Operator: Ladies and gentlemen, welcome to the Q3 2026 earnings conference call. I am Sergen, the Chorus Call operator. I would like to remind you that all participants will be in a listen-only mode and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it is my pleasure to hand over to Thomas Jessulat, CEO. Please go ahead, sir.
Thomas Jessulat: Ladies and gentlemen, I welcome you to our earnings call on the third quarter of 2026. Unfortunately, our CFO, Isabelle Damen, is unable to join today's call due to illness. I will therefore provide a detailed look into the results from the third quarter in the first nine months of 2026. With today's publication, we confirm the guidance for 2026 in the medium term, which we have originally published with the annual report end of March and updated for sales expectation on 13 October. At the end of the presentation, as usual, you will have the opportunity to ask questions, and we are pleased to answer them. At the outset, I would like to present a brief overview of the key developments from the past nine months. Before turning to the financial performance in more detail, let me briefly comment on the current environment in which we are operating.
Thomas Jessulat: The automotive industry continues to face elevated uncertainty, driven by geopolitical tensions, shifting trade policies, and regulatory frameworks under discussion. At the same time, market forecasts point to a decline in global light vehicle production in 2026. Despite these challenges, we navigate these uncertainties through our global production footprint, diversified product portfolio, and increasingly resilient supply chain, which allows us to respond flexibly to changing market conditions. In parallel, we continue to execute our SHAPE30 strategy with a strong focus on cost discipline, operational efficiency, and organizational simplification. Taken together, the execution of our strategy strengthens our competitiveness and supports our objectives of higher profitability, stronger cash generation, and sustainable value creation. When looking at SHAPE30, our strategy has two main dimensions: growth and efficiency. On the growth side, we are ramping up new E-Mobility orders across all major automotive regions, despite a decline of global light vehicle production.
Thomas Jessulat: At the same time, we continue to leverage our strong position in the classical business. In addition, disciplined working capital management remains a key lever for generating sustained cash flow. On the efficiency side, we are returning to a more disciplined level of capital expenditure following the recent investment cycle. We also place a strong focus on cost discipline to optimize our cost base through streamlining and further structural measures under SHAPE30, while consistently addressing underperforming products and locations. Together, both dimensions contribute to our strategic goal, strengthening our competitiveness by enhancing profitability, particularly in the original equipment segment, and generating sustained cash flow. Let me briefly highlight the progress in the growth dimension. The E-Mobility business area represents a key growth driver for the group.
Thomas Jessulat: As large-scale customer programs continue to ramp up across all major automotive regions, E-Mobility sales more than doubled year-over-year to now EUR 189 million in the first nine months of 2026. At the same time, increasing volumes are translating into improved profitability. The adjusted EBIT loss in E-Mobility was reduced from -EUR 40.7 million to -EUR 33.7 million, while the OE segment's adjusted EBIT margin improved by 1.6 percentage points to 0.6% in the first nine months of 2026. Excluding the E-Mobility business area, the OE segment would show an adjusted EBIT margin of 5.3% year-to-date after 4.4% for the first nine months of 2025. This development confirms that the OE segment and the E-Mobility business area in particular are gaining traction. Going forward, our focus remains on scaling the business profitably, supported by strict cost discipline and continued working capital optimization to generate sustained cash flow.
Thomas Jessulat: Alongside growth, improving efficiency remains a key strategic priority as a second dimension of SHAPE30. Following the investment phase required to support the ramp-up of new business, we have now reduced capital expenditures in property, plant, and equipment to normalized level. In the first nine months of 2026, CapEx declined to EUR 60 million, corresponding to a CapEx ratio of now 4.4%, down from 8.1% a year ago. At the same time, we continue to execute our SHAPE30 strategy to improve group-wide profitability. In the third quarter, we have entered into an agreement with Lydech to sell our US subsidiary in Fort Wayne, Indiana, as well as our shielding technology business in Kecskemét in Hungary. For the new owner, thermal and acoustic shielding technology is part of its core business, so both locations can be further developed in the interests of the customers and employees.
Thomas Jessulat: This is another step in simplifying our global production network, being close to the customer, and at the same time focusing on increased profitability and cash generation. The transaction involves a low to mid double-digit million euro amount in sales 2025 and a low triple-digit number of employees as of year-end 2025. Moreover, we have achieved progress on our SHAPE2EMPOWER program, which targets lean structures for faster actions, greater efficiency, and stronger customer focus. With having said this, let us now shed some light on the financial figures. Let us first turn to our order situation, which steadily improved over the past quarters. Order intake reached EUR 538 million in Q3 2026, representing an increase of 15.2% compared to the third quarter of the previous year. The figure also reflects continued positive momentum compared to the preceding quarters.
Thomas Jessulat: As a result, our order backlog increased to EUR 1,327 million at the end of the third quarter. This corresponds to a growth of 19.4% year-on-year. It marks the highest level shown over the past five quarters. This overall development shows continued customer demand and provides a solid basis for future revenue growth. Let me continue with the sales development in the third quarter of the year. Revenue increased from EUR 395 million in Q3 2025 to now EUR 451 million in Q3 2026, representing solid year-over-year growth. Foreign exchange effects contributed EUR 4.4 million, while the divestment in the UK subsidiary in 2025 had a slightly negative impact of EUR 3 million. This growth significantly outpaced the overall automotive market. Global automotive production edged down by 1.6% year-on-year in the third quarter, with Europe, excluding Russia, growing by 0.2%, and Germany declining by 4.9%.
Thomas Jessulat: Against this backdrop, ElringKlinger achieved good organic growth, clearly demonstrating its resilient position in a contracting market environment. The reason for this resilience, the strong growth in E-Mobility, is to be seen on slide number 10. Revenue in the OE segment increased significantly year-on-year, substantially exceeding the prior year level. Within the OE segment, E-Mobility generated sales of EUR 65 million in Q3 2026. The ramp-up phase for major series production contracts and cell contacting systems is further progressing. Compared to previous year's Q3, revenues increased by more than 100%, highlighting the business area's strategic importance for the group's transformation. The Aftermarket segment continued its strong performance, increasing again sales from EUR 96 million in Q3 2025 to EUR 102 million in Q3 2026.
Thomas Jessulat: In addition, the Engineered Plastics segment was able to slightly increase revenue in Q3 2026, rising from EUR 37 million to EUR 39 million. Growth in Q3 2026 was achieved in all relevant regions for ElringKlinger. We now turn to the profitability metrics on slide number 11. As you can see, our earnings development remains on track. Adjusted EBITDA increased by 29% year-over-year from EUR 41.1 million to EUR 53 million, supported by higher sales and continued cost discipline. The adjusted EBITDA margin reached 11.8% in Q3 2026. Adjusted EBIT shows an even stronger development, rising by 38% year-over-year to now EUR 29.2 million. The adjusted EBIT margin improved from 5.4% to 6.5%, despite the ongoing earnings impact from the ramp-up in E-Mobility. Adjusted EBIT in E-Mobility has been improved by EUR 7.3 million to -EUR 9.6 million and is on track towards a break-even.
Thomas Jessulat: The adjusted EBIT of EUR 29.2 million includes adjustments of EUR 9.7 million, mainly for impairments in the context of the divestment and for restructuring. We will continue to consistently pursue our strategic course of SHAPE30 as the year progresses. In this context, we expect one-offs for the full year to be in the mid-double-digit million euro range, but lower compared to those in the previous year. Looking at the EBIT bridge, the improvement in profitability was primarily driven by the consistent execution of our strategic measures, contributing EUR 10 million. This is in line with our 2025 goal of achieving savings of in total EUR 50 million, coming into full effect in 2027. It underlines that our strategic measures are translating into tangible results, even though we still record costs for the global ramp-up of large-scale orders of EUR 12 million in the quarter under review.
Thomas Jessulat: Higher business volumes and product mix effects provided additional upside. On the next slide, you see the positive effects on earnings figures. Adjusted EBT increased by more than 100% to EUR 28.5 million compared with EUR 11.7 million in the prior year quarter. This translated into adjusted net income attributable to shareholders of EUR 14.3 million compared with EUR 6.2 million in the prior year quarter. Consequently, adjusted earnings per share increased to EUR 0.23, more than doubling from EUR 0.10 a year ago. On a year-to-date basis, adjusted EPS amounted to EUR 0.64. Turning to cash and capital efficiency, we made further progress in improving our financial profile during the quarter. The net working capital ratio decreased to 19.5% of group sales compared to 23.2% in the prior year quarter. At the same time, we maintained a disciplined approach to investments.
Thomas Jessulat: CapEx was reduced by 46% year over year to now EUR 15.1 million, resulting in a CapEx ratio of 3.3% compared to 7% a year ago. This further reflects the normalization of our CapEx spending after a very strong investment cycle related to the ramp-up of our large-scale orders. R&D spending remained at a solid level of EUR 20.4 million, while the R&D ratio improved to 4.5% of sales, demonstrating our ability to balance technology investments with financial discipline. Turning to our balance sheet and cash flow development, we continued to make progress in strengthening our financial position during Q3. Operating free cash flow reached EUR 28.5 million in Q3, supported by disciplined working capital management and lower investment spending. It is a clear improvement compared to prior year figure of EUR 18 million.
Thomas Jessulat: As a result, net financial debt was further reduced quarter on quarter to EUR 350 million. At the same time, our leverage ratio improved to 1.7 adjusted EBITDA compared to 2.2 a year ago. Our equity position also continued to strengthen. Equity increased to EUR 697 million, resulting in an equity ratio of 36%. Overall, these developments reflect our continued focus on cash generation, balance sheet strength, and the disciplined execution of our SHAPE30 transformation strategy. Turning to the performance of our OE segment, profitability continued to improve despite a challenging market environment. Segment sales increased by 18% year over year to EUR 310 million, driven primarily by the ongoing ramp-up of E-Mobility programs. E-Mobility sales nearly tripled to EUR 65 million. At the same time, operational performance improved.
Thomas Jessulat: Adjusted EBITDA in the OE segment increased from -2.1 million euro to EUR 3.9 million, mainly due to the improvement in the E-Mobility business area, although additional ramp-up costs in the two other business areas affected the segment results. Overall, adjusted margin of the segment improved by two percentage points year over year. The margin in the Aftermarket segment was impacted by temporary effects related to customs issues and costs, while earnings in the Engineered Plastics segment improved thanks to strict cost discipline. Overall, the quarter confirms that the OE segment is moving in the right direction, supported by higher volumes, improving E-Mobility economics, and the ongoing execution of our efficiency initiatives. Let us now turn to the market environment and our outlook for the full fiscal year. Let me also briefly address the market environment. Industry production forecasts remain volatile across the major automotive regions.
Thomas Jessulat: Compared to the estimates published in July 2026, light vehicle production expectations have been revised downward for Greater China, but upgraded for Europe. On a global level, expected light vehicle production for 2026 now stands at 91.6 million units, representing a decline of 1.7% versus prior year production. Despite these market headwinds and ongoing uncertainty, medium-term industry fundamentals remain intact. Global production is still expected to recover to around 97 million units by 2030. Turning to our outlook, we continue to expect full year 2026 performance to develop in line with our guidance. As communicated on 13 October, we raised our sales guidance for 2026 to around EUR 1.8 billion. This updated outlook reflects our assessment of the group's operational performance throughout the year and for Q4 2026. However, the overall market conditions remain challenging.
Thomas Jessulat: Moreover, we confirm the other key figures in the 2026 outlook as well as in the medium-term outlook. Overall, our results confirm that we are making solid progress in executing our SHAPE30 strategy. Supported by a strong financial position and a clear strategic direction, we remain well-positioned to further enhance profitability, strengthen cash generation, and create sustainable value over the long term. Thank you for your attention, and I am now happy to take your questions.
Operator: Ladies and gentlemen, we will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and 1 on the telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and 2. Anyone with a question may press star and 1 at this time. We have the first question coming from Tobias Willems from LBBW. Please go ahead.
Tobias Willems: Yeah. Hello. Tobias Willems from LBBW speaking. I have two questions. First, BMW has decided to expand its portfolio and structural measures forward, looking to successfully launch of the Neue Klasse. BMW will gradually phase out earlier generations of vehicles and technologies sooner than originally planned. Could you comment on any potential positive effects this might have for the future business by ElringKlinger? The second question, on your solid performance in the region of APAC, could you give us a bit more color on that? We are hearing a lot of challenges in the Chinese market, especially for European OEMs and suppliers, but you seem to be doing quite well here. Do you expect that to change significantly going forward in the future? Thanks for having my questions.
Thomas Jessulat: Yeah. Thank you for your questions. To your first question, there is nothing that we would expect as a negative impact for ElringKlinger in a significant way to date. On the second question, APAC, and in particular China, is a very difficult market. However, the new products that we have, that we are in the process of ramping up, include also China, and there is expectation from us that there is going to be a contribution also in China from those projects. Therefore, we see, of course, on the one side, declining trends on the one side, and on the other side, we see also growth from new projects. Now, as to how much the one side is overcompensating the other is probably a little bit too early to say that.
Thomas Jessulat: But for ElringKlinger, we have some, in a positive sense, compensating additional business, in particular in China, that we expect to ramp up.
Tobias Willems: Okay. Understood. Thank you.
Operator: The next question comes from Michael Punzet from DZ Bank. Please go ahead.
Michael Punzet: Yes, Michael Punzet. Good afternoon. Thank you for taking my question. I have two at this time. First one is on E-Mobility. We heard from several, especially German OEMs, that the demand for BEV models is increasing, and it is higher than expected. Will this have any positive impact on the ramp-up curve of your E-Mobility business? That is the first one. And the second one is on your plastic business. You saw a very strong margin of roughly 18% in Q3. What is the normal level we could expect for Q4 and also the years forward?
Thomas Jessulat: Yeah. Thank you for your question. When I look at the positive development here in E-Mobility, we can say that generally, of course, this gives ElringKlinger a particular profile, because the battery products that we have compared to the classic products, they have a higher value, yeah? There is a more significant contribution to the group's development of the top line. Therefore, yes, this would give us, of course, a positive impact, we think, and it helps us to reach our target that we are, in 2028, that we are break-even in positive territory in regard to E-Mobility. Yeah. On the second question that you asked, typically, I would say we expect a double-digit margin in that business. Throughout all businesses of ElringKlinger, we execute right now very strong cost and also CapEx discipline.
Thomas Jessulat: Here, in particular, the Engineered Plastics segment has a very diversified product portfolio into different markets. Here, the current mix leads to a good situation here in sales and also contribution to the group margin.
Michael Punzet: Okay. But double digit mean, in the past, we saw levels like that, but closer to 10% than to 20%. Is it fair to assume that we will see a range of 10% to 15% going forward?
Thomas Jessulat: In that range, roughly speaking, expectation would be, yes.
Michael Punzet: Okay. Thank you.
Thomas Jessulat: Thank you.
Operator: As a reminder, if you wish to register for a question, please press star and 1 on your telephone. There are no more questions at this time. I would now like to turn the conference back over to Thomas Jessulat for any closing remarks.
Thomas Jessulat: Yeah. Let me close by thanking you all for your interest in ElringKlinger and for joining today's conference call. We wish you a successful and enjoyable remainder of 2026 and hope to see some of you again at one of the investors conferences later this year. In the meantime, we remain available for any follow-up discussions and questions and would be pleased to meet with you also individually. Thank you for your time and attention. You have a good rest of the week. Thank you very much.
Operator: Ladies and gentlemen, the conference is now over and you may now disconnect the lines. Goodbye.
