Waberer International : Az elemzői konferenciahívás leirata (angol nyelven)

SECOND QUARTER 2023 RESULTS ANALYST CONFERENCE CALL TRANSCRIPT

9 August 2023, 14:00 CET

[Presentation slides available here]

Slide 1:

Viktor Majzik (IR): Ladies and gentlemen, welcome and thank you for joining Waberer's Q2 2023 Results Analyst Conference call.

My name is Viktor Majzik and I'm the IR Manager of Waberer's. Mr. Barna Erdélyi (member of our Board of Directors) and Mr. Szabolcs Tóth (our Group CFO) are also present from Waberer's at the call.

The conference call will last roughly 60 minutes, including the presentation and Q&A session.

I kindly ask everyone to mute their microphone during the presentation and only turn it on during the Q&A session.

I would now like to turn the conference over to Mr. Barna Erdélyi. Please go ahead.

Barna Erdélyi (BoD member):

Good afternoon everyone. Thank you very much for joining us today and let me welcome you to our second quarter results conference call.

Slide 3:

Barna Erdélyi (BoD member): On our call, as usual, I will first introduce to you the latest quarterly trend of Waberer's Group, I will give you a commercial update on the performance of the ITS and RCL segments, and I also would like to introduce to you the strategic background of our recently communicated expansion plans in the railway logistics and insurance segment.

In the second chapter, Szabolcs will go into the details of the financials, and He will also give you an update on our revised 2023 expectations.

Slide 4:

Barna Erdélyi (BoD member): Let me start with the highlights of the 2nd quarter of 2023:

• The Group managed to exceed the financial performance of the same period of last year both on a quarterly and on a half-year basis. Quarterly EBIT reached EUR 14.3 million and all 3 segments improved its financial results, which proves the stability of the current business model of the Group. I also have to add that half of the income generated by our out-of-court agreement with one of the truck manufacturers is booked in the second quarter, while the remaining parts of the agreement will arise in Q3 and Q4 of 2023.

• On a half-year basis, our consolidated EBIT reached EUR 25.5 million in 2023 which is a 72% increase compared to the previous year. 60% of the EBIT was generated by logistics-related segments, while 40% by our insurance activity.
• As was published in our recent investment releases, we are in the middle of 2 Due Diligence processes in the railway logistics and in the insurance segments. The transactions are in line with our published strategy to diversify our activities in order to open new growth directions and decrease dependency on current focused operations. I will give you a summary of the target companies in the coming slides.
• And finally, the Management updated its expectations for 2023 and increased the expected annual EBIT to the range EUR 37 - 40 million which does not include the one-time positive financial effect of our out-of-court agreement with one of the truck manufacturers in the cartel lawsuit.

Slide 5:

Barna Erdélyi (BoD member): As usual, after the key messages of the recent quarter, I start the presentation by introducing to you the quarterly trends of the consolidated financials of Waberer's.

Starting with the above graph, the quarterly EBIT increased by 39% compared to the 2nd quarter of last year and exceeded the quarterly results of the previous quarters. Our ITS segment contributed by EUR

4.7 million, RCL segment by EUR 4.5 million and our Insurance arm contributed the quarterly consolidated EBIT by EUR 5.1 million. As we highlighted in our financial report, we are actively examining the long-term financial effects of the introduction of IFRS17 principles at our insurance arm, which could generate materially higher fluctuation in the results of the coming period. As you can see on the quarterly trends of 2022 - that was much more a typical year than 2020 or 2021 -, Q3 and Q4 are generally less profitable due to the summer- and Christmas holiday-related temporary factory shutdowns at our major customers. This trend is also reflected in our annual forecast as after our first half EUR 25.5 million EBIT performance, we expect roughly EUR 12 - 15 million EBIT for the second half of the current business year.

Regarding the consolidated net debt level of the Group, the Net debt increased by EUR 32 million compared to the end of last year and reached EUR 182 million which means a leverage level of 2.0 times the last-twelve-month EBITDA. The increase is mostly due to the leasing-related debt increase as the fleet size slightly increased by 75 vehicles and the Group replaced 346 vehicles in the first half of the year. The recently purchased trucks and trailers - due to the general price increases in the automotive industry - are visibly more expensive than the ones that we replaced. We are also intensively working on our warehouse development in Ecser and EUR 15 million was already spent on the development which reduces the cash balance. I'm proud to report to you that the construction is going on at planned pace and we can keep the original Q1 2024 deadline for starting the operation in the new warehouse. We are also working hard on acquiring new customers for our new warehouse and based on the current status of the discussions, we could realistically generate profit at our new operation right after the opening.

Slide 6:

Barna Erdélyi (BoD member) On our next slide, I would like to give you a commercial update regarding our two logistics related segments.

At our international freight transportation segment, in general we also experience the overall macroeconomic trend of declining industrial production and residential consumption in most of the

European countries. However, there are selected industries, where either the demand is less volatile, or due to the manufacturing challenges in the recent 1-2 years, the accumulated demand is still not eliminated on the market. We face stable demand at several automotive clients and Waberer's was very successful at automotive customers' tender for 2023. Due to our relatively standard fleet, we are able to allocate significant capacity year-by-year to those industries and customers where we face stable demand for our high-quality services. Based on the results of the latest tender season, we decided to slightly increase the size of our fleet by 75 vehicles for being able to serve the newly acquired automotive customers. In case, in the future we will experience decreasing overall demand, we will also be able to slightly downsize the fleet size without any negative cost effect during our annual fleet replacement process.

As mentioned, at certain other industries, we face visible market demand decrease, like electronics, who are traditionally also strong at our customer portfolio. The decreasing overall demand puts pressure on spot prices which we also use at the balancing trips to arrive back to our key account customers' location. As you can see on our overall results, the stable key account performance could compensate the negative effects of the decreasing spot market prices at our overall segment performance.

Turning to our supply chain logistics segment, which we call RCL, we face similar challenges than in our ITS segment namely at selected industries, we meet significant demand decrease, while other industries are stable with their logistics related demand. Retail customers and customers at the food industry are traditionally strong in our portfolio with distribution and warehousing activities as we are partners with nearly all major hyper and supermarket chains in Hungary and also with some of the major food producers in our country. Due to the material residential consumption decrease in Hungary, we also meet decreasing volumes for distribution at these customers. The segment was very active at responding to the changes of market demand and we were successful at acquiring new customers to our free capacity and we were also successful at decreasing the fuel consumption of the vehicles that were essential at the distribution activity to keep the profitability level even at lower volumes. Our container business, where we were very successful in the recent quarters, also faces significant volatility on the market, that is mostly driven by the trends of international trades. At our automotive customers - similarly to the ITS segment - the demand for our services are stable that is essential for our segment performance as this operation is one of the most complex and has a significant contribution to segment financial performance.

Until now, I introduced to you the actual status of our existing customers, but I also would like to talk a few sentences about our sales activity. We have several active discussions with automotive manufacturers in Hungary and in the region and also with the new battery producers who are currently heavily investing in Hungary. There are several ongoing tenders at these customers and the references that we built up in the recent years give us some confidence that we could be successful at some of these tenders, and we would be able to build up additional long-lasting partnerships, which could provide additional stability to the financial performance of our RCL segment. The first results of these tenders are expected at the end of this year and at the beginning of next year and we will inform our investors about the results of these tenders.

Slide 7:

Barna Erdélyi (BoD member): As promised at the beginning, I would like to shortly introduce to you our latest steps towards the diversification of our activities in line with our strategy.

Firstly, I will start with Petrolsped, which is one the leading Hungarian rail cargo operator also having businesses in Romania, Slovakia, and also in some Western-European countries. We are planning to acquire 51% of the share capital of the target company and we are planning to set up a long-term cooperation with the current owners and plan to keep them as co-owners at Petrolsped as they are respected and well-known members of their industry. Both them and we, at Waberer's, believe that given their industry experience and infrastructure and our customer base and network, significant synergies could be reached in the coming years.

As a short summary of Petrolsed Group, they have 3 major legal entities, 2 in Hungary and 1 in Romania. The Group's annual turnover was HUF 21 billion in 2022 which is roughly EUR 53 million and their consolidated EBIT was HUF 1.5 billion that is roughly 3.8 million in EUR term. Petrolsed Group has several diesel and also electric locomotives and several hundreds of wagons partly in the Hungarian and in the Romanian operation. The Group has a well-diversified customer base in the construction and oil industry, in agriculture, and also in the automotive industry and could also support these clients with specialized infrastructure. Petrolsped is also working on constructing an intermodal terminal in Hungary which is an additional synergy opportunity between us as Waberer's also launched intermodal services 2 years ago.

The parties agreed on some of the major terms of the transaction in the first half of the year and due diligence was just started at the end of July. Due to the nature of these transactions, in case no significant red flag item comes up during the due diligence and parties manage to agree on the contractual terms, most probably, we would be able to close the transaction by the end of the year and Petrolsped figures will be reflected in Waberer's consolidated figures from the beginning of next year.

Turning to the second ongoing discussion, Waberer's has started an intensive discussion with the owner of Magyar Posta Biztosító which is the insurance arm of the Hungarian Post. Our current insurance operation is dominantly focusing on vehicle and transportation related insurance services in Hungary, and we are actively looking for the opportunities to diversify our insurance activity either with organic business development or via potential acquisitions or mergers. Magyar Posta Biztosító is an optimal partner for these discussions as their size is comparable to our insurance activity, however, their business focus is complementary to ours. Posta Biztosító has both life and non-life activity and within non-life segment, they have a more diverse product range than our insurance activity as they are active in home, travel, health and vehicle related insurance products as well. The sales channels and sales strategy, and also the customer base is relatively complementary that could provide significant synergy potentials for the cooperation.

The parties are currently in a discussion about the structure of the transaction and final conclusion about this opportunity is expected in the next 3 to 6 months.

Slide 8:

Erdélyi Barna (Bod member): And now, I would like to ask Szabolcs to introduce the details of the financials and show the financial performance of both the Group and the Segments and will introduce the revised management expectations regarding the financial performance of 2023.

Slide 9:

Szabolcs Tóth (CFO): Thank you, Barna, and good afternoon! As usual, I would like to start with introducing you the Group level P&L figures for the latest quarter and the first half of the year. Group- level revenue increased by 2% in the second quarter and reached EUR 176 million. The half-yearrevenue was EUR 353 million which is a 6% increase compared to the same period last year. Unlike in the previous quarters, the fuel price decreased significantly in Q2 compared to the same period of last year, when we faced unprecedented fuel prices due to the war in Ukraine. As our international transportation and domestic distribution pricing structure are all linked to the change of fuel price and price levels are automatically updated in line with the change of the fuel prices, the decreasing fuel prices generated some revenue decrease in the ITS segment, and only a slight, 2% increase was reached in the RCL segment in Q2 2023 where the fuel cost has lower weight compared to the international transportation. Our insurance segment increased its revenue by 17% during the latest quarter in EUR term.

The Group level EBIT in the 2nd quarter reached EUR 14.3 million, which is an increase of 39%, while the half-year EBIT reached EUR 25.5 million, which is a 72% year-on-year increase. Both the quarterly and the half-year EBIT performance is the highest in the last 6 years. All 3 segments contributed to both the quarterly and the half-year increases as ITS increased its segment quarterly EBIT by 3 million, RCL EBIT growth was EUR 0.5 million and the Insurance segment also managed to improve its EBIT performance by EUR 0.5 million. I need to mention here that our quarterly EBIT performance in the ITS segment was supported by the half of the one-time positive financial effect of our out-of-court agreement with one of the truck manufacturers in April. The remaining half of the income will support our Q3 and Q4 results.

Last but not least, in the second quarter of 2023, Waberer's Group reached EUR 15.1 million quarterly Net Income which is a EUR 12.5 million increase compared to Q2 2022, while the half-year Net Income reached EUR 25.5 million which is a EUR 21.2 million increase compared to the same period of last year. In both the latest quarter and in the latest half-year the Hungarian Forint appreciated materially against the EUR, so Waberer's gained EUR 4.7 million non-realized,non-cash financial income in Q2 and EUR 6.9 million in the first half of 2023. Net Income without this non-realized,non-cash FX effect was EUR 10.4 million in Q2 and EUR 18.6 million in the first half, which are 73% and 109% year-on- year increases.