Traton SE

Good morning everyone and welcome to Trayton's Q3 and nine months 2026 results call. My name is Ursula Querette and I'm head of investor relations at Trayton SE. With me on this call are Christian Levin, our CEO, and Dr. Michael Jackstein, our CFO and CHRO. Christian will start today's presentation with the key results and highlights of the third quarter and cumulated nine months period. Michael will then guide you through our financial performance in more detail. As always, we will conclude the call with a Q&A session open to financial analysts, investors, and media representatives. To register for questions, please click the blue Q&A button on the webcast and follow the instructions. If you want to enter the queue via phone, please dial one of the country's specific numbers and enter your individual PIN followed by the hash key. To register your question, you need to press 01 on your keypad. To cancel the question, press 01 again. Please note that this call, including the Q&A session, will be recorded and the replay will be made available on our website later today. You can find our 2026 nine-month report, which we published this morning, and the slides to this call on our website. Before we start, let me remind you of the disclaimer with respect to forward-looking statements on page three of our presentation. And with that, I'm handing it over to Christian.

Thank you, Ursula. Welcome also from my side. So after a kind of slow start of the year and a moderate year-over-year growth in the second quarter, our sales momentum accelerated significantly during the third quarter. This was in particularly supported by a much stronger customer demand in the US, which gave us a year-over-year unit sale growth of 48% at our international brand in Q3. And this momentum is well reflected in the key figures that you can see here on our first slide. So Trayton Group overall deliveries in Q3 increased by 10% to close to 79,000 vehicles and sales revenue rose by 9% to 11.3 billion euros. The higher volumes improved our fixed cost absorption and supported our overall profitability. At the same time, and particularly at the international, the production ramp up came with incremental costs and higher commodity prices as a result of the Iran war added also some margin pressure. So against this backdrop, our adjusted return on sales of 6.8% represents a solid result. Net cash flow for trade and operations turned positive in the quarter with an inflow of 304 million euros despite high working capital coming from our ramp ups. Separately, our reported Q3 earnings per share increased more than fivefold, mainly coming from an accounting effect related to Sinotrack share sales, which Michael will explain more in detail later on. The last KPI on this slide, our incoming orders up 14% to 71,000 units year over year. At the same time, unit sales exceeded order intake as we convert the strong backlog into deliveries. So let's move on and have a look at our development more in detail on the next page. Our book to bill ratio. Our book-to-bill ratio fell below one in the third quarter. This reflects both the acceleration in deliveries and the moderation in order momentum following an exceptionally strong second quarter. Starting in Europe, orders were seasonally softer during the summer, but improved again in September, particularly in Germany and particularly in and around the IAA exhibition. This brought third quarter European truck order intake broadly in line with last year's quarter. Germany stood out positively with Q3 orders up 9% driven by a 15% growth at MIN in Germany. This improvement is not yet fully reflected in our deliveries. Combined, MIN and Scania's European truck deliveries were slightly down year over year in Q3. In North America, our order intake also moderated from the very strong levels recorded in Q2. Besides normal seasonal effects, the truck industry is still working through the pricing implications of the EPA 27, which made commercial discussions a bit more challenging during the quarter. Nevertheless, truck orders remained strong and increased by a 35% year-over-year in Q3. At the same time, international increased production across its truck and engine plants, driving our North American truck deliveries up 65% year-over-year and 24% quarter-over-quarter. In South America, truck order intake increased by 10% year-over-year. Sequentially, however, orders softened as the benefits from this Move Brazil program faded along the quarter. Scania and Volkswagen Truck and Bus continue to deliver vehicles from this program's backlog. So truck deliveries in South America also did increase with a 10% year over year. Outside our core regions, let me also manage Scania's production ramp up in China, which is providing additional support to the group's delivery figures. But overall, the developments are broadly in line with our expectations. Deliveries gain momentum in Q3 and we continue to expect this year's strongest volumes in Q4. However, the ramp up is also creating some additional supply chain challenges. At International in particular, the supplier base is not yet fully keeping pace with the rapid increase in production. Next slide, please. So, with only a few months remaining of the year, we have greater visibility across our key track regions for the full year 26. We have refined our regional outlooks to reflect the latest market developments. Starting in Europe, our overall view is now more positive despite the software order intake we saw in Q3. Our increased midpoint of 5% implies around 311,000 registrations in the 16 ton and above segment. While Germany has remained hesitant year to date, many other European markets such as Poland, Spain and Italy continued to perform well. Looking into 2027, initial customer discussions at the EAA suggest a more constructive outlook for Germany. After a longer wait, it seems like infrastructure and defense investments could finally feed through. And at the same time, some of this year's stronger markets might slow down. In North America, the market should accelerate towards year end. Improving freight rates and replacement demand also provide a constructive starting point for discussions with customers for deliveries in 2027. However, retail sales remain below prior year levels, year to date, and it is still difficult to assess how much of the increase in OEM deliveries that will ultimately reach end customers. As our North American outlook is based on retail sales, we're therefore maintaining a somewhat wider range, but increase the midpoint to 6.25% to reflect the more constructive market development. The midpoint, we still see class eight retail sales at around 276,000 units in 2026. In South America, deliveries continue to benefit from the Move Brazil. While the program expired in July, demand across the region has so far remained more resilient than expected. This supports raising the midpoint in our outlook up to a plus minus zero percent. Looking into 2027, the post-election environment in Brazil could provide continued support for investment activity and customer demand. Registrations in China have also developed more strongly than expected. This was partly supported by measures promoting battery electric vehicles. BEVs already accounted for 36% of sales year-to-date August, which is already then close to the government's target of 40% towards 2030. While we still expect some moderation towards year end, we now see a plus 5% midpoint as the most appropriate. Let's move into the next page. Let me now turn from the market developments to a few operational highlights from this third quarter. As our industry continues to evolve, more and more value is created beyond the vehicle itself. Services, financing and software are becoming increasingly important for our customers and help us to stand out in an even more competitive market. At the IAA, Scania introduced Scania Dynamic. Product designed to improve both energy efficiency and the driver environment and this across both our battery electric vehicle range and our ICE vehicle range. This reflects well what has always been at the core of Scania, staying close to our customers and helping them to improve their productivity, their operating economy and the driver's experience. Turning to MIN during the quarter, MIN together with its partners announced investments of around 700 million euros into the European sales and service network through 2030. While this strengthens customers' uptime today, it also prepares the network for a growing fleet of battery electric vehicles across Europe tomorrow. And at the international, we launched the so-called fleetright.com, giving customers now digital and direct access to the entire parts portfolio. This creates additional aftermarket opportunities for international as the installed base of S13 engines continues to grow. Volkswagen Truck & Bus recently announced their entry into the light commercial vehicle segment through a partnership with SAIC. Similar to Airman's success with the TGE, this broadens the product portfolio and addresses a wider range of customer transport needs. And as financing becomes increasingly important, trade on financing services continues to expand its footprint. This time with MAN Financial Services represented now in 19 countries. Just two years after the launch, MAN Financial Services already finances almost every third MAN vehicle in the market it serves. For e-trucks, the penetration was even as high as 50% in the first half of this year. Finally, during the quarter, Trayton also announced a partnership with Red Hat, opening our Trayton One OS, One Operating System, to a broader technology ecosystem. This helps us bring new software functions to customers faster, while creating a scalable software foundation across all of our brands. What all these examples have in common? is a strong focus on solving customer needs in this very rapidly changing industry that we are operating in. Overall, sorry, let's move on to... Excuse me one second. I lost my script. Here we are, so let's move on to the demand for battery electric vehicles. Let me conclude with an update from the IAA where battery electric vehicle stood as the major focal point. Our BEV order intake grew by 57% in the third quarter and 49% in the first nine months of the year. Deliveries, however, declined, small decline, 6%, reflecting lower BEV volumes at international in North America, but did, however, increase 29% year to date. At the IAA, Scania and MAN presented both their next-generation long-haulage electric trucks with ranges of up to 720 kilometers. With this broader e-mobility portfolio, we can cover more transport applications and meet a wider range of custom use cases as the models become available according to each brand's individual timeline. But attractive vehicles alone will not be enough, especially as competition from Chinese manufacturers in Europe is starting to show. Our response is clear. Besides competitive products, we provide comprehensive financing and service solutions, including charging solutions, all backed up by a strong service network. And this is how we support our customers as they make the challenging transition into e-mobility. Yet this only addresses part of the challenge. The so-called enabling conditions fall far short of what is currently needed. This is why we joined in as all the CEOs of Europe's leading truck manufacturers and went on stage at the IAA, calling for the CO2 targets to be postponed by three years. To make this crystal clear, this is not about slowing down decarbonization. It is about making sure that it can succeed. The vehicles and customers' demands are there. Now, support for our customers' business cases for BEVs, infrastructure, and grid connections urgently need to catch up. So summing it all up, the truck market develops in our favor and business continues to gain good momentum. The conversion of our strong order book into deliveries is supporting revenues and supporting profitability. At the same time, we're ramping up production, especially at international, while managing supply chain challenges and higher input costs. And last but certainly not least, we continue to invest in customer offerings across products, services, financing and software with a very high focus on electrification. With that, let me hand it over to you, Michael, for the financials.

Thanks very much, Christian. And of course, a warm welcome from my side as well. As we expected, the stronger order momentum from previous quarters is now increasingly translating into deliveries. In the third quarter, group unit sales increased by 10% year over year, driven by a 48% increase at international and supported by 4% growth in South America. As Ghana's production in China is ramping up, we delivered incremental 1,300 units there. Europe was softer, with unit sales down 3% year over year, mainly reflecting lower bus deliveries, while truck unit sales declined only by 1%. This translates into a 9% increase in sales revenue. Higher new vehicle sales were the main drivers, supported by positive price and mix effects. Trade and financial services also made a strong contribution, with revenue up 25%. Vehicle services delivered solid growth of 6%, underlining the continued strength of this important business. If we compare this with the second quarter, however, sales revenue declined, mainly reflecting a seasonal slowdown in the European new vehicle business. Vehicle services and trade and financial services continued to grow and provided some offsets. Looking at the nine months development, the figures still reflect the slower start to the year. But the clear year-over-year improvement in the third quarter shows that our business momentum is accelerating. This gives us confidence for a stronger finish to the year on the top line. As expected, higher unit sales improved fixed cost absorption and supported profitability. Adjusted operating profit increased by 16% year over year, while adjusted return on sales improved by 40 basis points to 6.8%. Positive price mix effects and good growth in the higher margin vehicle services and financial services business provided additional support. Tariffs, however, were a meaningful headwind. The Q3 tariff costs were largely driven by Section 232 tariffs, partly offset by credits recorded during the quarter. On a net basis, the impact amounted to around 80 million in the third quarter. For reference, when we look at the Q3 last year, there we carried US tariff costs of around 40 million euros. For the fourth quarter, The tariff burden could increase to around 160 million euros, reflecting higher sales volumes with fewer expected offsetting credits. This estimate does not reflect any agreement with the US administration that may be reached during the quarter. As a reminder, our tariff expense is currently based on a minimum expected US content of around half of the import value. Any recognition of a higher share due to credit for U.S. production-related activities would reduce the expense accordingly and result in corresponding additional cash reimbursement. In addition, profitability was impacted by costs related to the production ramp-up in the U.S. and some foreign currency headwinds. We also identified around 100 million Euro of additional input costs in the first nine months mainly related to Iran-driven commodity price increases. R&D spending is increasing as we invest into our trade modular system and step up our e-mobility developments. However, the year-over-year earnings impact in the third quarter was mitigated by higher capitalization. The key takeaway is that despite these significant cost headwinds, positive volume effects prevailed and drove a clear year-over-year improvement in profitability. Let's now look one level deeper and see what drove the top and bottom line performance across our brands and financial services. Scania's revenue increased by 5%, driven by a 7% growth of its vehicle services business and by higher unit sales in China and Brazil. Together, with a positive price mix, the strong service contribution supported an over-proportionate increase in adjusted operating profit. Adjusted return on sales improved to 12.3%. At the same time, Currency headwinds and increased fixed costs from the China operations weighed on the margin. At MAN, sales revenue was broadly stable, with higher truck sales offset by lower bus volumes. Growth in vehicle services and ongoing cost management supported profitability, while Iran-related input costs weighed on the result. Adjusted return on sales came in at 4.6%. Separately, a supply issue at a component supplier emerged late in the third quarter. While the impact in the third quarter was limited, some production effects are expected in the fourth quarter with corresponding cost implications. At international, the recovery in volumes is now clearly visible. Sales revenue increased by 36%, especially driven by 71% growth in truck revenues. These volume and positive price mix effects lifted the adjusted return on sales by 1.7 percentage points to 2.5%. Importantly, without the roughly 80 million euros in tariff costs, the margin would have been more than twice as high, despite significant production ramp-up expenses. At Volkswagen Truck & Bus, Move Brazil continued to support the top line, with sales revenue increasing by 11%. Adjusted return on sales was 10.1%. Profitability was impacted by the revised accounting treatment for floor plan financing and higher production costs. Finally, financial services continued to scale. Sales revenue increased by 25% driven by higher portfolio volumes, particularly at MAN and Volkswagen truck and bus. Profitability in the core financing business also improved, resulting in a return on equity of 10%. And this despite ongoing ramp-up expenses and elevated risk costs. Overall, growth broadened across the brands and Trayton Financial Services. While adjusted operating profit at trade and operations increased by 12% in the third quarter year over year, the strong contribution from financial services helped lift the adjusted operating profit at group level by 16%, as I mentioned before. Turning now to cash flow, net cash flow at trade and operations was slightly positive in the first nine months. The improved operating performance was nearly offset by the working The reduction in net debt is fully consistent with our capital allocation priorities. Bringing net debt at trade and operations including corporate items to zero remains a high priority for us in management. Separately, Sinotrack share placements also had a significant impact on reported earnings. Following the latest tranche in the third quarter, our stake declined to around 18% and we now no longer exercise significant influence. As a result, The remaining stake was reclassified from an equity-accounted investment to an other equity investment measured at fair value. This reclassification resulted in a non-cash valuation gain of around 1.3 billion euros. Together with the gains from the share placements, the total Sinotrack-related P&L effect amounted to around 1.7 billion euros before tax for the nine-month period. The resulting after-tax effect on earnings per share is around 3 euros per share. It is important to emphasize that this is a non-operational effect and does not reflect the underlying performance of our business. So, in line with our financial policy, we therefore intend to exclude these effects when determining the dividend proposal. Let me conclude with our full year outlook. Based on the strong momentum in the third quarter and the expected further ramp up towards year end, we confirm our guidance for 2026. So all guidance ranges remain unchanged. The key ones are zero to 7% growth for both unit sales and sales revenue and an adjusted return on sales of 6.3 to 7.3% for the group. We expect to deliver within these ranges despite the mentioned supply challenges and their associated volume and cost implications, while geopolitical developments remain an overarching uncertainty. We also confirm our net cash flow guidance for trade and operations of 900 million to 1.7 billion euros. As usual, we expect positive working capital effects towards the end to support cash generation in the fourth quarter. Just to be clear, our cash flow guidance does not include any sign or track effects as those are reported under corporate items. What it does include, however, are the tariff cash reimbursements we currently expect based on our minimum US content assumptions. Any additional refunds from the recognition of a higher US content share would provide further upside. So overall, the strong business momentum gives us confidence in our full year outlook. And this despite ongoing margin and cash flow pressure from tariffs, higher R&D spending, ramp up and supply chain costs, and input cost headwinds. With that, I hand it back to Ursula for the Q&A session.