Q2 2026 Tesmec SpA Earnings Call

August 5, 2026

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Operator 4: It's crazy but it's true. Hey, I can't get over the way you love me like you do. I have to be sure when I walk out that door. Oh, how I want to be free. Oh, how I want to be free. Oh, how I want to break free. Life still goes on. I can't get used to live without you by my side. I don't want to live alone. Hey, God knows. Got to make it on my own. Baby, can't you see? I've got to break free. I've got to break free.

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Speaker #3: Good afternoon. This is the Chorus Call Conference Operator. Welcome, and thank you for joining the Tesmec Group first half 2026 results conference call. As a reminder, all participants are on listen-only mode.

Operator: Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Tesmec Group H1 2026 Results Conference Call. As a reminder, all participants are on listen only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Mr. Carlo Caccia Dominioni, CEO. Please go ahead, sir.

Speaker #3: After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone.

Speaker #3: At this time, I would like to turn the conference over to Mr. Carlo Caccia-Domignoni, CEO. Please go ahead, sir.

Speaker #4: Thank you. Good morning, everyone, and thank you for joining our conference call to discuss our first-half results. We very much appreciate your interest in our company, and we welcome the opportunity to update you on our performance and outlook for the end of the year.

Carlo Caccia Dominioni: Thank you. Good morning, everyone, and thank you for joining our conference call to discuss our H1 results. We appreciate very much your interest in our company, and we welcome the opportunity to update you on our performance and outlook for the end of the year. I would like to start with three key main messages that, in our view, summarize the H1 2026. The group continued to improve its overall performance, and this is the first very important point. Overall performance in terms of revenues, that increased by 12% year on year. EBITDA increased by 14.7%, and net profit that reached EUR 4.5 million compared to a loss in the H1 last year. Last but not least, the net financial debt decreased up to EUR 120 million.

Speaker #4: First of all, I would like to start with three key main messages that in our view summarize the first half of 2026. First of all, the group continued to improve its overall performance and this is the first very important point.

Speaker #4: The overall performance in terms of revenues that increased by 12% year on year. EBITDA increased by 14.7%. And net profit that reached 4.5 million euros compared to a loss in the first half of last year.

Speaker #4: Last but not least, the net financial debt decreased to €120 million. The second message I would like to share is the fact that the performance of our businesses nowadays reflects, of course, different stages of development.

Carlo Caccia Dominioni: Second message I would like to share is the fact that the performance of our businesses nowadays reflects, of course, different stages of development. On one side, Energy continued to benefit from positive market dynamics and, for sure, a strong execution, as you can see also in the results. Trenchers are showing the first concrete sign of recovery, especially if we look at the transition between Q1 and Q2. While rail achieved important commercial milestones that are reflected in our backlog figures, at the same time, as I also anticipate in our Q1 conference call, is still suffering from some expected delays in the startup of new projects. Last but not least, the third point is that we are entering, but also maybe we are reinforcing a period in which we have a greater visibility in terms of market perspective and opportunities.

Speaker #4: On one side, energy continued to benefit from And for sure a strong execution, as you can see also in the results. Trenches are showing the first concrete sign of recovery.

Speaker #4: Especially if we look at the transition between first and second quarter. While rail achieved important commercial milestones that are reflected in our backlog figures.

Speaker #4: But at the same time, as I also anticipated in our first quarter conference call, we are still suffering from some delays—let's say, expected delays—in the startup of new projects.

Speaker #4: Last but not least, the third point is that we are I would say we are entering, but also maybe we're reinforcing a period in which we have a greater visibility in terms of market perspective and opportunities.

Speaker #4: If you saw our results, the backlog has increased up to 100 up to 498 million euros. Increasing both compared to the end of last year and compared to March 2026.

Carlo Caccia Dominioni: If you saw our results, the backlog has increased up to EUR 498 million, increasing both compared to the end of last year and compared to March 2026. This result is, of course, important for us because it give us a very strong basis for the execution over the next coming quarters. Let's say coming quarters, but also coming years. Just to sum up, of course, there is still work to do across some parts of the portfolio. Of course, there are still some activities that we have to reinforce in the next coming quarter, but we believe that, as we are also showing in our results, that the group is progressing in the right direction with a strong focus in our operational and especially financial priorities, for the next future.

Speaker #4: These results is of course is important for us because give us a very strong basis for the execution over the next coming quarters. Let's say coming quarters, but also coming years.

Speaker #4: So just to sum up, of course there is still work to do across some parts of the portfolio. Of course there are still some activities that we have to reinforce in the next coming quarter, but we believe that as we are also showing in our results that the group is progressing in the right direction with a strong focus in our operational and especially financial priorities for the next future.

Speaker #4: Before going into the dynamics of the different business, I will leave the floor to Ruggiero Gambini, our CFO, that will go on with more details on the figures.

Carlo Caccia Dominioni: Before going into the dynamics of the different business, I will leave the floor to Ruggero Gambini, our CFO, that will go on with more details on the figures.

Speaker #2: Thank you, Carlo. Welcome, everyone. As usual, we made available a presentation which you can download from our website investorrelations section. And going to page five of this presentation, just to comment briefly, our KPIs starting from the economic ones as Carlo said, both revenues and EBITDA showed a robust performance during the first part of the year.

Ruggero Gambini: Thank you, Carlo. Welcome, everyone. As usual, we made available a presentation which you can download from our website investor relations section. Going to page five of this presentation, just to comment briefly our KPIs, starting from the economic ones. As Carlo said, both revenues and EBITDA showed a robust performance during the first part of the year, confirming a gain of momentum, which started actually in 2025, and which is getting even more robust throughout this year, which is important, especially when we look at the estimates for the year end that will be commented later on. In terms of revenues, EUR 144 million, a 12% increase versus the first part of last year, with a 15%, almost close to 15% increase in EBITDA, which went above EUR 24 million with a profitability close to 17%.

Speaker #2: And gaining confirming a gain of momentum which started actually in 2025 and which get is getting even more robust throughout this year, which is important especially when we look at the estimates for the year end that will be commented later on.

Speaker #2: In terms of revenues, 144 million so 12% increase versus the first part of last year. With a 15% almost close to 15% increase in EBITDA, which went above 24 million with a profitability close to 17%.

Speaker #2: I remind you, as we already communicated in the past, that our target EBITDA margin is well above this level. This is part of our mid-term work to be done.

Ruggero Gambini: I remind, as we already communicated in the past, that our target EBITDA margin is well above this level. This is part of our midterm work to be done, which is ongoing as the actors are showing. Just a couple of comments. Clearly, a more than proportional growth at EBITDA level, thanks to operating leveraging versus the growth of sales on one side. On the other side, in terms of contribution to the growth of both sales and margins, there is a sort of a differentiated trend between the business unit. The single most important business unit driving this growth is represented by the energy sector, more especially Stringing. Only Stringing sales grew by close to 50% in the H1 of this year against 2025. While the automation sector achieved a growth of sales of around 18%.

Speaker #2: Which is ongoing as we act as our showing. Just a couple of comments. Clearly, more than proportional growth at EBITDA level thanks to operating leveraging versus the growth of sales on one side.

Speaker #2: On the other side, in terms of contribution to the growth of both sales and margins, there is a sort of differentiated trend between the business unit the single most important business unit driving this growth is represented by the energy sector.

Speaker #2: More especially stringing only stringing sales grew by close to 50% in the first half of this year against 2025. And while the automation sector achieved a growth of sales of around 18%.

Speaker #2: Also, trenches, as Carlo anticipated, showed first signs of recovery against the second part of last year, which was particularly negative, if you could remember.

Ruggero Gambini: Trenchers, as Carlo anticipated, showed first signs of recovery against the second part of last year. That was particularly negative, if you could remember. H1 2025, still positive for trenchers with a slowdown in the second part of the year, and then affecting the 12 months result of the division, in 2025. The Q1 results presented three months ago showed a first sign of recovery. This was confirmed by the Q2 sales. Trenchers grew around 5%, keeping an acceptable level of margins in absolute terms. Still to do in terms of marginality, this will be commented later on. In terms of EBIT, of operating results, the growth was even higher, 25%, thanks to depreciation, almost in line, H1 against H1, 2026, 2025.

Speaker #2: So first half of 2025 still positive for trenches with a slowdown in the second part of the year. And then affecting the 12 months result of the division in 2025.

Speaker #2: The first quarter results presented three months ago showed a first sign of recovery with this was confirmed by the second quarter sales. So also trenches grew around 5% keeping good keeping an acceptable level of margins in absolute terms.

Speaker #2: Still to do in terms of marginality this will be commented later on. In terms of EBIT of operating result, the growth was even higher 25% thanks to depreciation almost in line half year against half year 26, 25.

Speaker #2: This is the direct result of the overinvestments which were done in past years, leading to a level of depreciation substantially at maturities.

Ruggero Gambini: This is the direct result of the other investments which were done in the past years, leading to a level of depreciation substantially at maturity. Now we are simply continuing the level of depreciation D&A, which, by the way, are also a good measure also of total CapEx. As we will see briefly with CapEx nowadays in line with the level of depreciation. This is very important because to the extent this is confirmed, the EBIT could be a very proxy measure of the gross cash flow generated. In the period, financial charges remained stable in spite of a decrease in the bulk of the net financial position, both against June last year and December last year. This is due to a lower total debt with an increased average cost of such a debt. This is going to improve in the forthcoming quarters.

Speaker #2: So now we are simply continuing the level of depreciation. D&A which by the way are also a good measure also of total CAPEX. So as we will see briefly, with CAPEX nowadays in line with the level of depreciation.

Speaker #2: This is very important because, to the extent this is confirmed, the EBIT could be a very good proxy measure of the gross cash flow generated in the period.

Speaker #2: Financial charges remain stable in spite of a decrease in the bulk of the net financial position. Both against June last year and December last year.

Speaker #2: This is due to a lower total debt with an increased average cost of cost of such a debt. This is going to improve in the forthcoming quarters.

Speaker #2: There was a positive contribution very positive contribution on an incremental basis against last year from foreign change foreign exchange rates. This is due clearly to the dynamics especially of the euro dollar currencies.

Ruggero Gambini: There was a positive contribution, a very positive contribution on an incremental basis against last year from foreign exchange rates. This is due clearly to the dynamics, especially of the euro dollar currencies. We already explained this every now and again. The Forex variations are mostly linked to unrealized variations, rolling with uptrends and downtrends from quarter-to-quarter. In this last year, we were particularly penalized. This year, given to the rebound in the euro dollar exchange rate, there was a gain of EUR 1.2 million, as you can see, leading to, on an incremental basis, an improvement of around EUR 4 million. Ending result is represented by a pre-tax profit of EUR 7 million, and finally, a first sign also of return to profitability with the generation of an after-tax net result for a profit of EUR 4.5 million.

Speaker #2: We already explained this every now and again. The forex variations are mostly linked to unrealized variations. Rolling with uptrends downtrends from quarter to quarter.

Speaker #2: And this last year we worked particularly penalized this year given to the rebound in the euro dollar exchange rate there was a gain of 1.2 euro million as you can see.

Speaker #2: Leading to on an incremental basis an improvement of around 4 million. Ending result is represented by a pre-tax profit of 7 million and finally a first sign also of return to profitability with a generation of the of an after tax net result for profit of 4 and a half million euro.

Speaker #2: As you might remember, as we said in the previous conference earnings calls, we always said our target was not to break even—that was just the first step of our relaunch strategy.

Ruggero Gambini: As you might remember, as we said in the previous earnings calls, we always said our target was not to break even. That was just the first step of our relaunch strategy, and that our objective was to make money and create value for our shareholders. Finally, we are seeing the first outcome of the strategy implemented two and a half years ago, also in the results, and which is very important. Clearly, the second part of the year, we hope could even be better in order to enforce this very important message. In terms of net financial position, I would invite you to skip to page seven of the document. Here, as usual, we present the picture of the free cash flow generation. Total debt passed from the EUR 130 million of December last year to EUR 120 million at the end of June.

Speaker #2: And actually and that our objective was to make money and create value for our shareholders. Finally, finally we are seeing the first outcome of a strategy implemented 2 and a half years ago also in the results.

Speaker #2: And this is very important. Clearly the second part of the year we hope could even be better in order to reinforce this very important message.

Speaker #2: In terms of net financial position, I would invite you to skip to page seven of the document. Here, as usual, we present the picture of the free cash flow generation.

Speaker #2: So total debt passed from the 130 million of December last year to 120 million at the end of June. So 10 million euro free cash flow generation out of these 7 million is directly connected to the operating activities and 3 million as a reduction of IFRS 16.

Ruggero Gambini: EUR 10 million free cash flow generation. Out of this, EUR 7 million is directly connected to the operating activities and EUR 3 million as a reduction of IFRS 16. It is also very important to see and to notice the progress improvement in all the financial ratios, such that, if you remember, when we started with our process of relaunch from June 2024, at that point in time, the net financial debt reached EUR 185 million, around EUR 185. Considering now after 24 months, there has been a reduction of around EUR 64 to EUR 65 million. Very important because, again, the cash generation is a very, very relevant confirmation of the goodness of the strategy so far implemented. One last comment in terms of debt composition, out of the EUR 120 million, just to remind, around EUR 64, something more than EUR 60 million is working debt, meaning backing the net working capital.

Speaker #2: It is also very important to see and to notice the progress improvement in all the financial ratios such that if you remember when we started with our process of relaunch from June 2024 at that point in time the net financial debt reached 185 million euro around 185.

Speaker #2: So considering now after 12 months 24 months there has been a reduction of around 64 to 65 million euro. Very important because again the cash generation is a very very relevant confirmation of the goodness of the strategy so far implemented.

Ruggero Gambini: Very important because, again, the cash generation is a very, very relevant confirmation of the goodness of the strategy so far implemented. One last comment in terms of debt composition, out of the EUR 120 million, just to remind, around EUR 64, something more than EUR 60 million is working debt, meaning backing the net working capital.

Speaker #2: In terms of one last comment in terms of debt composition out of the 120 million euro just to remind around 64 something more than 60 million is working debt meaning backing the networking capital.

Speaker #2: Another €24 million is represented by IFRS 16 financial liabilities. So that means that, actually, the real net industrial financial debt is slightly above €30 million.

Ruggero Gambini: Another EUR 24 million is represented by IFRS 16 financial liabilities. That means that actually the real net industrial financial debt is slightly above EUR 30 million. If you compare this, in terms of duration, with the overall amount of mid long-term financial debt, which is above EUR 7 million, already excluding the portion of such debt expiring in the forthcoming 12 months, you can see that actually, on top of having finally acceptable financial ratios, there is also a huge room for financial flexibility. I would stop here and leave the floor to our CEO.

Speaker #2: If you compare this in terms of duration with the overall amount of mid long term financial debt which is above 7 million already excluding the portion of such debt expiring in the forthcoming 12 months you can see that actually on top of adding finally acceptable financial ratios there is also a huge room for financial flexibility.

Speaker #2: I would stop here and leave the floor to our CEO.

Speaker #1: Thank you Ruggero. So let's go and have a look in details on the single business units. Starting as usual from trenches from the bigger one.

Carlo Caccia Dominioni: Thank you, Ruggero. Let's go and have a look in details on the single business units, starting as usual from Trenchers, from the bigger one. For Trenchers, the H1 showed a number of elements that support our view that the business is gradually moving towards a more balanced phase. In terms of revenues, that increased by 5% year-on-year. Of course, looking at the backlog, that increased significantly to up to EUR 81 million, providing visibility for the next coming quarters. EBITDA, if you look at these figures, was stable compared to last year. If you have a look in details, if you look at the second part of last year and the Q1 of this year, as expected, there was a significant improvement in Q2. Let's say, we foresee for the next coming quarters to go on in this direction.

Speaker #1: For trenches the first half showed a number of elements that support our view that the business is gradually moving towards a more balanced phase.

Speaker #1: In terms of revenues, those increased by 5% year on year. And, of course, looking at the backlog, that increased significantly up to €181 million.

Speaker #1: Providing visibility for the next coming quarters. EBITDA was if you look at this figures was stable compared to last year. But if you have a look in details if you look at the second part of last year and the first quarter of this year as expected there was a significant improvement in Q2.

Speaker #1: And let's say we foresee for the next coming quarters to go on in this direction. Of course for trenches we are not yet considering the recovery process completed.

Carlo Caccia Dominioni: Of course, for Trenchers, we are not yet considering the recovery process completed. The indicators observed during this half are consistent with the expectation that we had for entering the year. In terms of production volumes, that compared to last year, improved a lot, and backlog, that is higher, as I just said. There are, for sure, significant opportunities in markets that, for us, are very strategic in terms of applications, especially with a main focus on pipeline energy infrastructure. That is a current topic that we will see also later on for data centers with energy and mining.

Speaker #1: But the indicators observe during this half are consistent with the expectation that we had for entering the year. In terms of production volumes that compared to last year improved a lot.

Speaker #1: And backlog that is higher, as just said. There are for sure significant opportunities in markets that for us are very strategic in terms of applications, especially with a main focus on pipeline energy infrastructure. That is a current topic that we will see also later on for data centers with energy. At least one very important point for this half, but I would say more important also for the rest of the year, is the fact that the US market is performing very well.

Carlo Caccia Dominioni: Last but not least, one very important point, for this H1, but I would say more important also for the rest of the year, is the fact that the US market is performing very well, and this is important for Tesmec in terms of volumes, in terms of geographical mix, and in terms of profitability. Let's now switch to rail. As you can see from the figures of rail, the current performance of rail does not yet reflect the commercial progress that the company is doing in this business. I like to remind the fact that when also we met for Q1, we underlined the fact that these results for H1 of this year were foreseen and anticipated.

Speaker #1: And this is important for Tesmec in terms of volumes, in terms of geographical mix, and in terms of profitability. Let's now switch to Rail.

Speaker #1: As you can see from the figures of rail the performance the current performance of rail does not yet reflect the commercial progress that the companies doing in this business.

Speaker #1: I like to remind the fact that when also we met for the first quarter we underlined the fact that these results for the first half of this year were foreseen and anticipated.

Speaker #1: When I mean results I refer to the fact that revenues are slightly lower than last year. Reflecting the transition between the former the completed projects the completed contracts that we were closing ended up of the new ones recently awarded.

Carlo Caccia Dominioni: When I mean results, I refer to the fact that revenues are slightly lower than last year, reflecting the transition between the former, the completed project, the completed contracts that we were closing, and the ramp up of the new ones recently awarded. At the same time, we have to have a look at the backlog. The backlog increased significantly. Nowadays, is around EUR 180 million. This give, especially for rail, and especially for the structure of the business of rail, is very important in terms of providing visibility, not only for the next coming quarter, but as you know, with the duration of our backlog, also for the next coming years. If you, looking at the numbers, of course, revenue and profitability are still reflecting a gap between the old projects and the new contracts.

Speaker #1: But at the same time we have to have a look at the backlog. The backlog increased significantly nowadays is around 180 million euros. And this give especially for rail and especially for the structure of the business of rail is very very important in terms of providing visibility not only for the next coming quarter but as you know with the duration of our backlog also for the for the next coming years.

Speaker #1: So if you looking at the numbers of course revenue and profitability are still reflecting a gap between the old projects and the new contracts.

Speaker #1: But at the same time I would like to spend some moments in underlining our activity in terms of sales activity. That from our perspective is very strong in terms of as you know Tesmec is looking forward to development of the international presence of the of our of our railway business across European market.

Carlo Caccia Dominioni: At the same time, I would like to spend some moments in underlining our activity in terms of sales activity, that from our perspective is very strong in terms of, as you know, Tesmec is looking forward to development of the international presence of our railway business across European markets, through the participation in major tenders. One of the evidence of this priority that we gave in terms of commercial activity is the Slovenian tender that we recently award of EUR 71 million. That is validating our capability to deliver a complex solution for the railway infrastructure. One other important milestone for our development in rail is the fact that the new bimodal maintenance vehicle platform has entered into the certification testing phase. This is important in terms of evolution of our product development roadmap.

Speaker #1: European markets. Through the participation in major tenders. One of the evidence of this priority that we gave in terms of commercial activity is the Slovenian tender that we recently award of 71 million euros.

Speaker #1: That is validating our capability to deliver complex solutions for the railway infrastructure. Another important milestone for our development in rail is the fact that the new bimodal maintenance vehicle platform has entered into the certification testing phase.

Speaker #1: This is important in terms of the evolution of our product development roadmap. And last but not least, we achieved in the first half some key certifications for specific markets and specific geographies that are foreseen to be very strategic for our near future, such as in France.

Carlo Caccia Dominioni: Last but not least, we achieved, in H1, some key certification for specific markets, specific geographies that are foreseen to be very strategic for our next future, such as France. If we look at the next future for this business, as we move through H2, the focus of our people, the focus of our structure in rail, will be on the execution of the existing backlog that as I was mentioning, is pretty important, and the conversion of the commercial development and activities that we are facing in the last recent quarters. Last but not least, in terms of business, let's have a look at the energy business. As you can see from our charts, energy continue to provide a strong contribution to the Group growth, in basically every financial that we show in the chart.

Speaker #1: If we look at the next future for this business as we move through the second half the focus of our people the focus of our structure in rail will be on the execution of the existing backlog that was mentioning is pretty important.

Speaker #1: And the conversion of the commercial developments and activities that we are facing in the last recent quarters. Last but not least, in terms of business, let's have a look at the energy business.

Speaker #1: As you can see from our charts energy continue to provide a strong contribution to the to the group growth. In basically every financial that we show in the chart in terms of revenues with a strong increase of 38% compared to last year.

Carlo Caccia Dominioni: In terms of revenues, with a strong increase of 38% compared to last year. Probably the most significant and rapid growth is the one of EBITDA, that increased by 74% compared to last year, so going from 18% to almost 23%. Backlog, that of course, is going on in a strong direction, as usual, giving us a very strong visibility for the next future. This business in each division, both energy automation and stringing, is benefiting from positive market dynamics, supported by ongoing investments in the grid infrastructure, both in transmission and distribution, as we were also mentioning while presenting Trenchers. If we want to have a deep dive in the two divisions, in stringing, the market is positive and driven by continuous investments in the power infrastructure.

Speaker #1: Probably the most significant and rapid growth is the one of ABDA, which increased by 74% compared to last year, going from 18% to almost 23%.

Speaker #1: And backlog that of course is going on in a strong direction as usual giving us a very strong visibility for the next future. This business in each division both energy automation and streaming is benefiting from positive market dynamics supported by ongoing investments in the grid infrastructure both in transmission and distribution as we were also mentioning in while presenting trenches.

Speaker #1: If we want to have a deep dive in the in the two division in streaming the market is positive and driven by continuous investments in the in the power infrastructure.

Speaker #1: Backlog that usually has a duration as you know that is very short is has increased by 86% compared to last June last year. And this is very impressive from our perspective.

Carlo Caccia Dominioni: Backlog that usually has a duration, as you know, that is very short, has increased by 86% compared to June last year. This is very impressive from our perspective. Of course, as we were mentioning for Trenchers, one very important aspect in terms of geographies, in terms of mix, is the fact that our US market is performing very strongly and is looking for performing in this way also, for the next future. In terms of technological platform, we communicate in the last couple of weeks, also the launch of the introduction of the new underground product range, still for transmission. That is an important milestone, especially in perspective, in order to complete our range for the transmission business.

Speaker #1: And of course as we were mentioning for trenches one very important aspects in terms of geographies in terms of mix is the fact that our US market is performing very strongly and is looking for performing in this way also for the next future.

Speaker #1: In terms of technological platform we have to also we communicate in the last couple of weeks also the launch of the the introduction of the new underground product range still for still for transmission that is an important milestone especially in perspective in order to complete our range for the transmission business.

Carlo Caccia Dominioni: On the other side, for automation, the execution remains solid across the key projects in pipeline and in the backlog, with an increasing weight of substation automation systems compared to the sale of products, especially in distribution. The backlog conversion to continue to support the growth in terms of volumes and of profitability. Of course, as per the railway business, there is still a continuation of our sales activity in order to diversify our customer portfolio, not only in terms of technologies, but also necessarily in terms of geographies, in Europe in general, not only in Italy. Before, let's say, closing our conference call, I would like to give you a look on the outlook of 2026. I would like to underline one very important aspect, that is basically that our priorities remain the same.

Speaker #1: On the other side for automation the the execution remains solid across the key project that the key projects in pipe and in the backlog with an increasing weight of substation automation systems compared to the sale of products especially in distribution the backlog conversion to continue to support the growth in terms of volumes and of profitability.

Speaker #1: And of course as per the railway business there is still a continuation of our sales activity in terms in order to diversify our customer portfolio not only in terms of technologies but also and especially in terms of geographies in Europe in general not only in Italy.

Speaker #1: Before before let's say closing our our conference call I would like to give you a look of the on the outlook of 2026. I would like to underline one very important aspect that is basically that our priorities remain the same.

Speaker #1: So we of course we entered this this second half of the year with a strong backlog almost around 500 million euros of course this gives us visibility and want to repeat too many times this the same topic but let's say of course gives us confidence for the future.

Carlo Caccia Dominioni: Of course, we entered H2 of the year with a strong backlog, almost around EUR 500 million. Of course, this gives us visibility. I don't want to repeat too many times the same topic, but let's say, of course, gives us confidence for the future. On the other side, from a managerial perspective, the key priorities of our people, of our key managers, of our people in Italy and in the international footprint of Tesmec remain very focused on cash generation, reduction of working capital, and debt reduction. Of course, based on what we see in terms of current developments, we continue to expect growth in our key economic indicators compared to the end of 2025, and a further improvement in the net financial debt. I think we are all done, we leave the floor to any question or anything. Thanks.

Speaker #1: On the other side from a managerial perspective the key priorities of our people of our key managers of our people in Italy and in the in in in the in the international footprint of Tesmec remain very focus on cash generation reduction of working capital and debt reduction.

Speaker #1: Of course based on what we see in terms of current developments we continue to expect growth in our key economic indicators compared to the end of 2026 25 sorry and a further improvement in the net financial debt.

Speaker #1: So, I think we are all done. We will now leave the floor to any questions or comments. Thank you.

Speaker #2: Thank you. This is the chorus call conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the telephone.

Operator: Thank you. This is the Chorus Call conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the telephone. To remove yourself from the question queue, please press star and two. We kindly ask you to use handsets when asking questions. Anyone who has a question may press star and one at this time. The first question is from Enrico Coco, Intermonte. Please go ahead.

Speaker #2: To remove yourself from the question queue please press star and two. We kindly ask you to use handset when asking questions. Anyone who has a question may press star and one at this time.

Speaker #2: The first question is from Enrico Coco Intermonte. Please go ahead.

Speaker #1: Yes. Good afternoon. I have some questions on on numbers because you basically commented that the semester but if I see the trends in the second quarter is the growth is is is much more aggressive compared to the to the first quarter.

Enrico Coco: Yes, good afternoon. I have some questions on numbers because, you basically commented the H1, but, if I see the trend, in Q2, the growth is much more aggressive compared to Q1. For example, on the sales part, in H1, sales were up 12%, but this is done by 7% in Q1 and 17% in Q2. If I see the trencher, for example, trenchers were down 7% in Q1, but in this Q2 are up 19% compared to Q2 of last year. It is really a turnaround of growth in trencher, and the only business going not really well is the rail. My question is on the rail business. You said that you expect an acceleration in H2 based on the backlog you already have in hands.

Speaker #1: For example on the sales part in the first half sales were up 12% but this is done by 7% in the first quarter and 17% in the second quarter.

Speaker #1: If I see the the the trencher for example trenchers were down 7% in the first quarter but in this second quarter are up 19% compared to the second quarter of last year.

Speaker #1: So it's really a turnaround of growth in in trencher and the only business going not not really well is the the rail. Now my question is on the rail business based on you said that you expect an acceleration in the second half based on the backlog you already have enhance.

Speaker #1: So the question in in the railway is can you can you tell the the revenues level you expect in in the second half based on the conversion of the backlog?

Enrico Coco: The question in the right way is, can you tell the revenues level you expect in H2 based on the conversion of the backlog? The revenue level on which we have visibility for H2. This is about the rail, which in H1 had the sales of EUR 20 million. The question is, if you expect for H2, I don't know, another EUR 20 million sales or at least we have visibility on these EUR 20 million sales for H2. About the group, you expect an acceleration in H2. The Q2 was already really strong in terms of growth acceleration. The question is, if I look at your outlook, for example, a level of revenues of EUR 300 million this year, do you think is achievable by the company?

Speaker #1: So the the revenue level on which you have visibility for for the second half. This is about the rail. We which in the first half had sales of 20 million.

Speaker #1: So the question is if you expect for the second half I don't know another 20 million sales or at least we have visibility on this 20 million sales for the for the first half for the second half.

Speaker #1: And then about the group you expect so an acceleration in the second half the second quarter was already really strong in terms of growth acceleration.

Speaker #1: So the question is if I look at your outlook for example a level of revenues of 300 million euros this year do you think is achievable by by the by by the company because if I see again the the the trend of the second quarter and and the acceleration expect and you expect based on the backlog in the second half you know the numbers should go should go up much more than your guidance.

Enrico Coco: If I see, again, the trend of Q2 and the acceleration you expect based on the backlog in H2, the numbers should go up much more than your guidance. Also on the margins. For example, in trenchers, in Q2, margins were 16.6%, almost 17%. Margins are already at a level which is pretty high. The question is, if you maintain this kind of margin, around 17% to 18%, also the profitability should be much higher at year-end. Basically, my question is about understanding, based on the acceleration you will have in H2, understanding the fair estimates for the year. If you could provide some indication on this. I have another question about the JV in the US.

Speaker #1: And also on on the margins so for example in in trencher in the second quarter margins were 16.6 6% so almost 17%. So margins are are already at a level which is pretty high.

Speaker #1: And the question is can if you if you maintain this kind of margin around 17 18% also the profitability should should be much higher at year end.

Speaker #1: So basically my my question is about understanding based on the on the acceleration you you you will have in the second half. Understanding you know the the the fair estimates for for for the year.

Speaker #1: If you could provide some some indication on on this. And then I have another question about the JV in the US. Can you tell the the impact I would see in Tesmec consolidated accounts if you will start consolidating this this JV.

Enrico Coco: Can you tell the impact I would see in Tesmec consolidated accounts if you will start consolidating this JV? What do you consolidate today, and what could change if you will start consolidating the asset line by line? Thank you.

Speaker #1: So what what do you consolidate today and what could change if you will start consolidating the asset line by line. Thank you.

Speaker #3: Thank you Enrico. Very very difficult questions just before going on holidays. Okay. Let's start from rail. As you as you know as I was as I was mentioning in the last couple of conference call we're expecting to have as low first half of the year.

Carlo Caccia Dominioni: Thank you, Enrico. Very difficult questions, just before going on holidays. Okay. Let's start from rail. As you know, as I was mentioning in the last 2 of conference calls, we were expecting to have a low H1 of the year, because we were still in the awarding phase of the new tenders, such as the Slovenian one. Because we all know that in order to see the results and the effects of the new awarded tender, especially in rail, especially with our supply chain, takes some time. I have to be very qualitative today, so I cannot give specific numbers. We want to be very coherent with how we have been in the last 3 years. We want just to give a flavor, an idea of what are our perspectives without giving specific numbers.

Speaker #3: Because we were still in the wording phase of the new tenders, such as the Slovenian one, and because we all know that, in order to see the results and the effects of the newly awarded tender—especially in rail, especially with our supply chain—takes some time.

Speaker #3: I have to be very qualitative today so I cannot give specific numbers. Also in terms of we want to be very coherent with how we have been in the last few years so we want just to give a a flavor an idea of what the our perspective perspectives without giving specific numbers.

Speaker #3: But we are positive for the rest of the year because as said we will see the results of the implementation of the new tender of Slovenia.

Carlo Caccia Dominioni: We are positive for the rest of the year because, as said, we will see the results of the implementation of the new tender of Slovenia. Of course, we will not see all the results in the H2, but we will see also the results in the next coming years. We will see the result and the start-up of new opportunities that we are facing and we are working on since, not 2 months, let's say, since 3 quarters from now. We expect to have the volumes in rail to increase significantly. We expect also the profitability to be much better than in the H1.

Carlo Caccia Dominioni: We are positive for the rest of the year because, as said, we will see the results of the implementation of the new tender of Slovenia. Of course, we will not see all the results in the H2, but we will see also the results in the next coming years. We will see the result and the start-up of new opportunities that we are facing and we are working on since, not 2 months, let's say, since three quarters from now. We expect to have the volumes in rail to increase significantly. We expect also the profitability to be much better than in the H1.

Speaker #3: Of course it will not see all the results in the second half but we will see also the results in the next coming years.

Speaker #3: And we will see the result and the startup of new opportunities that we are facing and we are working on, not just for a couple of months, let's say, but for a few quarters from now.

Speaker #3: So we expect to have the the the volumes in rail to increase significantly and we expect also the profitability to be much better than in the first half if you look our to our track record in rail in the last few years you see that it's more an outlier the first half of this year compared to other exercises in which the EBITDA was to a much more stable level.

Carlo Caccia Dominioni: If you look to our track record in rail in the last 3 years, you see that it's more an outlier, the H1 of this year, compared to other exercises in which the EBITDA was to a much more stable level. We expect to go back to our direction in terms of profitability. Because as a business, and also because in terms of geographical and technological mix, as we have said many times, the railway business is moving towards a better direction. For the diagnostic business and also for the fact that we are working to be more competitive in international markets, that has a higher profitability level compared to Italy. In terms of expectation for the end of the year, I would stick to our same position. We are stick to the fact that we are positive. The outlooks are positive.

Carlo Caccia Dominioni: If you look to our track record in rail in the last three years, you see that it's more an outlier, the H1 of this year, compared to other exercises in which the EBITDA was to a much more stable level. We expect to go back to our direction in terms of profitability. Because as a business, and also because in terms of geographical and technological mix, as we have said many times, the railway business is moving towards a better direction. For the diagnostic business and also for the fact that we are working to be more competitive in international markets, that has a higher profitability level compared to Italy. In terms of expectation for the end of the year, I would stick to our same position. We are stick to the fact that we are positive. The outlooks are positive.

Speaker #3: So we expect to go back to our direction in terms of profitability. Also because as a business and also because in terms of geographical and technological mix as you as we have said many times the railway business is going to is moving towards a better direction.

Speaker #3: In for the diagnostic business and also for the fact that we are working and working to be more competitive in international markets that are more that has a higher profitability level compared to to to Italy.

Speaker #3: In terms of expectation for the for the for the end of the year I would stick to the our same position. So we are stick to the fact that we are positive.

Speaker #3: The outlooks are positive. Our commitment at the beginning of the year was to improve all our key financial indicators and we are still very convinced to be able to do this.

Carlo Caccia Dominioni: Our commitment at the beginning of the year was to improve all our key financial indicators. We are still very convinced to be able to do this. As you said, the H1 was good. We expect to have a positive H2. Of course, we are in a market context that is. The dynamics of the market are very difficult to read. We are in good sectors, strong sectors. We have a very strong position in those sectors. Of course, as we all saw in the last few years, there are some uncertainties in the market dynamics that, from our side, of course, are requiring us and our people to be very careful. As I said, the key priority for us is to remain careful, remain very disciplined in the execution of our backlog, and be focused on improving the net financial position.

Speaker #3: As you said, the first half was good. We expect to have a positive second half. Of course, we are in a market context where the dynamics of the market are very difficult to read.

Speaker #3: So we are in good sector strong sectors we have a very strong position in those sectors but of course as we also in the last few years there are some uncertainties in the market dynamics that from our side of course are requiring us and our people to be very very careful and as said the the key priority for us is to remain careful remain very disciplined in the execution of our backlog and be focused in improving the net financial position that for us is a priority in order to be much more flexible.

Carlo Caccia Dominioni: That, for us, is a priority in order to be much more flexible. Last but not least, the JV in the US, as of today, is deconsolidated. As of today, we have the 50% of the participation in this JV. As of today, the only thing that we see is that the market is performing very well. Our activity in that market is performing very well. Of course, on us, it's positive because Tesmec is a supplier of this JV with our machine and technologies. The US market is by far the best in terms of profitability and in terms of, let's say, cash generation. As of today, we don't see any major change in the next coming future. Of course, the fact that the US market is performing so well is very positive in our perspective.

Speaker #3: Last but not least the JV in US as of today. Is the consolidated as of today we have the 50% of the participation in this JV.

Speaker #3: As of today we the only thing that we see is that the market is performing very well. Our activity in that market is performing very well.

Speaker #3: Of course on us is positive because our JV is because Tesmec is a supplier of this JV with our machine and technologies and the and the and the US market is by far the best in terms of profitability.

Speaker #3: And in terms of let's say cash generation so as of today we we don't see any major change in the next coming future but of course the fact of the fact that the US market is performing so well is very positive.

Speaker #3: In our perspective take into account that the the dynamics of the market in the US are seen very positive also for 2027 as of today.

Carlo Caccia Dominioni: Take into account that the dynamics of the market in the US are seen very positive also for 2027 as of today.

Speaker #1: Okay. Thanks. If I may follow up question is on capex. In the first half capex were around 10 million which 20% so 2 million were fleet.

Enrico Coco: Okay, thanks. If I may, a follow-up question is on CapEx. In the H1, CapEx were around EUR 10 million, of which 20%, EUR 2 million, were fleet. The question is about the CapEx level for the year, if we could take the H1 indication as a good proxy for the year. For the year, CapEx level between EUR 20 million and 25 million, of which 20% is fleet. Is this reasonable?

Speaker #1: The question is about the capex level for for for the year if we could take the the the the first half indication as a good proxy for the year.

Speaker #1: So, for the year, CapEx level is between 20 and 25, of which 20% is fleet. Is this reasonable?

Speaker #3: The total value, as I already mentioned, Enrico—this is Ruggiero speaking—is to make reference to an overall value of capex in line with the DNDA.

Carlo Caccia Dominioni: The total value, as I already mentioned, Enrico, this is Ruggero speaking, is to make reference to an overall value of CapEx in line with D&A.

Ruggero Gambini: The total value, as I already mentioned, Enrico, this is Ruggero speaking, is to make reference to an overall value of CapEx in line with D&A.

Speaker #1: Okay. And the and the and the the fleet capex within the number is around 20%?

Ruggero Gambini: Okay. The fleet CapEx within the number is around 20%?

Enrico Coco: Okay. The fleet CapEx within the number is around 20%?

Speaker #3: Could could even be lower something lower in second half but if you if you consider in terms of cash absorption the total level of outflows link linked to capex our limit is given by DNDA.

Ruggero Gambini: Could even be something lower during H2. If you consider in terms of cash absorption, the total level of outflows linked to CapEx, our limit is given by D&A.

Speaker #1: Okay. Thank you.

Enrico Coco: Okay. Thank you.

Speaker #2: The next question is from Emmanuel Negri Mediobanca.

Operator: The next question is from Emanuele Negri, Mediobanca.

Speaker #4: Yes. Good afternoon, everybody. Thanks for the presentation and for taking my question. I have some questions. The first one is on the trencher division. How long do you think it will take for you to bring the trencher division, in terms of profitability, to a normalized level?

Emanuele Negri: Yes, good afternoon, everybody. Thanks for the presentation and for taking my question. I have some. The first one is on the trencher division. How long do you think it will take for you to bring the trencher division, in terms of profitability, to a normalized level? You mentioned in some previous conference call. The second one is on the order intake. You mentioned that you are working a lot for the internationalization of your business in rail in particular. Which kind of region do you expect to be the most promising for this business? The third one is on the US. Some companies are mentioning, in the last few days, to have received some refund from tariff. I know that you have a direct presence in the US.

Speaker #4: You mentioned in some previous conference call. The second one is on the ordering take you mentioned that you are working a lot for the internationalization of your business in in rail in particular.

Speaker #4: Which kind of region do you expect to be the most promising for this business? And the third one is on the U.S. Some companies are mentioning in the last few days that they have received some refunds from tariffs.

Speaker #4: I know that you have direct presence in the US. Could you remind us which kind of impact did you have from tariff last year if any and if you are in case just working to to have some some reimbursement.

Emanuele Negri: Could you remind us which kind of impact did you have from tariff last year, if any, and if you are, in case, just working to have some reimbursement? Thanks.

Speaker #4: Thanks.

Speaker #3: Thank you Emmanuele. So I will start with the question on trenchers. As as said the our transition in trencher is still a work in progress.

Carlo Caccia Dominioni: Thank you, Emanuele. I will start with the question on trenchers. As said, our transition in trencher is still a work in progress. We don't want to say that we have achieved the results that we were looking for. The work is still ongoing. We expect, if you look with a focus on Q2, of course, you see that the results are positive. Of course, in a consolidation of the H1, are in line with last year, let's say these actions are the results of a few quarters in a row that we are doing some adjustments in our operational and sales strategy and some refocus on specific applications and specific markets that for Tesmec are more profitable, and are allowing Tesmec to leverage on new technological platforms that can be reused, giving us, for sure, a much better impact on the operational side.

Speaker #3: We don't want to say that we have achieved the results that we were looking for. We're still the the the work is still ongoing.

Speaker #3: So we expect if you look with a with a focus on Q on Q2 of course you see that the results are positive. Of course in a consolidation of the first half are in line with last year but let's say there are these actions are the results of few quarters in a row that we are doing some adjustments in our operational and sales strategy and some refocus on specific applications and specific markets that for Tesmec are more profitable and are allowing Tesmec to leverage on new technological platforms that can be reused giving us for sure a much better impact on the operational side.

Speaker #3: As you know we manufacture all the machines that we sell and as you know one of the key signs of the recovery of trenchers is coming mainly by the fact that our production plant is more and more full of production.

Carlo Caccia Dominioni: As you know, we manufacture all the machines that we sell. As you know, one of the key signs of the recovery of Trenchers is coming mainly by the fact that our production plant is more and more full of production, and this is, of course, a positive sign. What I can say is that we see the positive results and the positive effect of our activities that will go on in the next coming quarters, going back to what we consider a normal level for Trenchers. In terms of order intake, as you know, for both railway and energy automation, we don't want to be focused on too many countries.

Speaker #3: And this is of course a positive sign. What I can say is that we see the positive results and the positive effect of our activities that will go on in the next coming quarters going back to a what we consider a normal level for trenchers.

Speaker #3: In terms of order intake, as you know, for both railway and energy automation, we don't want to be focused on too many countries.

Speaker #3: We want to be very specific and very selective looking at specific markets where we have that where we see important sales opportunities with tenders and we want to develop the strategy of those markets after the achievement or the the the award of the specific tender.

Carlo Caccia Dominioni: We want to be very specific and very selective, looking at specific markets where we see important sales opportunities with tenders, and we want to develop the strategy of those markets after the achievement or the award of the specific tender. The only thing I can say nowadays is that we are focused mainly or mostly, both for rail and energy automation, on Europe. Outside of Italy, but mainly I would say Western Europe for energy automation. I would say a mix of Western and Eastern for the railway business. Still 100% in Europe. For the impact of the tariffs, I leave the floor to Ruggero.

Speaker #3: The only thing I can say nowadays is that we are focused mainly or mostly, both for rail and energy automation, on Europe. So, outside of Italy, but mainly I would say Western Europe. Western Europe for energy automation; I would say a mix of Western and Eastern for the railway business.

Speaker #3: But still, 100% in Europe. For the tariffs, for the impact of the tariffs, I leave the floor to Ruggiero. Hello, Emmanuele. So, in the first half of last year, the value was, I would say, immaterial.

Ruggero Gambini: Hello, Emanuele. In the H1 of last year, the value was, I would say, immaterial, really immaterial. The overall effect was quite heavy during the second part of the year, with total 12 months impact of tariffs last year of around EUR 1.4 million. As for our controlled company, Tesmec USA. This year, during the first part of the year, we had to accrue the tariffs EUR -1.1 million, but at the same time, we recovered, and the amount was already cashed in, another EUR 1.1. The net effect in terms of P&L was zero, almost zero, also in the H1 of this year, substantially aligned with the first part of 2025.

Speaker #3: Really immaterial. The overall effect was quite heavy during the second part of the year with total 12 months impact of tariffs. Last year of around 1.4 million euro.

Speaker #3: As for Tesmec, our control company is Tesmec USA. This year, during the first part of the year, we had to accrue tariffs for a negative amount of $1.1 million.

Speaker #3: But at the same time we recovered and the amount was already cashed in. Another 1.1. So the net effect in terms of P&L was zero almost zero.

Speaker #3: Also in the first half of of this year so aligned substantially aligned with the first part of 2025.

Speaker #4: Okay. Thanks Fato. It was very clear. Thanks.

Emanuele Negri: Okay, thanks a lot. It was very clear. Thanks.

Speaker #2: As a reminder, if you wish to register for a question, please press star and one on your telephone. For any further questions, please press star and one.

Operator: As a reminder, if you wish to register for a question, please press star one on your telephone. For any further questions, please press star one. Mr. Ambrogio Caccia Dominioni, there are no more questions registered at this time.

Speaker #2: Mr. Cacciadomignoni there are no more questions registered at this time.

Speaker #3: Okay. Thank you very much for joining our call and we'll keep you posted and we are available for any further question or answer in the next coming days.

Ambrogio Caccia Dominioni: Okay. Thank you very much for joining our call. We'll keep you posted, and we are available for any further question or answer in the next coming days. Thank you very much.

Speaker #3: Thank you very much.

Operator: Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones. Thank you.

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