Deutz Stock

Good morning, ladies and gentlemen, and a warm welcome to today's DEUTZ conference call on the first half year 2026. Please note that this call is being recorded and a replay will be available on deutz.com later today. Your participation in the call implies your consent to this. As always, please note the disclaimer regarding today's presentation, including the FFG transaction covered in this call. To get started right away. I'm pleased to welcome DEUTZ's CEO, Sebastian Schulte; the CFO, Oliver Neu; and Lars Boelke, Head of Investor Relations and Communications; who are joining us from Cologne today. After the presentation, we will be happy to receive your questions in person via the audio line.

And with this, I will hand over to Lars Boelke. Lars, the stage is yours.

Thank you very much and a very good morning from our side here in Cologne. Thanks for joining today's call. It's a kind of special call for us not only that DEUTZ grew double digit in the first half as you all know. But also that we, as you all know, recently announced our transaction that we'll also give a bit glance in this call. I'd also like to take the opportunity to thank all of you who we had the opportunity to meet in the recent weeks at various locations and occasions and of course that we're looking forward to further explain and discuss this really game-changing deal with you in the future.

Having said this, I would like to hand over to you, Sebastian, and get our call started. Thank you.

Thank you very much, Lars. And also from my side, good morning to everyone. Great that you're all joining. Let me start giving a general overview on our first half year results before I will then, as usual not only go through the business units and the details before handing then over to Oliver; but also, as Lars indicated, we'll mention again a bit of content on our FFG transaction.

Looking back at the first 6 months in 2026, we can say we are pretty pleased in how the year not only started, but how we actually moved through the first 6 months. So new orders the trend is still very positive, EUR 1.3 billion new orders. That is a 29% year-over-year improvement. Revenue was also up; EUR 1.1 billion, 11% over the respective period of last year. And the margin in the first 6 months at 7.1%. So on a very, very decent level particularly, and I will explain that later, given that in our sort of legacy business; the business unit engines, we are still seeing fairly low demand compared to historical standards.

But with that in mind, 7.1% margin is actually an extraordinary development we've seen so far. If I just break that out to the second quarter, as you see in the bottom part of the page. New orders, EUR 560 million, revenue EUR 585 million. So new orders slightly below revenue. That's not a point of concern, as you'll see later, because we had a very, very decent Q1 in terms of order intake. So we're growing here across all business units and all regions. And the margin in the end, that's the most important thing that on the margin. So bottom line second quarter was up a bit again 7.2%, a little above the first quarter and 1.4 percentage points year-over-year.

Highlights and there were quite a few. So just to keep that back in mind and most of you have been following us through the last 6 months. So we further increased our global footprint in energy with an acquisition in Latin America. We acquired the company Maxi Trust at Curitiba in Brazil. Closing happened in the second quarter as well. The profitability of engines rebounded and again, as I just said a couple of minutes ago, in spite of the still not perfect market environment, but we'll see later when we look on the margin how well we're developing here.

And very important, our business unit Service pushes on for further growth. So that was also extremely pleasing and I will elaborate a bit further the landmark transaction with regards to the acquisition of FFG what was signed at the beginning of July. Look, we announced this acquisition of FFG, Flensburger Fahrzeugbau Gesellschaft, on July 9. And since then, myself, but also Oliver, we had the chance to speak to many of you. We spoke in London, Frankfurt and last week I spent a couple of days in New York. And the reception on virtually all these investor talks was extremely positive; not only constructive, but very, very positive.

And that gives us a lot of confidence as we move forward to our Extraordinary General Meeting later this month on August 24. But let me use today also to build on the picture a bit further. I mean we are and I believe everyone who listened to us and spoke to us will feel that probably in every conversation. We are generally excited about what this combination will become and that, so to speak, is what I want to leave today with. So there are 3 things that matter.

So first of all, FFG is generally an exceptional asset. It generated approximately EUR 760 million revenue in 2025, a CAGR of around 50% per year since 2023 and that makes it one of the fastest growing businesses in all of European defense. And the trajectory from here going forward is actually what really matters because we expect FFG to generate revenues above EUR 1 billion in the coming years starting next year at an EBITDA margin, we write here how we are very specific here, on above 20%. So that is really a best-in-class asset as you can see.

And that is the destination this growth profile is heading towards and the order backlog at the moment standing above EUR 1.9 billion is what underwrites here this path. And we expect in the coming months and years obviously this order backlog to significantly increase. So more than 1,100 employees across 9 locations and more than 90% of the revenue comes from NATO customers as well as Ukraine with, at this point in time, less than 20% from the Bundeswehr alone. So important, FFG is not a German government contractor exclusively as many other assets are.

It's a generally alliance-wide defense industrial platform and that's one of the reasons why it perfectly fits to DEUTZ. Second, the program network behind those numbers is the single most important nonfinancial asset in this transaction. FFG holds certified positions across more than 30 NATO platform types, including the Leopard 2, the Boxer, the Puma, the Marder, the Fuchs, the Fennek, the M113, serving more than 15 NATO nations and the Ukraine and these are not just commercial relationships. They are formally certified, technically embedded program positions built over decades.

And that kind of institutional depth, that cannot be replicated quickly by no one and certainly not in time to capture this outstanding procurement cycle that is opening right now. So from the moment this deal closes, that entire network becomes part of DEUTZ. And third, FFG is not just an MRO operator that happens to be growing. That itself would be exciting, but FFG is more than that. It is a systems integrator with its own proprietary platform pipeline. The WiSENT 2, a multifunctional Leopard 2-based armored recovery and engineering vehicle; the ACSV, a modular armored combat support vehicle already delivered across NATO nations; and the next program base, the TAHR and the CAVS, representing substantial additional volume potential.

So this OE, this original equipment pipeline, is what gives the order backlog its duration and what gives the growth profile its structural character. Let me now turn to the structure because it tells you something about the nature of this partnership. The total consideration, as you will already know, is approximately EUR 1.6 billion. And around EUR 1 billion will be paid in cash financed through secured debt from a consortium of international banks; all secured, all signed, all without remaining risk.

And the remaining around EUR 0.6 billion will be paid in newly issued DEUTZ AG shares, which the seller family receives --families and more receive and will hold as long-term shareholders in the combined group. And third, strategic alignment, further variable performance in components, a long-term focused investment agreement and the Supervisory Board representation for the FFG families. And that last element was not incidental to this deal. It was central to it, quite frankly, because we did not want a seller who just disappears at closing.

We wanted anchor shareholders who literally have skin in the game and will keep skin in the game because then the incentives from day 1 are totally aligned with every other DEUTZ shareholder. And that makes it actually not only exciting, it makes it also extremely trustworthy and built for the medium and long run. So the FMG families, as I outlined, they will join at a 29.9% stake. And that is a structure I'm extremely proud of because it serves, as I just explained, our shareholders; it serves the interest of the combined group.

Let me now turn to the earnings profile because I want to be as precise as possible about how the accretion picture will build. So the share issuance creates initially a dilution of approximately EUR 65 million new shares. But FFG's stand-alone earnings contribution on a revenue base of approximately EUR 760 million taking the '25 numbers and at the best-in-class margins provides already a very strong starting point that offsets that dilution on a pro forma basis pretty much immediately. From there, the accretion picture compounds in 2 further stages.

So the early cross-business synergies such as engines, service network, logistics; they will add further earnings up. But more importantly, the conversion of FFG's already contracted order backlog and the ongoing MRO business. So that backlog, as I just explained, stands give or take about EUR 1.9 billion and it is awarded, it is contracted, it's signed and it is converting. So that is the near-term earnings engine, which will support this combined business. It does not depend on integration execution or qualification cycles. That's important and that's a message we kept sharing in all our investor talks.

This business, this acquisition makes already commercially, financially sense without additional synergy potential. Obviously it doesn't mean we're not going for that, but it's important. It makes sense without the synergy, the synergy add on top of that. And longer term the conversion of FFG's broader program pipeline into contracted revenue; the CAVS as I mentioned, the ACSV expansion, WiSENT 2 growth beyond the current 3 nations; extend the profile considerably and well beyond 2030.

We do expect revenue growth in line with double-digit NATO defense budget growth rates and that is a structural tailwind not a cyclical one and that adds to the resilience of DEUTZ as a group. So what I can say today is that the direction on earnings, on cash and on leverage is clearly positive from the point of close. The headline is this, we did not do a dilutive deal and we hope for synergies to catch up. So the accretion is there from the start, from the very beginning grounded in contracted revenue and it compounds from there and we will of course provide further guidance once we are through to closing. Right.

Having said that, let me now move on to the development of our business units. Let me start with the business unit Engines. The headline is very clear, profitability recovery accelerates. So we are continuing here with an outstanding team to implement our portfolio and footprint strategy and just a few highlights. So at our Porz plant, one of the largest DEUTZ plants here in Cologne, the performance program shows already first savings. There's a lot of efficiency improvement -- double-digit efficiency improvement on the assembly line 5. We do see higher cost savings due to a quicker relocation of products from Cologne Kalk.

That's a bit of a satellite plant here, which we just closed. Literally last week was the last. Last week Friday, we finally closed it and we moved the product from Kalk here in Cologne to Spain at much, much better cost base. That went in line or that goes in line, both aspects here, with the voluntary leave program for the Cologne site production, but also production overhead so nonvalue-adding positions here where we'll see around 100 to 120 FTEs leaving to further improve efficiency at conditions which are fair for the employees, but also favorable for the business.

Then moving a bit on portfolio. The new G-Drive program. Here we talk about a couple of new engines, including actually a 24-liter engine for genset customers. So here we're starting already with the first fixed orders. Next year we'll see further growth in that, but important is it works. Customers are ordering these products. Very, very structurally strong demand and a very, very good cost base with the use of partners here. Partner is a good point. We are bringing a very long-lasting, but long sort of hibernating partnership with Chinese FAW. We bring that back on track.

And here for the best cost country supply of some of the legacy engines, which does not make sense to deliver them from high-cost Germany anymore. But there is still a structural demand all over the world and we do that together with a partner in China. China is the next point here as well, our joint venture with Sany in China in Changsha. It's progressing quite well now. First time I can really truly say we're making really good progress here, particularly not only compared to the previous years, and that's also because we made a bit of a change there.

We're using also more engines there for power generation rather than what it was initially designed for for the use in heavy-duty trucks. So things are moving quite well despite the fact that the order intake is not on the level we'd like to have it going forward, but it's important to focus on what we can influence and we're doing that here pretty well. But bring that to numbers as well. So the demand in the second quarter slightly increased year-over-year. Market is still a bit under pressure, but this is really not to be seen with a point of concern. It's moving pretty well.

We also now have a fairly healthy order backlog of EUR 385 million. That's significantly higher than the EUR 315 million we had a year ago. And profitability, I just gave sort of the qualitative information on that. Cost savings from our Future Fit program. That was not the program I was just mentioning with the efficiency in Porz and the closure of the facility in Kalk. That was taking out mainly engineering resources last year here in Cologne as well. That program is pretty much not only fully on track, it's completed. All the savings we had aspired to achieve have been realized. So that's very, very successful.

Then obviously there are always cost increases; labor costs, material prices; but we managed pretty well to offset these cost increases with respective price increases as well. And you see here and I will not go through all the numbers in detail, but you see that we moved significantly up from '25 to '26 in the first quarter already with 3.7% margin. Now in the second quarter, 3.8%. That is still far away from 7% or 8%. But again given the occupation of the factory, that's pretty good. And important news going forward. As soon as there will be an uptick in new orders, gross margin in this business will immediately kick in at double-digit level and then we'll actually see a perspective, which we will enjoy very much.

Let me move on to the next business unit, which will be Service. So here's about growth. It's about growth and performance and we have also, and we'll show the numbers in a bit, a very, very healthy order backlog. So we're expanding here as DEUTZ Service as an authorized service partner also for machine manufacturers and service partners beyond the DEUTZ Engine, particularly in the United States, in the Nordics as well as with the implementation of our service business for the Daimler Truck engines because we exclusively sell to off-highway customers.

The expansion particularly has continued in the United States. We made another acquisition in California, G&T Truck Repair that we acquired in June '26. So the footprint in the U.S. and in this case in California, which was a bit of an untapped area before, is now improving. The DEUTZ power centers in the United States, they grow quite nicely; solid, solid field service growth. And very important also that we are realigning our dealer organization in the DACH region, particularly in Germany.

Those who follow us for longer know that we've been working in the last 4, 5 years quite successfully on in-sourcing or in-housing external dealers, but we didn't really touch the German network here. We're changing that now. We did actually terminate quite a few contracts and are now renegotiating them and that's what we mean when we're talking about realignment of the dealer organization here. So we see a very, very good progress as well. Parts trading business traditionally the one -- the part of service with the highest margin is continuously expanding as well and that's really a bit going forward.

Obviously DEUTZ Services is that asset what will in our ambition going forward not only support engines, but more and more actually support also the other business units, most notably Energy as well as Defense. And we're working here quite nicely, particularly on the genset service expansion with Frerk in Europe, but also in the U.S. with BlueStar. Let me go to numbers as well. So new orders are up. You see in the second quarter, I'll focus on the second quarter now, new orders EUR 152 million, revenue for the first time above EUR 150 million.

So obviously here showing or benefiting from all the growth initiatives I've just mentioned earlier. And the order intake in the first half is now the 16.1% increase year-over-year and that is exactly the level we would like to see in growing this important business. Order backlog is not as relevant of a number like in engines because the through time of the business is, as you can see, by EUR 57 million. I mean it's much, much quicker. But important is compared with the number from June '25 where it was only EUR 42 million. So you see also here a healthy development.

Very nice and we are celebrating every record of course to keep the team motivated. And June was the so far highest monthly revenue of EUR 55 million. So that means obviously the entire team is aspiring to beat that number at the next possible opportunity and things are looking quite nicely that this will obviously happen still in the year 2026. The margin is a little bit diluted, but that's not a point of concern. That is simply because we're preparing for future growth. Adding more structures, adding technicians because a lot of that growth only works with technicians.

We do of course focus more and more also on efficiency, on technician utilization. So that's why it's not a point of concern that the margin is slightly diluted, but also bear in mind on a very, very high level. And on top of that, obviously we grow more in working on the machine than selling spare parts. So that also contributes to that slight dilution of the business. But bear in mind on a group level, whatever we do here is always margin accretive.

So let me move on to the next business unit, which is Energy. I mentioned it in the highlight page at the beginning already. We acquired Maxi Trust in Brazil with that acquisition expanding the coverage to Latin America as well, but also very important growing market. There's further diversification of our U.S. customers with BlueStar. Distributor orders are record high. We like direct orders as much as we like distributor orders of course, but it's always good to improve and increase both foots we're standing on here, both legs are standing on here.

The ramp-up of Frerk for the second half is going quite well. The new assembly facility in Schweringen and Niedersachsen is well on track, the commissioning here. And now obviously, very important that this great business unit we have been creating over the last 3 years is now showing and proving that the equation 1 plus 1 equals more than 2 still holds true. The teams working together, the international teams working together pretty well here to really expanding and building a global business. And this year, we are already targeting and when I say targeting, it's actually we're planning and we're clearly building on achieving more than EUR 300 million very profitable revenue.

And the team has been super excited to grow that number to above EUR 1 billion in the next 5 years. The market is supporting that. Teams are excited to do that. So that's another great growth story that's developing. And a little bit also an exciting outlook. We are working here and elaborating a pilot case for the use of Agentic AI in the business development in sales in actually 2 facilities. There will be something probably we can present in the next months because obviously it's important to support this strong growth without adding proportionally human resources on that because we want to ensure that more growth gives extraordinary more profitability.

Let me turn into the numbers for Energy already and here you see an ever-growing business. So new orders in the second quarter at EUR 55 million and that includes EUR 10 million from the Maxi Trust consolidation. But there's also now an extremely strong order backlog now of EUR 220 million. So that shows sort of the forecastability, planability, reliability in this business model is one of the strongest in our portfolio particularly as you compare it to the first half of last year.

Across our 5 business units, Energy is the strongest growth contributor up EUR 37 million year-over-year driven obviously by the companies who joined us throughout this year, Frerk in Germany and Maxi Trust in Brazil, but also organic growth especially in the United States and also in Morocco and China. There is now, speaking on the margins, significant recovery in the second quarter compared to the first quarter. So we're now at 13.7% in the second quarter. We explained that when we showed the first quarter numbers that the first quarter was a bit of an outlier due to the consolidation effects and some seasonality.

And here you clearly see that we're moving already significantly up and the outlook for the rest of the year is also even higher than that both obviously in terms of revenue. I mentioned the EUR 300 million earlier, but also the margin level. So the good thing is here, as you can take that from the strong order backlog, the predictability not only in terms of revenue, but also in terms of profitability is extremely solid here.

Let me move on to business unit NewTech. Revenue nearly doubled. That sounds super exciting, but it's still on a fairly moderate level. We do, however, work here obviously on our presence. DEUTZ will now act under the brand DEUTZ NewTech. And Urban Mobility Systems as well as Futavis have been renamed and they're now operating under the DEUTZ NewTech brand. It's important now to position ourselves here with the strong brand we have. We're now in this business converting the pipeline into revenue. scaling further projects, scaling production delivery capabilities, enhancing also efficiency in R&D. It's all about focus, focus, focus.

And there are many, many market opportunities; but we are always, as you know, very transparent on the outlook in the different business areas. This is obviously the business unit, which is most difficult to predict because it depends a lot on sort of overarching market and industry trends. Important for DEUTZ is that we have to be here, we have to be ready when the market -- when the demand picks up. Then we are there. And it's a bit of an option value if at some point the engines business gets under more pressure from conversion to battery electric products, important is to be ready and that's exactly what we achieve with our NewTech business.

So in terms of numbers. New orders in the first half, you see already we talk about completely different levels, but EUR 7 million in new orders. That is still reflecting that muted demand which I just mentioned. Backlog is at EUR 6.5 million. It's even a little lower than what we had last year. But again with the sort of single-digit or low double-digit numbers, sort of percentage improvements or deteriorations are not as meaningful as obviously in other more established businesses.

The revenue in the first half nearly doubled, particular from the delivery of a few electrified excavators. Those go with solid gross margins, but obviously not strong enough. The business is not strong enough to bring the EBIT into breakeven. But you can also see profitability has been improving compared to previous years because again focus, focus, focus on R&D activities as well as cost discipline.

That brings me now to DUETZ Defense. DUETZ Defense becomes really like a core pillar of the business. We are continuously committed and working on the DefTech ecosystem. You all know about our investment and partnerships in ARX as well as in TYTAN. With ARX, we launched the first series production of the GEREON ground system in Ulm at our facility. It's not a huge series, but it's more than just a proof of concept. So that's great. There is more we are developing, particularly also in terms of resilient energy solutions.

We introduced at the Eurosatory in Paris a partnership with HDC Solutions. We do also further ramp up the SOBEK activities. We are talking SOBEK, as you know, we talk about battery electric drive systems for unmanned drones -- for drones. And we're working also continuously with R&D and new powertrain solutions. There is a lot of interest. There are, also after the Eurosatory, quite promising orders. Not all of them we can disclose for confidentiality reasons, but the vector is clearly positive.

Also new orders from a drone package for the German Army. One of the 3 suppliers of the German Army, they build on our SOBEK drives. And as I've just mentioned, Eurosatory was a success for us. Many, many, many leads for military engines, power packs and hybrid systems. And of course, as I mentioned earlier, the FFG acquisition was signed. In terms of numbers, we see substantial order growth in the second quarter '26 versus the previous year. The order backlog is now at EUR 43 million compared to EUR 27 million beforehand.

Also the revenue is 47% above previous year now at EUR 52 million and the growth is primarily coming from defense and not from others. Bear in mind that we have also hired HJS, the engine aftertreatment specialist part of this subsegment here, for which by the way the successful turnaround continues. Results are moving very much in the right direction. That is certainly not the focus of what I'm mentioning here. And the EBIT is also developing as expected in a nice way. It's a bit lumpy, both revenue and EBIT is always a bit lumpy because we don't talk about serial business.

So 1 quarter you have more, 1 quarter you have less. Important is obviously to look in the trends together. However, before moving on, what you've just seen here is DEUTZ Defense as it stands right now. Obviously, the acquisition of FFG will change the scale of that picture totally. Our defense business will then exceed, as I mentioned earlier in the call, EUR 1 billion in revenue already next year 2027. And with that becoming a really, really not only an integral part of the strategy, but a very, very relevant part of the business in all aspects; revenue, profitability, number of employees and so on.

FFG will operate as a stand-alone unit within our Defense business unit. Its management, its workforce, its customer relationships; they will be fully preserved. So we will create 1 strong Defense business unit around FFG. And what DEUTZ adds is industrial manufacturing scale, propulsion technology across the full power range relevant obviously to FFG's platform portfolio and as extremely important a NATO-wide service network and we can be quite proud of that.

Together, this Defense business unit will become the only European domicile platform covering the full land vehicle life cycle; propulsion, integration, MRO and modernization; that under one roof. So that opportunity exists in European defense today and we together with FFG, we are able to capture it. Right.

Thanks for listening so far. And with that, I will hand over now to Oliver, who will focus on the financials in a bit more detail.

Good morning. Warm welcome also from my side. Well, let's get started. After a strong Q1, we saw an even stronger Q2 and that shows our transformation is on track. Building the next DEUTZ is on track. So just to remember, beginning of 2024 we still were in a 3-shift operation on the engine business and that was where the economic downturn on the engine side, the cyclical part of our business kicked in. Since then since the mid of 2024, we saw that we increased our margins in 6 out of 7 consecutive quarters in a row. That is a great achievement.

That is a direct result of our strategic transformation. That is a direct result of our top line measures, of our bottom line measures; cost discipline, cost reduction on the engine side; but especially also growing service, growing defense, growing energy. And as you heard earlier, we need to keep in mind the cyclical part of the business so the engine business still remains on a rather low level. That means the 7.2% margin we achieved in Q2 is a margin we achieved in a weak engine market. And once the recovery kicks in, we're going to see the full positive operational leverage driving margins even higher.

Going to a bit more details on the financials. We see here, as you heard, the new orders 28.7% up. Yes, there is some inorganic effects in that especially due to the first-time consolidation of the contributions of Frerk, Maxi Trust and G&T. That in total adds up to somewhere around EUR 170 million in the new orders. But even taking that out, there is a positive book-to-bill ratio above 1, which means the business is also organically growing, which is a good sign. On the revenue side, we see an increase here of 10.7%. All Business Units are growing, especially growth is driven here by the energy business with the highest growth in absolute terms.

In terms of regional split: 55% revenue in Europe, 27% in the Americas, 11% in APAMEA and only 7% in China. So no relevant dependency, as you know, from the Chinese business. In terms of EBIT, we saw a significant improvement going up 43.1% to almost EUR 80 million. That is a good achievement. And of course consequently, also net income increased significantly to EUR 33.5 million and that is even after taking into account the EUR 12.5 million provision we booked for the voluntary program.

So not the Future Fit program we saw last year, but the voluntary program now where we're addressing also the operational part of the engine business especially here in Cologne. Talking about R&D, CapEx and working capital. R&D quota is going down in terms of sales to 4.0% after having seen 4.5% in first half 2025. So that is an achievement. The absolute figures here stay rather constant. However, we need to be aware that we shift especially R&D expenses from NewTech where we show way more R&D activities streamlined and focused towards what market is demanding and on the other hand, increasing it accordingly in the defense business.

On the CapEx side, what looks as a big increase here at the first glance is actually mainly driven by the renewal of a lease contract for one of the sites, which contributes EUR 12 million to EUR 13 million out of that increase. So the biggest portion of that while the traditional classical CapEx outside lease is only slightly increasing, that slight increase is mainly due to some IT infrastructure projects and software projects, which we are currently conducting around SAP.

On the working capital side, you see an increase by 21% to 21.5% of sales. While here we need to keep in mind that the figure is a bit distorted due to the acquisition effect. We acquired several companies as you know; Frerk, Maxi Trust and G&T. The working capital is included here. However, not the 12-month sales figure is included. So if you would normalize that, working capital quota would be reduced by 1.4 percentage points or 1.5 percentage points roughly bringing it to a lower level. However, we also see that inventory was increasing throughout the first half of the year.

That is of course also a direct result of being prepared for delivering on the improved order situation going forward especially in the second half of the year. Well, talking about inventory, that was also the main driver for the cash flow development in Q1 besides the operational results. So we see the cash flow from operating activities went down a bit to EUR 32 million. That is mainly caused by higher inventories as I just pointed out, also especially to be prepared for delivery on the good order backlog, but also some severance payments of people that were leaving as a result of the Future Fit program.

So result effect last year, cash flow effect coming in once the people are leaving and those were the 2 main drivers. That means in terms of free cash flow, it converts to before M&A minus EUR 29.7 million. Here we need to keep in mind that the year before was positively distorted by a few items as we pointed out at that point in time. So we come back here more to a normalized level where we see the typical simplicity that H2 is significantly stronger on the cash flow side. In terms of net debt, that's a consequence on the free cash flow before M&A, but of course also then reflecting our several M&A transactions. And that is the reason why we are going up here to EUR 520.5 million, including roughly EUR 92 million of leasing.

On the equity side, equity ratio remains strong. Yes. However, it dropped a bit from 51.3% to 43%. That's the result of the acquisitions we conducted. So we have the debt finance acquisitions, all of them debt finance, and that is basically bringing down the equity ratio, but still to a very solid level and our targeted level of above 40%. In terms of leverage, yes, we went up, 2.1x. That is including leasing here. If you take out leasing, we are 0.3x lower so at 1.8x without leasing and that is a moderate level.

Still. however, as you know, we will go up a bit in the leverage as of closing of the FFG transaction as we explained it over the last weeks. So that will bring us to a leverage in the range of more or less 3x, but with a very strong deleveraging potential of the combined group going forward.

With that, I hand over to Sebastian again. Thank you very much.

Thank you, Oliver, for providing the details on the numbers. Let me first give an update -- not update, confirmation of the guidance. Okay. Let me first start giving an update or confirmation of the guidance. So as you know, we initially gave that guidance with at that point a bit limited market visibility at the end of February. The limitation of visibility at that point because there was this various crisis; the Iran war, obviously the Ukraine war and so on. But we can now again confirm that there is no direct impact, nothing substantial. I mean always impact, but all very manageable as you can see also from our numbers.

And we also see that our portfolio diversification is now really paying off. We used to be a cyclical company, a cyclical business, a cyclical share with that high exposure on the combustion engine, on the construction sector, the agri sector. And obviously that still is there, but it is becoming less and less relevant because our service business, our defense business, our energy business is not due to those cycles. It's actually embedded in a very, very strong economic environment. And in that sense, we're very happy to confirm the guidance.

The revenue range between EUR 2.3 billion and EUR 2.5 billion. The EBIT margin between 6.5% and 8%. Half year down at 7.1% so it's pretty in the middle, but we're expecting as usual a bit of a stronger second half and this is not due just some hope on the engine recovery. We see signals here as well. We see signals here as well also moving into July. Orders are picking up nicely and still not like plus 20% level. That's also clear, but things are picking up nicely. But even more important, the new additions to the portfolio, most notably energy and defense, we expect for both of them a stronger second half than the first half.

That's why we are extremely comfortable that we will achieve that guidance and probably not on the lower end. So yes, that's pretty much my confirmation of guidance. Let me just briefly reflect on what Oliver and myself have just shared with you. So we're continuing to grow in energy; 2 acquisitions, but also that business or that part of the business, which is already with DEUTZ for longer is developing very, very nicely; U.S., Morocco, China. Profitability of engines rebounded. I cannot reiterate or repeat that more often because we have to focus on what we can influence.

And the global development of the construction market we cannot influence, but we can influence in which markets are we active, in which fields are we playing. So that shows why are we moving in energy and defense, why are we building -- doubling down on service. And of course we can influence cost position as well as product portfolio and engines. And that is exactly what we're doing. And that's why we're now in an engine business on a level of profitability that was at low level of occupation in the past completely unthinkable.

But that means also in turn once the market is picking up even stronger than it's been picking up in the last month this year, we're actually moving on really nicely there as well. Service growth I mentioned and the deal with FFG I also spoke about. But on the deal with FFG, I mean we will -- obviously over the next months, we will give -- the more we have, we will give more updates. But it's really a transformational transaction for DEUTZ because we are adding more than EUR 1 billion very profitable revenue to the business.

And that will bring DEUTZ not only on a revenue basis, but more importantly, on a profitability level on EBITDA, EBIT as well as free cash flow in a completely different area. And we are still, as you know, valued a bit like an engine maker with a multiple depending on where we are in the valuation, sometimes 6, sometimes 7 in terms of EBITDA multiple. And we truly believe that with the portfolio we're now working in energy and defense in particular, it's not nearly reflected what valuation potential DEUTZ has. So time will obviously support that, but we are looking ahead quite excitedly about what's yet to come.

Let's move on now, please. So in terms of time ahead of us, the signing of the transaction we did at the beginning of July, we now first half year results. In 3 weeks, 24th of August, we'll have the Extraordinary General Meeting. It's going to be a virtual meeting where we'll invite or we have invited shareholders to vote on the capital increase relevant for the acquisition of FFG. So far, we received a lot of extremely positive feedback from many, many institutional investors. Also the proxy advisers have issued recommendations to vote for that. So we received that extraordinary result.

By the way, the first relevant and very relevant antitrust approval from the German Federal Competition Authority has been received last week. So that's also another sort of implementation risk which we never considered as a risk, but it's always good if these steps have been completed. So we expect by the end of this year, we're writing here potentially by the first quarter. But at the moment, our assessment is rather the end of this year, we expect the final regulatory approvals from other jurisdictions to be granted and thus the closing of the transaction.

So that's where we stand right now. And in that sense, we would like to thank you for listening and obviously, as usual, look forward to your questions.

[Operator Instructions] We already have the first hand up from Lasse Stueben.

My first question would just be on the general market environment you're seeing and how Q2 progressed versus your expectations from Q1. I'm just wondering if generally the order intake dynamics, I'm guessing May wasn't fantastic particularly for engines, but I could be wrong. So I'm just wondering you briefly commented on orders picking up nicely in July, but would be good to just get a bit more color on the run rate coming out of the second quarter into Q3.

Lasse, thanks for your question. So first of all, it was actually fully according to our expectation not beyond, but also not below. So we always need to bear in mind that we had a very nice jump in order intakes in the first quarter and that obviously leads in terms of engines to higher revenue than before in the second quarter and we were slightly below revenue in terms of order intake in the second quarter, but that's very slightly. That's pretty much, I would say, not relevant. What we see here at the moment is particularly in construction, there are very positive signs.

If you look on sort of our geographic end markets, just take a look at the United States. You know that our main customers in the United States are Terex, JLG; their end customers for example is a main customer, United Rentals. Look at how they develop. They have given also updated numbers last week and very positive signs. And so that obviously translates also into order intake at us always a little bit of a delay. They need to work off their inventories. However, that's as much as I want to say about how we moved into July.

Obviously, July we'll report in October when we report Q3. But in principle, I can say to give you a bit of light, U.S. is going nicely. In Europe, some customers are increasing orders. Others are still a little reluctant. Also bear in mind, it's July, August now so that is not the time in the year where construction customers are really ordering. But what we feel is that potentially after the summer break, things will become more clear. But in principle, as I said, fully according to expectations and fully according to also what we put out on the guidance for the year is pretty safe.

Okay. Perfect. The second question is on gross margins. These were down a little bit in the second quarter. It looks like you had the same dynamic last year. So I'm just wondering sort of what's the driver of that effect in the second quarter versus Q1?

Yes. I mean that's a typical seasonal pattern that you saw. A little bit on the gross margin side that Q2, as you correctly pointed it out, is slightly lower. However, we're expecting that especially if you look towards the second half of the year, to increase again, What we're going to see then is basically especially the newly acquired or newly builtup businesses; especially energy, especially defense, especially also the service business; is structurally going up. The only impact in margin dilution we see is a bit on the service side to the effect that Sebastian pointed out earlier. That is if you acquire businesses which are slightly below the current margin level, but significantly margin accretive on group level, that should work also out on the second level. And of course the biggest impact is then from an expected recovery on the engine side, which has of course the most important impact on the gross margin due to the pricing power working leverage.

Okay. And then the third one is on the OpEx level in the second quarter. I mean so that was up again. I mean that's up materially year-on-year, but also on the first quarter. So just wondering is that sort of the right run rate for the remainder of the year and also looking into '27 or how should we think about that?

Well, I wouldn't talk about the right or wrong run rate. I think what you need to keep in mind we are consolidating additional businesses. So we acquired Frerk, we acquired Double Down end of last year, we acquired SOBEK end of last year, we acquired Maxi Trust and so on. So on the operating cost also SG&A cost, we see that those costs are coming into the game. And ultimately, we look at the EBIT margin and that is what counts and the EBITDA margin and that is where we're expecting the further increases.

Makes sense. And then the final question is just can you give the organic revenue growth figure for H1 or the second quarter?

Yes, I can give it. Let's say for H1, if you take the acquisitions we conducted in H1 so Frerk, G&T, Maxi Trust into the game, into the equation; then you have approximately EUR 170 million, 1-7-0 order intake and almost EUR 30 million revenue. If you include also the acquisitions we did last year in H2 so Solvay, DEUTX-FAHR Turkey, Double Down; we talk about in total including the others of approximately EUR 200 million impact on the order intake and approximately EUR 50 million impact on the revenue. If you want to have a pure like-for-like comparison H1 '25 against H1 '26.

Perfect. Very helpful. And just final one. Would you be happy to disclose the engine volumes for the first half? It might be in the report, I might have missed it.

Yes. I'm super happy. 68.x [indiscernible]

And in between, Mr. Neu, could you get closer to the laptop of the microphone. And next line is Stefan Augustin.

First is actually a clarification because you mentioned the EUR 1 billion for FFG and then for defense. So I just want to clarify do you see for FFG as a stand-alone on an organic base the EUR 1 billion for '27 or has there been a statement for the Defense business unit overall, including acquisitions?

So indeed, I mentioned that FFG will achieve a revenue above EUR 1 billion next year, probably a bit above EUR 1 billion. And the statement that the Defense business unit will be above EUR 1 billion also holds true of course because it doesn't have a negative revenue, but we're working. We're expecting on the sort of defense and others as it is right now also growth year-over-year. But what we're not providing as of yet is a very detailed number for '27. Very simply, as you know, we're conducting our planning only later this year and I don't want to by accident give an outlook or like a guidance for the next year. So that's why, unfortunately, we'll have to keep it a bit more on a high level with above EUR 1 billion at a very attractive margin and everything else will follow later through the year. I hope you understand that.

Sure. Fully understood. The second one is then a bit on the order intake in the energy business. We know it is lumpy. There might be possible projects at Frerk. There might be dealer orders at BlueStar. So do we need to brace ourselves a little bit for Q3 also being a bit lower than a large chunk in Q4 or is that a bit more evenly distributed in the second half? Because for the annual run rate, we would need to see a bit of a pickup from where we stand in Q2.

Yes, yes, but we see that. I mean our current assessment when I said earlier above EUR 300 million, I think, Oliver, the right number is EUR 320 million, EUR 330 million. That's what we expect on a full year basis at the moment. And there's very, very little risk in that because that's almost covered by fixed orders, a little bit of distributor business in the U.S., but that comes in pretty reliably. So here I see hardly any concern honestly speaking. But of course the second half is stronger than the first half. First of all, because in the first half neither Frerk nor Maxi Trust has been part of the entire 6 months. I mean they both joined a bit later.

And secondly, we do have a bit of a seasonal effect at Frerk, we had it last year as well. Obviously, you can't explain it with something like harvesting season, but it seems to be the typical in this business that orders are being placed throughout the first half, but they're being delivered rather in the second half. So we are very, very bullish or, let's say, positive on the outlook on energy in the second half. I believe that's probably the strongest foundation we have in terms of -- so if I were to bet money, I would put a lot of money on everything. But I would even put more money on the second half of energy, if you understand.

Okay. The final one is actually, I'd say, a bit of a combination. First of all, you had some one-offs for closing more efficiency measures in the engine business. Now FFG comes a bit on top and understanding that or to my understanding, we will have some [ serial ] production, which is largely taking up for the brunt of the sales increases of FFG. So is there an idea that you can harvest a bit more like sending out employees maybe from the direction of Cologne rather to Flensburg altogether with the idea of India and then do we need to brace ourselves for a bit more one-offs in the second half?

Not significantly. I mean so first of all obviously FFG is building up the plant. It's well on track. It's in Handewitt, which is a neighboring district to Flensburg. We've actually visited it on Monday. It's looking very nice in terms of development. They will have the Richtfest. I don't know what it is in English, honestly speaking, but one of the important milestones where you celebrate that the building is -- the structure of the building is completed so that will happen soon. And obviously they require also additional personnel. Of course we'll offer people working here to move there as well.

Let's see whether that's interesting. It's a very nice area out there so I wouldn't necessarily say no because other people go on vacation there. So we may actually send people to work there. It's a bit of a privilege. However, we also do not see beyond the 100 to 120 FTEs, which we'll take out as part of that redundancy or that voluntary redundancy program here. We at this point in time do not see any additional need to structure reductions here at the engine business.

Obviously we're continuously working on efficiency gains, but probably the number we mentioned will be more than sufficient for this year as well because bear in mind, we've done a lot of work in terms of reducing permanent or replacing permanent by temps already in the past years. But efficiency measures will continue year after year, but not necessarily for the second half of the year.

Yes. On your questions regarding one-offs, yes, there are going to be a few million small one-offs of course, but that is typically in line with what you are expecting with a transaction of that size. A bit on the typical professional consultants, you need and on the financing side of course, but nothing extraordinary high.

And with an eye on the time, we have 2 more raised hands. The first one is from Pal Skirta.

Can you hear us? We can't hear you.

Pal from Bernstein. I have a question on the free cash flow. You've confirmed high double-digit million for the year and H1 came in at minus EUR 30 million. That implies a swing of well over EUR 100 million in the second half of the year. Could you please break that down between the working capital release and operating cash? And specifically how much of it depends on the EUR 79 million roughly inventory buildup converting in the second half of the year?

Yes. Sure, I can do so. Basically they are exactly the 2 elements you mentioned. So on the one hand, we are expecting a very strong operational performance throughout basically all business units or the 4 relevant business units in H2. That's going to convert to cash. And on the other hand, we are actively addressing the topic of working capital and we started a program to bring that down a bit as we always do every few years. So we see good potential there.

And that's going to be like compared with current levels, we're expecting a EUR 60 million, EUR 70 million reduction throughout all the layers of working capital and of course a big part of that is related to the inventories. And that is also if you look at the history of DEUTZ, you see typically that kind of simplicity that the H1 is weaker in terms of cash flow. The H2 is stronger and you're building up for seasonality patterns, certain inventories throughout H1 and that is then reverting in H2. So I'm not at all concerned about that.

And last, but not least, the question from Klaus Ringel who also joined us via phone today.

Can you hear me now?

Very clear.

One would be on the outlook for 2026. I mean you already mentioned that you're feeling quite comfortable with the guidance. And looking at the H1 performance, you're already comfortably in the range for adjusted EBIT margin. In terms of revenue, you need a bit of a pickup in H2. So would be interested to hear a bit your view what will be the drivers in terms of business units here for the pickup in revenue in H2? That's the first question.

Yes, pretty much all, but NewTech because NewTech is just not relevant in terms of top line at the moment. But we'll see a bit of an uptick in engines, a bit, but that's well in line with the current sort of bottom-up projections from the teams. So there's no sort of hope in a way left. Secondly, I mentioned it earlier already, that the second half in energy is larger or expected to be larger for 2 reasons. First reason because Maxi Trust and Frerk haven't been part of the group since the 1st of January. So that's a very, very simple reason in a way.

And secondly, in particular Frerk, based on the visibility in the order book, we do see more in the second half than in the first half. So that's energy. On defense, we received particular at SOBEK a few relevant orders to be delivered in the second half. They do relate to the drone package that the German Army has ordered with 3 drone suppliers, one of them working with DEUTZ in particular. These orders have been placed. There was actually an additional order very recently.

Here we do not talk about a huge top line, but a healthy margin as well as some diesel engine orders from other NATO customers coming in. And on the service side last, but not least, we have for the first time surpassed EUR 150 million the run rate on a quarterly basis and the run rate in June and also in July is well above the EUR 50 million. So yes, that's pretty much supporting that top line prognosis for the second half.

Okay. And the second one would be more on the medium term. I mean yes, you have the medium-term targets more than EUR 4 billion sales, 10% EBIT margin plus. But obviously including FFG, it will be much more than that. So in your view, what would be the right timing for updating these targets? Is it already when you get approval for FFG, it's when FFG is closed the deal? Or what's your view here when we could hope for an update?

We do plan an update in the second half of this year. What I can say, well, this is very simple to say because we are already in the second half of this year and I know that we will give an update later this year. What I can say already and I mean you implied it with your question, Klaus, that our EUR 4 billion target, which we initially projected for 2030; we will achieve much, much, much, much faster not only the top line but also the bottom line.

I wouldn't even rule out that we already achieve this next year or we are like a little short of that. But we require because this is a big statement to be made and obviously we'll need a bit of a more bottom-up planning particularly on FFG side. There are changes in accounting principles. We're moving from Handelsgesetzbuch from a German HDB into IFRS. So obviously that doesn't change the business, but it changes the realization of revenue and of profit. And we want to run that exercise diligently before informing the capital market on something.

Because the worst thing we would be we say oh, we're going to be at the EUR 4 billion, which, as I said, could be possible. And then due to some accounting issues, well, we're at EUR 3.5 billion only, that would be terrible. So that's why we're working on that diligently. But as always, Klaus, you and the other analysts, you will be one of the first to know.

And with this, we come to the end of today's conference call. Thank you, everybody, for joining and your shown interest in DEUTZ. A big thank you also to you, Sebastian and Oliver, for your presentation and your time. From my side, it was a pleasure to be your digital host today. I wish you all a lovely remaining Thursday around the world. Stay safe. And with this, I hand back over to Sebastian for some final remarks, which concludes our call for today.

Yes. Thank you very much. Thanks for being our digital host, but also thanks, everyone, for dialing in. Thanks for your interest in DEUTZ. Thanks for your trust in DEUTZ in the share and for your shared excitement on what is ahead of us. And I just want to conclude. This is really a pivotal moment for DEUTZ as a company. We have always talked about the transformation. We have been also working on the transformation in the last years. We are on that journey since 2022 really waking up a company from a bit of a long-term sort of sleep sometimes it's the way it feels. And we did the homework in the first 2 years fixing basics, bringing the company into a profitable position, out of which we are then able to grow.

And I'm not saying it only started with that FFG transaction because obviously we've done a lot of very great things in the past. But now this is the biggest step and it's a step which we tested and prepared very diligently and we feel we know that this is the right asset at the right moment. And what I can promise is that DEUTZ in '27 will be completely different, larger, more profitable and also eventually a more valuable company. So it's great that you're interested in DEUTZ for us, but also for yourself. Thank you very much.

Good morning, ladies and gentlemen, and a warm welcome to today's DEUTZ conference call on the acquisition of FFG Flensburger Fahrzeugbau. Please note that this call is being recorded, and a replay will be available on deutz.com later today. Your participation in this call implies your consent to this. As always, please note that -- the disclaimer regarding today's presentation.

And to get started right away, I'm pleased to welcome DEUTZ CEO, Sebastian Schulte; the CFO, Oliver Neu; and Lars Boelke, Head of Investor Relations and Communications, who are joining us from Cologne today. [Operator Instructions]

And with having said this, I hand over to you, Sebastian. Please go ahead.

Yes. Thank you very much. And also from my side, good morning, everyone, and thanks for joining this morning. And whether you're here in the room with ourselves or dialing in from wherever it is, London, Frankfurt, New York, just to give a brief introduction, my name is Sebastian Schulte. I'm the CEO of DEUTZ, and I'm joined here this morning, as we just heard, by Oliver, to my right, our CFO; and Lars Boelke, our Head of Investor Relations, Communication and Marketing as well.

And it's a significant morning for DEUTZ. And I want to actually say it very, very openly, very plainly. I'm genuinely pleased to be standing here today this morning with you because the announcement we just did is, and that's without question, certainly the most consequent strategic step this company has taken in a generation.

Over the next 30 minutes or so, our CFO, Oliver Neu, and I will want to talk you through why we are acquiring FFG and what it means for DEUTZ and what it means, of course, as well for you as investors. So let's get into that.

So here, you see how we structured this morning. I'll talk you -- I'll take you and talk you through the overview and the strategic rationale. Oliver will then walk you through the deal synergies, the proposed transaction mechanics and the financing, of course. And we will close together our next steps because there is a clear time line and a clear ask of the shareholders. But let me now give you the headline picture before we build the detail beneath it.

So first of all, DEUTZ today signed a contract to acquire FFG Flensburger Fahrzeugbau Gesellschaft. Flensburger Fahrzeugbau Gesellschaft is a premier European land defense system integrator. And let me give you the very, very simple version of why this works, and then I'll spend the next 20 minutes or so demonstrating it.

So DEUTZ brings proven engine design, engineering and industrial manufacturing scale. FFG brings established defense prime and MRO credentials, strong customer relationships across NATO and serial integration expertise across more than 30 platform types. And together, and that's what's one of the exciting parts of that deal, together, that combination creates something that does not currently exist in European defense, a single German-domiciled industrial group covering the full land vehicle life cycle. That is the deal.

But now let me give you the arguments for why it's the right deal at the right price and at the right moment. So 6 things matter here, and I want to name each of them before I go through them in detail. So first, our Next DEUTZ strategy is delivering. We are not starting this transaction from a position of weakness or urgency. We are starting it from a position of strong momentum.

Second, the European defense opportunity is historic. So NATO budgets are heading toward EUR 700 billion and beyond by the end of this decade. And with Germany's Sondervermögen ring-fenced from electoral risks. So that's a unique environment.

And third, FFG is truly a rare asset, roughly EUR 760 million in revenue in 2025, best-in-class margins, I can assure you that, and the EUR 1.9 billion order backlog growing and a pipeline that extends well into the next decade.

Number four, the combination creates something that simply, as I said before, does not exist today in European defense, a single German-domiciled industrial group spanning propulsion, platform integration, MRO and modernization across the full NATO land vehicle life cycle.

Fifth, the deal is extremely well structured with approximately EUR 1 billion in cash underpinned by secured debt and approximately EUR 600 million in newly issued shares, and the operating cash flow of the combined group provides a clear self-funded deleveraging path.

And sixth, the private owner families of FFG, today's owner, they are not exiting. They are joining DEUTZ as our new anchor shareholders, taking a 29.9% stake. And that last point matters a great deal to me, and I will come back to it later.

So we signed today, July 9. One part of the transaction requires new shares to be issued to facilitate the contribution in kind for the private owner families of FFG. And for this, we will convene an Extraordinary General Meeting on August 24, and I will cover what we are asking of shareholders shortly.

We anticipate closing and regulatory approval by late 2026 or latest Q1 '27, and that is, of course, subject to completion of the required steps and customary conditions. And this is a well-structured realistic time line, and we will keep you informed throughout the process.

Now before I explain why FFG is the right acquisition, let me remind you of what DEUTZ is today because it's not the company some of you began following 5 or 6 or even more years ago. The transformation of DEUTZ from a single-product engine company into a diversified 5-unit industrial platform is already strongly reflected in today's numbers.

We've got 5 business units: Engines, Service, Energy, New Tech and Defense, and each carrying its own P&L responsibility, each targeting structurally growing end markets, each sized to perform independently of the engine volume cycle. That was the dominating factor years ago, but that's passed.

And in the financial year '25, as you know, group revenue reached a bit above EUR 2 billion, up 12.7% year-on-year. And Q1 2026, as we announced earlier this year, underlying order intake rose 15% year-on-year, and our financial year 2026 guidance is EUR 2.3 billion to EUR 2.5 billion in revenue with an adjusted margin of 6.5% to 8%, and we are very well on track here.

And the market, as you see, as you know, as you follow, has already begun to appreciate the quality of what we have built and what we're building. And frankly, there is still a gap between where we trade and how well the business is performing today and how we expect it to perform within the future. So there is more to come.

Since the beginning of this transformation in 2022, our shares have appreciated by 137%. Revenue has grown at a 9.5% CAGR from 2020 to 2025, and consensus is projecting an acceleration to 14.8% CAGR through 2027 as the margin and growth story becomes clearer. The adjusted EBITDA margin has expanded structurally to 10.2% in 2025 and with further expansion in the consensus forecast, what we support as management. And this rerating reflects growing recognition of the earnings quality that is embedded in our platform. What we're doing today is designed to build on that foundation to add to the group an asset that brings best-in-class defense margins, contractually underpinned supported revenue and a long duration growth profile that simply did not exist in our portfolio before, at least not at this scale.

Let me now turn to the context for the transaction because it frames everything that follows. As said before, European NATO defense budgets are on a structural multi-decade growth path from approximately EUR 365 billion in 2023, projections now point to somewhere between EUR 605 billion and EUR 970 billion by 2030, depending obviously on the pace of the ramp-up across member states. So that is at minimum a near doubling within this decade, potentially a near tripling. And these are not targets. These are the treaty obligations and in the case of Germany, constitutional commitments.

The German Sondervermögen, as you all know, provides ring-fenced parliament-approved capital that sits entirely outside annual discretionary budgets, insulated from coalition negotiations and electoral cycles. So that is the stability which supports this case strongly. And it removes the primary political risk that investors have historically assigned to European defense spending projections.

So 3 strategic consequences follow. Focus on sovereignty means governments want local OEMs, local supply chains and local partners. The need to build trust quickly means that qualified supplier status, which requires years of program participation, must be established now ahead of formal award cycles. And the continued prioritization of land systems means Germany places domestic OEMs in its top 5 procurement priorities.

And furthermore, the U.K., to give another example, is directing 20% of heavy equipment investment into armored machinery. That is the market. And the question for DEUTZ was always how do we capture it at scale and how do we do it before the window closes.

And this slide gives you the answers to the timing question. The median age of NATO land fleet vehicles is currently approximately 28 years, meaning the average platform sits at the center of its mid-life upgrade cycle right now today, platforms like the Leopard 2 introduced in 1979, the Fuchs introduced in 1979 as well, the M113 introduced in 1960. So systems that have been in continuous service for decades are entering peak sustainment and modernization requirements simultaneously.

The MRO opportunity, the upgrade opportunity, the capability enhancement demand, they are all crystallizing at once. FFG is one of the very few European companies with a NATO qualification, the program access, the certified serial production capacity and the customer relationships to capture that opportunities at scale. And that is the right moment, and we think it's a narrow one. The qualification cycles and the procurement awards are happening now.

So let me tell you a bit more about FFG. The Flensburger Fahrzeugbau Gesellschaft generated approximately EUR 760 million revenue in 2025 on a revenue CAGR of around 50% per annum since 2023. And that is one of the fastest-growing businesses in European defense and is growing at genuinely best-in-class margins, margin that compare quite favorably to publicly listed European defense peers.

The business FFG employs more than 1,100 people across 9 locations, and its order backlog stands currently at above EUR 1.9 billion. More than 90% of its revenue comes from NATO customers and the Ukraine and less than 20% from the Bundeswehr alone, which means the demand base is geographically quite diversified across the alliance and its close partners.

It maintains active program relationships across more than 30 NATO platform types. Finding an asset like that, I can tell you, is rare. Also acquiring it on terms that are fair for our shareholders, and I will come to the valuation in a moment, is even rarer.

So the depth of FFG's program relationships, that is the single most important nonfinancial asset in this transaction. And I want to spend a moment on it. FFG serves more than 50 NATO nations and the Ukraine, and it holds program positions across the Leopard 2, Boxer, PUMA, Marder, Fuchs, Fennek and M113. And these are sustained long-term program relationships involving deeply embedded technical knowledge and formally certified production status. The awarded contract backlog, as I said, is a multiple of the current annual revenue.

So that kind of program access and institutional depth, you cannot build in 2 or 3 years, certainly not in time to capture the procurement cycle that is opening now. So FFG has accumulated over decades. And from the moment this deal closes, that entire network becomes part of DEUTZ.

FFG is a systems integrator with its own platform pipeline, not just an MRO operator, although the MRO business is extremely excellent. We're very proud to have that -- of that part. So that distinction matters for how you model the long-term earnings, right, because FFG also develops and delivers proprietary original equipment platforms. The WiSENT 2 is a very good example. It's a multifunctional Leopard 2-based systems for recovery engineering and mine clearing with 67 vehicles delivered across multiple nations and more to come.

The ACSV is a modular armored support vehicle with 32 delivered across the Netherlands and Norway and then also next program waves, the CAVS and the ACSV expansion, which represents substantial additional volume potential. And the point here is that FFG is not a maintenance business that happens to be growing. It's a system integrator with proprietary platform capability and a genuine OE program pipeline. And that distinction is extremely important for understanding the long-term earning profile we are acquiring here from DEUTZ.

So the pipeline beyond the current backlog extends the picture much further. So the EUR 1.9 billion backlog is itself multiples of FFG's 2025 revenue, providing strong near-term visibility and the broader pipeline stretching toward 2032 and beyond is significantly larger in scale.

So obviously, I am not in a position to give you the precise quantum today. We will be able to provide more details once we progress through closing, but projects like the NATO ACSV platform expansion, the growing WiSENT 2 demand from NATO nations beyond the current 3, the localized German CAVS production program and the sustained NATO modernization tailwinds all underpin, all support a growth profile that extends well beyond the current backlog horizon. So the visibility profile of this business is among the strongest I have seen in European industrial defense.

Let me now address why 1 plus 1 equals more than 2. The combination brings together capabilities that are genuinely complementary. DEUTZ brings engine expertise and manufacturing technology, certified military power pack technology across V6 to V12 configurations with direct immediate integration potential across FFG's platforms portfolio. We also bring global industrial manufacturing scale and engineering competence from our facilities in Cologne and Ulm.

We bring a NATO-wide service network and REMAN capability for military drivetrains as well as hybrid, hydrogen, emergency power generation and electric propulsion technology. And all this is increasingly relevant as platform electrification accelerates.

FFG brings platform integration and certified serial production capacity across 30-plus NATO platform types. It also brings the prime and MRO relationships across Bundeswehr and NATO land programs and a proprietary OE pipeline. So together, the combined group closes a gap that no single German-domiciled company has filled, a complete land vehicle life cycle partner, propulsion, platform integration, MRO modernization, all under one roof. No NATO customer today procures all 4 from a single European-domiciled group. We will be the first.

Let me also be direct how -- about how FFG fits into the Next DEUTZ structure because I know some of you will think about organizational complexity. The answer is clean. FFG becomes the anchor of our Defense business unit. FFG will continue to operate as a stand-alone entity, preserving its identity as management and its workforce.

The management team at FFG has built something truly exceptional, and we are not acquiring them in order to restructure what they have built. We are acquiring FFG to accelerate what they have built and to use that platform to accelerate what we're building under a mutually beneficial partnership.

FFG's customer relationships and program knowledge remain intact and undisturbed, which means program framework access that DEUTZ Defense business would otherwise require years of independent accreditation to reach is available to us from day 1. And that accelerates our path to prime contractor eligibility by a strategically significant margin.

This sets a bit of a background for the synergy discussion, and I will now hand over to Oliver to take you through the synergy overview, deal structure and financing. Thank you very much for now, and I'll be back later.

Thank you very much, Sebastian, and good morning to everyone. I would like to first echo our shared excitement about welcoming FFG to DEUTZ Group. And part of that excitement is driven by the clearly synergetic nature of this deal, so let me be specific about synergies because I know that this comes in everyone's mind.

We are thinking about synergies across 6 categories. And the first one is Engines. By integrating DEUTZ powerpacks into FFG platform portfolio, we create incremental revenue from internal sourcing, higher value creation through in-house manufacturing and selected -- on selected defense components and a higher utilization of our engineering and production sites in Cologne and Ulm.

For Service, talking about synergies means expanding the defense aftermarket and spare part business through NATO-wide service coverage, generating additional REMAN revenue from the overhaul of military drivetrains and utilizing state-of-the-art DEUTZ spare part logistics for defense customers. This is a natural expansion -- extension of what DEUTZ service already does today, but it's brought to bear on FFG's installed base.

In our Energy business, FFG's customer access opens additional revenue channels for DEUTZ defense energy offerings, so our hybrid and field power systems, into an existing and trusted customer network.

For New Tech, this is about the integration of newer propulsion technologies. And for the existing DEUTZ Defense business, we identify cross-selling potential as well as utilization and expansion of existing DEUTZ Defense partnerships, especially in unmanned and electrified defense solutions, with the potential of quicker ramp-up and additional cross-selling. This is about site optimization, about G&A savings on insurance, fleet and overhead.

I'm not in a position, unfortunately, to give you precise Service synergy number today, but I can tell you that the synergy profile across the 2 businesses we talk about is material and that we will provide a comprehensive update once we are through to closing.

Let me make the engine integration and thesis a bit more concrete because it is one of the clearest illustrations of why the combination makes operational sense. Our defense engine portfolio spans configurations from below 200 kilowatts to the growing market of above 800 kilowatts, covering the full power range relevant to FFG's platform portfolio. When you look at the TAHR, the M113, the ACSV, these are precisely the platforms that require propulsion technology DEUTZ engineers and DEUTZ manufacturers at scale.

The integration opportunity is a direct fit between the 2 product portfolios. And that is what we mean when we say that this combination was, in many ways, a logical conclusion of 2 strategies converging. It's about the right technology. It's about the right platform, and it's about the right moment in time.

Next, let's talk about the service footprint. And here, let's take Germany as an example because it is the most limited illustration. You see the overlay of the DEUTZ service network distributed densely across the country with FFG's established service locations of Flensburg, Hamburg and across the North.

And the density of that combined network, its proximity to Bundeswehr installations and its proximity to the installed base of NATO platforms, it creates a service and logistic capability that neither company could replicate alone. It's about faster response times. It's about better parts availability and integrated logistics.

Defense customers measure platform availability. Procurement officers notice when a service partner can respond faster and get systems back into operation quicker. This is a competitive differentiator that will compound over time.

On energy, I want to be clear that this is an emerging opportunity, but the direction of travel is unambiguous. Demand for hybrid energy ecosystems for field power generation, for integrated energy management across our platform fleets is growing. And FFG's customer relationships and platform access provide the channel. DEUTZ Energy provides the technology and manufacturing capabilities.

Together, we have a joint offering that neither company can fully pursue independently. It is, so to speak, an important option value embedded in the transaction. Once that I expect -- the one that I expect to become increasingly tangible as military platform electrification accelerates over the next decade.

On manufacturing and road map production ramp-up, this is an operationally important topic. FFG is currently scaling Plant 3 in Flensburg. It is a new 100,000-square-meter facility to support the serial production volumes that the CAVS and ACSV programs require. DEUTZ brings procurement scale, quality management system and manufacturing excellence that directly accelerate the ramp-up. And this is not just a paper synergy. It is basically 2 industrial organizations combining their core competencies at precisely the moment when production throughput is the binding constraint in European land defense. Program award bodies will notice that, and it strengthens FFG's competitive position in future bids. This concludes our synergy review, and I will now walk you through the transaction structure and the financial profile in detail.

So let's start looking at the deal itself. The purchase price is approximately EUR 1.6 billion. And that consideration and the deal is structured across 3 main components. The cash component is approximately EUR 1 billion. The share component is approximately EUR 0.6 billion in newly issued DEUTZ AG shares for a contribution in kind, which the seller families will then receive and retain as long-term shareholders.

The third element is about alignment. The sellers families, they stay invested. There are some further variable performance-linked components, but they have agreed to a long-term focused investment agreement and will receive also the right to nominate 2 members to the Supervisory Board. As our new anchor shareholders, the incentives going forward are the same as every other shareholders.

That third element was a very important one to the owners of FFG but also to us. It is a governance architecture that structurally aligns the interest of our largest new anchor shareholder with those of every existing DEUTZ investor going forward.

And let me now take you through how the transaction is financed and how we manage the balance sheet from here. Well, as mentioned, the EUR 1.6 billion acquisition is funded through approximately EUR 1 billion in secured debt and approximately EUR 0.6 billion in newly issued DEUTZ shares to the sellers families.

The total debt facility is structured across 3 tranches: term loans basically to finance the cash part, a revolving credit facility to give us some flexibility and the guaranteed facility as a third component. It is underwritten by a consortium of 4 international banks, and that commitment was secured ahead of signing today. An independent fairness opinion prepared under German IDW S 8 standard has confirmed that the transaction price is financially appropriate from the perspective of DEUTZ shareholders.

On the cash generation, FFG's balance sheet carried a net cash position as of fiscal year 2025. And we have structured this as a lockbox transaction, which means FFG's cash generation above the threshold between December 31, 2025, and closing accrues to DEUTZ. That provides a deleveraging engine basically from day 1.

The combined operating free cash flow of the group then provides significant potential for deleveraging. It's a strong cash conversion profile based on the FFG's high margin based on a contract base that supports the deleveraging over the next 3 to 4 years until a level of lower than today's leverage. But of course, we are also evaluating all options as we always did in the past, and that also includes potentially a 10% capital increase at a later point in time.

On the earnings profile, well, the transaction is expected to be earnings per share accretive on a pro forma basis with further upside opportunities driven by synergies, a good FFG order book and the strong pipeline. And let me walk you through that waterfall logic here. The arrows you see are only indicative and based on pro forma combination and dilution.

Yes, the share issuance creates dilution, approximately 65 million new shares, bringing the total share count to approximately 270 million. But FFG's stand-alone earnings contribution at best-in-class margins on that base of approximately EUR 760 million revenue provides then a strong starting point. From there, the accretion picture only improves.

Near term, the crystallization of FFG's existing EUR 1.9 billion order book and the early capture of cross-business synergies across engines and service add further earnings uplift. Longer term, the strategic synergies across the full 5 business unit platform and the conversion of the strong FFG pipeline into contracted revenue extend the profile considerably. We will provide more details once we are through to closing. But what I can say today already is that the direction of earnings on cash and on leverage is clearly positive from the point of close.

And I will now hand back to Sebastian for some closing remarks.

Yes. Thank you very much, Oliver. Let me bring the 6 highlights back together because what I want to achieve is I want to -- I want you actually to leave this presentation with a full picture held in one place. So Next DEUTZ momentum, continued growth and 137% share price appreciation since 2022; the European defense opportunity, NATO budgets heading towards EUR 700 billion and beyond; Germany's constitutional spending commitment removing the primary political risk. FFG is a best-in-class asset, strong revenue growth, best-in-class margin, a EUR 1.9 billion order backlog, 30-plus platform types, 15-plus NATO nations, proprietary OE programs with CAVS and ACSV expansion as the next program waves.

So the combination, creating a European land champion, the only group spanning the full land vehicle life cycle from a single German domicile, conservative financing with a clear self-funded deleveraging path and the FFG families joining as a new anchor shareholder, so that is a deal structure I am proud of. It serves our shareholders, and it serves the combined group's long-term interests.

This is a good deal for FFG. They are joining an established industrial platform with growing momentum and clear benefits to accelerating the business. And it's a good deal for DEUTZ shareholders. Fair value is independently confirmed. Pro forma, the transaction would be accretive despite dilution. The implied multiple of the transaction values FFG below other NATO land system providers and significantly below publicly listed European defense peers, which brings me back to the time line and next steps.

We signed today July 9. We're convening an Extraordinary General Meeting on August 24. To issue the new DEUTZ shares to the private owner families of FFG, we need a 75% super majority of shares present and voting to approve the capital increase. The EGM convening notice published in accordance with German law will set out in full the terms of the resolution, the share issuance mechanics and the record date for voting eligibility. Closing is subject to regulatory approval and customary closing conditions, and we expect closing by late 2026 or latest Q1 '27. So yes, vote on August 24 is a vote for a stronger, more resilient DEUTZ with the defense platform scaled for the procurement cycle ahead, a high-margin anchor business and a committed long-term partner in the FFG families.

Thank you. And I generally mean that. Thank you for your time this morning. Thank you for the rigor with which I know you will examine this transaction, and thank you for following the DEUTZ story over the past years.

We have earned your attention, and I hope today, we have earned your confidence in this next chapter. Oliver and I are now very happy to take questions. And for those of you joining us on the roadshow over the coming weeks, I look very much forward to continuing this conversation in person. Thank you very much.

Thank you very much, Sebastian and Oliver, for the update, and we are now moving to the Q&A session. [Operator Instructions] And we already have a question from Mr. Stueben.

A question on the margin profile. I think you said sort of best-in-class margin versus the European defense peers. Can you sort of clarify what you mean by that? Are we talking high teens EBIT? Or where are we -- what are we supposed to be looking at just so we can kind of figure out the rough multiple that you've paid?

And then second, I guess, there's been a lot of discussions in recent weeks and months around the need for tanks and vehicles going forward in this new modern kind of warfare environment. So maybe would love to get your thoughts on that in the context of the deal.

And then finally, just given the -- if you can confirm the pro forma leverage that you're expecting at the end of the year and then also what that kind of implies for your M&A strategy in the next kind of 2 to 3 years. Should we expect this to sort of be on hold for now? I know you mentioned the potential for a share capital increase. So I just would love to get your thoughts on sort of M&A and the rest of the business over the next 2 to 3 years.

Sure. Thanks, Lasse. I will start and Oliver will complement mainly on the second half of your question. So as you see and as you -- and I think Klaus also asked the same question, we did not disclose the EBIT or EBITDA margin in specific numbers. But obviously, I can give a bit of an indication for that. So EBITDA, it's rather in the -- rather slightly above 20 and not only in the high teens. In terms of multiple, what I can say and what we're prepared to say is that if you look at the EBITDA numbers of '25, the current '26 expectation and also '27 plans, we are, on average, on a level that one could fairly argue of a multiple between 8 and 10x.

Yes. Coming to your question on the...

Sorry, sorry, that was -- sorry, I was just -- then you asked on sort of the future perspectives of land vehicles versus unmanned systems. And I answered in a similar way like we answered when we talked about our growing business on a smaller scale, but the growing business in unmanned systems. I'm personally convinced that it's not an either/or. Both routes, both paths will play an important role in the future.

Obviously, unmanned is growing fast. That's clear. The Ukraine war has shown that, but Ukraine war is also showing that sort of the traditional vehicles will remain and will be very relevant for a long period of time. So it's not that everything will become unmanned shortly. It's also not that unmanned is only a temporary phenomenon. So we expect the traditional as well as the DevTech perspectives, both to be relevant for decades and beyond. So that's why also here, diversification is something which is very, very important in the portfolio of any defense company. I don't think it's a question of beliefs. It's a question of portfolio. Now back to you, Oliver.

Yes. And on the leverage question, Lasse, thank you very much for that. I mean, apparently will drive up leverage a bit. So we are acquiring a target that has strong cash generation capabilities that has a positive net financial position, as I explained throughout the presentation. But of course, the total leverage of the group, which was at 1.7 in the first quarter at the last publication, that will go up by 1 or a bit more throughout the year. But then that is important with a clear path for very strong deleveraging over the next 3 to 4 years to come back to levels that are then expected to be even lower than today.

Yes, you also asked about future M&A. And yes, that remains always a possibility. I mean, clearly, with that step in defense, that's a major step in our, well, Defense business unit, in particular. The business unit or the Defense business of DEUTZ after the completion of that acquisition will likely be, in terms of revenue and certainly in terms of profitability, the strongest pillar of the combined group.

So however, when we look at the other growth paths we have decided to play in, we should mention definitely the Energy business. We started, as you know, from pretty much 0 3 years ago. And this year, we are already pro forma on a EUR 320 million, EUR 330 million revenue level with also very solid margins. And we see in that vertical high growth potential organically and potentially also inorganically.

We certainly do not envisage a transaction of the magnitude of that 1 in the next 2 or 3 years. But certainly, we are still prepared and able to selectively grow also in Energy because what we have in mind here is very clearly to extend the revenue in the Energy business also significantly in the next 5 years. So DEUTZ will grow in particular with the defense vertical and with the energy vertical, both organically and inorganically. This is not the end of the growth story, certainly not.

And we move on to the next participant, [ Mr. Augustin ].

Do you hear me now?

Yes, we can hear you.

Great. A couple of questions I have. The first is actually on the mechanics of the price to be paid. So it's around EUR 1.6 billion, give and take. The question is if the share price changes now, does FFG owners always stay at 29.9%? Or can they actually grow above 30%? And if the share price will fall, is it then that the debt side would actually increase to match still the EUR 1.6 billion? How does this work?

No, for the share price was as it is customary in a [ capital ] like what we have envisaged here, the sort of share price has been fixed with the signature of the transaction this morning based on numbers of the last weeks. So there is -- the share price is fixed. And we have agreed with the sellers families on quite customary rules and procedures in terms of hold periods as well as standstill periods.

So the idea is very clear -- or the concept. It's not the idea. The concept is very clear that the 29.9% will be a cap on the one side. And on the other hand, there will also not be a quick-ish sell-off of that shares so that we have a very stable anchor investor going forward here. I hope that answered your question, [ Mr. Augustin ].

Yes. Definitely. The next one is I was just having a bad line. Could you please repeat the leverage multiple you just stated a minute ago?

Yes, happy to repeat that. So what I said earlier is basically that we come from a leverage of 1.7, as you saw in the Q1 figures, and that transaction will certainly on a pro forma basis then drive up leverage by 1 or a bit more compared to the level we are coming from. Important point here is to see that we are buying a company that has a net cash position on the balance sheet and the combined group has a very strong cash flow profile to go for deleveraging going forward. Over the next 3 to 4 years, we are expecting that the leverage after that initial increase is coming back to levels as of today or even slightly below.

And then also on the slide, you state that around 90% is MRO revenue base of FFG. Does that imply that actually 90% of the sales currently are, let's say, service sales?

It is -- we call it MRO plus. So it's not only traditional service sales. It's also modernization of vehicles, also a fair bit driven by demand in the Ukraine right now. And that's a bit of perspective for the past. So in absolute terms, that MRO business is expected to remain more or less on that level.

But what the business will add on is a fairly strong ramp-up in vehicle sales or production and vehicle sales because that's like a figure I explained earlier through the presentation. That's one of the sort of transformation or growth trajectories FFG has been successfully undertaking in the last years coming from a company being very much focused on MRO but now adding more and more the OE capacities on top with the ramp-up of new production facilities with the ramp-up of the various programs we mentioned throughout the presentation. So the 90% is sort of a baseline on which more growth and profitability will build on.

Understood. And to the order backlog, Germany has signed a CAVS program of around EUR 1 billion or announced in December. Is that already part of the EUR 1.9 billion backlog, this EUR 1 billion for Germany? Or is that actually [ the pipe ] in that additional potential?

That is, in principle, part of a combination of the backlog and the pipeline because FFG is here acting as a partner of that contract with the Finnish Patria Group. So we will not -- at this point in time, we cannot detail breakdown in the public, the order backlog in detail, but you will expect -- we are expecting more of that program to be incorporated in the future backlog.

And we turn to one participant who is only able to do questions with our chat box. I'll read this out. Mr. Ringel is asking if -- have you finally decided to develop an engine for the plus 800-kilowatt power class?

We are still investigating here. And certainly, the combination with FFG helps here. But obviously, we are -- as normal, we are investigating what is the market demand because the market demand obviously needs to be there in a sufficient manner to support the development costs we're incurring here. So we have made decisions to continue developing engines, sub-800 kW for the military use. That's clear. That's actually ongoing. But for the 800 plus, we are in -- still in investigation. But obviously, the potential -- the market potential has with that step now certainly increased.

Mr. Ringel is adding up to another question for another topic, indication for cost of debt on the additional EUR 1 billion.

Yes, we have agreed on the conditions with the banks that are customary conditions, good conditions, if I can say that. So that's a typical margin grid you agree with the banks on a leverage depending basis. It's even compared to the conditions we currently have a slight improvement. So I cannot disclose specific figures here apparently, but yes, it's a typical margin grid on an overall base interest rate.

Yes. I also see, Mr. Ringel, another question on visibility and legal obligation to update, raise medium-term targets. As you imply with your question, that's too early right now. What we are clearly saying, and we also issued that or made that statement in our press releases that the path to the mid-term target of EUR 4 billion revenue and 10% margin, we will be there much quicker than what we previously outlined. But exactly when and how, that is something we will now develop jointly with the FFG team throughout the summer.

And as soon as we have the knowledge or the obligation where typically the one goes in line with the other, we will certainly update. The only thing I can say, we anticipate or we expect a very, very strong acceleration of that path. And I mean, the one aspect is obviously the top line. I think here, it's very easy to do the math right now. The other aspect is obviously the bottom line and what we can indicate and actually what I have indicated already quite clearly about 15 minutes ago, the FFG business is in terms of profitability, EBITDA and EBIT, obviously highly margin accretive to today's group's numbers.

So that's why we're probably being even faster at the 10% margin target than at the revenue target. But ideally, obviously, and that's where we're committed to, we raise revenue and we raise profitability. And that is the best thing what we can deliver and what you would like to see in your models as well. Happy to help.

And we have another question. And because we took one from the chat box, we'll refer to that one as well. Any indications on D&A of FFA (sic) [ FFG ] in the terms of sales? How much potential CapEx needs for the new growth at FFG?

Yes. I mean, I will also give only indication of numbers right now given the early stage of -- in the acquisition. But where FFG comes from, the D&A is relatively low, I mean, certainly compared to an industrial environment, industrial structure like we have at DEUTZ. On the other hand, for expanding the capacities at FFG, they're building a new facility up north in Flensburg. That's all publicly available also by their FFG's press releases of the past 6 or 12 months. So obviously, that goes in hand-in-hand with the investment, but I believe -- I know that the investment in that new facility is managed very rigorously, and we do -- we have obviously fully incorporated the CapEx and the planning and the investment is well on the way. And then this will, in the future, up slightly D&A but still not on levels that we know from industrial context.

The reason is very simple, because we do not talk here about highly automized production and assembly like what you see in automotive. Even in this sort of defense context, you speak about a ramp-up to a serial production, but it's not a serial production like you have in automotive or automotive near production. We talk about tens of thousands of units. We talk about hundreds or dozens of units, right?

And I'll wait for maybe a risen hand for a question because in the meantime, we have received no further questions. And for that, we come to the end of today's conference call. Thank you for joining and the shown interest in DEUTZ. Thank you very much, Sebastian and Oliver, for the presentation, the update and the time you took to answer the questions. From my side, I wish you all a very successful end of the week. And for some final remarks, I return and hand over back to Sebastian, which concludes the call for today. Thank you very much.

Yes. Thank you very much for dialing in, for listening, for asking questions. We're very happy to make that call this morning here. And I mean, let me just conclude a couple of highlights from my point of view. We are doing a landmark transaction, landmark acquisition from DEUTZ perspective. We are creating a new European champion for military vehicles. The objective is clearly to become a prime here. FFG has been growing extraordinary over the past years, both in terms of revenue, both in terms of profit. And with that acquisition, we're combining here with -- and I am convinced of that, certainly one of the most attractive and profitable defense companies available in Europe.

The purchase price or the deal structure is a very smart structure because it combines a very fair valuation with an alignment of interest between buyer and seller through the future representation of the sellers family in a very sort of customary way in the future shareholder structure. And as DEUTZ, obviously, we're taking an important step to accelerate our profitable growth to continue to be faster at the target picture of Next DEUTZ that we have developed.

And in that sense, it is exciting news for us. We appreciate that, particularly those of you guys running your models, you will need to make some significant adjustments, of course. It's not a bit -- adding a bit of euro revenue here or units and engines. And what I can say that our Investor Relations team is obviously happy to support you on that because we're truly creating shareholder value here and looking obviously forward to go through the next steps on making that transaction not only a signed transaction but then a closed transaction and then leveraging the strength of both companies and creating value also by the various synergy fields that Oliver has just presented.

All in all, thank you very much for dialing in. And for those who are on vacation, thank you even more for dialing in and enjoy the rest of the vacation and keep writing good reports on DEUTZ and for the investors, keep buying the stock. Thank you.

Good morning, ladies and gentlemen, and warm welcome to the Q1 2026 Conference Call of the DEUTZ AG. Please note that this call is being recorded and a replay will be available on deutz.com later today, so your participation in that call implies your consent to this. I'm pleased to welcome DEUTZ CEO, Sebastian Schulte; and CFO, Oliver Neu. And as always, please take a note at our disclaimers, especially regarding forward-looking statements.

So with this, we start the presentation, and I'm handing over to the Head of Investor Relations, Communications and Marketing, Lars Boelke.

Thank you, Sarah, and very good morning from my side as well here in Cologne. Thank you for participating in our today's conference call. I'm glad to welcome you, as it is the first time we report in our new structure with 5 business units reflecting the different markets and thus providing even more transparency and clarity. At the beginning of the presentation, Sebastian Schulte will share with you some key figures of Q1 and then provide an implementation update of our strategy along these 5 new business units. Obviously, next, our CFO, Oliver, will give a detailed overview on the group's financial performance. With a look at the guidance and how strong Q1 momentum is pushing financial year performance, Sebastian will wrap up. Before, of course, move over to your questions.

Sebastian, please go ahead.

Thank you very much, Lars, for the introductory words. And from my side, a very warm welcome as well to our Q1 earnings call 2026. And we started really, really positively into this exciting but also challenging year 2026. DEUTZ '26 is all in the light of transformation but also in the light of growth, profitability and successful start, as I said. Couple of highlights which are behind us or where we are in the middle of it, let me be more precise.

So first of all, and that was really an exciting moment for all of us, we were promoted from the SDAX to the MDAX, which is a nice milestone, a nice recognition of successful work the team at DEUTZ have been performing. And obviously, that's a result also of an above-market share price performance. We see it here for the last half a year where we compare our stock performance with the MDAX performance, we're clearly ahead of the index. And if you look -- if you would look -- were to look back at '24, the gap is even more significant. So -- and that's a sign that our work's paying off.

Frerk, the acquisition in our energy business unit, I'll come to that later, gave us an order intake impact of almost EUR 150 million. So that's contributing to the growth, but it's not the only contributor to the growth. And what I find particularly encouraging, quite frankly, is that next to all the successful ramp-up of new business units, also the sort of heritage business unit, our engine business unit, but also supported by service, sees quite positive momentum in very relevant markets, namely construction and agriculture. So all in all, a lot of positive points in our transformation.

And no surprise that with all these positive points, we also see that reflected in the numbers. New orders been up significantly, 41% year-over-year, EUR 771 million order intake, new orders. That's great. Revenue at EUR 530 million, also up 8%, so one of the highest numbers on a quarterly basis DEUTZ has delivered, well, in the company's history. And the same applies for the EBIT margin. We are now at 7% EBIT margin, which is also 1.8 percentage point better year-over-year. And we always need to bear in mind that the first quarter of the year is typically not the seasonally strongest quarter of DEUTZ. And in fact, that's also underlined by the fact that since the start of the downturn, the end of '23, that is the best quarter that we have achieved. So very encouraging news.

Important, I'd like to repeat that we've shown that at the annual results call earlier this year. We've also started, Lars said it in his introductory words, into the new year with a new structure, and a structure which clearly follows the company strategy. So we introduced business units set up in January '26. And next to the group-wide management, Oliver, the CFO; Katharina, EVP for HR, Strategy and Transformation. We have now in charge dedicated business unit leads. Marco for Defense, David for Energy, Markus for Engines, Bert for NewTech and Andreas for Service. And that's more than just an organogram. It just shows that we take our strategy seriously. We've implemented the structure to have a responsibility on a P&L basis for each of the business units, even though they are at this point in time still different in size, but all extremely relevant. So that's why we needed this clear responsibility. And I can tell you the setup is working extremely well since we implemented it.

Well, let me now walk you through the business unit by business unit, and I'll start with the largest business unit, with the business unit engines. And what is -- what happened at engines in the first quarter? It's positive again, back in black. That is great. And we also see very positive momentum in order intake. And I show that here on these numbers. We'll not go through this all in detail, but what you see is, particularly if you compare Q1 '26 to Q1 '25, in terms of revenue, only slightly up, 5.3%. But well, see where we were in Q3, for example, but in terms of new orders, up 26%. So that means there are -- the fundamentals become stronger. There is a certain recovery in certain sectors, particularly very important construction and agri sectors for us. And we also see the growth dynamics in all regions. There's even a particular momentum in China. That's the smallest region for us, but that was contributive here with high-margin business as well.

Profitability went up significantly. You see that. But at that point, last year, we were slightly negative. This is a like-for-like comparison, so you will not see these numbers in the presentations of last year, Q1 '25 because we're bringing here the numbers into place so that we compare apples with apples. So profitability went up significantly. Yes, of course, high utilization, but also the cost savings of Future Fit program. We will hear from Oliver later as well as obviously the positive order momentum. Sales growth with new products, there is a significant strong interest also in our new engines. We introduced a couple of weeks ago our G-Drive initiative, like engines for power generation. We hosted that here in Cologne after an important trade fair in Dubai was canceled. So we hosted that here. We received strong interest. More than 30 potential customers were there. And this is something we do not even see in the new orders yet, but we expect that to materialize in new orders in the coming quarters.

And of course, very important strategic work we're doing with the team, Markus and his team are doing. We are streamlining, aligning here our portfolio and also the footprint in order to further push the profitability because of this 3.7%. It's a great development compared to previous years, but that should not be the end of what is possible. We're working also on efficiency here in our main assembly plant in Cologne, Porz. Noticeable savings potential have been identified and is being implemented. So here we clearly see that the new responsibility we put in place is beginning already to pay off. So all in all, engines on a good development, both from a top line, market-driven, but also obviously from what we have under control in our internal measures.

Let me move on to service. And service, you see here a picture, it's a great picture actually. This is our material logistics center, also here in Cologne, where we implemented a new -- in our store. That's AI-driven storage management, which significantly reduces cost but also increases capacity for spare parts. Both is extremely relevant given that in service we are on a growth path. And in March, and I'll come to the quarterly numbers in a bit, but in March, the service business for the first time yielded revenue significantly above EUR 50 million, and that's great. I mean 2 years ago, 3 years ago, we were always around EUR 40 million. Now we're at EUR 50 million, and that shows that on a monthly basis, we are improving here the run rate significantly.

You see that here also in the numbers. In the last year, we were always between EUR 130 million, EUR 138 million. Now in Q1, we're at EUR 148 million, and that's particularly driven by February and March, given January is always a bit of a weak one. And also, this growth came across all regions, both driven by parts but also after-sales business and integration of our acquisitions. We did a few acquisitions in the United States as well as in Europe. I mentioned the EUR 50 million revenue already. The traction we're improving is also by our international network expansion.

The logic is very simple. The more service center we have, the more profit we achieve, right? We do have -- we do follow our further growth investment in our regional infrastructure, particularly in Europe and the Americas. We're opening new power centers across the nation in the U.S. And that is the only sort of critical point we'll see at this point in time is that the ramp-up reduced the margins a little bit, but on a very, very high level. And also, the margin in Q1 '25 was a little higher than normal because at that point we had a very high shared spare parts business, but we expect this to normalization across 2026. So by no means this is a problem with margins, it's actually a very healthy, profitable growth going forward.

Let me move on to energy. Energy, yes, besides the defense, our sort of biggest growth case at this point in time. And I showed it -- I said it initially, growth momentum comes, obviously, in particular from the new acquisition of Frerk, which is, as you know, active particularly in the data center business, which is a market which enjoys not only now but also the next 3, 4, 5 years at least a very high growth momentum. Looking at numbers, Q1 is also a first-time year the revenue was EUR 50 million, obviously, a bit driven already by the -- inorganic effect from the acquisition of Frerk, which joined us. The closing happened in the middle of the first quarter. So that's why here it's not really a like-for-like comparison if I compare Q1 '26 with Q1 '25. So EUR 145 million of order intake was contributed by Frerk. And now we have new orders of just above EUR 200 million, and we have an order backlog of EUR 240 million in the business unit energy. So that means the visibility of this business is extremely strong, and that applies to both top line as well as bottom line. I will come to that in a minute.

We're making extremely positive progress with the business unit energy to really create a global unit. Frerk is obviously supporting in Germany, but also in neighboring countries. DPX, our Chinese setup, is supporting out of China to also drive growth in Europe and, of course, in Asia. We do have a little margin dilution in the first quarter, particularly driven by FX in the United States as well as change in the product mix. But we expect a significant improvement in the second quarter. So the numbers we see here, Q1 '25, that's more the level of profitability we expect throughout the year. So that's why this is a temporary thing. And we will come later in this presentation also on the guidance for the full year where we will also give you a little bit of details on the guidance for the business units. So the guidance we provide you for energy is very safe and sound at this point in time.

And the growth perspective, as I said already, is continuing to remain extremely dynamic, particularly because of that data center opportunities we have in Europe, but also Blue Star continues to grow above what we initially had foreseen. And on a smaller scale but very encouraging, our North African genset business in Casablanca and Morocco, MAGIDEUTZ. We always explained that was a bit of a turnaround case. The turnaround has now been achieved. Company is EBIT positive and also enjoys growth, obviously, on a smaller scale with, like, an annual top line in the mid EUR 20 million.

And of course, one important aspect of creating a global energy business is obviously that we are now implementing more and more synergies, not only within the business unit energy, but because we're building really something global, applying the capabilities, data centers. We have Frerk. And also in other parts of planet, but also utilizing our service footprint, which historically has been created for industrial engines, but now we're beginning to utilize this for our energy business.

Let me move on to the business unit NewTech. So in -- I call it internally and also externally at this point in time a bit like a growth option. The growth option with very, very positive dynamics and outlook, but at this point in time, it's still rather an option than already secured top line. And you see that in the numbers here, the revenue is still on a low level. I mean it's growing, but growth here from Q1 '25 to Q1 '26 that is not a relevant number. Of course, 64% sounds much better than it is. It is still a small business. We do see new orders coming in. We have obviously also an order backlog, but that is still on a sort of prototype on small series scale. We do, in this point in time, work particularly to improve the earnings because it is, obviously, still a lot of upfront investment, R&D activities, and that's why we managed here to significantly reduce the quarterly losses. We cut them in half pretty much, coming from minus EUR 12 million to minus EUR 6 million.

And a big focus in this business unit is obviously converting the very promising large pipeline into actual revenue. And we're working here with a couple of promising large customers, but part of the truth is also that we have not yet secured a large order, but we're working on that. And why I consider this a bit of an option value because obviously as soon as we see or we would see pressure from electrification in particular into the lower power ranges in, let's say, our construction business, then obviously this business here will start to pick up speed. So that's why it's an important option value. It's an important business to be involved in. And we can and will further support, obviously, here the growth in NewTech.

That brings me to the last but certainly not least business unit, defense. And to be very accurate, defense as well as others. So we also include here the business of HJS, the emissions after-treatment specialist. And defense, you see here that fantastic picture where our Ulm plant has shown that we have the capabilities of assembling here unmanned vehicle systems from our partner, ARX Robotics. That's an exciting project we're working on together with ARX. And here, it's about increasing relevance and really, really building strong and strong business models.

Looking at numbers, defense is a business unit which has only been created by the end of last year pretty much. So beforehand it was more rather a collection of own businesses, of own projects, but late with the acquisition of the SOBEK Group, we really created then that business unit. That's why we don't have a meaningful quarter-over-quarter comparison in terms of profitability. But what we see here is that the business becomes more and more relevant. Q4 '25 was driven by a few large-ish orders, very, very strong with almost EUR 30 million. Now we're at EUR 22.1 million in Q1. We enjoy a lot of new orders, EUR 26 million order intake. So here also growth dynamics is in place.

The order backlog is at almost EUR 40 million right now. And without at this point here being able to release names of the customers, but we did receive in the first quarter first significant or relevant orders relating to loitering drone package that the German Army orders at a couple of drone OEMs, and in one of them we are the supplier of the drive systems. That relates to the ramp-up of SOBEK because that's the part of DEUTZ which actually provides here the drive systems. And we are also continuing to invest R&D, in particular, in new powertrain solutions and that applies especially also to the fuels of the diesel engines where we are enhancing our current product portfolio to make it sort of defense ready.

Also, the HJS, I mentioned earlier, HJS Emission, it's been bought by us as a turnaround case. Now it's working actually quite successful. We were able to integrate some of their production into our supply chain. That's important. And we're continuously committing also to that DefTech ecosystem. I mentioned it earlier already, the investment in ARX Robotics, but also the investment and the supplier relationship to TYTAN Technologies. So what's it about here? It's a conversion really of an extremely strong pipeline into sales. We'll have a lot of very promising conversations, project negotiations, discussions.

Obviously, the Ukraine plays an important role here, and we're continuously working on exploring more and more opportunities, both in terms of drive systems but also in terms of military energy solutions. And that will always include partnerships and M&A. So there's certainly more interesting news in the making throughout this year. So 13% margin level, I think that's a fair margin quality given the combination here of the traditional sort of defense business as well as the HJS contribution. So we're creating -- we have created here a pillar which is attractive to the business and which is enjoying significant growth in the next months to come. Right.

With that short run through the business units, I will hand over to Oliver, who will bring some more light on the financial aspects of our first quarter.

Thank you, Sebastian, and good morning. Warm welcome also from my side. So let me start with some figures that show quite nicely the strategic development DEUTZ has undergone over the last years. And you see here the quarterly EBIT development of DEUTZ since beginning of 2024. So just to remember, that was the year where the crisis in the traditional core business, the engine market, was kicking in quite heavily. So we see here on the one hand, on a yearly basis, significant EBIT improvements starting from a bit more than 4% to a bit more than 5.5% to 7% in Q1, but also on a quarterly basis. So this chart basically shows the increased resilience of the DEUTZ business.

Just to remember, in Q3 '24, that was where we acquired the Daimler Truck engine portfolio, where we acquired Blue Star Power Systems, entered into the energy business. In Q3 '25, we additionally acquired SOBEK as a strong entry point into defense business. And overall, of course, the continuous growth on service side, organically as well as inorganically, and the Future Fit program, with cost reductions then driving that profitability up. And that's nice to see that we see here a record result in Q1. And as you heard initially from Sebastian, that is typically a seasonally rather weaker quarter. So that's why we are proud to have achieved that.

Let me come to a bit more detail on the key figures. We see here new order developments increased by 41% or EUR 225 million. EUR 145 million out of that increase is related to the first-time consolidation of Frerk, so our recent energy acquisition, and EUR 80 million then organically. So the growth on the new order side is driven organically as well as inorganically. On the revenue side, lower increase to a level of EUR 530 million. So that is typically a weaker Q1 on the revenue side. So you cannot just take it times 4 to derive yearly values. We have to take into consideration first the high order intake, then second, of course, also cyclicity effects within the year. Growth here on the revenue side mainly in absolute terms with similar contributions from the engine, service and energy business, while NewTech still remains on a low level.

On the earnings side, also here we see substantial increase of 45%, 46% compared to the first quarter last year. So ending up at the 7%, driven by various factors, cost savings from Future Fit coming into place, again, especially on the R&D side, but also improved plant utilization. And that is also what brings us to higher net income, EUR 21.8 million. That is compared to minus EUR 10 million last year, but last year Q1 was also impacted by the Future Fit provision. But even adjusted for that, there was a significant increase. So EBIT logically is also turning to higher net income.

Looking at some more key figures. On the R&D side, we see a decrease of 4%. That is a consequence of our Future Fit program. We gave some more details in the text slide here on the split between the different business units. We see a very strong cost discipline on the engine side. We see our cost discipline also as announced on the Future Fit program on the NewTech side to tailor the R&D spend a bit more to what the market is demanding. And of course, we are not saving on the R&D spend when it comes to defense. There are some first R&D expenses here in order to get our portfolio ready and even more attractive on that defense side.

When it comes to CapEx, it's predominantly here -- it's a slight increase predominantly for IT infrastructure, production equipment and software. So as I mentioned last time, there is that S/4HANA transformation ongoing, which requires a bit of CapEx. But we are overall on a rather low level of the CapEx side, so Q1 '25 was exceptionally low. On the working capital side, we see an increase that has 2 effects. On the one hand, it's the acquisition of Frerk, first-time acquisition of Frerk or consolidation of Frerk, which contributes roughly EUR 25 million to that working capital increase. And on the other hand, there is also slight increase in the remaining working capital, basically also driven by inventories where we are getting ready for delivering on the orders which we achieved and realized and so ensuring delivery in the future.

That brings me to cash flow. Cash flow from operations went down by EUR 25 million. There we need to keep in mind that the cash flow in -- operating cash flow in Q1 '25 was extraordinary high driven by some effects at that point in time. So that explains basically the decrease. On the free cash flow side here, before M&A, we are slightly negative. Basically, I would say we are coming back to a more normal seasonal pattern where Q1 is on the free cash flow side typically the weakest quarter. After M&A, we ended up at roughly minus EUR 100 million because we acquired Frerk, we had those investments in ARX Robotics and TYTAN. So that's then also the reason why overall net debt went up to a level of EUR 385 million, including roughly EUR 80 million in leasing.

That brings me to the chart on equity, leverage and dividend proposal. So equity ratio remains very strong, 47.3%. It came down slightly driven by the debt-financed acquisition of Frerk. The leverage remains moderate, 1.7. Keep in mind that this leverage includes leasing, so taking leasing out would bring us 0.3, 0.4 lower on that level. So still on a good and absolutely solid level. Dividend proposal, as already announced, a slight increase to EUR 0.18 per share for our Annual General Meeting next week.

So far on the figures, and then I hand over to Sebastian again for guidance and outlook.

Thank you, Oliver, for the view and the numbers. So yes, let me speak a bit about the guidance first. So first of all, some context, we gave the guidance initially with obviously, as always, beginning of the year, fairly limited market visibility, particularly given the geopolitical challenges. But what we can say, I mean, the growth we've given or we've implemented in our guidance is clearly supported by the momentum we have, positive momentum in energy, service and defense, that is strengthening the overall resilience.

And when we gave the guidance initially, we said we expect a bit of a recovery in the engine markets also over the course in 2026 with a stronger H2. And we were a bit sort of taken by positive surprise that already in the first quarter, as shown in the numbers earlier, the order intake has been picking up speed. So let's see how -- in which speed that will continue. Obviously, geopolitically, there's still a little bit of a challenge out there, but so far, so good also what we've seen in April so far, preliminary.

So let me reiterate here, revenue, EUR 2.3 billion to EUR 2.5 billion. We see that very much also from our bottom-up planning right now. And obviously, the business units contribute as stated here, midpoint EUR 1.33 billion, service EUR 635 million. Energy, almost EUR 300 million with a bit of luck and further movements, potentially even above NewTech. NewTech, EUR 35 million. Defense and other, EUR 110 million. And within all of them, we see obviously a bit of potential up, but obviously also a bit of risk down. But in the end, that's a good thing of having a portfolio of business models and business units. So all in all, it's a very solid view on the future which we have here right now.

On the margin, we provided in March fairly wide range, 6.5% to 8%. We got feedback from many of -- many analysts and investors that was perceived as a bit too broad. Yes, we will take that point, but that visibility we had at that point really didn't allow us to be more specific. However, it seems like we're narrowing that down on a positive side right now. Engines, I mean, you can just compare what we've shown earlier in the last half an hour compared with the midpoint here. So we are well above that, the large engines business. Service, we are already at that level. Energy, well, in the Q1, we were slightly below, but the view we have on Q2 to Q4 is actually very much on that number we see here. Defense will also probably expect a number slightly above that.

So that actually confirms not only the guidance but gives me personally optimism that I will narrow down here on that corridor on the better side. And free cash flow, we heard also from Oliver, the view on cash flow right now, we expect high double-digit million euro amount positive. So yes, I mean, that's quite a bit about the outlook for '26. But confidence is extremely important, which we have right now. The transformation of the company is paying off. I mean we've shown already in the first quarter a very decent level of profitability, 7%, given where we come from at DEUTZ and given that in engines, despite the recovery we are seeing, we're still way below what the factories can deliver. So economies of scale are paying off, but only on a low level. So if the recovery continues, we will see massive contributions from economies of scale.

The other good thing is we have a lot of positive contributions from pretty much all business units. I mean in engines, we are doing our homework, cost cutting. You heard it earlier on the Future Fit program, but also the new initiatives in the factory. And we're growing step-by-step in service. The team's doing a fantastic job here, particularly in the United States and in Europe, really growing step by step. Hundreds of initiatives, but they're being implemented with tenacity, tenacity, tenacity. And we're growing in defense and energy. It's a growth case. It's exciting. Yes, not -- the business units are not massive yet, but they are significantly growing and they are improving profitability and resilience, which is extremely important.

And last but not least, we've got the option value of NewTech. And of course, the market perspective is a challenge. It doesn't certainly -- it certainly doesn't provide much tailwind, that geopolitical situation where every day we seem to have a new development. But it's our conviction as management team of DEUTZ here not to complain. No reason to complain. There's only one thing to control what you can control. And that's what we're focusing on. And there is a lot we can control to navigate strongly through that difficult environment. And the results we've achieved in the last years and now obviously paying off with this really solid quarter just confirm that it's the right approach, stop complaining and rather act because there's so much opportunity out there.

And that's why what makes -- brings us, me, in particular, myself also to have a very positive view on the future. We're creating something we call here the Next DEUTZ. I mentioned it before, the more resilient business units, the structure but also the business models behind that, they pay off, benefits pay off. We see already now a lot of positive P&L impact from acquisitions and other portfolio measures. And as I said, the efficiency and the cost improvement. So we're creating an industrial platform, industrial business, the DEUTZ, which with a strong heritage, but a lot of upsides and potentials in growing markets supported by macro trends, defense and energy in particular. And with that, we feel more than confident to achieve our growth, which is significantly above the market, and also bring the margin performance not only on that level, the 7% we are right now, but step-by-step also further increase here the performance and thus increase also shareholder value.

Yes, Next DEUTZ, I mentioned it, strong growth across the businesses, organic as well as inorganic. We are working very structured on M&A projects and we have delivered in the past. We have shown that we can deliver. Margin will increase further. One important thing, quality before volume. That applies particularly to engines. 5 years ago, DEUTZ was more volume before quality, and now we changed that around. So we rather sell less but at high margin. In the end, well, effectively, we'd rather sell much at high margin. But if we need to make a compromise, it's always quality before volume. And obviously, cash is relevant. We are very sort of comfortably set up, but this should not give us a false sense of security.

We're working here on discipline. ROCE is an important KPI also for the Executive Board, and that's at least a reason to take that extremely seriously. We are very much on track for the free cash flow guidance for 2026. And I mentioned already more than once that we have here -- we follow a prudent option approach that we continue to support or to grow in the NewTech business, even if that is, at this point in time, the only unit which is not profitable. But given where we are right now in other parts of the group, that is something we not only can afford but we must afford in order to be ready when the market dynamics eventually will change in this business. Right.

That brings me to the end of our presentation and we would hand back, obviously, and we're looking forward to receive and answer questions.

[Operator Instructions] And we received the first question from Lasse Stueben.

First question would be on the order intake in the engines, which you mentioned is up very nicely in the first quarter. You mentioned construction and agri is better, but can you just give more color on what's going on and maybe how that's looked into Q2, just thinking about higher oil prices generally not great for some of these sectors. So just generally what you're seeing from customers.

And then just on the same point in terms of the margins in engines, as you said, you're already above kind of where the midpoint guidance for this year. So I guess my question is, should we expect kind of that to flatline from here in terms of the margin? Or should we expect further operating leverage in the remaining quarters of the year? And I'll ask my questions one by one.

Sure. Yes, let me start. Thanks, Lasse, for the question. Let me start with the order intake. And the order intake in engines was around -- sorry, the book-to-bill was just shy of 1.2 in engines. So that's, first of all, the pure numbers, and it's driven by orders as well from the United States, from Europe and as I mentioned in the presentation also from China. So there are a couple of individual customers and I don't want to disclose the names here for confidentiality reasons, but it's been driven by particular one customer in the United States, 2 European customers, larger customers in the construction sector. And then -- and that's rather a larger number of customers with smaller individual orders out of China for what's called very special equipment. So not the sort of bread and butter business, but special equipment, which also typically has the advantage of being quite high margin.

So that was particular February, March. January, as I said, was a slow start as usual. April, May, we expect further order intake, at least probably on that level what we've seen in the last couple of months. Do we expect now a further increase? At the moment, I would be a bit more cautious here for exactly the reasons you mentioned. High oil prices are never great for economy. But on the other hand, and I did mention that earlier, we did not see any negative impact on the DEUTZ portfolio from the conflict so far. So the Iran war is terrible as it is. But it has not impacted our business, neither of the business units negatively. So we didn't see any cancellations. It's more like one customer shifting ahead, someone else is shifting forward. So that's -- yes, we're pretty resilient at this point in time. That's on the order intake.

On the margin level, we do expect a bit of purely operational leverage given that the current outlook on the second quarter in engines production is in terms of numbers here at the German facilities a bit above what we've seen in the first quarter. So that's on a quarterly level because -- mainly because of the seasonally very weak January. So the second quarter, yes, I do expect operational leverage mainly driven by volume. I also expect further improvements in profitability due to the efficiency measures we've taken in the assembly line here in Cologne. But that I do not yet expect significantly in the second quarter. That's more something for the third or the fourth quarter.

I mean what we do here is very simple measures. We increased the so-called takt, so how many engines we bring out on an hourly basis. And we obviously want to do that with less personnel. We don't talk about massive restructuring, don't get me wrong, but it is a difference when I -- on one shift, I can produce more with, let's say, 2, 3, 4 FTEs less. And that's currently what we are working on. But it obviously has quite a significant and nice impact on production cost and thus on operational leverage.

And then on top of that, but that's more a question for the end of the year, we're working with our Indian partner on the setup of the facility for smaller -- for sub-4-liter engines in India. But that only gets -- will go live in production in '27, but we expect the first components to be sourced from India, also for some of our products here in Germany. The first components we expect to be shipped in the fourth quarter. So that's not a game changer in this year, but step by step, it will help boost profitability as well. So that's a bit sort of the high-level view on profitability as well as order volume in engines.

Super. I might have missed it in the report, but are you willing to share the unit number on engines for Q1? I'm not sure if you've given that this time around.

I think we should have this number in the detail. We don't, but let me -- I'm happy to give it.

It was around 30,000, 32,000 engines.

Yes. If you take that number, 32,000 and multiply that with 4, and then you see the utilization ratio is still fairly low. And that's what I meant earlier when I was saying there's still a lot of upside potential if we bring that up from 32,000 to say, 36,000, 37,000, and that's a bit of the development we're expecting in the next month.

Yes, makes sense. Very good. And then on energy, I think if I'm working it out correctly, if I kind of adjust for the Frerk order intake in Q1, the consolidation, I think orders are roughly down 10% organically. Is that the right number? And if so, kind of can you give some color just on what's going on here? I know you sometimes have bigger orders from customers at Blue Star. So maybe it's some lumpiness, but just some color on the organic development on order intake in energy.

Yes. That is -- I mean, that's exactly the point. You answered the question almost by yourself. So the orders in energy are -- they're always a bit lumpy because if I look at Blue Star, there's a lot of business goes via dealers to sort of individual orders, but there's one larger customer that's a company setting up microgrids in supermarkets themselves for a large supermarket customer in the United States. And this customer, I mean, is our premium customer in the United States. And in Q1, we ordered a little -- or we sold a little less to this guy, but compensated that with dealer business. That's what diluted the margin a bit, which was one of the explanations, but also the order intake. These guys order, and when they order, they order for the next 6 months. And so that's why sort of the order intake Blue Star on a quarter-by-quarter doesn't have too much explanatory impact.

Yes, and maybe just adding to that point, also Q1 last year we had exactly the opposite effect. There was a large onetime order or large bulk order in the Q1. So Q1 '25 was really [ low ], so that's not a big relevant.

Understood. And then final question, you partially answered this, but just on the outlook for the EBIT margin for the full year. I mean last year you kind of -- you started below the range in Q1 and then you kind of worked your way into the range throughout the year. This year, you're starting in -- within the range and based on kind of operating leverage. Should we expect a similar sequential development? I understand maybe not quite as aggressive as last year. But generally, should we expect margins to improve sequentially through the year?

I guess, Lasse, here, you got to interpret a bit on what I'm saying because obviously we're following a very structured forecasting process. We're in the middle of the first update of our annual budget. And of course, if we would see substantial support for really narrowing down the margins or even increasing, we would have to update the guidance. We haven't updated the guidance today, so that's why we are still in the process of figuring it out. But I'm not pessimistic.

[Operator Instructions] We received 2 questions from Mr. Ringel. And Mr. Ringel would like to know, what's your view and visibility on growth momentum in the remaining quarters of this full year? And when will the strong new bookings convert into sales and earnings?

Yes, that's a bit what I said already, right, Klaus? So I mean, sort of the order intake in energy, the bit coming from Frerk, that also relates to the fact that we first time consolidated the business, right? And we're talking about EUR 145 million, and that's pretty much the entire order backlog for the rest of the year and beyond. So that explains that. So the range of order intake in energy is typically a bit longer, especially when we talk about larger projects relating to the data center business because this is -- so I mean, to build these products, that's also not a question of a day, that's a question of weeks, build and implement and install, question of months partially. So here the conversion is really for the -- throughout the end of the year and even beyond.

It's different in engines. The difference between engines, the conversion in Europe, it's typically below 3 months due to the short shipping times. The part which applies to China and America typically ranges rather 4 to 6 months. So that's everything in our -- let's say, Q2 and Q3. On the other business units, I mean, step-by-step on service, we have a fairly flat, fairly stable book-to-bill on a high level. But here, the conversion is typically only 30 days. And on NewTech, it's no material order intake at this point in time. And in defense, the order intake also spans throughout the year. That's sort of the most lumpy business, especially the order I mentioned when walking you through defense, the order coming from the German Army regarding the loitering ammunition drones. That's an order which has been placed, I believe it was in March and the delivery is expected throughout the rest of the year.

We rather expect a potential follow-up order throughout the year, which then would also be delivered throughout the end of this year, potentially even beginning of '27. So that's -- and we appreciate, obviously, the question from you guys on that because the business model of DEUTZ is changing. And also when Lasse asked earlier about the unit sizes. Up to, let's say, 2, 3 years ago, you could explain the business performance of DEUTZ very simply by order, book-to-bill and unit size. And now with different business units, we have obviously different business models and different relationships of KPIs. And we want to also do that together with you guys to help you building up your models on that by providing the transparency on a business unit by business unit level.

And the second question from Mr. Ringel, but I guess we touched already that as well. Looking at your guidance for financial year '26, where are you seeing yourself currently in the respective ranges?

I think that was basically answered throughout the call, I think.

And let me take a quick look into our system, but by now there are no virtual hands. So final call, ladies and gentlemen, if there are questions, just let us know. Otherwise, we would come to the end of today's conference call. So thank you for joining, you showed interest. And also a big thank you to you, Sebastian and Oliver, for your presentation.

And with that, I hand back to Sebastian or Lars, not sure.

No, that's fine. I can take that. I just can repeat what you just said. Thank you very much for joining. It's been a pleasure talking to you on that quarterly numbers and particularly with good numbers and good outlook. We look forward to see, hopefully, many of you next week in our AGM here in Cologne. For those who haven't realized, it's not in the trade fair show as usual. It's in the Gurzenich. It's normally a carnival location, but we do something far more serious than carnival this time. We're doing an AGM there. We're looking forward to that. The first physical AGM since COVID pretty much, right? So that's going to be good.

We also will provide an update on our brand because the transformation of DEUTZ will become visible to the outside. We're extremely excited about that. And then obviously the next steps, as we currently foresee, is the first-half interim report in August, Q3 in November and of course along the way as many, ideally also physical meetings with investors and analysts through various roadshows and conferences, which we look very much forward to. Thanks for staying with us. Thanks for following us, for supporting us, and obviously, thanks for buying our shares.

Good morning, ladies and gentlemen, and a warm welcome to the Full Year 2025 Conference Call of the DEUTZ AG. Please note that this call is being recorded, and a replay will be available on deutz.com later today, and your participation in the call implies a consent to this. I'm pleased to welcome DEUTZ CEO, Sebastian Schulte; and CFO, Oliver Neu. So Sebastian will begin the presentation with the key figures of the financial year 2025 and then walk you through the progress made in the business units. Oliver will then provide you with the financial details and Sebastian again, will conclude the presentation with a look on the guidance, after which we will move over to the Q&A session. And then as always, please note our disclaimer, especially regarding forward-looking statements.

But before we start the presentation, I'm handing over to Lars Boelke, the new Head of Investor Relations, Communications and Marketing of DEUTZ. So Lars, the stage is yours.

Thank you very much, Sarah, and a warm welcome from my side as well, both to the guests joining here physically in the room and obviously also virtually participating.

Yes, we had a very exciting [ bell ring sounding ] this morning. We enjoyed it a lot, and we are delighted to present to you our business results, the latest developments, obviously. And last but not least, the outlook for 2026 in more detail.

However, before I hand over to Sebastian and Oliver to kick it off, let me take quickly the opportunity to introduce myself. I'm Lars Boelke. I'm very delighted to be part of the DEUTZ family since mid-March, and I'm leading with a great team behind obviously, of Communication, Investor Relations and Marketing. Please feel free to reach out to me and the whole team at any time. If you need anything, we're happy to be at your service. And obviously, I'm very much looking forward to an exciting time ahead in the MDAX now because DEUTZ has a great team, a convincing strategy and fantastic products and services in place. And I would think it's a perfect timing to be here. DEUTZ is back in MDAX. DEUTZ is successfully transforming. And DEUTZ is growing, how? This, for sure, will be presented to you by our CEO and CFO, who will guide you through today's presentation. Afterwards, we are, of course, more than happy to take your questions. So let's kick it off.

Sebastian, over to you.

Yes. Thank you very much, Lars and Sarah and also welcome to the team, Lars, in this exciting phase of our transformation.

Yes. So first of all, first things first, this morning, it was a great moment for us, celebrating here in Frankfurt, entering the MDAX, ringing the bell, opening the daily trading year, and you see a picture of Oliver and myself, Katharina, our HR Boss as well as 3 of our business unit heads who were with us celebrating because it's a team effort, as we say, with a lot of pride.

But let's move on. And before looking ahead, let me look back because that's the purpose of today's annual results conference. I want to guide you through what we achieved as a company in 2025.

With a bit of an executive summary. And the headlines shows it actually pretty nicely. We managed to achieve growth, and we managed to achieve profitable growth without the support of our core markets, our long-term core markets. So obviously, we guide you through that later, now presenting or represented in many, many attractive markets, but the core markets, which were extremely relevant for DEUTZ, like mainly between 2000 and 2021, 2022, basically didn't help, but even more importantly, that we actually managed to sail through quite successfully.

But let me guide you through that step by step. New orders went up almost 14% year-over-year to a level of almost EUR 2.1 billion. And of course, the changes, the growth, the additions of our portfolio, they did help to compensate our weak engine demand. I'll come to that later.

Revenues slightly below new orders, EUR 2.044 billion, but also a growth of almost 13% year-over-year. And here, the driver was clearly our new business areas as well as -- and let's not underestimate that our service business, which continues to grow in a healthy way, and we'll also give you more flavor on that later. More important, from my point of view, then only the top line growth is the bottom line growth, the 5.5%. So that's 1.3 percentage point better year-over-year. And for that increase in profitability, our margin accretive M&A and also our cost reduction program, Oliver will talk about it a bit in his part, did help. And so that's a good result given the circumstances in our core markets.

And last but not least, we also managed to significantly improve increase free cash flow before M&A to EUR 44.2 million. That's also a significant increase of almost 50% year-over-year, especially driven by a strong cash flow in the final quarter of the year. Important, and we'll give you a bit of a mixed view between purely sort of revenue but also units. I know that many of the analysts and investors covering and following us for years, have always been looking at a number of engines as a key driver, and it is still an important driver, but mainly and only for the engine business. So you see that, and that's in the ellipses in a way, you see that from 161,000 engines in 2021 and then up 181,000, 187,000, down 142,000, down 133,000 in '25. And you see that sort of in this core market, and that was exactly the point I was referring to earlier. The -- there was no much support from the industrial activity, in particular, construction equipment, agri and so on. So that means engine business becomes, in relative terms, less relevant to the group, 64% out of that EUR 2.044 million revenue. In turn, the service business continues to be in relative terms on a level, a bit above 25%. But important is also that our new business units, particularly at this point in time, energy is becoming more and more relevant. I'll guide you through that later.

But let me summarize that. Despite these lower volumes in the engine business, we actually managed to deliver one of the strongest results in our recent history of the company. Performance quality improved. Margins became more and more solid and strong. And that's mainly because across our business units, we were actually executing with a high degree of discipline. And the broader business mix increasingly pays off. We are not as dependent on the traditional engine cycle anymore. And that's, as I said, is driven by the service business, by the energy business and most recently also by the defense business. We are building based on what we already have shown in the last month. We are building a significantly more diversified and also resilient setup. And we call that our new strategy, our strategy update, let me put it that way. We're building here the Next DEUTZ.

And the Next DEUTZ, let me summarize that. That's both our ambition and our strategy. And as we show later, also our structure, which in an ideal world, and that's what we're trying to achieve here following the strategy. So the Next DEUTZ will comprise and it's already comprising of 5 business units and also 5 business models. On the one hand, the defense business, that's still in absolute terms, one of the smaller units, but with a high growth. So here, we're building an ecosystem. Then the energy business, which we have grown also with acquisitions over the last years. I'll come to that later.

Here it's about really building a global business, moving from a fairly regional focused business to a global business. And engine, of course, still when we talk about revenue, when we talk about headcount, that's still the largest business. But the profit pools are shifting. The new business units become more relevant. So here it's about streamlining the business, driving performance, but still growing.

NewTech is driving innovation. It's a bit for me an option value in a way. The markets are not yet picking up as we would like to, but it's important to be in that business in order to be ready when the market is picking up. So let's hear about innovation.

And last but certainly not least, our service business that's really a global setup. Our footprint, extremely strong asset of the company where we want to broaden our position and the service business traditionally or historically helped the engine business, the customers of the engine business, but we are ideally set up to also support our new business units, defense and energy and NewTech. So that's our vision and strategy, and that -- let us move on.

So I said it already, structure needs to follow strategy. Since the beginning of this year, January 26, we are also -- we have reorganized ourself formally. So since first of January, we have introduced 5 business units, the defense business, led by Marco Herre. The energy business, led by David Evans, out of the United States, the engines business, led by Markus Villinger, the NewTech business led by Bert van Hasselt and last, but again, not least, the service business led by Andreas Schmidt. And group-wide leadership, you will see -- you see here in this conference call, Oliver as the CFO, myself as CEO and also last but not least, Katharina, who focuses on human resources, strategy and transformation. So that's a nice mixture between, let's say, a lean group-wide setup, group-wide leadership topic and very clearly P&L responsible business leaders in their respective business areas.

Let me walk you through the units item by item. So first of all, when I look back at defense, the contribution we had hoped for, we had planned for out of defense. We managed to exceed because there is. I think that's not a surprise, strong momentum in that business. We established our initial footprint now also in the DefTech area. We acquired SOBEK, as you all know, we sealed partnerships with ARX Robotics for unmanned ground vehicle systems. And then we secured and also executed first direct orders. And that's very, very , very promising, both in sort of the traditional field, i.e., we are delivering DEUTZ diesel engines to defense customers, but also in the field of the defense tech companies where we talk mainly about our battery electric systems in military drones. So we managed to establish ourselves as a player. And I can tell as much that we work on that and we continue on that because here, profitable growth lies ahead of us. The outlook, and that's a number which we have in mind for 2030, EUR 300 million revenue, step-by-step with high growth rates. We want to further expand our footprint in DefTech, a lot through partnerships, potentially joint projects. Every now and again, we're also considering investing, but it's always important for us when we enter into a partnership that we have a right to play and the right to win that we bring something to the table to the partners.

Important is, of course, there is an extremely promising sales pipeline, both in traditional drive systems as well as in the DefTech drive systems, and it's about strengthening execution in here, but we're on good track here. And of course, there will always be opportunities around because that field is developing quickly. Budgets are there, budgets are growing. Everyone is aware that this is a field which is important to also support from government side. So we're always open for partnerships and also M&A.

Energy, really a highlight, looking back in 2025. Blue Star Power Systems, our U.S. American footprint has delivered above plan growth and also profitability, expanding the network in the United States, improving in terms of growing but also execution on the operations. Our Moroccan asset are serving mainly Northern but also Central Africa. It's a completely different market, but the turnaround we had to initiate here after this asset was a bit left at the site for many, many years within DEUTZ. The turnaround is progressing. Leadership has been set up, a great guy, we've got there leading that business now. And we already see now in the first weeks and months of 2026 that is paying off. Order intake is increasing. So that's great. And we concluded the acquisition of Frerk. I mean, technically speaking, the closing was this year, but the signing was in December last year. And with Frerk, I will speak about that also later, we are establishing our presence in Europe, out of Germany, but also growing into neighboring countries, particularly in the field of emergency power supply for data center and creating momentum for further growth.

Outlook this year is very clear. Our objective, our target is achieving EUR 500 million revenue by 2030. It's 20% CAGR, not a low number, but we are very, very optimistic to achieve that. We've dedicated plan on that, and we're certainly ahead of the plan that we initially put in here. We're driving the organic growth with the companies and the operations we've got in the business footprint right now, Blue Star, MAGIDEUTZ, of course, now we have to execute the integration of Frerk, a light integration because these companies, they have developed very well without the support of corporate, so we want to continue enabling them. Obviously, their agility and their freedom. But on the other hand, we will bring what we really have to support the business, such as our service network to the table in order to achieve that the equation 1 plus 1 is above 2. That's what I also mean with synergies across the business unit because we've got engines in the portfolio, as I will point out later, we've got the service footprint. So here, everything is set up for profitable growth.

Moving on to engines. Looking back in 2025, I said earlier, the market has been challenging. Demand has been challenging across the regions. As you know, our main regions or main sales regions is Europe and the United States. So still the recovery, which we are waiting for, hadn't picked up in '25. I will speak about the outlook in a minute. But from a portfolio and strategic point of view, we did launch a new engine, the 3.9, 4.0 liter engine. The customer response is extremely promising. A lot of orders we already caught and secured. So that's fantastic. Also, our engines, which come from Daimler Truck, the so-called HDEP and MDEG, heavy-duty and medium-duty engines. We've successfully integrated them both in our sales product portfolio as well as our service portfolio. And that's important because it's crucial for us that we are expanding our portfolio towards higher power ranges like that one, because particularly in medium and higher power ranges, the internal combustion engine will play a significant role in the next, not only years but potentially decades to come. So here, we are extremely well set up. We did right size i.e., reduce our R&D capacities. Oliver, we'll talk about future program later. We're ahead of plan here as well, and market consolidation efficiency plays an important role.

If I look ahead for '25 and beyond, you see we foresee a growth here. We foresee a growth. And why is that? Because we want to integrate or we will integrate more of our partner in these large engines like a 24-liter engine, the V12 engine in our portfolio. We have already first orders from power generation customers. So that's great. We're driving further performance. We're now with the business unit structure under the leadership of Markus Villinger set up really strongly in a way that we have now a strong focus on performance, also both in sales, but also in operations. Like we haven't had that always. So that's a great progress going forward.

And let me give a bit of a glimpse as well. We're talking here, of course, about the long-term outlook. But we started quite well into the financial year 2026. So we see a good order momentum both from the United States as well as from Europe despite the geopolitical uncertainties. So order intake is quite promising, and that makes us also confident even in that field, which was under dire -- under pressure in the last years going into 2026 and beyond.

NewTech, now we acquired UMS in Holland, in the Netherlands. We initiated integration. We managed first shifts from sort of small one-offs to small series, still not into large series, but that's not because we are not successful. It's just because there's nothing like that happening in large series on the market. But we are continuously strengthening our portfolio and also our production capabilities. So important is when, and that brings me to the outlook. We are able to convert the pipeline into revenue. We're also able to scale up the projects, bring our production excellence here to force into play and deliver to the needs of the customers. So we want to be also more efficient in terms of R&D, faster, more cost-effective using artificial intelligence here. So this is an interesting and very promising field to simply become better and faster. And that's also needed in that field where the change in shift of technology is certainly faster than in our traditional fields.

Last but not least, moving to service. And as always, in the last year, service is really a business we're extremely proud of, looking at the development. We further expanded our network. We integrated also the larger engines coming from Daimler Truck, the HDEP and MDEG index -- engines. We completed further acquisitions in Turkey and in the United States. So we are -- because in terms of service, it's extremely important to be there where the customer is, particularly in rural areas. When I think about United States. So we are growing our U.S. footprint in a very good way and focusing now also on Europe, including the DACH region, Germany, as well.

Going ahead, looking ahead, no, no, one back please. Looking ahead, we're continuously driving this growth, especially America and Europe, as I said, but also expanding our portfolio exchange in the remanufacturing where we are able to bring new engines into a new life. That's something extremely important and now making use of our portfolio also for the new business units, expanding our offering in service business for the powergen business, with a focus on Europe and the United States.

Yes, let me conclude that we want to obviously confirm, reconfirm, give the confidence that we, as a management team, remain more than committed to our 2030 revenue targets, and we've got plans laid out in very much detail that every -- all of the business units has to make and will make their contribution to bring the status quo up to the target. And this -- yes, we're good on track, well on track here. The support of defense business, energy business, engines business, NewTech business and service business to bring us to the target to become more relevant and more profitable, but that's a perfect transition point to Oliver talking about numbers and I will be back in a second.

Thank you very much, Sebastian. Good morning. Welcome also from my side. Let's dip into the numbers immediately, and we heard it was a good year even though we are not receiving that much of support from the engine market. At least, it was a good year and a good year also means we met our guidance. That is where we are committed to, same as we are committed to our 2030 guidance, our targets, we are committed to our yearly guidance. And on the revenue side, we guided the roughly EUR 2.1 billion. We achieved it on the adjusted EBIT. Last guidance was midpoint of the or middle range of the guidance range expected. We made it straight on the point with 5.5% adjusted EBIT. And also the free cash flow, mid-double-digit euro amount guided before M&A, we met it, it was EUR 44.2 million. So very positive information on this slide.

Moving ahead, what was driving the results. And one topic we continue to report on and it's addressing directly our structural cost structure is our Future Fit program. Just to remember, we have a target of EUR 50 million cost reduction, structural cost reduction in 2026 compared to the baseline year 2024. We are absolutely well on track there. So we have more than EUR 25 million already fully P&L effective in the accounts. All measures are identified, implemented, running, so effects are ramping up continuously into the results, and that will continue throughout the year 2026 as well. Costs related to the Future Fit program, EUR 25 million was booked as you know, already in Q1 last year, so Q1 2025.

Looking a bit on the key figures of fiscal year 2025, we see, first of all, new orders ramping up 13.7% plus. That is book-to-bill ratio once again higher than 1, which is good, a trend which seems to continue also in the current quarter. The order backlog at roughly EUR 500 million, so positive sign there. On the revenue side, a 12.7% increase, application areas, especially construction, 14%; agriculture, machinery, plus 10% compared to the year before. Those areas particularly benefited from the contribution of the Daimler Truck industrial engines while material handling, which is mainly on the engine side in the U.S. was a bit weaker due to the overall economic situation in the United States. Service business, very positive news, continues the growth path, plus 9% year-over-year, so continuously contributing both in top and bottom line. Coming to the bottom line, talking about earnings, 5.5% adjusted EBIT margin, which is a 46% increase year-over-year. So cost saving from the Future Fit program supported the results, but also the portfolio measures. And this was somewhat offsetting missing fixed cost absorption due to the overall lower production volume.

On the net income side, EUR 54.1 million. This is a bit lower -- higher than last year, but a little bit lower due to the Future Fit provision that was booked in Q1.

On the next slide, we see further KPIs or the same KPIs basically on the quarterly development. And we see that new orders, revenue and EBIT increased and showed the strongest quarter in Q4, especially nice the trend on the EBIT side with a very strong Q4 at a margin level of 6.8%. Several factors that were supporting us there on the one hand, of course, the Future Fit savings, which continuously grew and grew over the year, but also higher sales volume on the engine side, roughly EUR 35 million higher volume than the quarters before. So that also had a very stable production with a good shift model and of course, also M&A activities like SOBEK or service acquisitions, which were kicking in, in September last year or throughout the last quarter of 2025.

Looking a bit in the segment reporting. It's the last time we're going to see the traditional segmentation. So here we look at engines and services. We see also here all KPIs growing, purely looking at the business unit engine side. We sold 133,000 units. So total sales volume was a bit lower, 5%, 5.5% lower year-over-year. Also in-house production was 4.5% lower than the previous year. So they were kind of negative economies of scale. These were, however, offset from Daimler Truck off-highway engines and also especially from the Future Fit cost reduction program. Very successful also HJS Emission Technology, the turnaround case we acquired and we turned it positively, so also contributing positively with the results.

On the business unit service side, revenues at EUR 545 million, 9% year-over-year. And also besides the -- this year slightly lower organic growth, especially inorganic growth. So the U.S. acquisitions OnSite Diesel, Double Down, which we reported early on in Q4, we're supporting, but of course, also the Daimler Truck service business we acquired, which is developing very well and nicely. Looking into the second segment, DEUTZ Solutions, combining here, as you know, energy and the business unit, NewTech, quite 2 different businesses. On the energy side, order intake remains strong, EUR 165 million. That's a book-to-bill ratio of by around 1 order intake is not naturally distributed equally throughout the quarter. So there are some peak quarters. That's why it's overall growing, even though book-to-bill is around 1 in the entire fiscal year.

On the revenue side, strong EUR 170 million and the EUR 15 million EBIT. Important to know here, this is an EBIT after these technical accounting purchase price allocation effects, you can see in the footnote. So purely operational and was even better EUR 23.7 million, which is a 14% EBIT margin on the energy side and supports a strong growth and with the group financials. NewTech are still low on the new order level and also on the revenue level, it was only EUR 14 million revenue. On the other hand, EUR 34 million losses, same level as 2024 on one hand, R&D expenses came down, of course, as you know, due to the Future Fit program. But we also build up a bit of a structure to be prepared and properly address the market side to be ready once orders are kicking in and of course, also to ensure that orders are kicking in.

Looking a bit more in the financial KPIs, R&D, CapEx, working capital, all KPIs go in the right direction. R&D spending reduced to a level of EUR 85 million, so 9% reduction, direct consequence of the Future Fit program. CapEx coming down to EUR 95 million. This is including leasing. So among others, some assembly lines, new test benches, logistic facilities, but also this year, a bit of IT infrastructure. And on the working capital side, in absolute terms, it remained almost exactly on the same level as in 2024. However, the ratio significantly reduced. So the trend is definitely going in the right direction and also inventory wise. We only saw a slight increase even though we had several acquisitions in, so there was an efficient inventory management in place as well.

Looking at the cash side and net debt. So cash flow from operating activities up by EUR 33 million to a level of EUR 143 million. That results in a free cash flow before M&A of EUR 44 million. So also here an increase compared to 2024. And net debt position then going up slightly. Going up, of course, mainly due to the M&A activities, which -- where we spend between EUR 160 million and EUR 170 million last year, while on the other hand, the capital increase we conducted in September was, of course, contributing in the other direction.

That brings us to the balance sheet and the financing side. Balance sheet remains strong. Equity ratio remains strong, 51.3% equity ratio, also leverage here, including leasing at a level of 1.3%. If you exclude leasing, you are slightly below in the leverage. And this combination of the figures we present here, of course, shows that we continue to have strong financial firepower also for further acquisitions. So for example, the acquisition of the Frerk Group, which we closed beginning of February and which was financed on via debt completely. Dividend proposal is going to be EUR 0.18 per share. That's a proposal Supervisory Board and Management Board will propose to the Annual General Meeting that takes place on the 13th of May.

Last but not least, just a quick outlook on the change of reporting structure follows strategy. So also reporting structure follows strategy. We're going to report beginning Q1 2026 in the new logic here alongside our business units, thereby increasing again, transparency towards the capital market, and also, of course, considering the differences in the business units, the different focus points and structures and challenges and opportunities those business units are having.

Then I hand over to Sebastian for the guidance 2026.

Yes. Thank you very much, Oliver, for the numbers and for the -- also all the details on capital structure and funding. I mentioned it earlier. We're building the Next DEUTZ. You see the Next DEUTZ again on the left part of that chart, but I'd like to also translate that a bit on what are the levers that will create value for the shareholders here. And it's very traditional. We've got a couple of important levers. So we see growth.

Selective. What do I mean with selective, not at any cost. It has to be profitable, structural in areas which are ready for growth and resilient. We want to build something which is there for the long run and not just for a hype. And what do I mean with that in terms of our portfolio, we can scale up. We will further scale up our energy and defense business that is clearly backed up by market growth, not much cyclicity. We want to further gain market share in service. Service is also resilient and it's there for the long term even if -- even in the engine business, the engines will remain in the field for decades and we will grow very focused also in our engine business, particularly in terms of using larger, more powerful engines.

Then second lever, margins, quality before volume. We like volume, but we like quality even more. So quality before volume, ideally both. We will increase the share of our margin-accretive businesses. Service is clearly margin-accretive, energy, clearly margin accretive and defense is clearly margin accretive. And there will be a focus on performance, especially in engine, not limited, but especially on engine. These are here, the big levers -- is the big levers in terms of margin. And then, of course, cash is king, discipline, orientation on ROCE. We've continued to allocate capital in a profit optimized way. We will obviously put a focus on working capital. I mean keep the focus, let me put it that way, especially when there is a market uptick in the traditional engine business. Managing working capital is key here. Not to build up too much, but also be there when the customer orders. And of course, there is integration potential in our new business as well.

And then last but not least, there is strategic upside on top of gross margins and cash. It's an option approach, leverage really partnership options, which may appear on the road and NewTech certainly is a market-driven strategic upside. We are there. We invest in a limited but focused way. But once the market is picking up, we are there and then we will benefit, so that's an extremely important perspective on our Next DEUTZ.

And when we look at '26, the outlook we will be giving in a minute. I mean that's clearly driven by our strategic value transformation. Of course, you all know that macro geopolitical volatility and uncertainty is there and will likely remain. However, the end markets and all of the end markets are improving. Some of them are already in a good shape, like energy, defense. Others are cautiously improving. The engine business is picking up, has been picking up already in the first days and weeks of 2026. So these signs are very, very good. Time will tell how strong, we will continue, we are there. But we are very positive right now, the first time, quite frankly, in, let's say, 15, 16 months are really, really positive in that outlook of the engine market.

And then, of course, the DEUTZ's perspective, the more resilient structure we have been building, the benefits will increase. They're already there, but they will increase. We see in 2026, the full P&L impact of our acquisitions, which we concluded in 2025. And Frerk we closed in February 2026. So it's almost a full year effect, which will support our numbers here and of course, also other portfolio measures as well as, of course, efficiency and cost improvements like we just heard from Oliver, the Future Fit program. We wanted to achieve EUR 50 million P&L effective, we are above that. So that's one of the clear points when we talk to our investors as well. We make announcements which we will deliver. And with that, we are positive to grow and to also grow in 2026.

Let me give you the numbers now. So of course, let me start with revenue. We're expecting here a range between EUR 2.3 billion and EUR 2.5 billion. We've provided you also the midpoint for the business units. I will not read them in detail. We see a margin range between 6.5% and 8%. Also, again, midpoint in engines, midpoint in the business units. And free cash flow, we expect to be high double-digit million euro. I mean there are certain important points, which I show you on the left-hand side. There is good positive momentum right now. in energy, services and defense and also most recently in engine.

So I would be a bit more bullish than what's written here on the chart. This sounds a bit like, oh, let's see what happens. Actually, first quarter order intake shows in a very good direction. That gives us confidence already for the second quarter and also leading into the third quarter. And so that's what we have somehow expected here a bit of a stronger second half. It's actually well supported by the KPIs we're following here right now. So yes, that's the look ahead. And we hope that you feel a bit the confidence we have coming out of a strong-ish 2025 with a new setup with building the Next DEUTZ and we are now looking ahead or looking forward to lead this great company not only through 2026, but beyond with our ambitious but yet realistic targets.

In that sense, thank you very much for your attention. And of course, as usual, we are open for questions.

Yes. Thank you very much for guiding us through here for giving the outlook, which is quite promising, if I may say so. Of course, we're happy to take your questions now. We would like to start with in this room, to make it a bit easier, I guess. So if there are any questions here, please go ahead. And afterwards, of course, we will also give all the colleagues dial-in opportunity to ask additional questions. [indiscernible] go ahead. You need to please use the microphones, thank you.

So thank you for the presentation, Sebastian, and congratulations on entering in the MDAX. I mean it's a great milestone. Regarding the guidance, if I may, I see that the target in terms of engines is more or less the same result this year, I think, making the math myself. So this means that you are quite cautious even in the midpoint? Or is there any reason to be this cautious apart obviously of the geopolitical events that we are suffering these days. That will be my first question, please.

Yes. I mean, I -- and we really rather give an outlook and then slightly over deliver. That's what I believe we've shown in the last 3, 4 years. So it takes some time to build up trust, it takes a second to destroy it and we want to remain within that sort of mindset. And of course, as I said, February order intake in engines has been promising. March, it's not over yet, but it's also promising. So I look quite forward to Q1, but especially Q2. And I'd rather wait until the end of Q2 when we have order intake numbers for Q2 and then to potentially be a bit more optimistic right now. At the moment, we see -- and you're almost right in the guidance for engines, it's a slight recovery expected, but certainly not a moderate or even large recovery. And the operating leverage, you know that very well and the engine business is extreme.

So we're coming from that 130,000, 135,000 engines. And once this is going up, it will be certainly moving not only in revenue towards and potentially beyond what we have here at the upper end, but especially profitability will benefit significantly. But let me be a bit cautious with that guidance right now and then see what happens. And I mean the war in Iran, that's obviously, we as DEUTZ do not feel any negative impacts right now. It's terrible as that obviously is from a personal perspective. However, we all know that the higher oil price is not good for the economy. So that's why we're a little bit cautious. I believe this is not the moment with that geopolitical uncertainty to say, all right, there's only sunshine and sparkles in the second half of the year, and that's a bit of background for providing that. I would still say, actually quite positive guidance. I mean, in a year like that 6.5% to 8%, DEUTZ has never shown numbers of 8% even in boom phases. So don't make me feel too bad about being slightly optimistic.

No, no, don't take me wrong, but it's -- I feel also that the year has started in the right direction. So I was curious to know how this was fitting into the optimism that you have or not.

And so maybe following up with this, can you give us a little bit of feedback of your conversations these days with the OEMs and how they see the investment plans in Europe. If this is something that -- is it still not driving really the demand or do you think that we can see some -- at some point, some good push to the demand maybe end of the year or next year or something that is going to happen?

Yes. I mean, I obviously don't want to talk about individual customers yet at this point in time. I think that -- those who are listed, obviously, provide their numbers also publicly. What we see at the moment is a couple of customers and a couple meaning more than 2, ordering relatively large quantities, and this both comes from the U.S. There is one customer who's quite optimistic in the United States, but also a group of customers in construction quite optimistic in Europe. We still have to bear in mind with -- starting with -- we are taking off from a low level. We're talking about numbers on a monthly basis, maybe 13,500, 14,000 engines, what we see recently on a monthly basis, and that's significantly more than what we've had through last year. But again, it's 1 month, right? It's 1 month. But what I take positive is that this is happening. This has not happened before the beginning of the Iran War, but during or after -- during and that means that we will see some recovery. And so yes, so it fits probably very much to what these customers particularly in construction, say openly. Bear in mind, wait until we release the Q1 numbers because then we've got the Q1 in the books, and we've got already a good indication of what's happening in April and also towards May.

Okay. Maybe last one from my side. And regarding defense, the target for 2030 is really strong. And is interesting that you have already a number in your mind about it. Also, you mentioned that the pipeline looks quite nice. How do you feel or see DEUTZ being recognized in the market. Are you positioning all your different products together? Or how you are managing this growth in defense that will be interesting to know.

Yes. Our defense business unit, it's a small, but pretty fast moving, fast-acting units. You know the guys a bit from several interactions. And I would describe them a bit as a market-oriented business unit. So they don't have their own products, but they market the products we have in the portfolio towards defense customers and it's extremely important because the go-to-market in defense is extremely different than a go-to-market in industry, right?

So let me give you an example when it's about placing a diesel engine into a military vehicle. Typically, the go-to-market takes not just weeks and months, but can take years because it has to be sort of baked into the specifications and there is a bit of lobbying sometimes as well, as we all know, right? And that's why -- and of course, on our side, also the application engineering is different. And we do not talk about volumes as high in terms of units as in industrial applications. So when we are -- if we manage to place, let's say, an order of 300 or 400 engines to a defense customer, because margins are higher and justified because there's more work to be done, right? So -- but if that happens, our engineering teams need to obviously do the work on the machine and they need to do the work pretty quickly. And under normal circumstances, you would always prioritize the industrial customer who wants 5,000 or 6,000 or 7,000 units, but their margin level is different.

So it's a bit also managing internally the resources. And that's actually proven to be quite successful to have a dedicated team who work dedicatedly with defense customers but also who manage the internal complexity in a different way. And that is just the example for the ICE, but the same applies for products for power for gensets, for example, because there's also increasing demand by defense customers as well as in the whole DefTech field with our battery electric products. So go-to-market business unit, fit for market and also managing the internal complexity. It's a proven recipe, which pays off every day more.

Please go ahead.

Actually, we'll start with the guidance for this year. And if you could remind us of the unfolding of the remaining cost savings of this more than EUR 50 million and connected to this. Last year, we saw a rather linear development of profitability through the year in terms of margins quarter-by-quarter. Would you expect the same picture or something like a seasonality through the quarter. So that's most [indiscernible].

On the cost savings, so that EUR 50 million -- I call it EUR 50 million plus, so it's going to be around EUR 55 million or even slightly higher. EUR 25 million to EUR 30 million are already in the P&L. The rest will then come '26. So that is fully P&L effective, then it's not like coming only in '27, with measures being implemented last second, but it's really like we want to see the full P&L impact '26 versus '24. And the ramp-up curve, I would expect that rather linearly. So part of those savings are related to employees. Majority are out already, some are still to come through the year. So that's a bit more front-loaded then. But on the other hand, there are certain other measures included, so linear ramp-up is a fair assumption, yes.

And second one would be on the, let's say, 2030 targets for the business units in the future, we'll report on. You gave us the sales figures you're targeting? Can you remind us also of margin conditions for the...

We gave the overall ambition level of a 10% adjusted EBIT margin. That's going to be distributed accordingly. But what we can say is that service and energy will be accretive, engines will be probably below the 10%, but also not at 0, right?

Thank you. Any additional questions in the room?

Lars Vom-Cleff, Deutsche Bank. New kid on the block here.

Welcome to the show.

Looking at your target of a high single -- sorry, high double-digit euro million free cash flow, I saw the working capital to sales ratio coming down from 21-ish to 18.7%. Is that the new normal? Or do you have a specific target ratio in mind to improve cash flow even further?

On the cash flow side, I wouldn't consider that as a new normal. I would consider that as a rather careful guidance on that end. So free cash flow generation was not the strongest KPI of DEUTZ over the past years. So we are a bit more cautious on that, but we are working on the right things. Working capital, you mentioned is exactly one of those where we are getting continuously better. Also new business models, changing it towards a bit less working capital efficient model. So we are targeting more towards the 15% in the midterm there. And on the cash flow side, we are -- overall see continuous improvement.

15% target?

The midterm.

Midterm. Sorry.

Not for the year, '26, that we gave the specific guidance in the report.

And I mean also on the different business, models or business units. I mean, the engine business typically comes with a very traditional sort of serial production or serial business model terms, whereas we have other business models, which work with down payments or with milestone payments. So it's even more difficult to purely say, all right, it's between, let's say, 15% and 20% because the business mix changes as well. But we want to, and that's a positive thing about that. Obviously, we want to also utilize this. This is one of the synergies in the group as well. Mixing different business models also, that's what I meant when I talked about the cash lever to hear a mix and match in a better way.

Perfect. And then your service business was continuously mentioned as one of the growth pillars, high margin. Of course, we appreciate that if it grows. How do you intend to grow that? Is it digitization, predictive maintenance offering. So are you also trying to take market share or convince your customers to do less and let you do more?

It's many growth levers. One lever is simply winning market share. Mainly when I talk about the engine business, service comprised of pretty much 3 levers. One is parts. And we have already a good market share, still a bit room to grow, but not unlimited room to grow, of course. The other lever is work at the machine, so like sort of labor technician work. There we have a still fairly low market share. Over the last years. I mean, 5 or 10 years ago, we had -- we weren't doing that at all. We were just selling parts. And now we're already doing much more work at machine. So that's 1 of the focus points to grow. And then thirdly is indeed digital offerings like telemetrics solutions, we have quite a few promising opportunities in that. And the fourth point is also small -- serious smallish M&A buying former external dealerships in order to increase the footprint and bring that margin in-house. These are the sort of -- and of course, last but not least, also offering or utilizing our footprint for the new business models. And that's why we're pretty confident on that growth, the number you just mentioned because they're supported by at least 4 pillars.

Maybe last question, staying with M&A. You said smallish in service, completely understood. You were quite successful with the recent bolt-on acquisitions, also targeting higher-margin product offering services. Where would you see remaining white spots rather, I guess, it's rather products or technologies than regions? And thinking about your leverage ratio of 1.3x. What would be the maximum to accept in this regard?

Let me start with the areas and then Oliver will talk on funding. So first of all, I mean, as you said, service, we'll continue to work on that. These are not large acquisitions. So we've shown a proven track record to do -- to be able to do quite a lot of them on an annual basis. We are certainly open to grow also more in both energy and defense business, and we have quite a good overview of what could be -- what could happen in the next years, but you will understand that this is exactly the field where transparency has very strong limitations. And we can just say we are working on a lot of opportunities and options. But with M&A, you never know, it always takes 2 to tango. And we'll see, we'll keep you updated as soon as we can.

And on the leverage question, well, we have a strong balance sheet. We have a decent leverage with a level of 1.4 leasing -- without leasing even below 1. So we have debt capacity. That also means -- and as you saw with the Frerk transition recently, we added additional debt because the balance sheet supports that. We see increasing resilience of our business model, growing energy, growing defense, growing service, volatility gets out of the results. That means we can support higher leverage. Specific numbers, it depends a bit on -- if you ask the CEO or the CFO, the CFO is always a bit more careful. So I can easily imagine a leverage of 2, 2.5. But of course, it needs to fit to the development of the business.

Thank you so much for your questions, and I hope you got the answers that you were looking for. There's one more in the room. And I think afterwards, we're going to move into the virtual world. Please.

Yes. You mentioned that your book-to-bill ratio in your new energy unit was below the threshold of 1. You painted out clearly growth path until 2030. Can you give us an indication how this order intake is currently developing, where you stand at the book-to-bill ratio?

In energy, you mean?

In energy, yes.

Yes. I mean first of all, the book-to-bill in engines is more an indicator of growth if it's above 1. In energy, it's -- we talk about a bit more or less sort of lumpy orders. So there is a lumpy order and then you suddenly have in a quarter potentially even a book-to-bill of 2. And then in the next, you have a book-to-bill of 0.4, 0.5. So that's why I would not put too much emphasis on the book-to-bill in energy. Again, in engines, in service it is highly relevant. So here, what we can say is that with our 2 larger assets in energy, which is Blue Star and Frerk, we do see a very solid perspective on growth in both. Both in the United States as well as in Europe and also in our smaller asset in Morocco. Here, the book-to-bill is actually above 1, but the same applies what I just said earlier. So that's why we see here based on the sales funnel. So here we rather think in the sales funnel, typical logic. You start with a fairly large sales funnel. You put in -- go and get probabilities on there, you calculate them. And so here we see quite a bit of supporting information for the growth we put in here into the numbers.

Once again, thank you very much. And with that, I would hand it over to Sarah to the virtually dial-in colleagues. I don't know why my microphone is a bit of a -- we have noise. I hope you can still understand me, but Sarah, please take it.

Absolutely. Sounds good, Lars. Thank you for handing over. So ladies and gentlemen, we have a couple of minutes left for you on the virtual line to ask your questions in person by the audio line. [Operator Instructions] Unfortunately, forgive us, we cannot cover all the questions in the chat today, but we will take them and come back to you afterwards. And in the meantime, we have a virtual hand from Stefan Augustin.

Yes. The question is actually on the guidance and the new business unit guidance. So there is defense and it says defense and others. Could you remind us what else is in others in there and possibly also if there is a huge differentiation between the profitability of these businesses?

And maybe a technicality, but to understand the rest a bit better, if you sell a genset to the Bundeswehr, is it then accounted for under defense or under energy? And maybe also then connected here, if I look at these business units guidance, is there anyone where you include an M&A perspective? Or shall we take these separate BU guidance as organic growth opportunity guidance for '26?

Yes. Let me start with your first question on the defense and other segments. So basically, it's defense, but we also will allocate our recent acquisition, HJS, which we acquired beginning of January 2025. So from a margin perspective, obviously, defense business is way more profitable than HJS, which is also slightly profitable, and that is then the combination of how we derive that overall guidance. But that is basically the only relevant part, which is covered by other.

And the second question, if you sell a genset to the Bundeswehr, for example, yes, that's defense.

And on the third question, to which degree M&A is impacting the guidance here. Naturally, we see some M&A activities on the service side, where we have a good track record of 2, 3 or more M&A transactions per year. That is also what we are expecting then so certain M&A contribution on the service side, along what we achieved over the last years while the other business units are not M&A driven in the guidance.

Which doesn't mean we're not doing that. It doesn't mean we're not doing that, but we do not put unlaid eggs into the guidance. Let's put it that way.

It's just that very clear, but it gives a better picture of what you think is organically happening.

Lastly is on NewTech, and how do you feel about the loss allowance here? So you outlined that some of the cost is for setting up structures. In case there would in first half or so '26, nothing materially happened on the opportunity side. How quickly could you reduce the cost base and how willing would you be to do so?

Yes. First of all, we couldn't reduce it to 0, obviously. I mean, we could, but that would not be wise because I talked about an option value, and that would destroy the option value also to 0. So -- but in fact, we are obviously always evaluating here the cost base and the structures because in the end, cost is structure or structure is cost. So in case -- and I'm not saying that is happening, but in case we wouldn't see the first sort of serial small material order, we obviously would be able to scratch projects to reduce the losses here and we're well prepared to do so, but we are actually quite optimistic that this will not be necessary. But it's important to be always ready for both potential developments.

Thank you so much for your questions. So in the meantime, we did not receive any further virtual hands. So we therefore, come to the end of today's conference call. So thank you, everyone, for joining and your showing interest. And also a big thank you to you Sebastian and Oliver for guiding us through the presentation and for answering all those questions. From my side, it was a pleasure to be your digital host today, and I hand back to Sebastian for some final remarks, which concludes our call for today.

Yes. Thank you very much for dialing in. Thank you very much for asking all these very valuable questions. Thank you very much for accompanying us as DEUTZ. And it's really a great time in a way to guide and lead this company through this transformation. It's also great to see how our measures are paying off. And that's also bear in mind, it's been a challenging year in 2025, given the environment. And we have managed quite successfully through that, and we are with a bit of caution, as we just heard also in the Q&A here, we're going with a bit of caution into 2026, but everything is set up to make this another success, and that's extremely important.

We need a bit of support from the end markets, from the traditional end markets, but we are ready to also grow both in terms of top line and profitability even if that support is not as strong as we all hope for. So we're looking forward to a great year 2026 and looking forward to the continuous dialogue with all of you throughout the year. And the financial calendar is put on the chart. I mean, we will release Q1 on May 7, AGM in Cologne, this time a physical AGM again on May 13. We are happy to welcome as many as possible for you, also physically in Cologne and then will be by H1, i.e., Q2 beginning of August. And obviously, looking forward to talk to many of you through the, I don't know, more than 20, 25 Investor Relations opportunities throughout the year.

Thanks for your attention. Stay tuned, there will be more to come.

Good morning, and welcome to DEUTZ's conference call on the acquisition of Frerk Aggregatebau GmbH. Please note that this call is being recorded, and a replay will be available on deutz.com later today. By participating in this call, you are consenting to this.

And now I am pleased to welcome DEUTZ's CEO, Sebastian Schulte, who will provide an overview of the acquired company, Frerk Aggregatebau GmbH and the transaction. Afterwards, we will open the floor for your questions. And for your information, we are planning this call to last 30 minutes.

As always, please note the disclaimer, especially regarding forward-looking statements. And with this, I'm handing over to you, Sebastian.

Yes. Thank you very much. And also from my side, good morning, in the last week before Christmas to our analysts and investors call. Because yesterday, we signed an SPA to acquire Frerk Aggregatebau in Northern Germany. And Frerk, as I will point out later, is an established German system integrator. And the rationale, and again, I will point that out later in more detail, is to really build up or strengthen our position as DEUTZ in an extremely fast-growing market for backup power solutions, particularly in the field of data centers, critical infrastructure. So all verticals which are growing strongly and where we have a very, very strong right to play and right to win.

What I will cover in this morning's short presentation is the market perspective, tell you a bit about the growth in that market, obviously, with a focus on data centers and critical infrastructure. I'll tell a bit more about what is -- who is Frerk actually, what's their footprint, their technology, their positioning. And of course, what's the strategic rationale why we picked Frerk as a company to be acquired and how Frerk fits into our growth strategy.

Let me start with a few words on Frerk. I said it before, it's a German-based system integrator of diesel, gas, gensets, and we're talking about an output -- output/revenue in 2025 of a bit above EUR 80 million. They also have -- Frerk also has a service share of roughly 10%. The remaining 90% is actually new build.

So the activities, the core activities is obviously they design, they engineer and then they package, as we say, in the field of power gen turnkey genset systems that includes containerized solutions. They do the project management, the installation, the commissioning and obviously also the long-term service and maintenance contract. Frerk today is owned by families. So it's private ownership. And that's why we are especially pleased to get on terms with the families currently still owning Frerk in handing that fantastic company over in our hands.

The output of Frerk is currently pretty dominated by German revenue, 85% and then, let's say, by other European countries we pointed out here on the right-hand side, France, Switzerland, Norway and others, but we can see here the main focus at the moment is still in Germany. But that also gives a nice growth perspective under future DEUTZ ownership, as I will point out later.

The market for gensets in general is growing. We talk here on that picture, we have got the European growth. So we see a 9% annual growth rate expected until 2030. But if you look a bit more detail, we see that sort of the general market is expected to grow around 3% to 5%, but the market for data centers -- well, gensets for data centers is expected to grow high -- well above that market CAGR of 15% to 20%. So we talk about in '25 for Europe about a total market of $3.5 billion to be expected to grow up to $5.5 billion by 2030. And the data center, obviously, the growth for the data center vertical is coming a lot from artificial intelligence and everything, and all the requirements from this market, which are currently developing.

When I look at the data center segment, and we see on the left side of that chart, the current capacity in megawatts, right? And we see that Germany here is centered on that map with above 1,000 is already quite strongly implemented. However, we still expect a CAGR of 10% to 20% even in Germany despite that large installed base, but driven by the hyperscalers as well as critical infrastructure on top, there is a stable and resilient growth to be expected.

If you look at other countries, in Europe, there's a bit of a mixed picture. So we still have already quite a strong capacity in France, in Spain, in the Nordics with a bit of pickup potential in Eastern Europe. I didn't mention the U.K., which is also obviously, mainly driven by data centers in London, already quite well established, but with a bit of pickup by Eastern Europe as well as Portugal. And that's actually very interesting also for the strategic rationale, which I will later point out that we do see European markets with extremely high growth potential in Southern Europe, and we see it here on the right in the bottom part. So cut a long story short, it's a lot of growth potential, growth perspectives in Europe pretty much across the continent.

Frerk, once acquired by DEUTZ, will position us very well to capture that data center and AI boom in Europe. Today, Frerk, the output, this is '24 numbers, but '25 numbers are fairly similar. Roughly 50% of that gensets go into data centers. Then we've got another 25% going into critical infrastructure, 10% service, I mentioned earlier, and other sort of smaller but still interesting segments, industries and others.

When we look at the customer exposure here, the data center operators, they typically have the highest requirements in terms of availability, redundancy and ultra-low latency backup power solutions. And I said it earlier, it is driven by the ever-increasing AI workloads and the cloud expansion.

When you look at the second largest customer group operators of critical infrastructure, what I mean with that, hospitals, utility companies, network operators, they do have long investment cycles and the regulatory requirements are increasing. The [ critical ] is a good example, German law, which will ensure that a lot of operators of critical infrastructures, in fact, will need to install backup power capacity for situations where the prime power may be interrupted.

And then, of course, we have here the third largest group, industrial energy customers. They just require reliable decentralized power solutions across a very, very wide range of applications.

So the entry barriers are not that low. So they're quite high actually to enter into that market because customer relationships are typically long term and the margin profiles are also extremely attractive. That's why -- that's what -- was the reason why we said we want to invest here. We want to purchase in order to then jointly with Frerk, and I will point that out later, build that business even larger and more successful in the future.

When I look at Frerk in particular, we're talking about -- we showed you about the output. It's a growth story, '24, '25, solid growth rate. We expect '26 to be well above '25. Frerk has a stable order backlog, good order book right now. And the momentum in data center growth, which I pointed out earlier, will drive here the output also going forward.

Revenue currently is expected to be around 10% of total output because typically, when you install such a backup genset, it goes along with a long-term service contract. So that is a very stable relationship between new installation and service.

So when we put Frerk together with DEUTZ, we are really creating synergies. We're really creating something attractive, something very attractive. So first of all, Frerk comes or joins DEUTZ -- will join DEUTZ with a strong underlying business, has a leading position in high-end backup power systems for data center and critical infrastructures. We understand and we believe that Frerk is extremely well positioned in these structurally growing markets, as I said earlier, which are benefiting from that AI-driven expansion of data centers.

And DEUTZ and now it's becoming actually very interesting. Frerk on a stand-alone basis, I would never say has reached sort of the peak of what they could do in terms of growing. They would grow on a stand-alone basis also grow going forward. But we believe with what DEUTZ can bring to the table, we can jointly certainly accelerate the growth because we bring scale, we bring industrialization, we bring global reach. So we, as a company at DEUTZ, we have -- we know the engine. We know all about the engine. We have system expertise. We do also bring manufacturing and sourcing capabilities to the table with our facilities in Germany, but also in Spain. And remember earlier, the Spanish and Portuguese market is also quite interesting. And that may be the strongest bit we bring to the table here is our globally, but in the case of Frerk, particularly the European service and dealer network.

And typically, when you want to win a contract, let's say, with a data center operator for the backup power, one of the questions they will ask is, all right, do you have the capabilities in that region where the data center is being operated to provide like 24/7 technical customer support. And when you're based in Germany, like Frerk is today, obviously, very strong in Germany with 7 service points. The answer for Germany is yes. But the answer for other countries in Europe at the moment without using our network would probably be still no. And with our particular European footprint all across the continent, we will be able to immediately answer all these questions with yes. And -- that's actually where really 1&1 adds up to more than 2.

So that's the European perspective, the DEUTZ scale and digitalization and reach perspective. We also will now be able to combine the platforms we have already in the field of power generation because you may remember a bit more than a year ago, DEUTZ acquired Blue Star Power Systems in the United States, a company also in the field of gensets, which is running extremely successful in their sort of -- in their niche and their strong niche. But now with the competency we acquired via Frerk, fully integrated turnkey backup power solutions, we're bringing in competency into the group, which we currently at Blue Star do not have yet. That includes advanced control and switching systems and these critical requirements for data centers, that's something which we now bring into the group via Frerk. So we can here transfer the knowledge, technology and the products from our European setup future going always -- going over the Atlantic also to our U.S. part.

So all in all, when we add these puzzle pieces together, Blue Star Power Systems, Frerk, our Magirus-Deutz, also our Chinese sourcing opportunities or options in our group. We are now really creating a globally scalable energy platform. We've got strong manufacturing and market presence in the U.S. We've got the capabilities now in Europe. So now we are actually putting pieces together to become a very relevant player in that field. And that's why -- yes, that's the reason why we acquired Frerk. That's the reason why we are excited, very excited about Frerk. And that's the reason why we call all of you this morning to walk you through our rationale and the details.

And our business unit Energy, I mentioned it already. We've announced when we started it 2 years ago that by 2030, we want to build a business with EUR 500 million revenue. We're moving well towards that number now. This platform, I said it earlier, Magirus-Deutz, cost-efficient production in North Africa, Blue Star in the U.S. and Frerk in Europe. And with all these pieces together, we are on a full year basis in '26, we expect already a revenue of a bit shy of EUR 300 million, EUR 280 million. And so we are well on track with further growth, organic and inorganic to achieve that EUR 500 million number by 2030.

Blue Star is working very well, top line and bottom line. You know that from our regular earnings calls. Frerk adds the capabilities and also profitable business. And when I look ahead with our business unit energy, we are really entering now the other or the structurally growing market driven by data centers. The EUR 500 million, just said it, we're well on track. And DEUTZ business unit Energy, yes, becomes relevant in that market. So we're extremely pleased with that.

And in terms of process, yesterday was the signing of the agreement. Now we will have to wait for the regulatory approvals, which is not expected to take too much time. So we expect a closing of the transaction somewhere, let's say, early or first half of the first quarter 2026.

And with that, I thank you for listening. And obviously, we are very much looking forward to receiving and answering your questions.

Thank you for the update, Sebastian. We will now move on to our Q&A session. [Operator Instructions] And the first question coming in from Stefan Augustin.

And I have just a question, Sebastian. Can you outline a little bit how the product ranges of Frerk and Blue Star fit together? And is there actually an easy point of cross-selling Frerk into the U.S. So is that usually working with the dealership structure that you have in the U.S.? Or is that something you would need to build up a direct sales for the larger products?

Yes. Let me start with the second question, Stefan. So we would typically not sell products produced by Frerk in Germany. We would not produce them in Germany, ship them to the U.S. and sell them there because logistic costs, and I will not talk about tariffs, but logistics costs are obviously quite large for machinery of that size. What we would rather do is we would bring the capabilities, the designs from -- which are developed here in Germany by Frerk to Blue Star in the U.S. and do the assembly locally because in principle terms, the packaging of the genset is extremely similar, whether we talk about these -- the models here produced by Frerk or the ones produced in the U.S. So it's rather transfer of capabilities in order to be efficient in terms of logistics. And in that sense, we would use the established dealership in the U.S. plus, of course, our own dealership. So there's something we already have.

And it's a bit like what I said earlier on the European footprint, which is very strong. Our U.S. footprint is equally strong. So that's actually not so much of a challenge from an operational, from a supply chain point of view.

Moving on to your first question there. So Frerk provides power gensets on the larger side. Blue Star, I would say, on the lower and middle side. So there's a certain overlap. But Frerk moves -- is going up to, I believe, 3 to 4 megawatts and Blue Star currently is going up to 2 megawatts, but there -- so there is an overlap a bit in the middle, but the capabilities are very, very comparable. So these assets fit well together.

Okay. And just to clarify that both products are sold versus dealerships?

Well, in the U.S., we're using both dealerships, but we also have a couple of direct customers, very large direct customers. And Frerk sells mainly directly to -- when I talk particularly about the data center, the data center companies, they sell directly to the data center companies. So that's the dealership -- the benefit of the dealership. And the service providers in Europe, which I pointed out earlier, is more in terms of servicing, maintaining the gensets rather than selling them. But we -- in the end, I believe we will actually use various existing sales channels in order to go to the market into the right way.

One more from Jorge Gonzalez.

My first question, sorry if you already commented on this because I had a couple of issues. Can you share with us what are the profitability levels you are expecting or if the business is doing something similar to Blue Star? That will be my first one, please.

Yes, we are here on an EBITDA level in the low double digits.

Amazing. And on regards of the future growth in Europe, is this transition in Europe also helping your plans to expand outside Europe? Is this a company that also is helping you to place these products in, for instance, in Asia or other regions?

Focus for now is to use Frerk as the platform for Europe and Blue Star is the platform for the United States. We would never obviously rule out to go beyond, but similar, like I'm not sure whether you had already joined when I said that earlier. But similar like we wouldn't sell products produced in Germany into the U.S. because of logistics, we may well use the capability we acquired with Frerk also outside Europe, let's say, in Asia or other regions. But then we would require local assembly capabilities in order to be efficient. But this is sort of for us rather a second step because the market growth in Europe is extremely attractive, as I showed on that one chart. And so we see possibilities with putting DEUTZ capabilities to what Frerk has to actually ensure that the Frerk business is growing well above the general market growth purely by adding these capabilities.

And maybe last one, when you were commenting on the direct sales in Europe. So this means that you are seeing a strong potential for cross-selling with the current structure of DEUTZ and with other also verticals for the business?

Yes, it's more -- I mean, the direct sales, I mean, we know that Frerk has a very good reputation in the market, particularly with operators of data centers. So when we bring our footprint, the DEUTZ footprint to the table, it's rather adding the capabilities for service and maintenance, which fills potential white spots in the capabilities that Frerk today has because the go-to-market, they have been pretty good, right? So it's more like adding the capabilities for service and maintenance.

Okay. And very last one, Sebastian. In terms of the number of engines that you can sell from DEUTZ to the new acquisition, is there potential also to place your own engines? Or for the beginning, you plan also like with Blue Star to maintain the current lineup of engines, and this is not the priority.

Yes. Selling DEUTZ engines is not the focus for that acquisition. The issue is -- the situation is that we talk here about significantly higher power ranges than the majority of the DEUTZ engine portfolio. So that's not the main field for synergies. We also talk with Frerk, Frerk is not buying -- is not buying or is not selling thousands of gensets. These are high-value products. So we are here in the low hundreds rather than in the thousands. So establishing another distribution channel for DEUTZ engines is not driving the acquisition. The main synergy potential comes really from our global service footprint as well as from production capabilities. So it's a bit comparable to the logic we applied with Blue Star successfully.

Thank you for your questions. And ladies and gentlemen, we have a few minutes left if you have any questions on the table. We have received no further virtual hands, and therefore, we will come to the end of today's conference call. Thank you all for joining. And also a big thank you to you, Sebastian, for your presentation. I wish you all a wonderful pre-Christmas season and hand over to Sebastian for some final remarks.

Yes. Thank you very much, and also thanks for joining us this morning for listening to the rationale behind our acquisition. And I would also conclude with what you just said because it's very unlikely that we'll hear each other before Christmas again. Don't worry, we'll not have any other surprises coming up before the 24th of December. So thanks for accompanying us on that journey. Wish you a Merry Christmas, happy holidays, happy New Year. And as you said, with many moving moments, we'll try to bring some of them from the business perspective, looking forward to interact and talk -- interact with and talk to you also in 2026. Thank you very much. Happy Christmas.

Good morning, ladies and gentlemen, and a warm welcome to the 9 Months 2025 Conference Call of the DEUTZ AG. Please note that this call is being recorded, and a replay will be available on deutz.com later today. Your participation in this call implies a consent to this.

I'm pleased to welcome DEUTZ's CEO, Sebastian Schulte; and CFO, Oliver Neu. So Sebastian will begin the presentation with the key figures of the 9 months 2025 and then walk you through the progress made in the business units. Oliver then will provide you with the financial details of the 9 months financials 2025, and Sebastian again will conclude the presentation with a look on the guidance, after which we will move over to our Q&A session.

And as always, please note the disclaimer, especially regarding forward-looking statements. And having said this, Sebastian, I hand over to you.

Yes. Thank you very much, Zara, and also good morning, everyone, and thanks a lot for joining us for this 9 months earnings call here. So let me say -- let me start actually with a lot of confidence and optimism because our numbers show clearly that we, as DEUTZ continue to deliver.

Double-digit growth in revenue and new orders, rising profitability, EBIT margin now year-to-date at 5%, and I will show later quarter-by-quarter improving. And most importantly, a business that's proving more resilient and dynamic again quarter-by-quarter.

Our broader portfolio is paying off and the transformation towards really innovative and sustainable mobility and energy solutions is clearly gaining momentum. As I said right now, we went through this first 3 quarters of the year and quite actually following the second half of last year, every quarter, an improvement.

Let's bear in mind, we came out of a very strong '23, driven at that point by the strong demand in our sort of heritage core markets, construction, agricultural equipment. But then there was the slowdown in demand, which helped -- which brought -- which made our numbers in the second half of '24, in particular, going down. But since then, we are on an upward trend.

First quarter, 4.3% margin, second quarter, 5% margin and third quarter now 5.8% margin, which is actually even more impressive given the fact that typically the summer quarter, the Q3 is seasonally a little difficult because most of our customers have at least 2, 3, 4 weeks of vacation, and so do we in our engine factories in Cologne and Ulm.

So clearly, year-on-year improvement and continuous momentum in margin uptake. If you look at the markets, and I mentioned earlier our sort of previous core markets now we've been broader, we're becoming broader. So we're talking about construction, agriculture, material handling, defense as the most recent addition, but also energy for our gensets.

And what we see here is in construction equipment in Europe, well, the activity is still somehow muted. In the U.S., the infrastructure demand is stable. But overall, here the outlook, let me put it that way, is resilient. Agri, still in the short term, fairly weak outlook because inventories have been high. Financing costs have been slightly negative on the customer side, but structurally, it's very, very solid.

Material handling, this megatrend is helping us. Commercial logistics, e-commerce that demands here quite stable activity in the material handling. Forklift CapEx remains robust. So that's why we see also on the left-hand side, a positive projection going forward.

And defense, of course, very strong momentum in Europe, driven by the increasing budgets and also the NATO programs in the European Union. And energy, the gensets, I mean, this is another megatrend growth in data centers, backup power application, and we here see a supporting expansion in all regions, but particularly the regions which are relevant for us in this segment as of now, the United States with our Blue Star business and also going forward, Europe.

So in total, we see that 9 months year-over-year, we've been growing at 15%. That's growing above all relevant markets here given that we are also entering into these new markets, defense and energy. If we look at -- let me start with defense. I mean, here, really the headline is that we have been strengthening our footprint in the defense tech ecosystem. When we talk about defense tech ecosystem, I mean, particular military drones.

I mean, military autonomous land vehicles. You will all remember our most recent acquisition of SOBEK Group. SOBEK is a leading manufacturer of electric drives, very high-performance electric drives for not only military drones, but obviously, that is the -- that is the factor which is growing most significantly right now. We signed and closed that transaction at the beginning of September and the purchase price we financed by a capital increase using the 10% ABB procedure, which Oliver will elaborate on later.

And the business has been developing pretty well since then. So all expectations that we placed into SOBEK so far have been fulfilled. The momentum continues to be strong. Then we entered into a strategic partnership with Arx Robotics. That's a Munich-based defense tech scale up. Here, we're not talking about drones, we're talking about vehicles, autonomous vehicles on the ground, as you see on the picture also on that page.

And the idea of that partnership is that going forward, we will, on the one hand, supply drive systems for these vehicles and also made our mobile energy infrastructure products and of course, the global production network available because assembly of those products, I mean, that's something where we have with our facilities in this case, in Ulm, in Southern Germany, where we've got actually a competency, which help Arx Robotics in the scale-up of their production. And almost -- well, as a nice side effect, we're also intending to participate as one of the lead investors in the next Arx funding round that's going to happen over the next weeks.

If you move on to engines, we are quite proud to be able to announce that we extended our product portfolio. We entered -- we brought a new product to the market. It's the DEUTZ TCD 24.0 V12 GDUL engine. That's a large engine. It's the largest engine we now have in our portfolio.

It delivers some 780 kilowatts, so really on the upper end of the portfolio. It's optimized for use in gensets. That's why it's future-proof in a way that the power-gen market is expected to grow very, very strongly in the next years. And obviously, the diesel engine for backup power is a very crucial component in such gensets. And we were able to develop that product very, very quickly using our international partnerships, our international supply chains.

And currently, this -- the first product is being tested in a pilot customer, by a pilot customer in Italy in a genset operation. And we also already received the first small series order very, very recently. We have planned a broader market launch of that 24-liter engine in the beginning of 2026.

On top of that, partnerships becoming more important for us on a broader scale as well because we have, over the last years, engines -- industrial engines also developed together with joint venture partners in Asia, and we're currently undergoing or these engines currently undergoing the testing in our test benches, our test center in Cologne in order for us to allow these engines to be offered in the future on a global scale with a very strong focus on price and performance as well.

And we want to develop or we will develop a new 6-liter engine, the DEUTZ TCD 6.0, and we will launch sort of the premier of this very, very powerful 6-cylinder engine in the Agritechnica. The leading trade fair for agricultural equipment, which is starting this Sunday in Hannover and then being there for the coming next week.

So we're pretty excited about this expansion of our engine portfolio, where we are broadening the portfolio. We're bringing, particularly on the upper end, more powerful engines to the market. And of course, also sort of in the mid-end, we're utilizing our global footprint to become also more cost competitive on a global scale.

If you look at service, a very important backbone for our growth, for our very profitable growth. And here, we can also proudly announce that we continue or we have continuously been growing our global service network over the last weeks and months as well. We concluded 3 acquisitions, our long-lasting Turkish service partner, Catalkaya Makina. We closed that acquisition beginning of October.

And on top of that, we widened our service network and also the capabilities in the United States, most recently by achieving 2 mergers or 2 acquisitions. One is a company called OnSite Diesel and it's a Texas acquisition happened in October 2025. With OnSite Diesel, we are offering or we're broadening our offering to mobile and stationary full services, where the customer focus here is on waste management, construction and rail. So all segments where the combustion engine, the diesel engine in particular, will, particularly in the United States, be relevant for quite some time to come going forward. So that's why that was the rationale behind the acquisition of OnSite.

More recently, just a couple of days ago, we acquired a company with a fantastic name of DoubleDown Heavy Repairs it's in Nevada, and it's a service company, which is extremely experienced and well positioned in the repair and maintenance of heavy equipment and engines in the mining, really gold mines and other mines in Nevada, also railway, construction and transport industries.

And then on top of that, we complement these inorganic growth with also our strong organic United States growth path, where we opened 2 new DEUTZ power centers in 2025. And the plan, which is totally on track is to open another 4 new DPCs throughout 2026. On top of that, I mean, that's the footprint in the market. But on top of that, obviously, we need to really work on our backbone as well because all the parts that we deliver through our footprint to the customers, they have to come in time and in the right quantity and quality out of our very, very modern global logistics center in Cologne.

We modernized that with an out-of-store system, AI-driven out-of-store system, which helped us really increasing the efficiency in the management of these parts. So we're talking about more than 25,000 parts and increasing the efficiency of up to 50%. So that means not only are we going to be faster, but we also have more space in order to grow and to really support our global footprint out of our global logistics center of Cologne.

Let me continue then with our Solutions business, particular Energy continues with a very, very strong and solid performance. The business unit Energy, driven by Blue Star Power Systems in the North American market. Market is continuing to be extremely favorable and there are more and more growth opportunities. So order intake is strong, sales strong, bottom line, most importantly, with a very high cash conversion is strong that is continued to be strong at Blue Star.

We also are beginning to realize more and more synergies with our U.S. business. So the service operations, that's what ties it into what I said just a couple of minutes ago on our DPC growth path in the United States. So obviously, with Blue Star, we're bringing products into the market with our service center throughout the nation, we are serving them when they are in operation.

And on top of that, our North African business, which operates under the name of MagiDEUTZ, got a new Managing Director in play, a new team, and they're working quite successfully on really restructuring it and repositioning for MagiDEUTZ to be really one of the backbones for Europe. And on top of that, we're looking -- we're continuously looking here also at inorganic growth within energy.

NewTech is increasing traction. UMS, a company we acquired earlier this year. The onboarding of the company is progressing pretty well. Last call, the former owner and one of the guys leading the business operationally. It's also been named as Head of Technology at NewTech. We merged now the existing sort of the formerly known as DEUTZ product portfolio with the product lines of UMS. So we've got a very, very clearly defined product portfolio now, and we're following literally dozens of promising leads with very, very relevant customers also throughout the world.

So the momentum is increasing here is improving here. So there is more to come in terms of positive news throughout the remainder of the year and of course, particularly the next year as well.

And with that highlights on our operational and strategic developments, I would hand over to Oliver before I come back later to give an outlook for the rest of the year.

Good morning. Welcome also from my side to our investor call. And let me start with the capital increase we recently conducted. So as Sebastian said, we are in the execution phase on our strategy. We successfully conducted a capital increase to finance further growth. We have an exciting M&A pipeline. So we decided to do that capital increase even though additional debt level would have been possible as well. But considering the exciting M&A growth and keeping strategic flexibility, we conducted a capital increase.

We saw strong demand, very strong demand, investors from Europe, but also from the U.S. that shows that the equity story is convincing and investors are trusting in DEUTZ, and our continuously improving performance. Books were filled after a few minutes. The take a capital increase was several times oversubscribed, and it really was a successful event that made a lot of fun from a CFO perspective as well.

Talking about execution, our Future Fit program is absolutely well on track. Just to remind you, we are intending here to achieve at least EUR 50 million savings 2026 compared to 2024 based on structural cost reduction savings we are talking about. We are absolutely well on track with a good measure pipeline, more than EUR 50 million in terms of ideas. So we are expecting even an overachievement here of 10% or 20% in terms of savings, and that also applies to the current year 2025, where we will end up more than EUR 25 million rather towards EUR 30 million on the savings side.

Measures are implemented, measures are on track. negotiations with the works council have been successfully conducted around 180 people already left the company. So that is a good sign and it was a good example of a positive execution.

Going a bit more to the details of the figures, we see an increase in the order intake, 11.8% year-over-year. So that is basically driven due to the portfolio development. Book-to-bill ratio is around 1. Order backlog remains at EUR 470 million.

On the revenue side, even EUR 15 million -- sorry, 15% increase there. So we see that application areas like construction and agriculture and a slight increase. That's, of course, also driven by the fact that we have the Daimler Truck engines, which we acquired last year, which are mainly in those areas. So the M&A activity is driving up revenue compared to the previous year.

On the earnings side, cost savings are paying off. We are at EUR 75.5 million or 5.0% adjusted EBIT margin year-to-date. We see that the third quarter was the strongest of the quarters. And typically, third quarter is driven by cyclicity rather than weak quarter. So that was very good and shows and proves that our portfolio measures, but also our cost reduction measures are really paying off and that we see that continuously in our results.

Talking about the different segments covering here, firstly, the segment Engines and Services. So we see here order intake increasing, revenue increasing and especially a good signaling that the margin is increasing from 6.1% last year to 6.6% this year. We need to keep in mind that last year, beginning of the year, we still were in a stronger market situation with the 3 shift operations.

So overall, we see that volumes on the engine side, purely driven by market effects went down a bit, 8% compared to last year. Production almost 10%. But nevertheless, we managed to increase the margin, which is a very positive sign because it means that our measures, our strategic measures, our cost measures are overcompensating the negative economies of scale resulting from a weaker production due to weaker market conditions. Also HJS, the emission after treatment producer, which we acquired beginning of the year, successfully managed the turnaround, is profitable, is contributing positive EBIT as well.

On the service side, revenue is year-to-date at EUR 406.6 million that is a 9.4% increase compared to last year. So even in the current market environment, we are continuously growing both organically, but especially, of course, also inorganically via the acquisitions we recently saw.

Coming to the segment DEUTZ Solutions, we see overall an increase in the revenue. This is due to the fact that we acquired Blue Star Power Systems last year in August, but also the adjusted EBIT improved significantly. In order to understand the segment, the figures, we need to keep in mind that we combine 2 business units with a different financial profile.

On the one hand, we have the business unit Energy. So especially Blue Star, MagiDEUTZ, our smaller entity in China as well. We see here the business is absolutely well on track. Order intake is on track. It's not totally like linear over the year, but it's absolutely on track. We just recently received another big order, which is not reflected in the figures here yet.

Also, revenue is organically growing, a little bit offset by the U.S. dollar development compared to the former year, but organically with a strong growth rate and also the adjusted EBIT of the segment at EUR 11 million or almost 10%. With that, and you see that in a little bit hidden in the footnote, but there is purchase price allocation effect, if I take that out, right EBIT would even be at 18.8% at a margin level of 15%.

So operationally, the margin is even better than what we show you on the figures driven by the technical accounting purchase price allocation effect. On the business unit, new technology, we are making progress as well. So new orders at EUR 15 million, first time consolidating the subsidiary UMS in the Netherlands.

In June 2025, revenue is at EUR 9 million, so still on a low level, but we are about to start and consolidating the product portfolio and good talks with customers. So we are expecting some increase going forward there, of course. And the EBIT improved. It's still negative, mainly driven by R&D expenses, but the run rate is getting better here as well.

Coming to a few more KPIs. R&D spending, we are at 4.3% of revenue. So that's a direct consequence, improvement as a direct consequence of the Future Fit measures, where R&D people are continuously getting out as part of the agreements we conducted with the works council. So that is showing a very positive trend here. Same for CapEx, we remain on a low CapEx level of 3.3%, more or less as in the year before. That is showing that we are investing where necessary.

But of course, we're also structurally targeting for continuously improved CapEx ratios, considering that the business profile of our group is changing towards less CapEx-intensive businesses. Working capital, we see a slight improvement there. We are at 19.9%, so 1.2 percentage points better than in the year before. We are not overdoing it on the inventory side here. We are pushing, but we are not overly pushing inventories down just to be prepared because we are convinced that the market in this engines part of our business is picking up at one point in time, and then we want to be prepared without restrictions on the supply chain. So that is why we are still on a 20% inventory or working capital level.

Talking about cash flow. Operating cash flow improved as well. So also here, good signals, direct development of a better cash generation capability, better operational performance, also a lower increase in working capital compared to the increase we saw in the year before. That is positive on the free cash flow before M&A, we guide a mid-double-digit million euro amount. That's absolutely on track here.

We are -- even though the Q4 -- Q3 is typically the weakest quarter in terms of cash flow due to summer breaks and so on, we are here at EUR 2.4 million year-to-date. So that's a EUR 31 million better development than the year before, also showing the positive impacts of our transformation. And net debt slightly increased, among others, due to the M&A financing.

Last but not least, balance sheet that remains strong, 49% equity ratio and also solidly financed. Our leverage is at 1.4x. That gives us sufficient headroom for the further M&A transactions we are working on. So only positive signals from this end of balancing balance sheet and financing figures.

With that, I hand over to Sebastian.

Yes. Thanks, Oliver, for the update on the financial part. Let me give you an update on the outlook of the rest of the year. So first of all, we confirm with a small specification, we confirm our guidance for 2025. So just to bear in mind what we -- what was our guidance or what has our guidance been so far. We provided so far a range between EUR 2.1 billion and EUR 2.3 billion revenue. We were always assuming a bit of an earlier recovery of the market in the fourth quarter. So that's not yet kicking in. So that's why we are specifying to arrive at roughly EUR 2.1 million or at EUR 2.1 million at the lower end of that guidance.

Good thing is we confirmed the adjusted EBIT margin range as well. We confirm here to arrive in the middle of that guidance range. And I think we've been showing clearly earlier that the path on profitability increase is well on way quarter-by-quarter. And we also confirm the free cash flow prognosis mid-double-digit million euro amount.

As Oliver said, particularly, the margin is supported strongly by our cost savings for Future Fit by the Service business and of course, by this ever strong Energy business as well as the portfolio measures. So we're showing that we're actually very well on track and quite happy with the progress here.

We also currently do not foresee any sort of significant impact from the semiconductor crisis because that's one of the things we're pretty good at. Bottleneck management when there are issues with supply chain, I mean, '22, '21, '22, we've been training quite hard on that, how to deal with difficulties in supply chain, particularly when it comes to semiconductors.

So all these activities, which guided us back in days well through these -- the problems is also helping us a lot so that we can actually say that there's no issue to be foreseen at this point in time. All right. With that, yes, this is a confident outlook for the fourth quarter and of course, also for beyond because I said it earlier, when I talked about the outlook on revenue, it's true. There is no tangible recovery in the engine demand in construction and the material handling.

However, we are able to -- or we have been able and will continuously to be able to steadily increase our profitability from quarter-to-quarter. Now the 5.8% in the third quarter is a preliminary high point, but we expect to arrive at a higher level in the fourth quarter as well. And that's, of course, due to the Future Fit program, as we just heard from Oliver, the savings -- further savings to materialize in the coming quarters, EUR 50 million. We announced this EUR 50 million a bit more than a year ago. And we just heard it from Oliver, we're very well on track, and that's an important thing. We promised and we deliver the promises.

And of course, DEUTZ is now more than just an engine company. The engine remains to be important, but we manage, we guide this transformation towards a much, much broader business model quite successfully. And that's why we are now in a position that despite still struggles in the former core markets, construction, agri and material handling were actually developing so well, particularly, of course, due to the business unit service and energy in particular, demand for gensets is extremely high and strong.

So a good start into Q4 that we can already say. I mean we are at 6th of November. So we know already what's happening in the first month. So that's been very good and continues to support our expectation for a very strong last quarter of the year. Revenue growth, which we expect to happen in the fourth quarter compared to the third quarter, supported by the latest portfolio additions in defense and services as well. Margin increase I mentioned already, and our strategic transformation, we continue to implement going forward.

With that in mind, 9 months in the books, 3 months to go. And thanks for your attention. And obviously, now, as usual, we are open for questions.

Thank you so much for your presentation, Sebastian and Oliver. So we will now move over to the Q&A session. [Operator Instructions] We move on with the virtual hand we received from Stefan Augustin.

Can you hear me?

Yes.

Great. Okay. That was a couple of buttons to press. So I would like to then dive already quickly into the Q4 projections. So I don't want to be really nitty-gritty, but we're looking for around EUR 100 million in higher sales versus Q3. And could you help us a little bit of how much of these EUR 100 million we roughly look for would be the additions from SOBEK and the purchased service businesses>

And where does in the fourth quarter then otherwise come the demand in the verticals from? So where -- into what vertical do you sell some more engines? Who gets more interesting? And from that would be then the conclusion, can we keep this level going into 2026 roughly on the same level? So let's say, having -- or is there a onetime effect in sales in Q4?

Stefan, thanks for the question. So first of all, when I go through, let's say, the verticals when I talk about verticals, I mean, that's sort of our business units. So obviously, the business unit engines, that will make quite a significant contribution in that fourth quarter. Typically, the fourth quarter is always a little stronger than the third quarter for 2 reasons.

First of all, in the third quarter, we have that summer break mainly in August, end of July, beginning of August. So that's why we're always lagging behind a little bit. And when it comes to the verticals within engines, it's pretty much across the 3 verticals, construction, agri and material handling. So there's nothing -- there's no vertical, which particularly stands out.

Then as you rightfully said, I mean, the service -- the service is developing quite nicely. We obviously track that on a monthly basis. So the last month is indicated that we're going -- we're getting better month by month as well and then the 2 acquisitions support as well. We don't disclose like the very details of the acquisitions. They're sort of too small to provide like exact million euro numbers for that, but obviously, they add up as well.

Energy business, Blue Star is expected to be a bit stronger in the fourth quarter than in the third quarter as well. And then, of course, the most recent acquisition, SOBEK as well, but that's not like we -- we don't talk about like tens of millions. In short, it all adds up together, and that's how we arrived at that outlook for the fourth quarter.

Sorry, I forgot to answer. And then, of course, you asked, which is sort of the million-dollar question for 2026. We are currently putting the plans together for 2026. And the fourth quarter right now, I don't expect to be a one-off to make that clear. However, to be able to arrive at a guidance for 2026, that's too early.

So sure. I understand that one, but that was already giving me an idea. Second is then this larger order at Energy that has been hinted. Is that something we should look for in the scope of something like between EUR 5 million to EUR 10 million? Or is that rather an annual big order of EUR 20 million, EUR 30 million, EUR 40 million or something like that? That would be the second question.

This order, which Oliver hinted to is the first, sort of, let's say, the first third of the year order from our major customer in the United States. So it came expected because they don't order on a weekly or monthly basis. They order, let's say, 3 times per year, 2 times per year. And I believe Oliver will talk about something -- EUR 20 million to EUR 30 million, yes.

All right. That's quite some scope here then. All right. And lastly, maybe on the tax rate in the third quarter. This has been a bit unusually high, but is there -- is this something that has to do with the structural changes from where we generate the profits? Or is it rather a onetime effect?

No, that are typical onetime effects. I mean, overall, the tax rate on a group level is at around 17%. That is mainly -- in general, that's mainly driven because we have a significant amount of tax loss carryforward from the past from the 1990s basically, but we are benefiting from that still. And so that in Germany itself, we are rather on 11% minimum taxation. So there are no structural changes to that and the tax loss carryforward is going to last some years in the future.

So Mr. Ringel was a bit surprised that I muted him, but he sent me his questions. So I'm happy to ask the questions for him. So his first question is, is the adjusted EBIT margin level now achieved a sustainable cruise level that can be assumed going forward?

Well, we want to improve it further. So I mean, very clearly, we want to get better. And obviously, with the current structure of the company, with the current demand in engines, you may consider that as a cruise level, but we are not up for cruising, we're up for speed.

So that's why, obviously, with further expectation in market recovery in the next year in the engines business and further growth in the verticals, which we entered into. Yes, we want to clearly depart from that cruise level towards a bit of more of a full throttle way of traveling.

All right. So has [indiscernible] 2 further questions. [Operator Instructions] And his second question is, what is your view on the expected recovery of the markets in the coming months also with regards to the German infrastructure package?

Yes. I mean that's what I tried to say earlier when Stefan asked a similar question. We don't see it -- still, we don't see it in the incoming orders as you saw it here in our numbers yet. We're still like book-to-bill around or slightly above 1. But yes, we will see. We cannot say yet. That brings me back to what you just said before.

It's good to have such a high cruise level now on this low occupation in the engine business. But the good news is, obviously, we're bringing also some new products into the market. We're bringing this 3.9 liter engines into the market. The demand from our customers is quite strong. So one thing is how is the general market developing in the engine business.

And that's again the million-dollar question for next year. We do expect a recovery, but everyone expects a recovery, but it's just not materializing. However, we're working also quite strongly on winning market share with the new products that we bring into the market, 3.9, as I just mentioned, but also the 24-liter engine in energy and utilizing also our JV partner engines from Asia in particular. So we're actually quite positive looking forward.

All right. And his last question is, when will you be in a position to carry out larger M&A transactions again? Will the focus remain on the energy sector? Or are they currently concentrating in particular, on the defense tech sector?

Both verticals are extremely interesting for us. And you will understand that there's not much more to say in a public earnings call on M&A strategy, but both energy and defense are very interesting verticals. And we are observing and pursuing a lot of different avenues.

But as we have shown very clearly in the last 2.5, 3 years, if we do M&A, we want to do it very successfully. And I think the acquisition of Blue Star and the Daimler Truck Engine business and all the others have shown that we're actually pretty good at it now. So that's why we are very picky, and we will only do the things which make a lot of sense. But in order to arrive there, you need to follow lots of opportunities, but we're pretty confident that we continue to work on that track.

All right. And then we have next question or raised virtual hand from Klaus Soer. [Operator Instructions] Then in the meantime, we will move on with Mr. Jansen. So same for you, Mr. Jansen. [Operator Instructions]

Okay. Just one question regarding Arx Robotics. You spoke about the investment round. And just for clarification, you don't plan to have a major stake afterwards, right, because there are so many other investors. And with SOBEK, you already had a big investment in the defense market, right?

Yes, that's correct. I mean we plan to participate in an investment round, but that does not -- that would not turn us into a major investor. That's absolutely correct, yes. This is an investment which is rather underlining our ambition or our strategic partnership, but we do not plan to takeover or anything like that.

And is there an indication on how big the round overall could be?

Of course, there is an indication, but that's in the court of Arx Robotics. So you will understand that I can and do not want to comment on an investment round of another company, right?

And now Mr. Soer, I'm not sure if you're able to speak.

I hope so.

Great. Then we're happy to take your questions.

Just coming back to the announcement that you are introducing the large 24-liter engine into the market. Could you be a bit more specific what your expectation is in terms of sales or market entry in '26? Is this material or small size, big-size units? Any indication what type of impact this might have?

Yes. First of all, we don't talk about huge unit sizes here because it doesn't go into sort of serial mobile equipment such as, let's say, material handling, where sometimes we sell 5,000, 6,000, 7,000 engines to one customer a year. But we also talk about a significantly larger engine. So the unit price is a multiple of the unit -- of the average unit price of what we typically bring into the market.

So we do not talk about thousands per year. We talk about after the ramp-up, probably hundreds per year -- per year at least in the next year. But from a revenue and especially also from a profitability point of view, there is sort of a rule of thumb in the engine business, the larger the engine, the more the financial attractiveness as well.

Okay. And if I may add one question on Arx. In your statements and in the presentation, it always says you intend to participate. Is there still an open question, if you participate in the financing round?

No, we have decided to participate, but this is a cautiously legally checked wording because we are one party to participate. And as in the financing rounds, there are also other parties to participate. And typically, in these sort of investment rounds, the financing round is concluded when every investor who wants to participate signed sort of the legal agreements. And that's currently, as far as I understand, being negotiated with many investors. So it's more like a process point of view.

So that's why we have this very cautious statement, but we are very clearly committed to do so because we are very convinced of the outlook of the company and also of the areas of cooperation between Arx and DEUTZ. It's an amazing opportunity, where DEUTZ can bring the industrialization expertise, scaling expertise, management of supply chain expertise to the fantastic technology expertise coming from dev tech company.

And then we have a follow-up question from Mr. Augustin. So please ask your question.

Yes. Just 2 smaller ones. I recall that you mentioned you had a new customer with comparatively higher amounts of unit volumes. Can you just remind me, if there is the expectation that this customer should ramp-up the business in '26? Or will that be a bit later?

And the other one would be, when do you expect the LOIs of UMS to materialize into orders? Is that also expected maybe for the year-end already or rather going into '26?

Yes. For the first question, that larger, I believe you referred to the larger order for our 3.9 engine in construction. And yes, for confidentiality reasons, we were -- we're still not allowed by the customer to announce who it is, but it's a very relevant construction equipment company. The ramp-up is expected to kick in at '27, not in '26. So that's the following the ramp-up of their respective products.

With UMS, we expect first orders or we are already gaining orders yes, but first larger orders potentially to be -- to kick in, in '26 already. We're still at the sort of smaller pre-series orders right now, but we're having very promising conversations also, particularly in the field of multinational construction equipment companies. And I'm pretty hopeful or pretty positive on good developments and news already early '26.

And in the meantime, we did not receive any further questions. So I see no further virtual hands. And that means we will come to the end of today's earnings call. And thank you very much for attending and to shown interest in the DEUTZ AG. And also a big thank you to you.

Sebastian and Oliver, we appreciate the time you took and for guiding us through your presentation and for answering all the questions. So yes, from my side, I wish you all a lovely remaining week. All the best for you for the remaining quarter. And Sebastian, as always, some final remarks from your side.

Yes. Thank you very much also from my side. Again, still in some areas difficult market environment, but we're doing well. Transformation is on track and the results clearly show that this is the case. We're looking forward to be in touch with all of you in the next touch points, financial calendar here is very clear, 2025 annual results end of March, Q1, May 7 and so on and so forth.

But on the road to there, we'll be around at many investors conference and hosting a couple of roadshows. So looking forward to be in touch with all of you, and thanks for your interest, for your confidence in DEUTZ. And yes, it's happy -- we're happy to continue rocking this thing here. Thank you.

Good morning, and welcome to DEUTZ's conference call on the acquisition of SOBEK Group. Please note that this call is being recorded, and a replay will be available on deutz.com later today. By participating in this call, you are consenting to this.

I'm pleased to welcome DEUTZ's CEO, Sebastian Schulte; and CFO, Oliver Neu. So Sebastian will provide an overview of the acquired company, SOBEK and the transaction. Afterwards, we will open the floor for your questions. For your information, we are planning for this call around 30 minutes. As always, please note the disclaimer, especially with regards to forward-looking statements.

And with that, I hand it over to you, Sebastian.

Yes. Thank you very much, Sarah, and good morning to everyone who has dialed in. And indeed, last night, we updated the public, the capital market with a talk release about our acquisition of SOBEK. And it's really the headline as we have it here that we, as a company, are strengthening our defense business with that acquisition. And SOBEK, and I will talk about that later, it's a drive system specialist for drones, but also for other applications.

So a true sort of dual-use business, but obviously with a strong focus on military and drones. What we're going to cover today is, first of all, spend some time on the market perspectives, well, defense market, but obviously, with a focus on the UAVs, unmanned aerial vehicles. We will introduce you to SOBEK, their technology, their positioning. And of course, we will also introduce what drove us, what's the strategic rationale behind DEUTZ acquiring SOBEK and how this is going to fit to our Dual+ strategy.

What I can say before going into this is that SOBEK is established and profitable business. So it's not a start-up. It's an established and profitable business. And that will help us to strategically really enter into sort of new technologies, but around what has made us strong in the past already, the drive, but utilizing in particular, this rapidly growing defense market and this one beyond the conventional ones.

Let me start with a market perspective. And I think this is not a left part of that chart. It's not a surprise. I mean this is an assessment of the ramp-up of the European NATO defense budgets. And due to the change in geopolitical situation, particularly since 2022, we observed a much, much stronger CAGR of these budgets since 2022, and we expect this all to continue.

Whether it's going to move into that case, which we take as a base case in a brown or whether we see a bit even more ambitious acceleration or even the ramp-up to the 3.5% budget -- purpose budget objective that we will see. But what is clear that the market is growing significantly. And why is that? Defense sovereignty is extremely important. And obviously, that leads to the need for industrial players also to locally produce, establishing new partnerships.

And for companies like DEUTZ, who are trusted companies in German industry, it's important that we are able to grow very quickly. To participate not only in the budgets, but really make here a contribution. And important, and that's what brings us over to the topic of drones that the spending, the budgets we see here, there's going to be a shift from the sort of defense traditional companies towards so-called def-tech, tech companies in defense and obviously, in particular with a focus on UAVs.

And just 3 examples here to use is that in Germany, of course, drone and also the loitering ammunition that's one of the top 4 priorities. And obviously, that also impacts other top priorities in these cross-domain operations using drone and counter UAV operations to just give you one example.

In the U.K., the statements of the U.K. military are sort of more ambitious towards UAVs and drones and related technologies seen in the future as up to 80% of the army -- and that really means that the military doctrine is changing rapidly, obviously, based on the experiences made and currently still being made in the Ukraine. Similar but not overly relevant for us in that field in the future is the United States, but it's also a prioritized system gaining significantly more relevance besides, or top sort of the established major weapon systems.

When we move on to the UAV market in particular, and we're talking about the European UAV market, we see consequently a very strong CAGR as well. We see numbers and there are many studies, which all provide more or less the same -- the same picture, the same growth phase, the same growth ambition. We see a lot of growth, particularly in the next years, 23% CAGR until 2030. And that, of course, sometimes there will be a stabilization. So that's pretty much constant.

And when we look at what's behind the drones, there is a very important focus on particularly the small and midsized UAV, which are essential for modern defense strategies because that allows scalable, quickly scalable and also very flexible operations. And of course, they are faster and also cheaper to deploy than traditional platforms where partially the development and then the production takes not only months, but years and partially even decades.

So what's also sort of a benefit for newcomers, for newbies in that market is that this tactical drone marketing market is opening now up to new planes. The entry barriers are lower. Innovation cycles are significantly faster and also political support is here creating space for specialized suppliers. So it's important to really have scale-up capability in order to really capture that growth.

And so that's why this drone market with a focus also on small and midsized is a very interesting one. Let me give you a bit of a glance on what SOBEK is and what SOBEK is doing. I said it earlier in the introduction, it's not a start-up. It's actually an established company. It's been founded in 1975 by a company, our owner at that point, Mr. Sobek and is led by Mr. Han since 2009, who is the 100% owner nowadays before the acquisition. 70 to 80 employees, so not a large company, but as we will explain later, highly specialized. And it's -- SOBEK is an established drive specialist.

I mean their focus in the past has been really developing high-performance electric drive and hydraulic systems for drones, but where they come from, particularly for motor sports and not for driving motor sports cars, but for auxiliary systems around pumps, as I will explain later, and also for aerospace. It's all German made, high-tech made in Germany. So that's why it's very -- it's a very important component in the military drone supply chain for the future, 3 production sites in the south and west of Germany in Kassel, Hirschberg, near Heidelberg and Rottenburg near Stuttgart. And also that's why it's fitting pretty well to the DEUTZ setup.

And the product portfolio SOBEK is offering, I used the word quite a lot already scalable, high-quality manufacturing across the core products. That's brushless DC motors, so small but powerful electromotors, control electronics, pumps and valves, whereas the pumps and valves include these highly specialized BLDC motors and the control electronics is own development and also own produced, very important for this resilience in the supply chain, particularly in the field of military.

The performance -- or company is performing very well. Revenue, so between low and mid-double-digit million euro range. EBITDA, approximately EUR 10 million to EUR 12 million on an annual basis. And we don't disclose the margin in detail, but it is double digit and is actually quite significant double digit. When we look at '24, and I'm just providing here the view of the past, products and applications, product side, it's pretty much 1/3, 1/3, 1/3 between motors and control electronics, pumps and valves.

And the applications, and that's where they come from in 2024 is with more than 60% for motorsports, defense, a growing field and aviation, but also some very niche applications like robotics, metrics and others. This year, the focus has already shifted quite significantly because '24, the top line was also lower, '25 top line has gone up significantly and the growth is very much coming from defense from selling these components to a number of pretty known European-based def-techs where we do not disclose the names here for confidential reasons, but they are very well known.

And going forward, where -- what is the sort of growth we expect? So I said it already earlier, we expect a CAGR of 16%, maybe 15%, maybe 20%. I mean this is very difficult to predict, but we're all in agreement that we see a significant growth. We do not see a significant growth coming out of the motorsports business. It's a very niche application. Having said that, the produce providing today to Formula 1, Formula E and also [ Le More ]. And there is still growth potential outside Europe, some series in Japan, some series in the United States, but that's not the focus as of now, but it provides additional growth potential.

So we have a very strong starting point here given the foundations in the high-end motors, but the expanding into military drones and that what we see with the red bar, I mean, that's underway and driven already by strong orders from, as I said earlier, had picked def techs that you see the 12% share in '24, increasing significantly, almost 50% in '25, and we expect in the future the share be at or above 50%.

And additional potential like in aviation, robotics and medtech, that is there, but it is something which SOBEK has not very actively pursued in the past, but what we also see as on top growth potential in the future. To explain a bit the role of components within the drone. As I said, there are 2 products. It's the brushless DC e-motor. And DCEs are electromagnetic motors to power the propellers. And they're often obviously combined with control electronics to ensure redundancy. It's extremely important.

You have between 1, but rather 4 or even 8 of these engines per drone because the drone needs to be steered very accurately with no margin for error literally but no margin for error. And that's why you also have in a drone like that between 1 and 8 control electronics. Both of them produced in Germany and are using very, very few components imported from outside the country, which makes these products very qualified for the military market where obviously, independency and resilience of the supply chain is key.

Maximum power of these motors is 10,000 watts from the controller electronics, we see up to 200 amperes, but again, as I said earlier, on the motor side, superior power density is extremely important, energy efficiency, precise controllability. So power to weight is an extremely important aspect because you can imagine these drones, they need to be light, they need to be fast and they need to be able to carry a very effective payload when they are in military use.

I mentioned it already earlier, but I would like to highlight, SOBEK is already a trusted partner to European def techs, and not only trusted but an early partner to these future defense primes. I said today's defense techs turning into future defense primes. So SOBEK already supplies electric drive systems, a system comprising as shown on the previous page of the motor control elements and the software to these leading European drone manufacturers.

And it's obviously a key component supplier for this new sort of European defense ecosystem, which we are currently seeing emerging pretty quickly in the def tech sector. I also said it earlier, local supply chains are a key differentiator. ITAR-free sourcing is extremely important. Not only that, it's actually mission-critical. SOBEK, with their setup in Germany, offers the local to local sourcing and very, very resilient European manufacturing.

And with that drone business, I mean, the first prototypes or even the first series that were relying a lot on Asian, sometimes Chinese components. And obviously, that for obvious reasons, is no longer possible. So that's where a company like SOBEK comes into play. And the preconditions for drone OEM, particularly the certifications, and these are fairly high entry barriers. They are already fulfilled to technical performance.

So everything is set to grow and -- but as I said earlier, on a very solid basis. When we put two companies together, I mean, SOBEK is obviously still a small company. But when we -- after we acquire or why we acquire SOBEK as a company, first of all, and it's the headline and I keep repeating, it's profitable and it's ideally positioned in defense, 2 extremely important preconditions. When you look at SOBEK from a stand-alone perspective, it's already extremely strong case because technology leadership in these advanced drive systems and a strong market position.

So purely on a stand-alone, it's already attractive. But we as, DEUTZ will contribute in digitalization scale. So manufacturing, sourcing, service infrastructure, homologation capabilities, but also access to markets outside the country. So that's where we come into play. And on the other hand, we benefit a lot from SOBEK as well because it's our aim to develop ourselves from a sort of pure product supplier to system integrator. And SOBEK brings here knowledge products and business models, which help us doing that. We are expecting to gain quite some technological edge.

We also see the perspective to be able to jointly develop modular system platforms, for example, powertrain kits tailored to defense, but also to adjacent markets. And with SOBEK as an established supplier -- drivetrain supplier, we are also expecting to gain -- fast gain the strategic access to these new defense ecosystems because it's one of our imperatives to actually quickly expand into that business, in particular, in the business where we can apply a fast entry where the development cycles are short or fast to be precise, to really participate here from the growth.

And I mean, to round it up, right, it's an additional milestone in our Dual+ strategy. You all know that. We're coming from a very, very ICE-focused business, internal combustion engine, our classic business. We're working on that to make it better, stronger, and we are well on the way. But it's still a business which is fairly dependent or very dependent actually on economic cycles.

And obviously, there is, at least in the mid and long term, there is the need to transform, right? And so we have, as with Dual+ set ourselves up to make ourselves less dependent on this still very volatile combustion engine business. We want to move from this sort of one product, the engine and the service to a multi-business company, which acts also as a system integrator. We've done that. We've kicked that off in the last years with our market entrants in energy with the acquisition of Blue Star.

So that's all worked pretty well. We also want to boost our defense business unit, which we founded very recently. We want to boost it in a market where obviously trust, experience, commitment are differentiators. And we are also expecting some cross-selling opportunities with the products which we now consider sort of our traditional customers. And high-tech made in Germany, I mean, that sums it also up. It's a claim, it's an important claim, and we want to utilize that claim where it makes sense.

And with all the discussions in this very, very intense due diligence we've undertaken, we learned how important that is to be a high-tech player made in Germany or made in Europe, but in this case, made in Germany because as I said, resilience in the supply chain is a must. How we proceed in terms of next steps and also some details on the on the transaction is the M&A deal has been negotiated and signed based on an EBITDA multiple of 11x, which is for an asset in that space, we consider pretty favorable.

Given that it's a German company -- acquiring a German company and not with a high overlap in business, we expect the transaction to close imminently. Financing is secured through credit lines with our banks. And we also put in the talk release that depending on the market conditions, we're also intending or considering financing the transaction with a capital increase from an ABB procedure, no more than 10% of the current share capital, depending on market conditions.

Moving on, we have made very good experiences in the last 3 years with acquiring successful niche players. And part of that is obviously selecting the right targets, but another part is also selecting the right integration approach. And when I say that, I mean a low-touch integration approach because we consider or we appreciate very, very clearly what made that company fantastic.

And that's the scalability, that's entrepreneurial dynamics and also the tax expertise of the team. And this is why integration only where it's necessary. I want to do it the same way we did it with Blue Star and UMS, which both has worked so far pretty, pretty well. So that's pretty much the next steps. And yes, I wanted to take the time to give you a brief quick first glance into what we've done with that acquisition, why we've done that and what to expect on that. Now we've got a couple of minutes left for questions.

Thank you so much for your presentation, Sebastian. So ladies and gentlemen, we are now happy to take your questions if you may have. And like you know from previous calls from DEUTZ [Operator Instructions] so let's start with -- I think we do like ladies first. So we go with Anna. So please go ahead and ask your questions.

[Foreign Language]

Please feel free to speak to ask in German. I would answer in English, if that's okay.

[Foreign Language]

Yes. So for everyone listening and speaking English, question's about our new business unit defense since when we do have that and what's the plan with that, how we want to grow it and so on and so forth.

So I mean, speaking on the business unit defense in general, -- we call it a bit of a sort of go-to-market business unit because we want to market products we have already in our portfolio, both in the traditional portfolio like our combustion engine, but also new businesses like we're speaking now about SOBEK. We want to market these products, which are in principle suitable for military as well as for civil use. We want to market them properly for military use.

And that's why we founded the business unit. And we founded that business unit formally at beginning of the year. Informally, it was already working as a project beforehand. And so far, I mean, this year, and that's what we've been saying in the past months very consistently. We also -- we are expecting roughly a double-digit million euro sales volume in military business.

Obviously, with that acquisition, that's adding up. So we are establishing this business unit to grow it over the next 3, 4, 5 years to be a significant but not overly sort of dominating part of DEUTZ.

The teams are excited because DEUTZ is driven by sort of entrepreneurs, by committed engineers and engineers like to solve challenges. And obviously, the military business, I mean, they bring new challenges and our engineers are super excited to solve them.

[Foreign Language]

In terms of numbers of employees, it's a small sort of handpicked group of less than 50 employees. That should not look too small because, as I said, these are the teams marketing the products. They're being produced by our sort of overall workforce.

And relevant, but not significant or however I phrased it, means I do not expect -- I will not -- let's put it that way. I will not set here growth targets in the triple-digit million amount for the next years. We're going to start developing this market. And what's even more important than pure top line is that this is a successful bottom line.

We will move on with Jonas Jansen.

Just one clarification question regarding the EBITDA multiple compared to the other number you said, like the EUR 10 million to EUR 12 million for this year? Or is that another range you have there?

And the second one is looking at the other businesses you already bought and had an idea with -- also in the defense spending with UMS, for example, do you already see there also raising interest from customers?

Yes. Let me first -- Mr. Jansen, first answer the question on the EBIT. So there are 2 things. We explained that SOBEK generates an EBITDA between EUR 10 million and EUR 12 million. So that's an absolute number.

And the multiple is the valuation, the valuation which sort of connects the EBITDA and the purchase price we paid, right? And so one is an absolute number, the other one is a relative valuation. And when I spoke about valuation earlier, the 11x is what we consider favorable because in the defense space, you see a lot of companies, particularly stock-listed companies with a higher valuation.

Moving on to the second question, we do see increased interest. We have -- we're working on quite a lot of promising partnerships. But -- and unfortunately, I always -- before something is signed and announced, I always have to say this is all very highly confidential. But what I can say is that these partnerships, I mean the most interesting and promising ones are the ones where we're talking about innovation in our drive systems, where we are bringing sort of capabilities that we have around the drivetrain, sometimes combinations from the traditional ICE combustion engine, but also battery electric technologies, how we bring that into -- with new players.

So there is a lot of interest, obviously, focused in Germany and Europe. But as always, once something is ready to announce like this acquisition, we're very happy to do so.

So then we move forward with the questions from Wolf from David.

German Price agency. I just have one-digit question. So what is your turnover share of your new defense unit? You said double-digit million turnover each year. So what -- so how many percent would this be of your full -- for -- of all DEUTZ?

And the second question is you said that actually SOBEK is about to expand into military drones. So did I understand it correctly that right now, it has nothing to do with military drones. I mean, right now, there's no business?

No, no, no. Actually, there is significant business in military drones. Let me start with your second question. So in this year, 2025, the share of SOBEK drives going into military drones is around 50%. So it's a very important pillar already. The history of SOBEK was they came from motorsports from Formula 1, not the engines to drive the race cars, obviously. This is not done with these small electric engines, but the engines using driving pumps and valves for cooling and so on.

But SOBEK successfully managed to transfer that technology into the military drones use case, and that's why they are set in a number of military drones manufacturers' products which are currently also in use in that war in the Ukraine. So it's already established there. And we expect further growth. That's what I'm saying.

The other question, your first question on the share. I said, well, look, we didn't disclose the numbers very digital in detail. That's why I'm saying double-digit million euro revenue number. That's the one statement. And the other statement today, it's still a small portion. Our group revenue is above EUR 2 billion per year. And so what we can say is today before that acquisition, before the growth, it's below 5%, but we expect it to increase. That's as much as we can say on these numbers. I regret.

Okay. Great. And SOBEK will be put to this new defense unit or...

That's correct. That's correct. That's correct.

But it's not fully military, right? It's not fully defense. It is also some from the racing units.

Yes, that's correct. That is correct. But the main growth path and the main share today of that company is in defense. So that's why we decided to also allocate it to defense, obviously, without neglecting the other business verticals, but it is for us clearly considered a part of that defense growth trends.

But as I said earlier, these products are obviously suitable for dual use, such as the engines DEUTZ has produced traditionally. So there's always -- and that's good in order to be resilient. There is always obviously the marketability given not only in defense but also in others, but we're doubling down here on the defense part.

And my last question, so in the Ukraine war, actually, are they using drones, which have SOBEK components?

Yes. I mean the Ukraine is using, not the Russian to be very precise, yes.

And then by now, we have the first virtual -- the last virtual hand, sorry, from Klaus.

Lost him?

Klaus, unfortunately, we cannot hear you. Okay. Maybe his questions are already answered. And then we have a question from a person who's not able to speak. So it's Klaus Schilling from M.M.Warburg.

So Sebastian, can you give a bit more granularity regarding margins at the motorsports unit? And where you think defense share of SOBEK total will look like in 3 years from here?

Sure, Klaus. We've shown that on the, I think, the third or the fourth page. Maybe we're just flipping back here, give us a second. Exactly. So currently, in 2025, the share is about 50% of defense. In 3 years, the share, we expect to be a little above that. But obviously, we expect the total business to grow significantly, right? So that's the current prediction.

And rationale behind that is, of course, that, as I said earlier, these UAVs, particularly the type 1, type 2, they become more -- a much more relevant component or part of the military doctrine and NATO as well. And so that's why there is growth expected, supported by a lot of market studies. We do not disclose margins in detail, in particular, not in relation to the verticals.

The only thing I can say is there are attractive margins all over the business, and that's purely because it's high-tech, it's not easy to be copied. And so that's why we're buying a successful business.

Thank you so much. And the last question by now. Can you please explain your thoughts of the process, what would let you choose to do a capital increase versus keeping the related debt on your BS?

Well, we're keeping it open right now. But the thing is we are on a growth pace on the growth pace as DEUTZ. We have ambitious targets to make DEUTZ more successful to grow DEUTZ to grow not only top line, but particularly also bottom line. All of you who are following us more closely know that with our Dual+ strategy, we also announced to make DEUTZ a EUR 4 billion business by the end of the decade with a 10% margin.

And that will only work as a combination of organic as well as inorganic growth. And particularly the inorganic part will require every now again, capital. That's what we've done last year in relation to the acquisition of Blue Star, where we successfully placed new shares. And I think everyone who entered is now 1 year later pretty happy about that. And that's why we're keeping it open because this has not been our last acquisition.

All right. Thank you so much. So in view of the time and in the chat or in the queue, it seems there are no further questions. So -- and then I'll just -- having said this, there is always a question. Why is the price so low, 11x EBITDA. Normally, we would expect in such a demanded sector, 15 to 20x EBITDA.

I would not consider the price is low. I would consider the price is fair. I think that's the only statement I can make. The price negotiation is obviously a result of seller and buyer negotiating and coming to a mutual agreement.

And we consider this a fair agreement for both parties. And when you look at comparables, you always find businesses that may be valued higher, but also may be valued lower. So please bear with me that I would not consider the price is lower, it simply is fair.

All right. Thank you so much. And answering that question, we will come to the end of today's conference call. And we thank you for your shown interest. And yes, have all a lovely remaining Tuesday. Also a big thank you to you, Sebastian, for the presentation. And last sentence belongs to you. That concludes our call.

Thank you very much. Thank you very much for listening, for dialing in and listening and for continuing being interested in DEUTZ. I can tell you it's a lot of fun shaping the transformation, and we look forward to be in touch and remain in touch with you in the future. Thanks.