Schindler Hldg Ag Akt

Good morning, ladies and gentlemen, and welcome to our first half 2026 results conference call. My name is Lars Brorson. I'm head of Investor Relations at Schindler. I'm here together with Paolo Compagna, our CEO. and Carla De Geyseleer, our CFO. As usual, Paolo will discuss the highlights of our first half results and our 2026 market outlook, and Carla will take us through the financials. After the presentation, we're happy to take your questions. We plan to close the call at 11 o'clock. With that, I hand over to Paolo. Paolo, please go ahead.

Good morning, everyone. Glad to be back to report on our first half year results. Overall, I'm very pleased with our operational execution in the first half of the year as we reached another record operating profit. But let us start with our top line development. In the first half of the year, our order intake grew 2.9% in local currencies. Similar to the recent quarters, with a strong contribution of the modernization business. With a growth close to 13% in local currencies, and a strong contribution from all regions. And that is on a tough comparison from last year, when we grew already 22% in the first half of the year. Order intake in new installation business in the first half of this year has an encouraging trend outside of China, particularly in EMEA and Asia Pacific. Outside of China, we grew high single digit in value and low double digit in units. In EMEA, we grew inner order intake by over 12% in units in a market which we estimate drew low single digit. And it's a broad-based strength in Europe, including Germany, our biggest market. While China continues to be a headwind, leading to the overall low single digit down in order intake. Also our modernization business is performing well in EMEA. Here we drew orders by 16% and that was on a tough comparison too from first half of the year 25 when we drew over 20%. And we see plenty of room for growth both on and off portfolio. And we also believe we can continue to deliver above market growth here. Let me say a word on revenue growth. which came in at 1.4% in the first half of the year. This is not the growth level we are happy with, but as Carla will explain shortly, we maintain our full year guidance, which implies an acceleration in the second half of the year. We have the backlog, which is up 5.8% versus year end 25, and we are seeing favorable order trends outside the Chinese new installation business. and we also believe our modernization business can and will accelerate further in the second half of the year. Now, let me turn to our operating performance in the first half of the year. We saw our operating margin expand by another 90 basis points to 13.2%, a record level for the group. And this improvement is broad-based across our regional businesses. Globally, we are executing well across our manufacturing and supply chains as well as our field operations. At the center of that is our product strategy. We are seeing a good traction of our modular platform in the new installation markets that were early in our global rollout, notably Europe. Not only is growth picking up here, but we are also seeing very visible improvements in terms of field installation efficiencies. Our new mid-rise product in the US is also leveraging the modular platform and here we are seeing continued good momentum too. Not at least We expect that the rollout of our standardised modernisation packages will also facilitate further gains in competitiveness of our modernisation offering. Looking at the additional cost inflation we are facing this year from logistics, fuel and commodities, Carla will later provide more details on the expected cost impact, but I can already say that we are actively working on mitigating The mitigation measures including pricing actions in order to offset these cost pressures, both lease prices as well as surcharges across our new installation, modernization and service businesses. And we are working with our supply chain to manage efficiencies on the supplier side as well. Now, a word on our strategy in light of the recent news in our industry. Let me say There is no change to our strategy. This is working. We have strong operational momentum and are committed to pursue with discipline and determination on profitable growth. As competitors merge, we remain focused on delivering on our promises to our partners and to all our customers to ensure they can count on us for stability and consistent long-term support. Does that bring commercial opportunities? I believe so, yes. And I look forward to discussing our midterm strategy with those of you who are able to join us at our Capital Market Day in November. And that leads me to conclude by highlighting three recognitions we received in recent months. Schindler was recognized by Fortune as one of the Europe's most innovative companies and we received the prestigious Red Dog and IF design awards for the outstanding product design of the Schindler X8. Why is that important? You will remember we launched the X8 last year in selected markets in Europe and we are now starting to see the impact this innovation is having on the industry, on our customers and partners. and we believe this is another good example of how Schindler continues to lead industry in terms of innovation. Moving to our market outlook for 26 on slide 4. While we do see potential for outlook upgrades in certain segments and regions, given the continued geopolitical uncertainty, we have opted for keeping our outlook unchanged for the time being. We continue to closely monitor the implications Thank you very much. in the areas where modernization is supported by government programs, such as the example of China and Spain. With the number of elevators ripe for an upgrade approaching worldwide soon 10 million units, there is no shortage of modernization opportunities in all our zones. In new installation, the markets continue to develop positively across the regions, the only exception being China, where the key lead indicators for elevated demand such as floor space started and real estate investment not only did not improve but in fact deteriorated sequentially again in June, reconfirming our outlook for another double-digit NI market contraction this year. In Europe, while the latest building permit statistics continue to show gradual pick-up across the major markets such as Germany, the more High-frequency indicators such as construction PMI and other sentiment indices to signal some hesitation to launch new projects and, therefore, some softness in new order by builders. Activity in Brazil remains good, driven by the social housing segment. In the US, multifamily permits and starts continue to rise but the architectural building index in multifamily remaining slipped below 50 again during the second quarter. Asia-Pacific continues to see healthy growth driven by India and most Southeast Asian countries with activities picking up in Australia too. Turning to slide five and our order intake in the first half of the year. In service, Our maintenance portfolio continued to expand, with accelerated growth reported in China, followed by Asia-Pacific, excluding China. In Americas, we saw growth in value terms, while we continued to be selective in terms of the units we decided to recapture from the market. In modernization, second quarter marked the sixth consecutive quarter of double-digit growth. We are very pleased with our consistently strong performance in this high growth, high potential part of the business. Our average growth rate over those six quarters reached 17% and was well above the overall market growth. EMEA truly shined driven by some of the largest northern European markets as well as Spain where the ITC regulation supports delivery of safety upgrades to our customers. We also continue to enjoy high double-digit growth in China, driven by the bond program for equipment replacements. For a new installation, China was the only region to have seen declining order volumes. In the rest of the world, our NR orders grew double-digit in units and, similar to modernization, Europe was the standout region, with above-market growth in all key markets. We are pleased to have seen share gains also in Asia Pacific, outside of China, according to our internal market estimates. And with that, happy to turn over to Carla for financial details.

Thank you, Paolo. Good morning, ladies and gentlemen. Happy to have you on the call. So let's start as usual with slide seven that provides you with the performance of the current quarter compared to the last four. As Paolo said already, we are very pleased with the operational momentum in the second quarter with EBIT margins up 90 basis points compared to quarter two last year and up 40 basis points on an adjusted basis. Now on net profit, we passed the 10% margin level in quarter one and continue to move higher in quarter two. In terms of our top-line development, order growth improved slightly to 2.9% in local currency in Q2, clearly still not where we want it to be. Revenue growth was at the lower end of what we expected in Q2, so let me give you some detail on the drivers behind this. Moving to the next slide. Where you have our order and revenue bridge for quarter two. So we grew order intake in local currency in all regions outside of China. And it is really the new installation segment in China which continue to be a significant headwind to growth. Excluding China, new installation order grew high single digit in value and low double digit in units in quarter 2, driven by EMEA and APEC ex-China, as Paolo mentioned before. In Europe, we saw a strong contribution from some of our key markets, including Germany and Spain. Now modernization that continued its nice growth journey and contributed strongly to the order intake in Q2, growing at 11% on a reasonably tough comparison from Q2 last year when modernization grew 24%. Again, here EMEA contributed positively to growth in the quarter. China also grew strongly but on a tough comparison from last year when the Chinese modernization market saw a big step up in the government's bond program, as you will recall. Finally, growth in our service business was accretive to Group overall. Moving on to our revenue, which grew 1.1% in local currency in Q2, that was slightly lower than what we had expected, driven by a softer development in our NI segment as well as timing on some of our larger projects in the modernization. But to be clear, we expect to catch up on these projects in the second half, which is partly why we are maintaining our full year guidance of low to mid single digit growth, as I will discuss shortly. Regionally, to complement Paolo's earlier comments on Europe, it's very pleasing to see our revenue growth gradually picking up here, now at mid-single digit in the first half, and we expect that to continue to gradually accelerate in the second half. A quick note on currency impact. We have been facing significant FX headwind in H1, with a revenue impact of 233 million. In Q2, the impact was 48 million. Based on current spot rates, however, we do see that the FX headwind could ease in the coming quarters. A note on our order backlog, which was up 3% year-on-year in local currencies compared to Q2 last year, but up 6% year-to-date. And that is driven by the backlog in modernization, which was up 13% year-on-year. And from a regional perspective, the total backlogs in EMEA and APIC grew mid single digit and by high single digit in the Americas. So that was partly offset by China where backlog was down mid teens. Our backlog margin continue to improve sequentially, which is also a very positive message. Now, moving on to the next slide, operating profit. So clearly the highlight of our first half, Our EBIT margin was 13.2% in H1 and 13.5% on an adjusted basis. We continue to make good progress on operational improvements, which was 45 million in our H1 EBIT bridge, which we are happy with after the strong improvement last year. Overall, price mix were contributors, but less so than efficiency. So it's the efficiency improvement that continues to be driven by SG&A, by procurement, by supply chain, as well as efficiency in NI and MOT activities. But we are also seeing a bit more cost inflation coming through in quarter two. and expectedly also in H2, which I will touch on shortly when I turn to our full year guidance. Now moving on to the net profit on the next slide. As I mentioned, a good development in net profit driven by our operational improvements, which are more than offsetting a decline in financial income as well as FX headwinds. Margins into double digits in H1, which we are also very pleased about. Now, moving to the cash flow. Operating cash flow in H1 came in below last year strong level despite the uptake in our operating earnings and here it is the networking capital which we were not able to improve to the same level compared to the strong performance in H1 last year and hence a headwind in our year-on-year bridge. Now, this was related to two factors. First, a decline in our Chinese new installation business, which is driving lower down payments. And secondly, we had an adverse impact on the networking capital from the implementation of the ERP system in our US operations. We spoke about that earlier this year. so we expect this to be ironed out in the coming months and therefore the adverse working capital development should reverse partly or completely in the second half now moving on to slide 12 and our full year guidance so we confirm the full year guidance So first note on our revenue growth guidance of low to mid single digits in local currencies in 26. So clearly that implies an acceleration. from the 1.4% growth level in H1. So we expect a strong double digit growth in modernization amid single digit growth in service and a gradual easing of the headwind in the new installations from the high single digit decline in the first half. Now onto the margin guidance of 13% in 26. So we were at 13.2% in H1. So very much on track to deliver on the guidance of 13% for the full year. Obviously the question will be why not be a bit more ambitious for the full year given the good performance for the first half year. Now let me comment on that. First of all, we had slightly more margin tailwind from mix in the first half than expected. This was partly due to the lower new installation revenue contribution as well as timing of revenue recognition on some of the larger projects in our modernization business shifting from H1 to H2. Secondly, we are facing slightly more cost inflation in H2. Based on our current assessment for the full year 26, we expect the additional inflation from energy and commodity pricing to be circa 35 million, split approximately two-thirds in the second half, one-third in the first half. Now, on commodity inflation, this is primarily associated with higher copper and aluminium prices, is broadly in line with what we have communicated in April. Now, we are working hard on mitigating actions to offset these in terms of pricing and in terms of efficiency. Now, let me also say a brief word on tariffs. Tariffs remain a moving picture. But our estimate of the annual gross P&L impact remains largely unchanged from what we communicated in April, so approximately 15 million. And finally, before I close, I want to touch on an accounting topic which will be important going forward, and that's the implementation of IFRS 18. As you might know, this is an accounting change which will be effective from 1st of January 27 and affect the presentation and disclosure of our financial statements in 27. We have a detailed note in our interim financial report, which I will refer you to, as well as the backup slide in this presentation deck. Now to give you an idea about the financial impact on us, if IFRS 18 would have been applied on January 1st, 26, the operating profit would have been approximately 20 million lower. So that is circa 40 basis points of EBIT margin. So a level of margin impact you should expect going forward from this accounting change once it is effective, so in 27. Obviously, this will all be taken into consideration when we communicate at a later point about our midterm targets. Now, I'm reaching at the end of... My presentation. So it's important, I think, that you allow me to thank, together with my colleagues in the executive committee, our close to 70,000 employees across the globe for their efforts. And many of them, and unfortunately more of them, continue to operate in exceptionally challenging circumstances. And with that, I hand back to Lars.