R. STAHL AG (RSL2) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the R. STAHL Investors and Analyst Conference Call for First Half 2025. I am Jota, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Judith Schauble, Investor Relations. Please go ahead.

Thank you, Jota. Ladies and gentlemen, welcome also from my side, and thank you for joining our today's conference call. Our prepared slides are available under the Investor Relations section of our website, www.r-stahl.com. Shortly after we will have finished this call, a replay of the entire conference will be provided for download at the same place. Please be aware of our disclaimer statement, which you find at the beginning of the slide deck. And now I will pass on to Dr. Mathias Hallmann, our Group CEO, who will walk you through our presentation.

Good morning, ladies and gentlemen, also a warm welcome to this Q2 2025 Analyst and Investors Conference Call. I'll start with the summary. We had a quite difficult quarter driven by huge economic uncertainties. Our orders saw a massive drop to EUR 67 million, prior year, we had EUR 88.5 million. Some of you may know, we had EUR 98 million in the first quarter. So that's a drop of more than 30% to Q1, and we saw especially significant declines in the Central region and in Asia Pacific. As a consequence, we saw decreasing sales with a year-on-year decline of 13% to EUR 77.9 million, and that all resulted in lower EBITDA, which came out at EUR 5.3 million and EBITDA pre margin of 6.8%, where we had 12.2% the year before. Free cash flow fell by EUR 6.3 million to minus EUR 9.1 million, mainly driven by the lower profitability. Net profit came out with a loss of EUR 2.5 million, prior year was EUR 3.7 million and earnings per share at minus EUR 0.38, prior year was plus EUR 0.57. If we look into the regions, you see declining sales in -- mainly in Germany, in Americas, in Asia Pacific, not so much in the Central region where we were benefiting from a strong order backlog. But I just mentioned that especially in the Central region also the order entry went down significantly in the second quarter. Looking then into the profitability or the P&L statement, we can summarize that we have 2 issues. The one is the top line and the other is the personnel costs. The top line came down, as mentioned, from roughly EUR 90 million to roughly EUR 78 million. That also resulted in lower total operational performance. Material costs look a little bit higher or they are higher, but that's mainly driven by a buildup of unfinished and finished goods, while we had in the last year and negative effect in the finished and unfinished goods, and that's clearly related then to the material cost. Overall, we see no problems in our material costs. Personnel costs remain almost stable as we have some severance of EUR 1.2 million in the second quarter. Without that, we would see reduced personnel costs. Other operating expenses are on the level of the year before and then all it boils down to the slightly negative EBIT and negative net profit of minus EUR 2.5 million as just reported. As I said in the beginning, the problem clearly comes from the top line, which is significantly reduced against last year. Even we had, again, inflation between last year and this year. So the actual decline is even a little bit higher. And on the other hand, we see inflation in our cost structure. So this is something we are working against, and we will come to that pretty soon after the next slide. Free cash flow already mentioned is negative. The main effect comes from the net profit, where we fall down from EUR 3.7 million last year to minus EUR 2.5 million. That brings a change of EUR 6 million. Then we have a buildup of working capital in the second quarter. We expect that to come down in the consecutive quarters. Nevertheless, that all then results in a negative free cash flow of minus EUR 9 million. And that drives a higher net debt, which is now at a level of EUR 44.6 million. It's already in the press. We are -- and some of you might have read it already. We are addressing our structural cost position at this point of time. And I just mentioned, we think we do have our material costs and our other operating costs well under control. What we cannot control easily is our personnel costs. We -- in order to reduce that, we closed one of our production sites, a small production site in Oslo. We did that during the second quarter. We saw a reduction of 12 employees there. And in Germany, we started a socially balanced structural personnel adjustment program using the tool of Transfergesellschaft. Employees are transferred in this Transfergesellschaft, which is a new company in order to get further qualified for the open job market. They can remain there up to 12 months. The target we have is a reduction of around 80 employees until the mid of next year with a cost reduction of up to EUR 10 million per year. I think I should say it should not be less than 80 FTEs or employees looking at the current economic situation. The severance payments, we used for that in the second quarter totaled at a level of EUR 1.1 million. That brings me to the outlook. We had to adjust our guidance for the year in the light of the current economic environment. We previously forecasted our sales on a level of EUR 340 million to EUR 350 million. We now expect EUR 320 million to EUR 330 million, which requires significant improvement, especially in Q2 and Q3. And we do see that in the month of July so that we feel safe at this point of time with this forecast of EUR 320 million to EUR 330 million. The EBITDA is now expected between EUR 25 million and EUR 30 million. Previously, we expected EUR 35 million to EUR 40 million. And we expect somewhat balanced free cash flow. Previously, we were expecting a middle single-digit euro million amount, a positive middle single-digit million amount. And we will see a slight decrease in our equity ratio under the assumption that the interest level for the valuation of our pension remains stable. The risks are clear. We see the economical risks. We see the geopolitical conflicts. This is something we have to have an eye on. But at this point of time, I think this is a pretty stable outlook, and we are confident to achieve it towards the end of the year. This is it. And now we are open for questions.

[Operator Instructions] The first question comes from the line of Harald Hof with mwb research.

Just 2 questions from my side. The first one is regarding the personnel cost effect. You mentioned the EUR 10 million in savings. Can you provide a little bit more color when do we see these effects? Do we expect them in H2 '25 already, at least partially? Or do we have some further one-offs regarding the payments for the employees? And the other question is regarding the EPS for the full year. Part of your guidance is that you are expecting a decline in the equity ratio, which indicates that there's like -- yes, the net profit will come in slightly negative for the full year. Is that correct? Or do I misunderstand this?

Second question, correct. Yes. With this guidance and if we don't see positive tax effects or something, we would expect a slightly negative earnings per share. First question, effects from the personnel reduction. What we see right now is that we have the charges for the Transfergesellschaft, which we have especially in the second half of the year. But we already have some personnel cost reduction, but the main effect we will see in the year 2026.

The next question comes from the line of Klaus Schlote with Solventis.

I've got a question regarding the top line development. It looks like it's all macro driven, it's politics, it's trade restrictions whatsoever, but it's not really caused by your products or changes in the situation -- in the sector. So question is you're really depending regarding the top line only on the macro developments, really cannot steer against from a micro point of view? Or is it -- would you see that differently?

I mean you're absolutely right. In the long term and also in the short term, you can hardly work against the market. Certainly, we can, in the long term, try to get more market share, and we quite successfully managed that, especially in the DACH region and in Europe over the last couple of years. But in the short term and in the midterm, we are heavily depending on the economical conditions. The competitive landscape didn't change. I don't think that we -- that new competitors, technological changes or anything is driving all that. We see nothing of that. It's just that we miss a significant portion of our business, and that's projects. Normally, we have roughly 20%, 25% of our business is big projects. And what happens right now is these projects are in the market, the pipelines are full, the financing is there, the projects are in generally approved, but they are not starting. There's so much uncertainty in the market that everybody is holding back final decisions. This is what we see. We hardly see those projects happening, and that's really harming us. The second effect, which is not that critical, but it's also part of the situation is the general weakness of the European economy, especially in the chemical field. This is also something where we are suffering from because we are historically very strong in the chemical industry. This is where STAHL came from, especially in the DACH region, and we all know that this industry is suffering. And those are the 2 main effects. But you're absolutely right, there is no change in the competitive environment.

What about the dollar, the U.S. dollar, which was devaluating over the last month? I think it's even exceeding the tax rate of 15%. How is that affecting you?

Not that much. We do have a factory. There are 2 things. First, we do have a factory in Houston. So we have quite some value added there. And when you look at the import part from our components, there's a lot of automation products and almost all automation players are coming from outside. There is almost no local competition, nobody really producing in the dollar area. So everybody has the same problems. The dollar is not really impacting us that much. It's the tariffs and even more the uncertainty in the market.