Kion Group Ag Unsp/Adr

Ladies and gentlemen, welcome to the Qion Group's Q2 2025 update call. Today's presenters will be Rob Smith, CEO of Qion Group, and Christian Hahn, CFO of Qion Group. I'm Sergin, the chorus call operator. I would like to remind you that all participants will be in listen-only mode and the conference being recorded. 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 the Raise Your Hand button. If you are connected to your phone, please press star followed by one on your telephone keypad. Also, please limit yourselves to two questions only. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Rob Smith. Please go ahead, sir.

Thank you, Sergio. Good afternoon, ladies and gentlemen, and welcome to our update call and webcast on our Q2 results. You can please see the update call presentation on the IR website as we go through the presentation together. I'm going to start with a summary of our second quarter 2025 results, and then Christian will take you through our Q2 financials in detail and reiterate our outlook for 2025. I'll come back and we'll be taking some key takeaways, and then Christian and I look forward to your questions after that. Let's start together on page 3. Q2 was another solid quarter and in line with our expectations. Group order intake was 3.5 billion euros, a 33% increase compared to the prior year, and reflects a record quarter for order intake in supply chain solutions. Revenue was down at the key on level and in both segments due to the subdued demand in new truck and new project business in prior quarters. Adjusted EBIT was 189 million euros, corresponding to an adjusted EBIT margin of 7%. While adjusted EBIT and supply chain solutions continued to improve its profitability, Performance in ITS reflected the expected negative impact of lower volumes. Free cash flow was again positive at 132 million euros. Earnings per share were 72 euro cents, an increase of 38% year on year. I turn you over to Christian now, and he'll take you through the Q2 financials and reiterate our outlook for the full year.

Thank you, Rob. So, Please, everybody, let's go to slide five for the key financials of the ITS segment. Order intake reached 70,000 units in the second quarter, and that is a sequential increase of 7%, a pretty normal seasonal development in the second quarter of the year. Year over year, the increase was 9%, meaning that the growth seen in the first quarter, 25, held its pace. New orders in money terms increased 5% year-on-year, driven by an 8% increase in the new track business, and the service business also showed continued growth at 3%. The order book reflects now ongoing the lead time normalization and its margin qualities in line with our expectations as reflected in our outlook. With this development, the book-to-bill ratio was above 1. Revenue declined by 6% year over year to slightly over 2 billion euros. The 2% growth in service only slightly made up for the expected 13% decline in the new drug business. Remember that in 2024, the new drug business revenue significantly benefited from the tailwind of a high order backlog. Adjusted EBIT at 173 million euros And the corresponding adjusted EBIT margin at 8.6% reflects the expected impact from lower volumes, resulting in reduced fixed cost absorption as well as lower cross margins due to the reduced pricing realized in the second half of 2024 in the new direct business. On page 6, I will now continue with the summary of the key financials for SCS. We had a very strong quarter in order intake, in fact, a record level of more than 1.4 billion euros. In contrast to recent quarters, this significant increase was primarily driven by business solutions, which more than doubled also thanks to the favorable timing of some order signings. The service business continued to grow. This is a very good development, but I would ask you not to extrapolate that number for every quarter going forward. While we may have passed the draft, we are still in a lumpy recovery trajectory and we are likely to see the next quarters below the 1 billion mark again. You will note that the increase in demand was very much driven by the pure play e-commerce vertical, while most of the remaining verticals continue to be impacted by customers' ongoing hesitancy to sign new contracts due to the geopolitical uncertainties. As a result of the high order intake, the order book increased both sequentially and year over year. This year-over-year increase would have shown an even higher growth rate without the adverse FX translation effects of approximately 225 million euros. Overall, revenue increased slightly sequentially and declined year-on-year. The 6% growth in the service business partially made up for the 12% decline in the project business, again, which was impacted by the lower order intake in the past quarters. The adjusted EBIT improved strongly, year-on-year to 42 million euros, with a near doubling of the adjusted EBIT margin to 6%. And that's mainly true to the growth in the service business and the solid projects execution. Now let me quickly run through the key financials for the group on page 7. Order intake, when it fitted from the growth across all businesses, new trucks in ITS, new projects in STS as well as the continued growth in the service business in both segments. The continued lead time normalization in ITS and the FX translation losses in STS led to the year-over-year decline in the order book. Revenue benefited from the growth in the resilient service business in both segments, nearly compensating for the lower ITS new truck and STS business solutions revenue. And adjusted EBIT at €189 million, and the adjusted EBIT margin at 7% was mainly impacted from the lower fixed cost disruption in ITS, which was partially compensated by the strong earnings improvement in SCS. Page 8 then shows the reconciliation from the adjusted EBITDA to group net income. The non-recurring items in the quarter did not include any material expenses for the efficiency programs. With regards to PPA items, remember that the prior year quarter was impacted by the €22 million goodwill impairment for Kion ITS Americas. In the second quarter of 2025, PPA items were back at the usual quarterly level. The net financial expenses improved year over year, mainly due to positive currency effects. This resulted in pre-tax earnings of €131 million in the quarter. The net loss attributable to shareholders increased by 38% to 94 million euros, and that's corresponding to earnings per share of 72 euro cents. The tax expenses of 38 million euros corresponded to a tax rate of 28%, significantly lower than in the prior year quarter. The main driver for the lower tax expenses in the quarter resulted from a positive tax effect relating to prior years. In June 2025, so June this year, the German government resolved to cut the federal corporate income tax rate from the fiscal year 2028 onwards. And that's leading to a revaluation of deferred tax assets. This is expected to lead to a tax gain in the low to middle double-digit million euro amount in the third quarter. This effect, together with the low effective tax rate in the first two quarters of this year, has led us to update our full year 2025 tax indication to between 25% and 30%, from previously 35% to 39%. You will find this information on the housekeeping slide in the appendix of this update call presentation. Now, page 9, let's continue with the free cash flow. Free cash flow in the quarter reached positive €132 million, substantially driven by an improvement in the network and capital in both operating segments. In contrast to the prior two years, where we had a 50 million euro cash out in the fourth quarter for additional pension funding, we are planning to spread the cash amount across three quarters this year. 15 million euro were funded in the second quarter, and additional funding in similar magnitude are earmarked for the third and the fourth quarter. The expenses relating to the efficiency program were not cash effective in the second quarter. They are expected to become cash effective in the second half of this year, and this is included in our full year 2025 free cash flow guidance. Page 10 then shows the development of the net financial debt and our leverage ratios. We had a slight increase in the net debt at the end of the second quarter 2025, but continued to remain below 1 billion euros. This had no impact on the leverage ratios across both net debt definitions compared to the end of March of this year. Our leverage ratios remain slightly lower than the level last seen post our December 2020 capital increase. But again, this time we achieved this improvement entirely through self-help measures. Let me quickly touch on the standard and poor global rating downgrade to BB plus with stable outlook that was published at the end of June. While disappointing, our analysis shows very limited impact on our financing costs and our refinancing ability. The margins agreed with our banks under the revolving credit facilities are driven by margin grids and margins will rise by very low double-digit number of basis points. As you can see in the maturity profile included in the appendix of this presentation, our industrial indebtedness has virtually no maturities until 2028, following the early refinancing of the upcoming bond maturity in September of this year, for which we had issued a new bond back in November of last year. Consequently, the impact on our industrial indebtedness is very limited. Our net financial debt of less than one billion carries fixed coupons for a large part and the variable part is contracted with fixed margins, fluctuating only with our report. Only the currently undrawn revolving credit facility, maturing in 2028, would be impacted by the margin increase in case of utilization and minimally with respect to the commitment piece. The leasing refinancing will be slightly impacted by the variable part of the existing portfolio financed via a revolving credit facility maturing in 2029. For future customer contracts, the slightly increased refinancing costs will be included in our end customer offerings. Overall, we expect a very low single-digit million euro impact on our interest result in 2025 and beyond. We enjoy a very stable banking group and will continue to work very closely with the rating agencies to establish a path back to a consistent investment grade rating over time. Now I'm moving on to slide 12. We had a good start to the year with the Q1 as well as the Q2 performing in line with our expectations. Looking ahead, we note that the economic environment is still characterized by considerable uncertainty. Geopolitical risks and potential negative impacts on our value chains and our markets could materialize from the ongoing trade conflict. Over the past years, we have invested in our production and R&D capacities and into our sales and service networks, particularly in the APEC and Americas regions, to prepare for shifting geopolitical scenarios. We therefore confirm our outlook for fiscal year 2025 for the group and our two operating segments as of today, subject to the condition that there is no significant disruption to our supply chains as a result of trade barriers, especially tariffs and restrictions on access to critical commodities. Slide 13 lays out our guidance as presented with the full year 2024 results. Since I provided a detailed walkthrough of our guidance at the full year 2024 update call at the end of February. I will skip it here in the interest of time. For those of you who are interested in the explanation, please refer to the transcript, which is posted on our investor relations website. I know you are going to ask me anyway, so let me share with you how we are currently thinking about the phasing over the next two quarters. As you know, Q3 is often a weaker margin quarter in ITS, with July and August being holiday months with some seasonality due to summer factory shutdowns, especially in our key market EMEA. I don't think this year will be any different. Q4 is often a stronger margin quarter, and again, this should not be any different this year. But how much stronger is the discussion like to postpone then when we actually present our Q3 results? For STS, as you know, in general, we're looking for a margin improvement every quarter. Since the margin improvement was quite pronounced from the first to the second quarter, maybe the next sequential improvement won't be as strong. And then maybe stronger again in the fourth quarter. Again, let's discuss Q4 when we publish Q3. Obviously, by then, we will have a much better visibility. And with that, Rob, I hand back to you for the key takeaways.

Thank you, Christian. Our key takeaways you'll find on page 14. Keyon had a solid start to this year, with Q1 and Q2 2025 performing in line with our expectations. Looking ahead, the economic environment is characterized by considerable uncertainty. In particular, the ongoing trade conflict could potentially have negative impacts on our value chains and or on our markets. Over the last two and a half years, our supply chain solutions business, Dematic, has been on a consistent and sustainable profitability improvement journey. And this has been based solely on self-help measures, such as the completion of legacy projects, improved project execution, and service growth. And with the order intake now beginning to recover, Supply Chain Solutions is well on the right track to deliver over 10% adjusted EBIT margin profitability in 2027. We confirm our outlook for the fiscal year 2025 for the group and both of our operating segments, subject to no significant disruptions to supply chains as a result of trade barriers, especially tariffs and restriction on access to critical commodities. This does conclude our presentation. Thank you for your interest so far. We're looking forward to some great questions. Back to you, surgeon. Let's open the lab.

Thank you very much, Mr. Smith. Ladies and gentlemen, we'll now begin the question and answer session. Anyone who wishes to ask a question from the webinar may click the Q&A button on the left side of the screen and then click the raise your hand button. If you are connected to your phone, please press star four by one on your telephone keypad. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press the lower your hand button from the webinar or press star and two on your telephone. In the interest of time, please limit yourself to two questions. Anyone with a question, make you up now. And we have the first question coming from line of Akash Gupta from JPMorgan. Please go ahead.

Yes, hi, good afternoon and thanks for your time. I got two and both are on supply chain solution segment. So the first one I have is on the On the order pipeline, you had a very strong Q2, and I'm curious, how does the pipeline look after such a strong quarter? Can you give us any insight on what you've seen out there, and how does it compare at the same point in time last year? And when we look at the prospect for second-half orders, is there any room to grow orders in the second half, or we should expect weaker orders? That's the first one.

Hey, Kosh, thank you for that question. I'll take that one. Look, you know, orders moving between quarters, shifting between quarters is quite normal business in supply chain solutions. And that's why it's important to look at the trend over several quarters. Q2 was a very strong quarter and it was a convergence of several different elements within a customer's seasonal schedule and internal approval processes and overall strategy. And We took multiple large orders in this quarter, leading to some very, very strong performance in this quarter. We don't see it at that level in the quarters to come. However, we do expect that the second half of this year is up versus the second half of last year, and I think, therefore, we'll be showing the trend is continuing. Thank you. And you're asking about the pipeline? You're asking about the pipeline, Cash. Look, our pipeline is strong. I've been telling you for many quarters we've got very good visibility to the projects in the pipeline. We've got very good visibility to the projects in the pipeline, and the pipeline is a strong pipeline. It's looking good.

Thank you. And my second question is on pricing in SCS. Maybe you can comment on what are you seeing there in the market, and when we look at your pricing in Q2 orders. Can you comment if that is consistent with your 10% margin objective set for 2027? Thank you.

Thanks, Gil. Thanks, Akash. Look, the pricing there is completely consistent with our 10% margin profitability and our plans to deliver that. Very consistent with that. And you'll recall that we've been building a protections into our contractual wording. We've intensified that in 2025 by adding obviously tariff fluctuations to our general terms and conditions in those contracts as well.

Thank you.

The next question comes from Gail Debray from Deutsche Bank.

Please go ahead. Thanks very much for the time. Good afternoon, everyone. Can I start maybe with the slight miss this quarter in terms of sales and EBIT, at least relative to the consensus expectations and maybe relative to the expectations that had been set with the pre-close call a few months ago? So I wonder if June was perhaps a bit weaker than expected today. I mean, that'd be great if you could talk a bit about the momentum throughout the quarter and what you've seen also so far in July. So that's question number one.

So, Kyle, this question, maybe I take the first one, right? I mean, I think you make a reference actually to Rico's call, I guess, right? which at that point actually, you know, what we were looking at was a forecast, right? Now we look at actuals, right? And the main difference that we actually look at is from the corporate services consolidation line, right, as a difference. So it's not to make a reference back to the market and the development in the markets.

Okay. And then the second question I have is around SES. firstly whether you expect the book to be a ratio to be clearly above one in the next couple of quarters and secondly trying to judge your level of confidence in reaching a margin of more than 10% for SES because this is clearly an area where the consensus is obviously slightly different and And looking into some of the details here, the gross margin for SES is apparently now nearly back to what it was pre-COVID, but SG&A expenses are still way above what they used to be at a percentage of group revenue, right? So what do you think needs to happen for the SG&A ratio to come down by four or five points for you to deliver the 10% margin objective? Is this just a function of you know, growth coming back and a better absorption through higher volumes? Or is there something else that you expect to do to reduce the SG&A ratio? Thank you.

So, again, I take this one, right? So, the first question that you had is, do we now consistently see book-to-bill with the quarters above 1 in SES? Well, most likely not, right? I mean, I said before, right? there is a certain lumpiness in the order intake in the quarter. So while we are looking at the second half of the year, that will have a growth against prior year in the order intake, right? For the individual quarters, we might see a book to bill that has a different number there, right? So again, to what it actually takes to get to double digits, right? I mean, it's the same elements that we make a reference to that hold true, right? So the one is, you know, we have, we are improving our project execution, right? And I think the continuous improvement that we are seeing in the margin profile of the SAS business speaks to that actually, right? We have to get rid of our legacy projects. We are on a good path to that, but there's some are still there, right? And they have They have an impact, and them going out will actually help us and will also help us on the gross margin. It's the service business. We have made repeatedly the reference to the good gross and the margin favorability of the service business, and then the rest is operating leverage in terms of the overall size of the business that then will be on top of a fair SG&A setup that we are having, right? And those four elements are still all true and they need to fall in place, right, in order to get us to the 10% by 2027 that you always make a reference to. Okay, thanks very much.

The next question comes from Sven Weyer from UBS. Please go ahead.

Good afternoon. Thanks for taking my questions. The first one is just following up again on the, you know, SCS pipeline, Rob. I mean, we've been talking about a good pipeline for some time, but now with this big e-commerce client obviously moving ahead on a few things. There used to be the cannery and the coal mine in the past cycles, both on the way up and on the way down. I mean, is that still the case that, you know, other e-commerce companies look what these guys do and maybe speed things up? Or are they just stubbornly looking at interest rates and tariffs but not what these guys are doing? That's the first one. Thank you.

Thanks for giving me a chance to talk on that some more, Sven. Very nice question. Look, we do see the main key e-commerce player. as a leading indicator. And you're right, early in going up and early in going down. That's been our observation, and we think that continues to hold. What I would say is, in addition to that, if you look at our modernization and upgrades line, the line item modernization and upgrades, that's up 57% year on year in the first half. And I think that's another indicator of need for capacity in the market, demand coming. I think both of those together give us a good indication that we should expect that the market is in an upturn now or is going up. And the observation on the modernization upgrades, I think, is also still consistent with people being hesitant to double down and start brand-new, very large, big greenfield projects. Why? Because it's existing capacity. We've got a very interesting offering where we can, over a short period of time, up the capacity, up the throughput, sometimes over just a weekend, and give customers extended capacity on existing installations. And that's an interesting offer for them. I think those two together is your leading indicator that you're asking about, Sven.

It's very clear. Thank you, Rob. The second question I had was just also, again, on SCS. I promise next time I do more justice to ITS, maybe. But it's on NVIDIA. I'm just wondering what's the latest there. It's now been, like, almost six months that you announced this. What kind of, you know, momentum are you seeing on the back of this and maybe kind of a more mid- and long-term perspective? Thank you.

You're right, Sven. We announced in January, together with Jensen and NVIDIA at the CES in Las Vegas, that we're the first industrial company worldwide to be bringing physical AI into industry, physical AI into the supply chain. And that is a very exciting innovation, and it's coming and developing well. The teams are working very strongly and very well together. We've been taking out a piece at a time at each of the trade shows. We did that at CMAT. We did that at ProMAT. We did that at LogiMAT, both in the States and in Europe. The next one, the next big one, is going to be the CMAT in Shanghai, where you'll see an integrated fleet, our own offerings as well as third-party offerings being orchestrated. The physical twin will be orchestrated by the digital twin. in real life right there on the trade show. And we've been working with customers now who are quite interested in this to bring some lighthouse projects into our pipeline and their pipeline. And I would say it's progressing well, and it's a very exciting innovation. Thank you for your interest in that, and thanks for calling that out.

Yeah, thanks for the comment. And I got back online. Thank you, Rob.

The next question comes from from Bank of America. Please go ahead.

Hi, good afternoon. Thank you for taking my question. Hi, Rob. Hi, Christian. Two questions from my side. I'll take them one by one. First would be, again, sorry for this on SES. Could you give us a bit of a flavor on how the discussions with the non-e-commerce customers are right now? And do you expect e-commerce activity to also remain high in the quarters following Q2? I appreciate maybe not on the level of one billion of a quarter, but is it more like a one and done with one large order and then we have to wait for new orders to come in? Or is this something where you will see more and more projects starting over the coming quarters already? I'll take the second question after. Thank you.

Sure, Tor, thanks for that. Look, first of all, it was not just one big project that made the second quarter. We had a multitude of very good-sized projects, easily a handful between 100 and 200 million in size, so multiple ones. The pipeline continues to be strong. The hesitation by verticals outside of e-commerce continues to be the case. The trend I was just describing to Sven, though, if the e-commerce and the mods and upgrades are the leading indicators that we anticipate that they are, we think the other verticals will be coming from the pipeline into starting those projects. So I point out to you as well, E-commerce was a vertical all by itself before COVID. During COVID, it became so embedded in people's expectations of the performance of the supply chain, real-time transparency and visibility, and very, very fast that they brought those expectations back to all their other verticals when they went back to the office. So lots of verticals have an element of e-commerce in it. And I think that you'll continue to see e-commerce as a – we call it out every quarter, so you'll be able to track it. But you'll continue to see e-commerce as a part of the order intake on a go-forward basis. What we're looking for now is for the other verticals to get out of hesitation mode and get into starting mode. And we think that we have some leading indicators that should indicate that that will be coming.

And do your discussions with these other verticals also indicate this? Or is this rather your leading indicators?

Well, I mean, we're watching the market just like everybody else is. And that's clearly a conversation you have with all customers, right? I think that there's been quite a bit of robustness in the middle of all of the volatility these last months and quarters. And I think that as one trade deal gets done and another trade deal gets done and I think there's becoming a little bit more certainty out there, and that's part of what's giving customers the confidence we would expect they will want to have when they make their starting decisions.

Okay, understood. Thank you. And just my second question would be, I'm trying to quantify the benefits from your cost-based adjustments in SVS that already seem to pay off. Do you think you could achieve a double-digit margin already before reaching an around 4 billion annual revenues, or does this volume that is needed for double-digit margins still hold on? And if and when the volume in SCS comes back, could you try and quantify for us a little bit, could margins be ahead, or rather on the level where they used to be with the past foot manufacturing footprint that you had, and let's say pre-COVID? Thank you.

Yeah, so, Tori, I appreciate the question, right? And sort of, you know, I think I described before the four lever that it takes, right? And, you know, the revenue line, the four billion that you also make a reference to, I think that's not by accident because that's basically always also the mark that we are using for that one. I think that's the area where we need to get to. We should not expect, you know, a double digit before that, right? But I think the order intake that we have, And so far, right, and how we look at the development now going forward is a solid step into laying that foundation. You know, let us reach the 10% double-digit EBIT margin in SCS in 2027, right? That has been for a while our goal. 2027 is yet to come, right? We are in good progress in that one. Once we're there, right, with the setup we have, we'll then talk, you know, what's standing ahead of us. But so far, 10% in 2027 is ahead of us. Great.

Thank you.

The next question comes from the line of Lukas Ferhani from Jefferies. Please go ahead.

Good afternoon, and thanks for taking my question. Just a follow-up on SCS and the Q2 order intake. Is there anything to say on client concentration? Maybe in that quarter when you look at these orders, was it maybe a couple of very large kind of customers coming in? And also regarding those orders, was there any change in the customer behavior potentially related to tariffs, specifically kind of some pre-buying thinking tariffs are coming, so potentially that would lead to price increases? Do you get kind of any sense related to that? And the last on that would be on a new contract signed during Q2, did you kind of change anything in the setup to take into account the uncertainty on the tariff and what that might mean for kind of your cost base and so pricing? Or is that kind of the usual and you expect that the change of law would kind of help you if there were kind of change in the costing of those orders? Thank you.

So maybe, Lukas, I start with sort of, you know, your questions on tariffs and potential pull-forwards, right, in that context. So first of all, I mean, you know, in 2022, we have adapted our contractual language, you know, to deal with, you know, uncertainties that we get from external factors and bring that into our contract language. beginning of the year with the trade conflicts arising and not becoming specifically a topic also on tariffs, we have actually made our wording more precise to reflect tariffs there as well. Make sure that we are covered from a contract terminology point of view. There is no pull forward for tariffs because basically you pay tariffs when you ship products, right? So actually... Ordering now would not help you in any respect for avoiding a tariff in that sense. So, therefore, we don't see pull-forward effects to any extent from any of our customers in this context.

And let me help you out with the first part of your question, Lucas. Our dramatic business is a key integrator for the e-commerce vertical. And our position in that market is a very strong and stable position. And it's a direct result of very reliable execution, our on-time delivery, our high-quality standards, and industry-leading technologies. So that makes Dometic a very trusted partner in high-performance fulfillment operations, as you have in e-commerce. And if there's a vertical concentration, yes, there was a vertical concentration in the second quarter. You saw 87% of the order intake was from that vertical. We are real pleased to have those orders. They are good orders for us. We expect to execute them very well. And we're looking forward to other verticals coming back to the table and starting the new projects with us that we see in the pipeline again.

Thank you. Just a second on ITS. Do you have any kind of change of your view for the year. Obviously, you have a competitor that is pointing to maybe more weakness than they expected. And in the second half, obviously, you didn't have as bullish of a guidance, so you already pointed to some weakness before, specifically in the margins. But just wondering if what you've seen so far and now kind of into July for ITS shows that maybe there's a bit more kind of competitive pressure or you have to deal with a bit more. So I understand you thought maybe at the start of the year. Thank you.

Lucas, thanks for the question on IDS here. Basically, we don't see a different dynamic. We had good order intake, good dynamic in the first quarter, good dynamic in the second quarter. any indication of that changing. That's all incorporated in our outlook for the full year, right? And as such, you know, that's the basis why we have actually confirmed that.

Great, thank you. The next question comes from Timothy Lee from Barclays. Please go ahead.

Hi, thanks for taking my questions. So my first question is also on the SCS segment. Can you please help quantify a little bit how much of the order in the second quarter was benefited from timing and how big is scale of the order from the pure play e-commerce vertical? I mean, probably any numbers that you can quantify on, you know, the last scale orders from the vertical that would be super helpful.

Sure, Tim. Let me help you with that one. As I mentioned, easily a handful of orders between $100 and $200 million came in in the second quarter. And what I said before at the beginning, you know, orders come in that business in kind of a lumpy fashion. And an order moving from one quarter to the next or coming forward, you know, shifting between quarters is very normal business. So there's no point in talking about Those came in the second quarter and we're looking to get more in the third and more in the fourth and converting the pipeline into orders. So, no particular timing issue there is beyond what we've discussed so far.

Understood. Can I follow up a little bit on that? So, how should we think about the timing of this order intake to flow into the revenue? So, as long as you're keeping your guidance unchanged for the whole year in terms of the revenue for the SES segment, is that we should assume the revenue contribution should probably start in next year for this big order.

Sure, also a good question. But going back to your previous one, yeah, you see in our reporting, we call out the PurePlay e-commerce percentage is a percentage of the total order intake, and that was 87% in the last quarter. On those e-commerce orders, Sven, the e-commerce orders convert a little faster than other orders. They convert over about 18 to 24 months usually, and the first six months is kind of the low part, and then it will – there's some conversion in the first six months. That's what makes them interesting too, but the six months are usually – the first six are the lightest, and the last 12 to 18 are where it picks up in terms of converting from order intake into revenue over time. So about 18 to 24 months for those kind of projects. Understood.

Very helpful. My second question is on forklifts. So you also just mentioned you don't see any change in terms of the dynamics for the overall industry. But how do you see the completion from the Chinese forklift? As long as if you look at the industry data, it seems like there was quite a meaningful increase in the imports from the Chinese forklift, especially in the first quarter. So any change in terms of the competitive landscape that you can call out from the Chinese players in the industry?

Sure, Tim. I mean, over time, the Chinese players have grown to be a larger influence in the industry. And as the market is getting tighter in China, there's more and more focus of those Chinese players, not just in our industry, but others as well, on export into other regions. But having said that, let me just be very clear about this. Keyon is extremely well positioned in China. China is a home game. It's a home market for us with our footprint, with our investment, with our capabilities there. Just like the EMEA market and the Americas market are home games for us and home markets for us. We're basically the only Western player in the China market at this point in time. The other ones have diminished or left. And we're the third largest manufacturer of industrial trucks in the entire country. So that gives us a great capability in China. And now with the introduction of some new global products, the first one being the global counterbalanced truck, but we have others in the pipeline for our warehouse trucks too. We're using China in China for China, as well as China as an export base. So we see ourselves as quite well positioned, very well positioned to be meeting those challenges that you're describing.

Sorry, actually I was focusing a little bit more on the import of Chinese products into the Europe market. Sorry if I was not clear enough.

No, as I covered it, Tim, the Chinese players are focusing on the China market and now intensively on export to all other regions. And we do too. We export from China to the Americas. We export from China into Europe. We export from our China operation into Southeast Asia and are the third largest player in the entire market in industrial trucks in China. Right. I understood. Okay.

The next question comes from Jorge Gonzalez from Hope Hoser. Please go ahead.

Hello, and good afternoon. Thank you, Rob and Christian, for taking my questions. I would like to go back also to ITS and very direct and quick questions. It was very useful, your indication, SCS, 10% margin for 27. Would you say that with the current backlog for ITS and the expected delivery of the cost synergies, you are in the position to recover the 10% in 26 for ITS that was, if I'm not wrong, the message that you sent with the full year, 24 results. That would be my first question.

Muy buenos dias, Jorge. Look, we're still talking 25. When we come back and talk to you in February of next year for, Our good results in 2025 and our outlook for 2026, we'll be giving you the guidance on that. We have been explicit that we're working very hard to deliver a look-through year in the ITS segment and in the SCS segment, a year of continued increases in profitability on a sequential and quarterly basis. So that's what we're doing in 2025. Our objective is to have both of our segments and our group above 10% by 2027 and we feel that we're well on track to be doing that.

Okay, so my second question is basically reading between lines on the message is that you have seen, we have already seen the worst probably in the demand in Europe And then it's more a question when the pick-up amount allows for better pricing. It could be maybe the remaining incentive to know the profitability for next year, or do you think the cost savings that you are planning are going to basically be the most important factor or driver for your profitability next year?

Let me pick out the parts that I think are appropriate to be answered. I am not going to be talking about 26 explicitly until we come back in February next year to give the 2026 outlook and ask you please respect that. The part, however, about increasing demand, we do see the market is growing. It happens to be growing in most of the regions. And the first quarter was quite, was indeed that case. The second quarter statistics will be coming out still a period of time from now. You know, they come out three months with a three-month delay. But our business is, as Christian explained, is up 10% first half versus first half of last year. We see that as a very good performance. Our expectations is that the market is growing in all regions, and we'll have that confirmed when the statistics come out. But clearly that will be helpful. And I think that you're asking, are we past the trough? We've got two quarters in a row where we see good growth and we are expecting market growth. And so it takes three points to make a trend, though. So we'll see how it goes. But our expectation is that we're past the trough. The trough is behind us and the markets are growing.

Muchas gracias, Rob. Very useful. Thank you. I'll go back to the line.

The next question comes from Lasse Stuben from Berenberg. Please go ahead. Mrs. Lasse Stuben, your line is open. You can now ask your question. Please unmute yourself from the webinar.

Hi, good afternoon. Can you hear me?

Yes, we can.

Perfect. Apologies. Just to follow up on the mix and ITS. you were very clear in the past, you know, when you were flagging the mix effects headed into 2025. So I'm just wondering if there's any color you can give on the mix of the new orders coming in. You know, you showed the development of the regions in the appendix, which looks like, you know, EMEA and Americas is performing better. So just wondering if you can flesh out any color on mix headed into the second half and potentially into early parts of 26. Thank you.

Yeah, so Lasse, thanks for the question. I mean, you know, actually there's several mix elements always, and you know that they need to be looked at in IDS. The one is the regional mix that you make a reference on, and rightly so. You hint to the sort of page in the appendix that actually speaks to that, right? I think we had a good mix from a regional perspective in the first quarter, and that also continues in the second quarter, right? We had 11% and 10% unit growth in our region, right? And as everybody understands, that's obviously helpful from a mixed perspective, from a regional mixed perspective. So in terms of the product mix, you know, we had a very favorable development in the first quarter. I think we still had a good development in the second quarter also from a mixed perspective with sort of a good growth also coming from counterbalance trucks, right, and then sort of also growth obviously in the warehouse segment. So the mix, you know, actually, you know, in the first half of the year was supportive, you know.

Right. If I could just ask a follow-up on North America. Destocking has obviously been a topic in previous quarters as well. I'm just wondering what the tariff situation is doing in terms of the expected pace of that destocking. Has that slowed somewhat or are you still kind of on track to see that, I guess, finish by the end of this year?

Yeah. So in the market overall, there were some pull forward effects from the tariff from when it's sort of, you know, people try to get, you know, before, you know, expected further increases on the tariff. So that's sort of, if you will, aggravating a bit the situation on the stocking in the market, right? Because that's an additional element that has now flown into the market and therefore the destocking overall will probably take a few months longer, right? Because all of this sort of, you know, pull forward things in the market now need to flow to the end customer in a sense. So I guess for North America, the U.S. in particular, we will see that for a while before it actually is normalizing again, you know, fluctuating just with the order intake from end customers.

Understood. Thank you very much.

We have a follow-up question coming from line of Lucas Ferhani from Jefferies. Please go ahead.

Thanks again. I wanted to ask about your partnership with the Chinese manufacturer EP Equipment that was signed kind of several years ago. Is this still kind of live? How is this kind of developing? Is there a decent amount of units for the China market or more globally? Can you talk a bit more about it if it's still something that is Thank you.

Sure, Lucas. Good question. Keyon remains well invested in EP. EP completed its IPO at the end of 2024, and it's now a listed company. And Keyon remains invested, indeed a very good partner. We have other partners as well in different elements and different areas. parts of the ITS as well as the SES segments. But you're asking about EP specifically, we're impressed with their performance and they're a good partner for us and we remain invested.

Understood, thank you.

Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Rob Smith for any closing remarks.

Surgeon, thank you, and thank each and all of you for your very good questions today. We appreciate them very much. We hope you have a very good summer. We're looking forward to continuing the dialogue after the summertime and the multiple conferences in September, and we'll be back at the end of October to give you our third quarter results and talk about how we expect the rest of the year to go. Looking forward to that, and thanks very much. Have a good summer. Bye-bye.

Ladies and gentlemen, the conference is now over. Thank you for choosing Coral School and thank you for participating in the conference. You may now disconnect your line. Goodbye.