Polytec Holding AG (PYT) Earnings Call Transcript & Summary

Ladies and gentlemen, we warmly welcome you to the earnings call regarding the H1 figures of 2026 of the Polytec Holding AG. I am pleased to welcome Polytec's CFO, Markus Muhlbock; and IR Manager, Paul Rettenbacher, who will guide us through the presentation shortly, after which we will move on to a Q&A session with audio line and chat. With that, I'm handing over to you, Mr. Muhlbock.

Good afternoon, ladies and gentlemen. Thank you for joining us for today's investor and analyst conference call on Polytec's half year results 2026. Let me start with a quick overview of the first half year. Polytec Group is on the right track. We continue to move forward with a clear focus on productivity and profitability. Although group sales are temporarily lower, this is no cause for concern, quite the opposite. We have significantly optimized our product and production portfolio, resulting in an improved profitability in the first half of the year. We also made further progress in strengthening our balance sheet with a higher equity ratio and significantly lower net debt. At the same time, we have intensified our efforts to expand and diversify our nonautomotive business. We are making very good progress in this area and see promising opportunities ahead. Against this backdrop, we confirm our outlook for the current fiscal year. Before I take you through the key figures of the first half year, I would like to briefly outline the strategic positioning of the Polytec Group as this provides important context for understanding our financial performance. Our guiding principle is to apply the right strategic approach to each product area. In automotive, we remain an established Tier 1 development and production partner with a clear focus on electromobility, disciplined investment, and capital preservation. In a largely flat market, we see M&A as our primary option for future growth. In parallel, Polytec is developing smart plastic application as an attractive second growth pillar by leveraging our automotive expertise and transferring it to new markets. The diversified market approach increases our opportunities for success. We enter new markets together with our customers and develop innovative plastic solutions for industrial applications. At the same time, we can act as an industrialization and scaling partner for innovative start-ups, bringing their ideas from concept to industrial scale production. Naturally, one of the questions we frequently receive from our shareholders is, where do we currently stand with the expansion of our non-automotive business? And when can we expect this to translate into higher sales? Let me, therefore, give you an update on where we stand today. The path to market in the nonautomotive sector differs from what we are used to in the automotive industry. Market testing, for example, plays a particularly important role before a product can move towards full commercialization. Our smart plastics applications pipeline includes a number of promising projects at different stages of maturity, progressing from initial concept through to a market launch. With projects ranging from load carriers to applications in construction, we are pursuing a diversified and capital-efficient approach. This includes our own product ideas, co-development projects with customers as well as partnerships. In this way, Polytec can efficiently leverage its existing expertise in materials, product development and industrialization across new markets and applications. We first presented this slide at our Annual General Meeting at the beginning of June. Since then, several of the projects shown here have moved to the right, meaning they have successfully progressed to the next stage of maturity. This demonstrates that our pipeline is moving forward and that we are making tangible progress in building our nonautomotive business. As mentioned, our nonautomotive business is becoming increasingly important to Polytec's overall value profile. Our goal is to achieve a group revenue share of around 30% in the nonautomotive sector in the midterm. For us, midterm means the period of 2 to 3 years. In principle, this is no longer than in the automotive projects, where the industrialization phase from winning the order to start of production takes a comprehensive time. We are focusing on reusable and industrial returnable containers. These products support efficiency, sustainability and the circular economy, ensuring stable demand and helping our customers to fulfill the European Union regulations. A strong example is BOOXit, an intelligent connected logistics solutions that combines physical robustness with digital intelligence. Polytec acts as the industrialization partner and exclusive supplier. This project is a good example of how we leverage our core competencies to develop profitable new applications together with innovative partners, always with a clear focus on industrial scalability and serial production. The first products for market testing will be presented to policymakers, military representatives and other potential customers at our plant in this September. But before we look ahead to September, let me take you back to the first half of the year and our financial performance. Let me start with a positive look at the year-to-date performance of the Polytec share. Based on yesterday's closing price, August 12, our share price has increased by 44.5% since the beginning of the year. In contrast, the STOXX Europe 600 Automobiles and Parts Index declined by 14.9%, while the ATX total return index gained 29.8%. Among the 38 prime market stocks on the Vienna Stock Exchange, Polytec ranked fifth in year-to-date performance. On a personal note, my fellow Management Board member, Martin Resch and I each purchased around 43,000 Polytec shares at an average price of EUR 4.58 at the end of June and beginning of July. This clearly reflects our confidence in Polytec's future development. Polytec is currently covered by 3 research houses with an average price target of EUR 6.73. Most recently, Montega initiated a coverage with a buy recommendation and a price target of EUR 10. Our current market capitalization is around EUR 107 million, approximately half of our equity. Over the coming months, we will further intensify our Investor Relations activities through conferences and roadshows. We look forward to meeting many of you in person and presenting Polytec's refined equity story to a broader investor audience. To remind you briefly, in fiscal year 2025, Polytec Group clearly achieved its operational turnaround, improving almost every financial KPI. We met and even exceeded our outlook and returned to positive earnings after tax. Based on this strong performance, the Management Board proposed a dividend of EUR 0.20 per share, which was unanimously approved by the Annual General Meeting. The total dividend of EUR 4.4 million was paid on 11th June 2026. Following the positive earnings development reported for the first quarter, our H1 results confirm that we remain on the right track. Let's take a closer look at the financial figures. Again, we improved all relevant earning KPIs compared with the first 6 months of the previous year. Consolidated sales in H1 amounted to EUR 287.4 million, down 19.6% or around EUR 70 million year-on-year. However, this decline was not unexpected. It mainly reflects the planned optimization of our product and production portfolio over the past few quarters. As already explained in our annual and Q1 reports, sales in 2026 are lower due to the divestment of our U.K. operations at the end of 2025 and the closure of our Weierbach plant in Germany at the end of April 2026. As a CFO, I can accept the lower sales if those sales are more profitable, particularly when the decline is temporary. Our focus is clearly on profitable growth and better margin quality. In the medium term, we expect new projects, particularly in the nonautomotive business to increasingly contribute to sales and support renewed growth and improved profitability. And our earnings figures already demonstrate that we are moving in the right direction. EBITDA increased by 7% to EUR 22.6 million, while the EBITDA margin improved significantly from 5.9% to 7.9%. EBIT increased by 47% to EUR 8.3 million, the EBIT margin rising from 1.6% to 2.9%. At the end of June, Polytec Group employed 2,804 FTEs, a reduction of 802 employees or 22%. This mainly reflects the divestment of our U.K. operations, including 348 employees as well as the closure of the Weierbach plant and related workforce reduction in Germany. The improvement is even more visible at the bottom of the P&L. Earnings before tax more than tripled from EUR 1.5 million to EUR 5.6 million. Earnings after tax increased from EUR 1.4 million to EUR 4.7 million. This resulted in earnings per share of EUR 0.21 compared to EUR 0.06 in the first half year of the previous year. So the key message is clear. We are operating on a leaner sales base, but with significantly improved profitability. Our balance sheet remains strong with the equity ratio now above the 50% mark. As of 30 June 2026, total assets decreased by EUR 33.8 million to EUR 442.2 million compared with year-end 2025. Despite the dividend payment of around EUR 4.4 million, the equity ratio increased by 3.9 percentage points to 50.1%. Over the past 3 years, one of our key priorities has been to reduce net debt and strengthen the balance sheet. As of June 2026, net debt stood at EUR 29.6 million, down 43% or 22.5 million compared with June 2023. increased moderately because of the higher working capital. The notional debt repayment period stood at 0.56 years, while the gearing ratio was 0.3. Both indicators remain at a very comfortable level and provide us with financial flexibility for future investments. Average capital employed decreased by almost 7% to EUR 249 million. Combined with the higher EBIT, this resulted in a significant improved ROCE from 2.2% to 9%. And finally, as of end of June 2026, Polytec Group had more than EUR 34 million in cash and cash equivalents. So the key message here is a stronger balance sheet, significantly lower net debt year-on-year and substantially improved capital efficiency. Let's have a quick look on the turnover split. Sales in the commercial vehicle market area accounting for 18% of the group sales were slightly above the previous year's level at EUR 51.4 million. Sales in Smart Plastics application amounted to EUR 20.7 million in the first half year 2026. This market area is subject to fluctuating call-offs from a major customer. However, this volatility is part of the nature of the business and does not change our positive view of the customer relationship. We have been a reliable partner for many years and look forward to continuing this cooperation on new projects. Having reviewed the first half of 2026, let's now turn our attention to the future. The outlook for 2026 remains unchanged, and we can summarize in the following sentence: stable earnings situation despite lower sales revenues. From today's perspective, the management of Polytec Holding AG expects planned consolidated sales revenues in the range of EUR 560 million to EUR 590 million for the 2026 financial year. Polytec Group's lower total sales compared to the previous year due to the divestment of the operational business in the U.K. as of December 2025 and the closure of the Weierbach plant as of end of April 2026. With regard to the margin development, the company expects a stable or slightly improved earnings situation despite the lower sales and is aiming for an EBIT margin of around 3% for the 2026 financial year. And the company intends to pay an annual dividend again in the future. Polytec stands for a solid balance sheet, strong cash generation and a reliable dividend policy. Our strong market position, broad technology portfolio and clear strategic direction support our financial performance even in challenging market conditions. Demand for high-quality plastic solutions remains strong across industries. We are an established Tier 1 partner to leading European OEMs, while smart plastics application is development into an attractive second pillar below the automotive business -- beyond the automotive business, sorry. In short, Polytec combines strategic focus, operational excellence and sustainable value creation, providing a strong foundation for long-term growth. Finally, we would like to thank our shareholders for their continued trust and confidence in Polytec Holding AG. This concludes our presentation of the results for the first half year 2026. Thank you very much for your attention.