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Operator: Good morning, and welcome to the Bekaert H1 2025 Results Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to turn the floor over to your host, Guy Marks, Vice President, Investor Relations. Sir, the floor is yours.
Guy Marks: Many thanks, and thank you to you all for joining today, what I know is a very, very busy morning. As per usual, I'll just quickly run you through the safe harbor statement and then hand over to Yves and Seppo. So, this presentation may contain forward-looking statements. Such statements reflect the current views of management regarding future events and involve known and unknown risks, uncertainties, and other factors that may cause actual results to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements. Bekaert is providing the information in this presentation as of its date and does not undertake any obligation to update any forward-looking statements contained in it in light of new information, future events or otherwise. Bekaert disclaims any liability for statements made or published by third parties and does not undertake any obligation to correct inaccurate data, information, conclusions or opinions published by third parties in relation to this or any publication issued by Bekaert. With that, tongue twister out of the way, I'd like to hand over to Yves. Thanks.
Yves Kerstens: Thanks, Guy. And a warm welcome from my side and Seppo's side. So if you look at first half '25 at Bekaert, we delivered a resilient financial performance in the current challenging end markets. You can all see the benefits of our long-term strategy, which has been focusing on the portfolio rationalization, good pricing discipline, and driving further cost efficiency in the organization. Certainly, first half of the year has been busy with managing the impacts of the tariffs. The first wave of 25% import duties on steel and aluminum, we were pretty successful in passing them through to our customer base, as you know, like we did in the past during COVID times, energy surcharges or wire rod fluctuations. The second wave in June bringing the import duties to 50%, as you can understand, was more difficult to pass fully to the customers. We were successfully, but we are more and more concerned about the second half impact on the overall demand of the market economy. We continue to execute our strategy. We disposed and concluded the disposal of Latam North is fully completed by end June. We keep on -- intense focus on our cost optimization. So in first half of the year, we reduced overhead cost by EUR 21 million compared to last year and we will continue working on these topics. The strong working capital improvement reduced by EUR 135 million versus first half of last year, creating good, nice cash flow generation for the first half and we keep on scrutinizing the CapEx investing -- while investing in good maintenance, good sustainability we are seeing how to invest in the growth segments. So having said that, we delivered a robust financial performance of 8.8% of EBITu in a very difficult market situation, strong free cash flow EUR 128 million (sic) [ EUR 123 million ] and keeping a very low leverage of the balance sheet, continuing our share buyback of EUR 200 million. So let me hand over to Seppo to give you a little bit more details by business segment and overall.
Seppo Parvi: Thanks, Yves. Now let's start by looking at the sales bridge and sales development at this year first half versus last year. I would describe in general results and figures that they are showing resilient results despite the challenges on the markets. Like-for-like, this excluding portfolio changes and foreign exchange movements was down 4.3% versus first half last year. Foreign exchange rates had negative effect of 1.1% or EUR 24 million mainly due to the effects from U.S. dollar and renminbi development -- weaker currencies impact sales versus euro. Portfolio change, quite flat, small 0.2% effect. That is a net from acquisition of BEXCO last year and capacity closures SWS in Indonesia and India. Price/mix and raw material impact was negative 2.2%. That is a reflection of lower raw material costs globally in different geographies with the exception of the U.S. where steel tariffs and market has been driving up the raw material costs. Net volume effect was negative 2%, and that is excluding discontinued SWS Indonesia and India entities that were closed last year. There what we have seen is especially volumes are down in Europe as well as in U.S., partly because of the tariffs as well as positive effect of volumes in China, but not fully offsetting the negative development in other geographies. Then moving to EBITu bridge and how the development has been there between the 2 years. I would say the margins are well protected despite lower volumes through strict cost control and mix improvements that we have been working on. Especially, I can mention higher plant utilization in China, leading to better fixed cost absorption there, offsetting the negatives in Europe and partly in U.S. We have worked hard to reduce overheads, and that work also continued second half. And the demonstration of that is, as you can see on the bridge, also EUR 21 million reduction year-on-year on overheads. And that is something important we continue to do in order to protect our margins and cash flow. I would say that we are more cost competitive than ever before. And when the volume growth returns, we are confident that operational leverage will support higher profitability levels relatively fast compared to past. Then let's move to our PUs, reporting segments, and I start by looking at the Rubber Reinforcements. Very strong China volumes have been offsetting lower volumes in Europe and North America, like already mentioned. They have managed tariff challenges well, thanks to local sourcing and production as well as global footprint and capability to pass through quite strongly the tariff effect to customers. Volumes were down 1.5% versus first half of last year, but actually 1% up versus second half of last year. And we have to remember second half last year was getting rather weak. Weaker demand in truck tires has been seen across all geographies, but resilient margins through cost reduction and high plant utilization levels, especially in China, where volume development has been positive, compensating for lower volumes in Europe. Then just as a reminder that outside our reported figures, we have our Brazilian joint venture in the Rubber Reinforcement business, where we had sales of EUR 84 million, down 1% year-on-year despite 14% FX impact -- negative impact. And that result shows positive underlying development that continues there on the Brazilian market. Their FX impact has been offset by higher volumes and better pricing. So margins have improved versus year ago. Steel Wire Solutions, like-for-like volume growth has been positive or at least stable, and we have been able to keep double-digit margin despite market headwinds. So Steel Wire Solution delivers another set of robust results. Excluding the impact of SW (sic) [ SWS ] closures in Indonesia, India, like I said, we had stable sales versus first half of last year. Especially, I want to highlight positive volume development, both in North America as well as in China, where we see volumes up more than 10% versus first half of last year. In North America, thanks to strong agri and energy and utility markets and in China, strong auto and agri markets. But volumes have decreased in Europe, driven by lower auto and energy utility market-related sales. And during the quarter, we also completed SWS units entities disposal in LatAm North. And those have been still fully consolidated during the first half, but will not be included in second half figures. That's just as a reminder. Then moving to our ropes business, BBRG, where we have been able to have sustained profitability improvement as also indicated end of the last year, although market have been getting weaker and outlook has been getting weaker as well. So we continue to sustain operational and profitability improvements that we implemented towards the end of last year, but uncertain trade environment has caused some delays when it comes to customer projects and orders. Sales were up 2.4% versus first half of last year. That is thanks to BEXCO acquisition mainly. And steel ropes in U.K. and U.S. have maintained output improvements, but there we have suffered from slower demand, especially in U.S. during the second quarter. And that has limited somewhat the profitability improvement potential that we would have seen otherwise. Positive thing is that profitability is now almost back to double-digit level that we are targeting. So on a positive trend, but we still work on to deliver more. Then moving to specialties, where challenging end markets continue, especially in sustainable construction in U.S. But also it has been challenging in the energy transition market, especially in the hydrogen part. Flooring business in the U.S. has been mostly impacted by tariff and geopolitical uncertainties that has continued. Let's see now after the deals are coming out between U.S. and other -- different countries, how that will stabilize the situation. At least it has been now reducing uncertainty recently. But we have been also facing increased competition in EU and Oceania in the flooring business. On a positive note, volumes have increased in tunneling and mining business and our penetration in Middle East has increased. It's still a relatively small business, but on positive trend, and we believe that there's lot of potential to grow further, thanks to a lot of projects in the pipeline that we are able to now look into. Reduction in sales volumes and related under absorption of fixed costs had material impact on margins but they have been also mitigated in construction business by working our cost structure successfully. In hydrogen, we continue to maintain good market share, excellent customers' engagement with the key players and customers in the market, but growth is not expected to return in the near future. But I think that it's fair to say that we're in a good position when the market growth comes back. Also, policy uncertainty has continued to weigh on demand on the hydrogen business. Then looking at the consolidated income statement and some key figures. There, first of all, I want to highlight strict cost control that has become now visible when it comes to -- for instance, selling and administrative expenses that are down from EUR 157 million last year to EUR 139 million first half of this year. Then also to notify and remind that in the one-offs and reported EBIT significantly has been impacted by non-cash EUR 56 million one-off impact from CTA linked to historical currency devaluations in Venezuela that was booked now through profit and loss as part of the closure of the Latin American entities divestment. This is neutral on equity and this more IFRS technical topic as I trust and know that most of you are aware anyway. Then moving to another focus area that we have been focusing during the first half and continue, cash flow, working capital management, where I think that we are very proud of the achievement by our teams' clear improvement of working capital level. EUR 135 million improvement versus first half last year. This has given a nice boost to our cash flow. Like I said, this has been and continues to be one of the focus areas. We have been working on all the parts of the working capital, especially on inventory management, working on improvement of overdue collections, good success there in different geographies, especially I want to comment and mention China. China team doing good work there. And of course, working on payment terms, both on receivables and payables, customers and suppliers. We are targeting 15% level when it comes to working capital to net sales. We are 16.3%, so there is more potential, and we of course, want to push it even further were possible. A clear improvement, 2 percentage points down year-on-year compared to 18.4% a year ago and 16.3% now. And that has helped us to reach strong cash generation despite the lower volumes and profitability. So EUR 80 million improvement year-on-year, reached EUR 123 million free cash flow this year. That is, of course, partly also thanks to lower CapEx as we have well-invested growth platforms, so we have been able to reduce growth CapEx for the time being. Of course, we are ready to invest more on growth-related businesses once we see that growth is coming back. So we have been keeping strict control on the CapEx and continue to do the same for the rest of the year. And that is, of course, one way to safeguard our cash flow. Now back to you, Yves, to give a view on strategy and operations.
Yves Kerstens: Thanks, Seppo. So while we are keeping on focusing on delivering on our performance, we keep on focusing on the 4 -- the 5 verticals, which are our end markets that we are serving. So let me give you some comments of first half and how we look into the future. So on tire reinforcement, we keep on driving innovation. We got some nice awards on the Tire Tech Expo 2025. We launched our Elyta brand, which is combining all the solutions we have in Ultra and Mega Tensile reinforcement solution and deploying them with our key customers. From a market perspective, I think the competitive landscape remains the same as before. Our tire customers, both China, Europe, U.S., Indian player, of course, evolving in their competitive play. If you look at transmission & performance wires segment, pretty stable volumes and margins there. We keep on looking at the portfolio, pulling the portfolio. And looking forward, we see a stronger second half on energy utilities for the second half, U.S. and also some expect in Europe. On advanced lifting and mooring, so happy with the integration of BEXCO, the performance of BEXCO. And also the operational challenges we had in the past in our U.S. and U.K. operations are stabilized and are positioning ourselves to recover, let's say, the market shares and the growth, with some uncertainty temporary in the U.S. also with the tariffs to Canada. But we see on the other side globally an improved outlook on mining and industrial. On the energy transition, so the offerings we have in the filtration business, in the hose wire business, in the heating business, but also in the hydrogen business. Some words on the hydrogen business. On one hand, good news that in the U.S., the 45V Act has been confirmed to be in place until January '28, that means subsidies for producing green hydrogen. And then secondly, in Europe, where the RED III, which is targets about renewable energy are under deployment. But as mentioned by Seppo, we expect a much more stable outlook in the upcoming 2 years, and we keep on positioning hydrogen as an emerging offering and technology for the future. On sustainable construction, we discussed also end of last year, a difficult second half for us. If you look at the industry last year, first half continued. Now we see a stabilization. What we see is that the whole construction industry has been down. And for us, especially in the flooring segment, as explained last time, where we are mainly in the automotive factory and batteries, which we are now pivoting into other segments. So we see a recovery from -- now in the mid of the year, also with some nice growth in Middle East, India and also some new projects in China and a recovery in the U.S. So we -- as mentioned, we continue to innovate, and I want to highlight, spend a minute of time on the acquisitions we did in construction play. We can go then -- thank you. So we launched the Dramix Loop, which is using the recycled tire cord from used tires into reinforcement of concrete, so a mix of Dramix plus recycled fibers. We acquired 2 companies in the first half of this year, one company, Twincon, which is specialized in how to bring these products to the market, so go-to-market plus construction of industrial floors with a mix of new fibers and recycled fibers. And as well Flexofibers, which is a technology which is innovating the way you take used tire cord into fibers to recycle or to reinforce concrete. So happy with this innovation in our Dramix business, continue on a journey of bringing the total cost down as well as sustainability and circularity. If we move then to the strategic execution of the different levers we have. First of all, on the transformation, we continue to prune our portfolio, and we continue to make our business units more autonomous and more focused on the end markets. Cost focus was mentioned. Happy on the reduction of the overhead. We will continue doing that this year. And we're also rightsizing footprint. We did the rightsizing in Belgium as well as in Scotland on the synthetic fibers, consolidating production and lowering, let's say, the fixed cost, which will give us an opportunity when volumes come back to further get margin improvement going directly to bottom line. On cash flows, very good work on inventory management, collection overdues, payment terms, and we continue our strict capital expenditure discipline also for the second half of the year. A word further on the import tariffs. So after a volatile first half with uncertainty, I think we see now that we get, hopefully, in a more stable policy environment so that all companies in the supply chain can adopt to the new reality. First, that means 50% import duties on steel in the 2 phases, correct, which we, most of them passed to the customers. And the last increase from 25% to 50%, we're also working on with our customer to pass that also through to the end markets. I think, of course, the concern we all have is the uncertainty on the end market demand in the different end segments and how the end products which are having steel as content, how that price increase in the end market will evolve. Coming to the outlook. First of all, for the full year outlook of 2025, we expect a slightly lower sales on a comparable base, like-for-like base. So corrected '24 with the disposals, the changes in exchange rates and the plant closures, we expect a slightly slower sales than top line '24. And from an EBITu margin, we expect a margin between 8% and 8.5% for the full year. Moving to the midterm and long-term outlook. So we communicated in our Capital Market Day, our ambition level, which remains the same. So 5% growth on the long and midterm driven by, of course, the growth platforms that are now delayed. So the timing of this growth will be postponed. Secondly, on the profitability side, we projected an ambition of a 10% profit by '26. So based on the recent events of the market outlook and the evolution of the growth platforms that will not be likely to be achieved in '26. However, we remain confident that we can achieve 10% profit levels. As mentioned by Seppo, we're bringing down our cost structure, more flexing our cost structure. So with the recovery of some of the volumes even in the core businesses and then also some growth, the 10% ambition is in reach. So let me conclude based on the summary pages. So pretty proud in a very difficult market environment about the performance. So focusing on what we can control, which is basically cost, cash flow, winning the businesses, client relationships, plus keeping our position ourselves for the future, working in parallel on the portfolio of the company and also on the future emerging products and offerings so that can help to transform the portfolio of Bekaert. Having said that, let me hand over, Guy, to you for the Q&A session.
Guy Marks: Very good. Thank you. Let's get back to the operator for questions.
Operator: [Operator Instructions] Our first question is coming from Frank Claassen with Degroof Petercam.
Frank Claassen: Two questions, please. On your outlook of the like-for-like slightly reduced sales, can you elaborate how much you think will be volume and how much will be price driven? That's my first question. And then second question on the gross margin. I noticed that it declined quite a bit from 18.4% to 16.6%. Can you elaborate what are the main drivers? What is the main reason for the decline in gross margin? Is this mix effect? Or are there more factors playing a role?
Seppo Parvi: So if I take first the question on the outlook like-for-like. I think if you look at the key drivers and look at the guidance that we had given, slightly down. That if you look at the main effects, it is foreign exchange that is having an effect when it comes to consolidation of non-euro profit and loss to euro, our reporting currency. And secondly, the changes in the footprint and taking into account the acquisitions and divestments that is BEXCO acquisition, then for the rest of the year, divestment of Latin American entities as well as the capacity closures that we did last year. So those are the key drivers so that when coming to like-for-like. Maybe, then you can comment on the gross margin.
Yves Kerstens: On the gross margin. So, Frank, there are a couple of drivers. First of all, if you go business-by-business. So in the Rubber Reinforcement business, so most of the changes are coming from a region customer mix. So in the Rubber Reinforcement business, the business in China, as mentioned by Seppo, has been pretty strong in the first half of the year, also like we planned and budgeted for, with a good demand and good absorption of the fixed cost. However, less demand in U.S. and in Europe has impacting the margins of that business. Secondly is the impact, of course, the margin erosion in Specialty Business, 2 drivers there. One is on the Dramix business, mainly a country mix. So we have less business in the U.S. and in Australia, which are more higher-margin business. But of course, the effect of the volume drop due to the market demand, which is having some impact on cost absorptions where we are taking the necessary actions to rightsize that. And then also in the energy transition play in hydrogen, so nothing on pricing, margin, but more also the cost absorption where we've been versus last year, basically the start-up of the factory in Belgium was basically capitalized. And of course, this year, the impact of the operation of this factory is fully into the P&L with, of course, lower volumes. So these are, let's say, the main drivers of the margin differences first half '24, '25. And to remind everybody, in first half '24, we still had good margin on the ultra fine wire, certainly in the first quarter, which also played a role. And second half of the year, we focused on semicon and for ultrafine wire and not anymore on the other segments.
Frank Claassen: Okay. And to come back on the guidance, do you expect pricing to be negative for the rest of the year or still a slight positive maybe by passing on the tariffs? What do you -- what can we expect from pricing?
Seppo Parvi: Like we have said, we have been already quite actively achieving the price increases needed to compensate for the tariffs. And the main effect looking at the sales line is more coming from FX and the footprint changes and acquisitions, divestments.
Operator: Our next question is coming from Alexander Craeymeersch with Kepler Cheuvreux.
Alexander Craeymeersch: A couple of questions from my side. So the first one would be that in Steel Wire Solutions, you showed good results, and you also mentioned a good order book. Yet in the outlook, you seem to warn for uncertainty and challenges. Could you clarify like which sentiment we need to follow now? Is this now -- do we expect stability in the second half on the back of that good order book? Or do we read more into like lower sales into the second half? Second question would be on the decline in working capital. It's very nice to see that declined further to 16.3% on sales. But I also see that there's a significant part on inventory. So I was just wondering if this is mostly explained by lower finished goods or rather lower materials -- raw materials. And then the third question would be on BBRG. This margin is now around 10% with the U.K. and U.S. production problems being solved. Is this now a sustainable margin going to the second half? Or do you think there's even more room for improvement?
Yves Kerstens: Perhaps I'll start with the question, Alex, on SWS. Good. So for SWS, basically, we see for the second half, a good outlook in the energy utility segment with some more deliveries in the second half. So that's on the positive side. Automotive markets in China are strong, but less in Europe, right? So we see a little bit of mixed bag depending on the region. But I think you could say that we are -- our sentiment is a stable environment with left and right some changes.
Seppo Parvi: Yes. And then on your question on inventory and working capital. So like I said, a lot of work has been done on the working capital improvements across the different items. And if you look at the inventory in specifically, especially, so we have been working obviously on many areas. And I would say that the main effect is coming from the fact that we have been reviewing consignment stock arrangements. We are reviewing safety stocks. We are improving production planning. And that way, we can manage our inventory levels better. And that is where the -- we see that the future potential is also supposed to come. Of course, if you look at the working capital, specifically, there is some about EUR 16 million, EUR 17 million reduction coming from the divested units that we have now divested in Latin America. Then over to you on BBRG.
Yves Kerstens: Yes, good. No, good. So happy with the progress we made on the operational improvement and the business development. So actually we will continue our journey targeting the 10% for that business. So no reason not to believe that.
Seppo Parvi: I would add that it's more a question of the volumes. We saw some softening of the volumes. And without that, we probably could be already at a higher level.
Operator: Our next question is coming from Martijn den Drijver with ABN AMRO.
Martijn P. den Drijver: I have a number of questions. I'll take them one by one, if I may. On Rubber Reinforcement, you mentioned tactical capacity management. Does that point to short, temporary work? Or is it something more permanent? And if not, are more permanent capacity reductions still on the table?
Yves Kerstens: There is no -- for the moment, Martijn, no plans on any rightsizing of capacity in China.
Seppo Parvi: And this tactical capacity management relates more to this kind of -- you can always have more filler volumes or less. And in order to manage capacity utilization rates, occupancy rates, the strategy has been to get some of that filler volume to run [ bills ] with full speed and that way you can achieve better cost absorption and improve your total profitability. And so far, the ratio between filler business and sort of our core business is quite healthy. And in that sense, no -- I don't foresee any issues with that as such.
Martijn P. den Drijver: Just coming back to Yves' statements. No plans in China, but what about the other regions, which is where the volumes were dropping and have been dropping for quite some time now?
Yves Kerstens: So from a long-term perspective, of course, you need to look at how the demand is evolving and in per region, correct? And we'll do the necessary adjustments in terms of rightsizing, let's say, capacities at different levels. First of all, within the operational means of flexing the volumes. And we also do mix sourcing, correct, delivering our customer in Europe from local Europe, but also from Asia. So there, we have some flexibility to work with. And then on the long term, structurally, we have to see how the demand will evolve.
Martijn P. den Drijver: Got it. Then a follow-up on RR. You mentioned, Yves, no real change in the current competitive environment. Could you specify that that's currently, but what are your expectations going forward, specifically in China with Zenith now coming to the market?
Yves Kerstens: So we all know that, and that's not new that there has been an overcapacity in the tire coat business and mainly in China. And that remains stable, correct -- that situation. You have Zenith coming online, focusing on certain segments of the business, correct? We understand as well, okay, that's for them to penetrate the customer that will take time. Yes. They need to demonstrate as well to work at the quality and performance levels of the leaders in the market. So we keep on monitoring how the competitive landscape is evolving. And that's why I said today, we see no further changes versus what we mentioned last year.
Martijn P. den Drijver: Got it. Moving on to Specialty. You mentioned in your comments rightsizing, specifically with sustainable construction. What measures are you thinking about? And when will those take effect? And how much should we pencil in, in terms of savings? Is there anything you can add to that a bit more color?
Yves Kerstens: Yes. No, happy to do that. So basically, what we've seen is different markets at different stages. So in Europe, you have the high penetration of the fiber reinforcement. So there, we've been first half now taking actions to move resources more to the growth markets, so from Europe into Middle East, India, supporting the U.S. So it's rebalancing our investments in terms of SG&A to more growth regions. Secondly, continue on the high mix, 4D, 5D was already high. We keep on doing that. Now with the new recycled fibers on top, we have an extra weapon, correct, to work on the high end. And secondly, it is more on the manufacturing side, capacity adjustments, basically that we are taking in terms of productivity, leaner and so on. But still, if you look back, the Dramix business has been a growth business over the last couple of years, last decade, correct? If you look at the added value created, that's a CAGR of 7% to 8% over the years. So yes, second half and first half were tough. But if you look from that business from, let's say, 10 years perspective, this has been a very healthy business. And even the performance of this year is much better than what we did in the past. Of course, our ambition is higher, to grow higher and we'll continue to invest in that business.
Martijn P. den Drijver: Got it. And another question on sustainable construction. I read that Sika is now also planning to enter this market in a more substantial manner. Has that been visible already? Or is that not visible yet?
Yves Kerstens: No, not. They were already, correct, active to a certain extent. And there are also areas where there's collaboration between the companies on how to go to market, correct and bring the offerings to the market. So we are working on that.
Martijn P. den Drijver: Okay. So that's not really something -- not really a concern. Okay. And then moving on to SWS. I asked that question, I know also in Q1, but now it is mentioned again that strong performance in agricultural markets. It wasn't mentioned last year. Is this really a factor to take into account, because in the Q4, I think you mentioned, it was modest? But is it modest? And if not, is it structural? Or is it just a seasonal effect due to good commodity prices for farmers in the U.S.
Yves Kerstens: So there is -- so today's situation is, I would say, on the favorable side for that business, correct, also with the import duties and the competitive landscape for that business. We can capture pretty good business in the U.S., correct? And then also in -- I think was your question related to China or U.S., Martijn?
Martijn P. den Drijver: Well, all of them basically, because you mentioned them in multiple geographies.
Yves Kerstens: Yes.
Seppo Parvi: And maybe to add on, it's of course, seasonal business compared to many other business. And this year, especially, I would say that we managed the season better than previously. For instance, being able to produce some in advance so that we were not having so much capacity bottlenecks so that we could meet the demand quite well. So I think planning-wise, also quite successful and helping to increase the sales in the segment.
Martijn P. den Drijver: Okay. That's helpful. And then my final question, would it be possible to just disclose the 2024 sales level, excluding M&A, plant closures and foreign exchange? Could you just give us the number, please?
Seppo Parvi: I think in rough terms, I would say that the net-net, it's about EUR 60 million difference right, Guy?
Guy Marks: So the -- well, say the net-net of the '24 like-for-like is about EUR 3.8 billion. So that's deducting about EUR 150 million, EUR 160 million from memory, of which about EUR 90 million is FX and EUR 60 million is lost revenues from the disposed business.
Operator: Our next question is coming from Wim Hoste with KBC Securities.
Wim Hoste: A couple of questions from my end as well. Can you maybe give us an updated CapEx budgets for the year and also your thinking on CapEx budgets going into next year, given, yes, the market conditions where they are and also given the -- certainly on the hydrogen front, which will probably not require any additional investments soon. So the CapEx budgets for '25 and '26. And then another question would be on the steel tariffs. To what -- you said that you made good progress in passing that through, although the second leg was probably -- was more difficult. But is it also impacting consumer or customer behavior in terms of where they are producing? Or maybe it's increasing imports from other regions where you were not used? So can you maybe be a bit more specific about fallout effects from the whole steel tariff discussion and how you might have to adjust to that, if you can also elaborate on that. Those were my questions.
Yves Kerstens: Perhaps I can start with the last one. So on the tariff side, so I think everybody is looking at more stable policies, which, hopefully, we're getting there, correct, and to adjust the supply chains. So we don't see our customers changing their policies on where to source and where to produce. Not yet. But to be seen in the future. What we've been doing is, since we have, of course, almost 70% of our production is locally, yes, we have been in the last couple of 6 months changing some flows towards the U.S., correct -- from more Europe, U.S., in India, Southeast Asia, U.S. to optimize within the constraints and the opportunities we have. But to answer your question, we don't see structural changes yet. But of course, logically, we would expect that with the policies and the ambition of the Trump, obviously, to have more local production that there would be some changes in the future.
Seppo Parvi: And on capital expenditure, we previously in connection to first quarter guided EUR 150 million, EUR 160 million region. What we see now is that looking at the current business conditions, where are we with the growth platforms, they remain well invested. The growth is -- it's going to take time before it comes back. We see now that we would be heading below EUR 150 million, maybe towards EUR 140 million. So some further reduction that we can foresee there. It doesn't mean that we would not be investing in growth and improvement projects. Roughly half of that in general terms is sort of maintenance, health and safety related and then the rest is still for the business development. When it comes to '26, it's a bit too early to comment. You have to remember that, like I said, that already this EUR 140 million, EUR 150 million level includes CapEx for growth and development. And as soon as we see the market conditions to change, so we are ready and we have a balance sheet to increase CapEx even significantly. I think previously, year before, we were somewhere, like, EUR 190 million, even plans to go beyond EUR 200 million. So that we can do then when we see that the growth is there. So we are not in a situation we would be cutting CapEx because of balance sheet. It's more to adjust to the growth that we have visibility to today.
Wim Hoste: Okay. That's clear. Maybe if I can then just follow up on the kind of cash or cash flow conservation or consideration you have. Is that -- is there any concern or restraint on doing additional acquisitions at the moment because of the preference for having good cash flow generation? Do you still have a decent pipeline of M&A projects? Are you still going fully for that? If you can also elaborate on that, please?
Seppo Parvi: If I start about the balance sheet, and as you see from the leverage figures, we continue to have strong balance sheet. And I would say rather the contrary that thanks to focus on cash flow operationally, it makes us strong, and our balance sheet can take quite substantial amounts when it comes to potential acquisitions. So this kind of war chest is quite big in that sense. Maybe then I hand over to you --
Yves Kerstens: Yes. No, I can confirm that besides the performance delivery, the transformation of the company is a priority. So we keep on working on the M&A agenda. The organic play and the investment thesis is that we shared in the past, so it's about where can we consolidate the industry, where can we go into more sustainable construction offering and energy transition. In energy transition, also looking more at the whole electrification play, right, we see the investments flow, the development on electrification continue. Yes, we see the slowdown on the hydrogen, but there's a lot of still energy transition anyhow will take place, correct? So we keep on looking at targets. And we have, as Seppo said, a good healthy position to do the necessary moves.
Operator: Our next question is coming from Stijn Demeester with ING Financial Markets.
Stijn Demeester: Just one for me. Sorry to repeat on this theme, but can I probe once more into your volume and price mix expectations for the second half? Because if I understand correctly, your guidance of slightly lower sales versus a base of EUR 3.8 billion seems to suggest a rather stable, even potentially positive organic revenue growth drivers for H2, despite your press release, which breeds uncertainty, et cetera. So can you be a bit more articulate in what you expect for the second half in terms of organic growth?
Seppo Parvi: Well, I think it's -- like I said, if you compared the first half and second half, the main driver is on FX and our footprint changes, acquisitions, divestments. A lot -- and I think what we were trying to highlight in the outlook and guidance was still the remaining uncertainties around volume and end customer demand because of the tariff situation. Tariff situation is becoming more clear now. We have been able to mitigate direct FX, I would say, extremely well. And what remains to be seen is the consumer behavior that can U.S. -- especially U.S. consumers absorb the additional costs that is coming through because of the tariffs? And then what does it mean in general economy in Europe or China or elsewhere as a reflection of the development in U.S. But as such, we don't expect huge -- as in our base case, huge changes in the mix or volume development as such.
Yves Kerstens: If I can add to that, what Seppo said is that, what we hear from our -- some of our customers is that their cost increase passed through to the end customer is taking in steps. It's a 5% per month and evolution. So I think what we want to monitor, clearly saying, how is that potential price increase inflation impacting the demand in the market and overall market sentiment.
Stijn Demeester: Understood. Still not very clear. If you say we expect stable, is that versus the first half of this year or versus the second half of last year?
Seppo Parvi: It's rather related to this year. You have to remember last year, especially Q3 was rather weak if you look at the developments, then improving towards end of the year. And then if you look at the development as such, it's more reflecting first -- second half this year.
Yves Kerstens: Of course, again, repeating then excluding the scope changes, like-for-like exchange rate, because exchange rates second half, if they continue at that level, from a consolidation perspective will impact the top line, correct? So I think --
Operator: As we have no further questions on the lines at this time, I'd like to hand it back to management for any closing remarks.
Yves Kerstens: So thanks for joining the call. Thanks for your insightful questions. From our perspective, I think you know all the market environment, and we basically are, as the management and the Board, let's say, appreciating the performance of the first half in a very difficult market context, volatile and uncertain, and the team has delivered on a pretty resilient performance while we are continuing to work, let's say, on preparing the group for the future. So more to come. For the ones who still have holidays ahead of you, enjoy it. And for the ones who had already holidayed, I'm sure you're back with renewed energy. So thanks for joining. Have a nice day.
Seppo Parvi: Thank you.
Operator: Thank you. This does conclude today's conference call. You may disconnect your lines at this time, and have a wonderful day. And we thank you for your participation.