Good day, and thank you for standing by. Welcome to the GEA Group AG Pre-close call Q3 2026 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 one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one 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, Oliver Luckenbach. Please go ahead.
Thank you very much, Heidi, and good afternoon, ladies and gentlemen. Welcome to our Q3 2026 pre-close call. My name is Oliver Luckenbach. I am the Head of GEA's Investor Relations team, and I am joined by my colleagues, Rebecca and Eduard. As today's call will contain forward-looking statements, it will be conducted according to our disclaimer. I will not read the disclaimer, but please be aware of the cautionary language that is included in our safe harbor statement, which is part of our presentations you can find on the internet. We will now address certain topics which we also discussed during recent conferences and road shows, and afterwards, you will have time to ask questions. First topic, our guidance. We confirmed our group guidance for fiscal year 2026, which we raised in July.
We expect organic sales growth between 6% and 8%, EBITDA margin before restructuring expenses 17%-17.4%, and return on capital employed between 36% and 40%. Second topic, customer industries. Let me start with food. The business is looking good overall, with projects and sub-industries like the poultry business showing strength. On beverage, here, the picture is strong, especially on the project side. Dairy processing, the pipeline continues to show activity across both projects and components. There is ongoing good market development in both areas. One of the drivers is the demand for protein-rich products, and we expect this trend to continue for the next two years or so. Dairy farming. In terms of the market outlook, we see that the general market sentiment is okay with ongoing good demand, especially from large farms. Pharma continues to look good. We see good potential for our continuous tablet presses.
That brings me to the third topic, order intake. We are very confident that 2026 will be again a good year for GEA in terms of order intake with a growth rate which will ensure the Mission 30 organic sales growth target of more than 5% per annum over the next years. The pipeline looks very promising, and in addition, we see a good baseload business as well. This supports our confidence that we will see good growth in order intake for full year 2026, despite the fact that we are running against very high comps in the fourth quarter, where we had an order intake volume of EUR 1.8 billion last year in Q4, including more than EUR 400 million in large orders.
We had a strong first half with an organic order intake growth of 10.7%, and we see no reason why this trend shouldn't have held up in the third quarter. Regarding the third quarter, in addition to a healthy development in base orders, we have seen several large orders, so orders above EUR 15 million with a combined volume in the low triple digit million euros in the quarter. Whereas the previous year quarter, so the third quarter 2025 contained three large orders with a combined volume of EUR 64 million. Topic number four, sales. In the first half of 2026, we achieved an organic sales growth of 8.2%. For the full year, we are guiding organic sales growth to be between 6% and 8%. Topic number five, EBITDA margin before restructuring expenses.
Our raised EBITDA margin guidance of 17%-17.4% clearly indicates that we want to make further progress with regards to our profitability in fiscal year 2026. After an already good first half with an EBITDA margin before restructuring expenses of 16.8%, we expect further progress in Q3 2026. Last year's Q3 EBITDA margin was 17.0%. That's it for my side, and I will now pass over to Rebecca.
Thanks, Oliver. Hello, everybody. Let me continue with topic number six, which is our cash flow. What to keep in mind for the cash flow in the third quarter. CapEx, just as a reminder, we expect CapEx of around EUR 240 million for the full year 2026, and in H1, we had EUR 72 million. As in previous years, we expect CapEx to ramp up in the second half of the year. Net working capital to sales. As you know, our target corridor is 7%-9%. Q3 will most likely be within this corridor. Cash outflow. Let me give you an update on our share buyback, which we started in August this year. The cash outflow for the share buyback as of last week, Friday, 2nd of October, we bought back 955,764 shares for an aggregated volume of EUR 62.5 million since the start of the program.
Let me continue with topic number seven, the additional financial information. Depreciation and amortization before restructuring expenses. For the full year 2026, we are guiding around EUR 230 million. In the first half of this year, we had EUR 107 million. Financial results, we have a guidance here for the entire year of minus EUR 30 million, and in the first half, we had minus EUR 16.7 million. The tax rate is guided to be between 28% and 30% for the fiscal year 2026, and in the first half, we had 29.7%. Last but not least, the R&D ratio. For the fiscal year, we are guiding around 3%, and in the first half, we had 2.4%. With that, I hand over back to Heidi for the Q&A session. We are happy to take any questions you might have.
Thank you. We will now begin the question and answer session. If you wish to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. We will take our first question, and the question comes from Sven Weier from UBS. Please go ahead. Your line is open.
Yeah. Thank you. Thanks for taking my questions. There are two. The first one is on order intake, please. Oliver, you said the H1 trend of around 10% organic growth should also hold true for the third quarter. Did you mean the positive trend or also with regards to the growth rate? That's the first question.
Yeah. You can also translate this that it's also with regards to the growth rate we have seen in the first six months or the 10.7%. I've mentioned also the triple digit number or million euros, so several large orders we have seen. From that perspective, all we can see as of today is also another strong quarter also for order intake. Yeah.
I think Stefan, in investor meetings, he said he expects significant order intake growth for the year as a whole. Can you confirm that?
Yeah. I can confirm this. We know you know that Q4 will not be an easy quarter with the EUR 1.8 billion in front of us. But given the comments or what we see so far on Q3 is that Q3 should be a very good quarter in terms of order intake. So let's say more than EUR 6 billion in terms of order intake this year. That is something I think one can expect. Yeah.
Sorry, could you just repeat the latter? I had a bad line.
Overall, we had EUR 5.9 billion of order intake last year. So if we talk about further progress here also on order intake, so the full year number will most likely be more than EUR 6 billion. That is what we are expecting. Yeah.
Understood. Yeah. Because I guess significant means more than 5% growth. Otherwise, it would be slight, I guess.
Yeah.
And then just on revenues, just to follow you there, did you say that Q3 should grow in line with the full year guidance between 6% and 8%?
I haven't said this. As you know, overall in Q2 or in the second half, we are running against tougher comps. Q3 last year, organic sales growth was 4.5%, 7.2% in Q4. We have raised also our guidance for full year for the organic sales growth to 6% to 8%. So, 6% to 8% is probably also a range for Q3. Yeah.
Because I remember you originally saying that the backlog had a phasing that is skewed to the second half. I guess especially on the project side, obviously, I guess that's still true, right?
It is true, but also in the current backlog, that is also explaining why already today, so positive for 2027 and probably also 2028. The overall backlog was up more than 13% at H1. So also most likely at the end of this year, we will go with a very strong order backlog already into next year because a lot of the especially very large orders like Baladna, they will also help us growing top line next year and probably also in 2028. Yeah.
Is there anything that has changed on the beverage side? I am not sure what you said in Q2, but at least when we look at it from what Krones has been saying, the momentum on the beverage side was a bit lukewarm, and I think you said it is strong. Has that changed in the last couple of months, or did you say the same in Q2?
Yes. We have this mixture between the service business, which is a relatively stable and also growing business. Then we have the components business and the project business. It is always then the project driven. Every quarter can be different regarding, are we able to book also bigger projects here? What we have seen, at least in the third quarter, is also good development here on the project side.
We mentioned also with the Q2 calls then, if you might remember that for pure flow processing, that actually beverage was also one of the growth contributors of their order intake in the second quarter.
Okay. I understood. Thank you, both.
You are welcome, Sven. Thanks.
Thank you.
Thank you.
Once again, if you wish to ask a question, please press star one one on your telephone. We will take our next question, and the question comes from Klas Bergelind from Citi. Please go ahead. Your line is open.
Thank you. Yes, I had a couple of questions. First, on base orders, it looks like these are down slightly quarter on quarter, if I assume. I do not know exactly, but you said low triple digit, let us say EUR 120 million large orders. Then they are up high single digits organically. The comp is a little bit easier here, compared to where we stood in the second quarter. I was just wondering, is there anything changing on the base order side? Obviously, large orders are picking up, but whether the base orders see some slowdown, if there was some pre-ordering second quarter, that means they will be slowing down on base. Nutrition was very strong on base. Anything going on there, Oliver? Thank you.
No, not really, Klas, to be honest. For sure, it is still relatively early now. We do not have all these kind of details. But at least what we have seen so far and what we have also heard so far, there is no big disruption or downward trend, or even a slight downward trend we are currently seeing here. Maybe we also need to look then into the final numbers, but also in these lower order categories, we see continuous good demand across the different businesses.
Then back to the large orders. The customer industries, where are they tilted towards now when they are picking up?
Yeah. Here we need to look into the details. But when we talked about the customer industries, I have mentioned here beverages. Since quarters, we talk about very strong dairy business, especially on the processing side. Also pharma here, and I mentioned the tablet presses. These are good businesses, and where we see a very good demand here from our customers.
Okay. My final one is on the sales growth you are alluding to for the midpoint 6%-8%, around 7% then for the third quarter. You think about margin here. No surprises, up 80, 90 basis points year-over-year, a bit similar to the second quarter, similar pace sequentially. Is that how to think about it? Which is broad in line with consensus, or anything going on from a price cost point of view mix that we need to think about this quarter?
Yeah. If you look at what we have achieved in the first half, it was 16.8%. Last year, we had 17.0% in the third quarter. As I have mentioned, we need and want to go to the corridor of 17%-17.4% for the full year. So there also needs to be some further improvement in terms of margin then also in the third quarter. And driven by what I have talked or we talked about in terms of sales growth and also certain leverage that can be expected. For sure, obviously, need to look into mix then a little bit later once we have the numbers. But yes, overall, you can also expect good margin development in Q3.
Thank you.
Thank you. As a reminder, if you wish to ask a question, please press star one one on your telephone. We will take our next question, and the question comes from the line of Ben Thielmann from Bernstein. Please go ahead. Your line is open.
Yeah. Hey, guys. Can you hear me?
Yeah.
Okay. Traveling, so sorry for the background noises. Maybe two questions from my side, if I may. First one is on tablet presses. You already mentioned it, Oliver. Is that particularly driven by what? We see that estimates for prescription volumes for oral GLP-1 drugs looks quite promising. Is that something that you already see in the order book, or where exactly is potentially good demand for tablet presses coming from? That's the first question. The second question is on chemicals. Chemicals, it's a little bit with Krones is on beverages. We hear so many negatives about the chemicals market. Andritz is talking about it. Sulzer, we just had Geisinger warning a couple of weeks ago. That business has been down for you in the last couple of quarters. Maybe any update on that would be super helpful. Thank you.
Maybe I'm going to start with the tablet presses. So Ben, what is driving the good demand for tablet presses is actually the new innovation we brought into the market for continuous tablet presses. So historically, tablets were produced in batches. It's a bit like producing or baking cookies for Christmas. So when you have one ready, you put it into the oven and wait until it's ready, and then you do the quality test. So to simplify it. And continuous tablet pressing is really, you have it all the time automatically going through the oven, and the quality check is happening in between. So you don't have these interruptions, and you don't have, if you have a quality issue, that you need to throw away the entire batch. And this continuous tablet press technology has actually gained a lot of traction also.
I think we launched it a couple of years ago. We talked about that quite openly at our Capital Markets Day in 2024. And we have seen actually good order intake since then. Plus on top what you mentioned with GLP-1, what we are seeing now, the GLP-1 is coming into tablet form, so it can orally in the future, and I think that opens another opportunity for the future for us, then if there is even more demand coming for the tablet business.
And maybe on the chemicals side, it's not one of the customer industries. We also talking here a lot in the pre-close call, not because we do not want, but it's not one of the major focus areas of GEA in general. And here we need to see if there was some, what was going on here in terms of orders. But yeah, most likely, maybe currently not the strongest end market. Yeah.
Okay. Much good.
Thank you, Ben.
Thank you. There seems to be no further questions at this time. I will now hand back to Oliver Luckenbach for closing remarks.
Yeah. Thank you very much, Heidi, and thanks.
I think we're hearing that there's another question coming in.
I was just told.
Apologies.
Closing remarks, yeah.
Apologies. Please stand by. I will announce the question. One moment, please. Your question comes from Adrian Pehl from Oddo BHF. Please go ahead. Your line is open.
Yes. Hi, Adrian Pehl from Oddo BHF. Just three housekeeping questions left. Nevertheless, good to check on them, I guess. For the free cash flow, not saying that this was an official guidance, but so far I think the narrative was that you target pretty much the same range as last year. Just wanted to hear, is that still valid? The same holds true for the restructuring amount. Should we expect a similar quarterly number than what we have seen? The very last one is on foreign exchange. Should we factor in any specific moves on FX rates? Is that kind of waning off, in terms of the effect that we saw? Thank you.
Yeah. Thanks for your questions, Adrian. First of all, on free cash flow, yes, we can confirm what we have said so far, that for the full year it will be round about the same level as last year. Let's say round about EUR 500 million. Also in terms of restructurings, we have set roughly the level of last year, so round about EUR 50 million. Last not least, on the FX side. It will be most likely in the neutral, maybe even slightly positive, from the FX side. It is a kind of a turnaround we are seeing here, at least compared to the last quarters. It could be neutral and maybe even slightly positive, but no big impact from today's point of view. Yeah.
Right. Just quickly follow up on free cash. Given that you had, I guess what you said is probably a bit ahead of expectations on the order intake for the third quarter, since this has been a topic or will be a topic for the full year, I assume, should we take into account that your prepayments that you are collecting from customers will support the free cash flow? Are there any other effects we should take into account on that very number?
Yeah. That is exactly what we are normally seeing, these kind of prepayments. We then need to look into the details, how this developed in Q3. But no other big impact to be considered from today's point of view. Yeah.
Except for the factors we mentioned, like CapEx.
Yeah, sure.
That the second half will be more CapEx than the first.
Okay. Will you say something about the status of the ERP rollout? It seems a little bit delayed, but not quite sure if that has changed incrementally since what you said the last couple of weeks and months.
Yeah. Actually, we have heard that there was some feedback was that it's delayed, but it's not delayed. When we had our Capital Markets Day 2024, then we have given them the new framing, and from that perspective it's delayed. But as such, it's not delayed. Today we have around about 15%, 15%, of total sales on this new platform. It will be about a quarter, then beginning of next year. We always said it's a longer-lasting project, and it still takes some time, but at least according to what we see so far, it's running according to plan. Yeah.
Okay. I think the financial impact will be limited anyway, but thank you for that. Have a good week.
Sure.
Thank you. We will take our next question. Your next question comes from [Barwin Zaka] from Bloomberg Intelligence. Please go ahead. Your line is open.
Thank you so much for taking my question. I just had one with regards to Farm Technologies order intake. Over the last three quarters, we have seen quite a step up, in the range of EUR 230 million-EUR 240 million worth of order intake. Shall we expect such a momentum to continue into the second half of the year, or shall we think otherwise?
Yeah. Thanks for your question. Let's say on specific divisions, it's too early to talk about, let's say, certain numbers in a certain quarter. But let's say what I've mentioned at the beginning is that in dairy farming, the market outlook that what we see is the sentiment is okay, and that we are seeing here ongoing good demand, especially driven by large or larger farms. Yeah. So that is what we can share as of today.
Thank you.
You're welcome.
Thank you. We will take our next question. The question comes from the line of Meihan Yang from Goldman Sachs. Please go ahead. Your line is open.
Hi, good afternoon. I just want to follow up on the dairy farming business. Per your comment that you think the sentiment was okay, do you see, versus in Q1 and Q2, has the recent moves in agriculture products prices been helpful, or have you seen more pushback from customers because of the high energy and the material cost? Thank you.
Yeah, I would say no, let's say, special new developments here. What we are certainly also looking at and what you can also see in the milk to feed price ratio, so in most of the regions and countries where we are active, that's, let's say, at a very healthy level also for the farmers. There might always be some smallholder farmers also depending on subsidies, which can vary then also country by country, year by year, quarter by quarter. This might have an impact. But the overall picture, as I've just said, remains positive for the time being.
All right. Thank you.
You're welcome.
There seems to be no further questions at this time. I will hand back for closing remarks.
My second try for the closing remarks. First of all, dear investors and analysts, many thanks for participating in today's pre-close call and also especially for your questions. With the end of this call, as always, we will start our quiet period, and are already very much looking forward to talking to you again, then beginning of November, 9th of November, the day of the release of our Q3 numbers. All the best from the entire IR team. Stay healthy and talk to you in November. Bye-bye.
This concludes today's conference call. Thank you for participating. You may now disconnect.