EuroGroup Laminations S.p.A. ($EGLA)

Good afternoon, everyone. We're waiting for everyone to connect. Good afternoon, everyone, and welcome to EuroGroup Laminations Q1 2026 Financial Results Presentation. Joining us today are Marco Stefano Arduini, Group Chief Executive Officer; Isidoro Guardalà, Deputy Group Chief Executive Officer; and Matteo Perna, Group Chief Financial Officer. Please note that the press release and the presentation supporting today's conference call are available on the company's website in the Investor Relations section. [Operator Instructions] I will now hand over to the Group CEO, Marco Arduini. Please, Mr. Arduini, go ahead.

Thank you, Letizia, and welcome to everyone to the EuroGroup Laminations first quarter 2026 results. Letizia, please move on the presentation. 2026, as we all know, is a very turbulent year. And for our industry, we see a lot of different dynamics that are impacting the overall as well as trends. And we -- the key message that we want to pass is that our diversified business model is resilient to this situation in the market. So overall, our revenues are almost stable at constant ForEx compared to 2025. But we see different situation and trends in the 2 business units. In the E-mobility solutions, we see 2026 that is a clear transition year that is impacted by the shift in the regulation in the North American market and is impacted by the phaseout of two projects that were in production since 2018 and 2019 in Europe and North America. These projects are now have been already started to be replaced by projects that are in start of production and ramp-up and are connected as well to the new projects that overall we have this year. So the 2026 for the E-mobility is a year where we expect a reduction compared to last year. That is for the first quarter was EUR 118 million, down 9.4% at constant exchange rate and the lower sales are mainly coming from U.S. and Mexico market. When we speak about the Industrial & Infrastructure solutions business division, we saw in this first quarter a clear confirmation of the stabilization role that there is in this business unit thanks to the diversification and the flexibility of the platform that we see in this market. Two segments that are growing compared as well to last year are clearly the HVAC and the logistics that are, of course, showing higher value and volume compared to last year. Overall, the margin of the first quarter is impacted by all the dynamics that you see in tariff and macroeconomic uncertainty. And as well the change in the mix. And the adjusted EBITDA is EUR 17.1 million. Overall, the order book and the pipeline for the automotive business unit remains at a good level. We speak of EUR 2.6 billion for the order book and EUR 1.9 billion for the pipeline. An important activity that was completed last week was as well the refinancing that was executed with an extension of the duration to 5 years, and was related to EUR 375 million. And this refinancing was finalized with a pool of leading banks. And these activities allow EGLA to optimize the overall financial structure. So in terms of maturity, the debt from roughly 2 years to an average of 4 years. In terms of performance improvement programs, the group is actively working on many activities that are related to improvement of the performance that are important programs in EMEA and USMCA, that are -- let's say, moving on -- in line with the target and in line with the budget. We have as well added more activities for the operational excellence plan, and as well other activity that are related to the improve of the performance across all the companies of the group. In terms of outlook for 2026, we confirm a revenue range between EUR 700 million and EUR 750 million and an EBITDA adjusted in the range of 11%. We confirm as well the outlook for a positive operating free cash flow from operations, including the CapEx at approximately EUR 45 million. I now pass the word to Matteo that can enter in the financial results.

So thank you, Marco, and good evening to everyone. So moving to the next slide, please. I have to say the major comment here is, as you can imagine now we will have a tough comparison with the first 2 quarters or the first half of 2025 compared to 2026 will be driven by a tough comparison, especially due to the fact that the first part of last year was not impacted by the change in the following the Trump administration, which had an impact starting from August last year. So the major message here is that we are running consistently with our budget. So again, the full -- the first quarter performance is aligned with our budget. And therefore, this is very important for us to emphasize this fact. And therefore, this has been, let's say, one of the reasons for which we confirm our full year guidance. So having said that, revenue, you see at the constant exchange rate we report an amount of EUR 203.5 million in terms of total revenues. I have to say this is including approximately slightly lower than EUR 10 million of raw material that we sold during the first quarter, which is impacting our revenues, having no impact on our margin, given that the material that we sold was sold at the same cost that we had in our inventory. You see in terms of performance by segment, the industrial, it's 0.5% plus compared to last year. This is mainly driven by the ForEx given that at constant exchange rate, this would have implied an increase of approximately 6%, as we said before in terms of growth on a quarter on a year-on-year basis. Then, for the E-mobility segment that you see, 13.3% decrease. But again, out of the ForEx effect, the implied decrease was in the range of 9.4%. And in terms of geography, this is mostly driven by the evolution of our business in North America, partially offset by the performance in Europe. In terms of EBITDA adjusted, the total amount, it's in the range of EUR 17.1, this is implying 8.4% margin. And you see in absolute terms, the total amount of EBITDA was the same as last year for the Industrial business, but the major difference is driven by automotive segment. EBIT EUR 1.6 million. This is following and including EUR 13.7 million D&A accounted over the first quarter. Total amount of CapEx, I have to say it's below our budget. We are trying as much as we can to have a strict control over CapEx in order to avoid any potential additional CapEx not only compared to the budget, but as well compared to an improved, let's say, efficiency program on the CapEx. So we recorded EUR 9.1 million compared to the EUR 26.5 million that we accounted in the first quarter of '25. Moving to the next slide. Yes, the major comments on this. We have for the E-mobility business, we sold approximately 1.1 million sets in the first quarter, so basically in line compared to the amount of sets that we sold in 2025. And you see there is an increased weight for hybrid application given that mild hybrid is representing approximately 11% of the total amount of sets that we sold compared to 8% in Q1 2025. Out of the 14 SOPs which are expected to take place this year, 3 started in Q1, of which 1 in Europe, 1 in Mexico and 1 in China. And I have to remember that out of the 14, 10 are expected to get started in China, meaning that SOP will be then executed in China within the end of this year. You see in terms of breakdown by segment, E-mobility, it's now representing approximately 58% of the total amount of revenues generated in the first quarter, while infrastructure is 42% and EMEA following -- I have to say recovery increase as well in demand for the Industrial business in the first quarter, it's now representing 57%, while North America is now slightly below 30%. Asia remains at 14%. Moving to the next slide, please. So in terms of EBITDA adjusted, yes, to me, the major message is that E-mobility segment, it's impacted by the different mix. But again, it was already envisaged in the budget. But in the comparison with last year, it's, of course, having an impact. So I make a reference to the phaseout of two new important projects which started between 2018 and 2019, which again are now under a phaseout phases. And this is, of course, having a negative impact in terms of mix over the margin. And all such projects were partially offset by the new project which started last year and which are now in a ramp-up phase compared as well additional project which started this year. So make a reference to the 3 projects which started at the beginning of this year. So this is having a negative impact in terms of margin. But again, that was already something expected this year. So we do expect to recover profitability going forward on a quarter-on-quarter basis, and this will be basically twofold. One, it's due to the evolution of the ramp-up curve with respect to the project which started end of last year and as well this year. And the second point is the execution of the efficiency program, which is expected to unleash the positive effects going forward, again, keeping momentum on quarter-to-quarter basis. EBIT -- we already said that now D&A are in the range of EUR 13.7 million. And again, this is what is impacting our EBIT reported. Moving to the next slide. As per our seasonality, you see the evolution of our working capital, which is picking up at the end of March, now is expected to remain somehow stable until the end of June. And then the decrease will start following June and then December will be the bottom of the working capital evolution. And again, this is mainly driven by the seasonality of our purchasing strategy on the raw material. And to say that now, the working capital is representing approximately 45% over the total amount of revenues on a last 12-month basis. Moving to the next slide, please. On this point, as we said, net debt EUR 288 million, which is implying a 3.5x net leverage ratio over the last 12 months EBITDA adjusted. And again, let me emphasize again the fact that this is expected to be the peak this year. And after that, we will start to decrease our net leverage consistent as well with the plan of positive operating free cash flow to be generated going forward. Moving to Slide #10. As Marco said, we are confirming the full year 2026 outlook on the basis of what we said, and it's important to remember to all of you that we do expect revenues to be on a full year basis in the range between EUR 700 million and EUR 750. EBITDA adjusted margin for the full year is expected to be in the range of 11%. CapEx, EUR 45 million. And again, we do confirm a positive operating free cash flow.

Thank you, Matteo. I think we can now leave the stage to the question.

[Operator Instructions] The first question comes from Alberto Gegra.

Alberto Gegra from Equita SIM. A couple of questions from my side. The first on margins. So after this quite weak first quarter, you mentioned the pickup in the following ones. Can you give us more granularity, for instance, in terms of evolution of start-up costs and maybe also on the pure price component that you are seeing from automotive customers in particular? The second, if you can recap the timing of the remaining 11 start of production, in particular, those on China?

So thank you, Alberto. On the progress on the margins, as we said, the main drivers to support such increase will be: one, the evolution of the ramp-up, and therefore, going forward, we will have the benefit deriving from the evolution of the ramp-up of the project which started in the second part of 2025. And then as well the expected evolution of the ramp-up that now we executed in the first quarter on 2026. To this extent, I have to say that we experienced a major ramp-up now in Mexico with respect to an important customer of us, which is project replacing one of the projects that is now currently under a phaseout. And again, I make reference to a project we started in 2018, if I'm not mistaken, Marco. So again, on a quarter-to-quarter basis, we do expect an improvement in the margin with the 11% is mostly better in the second part of the year. So the next quarter, we do expect an improvement, not a significant improvement compared to what we reported at the end of March. And again, the 11% is fully back in the second part of the year. That was a question on the margin. For the SOP, we said now out of 3 started in the first quarter. We do expect approximately additional 5 projects to get started in the second quarter and then the remaining will start in the second half of this year. And again, let me emphasize that out of the 14, 10 will be launched in China and I have to say that all of them are making reference to Chinese OEMs.

If I may, a quick follow-up. In terms of margins, this project in China, which is the gap compared to the Western project?

There is a gap, honestly speaking. And as you can imagine as well, given that it's -- I mean, the major are now the first project that we are now entering the business with additional Chinese OEMs compared to those that we already -- which were already part of our portfolio. So I have to say that the margin are below on what we report now in Europe and North America and stand more in the range of 7% and 8% compared to the 10% or 15% that we are used to report against other customer of us. But again, it should be as well read on the fact that it was important to get started the relationship with such OEMs.

Currently, we do not have any question queued. [Operator Instructions] We now have a follow-up question from Alberto Gegra.

So maybe also a question on the industrial side since you mentioned in March, an expectation for quite significant growth in volume. So if you can confirm this trend, maybe just a bit more color here on the subsegment of the Industrial. And maybe also an update on the strategic developments in India and China.

Okay. So let's get started from China and India. So this year in China, I have to say that we do expect to make a turnover above EUR 100 million, whilst in India, we do expect to get -- reach a turnover which will be above EUR 55 million. And again, this is something that we expect to achieve this year in India. It's important to remember that last year, we accounted approximately EUR 48 million of revenues under the Indian business. And with respect to the evolution of the industrial different subsegments, I have to say that compared to last year, we see a positive evolution in terms of volumes for the so-called Home segment, which is reporting an increase of more than 10% over the amount reported in terms of kilo that we sold last year. The other industrial application, it's reporting more than 10% increase. And I have to say that the subsegment which is growing the most is the Transformer business under which we reported more than 30% increase in terms of volume. So these are the major segments which reported a significant increase compared to last year.

Currently, we don't have any questions in the queue. We have a question from Alberto Francese.

I'm Alberto Francese with Intesa Sanpaolo. I have a couple of questions. First one regards raw materials. If you can give us a little bit of color if you see any impact coming from the Gulf conflict. And so how do you see raw material evolving during the year? And the second question regards the saturation that you have in your industrial sites and if there is a difference between the different geographies where the sites are located.

Yes. Maybe I'll let Marco to add some color on the evolution of the potential impact on our raw material base. Let's get started from the saturation. So now in China, we are now in the range of 65% in terms of saturation rate. In North America, the auto business is running between 55% and 60%, whilst industrial is more in the range of 60%, 65%. Europe, auto is in the range of 60%, while the industrial, it's more in the range of 55%. So that's the average saturation rate that we are now reporting in the first quarter. Then in terms of raw material, it's important to remember to all of you that under the contracts that we have in place with our customer, all of the potential impact deriving from increase in raw material will be a pass-through basis to our customers. And I have to say that as of today, the electrical steel, I'll let Marco to add some color on the electrical steel. What we see it's an increase in the quotation and underlying price for the alloy, which is an important effect of what is happening in the Gulf. And I have to say that other raw materials like -- how do you say, tungsten are as well increasing, which are not in our product, but again, are in our tooling, which are then part of what we sell to the customers.

Yes. Maybe just again to underline that, of course, the tensions that are coming from the world that we see today are impacting the energy overall, as we know, is a key driver in the production of steel. So if this process continues, we will see, of course, effect on all the raw material steel, alloy, and et cetera, et cetera. And on top of this, we need as well to remind that Europe has diminished the quota of steel that can be imported from the rest of the world in order to, let's say, secure that -- there is a protection for the local production that is in Europe. And this quota will -- for sure, create additional condition for increase of prices for the steel in Europe in the second half of this year. The other point that is as well impacting the European market, let's say, the condition and the measures that are related to the so-called CBAM that are, let's say, expected to be executed retroactively starting from the beginning of this year but that will be only confirmed later by the European regulation. So overall, the 3 trends that we see coming from the energy increase from -- as well the new tariff in quota that will start in Europe from the second half of the year. And the effect of the CBAM, for sure will create a pressure for increase of prices in the second half of this year.

Thank you, Alberto. Currently, we don't have any questions queued. We will wait just a few moments to give everyone the opportunity to ask a question. As there are no further questions, I will now hand back to the speakers for any final comments before bringing this presentation to a close. Please go ahead.

Again, thanks for your interest and your attention in EGLA Q1 2026 results. Thank you for your questions, and we remain available for any further request of information you may need. Thanks to all of you.

This presentation will now come to a close.