Q2 2026 DEUTZ AG Earnings Call

Speaker #1: To today's DEUTZ conference call on the first half-year 2026. Please note that this call is being recorded and a replay will be available on deutz.com later today.

Speaker #1: Your participation in the call implies your consent to this. As always, please note the disclaimer regarding today's presentation including the FFG transaction covered in this call.

Speaker #1: To get started, right away I'm pleased to welcome DEUTZ CEO Sebastian Schulte, the CFO Oliver Neu, and Lars Boelke, Head of Investor Relations and Communications.

Speaker #1: Who are joining us from Cologne today? After the presentation, we will be happy to receive your questions in person via the audio line. And with this, I will hand over to Lars Boelke.

Speaker #1: Lars, the stage is yours.

Speaker #2: Thank you very much and a very good morning from our side here in Cologne. Thanks for joining today's call. It's a kind of special call for us, not only that DEUTZ grew double-digit in the first half, as you all know, but also that we— as you all know— recently announced our transaction that will also give a little glimpse in this call.

Speaker #2: I'd also like to take this opportunity to thank all of you whom we had the opportunity to meet in the recent weeks at various locations and occasions.

Speaker #2: And of course, that we're looking forward to further explain and discuss this really game-changing deal with you in the future. Having said this, I would like to hand over to you, Sebastian, and get our call started.

Speaker #2: Thank you.

Speaker #3: Thank you.

Speaker #4: Thank you very much, Lars. And also from my side, a good morning to everyone and great that you're all joining. Let me start giving a general overview on our first half-year results before I will then, as usual, not only go through the business units and the details before handing that over to Oliver, but also, as Lars indicated, we'll mention again a few bits of content on our FFG transaction.

Speaker #4: Looking back at the first 6 months in 2026, we can say we're pretty pleased in how the year— not only started, but how we actually moved through the first 6 months.

Speaker #4: So new orders: the trend was still very positive, 1.3 billion new orders. That is a 29% year-over-year improvement. Revenue was also up 1.1 billion, 11% over the respective period of last year.

Speaker #4: And the margin in the first 6 months at 7.1%, so very, very decent level particular, and I will explain that later, given that in our sort of legacy business, the business unit engines, we are still seeing a fairly low demand compared to historical standards.

Speaker #4: But with that in mind, 7.1% margin is actually extraordinary development. We've seen so far. If I just break that down to the second quarter, as you see in the bottom part of the page, new orders 560, revenue 585, so slightly new orders slightly below revenue.

Speaker #4: That's not a point of concern. I will see later because we're having very, very decent Q1 in terms of first order— in terms of order intake.

Speaker #4: So we're growing here across all business units and all regions. And the margin in the end, that's— I mean, most of the most important thing that on the margin, so the bottom line, second quarter was up a bit again, 7.2%, a little above the first quarter.

Speaker #4: And 1.4 percentage point year over year. Highlights: there were quite a few. So just to keep that back in mind, and most of you have been following us sort of the last 6 months, so we further increased our global footprint in energy with an acquisition in Latin America.

Speaker #4: We acquired the company MaxiTrust at Coachiba in Brazil, closing happened in the second quarter as well. The profitability of engines rebounded. And again, as I just said a couple of minutes ago, in spite of the steel not-perfect market environment, but we'll see later when we look on the margin, how well we're developing here.

Speaker #4: And very important: our business unit service pushes on for further growth. So that was also extremely pleasing. And I will work— I will elaborate a bit further— the landmark transaction with regard to the acquisition of FFG was signed at the beginning of July.

Speaker #4: Look, we announced this acquisition of FFG, Flensburger Fahrzeugbaugesellschaft, on July 9. And since then, myself, but also Oliver, we had the chance to speak to many of you.

Speaker #4: We spoke in London, Frankfurt, and last week I spent a couple of days in New York. And the reception on all these— virtually all these investor talks— was extremely positive, not only constructive, but very, very positive.

Speaker #1: The profitability of engines rebounded, and again, as I just said a couple of minutes ago, it is in spite of the still not-perfect market environment. But we'll see later, when we look at the margin, how well we're developing here.

Speaker #4: And that gives us a lot of confidence as we move forward to our extraordinary general meeting later this month on August 24. But let me use today also to build on the picture a bit further.

Speaker #1: And very important: our business unit Service pushes on for further growth, so that was also extremely pleasing. I will elaborate a bit further: the landmark transaction with regard to the acquisition of FFG was signed at the beginning of July.

Speaker #4: I mean, we are, and I believe everyone who listened to us and spoke to us will feel that probably in every conversation, we are generally excited about what this combination will become.

Speaker #1: Look, we announced this acquisition of FFG, Flensburger Fahrzeugbau Gesellschaft, on July 9, and since then, myself, but also Oliver, we had the chance to speak to many of you.

Speaker #4: And that, so to speak, is what I want to leave today with. So there are three things that matter. So first of all, FFG is generally an exceptional asset.

Speaker #1: We spoke in London, Frankfurt, and last week I spent a couple of days in New York, and the reception at virtually all these investor talks was extremely positive—not only constructive, but very, very positive—and that gives us a lot of confidence as we move forward to our extraordinary general meeting later this month, on August 24.

Speaker #4: It generated approximately 760 million euro revenue in 2025, a tagger of around 50% per year since 2023, and that is— that makes it one of the fastest-growing businesses in all of European defense.

Speaker #4: And the trajectory from here going forward is actually what really matters, because we expect FFG to generate revenues above 1 billion euro in the coming years, starting next year, at an EBITDA margin— we write here— we write here, no, we are very specific here on above 20%.

Speaker #1: But let me use today also to build on the picture a bit further. I mean, we are—and I believe everyone who listens to us and speaks to us will feel that, probably in every conversation—we are generally excited about what this combination will become.

Speaker #4: So that is really a best-in-class asset, as you can see. And that is the destination this growth profile is heading towards. And the order backlog at the moment standing above 1.9 billion euro is what underwrites here this path.

Speaker #1: And that, so to speak, is what I want to leave you with today. So, there are three things that matter. First of all, FFG is generally an exceptional asset.

Speaker #1: It generated approximately €760 million in revenue in 2025, a CAGR of around 50% per year since 2023, and that makes it one of the fastest growing businesses in all of European defense.

Speaker #4: And we expect in the coming months and years obviously this order backlog to more than 1,100 employees across 9 locations, and more than 90% of the revenue comes from NATO customers as well as Ukraine, with at this point in time less than 20% from the Bundeswehr alone.

Speaker #1: And the trajectory from here, going forward, is actually what really matters, because we expect FFG to generate revenues above €1 billion in the coming years, starting next year, at an EBITDA margin—we write here—of above 20%.

Speaker #4: So important is FFG is not a German government contractor exclusively, as many other assets are. It's a generally alliance-wide defense industrial platform. And that's one of the reasons why it perfectly fits to DEUTZ.

Speaker #1: So, that is really a best-in-class asset, as you can see. And that is the destination this growth profile is heading towards, and the order backlog at the moment is standing above €1.9 billion.

Speaker #4: Second, the program network behind those numbers is the single most important non-financial assets asset in this transaction. FFG holds certified positions across more than 30 NATO platform types, including the Leopard 2, the Boxer, the Puma, the Marder, the Fox, the Fennec, the M113, serving more than 15 NATO nations and the Ukraine.

Speaker #1: is what underwrites here this path, yeah. And we expect that in the coming months and years, obviously, this order backlog will significantly increase. So, more than 1,100 employees across 9 locations, and more than 90% of the revenue comes from NATO customers as well as Ukraine, with, at this point in time, less than 20% from the Bundeswehr alone.

Speaker #4: And these are not just, you know, commercial relationships; they are formally certified, technically embedded program positions built over decades. And that kind of institutional depth, that cannot be replicated quickly by no one.

Speaker #1: It's important to note that FFG is not exclusively a German government contractor. Unlike many other assets, it's generally an alliance-wide defense industrial platform, and that's one of the reasons why it fits perfectly with DEUTZ.

Speaker #4: And certainly not in time to capture this outstanding procurement cycle that is opening right now. So from the moment this deal closes, that entire network becomes part of DEUTZ.

Speaker #1: Second, the program network behind those numbers is the single most important non-financial asset in this transaction. FFG holds certified positions across more than 30 NATO platform types, including the Leopard 2, the Boxer, the Puma, the Marder, the Fox, the Fennec, and the M113, serving more than 15 NATO nations and Ukraine.

Speaker #4: And third, FFG is not just an MOU operator that happens to be growing. That itself would be exciting, but FFG is more than that.

Speaker #4: It is a systems integrator with its own proprietary platform pipeline. The Vizent 2, a multifunctional Leopard 2-based armored recovery and engineering vehicle, the ACSV, a modular armored combat support vehicle, already delivered across NATO nations, and the next program waves, the TAR and the CAFs, representing substantial additional volume potential.

Speaker #1: And these are not just, you know, commercial relationships—they are formally certified, technically embedded program positions, built over decades. And that kind of institutional depth, that cannot be replicated quickly by anyone.

Speaker #4: So this O8, this original equipment pipeline, is what gives the order backlog its duration and what gives the growth profile its structural character. Yeah, let me now turn to the structure, because it tells you something about the nature of this partnership.

Speaker #1: And certainly not in time to capture this outstanding procurement cycle that is opening right now. So, from the moment this deal closes, that entire network becomes part of DEUTZ.

Speaker #1: And third, FFG is not just an MOU operator that happens to be growing. That, in itself, would be exciting, but FFG is more than that.

Speaker #4: The total consideration— as you will already know— is approximately 1.6 billion euro. And around 1 billion euro will be paid in cash, financed through a secured debt from a consortium of international banks, all secured, all signed, all without remaining risk.

Speaker #1: It is a systems integrator with its own proprietary platform pipeline. The Vizent 2, a multifunctional Leopard 2-based armored recovery and engineering vehicle; the ACSV, a modular armored combat support vehicle already delivered across NATO nations; and the next program waves, the TAR and the CAFS, represent substantial additional volume potential.

Speaker #4: And the remaining around 0.6 billion euro will be paid in newly issued DEUTZ AG shares, which the seller family receives or the families, the more, receive and will hold as long-term shareholders in the combined group.

Speaker #1: So this O8, this original equipment pipeline, is what gives the order backlog its duration and what gives the growth profile its structural character. Yeah, let me now turn to the structure, because it tells you something about the nature of this partnership.

Speaker #4: And third, strategic alignment: further variable performance link components, long-term focused investment agreement, and a supervisory board representation for the FFG families. And that last element was not incidental to this deal.

Speaker #1: The total consideration, as you will already know, is approximately €1.6 billion, and around €1 billion will be paid in cash, financed through secured debt from a consortium of international banks—all secured, all signed, all without remaining risk.

Speaker #4: It was central to it, quite frankly, because we did not want the seller who just disappears at closing. We wanted anchor shareholders who literally have skin in the game and will keep skin in the game.

Speaker #4: And because then the incentives from day one are totally aligned with every other DEUTZ shareholder. And that makes it actually not only exciting, it makes it also extremely trustworthy and built for the medium and long run.

Speaker #1: And the remaining approximately €0.6 billion will be paid in newly issued DEUTZ AG shares, which the seller families receive. The families, moreover, receive and will hold these as long-term shareholders in the combined group.

Speaker #4: So the FFG families— as I outlined— they will join at a 29.9% stake, and that is a structure I'm extremely proud of, because it serves— as I just explained— our shareholders.

Speaker #1: And third, strategic alignment, further variable performance-linked components, long-term focused investment agreement, and a supervisory board representation for the FFG families. And that last element was not incidental to this deal.

Speaker #4: It serves the interest of the combined group. Let me now turn to the earnings profile, because I want to be as precise as possible about how the accretion picture will build.

Speaker #1: It was central to it, quite frankly, because we did not want the seller who just disappears at closing. We wanted anchor shareholders who literally have skin in the game and will keep skin in the game, because then the incentives from day one are totally aligned with every other DEUTZ shareholder. That makes it not only exciting, it also makes it extremely trustworthy and built for the medium and long run.

Speaker #4: So the share issues creates initially a dilution of approximately 65 million euro new shares. But FFG's standalone earnings contribution on a revenue base of approximately 760 million— taking the 25 numbers— and at the best-in-class margins provides already a very strong starting point and offsets that dilution on a proforma basis pretty much immediately.

Speaker #4: From there, the accretion picture compounds in two further stages. So the early cross-business synergies, such as engines, service network, logistics, they will add further earnings up.

Speaker #1: So, the FFG families, as I outlined, will join at a 29.9% stake, and that is a structure I'm extremely proud of because it serves, as I just explained, our shareholders—it serves the interests of the combined group.

Speaker #4: But more importantly, the conversion of FFG's already contracted order backlog and the ongoing MOU business. So that backlog, as I just explained, stands give or take above 1.9 billion euros, and it is awarded; it is contracted; it's signed; and it is converted.

Speaker #1: Let me now turn to the earnings profile, because I want to be as precise as possible about how the accretion picture will be built.

Speaker #1: So the share issue creates initially a dilution of approximately €65 million new shares, but FFG's standalone earnings contribution on a revenue base of approximately €760 million, taking the '25 numbers, and at the best-in-class margins, provides already a very strong starting point and offsets that dilution on a pro forma basis pretty much immediately.

Speaker #4: So that is the near-term earnings engine which will support this combined business. It does not depend on integration execution or quantification cycles. That's important, and that's a message I kept recapped sharing in all our investor talks.

Speaker #4: This business, this acquisition, makes already commercially financially sense without additional synergy potential. Obviously, it doesn't mean we're not going for that, but it's important.

Speaker #1: From there, the accretion picture compounds in two further stages. So, the early cross-business synergies—such as engines, service network, and logistics—will add further earnings up.

Speaker #4: It makes sense without the synergy. The synergy adds on top of that. And longer term, the conversion of FFG's broader program pipeline into contracted revenue, the CAFs as I mentioned, the ACSV expansion, Vizent 2 growth, beyond the current three nations, extends the profile considerably and well beyond 2030.

Speaker #1: But more importantly, the conversion of FFG's already contracted order backlog and the ongoing MOU business. So that backlog, as I just explained, stands, give or take, above €1.9 billion, and it is awarded, it is contracted, it's signed, and it is converting.

Speaker #4: We do expect revenue growth in line with double-digit NATO defense budget growth rates, and that is a structural tailwind, not a cyclical one. And that adds to the resilience of DEUTZ as a group.

Speaker #1: So that is the near-term earnings engine, which will, you know, support this combined business. It does not depend on integration execution or quantification cycles.

Speaker #1: That's important, and that's a message I kept recapped, sharing in all our investor talks. This business, this acquisition, makes already commercially, financially sense—sense without additional synergy potential.

Speaker #4: So what I can say today is that the direction on earnings, on cash, and on leverage is clearly positive from the point of clips.

Speaker #4: The headline is this: we did not do a dilutive deal, and we hope for synergies to catch up. So the accretion is there from the start, from the very beginning, grounded in contracted revenue, and it compounds from there.

Speaker #1: Obviously, it doesn't mean we're not going for that, but it's important. It makes sense even without the synergy. The synergy adds on top of that.

Speaker #1: And longer term, the conversion of FFG's broader program pipeline into contracted revenue—the CAFS, as I mentioned, the ACSV expansion, Vizent 2 growth beyond the current three nations—extends the profile considerably and well beyond 2030.

Speaker #4: And we will, of course, provide further guidance once we are through to closing. Right, having said that, let me now move on to the development of our business units.

Speaker #4: Let me start with the business unit engines. The headline is very clear: profitability recovery accelerates. So we are continuing here with an outstanding team.

Speaker #1: We do expect revenue growth in line with double-digit NATO defense budget growth rates, and that is a structural tailwind, not a cyclical one. That adds to the resilience of DEUTZ as a group.

Speaker #4: To implement our portfolio and footprint strategy. And just a few highlights. So at our parts plant, the one the largest DEUTZ plant here in Cologne, the performance program shows already first savings.

Speaker #1: So what I can say today is that the direction on earnings, on cash, and on leverage is clearly positive from the point of close.

Speaker #1: The headline is this: We did not do a dilutive deal, and we hope for synergies to catch up. So the accretion is there from the start, from the very beginning, grounded in contracted revenue, and it compounds from there.

Speaker #4: There's a lot of efficiency improvement, double-digit efficiency improvement on the assembly line 5. We do see higher cost savings due to a quicker relocation of products from Cologne Kalk, that's a bit of a satellite plant here, which we just closed, literally last week was the last last week Friday, we finally closed it and we moved the product from Kalk here in Cologne to Spain at much, much better cost base.

Speaker #1: And we will, of course, provide further guidance once we are through to closing. Right, having said that, let me now move on to the development of our business units.

Speaker #1: Let me start with the Business Unit Engines. The headline is very clear: profitability recovery accelerates. We are continuing here with an outstanding team to implement our portfolio and footprint strategy.

Speaker #4: That went in line, or that goes in line, both aspects here with the voluntary relief program for the Cologne site, production, but also production overheads, a non-value-adding position here, where we'll see around 100 to 120 FTEs leaving to further improve efficiency.

Speaker #1: And just a few highlights. So, at our parts plant, the largest DEUTZ plant here in Cologne, the performance program is already showing the first savings. There is a lot of efficiency improvement—double-digit efficiency improvement—on assembly line 5.

Speaker #4: At conditions which are fair, but for the employees, but also favorable for the business. Then moving a bit on portfolio, the new G-Drive program, here we talk about a couple of new engines, including actually a 24-liter engine for genset customers.

Speaker #1: We do see higher cost savings due to a quicker relocation of products from Cologne-Kalk. That's a bit of a satellite plant here, which we just closed—literally, last week Friday was the final day. We finally closed it, and we moved the product from Kalk here in Cologne to Spain at a much, much better cost base.

Speaker #4: So here we're starting already with fixed, with the first fixed orders. The next year we'll see further growth in that, but important is it works.

Speaker #4: Customers are ordering these products. Very, very structurally strong demand. And a very, very good cost base to the use of partners here. Partner is a good point.

Speaker #1: That went in line, or that goes in line, both aspects here with the voluntary relief program for the Cologne site—production, but also production overheads—a non-value-adding position here, where we'll see around 100 to 120 FTEs leaving to further improve efficiency.

Speaker #4: We are bringing a very long-lasting but long sort of hibernating partnership with Chinese FAW. We'll bring that back on track. And here for the best-cost country supply of some of the legacy engines, which does not make sense to deliver them from a high-cost Germany anymore, but they're still a structural demand all over the world, and we do that together with a partner in China.

Speaker #1: At conditions which are fair for the employees, but also favorable for the business. Then, moving a bit on portfolio, the new G-Drive program—here we talk about a couple of new engines, including, actually, a 24-liter engine for genset customers. So here we're starting already with the first fixed orders. Next year, we'll see further growth in that, but what's important is: it works. Customers are ordering these products; very, very structurally strong demand, and a very, very good cost base due to the use of partners here.

Speaker #4: China is the next point here as well. Our joint venture with Sany in China, in Changsha, is progressing quite well now. First time I can really, truly say we're making really good progress here.

Speaker #4: Particular not only compared to the previous years, and it's also because we made a bit of a change there. We're using also more engines there for power generation.

Speaker #1: partner is a good point, we are, bringing a very long-lasting but long, sort of hibernating partnership with Chinese, FAW, we'll bring that back on track, and here for the best-cost country supply of some of the legacy engines, which do does not make sense, to deliver them, from a high-cost Germany anymore, but they're still a structural demand all over the world, and we do that together with a partner in China.

Speaker #4: Rather than what it was initially designed for, for the use in heavy-duty trucks. So things are moving quite well. Despite the fact that the order intake is not on the level we'd like to have it going forward.

Speaker #4: But it's important to focus on what we can influence. And we're doing that here pretty well. But bring that to numbers as well. So the demand in the second quarter slightly increased year over year.

Speaker #1: China is the next point here as well. Our joint venture with Sany in China and Chi and Changsha is progressing quite well now. It's the first time I can really, truly say we're making really good progress here, not only compared to previous years, and that's also because we made a bit of a change there. We're using more engines there for power generation, rather than what it was initially designed for, which was use in heavy-duty trucks.

Speaker #4: Market is still a bit under pressure, but this is really not to be seen with a point of concern. It's moving pretty well. We also now have a fairly healthy order backlog of 385 million euros.

Speaker #4: That's significantly higher than the ago. And the profitability I just gave I just gave sort of the quality of this information on that, cost savings from our future program, that was not the program I was just mentioning with the efficiency and ports and the closure and the closure of the facility in Kalk.

Speaker #1: So, things are moving quite well, despite the fact that the order intake is not at the level we'd like to have it going forward. But it's important to focus on what we can influence, and we're doing that here pretty well.

Speaker #4: That was taking out mainly engineering resources last year here in Cologne as well. That program is pretty much not only fully on track, it's completed.

Speaker #1: But to bring that to numbers as well: the demand in the second quarter slightly increased year over year. The market is still a bit under pressure, but this is really not to be seen as a point of concern.

Speaker #4: All the savings we had aspired to achieve have been realized. So that's very, very successful. Then obviously, there are always cost increases labor costs, material prices, but we manage pretty well to offset these cost increases with respective price increases as well.

Speaker #1: It's moving pretty well. We also now have a fairly healthy order backlog of €385 million. That's significantly higher than the €315 million we had a year ago.

Speaker #4: And you see here, and that's I will not go through all the numbers in detail, but you see that, you know, we moved significantly up from the from 25 to 26 in the first quarter already, with 3.7% margin.

Speaker #1: And the profitability I just gave, I just gave sort of the qualitative information on that, cost savings from our future fit program, that was not the program I was just mentioning with the efficiency and ports and the closure and the closure of the facility in Kalk, that was taking out mainly engineering, resources last year, here in Cologne as well.

Speaker #4: Now in the second quarter, 3.8%. That is still, you know, far away from 7 or 8%, but again, given the occupation, the of the factory, that's pretty good.

Speaker #1: That program is, pretty much, not only not only full on fully on track, it's, it's completed, all the savings, we had, aspired to achieve have been, realized, so that's, very, very, very, very successful.

Speaker #4: And important news going forward: as soon as there will be an uptick in new orders, gross margin in this business will immediately kick in at double-digit level, and then we'll actually see a perspective which we will enjoy very much.

Speaker #1: Then, obviously, there are always cost increases: labor costs, material prices. But we manage pretty well to offset these cost increases with respective price increases as well.

Speaker #4: Let me move on to the next business unit, which will be service. So here's about growth. It's about growth and performance. And we have also a we'll show the numbers in a bit, a very, very healthy order backlog.

Speaker #1: And you see here, and that's, I will not go through all the numbers in detail, but you see that, you know, we moved significantly up from the, from 25 to 26 in the first quarter already, with 3.7% margin, now in the second quarter 3.8%, that is still, you know, far away from 7 or 8%, but again, given, the, the occupation, the, of the of the factory, that's pretty good.

Speaker #4: So we're expanding here as DEUTZ service as an authorized service partner also for machine manufacturers and service partners beyond the DEUTZ engine, particularly in the United States.

Speaker #4: In the Nordics as well as with the implementation of our service business for the Daimler truck engines, which we exclusively sell to off-highway customers.

Speaker #1: And important news going forward: as soon as there is an uptick in new orders, gross margin in this business will immediately kick in at a double-digit level, and then we'll actually see a perspective which we will enjoy very much.

Speaker #4: The expansion particular has continued in the United States. We made another acquisition in California, GNT Truck Repair, that we acquired in June 26. So the footprint in the US and in this case in California, which was a bit of an untapped area before.

Speaker #1: Let me move on to the next business unit, which will be Service. So, here's about growth—it's about growth and performance. We also have, and we'll show the numbers in a bit, a very, very healthy order backlog.

Speaker #4: And there's now improving. The DEUTZ power centers in the United States they grow quite nicely, solid, solid field service growth. And very important also, that we are realigning our dealer organization in the DACH region, particularly here in Germany, those who follow us for longer know that we've been working in the last four or five years quite successfully on insourcing or in-housing external dealers, but we didn't really touch the German network here.

Speaker #1: So we're expanding here as DEUTZ Service, as an authorized service partner, also for machine manufacturers and service partners beyond the DEUTZ engine, particularly in the United States, in the Nordics, as well as with the implementation of our service business for the Daimler truck engines, because we exclusively sell to off-highway customers.

Speaker #4: We're changing that now. We did actually terminate quite a few contracts and are now renegotiating them. And that's what we mean when we're talking about realignment of the dealer organization here.

Speaker #1: The expansion, in particular, has continued in the United States. We made another acquisition in California—G&T Truck Repair—which we acquired on June 26, so the footprint in the US, and in this case in California, which was a bit of an untapped area beforehand.

Speaker #4: So we see a very, very good progress as well. Parts trading business, traditionally the one the part of service with the highest margin, it's continuously expanding as well.

Speaker #1: There's no improving the DEUTZ Power Centers in the United States. They grow quite nicely, solid, solid field service growth. And very important also, that we are realigning our dealer organization in the DACH region, particularly here in Germany. Those who follow us for longer know that we've been working in the last four, five years quite successfully on insourcing, or in-housing, external dealers, but we didn't really touch the German network here.

Speaker #4: And that's really a bit going forward. Obviously, DEUTZ service is that what is that asset what will in our ambition going forward not only support engines, but more and more actually support also the other business units.

Speaker #4: Most notably, energy as well as defense. And we're working here quite nicely, particularly on the genset service expansion with FRAG in Europe, but also in the US with Bluestar.

Speaker #1: We're changing that now. We did actually terminate quite a few contracts and are now really renegotiating them, and that's what we mean when we're talking about a realignment of the dealer organization here.

Speaker #4: Let me go to numbers as well. So new orders are up. You see in the second quarter, focus on the second quarter now, new orders 152 million, revenue for the first time above 150.

Speaker #1: So, we see very, very good progress as well. The parts trading business, traditionally the part of service with the highest margin, is continuously expanding as well.

Speaker #4: So obviously here showing or benefiting from all the growth initiatives I've just mentioned earlier. And the order intake in the first half is now 16.1% increase year over year.

Speaker #1: And, and that's really a bit going forward, obviously, DEUTZ service is that what is, is that asset what will, in our, ambition going forward, not only support engines, but more and more actually support also the other business units, and most notably, energy as well as defense.

Speaker #4: And that is exactly the level we would like to see in growing this important business. Order backlog is not as relevant of a number like in engines, because the through time of the business is, as you can see by 57 million.

Speaker #1: And we're working here quite nicely, particularly on the genset service expansion—with FRAG in Europe, but also in the US with Blue Star. Let me go to numbers as well.

Speaker #4: I mean, it's much, much quicker. So but important is compared with the number from June 25, where it was only 42 million. So you see also here a healthy development.

Speaker #1: So, new orders are up, you see, in the second quarter—focus on the second quarter now—new orders €152 million, revenue for the first time above €150 million. So, obviously here, showing or benefiting from all the growth initiatives I’ve just mentioned earlier.

Speaker #4: Very nice. And we're celebrating every record, of course, to keep the team motivated. In June, was the so far highest monthly revenue of 55 million euro.

Speaker #4: So that means obviously the entire team is aspiring to beat that number at the next possible opportunity. And things are looking quite nicely that this will obviously happen still in the year 2026.

Speaker #1: And the order intake in the first half is now a 16.1% increase year over year, and that is exactly the level we would like to see in growing this important business.

Speaker #4: The margin is a little bit diluted, but that's not a point of concern. That is simply because we're preparing for future growth. You know, adding new more structures, adding technicians, because a lot of that growth only works with technicians.

Speaker #1: Order backlog is not as relevant of a number like in engines, because the throughput time of the business is, as you can see by €57 million, I mean, it's much, much quicker.

Speaker #4: We do, of course, focus more and more also on efficiency, on technician utilization. So that's why it's not a point of concern that the margin is slightly diluted, but also bear in mind on a very, very high level.

Speaker #1: But what's important is to compare this number with the one from June 25, where it was only €42 million. So you can also see here a healthy development.

Speaker #4: And on top of that, obviously we grow more in working on the machine than selling spare parts. So that also contributes to that slight dilution of the business.

Speaker #1: Very nice, and we're celebrating every record, of course, to keep the team motivated. In June, we achieved our highest monthly revenue so far, of €55 million.

Speaker #4: But bear in mind on a group level, whatever we do here is always margin accretive. So let me move on to the next business unit, which is energy.

Speaker #1: So that means, obviously, the entire team is aspiring to beat that number at the next possible opportunity, and things are looking quite good that this will still happen in the year 2026.

Speaker #4: I mentioned it in the highlight page at the beginning already. We acquired MaxiTrust in Brazil with that acquisition expanding here the coverage to Latin America as well.

Speaker #1: The margin is a little bit diluted, but that's not a point of concern. That is simply because we're preparing for future growth—you know, adding new, more structures, adding technicians—because a lot of that growth only works with technicians.

Speaker #4: And also very important growing market. There's further diversification of our US customers with Bluestar. Distributor orders are on record high. We like direct orders as much as we like distributor orders, of course, but it's always good, you know, to improve increase both foot for standing on here, both legs for standing on here.

Speaker #1: We do, of course, focus more and more also on efficiency, on technician utilization, so that's why it's not a point of concern that the margin is slightly diluted. But also bear in mind, on a very, very high level.

Speaker #4: The ramp-up of FRAG for the second half is going quite well. The new assembly facility in Schwerin in the Niedersachsen is well on track.

Speaker #1: And on top of that, obviously, we grow more in working on the machine than selling spare parts, so that also contributes to that slight dilution of the business. But bear in mind, on group level, whatever we do here is always margin-equitative.

Speaker #4: The commissioning here and now, obviously, very important, that this great business unit we have been creating over the last three years is now showing and proving that the equation one plus one equals more than two.

Speaker #1: So let me move on to the next business, unit, which is energy. I mentioned it in the highlight page at the beginning already. We acquired, MaxiTrust in Brazil, with, that acquisition expanding here the coverage to Latin America as well, but also very important growing market.

Speaker #4: It's been will hold true. Our teams working together, the international teams working together pretty well here, to really expanding and building a global business.

Speaker #1: There's further diversification of our US customers with BlueStar. Distributor orders are at a record high. We like direct orders as much as we like distributor orders, of course, but it's always good to improve and increase both. Both feet are standing on here, both legs are standing on here.

Speaker #4: And this year, we are already targeting and when I say targeting, it's actually our planning and we're clearly building on achieving more than 300 million very profitable revenue.

Speaker #4: And the team's been super excited to grow that number to above 1 billion in the next five years. The market is supporting that. Teams are excited to do that.

Speaker #1: The ramp-up of FRAG for the second half is going quite well. The new assembly facility in Schwerin in Niedersachsen is well on track.

Speaker #4: So that's another great growth story here developing. And a little bit a little bit also an exciting outlook. We are working here and elaborating a pilot case for the use of agentic AI in the business development in sales.

Speaker #1: The commissioning here and now, obviously, very important, that this great business unit we have been creating over the last three years is now showing and proving that the equation one plus one equals more than two is, you know, will hold true.

Speaker #4: In SV2 facilities. There will be something probably we can present in the next month just because obviously it's important to support this strong growth without adding proportionally human resources on that, because we want to ensure that more growth gives extraordinary more profitability.

Speaker #1: Our teams are working together, the international teams are working together pretty well here, to really expand and build a global business. And this year, we are already targeting—and when I say targeting, it's actually our planning and we're clearly building—on achieving more than €300 million in very profitable revenue, and the team has been super excited to grow that number to above €1 billion in the next five years.

Speaker #4: Let me turn into the numbers for energy already. And here you see an ever-growing business. So new orders in the second quarter at 55 million euros.

Speaker #1: The market is supporting that, teams are excited to do that, so that's another great growth story here, development. And a little bit, a little bit also an exciting outlook: we are working here and elaborating a pilot case for the use of agentic AI in business development, in sales.

Speaker #4: And that includes 10 million euros from the MaxiTrust consolidation. But there's also now an extremely strong order backlog, now 220 million euros. So that shows the sort of the forecast ability plan ability reliability in this business model.

Speaker #1: In SV2 facilities, there will be something, probably, we can present in the next month, just because obviously it's important to support this strong growth without adding proportionally human resources to that. We want to ensure that more growth gives, extraordinarily, more profitability.

Speaker #4: It's one of the strongest in our portfolio. Particularly if you compare to the first half of last year. The across our five business units, energy is the strongest growth contributor.

Speaker #4: Up 37 million euro year over year, driven obviously by the companies who joined us throughout this year. FRAG in Germany and MaxiTrust in Brazil, but also organic growth, especially in the United States and also in Morocco and China.

Speaker #1: Let me turn to the numbers for Energy already. And here you see an ever, ever-growing business. So, new orders in the second quarter at €55 million.

Speaker #1: And that includes 10 million, euros from the MaxiTrust consultation, but there's also now an extremely strong order backlog, now 220 million euros, so that shows the, the sort of the forecast ability plan ability reliability, in this business model, is, is, is one of the, one of the strongest in our portfolio.

Speaker #4: There is now, speaking on the margins, a significant recovery in the second quarter compared to the first quarter. So we're now at 13.7% in the second quarter.

Speaker #4: We explained that when we showed the first quarter numbers that the first quarter was a bit of an outlier. Due to the consolidation effects and some seasonality.

Speaker #1: and particularly if you compare to, the first half of last year. The, across our five business units, energy is the strongest growth contributor, up 37, 7 million euro year over year, driven obviously by the, by the companies who joined us throughout this year, frag in Germany and MaxiTrust in Brazil, but also organic growth, especially in the United States and also in, in Morocco and China.

Speaker #4: And here you clearly see that we're moving already significantly up. And the outlook for the rest of the year is also even higher than that, both obviously in terms of revenue.

Speaker #4: I mentioned the 300 earlier, but also the margin level. So the good thing is here, as you can take that from the strong order backlog, the predictability not only in terms of revenue, but also in terms of profitability is extremely solid here.

Speaker #4: Let me move on to business unit new tech. Revenue nearly doubles. That sounds super exciting, but it's still on a fairly moderate level. We do, however, work here obviously on our presence.

Speaker #1: There is now, speaking on the margins, a significant recovery in the second quarter compared to the first quarter. So we're now at 13.7% in the second quarter.

Speaker #1: We explained that, when we showed the first quarter numbers, the first quarter was a bit of an outlier due to the consolidation effects and some seasonality. And here you clearly see that we're already moving significantly up, and the outlook for the rest of the year is also even higher than that, both obviously in terms of revenue — I mentioned the 300 earlier — but also the margin level.

Speaker #4: Deutz will now act under the brand Deutz New Tech availability systems, as well as Futaris have been renamed. And they now operating under the Deutz New Tech brand.

Speaker #4: It's important, you know, to position ourselves here with a strong brand we have. We're now in these business converting the pipeline into revenue, scaling further projects, scaling production delivery capabilities, enhancing also efficiency and R&D.

Speaker #1: So, and the good thing is here, as you can take that from the strong order backlog, the predictability not only in terms of revenue but also in terms of profitability is extremely solid here.

Speaker #4: It's a lot about focus, focus, focus. And there are many, many market opportunities, but we are always as you know, very transparent on the outlooks in the different business areas.

Speaker #1: Let me move on to the business unit, New Tech. Revenue nearly doubles—that sounds super exciting, but it's still at a fairly moderate level.

Speaker #4: This is obviously the business unit which is most difficult to predict, because it depends a lot on sort of overarching market and industry trends.

Speaker #1: We do, however, work here, obviously, on our presence. Deutz will now act under the brand 'Deutz New Tech.' Urban Mobility Systems, as well as Fruitavis, have been renamed, and they are now operating under the Deutz New Tech brand.

Speaker #4: Important for Deutz is that we have to be here. We have to be ready when the market, when the demand picks up. Then we are there.

Speaker #4: And it's a bit of an option value if at some point the engines business gets under more pressure from conversion to battery electric products.

Speaker #1: it's a, it's important, you know, to, position ourselves here with, with the, with the strong brand we have. We're now in this, in these business, converting the pipeline into revenue, scaling further projects, scaling production delivery capabilities, enhancing also efficiency and R&D, it's a lot about focus, focus, focus.

Speaker #4: Important is to be ready. And that's exactly what we achieve with our new tech business. So in terms of numbers, new orders in the first half, you see already we talk about completely different levels.

Speaker #1: And there are many, many market opportunities. But, as you know, we are always very transparent on the outlook in the different business areas.

Speaker #4: That's 7 million euro new orders. That is still reflecting that muted demand, which I just mentioned, backup is 6.5. It's even a little lower than what we had last year, but again, with these sort of single digit or low double digit numbers, it's sort sort of percentage improvements or deteriorations are not as meaningful as obviously in other more established business units.

Speaker #1: This is obviously the business unit which is most difficult to predict, because it depends a lot on overarching market and industry trends.

Speaker #1: Important for DEUTZ is that we have to be here; we have to be ready when the market, when the demand, picks up—then we are there. It’s a bit of an option value, you know. If at some point the engines business gets under more pressure from conversion to battery electric products, what's important is to be ready, and that's exactly what we achieve with our new tech business.

Speaker #4: The revenue in the first half nearly doubled. Particular from the delivery of a few electrified excavators. Those go with a solid gross margins, but obviously not strong enough.

Speaker #4: The business is not strong enough to bring the EBIT into break even. But you can also see profitability has been improving compared to previous years, because again, focus, focus, focus on R&D activities as well as cost discipline.

Speaker #1: So in terms of numbers, new orders in the first half, and you see already, we’re talking about completely different levels—that’s €7 million in new orders.

Speaker #1: That is still reflecting that muted demand which I just mentioned. Backlog is at 6.5; it's even a little lower than what we had last year. But again, with these sort of single-digit or low double-digit numbers, percentage improvements or deteriorations are not as meaningful as they are in other, more established business units.

Speaker #4: That brings me now to Deutz Defense. Deutz Defense becomes really like a core pillar of the business. We are continuously committed and working on the DevTech ecosystem.

Speaker #4: You all know about our investment and partnerships in ARX as well as in Titan. With ARX, we launched the first series production of the Gerion ground system in Ulm at our facility.

Speaker #1: The revenue in the first half nearly doubled, particularly from the delivery of a few electrified excavators. Those go with solid gross margins, but obviously not strong enough—the business is not strong enough—to bring the EBIT into break-even. But, as you can see, profitability has been improving compared to previous years because, again, focus, focus, focus on R&D activities as well as cost discipline.

Speaker #4: It's not a huge series, but it's more than just a proof of concept. So that's great. There's more we are developing particular also in terms of resilient energy solutions.

Speaker #4: We introduced at the Euro Cedar in Paris a partnership with HDC Solutions. We do also further ramp up the Sobeck activities. We talked to Sobeck, as you know, we'll talk about battery electric drive systems for unmanned drones, for drones.

Speaker #1: That brings me now to Deutz Defense. Deutz Defense becomes, really, like a core pillar of the business. We are continuously committed to and working on the DevTech ecosystem.

Speaker #4: And we're working also continuously with R&D and new powertrain solutions. There is a lot of interest. There are also after the Euro Cedar quite promising orders.

Speaker #1: You all know about our investment and partnerships in ARX as well as in Titan. With ARX, we launched the first series production of the Galleon ground system in Ulm at our facility. It's not a huge series, but it's more than just a proof of concept, so that's great.

Speaker #4: Not all of them we can disclose for confidentiality reasons, but the vector is here clearly positives. Also new orders from a drone package for the German army.

Speaker #1: There's more. We are developing, particularly also in terms of resilient energy solutions. We introduced at the Euro Cedar in Paris a partnership with HDC Solutions.

Speaker #4: For one of the three one of the three suppliers of the German army, they built on our Sobeck drives. And as I've just mentioned, Euro Cedar was a success for us many, many, many leads.

Speaker #1: We do also further ramp up the Sobeck activities. We talked to Sobeck, as you know. We talk about battery-electric drive systems for unmanned, for unmanned drones, for drones.

Speaker #4: For military engines, power packs, and hybrid systems. And of course, as I mentioned earlier, the FFG acquisition was signed. However, in terms of numbers, or not however, in terms of numbers, we see substantial order growth in the second quarter 26 versus the previous year.

Speaker #1: And we're working also continuously with R&D and new powertrain solutions. There is a lot of interest. There are also, after the Euro Cedar, quite promising orders—not all of them we can disclose for confidentiality reasons—but the work, the vector, is here clearly positive.

Speaker #4: The order backlog is now at 43 million euros compared to 27 beforehand. Also the revenue is 47% above previous year, now to 52 million.

Speaker #1: Also, new orders from, a drone package for the German army, for one of the three, one of the three suppliers of the German army, they built, on our Sobeck drives, and, as I've just mentioned, Euro Cedar, was an, was a success for us many, many, many leads, for military engines, power packs, and hybrid systems.

Speaker #4: And the growth is primarily coming from defense and not from other spare mind. We have also hired S, the engine after treatment specialist part of this subsegment here.

Speaker #4: For which, by the way, the successful turnaround continues. Results are moving very much in the right direction, but that is certainly not the focus of what I'm mentioning here.

Speaker #1: And of course, as I mentioned earlier, the FFG acquisition, was signed. However, in terms of numbers, or not however, in terms of numbers, we see substantial order growth, in the second quarter 26, versus, the previous year.

Speaker #4: So and the EBIT is also developing as expected in a nice way. It's a bit lumpy both revenue and EBIT is always a bit lumpy because we don't talk about serial business.

Speaker #4: So one quarter you have more, one quarter you have less. Important is obviously to look in the trends together. However, before moving on, what you've seen here is Deutz Defense as it stands right now.

Speaker #1: The order backlog is now at €43 million, compared to €27 million beforehand. Also, the revenue is 47% above the previous year, not €52 million. The growth is primarily coming from Defense and not from others. Bear in mind, we also have IRS, the engine aftertreatment specialist, as part of this subsegment here.

Speaker #4: Obviously, FFG, the acquisition of FFG will change the scale of that picture totally. Our defense business will then exceed, as I mentioned earlier in the call, 1 billion in revenue already in next year 2027.

Speaker #1: For which, by the way, the successful turnaround continues—results are moving very much in the right direction. But that is certainly not the focus of what I'm mentioning here.

Speaker #4: And with that becoming a really, really not only an integral part of the strategy, but a very, very relevant part of the business in all aspects: revenue, profitability, number of employees, and so on.

Speaker #1: so, and the EBIT is, is also, is also, developing as expected in a nice way. It's a bit lumpy, both revenue and, and EBIT is always a bit lumpy because we don't talk about serial business, so one quarter you have more, one quarter you have less, important is obviously to look in the trends together.

Speaker #4: FFG will operate as a standalone unit within our defense business unit. It's management, it's workforce, it's customer relationships. There will be fully preserved. So we will create one strong defense business unit around FFG.

Speaker #1: However, before moving on, what you've just seen here is Deutz Defense as it stands right now. Obviously, the acquisition of FFG will totally change the scale of that picture.

Speaker #4: And what Deutz adds is industrial manufacturing scale, propulsion technology across the full power range, relevant obviously to FFG's platform portfolio. And that's extremely important, a NATO-wide service network.

Speaker #1: Our defense business will then exceed, as I mentioned earlier in the call, $1 billion in revenue already next year, 2027. With that, it becomes not only an integral part of the strategy, but also a very, very relevant part of the business in all aspects: revenue, profitability, number of employees, and so on.

Speaker #4: So together, and we can be quite proud of that. Together, this defense business unit will become the only European domiciled platform covering the full land vehicle lifecycle, propulsion, integration, MRO, and modernization.

Speaker #4: And that under one roof. So that opportunity exists in European defense today, and we together with FFG, we are able to capture it. Right.

Speaker #1: FFG will operate as a standalone unit within our defense business unit. Its management, its workforce, its customer relationships—they will be fully preserved. So we will create one strong defense business unit around FFG.

Speaker #4: Thanks for listening so far. I will hand over now to Oliver who will focus on the financials a bit more detail.

Speaker #1: And what Deutz adds is industrial manufacturing scale, propulsion technology across the full power range—relevant, obviously, to FFG's platform portfolio—and, and that's extremely important, a NATO-wide service network.

Speaker #2: Good morning. Warm welcome also from my side. Well, let's get started. After a strong Q1, we saw an even stronger Q2. And that shows our transformation is on track, building the next Deutz is on track.

Speaker #1: So together, and we can be, we can be quite proud of that, together this defense business unit will become the only European domiciled platform covering the full land vehicle lifecycle, propulsion, integration, MRO, and modernization, and that under one roof.

Speaker #2: So just to remember, beginning of 2024, we still were in a three-shift operation on the engine business, and that was where the economic downturn on the engine side, the circular part of our business, kicked in.

Speaker #1: So that opportunity exists in European defense today, and together with FFG, we are able to capture it. Right, thanks for listening so far.

Speaker #2: Since then, since the middle of 2024, we saw that we increased our margins in six out of seven consecutive quarters in a row. That is a great achievement.

Speaker #1: And with that, I will hand over now to Oliver, who will focus on the financials in a bit more detail.

Speaker #2: That is a direct result of our strategic transformation. That is a direct result of our top line measures, of our bottom line measures. Cost discipline, cost reduction on the engine side, but especially also growing service, growing defense, growing energy.

Speaker #2: Good morning. A warm welcome also from my side. Well, let's get started. After a strong Q1, we saw an even stronger Q2, and that shows our transformation is on track. Building the next DEUTZ is on track.

Speaker #2: And as we heard earlier, we need to keep in mind the circular part of the business. So the engine business still remains on a rather low level.

Speaker #2: That means the 7.2% margin we achieved in Q2 is a margin we achieved in a weak engine market. And once the recovery kicks in, we're going to see the full positive operational leverage.

Speaker #2: So, just to remember, at the beginning of 2024, we were still in a three-shift operation in the engine business, and that was where the economic downturn on the engine side, the cyclical compartment of our business, kicked in.

Speaker #2: Driving margins even higher. Going to a bit more details on the financials. We see here, as we heard, the new orders 28.7% up. Yes, there is some inorganic effects in that, especially due to the first-time consolidation and the contributions of Freak Maxi Trust and GNT.

Speaker #2: Since then, since the middle of 2024, we saw that we increased our margins in six out of seven consecutive quarters in a row. That is a great achievement. That is a direct result of our strategic transformation; that is a direct result of our top-line measures, of our bottom-line measures, cost discipline, cost reduction on the engine side, but especially also growing service, growing defense, growing energy.

Speaker #2: That in total adds up to somewhere around 170 million euros in the new orders, but even taking that out, there is a positive book-to-build ratio above one, which means the business is also organically growing, which is a good sign.

Speaker #2: And as we heard earlier, we need to keep in mind the cyclical component of the business. So, the engine business still remains at a rather low level. That means the 7.2% margin we achieved in Q2 is a margin we achieved in a weak engine market, and once the recovery kicks in, we're going to see the full positive operational leverage driving margins even higher.

Speaker #2: On the revenue side, we see an increase here of 10.7%. All business units are growing, especially growth is driven here by the energy business.

Speaker #2: So the highest growth in absolute terms. In terms of regional split, 55% revenue in Europe, 27% in the Americas. 11% in APAMEA and only 7% in China.

Speaker #2: Going into a bit more detail on the financials, we see here, as we heard, that new orders are up 28.7%. Yes, there are some inorganic effects in that, especially due to the first-time consolidation and the contributions of Freak Maxi Trust and G-GNT. In total, that adds up to somewhere around €170 million in new orders. But even taking that out, there is a positive book-to-bill ratio above one, which means the business is also organically growing, which is a good sign.

Speaker #2: So no relevant dependency as you know from the Chinese business. In terms of EBIT, we saw a significant improvement, going up 43.1% to almost 80 million euros.

Speaker #2: That is a good achievement. And of course, consequently, also net income increased significantly to 33.5 million. And that is even after taking into account the 12.5 million provision we booked for the voluntary program.

Speaker #2: On the revenue side, we see an increase here of €7, 10.7%. All business units are growing, especially growth is driven here by the energy business—so the highest growth in absolute terms.

Speaker #2: So now the future of the program, we saw last year, but the voluntary program now where we're addressing also the operational part of the engine business, especially here in Cologne.

Speaker #2: In terms of regional split, 55% of revenue is in Europe, 27% in the Americas, 11% in APAMEA, and only 7% in China, so no relevant dependency, as you know, from the Chinese business.

Speaker #2: Talking about R&D, CapEx and working capital. R&D quota is going down in terms of sales. So 4.0% after having seen 4.5% in first half 2025.

Speaker #2: So that is an achievement. The absolute figures here stay rather constant. However, we need to be aware that we shift especially R&D expenses from new tech, where we show way more R&D activities streamlined and focused towards what market is demanding.

Speaker #2: In terms of EBIT, we saw a significant improvement, going up 43.1% to almost 80 million euros, that is a good, that is a good achievement, and of course consequently also net income increased, significantly to 33.5 million, and that is even after taking into account the 12.5 million provision we booked for the voluntary program, so now the future-fit program we saw last year, but the voluntary program now where we're addressing also the operational, part of the engine business, especially here in Cologne.

Speaker #2: And on the other hand, increasing it accordingly in the defense business. On the CapEx side, what looks as a big increase here at the first glance is actually mainly driven by the renewal of a lease contract for one of the sites, which contributes to a 12 to 13 million out of that increase.

Speaker #2: So the biggest portion of that, while the traditional classical CapEx outside lease is only slightly increasing. That slight increase is mainly due to some IT infrastructure projects.

Speaker #2: Talking about R&D, CapEx, and working capital – the R&D quota is going down in terms of sales, to 4.0% after having seen 4.5% in the first half of 2025, so that is an achievement.

Speaker #2: And software projects, which we are currently conducting around SAP. On the working capital side, you'll see an increase to buy by 21% to 21.5% of sales.

Speaker #2: The absolute figures here stay rather constant. However, we need to be aware that we are shifting especially R&D expenses from new tech, where we show way more, you know, R&D activities streamlined and focused towards what the market is demanding, and on the other hand, increasing it accordingly in the defense business.

Speaker #2: While here we need to keep in mind that the figure is a bit distorted due to the acquisition effect. We acquired several companies, as you know, Freak Maxi Trust, GNT, the working capital is included here.

Speaker #2: However, not a 12-month sales figure is included. So if you would normalize that working capital quota would be reduced by 1.4 or 1.5% percentage points roughly.

Speaker #2: This is actually mainly driven by the renewal of a lease contract for one of the sites, which contributes €12 to €13 million out of that increase—so that's the biggest portion of it—while the traditional, classical CapEx outside the lease is only slightly increasing. That slight increase is mainly due to some IT infrastructure projects and software projects, which we are currently conducting around SAP.

Speaker #2: Bringing it to a lower level. However, we also see that inventory is increasing, was increasing throughout the first half of the year. That is of course also a direct result of being prepared for delivering on the improved order situation going forward, especially in the second half.

Speaker #2: On the working capital side, you see an increase to by, by, 21% to 21.5% of sales, while here we need to keep in mind that the figure is a bit distorted due to the acquisition effects, we acquired several companies, as you know, Freak Maxi Trust, GNT, the working capital is included here, however, not a 12-month sales figure is included, so if you would normalize that working capital quota would be reduced by 1.4 or 1.5%, percentage points, roughly, bringing it to a lower level, however, we also see that inventory is increasing, was increasing throughout the first half of the year, that is of course also a direct result of being prepared for delivering on the, on the improved order situation going forward, especially in the second half.

Speaker #2: Of the year. Well, talking about inventory, that was also a main driver for the cash flow development in Q1 besides the operational results. So we see the cash flow from operating activities went down a bit to 32 million.

Speaker #2: That is mainly caused by higher inventories, as I just pointed out. Also, and especially to be prepared for delivery on the good order backlog.

Speaker #2: But also some severe payments of people that were leaving as a result of the future fit program. So result effect last year, cash flow effect coming in once people are leaving.

Speaker #2: And those were the two main drivers. That means in terms of free cash flow, it converts to before M&A minus 29.7 million. Here we need to keep in mind that the year before was positively distorted by a few items as we pointed out at that point in time.

Speaker #2: ...of the year. Well, talking about inventory, that was also a main driver for the cash flow development in Q1, besides the operational results. So we see the cash flow from operating activities went down a bit to €32 million. That is mainly caused by higher inventories, as I just pointed out, also and especially to be prepared for delivery on the good order backlog, but also some, some severance payments of people that were leaving as a result of the Future-Fit program. So, result effect last year, cash flow effect coming in once people are leaving, and those were the two main drivers.

Speaker #2: So we come back here more to a normalized level where we see the typical cyclicity that H2 is significantly stronger. On the cash flow side.

Speaker #2: In terms of net debt, that's a consequence sign on the free cash flow before M&A. But of course also then reflecting our several M&A transactions.

Speaker #2: And that is the reason why we are going up here to 520.5 million including roughly 92 million of leasing. On the equity side, equity ratio remains strong.

Speaker #2: Yes. However, it dropped a bit from 51.3% to 43%. That's the result of the acquisitions we conducted. So we have the debt finance acquisitions all of them debt finance.

Speaker #2: That means, in terms of free cash flow, it converts to, before M&A, minus €29.7 million. Here, we need to keep in mind that the year before was positively distorted by a few items, as we pointed out at that point in time, so we come back here more to a normalized level, where we see the typical seasonality—that H2 is significantly stronger.

Speaker #2: And that is basically bringing down the equity ratio. But still to a very solid level. And our targeted level of above 40%. In terms of leverage, yes, we went up 2.1.

Speaker #2: That is including leasing here. If you take out leasing, we are the 0.3 lower. So at 1.8 without leasing. And that is a moderate level still.

Speaker #2: On the cash flow side, in terms of net debt, that's a consequence sign on the free cash flow before M&A, but of course also then reflecting our several M&A transactions. That is the reason why we are going up here to €520.5 million, including roughly €92 million of leasing.

Speaker #2: However, as you know, we will go up a bit in the leverage as of closing of the FFG transaction. As we explained it over the last weeks.

Speaker #2: So that will bring us to a leverage in a range of more or less 3. But with a very strong deleveraging potential of the combined group going forward.

Speaker #2: On the equity side, equity ratio remains strong, yes, however, it dropped a bit from 51.3% to 43%, that's the result of the acquisitions we conducted, so we have the debt finance acquisitions, all of them debt finance, and that is basically bringing down the equity ratio, but still to a very solid level, and, and our targeted level of above 40%.

Speaker #2: With that, I hand over to Sebastian again. Thank you very much.

Speaker #1: All right. Thank you, Oliver, for providing the details on the numbers. Let me first give an update on, or an update, confirmation of the guidance.

Speaker #2: In terms of leverage, yes, we went up to 2.1; that is including leasing here. If you take out leasing, we are at 1.8 without leasing, and that is still a moderate level. However, as you know, we will go up a bit in the leverage as of the closing of the FFG transaction, as we explained over the last weeks. So, that will bring us to a leverage in a range of more or less 3, but with a very strong deleveraging potential of the combined group going forward.

Speaker #1: Okay, sorry. Let me first start giving an update or confirmation of the guidance. So as you know, we initially gave that guidance with the, at that point, a bit limited market visibility at the end of February.

Speaker #1: The limitation of visibility we at that point took because there was this various crisis Iran war, obviously the Ukraine war and so on. But we can now again confirm that there is no direct impact, nothing substantial.

Speaker #2: With that, I hand over to Sebastian again. Thank you very much.

Speaker #1: I mean, there always impact, but it's all very manageable as you can see also from our numbers. And we also see that our portfolio diversification is now really paying off.

Speaker #1: All right, thank you, Oliver, for providing the details on the numbers. Let me first give an update, or rather, a confirmation of the guidance.

Speaker #1: We used to be a cyclical company, a cyclical business, a cyclical share with that high exposure on the combustion engine, on the construction sector, the agri sector.

Speaker #1: Okay, sorry. let me first start giving an update or confirmation of the guidance. so as you know, we initially gave that guidance, with the, at that point, a bit limited market visibility at the end of February, the limit, the, the, the limitation of visibility we, at that point took because there was this various crisis, the Iran, war, obviously the Ukraine war and so on, but, we can now again confirm that there is no direct impact, nothing substantial, I mean, there always impact, but it's all very manageable, as you can see also from our numbers, and, we also see that our portfolio diversification is now really paying off, you know, we used to be a cyclical, company, a cyclical business, a cyclical share, with that high exposure on the combustion engine, on the construction, sector, the agri sector, and obviously that still is there, but it is becoming less and less relevant because, our service business, our defense business, our energy business is, not due to those cycles, it's actually embedded in a very, very strong, envi economic environment.

Speaker #1: And obviously that still is there, but it is becoming less and less relevant because our service business, our defense business, our energy business is not due to those cycles.

Speaker #1: It's actually embedded in a very, very strong economic environment. And in that sense, we're very happy to confirm the guidance, the revenue range between 2.3 and 2.5 billion euros, the EBIT margin between 6.5 and 8%, half year down at 7.1.

Speaker #1: So it's a pretty in the middle, but we'll expecting as usual a bit of a stronger second half. And this is not due just some hope on the engine recovery.

Speaker #1: We see signals here as well. We see signals here as well. Also moving into July, orders are picking up nicely on still not like plus 20% level.

Speaker #1: That's also clear. But things are picking up nicely. But even more important, the new additions to the portfolio, most notably energy and defense, we expect for both of them a stronger second half than the first half.

Speaker #1: That's why we are extremely comfortable that we will achieve that guidance. And probably not the lower end. So yeah, that's pretty much my confirmation of guidance.

Speaker #1: and in that sense, we're very happy to confirm, the guidance, the revenue, range between 2.3 and 2.5 billion euros, the EBIT margin between 6.5 and 8%, half year down, at 7.1, so it's, well, pretty, pretty in the middle, but we'll expecting as usual a bit of a stronger second half, and this is not due just some hope on the engine recovery, we see signals here as well, we see signals here as well, also moving into July, orders are picking up nicely on still not, like, you know, plus 20% level, that's also clear, but things are picking up nicely, but even more important, the new additions to the portfolio, most notably energy and defense, we expect for both of them a stronger second half than the first half, that's why we are extremely comfortable.

Speaker #1: Let me just briefly reflect on what Oliver and myself have just shared with you. So with the continuing to grow in energy. Two acquisitions, but also that business or that part of the business which is already with Deutz for longer is developing very, very nicely.

Speaker #1: The US, Morocco, China. Profitability of engines rebounded. And I cannot reiterate or repeat that more often. Because we have to focus on what we can influence.

Speaker #1: And the global development of the construction market, we cannot influence, but we can influence in which markets are we active? In which fields are we playing?

Speaker #1: that we will, achieve that guidance and, probably not on the lower end. so, yeah, that's pretty much, my confirmation of, of guidance. let me just briefly reflect on, what Oliver and myself have just, shared with you.

Speaker #1: So that shows why are we moving in energy and defense? Why are we building doubling down on service? And of course, we can influence cost position as well as product portfolio and engines.

Speaker #1: And that is exactly what we're doing. And that's why we're now profitability that was at low level of occupation in the past completely unthinkable.

Speaker #1: So, we've—we're continuing to grow in energy: two acquisitions, but also that business, or that part of the business which has already been with DEUTZ for longer, is developing very, very nicely—the US, Morocco, China.

Speaker #1: But that means also in turn, once the market is picking up even stronger than it's been picking up in the last months, here, we're actually moving on really nicely there as well.

Speaker #1: Profitability of engines rebounded, and I cannot reiterate or repeat that more often, because, you know, we have to focus on what we can influence. The global development of the construction market we cannot influence, but we can influence which markets we are active in, and in which fields we are playing. That shows why we are moving into energy and defense, why we are doubling down on service. And, of course, we can influence our cost position, as well as our product portfolio and engines. That is exactly what we are doing, and that's why we're now in the engine business on a level of profitability that, at a low level of occupation in the past, was completely unthinkable.

Speaker #1: Service growth I mentioned and the deal with FFG, I also spoke about. But talk a bit. But let's on the deal with FFG, I mean, we will obviously over the next month, we will give the more we have, we give more updates.

Speaker #1: But it's really a transformational transaction for Deutz. Because we're adding more than 1 billion very profitable revenue to the business. And that will bring Deutz not only on revenue basis, but more importantly, on profitability level, on EBITDA.

Speaker #1: But that also means, in turn, once the market is picking up even stronger than it has in the last months here, we're actually moving on really nicely there as well.

Speaker #1: EBIT as well as free cash flow in a completely different area. In a completely different area. And we are still, as you know, valued a bit like an engine maker.

Speaker #1: Service growth I mentioned, and the deal with FFG, I also spoke about. but talk better. but, let's, on the deal with FFG, I mean, we will obviously over the next, month, we will give the more we the more we have, we will give more updates, but it's really a transformational transaction for Deutz, because we're adding more than 1 billion.

Speaker #1: With a multiple depending on where we are in the valuation, sometimes 6, sometimes 7 in terms of EBITDA multiple. And we're truly believe that with the portfolio we're now working in, energy and defense in particular, it's not nearly reflected what potential, what valuation potential Deutz has.

Speaker #1: So time will obviously support that. But we are looking ahead quite excitedly about what's here to come. Let's move on now, please. So in terms of time ahead of us, the signing of the transaction with the beginning of July, we're now first half year results in three weeks, 24th of August, we'll have the extraordinary general meeting.

Speaker #1: This is very profitable revenue to the business, and that will bring DEUTZ not only, on a revenue basis, but more importantly, on a profitability level—on EBITDA, EBIT, as well as free cash flow—into a completely different area.

Speaker #1: In a completely different area. And, we are still, as you know, valued, a bit like an engine maker, with a multiple depending on where we are in the valuation, sometimes 6, sometimes 7, in terms of, EBITDA multiple, and we're truly believe that with, the portfolio we're now, working in, energy and defense in particular, it's not, not nearly reflected, what potential, what valuation potential, Deutz has.

Speaker #1: It's going to be a virtual meeting. Where we'll invite or we have invited shareholders to vote on the capital increase relevant for the acquisition of FFG.

Speaker #1: So far, we received a lot of extremely positive feedback from many, many institutional investors. Also, the proxy advisors have issued recommendations to vote for that.

Speaker #1: So, time will obviously support that. But we are looking ahead, and are quite excited about what's to come. Let's move on now, please.

Speaker #1: So we received that extraordinary result. By the way, the first relevant and very relevant anti-trust approval from the German Federal Competition Authority has been received last week.

Speaker #1: So in terms of, time ahead of us, the signing of the transaction with the beginning of July, we're now first half year results in a, in three weeks, 24th of August, we'll have the extraordinary general meeting, it's gonna be a virtual meeting, where we'll invite or where we have invited shareholders to vote on the capital increase relevant, for the acquisition of FFG.

Speaker #1: So that's also another sort of implementation risk which we never considered as a risk, but it's always good if these steps have been completed.

Speaker #1: So we expect by the end of this year, we're writing here potentially by the first quarter, but at the moment our assessment is rather the end of this year we expect the final regulatory approvals from other jurisdictions to be granted and thus that's where we stand right now.

Speaker #1: So far, we received a lot of extremely positive feedback from many, many institutional investors. Also, their proxy advisors have issued recommendations to vote for that, so we received those extraordinary results.

Speaker #1: And in that sense, we would like to thank you for listening. And obviously, as usual, look forward to your questions.

Speaker #1: By the way, the first, relevant and very relevant, anti trust approval from the German, Federal Competition Authority has been received last week, so that's, also another sort of implementation risk which we never considered as a risk, but it's always good if these steps have been, have been, have been completed.

Speaker #2: Thank you very much for the update, Sebastian and Oliver. We're going to now move on to our Q&A session. For a dynamic conversation, we kindly ask you to ask a question in person via the audio line to do so.

Speaker #2: Please click on the raise your hand button. If you are dialed in by phone, please use the key combination star nine followed by star six to unmute yourself.

Speaker #1: So, we expect by the end of this year—we’re writing here potentially by the first quarter—but at the moment, our assessment is rather…

Speaker #2: And please note that questions via chat will not be submitted today. We already have the first hand up from Lasse Stuben.

Speaker #3: Hi, good morning. My first question would just be on the general market environment you're seeing and how Q2 progressed versus your expectations from Q1.

Speaker #1: So, we would like to thank you.

Speaker #3: I'm just wondering if generally the order intake dynamics, I'm guessing May wasn't fantastic, particularly for engines, but I could be wrong. So I'm just wondering you briefly commented on orders picking up nicely in July, but would be good to just get a bit more color on the run rate coming out of the second quarter.

Speaker #3: Into Q3.

Speaker #2: Is it yourself? And please start that question from—

Speaker #1: Yeah, Lasse, thanks for your question. So first of all, it was actually fully according to our expectation. Not beyond, but also not below. So we obviously need to bear in mind that we had a very nice jump in order index in the first quarter.

Speaker #3: Hi, good morning. First question would just be on the general market environment you're seeing and how DEUTZ is performing versus your expectations from Q1. So you commented on orders picking up.

Speaker #1: And that obviously leads in terms of engines to higher revenue than before. In the second quarter, and we were slightly below revenue in terms of order intake in the second quarter, but that's very slightly.

Speaker #1: That's pretty much I would say not relevant. What we see here at the moment is particular construction. There are very positive signs. If you look on our sort of our geographic end markets, just take a look at the United States.

Speaker #3: Okay. It would be good to just get a bit more color on the run rate, in terms of order rate, and taking the second quarter, but it's, you know, very slightly.

Speaker #1: You know that our main customers in the United States are Tarex, JLG. Their end customers, for example, is our main customer, United Rentals. Look at how they develop.

Speaker #1: They have given also updated numbers last week. And very positive signs. And so that's obviously translates also into order intake at us. Always with a bit of a delay.

Speaker #1: They need to work off their inventories. However, that's as much as I want to say about how we moved into July. Obviously, July will report in October when we report Q3.

Speaker #3: It's pretty much, not relevant. What we see here at the moment is, particular construction, there are, very positive signs. if you, if you look on our sort of our geographic end, end markets, just take a look at the United States.

Speaker #1: But in principle, I can say to give you a bit of light, US is going nicely. And Europe some customers are increasing orders. Others are still a little reluctant.

Speaker #1: Also bear in mind is July, August now. So that is not the time in the year where construction and early customers are really ordering.

Speaker #3: Very positive signs, and so that’s obviously a delay in the work of the employees. That’s what I want to say about that. It is going nicely. Europe, some customers are.

Speaker #1: But what we feel is that potentially after the summer break, things will become more clear. But in principle, as I said, fully according to expectations and fully according to also what we put out in guidance.

Speaker #1: So the year is pretty safe.

Speaker #3: Okay, perfect. The second question is on gross margins. These were down a little bit in the second quarter. It looks like you had the same dynamic last year.

Speaker #3: So I'm just wondering sort of yeah, what's the driver of that effect in the second quarter versus Q1?

Speaker #3: Mind is July, so that is not, that is not time in the year. Feel of our, in principle. To expectations, fully, according to what's, what guides is pretty safe.

Speaker #1: Yeah, I mean, that's a typical seasonal pattern exactly you saw a little bit of the gross margin side that Q2 you correctly pointed out is slightly lower.

Speaker #1: However, we're expecting that especially if you look towards the second half of the year to increase again. What we're going to see then is basically that especially the newly acquired or newly built up businesses, especially energy, especially defense, especially also the service, business is structurally going up.

Speaker #3: Okay, perfect. The second question is on gross margins. These were down a little bit in the second quarter. It looks like you had the same dynamic last year, so I'm just wondering, sort of...

Speaker #1: The only impact margin comes then usually sees a bit on the service side due to the effect that Sebastian pointed out earlier. But that is if you acquire businesses which are slightly below the current margin level but significantly margin increased on the group level, that should work also on the second level.

Speaker #1: Typical, typical seasonal pattern exactly as you saw. A little bit on the gross margin side, but, due to your correctly funded and all this, it's slightly lower.

Speaker #1: And of course, the biggest impact is then from the expected recovery on the engine side, which has of course the most important impact on the gross margin.

Speaker #1: The, the second half of the year took increase again, what we're gonna see that is basically that especially the newly acquired or newly built up businesses, especially energy, especially defense, especially also, the service, business is, is, is structurally, is structurally going up.

Speaker #3: Okay, thank you. And then the third one is on the OPEX level. In the second quarter, I mean, so that was up again. I mean, that's up materially year on year.

Speaker #1: The only, in fact, margin kind of dilution we see is a bit on the service side, due to the effect that Sebastian pointed out earlier.

Speaker #3: But also on the first quarter. So just wondering, is that sort of the right run rate for the remainder of the year? And also looking into 27 or how should we think about that?

Speaker #1: Yeah, but that is, you know, if you acquire businesses which are slightly below the current margin level, quite significantly, the margin increase will look like that. That should work also on the second level.

Speaker #1: Well, I wouldn't talk about the right run rate. I think what you need to keep in mind, we are consolidating additional businesses. So we acquired double down the end of last year.

Speaker #1: And of course, the biggest impact is definitely on the third one, is on the—

Speaker #1: We acquired outside news end of last year. We acquired maxi first and so on. So on the operating cost also SG&A cost, you see that those costs are coming into the game.

Speaker #3: OPEX level in the second quarter. I mean, so that was up again. I mean, that's up materially year-on-year, but also on the first quarter. So, is that sort of the right run rate?

Speaker #1: And ultimately, we look for the EBIT margin. And that is what counts as EBITDA margin. And that is what we're expecting the further increases.

Speaker #3: For the remainder of the year, and also looking into 2026.

Speaker #3: Makes sense. And then the final question is just, can you give the organic revenue growth figure for H1 or the second quarter?

Speaker #1: Consolidate. The acquired double down at the end of last year, the acquired outside user at the end of last year, the acquired margin first, and so on. So, on the operating costs, also SG&A costs—you see that those costs, €270 and €170 million order intake.

Speaker #1: Yes, I can give it for, let's say for H1, if you take the acquisitions we conducted in H1. So the maxi trust in the game into the equation.

Speaker #1: They accounted for approximately 170 and 170 million order intake. And 30, almost 30 million revenue. If you include also the acquisitions we did last year in H2.

Speaker #1: So those are totally double down because in total, including the others of approximately 200 million impact on the order intake, approximately 50 million impact on the revenue.

Speaker #1: Those are going to have a few like-for-like comparison H1, 25 against H1, 26.

Speaker #3: Perfect. Very helpful. And just final one, would you be happy to disclose the engine volumes for the first half? It might be in the report.

Speaker #1: And 30, almost 30 million revenue. If you include also the acquisitions we did last year in H2, so those are those total the others of a, of approximately 200 million impact on the order intake.

Speaker #3: I might have missed it.

Speaker #1: Yes, I'm super happy. 68.x units. 68.x units.

Speaker #3: Okay, perfect. Thanks very much.

Speaker #1: And approximately a €50 million impact on the revenue. So if you want to have a few, like, comparisons H1 2025 against H1 2026.

Speaker #2: Thank you very much. Last for your questions. And in between, Mr. Noy, could you get closer to the laptop of the microphone? Yes, thank you very much.

Speaker #2: And next in line is Stefan Augustin. You may unmute yourself. Thank you.

Speaker #3: And the first half? It might be in the report. I might have missed it.

Speaker #1: Yes, I'm super happy. Sixty-eight. Sixty-eight. That's important.

Speaker #3: Thank you very much. First, actually, a clarification because you mentioned the 1 billion for FFG and then for defense. So I just want to clarify, do you see for FFG as a standalone on our organic base, the 1 billion for 27, or has that been a statement for the defense business unit overall, including future acquisitions?

Speaker #3: Okay. Perfect. Thanks very much.

Speaker #2: Thank you very much, Lasse, for your questions. And in between, Mr. Neu, could you get closer to the laptop? Yes, thank you very much. Next in line is Stefan August.

Speaker #3: Thank you very much. The first is actually a clarification because you mentioned the one defense, so I just want to ask for FFG as a standalone.

Speaker #1: So indeed, I mentioned that FFG will achieve a revenue above 1 billion next year, probably a bit above 1 billion. And the statement that the defense business unit will be above 1 billion also holds true, of course.

Speaker #3: Oh, no, organic base, the 1 billion 27, or has that been a so, indeed, I mentioned that FFG will go above 1 billion next year, probably a bit, a bit above 1 billion.

Speaker #1: Because it's a negative revenue, it doesn't have a negative revenue. But we're working we expecting on the sort of defense and others, as it is right now, also gross year over year.

Speaker #1: So but what we're not providing as of yet is a very detailed number for 27, very simply, as you know, we're conducting our planning only later this year.

Speaker #3: The statement that the Defense business unit will be above $1 billion also holds true, of course. But we're working— we're expecting right now, over a year, that it is a very detailed 27.

Speaker #1: And I don't want to, by accident, give an outlook or like a guidance for the next year. So that's why unfortunately we'll have to keep it a bit more on a high level with above 1 billion.

Speaker #1: At a very attractive margin. And everything else will follow later through the year. I hope you understand that.

Speaker #3: There is this year, and guidance for that, unfortunately, will have to be a bit more on a high level. Very attractive margin, and everything else will follow latest of the year.

Speaker #3: Sure, fully understood. The second one is in a bit on the order intake in the energy business. We know it is lumpy. There might be possible projects at FERC, there might be dealer orders at Blue Star.

Speaker #3: So do we need to brace ourselves a little bit for Q3 also being a bit low and then a large chunk in Q4? Or is that a bit more evenly distributed in the second half?

Speaker #3: I hope—you, I hope you understand that. Sure. Fully understood. The second one is a bit on the order intake in the energy business.

Speaker #3: We know it is lumpy. There might be possible projects at FERC; there might be deal orders at Blue Star. So, a large chunk in Q4 or that—a bit more evenly in the second half.

Speaker #3: Because for the annual run rate, we would need to see a bit of a pickup from where we stand in Q2.

Speaker #1: Yeah, yeah. But we see that. I mean, our current assessment, when I said earlier about above 300, I think Oliver the right number is 320, 330.

Speaker #1: That's what we expect on the full year basis at the moment. And that's very, very little risk in that because that's almost covered by fixed orders.

Speaker #3: General run rate, we would need to see a bit of a pickup from where we stand in Q2. Yeah, yeah. But we see that.

Speaker #3: I mean, our current assessment—when I said earlier about above 300, I think, Oliver, the right number is 320 to 330. That's what we expect on a full-year basis at the moment.

Speaker #1: A little bit of distributed business in the US, but that comes in pretty reliably. So here we do I see hardly any concern, honestly speaking.

Speaker #3: And there's very, very little risk in that, because that's almost covered by fixed orders. There's a little bit of distributed business in the US, but that comes in pretty reliably.

Speaker #1: But of course, the second half is stronger than the first half. First of all, because in the first half, neither FERC nor maxi trust has been part of the entire six months.

Speaker #1: I mean, they both joined a bit later. And secondly, we do have a bit of a seasonal effect at FERC. They had the last year as well.

Speaker #3: So here we do—I see hardly any concern, honestly speaking. But, of course, the second half is stronger than the first half.

Speaker #1: Obviously, you can't explain that with something like harvesting season, but it seems to be a bit typical in this business that orders are being placed throughout the first half, but they've been delivered rather in the second half.

Speaker #3: First of all, because in the first half, neither FERC nor Maxi Trust has been part of the, of the entire six months. I mean, they both joined a bit later.

Speaker #1: So we are very, very, very bullish or, let's say, positive on the outlook on energy in the second half. Honestly, I believe that's probably the strongest foundation we have for in terms of so if I were to bet money, I would put a lot of money on everything, but the more I would even put more money on the second half of energy if you understand.

Speaker #3: In fact, as well, on everything, but more money on the closing efficiency. Comes a bit on, understand that, that's why we will have some, a brand of the increases F of FFG.

Speaker #3: Sure. Okay. The final one is actually I'd say a bit of a combination. First of all, you had some warn-offs in for closing more efficiency measures in the engine business.

Speaker #3: Now, FFG comes a bit on top. And understanding that, or to my understanding, we will have some serial production which is largely taking up for the brunt of the sales increases.

Speaker #3: Of FFG. So is there an idea that you can harvest a bit more like sending out employees maybe from the direction of Cologne rather to Flensburg altogether with your idea of India?

Speaker #3: So, is there an idea that you can—and we need to do more one-offs in the second?

Speaker #3: And then do we need to brace ourselves for a bit more warn-offs in the second half?

Speaker #1: Not significantly. I mean, so first of all, obviously, FFG is building up a third plant. It's well on track. It's in Handewitt, which is a neighboring district to Flensburg.

Speaker #1: We've actually visited it on Monday. It's looking very nice. In terms of development, they will have the Richtfest, I don't know what it is in English, honestly speaking, but the one of the important milestones where you celebrate that the building is the structure of the building is completed.

Speaker #1: It's 100, which is very nice.

Speaker #1: So that'll happen soon. And obviously, they require also additional personnel. Of course, we'll offer people working here to move there as well. Let's see whether they whether it's interesting.

Speaker #1: It's a very nice area up there. So I wouldn't necessarily say no because other people go on vacation there. So we may actually send people to work there.

Speaker #3: of course, we'll offer, we'll offer people working here, to see whether they, whether it's a very nice area out there. So, I wouldn't I wouldn't necessarily say no because, other people go on vacation there.

Speaker #1: It's a bit of a privilege. However, we also do not see beyond the 100, 220 FTEs, which will take out as part of that redundancy or that voluntary redundancy program here, we at this point in time do not see any additional need to structure reductions.

Speaker #3: So we may actually send people to work there, so that would be privileged. Or voluntary redundancy. He's working on efficiency gains, and, well, the number we mentioned will be more than sufficient for this year as well because bear in mind we've done a lot of work in terms of, you know, reducing permanent or replacing permanent by tens already in the past years.

Speaker #1: Here at the engine business, obviously, we continuously working on efficiency gains. And but probably we'll the number we mentioned will be more than sufficient for this year as well because bear in mind we've done a lot of work in terms of reducing permanent or replacing permanent by 10s already in the past years.

Speaker #1: But efficiency measures will continue. Year after year, but not necessarily for the second half of the year.

Speaker #3: But efficiency—efficiency measures will continue year after year, but not necessarily for the second half of the year.

Speaker #2: Yeah. On your questions regarding one-offs, yes, they're going to be a few million small one-offs, of course. But that is typically in line with what you are expecting with the transaction of that size.

Speaker #1: Yeah. On their questions regarding one-offs, yes, they're gonna be a few million small one-offs, of course. but that is typically in line with, you know, what you are expecting with the transaction of that size.

Speaker #2: A bit on the typical professional consultants you need and on the financing side, of course. But nothing extraordinary high.

Speaker #1: A bit on the, you know, on the typical professional consultants you need and on the financing side, of course. But nothing extraordinarily high.

Speaker #3: Right. Thank you very much.

Speaker #3: Right. Thank you very much.

Speaker #4: Thank you very much, Stefan, for your questions. And with an eye on the time, we have two more risen hands. The first one is from Pál Szirta.

Speaker #2: Thank you very much, Stefan, for your questions. And with an eye on the time, we have two more risen hands. The first one is from Paul Skirta.

Speaker #4: You may be able to speak now, Pál.

Speaker #2: You may be able to speak now, Paul.

Speaker #2: Hi, Pál. Can you hear us?

Speaker #1: Hi, Paul. Can you hear us? We can't hear you.

Speaker #1: We can't hear you.

Speaker #3: Yes. Good morning. Yes, Pál from Bernstein. Thank you for hosting the call and for taking my question. I have a question on the free cash flow.

Speaker #3: Yes, good morning. Yes, it's Paul Bernstein. Thank you for hosting the call and for taking my question. I have a question on the free cash flow.

Speaker #3: You've confirmed high double-digit million for the year, and H1 came in at minus €30 million. That implies a swing of well over €100 million in the second half of the year.

Speaker #3: You've confirmed high double-digit million for the year. And H1 came in at minus 30 million. That implies a swing of well over 100 million in the second half of the year.

Speaker #3: Could you please break that down between the working capital release and operating cash? And specifically, how much of it depends on the €79 million, roughly?

Speaker #3: Could you please break that down between the working capital release and operating cash? And on the 79 million euro roughly inventory build-up converting in the second half of the year?

Speaker #3: Inventory buildup, converting in the second half of the year. Thank you.

Speaker #1: Yeah, sure, I can do so. Basically, they are exactly the two elements you mentioned. So, on the one hand, we are expecting a very strong operational performance.

Speaker #3: Thank you.

Speaker #1: Yeah. Sure, I can do so. Basically, they are exactly the two elements you mentioned. So on the one hand, we are expecting a very strong operational performance.

Speaker #1: Two are basically our business units—the four relevant business units—in H2 that's going to convert to cash. And on the other hand, we are actively addressing that topic of working capital.

Speaker #1: Two, are basically all business units or the four relevant business units in H2. That's going to convert to cash. And on the other hand, we are actively addressing that topic of working capital.

Speaker #1: and, and we, we started a program to, to bring that down a bit. as you always do it every few years. So we see, we see good od potential there.

Speaker #1: And we started a program to bring that down a bit. As you always do it every few years. So we see good potential there.

Speaker #1: And that's gonna be like a compared to current levels, we're expecting a 60, 70 million, reduction throughout all the layers of working capital. And of course, a big part of that is related to the inventories.

Speaker #1: And that's going to be like a compared to current levels, we're expecting a 60, 70 million reduction throughout all the layers of working capital.

Speaker #1: And that is also, if you look at the history of Deutsch, you see, you see typically that kind of simplicity that the H1 is weaker in terms of cash flow.

Speaker #1: And of course, a big part of that is related to the inventories. And that is also, if you look at the history of Deutsch, you see typically that kind of simplicity that the H1 is weaker in terms of cash flow.

Speaker #1: The H2 is stronger. You're building up for seasonality patterns, certain inventories throughout H1. And that is then reverting in H2. So I'm not at all concerned about that.

Speaker #1: That is, reverting in H2. So I'm not at all concerned about that.

Speaker #3: Thank you. That's helpful.

Speaker #3: Okay. Got it. Thank you. That's helpful.

Speaker #2: Thank you very much, Paul. And last but not least, the questions from Klaus, who also joins us via phone today. And ma'am, you can proceed with Starkey 6.

Speaker #4: Thank you very much, Pál. And last but not least, the questions from Klaus Ringel. Also, joins us via phone today. And ma'am, you can self with Starkey 6.

Speaker #2: Mr. Ringe, yes.

Speaker #3: Good morning. Can you hear me now?

Speaker #4: Mr. Ringel, yes.

Speaker #2: Yes.

Speaker #1: Very clear. Loud and clear.

Speaker #3: Yeah, yeah. Thanks for taking my questions. One would be on the outlook for 2026. I mean, you already mentioned that you're feeling quite comfortable with the guidance and, looking at the H1 performance, you're already comfortably in the range for adjusted EBIT margin.

Speaker #3: Good morning. Can you hear me now?

Speaker #1: Loud and clear. Loud and clear.

Speaker #3: Yeah. Hi. Good morning. And yeah, thanks for taking my questions. One would be on the outlook for 2026. I mean, you already mentioned that you're feeling quite comfortable with what guidance and looking at the H1 performance you're already comfortably in the range for adjusted EBIT margin.

Speaker #3: in terms of revenue, you, you need a bit of a pickup in H2. So would be interested to hear about what will be the drivers.

Speaker #3: In terms of revenue, you need a bit of a pickup in H2. So would be interested to hear a bit your view, what will be the drivers in terms of business units here for the pickup in revenue in H2.

Speaker #3: That's the first question.

Speaker #1: Yeah, pretty much all but new tech at the moment. We'll see a bit of an uptick in engines, a bit.

Speaker #3: That's the first question.

Speaker #1: Yeah. Pretty much all but new tech. Because new tech is just not relevant in terms of top line at the moment. But we'll see a bit of an uptick in engines.

Speaker #1: But that's a lot of tools—first reason based on the visibility and the order of. And then, in the defense, we received particular to the drone pack with three drone suppliers working with DEUTZ in particular.

Speaker #1: A bit. But that's well in line with the current sort of bottom-up projections from the teams. So there's no sort of hope in a way left.

Speaker #1: Secondly, I'll mention it earlier already that the second half in energy is larger respected to be larger for two reasons. First reason, because maxi trust and frag haven't been part of the group since the 1st of January.

Speaker #1: So that's a very, very simple reason in a way. And secondly, the particular frag we do based on the visibility in the order book, we do see more in the second half than in the first half.

Speaker #1: So that's energy. On the fence, we received particular throwback a few relevant orders to be delivered in the second half. They do relate to the drone package that the German army has ordered with you know that with three drone suppliers, one of them working with Deutsch in particular.

Speaker #1: These orders have been placed. There was actually an additional order very recently. Here, we are not talking about a huge top line, but it's a healthy margin.

Speaker #1: as well as 150 is well above the 50 million. So yeah, that's pretty much supporting, supporting that top-line prognosis for the—

Speaker #1: These orders have been placed. There was actually an additional order very recently. Here we do not talk about a huge top line, but it's healthy margin.

Speaker #1: As well as some diesel engine orders from other NATO customers coming in. And on the service side, last but not least, we have for the first time surpassed 150 million in the run rate on the quarter.

Speaker #1: The basis on the run rate in June and also in July is well above the 50 million. So yeah, that's pretty much supporting that top line prognosis for the second half.

Speaker #3: Yeah. You've done targets more than sales, obviously. And you're—what would be the right timing for updating these targets? Is it, is it close deal?

Speaker #3: Okay. Thanks for that. And the second one would be more on the medium term. I mean, yeah, you have the medium-term targets, more than 4 billion sales, 10% EBIT margin plus.

Speaker #3: But obviously, including FFG, it will be much more than that. So in your view, what would be the right timing for updating these targets?

Speaker #3: For an update?

Speaker #1: We do plan an update in the— and I know, but we will— we will give our side, which we order for, like, a little short of that, but we require it because this is a big, big statement to be made.

Speaker #3: Is it already when you get approval for FFG? It's when FFG is closed the deal or what's your view here when we could hope for an update?

Speaker #1: We do plan an update in the second half of this year. What I can say, well, this is very simple to say because we are already in the second half of this year.

Speaker #1: I know that we will give an update later this year. What I can say already, and I mean, you're right with your question, Klaus, that our 4 billion target, which we initially projected for 2030, we will achieve much, much, much, much faster not only the top line, but also the bottom line.

Speaker #1: And, obviously, we'll need a bit more bottom-up planning, particularly on the FFG side. You know, there are changes in accounting principles. We're moving the 100 skills pool from German HGB into IFRS.

Speaker #1: I wouldn't even rule out that we already achieved this next year. Or we are like a little short of that. But we require because this is big, big statement to be made.

Speaker #1: So, obviously that doesn't change the business, but it changes the— but thanks for that.

Speaker #1: And obviously, we'll need a bit of a more bottom-up planning particular on FFG side. You know, there are changes in accounting principles. We're moving from hundreds of gazettes from German HGB into IFRS.

Speaker #1: So obviously, that doesn't change the business, but it changes the realization of revenue and of profit. And we wanted to be run we want to run that exercise diligently before informing the capital market on something because the worst thing we would be we say, "Oh yeah, we're going to be at the 4 billion," which, as I said, could be possible.

Speaker #3: We have two things. Thank you.

Speaker #2: Thank you very much. In Deutsch. A big thank you also to you, Sebastian and Oliver. I wish you all a great rest of your Thursday around the world.

Speaker #1: And then due to some accounting issues, well, we're at 3.5 only. That'd be terrible. So that's why we're working on that diligently. But as always, Klaus, you are the other analyst.

Speaker #1: You will be one of the first to know.

Speaker #3: Okay. Thanks. Thanks for that. Very helpful. And have a good day. Thank you.

Speaker #4: Thank you very much, Klaus. And with this, we come to the end of today's conference call. Thank you, everybody, for joining and your shown interest in Deutsch.

Speaker #2: Stay safe. Marks, that concludes our call for today.

Speaker #1: Yeah. Thank you. Thank you very much. Thanks. Thanks, everyone. Trust in what is ahead of us. And I just want to conclude, you know, this is really for—we have always talked about a transformation.

Speaker #4: A big thank you also to you, Sebastian, and Oliver, for your presentation and your time from my side. It was a pleasure to be your digital host today.

Speaker #4: I wish you all a lovely remaining Thursday around the world. Stay safe and with this, I hand back over to Sebastian for some final remarks, which concludes our call for today.

Speaker #1: Yeah. Thank you very much. Thanks for being our digital host, but also thanks everyone for dialing in. Thanks for your interest in Deutsch. Thanks for your trust in Deutsch and the share and for your shared excitement on what is ahead of us.

Speaker #1: We've been working; we are on this journey since 2022. We are a company from term—sort of sleep sometimes; it's the way it feels. And we did the homework in the first two years: fixing basics, bringing the company into a profitable... to grow.

Speaker #1: And I just want to conclude, you know, this is really a pivotal moment for Deutsch as a company. We have always talked about a transformation.

Speaker #1: And we also—I'm not saying it only started with that FFG transaction, because obviously we've done a lot, which we prepared very diligently—and we feel momentum. What I can promise is that DEUTZ in '27 will be completely different: larger, more profitable, and also, eventually, a more valuable company.

Speaker #1: We have been also working on the transformation in the last years. We are on this journey since 2022. Really waking up a company from a bit of a long-term sort of sleep sometimes it's the way it feels.

Speaker #1: And we did the homework in the first two years, fixing basics, bringing the company into a profitable position out of which we're then able to grow.

Speaker #1: And we also I'm not saying it only started with that FFG transaction because obviously we've done a lot of very great things in the past.

Speaker #1: But now this is the biggest step and it's a step which we tested and prepared very diligently. And we feel we know that this is the right asset, the right moment and what I can promise is that Deutsch in 2027 will be completely different.

Speaker #1: A larger, a more profitable, and also eventually a more valuable company. So it's a good it's great that you're interested in Deutsch for us, but also for yourself.

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