Sfc Energy Ag

Ladies and gentlemen, welcome to the SFC Energy Ag publication of the half-year report 2026 conference call. 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 N1 on your telephone. For operator assistance, please press star N0. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Dr. Peter Podesser, CEO. Please go ahead, sir.

Thank you very much, George, for the kind introduction and good morning, ladies and gentlemen. Thanks for taking the time and joining us here for our half year results, but also for naturally the discussion and presentation of our second quarter results here in 2026. We are obviously happy to present a good set of numbers. We are looking back at the best six months of our company since inception. and we are looking at an exceptionally strong Q2 here in terms of revenue about 20% above our previous record quarter but also naturally translating into a significant improvement and strong increase in profitability. Some of the highlights here, doubling EBITDA on an adjusted basis compared to last year and also more than tripling the EBIT by itself is a positive fact. We also looked at an increase of revenue by about 12%, where we have to see that the second quarter was here having the key impact. Apart from naturally looking back, I think looking ahead, a significant increase in order intake to more than 108 million euros compared to 43.6 last year. and also a solid backlog still now at the middle of the year are also the basis for us being able to narrow the guidance upward here within the previously increased ranges. Before going now into all the financial details, I think, Let me put the results here in perspective. Very clear, the market entry into the Ukraine has and will have also within the year a boosting effect. but overall this is following naturally the strategic positioning here of ourselves in structurally growing energy markets. It also shows a scalability of the business model as mentioned with an acceleration in profitability. If we look at the background here, especially on the defense and security part of the business, what we are witnessing is A different format of combat, a different format of warfare. Strongly unmanned and most of it electrically powered. So all going electric if we put it in more generic terms. And at the same time in a very dynamic, agile and mobile way of implementation. All these requirements, all these changes are a very good fit for our fuel cell based energy supply. We are able to easy and fast deploy and move. We have a long lasting and longer lasting than conventional sources energy source and I think The element that we are not generating or we are virtually not generating signature neither temperature nor noise is the changing element. This means low to no detectability and therefore increase a significant increase of safety of all the operators. So what we've witnessed here and I think the examples we are getting here especially also from Ukraine but also other parts of our business is we are moving from a nice to have to a must have. But beyond the fact that we are naturally happy with, let's say, a successful market entry here in the Ukraine and the deployment is happening as we speak, and I'll get back to the next steps here in Ukraine in terms of what does it now need to perpetuate this kind of entry success. Let us also look into some of the other markets. If we look into our industrial fuel cell business, reliable, resilient, long-lasting, and commercially viable off-grid and backup power for areas like civilian security, all our CCTV customers, critical infrastructure backup power, and also all our sensing and monitoring solutions here looking into the European part of the business and also what we are witnessing especially for example in Singapore we are looking at the range of growth of 10 to 20 some of it 25 growth solid momentum solid demand there oil and gas for both segments The clean energy with the fuel cell powered solutions and also the clean power management with our frequency drive business there. Canadian oil and gas business based naturally also on the raw material and commodity pricing having a solid performance. Yeah, we have to also see some impact and Daniel will relate back to this later with some negative currency effect but solid development there. Still, with all the good news, I think it's even more important to look at the areas where we feel we are not at target, not at plan. Not happy with the power management business for the time being compared to the plan here in Europe, although we have to say we had a very strong first half year last year and we are not quite at this level, but we're also seeing a softer demand from our largest customer, them facing some soft demand in their end markets. Factoring this in for the remaining part of the year, we are seeing already an uptick in in their forecast here. So we are not expecting an immediate change here, but we are factoring this into our year-end forecast here. The other area, if we look at the regional business here in the US, customer diversification is the most important strategic initiative there here, branching out from, I'd say, initial customer here in the CCTV sector. We are now seeing, let's say, half a dozen to 10 leading CCTV mobile security players being already repeat customers, also a first-timer here entering into Amazon MSU division here with initial systems, I think is an inspiring fact. but at the same time we have to see volume-wise we are lagging behind here. Means there is room to improve and we will focus here in the next six to 12 months to catch up and create the right momentum. Looking at India, After spending a couple of days together with our Indian partners here in July, I think we are seeing the right signs of call it recovery. We are seeing a reinitiation of procurement here in our existing programs. We are seeing new programs coming up. The expectation here is higher order activity now in Q3, Q4 and especially also in Q1 of 27. All factored in into our overall forecast. Coming back to Ukraine. As said before, the sequence is clear. We are right now in the phase of deploy. We are in the phase of crane. and we are building up training support and backup activities and structures locally. We are talking about the training elements here, including naturally standard activities like documentation, videos, all in local language, but we're also talking about different local structures, redundant structures. We are setting up separate locations here and well eventually in a case of emergency they also have to be mobile to a certain extent. This is happening as we speak and I think we are progressing well now in Q3 and the next step is a localization step looking at local supply chain as other companies do it there too and expanding our activities of sales also to other parts of the armed forces our team was there again now in summertime and we are planning to get back end of the month so This is where we see the need here in terms of further allocation of resources from our side in order to be able to continue with repeat business also in this market. Strategically, I think we have taken the time also to invest in our growth platform. We were on site in Singapore with our partner OneBerry. I think the investment is in good shape. We are seeing good activities. We are expecting 2026 on track. And there are some larger opportunities in the pipeline here on a local basis for AI-based unmanned security systems. The collaboration with General Dynamics, We published this together here at Eurosatory, the first platform where our Emily fuel cell is built in is the so-called Pandua. We went to see the general dynamics team last week in Vienna to talk about, let's say, marketing initiatives and the sales strategy here together with them. Last but not least, we are also delivering on our M&A. strategy. Just a couple of weeks ago, on 2nd of July, we announced the acquisition of assets of Sigmund, company active specialist in reform methanol fuel cell technology, a good complementary fit to us. So between one and five kilowatt solutions being positioned between our methanol direct methanol fuel cells and our hydrogen fuel cell solutions at the end giving us good access to to users who cannot who are not allowed or who are not willing to use hydrogen so higher power methanol systems Finally also a consolidation activity here with an upcoming competitor and besides the assets we are particularly happy to have a team of experts here who joined us now in July and integration is on its way. Target here is to get cost neutral with first projects being executed in 2027. The product needs some touch up and some finalization. I think that our experience from an industrial perspective is really helpful. If we look at the order part of the business, as mentioned before, we had an active first half of the year with about 108 0.6 million order intake. Well, compared to last year, a factor of 2.5x. But even if we net out the Ukrainian large project here, we would look at the factor of 1.5. So also here one can see that we have the business growing also outside the Ukrainian project. Obviously clean energy from a segment perspective is the growing element in the first six months as mentioned with 22.7% of Both with a significant impact also from shipments to Ukraine, about 22 million. So roughly half of the project was shipped by 30th of June. And the shortfall on the power management, I mentioned this already, like two sides of this business, very solid and growing with the oil and gas market in Canada and the shortfall here in Europe. But also here, I think factoring into the outlook and seeing also an improvement of the forecast of our key customer here, we see, let's say, the turning point happening as we speak. For the clean power management, there is also one additional element that is, I think, worthwhile to mention. We have our first OEM defense project in-house with a European OEM for high energy laser systems also for the defense use. Usually this is for drone defense, either platform-based or portable. So also there we expect some impact Maybe not in the short run here in the next couple of weeks, but then also over the next quarters. With this, I would like to hand over to Daniel to look into the earnings.

Thank you, Peter. Good morning, everybody. Thank you for joining our call. Let me run you quickly through our earnings, through the margins, a bit on the cash flow and give you some highlights and background on some cost positions. I think Peter already mentioned it, the growth momentum in the second quarter as well as the first half year were exceptionally strong with regard to revenue but also with regards to earnings and marchings. And these are reflecting on the one hand side the strong growth and the performance especially of the segment clean energy as well as the attractive product mix that we had in the first half year and the second quarter with a high share of defense revenue. coming from the Ukraine order. The results for our key KPIs across the boards were very strong, exceptionally strong, I would even say. Revenue growth, Peter mentioned it, 12% half year and a half year. We had a gross margin on the group level of 47.1%, which corresponds to a margin expansion of 4.6 percentage points compared to the first half year 2025. The EBITDA adjusted margins increased to 22%, which is a 10.8 percentage point margin expansion compared to the same period last year. We had an EBIT adjusted margin of 17%, which is also a 10.7% percentage point expansion compared to the same period of last year. We had a cash flow operating activities, which were 4.6 million euros. And we had a very strong order backlog of 105 million euros. Looking at the gross margin on growth level, I mentioned before, very strong with 47.1%. This is also significantly above what we've seen for the full year last year. We consider this margin to be on a reasonably strong level. with apparently, and Peter already touched on that, upside potential in the segment clean power management, where especially the notable drop in revenues led to a higher unit cost due to relative higher production overhead per unit. So that really reflected in the gross margin per segment. The gross margin is a segment clean energy well above 50% with 52.6%. also well above what we've seen in the last year, whereas we had to realize a slight drop in the gross margin on the segment clean power management, which is going to 28.3%. That drop is really due to the lower revenue in the power management solutions, our Dutch slash Romanian business, and the Miller Revenue always leads or tends to lead to a lower dilution of the manufacturing overhead. If you look at the group operating expenses below the gross margin, we see that the functional operation expenses decrease slightly year-on-year by 1.2%. The biggest positive influence on the cost factors were in the G&A expenses and mostly due to lower spending on IT and the ERP implementation in the first half year. Remember in 2025, in the first half year, we really had a lot of spending on that one. We did streamline the cost where we made some advancement here. Of course, these costs will also occur in the second half of the year. We had some negative effects on our operating expenses in spite of the fact that they decreased slightly. One of them was an impairment of capitalized R&D expenses. The impairment was 500,000 euros. It is shown in the R&D expenses that why you see R&D expenses being slightly higher than what we expected and also what we've seen previously. and subsequently also that impairment is shown in the depreciation. That's why you would also see a slightly higher depreciation in the second quarter. And the other negative effect were consultancy expenses of approximately 600,000 euros in context with clothing, the Ukraine deals. These are shown in sales and marketing expenses, a lot of advisory, a lot of legal expenses. big contract, a lot of consultancy expenses in context with closing that contract in the Ukraine. If we look at the capitalization rate of our R&D expenses, so 13% of our R&D spent were capitalized. That is still on the lower level compared to 15% what we had in the last year, which already was on the lower level. But for the time being, we assume that this will not change. We won't have a higher rate of capitalized R&D expenses in this year. When we look at the exchange rate income and losses, and if you look at the net effect, so we had a balanced result. We had a net gain of 67,000 euros, so basically the result is zero. and that compares to 2.6 million of net losses last year. So there you see that this will also contribute to the margin expansion on EBIT and EBITDA level. Brings us to our adjusted EBITDA. I mentioned it, 22.4% is the margin, corresponds to 18.4 million euros. Solid, solid increase. The increase, in summary, one more time, It's the very good performance of the segment clean energy, driven by the product mix, by the revenue growth itself. The overall positive operating expense effect, operating leverage kicking in, especially in that segment, which also counteracts the lower margin of the segment clean power management, which went in the opposite direction. Depreciation, total depreciation is 4.4 million. Still the structure of the depreciation is the same as we've seen in the previous quarters. About 40% is IFRS 16, i.e. lease accounting related. Slightly higher than what we've seen in the last year simply because we are leasing or we have leased a new site in the Netherlands. which will bring these depreciation expenses slightly up. And on top, as I mentioned before, you see the impairment of an R&D project in those depreciation costs. That brings us to the EBIT, adjusted EBIT solid with 14 million and giving us a margin of 17%. CapEx, if we exclude the investment in OneBerry, which happened earlier this year, and the IPR-16 related CapEx expenses, we had 1.4 million in PPA in equipment and machinery, which is really a normal level, nothing extraordinary or special there. Cash flow, the operating cash flow before change in net working capital were 17.5 million euros, much stronger than what we've seen last year. If we look at the development of the working capital, the working capital ratio to last 12 months net sales increased to 42%. It's a little bit higher from what we've seen for the full last year, where we were at 37% with that ratio. And the largest impact on the net working capital had a strong increase in accounts receivables with a negative cash impact of 9.8 million euros. It has to do with the very strong revenues, especially towards the end of the quarter. Our days of sales outstanding increased to 139 days. We were looking at 122 in the last full year. That number will go down in the next quarters. As I said, it really has to do with the strong rollout of sales at the end of the first half year. We had a reasonable impact from an increase of inventory, about 300,000 euros. So by and large, inventory stayed at the same level. The inventory will decrease in the third quarter. Key reasons why the inventory stayed on the same level is that we purchased a lot of components in the second quarter. for delivering now the last part of the Ukraine order so really this is what has been driving raw material components and on the other hand we also purchased quite a bit of platinum in the second quarter looking in on the relative lower platinum prices that platinum will carry us towards the end of the year into the first quarter of 2027. So these are the key reasons why inventory has stayed more or less at the same level. Again, that will go down towards the end of this quarter and also towards the end of the year, and then we will see a release of cash. After tax payments and the change of inventory, we're looking at an operating cash flow of 4.6 million euros, much better from what we've seen in the last year. Cash flow from financing activities, most related for F-16 again to lease payments, was negative 1.9 million, slightly higher than what we've seen in the last year. and then the change in cash, we had minus 2.9 million euros driven largely by the networking capital development and also the capex, especially investment in OneBerry. So that brings us to our cash position. Cash freely available is 44 million euros. The financial debt has decreased slightly, never a big amount on our balance sheet as you know and have you seen. Our net debt, in this case net cash position, is 41.2 million euros at the end of the first half year. With a lot of payments coming in right now, we will see this position Thank you very much, Daniel.