dormakaba Holding AG (DOKA) Earnings Call Transcript

Ladies and gentlemen, welcome to the dormakaba Q1 2026-'27 Trading Update Investor and Analyst Conference Call. I'm Vicky, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Till Reuter, CEO. Please go ahead.

Thank you very much, and good morning, everyone, and thank you for joining us today for dormakaba's first quarterly trading update for the fiscal year '26/'27. As you know, I'm Till Reuter, and I'm CEO of dormakaba. And today, as always, I'm accompanied today with our CFO, Rene Peter, who will join me in answering your questions following my initial comments and remarks. As part of our ongoing commitment to transparent communication with the capital markets and other shareholders and stakeholders, we are introducing quarterly trading updates. These updates are intended to provide a focused view of sales performance and key business developments between our more comprehensive half year and full year reporting. They also offer a regular pulse check on business momentum and evolving market conditions across our industry. I'm sure most of you have had the opportunity to review our first quarter trading updates released earlier today. So I'll keep the opening remarks brief, recap a few key points, and then I'm open and Rene, we both are open up for your questions. The first quarter covering July 1 to September 30, delivered a solid start to the financial year. Net sales amounted to CHF 702.9 million, an organic net sales growth of 4% year-on-year. It reflects the resilient business momentum despite trading conditions still impacted by geopolitical tensions, tariffs and conflicts we see every day. Acquisitions had a positive impact of 1.3 percentage points on total net sales growth though this impact was offset by divested and discontinued business in the period. Including a favorable currency effect of 1.1 percentage points, total net sales growth reached 5.2%. Organic growth was driven by volume growth of 1.3% and price increase of 2.7%. We are pleased to see that both segments contribute to the organic growth mix with Access Solutions continued to report robust volume growth and strong order book and KWO benefiting from increased pricing due to higher raw material costs. Solid growth continued in Europe and North America with notable contribution from Switzerland and accelerating growth in Australia. Alongside our organic growth priorities in Q2, we continue to execute on our disciplined M&A strategy. During the first quarter, we announced the acquisition of the Style Group in July, Azure in August and Alliants in September. These acquisitions further strengthen our business portfolio in attractive market segments and support our strategy of expanding customer access, increasing our installed base and enhancing our capabilities in areas where we see attractive long-term growth opportunities and sustainable value creation for our shareholders. In the consolidated industry and with the strength of our balance sheet, we see attractive opportunities to further expand our market presence through targeted bolt-on acquisitions. Beyond adding scale, this acquisition enable us to broaden our capabilities, accelerate innovation and bring next-generation access solutions to market faster than we could do organically. We do have a strong pipeline of M&A opportunities and remain disciplined in our approach, pursuing transactions that fit our strategy and create sustainable value for our shareholders. With our strengthened portfolio, resilient business model and continued investment in future growth opportunities, we are taking the next chapter from a position of strength and therefore, very confident to reiterate the outlook for the financial year '26-'27, now under IFRS accounting standards, namely organic net sales growth above 3%, operating profit margin above 11% and operating cash flow margin between 10.5% and 11% (sic) [ 11.5%. ] With that, I conclude my prepared remarks. And Rene and I would be happy to take your questions for this first quarterly update. Thank you so far.

[Operator Instructions] The first question is from Delphine Brault, ODDO.

I will limit to 2. Starting with prices. What is your price assumption for the remainder of the year? And I know it's only a trading update, but was your 2.7% price increase in Q1 sufficient to offset the inflation?

Okay, number one.

Yes, it's number one. Okay. And number two, can you be a bit more specific on the trend by regions?

Okay. Let me start and maybe Rene can add. So pricing, we had 4%, 1/3 volume, 2/3 of pricing. I think what we see is that according to our guidance from September, that inflation remains high. So it's not that inflation comes down very soon. That means like on our supply side, we have higher inflation. And I think that is what in the end, we were guiding like 1/3 volume and 2/3s of pricing. I think it's also -- and I know that was the guiding we gave in September, and we believe also that is the right guiding for the full year because we do not see that inflation come down. If I look more regionally, and we are in Switzerland, I think regionally, we have a very broad span from America towards Australia. And if I took that 2 markets, so take on the one hand in Switzerland with a very low inflation. So I think here pricing has a different magnitude than if you look at the high inflation like U.S. So the more U.S. business, also if it compares with our competitors, we're having 25% U.S. exposure. So I think pricing is higher in higher inflation countries. So we see higher pricing in U.S. And I think for us, it's a mix because of our business, 25% U.S., majority in Europe, some in Asia. So I think pricing is very locally and has to be in the end decided locally and globally tracked. If I look at the trend by region, so we have a very robust momentum in Europe, where we have a full product portfolio. I think what we have seen in the first half of the -- not the financial, but the calendar year, Europe is robust, continue on a very good trend. We see rebound in Asia and in Australia with good starting of the year, Australia and Asia Pacific. We see China still a little bit challenged, and we see good momentum, continued momentum as in the second half and the first half of the calendar year in hospitality and also automotive U.S.

The next question is from Patrick Rafaisz, UBS.

Maybe a follow-up as a first question on the regional trends, specifically in Europe, excluding Switzerland. Can you add a bit more color where you see the robust momentum in terms of verticals and maybe countries? And is it correct to assume that the U.K. is still negative due to the hospitality segment? And then the second question would be on your KWO business where you talked about the benefit from increased pricing. What does that mean for volumes in that segment? Were volumes still positive also for KWO or maybe flat or negative?

Thanks a lot, Patrick, for this question. I would like to start first with the European business performance out of Switzerland. As Till already mentioned, Switzerland was very strong in the first quarter, but we have seen also very strong sales momentum across whole Europe. But when we look across Europe, strong volume growth in North Europe, Benelux, South Europe, where we see, as you already highlighted, U.K. is still impacted by prior year comparison due to the project business. And Germany, what we see also there is that we have very good momentum, especially on access control solution, while in one specific product range on the door -- on the Safe Locks business, this is more project driven where we had last year a stronger project. And therefore, overall, in the core Access Solutions market, very strong, except as mentioned in U.K., where we have a tough prior year comparison, especially due to hospitality. And we also see a little softer business in France. On the second question, KWO. KWO is obviously, when we look at the business, it's much more dependent on materials, especially on the Key Systems. And that's where we actually see the highest price increase in our portfolio where we have been passing over the raw material price increases, which we saw roughly about 8% in the average to our customers. Now in that particular business, there was also a volume decline, especially on the automotive part. But the remaining part of the KWO business is actually growing volume-wise in line with our expectation.

The next question is from George Farmiloe, Jefferies

Yes, 2 questions from me as well. First of all, volumes up 1%. I think in full year, you said you had an order book that was up high single-digit. I was wondering if you're seeing this continue and if you're seeing any hesitancy on this translating into revenues. That's my first. And then on second, if you could just give us a little bit more light on the acquisition strategy going forward, how important this is to your revenue growth and whether that's sort of changing this year?

Maybe I'll take the first question, then I'll pass over to Till for the second question. When we look at our order book, actually, we see a continuously strong order book, particularly in the core Access Solutions market, in our upper single digits, which covers roughly about 3 to 4 months of revenue. And this is particularly very strong in markets like U.S., Germany, but also Australia. When we look at the KWO business, the order book is slightly softer. But again, there, it's more driven by project business, especially on the Movable Walls side. But overall, we are based on our order book confident, especially in Access Solutions for the coming months where we have seen, as mentioned, a continuation of our strong order book as we have already seen that at the end of Q4 last year. And with this, I would like to hand over to Till for the second question.

Thank you, Rene. I think on the M&A side, I will do some statements and then you all know that we have invited you to the Capital Markets Day on November 18. We're getting more details on our M&A strategy and what we see and how we are heading in the future. But let me do a couple of statements. I think, first of all, at the beginning of the transformation process and which we finished this year, we haven't done acquisitions. We did start last year, and we have done 8 acquisitions in the fiscal year '25, '26, and we have done 3 acquisitions in the first quarter. And I think what we -- what Rene and I in the end communicated that M&A is an integral part of our growth. So we have organic growth of above 3% or 3% plus. And the M&A part is a very important part, and we want to participate and we have the balance sheet to take an active part in the M&A consolidation. What we see is, so far, we have done lots of bolt-on acquisitions, which are not increasing our complexity, but helping us in the offering we have seen on the Airsphere. We could have with Alliants on hospitality. So I think we have done acquisitions, which will really help us on growing and continue on this way. So that is, I think, the goal that we will give you clear guidance on M&A, how much we see per year and how -- and I think that's something which is planned for November.

The next question from Martin Hüsler, ZKB.

My first question is on the general environment. Do you see any impact from higher interest rates, obviously, in several markets, maybe in terms of impact on order book executions or delay of projects? So maybe I ask my question one by one.

Okay. Let me talk on the environment. I think it is something we are growing 4% I think also like if you maybe one adding on the Access Solutions, we were having more volume. So I think the 4% was nearly equally distributed between price and volume. So I think that's also a good indication. And I think Rene mentioned that on the KWO side, we had more pricing, less volume. But on AS, it was nearly equally distributed between price and volume, which is, I think, also shows a good momentum. And I also mentioned at the beginning that we had a solid organic growth of 4%. And I think that we are very -- it's a resilient business momentum. And we see that we are still in the middle of lots of volatility, geopolitical tensions, you see the wars, the armed conflicts, you see the tariff discussion. And I think here, we see that the environment, we also do not believe that the environment is changing drastically to come back to what happened 5 years ago. And I think we have to manage the volatility. On the interest rates, and as mentioned at the beginning, we see that inflation will stay on a higher level, which has an impact on the one hand on the supply. So we have to think about how do we work on the pricing because our raw material we are buying on higher levels. On the interest rate, the biggest impact is on maybe much more on residential. You know that we have more than 80% commercial. And I think the interest rate has a bigger impact on new projects on the residential side. So we see an impact, but I think that's something where it didn't change over the last 6 to 12 months. I think it remains consistent. But to be clear, we also did not see so far an impact from the German infrastructure package. And I think it's many, many small topics also like we see smaller impact because of U.S. government spending. So I think it's lots of things which are unchanged over the last 6 to 12 months. And in the end, it reflects the volatility of the environment. And still like the same time, it shows the resilience and the robustness of our business that we really deliver on target, 4% above the 3%. I think that we want to continue, and we are very confident that we are going to deliver for the full year.

That's very helpful. And then the second question I have is rather a technical one. So I think the conversion to IFRS has had a positive impact on the sales, at least you guided that for the full year. Now if we look at the second quarter, and it looks like that seasonally, the second quarter seems to be at least as -- in terms of sales on a similar level than Q1. I rather thought that Q1 would be a more important quarter due to a weaker December month. So maybe can you share some details about how we should expect the sales in absolute numbers as well as to evolve over the next couple of quarters? Is there a certain seasonality quarter-by-quarter?

Martin, I will take this question. The first on the IFRS conversion. Yes, it's correct. It had an impact on the top line. It's for the full year, roughly about CHF 34 million, CHF 35 million because we were reclassifying some freight charges, which we had deducted in the past from our cross-sells, which is now part of cost of goods sold. Now regarding seasonality of our business, normally, Q1 is the softest business in our year because of especially the vacation period in July and August in Europe. What we normally see is a strong September, October, November are strong months. Similarly afterwards, especially also in the second half year, it will be typically March, May and June. So therefore, when we look at the seasonality, we have seen quite equal distribution half year by half year, but it changes quarter-by-quarter.