Andritz AG

Thanks a lot, George. It’s Matthias Pfeifenberger.

A warm welcome from Andritz this morning. I’m in charge of Investor Relations, and I would like to welcome you to today’s call on the Q1 2025 financial results.

It’s a big pleasure for me to have our CEO, Dr. Joachim Schönbeck; and our CFO, Vanessa Hellwing, with me in the call.

I’d like to show you the disclaimer for a second and then remind you of the agenda today. So we’ll start the call with the CEO key messages and the Q1 highlights, followed by the financial performance, an update on the business areas and then finally an outlook and the targets for the medium term.

And with that, it’s my pleasure to hand over to the CEO, Dr. Joachim Schönbeck.

Thank you, Matthias. Good morning, everybody.

Welcome to our conference call. Thank you very much for spending your time with us and your interest in our performance.

If we conclude on the first quarter, we would say we are quite happy with the business performance in that quarter, considering what’s happening besides us in the world. We had a significant increase in order intake.

We had a big step-up in Pulp & Paper and Hydropower year-on-year. We could record quite stable development in Metals, and we could see further growth in our Service business.

The revenue declined. You know that order intake, particularly in the first half of last year, was rather low, but we could increase Service revenue, which is good and in line with what we strategically have planned.

The EBITA remained stable on the profitability side, on comparable EBITA and on reported EBITA level. It’s, I would say, a mixture of quite solid project execution and an improved mix that increased Service share.

We also could see in the first quarter already the first fruits of our restructuring efforts we’ve done last year, which is then in total quite good. We had a decline in the net income margin, and that’s more a seasonal impact, more or less beyond what is following on the sales decline.

If we go to the next page, we see the main KPIs in more detail. Order intake at €2.3 billion, up 20% from last year.

Revenue, as I said, dropped by 7% to €1.8 billion. Happy that the order backlog [Technical Difficulty] Can you hear me still?

Yes.

Okay. I was informed that I’m in silent mode.

Okay. So order backlog heavily increased to €10.2 billion, which is, to look for the outlook, quite stable cushion.

Comparable EBITA margin at 8.2%, slightly up from 8.1% at a total of €145 million, and the reported EBITA margin at 8.1%, stable to last year at €142 million. Net income dropped to €89 million and 5.1% margin.

If we look to the order intake in more detail, you can see that the growth is clearly driven by Pulp & Paper, up by 52% from last year, €975 million. So I would say, a good quarter.

Metals and Environment & Energy, rather stable compared to last year, and Hydropower up 14% to €570 million. So I would say, quite a good development.

You can see that Europe, North America increased, while emerging markets decreased a bit from 45% now to 38%. We were happy in Pulp & Paper, we got another complete pulp mill in China awarded in the first quarter.

And you might remember that we had been awarded two complete pulp mills in China in Q4 last year. So, it’s quite a positive sign towards us, regarding our technology, also I would say, a good signal for the Chinese market in total.

On top of that, we have two large orders, one from Japan and one from U.S.A. So quite good, constant growth in Service supports our more stable business.

In Metals, it’s, I would say, globally, as I said, it’s rather stable, minus 1%. Good to see also here, we could see a significant growth in China, where I would say the automotive industry has maybe a bit different cycle than what we see in Europe and U.S.

with the traditional OEMs. In Hydropower, it’s a good development driven by rather many medium-sized orders and further growing in the Service business.

Also grid stability played a role. Environment & Energy, we had, I would say, a slight decline.

But I would say, on a very high level, €443 million is quite good. We had, in Separation and Pumps, slow start in the year, while Biofuel and Clean Air had a rather good start in the year.

If we look to the revenue, we happily see that the revenue in Service could increase. We have a decrease overall by 7%, that’s mainly driven by Pulp & Paper and Metals.

And here again, in Pulp & Paper, the decline mainly relates to the – completely relates to the Capital business, driven by the low order intake a year ago, while we could grow the Service. In Metals, we have a decrease in Europe and North America.

We could see an increase in China. In Hydropower, you see we are up 23%.

That’s clearly driven by the good order intake we have now basically for the last five to six quarters. As I told you previously, the execution time in Hydro project is a bit longer.

So, the start was rather slow, but now we see the sales coming. Project execution is solid.

So, nicely 23% up. Environment & Energy is up by 6%.

Good development across all industries. That leads to backlog of €10.2 billion, it’s a good stable cushion for our sales for the remaining part of the year.

And as usual, approximately two third of the backlog is attributed to Hydropower and Pulp & Paper, with the share of Hydropower now at 40%, clearly supported by the excellent order intake we had now for the past quarters. We move to the EBITA, we can see that EBITA dropped along with the revenue.

However, profitability remained at a good level, 8.1% on a reported EBITA margin. And on a comparable EBITA margin, we even moved up from 8.1% to 8.2%.

On the revenue, that’s a drop of 6%. That’s definitely attributed to good execution of the projects and also first effects on our overall capacity reduction and restructuring efforts that we have started actively last year.

That was mainly in the areas of Metals, and Pulp & Paper, where we have made these capacity reductions. And if we conclude that in total, we have reduced headcount in Pulp & Paper and Metals in the last – in 2024 and the first quarter 2025, in total, approximately 1,300 people.

That’s counterweighted by an increase in – particularly in Environment & Energy and in Hydropower and of course, the acquisitions we have made. But at least in Metals and in Pulp & Paper, we could really protect the margins by timely executed restructuring measures.

Just to recap on the ESG. That’s the status end of 2024.

Nothing – you know that – I think we are well on track to reach our 2025 ESG targets. We have concluded two important acquisitions, one in the – supporting us for our decarbonization efforts, that’s LDX Solutions will be part of our Clean Air business, which is resting inside Environment & Energy.

It’s a complementary acquisition to what we do. It’s complementary regionally because the business is mainly focused in North America and they are mainly in U.S., where we have not a very large presence for Clean Air.

And they have some complementary technology that could also support us in the rest of the world. So we are quite happy.

Size is about US$100 million. And we see good market potential, and we see particularly a good growth perspective for them inside the ANDRITZ environment.

Then in Italy, we have acquired A.Celli Paper. It’s a manufacturer of paper machines specialized for tissue paper and board grades.

So we could strengthen our role as a full-line supplier. We have a good winder technology that we historically often used anyhow.

They are located in Italy and China. Sales revenue is approximately €70 million.

We expect closing that deal within Q2. As I said, we could grow the Service business.

We have it on an all-time high of 44%. But more importantly, we could grow – in absolute terms, we again could grow the Service revenue and that is good and helps us in stabilizing our financial performance, which will now be presented to you in more detail by Vanessa.

Yes. Thank you, Joachim, and good morning and afternoon, everybody listening.

I’m now going to give you an update on the financial development of the ANDRITZ Group for the first quarter in 2025, and then provide also a summary of the financial KPIs. As mentioned by Joachim, due to lower revenue generation, the absolute EBITDA came in about €9 million behind last year, while EBITDA margin slightly increased from 10.3% to 10.5% year-on-year.

With absolute EBITA down in the quarter, as mentioned, margins have remained stable in percentage compared to the previous year period. IFRS 3 related amortization has increased mainly due to the acquisition of LDX Solutions, which led to an EBIT margin 0.2 percentage points below Q1 last year.

The financial result is driven by the decrease of interest rates applied on a reduced gross liquidity, and a slightly more negative FX impact also played a role. Our tax rate remained stable at 25.6% compared to 25.5% of Q1 last year, and we arrived at a net income of €89.2 million at a net income margin of 5.1%, which is 0.4 percentage points lower than last year.

Looking at the free cash flow bridge, you can see net working capital is the major driver of our operating cash flow. However, while the bridge here also shows the year-on-year comparison, the net working capital change in Q1 2025 compared to the year-end 2024 is not that significant, especially if we look at our operating net working capital.

The roughly €60 million increase is in essence triggered on the one hand by higher service activities and thereby increasing inventory by €40 million and on the other hand, by the slowdown in project revenue, which triggers a temporary reduction in payables by €103 million. Based on the cash flow from operating activities and after our continuous in-house investments of roughly already €50 million in the first quarter, we arrive at a free cash flow of slightly positive €23 million for Q1.

This slide illustrates, on the left side, that we are well funded for the constantly broad variance of liquidity needs from our business to finance the typical project execution cycles. Usually, we have significant advance payments early in the project phase, being followed by heavier ramp-up of costs at the later stages of the order execution.

However, as you can see in the right chart, we have achieved a substantial operating cash flow in the recent years, further improving cash conversion. Now taking a look at our strong financial position.

We managed to keep a solid liquidity over the years that allows us to not only adequately finance our project business, but also to constantly invest in our own assets like service workshops that are close to our customers and also gradually increase the dividend payout. Having digested the payment of the acquisition of LDX Solutions in Q1, we continue to stay flexible for further acquisitions whenever we spot opportunities that meet our M&A criteria and add long-term value to ANDRITZ.

As you can see in this slide, the dividend was constantly increased over the last five years and increased by 27% since 2020, resulting in a €2.60 dividend per share for 2024 with a payout ratio of almost 52% that we have just paid in April. At the same time, we can show a constantly positive development of our return on invested capital, which again increased in Q1 2025 while WACC remained on a stable level and still far below the ROIC.

The increase in ROIC is mainly driven by the reduction of invested capital. So let’s conclude with a summary of our financial KPIs.

In a nutshell, it was a good quarter. Even though revenue continued on a lower level similar to Q4 last year, we recorded the second consecutive quarter of recovery in our order backlog.

We are extremely happy about the 20% increase in order intake in Q1 2025, sustaining the trend from last year, especially for Pulp & Paper and Hydropower. The financial stability of our business and the resilient development of our profitability is driven by also our broad diversification.

In detail, this means even though the Pulp & Paper business currently undergoes some capacity adjustments due to the lack of large projects in the recent past, Hydropower is developing positively volume and profitability-wise, also due to new technology fueled by our constant R&D spend in cooperation with our customers. Some years ago, we could see the performance of these two business areas being quite the opposite as compared to today.

With the respective cycles in these business areas being faced, our level of diversification is a stabilizing factor. While this is considered a weakness by some capital market participants, we think it is, in fact, our clear strength, supporting EBITA margins at a sustainable level.

On the cash side, we have highlighted the increase in operating net working capital driven – driving our operating cash flow, higher CapEx leading to free cash flow of €23 million and furthermore, the cash out of acquisitions, mainly LDX Solutions affecting, of course, our liquidity. The number of employees has, in essence, increased by acquisitions, just mentioned by Joachim, despite also there are variances across the different business areas as well as some restructuring measures ongoing.

And yes, well, with this, Joachim is now going to guide you through the details of the business areas, and I hand back to Joachim.

Thank you, Vanessa, for the insights. Let’s move to the business areas and start with Pulp & Paper.

We are happy to have Pulp & Paper market back with an excellent order intake of €975 million, up 50%. That is really good.

We – the revenue is declining – was declining in the first quarter, driven by capital business, which had a low order intake last year, as you know. The Service business reached a record level of 60% on the revenue, but that’s clearly driven rather by – even though it’s growing, it’s clearly driven by the drop in the capital sales.

In total, the combination of a favorable mix and good project execution and early capacity reduction on the capital side, we could keep the EBITA stable at 10.1%, which we believe is quite good. As I said, another new complete pulp mill awarded in China is a good strong recommendation of our technology, the third one in a row; two larger orders in the pulp area from Japan and the USA definitely is a good sign that these markets are in good shape.

I think on the profitability side, I had already explained what was driving it. We move to Metals, where the order intake is stable, I would say, on a quite moderate level.

Revenue has been declined a bit 6%. What is here, I would say, really remarkable is the EBITA margin.

On a comparable EBITA, we could increase compared to last year, 5.3%, showing that despite, I would say, the moderate volumes, that profitability improvements are on the right track. Project execution clearly improved compared to the previous years, and the first fruits of the restructuring measures also could be harvested.

Reported EBITA margin also slightly increased from 4.8% to 4.9%. So we would confirm that we are on the right track there.

On the market side, we definitely have a, I would say, reserved investment position in Europe and North America, but we could see good growth in China, and that is really something we also see for the next quarters to continue. So I would say, we see quite active markets across automotive and also steel and aluminum.

So Hydropower is continuing the good development I’m reporting now for several quarters, and we really see that this Hydropower will take its place in this shift of the energy towards the renewables. The significant role of Hydropower is recognized and now we also see it in the orders.

And there is a good mix of modernization of existing plants and also new plants, which makes the business very well balanced regionally as well as from the operational side. Order intake, nicely up by 14%, revenue up by 23%.

EBITA up by 54% to €24 million for the first quarter, the margin – comparable EBITA margin up from 5.1% to 6.4%. And here, we can also see that we can grow profitability over proportional with the business, which is good.

Order execution clearly has improved. So we are more stable.

We are confident that we can deliver the revenues of the good order intakes, and we could also get some price increases implemented in this good market. So we are quite optimistic.

Besides the Hydropower capacities installed, we have successfully built up this business for grid stability, where we delivered our synchronous condensers, too, and they also see a big demand on the market, not only in what has been booked, but also what is in the project list looking out. Looking into Environment & Energy, I would say, moderate on the market side, a slight decline, 4%, but still on a very good level with €443 million order intake.

Revenue nicely up by 6% to €332 million. EBITA, EBITA margin, very stable, very solid at 10.1%.

We had an excellent start of the year for Feed & Biofuel and for Clean Air, while in Separation and Pumps, it was a bit muted market. But we are happy that we could get the profitability very stable and that despite the rather high R&D spendings we have in this area, where we have this green hydrogen, the carbon capture activities, where the buildup of our value proposition takes a bit more of R&D money than we usually have in our business.

So that was for the business areas. We will confirm and can confirm our guidance for 2025.

So we see the revenue between €8.0 billion and €8.3 billion for year-end and a comparable EBITA margin from 8.6% to 9%. So that remains our guidance, and you might ask what is about the tariffs.

Are we not affected? And I can tell you, we do not see adverse impact on the markets yet.

We keep our financial guidance unchanged. But of course, we are monitoring the situation closely.

Maybe to elaborate a bit on that. Our business model is based on a system where usually our customers pay the tariffs applied and on the laws that apply when we are exporting the goods to these countries.

And that’s mainly the case for our Capital business. Our Service business is, to a widest extent, local for local.

So usually there only tariffs basically do not apply. So we checked on our backlog and potential financial impact on the tariffs on our business, we can consider small.

Uncertainty on the global tariff scheme, especially with frequent changes on a daily and weekly basis, definitely can slow down decision-making for investments. But here, we have not seen anything.

So therefore, we can keep our guidance unchanged. That’s also the case for the midterm targets.

We confirm the 2027 targets, revenue between €9 billion and €10 billion, comparable EBITA margin higher than 9%. That’s basically what we could tell you by now, and we are open for any questions you might have.

Thank you.

Yes. Good morning and thanks for taking my question.

It’s just coming back to the current demand and ordering activity. Obviously, you had a really good start.

I was wondering on Pulp & Paper specifically. I mean, that’s been a tough market for the last one year or two years or so.

So is it fair that despite the recessionary fears that are out there that this market had reached such a low level that the incremental downside would actually be quite limited and some of the pulp and paper guys are now moving ahead on strategic projects kind of nevertheless? That’s my first question.

Thank you.

Yes. It looks like that we have gone through the trough now.

It’s good that the market came back and that we could see it regionally quite distributed, Asia and North America. All of that is without any of these giant projects that you sometimes see in South America.

So we are happy that this market is back to normal. And that is not too surprising because if you have lower investment for a certain amount of time, then you need to do some to get your assets up in shape and running.

So I would say that is very normal on the long run, we still believe that the growth in Pulp & Paper is sustainable demand in pulp remains strong worldwide. And we still firmly believe in the potential of pulp and paper to replace plastics and other material in packaging as well as in textile.

So I would say both on the short-term and the long-term, we are not too concerned and happy that this market is back in good shape now.

So this sounds like Q1 should not have been like a big blip, and then in Q2, you go back to a much lower level. I mean it was high, of course.

So we probably shouldn’t expect that to be every quarter, but you’re probably not going to go down drastically sequentially either. Is that fair?

Yes. We see solid projects of this – in this medium-sized range.

And this – I would say, I cannot – I don’t expect that we now book €1 billion in every quarter. That’s very clear.

But I think we have a solid project list. And I would say it’s a bit better in pulp than it is in paper.

And have you seen any behavioral changes of your clients since April? Or is the decision-making still kind of the same that you saw in the first quarter?

I mean, they are all serious people who are definitely affected by the tariffs, and they need to sit down and, I would say, adjust their supply chains and operational models to the reality of the new tariffs. So we expect like with all of our business partners that decision-making will slow down.

But definitely, it will not – the tariffs will not change the fundamentals of the demand side. That’s for sure not the case.

Yes. And I think it would seem to me that when I look at Pulp & Paper, I mean, it looks to me a little bit less into the epicenter of the tariffs than maybe other things when you look between South America, exports to China.

It’s not immune, right, but it’s maybe not the worst bit, and probably the same could be set for what you do on the Hydro side and on the Environment side.

Yes. I would say that’s not targeted.

And we also need to remember that we are not a producer of pulp or any other products. We are machinery supplier.

And one of the – at least the communicated goals of the politics in the U.S. is reshoring of the manufacturing base in the U.S.

and that definitely would support our business on the long run, because we are delivering the machinery to reinstall that manufacturing base. And to the largest extent of our product portfolio, we do not have U.S.

competitors. So from that, I would say, we are definitely not in the main target of these activities.

Makes sense. Thank you, Dr.

Schönbeck.

Thank you.

Thank you very much. Good morning.

Lars Vom Cleff, Deutsche Bank. Thanks for taking the questions.

Two and this would be following Sven’s questions on the order intake. I mean Pulp & Paper order intake was really strong in Q1.

I guess momentum is holding up well. Is that already enough to make you optimistic that we could see revenues in Pulp & Paper for this year even increasing year-on-year?

Or is it too early to say? I mean, you also remarked that you see further growth in the Service business, which should then materialize as revenues this year already, I would assume.

Yes. I would say – I would be – we could book these orders early.

Growth, I would be rather cautious as, I would say, the normal cycle of the project would not predict that and we do not see that acceleration of these projects that this is now very likely to happen. So I would say, we will have definitely stabilized and we have a much better outlook now in Pulp & Paper that we had – than we had half a year ago.

And the restructuring capacity adjustments, they come into place, so we also protect profitability there.

Perfect. Understood.

Thank you very much. And then maybe quickly focusing on Metals.

Order intake in Q1 rather flat, minus 1%, give or take. And you’re talking about quite active markets.

So you’re seeing momentum coming back? Or is it too early to say?

Yes, we see quite active market in Asia. We see, I would say, muted markets in North America at the moment and in Europe.

We know that the large customers we have in North America, in that area, they are all in one-on-one discussions with the authorities for tariff exemptions that is now going on, because if we want to – if they want to make reshoring of manufacturing, if they want to make it viable, usually, you need steel, you need aluminum, it doesn’t work without. So therefore, we are on the midterm, we are not too pessimistic there.

Understood. Thank you very much.

I’ll go back into the line.

Yes, good morning. Thanks for letting me on as well.

Actually, I’d like to follow up on the order intake in Pulp. Do you see the recent awards that we saw in Latin America and also Asia, U.S., [ph] Japan.

Does it influence the investment decisions for further larger greenfield projects in Latin America?

I cannot connect that.

Okay.

I would say, what has been – but that has been true the last year that in Brazil, with the size of the projects that we are now talking about, around 2.5 million to 3.5 million tons per year. The size of the project is that big that basically the country cannot support two of these projects in parallel, or at least it would be quite a stress.

So therefore, you could say that the investment in South America last year has an impact, but this impact will be gone by end of this year. The other projects in Asia and North America are not affected by the decisions in South America.

That’s at least my view.

And also not the other way around?

No, no, also not the other way around, no.

And then one related to the order intake. Have you already received the down payments for these bigger orders, bigger contracts that you signed?

I would assume so, because otherwise we don’t book them. Vanessa, you can provide any additional insights there?

As far as I know, we have received for two of these three mentioned orders, but I have to check on this.

Is there anything – does the amount change this year? Usually, it’s like 10%, 20% down payment, right?

Is this still the case?

That’s the right order of magnitude, yes.

Perfect. Thank you very much.

Welcome.

[Operator Instructions] We have another set of questions from Akash Gupta from J.P. Morgan, who could not attend the entire call.

I will read them. I think the first one is about large projects that we mentioned in Dr.

Schönbeck’s elaborations. It’s one bigger order in Japan, one bigger order in the U.S.

and both in Pulp & Paper? And the second one is to give us a feeling about the underlying service growth, and I would ask Dr.

Schönbeck to give more color on that? Please.

Yes. So we had large orders, as you already said, one from Japan, one from U.S., both for Pulp assets and both with an order value above €100 million, so that is quite substantial.

And we see it as a good sign for these markets, because these orders locally have some impact also on other regional investment decisions. On the order intake service mix, we have a nice growth in Service revenue.

We grew by 5% compared to Q1 of the previous year, of 2024, which is very good. That growth was driven by Hydropower and by Environment & Energy, while it was rather flat for Pulp & Paper, 1% change, and a small decline in Metals by 3%.

So – but overall, it’s a good share, it’s a record high. It’s 44%; I would say it’s a good development.

I think we have one more question in the queue.

We cannot hear you.

Okay. Can you hear me now?

Now we can hear you. Thank you.

Okay. Thank you.

First, a question on Environment & Energy. So how it looks as the project pipeline on the one hand for hydrogen and on the other hand for carbon capture?

Do you see here some bigger projects coming up?

Yes. Basically, the situation has not changed since last year.

We see quite significant projects, high market activity and, I would say, a good interest in FEED studies and preliminary results. Final investment decisions, I would say, the climate has not changed and we do not expect to help it.

So we see activities, we see high interest in these technologies, and – but we do not see a change that everybody is now placing orders. The announcement in Germany for infrastructure investment extraordinary of €500 billion – help for the situation in Europe.

So, I would say, we keep on there, and we improve our offerings, and we expect it to change, but we cannot give definite dates when it will be. It is for sure slower than we hoped for two years ago when we started that journey, but we are confident that it will materialize.

My second question would be for Vanessa regarding the financial results. So Mr.

Nettesheim said in recent calls that ANDRITZ would expect a significant improvement in the net financial result in 2025. Now financial result in the first quarter was relatively weak.

What is your expectation now for the full year? Do you still expect then – positive financial result for the full year?

Yes. Well, thank you for the question.

I mean, this is specifically also difficult to judge on the interest rate development that we might expect also throughout the year. So we have undertaken already some actions in terms of tax optimization globally to foster the result improvement.

Yes, so I mean, it has a lot of parameters to – that are not always under our control.

But can you confirm that the first quarter net financial result was extraordinarily high compared to what you expect for the upcoming quarter?

No, it was not extraordinarily high. No, that’s not the case.

We actually expect improvement throughout the year towards the end of the year. So, you saw a decline on this from last year, end of last year, at least on the margin as well on the absolute figure, of course.

And we expect further improvement throughout the year. Does that answer your question?

So maybe I don’t get your point.

Yes. So the point was from the financial result, I would have expected overall positive net financial result for the full year.

And therefore, I was a little bit surprised about minus €6.7 million net financial result in Q1.

Okay.

Okay. Great.

Thanks for the interest in ANDRITZ and for our management team for the elaborations. I think there’s no further questions, and I would like to hand the call back to Dr.

Schönbeck for any concluding remarks.

Thank you, Matthias. Yes, thank you very much for attending the call.

We are happy with the first quarter. We are looking forward with solid project activities to continue on that path for the second quarter and the rest of the year, but we are prepared for anything else that the macroeconomic environment is delivering to us.

So thank you very much for your attention, and see you back in three months. Thank you very much.