Good afternoon, ladies and gentlemen, and a warm welcome to today's earnings call of PORR AG, following the publication of the Q1 2025 figures. I am delighted to welcome the CFO, Klemens Eiter, who will guide us through the presentation and the results. Kindly note that you are not able to speak during the presentation. After the presentation, we will move on to our Q&A session, in which you will be allowed to place your questions directly to the management. Having said this, I hand over to PORR's Head of Investor Relations, Lisa Galuska.
Hello and a warm welcome from Vienna too from my side. Please, as always, find all the relevant investor relations materials on our website. I am happy to hand over now to our CFO, Mr. Klemens Eiter. Please go ahead.
Good afternoon, everyone, and thank you for joining us to our conference call on our Q1 results. Let me start by giving you a brief summary of today's topics on slide three. First of all, despite the ongoing developments in the global economy, we are very positive about the European construction industry, especially in our CEE countries, Romania and Poland. We see continuous growth, while for Germany, we expect first impacts on the P&L coming from the special funds in 2027. About Q1 of this year, there was pleasing growth in both order intake and our order backlog. This also contains some contracts in German residential construction, a first sign of our turnaround here. Furthermore, with our double-digit increases of order intakes in Austria and CEE. Sharing a first brief glance on our P&L, we once again delivered as promised.
While our revenue broadly remained the same compared to last year, earnings increased again by around 12%, leading to an EBIT margin of 1%. In our debt position, we have to discuss several one-off effects, including the lower financing from suppliers. With regards to our liquidity cushion, I can emphasize once again that we stick to our improved share of committed cash facilities and now stand at available cash and cash lines of more than EUR 800 million. In addition, our equity ratio improved despite a big redemption of hybrid bonds. Last but not least, we want to confirm our current guidance, stating moderate growth in output and revenue while reaching a n EBIT margin of between 2.8% and 3%. Now let us start right off with the current market environment on slide four.
Civil engineering continues to be the main growth driver for the construction industry, especially in Poland and our CEE home markets. The European funds like the Recovery and Resilience Facility and the Next Generation EU budget support the ongoing demand. This also results in high-value investment programs like the EUR 48 billion railway program in Poland or the decision to more than double the expressway network in Romania from around 1,000 km to up to 2,500 km. The same is true for Austria, where we see the setup investment plans coming from ÖBB and ASFINAG. Of course, talking about investment programs, we have to mention the German special funds worth EUR 500 billion. As I said before, we expect the first impacts on our P&L in 2027. Order intake, of course, is to be earlier than that.
At the moment, we do not know the exact distribution of the funds, but the dedication decision to several federal states has already been made for the first EUR 100 billion, where the old Western German states take the higher share. Due to our unique value chain, including a broad line of services in infrastructure and building construction, we want to point out that however the funds will be distributed to the different construction sectors, we will be able to deliver and benefit. In other building construction, we see continuous growth in specialties like data centers and healthcare construction. We even secured ourselves a new project relating to the expansion of a hospital in Warsaw. Residential construction is generally still lagging behind the overall industry development, despite some uplifts in Germany. Therefore, we expect the turnaround towards growth to be completed within the upcoming quarters here.
Now let me move on to our strong order intakes in Q1 on slide five. Here, the major part of the increase comes from building, where we grew by 62%. Especially some of our niche competencies, namely industrial and healthcare construction, contribute to this development. Besides that, we also won another major order from our long-term partners in the Bavarian car manufacturing industry. The segments Austria and Switzerland, Germany, and CEE were able to report double-digit growth. Most importantly, the turnaround in German building construction is definitely worth mentioning here. In Germany, order intakes nearly doubled with an increase of more than 80%. If you follow me on slide six, you will find an overview of our biggest order intakes in the last four quarters.
Here on the right-hand side, you see some of which I already mentioned today, namely the community school Insel Gartenfeld c in Berlin, the production facility in Munich, and the hospital expansion in Warsaw. In civil engineering, we were awarded the major reconstruction of the railway line between Nezamyslice and Kojetín in Czech Republic, besides some medium-sized infrastructure contracts coming in from Poland. Now let us move on to where we stand today. On slide seven, please find our current order book. Roughly speaking, we enjoy a visibility of more than one year. The order gap for the year 2025 is even lower than the year before. Nearly all our operating segments contributed to this positive development, leading us to report a plus of 4.4% in our order backlog. I already talked about the strong order intake in building construction, here also visible in our order backlog.
That said, let us move on to the hard facts and figures with our top line as reported in our Q1 on slide eight. At first, please let me remind you that the construction industry is a very seasonal business, so these figures are mostly not indicative for the year 2025 as a whole. This is especially true for our output, where we experienced a slight decrease as a result of the late onset of winter and some delays in the start of projects in Germany and our CEE countries. Nonetheless, we see strong growth of about more than 10% in our solid backbone segment, Austria and Switzerland. In the segment infrastructure international, output even increased by a quarter, showing strong operations internally. Coming to our results for the first quarter, please follow me to slide nine.
Our EBIT increased by 11.7% to EUR 12.6 million, a new all-time high for the usually seasonally weak first quarter. Our EBIT margin improved to 1% in relation to sales. With a stable top line, the reasons for this lie in the absolute reduction of materials and other related production services by 2.4% compared to the previous year. As typical for the first quarter, we see the relatively high addition in the personnel cost expense as a result of the inflation-related adjustments during the course of last year. Due to lower cash and cash equivalents, our financial result declined, and as a result, also the profit for the period topped slightly by EUR 1 million. As usual for the first quarter, our debt position has increased, as you can see on slide 10.
Due to seasonality and higher IFRS 16 rentals, our gross debt now stands at EUR 650 million, with around 40% of that being IFRS 16 long-term rentals. On the left side, you see our net debt development showing an increase of EUR 152 million compared to 2024. EUR 67 million thereof are caused by one-off payments for hybrid bond redemption, share buybacks, and the acquisition of Knape Bahnbau. This was made to gain an even broader footprint on the German railway construction market to be optimally prepared for the orders of the German special funds. The share buyback impacted both the net debt and cash flow situation in the first quarter of 2025 by EUR 9.7 million. It was finished at the beginning of April. In total, PORR repurchased 701,614 shares at an average purchase price of EUR 21.36.
In total, we now hold around 1.7 million of Treasury shares, representing 4.3% of our share capital at an average purchase price of EUR 17.27. About EUR 80 million of net debt increase derived from lower supplier financing, while operating receivables only increased by EUR 60 million compared to the previous year. These working capital changes also affected our operating cash flow, leading to a decline of EUR 1 million compared to 2024. The cash flow from investing activities shows the comparably high investment activity in the first quarter as a preparation for the upcoming construction season picking up just now. The cash flow from financing activities was impacted by the hybrid redemption and the share buyback, thereby leading to an overall reduction in cash and cash equivalents. Nonetheless, our liquidity reserves, including the committed cash lines, continue to stand at a very high level of more than EUR 800 million.
Speaking of hybrid redemption and share buyback, let us, last but not least, have a look at the impacts on our equity on slide 11. Compared to March of last year, our equity ratio rose to 19.8%. In absolute figures, this means an improvement of EUR 18.4 million. Despite the redemption of hybrid capital and the repurchase of Treasury shares, we managed to improve the equity position and almost reached our target ratio of 20% at full year, a pleasing development. Finishing up with the outlook on slide 12, there is not much new as of today. Based on the further increase in the order backlog to more than EUR 8.8 billion, we continue to forecast a moderate increase in both output and revenue. The EBIT margin for 2025 should come in between 2.8% and 3%, while our long-term target remains at 3.5%-4% in 2030.
Now I would like to thank you for your attention, and I'm looking forward to opening the call for your questions.
Thank you, Mr. Eiter, for your presentation and the dive into your first quarter. Dear participants, we are now opening our Q&A session. For a dynamic conversation, we kindly ask you to ask questions in person via audio line by raising your virtual hand. If you have joined 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. Mr. Stefan Scharff, you should be able to speak now. Please unmute yourself in the left corner of your window.
Oh, hi. You hear me now? Good. Good afternoon. Yeah. My first question is about the order intake.
It was very strong in Germany, but also CEE + 50% and also Austria + 15% was really good. What is here your impression from your numbers in April and May? Do we have a similar trend for the next month?
Generally, we see that order intakes are taking on, as you're saying, and actually, it's a reflection of infrastructure development. As I already mentioned in my presentation before, we also see some take-up in building construction, also in residential construction. I think it's all in general in a positive way.
Okay. That's good. The other question is about Poland. In your quarterly report, I could read that you gained or you were successful with some offers for some big-scale projects in Poland. Perhaps you can say here a bit more about the quality or the kind of the projects and what you expect for Poland.
This was a bit weaker in order intake, I guess, but Poland came from a high level last year.
Yeah. Thank you for the question, Stefan. Indeed, the order intake in signed orders was a bit weaker in the first quarter, but we now see projects coming in from the big railway package. There are several projects that we won, and we are now working on finishing the contracts and signing that. For the rest of the year, we expect an absolute positive development. There are also big tenders expected to be decided in the second half of this year with really some big projects where we think we are very well prepared for the tenders. I think that in general, Poland is probably our hottest market at the moment.
Okay. Thank you very much.
Thank you, Mr. Scharff. We will move on to Patrick Speck.
The stage is yours.
Yes. Hello. Good afternoon, Mr. Eiter. And first of all, congrats also from my side on your strong order intake, especially. My first question is about the order intake. Could you give us some insight about your margin calculations behind it yet? Are you targeting for the 3% EBIT margin with new orders, which is your current goal or the goal for the current year, or are you already targeting for the 3.5%-4%?
Yeah. Thank you, Patrick, for that question. As we are targeting 4% in 2023, we increased our target for our orders here for our tenders here to 4%. As long-term projects in infrastructure especially will need that, so we're going for the higher margins here now.
Thanks a lot. And secondly, a question on your capacity utilization, especially in Germany right now.
Could you give us some, yeah, or could you add some color? What is your current capacity utilization in Germany? Especially the strong order intake, what does it mean for capacity build-up and also for the CapEx spendings you need to do? Yeah.
I mean, development in Germany, we have to say that last year we saw shrinking there. Actually, we had an increase of our output in average of almost 6% the last year while Germany was shrinking. Therefore, our capacities are not fully used yet in Germany. We are really, let me say, hopeful seeing the development in the first quarter before the special funds and the big infrastructure tenders are starting. Taking into account that we saw that shrinking, we are not aware of any problems or shortage we see for our capacities going forward.
I think you also have to take into account that the special funds of EUR 500 billion will not come in within one year, but expected for about 12 years. We are talking about EUR 40 billion a year for the whole market, which is, in our understanding, about 8%, maximum 10% of the total construction market in Germany. Taking the shrinking of the last years, I think that will lead to a healthy use of capacities in the next years. I mean, by the way, if you look at the capacities and at our labor workforce in Poland and Romania, we have been able to increase not only our output much in the last year, but also our workforce. We see that capacities are not fully used yet and hoping for more contracts in the next time and are pretty sure that we will be able to deliver.
Very clear.
Thanks a lot. I'll go back into queue.
Thank you, Mr. Speck. We will go on with Markus Remis. You should be able to speak now. Please use the key combination star six to unmute yourself. Yes. Hello.
Hello. Can you hear me?
Yes.
Yes.
Okay. Excellent. Thank you. Few questions. Firstly, coming back to the backlog development in the segment Austria, Switzerland, I mean, the growth comes from a rather low base in 2024. I would also like to understand to which extent the residential inflection that you've pointed out on recent occasions is already mirrored in the first quarter.
I think thank you, Markus, for your question. If you say we're coming from a low level in order intake, I think please have a look at our order backlog there. It increased by more than 4% to almost EUR 3.5 billion.
I think in my eyes, that's really impressive. Actually, that's.
Klemens Eiter. Sorry, I have to step in here. You misunderstood me. I was referring to a base effect because in the first quarter last year, there was quite a decline. I'm not at all conflicting with your view that order intake is very good. I was just referring to an easy comparison base in the order intake. Please carry on.
Thank you very much. I just wanted to point out that we see in total here really very good order backlog, which is also an all-time high here in our segment. Actually, this is mainly driven from building construction. As in civil engineering, we saw high levels before, and we see that building construction is taking on. Talking about residential construction, I think you also followed our Capital Market Day.
We're working here on a concept for modular residential construction. I think when we finish that concept, there's potential for further growth in residential in that area.
Okay. Can I come back to the core of the question, whether you already observed a rising order intake or to which extent this rising order intake was already driven by some uptick in the residential subsegment? Is that already part of the numbers, or is that something that we will only see in the upcoming quarters?
It's part of the numbers, but not to that really huge amount.
Okay. Okay. Understood. Secondly, you pointed out a weather impact in the first quarter. Can you help me understand where that comes from?
Yeah. Sure.
Actually.
I mean, first quarter is always a little bit difficult for us. As you know, in winter, there's no construction.
Usually, we start with many activities in March. Last year, actually, we had an early start of the season. This year, in March, we had some drop of temperature and winter coming in March. That meant that some projects that should start in March have been delayed and did not start in March, but in April. This caused the decline here in output. Is that understandable for you?
Absolutely. Which countries were impacted?
Quite a few, as the conditions have been the same. We saw that in, for example, we talked about rise of residential and building construction in Germany, talking about output. We saw it there. We saw it in Czech Republic, but also in Poland and Romania. That caused, in total, the reduction of the output in total. We already completed our first forecast for the year.
As you have seen in our guidance statement, we still stick to our moderate growth. We still see for the total year.
Yeah. Sure. Okay. Okay. All right. If I may follow up with one question related to the material cost, also to understand, and I do not want to be picky and to one small quarter, but this underproportionate increase or actually this decline that we saw in absolute terms, is that more a reflection of a change kind of product mix, or is it also resembling kind of lower costs for raw material, subcontractors, etc.?
We see it more as a change in the product mix. We also see some lowering there, but not in that amount in general. It is more to the product mix.
Okay. All right. Thank you very much.
Thank you, Mr. Remis.
Before we move on to our last hand up, please feel reminded that you can place your questions now in our chat box or by raising your hand. Mr. Philipp Kaiser, the stage is yours.
Hello, everyone. Can you hear me?
Yes. Hello.
Perfect. Thanks a lot. Yeah. Thanks for the presentation, and thanks for taking my questions. Only just one last follow-up with regards to the material expenses. Can we kind of get this at the one rate due to the different product mix for the next couple of quarters, or what's your guess on that?
I think in general, there is the issue that we are monitoring our business on a project basis and the margins on the project, and we are not so much in the P&L for the different type of cost. Yeah.
I know that you're looking at our P&L in that way and try to understand how this is going to be developed moving forward. Actually, we are taking the cost for the project, also the expected development there in increase for labor, for wages and salaries, but also material and working on that. In general, I have to say that we don't see any movement or changes in the margins or cost relations that do concern us. I think you can see that we improved our EBIT margin, although we had a slight decline here in output and sales. We don't see major changes, and that leads us to confirming and reiterating our statement of EBIT margin development for the total year.
Okay. Perfect. Thanks for the clarification.
With regards to your strong order intake in Germany, could you shed some light on the potential on the EBIT margin of those projects? Are those already in the ballpark of your midterm guidance, 3.5%-4%?
I have to say that, as I said before, Germany has been the weakest market. As volume was low, in general, margin expectation has been a little bit lower there. I think this is something that is in development. You see that in general, our margins for the whole year, the last years, have been weaker. I think Germany will take some time to improve the overall margin.
Okay. Thanks a lot for the additional information, all from my side.
Thank you, Mr. Kaiser. In the meantime, we have received no further questions. We therefore come to the end of today's earnings call.
Should further questions arise at a later time, please contact Lisa Galuska from Investor Relations. Thank you for joining and your shown interest in the PORR AG. A big thank you also to you, Mr. Eiter, for your presentation and the time you took to answer the questions. I wish you all a lovely remaining week. With this, I hand back to Mr. Eiter for some final remarks.
Yeah. Thank you very much, everybody, for taking the time and having the interest in our results and development. I wish you all a good and fine summer for refreshment and relax and see you again at the end of the summer for our half-year results in Au gust. Thank you very much.