Thank you, Heidi, and good morning, everyone. Welcome to Kendrion's Q3 2026 results conference call. My name is Joep van Beurden, CEO of Kendrion, and with me is our CFO, Jeroen Hemmen. Thank you for taking the time to join us and for your continued interest in Kendrion. Today, we will review our performance in the third quarter and the first nine months of 2026. We will discuss the group's financial results and the performance of our business groups, as well as our financial position, strategic progress, and outlook. A recording of this call and the Q&A session will be made available on Kendrion's corporate website shortly after the call.
Before we begin, I would like to note that certain statements made during this call may be considered forward-looking statements, and these statements are based on current expectations and assumptions and involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied. Let me start with a brief overview. We delivered a strong third quarter, building on the momentum of the first half of 2026. Our industrial revenue grew by 7%. Profitability improved on all metrics of the P&L. Normalized EBITDA in Q3 increased by 12% to EUR 10.5 million, and the normalized EBITDA margin rose to 17.2%. This is near the upper end of our original 15%-18% target for 2027 that we set in 2024, and already within the 17%-20% range for the 2027-2030 target announced at our recent Capital Markets Day in September.
Net profit from continuing operations increased by 20% to EUR 4.2 million. For the first nine months, normalized EBITDA rose by 16% to EUR 33 million, with a margin of 17.4%. Normalized EBITA was up 27%, and net profit before amortization was 36% higher. Normalized return on invested capital increased to 27.1% compared with 17.1% a year ago. Our healthy order book and record project pipeline provide a solid basis for the coming quarters, despite limited economic visibility. Let me walk you through the financial performance in more detail. Group revenue in Q3 was EUR 61.2 million compared with EUR 60.6 million in Q3 of last year. Currency translation had no material impact on revenue in the quarter. As mentioned, industrial revenue increased by 7%, reflecting growth in both Industrial Brakes and Industrial Actuators & Controls.
The added value margin increased by 80 basis points to 58%, mainly because of the higher share of industrial revenue, as Mobility is running off as expected. Normalized EBITDA increased by 12% to EUR 10.5 million, and the normalized EBITDA margin improved to 17.2%. For the first nine months, revenue was EUR 190 million, up with 3%, and the normalized EBITDA over that period was EUR 33 million, with a 17.4% margin compared with 15.4% in the same period last year. Year-to-date normalized EBITA increased by 27% to EUR 23.9 million. Normalized net profit before amortization for the first nine months amounted to EUR 15.8 million compared with EUR 11.6 million a year ago, so 36% higher. Free cash flow was EUR 5.7 million in the third quarter, bringing the year-to-date total to EUR 6.3 million. The comparative year-to-date figure was EUR 10.9 million.
The lower year-to-date cash flow reflects the timing of corporate income tax payments in the first quarter and higher inventory levels. The inventory built partly supports the larger industrial order book and partly secures materials with long lead times. Net debt decreased to EUR 44.2 million at the end of Q3 from EUR 48.1 million at the end of Q2. The leverage ratio improved to 1.0x compared with 1.2x at the end of Q2, and compared with Q3 of last year, the leverage ratio improved from 2.1x to 1.0x. We expect to finalize the key terms of a EUR 70 million revolving credit facility in the coming weeks. This facility will refinance the existing loan facility, which expires in April 2027. At the end of Q3, Kendrion employed 1,259 FTEs compared with 1,313 at the end of Q3 2025. Let's talk about the business groups.
Industrial Brakes delivered strong growth in Q3, with revenue increasing by 12% to EUR 26.3 million. Growth was mostly supported by broad-based demand, particularly in European robotics and automation, and by the conversion of customer projects into revenue. For the first nine months, Industrial Brakes revenue increased by 10% to EUR 77.8 million. Industrial Actuators & Controls increased revenue by 3% to EUR 27.4 million in Q3. Order intake at IAC showed positive momentum, like in Industrial Brakes, but was partly offset by weaker orders at a limited number of accounts. The longer-term fundamentals in IAC are also similar to IB. Year- to- date, IAC revenue grew by 2% to EUR 83.8 million. Across both industrial businesses, our priority remains disciplined execution, converting attractive projects into revenue, and further enhancing profitability.
Mobility revenue amounted to EUR 7.5 million in Q3, compared with EUR 10.4 million in the same quarter last year, which is 28% lower. Revenue was affected by lower call-offs from a major customer platform following a strong prior-year quarter. Please do not extrapolate this. If you look at the first nine months, Mobility revenue decreased by 7% to EUR 28.4 million. The runoff is progressing in line with our expectations, and as Jeroen mentioned during the Capital Markets Day, we expect a revenue runoff of around EUR 5 million per year on average for the coming years, but there will be some quarterly swings. On the profitability side, we are benefiting from the cooperation with Knorr-Bremse at our CBU Mobility facility. Turning to our strategic positioning, Kendrion is focused on motion and control technologies for industrial applications where safety, precision, and reliability are essential.
As artificial intelligence and automation enable increasingly intelligent and autonomous machines, the need for dependable physical motion remains fundamental. Our focus is on four high-value markets: robotics and automation, Healthcare & MedTech, energy and transmission infrastructure, and industrial safety. Customers in our focus markets need solutions that help their systems move safely, precisely, and reliably. With decades of experience in valves, actuators, brakes, and control technology, Kendrion has the expertise to meet demanding product and application requirements. Our project pipeline continues to expand across all four focus markets and has reached record levels. The order book for Q4 is healthy. We allocate resources and capital selectively, prioritizing opportunities that combine attractive growth, mission-critical functionality, and profitability. Our approach is to execute the pipeline with discipline, further growing our profitability, and on cash conversion. Looking ahead, macroeconomic visibility remains limited, and geopolitical and trade-related uncertainty are still present.
Nevertheless, we expect our robust performance to continue, supported by a healthy order book and a strong project pipeline. We are confident in reaching our financial targets for 2027 to 2030, as announced at our recent Capital Markets Day. Expected annual industrial growth of 5%-8%, an EBITDA margin of 17%-20%, and 100% cash conversion. I want to reiterate our growth expectation. The 5%-8% is for our industrial business and excludes Mobility. In summary, in Q3, Kendrion delivered growth in our industrial business of 7%, well within the 5%-8% expected growth range. We also recorded continued strong profitability and further improvements in all metrics of our financial performance. Our healthy order book, record project pipeline, and focused industrial strategy provide a solid foundation for both the coming quarters and the longer term.
We will remain focused on executing our pipeline, growing our profitability, and converting our operational performance into cash. Thank you for your attention, and Jeroen and I are happy to take your questions.
Thank you. We will now begin the question-and-answer session. As a reminder, if you wish to ask a question, you will need to press star one one on your telephone, or if you have joined via device audio, click the raise hand button and wait for your name to be announced. To withdraw your question, please press star one one again, or click the lower hand button. We will take our first question. Your question comes from Martijn den Drijver from ABN AMRO. Please go ahead. Your line is open.
Yes, thank you, operator. Good morning, gentlemen. I have four questions, and I'll take them one by one. With regards to IAC, I understand the remark about the limited number of accounts impacting order intake, but when do you expect growth to be more in line with underlying order intake? Is that in the course of Q3, excuse me, Q4, or is that more a 2027 development?
Okay, Jeroen, you want to talk to that?
Yeah, that is most likely as from Q1, and the comparables will have adjusted for these two accounts.
Okay. If we take a step back, I know that you have not disclosed the EBITDA margins for Mobility and for Industrial, but is there any reason to assume why the EBITDA margin of Industrial did not improve, given the reported added value improvement in Q3? If so, why?
No, the margin in Industrial improved.
Yeah.
Driven by the volume increase. We had quite good operational leverage on the volume increase in Industrial.
But I am sorry to ask, would you mind then, in the Q1 and Q3, given that Mobility distorts the picture, rethink the decision not to disclose Industrial and Mobility EBITDA? Because it would help the market better understand the strong performance you actually have in Industrial, which is now being obscured by Mobility. It is just a suggestion, but looking at the share price, it would help.
We take it on board.
Yeah, it is a valid suggestion. We will have a look at that.
Okay, moving on. I just want to come back to your statements that there is going to be quarterly swings.
On Mobility, right?
On Mobility, absolutely. I am sorry. I should have been more clear. If you take the EUR 2.9 million and you annualize that, we are talking about EUR 11 million. If you say we are on track with what we guided for, the EUR 5 million step-down, would it then be fair to assume that in Q4, to get to your roughly EUR 35 million-EUR 36 million in Mobility revenue, which is the step-down relative to 2025, that Q4 Mobility would go up again to around EUR 9 million? Is that the way to think about it?
No, that is not the way to think about it. Look, I understand the focus on Mobility, but Mobility is a cash cow. I mean, it is the proverbial cash cow. We do not invest in it. We are not looking for more orders. We are not looking for more business. We have no research and development anymore. We have struck a deal with Knorr-Bremse to ensure that if you get these types of volume swings, up or down, that we have the capacity available. If we do not need it, the cost of that capacity is not for us. The way to think about Mobility, that is the way we treat it, is basically it is a bag of cash. It is very difficult, even for us, over the time that this is going to run off, to exactly assess how much cash that is.
But of course, we have a bit of an idea. There is no terminal value related to it. It is not part of our strategy. It is really not part of anything that we do other than running it as good as we can. So, that EUR 5 million that Jeroen mentioned and referred to at the Capital Markets Day is our best estimate. It can well be that in a given year, it is last year, the Mobility was much stronger than we expected it to be. And now, compared to that, it could well be that it is a bit more than five. It could well be that in 2027, it is actually a bit less than that. So, it is also for us, because there is very little emphasis within it, we are not really looking at trying to find more business there.
It is going to be the result of ultimate decisions of the Mobility customers. So, we are just trying to be helpful with that EUR 5 million in trying to model this out, but it is certainly not that we control or that we can guide towards. That is impossible.
Understood. Then I am coming back to my earlier point, split it out so the market can better understand what is really happening.
I think that is, as you said, I will repeat that is a valid suggestion. We will take that certainly on board.
Okay. Because the rest of the results in terms of order intake and the record pipeline, they're all the same. If you had to make a judgment call, where we stand today relative to the Capital Markets Day, are you equally positive, more positive, or slightly less positive on the industrial business?
No, if anything, and of course, let's not forget, it's just two months, right? It's not that long ago. But if anything, we're more positive. We also feel, if you look at the industrial performance in this print, that it confirms the targets that we set for ourselves, including the growth. We said expected 5%-8%, this is 7%. You looked at the margin now, it's at the bottom end of a range that we've just announced for 2027 to 2030. So, 17.2 is just within that range. I think that's a good start. Now, of course, the next couple of years, the key for us is going to be to translate that record and strong order project pipeline that we have into revenue.
That will drive the growth expectation, and then the operational leverage will take care of the profitability. I think my statement on this is, we're off to a very good start.
Understood. My final question is for Jeroen. Just to be absolutely sure, how should we think about Q4 working capital, given the raw material prices and the growth in the order intake? Should we still expect a release, or should we be slightly more cautious in on that element.
You should definitely expect a release, maybe slightly less than in the previous years, but definitely a release. Why less? That is really driven by the topics that you have mentioned. It is mainly inventory, driven by the high order volume, and some additional buffer inventory for products where we have longer lead times, like permanent magnets.
When I talk about a release, it means a cash inflow, not a cash outflow, right?
Yeah.
Yeah, okay. Just wanted to be absolutely sure. All right. Thank you very much, gentlemen.
Thank you, Martijn.
Thank you. We will take our next question. Your next question comes from Erik Karlsson from CapeView. Please go ahead. Your line is open.
Hi, gentlemen. Thanks for taking my question. Just on Industrial Brakes, very impressive growth, 12%. Was there anything extraordinary or order-wise or customer-wise that make you think we shouldn't extrapolate maybe low double-digit growth there in the next few quarters? Thank you.
Yes, it's certainly a good quarter with 12%. Also, if you look back for the last nine months, it was 10%. There are two things, two main points here. One is that the overall, specifically in Robotics & Automation, the overall market for that segment, that is also our largest segment of the four we focus on, is doing a bit better than what has happened over the past couple of years. Of course, then you get into the comparables, so that means that it was last year that it's strongest now. That's one. And two, we are beginning to see the first conversion of the projects in the pipeline into revenue, and that, of course, is a little bit more fundamental. I wouldn't go as far to say, look, double-digit growth can be extrapolated.
We've just, two months ago, on the Capital Markets Day, for the industrial franchise, so the combination of IB and IAC, is between 5% and 8%. We stand by that. We will get some quarterly swings, as always. That's clear. But it's encouraging to see that indeed, at the start of this new period for us, IB is doing so well.
Super. That's helpful. And one question on Mobility. Could you give us some kind of indication of range of the I understand you can't give us a precise number, but any kind of range, order of magnitude for that cash inflow that you expect over the next few years, that would be helpful for us.
Yeah. It's not, yeah.
Jeroen?
No, yeah. Okay, what we have said, on average, the revenue will drop down on average with EUR 5 million per year. Of course, normal fluctuations exist. We have also said that on EBITDA, so we had a very strong first half year. So, the 25% EBITDA margin we will not be able to sustain most likely, but we will definitely be north of 15%. So, let's say a 20% EBITDA margin with a very strong cash conversion. So that you can model out for the coming years. So that will be, let's say, the cash in, because the investments will be, as you would understand, very limited as we are ramping down production. So, if you calculate with 70% cash conversion on EBITDA, on those numbers, yeah, you come to a reasonable analysis of the cash contribution of this business.
That's helpful. Thank you.
Thank you. Once again, if you wish to ask a question, please press star one one on your telephone or click the raise hand button. We will take our next question. Your next question comes from Tijs Hollestelle from ING. Please go ahead. Your line is open.
Yeah, thanks, operator. Morning, Joep, Jeroen.
Morning.
Morning. I want to come back to Martijn's comment because I fully agree with him. I think that Jeroen and yourself explained the dynamics with Knorr-Bremse very well, as with the payment structure and all that. But the fact is that every single quarter we have to make estimates, and yeah, the Mobility business, as it moves now per quarter, will disturb the picture. In prior quarters it was better, so then you have to say in the morning meeting, "Oh, it's much better, but watch out because it was Mobility." Today it's reversed. Now, apparently Martijn did the same, but still the stock is down. We have a hyper-nervous stock market, so I would indeed suggest to do the numbers, extra Mobility numbers, because then, yeah, we just can track the core business of Kendrion. Otherwise, it will not go away.
It has nothing to do with you guys not explaining to us how it works, but it is just more how the stock market deals with information in the morning on all these results that's coming out. Kendrion is not the only one reporting numbers, so that I want to give to you. Then I also had a question on, what was it? Oh, yeah, on the discontinued operations, because that was a EUR 1.8 million positive, and it was, I think, it was a little bit lower on the first nine months. What was that exactly?
Yeah, that was the final assessment of the tax consequences of the sale of Automotive in 2024, which has led to a one-off contribution of EUR 1.8 million, which is largely a revaluation of tax losses. So, we generated taxable losses that we can now value as a deferred tax asset. So, in the coming years, we will pay less tax as a consequence of it.
Okay, perfect. Yeah. I also had a question on the inventory level, the balance sheet that you explained that basically financing the order book growth.
Yeah.
I think you already mentioned it in the analyst meeting in August, but what kind of components and materials does this concern mostly?
Mostly, so let's say on the products on the material with longer lead times, it is mainly permanent magnets, which we use for the permanent magnet brakes. So, where we have one year of stock, where normally, yeah, three months would be more than enough. So, that is the main component of this.
Okay. Yeah. That depending on your order book developments, it will be at an elevated level in the fourth quarter going into 2027, but not materially increased, except if you see a boom in your order intake. Is that the way to, let's say, track and look at it?
That's the way to look at it, yes. Yeah.
Yeah. All right. Yeah. Perfect. Thanks.
Tijs, thank you for your comment. As we said to Martijn also, it's all registered.
Yeah. Perfect. Thanks.
Thank you. We will take our next question. Your next question comes from Maarten Verbeek from The IDEA. Please go ahead. Your line is open.
Morning, Jeroen, Joep. It's Maarten of The IDEA. Two [crosstalk]
Morning, Maarten.
Questions. First of all, in your other operating income, did you book a contribution under the capacity sharing agreement of the Mobility electronics in this quarter?
Yes, we did. Not a high amount. As I explained, it is lumpy by nature. It's roughly EUR 150,000 because of this agreement in Q3. [crosstalk]
160.
Thank you.
Sorry? [crosstalk]
Roughly one. Yes.
Okay. Then, secondly, concerning your other operating expenses, they edged up quite a bit. It is also pretty volatile when you look at it quarter-over-quarter. Could you color that a bit?
They went up year-on-year. That has mainly to do with the stranded cost, the dis-synergies from China. It is a bit technical, but it was the same in Q2 and Q1. There also year-on-year it was up. Largely compensated by also increased other operating income. The reason is basically that China contributed to those costs. So, the contribution of China to those costs, yeah, basically in the P&L netted those costs out. This year, obviously, we do not have the contribution from China. So that is the reason why it is higher than last year.
But you mentioned you still have stranded costs.
No. China, yeah, okay. China paid, let us say, part of the central cost was paid by China. That netted itself out in the other operating expenses. So, the other operating expenses of the continued operations are therefore then lower. We were able to offset the dis-synergies by reducing staff costs, for example, but that you will see back in the staff costs, and also, we were able to generate a higher other operating income. So, let us say the dis-synergy you see in the other operating expense, and the offsetting cost-saving measure, you see mainly in the staff cost.
Okay. Thanks.
Welcome.
Thank you. There seems to be no further questions. I will hand back for closing remarks.
All right. I thank you very much for your attention and for your questions. If you have any follow-ups, you know where to find us. Thank you very much.