Bystronic AG (BYS) Earnings Call Transcript & Summary

Good morning, everybody, and great to meet you and I'm pleased to present you our half year results 2025. We -- as usual, we have the same agenda. We will go through the business review, afterwards, the financial review. And then I will give an outlook for the full year 2025, and then we will close the session with an open Q&A. Before we start with the business review, please take a minute to go through the disclaimer. I will just read it by myself and expect you do it in the same time. Perfect. So let's start with the first slide. Can we say that we are pleased with the performance of the first half year 2025? Of course, not. We are still negative. On the other hand, it went as planned and as we expected. We had a still challenging market environment, but we saw a stabilization of the order intake with this nearly CHF 307 million (sic) [ CHF 309 million ] which is an increase of 3.5%. As expected, we have a lower net sales, but I want to emphasize, and you will see it later on, that we have the first time since years, a positive book-to-bill ratio. That means net sales lower than the order intake, and it was exactly as expected. Thanks to our cost reduction efforts and our reorganization and even our operational excellence, our EBIT loss was substantially smaller than last year despite a similar sales level, which is a huge achievement of being better by 66%, which I think it's the biggest achievement of the first half of the year. So how the market looks like, it's a mixed view. I think we can start with the order intake on the left side. That's why I'm talking about the stabilization on a low level. So we had a continuous fall down since years. And now we see that we reached a level with a side where it's move. And of course, from quarter-to-quarter, it might be a little bit different, but we are more or less in the same range. Let me give you an update on the market development and what we are seeing per region. The market has been weak in the past quarters. But again, we think we have reached the bottom, and we could stabilize orders. And we should not forget that there is always, especially in Asia, a price deterioration, which means that we are even selling in terms of machines more, right, to reach the same numbers as in the past. When we initiated the restructuring, I have mentioned that we faced some quality issues and therefore, have also lost some trust from customers, which, of course, ends up even in loss of market shares. And I think here, we have done a fantastic job to regain. Our worst-case scenario could, therefore, have been that we lose additional market share, but we don't. However, we could stop this negative trend and see positive reactions from the customers. And here, I have many, many examples, but I think we see it with the stabilization of the order intake. When it comes to the regions, everybody could think that Americas leaded by U.S. could be weak due to the tariff situation. I think here we managed the situation in a very good way. I just want to remind you that we have our own manufacturing in the U.S. as well. We reacted very fast. So we increased our portion of local sourced part and local produced part in Americas so that we were able to swallow basically the tariffs. And on the other hand, the market even accepted a slightly price increase. So we still see a quite strong Americas. It's above our expectation. Positive as well is China. We have really good demand for automation and smart factory solution. This is for our Bystronic brand as well as for our second brand, DNE. So let's put it this way, the package made by the Chinese government is really supporting the market dynamics. APAC is from region to region or from country to country a little bit different. But in overall, it's better than we have expected. The biggest pain we have in EMEA led by Germany; we don't see a real recovery in EMEA. This is somehow disappointing. Was it expected? Yes, that's why I'm very cautious to say that there is a very strong recovery. So we don't feel ramping up so far. It is from country to country, slightly different, whereas countries like Italy and Spain are performing quite well, but DACH really, really difficult. So it is in overall, not the dynamic we would wish to see. But in overall, again, order intake and the development of the order intake is stabilizing as expected. On our next slide, I want to just emphasize that -- I have a problem here with the slide, one second. We have -- yes, so now we are on the right line. We have successfully completed our restructuring and our reorganization, which was, of course, one of the most risky part of the last months, but it worked quite well. Before we dive into the results of our restructuring, let me once again provide some more context here because it's very important why we did it and why we were so fast and why we did not lose time to make it. I think this is very important. So with the measures I have just explained, we could substantially reduce our cost base -- no, I think we have -- excuse me, just go one slide back. I mean, again, we have introduced our divisional structure with Systems and Service, and we kept our strong market focus, clear responsibilities and fast decision-making. As I mentioned at the beginning, there is a restructuring process in there why the result is better, but we even increased the efficiency. So operational excellence brings to better results as well, right? We consolidated group functions. We optimized production setup. And this is something we are starting really to feel, and we see it even in our numbers. On the other hand, it's always the biggest risk when you do a restructuring that you lose your performance in innovation. And I think here, with the move to integrate the R&D into the divisions, especially to the division Systems helped a lot to reduce the time to market, which often was a problem in the past. So -- and then again, expansion of automation solutions, it's key. We see it all around the world. So more and more automation is coming in. So our strategy from -- to develop ourselves from a machine supplier to a system supplier is definitively the right one. And that's why we just recently announced that we are opening our new smart factory even in Bilbao because we are pushing smart factories and solutions. We still have opportunities. I mean, we are a Swiss company. The market expects Swiss quality. I told you in the past that we had some quality issues. I think we are -- we have not yet solved everything. We still have some, let's call it, relics from the past. But slowly, but surely, I see an improvement even on this one. We are coming up with a market-oriented product portfolio. We just defined our road map. I think we made great achievements here. And you will see it later on. We -- the focus on tube laser cutting system pays fully into the order intake. So the competition of our restructuring and reorganization led to a lower cost base. I think here, the numbers are very clear with the measures we just explained, we could sustainably reduce our cost base. This is also proven by the lower OpEx and [ PEGs ] as well as FTEs. With this performance, we are on track for the commitments we gave earlier this year. So the CHF 60 million annualized savings will be definitively achieved. The 600 FTE reductions will definitively be achieved. There might be that we even had to correct it in the other way around because we see a very strong revamp in China, where was -- which was even part of the 600 FTEs. But the most important point is that we definitely will have the full annualized savings of at least CHF 60 million. And you see it in the half year result, it might be -- that we will be slightly higher. And 2/3 of the savings in 2025, in my eyes are given. The average number of FTEs went down from 3,525 from the time we kicked off the restructuring to 2,940. Please remind that especially in the first quarter, we still had some FTEs, which were still in the company. This had a huge impact in the personnel costs from CHF 123 million down to CHF 105 million. Again, here, we will, for sure, see a further improvement in the second half year. But for me, it's important as well, it seems always to be very difficult to use fixed OpEx, but it is possible by closing sites, by doing consolidations. We had many, many assets leased, so by closing these lease agreements and so on. And even due to new locations where we built or we opened up new sites, we will see even further improvements in the future. So with that said, I think we are definitively on track, a little bit overachieving what we had in mind. So this is something we'll see in the numbers. Perfect. Coming to the next slide, we further sharpened our focus on customers, innovation and people because this is very important because again, you can lose everything while restructuring, but while we restructured and reorganized our business, we really kept a high priority on 3 things, and this is keeping our customers, driving innovation and keeping our people motivated. As you might imagine, every restructuring goes on the morality of the employees. You lose your colleagues, and this is something which can be dangerous. I think here, we managed it quite well. One of the most important achievements of our reorganization was the renewed focus on our customers. Again, I keep telling everybody, our customers are paying our salaries. Too often, we believe that the salaries are coming from the company, the customer is the key. So we are approaching the customer as one Bystronic. I think this is something which comes extremely strongly out of the new organization and not from different locations and different providers. We are one Bystronic. And I can tell you the feedback from our customer has been really tremendous positively. For sure, we are not perfect and have not yet solved all issues, but many customers recognize and appreciate the better interaction, communication and the increased support. I think this is very important for the customers. So being taken care is one of the keys in our business. So what we can see is even that the participation from our customers on our events has increased. For example, we have conducted 30% more customer demos versus last year. In addition, we are benefiting of our optimization of our internal processes, and we could even improve our project execution for our customers, which, of course, again, pays into our reputation on one hand. And on the second hand, if we are leaner in executing our projects, of course, we have even savings, especially in the variable OpEx, installation time, third-party support and so on. But in times of economic uncertainty, customers are postponing investments into new machines. So service becomes an even more important role in customer satisfaction. Our service business will stay and remains very attractive to Bystronic, but we see an opportunity as a key driver to rebuild customer trust. There will, for sure, be a question from your side why we have a slightly decrease of service. This is a clear own taken decision that, of course, if you lose market share and if you lose trust from the customer, you sometimes have to gain it back, you have to earn it back, but sometimes you even have to buy it back. And this usually goes over a free spare part or small little things, which we do in favor of the customers. I think let's come to innovation. Innovation is the DNA of Bystronic. It was the driver from the past. I think -- we have to continue on this one. As I mentioned, we already see something in the order intake. It was our successfully launched new ByTube Star, which is definitively one of our lighthouse project, which is opening us new market. In addition to the new product development, we are further improving processing -- processes, standardizing automation solutions and streamline our product portfolio. One other key accomplished is the full integration of Kurago, which was our, let's say, IIoT software company, which we meanwhile converted into Bystronic software and completely integrated in the Bystronic world. So with this move, I think we will be faster. We will reach more customers in the future and reach our customer base, which is huge at Bystronic. So software is key, and we centralized it in Bilbao. We have great access to universities. We are increasing our capacities, and it will be a fully integrated part of our System division. So let's move to employees. We are coming out of a difficult time market-wise, but also following the restructuring and transformation. I can only say our employees have done a tremendous work to cope with all those changes. While trying to improve processes and customer focus. For that reason, we started a new culture and mindset journey with our employees that we are now rolling out globally. And for me, very, very important because, again, we are coming from a negative past. We are going in a positive future, and this goes a lot over culture and how you think the company is going to develop. The program is geared towards helping employees, improve collaboration and developing an entrepreneurial and more agile mindset to better cope with uncertainty while keeping a strong focus on solution. So let's come to our operational performance. I think we already mentioned it. It demonstrates the success of the restructuring. Our net sales declined by 8%. Sales declined in both our division Systems and Service to a similar percentage. Today, the Service business accounts for around 30% of our net sales. Our gross margin improved slightly on one hand, due to the product mix effect, a little bit weaker machine business against service share. On the other hand, I see an improvement in operational excellence. We substantially lowered our FTEs. Our -- also our personnel expense declined significantly. You see here the reduction in OpEx, especially the fixed OpEx by 11%, which is a great achievement. And as we said earlier in the year, we incurred a small amount of onetime costs from the restructuring as announced at the beginning of the year, we are talking about a very low 1-digit million number as expected. So this was, I think, even a good achievement that we could digest most of the one-offs last year. But yes, the first half year has a little impact still from the one-off. So if you compare H1 to H2, yes, you have to consider this. Taxes are higher as our business in the U.S. is developing strongly. That's why between EBIT and net profit, you see a bigger difference. Yes. And in overall, all of this led to a loss of CHF 13 million, which -- CHF 13 million for the half year. Yes, I mean you will have anyway questions later on, and we can elaborate more on this slide when we are coming to the slide. So I think we -- when it comes to our balance sheet, we still have a solid cash position that is slightly lower due to the -- on one hand, due to the negative result and corresponding negative cash flow. But during the first half, we have focused on reducing inventory. For example, we could make better use of stock in different subsidiaries. If a customer requests a specific machine, we focused on faster delivery and made it available from the stock in other subsidiaries. This helped us to push inventory level down massively and our equity ratio remains extremely strong with around about 72%. And again, I think that the biggest cash out we had in here, well, from the one-offs from 2024, and we are talking about around CHF 16 million cash out, which are one-to-one related to the severance payment and so on. Perfect. Cash flow development. That's what I already anticipated a little bit due to the half year loss, our cash flow was also negative here. I think let me point out some key changes here. Our advanced payment declined by CHF 14 million. Usually, this would lead to a thinking that we had a lower order intake. This is not the case, right? Because once our customer place an order, we take several payments. The first payment is due to upon -- due upon order placement and the last payment is due when the handover protocol is signed, and we recorded our sales. This means that machines have been delivered and installed and the customer received the required training. The amount of advanced payment we receive at any given time depends not only on new orders, that's what I just mentioned, but also on how far existing orders have progressed. Since our order intake has been weak over the past 2 years, but our backlog was continuously declining, fewer orders are reached, let's say, the stages where follow-up payments were due. These are the main reason for the decline in advanced payment and not because we have less order intake. It sounds complicated, it's not. For our restructuring, we have made provisions for the onetime costs last year, as I mentioned before. But during the first 6 months of 2025, we recorded a cash outflow for several millions of these costs, which I can say this around about CHF 16 million are paying in directly into this one. Another item I want to highlight to you from our vendor loan to Mammut back, I think since from 2021, we received a prepayment of CHF 15.4 million. So we still have a remaining outstanding balance of another CHF 51 million, which is due in January 2026 (sic) [ 2027 ]. Okay. Yes, 2025 is a transition year as announced. And before we start with the Q&A, let me show you what we expect for the remainder of the year, right? So we still expect continued difficult market situation. You all know we have tariff discussions. You all know we have FX risks. I mean you have seen it on the order intake. We've cleaned up FX rates, we would have nearly CHF 10 million more order intake. So there are certain uncertainties. But on the other hand, we see a chance if the markets recover, we expect even order intake to increase in the second half of the year. Historically, even in the bad years, even last year, the second half of the year was better than the first half of the year. That's normally in our business. Again, I think about currencies, we don't have to discuss the strong Swiss franc sometimes is a burden. On the other hand, it gives even certain advantages. I see that we are absolutely on track with our cost savings. I think here, we can even have a slight upside potential as long we don't have another impact, which we don't know today, right? So even for the second half of the year, I don't expect a very high one-off costs for our restructuring. There will be some lower-digit million, which will impact. And again, the potential financial risk from U.S. tariffs are not quantifiable. And I'm just saying we have to manage it. So I think we are quite flexible, and we are doing it quite good. So the conclusion is, I know that we did not make guidance after the quarterly closing. I think I can confirm what we said at the beginning of the year, assuming the geopolitical situation does not get worse, Bystronic expects slightly lower sales compared to 2024 and an improved operating results for the full year compared to 2024. So we are cautious, but I think for the time being, this is the best guidance we can give. So operator, please move on the first question from the call.

[Operator Instructions] The first question comes from Walter Bamert, Zürcher Kantonalbank.

This is Walter Bamert from Zürcher Kantonalbank. Yes, Domenico, I'm satisfied with the numbers and congratulations to these achievements. My first question is to get more color on the revenue trend. As you know how the order book looks like, do you expect the top line in the second half to be very comparable to the first half or more towards the second half of last year?

So I mean, revenue, it's usually net sales. I think you are referring to the order intake. It depends, right? So we expect a slightly higher order intake in the second half of the year as, of course, depending on the geopolitical situation. But if it stays as it is, we see a slightly increase compared to the first half of the year. When it comes to the net sales, it depends whether the third quarter will already pick up or it's only the fourth quarter because if it starts only in the fourth quarter, we will not have the positive impact of the higher order intake in net sales in 2025. So that's why I stay with my guidance, especially on the net sales that we are -- we will have more or less sideways movement.

So then the second half would be very similar to the first half in net sales?

Yes, small.

If there is no uptick. Okay. Then you mentioned you had one-offs of about CHF 2 million in the first half. There is some more to come, so one-offs in the second half, about CHF 2 million, too. That would be correct?

I never talked about CHF 2 million, Walter.

Yes, low single digit million, in that area. And more one-off in the -- at the same level of one-offs in the second half, low single digit million. And then on the underlying profitability in the second half, typically, you have this CHF 45 million, CHF 55 million seasonality. So the second half with stronger profits plus you have the beneficial effect of better trend based on the restructuring and the efficiency gains and so do you expect the breakeven EBIT in the second half or for the full year?

No, for the full year not. This is -- again, we keep our guidance. We will -- we still expect a negative result.

For the full year?

For the full year.

But it should improve. There is no reason why profitability should deteriorate in the second half if we have a stable revenue development.

Exactly.

Okay. Then in the half year report, you mentioned for the first time, quite a detailed explanation on what's going on in the end markets, in particular, agriculture. And I think also in Europe, you comment on some end markets. Is that more related to the problems of agriculture? Or do you really see OEMs or suppliers to the OEMs picking up with orders in those end markets?

I mean, again, from region to region, it is different. So in the U.S., we see rather a pickup, honestly speaking. So we were expecting -- it's over our expectation, honestly speaking. And again, in Europe, it's vice versa. I mean, with the announced package from the EU and especially from the German government, we would have expected a faster recovery. We don't see this right now.

The next question comes from Tommaso Operto, UBS.

Just a quick follow-up on the previous questions regarding to the cost savings of CHF 60 million. I mean, do you have an idea of how those CHF 60 million spread across H1 and H2? So how much of the CHF 60 million is still expected to come in H2?

Yes, this is a very dedicated, I would say, difficult -- no, difficulty, it is not. I mean we definitely have the 2/3 in overall, right? And I would say that -- how to say the percentage, right? I mean I would say still somehow another CHF 15 million savings in the second half year should be possible, depending a little bit on how high the one-offs will be, right? I mean we still have some inventories and so on, but more or less in this range.

Okay. So the large part of those CHF 60 million already came in H1 basically?

No, it's vice versa. It's the other way around. So maybe I did not explain myself well. I mean, if you look at the full half year, the savings of the full half year should be higher.

Okay. And so for H2, do you expect to be on a breakeven level already for EBIT?

For full year, definitively not. There is a slight chance that we might come close to a breakeven in 1 quarter over a period of 1 quarter, but over the full year, impossible.

Okay. And then you mentioned inventory reduction for the optimization of net working capital. My question there would be, is that kind of already fully optimized? Or do you see like some further area of improvements for the net working capital for the second half?

I think let's put it this way. I mean, you know how it is. I mean one thing is collecting money. The other thing is optimizing our supply chain and the payment and so on. I mean you know all these stories. The factor is as better we execute our project, the faster we can collect the money. And this was a burden in the past. So if you can't close a project because you have quality issues and so you will never collect the money. And this was a big impact in the past, right? And here, we still have some, let's say, some -- a little bit of a burden from the past, but we see further improvement. So there is still slight potential to further improvement.

Yes. All right. And just last question on the tax expenses. I mean you mentioned that there is a regional mix because the U.S. was more important. Is that the entire effect? It's just regional differences? Or is there another impact?

No, it's the biggest impact by far. And the second one has to do, of course, with even so hedging costs and stuff like this, which were very strong. But the biggest effect is definitively from the high EBIT and the high profitability from our U.S. organization, whereas we cannot use the tax losses here in Europe, right?

[Operator Instructions] The next question comes from Aurelien Sivignon, ODDO BHF.

On the market share gains expected in H2, will this involve any changes in pricing? I believe you mentioned during the call some pricing pressure in Asia. So underlying question is, should we expect any impact on gross margin for the rest of the year?

No, not at all. You should not forget -- let's be very clear. We don't have a margin problem. We don't have a gross margin problem. I don't see that we will have a gross margin problem. We would need a little bit of more volume. I mean the restructuring was very successful. But of course, we aim more volume, right? So that's the point. So we are not losing a margin. Of course, it is a tough market. When I'm talking about China, it is a continuous low-price level. So you don't have the same price levels from region to region, right? That means that you -- especially in China, Mainland China, you have different, let's say, different margins than with exporting from China, right? But the mix of both makes it again on a normal level. So that's positive. The second thing what we should not forget, I mean, we're always talking about FX effects and so on. Of course, volume-wise, top line, it seems to be lower due to the currency. On the other hand, we can even purchase in local currency and buy cheaper, right? So -- and the second, and I think it is also the last one, which is impacting a lot is really we have some big components, which are buying parts used in our machines. If they lower the price, right, even our price is getting better, but we don't lose gross margin points.

Okay. That is very clear. And then just a follow-up on CapEx. I think H1 level was quite low, I believe, roughly 1.5% of revenue. Is it temporary? Or would you say it can be a sustainable level going forward?

It's definitively target of mine to keep it lower than in the past.

To 1.5%?

Yes, it's difficult. It depends from year-to-year. We will, of course, especially having the bigger IT projects coming up in the coming years, it's difficult to just stick on a number. But from the range, it is more or less the one we want to keep.

Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Domenico Iacovelli for closing remarks.

Okay. Thank you very much. And sorry for messing up. I had one presentation or one slide missing, but it was my mistake when I printed it out. Thank you very much for listening. I wish you a wonderful rainy day if you are in Switzerland, and I hope some of you are somewhere on the Maldives and enjoying the nice weather. Have a great weekend. See you. Buh-bye.