Grammer AG ($GMM)

Welcome, everyone, and good morning to all of you joining us today. My name is Katerina Koch, and it's really my pleasure to welcome you to Grammer's Conference Call on the results for the first quarter of 2026. Over the next 30 minutes, our CEO, Jens Ohlenschlager; and our CFO, Kelvin Wang, will guide you through the presentation. You can find the presentation along with all the materials related to our Q1 release on our website in the Investor Relations section. [Operator Instructions] And with that, I would like to hand over to you, Jens. The stage is yours.

Thank you, Katerina, and good morning also from my side. My name is Jens Ohlenschlager. I'm the spokesman of the Executive Board at Grammer. Thank you for your interest in our company. I will start again. I was on mute, sorry. Thank you, Katerina, and good morning also from my side. My name is Jens Ohlenschlager. I'm the spokesman of the Executive Board at Grammer. Thank you for your interest in our company. And on behalf of our entire team, I welcome each of you for today's presentation of the Grammer Group financial results for the first quarter 2026. Joining me is our CFO, Kelvin Wang. Together, we will walk you through our financial performance and the outlook of 2026. I will begin with a brief overview of the most important developments for Q1. Q1 revenue decreased compared to last year, was accompanied by a corresponding decline in operating EBIT. Adjusted for currency effects, group revenue, however, was less impacted. The decline was less significant. Looking at the product areas, we saw a mixed picture, while Commercial Vehicles proved resilient, Automotive remained under pressure. Regionally, EMEA kept resilient, while Americas stayed challenging. EBIT increased mainly due to exchange rate effects and operating EBIT result below the prior year level caused by the decline in revenue. However, operating EBIT margin stayed essentially in line with the full year 2025 result at around 4%. Free cash flow was negative, influenced by higher inventories and accounts receivables. Improvements in this sector expected already in Q2. I'll now hand over to Kelvin, who will walk us through the details.

Okay. Thank you, Jens. Let me go through the numbers for Grammer first financial -- first quarter financial performance. The group revenue, EUR 462 million. This represents a decline of 5.2% compared to the prior year level of EUR 487.4 million. Without the exchange rate impact, the decline is 1.9%. Looking at the 2 product areas, Automotive revenue was down by 9.3% to EUR 284.8 million. This reflects economic-related weak demand across all regions. Commercial Vehicle was stable and grew by 2.1% to EUR 177.2 million. Now let's move to the profitability. The group reported EBIT rose to EUR 23.3 million. The EBIT margin ratio improved from 3.9% to 5%, mainly driven by the positive currency effect. Operating EBIT came in at EUR 18.3 million versus EUR 23.9 million last year. The operating EBIT margin ratio stood at 4%. This is close to our full year 2025 level of 4.1%, which means our profitability of 2026 Q1 is sustainable with the full year level of 2025. A few items to flag on the operating EBIT. It was adjusted for positive currency effects of EUR 4.8 million from EBIT. While we had negative currency effect last year, we also recognized income from the dissolution provision of EUR 0.2 million. In summary, for group level consolidated, revenue below prior year, while reported EBIT and margin ratio improved. Now let's move to the regions, starting with EMEA region first. The region proved stable in a difficult market environment. Revenue reached EUR 280.5 million, slightly below prior year level of EUR 285.2 million. Looking at the 2 product areas, Commercial Vehicles grew by 1.1% to EUR 120.8 million. The agricultural and construction equipment segment was the main driver here. Automotive declined by 3.6% to EUR 159.6 sic [ 159.7 ] million, reflecting the continued weak market performance. For profitability of EMEA region, reported EBIT rose significantly from EUR 13 million to EUR 19.8 versus 2025 Q1, the EBIT margin percentage improved from 4.6% to 7.1%. Operating EBIT also clearly improved from EUR 15 million to EUR 18.8 million. The operating EBIT margin ratio increased from 5.3% to 6.7%. The profitability improvement sustainably comes from the operation efficiency improvement and also the favorable product mix. Operating EBIT was adjusted for positive currency effect of EUR 0.9 million and for income from the dissolution provision by EUR 0.2 million. Now moving to APAC region. The revenue reached EUR 120.6 million, down 4.8% against prior year, but this headline figure is impacted by currency effects for reporting conversion from RMB to euro. If without exchange rate conversion impact, APAC grew by 2%. The 2 product areas developed in opposite directions. Commercial Vehicle grew strongly around by 22.7% increase. The driver was a stronger demand in the off-road business. Automotive declined by 14.7%, mainly due to a weak automotive market demand in China. EBIT and operating EBIT were both down. Operating EBIT came in at EUR 8.1 million versus EUR 9.8 million from last year. The operating EBIT margin ratio stood at 6.7% compared to 7.7% in Q1 2025. The main reason is the unfavorable product mix impact to profit from automotive business. Operating EBIT was adjusted for negative currency impact by EUR 0.4 million. APAC remains profitable. The main challenge is the ongoing shift in the Chinese automotive market from European and American OEMs to local OEMs, which requires us to adjust our customer mix. At the same time, this shift also creates opportunity to strengthen our position with local OEMs in China market and the Chinese main shareholder support. Now let's turn to American regions. For Americas remains our most challenging region. Revenue declined by 18.9% to EUR 70.3 million. Without the currency effects versus 2025 Q1, the decline was 10.5%. Automotive was down 18.2%, mainly reflecting the phaseout of platforms. Commercial Vehicle declined by 20.3% due to lower volumes. Earnings turned negative at the operating level. Operating EBIT finalized by minus EUR 3.9 million versus EUR 1.6 million from last year. The operating EBIT margin ratio stood at minus 5.5%. The revenue decline was fully reflected in the earnings. Operating EBIT was adjusted for positive currency effects by EUR 2.5 million from EBIT and reached minus EUR 3.9 million. Reported EBIT amounted to minus EUR 1.3 million. Americas stayed with negative result. However, with new projects ramping up this year, we expect a more positive contribution going forward. Turning now to our workforce development. As you may know, we reported the numbers of employees, including temporary workers. And as an average over the period, this gives a more accurate picture. Group head count, including temporary workers came down by 5% to 13,658 employees on average, but the regional picture is more different. In EMEA region, the head count declined by 10.6%. There are 2 main drivers. First, our restructuring measures and organizational changes. And secondly, the internal transfer of selected functions to central service. Effective from January 1, 2026, those functions are now reported under central service instead of EMEA region, where the headcount increased accordingly. In Americas, head count was down by 16.8%. This mainly reflects the lower sales volumes in the region. APAC developed in the opposite direction with head count up by 8%. The growth is driven by intercity expansion and also the new product launches across the key locations. For example, the new Fuzhou plant with workforce ramp-up [indiscernible] head count in place to manage the new product launches. Now let me turn to the capital expenditure in Q1 2026. In the first quarter, we invested EUR 22.8 million, which was a 16.3% increase versus EUR 19.6 million from 2025 Q1 by region. EMEA almost doubled its capital expenditure to EUR 10.9 million, but this one is mainly because of IFRS 16 leasing contract by EUR 5.1 million capitalization instead of the equipment purchasing. APAC was at EUR 6.5 million, an increase due to high capitalization that also is for IFRS 16 that is EUR 2.2 million in leasing contract. Americas saw a decrease by EUR 5 million to EUR 2.7 million. In Q1 2025, there were higher investment for the industrialization of new projects. And for central service with a capital expenditure of EUR 2.7 million nearly remained on the level of last year. Now let's come to the 3 metrics to cover this slide, working capital, free cash flow and net debt. Working capital increased to EUR 206.3 million, up from EUR 139.8 million at the year-end of 2025. There were 2 main reasons. First one, in EMEA region, there is a seasonal increase with sales in 2026 Q1 compared to 2025 Q4, which caused accounts receivable increase versus December 2025. Secondly, APAC region accounts receivable also increased for the new project, SOP. The free cash flow came in at minus EUR 36.1 million versus minus EUR 6.7 million from 2025 Q1. The decline mainly reflects the reduced cash flow from the operating activity linked to the working capital movement versus than last year. Net debt increased to EUR 530 million compared to EUR 476.8 million at year-end 2025. This follows directly from the working capital development. On an adjusted basis, net debt was at EUR 400.4 million. This figure trades the EUR 130 million subordinated loan from our main shareholders as equity instead of loan. Let me close my part with a look at the equity, leverage and gearing. The equity increased by 6.9% to EUR 297.8 million. The main driver was the positive net result in the first quarter. The equity ratio improved from 17.3% to 18.1% on an adjusted basis, which trades the EUR 150 million in subordinated loan from our main shareholder, Ningbo Jifeng, as the equity. The equity ratio stands at 26%. This reflects a more accurate picture of our financial structure. Leverage stood at 3.5 compared to 3.2 at the year-end 2025 before shareholder subordination loan adjustments. After adjustments, leverage was 2.7. The gearing came in at 178% after 171% at year-end 2025. After shareholders subordinated loan adjustment, gearing stands at 93.7%. Now I will hand back to Jens for the outlook.

[indiscernible] now to the outlook for 2026. Before sharing Grammer's expectations, let me briefly frame the market environment. Picture for 2026 is mixed across end markets and across regions. Light vehicle production is expected to decline slightly on a global level. The weakness is most pronounced in EMEA and China. The truck and bus segment, we see a steady recovery in EMEA and a substantial improvement in Americas. China is following a strong prior year. In the truck and bus segment, we see a steady recovery in EMEA and a substantial improvement in Americas. Agricultural machinery is stabilizing worldwide after a difficult period, while large agricultural equipment is expected to decline heavily in Americas. Construction machinery shows a broad-based recovery across all regions. Material handling is expected to grow solidly worldwide with particularly strong momentum in China. In summary, a quite mixed picture with clear signs of growth besides ongoing weaknesses in parts of automotive and large agricultural vehicles. While these trends shape the overall industry environment, the relevance for Grammer depends on multiple factors and does not apply uniformly across all regions and across all product segments. As a result, our development may differ from the general market picture outlined. Market fundamentals are one part of the influencing business aspects. Geopolitical conditions and structures are the other part. In light of the current U.S.-Iran conflict, the ongoing Russia-Ukraine war and an unpredictable change in the trade policy, economic development remains fragile, demands volatile. Nevertheless, Grammer is navigating quite well in these difficult conditions, achieving stable results in line with our outlook. Against all headwinds, we still expect a revenue of around EUR 1.9 billion with different regional contributions. In China, sales increase will continue, driven by local OEMs where Grammer has expanded share substantially and grounded a robust sales fundament. In Americas, new project ramp-ups in Automotive will contribute. In terms of profitability, we are guiding for an operating EBIT of around EUR 80 million. The continued execution of our top 10 measures, efficiency initiatives, restructuring measures and cost discipline will be primary driver. As always, this outlook is subject to geopolitical developments and their impact on the global economy. Before we close the presentation, let me briefly share some market impressions. In March, we participated in the CONEXPO in Las Vegas, the largest construction equipment trade fair in North America with broad participation from OEMs and suppliers. Grammer was on site with a wide range of seating portfolio. The response from the customers was really encouraging. One product in particular to noticeable interest, our seating generation for off-road purposes, the MST 297 designed for drivers in the agricultural and construction equipment sector. Compared to its predecessor, it brings significantly improved suspension performance and it integrates quality standards from Automotive business into the off-road segment. This product is exemplary for what Grammer seats standing for, combining ergonomics, comfort and functionality. Before ending and turning to the question-and-answer session, take a brief look on our upcoming events. Grammer Annual Virtual General Meeting will take place on May 22, publication of the half year results on August 14, followed by the 9 months report on October 13. With that, we are coming to the end of the Q1 2026 result presentation. Thank you for your attention, and we are available now for answering your questions.

Thank you, Jens and Kelvin, for the detailed overview of Grammer's performance in the first quarter of 2026. As already announced, we will now move to the Q&A session.

[Operator Instructions] I don't see any questions coming up from the audience. So thank you very much to all of our participants for your attention and see you on our next publication mid of August. Thank you. Have a good day. Bye-bye.