Good afternoon, ladies and gentlemen, and a very warm welcome from Vienna to our Half-Year 2024 Results Presentation. Thank you for being with us, as we appreciate your time and interest in Semperit. I'm here on the call with our CFO, Helmut Sorger. He will discuss the financial details before we finish with the market outlook, our management agenda, and for the first time, a midterm guidance for 2026. Afterwards, Helmut and I are at your disposal for Q&A. To summarize the first half year, despite challenging market conditions and the recent stock market volatility, I'm delighted to be able to present a solid set of results.
More importantly, we have been consistent with our messages to analysts and investors since the beginning of this year, and continue doing so as we are implementing our Industrial strategy, with a particular focus on profitable growth, customer intimacy, and technological leadership. So let me start with the highlights of the first half year, 2024, on slide 3. Against the backdrop of top line pressure, EBITDA increased by 7.9% to EUR 47.3 million, and our EBITDA margin improved by 1.4 percentage points over 13.7%. Much of this is due to our overhead cost reduction program, which has exceeded our original run rate target of EUR 10 million already, and helped to save EUR 14.4 million costs in total. In a few minutes, Helmut will show an interesting chart, what difference this really makes to our results.
As of the end of the second quarter, we fully complemented the exit from the glove business, as we handed over the surgical operations to Harps earlier than the original deadline. As you remember, we had a contract manufacturing agreement in place until 2028, but with end of June, we handed over the business, and therefore we are only the landlord of the facility building for Harps, the new owner of the surgical business. Further down the P&L, earnings after tax more than doubled YoY to EUR 9.6 million. Given our strong cash focus, I'm particularly pleased to report a substantial improvement in free cash flow to EUR 23.6 million. Finally, and despite all the economic headwinds, we can confirm our EBITDA guidance of around EUR 80 million by the end of the year 2024.
In a divisional summary on page 5, we excluded surgical operations in the group revenue and EBITDA numbers. The share in contribution between Industrial and Engineered Applications has shifted over the last 12 months, as Rico has been fully integrated now. Given the cyclical nature of the Industrial Applications business, a proportionally lower revenue number in half year 2024 still resulted in a similar share in EBITDA, as we have strictly focused on cost control and adapted our capacity utilization in order to increase efficiency. In turn, the relative shift in top-line growth at Engineered Applications produced a comparable share in EBITDA. We'll come at the different dynamics in our mid-term growth expectations for both businesses towards the end of our presentation. But let me first spend a few minutes on the operational details for each division, starting with Industrial Applications at slide 6.
The chart on the upper half nicely illustrates the margin improvement, largely on the back of our cost reduction program and our defensive price policy. Overall, while revenues were down 21% YoY, in a still difficult market environment with no signs of imminent recovery, EBITDA was down by only 12% in absolute numbers, with the EBITDA margin improving to 20.3%. In terms of business units, market demand in Hoses remains low, given ongoing inventory cleanup and still limited customer demand. Some of this external market pressure was offset by our share of wallet gains. At Profiles, the German construction industry, as one of our largest markets, remains subdued, but we are confident that cost optimization of our capacity utilization will have a positive impact at the bottom line.
Overall, at Industrial Applications, I am particularly encouraged by the speed and efficiency of our overhead reduction program, which will ultimately help to improve future operating leverage. Over the page to slide seven. Engineered Applications produced higher top-line growth of 18% YoY, but EBITDA was down by 8%, essentially due to a mixed demand and more importantly, pricing pressure, given the economic headwinds. In terms of business units, Form was still impacted by the economic downturn in the Industrial and construction businesses, but overall profitability benefited handrails, transport, and our mining application business. In Belting, the basically positive late cycle demand in mining was offset by customer project delays, while at the same time, we observed lower demand from Europe as well as price pressure, especially from China.
Finally, Rico contributed sales of EUR 47 million in half year 1 2024, and on operating EBITDA, EUR 5.8 million, largely due to a lower tool shop utilization, as some of the orders were delayed. With this, let me hand over to Helmut to take us through the financials. Helmut, please.
Thank you, Karl, and a very warm welcome from me as well. Permit me to start with the financial highlights for the first half of 2024 on slide number 9. There's basically five key areas of focus I would like to draw your attention to. First, our strong focus on free cash flow generation and active working capital management, and this has resulted in a significant increase in free cash flow before the proceeds from business disposals. We increased it to EUR 23.6 million YoY. Given our defined capital allocation policy, this is very crucial for future growth investments that we refer to as strategic growth investments and shareholder return in the form of dividends.
Our structural cost adjustments are important to recalibrate the operating leverage for future market recovery, and I'm delighted to be able to report that we've now exceeded our original run rate target of EUR 10 million cost savings by EUR 4.4 million as of June thirtieth, 2024, to reach a total of EUR 14.4 million. We've made great progress as well with our ONE ERP strategic digitalization project, which is approaching the end of the template stage and is now ready for roll-ins next year. At the same time, we don't wait until this project is available, but have embarked on smaller operational digitalization initiatives, with a focus on those with a payback of less than two years, and we'll certainly continue to do so.
The sale of the medical business has now been completed with Closing 2, and we've received a net cash inflow of EUR 6.6 million. This puts us now into position to focus exclusively on our core competence of the Industrial elastomers business. We continue to have a strong balance sheet and ample cash reserves, including cash and cash equivalents of EUR 124 million, as well as EUR 100 million in unused credit facilities. As a result, net debt to EBITDA is at a very conservative 1.6 times as of June 30th, 2023. Given not only continuing high interest rates and sticky inflation, but also global trade frictions and geopolitical conflicts, I feel encouraged by this strong financial position.
Against the backdrop of adverse exogenous shocks, we focus on those things which are under our control and thus creating the conditions to outperform the market. Over the page, we present the main financial KPIs for the first half of 2024 compared with the same period last year. There are three things I would like to highlight here. Despite top-line pressure, we managed to improve EBITDA and margin, largely on the back of strict cost reduction and optimized capacity utilization. EBIT was impacted by higher depreciation for Rico, now included for the first six months of 2024, while earnings after tax benefited from the cost focus as well as the sale of the medical business, which no longer contributes a loss.
Most importantly, free cash flow we defined before proceeds from divestments and strategic growth projects, improved significantly despite higher interest on debt and stable normal investments, and of course, also due to our strict focus on working capital management. I will come back to growth investments in a minute, but at this stage, suffice to say that CapEx was up by EUR 16 million YoY due to the strategic projects for the DH5 plant in Odry, as well as the expansion of the Rico site in Austria. The next slide is important as it illustrates not only the cyclicality of our Industrial business, but what difference our cost reduction efforts make. By providing a straight line for the actual operating EBITDA margin and a dotted line for what it would have been without our cost measures.
Given the sharp decline of the dotted line in Q3 2023, and again in Q1 and Q2 2024, and most importantly, the significant spread between both lines, I think it is a clear testimony of our management focus on what we can control, notably capacity adjustments, costs, and investments in future growth. On slide number 12, we present the EBITDA bridge on a YoY comparison, with large parts of the negative price and volume effects being offset by lower cost of materials. However, we made also significant cost improvements in personnel when adjusted for Rico, as well as costs for consulting and warranty claims. The changes in the consolidation range refer to Rico's EBITDA contribution in the first six months. The final block of EUR 7.5 million cost reduction made all the difference in reaching a higher EBITDA YoY in the first half.
In the small box next to it, we provide all the details, how we got to the EUR 14.4 million cost savings on an annualized run rate since 2023. Overall, more than 80% of the savings under the cost program relate to personnel costs, the remainder to other operating expenses. Just a quick reminder. Please do not extrapolate the EBITDA of the first two quarters to the full year, as this does not correspond to our business seasonality. Firstly, because of the cyclical behavior of our customers, and secondly, because of regular maintenance stops at our sites in the second half of the year. Additionally, we see no clear signs of improvements from the markets. Turning the page, active working capital management has resulted in 17.7% of last twelve-month revenues, reversing the previous quarterly uptick and staying well below the 20% target.
Please note, the low number of trade receivable also includes an effect from factoring in the second quarter, but working capital remains a key element of our free cash flow focus going forward. Moving on to free cash flow, CapEx, and net debt in the bridge of our net financial debt on slide 14. This is a new way of presenting the priorities of our capital allocation policy and how this impacts our balance sheet. It nicely illustrates the free cash flow before proceeds from divestments of EUR 23.6 million, almost entirely covered CapEx for strategic growth projects and the dividend. In this context, we have not only a convenient 1.6x net debt EBITDA ratio, but also EUR 100 million in unused credit facilities.
In terms of balance sheet structure and financial profile on slide 15, I would only highlight the 6% increase in financial liabilities due to the financing of the capacity expansion at the DH5 plant in Odry, in the Czech Republic, and the EUR 10 million early repayment of debt after the reporting period at the end of July. Finally, I should not forget the payout of the EUR 0.50 per share dividend for the 2023 financial year on April 30th, 2024. Over the page, I would like to finish the financial section of this presentation with our capital allocation policies and the priorities for the usage of cash. Here we provide further details for distinguishing between maintenance, or also referred to as normal investments, and growth CapEx and digitalization, which are both crucial for our license to operate and to safeguard our Industrial base.
Please note, the former also includes small growth projects that enhance our Industrial base. In addition, we remain open for opportunistic bolt-on acquisitions, which provide a strategic fit and compelling investment proposition. Finally, our commitment to shareholder return in form of dividends, we've reiterated by paying EUR 0.50 a share dividend by the end of April. With this, I've come to the end of the financial details and would like to hand back to Karl.
Thank you very much, Helmut, and I continue at slide 18 with the market outlook for the rest of this year, 2024. Our general view on the cycling nature of Industrial Application, as well as the diversity of markets and Engineered Application with very different dynamics, have not changed since we had last reported in May. Given the specifics of delayed customer orders and Engineered Applications in half year 2024, we obviously faced a hit at profitability, but going forward, would still expect more stability and resilience at this division, given its focus on technology and Industrial solutions. From today's perspective, the challenging market environment will continue into 2025. However, Semperit stands on a strong and healthy foundation. As we clearly committed to deliver on what is under our own control, let me also reiterate our management agenda on slide 19, which is consistent with what we said before.
The only thing I would highlight here is, first, that we not only manage the downturn, but also invest in future organic growth. And second, we are continuing to work on increasing our efficiency and effectiveness for the next upswing. On that basis, we can reconfirm our guidance for 2024 on page 20, notably, EBITDA being expected at around EUR 80 million and CapEx at around EUR 70 million by end of this year, 2024. As Helmut already mentioned in his analysis of the half year result, we cannot simply extrapolate our half year EBITDA of around EUR 47 million to the full year, given the cyclical behavior of our customers. Regular maintenance stops in August and December at our sites, taking place in the later two quarters of the year, as well as the economic outlook for the remainder of 2024.
But as shown, we will increase our EBITDA overall this year, and we'll continue our profitable growth in the coming years. With that, I would like to hand back to Helmut, who will present our medium-term financial targets for 2026 and how we will achieve them by outperforming the market. Helmut, please.
Thank you, Karl. Since our 2024 guidance is unchanged, I'm delighted to take the opportunity in presenting our midterm targets for 2026 to provide some additional information. On slide 21, as we're now one year after both the acquisition of Rico and the sale of the medical business, we've taken the time internally to focus on our core Industrial competence and define clear midterm targets for 2026. The conceptual outline, how we want to get here, there, is presented on this slide, both through the changing external market environment and internal effort, notably structural growth, what is under our own control. And the overall strategic ambition, which is what we want to outperform the market, we're committed to strong organic growth, operating leverage, and cost optimization.
For both divisions, we've listed key competencies and growth drivers along the time axis of short-term cyclical recovery, midterm structural growth, and what is under our own control, as well as long-term megatrends. Without going into each detail, let me just emphasize that the combination of standardized high-performance products in Industrial Applications with the attractive niche markets, know-how, and leverage of engineered technology and Engineered Applications, is a very compelling growth proposition. The actual targets for revenues and EBITDA for 2026, you can see over the page, with a clear ambition to reach in excess of EUR 900 million in revenues and an EBITDA of around EUR 120 million by the end of 2026.
The EBITDA bridge chart is provided starting from year-end 2023, and presenting the building blocks for each of the conceptual growth drivers discussed on the previous page: cyclical recovery, structural growth, and our own effort and operating leverage with the cyclical recovery in our SEA division, expected to provide the greatest upside. However, both structural growth and measures of our own control remain important elements of our positive outlook for midterm growth. Structural growth includes our expansion investments at Rico, which will enable us to benefit from the expected strong market growth for liquid silicone, as well as innovative product market combinations in our SEA business. The so-called own control measures mainly refer to our cost initiatives, which are going to drive forward.
Most importantly, the more than 30% increase in revenues is expected to result in a more 50% higher EBITDA by the end of 2026, which is a clear sign of operating leverage as we've now built a strong global platform for profitable growth. The underlying assumptions listed below provide the benchmark for our ambition to outgrow the market by 2026. Before I hand over to Karl, I would like to draw your attention to an upcoming invitation in fall. We will be holding an information day at Rico at the end of October, so that you can get the comprehensive picture of our growth investment and Rico's high tech expertise. We would be delighted to welcome you to Thalheim bei Wels on October 23rd. I kindly ask you to take note of that date, and we'll get back to you with details shortly.
With this, I would like to hand to Karl for his final remarks.
Thank you, Helmut, and great, great information. Finally, and to finish our presentation, let me just remind you of our five investment propositions, which we had first presented to you in March this year, with a key focus on market leadership, innovation, our resilient business model, and cash generation capacity, and which now have been substantiated by clear midterm targets of 2026, what Helmut just referred. With this, we have come to the end of our presentation, and both Helmut and I are available for any question you might have. Please, operator, if you want to start with the Q&A procedure.
We now begin the question-and-answer session. Anyone wish to ask a question, may press star and one on their telephone. You will hear a tone to confirm that you've entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Anyone who has a question may press star and one at this time. The first question is from Markus Remis with RBI. Please go ahead.
Good afternoon, gents. Let me start with a question concerning Rico. I'm trying to get a sense of the earnings development there. If I look at the revenue path, EUR 47 million, like, it is pretty, this first half, pretty consistent with the run rate we've seen also in 2023, and in line with the EUR 90 million that you've guided during or upon the acquisition. But when I look at the EBITDA, now just shy of EUR 6 million, that is actually quite far away from this recurring number of, I think you said 16.5 back then. Can you maybe shed some light on the delta?
Thank you, Mr. Remis, for the question. You're absolutely right with regards to revenue. We are approaching EUR 90 million. Hopefully, of course, is always outperforming this. But what we need to understand with Rico, it's a business coined by very high operating leverage in two distinct areas of the business. One is the tool making and the project development, which is recognized at percentage of completion for the revenues and also for profit. And the other one is the manufacture of liquid silicone parts. Now, what we've seen during the first half and also in the first quarter, is that there's market headwinds, a certain cyclicality, a delay in call offs from customers which have reduced utilization, temporarily reduced utilization. Of course, market headwinds are there with regard to volumes.
Of course, what we wanted to do is we want to implement, and we have implemented excellence in sales, which also means pricing excellence. And therefore, we see a temporarily lower profitability from the business. I hope this answers your question, yeah? But of course, we are shy of the run rate at the moment, as is the industry.
Helmut, maybe I add here. And of course, you know, Mr. Remis, construction is not the most booming industry, and the whole industry is facing a little bit, let's say, a downturn. And of course, Rico is producing some silicone part for construction, is it a shower head or other topics. And here we are, we have not gotten new tools. We have not lost any contract or any prospect, but of course, the delay is there because the companies, the customers, need to decide on this, investing the CapEx into the tools. It will come. We feel comfortable that we're coming back to the run rate, what we have planned, but unfortunately, Rico is as well hit from this economic situation on the construction bit.
Yeah, let me rephrase it. To me, it looks as if despite this headwinds, you're on track in terms of top line, compared to the time of the acquisition, but there is quite a gap to what you would think called, a recurring EBITDA. So this is what I'm struggling a bit.
Mm-hmm.
Mm-hmm.
Understand.
I can repeat what I've just said, but I can be more concise. Rico has a very strong operating leverage for two reasons. First of all, the high degree of automation. Basically, once a product is running in production, it is running, yeah? So basically, we manufacture this at variable cost. The downside of it is, we have a certain fixed cost base. And just to remind you, we completed the expansion of the Thalheim site in the beginning of this year, actually in the first quarter. So we built up resources, we built up capacity, which is now a step down in utilization. It's a strategic move, but of course, we see-
Okay
... the results of the operating leverage being at a very, very steep point, yeah.
Okay. Can you maybe shed some light on-
If you can picture it, yeah.
Yeah. Yeah, that was helpful. So, what would be then the revenue level to reach this recurring EBITDA now? So just to get an understanding of the operating leverage.
It is very, very steep at the moment where we are with the utilization rates. So added business, which means added volumes, of course, show once we get into the sweet spots of a better coverage of new capacities of the new building, we'll show results instantaneously. But of course, the markets are not a big help at the moment.
Sure. Sure. And you've reiterated this delayed call outs. It was already part of the Q1 presentation. Is it delayed into the second half or actually already into 2025? And maybe you can elaborate on which end markets this is most pronounced.
Karl has already explained one effect, certainly we see from construction-related build businesses, hot and cold shower heads, everything that goes with it. Consumer products, like, certain elements for coffee machine, which is still, you know, the aftermath of the COVID pandemic, where we have quite a saturation with this kind of equipment. Where we see strong demand is the medical components, particularly in markets like the U.S., but also Europe, yeah.
Okay.
The timing, yeah, it's call offs by customers. I mean, you analyze the industry with regard to consumer goods, construction economy, then you have good outlook. So 2024, yes, our hopes are there, but we're probably not surprised if it goes into 2025. With medical, I mean, it's project by project. Here we see strong demand. But, Karl, if you want to add something, I mean, you-
No, you summarized it very well. And as I said before, we have not lost any order, but a tool costs between, let's say, 100 and 700 thousand EUR, and this is CapEx decisions from our customers, and they delayed. And from that point of view, we are not worried. These projects will come, because it's always a technological challenge to produce it. And Rico is ready and up to these challenges, have improved it very often, and so we feel comfortable, we will come back on this.
Mm-hmm. Okay. Yeah, staying with Engineered Applications, in the second quarter, you had an organic drop from the top line by about 20%. That's quite a deterioration in the momentum compared to the flat development. I'm talking about ex Rico in the first quarter. So I get the point here that the conveyor belt business apparently has softened. But, maybe you can help us with a bit more granularity on the sequential development.
Mm-hmm. Yeah, the conveyor belt business is always a late cycle business. I think that most of you understand this. And last year we had still, let's say, a good, I would say, tailwind from the spread raw materials versus market price. And of course, this year we have not, let's say, enjoyed this higher spread. And the projects which are definitely there are also delayed according to this big investment, which is in mining overalls, are there. Therefore, we I would say felt this in our business, in the Belting, in the first six months high.
Mm-hmm. And I mean, is that similar now after the summer months, or what's the order situation look like in Belting?
Yeah. I would say, Mr. Remis, we have offers in the market which are quite huge, and we expect this offers will result into orders. But of course, you have always a likelihood that you get this project. I think we are well prepared, but of course-
Mm-hmm
... the role with this, let's say, GDP growth globally has changed a little bit. From that point of view, project will come. We are ready. We have the offers in the market, and so let's face it, let's come.
All right. And apart from Belting, was there any other end market, kind of-
Uh
resulting in the sequential?
Maybe for one, as an example, we are producing seals for concrete pipes. And of course, as you know, concrete pipes is in the middle of the construction industry, and this went also not in the best way. Yeah. Everything else, handrail, it's just a little bit of geographic shift from, let's say, Europe to U.S. or Asia, but in a very nice business. And the rest is going to expectation from the margin point of view. But everything which is in Form, construction-related, suffers as well, a little bit, as this example, concrete pipe, what I said.
Okay. One more, if I may, before I get back into the line. I was actually positive surprised by the margin in the Industrial Applications-
Mm-hmm
segment, so congrats to that performance. I mean, is it fair to assume that you've had some tailwinds from material cost deflation, specifically in this segment? And, is the kind of origination of the cost savings skewed towards Industrial Applications?
I wouldn't call it tailwinds from material cost. I mean, they're pretty much where we expected them to be. Slight headwinds, I would even say, from global logistics costs.
Yeah.
Don't forget, hydraulic Hoses is a global business, and the containers always seem to be on the wrong side of the planet, of the oceans, at least. I think it's a story of what we have stressed several times. Karl mentioned it, I mentioned it. SIA is a prime example. We influence what we can influence, and this is primarily cost and working capital. So this is what we have under our control. So it's about, reducing cost, reducing overheads, getting the best possible utilization from our clients.
Okay.
To add, Mr. Remis, here, you know, the market demand went down, and even if you play around with the price a little bit around, you don't get more volume. From that point of view, we are quite stiff on pricing because-
Mm-hmm
You cannot just buy the volume. It's always about share volumes, which we are doing very, very well, to get our share volume and be quite stiff on price. And I think, our teams, our colleagues did a great job there.
Yeah. Okay. Now I was just thinking, because if I look at the material expense ratio, it's 42% compared to 47% in the first half of 2023, so that's quite a contraction. So I would assume the raw material costs have also played in favor. All right, but thank you. I'll get back into the line.
As a reminder, if you wish to register for a question, please press star one on your telephone. The next question is from Christian Obst with Baader Bank. Please go ahead.
Yes, good afternoon. I just have one question. It's concerning the free cash flow. Of course, an impressive number you presented, but can you give us a little bit of an idea how the share is, what of the share is structural? So what have you achieved to really reduce net working capital for a longer period of time, and what of it is due to the reduction of volume? Thank you.
We've basically the volume effect is a relatively minor effect that you see. It's in part, of course, related to revenues and accounts receivables, which is, of course, overlaid to some degree by the sale of receivables before maturity, the so-called factoring. What we focus on now is group-wide targets, initiatives, and we're implementing them to structurally reduce it. And it's a very detailed plan, very detailed initiatives, talking about, just to give you some flavor on it, Mr. Obst. Talking about spare parts inventory. We are now in the summer shutdown for maintenance, so we said, okay, we define spare parts along a hierarchy, critical spare parts we want to have on stock, others we live with an availability of one, two days when you overnight them, and we don't, after the maintenance break, we don't immediately restock them.
That's one effect. The other effect is basically safety stocks and basically an ABC analysis of inventories, that we say: How far down can we run inventory levels? This is, of course, an effect that you see, which is overlaid by seasonality to some degree, but which will now gain momentum. Another one, a third one, important one, is basically input terms and the entire supply chain. So if you look at payment terms, payment terms that we have with our suppliers, this has gotten next to price and quality in the focus of our procurement. Input terms with our customers are in focus, because it's not-- we're not only selling on price, we are also optimizing that business. So, these changes are, attributing structurally to it, yeah.
We want to stay, and I think this is a clear commitment below our 20% target, but of course, we have a certain degree of seasonality, too, with the production levels needing to cater for the summer shutdown. So structurally, we typically have higher levels at the end of Q3, I'm sorry, Q2. So you see a fair share of it structurally. Can I give you concrete figures on it at this time? No, but we can certainly provide some in-depth analysis on it in Q3 and Q4 results, if that's of interest to you.
Yeah. Okay, thank you for that. Maybe one, one other question. You described how the metrics with Rico, Rico are performing. So, unchanged save expectations, but because of rising capacity, of course, a decline in the underlying EBITDA. So, when do we have more or less the same situation within Hoses, when you are in the final stage of the new Czech plant or the new Czech capacity there, then we are facing more or less the same situation, right?
No, it's different to the situation in Rico, because the startup of DH5 will be an incremental one, the first step taking place with spiral hose production, and then the new stages with braided hose machines, which will be only brought online when it comes to market demand, when market demand yields. So it will only be staffed in the moment when the demand is there. With Rico, the business model is different. The degree of automation is far higher. So I need to start investing into people, into competencies, of course, also in machines and into the building before the demand is actually there. And Karl has mentioned it very well. There's a certain lead time involved with the tool making.
Yeah.
The project time is far longer than in a commodity business. I mean, we're talking months, we're talking in part, almost a year or more than a year from, you know, the, initiation of a product, project for a new product, for a new component, until we take first deliveries.
You do think that-
Of course, the steepness of our cost curve with Rico is far higher than the...
Yeah.
Highly efficient performance commodity, like in Hoses.
Yeah.
Of course, depreciation will. You'll see that effect from the building immediately.
Yeah.
Of course.
Do you think about any kind of short-term work within Rico, or do you think, you know, because we see that there will be an increase in capacity, it takes a lead time, and we are not currently in a situation where we discuss short-term work.
Here, Mr. Obst, we reduced, of course, already a certain amount of people. But what Helmut said, these very high-skilled people were hired already before we acquired Rico on the belief that the journey is ongoing. Now, we have a little bit of interruption, and so we need to be very careful that we are not losing our key people, because the system-
Mm-hmm.
-of Rico, worked very well over 15, 20, 30 years. Therefore, we need to manage this very careful. But of course, we used all the, let's say, collected hour to reduce our cost position, which we did. And, from that point of view, I think we are on the right track.
Okay. Thank you very much, and all the best.
Thank you.
The next question is from Roland Könen with Value-Holdings. Please go ahead.
Yes, good afternoon from my side. Thanks for taking my questions. I have two. First one goes to you. You're mentioning that you have identified further saving potentials in the Industrial Applications segments. Do we have to calculate with new restructuring costs there? And if so, are they included in your guidance of EUR 80 million EBITDA for 2024? And my second question, it goes to the new outlook for 2026. Thanks a lot for your bridge for the EBITDA from 2023- 2026. There is, in respect with EBITDA, could you elaborate a bit on a kindly similar bridge for the sales development from roughly EUR 700 million-EUR 900 million?
It seems a big step of nearly 30% in two years. And if you reach this over EUR 900 million sales, why is the EBITDA target not higher? Because your basis is in a really depressed 2023, 2024 environment. So thanks a lot.
Mm-hmm. Thank you very much for your question. With your first question, you said SIA, Semperit Industrial Applications, with regards to cost savings. I think we're pretty much there. I mean, we continue to optimize, but this is already at a very high level, yeah. When it comes to cost initiatives and the further focus on cost, we certainly have overheads, which is, of course, as you've seen, the reduction of corporate expenses, that we were able to reduce significantly, and of course, better processes, more efficient processes, in the SIA segment, yeah.
Okay.
Just to clarify, that because I understood you, you mentioned SIA, but that's, I think we're well on track.
One of the bullet points in the segment in the half year report was that you-
Mm.
Identified savings potentials and especially on further personnel costs.
Mm-hmm. That was with Engineered Applications, yeah. On our 2026 guidance on EBITDA, we tried to structure it, and let me explain it from the back end. Basically, focus on what's under our own control, and of course, to be very honest to ourselves and to you, this is of course net of headwinds. So we've already shown more than EUR 8 million in savings in 2024. I mean, since the base year of 2023, there are certain headwinds running against it. Just to mention, cybersecurity is an ongoing threat for everyone and requires investments. There's the NIS2 directive for critical infrastructure and, as a close to chemical company, we in certain jurisdictions are subject to that, which requires additional cost, additional headwinds.
But we still are focused on getting our overhead costs right for what our business perspectives are. It also means reducing complexity, getting leaner in processes. But of course, we have a highly cyclical business in our Industrial Applications, and most of what we can call the structural upsides, the net effect is driven by our Hoses business, our Profiles business. If you want to translate that, we did the analysis, of course, for the entire company. If you want to translate that into revenues, it's about an increase of EUR 221 million in revenue, so more than that, since we want to exceed our EUR 900 million.
If you say 115 about is in our SIA division and in our SEA, it's of course the living up of Rico to the full potential. And of course, as we define new niche markets, new product market combinations for our Form business unit, and of course, some headwinds also from the late cyclical business in Belting, depending on where the global mining economy is heading. So that accounts for the difference, let it be 105.
Okay. So, there's no M&A in this figure included?
There's certainly not, no M&A. We always stated we want to grow Semperit as quickly as possible to a EUR 1 billion company again, organically. Well, EUR 900 million is close, but not there yet, so we leave some room for M&A here, too, to reach the billion target.
Perfect. Thanks for this explanation.
We have a follow-up question from Markus Remis with RBI. Please go ahead.
Yeah, thank you. I'd like to follow up on Roland's question on the EUR 120 million EBITDA target. I mean, it might be a bit difficult to separate structural from cyclical growth. For instance, if you're thinking about the new capacities in Hoses. Okay, I get the point you that that would be structural, but will you then differentiate kind of the cyclical upswing in this in this business? And can you maybe break down a bit the assumptions on the on the kind of business business segments and and the product mix that you've underlined, those whole revenues are much more earnings sensitive than I don't know what was Semperit in the in the past, for instance. So what's kind of the underlying product mix development.
Mm-hmm. Yes. I mean, Hoses, you're certainly right. I mean, it's a high-performance commodity business, so this is clearly also what we see in this cyclical effect. It's basically the benefit from operating leverage, taking in account our better cost base that we have right now. There's not too much additional capacity in 2026 from our DH5, so that's, I would call, additional upside. So this is a true cyclical swing. Structurally, we're talking new product market combinations, new capacities, new products, and also new capacities that are available. Most notably, the site of Rico in Thalheim, the expansion of Simtec in the US, and of course, some effect from, but not the full effect, some effect from DH5 in Odry.
Just remember when we presented you the project in, I think we did it with the full year presentation in, in, in greater detail, we said, "Okay, this is a long-term project that we invest anti-cyclically, and, it should yield us capacity, for our strategy 2030, so beyond 26.
Okay.
I hope this, to some degree, answers your question. Of course, I cannot stress enough the focus on overheads, which has, of course, an EBITDA effect, but no revenue effect. This is the-
Yeah.
Third point in our bridge. What I really think we're in the driver's seat, and we can really change processes, work constantly against complexity, because as you're all aware, if you don't do anything, complexity introduces itself, yeah? And this is the constant, meticulous, persistent focus that we have with regard to our cost structure. Of course, with all the lessons learned from our high-performance commodity business and separate Industrial Applications. First story, first success story in there is clearly the profiles business, where we say even in a very difficult market with regards to the home markets of the DACH region, Germany, it's still a profitable business. It's very...
I, I would not stress, because we, we still have higher ambitions, but, of course, this cost measures, of course, show the, show the fruit, and you see that when you look at the SG&A margins, and-
Yeah. No, thanks for sharing this vision or objective. Just trying to get my head around. I mean, cyclical upside, yeah, I mean, that's certainly something that will give you a lot of operating leverage. I'm not sure how you can distinguish these two items, such as thinking about the rebound in Hoses, for instance. Okay, there is this cyclical upside, and this will tremendously help you on the operating leverage side. So I'm not sure if you can really-
No, you cannot-
These two columns, so it's-
No.
Probably very hard, not only for us on the outside to track it, but especially for us outsiders.
No.
Okay, uh-
What we try to do, we want to illustrate, to the best of our knowledge, the two effects, yeah? But of course, they're estimates, yeah.
Yeah.
What we can measure also, at the end of the day, is the EUR 120 million.
Yeah, yeah. No, not meaning the numbers per se, but cyclical upside is a driver of operating leverage per se, so I'm not sure why it's in two different columns. But looking forward to this earnings growth. And my final question would be on factoring. So if you could maybe shed some light on the figure at the end of the first half and where it stood in at year-end 2023.
Mm-hmm. Year-end 2023, we had zero.
Okay.
First half of 2024, we had EUR 22.5 million accounts receivable sold.
Okay. Are there further plans for... We're just looking at now, you had something like EUR 130 million at year-end in terms of working capital. Now, we're talking about EUR 120 million, so that means there was a net increase of EUR 10 million adjusted for the-
No, we increased it by 10, temporarily, for very mundane reasons. It's our interest fixing date, where our margins are evaluated.
Mm-hmm.
Of course, the payback of increasing factoring is the highest when you have this kind of event.
Mm-hmm.
It's all-
Uh, the-
We're quite transparent.
Okay. Is there a plan to increase that number further? No.
No. We want to focus or we are focusing on structural measures, and we want to ramp it down because we want to keep the potential, yeah.
Yeah. Okay, very good. Thank you.
Mm-hmm. But it lives, it lives with the seasonality of our accounts receivables, yeah.
Mm-hmm.
But I certainly cannot give you a guidance on year-end factoring right now.
No, that's... Thank you.
Once again, to ask a question, please press star one on your telephone. Ladies and gentlemen, that was the last question. I would like to turn the conference back over to Mr. Haider for any closing remarks.
Thank you very much for listening to our half-year 2024 results. We delivered what we promised, and we would like to keep it in the future as well. Thank you very much for listening and engaging with our company. Bye-bye.