Aalberts N.V. (AALB) Q2 2026 Earnings Call Transcript

good morning everybody welcome at our first half 2026 results presentation it's great to see so many of you joining today's webcast i'm happy to introduce our ceo stefan simonetta and our cfo france den houten stefan will kick off the presentation with some business highlights this will be followed by france who will share an update on our financial development stefan will then share an update on our strategy in action and provide an outlook for the remaining of the year 2026. After the presentation we will give you the opportunity to engage directly with us in a Q&A session. Please note that after the presentation both the presentation and the recording of today's webcast will be made available on our website. Please welcome Stefan to begin our presentation.

Thank you, Rutger. Let me start with our key messages. In the first half of the year, we report positive organic revenue growth in our three segments, and particularly in Semicon. We also report an improved EBITDA margin in our three segments. And you can see the strong contribution of all the portfolio update that we have done last year with our acquisition and our divestment, which are all contributing positively to both growth and margins. And we continue to see positive and market dynamics based on our good position at Albert's aligned with four compelling global tailwinds, being urbanization, technology acceleration, reshoring and decarbonization. So in a nutshell, we improve our performance, We are rebalancing our portfolio, and we continue to see positive market momentum. Going into the numbers, we are reporting 1.5 billion euro revenue with an organic revenue growth of 5%. Our EBITDA margin is 225 million euro, equivalent to 14.4% of revenue. And another solid free cash flow with €89 million, with an earning per share improving to €1.47. So improving organic revenue growth, improving EBITDA margin align with our outlook. Now, going to the operational development. As I mentioned, we continue to be well positioned with these four global tailwinds. And urbanization, where we still see more and more people in the future that will need to live in residential, in commercial building. And it's all about comfort and energy efficiency. And that's where our portfolio is so relevant. AI adoption being used in more and more applications is driving a very high growth in semi-con equipment. And we are also well positioned into that trend. The reshoring trend continues. You produce in Europe for Europe customers, you produce in North America for North America customers, and you produce in Asia for Asian customers. That's also our strategy and our footprint is well aligned to these trends. And at the end, we still believe in the long term energy efficiency driver across all the end market and across all geography. So we are well positioned with this long term growth driver. Looking at the first half of the year, you see the breakdown of our revenue by segment, by geography, and you see also that we continue to be well aligned with the sustainable development goals. The key change compared to last year is that now you can see the weight of Semicon is also increasing, representing now 21% of our revenue. And you can see on the geographical side that Southeast Asia is now a bit bigger, especially after our acquisition of GBT. And you can see also in North America, we continue to make further progress, aligned with our long-term ambition to double our revenue in this part of the world. So, attractive market, and we have a good and strong ability to achieve leadership position. Now giving you an overview of our performance by segment. In building, 2.9% organic growth, 13.5% EBITDA margin, improvement compared to last year. In industry, 6.4% organic growth, very strong quarter, where here we are actually doing a bit better than the market, with 18.6 percent EBITDA margin, which is basically the best proof about all the action we took last year, continuing to invest in organic growth initiative, in operational excellence initiative. And in Semicon, we are very pleased to see an accelerated growth. Our Q2 has been very strong, and as a result, we are pleased to report 9.2 percent organic growth, equivalent to 14.2 percent and now we see the strong dynamic in both our front end but also back end so as i mentioned improving in our three segment let's go now one by one with a bit more details by geography product line and end market so building first as you can see q2 was actually a bit better with 4.4 percent organic growth and it's a mixed picture in the geography strong in US, mix in Europe, as on one hand we continue to see positive momentum in Europe, in Benelux, in the Nordics, an early sign of recovery in Germany. But on the other hand, France, UK, East Europe remain challenging. And Middle East is still a big uncertainty. In the first half, we couldn't simply ship anything to our customers, and we are looking closely about the situation by technology very strong momentum on the valve very high order book in all our ballroom technologies and a more stable activity in our connection system link to the residential building activity which we also see stable and on the other hand we continue to see very high order book in data center and commission building and talking about data center let me highlight one example of the many things we do you can see here a picture of our stainless steel air separator that is used actually in data center cooling solution and this is our own ip our own design and what make us win is actually our speed to market we have been very fast to go from prototype to mass production to support the increased need of our customers going into industry very pleased about the results i think our team have been doing a fantastic job and you see that our organic growth it's much higher than most of the industrial index seven more than seven percent organic growth in the second quarter after already a first quarter and this is a result of all our organic growth initiative our geographical expansion of business development initiative and we see also here strong dynamics continued strong dynamics in aerospace in power generation in defense and more stable activity in automotive and general industry and an example i would like to highlight is that we continue to invest in in technology i think we are pleased to now have put our second hip vessel in eindhoven where here it's all about removing the defect of all the parts improving the material characteristics and with our hip vessel we are putting some parts up to 2,000 bar in order to improve the material characteristics and the strength of all the components we treat. And the good news is we see more and more demand from our customers about this type of services. In Semicon, very strong dynamic, very healthy order book. And it's actually a bit better than what we expected because we already saw a huge organic growth with more than double digit 16% organic growth in the second quarter we were more expecting that in the second half and it came earlier so we are our team are really doing a great job to manage the volatility and the different dynamic of the end markets so strong in front hand strong also in backhand gvt is already contributing positively to both organic growth and margins and we continue to invest capacity our greenfield factory in dronton is in the final step and we are ready for the huge jump up coming in 27 and and beyond also adding capacity in southeast asia as we see more and more demand and requests from our customers so great dynamic overall all driven by ai adoption in more and more application but innovation is also key and i would like to I'll add just one example with a robotic system we are doing for the Somycon industry with our pre-aligner, with our own design, our own technology in order to move wafer in a very accurate way. So just to allow that innovation remain at the core of what we do, especially in this segment. And as a last point regarding our operational development, I'm also pleased to report that we continue to make further progress with our sustainable commitments more than 70 percent of our revenue linked to sustainable development goals and also now making an additional progress in our scope one and scope two reduction with more than 6.6 percent reduction compared to last year so on track with our sustainable commitment so that's what i wanted to say regarding our operational development so let me now hand it over to france to give you an update on our financial development france thank you stefan and good morning everybody and happy to talk you through the first six months of this year and show you the these four important kpis first of all

revenue our organic revenue growth improved with five percent you see very clearly also in each segment we had nice step ups this all converted to an ebitda margin of 14.4 percent 225 million which is a 15 million up year on year also nice to see added value in a solid place 65.5 percent net profits seven million up bringing us 158 million in in net results capital expenditure you see a step down of more than 30 million basically that's all phasing we will see the reversal of this in the second half year as we have a bit of timing effects in our capital expenditure programs so the full year guidance for capex to be on around a level of last year 190 million is still firmly in place free cash flow improved nice to see 30 in a row small steps up in the mid-year free cash flow bit more better balance in the year driven also of course supported by the lower capex and predominantly the abida which is also supporting this number then the networking capital was a cash out so all in all solid performance in the first six months if you go to revenue we see nice contributions of our three acquisitions we added geoflow paolo and gvt to the portfolio and you see 135 million step up in revenue the divestments of brun and materly and the reduced shareholding in khan brought to the number 278 million negative correction for the divestments and also a negative impact from forex 21 million good to see the five percent organic revenue growth driving our absolute revenue with a plus of 68 million so on the revenue side the good set of numbers to go to the abita the acquisitions we just mentioned 24.4 million if you do the numbers that's more than 18 percent abita on the companies that we acquired in the past 12 months on the divestments a negative of more than 15 million that is a little bit over eight percent so 18 on the acquisitions and eight percent on the divested companies small forex 2.8 a million effect and then the organic EBITDA contribution was more than nine million so good to see there also being back to growth but also a positive impact on the EBITDA from the hard work by our business teams on driving our improved revenue to a 9 million plus 225 million i repeat 50 million up versus versus last year on the free cash flow of course we see again the EBITDA and the capex effects contributing positive on the working capital six months rolling we lose 25 million year on year small plus in the in the other is mostly provisions and timings, almost $8 million, and then a nice $80.8 million, a step-up of $13 million. The EPS, very important slide. Nine cents improvement in the first six months, driven by the M&A portfolio. You see a plus 18 on the acquisitions and a minus nine cents on the divestments. That comes, of course, with financing costs, a little bit of a tax impact, negative one-off element there from a divestment, a little bit of forex impact, And then really nicely, $0.05 improvements from our organic performance and $0.03 improvements for the share buyback program. And this year, share buyback program, we're halfway through the scheme, so still continuing that. And for now, we report a $0.03 improvement to 1.47 earnings per share. Then we go to the segment reporting. And Stéphane already talked you through the revenue and the EBITDA effect. You see the CAPEX added here. Yeah, no surprise. The total capex was down. You see that here as well in each segment. But that will reverse in the second half. Specifically in industry and Semicon, we will see a step up as we complete some of the divestment programs that we have ongoing. In the third column, we added holding eliminations last year. So you see also now again 13.6 million reported, 3 million up versus last year. Some small effects in there. And I think all in all, growth and operational excellence driving improved profitability in the segments. Exceptional cost, yeah, we normally report this only at year end. We decided to also show this half year, improved transparency. A small number here for the first six months, 3 million, mainly or fully related to our projects to leave Russia. Some progress there in the first six months. We're still continuing that. We hope to finalize it this year. and we already mentioned in the annual report that the total exceptional cost expected for this year will be around 25 million mostly non-cash and that guidance we still leave in place so there's expected to be more to come in the second half and then let's go to the balance sheet a resilient company with you see on the right top equity and solvency in a good place On the left top, the debt has gone up. Of course, we drive the M&A year on year. Our ratio is still 1.9, same as it was at year end. But yeah, versus 12 months ago, it went up because we increased debt to drive the M&A portfolio. At the left bottom, you see our capital employed. Still same level as last year. Small step back on the road sheet, but that's a 12-month rolling number. So I think better to deep dive on that at a full year again. And, yeah, very nice to close off, I think, with the net working capital, $62 million lower. That's a two-day reduction. Yeah, it's inventories went down a little bit, our receivables as well, and we made a step up in payables, six days in total, also driving the growth of the company, and that's really increased purchasing. So no payment stretch there. So strong balance sheet in supporting our strategy. And, yeah, to give you a bit more insight how we are driving our strategy, I give back the floor back to Stéphane to tell you all about strategy in action, Stéphane.

Thank you, France. So you have seen how did we perform in the first half of the year. Let's see now how did we thrive in the first half of the year. And as you know, 2026, it's only the second year of deploying our Thrive 2030 strategy. So you have seen how we continue to be well positioned with these four compelling global tailwinds. We continue to rebalance our portfolio across our three segments, across geography, across end market application, with our organic growth and our portfolio update. So let me give you a short update, as you can see on the right, with our four strategic priorities. And I'm pleased to report that actually we made good progress in our four strategic action in the first half of the year. driving organic growth, optimizing our portfolio, the Albert's Way being our operating model, and then further progress in our sustainable commitment. If we start with profitable growth, I think one of the key examples is the very strong momentum we see in data center, where our order book is increasing month after month thanks to either our flow control and boiler room technologies, either with our engineering system and prefab solution but also with our connection and piping system. And we are well positioned in both the primary loop and the secondary loop for the cooling system and solution of the data center. We see more than double-digit organic growth and this is all for our building segment. Today it's only roughly 2% of our revenue but we see a very good expansion in the coming months. And what makes us win today is our global offering and also our speed to market. We are quite good to go from prototype to mass production. And as you know here, speed is of the essence to support the accelerated growth, especially in North America. Another great example of driving organic growth is our geographical expansion we are doing in our industry segment. You see here four examples of either greenfield or capacity expansion in Netherlands, in Mexico, in France and in Hungary. This is driving organic growth and this is a result of all the investment we have done over the years. And we see more and more demand for our services, either with e-treatment or surface treatment, in aerospace, in power generation, in defence, but also in automotive, like in Mexico and Hungary. In Semicon, we are investing for the future. The growth is there. The Semicon industry remains very strong. And I'm pleased to report that we are ready for the growth. Very soon, we will start a ramp-up operation in our Dronten factory in the Netherlands, where we expect the ramp-up in 2027, mostly for lithography systems. And in Southeast Asia, we are adding capacity in Penang, in one of our factories, to support also the increased demand from the back-end customers. So, preparing for the long-term growth. On the portfolio update, just a reminder that we are well on track. We did four transactions on the divestment, mostly in our building and industry segment, and we did four transactions on acquisitions in our building, industry, and semi-con segment, and we will continue. We have an active funnel. We still have the same M&A criteria and the same priority also with our divestment program where we expect to make further progress in our building and industry segment. So continuing to rebalance our portfolio in order to have attractive EBITDA margin and organic growth update. One example of the Albert Way, it's the operational excellence that we continue to drive, making further progress also in our albert's production system and it's all about footprint optimization about inventory optimization driving production efficiencies in our factories and also optimizing our asset utilization in order to have a better capex intensity most of the driver today are within building an industry segment but also semi-con is becoming more and more relevant as we see this huge growth so an opportunity also to safeguard of our margin so continue to drive operational excellence so now time to give you an outlook and to be very simple we are confirming our full year outlook with improved organic growth habitat margin compared to last year because the market dynamics are similar with what we shared in our full year result building remaining a mixed picture strong in us more mix in europe middle east remaining a key question mark are we going to be able to ship but also what will be the indirect impact and when you look at the product line strong on valve strong on hydronic solution strong in data center and commercial building and more stable in residential building and some geography industry we expect similar trend in the second half, mostly driven by our own initiative, but also continued growth, aerospace, defense, power generation, and more stable activity in automotive and in general industry. And in Semicon, we are actually satisfied to see actually a higher growth than expected. We expect similar organic growth as in the second quarter, in the second half of the year and we continue to invest the capacity in order to support the demand increase as we see more and more capacity requests from our customers in both front and back end so based on this and market dynamic we are pleased to reconfirm our full year outlook so let's wrap up before opening the q a so as you have seen our first half of the year 2026 we are pleased to report improve organic growth and EBITDA margin in our three segments. We are entering the second half with positive momentum and a very healthy order book. So as a consequence, we are confident to deliver a full-year outlook with improved organic growth and EBITDA margin compared to last year. You see that our portfolio rebalancing is well on track and all our integration plans are progressing well. And we continue to deploy our capital allocation according to our policy, first returning dividend to our shareholder, investing for our business to drive profitable organic growth, doing accretive acquisition, and continuing our share buyback program. So, at the end, I'm really pleased with the first half performance. And also, I want to acknowledge the resilience and commitment from all the Albert teams. you can see that first half shows the strengths of our diversified portfolio and you can count on us to continue to discipline to execute in a disciplined way our thrive 2030 strategy thank you as we are starting the Q&A session I'd like to remind everyone how to join the queue for conference call participants please press hashtag five on your phone to join those tuned in via the webcast

please submit your questions via the q a form i would like now to give the word to martin and driver from abn amro for the first questions good morning martin good morning and also good morning to stéphane in france of course morning morning i have three questions and i'll take them one by one please um what was the reason that the building division despite uh four and a half cent organic growth in q2 so decline in a bit a margin year on year and quarter on quarter can you elaborate a little bit on that development maybe you want to ask this free question and

then we go one by one i'd like to go one by one page okay so a few comments uh you are right uh first of all and uh i will mention three main reasons first of all we have had some challenge in middle east where we simply couldn't ship any goods so we have also more inventory but our invoicing has been nil in the second quarter for the building segment second I think, as we mentioned, we continue to see a challenge in our connection system, especially in Europe, due to the low activity of the residential building. And then we have also some one-off costs, especially in this segment. So that's the three main reasons where it's a bit lower than expected in the second quarter.

And that one-off element, is that a material amount, low single-digit millions? that maybe yeah yeah low single digits i would i would put a number like that on okay thank you i'll move on to my second question um semi-con obviously had a blowout q2 i already mentioned that 16 organic growth an ebit margin of close to 15. how should we think about h2 and 2027 given the positive statement from asml on the front end and base here on the on the back end and also your own statements in the presentation, a further acceleration. Does that imply that we should think double digits in H2 and perhaps even high double digits in 2027?

I think you mean the second half 26, right? That would be my assumption.

The H1 2026 was almost 16% growth. You mentioned positive statements from a further acceleration is expected. We know the statement from ASML and Basie. So how should we think about H2 2026 and 2027?

First of all, you are right. And let me confirm that, indeed, the second quarter organic growth with 16% in our semi-con segment was higher than anticipated. And actually, we can confirm that we expect a similar trend in the second half as in the second quarter. So a 15% organic growth continuation in the semi-con. and we are also quite confident for 2027, but you should expect a second half organic growth similar to the second quarter for a semi-con segment.

Martijn, are you still there? Because you had a third question. I think that we lost, Martijn. Yeah, the connection is gone. But we have some good backups. So David Kerstens from Jefferies, perhaps you can also ask some of your questions. Good morning, David. Good morning.

Good morning. Good morning, gentlemen. I hope you're well. Two questions from my side, please. First, on the industry segment, you said momentum in the second half in line with the first half, which was very strong, right, and accelerating to 7% in the second quarter, despite the impact of higher energy prices and despite the impact from the increasing pressure on the German OEM car industry. What is the impact of those two factors, the higher energy prices on the organic growth? And how do you see the increasing pressure on the German auto industry impacting your industry segment growth? And also margins seem to have reached a new level following the divestment of Broome at 20%. Is that a sustainable level going forward? And maybe a follow-up on Semicon growth. Very clear guidance. But I think in the fourth quarter, you will have also GVT coming into the organic growth for two months. And from what I understand, GVT is growing more than 20 percent or 25 percent. And can you give an indication what the exact revenue contribution was of GVT in the first half of this year? Thank you very much.

Thank you, David. And let me do a first few couple of answers. So on the industry and the price increases that we saw in the first half, I think, first of all, price increases, be it from energy or from raw material increases, we are able to price that on really well to our customers. So pricing excellence is there. And I would say in the mix, the total impact, 1% to 2% on pricing with inflation in there, is, I think, a good proxy. So you can see that the organic growth really driven from the volume is very strong. And as we said, we give no specific organic growth expectation for the second half. But in The Voice, it's pretty clear we expect that to continue. And then on Brun, so you ask a little bit of guidance on the EBITDA levels for the second half of the year. Yeah, of course, the impact of Brun is positive. You can see that also in the waterfalls we just showed you. We give those guidance overall over the whole portfolio. So no specifics there. But of course, in the second half, this will continue to have a positive impact. And then on Semicon, yeah, very clearly, GVT, organic growth in GVT, you can deduct from the Semicon numbers, and we acquired this company at a revenue level of 107 million. Yeah, if you do the numbers now, you see quite a significant step up. And indeed, we don't give guidance and expectations on an individual level, but from October onwards, GVT will be added to the organic growth calculation, calculation and that of course will also help the semicolon number there yeah thank you very much perhaps and the 20 percent in three in the second quarter that is a new new high for industry right now the new sustainable level following the divestment of prune now so we only give guidance on the company level as as you know so we i try to give you a bit color where we are and i think also from the voiceover of Stéphane. Clearly, per segment on building an industry, we expect the second half to be continuing at what we see in the first half in general terms. And then there's the guidance on a company level, and that's where we leave it for now.

Thank you very much.

But I can understand the question.

Okay, thank you. I would like now to give Martijn Drijver the opportunity to ask his third question, because I see that you are back in the queue.

So, hello, Martijn. do you hear us no we lost him again so now i'd like to give the word to christophe samua from kbc hello good morning christophe yes good morning good morning a few questions if i may first of all just as an observation looking at the organic revenue growth and the organic EBITDA evolution in your waterfall schemes. Could you comment on the drop through which we can expect going forward because it's in the first year half it was well below 25% and then we in terms of the inventory we typically see a seasonal update going from year end into first year half but we've seen considerable growth in industry um in the first year half we also see considerable growth in in in semi-con there have been already some optimizations in building um could you detail maybe what the impact was of the middle east on the days of the inventory outstanding And then finally, just on Semicom again, to make it clear, you expect similar growth in the second year half as you have seen in the second quarter. So that means that quarter on quarter, you're not expecting any significant uptake in growth in Semicom anymore. Thank you.

Thank you. Let me maybe start with the last one, and then I will let France answer your first two. So you are right, and I confirm that you should expect an organic growth in the second half of the year for the semi-con segment aligned with our Q2, which was a bit more than 16%. so that's what I can confirm knowing also in Q4 like Iswa said I think earlier we will also add GVT in our organic growth reporting numbers Yes and let me come back on your first question on the drop through and that's a good observation because normally you would expect a drop through to be of a higher level it's 9 million, we're happy with positive organic growth, we're happy with a positive EBITDA contribution organically but

it should be a bit higher, basically three reasons the holding elimination cost that went up with three million year on year that's holding us back a little bit um and then we have as stefan in the introduction also shared in building uh yeah we we see lower profitability because connection systems uk market holding us back and also the middle east so those effects uh yeah hold back a little bit to step up in organic, which we will work further on, of course, in the second half of the year. And then you also asked about the impact of the Middle East on inventory. That's also indeed one of the drivers there. I would say single-digit euros as an indication. So single-digit million euro impact on the inventory from Middle East. Thank you, Frans.

If I may just follow up on building building you mentioned the UK situation but you've recently took some action in Doncaster what what what what is the the reason that the situation there remains difficult or is deteriorating could you provide some more color there it's it's more the market the market trend and especially in the residential building where we don't see, I think as per our guidance, a flattish market.

And this is where also we have our biggest exposure with our Connection System portfolio. So that's the two element, market, trend, residential and product line exposure.

Thank you very much.

Thank you, Christoph. I'd like to give the word to Luc van Beek on the Groove Peterkam. Good morning, Luc.

Good morning. Good morning, Luc. Yes, good morning. First of all, a question about buildings. Do you see any support of the higher energy prices in the efforts to reduce dependency on fossil fuels? So maybe more demand for heat pumps and things like that. And secondly, on buildings, how do you look at your portfolio? You mentioned a couple of challenging areas. Do you think that's something that's just cyclical and will improve over time? Or do you think some adjustment in the portfolio would be needed to optimally position for future growth?

Yes, I think we mentioned it. Let me repeat, because we start to see, you could say finally, some early sign of recovery in Germany driven by higher demand of heat pumps. All the indexes that we see are quite positive. we don't see it yet in the short term but this gives some hope that the situation will improve maybe in the second half but also in 2027 but as you know there is a usual disclaimer about the government incentive what will the German government will do to continue to incentivize the demand for house and homeowner to go for heat pump so start to improve let's see but it's I think compared to the previous year, a bit more encouraging. And the second point, I will say, it's a continuation. We are still, first of all, doing very well in our valve business, doing very well with a very strong order book in our borrow room situation, also doing very well in North America. And we continue to see markets stable in residential in Europe, especially, I think, we talk about the French market, the UK market, East Europe. And then we are challenged in terms of performance still in our connection system. So we still have the same strategy in terms of portfolio optimization. And we are not done in both our acquisition and our divestment. And indeed, we still have further opportunity to optimize our portfolio in both building and industry segment also, where we still have opportunity to do further divestment. Thank you.

One further question, if I may, on automotive. We see some mixed signs on the one hand, obviously all the restructuring in German automotive, but also pickup and new car registrations. Do you see any signs of improvement after the stabilization that you're already?

Too early to say. We see the market still stable. And if yes, you can see some reports of some index showing one to two percent growth. But for us, we're still more stable activity. But what I think is more important is that we are doing better than the market with our own initiative, with our geographical expansion. So in the first half, we have actually grew a bit better than the market, also with our exposure in automotive. Thanks, for example, to the opening of a factory in Hungary, in Mexico. So we are able to grow a bit better than the market. But to answer to your question, we still more stable activity in the second half.

Thank you. Thank you, Luke. That's still a nice cue. And I would like to ask Ruben De Vos from Kepler Chevreu to also ask your questions. Good morning, Ruben.

Hello. Good morning. I have the first one regarding Semicon still. So that's helpful for the H2 guidance. But just thinking about your visibility, how far forward it could stretch, maybe compared to what it was a year ago. I'm just thinking of the prior upcycle, right, during COVID, where you were also talking about quite long visibility. I think it was 12 to 24 months at some point, but then we had quite a drastic turnaround late 2024.

So just wanted to hear a bit your sense of, yeah, the visibility you have, the firm commitments you basically get from your customers um and how that might be different from from the prior um upcycle let's say um yeah let's start with that one yeah i think you you are right we i think we also mentioned it we have a very strong order book and we have more and more demand for product and solutions and the good news is we see that not only in europe with a very strong exposure to the lithography but also now in Southeast Asia so both in front and back end and not only our order book is very high but we see more and more capacity requests coming from our customers so we are doing a lot of scenarios how could we do more and that's not for the short term i think we are quite confident for second half or 27 but what could we do more beyond 2027 and the good news is we are ready with our footprint expansion with our new factory we will be ready in 2027 with our new factory in Dronten we are adding capacity in Southeast Asia in Malaysia very promising, very strong let's see how the second half will be and then it will be the time to give a new outlook how we see 2027 Ok, thanks very helpful a follow up on that actually

I mean, CapEx fell almost 30% year over year, but you still have those, you basically have the accelerating semi-con cycle, right, and then two capacity projects running in parallel. Is that CapEx basically just a matter of timing, or does it reflect maybe a structural shift towards serving the upcycle with less capital than the previous one? and you of course have the return capital employed at 12.5 percent basically for this new project in drompton and malaysia um what is sort of the yeah the hurdle rate you're looking for here um yeah so so thanks for your question so maybe a few elements so first of all uh the the phasing within the year and also explained in the in the intro but let me repeat we have 71 million of capex in the in the first half year which is relatively low so we really expect a lot

of additional capex to materialize in the second half and dronte is a significant element there where we are preparing the finalization of the the project and the startup of our factory total guidance for this year also again repeating it but good to stress it out 190 million which is in line with previous year in indeed an area where we are spending more capex than we depreciate so we're investing in the company we saw that in building we keep seeing that in semicolon and we are still specifically in or we doing it in industry and specifically in semicolon for this year we see some significant numbers and and and we will keep on doing that because we will keep investing if we have good opportunities organically to drive new projects we will keep investing and i think the market confirms also uh that that we have good opportunities to improve the company performance based on that and then of course there's the rochi where indeed year on year the 12 and a half percent it's a little bit lower that's a rolling number so we need to take a long perspective on that yeah the guidance we gave and then we go back to the capital markets today is basically on roichi in the longer run where we want to be above 18 percent in 2030 so that's a number that's clearly in our minds on where we want to go but that is roichi guidance not rochi i hope that helps okay thank you yeah that's that's great and just the final smaller question

um regarding the data center opportunity right so i think it comes up in building every quarter now um but we never had that really sized right so is it is it large enough now to move the divisional growth rate on its own um and how does the the margin um for that activity compared to basically your traditional residential and commercial mix.

Thank you. Let me repeat because actually we started to size it. Today we have disclosed that it's roughly 2% of revenue of our building segment. And we see an addressable market of 1.5 billion. And we have an order book increase in and we expect double digit organic growth, especially in North America. So that's the first sizing we have done, and count on us, I think in our full year result, to give you a bit more transparency. I can only tell you that we continue every month to win orders, and I'm really pleased with the work by our team, especially in North America. I mentioned a few examples in the presentation, and it can be on our stainless steel ball valve, it can be on our air separator also stainless steel, And we do that with our own IP, our own design, and we are super good to ramp up. And I think that's what, as a data center owner, they are looking for. They look for global companies that can ramp up, that can provide quality. And I think this is where Albert's offering is quite unique. So promising, still a small number of our building segment, but I look forward to share more in our full year result presentation.

All right. That's great. Thank you very much for your comments.

Thank you, Ruben. I'd like to give the word to Rajesh Patki from Barclays. Good morning, Rajesh. Good morning.

Yes, good morning, all. I've got three questions, please, if you don't mind. You can go one by one. First one is on the Semicon business. Thanks for the top line guidance for strong growth there. I guess the next question on that would be, how should we be thinking about the incremental dollar of revenue dropping down to EBIT A? And just to follow up on that, you talked about capacity addition for this business. Once that is complete, will you be in a position to service a 20 to 30 percent demand CAGR over the next three years, or will you need to add more capacity? That's the first question. Thanks.

First question, as you know, we don't provide outlook by segment, right? So I think here we are pleased first to have improved a lot, I think, in the first half compared to previous year, our EBITDA margin. I think it shows the strength of our portfolio. And we are focusing now to support the high demand from our customers, but also adding capacity, adding cost in our operations, in our capabilities. to support the growth. Because, as I mentioned, we see the similar growth in the second half, but we are getting capacity requests without order from our customers. So I think our biggest customers have made it public. They expect 30% growth this year. They are asking their supplier to be ready for 30%. So work is in progress to ensure we don't miss the upturn. But so far, I can confirm that we have our capacity plan well aligned with the demand increase from our customers.

That's great. The second question is on margins. The added value margin has grown more than 200 basis points in the first half year over year. Can you talk about what has driven that and do you think that is a sustainable level going forward? and follow up on that as well. The EBITDA margin has grown only by 90 basis points. Is the difference between the two related to fixed cost investment in the Semicon business?

Yeah, thank you. Good observation and indeed a good step up in our added value. In all honesty, there is also positive contribution from our M&A that we have done, so the mixed effect. Specifically, if you look at the divestments that we've done in industry they typically carried a lower added value however also very good pricing discipline so we saw price increases on raw materials on the energy general cost increases and we were able to price that on really well to uh to our customers i think yeah as a guidance we have a target to be around this level so uh we want to sustain uh this this number so so that's why we keep on also executing the pricing discipline and making sure we we drive towards that number And then I think on the EBITDA, I think your question was, I think more on the drop-through again. Can you repeat exactly the point you were asking?

No, no, no. I just meant the added value margin was up more than 200 basis points, but the EBITDA margin was up 90 basis points. The lower improvement in EBITDA margin, is that related to fixed cost investment in the semiconductor business or is there something else?

No, and that's why we said this goes back to the drop-through. So we saw the holding elimination cost, the margin in building specifically at the Middle East and the UK connection systems that Stefan commented on, holding us back a little bit. And that's the reason why you see the added value, not one-on-one translated into the margin.

Got it. Thank you. And lastly, on M&A, can you talk a bit about how your pipeline is looking? Are you focused on any specific regions or businesses? And do you see much opportunities on increasing the scope for your Semicon business? Thank you.

Let me confirm. We still have our three same priorities to do further acquisition. I think we are well on track with our portfolio rebalancing, as you have seen also. And we still have the same priorities. So in building, looking at further expansion in North America and also from a portfolio optimization, especially in our commercial building, where we see high exposure to building, consuming more energies and exposed to key verticals like data center, health care, hospitality. so that's still the priority and we have a good funnel to look at target, also water treatment is actually one of our priority second industry is to continue what we have been doing so I think Paolo was a great example so continue to expand in North America but also looking in Europe in higher exposure to key verticals in order to rebalance our exposure between automotive and non-automotive so we have a good funnel in europe for bolton acquisitions and in some econ after having done of course gbt we are now fully focusing and and i'm really pleased with the progress by our team to do the post merger integration and soon it will be time to go to the next one and we already have a funnel to continue to look in europe in southeast asia additional mna to expand i think our portfolio and to become more and more an integrated module provider, right, in order to support our customers in both the front-end and the back-end. And we see actually more and more synergies and more and more there is a need to have global supplier, global partner. And I think that is where we are well positioned. So here also we have a key funnel. I think in Semicon, you should not expect some move in 26, but I think we still have some further acquisition to be done in the coming years.

Very clear. Thank you very much. Chase Cufflin from Van Lanschot Kampen. Good morning, Chase.

Hi, yes. Good morning, all. Thank you for taking my questions. I just have two. Firstly, on building, you know, previously we saw the stock levels that wholesalers and distributors were at relatively low points. Could you just speak to where those sit today? was there any pre-buying effect in the second quarter and how do you expect sort of inventories to to progress throughout the course of the year and then my second question would be on the semi-con plants the drunton plant when she flagged as yeah sort of on track to ramp up in 2027 could you give any indication on you know how fast you expect this plant to be sort of comfortably utilized any kind of sales indication as well as you know what kind of depreciation step up we can expect on the P&L on the back of that plant becoming operational. Thank you very much.

So, let me start with the first and I will let France answer the second one. So, the first one, I think what happened over the past year, right with the famous de-stocking about old seller, we see that more as a new normal. I think the old seller have been used to have low inventory and of course, we have also been used to deliver more just in time and it's all about delivering on time. So we still see the same very low inventory at the wholesaler overall. And then product line by product line depending on the raw material price exposure there is some additional buy from some customers in order to avoid all the coming price increase or inflation. So in some technology we see some pre-buy but I would say overall is still about the same situation and we don't see yet restocking in this segment compared to the previous year.

Yeah, maybe on the depreciation. Earlier we already indicated asset under construction way over 200 million. Majority of that related to Dronte. I think that's at least two statements we made. Depreciation guidance should be around 6 million for this location.

Okay, perfect. Thank you.

Thank you, Chase. And now I would like to give a third attempt to Martijn to ask his third question we are waiting for now for quite a bit of time. So, Martijn.

Yes. I apologize. I had some issues. I want to come back to industry, please. If general industries, machine build, and automotive are stable, and that represents roughly 75%, 80% of your sales, how did you get to 7% organic growth in Q2? can you elaborate a little bit on that and my second question also an industry would it be fair to say that given the ramp up two words commissioning in drone to NDGVT expansion not only in Malaysia that you're incurring OPEX in 2027 excuse me in 2026 in preparation of taking those plans really into sales mode in other words are those open assessments not hampering your 2026 a bit a margin already in industry.

So the first one, you are right, that what we see by stable is a market, right? But we are doing better than the market. I think that's where I'm really pleased with the work done by our team in the industry segment, all our business development plan, like the heap expansion that we are doing. We see more demand. And let's not forget that aerospace, power gen and defense are going quite quite well and we say a single digit organic growth we see that in in both part of the world and in automotive even the market is flattish we have actually had a better growth in the market with the additional service and our exposure to some new platform where customers can maybe move or have the same activity but when they move a operation from west europe to east europe for example for us it could mean additional volume or additional services even if the number of cars they produce is the same and same which is the same trend also

in north america so i think the simple answer is we did better than the market yeah and i think just apologies industries obviously sorry could you repeat your comment uh martin Yeah, I asked whether the GVT expansions in Malaysia and the expansion in Dromte, the two new plans, whether that was not already resulting in OPEX investments. Therefore, the EBITDA margin in Semicon is probably hampered a little bit in 2026. You will see the benefit in 2017.

No, very clear. And indeed, we are investing there and we are planning to commission those plans. That will bring some OPEX. Most of it is CAPEX, of course, but there's always some. I think that is a minority and it is not a factor in our EBITDA numbers that you see. So it's not material. And the moment we will start to operate those sites, it will contribute in a positive way. So there is no leakage on EBITDA because of the OPEX on CAPEX investments, nor in GVT, nor in Dronten.

Okay, and my final question for you, Frans. Is there any components of working capital that we should be aware of in H2 in terms of how free cash flow in the second half will develop? Normally, you have a release of working capital. Is there any element or development that we should take into account that could influence that normal seasonality?

No, I think not other than what we saw in the first half. So in the ramp-up, there is an impact because your payables and receivables and also inventory increases. So there is, in that sense, a bit of a negative. But we saw that in six months. Yeah, how that exactly will evolve in the second half, that's difficult to forecast. But yeah, if that further enlarges, it's a positive thing because that's a result of further growth. And that's what we want. And so there are no other one-off elements that you should take into account on working capital. I think if we look at cash flow, there's clearly the capex that you should not extrapolate. There's a phasing element. So that will be a significant switch in the second half.

Understood. Many thanks.

Okay, thank you. Thank you. It's good to see that we also have some questions actually coming from the Q&A forum. and one I would like to address to Franz. And that is whether you could comment a little bit on your full-year outlook for holding cost.

Yeah, that's a good question indeed. So we saw 13 million in the first six months, so 3 million up. Yeah, basically the run rate we saw in the first six months, you take that as an assumption for the second half. So basically doubling it. But there's always the question, what are the one-offs that we will encounter? Last year, we had some gains from divestment, some book gains. The year before that, we had some income on claims. So that's always a bit unknown. But yeah, as a basic assumption, I would just keep H2 in line with the first half.

Okay, thank you. There were some other questions submitted, but I think they've been answered already during the call. So I think that we are concluding today's webcast. I'd like to thank everybody to join today again. Later today, we will make the presentation and also the recording of today's webcast available on our website. Thank you so much. Thank you. Thank you. Enjoy your day.