Earnings call transcript: Eurogroup Laminations Q2 2025 sees modest growth

Eurogroup Laminations SpA reported a slight increase in revenue for the second quarter of 2025, with total revenues reaching €429.2 million, marking a 1.6% growth from the previous year. The company’s stock experienced a minor uptick of 0.17% during the open market session, building on its impressive 44.4% gain over the past six months. According to InvestingPro analysis, the stock currently appears overvalued relative to its Fair Value, though it maintains a "Fair" overall financial health score. Despite some challenges in the European and North American markets, the company’s strategic alliance and strong order book offer promising prospects.

Key Takeaways

• Revenue grew by 1.6% year-over-year to €429.2 million.
• Stock price increased by 0.17%, indicating a stable market response.
• Strategic alliance with EMS and Fulton Invest announced.
• Strong order book of €5.1 billion supports future growth.
• European market conditions remain fragile, impacting performance.

Company Performance

Eurogroup Laminations reported solid performance in Q2 2025, driven by growth in its e-mobility and industrial segments. The company sold 2.2 million traction sets, up from 1.8 million in 2024, underscoring its competitive position. However, challenges in Europe and North America tempered overall growth.

Financial Highlights

• Revenue: €429.2 million, up 1.6% from 2024.
• EBITDA: €44.8 million with a 10.4% margin.
• Net Debt: €264 million, maintaining a 2.4x leverage ratio.

Outlook & Guidance

For the full year 2025, Eurogroup Laminations projects a revenue growth of 5% and an EBITDA margin of 12%. The company plans to invest €70 million in capital expenditures and anticipates positive operating free cash flow, despite current negative free cash flow yield. With a current ratio of 1.67, the company maintains strong liquidity to meet its short-term obligations. The strategic alliance with EMS and Fulton Invest, holding 55.3% voting shares, is expected to close in 2026.

Executive Commentary

CEO Marco Cordui highlighted the company’s resilience, stating, "The resiliency of EGRA is one of the key characteristics." CFO Matteo Perna emphasized the importance of the Chinese market, noting, "China is still one of the few geographies where there is a clear and defined framework."

Risks and Challenges

• Fragile European Market: Could affect future revenue streams.
• Postponed SOPs: May delay revenue recognition and growth.
• Weak North American Performance: A potential drag on overall results.
• Supply Chain Logistics: Undergoing transformation, which may pose short-term risks.
• Market Saturation: Particularly in established regions like Europe.

Eurogroup Laminations remains focused on strengthening its position in China and optimizing its supply chain to drive future growth. The company’s strategic initiatives and strong order book are expected to support its long-term objectives, despite current market challenges.

Full transcript - Eurogroup Laminations SpA (EGLA) Q2 2025:

Elena, Moderator/Host: Before I hand over to your host today, please be advised there will be an opportunity to ask questions at the end of the presentation. I have now pleasure handing over to Ms. Ilaria Candotti, Head of Investor Relations.

Ilaria Candotti, Head of Investor Relations, Egla: Thank you, Elena, and welcome again to Egla first half twenty twenty five results presentation. Together with me, we have the group CEO, Marc Cordui the deputy CEO, Isidore Guardala and the group CFO, Matteo Perna, that will illustrate the presentation. Please note that the supporting deck and the press release are available, as usual, online on Egla website at the Investor Relations section. Now I leave the floor to our CEO, Marco Guinee. Please, Marco, the floor is yours.

Marco Cordui, Group CEO, Egla: Thank you. Thank you, Nadia, and welcome as well from my side to all of you. Thank you for attending to this session. We are here to present our first half result for 2025. Let me just say a few words before starting.

The second quarter in twenty twenty five will be remembered as a turbulent second quarter. This quarter was impacted by many news that were in some way affecting negatively the overall environment. Tariff and trade were a news every day in newspaper. The volatility and the uncertainty in the economy increased. The forex fluctuation and the major currency shift was as well another topic.

And all this create cost pressure. We saw some cost increasing. And in addition to this, we saw as well policy changes impacting as well the green deal. And finally, all this created some disruption in the supply chain. So the resiliency of EGRA is one of the key characteristic because the macro trends that are behind our business are remaining there.

The diversification that we have created in our business model is offering us the flexibility that is capable to follow any strategy that is required. And, of course, this condition is putting all of us in the condition to take action to improve margin and improve cash flow. So with these premises, I want to comment this page. In this page, we have summarized the results and the key facts that are related to our group for the current situation. So our revenues overall were achieving €429,000,000 sales.

So it is 1.6 more than 2024. If we speak about e mobility, e mobility increased slightly at 0.4% compared to last year. And the industrial and infrastructure business grew 3.6%. Of course, Asia remains the key region of behind the growth both for the e mobility and for the industrial. While Europe is stable in in the EV, in the e mobility and is remain fragile in in the industrial infrastructure.

And North America is, of course, the weakest region both in e mobility and industrial. Overall, this situation achieved put us in the condition to achieve an EBITDA of 44,800,000, equal to 10.4% of marginality. And, of course, the situation that I mentioned impacted this marginality. Overall, our EV and order book and pipeline remains strong. Order book remains at 5,100,000,000, and we have some postponement of new programs in in North America.

The pipeline is at 2,600,000,000 and is reflecting a strong conversion of order book in order book, and the current market uncertainty are impacting in the discussion mainly in Europe and in North America. As I anticipated, promptly react to the market condition with a performance improvement program. Through this, we have launched the different initiative in in Europe in second quarter, and this initiative will be rolled out as well in North America in q three. And we have as well activated different initiative in order to compensate the supply chain impact. Overall, thanks to this performance improvement program, this will support the result of the year.

So in term of outlook, we see the guidance on the full year 2025 that is aiming to reach a 5% increase in term of revenues versus the full year 2024. We see a recovery in the EBITDA margin adjusted at 12%, and we confirm as well the positive operating free cash flow from operation. With regards to midterm guidance, this remain confirmed in view of the macro trends behind our business. If we move to next page, is, of course, one page dedicated to the news that arrived last week. On July 28, EMS, that is the Egla major order and Fulton Invest, that is an an Asian investor, announced a strategic alliance to accelerate A Class global growth in a in a rapidly evolving market.

And summarized the the key highlights of of this agreement, and this agreement is com is including a sales and purchase agreement for the transfer of the stake of EMS and a co investment agreement in a new holding. TKO Capital, that is the second largest shareholder of VEGRA, also has expressed the support to this deal and has as well finalized a share purchase agreement. So the transaction is, of course, subject to customary regulatory condition, and it is expected to be completed by the 2026. At closing, EMS and Funta Invest will jointly hold through the new holding 55.3% of the voting share capital in Eglen. Following the closing, a mandatory tender offer with an offer price at euro 3.85 per share will be launched on the company remaining 44.7%.

So the price of euro 3.85 per share implies a market capitalization of Vega of approximately $626,000,000. This is, of course, a news that we we had to bring as well to this meeting in order to highlight what EMS and Fontan Invest have underwrite. I now pass the words to Matteo in order to enter in the details of all the financial results.

Matteo Perna, Group CFO, Egla: Thank you very much, Marco. So on the revenue side, you see the total amount of revenues generated in the 2025 was approximately EUR 4 and 29,200,000.0, which is implying a slight increase of approximately 1.6% compared to the 2024. This is the result of basically a flattish performance for the AV and automotive e mobility segment, which has grown to approximately €265,000,000 compared to 264 in 02/2024, whilst the Industrial Infrastructure Solution has increased the revenues to €164,200,000 as well on the back of the consolidation of the Kumar business, which is approximately 27,800,000 On EBITDA adjusted side, 10.4% was the total amount of EBITDA adjusted margin accounted in the first half. And we have reported, in light of what Marco was explaining before, a reduction in the EBITDA margin for both business units. And as we said, this is the result of the second quarter, which was, again, impacted by temporary effect and as well uncertainty, but we do hope that we’d be cleared in the second part of the year.

On the beside the impact on the EBITDA, you can see as well the evolution on the EBIT side, which was in line with what we were expecting due to the fact that this is mainly driven by the evolution in the EBITDA, but as well the fact that over the first half, we have accounted approximately €27,600,000 of D and A consistent with the execution of the CapEx plan that we have executed over the last years. As expected, the CapEx are in the range of €40,000,000, of which 75% are related to the e mobility segment, whilst the rest, it’s for the benefit of the industrial infrastructure solution. So if you move to the next slide, yeah, in terms of breakdown by business unit, you you can see that, basically, this is even split between the ’24 and ’25. We have as well on the basis of, you know, the the latest input as well that we received from the auditors updated the geographical breakdown now considering the country of our final clients. So this is a change compared to what we were reporting before.

Therefore, you see that on the basis of new representation, Asia is now accounted for approximately 14% compared to 6% in the ’24. India is still the largest region with approximately 53% over the total amount of revenues that we generated in the first half. Main message, there was a strong increase in terms of number of sets sold for the traction business in the 2025, which were approximately 2,200,000 compared to the 1,800,000 that we sold in the ’24. And I have to say that out of the five new SOPs, which were expected to be started in the first half, three of them were postponed to next to the next year. All of them are making reference to one customer in in North America.

On home and industrial, it’s still fragile, the performance in Europe. So we are satisfied by the contribution of the growth of our Asian business. So beside the India, I have to say, but as well China, it’s it’s keep growing in light of all the business development activity which have been carried out over the last month from our sales force. And in terms of segment, I have to say that the energy segment was the one which was reporting the worst performance in the first half in light as well of the situation of one of our main client in The U. S, which was indirectly impacted by the discussion on the tariff.

If you move to the next slide, Yes, we spoke about the evolution of the total EBITDA adjusted margin, which is approximately 10.4%, of which for the e mobility solution business, it’s approximately 10.8% compared to approximately 12.1 in the 2024. And I have to say that this is in line with our budget, which was already considered in the EBITDA margin on the basis of a different mix as we commented as well last time. What is not in line with our budget is the performance of the industrial business, which was impacted by the situation in in North America, which was not expected and was on the back of the liberation day. But we do think that this will lead the situation in the second part of the year and as well the performance and the relative impact in terms of operating scale in Europe due to the weakness of the underlying demand. On the EBIT, we spoke now, DNA representing approximately 6.4% of a total amount of revenues, and this is implying an EBIT reported, which in the range of 14.9% compared to €40,000,000 in the ’24.

If we move to the next slide, I’d to say the performance from the economical standpoint was counterbalanced by a positive performance on the balance sheet side and therefore on the cash flow generation. We have increased we have decreased our net working capital by approximately €25,000,000 over the last quarter. You see that was approximately €290,000,000 at the March and now stands at approximately €265,000,000. This is implying an incidence of approximately 30% over the last twelve months revenues. And this is the result of reduction of the inventory, which is now approximately €365,000,000.

Trade receivables are in line on what we were considering in our amount and are equal to approximately €166,000,000. And on payable side, you see that we have reported €266,000,000. So if we move to the next slide, you you can see on the simplified net debt evolution that we reported at the June, €264,000,000 as total net debt, which is implying over the last twelve months adjusted EBITDA a net leverage ratio in the range of 2.4x. This is including EUR 20,000,000 cash out related to the one off effect due to the buyback of the minorities of our operating companies in China. And on top of that as well, the amount of dividend that we paid in May, which is totaling approximately €7,700,000 And without the impact of both the minority buyback and as well the dividend, the net debt would have been in the range of €244,000,000 implying a net leverage of approximately 2.2x.

So this is a positive cash generation compared to the result that we posted at the March. This is in line with our guidance of having a positive operating cash flow by year end. And I have to say that this is as well better compared to what we were considering in our budget. If we move to the next slide, as Marco said, one of, you know, the the first reaction which were the management has taken in order to counterbalance the current market volatility was to get started with an industrial efficiency program. And I’ll let Isidoro to outline the the key terms of our industrial performance improvement program.

Thank you, Matteo.

Isidoro Guardala, Deputy CEO, Egla: We focus our attention to improve, some key points, important key points in the operation, but also in the organization. The first point is con connected to the And we will work, we already started and applied a plan to have a major efficiency in the material, in the machine utilization and the labor cost. This can give us the opportunity to improve the utilization of the machinery and to increase the OEE of the group. This was already started and applied in Europe, and we will go to apply the same program in North America starting from Mexico.

The second point are connected to the supply optimization. We will improve our activity with the suppliers, and we will improve our profitability on the cost of the material and also to, to have, benefit in this kind of area. And and this is strictly connected to the supply chain, logistic transformation. We install a new organization fully dedicated to this, matter, and, we started also in this from Europe, and we started also in in North America through Mexico. And this can give us the opportunity to optimize the the the cost locked to the inventory and also, shrink the cost of the logistic and transportation.

And, if you also the new situation, we create a group of people specialized to coordinate and, to governance the functional ownership of the major activities, across the performance of the group.

Matteo Perna, Group CFO, Egla: Thank you, Zidaro. So you we we do think that the execution of this program will allow us to match the guidance for the short term that we are now summarizing in this slide. So you see that we confirm despite the reduction envisaged in the growth of our top line, which is now expected to be in the range of 5% on the basis of the assumption of stabilization of the macroeconomic condition in the second part of the year. So at least we want to see a framework clearly defined to be able to cope with. We do think that through the execution of our industrial efficiency program, plus supply chain recovery initiatives that we have prompted activated in the second part in the second quarter of the year, do think that if we’d expect the evolution half half basis of our business, it will be part of our ability to match the 12% margin guidance for full year 2025.

The rest of the guidance is confirmed. So €70,000,000 will be the amount of CapEx executed, which will be executed this year. And again, as we said before, we will confirm as well the ability to generate a positive operating free cash flow by year end. The outlook for the medium long term period is confirmed.

Marco Cordui, Group CEO, Egla: Thank you, Matteo. Thank you, Sidono. And we can pass the word back to the team in order to start the Q and A session.

Elena, Moderator/Host: Thank you. Thank you to the management team. We now have an opportunity to ask question. First question today comes from Ms. Monica Bosio.

Please, the floor to you.

Monica Bosio, Analyst: Yes. Good afternoon. Can you hear me?

Elena, Moderator/Host: Yes. We can indeed.

Monica Bosio, Analyst: Just a few questions. The first is on the order pipeline. How much of your order pipeline has been converted into orders? And I was wondering if you can comment on your order trend in China, splitting between orders awarded by Western car players and orders awarded by Chinese players? This is my first question.

And in relation to this, I was wondering if you can share with us what are the revenues do you expect from China this year? And if you can share with us, I don’t know if you can, the margins in China in the e mobility segment. The third question is on the cost savings program. Do you have quantified the savings for 02/2025? And if yes, can you share with us?

Thank you.

Matteo Perna, Group CFO, Egla: Okay. On the on the pipeline conversion rate, we converted approximately €300,000,000 of pipeline into order book in the second quarter of the year. And I have to say that, basically, all of the conversion of the pipeline was concentrated in the USMCA area. Mhmm. And China is still representing now the vast majority of our pipeline given that as well the commercial discussion in Europe and North America have been temporarily impacted by the confusion and uncertainty related to the tariff situation.

So given that China is still one of the few geographies where there is a clear and defined framework, I have to say that pipeline remains very strong, and it’s approximately more than EUR 1,700,000,000.0 out of the total 3.1 that we are reporting as of the July. Mhmm. I have to say, and then I’ll let Marco to to comment on conversion against the Chinese OEMs vis a vis Western OEMs. What we see is that it’s it is increasing now the amount of new orders that we receive from Chinese OEMs on the back of you know, where all of them are trying to identify new innovative solution and new technologies, which were maybe already adopted by certain of our clients as well in the past. Now there is a push in the Chinese market as well respect to technologies that we adopted earlier in other geographies around the world.

And we do think that this for us, it’s a good opportunity to continue our market our local market penetration. I don’t know, Marco, if you want to add some Yes. Of

Marco Cordui, Group CEO, Egla: Maybe just to say that we see the margin in China as well for with the Chinese OEMs or for the Chinese market in line with our practice. Of course, this is connected as well to the technology that is inside our products, and this is probably the reason for which we are capable as well to maintain a good marginality. In terms of mix, in China, the production for the Chinese market is growing and is, of course, is more than 50% today. And of course, within this percentage, there are Chinese OEM and as well international OEMs that are operating as well in China. And the portion of Chinese OEMs is growing.

And today, it’s probably in the range of 10%, 15%, but it’s growing quarter by quarter.

Monica Bosio, Analyst: Okay. Thank you very much. Very useful. And for the cost savings, if you have a quantification, I don’t know.

Matteo Perna, Group CFO, Egla: Yeah. We have. We have. And I have to say that the cost saving initiatives that we are now executing will represent approximately slightly less than 10% of the total amount of EBITDA to be reported in the second part of the year.

Monica Bosio, Analyst: Slightly less than 10. Okay. You. Thank you very much.

Elena, Moderator/Host: Thank you, Ms. Basia. Next question comes from Mr. Alberto Zegra. Please, the floor to you.

Alberto Zegra, Analyst: Good afternoon. Can you hear me?

Elena, Moderator/Host: Yes, we can. Okay.

Alberto Zegra, Analyst: So three questions from my side. The first is if you can tell us the sales contribution from Kumar embedded in the new guidance. If I’m not wrong, last call you mentioned in some €50,000,000 plus for the 2025. Then if you can comment on the price pressure in the two segments, in particular, what you are seeing in the automotive space compared to the first comment that you provided in May? Then one question for what you can tell us for the time being on the deal with Fountainvest.

Since the time schedule looks a bit longer, maybe if you can comment on the regulatory condition, the most critical steps that, in your view, could potentially delay the closing of the sales? You.

Matteo Perna, Group CFO, Egla: Alberto, so on Kumar, we do confirm that the total amount of revenues generated by Kumar in 2025 will be above €50,000,000 The price pressure in automotive, I would say nothing has changed compared to what we already said in May. So but that was already embedded in our original guidance. There was a price reduction with certain key customers in Europe, and, again, that was already in our budget. And I have to say that with respect to the industrial business, we don’t envisage, as of today, a further price reduction in the second part of the year. And this will be as well part of our expected margin improvement to be reported in the second part of the year for the industrial business.

Then on the expected closing date for the deal with the partnership with Fontan Investor, it’s I have to say that as you might know, Egla is a global business with different activities in many countries. So the the closing is subject to the tailing of the authorization required by the antitrust and FBI authorities in several countries. And as you can imagine, this is implied different review periods. So that was already part of what, you know, was announced, and we don’t have any additional color to be added to what was part of the press release.

Alberto Zegra, Analyst: Thank you, Matteo.

Elena, Moderator/Host: Thank you. At the moment, we do not have any questions queued. We will wait just a moment to give everyone the opportunity to raise their hands. Next question comes from Mr. Emmanuel Enegri.

Please, the floor to you.

Emmanuel Enegri, Analyst: Yes. I hope you can hear me. I have a couple of questions. The first one is on your SOPs. Could you please give us an idea on the start of production in terms of geographies you expect for the second half and maybe also some of the pipeline you have in terms of start of production for the next year?

And the other one is on Chinese OEMs. Do you have can you give us an idea on the pipeline you expect with local OEMs for having new clients or or negotiation you may have? Thank you.

Matteo Perna, Group CFO, Egla: Thank you, Manuel. So on on the SOP, as I said, we were originally expecting 10 new SOP to be started this year, of which four in North America, three in EMEA and additional three in China. Zufar, as of today, to the best of my knowledge, beside the three SOP, which were postponed to next year, the rest of the SOP has been have been confirmed and will be started in the rest of the year according to the original plan. I have to say but, again, we will not disclose, but all of the SOP which were postponed are making reference to one to one group. So beside this, the rest, again, it will be launched according to the original plan.

That that was on SOP. Next year, we will disclose the number of SOP to be started next year in November when we will announce the third quarter results. I don’t know, Marco, if you wanna add anything on the second part of Manuel question.

Marco Cordui, Group CEO, Egla: To the pipeline in the Chinese Yeah. Maybe you want

Isidoro Guardala, Deputy CEO, Egla: to to

Marco Cordui, Group CEO, Egla: to say something about

Matteo Perna, Group CFO, Egla: disclosing without disclosing the names, I have to say that over the last period, we have been able to get started the relationship with the major Chinese OEMs. And as you can imagine, this is one of the main pillar as well of the potential of the partnership with Fountain Investor given that we already explained in the past that in order to be able to gain market share and penetrate the local market, we need to be stronger locally in China. And to do it, we need larger Chinese shoulders. So we do think that through the partnership, we found an investor who will able to accelerate the growth and the market penetration in China and as well the market penetration vis a vis the Chinese OEMs, which will allow us as well to maintain our leadership beside China, so both Europe and North America.

Emmanuel Enegri, Analyst: Okay. Thank you very much, mister Grier.

Elena, Moderator/Host: Thank you, mister Nige, for your questions. We will wait now for any other questions. We have a follow-up question from Mr. Cigla. Please, the floor to you.

Alberto Zegra, Analyst: Okay. Just a couple of follow-up. Apart from these three platforms that have been delayed, in the other seven, you are having more or less the same volume that you expected at the beginning of the year, or you are also experiencing a slower ramp up of those that have started? Then the second, will you have some positive impact from compensation in the second half?

Matteo Perna, Group CFO, Egla: Gilberto, so on on the expected ramp up quarter of the new project expected to be starting the second part of the year, As of today, we don’t have any update to be shared, and we do have a ramp up curve, which is in line to what we were considering before. On the second question, yes, As we said, as well, certain supply chain action are included embedded in the second part of the year results.

Alberto Zegra, Analyst: Okay. Clear. Thank you.

Elena, Moderator/Host: Thank you very much, mister Segre. We will wait a few seconds for any other questions. As we do not have any further questions, I will now have pleasure handing over to the management team for any final comments. Please, the floor to you.

Marco Cordui, Group CEO, Egla: Yeah. Thank you very much, for, your interest in Egla. I think we have touched the results of the first half and as well the outlook that we consider relevant for the future in of this year. And we remain available for any further clarification that you may need, and we take this opportunity to to make best wishes for this August to all of you.

Elena, Moderator/Host: Thank you very much. This presentation will now come to an end.

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