Welcome to Half Year's Earning Call of Friedrich Vorwerk Group SE. Today's presenting team is our CFO, Tim Hameister, and myself, Torben Kleinfeldt, CEO of the company's group. For myself, 25 years in the business with Friedrich by now, and today responsible for the overall strategy of the company's group. I'm still looking in very detail into some hydrogen projects, which hopefully will be developed in the next time. For this presentation today, we'll first give you a short introduction about the activities of our company's group for those who are not 100% familiar with our business at the moment. Afterwards, I will give you a short market update on what is going on in the energy infrastructure market here, especially in Germany.
I will hand over to Tim for the financial figures and come back later with some very interesting projects we've just been awarded and that we will be executing over the next month and in due course of next year. For everybody who's not 100% familiar with our company's group, short introduction. Friedrich Vorwerk has been founded in 1962. Since then, always been active in the sector of energy infrastructure. In the end, we are capable of developing new energy infrastructure projects in terms of cables, pipelines, and also other buried infrastructure, which is able to transform energy, for example, clean hydrogen. Our adjacent opportunity where we cover all our activities in terms of district heating, water mainlines, but also biomethane treatment.
As you can see on this slide, on the left-hand side, our branch offices are well located in the north of Germany, covering a vast area of northern Germany where most of the activities of the company's group are going on. Over the years, we have developed very strong ties to our customer. On the right-hand side, some of our customers mentioned here, of course, the large TSOs like Amprion, TenneT from the cable side, and also players like Gasunie Deutschland, Ontras, and Open Grid Europe on the pipeline side. You will also find here some cable producing entities like NKT Prismian, where we execute mainly cable lines which connect the offshore wind farms with the onshore inverter stations. Over the last years, the energy transition going on in Germany has boosted our growth.
Today, with an order backlog of roughly €1.1 billion, a very strong order backlog for the future and also for the upcoming year. What is Friedrich Vorwerk actually all about? I think the next slide can show that quite well. For example, we are able to engineer and execute large pipeline systems. For example, taking over regasified natural gas from LNG terminals or from a border connection station. We are able to do the engineering and also the execution of large-scale and long-run pipeline systems with all adjacent stations that are necessary to run those pipeline grids. For example, storage facilities are necessary, but also compressor stations to boost the flow in the pipelines and actually bring the gas to the consumer.
At the very end of this downstream pipeline, so to say, we have gas pressure regulating and metering stations, which are responsible for supplying the gas in the right quality, in the end, also in the right pressure and in the right amount to the customers. Of course, in these stations, the gas flow will be metered for later invoicing of the customers. Basically, the same setting is also true for the future hydrogen grids, which we see on the bottom of this slide, with one difference, except from the pipelines and also the compressor stations that are needed in the hydrogen pipelines. It requires electrolysis at the very beginning of the production because hydrogen can usually not be found in nature, so it needs to be produced by mankind.
That's why Friedrich Vorwerk is also able to set up large electrolyser systems where actually water and electricity is converted to hydrogen. In the middle, the cable systems, usually our cable projects start with the landfall of the cable systems coming from offshore wind farms. They are being pulled onshore by means of horizontal directional drilling, which we can engineer and also execute. This method is usually used to underbore very sensitive areas of nature at the north end in the Baltic Sea. We can run these cables underground to the next transformer or inverter stations. Of course, Friedrich Vorwerk is also able to set up power-to-heat systems. When electricity is in excess, the grids can be transformed to heat and can be used in the households for heating purposes. Maybe on the next slide, short market update because it's a very new development.
We had a plan already in 2016. Germany had planned on the CO2 transport grid. Basically catching all the CO2 from the large power stations in the Rhine-Ruhr area and bringing it to the North Sea and then dump it in old oil fields or gas wells. Germany has just ruled out the law that Open Grid Europe is able to set up a CO2 grid again to collect these hazardous gases and transferring it mainly to Norway, where it will be stored for a long period of time. First estimates of this grid will be an approximate length of 1,000 km. It will be all new-built pipeline because existing natural gas pipelines cannot be converted to CO2 pipelines. In this first CO2 start grid, so to say, as of roughly €14 billion as it is planned and shown on the little map of Germany here on the left-hand side.
Newest development and of course setting up a CO2 grid will be an excellent new business case also for Friedrich Vorwerk in engineering and also setting up those CO2 grids and the adjacent stations. After this new development, I would like to hand over to Tim for some financial figures.
Thanks a lot, Tom. Good afternoon, ladies and gentlemen, and welcome to Friedrich Vorwerk's Earnings Call on the H1 figures. My name is Tim Hameister, CFO of Vorwerk, and I'm very pleased to walk you through our very strong half-year results and the updated outlook. Before we dive into the figures, we've summarized the key news items on this slide. First and foremost, we were delighted to announce the listing of Friedrich Vorwerk Group SE shares on the SDAX Small Cap Index in April.
Since then, we've climbed a good 30 places in the rankings to reach the middle of the table where we've maintained our position. In addition, there were many positive market developments in the first half of the year, starting with the decision to allocate the special funds for infrastructure and also new estimates of the investments required to renew and expand the drinking water and sewage grids in Germany, as well as further political progress on the CO2 storage and the corresponding pipeline transport projects. Let's continue with the top line development in H1. Following a historically strong first quarter, our growth momentum continued virtually unabated. Supported by favorable weather conditions, very high capacity utilization, and continued strong growth in qualified employees, we increased revenues in the second quarter by 45% to €170 million, which is Vorwerk's highest quarterly revenue to date.
In addition to the Nord Cabel route, many new projects such as the Bourbon six scale route in Schleswig-Holstein and some projects that restarted after the winter break, such as the multi-year drilling project in Baltrum, which will only be worked on in Q2 and Q3 each year, contributed to the strong revenue growth in Q2. This led to outstanding revenue growth of 56% to €303 million in the first six months. As already announced in recent presentations, this growth is mainly attributable to the electricity segment, which now accounts for more than 50% of the group's revenue in H1, while the other segments remained roughly at the previous year's level in absolute figures. The development of profitability in H1 and in particular in the second quarter of 2025 is all the more encouraging.
In the second quarter, we increased the EBITDA margin by more than 6 percentage points to 21.3%, achieving the best quarterly margin since the IPO in March 2021. This very rapid and successful turnaround of profitability after the transition year 2023 was made possible by very good project execution, better operating leverage, and a strong project mix. The improvement in earnings can be observed across all segments, with the largest improvement in the adjacent opportunity segment, which benefited from high demand in the district heating and biomethane subsegments. The EBIT margin even rose by almost 7 percentage points to a new record high of 17.6%, corresponding to EBIT of €30 million alone in Q2. Accordingly, we generated EBITDA of €54.5 million in the first half of the year with a margin of 18% and EBIT of €42.7 million.
These fantastic results include minor catch-up effects in the low single-digit million euro range from amendment negotiations, but the vast majority was achieved with ongoing projects from our very high-quality order backlog. We also reaffirmed our outstanding market position in terms of order intake. In the second quarter, in particular, we secured several major projects. These include, for example, the 86-km-long ETL 182 pipeline, the third construction lot of the South German natural gas pipeline, and also construction lot three of the Suedlink electricity highway, as well as small and medium-sized projects such as several sections of the Hamburg hydrogen grid and inner-city cooperation construction projects in which we are renewing several systems in parallel, such as drinking water and sewage, power lines, and telco lines.
In these projects, we benefit from the fact that we as Friedrich Vorwerk have approvals and permissions for each of the different infrastructure operators. We've also introduced a new key figure in the H1 financial statements, the so-called total acquired project volume. Since all major projects in this half-year were awarded to joint venture, which we call Bau Arbeitsgemeinschaft in Germany, the pure order intake of €220 million is significantly lower than in the previous year. This is because in this constellation, we are only allowed to show the supply of personnel and equipment by Vorwerk to the joint venture as order intake, which does not reflect the actual construction volume.
The new key figure, total project volume acquired, also includes the proportional project volumes from these joint ventures and, in our view, enables a more transparent presentation of the services provided by Friedrich Group regardless of the type of the contract structure and award procedure. The total project volume acquired rose by 42% to €613 million in the first half of 2025. The order backlog, which corresponds to order intake, declined slightly to €1.1 billion for the reasons stated before and currently consists of around 70% electricity projects. We also have a look on the balance sheet, which remains very strong and also relatively unchanged compared to December 2024. We've continued to invest in our non-current assets such as drilling and in Q2, especially in welding equipment or subsidiary 5C tech. For seasonal reasons, working capital again increased compared with the end of the year.
However, the working capital management, which was a great priority in the last two years, has achieved continued positive results. Therefore, our net cash position has improved by €95 million compared to Q2 2024. As in the previous year, of course, a clear positive free cash flow is expected for the 2025 financial year as a whole. Due to the fantastic performance in the second quarter, we revised our guidance for the 2025 fiscal year upward last month. We now expect revenues in the range of €610 million- €650 million, which corresponds to growth of 30% at the upper end. Furthermore, we expect the EBITDA margin to improve by 1.5 percentage points. It would be between 17.5% and 18.5%, which already takes into account the usual uncertainties inherent in our business model.
Even at the lower end of both ranges, we will therefore achieve EBITDA of more than €100 million and EBIT of more than €80 million this year. Let me now hand it back to Torb for some updates on the ongoing projects and also on our recent M&A acquisition before we open the floor to your questions.
Tim, thank you very much. You already touched on some of the projects. First project I'm very proud of is the award of ETL 182, which is a natural gas pipeline. The project is run by Gasunie Deutschland. The pipeline is actually already made hydrogen-ready. In the first stage, this project will carry natural gas from the LNG terminal in Stade at the River Elbe and transport it towards the existing infrastructure close to the city of Bremen. The pipeline is a 56-inch pipeline, so a very large diameter that's already made for the future use of hydrogen because hydrogen, of course, is less energy dense than natural gas, so it requires larger diameter pipelines. The whole pipeline track here is roughly 90 km. Some of that is very difficult terrain for constructing in.
We are very, very proud that Gasunie handed over this job to the combination of Vorwerk and Harbaugh. We have already started executing some of, in parts of the pipeline track, the pipe storage yards because the pipe for the pipeline will be already delivered in October this year, and main construction activities are expected to start in February next year. Next project, almost in the same region of Germany, running more or less parallel, is a cable system. It's actually the lot number three in the SuedLink . Basically, this lot picks up the cable route from the so-called ElbeX, which is a large tunnel system crossing the River Elbe with a double cable system, and will pick up the cable from the tunnel shafts and then run it in the southern direction towards the city of Zeven. Total length of the lot is 43 km.
In the end, two cable systems in parallel, a lot of horizontal directional drillings have to be performed here. Here, we are in a joint venture with the company Bela and Matthäi. Friedrich Vorwerk with subsidiary Bohlen & Doyen mainly responsible for HDDs and some civil works here on the track. Looking at the next market section is actually a hydrogen project called Hamburg Wind, which is the setup of a hydrogen grid in the port of Hamburg. Key figures here are a 100 MW electrolyser, which is set up in the port area, and then in the end, a hydrogen grid with, in the end, 60 km of length in numerous diameters, which is able to supply industrial customers in the port area with clean hydrogen.
Friedrich Vorwerk is, besides able to execute the electrolyser works or what we call the balancing of the plant works on the electrolyser, also already awarded a couple of lots to set up the hydrogen grid in the port area. Actually, two lots have already been handed over to the customer. This project, in part, is certainly finished for Friedrich Vorwerk, but there will be other sectors of the hydrogen grid being awarded in the near future. Of course, we'll hope to also gain some work in the hydrogen grid here in the port of Hamburg because it's right in front of our doorsteps. The next project is from adjacent opportunities. The main scope is to renew a water mainline, which is running in the street in Hamburg called Elbchaussee.
It's a very old water line constructed around 1900, diameter is 850 mm, and we'll basically take out the old water pipeline and put in a new one. Besides the water pipeline, all other energy infrastructure like gas mains, electricity cables, and fiber optics will be renewed in the area. We will reconstruct the water pipeline. Here, we are together in a joint venture with STRABAG, our own subsidiary Gottfried Pullmann , and Friedrich Vorwerk. Activities have already started, and for everybody who has been recently to Hamburg, we have been responsible for the one or the other traffic jam in the area west of Hamburg because the Elbchaussee is mainly blocked due to the construction works. Last but not least, our company's group has grown again. We were able to take over the branch office of Christophers in Brunn, which is in the very northeast of Germany.
The company has roughly 35 qualified employees in the field of drainage construction, water construction, and also heat and water mains. If you look at the map, Vorwerk is not really represented in the northeast of Germany. This branch office is a very nice place, and we do expect further cable projects and also pipeline projects in the area of northeastern Germany. This is a very good branch office to start activities on these new projects. Not only in terms of M&A were we active and quite satisfied with the success, but also our growth in terms of employees has been almost up to the target this year. We have grown from 1,948 to more than 2,100 employees so far this year. Looking at the rest of the year, 10% growth in headcount is still possible for this year.
Of course, we are also happy that we were able to acquire a lot of good and well-trained and qualified employees for the upcoming and very challenging projects we have to deal with. That was it from my side and also from the current projects. I would hand back to you, and we would be ready to take your questions.
Yes, thank you very much for your presentation and the dive into your numbers. Ladies and gentlemen, now it is your turn as we move on to our Q&A session. For a dynamic conversation, we kindly ask you to ask questions in person via audio line. To do so, please use the button raise your hand. If you are dialed in by phone, please use the key combination Star, nine followed by Star, six. If you do not have the possibility to speak freely today, you can also place your questions in our chat box. We already have our first hand up from Mr. Lasse Stüben. You should be able to speak now.
Hi, good afternoon. Two questions, please. Just on A-Nord, just in terms of where we are in the progress of that project, is it fair to say Q2 and Q3 will be peak revenue contribution from A-Nord, or can you help us just on the timeline there, just given how your progression has been? The second question I have is on the segment profitability in natural gas, which was very high in the second quarter. I think you're almost above 30% EBITDA. Just curious to hear what's happening with that profitability. Thank you.
Yeah, hi Lasse. Thanks for the questions. Regarding A-Nord, we have pretty good progress on the sections in Lower Saxony, although it's foreseeable that there will be some delays in the sections in North Rhine-Westphalia due to the lack of building clearance there. We are currently in discussions with the client to adjust the relevant targets also for our bonus-malus clause. I think we will be able to report more on this in detail in the coming or in the two quarters. Regarding the revenue, as I said, we are mainly working in Lower Saxony, which is our part. Your assumption is right that we'll see the highest revenue from A-Nord in 2025. Regarding the question on the segment profitability, as I said earlier, we had some minor effects from the amendment negotiations, positive effects. These were reflected both in natural gas and the adjacent opportunity segment.
Okay, great. One more just on the acquisition that you made. Was that done already in the second quarter, or is that in Q3?
The second acquisition this year was in the beginning of August this year, so just very fresh.
Okay. That's not included in the headcount you provided. Okay. Thank you.
Thank you very much for your questions, Mr. Stüben. I will hold the room for another moment. If there should be any questions left, please use the button to raise your hand or place it in our chat box. I will read them out for you. So far, it seems like Mr. Hameister and Mr. Kleinfeldt were clear enough. With this, Mr. Stüben, another question, please.
Yes, just one follow-up, if I may. Just in terms of the typical seasonality you usually have in the business, I'm just wondering, has that somewhat changed given the strength in the second quarter? I'm just wondering, should we assume Q3 is roughly in line with Q2, or has there been anything to mention in terms of weather or anything else that's affected your performance in Q3? Q4 does tend to be the strongest quarter of the year from pretty much all standpoints. I'm just wondering, does that hold this year again, given how strong you've been in the first half of the year?
The start in the second half of the year, especially in July, was not that good in terms of the weather conditions. We had a lot of heavy rainy events in July. Apart from that, usually Q3 is in line with Q2 if you look at the historical figures. The profitability in the last quarter is also partly depending on the success on the claims negotiation, which typically takes place with the final invoices in November and December. As you can see, we've already given a pretty strong guidance also for the full year. Nothing to worry about.
No, I would say nothing changed in general. Of course, we cannot influence the weather. I think so far, except from the heavy rains in July, we did quite well on all of the projects. Let's hope that we could get a very dry and nice fall this year. I think we can still see some nice figures at the end of the year.
Okay, thank you.
Thank you, Mr. Stüben. We have one more question in our chat box. Can you reiterate your IPO targets for EBITDA guidance for 2030? Do you expect to meet or exceed this now that some time has passed since then?
During the IPO, we've drawn up our, let's say, vision, 10-year vision. We envisaged revenues of €1 billion 10 years after the IPO. Given the current growth trajectory, I think we're in a pretty good position to be able to reach that if we are still successful in hiring new employees. Also, in terms of the margin, we always said we want to grow to €1 billion and keep the margin we had back in that time, which was around 20% EBITDA. I think we've already shown with this strong Q2 that we are pretty close to that, at least.
Thank you very much. Can you explain again the difference between total project order intake and order intake?
Yeah, as I said, this is a new KPI we've introduced due to the fact that some clients tend their large-scale projects only to joint ventures. In this constellation, we are only allowed, due to the accounting principles, to post the share of Vorwerk machinery and personnel, which we rent to the joint venture as order intake. It doesn't reflect, for example, materials and other stuff, which is directly procured by the joint venture. We decided it would be a more transparent way to include these volumes also into the project volume. The order intake, as I said, just reflects from our own projects the full project volumes. In terms of the projects we have, these joint venture constellations, the rental rates for personnel and machinery and equipment.
Thank you very much. The last question, in terms of German infrastructure spend initiative, for which we will still need details, how much of a tailwind could this be and which segments could benefit most? Anything from this in your plan currently or all upside potential?
Our planning is at the moment based on the grid development plans drawn up by the large TSO both on the cable side, so on the electricity market and on the natural gas market, plus the first time Bundesnetzagentur has published a grid development plan for hydrogen. Our plan is basically based on those three major development plans. Since the German government has not announced where the extra infrastructure money is spent, we do expect that it will be spent on sewer lines, district heating, also water mains, which are desperately in need of some investments because they have not been treated very well over the last decades. We do expect that we'll see further investments in these assets, especially when it comes to renewing streets. It is logical that all infrastructure underneath the streets will be touched and renewed as well.
That, of course, gives an upside potential for Friedrich Vorwerk as well.
Thank you very much. The question concerning the same points. I'm a very long-time investor. Times are booming now. The trees grow to the sky. After the big boom, after 2030, when the big German infrastructure works are done, how do you see the order intake after the big boom and in which segments?
Looking today at the grid development plans, natural gas reaches out to 2032. Also, hydrogen is planned up to 2035, roughly. If you look at all electrical infrastructure, the grid development plan is at the moment looking out up to 2045. We do expect that the infrastructure boom will not end in 2030. Also, taking into account that some projects will be shifted a bit backwards due to the difficult permitting system here in Germany, we do expect that we definitely have a lot of projects and a huge market in front of us, at least until 2040.
Thank you. A follow-up question on that. Belgium is coming behind. Do you see an expansion in Belgium, Netherlands, which are the adjacent countries? The person is writing as a Belgian, please stay way out of Belgian and administrative hellhole.
In the end, we did make a decision within our company not to execute projects south of the Alps, but definitely the Benelux states, same as the Nordics, are definitely within our target, at least for cable and pipeline projects. Since we, especially for the Netherlands, know the customer Gasunie very well, if there are big projects coming up, we'll definitely tender for them. We have so far not worked in Belgium. It seems to be very difficult there, but in the end, Fluxys is a client we know as well. At the moment, the biggest market is within Germany, right in front of our doorsteps. Why go elsewhere? In the end, also Netherlands and Belgium could be a potential market for us.
Thank you very much. The next question. How will you accelerate workforce growth and manage it in a potential even tighter labor market, given that larger players like Siemens Energy have announced aggressive hiring plans?
At the moment, I think we are doing pretty well in especially acquiring blue-collar personnel. We've set up a small team looking for employees not only within Europe, but also outside of Europe. I do think that also, except some overlaps with Siemens Energy, for example, electricians, we are probably not looking for the same personnel. I'm quite relaxed concerning Siemens Energy. Also, when we keep up our team, getting us especially blue-collar workers from outside Europe, I think we are definitely capable of growing by 10%, which is at the moment the target, organic growth of 10% in headcount. I think looking at the figures today, that's definitely achievable and should also be achievable over the next years.
Thank you very much. In the context of the grid expansion required for the energy transition, what changes are you observing in the discussion around overhead versus underground lines? Specifically, how are customers assessing the trade-off between the significantly lower cost and faster deployment of overhead lines versus the higher investment and longer lead times of underground solutions?
Currently, it's only a topic within the electrical market. We, of course, know that there are discussions going on. In the end, for the first, what we call the first wave project, all major cable projects that will be executed until 2030, all permits and most of the cables are already procured. There will be no major change in those projects. I'm very sure that customers will look into the second wave of major electricity highways and figure out if it's feasible to change from underground to above-ground lines. Although what you have to take into account is that there are also some technical reasons to put the lines underground, especially when it comes to DC cables. The large transition corridors bringing energy from north to south are usually DC voltage because they are not connected to the rest of the grid. Then cable definitely has a big advantage.
Also, in the long- term, in terms of maintenance cost, I think in the end for these major highways, the cable will always be the first choice.
Thank you so much. The last question in our chat box: Could consolidation make sense in your sector?
In consolidation in terms of what? Can you maybe give us some more details?
M&A, I guess.
M&A?
Companies, yes.
I mean, M&A has always been a part of the growth strategy of the group. Alone since IPO, we made like five acquisitions. Smaller ones since the IPO, but also we did larger acquisitions like Bohlen & Doyen before that. We are constantly looking for new companies, as you can see with the most two recent acquisitions this year. This will be also going forward part of the strategy, yeah.
Thank you very much. I will hold the room for another moment if there should be any questions left. That is not the case. We therefore come to the end of today's earnings call. Thank you for joining and your shown interest in Friedrich Vorwerk Group . A big thank you also to you, Mr. Kleinfeldt and Mr. Hameister, for your presentation and the time you took to answer the questions. It was a pleasure to be your host today. I wish you all a lovely remaining sunny Thursday. With this, I hand over again to Mr. Kleinfeldt and Mr. Hameister for some final remarks.
Thank you very much. Thank you for listening today. I think for the next future, very interesting projects ahead of us, especially in pipeline construction and in cable construction, huge projects coming up. What can I say? It will be, I think, a very challenging time over the next year. Stay with us. Good to see you next time. Bye-bye.