NV Bekaert SA ($BEKB)

Good morning, and welcome to the Bekaert Q1 2026 Trading Update Call.[Operator Instructions] And as a reminder, this conference is being recorded. It is now my pleasure to turn the floor over to your host, Mr. Dries Van Hamme, Director of Investor Relations. Sir, the floor is yours.

Thank you very much, and welcome, everyone, to our Q1 trading update call. I will first read out the safe harbor statement as usual before handing over. So this presentation may contain forward-looking statements. Such statements reflect current views of management regarding future events and involve known and unknown risks, uncertainties and other factors that may cause actual results to be different from any future results, performance or achievements expressed or implied by such forward-looking statements. Bekaert is providing the information in this presentation as of its date and does not take any obligation to update forward-looking statements contained in it in light of new information, future events or otherwise. Bekaert disclaims any liability for statements made or published by third parties and does not undertake any obligation to correct inaccurate data, information, conclusions or opinions published by these third parties in relation to this or any other publication issued by the company. And then I hand over to Yves Kerstens, CEO.

Thank you, Dries, and also a warm welcome from my side on the trading update. So for quarter 1, we delivered a top line of EUR 917 million. So on a like-for-like basis, stable business, volume growth of 3% mainly in areas like Rubber Reinforcement, Steel Wire Solutions in the transmission, but also in Sustainable Construction with some lower volumes in the BBRG project. We continue -- and of course, and Seppo will give some more comments also on the FX impact and also the impact of the -- on the top line of our Latin American disposal, which we still had consolidated in first quarter 2025. So in that period -- in this period of Q1, we continue to work on the actions to make the company more sustainable and in terms of profitability and resilience. We all know the geopolitical tensions and the trade changes that are happening in the market around us. So we've been continuously navigating that by additional initiatives on optimization of the cost structure and our conversion costs. We've seen that the conflict in the Middle East have so far not impacted our business in the sense that the projects mainly in the construction area continue to be executed. Of course, we see an increase in the cost like transportation cost or energy costs. So we are carefully watching the indirect impact of this conflict in the Middle East on the rest of the world in terms of inflation and cost changes. We remain flexible in our supply chain and trade flows to serve our customers. From a financial point of view, we continue to drive good working capital. CapEx for the year, we estimate around EUR 140 million, and we proposed today during the general assembly here in Zwevegem headquarters, a dividend of EUR 1.95 per share, which is a continuous increase of 3% versus last year and continuing the share buyback of EUR 200 million, finalizing this program by the end of this year. So now I hand over to Seppo for more color by business and on the financials.

Thanks, Yves. And let's start by looking at the sales bridge from first quarter of '25 to first quarter of this year. Like Yves already mentioned, we have stable like-for-like sales after taking out negative 5%, about 5% effect on FX. That is a reflection of weaker Renminbi and U.S. dollar. Both those two started to devalue after first quarter last year and more recently, devaluation of Renminbi -- sorry, Indian rupee versus Euro. Also, we had the disposal of Latin American business of SWS mid last year. And if you look at the comparable figures, that had 3% effect on the top line. Then looking at the volume growth and some business drivers before going to BU. So in Rubber Reinforcement, we have volume growth in Asia and North America. While in Steel Wire Solutions, we have volume growth, continued volume growth in transmission wires in North America, in Energy Utilities business. So good positive trend continues there. And in Sustainable Construction, we saw growth in higher value-added applications in North America. So the positive sentiment over there in North America when it comes to our construction business has continued after a slowdown after first half last year towards end of the year. So I think that's also, I think, important business driver that we can see now. We had a bit unfavorable mix in Rubber Reinforcement as we saw more sales in China, if you look at the relative share of sales globally. And in Steel Wire Solutions and Energy Utilities businesses, we saw some project delays in Europe. And a bit similar trend in BBRG, both in steel and synthetic ropes, we saw some project delays affecting the top line development for the quarter. Then let's look at the separate individual business units, and let's start with the Rubber Reinforcement and Steel Wire Solutions, where we saw volume growth in both business units. Like mentioned, in Rubber Reinforcement, we had strong volume growth in China, and we continue to have full plant utilization levels over there. We also saw volume growth in North America, but volumes were down in Europe. We continue to focus on stronger high recycled content, tire cord and increasing scrap content in tire cords. And that is, of course, a competitive advantage we have and how we can differentiate from many of our competitors. Also a bit of positive news relating to Bridgestone acquisition that was completed after the end of first quarter at the end of April as expected. And we also signed long-term sales agreement. So that has now added 2 new plants, one in China and one in Thailand to our footprint in Asia, strengthening our position there in the Rubber Reinforcement business. We have 550 new employees coming from Bridgestone. EUR 80 million annualized sales and EUR 60 million cash consideration that was paid for the acquisition. And those plants will be now included in our figures starting from second quarter of this year. So nothing included in the first quarter report yet. Then we have a structural change. We moved ph( HEP ) back to Rubber Reinforcement from energy transition. So that increased the sales of Rubber Reinforcement and equally reduced the sales in energy transition. And it's because good manufacturing is similar and takes place in the same entities. So the operational technology synergies when looking at the RR and ph( HEP ). So that's the driver for the change. Then moving to Steel Wire Solutions on the right-hand side of the slide, where we saw volume growth in Europe, but some delays in energy utilities projects impacting the mix. We had lower volumes for flex bright and flat cable armoring replaced by volume growth in round wire cable armoring, which is more mature product. We also saw strong volume growth in energy utilities in North America. There is structural demand trend, large investment in power and data transmission related to data center connections, grid expansions and modernization. So the positive trend there that we have seen already earlier has continued. There is some time lag of input price pass-through, especially U.S. where wire rod prices remain high. We also have seen some price increase of the European market recently after the smart actions by the EU that were announced end of last year. Then let's move to BBRG and Specialties, where we had mixed performance in both BUs. In BBRG, we have some macro uncertainty that has continued to delay customer investment decisions impacting steel ropes demand. And we have some delays -- we have seen some delays in deepwater mooring projects impacting also synthetic ropes. The transport volumes were slightly lower as construction environment is subdued. However, other core applications are doing better and partly offsetting the sales value. In Specialties, Sustainable Construction had lower volumes in commoditized segments, but strong growth in high value-added applications, especially in North America. So mix has clearly improved there. And that's something that we have been also actively working on. Other segments. In Specialties, good to remember that we had high comparable sales in first quarter last year, especially in hydrogen. And as you remember, we did some rightsizing actions in hydrogen business in Belgium last year that is obviously then reflected as well on the sales. And now back to you, Yves, to summarize and come back to our outlook.

Yes. Thanks, Seppo. So as you can see, we continue the journey of making the company more resilient despite the market environment by work on portfolio, cost structure resilience. I want to highlight a couple of things specifically for '26 that are coming our way. The first one is, of course, the steel metal action plan that will come in place by the mid of this year. So with, let's say, import duties for imported steel. And we have to see, as we said, how that develops and impact the market. It should be favorably for the European steel industry production upstream and downstream. We source 90% of our wire rods locally, correct? So from a cost impact, no impact. And secondly, after also consultation and discussion with the European Union and Commission, the steel metal action plan is in the first phase focusing on the steelmaking industry and not on the downstream, where there has been an agreement to review the scope of that within 6 months so that the full, let's say, value chain of the steel industry in Europe is protected. Second change for '26 is CBAM, which came into place beginning of this year. And so there's a carbon border adjustment tax for imported products. And so that we are -- for the products we import, of course, translating to the customer, but also is protecting, of course, incentivizing the local production for our products here in Europe. On the financial, I already mentioned, I don't want to repeat. So if you look at the outlook for 2026, which is unchanged. For the moment, we see no significant impact on the Middle East conflicts for us from a direct point of view. Indirect, we have to see how the inflation and the supply chain evolves in the upcoming months and also how the conflict evolves. On the energy side, we have been proactive and also have some hedging on some of the energy cost increases. We see good growth in areas like sustainable construction. If you remember last year, '25, probably '24 was lower, let's say, tailwind we had in construction, but that has turned around, and we see stronger demand in the U.S. and also continued strong growth in markets like India and Middle East. We, of course, have to balance the competitiveness and uncertainty in more commoditized products like Rubber Reinforcement and some of the Steel Wire Solutions, but we have growth opportunities in the energy and utilities -- and also in energy transition, last year, we rightsized the growth platform of hydrogen. But in 2026, we have a stable platform, good stable cost structure. And we also continue to win qualifications certification with customers, which will increase gradually the volumes of that business upcoming months and years, of course, not with the growth areas above 10%, but some nice growth year-on-year. So we expect top line like-for-like and also EBIT bottom line like-for-like to be the similar levels as 2025. Let me close on a personal note as this earnings call and today's general assembly meeting here at the Zwevegem headquarters marks a transition for me as I conclude my mandate as CEO. It has been a privilege to lead Bekaert and to work alongside all our people and our customers around the world. I also want to express my thanks to the analysts for your constructive challenge and following of the business and also the investors who are putting their confidence in Bekaert and into the management. I wish my successor, Olivier and the entire team every success as they take on the next step for the company. I'm confident they will continue to build on the strong foundation in place and deliver sustainable value for all our stakeholders. So thank you for your trust and your support, and then we are open for questions.

[Operator Instructions] Our first question today is coming from Wim Hoste with KBC Securities.

Yes. And let me maybe also start with a thank you from our side for the engaging interactions in the past couple of years, and we wish you all the best in your future endeavors. Then on the questions -- sorry. Then on the questions, the first one is on Rubber Reinforcement. Can you maybe elaborate a little bit on the competitive situation, especially in China? And I think your strategy in the past few years has been to go for an optimal capacity utilization. Is the rise of Zenith and the arrival of Zenith in the market changing anything to that strategy? Or will it change anything to that strategy? If you can elaborate a little bit on that? And then my second question would be on the whole inflationary discussion, raw materials, transportation costs, energy. Can you maybe elaborate a little bit on how much or what kind of percentage of cost increases you're seeing at the moment? And how swiftly can you pass this on? Have you already succeeded to pass on past inflation? Or is that still an ongoing process? If you can offer a little bit more clarity on that? -- that would also be helpful. Those were my questions.

Perfect. Thanks, Wim. So let me take first on the Rubber Reinforcement. So from our perspective, no change on our strategy. So we keep on loading the plants in China, selecting the right customer profiles and mix in China. So our utilization rate is above 95% in China and also taking, of course, the opportunities in Europe and U.S. And we've seen recently in the U.S., some opportunities for us to increase some of the volumes and the share there. So it's an evolving competitive landscape. Concerning Zenith scaling up, of course, it's not up to us to make comments on our competitors. But basically, that, of course, as mentioned in previous calls, the first impact is more local competition between local players. And we have to see over the long term, how that plays out. But for the moment, our strategy remains the same.

And when it comes to your question on inflationary environment and effects, I think, first of all, if you look at the key raw materials, especially wire rod. So what we can see is that if you look at overall, I would say that prices are rather stable. In U.S., we have seen a bit of reduction on the prices. In Europe, we have seen recent increase of steel and wire rod prices. I think it's an indirect effect of the smart action plan by the EU. And we are working like always on the pass-through mechanism, which has been typically working well also with our customers. On energy, first of all, good to remember that energy is about 7% of our -- if you compare to sales, so it's about 7%. So that's at the share of the total. It's mainly electricity. Of course, volatility is having some concerns and has an effect on the overall the cost. In the shorter term, we are pretty well hedged if you look at our hedging policy. So that, of course, smoothens the effect. But going forward, depending on how the Middle East crisis develops and how the energy market is developing, that can, of course, become a bigger issue. And on the logistics, obviously, increasing logistics costs, especially in Middle East and around Middle East shipments, some effect on the availability of ships and containers. But there also, we have been able to manage quite well on pushing through the increased costs to our customers. I would say that overall, the pass-through mechanism continues to work well. But obviously, as there has been quite significant increases also because of tariffs and other things in the past year or so, it's, of course, increased -- what we see is an increasing pushback from customers, but our sales teams has been very strongly on this and keeping an eye on the ball, so to speak. So I think we continue the strong push and work on that.

I think we have to see how this whole inflation will impact the demand in the industry. So that's, let's say, an uncertainty moving forward. But that's for all industries, not just for ours.

Our next question is coming from Frank Claassen with Degroof Petercam.

I have 2 questions. First of all, on your guidance, what can you -- on the flat revenues, what can you say about seasonality? What do you expect H1 versus H2? Will it be, as usual, a stronger H1 and H2 weaker? Or is there anything to say about seasonality? And then a more general question on competition, the Asian competition. You talk about supply chain issues maybe coming up, cost inflation. Do you already see that, let's say, in the Latin Americas, the U.S. or Americas of this world, there's less competition from Asia because of these issues? Or do you still expect to see this? What can you say on that?

Frank, I'll take your second question and then Seppo can comment on the financials by half or the business by half. I would say if your question is specifically about the impact of the Middle East conflict on some of these global competitive threats, perhaps a little bit of mixed bag. For example, what we see in Middle East is that where Chinese competition has been also pretty severe. For example, there, we see a little bit relief from that competitive pressure and again, a little bit more for local dynamics. The impact on the U.S., I think we don't see specifically on certain trade flows changes, so perhaps a little bit too early to see. So I would say, in summary, except one our left area, no impact for the moment or no change.

And when it comes to seasonality, your question, first half versus second half, like you said, normally, and that's also our expectation that typically first half is stronger than second. As with the second half, we have the holiday season, Christmas, et cetera. What you can say that the wildcard, obviously, is currently what happens in the Middle East crisis or Ukrainian war. So those can, of course, change a lot, as you can imagine, with the macro environment and when it comes to demand development. But leaving that aside, I mean, no reason to sort of expect anything else with the seasonality than normally.

Okay. That's clear. And of course, also from my side, thank you for the past few years and good luck in your future endeavors.

Our next question is coming from Martijn den Drijver with ABN AMRO.

Yves, it's been a tough few years market-wise, but again, all the best with your future endeavors. Let me start off with that. Question-wise, I have 3, and I'll take them one by one. I just want to come back to that RR volume plus in North America because if I look at production volumes in the U.S., they were down mid- to high single digits, passenger cars and light commercial vehicles. You just mentioned that the competition from Asia in the U.S. was stable. So what drove the volume plus then? Because I assume it was market share gains because the trade tariffs were hampering your Asian competitors? That's question one.

Martijn, so you know that, first of all, on top of my head, I don't have the exact ratio, but if you look at tire cord production locally versus import, you know that for the American market, most of them are import. We are one of the few local players locally. And what we've seen recently is for our business that we produce locally, but also on what we import is also some gain of market share at customers specifically. So I think you don't have to link it back to the overall tire demand, but more about how we've been able to develop some of the relationship with some local producers there and get some share from competition. But again, it's the local part is minority versus what we import tire cord.

And just a follow-up on this one. Do you think this is sustainable in the coming quarters?

I think, yes, in the sense of -- because the customers evolution mix is not something that changes quarter-by-quarter in a business like our.

That's great. That's understood. And then on Asia, I was wondering, you mentioned something which I would call prebuying that customers were anticipating some supply chain issues. Is there some way you could help us understand what roughly the effect was in Q1 of that prebuying in Asia? Was that material? Was it -- any color would be helpful.

No, it's not really material, some increases, but not substantial.

Okay. And then on -- you briefly mentioned CBAM in your discussions with the EU. What are your thoughts now currently on the effect of local European wire rod prices once implemented?

So we have -- so first of all, I think in the current geopolitical situation, I think industrial companies like us are welcoming the trade barrier certainly for a period in time because we know that trade barriers are not a solution long term for competitiveness, but for the whole industry, upstream, downstream to get organized energy costs under control in Europe and becoming more competitive. So from that perspective, of course, welcoming for Europe, the import duties. They will be applicable from mid of the year. So basically, and I mentioned in the last call, I expect that -- I hope that the steel wire prices are not increasing in Europe because the objective is that the upstream, our suppliers would be able to produce more, get more share from the downstream business and become so more competitive. So a little bit to be watched, and we have May coming closer to July to see what the prices are doing. We see slight increases, correct? So there is certainly the opportunistic approach of with import duties coming to increase margin and price in Europe. But of course, the steelmakers need to be very careful because if they too much and the downstream projects are not protected, they will not have a sustainable increased volume and profitability. And I think that's a little bit the trade-off and the dynamic that we need to watch the upcoming months until the downstream is protected.

Okay. And then moving on to SWS. Can you help us understand the effect that you mentioned of these power transmission project delays in Europe and the effect on volume? Because you've done well in the U.S. Are you now guiding for a more stable volume development in Q2 given these project delays? Or how should we view that element?

Well, it's -- first of all, it's project business. And that's always a challenge in the project business that when it comes to project delays, but it means the tenders are delayed or the existing projects are delayed. Obviously, they are not disappearing. So it's more the delay in the volume rather than lost business as such. But the key thing here is like also referred to in my comments that, of course, geopolitics has an effect as well there on the business activity and investments going forward, and that might then be driving the volume development as well.

All right. And I'll squeeze in one final one. What -- you mentioned several times that there are initiatives to mitigate inflation and supply chain challenges. Can you give us a few examples of what you do?

[Technical Difficulty] When it comes to wire rod, simplifying the SKU [Technical Difficulty] structure, combining consolidating the volumes to more to fewer number of SKUs, meaning that we are more volume player in those. So we can then shift easier volumes from one supplier to another or from one region to another, and that may also mitigate the effect of those smart as well as increasing our actions when it comes to tendering of our volumes. And then also, I think the pass-through mechanism, that's an important part. I mean our sales teams are actively working on passing through the increased cost also to our customers so that we need to be there very active.

Our next question is coming from Alexander Craeymeersch with Kepler Cheuvreux

Also from our side, thank you, Yves, for the interactions and the color that you have provided on Bekaert. My questions -- I have 3 questions. The first question would be on Rubber Reinforcement. I think the mix has been a bit lower. So I think you also mentioned that there's more volumes in China. So I remember in the past that the China production has been a bit more margin dilutive. So I'm wondering how we should see the margins for the remainder of the year if volumes remain like this for the rest of the year? The second question would be on BBRG. You mentioned weakened steel rope demand due to delays in projects. So are we now in the outlook foreseeing a pickup in the remainder of the year? And also, if volumes would remain where they are at the moment for BBRG, what would the effect be on the EBIT margin? Because I remember OpEx is rather stable in this segment. So it's not giving much room for adjustments, if I remember correctly. And then the third question would be on the outlook. So the flat sales, flat margins. Would -- is that made with the basis that we see an improvement versus Q1 or that we see the same as Q1?

Let me start with the first on RR and then you can take BBRG on the outlook. So on RR, the strong business in China is, of course, linked to the whole, let's say, shifting of the automotive industry. Is it car making, truck making? Is it the tire industry? Correct? Which is increasing the global impact out of China. That means there is a strong pull and strong opportunity in that market. We've been always -- we've been very selective. In the past, we've been also reducing our capacity in China while optimizing in existing plants. So we have 4 plants running at full tilt. It's true that the competition in RR has been severe, but it continued to be severe. And so we're also working on our cost side, correct, to protect margin in a business or a market where there is more price pressure than you have typically in Europe or in the U.S. So it's a combination of good filling of the plant, but also we continue to be disruptive in the way we lead our production plans and drive cost efficiencies. So that's the journey we are on.

Then coming to your question on SWS and Rope business, I think in SWS, what we are continuing to work in is the mix, both geographical and product mix. And that's, of course, the key going forward. It's not only volume always, as you can imagine. Then on the ropes business, it's good to remember that the number of tenders are still in the pipeline and think about the future outlook and where do we then end up with the full year depends very much also on our success on the tenders going forward. So that's, I think, one of the key drivers there. Then it comes to outlook, as you saw that Q1 is in line with last year like-for-like as we are guiding. Other than that, of course, I mean, we expect normal seasonality like I commented earlier. So no change in that expectation, think about the outlook. But as you saw, we flagged and highlighted certain risks around the geopolitics indirect effects of the war in Iran and energy market turbulence, et cetera, which I think it's something we all are facing on the macro economy, and that will, of course, drive the way forward. So far, like we said, we have been mitigating well and direct effects have been very limited, and we have been able to manage the indirect. But of course, if the situation continues, we are not immune. And that is, of course, the risk side of it. But so far, so good.

Okay. So in conclusion, I mean, the margins in Q1 have been -- we cannot say much about the absolute and the relative margin, but the margins have been somewhat stable versus the prior year.

I like I said, so far, so good.

Okay. [Operator Instructions] As we have no further questions on the lines at this time, I would like to turn the call back over to management for any closing remarks.

Good. All right. So thanks for taking the time for the trading update. So more to come in the upcoming months. And again, also thanks for the good collaboration, constructive discussions we had from the analysts and investors really enjoyed it. And so looking forward to meet you somewhere else. Thank you.

Thank you.

Thank you. This does conclude today's conference call. You may disconnect your lines at this time, and have a wonderful day, and we thank you for your participation.