ZIL2.DE(ZIL2.DE)
ZIL2.DE
Operator: Ladies and gentlemen, welcome to the conference call on the preliminary figures for full year 2025. I'm [ Sargen,] the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] At this time, it's my pleasure to hand over to Mr. Thomas Jessulat, CEO. Please go ahead.
Thomas Jessulat: Ladies and gentlemen, hello and good afternoon, and thanks for being available today. I welcome you to our conference call on the preliminary and unaudited figures of the fiscal year 2025. I'll start with some remarks on today's release. Afterwards, I will hand over to our CFO, Isabelle Damen, who will walk you through the financials down to the EBIT level. As usual, you will then have the opportunity to ask questions. Please note that the outlook as well as the financial details will be published together with the final and audited figures on March 26. The company closed the year in an environment still marked by considerable uncertainty and volatility. At the same time, the group continued to prepare for the next phase of its transformation reflected in high levels of investments to launch additional series projects in the field of cell contacting systems. Despite these upfront costs, the year-end performance was strong with operating free cash flow reaching 2% of sales. The ramp-up of battery component projects progressed further, driving significant sales growth in the E-Mobility business unit. In addition, the group successfully implemented its STREAMLINE program, achieving a sustainable reduction in personnel costs. Overall, the company mainly met or in some areas, even slightly exceeded its full year guidance targets. Let us have a quick look on the markets. Across major automotive regions, the powertrain mix shows clear structural differences. In North America, internal combustion engine vehicles continue to hold a dominant share supported by market preferences and comparatively slower electrification dynamics. Europe, by contrast, sees a higher share of all electric vehicles as well as hybrid vehicles. Within the second half of the decade, there will be a significant shift towards all electric. A lot of new programs of the established players are going to ramp up; however, long-term forecasts point to a decisive shift. By 2030, all major auto regions are expected to accelerate strongly towards fully electric vehicles. Projections indicate that Europe and China will experience some of the fastest growth in battery electric vehicles, while North America is also set for a substantial increase by the end of the decade. In summary, although today's powertrain landscape varies widely between regions, the trajectory towards fully electric mobility by 2030 is clear and consistent around the globe. Let us have a closer look at the pure electric mobility because this will be our core growth market with regard to cell contacting systems, or other components from our broad range of e-mobility solutions. Across all major automotive regions, including China, Europe and North America, the shift toward electric mobility is firmly underway with strong growth projected through 2030. When considering our large-scale projects, you will see that we are covering quite a good share of those vehicles, especially in Europe and also North America. China continues to lead the global transition to electric vehicles and shows a different market development with regard to the rising importance of pure local players. Overall, the market of all electric mobility is expanding across all major regions and significant growth is expected throughout the coming years. The shift towards e-mobility is well underway and continues to accelerate. Let me now hand over to our Group CFO, Ms. Isabelle Damen.
Isabelle Damen: Thank you for handing over, Thomas. Let me first come to the preliminary and audited figures on Slide #5. Summing up, we have successfully concluded the 2025 financial year and laid the foundation for our future transformation. We have generated sales revenue of EUR 1.6 billion, which is a decrease to previous year's figure on a reported level. But there have been M&A effects from the divestment of our entities in Sevelen and [ Buford ] amounted to EUR 159 million. In addition, we have been faced with headwinds from the exchange rate of EUR 40.4 million. Excluding these effects, we achieved an organic sales of 2.1%, which slightly exceeded our guidance given in March '25. The group reported adjusted EBIT of EUR 88.6 million in the financial year under review, which corresponds to an adjusted EBIT margin of 5.4%. Therefore, the group achieved a level at the upper end of the guidance range, which was around 5%. If you take into account that the earnings of the E-Mobility business unit currently remain in negative territory with an adjusted EBIT of minus EUR 62 million, it shows that ElringKlinger's classical business generates reliable cash flows and creates sufficient financial room for strategic investments. All in all, adjusted EBIT margin is fully on track to continuously improve profitability of the group in the medium term. Regarding the other metrics, we've seen strong efforts in the fourth quarter. Due to an active working capital management, we achieved a level of EUR 285 million in the financial year 2025. At 17.4% of the group revenues, net working capital ratio was even lower than prior year's figure. The target set in March '25 to maintain a net working capital ratio of under 25% of group revenue was therefore clearly fulfilled. In line with the lower level of working capital and despite the high level of investments for the ramp-up of the large-scale e-mobility projects, we have generated an operating free cash flow of EUR 32.6 million in the financial year 2025. With the ratio representing 2% of sales, we have achieved our target range of 1% to 3% of group revenue. As a result, net financial debt was kept at a low level. It amounts to EUR 288 million. As a result, the net debt-to-EBITDA ratio stood at [ 2.0 ] and fulfilled the guidance given in March '25 when we had appointed to a figure of around 2. When adjusted EBITDA for the one-off effects from SHAPE30 and STREAMLINE measures, the adjusted net EBITDA ratio would even amount to 1.5 compared to 1.2 in the previous year. Let me briefly reconnect these results to our transformation strategy, SHAPE30. SHAPE30 outlines our road map for transforming the group in response to the profound changes shaping our industry. The strategy is focused on enhancing our profitability and strengthening cash flow performance. To ensure long-term success, we continuously monitor global market developments and align our product portfolio accordingly. This enables us to remain well positioned for the future and to act with maximum flexibility as market dynamics evolve. This includes terminating nonperforming products, divesting CapEx-intense business areas and consolidating our global footprint. In an effort to position the group effectively for the future, ElringKlinger implemented STREAMLINE, a global program to scale back staff costs in 2025. The measures on a STREAMLINE and SHAPE30 will translate into a significant reduction of the group's cost level. As planned, the initial benefits of these measures will be seen as early as the current financial year. The measures will take full effect from 2027 onwards. In parallel, we entered the next steps of transformation by ramping up several large-scale e-mobility orders. With the ramp-ups, we returned to a normalized CapEx spending after an intense investment cycle as main investments have been done. The full and audited figures for fiscal 2025 will be released on March 26 in the morning. A press conference is scheduled for the morning, followed by an analyst conference call in the afternoon. The then released figures will include the full set of financial statements and therefore, more details on the financial KPIs. Moreover, we will provide you with an outlook on the fiscal year 2026. The invitation for the calls will be sent out in due time. Ladies and gentlemen, thank you for your attention. And now Thomas and I are happy to answer your questions.
Operator: [Operator Instructions] And we have the first question from Michael Punzet from DZ Bank.
Michael Punzet: I have -- I will start with some questions with regard to the development in Europe with regard to the transformation to e-mobility. I think we have seen a lot of changes in the strategy of the big German and other OEMs as well as we have seen that the European Commission decided to soften the rule for 2035. And when I look to the presentation, I look at the slide on Page 3, your data you've shown there are based on the S&P Global Mobility outlook based on October 2025. Do you think this will have an impact on the strategy changes as well as the decision by the European Commission on your ongoing forecast for the e-mobility? And the second question is, will this have any impact on your planned breakeven for the business unit E-Mobility in 2027?
Thomas Jessulat: Yes. Thank you for your initial questions, Mr. Punzet. I think when we look at the likely shift now after the change of the EU legislation, there is, I think, some change to be expected. It's not necessarily an adverse change to our strategy. That means that the strategy that ElringKlinger has is sound. The growth market within the auto business here, in particular, in Europe will be e-mobility with battery electric vehicles. I think that's not going to change. The quantities may change. And therefore, it may have an impact on our initial assumption that we will see a 50%, 50% share of non-ICE versus ICE in our portfolio in 2030. That may be impacted. But it's not meaning on the other side that we need to change our strategy because then it would be merely a change in quantities to the ElringKlinger product portfolio.
Isabelle Damen: Yes. And towards your second question on the breakeven point. So we don't expect a huge impact because of the measures you mentioned on '26 and '27. And I think we discussed before, we expect in '27 to realize a breakeven point on e-mobility.
Operator: There are no more questions at this time. I would now like to turn the conference back over to Thomas Jessulat for any closing remarks. We have a last minute question from Klaus Ringel from ODDO BHF.
Klaus Ringel: I just want to -- really to ask for the special items in Q4 were a bit higher than I had expected. So can you give a bit insight what was the driver here? And let's say, if you have pulled forward some of the measures that you might have planned for '26 for later, which now gives you a clean sheet to start in 2026.
Isabelle Damen: So thanks for your question. On your first question, the adjustments we've booked in the fourth quarter are partially related to STREAMLINE, our personnel cost reduction program. So there's about EUR 6 million we booked in the fourth quarter versus EUR 21.5 million for the full year. Furthermore, we booked some adjustments on the consolidation of our global footprint of EUR 9.2 million in the fourth quarter, about EUR 12 million in the year. And on nonperforming assets, there we booked about EUR 35 million for the year, of which EUR 19.4 million in Q4. So that's for the adjustments we booked in this quarter and for the year, and we did not really pull ahead anything of '26. So we still expect some effect in '26. The intention is in '27, we will no longer have any impact in adjustments for -- related to STREAMLINE or SHAPE30.
Thomas Jessulat: Also in regard to the measures, we indicated that we were -- we wanted to have a EUR 50 million cost improvement in the group. When we head into 2026 now, I would say we're half through of it. There is -- as part of the STREAMLINE program, there is still, in particular, in Germany here, contracts that will run out at the end of Q1 so that the full impact, in particular in Germany on the STREAMLINE program will be measurable starting in Q2 2026, like Isabelle is saying. Most of the accounting items in terms of impairments and also changes to the footprint, most of the items were already carried out. We're not fully complete yet in that regard. But the expectation is that there is, from an accounting perspective, a little left that would be a difference between reported items and adjusted items. So that we expect more improvements to be seen in the course of 2026. And like Isabelle said, that we shoot for a clean 2027 with our activities.
Operator: And we have a follow-up question from Michael Punzet from DZ Bank.
Michael Punzet: Michael, again, I have several questions on the business unit E-Mobility. First, I would like to thank you very much for publishing the earnings figures for that business division. And I hope this was not a onetime effect, so that we will see that figure on a quarterly basis going forward. I have two questions with regard to the business unit. The first one is, can you give us any kind of guidance for the revenues you expect in 2027 to reach breakeven in that division?
Thomas Jessulat: Yes. Let me ask -- or let me give you some information here on your first remark. I mean the transformation here is a key activity for us within our strategy SHAPE30. And we are dedicating significant resources, including CapEx into this process as we have done throughout the last couple of years. And we approach, as you say rightly, the revenue cycle now. And I think -- and we think that it's the right point here to share this information with shareholders of ElringKlinger to show the financial progress in this transformation here for ElringKlinger. This is a background for that. And yes, we'll continue to report on that because, again, it shows the progress that we make in regard to this transformation process. When we look at your second question here in terms of the top line, it's expected that through 2028, you would say roughly that we will double revenues here. And you have also to take into account that the loss situation here, part of it is one-off as part of this and part is part of start-up. So it's not a full amount that we have shown here in regard to recurring loss-making, but there's also part of it that is one-off amounts. And I think that's important to understand. So with the contribution margin that will come in through the doubling of sales, we think that we'll generate sufficient contribution margin in order to reach breakeven in the area of 2027, okay?
Michael Punzet: Okay. That means doubling revenues compared to the figure for 2025?
Thomas Jessulat: Yes.
Michael Punzet: Okay. And second question on that business unit. Is it right to assume that the fuel cell technology business is fully included in that figure on a 100% basis in EKPO...
Thomas Jessulat: Yes, that is included in there. But it's included here.
Michael Punzet: So it's not adjusted for the minority stake. So that is included on a 100% basis?
Thomas Jessulat: Yes, exactly because EKPO here is fully consolidated within our figures and therefore, is 100% considered.
Operator: Ladies and gentlemen, that was the last question. I would now finally hand over the conference back to Thomas Jessulat for any closing remarks.
Thomas Jessulat: Yes, ladies and gentlemen, together, my colleague, Isabelle Damen and I thank you for your attendance here during this call. On March 26, we will release our full and audited figures on the 2025 fiscal year and host a press conference as well as an investor conference call. We're looking forward to welcome you again and wish you a good rest of the week. Thank you very much. All the best.