Earnings call transcript: Jost Vertica’s Q4 2024 results show mixed performance

Jost Vertica has reported its financial results for the fiscal year 2024, revealing a mixed performance with a decline in sales and adjusted earnings per share (EPS) but an increase in net income. The company also announced strategic acquisitions and investments aimed at future growth. Currently trading at €56.51, InvestingPro analysis suggests the stock is undervalued, with a Financial Health Score of "GREAT" (3.03 out of 4). The company’s market capitalization stands at €842 million, with a P/E ratio of 21.39.

Key Takeaways

• Full-year sales decreased by 14.4% to €1,069 million.
• Adjusted EPS fell by 16% to €5.2.
• Net income increased by 1% to €53 million.
• The company acquired FIBA Group and invested in Itonomy Group and Stratodynamics.
• Jost Vertica aims for significant growth in 2025, driven by strategic acquisitions.

Company Performance

Jost Vertica experienced a challenging fiscal year 2024, with sales declining by 14.4% to €1,069 million. This downturn was attributed to a weak market environment, particularly in the transport and agricultural sectors. However, the company managed to increase its net income by 1%, reaching €53 million, demonstrating resilience amid market challenges. The company’s diversification strategy and strong aftermarket presence helped mitigate some of the adverse effects.

Financial Highlights

• Revenue: €1,069 million, down 14.4% year-over-year (YoY)
• Adjusted EBIT: €113 million, down 19.8% YoY
• EBIT Margin: 10.6%
• Reported Net Income: €53 million, up 1% YoY
• Adjusted Earnings Per Share: €5.2, down 16%
• Proposed Dividend: €1.5 per share, stable
• Cash Flow: Record €115 million
• Net Debt Leverage: Reduced to 0.86x

Outlook & Guidance

Looking ahead to 2025, Jost Vertica is optimistic about a 50-60% increase in sales, largely driven by the acquisition of HEVA. The company anticipates a 25-30% rise in EBIT, with markets expected to recover in the latter half of the year. With a beta of 1.36 and an impressive free cash flow yield of 18%, InvestingPro subscribers can access 12+ additional ProTips and detailed analysis about the company’s growth potential. A comprehensive Pro Research Report is available for deeper insights into the company’s fundamentals and future prospects. Jost Vertica is targeting synergies of €20 million by the fourth quarter of 2026, with potential upside from infrastructure investments.

Executive Commentary

CEO Joachim Yur expressed confidence in the company’s future, stating, "We have seen the worst in the last two quarters," and anticipating a market recovery in 2025. He emphasized the company’s readiness to generate shareholder value, highlighting strategic acquisitions and investments.

Risks and Challenges

• Market volatility in key sectors like transport and agriculture.
• Potential supply chain disruptions affecting production and delivery.
• Macroeconomic pressures, including inflation and fluctuating exchange rates.
• Competitive pressures in the tipping cylinders market, despite a strong position in Europe.
• Uncertainties in global infrastructure investments and geopolitical tensions.

Q&A

During the earnings call, analysts inquired about the company’s truck order intake, which showed positive signals for the second and third quarters of 2025. Questions also addressed potential growth opportunities in infrastructure and the reconstruction of Ukraine. The company expects a tax rate of around 27% and financing costs between €30-35 million.

Full transcript - Jinpan International Limited (JST) Q4 2024:

Conference Moderator: Ladies and gentlemen, welcome to the Jost Vertica Fiscal year twenty twenty four conference call. I would like to remind you that all participants will be in listen only mode. The presentation will be followed by a question and answer session. If you would like to ask a question from the webinar, you may click the Q and A button on the left side of your screen and then click the raise your hand button. For written questions, please click the Q and A button and then text button and type your question.

At this time, it’s my pleasure to hand over to Joakim Yur CEO. Please go ahead. Yes.

Joachim Yur, CEO, Jost Vertica: Thank you very much and warm welcome here from Noriesenborg to our twenty twenty four earnings conference. We’re happy to inform you about our performance in the year 2024, a year that has been weak in the market environment, but that the host has used very well to further develop the company. So here are some of the highlights. We have developed our strategy and presented our midterm targets, which we call Ambition 2,030, at the Capital Markets Day in September of last year. We have signed the acquisition of FIBA Group in October 2024, taking a first important step for this growth strategy into the off highway markets and segments.

We were able to sign new OEM customer contracts in our agriculture and construction business, gaining the market share and implementing the strategy of being a global tier one supplier to the ag and construction industry. We’ve invested strategically into R and D with Itonomy Group and Stratodynamics to gain access to pioneering technology in transport. And we have significantly improved our carbon footprint by reducing our CO2 emissions, Scope one and two, by 58% compared to 2020. But that’s not the only highlights. We also, together with HEVA, will boost our global market presence and our resilience.

We are expanding our product portfolio with the products that you see here on the right in yellow. We are increasing our exposure to the off highway markets that will give us more resilience and more profitability. We are enhancing our regional footprint worldwide, and we’re strengthening our push and pull sales organization and sales setup with the HEVA brand. By that, we are reducing the dependency from individual OEMs, while OEMs remain an important customer to us. Each individual OEM has less weight because we have more customers with the HEBA acquisition.

And therefore, we are growing the resilience on markets and products. We will increase the midterm profitability via the synergies that we have identified and are enhancing our unique selling propositions and our market positioning. Looking at the outlook that we have given, I can confirm that we are achieving the targets that we have given in the outlook after the EIA in October of last year. So sales in the corridor that we guided, we ended up with $1,069,000,000 euros in sales, which is down 14.4 compared to the year 2023. Our adjusted EBIT was EUR113 million, that’s 19.8% below previous year.

The EBIT margin still a very healthy 10.6% in a declining market environment. CapEx is a little bit outside of the range due to the fact that sales was lower than initially expected and we continued with the important investments and working capital improved from where we guided, ended up at 15.3%. This is all excluding the M and A and our EOS only numbers. A bit more details on the financial highlights. The market downturn in transport was around 19%, and that did affect our sales numbers.

Also in Ag, we had declining markets, but we had M and A contributions from JOST Agriculture and Construction South America and from LS Lift. And that supported our sales in the business line agriculture, which grew by 5%. Adjusted EBITDA developed in line with sales, so that the margin remained stable at 13.9%, despite the clear sales decline and the strong sales decline. And I think that’s a quite good achievement. Also, our cash flow is at record levels with 115,000,000 supported by strongly improved leverage.

And that supported the strongly improved leverage, which is down to 0.86 multiple. The reported net income grew by 1% to €53,000,000 and that was aided or supported by a financial result and the low tax rate. And I’m sure Oliver will give you a bit more details on that. Our earnings per share declined adjusted earnings per share declined by 16% to EUR 5.2. So we propose to pay a dividend of EUR 1.5 per share, stable versus prior year, despite the M and A and higher financing and a lower market environment, because we think it was a very successful year overall and we want our shareholders to be able to participate with that.

Yes, this slide underlines our resilient business model. And you all know that our business model is based on a flexible and asset light operations and production, but it’s also supported by a wide range of end markets, products and customers where we have a very resilient setup. As you can see, sales by destinations is, Europe is losing weight and The Americas and Asia Pacific and African markets are gaining weight. And with the HEVA integration, that will improve even further. Same is true for our OEM and aftermarket mix, which gives us a lot of resilience because, as you know, the aftermarket remains stable when the OEMs decline and and that supports our margins.

And also, if you look at the applications between truck, trailer and tractor, we’re more and more becoming even. And that also supports the resilient business model that, as I mentioned, is based on a flexible and asset light operation and supported by a regional end market mix that is very resilient. With that, I would like to hand over to Oliver to give you a bit more detail on the financial performance.

Oliver, CFO, Jost Vertica: Yes. Thanks, Joachim. And good morning, good day from my side. As always, let’s jump into the performance section and start with the overview on the regional performance, starting with Europe, and also within that focusing a little bit more on the total year numbers instead of the isolated fourth quarter numbers. What you can see in Europe, we were faced with an organic sales decline by 18%, strong headwinds from the market environment as Joachim outlined.

Truck demand down by 24%, trailers down by 5%. As you probably know, trailers started to suffer already in 2023, and the agriculturetractor market also down by roughly 15%. On the other side, we had a little bit tailwind of the consolidation of the acquisitions that we did in the second half twenty twenty three. So the former Greno de Kvasil business and the Finnish company LH Lift, both in total provided a positive sales effect of €52,000,000 for the European region. As you know, JAXACranu is still consolidated in the European region, although that might change in future.

But Joachim will outline that a little bit later. So that means then a reported decline of minus 10%. No material FX effects in terms of sales. And what you can also see isolated for the fourth quarter, you see the organic decline continued and was minus 17% for the fourth quarter. And that, I mean, resulted into the outlook adjustment as Johan mentioned October at this was then clearly visible.

Then coming to the EBIT for the European region, you see that for the total year, it’s down by almost 20%. So a little bit more than the organic decline. We supported that stabilization of the margin overall with cost takeout programs that have been initiated already in the first half and then paid off into the second half of the year. You also know from previous calls that we were partially on short time work, although but also that’s probably for a little bit later that have been canceled now as we see a step by step improvement also in the European region going forward and resulted then with all those measures into a full year EBIT margin of 6%. You know that the European region is bearing a higher proportion of fixed costs, R and D, IT, etcetera.

And this is why the region is always a little bit dilutive compared to the overall group. There’s one special effect I would like to mention here. You see, if you look into the profitability of the fourth quarter, that’s normally by far the lowest quarter in terms of EBIT for Europe. Normally, this time, it’s a little bit higher. There’s a one off cost allocation that has been taken place in the fourth quarter to allocate for certain global function costs and that’s shifting profitability towards Europe from especially the North American region where you see the opposite effect.

Yes, and I mentioned already the short time work in the second half of the year. So going then to North America, We would say so that we have successfully adapted to a much lower market there and achieved still a very healthy business. You see in the total year numbers that organic

Jorge Gonzalez Sattermill, Analyst, Hochhaus Farhad Investment Banking: decline has been almost 27% and

Oliver, CFO, Jost Vertica: even a little bit more in and then starting especially in the second half of the year and especially within the fourth quarter, we also have seen that the truck demand started to decline and also on top, we were suffering from an agricultural market that has not improved. Quite the opposite was also down by 15%, resulting then in an EBIT of $29,000,000 for the total year and respectively an adjusted EBIT margin of 11.3%, which we believe is still a very solid number in the light of the sales decline. What is the reason here? Aftermarket in general remained relatively strong in both business lines, supporting the profitability. Don’t look too much in the fourth quarter numbers.

As I mentioned before, there is an opposite effect of profitability that has been shifted to the region Europe and that’s leveling out then in 2025. But on the other side, we were quite well adapting to the low utilization, especially in the fourth quarter by layoff temporary workers reducing the capacity in the plants. We consolidated actually also sites in Michigan, and that will help also not only in 2024, will help much more in 2025 to achieve also going forward a good level of profitability in the North American market. So we are quite proud of the teams there, how well they managed the sharp decline in sales. Going then to the last region, Asia Pacific Africa, solid profitability, strong, partially driven by a good product mix, especially a product mix towards the off highway market.

You see the overall organic sales decline is 7% from 208% to 194%, a little bit more in the fourth quarter. Overall, robust markets, especially in Oceania, so Australia and New Zealand. And also on the other side, we are not super unhappy with our Chinese business. The China business is for yours quite a good one. Why is that the case?

Although domestic demand is low and lower in China, we have very high market shares with the export business. So with all the trailer and truck OEMs, they all come with a fish wheel to the export market. So when Chinese producers export to the emerging markets and that supported sales and EBIT in the region. A little bit of weak point in 2024 was India indeed. Not everyone was expecting after the general election, which happened in April, May, that the second half might already see a stronger upturn there.

That’s still a little bit lagging behind. We think in 2025 we should see here an increase, but let’s see. I think Joachim will outline that later. Yes, basically no FX headwinds, too much in sales coming then to the EBIT margin you see for the full year. It’s more or less in line with prior year, So twenty four percent for the full year and even in a low fourth quarter, ’20 ’5 percent quite a very healthy margin.

As I said, pretty much driven by a favorable product mix with good sales in the off highway and mining section, especially in Far East. So countries like Indonesia, we’re supporting here quite a lot the business. On top, we had a very successful ramp up of our new agricultural plant in Chennai in India, especially the first half year was a very good one, contributing to the overall EBIT and profitability of the region despite the case that this is still a ramp up plant. And a third good point is that we, as outlined already before, we definitely realized good synergies in China from the integration of the LH Lift company. That’s the Finnish company you might remember, which has a facility or had a facility in China as well close to our existing host facility.

And those facilities have been fully integrated and reduced to only one and now realizing very nice cost synergies going forward and also the sales synergies are quite promising going forward from the products that have been acquired through that. If we now go to the group and sum it all up, you see for the full year, as already announced with the prelim release February, an organic sales decline of 18% from $1,250,000,000 euros to €1,690,000,000 And this is, again, as Johan pointed out, pretty much driven by an organic transport sales decline of minus 19%. If you look into the business lines, we see that we report a nominal growth in the agricultural business line of 5%. However, again, this is driven by the M and A effect. The organic sales development in agriculture is minus 12%, so a little bit less than the transport cycle, but still a decline.

And what you can also see is that the fourth quarter didn’t show a release so far. The run rate of the organic sales decline was even a little bit lower in the fourth quarter was minus 20.3% and compared to the full year again resulted in the changes of our outlook October when we disclosed that to the capital market. Coming to the EBIT development, Joachim already explained, full year €113,000,000 resulting in an EBIT margin of 10.6%, which is then down by minus 19.8% versus prior year. So a little bit more, and the reason is here indeed that despite the sharp decline in the second half year in terms of absolute EBIT, we continued to invest in certain strategic topics where we will benefit in future from a better cost basis, like smart automation, like plant consolidations, as I outlined already, which we definitely executed as planned. So, and I think on top, we showed good cost control overall and again many thanks to our teams here throughout the world for having a very disciplined execution, especially in the second half of the year.

If we now go to our KPI numbers, first here regarding incomeP and L development, we start with a reported income as Joachim showed 53,000,000, so that’s even slightly higher than you would expect out of the EBIT and that’s indeed driven by a nice finance result. You see here, it’s only minus 4,000,000, so adding up here in that bridge, which is a strong improvement versus prior year. But that’s by 14,000,000 driven of US dollar derivatives that we concluded to hedge the purchase price of the GUEVA acquisition. Then we also benefited from a lower tax ratio. Partially, this has to do also with our new allocation model between the regions.

So somehow our shareholders are benefiting from that development and that restructuring also in the tax organization. So that means then a reported EBIT of 67,000,000. Then adding up our typical, as you know, PPAs, 24,000,000, so slightly lower than last year. And on top, 22,000,000 other exceptionals. Just the two sentences here.

You can cluster those exceptionals predominantly in three categories. One has to do with the project of acquiring Huva, so M and A fees, due diligence costs and so on and so forth, resulting up to €9,000,000 And then there’s another big group which has to do with site consolidations and also the closure of one plant in Germany where we built provisions to execute that closure over the next twelve to eighteen months. That bucket sums up to 18,000,000 but also will benefit in future with a lot of savings on top and other restructuring measures in our workforce resulting by minus 4,000,000. So that dumps up to that as a exceptionals coming then to the 113,000,000 adjusted EBIT as disclosed. And if we then apply adjusted finance result and adjusted tax rate, we are then ending up with an adjusted net income of €77 which is then €5.2 per share.

Also an important number at least we look at is what is the adjusted net earnings versus sales ratio. So bottom line net income just adjusted for the adjustments that we showed here and this remained more or less stable with 7.2% compared to 2023 with 7.4%. So also underlying somehow the overall good development for the P and L and income despite the market challenges in 2024. Then coming quickly to our KPIs for the balance sheet’s development, overall, I would say quite, quite nice improvement also here showing now a good resilience going forward. You see ROCE has declined indeed from 21% to 17.1%, which is driven for sure by the lower adjusted EBIT, but is with 17.1% only slightly below our long term target of 18% and a quite healthy margin in light of the market environment.

Equity ratio rose up to 40.4%. So at least for, let’s say, the last years, the first time again up over 40% and giving us tailwind in terms of a strong balance sheet when now digesting the Huber acquisition for sure, which will have a certain dilution on the equity ratio. And this, despite the fact that we had to consume negative FX translation effects of around SEK8 million in the balance sheet. And also as you outlined quite nice development in the net debt ratio or net debt leverage, so to speak, which is down to 0.86% according to our definition, which underlines now the power and the possibility to digest the Uber acquisition without having a capital increase, still being able to pay a dividend as proposed. And on the other side, we had to consume in 2024 the acquisitions of the share in Trailer Dynamics with £15,000,000 The dividend payment last May of £22,000,000 And as you know, the Arlo arbitration outcome was roughly £21,000,000 payout in January 2024.

And despite that defect, we were able to reduce the net debt quite significantly, which is and that’s then shown on the next page, for sure driven by a very healthy free cash flow development. So the cash conversion rate increased even more up than compared to last year where we already had with 1.2, a very healthy one, above our mid and long term targets, now up to 1,500,000.0, 1.5 times to 150,000,000, driven by strong operating cash flow, which was somehow supported also by the working capital development. So we achieved, and you see that on the very low chart here, a nice decrease in terms of accounts receivable reductions, which is not only driven by the business volume. That’s probably the flip side. We also did a good improvement in terms of factoring usage, quite an opportunistic one.

So whenever it makes sense and we save overall interest costs, we try to do so. And on top, we had a very good development in terms of inventories and that again now pushed the, despite the fact that we had to pay the earnout for Alu, the free cash flow up to 115,000,000. Regarding CapEx already, Joachim mentioned slightly above our target, which was up to 2.9%. And indeed, the fact is that certain CapEx projects that were already planned for 2024, we still executed despite the fact that the sales drop was quite significant in the second half of the year as these projects are clearly supporting the profitability going forward. And that’s why we decided to do so.

Yes. And with that, I would like to hand over for you, Achim, again to give us the quick financial and business outlook for this year.

Joachim Yur, CEO, Jost Vertica: Yes. Thank you, Oliver, for the details. And let me come to the summary. The JOS organization has been very successful with our local for local management approach and focusing on the regional regional organization to run the operational business and to have the customer proximity. We will continue with that organization, and we will do some slight adjustments with the integration of EVA.

So our group steering will be focused also in the future on three regions that we have cut a little different and combined them with the existing EVA regions. So we will report in three regions. The first one is Americas. That’s North And South America. The second one, Europe, Middle East, and Africa.

And the third one, Asia Pacific and Oceania. And that will be the reporting and the operational structure on how we run the business in the future. It’s a continuation of the already existing business model. And we will, as I said, continue to focus on the regions, headed by a regional top management team that develops and implements all the regional activities that drives the Ambition 2,030 strategic topics and that also has the customer focus and the operational focus on the local for local operations and customer support that we give. This is being supported by three business lines.

In the past, we had two business lines, transport and agriculture, as you know. Now it’s three transport, agriculture and hydraulics. And these business lines continue to be responsible for the strategic global product development and the market roadmap on where we sell which products, which products do we develop for the future and manage the profitability of those products on a global basis. And with that new business line, you will find the sales of FIBA Group consolidated in that hydraulics business line and that will be transparent also for the future so that we and you will have an ability to follow the development of that hydraulics business. Looking at the markets, and we’ve now added the market expectations for hydraulics.

I would summarize that the markets for 2025 are expected to bottom out. So I would say that we’ve probably in the last two quarters have seen the bottom of the market development. And even though that is for this quarter, probably less than it was the February the first quarter of twenty twenty four because that was still a quite good quarter, we see overall over the course of the year a bottoming out. For trucks, in EMEA, a slight increase mainly in the later half, but we also see some promising signals already from our truck OEMs. In America, it’s a bit more uncertain.

Right now, it’s very difficult to make any predictions for the North American markets. Our customers are having difficulty to decide where to locate their supply chains because they don’t know which tariffs they should calculate in these calculations. So there is a lot of uncertainty right now. And therefore, the current expectation is that there will not be too many investments and therefore a slight decline in Asia Pacific, Africa no, APAC sorry, Asia Pacific. We see and expect a slight increase.

Same for trailers, where we see a stable market in North America and a slight increase in Europe and APAC. Also on tractors, we see the bottoming out little question mark in the Americas market. But overall, the expectation is that we are going through the bottom right now and we see a bit more demand coming up for 2025. And you can more or less assume the same for the hydraulics markets. Also here in North America, a bit of an uncertainty.

Also South America with an expectation of maybe a slight decrease. The remainder of the markets, there’s more upside potential and maybe even some hope for a little further increase in Europe, depending on what the situation with the Ukraine conflict will be in the course of the year. So markets bottoming out and that for the outlook means, that our outlook is not market driven or slightly market driven, but mainly M and A driven, a big increase with the consolidation of HEVA. And that will be the big growth story, obviously, for 2025 because we will consolidate eleven months of HEWA sales and results into our results of the or into our outlook for 2025. So with sales, we expect sales will be up by 50% to 60%.

Little market effect, but mainly M and A’s effect with the HEVA acquisition. Same is true for EBIT. We expect it to be up 25% to 30% versus prior year. The same for the adjusted EBITDA. CapEx, we expect to go again to our normal range of 2.9% of sales and working capital also we expect to be below 18.5% of sales.

So far for the outlook, as I said, the HEBA consolidation will be the biggest impact. So to give you a bit more detail on where we stand with the post merger integration activities, We have had the closing on February 1. The global PMI programs have successfully started. We have a strong cross company collaboration with teams from the JOS organization and the HEBA organization. Very entrepreneurial mindset in those teams.

And we noticed that it’s a very similar mindset when we talk about customers, when we talk about markets. The products and the way the products are being sold into the markets and supported in the markets are very similar. And that’s why we find a very good culture in those teams. We have started the PPA analysis, and we will inform you about those effects with our Q1 numbers that we disclosed then in May, I believe. Coming back to the synergies and the cross company collaboration on the PMI, We see even more synergy potential with a slight upside versus the initial assessment.

You remember, we’ve said that we target 20,000,000 of synergies. Right now, we have the hope that we will be able to exceed that. We find a lot of opportunities. You also remember that we said these 20,000,000 we will find in the run rate of Q4 of twenty twenty six. So this year will be the year where we identify the synergies, where we take the decisions and we expect the actual impact of those synergies to come in, mainly in 2026, starting at the beginning of the year and to have the entire synergies of those 20,000,000 in the run rate of Q4 twenty twenty six.

Also there, we will give you more details with the Q2 numbers in February of this year. Now, we have an attractive bridge financing in place, but we have already started for a takeout financing to stay flexible and opportunistic with even after that bridge financing. Yes, to sum it up, we’ve had strong we expect strong sales and adjusted EBIT growth for 2025, of course, mainly driven by the HEVA consolidation. The markets worldwide are bottoming out with an expected pickup in demand in the second half of twenty twenty five. And with the exception of North America, with an uncertainty, we already see the first positive signs on that.

The EVA PMI integration is well on track, strong synergy potentials, and that should support our midterm targets and our commitments to be back in our margin corridor in Q4 of twenty twenty six on a run rate basis. The adjusted steering rate metrics strengthens our regions and continues to drive the entrepreneurial mindsets and the local for local business model that we have. And therefore, The U. S. Resilience is further growing with even more balanced regional footprint and a more balanced customer mix.

So we think we are well posed to continue to generate value for our shareholders and to boost the profitable growth that we’ve shown you in our Ambition 02/1930. Thank you very much and with that we’re open for questions.

Conference Moderator: The left side of the screen and then click the right hand button. For written questions, please click the q and a button and then text button and type your question. If you are connected via phone, please press star and one on your telephone keypad. The first question comes from Jorge Gonzalez Sattermill with Hochhaus Farhad Investment Banking. Please go ahead.

Jorge Gonzalez Sattermill, Analyst, Hochhaus Farhad Investment Banking: Hello, good morning, Oliver and Joachim. Thank you for taking my questions. My first question will be on the guidance and the selected market figures that you provided for 2025. I am wondering where are you positioned in your guidance compared to these numbers that you are offering? If you are basically in line with this or there is any market or product where you are more cautious or maybe more optimistic than the selection?

And specifically, I will be interested if you can put these numbers in contest with the new investment budgets in Germany and the potential reconstruction of Ukraine. Whether you see upside for your business in general with these two events, if and if that is reflected some way in this volume outlook for 25%? Thank you.

Joachim Yur, CEO, Jost Vertica: Thank you, Jorge. I’m happy to elaborate a little bit on that. And of course, indeed, the market numbers here, they do not take into account any effects of those investment potentials and the potential Ukraine ceasefire or Ukraine rebuild even because, you know, for 2025, probably would be very optimistic to already calculate with that. But, of course, that would have a very positive effect on our business. So any investments into infrastructure, be it in Germany with the big funding that is right now in the decision process, or be it in Ukraine for a rebuild, would have a very positive impact.

The our products for transport, for truck and trailer, They do support those infrastructure investments, and especially now with HEVA, with the hydraulic cylinders. And you see on that market side, the tipping function, that is something that you would need for any type of construction, and of course, for any type of rebuilding in The Ukraine. So that would certainly be a big boost for our business. We have not assumed that in the numbers that we’re showing at this point in time. So that would be a clear upside.

Jorge Gonzalez Sattermill, Analyst, Hochhaus Farhad Investment Banking: Okay. And allow me a catch up on these questions. Can you share with us I think in the past you’ve mentioned that HEBA has more market share or is the dominant player in Asia, especially in India. But how is HEBA comparing in Europe? And if you might take the opportunity of further growth next year to maybe push a little bit more for gaining market share in Europe?

Joachim Yur, CEO, Jost Vertica: Yeah. You’re right. HEVA is very dominant in India with this application. They’re also very strong in Asia. But also in Europe, I would say that they have about 40% market share on these tipping cylinders.

And, you know, if the market grows, of course, we will grow with that market. In the synergies, we also have, of course, some opportunities to better serve customers, to have better dealer access if we combine the Yost and the HEVA volume. So there also is on the market share a slight upside, I would say, but it’s a very established and competitive market. So that that will not be something that will change in the course of a few months. So from that expect from that effect, I probably would not expect too much in 2025 or 2026.

But the growing of the market and also in Europe, HEVA is clearly the dominant player for those applications. We will certainly grow with the market.

Oliver, CFO, Jost Vertica: I would add so And you Horger, I would add, no, I would totally agree. And on top would say, let’s say market share expansion, market share increase, that’s probably more a potential than in Americas and APAC specifically. You pointed that out already that with the leverage of the Yoast sales platform in North America, but also in Australia, in Oceania, once the markets here catch up in terms of infrastructure investments, we should, let’s say, over average benefit from that development. When it comes to EMEA, I mean, there could be some regarding South Africa, no? As South Africa is now consolidated in the EMEA region, there, Joust has a very strong sales platform, yes.

Jorge Gonzalez Sattermill, Analyst, Hochhaus Farhad Investment Banking: Thank you very much for the color. A very last one from my side on regards to the cost saving the cost saving, sorry, the synergies. I don’t want you to anticipate us any number, but just to understand the message of potential higher synergies. This will support your target of achieving the lower end of the midterm guidance in margins for 27% or it’s more like long term kind of synergies to be achieved? Thank you.

Joachim Yur, CEO, Jost Vertica: Yes. I would say on all synergies, our expectation is that you would find them in the run rate of Q4 of twenty twenty six. So that will have a full effect than in 2027.

Jorge Gonzalez Sattermill, Analyst, Hochhaus Farhad Investment Banking: Great. Thank you very much. I go back to the line.

Joachim Yur, CEO, Jost Vertica: Thank you, Jorge. Thank you.

Oliver, CFO, Jost Vertica: I think we have Nikolai.

Conference Moderator: The next question comes from Nikolai Kempf in Deutsche Bank. Please go ahead.

Nikolai Kempf, Analyst, Deutsche Bank: Yes, good morning. Nikolai here from Deutsche Bank. Thank you for taking my questions. And yes, well done for a year that seems challenging in terms of end markets. You did mention that truck demand in Europe is showing some positive signs in the first months.

Can you share a bit more color on this? And my second one, third one would be more of housekeeping questions. The tax rate was indeed quite low in ’24. What kind of tax rate can we assume in ’25? And also for venture costs should be put in much higher number now in 25% for financing the transaction?

Thank you.

Joachim Yur, CEO, Jost Vertica: Yes. I’ll take the first question and then let Oliver answer the second one. Thanks, Nikolay, for your question. Yeah. Concerning truck, we see the order intake or the call offs that we see with our truck OEMs increasing.

That will not have a sales impact in Q1. It’s more that the outlook that they’re sending us for Q2 and not only the outlook, also the firm orders that we’re seeing for Q2, they are improving. So that’s why I said we see a bit of positive impact in the order intake, and you will that will only have an effect in Q2 and Q3. And concerning tax, I think.

Oliver, CFO, Jost Vertica: And indeed, Nikolai, now that’s exceptionally low and there is a certain portion of one off in there. Again, as I said, so we organized a little bit our management allocation model throughout the world and that had impact on DTA and DTL calculations. So going forward, definitely stay pleased with the P and L bridge that I showed and the adjusted tax rate that we apply there, which is I think it’s 27% at the moment. And it should always be a fair assumption for the modeling. Also going forward, I don’t expect too much changes when it comes to incorporating the EVA numbers there.

That’s probably more or less the same.

Nikolai Kempf, Analyst, Deutsche Bank: Got it. And on the financing cost? Anything?

Oliver, CFO, Jost Vertica: Financing costs, I mean, we guided, I think, around $3,035,000,000 euro interest costs all in for 2025, I think, to in various meetings that we had before. So you can calculate with a, let’s say, overall interest rate. I mean, most of the instruments are somehow linked to the Euribor, which is partially swapped, But with 4.5%, four point six % interest rate, I think that should be okay.

Nikolai Kempf, Analyst, Deutsche Bank: Okay. Got it. Thank you.

Conference Moderator: The next question comes from Felix Opetdorfer with DNP Financial Services. Please go ahead. It looks like we don’t have mister Oberdoefer with us, so we may proceed with the written questions.

Oliver, CFO, Jost Vertica: Now here he is, Mr. Oberdoffer. We can see you now, but we cannot hear you.

Conference Moderator: Maybe your microphone is muted, sir.

Oliver, CFO, Jost Vertica: No. We cannot hear you.

Conference Moderator: We cannot hear you.

Oliver, CFO, Jost Vertica: Or we use the chat in between and then okay. And let’s go to the other written questions first.

Joachim Yur, CEO, Jost Vertica: Yeah. And then we can go back or you can use the chat.

Question Moderator: So, the first recent written question come from ICIC Bank, Nakul Jadav. Thanks. In the next full year, which sector do you foresee will improve, off highway or on highway? How will Hubert contribute to the sales? Europe is foreseeing a downtrend when it comes to on and off highway market.

Which form which forms larger parts of the sales? How do you see the share in coming full year?

Joachim Yur, CEO, Jost Vertica: Yeah. Okay. I’ll I’ll start with that. You said in the next fiscal year, which sector do you foresee to improve off highway or on highway? As we see here in the market development, we think that’s more or less even.

We see in infrastructure and agriculture, a bottoming out and the slight growth opportunity and the same for transports. So it’s it’s more or less even, I would say, more detail you find on this market development between truck and trailer, which is transport and, and tractor and hydraulics, which is mainly off highway. Some of the hydraulics are also transport applications. Europe is foreseeing a downtrend when it comes to on and off highway markets. We do not expect a downtrend in Europe for on and off highway.

We expect a bottoming out, as we said here. So that’s that is that assumption we do not share. We believe that we have seen the worst in the last two quarters and that we see a bottoming out throughout 2025. And then the last question, how do you see the share in the coming fiscal year? We still have more sales in transports than we have in off highway.

So we still have more on highway applications globally than off highway. Of course, with HEVA and the construction footprint that HEVA brings with it, we have a growing share of off highway and we expect that that will continue to grow because as I mentioned in one of the slides earlier, also in the agricultural segment, we see that on a global level, we’re we’re adding market share. With our investments that we’ve done in India and in Brazil, we get very positive customer response, and we see those markets growing in our off highway footprint. And therefore, you can expect that overall, the off highway portion will continue to grow quicker than the on highway section of The U. S.

Business.

Question Moderator: Received the question from Felix Obadov for Pershade. Thank you for reaching that, sending it to us. The question is, can you say something about Cuba performance in the February? Can you say something about market dynamics differences in trailer trucks between Americas and EMEA? It appears that EMEA is ahead cyclically.

Correct? And then another the last question is the cost allocation difference in the fourth quarter between Americas and EMEA, is that permanent?

Joachim Yur, CEO, Jost Vertica: Okay. Do you wanna start with the first one, Oliver, and then I take the rest?

Oliver, CFO, Jost Vertica: Yeah. I can too take who also the cost allocation question. Yeah.

Joachim Yur, CEO, Jost Vertica: You can take one and two.

Oliver, CFO, Jost Vertica: Likewise with us, I think you mentioned that before somehow, Achim, they were also a little bit suffering from the economies in the second half of the year and had a volume impact. So their second half margin was slightly below their first half year margin, more or less in line with the EOS development. However, still in line with our investment case and with the synergy potential that Joachim outlined, we will be by end of twenty twenty six on the run rate they need to be. And the start into the year is quite solid, to be honest. And then the next question, cost allocation difference.

Yes, in general, it will be permanent, but what you cannot do is taking the difference of the fourth quarter and multiply by four because this was a retroactive change for the full year. So the effect of the fourth quarter is then expected to be a full year effect going forward as a permanent effect. But it’s then it’s not an increase. It’s just the same effect but spread out over the full year.

Joachim Yur, CEO, Jost Vertica: Okay. Yes. And concerning the markets, typically, I would say we don’t see a big link between America’s market and EMEA markets. The link that I think you were asking for is more between the trailer and the truck markets. And, yes, indeed, typically, the trailer markets are a little ahead of the truck markets.

And that’s usually because it’s a more dynamic production. It’s a more flexible production. It’s much simpler supply chains. So if there is an increase in capacity needed, then it’s much easier to replace a trailer than it is to replace a truck. It’s also a much lower investment, and that’s why we typically see the trailer markets being faster and quicker and the truck market following that.

On the truck market, you always have an overlay of emission regulations, because the trucks are impacted by emission regulations. So if there is a tough step in emission regulations like there is foreseen for 02/1927 in North America, which is questioned right now by the new administration, then you would see a pre buy effect where our customers would try to avoid those new trucks, which are typically less reliable and more expensive to operate. And, therefore, they would buy the old ones, and that’s when we typically have this pre buy effects that that more or less overlay the the market dynamics in those markets. But we cannot I do not see a link between North America and Europe that we would say that one market follows the other. It’s more than the truck market is following the trailer market.

And as I mentioned, in Europe, we’ve seen the trader markets go down already in 2023 in the last quarter. The truck markets were still strong in the first quarter of twenty twenty four, and that has been another sign of that typical pattern that we see. And now we are seeing that the trailer manufacturers are stopping their short term work. They are improving, increasing their capacity. And we also see now the order intakes or the call offs from the truck OEMs, with a little bit of hope that they will follow, throughout this year.

I hope that has answered the question. If not, then just send us another one.

Question Moderator: Answers that you gave, Joachim also answered the next question by Nicholas Bentlauer, which was what gives you confidence for h two pickup and tangible reasons for that assumption? I think that you just answered. So probably we should go to the next one by Claudio de Ranieri. Where is the organic sales growth embedded in 2025 guidance on constant twenty twenty four perimeter? At constant twenty twenty four perimeter?

Oliver, CFO, Jost Vertica: Yeah. I can take that if you want. So if you take the midpoint of the sales guidance, I think then we are around sixteen fifty. And then for sure you have to exclude a little bit of FX topics at the moment, for sure the HUEVA acquisition. And within HUEVA, we have to take into our mind that we will only consolidate for eleven months from February to December.

Having putting that all aside, that is probably between 02%, two point five % organic growth incorporated in those guidance, which probably fits well to that picture here when you multiply this with the sales volume in each of these regions and segments and is then driven somehow by the slight recovery that we see in the EMEA regions, which at the moment we see confirmed. However, as Joachim pointed out, there’s a little bit of a development towards the second half of the year where we have to see how these things develop. There are up and downs that are possible as Joachim outlined before.

Question Moderator: I think I don’t see any more questions in the chat right now. We answered all of the ones that were posed. Now there’s no more written questions at this point.

Joachim Yur, CEO, Jost Vertica: Okay. Then I think we’ve answered our questions, and there’s no further questions online. With that, I would like to thank you very much for the interest in our company. I think we have had a quite successful 2024, considering the market environment, very good performance. And we’re happy that also our shareholders will be able to participate with the from that performance.

We’re looking forward to 2025, which will be an ambitious year to implement all the potential that we have, a big growth in sales, a growth in EBIT and adjusted EBITDA. And we also think that it’s a very nice setup for the future where we improve the resilience of our company and are well positioned to boost our profitability even further. So with that, we would like to thank you very much, and we wish you a great success in 2025. Thank you.

Oliver, CFO, Jost Vertica: Thank you. Bye bye. Bye bye.

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