JOST Werke SE (JST) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the JOST Werke Q1 2025 Earnings Conference. I'm Moritz, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] At this time, it's my pleasure to hand over to Joachim Durr, CEO. Please go ahead, sir.

Thank you very much, and a warm welcome to the JOST Werke SE earnings conference for the quarter 1 2025. You will see Oliver and myself today separated. There's about 16,000 kilometers between us because I'm speaking from the Brisbane Truck Show, but I hope that technology will not let us down and can give you a good overview of what we think was a good start in the year 2025. Going through the Q1 highlights, we were closing the Hyva transaction on January 31, 2025, and we were able to get already some positive contributions of that merger on an adjusted EBIT, earnings per share level in the first quarter. The post-merger integration is fully on track. The identified adjusted EBIT synergies of EUR 27 million are identified, and we have a very high confidence that we will be able to implement them. We had very positive customer and market response to the Hyva acquisition, and that supports our synergy plan. On the market side, we see some slight positive signs in market demand. So the market seem to be stabilizing in Europe, Middle East and Africa and as well in Asia Pacific. The U.S. market, as we all know, has been quite hesitant due to the uncertainty of the tariffs and the trade regulations. We also prepared in Q1 the refinancing of the bridge facility that we took to pay the purchase price for the Hyva acquisition, and we were able to close that meanwhile in April 2025. So we've fully refinanced the EUR 320 million that we had in the bridge. Let's go to the Q1 results. As I said, we think we had a quite good start despite the ongoing market weakness. Sales were up 25% to EUR 374 million. That was supported by 2 months, February and March of the Hyva M&A effect. The organic sales decline was 9% versus the Q1 2004 (sic) [ 2024 ], and that was mainly a result of the weak markets. The adjusted EBIT increased by 3% to EUR 36 million, and the adjusted EBIT margin ended up at 9.6%, which was slightly better than we had anticipated after the consolidation of Hyva. Free cash flow, excluding obviously the M&A payments went up 26% to EUR 44 million, and that was supported by the Hyva consolidation and a proper working capital management. The leverage after the financing ended up at a multiple of 2.45x after the debt-financed acquisition, but remained below the 2.5x multiple that we had announced and planned in October of 2024. So Hyva contributed already positively on an adjusted earnings per share, partially offsetting the organic sales-driven decline that would have been 9%. And thus, with the Hyva positive effect, the adjusted earnings per share was only down 3% at EUR 1.65. Next slide, please. Yes, this is the market view. I already mentioned that we see a little bit improvement for the rest of the year for Europe, Middle East and Africa. What you see here for this region is that the truck market was still down because we're comparing here Q1 versus Q1. And the Q1 was for trucks, still a very strong quarter last year. And this year, we see the bottoming out effect and see a little improvement, as I said, for the rest of the year, but we'll come to that later. The biggest surprise you will see in Americas. There, we had a decline over the last year of 15% to 20% on trucks and on trailers and on ag. Ag was weak in Europe and in North America. And in our Hydraulic business, we also saw a weaker quarter, slightly weaker quarter between 5% and 10% below last year's Q1. For APAC, we have the bottoming out effect, some stabilization for trucks, especially in the Chinese markets. India was also stable. The trailer markets more or less on the same level and on tractors, a slight improvement, and the same is true for hydraulics. Next slide, please. Yes. And we also were able to improve our resilience after the acquisition. Now we have a wider range of applications and that you see on the right side, transport applications are 55% of our turnover; ag, 17%; and hydraulics, 28%. And also in the regional split that you see on the left side, we see a more balanced view. Europe, Middle East and Africa is at about 50% and the rest is evenly distributed between Americas with 26% and Asia Pacific of 24%. Next slide, please. And I think for more details, Oliver will give you a more detailed view of the financial numbers.

Thanks, Joachim, to down under. Let's, as usual, go first into the regions before we come to the group and balance sheet and cash flow items. Looking here into the EMEA region, obviously, a big contribution in terms of sales regarding the consolidation that happened also in the other regions, and I will not mention that several times. That means 15% more sales, EUR 188 million versus EUR 164 million last year's first quarter. However, organically, you see a decline of roughly 6%. And as Joachim mentioned, that was both because of Transport and Agriculture had a weaker start compared to the last year's first quarter in terms of organic sales. Positive is here at the moment, we see a stabilization and order intake for both for Truck business, but also for Agriculture business, gained a little bit of a momentum. We need to see how sustainable that is. But at least at the moment, it looks more promising than the weeks and months before so that we are quite confident with our outlook for the EMEA region going forward. FX effect this quarter hadn't much of an impact. And if you look into the EBIT margin for the region, it declined from 9.1% to 6.1% and absolute EBIT from EUR 14.9 million to EUR 11.4 million, but this is fully in line with our expectations that we had in our internal models when consolidating Hyva. There's nothing especially in there, so to speak. And I mentioned that in all the various investors conference that we had that we have this business unit cranes in Hyva, which is dilutive and a big portion of that sales is reported in the EMEA region, and that explains also the deterioration of the margin in EMEA. Good signs here from the operations is that short-time work that had been in place until February and March in our Transport plants in Europe, but also in the Agriculture plants in the Nordics, that has been ended. And yes, the hours that we are producing now, the shift model has been now following the increased demand, and that should give us a tailwind over the next months. Yes. Next slide then. Going to Americas, also here, an organic effect from the consolidation, although that's not as big as in EMEA as Hyva is not so much present in the Americas region than like in EMEA or APAC. So reported growth was 8% only. And the organic sales down was minus 16%, as Joachim mentioned. Two big topics here is definitely the Truck business is suffering from the whole geopolitical and tariff discussions in North America. And on the other side, the Agriculture business in North America is again really down versus prior year's first quarter. On the other side, regarding profitability, you see despite that, we have absolute-wise, the profitability increased and also slightly the margin is now up again to close to 11% of EBIT, and there is a strong back wind from the aftermarket business. We had almost 40% aftermarket share in North America and U.S., which comes with very solid margins, and that definitely supported us. And on the other side, you might remember that we finished a plant consolidation in North America in the second half of last year. That helps to create efficiencies on top. Next slide, please, is then APAC. There's a really boost in sales reported-wise as Hyva is so much strong in China and in India. So it's almost doubling the sales from EUR 44 million last year's first quarter to almost EUR 90 million. So that's on the one side, nice. On the other side, we also see here a slight organic decline of minus 7.5%. And this comes mainly from India. The Indian economy is not bad actually, however, but what we are still facing here is that even 1 year after the election, the government spending in terms of infrastructure programs, economy [ subsidation ] is still waiting and still extending its impact into the economy. We need to see how that goes forward. The China business itself is robust, both in JOST and in Hyva. We are happy of this. JOST is strong here, especially in the export business, and that helps to keep our sales and margin in the APAC region, in a [ quite nice ] region. Also here, we see a, let's say, consolidation-driven decline from almost -- from 19% last year to 15% EBIT margin this year, which is driven by the incorporation of the sales of Hyva and totally in line with our internal expectations. Yes. Then let's go into the group. What we see overall is the 25% reported growth from EUR 299 million last year's first quarter to EUR 374 million. The split into the application/business line was just mentioned by Joachim. So Hyva contributed EUR 104 million. And keep in mind, this is just 2 months. So it would have been like-for-like around [ EUR 150 million ] and then contributing almost 1/3 of the sales. Organic sales decline is overall on average minus 9% versus last year at constant currency. And just repeating here, we see first signs of stabilization, especially in EMEA and in APAC. The outlook here for the second quarter is promising. We need to see. Sales impact in terms of FX was low. And also, as Joachim mentioned, overall, the profitability was good, better than we -- slightly better than we expected, almost EUR 36 million EBIT, 9% -- 9.6% margin, partly driven by what I mentioned in North America, nice aftermarket and resilient aftermarket margins over there. But also you might remember, we have TRIDEC, a mechanical and engineering systems provider in our group has an exceptionally high order book at the moment. Volume is not so much low, but it comes with a very high EBIT margin and that boosted that a little bit of our internal models. Yes, I think that's it for the group. And then we can jump into our net earnings bridge. So the reported net income is EUR 13 million for the quarter. If we then add back taxes, interest and the adjustments that we do for PPAs and purchase price allocation amortizations as well as other exceptionals, and I will come to that because it's a little bit special for this quarter in a later slide, we end up with that adjusted EBIT that we're mentioning of EUR 36 million and then correcting by an adjusted finance result and adjusted tax rate, we end up with EUR 25 million adjusted net income, resulting in an adjusted EPS of EUR 1.65, which is almost the same level that we had in the first quarter. And that means despite the organic sales decline in the business lines, Agriculture and Transport, we were partially able to offset that net earnings decline with the result that Hyva already contributed to the overall group. And again, regarding the exceptionals and the PPA, I will come to that a little bit later. So what we show here is the preliminary purchase price allocation. So overall, we have acquired and closed a balance sheet by end of January of EUR 671 million. And what you see here is then the balance sheet that we are incorporating now in our numbers for the first time, asset side and liability side. These numbers here already include a preliminary status of the purchase price calculation. So that means we revaluated the assets, the intangible assets, PP&E assets as well as inventories. And also on the liability side, there were certain minor adjustments. And you also see the equity. There was also a recapitalization of the group directly with closing. You can see here what has been incorporated. And this, in a nutshell, means preliminary purchase price at the moment, preliminary because there is still a final settlement mechanism outstanding with the seller. Should be only minor regarding [indiscernible] of, let's say, opening working capital accounts and so on and so forth was EUR 327 million in cash. This purchase came also with an operating receivable of Hyva against the former shareholder that has been immediately settled with closing, and that means the net cash proceeds have been EUR 309 million. And if add then back the debt and the IFRS leasing positions, deducting then the cash that we get or got, we are ending up at the moment with an EV calculated by EUR 373 million. And when I adjust that for the changes of the U.S. dollar, euro rate over the past weeks and months, this is more or less in line with the purchase price or EV that we always communicated, it's even a little bit less. So in U.S. dollar, it's roughly EUR 10 million less than the EUR 398 million that we communicated. The main intangible asset groups that have been identified of EUR 276 million are, for sure, trademarks or the trademark Hyva as well as customer relationships. Hyva has strong customer relationships all over the world like most have, and those relationships will be capitalized. Just want to mention here, again, these valuations are not yet final. We are still in discussions with the auditors and experts. There might be changes. I don't expect any material changes at the moment. However, I just want to mention that the final goodwill amount and especially the amount of the trademark Hyva that is incorporated might change a little. Goodwill at the moment stands at EUR 37 million. And just keep in mind, these numbers can always fluctuate a little bit, especially at the moment the USD and euro rate fluctuates more because the original balance is a USD balance and not a euro balance like shown here. And let's go to the next page. This is then the P&L look into the PPA, so to speak, and the exceptionals of the first quarter. You see here, we report overall minus EUR 14.2 million adjustments versus minus EUR 7.1 million last year's first quarter, and we have grouped that in 4 groups. You see the dark blue group, that's the roughly EUR 6 million, let's say, legacy PPA that you have. No major changes here. Then we report minus EUR 3 million exceptionals. Last year, we were minus EUR 1.1 million. The increase is predominantly driven by integration costs, restructuring costs that are fully related to the acquisition. And then we have separately marked here out, which we would consider, that's the core new PPA topic with the [ CIFA ] #1 and the CIFA #2. CIFA #1 minus EUR 2.8 million. That's the PPA from Hyva itself, including also order backlog depreciation and a portion of that EUR 2.8 million. So excluding the order backlog will continue then for the next years. I will sum that up in a moment. And then we have on top built a fair value step-up for 2025 in inventory. That's a usual process through a purchase price allocation. That amount is for the total year 2025, roughly EUR 40 million, EUR 2.5 million have been already consumed in the first quarter. Just again, here to mention, you cannot just multiply by 4 because Hyva has already -- has only been incorporated by 2 months and not 3 months. What does this mean for the net income in 2025? We expect from the PPA as well as from the inventory step-up amortizations, a negative net income impact between minus EUR 21 million to EUR 25 million on reported net income and reported earnings, which will be adjusted in adjusted EPS for sure. And going forward, so from 2026, as then the inventory step-ups are already fully phased out as well as the order book depreciation from the normal PPA of Hyva, we will expect a net income effect of between minus EUR 9 million and minus EUR 13 million per annum. Finally, depending on, as I said, the valuation, especially for the trademark Hyva and for goodwill is not yet finalized. Next page, please. Coming then back to balance sheet and later on to cash flow. We see a decline in ROCE from 17% to 13.5%, also fully expected and in line with our internal model. No surprise. That's a deterioration driven by the consolidation. Again, we are adding EUR 670 million on our balance sheet. We need now to work with deleveraging and with working capital measures on keeping that balance sheet some lower and on the other side, increase our net earnings, and that will then step by step, bring the ROCE back into our mid and long-term guidance. Equity ratio, basically the same story. No surprise. We had expected around 23.5% to 24% equity ratio, driven by the financial liabilities that have been put on the balance sheet to finance the acquisition. Net debt, Joachim mentioned before, we were always striving for having not a leverage above 2.5x initially after the consolidation, and we managed that successfully. Net debt is EUR 451 million. And this despite the fact that the LTM EBITDA just by market-driven decline of sales volume and EBITDA also in the old JOST World have been lowered. We are still below that threshold and are quite happy with that because that also gives us a benefit in terms of our interest margin. Let's go next page. Joachim mentioned that at the beginning, we already successfully refinanced the bridge financing. The initial amount that we draw down was EUR 350 million. We managed to immediately after the closing, paid back already EUR 30 million of the bridge facility. So it stands at EUR 320 million. And as you know from the press, we were launching in Schuldschein, a promissory note loan. It was highly oversubscripted. We at the beginning would have not expected to fully refinance the bridge facility at once. However, finally, it came out through the process that despite attractive margins from our side and a nice mix in terms of terms, the appetite from credit investors was so high that we can -- we increased somehow the volume to the full amount of bridge facility. And again, it's fully done. We are just making the technical procedures of replacing the bridge money with the Schuldschein money. And what you can see here then on the left side is from our side, we see now we have a very nice maturity profile over the next years. And that's important for us because now we can concentrate on really the operational work and the synergies. And this is also work for the finance organization and having that stability in terms of the finance profile now in our back that gives us freedom to look for the potential going forward. Next page, please. This then our cash flow KPIs. Cash conversion rate has been 1.8 and reported free cash flow of EUR 44 million, a nice increase, partially supported by consolidation effects of Hyva. As I mentioned, there was an old receivable, was an operating receivable that has been immediately settled. And on the other side, working capital measures and also a little bit of an increase in factoring support that nice cash flow figure. CapEx, as always, in the first quarter has been a little bit under the expectation for the full year with 1.8% or absolute-wise EUR 6.7 million. That's because normally the projects start a little bit slowly into the year. And also here, you see no major impact from the Hyva consolidation. We always are mentioning that the CapEx profile is very similar to the JOST one. Net working capital, that's indeed something quickly to mention. Yes, the balance sheet of Hyva comes with a [ intendency ] higher working capital ratio than in the old JOST legacy, and that's predominantly driven by the APAC region. So Hyva is strong in the APAC region and in the APAC region, let's say, the business model comes in the whole supply chain that Hyva has with a higher amount of accounts receivable and a higher amount of accounts payable, and that ties into that picture. Nevertheless, we are very confident that we will, by end of the year back into our corridor and our guidance that we gave for 2025. And I believe Joachim will mention that at the end of the presentation. And then next page, please. I think that's from my side, giving back to down under.

Yes. Thank you, Oliver. So let's look at the market for the full year now. That's the full year expectation. What you saw before is the Q1. That's a little bit tricky to look at the Q1 because we had a partially very strong quarter to compare with. So this is now a better comparison. You see the effect of bottoming out that we expect for the Europe, Middle East and Africa region, where we see the markets for truck go up slightly between 0% and 5%, for trailers, 5% to 10%. And also in tractors and agriculture, we see a slight improvement as well as hydraulics. The big unknown, obviously, is Americas, highly dependent on the very volatile communication on tariffs and economic boundary conditions. So I think there, we probably have to wait and see. Our flexible business model allows us to respond very quickly in our local-for-local setup, also allows us to not have too big of an impact out of the tariffs. So we should -- we expect that we can manage that a bit better than most of our competitors. So -- but of course, the best would be if we would have stable conditions. And right now, this is what we see from the market expectations. But as I said, that depends highly from the tariffs and the tariff communication. And right now, we will probably see that a bit more positive after the tariffs between China and the U.S. have been, yes, at -- agreed for a certain time at least at a lower level. And for APAC, as I said earlier, we also expect the bottoming out effects, slight improvements in the Asia Pacific region on trucks, on trailers, but also on agricultural tractors and on hydraulics. So next slide, please. Yes, that's the outlook then for the entire year. We confirm the guidance that we have given. We expect sales to be up 50% to 60% versus prior year, mainly the M&A effect from the Hyva acquisition. The adjusted EBIT, we expect to be up 25% to 30% versus prior year, which was at the level of EUR 113 million. Also adjusted EBITDA, we expect to go up at the same rate, 25% to 30% versus the EUR 148 million that we had last year. Our CapEx ratio, as usual, below 3%, 2.5% to 3%. We expect to be at 2.9% of sales, and working capital ratio, we will bring down below the 18.5% of sales. Yes. Let me give you a little insight of the post-merger integration. When we talked about the Hyva acquisition, we promised that we will have an accretive business on an adjusted EPS base from the start, which I'm very happy to confirm that, that was already the case in Q1. But we also said that we will implement synergies that you would see in the run rate until the Q4 2026. And we said we would need about EUR 20 million of synergies to come back to -- in our margin corridor. This is the current planning right now. We have identified EUR 27 million of annual savings that you can see in the run rate of Q4. The majority, I would say, a bit more than 1/3 we expect from purchasing, just better negotiation, better supplier access, higher volumes, bundling effects with our supply base. Sales, that is additional margin that we generate out of additional sales. I mentioned already, customers are very positive. We have a lot of new leads, and we expect also that we will have a very positive effect out of that. Cost reduction in shared services, typical SG&A costs about the same percentage. So I would say sales and shared services is probably together maybe half of the entire synergies that we expect. And the rest would be between production, improved production, consolidation or producing -- in-sourcing even some of the components that we can produce in our existing facilities and improved logistics and other costs in -- that adds up to the EUR 27 million of potential that we have. Out of that, we would today say EUR 17 million is -- we have a very high confidence level already that we will be able to implement that on EUR 10 million, we rate as high confidence and EUR 10 million, we are in the process of identifying and confirming that potential. So in total, we have 30 post-merger integration teams working, 270 people are involved worldwide. We expect one-off integration costs, redundancies, closing costs and others between EUR 12 million and EUR 24 million. We see strong R&D potential on top of that, and that will lead to new products in the long run, especially for the digital solutions that Hyva has already and now brings to the family. And I mentioned it earlier, we have very positive customer feedbacks and also here at the Truck Show in down under, we get very positive feedback and interest from our customers, and that confirms the sales synergies. So to sum it up for this year, we had a good start to the fiscal year 2025, supported by the consolidation of Hyva for the 2 months starting February 1. The PMI integration for Hyva is well on track, strong synergy potential, and that supports our midterm targets. We have a very robust financial development, boosted by a strong free cash flow and a well-managed leverage. And Oliver explained in detail the refinancing that we have closed now in Q2. The local-for-local approach and the strong market access worldwide limits our direct impacts from the tariffs. So we -- everybody suffers, but we have, I think, a very good setup with our local-for-local production. The markets are bottoming out and the demand is picking up in Europe, Middle East and Africa and also in Asia Pacific. And in Americas, we'll have to see. It all depends on tariffs discussion. So we confirm our outlook 2025. Our resilient business model offers strong opportunities for -- to continue the profitable growth path that we've had in the last years. So with that, that's the summary, and we're eager to hear your questions and to answer them.

[Operator Instructions] And the first question comes from Jorge Gonzalez from Hauck Aufhauser Investment Banking.

If you don't mind, I would like to do them one by one. And the first question is on regards to the guidance on Hyva. The Q1 was quite strong. And with this run rate, obviously, of margins that you have delivered, the guidance looks quite conservative now in EBIT. So I was wondering if you can first give us more or less the profitability for Hyva in the first quarter? And maybe if you can indicate us more or less what you are expecting for the year? And then also, if you can comment on the seasonality, if there is a reason for expecting margins to decline a little bit for the rest of the year? Or if in fact, if there is no further deterioration in North America, you are in the right track to beat your own guidance? That will be the first question, please.

So Joachim, maybe I'll start with the Hyva question and you can take North America.

Yes.

So regarding Hyva, indeed, also Hyva also was slightly better than we expected. And always keep in mind, first quarter is our strongest margin corridor. So that we need to always incorporate when it comes to seasonality topics in the second half. But answering your question directly, also Hyva was definitely better than we expected and better than the run rate that we have seen of Hyva in the last months before we closed the transaction. There's one effect in there. And there, this is why we are still a little bit cautious, to be honest, and don't want to change the guidance at the moment, and it's not necessary because we are fully in, is that remember that there is this business unit cranes, which is a dilutive business unit, and we are sorting any option at the moment still, and this is a task for 2025 to make a strategic decision here. However, immediately when JOST took over the business, yes, we settled topics in the supply chain of that business unit, et cetera, et cetera. There was pressure obviously before under the PE ownership. And that immediately released a little bit of margin pressure they had in the past because they could eat up their backlog and so on and so forth. And that had positive impact on Hyva. We need to see how sustainable that is. For sure, we are working on.

Yes. And maybe just to add to that, we think it is according to plan. And you have to keep in mind that if you look at the recent years, we've always had the strongest margin in the beginning of the year and then weaker quarters after that. And with that, I think it is within expectations. So we don't see any reason to change it for now. And Oliver explained the onetime effects. North America is a profitable region for us. It's usually helping the overall margin quality. We have not seen our margins go down in North America with the reduced volume at this point in time. But there could be some effects and therefore, also we may be a little more cautious. We were able to offset the volume effects by the improved situation in our plant in Michigan. The plant consolidation there has helped our cost basis, and we see that positive effect more or less ironing out the negative volume effects that we have.

Thus a very high aftermarket share.

Yes, correct.

It might be also impacts from the tariff topics now that dealers buy the stock to have stock whatsoever, but that might have a little bit of extra support. Yes. Normally, we have in North America aftermarket ratios of around 30%, and they have been up to 40%, yes, in some months.

Interesting. I couldn't read through all the report, but can you share the aftermarket share for the group in Q1?

This should be -- we don't disclose this really on a quarterly basis, but it should be around 30%. So definitely up versus the run rate over the past months before.

Okay. And then you prefer to not guide us for the Hyva's margin in Q1, I understand.

You understand correctly.

Okay. And for the year maybe?

For the year, I think we mentioned before, we come out of 2024 in the numbers with around 6%. And definitely, we want to be close to 7% by the end of the year. So, yes, I mean, that's definitely a target.

Okay. And then 2 quick ones. On the one-off cost, I think the range is quite large. So I'm wondering, this means that you are expecting this EUR 24 million between 2 years maybe? Or is really that you see potentially this one-off cost coming only at EUR 12 million in the long run?

I mean the run rate at the moment would be then EUR 12 million, if I just multiply or even a little bit less. But if topics come like the carve-out of a cranes unit and so on and so forth, like you mentioned, and also it's only 2 months. Yes. So, yes, I think at the moment a fair guidance. And from a timing point of view, I would expect that the biggest portion should be in 2025.

Yes.

Okay. So it's not like you are targeting EUR 24 million and you don't know if it's all in the first year and then some in the second year.

No. We don't expect that we take a lot of one-off integration costs into 2026.

Yes. Yes. I would also say that the synergies will mainly be in '27, '26, but the one-off costs will mostly be in this year because closing costs, redundancy costs and potential carve-out costs that will mainly be in this year.

Interesting. And maybe a last one from my side. So in terms of the market outlook, I mean the highlight is that you see some improvement in EMEA and APAC or some stabilization, let's say. Do you see this for both truck and trailer? Or it is more clear in one of them? Can you give us a little bit more detail on that?

Yes. No, it's -- the trailer market responds typically quicker than the truck market. So we see it more in the trailer market than in the truck market. Even though we see our OEM customers in their planning, they have added some volume recently. So they are more optimistic than they have been. And in trailers, we kind of see it already happening in the orders, whereas in the trucks, we see it more in the outlook that we have. But we will also see already a little bit in Q2. So I would say it's as usual, the trailer market is a bit quicker in responding. So it's a bit faster going up, but we also see it on truck and also gradually in agriculture.

Then the next question comes from Yasmin Steilen from Berenberg.

I have 4, if I may, and I will take them one by one. So the first on your guidance, again, coming back to this. So you mentioned an assumption of a deteriorating business in Americas for the remainder of the year. So could you please elaborate a little bit more on the impact of the changes of the regional assumptions? And what are the offsetting factors of the U.S. weakness that keeps you -- or gives you confidence in keeping the guidance unchanged? So are we talking about market share gains, pricing or the slightly better than initially expected development in EMEA? That's my first question, please.

You want to do?

Yes. The -- I mean the market expectation that we have and the assumptions for North America is quite low. But there are effects, as you state, that would partially compensate that. The one is typically when the OEM markets go down, we see the aftermarkets be a bit stronger because vehicles are being used longer and then that's when dealer prepare and when they increase their stocks for potential spare parts. And that gives us a profitability boost and that can help compensate some of that. Also, we see some potential in North America in agriculture. And we don't see South America, and the numbers that you've seen is for the entire Americas region, we don't see South America as much under pressure. Brazil has not been strong in the last half year, I would say, but we don't see the same negative effect in the other parts of the region. So it's merely, if you could say, a U.S. American effect and the Southern part of the continent will not be affected as much.

Yes. Probably just adding, that's an important comment for you, Yasmin. So we have in Brazil, we have a huge business, and this is -- the exposure here is construction predominantly, and that's running okay. Plus on top, we have gained here a substantial customer share, and that business is going to ramp up in the second half of the year. So that is then incorporated in our guidance, but you obviously don't see this in the market overview slide.

Yes.

Okay. Perfect. That's very clear. Then the next question on agri. So we've seen general business climate index moving upwards also in May. So you mentioned already that order intake was gaining some momentum. Could you update us on the current discussion with your customers? So is destocking kind of finalized? And when should we expect the first really meaningful impact on your order intake?

Yes. I think we could say that the destocking is finalized. It was happening a lot at the dealer level because the -- in the ag industry, the dealers are not as connected to the OEMs as they are in the transport industries because they are typically private dealer groups. And so what happens in late 2023 was that the OEMs were selling to the dealers, the dealer stock was very high and the dealers just did not reorder. And the truck industry, since the dealers are mainly captive or a lot of them are captive, there's a better coordination than we had there. So the dealers, we see the dealers reordering implements tools, but also loaders to fit existing tractors with loaders. And then we will also see that at the OEM level. But yes, I would say the destocking at the dealers is coming to an end. They are preparing for the season, and that is reflected in the sentiment of the industry.

Perfect. Then a question on cost synergies. So many thanks for sharing the post-merger integration dashboard. The transparency is highly appreciated. Could you provide more insights in the EUR 10 million kind of work in progress part? What is reflected there? And what could change your assumptions on the likelihood of the realization?

Yes, yes, go ahead, Oliver.

To be honest, this is not that this is then a different kind of category. So this is also then topics that might impact or come from purchasing synergies or logistics synergies, but I would say the degree of implementation level is just so premature that we are not confident enough to put it there. It's mainly filling up a bucket which we can always use in case even in the bucket of high confidence, some ideas might fall out or reduce with the final impact that we can fill up the pipeline again back to the [ EUR 27 million ]. But it's -- again, it's all over the P&L and the balance sheet topics.

Okay. Perfect. I just wanted to make sure we're not talking about kind of a single project and a very...

No, we're not.

It's just this idea, so to speak, is more a classification in terms of degree of implementation.

Okay.

It goes more or less through all the 5 buckets that you see on top. I would say a big part is probably purchasing because they are the ones that are implemented the quickest together with the logistics. But you can say that the high confidence is just a part of all of the 5. So each category has a part in that high confidence, in the very high confidence and also in the in progress.

Okay. And finally, just a housekeeping question. The around EUR 10 million realized FX gains, are they solely related to the hedging of the Hyva purchase price or does it also reflect other effects?

No, it's more or less the purchase price.

Okay. Perfect.

Just a comment to that. P&L-wise, net income-wise, these effects has been already incorporated in 2024, if you are mentioning the same. But probably you can reach out to Yasmin. Sorry.

I will definitely do.

And the next question comes from Nicolai Kempf from Deutsche Bank.

It's Nicolai from Deutsche Bank. And well done in Q1 and know that the capital market appreciates that with share price reaching all-time high. A couple of questions from my side. Maybe starting with the U.S. tariffs. Trucks are not that much impacted by tariffs, just probably one on the steel and aluminum. Are you confident to pass on to your end clients?

Do I want to...

No, I can go ahead. I'm not sure if I understood the question right. Are you saying we are not impacted or our customers are not impacted. Our customers are quite impacted actually because their supply chain goes across the Mexican and the Canadian border and other borders. And sometimes even 3 or 4 times until the part is actually in the factory. So we've seen them taking out volumes in those uncertain times because I think they -- at least what they tell us is they have a hard time even understanding the cost at which they produce these trucks that they are producing today because there's so much terrorist effect, and it's unclear when it goes across the border 3x, if there's 3x tariff or if that gets compensated. And therefore, that uncertainty is something that led them to reduce the volume. For us, we have calculated our effects. The primary effects, we will -- we have calculated, they are not as relevant. So because we're not buying so much from outside of the U.S. for our transport customers, we don't have a huge effect. The secondary effect could be more or less at the same level, that's when we get secondary effects from our U.S. suppliers when they claim cost increases. We expect and with some customers, we have agreements with others, we will negotiate. We expect that we will be able to compensate a good portion of that in the price to our customers because it hits everybody. And in the end, the products will be more expensive and our customers have already raised prices, which they are now partially taking back with the new agreement.

Okay. And my comment, tariffs was regarding to trucks, mostly heavy trucks, which are so far not part of the tariffs, but they're looking into that. But understood. Maybe on the profitability side, we understand why you're a bit more cautious on North America and the margins there. Also of APAC because we see higher dilution, right, with Hyva coming in for the entire quarter in Q2 and onwards. But on Europe, is there upside potential just given that you stated the market is coming back and that's something that's happening in all segments, right, Truck, Trailer, Agriculture?

If you are seeking for upside, I think there might be on top dilution effects going forward because it's only 2 months also in EMEA. And we need to see how the cranes business develops. But in general, I would say, yes. For sure, in the European region, we are suffering more than compared to other regions when capacity utilization is lower, and that has been over the past months. And when especially the Truck business starts to pick up, which we see, but at least let's be a bit cautious at the moment. This is sustainable, then we will have a scale effect. That's clear.

Okay. Makes sense. And my final one on the leverage. Any target by when we should expect leverage to be below 2x again?

I mean we said for this year, the clear target to be below 2.5x. I mean we have now to digest the dividend and so on and so forth. By end of 2026, if economies are really picking up and 2026 is expected to at least in the moment, being better infrastructure programs, blah, blah, blah, [indiscernible] close to the 2.0x by end of 2026. I would guess so yes at the moment. I think there's one text question from [ Pierre Castella ]. I just read it loud. Can I assume that the EUR 44 million of free cash flow of the first quarter is a low point going forward? Pierre, it is positively impacted by one-off topics from the Hyva consolidation. So the run rate is potentially lower. So you cannot just multiply by 4x. You should make a cushion.

As there are no further questions at this time, I would like to hand the conference back over to Joachim Durr for any closing remarks.

Yes. Thank you very much for your interest and for your questions. Very glad to hear that you are happy with the results. And I'm happy that not only we get good feedback from our customers, we also got good initial feedback from the capital market. So with that, we will continue the path. And as I said, we are very happy that we are performing according to plan. So that looks like a stable development. And with a little bit of support from the U.S. tariff situation, I think we should have a continued good year. So with that, we'd like to close the conference, and thank you a lot for your interest in JOST Werke. Thank you very much. Bye-bye.

Bye. Bye-bye.

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