Bossard Holding AG (BOSN) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Bossard Holding AG presentation of Bossard Semi-Annual Results 2026 Conference Call. I'm [indiscernible], Chorus Call operator. [Operator Instructions] The conference must not be recorded for publication or broadcast. And at this time, it's my pleasure to hand over to Dr. Daniel Bossard. Please go ahead, sir. Mr. Bossard, I think you might still be muted..

Thank you. Ladies and gentlemen, welcome to our semi-annual results webcast 2026. Stephan Zehnder and I are happy to guide you through the following agenda. Good. I try again. Ladies and gentlemen, welcome to our semi-annual results webcast 2026. Stephan Zehnder and I are happy to guide you through the following agenda. After a few words on the highlights. Sorry, the Echo is still here. Can we restart again?

One second, ladies and gentlemen, we have some technical issues. Please hold the line. We will continue shortly. Ladies and gentlemen, sorry for the issues. We will now continue with the conference. Mr. Bossard, please go ahead.

Ladies and gentlemen, welcome to our semi-annual results webcast 2026. Stephan Zehnder and I are happy to guide you through the following agenda. After a few words on the highlights of 2026, Stephan will navigate you through the financials. I will then follow up with an update on our Strategy 200 developments and our focus for 2026, followed by our financial targets and an outlook. So let me start with the highlights. I would like to split this into 2 sections: The general market perspective and the Bossard view. From a general market perspective, we have seen the following. A positive structural demand. Trends continued across railways, semiconductor and electronics, data center infrastructure and aerospace industries. Demand continued to improve during the first half of 2026. Europe returned to growth, the Americas recorded accelerating growth, while Asia maintained its robust growth trajectory. We have seen Swiss franc appreciation versus most currencies. Demand for automated data-driven [indiscernible] parts management solutions sustained. From a Bossard, we can highlight the following: We seized opportunities and gained market share in growth industries. We successfully executed our growth initiatives. Targeted procurement measures helped to retain margins and reduce product cost. Our operations and sales engine initiatives enhanced internal efficiency and customer value. This includes the rollout of our global ERP system, Microsoft Dynamics 365 and our AI initiatives. We continue the implementation of Smart Factory solutions, reinforcing customer relationships and differentiation. With these highlights, I'm happy to hand over to Stephan Zehnder for the financial review. Stephan, please.

Thank you, Daniel. Good afternoon, ladies and gentlemen. The first half of 2026 was characterized by an improving market environment, shaped by ongoing geopolitical uncertainties and changing trade policy developments. Against this backdrop, the Bossard Group generated sales of CHF 575.7 million in the first half of 2026, corresponding to a growth of 9.7% in local currency. In Swiss francs, sales increased by 5.3%. Currency effects reduced the reported sales growth by 4.4 percentage points, mainly reflecting the recent appreciation of the Swiss franc. Based on the current exchange rate levels, the negative currency impact is expected to ease in the second half of 2026. All 3 market regions delivered positive sales trends, although pace and drivers of the growth differed by region. Europe returned to growth, supported by a broader recovery across key customer industries. America recorded accelerated growth momentum, benefiting from the continued improvement in demand as well as additional support from the pass-through of import duties. Asia maintained its robust growth path, driven by sustained demand in several growth industries and continued positive momentum in selected local markets such as India and Malaysia. At the same time, the demand normalization observed in the second half of 2025 continued and gained further momentum during the first 6 months of 2026. The encouraging growth continued in rail, aerospace, semiconductor and electronic industries, reflecting sustained demand and benefits Bossard's strong positioning in these attractive growth markets. Overall, the development demonstrates the resilience of Bossard's business model and the benefit of its geographically diversified market presence. While currency effects continued to weigh on reported sales, the underlying business performance showed signs of recovery and improvement across the regions. The further look at the income statement shows that gross profit margin increased by 11.7% to EUR 198.3 million in the first half of 2026. As a result, the gross margin improved from 32.5% in the prior year to 34.4%. This positive development was supported by targeted purchasing measures, selected price adjustments and a favorable customer product mix. It also reflects the group's continuous focus on margin quality and disciplined commercial execution despite a still demanding market environment. Selling and administrative expenses increased moderately by 2.7% from CHF 124 million to CHF 126 million and therefore, remained clearly below the sales growth rate. This development demonstrates continuous cost discipline across the group despite additional expenses related to the higher number of full-time equivalents, which increased by 1.6% to 3,178 FTEs. Salary adjustments and the ongoing rollout of the new ERP system in the group. In particular, the higher license fees arose as more users were brought on to the new platform during the implementation phase. In addition, investments under the Strategy 200 continued as planned with a particular focus on digitalization, process standardization and efficiency improvements. The ERP rollout remains a key element of the transformation agenda, supporting the group's ambition to harmonize systems, improve transparency and strengthen operational scalability over the long term. The combination of higher sales and improved gross profit margin and continued cost discipline had a clearly positive impact on profitability in the first half of 2026. EBIT increased to CHF 72.9 million compared to CHF 55.5 million in the previous year. As a result, the EBIT margin improved from 10.2% to 12.7%. This development demonstrates the group's ability to convert sales growth into stronger operation earnings. The financial result amounted to CHF 2.4 million compared to EUR 5.6 million in the previous year. This improvement was mainly driven by lower interest expenses, reflecting a more favorable financing cost base and positive currency effects. While a negative contribution of CHF 1.7 million resulted from the foreign currency revaluation in the previous year, we experienced a positive impact of EUR 0.2 million in 2026. Overall, the development of the financial results contributed positively to the group's earnings performance compared to prior year. Net income increased significantly in the first half of 2026, rising from CHF 38.7 million in the prior year to CHF 54.7 million. Return on sales increased from 7.1% to 9.5%. As already mentioned, we experienced different sales developments in the 3 market regions. In America, Bossard recorded sales of 17.3% in local currency in the first half of 2026. Next slide, please. Reported in Swiss francs, sales increased by 7.9% to CHF 123 million compared to CHF 114 million in the previous year. The region benefited from the continued recovery in demand that started in the third quarter of the prior year and gained further momentum during the first half. Sales growth was additionally supported by the pass-through of import duties. Positive developments were seen across several customer industries, including mechanical engineering, energy, electromobility, data center infrastructure and agriculture with the agriculture sector further supported by the acquisition of a new customer. This positive development was partly offset by the appreciation of the Swiss franc against U.S. dollar, which weighed on the reported sales. In Europe, Bossard delivered solid sales growth in the first half of the year. Sales increased by 5.8% in local currency and by 4% in Swiss francs, reaching SEK 349.7 million compared to CHF 336.3 million in the previous year. This positive development was supported by Bossard's strong market position in the region and its ability to further strengthen customer relationships across the key industries. As a result, encouraging growth rates were achieved in the aerospace, rail, electronics and mechanical engineering industries. The performance in Europe, therefore, underlines the resilience of the business model and the benefits of a well-diversified customer and industry portfolio. In Asia, Bossard achieved strong sales growth of 15% in local currency and 6.8% in Swiss francs, reaching SEK 103 million compared to SEK 96.4 million in the previous year. The region maintained its upward momentum in the second quarter, reflected in sustained double-digit growth. In India, the company continued to benefit from the Make in India initiative, while in Malaysia capacity expansions of global manufacturers, in particular in the semiconductor and electronics industry had a positive impact. Organic growth continued also in China, driven notably from the electronics and mechanical engineering sectors. The appreciation of the Swiss franc against Asian currency also impacted the sales performance in this region. Upon review of the balance sheet, total assets increased during the comparison period from CHF 940 million to CHF 976 million, primarily driven by the positive sales development. Equity also rose by CHF 59 million, supported by the sustainable year-on-year improvement in profitability. And overall, Bossard continues to maintain a solid balance sheet, reflected in an improved equity ratio of 39.1% in the prior year to 42.7%. Compared with the previous year, operating net working capital increased from CHF 502 million to CHF 540 million, reflecting the higher level of business activity and the corresponding increase in operating volumes. In relation to sales, capital intensity did slightly increase from 49% to 49.2%. With a focus on the balance sheet ratios, year-over-year net debt decreased from CHF 347 million to CHF 317 million. The decrease was primarily related to the positive cash flow, which is due to the better business performance. Considering that CHF 30 million dividend payout in April 2026, the reduction in debt was even more significant. The gearing net debt measured against equity decreased from 1 to 0.8, whereas net debt in relation to EBITDA decreased from 2.8x to 2.1x, which is close to our rather conservative set long-term funding ratio of 2. Assuming continued positive business development in the second half, we expect this KPI to improve further by year-end. In the first half of 2026, total capital expenditure amounted to CHF 15.3 million. Thereof, CHF 2.7 million was spent on office and warehouse maintenance and investments related to ESG initiatives. An amount of CHF 2.6 million was allocated for replacement investments within ongoing operations, and we invested CHF 2.2 million in smart devices, installing them at our customer sites as part of our Smart Factory solutions. We invested a substantial amount of CHF 7.8 million in our digitalization initiatives. The biggest share of this investment was dedicated again to the rollout of the new group-wide ERP system. Further deployments are planned for the second half of in Switzerland, Spain and China. A look at the cash flow statement also reflects the current business development. The cash flow from operating activities before changes in net working capital increased from CHF 56.2 million to CHF 72.9 million, whereas the cash flow from operating activities increased from CHF 32.7 billion to CHF 42.1 million. Cash flow from investing activities totaled CHF 17.5 million compared to CHF 77.1 million in the prior year, which was significantly below last year's figures. This is primarily attributable to [indiscernible] the substantial outflow of funds in the prior year due to the acquisition of the Ferdinand Growth Group. Overall, the first half of 2026 resulted in a positive free cash flow of CHF 24.6 million after the prior year's negative free cash flow of EUR 44.4 million. With that, I conclude my remarks on the semi-annual results 2026, and hand over back to you, Daniel. Thank you.

Thank you, Stephan. With this, I'm happy to switch over to our Strategy 200, its progress and focus for 2026. As you know, Strategy 200 is not a 200-year strategy, but the strategic ambition we follow by 2031 when Bossard turns 200 years old. Details of the strategy can also be found in our Investors manual available on our website. In essence, we aim for profitable and sustainable long-term growth based on our proven business model organically and through acquisitions to achieve relevant market shares in our key markets through 7 strategic initiatives. I will not go through all initiatives, but only highlight 3 of them more in detail, marked white on slide. The first one is, together we create our cultural initiative, and our promise to live up to our guiding principles. These basically circle around collaboration, experimentation, empowerment, talking real, addressing and solving issues quickly and delivering value. In the end, we want to improve global collaboration to ensure we can do more with the same staff sharing experiences, learning and benefiting from each other across functions, regions and hierarchies. We foster this through internal training and financial as well as nonfinancial incentive structures. Since aging is not only a Western Hemisphere demographic topic, but also a reality in Bossard, we put a special focus on succession planning and rejuvenation of our organization to ensure sustainability and make it easier to embrace new technologies by younger generations. In the end, we continuously focus on talent and leadership development to ensure the successors meet with our cultural requirements. The second initiative is the sales engine. Within this, we focus on growth verticals to foster sales acceleration, which is in the railway, semiconductor, data center and aerospace sectors. Some examples are Pilatus, where we signed a 6-year [indiscernible] agreement beginning of this year, leading to tenfold in our animal sales in the coming years. Another example is AGCO, a U.S.-based agricultural equipment manufacturer producing brands like Ferndt, Massey Ferguson and Valtra. We won the customer last year from one of our major U.S. competitors. We installed more than 4,000 smart bins in 4 different U.S. plants and are currently ramping up looking into a high single-digit million U.S. dollar turnover this year. And the last example is LAM Research, a U.S.-based leading global supplier of wafer fabrication equipment and services for the semiconductor industry. We won an annual double-digit million U.S. dollar contract last year with a multiple year commitment. LAM Research announced to double their output in 2027. And again, in 2028, let's see for sure on the growth trajectory. Another area for sales growth is the data center ecosystem and tier suppliers. Bossard serving more than half of these customers that you see on the chart. And all of them are in growth mode. For example, Schneider, Legrand, ABB, Siemens, Eaton, et cetera. Within our sales acceleration initiative, we focus on developing these customers globally. Besides focusing on growth customers, we are also looking into expanding our relationships with our existing customers globally with additional products and services. The program we are running here is called G60. These are basically 60 global customers, which we serve in at least one country today, and see the potential to serve them in other regions as well. A dedicated global Bossard team takes care of these customers and ensures a coordinated approach to knowledge sharing customer acquisition and implementation support. A good example would be SEW-EURODRIVE, where we look into expanding our relationship from the U.S. into Europe, or Enderson Houser where we are in the process of acquiring U.S. plants. All these activities are supported by our new global KPI dashboard. Some of you probably saw the demo at our Capital Markets Day last October. The tool is based on our new ERP system and CRM and allows global transparency of customer business development, open opportunities and conversions. It's used as internal tool to create transparency and to benchmark between areas and sales teams. And last not least, we continue with our focus on Smart Factory services used as an enabler to win new business and create customer loyalty or stickiness. We are constantly updating and enhancing our smart win with latest technologies. We just introduced an easier and more cost-effective battery system and we continuously enhance the underlying software with AI features to support us in making sense of data and reducing stock outs. As of June this year, we served over 1,100 customers globally with close to 0.5 million devices. We see a net growth of installed devices of 4% compared to last year. That's what you see here in the last bubble. Smart Factory Assembly, our latest Smart Factory service has also helped us onboard new customers and create peace of mind for existing customers in their assembly. As of June, we served over 120 customers with over 300 installations globally, growing 25% compared to last year. Again, you see the number of the last bubble. With our third initiative, the operations engine, we will conclude the introduction of our new ERP system, Microsoft Dynamics 365 by end of this year. After 23 rollouts, last one in Switzerland, China and Spain in H2 2026, we will have 61% of our business on the new system. The rest are acquisitions, which will follow in the next 5 years, many of them run smoothly, and there is no need for change and will operate with interfaces. The new system allows us to create much better transparency, quicker response to global customer requirements and faster acquisition, as mentioned before. AI addresses the same benefits. We are focusing on initiatives which improve internal efficiency, such as, for example, document processing which allows us to process customer requests for products and prices much quicker with less staff. At the same time, we use AI to improve customer responsiveness with quicker turnaround times to customers and less inventory stockouts as mentioned before. We reviewed our supply chain infrastructure and processes and opportunities globally to become leaner, for example, regarding our product portfolio and storage locations, optimizing purchasing volumes into fewer warehouses and by that, reduce total cost. We created an internal benchmarking tool for our warehouse locations to challenge warehousing costs and processed order lines and we set KPIs to measure supply chain management-related improvements. For example, purchase price value a KPI measuring the improvement of product procurement costs over time. After all, we reallocated group resources outside of Switzerland, not at last due to the high negative Swiss franc currency impact. Since last year, we moved key IT personnel from Switzerland to Spain where today, we run an IT hub with 25 people and are no longer replacing staff in [indiscernible] but in Barcelona. We are currently looking into other group functions and how we can reallocate costs. After the review of our Strategy 200 and our focus areas, a few words to our financial targets and the outlook for the business year 2026. I assume you are mostly familiar with our midterm financial targets, which is basically organic sales growth of bigger than 5%. Operating profit margin, EBIT of 12% to 15% and equity ratio of over 40%, dividend payout ratio of 40% of net income. We confirm these targets. For the full year, we are expecting an organic sales growth in local currency of over 5%, in line with our midterm goals. The EBIT margin will continue to improve compared to last year. With this, we are concluding our remarks on the semiannual results and are happy to open up for questions.

[Operator Instructions] And the first question comes from Tobias Fahrenholz from ODDO BHF.

Yes. So two question blocks, if I may. On the general business momentum, could you speak here a little bit about the monthly sales trends in the second quarter and also start into July. And if you could maybe also touch on a potential restocking in there and what tariffs and higher prices were doing and what could they do in the second half?

In general, the momentum from the first quarter continued in the second quarter. We can clearly confirm that. So, so far, that looks very good. And how far we see restocking, I have to say, -- we don't hear and see that a lot from our customers. So it's not mainly restocking-related growth, but it's really actual demand related growth. So that's what we clearly see with the majority of our customers. I cannot recall any customer now who would have told us well, it's mainly because of restocking. That's actually not the case, at least for the majority of our customers we talk to. So in that sense, a positive. Now on the tariff side, as you may know, we are still under the steel and aluminum tariff jurisdiction in the U.S. So in that sense, this is going to continue, and there is not going to be an expiry of this to be foreseen. So in that sense, the price increases that have taken place will stick. And so far, we don't see any reason why we should remove them.

Okay. And then on profitability, could you quantify these additional ramp-up costs which you have in Switzerland and China? And is it fair to assume at the end that you'll have a typical have it split with around 55% in the first half and 45% in the second half, meaning that you might come in a notch below your 12% to 15% EBIT margin range.

Well, it's always reality that, of course, the second half of the year is a bit less performed due to slower July due to slower December, and that's always the case. And we still see additional costs coming up with the implementation of our ERP system, how much exactly will come extraordinarily. We don't know. Of course, there is some sort of planning. But for sure, we will continue the positive EBIT development trend compared year-to-year. So looking into the end of the year, you will see a significant improvement. Whether this is exactly in the range you mentioned we leave open, but we are very optimistic that we see a very good improvement compared to last year. I know, that's not what you wanted to hear maybe but talk about for the question.

And the next question comes from [indiscernible].

Yes. I also have two, if I may, and also the first one would be on the guidance, but more on the top line. you quantified it there as over 5% organic for the full year. So if you consider now the first half of almost 10%. Maybe you could explain what makes you so conservative about the second half, namely to include the possibility that growth would be or decelerate to almost 0%. And then the second one would be on the gross margin. Now the 34.5% is an extraordinary high level if we compare it to the past. So I'm just wondering if there is any effect here that we should not take as a permanent one as a one-off. And also there if possible, could you provide a bridge between the price increases, mix effects and procurement effects that you mentioned earlier in the call, this would be very helpful as well.

Okay. I will take the first 2 questions. Maybe, Stephan, you can talk about the procurement price effects. So the growth on 5 -- more than 5%. So we said it's not -- it's like more than 5%, right? So we didn't say it's going to be at 5%. So it's going to be more than 5%. So currently, yes, 10%, but -- so it could be more. But we just want to be in line with our financial target commitment, which is basically saying over 5% since the world is still very volatile, we never know what's going to happen, looking at our current situation and with some customers with a bit longer lead time order books, it looks very positive. But again, on the other hand, we don't know what's going to happen in the next 6 months politically and any blockages and so on. So we stay a bit conservative, but definitely, it will be more than 5%. On the gross margin, the 34%, bigger than 34% what is sustainable. I think it's really a product mix that we have seen. So I would say most of what we've seen is not a one-timer. It's mostly, I would say, rather sustainable also to do with industries that we're serving, imagine some industries like the aerospace, for example, availability is still more important than price. So there, the pricing is not a big issue. Well, so it's an issue somehow, but it's really more about availability. So we have sectors also in the data center arena where availability is still more important than price. So in that sense, we can benefit. And also, when it comes to tariff-related increases, we managed to maybe get an increase, which was a bit bigger than just covering the additional cost that we had and we're also benefiting from that as long as we still have stock. This could be partially one-timer, but I would say we're on a good track here also in the States, keeping up the margins. So I would say most of it, at least 2/3 would be sustainable. Now the third question was on procurement and price, maybe, Stephan, if you could...

Yes, I can take that one. So on the procurement, as Daniel mentioned before, we have this KPI, which we will start to track. I can't give you -- it's not a [indiscernible] number from that perspective. So there is dedicated activities within the different business units, which we can see based on the action and we track certain prices by certain product segments, which we can see. It's keeping at least the same cost level, although we have seen that certain prices went up, specifically driven by -- also by the energy cost. One thing was what was also dedicated, of course, is with these price increases to negotiate on one side with the customer, to convey those further cost to the customers. That's one part of it. And the other part, of course, it's always 2 sides to negotiate also if the suppliers. But you can see based on the activities that we created a positive impact from the procurement side. But to give you a number by 1 million SKUs, 40,000 customers, it's a bit difficult ambition. But I think what Daniel mentioned before, the biggest part is really the product and the sales mix, partly driven by the growth by the segments, aerospace, also semicon and the other part is that we have a bit different gross profit margin mix within the regions. And seeing that Europe got a bit more momentum that also changes the product mix from that perspective. And obviously, that has also a positive impact with Europe, Europe coming back a bit with the higher EBIT margin with this region, which benefits the group's profit mix at the end of the day.

And the next question comes from Sebastian Vogel from UBS.

I've got three questions. I would ask them one by one. The first one is with regard to your revenue share as part of the group revenues related to railway, aerospace and semi. Can you give us the sort of ballpark what was this share in the first half 2026. And to put things into context, how this number roughly was looking in the first half of 2025.

So on the railway, the share remains about 9%. Also, we do about 9% now in aerospace, which was rather 7.5%. So we gained momentum, additional revenues from that perspective. And as we elaborated already in other meetings or calls, what's related to semicon or electronic semicon related sales, it's not a one-to-one comparison. So we have a one-to-one relation with certain customers, but there is other industries which benefit also from this semicon trend, whether it's in machine building or in general electronics. But we assume that this is somewhere about 6%. So basically, we have with the aerospace, with the railway and the semicon, we have a solid 25% of the turnover, which is contributing positively at the moment to the business development.

And that number was around like 22%, 23% last year around or...

About, about. Yes, about I would say. So I would say it's about 2 percentage points up 2 to 3 percentage points.

Got it. Second question is with regard to the U.S. specific, the benefit from the pass-through of the U.S. tariffs in the second quarter. Can you give me a number there? Was it around like the EUR 5 million? And what is sort of to assume for the third quarter? Or is it pretty much a annualized?

So if I look at the first half year, the tariffs' impact in U.S. was about 60%. So organically, can say it's somewhere 7% growth. If you look at the group, it's the organic growth without the tariffs is somewhere 7.4%. So it has an impact of about 2 percentage points. And we started to pass on the tariffs in Q3 last year and became on the full run rate -- so there will be kind of a slowdown in the growth rate due to the tariffs. But it's also here, it's not an exact number, which we can give you because it's always a combination of tariffs we pay and on the other side of price increases we get through the supply chain.

Got it. And then the third and last question on my side. With regard to these gaining the additional agri customer that you were alluding to in rough terms, by when would that be sort of annualizing and being then reflected in the base? Would that be something for the third quarter or for the fourth quarter? Or do you have any indication that we can provide us with?

No, it started actually beginning of this year already. So we installed the systems by end of last year, and we started ramping up this year and should already see 80% of the business in this year. So yes, that's about how it looks like.

And the next question comes from Louis Billon from [indiscernible] Europe.

So my -- I have a question on could you provide us -- what is the percentage or an idea of the percentage of sales related to data center?

That's a difficult one since there is numerous tier suppliers delivering also indirectly into data center customers. So it's hard to give you a number. So -- we don't have that number. So I would say, overall, something between 5% and 10%.

Okay. That -- and maybe another question, if I may, on the smart device installed base. It's growing 4%. Is it -- are you comfortable with this growth rate? Or were you expecting more significant growth?