Edited Transcript of RBAV.VI earnings conference call or presentation 14-Aug-20 9:00am GMT

So what is going on at Rosenbauer? You know this slide partly already, but what is the situation with the Concept Fire Truck, which is now called Revolutionary Technology, RT? This is our new series of hybrid fire vehicles. And what happened here is that we are already with the pre-series now, the 3 first units will be handed over on the 23rd of September, when we will also hold a Capital Markets Day, which I hope you all will participate and we will produce these vehicles in the plant 1 here in Austria, the first ones. And we expect also for next year to have 10 to 20 of these vehicles already being produced here in Austria.

We see the customers very interested in the product, and they are now — we are placing orders for prototypes, they want it from us, and then they want to test these vehicles before they replace their fleet and this is actually what we see very positively. The target group for this vehicle is bigger cities, fabricates in cities because that’s where we believe they are most useful. And we see with this vehicle concept, as I was explaining now since sometime the potential to have a world fire truck, which is a more unified fire truck and more standardized fire truck, simply because nobody else has such a solution at this moment.

If we look at what happened, of course, and I told that also is that due to the corona crisis, the INTERSCHUTZ, this is the biggest firefighting exhibition taking place every 5 years, could not take place this year. So it is delayed to 2021.

And besides the presentation of the Concept Fire Truck, which we will do on the 23rd of September, as you saw on the previous slide, we are now launching our innovations, which we would have presented at INTERSCHUTZ step by step. So we will be finishing our ladder welding production site in Karlsruhe, and we’ll have an opening for these on the 14th of September. And we will also present novelties for airports and equipment in Dresden in October then and also innovations for the municipal fire fighters in end of October at a trade fair in Wels.

So regarding the COVID situation for us as a group, the situation did not change from the Q1 figures. We are still managing the crisis as good as we can and I believe quite well. So far, we have no permanent disruptions of our production sites, which is the most critical part, and we also see the customers accepting the vehicles and the supply chain being steady in this difficult situation, and I will come back to the financial influence of the corona crisis later.

We implement the measures of the Austrian government quite closely. So we also follow or implemented a traffic light system at Rosenbauer. We are at this stage in Level 2 in the orange stage. At the moment, we see this necessary because there is certain rules and we give a brief summary of them on this slide, which our people need to know, and we cannot change everything regulation from 1 day to the other. So we made some bundles of regulations, and we have these 3 bundles for Level 1, Level 2 and level 3. And in principle, that means we will have Level 1 as long as we have a vaccine in Europe. So the Russian one will maybe not help us here. And we have Level 2 if we see the situation more critical and Level 3 would be more or less a lockdown like we had it, and hopefully, will not happen again.

You see our measures. We are keeping, of course, distance and try to have the infrastructure now in place. So people are coming back to the — also in the offices. But of course, home office is still recommended. We avoid face-to-face meetings at the moment, they are actually prohibited, and we have no bigger groups, more than 5 people at this very moment. If there would be a lockdown, of course, regulations would be even more strict.

So let’s turn to the financial figures. I mentioned already, we see the situation in the first half year 2020 very positive. We could increase our top line figure by 16% to a record turnover of EUR 458 million. And this was coming from the regions, NISA, MENA and North America, I will come back to that a little later more in detail.

We see from the corona crisis an impact of EUR 9 million to our EBIT figure. Even with this effect, we could increase our EBIT to EUR 5.4 million, which was EUR 5.2 million in the year before half year 2019. And also, our trade working capital efforts show first results. We are starting the initiative. We are in the course of starting the emission fees, but the net debt remains stable year-on-year, and we could have the best operating cash flow since 2008, and this is something I’m personally very happy about. This is a part target we reached now. But of course, this project is not ending, and we have to and we will continue with these initiatives to improve trade working capital to lower net debt and improve operating cash flow.

On the order side, we have an order intake of EUR 455 million, which is on the level of our turnover figure. However, lower volume like last year. This is quite obvious in the month of April and May. Order intake was low. We hope that after the summer, in autumn, orders will come back. Some bigger projects have been delayed, especially in Asia Pacific. I will also come back to that a little later.

In our guidance for this year, we can increase a little bit our top line guidance. So we believe that we will exceed the previous year’s figure moderately. And we also now want to give profitability guidance, and we believe that EBIT will be in the range of 4% to 5% in the year 2020.

So if we have a look on the financial figures, we spoke about turnover already. I believe we really could prove now the resilience of our business model. This is important nowadays and we have the highest turnover in the H1 since ever. And we could keep EBIT stable, as I said, and slightly increased EBT and net profit for the period. I was mentioning the operating cash flow, which is still negative. This is due to the cyclicity of our business. But the most — the best figure also for quite some years. And this is, like I said, the first sign that our initiatives to improve the trade working capital is showing gains.

So if you look on the quarterly figures, we see that the 16% increase in our top line figure was mainly done in the first quarter, where we had even an increase of 32%, but also in the difficult second quarter, we could increase by 3% to EUR 225 million in our top line figure. And of course, this is, like I said, you see also here the EBIT implications on a quarterly basis, and you see that most of this EUR 9 million I mentioned were materializing in the second quarter. So most of the corona effect of this EUR 9 million is included in the Q2 figure.

So where does the growth come from? We are proud that actually everything segment of our business, everything region could increase the top line figure, especially NISA was increasing by 40%; and MENA was increasing by 30%; and NOMA by 20%. Like I said before, you saw that Oshkosh is getting strong, but in NOMA, in the first half year, that’s really a very nice turnover with more than EUR 150 million. We believe that we do very well here. And thankfully, our production sites in NOMA in North America are not so much in the center, in the city centers, not at the West and East Coast, but in the center of this continent. And therefore, we have not so many infections. So we see less infections in South Dakota and Minnesota, which helped us to keep production stable, which is also positive.

Here, you’ll see that order intake was a little bit smaller than — on the level of the turn of a little bit smaller like in the previous year. You see that the Asia Pacific order intake was quite weak in the first half here. Some projects delayed everywhere where we see central procurement. Governments are now not in the mood to order fire trucks. They — if there is a ample procurement, they delay these procurement processes. And the municipal processes like we see in Germany, like we see in the U.S. goes on, and we can benefit from our strategy to grow into the municipal markets because these regions, Central and Eastern Europe, North America, but also NISA are keeping order intake up.

You see also that the MENA region is continuing to recovery. So the order intake in MENA was quite positive, which we also believe is a very good sign.

Regarding the EBIT development, I have to say that the corona effect mainly was going to the regions CEEU and Asia Pacific, obviously, in Central and Eastern Europe, and I will explain it a little bit more in detail, were suffering because of the main production sites are in this region and the main affected production sites are in this region. Asia Pacific was suffering as well because we have a small production site in Singapore, which was affected. And also — but here also the order mix in the first half year was not very favorable. It’s the different — or the opposite situation in MENA, where we had a difficult product mix in the first half 2019 and see a better, more favorable product mix now in the first half year of 2020. This is explaining the contributions to the EBIT of different segments.

So this is actually how this EUR 9 million corona effect was calculated. You see that actually, we see a stop in the bottom. We have, of course, decreased production hours, the productive hours in our sites in Austria. Obviously, we put forward the company holidays. We had short work here in Austria, and this makes up for lower productive hours, which is making an — giving an effect of EUR 3.7 million. This can be almost compensated by the compensation we received from the Austrian government for the short time, which is having an effect of EUR 3 million. This is, of course, also including the effect we saw in the indirect part, indirect personnel, and this is more or less equaling out.

What we cannot compensate is the lost turnover. We had planned an even higher turnover in the first half year. And therefore, we see also a reduction in contribution margin. We hope that we can catch up some of that in the first half year. But like as you all know, the production capacities in the first — in the second half year are always fully booked, and it will be not 100% possible to catch up all of that reduction of the first half year.

So that’s the effect on the Austrian production sites. And then we see also effects on mainly the German production sites, which is the big production sites we have there also but also on our smaller sites in Slovenia, Spain and Singapore, all of that summing up to EUR 3.3 million effect we see out of that crisis in the first half year 2020, and that’s how we calculate this EUR 12 million minus EUR 3 million compensation is EUR 9 million effect, which we see out of that corona crisis for Rosenbauer.

So on the CapEx side, we continue the path of consolidation. We invest less than we depreciate, but thoroughly invest in efficiency. And we invest, of course, in replacement of infrastructure, which has to be done. We have a new pump test bench at our plant in Leonding. We have, as I said before, we will present this also, finished the welding robot in Karlsruhe, which will help dramatically to improve quality and efficiency in the production of the ladder sets.

And we also continue with our SAP project, and we bought the licenses for this SAP project in the first half year 2020. This is also included in this EUR 7 million investment.

Yes. As I said before, thanks to our trader working capital initiatives, we could at least keep total assets or the balance sheet total in the first half year stable. It has to be mentioned here that actually we did a factoring of EUR 70 million through 31st of December 2019. This is something we do at year-end only. So you don’t have that EUR 70 million included in; the June figures here, we could compensate that factoring. So actually, that explains also the much better cash like we had last year.

Our equity ratio is also on the level of the first year. Of course, it’s a little bit reduced compared to the year-end due to the dividend payments we do in the first half. And you see also net debt. Like I say, it’s also stable compared year-on-year in the figures year-end 2019. You have to include the EUR 70 million factor we don’t have in half year now.

So all in all, situation is stable. We want, like I said before, to drive forward that trade working capital initiatives. We want to improve our processes, speed up the processes in production, improve conditions with customers and suppliers so we can reduce the balance sheet total, reduce the net debt and improve equity ratio and operating cash flow. This is what we plan to do for — in this initiative, we want to achieve a 40% trade working capital in percent of turnover until the end of 2021.

I also want to mention that we are still — or you have — or please keep in mind the effects we saw from IFRS 15 and 16. Without these 2 new reporting standards, our total balance sheet would be at EUR 850 million. Our equity ratio would be at 29.3%, and our net debt would be at EUR 250 million. So if you do a long year comparison, please keep in mind the years 2018 and ’19 and ’20 have this effect included, and we had to change due to IFRS 15 and 16, the accounting.

So on the balance sheet, we see an increase of 10%, which is coming, first of all, from increased accounts receivable, which they increased by 26% on the other side, and we will come back to that later. We could improve the down payments from 10% to 15%. But okay, still, this shows we can do something on the trade working capital, and we have to improve again on the accounts receivable. This is what we will focus on in this initiative as well.

Yes, the leasing, the IFRS 16 standard because it’s mentioned here. There is liability included in our balance sheet of EUR 32.5 million in the half year figures, which is due to the IFRS 16.

So I explained the trade working capital is slightly improving year-on-year. We see that improvement is coming, like I said before, from the prepayments that was 10% only in the first half year 2019 and is now going up — went up to 15%.

On the other side, average payment, unfortunately, went up from 70 to 78 days. This is always depending very much on the individual orders we have shipped in the first half year and on the payment terms of these orders.

So if we turn to the outlook, I want to speak a little bit about order intake first. You see order intake, like I said before, was lower than in the previous 2 years, but on the level of turnover still. We see in spite of the difficult worldwide situation, we are still satisfied with that order intake. However, you’ll see where the reduction is also coming from. It’s Asia Pacific, like I said before. There are so many bigger projects were delayed, where we did not lose these orders, but we have to work on that.

On the other side, NOMA region went up dramatically, and this makes us confident because, of course, we know difficult situation in the U.S. regarding COVID can also lead to problems in the future. But with this order book, we believe we have a good situation.

So I want to give some more details on sales regions. We spoke about Asia Pacific. So we saw a slowdown here in all product segments, be it vehicles or equipment and service. The standstill in China led to delays in the bigger projects, but also in India, in South Korea. We did not see the same orders coming in like we had last year, for example. And of course, also a lot of authorities tend to support local business nowadays. On the other hand, if we speak about airport business, I believe that decision-makers now tend also to prioritize quality in times like this, if they have the budget available.

The normal area increased by 20% almost year-on-year, the order situation is quite good there. Like I said before, equipment sales tripled. So we didn’t do so much equipment before and are focusing now more on equipment also. And we have strong governmental business in the U.S., which is also something which helps us, obviously.

In Central and Eastern Europe, we see also a very stable situation. This gives us a strong foothold also as a company. And we see that after the mitigation of lockdown support, this area could recover very well. And that is, of course, a very good sign because this is our home market.

In the NISA region, we see a lively project landscape. Of course, there is also uncertainty, especially in South America, but also in Africa, of course, regarding the budget, but we have to also watch closely this area in MENA. The recovery goes on, like I said. Order intake increases by 22% compared to last year. So actually, the country and also our production site there is fully operational. And of course, the ongoing low oil price is a challenge in this region we have to face.

So the overall outlook, the IMF reduced their outlook, and they believe that the recession will be worse than originally expected. And we believe the recession will be at 4.9% in 2020. The economic recovery is more gradual and with a higher-than-usual degree of uncertainty. This is very — obviously, nobody knows what will happen in autumn, and this is the uncertainty, which is in the market as well.

The world fire service seems to be very well prepared, and it follows with a delay, like you know, several months, I would say, even 1 year. And of course, this sector is well prepared that the demand has slowed down, but we believe the order situation is good in this sector. And there is only limited possibilities. You can delay a few months, maybe 1 year, but then governments and customers have to repurchase.

North America and Central Europe seem very stable from our point of view. As I said, these are our home markets. This is of highest importance for us. And like I said before, all of that makes us believe that we will have another increase in our top line figure in 2020 and an EBIT margin of 4% to 5%, which is also showing the resilience of our business model.

So with that said, I thank you for your attention, and I would kindly ask you for your questions.

================================================================================

Questions and Answers

——————————————————————————–

Operator [1]

——————————————————————————–

(Operator Instructions) And the first question is from the line of Markus Remis of RCB.

——————————————————————————–

Markus Remis, Raiffeisen CENTROBANK AG, Research Division – Financial Analyst [2]

——————————————————————————–

I have a question related to Slide 20 and the breakdown of the impact of the corona lockdown on your operations. So is it fair to say that without corona, you would have generated something like EUR 15 million — almost EUR 15 million. So triple the amount of 1H ’19. Is that a correct interpretation?

——————————————————————————–

Sebastian Wolf, Rosenbauer International AG – CFO & Member of Executive Board [3]

——————————————————————————–

Yes, in principle, that’s true. Of course, what we did not have is the cost for the INTERSCHUTZ. This would have been about EUR 3 million, which is now delayed to next year. And we, of course, would also set some measures on the overhead costs. But I would say, if you deduct, let’s say, EUR 3 million, then you can have a normalized figure here. So EUR 6 million — deduct EUR 6 million, and then that’s the normalized figure.

——————————————————————————–

Markus Remis, Raiffeisen CENTROBANK AG, Research Division – Financial Analyst [4]

——————————————————————————–

Very helpful. I appreciate the granularity. On the contribution margin, part is EUR 5 million. Can you give us an idea what the underlying revenue figure was for calculating the future…

——————————————————————————–

Sebastian Wolf, Rosenbauer International AG – CFO & Member of Executive Board [5]

——————————————————————————–

Yes. That’s difficult. I cannot give you that figure here now because that is — some of it is only delayed so we did not include that. Some of it is really something we cannot catch up. So this is something which is too difficult to say. It’s an estimate on the average gross profit on the number of units we had to move from the first half year.

——————————————————————————–

Markus Remis, Raiffeisen CENTROBANK AG, Research Division – Financial Analyst [6]

——————————————————————————–

And then a question related to the order intake. You mentioned a couple of tenders were delayed as the situation in most economies has some sort of normalized. Are you seeing them already coming back on stream? So like over the summer, presumably less activity. But with the outlook into September and October, do you see that these delayed tenders are actually coming back to the pipeline?

——————————————————————————–

Sebastian Wolf, Rosenbauer International AG – CFO & Member of Executive Board [7]

——————————————————————————–

Yes, yes. We hope that that’s always governmental decisions also necessary. I spoke to our dealer in India, which was, like I said, a big order intake last year and we did not see orders coming in from India in the first half year this year. And he is of — of course, the dealer is confident, and he believes that — and he told me about the project he’s working on, which is a big project, again, of course. But in the end, the decision has to come from the government in this case. And if they have priorities differently, then they might move the project again, for example, and this is the situation we see everywhere. So the customers are working on the tenders, but the final approval in these centrally procuring markets is, of course, hopefully, an obligation and then had to come. And if they decide differently, then it’s difficult, but then it will be delayed again. And that by the way, it would be not serious to have a clear — to have clear statements from these countries.

However, all non-centrally procuring countries, like I said before, especially Central and Eastern Europe, NOMA and also some countries of NISA like Holland, England, France, we see buying continuously, of course, with smaller volumes. So we have — simply, we have no bigger one-off orders in the first half year, which we saw in previous years already from somewhere. And that’s what we are a little bit hoping for, but it’s impossible to have it 100% increasingly clear at this stage here.

——————————————————————————–

Markus Remis, Raiffeisen CENTROBANK AG, Research Division – Financial Analyst [8]

——————————————————————————–

Yes. Okay. And then can I ask on the net working capital? So is it correct that your ’21 target implies about EUR 100 million reduction of net working capital?

——————————————————————————–

Sebastian Wolf, Rosenbauer International AG – CFO & Member of Executive Board [9]

——————————————————————————–

That’s correct, that’s correct. So 2020 — end of 2021, we want to achieve about 40% of — attributable capital of 40% of our turnover. We don’t have the turnover figure now, but we will start the budget process beginning of September and then have it have it clearer. However, the target is not only this percentage. We break it down to the cash conversion cycle and to also our legal entities. And yes. That’s what we are doing at this stage. So the initiatives have started already, and we are having — we will work out the content in the next weeks. And I hope that we can present some more information about that initiatives then at the Capital Markets Day in September.

——————————————————————————–

Markus Remis, Raiffeisen CENTROBANK AG, Research Division – Financial Analyst [10]

——————————————————————————–

But on the components, I mean, where do you see the biggest levers? I mean prepayments are now up at least 15%. I understand correctly that’s already quite an achievement. And payment terms, I think that will also depend on the tenders you’re active in. So I guess inventory probably be a big trigger, but if you would have to break down the EUR 100 million, what reflected the biggest figure?

——————————————————————————–

Sebastian Wolf, Rosenbauer International AG – CFO & Member of Executive Board [11]

——————————————————————————–

Yes, what we do at this stage is that we have 6 projects in this initiative, and we did not — we don’t have the figures now for every of these projects. But the projects are one is working capital. One is stock units, be it vehicles or also equipment. One project is payment terms on the supplier side. One is payment terms on the client side, customer side. And then we have 2 extra projects. One is quick wins out of standardization and the other one is organization and KPIs. And these 6 projects will have to contribute to that overall target. However, we are in the process of defining the measures and subprojects in these 6 segments at this moment. And then we will also give them value and the contribution value to every 1 of the 6 projects and every sub-project and measure in these 6 projects, and then we will — then I can answer the question, where we see the biggest lever. However, from this point of view, I see that we need to tackle the topic on all of these sides. The 4 figures is the inventory, which is the biggest number, and the accounts receivable, which is a big number, which is harder to influence but we see that on the supplier side, we have only at the moment 15 to 20 days of payment terms with our suppliers. On average, we see that has to be improved, and we see the chance in this situation, especially to improve this figure. And so we see possibilities in all these areas.

——————————————————————————–

Markus Remis, Raiffeisen CENTROBANK AG, Research Division – Financial Analyst [12]

——————————————————————————–

That’s fine. So this EUR 100 million roughly is a top-down figures. So it’s not like it has not been built from a bottom-up analysis?

——————————————————————————–

Sebastian Wolf, Rosenbauer International AG – CFO & Member of Executive Board [13]

——————————————————————————–

That is the process we are doing now. We give the target and now in these streams, in these 6 projects, key projects, we’re working on that. We are focusing at the moment on the big European production sites. So Austria, Germany, where it’s Karlsruhe and Luckenwalde; Austria, including also Leonding and this is where we see the biggest lever at this moment. The KPIs from the U.S. companies are much better and exact, and especially these production sites have to improve.

——————————————————————————–

Markus Remis, Raiffeisen CENTROBANK AG, Research Division – Financial Analyst [14]

——————————————————————————–

Okay. Just one remark on Page 21, the depreciation figure you show here. I’m not sure if that is correct, the EUR 8.6 million, EUR 8.3 million. So that role looks different in my model from the report….

——————————————————————————–

Sebastian Wolf, Rosenbauer International AG – CFO & Member of Executive Board [15]

——————————————————————————–

So Q2 sales year, depreciation on Page…

——————————————————————————–

Markus Remis, Raiffeisen CENTROBANK AG, Research Division – Financial Analyst [16]

——————————————————————————–

In H1, depreciation.

——————————————————————————–

Sebastian Wolf, Rosenbauer International AG – CFO & Member of Executive Board [17]

——————————————————————————–

Yes, you’re right, it’s 11 — sorry, 12-point — has to be EUR 12.2 million, EUR 12.3 million. You’re right. I have to check because actually, this might include the intangibles, which are not included maybe in this Slide 21. But I answered that during the call.

——————————————————————————–

Operator [18]

——————————————————————————–

The next question is from Volker Bosse of Baader Bank.

——————————————————————————–

Volker Bosse, Baader-Helvea Equity Research – Co-Head of Equity Research [19]

——————————————————————————–

Volker Bosse, Baader Bank. I have a couple of questions. I would like to start with the order intake. It seems that APAC region is most worrying. Would you agree on that? I mean, on the one hand, we have these seasonal shifts, but also this structural change to support more local businesses. Would you say that is an ongoing effect, which we will continue to see in the future as well? So it is kind of permanent drag, so to say, on the order intake potentially from APAC?

——————————————————————————–

Sebastian Wolf, Rosenbauer International AG – CFO & Member of Executive Board [20]

——————————————————————————–

Yes. That’s, of course, very obviously also worrying us most here. Like I said, I — we believe it’s not something ongoing. I mentioned especially the airport business, and we shipped the BUFFALO Supreme units now to India, for example, which were very well received by the client. So we believe that, especially in the airport business, decision-makers will rely on Rosenbauer quality in difficult times.

However, in the municipal market, that is what we refer to here that in the short term governments tend then to support the local suppliers, of course. And especially in China, this can be the situation. In China, we had also a reorganization of the firefighting organization. This was shifted from one to the other governmental departments. So they had some delay also out of that because actually, if we listen to the IMF, they believe that China will be an exception on this reduced economic growth in 2020. So in other businesses, we don’t see such a reduction in China, and we believe that, that might also have to do with this change of the responsibility there from one to the other governmental department, which can have an influence on delays.

So all in all, we believe, yes, in the short term, maybe some local suppliers have been prioritized. But in the midterm, we strongly believe that decision-makers will rely on Rosenbauer and delayed projects will be also given to us again.

——————————————————————————–

Volker Bosse, Baader-Helvea Equity Research – Co-Head of Equity Research [21]

——————————————————————————–

Okay. Understood. Well explained. And the second question would be on your earnings guidance. Welcome that you could give a guidance. I mean, not everybody gives the guidance in this uncertain time. So good to have any guidance from your side. Coming back to your earnings guidance, if I take the 4% to 5%, this means roughly an EBIT for the full year of between EUR 40 million to EUR 50 million. And after you have EUR 5 million in the first half, it would mean EUR 35 million to EUR 45 million EBIT in the second half of 2020. Last year, 2019, you had in the second half EUR 46 million. So you guide for sales or at least a stable sales development in the second half, but earnings could decline by up to 25% year-on-year, just as a rough calculation. So what could last on your earnings trend in the second half? Which kind of buffer you build in your model here or in your guidance?

——————————————————————————–

Sebastian Wolf, Rosenbauer International AG – CFO & Member of Executive Board [22]

——————————————————————————–

Yes. Yes. Yes, of course, we are we are not — like you say, it’s uncertain times. We did the guidance based on our forecast, of course. And this is — these uncertainties in every general manager of our company. So on the — and that’s what is reflected also in this guidance. So I believe we have the chance to be really on the upper end of this guidance, but the uncertainty is so high. And if there is any delays in the supply chain in the last quarter or handover problems with clients being not able to travel and not accepting a remote handover, then I believe we could have here some problems in being on the same level like last year. This is what is reflected also in this guidance. So I’m — and this is what I see difficult here, which is leading to that guidance. But I’m really confident that we can fulfill that guidance and be in that range, which I see already as a positive development. Because if you will then include, let’s say, this EUR 6 million we discussed before, then the situation would be — again, we are on the same or a higher level than the year before.

——————————————————————————–

Volker Bosse, Baader-Helvea Equity Research – Co-Head of Equity Research [23]

——————————————————————————–

Okay. Yes. Well, understood. Third question would be on the CapEx, could you remind us on your CapEx assumption, CapEx outlook for the full year, what range we can expect CapEx to be at the end of fiscal year ’20?

——————————————————————————–

Sebastian Wolf, Rosenbauer International AG – CFO & Member of Executive Board [24]

——————————————————————————–

Yes. So I believe it will be on or below the level in 2019, which was EUR 17.7 million, and this is what we see here. Like I said, we did reduce the original plan, which was higher than that, and that means we will be slightly lower than 2019. So maybe in the range of EUR 17 million.

——————————————————————————–

Volker Bosse, Baader-Helvea Equity Research – Co-Head of Equity Research [25]

——————————————————————————–

Okay. Good. And perhaps your improvement on the operating cash flow by around EUR 18 million in the first half ’20, although it’s still negative, but good and a significant improvement. So is it fair to assume that you could — might come up with a positive operating cash flow for the full year 2020?

——————————————————————————–

Sebastian Wolf, Rosenbauer International AG – CFO & Member of Executive Board [26]

——————————————————————————–

Absolutely, that’s the clear target to do that. I mean, in the year 2019, the situation was that we really increased inventories dramatically, like I said, was not the case this year, and that’s the main difference. So I don’t see that happening until the end of the year. So I really believe that the operating cash flow has to be positive. We will focus on that. That’s a clear target for this year.

——————————————————————————–

Operator [27]

——————————————————————————–

The next question is from Frederik Bitter of Hauck & Aufhäuser.

——————————————————————————–

Frederik Bitter, Hauck & Aufhäuser Privatbankiers AG, Research Division – Analyst [28]

——————————————————————————–

So very excited for my first question in any Rosenbauer call, so very excited to follow the company development going forward. I have 4 questions, and I do with them one by one.

The first one would be on the monthly order intake development in July and also early August, obviously, it’s only 2 weeks now within this month. But just to get a bit of better understanding where the monthly order intake has developed on a year-on-year, but also on a quarter-on-quarter basis. Just trying to understand a bit better how the momentum is going.

——————————————————————————–

Sebastian Wolf, Rosenbauer International AG – CFO & Member of Executive Board [29]

——————————————————————————–

Yes, the situation did not really change. So it’s — compared to end of June. So we are still monitoring it very, very closely. However, the month of July and August are not representative always because these are the summer months where we always plan also a lower order intake. So situation did not really change from what you see in the half year. So we really have to wait for the autumn. We are, at the moment, like I said, in the preparation for our budget. And we see that we have to balance also our production capacities like you see now, it’s Asia Pacific and NISA are affected from the reduction in order intake mainly and that means the reduction refers to the production capacities here in Austria mainly because these 2 areas get products from production sites in Austria. The other production sites seem to be quite stable there. And this is what will be now the exciting thing to do in autumn in the course of the budget process to adjust our capacities, and we are very good in that for 2021. This is what we are doing at the moment.

——————————————————————————–

Frederik Bitter, Hauck & Aufhäuser Privatbankiers AG, Research Division – Analyst [30]

——————————————————————————–

Okay. And obviously, when I asked on a year-on-year comparison, then obviously, that takes into account that the summer months of July and August are typically obviously seasonally weaker. But how is the order intake now compared to last year? Has last year been particularly strong, so that we have — we’d be looking at a more tough, say, comparable base? Or is it just something maybe comparable? And then — and how does the order intake now this year compare really to sort of last year, even if you would adjust for, like, say, bigger ones or bigger projects, et cetera?

——————————————————————————–

Sebastian Wolf, Rosenbauer International AG – CFO & Member of Executive Board [31]

——————————————————————————–

Yes, hold on for 1 second. I mean, last, with that order intake you saw in the half year results, we are actually 20% behind what we saw last year. This is what you see on the slides. And the situation now, like I said, is much more the same, yes. So we are still about that 20% behind what we see year-on-year. There was no change in the months of July and August.

——————————————————————————–

Frederik Bitter, Hauck & Aufhäuser Privatbankiers AG, Research Division – Analyst [32]

——————————————————————————–

Okay. Perfect. No, I understand your previous comment as well. Obviously, that’s unchanged compared to June, but you also mean not only quarter-on-quarter but also year-on-year. Then obviously, the decline we have seen in the first half, basically, so the minus 20%. And that’s very helpful.

So the next one I had is, could you give us a bit of an update on the pricing environment? And what kind of competition you see in tender projects that are out there?

And related to that also, what is the margin quality in the order backlog, meaning especially in the orders you have taken in now in the first half of this year? I guess, would it support your 4% to 5%, what you would be aiming for to achieve this year? Or could that be better? Or could it be worse? Just to get a bit of understanding now in terms of…

——————————————————————————–

Sebastian Wolf, Rosenbauer International AG – CFO & Member of Executive Board [33]

——————————————————————————–

Yes, the pricing quality. So the 4% to 5% we have in the guidance is not — is coming from a pricing we saw last year. The quality there is roughly the same like we had last year, I would say, on the difference that we had, some difficult orders already in the first half year now included. So I mentioned that Asia Pacific, for example, was having or seeing a difficult product mix in the first half year. And also from the NOMA region, we had a difficult order included in the first half year already. So we see here some good potential for the second half year to do better. However, we have to — or this has to materialize. So we have to work efficient. And the question here is how possible will there be delays from supplier side, will there be people are not coming to work because of sick leaves, et cetera. This is the uncertainty we see and this is building into our guidance already. Of course, not built in our guidance would be a second lockdown.

On the other side, what we see on the markets regarding pricing is that the situation is actually, broadly speaking, unchanged. Yes. Of course, there is one or the other competitor trying to go in with a low pricing. However, we set already some new standards for our pricing and sales has to still carry out these regulations, which are very strict now and should lead to an improvement, a step-by-step improvement of our profitability. This is what we implemented 2 years ago and where we slowly see the developments and the improvements in our P&L.

——————————————————————————–

Frederik Bitter, Hauck & Aufhäuser Privatbankiers AG, Research Division – Analyst [34]

——————————————————————————–

Okay, that’s very helpful. And just to elaborate a bit on the — because you said — I remember your earlier comment, you were talking about positive product mix as well, which you think should have a positive impact from H2 this year. What does the product mix stem from? What clearly — what are the products in the order backlog that are higher margin? Just to understand a bit better.

——————————————————————————–

Sebastian Wolf, Rosenbauer International AG – CFO & Member of Executive Board [35]

——————————————————————————–

Yes. So the MENA region was, for example, recovering. We came from an environment, the MENA region made 30% of the turnover orders. We are now back to a situation the MENA region makes up, like you saw on the slides, an order intake of roughly 20% again, and that helps us because — 15%, sorry, again, so that helps us to improve our product mix because MENA region is a little bit higher priced, not only higher priced, but they are standardized, let’s say, like that. So there is not — for example, in Saudi Arabia, it’s 6-vehicle types they are selling, not more than that. So that’s better standardized, and therefore, the contribution margins are better there. Yes, that is something which helps us, also Asia Pacific. I mentioned India. This is always a very competitive market. So if orders are lower from that region, that helps us also. So that is the situation. NOMA region has a good price level. Our production site, they work very efficient. And we set up the (inaudible) production now very stable. In the meantime, this also took 2 years, but this is also something which helps us in our product mix. So this is the situation we see here.

——————————————————————————–

Frederik Bitter, Hauck & Aufhäuser Privatbankiers AG, Research Division – Analyst [36]

——————————————————————————–

Yes. Okay. Perfect. Understood. So it’s more regional mix than the product mix. I mean, that’s at least my understanding now, of course. That makes perfect sense, good.

And then a bit of a follow-up on this one as well because when I see the loss of the #1 market position to PS Oshkosh, any comments earlier because of the new CEO you have in North America, you’re trying to regain some business and market share there? How much would you be willing to sacrifice the margin for that? Or do you have — or what exactly is the strategy to regain share there?

——————————————————————————–

Sebastian Wolf, Rosenbauer International AG – CFO & Member of Executive Board [37]

——————————————————————————–

Yes. So we will not [take] margin for that, that’s very clear. John Slawson is coming from the business. So he worked for Spartan before and he also even worked for Oshkosh before, and he’s a salesperson. Our previous CEO was one of the co-owners of Rosenbauer America coming from a manufacturing or with a manufacturing background.

So what he is doing that he is — in the U.S. is working on the dealer network. And he is enlarging our dealer network. He is trying to drive the dealers actively. And with that, we are seeing possibilities. We have installed a governmental business division in the U.S. who is proactively only responsible for the governmental business. For example, we have gained a bigger order for U.S. Air Force last year, which we are shipping this last year and this year. So this is what showed already some positive effects. And we are positive that this will go on and carry on. And like I said, with this turnover of EUR 150 million, more than EUR 150 million in the NOMA region, I believe the figures for 2019 will again look differently. And for 2020, will look differently. And then it will be critical to be the one who is handling that crisis even better.

——————————————————————————–

Frederik Bitter, Hauck & Aufhäuser Privatbankiers AG, Research Division – Analyst [38]

——————————————————————————–

Okay, great. That’s what I missed. And then 2 small ones. The net working capital ratio at year-end 2020, where around about would you see that?

——————————————————————————–

Sebastian Wolf, Rosenbauer International AG – CFO & Member of Executive Board [39]

——————————————————————————–

Yes. I hope that we will also identify some projects and measures in our initiative, which show effect this year. But I believe that the majority will show effect next year then. So I would say it has to be, and it will be, of course, better than we saw in the half year figure, this is always the case. By the way, the figure looks better at the end of the year. So let’s say 45% would be a nice figure. Maybe it will be slightly above that.

——————————————————————————–

Frederik Bitter, Hauck & Aufhäuser Privatbankiers AG, Research Division – Analyst [40]

——————————————————————————–

Yes. Okay, perfect. No, that’s quite reassuring and obviously a testament to your initiatives now implemented in the first half. Perfect. The last one I had is — and perhaps you want to comment on it, perhaps you won’t. A bit of a sneak peek on your Capital Markets Day schedule. Just what are the main topics you want to talk about, if you could share. Obviously, not the whole content, but just maybe an idea so we can prepare that.

——————————————————————————–

Sebastian Wolf, Rosenbauer International AG – CFO & Member of Executive Board [41]

——————————————————————————–

Yes. So we will present the RT. So that opportunity for everybody coming, of course, that you will have the Board of Directors. So everybody will have a part in the presentation. So you will see — or you will hear from our CEO about the strategy. You will hear about from our CSO about mainly the RT, but also the situation on the market. CTO and myself, we will present these initiatives to improve working capital and this will be roughly — or this is roughly what we plan to present there. But we will also, of course, have the chance to see this new, and I think it’s really revolutionary concept or not concept, but truck, we will present there. And you can also feel, hopefully, from the clients how — because we will hand over these 3 vehicles there. So we will also get an impression how they feel about it, yes.

——————————————————————————–

Frederik Bitter, Hauck & Aufhäuser Privatbankiers AG, Research Division – Analyst [42]

——————————————————————————–

Yes, that’s perfect. I’m really excited about it. And obviously, flights are booked. So will you also talk a bit about maybe your sales ambition or your sales target for the midterm and your margin ambition as well? Or is this something you want to discuss at a later point, not then?

——————————————————————————–

Sebastian Wolf, Rosenbauer International AG – CFO & Member of Executive Board [43]

——————————————————————————–

I believe we will not be ready to do that because, I mean, we have a continuing midterm plan, but this is then also in the course of the budget process to be updated. And so the top line guidance, we normally can only give earliest in January when we are ready to have that seriously.

Thank you for participating, Mr. Bitter. And I take this opportunity to answer the question from Mr. Remis because he got that information in the meantime. So actually, the depreciation shown on this slide with the CapEx is showing only the assets and the rights we have on books, but it’s not showing the activated development cost and the IFRS 16 leasing asset position. So that’s the difference. And you can see that also in the footnote on Page 2 of our quarter report, you will see the definition of these investments and the depreciation is following the same definition.

——————————————————————————–

Operator [44]

——————————————————————————–

(Operator Instructions) The next question is from Olivier Calvet of Kepler Cheuvreux.

——————————————————————————–

Olivier Calvet, Kepler Cheuvreux, Research Division – Equity Research Analyst [45]

——————————————————————————–

Maybe just to comment on that later point. And it would be probably useful to see the overall depreciation going forward. But yes, just to comment on that.

Now I’m just wondering, as a follow-up to the questions that have been asked on your truck volumes. Could you comment on how many trucks you postponed from H1 to H2?

——————————————————————————–

Sebastian Wolf, Rosenbauer International AG – CFO & Member of Executive Board [46]

——————————————————————————–

Yes, it’s not really — I don’t really want to do that because then I can give — I would give you the average margin, and this is something we did never communicate, and I don’t want to start that now because that’s sensitive information on the market.

——————————————————————————–

Olivier Calvet, Kepler Cheuvreux, Research Division – Equity Research Analyst [47]

——————————————————————————–

Okay. Well, I tried. All right. Okay. And then I’m just wondering if you could detail a little bit what you would expect in terms of EBIT impact from COVID in H2? I mean, I understand that you worked more, obviously, in August since the planned holidays were in April. Can you comment a bit on that in terms of the positive impact from increased working times? And yes, obviously, without any lockdown or anything like that?

——————————————————————————–

Sebastian Wolf, Rosenbauer International AG – CFO & Member of Executive Board [48]

——————————————————————————–

Yes. So actually, we did not plan in some value for a COVID impact in second half year. So short term, this has run out. We don’t have any short term anymore. Our production sites are running normal now. So implicitly, this is included in this 1% range we gave as EBIT guidance. This is including 2 things. On one hand, the uncertainty on how much we can catch up. And on the other side, of course, there could be some smaller effects coming from COVID again. This is included in this range. But we did not go in with a certain number there because we don’t see it necessary now. We see production sites fully filled. With the order book, we have the possibility to work that, to work on these orders without any delays or disruptions. If there would be some, this should be covered in smaller bonds, but it’s 1% range of the guidance.

——————————————————————————–

Olivier Calvet, Kepler Cheuvreux, Research Division – Equity Research Analyst [49]

——————————————————————————–

Okay. And then maybe just for a bit of granularity. Can you remind us how long your production was stopped in terms of number of weeks in H1?

——————————————————————————–

Sebastian Wolf, Rosenbauer International AG – CFO & Member of Executive Board [50]

——————————————————————————–

Yes. Production, that was not the full production, I mean, we put forward the company holidays. So 2 weeks company holidays, it was fully stopped, which was normally planned in August. And then we had part of the production stopped for another 4 weeks. Part of the production stopped for another 2 weeks. And part of the production stopped for another week. And then, first of all, the prefabrication was running up. So some production and preset and then certain pump lines were running up again. And at the end, the final assembly lines were running up again. For example, the handover area was functional the whole period. Pump testing was also working for the whole period. So it’s not that we closed down everything for a certain period of time, that was only these 2 weeks. And then we run through a step-by-step ramp-up again after that 2 weeks of company holiday.

And on the other production site, we had — it’s only small production sites, which were affected. We had some — a lot on government lockdown for 1 week in Italy, for 2 or 3 weeks in France, for 2 weeks in Spain, but that’s anyhow only small production sites. So unfortunately, there is no very clear answer to that because — simply because that was different from production site to production site, but also from even the parts of production in our main production site in Austria.

——————————————————————————–

Olivier Calvet, Kepler Cheuvreux, Research Division – Equity Research Analyst [51]

——————————————————————————–

Okay, understanding. But just focusing on Austria, perhaps could you — I mean, I understand what you’re saying with the end of the short-term work program. But if that should resume, I just want to try to get some color for how long, on average, would you say you got money from the Austrian state for your Austrian plant shutdown?

——————————————————————————–

Sebastian Wolf, Rosenbauer International AG – CFO & Member of Executive Board [52]

——————————————————————————–

So we have the short work was for 3 months. But the shutdown for the local production in Austria in average was, I would say, 1 month, whereas half of it was a company holiday and half of it was short work. So 2 weeks company holiday, 2 weeks in average short work in Austria. And the short work period we applied for and we then do was 3 months because in this concept of short work, you can start with a lower percentage or at actually with 0, you could start 0% in the beginning because they are not necessary to protect also employees, protect health of employees and then we started again and went through — started again step by step. But in average, you can take 1 month for a production site in Austria.

——————————————————————————–

Olivier Calvet, Kepler Cheuvreux, Research Division – Equity Research Analyst [53]

——————————————————————————–

The EUR 3 million contribution you got was so — was for essentially 1 month or…

——————————————————————————–

Sebastian Wolf, Rosenbauer International AG – CFO & Member of Executive Board [54]

——————————————————————————–

Was for 3 months, 3 months and this also including like I said, for the indirect people because also the office workers were on short term, and there, it was different. They went department by department with a certain percentage in from month-to-month, and that’s then calculated from the actual working hours. So that’s quite sophisticated, unfortunately. But for example, I can — we are — controlling department was on 70% short work and treasury was accepted from short work. So this is how you can — then that’s why it’s very difficult, unfortunately, to calculate that. But on this 3 months — EUR 3 million, it was more or less half and half employees in office and workers on the workshop.

——————————————————————————–

Olivier Calvet, Kepler Cheuvreux, Research Division – Equity Research Analyst [55]

——————————————————————————–

Okay, okay, okay. Switching to another topic. Could you — so in APAC, could you explain again what’s happening precisely with the reorganization you mentioned about in China?

——————————————————————————–

Sebastian Wolf, Rosenbauer International AG – CFO & Member of Executive Board [56]

——————————————————————————–

Yes. Unfortunately, I always mix it up. But before this change, the military or the Ministry of, I think, Defense was responsible for the firefighters. And now the Ministry of Interior is responsible for the firefighters. So these governmental authorities set the rules for the procurement of fire vehicles as well. They are responsible for the firefighting. Now it’s the Ministry of Interior, and it takes simply some time for them to work into that new field there. That’s public officials who have to now work themselves into this new subject there because they were not — they are managing fire brigades before. And now they’re responsible for that and this simply takes some time. That had some influence on the import of vehicles also because this is, in China, very much restricted. We have a so-called CCC certificate where we have to fulfill certain technical standards, and we have to apply to get the import license for our vehicles to China. And there were some delays simply because the responsible was changing and some vehicles could not be imported on time as originally scheduled.

But the overall organization is responsible for the management of the firefighting in China and this simply changed. And China is a very, of course, also a bureaucratic country, and therefore, these new public officials have to work themselves into this new subject and this is taking place at this very moment.

——————————————————————————–

Olivier Calvet, Kepler Cheuvreux, Research Division – Equity Research Analyst [57]

——————————————————————————–

Okay. Understand. And then you were talking about India. Just wondering if it’s possible. I mean, this is a bit news flow related, but you’ve seen this sort of crash of a plane in India last week or so. Is it possible that you might be too bearish in terms of the willingness of local officials to order trucks for airports?

——————————————————————————–

Sebastian Wolf, Rosenbauer International AG – CFO & Member of Executive Board [58]

——————————————————————————–

Yes. So actually, the Airports Authority of India is one of these 2 bigger tender processes, which are running at this moment. And I hope that actually such happenings will speed up the process. Like I said before, that’s really, yes, something which is hard to foresee for us. Unfortunately, that can happen very fast or can take longer. And this is daily work of our sales department. And the dealer, of course, to work with that client and to focus on that, the dealer is aware of the situation, of course, because he simply did not hand in any warrant this year so far, so he’s working hard on that. But yes, that’s what I meant. It’s hard to foresee that. However, we hope that there will be something quite soon.

——————————————————————————–

Operator [59]

——————————————————————————–

The next question is from Sebastien Hoyez of Quaero Capital.

——————————————————————————–

Sebastien Hoyez, Quaero Capital SA – Fund Manager & Research Assistant [60]

——————————————————————————–

Wonder if you will give more color about the new Concept Fire Truck during the official presentation in September. Could you address to understand the size of the addressable market for this truck? You mentioned that the target growth is bigger cities. And also, could you help us understand if bigger cities is currently one of your stronger start to weak start? Or what’s your market share in this specific area?

——————————————————————————–

Sebastian Wolf, Rosenbauer International AG – CFO & Member of Executive Board [61]

——————————————————————————–

Yes. Sure. So we believe the market will be 3,200 vehicles of that kind running until 2030. This is a market service. It is when we started with that concept. So in these 10 years, we believe that 3,200 of such vehicles will be sold. That will be an increase year by year. So we believe in the beginning, that will be quite lower number. I mentioned, we believe, 10 to 20 units we will ship next year. And then the volume will increase until 2030. Then we also see that, of course, competition will provide some similar products as we think. And yes, regarding the bigger cities, you saw on the slide, we mentioned Berlin, Amsterdam, Dubai also and L.A. as the ones who bought this unit already. Berlin and Oslo have and Dubai have been already our clients. Amsterdam and L.A. are new clients for us. At this moment, we are not so much in the bigger cities like one would expect. for example, in the city of New York, there is one local manufacturer who produces everything their vehicle for the city of New York. So we really believe that with this truck type, we can attract new customers. Let’s say, maybe 2/3 of clients will be new customers, maybe 1/3 will be existing customers as a rough estimate. We mentioned on the slide also pre-reservations from Vancouver, Las Vegas, Portland and Canberra. We don’t have any vehicles in one of these cities at the moment. So this shows that we believe that we will gain market share with this new product.

——————————————————————————–

Operator [62]

——————————————————————————–

There are no more questions at this time. I hand back to Sebastian Wolf for closing comments.

——————————————————————————–

Sebastian Wolf, Rosenbauer International AG – CFO & Member of Executive Board [63]

——————————————————————————–

Yes. Thank you, everybody, for participating in our conference call today. Like always, you’ll find the presentation on our website. And if you have questions in the meantime, please don’t hesitate to contact our Investor Relations team, Tiemon Kiesenhofer and Julia Kronschläger or myself. Thank you for participating, and have a wonderful weekend.

——————————————————————————–

Operator [64]

——————————————————————————–

Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for joining, and have a pleasant day. Goodbye.