PORR AG (ABS2.DE) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and a warm welcome to today's earnings call of the PORR AG, following the publication of the first half year figures of 2025. I am delighted to welcome CEO, Karl-Heinz Strauss; and CFO, Klemens Eiter, who will guide us through the presentation and the results. Kindly note that you are not able to speak during the presentation. After it, we will move on to our Q&A session in which you will have the possibility to place your questions to the management via online and chat box. And having said this, I hand over to PORR's Head of Investor Relations, Lisa Galuska.

Hello, and also a warm welcome here from Vienna. Thank you for joining us today on our conference call. As always, please find all the relevant materials like the reports, the press release and the presentations on our website, porr-group.com. And without further ado, I would like to hand over the call to Mr. Karl-Heinz Strauss.

Thank you, Lisa. Good afternoon, everyone, and thank you for being part of our conference call on PORR AG's half year results 2025. Let us start by giving a brief summary of today's topics on Slide #3. We begin with a quick overview of the current market environment. Construction is trending up with strong momentum in Poland and across our CEE countries. We see all of them operating at a very high level, and our incoming orders are a proof of that. In the first half of 2025, our order intake accelerated even further with sustained growth in the CEE infrastructure sector as well as slightly positive signs coming from Germany. We are currently at the new peak with our order book standing at EUR 9.4 billion, reflecting a 10% increase compared to the previous year. After discussing the order situation, let us take a brief glance on our P&L. We delivered as promised. With a consistently high level of output, we achieved a further improvement in our EBIT margin. While our revenue broadly remained the same compared to last year, earnings increased again by 15.5%, leading to an EBIT margin of 1.6%. Moving on, our liquidity position remains solid. The slight increase in net debt during the first half of the year is mainly seasonal and in line with expectations. Overall, we are financially well positioned and have sufficient flexibility to pursue our strategic goals. Regarding equity, we do not only see our equity ratio standing at 20.0%, which keeps us firmly on track, what is more in tune is, this year, we broadened our shareholder base even more by selling all of our treasury shares to international investors. Wrapping up, we confirm our outlook for the full year a moderate growth in output on revenue, EBIT margin 2.8% to 3.0%. This guidance remains unchanged and reflects our confidence in the current direction. Let us now begin by taking a closer look at the current market situation on Slide #4. Civil engineering continues to be the main growth driver of the construction industry. Euroconstruct forecasts real growth of 2.5% for this year. Strong momentum is coming from various infrastructure programs. Across Europe, government and the EU facilities are pushing forward. The CEE countries, in particular, show a positive moment. This way, Poland strives to modernize and expand its railway system, and continuous work on its central airport in Romania is on the verge of doubling its highway network. In the Central European countries like Austria, steady funding for railways and roads is ensured by the national operators, while Germany has the ambitious plan of investing EUR 500 billion over 12 years for climate, infrastructure and defense. But that seems quite a while away and will only come into effect in late 2026 at the earliest. While we already see signs of recovery in residential construction, the stronger momentum is not expected to unfold in the next few weeks. Instead, we think that it might still take up to a few quarters until we see impacts further down our P&L. In other building construction, growth remains solid, particularly in specialties such as data centers and health care facilities. A good example is our recently secured project for the expansion of a hospital in Warsaw. Coming to our next slide, we have a look at our order backlog on Page #5. I'm proud to say that we have reached a new all-time high, thereby reflecting an increase of 10% year-on-year. The main driver was transport infrastructure across all our home markets, with particularly strong contribution from Poland and the CEE countries. Both segments are supported by the tunneling division of our Infrastructure International segment. Compared to year-end 2024, the backlog increased by an additional EUR 878 million. Austria also recorded a strong increase, adding further stability to the overall portfolio. Last, but not least, I want to explain the reclassification of our design build contractor unit as well as of our divisions of major projects in Germany and normal building construction in Switzerland. The first 2 have been reclassified from the Austria and Switzerland segment to the German segment as they are mostly working on German projects. The latter one is not managed directly by the Executive Board and therefore, reclassified to the Holding segment. This improves our geographic segmentation and cleans up our segment reporting. Now turning to Slide #6. I would like to talk about the increasing order intake. After a drawback in the comparable period of last, we see order intakes coming back as strong as ever. As some of you may already have observed by following our latest press releases, PORR won several new major orders in infrastructure. Therefore, we see the strongest share of order intakes coming from traffic route construction, while tunneling also reported strong growth of 14%. In nonresidential building construction, health care construction remains an important driver alongside follow-up orders from long-standing clients in Germany, while we secured the first larger project in residential construction in Austria and Germany again. To give you a brief overview of our latest orders, please follow me on Slide #7. Most notably, our biggest order in the reported period came in Romania. The renovation and modernization of the railway line between Craiova, Drobeta Turnu Severin and Caransebes, all is engaged there with the full range of its services in railway construction, enhancing speed, safety and capacity. The same is true for the CPK tunnel near Lodz. This project is already part of the central Polish airport, which not only raises the demand for airport infrastructure, but also for the surrounding facilities like roads and railways, like this project, for example. With the second S-Bahn Stammstrecke, the core line near Munich, we saw further another major order intake in railway construction. As I said before, we see minor signs of improvement in residential building construction like this mixed-use apartment and hotel building in the Stralauer Allee in Germany. However, in my opinion, we still have to be cautious and let ourselves believe that this is already the start of a major turnaround in German building construction. Let us move on to Slide #8 and start discussing our performance with the production output. With an increase of 1.8%, we have reached a new top level in production output. Growth was mainly driven by large-scale building construction and tunneling. However, I do not want to leave out the temporary drawbacks in the Polish and CEE segments. These have been a result of various project delays and major projects where construction work is just starting or finished. This way, they cannot contribute the same share of output as up and running construction sites. Nonetheless, these are clearly temporary topics as we expect Polish construction output to recover very, very quickly. Our focus remains on the 7 home markets, with Austria as the strongest contributor followed by Germany and Poland. Let us move on to our performance on Slide #9. I'm once again proud to present the clear improvement in earnings. The increase in production output, together with the higher earnings from companies, accounted for under the equity method, and then the absolute savings in purchase services of EUR 11.9 million led to an improved performance. Nonetheless, we also have to talk about higher personnel and material costs. The first are a result of inflation adjustments in salaries due to collective bargaining agreements. The latter reside from usual fluctuations together with more work being done by own personnel. PORR is a construction company. We build as much as possible by ourselves, a clear motto. That said, we achieved a rise in EBIT, in EBIT margin, of 0.2 basis points. To mind, the rounding difference is 1.6%. Total bottom line, meaning earnings per share, came in at EUR 0.59 per share (sic) [ EUR 0.53 per share ], a clear uplift of 17.8%. On a segment basis, we saw clear operational improvements in Austria, Switzerland, Poland and Infrastructure International. The CEE segment is burdened by the lower output contribution, resulting in a lower coverage of fixed costs, while the German segment is still experiencing a difficult market environment. Turning to Page #10, please find some comments on our cash situation. Cash flow from operations was seasonally burdened by the kickoff of the construction season, to begin with, the cash flow from working capital, which showed the usual higher funds being tied up like increase in trade receivables and inventories. In addition to that, compared to last year, less financing came in via trade payables, which caused a reduction of EUR 21.8 million. Coming to the cash flow from investing activities, we see, however, a clear upward movement. We reduced our investment so that also our CapEx ratio came down to 3.9%. For the full year 2025, we continue to expect the CapEx ratio to be around 4%. Last, but not least, the cash flow from financing activities showed the redemption of hybrid capital as well as the purchase and sale of our treasury shares, together with the payment of dividends. In total, even though free cash flow has seen impacts from the higher cash demand in working capital, this could be more than compensated with the lower investing cash flow. The bottom line is an improvement of EUR 14.8 million in free cash flow. On the other side of this slide, you see similar effects on our net debt. This, too, was impacted by one-off effects such as the redemption of hybrid capital, the share buyback and sale programs as well as one minor acquisition. Taking these effects into account, we achieved an operational improvement of 16%. At this point, I must remind you that the major part of our net debt positions continues to the IFRS 16 long-term office rentals and could, therefore, well be deducted from the overall position. On Slide #11, let us have a look at our equity. First things first, at the beginning of the summer, we successfully sold all of our treasury shares at a price of EUR 26.5, generating gross proceeds of EUR 45.1 million. Let me tell you that the order back oversubscribed multiple times, and we managed to place our shares with many new investors also from the U.S. and U.K. After a very pleasing share price performance in the last few months, this transaction, together with the sale of some of my very own syndicated shares, will improve PORR's attractiveness on the capital markets even further and increases the chances of the share being included in the Austrian ATX. Moving on to the other parts of equity, we have to discuss our hybrid capital where we already redeemed EUR 46.9 million (sic) [ EUR 46.5 million ] in February this year. Despite this, we managed to increase our equity position in absolute terms by 5.4% to EUR 855 million, while pushing the hybrid share down to 18%. PORR now stands at a comfortable equity ratio of 20%, an improvement of 0.6 percentage points compared to the half year figure of last year. Coming now to the end of today's presentation, please follow me to Slide #12, the current outlook. You see there nothing has changed since May this year. We are still confident to achieve moderate growth in output and earnings in 2025. With our strong and still growing order book, we see ourselves in a most suitable position for the upcoming months and years. However, please bear in mind that the recent increase in the order backlog will not come into effect right away. The impact might only be seen from 2026 onwards. Regarding this year's earnings, we expect an EBIT margin in relation to sales of 2.8% to 0.3% (sic) [ 2.8% to 3.0% ] as per our utmost goal is to stick to our promises and deliver on our targets. This will also be the case for 2025. Last, but not least, our long-term goal, an EBIT margin of 3.5% to 4% in 2030. There is still a long way to go there. Right now, we are secure of the paths we have taken, focusing on our home markets and providing the whole construction value chain from one single source. And with that, I would like to thank you for your attention so far and open the call for your questions.

[Operator Instructions] And we already have 4 hands up, Mr. Stefan Scharff, the stage is yours.

Congrats for the overall good business performance of the first half of the year. My first question is about your EBIT margin. It was up a little bit to 1.6%. With the good business performance and the high demand and the all-time high in the order backlog, some people and some investors might have expected an EBIT margin for the first half year coming closer to 2%, perhaps 1.8% or something. Have there been some special issues you want to mention that prohibited a better margin picture? That would be my first question.

Well, thank you very much, Stefan, for your question. As you know, we started off a little bit with delays and slower in output in the first quarter. And we recovered, I think, pretty well in the second quarter. Altogether, still the performance this year is not that high. And in total, we had an increase of output of 2% in revenue, and we managed to increase our EBIT margin by 20 basis points. Actually, our expectation and guidance for the total year was from 2.6% up to 2.8% to 3%, so an increase between 20 to 40 basis points. And actually, we think we're totally on track with that. The high order intake and order backlog will give the possibility to increase output and earnings, I think, especially from '26 onwards as we see these orders coming in, by the way, as we expected, and we highlighted in our discussions with investors in Poland, especially also in Romania. These projects are now kicking off. And I think we will see improvement for that especially in '26 onwards.

Okay. Another question is about the topic of data centers. You stated in your half year report that there is a high demand for data centers, and there will be a high demand for data centers in the next years. What does it mean for the future, getting along at the learning curve and become a specialist for building such data centers? That could be a very good support for good margins in future. And perhaps you can say here a bit more.

Yes, Stefan, you're absolutely right. PORR is not becoming a specialist for building data centers. We are now a specialist. We have now a track record of about more than 8 data centers. We have finished in Berlin, in Warsaw, now under construction in Frankfurt, now in Upper Austria. We have finished in Lower Austria. So there is not that many companies that they have 8 data centers now with a reference for that. So we are a specialist one. But we have to be very careful with data centers. One year ago, there was all the forecasts were very high up for data centers because the need is still there. But then come a little damp on the forecast from Mr. Trump that all his tech companies, he said, okay, stay first in the U.S. and then went over to one. Now they learned only to be in the U.S. is not enough. So they have to be the network all over one. So they are coming back, but not, I would say, with the many numbers of data centers they have said 2 years ago. So they will be coming up for sure. They always become bigger and bigger, EUR 500 million up to EUR 1 billion. And new techniques are now used with normal cooling. So they are cooling now with liquidity and stuff like that, so making them a little bit smaller and more efficient in that way. PORR is in the first line of data centers. We still keep on fighting for our position there. Our Polish team is leading up these data centers, and they bring all the experience and all the knowledge in our local markets like we did it in Germany, like we do it now in Austria. Even Czech Republic and Romania is now the next one besides Warsaw and Berlin again on our targets.

Okay. My next question is about the revenues in Germany. They almost doubled from EUR 450 million to more than EUR 800 million, but EBIT was just up EUR 1.5 million to EUR 4 million. I see that it was a lot -- belongs to the reclassification of your segments. But is this the only effect? Or how is the margin situation in Germany? Is the picture here still challenging? And did you already receive some signs for a better picture to come in the second half of the year or, let's say, for '26?

Thank you, Stefan. Well, as you're saying, a big part of the increase in revenue is due to the reclassification. By the way, why did we do the reclassification? Actually, it's business units that are managed by Austrian, but the business is done in Germany, like industrial construction for big industrial clients there. So I think it's giving a clearer picture of where we are acting. In general, these parts are performing pretty well and they are developing. But in general, I think as you know, from the general development, business and macroeconomic development in Germany, we see still a tough situation. There have been big announcements about the new infrastructure programs, but yet they didn't start. So actually, from the actual point of view, we're still a little bit suffering from the general situation, waiting for what has been announced to get into our books in place.

I know our country is a bit sluggish. That's true. We also wait here for a recovery, let's say, next year. And another question is about Poland. You mentioned in your half year report that there have been delays in building construction and also infrastructure construction. Can you say a bit more here about the projects? And is this solved now and we will be back on track for the second half of the year?

Yes, I think that's a good message. We're on track, I think, and we had a decrease of output in general to half year of about EUR 50 million. But for the total year, we expect the turnaround, and we expect actually also an increase of output of the same amount at least. So performance is taking up there. And I hope you also managed that earnings-wise and margin-wise, we are developing pretty well in that market, also after we had a strong order intake already in Poland. But right after closing our books for the first half year, we won 2 projects in railway worth something like EUR 430 million, and railways are usually contracts with good margins. So in general, I see a very good development in Poland. And for this year, we are already in the turnaround and future expectation will be even better.

And we will move on to the person with the phone number ending 8952.

It's Markus here from ODDO BHF. I would have a question related to Germany. And as a matter of fact, given that the federal budget has not been resolved by now, it seems that the municipalities are just allowed to spend 40% to 45% of their annual budget. So I was wondering to which extent that is already felt in terms of tender activity? And what would be the impact then on the second half? And I mean, I guess it's fair to assume that there will be a catch-up effect then around year. Is that something you would confirm?

Well, in general, we are starting from a low base in Germany. And therefore, actually, we're waiting for an increase that did not happen yet. As you said, we were all a little bit disappointed about the announcements not to increase the budgets here for infrastructure spending and start the tenders. As you see in our development, especially earnings-wise, as Stefan was also questioning, we are a little bit suffering from that, and that's also a reason for the low result in Germany. I think for the total year, we already reflected that in our outlook, but we hope that situation will improve further on.

Okay. On the order intake, I mean, Q2 was apparently benefiting from the uplift from these 2 large contracts that you've mentioned. There's apparently one that already booked for Q3. I mean, in general, I mean, if I look at 2023, you also had like EUR 2.5 billion in the second quarter with then quite a sequential moderation of momentum. Maybe can you give us some comfort that this will not be the case in the current year. Is it still like this Eastern European momentum that prevails in the second half? Or are there other factors in terms of tender activity that we should bear in mind?

We also think that will go on in the same way. We see now that especially a lot of projects are coming for tender in Poland, especially in the railway construction, but also for industrial-related projects like that or infrastructure in Romania. We have a very good pipeline there, and we are expecting some more of these big projects within this year. But we are very careful still in our acquiring line with projects. We look very carefully. I think within the next 9 to 12 months, so many projects will come on. And even in '27, Germany will come with big projects. Maybe some projects are coming earlier, but we are not very positive on that one. But there will come, for sure, projects like that. So we see a strong incoming for our backlog, but we look very carefully for the right project. We only do projects if we have the people. We do the projects and looking for projects which have a high broad value around so that we can focus out on our strengths against our competitors that everything is coming out of one hand. So we can also mix teams now countries by countries, not only in the countries, but also over the countries so that Polish people will come to Germany, Austria will do a lot of German road construction in Bavaria. So this is a good preparation. We are very careful. But at the midterm and long term, we are very positive on that.

Markus, as you've been saying, in '23, I think we had some order intake in tunneling. And actually, our resources were sold out at that moment then, and that's why there was no extension further on. But I think that's the difference now. We already announced additional EUR 430 million in railway in Poland, where we still have capacities. And we're waiting for more also in Romania, you see that we had a decrease in output there. So we do have the reserves. And I think for the total year, in general, for the future, we are optimistic in developing our order book.

Okay. Sounds comforting. I would then like to turn to the cost base and asking particularly about the development of subcontractor prices. I mean, given that there is so much spending on infrastructure, I mean, I'm hearing it's quite intense to get additional capacities. And of course, prices are on the rise, which contrasts a bit the picture that is seen in building construction where apparently the demand is not that strong. Is that a picture that you can confirm quite some pressure in terms of infrastructure subcontractors and cost deflation for building construction?

I think it's a little bit difficult to analyze, in general, our P&L because actually, we're monitoring here project-wise, and it's always depending on -- if you do, for example, more in infrastructure and civil engineering, our own share is higher. So you will see that personnel expenses increased a little bit more, but our share of own work is higher in infrastructure. That's also, I think, a reason in absolute figures that contractors are going down. So in general, I would say it's hard to analyze this just by having a look at the P&L. You have to go more to the project level. And our picture there is that we develop in line with our expectations and our margin improvement is according to our budgets and forecast.

And we will go on to a question in our chat box. A question on your margin development in Germany. Year-over-year, your margin declined in the first half year 2025 by 10 basis points to 0.5% despite moving the accretive German industrial construction segment from Austria and Switzerland to Germany. You cited weak market conditions there. Could you perhaps just give us some color on that and your outlook for the Germany margin going forward? I take the questions question-by-question.

Well, I think I tried to explain some of that before. We're suffering from the general development and from the low output level. But according to the announcement, we expect that to take on. We are not going to reduce our capacities there. So we think that we will need them in the future. And as long as the increase is only announced but not coming to our books and to our output, we will suffer a little bit from that. And I think our margin will improve as this will take on.

And do you expect the Germany margin to become accretive to group margins in the coming years? Or will growth in Germany continue to lead to a negative mix effect at group level?

Well, in general, I have to say we have big parts of business in Germany performing already at the group level, but others are suffering from the actual situation. And according to the outlook and packages planned there, we think we have the capacity also to improve the margin to the general level that we do see and perform in the other markets.

And we will move on to Mr. Speck.

Congrats from my side on your very good figures, especially the order intake. I have 2 questions on the Polish segment. First of all, after Q1, you mentioned that you won several tenders totaling EUR 800 million that should become order intake in the upcoming quarters. So to me, it looks like roughly half of it was now coming in, in Q2. Is that correct?

Well, as I said before, we have already a press release after the first half year of 2 additional railway orders of EUR 430 million, and that sums up to what you've been questioning, I think. And we're expecting even more still after this EUR 430 million, still based on the tenders that we won, we still expect something like EUR 400 million to EUR 500 million new orders in Poland. So Poland is really hot on the order side.

Great. And my second question, also on Poland. Those project delays you mentioned, could you give us some more information about what caused those delays? Was it bad weather conditions like you mentioned after Q1? Or was there something else coming up, maybe like supply chain issues or lack of workers or something like that?

No supply chain issues, weather conditions and missing permits from the customer side. And as I said before, we are now in a turnaround. And for the total year, we expect an increase in performance. So in total, we are pretty sure we see a comfortable growth already in '25 in Poland.

And also in the CEE segment?

In CEE, we are now in the phase of starting the new projects. I think we also highlighted sometimes that we're doing design and build there in infrastructure, which means before going into the build phase, you need to do the design and there's much lower output in this phase. And the phase is lasting for something like half a year in that kind of contract. So in Romania, we will not be able to recover totally this year. But in general, we had an output level of around EUR 430 million last year. We're shrinking this year. But the pipeline there, order book is now at EUR 800 million. And looking forward, we still see infrastructure projects on the horizon where we are already best listed in the tenders. So there's a good chance that we will have an order book of more than EUR 1 billion, which will be output-wise compared to last year, more than 2 years, 2 or 3 years. So it will take a little bit more in time, but we are really on a good way there.

And we will move on to [ Lukas Schpan ].

I would like to follow on, on your presentation when you mentioned that we should not expect that much of the order backlog in this year. So I would be interested how much of the order book you have right now or end of June is already for 2026.

Yes. I mean that's in line with our guidance for the output for the year that we expect a moderate growth. We have now about 2%, and we still expect not pretty much more for the total year. This means the projects that we won now will mainly start off in '26. Does that answer your question?

So you would not like to share a concrete number, which is already revenue planned for '26.

Well, I think the clear guidance for the output this year is that we see a moderate growth. We had about 2% in first half year, and we don't expect that to exceed pretty much for the total year. But the order book is well designed for better growth or higher growth in '26 onwards.

Okay. That helps. And then on the segment or regional perspective, we now talked a lot about Germany, Poland, Eastern Europe. But if we look on the numbers for Austria and Switzerland, there's also a slight double-digit decline. So how do you look on this region or segment, which is still by far the biggest segment regarding half year 2 and also then into 2026?

Well, I think regarding output-wise, it's all according to the reclassification. So in general, the output level in Austria was about the same than last year. If you look at our margin development and our earnings, they are very positive, and we're keeping at an EBIT margin here of 3.7%. So we are really happy about that. And our backbone is still delivering as promised, and we are totally happy and on a good path in this segment.

Yes. Okay. And then last question, more related to Germany. There was some media around this, the Autobahn GmbH, regarding the finance of this company. How do you look on this currently?

Look, the Autobahn GmbH, within the next year, so many jobs and orders they have to provide and tender and other ones. So nowadays, they provide a lot, but with 1st of July, because there was no new budget on the German government, they had to stop the tender and tender new project. So they stopped it for 1 month. Then came help from the government. EUR 450 million plus EUR 700 million was extraordinarily provided to the Autobahn GmbH. But there was really 1 month no tender coming from the Autobahn GmbH. We have not been affected by them because we had our orders in that time before, and all existing orders were not involved in that one. So I think that finally, when the German budget will be finished for the next 2 years there, then they really will come up, but getting all the [ budgets ], what they need to get all the tenders, it will come up by the late '26 and '27, '28. And for sure there, Germany will be the biggest construction site of Europe, starting in 2027, for sure. And this is our big chance because now we are fully booked up with Poland, Czech Republic, Romania, existing Austria and Germany. And when we write these markets and these markets will, in years, become a little weaker like that. So Germany will ramp up, and we have all the capacities, and we are well prepared to get a big portion of that cake.

[Operator Instructions] And we have a few more hands up, [ Gregor Koppensteiner ].

Given that 2 major infrastructure projects are coming from Eastern Europe, the question arises here that when the focus is now on Germany, should the focus be placed on infrastructure or whether to step back a little bit and focus on building construction here? And my second question in this regard is, where could be a potential bottleneck in Germany? Is it more the slow bureaucracy or an increased competition as the more tenders we expected also are here to attract more applicants?

I would like to start answering with the second question because, as you know, the infrastructure business in Germany is under really pressure because they need to do so much. So the demand is huge. But getting all the projects because of, I would like to say, old tender methods, like they don't do a lot of design and build contracts like we do in Poland, in Czech Republic and Romania, Germany is going with the argument to save, to take care of the Mittelstand, they go tender by tender. So normally, you make one tender, one highway, all including bridges, tunneling, noise protection and so on. In Germany, you tender every bridge like we see it now at the [ Albach state ]. So this is a big mistake. And I think, to get along with all the demands they have, they will change it. But for sure, Germany is preparing that. So it will need 1.5, 2 years. As I said, in 2027, it will go up and then you will see that the German machine will run. We are prepared for that. We are now phasing up with capacities with new companies like we mentioned that we bought Knape, a railway construction company, with all the licenses we will need. We jump on now with Austrians, Polish ones. So we are very much prepared. And as I mentioned earlier, now we cover and concentrate on Poland, Czech on Romania. We do not get out of our view with Germany. We are very much in energy transformation. We go on everything what's going on there in industrial construction, LNG terminals and all the stuff what you need. But I think the main focus on Germany will come up in '27.

And the first question was about the order intake, the 2 major infrastructure projects in Eastern Europe. And in Germany, is your focus then also there on infrastructure or to step back and also focus on building construction here?

We have a clear overview on that one. We look always very carefully to the whole market. We see infrastructure, what we go very careful with our capacities. So we do not go for tender when we don't have the right people, when we don't have the right possibilities, what we can do. So we look for sure on infrastructure projects like that. You see all the bridge projects, Hanover and stuff like that. We are very much in that. But we also look now coming up, instead what you read in the newspapers, we can see that a lot of industrial clients coming up with new projects. And we cover that. And there, we have unique technologies with us so that we can do EPC contracts. We can do all the design for special one in biotech, in life science, in semiconductor. So we concentrate also on that. So this is what makes out, the whole range of construction is what we focus on that. Maybe it seems to be more infrastructure, but we look carefully for all, including all coming up slowly hotel projects or residential. As we mentioned, we will come up with affordable housing in the second half of this year.

And we will move on to Mr. Philipp Kaiser.

Can you hear me?

Yes.

Perfect. Just two quick questions and one clarification question on Page 4. You mentioned the German fund will contribute approximately EUR 40 million to start in 2026. Is it already in P&L impact or just an order intake?

I'm very sorry, Philipp, could you please ask the question again. We did not really understand you. I'm very sorry.

No worries, I will try. On Page 4, you stated that the German fund starts to contribute in 2026 at earliest. Is that already a positive P&L impact or just then visible in order intake?

Actually, as we see it developing now, the possibility that we already see it on the P&L is reducing as the funds are not there and the tenders are not there. So I think our general statement was always that we expect P&L impact by '27 ongoing. And I think development is turning in that direction.

Okay. Perfect. And the last one is on the EBIT margin. In the first half, it seems, and you already stated it in the news release, it's predominantly driven by lower depreciation and amortization. First of all, is this current level now the new normal then we could use as a proxy? Or is it a seasonal effect?

Well, actually, we had something like a one-off effect in the previous year, in the first half in '24. For High Speed Two in U.K., we are doing our track system and precast. And actually, the usual plans and contract with the customer was that we also deliver a precast factory here. This has been changed last year in the first 6 months by contract with the customer. And that meant that what we already invested before for that precast factory had to be written down kind of depreciation or impairment in the amount of EUR 8 million. This was not a negative effect on the result in total because it was refunded from the client and therefore, also included in revenue. This means that you had an impact on revenue of EUR 8 million plus and minus in depreciation of EUR 8 million. And on the level of EBIT, there is no impact from that at all. But if you look at EBITDA and depreciation, you see that onetime effect of EUR 8 million. So if you look at our EBITDA development and margin and at the depreciation, you should keep that in mind. You also see that because in the second quarter, depreciation decreased by about EUR 5 million. And in general, our strategy is to invest really into being well equipped, and we're doing well investments there above the book values. And in general, depreciation is growing. So you also see that supported by the figures here. So it's just, let me say, some special contract and accounting that is necessary under IFRS 16 that is showing some one-off effect without some commercial impact really.

Okay. And a follow-up on that. So for the second half of this year, can we expect some kind of clean margin potential? As you already mentioned during the presentation, material costs stabilized on a high level, personnel costs lift up by inflation. Any chance we see here cost efficiency impact and kind of margin potential by the end of this year?

Well, as I said at the beginning, on an EBIT level, we have an improvement of 0.20%, which is in line with our guidance of an increase of 0.20% to 40%, and we are pretty comfortable to deliver that. So I think we are on track on that development.

And we will move on to our last person for today's Q&A session, Markus, you should be able to speak now.

Yes, a follow-up, please, on this residential market. I mean firstly, can you maybe shed some light on the momentum that is building up in Austria. We've been talking now about the trough being behind us for, I think, now 2 or 3 quarters. So I'd be interested to hear kind of how strong the demand increases actually and if it's already resulting in firm tenders or if it's just more of a kind of an intangible feeling. And then related to this, with your residential housing solution with prices below EUR 2,000, one of your competitors has launched this now as well, maybe you can shed some light on kind of the differences that you can spot and the competitive environment on this in general, if there are more players or if you expect more players to come up with this kind of solutions.

Yes. I think that the demand for affordable housing is still increasing very, very much. What we see now is that there is no movement in single and second households. There is no movement that there are banks are giving credits to clients. We don't see it. We do not have anything, for one, anymore, but I think all the banks are on a break for real estate contracts and real estate financing in that. So I think that we have lost 50% of the market makers as development companies. I think within the next 6 to 9 months, we lose another 50%. So at the end of the day, 25% of all the market players will have gone around this one. So we see also now that all the projects which were prepared for '21 and '22 are now under construction, which gives now slight improvement to all the numbers in Austria, that now there's more and more construction in real estate. That's true. But if you go on mid-market and affordable housing, you will not find any new projects there. The need is very strong, especially when you see now in Germany, when you look at the market, normally, they need 450,000 condominiums per year. Now they have 150,000 constructed. So now I think there are more than 1 million condominiums are needed in Germany. In Austria, we have only 40% or 50% of the total needed numbers of condominiums we need there. So that is slightly improved, very expensive and well-situated apartments and condominiums are sold. But I think there is a market overhang now with too expensive apartments and whether we see who will move first, the buyer or the seller in this market, which is coming now. If you see the affordable housing method, what PORR has described and what we see now a lot in our markets, I mean, the whole construction market is looking for a serial construction in affordable housing. You see Gropius, you see all the other ones in Germany, they tried since years have burned EUR 200 million like that. And maybe they will succeed. I don't know, I don't care. But what we see now is that we have find a solution which is totally different to all the solutions which has been presented until today. We have more than 12, not 3, we have more than 12 different types of affordable housing condominiums. We have mixed a lot of materials to find the most one built on a business solution only constructed by PORR. We have now done all the testing. We have done now the certified test in Austria and Germany, and we are not in a hurry in that way. When we are finished and we are now going to market clients. And then we present. And this is what we did now in the last weeks, we presented our solution. And even now big cities in Germany, big cities in Austria, states in Austria are now coming to us and say, let's do business together in that one. We are preparing that. And I think in a very short period, we will show exactly what we understand of affordable housing with a quite good quality and prices very low, under EUR 2,000.

Okay. So the main advantage is kind of the greater variety, if I understood you right.

No, no, this is only what you see if you have a choice for doing that. We have different materials. We don't have one material. We have different kind of concrete stuff. Our element, we do not call it serial construction, we call it elemental. We have seen what is the combination -- let me say in this way, we have looked which materials for which case is the best materials. And then we fit together different materials to one best solution. And in the middle of the best solutions, we're using concrete, we're using wood, we're using all the stuff that you need normally. And then we came up with different facades, all the stuff like that. We can do it in a very quick time. At the end of the day, you will have affordable housing with a very, very good quality. You will have cooling and heating inside. You will have everything that you need. Outside, sun protection, all the stuff, what normally affordable housing should have, what we have in Vienna now coming over to Austria and Germany. So I mentioned this different one because everybody was happy to hear 3. We have 12.

And with an eye on the time, we will end the call at this point. With the open questions left and with questions that arise at a later time, please contact Lisa Galuska from Investor Relations. Thank you for joining and your shown interest in the PORR AG. A big thank you also to you, Mr. Strauss and Mr. Eiter for your presentation and the time you took to answer the questions. I wish you all a lovely remaining week. And with this, I hand back to Mr. Strauss for some final remarks.

Thank you very much for joining our half year results, and I'm looking forward to see and hear you in our third quarter results this year. Thank you very much. Stay healthy, and have a good day.