Q1 2024 Market Update

Anticipated weak Q1; Full-year outlook reiterated. Strong margin improvement confirms strategic strength

Financial developments in the first quarter of 2024

• Turnover of € 421.0 million (-4.3% organic decline vs. Q1 2023¹)
• EBITA excluding one-off income and expenses of € 41.2 million (-21.2% organic decline vs. Q1 20231), affected by ramp-up costs of the new factories and destocking effects
• ROS of 9.8% (Q1 2023: 12.8%)
• Added value further improved to 51.8% (Q1 2023: 49.1%); improvement in all segments
• Order book at € 1,004 million (year-end 2023: € 970 million)
• Outlook reiterated: organic growth in turnover and EBITA in 2024

^{[1]  Q1 2023 turnover and EBITA excluding one-off income and expenses includes TKH France. Turnover and EBITA of TKH France in Q1 2023 amounted to € 34.8 million and € 5.4 million respectively. TKH France was divested on September 29, 2023.}

Alexander van der Lof, CEO of TKH: “ We saw continued growth in Smart Manufacturing systems, while Smart Vision and Smart Connectivity systems continued to face destocking, which coupled with the ramp-up costs of the new factories resulted in an expected decline in results compared to a strong Q1 in 2023.

The substantial increase in added value is solid proof of the strong position of our innovative technologies. During the quarter, we remained focused on our strategic priorities to drive added value of our technologies and capitalize on the growth from the megatrends. Cost levels were high, but in line with anticipated growth in the coming quarters. The start of the type test production of offshore cables in our new state-of-the-art facilities in Eemshaven in Q1 marks the completion of our strategic investment program within the set time frame of 1.5 years and within budget. The sales funnel for our Eemshaven facilities is strong, with 45 projects totalling 6,000 km currently under tender.

While in Smart Connectivity systems the destocking effects in onshore energy are expected to continue throughout the year, the order intake in Smart Vision systems improved compared to the previous quarter, which is an early sign that the headwind from destocking is easing. Smart Manufacturing systems performed well in the first quarter, with order book growth driven by the reshoring, sustainability, and automation trends in the tire building sector.

We expect the second quarter to be considerably better than the first quarter, driven by growth in Smart Vision systems, continued growth in Smart Manufacturing systems, and improvements in Smart Connectivity systems. For the remainder of the year, we will benefit from the completion of our capacity expansions and an expected return to growth in Smart Vision systems. We reiterate the outlook communicated in March, and we anticipate organic growth in turnover and EBITA in 2024.”

Developments by technology segment

Smart Vision systems
Smart Vision systems recorded a 12.4% organic decline in turnover compared to Q1 2023. In Machine Vision, turnover decreased due to destocking, while the decrease in Security Vision was mainly due to the comparison effect of a large project in Q1 2023. Machine Vision’s order intake has been increasing during Q1, and the order book reached a higher level than in the previous two quarters.

Smart Manufacturing systems
Smart Manufacturing systems recorded a 16.2% organic increase in turnover compared to Q1 2023. Tire Building performed strongly with continued high order intake and high return on sales. The market for tire building machines is expected to remain strong as a result of the continued need for sustainable products and production technologies. The introduction of AI-driven foreign object detection, reducing waste in the tire building process, was launched successfully.

Smart Connectivity systems
Smart Connectivity systems reported an organic decrease in turnover of 13.4% compared to a strong Q1 2023. The destocking in the Dutch onshore utility companies continued, leading to a significantly lower demand as anticipated. The offshore wind segment performed well, partially offsetting this lower demand. Digitalization was impacted by the ramp-up of the new fibre optic cable production facilities in Poland and challenging market circumstances. Ramp-up costs for the new plants had a considerable impact on the results.

Outlook

TKH reiterates its outlook as communicated on March 5, 2024. For the full year, we expect Smart Manufacturing systems to return to more normalized growth when compared to last year. In Smart Vision systems, we expect growth to return in the second half of 2024, on the back of market recovery. Within Smart Connectivity systems, we anticipate the destocking in onshore energy cables in the Netherlands to continue throughout the year. Barring unforeseen circumstances, we anticipate organic growth in turnover and EBITA in 2024.

TKH will provide a more specific outlook for the full year of 2024 at the presentation of its interim results in August 2024.

Haaksbergen, May 6, 2024