JOST Werke SE (JST.F) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the JOST Werke Q3 2025 Conference Call. [Operator Instructions] At this time, it's my pleasure to hand over to Joachim Durr, CEO. Please go ahead.

Yes. Thank you very much. A very good morning here from Neu-Isenburg, and a warm welcome to our Q3 earnings conference for JOST Werke SE. So I would like to start with the highlights of the first 9 months and the third quarter of this year. In the third quarter, we were able to accelerate our profitable growth despite the challenging market environment. This was supported by market share gains we had organic growth opportunities we could implement and of course, by the M&A of the Hyva Group. The Hyva Group PMI post-merger integration is fully on track. We see already a ramp-up of the synergies, and we advance further with new cross-selling opportunities that we have identified. We were able to obtain market share gains across all regions and in all business lines, and that is because we could successfully combine our local-for-local approach in operations, selling and production with the global strength of our business lines. The market demand in Europe, Middle East and Africa has strengthened somewhat over -- in the Q3 compared to a weak Q3 in 2024. However, the demand in the U.S. has been contracting further due to the tariff concerns of our customers. With that performance, we can confirm our outlook for the fiscal year of 2025. Let's go a bit deeper into the financial highlights. Our operational model and our strategy proves its resilience and the strength in this challenging market environment. Our sales in the third quarter 2025 went up by 56% to EUR 383 million. This was, of course, supported by the Hyva merger and acquisition effect, but also by an organic growth of 10% that we had across all regions. Our adjusted EBIT grew by 40% to EUR 37 million in the third quarter, and the adjusted EBIT margin reached 9.7%. That had a negative FX impact. So at constant currency, that would have been 9.9%. Our good operating performance and the realization of first synergy effects from the Hyva integration resulted on a 9-month basis in EUR 110 million adjusted EBIT, which is almost the value that we had for the entire fiscal year 2024. And the adjusted EBIT margin on those 9 months of 2025 reached 9.6%. Also, adjusted earnings per share increased 14% to EUR 1.11 for the quarter 3. This increase was also supported by an organic growth and of course, the contribution of the Hyva acquisition. Leverage has improved to 2.44 in the Q3, which means that we have been reaching the targets to be below 2.5x leverage by year-end faster than we initially expected. So we're very happy about that. Of course, a big help came from the free cash flow that was very good in Q3. It grew by 144% to EUR 56 million and the driving factors also here were the strong Hyva contribution, improvements in working capital, some factoring and some positive timing effects. To give you a little bit more detail on what we are doing on the Hyva integration. We showed it already in previous conferences that our target is to reach EUR 20 million positive impact in the run rate by the end of 2026. And here, a bit more detail. So one part, an important part of those synergies is additional sales that we generate through cross-selling synergies. We are successfully offering our Hyva products to JOST's customers in various countries. We have good success there in Australia, but also in North America, where we see additional sales being generated by using that sales channel for the existing Hyva products. But vice versa, also, the JOST products are gaining access to new customers by leveraging Hyva dealers using the Hyva network in APAC and also in Americas. We see that especially in Canada and in some of the Asian markets. So we expect a total effect of EUR 8 million additional EBIT generated through additional sales that we find with these cross-selling synergies. And then another big lever, of course, is material costs, logistic costs, production costs. The sales of the Cranes business has been signed. So that carve-out is ongoing and is certainly helping. But on the logistics cost, also, we have a consolidation and closure of first sites and warehouses that we have already implemented in Australia, in South Africa and also in Europe, and we see the first effects out of that. Over 50% of the purchasing and logistic contracts have already been bundled, and we are in the process of renegotiation. So that we expect here an effect and it should be the biggest effect of the entire EUR 20 million. Here, this effect should be EUR 8 million to EUR 10 million by the end of 2026. And of course, we are also trying to optimize and we will optimize our structure, selling, general and administrative costs. We are streamlining in our management and reporting structure worldwide. We're advancing very swiftly on this one, and we will have the structure implemented, the majority of that structure implemented by the end of this year. We have savings from combined IT services contracts and license fees, but also the combination of shared service centers for accounting and auditing reduces those fees. But we're also integrating our marketing organization. We are running combined trade shows. We've just been -- I've just been on a trade show with the Agritechnica for the last 3 days. We had the Wuhan show last week, and we're already at these shows as one company, partially with one stand for Hyva, JOST and Quicke. So also here, we expect around EUR 8 million. EUR 5 million out of those EUR 20 million, we will already see by the end of 2025. Looking at the market development in Q3 versus the Q3 of last year. In Europe, Middle East and Africa, we have increasing markets. I already mentioned that it has been a weak quarter last year, Q3 and Q4 in Europe. In Americas, the tariffs take their toll. There's a lot of uncertainty that our customers sense with their customers. So production rates on trucks, but also on trailers is going down. And in APAC and the transport business, you can say it's more or less flat, a little better in trucks and a little weaker in trailers. The tractors are still negative compared to last year. However, it's not hitting us so much because this is mainly the large tractors that are being impacted by this downturn on the dealer business. We see already a slight coming back of the market. So this is the official numbers for the markets, but our dealer channel is actually improving a little bit versus last year. And on Hydraulics, we -- you can say across, we have more or less stable markets, a little weaker in Americas, also a slight impact on the tariffs. But in the rest of the world, we see infrastructure still on a very solid basis. This resilience, it comes also from a nice distribution of markets, products and customers. And we've shown this slide before, but I think it shows very well that we are not dependent on any specific customer groups or any specific market. If you look at where our sales are being generated, you can see that it's 47% in Europe, Middle East and Africa, 27% in Americas, 26% in APAC. So already a very nice distribution. If you look at it from an adjusted EBIT contribution, you can always say it's 1/3, 1/3, 1/3, 31% in Europe, Middle East and Africa. Americas with 30% plus 2% with the joint venture in Brazil and APAC region with 37% of our adjusted EBIT. So also that adds to our resilient business model. And if you look at the applications, we have about 50% in transport, still 53% and the growing agriculture business and hydraulics business with 18% and 29%, respectively. Yes, with that, I would hand over to Oliver for more financial details on our performance.

Thanks, Joachim, for the overview. Yes. And then indeed, let's go into the financials. As usual, first, a little bit more focusing on the quarterly results by region and then summing up into the group. Starting here with Europe, we have seen organic growth and the first synergies that improved also our profitability. The sales contribution by Hyva in the third quarter has been EUR 36 million, leaving then the rest of the growth with almost 13% of organic growth in the third quarter. This is driven by stabilization both in transport and agriculture and also the general overall order intake gained a little bit of a momentum. However, we still need to say that the situation in EMEA is somehow fragile, right? We need to stay flexible and need to be close to the customer group as especially in the DACH region, right, the whole effects from the infrastructure program are yet to come somehow. We had only minor FX effects in sales by 0.3 percent points. So that sums then up to an almost 41% of reported sales growth from EUR 129 million to EUR 182 million in the third quarter. Looking into EBIT, also there, a nice growth from EUR 7.3 million to EUR 11.4 million, driven by the margin increase. On the one side, Joachim mentioned that also in Europe, we see the first synergies that are going to be realized. We are consolidating sites and warehouses. And on top, very helpful here is that we have a profitable business in agriculture, especially in EMEA, and that business has been organically grown by 25% compared to the fourth quarter -- third quarter of last year. That obviously helped to improve the profitability in EMEA as well. Please remind me that as in the past, the EMEA region carries, let's say, the big, big share of the headquarter cost, and that is also after the Hyva acquisition, still the case as the headquarter there in the Netherlands. So that's then the overall impact on the margin, but nevertheless, increased compared to prior year. So that's the quick summary for EMEA. If we now go into Americas, we have seen growth in Americas in the third quarter. This is driven by our diversified model within the region and also, as Joachim mentioned, selective market share gains. The Hyva contribution to the growth was EUR 30 million, which led to a reported sales growth from EUR 77 million to EUR 107 million, so by almost 39%. However, even in Americas, we achieved an organic sales growth of 6%, which is partially driven by a very good situation in our trailer business and aftermarket business in North America on the one side that helped us to compensate also the margin effect from the truck downturn. And on the other side, a very successful quarter for our business in Brazil, an acquisition that you might remember, we did in 2023, which is strongly growing versus prior year, also by new projects and new customers with very solid margins. And that indeed then turned into a strong quarter from our point of view also in terms of EBIT for the region, absolutely wise growing from EUR 9.8 million to EUR 10.9 million to a margin of 10.3%. And that despite the Hyva dilution that we will have and still have in the region here, but we are fully on track to realize the synergies there. And Joachim mentioned that we are benefiting here on both sides with regards to cross-sell effects. And so we are happy with the results here in Americas as well. And yes, looking forward for prosperous 2026. Then going to APAC. APAC has seen a very strong reported sales growth in the third quarter from EUR 40 million to EUR 95 million, so more than doubled. EUR 55 million of that growth has been driven by Hyva acquisition. As you know, Hyva is especially in China, a very, very strong player with high market shares and is currently benefiting also JOST, but especially Hyva from a very strong export business. So we have gained a lot of business with Chinese customers. And these Chinese customers are very successful now in the global market, so not only domestic, also in their export markets, and Hyva is growing with their customers. But also organically, so without the Hyva effect, we have grown by almost 7% in the region. And this is somehow by still solid transport business for JOST, again, also here driven by export business but also by a ramp-up of our agriculture business in India, so very successful here. We had strong FX headwinds of almost 11% points. That's because of the strong euro, but nevertheless, have achieved almost EUR 100 million of sales in the region for the third quarter. Looking into EBIT now, again, very strong like in the second quarter, growing absolute wise, the EBIT from EUR 7.7 million last year's third quarter to almost EUR 40 million now in this year's third quarter. So the strongest region by far now in terms of EBIT and EBIT has grown by 80%. We see the first synergies are ramping up, as Joachim mentioned, across all, let's say, cost line items, so in COGS in SG&A, but also on the sales side with regards to cross-sales activities. So overall, from a region point of view, APAC has been very, very strong in the third quarter and also looking short term going forward, we still see a good momentum, especially in China for the moment. Then summing up for the total group. We see an organic growth in all regions. And then together with the M&A contribution has boosted sales and earnings in the third quarter from EUR 246 million now to EUR [ 283 ] million, as Joachim mentioned, impact from Hyva stand-alone is EUR 121 million in the third quarter, leaving us with 10% of organic growth in such a geopolitical and worldwide environment. I think that's quite an amazing result and underlines the resilience of our business model and the exposure to various markets to all the big customers worldwide, including the new ones in China and in India helps us to balance that, so to speak, challenging environment very well. On top, we have seen a momentum increase in the agricultural business worldwide by now 18% year-over-year increase. And we need to see Joachim was just on the [indiscernible] seems to be that there -- we have definitely reached the bottom through the summer period in agriculture. So also there, we are slightly optimistic for the next months that this is going to continue. When we look into EBIT, EBIT has grown by 40% from last year, EUR 26.5 million now to EUR 37.2 million. So a very decent margin of 9.7%, so almost close to our strategic corridor of 10%, again, in such a complicated environment. And if you would adjust this for the negative currency effects, both in sales and in EBIT, that would have been a constant currency rate of EBIT by 9.9%. So we are very glad and positive to show this number here. We see in all regions, the ramping up of the synergies, as we mentioned. On the other side, here and there, the situation remains fragile from the market point of view. We need to stay flexible. And I think we are well set with our business model to deal with whatever is upcoming over the next months. And one last point to mention here, basically in all regions, but especially in North America, we have seen a very high market share for our aftermarket business that stabilized the margin here as well. So that's regarding sales and adjusted EBIT. If we now look into our adjusted net income and adjusted EPS bridge, we start with a net income of EUR 22 million for the 9 months, impacted for sure by the finance results, which is increasing definitely versus prior year because of the higher debt load and the interest. We also had a little bit higher taxes in the third quarter. There are some timing effects, partially are related to our PPA charges here and there. There is a phaseout definitely going to be expected over the next months. We need to look at this at year-end. Adjusted for both, we stand within a reported EBIT of EUR 58 million. And then for sure, as usually, we adjust the PPA charges that have significantly increased compared to prior year because we do now incorporate the purchase price allocation of Hyva. So that sums up to EUR 41 million. That's high, especially this year because we have in the first 12 months of the consolidation special PPA charges. There's one detailed slide in the slide as well that will phase out until year-end. And then this D&A PPA charge is going to be significantly reduced from next year onwards. Then we add EUR 11 million exceptionals for the first 9 months. These are to 95% related to the integration of Hyva and then from a cost point of view, layoff costs consolidation costs, adviser costs, et cetera, so all related to the integration of Hyva. We are still fully in line with our overall guidance that we would expect between EUR 12 million to EUR 24 million integration costs of Hyva in the first 2 years. So with the EUR 11 million for this year, we are fully aligned, summing up then to an adjusted EBIT of EUR 110 million. And then again, if we do our retroactive calculation of finance result and the adjusted tax rate related to this, we are ending up with an adjusted net income of EUR 63 million, which we are very happy to announce, which is already then higher than last year despite the higher -- significantly higher finance result. In adjusted EPS, that means then EUR 4.17, an increase from the EUR 4.04 last year. And I always like to mention also the adjusted net earnings to sales ratio, which reached again above 5%, which I think is in the current environment, still a very solid number. So then showing here again the details of the PPA charges, I mentioned it basically already. That's probably more for the readout material. One important point, the last bullet point on the right side is what I said. This year's net income is affected by that within the first year, special PPA charges, all that sums up to EUR 31 million. We expect that this is going to be lower by almost EUR 20 million from January next year onwards. Coming now a little bit to capital efficiency and balance sheet figures. We have seen a ROCE by end of September of 14.3%. That's already for the first time now sequentially improved ROCE. In the second quarter, we had 13%. So that's a good signal, also showing the effect of the synergies and the EBIT growth. There's still a way to go for our overall target mid- and long-term target. But also here, we see that we are quite fast and happy to announce that 14.3%, showing that we see already that the Hyva M&A is value accretive and is managed in a capital-efficient way. Equity ratio has decreased from 40.4% end of last year to 21.3%. That's obviously clear from the financing of the Hyva acquisition. On the one side, that's probably 70% of the effect and the other 30% of the effect is that still by end of September, we see an impact of almost EUR 50 million currency translation in our balance sheet. We have -- and that's somehow then the other side of our diversified model all over the world. We have net assets all over the world. And as you know, the euro currency has increased its value to a lot of currencies worldwide. So we see a translation effect, but it's only a translation effect, so to speak. Regarding leverage, quite happy to announce that because of a very strong cash flow in the third quarter, we were able to get the leverage number already below the 2.5 threshold, 2.5x EBITDA threshold that has been our target for end of this year. We have now reached already by end of the third quarter, and I'm confident that we can maintain at least that level until year-end. That, for sure, underlines our strong ability to generate cash flow. And Hyva again, is also here contributing to that. Next page. Yes, here, you see the free cash flow as a result for the first 9 months has been now EUR 105 million. So the operating cash flow is improving through the acquisition and our organic growth on top, as Joachim mentioned, we have now a higher business volume, and that also gives us opportunities here and there for better working capital management. We are harmonizing factoring programs between JOST and Hyva. So that had positive impacts here as well, resulting in a conversion rate of 1.7% for the first 9 months, which I think is a good result despite the challenging environment. Looking into CapEx, we have spent so far EUR 28 million, which is 2.4% in terms of sales. So also here, fully in line. You may remember from our guidance that we want to stay below 3% this year. So I think we are well underway here. Nothing special to mention. Regarding working capital, that's then vice versa a consequence of the working capital management. I think we did good in the third quarter. Working capital has been 16.2% and it's already below what is our target for the year and helping to improve our balance sheet. Next page, please. So that's it from my side. Handing back over to Joachim.

Yes. Thank you, Oliver. So let's look how the rest of the year is what we expect for the rest of the year. From a market point of view, this is not much different, obviously, than the slide you saw before, this was the 9 months. This is now the full year. So there's no expectation that the market environment will change. A quick summary of this is that Americas, mainly driven by U.S. and Brazil are much weaker markets than the year before. And also that's the ag market on the tractors remains weak. If you look at those numbers, we have been able [ to uncouple] our development a little bit of that, driven by market share gains that we have, by new contracts that we have, especially in the ag sector, by increasing sales channels, as I've already mentioned, and also by some positive pricing effects where we could implement the tariff pricing on our products. So that's why we are not fully hit by this market development. But certainly, the expectation is that we will also not get a lot of help from the markets in the remaining quarter. As I mentioned, we are a bit uncoupled, and that's why we are happy to confirm our outlook for the year 2025. And you all know that outlook. Sales, we expect to be up by 40% to 50% versus prior year, mainly driven by the Hyva integration. And in 2024, we had EUR 1.069 billion in sales. Our adjusted EBIT should be up 23% to 28% versus prior year, where we had EUR 113 million in adjusted EBIT. Adjusted EBITDA also up between 23% and 28% versus prior year. The base is here EUR 148 million from last year. Our CapEx range will be around the 2.9%. Last year, we were at 3.1% and working capital, we expect to be below 18.5% of sales. Last year, we ended at 15.3%. So let's summarize the quarter. We had a strong quarter in a challenging market environment, and we think that is proving our JOST strategy that we announced in the Ambition 2030 that we showcased you in the Capital Markets Day in September of last year. The diversification across the end industries, across the customers and our regions that strengthens our resilience and our profitability. The Hyva PMI integration advances swiftly, and we have a clear focus on the core business and on delivering the synergies that we are expecting. We are achieving organic growth in all regions and all business lines despite the weak market environment, and that is supported by market share gains and new contracts with new OEMs. Our local-for-local approach, our operational flexibility and our strong market access worldwide limits the impact from the tariffs and from the regional market downturns. And therefore, we could confirm our outlook for 2025 for our continuing operations. With that, I would like to conclude the presentation. Thank you for your interest, and we're open for questions.

[Operator Instructions] Our first question comes from Yasmin Steilen from Berenberg.

I have 4, if I may. So the first one on the EMEA agri market. It's very nice to see sales growing by 25% year-over-year in the third quarter. Could you provide an update on your discussions with the dealers? So is it fair to assume that a significant amount of the stocks have been sold off in the meanwhile and the inventory levels are low. So Q3 is kind of underlying demand and how the development into Q4? Then the second question is on the U.S. truck and trailer market. So we have heard from most OEMs have idled production most recently. Could you share your assumption on the developments for the winter holiday breaks in the U.S.? Should we expect a normalized winter break? Or might we see extended breaks given the ongoing uncertainty? Then thirdly, I have one housekeeping question. If I remember correctly, you hedged the U.S. dollar purchase price for Hyva back in October '24. Should we expect FX gains in Q4 within your interest result? And finally, on the tax rate, again, just housekeeping, your tax rate in Q3 was extraordinarily high. Was there anything specific behind this? And do you still expect a tax rate of around 25% for the full year?

Okay. I will take the first 2 questions, and then I think Oliver can cover the last 2 questions better than I. On ag, yes, indeed, I think that is the picture that I can confirm that we -- the market for tractors is still not coming back at that level. But for the dealers, we see that the dealers are coming back. There's a lot of interest also because we've added new products in our portfolio, but there's a lot of interest also because they have reduced their stock levels. So the dealers had a really tough time. You know that in Europe, in Germany, BayWa in Sweden, [ Lantmannen ], they all had big financial problems. The OEMs had to help and pitch in to solve those problems. The dealers are coming back. They are active and they are interested and they have reduced their inventory so that they are preparing themselves for the new season. And we see a slight uplift, and that is also the uplift that you see already in our numbers and that we expect to continue. My [ view ], always comparing to a low base from last year, right? So that's why the numbers look so attractive. On truck and trailer, it's hard to tell. I don't see a comeback, let's put it that way, in North America. Nobody has announced anything of the winter breaks so far. The volume in North America is down by about 30%. And it will be depending individually from OEM to OEM, how they manage their production over the winter break. But I certainly don't see that before the winter break or through the winter break that the market will come back. We expect also that when we look into the first quarter and what we see already from the call-offs that the run rate and production rate is going to be more or less at the level that we see today. So that uncertainty remains, but it will be an individual decision from OEM to OEM, how they manage that, if they reduce the daily production, if they close for a few more days or weeks, we don't have heard any announcements of that at this point in time.

Okay. Then regarding your 2 housekeeping questions, Yas. So regarding FX, no, no effect expected for the fourth quarter. So that has been single FX deals, which have been fully set when the purchase price has been paid end of January. So at that point in time, we realized already the FX gain. So it's already incorporated already in the first quarter, it has been incorporated, and there's no change going to expect it from that single topic that you are mentioning until the end of the year. Regarding the tax rate, yes, indeed, it's definitely higher in the third quarter. There are some technical shift effects, which will, to a certain extent, phase out until year-end. Nevertheless, the effective tax rate will be higher for the full year a little bit. And that has to do also with the fact that our APAC region is doing much, much better than in the past. And that means we pay global taxes, as an example, in China, which cannot be offset with tax losses carried forward that we carry in -- as an example, in Germany, right? So it will be technically a little bit higher, but it also showcases that our operating entities are generating a lot of profit, which means that overseas, especially, which then turns into profit. But there will be -- you are somehow right, there will be a positive impact in the fourth quarter that's going to be expected, yes.

Okay. Just to follow up. So if you're talking about a little bit higher, so talking -- are we talking about something in the ballpark of 28% to 30% instead of the 25% tax rate for the full year?

Yes, I would assume that's a good and fair assumption. Anyhow, for this year, as I mentioned, we have this PPA effects this year where within the first 12 months, we have higher charges because we have inventory step-ups and order backlog step-ups that are depreciated within the first 12 months. I like to look, especially this year into the adjusted net income to see what is the real operating net profit run rate of the business.

[Operator Instructions] Our next question comes from Jorge Gonzalez with Hauck Aufhauser.

It is very pleasing to see the organic growth this quarter. And I was wondering if you can give us your early view on how this could be even accelerated next year? I'm especially curious about your view on the U.S. market. You have already talked a little bit, but how you see the development next year when your competitors adjust better to the fact that Mexico is not anymore in a good situation because of the tariffs and also taking into account that some of the truck OEs are expecting the growth to be more back-end loaded next year. How that -- how do you see that working for you? I'm also interested in Europe. You had very positive green shoots for the agriculture sector. And I was wondering if you see this also at some point starting to materialize this recovery in U.S. I think the market has been quite weak since '22 and also the sector has been a little bit hit by tariffs. How do you see this going on? Do you see we are at the worst in most of the sectors but it's difficult to a little bit put a figure there. But do you see growth in all your businesses going forward?

Yes. Some more details on the organic growth. We've added new products in our lineup, and that helps, especially in Europe. I already mentioned, especially in the implements and tools for our agricultural portfolio, we have added new products, and that generates a lot of interest with the dealers and the dealers are coming back. So that's where we see positive impacts. And that I expect will also carry through next year so that we see on ag, especially on that -- on those segments, but also on the loaders, a slight comeback for Europe, and that will help. Another big driver of the organic growth has been new contracts with OEMs that we had, especially in Brazil, but also in some other areas. And North America is one of them for agriculture. Those will slowly ramp up, and we will see some of that effect in the next year. As I mentioned, we don't expect a lot of help from the market in the coming 3 months and probably not in the coming 6 months. And therefore, that is a welcome improvement that we are counting on. You had a question also on U.S. trucks. It's -- that is really hard to say. The tariff is changing, maybe not on a daily basis anymore, but it seems like still on a weekly or biweekly basis. And it's equally hard for our OE customers to manage their supply base and their supply chains, including their own production chains. We don't -- so I cannot tell you if we will be benefiting from any changes in tariffs with Mexico and so on. Our answer to all of that is flexibility. We try to be as flexible as possible with our local-for-local setup, with our flexible operations in production, but also with our flexible supply chain where we can swiftly change the sources of our products. And therefore, we will make the best out of it. And where possible, we will use the opportunities to grow our market penetration with that. But it's really so, I would say, so uncertain the environment in North America and unpredictable that we're not even trying to predict it. We're trying to act as flexible as possible and take the opportunities as they come.

Jorge you had a question about ag US, right?

Yes.

I think when you look here into Americas with the organic growth, this is then our combined region North and South America. And as Joachim partially mentioned already, so the stronger growth or the growth is coming at the moment from agriculture/construction business in South America. Nevertheless, this is partially export business to the U.S., so driven by U.S. demand. The local agriculture demand in the U.S., that's still somehow not improving that much, right, especially not in the third quarter. We see here over the past weeks the first signs of improvement. But again, like Joachim mentioned, we need to be careful here and close to the customers, close to the market and stay flexible. It's definitely not as solid recovery as in the other ag regions of the world. So the ag growth at the moment comes partially from India, partially from China. Strongly from Europe, strongly from the Brazilian market.

And I have a final question on Europe. So I understand that so far, the business has not really enjoyed and especially for Hyva due to this is more related to construction, but has still not benefit from the investment plans or the support from the government, especially in Germany. I am wondering if you are expecting this also to support your sales for Hyva in Europe next year? Or if you think that we will need several months to see a translation of the future support in investments for your business? How you are planning to budget this this part of the business for Europe?

Yes. Indeed, you're right. We don't see a lot of projects that came out of these big funding announcements at this point in time. And in general, we don't rely too much -- we don't like to rely too much on government announcements, more on a close collaboration with our customers and our products, our strong products. So I would say we have not seen any of that. We are certainly expecting that the construction and infrastructure sector will grow not only because of some potential funding wherever that will end up, but also because there's just a big need in replacing infrastructure and repairing and building new infrastructure. And that, combined with a stronger market presence that we have in the combination between JOST and Hyva and some additional products that we will add, I think that should be a good basis for a positive development in 2026 for that sector.

Our next question comes from Klaus Ringel with ODDO.

I have 2 to 3 of them and I would like to take them one by one. The first one on your guidance for sales and adjusted EBIT. And here, you've given these ranges and comparing this to your 9 months performance, it seems you're currently still slightly below the levels. So could you give us a bit more color here where you see yourself maybe finally ending up in this range, low end, mid or upper end?

Yes. I think we've always -- we've not adjusted our guidance throughout the year. So we are still working with the guidance that we gave you at the beginning of the year. And we've said in the last calls already, we are certainly at the lower end of that range. But we are still within that range. And we feel very confident that we will be in that range, probably on the mid- to lower level of that range by the end of the year. The Q4 of 2024 was also a very weak quarter. So you have to take that into account if you do an extrapolation of the existing numbers. Do you want to add?

No, perfect. I think and Klaus, to be honest, that's in line what we mentioned after the second quarter's call that it's probably between the low end and the mid.

Okay. Perfect. Second one, you had a very strong and nice free cash flow in Q3. And yes, you mentioned good contribution from Hyva here. And the question is what's a good cruise level looking ahead now here. So it's at these levels, slightly below? Or could you even do more per quarter?

No, no. I think it's I think it's already at the higher end. We need to be honest and to be fair here. We had some positive timing effects also, as Joachim mentioned. There has been also one positive impact that's laid out in our quarterly report that we had a payback from the purchase price. So the closing accounts mechanism for the Hyva deal has been closed now. There has been a small contribution in terms of cash flow. So that also helps. Also, we have a higher business volume, as I said, and that led to the situation that we could incorporate certain receivables from Hyva into factoring and so on and so forth.

Okay. And last but not least, it's good to see that you're bringing down your leverage step by step. Can you remind us, please, where is the leverage level where you would think about cash returns to shareholders?

Well, our range is -- we feel comfortable between 1x and 2x. And as you know, we've been below the 1, and we have not done that because we believe that we can better invest the money of our shareholders in the profitable growth. We see a lot of opportunities for us to continue to grow organically and inorganically. And I think we've seen that it's typically a much better use if we use that money to invest into our future and into our profitable growth. So it certainly would be probably below 1 where we would consider these.

Our next question comes from Nicolai Kempf with Deutsche Bank.