Friedrich Vorwerk Group SE ($VH2)

Welcome to the earnings call of Friedrich Vorwerk Group SE regarding the Q1 figures of 2026. The company CEO, Torben Kleinfeldt and CFO, Tim Hameister, will guide you through the figures in a moment, followed by a Q&A session via audio line and chat. And with that, I hand over to you, Torben.

Yes. Thank you very much for the introduction and also a very warm welcome from my side. Welcome to the Q1 earnings call, 2026 of Vorwerk Group SE. As always, I would like to start up with a short summary of what is happening within our company's group and also with a short market update, then I would hand over to Tim for the financial figures. I would then give you at the end an overview of running projects which we are executing at the moment. So first of all, Friedrich Vorwerk is active since 60 years in the business of energy infrastructure. Our main markets focused here on the top right of this slide is the natural gas market, electricity market, clean hydrogen market and adjacent opportunities, whereas the adjacent opportunities is mainly our activities in heating district heating grids and stations, but also biomethane treatment and CO2 separation and transport. Today, I would still like to show you this slide, although probably most of you know it or have seen it for a couple of times, but there is some change in the composition of our 15 locations. As you have heard, we have sold our property in [ Lucho Dannenberg ], where the activities have mostly been taken over from our headquarters in Tostedt. And we have opened up a new facility in the Netherlands called Houten which is the main office for 5CTEK, our company for our welding technologies. And from Houten, we will guide our international activities in terms of delivering welding services to our customers. Besides that, still most of our customers are from the TSOs and DSOs. So main customers are on their natural gas and hydrogen site, Open Grid Europe, Gasunie, Bundesnetzagentur and on the electricity side of the business, it's TenneT, Amprion, 50Hz which are among our major clients. Growth of the company group has still been driven by the energy transition going on year in Europe and looking back on the year '25, we did a great job acquiring more projects. So total project volume acquired in '25 was almost EUR 1 billion to be exact, EUR 991 million, which is a rise of almost 1/3 compared to 2024 figures. And as you know, the total project volume acquired also takes into account our share in the joint ventures we are operating on many projects. Yes, that's for the status update. And now I would like to change over to the market update. So besides all political discussions going on at the moment, many countries in the EU are still planning massive projects in terms of the energy transition. So the European Commission has just published in late April, the new list of PCI PMI projects, which also focuses on infrastructure projects, which cross borders between European countries. And from the map, that is highlighted from the European commission, you can see more than 230 cross-border projects. For example, in smart grids, electricity transition lines but also hydrogen projects and also projects for the transport of CO2. Projects are shown there are in various statuses. So for example, you will find a hyperlink project which is operating by Gasunie where we are already active in our H2 Hercules, which is the core grid projects of Open Grid Europe, where we have also received the first project to execute in the next years. But other projects like autos our high pipe per Bavaria are still in tender-phased, so permitting phase is ongoing, and execution will be in the next 5 to 10 years. But also other projects are highlighted in this map. For example, export routes of CO2 to Norway. These projects are still under investigation or they published the first project ideas. So whoever is interested in what is going on in the next 20 years in Europe, I think the map of the PCI PMI project of the European Commission itself is a good for us to look at. Yes, but not only in terms of transport grids, there's a huge upgrade in demand, but also there's a huge step in investments in the distribution grids. So The Acre has conducted a survey among the deals also this so among the distribution system operators in Europe to find out how the investments in the electrical distribution grids are developing in all of Europe. And as you can see from this graph, there's a huge step up over the last over the last 5 years of almost 80% in investments in the distribution routes. And of course, also, Germany is leading here because Germany is really focusing on new -- I'm sorry, so, yes -- sorry, that was a call coming in. So especially Germany is focusing on developing the distribution grid to get more charging infrastructure and new heat pumps to the households. And besides the investment in the distribution infrastructure, there's, of course, still a discussion going on in Germany about transport infrastructure, especially in electricity. As you've probably been known that since 2016, Germany has passed a law to move all transport electricity infrastructure underground, so not using overhead power lines, but undergrown cable systems to transport the energy. And now this year, the new government has drafted out new law that will change the Carbon Law, which has passed in 2016, and they want to move more power lines above ground again due to cost issues. Of course, this bill has not been passed by the government yet. And also the next project in electricity, especially the large North, South and West East corridors, they have already been planned and permissions have already been granted. In some cases of projects, the cables have already been procured. So we do not see a change in outlining these projects, at least not for the next 5 to 8 years. What happens after that will be a point of policy for discussions. But in the end, just to give you a technical idea also on the advantages of underground power systems. Of course, it creates better acceptance with all the stakeholders that are influenced by the project. The underground power lines are more resistant -- more resistant to weather issues and also for terrorist attacks. So there are also some electrical issues where using cable systems is more advanced, especially in transport losses compared to the above ground power lines. So we do not see any changes here for the upcoming projects, at least not for the next 5 to 8 years. And therefore, we are very comfortable that our cable laying services will be required for the upcoming project without any changes. And with that, I would like to hand over to Tim for our financial figures.

Yes. Thanks, Torben. I would also like to welcome you to today's earnings call and our first quarter figures. Let me now take you through our financial results in more detail, and as usual, at let's start with the top line. As we already flagged, the first quarter was significantly more challenging in terms of weather conditions than in recent years. In January and February, there was a particularly heavy amount of snow in northern Germany, meaning that work at some of our sites and projects had to be paused in February or could not even begin after the scheduled winter break. This makes it more pleasing that we still managed to increase revenue by 5% compared to the previous year, bringing it up to EUR 139 million. Contributing factors here included, in particular, a very strong growth in headcount over the past few quarters as well as in the current quarter, during which we increased our workforce by almost 4%. And had a very strong performance in March, which allowed us to partially offset downtime for February already. In terms of revenue breakdown, the electricity segment was once again the strongest, accounting for 56% of total revenue, followed by natural gas at 26% and our adjacent opportunities at 16%. Clean hydrogen revenue was still quite weak in the first quarter. However, we continue to expect strong growth in this area, not least due to the orders already received in Q1, but also due to the very attractive project pipeline related to the hydrogen corporate which we outlined in recent calls. However, our profitability showed particularly strong growth in Q1. EBITDA increased by 75% to EUR 31.8 million, corresponding to a margin of 22.8%. It's already nearly achieving -- reaching the level achieved in exceptionally strong fiscal year 2025. We nearly doubled to EUR 24.1 million, corresponding to a margin of 17.3%. This strong increase in margins is attributable to several factors. First, we achieved modest revenue growth while simultaneously reducing material expenses by approximately 20%. This is due to a shift in the project mix as Q1, 2025, now included a high proportion of revenue from material deliveries such as the cable protection pipes for our major project in and revenue in Q1, 2026 on the other hand, was generated with a higher proportion of in-house work, which compared to, let's say, simple material deliveries, naturally leads to a higher margin. Second, earnings contributions from joint ventures increased from EUR 1.5 million in the prior year to EUR 4.1 million in the reporting period due to the higher order volume handled by the JVs. Third, the earnings figures include a positive onetime effect of EUR 1.7 billion from the sale of our former branch office in [indiscernible]. Let's now turn to the order situation. The top 2 charts here on Slide 2 show the standard metrics of order intake and order backlog. Order intake in Q1, 2026, increased by EUR 110 million to EUR 192 million, even though no major projects were awarded in Q1. Ultimately, this order intake was achieved exclusively through small and medium-sized projects worth up to EUR 50 million each. We do not typically prevent these projects and the project pipeline due to their respective sizes, but the total value of these projects can be quite significant and meaningful. Among the larger orders received in Q1, there are 2 gas pressure regulating metering stations, one of which is already designed for the use of private as well as additional hydrogen pipeline projects. The 2 charts below show corresponding figures, including the proportion of order volumes of the joint ventures. Total project volume acquired rose by 50% to EUR 196 million and is only slightly higher than order intake, as no major projects were awarded in Q1. And accordingly, no new joint ventures were formed in Q1. New, however, is the key figure is the backlog, including joint ventures, which we are reporting for the first time this quarter. This figure rose by 14% to EUR 1.4 billion and includes not only the conventional order backlog, but also the proportionate share of JV orders. In this context, we've also published a so-called production output figure for the first time, which rose by 14% as well in Q1 and also includes the proportional joint venture revenues. This should now provide all relevant key figures to form a complete picture of the company's situation, taking into account the shift in the order structure towards more JVs. Based on the current quarterly results, we confirm the guidance for fiscal year 2026, which we published in March and which projects revenue in the range of EUR 730 million to EUR 780 million and EBITDA of EUR 160 million to EUR 180 million. But please keep in mind, this Brokers based solely on the company's organic growth and does not include any additional inorganic growth. Given the net cash position of EUR 232 million as of quarter's end, the range of opportunities for further growth remains definitely. Yes, let me now hand it back to Torben for some updates on our ongoing projects and upcoming projects before we open the floor for your questions.

Torben, you have to unmute yourself with a click on your microphone.

I'm sorry. So yes, thanks a lot, Tim. And today, we have chosen to focus really on our largest projects going on at the moment. So the first one would be the corridor north, which probably most of you have heard of. within this EPA project, [indiscernible] is responsible for about 40% of total project volume. Actually, the lot's being executed at lower Saxony progress, especially over the winter has been quite good on the project. The first lot within Lower Saxony have already been completed. We are quite happy with the progress also in terms of all closed crossings we have to execute. So all resources in terms of horizontal directional drilling have been busy over the winter, and this project definitely contributed a lot to the overwhelming Q1, 2026. Next project is not from electricity market, but from natural gas market. It is our combination of 2 ETL pipeline projects, which are executed for the customer GazUni Germany. The 2 projects compromises (sic) [ comprises ] of 1 pipeline, ETL 182 with a length of 86 kilometers and a diameter of 1.4 meters and a smaller pipeline called ETL179-200 with a diameter of 900 millimeters, which will tie into the larger pipeline system at a location called Dinstem. Both projects are executed in a joint venture with PPS and Harbor group. Project has already started last year with preliminary works. So we prepared pipe yards. The customer already delivered most of the necessary pipes. You see a picture of one of the pipe yards on this slide. And in March this year, the main activities on both projects have been started. We are especially happy that two of the -- in total, four very complicated drilling have already been executed successfully, actually, a bit ahead of time. So we are also here quite satisfied with the progress of these two major gas installation projects. Next project is from hydrogen market. We've received order from [indiscernible] Gas Transport to plan and erect gas metering system and regulating system at the location of Babau, which is a major compressor station within the grid of OnGas transport. Here, we will deliver in this year and beginning of next year, mainly engineering services and procurement services for the project and then we'll start with the actual execution of this mid-two-digit million project beginning of next year. And besides this, Adjacent Opportunities are also going quite well. The Friedrich Vorwerk Group is active in numerous district heating projects all across Germany. Major project at the moment is, again, in the city of Hamburg, where we are executing a major district heating pipeline connecting the waste to energy plant at Wugenbergardam to the main grid of Hamburg, pretty much similar projects executed at the moment in Litt's called the so-called refill project, connecting industrial facilities to the main district heating grid of the City of Leitz. This project will still be going on this and the next year and it compromises (sic) [ comprises ] of roughly 12 kilometers of newbuild district heating pipe, DN 700 and 900 but also a lot of renewing work is going on in terms of district heating grids. So our branch in Berlin is at the moment active at the Berlin [indiscernible] to renew a couple of old district heating pipelines, DN500, 400 and 600 only over a short distance, but still it's quite a challenging and big project for our branch office in Berlin. So that's it for the update on our projects. I'm really happy and excited about the first quarter, and I think we are up for a great year '26 so far. When the weather stays good, which at the moment, it looks like I think we will have a great year in front of us. So please stay with us, and we are ready for your questions.

[Operator Instructions] And we do have the first 2 hands up. Lasse Stueben.

Just to confirm on the [indiscernible] so it feels like this was a bit of a nonevent in the short term. Is it fair to say that I think you said no projects kind of impacted earlier than 2032 or 2035. If you could just give some more color on kind of the near-term impact of that more should it be passed? And then the second question would be just around sort of how the business has done so far in the second quarter. It looks like the weather has been much better. So just wondering about the phasing of revenues throughout '26 and whether there's anything unusual just given sort of maybe Q1 was a bit weaker than it has been in prior years? And then finally, the headcount additions of 4% in the first quarter. Is this roughly the run rate you're targeting for 2026? And then finally, just on the M&A front, if you have any sort of extra sort of information you can give on what you're looking for if you're close to anything on the acquisition front?

Maybe I'll take the first part of your question in terms of underground cable systems. So for the upcoming projects, say, up -- 2030 to 2032 for most of the projects, permission procedures are on the way. And these permissions are all based on earth cables for some of these projects like [indiscernible] and others, at least a part of the cables are already procured. So we do not see -- in terms of cables have already been purchased or ordered and permission process is already ongoing. That there can be a change in these projects because that would mean a total stop to the project. The permitting procedure had to be reestablished from our 0, so to say, so there would be a large fallback in the timeline of these projects. So I do think that at least for the next projects seen in the grid development plan, there will be no change from the cable systems. We have discussed it before that for the future project, so the second wave being executed in the years 2032 and after it is feasible that some of the projects could be executed by overhead power lines, although there are still technical issues, which do have a strong advantage on the side of the cable systems, for example, losses in the transitions are much lower than in overhead lines. So that probably needs to be discussed in details with each TSO and the final decision, he doesn't make on the technology, he uses -- but for the next years, I don't -- do not see any impact if the law's passed. I mean we've already seen that, for example, [indiscernible] and the federal country of Lower Saxony, they've strongly post to this idea. So we'll see what comes out in the end and if this bill is in the end passed, we don't know yet.

I will then take over the remaining questions from Lasse, to start with the Q2 question, apart from the relatively weak start in terms of other conditions to the year, we expect to see a regular year in terms of the seasonality of the business. Also April in terms of weather conditions was quite normal compared to recent years. So we will see increasing revenue in Q2, Q3 and then the reduction in revenue in the last quarter, depending on the other conditions in December. If we go regarding [indiscernible] just take the 4% in Q1 as a basis for the next quarter then we would end up with another 15%, 16% headcount growth for the third year in a row, which we definitely don't intend to do. As we've communicated before, we would see a more sustainable to reduce the speed of hiring this year so that we will end the year with a 6% to 8% headcount growth in total, meaning that the speed of hiring will definitely slow down in the next quarters. And yes, regarding M&A, we currently have various targets on the short list, which we are at different stages. These range from small add-on acquisitions that give us access to either new regional markets or new technologies to further expand our own value chain to larger companies that are mainly in interest for us due to their workforce we can integrate into our projects.

Thank you for your questions, Lasse. [Operator Instructions] And with that, we're going on to Leon Muhlenbruch.

My question is also on the cable law. I mean you did say it's unlikely to have an impact on you for a long time. I'm interested in the background to the, well, potential change of the law. I mean, my experience is that in Germany, high voltage lines are either underground or they're not going to be built. So what is driving the political drive to change the law. It doesn't seem to make any sense other than maybe demonstrating that somebody somewhere speaking about cost, but I think the reality is still that if you want new high-voltage lines, they just have to be underground. So what is the motivation behind it? And is there a chance that maybe we are going to get a sensible outcome where they're saying, well, you know what we thought about it, and it's just not practical to seek a change in the law? What is the timeline there? When are we going to find out if the law will pass or not?

Well, first of all, a good point. I mean, we still need to distinguish between transport grids and distribution grids. So I think for the distribution grids, we do not have a discussion within Germany, we will not go back and tie the electrical lines in front of our houses. So that will undoubtedly be underground systems. And if we look at also the volume, which goes into the distribution grids, it's just still sheer project volume in underground cable for the distribution grid. Of course, cost is an issue for transport power lines, it is estimated that an underground system is 5 to 8x more expensive than above-ground power line. So that, of course, also triggers politicians to look into it. But in the end, I think before that bill really passes, it has to pass the [indiscernible], then also the Bundeslat. If you look at the Bundeslart, [indiscernible] all the northern federal countries have already strongly opposed to changing this law. So even if it passes the Bundestag, it is not 100% sure that it will also pass the [indiscernible]. I'm not sure about the political timeline to pass that law. Probably we'll see more before summer. And in the end, it is then to each and to each individual TCO to decide what technical system is the best. And if it gets approved by the grid development plan, so by the Bundesnetzagentur, since all or most of the next projects have already been approved by Bundesnetzagentur and are also confirmed in the development plan we do think even if the law changes, no change for upcoming projects.

And then what is your best guess as to the political motivation behind it? Because with grid security...

Reducing costs for the energy consumers. Reducing costs for the energy consumers because they have to pay for the grid extension.

Okay. And if infrastructure just doesn't get built, we can all celebrate savings, but you don't worry about the consequences. Is that right?

Yes.

Thank you, Lida, for your questions. And we are moving on to the questions in our chat box. Was the strong order intake in Q1 more of a one-off effect or do you currently see a general acceleration and contracting activity?

Well, as Tim already elaborated, we didn't have an order intake of major large-scale project. It was a lot of district heating, small, medium-sized projects, not only from district heating, but in the end, from all markets. And I think it does show a tendency that both in distribution and also in transport bids, there are a lot of activities, not only in major projects, but also in smaller to medium-sized projects that need to be executed. And I think in the end, it does show the huge demand, which is really driven by the energy transition.

Thank you. And the last question for now, ladies and gentlemen. [Operator Instructions] There is much excitement in the U.S. for enhanced geothermal systems EGS. Over time, can you drilling technology and value -- add value to this industry?

Well, in the end, our drilling technology is horizontal directional drilling. If you are looking for geothermal power, also in Germany, you need to do -- execute deep drilling. If you look at the different landscapes here in Germany, the boards need to be at least in the Northern Germany between 5,000 and 6,000 meters deep to get the real -- the warm water out of the ground and use it for heating purposes. These very deep drilling are very cost intensive. And that's we have looked a couple of years, I think 10 or 15 years ago, we looked into these projects, but the risks of finding the right horizon where you can extract heat from the ground. This has a very high risk, and the investments are just huge. So at the moment, I do think our horizontal drilling technology will be core for boring infrastructure in a Nordic way. So in a nonopen cut way, and that is the main focus of our technology. So I think this technology will not be used for geothermal power plants.

Thank you very much. And this is it for now with no further questions, we have come to the end of today's earnings call. Thank you very much for your interest in Friedrich Vorwerk. A big thank you also to you, Torben and Tim for your presentation and your time. Should you have any further questions later on, please feel free to contact Investor Relations. And with that, I wish you all a successful day around the world and handing back over to Torben for some final remarks.

Yes. Thank you very much for listening today. To be honest, I'm very happy with the Q1 we had so far. I think we haven't had a stronger Q1 so far in company's history at least as I can recall it, Hopefully, this year goes on like this. And if whether it's with us, I think we'll come out with a very strong year 2026. And I'm really delighted to join this with you. Have a good week.