Gurit Holding AG (GURN) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Gurit Half Year 2026 Results Live Webcast. I am Moira, the Chorus Call operator. [Operator Instructions] Note that the conference must not be recorded for publication or broadcast. Today, the audience will hear from Mr. Philippe Royer, Chairman of the Board of Directors of Gurit; and Mr. Viktor Bernhardt, CEO of the Gurit Group. Mr. Royer will open today's webcast with an update on organizational developments before handing over to Viktor, who will lead the presentation on the half year 2026 results and business update. Both speakers will be then available to answer questions during the Q&A session. At this time, I'm pleased to hand over to Mr. Philippe Royer.

Yes. Good morning, everyone. Thanks for being in the call. As you have probably read already this morning, we have plenty of good news, which we are happy to share with you. Yes, I'm going to explain the reorganization, then Viktor will cover the results presentation, and then we'll go for the Q&A. First, let me be loud and clear about our reorganization. So our former CEO, Dr. Tobias Luhrig, has left on his own. There was by no means an issue with Gurit results or any kind of strategic disalignment, nothing like that. The Board of Directors decided immediately on 2 things. First, we declined Tobias Luhrig's offer to stay for some time as we knew we had a ready internal solution. Then we immediately nominated Viktor Bernhardt as CEO ad interim. In the following weeks, the Board of Directors discussed what was the best long-term solution for the company and the considerations were as follows: First, our business units have distinct business models and operating requirements. Hence, it is difficult for a CEO coming from outside to add business value on top of what our BU heads bring. Then we have defined at the end of 2024, a detailed strategy for the company. You have seen with the 2025 results, the first outcome of this strategy with well-executed realignment and restructurings. You see now with the first half 2026 results, another outcome of this strategy, which is profitable growth in our traditional markets and in new markets for us. This for us is only an intermediate step, and we need to continue to execute according to the strategic directions. So an organization led by an expert in finance with proven leadership and execution capabilities is then adequate. Talking about Viktor, the Board first had been careful in the recruitment process of Viktor to hire someone with an experience much wider than the traditional CFO role. At Gurit, also Viktor fulfilled a lot of the CEO typical functions, participating in all business unit monthly performance reviews, being involved in all large customer contracts negotiations or renegotiations, checking performance of procurement, overseeing development of IT, producing the remuneration report and regularly participating in meetings or calls with me. He also played a pivotal role in the strategic review we did during the second quarter as we do every year. Viktor has obviously also developed clear financial goals for the company and strong directions for the finance organization. So I'm pleased to announce that the Board of Directors has decided unanimously to nominate Viktor Bernhardt as a CEO, and I can share with you that this decision was very much welcome in the organization, for example, by all business unit heads. The search for a new CFO is underway. For the time being, it remains with Viktor and the finance team. We, in the Board are convinced that Viktor's nomination will allow us to continue to progress on this profitable growth path that was elaborated 2 years back. And it goes without saying that with this nomination, Gurit will avoid losing another, let's say, 18, 24 months, which is the time needed to recruit a new CEO with a notice period and train a new CEO. We want to continue to deploy on the strategy we have elaborated 2 years back, and we believe Viktor is the perfect guy to do so. And I leave the word to you, Viktor, for the results presentation.

Thank you very much, Philippe. Thank you for the words, and thank you for the trust placed in. Good morning from my side, and welcome to our media and analyst webcast. And today, as Philippe already announced, I have the pleasure -- literally have the pleasure to present our first half year results '26. Going into it, we have delivered strong first half '26 performance with a significant profitability improvement versus previous year period. Looking at our continuing operations, we grew by 16% at constant FX. We have significantly improved our adjusted operating profit margin from 5.7% to 11%. We improved our free cash flow versus previous year, and we significantly reduced our net debt in the past 12 months. This all being said, the portfolio transformation and multi-market strategy is delivering results, and we will see it on the next pages. The strategic realignment benefits are visible, and we keep confirming them. And encouraged by this strong H1 results and with more visibility for the rest of the year, we raised our full year guidance. I mentioned the full year market strategy showing results. If we look into our business units, starting with Wind Materials. Here, on a continuing business at constant FX, we grew 9.6%, exceeding our own expectations. The main driver for the growth was obviously the leading OEMs. We increased their onshore production and ramped up their offshore facilities. We, as Gurit, benefit from our long-term agreements with our partners. And of course, we benefit from our global footprint. Moving to Manufacturing Solutions. They delivered a very nice first semester '26 with a growth year-on-year at constant FX of 69% admittedly versus a relatively soft first semester '25. The driver here was increased customer activity, particularly in India. And here, we strongly benefit from our successful manufacturing site establishment in India and from strong project execution across all business units. The order backlog and the current customer demand confirms our full year momentum for '26. Marine & Industrial, here, we grew by -- in line with our expectation by 9% at constant FX versus previous year. And this despite marine markets being still soft. The Subsea expansion and diversification strategy drove the real growth as well as market share gains in smaller marine segments. The increasing adoption of recycled PET foam solutions, broad industrial application and a growing opportunity pipeline helped to boost the growth. Now of course, as probably everybody in our industry, we had to face as well headwinds. The geopolitical tensions in Iran drove the raw material cost up, drove the freight cost up and drove the energy cost up. The U.S. tariff environment still remains uncertain, and you have as well heard the recent discussions of 50% tariff increase in Canada. This all doesn't help, but we at Gurit, we could mitigate it. We mitigate it with new and different procurement initiatives, continued supply chain optimization, changing in local sourcing and routing, playing our global footprint game and very important to our commercial cost pass-through. The achievements, which we're really proud and you will see it in our financials is -- well, first of all, we have delivered a reliable supply chain. And much more important, we have delivered reliable deliveries to our customers. So all in all, so far, we have not seen any significant impact from the geopolitical tensions and the supply chain headwinds which we are seeing in the market. Diving a bit deeper into the financial performance. Key facts. We reported a net sales in Swiss francs of CHF 154 million, including discontinuing business. This represents a slight decrease versus previous year period of 0.7%. Our operating profit is 17.8% (sic) [ CHF 17.8 million ] for the first half year. We significantly increased our adjusted operating profit from CHF 9.3 million to CHF 16.9 million with an adjusted operating profit margin of 11% coming from 5.7% in the previous year period. Net debt increased in this year. I will come to it later in detail. But comparing to previous year, we were able to decrease our net debt by CHF 20 million. and we improved our free cash flow versus previous year. So all in all, just as a summary, 16% growth in continuing business constant FX, growth across all 3 business units supporting our multi-market strategy. And we keep confirming the success of our strategic realignment. We have a leaner cost base. We have enhanced operating efficiency. And ultimately, we have an improved profitability profile, which let us believe that we built a strong foundation for our future and for our future growth. Now diving even a bit deeper, as mentioned before, on the net sales -- on the reported net sales, we see a decline of 7% and 1% at constant FX. This includes discontinued business, which still had quite significant in the first semester '25. We move on to the continued operations and just compare the net sales, as mentioned before, we see an increase of 16% at constant FX and this across all business units. The gross profit grew by 23%, reaching a gross margin of 24%, coming from 18% 1 year ago. Our adjusted operating profit grew from CHF 9.3 million to CHF 16.9 million, generating an adjusted operating profit margin of 11%. Now here, we compare obviously one semester -- first semester '26, which is completely post restructuring with a first semester '25, which is pre or in the mid of restructuring. And the question is, and I'd like to come to the next slide, which we think really should are proud, how did we do versus a very strong second semester '25. Remember, second semester '25 was a bit backloaded, especially in Manufacturing Solutions. And here, on continuing operations at constant FX, we managed to grow by 2.3% and we managed to increase our adjusted operating results and our adjusted operating margin. Remember, second semester '25 is still at a different raw material and cost base than we see now in the market. This just supports that we are -- achieve a sustainable structure, and we keep mitigating the headwinds which we are facing in the market. Diving into our cash position. Our trade net working capital here comparing year-on-year, we decreased it by CHF 6.5 million, CHF 6.6 million to be precise. However, we had an increase of CHF 5.2 million in '26. This is mostly driven by seasonal related inventory buildups as well as project-related inventory buildup in Manufacturing Solutions, preparing for deliveries in the third quarter. Here, we expect a reduction towards year-end. CapEx, we spent CHF 4.8 million in the first semester '26, primarily containing targeted projects to support our capacity and efficiency enhancements. And here, we are fully in line with our planning. Our free cash flow, as mentioned before, significantly improved versus previous year, driven by profitability improvement, but of course, driven as well by absence of restructuring cash outs, which we had in the first semester '25. We had an adverse impact on our free cash flow from increased trade net working capital, as mentioned before. But as it goes for the trade net working capital, which we will reduce towards year-end, we will improve our free cash flow in '26 in the second semester. If you look at our priorities, which is next to profitable growth, financial flexibility, strengthened balance sheet and improved leverage profile, we see very well that we made nice progress here. Comparing our net debt year-on-year, we managed to reduce this by CHF 20 million coming from CHF 79 million. Within the year, we increased our net debt by CHF 4.2 million, mostly driven through a deferred cash payment related to an early acquisition of Fiberline Composite A/S. The equity increased half year by half year, coming from CHF 46 million up to CHF 65 million, so an increase of nearly CHF 19 million in the past 12 months and CHF 12 million increase in the past 6 months. Consequently, our net debt-to-EBITDA ratio decreased from 1.9x by the end of -- by mid of '25 to 1.4x by mid of '26. Coming to the outlook '26. And as mentioned before, we are really encouraged by the first year results. We have much better visibility. And consequently, we raised our guidance. We raised our guidance for net sales growth for continuing operations at constant exchange rates in a range of 9% to 11%. Previously, we were guiding mid-single-digit growth. The full year adjusted operating profit margin, we raised to around 10%. Previously, we said we want to be better than [ '25 ], which was 8.1%. What we did not raise because we continuously focus on it is our disciplined execution, operational excellence and cash generation. And of course, we keep monitoring the geopolitical developments such as tariff and supply chain risks as this has the biggest implication on our this year's performance. So what are the key takeaways, which we wanted to give you this presentation? Well, first of all, strong H1 '26, and we confirm the success of our strategic realignment. And we not only confirm it in the second -- in the first semester '26, we repeated it. We repeated it after the strong second semester '25. Our multi-market strategy is delivering results, tangible results. We see it across all 3 business units, which shows organic growth. With the decision of the Board to appoint me to the CEO, we reinsure stability in the organization. And following all this, we raised our full year guidance. Of course, we keep focusing on profitable growth. So in a nutshell, strong H1 and raised guidance. And before we move on to the Q&A, just one word from my side. I would like to thank our teams around the world for having delivered this for having delivered these results over the past not only 6 months, but over the past 12 months and to manage the strategic transition realignment and restructuring in the past years. Thanks a lot to our teams. And with this, thank you for your interest, and I will hand over to you for Q&A.

[Operator Instructions] The first question comes from the line of Laura Bucher from Octavian.

First of all, congratulations on the results. I have a couple of questions. So first is on the midterm margin potential. I mean, at the full year '25, you said it post '26 adjusted or actually reported EBIT margin of around 10%. You have now effectively hopefully reached that level a year earlier today. And in the press release, you referred to midterm now 10% or above. So I mean, I just wanted to understand what this above means in practice? I mean, looking historically, Gurit had margins of above 11%, but the portfolio was rather different back then and Manufacturing Solutions were at peak levels. So I mean, given that you've stated multiple times that you do not expect Manufacturing Solutions to get at that level again, I mean, what do you see realistically in terms of margin potential for the current -- with the current portfolio that you have for the midterm?

So thank you very much, Laura. First of all, nice try, but we will not guide on '27. It's just too early for that. So definitely, some macro trends will continue in the wind industry that we confirm like the offshore ramp-up, increasing ramp-up in the submarine. On the project business on the Manufacturing Solutions, as you referred specifically to it, the visibility is not that far out. So right now, for this year, we see the momentum. We continue on the momentum, but we will not be able to raise it. Maybe just to manage expectations. On the -- our strategy deployment, basically, we had 2 steps, right? -- restructuring in the first step and profitable growth in the second. So restructuring, I think we can now certainly say complete it and move on. The second one, profitable growth, that's a longer one. We see first results, and we are very happy with the first results of the first semester '26. However, there are still quite a few risks out there. I mentioned tariffs and you see the development there is quite dynamic. The raw material and supply chain situation is still volatile. So we are careful to guide further and to increase. Nevertheless, we strongly believe that we are only in the beginning of the second phase of our strategy. We do not intend to stop there. But at this point in time, we cannot and we will not raise and change our guidance and ambition.

That's fair. And then a second one on the U.S., Canada tariffs. I mean, can you quantify the impact you would expect in Swiss francs? You said that you've embedded that already in the full year '26 guidance. So can you give us some more detail there?

Well, it's a bit early to say, right? It's because it's really fresh. But in a worst-case scenario, it's, let's say, mid-single million Swiss franc of top line.

And have you -- just out of curiosity, have you received any reimbursement so far from the tariffs earlier this year?

Yes, we did.

And did you report that in this year's -- well, in the half year already? And if so, how?

No, we have not reported this in the half year. It's not in there. And the question is, of course, what our customers will ask. And so that's something we cannot comment on that at this stage. And I would be very careful to put this in our financial guidance.

And then just a third and final one. In the marine market, I mean, for quite a few quarters now, you've reported that underlying marine demand still rather muted. Once it was mentioned the tariffs was one of the potential factors. So I mean, what are you currently seeing in terms of demand there, specifically in the marine market and ex Subsea business? Is there any indication of a recovery or improving order momentum or anything in that sense?

It was flat in the beginning of the year, and we were carefully, carefully optimistic, but then the Middle East crisis had an adverse effect on it. So it really reduced it. We don't see that this will go away as long as the Middle East tensions are there.

The next question comes from the line of Tobias Klopper from ZKB.

Two questions from my side. I will take them one by one. First, a follow-up on the previous question regarding the tariff situation. If I remember correctly, you have a production facility in Canada. And then my question would be how important that is for supplying the U.S. market, maybe in terms of share of sales? And would it be possible to shift production from there?

Yes. Thank you for the question, Tobias. Indeed, we have a production facility in Canada. And indeed, it is important for U.S. market, especially in the subsea area. that we deliver the product there. Will we shift production? No, this type of production is not an easy one to shift. So that's -- we have to see how this develops. But right now, that's not an option.

Maybe I can add a little bit to this answer. So we deliver from Canada to the U.S. 2 completely different kind of markets with these Corecell products, or composite products that we are producing in Canada. The first one would be products for the typical marine markets mainly. Here, we cannot shift production -- on the other hand, our customers are most probably going to reroute part of their production if really this 50% tariff will stay for long term. That's a part of it. As Viktor indicated earlier, we are talking all together about, let's say, mid-single-digit sales in the second year foreseen. The second part of it is much more on the subsea. And here, we would be given the nature of this business, which I cannot explain in detail. But given the nature of this business, we would be extremely surprised that tariffs stay on this because this is raw materials for very important applications to the U.S. So we believe that this is going to develop very fast. We, in our guidance, have taken full caution for the second half. We would be surprised that this full caution is necessary for the reasons I just explained.

That's very helpful. And regarding my second question on Chinese competition wind. Nordex mentioned in their call that they are increasingly using Chinese suppliers in Morocco and China for blade production. Can you give us some more insight into how they are positioned with these blade manufacturers? Are they maybe preferring Chinese material suppliers?