Katerina Koch: to GRAMMER's conference call on our results for the first nine months of 2026. Over the next 30 minutes, our CEO, Jens Öhlenschläger, and our CFO, Kelvin Wang, will present the key developments financial performance for the reporting period. The presentation and all related nine months documents are available in the investor relations section of our website. After the presentation, we will open the floor for questions and unmute your microphones for the Q&A. With that, I would like to hand over to you, Jens.
Jens Öhlenschläger: Thank you, Kati, and good morning also from my side. My name is Jens Öhlenschläger. I am the Spokesman of GRAMMER's Executive Board. Also on behalf of my colleagues, I welcome you to the presentation of the GRAMMER Group financial result for the first nine months of 2026. Together with Kelvin Wang, our CFO, we will walk you through our financial performance and adjusted outlook for the remainder of the financial year 2026. Let me start with an overview for the first nine months. Industry-specific challenges were ongoing during this period. Global automotive production remained below prior year level, intensified competition in China, geopolitical tensions, and trade-related uncertainties, while the commercial vehicle market proved more resilience. Within this market environment, GRAMMER Group revenue increased compared to prior year period.
Jens Öhlenschläger: On the year-to-date basis, earnings also improved due to the continued implementation of our Top 10 initiatives, ongoing restructuring measures, and efficiency gains across all the group. Nevertheless, Q3 earnings have been EUR 2.8 million below the prior year level due to higher costs related to the Iran conflict, special US and Mexican tariffs, and higher launch costs in the region Americas. These cost-increasing effects are ongoing and will have also an impact on the outlook for the full year, which has been revised. Details about will be explained during this presentation. First nine months, the development in both product areas was positive. Commercial Vehicle grew further, while Automotive experienced only a moderate increase in a challenging market environment. From a regional perspective, region APAC was the main growth driver. EMEA region showed a significant improvement in operating income, but the situation in Americas remained challenging.
Jens Öhlenschläger: So much from my side for the moment. Kelvin will now explain in details relevant financial KPIs. Kelvin, please.
Kelvin Wang: Yeah. Thank you, Jens. Also good morning from my side. I am Kelvin Wang, the Group CFO board member. Now let me walk through the Group's financial result for the period from January to September 2026. Group revenue reached EUR 1,435.6 million, an increase of EUR 48.7 million against EUR 1,386.9 million last year. Adjusted for currency effects, the increase was 4.3%. Looking at the quarterly development, Q3 revenue reached EUR 474.2 million, up 9.5% from EUR 433.2 million in the same quarter last year. Our product areas, Automotive and Commercial Vehicle, both experienced positive developments. The Commercial Vehicles segment grew by 5.1% to EUR 533.6 million, driven primarily by the Offroad and Rail&Road segments in the APAC region, while the Automotive segment increased by 2.6% to EUR 902 million.
Kelvin Wang: Focusing on the profitability, the EBIT rose to EUR 57.6 million, with the EBIT margin improving from 3.1% to 4%. Positive currency effects contributed to this improvement. Operating EBIT, which excludes currency and exceptional effects, rose by 6.6% to EUR 53.2 million, lifting the operating margin to 3.7%. Operating EBIT was adjusted for positive currency effects of EUR 7.7 million and exceptional effects of EUR 3.3 million. Now, let us move to the regions. The first one, let us go from the EMEA region. The region experienced growth despite a market environment that remains challenging. Revenue rose by 1.6% to EUR 825.7 million compared to its EUR 812.9 million in the prior year period. Commercial Vehicle grew by 1.5% to EUR 350.5 million, mainly driven by Rail&Road products. Automotive improved by 1.6% to EUR 475.2 million.
Kelvin Wang: EBIT in EMEA region grew from EUR 30.9 to EUR 48.6 million, with a margin increase from 3.8% to 5.9%. Operating EBIT improved from EUR 34.6 to EUR 53.5 million, and the operating EBIT margin from 4.3% to 6.5%. That is a big increase. The increase in Operating EBIT was primarily attributable to the Top 10 initiatives and also the restructuring measures. Operating EBIT was adjusted for positive currency effects of EUR 0.7 million and exceptional effects of EUR 5.6 million. Let us continue with the APAC region. Revenue increased by 13.6% to EUR 408.6 million. Adjusted for currency effects, the increase was 13.5%. Both product areas had a positive development, with Commercial Vehicle experiencing a particular strong growth. In Commercial Vehicle products area, the revenue grew by 27.5% to EUR 128.3 million, supported by strong demand in the Offroad business.
Kelvin Wang: Despite the challenging market conditions in China and supported by the new product launches, revenue in Automotive grew by 8.2% to EUR 280.3 million. Regarding earnings, EBIT remained essentially unchanged at EUR 26.8 million compared to EUR 26.3 million in the prior year. The EBIT margin was 6.6%. Operating EBIT improved slightly from EUR 26.7 million to EUR 27.6 million, with an operating margin at 6.8%. Operating EBIT was adjusted for negative currency effects totally by EUR 0.8 million. With those results, the APAC and EMEA regions remain a reliable earning driver to the Group. The next region, let us go to America region. For America region, the revenue declined by 5.2% to EUR 233.1 million. A significant portion of this decline was due to the currency effects. Adjusted for currency effects, the decline was 2.2%.
Kelvin Wang: Revenue in the Commercial Vehicle product area declined by 4.3% to EUR 79.9 million, primarily due to the lower customer demand resulting from the market weakness in the Offroad business. Automotive was down 5.6% to EUR 153.2 million. On a currency-adjusted basis, the decline was 2%. In terms of earnings, reported EBIT dropped from minus EUR 9.4 million in the prior year to minus EUR 11.3 million, with margin declining from minus 3.8% to minus 4.8%. Operating EBIT amounted to minus EUR 16.2 million compared to minus EUR 3.9 million in the prior year period. This development was primarily influenced by higher-than-expected launching cost related to the new project following the start of the production in July this year, as well as by the effect of the special tariffs in the United States and also Mexico special new tariff.
Kelvin Wang: Operating EBIT was adjusted for positive currency effects totaling EUR 4.8 million. As new projects are now getting started, we expect its contribution to steadily improve as volume increases. Now, let's turn to our workforce. As a reminder, the number of employees includes temporary workers and is reported as our average for the reporting period. On that basis, group headcount came up by 1.3% to an average of 14,161 employees. However, there are significant regional variations. In the EMEA region, the number of employees decreased by 7.2%. This reflects our optimization and restructuring measures, as well as the internal transfer of selected functions to the central service division, effective 1 January 2026. Those functions are now reported under central service rather than in the EMEA region. In the America region, headcount declined by 9.6%, primarily due to the lower sales volume in the region.
Kelvin Wang: In the APAC region, the number of employees rose by 21.3%. This was due to the capacity expansion and the launch of the new products at the key locations, like Suzhou City and Kaifeng City. We have a new plant for our new customer. Now, let's move to the capital expenditure. In the first nine months of 2026, capital expenditure totaled EUR 65.2 million, representing a 14% increase from EUR 57.2 million recorded in the prior year. A large portion of this increase is attributable to lease increase recognized under IFRS 16, which rose from EUR 7.6 million to EUR 12.8 million. From a regional perspective, EMEA invested EUR 24.8 million, an increase of EUR 2.6 million, mainly from IFRS 16 leasing contract for a building in Poland, and the higher investment in the GDG, our largest CV plant in Germany.
Kelvin Wang: Capital expenditure in APAC rose to EUR 21.4 million, primarily due to investments in customer projects and due to leasing capitalization under IFRS 16 of EUR 3.5 million. Americas came down to EUR 9.7 million as the industrialization of new projects is largely concluded. Last but not least, central service was at EUR 9.3 million, with a high leasing and the capitalization of R&D projects. Let's move to the liquidity. Regarding the balance sheet and the statement of cash flows, the focus is on three key financial areas: working capital, free cash flow, and net debt. Working capital rose to EUR 210.2 million compared to EUR 139.8 million at the end of 2025. This is primarily attributable to the impact of the trade accounts receivable and the higher inventory level in America and APAC regions.
Kelvin Wang: Free cash flow declined to EUR -7.1 million compared to EUR -5.2 million in the same period in the prior year. The operating cash flow decreased primarily because of the increase of trade accounts receivable and inventories. However, the development of the investing cash flow partially offset the negative impact due to the fact the same period in the previous year was affected by EUR 43 million payment for the JAI acquisition. Net debt stood at EUR 526.6 million compared to EUR 476.8 million at the year-end. On an adjusted basis, trading the EUR 130 million subordinated shareholder loans from Ningbo Jifeng as equity, net debt was EUR 397 million. Let me close my part with a look at equity, leverage, and also the gearing. Equity rose by 14.2% to EUR 318.2 million, primarily due to the positive net income and the favorable currency effects.
Kelvin Wang: The equity ratio stood at 17.1% compared to its 17.3% at year-end. On an adjusted basis, with the subordinated shareholder loans totaling EUR 130 million once again treated as the equity, the equity ratio amounts to 24.1%, reflecting a more accurate picture of our financial structure. Leverage improved slightly to 3.1 times from 3.2 times at the year-end 2025 without subordinated shareholder loan adjustment. On an adjusted basis, it was 2.4 times. Gearing decreased from 171.1% to 165.5%. On an adjusted basis, taking into account the subordinated shareholder loan, the gearing stood at 88.7%. With that, I hand it back to Jens for the outlook for 2026.
Jens Öhlenschläger: Yeah. Thank you very much, Kelvin. I would like now to continue with the outlook for the full business year of 2026. Before presenting the financial forecast, I would like to provide a brief overview of the current market situation. As mentioned already at the beginning, the market outlook for 2026 remains mixed and challenging. On the global automotive production, the volumes remained below the prior year's level. We see substantially increasing competition in China. We are faced with geopolitical tension and trade uncertainties. This is the environment for the automotive sector. Commercial vehicle showed and proved here a little more resilience, resulting in a moderate growth. Despite this fact, we see high financing and energy costs, ongoing geopolitical risks, and cautious investments. They continued to influence the demands in key markets for us, also for GRAMMER.
Jens Öhlenschläger: Also, GRAMMER, for this reason, was affected by geopolitical tension and trade-related uncertainties, and is experiencing heavy cost impact of the Iran conflict on its business performance. In addition, on top of that, there are launch costs associated with new projects in the Americas region, were substantially higher than originally expected. Impacted by these negative effects, GRAMMER published on 14 October an ad hoc and announced to adjust the full-year guidance. While revenue is still expected to be at around EUR 1.9 billion, the earnings forecast has been revised, and operating EBIT reduced from around EUR 80 million to now approximately EUR 70 million. For the remainder of the year, our focus will be on the consequent implementation of the measures already initiated and the stabilization of the region Americas, which is still a challenging area, still a challenging region for us.
Jens Öhlenschläger: So much from our side to the financial status of GRAMMER in the first nine months in 2026. For my part, I would like to finish with a short report about the status of our product segment railway seats. As the demand for sustainable mobility solution continues to grow, public transportation is becoming increasingly important. GRAMMER supports this development with innovative railway seating solutions designed to meet evolving requirements in regional and long-distance transportation. At the InnoTrans, the world's largest and most important railway equipment exhibition, GRAMMER was presenting recently several seating solutions considering criteria of sustainability, flexibility, and comfort. Plenty of discussions with railway customers showed the high interest at GRAMMER and our positive reputation in this market segment. As a brief outlook, even it is just a niche, in the next 5 years, GRAMMER is planning to double our sales with railway seats.
Jens Öhlenschläger: Before we conclude our presentation and move on to the question-and-answer session, we would like to briefly present our financial calendar for the year 2027, and I would like to hand over back to Kati.
Katerina Koch: Thank you, Jens. As already said, let us have a brief look at our financial calendar for the next year. We will publish our annual report for the year 2026 on 31 March, followed by our first quarter results on 29 April. Our annual general meeting will take place in June, specifically on 10 June. Our half-year report will follow on 13 August, and we will conclude the reporting year with our 9-month results on 29 October 2027. This concludes our presentation of the results for the first nine months of 2026. Thank you very much for your attention, and we are now happy to take your questions. For this case, please raise your virtual hand, and we will unmute you. All right. Obviously, no questions for today, so thank you very much again for your interest in GRAMMER.
Katerina Koch: Thank you, Kelvin and Jens, for guiding us through the results, and we look forward to see you on the next call. Have a great day and goodbye.
Kelvin Wang: Thank you. Thank you. Goodbye.
Jens Öhlenschläger: Bye.
