SFC Energy AG ($F3C)

Good morning, ladies and gentlemen, and thank you very much, Vicki, for the kind introduction. Well, and thank you all for taking the time to join our presentation here of the audited consolidated financial results 2025. In a good tradition, we will share the presentation here between Daniel and myself and then be happy to go into a Q&A session. Well, looking back to 2025, when we did this more or less in the same format a good month ago, we have to say that 2025 was a year of particular challenges. Also some difficulties where we had to revise our original targets for the year. Daniel and I will elaborate on the main reasons once again today here later in the presentation. But I think we also took the time and the opportunity to consolidate, to reset in some areas and then also to put together a clear set of strategic priorities in 3 main areas to prepare ourselves for another growth phase, another growth stage in which we are already in now at the end of the first quarter. What are those 3 pillars here of, again, growth here for SFC Energy? Well, expanding our international footprint. Two examples for it. In Scandinavia -- in Denmark, we turned the hydrogen assets we acquired from Ballard into a profitable core business of hydrogen fuel cells for critical infrastructure and telecom. Together with this, we streamlined our hydrogen activities group-wide. We made Denmark a competence center consolidating the knowledge for this part of the business, especially in terms also of applications and specific customer needs. The second one, well, just finalized last week -- a week ago, but most of the work done back in 2025, 15% stake holding in our long-term partner, Oneberry Technologies in Singapore. At the end, creating a regional hub for the further expansion here in this populous region of the world, active region of the world, Southeast Asia. But at the same time after [ 15 ] years of partnership also stepping into a different business models, unmanned AI-based automated security solutions here in mostly a business model that is based on security-as-a-service, long-term lease and rental contracts here with governments. And now it's up to us to simply assess in which parts of our business and regions can we make use of this kind of knowledge here of a different business model, particularly also to overcome -- yes, naturally existing also CapEx hurdles we have in our mainly CapEx-based business. So really looking forward to this. I will also be happy to join the Board here of Oneberry as we speak. And yes, try to consistently grow the business. And not to forget, yes, we also linked the final close here with a significant order coming in of EUR 6.6 million size, also contributing naturally to this year's dynamic start of the business. The second area really is systematically growing our business in the defense, but also public and civilian security business. So it's naturally the military-based part of the business, the government-based part of the business, but also our civilian security business, especially with our customers in the CCTV-based security service business, coming up to about [ 15% ] of the business of the group already. Well, and on the defense part, yes, we will look into this in a minute. We saw some delays in India having an impact naturally on the overall growth, but at the same time, expanding regionally with defense forces here NATO-wide, but also outside of NATO as well as OEM programs being kicked off here in the defense business. The third element, our business is based on leading technological solutions, making sure we have dependable power that consume less energy here for our customers, power supply solutions that help to reduce the power consumptions for our customers in all our end markets. And I think looking at what we have successfully already commercialized in 2025 is worthwhile mentioning. The one is entering the defense business also with our power supply solutions for man portable and platform-mounted laser systems predominantly used as anti-drone capabilities. We have a long-term OEM partnership here that translated already into a business that is significantly above EUR 1 million in 2025. We are now expanding this as well as presenting this product to other OEMs where we see quite a positive feedback and expect further substantial scaling here. The other part for the Canadian government and with the Canadian government, we have developed what we call an Arctic power solution, our new product called EFOY Pro Shelter dependable power for border security and surveillance solutions on the Northern Canadian border, sub minus 40 degree C environment, pretty hefty requirements also in terms of autonomy, 12 to 36 months of autonomy. We expect this program to scale in '26 and '27 significantly within the Canadian framework, but the project is also presented here on a NATO-wide basis at the first feedbacks we have here from Scandinavian and also Scandinavian potential customers as well as from the Baltics is pretty positive here. So we expect this to further scale. As said, both products are already out with customers. So they are commercialized. Now looking into the development of sales, once again, we did most of it already, as I said a month ago. So let me stay at the, I'd say, consolidated level, yes, seeing a decline of the revenue by 1 percentage point to EUR 143.27 million, mostly influenced by a delay in programs follow-on programs for defense customers in India as the main impacting factor here for the top line. Just visiting India a couple of weeks ago, I think we are on good ground to expect a rebound of this business within, let's say, our fiscal year here 2026. The fiscal year in India is ending as we speak here at the end of our first quarter. So we expect, let's say, first activities starting in their first quarter, which is our second quarter. The other part where we fell short of our own expectations was the organic growth of the business in the U.S. still including currency impacts growing by 19%, almost 20% is a solid organic growth, but naturally not reaching to the levels we had historically there, and we also expect it for 2025 being at around 40%. So we promised 40%, we delivered 20%, not meeting the target at that time. And the negative currency effects in the U.S., in Canada and in India had naturally a further impact also on the top line development. Just completing the picture here on the power management side, we were particularly happy with the development in the European part of the business, but we saw one major project shifting in Canada here on the power side of the business. which we expect, by the way, to now being decided in 2026 and coming in, in 2026. But in 2025, this was the single reason why we had a decline of the power business in Canada. And so overall, consolidated sales coming in slightly below the forecast corridor of last year. Nothing I'd say that we are particularly happy with, but I think the facts are clear. And with a sensible planning for 2026 and the growth outlook for 2026, I think we are reacting to this. And with this, I would hand over to Daniel to look into the financial results, starting with the earnings part.

Good morning, ladies and gentlemen. Thank you for joining the call also from my side. Let me provide you some more information and beat to the bone with regards to costs, to the gross margin and give you some more color on why it has developed the way it developed as well as what we see for the current year. When we look at the gross profit and the gross margin specifically, we see that almost symmetrically developed with the cost. We've seen a decline in the gross profit of 1.5%. If we look at the gross margin, we see that the gross margin on group level remained nearly at the same level as in the previous years, even though the gross margin of the segments developed differently. Overall, we consider the group's gross margin to be on a level which we are not entirely satisfied in 2025. So good wheels. At the beginning of the year, we were anticipating a higher margin level. However, and we discussed that in the previous quarter calls, the economic turmoil, especially with trade politics were a challenge in -- remaining on the margin or increasing the margin level that we have. We set the targets higher. If you look at the outlook for the current year, we do expect to deliver stable gross margins. Whether we'll be able to expand the margins significantly highly depends on how the entire geopolitical landscape will develop with prices for components, with prices for energy especially with prices for the precious metals and platinum that we use in our products. So far, the way we look at it, we can manage price increases well. But of course, it depends on how high the increase of this cost may be. We had an exceptional impact on our gross profit in 2025 as we had in 2024. So in 2025, we had an exceptional income of EUR 0.6 million comparing to a net expense exceptionally of EUR 1 million in the previous years. Those expenses and incomes relate to provisions that we make a warranty to revaluation of the precious metals that we hold our stock. When it comes to 2024 with the [indiscernible] from the Ballard acquisition that was reflected in the gross profit, and will be provided some more information in our annual report. Looking at the gross margins of the segments. The gross margin of the segment Clean Energy declined to 45.4%, which is a decline of 1.2 basis points. One of the main reasons behind the slight contraction of the gross margin, main reason is the product mix, which was [ characterized ], Peter mentioned that before. By a lower share of defense revenue in 2025, we were looking at 10% of the segment's revenue being generated in the defense sector that compares to the 18% that we had in 2024 and the segment revenue that had in the segment in 2024, of course, heavily impacted by the defense revenues that we realized in India. Second huge impact on the gross margin in the segment was the unfavorable movements in the exchange rated -- rates with regards to the U.S. dollar and with regards to the Can dollar. In average, the U.S. dollar depreciated 7.3% year-on-year. That would apply to roughly 18% of the segment revenue and the Canadian dollar depreciated about 5.5% year-on-year, and that would apply that to 26% of those segment revenues. So you see a rather strong impact on this exchange rate in the revenues and then consequently also the gross margin, which has an impact on the segment gross margin. When it comes to the gross margin of the Clean Power Management segment, we have seen an increase. The gross margin increased to 30% in 2025 from 28.2% in 2024, which is a 1.8 percentage point increase. Those positive impacts result basically from a good pricing power for those products on the one hand side, but also from a higher share of value-added services and higher value-added products that we sold in that segment. That applies to the power management solution as well as the drive motor controls. Going to the operating expenses, and I would start with the key cost drivers or exceptional cost drivers that we had in 2025. Those of you who have been listening to us in the quarterly reports are already aware that there were certain developments in the cost basis that had an impact -- an exceptional impact on our margins. I would start off saying it has a negative impact on the SFC results. However, we do not consider this to have an impact on the underlying earnings power of the group, given the extraordinary character of those costs. I will start off with the extraordinary expense for the exchange rate net losses. So the net losses accounted in 2025 to EUR 3.4 million. That will translate in 2.4% impact on the EBITDA margin. I would like to stress one more time that out of those EUR 3.4 million, roughly EUR 1 million has been realized. The rest of these losses are not realized, and you can also see that reflected in the cash flow statement. Second large driver on the cost basis were the expenses for IT as well as the implementation of our ERP system. Total cost for these 2 items were about EUR 5.1 million, which translates into 3.8% impact on the EBITDA margin. And last but not least, the decrease of the capitalized R&D expenses to total R&D expenses. It decreased from 29% in 2024 to 13% in combination also with a notably higher spending for R&D. The impact on the EBITDA margin is around 1.2%. The total impact on the EBITDA on those 3 specific effects amounted to approximately EUR 10 million in 2025, of which we consider roughly between EUR 6 million and EUR 7 million not to be recurring in the midterm. Giving you some more color on those effects. So with regards to the exchange rate losses, we had income from exchange rate differences of EUR 2.6 million, which were entirely offset by the exchange rate losses of EUR 6 million in 2025. So that comes to the net effect of EUR 3.4 million and that is an effect on EBIT and EBITDA. As I mentioned, out of the exchange rate losses of EUR 6 million, approximately 85% were unrealized losses and EUR 4 million of the EUR 6 million related to intercompany position, therefore, also unrealized losses. These intercompany positions are shareholder loans, financing for our subsidiaries all over the world as well as intercompany receivables from the supply to our subsidiaries. The biggest impact with regards to the losses we had from the Indian rupee, followed by the Canadian dollar. Some color on the extraordinary costs for IT, which are reflected in the G&A expenses. So the cost relating to the SAP implementation amounted to approximately EUR 3.3 million in 2025. We would expect that this amount would also be invested and be expensed in the current year. However, we do not expect that cost to be recurring in the next year. The cost for improving of our IT system, which will also include licensing fees for new software, including the SAP software amounted to an additional EUR 1.7 million in 2025. And this portion of the cost would likely be recurring also in the next years as we will put a special focus further on IT security as well, as I mentioned before, licensing fee for our software. Lower rate of capitalized R&D expenses. So the total R&D spending in 2025 and that spending is made up of the R&D cost that you'll see expense on the P&L plus the capitalized R&D costs plus subsidies that we received amounted to EUR 11.4 million. That compares to EUR 11 million in 2024. So you see a slight increase in R&D spend of 3%. From this R&D spend in the previous years, we capitalized 29%. In the current year, we capitalized only 30% of this cost. On a like-to-like basis, this would translate an additional EUR 1.7 million of cost that could have been expensed in the P&L. However, the capitalization is an audit function and accounting function. In 2025, we focus much more on improving, making our serial products more stable, better also with more features. These development costs cannot be capitalized in the current year. We would see a higher rate of capitalization again as we are developing new products, new generation of products and these costs can be capitalized. So these are the extraordinary effects, as I mentioned before, an impact of EUR 10 million on EBIT and EBITDA. That brings us to our adjusted EBIT and adjusted EBITDA. We had an adjusted EBITDA of EUR 16.7 million in 2025, slightly above the midrange of our guidance, respectively -- slightly above the high end of the revised guidance of specific guidance we published in September. That translates in adjusted EBITDA margin of 11.6% compared to the very good 15.2% in 2024. And yes, it's a decline of 3.6 percentage points. Adjusted EBITDA excludes the nonrecurring expenses and income as we have in every year. These are -- I'm repeating myself related to the provision in addition to the capital reserves for the LTI programs, stock option programs that we have for management and senior management as well as the transaction-related expenses. The total negative impact on the EBITDA of those 2 cost items were EUR 4 million. So it compares to EUR 2.4 million in the previous year. The net expense for the LTI programs, SARs, stock options and PSP amounted to EUR 2.5 million comparing to EUR 2 million in 2024, so decently higher. And if you look at the transaction-related expenses, they amounted to EUR 1.9 million. That compares to EUR 900,000 in 2024. So you see that we had a high activity level on our M&A strategy on further driving in growth. And of course, also in these costs is reflected the transaction expenses for taking the 50% stake in Oneberry, but not also Oneberry, there are also some other activities ongoing. So as I mentioned, the adjusted EBITDA was EUR 16.6 million is 24% below 2024 EBITDA and the margin declined to 11.6%. That contraction is due mainly to those 3 effects that I mentioned before, which is the losses on exchange rate, which is the IT expense as well as the lower rate of R&D capitalized. So as I mentioned, we would not see all of this cost recurring this year. Some of them will recur this year, especially with regards to the IT expenses. Depreciation and amortization, a quick word on that one. So total depreciation and amortization were EUR 7.7 million above the EUR 6.5 million, which we saw in 2024. Almost 40% of the depreciation is related to IFRS 16, so accounting for the leases, which is a cash expense and were about EUR 3 million in 2025, above 2024 level, it has to do with the fact that we have a full lease in for our U.K. subsidiary, for our Denmark subsidiary as well as for our U.S. subsidiary. The depreciation without the IFRS 16 impact comes to EUR 5.5 million. And a larger part of this depreciation results to depreciating the capitalized R&D expenses. So out of this EUR 5.5 million, EUR 2.4 million is depreciation from capitalized R&D expenses, which also has no cash impact. That brings us to the adjusted EBIT. The adjusted EBIT reached EUR 8.9 million compared to the EUR 15.5 million in 2024, and that results in a margin of 6.2% compared to 10.7% in 2024. So a notable 4.5 percentage points below what we've seen in 2024. CapEx for the year were well below what we've seen in 2024. So total CapEx, excluding the CapEx for right of use IFRS 16 accounting was EUR 4 million at a much lower level than what we've seen in 2024, where the CapEx was EUR 9.2 million. What is the reason for the lower CapEx? Mostly, we had a lot of expansion CapEx in 2024. This expansion CapEx related to building out our Romanian site for the production of fuel cells. It relates to building out our site in the U.K. for the manufacturing for the membrane electrode assembly or the MEA. And also EUR 9.2 million is reflected the acquisition of the Ballard assets in 2024. So it was a bit of an extraordinary year in 2024. We see that CapEx has come to, what we consider, be a more normalized level in 2025. The split of CapEx between intangible assets and PP&E is about 61% to 39%. And yes, cash and cash equivalents, net debt liquidity position of the group, we are rock solid when it comes to our liquidity position. Cash freely available at the year-end was at EUR 46.6 million EUR 30.9 million lower than what we've seen in 2024, where we ended the year with EUR 16.5 million. I'll provide you with some details on that in a minute. The financial debt, it decreased to EUR 3.3 million. Financial debt has not changed in terms of what it is. It is mostly working capital lines, short-term debt for SFC Netherlands as well SFC Canada. That brings us to a net debt or in this case, specifically a net cash position of EUR 43.3 million at the end of the year, below the EUR 56.4 million in 2024. Equity decreased by EUR 0.5 million. That is due to the negative net income or net loss in this case. The net profit was minus roughly EUR 1 million, but the equity ratio remained on the level of last year at 72% compared to 71.5% at the previous year. So cash flow, why did the cash position decline? The operating cash flow in 2025 came to EUR 17.4 million comparing to EUR 21.8 million in 2024. So that is below what we generated in 2024. But given all the extraordinary costs that we've seen, still a decent level. And that also reflects, as I mentioned before, that large parts of the currency losses had no cash impact because they were not realized. So we still consider that cash to be at a solid level, even though there's room for improvement. What we, however, see is that the net working capital increased significantly in 2025, totally by EUR 20 million, where we saw a much lower increase in 2024, which was EUR 5.3 million. The working capital ratio to net sales increased to 37% in 2025. We had 25% in 2024. So what are the key drivers in the net working capital? The largest impact had an increase in accounts receivable, which were cash consuming of EUR 12.8 million. We have seen that the days of sales outstanding increased to 103 days compared to 80 days in 2024. Key reason is that really a lot of customers are using the payment terms to a maximum. We also see that especially larger customers are stretching the payment terms for a couple of days. We have not seen any defaults or any major defaults with any customers. So in spite of the fact that payment terms and days of sales outstanding have increased, any write-offs or the provisions for bad debt have not increased. And frankly speaking, we do not see this in the current year neither. Nevertheless, we are pushing hard to bring those accounts receivables down and are in constant discussions with other customers to optimize that position. Second largest impact is from the increase in inventory. We see that the inventory increased with a cash impact of EUR 6.8 million. That increase was mostly driven by stocking for fuel cell components in anticipation of higher revenues at the beginning of the year. So the stocking has taken place mostly in Germany and to some extent also in the U.S. All of this material that we purchased will be used. So we don't see any -- use correction or write-off in this inventory. That was one reason. The other reason for the increase in the inventory was initial stocking in our U.S. subsidiary also in light of the discussion of customs. We have shipped quite a lot of components, quite a lot of fuel cells to the U.S. to optimize customs impact that has an impact also on inventory levels. The days of inventories have increased to 152 from 131 in 2024. Those 2 impacts altogether, if you add them up, roughly EUR 20 million were not offset by the increase in accounts payable, which increased by EUR 1 million only, and that translates into days of payables outstanding to 69 from 66. After tax payments of EUR 2.4 million, this then results in a negative cash flow from operating activities of EUR 4.9 million. The CapEx or cash flow from investing activities came to EUR 3.7 million, much lower from what we've seen in 2024. And then it goes -- then we have the cash flow from financing activities, which is mostly lease payments came to EUR 3.6 million. That altogether that results in the change of cash of EUR 12.2 million, but still with what we consider a very solid and a good cash position. With these wonderful [indiscernible] details, I would return to Peter for an outlook and further details.

Well, thank you very much, Daniel. Two things here to close out from our side. First of all, some remarks really on the let's say, geopolitical and macro situation out there and the impact on SFC Energy. Daniel already mentioned, yes, we saw some precious metal cost increase, especially with platinum peaking out last year here and naturally exchange rate impacts. We did some price increases already implemented throughout the entire offering. As always, this takes some time to trickle down, but I think on a good way. And then direct and potential impact of the war here, U.S., Israel versus Iran. I think we are fortunate that our business model is, let's say, also in terms of energy consumption, pretty light. So we see a direct impact here on methanol spiking up a good, let's say, 20% to 30% here on the substance. But the substance only being, let's say, 10% of our fuel cost as such as this is mostly, let's say, packaging safety and some logistics, we see, let's say, a single-digit percentage impact here and working on, let's say, our customer buy-in here. The other area is transportation cost. And naturally, we are in talks with key customers to see how we can share the burden here. So from this side and also on the top line, yes, naturally, some projects regionally might see a delay here. But as this region is still for us a business development region in terms of the Middle East, also here, we do not see a significant impact also on our projections. And Israel has been a constant, let's say, customer there also, I'd say, we feel our outlook not impacted from today's point of view in terms of the top line. So going to the forecast here and the outlook. We see despite the volatility in the macro environment or you see us in an optimistic mode here. We have returned back to growth in Q4 2025 already. We are predicting a range of EUR 150 million to EUR 160 million of revenue. We acknowledge also the feedback that this slide is seen as somewhat conservative by some of you. But at the same time, I think we have it as a sensible planning here. And I think a good starting scenario into the year. Where is this growth coming from regionally? Well, Asia, I mentioned Singapore already, but also Europe, a good start off here in the first 3 months, and we are expecting a really strong first half year. The other part of the growth, and I mentioned this also initially, is definitely a significant growth in our defense and public security business up to a range of 15% to 20% of group's results. And still, the underlying growth here in our industrial business is also seen as, let's say, a positive contributor. Oil and gas benefiting here from the current oil price levels. We see CapEx programs being, let's say, some of them accelerated in Canada already being there last week seeing our team, but also seeing some of our, let's say, users, yes, this has for this part of the business, obviously, a positive impact. Looking at the profitability, we see EBITDA adjusted increasing to EUR 20 million to EUR 24 million range and the EBIT adjusted between EUR 11 million and EUR 15 million range. So both indicators, both core KPIs we have on the profitability side should see, I'd say, a significant increase. Main factors, top line growth, sales growth, higher-margin business in Defense & Security as well as a good mix on the industrial side, and some operational efficiencies. We do not neglect some of the residual risks, naturally exchange rate, but also naturally the spending on ERP as well as cybersecurity. But at the same time, we feel that this is catered well from today's point of view. So again let's say, all this background, we see ourselves well placed for growth again and also increased profitability. Looking forward to your comments and questions, and thank you very much for your attention so far.

[Operator Instructions] The first question is from Karsten Von Blumenthal. First Berlin Equity Research.

My first question is regarding your Oneberry acquisition. You have acquired 15% and you have concluded this recently, and you still have a 50% option to increase to 50%. What are your plans there?

Peter, yes, I think we are still, I'd say, having been working together for 15 years, we are, I think, doing the right thing now stepping in with a limited risk also seeing the business developing well on their end. And I think both parties at the end of the day are operating in good faith here to assess also a majority option. While I think it is not a compulsory step here, we still can achieve our strategic targets here. And finally, you know us well enough. We are always pretty cost and price sensitive here in M&A steps. It will definitely also depend on the development of the business and then the valuation is the key factor of decision-making. But knowing each other long enough, we can operate now for a foreseeable future in this format, and we'll take it from there.

Great. That helps me. My second question is regarding your CapEx budget in 2026. Daniel said that in 2025, it normalized. So could you roughly elaborate on your budget for CapEx for PP&E and intangibles in 2026?

Yes, Karsten. So the CapEx we would see for 2026, a little bit above what we've seen in 2025, but that is mostly related to the increased capitalization of R&D. So when it comes to PP&E, we do not see any huge investments above what we've seen in 2025.

Last question. I mean, we talked just a few weeks when you published your preliminary figures. If you recall this time between the call today and some weeks ago, is there any major change you have perceived? Or have things developed in the way you said it? I mean my impression is it is developing well, but perhaps I have missed anything. So perhaps you could elaborate on that.

I think we see ourselves well on track here in the -- from different perspectives. The one is we see, let's say, significantly higher dynamics in the defense part of the business. I mentioned this, we expect a rebound in India, but we also have signed initial, let's say, OEM program steps in the meantime, in Europe here and on the industrial side, a very, very good start here in the European part of the business and also a good start, especially driven also by oil and gas business in Canada. So overall, I think well on track, but still, let's say, especially the expansion on the defense side of the business, I mentioned that is contained in the outlook, still is contingent to a couple of decision points regionally, but also on the OEM level of business. But also there, I think within also expectations in terms of time line.

Gentlemen, at the moment, there are no more questions. I would like to turn the conference back over to you for any closing remarks.

Well, thank you very much. Thank you all again for taking the time. As always, don't hesitate to reach out to us here Suan, Daniel, myself for direct interaction and follow-up questions. With this, happy to close the call right now and wish you all a perfect day. Thank you very much.