Lem Holding SA (SIX:LEHN), the Geneva-based electrical measurement company, on Monday reduced its mid-term financial targets after reporting a 20.8% drop in net profit for the first half of fiscal 2025-26.

The company cited the continued appreciation of the Swiss franc, slower demand in key markets, and structural shifts in renewable energy and e-mobility as reasons for the revision.

Lem now targets average annual sales growth of 4-7% at constant exchange rates and a gradual improvement of the EBIT margin toward 10-15% following a phase of market adjustment expected to continue through the 2026-27 financial year. The previous mid-term guidance aimed for CHF 600 million in sales and an EBIT margin of about 20% by 2029-30. Sales for the six months ended September 30 fell 5.3% to CHF 148.3 million from CHF 156.5 million a year earlier but were up 0.5% at constant exchange rates.

Automotive and Track businesses grew 8.9% and 14.9% respectively at constant rates, while Renewable Energy and Energy Distribution & High Precision declined 15.1% and 15.2%. Automation sales rose 2.8% at constant rates.

By region, China accounted for CHF 55.1 million in sales, down 8.5% but nearly stable at constant rates.

EMEA sales dropped 6.8% to CHF 49.7 million, while the Americas rose 1.9% to CHF 18 million and Rest of Asia edged up 0.4% to CHF 25.4 million. Operating profit (EBIT) declined 19.8% to CHF 11.4 million, with a 7.7% margin. Excluding CHF 1.5 million in restructuring costs related to the company’s efficiency program “Fit for Growth,” EBIT reached CHF 12.8 million with an 8.6% margin. Net profit decreased to CHF 6.8 million, resulting in a 4.6% margin compared with 5.5% a year earlier.

Gross profit fell 14.9% to CHF 58.8 million, with the margin down to 39.6% from 44.1%.

Lem said the gross margin rebounded to 41.1% in the second quarter from 38.2% in the first, driven by pricing discipline and productivity gains. Selling, general and administrative expenses fell 13.4% against a 5.3% drop in sales, while research and development spending declined 21% to CHF 14.6 million, or 9.9% of sales.

Free cash flow turned positive at CHF 5.6 million, improving from negative CHF 11.6 million a year earlier due to better working capital management. Before restructuring costs, it stood at CHF 11.1 million.

Financial expenses increased to CHF 2.4 million from CHF 1.8 million, reflecting higher debt, while foreign exchange effects had a smaller negative impact of CHF 0.7 million compared with CHF 2.3 million last year. Chief executive Frank Rehfeld said Lem “delivered a moderate performance in the first half of 2025/26 with stable sales at constant exchange rates.”

He added, “despite currency headwinds, we achieved growth across key segments such as Automation, Automotive and Track, confirming the resilience of our diversified portfolio.” Rehfeld said the company’s EBIT margin rose from 5.5% in the first quarter to 9.9% in the second quarter “despite lower reported sales due to exchange rate effects.”

Lem said it expects no significant change in business development for the remainder of the fiscal year. It forecast sales between CHF 265 million and CHF 290 million and a high single-digit EBIT margin for 2025-26.

The company cited uncertainties related to U.S. tariff policy, currency fluctuations and geopolitical developments in the semiconductor ecosystem. The company said its “Fit for Growth” program, launched in November 2024, remains on schedule and is showing a positive impact through cost reductions and operational efficiencies.