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

Ladies and gentlemen, I 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. Next to me is the entire Management Board. New joining Dr. Claus Bischoff; Tobias Popp; and Dr. Mathias Hallmann, our Group CEO, who will now walk you through our presentation.

Okay. Good morning, ladies and gentlemen. A warm welcome from my side to this Q3 2025 Analysts, Investors and Press Conference Call. As always, we start with a quick summary. Our order intake in Q3 remained at a low level of EUR 72.2 million. Prior year, we had EUR 74.4 million, but we also should have in mind that in the first quarter this year, we had roughly EUR 98 million. So second quarter, third quarter were significantly lower and we see weak demand from nearly all customer industries in all regions. That resulted in decreasing sales in all regions with a year-on-year decline of 10.1% to EUR 78.6 million. Nevertheless, EBITDA pre improved by 28.8% to EUR 11.3 million because of cost reduction measures; EBITDA pre margin resulted at 14.4%. Free cash flow fell by EUR 5.5 million to EUR 0.5 million, mainly due to build up of working capital. We come to that later. Net profit increased to EUR 2.6 million. Prior year was EUR 1.8 million and earnings per share ended at EUR 0.39, prior year EUR 0.28. When we look into the details, we see the sales decline in all regions: Germany, down 15.9%; Central region down minus 3.5%; Americas, down 11.4%; and Asia Pacific down 17.3%. What's new to us is that especially Germany, which remained stable through all the crisis in the last couple of years, this time shows a significant decline. We have to admit that not only our core industry, the chemical industry is still under significant pressure, but also the pharmaceutical industry is getting under more and more pressure due to the global uncertainties with respect to taxes. Americas' the oil and gas industry, especially under pressure and Asia Pacific, no decisions on any big investments at this point of time. When we look into our P&L statement, we see a total operating performance, which is almost on the level of last year. Here, we also see the work up of working capital, which is due to big projects we booked in Q1, and we have some finished goods or significant finished goods already in our warehouses for those projects, which are about to be delivered partly in Q4 and in Q1 2026. Cost of materials are still under -- well under control, a little bit higher ratio due to the build up of unfinished and finished goods. Personnel costs include EUR 2.2 million of severance payments without those, where they would fell by EUR 0.8 million despite significant wage increases across the world. So, we see here the impact of our cost measures with respect to personnel. We also see it in our other operating expenses, which came down from EUR 15.9 million to EUR 14.6 million. That results in stable EBIT, stable EBT and then improved net profit of EUR 2.6 million. The other numbers we already discussed. Free cash flow, the major impact is -- comes from changes in working capital, minus EUR 3.9 million, so that cash flow from operating activities is down EUR 6 million. Free cash flow is on a level of EUR 0.5 million then in comparison to EUR 6 million last year. And our net debt is increasing to EUR 40.5 million from EUR 29 million last year. Already mentioned that we are working on structural measures to adjust to the ongoing weak market demand. In Germany, we started a socially bound structural personnel adjustment program using the tool of a Transfergesellschaft. 73 employees are or will be transferred into this Transfergesellschaft until end of February '26. That means, 73 employees have signed agreements. So, I think 58 of those are already in the Transfergesellschaft at this point of time. Total onetime costs are slightly lower than EUR 5 million and will finally lead to a personnel cost reduction slightly above EUR 6 million at this point of time. But we are planning additional personnel cost measures or some of them are already implemented. We have partial reduction of weekly working hours starting this month, and we have closing weeks, closing days around Christmas. We also have tight expense control. Travel is limited to the absolute necessary and other operating expenses in total are under tight observation and control. Our outlook, our guidance for 2025 remains stable. Sales forecast is around EUR 320 million to EUR 330 million. EBITDA pre is still expected between EUR 25 million and EUR 30 million. Free cash flow should be balanced, and we would expect a slight decrease of our equity ratio as long as pension stay or the interest rate for the pension provision stays stable. The risks, we all know, it's the general economic development, the geopolitical conflict and some environmental risks. This is ongoing. We have to manage that since quite a while, so nothing changed. That's it from my side. Now I and also my two colleagues are open for questions.

[Operator Instructions] The first question comes from the line of Nico Löchner from Solventis.

I have a few questions. You said the demand was weak from almost all customer industries. Which industries performed better then or had a positive development then?

I cannot really see -- I mean, there's one industry which remains pretty stable, that's LNG as part of the energy industry. All the others, especially the chemical industry in Europe, pharmaceutical industry, on a global level, India is very soft in the pharmaceutical sector. Oil and gas is particularly under pressure in North America. So the only highlight at this point of time, I would see in the LNG industry.

And do you expect additional costs related to the cost-cutting program in Q4 and 2026?

We will see additional costs with respect to the cost-cutting program. As you see, what we achieved in the first wave was pretty -- yes, the costs were pretty much under control, but we would probably see similar ratios that when we -- I have no numbers in mind how many people we might reduce in the future. But for example, if we have to reduce another 20, 30, then we would also see additional cost in the range of EUR 2 million to EUR 3 million. So this ratio will be stable, but we haven't decided yet what's the final amount of people we have to reduce. We still hope that the economical situation will improve, then we can do more about temporary work hour reduction. If we come to the final conclusion that it's not going to improve in the next 6, 12 months, then we will probably go more into the structural direction.

So, you see no light at the end of the tunnel currently?

You know that saying, the light can also be the incoming train. I can't -- I don't know. I don't know whether it's the light at the end of the tunnel or it's the incoming train. We were expecting improvement, for example, in the chemical industry. What we see now and it's communicated in the press is that it goes further down. I cannot see significant improvement in the pharmaceutical industry as long as our friend Trump is not giving away his taxes. It's huge taxes, for example, for India and China. And -- and also, when we look in the channel of our machine builders, which is a strong distribution channel for us, and they do equipment for the chemical, for the pharmaceutical and for the oil and gas industry, their order pipelines are getting dry at this point of time. So, despite the fact that some optimism is there in the general industry, we also have to admit that we typically -- we are late in the cycle. So, if the general industry is going to improve in the next 6 months, it will probably last another 6 plus 9 months more until we have those effects in our book.

And you want to achieve a balanced free cash flow this year?

Yes.

And is it mainly the reduction of the inventories to reach that number or other arrivals?

Yes. It's a reduction of inventories plus deliveries of big projects. So, which is finished goods, which will then be delivered, hopefully, in Q4 to our customers.

The next question comes from the line of Harald Hof from mwb research.

And I would like to do it also one-by-one. So, I'd like to start with the first question regarding the order momentum in Q4. Can you put some light or provide a little bit more color on this topic? Is it still going on weak? Or do you see at least a stable development compared to...

Stable on a low level.

Stable on a low level?

Yes.

And do you see any kind of change in behavior regarding the year 2026? Do you expect a recovery from the different industries? Or do you still have the impression that the order momentum and also the revenue generation will be weaker?

Our planning scenario is that, we remain on the level we have right now. And the answer is basically the same I just gave to Mr. Löchner. Even when the general industry may improve and some of the political uncertainties disappear, we -- it will take another 6 to 12 months until we see those effects in our books.

Okay. And we've discussed the pharmaceutical industries already. A follow-up question regarding this topic. Do you have any reason why the pharmaceutical industry is weak? Because it's normally a quite stable industry. It's also part of Trump's relocation to the America first situation that the new production facilities are expected to be relocated in the U.S.

I'll give you one very specific example. I've been -- I was in India last week. And the pharmaceutical industry is our biggest customer industry in India and 50% of their volumes go to the North American market. And they are significantly down because they have, I think, 35% of taxes. And so that's bringing significant pressure on them. And investments are not really taking place in the same amount in the U.S. at this point of time. I mean, those plans, they need time, then you need -- you also need the people doing it. At the end of the day, the whole industry is slowing down in this uncertain situation.

Okay. That's a quite specific example. And, makes it quite understandable what's going on. A final question regarding -- from my side regarding the Q4. Looking at the severance payments, you provided on the slide that it will be like EUR 5 million full effect. We saw in the 9 months EUR 3.6 million. So you could expect a EUR 1.4 million for Q4. Is it...

No. No. The EUR 5 million we used for the 32 contracts signed. Those will have an impact of EUR 6-plus million in cost savings, not completely next year, but when they are all implemented by the end of the first quarter next year, then we have that full impact in the P&L. We don't know at this point of time what impact we will see from additional measures, because as I just explained, we hope that we can dive through certain phase with other measures like reduced working hours. But we will need a certain portion of structural measures. And the final decision how much each has to contribute is not taken right now. But we would expect the ratio will be similar that we spend less in onetime costs than we save in cost reduction.

[Operator Instructions] Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Judith Schauble for any closing remarks.

Ladies and gentlemen, thank you for joining our today's conference call. With this quarterly statement, we disclosed the financial calendar for 2026. On February 24, we will publish the preliminary figures for fiscal 2025. And on April 16, will be the next conference call after publishing the annual report. We hope to talk to you again latest on this occasion. Have a great day. Goodbye.