Thank you for standing by. Welcome to the Kendrion Q1 2025 results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one and one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one and one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Joep van Beurden, CEO. Please go ahead. Thank you, Melanie, and good morning, everybody. Welcome to Kendrion's Q1 2025 results teleconference. My name is Joep van Beurden, Kendrion CEO, and with me on the call here is Jeroen Hemmen, our CFO. I will start the meeting with some remarks regarding our Q1 results, after which we'll have time for Q&A. We will post a recording of this call and of the Q&A on Kendrion's corporate website as soon as it's practicable. I would like to draw your attention to the fact that certain statements contained in my remarks and in the answers to your questions constitute forward-looking statements. These forward-looking statements rely on several assumptions concerning future events and are subject to uncertainties and other factors, many of which are outside the company's control, which could cause actual results to differ materially from such statements. We will start with a financial review. We are pleased to report a solid start to 2025, with first-quarter revenue rising 4% to EUR 78.1 million despite global economic challenges. Revenue in industrial brakes increased by 7% to EUR 30.4 million in Q1 2025, following the gradual market recovery that began in the second half of last year. Revenue in industrial actuators and controls declined by 8% to EUR 29.6 million, primarily due to ongoing weakness in the machine-building markets. This was partially offset by growth in segments such as circuit breakers for electricity distribution and safety valves for nuclear power plants. Of course, the IAC revenue is compared to Q1 2024, when IAC trading was relatively strong. In the mobility segment, revenue amounted to EUR 18.4 million in Q1 2025, which is 25% higher than a year ago. This growth was driven by the ramp-up of projects in China. We are making steady progress towards our 15% EBITDA target by the end of 2025. Our EBITDA reached EUR 10.8 million, which is 7% higher on a like-for-like basis compared to Q1 2024. This means an EBITDA margin of 13.8% compared to 13.4% a year ago. Profitability improved due to the increase in the added value margin across all business groups: IAC, IB, and in China. All actions to mitigate the synergies following the sale of automotive were implemented before the start of the year. Please note that the total savings of the synergies are EUR 9 million, of which EUR 7 million were already effective in Q4 2024. In Q1 2025, we realized an additional EUR 2 million in annual savings. Net operating costs and depreciation remained stable compared to a year ago, resulting in a normalized EBITA from continuing operations of EUR 6.9 million, which is 11% higher than last year. Net finance charges were EUR 1.6 million, increasing EUR 0.3 million due to negative currency results. The effective tax rate on normalized income was 29.5%. All this resulted in a normalized net profit before amortization of EUR 3.7 million compared with EUR 3.6 million in Q1 2024. Reported net profit increased by 19% to EUR 3.2 million as the previous year's first quarter was affected by a net loss from discontinued operations. Looking at the balance sheet, we completed the divestment of our automotive business, receiving EUR 8.6 million from Solero. This resulted in a net debt of EUR 97 million compared to EUR 103.0 million at year-end, of course supported by the Solero payments, but also by the better profitability and by our disciplined working capital management. The leverage ratio improved to 2.5 compared to 2.7 at the end of 2024. Kendrion is focused on further reducing its net debt. Let us talk about the outlook. We are currently in a period of what I would call COVID-like uncertainty because of the global trade war. As you have seen from our solid results over Q1, so far the impact on Kendrion has been limited. So far, trading in Q2 has mostly been business as usual as well. We started the second quarter well. The 90-day reduction in tariffs between the U.S. and China, as announced yesterday, is welcome and may help Q2. As with all these announcements, this may change. Of course, as is the case for all other globally operating companies, a slowdown in the world economy would affect Kendrion's trading. However, I do want to emphasize the benefit of our so-called local-for-local strategy. Over the past years, we have implemented a strict local-for-local supply chain in our operations in Europe, China, and the United States. It means that our suppliers of raw materials, sub-assemblies, and also production equipment originate in the region where our factory operates. This is also true for our customers. A European customer gets supplied by a European factory. For example, the China-based factory of that same European customer gets supplied from our factory in Suzhou. Therefore, the flow of goods between regions when it comes to Kendrion products is limited. There is no need for us to reconfigure the supply chain, which is costly and takes years. We started our local-for-local initiative in 2017. In summary, the local-for-local supply chains in the U.S., China, and Europe help mitigate tariff impacts. Longer term, despite potentially reduced economic activity in the short term, our industrial focus and leading position in the niche markets we operate in will stay. Our local-for-local supply chain will stay, and this strengthens our ability to navigate potential challenges. At this point, we anticipate trading conditions in Q2 2025 will be similar to Q1, despite the aforementioned global uncertainties. Kendrion will focus on further improving margins, maintaining cost discipline, and enhancing efficiency to meet our financial goals of an EBITDA margin of between 15%-18% from 2025 onwards, and a return on invested capital of 23% by 2027. Melanie, we are now ready for questions. Thank you. As a reminder, to ask a question, you will need to press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. Our first question comes from the line of Frank Claassen from Degroof Petercam. Please go ahead. Your line is open. Yes, good morning, Joep and Jeroen. Good morning. Good morning. Two questions, please. First of all, your added value margin went up. Could you elaborate what were the main drivers? Was it higher pricing or lower raw materials? That is my first question. Secondly, on the cost savings, could you also elaborate what is still to come and the phasing of new cost savings? Thank you. Okay, thank you. On added value, maybe first step back a bit as we post the sale of automotive. We are active purely industrial in a whole range of niche industrial segments where we have a leading position and clear USP. The pricing power of Kendrion post that sale has improved. What we're doing on the added value side is for selected products and selected customers, we're looking to increase pricing. Of course, at the same time, we're also analyzing our supply chain to see where we can save on our raw material and on our input costs. That is a plan that is running for the entire year. What you've seen in Q1 is the first step in a number of initiatives that we still have ongoing for Q2 and beyond. It's the same story. It's a good start. The added value margin has improved, but we have still more actions to take. We expect that to expand a little bit further in the remainder of 2025. Jeroen, maybe on the cost savings? Yeah. On the cost savings, the announced cost savings of EUR 9 million, of which EUR 2 million related to the continued business, are fully effective. The additional EUR 2 million from the continued operations kicked in as from the 1st of January. In the rest of the year, it will be more a matter of cost control, keeping the cost stable, and yeah, try to reduce further by, for example, non-replacing leavers, but no further big restructurings. Okay, that's helpful. Thank you. Thank you. We'll now move on to our next question. Our next question comes from the line of Tim Ehlers from Kepler Cheuvreux. Please go ahead. Your line is open. Thank you. Good morning, Joep and Jeroen. One question about the margin target. You reiterated 15%. I mean, it's nice to see that after margin improvement in Q1. Could you maybe explain a little bit what needs to happen to go to these 15%? Because now we have the cost cutting effects in the margin. We did have some revenue improvements. What really needs to happen to go to the 15%? Yeah. If you look at the good morning, if you look at the initiatives that we're taking, so of course, we do continue to expect a little bit of growth as we saw in Q1. That's not, by the way, the objective, but simply what is in the pipeline. We continue to push for more added value. And then also the cost control that Jeroen just elaborated on. It's not going to be, as we just said, a big restructuring, but we're certainly going to be mindful of our cost base and to make sure that where we can improve the efficiency and the effectiveness, we will. So basically, it's the same initiative that you've seen in action in Q1 that has led to that 7% EBITDA expansion for the remainder of the year. Based on our analysis, we are confident that towards the end of the year, we will have hit that 15% EBITDA on a run rate basis. By the start of 2026, we will have achieved that. Okay, clear. Thank you. One question about the divisional performance. It would be good to see that there is growth again. Could you explain from which end markets that growth is coming from? In IAC, basically the same question, but more for the decline. Also, what do you expect for the rest of the year? Sure. For IB, our first remark for both, and that's of course always the case, as you well know, you're always comparing it with a year ago. Now, IB had very strong years, if you recall, in 2021 and 2022, and then in 2023, it was much weaker. Compared to that, we saw some recovery in the second half of last year, and that has continued. The particular, and that's also quite interesting for us, the particular segment that was rebounding a little bit here was wind power. That's also a story of very strong performance in 2021 and 2022, then far less active in 2023, and now we see a bit of a rebound there again. IAC, similar story. Last year, the machine building industry was actually not that strong, but for some reason, the IAC segment held up, but that has now come to an end. We see, compared to a strong Q1 2024, an 8% contraction. At the same time, some of the segments, and I gave some examples there, are doing reasonably well. We also have some innovative projects that are ramping up. We have talked about this before, industrial locks, induction heating. For IAC, if you look further into the year, of course, notwithstanding all the uncertainty that we are looking at, we feel good about the remainder of the year also for IAC. Okay, clear. One last one about China. Decent growth with the ramp-up of the new projects. Are there more projects expected to be ramped up going forward, or was that the main chunk, let's say? Yeah, these projects that we talked about, they're actually ramping a bit later than we originally expected a year and a half ago, but they are ramping now. They will continue to grow during the year. These are the projects that we've talked about earlier. Of course, we're always looking for more business, and we will talk about that when it happens. That ramp there is based on the project that we've talked about, I'd say, about a year ago. Okay, clear. Thank you very much. Thank you. Thank you. We'll now move on to our next question. Our next question comes from the line of Martijn den Drijver from ABN AMRO. Please go ahead. Your line is open. Yes, thank you, Operator. Good morning, gentlemen. Morning. My questions have already been asked, but I have a let's start off with one for Jeroen. The EUR 9 million you say has been effective now fully in the quarter, yet the ERP implementation is still to be planned. I assumed and I thought that part of that saving was still to come from the ERP. Isn't there still a bit of savings coming in from phasing out these licenses and getting a bit more efficient, more efficient software architecture? Yeah, but the main part of that is actually not, so the license part is for 2025, I would say, noise, because we still have also some overlap with the old system. I'd say the big driver for this is to further simplify the organization. For that to happen, the software needs to be implemented, and that will happen during 2025. Let's say the benefits that we can reap are as from 2026. Yeah, on the cost, it's really cost control, saving where we can, but no further big steps in 2025. Okay. Going back to Tim's question on China, I was also perhaps slightly higher in my estimate for growth in China. You mentioned that they were ramping up a little bit slower. What was the reason for that slower ramp-up of production? Should we assume an overall less steep growth path in Q2, Q3, Q4, or do you think there's some sort of catch-up in the coming quarters? Yeah. I mean, it's of course also for refit. That's also quite difficult to assess what the source is compared to what they initially indicated to us, but now we're talking about at least a year ago. First of all, I mean, we've seen a lot of press and also numbers on the Chinese economy not doing as well as we're used to. Of course, it's still 5-6%, which is not bad at all. We're used to something like 8%. That is part of it. It's still, I mean, you saw the numbers. It's still very solid growth. Could have been a bit better, perhaps, but I wouldn't make too much of that. We do expect that these projects will continue to do well for the foreseeable future. I understand the remarks about the general Chinese economy, but if I look at any resales, so new energy vehicle sales in China, those have actually been better than expected in Q1. Hence my slightly more optimistic assumption. Yeah. And. But. No, and that's totally fair. Now, let's not forget, if you look at the Chinese market for electrical vehicles, there's a list of around 20 different brands. Not all are doing equally well. Now, the good news for us is we are, for instance, also supplying BYD, which is a brand, of course, we all know, and they're doing extremely well. The flip side of that is there's also some brands that are more or less successful as what was initially anticipated. I would say in the mix, I mean, we're very pleased with the growth and with how these projects are performing. Did we have a year ago maybe a little bit more optimistic expectation? Yes, but it's still quite good. Okay, clear. Then on IAC, you mentioned a couple of projects ramping up innovative. I assume that's the pressure regulator part of the business and washing machine lock. How secure is the expectation that you've baked in given the macro environment? Are they confirming on a monthly basis what you guys need to produce? How does that work? How secure is what you baked into your guidance? I would say in terms of, I mean, these locks and these washing machines, these industrial washing machines, that is reasonably secure. I mean, we are designed in, and these projects, it's ramping as we speed. What is difficult also for us is to assess the impact of everything that's ongoing with the tariffs. That's just possible to do. As we said, so far, I mean, Q1, we're looking at the order book, as you can well imagine, on a weekly basis. We didn't see any anomalies. You can see late cancellations or the opposite. It seems to be okay. Now, for Q2, so far, it's exactly the same. As I mentioned, the 90-day pause in the tariffs between China and the U.S., my expectation is that will help a little bit. The final thing to say is we usually, if you look at our customers, what they forecast, we usually tone that down a bit and bake that in anyway so that we're not overstating what is to be expected. Our feeling is, as I said, we were off in Q2. We had a good April, in line with our expectation at least. If that 90-day pause holds and there are no further surprises, we think we're looking okay for Q2. That's clear. My final remark is again for Jeroen. Can you confirm that the cash-out from the restructuring provision and the provision that you created, recognized in fiscal 2024, that that cash-out has completely happened in Q1, or is there still a bit of a tail end in Q2? That's the EUR 4.5 million. Yeah. No, there's still a tail end in Q2. A bit less than EUR 2 million is still to come. Got it. Thank you very much, gentlemen. That was one of my questions. Thank you for your time. Thank you. There are no further questions at this time, so I'll hand the call back to you for closing remarks. All right. Thank you all for your attention and for your questions. If you have any follow-up for us, you know where to find us. Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect. Speakers, please stand by.