Steyr Motors AG (4X0) Earnings Call Transcript & Summary

Ladies and gentlemen, and welcome to the Steyr Motors AG Publication of Half Year Figures 2026. The conference will be recorded. [Operator Instructions] Let me now turn the floor over to your host, Julian Cassutti Cusuti, CEO; and Bjorn Krausmann, CFO.

Thank you, and good morning from our side. Before going into the details regarding our figures, let's give you, and for those of you who don't know exactly our company, a short overview what we are doing, what Steyr Motors is doing. Steyr Motors, we are the global leader for customized diesel engines, especially in special military and civil situations. We have an outstanding product portfolio, especially for B2B customers for the military vehicles industry, for aggregates, especially for main battle tanks in the defense industry, but also for locomotives in the civilian industry, but also in the marine industry and also here both for the civilian and for the defense industry. We only serve B2B customers, but the final customers are all either MODs or the respective governmental institutions, so B2B business, but only through our B2B customers. As just said, we only produce and completely customized diesel engines for the military vehicle industry and for the civilian industry. We also now have, but we come to that later on in the outlook, new kind of product applications for -- especially for the so-called USV and UGV market, the unmanned industry, which will be one of the main growth drivers in the next couple of years, but also a complete new -- newly designed, newly developed product, the so-called M12, the Mobile Power Unit. And also here, we will present much more details in the next couple of minutes. So now I hand over to Bjorn Krausmann, the CFO, to present the respective figures. And then we will present also strategic remarks regarding the respective outlook.

Thank you, Julian, and good morning from my side. So let me just give you a brief overview regarding the key financials for the first half year. As already announced, the business development clearly fell short of the expectations we had for the first half year due to significant delays in the Defense segment. So we had sales of EUR 22.8 million, which was roughly at the same level of '25 but a clear shortfall in profitability. So our adjusted EBIT was at EUR 0.1 million versus EUR 0.4 million we had last year for the same period. Reason or the main reason for the drop in profitability was clearly a shift mix within our client portfolio for the first half. Last year was clearly impacted by major high-margin projects in the defense industry, but also civil sector. So for example, we had a license manufacturing with an Indian client, revenues with the Spanish vehicle clients in the military sector, but also locomotive engines from Siemens in the civil sector, all with pretty favorable margins. And this led to a very positive H1 '25, whereas '26 was clearly largely determined by marine engines in the civil sector with generally lower margins. At the same time, we also saw moderate growth of costs, notably within personnel, which is related to the integration and consolidation of BUKH, of course, but also selective hirings we did in the second half of '25 and the first half of '26. So we'll come to our new guidance in a few minutes. But based on our current outlook and sales pipeline, we clearly expect a rebalancing of our mix in the second half of '26 and going forward. And so also to get back on a more profitable track, of course. As you can imagine, the underlying business development as well as the milestones in '26 also had an impact on our cash flow development and resulted in an overall outflow of EUR 7 million. To highlight the cash flow from operating activities amounted to minus EUR 4.7 million. Main driver here was the increase of working capital, especially with inventories. We have long lead times for some raw materials, which are needed to fulfill orders in the second half of '26, but we also had a buildup of inventories related to delayed projects in the first half. Regarding the operating results, adjusted for nonoperating items, we were more or less balanced. So at EUR 0 or minus EUR 0.1 million, but working capital was clearly the driver here. We also had an investing cash flow, which amounted to EUR 4.9 million, which was related mainly to our BUKH acquisition. So the effect from the BUKH acquisition in our investing cash flow amounts to EUR 2.9 million. We then also have the capitalization of development projects of EUR 1.2 million and the CapEx of EUR 0.6 million, mainly for software and tools needed in production. Just a side note on the acquisition amount, this also includes a positive effect from our capital increase of around EUR 2 million, which was used as part of the purchase price financing. And lastly, the financing cash flow, which contributed EUR 2.6 million. We see here major inflow from bank loan, which was related to the BUKH acquisition and amounts to EUR 4 million and then outflow regarding the dividend payments we did in '26 of EUR 1.3 million. So these are the figures just in a nutshell. Let's now have a closer look on the underlying reasons for the business development in the first half year. Main reason, as we already mentioned, was significantly slower market momentum in the defense sector. So project and call-up decisions are currently delayed more than we originally expected across the market. So this is a development. We also see in large OEMs and systems partners on whose production and procurement plans [indiscernible] at the end depends as a supplier. In concrete terms, this led to revenue recognition or lack of revenue recognition of around EUR 10 million in the first half year, which means that the corresponding sales are postponed to later reporting period. And this underscores a little bit the project-related planning uncertainty of the defense business where we see shifts in public procurement permitting and acceptance processes. One additional effect is certainly that we see in the defense business strong seasonality. So in general, the second half of the year is generally stronger with the fourth quarter, in particular, accounting for a significant share of annual revenue and earnings recognition. As we said, we saw a delay and therefore, a reduction of revenue in the defense sector. At the same time, we grew our civil business. This is, of course, mainly related by the BUKH acquisition we did in the first half year at the end of Q1. With the acquisition of BUKH and its first time consolidation in Q2, we set a very important strategic milestone for us in the Civil segment. So it extends our product portfolio in the commercial marine sector and also gives us access to attractive international sales markets, especially in Asia and South America, where we didn't have a strong footprint so far. First half of the year was the implementation of the new holding structure which sets for us kind of organizational basis to efficiently map further growth and integrate at the end additional products, markets and companies in the future. So this is mainly important if we look at potential future M&A transactions or international corporations and will facilitate the integration of these. So let's maybe now move after these key developments and the key figures in H1 to the change in guidance, which has been already communicated. So in order to take into account the delays in public procurement approval and acceptance processes, which we clearly experienced over the last time, which is also for us a learning process, we decided to conservatively adjust the guidance for the full year and to take into account potential project postponements and future project postponements. And so we expect a revenue growth of 15% to 25% for '26 compared to previous year and an EBIT margin of 8% to 12%. So depending on the realization of and phasing of certain projects, of course. And these delays, we would also expect that they have an impact on the planned values for '27, which have been communicated so far and a quite ambitious target. So from today's perspective, we think that this will not be achieved in the originally expected time frame. And -- but what is really important, we believe that the underlying market drivers and the expected market demand, this remains intact, and that's also the feedback we get from our clients and from our pipeline and what we see in the second half and what we see in the midterm. So some projects which got delayed compared to previous planning include a project to equip the K2 main battle tanks for the Polish MOD as an end customer, but also DPM for Siemens locomotive for Scandinavian end customer as well as an engineering project with an Indian customer. So from today's perspective, these projects cannot be realized in '26 or '27 in the original time frame. So corresponding sales contributions will therefore, be postponed by 1 or 2 years according to our current picture. So I will hand over to Julian now, who will also give you a bit more insights regarding our order backlog and current developments on the client side, which will also have then an important impact, of course, on the future picture and future strategy of our company.

Thank you, Bjorn. So what has been just announced and positively is the development of the order backlog and the project pipeline. The order backlog now amounts to EUR 310 million until 2030. We now have and in addition to the almost 500 boats for the Navy Seals, which have been already communicated, the project pipeline includes also a tender for 1,000 vehicles from one of our major Spanish customers which will be equipped with Steyr engines. And for both projects, the production will be started beginning of 2027. For instance, and just to highlight and emphasize that we at Steyr Motors are mentioned in the official tender of the Navy of the Pentagon. Here, it's clearly said that a Steyr Motors engine will should be included in those almost 500 boats, which again underlines the concreteness of future orders starting 2027. But also, we already known and in March this year signed new KNDS framework agreement for 500 new Leopard 2 main battle tanks where we supply the APUs for such main battle tanks until 2034 will contribute to the basic utilization of our production capacity, especially starting beginning of 2027. This means that the Steyr Motors Group has a strong foundation for sustainable and profitable growth, but also a high level of visibility for revenue recognition in the coming years, especially starting 2027. The highly specialized and high-performance products of the Steyr Motors Group as well as the ability to deliver those engines significantly faster than the competition meet clearly the current needs of the defense market. Also, what we want to highlight in the weeks leading up to the publication of the half year figures, there have been market rumors about a potential takeover of Steyr Motors Group by Red Cat Holdings from the U.S., which is why we, as a Management Board, informed about this in a corresponding ad hoc announcement. Red Cat out of the U.S. has expressed clear interest in Steyr Motors, but the concrete talks broke off. However, the attention around Red Cat shows the strategic attractiveness of Steyr Motors significantly. The combination of a technological niche position, robust order backlog and short delivery times makes us fundamentally attractive to respective market participants. However, our focus remains on the operational implementation of the outlined growth strategy, especially regarding the just announced programs, for instance, regarding Spain, regarding U.S., but also regarding some other projects, which I will highlight in the next couple of minutes. For the second half of 2027, we expect stronger revenue recognition. Demand in the strategic core markets remains very high. However, due to the delays in the call-off and execution of individual programs, our revenue and earnings realizations have been partially postponed to the second half of 2026 and to the future reporting periods, so 2027. In the Commercial Marine business, we expect further revenue contribution from our acquisition in Denmark, the BUKH Group, which will enable us to position ourselves as a full range supplier in the selected market segments. We are now also able to process projects quickly and serve our customers with short delivery times. New orders can be implemented in additional production capacities without further investments. In general, the market for highly individualized diesel and power systems differs significantly from the classical engine market. We are not operating in a high-volume business, but in a specialized niche market characterized by short delivery times, high technical requirements and long-term customer relationships. In contrast to pure manufacturers of serial engines, we at Steyr Motors, therefore, define ourselves not only by quantities, but also by clearly customized tailor-made product development, so-called customized engineering and rapid integration into the selective customer platforms. This clearly differentiates us from classical series engine manufacturers. Therefore, we at Steyr Motors Group have the most important criteria for successful positioning in the niche market. First of all, top products, which are highly customized. Secondly, a secured supply chain according to our customer requirements. And thirdly, customized development and support with our teams on site to make the vehicle or the respective quote operational. And last but not least, a relatively fast processing implementation and delivery of orders in comparison to our competitors. Let's now move on to the respective implementation of our growth strategy in the next couple of months and years. Clearly, due to the increased defense budgets in the company's key target markets, we as Management Board expect above-average market growth in our relevant sales regions. In addition to the implementation of already planned orders, the development of new markets and [indiscernible] are to provide significant support for the growth strategy. We expect additional strategic defense future markets of the so-called unmanned systems, so the USVs and UGVs and also in the field of the so-called power generators, our newly designed newly developed product. We have identified and we want to highlight, therefore, 4 growth segments of the strategy -- of our strategy. Firstly, the international market development and the diversification. We continue our international expansion and diversification of our customer base. New target markets are being tapped in a targeted manner and existing customer relationships are being further expanded. Possible new strategic partnerships and also selective acquisitions can support implementation where they meaningfully complement product portfolios or a specific market access. Secondly, a clear focus on the growing unmanned sector, the so-called USV and UGV market. This market segment for the unmanned systems is rapidly gaining an importance for mission-critical missions. We are very well positioned here with the engines, with our engines, and there are concrete negotiations with different customers about short-term production of over 1,000 engines each, which can already be reflected in the 2027 sales figures. And this would clearly represent excellent growth opportunities here. So it's -- we can clearly confirm that it's not only Red Cat as a strategic interest, but also we are in discussions with other concrete customers regarding the production of, in some cases, at least 1,000 engines each, and this would even start in 2027. And this, as just announced, as just said, would represent an enormous growth for us for Stein Motors. Coming back to these 4 pillars. Number three, the expansion of our product portfolio with our so-called M12, the mobile power generator. Here, it has to be said that the demand for mobile energy generators is increasingly significantly. So as armed forces have a constant growing energy demand and require a reliable and mobile energy supply. For instance, for drones, anti-drone systems, for drone charging systems, those are the main examples where our power generator can be utilized. This means that generators have become part of the basic equipment of modern armed forces. Therefore, this market segment is one of the cornerstones of the modernization of military infrastructure. As just said, especially for the increasing integration of drone and anti-drone defense systems. Therefore, with the addition of the M12 power generator, we as Steyr Motors are in an excellent position regarding this new market trend. The current product is currently tested by a Western NATO force. We expect feedback in the next couple of weeks, next couple of months, whether we can secure a very concrete order of at least 1,000 power generators as a total production outcome and this production would also start in 2027. So also here, a very concrete with a very concrete customer negotiations about a potential massive ramp-up of the respective new product, the so-called power generator. Again, coming back to the 4 pillars. Number four, we want to become not only an engine manufacturer, but we want to become a supplier of entire powertrains, especially in the marine industry, in the marine sector. As you all know, the marine market offers an attractive growing environment. While the global market for marine engines is growing slightly, the market for high-performance boat applications is developing much more dynamically. And this is the market where we are in. This increasing demand for powerful compact and reliable drive solutions opens up attractive opportunities for us in the international civilian market. Therefore, the acquisition of the BUKH Group in Denmark will create strategic growth in the field of civil marine applications. But also, as we now know the receipt of U.S. order to equip the almost 500 Navy Seals boats with engines from Steyr also shows that we will continue to grow strongly in the defense marine market. Our aim is clearly to gradually develop from a pure engine manufacturer to a provider of the complete marine solution system. This means to a complete drivetrain provider. The necessary competencies can be built up organically through strategic partnerships or where strategically sensible also through selective M&A acquisitions. To sum it up, let's present some key messages where we want to focus on. So first of all, we clearly see that the structural market growth is still intact. However, as we also now have announced, there are and there have been some short-term delayed market implementations. The general market continue to show attractive structural growth. Short-term postponements and delays in the defense business do not change the long-term market opportunities and the strategic growth story. The strategic separation of the civilian and the defense divisions in our corporation and our company allow us the respective opportunities on the market to be exploited in the best possible way. Still so far, we clearly have to emphasize that all of our projects we have been reporting and also discussing internally, no single project has been canceled. However, of course, some projects, and we've just mentioned several projects have been delayed to 2027. But still, the market itself is fully there. There's a strong market demand. and no project has been canceled. But in several major projects, especially in Western Europe but also in some cases in India, there have been some postponements, some delays, which we now see clearly in our H1 sales. However, we've highlighted several projects, for instance, in Spain, for instance, in the U.S. with Navy Seals, but also clear opportunities with our power generator, clear opportunities regarding the USV, the unmanned market. The show in addition, clear opportunities at the latest starting in 2027. Second key message, clearly, the high visibility due to our order backlog. The high order backlog creates a strong base for further business development and offers a high level of visibility for the coming periods. One of the most important orders in this regard is the KNDS framework agreement until 2034, also a concrete order opportunity with the Western European vehicle manufacturer. This means 1,000 vehicles in the next couple of years, but also the order from the U.S. -- from the U.S. Navy Seals to equip almost 500 new boats with Steyr Motors engines in the next couple of years. Thirdly, third key message is the consistent strategic transformation from a pure engine manufacturer into a provider of mission-critical drive and energy solutions. We at Steyr Motors are gradually developing from a pure engine manufacturer into a provider of mission-critical [indiscernible] energy solutions. We have acquired the BUKH Group in Denmark, and this underlines the strategic orientation and shows -- clearly shows that we at Steyr Motors are able to drive the transformation forward through targeted M&A activities. Also, and again, we want to highlight that the launch of our power generator, the newly designed -- newly developed product, the so-called M12 power unit serves as a significant growth market with high demand. And also here, again, we have to highlight and emphasize that this new product so far is not included at all in the respective business plans and guidance and the respective guidance in the next couple of years as this newly designed, newly developed product would add to the respective guidance would add to the respective business plan. Key message number four, the attractive niche position where we are in. With a technological know-how, long-standing customer relationships in our core markets. And clearly, we offer reliability with our respective products. Those factors as well as the high degree of customer specialization create relevant barriers to entry and form the base for our sustainable margin and also profitability potential with the respective volumes in the next couple of years starting in H1, but clearly with a clear ramp-up starting in 2027 with the respective examples what we've expressed and outlined in the last couple of minutes to name, again, some examples is the orders from the Spanish MOD from our Spanish customer for the defense marine market but also additional opportunities in the USV market with very high potential volumes starting 2027 and also our new product, the power generator, the M12, also here, very concrete discussions with potential customers also for high volumes with more than 1,000 of the respective generators, but also starting here in 2027. That's from our side, the presentation of the figures and also some expressions, some highlights and background regarding the future outlook. Now we are happy to answer your questions.

[Operator Instructions] So the first question is from Patrick Steiner from ODDO BHF.

Patrick Steiner speaking with ODDO BHF. I do have a few questions, and I will take them one by one, if possible. So the first one on the new 2026 guidance. I mean, if I've read correctly between the lines, this is indicated to be a bit more on the conservative end in your view, but still implies revenue growth of 30% to 50% year-on-year in the second half of 2026. Can you therefore please explain to us the main drivers of this expected revenue growth for the second half of the year? And if possible already give us your impression of the operating development of the third quarter?

I'll start and then Bjorn will go into some details. In fact, of course, compared H2 with H1, clearly, H2 will have a significant growth. There are several main reasons. And maybe to answer your second question first, clearly, Q4 will be much stronger than Q3. This is what we clearly see right now and what we clearly see regarding the concrete purchase orders. To give you some examples, the KNDS, the APUs for the Leopard 2 main battle tank, it will clearly be much more volume than H1. Also some spare parts for KNDS. This will also be clearly a sales and profitability driver for H2. Also clear, as a matter of fact, we have the consolidation of the BUKH business, which we did not have in Q1. Therefore, of course, as a matter of fact, even with a stable business for BUKH, we will, out of accounting reasons, have to consolidate more revenue in H2. But also -- and Bjorn will give you some more details with some other major customers. H2, what we see clearly right now regarding the concrete purchase orders will be stronger. Also what we've just uploaded in our new investor presentation, the order backlog for H2 for the remaining months is EUR 32 million. And if you add this up to the just announced H1 figures, of course, you can clearly see what you've also just outlined, Patrick, that the lower end of the now guided range can be clearly reached just by H1 figures plus the order backlog. And -- but of course, we clearly believe that some opportunities still can be realized in H2. And therefore, the lower end of the now guided range is, in our opinion, really a very conservative a very conservative outlook, a very conservative guidance for this year. But Bjorn, please.

Yes. I mean you already mentioned a couple of customers, and we said, I mean, there will be a shift from our expectations also back to more military customers, and that's what we see. Of course, I mean, especially regarding US market, U.S. Navy, et cetera, we know these things are in the pipeline. They will come with a high profitability. But as we the last time over the last month and there can be always a shift and the phasing effect. So things might shift from Q4 to Q1 next year, fever. And that's why we -- of course, we want to take a conservative approach here and have targets, which might then be reached.

All right. So if I understand correctly, you can confirm that you already see some kind of revenue momentum year-on-year in the third quarter and you're quite upbeat about the order backlog conversion of the EUR 32 million within 2026. Is that correct?

That is [indiscernible] correct.

Second one, on Page 15 of the H1 results presentation, you've outlined the revenue bridge to get to the EUR 140 million of sales by 2029. I see no figures or estimates for EBIT development, also not in the press release. So is this EUR 40 million EBIT target, is it also just postponed until 2029? And if not, what kind of operating profitability should we expect for 2029?

In general, what's the key messages here because, I mean, given our business model, of course, if we have in 2026, a delay and therefore, the guidance cut, then of course, as all of our respective programs are ramping up, then, of course, also, as a matter of fact, as a clear consequence, the 2027 targets will have some delays. And therefore, we now clearly say from a conservative point of view, from a conservative perspective, still our targets, as we've just also announced and expressed, we don't know any single projects which have been canceled. But really different major programs, different major projects have been delayed. There have been postponements. Therefore, we now clearly say our targets, our initial targets, which we had for 2027 are still valid. However, there will be a delay of 1 or at the latest 2 years. Therefore, we've just announced and including in our investor presentation, which can be found in the Investor Relations section of our home page. There's a bridge how we can reach those initial targets, revenue targets. Of course, in the next couple of months, we will announce a concrete guidance for 2027. This is clear, including a concrete profitability guidance also here. In general, what we can confirm the initial guidance for 2027 is clearly still possible. So far, we've only uploaded and we've only announced the revenue target, the revenue bridge, but clearly, as just said, we will publish also the respective profitability in due course. And in general, of course, yes, our initial targets are still valid, but there will be clearly some delays of the latest 2 years.

Okay. You have mentioned during the presentation that you were in concrete negotiations with customers for short-term production of around 1,000 USV engines each for 2027. And also, you were talking about the potential for the mobile power unit. Could you maybe give us a ballpark range about the expected sales numbers in terms of units of mobile power units and USV engines for 2026 and '27?

Well, this is -- this would be quite a range, just that we are in both field -- so concrete for the mobile power unit and for the USV with different customers in concrete negotiations for respective contracts. And this would imply if we, hopefully, in the next couple of weeks can sign or in the next, let's say, 1, 2, 3 months can sign such contracts, this would mean in the best case scenario that we have a minimum quantity of 1,000 USV engines produced being in 2027 and also production of 1,000 generators. But the range -- it's quite a range. I mean, it can be, let's say, a couple of hundreds each next year up to so far 2,000 in total. It clearly depends on the concrete outcome of the negotiations with those concrete customers and maybe there will be some other customers coming in the next couple of months. So the concrete range is now, let's say, a couple of hundred to 2,000, but this is quite a broad range. But so far, we cannot -- we are not in the position to give a concrete figure as it all depends on the concrete negotiations in the next couple of weeks.

All right. Fair enough. Last one from my side. The 1,000 vehicles with Urovesa and the 500 boats for the Navy Seals, is this already in the backlog or not yet?

Yes. This is in the backlog now.

It is in the backlog. And it was in the backlog in Q1 already as well or not?

I mean there was -- yes, to some extent, there was Urovesa in the backlog, but this has been extended now.

The next question is from Ivan [indiscernible].

I have one question regarding your liquidity. Your cash and cash equivalents fell sharply from EUR 7.3 million at the end of 2025 to just EUR 300,000 as of the end of June this year, while your operating cash flow turned to a negative EUR 4.7 million. Given these tight liquidity levels and your heavy reliance on factoring, how do you plan to secure operational funding for the next quarters? And does this cash constraint limit your capacity to ramp up production for the new M12 power unit?

As outlined before, I mean, the main drivers in the first half, as you said, I mean, it is operating cash flow, which contributed EUR 4.6 million negative. This was mainly due to buildup of inventories. And as I mentioned, I mean, this is already due to the buildup of inventories from delayed projects in H1 and also projects which can be bundled, which should be fulfilled in the second half. So I mean, we don't expect such a huge ramp-up in inventories again until the end of the year. It depends, of course, on the project. And of course, I mean, we expect, as we outlined that H1 is a clear shift back to profitability with also more military clients. So this should also create a positive operating cash flow on this side. Second point in the first half year was, of course, that we had this financing -- this investing cash flow, which was negative due to the acquisition of BUKH. Of course, not financed by a loan, but this contributed also a lot to the negative outflow in H1 because we also had one-off effects regarding consulting costs, et cetera, which were also related to the transaction. So clearly, for the second half, we expect a positive cash development, which will also support us. And second point, I mean, yes, we use factoring, which gives us a certain flexibility. But as you can also see in our balance sheet, I mean, we have quite limited loan funding so far. So I mean, our financing structure is also quite conservative. We have the EUR 4 million bank loan now, which is clearly related to the BUKH acquisition. And we also -- we have a revolving facility, which is currently used only temporary and to a certain extent, but which gives us also a lot more flexibility. So I would say we have flexibility because we have, of course, existing short-term facilities, but also the perspective that we can build up more long-term loans if needed. So -- and given the positive outlook we see in H2, this will also provide us with a positive cash impact.

And the next question is from Lukas Spang from Tigris Capital GmbH.

I would take my questions one by one. The first one is related to the BUKH acquisition. Can you share the inorganic revenue effect in the first half of the year, please?