Stabilus S.A.

gentlemen, and welcome to the Analyst and Investor Web Conference regarding the Stabilus results in the second quarter of fiscal 2026. At this time, all participants have been placed on a listen-only mode. The floor will be open for questions following the presentation. Let me now turn the floor over to your host, Dr. Michael Bixner.

Hello and welcome together to our earnings call today. My name is Michael Büchner. I'm the CEO of the Stabilus Group and for sure you also have our CFO, Andreas Jäger, with us in the call today. Actually, in terms of the presentation, we'll see it slightly different today because we wanted to put also a main focus on where we stand in terms of our strategic priorities and also as we're in the transformation, giving you some updates on the transformation along the sidelines So what's the current status and what do we plan in the close future to proceed and to further improve? The bottom line is a key takeaway. I would say we're progressing very well on our transformation. And despite the rough waters, we deliver stable results. In the past weeks, we did streamline further our industrial footprint in Asia, this time around with our Sushu plant. We'll talk about that in a bit. Then for sure, we also had a lot of new business wins in both automotive and on industrial side. I would also like to highlight one good win, which is actually in terms of the aftermarket, a big win in North America, again, for electromechanical devices. We're further working on our defense applications. That's important to us. It's steadily growing. We'll have an own section about this business or part of the business in a couple of slides. And then, for sure, we continue in general to turn our star 2030 platforms. This time around, we'll also talk a bit about the robotics market. Stables for automation, that's our slogan. And we invest in the automation sector, predominantly also in the robotics area in the close future, to make sure that we follow the megatrends which we're faced with. There is also a good progress in terms of our personal related measures which we did introduce half a year ago. We've been fully executing them and this actually helps and we'll see that on the financial deck to improve our margins along the line because even with lower sales this year round, we could maintain our EBIT margin. That is, resilience point is extremely important for us in difficult times, predominantly also with The slogan, and it's really what we live, local for local. So in the region, for the region, to be close to the customer. Now switching to the next slide. Actually, it's pointed out spot on. We had in the second quarter $304.9 million in terms of sales, which is better than the first quarter this year, where we've been in the range of $291 million. However, it's 10% less than prior years. And the remarkable thing is that despite of lower sales, we achieved the same EBIT margins than last year, which was 11.2%, which underlines again our execution in terms of our cost measurements and cost measurement savings, which we initiated over the course of the past months. I've been talking about the defense sector in the beginning of this slide. And actually, we had significant order wins over the course of the past quarters. And it's significant for us because we already sold 3.2 million. And this will be tripled soon. We'll be tripling soon. We'll be selling all kinds of features, be it dampening systems, opening systems, gas springs, gas struts, for all kinds of applications in the military sector, starting from standard weapons up to drones. So we are basically becoming bigger and bigger in this sector of our business. And this is only a starting point because when it comes to the next and even bigger areas like human with robots, we are also now in the process to develop the right features to be also present in that market. So you see that with whatever we do, also in strategic terms, we invest a lot in that point. To be closer to the customers, we decided to combine our industrial brand under one roof. So we have the inauguration of our new plant in Souchou two weeks ago. It was a great success. 65 valued customers have been participating in the same way than representatives from the government. For sure, the management was there for Stabilus Group. And we could open in Souchou a brand new facility to actually capture our industrial brand under one roof. And to be closer to the customers, this is really appreciated by our customers. And we see very nice order intake since that because now we have all the expert brands under one roof, which adds to basically efficiency. And it brings us very close to our customers, which is absolutely appreciated and needed this time around. So it's in the region for the region by excellence. They're talking a bit about the market environment, and I told you already that the presentation this time around is a little different than the times before, because we also would like to talk about the market environment, right? So there is still a lot of competitive pressure in the market. You all know that, particularly in the automotive industry, Asia-Pacific forefront, right? The global lightweight production is below prior year's plan or below prior year's execution by 3%, yeah? We see some unfavorable currency translation effects driven mainly by the U.S. dollar and the renminbi. And at the end of the day, the industrial segments, they are also impacted by the current situation out there in the market. There is a consumer sentiment which is basically cautious in all kinds of investments for goods. And then For sure, along with that, we are basically working on protecting us in terms of supply chain disruptions, right, driven by all this geopolitical unrest in the world. Basically, protect ourselves and make sure that our supply chain is independent and robust and stable. So this is currently the market environment we're faced with, like many or almost all other companies in the world as well. And as I said, we are fighting through that. because our EBIT margin basically stood on the same level than last year, with even lower sales, which underlines the execution and the effect of our activities at the Stabilance Group. So on the next page, we jump directly into our deep dive and the different market segments we have on hand. And actually we are now at 50-50 between automotive and industrial businesses. Our industrial business actually did grow organically 2%. However, the FX rate was an issue in the first half of the year, particularly also in the second quarter. And the automotive industry, as I said before, minus 16% is impacted by the currently weak automotive market around the globe, right? You see that on top of the slide on the right-hand side, 16% down year over year. Also, the industry machinery and automation market is impacted by that. People are consuming less, and this also brings to the point that the companies are investing less in automation. They're investing less in industrial machinery, and this is certainly something we feel. However, distribution and forefront, the commercial vehicle and also the aerospace, marine, and rail sector, they are performing well. And this is basically for us, particularly the commercial vehicle sector, an indicator for growth in the future because typically the economies start to grow with commercial vehicles and commercial vehicle growth. This basically drives the economy on global scale, despite of the current headwind we're seeing in the global economy. So with that, On the next page, I would hand over to Andreas Jäger, leading us through the financials for the last quarter and the first half of the year.

Thank you, Michael, and also from my side, a very warm welcome to this conference. If you look at the second quarter, where I will start, that's January to March, and then I will go into the half-year results. So in the second quarter, we lost compared to prior year 9.8% in the revenue. And you see about two-thirds is really coming from the volume, where one-third is impacted by foreign currency translation. So we had headwind from that side. If you then look where this volume drop is coming from, it's mainly Asia-Pacific. And also America's isolated Q2 had a softer revenue result than in the prior year. What we also did realize, also in the second quarter again, are some synergies from the stock combination of $2.4 million. If you then look at the EBIT margin with minus 9.8% in revenue, we could maintain the EBIT margin at prior year level. So that shows we really could flex our cost basis. From the revenue side, you see it then later on in the bridge, we lost more than 9 million in EBIT, but where we really strong was in the compensation with overhead cost of 7.6 million. And just bear in mind, we reduced them by 7.6 million compared to prior year, despite the hacking we have from all the inflationary price increases. If you then move on to the profit for the second quarter, you see it went down by 17%. However, it's important to notice that the deviation basically comes from the EBIT. So below the EBIT, there was not a lot of movement as compared to the prior year. The adjusted free cash flow in the quarter, and it's important in the quarter standalone, was clearly below the prior year level. The main driver behind there was the strong March. We had in March very strong sales, clearly above the normal run rate that we have, and these sales were then reflected in higher accounts receivables. If I then move on to the half-year results, you see the revenue in the half-year is 0.2% down. We're also half, two-thirds volume, half ethics impact. And what we see then, if you look at the whole half-year, 2026, it was predominantly from Asia-Pacific, and in Asia-Pacific, a big portion from PowerEyes. If you look at the whole half year, 2026, we realized more than 4 million of sales synergies with Testaco. In the EBIT, a similar picture you see, the gap to prior year was closed a little bit in the second quarter. That's also why we see a bigger deviation in the first half. The margin is still 10.6% in the quarter standalone. The major impact, and you also compare it in absolute numbers compared to prior year, also comes from the volume effect. You see in the full half year, 2026, we even reduced the overhead cost by 14.3 million. So here you see the effort from all the measures we took, we really see in the results. Moving on to profit, similar picture for the second quarter, the major deviation in the profit as compared to EBIT comes from the lower EBIT in absolute terms. And then if you move directly on to the cash flow, you see if we compare the full second half year with prior year, we even generated slightly more cash flow. The reason being in the prior year, the Q1 was weak. And now this year, Q2 was rather weak. But if we compare the whole, the full six months to prior year, we could even slightly increase it. But you also see, if you just go for one second back, you also see that on one hand, it's the operating cash flow, but clearly adjusted also current level of the business activity was the cash flow from investing activities. If we then move on and look more at the sequential view, that's also a new slide that we prepared and also a new kind of presenting the result, you now see the quarters trailing for the last 12 months. And you see, we improved our revenue as well as our EBIT from the first quarter to the second quarter. On one hand, that's driven by the higher revenues that we could achieve and also by the good March revenue that we could book. And you also see that our cost measures on cost of goods sold, but also on the overhead cost, showed its positive impact even more in Q2 than we saw it in Q1 2026. If I then go into the region and give you a little bit more flavor about the region, the three regions developed quite differently. In the U.S., the top line went down quarter to quarter by 11.5. That's really driven by the automotive business, but you also must note that the automotive business was only in the second quarter, particularly in the U.S., where we achieved good, or I would even say very good results, is industrial components, particularly in the form of Destaco, where we could increase in America the revenue by 6%. If you then look at the development of the EBIT, we said it already in Q1 presentation that we are not satisfied with the EBIT that we delivered in Q1 with the 5 million. In Q2, it is a little bit better with 9.9 and 8.8 margin, still not there where we want, and it has basically two reasons in there. Reason number one is the challenges we had in the production of gas spring in Mexico. We already discussed that in the last call for Q1, and what you also saw in the second quarter. And when we produce in Mexico, we ship a big part of our products to the U.S., and we invoice that in U.S. dollars. And when then the currency moves and the dollar gets weaker, we then get less Mexican peso and then we convert it to Mexican peso in order to cover our cost. When we then look at EMEA, We see a different picture. If you look at quarter to quarter, we could basically maintain our revenue level. Organic, we even slightly increased it, mainly also coming from automotive gas spring. Interesting to see is that industrial components, even in Europe, where we really can say have not an easy economic environment, it could increase the revenue by 4.3%. And in Europe, different to the other region, it could maintain or even slightly increase the automotive power ice business. When we then look at the EBIT margin, also here a clear improvement quarter to quarter from 10.8% to 11%. Also here we see on one hand the volume impact that we could realize with a better EBIT and what we also see that the cost saving measures are really booked now into the results. Asia-Pacific, also again a different picture than EMEA and Americas. In Asia-Pacific, we clearly see the lower revenue. The top line was down 28% or 26.6% if you compare it quarter to quarter. Mainly, this mainly is coming from automotive and within automotive, especially from the power rise business. What I would stress here and highlight is the EBIT and the EBIT margin. I mean, we lowered the revenue significantly driven by the economic mainly in China, but we still deliver EBIT margin of 18, 16.7%, what I would consider as a strong result. When we then move on to the bridge, that's also a new slide that we now share with you. And here we compare the EBIT from Q2.25 to the EBIT Q2.26 to give you a better flavor what is the driver of the result. And you see clearly on the negative side is the impact from the revenue with 9.3 million. On the margin, I could say that minus 0.4 is almost flat, so we adjust our cost of goods sold to the new volumes that we have in Q2 2026. And then you see the savings we realized, totaling 7.6 million, a little bit in R&D, but mainly in selling, and what is even more important in admin expense, that it could reduce by 7.4%. in an inflationary environment. The adjustments also were a little different than in prior year, and that brings us to the 34.1 million in Q2 2026. We also prepared for you a similar bridge for the cash flow. In the cash flow, we compare the cash conversion, and you see we start with the EBIT, and then we add the depreciation and amortization so that we are at the level of the EBITDA. Then you see the change in networking capital with the strongest negative impact. The change in networking capital is mainly explained from the higher accounts receivable, from the good revenues we had in March 2026. To a lower extent, it's also driven by the fact that in prior year, We reduced inventory in the second quarter and notably this reduction, we obviously cannot repeat year over year and year, so in comparison then to prior year, this has also a slightly negative impact, as well as tax and others. That brings us to the operating cash flow of the $15.7 million. If you then make the bridge to the adjusted free cash flow, we invested $15.4 million in our facilities and also in new production equipment, significantly less than last year to adjust also and to preserve the cash, and then you see with the adjustment, it gives us a free cash flow of 4.1 million in the quarter, which is clearly below prior quarter standalone. But as I showed at the beginning, if you look at the first half year, we were even slightly above. With that, I would also show you how the net leverage ratio developed. and it went slightly up because the debt increased slightly as compared to 2025. However, we continue our deleveraging, our reduction of net financial debt over the years, and we will also continue that path in the second half of 2026. And we also initiated actions and plans in order to particularly work on the inventory level in order to bring that further down. The last slide is then from my side on the networking capital. Here you see the increase on trade accounts receivable. You see it also on the right-hand bottom side. The major increase, the 27.7%, comes from accounts receivable by the strong month March 2026. That's what we prepared for you in respect of a deep dive into the numbers. And I would hand back to Michael for the remaining presentation.