KION GROUP Stock

Ladies and gentlemen, welcome to the KION Group Quarter 1 2026 Update Call and Live Webcast. I am Chloe, the Chorus Call operator. [Operator Instructions]

At this time, it's my pleasure to hand over to Rob Smith. Please go ahead.

Thank you, Chloe, and good afternoon, ladies and gentlemen. Welcome to our update call and webcast on the first quarter of 2026. Please refer to our update call presentation on the IR website if you're joining by telephone.

I'm going to start with a quick summary of the first quarter of '26 and talk about some recent business highlights. And then Christian is going to take you through the detailed Q1 financials and reiterate our guidance for 2026, and I'll be back for some key takeaways, and we're looking forward to the Q&A thereafter. 

Starting on Page 3, please. KION had a positive start into 2026, in line with our expectations. Order intake was EUR 3 billion, driven by both segments. Revenue was slightly below the prior year quarter level. Adjusted EBIT was EUR 205 million, corresponding to an adjusted EBIT margin of 7.4%. Both ITS and IAS segments contributed to the increased profitability. And free cash flow was positive at EUR 47 million and included the cash out for the efficiency program and higher incentive payments. 

On Page 4, let's talk about the exciting things that are going on at KION right now. In the context of our strategic collaboration with NVIDIA and Accenture, Lighthouse physical AI projects moved from simulation last year into live warehouse operations, showing how advanced AI is turning into measurable value for customers. At the GTC Conference in San Jose, California, with NVIDIA in March of this year, we showcased two core applications: an autonomous industrial truck supporting day-to-day warehouse operations and AI-based safety-certified human detection, enabling automated trailer loading. 

We've deployed these at a warehouse of GXO Logistics, the world's largest pure-play contract logistics provider, in their warehouse in Épinoy, France. This pilot makes an important step forward in demonstrating physical AI solutions and how they deliver clear, tangible value for our customers. 

Another highlight in the first quarter was the LogiMAT in Stuttgart, where we presented a true milestone in intralogistics, the first market-ready serial-produced solution for the autonomous loading and unloading of trucks. We demonstrated how the receipt and dispatch of goods practically takes care of themselves, thanks to the new product called the AXL iGo from STILL, leaving employees' hands and minds free for more value-added tasks in the warehouse. 

In addition to these two great milestones, we also made an exciting addition to our start-up automation portfolio and deepened our technological footprint in warehouse automation through an M&A action. With a strategic equity investment in ZIKOO Robotics, a leading provider of pallet storage robotics based in China, we marked the next step in building an ecosystem of automated technology partners. 

The partnership brings together KION's extensive experience in industrial trucks, intralogistics solutions, and orchestration with ZIKOO Robotics innovation in warehouse robotics, a six-way pallet shuttle, and high-density storage technology. Through an expanded portfolio of automation warehouse solutions, KION will deliver warehouse offerings that provide higher efficiency, better space utilization, and greater flexibility.

And the investment is already bearing fruit. Last year, we jointly unveiled the next- generation pallet warehouse solution, the AI Smart Warehouse. The solution integrates ZIKOO Robotics' latest pallet handling robots, high-speed lifting systems, and AI intelligent software platforms.

I'll now hand it over to Christian, and he'll take you through our detailed Q1 financials.

Thank you, Rob. Let's go to Slide 6 for the key financials for the ITS segment. Contrary to our earlier expectations, order intake increased by 11% year-over-year to almost 73,000 units. The increase contains significant pre-buying activity in the later part of March, following a price increase announcement becoming effective on April 6, 2026. This is a good example of our agile pricing strategy, where we regularly review the appropriateness of the current pricing. This price increase was announced to cover expected increases in material and energy costs resulting from the war in Iran. 

New orders in value terms increased 4% year-on-year. The slight decline in the service business was substantially more than compensated by the 12% growth in the new truck business, which also points towards a good product mix in the quarter. Revenue was down 5% year-over-year, driven by the 9% decline in new truck revenue, which was due to the lower order book at the end of 2025 compared to the end of 2024.

Adjusted EBIT was EUR 183 million and was comparable to the prior year level. Savings from the efficiency program and lower share price-driven expenses for the long-term incentive programs were offset by the continued insufficient fixed cost absorption. The adjusted EBIT margin increased to 9.1%. 

I will now continue on Page 7, which summarizes the key financials for IAS. For the fifth quarter in a row, order intake showed year-over-year growth. The increase of 26% was driven by a 56% growth in Business Solutions. Main verticals contributing to the growth were purely e-commerce, 3PL, and food and beverage. Order intake in services was slightly down due to the positive one-time effect in the spare parts business in the prior year quarter. The order book increased 23% year-over-year due to the increased order intake, as well as to a lesser degree, positive foreign currency effects. 

Overall, our revenue increased by 12% year-over-year, driven by a 30% growth in Business Solutions. The sequential development follows the order intake development with approximately six months time lag. Adjusted EBIT increased strongly year-over-year to EUR 46 million, corresponding to an adjusted EBIT margin of 6%. Higher revenues, the further reduction in legacy projects, improved project execution as well as lower expenses for the long-term incentive programs contributed to the increase in profitability. The sequential decline in adjusted EBIT is a result of the sequentially lower revenue.

Now let's quickly run through the key financials for the group on Page 8. Order intake reflects the growth in the new business in both operating segments, which also had a positive impact on the development of the order book. Revenue in IAS continues to benefit from the order intake recovery since the beginning of 2025, offset by the expected revenue decline in the ITS new truck business. Adjusted EBIT increased to EUR 205 million, corresponding to an adjusted EBIT margin of 7.4%.

Profitability improvement was driven by both operating segments, supported by savings from the efficiency program, lower expenses for long-term incentive programs and slightly lower expenses in the corporate services and consolidation line.

Page 9 now shows the reconciliation from the adjusted EBITDA to group net income. Nonrecurring items in the first quarter included only EUR 5 million expenses relating to the efficiency program. You may recall that we said that out of the total expenses of EUR 180 million, EUR 169 million were expensed in 2025 already, and a small remainder will follow this year.

PPA items were in line with the usual quarterly levels. Net financial expenses improved year-over-year, mainly due to the lower interest expenses on financial liabilities and the improved net interest result from the rental and leasing business, partially offset by costs in relation to foreign currency and interest hedging activities. Pretax earnings, therefore, increased to EUR 141 million. Tax expenses of EUR 49 million in the quarter corresponded to a tax rate of 35% and thus are in line with our full year expectations. Please refer, as usual, to the slide in the appendix with the unchanged housekeeping items. Accordingly, net income attributable to shareholders reached EUR 90 million, corresponding to earnings per share of EUR 0.69.

Let's now continue with the free cash flow statement on Page 10. Free cash flow in the quarter reached positive EUR 47 million despite the cash out for the efficiency program as well as higher incentive payments. Lower capital expenditure is in line with our full year expectations as the larger footprint projects of the last years are coming to a conclusion. The increase in net working capital is seasonal and should reverse again over the course of the year. There was no material cash outflow yet for mergers and acquisitions in the first quarter of 2026.

Moving on to Page 11, which shows the pretty stable development of net financial debt and our leverage ratios. In March of this year, we successfully placed a corporate bond with a total volume of EUR 500 million using the public capital market under our established EMTN program. Despite the challenging environment, the issue attracted a great deal of attention from investors. The unsecured bonds, which matures in March 2031 was issued at a price of 99.487% and has an annual coupon of 4.125%. From Q2 onwards, the proceeds from the bonds will be used to refinance existing liabilities in the short-term rental and leasing business to create opportunities for future growth.

Slide 13 lays out our guidance as presented with the full year 2025 results. Since we provided a detailed walk-through of our guidance at the full year 2025 update call at the end of February, we will skip it here in the interest of time. For those of you who are interested in the explanation, please refer to the transcript, which is posted on our Investor Relations website.

The geopolitical risks have heightened since we published our full year 2026 guidance at the end of February. In effect, the war in Iran started just two days after our results publication. We have limited direct impact as our revenue in that region is around 1% of total KION revenue. However, we do see potential impact from higher material and energy costs and vulnerabilities in the supply chain.

Many capital markets participants have drawn parallels to the situation in 2022 with the start of the war in Ukraine, which was also characterized by inflation and supply chain disruptions. We here at KION had learned many lessons in 2022 and expect the measures we developed to increase our agility and resilience in volatile times to surface now in 2026. The April price increase in ITS is one such measure. The inclusion of price adjustment clauses in the terms and conditions and contracts is a further measure as is the building of safety stock and developing additional supply sources for key affected components. We, therefore, confirm our outlook for fiscal year 2026 for the group and our two operating segments as of today, subject to the condition that no additional significant burdens arise from the current geopolitical situation.

On one hand, these could result from significant disruptions to our supply chains for example, due to trade tariffs or shortages of important components or from a decline in demand due to a significantly reduced willingness of customers to invest. On the other hand, the guidance assumes that the steps carried out to counter cost increases will have the anticipated impact.

And with that, I now hand back to Rob for our key takeaways.

Thank you, Christian. On Page 14, let me walk you through our key takeaways. KION had a positive start to fiscal year 2026 with order intake and profitability increasing in both operating segments and a positive free cash flow. We are actively steering the organization with our operational and commercial agility measures to limit potential impacts from the war in Iran. KION is making significant advances in developing innovative physical AI solutions for our customers. In March, we presented the first Lighthouse project with customer GXO as a next step in the strategic collaboration between KION, NVIDIA and Accenture. We also launched the first market-ready series produced solution for the autonomous loading and unloading of trucks last month. And this month, we made a strategic equity investment in a leading provider of pallet storage robotics, ZIKOO Robotics.

We confirm our outlook for fiscal year 2026 for the group and our two operating segments, subject to the condition that no additional significant burdens arise from the current geopolitical situation.

This concludes our presentation. Thanks for listening so far, and we're looking forward to taking your questions. Chloe, let's open the line, please.

[Operator Instructions] The first question comes from the line of Sven Weier with UBS.

I'll start with trucks and thanks for pointing to the price increase in the prebuy. As you imagine, I would be curious how you have orders -- seen orders developing after the price increase. I mean, have you seen like a sharp normalization or is business as usual? And I also wonder, of course, if you look at the guidance for trucks and you take the midpoint of that, I guess it also assumes kind of a better mix in the coming quarters. Now in Q1, I think the mix has improved year-on-year, but not sequentially. So how do you see that mix support for making that EBIT increase possible in the coming quarters? That's the first one.

Sven, we're going to double team on this. I'll give you some insights on the price increase and the developments, and Christian is going to talk you through the mix calculations for your model here. As you know, we put up the prices. We only did at 3%, and we put it for the 6th of April. And there was a prebuy effect for sure. How much that is, we're still in the process of working out. And we shall see as things develop through end of this month and going into next month. So it's a bit early to tell. But clearly, there was an element to that. And Christian is going to talk you through the mix.

Yes. So Sven, as I said in my commentary to the numbers already, right, the numbers in the first quarter actually indicate that we had a positive mix in the quarter, that will support revenue in the following quarters, obviously, right, as it turns into revenue going forward. And that's also sort of how we would look at the development now going forward actually, right, in terms of mix. So that should actually be in line and is in line with what we have set out in our guidance for this segment.

And I mean, can I just ask a follow-up on this? In terms of the difference I mean, because in trucks, you also have price indexation clauses. So you could say, well, do you really need a price increase? Or are you not covered by the price indexation on the truck anyhow and you don't need to bother with price increases anymore? Or do you still prefer like a general price increase like you just did?

Yes. Just let me sort of go back two or three years just that the comparison is clear, right? In 2022, we were actually sitting on an order book where orders were placed for shipments almost with 6, 8, almost 12 months' time delay. So there were some even longer, right? So the point was the time when the order was placed, which then contained the price of that to the time of the shipment, which is then where the costs were relevant, actually was extremely long, right? And we were actually exposed to the material cost inflation risk, if you will, over a pretty long period of time. Now the point right now is with our order book having normalized, that period is significantly shorter.

So yes, we do have clauses, right, that would allow sort of between the timing of placing the order to the shipment order when that is beyond certain thresholds, but everybody should be reminded that is then based on an average now three to four month period and not like what we had before. Now when we see developments coming, and that's what I said in my commentary before, when we do the assessment in the HL pricing in terms of what we feel is coming up to us in terms of energy cost, material costs, we are actually looking way beyond this time of just three months, four months going forward. And that needs to be covered then in the pricing of the trucks as such. And therefore, we have actually changed or increased our list prices at this point in time.

And can I just ask one question on warehouse automation? Because obviously, you had a very good order intake in the quarter. And usually, when we had this in the past couple of years, the next quarter tended to be quite a bit lower. I mean, should we now see a more stable range, say, between EUR 800 million and EUR 1 billion to achieve your full year target of flat orders? Or would you still guide us to this like extreme lumpiness that we've seen in the past two, three years?

Sven, you did a triple dip on us, and you're asking me about order intake again. But let me pick up on it. I mean the whole point is that I'd like to make here is you'll recall last year, we had a fantastic second quarter order intake. It was an all-time high, clearly over $1 billion. My recollection is $1.4 billion. So, as we go into the second quarter, if you're looking for year-on-year comparisons, that was a tough comparison.

What I would say is shout out five quarters in a row now, there's some very good order intake coming through in our -- IAS business. I told you a couple of calls ago that we think the trough in the market is clearly behind us. We continue to see the market moving in a direction that's good on order intake for our Intelligent Automation Solutions segment. And we would expect to have a continued good performance there, potentially a little bit less lumpy than in previous times when there was a whole bunch of volatility in the market. I wasn't exactly sure where the trough was. As I say, the trough is behind us, maybe a little bit less lumpiness. I think it will be a real tough comparison versus the all-time record. But I would expect we have a good Q2.

I'd also hauler out as long as we're talking about it, four out of the last five quarters, Christian talked about our 73,000 trucks sold in order intake in the ITS segment. That's four out of five quarters that we beat Toyota in terms of order intake in units. And I think that's a nice strong performance. So a little triple dip from my side, too.

We now have a question from the line of Akash Gupta with JPMorgan.

I got two as well, and I'll ask one at a time. The first one is on ITS. So when we look at your Q1 orders, you are highlighting that there is some prebuy effect and that is in relation to your price increases, which is increasing your cost base. The question I have is that when these orders will be turned into revenue, is there anything we should look after in terms of impact on margin from this cost increase, which is leading to price rises? Or do you have some mechanism like hedging or inventory in place so you can mitigate the impact? So question is, to cut it short, like how should we think about Q2 or maybe Q3 margins from these Q1 orders given the price cost dynamics?

So Akash, happy to take this one, right? So I mean, it's essentially the essence of the price increase sort of in this, what I described as the HL pricing forward-looking to actually cover the price increases that we, at this point in time are looking at to sort of keep our margins, right, and not take a margin hit from potential price increases. So therefore, from this perspective, from what we have seen, right, we have not yet seen material effects in the first quarter yet, right, in the sense that we already see effects on our cost base but we expect that is going to happen. And therefore, we have increased the prices.

So when costs will hit us through material costs, energy costs coming up, our price increases that we have put in place should also hit us in a positive sense, right, because by then sort of the orders giving again an order book of three to four months there will turn into revenue, right?

Akash, as long as we're on that one, I'd point out to you that we had a lot of talk about pricing and costs in '22, '23, where KION was forced to be reactive and putting up pricing after the costs had already come into the picture substantially. And I'm really pleased with our business' proactivity and embracing -- the long-term embracing of the agility on the commercials and the operations. Very good teamwork between our supply chain team and finance team and business team to project what could be the case and proactively in advance, adjust the pricing. And we've got the whole supply chain and operations team working hard to mitigate the cost impacts coming towards us. So I think that we're nicely ahead of the game now, and it's very -- it feels real good to be proactive on these things.

So can we say that your ITS backlog margins are not really far off from what they were three months ago at the end of full year?

Yes, that I think is a fair statement, Akash.

And then my second one is on IAS. I mean, if you look at your service revenues here, they were down almost 10% year-on-year to EUR 286 million, which I think in absolute term is the lowest since first quarter of 2024. Can you talk about what's driving that? And maybe a follow-up. When we look at your e-commerce order pipeline, is there anything to highlight there?

So, just if you take the year-on-year comparison, right, in the service sector, right, I mean for -- in prior year, we actually had, like I said in my commentary in the first quarter, right, we had sort of a onetime spare parts stocking event from a major customer that happened in that quarter, right? So that is, if you will, a one time in a particular quarter. And also, we commented last year, we actually had a very strong quarter in terms of modifications and upgrades. That is a continuously good business, but it was exceptionally strong also in the first quarter last year. And if you would go to the brand script, you probably will see that we have commented on a 100% increase year-on-year in the first quarter last year in the mods and upgrades, right? So that calls out sort of that one in terms of comps. But we continue to be positive about the development of the service on IAS.

We now have a question from the line of Tore Fangmann from Bank of America.

Two questions from my side. First question would be your competitor has profit warned talked last week and was flagging very intense competition and price pressure as well. So would just like to hear from your side, how do you view the incremental, is there even an incremental pickup in competition and also thinking about competition from China, just what is the market picture right now?

Sure, Tore. I appreciate the question. We have an extremely strong footprint in China. It's a home game for us, and we're able to leverage that strength to benefit all of our regional performances in China for China, in China to benefit our businesses in Europe and the Americas, too. So I think that's a very unique and important element of our business model and certainly helps us be very good and competitive in our pricing. As I say, we only put them up 3% in the first, on the 6th of April. And we see people acting rationally. And there's always competition in the market, but we don't see it particularly intensifying vis-a-vis this time versus previous times.

And Tore, happy to have you back actually. One maybe point to add here. In 2022, inflation was basically a European phenomenon. This time, this is energy cost driven, which is actually a global phenomenon, right? So that's also in terms of relative also for what to be expected kind of pricing development. This time inflation have actually hit everybody.

Very, very well understood. And then my second question would be on the profit outlook for IAS. And just generally, what do you think can you deliver basically throughout the year, should we see further sequential step-ups? And together with this, we had a recent change in Section 232 tariffs now also including Canada and Mexico. And I know you have a facility in Monterrey. So could you just comment on are all these prices covered by your price increase clauses? Does this have any effect on margins or on demand in the segment?

Yes Tore. So on the outlook first, right, and sort of the step-up to the midpoint of the outlook and the outlook overall, right? Like we said before, I think it's exactly the same drivers that are in place there as well and I can remind everybody on those, right? But within the year, it's particularly we are working through the legacy project. We've closed in the first quarter, we continue to close and that will have a contribution throughout the year just as the development of the service business and the execution of the projects, right? But we are looking forward to continue closing legacy project as we speak throughout the year. And that will obviously have a positive contribution.

Now on the tariffs, basically, also there, maybe as a reminder to everybody, I mean, as everybody knows, there is just two sorts of tariffs, right? There is the one with this strange acronym, but everybody calls them the reciprocal tariffs, right? And that's the one that were affected also by the recent verdict from the U.S. Supreme Court. And then there's the Section 232, which we're not affected by that particular ruling. So our guidance that we have put out or the outlook that we have put out at the end of February and that we are confirming right now is including the effects that we have seen from those two types of tariffs in our IAS business and also in our ITS business as far as North America is concerned.

Now what -- has changed now, right? The one thing is the reciprocal tariffs sort of were taken up or removed from the U.S. Supreme Court. And obviously, we have filed for a refunding as far as we think the refunding belongs to us. That is a recent process. On the other hand, the Section 232 methodology has adapted a bit, so has broadened the base for the tariff. And sort of we are looking at a low double-digit amount for a potential refund following the ruling from the Supreme Court. But at the same time, we're also looking at the low to mid-single-digit incremental effect that we see from the changed ruling on the Section 232. So very long story short, that's basically a wash as we are looking at it right now. And therefore, we feel with the guidance that and the outlook we have put out in February, that's well covered.

We now have a question from the line of Lucas Ferhani with Jefferies. Please go ahead.

I just wanted to come back on the start from Sven regarding the prebuy. Just can you talk around maybe what you've seen into your proposed the price increase? Was it really a prebuy and so then there's a bit of normalization? Or was it maybe just a bit better demand than what you expected? How can you kind of differentiate? Thank you.

Luca, so let's talk about that. As I said, we put up -- we announced in March a 3% price increase that will be effective -- that was going to become effective on the 6th of April. Last time we did a first quarter price increase back in 2022 when there was a substantial effect, we had put it up. My recollection was high single digits, almost 9%, 10%. There was a substantial prebuy effect back then, but that was good four years back or more. It was only 3% this time. We put it in place for the 6th of April. There maybe was more prebuy than we anticipated when we had our pre-close call, but there still was a certain amount of prebuy effect. How much we're still in the process of figuring that out. And we'll only know as we look at how it really comes back, how the orders are coming in April and May.

The point I guess I would get to is with the prebuy effect that we saw, maybe the usual quarter distribution where Q2 is often larger than Q1 in past times, maybe it might adjust the quarterly progression during the course of this year. And as I say, we'll have a feel for how much of that prebuy is as we get through the next weeks and get through the month of May and have a view. But it wasn't massive, but it wasn't marginal either. It was a little more than we thought it might be. And how much we'll see as we get through May. Does that help you?

Very clear. And then on the IAS, the order intake, I think also in Q1, it's relatively better than maybe what we saw at the pre-close. So wondering a little bit if maybe things finished the quarter a bit better than expected from kind of things falling maybe this quarter or roughly in line with what you had in mind. It just seems that the pre-close, we didn't expect this type of growth in that segment -- in orders.

So I think we feel -- we said that actually also in the pre-close call leading indicating high double-digit growth, right? And so I think that's in line with how we talked about that.

Okay. Perfect. And the last point was just on the M&A. There's a part of the kind of free cash flow that is set aside for that. I was wondering if that strategic investment that was made, I mean, some of that money was kind of used as part of that or that EUR 200 million is set for something different?

Yes. So yes, again, also to remind everybody, we said in the outlook for the free cash flow that about EUR 200 million are earmarked for M&A activity throughout 2026. Now actually, in the first quarter as such, following the closing of transaction, only a very small amount of that has actually been used. The ZIKOO Robotics transaction that Rob made a reference to earlier is actually -- has actually closed in April, right? So in that sense, it's not in the first quarter cash flow, but the deal is closed, right? And the money has flown, right? And the equivalent, we have had an investment of RMB 235 million, roughly EUR 29 million. So that's an amount that is going against those EUR 200 million that we have earmarked in the cash flow in the outlook.

And I think it's a great example of what we told you we were interested in doing, M&A on, very strategically interesting software and robotics kind of companies, where we see ourselves as a very logical, good fit owner of that business and able to scale that business. It's a great example of exciting technology that fits very, very well into our overall solution and that we can scale on a worldwide basis.

We now have a question from the line of Lasse Stueben with Berenberg.

I have a question about IAS. LogiMAT this year seems to have been busier than prior years, at least that seems to be the anecdotal feeling. So I mean, generally, what is the message you're getting from customers in terms of -- we've spoken a lot about hesitancy to invest in a lot of early conversations, but no one is really pulling the trigger. So I'm just wondering what the key messaging was from customers at LogiMAT because it did seem to be a bit more upbeat than it did in prior years.

And then the second question is to some extent related to that. I think in the Q4 call, you talked about the need for, I think you said win and do orders, if I remember correctly, particularly in the context of reaching that kind of EUR 4 billion revenues in '27. Have you seen any signs of some of those maybe coming through, maybe also since LogiMAT? Or what's the update on that front?

Yes, Lasse, you're right. There was good resonance at the LogiMAT. There was the week after a really good resonance at the ModeX in Atlanta, following the -- ModeX in Atlanta followed the LogiMAT in Stuttgart. Good resonance and good customer feedback in both good sentiment. I think that the quote that you're talking about was actually multiple quarters ago and back earlier last year, when we were talking about customers being quite hesitant about starting brand-new big projects in the IAS business based on uncertainties and volatilities. 

We have updated that now and are saying that the -- that trough -- the trough in the market is behind us for both of our segments. Certainly, in the IAS segment, customers across the patch in multiple verticals have been coming back to the table and placing and pushing the button on starting those new orders. And so I think the trend you're describing is behind us now. for several quarters now. We've been calling that out. You can follow up with our IR team to get the detail of that timing. But that's behind us, and the [indiscernible] -- the resonance is good, and the customers are coming back and placing good orders now.

And Lasse, I'll take the other one on the win and do. So let me maybe clarify one point first. When we talk about win and do, we talk about the order intake that is translating into revenue in the year of the order intake, right? So that is on 2026, right? Because you made a reference to sort of EUR 4 billion revenue. Actually, we have no outlook to have EUR 4 billion revenue in 2026, right, just to clarify this.

So when it comes to win and do, which is sort of order intake still to get for the revenue outlook that we have taken out, given out to the street. It's actually a very small manageable amount of win and do, and that we expect to have in the second quarter, with the order intake that we look at with the order book and the small win and do still to get, I think we are covered actually for having the 2026 outlook there. And 2027, we'll talk when we talk 2027 as always.

We now have a question from the line of Timothy Lee from Barclays.

So my first question is about the price increase in ITS again. Can I just confirm, is the price increase of 3% is similar for everybody in the suite? And how about the Chinese players? Are they also making the price increase because of inflation this time? And also in terms of competition, have you seen the Chinese players moving towards the higher-end products? That means whether you are seeing like a step-up in terms of competition in the high-end products that you used to be -- have a much better position?

Timothy, a little bit of difficulty hearing exactly on the line, but I think you asked if our 3% price increase applied to all our customers. And most certainly, it does. Indeed, we increased the list price for all our goods in the ITS EMEA business, where we had the most concern about potential cost changes coming from inflation.

We increased our pricing in China as well, or have one coming up very soon. The agility measures I'm talking about, we do on a worldwide basis. We've been adjusting pricing in North America as appropriate, too. The 3% call out was our ITS business here in Europe. But we are adjusting pricing as appropriate, like Christian was saying earlier, in all regions on a very regular basis.

As opposed to commenting on pricing by competitors, let me just say the market is acting very rationally, and competitors continue to act rationally. And KION has a very strong footprint in China and has a very good offering in all the market ranges for our trucks. We do see as many industries in China are becoming -- are bumping up against the growth limits that they'd like to have; they're looking externally and are taking -- moving to other regions in the world. And I think that continues. And there's very good technology in China, and we take that very seriously and take our competition very seriously.

Sorry, actually, I would like to clarify a little bit about my question. I was actually wondering if your competitors are also making similar price increase of 3% as what you did, and also whether the Chinese players have also increased the price this time?

Yes. Look, our observations looking into the market is that pricing is done on a rational basis. We were on a rational and proactive basis and took very good account of our own projections of expectations on inflation and potential impacts coming from the war in Iran. And on the basis of our expectations, we made the pricing change. But in terms of commenting anybody else's, that's not our approach.

Understood. And then my second question is about the margin development for ITS in the rest of the year. So, in the first quarter, you have 9.1% margin and the midpoint of the full year guidance is 9.7%. So, I'm just wondering what would be the key drivers for margin improvement further in the coming quarters given that you have a price increase to offset the cost? You may have the utilization rate to improve in the second quarter because of the strong order this quarter -- strong quarter in Q1, but then in Q3 because of the prebuy normalization in Q2, then utilization may probably drop a little bit in third quarter. So, I'm just wondering what were the moving parts to help your margins to improve, let's say, in the rest of the year, especially in the second half?

Yes. So, let me start with the end first, right? Because basically, if you look at the margin development for the remainder of the year, we would sort of expect that as we go now into the next quarter, we would be sort of close to the level that we have seen in the first quarter. Third quarter is always a summer quarter, right? That has some implications in particular also when it comes to the service contribution to the business that is natural in the summer quarter.

In our business, in the ITS business, the fourth quarter always tends to be the strongest quarter in the margin. We don't think that 2026 will be different from that perspective. And so that already describes also the margin drivers because the one is the volume that is going through the system, which is a consequence of the order intake as it translates into revenue.

And the other element is the services business in the various pieces and that's sort of growth in the after-sales segment, continuous growth in the rental business at which we look. But also in the ITS segment, we do a fair amount of automation, right, that will also translate into revenue as we speak in the coming quarters.

So, all this will contribute to the top-line development and then consequently also to margin development that, again, just to remind everybody, will be back-end loaded as it was also in prior periods where the fourth quarter is the strongest, and we expect that again.

Last question comes from the line of Philippe Lorrain with Bernstein.

I'll start with one for Christian. Are you going to earmark in the balance sheet notes the exact amount, for instance, of financial liabilities, e.g., for instance, the bond that you've placed in Q1 and that is related to leasing and short-term rental activities because the disclosure so far in Q1 it looks a little bit different. So, I'm wondering about the year-end reporting that will help to determine the industrial net operating debt levels by ourselves.

And then the second question, more for Rob. If we speak about, for instance, players in the contract logistics space and take into account your former at least, let's say, largest customer in IAS, Amazon. Apparently, these guys are also outsourcing some distribution centers and so on to contract logistic players in North America now, which was a trend that was observed already in Europe. Would you expect this to have a material impact or not on your own business in that very special e-commerce vertical?

Philippe, thanks for the question on the bond and the use of the proceeds of the bond. Yes, we will disclose it in the context of the use of the funds, right? That's exactly why we have also together with the outlook said that there will be an adjustment to the free cash flow so that you can actually transparently see how the proceeds of the bond, the EUR 500 million have been used. And as that will happen, right, then you will also be able to see what -- to the extent that, that is actually not financial debt in the classical sense as you made the reference to, but it's actually used for the leasing and rental business. So that disclosure will follow once we use the proceeds for the leasing and the rental business.

And Philippe, on your question, we haven't seen any particular impact as of now. I would remind you that all those warehouses and distribution centers and cross-dock centers and fulfillment centers need first-class automation solutions in them and need first-class automation solutions and then updated on a every -- once they -- when they're greenfield, they need to get a great solution in there in the first place, and that's a big piece of our contribution. And then over a period of time, they'll need some brownfield upgrades, too.

And we do very good green and brownfield with the -- all the customers and certainly the one that you're talking about, whether they're in-sourced or outsourced or resourced or it's all good automation solutions coming from KION. So no, I don't think that that's an impactful trend, and I would encourage you not to be too concerned about that one.

Ladies and gentlemen, in the interest of time, that was the last question. I would now like to turn the conference back over to Rob Smith for any closing remarks.

Thank you very much, Chloe. And ladies and gentlemen, thank you all for joining us for today's call and the many good questions. We look forward to continuing the dialogue with you and face-to-faces over the next weeks in the different conferences, and we look forward to being back here with our Q2 results at the end of July. Thanks very much, and have a good afternoon. Bye-bye.

Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call and thank you for participating in the conference. You may now disconnect your lines. Goodbye.

Ladies and gentlemen, welcome to the Analyst and Investor Update Call Q3 2025. I'm Serge, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions]

At this time, it's my pleasure to hand over to Rob Smith. Please go ahead. You can go ahead, Mr. Smith.

Serge, It's Rob. I lost your introduction. Maybe you've you got to switch line now?

You can go ahead, Mr. Smith.

Operator?

Can you hear us, Mr. Smith? We lost connection to the speakers. Please stay on the line.

[Technical Difficulty] Shanghai, China, where KION is at the CeMAT trade fair, which is currently taking place here in Shanghai. But I'll tell you more about that later. Please look for our update presentation on the IR website for today's call.

I'm going to start with a summary of our third quarter 2025 results and several exciting business highlights. And then, Christian will update you on the efficiency program before taking you through the detailed Q3 financials and our updated outlook for 2025. And then, I'll be back for our key takeaways before we open the line for questions and answers.

Starting, please, on Page 3. The third quarter was another solid quarter, in line with our expectations. Group order intake was EUR 2.7 billion, a 10% increase compared to the prior year. Revenue was flat at the KION level with the increase in Supply Chain Solutions compensating for the anticipated decline in the ITS segment. Adjusted EBIT was EUR 190 million, corresponding to an adjusted EBIT margin of 7%. Year-over-year, while the SCS continued to improve its profitability, profitability in ITS reflected the expected negative impact of lower volumes. Both operating segments improved their adjusted EBIT margin sequentially. Free cash flow was a strong positive EUR 231 million. And earnings per share was EUR 0.87, an increase of nearly 60%.

On Page 4, I'll share with you some recent business highlights. In September, Linde Material Handling announced its partnership with the European aircraft manufacturer, Airbus, for the deployment of automated logistics solutions on the Jean-Luc Lagardere site in Toulouse, where the aircrafts of the A320 family are assembled. A range of robotic solutions designed to help optimize the efficiency and safety of Airbus' logistics processes have been commissioned. These innovations include the R-MATIC trucks, retractable mast autonomous guided vehicles, or AGVs, for a much more reliable material flow management and improved working conditions, helping Airbus build the 320 family.

Also in September, KION Group received the highest award, which is a Platinum rating, from EcoVadis for the first time. This places KION among the top 1% of the more than 150,000 companies rated by EcoVadis. KION joined its well-established brands, Linde Material Handling and STILL, which were awarded the Platinum award from EcoVadis again in 2025. This positive group-wide development highlights KION's steadfast commitment to our sustainability strategy.

And here at the CeMAT in Shanghai, China, KION is showcasing an advanced physical AI-powered Omniverse solution as part of the large-scale collaboration with NVIDIA and Accenture to reinvent industrial automation. CeMAT fair visitors are experiencing how AI-driven industrial trucks and digital twins can transform supply chain operations. The showcase is a milestone on KION's path to an adaptive autonomous material handling standard for customers worldwide. And Dematic unveiled the first demonstration of the FD system, showcasing its end-to-end workflow and innovative evolution of Dematic's multi-shuttle technology. It's ideal for a wide range of industries, including third-party logistics, supermarkets, e-commerce, apparel, pharmaceuticals and electronics.

CeMAT is a truly inspiring experience for us: for me, personally inspiring, for our Board members, for our teams. I'd like to share with you our mutual impression of an atmosphere that's very powerful here. Our supply chain solutions industry is an industry of the future, and we are all in the middle of the beginning of this future at this point with lots of excitement still to come. CeMAT is a strong manifestation of the trends we at KION identified that are driving our business and our own innovation, especially electrification, the increased demand for warehouse trucks, e-commerce, automation and robotics. Yesterday, at the CeMAT, we signed 7 ecosystem strategic partnerships with highly innovative players that are outstanding in their respective fields of the supply chain solutions industry. With win-win partnerships like these, KION is enhancing its ecosystem focus on innovation, advanced robotics and automation technologies. With all what we've seen during these recent days, I'm very convinced KION is well positioned to shape the supply chains of the future.

I'll hand now over to Christian, and he will take you through an update on the efficiency program, our detailed Q3 financials and our updated outlook for 2025.

Yes. Thank you, Rob. As promised over the last months, we are providing you now with an update on the efficiency program that we announced in February of this year to achieve a sustainable annual cost saving of around EUR 140 million to EUR 160 million from 2026 onwards. For the implementation of those cost-saving measures, nonrecurring items of approximately minus EUR 240 million to minus EUR 260 million were initially expected.

I'm sure, you have all seen our announcement last week. Following the constructive and effective teamwork with our works council labor representatives, we have made substantial progress in the negotiations in most jurisdictions, particularly in Germany, giving us a better view on program instruments, financials and timings. We still have some jurisdictions in which we are still negotiating, which is why we don't have a final number yet. But we can now more precisely quantify the expected expenses, and we are now able to lower them to between EUR 170 million and EUR 190 million in 2025.

The savings target remains largely unchanged at between EUR 140 million and EUR 150 million. We are able to achieve almost the same savings with much lower expenses, mainly because many employees accepted our voluntary redundancy package. As a consequence, we don't need additional redundancy schemes. We expect the savings to start impacting the bottom line already in the fourth quarter '25 with a small amount and anticipate the majority of the savings to become effective in 2026 and the remaining will then support earnings in outer years.

Of the EUR 197 million efficiency program-related expenses recorded in the first half of 2025, we were able to release approximately EUR 34 million in the third quarter. Many leavers have, for personal tax reasons, opted for the severance payment to be paid out in the first quarter '26 rather than at the end of this year. Accordingly, this will shift a significant portion of the lower-than-initially-expected cash out for the efficiency program from the fourth quarter to the first quarter of next year.

Let's go now to Slide 7 for the key financials of the ITS segment. Order intake reached 60,000 units in the third quarter, which is a sequential decrease of 14%, a pretty normal seasonal development in the third quarter. Year-over-year, the increase was 17%, an acceleration of the growth rate seen in the first 2 quarters, which is also due to the lower prior year base. New orders in value terms increased 8% year-on-year, driven by a 17% increase in the new truck business. The service business also showed continued growth at 1%. The order book reflects ongoing lead time normalization, and its margin quality is in line with our expectations, as reflected in our outlook.

Revenue declined by 3% year-over-year to EUR 1.9 billion. The 3% growth in service partially compensated for the expected 9% decline in the new truck business. Again, remember that in 2024, the new truck business revenue significantly benefited from the tailwind of a high order backlog. Adjusted EBIT at EUR 171 million and the corresponding adjusted EBIT margin at 8.8% reflected the expected impact from lower volumes, resulting in lower fixed cost absorption in a year-over-year comparison. The sequential improvement in the adjusted EBIT margin, despite the usually weaker summer quarter, is supported by a slightly higher gross margin.

We will now continue on Page 8, which summarizes the key financials for SCS. Following the record order intake in the second quarter, which was also impacted by the favorable timing of some order signings, orders in the third quarter declined by approximately 50% sequentially but still representing a 16% increase year-over-year. This year-over-year growth was once again driven by a 46% increase in business solutions orders, while the order intake in customer services was down 12% on a strong prior year quarter. Remember, we had flagged in the second quarter update call to not extrapolate the record order number for every quarter going forward. While we may have passed the trough, we are still in a lumpy recovery trajectory, and we are also likely to see the next quarter below the EUR 1 billion mark again. While last quarter's increase in order intake was very much driven by the pure-play e-commerce vertical, their share in this quarter's business solutions orders was 24%, meaning that the growth was fueled by customer in other verticals.

As a result of the growth in order intake, the order book increased 16% year-over-year, and that year-over-year increase would have shown an even higher growth rate of 22% without the adverse foreign exchange translation effects. Overall, revenue increased both sequentially and year-on-year and is starting to benefit from the recovery in the order intake, which increased the business solutions revenue by 15% year-over-year in the quarter. The adjusted EBIT improved strongly year-on-year to EUR 48 million, with adjusted EBIT margin increasing to 6.2%, following higher revenues and improved project execution.

Let's quickly run through the key financials for the group now on Page 9. Order intake benefited from the improvement in demand in the new business in both operating segments. The order book reflects the increased demand in SCS, partially offset by the continued lead time normalization in ITS and FX translation losses in SCS. Revenue in SCS is starting to benefit from the order intake recovery since the beginning of 2025, offset by the expected revenue decline in the ITS new truck business. Adjusted EBIT at EUR 190 million and the adjusted EBIT margin at 7% was impacted mainly by the lower fixed cost absorption in ITS and the normalized EBIT in the Corporate Services Consolidation segment, which was partially compensated by the strong earnings improvement in SCS.

Now Page 10 shows the reconciliation from the adjusted EBITDA to group net income. Nonrecurring items in the quarter included approximately EUR 34 million release of provisions for the efficiency program. Please note that due to the overall lower-than-initially-expected expenses for the efficiency program, we have revised our full year 2025 expectations for nonrecurring items to between minus EUR 210 million and minus EUR 230 million from between minus EUR 240 million and minus EUR 275 million. You will find this information on the housekeeping slide in the appendix. In this quarter, [ PPA ] items were at the usual quarterly level.

Net financial expenses improved year-over-year, mainly due to the positive impact from the fair value of interest derivatives and the lower net interest expenses from lease and short-term rental business. We have also adjusted our expectations for full year 2025 net financial expenses to between minus EUR 140 million and EUR 160 million from previously between minus EUR 170 million and EUR 190 million.

Pretax earnings grew 9% to EUR 142 million in the quarter. Tax expenses of only EUR 23 million in the quarter corresponded to a tax rate of 16%, significantly lower than in the prior year quarter. The main driver for the lower tax expenses in the quarter resulted from a revaluation of the deferred tax liabilities amounting to EUR 38 million, following a June 2025 resolution of the German government on the lowering of the federal corporate tax rate from 2028 onwards. And then, the net income attributable to shareholders increased disproportionately by 58% to EUR 114 million, corresponding to earnings per share of EUR 0.87.

Now, let's continue with the free cash flow statement on Page 11. Free cash flow in the quarter reached positive EUR 231 million, substantially driven by an improvement in net working capital in ITS. In contrast to the prior 2 years, we had a EUR 50 million cash out in -- sorry, where we had a EUR 50 million cash out in the fourth quarter for additional pension funding, we funded [ EUR 50 million ] in the second quarter and EUR 35 million in the third quarter.

Page 12 shows the development of net financial debt and our leverage ratios. We had a solid decrease in net debt to EUR 818 million at the end of the third quarter 2025. Consequently, the leverage ratios improved across both net debt definitions by 0.1x compared to the end of June 2025. Our leverage ratios continue to remain slightly lower than the level last seen post our December 2020 capital increase. But this time, we achieved the improvement entirely through self-help measures.

Slide 14 now lays out our updated guidance for the fiscal year 2025. I will quickly walk you through it. Based on the 3 solid quarters -- the first 3 solid quarters and our visibility for the fourth quarter, we have narrowed the guidance range for ITS. For SCS, the good year-to-date performance, including the growth in order intake since the beginning of the year, allows us to increase the lower end of both the revenue and adjusted EBIT guidance.

In addition to the above, the narrowed group guidance range reflects our expectations of more negative adjusted EBIT contribution from the Corporate [ Services ] Consolidation line. This difference is around EUR 10 million in the midpoint, driven by higher expenses for long-term incentive programs, resulting from the increased share price and for strategic projects.

And finally, as outlined earlier in this presentation, we expect lower expenses and related cash out for the efficiency program in addition to a significant portion of that cash out shifting from the fourth quarter '25 to the first quarter '26. Accordingly, our free cash flow guidance increased substantially to between EUR 600 million and EUR 700 million from previously EUR 400 million to EUR 550 million. As always, you will find the slide on the housekeeping items in the appendix.

And with that, now, I hand back to Rob for our key takeaways.

Thank you, Christian. Let's move to Page 15, where we have our key takeaways. KION achieved another solid quarter, completing the first 9 months of 2025 in line with our expectations. Both the industrial truck market, as well as the warehouse automation market, have passed through their troughs and are on a recovery path amongst geopolitical challenges. KION is growing order intake in both operating segments.

Following the constructive and effective teamwork with our works council labor representatives, we have made significant progress in implementing the efficiency program. With most jurisdictions having completed their negotiations, we're able to reduce our expected costs for the efficiency program meaningfully, while delivering the targeted savings. A significant portion of the associated cash out is shifting from the fourth quarter of '25 to the first quarter of '26, preserving cash in 2025.

With 9 months of 2025 behind us and increased visibility on the fourth quarter, we have narrowed our guidance ranges for revenue and adjusted EBIT. We've also increased our outlook on free cash flow for fiscal year 2025 due to the lower expenses for the efficiency program and the shift of the related cash out. Our outlook remains subject to no significant disruptions to supply chains as a result of trade barriers, especially tariffs and restrictions on access to critical commodities.

This does conclude our presentation. Thank you for your interest so far. We look forward to taking your good questions. Back to you, Serge. Let's open the line.

Thank you, Mr. Smith. Can you hear me? [Operator Instructions]

Serge, we can't hear you.

Can you hear me, Mr. Smith?

Nor can we hear [indiscernible].

[Technical Difficulty] Ladies and gentlemen, please hold the line. We will continue with the Q&A shortly.

I trust everyone has heard Christian and me for the last 15 minutes, but we don't hear any...

Can you hear me, Mr. Smith?

[ Haven't ] put on the other line yet.

Do you hear me now, Mr. Smith?

Okay. Raj is writing us the question and we're answering to that.

It's an outstanding solution.

Okay. We'll start with the Q&A. The first question comes from Sven Weier.

I hope you can hear me, Rob and Christian.

Please ask the question. We will forward it, Sven. It will take a bit.

Actually, now, I do hear you.

You can hear me? Okay. Great. So I have 2 questions, please. The first one is a more short-term question. And obviously, you had a great order intake development on the truck side in Q3 against what were, I guess, tough economic circumstances in Europe. So wondering if you could see a continuation of that also in the fourth quarter so far? That's the first one.

I'm sorry, I hear your voice, and there was some feedback on the line. If you would be so kind just to repeat that, maybe we'll get a better chance the second time.

Of course. Yes. I hope you can...

[indiscernible] will order intake continue like this in the fourth quarter?

Yes, sure. Let's talk about that, Sven. I mean, maybe we look at both segments. Historically, the fourth quarter is a very strong segment, probably the strongest segment for order intake in the ITS segment. Seasonally, the third quarter is usually a little lighter and the fourth quarter is a strong fourth quarter. I anticipate that will be a similar situation this year, no reason not to think it would. And as we say in both segments, we're past the trough. We're in a growing -- we're back into growth mode in the markets, and our order intake is certainly in growth mode. We have expected we got a better third quarter this year than we did last year in SCS. And as we described, we expect certainly a stronger second half this year than the second half last year. And we're looking for a good fourth quarter here.

Sven, I trust that answers your first question.

Yes, and I could hear you really well. So that's fine. The second question is a little bit more looking forward on the...

So, you had a second question as well, Sven?

Yes. Can you hear me? Can you hear me, Rob? Operator, can you pass it on?

Please ask your second question, and we will forward it to Mr. Smith.

Yes. So the second question is around the general sentiment among your clients, both in ITS and in SCS, in terms of their investment plans going forward. Do you sense they want to grow CapEx and it's just politics preventing them to do so, meaning that if there was any clearance on the political side, that this investment is released? Or what's the kind of general investment sentiment among both client segments?

The general sentiment, Sven? There we go. How about that? General sentiment among clients in ITS and SCS. Do we sense they want to grow CapEx and our geo -- let's talk about that. I think it's pretty exciting. I think everybody thinks it's exciting that President Xi and Trump came together today, shook hands, and it looks like there's a significant de-escalation of tensions there. And no one has seen any effect of that yet, but I do feel that that's a very good step in the right direction, and I think all our customers are going to feel that way, too, in all markets. I think it was positive. I think it was already priced into the markets, but I think it will be a positive thing for our customers, especially on the SCS side. The Fed has reduced the rates now again. So with 2% in Europe and the lowest rate in America over the last 3 years, that has to be a positive thing. And our customers have been very active with us in the pipeline. And it's just a matter of going through and converting those into orders now. We've talked about that being lumpy. But the trough is behind us. We're in an upward slope. And we're expecting to have a second half stronger than the second half last year. And we think we'll have a seasonal adjusted good fourth quarter as usual on the ITS side. So I think the sentiment is clearly much more positive post the meeting with Trump and Xi today than has been in the lead up to that over the last several months.

Ladines and gentlemen, please shorten a bit your questions since we're forwarding them to Mr. Smith. The next question comes from Akash Gupta from JPMorgan.

I have 2 as well. My first one is on the phasing of savings. So I think if you look at the savings, it translates to EUR 35 million to EUR 37 million per quarter, and you want to achieve fully in 2026. So maybe if you can give us some indication on how we shall think about phasing and by when do you expect the full run rate to be achieved?

The second question is on lower interest rates from lease and short-term rentals.

Okay. So the question was on the phasing of the savings for the efficiency program, right? Let me take this one. So, as I said, right, we will have a small part of the savings already in the fourth quarter of this year, and then the far majority of the savings then in 2026 and actually very much sort of forward-loaded in the year. And there will be a small remainder potentially in the following year. So we will have a small part right now and the majority in the beginning of 2026.

And my second question is on lower interest rates -- lower interest from lease and short-term rentals. I mean, your rental revenues were up 2% in the quarter. So maybe if you can elaborate what is driving this lower interest from lease and short term. Is this due to lower interest rates, or something changed in the way how you do business? And what shall we expect going forward in terms of the sustainable interest from lease and short-term rentals?

That's actually a consequence of the lower negative interest that we had against the prior year. We don't change the way we do the lease business. There is no structural change in how we perform the lease business or the short-term rental business. We have actually just a lower negative -- a lower interest against the prior year, and that's the consequence of that. Well, I mean, that will -- so, that sort of will potentially continue in the fourth quarter as a development. But then, sort of over next year, that effect will then actually disappear as the rates actually align themselves again.

Next question comes from Tore Fangmann from Bank of America.

Perfect. Trust, operator, you can hear me. One question would just be what is the reason for cutting down the upper end of the savings range from EUR 160 million to EUR 150 million? And I'll take the second question afterwards.

Okay. Yes. Well, okay. So I think cutting down the upper end is a pretty harsh wording actually on the adjustment, right? When we defined the efficiency program, we basically targeted the entire EMEA region and all the countries in the setup. Now, the EMEA region actually has not a consistent level of personnel costs, nor do sort of individual jobs and functions have all the same personnel costs. So, on the implementation, now, as we are sort of finishing sort of the execution of the program, the mix that we have between countries and between functions, as we have come to the end of that, is slightly different to the mix that we had planned initially. So that's the background of that slight adjustment, I would call that rather.

Understood. Second question would be on the higher gross margin in IT&S. Is this a question of mix? Or is there some pricing in there? Or is it just more efficient production?

So the question on the gross margin in ITS, it's basically a mix. I mean, we did not have issues in production throughout the year. We have been reporting in the past that production is actually running overall quite well. So there was no impact on that. So when we look at the gross margin impact there, that's mainly mix.

The next question comes from Martin Wilkie from Citi.

It's Martin from Citi. My question was on the pipeline in Supply Chain Solutions. There's a lot of debate across the industry as to whether the interest rate environment has prevented some projects going ahead, and we are now seeing rates coming down.

I appreciate the question. And you're asking on what's the pipeline in our Dematic business, our Supply Chain Solutions business. Very healthy pipeline, continued very active discussion with our customers. And I've been sharing that. It's stayed healthy. It stayed quite active pipeline. And now, as we've been talking for the last couple of quarters, customers are coming in and starting those projects. So the difference, I think, now to previous times is, we see ourselves and the market is clearly with the trough behind us and on an upwards order intake trajectory now. So the pipeline is good. The pipelines continue to be good, and it's very active with our customers.

The next question comes from Gael de-Bray from Deutsche Bank.

My question relates to SCS. And I was wondering why the gross margin was down so much sequentially in Q3? I think it was down 300 bps.

So the question was on SCS. Why is the gross margin down sequentially? So as we -- I mean, we have been talking about closing out the legacy projects over the recent months, right? Closing out legacy projects, as we close them, still comes with the cost, right? We had some costs in the third quarter that we had to reflect for the legacy projects in the business solutions margin, right? And that's reflected here in the gross margin development sequentially for SCS.

Now, on the legacy projects, maybe just overall, right, we are -- as I've said, we are continuously closing out those projects. Also in the fourth quarter, we will have a further closing out of legacy projects. There will be a very small number remaining for the next year. And again, as a reminder, that's also not new. There will be one large project that we have that will last into 2027. But we are closing the legacy projects out as we speak. And at times, that comes with costs. We had to reflect some in the third quarter.

Could you perhaps quantify this cost in -- I mean, in Q3 and maybe in the first 9 months so far?

Quantify the cost of the -- separate out the legacy cost development in the first 9 months.

The next question comes from Lasse Stueben from Berenberg.

Could you please share the verticals and regions in SCS that are driving the orders from the non-e-commerce side?

Sure, Lasse. Let me -- why don't I try it a little bit differently because orders are up well year-on-year in all 3 regions. What I'd call out is, if you want to talk verticals, the order intake in SCS, some good growth in the non-e-commerce verticals of third-party logistics, also food and beverage. And we also had

[Audio Gap]

in durable manufacturing. So those 3 really stood out.

[Technical Difficulty] Ladies and gentlemen, please hold the line. We lost the connection with the speakers. We'll shortly continue with the conference.

Ladies and gentlemen, please hold the line. The conference will shortly continue.

Can you hear us now?

Mr. Lasse , you can ask your question now.

[indiscernible] answering your question again. You were asking where are the pickup year-on-year in non-e-commerce. A matter of fact, all 3 regions are having good growth on a year-on-year basis. The strongest is in the Americas, but all 3 are making good year-on-year growth. And the verticals that are non-e-commerce pure-play verticals that are picking up in a good way would be the third party, the 3PL vertical. Food and beverage has a good pickup and durable manufacturing as well. I hope you caught all that.

The next question comes from Timothy Lee from Barclays.

So I just want to ask about the guidance for ITS. So the full year guidance is reduced in terms of range. And if we look at the midpoint of the guidance for the revenue number for ITS, that would imply, in the fourth quarter, revenue number could be down quite a bit, something like 8% if we take the midpoint of the full year guidance as a reference. That is a bigger decline compared to the previous quarter. Is that something you see to be fair? Or you're probably a bit conservative on your guidance for ITS revenue?

So the question is, whether the midpoint Q4 for ITS implies lower year-on-year, is that fair? Well, I mean, we had this development for 3 quarters now in a year, right? Also the fourth quarter will not be an exception to that, right? I said we will have small impacts from the efficiency program kicking in the fourth quarter, but that will not be sufficient to reverse that trend -- that will not be sufficient to reverse the trend already. So therefore, the fourth quarter, in that respect, has to be seen in the context of the entire year. And so, yes, we consider that actually fair.

The last question comes from Alexander Hauenstein from DZ Bank.

Ladies and gentlemen, there are no more questions at this time. I would now like to turn the conference back over to Rob Smith for any closing remarks.

Serge, thank you for helping us do the best that we could in the Q&A session and thank everyone for your patience during the Q&A session and your interest during our call. We're looking forward to continuing this dialogue with our investor conferences in November and early December. We'll be back in February for our full year results and our guidance for 2026 at the end of February.

Obviously, the Q&A session wasn't as easy as we expected it would be and as it normally is. And so, our IR team will be clearly available to everybody that has a question they'd like to get a little bit more detail and depth on in rest of today and the days to come to make sure that the messages that we've got are well understood and the results that we've brought are well appreciated. So thank you for your interest, and we wish you all a good weekend. Goodbye now.

Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.

Okay, all right. Thank you all for joining our pre-close call for the third quarter '25. As always, in these calls, we'd like to remind you that the following trends and statements are based on our current view on the third quarter and that some of the developments we will describe here are still subject to change. Especially in Q3, September is a very decisive month after the summer months of July and August, and we don't have the actuals yet for last month.

So let's start off with our ITS segment as usual. With regards to order intake in units, we have not seen much of a change in the year-on-year momentum from what we observed in the first and second quarter. It still feels like this year may show typical seasonality, meaning that Q1 and Q3 tend to be seasonally weaker, and Q4 and Q2 tend to be seasonally stronger quarters in a normal year. In that context, Q3 '25 looks like a normal Q3, with orders and units decreasing sequentially maybe by a mid-teens percentage. The year-over-year growth rate may be somewhat higher than what we saw in Q1 and Q2 based on the low level in the prior year quarter. We believe we have seen growth, particularly in EMEA and APAC.

The order intake in value terms has likely increased less than proportionately to unit growth in a year-over-year comparison due to, for the first time in several years, new truck business in '25 growing faster than service growth. The year-on-year growth rate could be comparable to the growth rate we have seen in Q2.

Before we move over to the revenue development, please recall that revenue in '24 benefited from the tailwind of a high order backlog, the effect of which has now been pretty much exhausted. Consequently, revenue in ITS is expected to be marginally below the prior year level.

In combination with our earlier commentary in order intake, the revenue development should result in a book-to-bill ratio somewhat below 1. Unsurprisingly, the order book is expected to be lower again in a year-on-year comparison. As outlined before, the lack of tailwind from the order backlog has an adverse effect on our factory utilization levels, which leads to a substantial but temporary decline in the adjusted EBIT margin in 2025.

Lower gross margins due to the reduced pricing realized in '24 in the new truck business also contributed to the year-over-year decline in the adjusted margin in 2025. You have already seen the impact of this in the Q1 and Q2 adjusted EBIT margin in ITS, and you will see it again in Q3. What also has an impact on Q3, not only in ITS, but also in SCS and especially in the corporate services and consolidation line is that we will incur additional expenses for our long-term incentive programs as a result of the higher KION share price.

Moving on to our SCS segment. In terms of order intake, fiscal years '23 and '24 were characterized by customer delays in signing new orders, even though the pipeline remained well filled. Some of the orders pushed back at the end of '24 were signed early this year, and quite a bit more were signed in Q2, which led to the record quarterly order intake, which, as we all well know, also benefited from positive timing issues. Therefore, we had flagged early on that neither that number nor the growth rate should be extrapolated forward. While we believe we have passed the trough, we are still in a lumpy recovery trajectory, and we are likely to see the next quarters below the EUR 1 billion mark again.

What we have seen so far in Q3 supports year-on-year growth in order intake. With the healthy order intake so far in 2025, the order book in SCS should again show a favorable development. Revenue may be starting to benefit from the recent recovery in order intake and could show a year-over-year as well as sequential increase. Book-to-bill is, therefore, anticipated to be just above 1.

Adjusted EBIT is expected to have again increased strongly year-over-year, with the year-over-year growth rate may be lower than what we saw in the last quarter. The sequential improvement in adjusted EBIT from Q2 to Q3 could be lower in absolute terms than the strong increase seen from Q1 to Q2. Additional expenses for our long-term incentive programs as a result of the higher KION share price also contributed to the limited improvement.

For KION Group as a whole, the development in ITS and SCS means that we are likely to see year-over-year higher order intake, possibly close to what we saw in Q2 '24. It goes without saying that the order intake in Q3 will be down sequentially due to the seasonal decline in ITS and the record Q2 in SCS. The KION Group order book is likely near the prior quarter and slightly higher than the prior year level.

Group revenue is maybe going to be marginally higher, both sequentially as well as year-over-year. Group adjusted EBIT is likely to see a decline both sequentially as well as year-over-year based on a more negative contribution in the corporate service and consolidation line compared to the prior quarter and the prior year quarter. Again, a lot of this is driven by additional expenses for long-term incentive programs as a result of the higher KION share price. All in all, Q3 '25 is likely to have been another solid quarter.

I'd like to add some color on the housekeeping items in Q3 '25. You will recall that EUR 197 million of nonrecurring expenses for the efficiency program were recorded in the first half of 2025. We have progressed further in our negotiations with the employee representatives and expect to be able to provide a more detailed update on the efficiency program when we report Q3.

One thing we already observed is that many levers have, for tax reasons, opted for their severance payment to be paid out in Q1 '26 rather than at the end of this year. Accordingly, this will shift a significant portion of the expected cash out for the efficiency program from Q4 to Q1. If you ask me how significant that portion will be, we don't have a final figure yet as we are still in the process, but it could be a very, very high double-digit million euro amount. We are not expecting any material nonrecurring items in Q3 '25.

With regards to PPA, you are likely to see the usual quarterly amount similar maybe to last quarter. Net financial expenses could also be comparable to the prior quarter. The developments described earlier could result in a pretax profit, close to the level of the previous quarter and the prior year quarter. We expect a low tax expense in Q3 '25.

As flagged at our Q2 call, we will record a tax gain in the third quarter '25, due to a revaluation of deferred tax liabilities following a June '25 resolution of the German government to cut the federal corporate income tax rate from the fiscal year '28 onwards. Accordingly, net income could be around 30% higher than the prior year quarter and the prior quarter.

And finally, free cash flow is expected to be solidly positive and somewhat lower than in the prior year quarter, which did not include any additional pension funding while this quarter's free cash flow does include around EUR 35 million of additional pension funding. Remember, we had already funded EUR 15 million in Q2.

This concludes our prepared remarks. Please remain aware that these are only preliminary statements based on our current view, and some of the trends we have discussed here are subject to change.

We will take a couple of questions, but please restrict your questions to the purpose of this call, i.e., to clarify the presented prepared statements. Let's leave all other questions for our management to answer when we report on October 30 and have a much better basis for answering your questions in more detail.

All right. Sven, I think your hand was the fastest.

Just 2 follow-up questions I have. I mean is it possible to quantify the total impact of the share price in terms of euro numbers for the quarter? I mean I don't expect you to specify that by division, but maybe what is kind of the total impact? And is it like a onetime, let's say, if the share price doesn't go up further from here, is that then limited to Q3, or are you phasing the charge? I know you had this in the past, but I don't remember what precisely went.

Yes. The effect in Q3, I think, is going to be a mid-single-digit million number for KION as a whole. And should the share price stay here or increase further, it's likely to have another impact in Q4.

And what did you -- because it was a little bit fast on the truck margins. What did you say -- the overall conclusion on the truck margin, what was that in Q3?

The overall conclusion is that the effect you saw in Q1 and Q2, you will continue to see also in Q3.

The mix effect?

The effect of a lower utilization and the effect of -- we have lower prices in the second half of last year in the order intake, which is feeding through the revenue this year.

But you didn't say whether the margins -- what the margins specifically would do, right? You left it at this in terms of this comment.

Maybe that means it's maybe not a significant change compared to Q2. There might be a mild change, but not a significant change.

And the last follow-up I had was just on SCS orders. I think you said it will be below EUR 1 billion for the next quarters, not just Q3, right?

That would be our expectation, yes.

And with that, you mean Q3 and Q4, I guess?

Yes. I am not yet looking into Q1.

Ben, I think you were next.

Brilliant, Raj. A couple of questions. One is a slightly nerdy question on the model and then a bit more qualifying. But you talked about the value increasing less proportionally, I think.

ITS order intake, yes.

Yes, exactly. Could you just give us a hint, if possible, on the actual units? So if I look at what happened last year on your units, there was quite a big step down as normal between 2Q and 3Q. They came in, I think it was 52,000 or something. Are we saying -- I just want to sort of make sure I understand, do we still expect the year-over-year units, not the value, to actually be up? So that was my first question.

The second one is just, can we just step back, how is the business environment, right, for truck, particularly in Germany? How are you seeing, let's call it, the overall trend? How does it feel?

Okay. First one is an easy answer. I did hint towards it. We said that it could be a sequential mid-teen decline. That still brings us up year-over-year.

Okay, okay, okay. You could still be up 4%, 5%, but let me wrap my head around that.

Probably even more than that, actually, the growth rate could be, but now we need to differentiate a little bit to not get too excited. The growth rate could be a little bit higher than what you saw in Q1 and Q2, the year-on-year growth rate. But as you correctly said, the Q3 '24 number was very low. So the little bit higher growth rate in Q3 is more a function of the low base and not that Q3 was particularly strong, Q3 '25 was particularly strong.

In terms of overall business environment, it is -- I mean you see we had double digit, nearly double-digit increase in orders and units in the first 2 quarters, 9% and 10%. That's not a usual run rate. Our usual run rate would be 4% to 5%. But then again, we had 2% to 3%, 2.5% declining years before that.

So I think you are seeing a recovery, but you are seeing, particularly in EMEA, a recovery with your hand brake kind of half on. Lots of wait and see, yes, lots of wait and see. There's a lot -- as you know, I don't have to tell you, a lot going on politically that it's like 1.5 steps forward and 1 step back.

So I would call it a cautious recovery, pretty stable, but I think the expectations that many particularly overseas investors had in the March, April time frame when the German government or the new, to be German government said, "Oh, we're going to do this investment boost," and whatever. I think there was some expectation that you'll see the stocks coming out everywhere, and that's certainly not happening. And I think you have a certain amount of sobriety now arriving and saying, okay, it's there, it will come, the money will come, but it will take longer and it's going to be trickling rather than flowing, and I think that characterizes the business environment.

Tore, I think your hand was next.

Yes, Raj. Just could you remind us again of during the quarter, I think at a few conference, you spoke about the current mix and the counterbalance versus other warehouse equipment in your orders. And from this, we can maybe think about how we could see like margins trending then over coming quarters. Could you just repeat what you have said over the course of the conferences?

Yes, we have talked about -- we haven't talked so much about Q3 because obviously, at that point, we didn't have much of Q3. We talked about the trends in the first 2 quarters that we did see a pretty good performance of counterbalanced trucks vis-a-vis warehouse in contrast to the past 2 years at least. But the other maybe even more interesting mix change that we saw is that we see the new truck business growing quite a bit faster than the service business, which, again, has been different in the past 2 years. I think that mix effect is probably more impactful in the short term than the actual mix within the product.

I think Lasse, you were next.

Just a follow-up on SCS. You commented that revenues are starting to see or benefit from the recovery in orders in the prior quarters. So does that mean that the orders you saw in -- to some extent, in Q2, are those slightly faster moving in terms of revenues than what we saw historically? Or yes, just some more color on that comment would be great.

Yes. Maybe not yet Q2, but do remember that Q1 also showed an increase. And while that increase was more driven by the services business, it was driven very much by the mods and upgrades we have been talking about for a while. And those actually turn into revenue faster than some project business does.

The other thing I'll remind you, but this is less a Q3 issue and could be a Q4, more a Q4 theme is remember that a big chunk of the Q2 order intake in new business was related to pure-play e-commerce, and pure-play e-commerce does convert a little faster into revenue than projects from other verticals. So it's not going to be the entire business, but some of that Q2 will be revenue in Q4.

Okay. And then maybe one follow-up on ITS margins. With some of the savings coming through slowly. Does this mean this Q3 kind of trough margin or sort of an inflection point, or how do you think about it internally? You probably can't answer that, but I'll try anyway.

I -- yes, yes, yes, that's completely fair. What we'd really like to do is have the September actuals and then look at our forecast again and then comment on that. And that's why I'd like to defer that to the 30th of October, sorry.

Okay. Jorge, [Foreign Language].

[Foreign Language] Can you hear me, Raj?

Yes, I can.

I have only one question, and I'm sorry, because it's a catch up on your comments on the value for the order intake of ITS. It was -- it is very clear to me the evolution in units. But taking into account that your main competitor in Europe gave some bad news in terms of the pricing. Can you repeat, please, your view on the mix in terms of price, value, total value. I missed that part.

For Q1 or Q2 or...

For this quarter, for Q3. Yes.

Yes. I think we would like to defer that to the 30th of October because we don't have September yet, right? September, we probably have the first 2 weeks. So we want to have full September view, i.e., a full actual view on the third quarter before we really start talking about the individual elements.

But I think you commented something on the book-to-bill, no? For ITS, if I'm not wrong.

We -- I commented on the book-to-bill in Q3 will be slightly below 1 or below 1. But I didn't comment on the individual mix components. That's what it was.

And not in the sequential development of the price, isn't it?

Not yet, not yet. We'd like to have September in the books first.

Okay. So then I wait for the final results.

I've got [ Nicholas. Nicholas Tan, ] did you want to ask a question?

Can you hear me?

Yes, I can. I can.

It is not related to the quarter, but I just wondered if you had commented about the Section 232 on the included forklifts going into the U.S. So maybe if you can remind us what you've said there and how that's affected things in the U.S., if at all?

Absolutely. So basically, let me start off with SCS. SCS does not have a lot of imports from Europe. So whatever the impact may be, I think, is well covered within our guidance brackets. In terms of ITS, there is not a lot, but there is some imports going from Europe into the U.S., and we're still in the process of actually calculating the impact because -- and I think you probably heard this from other companies before, it's not a trivial issue, it's actually quite complicated because for every single product type, you have to go through your bill of materials and then basically, identify the steel. Aluminum is not such a big issue for us, but the steel components, and then apply the 50% on that and the 50% on the rest. So we're still evaluating that. And we are planning to provide a more concrete update on that on the 30th of October.

Sven, I think you had a follow-up question. I can't hear you, you're on mute.

Yes. Sorry. One follow-up on...

It's always one, and you're with the one, this one.

On service, right? I think you said service is growing slower than new equipment on the order intake.

No, I'm saying new business is growing faster than services. That was growth rate, it's not changing much. The change is coming from the new business, the new truck business.

Because I think that's already what we had in Q2, right, that new equipment was growing faster. So it's not like we're seeing -- we don't see cannibalization here, right, that people buy more new trucks and don't sweat the existing assets harder, no longer.

No, no, no. I wouldn't say that. I would say the service is just a very continuous growth path and it's the new business that is growing faster.

Lucas, you may have the honor of the last question.

My first one is on the ITS margins in the quarter, just to come back on the commentary. So lower year-on-year kind of as expected, the similar effect we saw in Q1, Q2. And then you said, I think, mild changes but not significant in terms of where the margin will be versus Q2?

Correct.

And did you say whether they will be higher versus Q2? Because I think there was a question on whether you hit the trough. I don't know if you replied to that.

It would be -- so again, I can only repeat, we don't have September yet, and September is a big month in Q3. But where we stand today, I mean, Q3 is usually a sequentially weaker quarter because we have the factory shutdowns in the summer. So even if it's not much changed from Q2, I would look at it more from lower than Q2 rather than higher than Q2.

Perfect. That's super clear. And then the other one was just on the comment you made on German stimulus. You're saying there are quite elevated expectations and you're not seeing kind of much in the environment. Do you still see, I guess, signs that something could happen? Or do you no longer really count on it? Just to understand a little bit the background or the context behind that comment.

Oh, yes, yes, it will happen. But I mean, Lucas, remember the day [ Merz ] announced the package, our stock was up like 20%. It lost it within a day or 2, but I think a lot of German industrial companies were massively benefiting from that expectation to be visible very, very quickly, and that's what I was referring to.

I think if you ask the German companies in Germany or German IRs or German board members, they would have said from the very beginning, it's nice, it's good, let's not get over excited. It will take time to pass through the government, and then there will be a discussion between the government and the state, who is getting what portion and in what form are we going to pass this on to the companies and who is getting what first.

So we are quite used to these things moving forward slowly, and that's what they're doing. But I think vis-a-vis expectations, particularly from non-German investors, this is probably a little bit of a sobering moment.

Gael, I'll take your question, and that will be then the last one. Gael, Deutsche Bank.

Yes. Can you -- sorry, can you hear me?

I can hear you. Yes.

Raj, yes. I just wanted to ask about the pricing dynamics. I mean would you say the forklift PPI in Germany is a good guide for what's going on, on the pricing side for you?

I think that's probably fair. I mean there will be differences between producers, obviously, because you're talking about different types of products. But until we provide more clearer messaging, I'm happy for you to take that.

So that's marginally negative then?

Again, before, when we went out in Q2, we said we haven't seen a step down in -- we saw stable pricing since the end of last year. And for Q3, we'd really like to see September before we make -- we don't comment on monthly pricing. We'll comment on quarterly pricing, and that's why we just need September.

Thank you, guys. Thank you for calling, for joining into the pre-close call. We will speak to each other again in 28 days, in 4 weeks. Thank you all.

Thank you, Raj.

Bye-bye.