Schindler Hldg Ag Akt

Good morning, ladies and gentlemen, and welcome to our first quarter 2024 results conference call. My name is Lars Horsen. I'm head of investor relations at Schindler. I'm here together with Silvio Napoli, our chairman and CEO, Paolo Campagna, our COO, and Carla De Geisele, our CFO. Silvio will provide a brief overview of the key messages of the quarter. Paolo will discuss our market outlook and auto intake in the quarter, and Carla will lead us through the financials. After the presentation, we're happy to take your questions. We plan to close the call at 11 o'clock in one hour. With that, I hand over to Silvio. Silvio, please go ahead.

Thank you, Lars. Good morning, everyone. Thank you for joining this Q1 results conference for Schindler. Last February, I reported to you that we were back and we were in a steep climb. Today, I'm pleased to say that we not only continue with a steep climb, but in fact we are accelerating. And accelerating is important because the weather conditions are testing. I say that because we are confronted with a quite unique combination of strong tailwinds, but also strong headwinds. So let's have a look at the most significant headlines before diving into the details. Starting with tailwinds precisely. And there it is definitely encouraging to see how both the modernization and service markets continue to grow across all regions. This is absolutely critical because this is the long-term business base and already today this is critical because these two markets account for the biggest portion of our revenues. Moving on to There, and I'm sure you'll realize, the new installation market continued decline, driven by China. I just come back from China where I was last week, where definitely the property situation is far from being resolved. But also, and this is more recent with pressure in Europe, and that is even more recent in America, both under pressure. In a totally, I would argue, diametrically opposite situation, we see incredibly strong markets in India and the Middle East back to growth, mainly driven by Turkey. Now, I also wanted to spend the second year on an highlight that is not yet affecting our current performance, but it is absolutely critical for our results, let's say from 2025 onwards, and that is the successful modular platform launch, which you heard me repeatedly mentioning as strategically relevant for the future. And then I'm very pleased to say that indeed it has been successful because this new platform already accounts for more than 40% of units sold in the EMEA region where it has been launched in the first phase. You may remember that we've now a stage launch across the globe and the first part was EMEA. So they're a very successful reception. And I'm pleased to say continuing to do so as it is launched in more countries and customers take it for more and more of their projects. What is definitely affecting today's performance are two critical factors. And that is number one, the sustained pricing discipline and two, the efficiency measures that we continue to drive across the whole value chain. Pricing is crucial, especially in testing markets. And we have no hesitation to say that we have learned a lesson. And so we're just simply not taking any job at any cost. But to the contrary, we are focusing on the ones that make sense in terms of margin, but also in terms of conversion into our portfolio. And to do that, then we have to drive efficiency without ever stopping. because this is what allows us to increase our competitiveness and allow us to have sufficient margins to secure the jobs I just mentioned before that we want to get. Now, these were what I call the inputs. Now let's look at the output. So in terms of financial results. And there, I'm pleased to say that our order intake measured in local currency has increased by 2.5%. mainly driven by modernization and service, and partially offset by the new installation order intake. I'd like to stress there, and I'm sure you hear it from our Chief Operating Officer, Paolo Compagna, that we have been gaining share in new installations. So again, that's part of our strategy of securing jobs where it makes sense. Moving on to another key results, of course, is a top line growth in terms of revenue and local currency. I'm pleased to say we had a 1.1% growth driven mainly by the EMEA and Americas region and partly offset by South Asia Pacific, where traditionally Q1 is slow. But there, of course, there are particular market conditions. The, of course, extremely reassuring point is that on the basis of all that we have been increasing our operational profitability with a 15.8 percent increase in EBIT adjusted in local measure in local currency again this is as a result of operational efficiency pricing measures but also of course as a result of the product exchange as the not only product mix in terms of what type product we sell within a new equipment but also part of the problem mix in terms of a shift towards more and more service modernization revenues. Final point of output is our operating cash flow, increasing by 80.4% as a result of higher profitability and lower net working capital requirements. Perhaps on that, I'd like to make a comment that this is also a testimony of how effectively we have been managing credit risk in a overall tough construction environment. Overall, in Q1, we delivered both growth and margin improvement. So overall, we can say that Schindler had a solid start of the year 2024. With that, I'd like to pass on the word to Paolo Compagna, our Chief Operating Officer, that will take us through the market outlook and order intake for the first quarter. Paolo, please.

Thank you Silvio and good morning everyone. Before we move to our expectations for the market development in 24, I just wanted to remind everyone and emphasize the fact that we are a predominantly service company with maintenance, repair and modernization accounting for more than 60% of our revenue. And also to be reminded in terms of our exposure to China, It was below 14% in 2023 and is even lower in Q1 2024. In this frame, I like to point out that overall, we maintain our 2024 market outlook for the E&E markets worldwide by business and by region, with one exception. This is the energy market in China, where we now see the market sliding down by slightly more than 10%. as the real estate sector was off for a disappointing start this year, with most lead indicators further weakening. But sure, if we hear more positive news in the coming months, we will be adjusting our expectations accordingly, but this is what we see at the moment. A few words about the other regions. In America, the key lead indicators in the largest market of the region, the US, remain under pressure. the Dutch momentum index recently declined, indicating weakness in the non-residential segment, whereas the architecture building index slightly improved, but remains below 50, indicating still low construction activity. As a result, the E&E market declined high single digit, with residential segment outperforming the commercial. In Brazil, Total apartment lounges have dropped recently, but there are pockets of growth, such as social housing, while the SELIC, this is Brazil's benchmark for interest rate, has been reduced, which can be seen as a positive signal for the market. Moving to EMEA, Middle Eastern countries, such as Turkey and Saudi Arabia and UAE, are seeing good growth, while Spain and France in Southern Europe proved quite resilient. In Northern Europe, Germany and the UK remained weak. For example, in Germany, the multifamily housing permits declined by 30% in the last 12 months until January 24. Asia Pacific, excluding China, India continues to show strong growth in spite of some uncertainty due to elections, and the market in Southeast Asia will grow despite the China slowdown, which is setting an impact on their economies, while the market in South Korea remains subdued. The global installed base keeps growing at an healthy pace, and modernization is enjoying robust demand, sure due to the aging installed base in Western markets and in China. Turning now to slide six and looking at our own order intake in the first quarter. On the left-hand side, you see our order growth in units. We are pleased with the performance in new installations in light of the challenging markets we faced. For the group overall, we delivered low single-digit unit growth this first quarter in new installations, including a solid performance in China, especially given the overall market situation. Modernization had a good start into the year, primarily driven by very strong growth in Asia-Pacific, both in China and more broadly across the region. Also, the service business remained very robust and continued to grow across all regions. In value terms, this is on the right-hand side, new installation order declined low single digit in the quarter, but less than local markets overall. In particular, we saw a softer NI order intake in Northern Europe and Asia Pacific, both in China and more broadly across the region. However, it is worth pointing out that we faced some significant mixed headwinds in the quarter in Asia Pacific, excluding China, which had some very large projects wins in the last year first quarter. Meanwhile, the service business continued to grow solidly across all regions, driven by and our conversions, but also balanced pricing actions as we remain disciplined on pricing across all business lines. With that, I would like to hand over to Carla to lead us through the financial results.