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Operator: Good day, and thank you for standing by. Welcome to the GEA Group AG Second Quarter 2025 Conference Call and webcast. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Oliver Luckenbach, Head of Investor Relations. Please go ahead.
Oliver Luckenbach: Good afternoon, ladies and gentlemen, and thank you for joining us today for our second quarter 2025 earnings conference call. With me on the call are Stefan Klebert, our CEO; and Bernd Brinker, our CFO. Stefan will begin today's call with the highlights of the second quarter. Bernd will then cover the business and financial review before Stefan takes over again for the outlook 2025. Afterwards, we will open up the line for the Q&A session. Please be aware of the cautionary language that is included in our safe harbor statement as in the material that we have distributed today. And with that, I hand over to Stefan.
Stefan Klebert: Thank you, Oliver, and good afternoon, everybody. It's my pleasure to welcome you to our conference call today again. In the second quarter of '25, GEA has once again delivered a very good performance and continue to improve all major key figures. Order intake growth year-over-year by 5% in organic terms to EUR 1.3 billion. Sales rose organically by 1.5%. As already mentioned in the previous quarter, the slower sales generation in the first half of this year is due to the order backlog composition at the end of '24. We expect an acceleration in sales in the second half of this year. EBITDA before restructuring expenses increased by 8.1% year-over-year to EUR 217 million. The corresponding EBITDA margin improved significantly from 15.2% in the prior year quarter to 16.5% in the second quarter of '25. This marks a new record level. Return on capital employed increased strongly and exceeded the 35% mark for the first time. We have achieved an outstanding ROCE of 35.3% in the quarter. Due to the very positive operating performance in the first 6 months and confident expectations for the remainder of the year, we had to raise our guidance for the financial year '25 as announced last Thursday. We are now guiding organic sales growth to be between 2% and 4% for the full year, '25, up from the prior range of 1% to 4%. EBITDA margin is expected to be in the range of 16.2% to 16.4%, considerably up from the prior guidance of 15.6% to 16%. The new guidance for return on capital employed is between 34% and 38%, clearly above the prior range of 30% to 35%. And we are also having another reason to be optimistic about the second half of this year. As most of you have probably seen, GEA signed one of its largest single orders to date. We expect to book this order in the second half of this year. Together with Baladna, we will construct the world's largest integrated dairy farm and mid-powder facility in Algeria. The new facility will significantly enhance food security and drive economic development in Algeria. The project will contribute to producing about 50% of Algeria's national milk powder needs. GEA will cover the entire value chain of milk powder production from dairy farming to processing to packaging of the final product. Milk powder production is scheduled to start in late '27 with gradual ramp-up of production over subsequent years. Once completed, the facility will have the capacity to produce 100,000 tonnes of milk powder per year. The largest share of the order is assigned to our liquid and powder and farm technology divisions. But also our other divisions will contribute to this project. This lighthouse project underlines the attractiveness of GEA's integrated state-of-the-art technologies under one roof. But we are not only making progress in our traditional food markets. 3 weeks ago, GEA opened its new food application and technology center in Janesville, Wisconsin right in the heart of the Midwest in the U.S. I had the honor of cutting the ribbon at the state-of-the-art facility, which focuses on alternative proteins and sustainable food. Here, we are offering an infrastructure for leading-edge food technologies such as cell cultivation or precision fermentation. This center is a launch pad for the next generation of food and a major step towards our commitment to sustainable food solutions. This new facility expands the food technology hub at GEA's Janesville campus which has served as a site for production, repair, logistics and training our division Separation & Flow Technologies since 2024. With this campus, we are strengthening our North American footprint, where demand from our U.S. customers for local testing and development is growing. The center will give start-ups and all food innovators access to industrial grade equipment and together with GEA experts, they learn how to efficiently scale their processes. After the test phase, GEA will be the first choice for helping customers produce sustainable food on a large scale. And once again, our sustainability efforts have been recognized, the Time Magazine and Statista identified the world's most sustainable companies of 2025. Over 5,000 companies were evaluated globally to identify the top 500 companies. And once again, GEA not only made it into the top 500 but we are now ranked #12 globally, up from Rank 33, which was already a fantastic position in '24. And in Germany, we are even #2, this achievement underscores our position as a frontrunner in sustainability. Let me also give you some updates on the U.S. tariffs. We already provided an overview of how U.S. tariffs are affecting GEA in the last quarter. At this point, I would just like to add that we are even more confident than before that we do not expect any material impact from tariffs. First of all, we were able to pass through the additional costs to our customers. And secondly, all of our relevant competitors are also based in Europe and mainly produced outside the U.S. Therefore, GEA does not have any competitive disadvantage here. With that, I hand over to Bernd.
Bernd Brinker: Thank you, Stefan. Good afternoon, ladies and gentlemen. Let's start with order intake. Order intake rose organically by 5.0%, although we had no large order this quarter. A clear indicator of the robustness of our business model. In comparison, the prior year quarter contained 4 large orders totaling EUR 98 million. Organic sales growth of 1.5% in Q2 was an improvement versus Q1 and was driven by solid growth in service sales, while new machine sales saw a slight decline. EBITDA before restructuring margin increased considerably by 130 basis points to 16.5% because of higher gross profit. The higher profitability also supported the return on capital employed development, which further improved to a new record level of 35.3%. Net liquidity decreased year-over-year by EUR 92 million to a minor net debt position of EUR 60 million, mainly due to the cash outflow of EUR 415 million for the share buyback program and the dividend payment. As the share buyback program has been completed, it won't have any further impact here so that we would expect Ceteris paribus to return to a net cash position in the second half of the year. Looking a bit deeper into the group performance. Order intake rose organically by 5.0% year-over-year particularly on the back of a continued positive development of base orders and midsized orders between EUR 5 million and EUR 15 million. From a customer industry perspective, they're reforming they're reprocessing, pharma and oil and gas were the main growth drivers. Other customer industries contributed as well, indicating a broad-based positive development in order intake. On a reported basis, order intake was negatively impacted by a EUR 31 million translational FX effect this quarter. Sales grew organically by 1.5%, driven by solid organic sales growth of 4.6% year-over-year to which all divisions contributed. This marks the 19th consecutive quarter of organic service sales growth. New machine sales declined slightly by 0.6% year-over-year in organic terms. As already mentioned before, new machine sales are expected to accelerate in the second half of 2025. The service sales share increased year-over-year from 38.9% to 40.1%. When looking at the sales development on a reported basis, an adverse translational FX impact of EUR 27 million needs to be considered, mainly driven by the U.S. dollar and the Chinese renminbi. EBITDA before restructuring expenses rose by EUR 16 million to EUR 217 million, resulting in a corresponding year-over-year margin expansion of 130 basis points to 16.5%. This is an outstanding profitability improvement, marking a record EBITDA margin. Now I will continue with the figures for the Separation & Flow Technologies division, which reported strong order intake growth and a record EBITDA margin. Order intake increased organically by 8.2% year-over-year, which was mainly driven by base orders below EUR 1 million in size. From a customer industry perspective, dairy processing, pharma and oil and gas were the main growth contributors. But also other customer industries, such as environmental applications contributed here. So overall, a quite broad-based order intake strengths. When looking at the order intake development on a reported basis, an adverse translational FX impact of EUR 10 million needs to be considered. Organic sales grew by 2.9% year-over-year, driven by a 5.7% increase in organic new machine sales. Organic service sales remained flat year-over-year due to a base effect. As you might recall, service sales in Q1 last year were impacted by a change of our logistics provider leading to a one-off catch-up effect in Q2 last year. Given the pronounced impact of this catch-up effect in the prior year quarter, the flat development this quarter is a very good achievement. As new machine sales grew stronger than service sales this quarter, the service sales share decreased slightly on a high level from 50.6% to 49.2%. The better gross margin resulted in a significant year-over-year improvement of the EBITDA margin by 300 basis points to 30.3% in the second quarter exceeding the 30% threshold for the first time. Let's move on to Liquid & Powder Technologies, where we have expanded our service business and further improved the EBITDA margin. Order intake for the quarter was down organically by 10.7% year-over-year as no large order has been booked this year. In comparison, 3 large orders totaling EUR 83 million were booked in the prior year quarter. As 2 out of these large orders came from the customer industry beverage and 1 from chemicals, it is not surprising to see that those customer industries showed a decline this quarter. Despite the positive development in the customer industry's food, new food and dairy processing, they could not offset the decline in beverage and chemicals. And as Stefan said at the beginning of this call, the large order signed with Baladna recently is expected to be reflected in the order intake in the second half of this year. This quarter, an adverse translational FX impact of EUR 11 million needs to be considered when looking at order intake. Sales declined by 6.6% year-over-year on an organic basis. Service sales continued its growth trajectory since Q4 2021, growing organically by 2.4% year-over-year. At the same time, organic new machine sales decreased by 9.7% resulting from the lower order intake in the first half of 2024. As already mentioned, new machine sales are expected to improve in the second half of 2025 due to the higher expected conversion of large orders into sales, which have been received in Q4 2024. EBITDA before restructuring expenses declined slightly by EUR 2 million year-over-year to EUR 40 million. However, EBITDA margin increased by 40 basis points to 10.6% in the quarter due to an increase in gross margin because of a positive product mix and better project execution. Operating costs remained stable year-over-year. Moving to Food & Healthcare Technologies, which generated strong top line growth and continued its sequential profitability improvement. Organic order intake increased by 10.0% year-over-year, although no large order was booked in this quarter. The prior year quarter included 1 large order of EUR 15 million from the pharma industry which led to a decline in this industry this quarter. However, growth in the customer industry's food and new food were able to offset the decline in pharma. When looking at the order size brackets, midsized orders between EUR 5 million and EUR 15 million showed a strong development. Sales grew organically by 12.2% year-over-year with contributions from both new machine and service business. New machine sales showed an extraordinary organic growth rate of 15.3%, while service sales grew also well by 6.9% organically. The service sales share decreased slightly from 35.8% to 34.5% on the back of the strong increase in the new machine business. The EBITDA margin continued its quarter-on-quarter improvement since its low point of 6.1% in Q2 2023. EBITDA before restructuring expenses reached EUR 35 million with a corresponding margin of 13.2% in the quarter, significantly up from 9.8% in the prior year quarter. Main drivers behind this profitability expansions are a significantly better gross margin and higher sales volume. Continuing with Farm Technologies, which recorded significant order intake growth this quarter, but let me give you some more details here. Order intake increased organically by 34.3%, 34.3% year-over-year. This marks the highest growth rate since Q2 2021. The pickup in the new machine business and here especially in automated and conventional making systems were the key drivers behind this remarkable growth. The market improvement, which began in December 2024, continued steadily throughout the first half of 2025. This was largely driven by robust milk prices and the introduction of new product features. This favorable environment contributed to the notable increase in order intake, which is expected to remain on a high level for the remainder of the year. Organic sales decreased slightly by 1.6% year-over-year, still reflecting the impact of a low starting order backlog in new machine business at the beginning of this year. New machine sales experienced an organic decline of 8.9%, which could not be fully offset by the strong organic growth of 6.3% in the service sales year-over-year. As a result, the service sales share rose from 47.7% to 51.1% in the quarter. EBITDA before restructuring expenses declined slightly by EUR 2 million to EUR 26 million due to lower sales volume. The corresponding margin decreased by 50 basis points to 14.4% in Q2 2025. And finally, let us turn to heating and refrigeration technologies. This division delivered strong sales growth combined with further EBITDA margin expansion. Order intake declined slightly by 2.2% organically year-over-year mainly due to lower volume of orders in the ticket size between EUR 1 million and EUR 5 million. The customer industry's beverage, energy and oil and gas were the end markets with the strongest demand development, which was, however, offset by the decline in food. Sales rose strongly by 5.8% organically, mainly driven by a significant organic increase of 12.8% in service sales. The new machine business grew by 1.4% organically at a lower rate than the service business so that the service sales share increased from 38.2% to 40.8% in the quarter. EBITDA before restructuring expenses rose by 13.4% to EUR 20 million due to an improved gross profit resulting from higher sales volume and a positive mix. The corresponding margin of 13.6% showed an expansion of 110 basis points compared to the margin in the prior year quarter. Closing the division is kept with the overview on the EBITDA contribution in the first half and in the second quarter of 2025. There were 2 important messages. Firstly, we have been able to increase our EBITDA before restructuring expenses in both time periods considerably despite facing stable or even higher operational costs in most cases. Almost all divisions contributed to this positive development. The very strong performance of Separation & Flow Technologies as well as Food and Health care technologies were the main contributors in Q2 and also in the first half of 2025. And secondly, we have managed to improve or at least to keep gross profit stable in most divisions. This is due to a strong service business and better margin quality in the new machine business. But it also reflects GEA's price and cost discipline as well as savings from our procurement and production optimization efforts. Coming now to another important topic, which is net working capital. In a year-over-year comparison, net working capital declined by EUR 64 million to EUR 422 million. This reduction results from the continuous focus on working capital optimization, and includes structural improvements, showing a positive impact in the quarter, lower inventories, higher trade payables and lower trade receivables. The reduction in contract liabilities was partly compensated by lower contract assets. The resulting net working capital to sales ratio of 7.8% puts us comfortably below the midpoint of our guided corridor of 7% to 9%. Free cash flow has been solid for the second quarter, but let's have a look at the details. Operating cash flow of EUR 82 million was driven by a net working capital outflow of EUR 42 million and a EUR 64 million outflow in what is summarized at the bucket others, which mainly results from miscellaneous balance sheet movements like VAT and noncash translational FX effects. Main reasons for the net working capital outflow were higher quarter-on-quarter inventories and trade receivables. The CapEx-related outflow of EUR 59 million has been in line with our full year 2025 guidance of around EUR 235 million. As a result, free cash flow stands at EUR 38 million, leading to a net cash flow of EUR 14 million after deducting lease payments and interest paid. When looking at the quarter-on-quarter net cash development, the cash out for the recently concluded share buyback program as well as the dividend payment need to be considered. As a result, the quarter ended with a minor net debt position of EUR 60 million. This leaves us plenty of headroom to do M&A once we identify the right targets in terms of strategic fit and value creation potential. Free cash flow generation over the last 4 quarters has been strong, reaching EUR 468 million. The corresponding cash conversion ratio, which indicates how much of the EBITDA before restructuring expenses has been converted into free cash flow before restructuring expenses landed at a solid 55%. With that, I hand back to Stefan for the outlook.
Stefan Klebert: Thank you, Bernd. Before talking about the fiscal year guidance, let me share with you our view on the current order intake situation. As you know, large orders can be lumpy, and we cannot perfectly forecast when orders will be signed. This quarter, we saw a perfect example for this. Also, we negotiated several projects. We did not even book a single large order in Q2. However, 4 weeks later in July, we signed one of the largest single orders for GEA to date, and there is more to come. Therefore, it makes more sense to look at our order intake development on the rolling last 4 quarters perspective. Here, it becomes clearly visible that the second quarter of last year marks the lowest point and that we have seen good order intake development since then. This trend also continued in the second quarter this year, and we are quite optimistic that it will persist in the coming quarters. As already mentioned at the beginning of today's call, we have increased our guidance for 2025 based on the very positive performance in the first half of this year, and the promising expectations for the second half of '25. Despite the volatile environment, GEA's positive journey continues. Our improvements are broad-based, supported by a healthy order situation, accelerating revenue growth and margin improvements across the group, also going into '26. Once again, we are proving our strength in executing our plans. Finally, our road map for '25. The next important date will be the release of our third quarter results in November 6. In the meantime, we look forward to seeing many of you at the upcoming roadshows and conferences. And the Investor Relations team, and I will be meeting investors until the end of September. This concludes my presentation, and I hand back to Oliver for the Q&A session.
Oliver Luckenbach: Yes. Thank you very much, Stefan and Bernd. So we will now start the Q&A session. So please, operator, open up the lines.
Operator: [Operator Instructions] And this comes from the line of Klas Bergelind from Citi.
Klas Henrik Bergelind: My first question is on SFT. And I'm trying to understand if you see more cost coming back into the business to deliver on the solid orders. Otherwise, I struggle to see why the new machine sales growth here into the second half shouldn't improve the margin further into year-end. I mean you're growing orders nicely, and the lead times in SFT are pretty short. You've raised the SFT margin guide for the year, but it largely reflects the strong second quarter performance. So the margin guide looks a bit conservative. I will start there. Thank you.
Stefan Klebert: Yes. I mean, obviously, this is what you can see. We are improving performance further. SFT is like you all know, one of our ground tools and there are many, many activities going on, which lead to this situation, which you can see here now. So let's see where it will end at the end of the year, but SFT will remain an important contributor.
Klas Henrik Bergelind: All right. Okay. Fine. Yes, it looks conservative. My second one is on the comments you made on 2026 in the pre-release, Stefan that you expect to significantly accelerate your revenue growth while further increasing profitability. You probably expected this question. I'm going to ask what does significant mean? You're going from 2% to 4%. Is it perhaps over 6%, i.e., doubling at the midpoint? And is it just timing of deliveries out of the backlog, including the very big order from Algeria in LPT and FT? Or do you see that the pipeline is strong enough to perhaps drive quarterly orders here back to above the EUR 1.5 billion level. And if you could comment on the order pipeline by end market, that would be very helpful.
Stefan Klebert: Yes. Thanks for this question, Klas, as well. I mean, what we see is I mean, first of all, Baladna is not yet booked. This will be booked. This will help us significantly also to accelerate our growth next years. As I indicated, we have some more interesting, really large projects in the orbit where we are quite optimistic and hopeful that we can close some of them that will also help us. And like you also could see in Q2, we have a very good baseload business. So despite we did not book any single large order in Q2, we could exceed the Q2 order intake from last year. So this all makes us optimistic. It's too early to give a clear guidance for '26 in terms of sales growth. But you know our Mission 30 target is to grow above 5% with a CAGR of more than 5%. And I'm very optimistic that this is also from today's perspective, and also, if we have to catch up a little bit, let's say, from '25, we will make it.
Klas Henrik Bergelind: Good. My final one is on the margin progression into 2026. And obviously, Stefan, I'm not expecting you to give a level, but you alluded to continued margin expansion. And I get the better utilization from higher machine sales like we have here in SFT, but SFT is a product business. when you look at those larger orders that now sit in the backlog and upcoming orders, I'm trying to understand to what extent perhaps the gross margin should level off here if the margin expansion into next year should come more from the G&A savings. At the CMD, you said the G&A savings are back-end loaded to 2030. So my math here, unless your COGS savings are greater than planned, it sort of could be that the gross margin start to level off. I don't know if you could comment on that.
Stefan Klebert: Yes. I mean there might be different effects. I mean, of course, larger orders normally have a lower direct margin compared to smaller ones or medium-sized ones. On the other hand, we are doing a lot in terms of COGS programs, optimizing further our efficiency in production and in manufacturing costs and material. So I'm very optimistic that we can also improve further our direct margins. And on top, like you mentioned, and that's also what we promised. We are working also on our G&A costs. And that all together will help us to improve further like promised.
Operator: We're going to next question, and it comes from the line of Max Yates from Morgan Stanley.
Max R. Yates: So just my first question is around the services growth. And not really focusing on the quarter, but focusing on kind of the journey since you started talking about this. I remember at the Capital Markets Day, you talked -- I think it was the prior one, sorry, you talked about getting a higher share of the installed base on service contracts, kind of increasing the revenues per machine. And I guess I just wanted to understand kind of where do you think you are in that journey? Are you still finding kind of parts of your installed base that you can attach to service contracts where -- are there still more opportunities? And are you still able each year to drive kind of more revenues per machine? I guess what I'm trying to understand is you've had some pretty kind of outsized and very impressive service growth rates. Would we kind of expect those to normalize down to low single digit? Or do we think we can keep seeing these size maybe mid- to high in services?
Stefan Klebert: Understood. Thanks for your question, Max. Also with the latest Capital Markets Day and with our Mission 30, we guided that we expect the growth in service, which is above the growth of new installations that also means very clearly, we see still a lot of potential, how we can outperform in terms of sales growth in the service organization and service department. It's a mix of many, many activities which are going on, starting with mobilizing installed base, which is not buying from us today. It also has something to do with intelligent pricing models. We applied -- it has something to do with more and more digital products. We are releasing, introducing with different pricing models for digital solutions and -- so to sum it up, I'm very optimistic that the growth rate of service will remain above average driver for our total growth.
Max R. Yates: Okay. Perfect. And maybe just a follow-up. I guess when you gave your Mission 30 targets, implicitly, there wasn't the assumption that margins will be going up 100 basis points every year. But if I look at kind of last year, I look at this year, effectively, we are seeing margins going up around 100 basis points per year. and you're doing it on organic growth rates that are below what you thought. So I guess my sort of question is, I mean, firstly, what is actually going much better than you thought? Because I assume if you're doing more margin expansion than you planned on lower growth, something specifically is better? And then secondly, when you look at kind of the makeup of the business and look forward, I mean, it doesn't look to me and maybe us from the outside any reason why that margin progression should slow down. But is there anything particular that's unique to these years that we should maybe think about as sort of not repeating or that's not normal when we think about the business moving out on a 2- to 3-year view?
Stefan Klebert: Well, you are right. We are now in the second year where it looks like that we can really improve margins by 100 basis points, which is really I would say, outstanding because we are not coming from a kind of a turnaround or restructuring we have been on a very -- quite high level where a lot of machine-building companies would be more than happy to have this kind of level, which we had 2 years before. So what we always want to do, we always want to deliver what we promise. That's very clear. Failure is no option for us. Are we one that you can trust on what we promised? And this is the situation, how you should see also our guidance for Mission 30. We have no doubt to believe that this is not achievable. If we are lucky, we can achieve it again earlier than originally expected. But I also have to say, of course, it will not continue 10 years long, that we improve year-by-year by 100 basis points. Sometimes it will slow down. I think it's natural. So we are really very active here. We have a lot of things we do. Yes, and this is how you have to see it. So we will continue, but it -- it's not a given, let's say, that we also might improve during the next 2 or 3 years with 100 basis points.
Max R. Yates: Sure. But just conceptually, there's nothing in the last couple of years which have massively flattered the margins, which are strange, and we should be very conscious of going forward. It's just good execution better pricing, better service and a number of different smaller things rather than one big thing we should be very cognizant of.
Stefan Klebert: Absolutely. Absolutely. I think it's a lot of activities and measurements which we always talk about, a lot of operational efficiency, a very clear performance-driven culture, a lot of great teams good project execution. We also consolidated some footprints in the past, which are now kicking in the full year effect. So there are many, many things, but there is not one thing item where we have -- would need to have some fear that it might collapse. It's really on a very broad base. And I also, I would say, extremely sustainable meanwhile.
Operator: Now we're going to take our next question. And it comes the line of Akash Gupta from JPMorgan.
Akash Gupta: I got a few as well. The first one I have is on SFT, and I wanted to dig a bit deeper on the margin surprise we saw in the quarter. So we had 2 years of decline in new equipment revenues. And I think you did see growth in Q4, but we saw new equipment revenues returning to growth in the quarter, while aftermarket was flat. And despite somewhat weaker mix than last year and sequentially, your margins improved quite significantly. I mean, is it fair to say this is all driven by pricing in new machines where like the market structure is quite consolidated and you have high market share? Or is this driven by any other factors? So I wanted to get your thoughts on what led to this margin -- strong margin beat when the mix was less favorable. And why we shouldn't expect the same going forward?
Stefan Klebert: Yes. I mean, thanks for the question, Akash. I mean, SFT is also a mix of different products. It's not only separators, which are normally in mind. It's, for instance, also the kind of business where we invested heavily during the last 3 years to improve the performance. We move things to India. We consolidated production. We upgraded and invested in production. So there are many, many shades of gray in SFT where we optimized our production, where we optimized engineering to have a kind of better modularization. We developed new lines for valves, for instance, which we exclusively sell to Asian markets, many, many things are going on. And we also now see that all these effects are kicking in. Of course, it always depends also on the mix of the projects you have and this quarter was really a very good one. But what you can see, the underlying trend is not based in the new equipment, not based on pricing. There might be a little impact, but not significantly. It's more in the new installation coming out of a lot of measurements, which we did during the last years here.
Akash Gupta: That's very helpful. And the second question I have is on geographic split of your orders in the first half. And I wanted to ask, particularly if you saw high growth in one particular region like the U.S. ahead of the tariffs kicking in. And maybe on the U.S., you said that 1/3 of the revenue there is imports. Can you tell us how much of that is spare parts and how much of that is new machines?
Stefan Klebert: I mean, first of all, when we talk about regions, it's always especially when we talk about a quarter, it's really risky because you can imagine if you now book a project like Nigeria in Africa, it doesn't mean that the market in Africa is booming because this is simply based by one large project. And therefore, we always have to be very cautious in thinking about or interpreting that there are special trends in special regions or segments just because we booked a bigger order in some segments. That's what I would need to say. If I want to make a general statement, of course, Europe is nothing where we expect the biggest growth rates. We see large growth rates also in the medium to long term. And I already want to avoid to focus on a quarter only in countries like India or in Asia. We also think that U.S. is an interesting area for us. And this is what we see. But as I said, it's very often depending on larger projects. So if we would book tomorrow a large project in the U.S., it doesn't necessarily mean that U.S. has a booming economy, and that is always what we have to consider. But all in all, if I need to summarize it, we are very well positioned in many of our market segments. We see interesting activities in many fields. And if I -- if you ask me about the regions, but this is also not a surprise. Europe might not be in the medium to long term run at the forefront of the growth in the world.
Akash Gupta: Just to double check, there was no prebuy or anything you saw in the U.S. in the quarter?
Stefan Klebert: No.
Akash Gupta: And my last one is for Bernd. So when I look at your free cash flow chart, you have a big EUR 64 million negative line. Can you elaborate how much of that was translation effect and how much is VAT. I mean, I'm particularly surprised about translation effect because I see you also have a very large item in your comprehensive income statement, some EUR 97 million in the quarter. And normally, these translation items are part of EBITDA. So I'm just like a bit confused why we have another line in cash flow, I mean it should be any items that you have in comprehensive income on exchange rates, usually, they are noncash. So a bit surprised why you have this other line in cash flow from your EBITDA?
Bernd Brinker: Akash, what we can do and have a follow-up on this very specific element. But in general, the feedback is out of the EUR 64 million, which we have summarized under the bucket others. We have roughly EUR 40 million as an FX translation effect and the remainder -- the majority of the remainder goes into VAT.
Akash Gupta: Okay. I'll follow up separately on this EUR 40 million.
Operator: [Operator Instructions] And now we're going to take another question and it comes from the line of Adrian Pehl from ODDO BHF.
Adrian Pehl: First of all, 2 quick ones, one is on the CapEx outlook that you increased by EUR 20 million when I saw this correctly. I was just wondering where you saw additional need for investments and how should this pay out? Second question is on FX again more on a general basis. So the effect that we saw in the segments and for the group in the second quarter, is that something that we should also expect to reoccur in Q3 most likely or maybe for H2? And then Mr. Klebert, you were saying in your presentation that the order trends should persist pointing to the nice chart with a curve on how order intakes have been moving. Just to get more kind of a statements on the customer sentiment. I mean now after, let's call it, the first wave of tariff discussions is over, how has that influenced or maybe some customers have become more positive, your client base? And a question a little bit linked to that. Just to get an idea or an example, obviously, you have been talking about Baladna quite a lot and congrats to this nice deal. Can you give us a sense on how long has this been in the making? And if that was kind of not influenced from any kind of tariff discussions or -- have there been some postponements on words about global macro?
Bernd Brinker: So Adrian, let me start with the first 2 questions on CapEx. First of all, our CapEx spending for Q2 is fully in line with what we indicated for the full year of -- so the EUR 235 million then we have just updated our guidance to EUR 255 million, and this predominantly reflects additional capitalization related to our ERP project, which is running full steam. The second question on foreign exchange impacts, whether we and you should expect the same pattern in Q3 or even beyond Q3, as we have seen in Q2, I can only give the question back to you so we might start to guess, so we don't have the crystal ball here. You are aware of our profile in terms of footprint in different countries. But honestly, we don't have a clue what will happen. What we can clearly state is that we continue to communicate FX translation and that we continue to hedge FX transaction in order to mitigate risk. The last question, I think we'll hand over to Stefan. Thanks.
Stefan Klebert: So concerning with tariffs and the overall situation, I think even if nobody likes the tariffs, and if we have now this 15% here, it is at least, I would say, something where our customers know what they expect. It was the most horrible thing when all the discussions were going on, and nobody knew what will happen because you know that we -- all contracts we are signing, it's very clear that the customer is in charge of the tariffs because we can't take that risk. And that's also clear in what we can achieve in 99.9% of all cases, I would say. Therefore, I think it's because our customers, they can now rely on something, hopefully, and they have a clear picture. So I think it will rather help than compared to the last months. The question, how long does it take to close a project like Baladna, in that case, it's about 2 years since we have been working on that project. I personally was in a discussion and negotiation with this customer 11 months ago where we had the feeling we are very close to sign, I can tell you that we originally expected to book this order already last year, which did not materialize. And this is a clear example and a very good example how things are sometimes delaying or postponing in that case. It's also that the Algerian state is involved in all the business. And so some things take a long time. Then we also hope to book it in Q1, which did not materialize, then we were optimistic to book it minimum in the first half year, which we did not do, but we have now meanwhile the signed order, we had the celebration. We wait for the down payment, and then we will book it. We hope that we can get the down payment in Q3, but it also might be that it is postponed and comes somewhere in Q4. But if I tell you this story, it gives you maybe an example how long projects of this magnitude are sometimes into negotiation and discussion. And what I wanted to point out, Baladna is not the only large project we are talking to. We have some others, which also can materialize in 2 weeks or in 3 months or in 1 year. And this is the nature of our business, but what is important for you to understand and what my message is, clearly, we have an interesting pipeline, and therefore, I'm quite optimistic also about the remainder of the year and also next year.
Adrian Pehl: All right. That was very helpful indeed. So maybe to also ask a follow-up on how the business is going short term. I mean one of your peers gave an example that at least when those U.S. discussions led to this 15% as you rightfully said, hopefully staying where they are. This triggered the release of some larger orders. So is it something that you would agree on in general? And then also following up on the comments from Bernd. Actually, I just wanted to make sure the question, maybe I wasn't precise to say, are there any kind of subsequent effects or different phasing of FX effects in the quarter. So saying that on Ceteris paribus level, with same rates and obviously, same exposure. Should we see something similar in Q3 compared to Q2? That's it then from my side.
Stefan Klebert: So I will address the last letter element you asked again. So there is no structural thing which we expect to change in the second half. So therefore, this should be basically same level or same methodology without any surprise given the underlying currency environment.
Adrian Pehl: All right. And on the order trends again?
Stefan Klebert: Yes. I think there's nothing specific what I can add here. As I said, if I understood you right, the tariff, I feel will make it rather more likely that customers are now doing larger investments than before because now they can clearly calculate what they might expect. But I don't see such a spontaneous impact, let's say, because all the big orders are normally discussions, which go on many, many months or years for our customers. Yes. And what is maybe also what I mentioned before, but what I can stress again, our big advantage is that the vast majority of our main competitors are based in Europe, mainly Germany or North of Italy. This is typically the cluster where you can find the excellent machine-building companies for food, pharma and beverage. You know them all also the typical German Mittelstand is here involved and they all have no production in the U.S. They produce all out of Europe, and they will -- I'm quite sure like we add all the tariffs which come. And therefore, if customers in the U.S. have a clear and solid base of calculation, they know now it's 15%. They can make the business case and then they make a decision. The most horrible thing is if it is every week in a discussion might be 15% or 50%, then we have an environment where customers normally postpone decisions.
Operator: [Operator Instructions] And the question comes from the line of Adrian Pehl from ODDO BHF.
Adrian Pehl: Let me use the time to ask another one. So actually, on Farm Technology, just to understand, obviously, you have increased your revenue guidance for this segment and also the margin guidance by 1 percentage point on low end and high end. Nevertheless, the increase in the segment itself that you did was quite substantial, and you have been talking about the effects there. Should we have assumed that there could be more potential from this change on the top line for the margin side of things?
Stefan Klebert: Well, what should I say? I hope so, too. But we guide always what we -- where we feel comfortable what we can achieve, that's what I said. This is our general sentiment. Of course, especially in farm technology, when we have volume, when we have a big workload in the factories that will help us to overachieve our targets because then we have all this over absorption in the factory, which kicks in. So let's see. But yes, we believe in what we guide.
Adrian Pehl: Okay. Conservative again, probably. All right. Thank you.
Operator: Thank you. There are no further questions for today. I would now like to hand the conference over to Stefan Klebert for any closing remarks.
Stefan Klebert: Thank you, operator, and thank you, everybody, for listening and for your great questions. let me try to summarize our situation, our state of the union. I think it's important to mention again that we improved all major KPIs in Q2 and in the first half year and especially in the light of the overall economy. And if you look at other machine-building companies, I would say this is really remarkable. GEA walks the talk, we are performing. We are delivering quarter-by-quarter. And this is, I think, and I hope what comes across. Yes, given the overall strong performance which we had in the first half year and also the positive outlook and expectations we see, we are very optimistic for the remainder of the year, and that's the reason why we increased our guidance for the full year and which also brings us at the end of the year to, again, a different level than we had already last year. And yes, on top, we continue to see a very strong order pipeline, which makes us very optimistic not only achieving a good '25, we also expect that there is a good '26 ahead of us. With that, I close the presentation and the discussion and I thank you very much for your continued interest in our great company. Have a nice summer and talk to you latest in November.