Wacker Neuson Se Namen Ak

Good afternoon, everybody, and welcome to the nine-month earnings call of the Bakker Neusink Group. My name is Per Schlinkmann, Head of Investor Relations and Corporate Communications. Thank you for joining today on the occasion of the release of our 2025 nine-month results. As usual, we will first start with the operational and financial results of the nine-month 2025 and give additional insights on the recent developments. Following this, we are happy to answer your questions in the Q&A session. If you are able to follow today's call via the webcast, the presentation slides are also available for download at wacker-neusen-group.com slash investor-relations. Please note that the entire call, including the Q&A session, will be recorded and the replay will be made available on our corporate website by the end of the day. And now I would like to hand over to our executives, Karl Dragl and Christoph Burckhardt, who will lead you through this call.

Thank you, Pierre. This is Christoph Burckhardt, CFO of the Wacker Neuson Group. Welcome, everybody, to our earnings call, and thank you for joining.

Dear all, a warm welcome from my side, too, and thanks again for joining the conference call. I'm Karl Dragl, CEO of the Wacker Neuson Group. I would like to start the presentation with a brief overview of our key financials for the first nine months of 2025. Our operational recovery continued in quarter three of 2025. Despite a challenging macroeconomic environment, which had especially weighed on the first quarter of this year, we were able to increase both our revenue and EBIT margin in quarter three year over year. This positive development is among other things the result of efficiency measures that we initiated last year. But let's take a closer look. Our revenue for the first nine months of 2025 amounted to 1.625 million euros, marking a 5.6% decline year on year. This decline was primarily due to the weak first quarter of 2025, as well as persistently weak demand in the US. Our nine-month EBIT margin in 2025 amounted to 6.0%, which is 0.3 percentage points below the previous year. Also here, we were negatively impacted by the weak beginning of this year. However, it is apparent that we have succeeded in further stabilizing our improved profitability. The EBIT margin in the third quarter was at 7.5%, thus, nearly on the same level as in quarter two, 2025, despite the lower revenue base of quarter three. Moreover, this quarter's EBIT margin was 2.7 percentage points higher compared to quarter three in 2024. Looking at the net working capital ratio, we see a slight decrease compared to previous year. However, our yearly strategic target of approximately 30% remains under pressure, especially due to the uncertainties in the US market. Our free cash flow surpassed the triple digit mark and amounted to 116 billion euros. Christoph will explain both developments in more detail. Now let's look at the developments of our business segments after the first nine months of this year. In general, the overall picture remains challenging. Recovery of compact equipment was slower than initially expected. It faced a year-on-year decline of 10%. Nevertheless, certain product groups like dumpers differed from the general trend, demonstrating resilient customer interest in our innovative product. The light equipment product segment stabilized and remained only 1% below the previous year. And moreover, services grew again year-over-year by 1%. The 9-month year-to-date book-to-bill ratio was at 1.1. Nevertheless, we see the agriculture as well as construction industry's recovery slower than initially anticipated. We therefore keep monitoring our markets closely and remain cautious regarding the developments in the last quarter of 2025. Let's take a closer look at our regions during the last nine months. Revenues in the Europe region, EMEA, after nine months of 2025 stood at 1.269 million euros and made up 78% of our global group revenue. Also, quarter three of 2025 revenues increased year over year. The nine-month revenues remained 4% below the prior year, still impacted by the negative effects of the weak first quarter. Moving to America's region, accounting for 20% of our group revenue, we saw a decline of 10%, resulting in revenues of around €322 million. Demand in the first nine months of 2025 was further characterized by greater caution in ordering behavior in the U.S. compared to Europe, due to ongoing macroeconomic and geopolitical uncertainties. mainly due to the effects of the US tariffs. Demand declined not only in the US, but also in Canada and Mexico. In the Asia-Pacific region, which represents 2% of our business, revenue dropped by 21% to approximately 34 million euros. The region was primarily characterized by a decline in demand in Australia and China. I will now hand over to you, Christoph, to give some more insights into our financials.

Thank you, Karl. Let's take a closer look at where we stand with our networking capital. Our networking capital ratio based on the last 12 months' revenue at the end of September stood at 32.4%, slightly below the value at the end of the second quarter in 2025. In comparison to last year's figures, however, the progress we made is more apparent. Over the course of 12 months, net working capital dropped by €116 million from €808 million at the end of September 2024 to €692 million at the end of September 2025. This reduction is mainly driven by a steady reduction of inventories and an increase of trade payables in the last 12 months. This is the driving force behind the reduction of 1.8 percentage points of net working capital and in the net working capital ratio over the last 12 months, which stood at 34.2% at the end of September 2024. Now looking towards year-end, I expect a slightly higher working capital ratio, predominantly caused by higher year-end inventories in the U.S., Alternatively, we could have adjusted our production plan for 2025 downwards to the current lower demand in the U.S. This again would have triggered underutilization in our European plans. In light of our stable cash flow generation and in preparation for 2026, we decided to prioritize stable production output over short-term working capital optimization, leading to this temporary increase in finished goods inventories by year-end. We believe that this is the right decision because we avoid additional under-utilization costs and at the same time, we expect inventories to decrease again towards springtime due to overall market normalization in 2026. Now let's have a look at our cash flow. Although our revenues decreased by 5% quarter over quarter, we were able to keep our profitability stable on a level of about 7.5% on a quarterly basis. This is also reflected in our stable cash flow from operating activities. Therefore, we could continue in Q3 with a positive free cash flow generation now for the sixth quarter in a row. Due to the just mentioned rising inventories in the U.S. by year end, I do not expect cash flow generation in Q4 to continue as in the previous quarters. However, I stick to my previously made statement of a triple-digit free cash flow number at the end of the year. Also on the positive side, we further reduced our net debt in Q3 down to 258 million euros, reaching the lowest level since the first quarter in 2023. Consequently, also our leverage ratio reduced further down to 0.9. And last but not least, The picture of our capital structure is completed by a robust equity ratio of 60%. And with this, back to you, Karl.

Thank you, Christoph. Before concluding with the current outlook, I would like to give you an update on the implementation of our strategy 2030. Despite the challenging market environment, along our strategic leaders, we are continuing to implement the milestones, which you can see on the slide. The John Deere Corporation is fully on track. We have successfully started delivering first serial excavators for John Deere from Linz. At the same time, we are ramping up the production line of our US plant for further models, and we'll start their delivery in 2026. On the chart, you see a picture of our modernized production site in Menominee Falls in Wisconsin. I can tell you, it really looks good. On the other hand, we have advanced our light equipment portfolio. We expanded the range of reversible plates and also introduced new battery-powered versions. The battery-powered rammers gained on efficiency through a feature called the integrated speed control. The compaction performance can now be optimally adapted to the respective applications. And last but not least, we have expanded our zero emission portfolio in compact machines and added two models of excavators. With just a 1.2 ton operating weight, ESET10 Electric is particularly well suited for applications with a restricted floor load such as indoors. The green illuminated active working signal increases safety on both internal, and nighttime construction sites. The second model introduced, EZ26 Electric, is a bigger tracked zero-tail excavator. Its emission-free, quiet, and low-vibration operation makes it the ideal choice for legally restricted or noise-sensitive and environmentally critical areas, as well as for special worksites with local and time restrictions. As you can see, one of our strategic focus areas remains our investment in sustainable construction. We believe that this is the future of construction and we are ready to seize the future opportunities. Let's move on to our outlook for the year 2025. Also, we have a stable order book development in the course of this year. Market recovery is slower than we initially anticipated. Industry outlook partially stagnated as well, and moreover, we have faced a significantly weaker market demand in the US due to geopolitical uncertainty as well as the tariffs. Due to supply chain issues of Nexperia, we only expect a minor impact on our production in the last two months of 2025. However, we will closely monitor the situation. Due to all of these factors, we have decided to narrow our yearly guidance. For 2025, we now anticipate a revenue in the range between 2.15 billion and 2.25 billion euros and an EBIT margin in the range between 6.5 and 6.8%. We expect our investments to reach around 80 million euros and our networking capital to be at around 34% by the year end. As we already mentioned, we succeeded in stabilizing our improved profitability in the current market environment in quarter three of 2025. Looking ahead, we will continue to counteract the weak market, especially in the US, with efficiency measures and cost discipline. For 2026, we expect market recovery in Europe, as well as normalization of market demand in the US. Nevertheless, we still remain cautious and track our market development continuously. Summarizing the key messages from our first nine months. Revenue is in line to reach full year guidance. Narrowed margin guidance is driven by underlying U.S. tariff impact and geopolitical uncertainties. We are ready to seize the opportunities in the years ahead presented by the German Special Fund. The balance sheet is our foundation to execute our strategy 2030 and drive future growth. Before we now jump into the Q&A session, let me send a sincere thank you to all our employees of the Wacker Neuson Group, who relentlessly are giving their best for our customers and our company, even more so in challenging times. So really, a thank you. Nobody is perfect, but a team can be. Thank you for listening. Operator, we are now ready to start the Q&A session, and we're very much looking forward to answering your questions.

With pleasure. Thank you very much. So, dear ladies and gentlemen, to ask a question, please press 9 and then the star key if you are dialed in to the conference call. I repeat, the combination is 9 and star. If you wish to cancel your question again, please press 3 and then the star key, but for now, please press 9 star. One moment for the first questions, please. First question is from Stefan Augustine of Warburg Research. Please, over to you.

Thank you for taking my question. The first one would be actually on the book to build just for Q3. And I'd say with that, maybe a little bit progression throughout the quarter. Was that rather a stable quarter, or was it more, let's say, weaker versus the end? Something like that in the color on the current situation. That will be the first question, and I take one by one. Two more.

Stefan, thank you for asking the question. The 1.1 in the year to date was driven by a lot in the April and the Bauma effect. In quarter three, we have been fluctuating around 1.0, so it's stable at the situation.

Okay. The next one is then a little bit more complicated, and I'll try to square it a little bit up. Starting from the networking capital ratio that goes up to, in the new guidance, 34%, And you mentioned the production shipment into the US. Is that the right calculation to think about if you're now at 32% and you go up to 34, that is roughly something like 40 million in additional inventory. And how would this square up with shipments from to the US for deer which have been mentioned, I think, in the range around 20 million for this year. Is there other shipments that are also impacted here, or is it inventory that is not only in the U.S.? How do you need to think about that?

Hi, Stefan. Christoph here. Well, You need to add to your John Deere calculation, of course, the imports from Europe that are already phased into 2026. And that, of course, is easily adding up to the number that you have in mind. I don't know, is that the direction you wanted to go?

Yeah, I think I get this now. I just wanted to come, let's say, how do I come from the 20 to the 40? But that's a plausible answer. And then you cut on your investment. Is that actually something you abandon here or is that push out? And what has been, let's say, what is the cause of the lower, the 20 million lower investment? Where do you see it?

Stefan Karl speaking here. There is no major investment which has been affected by this one. It's just many small investments which we just moved a little bit forward to be on the safe side on that end. So it doesn't affect any future growth or any strategic investment. I would call it it's a normal effect of cautious cost and cash flow management in such a situation.

And Karl, if you allow me to add one thing here, Stefan, Something that sometimes gets a little bit in the background is that our investment number does also comprise investments in terms of our sales network and sales channels. And so we are always evaluating, will we now replace a certain sales outlet? Will we replace rent by a purchase? of a building and real estate, et cetera. So there are just some moving parts where we can be more conservative on the investment side without basically affecting the plants that are really adding to our capability for innovation. So it's not purely plant-related.

All right. Thank you for that explanation. And then the last one is maybe a little bit on – the pricing situation. What do you see right now? Is it okay or is it starting to deteriorate in Europe or the US? How do we have to think about that one?

Yeah, pricing situation, pricing expectations towards 2026, Stefan, let me differentiate between two The first one is I think we have been discussing that is the current situation in the US where we encounter really difficult to increase prices. Here we believe that, I know it's a little bit vague, but sooner or later, I think the market will have to accept some price increases. I know this is pretty fuzzy, but that's, I think all of us, even our competitors are calculating with this for 2026. And so the first part of our expectation that we will see modest price increases in 2026 is certainly in the US. And the second area for Europe, I think we will see the regular slight increase. So altogether, a slightly positive trend from our point of view.

Okay. And finally, a bit of housekeeping question. Can you remind us on the ramping up, the paving of the DEA cooperation going from this year, the 20 million to... What roughly bracket in 26? And when does the production start in the US?

Okay, Stefan, let me take the question. Carl speaking here. On the first hand, I just want to remind us all that this is another partner who's not on the table, and we have to be careful not to jeopardize any communication from that side, especially we talk about start of production or start of delivery. But in general, what we can say is, as I said, The cooperation is fully on track in the times as we both agreed. Linz is fully operational, as we mentioned. There is start of production in U.S. by end of this year for the first model, which means then delivering next year. And as you always communicated, we are working with a one-year interval in between two start of productions. So start of production of the next model is then obviously somewhere second half of next year in U.S.

Okay. Thank you very much, Karl.

Thank you, Stefan.

Thank you very much also from my side. A lot has been clarified, I see. There are no more questions in the queue right now. So, dear ladies and gentlemen, please press 9 and the star key now to ask a question. There seem no questions to be incoming anymore, so with that, I'm handing the floor back over to Peer Schlenkman. Thank you.

Thank you. Ladies and gentlemen, as we can see, there are no further questions left from you. That brings us to the end of our conference call. As usual, if you have any further questions, please do not hesitate to contact me or the entire Investor Relations team via phone or email. If you would like to meet in person, please let us know or check our website and financial calendar for all relevant Roadshow days in the coming months. Thank you again for joining our call, and we wish you all a wonderful winter and Christmas season. Have a great day.