Schindler Hldg Ag Akt

Ladies and gentlemen, welcome to the Schindler Conference Call on the Q1 Results 2023 and Live Webcast. I am Sandra, the Chorus Call Operator. I would like to remind you that all participants will be in this synonym mode and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. 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 Marco Knuchel, Head of Investor Relations. Please go ahead, sir.

Good morning, ladies and gentlemen, and welcome to our first quarter 2023 results presentation. My name is Marco Knuchel. I'm Head of Investor Relations at Schinzer. As usual, I'm here together with Silvio Napoli, our Chairman and CEO, and with Carla De Geisler, our CFO. Silvio will start with key messages and will provide an update on recent market developments. Carla will then lead us through the financials. After the presentation, we are happy to take your questions. Today, we plan to close the session at around 11 o'clock. With that, it's my pleasure to hand over to Silvio. Silvio, please go ahead.

Thank you, Marco. Good morning, everyone. Thank you for joining our Q1 results conference call. You have received the package and I will refer to the slides that you see also on your screens. But more than the slides, I just wanted to start by conveying a message. And this is the following. You will have seen on our media release that we chose Staying the Course as a title. And let me perhaps pause a second to explain why this is the case. When I... We introduced to you our results in February 22, together with this new governance model in place with the Chairman and CEO role. I stated very clearly that our priority is to close the gap versus competitors, in particular in terms of profitability, i.e. relative EBIT percentage. Well, today I must say we are delivering on this mission. We have still some way to go. But in spite of the many changes continue to happen in the market, I'm pleased to say that the measures we put in place are starting to pay off. And why is that? Now we can maybe refer more specifically to the slide. First of all, we are facing a new installation market which unfortunately continues to weaken globally most of all this weakening is associated with uncertainty with we'll see in a second some markets that were previously going very strong now suddenly showing sign of of hesitation others that were supposed to come back strongly which shows some delay that's a fact and of course again and the third we continue moving along our mission uh notwithstanding the situation Now, as a result of the weakening market, unfortunately, our order intake is decreasing as a reflection of that. At the same time, I like to stress this, and we then look at this more with a CFO in a second, with Carla, our margins are improving remarkably, possibly even above expectations in terms of new order intake. At the same time, our growth in service and repair continues very strongly. The third element are revenues, where there we are pleased to drive revenue growth across all regions and product lines, even in regions where the market is uncertain based on our strong backlog. Number four, of course, now we come to our main target and goal declare, which is the improvement in EBIT and net profit. This improvement is first and foremost operationally. In the case of Q1, you will have seen we have a particular, if you want, supplement due to the sale of our former factory land in Suzhou, China. Coming to the fifth highlight is that notwithstanding as i said we got somewhere to go we continue to progress on discipline execution of a strategic priority which are intended to drive competitiveness and performance not only short term but also medium and long term before i move on from this page i'll maybe like to add one six highlight and it is one i briefly mentioned before this is the one of our backlog Our backlog today stands at 9.6 billion, which is more or less equivalent to two years of new installation revenues. In other words, this backlog offers us what I would call a top-line buffer, which therefore allows us to continue driving orders while also improving margins. The backlog in terms of bottom line, as if you want a two-edged sword, on one hand, we are continuing to getting rid of the diluted margins from the old orders. You may remember this BOA constrictor slide, as I called it, showing how these diluted margins of the old orders will continue to hit the results until 2025 and some small portions even beyond. But at the same time in the backlog we have improving new OIT margins which ultimately will drive what I call a progressively positive backlog impact going forward. So with those six highlights, so the five here plus one, which is the backlog, we now can move to the other slide, which refers to one of our strategic priorities. Again, in February, I presented our strategic deployment framework. I mentioned how going from our purpose to our ambition, to our choices, on to our targets, deploy those across our organization along four Ps, people, product, performance, and planet. And the first of these four Ps is people. And there we announced today that we have a succession in chief technology officer, whereby Karl-Heinz Bauer, who after eight years come to his well-reserved retirement age uh he will be succeeded by donator carparelli uh who's someone that has been with a group 30 years someone who knows our products uh our markets and in particular domain competence in the elevator and escalator technology uh is the uh the ideal candidate to take over from carlines uh bauer uh Donato worked in Asia, he worked in Europe and in particular he has shown great performance in product management and innovation and has been now driving our simplified module elevator platform which is being launched as we speak so again we put a cto someone that has particular domain competence and direct involvement in what is today the most important aspect of a product strategy so we are very positive about this succession And perhaps you see on the right-hand side, we used the format we used in the past to communicate changes in the executive committee, and you see now this is the ninth change in 14 months. So, in terms of speed of change, in terms of continued evolution, you can see that on this front, too, we are proceeding unrelented along the target we set ourselves in February 22. now with this team now if there are many changes uh one thing to the contrary continues constant which is the the constant progress on delivering on our priority which is achieving a trajectory correction in terms of profitability and not only profitability you can see on the chart here with the red curve are revenues and you can see here that since q3 22 they have been improving steadily. And there is a number of factors there. Of course, the lockdown easing. There are also the supply chain bottlenecks easing out. And, of course, our drive to work with our customers to make sure that we could deliver on the construction site and proceed with the installation of the units in our order book. Now, the other curve on the chart is the one in gray, and then you see the gray chart shows the EBIT year-on-year gap or improvement, and you can see that the trough, both in terms of revenues, by the way, and an EBIT gap was in Q2 22, so half year last year. And year two, you can see that from Q3 22 onwards, this year-on-year EBIT has been improving. And you can see that in Q1 23, you have the first year-on-year improvement in this quarter, both in terms of revenue and in terms of in absolute figures. Now, moving to the relative EBIT percentage, you can see the box at the bottom of the chart. We can see the same trend. And in Q123, you can see this is now the first time we have an improvement both in positive and in relative EBIT performance year on year. So what does that say? Does that say that the profitability enhancing measures that we put in place are starting to pay off? I use the word starting because, of course, once more, we still have some way to go. But we are once more staying the course and proceeding onwards. Now, staying the course despite markets, which then takes us to the next slide, which is the updated market outlook. It's important that I I stress the word updated because indeed there are some changes. The chart again for everyone's understanding relates to units in terms of new installation and you have below modernization and service but starting with new installations. We do have some major updates but the first one regarding China is I'm not going to say positive but I would say it's a less negative sentiment. I was in China for the first time since March 19 two weeks ago, spent there almost two weeks, and maybe focusing on the market now, if maybe in February we said our assessment was for the year 23, between minus 10 and minus 15, today probably we are closer to the minus 10, but nonetheless we still talk about negative territory, unfortunately. And now we can see that the decline is slowing down but as we speak uh if one expects a recovery which unconfident will come but today it is still uncertain when the timing of this recovery will take place and what the magnitude of such recovery will be in any case we remain uh of the opinion, like in February, that there is probably no recovery in sight before the second half of 2023. The next market, Asia-Pacific, including China, where this is good news, there is no change. The markets remain very strong. not only in India but also in Southeast Asia. Of course one has to recognize these markets for having worked there myself a number of years are very much subject to global economy evolution. So if there was a global recession I'm afraid we will have also an impact on these markets where the fundamentals in terms of urbanization remain nonetheless very strongly. Moving on to the Americas, there we do have a downgrade. We had a flat assessment in February, and today you see we put there a minus, which is equivalent to a zero to minus 5% outlook for the year. And of course, this is... driven by a combination of North America and South America, mainly Brazil. But in America, we see the commercial sector in particular weakening. Maybe as one data point, the ABI has been minus 17% for the first two months or 23 in comparison to 22. So that is a sign. And of course, we're watching this very carefully. In Brazil, it is more of a question of slow down and that of course cannot offset the evolution in in North America another downgrade moving on to to the next one which is EMEA there is I would say quite a significant downgrade in the outlook is that we now have a negative outlook for the year because we see what used to be a strong markets with stable demand, moving on to a moment of delay projects and hesitation. To be clear, demand remains strong across Europe, but in Europe in particular, the cost of capital increase, combined with in specific markets, some political changes regarding construction, environment and other element brings to putting projects on hold, so the project is still there, but therefore for 2023, the outlook has been downgraded. Middle East and Africa continue strong, but unfortunately they cannot offset the European change that we observe at the moment. Finally, then, if you look at the overall outlook, then there is no change because we still see that between minus five and minus ten, uh where this weakening trend globally combined with uncertainty including china continues to affect markets on modernization the demand remains robust And in service, we observe continued growth across our regions. As you will see later, our OIT performance or in terms of service remains strong with modernization. Unfortunately, we are at a slow Q1. There is no other way to put it, but we remain confident that the large projects we are going after for modernization will materialize in the rest of the year. So with that, I thought it was important perhaps to spend one more slide on China, presenting the slide that we have shown every time as I think a strong indicator of the situation in China. Unfortunately, the latest figure we have are the ones of February, so clearly we don't have March yet. But you can see here, first of all, in terms of floor space sold, there is a pickup. So when we said the decline has slowed down, however, if you see from this curve, even for Tier 1, we still are below zero. So we still are in negative territory, but, of course, less negative than we used to be in the past. You can see that Tier 1 are still much better than Tier 2 to 4, but nonetheless, This has to be put in perspective with what you may have read, sales orders in China picking up in March for the first time by figures which even talk about 43% year on year. First of all, there is a base effect, but of course you can see that obviously there is a big absorption of the unsold inventory of goods. And that, of course, is good news because it means that then hopefully we will then evolve into the positive growth, which is something as in once more we are hopeful we materialize in the second half. But today it is still uncertain. I mentioned inventory, which then takes us to the right-hand slide, and then you can see that Tier 1, in fact, we are still within what I call healthy levels, so 10 to 15 months of consumption of housing inventory. Unfortunately, in the Tier 2 and 4, again, the decline has been arrested. However, we still are into the 20-month area of inventory, which is definitely very high at the level of the previous crisis, and this will have to be absorbed before we can then expect growth in new installation elevator markets. With that market outlook, I'd like to pass on the word to our CFO, Carla De Geesler. Carla, please.