Good afternoon, ladies and gentlemen, and welcome to the Heidelberger Druckmaschinen AG conference call for the publication of the second quarter of the fiscal year 2025-2026. At this time, all participants have been placed on a listen-only mode. The floor will be open for your questions following the presentation. Let me now turn the floor over to Jürgen Otto, the CEO of the company.
Yeah, good afternoon, ladies and gentlemen, and welcome to our half-year performance report. In a highly dynamic business environment, our half-year results demonstrate a solid financial performance in line with expectations. While we see FX effects in tariffs with an impact year- to- date, we remain focused and disciplined with more than encouraging results in the books. Amid U.S. tariffs, overall economic uncertainty and adverse FX effects underlying order intake for the first half year, compared to an outstanding prior Drupa year, nonetheless amounted to EUR 1.1 billion . In line with the general mechanical engineering development in Germany, we have to acknowledge that order intake was impacted by the overall global economic conditions, in particular hesitation in the U.S.. However, our one-of-a-kind global setup has enabled us to compensate to a high degree, so we were able to show also a strong development in certain countries such as Italy.
Looking at the broader financials, it's clear that our strategic measures are taking effect. Not only has net sales improved by 8% year-over-year, and it's important to note that this comes despite a significant FX headwind of EUR 23 million, but the underlying business performance is also trending positively. Net sales growth was driven by strong demand across our packaging systems integration offering, especially in our digital offering for the label industry. Further, personnel measures are starting to show impact with headcount reductions implemented so far. In addition to headcount reductions, further cost-saving measures on the functional cost side are clearly reflected in an almost doubled EBITDA margin from 3.4% to 6.4% with no special items in the first half.
Also, still negative free cash flow improved compared to the previous year, primarily driven by operating performance, but was also burdened by M&A activities and cash out relation to our [Foreign language]. Overall, I'm pleased to report that we delivered an encouraging half year. Let's take a look at our order situation. Next slide. Yeah. Our book-to-bill ratio improved from 1.08 to 1.13 compared to the Drupa year and remains above 1. Also in challenging environment as we see today. Main reason for this is that our unique global setup in 170 countries and best-in-class production with a local-for-local concept is paying off. We are seeing solid growth momentum in markets such as Italy and Mexico, while our production in China is not only providing a strong cost advantage compared to our direct competition but also contributes significantly to our orders.
34% of our equipment order intake for the first half year will be produced and manufactured in China, which have superior profitability levels inherent compared to equipment manufactured in Germany. Now, David Schmedding will give us some insight on our highlights of the last month. Please, David.
Thank you, Jürgen, and welcome, everyone. I'm very pleased to present to you a few highlights from our first half year. Ten years ago, Heidelberger Druckmaschinen and MK Masterwork, China's leading manufacturer of finishing systems for the packaging industry, entered into a strategic sales partnership. Under this agreement, Heidelberg distributes MK Masterwork's high-performance post-press portfolio. Since then, Heidelberg has installed around 1,500 systems produced by MK Masterwork for customers all over the world. In October, both companies celebrated the anniversary of their successful partnership with around 100 international customers at MK Masterwork's headquarters in Tianjin. At the same time, we turned towards the future and signed an agreement to extend and expand our cooperation in the field of integrated and highly automated packaging solutions, which, for example, also includes the integration of MK Masterwork's robotic systems.
As of today, we can conclude that our cooperation with Masterwork is a proven success story. Furthermore, we celebrate 20 years of Heidelberg in Shanghai. From a small site with 60 employees assembling entry folding machines in 2005, our Shanghai plant has grown into one of Heidelberg's largest global hubs, producing advanced mid and large format presses, including the Speedmaster SX 102 and CX 104. From a strategic and long-term point of view, Heidelberg's production setup, including our site in China, is one of the key competitive advantages vis-à-vis our direct competition. In October, we announced another success story in the field of digital printing. Shengda Printing Technology, China's largest web-to-print company, stood out as the first Chinese customer to employ an industrial Jetfire 50 inkjet system. More than 95% of all orders come via the internet, with a daily capacity of 80,000 orders.
After its initial very positive experience with the Jetfire 50 system from Heidelberg, the company has now invested in a total of 10 more systems of this type. And in addition, Shengda has ordered 10 Gallus One and Gallus Five label systems. This landmark deal with Shengda Printing Technology emphasizes the strength of our industrial digital printing solutions. Let's stay with the label printing for a moment. In September, we successfully presented ourselves together with Gallus at Labelexpo 2025, with strong demand across the entire system-to-compose portfolio. The positive market feedback underscores our leadership role in innovation and digital transformation. Three important product launches are driving next-generation growth in label printing. The Gallus Five sets new standards in hybrid productivity with a speed of up to 100 meters per minute. The Gallus Alpha is an affordable entry-level digital solution for growing customer demand.
The Gallus Print Academy provides on-site training for smart, connected printing. It is encouraging to see that pace momentum is exceeding expectations for both new and existing digital label systems. We are not only making progress in our equipment solution approach, but also in further areas such as service as part of our system integrator approach. As one of the first projects, we have partnered up with Schubert Group , an international specialist in packaging solutions based in Crailsheim. Schubert produces packaging systems for the filling industry, primarily in the food, cosmetics, and pharmaceutical sectors. We have taken over operational service, including installation for packaging solution installation at a customer site in Brazil. Under the partnership, Heidelberg is responsible for production support and targeted measures to optimize the performance of machines and systems in Brazil, which includes functional tests, technical advice, and inspections and maintenance work.
The use of our professional and global service network by partners such as the Schubert Group is a testament to the quality that our service team is offering. As of now, we will not only offer these services to customers in our core industry, but also open it up to further industries. I will pass now on to Jürgen to share an update on our technology segment.
Yeah, thanks, David. Let's now take a look at our affiliate Amperfied, which also had some exciting news to report shortly before the publication of this report. As a general remark, I would like to reiterate that we are continuously transforming our business model in this area. The basis for this change is our comprehensive expertise, not only in manufacturing high-quality products, but also in software and automation. Both of that helps us transform our business, leveraging our know-how in software automation and service. Now to our latest achievement at Amperfied. After taking over the operational management of more than 1,700 SAP charging points, Amperfied was able to further expand its position as a provider of modular, scalable, and hardware-independent charging infrastructure solutions for corporate fleets.
With their full-service approach for fleet customers, our colleagues at Amperfied prevailed in a highly competitive tender process and won Siemens Energy as a new major customer. Implementation will start immediately, while the partnership is designed to be long-term and based on further expansion of the charging points by Amperfied, which will ensure recurring revenues in a highly scalable business model. And more importantly, e-mobility is not the only business field we are progressing. Let me conclude our highlight section with an update on our defense activities, especially on our Coreum partnership. As we have already said, projects of this size and in the area of defense take some time, but I can assure you that our activities are encouraging, and especially the collaboration with Coreum is proceeding according to plan.
Joint research and development project activities are on the way, and we have already seen an initial financial contribution for our group. In the next fiscal year, we see potential for a visible financial contribution. I think it is important for you to hear that the defense industry acknowledges the competencies and capabilities which we have here at Heidelberg. As a consequence, we are still in discussions with defense companies and third parties in the field of heavy machinery assembly, energy management, software, robotics, and automation, and we remain focused on developing this business field of our group. With that, let's move on to the central topic of the past year, the implementation of our [Foreign language]. We have put together a comprehensive package of measures aimed at sustainably reducing costs at our sites by more than EUR 80 million over the next three years.
The impact of these measures will become increasingly visible in the coming fiscal years. While a further automatic increase in personnel cost is suspended under the existing agreement, we can announce that we have our personnel initiatives contractually secured, giving us high visibility on the projected personnel cost savings over the next years. This enables us to continuously increase annual savings, which directly contributes to our profitability. In other words, we are saving more money every year. The [Foreign language] is an important step for Heidelberg, laying the foundation for sustainable growth across the group. By taking this step together, we are not only reducing costs at our largest sites in Germany, but also freeing up capital for key investments that will help us to achieve our growth targets. And of course, the question is, how can we become more profitable? Here, we are implementing a range of measures.
We are focusing on growth in more profitable business areas, such as automation, technology, service, and defense. However, please note that the full effect of such second engines is not yet included here. It accounts for potential M&A activities, which we observe at the moment. At the same time, we are continuing to reduce costs. As I mentioned before, our [Foreign language] is already well underway. I will now hand it over to Volker for a detailed look at our half-year results in detail.
Thank you, Jürgen. Hello, everyone, from my side, and thank you for joining us today. On the next page, let's concentrate on the second quarter financials. On the order slide, we continue to operate in a challenging market environment while demonstrating resilience. In the second quarter, order intake declined by 4% year-over-year, reflecting the strong prior-year performance driven by Drupa-related machine orders and adverse currency effects. However, the Labelexpo trade fair in September generated new orders in the double-digit million euro range, underscoring the strategic importance and growth potential of label printing, as Jürgen mentioned before. Net sales were also impacted by currency effects, but still showed a slight year-over-year improvement of 1%. On a currency-adjusted basis, growth would have been close to 4%.
The implementation of personnel and efficiency measures under the so-called [Foreign language] delivered tangible benefits, driving a year-over-year increase of 40 basis points to an EBITDA margin of 8.2%. The solid underlying business performance confirms the effectiveness of our strategy and positions us for continued improvement in the coming quarters, with a further impact of personnel reduction savings expected from Q3 onward. Building on this, free cash flow improved year-over-year in the second quarter from EUR 2 million to EUR 4 million, driven by operating performance, although partially offset by a low double-digit investment related to the final acquisition. On the Heidelberg segment, let's look at this performance after six months. As noted earlier, currency headwinds had a significant impact on the first half results. Incoming orders in the print and packaging equipment segment declined by 20%, amounting to EUR 566 million, reflecting the strong prior-year performance driven by Drupa-related machine orders.
Net sales grew by approximately 17%, reaching EUR 463 million , driven primarily by robust demand for Boardmaster and sheetfed machines. As a result, Adjusted EBITDA improved, reaching EUR 41 million compared to EUR 22 million in the previous year. The Adjusted EBITDA margin rose to 8.8%, an increase of 330 basis points due to higher sales and enhanced operational efficiency and cost-reduction efforts. I have lifted EBITDA across all segments as the [Foreign language] initiatives begin to deliver the results. In the first half of the year, the digital and lifecycle segment recorded an order intake of EUR 516 million , which is about 4% below the previous year level. In the second quarter, however, order intake improved slightly to EUR 272 million , marking an increase of almost 3% compared to prior years.
Net sales held with EUR 493 million , broadly stable, as the decline in service and consumables, including a 10 million currency impact, was fully offset by robust narrow-web growth, boosted by Labelexpo in September this year. The segment-Adjusted EBITDA showed a significant improvement, reaching EUR 30 million for the half year and EUR 18 million in the second quarter. Within Heidelberg Technology, Amperfied is constantly transforming its business, as we just heard, to a full-service systems integrator with recurring revenues. The segment reported orders in sales of almost EUR 29 million , showing no significant year-over-year change, while the Adjusted EBITDA margin improved by 530 basis points. Let's move to the regions. In EMEA, the absence of last year's Drupa effect combined with challenging economic conditions was clearly felt, resulting in an 11% decline in order intake to EUR 563 million .
Net sales, however, reached EUR 523 million, representing a significant 15% increase driven by early new machine deliveries, particularly in Italy, supported by a governmental subsidy program. While service and parts and consumables remained weak. In Asia-Pacific, order intake remained subdued at EUR 296 million due to cautious investment behavior, amid currency weakness, and U.S. trade conflict. The decline of 14% would be around 11% again when we adjust for currency effects. Chinese market conditions were particularly challenging. While China Print had a positive impact early in this year, last year also benefited from the Drupa effect. Currency headwinds added EUR 8 million of negative impact versus prior year. The net sales in Asia-Pacific reached EUR 296 million, significantly above last year's low level, supported by a strong opening backlog, especially from Japan and Thailand. Adjusted for currency effects, a year-over-year improvement would have reached 11%.
China posted a strong first quarter and softened, ending roughly flat year-over-year on a currency-adjusted basis. Last but not least, in the Americas, order intake was impacted by U.S. tariff issues, limiting larger volumes and a negative currency effect of EUR 14 million so far. This means that a reported 14% decline equivalent to EUR 251 million would have been only 9% on a currency-adjusted basis. The deviation in net sales compared to the prior year, amounting to EUR 202 million and reflecting a 7% decline, was primarily driven also by currency effect. Let's come to the EBITDA bridge, which shows the changes in our operating profitability, which I will now hand over to Jürgen.
This year was very profitable compared to last year, which was only EUR 31 million.
In addition to the higher sales volumes and the associated higher capacity utilization in production and service, the efficiency measures introduced had a positive effect on productivity. Cost control initiatives led to improvements in operating costs. The increase in personnel costs, driven by the discontinuation of short-time work in the prior year and the one-off payment, was largely offset by our FTE reductions. Material expenses were also significantly reduced. In addition, there were no expenses for the Drupa trade fair in the previous year. Expenses from Drupa amounted to around EUR 10 million. In total, Adjusted EBITDA doubled year-over-year and was at EUR 63 million after six months, with no items adjusted in EBITDA in the first half of the year. The increasing comes especially out of materials, where we improved our quota by 1%, and our personnel quota of our sales has improved by approximately 1.7% this year.
Let's come to the operating cash flow. We started with a clearly improved operating cash flow, which was at minus EUR 30 million compared to minus EUR 87 million in prior years, mainly due to a strong EBITDA achievement with EUR 63 million. Tax and interest were in line with prior years. Net working capital continued to improve year-over-year by EUR 6 million, supported by enhanced trade receivables management. Restructuring-related payouts increased to EUR 10 million, reflecting the implementation of the first phase of the [Foreign language]. Function and other operating changes contributed positively to operating cash flow development, primarily driven by adjustments in tax-related positions and VAT balances, showing an improvement of EUR 18 million year-over-year. Let's finish the cash flow section by looking at our free cash flow. The cash flow from investment amounted to minus EUR 39 million after six months.
Higher investments were driven essentially by the existence of the Polar Group business, which amounted to a low double-digit million range. Investment income decreased versus the prior year, where we had the machine selling of the Drupa demonstration machine. After six months, free cash flow was minus EUR 64 million compared to a negative EUR 102 million in the previous year, as a result of an improved operating cash flow. Let's conclude the section with a few of our balance sheet figures. First, our equity decreased to EUR 533 million as of September 30th, 2025, despite a balanced after-tax result and positive effect from the change in the pension discount rate from 3.8% to 3.9%. This decline was primarily driven by negative currency effects of approximately negative EUR 20 million , residing in an equity ratio of 24.4%.
Our pension provisions totaled EUR 641 million , reflecting again the increase in the German pension discount rate to 3.9%. Moving to the right side of the chart, the net financial position remains positive at EUR 10 million , meaning cash and cash equivalents still exceed financial liability. The decrease is mainly due to a negative free cash flow of minus EUR 64 million , a non-cash rise in lease liabilities, and negative currency effects on cash holdings. Despite this, we maintain strong liquidity with ample headroom in our revolving credit facility, which was utilized at only 16% of its EUR 370 million capacity as of the first quarter before the income. To summarize the financials, I would like to highlight some key messages. Despite a challenging market environment, Heidelberg delivered a strong performance in the first half of the fiscal year.
The net sales increased by 8% year-over-year, reflecting the resilience of our business and the trust of our customers, even in uncertain times. Profitability remains at the core of our strategy. I'm pleased to report that Adjusted EBITDA has doubled compared to the previous year, a clear indication that our focus on operational excellence and disciplined cost management is paying off. Furthermore, our [Foreign language] initiatives are beginning to show tangible results. The cost and efficiency measures we implemented are not only improving our profitability but also strengthening our foundation for sustainable growth. These efforts position Heidelberg to navigate market volatility by continuing to invest in innovation and customer value. And with that, thank you, and let me hand it over to Jürgen again.
Yeah, thank you, Volker. And this brings me to our outlook for fiscal year 2025-2026.
Heidelberg is firmly on track to meet the financial guidance set for the current fiscal year. This confidence is grounded in the strong progress we have demonstrated over the first six months and supported by our order backlog, which positions us well to drive sales in both the third and fourth quarters. For the second half of the year, we expect sales to remain broadly in line with last year's level. However, it is important to note that we have already achieved around 8% higher sales in the first half compared to the previous year, which has had a positive impact on both profitability and free cash flow. The Adjusted EBITDA margin nearly doubled, reaching 6.4%, and these improvements are not coincidental.
They reflect the disciplined execution of our strategy and the benefits of ongoing efficiency and cost control measures, which will continue to support our performance in the months ahead. Overall, we reaffirm our guidance: net sales of EUR 2.35 billion, Adjusted EBITDA margin of up to 8%. And this outlook underscores our commitment to delivering sustainable growth and profitability, even in a challenging market environment. I would like to highlight that this performance is based on the tireless work of our Heidelberg colleagues. And it is important to note that we have also strengthened our team with new and top management additions in important areas such as packaging, technology, and defense, as well as Volker in finance. As we conclude, I'd like to highlight some key messages. The first half of fiscal year 2025-2026 delivered the improvements we committed to: net sales and Adjusted EBITDA margin.
Both showed significant progress. Looking ahead, our order backlog and continued cost and efficiency measures provide a solid foundation for achieving the full year guidance. We remain confident in delivering net sales of approximately EUR 2.35 billion and an Adjusted EBITDA margin of up to 8%. Beyond financial performance, Heidelberg continues to maintain its strong global market position while actively expanding into new business fields, as our examples in e-mobility and defense are showing. Thank you for your attention. I would like to hand it back to the operator.
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Perfect. All set. Thank you very much, and see you soon. Thank you. Bye.