Sfc Energy Ag

Ladies and gentlemen, welcome to the SFC Energy publication of the quarterly report Q3 2025 conference call. I am Valentina, the Coral School operator. I would like to remind you that all participants will be in listen-only 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 1 on your telephone. For operator assistance, please press star and 0. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Dr. Peter Podesa, CEO. Please go ahead.

Thank you very much, Valentina, for the introduction. Good morning, ladies and gentlemen, and thank you for joining us in this call, presenting our Q3 and nine-month figures, as well as an overview of the business right now. Together with Daniel, we will lead you through all the key figures, but also key facts relevant to the nine-month period right now, but also naturally onto the outlook. And thereafter, we will be happy to answer all your questions. No question. We are looking back to a soft quarter. We're looking back also to a challenging period here in the business. We have to say, as also anticipated, as this was one of the key reasons why we saw ourselves obliged, to bring down the guidance back in Q3 at the end of July. But Nathalie, starting with this point, I think we want to give you, let's say, a solid and concrete analysis on this. If we look at the development here in the first nine months, we see a slower growth than originally planned in core parts of the business. And if we look into the main reasons of deviations, I think we have to start off with the biggest impact on the defense business in India. We saw a postponement of the follow-on programs here for our Emily and Jenny deployment, Emily and Jenny fuel cell deployment. to the Indian Army based on a decision that was basically a repurposing of funds during this current fiscal year. We have spent quite some time in various meetings on site in India, and I think within the last three months, we see a, I think, We see solid signs and we see a basis also for a rebound within, let's say, the next fiscal year here for the business in India. Maybe not back to immediately the levels of the 2024 business, but definitely higher levels than we see it in 2025. Two additional elements here, we have signed service and repair contracts, comprehensive maintenance contracts now for all the deployments with the Indian Army, which going forward as of Q4, and we have signed them last Friday. So going forward, this is basically also covering more or less local costs and also yield a proper capacity loading here for our operation. In India, we have also started last weekend local methanol filling here, as we do it in other parts of the world, North America and Asia as well. So we are also able now to provide local methanol, address also cost concerns from customers there, And also, see this as a basis also for the rebound. So India, the first element here of deviation this year, definitely, I'd say volume-wise, the biggest impact. if we look at our organic growth we also see a growing we still see a growing business in the us overall in the first nine months we see about 28 growth but we have to say especially With new customers, we were expecting, also based on historical growth rates, a significantly higher growth. The overall economic uncertainties have an impact on decision-making of our customers there, and therefore, we have missed out on the original plan to see growth above 40%. As said, 28% organic in the first nine months, And a corridor that we also expect until the end of the year is per se a solid growth number, but definitely not what we had planned for and what we expected. The third element, and Daniel will dive into this. Yeah, we've seen three functional currencies, I'd say, devaluating significantly against the Euro, US dollar, Canadian dollar, as well as the Indian rupee with an impact on sales and earnings. Getting into this in a bit. If we look now into, let's say, the reaction on these developments, I think we are seeing first fruits out of, let's say, cost alignment and cost measures that we have implemented right immediately in third quarter. We are seeing, let's say, a normalized fix, especially on IT and ERP spending, and I think also functional costs you will hear from Daniel, is I think an alignment on what we implemented. As also mentioned before, we are not talking about here now a significant headcount reduction at all. I think we are in a selective hiring mode here in those areas where we see growth, and we are reallocating also resources to those areas where we see growth, and we are taking capacity out in those areas where we don't see growth. If we now look into the third quarter, we are seeing a significant increase, especially on the order intake side, which also is the basis for us expecting a strong fourth quarter. We are overall seeing an increase to a book-to-bill ratio of 1.2 compared to about 0.76 in the first half of the year, and combined with, let's say, a product mix also impacted and positively impacted by a higher defense sales ratio in the fourth quarter, we see a positive impact also in the fourth quarter. If we now look also into, let's say, the next steps of implementing our strategy, I think the acquisition of a 15% stake in OneBerry Technologies in Singapore is a key element On the one hand, for the regional expansion of the business, we are seeing Singapore as the regional hub for the expansion in Southeast Asia. The closing process is in a final phase, and besides the regional expansion, I think we have... a unique opportunity here to learn and to step into a business model that is highly attractive and profitable where OneBerry is operating under a security as a service business model for their AI-based unmanned security solutions from border protection to drone defense applications and critical infrastructure protection. Overall, we have an option also to take majority ownership, and we are working actively on this as also a platform for further growth in Asia as of 2026. Furthermore, important to inform you about the U.S. operation. We are on track for the ability to do the local production, to ramp up the local production in our facility in Salt Lake City. Strengthening our local for local program here at the end helps us to reduce exposure to import tariffs, but over time naturally also makes us less vulnerable and depending on exchange rates and currency risks by establishing a local supply chain. Our team from the US right now is here in Europe for training. And therefore, we will be ready to have first pilot series produced still this quarter and ready for production early 2026. So overall, looking at the sales performance, we see a decline of 2.4% as said. not happy with this performance, the reasons for the deviation, the reasons for the decline, the main reasons mentioned here. If we look into, let's say, the order intake, I mentioned this, Seeing $34.6 million in the third quarter, we see a significant increase to the previous quarters. So the book-to-bill ratio now is up at 1.2% in this quarter, and this also actually gives us a solid basis here now for the final quarter. for the final weeks of the year. If we look at the overall backlog here being around 79 million, that is definitely significantly lower than at the beginning of the year, with 104 million reflecting the week order intake we had, especially in the first six months of the year. Yeah, I would like to also draw your attention to the fact that we naturally have a part of the business being highly transactional, which means it's kind of a rolling order book that is turned around within the quarter. And we are looking here at a ratio between, let's say, slightly below 40%, up to 50% of the revenue also turned around within a quarter. So we are looking at, let's say, This year, 14 to 15 million turnaround in the quarter. So, having this in mind also, you put in perspective that order backlog. If we look at the segments, The big impact here on the revenue and the significant impact here was mainly on the clean energy segment. The bigger segment, clean energy, still is accounting for about 69.7 percent, so almost stable. to the year before, but still here we see a drop in revenue of about, I'd say, 2.5%. I mentioned that the U.S. and the Indian defense business being the biggest impacting factors. Looking at the end markets there, we still have to see that the Industrial part of the fuel cell business is growing above 10%, 10.8%. And the security part in this, that is basically CCTV application, civil security business, is running above 15%. So there is an intact growth curve, I think, visible. Looking at the clean power management, around 30% of the business A decline of 2% strictly leading back to a single project missed in the Canadian oil and gas business of, I'd say, 2.8 million business here for power products. with one customer in Canada that was basically in our forecast but lost to competition. Looking at the clean energy business in Canada, we see also this part on a solid growth curve. With this, I will hand over to Daniel leading you through the financial results here of Q3 as well as the first nine months.

Good morning. Thank you for dialing in. Let me go into the margins a little bit as well as the cost basis. I think as a summary, what we could say is that those negative impacts that we have seen in the first half year have continued. To some extent, they have lowered, but there was still a negative impact. I believe from the cost base, if you've seen, we're running rather stable in the underlying because costs are rather optimized. But let me go into that. and highlight certain developments. So when it comes to the overall gross margin in the first nine months, we've seen the negative effects that we also have seen in the first half year, especially with regards to the segment clean energy, which is the less favorable product mix with the lower share of the defense revenue. We mentioned that before. That really played an essential role in the unfavorable gross margin development that we've seen since the beginning of the year. What we also have seen now is that the cost and duty that have been introduced slowly negatively impact our cross portion. Like I said, it will be unlikely that we'll be able to avoid the entire customs impact. So it is not that we will see a huge impact, obviously a slight impact from those custom duties. And then what we also see in the segment clean energy is the less favorable exchange rates with regards to the U.S. dollar and the CAND dollar. So if you compare the average exchange rates of those two major currencies, the U.S. dollar in average depreciated by 1%, the CAND dollar in average depreciated by 4%, which has an impact on the philosophy. So the overall gross margin is 40% in the first nine months, which is slightly below what we've seen in the nine months of 2024, while we have had a gross margin of 41.7%. And it's also moderately below the level of the previous four-year margin, which was 41%. Nevertheless, we consider the group's cost margin to be on a level with which we're not entirely satisfied. That's for a good reason. At the beginning of the year, we have higher goals and higher targets. We may not have anticipated entirely economic turmoil ahead of us at the beginning of the year. We may not have seen entirely the development of the exchange rate. but also the development in India, all of it has an impact on the gross margin, especially with regards to the segment clear energy. If you see heterogeneous development in the gross margin, you've seen that. We have a gross margin expansion in the segment clean power management. What we see is the gross margin going up to 29.7% from 26.9%. So that is something that we are happy and content with. The main reason for that increase is basically that in both main product lines in that segment, so the power management solution, We were able to implement a higher pricing, also because I mentioned that in the first call already, also due to our own products that we've been operating. But we've also been able to implement higher prices in the drive motor control products. So if we then look at the EBITDA margin and the key impact on those operating expenses, R&D and G&A, I think there's, again, those three major topics that we've seen in the first half year, which is the extraordinary cost for exchange rate losses, that is the IT spending, for the implementation of SAP as well as making our ITs overall landscape more robust. We've seen those costs or those expenses having come down in the first quarter, but there was still an extraordinary expense in there. And what we also see in the third quarter is a lower rate of capitalization of R&D, which is something we've had for six months, and which is also something that will unlikely change because that is pure accounting, and that has also impacted EBITDA negatively compared to the first nine months in the last year. So if we add up those three facts and look at the last year and make it light for light, comparison. Those three effects together have impacted EBITDA negatively with approximately 5.5 million euros, which really shows that our cost basis is solid. The earning power is still there. We take those three effects away. We know that they're there. But you'll see that we didn't do that bad. Let me take you to the exchange rate losses. First of all, so you've seen we had an income from exchange rate gains of 1.8 million euros in the first nine months. which were entirely offset by the exchange rate losses of 0.1 billion in the first nine months. So that comes to net impact of 3.3 million euros, which negatively impacted the EBITDA or 3.2% of revenues. So out of these exchange rate losses that we've seen, 4.4 million, or 85%, is unrealized losses, and out of which approximately 4 million are related to intercompany positions, i.e. shareholder loans, and intercompany receivables. I mentioned that already in the first half year, so that's why you would not see that in the cash flow statement. Yes, we'll book it, but it's unrealized losses for the exchange rate. But still, it does impact our EBITDA negatively with 3.2% rather highly. The next position is the extraordinary cost for IT in the G&A expenses. These are costs relating to the SAP implementation. So in the first nine months, the total cost has been 1.9 million euros. The spending has come down notably in the third quarter. But it still over the first nine months has placed into 1.8% negative impact of the revenues on the EBITDA. We also had costs for improving our IT system that amounted to approximately 1.4 million euros. in the first nine months, which again would then mean a 1.4% negative impact on the EBITDA. Together, if you see the amount that we really spend on IT, and yes, it's necessary, we need to make our system more robust. make a step forward in higher efficiency and automation in our system. So this is not something that we're just doing for doing it. It really means making the major steps in getting our system safer, more secure, more robust, increase efficiency, also increase effectiveness of our operations. What is the huge investment that we've seen? We'll see further investment in the force port. We also will see some of those investments still in the next year until we got the system entirely implemented. And then the third impact is the lower rate of capitalized R&D expenses. So the total R&D spending amounted to 8.7 million euros in the first nine months of 2035, compared to 7.5 million in the previous year's nine months. So you see a decent hike in our R&D spending. But what you will also see is that in the previous years, approximately 23% of these costs were capitalized. In the current year, we are capitalizing 13% of the cost. So on a line-to-line basis, this will also translate into a negative impact on the EBITDA on 600,000 euros. To go into this really briefly, so capitalizing on the expenses is not a choice or not an option, which we do. It is, as I mentioned at the beginning of the call, it is an accounting principle. So third projects can be capitalized, third projects cannot be capitalized. and that's a little bit depending on your R&D focus, but also what you have in the pipeline. Remember, any capitalization going forward means also depreciation, additional costs. So it's not that you're optimizing your costs, you're just pushing those expenses into the future. In any event, it is what it is, but you'll see that our R&D spending, even though it has increased, it has not the huge jump that you see in the P&L And the earning power, that's why I said at the beginning, is still at an even level. So what does it mean for the adjusted EBITDA? For the adjusted EBITDA, it means that we reached 10.8 million euros, which of course is significantly, 56% below what we've seen in the previous year's nine months. It is, of course, a factor of revenue growth, of gross margin growth. and those negative effects in the other operating costs that I just mentioned. Depreciation amortization, you don't see a big change in there. Depreciation 5.8 million euros versus 4.5 million euros, 40% of the depreciation is IFRS 16 related, so you will not see a huge change in that position going forward either. That brings us to the adjusted EBIT, which came up to $5 million. That represents an adjusted EBIT margin of 4.9%. That's significantly lower from what we've seen in the first nine years in 2024. Again, we're not entirely happy with that, as you can imagine. Let me finalize with a cash flow and our cash position. cash freely available at the end of the first nine months were 40.8 million euros, compared to 60.5 million euros which we had at the end of 2024. So it's 20 million euros lower from what we have seen. The financial debt on the other side also decreased by approximately 1 million to 3.1 million euros, which gives us a net debt, sorry, net cash position of 37.6 million euros, pretty much 20 million below what we've seen at the year end. Our equity decreased by 1.5 million euros. That is due to the negative earning, but remember the negative earning also does not require The operating cash flow before the change in net working capital was 10.5 million euros. That compares to 18 million euros in the first nine months of the previous years. So what we see is it is significantly lower but it's still at a good level with 10.5 million euros. So it is 40% and what we see now is the networking capital development. The net working capital increased by 21.5 million euros. That compares to 2.5 million euros in the last nine months. So the working capital ratio to last month net sales went up to 40% as of September compared to 25% what we see at the year end. So we're really trying hard to manage that working capital. It is really the inventory that we need to look at. It's really looking at the accounts receivable. The largest impact is really the increase in the inventory, which has gone up by 10.3 million euros. That has changed the date of inventory to 237 compared to 131. at the end of the year, that is an extreme high value. We are fully aware of that. That is something that we need to manage more actively and bring it out. We are fully aware of that. We have a lot of materials sitting in there. It is mostly fuel cell components and materials. which we intend to bring down in the next six months. So it's nothing that is going to go bad or will become obsolete. It is really material that has been acquired and has been brought down. You also see a large impact on the increase of the accounts receivables. They increased by 8.1 million euros. compared to year end. That translates into a 12-month daily base of sales outstanding of 114 compared to 90, which we had at the end of the last year. So we see an increase in the sales outstanding. We don't see any bad receivables out there, but this is something also that we are managing actively and intend to bring that number down again towards the 90 days. Then what you also see is that the accounts payables have gone down. They have gone down to 2.8 million. That brings the payables down outstanding down to 52 days from 66 days. So then with the tax payments of 1.4 million, you'll see that the operating cash flow after networking capital tax is becoming very negative. With very negative, it means minus 12.4 million, all driven by the networking capital developments. Cash flow from investor activity is much, much lower from what we've seen in the last year. We're looking at 2.6 million compared to 6.4 million in the last year. So all those large investments that we have made last year are done and completed. So 2.6 million is at a decent level. It includes, of course, the capitalized RMD. Then you see the cash flow from financing activities of 2.8 million euros. A large portion of that is related to leases. And if you add those numbers up, you'll see a change in the cash position. of $70.9 billion, and then we'll still have to add the exchange rate impact on our cash in foreign currency. So overall, cash has reduced. Like I said, in summary, mostly with the nitrogen capital. We've seen the March decline. Still, I think we are at a good level, but not a level which we are happy or satisfied with and we are fully aware that we need to keep on working on implementing measures and structures to optimize especially our tax consumption. With that, I'll return it to Peter.

Thank you very much, Daniel. Summarizing where we are, I think on the basis of the performance today, also we talked about the order backlog and also, I'd say, still some, I'd say, challenging macro conditions here. We've done, I think, a concise assessment here on the urine forecast and we are expecting the revenue at the lower end of the corridor that we have out there as a revised guidance. We see EBITDA adjusted as well as EBIT adjusted in the lower half of the corridor that is out there for EBITDA. The corridor is 13 to 19 million, and for the EBIT respectively, it is the corridor of 5 to 11 million. As said, we are expecting to end up in the lower half for both ratios. So looking at this, I think after years of continuous and significant growth and increasing profitability, while you see ourselves here clearly and honestly disappointed with those results here after nine months, we also have to be self-critical here in terms of some maybe too aggressive and optimistic plannings in some areas, especially of the top line against the macroeconomic also environment that we are operating under. But at the same time, I think we have done a thorough analysis of the situation. We also see the recent of deviations and we have implemented clear and targeted measures. We've talked about the cost part. I think on the inventory part, yeah, the defense part of the business has downsides with, let's say, longer procurement cycles. But the good thing is those products are not turning anywhere bad, as Daniel mentioned. So this is naturally the basis here for the improvement also on the cash flow side to get, let's say, this out of the door as fast as possible. And that's why you see ourselves here, and I'd say this clearly, I'd say, a realistic move, but with all the dedication to get this back to a growth curve. And again, I think for all of us here, we have an organic growth in the business, be it, let's say, our civilian security business, be it the industrial business. We are talking here about double-digit growth here between 11% and 15%, and also our U.S. business, significantly above 20%. The expectation there is to continue on this growth path to return to a growth path in India, as I said, service contracts in place, local methanol filling, all basis also for further, I'd say, satisfying the customer's needs there. And we've been... intensively working on OEM programs on the defense part of the business in Germany, as well as in NATO states and naturally we are expecting an impact of this in the year to come. We are doing again our regional expansion with the investment in Singapore. We expect a growth impact out of this. We are seeing our products performing properly well also for new applications like drone charging and I also mentioned the drone defense activity here in Singapore. All over, yeah, the situation, especially the last two quarters, are very, let's say, disappointing. We've taken the measures now, and we are looking at a strong year-end and, again, a return to growth and improved profitability here based on all the measures that we mentioned together. We close our presentation and would like to open the floor for questions. Thank you very much.

We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on the touch-tone 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 2. Participants are requested to use only handouts while asking a question. Anyone who has a question may press star and one at this time. The first question comes from Carsten from Blumenthal from First Berlin Equity Research. Please go ahead.

Good morning, Peter. Good morning, Daniel. My first question is regarding OneBerry. You have now a 15% stake and perhaps you could shed some light on your future activities, you have a 50% option. When and how will you try to get this option?

Good morning, Carson. So we have that option to be exercised in the short term. Short term means anything within this year, potentially beginning of next year. That option, apparently, as we said, is to increase our holding in one very true majority for a fixed valuation. This is something that we intend to do, and then we put this option in there in order to exercise it. Of course, we'll have to review certain things with the business. We'll have to complete a bit more on the due diligence side everything that is set up in such a process. And then we will likely exercise that option.

If I can add here, Kirsten, just to shed a little more light on, let's say, the business model. At the end, they are engaged in long-term, multi-year contracts with the Singaporean government. The pipeline they have and the backlog they have is more than 90% government business there, and this is something naturally we want to continue to drive, but then also replicate this model to other parts of the region, and if possible, so in other parts of the world. A rental business, so security, unmanned security automated based on, let's say, significant also, let's say, AI content to, let's say, recognition parameters here. At the end, with a higher profitability than we see in our own business, and well, having been partners for quite some years, I think we also have a good trust base there. to roll this out to other areas in the region as well as in other parts of the world.

So there's a high likelihood that you will be able to consolidate OneBerry next year when you exercise the option could you shed some light on on sales and ebit uh one berry reached for example last year in 2024 that we can have an idea uh what will be the impact on your p l next year i think we would at this point also of the after negotiations there i think it's good to have a ball park figure here in terms of revenue we're looking at about 20 million of

20 million euros revenue and has that profitability above our own EBIT and EBITDA level.

Let's assume that we exercise that option. Let's assume that we'll get the control as we find for consolidation. then apparently, unless assumed that we would close that transaction, then yes, we would consolidate one from next year on.

All right.

The numbers we are saying are not in IFRS, to be also to make that sure, right? We're still talking about Singapore gaps, just as a caveat here.

All right, that is very helpful. Next question, you mentioned the postponement in India, and you said that you expect a rebound in 2026, but not as high as in 2024. Could you roughly tell us how high revenue was in India in 2024?

Well, the defense revenue in India was around 12 million euros. And being, let's say, now, let's say, 60% below last year's revenue asset is one of the major impacting factors this year. The fiscal year there ends at the 31st of March. And that's why we are, as we speak now, in the assessment of I think that the right level of or the right budgeting level together with our partner on site and will naturally be based on the experience a cautious assessment for next year, but still we expect a rebound and growth based on what we have learned over the last three months out there.

All right, thanks for that. One follow-up question regarding the U.S. You mentioned that you are on track for local production in your facility in Salt Lake City. Could you shed some light on the next milestones you want to reach? So when will production start? How quick do you want to scale it up?

Wow.

Pilot, we have our team of the U.S. right now in Europe for training for, let's say, still the next weeks here. And then we do the first pilot trail still in December so that everything is geared up for 2026. series production. The plan here is to have especially, let's say, our high runners, the EFOI 2800, all produced locally next year. And that's why we are looking, let's say, at a shift here from production from Germany as well as Romania to the U.S., whereas the core element as the stacks still will be mounted here in Brontal. So it's pretty the same exercise we did here with India and we did with Romania in the last, I'd say, 12 respectively, 24 months. So we are not reinventing the wheel here. So it's basically copying the process.

Yeah, that was certainly facilitated. Could you roughly give us an idea about the value of this shift in terms of revenue?

For 2026? You mean end customer revenue or simply the transacted systems?

No, how much revenue will you generate with the U.S., what you plan to generate with the U.S. production next year, roughly, very roughly. Okay.

Well, this will be somewhere above 10 million euros because still part of the product will be shipped from here as we are not transferring the whole product line over there. We also do refurb of old e-foils here in the market where we will not shift the entire production of this. And therefore, in the first, I would say, two years, we will still see a mix dominated by also the old version here that is in the market. And then step by step, I think we will phase this one out. And then the entire production for the U.S. consumption of EFoS is planned to be there. And in addition, naturally, we will also have to see how the defense part of the business evolves. I think that we were particularly pleased to be invited by the US Army on the occasion of the AUSA, this defense show here a couple of weeks ago, to again re-engage into a fuel cell development program. And they were particularly happy about the fact that we already had prepared local manufacturing capacity there, which I think is also a big argument for us being then a partner for them doing the local production also on defense over time on site in the country.

All right. That sounds pretty interesting. Thank you very much for taking my questions.

Thank you.

The next question comes from Michael Kuhn from Deutsche Bank. Please go ahead.

Good morning. Thanks for taking my questions. Three, essentially. First of all, you mentioned OEM programs and the defense space into 2026. Is there any possibility to roughly quantify that scope already, or would that be too early? Second question would be on the contract loss you mentioned in North America, I think, where you lost versus a competitor was that a competitor or was a customer there going for let's say different technical solution and last question would be on working capital I think you talked about a six month time frame to reduce that so just to confirm that and maybe get a confirmation on let's say that working capital won't dramatically change over the course of the fourth quarter

Good morning, Michael. First, OEM programs in defense. I think with, let's say, all the experience we just are undergoing, we are a little hesitant now to come out, let's say, with numbers on those programs that are still work in progress. What we see today is that I'd say with a very favorable financing environment based on all the political decisions, we also see that still the capacity on the administrative part of the purchasing Our procurement price, but also the capacity in, let's say, some of the OEMs manufacturing capacity is a limiting factor. And we, I'd say, therefore expect all this to happen, I'd say, in 2026. Part of it, I would say, on the earlier part of 2026, but i'd say that the visibility at this point in time is not at the point where i would feel comfortable to to let's say put numbers out um we are looking at programs in germany but we are also looking as you as you recall we have let's say this this also partnership here um with uh polaris on on where where let's say our products are under a So we know that this program, that TENDA has been awarded here to Polaris, but we have not been, let's say, informed about individual numbers here out of the different countries participating. I think the same thing here now with our German program. We are working on it as soon as we have more clarity, even if this is still before Christmas, we would be, let's say, able to share this. On the contract loss in Canada, we are talking here, we are not talking about the fuel cell business. So it is on the power management side where we are integrating VSDs, where we are integrating equipment also from ABB. And this was a loss based on, let's say, tough pricing here with an oil and gas OEM. At the same time, I think we also see, let's say, that's a competitive market, but it's the single reason for, I'd say, seeing a deviation from the original plan here. Otherwise, in the, I'd say, Canadian oil and gas business, also especially on the E4 side, we are still on our growth plan. And the third question I would hand over to Daniel for answer.

Good morning, Michael. So with regards to the working capital, yeah, there are two positions that we will be working on. As you already said, the first one will be inventory, bringing inventory down. That, of course, is a function, apparently, of selling manufacturing those fuel cells because the largest part of the inventory in Greece, as I mentioned, is in the German entity and happening in Germany. So that is really our intent to get back to a normalized level, which would be looking at what we have at the event. One impact that One factor that is negatively impacting our inventory is the platinum pricing. Remember that a large part of our membrane is platinum. The price has increased significantly in the last nine months to an all-time high. not the all-time high, but at least I think the highest thing I've seen for the couple of years. The amount of platinum that we have in our inventory is over 1 million euros. So, of course, and we tend to buy platinum when it's at a low price or relatively low price, and then we intend to buy an amount of platinum that covers us for at least That is really making sure that we can lock in the cost. That will have an impact on our inventory. Like I said, right now we have only one million. On the house receivable, yes, we intend to bring them down significantly. We expect collections. We don't see any receivable going far or going sour. I don't know why not there. So that is something we expect to improve towards the end. I know you made the math with regards to revenues, so you know what we expect in terms of revenue in the fourth quarter. Apparently, you know, the higher revenues at the end of the quarter, the higher the accounts receivable. But everything that we have to look at now, we intend to turn around quickly. Okay. Thank you.

Thank you. The next question comes from Malte Schaunen from Barbour Research. Please go ahead.

Yes, good morning. This one is on the customer behavior. I mean, during the second quarter call, one of the reasons for the weak slow order intake in the first half of the year, you mentioned that especially new customers kind of hesitated to adopt new technologies, place orders, et cetera. Do you actually have in the recent weeks with just that a change in the customer behavior or the ball is more of the same, U.S. territory discussions, et cetera, and still lead to existing uncertainties?

Good morning, Martin. I think at the end, we see, let's say, with new customers still, I'd say, hesitation out there. And I mentioned before also that the U.S. pattern of the business still, yeah, seeing a... I'd say a growth of significantly above 20% organically is a solid growth, but it's not at what we have seen here, I'd say, historically over the last three years. And that's why I think with the environment, let's say, not being more stable and continuing as it is in the macro part for the new customer business, we have also factored this into our year-end planning. Existing customers, I think, being We published a significant order a couple of weeks ago with one of our largest civilian fuel cell customers here in Europe. We see a consistent repeat business. As mentioned before, the overall CCTV part, civilian security part of the business, is also above 15% growth. But that... The change or the decision-making to, let's say, embark on a new technology here and complementing the existing whatever battery and solar devices with fuel cells definitely is delayed with, let's say, the environment as it is today. So, therefore, I think we can differentiate this pretty clearly and see this also in, let's say, the customer behavior.

Okay. And then maybe kind of an early view next year or your level of confidence that order levels will – But what do you expect kind of subdued all the levels going into early next year and then hope for recovery later next year? What's your visibility or your level of confidence then going into 2026? Where do you see maybe increasing customer activity and where are uncertainties still prevailing kind of reducing the visibility? I mean, you have alluded to, in some areas, unsustainable situation, low visibility, but then on the other hand, you might have gained some confidence in the meantime that, for instance, in the end, India will return as a major customer in defense. So maybe you can shed some light on what are your thoughts on maybe how 2026 can pivot.

If you can imagine, now we are doing a constant analysis on this and then let's say also assess the original part or the different regions of the business and also the different end markets. Looking at where we are right now, I think We see, I'd say, this repeat part of the business on a constant, I'd say, growth curve that we also would, I'd say, assume as a basis. And we are also doing this in our planning right now because it's budgeting time. We are finalizing our planning rounds right now. So we are expecting, let's say, an organic growth out of this. seeing, let's say, signs of, again, improvement, again, in India, where we had this deviation this year. With this coming back to, let's say, a modest growth part, I think we are in a corridor here of near organic price that is somewhere around, let's say, low double-digit growth. And we also do, I'd say, this analysis here on our, I'd say, what we call this rolling part of the order book that is intra-quarter business transactional, where we have a pretty good view on it. As I said, this is between, let's say, 40 to 50% here that comes in and out within a quarter. So adding this all up, I think, and then also looking at what we have, let's say, done on the cost side. We're also looking at our product pricing here based on raw material, platinum being a big factor here. We will have to adjust this and we are preparing for this. And therefore, I think a a growth corridor just organically, as mentioned here, of a good 10% is, I think, a solid ratio across everything. This does not include, let's say, a big impact also of when we look at, let's say, a larger defense program. And at the same time, we have just discussed with Kirsten also the impact here of the potential majority acquisition of the Singapore business here adding up to, let's say, the planning then in 2026. Also, with the caveat, we have not exercised this option yet, but naturally we have done this to go through this process and hopefully get to a positive end also here with our partner in Singapore.

Okay. Then on one, Barry, in the press release, I think you laid out the scenario for potential significant growth in the years ahead, so maybe you can shed some more light on where do you see growth. I think you mentioned 100 million potential revenue contributions, so maybe you can shed some more light on that number and where does the growth primarily come from and what should happen that this will materialize in maybe, I don't know what the time frame is, five years, five years plus. So what are your thoughts on that?

Yeah, OneBerry has been very focused and fully entrenched in the Singaporean security architecture also by, let's say, family of the owner of OneBerry. And also let's say looking where let's say such a family business then stays also in terms of let's say further investment into regional expansion, the planning of the the owner here, the family owner, was not to expand this and roll this out, let's say, into the region. With us being on board, this is a key element, really copying what we have what they have built up integrating also our products into those security services and roll this out. And actually it is logical. We have done some business development in Indonesia. We have done in Malaysia and Thailand and in the Philippines. And this is at the end, the overall business plan that we have already sketched out with them. But naturally, first of all, we need to take the next step and close the transaction and talk about, let's say, the option. And then it is initially a regional play, but we are also seeing large customers in our civilian security business looking for potential rental solutions. And we might also have to and be able to copy this part or this business model here in other regions. If we look at the potential in Asia, this is what we have developed together as a scenario with the owner family of OneBerry. that is also, at the end, a reflection of what we see in terms of demand here in Asia, which, at the end, again, is the most populous region. Time frame, yeah, as you said, we are talking definitely mid-term, and we are talking about a five-year scenario here. Okay. Thanks. Thank you.

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

Well, with this, we thank you all for your time and interest. As always, we are at your disposal also for bilateral discussions here with Daniel, myself, and also Susan. We are heading through some rough waters here. Stay with us. I think we have a solid plan ahead of us, and we have shown that we are able to, let's say, implement plans apart from naturally not neglecting the fact that we have seen two very tough quarters behind us. Thank you very much.

Ladies and gentlemen, the conference is now over. Thank you for choosing Coral School and thank you for participating in the conference. You may now disconnect your lines. Goodbye.