Ladies and gentlemen, welcome to the Semperit publication of Q1-Q3 2025 results conference call. I am Sandra, the conference call operator. I would like to remind you that all participants are in listen-only mode and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Mr. Stanek, CEO. Please go ahead, sir.
Thank you very much. Ladies and gentlemen, welcome to our results presentation for the first three quarters of 2025. Joining me today is our CFO, Helmut Sorger. We are well aware that today is a particularly busy day for publications, with numerous Q3 reports being released. That's why we are all the more pleased that you are taking the time to learn more about our progress. Helmut and I will guide you through the presentation, which is available on our website, and then open the floor for your questions. I would like to start with slide three, the overview. On this page of the slide deck, you will find a brief summary of the highlights. Let me start with the positive development in the third quarter. We continued to build momentum, with EBITDA improving to EUR 21.3 million. That's a 92% increase versus Q1 and nine% growth versus Q2.
Year on year, EBITDA was up by almost 29%, and the margin climbed by 2.8 percentage points to 13.1, despite revenue growing only slightly by around 1%. This clearly shows that the measures we implemented earlier in the year are paying off. Our order situation is now above 2024 levels, following the subdued development we saw in the first quarter. This gives us confidence as we move into the final weeks of the year. At the same time, we have defined additional cost savings initiatives, which will reduce our annual cost base by another EUR 10 million. These actions are essential to strengthen our resilience and improve profitability going forward. However, we must acknowledge that challenging market conditions still weigh on overall performance for the first nine months. EBITDA stands at EUR 52 million, down 18.6% year on year, and the margin is 10.8% compared to 12.6% last year.
On a positive note, earnings after tax returned to positive territory in Q3, reaching EUR 2.8 million compared to a loss of EUR 2.5 million in the comparable quarter 2024 and losses in the first two quarters this year. The third quarter marks a clear turnaround and reflects the progress which we are making. Finally, based on the development so far, we have specified our outlook for the full year. We expect operational EBITDA to come in at approximately EUR 78 million. Just to remind you, that is EBITDA before costs for our One ERP digitalization project. Turning the page, you see the shift in revenue and EBITDA year on year for our two divisions, Semperit Industrial Applications and Semperit Engineered Applications, showing graphically the impact of some of the latest economic trends.
After engineered applications muted first quarter, we now see a much more balanced split between revenue and EBITDA across our two divisions, approaching the distribution which we saw last year. Revenue stands at 42% for SEA and 58% for SEA, while EBITDA is 59% for SEA and 41% for SEA. This demonstrates that the recovery in SEA engineered applications is well underway and that our portfolio is returning to a more balanced state. Let's turn to the industrial applications divisions at slide five. Here we see a continuation in margin recovery since the final quarter of 2024 to nearly 20% in the third quarter on the back of cost reduction, better capacity utilization, and sales excellence initiatives. Overall, challenging market conditions persist, but the order situation has improved compared to last year, mainly driven by the hoses business.
Sales in the first three quarters remained broadly stable, with a slight year-on-year decline of 1%, primarily due to lower volumes. EBITDA decreased by 8.3%, but the margin held firm at a resilient 18.7%. In hoses, demand remained subdued, especially in the OEM segment, while direct customer business improved as inventory destocking ended. Order intake and backlog are above last year's levels. For profiles, construction activity is still weak. That said, early economic indicators suggest signs of stabilization, although we do not expect a short-term recovery. We are countering this with targeted cost saving and sales excellence initiatives. Turning to slide six to the engineered applications division, following a slow start to the year, the division gained noticeable traction from the second quarter onward, as clearly illustrated in the chart on the top, showing the development of quarterly sales and margins.
We can see a continuous improvement since Q1, although the weak start of the year could not be fully offset over the course of the first three quarters. Sales for the first three quarters totaled EUR 282.2 million, representing a 7% decline year on year, mainly driven by project delays in belting and liquid silicon rubber tooling during Q1. EBITDA amounted to EUR 26.3 million, with a margin of 9.3% compared to 12.1% in the previous year. Encouragingly, the order situation has improved compared to last year. Looking at the business units, our Form business, which encompasses various product-market combinations, recorded a slight increase in sales. Demand was mixed. Mount applications, industrial, and European handrails performed strongly. Transport was stable, but we see delays in larger infrastructure projects like high-speed rail and budget shifts towards defense.
The Chinese handrail market remains challenging due to weak infrastructure investment and high local government debt in China. Importantly, both order intake and backlog in the Form business exceeded last year's levels. As you know, belting, our conveyor belt business, started the year under pressure from project postponements and uncertainty around the US tariff policy. As a consequence, we did adjust capacity. In Q2, orders clearly picked up but lost some momentum in September, leading to a slight slowdown toward the end of Q3. Still, intake and backlog for the first nine months are above last year. Currently, we are operating at full speed and full capacity to process all orders on time and ensure reliable delivery until the end of the year. Finally, our liquid silicon rubber business, respectively Rico, posted stable revenues compared to last year but managed to increase EBITDA.
Order intake in parts production developed satisfactorily overall, although demand varied by product group. Call-offs from the healthcare sector increased. Mobility continued at a high level. Declines were seen in segments like the construction industry. The order situation in the tool shop has improved, and this has also laid a good foundation for future capacity utilization in the production of Liquid Silicon Rubber parts. With this, I would like now to hand over to Helmut, who will take us through the financials.
Thank you, Manfred, and also a very warm welcome from me. Let me start with the financial highlights in the first nine months on slide number seven. As already announced, we defined and began implementing yet another cost-saving measure beginning of the year. These initiatives reduced our annual cost base by another EUR 10 million on a run rate basis, annual run rate basis. By the end of September, we had already achieved savings of EUR 4.1 million. In this context, allow me to just remind you of the extensive actions we've already taken since 2023. We responded very early, and together, the new measures we will have removed around EUR 30 million in overheads in the last two and a half years. This has certainly helped us counter inflation, support margins, and significantly improve our operating leverage. You clearly see the impact once market demand picks up a little bit.
We maintained our free cash flow at a stable level at EUR 22.3 million, and we clearly see Q3 the cash flow generation gaining clear momentum. We have a stable balance sheet. Our net financial debt/EBITDA ratio is at 1.5, so clearly below our internal threshold of 2.5. Turning to our key transformation project, One ERP, which is in a really, really hot stage right now. We had the technical go live on November 1st, so we have a system, and we are officially in cutover. Big thanks to the team, the efforts that went into it. It clearly shows there's still some pioneering spirit left in Semperit that we'll certainly leverage with the continued rollouts. This will give us one system for the entire group, help us be efficient in back office processes, and we're looking forward to the rollouts of the next plans in the next three years.
Not to say the least, we also managed to pay a dividend of EUR 0.50 per share. That's EUR 10.3 million total to our shareholders on April 30th. While this may feel like a while ago, it remains an important element in how we allocate capital and reflect our commitment to delivering value. On the next slide, we summarize the main items of the P&L and other key financial indicators in comparison to the last period. As you'll recall from our last calls, we suggested using the first quarter as proof of our operating leverage. Just to remind you, sales in the first quarter were down 14%. EBITDA was down 52%. So to give you the Q3 in a side-by-side comparison, in Q3, sales were up just slightly, 1%, but EBITDA plus 29%, operating EBITDA even 34%.
This is kind of a situation where we say an incremental, small incremental change in volumes and utilization goes directly into the bottom line. As Manfred has already told, revenues recovered in Q2, Q3, improving overall trajectory despite the soft start. EBITDA also benefited from our cost measures, partly offsetting the volume decline. Over the course of the first three quarters, we recorded a moderate decline in revenue of 4.6%, while EBITDA came in at €52 million, which is still down 18.6% compared to last year. Operating EBITDA reached €55.6 million. This includes the €3.5 million in project cost for our digitalization initiative, One ERP. Earnings after tax came in negative at €8.4 million. This reflected the overall development but also had the €3.3 million impairment of our customer base at Rico and €4.2 million in negative currency effects.
Our free cash flow, as I mentioned before, remained stable, and this primarily due to our disciplined CapEx management, so we tried to shift CapEx projects into future years when they were not entirely essential, and not to mention, at last, we also use the effective method of factoring in order to cash in on our accounts receivables. Turning the page and plotting the last 12 months' industrial revenues against the industrial EBITDA margin, after a margin decline from 14.8% in Q4 2024 to 12.5% in Q2 2025, largely due to the stronger margin base in early 2024, we now see a clear upward trend in Q3. This improvement reflects mainly the impact of our cost reduction efforts, but also good procurement and control of the sales prices. As I've emphasized before, these measures play a key role in stabilizing margins, especially in a challenging market environment.
When looking at the year-on-year EBITDA bridge on slide 10, the decline in volumes could not be fully offset by price mix effects and other measures. However, you can already clearly see the impact of our latest cost-saving initiatives, which contributed EUR 4.1 million in savings by the end of September. Cost of materials, services, and energy increased slightly year on year, while the change in inventory continues to play a role in the overall pictures. It reflects the normalization of our stock levels. Project costs related to our One ERP digitalization initiatives amounted to EUR 3.5 million, and that brings our operating EBITDA to EUR 55.6 million. Over the page, we present the constituent parts of our working capital management with an improvement compared to the situation a year ago.
In total, trade working capital as a percentage of last 12 months' revenues was down at 16.7% after 18% at the end of September last year. Compared to the end of the year, we see a slight increase, which is mainly due to the normalization of inventory levels and certainly an uptick in production activity. The bridge chart for year-on-year net financial debt development on page 12 shows that free cash flow of EUR 22.3 million comfortably covered both our growth-related CapEx of EUR 7.1 million and the dividend payment of EUR 10.3 million. At the end of September, our net financial debt to EBITDA ratio stands at 1.5 times, slightly up compared with 1.2 times at the end of the year last year, but a very solid and conservative level and well within our financial framework.
Let's take a look at our financial position at the end of the third quarter on slide 13. Cash and cash equivalents stood at EUR 86.6 million, a decrease of 31% compared to year-on-year. This was primarily due to the repayment of a short-term loan with a nominal value of EUR 31 million that happened in July. As a result, our financial liabilities were reduced to EUR 199.1 million. Most importantly, our EUR 100 million revolving credit facility remains undrawn, giving us additional financial flexibility. As already mentioned, our leverage remains at a very solid level with net financial debt to EBITDA ratio of 1.5, and our equity ratio is stable at 47%, underscoring the continued strength of our balance sheet. Let me conclude with our capital allocation priorities on the next page, cash usage, which you're already familiar with.
Rather than going into detail for each component, the key message is that we managed to keep normal investments under tight control. Maintenance CapEx amounted to EUR 18.6 million in the first three quarters, while growth investments totaled EUR 7.1 million. Given the current market environment, we believe it's prudent to pull this lever, which is fully within our control. And we paid a dividend of €0.50 per share on April 30th, totaling EUR 10.3 million. With this, I've come to the end of my part of the presentation and would like to hand back to Manfred for his concluding remarks.
Thank you very much, Helmut. Let me wrap up with the outlook and a few key takeaways for the months ahead. Order intake continues to trend positively year on year. This was also true for October. Nevertheless, market conditions remain challenging. In the industrial application segment, the hose business is benefiting from the completed inventory reduction, while profiles are showing early signs of stabilization. In the engineered application segment, the picture is mixed. Strong performance in mount applications and handrails in Europe, plus a clear rebound in belting and liquid silicon rubber after a soft first quarter. At the same time, some areas remain under pressure, and the Chinese market is still tough. Based on our earnings performance so far, we fine-tuned our full-year outlook. For 2025, we now expect operating EBITDA of around EUR 78 million. Project costs for One ERP will be about EUR 5 million.
As for CapEx, we are looking at roughly EUR 40 million, and as we've already said, we can flex our investments to match market conditions. Looking ahead, seasonality will continue to play a role in 2026 with a slower start and a stronger second half. We are planning for that. Thanks to our lean structures, strict cost discipline, and ongoing innovation, we are confident we can capture above-average gains even from a modest market recovery. Looking ahead to the midterm, we see strong structural growth drivers in place, including the German infrastructure program, rising EU defense budgets, and reconstruction efforts in Ukraine. These are tailwinds alongside other factors that will further support demand, and to wrap up, our investment case remains strong: market leadership, innovation, and a resilient business model with high operating leverage.
When demand rebounds, we are positioned to benefit disproportionately, and our platform sets us up for sustainable growth. And now, Helmut and I are available for any questions you might have. Operator, if you would please start with the Q&A procedures.
Yes, thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press Star and One on the telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press Star and Two. Questioners on the phone are requested to disable the loudspeaker mode while asking a question. Anyone who has a question may press Star and One at this time. Our first question comes from Markus Remis from ODDO BHF. Please go ahead.
Good afternoon, gents, and congrats on the strong profit improvement in the third quarter. I would have one question related to the earnings walkdown that you displayed in the third quarter. If I compare the first three and the first two quarters in the third quarter, it appears that there was quite an impact from the change in inventories. If you could break that down, it seems more pronounced than in the prior quarters. If you can shed some color on it, thank you.
Markus, yes, absolutely. I mean, we had, if I remember correctly, about EUR 7 million in the first half. Change in inventories now is, of course, a build-up that we have. We had to play catch-up with production since, as you're aware, in July and August, we have our planned standstills. So there's two moments in time when we basically need to optimize working capital but also make sure that we generate enough product to furnish the market, and the better utilization rates, the higher rate of work in progress that we had in Q3 contributed to this positive turning of the change in inventories due to the better absorption of the fixed cost part.
Is it fair to assume that there is a bit of a countering effect then in the final quarter?
Yes.
Yeah, okay. And then on the guidance, thanks for keeping this refined target. I'm a bit surprised, I have to admit, that you're pinpointing to a specific number, still adding this approximately. What gives you the high confidence that it will be that close to that number? And if I may add, for the fourth quarter, given that we saw a further increase in the order intake and the order book, is it fair to assume that revenue momentum, top-line growth will pick up compared to the third quarter?
Let me start with the guidance, why the pinpointed guidance, because it's the best we know. And since the market at the moment is not the bottleneck, Manfred has told you we have pretty good order activity in Q3 and also throughout Q2. So we are playing a game of catch-up now where basically we are utilizing all the capacities that we have available according to current staffing levels. So the exercise is a forecasting exercise where basically the bottleneck is our production capacity. And we certainly have confidence in our plants and confidence in our people that we will not have breakdowns and be able to furnish all the goods out of our doors to our customers. Of course, it has some caveat in there. December is always a month coined by weather effects, but also delays in shipping that might occur.
So basically invoicing, we tried to do till the last day of the year, literally. We did that last year. And we want to continue that. But of course, this is what we have as an internal forecast that we share with you again. So there's no any adjustments that we make or any room of safety that we want to do. If everything works to plan, we can deliver the 78 or maybe a little bit more. If we have standstills or there's breakdowns in the supply chains or we have bad weather so that the trucks can't come to our plants in December, it could be a little bit less. But we are, from the moment, from our forecasting, determined to get there.
Do you want to add something about activity?
No, just as you said, we have the orders in-house, so it's up to us to produce. We don't see any additional bottlenecks, so we are very confident to deliver to ship that in the next seven weeks. Nothing I can add.
Your question to order activity in Q4, it's above last year, but it's not the wall that's coming and approaching us. So we don't see the big uptick and OEM business on the whole side. I mean, I'm sure you're following the figures that Volvo Construction Equipment is publishing, Caterpillar as well. I mean, they see a flattish development. But what plays for us now is that the overstocking effects are out of the system, and this is a great help. Markus, I hope that answers your question.
Yeah, very clear. Then I would have one regarding the remarks regarding the 2026 seasonality. So typically, the industrial business is stronger in the first half, at least than what it was for many years still looking at the old, if I may say so, reporting structure. Now, if I look at the comparison base, Q1 will be the weakest quarter. So my sense would be also now with the better-filled order books that Q1, Q2 shouldn't be that bad. Is your statement basically a reference to further build-up of momentum, of order momentum in the first half, and that will then carry into even stronger second half? Is that a fair angle?
I would not go that far. I mean, for this year, our guidance was clear. First half difficult, second half better. I think that's what we're experiencing right now.
For next year, I think we just need to see in our performance commodity business. You're absolutely right that the first half of the year is stronger than the second half because in the second half, we have two planned standstills for maintenance. So this is a very natural explanation. We need to repair and equip machinery. For the project business, which is impacting the belting business and, in particular, it's more the uncertainties and also the CapEx cycle of investments and investment proposals that the big mining companies do. So here we experienced that the first quarter was weaker due to the uncertainties in the economy and also wait and see in the project business, and I don't rule that out for next year at all.
Yeah, and additionally in the belting business, we had a maintenance shutdown planned for December. We have pushed this maintenance shutdown into January because production is so strong in this year, so there will be, at least in the belting business, a weak month in the month of January, so this also plays into our forecast.
Okay. Thank you. And then the last question before I get back into the line. You've again lowered the investment budget to EUR 40 million. Now, if I look at the beginning of the year when it still stood at 60, you have cut maintenance by a quarter, which I find remarkable given that maintenance should be more of a, I would say, non-discretionary in nature. Can you elaborate a bit on the pushback or on the reduction? And also, I think in the last call, you said the decline from 50 to 60 would be then compensated by a higher budget in 2026. If you could give us some sort of brackets for CapEx next year?
Let me explain. Our maintenance CapEx comprises maintenance, smaller growth projects, and automation, so there's clearly some discretionary room that Manfred, Gerfried, and myself have in approving this when it comes to a situation. Remember the first quarter and even the second quarter when Semperit was basically barely cash positive, so then you can be assured we will not spend on CapEx that can be shifted into future periods when we are not earning money. Now the situation has turned. The free cash flow has improved, but of course, for CapEx projects, you run out of time because the year ends. It's basically we try to push whatever is not safety critical, whatever doesn't have a payback of less than two and a half years, I think our cutoff was, and we are definitely, you see, with the strategic growth CapEx, we are committed to our strategic growth CapEx.
So we have not cut back any on this. But there's certainly a line that you can walk when you replace machinery, whether you want to push that equipment another year by doing a sound maintenance, which then goes into OPEX, and then replace it at the future point in time with, of course, risks of machine breakage. But some of our machinery have been with us for decades.
For decades.
For decades. In that time, machinery was still good and overbuilt. So I think we can joke aside, take that risk to a certain degree. But we are certainly committed to maintaining our industrial base. This is our obligation, and this is our responsibility here.
Understood.
But you won't see higher CapEx next year because, I mean, there's just a certain amount of projects that we can do a year with our engineering program.
Right. So higher than what's like 60 or against 40?
I'm just saying the backlog, the shortage of this year won't be on top of the normalized maintenance CapEx. I think we've told you before is about 30-35. The rest would be automation projects, and the rest would be strategic investments.
Okay. So if I say EUR 50 million is like this run rate of depreciation, that's kind of.
We are a bit less than that and compensate the strategic investments. We're certainly committed.
Okay. Understood. Thank you.
The next question comes from Volker Bosse from Baader Bank. Please go ahead.
Yeah, hello, gentlemen. Volker Bosse, Baader Bank. Congratulations on the great earnings improvements. I would have two questions. First question is on the specified guidance, EUR 78 million before project costs. You mentioned also the EUR 5 million for the One ERP. Is that all, or are these all project costs, these EUR 5 million, which you want to exclude of the EUR 78 million? Or are there further project costs which have to be taken into account? So basically, you guide for EUR 73 million reported EBITDA and EUR 78 operating EBITDA or adjusted EBITDA. Did I get the message right? Thank you.
It's just the project expenses. That's a very quick answer, and the reason for it is we are implementing S/4 Public Cloud from our friends at SAP. And since this is software as a service, it's only very limited potential to capitalize that. So basically, the implementation expenses have to go through the P&L, so we exclude specifically these expenses for comparability, nothing else.
Okay. That's all what you have in mind. Perfect. Got the message. Thank you. And the second question is also on the order intake. You speak about positive order intake despite challenging market environment. Could you give a bit more granularity if you speak about order intake from a regional perspective or in general, what are the underlying trends by region? Can you break it out to get your picture of the world, so to say? Thanks.
Yeah, I can take this in. Maybe you can complement Helmut. So when I go in my mind through the different businesses, I cannot really say that I see a trend per region. Yeah, we see a strong order. No, not a strong. Better than last year, order intake definitely in all regions, I would say, with the exception of China, where we have a very big handrail business, and the local towns and communities in China are not investing currently because they have a very high debt. But other than that, we see a good order intake throughout all our businesses all around the globe. What would you say, Helmut?
Yes. I mean, the exception of China, as you mentioned before, which is basically domestic sales of handrails in China have tanked, as we explained in the management report. But our form business is able to compensate that with new PMCs, strong performance in Mount applications, very solid order intake in industrial mining, filtration membranes, mixed metals. So the niche business of our SEA comes into play here that we can say, okay, they are moving at the moment all in the right direction apart from, and this is a biggie, handrails in China.
Yeah, exactly. And in the belting business, for example, we strategically made a shift when it comes to our customers away from coal mining towards copper mining and towards the minerals which are supported by the electrification. And for example, in the last month, two months, we have seen that almost the entire order intake is also coming from those new minerals and not from the old minerals. So we're also very pleased how this order book is developing.
Yeah. Thank you very much. All the best then for the rest of the year.
You're welcome. Thank you.
As a reminder, if you wish to register for a question, please press star followed by one. The next question comes from Marc-René Tonn from Warburg Research. Please go ahead.
Yes. Good afternoon. Thank you for taking my question as well. But coming back to the EBITDA outlook at first, I think when my math is correct, I think with the EUR 78 million for the full year, you're basically targeting a Q4 result in the magnitude of Q3. I think seasonally, probably sales will be lower than compared to the third quarter. So if I'm not mistaken, or are you expecting anything different than that, which would mean another margin improvement for that quarter on a standalone basis, potentially supported by cost savings. Is this the right way to look at it? Or is there, let's say, anything else you would expect, like higher sales, which would contribute to that?
No, I think you're spot on with your analysis. I mean, the cost savings, basically the €4.1 million with the main momentum built up in Q2, Q3, they should contribute it fully, or they will contribute fully in Q4. Inflation is basically digested, so most of the wage increases have already happened. So this is basically just the run rate. What we are going to see is good productivity in Q4, knocking on wood that equipment holds up, and on the dark side, of course, to manage working capital becomes more challenging. You mentioned EBITDA, but of course, if you're fully booked and you need raw materials and you have work in progress, of course, our eyes are fully on working capital and making sure we're not overshooting on this one. This is the challenging part in managing the upturn, if I may add here. But it's still Q3 that we need to replicate, but we have, as Manfred has mentioned before, basically capacity available until short before Christmas when we have our planned standstills.
Got it. And that's just, let's say, with the end market correctly. I mean, if we would see, let's keep our fingers crossed that this will materialize, let's say, a more pronounced increase in revenues in the second half of next year, you are confident that you will, let's say, be able to build capacity with new hires just in time in other regions?
The machines are not the problem at the moment, labor, because we are staffed, of course, to market demand or to needs, but we are already improving in our hoses business by hiring here. And of course, other businesses like our liquid silicone business is highly automated. So I mean, labor is not really the restriction here.
Perfect. And perhaps lastly, I think you mentioned in earlier calls some price pressure. I think it was in belting at the time when, let's say, it was weaker demand. And you already mentioned the mix in the customer structure you are targeting there with, let's say, a focus shifting from coal to metals. Is there also, let's say, a different kind of price pressure, or is, let's say, the competition basically following you? So with no major, let's say, relief on the pricing side there?
I think the only thing that we see is Chinese competition has become stronger outside of the US. Exports from China to the US have declined strongly. But at the same time, this entire decline was compensated to exports in other regions. I mean macroeconomically. And we also see that in our regions outside of the US, a stronger Chinese competition, which puts a pressure on prices. But it's just something we have to deal with here.
Thank you very much.
You're welcome.
The next question comes from Sara Hellermann from NuWays. Please go ahead.
Hi. So my question would be, since the Chinese demand for handrails has been so weak, if there are any visible changes for the next quarter's coming?
For the demand for Chinese handrails, well, we see a shift. We sell less to the OEMs, and we sell more to the aftermarket sales, to the service market, because there are less newer handrails, but the handrails which are installed are being changed at a higher rate. This has a little bit of a negative margin impact for us. But still, part of this business is compensated through the aftermarket service, compensating less OEM sales. That's how I would see that.
And if I may add, of course, if budgetary restrictions with the provincial governments are very tight, of course, they're inclined to use cheaper handrails because, I mean, they still need the handrails. And of course, we have products in our portfolio that satisfy those needs.
Absolutely. Yeah. Sorry.
Yeah. Which is basically also for aftermarket business, a cheaper alternative. Of course, we'll see some margin impact. I mean, of course, if the price point is a different one, you see different revenues, and you see percentage margin is comparable, but in absolute terms, margins are lower. But we are very confident that in SEA, we can compensate the temporary decline with new PMCs, with new business. In fact, Manfred more than compensates.
Thank you very much.
We have a follow-up question from Markus Remis from Oddo BHF. Please go ahead.
Yeah, it's actually two follow-ups. Firstly, can you give us an idea of the current capacity utilization that you're running? I appreciate it's diverse over the business unit, but a better understanding here would be helpful, and related to that, how much growth can you digest before your cost base will have to be inflated again?
A lot.
A lot. Okay. So, no, what we call in German, Stromfixerkosten, in the next couple of quarters.
It's interesting that you ask because we just had a management call at 1:00 P.M., and the executive board was very adamant to congratulate everybody on the call. That's top management, about 170-180 people. Congratulate them on the efforts with regard to cost reduction because, I mean, it's really not the fat we're carving out now. I mean, it's the tough ones where, I mean, we had to cut out performers too. But we made them aware that when business picks up, they need to be very vigilant that higher overheads are not introduced because it comes through the back door. You don't have to have everybody on staff anymore. The work needs to be done.
So you're playing with the thought to use third party for some time, and then you have the great idea you replace third party with employees, with full-time employees, and then all of a sudden, you get back to where you started. So everybody's cautioned. We try to be minus one. If it takes two to do the task, we have one. And what's going to help us? I mean, this is clearly not a sustainable situation under normal circumstances, but what's going to help us is the ongoing digitalization initiatives.
So we basically moved ahead, reduced overheads for back office functions, for other key functions, and we'll replace that with digital workflows. And One ERP will be a great help because we'll have one system, unified processes, and of course, need less people for doing the tasks. But you're absolutely right. It needs to be managed, but we're confident that we can manage the uptake without adding overheads.
And to your first question, it's a little bit difficult to answer because we don't calculate an overall capacity utilization. It's different between the businesses. But I would say that we are roughly at around 70% of installed capacity.
Roughly. So Belting is fully booked at the moment, which is good. Hoses, we are operating basically to the shift system. So we're basically at capacity with a 15-shift model, but we can go back up to a 21-shift model. So there's plenty of machinery in our park once we staff it. And of course, don't forget, we have our project DH5, which is basically almost fully automated hose factory that we plan on bringing online as well, which is online already, but not utilizing fully. And in the Profiles business, we are pretty well booked in mounting applications, fully booked in compression molding, and have some spare capacities when it comes to the project business for railway systems because, of course, railway projects were stopped temporarily.
Okay. Thank you. That's very helpful. And last question relates to, say, the sphere of U.S. tariffs, U.S. dollar impact. Firstly, is it correct to assume that the entire dollar effect is suggested in the financial result, if I remember correctly?
We have some impact, of course, also in revenues. That was not the major impact. But of course, we have a dollar cash pool. I mean, we have a $100 million business in the U.S. just for the legacy businesses or including Rico. So we have some effects. And I think the cash effect of that was about $2 million, and $4.2 million was the overall effects, majority of it being the U.S. dollar.
Okay. And on the impact of tariffs on your overall trading conditions, on volumes not being shipped into the U.S. from your peers, so volumes diverted or have come back into European markets, anything you can tell us about these conditions?
Not so much, really, because, I mean, you clearly saw the effect of the U.S. foreign trade regime change in our Q1 results when basically all the projects in Belting came to a halt where we should have produced. So this was a major impact. I think our estimate was about EUR 8 million on this, but it's probably right now in hindsight. The impact in the other businesses is basically a little impact on margin, but on volume, so far, not really. It's more a margin impact that you somehow have to split or take over the customs duties, particularly with long-length hoses where we have to plan to build up a local production in the U.S.
Okay. All right. Thank you very much. I'll get back to that now.
Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Mr. Stanek for any closing remarks.
Okay. Thank you very much. Thank you for your time and participation. We still have seven weeks to go, but we all know time tends to fly. So we already wish you now a wonderful holiday season. And of course, we remain available for any questions at any time. And we will speak again in this circle at the latest when we present our full year 2025 results on March 18th. Well, it sounds a little early to wish you a happy holiday, but I don't think we will hear each other again. So please allow me to do so.
Okay. All the best. Thank you.
Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.