Heidelberger Druckmaschinen Aktiengesellschaft ($HDD)

[indiscernible] of the final figures of fiscal year 2025, 2026, Analysts and Investors Conference of Heidelberger Talk Machine AG. This conference call is being recorded. [Operator Instructions] Let me now turn the floor over to your host, Jurgen Auto.

Good morning, everyone. Before we start with the official part of this presentation, we would like to thank our Board of Directors for extending David and my contracts ahead of schedule, allowing us to continue the execution of our long-term strategy. Let us now officially begin today's presentation with a short review of last year's performance and summarizing our key achievements in full year 2025, '26. Overall, we made strong progress on both our strategic initiatives and cost measures, which translated into improved structural cost indicators as well as a better result before and after taxes. This is laying a solid foundation for our future development. Let me highlight the key cost savings achieved in 2025, '26. Within our tokens plant, we concluded more than 550 exit agreements in Weslock to structurally adjust our personnel cost base. We reallocate the production of the CX 104 to China. The launch of our low-cost country footprint in North Macedonia and we accelerate our key digitalization initiatives. In addition, we made substantial progress in executing our strategic transformation in that context, the following developments are particularly North worthy. First, we further expanded our digital business, including the ramp-up of digital print through strategic partnerships with Canon and Rico. Second, we signed a strategic partnership agreement with Masterwork, significantly expanding the scope and depth of our collaboration beyond the previous sales cooperation. Third, we completed the integration of Polar, further enhancing our market position and operational platform by striving for further M&A even extend our position as a leading player in our industry. Fourth, we successfully transformed Amplify's business model from a hardware-focused player to a fully integrated solutions provider in charging technology. And as most promising driver for future growth, we established a further pillar in security and defense successfully initiating our activities in high-growth and future-orientated markets. Taken together, these measures have started to improve our cost base and earnings profile, reinforcing the foundation for sustainable and profitable growth going forward. They are crucial to securing Heidelberg's long-term competitiveness. With that, I hand over to Volker.

Thank you, Jurgen. Hello, everyone, and welcome from my side. Fiscal year 25, 26 marked a year of setting the strategic direction for Heidelberg. With mentioned key initiatives already underway and partly delivered providing a solid foundation for our mid- to long-term ambitions. Despite geopolitical tensions, and the volatile macro environment, Heidelberg demonstrated resilience, delivering order intake of around EUR 2.25 billion and a slight growth in net sales to roughly EUR 2.3 billion with a clear improvement in momentum towards the fourth quarter. At the same time, the adjusted EBITDA margin reached out at 6.6% affected by continuously negative currency effect and customs issues in U.S., a weaker product mix and accelerated investments in new promising activities outside the core business. Net result tribute to EUR 15 million compared to prior year. This strong performance was primarily driven by an increase in EBIT of EUR 6 billion as well as an improvement in the financial result of EUR 4 million. Furthermore,we strengthened our balance sheet reflected in an improved equity ratio of 27.2% and solid net financial position. In absolute terms, equity increased to EUR 568 million, supported by higher net income and favorable function effects. Headcount decreased from 9,309 to 9,065 resulting in approximately 6% personnel cost savings. Excluding the restructuring provision booked in fiscal year '24, '25, the net impact amounts to EUR 23 million. Operationally, we delivered positive cash flow of EUR 36 million, while free cash flow of negative EUR 19 million reflects lower prepayments and restructuring. In fiscal year '25, '26, Heidelberg continued to operate in a challenging environment with geopolitical uncertainty including tariff discussions and the Iran conflict, weighing of customer investment behavior. Heidelberg was not immune to these market conditions and external circumstances in fiscal year '25, '26. As a consequence, order intake came in at EUR 2.25 billion as expected below the prior year tube with a book-to-bill ratio of 0.98. It is important to flag at this point that customers still rely on Heidelberg products and services and has not opted for the solutions in the meantime. Cancellations are and remain the exception. Summarized, underlying demand remained resilient overall, supported by our global diversification which continues to provide revenue visibility and stability despite ongoing currency headwinds. Let me now turn to our guidance for the fiscal year and how we delivered against it. The overall performance can be described as satisfactory despite external headwinds. Net sales came in at EUR 2.293 billion, slightly above the prior year for 2.4% below guidance due to currency effects, while constant currency sales reached EUR 2.362 billion and were fully in line with our expectations. At the same time, adjusted EBITDA margin reached 6.6%, falling short of the guided improvement to up to 8% in a challenging environment. While operational discipline, progress in new business areas and higher earnings before and after taxes underline the continued execution of our strategy. Having discussed our performance in delivery against guidance, let me now turn to our strategy and how we are positioning Heidelberg for a promising future. With this, I hand over to David.

Thank you, Volker. Hello, everyone, and also welcome from my side. I will start with an update on our strategic progress, focusing on strengthening our core business. In packaging, this means clearly positioning Heidelberg as an end-to-end system integrator across the value chain. We have expanded beyond printing and converting into upstream and downstream processes. With a strong focus on measurable customer outcomes, higher OEE, reduced downtime and faster time to market. Packaging remains a core growth driver, supported by structural trends and our strong exposure to attractive segments such as pharma, food, labels and luxury packaging. The key differentiator is our connected and integrated offering, enabling digitalization, traceability and serialization. This increases customer relevance, particularly in regulated and brand-sensitive industries and support value-based pricing. To accelerate this transformation, we are building a strong ecosystem of partners allowing us to expand capabilities with relatively low capital intensity and extend our reach along the full packaging chain. Building on our strength positioning as an end-to-end system integrator, the next step is how we extend this into a truly integrated ecosystem. At Interpack, we demonstrated how we bring together materials, production and logistics into seamless workflows going well beyond traditional printing. The key enabler here is our digital layer, where we integrate capabilities such as serialization, authentication and traceability, allowing customers to create fully transparent and data-driven packaging processes. At the same time, we are strengthening our positioning and sustainability, combining high-performance substrates with our process expertise to enable more efficient resource saving production. All of this translates into clear customer benefits, higher automation, greater transparency and faster end-to-end processes. Overall, this shows Packaging business into a fully integrated scalable and future ready solution offerings. The print market is becoming increasingly hybrid with shorter run lengths more small jobs and growing cost pressure, combined with a shortage of skilled labor. Our answer is to provide fully integrated workflows, combining offset and digital technologies giving customers the flexibility to adapt to these changing requirements. At the same time, we are moving towards autonomous production enabled by AI-driven solutions such as Pinectad-free, which automatically optimizes production decisions across the entire workflow. A key pillar is our life cycle business, where data-driven services help maximize uptime, reduce downtime and put customer investments. With the global service network of around 2,300 experts, we ensure high availability and increasingly extend these capabilities beyond print into adjacent industries. This transforms Heidelberg from a machinery provider into a digital service-driven solution partner with recurring revenue potential. With our Connect Touch-free workflow software, we have achieved a milestone in the automation and AI based out optimization of production planning and control in commercial printing including hybrid printing, which gives us a clear competitive edge in the global market. Here, we intelligently integrate various printing technologies with prepress and post-press into a comprehensive system. This system not only controls individual steps as is typical with traditional automation, but also calculate and manage all processes autonomously. Here, we create measurable added value for our customers across the entire life cycle through connected solutions, intelligent data models, sustainable technologies, consumables and global service excellence. Let us now switch the focus from our product strategy to our international expansion plans. China recently recovered -- recorded its strongest order intake in a long time. With our new targeted strategy will further enhance efficiency to continue growing in China. In India, too, we are pursuing a dedicated initiative to further secure and strengthen our access to the market. The African countries and Vietnam are also focused market for us. This means that we are unlocking new potential with tailored strategies. In Brazil, thanks to a strong sales and service network, we see an opportunity to capitalize on the promising market growth. Packaging printing is also a key growth driver here, fueled by rising prosperity and the increasing use of paper packaging. We are now also seeing positive trends in Mexico over many quarters. driven primarily by nearshoring. With that, let me conclude the section on our geographic expansion strategy across customers and end markets. Equally important are the geographic plans to ensure further competitiveness of Heidelberg as base for stakeholder value creation. As part of our efficiency and cost optimization strategy, we are establishing a low-cost country footprint in North Macedonia. We have created a new entity, Heidelberg Industrial Solutions, operational since beginning of 2026, starting with the assembly of post-press equipment and scalable over time. Execution is progressing quickly. Production starts already in 2026 in an interim setup, while the finance side is being developed with ramp-up towards 2028. The location offers a very attractive cost position at China level, combined with government support for both CapEx and OpEx. Overall, this is a key lever to structurally improve our cost base and support margin expansion. Having laid a strong foundation through consistent cost optimization, we now shift our focus with full conviction to unlocking substantial growth opportunities in new markets beyond Heidelberg's core business. And with that, I will hand back to Jon.

Yes. Thank you, David. Building on our strategic progress and the investments we have made, we aligned closely with the German high-tech agenda, which identifies around EUR 1.7 trillion of untapped potential where we see attractive opportunities for Heidelberg to participate in selected high-growth areas. In AI and robotics, we already leverage strong capabilities in software and automation, including our Prinect ecosystem and process electronics. This from scalable foundation to expand into industrial automation and AI-driven applications beyond our core markets. In Climate Neutral mobility, we are building on our strength in sensor-based control, industrial logistics and connected technologies to participate in the transformation towards more sustainable and automated mobility solutions. In electric and electronics, we benefit from our engineering expertise and manufacturing capabilities here in Germany, enabling us to provide high-tech components, center integration and industrial control systems. Especially Hyder-roven skills in tics and microelectronics are a key enabler to enter and develop in defense industry. In accordance with this high-tech agenda, we position Heidelberg as a partner for rapid industrial scaling with HD Advanced Technologies, we are establishing a further growth pillar, leveraging our existing industrial and engineering capabilities and capacities to expand into new compelling high-tech markets. What sets us apart is that we don't start from scratch. About 80% of the required technologies expertise and capacities come directly from our core business enabling a fast and efficient market entry. So we are ready. This is built on a broad improving capability base from precision engineering, including casting, machining and mechatronics to system integration, combining sensor technology, measurement systems and control software to electronics and software including power electronics and embedded development and extending into digital monitoring and life cycle solutions such as remote services, performance optimization and AI. What is critical is that we combine all of these into end-to-end industrial solutions, and this is exactly our USB. This enables us to take existing technologies, industrialize and scale them efficiently into new applications. Accordingly, we are targeting with HDAT global megatrends, such as security, energy, robotics, AI and mobility and we built a new scalable high-tech business for Heidelberg. Building on this proven operational foundation, which rely on spanning infrastructure, technology and end-to-end capabilities and long-standing track record, we will now highlight our latest achievements. End of July 2025, Heidelberg starts in Defense journey signed the MOU with Encore Advanced Systems. Between coring as a strategic partner, Heidelberg has established a collaboration aimed at the development of industrialization and construction of energy control and distribution systems. In this way, the alliance will help boost technological suvereinity and safeguard domestic value chains. The partnership is progressing according to plan with first revenues already generated in full year 2025, '26. As another important milestone, Heidelberg enters the Citis sector and signed the MOU with Andes in December 2025. The critic market we are addressing is large and supply driven accordingly high promising and quite attractive. Critical infrastructure is cross-sectoral and will become increasingly regulated with more than 2,000 operating sites in Germany alone. What makes this particularly compelling is that investments are nondiscretionary regulation and security requirements. The market is also structurally attractive with recurring revenues and replacement cycles, creating long-term visibility. This is exactly the type of market where our capabilities create strong differentiation. In addition, demand is highly civil and defense applications, providing a high degree of resilience. Combined with strict regulatory requirements this results in a large, stable and scalable market environment. Overall, this represents an attractive fit for Heidelberg's system integration and industrialization capabilities positioning on bag as a one-stop shop for autonomous counter-drone solutions. A cornerstone of Heidelberg's defense strategy is on Berg, our joint venture with Andes established in recent months. Here, we combine a leading proven drone technology with our engineering and industrialization competence to develop defense solutions addressing the European market for ensuring Europe's security. The ambition is clear: building a one-stop shop for autonomous counter-drone solutions, especially for critical infrastructure. We follow a phased approach, starting with market access and distribution, moving into localization and ultimately, industrial scale production in Germany for Europe. From a timing perspective, we are progressing well. Approvals are underway and first revenues are expected towards year-end. This is a disciplined and scalable entry into a highly attractive regulated market. Expanding into new businesses areas requires an appropriate organizational structure. In this context, HD advanced technology loss established. With HDAD, we are not just particular new markets. We are actively building a new growth business, a second engine for Heidelberg. We start from a position of strength leveraging our existing core competencies and precision engineering, system integration and industrialization. On this space, we developed technology partnerships particularly in the U.S. and Israel, giving us direct access to leading-edge innovation. Our role is to industrialize these proven technologies and bring them into scalable, market-ready solutions, where Heidelberg's capabilities create real differentiation. This enables us to address attractive supply-driven markets in Europe and beyond, including security, defense and other high-growth applications. Overall, this is a clear buildup story from core capabilities to part to scalable industrial businesses, creating a new sustainable growth pillar for Heidelberg. But Heidelberg's defense activities are not limited to partnerships and collaborations, our proprietary UTV development highlights our strong in-house capabilities to drive and scale defense projects. Now we start the video. [Presentation]

At the same time, we are expanding into charging infrastructure operations and opening our service network beyond the print industry. Our subsidiary Amplify operates according to its free-tier business model. One, Amplify provides operational management services to corporate clients. This segment is growing organically by over 10% annually and generates stable cash flows. Examples of corporate client SAP and Siemens Energy. Second, Amplified intu's operational management at public charging stations and logistics sites. Their focus is on maximizing availability through recurring monthly fees. Our next goal is to enter the market with our own DC products in the second half of the fiscal year. Amplify offers services for third-party hardware. This is the third point, as many customers operate multiple brands. These activities have also already begun. Initial revenue from customers has been generated and numerous accounts are currently in contract negotiations. Building on this strategic positioning, let me now turn to our outlook and the guidance for financial year 2026, '27 million. Looking ahead to full year 2026, '27, we see no signs of a material improvement in the economic environment and anticipate continued challenging conditions. Accordingly, we expect stable net sales at around prior year's level and a noticeable improvement in adjusted EBITDA margin. Our guidance is supported by 3 key levers: targeted regional and portfolio expansion, ongoing cost discipline and increasing benefits from our Tucuman. For the first time, we are also providing guidance at segment level. further increasing transparency on our business development. In print and packaging equipment, we expect a noticeable decline in sales, reflecting the continued cautious investment environment. At the same time, margins are expected to increase significantly supported by efficiency measures and structural improvements. In Digital Solutions and life cycle, we anticipate slightly sales growth driven by our life cycle business with a temporary slight decline in margin due to mix effects and the ramp-up of digital business. In Heidelberg's technology, we expect significant growth in both sales and margin, supported by strong momentum in industrial applications such as e-mobility as well as security and defense. Overall -- and increasing contribution from higher growth, higher-margin businesses. Taking a step back to summarize the key drivers behind our outlook and midterm development. First, our dual-use strategy, expanding into high growth, less cyclical areas through HD advanced technologies makes our business more resilient and strengthens long-term growth. Second, system integration and packaging by offering end-to-end solutions across the value chain, we clearly enhance our value proposition and differentiation. And third, efficiency and cost discipline, increasingly support by digitalization and AI, which will drive further savings and margin improvements over time. Together, these drivers underpin our strategy and give us confidence in delivering sustainable, profitable growth. Thank you very much for listening and looking for your questions.

[Operator Instructions] The first question is from Stefan Augustin from RaboResearch

So the first one is quite obvious on the guidance theme. You have...

I cannot hear you.

You cannot hear me.

Connection issue, I suppose because I can hear very well, Mr. Augustin, please stay under line. Thank you. I would suggest dear host could you please dial in again. There seem to be a network issue. Please hold for a little while longer. We are right back. Yes, we can hear you now. Could you please repeat your question? .

Yes, sure. And I hope everybody can hear me. It is actually on the guidance, and you have relative targets for the respective segments. And I wonder if you can clarify a little bit what is meant with the different wordings. I mean, flat is obviously quite clear, but what is a significant or a very significant increase or improvement?

Yes. This is Volker Herdin speaking. I can answer your question. We have on a flat. We have a bandwidth between 0% and 1%. We have light between 1% and 5% between 5% and 10%. We have basically significant and over 10% is strong or dramatic.

Okay. And so -- when we think about Heidelberg technology, obviously, we come from a quite low base. So the above 10% is in absolute terms, not so much. Can you hear, let's say, have a direct absolute scope. So should we look for something like rather EUR 50 million or EUR 20 million or EUR 100 million? .

Basically, on the -- and overall, we come back and back to a level, especially in premium packaging equipment back to levels seen in '24 in the business year fiscal year '24, '25. On the digital solutions life cycle, we will increase, and we have a revenue growth-driven dip in adjusted EBITDA margin. And in technology, we have a low to middle double-digit percent increase in sales and in adjusted EBITDA, impacted by ramp investment expenses in HTA in a strong increase.

Okay. But, you would -- I should expect still losses at Heidelberg Technology? .

Yes, we will have -- especially in this fiscal year, high investments and high free payments for growing, especially this business. And since Advanced Technology includes from now on Amplify and our industry product especially amplified, we need to scale up and into defense we need to scale up. This will be also for a strong draw for cash; however, it's a secure our future in the following years.

I fully understand that one. On the new production facility in Macedonia. You mentioned that this is post-press production partially. So is there relocations to be expected? And is that, let's say, pointing to a one-off for the transition of, for example, Ludwigsburg, where we currently produce the postpress equipment?

So he David Schmedding speaking. So part with post-press equipment mainly for Polar, first and some components. So we are ramping up and we're building the expertise on site. And maybe let's see how things are developing, of course, ideas also to transfer also other first of all, easier would say products to the site. And afterwards, we will -- from time to time, of course, we are running this up to more complex products, but this is a plan.

And then finally, before I go back into the queue. Can you give an update on how the market and the order intake has continued in China versus your last statement a couple of weeks ago. Do we still continue to see a good demand?

Yes. So David speaking. -- mismanaginspeaking, so a clear statement, yes. So the trend is continuing. So luckily, the trend is pretty positive over the last weeks, and we expect also to be continued.

At the moment, there are no further questions. [Operator Instructions] The next question is from Norbert Code from Dr. Kalvoda Research.

Okay. Hello, good morning to you hear me. Thank you so much for your presentation. I have 2 questions. The first is, so you have this software platform preneed, maybe you can tell us or give a shed some or give us some more details about how many clients use this or how they use the cloud service or the software as a service? And the second question is you mentioned the new business will contribute with EUR 300 million sales until 2029. And do you expect the biggest share of that in '28, '29 or do we see still in '26 and '27, yes, relevant success? Thank you so much.

So first of all, answering your question on Kinect. So today, we have thousands of customers using our cloud services First of all, starting, of course, with the premium model with our Heidelberg portal or customer portal customer success to this portal. And this portal is designed to the customers can, let's say, buy additional licenses. So this is the starting point. And of course, connect environment, our workforce software especially highlighting our Prinect touch free as the new development, connecting the different different printing technologies. We have also a couple of, let's say, thousands of customers paying for this on a monthly basis. So here we have only a subscription model avails customers have to buy a subscription on a monthly basis and they have to pay our services. So this is on Prinect and going into the future. The touch free topic, it's AI driven. So we're helping her customer to improve efficiency and effectiveness of the production workflows by automatically, let's say, helping them to drive that production. The share of, let's say, the sales over the next years -- so of course, we have a clear target and it has been communicated in a 3-year plan with the EUR 300 million on top growth coming from our new areas. This has been communicated. And of course, we are expecting also first revenues in this fiscal year. First, revenues on a small scale, as Joao said, for the core business are in but the further ramp up, of course, as part of our plan. And we are still targeting all the first results to be shown in this fiscal year.

Thank you very much for your questions. [Operator Instructions] Assume no further questions to be incoming. So thank you very much, ladies and gentlemen. There is a follow-up question from Stefan Augustin Babak Research.

Yes. Thank you. Some smaller follow-ups. Can you elaborate a little bit what is the expansion with the Masterbug operation? That would be the first one. The second 1 is, would you give us an update on your plans for the entry into the very large format segment. And finally, should we expect from the Omberg JV, say, significant or a reasonable deterioration in the financial results?

Yes. Thanks for your question. So first of all, talking about the expansion of the MK, let's say, corporation, yes, last year, and this is something which we have communicated. We extended the cooperation contract for 10 more years. So maybe being the, let's say, distributor and also service provider for MK products outside of China. We extended here also the scope of the portfolio, which is part of the corporation. So covering more of, let's say, the relevant machines for the packaging -- post-press packaging industry. Just 1 example is corrugated as just 1 highlight here. And of course, this is also something what we are have in our pockets with the development, joint development of the machine with some expertise from us produce them at MK in China. This will be somehow announced in the case of the year, but we are close to, let's say, the market entry. So this is the first point on MK, VLF, and please excuse me, there's no change compared to our last communication of Portware following, let's say, the market development, what's going on. And as soon as we have some updates here, we will let's say you will be the first 1 where we communicate any news.

Yes. And Jorgen also speaking for Amberg, of course, we expect business with Heidelberg. We have a very attractive booth at ELA in Berlin starting today, and we have -- we expect an MOU to be announced tomorrow. So these defense activities, they have a full pipeline and multiple opportunities, and these are in development. And more to come and listen tomorrow, I would say.

Yes, fully understood. First, the question is that you consolidate the JV in the financial result, and I would expect a negative net in the JV in the first year. So the question is if this is something that is of scope, we should, let's say, it's in our forecast?

No, this is not significant, yes.

And the last 1 you pointed a couple of times out to more investments into HD how should we think about free cash flow in '26, '27. I know it's not a guidance KPI, but just more.

Yes. Basically, the expansion, especially in this segment is significant. So it requires significant repayments and we it is fair to assume that investments in defense will weigh on FCF in a larger scale, leading to a negative -- clear negative generation next year, this business year. And from after the business year in the following years, that will then count turn into positive profitability.

Thank you very much for your questions. With that, we close the Q&A session, and I hand the floor back over to the host.

Yes. Thank you very much, and see you soon. Bye-bye. Bye-bye.