DEUTZ Aktiengesellschaft ($DEZ)

Good morning, ladies and gentlemen, and warm welcome to the Q1 2026 Conference Call of the DEUTZ AG. Please note that this call is being recorded and a replay will be available on deutz.com later today. So your participation in that call implies your consent to it. I'm pleased to welcome DEUTZ CEO, Sebastian Schulte; and CFO, Oliver Neu. And as always, please take a note at our disclaimers, especially regarding forward-looking statements. So with this, we start the presentation, and I'm handing over to the Head of Investor Relations, Communications and Marketing, Lars Boelke.

Thank you, Sarah, and a very good morning from my side as well in Cologne. Thank you for participating in our today's conference call. I'd like to welcome you as it is the first time we report in our new structure with 5 business units, reflecting the different markets and thus providing you even more transparency and clarity. At the beginning of our presentation, Sebastian Schulte will share a view on the key figures of Q1 and then provide an implementation update of our strategy along these 5 new business units. Obviously, next, our CFO, Oliver, will give a detailed overview on the group's financial performance. With a look at the guidance and our strong Q1 momentum is pushing financial year performance, Sebastian will wrap up. Post of course, we move forward to your questions. Sebastian, please go ahead.

Thank you very much, Lars, for the introductory words. And from my side, a very warm welcome as well to our Q1 earnings call 2026. And we started really, really positively into this exciting but also challenging year 2026. DEUTZ '26 is all in the light of transformation, but also in the light of growth, profitability and successful start, as I said. A couple of highlights which are behind us or where we are in the middle of it. Let me be more precise. So first of all, and that was an exciting moment for all of us. We were promoted from the SDAX to the MDAX, which is a nice milestone and nice recognition of the successful work that the teams at DEUTZ have been performing. And obviously, that's a result also of an above-market share price performance. We see it here for the last half year where we compare our stock performance to the MDAX performance. We're clearly ahead of the index. And if you look -- if you would -- were to look back at '24, the gap is even more significant. So -- and that's the sign that our work is paying off. Frerk acquisition in our energy business unit, I'll come to that later, gave us an order intake impact of almost EUR 150 million. So that's contributing to the growth, but it's not the only contributor to the growth. And what I find particularly encouraging, quite frankly, is that next to all the successful ramp-up of new business units, also the sort of heritage business unit, our engine business unit, but also supported by service sees quite positive momentum in very relevant markets, namely construction and agriculture. So all in all, a lot of positive points in our transformation. And hence no surprise that with all these positive points, we also see that reflected in the numbers. New orders been up significantly, 41% year-over-year, EUR 771 million order intake, new orders. That's great. Revenue at EUR 530 million, also up 8%. So one of the highest numbers on a quarterly basis DEUTZ has delivered, well, in the company's history. And the same applies for the EBIT margin. We are now at 7% EBIT margin, which is also 1.8 percentage point better year-over-year. And we always need to bear in mind that the first quarter of the year is typically not the seasonally strongest quarter of DEUTZ. And in fact, that's also underlined by the fact that since the start of the downturn, the end of '23, that is the best quarter we have achieved. So very encouraging news. Important, I'd like to repeat that we've shown that at the annual results call earlier this year. We've also started, Lars said it in his introduction words into the new year with a new structure and a structure which clearly follows the company strategy. So we introduced business unit set up in January '26. And next to the group-wide management, Oliver, CFO; Katharina, EVP for HR, Strategy Transformation. We have now in charge dedicated business unit leads; Marco for Defense, David for Energy, Markus for Engines, Bert for NewTech and Andreas for Service. And that's more than just an organic run. It just shows that we take our strategy seriously. We've implemented the structure to have a responsibility on a P&L basis for each of the business units, even though they are at this point in time, still different in size, but all extremely relevant. So that's why we needed this clear responsibility. And I can tell you the setup is working extremely well since we implemented it. Well, let me now walk you through the business unit by business unit. And I'll start with the largest business unit with the business unit engines. And what is -- what happened at engines in the first quarter. It's positive again, back in black, that is great. And we also see a very positive momentum in order intake. And I show that here on these numbers. We'll not go through it all in detail, but what you see is, particularly if you compare Q1 '26 with Q1 '25, in terms of revenue, only slightly up 5.3%, but well, see where we were in Q3, for example, but in terms of new orders, up 26%. So that means there are -- the fundamentals become stronger. There is a certain recovery in certain sectors, particularly the very important construction and agri for us. And we also see the growth dynamics in all regions. It's even a particular momentum in China, that's the smallest region for us, but that was a contributor here with high-margin business as well. Profitability went up significantly. You see that. But at that point, last year, we were slightly negative. This is a like-for-like comparison. So you will not see these numbers in the presentations of last year Q1 '25 because we're bringing here the numbers into place so that we compare apples with apples. So profitability went up significantly. Yes, of course, high utilization, but also the cost savings, the Future Fit program, we will hear from Oliver later as well as obviously the positive order momentum. Sales growth with new products, there is a significant strong interest also in our new engines. We introduced a couple of weeks ago our G-Drive initiative like engines for power generation. We hosted that here in Cologne after an important trade fair in Dubai was canceled. So we hosted that here. We received strong interest, more than 30 potential customers were there. And this is something we do not see in the new orders yet, but we expect that to materialize in new orders in the coming quarters. And of course, very important strategic work we're doing with the team, Markus and his team are doing. We are streamlining and aligning here our portfolio and also the footprint in order to further push the profitability because of this 3.7% is a great development compared to previous years, but that should not be the end of what is possible. We're working also on efficiency here in our main assembly plant in Cologne, Porz. Notable savings potential has been identified and is being implemented. So here, we clearly see that the new responsibility we put in place is beginning already to pay off. So all in all, engines on a good development, both from a top line and market driven, but also obviously, from what we have under control in our internal measures. Let me move on to service. And service, you see here a picture. It's a great picture actually. This is our material, our logistics center obviously in Cologne, where we implemented a new -- an out of store, that's AI-driven storage management, which significantly reduces cost, but also increases capacity for our spare parts, both is extremely relevant given that in service, we are on a growth path. And in March and I'll come to the quarterly numbers in a bit, but in March the service business for the first time yielded revenue significantly above EUR 50 million. And that's great. I mean, 2 years ago, 3 years ago, we were always around EUR 40 million. Now we are at EUR 50 million. And that shows that on a monthly basis, we are improving here the run rate significant. You see that here also on the numbers. In the last year, we were always between EUR 130 million, EUR 138 million. Now in Q1, we're at EUR 148 million, and that's particularly driven by February and March, given January is always a bit of a weak one. And also this growth came across all regions, both driven by parts, but also aftersales business and integration of our acquisitions. We did a few acquisitions in the United States as well as in Europe. I mentioned the EUR 50 million revenue already. The traction we're improving is also by our international network expansion. The logic is very simple. The more service center we have, the more profit we achieve, right? We do have -- we do follow a further growth investment in our regional infrastructure, particularly in Europe and the Americas. We're opening new power centers across the nation in the U.S. And that is the only sort of critical point we'll see at this point in time is that the ramp-up reduced the margins a little bit, but on a very, very high level. And also the margin in Q1 '25 was a little higher than normal because at that point, we had a very high share of spare parts business, but we expect normalization across 2026. So by no means, this is a problem with margins. It's actually a very healthy profitable growth going forward. Let me move on to energy. Energy, yes, besides to defense, our sort of biggest growth case at this point in time. And I showed it -- I said it initially, growth momentum comes, obviously, in particular from the new acquisition of Frerk, which is, as you know, active particularly in the data center business, which is a market which enjoys not only now but also in the next 3, 4, 5 years, at least a very high growth momentum. Looking at numbers, Q1 is also first time here, the revenue was at EUR 50 million, obviously, a bit driven already by the inorganic effect from the acquisition of Frerk, which joined us, the closing was happened in the middle of the first quarter. So that's why here, it's not really a like-for-like comparison if I compare Q1 '26 with Q1 '25. So EUR 145 million of order intake was contributed by Frerk. And now we have new orders just above EUR 200 million, and we have an order backlog of EUR 240 million in the business unit energy. So that means the visibility of this business is extremely strong, and that applies to both top line as well as bottom line. I will come to that in a minute. We're making extremely positive progress with the business unit energy to really create a global unit. Frerk is obviously supporting in Germany, but also in neighboring countries. DPX, our Chinese setup is supporting out of China to also drive growth in Europe and, of course, in Asia. We do have a little margin dilution in the first quarter, particularly driven by FX in the United States as well as change in the product mix. But we expect a significant improvement in the second quarter. So the numbers we see here in Q1 '25, that's more the level of profitability we expect throughout the year. So that's why this is a temporary thing. And we will come later in this presentation also on the guidance for the full year where we will also give you a little bit of details on the guidance for the business unit. So the guidance we provided for energy is very safe and sound at this point in time. And the growth perspective, as I said already, is continuing to remain extremely dynamic, particularly because of that data center opportunities we have in Europe, but also Blue Star continues to grow above what we initially had to see. And on a smaller scale, but very encouraging, our North African genset business in Casablanca and Morocco, MAGIDEUTZ. We always explained that was a bit of a turnaround case. The turnaround has now been achieved. The company is EBIT positive and also enjoys growth, obviously, on a smaller scale with annual top line in the mid EUR 20 million. And of course, one important aspect of creating a global energy business is obviously that we are now implementing more and more synergies not only within the business unit energy, but because we're building really something global, applying the capabilities in data centers, we have the Frerk, in also other parts of planet, but also utilizing our service footprint, which historically has been created for [indiscernible], but now we're beginning to utilize this for our energy business. Let me move on to the business unit NewTech. So in -- I call it internally and also externally at this point in time, a bit like a growth option. A growth option with very, very positive dynamics and outlook. But at this point in time, it's still rather an option than already secured top line. And you see that in the numbers here, the revenue is still on a low level. I mean it's growing, but growth here from Q1 '25 to Q1 '26, that is not a relevant number, of course, 64% so much better than it is. It is still a small business. We do see new orders coming in. We have obviously also an order backlog, but that is still on a sort of prototype on small serious scale. We do, in this point in time, work particularly to improve the earnings because it is -- it needs still a lot of upfront investment, R&D activities. And that's why we managed here to significantly reduce the quarterly losses. We cut them in half, pretty much coming from minus EUR 12 million to minus EUR 6 million. And a big focus in this business unit is obviously converting the very promising large pipeline into actual revenue. And we're working here with a couple of promising large customers, but part of the truth is also that we have not yet secured a large order, but we're working on that. And why I consider this a bit of an option value because obviously, as soon as we see or we would see pressure from electrification, in particular into the lower power ranges in, let's say, our construction business, then obviously, this business will start to pick up speed. So that's why it's an important option value. It's an important business to be involved in we can and will further support obviously here the growth in NewTech. That brings me to the last but certainly not least business unit, defense and to be very accurate, defense as well as others. So we also include here the business of HJS, the emission after-treatment specialists. And defense, you see here that fantastic picture where our Ulm plant has shown that we have the capabilities of assembling here unmanned vehicle systems from our partner, ARX Robotics. That's an exciting project we're working on together with ARX. And here, it's about increasing relevance and really, really building a strong and a strong business model. Looking at numbers, defense is a business unit, which has only been created by the end of last year pretty much. So before it was more rather a collection of businesses of own projects, but late with the acquisition of the SOBEK Group, we really created that business. That's why we don't have a meaningful quarter-over-quarter comparison in terms of profitability. But what we see here is that the business becomes more and more relevant. Q4 '25 was driven by a few large-ish orders very, very strong with almost EUR 30 million. Now we are at EUR 22.1 million in Q1. We enjoy a lot of new orders, EUR 26 million order intake. So here also growth dynamics is in place. The order backlog is at almost EUR 40 million right now. And without at this point here, being able to release names of the customers, but we did receive in the first quarter first significant or relevant orders relating to loitering drone package that the German Army orders at a couple of drone OEMs. And in one of them, we are the supplier of the drive systems. That relates to the ramp-up of SOBEK because that's the part of DEUTZ, which actually provides the drive systems. And we are also continuing to invest R&D, in particular, in new powertrain solutions and that applies especially also to the peers of the diesel engines where we are enhancing our current product portfolio to make it sort of defense ready. Also the HJS mentioned earlier, HJS Emission has been bought by us as a turnaround case. Now it's working actually quite successful. We were able to integrate some of their production into our supply chain. That's important. And we're continuously committing also to that the DefTech ecosystems I mentioned it earlier already the investment in ARX Robotics, but also the investment and the supplier relationship to TYTAN Technologies. So what's about here, it's a conversion really of an extremely strong pipeline into sales. We have a lot of very promising conversations, project negotiations discussions. Obviously, the Ukraine plays an important role here. And we're continuously working on exploring more and more opportunities both in terms of drive systems, but also in terms of military energy solutions, and that will always include partnerships and M&A. So there's certainly more interesting news in the making throughout this year. So 13% margin level, I think that's a fair margin quality given the combination here of the traditional sort of defense business as well as the HJS contribution. So we're creating -- we have created here a pillar which is attractive to the business and which is enjoying significant growth in the next months to come. Right. With that short run through the business units, I will hand over to Oliver, who will bring some more light on the financial aspects of our first quarter.

Thank you, Sebastian, and good morning. A warm welcome also from my side. So let me start with some figures that show quite nicely the strategic development DEUTZ has undergone over the last years. And you see here the quarterly EBIT development of DEUTZ since the beginning of 2024. So just to remember, that was a year where the crisis in the traditional core business, the engine market was kicking in quite heavily. So we see here on the one hand, on a yearly basis, significant EBIT improvement starting from a bit more than 4% to a bit more than 5.5% to 7% in Q1, but also on a quarterly basis. So this chart basically shows the increased resilience of the DEUTZ business. Just to remember, in Q3 '24, that was where we acquired the Daimler Truck engine portfolio, where we acquired Blue Star Power Systems entered into the energy business. In Q3 '25, we additionally acquired SOBEK at a strong entry point into the defense business. And overall, of course, the continuous growth on the service side organically as well as inorganically and the Future Fit program with cost reductions and driving that profitability up. And that's nice to see that we see here a record result in Q1. And as you heard initially from Sebastian, that is typically a seasonally rather weaker quarter. So that's why we are proud to having achieved that. Let me come to a bit more detail on the key figures. We see new order development increased by 41% or EUR 225 million. EUR 145 million out of that increase is related to the first-time consolidation of Frerk, so our recent energy acquisition and EUR 80 million then organically. So the growth on the new order side is driven organically as well as inorganically. On the revenue side, lower increase to a level of EUR 530 million. So that is typically a weaker Q1 on the revenue side. So you cannot just take it to derive the yearly values. We have to take into consideration, firstly, high order intake and second, of course, also simplicity effects within the year. Growth here on the revenue side, mainly in absolute terms with similar contributions from the engine service and energy business, while NewTech still remains on a low level. On the earnings side, also here, we see a substantial increase of 45%, 46% compared to the first quarter last year, so ending up at 7%, driven by various factors, cost savings on Future Fit coming into place, again, especially on the R&D side, but also improved plant utilization. And that is also what brings us to a higher net income, EUR 21.8 million. That is compared to minus EUR 10 million last year, but last year, Q1 was also impacted by the Future Fit provision. But even adjusted for that, there was a significant increase. So EBIT logically is also turning into higher net income. Looking at some more key figures. On the R&D side, we see a decrease of 4%. That is the consequence of our Future Fit program. We gave some more details in the tax slide here on the split between the different business units. We see a very strong cost discipline on the engine side. We see our cost discipline also as announced on the Future Fit program on the NewTech side to tailor the R&D spend a bit more to what the market is demanding. And of course, we are not saving on the R&D side when it comes to defense. There are some first R&D expenses here in order to get our portfolio ready and even more attractive on that defense side. When it comes to CapEx, it's predominantly -- a slight increase predominantly for IT infrastructure, production equipment and software. So as I mentioned last time, the S/4 HANA transformation ongoing, which requires a bit of CapEx. But we are overall on a rather low level on the CapEx side. So Q1 '25 was exceptionally low. On the working capital side, we see an increase that has 2 effects. On the one hand, it's the acquisition of Frerk, first-time acquisition of Frerk consolidation of Frerk, which contributes roughly EUR 25 million to that working capital increase. And on the other hand, there is also a slight increase in the remaining working capital, basically also driven by inventories where we are getting ready for delivering on the orders, which we achieved and realized and so ensuring delivery in the future. That brings me to cash flow. Cash flow from operations went down by EUR 25 million. There we need to keep in mind that the cash flow in operating cash flow in Q1 '25 was extraordinary high driven by some effects at that point in time. So that explains basically the decrease. On the free cash flow side here before M&A, we are slightly negative. Basically, I would say we are coming back to a more normal seasonal pattern where Q1 is on the free cash flow side, typically the weakest quarter. After M&A, we have ended up at roughly minus EUR 100 million because we acquired Frerk and we had those investments in ARX Robotics and TYTAN. So that's also the reason why overall net debt went up to a level of EUR 385 million, including roughly EUR 80 million leasing. That brings me to the chart on equity, leverage and dividend proposal. So equity ratio remains very strong, 47.3%. It came down slightly driven by the debt finance acquisition of DEUTZ Frerk. The leverage remains moderate, 1.7. Keep in mind that this level includes leasing, so taking leasing out would bring us 0.3, 0.4 lower on that level. So still on a good and absolutely solid level. Dividend proposal, as already announced, slightly increased to EUR 0.18 per share for our Annual General Meeting next week. So far on the figures, and then I hand over to Sebastian again for guidance and outlook.

Thank you, Oliver, for the view and the numbers. So yes, let me speak a bit about the guidance first. So first of all, some context, we gave the guidance initially with obviously, as always in the beginning of the year, fairly limited market visibility, particularly given the geopolitical challenges. But what we can say, I mean, the growth we've given or we've implemented in our guidance is clearly supported by the momentum we have positive momentum in energy, service and defense, that is strengthening the overall resilience. And when we gave the guidance initially, we said we expect a bit of a recovery in the engine market also over the course in 2026 with a stronger H2 and we were a bit sort of taken by positive surprise that already in the first quarter, as we've shown in the numbers earlier, the order intake has been picking up speed. So let's see how we speed that will continue. Obviously, geopolitically, there's still a little bit of a challenge out there. But so far, so good also what we see in April so far, preliminary. So let me reiterate here. Revenue, EUR 2.3 billion to EUR 2.5 billion. We see that very much also from our bottom-up planning right now. And obviously, the business units contribute as stated here, the midpoint EUR 1.33 billion, service EUR 635 million. Energy, almost EUR 300 million with a bit of luck and further movements, potentially even above NewTech, NewTech EUR 35 million and defense and others EUR 110 million. And all of them will see obviously a bit of potential up, but obviously also a bit of risk. But in the end, that's a good thing of having a portfolio of business models and business units. So all in all, it's a very solid view on the future, which we have here right now. On the margin, we provided in March fairly wide range, 6.5% to 8%. We got feedback from many of -- many analysts and investors that was perceived as a bit too broad. We will take that point, but the visibility we have at that point really didn't allow us to be more specific. However, it seems like we're narrowing that down on a positive side right now. Engines, I mean, you can just compare what we've shown earlier in the last half an hour compared with the midpoint here. So we are well above that at the large engines business. Service, we are already at that level. Energy, well, in the Q1, we were slightly below, but the view we have on Q2 to Q4 is actually very much on that number we see here. Defense will also probably expect a number slightly above that. So that actually confirms not only the guidance, but gives me personally optimism that we'll narrow down here on that corridor on the better side. And free cash flow, we heard also from Oliver, the view on cash flow right now, we expect high double-digit million euro amount positive. So yes, I mean, I said a bit about the outlook for '26. But confidence is extremely important, which we have right now. The transformation of the company is paying off. I mean we've shown already in the first quarter a very decent level of profitability, 7% given where we come from at DEUTZ and given that in engines, despite the recovery we are seeing, we're still way below what the factories can deliver. So economies of scale are paying off, but only on a low level. So if the recovery continues, we will see massive contributions from economies of scale. The other good thing is we have a lot of positive contributions from pretty much all business units. I mean, in engines, we are doing our homework, cost cutting. You heard it earlier on the Future Fit program, but also the new initiatives in the factory. And we're growing step-by-step in service. The team is doing a fantastic job here, particularly in the United States and in Europe, really growing step by step, hundreds of initiatives, but they're being implemented with tenacity, tenacity, tenacity. And we're growing in defense and energy. As a growth case is exciting. Yes, not the business units are not massive yet, but they are significantly growing, and they are improving profitability and resilience, which is extremely important. And last but not least, we've got the option value of NewTech. And of course, the market perspective is a challenge. It doesn't certainly -- it certainly doesn't provide much tailwind that geopolitical situation where every day, we seem to have a new development. But it's our conviction as a management team of DEUTZ here not to complain. No reason to complain. There's only one thing to control what you can't control. And that's what we're focusing on, and there is a lot we can control to navigate strongly through that difficult environment. And the results we've achieved in the last years and now obviously paying off with this really solid quarter, just confirm that it's the right approach to stop complaining and rather act because there's so much opportunity out there. And that's why what makes brings us and me, particularly myself also to have a very positive view on the future. We're creating something we call here the Next DEUTZ. I mentioned it before, the more resilient business units, the structure, but also the business models behind that, they pay off, the benefits pay off. We see already now a lot of positive P&L impact from acquisitions and other portfolio measures and as I said, the efficiency and the cost improvement. So we're creating an industrial platform, industrial business, the DEUTZ, which with a strong heritage, but a lot of upsides and potential in growing markets supported by macro trends, defense and energy in particular. And with that, we feel more than confident to achieve our growth, which is significantly above the market and also bring the margin performance not only on that level, the 7% we are right now, but step-by-step also further increase the performance and thus increase also shareholder value. Yes, Next DEUTZ, I mentioned it, strong growth across the businesses, organic as well as inorganic. We are working very structured on M&A projects and we have delivered in the past. We have shown that we can deliver. Margin will increase further. One important thing, quality before volume. That applies in particular to engines. 5 years ago, DEUTZ was more volume before quality, and now we changed that around. So we rather sell less but at high margin. In the end, well, effectively, we'd rather sell much at higher margin. But if we need to make a compromise, it's always quality before volume. And obviously, cash is relevant. We are very sort of comfortably set up, but this should not give us a false sense of security. We're working here on discipline. ROCE is an important KPI also for the Executive Board, and that's at least the reason to take that extremely seriously. We are very much on track for the free cash flow guidance for 2026. I mentioned already more than once that we have here, we follow a prudent option approach that we continue to support or to grow in the NewTech business even if that is, at this point in time, the only unit which is not profitable. But given where we are right now in other parts of the group, that is something we not only can afford, but we must afford in order to be ready when the market dynamics eventually will change in this business. Right. That brings me to the end of our presentation and we would pay back, obviously, and we're looking forward to receive and answer questions.

Thank you so much for the presentation, Sebastian and Oliver for the dive into the first quarter. [Operator Instructions] And we received the first question from Lasse Stueben.

First question would be on the order intake in the engines, which you mentioned is up very nicely in the first quarter. You mentioned construction and agri is better. But can you just give more color on what's going on and maybe how that looked into Q2, just thinking about higher oil prices is generally not great for some of these sectors. So just generally, what you're seeing from customers? And then just on the same point in terms of the margins in engines, as you said, you're already above kind of where the midpoint guidance for this year. So I guess my question is, should we expect kind of that to flat line from here in terms of the margin? Or should we expect further operating leverage in the remaining quarters of the year? And I'll ask my questions one by one.

Sure. Yes. Let me start. Thanks, Lasse for the question. Let me start with the order intake. And the order intake in engines was around -- sorry, the book-to-bill was just shy of 1.2 in engines. So that's, first of all, the pure numbers and it's driven by orders as well from the United States, from Europe and as I mentioned in the presentation also from China. So there are a couple of individual customers and I don't want to disclose the names here for contingency reasons, but it's been driven by particular 1 customer in the United States, 2 European customers, larger customers in the construction sector. And then -- and that's rather a larger number of customers with smaller individual orders out of China for fairly special equipment. So not the sort of bread and butter business, but special equipment, which also typically has the advantage of being quite high margin. So that was particular February, March. January, as I said, was a slow start as usual. April, May, we expect further order intake at least probably on that level, what we've seen in the last couple of months. Do we expect now a further increase? At the moment, I would be a bit more cautious here for exactly the reasons you mentioned. High oil prices are never great for economy. But on the other hand, and I did mention that earlier, we did not see any negative impact on the DEUTZ portfolio from the conflict so far. So the Iran war is terrible as it is but it has not impacted our business, neither of the business unit negatively. So we didn't see any cancellations. It's more like one customer shifting ahead, someone else is shifting forward. So that's -- yes, we're pretty resilient at this point in time. That's on the order intake. On the margin level, we do expect a bit of purely operational leverage given that the current outlook on the second quarter in engines production is in terms of numbers here at the German facilities, a bit above what we've seen in the first quarter. So that's on a quarterly level, because -- mainly because of the seasonally very weak January. So the second quarter, yes, I do expect operational leverage, mainly driven by volume. I also expect further improvements in profitability due to the efficiency measures we've taken in the assembly line here in Cologne. But that I do not yet expect significantly in the second quarter. That's more something for the third or the fourth quarter. I mean what we do here is very simple measures. We increased the so-called tax, so how many engines we bring out on an hourly basis. And we obviously want to do that with less personnel. We don't talk about massive restructuring. Don't get me wrong, but it is a difference when I -- on one shift, I can produce more with, let's say, 2, 3, 4 FTEs less, and that's currently what we're working on. But it obviously has quite a significant and nice impact on production cost and thus on operational leverage. And then on top of that, but that's more a question for the end of the year. We're working with our Indian partner on the setup of the facility for smaller -- for sub 4 liter engines in India. But that only gets -- will go live in production in '27, but we expect the first components to be sourced for India, also for some of our products here in Germany, the first components we expect to be shipped in the fourth quarter. So that's not a game changer in this year. But step by step, it will help boost profitability as well. But that's a bit sort of the high-level view on profitability as well as order volume in engines.

Super. I might have missed it in the report, but are you willing to share the unit number on engines for Q1? I'm not sure if you've given that this time around.

I think we should have this number in the details. We don't, but let me -- I'm happy to give it.

It was around 30,000, 32,000 engines.

Yes. If you take that number and 32,000 multiply that with 4, and then you see the utilization ratio is really low. That's what I meant earlier when I was saying there's still a lot of upside potential if we bring that up from 32,000 to say, 36,000, 37,000 and that's a bit of the development we're expecting in the next month.

Yes, makes sense. Very good. And then on energy, I think if I'm working it out correctly, if I kind of adjust for the Frerk order intake in Q1, the consolidation, I think orders are roughly down 10% organically. Is that the right number? And if so, kind of can you give some color just on what's going on here? I know you sometimes have bigger orders from customers at Blue Star. So maybe it's some lumpiness, but just some color around the organic development on order intake in energy.

Yes. That is -- I mean, that's exactly the point. You answered the question almost by yourself. So the orders in energy are -- they're always a bit lumpy because if I look at Blue Star, there's a lot of business goes via dealers to sort of individual orders, but there's one larger customer that's a company setting up microgrid in the supermarkets themselves for a large supermarket customer in the United States. And this customer, our premium customer in the United States. And in Q1, we ordered a little -- or we sold a little less to this guy, but compensated that with cleaner business. That's what diluted the margin a bit, which was one of the explanation, but also the order intake, these guys order and when they order, they order for the next 6 months. And so that's why sort of the order intake Blue Star on a quarter-by-quarter doesn't have too much explanatory impact.

Yes. And maybe just adding to that point also Q1 last year, we had exactly the opposite effect. There was a large onetime order in the Q1 '25 was low. So that's not a big relevant.

Understood. And then final question, you partially answered this, but just on the outlook for the EBIT margin for the full year. I mean, last year, you kind of -- you started below the range in Q1 and then you kind of worked your way into the range throughout the year. This year, you're starting in -- within the range and based on kind of operating leverage. Should we expect a similar sequential development? I understand maybe not quite as aggressive as last year. But generally, should we expect margins to improve sequentially through the year?

I guess, Lasse, here, you've got to interpret a bit on what I'm saying because obviously, we are following a very structured forecasting process. We're in the middle of the first update of our annual budget. And of course, if we would see substantial support for really narrowing down the margins or even increasing, we would have to update the guidance. We haven't updated the guidance today. So that's why we are still in the process of [indiscernible] that. But I'm not pessimistic.

[Operator Instructions] We received 2 questions from Mr. Ringel And Mr. Ringel would like to know what's your view and visibility on growth momentum in the remaining quarters of this full year? And when will the strong new bookings convert into sales and earnings?

Yes, it's a bit what I said already, right, Klaus. So I mean, sort of the order intake in energy, the bit coming from Frerk, that also relates to the fact that we first time consolidated the business, right? And we're talking about EUR 145 million. And that's pretty much the entire order backlog for the rest of the year and beyond. So that explains that. So the range of order intake in energy is typically a bit longer, especially when we talk about larger projects relating to the data center business because this is -- I mean, to build these products, that's also not a question of a day, that's a question of weeks, build and implement and install a question of months partially. So here, the conversion is really for the -- throughout the end of the year and even beyond. It's different in engines and difference in engines, the conversion in Europe is typically below 3 months due to the short shipping times. The part which applies to China and America typically ranges rather 4 to 6 months. So that's everything is for, let's say, Q2 and Q3. On the other business units, I mean, step-by-step on service, we have a fairly flat, fairly stable book-to-bill on a high level. But here, the conversion is typically only 30 days. And on NewTech, it's no material order intake at this point in time. And in defense, the order intake also spans throughout the year. That's sort of the most lumpy business, especially the order I mentioned when walking you through defense, the order coming from the German Army regarding the loitering ammunition drones. That's an order which has been placed, I believe it was in March and the delivery is expected throughout the rest of the year. We rather expect a potential follow-up order throughout the year, which then would also be delivered throughout the end of this year, potentially beginning of '27. So that's -- and we appreciate, obviously, the question from you guys on that because the business model of DEUTZ is changing. And also when Lasse asked earlier about the unit sizes, up to, let's say, 2, 3 years ago, you could explain the business performance of DEUTZ very simple by order -- book-to-bill and unit size. And now with different business units, we have obviously different business models and different relationships of the KPIs. And we want to also do that together with you guys to help you building up your models on that by providing the transparency on a business unit by business unit level.

All right. And the second question from Mr. Ringel, but I guess we touched already that as well. Looking at your guidance for financial year '26, where are you seeing yourself currently in the respective ranges?

I think that was basically answered throughout the call, I think.

Great. So thank you, Mr. Ringel for that question. And let me take a quick look into our system by now, there are no hands. So final call, ladies and gentlemen, if there are questions, just let us know. Otherwise, we would come to the end of today's conference call. So thank you for joining. You shown interest. And also a big thank you to you, Sebastian and Oliver, for your presentation. And with that, I hand back to Sebastian or Lars, I'm not sure.

That's fine I can take that. I just can repeat what you just said. Thank you very much for joining. It's been a pleasure talking to you on the quarterly numbers and in particular with good numbers and good outlook. We look forward to see, hopefully, many of you next week in our AGM here in Cologne. For those who haven't realized it's not in the trade fair show as usual, it's in Guernsey. It's normally a Carnival location, but we do something far more serious at Carnival this time. We're doing an AGM there. We're looking forward to that. It's the first physical AGM since COVID pretty much, right? So that's going to be good. We also will provide an update on our brand because the transformation of DEUTZ will become visible to the outside. We're extremely excited about that. And then obviously, the next steps as we currently foresee is the first half interim report in August, Q3 in November and of course, along the way, as many ideally also physical meetings with investors and analysts through various roadshows and conferences, we look very much forward to. Thanks for staying with us. Thanks for following us, for supporting us, and obviously, thanks for buying our shares.