JOST Werke SE (JST) Earnings Call Transcript

Ladies and gentlemen, welcome to the JOST Werke SE Earnings Call H1 Q2 2026. I'm Moritz, the Chorus Call operator. [Operator Instructions] The conference is being recorded. At this time, it's my pleasure to hand over to Joachim Durr, CEO. Please go ahead, sir.

Yes. Good morning, everybody, from Neu-Isenburg, and a warm welcome to our earnings conference for the first half year and the second quarter of 2026. I'm very happy to report that we had a record first half year in 2026. Our sales grew 12% to EUR 857 million, and our adjusted EBIT grew 21% to EUR 88 million, which calculates to a margin of 10.3%. Very happy with the strong quality of our growth. Organic sales went up around 9%, driven by all 3 regions and all our business lines. The Hyva integration is fully on-track. We are creating the cross-selling synergies and they are ramping up. And with our profitability, we are back into our strategic corridor between 10% and 12% in terms of adjusted EBIT margin. And we're winning new customers worldwide. Our market share is growing across business lines consistently, and we are executing our AMBITION 2030 strategy. So let's look at the financial numbers a bit more in detail. It shows our strength and our resilience for the Q2. So sales were up 13% to EUR 440 million in the second quarter 2026, paired with an adjusted EBIT growth of 19%, up to EUR 44 million and an adjusted EBIT margin growing 0.5 percentage point to 10.0%. Free cash flow was up in Q2, EUR 17 million despite the working capital increase that we needed to drive the high business growth that we have. We had high capital efficiency with a return on capital employed up 3.5 percentage points to 16.3%. Our leverage improved to 1.81x and is now back in the strategic range between 1x and 2x. Adjusted net income grew 19% to EUR 25 million in the second quarter of 2026, and that calculates to an adjusted earnings per share up 7% to EUR 1.48 due to the high -- to the larger number of shares that are circulating compared to last year. So -- H1 2026 posted the strongest first half in JOST company history and was supported by a strong organic growth. And with that, we confirm our outlook for the fiscal year of 2026. Looking at the market environment that we had in the first half of the year in Europe, Middle East and Africa, the truck and trailer market grew slightly 5% to 10% tractor market, very slight growth between 0% and 5%. Hydraulics also very slight growth. Our organic growth in that market environment, a strong 5.6%, and I'll explain a little further on the next slide, what the main drivers are, but it's mainly been our Ag and Transport business. In America, we had no support from the market, not in North America and certainly also not in Brazil. So market declined between 15% to 10% on trucks and 10% to 5% lower on trailers. Also in agricultural tractors, down 5% to 10%. Hydraulics, more or less stable, slightly positive. Our performance in Americas region, plus 9.9% on an organic basis without the M&A effect. And that is mainly driven by new Ag customers, also some market shares on trailers in North America and cross-selling synergies that we were able to generate. Asia Pacific region, market in that region for truck and trailer, fairly strong, 10% to 15% market increase; on agricultural tractors, 5% to 10%; on Hydraulics, 10% to 15%. Our performance up almost 15%, 14.6% to be exact. We're benefiting from the growth of our Chinese customers in their export business and also with the growth that we see mainly in India. And as promised, on the next slide, I will go a bit more into detail on the organic growth that we are seeing in our business lines. So if we split down the organic sales development by regions and business lines, if you look at the total sales in half year 2025 of EUR 764 million and the EUR 857 million that we are reporting in the first half year of this year, EUR 69 million is organic sales, EUR 39 million is Hyva that is in effect, the 1 month additional that we had in January because we closed 1st of February last year, and we had a negative EUR 15 million FX effect. So looking at the organic growth that we are seeing, Transport grew 6%. If you compare that to the reported number, it's an FX difference. There's nothing else included, but FX, the same on Agriculture. So 6% growth in transport. New trailer business in North America is one of the drivers, a strong export business in China, where we're growing with our Chinese OEMs that we supply and the growing demand in India that we see. We see a robust demand in Europe, Middle East and Africa. And we've also launched a new product, which is the BusLink in Europe. So that ramp-up plus the market share gains gave us those 6% growth in transport. If you look at Agriculture, the biggest growth, 22% organic. That's a ramp-up of our organic projects that we had in South America and in APAC. It's also the dealer business, especially in the U.S. that is picking up, and the strong demand in Europe, Middle East and Africa for our agricultural loaders and our implements. So that's a really impressive 22% that we were able to grow here in our agricultural business. If you look at Hydraulics, of course, the reported is 20%. That includes the 1 month of January. If we look at only the organic growth, that's 6%, and that is cross-selling synergies that we have in the U.S. and demand in Brazil and the U.S. It's also new products, EPTOs, and digital tipping systems that are gradually ramping up in APAC, and are systems that give us upselling potential and cross-selling synergies in Pacific, Americas, and South Africa. So as I said, very happy with the organic growth that we're seeing on top of the positive M&A effects of the Hyva acquisition. So let's go to the next slide, please. You've seen that it has changed a little bit, a bit more weight in Americas and in APAC, in our sales by destinations. Europe, Middle East, and Africa is 46%, and Americas and APAC at 27%. So a very good setup to also participate in the growing markets that we see in North America and in Asia, especially. If you look at where we earn our adjusted EBIT, it's almost 1/3, 1/3, 1/3 between those regions, and Oliver will explain you a bit more on that distribution. And also on business lines, you can see that for us, Transport business is about 50% of our business, but we are also benefiting from the growth in infrastructure with our Hydraulics business and the stronger agricultural business that is 20% of our weight. With that, I would like to handover to Oliver to give you a bit more detail on the financial numbers.

Yes. Thanks, Joachim. Hello, and welcome from my side to this year's first half year call. As usually, I will jump into the 3 regions before coming back to the group. A bit different to normally, I will focus more on the half year numbers for one specific reason. You might remember that last year, with the half year numbers, we showed the Cranes business as discontinued operations and that had an effect that we had to consolidate all of the sales numbers for the second quarter, the full half year numbers of Cranes, and that's an artificial effect in the prior year numbers. But I will come to that point once we are reaching the group figures. When we look into EMEA for the first half year, we have seen an organic sales up by almost 6%, as Joachim has shown. And as you said, with strong growth for EMEA across all business lines and driven by, let's say, a large extent by a broad product portfolio that we are offering here. There is an M&A impact of roughly EUR 10 million in EMEA for the first half year, and that's why the reported growth jumps up to 9%. The strongest growth comes from the Agriculture products. We have seen continuously following already the improvement in the second half of last year, demand for our Agriculture products. And then what helps now is that also Transport and Hydraulics is starting to recover. The order intake in general remains very solid. We don't see at the moment, direct demand impact, negative demand effects from the Iran conflict so far. And overall, the FX effects have been very relatively low for the region, a slight negative of 0.5% points in EMEA. When we look into the EBIT for the first half year, went up by 9% to EUR 24.4 million, and the adjusted EBIT margin reached 6%, driven for sure by scale effects from the growth, but also definitely by realizing synergies and also by a mix towards the off-highway products. Keep in mind, the region here bears the group costs, right? And with the larger group, this is also increasing that always a little bit of burden for the EMEA margin. And besides that Cranes effect that I mentioned already in the introduction, there is another effect, and that's also a structural effect that's going to be continued for the EMEA region. We have started beginning with the second quarter to shift certain highly profitable sales, not for the sake of highly profitable, but in general, as part of the business model change into the regions. Those sales were routed previously by Hyva International, which is a Dutch company, so consolidated in the EMEA region into the regions, definitely following our steering model like we have JOST legacy, so to speak, that overall reduces the cost for the group. So it's for the benefit of even further synergies. It allows us also to legally consolidate certain legal entities in Europe, but that has the offset effect for the EMEA region that certain profits are now shifted into the Americas and APAC region, where on the other side, we see the positive impact for the group is a 0 impact. And on top, what we also slightly see is in the second quarter, the region is being burdened a little bit by higher input costs. We see rising logistics and freight costs, long supply chain. You know that we are shipping parts from China, from India into Europe to serve our markets here, and that comes with the higher cost. So that's a little bit. But overall, a very successful first half year and fully in line with our internal expectations for the region EMEA. Now coming to Americas, super strong first half year, very strong organic growth despite challenging markets in both U.S. and Brazil, as Joachim mentioned, sales went up organically by 10%, reported by almost 12%. We see the synergies are ramping up. We have really a well-oiled machine, I would say, in Americas at the moment. And although the U.S. markets have remained challenging in the first half year, we could show a very nice growth. From a sales perspective, EUR 225 million sales in the first half year represents an all-time high for sure. And also what we see now in the specialty Transport business, and that's in focus for the second half, I believe also from your questions, we see that sequentially improving now, and we see a strong order book in Americas for the second half market definitely started to recover, and that should support a very nice Americas sales here in 2026. There is a slight FX headwind in the top line of 2.9% points. That's because of the euro value versus the USD, and the Brazilian real also affected a little bit from year-to-date average calculation. When we look into the adjusted EBIT margin, adjusted EBIT for the first half year went up from EUR 22 million to EUR 27.2 million, a margin step-up of 120 basis points, again, driven by the synergies, driven by the market share gains that Joachim pointed out. We've seen a strong ramp-up of profitable projects in South America. And that paired with the business model change that I was introducing in EMEA, which also has a slight positive effect in Americas, increased that margin to above 12%. And when we look here in the second quarter, it's even above 13%. And what we see at the moment is that we are probably able to run that ratio also going forward. Again, it seems to be a well-oiled machine here at the moment. Super good team. Congratulations to our teams over there. When we go then to APAC, also super strong organic growth with almost 15% basically across all business lines and all subregions. We see still a very strong business in China with our Chinese customers that are increasing their export shares, right? And we don't see that stopping. So that definitely is paying for our APAC story. Sales went up from EUR 187 million to EUR 223 million, also hit an absolute record in our history. And the growth rate in the second quarter versus the first quarter is even slightly higher, right, also underlining that India seems on a recovery track, and we're expecting that to continue also into the second half. Regarding FX, there is a slight headwind that mainly comes from India. And also what we see is a little bit of an ongoing weakness in the Indonesian mining market. However, that's going to be of temporary nature. When we hear and analyze the press and the news coming from over there, the government is already actively working on incentive programs. So there might be a positive upside towards probably more the end of the year, beginning of next year regarding the sales numbers in APAC. When we look into the adjusted EBIT, strong growth absolutely from EUR 26.4 million to EUR 34.4 million. That's increased by 30%. Margin reached 15.4%, very strong that's driven by the synergy ramp-up. As you know, the Hyva business has a higher share in Asia than compared to the other regions. So that means also the synergy potential is higher in the APAC region, and we are realizing that. But also, we are seeing a very high capacity utilization, especially in the Transport plants that we have in the region. And that also helped us to increase the margin from 13.7% to 15.7% in the second quarter. Again, there's a slight positive effect from that business model change. However, most of the increases of credits is in structured nature. The only, let's say, a little bit of a flip side that we see at the moment is India compared with the high growth there and compared with the -- and paired with the high-capacity utilization, we see higher supply chain costs there, which should be mainly of temporary nature, but it's driven by the business line. So that's the regions when we sum that up for the group. Yes, just to repeat, very strong growth. Second quarter and full half year quarter organic growth is 8.9%. We should say very strong in light of the current environment and the numbers that we see around us for an industrial company, I would say. The positive M&A effect is EUR 39 million, as Joachim just show. And excluding that, we see the strongest growth definitely in the business line Agriculture with 23%, Transport up by 4%, organic 6%. And even the business line Hydraulics is 6% organic growth, absolutely on the right path to contribute to our ambition strategy. When we look into the EBIT margin, EBIT went up 21% from EUR 72.8 million to EUR 87.9 million for the first half year. So that's 21% and also for the second quarter, it went up by 18%. So I think very successful. We have a certain seasonality in our business. The first quarter is normally the strongest for various reasons. We see the same pattern this year. And on top, I want to mention a small footnote here. When you look into the second quarter numbers last year, they are a little bit high in terms of the margin as the full Cranes sales from February to June last year has been deconsolidated in the second quarter last year. If you want to compare apples to apples, you probably would need to compare a 9.1% last year's second quarter to 10% this year's quarter. So that's a 90 basis point step up fully in line with our expectations, I would say. So very successful. And then let's go a little bit into some balance sheet and cash flow numbers. First here, the adjusted net income bridge that you know. So that EUR 88 million adjusted EBIT, we are just talking about starts with a EUR 32 million net income, then we had our taxes, finance results, coming up with a reported EBIT of EUR 63 million for the first half year. And then we do our adjustments, as you know, that's mainly predominately more than 70%. The PPA amortization, that's EUR 18 million, EUR 7 million exceptionals. So compared also to the first quarter, we see that further going down, ending up then with the EUR 88 million. And then when you adjust again for the -- deduct the finance results and the actual tax expense, you end up with that EUR 53 million adjusted net income, which is 80% higher than last year and turning into an adjusted EPS growth of 10% for the first half year, even with the higher number of shares calculating, I would say, also quite successful showing our value creation through that 6 months. Next page. Yes, one little detail regarding the exceptionals. You might remember when we announced the deal, we said for sure, we want to realize that synergies in a range of EUR 23 million to EUR 28 million on a full year basis. That comes with a certain amount of integration costs we estimated that those integration costs should be in the end between EUR 12 million and EUR 24 million. We have reached now EUR 18 million since we announced the deal. So pretty in line with that guidance, so to speak, in terms of integration costs. There's a little bit [ pieces to wrap up ] for the next 6 months here and there still, want to do some integration work. So it's probably more to the upper half of what we announced back then to align with what we disclosed, and also with a nice payback period of less than under a year. So that's some details. Let's go now to the capital efficiency and balance sheet figures. When we look into our ROCE development. So versus end of last year, further sequential step-up of 60 basis points, now reaching 16.3%. And I would say 16.3% after only 1.5 years after the biggest acquisitions of -- within our history, that is quite a nice showcase for efficient capital allocation. We are very proud of that number versus the end of half year 1 last year. That's a step-up of 3.5% points. Equity ratio, I mean, as you know, we did the capital increase end of February, driven by that and driven by the net income despite having paid out EUR 25 million dividends, shows an increase by almost 6% points up to rounded 27%. And together now with the net debt leverage of 1.81x, I think we are feeling now comfortable back in our strategic corridor to further execute our AMBITION 2030 strategy, which, as you know, is a combination of organic growth, which I think we demonstrated with that numbers here and are going to demonstrate further and potential M&A deals. I think we are now back in a situation where we can definitely further execute on this. As we promised, next page is cash flow figures. You might remember from the first quarter results that were a little bit burdened by the growth and then the driven working capital increases that slowed down, turning now into a significantly positive free cash flow in the second quarter. For the first half year, that means then almost EUR 60 million. Yes, that's definitely less than last year, but that's somehow the price for that strong organic growth. For the second half, I expect that this working capital build is going to be reversed at the growth rates, so to speak, are more on a stable basis that incremental working capital growth should then stop. So here, definitely tailwind for the second half. In terms of our CapEx spending, we are well underway. We gave a guidance of a maximum of 2.8% sales CapEx for 2026, with 2.2% for half year. I think we are well underway, giving us also a little bit of flexibility -- opportunities to further invest into automation and efficiency projects. I mentioned that in the one or the other location, we are already very close to capacity limitations, [Foreign Language] no problem at all. And net working capital ratio, we remain the same discipline now for the last, I would say, 2 years more or less and with 17.4% of sales, we showed an efficient working capital management for the second time, so to speak, in this year. There is definitely a payable growth if you look into the numbers, but that has for one reason to do with the business increase. And for the other reason is also that we are looking strategically at the moment in our safety stocks, right? I mean, we said this already in May. We don't believe that this Middle East conflict is over on short notice. I think that's now proven by the development and we have buffer for our business. I think that's it. And with that, I handover back to Joachim, for outlook and summary.

Yes. Thank you, Oliver. So let's look at what we expect from a market for the remainder of the year. For Europe, more or less, it continues to be a market that is bottoming out with a slight recovery. We expect for truck and trailer a slight growth from 0% to 5%. The same is true for agricultural tractors and for the Hydraulics business. The biggest change to the previous assumptions you see in Americas, a strong increase in the expectations for truck, a slight increase for trailers, truck mainly driven by the EPA 2027 pre-buy effect and also, quite honestly, by a pent-up demand because production rates have been far lower than the long-term average. So we believe that with the momentum we've seen in the last weeks, that we may even exceed the perspective that you see here for the Class 8 trucks in North America. As I mentioned, trailers, slight increase, tractors, more or less the same as we've seen in -- so far and also Hydraulics only a slight increase. For Asia Pacific, we expect the growth story to continue and the Chinese truck OEMs, they are growing their exports to the global South and we're benefiting from that with our market share that we have with these global OEMs. The demand in India has been growing and continues to grow, and we expect that to also continue throughout the year. And the same is true for tractors. And on Hydraulic, we see the market growing even stronger so that we believe that we can benefit with our Hydraulic products from that. How does that translate to the overall business? Based on the strong first half year and based on the market outlook, we feel very comfortable with the outlook that we've given and the guidance can be confirmed. So we expect to grow single digit in sales to grow mid- to high single-digit in adjusted EBIT, and with that, we will improve our EBIT margin above last year, where we've had the 9.5%. CapEx will be around 2.8% of sales, and our working capital will be in the range between 17.5% and 18.5% of sales. So what should you take away from this call? For the first half year, sales were up 12% to EUR 857 million and adjusted EBIT up 21% to EUR 88 million, with the margin improving 0.8 percentage points to 10.3%, well inside our strategic corridor of the 10% to 12%. The diversification that we have within the commercial vehicle industry is delivering organic growth around 9% organic growth in H1 in all regions and in all business lines, paired with market share gains also across all business lines. The rolling last 12 months figures confirm the profitable growth. Those 12 months figures are EUR 1,627 million in sales. So from last year, 1st of July until 30th of June of this year. Adjusted EBIT at EUR 160 million and an adjusted EBIT margin of 9.8%. So we see the rolling LTM numbers grow quite nicely. Capital efficiency is high ROCE up 3.5 percentage points to 16.3%, showcasing an effective capital allocation. Free cash flow up EUR 17 million, closing the gap to prior year. And despite the fact that we allowed a working capital increase in order to grow -- to allow the growth in sales and also to protect our supply chains to a certain degree. And as Oliver mentioned, we should have a little bit of support here in the second half year, with the ability to release some of that working capital. With that, our synergies are supporting our growth and our profitability, and we are very comfortable with our outlook for 2026 and can confirm that. So thank you very much, and we're now looking forward to your questions.

[Operator Instructions] And the first question comes from Nicolai Kempf from Deutsche Bank.

And let me start by saying congrats to a strong quarter. A couple of questions from my side, and I can take them one by one. Let's start with the U.S. And given the strong Class 8 orders you saw over the last months, we also share your view that H2 will be much stronger. I'm just not sure how much is related to the market based on higher freight rates? And how much is driven by the EPA '27 kind of pre-buy effect? And the reason I'm asking is if it's driven by the freight rates, it would maybe point to an underlying improvement. If it's driven by the EPA pre-buy effect, then there could be kind of not a big cliff, but it could be a slowdown again in '27. Start here.

Yes, Nicolai, thanks for the question. That's a million-dollar question, obviously. But I think we have both. We have -- and that's why I mentioned the pent-up demand. I believe that we have the pent-up demand in North America because build rates, especially of Class 8 tractors have been quite a lot lower than the average. The vehicles are used and the new vehicles give you a benefit in fuel consumption. Some of them will actually be electric in the future also that will be a driver. So I think we have a combination of both. And I now believe more in pent-up demand that will continue in 2027 than I did maybe 3 months ago. So yes, there is a certain EPA 2027, but that's not the only driver. One, because the regulation is not as strict as it used to be. Some of the OEMs will actually continue with the existing engines. PACCAR just announced that they will continue with the existing engines until 2027. So not all of that is EPA-driven. It is a base demand that is increasing due to the pent-up demand that has been generated.

Okay. Understood. Then moving to Europe. Yes, you mentioned a bit of pressure with higher freight rates, high input costs. I assume you will raise prices to offset these?

Yes. We typically have that effect when freight rates and energy cost goes up. In the aftermarket, we can relatively quickly adjust the prices. If we believe that it's a consistent price increase, then we will do that relatively quickly. In the OEM contracts, we have trailing price elements with the OEMs that we have agreed. So that means the pricing will be adjusted after 3 months, 6 months, partially after 12 months, but we've recalculated or we've agreed that 12 months will go to 6 months. So we had a few OEMs where we had the 12 months adjustments, but we're now with all OEMs to 3 or 6 months adjustments. So that means it can take until it's in the calculation and until it's then being paid more than 6 months until you see that effect. And therefore, the answer is, yes, it will be driven into the prices, but we will have this delay that we typically have. And you probably remember when costs went down, we had a positive effect because we benefit from the higher prices, even though we are experiencing the lower cost already. Now we're having to a certain degree to assume those higher prices until -- the higher cost until we can forward it to the higher prices.

Makes sense. Okay. And last one, a bit of housekeeping. I did notice that you tax rate was elevated in H1 at 40%, 34%. Is that the full year run rate? Or should we expect a lower run rate for the income tax rate for the full year?

To be honest, difficult to assess from my point of view, our tax rate based on report. I'm assuming you are linking that to reported net income. I would recommend that you give Romy a call afterwards. From my point of view, there is all these PPA adjustments that you have seen in the net income bridge as an example, which were I think it was 17 or whatever for the first half year. These are not tax deductions. So at least you should add those 17, right, and ending up probably with 50 or so. And if you then do your math, I think you come to a much better ratio, which is relatively typical for corporate between 25% and 30%. To a certain extent, you are right. We are seeing higher tax rates in China at the moment, and that's a structural impact that's going to continue.

And the next question comes from Yasmin Steilen from Berenberg.

I have also three, if I may, and we'll also take them one by one. So the first on your guidance. I'm fully aware of the historic seasonality with Q1 -- H1 being stronger than the second half. However, even adjusting for the divestments of the Tipper business, your sales guidance, at least at the lower end, looks or implies for H2 significant deterioration of the 9% organic growth rates we have seen in H1. Could you walk us through the assumptions also as you became more optimistic on your industry outlook for trailer in Americas, but also for Hydraulics in Americas and APAC? That would be very helpful.

Yes. I'll try to start and then I'll hand it over to Oliver, if he can -- I'll have to see he focuses on that. Now as I mentioned, we are very comfortable with the guidance at this point in time. But if you look at the last 12 months figures, you see that we had 6% of sales growth in the last 12 months. And we will compare to a second quarter of -- or to a third quarter and the fourth quarter of last year that have been structurally better than the first 2 quarters. So we will not see the same growth. Of course, you're right, we expect that organic growth to be consistent and to also flow through. So with that, looking at the last 12 months numbers and the outlook, we're certainly at the upper end and quite comfortable with the guidance we have at this point in time. But we would like to reassess the situation once we have all the call-offs for North America. We get the call-offs updated typically after the vacation period. And some of the announcements that we have from our customers that we've seen in the press, they have not yet translated into the EDI call-offs that we have. So we'd like to see those and then reassess if we are still in the guidance or not.

And just let me add with some numbers, right? For sure, we are not talking about the lower end of the guidance, but let's talk about the typical seasonality and the midpoint of the guidance. If you just do that seasonality math, you would -- and just for the sake of disclaimer, just do the math had nothing to do with our guidance. You would end up with EUR 645 million or so I just did this morning. And when you then exclude, I don't know, EUR 8 million or EUR 10 million from the potential sale of the Tipper business if that closes end of September or beginning of October, you end up with EUR 1,635 million or something. When you compare -- when you compare that with the consensus, I think we are fully comfortable with that. And that basically is the basis for us at the moment to say we are fine with the consensus. But for us, that shows from a current point of view, fair assumption of the outlook, which is probably in the mid of -- a little bit up of the midpoint of our guidance. And as Joachim said, we will reassess that around the [indiscernible].