Good morning, ladies and gentlemen, and welcome to Zumtobel's conference call on our results for the first nine months and the third quarter of our financial year 2023/24. With me on the call today are Alfred Felder, our CEO, and Thomas Erath, our CFO. Alfred will walk you through the highlights of the quarter, while Thomas will discuss the financial performance after the presentation. Both gentlemen will be available to answer your questions. In case you have not a copy of the report and the presentation, you may find both documents for download on our web page. After the call, a playback of this conference call will be available on our web page as well. With this, I hand over to Alfred.
Yeah, good morning, ladies and gentlemen. Warm welcome also from my end. Today we are calling you from Frankfurt, not from our headquarters, as this week we are participating in the Light + Building, the leading fair in Frankfurt. This is an international trade event, focusing on many different trends in lighting, electrification, digitalization of home and building systems, and the integrated safety technology. Before we dip into the Q3 results, I just wanted to share a few highlights out of the fair. Already on the first day, we had reason to celebrate, as we have been awarded with the Sustainability Exhibition Award for the most sustainable stand at the Light + Building, out of a couple of hundred applications which have been submitted and evaluated.
Furthermore, we are demonstrating our highly professional lighting expertise with our CIELUMA, you'll see it here in the picture in the middle, a light ceiling illumination measuring over 200 square meters, where we also set the Guinness World Record for the world's largest continuous light ceiling at Light + Building. This product is unique in the lighting industry, and we are doing it together with a longstanding manufacturing partner, Typico, also being in Vorarlberg in our headquarters, and it measures 45 meters in length and 4.5 meters in the width. Absolutely worth seeing it, and it was also a magnet of attracting many visitors to come to our booths. KEYURE is the Zumtobel Group's new cloud-based connectivity and IoT ecosystem. Its intelligent key features support the optimal use of both the Zumtobel and the Thorn luminaires in a professional-sense-supported lighting system to enable the operations with maximum energy efficiency.
In this way, the system makes an important contribution to the decarbonization of the buildings because they facilitate the cost-efficient and intelligent operations of the lighting in the different properties, be it retail, industry, or office. The modular-structured multifunctional software suite is based on intelligent sensors and includes solutions to maximize the energy savings based on the control and provides the necessary information for maintenance or monitoring sustainability goals, optimize the space in real time, and it identifies and follows objects like locating assets in a building. As reported in the half year, the Zumtobel Group acquired the rights of the SiteWorx IoT software developed by the company Digital Lumens in autumn 2023 with the exclusive rights for Europe and has now successfully integrated the software in the product offering of the smart building solutions.
Keyure will be available to customers starting in autumn 2024 after the first presentation at Light + Building and will form the core portfolio of the smart building solutions. The consequent development of the building is also reflected in our recently announced ecosystem partnership with Siemens and its Enlighted subsidiary. This strategic partnership is designed to bundle the know-how from smart buildings and jointly offer innovation innovative solutions. The focus of this partnership lies above all in the following verticals: commercial buildings, higher education, and smart hospitals. With the integration of Keyure and the new Siemens partnership, we will present the market that we have not developed today, in particular with the focus of wireless IoT solutions. As you know, we have quite a significant portfolio wired but not on wireless IoT solutions, and the current forecast points a double-digit growth for this market in the coming years.
Let's have now a look at the result on slide four. The market and the general economic environment remain difficult, and this climate is also reflected in our numbers. The third quarter brought a further decline in revenue, which fell by 7.9% to EUR 840 million in the first nine months of this fiscal year. Lighting segment remained resilient with a slight drop of 2.1%, resulting in a revenue of EUR 663 million. But however, the component segment recorded a 20.4% decline in revenues compared to the first nine months of the previous years, to EUR 222 million, despite a slight recovery in the third quarter. And always as a result, the adjusted EBIT declined by 32.5% to EUR 44.5 million, which represents an EBIT margin of 5.5% and remains within our forecasted range.
All things considered, we were able to report a net profit of EUR 21.4 million, and we have a strong balance sheet. Thomas will guide you to that one. Our equity ratio increased to 43.4%. With that, I will hand over to my colleague Thomas, who will give you now the detailed overview on the figures in quarter three.
Thank you, Alfred. Good morning, ladies and gentlemen. Let me start with the lighting segment. Revenues in the lighting segment amounted to EUR 208.9 million and were slightly below the previous year. The decline in sales volume was largely offset by efficient price management and increased sales in high-margin countries. Adjusted EBIT in the lighting segment decreased from EUR 15.1 million to EUR 11.5 million. Please remember that the Q3 result does not include the payment of the research bonus. This payment of EUR 1.8 million was received in Q2 this year. The decline in sales and increase in fixed costs were partially offset by higher sales volumes in high-margin countries. As a result, our adjusted EBIT margin decreased from 7%-5.5%. Let me move now to the component segment.
The component segment lost 14.8% in revenues and recorded sales of EUR 70.5 million in the third quarter. The key factors were limited demand as a result of still high customer inventories and low momentum in general with customers. Also, unfavorable FX effects and price pressure impacted the results. Due to this difficult market environment, adjusted EBIT in the component segment fell from EUR 4.9 million to negative EUR 1.4 million. The decline reflected the above-mentioned drop in sales and price pressure. Similar to the lighting segment, the component segment also received this year's research bonus of EUR 1.8 million in the second quarter. The adjusted EBIT margin declined to negative 1.9%. Slide seven shows the overall result of the group. Our top line declined by 6.6% to EUR 265.5 million, mainly driven by the low momentum in the component segment.
The decline in revenues and early payment of the research bonus in Q2 had a negative impact on our results in Q3. As a consequence, our adjusted EBIT decreased from EUR 17.2 million to EUR 5.9 million. The adjusted EBIT margin reached 2.2%. Let me now explain the main building blocks on slide eight of our adjusted EBIT for the first nine months in more detail. Let's start with the prior year adjusted EBIT of EUR 68 million. As already mentioned, our negative volume development, especially due to the low demand from customers in our component segment, had a negative effect of EUR 40.7 million. Looking at our COGS, inefficient price management, and the shift in sales to high-margin countries in combination with lower raw material costs had a positive effect of EUR 23.8 million.
Higher personal expenses due to salary increases and the result of merit round increases had a big negative impact on our result. Based on these factors, our adjusted EBIT declined to EUR 45.9 million. Slide nine provides you with the information on our income statement. As I previously indicated, our adjusted EBIT reached EUR 45.9 million. Special effects had a negative EUR 9.1 million, including EUR 7.4 million for personal expenses, EUR 0.8 million for depreciation, and EUR 0.9 million for higher expenses. After deduction of these special effects, our EBIT stood at EUR 36.8 million. Our financial results amounted to -EUR 13 million. Our net financing costs increased to EUR 8.2 million, mainly due to higher interest costs for current loans and finance leases.
Other financial income and expenses amounted to -EUR 4.7 million and included the interest expense for pension obligation, as well as negative effects from exchange rate changes and hedging valuations. After the deduction of income taxes, our net profit for the first nine months of 2023/2024 amounted to EUR 21.4 million. As a consequence, earnings per share stood at EUR 0.50. Let's move now to slide 10, the cash flow statement. Cash flow from operating results fell year-on-year from EUR 109.5 million to EUR 78.5 million, mainly due to decline in revenues. The change in working capital improved compared to last year. Total cash flow from operating activities were EUR 58.6 million. Cash flow from investing activities totaled to EUR 29.7 million compared to EUR 38.3 million in the previous year.
In addition to investments in property, plant and equipment, this position includes also cash outflows of EUR 6.1 million for capitalized development costs. As a result, free cash flow came in at EUR 28.9 million in the reporting period compared to EUR 46.2 million last year. Let me finish with slide 11 and some comments on our balance sheet. The balance sheet structure remains stable and strong. Equity ratio slightly increased to 43.4%. Net debt rose to EUR 94.3 million, and the debt coverage ratio is at very healthy 0.86. At this point, I would like to inform you that all participating banks in our syndicated loan have extended the consortium credit agreement for another year. With this, I hand back over to Alfred.
Yeah, you noticed slide number 12 already, what shows the developments over the quarters. As we have already explained, you can see here that we are working, again, our way, step by step towards positive territory. However, it's much less steep than the decline was, and we are now working in really a challenging market environment in different countries. But we also do see light at the end of the tunnel, especially on the component segment, as we are finally seeing increasing order intake with, the fact that the, high inventory levels at customers are really, basically now at back at normal levels. Slide number 13, let's have a quick look at the revenue development in the different regions during the first three quarters.
Compared to the above-average performance in the same period of the previous year, declines were recorded in all regions, particularly due to the drop in the component segment. DACH was slightly down. Main drivers, with good performance have been Austria, especially Switzerland, and the sizable decline in Germany. However, in the Northern and Western Europe , we have a decline, especially led by the U.K., which, as you know, is one of our big markets here. The construction basically collapsed more or less, with a decline of 31% last year, and we feel this now in our revenues. Southern and Eastern Europe's were below the previous year's level, with particular market declines slightly in Italy but also in Spain, in the Czech Republic.
Asia and Pacific also suffering with a high exchange rate impact, a negative one, where we have declines in Australia and in China, and the same is valid for the Americas and Middle East. I would like to conclude our presentation now with a few words on our outlook. Obviously, it's clear that the environment remains difficult and has already had the appropriate negative influence. Commercial construction sector, the demand consortium segment is still dense, and the business in the lighting segment is also not so easy, with now everyone out of their allocation and less projects available in the market. Considering this situation, we do continue to expect a decline in revenues in the mid-single-digit range for the entire 2023/2024, where we assume that we'll come out at the end, at the upper end of the absolute terms.
For the entire financial years, we expect, therefore, an adjusted EBIT excluding special effects of 4%-6%. And we have also adjusted the CAPEX figure. We are now expecting a spending of EUR 50 million compared to the previous one of EUR 60 million. And with that, thank you so much for your attention. Now Thomas and I will be more than happy to take your questions. Thank you for listening.
We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star followed by one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star followed by two. If you're using speaker equipment today, please leave the handset before making your selections. Anyone who has a question may press star followed by one at this time. The first question comes from the line of Markus Remis with Raiffeisen Bank International. Please go ahead.
Yeah, good morning, Tim. So, a few questions, please. Firstly, regarding the top line outlook, maybe you can elaborate where you see the border between a mid-single-digit and a high-single-digit revenue declines, or where would be, for you, the threshold?
So, as you know, Markus, thank you for your question.
The critical part is the Tridonic part. We are seeing now an improvement on the order intake. And obviously, we do have a short visibility. It's much more stable here, but we will see the lower threshold in the range of three-four and the higher one in the range of seven. That's it.
Okay. Okay, thank you. And then staying with the component segment, I mean, we're now at EUR 17 million of revenues in the quarter. I mean, if that, like, the bottoming out I think you already in the last call indicated that there are at least some green shoots on the order intake. I mean, interpreting your statement now, it seems as if the bottoming out is seen. So should we expect a normal seasonality in Q4, meaning it's a bit higher than, again, Q3?
Yeah, the normal seasonality we see, so basically, the order intake or the orders placed are now back to normal levels that we have to ship between order confirmation order intake and shipment between two and three weeks, which obviously, you can imagine, with factories not completely full, it's not an issue at all. So we are going in that direction. However, we are seeing, since November, a slight increase of the order intake, and the order intake is currently in the range of 6-6.5 million, which is EUR 1 million up from that what was in the back and continuously growing. But it's slower growing than we expected. So with that, we believe, if this continues, we will have then a much better start into Q1, but Q4 will still remain dense.
Mm-hmm. Okay. Okay, thank you very much. And then, a question, kind of relating to the material expenses. I mean, of course, staff costs are going up. I mean, looking into the next couple of quarters, what would be your assumptions regarding the material expenses? Is it stagnant on accumulated basis, or do you perceive either headwinds or tailwinds, actually?
Well, we don't see, you know, the big momentum of the past. There will be no 6%-8% material price reduction, but 1.5%-2% or 2.5% material price reduction we would see in the future months.
Mm-hmm. Okay, thank you. And yeah, final question would be regarding the working capital and then or net debt development that you perceive until year-end. I mean, you've got the guidance for CAPEX, so I understand this is mostly a shift into next year. But anything you can shed in terms of the expected working capital development over kind of a bracket where you would expect net debt to be at year-end?
Well, I would see an improvement in net debt as in the fourth quarter. We always generate quite some cash as we don't have the big impact, double salaries, bonus payments, and things like that in the fourth quarter. So our net debt should improve.
Okay. And, bookkeeping question, any further restructuring charges in the final quarter?
not significant ones, you know.
Okay.
Everything.
Okay.
Below more below EUR 1 million.
Yeah. Yeah, yeah. Okay. Thank you very much.
With the big Markus, the big adjustment we did already back in November with.
Yeah.
The move of two-thirds of the production from Dornbirn on components to cost-effective locations.
Mm-hmm. Thank you.
The next question comes from the line of Patrick Steiner with Kepler Cheuvreux. Please go ahead.
Good morning, and thanks for taking my questions. The first one would be, I mean, in the light of your current full year 2023/2024 guidance in place, what are expectations on Q4 sales and EBIT margins, and how confident are you in achieving the full year EBIT margin target of 4%-6%? The second one is more about the regions. I mean, northern and western Europe has performed quite badly compared to DACH, which has held up much better. Do you expect the DACH region to somehow catch up with the negative development, so to say, or, like, to get worse, going forward? Thanks.
Let me start with the question number B first, or the second one. We do see in the DACH territory a continuous good momentum, driven with Switzerland and Austria, but also in Germany. Despite the fact that the economy is really not looking very promising, we believe the DACH will continue to perform on the Q4. As I said, we believe that we stay within the guidance regarding the EBIT. The challenge on the top line for Q4 will mainly come from the components business. If we continue like this, then we will more be in this lower threshold, but obviously, the uncertainty remains. With the adjusted EBIT margin guidance, I'm very confident that we will reach it.
Okay, great. Perfect. Thank you very much.
The next question comes from the line of Michael Marschallinger with Erste Group. Please go ahead.
Yes, good morning. Thanks for taking my question. Basically, I have just one left on my list. It's about the price-pricing pressure in the lighting segment. You said in the la on the last call, you expect to pick it up. So I would like to know what degree did you saw, and, and was it in line with your previous expectations and, what do you expect now also for the fourth quarter?
Mr. Marschallinger, can you repeat your question, and please, slowly, because the line is very bad. We.
Is it, is it regarding price?
Oh, sorry. Sorry.
It was in the lighting?
Can you hear me now better? Sorry.
Yeah, yeah, yeah. It was the price pressure in the lighting segment. Yeah.
That was your question?
Yeah, yeah, yeah. And on the second quarter call, you already mentioned you expect pricing pressure in the lighting division.
Yeah.
To increase. So what degree did you see now in the third quarter? Was it in line with your previous expectations and what do you expect in the for the fourth quarter in this division?
Yeah. So in the lighting segment, luckily, we are seeing slight indications, but currently, the prices are stable. And in some countries, even, we are able still to increase prices. So I think that's good development here. In the components segment, especially with larger accounts, there is a price pressure. And as I said, we are here at the Light + Building, and we are having a very good, let me say, analysis now on the different players and the intelligent. I think that will be there, but it's slightly better than I expected. But nevertheless, the market is not really showing tailwinds in certain economies where we are operating. And that automatically means, with an oversupply what is there, that price will be an issue moving forward. But currently, it's also.
Thank you.
Better than we expected. That's why also Thomas said he's not very concerned about the EBIT.
Okay. Yeah, thank you.
As a reminder, if you wish to register for a question, please press star followed by one. The next question comes from the line of Laurent Stockli with Quaero. Please go ahead.
Yes, good morning. I wonder whether you can. You talked about a reduction in CAPEX. Can you tell us a little bit about your industrial organization between Austria and Serbia, how things are moving there in terms of changes? Thank you.
You mean on CAPEX, what we spend there, Laurent?
Sorry, I didn't get that.
Laurent, just question, Alfred here. Your question was, how is the CAPEX expenditure distributed among the different locations? How much, let me say, in headquarters and how much in Serbia?
No, not figures on CAPEX. Just to get a better idea of how you are evolving your production capacity between Austria and elsewhere. Where's increasing.
Oh, okay.
Where's reducing?
Yeah, as you know, we basically have reduced the capacity in Austria, mainly on the components segment, but also, we have adjusted and reduced 70 headcounts in the lighting segment. Attached to that, those products have been moving mainly through Serbia. We also have adjusted slightly the capacity in Lemgo and moved some products there into Serbia. And in the U.K., in a lot of other locations, we are pretty much constant, no change.
Let me add one sentence. You know, we in our trunking system, we have developed a new trunking system, and do the CAPEX trunking system now. This is our main product. And this is very capital-intensive. So a big chunk of these CAPEX goes to Dornbirn to highly very highly automated machinery and equipment for the new trunking system.
Thank you. Can you help us understand what the impact of this, this increased production, in Serbia, in your very automated factory will have on the sort of, gross margin or profitability of the business going further out?
Well, you know, the thing is, we are confronted with high inflation, as everybody knows, and high pay rises. And this helps, you know, to mitigate this effect of other locations and bring it to close to a zero impact, from an inflationary point of view. With, of course, direct and indirect workers.
So, this will serve just to combat inflation but will not improve the profitability of the business?
not significantly.
Okay, thank you.
Once again, if you wish to register for a question, please press star followed by one. There are no more questions. I will hand over back to Mr. Felder for any closing remarks.
Ladies and gentlemen, thank you so much for listening today, and for your questions. With that, then, I would conclude the session and go back to the waiting customers, what we have here at Light + Building. Thank you so much for listening.