NV Bekaert SA (BEKSF) Q2 2025 Earnings Call Transcript

NV Bekaert SA delivered a resilient H1 2025 financial performance, reporting an 8.8% EBITu and strong free cash flow of EUR 123 million, driven by significant working capital improvements and EUR 21 million in overhead cost reductions. Despite a 4.3% like-for-like sales decline amid challenging end markets and the increasingly difficult full pass-through of 50% steel import duties, the company maintained robust margins through strict cost control and portfolio rationalization, including the Latam North disposal. Bekaert projects slightly lower full-year 2025 comparable sales and an EBITu margin between 8% and 8.5%, acknowledging ongoing market uncertainty, particularly regarding demand impact from tariffs, but remains confident in achieving its 10% mid-term profit ambition, albeit with a delayed timeline.

Analysis

NV Bekaert SA demonstrated significant operational resilience in its H1 2025 results, delivering a robust EBITu margin of 8.8% and a strong free cash flow of €123 million despite deteriorating end-market conditions. This performance was underpinned by rigorous cost discipline, evidenced by a €21 million year-over-year reduction in overheads, and exceptional working capital management, which improved by €135 million. However, top-line pressure was evident, with like-for-like sales declining 4.3% due to a 2% volume drop and negative price/mix effects. While the company successfully passed through an initial 25% steel import tariff, management expressed concern over absorbing a subsequent increase to 50%, highlighting a key risk to second-half demand and profitability. Segment performance was divergent: strong volumes in China supported the Rubber Reinforcement division, and Steel Wire Solutions maintained double-digit margins, but the Specialties business faced material headwinds from under-absorption in construction and a stalled hydrogen market. The full-year 2025 guidance for an EBITu margin between 8.0% and 8.5% suggests an anticipated contraction from H1 levels, and the company has formally delayed its 10% mid-term margin ambition beyond 2026, reflecting the postponed recovery in key growth platforms.

Key Decisions for Investors

• Investors should weigh the company's proven execution on cost control and cash generation against the clear top-line headwinds and margin pressure from tariffs expected in the second half.
• Monitor commentary on end-market demand closely, as the ability to pass through the full 50% steel tariff without significantly impacting volumes is the primary uncertainty for H2 performance.
• The deferral of the 10% EBITu margin target beyond 2026 necessitates recalibrating long-term growth expectations, particularly for the energy transition and sustainable construction segments.
• Consider the strong balance sheet and commitment to capital returns, including a €200 million share buyback, as a key source of shareholder value amid a challenging growth outlook and potential M&A activity.