Koenig & Bauer AG (SKB) Earnings Call Transcript & Summary

Good day to everybody. This is [indiscernible]. Welcome to our presentation of the quarterly results. If we switch to Page 2 please. I start with a summary at Koenig & Bauer at a glance, as usual. I think the first and most important message for this year is that we are well off with the spotlight program and in an environment where we can despite all the international political disruptions where we can confirm our guidance. I think that's the most important message which we give out today. We have seasonal effects but the guidance is still the guidance, and we are still good that we have priced that all in. We had a difficult first quarter, but that again is nothing unusual in the Koenig & Bauer world. In the same way as the fourth quarter is always -- for people who have good nerves, if you look at the amount of turnover in EBIT which we want to create in only 3 months. It has also been for a very long time that the first quarter was slightly difficult and there is no change this year. But despite of all of these things, despite some shifts, which Stephen Kimmich explain later, we are well on track where we are. We are well on track in order intake despite the global uncertainty the order intake year-on-year was just about comparable to the last year. It is actually rising by 0.9%. We still have the highest order backlog at the start of the year in our recent history, you'll see more details on the next page. But on group revenue, we are below the first quarter due to seasonality and some expirations, which Stephen will give to you. The net working capital ratio is now in the second quarter in a row below our threshold of 25%, which we have as an internal goal. On the segments, Paper & Packaging, which is the new segment, and we start with the new segmentation this year. has a positive revenue growth and also a slight improvement in earnings and a stable order intake, whereas special and new technologies is slightly below the previous year. The outlook remains unchanged. We still see a slight revenue growth around EUR 1.3 billion and an increase in operating EBIT in a corridor between EUR 35 million and EUR 50 million. We see our tailwind from the order backlog and also the savings from its focus -- focus program Spotlight, which is in all parameters well on track. For the financial year '26, we also confirm that we will plan a group revenue between EUR 1.4 billion and EUR 1.5 billion, with an operating EBIT margin between 5% and 6%. That target achievement will, of course, be highly dependent on the global economic and geopolitical development, which we'll see throughout this year how that develops. If we turn one page, there you see the figures which I just read to you at a glance. Our order backlog is EUR 1.032 billion, whereas in last slide just about the same quarter before that remains stable. So more or less, we had as new order entry, what we did as revenue. And you also see the book-to-bill ratio of 0.97 in the box below, expressing that as a KPI. The order intake was slightly on that level. The revenue is EUR 252.2 million. And the EBIT -- the operating EBIT is EUR 11.4 million as compared to last year, minus EUR 10.2 million. So just slightly below that, the details will be presented by Stephen. Some of the highlights of this year or this quarter. We're in the middle of the generational change, which we have announced consecutively over the last 3 quarters. And 2 changes are coming up. One change is sitting right next to me, that is Dr. Alexander Blum. He joined here for the first time. and this will be my last presentation of the quarter results to you. You'll see or hear me again on the AGM in -- on the 4th of June, but it will be my last quarterly presentation. The next will be done by Stephen in his new role as CEO and Dr. Blum as the new CFO. Dr. Blum has joined the company on 1st of May, and he now has the full experience of one working day behind him, and I want to hand over the word to him of what is -- what his reading of the company and his plans are. Please, Mr. Blum.

Thank you very much. I'm very happy to be on board already starting in the last days before I get officially appointed to the Board of Directors as of July 1. During as CFO, I have worked already since 15 years -- over 15 years in different industries and companies, among others, have also been in the machinery and equipment business. So part a lot of things I see at Koenig & Bauer look familiar to me. I've also been a Board member and CFO of a public listed company, which likely will help me also in the relation that we have further on. Together with Stephen and the whole team, I'm dedicated to focus on the further transformation of Koenig & Bauer to work on our midterm guidance and of course, to put further emphasis and focus on the spotlight project, which is working out quite successfully at this point of time. After my first date of Koenig & Bauer, yes, I can confidentially say I haven't fully figured out the company yet. So kindly give me a few more days before you start drilling these. I'm looking forward to meeting you in person, either during our next AGM, for example, the coming Capital Market Day. And so far, thank you very much. I'm really looking forward to the ongoing journey.

Thank you. As everybody knows, I'll hand over my role as a CEO on the 4th of June to Stephen. But there's still 1 month to go, and 1 month to work for me, at least in that role. The second highlight I present, please, we go to Page 5 is the spin-up of the software innovation hub into the Koenig & Bauer Kyana GmbH. So why did we do that? It is an extremely important strategic move to focus our resources and also in the future, the revenue on digitization and also digital products. Mr. Wagner has been previously the Vice President of digitalization. And she has -- for those of you who have attended presented what we do in KI or AI in English and digitization at the drupa. Now we want to bring this thing more to market we are starting with turnover, and we want to expand this business substantially. So therefore, we think it is the right move to move it into a separate entity to bring it out of the company. First of all, the digitization unit follows other rules than heavy metal of what we do with the rest. Secondly, we want to move and grow this company very quickly. And thirdly, the product type, which they do with the digitization product is very special. So we think the best growth change is if they have their own environment. And therefore, we did the spin-off and outsourced. We are obviously the 100% shareholder of that. The next one follows that line on Page 6. Mr. Wagner and her team presented our artificial intelligence approach at the big fair, which we had together with Google. The development of Google in this we have been announced as the first or -- I don't think we're exclusive, but I think we're still the biggest industrial strategic partner in the equipment manufacturing in Germany with Google. And therefore, this is an extremely important collaboration with us. At the Hannover Messe, we had a booth to show this, and we were -- that was very well received, I believe. If there's one thing you'll hear over the next quarters over and over again, is the impact of artificial intelligence on our business. And I hope and I'm sure that eventually you will also see that some revenue and profit comes out of it, again, maybe not over the next quarter. But over the next year, it is certainly one of the areas where we want to grow and play a very important role in our business. If we turn one page over on Page 7, there you see another move which goes into the direction of bits and bites. It's our strategic partnership with Siemens. For our modular automization, the modular authorization that we will implement in our equipment is the interface to artificial intelligence, and it is also the next generation of controls in our machines. It is very unique, again, that we combine our forces here with Siemens. We are there also one of their, let's say, transforming partners. What you see here on the picture is a photo. And on the right-hand side, you see [indiscernible], who is also a new member of our management team and part of the transformation. One page further, we come to spotlight and since bodlight is closely tied to the numbers which were presented after you. I'll hand over now to Stephen, please.

So thank you very much, Andreas, and good afternoon, good morning or good evening from my side as well. As mentioned, I'll walk you through the next slides, talking more about the financial results. . Starting with Spotlight, I think one of the most important messages beyond what Andreas already mentioned that we are confirming our guidance for the full year. is that our Spotlight project is absolutely on track. And to take in advance. I think the question any of you would be asking when you look at our Q1 results is, well, where are the savings? Why don't I see the savings in the P&L. And I'll, of course, be going into that in just a second. I think the very clear message for me is spotlight savings are there. They're here. There's a reason we achieved our Q4 guidance, which was very, very challenging, and we were very happy to publish is a fantastic Q4. The Spotlight savings helped us last year, and they continue to help us in Q1. There's other things that happened in Q1, particularly seasonal issues and exchange rate issues that I'll talk about in just a few minutes, why our Q1 result wasn't better than last year. But if you dig into the details, which I'm happy to talk about. The fact is our run rate in Q1 and our progress is visible, it's there to see, and you'll see it in some duties in the P&L later. We're on track. The personnel cost adjustments of just around 300 FTEs are installed and the contracts are signed. People are -- headcount is leaving the company. Our hourly contracts are being reduced. The savings are there in all 4 business areas. And if I look in detail our Q1, we're still absolutely convinced that we're on track. The focus we have in the company on improving profitability and banknote on improving the loss-making situation in digital web on improving our market leadership and profitability in metal print and reducing our structural costs in the holding. The 4 focus areas of Spotlight are the right challenges to be addressed. And we're on path. It's our key to meeting this year's guidance and our key to meeting next year's targets, and we are fully on track. Again, I will go into more detail in just a couple of minutes on why Q1 despite the spotlight savings did not end up significantly better than last year. But I can remind all of you, I think nobody on today's call is new to the company. You all know us very, very well. And Q1 at Koenig & Bauer is -- Q1 at Koenig & Bauer, it's often and always weak and often suffers under some seasonal effects, which again happened this year, but doesn't change anything in our approach for the full year or in our Spotlight program. If we look at Page 9, some of the figures have been mentioned, but just a little bit more detail. Order intake in Q1 is historically also weak last year, EUR 243 million this year, EUR 245 million. So still 0.9% up, but of course, down compared to the 3 strong quarters we had last year. Revenue with a product mix moving more to the paper and packaging ex Sheetfed area and less to the special new technologies. So we had some mix effects between -- within the revenue actually down year-on-year by 0.4% despite having much, much higher backlog moving into Q1. So again, a typical Koenig & Bauer weak Q1 on the revenue side. But again, nothing that changes our opinion on the full year. Order backlog with the book-to-bill, just around 1, basically in line with December 31, much higher than this time last year, EUR 1.033 billion of order backlog. And of course, Page 10, at a very high level, all of you would be expecting spotlight to be driving higher profitability. Of course, that is the justified and correct expectation for the full year. In Q1, we weren't successful in improving the bottom line profitability, operating EBIT at minus EUR 11.4 million compared to minus EUR 10.2 million last year. So just about in line. We did have some negative volume and mix effects within this year-on-year comparison. And I had mentioned already in February and again in March that we were expecting spotlight expenses, nonoperating Spotlight expenses in a low single-digit million euros in the first half of this year. So the EUR 2.8 million for the people on the call should not be a surprise. That's exactly what we had basically projected there will again be a much smaller number than this one, but some small amount in the second quarter. And then Spotlight is finished for the full year. So we stick to our previous statements and they're coming as we had mentioned in a low single-digit million euro amount. But overall, minus EUR 1.2 million like-for-like at a very high level group despite having significant improvements on the cost side through spotlight. Why is that? And I would like to point out the second bullet point on this page, and I would frankly almost read it because it's probably the most important message on the -- in the entire presentation. Even though Spotlight achieved the planned savings, we had temporary effects of around EUR 5 million in the segment special and new technologies which is where the most of the focus is in Spotlight, Banknote, Metalprint and Digital Web. These temporary effects of EUR 5 million will be recovered in Q2, Q3, Q4 of this year. There were 2 primary drivers. There was a EUR 2 million exchange rate impact in Q1. You'll find that under other income, other expenses in the P&L that we -- because of our successful hedging of the U.S. dollar and euro in Q1, we can already firmly forecast that this negative impact of circa EUR 2 million will be corrected throughout the next 3 quarters. So EUR 2 million is FX and EUR 3 million was a seasonal project phasing issue also in special new technologies, particularly in our bank note business that we were -- we had a roughly EUR 3 million EBIT shift from Q1 into Q2. That will and has certainly arrived. Therefore, again, main message, EUR 5 million of EBIT in Q1 is pure phasing and will be recovered throughout the rest of the year. And if we have published today around a EUR 6 million year-on-year improvement -- or sorry, minus EUR 6 million or minus EUR 5 million instead of minus EUR 10 million. I think all of you would understand we're fully on track to show the year-on-year improvement that we're showing in our guidance. So this quarter of EUR 35 million to EUR 50 million that we're targeting. If we were showing each quarter around a EUR 5 million improvement, we'd be fully on track. We know internally we are. We also know that on the bottom line, you're not seeing in the P&L in Q1. But again, please don't judge Koenig & Bauer on Q1. It's our most difficult quarter, and please understand the importance of us confirming our guidance for the full year and the fact that many of these effects in Q1 were simply phasing issues that will be recovered throughout the next 3 quarters. I repeat myself a set a couple of times, but I think it's important that everybody understands where we're coming from. On Page 11, you see the full P&L. Again, it's Q1. It's as a CFO, again, showing a negative EBIT and net losses to start the year. It's no surprise. It's -- the way we start our years, we feed ourselves into this hole that we then in the next quarters have to climb back out of. But in detail, we know we're online. We had negative volume and mix. You see that in gross profit. Research and development, which is a very big focus of Spotlight, as all of you know, one of our other messages in Spotlight is not just cost out, cost out, cost out, it's focused on go-to-market and less new development, new products, broader portfolio. So the reduction in R&D expenses, you see here in the P&L from minus EUR 16 million last year to minus EUR 10.6 million this year. I think is a clear indication that spotlight working. The same you see also on the sales side where we're reducing distribution costs, particularly on the fixed cost side in sales expenses. Administration costs are a little bit more necessary to explain. We see a year-on-year increase despite spot life. Also here, we can confirm the Spotlight savings are in, and you will see this throughout the rest of the year that we will show year-on-year reduction of administrative costs. But please remember that last year, we had not really kicked off full speed on the Spotlight program. So some of the consulting expenses started in Q2, and we still had some spotlight expenses in Q1 this year, year-on-year. And I think you're all aware of the generational change in the Board and in the management structure that leads to a slight increase Q1 over Q1. But for the full year, I can only repeat, in all of our fixed cost blocks, R&D, distribution and administrative costs you will see year-on-year improvements also in administrative expenses in the coming quarters or for the full year. So it's a mixed picture, I understand, but explaining only at a very high-level group is sometimes not enough. We have to go into more detail, and we're happy to answer any detailed questions about that in the Q&A session. Otherwise, interest results slightly down, which is good news, minus EUR 6.6 million down to minus EUR 6.4 million. Also here, you can expect that the interest expenses year-on-year will continue to drop because the European Central Bank has obviously reduced interest rates throughout the last 12 months as well as improvements in our leverage ratio in the last 2 quarters, which drives a lower interest rates with our banks. So interest results slightly better than last year, but you could expect this trend to improve over the coming quarters. And overall, of course, net loss as a CFO, never good, but very, very typical for us in Q1. Free cash flow on Page 12. Yes, we had negative cash flow in Q1. Also here, no surprise. This change is nothing on our guidance we've given to you in the past that we're expecting positive cash flow for the full year. I think it's clear to anybody that covers industrial companies that after the very, very strong Q4 in sales and revenue, that we now are -- we spent Q1 placing less -- or we had less revenue in the income statement. And therefore, obviously, we're spending our efforts increasing inventories, increasing finished goods, preparing for the sales to come in the coming quarters. So the increase in net working capital on a euro basis, year-on-year, as I think no -- sorry, quarter-to-quarter. So at December 31 compared to March 31, we had an increase in net working capital. I would like to focus on the good news 24.1%. It's now the second quarter in a row that our networking capital level is below our long communicated midterm target of maximum 25%. So we still have net working capital fully under control, but it is necessary purely from our operating -- seasonal operating model that in Q1, we spend more efforts in our factory as opposed to add our customers preparing the next deliveries, and that's the nature of our business. Overall, we still have a very strong focus on net working capital management. And for the full year, again, to repeat myself, we still see Koenig & Bauer on track for a full year positive cash flow. Page 13, you see the details on the net working capital that I just mentioned verbally the increase quarter-on-quarter from EUR 294 million net working capital at the end of December, increasing to EUR 306 million in Q1, so EUR 12 million increase in net working capital. But I repeat, it's still an incredible improvement year-on-year, down from EUR 362 million a year ago to EUR 306 million this year, although we're projecting revenue at a similar level for the full year as we did last year. So we continue to make great improvements in our networking capital management you see on the top right, inventories at EUR 422 million. Yes, they're slightly up. I can only repeat, it's because of our seasonal operating model that our Q1 is more in plant as opposed to at the customers by year-on-year of EUR 51 million reduction in inventory shows that we're absolutely heading in the right direction. And -- but at the end of the day, purely looking at March 31, it was a reduction in our net financial position from minus EUR 128 million to minus EUR 158 million. But overall, for the full year, on track to recover, particularly in the second half of the year. I think you see the details on Page 14 to the points that I just mentioned. The free cash flow negative, particularly due to changes in inventories, receivables and other assets at minus EUR 19.3 million as just discussed, and this is simply us preparing for the strong quarters to come. Otherwise, I think just minor points the cash flow from finance activities, the minus EUR 11.7 million. So we reduced our credit lines that we've withdrawn from our banks that helps us in reducing interest expenses and it's generally a good sign that we feel comfortable with our cash management for the coming year. So we were able to return EUR 11 million -- or roughly EUR 11 million to our banks last year -- or last quarter. Page 15 on the balance sheet. I think there's no other points specifically to mention. We talked about inventories, and we talked about, of course, the net income, the negative net income driving the reduction in shareholders' ratio -- our equity ratio. But as mentioned, this is simply Q1 and will recover in the quarters to come. Page 16, moving into a little more detail. This is the first quarter where we begin to publish in the new segment structure. It's important to us that we -- the organization is driven by these 2 new segments that are very much market-oriented and market focused. So Paper & Packaging Sheetfed Systems, replacing the previous Sheetfed segment and including in addition to the previous Sheetfed segment, including the corrugated business for the corrugated Sheetfed machines and special and new technologies, including these heterogeneous business units in -- outside of Sheetfed and the first time we published the results in this these 2 segments. You see that now on Page 17. The format is in the same as what we've shown in the previous -- in the previous years with the 3 segments. I think good news that Paper & Packaging Sheetfed, which again is very similar to our previous Sheetfed segment, continues to be stable in its operating performance. Revenue was slightly up year-on-year. We did have a negative product mix -- sorry, a regional mix and product mix. I think you'll see that in the backup that we're simply selling or bringing into revenue fewer U.S. machines and more China machines. So we have a negative regional mix in terms of margin, but it's very good news that I mean, Sheetfed ended last year. Q1 was also weak. And we ended the year with a strong result and a strong Q3, Q4. Paper & Packaging Sheetfed continues to show this robustness in its business model that we expect -- I mean, the minus 0.1% operating EBIT in Q1, we're at least off to a -- for the segment, a strong start in terms of again having a profitable year in profitable coming quarters. So we were getting a stable business, and we have a strong order backlog and is moving along. Special new technologies is obviously a little bit more difficult to explain at a high level we see a drop in revenue. And I can repeat what I said earlier. This is -- you'll see in the back of also that we kept our promise to the capital markets that we continue to report Digital & Web as an old segment for the coming quarters for the sake of full transparency, and you will clearly see that Digital & Web is also down on revenue year-on-year. And we also, as mentioned, had a shift in a banknote service project from Q1 into Q2. Otherwise, we would have been able to publish higher revenue in this segment. But for the segment at roughly EUR 8 million lower revenue, operating EBIT at rough -- a very small EUR 900,000 improvement. As mentioned, we have the spotlight savings in the segment. They are there. They are real but we were unable to compensate, number one, the missing revenue in Digital & Web, and we were unable to compensate this missing service project in banknote if those would have come -- if the banknote business would have been here in the FX and not happened, that EUR 5 million impact that I mentioned earlier, you would have seen entirely in this segment. And again, if I was publishing or explaining a minus EUR 6.1 million special New Technologies today compared to a minus EUR 12 million last year. I think all of you would be happy and fully convinced that we're on track to meet our full year target, that missing EUR 5 million due to the EUR 2 million FX effect and the EUR 3 million missing service project that will be recovered really explains our entire gap to what are probably or likely or should have been your expectations for the single quarter in that segment. But again, we're confident we'll be showing this improvement in the quarters to come. And we'll simply keep pushing for it and reiterating our commitment to show you the improvement in that segment in the months to come. On Page 18, I think obviously, a hot topic that we would expect questions about, how do we see at Koenig & Bauer, the impact of the trade wars and the punitive tariffs coming from the U.S. and expanding throughout the world, also affecting China and tariff policies throughout the world. I think there's a few very important major messages. Number one, these potential U.S. tariffs don't only affect Koenig & Bauer. They also affect our major competitors, predominantly based in Europe. But also Japanese competitors or potential Chinese competitors that are just as affected as we are. So we don't see any issue in market share or in competition. The big question is what happens to a potential decline in demand in the U.S. market because, again, Economics 101, as we discussed in the past, higher pricing due to tariffs will drive demand down. I think it's no surprise that we'll confirm that we see that. We do see weaker demand in Q2 coming out of the U.S. than we would have hoped for in a normal environment, that's nothing that worries us about calendar year 2025 too much. It does expose us to some risk in this calendar year. But predominantly, it's more of a question for how will it affect 2026. And as we're sitting here today, I think nobody really knows. We're all hoping that trade wars will be short and resolved quickly. But I think again here, the real question is what happens to a potential decline in demand in the U.S. market and how could that affect a 2026? And how could a U.S. trade war affect demand in regions outside of the U.S. such as China or such as Europe? And are we able to compensate a decrease in U.S. demand in other regions. That's the big question. But again, we feel comfortable with our 2025 and that's why we reiterate our guidance for this calendar year. And North America is, of course, an important market for us, and we're working hard. I think the other very important message is that our order backlog in the United States, including also our large banknote orders from the United States. We consider to be absolutely secure and that the tariff risk has been -- or the effects from the tariffs have been successfully passed on to the customers. So our customers will take over the cost for the tariffs. That is -- that statement is valid for our entire order backlog, and that's a very good news. So it's not an issue for us in order backlog. It's not an issue for us in -- from service and from spare parts. These are all things that we can manage. The big elephant in the room and the big question that nobody can answer is what happens on the demand side going forward and how it will affect 2026. But I think, again, the main message is for 2025, we consider the risk to be very well managed. Nothing can be eliminated completely. And there are still some orders coming out of the U.S. that we need for our revenue in Q4 this year. But overall, we would consider the risk in this year to be managed and manageable and the risk for 2026 is a big question. And that leads me to Page 19 of the last page. Despite our Q1 only being in line with prior year, we still are on track and absolutely confident that we will achieve the full year improvement in our operating EBIT in the range of EUR 35 million to EUR 50 million. So we confirm our guidance. We know the spotlight savings are there. We know they're real, they don't show up directly in the in the P&L in Q1. They are in the P&L. And if we didn't have them, the quarter would have looked even worse because of the phasing effects I just mentioned coming out of banknote business. But we know that for the next 3 quarters, we're on track. Therefore, we're confirming our guidance and are confident that we're on track for both the revenue target of circa EUR 1.3 billion, and the operating EBIT in our guided range. Of course, this is all under the assumption that the world doesn't go crazy than -- or even more crazy in the next 9 months. And we will see what happens throughout the world, but we know that our operating measures and operating management on track to make this possible. And under the current assumptions, we still see ourselves on track for our guidance in 2026 of somewhere around EUR 1.4 billion to EUR 1.5 billion. And with the additional spotlight measures an EBIT margin between 5% and 6%. Of course, this guidance is under a little bit more of a risk profile or a lot more risk profile compared to 2025 because we simply don't know how much the trade war will escalate or not escalate. Will it resolve itself? Will it become worse? Will it become better? So obviously, I think every company in the capital goods sector and the industrial sectors is fighting the same assumption, what happens in demand for 2026. But as of right now, we still feel comfortable we're on track for both the sales increase and further EBIT improvements as we've been promising for the past quarters. So that's it from my side. I think it's a lot of information and perhaps also a lot of questions, but I hope the main messages came across that we're confident we're on the right track, and we keep pushing. So I would hand over to the operator for Q&A.

[Operator Instructions] The first question comes from Stefan Augustin from Warburg Research.

Welcome, Dr. Blum. The first question is actually on the EUR 2 million FX effect. Could you just simply outline how this is exactly constructed and the thinking what happens if the U.S. dollar right now in the second quarter would actually go down into the direction of EUR 1 million again, would there be a negative effect? Or is that simply baked in? And is also the full, let's say, bank note orders until their end completely hedged. So that would be the first question.

I'm very happy you asked the question because, frankly, we have a very good answer, and I hope that the markets also understand how important the answer to the question is, so we have in Q1 in February when the dollar was around [ 1.03 ], [ 1.04 ], we have successfully executed a hedge for our entire U.S. dollar revenue for the coming 2.4 year years. And of course we had -- of course, you pay a premium to the actual dollar was [ 1.03 ], [ 1.05 ] or something like that. So our hedge is higher than that a couple of basis points higher than that. But we have executed a hedge at exactly the right moment. I'm really proud of our treasury team for their work. And we have the dollar hedged at a very attractive dollar rate for the coming, say, through the end of 2026, is certain depending on how much the revenue is the amount is. It's a question of how long it lasts, but that's the good news. The consequence of that hedge, however, is that the December 31 books were closed at, of course, also a dollar course of around that [ 1.04 ], right? And our hedges I think I don't want to publish the exact number, but our hedge is somewhere between [ 1.04 ] and [ 1.10 ], right? So we have a premium on that [ 1.03 ]. But it's -- so we have a balance sheet reassessment March 31 at the hedge course. So we had to reevaluate all of our receivables, our dollar receivables on March 31 at the hedge course, which was higher than the December 31 course. And that cost us this EUR 1.8 million in revaluation in our EBIT in Q1 and that's unrealized. It's just a bookkeeping issue. But that drives us this EUR 2 million roundabout negative effect in Q1. In the coming 3 quarters, we know exactly how much dollar revenue we're going to do and what our benefit from the hedge will be, and that's going to roughly even out in the next 9 months that we're going to have a positive effect from our hedging in the next 9 months to outweigh this one-off, and that's realized effect, by the way, to offset the balance sheet revaluation under on March 31. So it was actually a very, very good news to be honest, that led to this negative EUR 2 million impact in Q1 because we have really secured our dollar business for the foreseeable future at a very attractive rate for Koenig & Bauer. So I'm glad you asked the question. And I hope it's a little bit technical from a finance side to explain. But again, it's great news that the dollar -- frankly, if it weakens the [ 1 15 ] or [ 1 20 ], that's probably even a benefit for us because it gives us a chance to renegotiate other contracts despite having hedged for a long period of time. So it's good news, and glad you asked the question.

Just here, again, on the end of June, if we have another depreciation, we have another, let's say, the revaluation of the remaining receivables at that time? And can we still have then, say, a temporary effect just, let's say, technicality?

It was only one-off because it was the revaluation, December 31 unhedged compared to March 31 hedged. So we executed the hedge in February 2025. This year, we executed really when the dollar was at its strongest. And the -- sometimes you have to be lucky in life. So we got a little bit lucky that we picked exactly the right point to hedge exactly when the dollar was the strongest in February. So it only affects Q1 and going forward. So we -- March 31 is evaluated at the hedge course. And going forward for the coming quarters, everything will continue to be valued at that hedge course.

Okay. Great. Thank you very much for that one. And congratulations on the good hedging. Then as a follow-up, you mentioned, and I just want to clarify if I understood that correctly. So you have agreed also with your bank note clients in the U.S. on risk path through of the tariffs. Is that right?

I think I would answer it indirectly because we don't talk about specific customers or individual projects, but I think the statement was our entire order backlog is covered with pass-through of tariffs.

Okay. Great. In the cash flow, Q1, is there any significant amount of spotlight cash out in there?

Yes, there is. There is I don't -- I will follow up -- we'll follow up with that with an Landenberger because we haven't published that figure yet, and I don't want to shoot the number in the room. We had mentioned that on December 31, we had roughly EUR 17 million of cash out to come and that's certainly a portion of that was in Q1 this year. I -- we haven't published the amount yet. I take that as homework, but you can clearly I mean, the EUR 17 million divided by [ 4 ] would be the minimum what you would expect in each quarter -- in this first quarter. But again, I don't want to throw a number in the room. We'll come back, but it's somewhere in that low single-digit million euros range is what it would be in cash out in Q1. But for Ladenburg, we'll follow up with that, and we'll consider if we publish it quarter-by-quarter going forward. I can only repeat the EUR 17 million is the full year effect, and some of that did fall in Q1. I want to correct myself, the EUR 17 million was the open amount. A small portion of that hits 2026, a very small portion. And how much in Q1, we have to consider how we publish.

Good. You mentioned something on the regional mix, respectively, you said there is a negative regional mix due to less U.S. and more China business. I wonder if you would keep that statement if I ask you that imply that the Sheetfed machine sold to China has a lower margin than the Sheetfed machines sold to the U.S.

I mean peak the answer to that is it's difficult to say directly. I think there's 2 mix effects happening. One is it's not just that you have less U.S. machines. It's that the U.S. is our largest customer for large-format machines. And I think everybody knows large format is one of the big business drivers for our Sheetfed segment. So less U.S. also implies -- less U.S., more China doesn't necessarily imply lower margin on the individual machine, it implies a negative product mix within the region because we're selling a lot of the basic standard of bread and butter, Rapida 105 with low automation that the product mix in Asia is more towards the commodity machines and less towards the highly specialized high-output machines that we would sell in the U.S. So it's not necessarily a regional issue in terms of like-for-like the same product in the different regions, I think we're not commenting on one region is better pricing than the other or such. That's not the case. It's more that the mix within the regions is better in the U.S. than it is in an Asia or in a developing market.

Okay. Fully understood here. The last one is actually a little bit looking at the segment. If I look at Slide 17 are recognized in the first quarter '24 that these are exactly the same numbers as in the reporting last year. So I wonder is -- can I read into that, that actually, the complete web and digital is fully in the special and new technologies, and there is more or less nothing moved into the Paper & Packaging Sheetfed Systems?

It's a different answer that it's only about the corrugated business and the corrugated business involves Telemark. So we said Paper & Packaging is Sheetfed old plus corrugated. Corrugated is Telemark, which is not consolidated. We're 49% shareholder. And corrugated involved that Cromax Pro 1 machine out of Virsborg. And in 20 -- basic assumptions in Q1 2024, there was very little activity in that area, in the Digital & Web segment. So there will be differences going forward. You will see it, but perhaps we're still working a little bit on that on that year-on-year comparison. I think the main message is Paper & Packaging is basically old Sheetfed. There will be some minimal differences you'll start to see, but corrugated, which is for us strategically very important to move into Paper & Packaging is largely nonconsolidated because it's run through the [indiscernible] business. So that will work on. I mean we also have to practice a little bit with the 2 new segments and making sure we're explaining it correctly. I think you understand we hope to start consolidating [indiscernible] in the coming, say, 2 years. But until then, we'll have to figure out how we explain our progress in the corrugated business despite it being nonconsolidated.

The next question comes from Jorge González from Hauck Aufhäuser Investment Banking.

Well, first, I would like to thank the Dr. Plesske for all these years, helping us to understand better the company. And then also warm welcome to Dr. Blum and I wish both of tell the very best. And then on the results, I would like to start with the order intake. I'm quite interested to understand the dynamics by region and how, for instance, tariffs are hitting North America at the start of the year, especially what I want to understand is the trends, if we can compare the second quarter, the next months to come with last year or you are expected a completely different dynamic maybe in North America towards and in Q2. How do you see the development of the year, how we need to model the demand for the next quarters, if you think Q3 is going to be more important, what can you tell us in terms of the seasonality for this year, please?

Sure. It's a very difficult question, very difficult question that we expected because the crystal ball is clearly a little bit cloudier on order intake in the regions going forward than in, I'd say, normal times. So I don't want to avoid the question, but it really is a tough question. I think we openly already said that demand is -- we see demand weakening in the U.S. It's clear. It's not that we're losing projects and certainly not that we're losing market share or customers are canceling orders. We don't have any canceled orders. What we do see is simply delayed decision-making that customers are simply saying let's wait and see what happens with the tariffs and delay the order. That's going to have an effect in order intake. There's no other way to work around it. But right now, we see it predominantly limited to the U.S. China is also a little bit weaker due to the uncertainty. We have a big China print trade show, which is kind of the every 2-year drupa in China. That's in May -- this and creates some demand in Asia. So Koenig & Bauer is -- actually the entire industry is presenting. It's similar to a drupa for the China region. So we're hoping that's going to give us some impulses Banknote remains. As we've always said, despite the high order backlog, we still see a great pipeline. And that's pretty much independent of any macro trends because it's government is making decisions. So we still expect a strong banknote and digital web is with its RotaJET and HP, very much also dependent on the U.S. So again, I don't want to avoid the question, but you're specifically asking about seasonality on order intake is tough. I think Q2, you can't expect any miracles. We had an incredibly strong Q2 last year, particularly in S&T if you look at it, EUR 225 million that was driven by a single off orders in banknote that can't be your measuring stick for S&T. And paper and packaging. This time last year, we had drupa. So we had a strong EUR 180 million that we might be able to reach again. We simply don't know. What we do know is we have a very strong order backlog, so we can hold out several quarters and still maintain operations in a normal way. And we're hoping that the trade wars are resolved quickly. . And we're also confident that we're doing everything possible on finding alternative regions or alternative markets and getting machines placed into the market. But again, please, I don't know how other companies are answering that question. I would be skeptical of any company that tells me they know what's going to happen on the order intake coming out of the U.S. in the next 2 quarters. We're not that brave. And -- or we're more serious about it and say, we simply don't know, demand is weaker. And what that means in numbers, you have to wait and see. And in the meantime, we do everything possible to manage it.

Okay. So I understand that with the backlog that you have at this point the record backlog, you don't have any expectation of reduced production during the year, not even in Q4. But so...

I would hedge that with Q4 is always a little bit of risk towards the end of the year, but the next 2 quarters, I would answer that question definitely with yes. We're fully utilized and running at full speed and don't see any risks in Q2, Q3. There's always a couple of orders that we need for revenue in Q4, particularly in the path percentage of completion business units that have a much smaller gap order intake and revenue. So some small risk in Q4. But overall, again, we feel comfortable with 2025 and what it means for Q1 and beyond, it's simply too early to tell.

Okay. Do you see any momentum improving in Europe and maybe competition for...

We do absolutely. Absolutely, we do. We do, particularly in Germany, there is increased demand. We are placing orders, but Europe in general, it's coming from a weak couple of years, but we do see some strengthening.

Okay. And finally, can you update us on how the project for the for the printing components for batteries is ongoing. Is there anything new that you can tell us?

We have published shortly before Christmas and then I'll talk that we are aiming for a proof of concept together with Volkswagen in the middle of this year. And if I look at our timetable and we are I would confirm that statement. So we are aiming for a proof of concept mode of this year. If we achieve that, then this will be an extremely important milestone. So it's one of the things where we are not affected by tariffs or if so, positively because it's mostly an upcoming business for Europe and for derisking by Volkswagen. So let's press our funds and [indiscernible] to the R&D department that this thing turns to turn over in '26. We are in no way. There's still the development risk. It's a new thing. It is still there. But so far, you don't see me frightened.

The next question comes from Peter Rothenaicher from Baader Bank.

I would be interested in a little bit more background on the different markets you are in, in the special New Technologies segment. So order intake in the first quarter in the segment remained on a relatively low level. Were there some special developments affecting one of the other areas perhaps bank note weak order intake? Or how do you see this? Is there some special development?

I think it's just a typical Q1, I mean, Q1 last year, you see was also quite weak at EUR 76 million. I mean, especially the technology is dominated by the largest business is banknote. The second largest is digital web and the third largest is metal print. Those are the 3 dominating businesses in that segment. and bank note is, again, has a fantastic order backlog. So -- and it's simply a business where you don't have huge orders every quarter. The 3 strong quarters we had last year is atypical for the business. It's we're very happy that it happened. So we're never -- we never get nervous by 1 or 2 or even 3 weak quarters of banknote. And now we had one week order, my god, that's really nothing unusual. And frankly, for -- again, I repeat, we see a strong pipeline in banknote. And for Q2 moving forward, we can even expect us to continue to publish order entry in the banknote business. Digital & Web, I think you'll see that in detail in the backup the order intake, the top line continues to be weak, but we know that. We had order intake slightly down over previous year, EUR 17.4 million as opposed to I think, EUR 24 million last year, yes, EUR 24.5 million. This is -- but this is something we know. It's why we're doing Spotlight. The whole point of Spotlight in Digital & Web is to reduce and the breakeven point of the business and prepare ourselves for the revenue at the level it's at. And the order backlog of EUR 109 million is roughly in line with last year. Last year, we ended at EUR 160 million in revenue. We're targeting around EUR 180 million for breakeven, as we've mentioned in the past. So we do need some more orders, but we're working hard on it. And of course, the issues in the U.S. don't help. But digital web is more a cost issue where we're cutting costs, cutting staff, cutting personnel and the order intake is at least at a level that we -- around the level we expected. And we, of course, we would be happy with 1 or 2 more orders, but it is what it is. Our focus there is on the cost side. And...

And regarding the market potential for the RotaJET, anything new here? How do you judge this for the next 1, 2 years?

We have more projects than ever before. in terms of working with the customer on potential projects, but they're not turning into order intake. The last couple of quarters. We had one really nice project in Q4 that we announced. I think that's in our in our Q4, our year-end publication that we placed an order that was driven by a brand, a brand drove through their project, the investment at our customer, the converter. So we are booking specific projects, but it's still too difficult to say. It is specialty machinery building and the projects simply have long project time between talking to a customer and coming to an order. So nothing new to update. And all of this market uncertainty, it simply doesn't help. And we have -- actually, I mentioned already, we have examples of projects that are being delayed, the decision is being delayed, and there was one big RotaJET project that we hope to book in Q1 in the U.S., and that decision was delayed. The project is still alive. It's still out there. We're hoping to book it. But it's simply is what it is. We have to keep pushing.

And regarding Spotlight, you indicated that you're looking perhaps to finish some of the activities in special and what that -- how much on revenue impact might just have in '25 and '26?

Which activities? I think I didn't understand the question exactly. So we don't have any activities that should decrease revenue. The only real revenue risk is...

I understood that with the Spotlight program, you're looking on every product, which make sense to continue or to discontinue, and I would have expected that this might have perhaps some impact that you are losing some revenues to avoid bigger losses?

So Mr. Rothenaicher, I think your question was about Spotlight impact on revenue. And if you could just repeat your question.

Yes. So my impression was that every project, every R&D project and et cetera will be checked if it makes sense to continue it. And I -- my question was if there is some impact on the revenues in 2025 and 2026 from the discontinuation of perfect plan?

No, I think that's a clear answer absolutely not. We discontinued for example, the CS MetalCan that was not planned with any revenue in this year. Those we only canceled projects that were promising revenue in future years, but they have been doing that for several years. But there's no impact from any discontinuation of product lines or discontinuation of R&D projects. There's no impact on sales or revenue targets in '25 or in 2026. That's definitely a clear no.

The next question comes from Johan [indiscernible] from Apus Capital [indiscernible].

Some follow-on questions for me. First, maybe how has [indiscernible] developed during this year and what do you expect for the full year? That's maybe the first question. The second question, let's do it step by step the questions.

Sure. So we're -- I mean, if you look at the market data, the corrugated business is the weakest of all of our markets, whether you're looking at offset or flexo or commercial from all of the addressed markets, the corrugated business is suffering the most. But despite that, Telemark has been able to maintain profitability throughout all of the year since we acquired them, the market growth hasn't been what we had expected. I think these may emergence that you're aware of, the Smurfit Kappa WestRock and the DS Misanational paper and just the general weakness has at least heard us a little bit on our growth perspective, but we're incredibly happy with the business. And again, [indiscernible] maintained profitability throughout the last 3 years.

Okay. Secondly, on Kyana, I really like what you do -- can you give us a little more data about this new company? How many people you took over? Any idea maybe how important this business could go forward. I really like this because Mr. Wagner has really done a great job, and I was really impressed last two parts of presentation. So far, maybe if you can add 1 or 2 is that we have a feeling how big this attempt is with this own company on it activities?

Sure. So I mean, I'm glad to hear your opinion on near obviously, we share she's doing a fantastic job, and she's really absolute diamond in the industry for energy and for her to serve representing Koenig & Bauer. So I think there's 2 parts to your answer. So I'm not going to give you today a revenue target on Kyana the next 3 or 5 years. We're still working on it, but we do see potential for it to be an absolute relevant contributor to the company. The good news is it's not an R&D project. We're in business, we have customers. We have installed machines that are buying Kyana products. And this is a business that recurs. So as we get more and more machines online, it becomes more and more relevant and [indiscernible] doing a fantastic job. The decision to spin this off into a separate GmbH is for exactly that reason. We saw this has moved from an R&D development project into a real revenue bringer where we can start generating sales, and the business is simply different and has a different agility, a different speed than our core business, and therefore, we need to get into a separate GmbH with its own rules. And so [indiscernible] team can be moved more dynamically. Today, it's only around 20 people. It's not a huge business, but it's not just about the 20 people you have internally. It's all about the partners. So we work with Google. We work with Tesi Toro. We work with Coca-Cola -- you see some of the announcements in the past years. So [indiscernible] does a fantastic job of leveraging partnerships and that's the way this entire industry works. It's not about how many people Koenig & Bauer has. It's about how we get, call it the digital ecosystem, I think, is the new way to talk about it. It's how to get the digital ecosystem management moving. And so it's 20 people fully dedicated to this business, which is an investment. And it's a team, they're powerful, and they're moving, and we're really confident. Again, I don't want to avoid your question, but I also don't want to answer it, what revenue targets will we see in the business. We understand we're going to have to put that number out there sometime, but we're not there yet. .

Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Dr. Andreas Plesske for any using remarks.

Yes. Well, thank you for covering us and being with us. I personally hope to see you on the 4th of June, if you make it. If you don't make it, as usual, we broadcast the first half of the AGM through our investors channel. And otherwise, as I said, it's the last time I participate here in that round. And I must say -- and I can say that at the end because it sounds better at the end of a career than at the beginning. I enjoyed speaking to people who cover us, and I enjoy speaking to investors, and I enjoyed speaking to analysts to explain to you the business. And I'm -- I like this environment a lot because you know what we are doing. There are so many shareholders who are, let's say, a little bit more disciplined. So I think you're the perfect translator as the analysts to understand our business and help us to also be performing in the future of the capital market. So my thanks goes to all of you for being here for covering us. And I wish you all the best in this round of the quarterly results to my colleagues and hope to see you one more time at the AGM. Have a good day.