Good day, ladies and gentlemen, and I warmly welcome you to today's earnings call of Bertrandt AG following the publication of the Q3 figures for the financial year 2024-2025. I'm delighted to welcome CFO Markus Ruf, as well as Head of Investor Relations and M&A, Björn Voss, who will speak in a moment and guide us through the presentation. Afterwards, we will move over to our Q&A session, in which you will be allowed to place your questions directly to them. Having said this, Mr. Voss, I hand over to you.
Yes, good afternoon, ladies and gentlemen. Also, a warm welcome from our side. I think with this, we will directly start with the presentation. I will share the screen in a second. If you'll give me, please, a second. Now, Markus, the floor is yours.
Thank you for your introduction. We have published our nine-month report this morning, and you can see the entire automotive industry is under pressure, particularly due to declining sales units in China and especially the tariff discussions with the U.S. We have seen a lot of profit warnings last week, and we see further cost optimization programs from our customers. On the other side, we see huge pent-up demand for R&D projects. We see a lot of projects in the pipeline. I think also positive where we are able to win two major projects with a duration of five years in the defense sector. Today, we see also a continuing trend towards relocation of R&D projects, but with a more international approach. Q3 was the most difficult quarter in terms of working days. We had only 59 working days in Q3.
Additionally, some one-off items with around EUR 5.5 million, especially a provision for penalty payment in France and terms and exchanges with around EUR 1 million. You can see all cost items down. We implemented additional measurements. For example, last week, we removed the level of Division Manager who reported to the Board. We optimized the whole management level last week. We are on the way. Some highlights from our customers. Porsche announced in the measurement. The measurement reported Porsche postponed the SSP6 platform, and everybody in the group is waiting for the decision and for the platform. It's not easy for all. We see the cycle plan is not finally in a decision, but we expect, especially from Porsche, the final decision about the cycle plan at the end of August. I think it's helpful for all and for clear projects in the future.
I think these press articles show you that, generally speaking, the R&D market is not in a bad shape, but we have some customer-specific issues, especially within the Volkswagen Group because of, let's say, postponed platform developments and decisions that are simply not taken to invest into special models. This is causing also the underutilization, at least to a certain degree, also on our side. I think these two articles are nicely expressing and showing what is happening in one customer group at the moment.
I think, additionally, this morning, BMW announced 40 new models and a new E-Class. It's also, I think, interesting for you. On the next slide, you can see sales down by 19%. We were able to achieve EUR 742 million. Employees, 12,672, so minus from 12%. EBIT from minus EUR 39 million, but including one-offs from around about EUR 12 million. In the third quarter, EUR 5.5 million. As I mentioned, positive free cash flow from plus EUR 70 million and the equity from EUR 306 million and a stable equity ratio from 41.5%. As I mentioned, Q3 was or is the weakest quarter in our fiscal year. We were able to achieve EUR 226 million sales. Year-on-year means a decline from 23%, EBIT from EUR 25 million. Based on only 59 working days. The EPS from - 2.87, free cash flow from - 11, which is normal for the Q3 model, and CapEx from only EUR 2.6 million.
Q3 revenues down by EUR 69 million, based on under-capacity utilization. The capacity utilization is only on an 84% level. It's too low. We see also, we are acting. We reduce our employees from 14,400 to 12,700 over all divisions and over all services, admin, also admin, and management level. On the right side, you can see the Q4 will benefit from more working days, five or six more working days, and also from further cost savings in Q4 from our F3 cost optimization program.
Maybe one additional remark from my side. We have not only seen a reduction in revenues in Germany, like in the other quarters, but now in that quarter, also in the rest of the world, which is basically driven by France. We have one project ended in the last quarter in France. In that project, we also had lots of external services. This is one reason also why we've seen a 24% reduction in revenues globally, as I said, predominantly because of France. Not a general trend in other foreign markets. We are still growing or at least developing stable. Especially in France, it was affected by lower external services, which was also seen in the material expenses line.
Diversification is part of our group strategy. You can see since 2010, 2007, we received only 2% outside from automotive revenues. Now we are on the way to 25%. As I mentioned, we were able to win two major projects in the defense sector. I think we are optimistic in this area in aerospace, in defense, but also in healthcare and medical because based on a lot of frame contracts with Siemens Healthineers, with Sanofi, with Roche, I think it's a really good basis to grow in the future.
As Markus already said, we have already received a very, very sound new order in the defense area, which should enable us to significantly increase our footprint in the aerospace defense industries over the next years.
Five years, yeah. EBIT development, as I mentioned, is impacted by capacity underutilization. All cost items are reduced in line with sales trends, except for personnel expenses due to costs linked to short-time work. We have special items from around EUR 12.7 million. Especially antitrust fine, so payment penalty in France, also for additional construction costs in the first nine months. In total, EUR 12.7 million. We see the current headcount to use service know-how and compensation. We have to balance that because we see a lot of projects in the pipeline. We have to balance on one side the cost optimization from the personnel costs. On the other side, we see a lot of projects in the pipeline. We need the capacity and we need the capabilities in the future. We will see also more selling benefits in our cost optimization program. Today, we see more than EUR 90 million.
Maybe one remark also from my side here. The fine which we booked a provision for in France is linked to an antitrust decision by the French antitrust authority affecting us and three other engineering services providers. We will appeal against this. Let's see what will happen in the future. The fine amounted to EUR 3.6 million.
The reason for the penalty is an email from a competitor who said, "Hey, we have a gentleman agreement to not hire employees from each other." That is the basis for the penalty. We are arguing against the penalty.
In fact, we haven't done it. There was no damage for us or for the customer. Based on this mail, which we didn't agree, let's see what will happen.
It takes time.
Yeah, looking into the segment development, you see that especially year- over- year, we see a reduction in the digital engineering segment. This is caused by missing new projects at the moment. The physical engineering segment is rather stable over the last quarters. In the electric electronics, we have seen quite a significant decline quarter on quarter. This is based on intrasegment sales. Q2 this fiscal year was inflated by intrasegment sales for the digital engineering services. These numbers here are gross figures, and we are eliminating them in the reconciliation line. If you just look at the numbers, you might be surprised. As I said, it's linked to intrasegment sales.
As I mentioned, we are on the way with our cost optimization program, the special redundancy program, but also the optimization from infrastructure costs and structural costs. There are more than 250, 270 single measures. For example, we optimized around 26,000 square meters. We will see a further effect in Q4 because some rent contracts are finished at the end of June. Also, for the power grid solution center, partially added, and we see all options are on the agenda. We see the next hearing is in September in the court, and we will see what happens. As I mentioned, the optimizations will exceed the value of EUR 90 million. We are optimistic. Profit and loss, we have optimized our largest cost factor, personnel costs, but not in proportion to the decline in total output. You can see the sales down by -19.5%. You see also optimization in the personnel costs.
I think we are missing around between EUR 90 million and EUR 100 million total sales on a normalized capacity underutilization. You can see all other cost items are optimized. Stable balance sheet, we see equity from EUR 360 million and equity ratio from 41.5%. Cash flow is around EUR 100 million on the fine level. Also, working capital measure works really well. We see and we expect also a stable fourth quarter. Forecast for fiscal year, we see a weak economic environment, including in Germany. We see also high demand on international R&D volume. We see also going more internationally, that's the reason why we open or will open a new site in Mexico, also in Sweden. We see also capacity callouts still sluggish and volatile. We expect a normalization in H2. We have won some projects in the last two weeks, especially from BMW last week.
As I mentioned, Q4 will benefit from more working days and additional cost optimization savings. We are optimistic for Q4. We see in total, the R&D demand is on a really high level, especially in midterm. Our forecasts, I think, the same like and as we mentioned in the six-month report. Total revenues significantly down year on year, it means more than -10%. EBIT significantly up year on year, possibly uncertain, especially after the third quarter, positive operating cash flow. We see with a normalized capacity utilization and especially the savings from our cost optimization program, it is possible to receive between 6% and 9% EBIT margin level. Summary and outlook: the market is really challenging. We see the underutilization in Germany and abroad, especially in France. The EBIT is impacted by underutilization and special items, as I mentioned. We see also positive benefits from our cost optimization program.
We have a solid balance sheet with a cash position and with an equity ratio of 40.51%. We expect a normalization in H2. The sooner, the better, especially for the capacity utilization. We are optimistic also based on an open RFQ level for more than EUR 4 billion. Thank you for your attention. Now we are ready for your questions.
Thank you so much. We will now move over to the Q&A session. If you would like to speak directly to Mr. Ruf and Mr. Voss, just raise up your virtual hand. If you have dialed in by phone, you can use the key combination star key nine followed by star key six. You can also submit your questions in the chat box, and we will read them out for you. We received the first hand from a person who has dialed in with a phone number ending 809. You can unmute yourself with star key six. Please go ahead and introduce yourself to us.
Yes. Hi, this is Miro speaking from JMS. Can you hear me?
Yes. Hi, Miro.
Hi, Björn. Regarding the EUR 12.7 million one-offs, if I'm not mistaken, this is a year-to-date figure. Could you please give the details in which P&L lines have they been booked and in which quarter? See the detailed question? I hope that's fine to answer in the call.
Markus shall I?
Yeah, sure.
Yeah, we have booked EUR 1.9 million for a customer insolvency in the first quarter. It was in France. We have booked the EUR 3.6 million.
In which line? In which line was that?
Operating expenses. Operating expenses.
Other operating. Okay. Yeah. Yeah.
The second one is also another operating expense. It's the EUR 3.6 million fine in France, which was booked in the third quarter.
Yeah.
We had in the third quarter, as Markus said, EUR 1 million FX losses because of the euro appreciation versus the dollar.
That's in the financial results, or where is it booked?
No, it's also in the other operating expenses line.
Okay.
Yeah. We had in the personnel expenses line provisions for the additional restructuring measures, which were not covered under the Fit for Future program. We have done more than just the Fit for Future measures in the last quarters. They were basically equally split over the last three quarters, the EUR 6.2 million. For example, eliminating one management line for additional headcount reductions in sites or in subsidiaries. We have last year not expected to lay off people there. Basically, additional layoffs and restructuring charges there.
Okay. Good. Second question would be, how many working days did you have in Q3?
59.
59. Okay.
In Q3 and 65 in Q4.
The amount of working days always depends on the exact number of headcount in our different countries. We make a judgment at the beginning of the year how many people we would probably have in the different countries. When the quarter is over, we look at the exact number of people in the respective countries because every country, even every state within Germany, has different working days. In the end, we know what the exact number of working days was in our most recent quarter.
Okay. The next question would be a rather general one. Basically, the operating loss, if we correct for the EUR 13 million, was minus EUR 26 million year-to-date. Of course, in the last years, you know Q4 provision was certainly, you know, the impairment was certainly a one-off. In Q3, you already lost minus EUR 7 million. You've showed the articles on page three of your presentation, basically arguing for further push-outs and uncertainty and so on. Now we have the tariff situation. What is the management stance regarding the general business prospects? You know, we know each other since a long time, and you've been stagnating since basically 2017, 2018, right? Growing very fast before that. Now almost seven years of stagnation. Is there any, what's your view on that? Is there any kind of inflection point visible from your point of view at some point in time?
First of all, we are in daily and monthly communication dialogue with our customers with each management level. Today, we see there's no shift for externalization from engineering services. We see further there's more volume. We have today more than EUR 4 billion open RFQs, and we see there are a lot of projects in the pipeline. As I mentioned, if they decide the lifecycle plans, then we will see the projects are coming. Today, we see there's no shift. We see there's potential for the future, and also outside from automotive.
Maybe a last question here relating to this. I mean, this is something which you have said over and over again, right? It's always this pushing out. You say this in digital engineering, they're down 28% in Q3 and 31% in Q2. It's basically, you say they are coming, but you've seen you said this one year ago, but instead, we are 30% down. You still used to basically, you have this "durante parole" in German. I don't know the word in English. At some point, you probably need to, at some point, you probably have to rethink your approach, right? You're burning money and making losses.
I see where you're coming from, but we are in dialogue with the R&D departments. Honestly, the R&D department will start the projects sooner than later because they are under pressure for the future. Today, we see not a shift, and we see there are a lot of projects, and there are concrete offers in the pipeline. We see this volume, but we are also shifting to more aviation and defense. You are right.
Miro, I think we can totally understand your view because, I mean, Markus and me and all of us in the organization are also looking at it that way. Our customers tell us, the R&D departments, "Yes, we have the projects. We have done lots of specification catalogs and so on. Finally, these projects are simply not executed." This is why we have shown you also the press articles. Some customers, I mean, it's not a general market issue, but some customers are postponing and delaying their decisions. You are right. We have waited a long time for our customers to come back. In the end, last year, we took the decision to restructure our business. I mean, we have laid off more than 15% of our German workforce in the meantime because we will not wait anymore or simply wait.
We have now taken more measures by eliminating one reporting line. We have now reached a level of headcount that we can't really lay off more people because we have to ensure our capacities because the projects are there. We have given prices to the projects. When some of our customers now decide, "Yes, we will start with, I don't know, project X," we have to get or we have to be there. We have to have the people there. This is what we're doing in the moment, reducing the costs, looking at costs, and talk to our customers that sooner or later, they have to start the projects.
Cool. Thank you. I go back to the line.
Yeah, thank you, Miro.
Thank you so much, Miro. The next person will be Sebastien LeMenager. Please go ahead and ask your questions. Unfortunately, we cannot hear you. Unfortunately not. In the meantime, we have no further questions. Ladies and gentlemen, if there's still topics you would like to discuss, just let us know. Let's try again with Mr. LeMenager . In the meantime, he says there's some technical issues.
Hi, I have more details about the defense contracts.
Yeah, that's the funny thing about defense. We can't really talk. I mean, generally speaking, we can't talk about our contracts. I think, Markus, we can tell you that it's linked to physical testing.
Exactly.
Things.
Validation of equipment, yeah.
I think the size, it's a triple-digit million euro number split over five years. A low triple-digit million euro number split over five years from military equipment.
All right. Mr. LeMenager , we hope this answers your question. Let's wait a couple of seconds. Maybe another virtual hand pops up or we receive a further question in our chat box. It seems everything appears to be answered by now. This means we come back now. Final reminder was a good one. We move on with the question from Matthias Rutsch. Please go ahead.
Yeah. Hi. Do you hear me? It's Matthias from Tiger. Okay, perfect. Unfortunately, also some technical issues. The defense question that we answered, I just got in partially. Are there more in the pipeline, and would you give more color going forward on these projects? You know, what can we expect maybe in one or two years' time in terms of revenue share or even profit share?
Yeah. First of all, it is ongoing. We are in negotiation with our main potential customer in the defense area. We are also part of the Deutschen Luft-und Industry Association, so we are really well linked to the management level. We see there are a lot of projects, but honestly, now there are other organizational models to organize external services. I think we will see in the next two, three years much more, but it's difficult to say in which volume. Today, we see it's also possible to work in the electronic and software area, especially for IT security, but also in the CAD area to develop new surfaces and also our interior or exterior, but also in the physical segment.
I think we have shown you on page seven of the presentation that we look for a 15% revenue share in aerospace defense in two years' time, up from 6% at the moment.
Yeah, you're right. Okay.
Is it fair to assume that the profit margin is much higher compared to automotive?
Today, yes. Yeah.
Great. Maybe a further question on your shareholder structure. I mean, Porsche is still a 29% shareholder, if I'm not wrong. I mean, are there any plans even on Porsche's side? You know, will they keep stable, or is it possible to acquire the stake, for instance?
We have now other information. I think new is Porsche said in the Supervisory Board. We have a new member, Martin Roth. He is now part of the Supervisory Board from Porsche since last week. They will work more on the strategical side together with the German board.
Does it still make sense for Porsche to be a key shareholder of Bertrandt or different?
Yeah. Sure. The intention in 2000 was to have access to an engineering service provider in case they need more capacity. It makes sense for Porsche, especially because our engineering hour is much cheaper than the internal hour from Porsche.
Yeah, makes sense. Do you see a lot of projects from Porsche coming in?
We are expecting, but they first have to decide their lifecycle schedule. That will be at the end of August.
Right. How will you manage actually the ramp-up? I mean, will we see like also margin pressure because you will be forced to hire people, which you previously had to basically release?
The intention is to hire additional people outside of Germany, especially in Morocco, in Romania, in Turkey, or in India. We are ready, and I think it's possible to scale up 1,500- 2,000 employees. That's not a real problem because there are a lot of CVs. We have the IT infrastructure, so we are ready.
Matthias, this is one of our issues at the moment. Although we have released 1,700 people, we still only have a utilization rate of 84%. We would need some projects to increase the utilization. We are using short-time work at the moment. I think we should manage also any kind of ramp-up. Based on a very lean cost structure we now have, we think to get back to the 6%- 9% margin level, yeah, based on a higher utilization.
Sounds great. Looking forward to that.
Thank you.
Thank you so much. We have a follow-up from Miro. Please go ahead and unmute yourself.
Yeah, very slightly.
Oh, okay. Sorry. Is this better now?
Yeah.
This is better.
Good. I'm with my mic still in the wrong position. I have a question. Do you know we've seen this Chinese car, Yangw ang, I think SU9 or U9 or so, with this new suspension system allowing it to jump around or very actively keep the car in place when you go through turns and so on. I know for once, it seems that the Chinese are really attacking the very heart of the German cars, which is how it drives through corners and how it behaves on the racetrack and how it balances in the corners with the suspension system and can go very fast over bumps in the road, actively absorbing any impact. Just out of curiosity, was there any reaction from your customers like Porsche or Audi where they basically said, "Holy macaroni, this is really an attack on us," or was it basically ignored?
What was the reaction from them?
I think you should ask them, to be honest. I think they take the Chinese OEMs very seriously, like they have done with, I don't know, Hyundai and Kia in the mid-2010s. I'm pretty sure that they look at it very seriously, but they don't talk to us about it. We can't really comment on this.
You're right. I think let's come to the motor show in Munich in September. I think there are a lot of Chinese OEMs and a lot of European OEMs. I think then we can see a lot of reaction and answers to your question.
Okay, we haven't heard anything.
Thank you.
Thank you, Miro, for your follow-ups. In the meantime, we did not receive any further questions. We therefore come to the end of today's conference call. Thank you, everyone, for joining and to show interest in Bertrandt AG. From our side, I wish you all a lovely remaining Monday. Should further questions arise, I guess Björn Voss is available. I hand back to you for first and final remarks.
Thank you very much, everybody. Thank you for your patience and your interesting questions and the discussions. Have a good holiday season now, and looking forward to talk to you soon in September at all the conferences. Bye.