Gurit Holding AG (GURN) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Gurit Full Year 2025 Results Live Webcast. I am Sandra, the Chorus Call operator. [Operator Instructions] the conference will be recorded. [Operator Instructions] Note that the conference must not be recorded for publication or broadcast. Today, the audience will hear from Mr. Tobias Lührig, CEO of the Gurit Group; and Mr. Viktor Bernhardt, CFO of the company. At this moment, I am pleased to hand over to Mr. Tobias Lührig. Please go ahead.

Live from Gurit's headquarter here in Zurich. I'm pleased to have with me today our new CFO, Viktor Bernhardt. In 2025, we did our homework. We executed a rigorous restructuring program, repositioned the company for future growth. Today, we will demonstrate that these efforts have already started to materialize in the second half of 2025, and are expected to continue going forward. We structured today's presentation into 3 parts. I will start with an overview about the financial performance, for example, net sales, operational results, then business market highlights, and give you 2 or 3 facts about our sustainability efforts in 2025. Then Viktor will continue with a deep dive on the financial results of 2025, including restructuring costs, free cash flow development and balance sheet positions. Then I will resume, give you an outlook about our strategy and the market, an overview of the wind market and how we operate in those growing markets and why we are well positioned to capture future growth. And I also present you some selected highlights from our Marine and Industrial businesses. Before we dive into the Q&A session, I will conclude with the guidance for 2026 and a midterm outlook. Let's start with our 2025 achievements. Gurit successfully completed its restructuring program and streamlined its production footprint with reduced overhead costs and exited significant unprofitable businesses. As a result of these measures, our net sales decreased from CHF 431.7 million to CHF 319.6 million, mainly due to the discontinued businesses. Our reported operating results were at CHF 43.2 million, reflecting restructuring effects. However, on the adjusted basis, we reached an EBIT of CHF 29.7 million. Our return of sales went from 6.9% in 2024 and improved to 8.1% in 2025. Despite this challenging year, we delivered a solid financial results. The net debt reduced by CHF 7.7 million to CHF 55 million. The free cash flow increased significantly to CHF 12.3 million compared to CHF 4.4 million in 2024. These figures provide a clear indication of the progress achieved over the past 12 months, a leaner, more focused organization with improved profitability and strong cash generation. In 2025, we focused on profitable strategic important businesses. At the same time, we worked on our resilience and diversification by advancing our multi-market strategy. I'll give you some example of that. For example, in the Wind Systems, we secured a long-term supply agreement with Western OEM, supported by our Gurit OptiCore technology. We entered new markets like the subsea markets and we've been awarded with a multiyear subsea contract, entering an attractive new market where we see strong positioning of our company and strong growth potential. Therefore, we are expanding our footprint in Australia and Dallas in order to serve this future growth in those segments. We ramped up our capacity in Europe and our production facility, especially in Falces in Spain in order to meet future demand. I will provide you more details on the underlying market growth and demand drivers later in the presentation. Let me provide you an overview of our 3 business units. Wind Systems ended at CHF 119 million; Manufacturing Solutions at CHF 41 million; and Marine and Industrial at CHF 88 million in sales. In Wind Systems, we delivered stronger-than-expected performance despite strategic exits. We improved competitiveness through footprint optimization and restructuring. As I told you, we secured the first long-term contract based on our OptiCore technology. And I will share you more details on how our new operational setup is looking like later in this presentation. In Manufacturing Solutions, the net sales were in line with our expectation. We experienced a small, small slowdown in early '25 and followed by a recovery later in the year. The outlook remains positive because we received some positive signs in early 2026. In Marine and Industrial, we operated generally in a softer market environment, achieving the major breakthrough in the subsea segment, as I mentioned before. All across the 3 business units, we see a clear evidence of improved positioning, with early wins validating our strategic direction. Let me now turn on the supply chain performance and the ongoing topic of the U.S. tariffs, focusing first on -- of the year 2025. Throughout the year, we experienced -- actually, especially in the first time half of the year, we experienced fluctuating freight rates and volatile transit times. Despite this environment, we ensured high service level by relocating select suppliers and optimizing our inventory management. These measures allowed us to maintain stable operations and reliable customer supply. In 2025, the impacts of the tariffs were minor. As a direct importer, we paid less than $1 million, where the majority of those tariffs could be passed through. We are currently working with duty specialists to reclaim those tariffs. But due to the high pass-through rate, we do not expect significant positive effects. More relevant were the indirect effects, early year order delays, particularly in Marine and Industrial. And over the course of 2025, it gradually normalized during the year. While we had expected that the tariff topics go away, it has recently resurfaced, as you know. However, due to our organizational setup in Canada and Mexico, both benefiting from the U.S.-Mexico-Canada trade agreement, the direct impact of currently imposed tariffs remains limited. Let me briefly share 2 highlights of Gurit's sustainability efforts in 2025. We were awarded the EcoVadis Gold rating once again. This place Gurit in the top 5% of all assessed companies, and it's notably worth that we say that this is the third time -- consecutive time we achieved this rating. As another highlight, I would like to mention that we reduced our Scope 1 emissions by 24% since 2020. That means that we are very well on track on our defined pathway toward a net zero company. This achievement underlines the continued commitment to sustainability, combining external validation with measurable progress on emission reduction. And now I would like to give you to Viktor.

Thank you very much, Tobias. Good morning, and a warm welcome from my side. Let me guide you through our financial 2025. But before we start, just some opening remarks from my side. The headline of my -- today's presentation is transformation completed well positioned for 2026. And this is pretty much what we see in our 2025 financials. On one hand, last year's financial performance was heavily impacted by the transformation Gurit went through. On the other hand, financials which we do report for 2025 show as well how swift, how decisive Gurit executed the transformation and why we believe that after the completion of it, we are well positioned for 2026. Key facts. In 2025, we generated net sales of CHF 319.6 million. Operating result was driven by major onetime effects, minus CHF 43.2 million. Our adjusted operating result was CHF 26 million, and the margin of the net sales was of 8.1%, well above previous year. Gurit generated, despite the restructuring efforts we went through, a cash flow of CHF 12.3 million, and reduced its net debt down to CHF 55 million by the end of 2025. We dive a bit deeper into it. The decision to stop the carbon fiber pultrusion business as well as to focus on profitable wind customers had, as expected and as communicated, a major impact on our top line. In addition, business unit Marine and Industrial and Manufacturing Solutions were, especially in the first semester, impacted by tariff uncertainty and delayed customer decisions. All this in combination with unfavorable FX effect. Of this, we saw a decline in our net sales of 26%. The gross profit went down by 13%. However, in relative terms to net sales, it was already above previous year. Adjusted operating results, here, we reached CHF 26 million. And same as before, we are, in terms of net sales margin, we are well above previous year. Our operating result was minus CHF 43 million. And if we look deeper into it and the drivers for it, by building a bridge, we see that the main deviation comes from business divestments and here, from goodwill recycling of CHF 64.2 million related to carbon business pultrusion business exit. We had restructuring expenses of CHF 4.3 million, mainly in Denmark and Italy as well as some minor impairment adjustments. I mentioned before that the financials 2025 show a clear picture of how we manage the transformation and why we believe to be well set for 2026. If we compare the second semester '25 with the first semester '25, where we still were in the -- heavily in the restructuring phase, we see that our gross profit went significantly up in the second semester and our adjusted operating result went up to CHF 16.7 million or 10.8% of net sales, a significant increase versus the first semester. Diving deeper into the -- some balance sheet items. Our trade net working capital reduced in line and along with our business reduction. We reduced it by 25%. Our net CapEx we spent last year was CHF 8.7 million, reflecting a somewhat smaller Gurit, and reflecting as well our disciplined project execution while continuing investing in operating efficiency. Our free cash flow was at CHF 12.3 million, well above previous year. Net debt. Here, we successfully managed to reduce net debt by nearly CHF 8 million down to CHF 55 million by end of last year. The equity went down by CHF 8 million, heavily impacted by CTA of CHF 12.3 million. And last but not least, our net debt-to-EBITDA ratio went significantly down from 2.5 to 1.6. And with this, I hand over to Tobias for the outlook.

Thank you very much, Viktor. Before we go to the outlook, let me just take a few minutes to give you 2 insights about our market environment in wind energy and our positioning as well as on the marine and industrial sector. Let's start with the wind energy. This is our primary market at this point in time. There are some global megatrends we are riding on. The global electrification is accelerating. Megatrends such as digitalization, artificial intelligence and the rapid expansion of data centers are driving a significant increase in electricity demand around the world. This growing demand must be addressed through evolving energy mix, with renewables playing a central role. And if you take a closer look at Europe, wind is the extremely strong and very competitive energy source that will be tapped over the next few years. According to the global supplier forecast of -- by Brinckmann, Western OEMs are expected to deliver a compounded annual growth rate of about 10.5%. This growth is supported by strong regulatory frameworks in the Western markets, clear decarbonization targets in the countries and in the regions and a continued policy to support renewable energy. This combination of structural demand growth and supportive regulation creates a highly favorable market environment for Gurit, particularly given our positioning in advanced composite material for wind and energy applications. Let's take an even closer look. It is important to note that according to the industry expert and our own analysis, Chinese OEMs are expected to play a relatively minor role outside of China. The market penetration is projected around 16% globally ex China by 2035. Chinese OEMs are likely to enter price-sensitive markets such as India, Southeast Asia, Turkey and Australia. And it's also, I think, important to note the moment those OEMs -- non-Western OEMs enter a different market and they open local manufacturing sites, they're also seeking for global suppliers like Gurit. Let me go on 2 submarkets, the onshore and the offshore market, and I start with the onshore market first. Here, the market dynamics looks like the following. We expect a growth at approximately 6%, primarily driven by the European demand. Around 70% on the future onshore installation are forecasted to be accounted by the 5 major OEMs. In the offshore market, we see a slightly different picture. We expect a stronger growth between 14% and 16%, but kicks in a little bit later. And the regional driver is by far the European market region. The -- I think it's important to note that the U.S. market outlook is expected to have minimal installation due to the current U.S. policy framework. And if it doesn't -- if it change, and we see it probably change after the next administration, we will see positive effects not earlier than the 2030s. I understand, it can be sometimes challenging to grasp what Gurit actually does and is producing, especially if you are just starting to look at our business. Let me clarify this a little bit by focusing on Wind Systems. Gurit provides mission-critical supplies and tools for the wind turbine blades, including highly engineered molds. They are essential for building the blades, and they are 100-meter long steel structures, very complicated. We produce and deliver core materials, PET and balsa, which form the internal structure of the blades who are essential to deliver structural integrity of the blades. We make tailor-made kits. They're ready to assembly on the spot delivered to our customers for each blade. And we produce highly -- high-performance profiles, assuring a reliable torque transition when you -- from blade into the turbine. And we produce special coatings, ensuring performance, durability and efficiency, not only during the production process, but also in the aftermarket. We believe that no other suppliers in the market offer those breadth and integration of products and services that Gurit provides for wind turbine blades. This combination of material tools, engineering service positions us very well as a strategic partner for our customers. As you know, and it's very easy to spot trends. Turbine becomes larger and larger, and so blades become larger and larger. And some of you have asked me whether this could reduce the market size for our core material. The answer is easy. Based on detailed analysis of our engineering data we get from our customers, and we can grasp by ourselves, we can see that the increase in material usage more than offsets any potential reduction from the larger blade designs. As a result, demand for core materials remain robust. Given the current design trends, Gurit is well positioned to fully participate in the global market growth. As I promised you earlier, let me guide you through our new production footprint for Wind Systems. Currently, we operate in 7 countries, strategically serving the wind industry. This network is deliberately designed to ensure customer proximity, cost-efficient production and strategic risk mitigation. Our key location and capabilities are, for example, Ecuador, where we positioned ourselves in a country that are producing 80% of the global balsa supply. And we are the only major player with free access to -- that means we don't have our own plantation, and thereby avoiding structural supply risk. We are located in Mexico, near the U.S. border, specialized in core material and kitting. In Spain, we are focusing on kitting and core materials, supporting the European demand. In India and China, we are producing and we are -- concentrated our production of structural profiles. And in China and India, we're also producing molds for manufacturing solution. And in both countries, we have kitting and core material capabilities. Talking about core materials. Gurit supplies to the market very important core materials and ready-to-use kits using both recycled PET and so-called virgin PET. Recycled PET enables us to meet the strictest sustainability requirements of our customers. And with the choice between recycled and virgin PET, we have access to multiple raw material sources that reduces the dependency on any single supplier or supply chain. We benefit from a strong scale effects through centralized extruder facilities in our core markets. Many decades of continuous product optimization have delivered us industry-leading yields on our extruders. Our proprietary OptiCore technology allows customers to reduce blade weights by several hundred kilograms per blade. This weight reduction enhances turbine efficiency over its lifetime, creating value both for direct customers as well as for the end users. Now I would like to go to the Marine and Industrial business for a while. Looking ahead, the Marine and Industrial market are expected to show moderate growth, influenced by a slower marine demand due to the U.S. tariffs and a decline in certain U.S. segments. Despite these headwinds, we entry -- we have entered new market segments and driving increasing demand, particularly for the recycled PET form in the industrial space. Our Corecell or proprietary Corecell technology is seen as the only long-term reliable solution for specific application in the subsea and defense sector. We expect a strong growth in the subsea market. And also, we see multiple opportunities to replace traditional materials such as with across various industries. New products are in the pipeline and are expected to start impacting top line later this year and the years to come. We believe Gurit is now very well positioned to capture those growth in the marine and industrial sectors. We have the best-in-class structural engineering plus scalable kitting capabilities to support efficient production. The proprietary Corecell technology delivers exceptional and consistent material performance. We only begin to unlock new lightweight opportunities by replacing traditional materials with Gurit solution, improving performance efficiency and total system cost. Let me now come to the guidance. We believe and we see that the net sales from continued operations at constant FX rates to increase at a mid-single-digit rate. Our adjusted operating results margin will improve versus 2025, obviously depends on geopolitical situation and market development, including FX fluctuations. Our midterm outlook, post 2026, we see a mid- to high single-digit growth in wind, a high single-digit growth in nonwind, and we are reaffirming a 10% operational result margin going forward. We completed our transformation. We have now a leaner and cleaner footprint. We reduced our overhead costs. We improved our operational resilience and focused on strategic partners and customers. We believe we position the company for sustainable profitable growth in the future. Before we go into the Q&A session, let me give you some -- our 3 next important dates. This will be April 16 with the Annual General Meeting and the Q1 '26 results. On August 26, we present you the half year report. And on October 23, we present you the Q3 numbers. At this point in time, I thank you very much, and I'm -- and we are happy to take any answers.

[Operator Instructions] Our first question comes from Laura Bucher from Octavian.

I have 2. First, I'm looking for some comments on China. I mean, you deliberately reduced your exposure to domestic products in China. So I'm wondering how you're positioned to capture the growth from, number one, the 120 gigawatt annual installation target under the new 5-year plan, which is, I think, is quite sizable. And number two, from the Chinese OEMs gaining share internationally, if I'm not mistaken, they've increased their non-China share threefold last year? And also, have you factored any of this into your '26 and post '26 growth targets? I'll take my second question after the answer, if I may.

Yes. Thank you, Laura, very much for the questions. Yes, we are working with Chinese customers, obviously. And yes, we are working with Chinese customers outside China as well. And as I told you in one of my slides, we are getting requests, especially for the growth outside of China for our core material and kitting services. And I believe we are strongly positioned over there. Yes, we see this 120 gigawatts installation as well. We expect a little bit less than that, but it's on an extremely high level. And we -- but I think it's most important that we really focus on profitable customer relationships. So we are very selective and don't participate in any big price competition in the China market. We have factored a little bit into this -- of this growth into our numbers going forward.

Okay. And just wondering why are you not guiding -- You're only guiding to -- well, not only, but anyway, you're only guiding mid- to high single digit and not the 10% growth you expect in your Western market. I'm just wondering why you expect less? Is it the lower prices? Do you see risk to your market share?

We don't see any risk at the market shares. The prices are very stable. But nevertheless, we are still a little bit, let's say, conservative in terms of the global situation.

[Operator Instructions] The next question comes from Marti Queral from UBS.

Question number one would be, please, could you give some color on what were the drivers of the gross margin expansion in H2 versus H1? I mean is it all related to the discontinuation of the carbon fiber business? Or did you have also some tailwinds from lower raw material prices?

I take this question, Marti. Thank you very much for the question. No, we didn't have any special effects in H2 on the gross margin. It's really mostly coming from the discontinuation of the carbon fiber pultrusion business. No major tailwinds.

Okay. And then for 2026, I mean you expect core EBIT margin above 2025 levels, so above 8.1%. And -- but I mean, most likely, I would say that this implies a contraction compared to the 10.8% margin that you had in H2? I mean could you elaborate why you do not expect the H2 margin to be sustainable in '26?

Yes, a fair question. And we're kind of -- we're expecting this one. Indeed, we delivered above 10% margin in -- for 2 consecutive quarters. On the other hand, we want to be prudent, similar to the answer Tobias gave before. We are cautious going forward with all the uncertainty still.

Okay. Then I would have a question on the wind business, also similar to a question that was asked before. But I mean if I look at the outlook statements from wind OEMs, they are encouraging for 2026. But then if I look in '25, for example, the megawatts that some of these OEMs delivered grew double digit, while the core sales in wind materials were down 3% roughly. So my question is, could you help me understand where is this difference coming from? I mean -- is it due to lower ASPs? Is it changes in market share? Like some color would be appreciated here.

Marti, just to have your question correct, so you're asking why there is a difference between the market growth and us being down on wind?

Basically, yes. Yes.

Okay.

Yes. We have seen that the raw material prices went down and some of our raw material prices will reflect also into our sales prices.

But mostly -- if I may add, Marti, I mean we -- as we said, we stepped out from nonprofitable customers in line. So it's -- that we gave basically sales away.

Okay. Okay. That's clear. But I mean now you just said that raw materials went down. So I mean, I guess this helps also on the margins. That was my question before.

That goes in line, but I mean, it was not a major tailwind on the gross profit.

Okay. Okay. And then maybe one last question, if I may. I mean you had an equity free cash flow of around CHF 11 million, I would say. I mean is this the new base level that we should think about Gurit going forward? Is this something that you can achieve also in 2026?

On the free cash flow, well, the free cash flow [ '25 ] was impacted by restructuring measures, which we don't expect in that magnitude going forward. So I think the level of [ '25 ] should be -- definitely set the rock bottom for us.

Ladies and gentlemen, this concludes the question-and-answer session. I would now like to turn the conference back over to Tobias Lührig for any closing remarks.

Yes. Thank you very much, everybody, for participating today. And I hope I see you soon in the -- for the next media conference. I wish you a great day. Thank you very much, and bye-bye.

Thank you from my side as well.

Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.