integration is fully on track. The identified adjusted EBIT synergies of 27 million are identified, and we have a very high confidence that we will be able to implement them We had very positive customer and market response to the Hiva acquisition, and that supports our synergy plan. On the market side, we see some slight positive signs in market demand. So the market seemed to be stabilizing in Europe, Middle East and Africa, and as well in Asia Pacific. The US market, as we all know, has been quite hesitant due to the uncertainty of the tariffs and the trade regulations. We also prepared in Q1 the refinancing of the bridge facility that we took to pay the purchase price for the EVA acquisition. And we were able to close that meanwhile in April 2025. So we've fully refinanced the 320 million that we had in the bridge. Let's go to the Q1 results. As I said, we think we had a quite good start despite the ongoing market weakness. Sales were up 25% to 374 million. That was supported by two months, February and March, of the Hiva M&A effect. The organic sales decline was 9% versus the Q1 2004, and that was mainly a result of the weak markets. The adjusted EBITs increased by 3% to 36 million. And the adjusted EBIT margin ended up at 9.6%, which was slightly better than we had anticipated after the consolidation of Hiva. Free cash flow, excluding obviously the M&A payments, went up 26% to 44 million euros. And that was supported by the Hiva consolidation and a proper working capital management. The leverage after the financing ended up at a multiple of 2.45 after the debt financed acquisition, but remained below the 2.5 multiple that we had announced and planned in October of 2024. So Hiva contributed already positively on adjusted earnings per share, partially offsetting the organic sales driven decline that would have been 9%. And thus, with the EVA positive effect, the adjusted earnings per share was only down 3% at €1.65. Next slide, please. Yes, this is the market view. I already mentioned that we see a little bit improvement for the rest of the year for Europe, Middle East. And Africa, what you see here for this region is that the truck market was still down because we're comparing here Q1 versus Q1. And the Q1 was for trucks still a very strong quarter last year. And this year we see the bottoming out effect and see a little improvement, as I said, for the rest of the year. But we'll come to that later. The biggest surprise you will see in America is there we had a decline. over the last year of 15% to 20% on trucks and on trailers and on ag. Ag was weak in Europe and in North America. And in our hydraulic business, we also saw a weaker quarter, slightly weaker quarter, between 5% and 10% below last year's Q1. For APAC, we have the bottoming out effect, some stabilization for trucks, especially in the Chinese markets. India was also stable. The trailer markets more or less on the same level and on tractors, a slight improvement and the same is true for hydraulics. Next slide, please. Yeah, and we also were able to improve our resilience after the acquisition. Now we have a wider range of applications and that you see on the right side of transport applications are 55% of our turnover Ag, 17%, and hydraulics, 28%. And also in the regional split that you see on the left side, we see a more balanced view. Europe, Middle East, and Africa is at about 50%, and the rest is evenly distributed between Americas with 26% and Asia Pacific of 24%. Next slide, please. And I think for more details, Oliver will give you a more detailed view of the financial numbers.

Thanks, Joachim, to Down Under. Let's, as usual, go first into the regions before we come to the group and balance sheet and cash flow items. Looking here into the EMEA region, obviously a big contribution in terms of sales regarding the consolidation that happened also in the other regions, and I will not mention that several times. That means 15% more sales, 188 versus 164 last year's first quarter. However, organically, you see a decline of roughly 6%. And as Joachim mentioned, that was both because of transport and agriculture had a weaker start compared to the last year's first quarter. In terms of organic sales, positive is here at the moment. We see a stabilization and order intake. for both for truck business, but also for agriculture business, gained a little bit of a momentum. We need to see how sustainable that is, but at least at the moment it looks more promising than the weeks and months before, so that we are quite confident with our outlook for the EMEA region going forward. FX effect this quarter hadn't much of an impact. And if you look into the EBIT margin for the region, it declined from 9.1% to 6.1% and absolute EBIT from 14.9% to 11.4%. But this is fully in line with our expectations that we had in our internal models when consolidating Uva. There's nothing special in there, so to speak. And I mentioned that in all the various investors' conferences that we had that which is dilutive, and a big portion of that sales is reported in the immediate region. And that explains also the deterioration of the margin in Enea. Good signs here from the operations is that short-time work that had been in place until February and March in our transport plants in Europe, but also in the agriculture plants in the Nordics, that has been ended. and that should give us a tailwind over the next months. Next slide then. Going to Americas also here, an organic effect from the consolidation, although that's not as big as in EMEA, as HUVA is not so much present in the Americas region than like in EMEA or APAC. So reported growth was 8% only, and the organic sales down was minus 16%, as Joachim mentioned. Two big topics here is definitely the truck business is suffering from the whole geopolitical and tariff discussions in North America. And on the other side, the agriculture business in North America is, again, really down versus prior year's first quarter. On the other side, regarding profitability, you see, despite that, we have absolute rise to profitability increased and also slightly the margin is now up again to close to 11% of EBIT. And there's a strong backwind from the aftermarket business. We had almost 40% aftermarket share in North America and US, which comes with very solid margins. And that definitely supported us. And on the other side, you might remember that we finished a planned consolidation in North America in the second half of last year. That helps to create efficiencies on top. Next slide, please, is then APAC. There's a really boost in sales, report-wise, as HUVA is so much stronger in China and in India. So it's almost doubling the sales from 44 last year's first quarter to almost 90 million euros. So that's on the one side nice. On the other side, we also see here a slight organic decline of minus 7.5%. And this comes mainly from India. The Indian economy is not bad, actually, however. But what we are still facing here is that even one year after the election, the governance spendings in terms of infrastructure programs, economy subsidization is still waiting and still extending. its impact into the economy. We need to see how that goes forward. The China business itself is robust, both in Joost and in Hyva. We are happy of this. Joost is strong here, especially in the export business, and that helps to keep our sales and margin in the APEC region. In the Kwai's Night region, also here we see a let's say consolidation driven decline from almost or from 19% last year to 15% EBIT margin this year, which is driven by the incorporation of the sales of Hyva and totally in line with our internal expectations. Yeah, then let's go into the group. What we see overall is the 25% reported growth from 374. The split into the application slash business line was just mentioned by Joachim. So Juwa contributed 104 million. And keep in mind, this is just two months. So it would have been like for like around 150 million and then contributing almost one third of the sales. Organic sales decline is overall on average minus 9% versus last year at constant currency. And just repeating here, we see first signs of stabilization, especially in AR and in APAC. The outlook here for the second quarter is promising. We need to see. Sales impact in terms of FX was low. And also, as Joachim mentioned, overall, the profitability was good, slightly better than we expected, almost 36 million EBIT, 9.6% margin, partially driven by what I mentioned in North America, nice aftermarket and resilient aftermarket margins. Tridec and mechanical engineering systems provide in our group as an exceptionally high order book. At the moment, volume is not so much lower, but it comes with a very high EBIT margin. And that boosted that a little bit of our internal models. Yeah, I think that's it for the group. And then we can jump into our net earnings bridge. So the reported net income is $13 million for the quarter. If we then add back taxes, interests, and the adjustments that we do for PPAs and purchase price allocation amortizations, as well as other exceptions, and I will come to that because that's a little bit special for this quarter in a later slide, we end up with that adjusted EBIT that we mentioned of $36 million. And then correcting by an adjusted finance result, an adjusted tax rate, we end up with 25 million adjusted net income, resulting in an adjusted EPS of 1.65, which is almost the same level that we had in the first quarter. And that means despite the organic size decline in the business lines, agriculture and transport, we were partially able to offset that net earnings decline with the result that Uwe already contributed to the overall group. And again, regarding the exceptions and the PPA, I will come to that a little bit later. So what we show here is the preliminary purchase price allocation. So overall, we have acquired and closed a balance sheet by end of January of 671 million euros. And what you see here is then the balance sheet that we are incorporating now in our numbers for the first time, asset side and liability side. These numbers here already include a preliminary status of the purchase price calculation. So that means we revaluated the assets, the intangible assets, PP&E assets, as well as inventories. And also on the liability side, there were certain minor adjustments. And you also see the equity. There was also a recapitalization of the group directly with closing. You can see here what has been incorporated. And this, in a nutshell, means preliminary purchase price at the moment, preliminary because there is still a final settlement mechanism outstanding with the seller, should be only minor, regardless of, let's say, opening working capital accounts and so on and so forth, was $327 million in cash. This purchase came also with an operating receivable of HUVA against the former shareholder that has been immediately settled with closing. And that means the net cash proceeds have been 309 million euros. And if I add then back the debt and the IFS leasing positions, deducting then the cash that we get or got, rate of the past weeks and months, this is more or less in line with the purchase price or EV that we always communicated. It's even a little bit less. So in US dollar, it's roughly 10 million, a 10 million euros deal less than the 398 that we communicated. The main intangible asset groups that have been identified of 276 million euros are for sure trademarks, so the trademark Hyver, as well as customer relationships. Weaver has strong customer relationships all over the world like most have and those relationships will be capitalized. I just want to mention here again these valuations are not yet final. We are still in discussions with the auditors and experts. There might be changes. I don't expect any material changes at the moment. amount of the trademark Huber that is incorporated might change a little. Goodwill at the moment stands at 37 million. And just keep in mind, these numbers can always fluctuate a little bit, especially at the moment when USD and Euro rate fluctuates more because the original balance is a USD balance and not a Euro balance, like shown here. And let's go to the next page. This is then the P&L look into the PPA, so to speak, and the exceptionals of the first quarter. You see here we report overall minus 14.2 million adjustments versus minus 7.1 million last year's first quarter. And we have grouped that in four groups. You see the dark blue group, that's the roughly 6 million, let's say, legacy PPA that you have. No major changes here. Then we report minus 3 million exceptionals last year, where the increase is predominantly driven by integration costs, restructuring costs that are fully related to the acquisition. And then we have separately marked here out which we would consider that's the core new PPA topic. And with the cipher number 1 and the cipher number 2, cipher number 1 minus 2.8, that's the The PPA from Viva itself, including also order backlog depreciation and a portion of that 2.8, so excluding the order backlog, will continue then for the next years. I will sum that up in a moment. And then we have on top built a fair value step up That's a usual process through a purchase price allocation. That amount is for the total year 2025 roughly 40 million euro and 2.5 million have been already consumed in the first quarter. Just again here to mention, you cannot just multiply by four because Viva has only been incorporated by two months and not three months. What does this mean for the net income in 2025? We expect from the PPA as well as from the inventory step-up amortizations, a negative net income impact between minus 21 to 25 million euro on reported net income and reported earnings, which will be adjusted in adjusted EPS for sure. And going forward, so from 2026, as then the inventory step-ups are already fully phased out, as well as the order book look depreciation from the normal PPA of Weaver, we will expect a net income effect of between minus 9 and minus 13 million euros per annum. Finally, depending on, as I said, the valuation, especially for the trademark Weaver and for Goodwill is not yet finalized. Next page, please. Coming then back to a balance sheet and later on to cash flow, we see a decline in ROSI from 17% to 13.5%, also fully expected and in line with our internal model. No surprise, that's a are driven by the consolidation again we are adding 670 million balance sheet we need now to work with the leveraging and with working capital measures on keeping that balance sheet some lower and on the other side on the other side increase our net earnings and that will then step by step bring the rosy back into our mid and long-term guidance Equity ratio, basically the same story. No surprise, we had expected around 23.5 to 24% equity ratio, driven by the financial liabilities that have been put on the balance sheet to finance the acquisition. Net debt, Joachim mentioned before, we were always striving for having not a leverage above 2.5 in And we managed that successfully. Net debt is 451 million. And despite the fact that the LTE and EBITDA, just by market-driven decline of sales volume and EBITDA, also in the already worst world, have been lowered, we are still below that threshold and are quite happy with that because it also gives us a benefit in terms of our interest margin. Let's go next page. Joachim mentioned that at the beginning, we already successfully refinanced the bridge financing. The initial amount that we draw down was 350 million. We managed to, immediately after the closing, pay back already 30 million of the bridge facility. So it stands at 320. And as you know from the press, we were launching a show shine, a promising node launch. It was highly oversubscripted. At the beginning, we would have not expected to fully refinance the bridge facility at once. However, finally, it came out through the process that despite attractive margins from our side and a nice mix in terms of terms, the appetite from credit investors was so high that from our side we see now we have a very nice maturity profile over the next years and that's important for us because now we can concentrate on really the operational work and the synergies and this is also work for the finance organization and having that stability in terms of the finance profile now in our back that gives us freedom to look for the potential going forward. Next page please. is then our cash flow KPIs. Cash conversion rate has been 1.8 and reported free cash flow of 44 million. A nice increase, partially supported by consolidation effects of UVA. As I mentioned, there was an old receivable, it was an operating receivable that has been immediately settled. And on the other side, working capital measures and also a little bit of an increase in factor in support of that nice cash flow figure. CapEx, as always in the first quarter, has been a little bit under the expectation for the full year with 1.8% or absolute-wise 6.7 million. That's because normally the projects start a little bit slowly into the year. And also here you see no major impact from the EVA consideration. We always have mentioned that the CapEx profile is very similar to the used one. Networking capital, that's indeed something quickly to mention. The balance sheet of Viva comes with a tendency higher working capital ratio than in the old Yoast legacy and that's predominantly driven by the APEC region. So Viva is strong in the APEC region and in the APEC region, let's say the business model comes in the whole supply chain that Viva has with a higher amount of I will mention that at the end of the presentation. The next page, please. I think that's from my side, giving back to Down Under.