Detailed narrative
Balance Sheet Transformation
SCHMID Group executed a significant balance sheet transformation in H1 2026, raising EUR 33 million in new net capital through a convertible and standby equity. A EUR 30.75 million debt-to-equity swap reduced total debt from EUR 53 million to EUR 23 million, creating debt capacity for future growth. The company also secured additional debt capacity for China, up to EUR 20 million, with an attractive average funding cost of approximately 2.7% for new Chinese debt, which can be non-recourse to the German subsidiary.
Cost Optimization (Sprint Program)
The company successfully concluded Sprint 1, a cost program that reduced headcount by more than 14 full-time equivalents in German overhead functions, achieving an annualized run rate of EUR 4 million in labor cost savings. Restructuring costs for Sprint 1 are estimated at EUR 700,000, with EUR 400,000 expensed in H1. SCHMID has now initiated Sprint 2, a purchasing cost savings program targeting at least 5% savings on purchasing expenses, with most expected by year-end, and further design-to-cost initiatives planned for 2027.
Order Intake Momentum
SCHMID Group experienced accelerating order intake, with EUR 52.3 million recorded in Q3 through mid-August, bringing the year-to-date total to EUR 96.6 million. This momentum is primarily driven by investments in flip chip BGA substrate and AI server board capacity. The company's order backlog reached a record EUR 89 million, with recent orders expected to flow mostly into 2027. Management expressed confidence in achieving the upper half of its raised FY26 order intake guidance of EUR 125 million to EUR 150 million.
China Manufacturing Expansion
To support growing customer demand, SCHMID is consolidating and expanding its Chinese manufacturing campus in Zhongshan, Guangdong province. This EUR 11 million investment for land and building will double the company's production capacity in China, increasing its annual revenue potential from EUR 50 million to EUR 100 million. The new facility is expected to be operational by Q4 2027, with construction anticipated to begin in September/October 2026 and spending spread over approximately 12 months.
H1 2026 Financial Performance
H1 2026 saw a slow start, with Q1 revenues of EUR 18.2 million increasing to EUR 27.8 million in Q2. Equipment revenues grew significantly to EUR 39.4 million in H1 2026 from EUR 10.7 million in H1 2025, while spare parts and services revenues increased to EUR 6.4 million from EUR 5.9 million. The gross profit margin for H1 was 21.2%, lower than expected due to reduced scale and a shift towards lower-margin China production. G&A expenses rose by over EUR 3 million, impacted by restructuring, share-based compensation, and capital structure costs, and the company recorded EUR 1.7 million in foreign exchange losses.
Working Capital and Cash Flow
The company reported an operating cash outflow of EUR 29.3 million in H1 2026, largely attributed to a EUR 26 million investment in working capital. Working capital as a percentage of last twelve months (LTM) sales stood at 14% by June, with a medium-term goal to reduce this to 10% or less. Management noted challenges in securing cash advances for European contracts and the impact of prior advance payments to suppliers, which are now mostly resolved, on working capital.