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

Ladies and gentlemen, a warm welcome. I'm Holger Nass, and I'm very excited to have you join the R. STAHL earnings call for the second quarter of the fiscal year 2026. The results will be presented by Tobias Popp, who is the sole member of the Management Board. There will be a Q&A session following the presentation. [Operator Instructions] We will record this earnings call, and you will find it later today on the R. STAHL Investor Relations page as well as on Research Hub. We're also covering the company, and I will supply you with a link to our research shortly also in the chat box. All this in mind, I wish us interesting insights and now hand it over to Mr. Popp. It's all yours.

Thank you, Mr. Nass A very warm welcome as well from our side to our earnings call. And I would like to kick it off immediately. We start with the summary for the quarter. The summary by order intake improved at a low level to EUR 68.6 million. All regions, except the Americas recorded growth. The sales decreased slightly to EUR 72.2 million compared to the quarter last year. Asia/Pacific region is still strong, but America and Central remains a bit weak. EBITDA pre increased from EUR 5.3 million to EUR 6 million due to cost optimization measures. EBITDA pre margin is now at 8.3%. Net profit is still negative, but stable at minus EUR 2.5 million. The earnings per share are at the same level as previous year at minus EUR 0.38. The free cash flow improved significantly by EUR 6.1 million to minus EUR 3 million. In a nutshell, the business has stabilized in the markets, but the market remains challenging. Let's go a bit deeper into those numbers in the financials. First, the regional split. As told before, while Germany is more or less stabilized, this is mainly driven by a major chunk of day-to-day business. So not that heavily project impacts. As I've told you over the last quarters, and that remains valid, the investment side of the business is still weak. That means especially the greenfield investments and stuff like that are behind the expectations. And that you see then more in detail when you go to the Central region, especially here the Western part of it is far behind expectations. And Americas, which is mainly due to missing oil and gas investments, political uncertainty and things like that are, of course, playing into that scenario. While on the other hand side, Asia still remains very strong. You remember, this is our last or late deliveries out of the earlier booked big project orders in 2025. In total, we are getting to EUR 72.2 million sales-wise, which is compared to the second quarter in 2025, a minus 7.3%. And as I told before, the first, second quarters of 2025 were more or less normal operation, while then the third and the fourth were dropping down due to this, let's say, low level of global investment behavior, which is still part of the game. Going a bit more in the P&L. The cost of materials ratio fell sharply to 29.8%, which is despite the lower total operating performance, a very good level of operations we have here. And here, you feel definitely that our business is mainly driven by day-to-day business, which, of course, generates much better margins than the project-driven ones where you are in tough global competition. The personnel costs decreased by 8.1% to EUR 33.1 million. This is primarily driven by our workforce reductions, what I was announcing the last 2 quarters. This is now paying off with the effects out of it. The EBITDA pre increased despite lower sales because of cost reductions to EUR 6 million. The EBITDA pre margin is now at 8.3%. The net profit remains still negative, but stable at minus EUR 2.5 million. And the earnings per share I was mentioning before at minus EUR 0.38. So all in all, the profitability increased despite lower sales due to significant cost reductions and, of course, discipline, especially when it goes to the net working capital, and that is the trigger for the next slide. When we look at the net profit, the cash flow is nearly stable at EUR 2.0 million. The cash flow from operating activities increased by EUR 4.4 million, and the free cash flow is developing in the right direction. There you see effects, especially out of the changes in working capital, as you see here now. So what is driven by earlier major investments like the land building in Weimar, what we had in 2025 here under those numbers. And the net debt increased compared to year-to-year to (sic) EUR 34.9 million (sic) [ EUR 43.9 million ] because we are still negative with the free cash flow. Coming to the outlook for '26. We stick on our promises. The guidance I can confirm at this point, which is sales-wise between EUR 285 million to EUR 300 million. EBITDA pre, we expect something in between EUR 22 million to EUR 27 million. The free cash flow will be balanced and the equity ratio will be slightly decreased, but remain on a good healthy level. We -- on the other hand side, we still have the risks that those ones we as well carry on over the next couple of quarters, the geopolitical conflicts, everybody is aware of. And then we have this general economic development, which affects the one or the other industry, for instance, the chemical industry in our world and which is heavily affected by those megatrends of transforming those industries to other countries, for instance. I don't want to do too deep dive in the strategy, but I would -- I brought a slide with me what I already shared at the Annual Shareholder Meeting in June. And this gives a kind of overview about our strategy journey with, let's say, building the foundation first, which is behind us with things like global SAP implementation and stuff like that. And then we addressed the first initial priorities, and now we are converting that in a way forward that we support our growth by strategy. And within that, what we call NEXUS last time, we have the first building block right now, which is the finance stabilization and all the numbers you've seen is about that. But nevertheless, there will be a time after that when we look forward, when we have some [ back winds ] to get there. And therefore, I brought an example out of our success stories from the last quarter with me. And this is about hydrogen. I was presenting that hydrogen value stream at the Annual General Meeting in 2025 and was telling then to the audience that we shape the value stream in 3 sections, which is on the left-hand side, the production, then the transport and finally, the demand. And I was presenting at the same time, a first success on the production side, which was then that electrolysis plant in Rotterdam. And this time, I brought something in the storage side and the transport side with me, which is the first cavern storage in Germany. This is close to the Netherlands borders. And there, we could bring our products in and make that plant a bit safer than before. And you see at the right-hand side, and this is not the R. STAHL picture, the same philosophy is there with the production, with the storage and with the demand at the end of the day. And it's really good to see that those things are picking up, and we are part of it. So that's to say, on a quick note, I know we are close to a vacation period, and therefore, I keep it lean. But nevertheless, I'm completely open for all your questions and looking forward to those. Thank you.

Thank you so much for the insight shared. We do have quite a few questions, and I'm just looking at the last one to include this in the catalog. The first round of questions that we received are related to Asia. Can you give us a little bit more insight as to how the Asian business is development by region? And if you can give us a little bit more background on the projects in Asia as well.

Of course. Asia, I was presenting our first successes in a new application field, which is called UPS, uninterruptible power supplies. And those ones, we had a big booking beginning of 2025, but that has, of course, not stopped. It was not that big numbers, but it was a lot of, let's say, good jobs in that manner, and they are all paying off by sales now. And on the other hand side, even order intake-wise, that story continues. So we are really happy to see that this new application field is picking up. And the region where this is mainly generated is offshore and those offshores Asia/Pacific and those offshore -- big offshore plants belong to the Asia/Pacific region, including the Near East and the Far East.

One question was regarding your new construction in India. What's going to happen to that? And why investments in the first half of '26 were rather on the low end?

Yes. Thanks for that question. The new plant in India will mainly -- you will mainly see by numbers in 2027. We are now in a way to kick it off, means the project and then the investments will flow in. We spent the last couple of weeks and months in order to get the approach clear, means that to know what to build there. And the rest we already told about. So this is up and running, and we are still foreseeing to get it open by end of next year.

Great. Thank you. Continuing with the Asia/Pacific region, were there specific projects, incoming orders for projects that led to the good results for Asia/Pacific?

Okay. I mentioned that before. This is mainly project driven. This is, of course, not all about UPS. This is as well other jobs. I was at the Annual General Meeting this year. I was presenting another job in the Near East, which was about distribution with a lot of panels and stuff like that. So this kind of demand. So this pays all in the good numbers there.

Great. We talked about Asia/Pacific. Let's go to the European region. Question is regarding which countries or subregions were the main contributors to the roughly 15% sales decline in Europe, excluding Germany and Africa and whether you're seeing meaningful differences across Europe, the Middle East and Africa in terms of demand, project activity or pricing? Maybe let's start with the first part, if you've seen any countries or subregions which were the main contributors to the sales decline of around 15%.

Yes. I was scratching at that surface, and I don't want to go too deep into it, but it's basically the Western side of Europe. That means in the Western side, you have then U.K., of course, you have France, of course, and countries that are a bit more behind than the Southern part, I would say, and the Northern part on the other hand side. So long story short, it's a heterogeneous scenario over Europe. That was the core of my saying here. And overall, they do quite good or let's say, okay, except the investment side, what I was referring to, this is missing here as well. That means plant extensions, greenfield investments and stuff like that, you don't see as well there. But the small things and even the innovative things where we can pay in with our nice products portfolio that is still up and running.

Great. This is more of a general question. Is R. STAHL doing any businesses in China? And if so, what sort of business?

R. STAHL is doing business in China. We have a subsidiary there, mainly sales driven in Shanghai, and we are approaching the market with the differentiated things. That means mainly for export business out of China, but as well for things which is crossing China. China plays a major role in the global, let's say, yard portfolio. That means you have a lot of OEMs being there at the yards and finishing their process modules, and we are really happy to be part of that with our deliveries there.

Great. We've talked a lot about regions. Let's now maybe talk about industries. In which end markets are currently the greatest delays in customer investment decisions? And has the pipeline for larger projects improved or weakened since the end of Q1 '26?

So basically, we are talking about 2 major industries. First is oil and gas. This has a lot to do because the global price is not regulated these days. So it's not about the missing money from my point of view, it's more about the will to do so and the wait to look what's coming next. And things what we are all faced with in the daily news like the Iran war and stuff like that don't help to get there a clearer picture. And the second industry is, of course, the chemical industry, which is in, I would say, a huge transformation from Europe towards Asia, and that creates as well some uncertainty. Other industries like the pharma industry is picking up quite nice as well in Europe as in Asia. And even the new things what we are approaching by strategy like harsh environment and so on are good to see.

Great. You've basically already answered most of this question, but just to be complete, I'm going to quickly run through it. The main reasons behind the continued weakness in chemical and the auto industry and machinery and plant engineering, are customers just postponing projects presently? Or do you see more of a structural reduction in spending coming from those industries?

We believe that we see a kind of relief in the second half of the year demand-wise because this is not all about the new things. This is as well about investments [ made ] which are mandatory requirements to keep the operation running. That means postpone things. And those ones at minimum, we expect in the second half of the year in order to see them on that project side besides the baseload business. So we are optimistic that there will be the one or the other relief, which will help us at the order intake side in the second half.

Okay. Which also answers part of the next question that I was going to ask you, which is, on the one hand, which particular leading indicators you're monitoring to see a potential recovery in the chemical industry? And would you expect a stabilization already in the second half of this year or more pronounced during the fiscal year 2027?

Yes. More pronounced in 2027, of course, especially sales-wise. But as I said, order intake-wise, we expect the one or the other thing in the third and fourth quarter this year as well. The first indication internally is, of course, our opportunity pipeline, what we create by ourselves, there to see if this goes a bit more active or if the -- let's say, the opportunities are just postponed month by month. Those ones, what we are talking about, the investment ones, and this is the first internal indication. Of course, there's a lot of external indications everybody can read on the news about the global behavior of those industries. But again, we think there will be the one or the other relief of investment in the second half of this year, and then we will have that pay out in the next year's top line sales-wise. And -- but the next couple of weeks will tell us the final truth on that. There's as well external influences, which are not to predict, especially in these days where it gets partly a bit chaotic around the world.

I hear you. And any specific indicator that you're watching to see the development in the chemical industry?

Yes, you see this -- they have special products there. They normally demand from guys like us. And if you see those products are ramping up, you get then an early warning that there is more activity behind. And this is the one hand side. The other hand side is, of course, when we are frequently asked over our channels in that manner, mainly the OEM channels who are building special machineries like mixers and apparatus for those industries. And so you get a lot of indicators, which gives you a kind of guidance what's coming next. And this is still -- at the moment, as I was telling, this is still on a very low level of activity. So it's more these replacement things. If anything is broken, we are asked to support with products to get it replaced. And -- but those indicators are already installed. So we will monitor them closely. And of course, we will have a push effect as well in those things in order to introduce these guys out of the different industries our innovative side of the business. That means if we have some good new ideas when it goes, for instance, to automation products or stuff like that, we will, of course, not wait until they have demand, we will be there and introduce those things in order to provide an additional value for those customers to make them think twice if the demand is not there.

Great. We've talked a lot about the revenue side, about regions, about customers and the like. Let's dive into the financials a little bit more. First question is regarding the tax amount. You've had a negative EBIT -- EBT, sorry, in the second quarter. Tax expense still amounted to around EUR 1.0 million in the second quarter. How should we model cash tax payments going forward in the tax line for the second half of 2026? And do you expect a normalization compared with the first half of this year?