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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Ladies and gentlemen, a warm welcome also from my side. I'm happy to have with me today Dr. Mathias Hallmann, our group CEO, who will lead you through our presentation. The slide deck is also available under the Investor Relations section of our website, www.r-stahl.com. Before we begin, allow me to point you to our safe harbor statement, which you will find at the beginning of the slide deck. And with this, let me hand the call over to Dr. Hallmann.
Good morning, ladies and gentlemen. Welcome to our analyst and investors conference call today. Let us directly switch to the summary of this call on Page 4. Actually, we are still managing tough times. Our sales are flat quarter-on-quarter on a level of around EUR 60 million. Nevertheless, we are EUR 12 million or 16.4% down in comparison to the quarter -- third quarter 2019. We put tight cost control measures in place to defend profitability. But EBITDA pre EUR 5 million from comparison of EUR 10.2 million last year, which finally leads us to an earnings per share of minus EUR 0.09 in the third quarter. Our order backlog remained strong on the level of EUR 74 million by the end of Q3 and remains robust above the average level of the prior year quarterly average. We do have a positive free cash flow, which helped us to lower our net debt to roughly EUR 9 million by the end of the quarter. And we will discuss at the end of this call, our updated guidance, where we see our sales in a range between EUR 242 million and EUR 248 million by the end of the year. And EBITDA pre in the range of EUR 15 million to EUR 18 million. And with this, we will be slightly above market expectations at this point of time. Looking into our sales structure. Again, we suffer from a drop of 16.4% against the comparable quarter in 2019. The detailed picture shows that in our home market in Germany, we are pretty robust. We only see a decline of roughly 2%, and that indicates our very solid, strong position in the German industry, especially in the chemical industry. So there's only little dependency on the upstream oil and gas markets. About those markets, I will be talking in the next couple of slides. In the central region, which is basically Europe and Africa, excluding Germany, we would have -- we would actually have a similar development. Also, we show a decline of roughly 16% if we could exclude Norway. The drop we see is mainly driven by the strong decline of demand in the upstream oil and gas part of our Norwegian business, which clearly relates to the strong decline in oil demand and ongoing decline of oil prices. The same we see in America. Many of you know that we are based in the Houston area. Our business is centered around oil and gas business in this region. And we basically suffer from the same market development as we suffer in Norway. That upstream oil and gas part of the business more or less collapsed and only slowly recovers -- is in a slow recovery right now. Asia Pacific, where we see a decline of roughly 20%, is heavily impacted by Australia, which basically fell from one crisis to the other. We had the fires in the beginning, then we had the floods and then we had COVID. And actually, the country didn't recover from that at all at this point of time, and then we see the normal market weakness in the rest of the region. But what we also see when we talk to customers and when we talk to our sales force is that although these numbers are certainly disappointing and not the numbers we want to see, we are pretty sure that we are not losing share in those difficult times because the market still considers R. STAHL as probably the most stable player in the industry at this point of time. Looking in the order intake. Yes, the picture is even worse when you look in Q3. We actually saw numbers, which are at a 5-years low. I personally have never seen such numbers since I'm in the company, and we quickly looked into the data and while we celebrated the strongest order intake in the first quarter where we really thought we would now enter in the phase where we start harvesting the result from the strong restructuring we did over the last 3 years. We had to accept very low order intake in the third quarter, which reached its low in August. And we had the impression and, honestly, we did it the same way that almost everybody tried to put the business asleep and send as many people in vacation as possible in order to safeguard the bottom line in the profit and loss statement. Nevertheless, as we indicated, our order backlog is still on a solid level and very important, it's faring very reasonable margins. On the next slide, we dare to give a first little outlook in what probably going to come. What you see here is a sketch of the project business in the Middle East. In January, we were working on big projects with volume way beyond USD 100 billion in the 4 segments, oil, petrochemicals, chemicals and natural gas. And in the summer, basically in August, we had -- and when we discussed with our people in the market, we had to accept that almost every project outside the natural gas segment came to a hold. Right now, we see these projects recovering, coming back slowly. But we -- with the nature of our business, we cannot expect significant sales or revenues from those projects before the second half of 2021. So that we have to state, we would not expect the market to normalize before second half or the end of the next year.Going into the P&L. We see the drop in sales, our cost of materials indicate that we continue to have robust margins. We adjusted our personnel capacities and personnel costs as much as we could. But always under the condition that we were clearly stating and we are working on that -- in that direction that we don't let people go, which we will need in a year from now or in 6 months from now when the markets really recover. So we did nothing until now, which will harm the capacity of R. STAHL to capture opportunities when the market is coming back. We could slightly lower the sum of other operating expenses, and we see some improvement in the financial results, which basically came from lower interest accruals for pension provisions, and all that leads us to an EBITDA of EUR 500,000 in the quarter, a net profit of -- or net loss of EUR 600,000 and EUR 0.09 per share, which I indicated on our first slide. Next slide, there is not much to say besides the fact that our exceptionals continued to decline as planned and that this fact is basically illustrating that we made significant progress in the structural adoptions of our business and the -- we also don't expect significant exceptionals in the rest of the year. What you see on Slide 11 is basically a summary of the -- of many things we discussed in the last 3 years. We actually significantly strengthened the resilience of our business. On the slide, on the left-hand side, we eliminated -- and that's important for people who are deep in accounting, let's say, procedures, we eliminated all impact of IFRS 16. And what you see then is that we could significantly lower the breakeven of the business where we -- while we needed a turnover of EUR 260 million in 2017 to reach a 0 EBITDA, we could bring that down to slightly -- a number slightly above EUR 220 million. And that flexibility is helping now in this crisis to somewhat manage the bottom line of the business without really cutting into structures and having the potential of the business for the future. And the reasons are what we also discussed over the last 2 years extensively, it's the focus on regional margins and improved order profitability. It's the central group organization with clear responsibilities and the continued implementation of unified processes and, as a result, increased efficiency and higher flexibility. On the cash flow side, yes, we -- even we had a net loss in this quarter. We do have some noncash relevant expenses in it. We also put additional working capital measures in place so that a positive free cash flow at the end of the day helped us to lower our net debt by EUR 1.7 million from EUR 10.3 million to slightly below EUR 9 million in the quarter. Also that we discussed extensively in many calls. We are very -- our financing is very solid. We have significant volume of open lines and with the developments we foresee, we do not expect that we will end in any liquidity problems during this crisis, even if it's going to continue deep into 2021.Yes. Looking into the outlook. We predicted sales of EUR 260 million to EUR 275 million. In the beginning of the year, we were one of the few companies, which were giving an outlook, but -- in those days, but we felt quite confident about it because we had this very nice order intake in the first 3, 4 months of the year. Everybody was expecting that the markets will catch up in the second half. And yes, now the development actually were quite different. Our orders dropped dramatically, the markets didn't recover or they recovered but now they are starting to decline again with the second and the third wave of COVID-19 in many parts of the world so that we have to lower our expectation into a range of EUR 242 million to EUR 248 million for the top line by the end of the year. Nevertheless, we can we can give a guidance for the EBITDA pre of EUR 15 million to EUR 18 million, which is actually slightly above current market expectations. This is it from my side, and I'm open for questions.
We will take the first question from Igor Kim from Bankhaus Lampe.
Igor Kim from Bankhaus Lampe. I just have a quick question on the top line. There was some problem with the connection, but could you repeat, you said that you the recovery in the second half of the year from those delayed projects that you've seen in the first quarter and probably in the fourth quarter? Is that correct? And if yes, does it mean that the first half of the next year in terms of revenue growth will be fairly weak? Or I don't know, would it be flat or slightly below the prior year? If you could give some color. I know there is no guidance for the next year, but at least some direction.
Yes. Yes. I try to answer as much I can see in my crystal ball. The markets are almost not predictable. Nevertheless, what we see is that the projects came back, and we were really afraid in -- by the middle of the year that we wouldn't see many of those again. So we will expect greenfield business in the future, but not before the second half. And I would also not expect significant volumes in the second half that will -- that we probably have to wait for that until 2022. But it will start again. The basic markets, I would see a little bit stronger than in 2020 because the world is learning to deal with COVID. The world is learning right now that it's not the solution to shut down everything and wait 2 years until COVID disappears. So we would expect a slight recovery of our markets. But that's more driven by applied common sense than using data. Because if you look into data, you find data for everything, for declines, for strong increases, it really depends where you look, but there's basically no consistency. And when you talk to customers, they typically don't know much more than we. And if they know something, they are not really willing to give an outlook. So there's still lots of unsecurity in the market, but yes, we are planning for a better 2021 than what we see in 2020.
[Operator Instructions] We'll now take the next question from Felix Lutz from Frankfurt.
This is up from Felix Lutz from Frankfurt Main Research. A quick question on the equity ratio, you have 19.6% now. Is this a topic for the banks with covenants? And with your orders on hand, do you maybe expect some cancellations? That's so far.
Right now, we have more than enough headroom in our covenants, and that's true for the profitability as well as for the equity. So we monitor this very closely, but we cannot see issues in the near future. We all don't know what the world will bring. But at this point of time, we are not concerned. And second question was?
About your order intake on order...
Whether we expect cancellations, yes. Actually, no. Actually, no. We don't have orders from projects which can be stopped. Typically, we are very late in the food chain, let me say, that in big projects, many billions or at least millions have been spent before we come. And that would mean that if somebody wants to cancel a project, he needed to write-off huge investments.
Okay. I see. Maybe a follow-on on the expectations of the oil prices. Do you see a level at which you expect investments will get stronger again?
What we know and we discussed, when I started to work in the oil and gas industry, and that was even before I worked with Stahl, the numbers we heard that deep-sea drilling made sense was around, I think, USD 120 in Brazil and around EUR 100 in Norway. And nobody is giving you an exact number, but at this point of time, I think in the Norwegians can already work with the price level of around USD 40, which is probably also the price level the industry needs USD 40, USD 45 and USD 50, the price, which the industry needs in North America. But that will not trigger big investments. So I would expect that when the economy picks up, that the oil prices pick up in parallel, because then we will see the effects of depletion that you need investments in the oil and gas industry to just remain the level we have. Because some of the oil wells just stopped to deliver. And -- but -- so it's a very complex world we are working in. I think it's not only the oil price, it's also the general demand. And the outlook on the economy, the people need before they put billions of euros into big projects. But the people seem to have that confidence, at least in the Middle East, because they are starting to work on these projects again. Even though oil price is probably on the level where many of those projects wouldn't be profitable.
We will now take the next question from Ulrich Sachse from UniCredit Bank.
Dr. Hallmann, Ulrich Sachse from UniCredit Bank. I have 2 questions. The first question is, when do you expect to return to the pre-corona levels for R. STAHL or at least the industry? And the second question is, could you give us a little more details about the share of the sales for the basic business you told us and the maintenance business you described in your report?
I would expect a share of -- I would expect that we are back to normal in 2022. 2021 will still be a year of transition. And the other thing is even when the orders starting to pick up with big projects, it will -- until we see it in the bottom line, it takes at least 6 months. Then the second question is, what is MRO and what is -- and the rest is basically brownfield and greenfield. And greenfield is dying at this point of time. There's still some -- a lot of brownfield business in the market, where the customers really make use of the fact that they shut down their factories and then they do this smaller or midsized brownfield projects because otherwise, they would never have time when the market is picking up again. And that's, for example, drives our investments in the chemical industry and the petrochemical industry. Pharmaceutical industry is upgrading. So I would say from what we have right now, and that's a rough guess, 10% is greenfield, 60% is brownfield and 30% is MRO, where the -- where between MRO and brownfield, there's -- I mean, that's an overlap, yes.
There are no further questions in the queue at this time.
Okay. Ladies and gentlemen, thank you for joining on today's conference call. We look very much forward to staying in touch with you. As a reminder, our next event will be the Capital Forum Frankfurt, where we will do virtual meetings from Monday next week until Wednesday. And if you're interested in seeing us there, please feel free to get in touch with the organizer team of the Capital Forum. Have a great day and state safety. Goodbye.