Jenoptik AG

XETRA:JEN

Earnings Call Analysis

Jenoptik Reports Strong Q2 and Confirms Annual Guidance

Jenoptik's Q2 saw a significant recovery with a 16.7% increase in order intake and 11% growth in sales compared to Q1. Revenue for H1 2024 rose 7% year-over-year. Key drivers were the Advanced Photonic Solutions division and Non-Photonic Portfolio Companies. Group EBITDA reached €101.4 million, with a margin increase of 70 bps. The company confirmed its full-year guidance, expecting mid-single-digit sales growth and EBITDA margins between 19.5%-20%, despite a 0.5% impact from the new Dresden facility which will start contributing positively in 2025.

Strong Performance Amid Variability

In the first half of 2024, Jenoptik has demonstrated resilience, reporting a revenue increase of 7%, reaching EUR 524 million. This growth is attributed to its Advanced Photonic Solutions (APS) and Non-Photonics Portfolio (NPC) segments. Despite a 4% decrease in order intake year-over-year, a notable uptick in demand was seen in the second quarter—evidenced by an order growth of 16.7% compared to the first quarter of 2024. The company anticipates converting approximately 57% of its order backlog, which stands at a healthy EUR 734 million, into revenue for this fiscal year.

Profitability and Cost Management

Group EBITDA rose to EUR 101.4 million, with a margin improvement of 70 basis points, attributed to scale effects. However, the gross margin faced a slight decline of approximately 100 basis points year-over-year, primarily due to higher depreciation and material costs. The company remains committed to disciplined operating expenses despite inflationary pressures affecting labor costs. Jenoptik has maintained its guidance for EBITDA margins for the year, projecting them to remain stable at around 19.5% to 20%.

Segment Highlights: Advanced Photonics and Non-Photonics

The APS segment reported an 8.2% revenue increase, though its profitability margin slightly decreased from the previous year. The semiconductor equipment sector is identified as a strong demand driver within this segment. In contrast, the Smart Mobility sector experienced a 43% increase in order intake in the second quarter; however, this was balanced against a weak first quarter, leading to year-over-year revenue stability. The NPC segment showed a strong performance, particularly from Prodomax, which helped achieve an impressive EBITDA margin of 18.5%.

Strategic Moves and Future Outlook

Jenoptik is poised for growth, confidently reiterating its mid-single-digit sales growth target for the fiscal year. The company expects to deliver EBITDA margins between 19.5% and 20%, accounting for a projected 0.5 percentage point negative impact from transitioning to a new semiconductor fabrication facility in Dresden, expected to become operational next year. There remains cautious optimism surrounding the second half, underscored by potential increases in order intake and capital spending, anticipated to be slightly above the previous year's EUR 110 million.

Risks and Considerations

While the overall forecast remains positive, Jenoptik acknowledges potential macroeconomic factors that could influence its performance. The company must navigate challenges in traditional industrial sectors and laser technology applications pressured by competitive dynamics, particularly from China. As it moves towards the latter part of 2024, Jenoptik will need to successfully manage operational efficiencies across its business units to sustain margins amid evolving market conditions.

Earnings Call Transcript 2024-Q2

[Operator]

Good morning, ladies and gentlemen, and welcome to the Jenoptik conference call regarding the results of the first half year of 2024.

[Operator Instructions] Let me now turn the floor over to your host, Dr. Stefan Traeger. Please, the floor is yours.

[Stefan Traeger, executive]

Thank you very much, and a very warm welcome from Jena to everybody out there. With me today, as always, is Prisca Havranek-Kosicek, our CFO, and we're more than happy to present to you the results of Jenoptik in Q2 or H1 combined, the first 2 quarters. Second quarter actually has been a very good quarter for Jenoptik. We are very pleased with the development. By and large, all our KPIs are developing in the right direction.

We're particularly pleased to report that demand picked up as anticipated. We saw a Q2 order growth quarter-over-quarter versus the first quarter 2024 of almost 17%, a 16.7% quarter-on-quarter earnings order intake growth. Versus the Q2 of last year, the order intake grew by 7%. However, for the combined 2 quarters of the first half year, order intake is still slightly below prior year, but as you can see from the dynamics, the anticipated order intake and demand pickup is actually unfolding.

We also saw a substantial increase in sales, which we're very pleased of. Again, quarter-on-quarter, Q2 over Q1 saw a growth of a bit more than 11%. Versus Q2 of 2023, a bit more than 5%. And if you take the first half of the year, 2024 versus 2023, we saw a growth of plus 7%. And again, we're very pleased with that development in sales.

A bit of a sort of input from what's going on within the business, really very important for us is the construction of all new fab in Dresden. We all know that very important fab us to be able to cater to the demand out there, in particular on our microoptics business for the semiconductor manufacturing segment, and that construction goes according to schedule. As anticipated, we're fully on track to move into the new fab and will be up and running next year.

We continue to anticipate back-end loaded order intake. In other words, we continue to anticipate that the order intake in H2 will be higher than in H1. And if you combine all of that, we can fully confirm our guidance for the fiscal year. We guide for mid-single-digit sales growth, and we can confirm that. And we guide for an EBITDA of about between 19.5% and 20% of sales, we can also confirm that, including 0.5 percentage point of negative effect that we will -- or at least we anticipate to see from the move into the new factory in Dresden that I mentioned earlier.

So overall, Q2, very pleased with that. Continue to see the dynamics unfolding in the demand pattern as we anticipated at the beginning of the year. Not quite at last year's level in order intake, but we're getting there, and yes, good growth in sales and margin expansion.

With that, I would hand over to Prisca, and Prisca is going to take us through the numbers in way more detail. Prisca, over to you.

[Prisca Havranek-Kosicek, executive]

Thank you, Stefan, and good morning to all of you on the call. We have, as Stefan just mentioned, delivered again a solid set of numbers, and I would like to now cover our performance in greater detail, as always, starting on Page 6 with order intake and order backlog.

First half year order intake came in at EUR 524 million, still down some 4% year-over-year. However, after an overall weeks through the current fiscal year, as Stefan just mentioned, we saw demand picking up in the second quarter, led by our semiconductor equipment business, and also a certain order intake normalization within our NPC segment after the project postponement we have seen in Q1.

Still, our demand in our Optical Test & Measurement business as well as in certain areas of our life science and medical applications remained subdued in the first half of '24. As a result, our book-to-bill ratio on a group level has reduced to slightly below 1, with our NPCs being the main driver here.

Now moving to order backlog, which overall remains on a continuous high level. The slight decline you see here year-over-year of 1.5%, it's mainly attributable to the situation around our NPCs as mentioned before, so they affect on Q1. we anticipate to convert roughly 57% or in absolute terms, around EUR 420 million of this order backlog into revenue within the fiscal year 2024.

Now turning to revenue and profit management on Page 7. Looking at the left graph, you can see that top line development remained strong in the first half of the year, with revenue up by around 7%. We had no effect from portfolio changes, hence the growth is purely organic, and also foreign exchange rate fluctuations had no meaningful impact on the top line development within the first 6 months of the year. The main growth drivers in this period were once again our Advanced Photonic Solutions division as well as our NPC segment.

Now moving to profitability, on the right side of the slide. As you can see, we have again improved our profitability, and the strong top line growth converted into substantial profit and margin improvement. Group EBITDA came in at EUR 101.4 million, and the respective margin was up 70 bps, mainly driven by scale effects. However, looking at profits from a division perspective, the main contributor in absolute terms were the Non-Photonic Portfolio Companies, but also our APS division performed at a robust level.

Please note that our unchanged EBITDA margin guidance for the full year, we continue to expect margins to be largely flat year-over-year for 2 reasons, mainly: firstly, our EBITDA margin of our NPCs in the second half of last year was very strong, so we do not expect a positive year-over-year margin effect from this business in the second half of this year; secondly, we expect certain tailwinds from the next step of the union tariff agreement driving our personnel expenses in the remainder of this year. Stefan will talk about our divisional performance in greater detail a bit later in this call.

Moving on to Page 8. Here, I would like to give you a little more color on the drivers behind the evolution of our margin. In H1, we saw gross margin approximately 100 bps down year-over-year, which from a line item perspective, was influenced by higher depreciation on the one side and material costs.

Looking into functional costs, as you can see here, we remain disciplined in our OpEx despite the labor cost inflation we're seeing and our continuous investments into IT. As a consequence, functional costs are growing at a lower rate than revenue. Our other operating results improved year-over-year, primarily as we recognized an impairment, as you know, related to the sale of our equity stake in TELSTAR-HOMMEL Korea, which we reported about a year ago. And in addition, we recognized lower FX losses in this year compared to 2023 first half.

Moving on to the EBIT line. You see a marked increase both in absolute terms as well as margin-wise. Further down the line, our financial result was at minus EUR 8.5 million compared to minus EUR 7.8 million in the prior year, primarily due to net negative impact from exchange rates. Finally, earnings per share reached EUR 0.69, up around 23% year-over-year. So overall, we reported a very solid set of earnings in the first half of '24.

Now turning to Page 9, looking at cash flow and balance sheet data. Starting with cash flow. As you can see, operating cash flow pretax was broadly in line with EBITDA accretion. Our net working capital intensity reduced 100 bps point year-over-year, but slightly increased versus fiscal year end '23.

Moving on to CapEx. We are continuing, as Stefan also mentioned, to invest into our capacities as planned and as you know, also into our semi fab in Dresden, which is almost a [ fortune ] project, however, with a bit of a phasing effect here, so for the first 6 months of the year, our cash CapEx was at around EUR 35 million, so somewhat lower than a year ago. So for the remainder of the year, we expect to see a certain catch-up in investment.

Finally, our net debt position was broadly at the same level as we reported for the end of 2023. And of course, please have in mind that this also affects our annual dividend payment of around EUR 20 million in Q2. Leverage remains unchanged versus fiscal year '23 at 2x EBITDA.

And with this, let me turn back to Stefan to cover our divisions and our outlook.

[Stefan Traeger, executive]

Thank you, Prisca and as always, let's start with our APS business. So if you would follow me on to Page 11 of our deck, you'd see that order intake in APS is essentially flat, where there's good momentum in semiconductor equipment industry, which, of course, for us, is important.

We did see some lower ordering activities in the OTM arena, in Optical Test & Measurement, that includes the TRIOPTICS business, but also some other businesses, which are together in that area and in certain life science applications in the medical sector. But as I say, overall, good order intake. Not phenomenal, but good order intake. Book-to-bill is just a tad below 1, 0.99, and we were very pleased to see, in particular, the semicon activities are having good dynamics for us.

Revenues were up by 8.2%, which is great. And as a result, we see a slight increase in profitability. In APS margin, though, is below last year. I think that's something to point out, and I'm pretty sure we're going to get questions on that later on in the Q&A session. But overall, I think APS has performed nicely in the first half. And again, the demand pattern, which is important, again, for us in particular in semicon, given the current circumstances and the market noise out there, we're pleased to report that semicon for us is stable.

Let's go to Smart Mobility on Page 12. Here, we have to always remind ourselves, and I would like to [ give ] my view that Smart Mobility is a project business, and thus, things can be quite lumpy. If you take order intake in the second quarter, if you isolated second quarter this year versus prior year, we actually saw a very good order intake in the second quarter of plus 43%, again, as sort of the effect of the small numbers, basically.

The percentage is huge, but in absolute terms compared to the group, that's not as much. But nevertheless, so the demand in the second quarter has been strong. However, year-over-year is basically flat, balancing out the weak first quarter in order intake. As a result, revenues are down. That is to do with, yes, lumpiness of business, but in particular, actually with missing orders and issues that we had coming into the second quarter and into the year.

So that needs to pick up in the second half in terms of sales. And yes, that's -- and a lot of that, we also basically miss operating leverage here. With the volume being lower, we do see the fall-through basically into the profitability. As a result of the missing volume, we do see a reduction in EBITDA of a bit more than EUR 1 million. That's basically the fall-through from the volume, definitely.

Now maybe to some, the biggest surprise, if you want, the Non-Photonics Portfolio companies, Prodomax and HOMMEL. Now here, we've got to be really sort of segmented down and look into the details to understand the dynamics. In terms of order intake, again, we had a very, very weak first quarter order intake for Prodomax. And you might remember that we called out that Prodomax in the first quarter basically had almost no orders from project delays and moving around in projects.

We had a bit of a discussion about that in the Q&A session in the Q1 earnings call. Second quarter had been good. Not huge, but still there was some growth in the second quarter. Quarter 2 this year versus quarter 2 last year's grew by around 3.5%, I think. So there has been growth in order intake in the second quarter, to some extent, compensating, but obviously not fully compensating, the order intake weakness in the first quarter.

Nevertheless, sales grew significantly, and you see that sales grew by 12.1%. And that is -- on the flip side, if you want, growth that we see, in particular, in Prodomax over way more than the growth that we see in HOMMEL, although HOMMEL is well underway. But we see particular growth in Prodomax in terms of closing out projects. And since Prodomax is obviously pretty profitable, the EBITDA, the operating profit of NPC at the NPC segment, has been developing, well, really good.

We're really proud of that and really happy to report the EBITDA margin of NPC overall is at 18.5% and without going into any numbers, but the big driver here is the profitability of Prodomax, that HOMMEL is also developing nicely. We're making money with HOMMEL nowadays, and that's a good message, given that we spent some money on restructuring in the past.

Let me point you to the last bullet point on that Slide #13. We have made the decision to keep HOMMEL within the group and develop it internally. We do see the opportunity to form a cluster of metrology businesses, HOMMEL and our OTM business, mainly but not exclusively TRIOPTICS, but HOMMEL and TRIOPTICS together with some smaller businesses. We intend to form a cluster of businesses that will cater to the broader metrology and inspection arena.

We believe that there is a better future for HOMMEL internally than from what we have seen from other pillars, if you want, in discussions that we had in the last year or 2. And therefore, we intend to develop HOMMEL internally, and use the assets we have there for supporting the internal -- the growth in that segment, in particular, the site there, our operations assets, the people, they're very knowledgeable people, very good people that we have, and we believe that we can make more out of that asset. We combine it, put it together with other metrology activities that we have then -- basically, to give it into external hands.

With that said, we, on Page 15, laid out that we can fully confirm our outlook for 2024 for the fiscal year. We do believe that revenue growth will be in the mid-single-digit percentage range. We believe that EBITDA will be between 19.5% and 20% of that sales number. That does include an expected negative impact of about 0.5 percentage point from the move to the new site in Dresden. You guys are all aware of that. We believe that capital expenditure will be slightly higher at last year's level or slightly above, and of course, all of that is based on our strong order backlog.

We still have some, and Prisca pointed that out, around EUR 734 million of backlog in our books. We do see pickup in demand. We still need a good second half in the order intake, but in particular, for next year. But for this year, we can rely on good backlog, pickup in demand. And of course, it goes without saying that our guidance is subject to certain assumptions that we've laid out on the page. I don't want to read it out to you, but I want to caution everybody. So if macroeconomics do deteriorate, then we have to have a second look at that. But at the moment, we don't have any reason to doubt that we can make our guidance.

With that, I think we'll pause here. Thank you very much, and looking forward to your questions.

[Operator]

[Operator Instructions] First question comes from Adrian Pehl with Stifel Financial Corp.

[Adrian Pehl, analyst]

Actually three questions from my side. The first is a little bit more complex, maybe. So maybe start with that, one by one. On the demand side, I mean, I sense that actually what we say now in comparison to Q1 is much more upbeat. So I was wondering where that is actually coming from. I mean obviously, you alluded to the semi business, and that's relatively clear, but I was wondering, is that a broad demand that you see on the semi side? Or is that largely driven by one specific front end client?

And maybe you could also elaborate a little bit on the exit rate you had in the quarter. So orders being much better until the until the end of the quarter, which gives you some hope on Q3? Or how should we see it?

And then lastly, on that complex, could you give us an idea on the, let's say, non-semi side of things, on the more industrial segments. I mean, obviously, you have spoken about the weakness still at TRIOPTICS and some medical applications, but is the demand also picking up in APS in the more industrial segments? That's my first question, and then I have two follow-ups.

[Stefan Traeger, executive]

All right. And let me take that first one. I don't know. I don't actually think that we see that we are more upbeat than in the first quarter. I think what we see is -- and how we see the world is a continuation. We, I think, always said that we expect order intake patterns to pick up throughout the year. Maybe the minus 14-or-so percent in Q1 was down of all of us. But we did know that it's due to a particular reason in Prodomax at the time.

And maybe we are pretty much of a, I don't know, conservative bunch, maybe. That could also be. But I would say I don't think that we have any additional information or any change. I would think it's a continuation of what we have seen and what we felt throughout the full year, and -- yes, full stop. I don't think there's a big change. I would not interpret too much into it. I think we're basically sticking to what we said all the time.

Obviously, I cannot sort of comment on Q3 yet. We'll -- we're going to do that. We're going to cross that bridge when we come to it. But what I would say is we don't see any slowdown or anything either. So I think same that I said to the first part of the question applies to the second part. We're anticipating higher order intake in the second half than in the first half, and that does mean that, yes, you can basically conclude from that. We do believe that the pickup in demand is real and continues to be real in the second half.

On the more industrial part of the business, those are the ones that are more sort of [indiscernible] there. In the more industrial part of the business, we have our issues. I mentioned, you mentioned and you repeated that, TRIOPTICS. When I say parts of the medical business, then that is also to do with more like laser activities and stuff that are basically under the medical headline. So the more industrial applications are the ones that are under pressure, indicating that semicon activities are well underway for us. And I think -- I hope that basically covers your first question.

[Adrian Pehl, analyst]

Right. So and the demand in semi is broad, I believe, right? So it's not only, let's say, one specific customer, but it's also, let's say, the other top clients that you have there still quite strong in demand rate.

[Stefan Traeger, executive]

Please do understand, I cannot comment on particular customers.

[Adrian Pehl, analyst]

Okay. And then the two follow-ups, I have really rather short ones. One's actually in APS, CapEx was not really that much in second quarter, so I was wondering if there is a lot to [ come ], or should we take it? Actually, the CapEx spending throughout 2024 will be a little bit lower than you have envisaged before.

And the last question pretty much on TRIOPTICS. I recall that you said, obviously, that you are considering taking out further cost given that the top line development is not as good as possible in the new businesses. So is there still significant work to do? Or where do we stand with taking out costs, not necessarily calling it restructuring, but maybe you could elaborate on a little bit on this one.

[Prisca Havranek-Kosicek, executive]

Let me take, Adrian, the question on CapEx. So that's pretty easy. We see that our CapEx guidance is at slightly above previous year. That was around EUR 110 million. And as I also mentioned a little bit in my comments, there is a phasing effect there, that you, of course, see the group, but you also see it in the APS. So I wouldn't change -- our estimates haven't changed there. That's a catch-up effect that we'll see in the second half of the year, and obviously, Dresden has a big impact on that one.

[Stefan Traeger, executive]

And on TRIOPTICS, yes, we are running down capacity somewhat, but not -- I mean we're not like having a big closure plan or anything like we would see in Germany, it's more like attrition that we use, but we anticipate lower headcounts in TRIOPTICS versus prior year. And again, that's basically achieved by -- in Germany, you would say, [Foreign Language], whatever I would be in English, I don't know, but using attrition and things like that.

So we're not running a big social plan or anything like that, but we do run down headcount a bit slightly in TRIOPTICS, given that we have lower demand than anticipated. But if demand -- and if we do get -- if demand picks up, which we all hope and anticipate, we will fully be able to execute any orders that we get.

[Operator]

The next question comes from Michael Kuhn, Deutsche Bank.

[Michael Kuhn, analyst]

Two questions also from my side. Starting with the first one, on HOMMEL ETAMIC, where you now plan to develop the company internally. Is that applying to HOMMEL ETAMIC as a whole? Or is there, let's say, different plans for the plants in -- by you and [ in Villingen, ] because my understanding always was that Villingen be more photonics-driven. It is quite a good fit, whereas by you, which is more [indiscernible] driven, is kind of different animal. So maybe a few more details on how you want to develop the asset and maybe also by the 2 sites.

[Stefan Traeger, executive]

Thanks for the question. Please, again, do understand, we cannot go into that detail at this point in time.

[Michael Kuhn, analyst]

All right. Understood. Then another tricky one, which is probably difficult to answer, but still. Prodomax is still not reported as a discontinued operation. So any update or very broad indication you can give us here on how you're progressing with the disposal of that asset?

[Stefan Traeger, executive]

As you say, it's another tricky question. Let me answer this way. We will obviously inform our investors and the public at the point when it's the right point in time. So at this moment, what we said last time, we're not reporting it as IFRS 5 and that should stay as it is.

[Michael Kuhn, analyst]

Understood. And then one on Smart Mobility, which I got your comment on, let's say, your slight volume losses and that translating into profitability, still this segment slipped into an EBIT loss in the first half. This used to be a close to 13% EBIT margin generator. Is there any perspective that it can reach that level again anytime soon? Or is there specific levers underway?

And then more specifically, I also had a look at the [indiscernible] development. They're down 40% year-over-year. How are you making progress with the new sales organization? And is there a perspective for and improving sales in the Americas also in the foreseeable future?

[Stefan Traeger, executive]

Yes. Here as well, you hit the nail on the hand. That is the issue basically in North America, us investing into our own sales activities, sales not [ following ] fast enough, and it's not compensating fast enough the sales we had via Verra Mobility in the past, our distributor of the past. And that is a direct on the margins as well. Obviously, we do anticipate it to get better, but it developed slower than we would have hoped.

As I say, obviously, we invest with the anticipation to get return from it. So we need to get better margins or better sales out of North America, which will turn into better margins for the SMS as a whole. That needs to materialize. And we really can't wait for like 5 years for that, obviously. But yes, we would have -- we anticipated it faster, and it takes a while. Maybe that's us being overly optimistic at the time, and it does take time to develop customer relations in this business and so on and so forth, but it's got to get better in the not-too-distant future.

[Michael Kuhn, analyst]

Okay. But it sounds like it's not just [ slow down ] sales that is done, but the order intake hasn't picked up yet in North America as well.

[Stefan Traeger, executive]

We do not comment on particular order intake patterns in regions for divisions, but let me just point out that we do have nice -- we won nice businesses there, nice tenders, large businesses. The order intake pattern in this particular business, though, we don't sort of record the order and post the orders once we get framed contracts, but it comes in over time.

So we would post orders and sales almost like the same second, if that makes sense, because it's [indiscernible] business, largely where we are like running the show and the whole thing. So in other words, in what we post as orders in our reports is sometimes a bit different from contracts we won in SMS, in particular in North America. And I hope that gives you the color you're looking for.

[Michael Kuhn, analyst]

Yes, that is a good indication. And a very last question, more kind of technical. Cash tax rate, relatively low in the first half of the year. Is there also a timing effects involved? Or should we expect that to continue into the second half?

[Prisca Havranek-Kosicek, executive]

Yes, I think that's a question for me. I wouldn't read too much into a year-over-year deviation there. I think we are broadly in line with what we have guided for, and I have no reason to believe that it should anything change in the second half of the year. Maybe just to add a little bit of color there, you know that our cash tax rate last year was slightly higher because of the impairments that we had in the group, right? So that has -- that, I would see, should be wearing off.

[Operator]

Next question comes from Lasse Stueben, Berenberg.

[Lasse Stueben, analyst]

I just wanted to follow up briefly on your comment on H2 profitability. I wanted to ask if you can just repeat those comments that you made. I didn't quite catch it. And I guess in the same vein, just to give us a feeling for the cost outlook for the second half. I mean costs have been remarkably stable, particularly in Q2 sequentially. So I was just wondering how to think about the cost in the second half, I guess, also especially related to the Dresden headwind. So some comments around that would be great.

[Prisca Havranek-Kosicek, executive]

Yes. Let me try to give you a bit more flavor there. So I think what I was trying to say is that we expect the margin to stay basically flat, which we have also guided for. Last year, we had 19.7%. This year, we're guiding for 19.5% to 20% from an EBITDA point of view.

And what I try to point out, also to give you some cautiousness, I would say, into the second half is that if you look at just the first half, you see basically an uplift from NPC. Stefan talked a lot about, in particular Prodomax, where we really see very nice margins improvement that will basically be analyzed in the second half of '24, because we already saw that in the second half of '23. So that's number one.

And the other reminder is to note that our tariff agreement had 2 phases, and phase #2 is only effective midyear '24, which means an additional increase that we have not seen in the first half. That's what I tried to point out as 2 sort of drivers of margins into the second half of the year. But overall, as Stefan said, we guide for 19.5% to 20%, that's unchanged.

And maybe last question you mentioned also, Dresden. We stick to our assumption that we have roughly 0.5 percentage point of negative impact of Dresden in this full year.

[Lasse Stueben, analyst]

Understood. That makes sense. And then just on HOMMEL. If you can just give us, again, a reminder of, I mean, the rough size. I mean on my estimates, I'm guessing it's somewhere around EUR 15 million of revenues. I just want to get a feeling for if that's the right ballpark or not. If you could comment, that would be great.

[Stefan Traeger, executive]

It's the right ballpark, and it's on the lower end of the ballpark. So yes, you're right. It's roughly a bit more than that, depending on whether you [ land ] off the rate. But -- so it's the right ballpark, maybe a bit higher, but not EUR 100 million.

[Operator]

Next question is from [indiscernible].

[Unknown Analyst]

First of all, congratulations on the strong quarter. I have 2 questions, both related to your semicon business, if I may. The first one concerns your exposure to possible U.S. restrictions on chip exports to China. I mean I think we all know that also the shift now already bans from being exported to China, but I'm kind of concerned that the change in the politics could lead to even stricter control from chip exports. And my question is if you see that as an indirect risk to your future volumes. Any insight on this would be appreciated.

And then if I may, the second question, which pertains to Germany. With Intel and TSMC establishing their chip factories in Germany, maybe you could provide us with some insight into this localization of chip manufacturing in Germany is already reflected in your current order backlog. And if not, should we anticipate a positive one-off effect, your order intake going forward as the factory are being constructed? And if so, maybe you can just give us a timeline when we should expect this positive one-off?

[Stefan Traeger, executive]

Yes. Thanks for that question. Let me [indiscernible] is reminding all of us that we're not selling to chip manufacturers. We are -- our customers are equipment builders. So basically, you're talking about the customers of our customers, when you talk about Intel and Infineon and others, TSMC, Bosch, all building factories in Germany and other parts of the world.

And that said, whether a particular factory will be built here, there or elsewhere doesn't really make a difference to us because we don't sell to those factories. And as long as factories are being built, our customers, the manufacturer of machines, have good demand, and as long as they have good demand, then we have good demand, basically. So whether a particular factory in Dresden or elsewhere will be built definitely make a different to us as long as the world in total continues to build factories.

On the particular China issue, in a way, the same comment applies, that we don't sell our products to semicon customers in China. Our customers are in Europe and in the broader area here and obviously in the U.S. and a lot of places, but we don't sell product for semi customers into China, and therefore, we are not affected in the first order. But you are right, there can be a discussion whether or not sort of there could be a second order effect.

That question, you basically would have to ask our customers. But from what we can tell, from what we can see in our own pipelines and in our discussions with the customers, I mean, it's still the case that, overall, the geopolitical tensions that we do see in a way actually help us. I know it's almost like pathetic, but given the whole geopolitical tension around China and Taiwan and other issues, the world is building factories for chips.

And as long as the world is building factories for chips, our customers have good demand. And you guys know what our customers have posted as order intake in the second quarter, which is really strong. And obviously, that ends up in order intake for us. I know it's a bit of a long-winded answer to a clear question, but it's a nice way of saying, don't ask me, ask my customer. But I hope it does at least give you some color.

[Unknown Analyst]

Yes. I was referring to the second order effect, actually. Thank you. That's very clear.

[Operator]

Next question is from Craig Abbott, Kepler Cheuvreux.

[Craig Abbott, analyst]

I have a couple still. My question on the sustainability of the margin in NPC, you actually already partially answered, so thanks for that. And secondly, my next question you also just discussed basically, but I was going to ask how comfortable you feel at this stage with us now nearing the date where you start to move into the new Dresden plant. You told us it's all on track, so that's encouraging.

But looking beyond that in terms of being able to fill that capacity in '25 and '26, I mean could you just give us some color on what -- I mean, is your confidence level as high as it was before? That would be the first question. And then I have two other quick ones.

[Stefan Traeger, executive]

Let me take Dresden first. As I said, we're fully on track to move in, in time. We do have the opportunity to build the second phase if we need to, not execute it at that moment, but we can, if need be, still expands that factory and could almost double it again if need be. But at this moment, we're focused on finishing our projects here, and we can decide in the next -- yes, '25, '26, if we need to expand rates beyond the capacity that we anticipate in '25, '26.

Margin, NPC, yes, yes. Basically, HOMMEL has been okay, Prodomax has been very strong, result in good margin development at NPC [indiscernible]. Nothing more to it really than just that. Prodomax developed nicely in terms of sales. Not quite as good in terms of order intake, but we knew that. Basically, the hangover effect, if you want, or rollover effect from the first quarter from that particular -- in the U.S. electromobility issue that we discussed in the last earnings call, and there isn't really much more to it, actually.

[Craig Abbott, analyst]

No, but my question was, Prisca, I believe I understood you correctly, you suggested we should expect normalization in the NPC margin in the second half. I was just trying to get a feel for how sustainable a level around 20% is. For me, it sounds like it was perhaps a little bit related to final [indiscernible] on a very profitable Prodomax project, but we probably shouldn't be thinking around that kind of margin level going forward. That's my question.

[Stefan Traeger, executive]

No, I think what Prisca refers to is that the comparator for NPC in the first half was much easier than in the second half, just a comp, basically. NPC first half last year has been, relatively speaking, weak, and second half, relatively speaking, strong. So the comp for NPC in the second half is much harder than in the first half.

[Craig Abbott, analyst]

Okay. Yes. And then I have -- I just want to quickly, on HOMMEL, I realize you [indiscernible] give a lot of details on this page, but I want to make sure I understand you correctly. You said you want to build this new business unit, and did I understand it that you want to bring TRIOPTICS into that unit as well? And if so, I'm just trying to understand what kind of competitive advantages you envision for that unit.

[Stefan Traeger, executive]

Yes, that's correct. And the thought process is basically this. Look, I mean, both TRIOPTICS and HOMMEL cater to customers' measuring things, basically. [indiscernible] TRIOPTICS, our TRIOPTICS business is focused on measuring the quality of production or inspection, if you want, or during the production process of optical parts with optical means. The friends and colleagues in Villingen-Schwenningen cater to people measuring mechanical parts with mechanical and optical means. And so while customers are not quite the same, there is some overlap.

In particular, the more you see optical modules also in mechanical parts and then like in cars and other things, so optics is ever more important. And what we see is some synergies, if you want, where we can help each other on the sales side, but much more on operations. It's more than operational leverage than the market leverage, if you want. Customers are somewhat different, but production is fairly similar.

If you look at a box from HOMMEL produced in Villingen-Schwenningen versus a box from TRIOPTICS produced in Hamburg or Wedel, they look fairly similar. And we can hope that, believe that we can basically cross-utilize our production facilities in -- across these 2 businesses. That's the main effect. It's more of a cost "synergies". Don't read too much into it, but more on the cost side, on the operations side, on utilizing existing capacity better than on the sales side. There is some overlap on the markets, but more on shared software platforms, shared operational resources and that type of stuff.

[Craig Abbott, analyst]

Okay. Very helpful. And my last one is a real quick technical question for modeling. Looking at the group EBITDA, the holding on the [ next line ] is based in the [ meantime ] negligible in Q2, which actually contributed more than EUR 2 million to the group EBITDA progression. If I am thinking of this, I think it has been primarily due to cost reallocation to the segment. I just wanted to know, should we take this current level sort of the run rate? Or were there some special factors in there?

[Prisca Havranek-Kosicek, executive]

Yes, Craig. So you're right. This is primarily -- this is purely related to cost allocation. And I would more say that last year was maybe a little bit off, so I would basically take this year's progress for the full year. The effect comes from last year. But it's nothing operational. It's just [ allocation ] based.

[Operator]

Then the last question in our queue is from Finn Kemper, HAIB.

[Finn Kemper, analyst]

Congratulations on the strong results. A lot of questions have already been asked, but I have one more regarding the weakness in life science and med tech. Could you provide a couple more details on what subsectors are stronger than others? And finally, when we should consider a recovery to take hold?

[Stefan Traeger, executive]

Yes. We have a certain product line under the -- within this strategic business unit that basically produces -- in a way, it's high-power lasers. So laser [indiscernible] with a lot of power output that are used to, for example, bleach tattoos if you want to -- it's dermatologist's application here, skin treatment. If you do have a tattoo and want to -- for whatever reason, don't like it anymore, want to get rid of it, you can take a higher power laser and basically destroy the ink, if that makes any sense. I'm not an expert on that, but I can tilt the lasers.

So strong lasers are used for that, but they're also used for other applications, nonmedical applications, obviously, non -- more like industrial applications. And [ I split ] to the comment has been made earlier, the weakness is more in the traditional industrial fields and segments. We report that business under medical, because you have -- for historic reasons and it needs a home and a large part of the application is a medical application. But I'd say probably half of it is actually non-medical.

So you utilize strong laser power for lots of things, and that half is weaker or actually very much down due to increasing competition out of China, and it has been a business that was strong in China and a product line that is strong in China. And let's not read too much into this. I mean we're not talking about EUR 100 million business there. It's around -- I'd say around EUR 30 million or so product line that's under pressure, but of course, for our medical business, it has an impact.

[Operator]

Thanks a lot. And with that, I would like to close the Q&A session for now, since there are no more questions in the queue. Over to the host.

[Stefan Traeger, executive]

Well, thank you very much again for being with us today. We're pleased with that, pleased with the results of Q2. On to Q3, we continue to work hard to deliver a good Q3 and obviously anticipate to fulfill our guidance for the year. Thank you very much.