Earnings call transcript: Andritz Q2 2025 sees strong order intake, shares dip

Andritz AG reported its second-quarter 2025 earnings on July 31, revealing a robust order intake but a decline in revenue compared to the previous year. The company’s stock fell by 4.65% in pre-market trading following the announcement. Despite a 26% year-over-year increase in order intake to 2.4 billion euros, revenue dropped by 8% to 1.9 billion euros. The earnings per share (EPS) forecast was not met, contributing to the negative market reaction. According to InvestingPro, Andritz has maintained dividend payments for 24 consecutive years and holds more cash than debt on its balance sheet, demonstrating long-term financial stability despite short-term fluctuations.

Key Takeaways

• Order intake rose by 26% year-over-year, reaching 2.4 billion euros.
• Revenue fell by 8% to 1.9 billion euros, missing expectations.
• The stock price declined by 4.65% in pre-market trading.
• Four major acquisitions were completed in the first half of 2025.
• Service revenue increased to 44% of total revenue.

Company Performance

Andritz AG’s performance in the second quarter of 2025 was mixed, with a significant increase in order intake but a decrease in revenue. The company’s diversified business model across four sectors and its focus on service and digitalization have been key drivers of resilience. However, the decline in revenue and net income margin, which fell to 4.5%, highlight challenges in the current market environment.

Financial Highlights

• Revenue: 1.9 billion euros, down 8% year-over-year
• Order Intake: 2.4 billion euros, up 26% year-over-year
• Comparable EBITA Margin: 8.4%, up 0.1% year-over-year
• Net Income Margin: 4.5%, down 0.9% year-over-year
• Free Cash Flow: 70 million euros

Market Reaction

Following the earnings release, Andritz’s stock price fell by 4.65% in pre-market trading. This decline reflects investor concerns about the revenue shortfall and its potential impact on future profitability. The stock’s performance is notable given its proximity to the 52-week high of 67.8 euros, suggesting a cautious outlook from investors. InvestingPro data indicates that Andritz generally trades with low price volatility, making today’s movement particularly significant. For detailed analysis of Andritz’s valuation and future potential, access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.

Outlook & Guidance

Looking ahead, Andritz has set ambitious targets for 2027, aiming for revenue between 9 and 10 billion euros and a profitability target of over 9%. The company expects the book-to-bill ratio to remain above 1 and anticipates revenue growth in the second half of 2025, despite potential revenue impacts from a strengthening euro.

Executive Commentary

Dr. Joachim Schoenbeck, CEO, emphasized the strong project pipelines in all business areas, stating, "Hydropower, for sure, is the highlight. We are in the beginning of a significant upturn of the entire market." CFO Vanessa Helving added, "Our long-term performance demonstrates consistent, profitable growth across cycles."

Risks and Challenges

• Revenue decline: Continued revenue drops could impact profitability.
• Currency fluctuations: A stronger euro may affect revenue.
• Market dynamics: Cautious investment decisions in the Environment and Energy market.
• Supply chain complexities: Potential disruptions could affect operations.
• Competition: Maintaining a competitive edge in a diversified market.

Q&A

During the earnings call, analysts focused on order intake expectations, margin guidance, and the dynamics of the Pulp and Paper market. Questions were also raised about Andritz’s M&A strategy and the growth potential of its service business.

Full transcript - Andritz AG (ANDR) Q2 2025:

Matthias Feifenberger, Moderator/Host: Welcome to our Q2 earnings call from Graz. I would like to present your hosts today. With me are our CEO, Doctor. Joachim Schoenbeck and our CFO, Vanessa Helving. We will start the call with the key highlights followed by the financial performance review and then go into an update on the business areas followed by the outlook and 2027 targets.

We will then conduct the Q and A. Please make sure you register with your full name for the Q and A. In the end of the presentation, I would point you at the disclaimer. Please read it carefully. And now I’d like to, pass over to Joachim.

Dr. Joachim Schoenbeck, CEO, ANDRES: My dear, thank you very much. Good morning to everybody. Thank you for attending our call, spending the time with us and jumping right into the details. We are very pleased that we can report another very strong quarter in order intake. We had extremely high order intake in Q2 and also first half of this year.

We did not see any significant impact of the tariffs. Growth was mainly driven by our business areas, metals and hydropower. We had, I would say, a very satisfactory level in Pulp and Paper, and we had a decline in Environment and Energy. The book to bill was again above one for the third consecutive quarter. We saw a decrease in revenue though that results from the low order intake we recorded last year.

And we had a moderately negative FX impact due to the strengthening of the euro against major currencies we have in our portfolio. We have a stable comparable EBITA margin that’s based on a very solid improved order execution and selectively also better pricing. We could increase the service share increasing in a year to year basis. If you look to the numbers themselves, order intake for the second quarter was at EUR 2,400,000,000.0, revenue 1.9, euros order intake was up 26%. And as revenue declined, the order backlog also rose by 7% to €10,400,000,000 So a very solid backlog to generate the revenue to come.

EBITA margin comparable was at 8.4% compared with 8.3% in Q2 twenty twenty four. The reported EBITA margin though dropped to 7.8% down from 8.6%, and that was mainly driven by severance expenses for restructuring needs. The net income margin is at 4.5%, down from sorry, 5.4%, down from five point seven percent €102,000,000 A quick look to the first half financials. Order intake, very strong at €4,700,000,000 up 23% compared to the previous year. Revenue, as I said, for the second quarter down by 8% to €3,700,000,000 Backlog is the same and EBITA margin at 8.3% compared to the 8.4 and the reported margin a bit down due to the restructuring costs that we had.

We could see a very good and continuously increasing project activity. It’s reflected in the momentum in the order intake that we see. And we are very happy that apparently we have the right offerings for our customers in these challenging times and are happy that they are staying with us with a lot of confidence and trust to our solutions. If we have a closer look to order intake in the first half and in the second quarter, we can see in the total second quarter up by 26%. That’s mainly driven by hydropower

Hydropower jumped by 173% from €284,000,000 to €777,000,000 Metal has jumped by €200,000,000 from €321 to $527,000,000 So that’s really good. Pulp and paper decreased slightly against the Q2, but we have but we see a strong growth in the first half of the year. And it’s basically only environment and energy where the markets are extremely cautious at the moment to place orders. Project pipeline is quite good, but decisions are awaiting. However, what we could see in environment and energy is a good growth in feed and engineering studies, especially for the for our new products like carbon capture and green hydrogen.

The revenue, as I already mentioned, decreased in the second quarter and in the first half. We would see an increase compared to these figures for the second half of the year. But the low order intake that we had in 2024 drove this decline, especially in pulp and paper and in metals. In both areas, we had necessary capacity reductions have been started. And I would say to a majority already implemented, Hydropower gets a strong momentum, is increasing revenue and executing their large backlog.

And we could see in hydropower a very nice growth in the service business. Environment and energy, we have the revenues at an all time high and a very solid growth in the service revenue. The backlog is again solidly up at €10,400,000,000 As usually, two third of that is driven by pulp and paper and hydropower. And you can we expect about twothree to be executed in the next twelve months. EBITDA development.

We have a stable comparable EBITDA margin, and we have a we are falling on the EBITDA along with the decrease in revenue. On the reported EBITDA margin, we are dropping from 8.4% to 7.9%, and that’s mainly driven by the one offs due to the capacity reductions in Pulp and Paper and in Metals. On our ESG program, we are I would say we are well on track. The majority of the targets for the 2025 have already been reached. It’s the share of sustainable solutions and products where we are lagging behind and the share of women in the workforce where we are below the target.

Everything else, we have reached the targets already and are preparing for new ones, which will be communicated within the next couple of months. We had a very good run on our acquisition strategy in the first half of this year. We completed four major acquisitions, very important, very perfect complementary fit to our product offerings in our various areas. The LDX, we already reported in Q1 that was closed in February. Then we acquired Acheli Paper, a specialist for paper and tissue machine, especially in the winder and rewinder business, filling a product gap that we had in our portfolio.

They have locations. They’re based in Italy but have a strong location also in China. Revenue is approximately DKK70 million. We are strengthening our customer service for the energy business, for boiler cleaning equipment, Diamond Power, more than one hundred and twenty years of experience to clean boilers. We are working together with Diamond Power for many years, so we know them.

And I would say it’s a perfect fit to our product offerings. And it is, I would say, a significant step forward to serve the customers for the outages out of one hand. We received good feedback from the market for this acquisition. Same applies for acquisition of Saleco Group. It’s a small Italian machine maker for finishing equipment for strip and plate, exactly located in between our metals processing and metals forming part because they are providing the equipment to further to further partition the strips and the plates for the as the incoming products for the press lines in our Schuller business.

So that’s makes makes a lot of sense to to close that gap. Revenue is approximately €100,000,000 and very complementary to our current business. Service is steadily increasing. The revenue is increasing to an all time high of 44%. So we are continuing on that track.

With the acquisitions we made, we will strengthen that further. So that’s, I would say, that is on the right track. And with that, I would like to pass on to Vanessa to give us some more details on the financial performance.

Vanessa Helving, CFO, ANDRES: Thank you, Joachim. Yes, hello, and good morning to everybody listening. Before I go into the financial details of Q2, let me take a moment to reiterate the cornerstones of our strategy of long term profitable growth and also illustrate how focused diversification and risk conscious expansion have made all that possible. This chart is a twenty five years performance snapshot that does not only show the absolute growth with 400 basis points margin expansion, it also shows that 100 basis is growing well across the cycles, with, in fact, only a few down years with rather moderate revenue declines and quite a low margin variance from peak to trough. This resilience is achieved by various factors, which mainly are the following: We are exposed to different sectors with generally faced economic cycles.

We have increased our Service business to 44% share of revenue with good margins. Our long term track record with bolt on M and A contributes to growth and value generation. Our asset light business model supports flexibility. We benefit from synergies across the four business areas with limited dependencies. Our internal focus is on cost consciousness, flexible cost base, improved project execution and detailed risk management.

We manage our global supply chain effectively with local for local and multi source strategies and also have manufacturing cooperations. Furthermore, we focus on digitalization, reduction of structural complexity and we are also implementing global shared services. So your key takeaway from this slide should be: ANDRES long term performance demonstrates that we have delivered consistent, profitable growth across cycles through the right mix of sector exposure, a resilient operating model and disciplined execution, resulting in both margin expansion and long term value creation. Let me now walk you through the key components of our EBITDA to net income bridge for the 2025. Our EBITDA margin remained stable at 10.3% despite higher nonoperational items, while absolute EBITDA decreased to EUR $374,000,000 due to the temporary decrease in revenue that we are undergoing in the first half of this year.

Depreciation was slightly lower at 86,000,000 due to asset devaluation in the metals restructuring in the first half last year. This results in a reported EBITA of $289,000,000. And the purchase price allocation from recent M and A, mainly LDX Solution, lifts the IFRS three amortization to EUR 31,000,000. The financial result improved from minus EUR 8,600,000.0 in the first half twenty twenty four to minus EUR 500,000.0 in the first half twenty twenty five due to the deconsolidation of Otorio last year and the recent fair valuation of Amis shares. The tax rate remained flat at 25.5%, leading to a lower absolute tax charge.

Summing up, the net income for the first half twenty twenty five at €192,000,000 is actually reflecting the temporary revenue softness and elevated nonoperating items. Just as a reminder, Anrits has recently sold its stake in Notorio to Amis. That was a leading supplier of cyber exposure management and security. So UNREDS received a consideration in ARMS equity that generated the fair value gain that I just mentioned and fosters thereby a cooperation that will strengthen UNREDS digital solution offering in cybersecurity. Turning to cash flow.

Let me outline the key movements from EBITDA to free cash flow in the first half twenty twenty five. We start with EBITDA at EUR $374,000,000. While outflow from net working capital increased from minus EUR 31,000,000 in the first half twenty twenty four to minus EUR 114,000,000 in the first half twenty twenty five due to bonus payments to our employees but also due to higher inventories basically supporting our service activities. Also, we had lower trade payables and prepayments resulting from missing large scale projects. Cash outflows from income taxes were basically on the same level as last year.

The net interest received decreased from EUR 18,000,000 in the first half twenty twenty four to EUR 8,000,000 in the first half twenty twenty five due to lower interest rates and reduced net liquidity. Changes in provisions and other are nearly at the same level as last year and mostly comprise outflows from provisions. Summing up these items brings us to a cash flow from operating activities of 169,000,000 for the first six months, mainly driven by lower revenue and working capital outflows. Then deducting the CapEx at a similar level as last year with EUR 98,000,000, we arrive at a free cash flow of EUR 70,000,000. As Joachim mentioned, our M and A delivery exceeded last year’s level with four deals signed in the first half twenty twenty five.

LDX was closed in Q1 and the other three were signed in Q2 and will trigger further cash outflow in the 2025 after closing of the deals. So M and A spend thereby increased to €99,000,000 in the 2025 compared to €58,000,000 last year. To summarize here, the working capital build was the single biggest drag on operating cash, but it is set to unwind as service and project revenues convert. Our core CapEx discipline is preserved while keeping the free cash flow positive despite the volume dip. And continued bolt on M and A supports strategic priorities.

The corresponding purchase price payment will, of course, impact the cash flow of the second half of this year, but balance sheet capacity remains ample. I would now like to turn your attention to our operating cash flow generation. Operating cash flow amounted to 96,000,000 in the second quarter twenty twenty five million and EUR 169,000,000 for half year. Following a decline in Q1, Q2 actually showed already an improvement in the operating cash flow year on year. In general, we’re still seeing the usual volatility in operating cash flows on a quarterly basis, which is typical in the project business and driven by an actual processing of large and midsized orders.

So whereas to emphasize here that the overall high level, we are maintaining an operating cash flow compared to the history. That becomes evident if we look at right side of the chart at the annual three years rolling average. Three years rolling actually reflects the average execution cycle of our capital business. Let me turn from cash generation now to liquidity and walk you through the changes in our net liquidity profile. Over the last three years, we steadily decreased our liquid funds by termination of bonds while maintaining a stable net liquidity, as you can see here.

In 2025, our net liquidity, together with the liquid funds, further decreased from EUR $9.00 5,000,000 by 2024 to EUR $516,000,000 by the June ’25. Hence, the total change in net liquidity in the 2025 amounted to minus EUR $389,000,000. This decrease in net liquidity in the first half of the year is actually not unusual and results mainly from payment of the dividend typically conducted in the second quarter. Based on a lower operating cash flow of $969,000,000, as explained before. The dividend payout amounts to total outflow of EUR $254,000,000.

Furthermore, and now I’m repeating here, our liquidity was spent for usual CapEx in the amount of €98,000,000 and our enhanced M and A delivery, which led to an increase in M and A spend to €99,000,000 in the 2025. As shown before, also working capital needed funding in the usual amplitude of our business. Despite what we call enhanced capital allocation, which I will address later, ANDRIDZ continues to hold a strong financial position with sufficient liquidity as part of ANDRIDZ DNA. Not included in this picture here is our undrawn revolving credit facility of EUR 500,000,000 provided by our core banks, which implies further headroom for ongoing M and A. With this slide here, we provide further transparency on net working capital.

While our total net working capital remains part of our financial disclosure, we decided to increase granularity on changing the working capital by presenting now also the operating net working capital. The quarterly development of the operating net working capital is shown here. As you can see, we are still pretty lean overall with current run rates of some 12% of sales. As a project engineering company, our operating net working capital consists of the typical trade working capital, means inventory, receivables and payables as well as contract asset and liabilities with prepayments. What you can see here at the operating net working capital that we increased somewhat following the period in 2022 where we received large several actually, several large projects and therefore, large prepayments.

Following the increase throughout last year, the operating net working capital has been slightly reduced in Q2 twenty five after the all time high in Q1. In absolute terms, but also in percentage of sales, the decrease from Q1 to Q2 is visible. So and to even enhance transparency further, we have split the operating net working capital into its two components: trade working capital, that’s the upper blue part in this chart and contract assets and liabilities and advanced payments. Those are reflected in the gray at the bottom of this chart. It’s a typical management element for us as a project engineering company and it is used to set and control targets for project execution.

The trade working capital remains relatively stable at about 16% of revenues on a long term average and our net contract liabilities and prepayments typically fluctuate between 3% to 10% of revenues, depending on where we stand in the execution of our several thousands of projects. This fluctuation is especially driven by large projects where we typically receive significant down payments, as you might know. On the prepayment side, we have seen a sequential improvement over the last few quarters, along with our increased order intake. The orange line in the middle of the chart shows the two items combined, again, resulting in operating net working capital, as shown on the previous slide. This has recently improved slightly to 12% of revenues, normalized on a twelve month basis and generally shows a stable development between 713% of sales.

So I hope you appreciate the improved financial disclosure, which makes the drivers behind our working capital development more tangible for you. Some further background with regards to our liquidity decrease. You know we paid the dividend of 2.6 per share for the business year 2024 in April, totaling to €254,000,000 The payout ratio was 51.8%. And at UNREDS, we aim for a gradual and sustainable increase in dividend payments. This commitment is reflected in our track record.

We have raised the dividend for the last five years and a target payout of more than 50% of net income. So being committed to generally enhance our financial disclosure, here is another slide providing better insights into the capital allocation and explaining our liquidity development. Since 2020, we have progressively increased our capital allocation to support strategic growth and value creation from, as you can see, $238,000,000 to EUR $679,000,000. Next to increasing CapEx spend, you can see continuous strong spending on M and A, which represents a cornerstone of our strategy of long term profitable growth. As just mentioned, we have also significantly increased dividend payments in the last five years.

And in addition, share buybacks are a flexible tool with our capital allocation framework. As you can see in the pie chart on the right side, in the period of 2018 to 2024, we have achieved a quite balanced capital allocation mix with roughly one third each devoted to CapEx, M and A and dividends. 34% CapEx, 31% M and A, 29% of dividends and 5% share buyback. So important to mention here as well is that operating cash flow has covered, as you can see, 95% of our capital allocation in this period of the past seven years on average. Following these details on our capital allocation, let me briefly also show you how effectively we are putting that capital to work and how profitable our operations truly are.

ROIC is our main metric quantifying value generation over the long run. It has been increasing since 2020 and stands at a substantial margin above our cost of capital. Above 20% is actually an industry leading level. Return on invested capital is calculated on a post tax basis, so fully comparable with WACC. And as it includes the goodwill and intangibles, it also gives a good picture of how value generative our CapEx and M and A initiatives are.

ROIC slightly declined in the first half of compared to year end twenty four, driven by the decrease in EBITDA. However, at 20.7%, our ROIC is still significantly above our WACC at 7.9%. This clearly outlines the substantial value we generate at ANDRES. So with this, I’m coming to the end of the part of my presentation. Let me just also quickly summarize the drivers behind the key financials.

Our leading indicators are positive. Order intake significantly increased by plus 26% in Q2 and plus 23% year to date and a book to bill ratio of 1.3 for the first half compared to less than one from last year. The high order backlog already secures a material part of next year’s revenue. The margin development in order intake is positive and strict project management is improving the execution. Lagging indicators on the other hand are rather negative but not surprising.

Revenue declined by 8% coming from a high comparable sales basis and low order intake of the last year. Along with lower revenue and restructuring impact from capacity adjustments in Pulp and Paper and Metals, our profit decreased by double digits. This has the effect that several non P and L indicators are behind last year as well, all impacted by lower revenue and thereby absolute returns like cash flow, net working capital and ROIC, as just explained. The operating net working capital remains in high focus going forward. Again, to outline, lower order intake from 2024 is now materializing in sales figures, No surprise and no concern.

Our enhanced capital allocation and higher M and A delivery is supporting value creation and has reduced our net liquidity position. Last but not least, the numbers of our employees is steady and overall the group level, but with variances, of course, across the business areas. FX has been a headwind in the first half, but tariffs have still not impacted our operations, and we will provide further details on that later in the presentation. For now, I would like to thank you for your kind attention and handing the word back to Joachim who will present the developments of the business areas.

Dr. Joachim Schoenbeck, CEO, ANDRES: Vanessa, thank you very much for the detailed insights. Let’s turn quickly to the business areas starting with Pulp and Paper. I see we can see good development in the market driven by large pulp mill orders and as well as single line orders. Majority of the investments are in The U. S.

And in Asia, not so much in Europe and in South America at the moment, but project activities are going on there as well. It’s very good that it’s not only the pulp, but also the paper business that could grow compared to the previous year, which is a good sign for the months to come. The revenue declined. That’s, as I said, that is driven by the low order intake we had last year. Capacity reductions in Pulp and Paper, I would say, have been basically completed, and we are we have set our cost base adjusted to the new to the volumes that we see.

The profitability could be, on a comparable basis, increased. We had a we improved project management a lot and could also lift the service share. In the metals area, we could see a strong growth in order intake, And that’s again driven by The U. S. Business and China business.

And also the metals forming, the Schuler business in China is continues to grow exceptionally. The decline in revenue is driven by the low order intake last year. Also here, the capacity reductions have been implemented. The processes that’s the majority of the capacity reductions are in Germany. It takes a bit longer to have all negotiations done with the unions, but it’s on the way.

And we can see everything will be implemented by Q4 this year. On a comparable basis, the EBITDA remains stable. And the service share has increased a bit even though it can still it is still compared with other UNRWIS businesses at a rather lower level. Hydropower, for sure, is the highlight. And I can tell you this is not a onetime event.

We see a structure. We are in the beginning of, I would say, significant upturn of the entire market. That is what the project discussions and the plans that our customers reveal show. So we will see a very good market in years to come. Increase in Q2 by 173% on the order intake.

The revenue grew by 11, and we already discussed it last year when we when basically the order intake started to pick up in Hydro. The execution time in Hydro are even longer than we have it, for example, in pulp and paper or metals. So we often talk two to five years. So the revenue grows a bit slower, but it grows continuously. The good market condition also allowed us to moderately increase the prices.

And with the phasing out of the old projects, we are, first of all, seeing improvement on profitability here already in the Q2, and we also see that this trend will continue. Environment and Energy. Here, we see a decline in the order intake. We had, I would say, several special effects in markets where decisions have not been taken. And in this area, we also depend a bit on our on the new developments.

We have made the green hydrogen development Power2X, but also carbon capture. Here, we had a good growth in the engineering studies, FEED studies for these areas. But final investment decisions have not been taken in the first half of this year, and this is why order intake remains low. Revenue is on a record high, SEK $7.00 3,000,000, and the service in environment energy is growing very nicely. Where we have quite a good development is in clean air technology, and that’s especially in Europe, but also in China, a lot of pollution control, flue glass cleaning systems are looked after and our apparently our offerings are the right ones.

So if we target our look to the future, I would say on the trade, we do not see any change from what we told you three months ago. So basically, we have not seen a direct impact. Of course, we have seen some indirect, but nothing so much material. The strengthening of the euro, which started already beginning of the year, but which accelerated from April onwards was hitting our revenue and will most probably further hit our revenue development for the second half of the year because we do not see from the experts that the euro will weaken over the second half. So we see that trend continue.

And you see it’s for us, it’s not only the U. S. Dollar, it’s the Brazilian real, it’s the Mexican peso, but it’s also the Canadian dollar. Again, against these currencies, the euro has strengthened. So we are we it’s not a concern.

We are protected there. But of course, we cannot impact that and the revenue will move accordingly. This is why we see that the revenue will drop, and we will be in the guidance more on the lower end of the of our revenue guidance compared to what we told you last time. The midterm targets on revenue and profitability will be are confirmed, euros 9,000,000,000 to €10,000,000,000 for 2027 and more than 9%. I would say that’s all the targets for the business areas remain the same.

I don’t need to repeat it. That’s more added for sake of completeness to make it easier for you and not to dig out your old presentations. Thank you very much for attending, and I pass over to Matthias to further guide us through the Q and A.

Matthias Feifenberger, Moderator/Host: Thank you, Joachim and Vanessa, and we can now start the Q and A session.

Operator: Anyone who wishes to ask a question may press star and one on their telephone. If you’re listening from the webinar, you may click the Q and A button on the left side of your screen and click the raise your hand button. If you wish to remove yourself from the question queue, The first question comes from Akash Gupta, JPMorgan. Please go ahead.

Akash Gupta, Analyst, JPMorgan: Yes. Hi. Good morning, everyone, and thanks for your time. I got two to start with. The first one is on order intake.

We had another strong quarter for orders in Q2. And I’m wondering if you can talk about pipeline at a group level and your expectations for second half, particularly on book to bill when we will see some uptick in revenues. So maybe as your comments on book to bill expectations for second half to start with.

Dr. Joachim Schoenbeck, CEO, ANDRES: So we see strong project pipelines in all business areas. So we believe that the markets will remain intact. The demand is there. We also see that a lot of the hesitation that came in beginning of Q2 with the tariff discussion now calmed down because people better people better understand what it means precisely for their business, how many exemptions are from tariffs, and that not everything is written in the newspaper is is really becoming material. So we despite the increasing revenue, we would not expect that book to bill would drop below one.

Is that did this answer your question?

Akash Gupta, Analyst, JPMorgan: I mean, yes, it does. But maybe I was wondering if you can provide a bit more color at high level that where this because you said earlier in your prepared remarks that you expect strong hydro, but just any color outside of hydro in terms of expectations for the second half in order intake?

Dr. Joachim Schoenbeck, CEO, ANDRES: Yes. I would say from as I said, good project pipeline is supported by all business areas. But for sure, I would say, from a market point of view is the strongest, yes.

Akash Gupta, Analyst, JPMorgan: Thank you. And my second question was on your margin guidance. So, I completely get it that due to exchange rates, you are now seeing lower end of the revenue outlook. But when it comes to margin, I think you’re also indicating lower end of margin guidance, which would imply full year margins could be down about 30 basis points, while we are up 10 basis points in the first half. So maybe for Vanessa, like if you can elaborate what is driving this, how much of this is exchange rates and how much of this is maybe some of these cost saving measures coming with some delay or maybe anything on execution which is driving this weakness in second half margin?

Thank you.

Vanessa Helving, CFO, ANDRES: Well, I mean, first of all, as you could see, the margin are stable even though with the lower revenues that we have currently seen. And we see that for the total year, of course, also FX will slightly impact the margin as such. But as mentioned, we have a very good development in Hydro business. So also the mix might impact. As you know, we have a lower margin in general in Hydro than in the other areas.

And this mix, of course, is affecting the margin slightly also for this year already.

Akash Gupta, Analyst, JPMorgan: So just to clarify, this lower indication is mostly due to mix outside of exchange rates. Nothing unusual that you have seen in other businesses.

Dr. Joachim Schoenbeck, CEO, ANDRES: But Akash, I think we are not on the margin side, we have not decreased in the we have increased from 8.2% to 8.3% on a comparable EBITA margin. That is our guidance. And so we did not decline in the first half, and we do not expect that for the second.

Akash Gupta, Analyst, JPMorgan: Sorry. My question was for the full year because you’re indicating full year margins towards the bottom end, which would be around 8.6% and last year you did 8.9% and H1 was up 10 basis points. So I was trying to get to why you are indicating second half margins to be down year on year?

Dr. Joachim Schoenbeck, CEO, ANDRES: Okay.

Akash Gupta, Analyst, JPMorgan: Thank you.

Dr. Joachim Schoenbeck, CEO, ANDRES: Thank you.

Operator: The next question comes from Please go ahead. Line is open, Mr. Klef.

Lars Klef, Analyst: Yes, thank you very much. Good morning. Thanks for taking my question. A quick one regarding Pulp and Paper. I mean, we saw this decline 10% year on year in Q2.

I know, yes, this order intake tends to be volatile from time to time. And looking at the first quarter, I was hopeful that we would see an improvement now. Any view on you said the pipeline is good for all divisions. That also affects Pulp and Paper, I assume. So you’re expecting Pulp and Paper to also positively contribute to order intake going forward?

Dr. Joachim Schoenbeck, CEO, ANDRES: Yes. I can confirm that.

Lars Klef, Analyst: Okay, perfect. And then secondly, I’m scratching my head a bit looking at the flat development of your contract assets while we saw this revenue or seeing this revenue decrease. And if my math is correct, the ratio even is at an all time high currently, which normally is not a good sign. Anyhow, giving you the benefit of the doubt, does that imply for us that we should expect a very strong revenue and profitability generation in the second half? That would also be helpful for your free cash flow, I would say, because your H1 free cash flow comparing it to the Bloomberg consensus figure so far only is a fraction.

So I guess a lot more needs to come now. Thank you.

Vanessa Helving, CFO, ANDRES: I take this question, Lars. Thank you for this. I mean, we have we just talked about the guidance for the revenue. So this is, of course, also affecting our contract assets as such and the net working capital overall. I mean you can do the math on your own, but of course, we also go for further business and hope that we continue with the good order intake coming from the pipeline that we see.

So cannot promise anything. We firstly do business, but of course, we also convert into revenue as it goes through the year.

Lars Klef, Analyst: I guess the contract assets are not necessarily related to the upcoming order intake. It’s rather the business you’re doing currently.

Vanessa Helving, CFO, ANDRES: Yes. Of course. But if we have the order intake, it will revert into contract assets sooner or later. And since we see that we have rather midsized orders instead of large orders, this happens sooner than later currently. So that’s also because of the mix.

So with the large orders, of course, we had some tailwind on this in the past. And since we see since last year, we are more going into midsized or smaller orders, this has an impact also on the part of the net working capital, the development. We also have to say, I mean, we have like, as you might know, 60% only POC orders.

Lars Klef, Analyst: The

Operator: next question comes from Daniel Lyon, Astro Group.

Daniel Lyon, Analyst, Astro Group: Hi, good morning. You mentioned that, of course, demand and pipeline look good. But obviously, especially in environmental energy, there’s uncertainty on the markets, potentially also for large investment decisions, so larger projects might be impacted. Do you think that this is already changing now with a sort of tariff deal in place with U. S.

And EU and Japan? And or would we need to see more of more tariff deals happening, especially with China as well, in order to have a more settled situation with better visibility? Or what do you see as a driver for investment decisions to be again taken instead of pushed out?

Dr. Joachim Schoenbeck, CEO, ANDRES: Yeah. We see that the the deals that have been reached take out the the momentum of uncertainty, which usually is the worst for an investment decision. Now that the deals are in place, investments can be made more more clearly, and and I believe that is really supporting. And, I mean, we also have to have to make sure US is a very important economy, but many of the projects we are delivering, US only takes a part of the share. And we we can see that that the trade within the rest of the world is not so much affected by the tariffs.

So the uncertainty is out, and we believe that this will drive decision making again to a good level in Q3 and Q4.

Daniel Lyon, Analyst, Astro Group: Okay. And then you mentioned that capacity adjustments should be finalized towards the end of the year in Q4. I think this is true both in for Metals and Pulp and Paper. So would you expect to see a reported margin pickup then already in Q4 or rather starting in Q1? Maybe also tied with this question, when would you see maybe also, yes, based on the order intake and order book level, when would you see the turnaround in revenues on a quarterly basis?

This year or next year as well?

Dr. Joachim Schoenbeck, CEO, ANDRES: So the we expect we already see that the cost base in Pulp and Paper where we had the reductions already implemented, we can see in the already in the third quarter. Maybe in Metals, we will start to see that in the fourth quarter. And full year effect for both will be next year. And guidance on revenue on a quarterly base, we cannot provide that. We are not prepared for that.

Daniel Lyon, Analyst, Astro Group: Okay. Maybe can I ask a last question? How would you see the M and A the announced M and As to to add to profitability going forward? Overall, are these margin accretive?

Dr. Joachim Schoenbeck, CEO, ANDRES: They are. That’s

Daniel Lyon, Analyst, Astro Group: Perfect. You.

Operator: The next question comes from Elias Niew, Kepler Cheuvreux. Please go ahead.

Elias Niew, Analyst, Kepler Cheuvreux: Yes. Good morning. I hope you can hear me. I would just have a question on on the sort of pulp and paper market dynamics and outlook. Just sort of given the current geopolitical uncertainties and declining pulp prices, do you see customers delaying investment decisions?

And what are your expectations of the market environment going forward, particularly with regard to greenfield projects? Do you expect customer activity to improve going forward or hold at the current level? So any any color you could provide on on that would be very helpful.

Dr. Joachim Schoenbeck, CEO, ANDRES: I mean, investment decision in last in last pulp assets, I would say it’s a it’s a complex it’s a complex decision making process. You have on the one side, you have the current pulp price. But everybody knows that the current pulp price, you cannot you cannot sell anything on that price. So you need to have a a clear view where is your pulp price in in three to five years. I would say that’s that’s one element.

Psychologically, the current pulp price is affecting. Yeah? But that’s only one element. The second is that if you wanna build a pulp mill, you need to have forest. And and the forest, once you have secured, is growing.

And this gives you a certain timeline when you have to make a decision because if the forest become overdue, then it it’s it’s it’s again very costly. The third element is the demand side. And what we can see talking to our customers, what we can see when we talk to the gurus of the industry, pulp demand is growing and it will grow for long term. So I would say in these elements, the decisions will be made and discussions are ongoing, yes, but decision making is definitely not predictable.

Elias Niew, Analyst, Kepler Cheuvreux: Very helpful. Thank you. And just a second question on environment and energy and the demand development there. So you’ve seen a relatively muted investment activity lately, particularly in pumps and separation, I believe. Could you just comment on what is driving this weakness, particularly in pumps and separation?

And maybe give a little bit of the demand outlook for the different sort of businesses within environment and energy.

Dr. Joachim Schoenbeck, CEO, ANDRES: Very good question. Thank you very much. And I would be happy to share it with you if I would have the answer. And we would we see projects. We see a good project level, but we do not we do not see decisions.

We also do not lose a lot. Yeah? So I’m it’s for us, it’s a it’s a question. Yeah? So, unfortunately, I cannot I cannot I cannot provide the clarity you like to have and I like to have.

Operator: The The next question comes from Patrick Steiner, ODHF. Please go ahead.

Patrick Steiner, Analyst, ODHF: Morning. Patrick Steiner speaking. Two questions from my side. Firstly, looking at the metals business, especially the service part, what are, in your view, the main drivers, but also challenges to increase the metal service business going forward? And what number is realistic in terms of service revenue share in the division over the mid- long term?

Dr. Joachim Schoenbeck, CEO, ANDRES: So there is we have at the moment, we have two challenges. On the everything related to automotive, factories, all companies have a very strict cost control as they see a declining business, and they only go for very necessary investments in modernizations, repairs. On the metal processing side, the main challenge is that historically, the maintenance has been done by the customers ourselves. And this is where we have to take a lot of the business away from, and this is what takes a bit longer. This is why we are not growing with the pace we like to see.

But we know there is a value add from our service offerings, and we are persistent and patient.

Patrick Steiner, Analyst, ODHF: Okay. Thank you very much. Second question, could you give us some more information on your current M and A pipeline? What are you looking at in terms of size, product, geography wise?

Dr. Joachim Schoenbeck, CEO, ANDRES: Yeah. I mean, I presented four acquisitions, and they very much fit the ideal profile that we are looking for. Right size, complementary to our product portfolio, good profitability and good regional fit. So I would say they are exactly the blueprint, the role model we are looking for, and we will continue supporting our strategy on service, on digitalization and on decarbonization.

Patrick Steiner, Analyst, ODHF: All right. Thank you very much.

Operator: Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Matthias Feifenberger.

Matthias Feifenberger, Moderator/Host: Yes. Thank you for your interest and your participation in our Q2 earnings call. And I’d like to hand back the word one more time to Joachim for concluding remarks.

Dr. Joachim Schoenbeck, CEO, ANDRES: Yes. Also, thank you very much from my side. And we will continue to work hard that all the opportunities we explained to you will materialize and we can mitigate the risks to give you good numbers when we meet again in three months from now. Thank you very much. Have a good summer break, vacation if you can take it, and then looking forward to seeing you again at the September.

No, October. Sorry. Thank you very much. Bye bye.

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