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.

Thank you, Carla. Let me remind you of our Capital Markets Day, which has been rescheduled for the 19th of November this year at our headquarter in Ebikon, Switzerland. We look forward to seeing as many of you there as possible here on our campus. Please note that the registration for this event closed on the 30th of October and the number of participants is limited. Now with that, Paolo and Carla are happy to take your questions. I would ask you please to limit yourself to two questions given the limited time we have available. With that, operator please.

Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their telephone. 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 star and two. Questionnaires on the phone are requested to disable the loudspeaker mode and eventually turn off the volume from the webcast while asking a question. Anyone who has a question may press star and one at this time. The first question comes from Daniela Costa from Goldman Sachs. Please go ahead.

Hi, good morning. Thank you for taking the questions. I'll stick to two. The first one, I think you mentioned sort of on the original equipment outside of China, you had high single-digit growth in value and low double-digit in volume. Can you talk about sort of is the difference most that we're getting negative price in some of the regions, maybe where, or is it just down to mix, to regional mix? And then the second question relates to, I guess you've kind of mentioned the savings or the efficiencies had had a bigger impact into Q if I heard correctly. How should we think about sequentially the efficiencies impact into the second half? Will it accelerate or have we now reached sort of a run rate at which it will be more stable and then that's why you don't get to offset the inflation and upgrade guidance? Thank you.

Good morning, Daniela. Paolo here. First of all, to the order intake outside of China, if I got your question right about pricing, there we don't see a specific zone outside of China with significant price decline, price pressure above the, let's say, normal competitive environment we are used to have. So the development is, you can say, across all the regions. Yes, I was also mentioning Europe with standing out at least in this first half of the year, especially also in Q2, where we saw a big up of our order intake also, and I said it before, based on our modular platform, you remember, which was introduced first in Europe. when we started the rollout. So therefore, not a special comment on pricing. It's more normal development, I would say, competitive environment, if we exclude China. On the effective efficiency, before I hand over to Carla for more details, I mean, the development so far, it goes also hand in hand when we talk about field efficiencies with the modular platform, right? When we introduced it, we were talking about this one big component, which is the field efficiency, which we were striving to gain and improve three, four years back, right? And now, obviously, with the increased portion of those new products coming into what we say fulfillment, it means as in installation and hand over to customers. then this portion of the benefit comes in and obviously this is not a one-off this continues to stay as we then continue to sell and install this type of products but please Carla if you like to complete the picture on efficiencies yes I think you actually said that when we look Daniela at the overall efficiency story it continues to be pretty strong

So we are actually foreseeing also a good increment in the second half. And you know our building blocks very well. So yes, there is a certain maturity in the procurement savings, but they are still at a solid level. But the operational efficiency, as Paolo pointed out, they actually are expected to further increase because that is really the result now of the implementation of the modular platform. and I think that is very encouraging. So yes, then your question will be, I guess, you know, with respect to the margin in H2, but it is really, you know, for the factors, you know, that I mentioned that we actually confirm the guidance because there might be, you know, costs coming our way. So in H2, yes. Got it, thank you. Thank you.

Thank you, Daniela. Next question, please.

The next question comes from Andre Kunin from UBS. Please go ahead.

Yes, good morning. Thank you very much for taking my questions. Can I just do two clarifications first, quickly? Firstly, on IFRS 18, that change in operating profit by 20 million, is that on full year basis or for H1?

This is for H1, so you could double it, you know, for the full year, to be clear.

Great, thank you. And back to the comment on orders growth. So you saw high single digit growth ex-China in value and low double digit in units. Did I get that right?

You got that right, yes.

And sorry, I probably have to ask the same question again, but is it just mix then that resulted in that lower growth in value versus units, if you're saying there's no price pressure anywhere?

The figures you mentioned, sorry to reconfirm, these relate to NI, so new installations only. The order growth is the total order growth that you see on the slides.

Great. So if in new equipment the orders grew faster in units than in value and you said there was no pricing pressure anywhere, Thank you, André. Thanks, Andre. Next question, please.

The next question comes from Phil Buller from JP Morgan. Please go ahead.

Hello. Good morning. Thanks for the questions. I have two. They're quite different, so I'll ask them one at a time. The first one is on market share. You talked about gains in Europe, and I also understand the focus on selectivity elsewhere. But it seems like that competitive intensity isn't going away anytime soon, including in North America on the service side. What's driving the gains in Europe and how do you intend to address the competitive situation in North America on service, please? That's question one.

Phil, I take the question. Good morning. Well, if we look at Europe, as I mentioned before, the modular platform, which was introduced for everything, which is low-rise, mid-rise, it's absolutely supporting us also in gaining market shares. So without going to the individual markets, this is, I think brought based a supportive argument in Europe and you remember the modular platform was introduced in sales one and a half years ago we were starting selling in Europe starting by the way also in some in some selected cages sorry markets so therefore that's one part of the answer you assume it right it's about the modular platform supporting our low and mid-range in Europe on the North America Specialist Service, I mentioned before, in value terms, we do a good progress. In units term, we stayed in the first half of this year, second quarter, very much to our strategy of not pulling in big tenders, which come with high number of units and very low values, which actually looks good in numbers of units, but don't add, let's say, meat to the bone. Going forward, and we also mentioned introduction of the meat rice product equal modular platform in the US which actually going forward will also help us Having a better position was your question. How do we think to gain back on market shares in the US? The modular platform, especially in the mid-range, will help us also in new installation and subsequently also in modernization and service.

Thank you, that's helpful. And the second question is in relation to the Capital Markets Day, which was delayed obviously to November. I assume that that was because the Kona TKE announcement was just beforehand. So the November timeframe, is that set in stone and purely focused on organic topics or was it in any way predicated on some internal views on timelines of potential remedies or M&A from your side, in which case perhaps the date could move again? Just any kind of colour on the assumptions behind the date in November would be great. Thanks.

In November, we will be happy to share with you our mid-term plans, focus on what we aim to do and what is in our hands.

Again, very straightforward. Thank you. Thank you, Phil. Next question, please.

The next question comes from Luis Merrick from DNP Paribas. Please go ahead.

Good morning. Thank you for taking my questions. Just going back to the America's order intake service, I mean, from Q3 you'll start to annualize that negative order intake. So based on the actions you've taken to be more selective, do you think that that can inflect positively in the second half?

Luis, morning. Yes, that's absolutely our intention. First of all, we see already in the In the new order intake, also in modernization, first signs of picking up there. And if you ask about service, our intention is also to have a gradually improving recovery also in terms of units, not only value, which we already did in Q2. So Q3, Q4, we intend to further progress also in units in North America. Absolutely, yes. Okay.

And just on China, the pace of new installation decline in orders continues to be in excess of 10%. I mean, some of your peers have started to see those declines moderate somewhat, sort of high single digit levels. Do you see that based on the current order run rate and the comps you are facing, we can see the pace of those declines start to moderate in the second half as well?

Well, let's just say it's philosophical now, I mean, I was in the past always looking a bit more on the dark side of the Chinese development, market development, while competitors were more positive. And unfortunately, I must say, we were proven right in the past. If you ask now about the second half of the year, difficult to say. However, every leading indicator right now would indicate we would be rather at a double digit, low double digit decline. Thank you very much.

Thank you, Louis. Next question, please.

The next question comes from Delphine Brault from AutoBHF. Please go ahead.

Yes, good morning. Thanks for taking my questions. I have two and will ask them one at a time. First, can you provide some colors on modernization by region, maybe in terms of growth? And if I may, how big is your modernization business now in percentage of sales?

Good morning. Let me for the first question answer, then normally we don't disclose individual business lines in their individual contribution. But where modernization is growing, I'm happy to share it's growing in every part of the world. We call it zones. So in every of our zones, the modernization business is growing well, double digit. And You can say there's no part of the world. Let me include here explicitly also China in that regard, which is not contributing on high levels to the growth. By the way, let me repeat, compared to a tough comparison to the first half year of last year, where we were already growing all over the place, double digit. So here we have a continued acceleration of growth, you can say. And this is in all zones. North America, South America, Europe, China, Asia Pacific. And the second question I have to leave open as we don't disclose single business lines.

I tried. The next one is, and sorry if I may have missed it, but did margin in backlog grow sequentially?

Yes, the backlog margin grew sequentially. It's actually quite a nice... Thank you.

The next question comes from Martin Huesler from Türke Kantonalbank. Please go ahead.

Yes, good morning everyone. So my two questions. First of all, On the Chinese market again, what is the situation regarding payment terms and bad debt allowances among Chinese customers? Do you make any concessions with down payments here?

I confirm we don't make any concessions with down payments because it would expose us too much because we also see a bit overall A deterioration in the credit risk. So we stick to our policy in a very disciplined way, I can tell you.

Is this the same for MOT orders and NI orders or is there something which we should take into consideration?

No, we actually state, we are very, we apply the same rules for modernization as for the new installation.

Thank you. Then the second question is on US tariffs and obviously we saw first companies that reported some tax or tariff refunds. What is your view here and are there any tax refunds being taken into H1 results or not at all yet?

Well, we started actually in the first half to file for refunds. And on the first filing, we got already a refund back, but it's not a significant amount. But yes, we see definitely that the process is working. Yeah.

Okay, an indication on the possible full refund of the next couple of quarters?

It's difficult to say so. I mean, it's obviously, you know, it will be something that, yes, a couple of millions, but it's not something that now really, you know, will change our results overall. But yes, it's true that the refunds are started. Yeah.

Thank you. Thank you, Martin. Next question.

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

Hello, hi, good morning. Thanks for taking my question. I have two and we'll ask one at a time. The first one is on EMEA new installation orders, which appears to be materially ahead of the market. To what extent is Schindler's competitive position changed to drive such a performance compared to the market? And is there any evidence that current industry consolidation is creating opportunities to win business from destructive competitors? This would be the first one.

Let's take me. Well, competitiveness, I can talk about ourselves. As I mentioned before, the modular platform which we launched is helping us absolutely also in competitiveness, but also in efficiency and in internal performance. Thank you very much. This we always did and we do now even more. So actually for us is no change to our dedication to our customers and this includes obviously also new installation customers, which also includes for sure the low and mid range part of the business. Got it.

Thank you. The second one is on America's services. Perhaps, can you elaborate a bit further on what gives you the confidence besides the easier comes of around the improvement in America's services when we look at the second half of this year? Thank you.

We look forward to our bits we have out there. So now we know what is in the pipeline. We know how the quality of our offers in the pipeline is and the customers we have now offers to. And here we have a bit of a confidence that we can continue on our dedication to, as Carla was mentioning before, making sure that our or the intake stays on positive levels, but also in service with an increased trajectory on units.

Thank you very much. Thank you, Aaron. Next question.

The next question comes from John Kim from Deutsche Bank. Please go ahead.

Hi, good morning. I'm wondering if we could drill down a bit into Europe. Sorry if I missed this. Could we get some color on NI in the European markets? I know EMEA was quite strong for you and well done on that, but I'm looking for color on Europe itself. I seem to remember Southern Europe was quite strong as markets, but you spoke about Germany. I believe any color in what I'd characterize as Central or Northern Europe?

So happily, we can say in a second, quarter two was confirming for us a strong order intake, new installation all over Europe, what we call Europe, right? So that's, first of all, the first part of your question and assumption is right, it's all over Europe. And if we look to mid or northern Europe, I was mentioning Germany, Germany is a big market. and we were in the last few years and also last year we were looking at yeah how to say slow paced market in Germany which well it is now not exploding to be crystal clear but we see that our order intake also in Germany is picking up nicely and this leads us to the well assumption of the market share gains However, the market itself is developing now in a better trajectory than it was in the past. You remember, we were looking also in Germany for years on a declining market, then stagnating market. And here, one has to say it has slightly improved and has some signs of recovery. A bit different between low rise and commercial projects. However, we see our position here strengthen and also gaining in the market. Fantastic.

And a second unrelated question. If we think about dynamics in China, as the market continues to contract, do you have a view as to when your revenue mix will come into balance in the sense that modernization and service are growing and MBS or NI continues to contract? Is that journey or market rebalance within the next few years, you could argue?

Yeah, Aaron, I think the argumentation is a bit of philosophical pre-assumption. However, if it continues at that pace, that new installation declines high, single, low, double digit every year, and the market in modernization grows every double digit, one could do a calculation and assume, rightly so, you say, that one day modernization and service will be the bigger part of the business. So, well... Difficult to say no, this will not take place. Should NI pick up again, then the story changes. But you are right, I think, looking forward, this is the scenario which could happen, that modernization and service become bigger than new installation. This cannot be excluded over the next years to come. Okay, thank you.

Thank you, John. Next.

The next question comes from Nick Hudson from RBC Capital Markets. Please go ahead.

Hello, thanks for taking my questions. My first one is on new installations in the Americas region. We saw it was down in the quarter. I'm just wondering if that's a comps effect or if there's anything else in there. And then I guess more broadly on Americas NI, I think order intake in 24, 25 and H1 26 was generally quite good. So just any comments on backlog conversions Thank you very much.

to a very strong Q2 last year in America. So actually, we don't look at all unhappy on the OIT or the intake in America on Q2 this year. The comparison was very tough for us as last year we had some large jobs booked in. So therefore, I would like to give you a second view of your assumption. And when it comes to the backlog conversion, Carla, I don't know if you'd like to elaborate, but yes, backlog is growing nicely with, by the way, good C1s. Carla, please.

Yeah, definitely. And that is what we will focus on is the pull through in the fulfillment in the second half. And that is also one of the reasons why we are comfortable with confirming the guidance for the full year.

Okay, great. And then my quick follow up is just on China service units, which grew five to 10% in the quarter, which looks slightly out of keeping with the sharp declines in the new installation market. I was just wondering if you could provide a comment on why that is and what we should expect in the next few quarters.

Yeah, as you mentioned before, in China we see also quite a substantial inflow in the units from different angles than only new installation conversion. And obviously, The new installation conversions are declining as we speak, right? As the new installation went down for us and for the market, but also for us subsequently. So what are the inflows? Number one, it is modernization. Modernization, inflow into service for modernization is also increasing as we speak nicely. So it's one source of additional units. And the second one is recoveries from the market where we remain as Carla mentioned before very diligent to all our rules however the market it is and remains the largest market on this planet and there we also So again, some recoveries, call them. And these two inflows into the portfolio is what you see in number of units, which absolutely doesn't reflect only the NI inflow, which obviously for all of us was the normality in the very past. You remember it was only NI, two years or a one year gap, it was EI inflow. Now it has changed. Now we got modernization, we got recoveries, and this is what you see in the numbers.

Thank you very much.

Thank you, Nick. Next question, please.

The next question comes from Vivek Mehta from CT. Please go ahead.

Thank you very much, everyone. Good morning. My first question is a follow-up on backlog margin and price cost. You've commented that the backlog margin was up sequentially. You've also commented that you're not really seeing price pressure. And given that the backlog margin is improving, then clearly you should be Thank you.

Thank you very much. Your observations are right, but when it comes to the cost inflation in the second half, I think where there is some uncertainty is definitely in the raw materials, or call it a commodity, so the aluminium, the copper and the steel. And yes, we Thank you very much. Thank you. We expect a bit of an acceleration of this cost. And yes, we will continue to work on the passing on. But of course, I mean, it requires work and mitigation factors. And I don't want to preempt the potential successful passing on, yes or no. And that's why we kept that caveat there. But pricing overall, especially in the commodity, I reconfirm was outside of China, I need to say, was pretty solid.

Understood. And just to follow up on that, you commented about the second half. It's clearly far too early to guide on 2027. But just with one eye to beyond the second half into next year, how are you feeling about your ability to mitigate the impact of steel as we go into next year? Thank you.

Well, I mean, we obviously continue to work on it and how you own. It's always a combination, first of all, in the supply chain, supply chain efficiency, but also, of course, try to negotiate better prices with the suppliers. I mean, that remains. And of course, a big part is also, you know, the increased pricing to the customer. and that works not only for the new projects but also for the backlog through the variation orders that we try to pass on to the customer. So it's always a combination of different elements.

Understood. My second question is around China new installations. Just how we should think about that development as we go through the second half because there are two factors here. As you say, the market remains very challenging at the same time you had a much weaker second half last year and so the comparison should get easier so is there a sense you can give us on how that decline rate should develop as we go through the year particularly if some of your newer launches or self-help measures are able to get a little bit of traction and you could see some sequential improvement thank you

your assumption is right so first of all if we look at the Chinese market is one part of the story in our deliberate decisions which we were talking also second half of last year are the second part of the story in all transparency we told you that we are working on ourselves and resetting the way we sell new installations in China. This was done second half of last year and surely continued within this year. So now, if you compare, as you do rightly, on our second half of last year, one could expect an easier comparison, yes, and for sure, the products we are launching the first we just launched as you might have heard more to come in the second half of the year plus all the efficiency measures we have initiated second half of last year first quarter of this year are expected to start to support how much this now really helps already in Q3 but an assumption which is absolutely in line with our expectation is that in the course of the second half of this year we should see A bit of an easing of the NI installation or the intake in Schindler, which is on our side. And I repeat, it's not based on glorious or positive or whatever expectation from the market. But our own internal part, I would confirm your expectation. Very clear. Thank you.

Thank you, Vivek. Next question, please.

The next question comes from Vlad Sergeevski from Barclays. Please go ahead.

Yes, good morning. Thanks very much for taking my two questions. I'll start with China. Is there any line of sight on when new equipment demand back and bottom? Or it is fair to assume that it just continues to decline well beyond this year, given all macro and demographic trends that we're seeing over there? And how you are positioning your China businesses? for what is ahead, not just this year, but in the coming years.

Okay. Vlad, let me take the first part. So talking China and our market, as I mentioned before, let's hope that we get proven wrong this time. Again, in the past, we were the most, yeah, how to say, conservative looking forward and we were proven right. So I'm not proud of that. Absolutely not. And I would wish myself to see the market picking up. It would help. This being said, as I also mentioned before, there's a part of how we act in this market. And Carla mentioned before, we stay very diligent in making sure we don't go into projects, jobs, which then would cost later. Our results and our future. This being said, this leads me to the second part of your question or the second question. How do we look forward in the future years? And happy that we don't talk now only one quarter. Let's look quarters and years to come here. I always say China is and remains for the moment the largest market. Not only new installation is also modernization is also business of this planet. So therefore for us, there is a business, there's a good business to be done. And this is not at least the reason why last year in towards end of the year, second half of the year, we were starting our own recovery and reassessing and resetting So looking forward, China remains a key market to be looked at and going forward also with a big portion of business to be done.

That's great. Thank you for that. The second one will be on accounting impact. Could you provide a bit more detail on what are those 20 million actually are that are currently sitting in operating profit but will not be part of it as accounting rules changes?

Yeah, I'm happy to do that, Vlad. So, I mean, the main part of this 20 million that are actually operating finance costs, obviously that were below the line before. So you have to think about bank fees, you have to think about credit card fees. You have to think about fees, you know, financial costs that are related to financing of modernization activities. And obviously they were below the line which was consistent with the previous, call it a pre-IFRS 18 rules, which promoted and still promotes a clear distinction between operating and financing results. So we applied that consistently since the first time application of IFRS decades ago. So now obviously there is the change. And then there is a smaller part which is actually related to FX gain and FX losses. and that part, although it's only a couple of millions, that definitely will cause a bit of volatility going forward because obviously the nature of it is inherently volatile and it depends both on the underlying FX exposure and the exchange rate movements. Thank you. Thank you, Vlad. We'll take one final question, please.

The final question comes from Andre Kunin from UBS. Please go ahead.

Good morning again. Thanks very much for fitting me in. Sorry if it's not going to be a short one, but I just wondered if you could put some numbers on the operating profit bridge for H1 and expected H2 between savings, i.e. what you achieved in H1 and are we on track to get to that close to $200 million Paolo Compagna, Paolo Compagna,

Pricing in the first half was definitely solid, but I have to mention ex-China. So that is clear. And when it comes to the NI business, with respect to service, repair very much in line where we expected it to be. And we also believe that that part will continue in the second half. When it comes to the efficiency, Well, data progress is actually solid and that we are well on track, you know, to deliver the 200 million. So it might be even a bit, I would say, yeah, stronger than that. Let's see. Where is it coming from? Well, clearly, because the procurement savings are holding up quite nicely. And now we see the effects in the field operation coming from the modular platform in all the countries involved. where we rolled it out and obviously you know it comes gradually and incrementally so I expect that it also track nicely now in terms of inflation also in line with where we expected it to be but we have that uncertainty I repeat now for the second half when it comes to energy and commodity but it's mainly actually the volatility in the commodity So these are a bit you know the major blocks as and you know them well in our impact bridge.

Thank you Carla. If I may just double check the 200 or 200 million plus of efficiency would you expect that now to be more H1 or H2 weighted given is this over delivery in H1 or is it looking better for second half?

If to be honest with you if our plans are executed properly, I would rather see a bit of a stronger H2 than H1, to be honest with you. But of course, you know, In field operations in so many countries, you need to be careful because there is always a bit of volatility. And it's always also impacted by the rollout of the large projects. And that's where sometimes you have less visibility. If some of these large projects move to Q1 27, you can already have quite a big impact. And that's why I'm careful.

Very helpful. Thank you very much. Thank you, Andre.

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

Thank you, Valentina. Thank you very much for attending today's call. Please feel free to reach out to me and the IR department for any follow-ups you might have. The next scheduled event is the presentation of our Q3 results on October 22nd. With that, thank you and goodbye.