Andritz Ag Graz Akt

Good morning from Andritz this morning and welcome to our full year 24 earnings call with analysts and investors. I'm Matthias Pfeifenberger, the head of investor relations, and I have a big pleasure to introduce our hosts today. It's our CEO, Dr. Joachim Schönbeck, our CFO, Mr. Nettesheim, and our new executive board member, Vanessa Helving. What is the agenda today? We'll run you through the full results, including the divisions, then we'll switch over to outlook and medium-term targets, followed by Q&A. And before we start, I'd like to pass over to Vanessa Helving for introductory remarks. Vanessa, please.

Thank you, Matthias. Thanks for the intro and also a sincere thanks to Joachim and my dear board colleagues for the great welcome at the Board of Hundreds. So maybe a few words from my side. Good morning to all. My name is Vanessa Helving, and I'm part of the Android team since January. I'm very excited to take over the new CFO role from April, following a very smooth and professional handover from Lovett Nettersheim. I have already been in CFO positions since the age of 29 and have been working with companies like Siemens, ThyssenKrupp and Fisman Climate Solutions, which was recently sold to Carrier Global. I'm bringing along quite significant experience in the large cap sector. Many fields of my professional expertise actually imply a broad overlap with hundreds focus areas. like plant engineering in general or large project business in specific. But also the focus on sustainable solutions, a strong service offering and also my favorite, digitalization. In my previous roles, I was driving large restructuring programs and portfolio optimizations. I have headed large-scale M&A processes with intense post-merger integration and also special projects like shared service setups and an IPO preparation. Equipped with my experience, I'm looking very much forward to making a significant contribution and help promoting the UnRitz success story to the next level. While I'm today only enjoying the show, I will already meet analysts and investors at our next investor conferences scheduled in March and April and hopefully catching up with many of you and, well, having good conversations. And with this, Joachim, the stage is yours.

Thank you very much. Good morning to everybody from my side. So, we are very happy, Vanessa, to have you on board. Even though we will miss Norbert, we for sure believe that you will help us to improve further. And I hope that the analysts will love it and the investors even more. because tomorrow is a better day than today is one of our DNAs. So that is a very good change. However, as you know, the changes in unreads are very much based on changes in continuity. This was when I took over from Wolfgang Leitner on the CEO, and this will be the same mode of operation we will have in this change on the CFO. as we will be the last time in this round also from my side a big thanks to Norbert for his good contribution and his good guidance of you to the greater good of hundreds I would say the times we are in currently cannot be more interesting, to say the least. However, we see some, I would say, some good improvements in Austria since a week. We even have a new government, and I think it's... Not everybody has heard it. They call themselves the government of economic reason. I would say that's at least a good start. And also Germany is on a good way to form a new government. So I would say that gives a good environment for what we share with you today. Do I click? Yeah. Okay. So, if we look to the hundreds performance of Q4, 2024 and the full year, I would say we made a good end of the year record order intake in December, very strong order intake in Q4. Overall, it brought us to a book-to-bill of one, definitely driven in Q4 by pipe and paper and hydropower. a good recovery in many of our markets across the industries, and we could see a continued growth in the service business, even in the, I would say, more subdued market conditions of last year, service grew quite strongly. We had a slight decrease in revenue year on year, but I'm happy that we can report a stable EBITDA margin. good improved mix from capital to service, solid project execution. We made additional provisions for capacity adjustments in Q4. Still, the reported EBITDA is stable. The operational EBITDA could even improve. We have a stable net income with a record net income margin of 6%. So if we put it in numbers for Q4, 2.5 billion euro order intake, 2.3 billion euro on revenue. The order backlog nicely increased from Q3. We are now almost at the same level we had been in Q4-23, so 9.7 billion. The comparable EBITDA margin was 10.2% in the last quarter. It was on the reported margin 9.0%, 206 million euros, resulting in a net income in the last quarter of 154 million euros, or 6.8%. Looking to the full year, order intake and revenue both settling at 8.3 billion euro. I would say for a not too bad number for a difficult year we had. We have the EBITDA. The comparable EBITDA at 743 million euro, 8.9%. The EBITDA reported at 713 million euro, it's 8.6%, exactly on the level of the previous year. results up in a net income of almost half a billion Euro, 497 million at 6% net income margin. The dividend per share we are proposing to increase by 10 Euro cents per share to 2.6 Euro per share. We made further further way on our acquisition strategy, strengthening our digitalization and decarbonization parts of our strategy. We acquired, summer last year, we acquired Procevex, the market leader of optical web inspection for the paper industry. Extremely successful company, excellent fit, strengthened us in the digitalization in our efforts towards the autonomous mill. On the decarbonization, we invested in Hydrogen Pro. That's our technology partner for the green hydrogen alkaline electrolyzers. And we acquired, beginning of this year, in January, we acquired LDX Solutions. That is a U.S.-based leading company for pollution control solutions. specialized in North America, sales approximately 100 million, believe that it's the right time to enhance our business in the United States. Our intake in detail, we look Q4 full year. You could see that in Q4, the increase compared to last year was significant. Pulp and paper plus 25%, metals plus 6%, hydropower plus 54%. So it's really, it is significant. It's significant, only environment energy dropped in Q4, but you might or might not remember, we had a very large order last year in the Q4 reported, so I would say in total it does well. Looking for the full year, we can see strong growth in hydropower, environment and energy, definitely a reduced demand for pipe and paper and metals. Maybe if you can see the development, if you look on the chart to the quarters, that we had an increase in Q3, an even higher increase in Q4. So we believe there is definitely a change in the market. in the market doing. On the revenue side, we saw a decline, a slight decline in 2024. We had a solid growth in service business. We had a very late, I would say, auto intake pickup, which at the end did not convert into sales in 24, so that sales will come then in 25. We have in pulp and paper, we have the situation that the very large projects of the past years, they're approaching completion in... I would say in metals, the overall drop is not that significant, minus 2%. Hydropower, very stable. But you could see we have an increase in hydropower sales. That's 1% only. But if you see in the last quarter, the increase is 13%. And this basically reflects this business model of hydro. Execution time is rather long and in the first six to nine months rather moderate sales recognition because this is the period when we have the engineering trials, the mock-up will be built. So we are confident that the sales will come. We do not see any delays in execution or any obstacles on our way. In environment and energy, we see the solid growth that we saw is basically across all industries that we are serving. Having a closer look to the service business, we reached service revenue share an all-time high, 41%. Never been there before. That is very good. And that is not only because the capital sales went down, but if we look to the absolute numbers, you can also see that we could increase nicely to 3.4 billion Euro service revenue. This will continue. The 8% is definitely what we would like to see further. Capturing entire lifecycle value is what our customers want. That's a clear part of our strategy. And we will go there with organic expansion and, of course, with M&A. with the large capital orders we have had over the past years, definitely provide an excellent basis to further increase our revenue shares. You can see that we have a solid backlog, significant improvement, 4% from Q3 to Q4. Majority... as usual in pulp and paper and hydropower and with a strong growth of hydropower that share is really significantly increasing you could see from previous year to this year from from 34% to 41%, so that is a significant increase, gives a good solid foundation for the sales recognition in this year. Looking to the EBITDA, The reported EBITDA, as I already mentioned, dropped from €742 to €730 million. EBITDA margin is reported stable, 8.6%. You could see rather stable over the year. Interesting view definitely is on the comparable EBITDA margin. I reported to you already in the last calls that we saw in our industry some, I would say, structural changes which we do not believe will quickly recover, so we took the decision to go for capacity adjustments in certain areas. Mainly in Europe and within Europe, mainly in Germany, this has been accounted for. This is why the comparable margin is significantly higher. So we can report here 8.9%. 743 million Euro, which shows that we are on the operational side, made our homeworks and are on the right way to improve sustainably also our profitability. On the ESG side, I would say we are well on track. Basically the majority of our ESG targets for 2025 we have reached. We are lagging a bit behind on this share of green revenues. We are stuck at the 44%. We believe it will be difficult to reach the 50% in 2025. On the social goals, I would say we are on a good way. The governance is all green. We will define new ESG targets during the year. The greenhouse gas emission targets will be aligned with SBTI. We are in the process of getting their approval across And I would say within Q2 or Q3, we will inform you about the new targets. So I hand over to Norbert to report in more detail about the financial performance.

Thank you Joachim. And also from my side, good morning to all who are on the call today for the last time. But continuing as I did in the past, I will dig a little bit deeper into our group's financials, starting with the P&L and then going through cash flow, liquidity and some major KPIs all related to the total group. So starting with the P&L key figures about the EBITDA, Joachim has already reported a very strong Q4, which 206 million brought us to the 713 EBITDA. This includes 26 million additional non-recurring or restructuring expenses which we have accrued for in the Q4 to start some adjustments for capacity adjustments especially in metals and in some parts of paper. This led then to the 713 And if you look to the left, with regular depreciation, we were able to get a 10.7 EBITDA number, which is a 20 base points increase compared to previous year. And from EBITDA to the right, you know the regular topics which we have with regard to amortization. 51%, nothing special, regular amortization, no special write-offs to do, also have enough and very headroom in our impairment tests. Then with the EBIT of 661.2, also a slight increase, 8% compared to 7.9% in the past, and then comes, let's say, the The first new in this slide, which you didn't see that way in past quarters, we report on a negative financial result. And this is simply a devaluation issue. You know that we had this cybersecurity joint venture, Otorio, which was a fully consolidated unit because we had majority in the past. We took now additional investors in. And this led to the fact that we had to deconsolidate it, bringing our share a little bit below the 50%. And this consolidation led to a slight devaluation effect of 23 million. It's simply a balance sheet devaluation of this matter and this brought the financial results into the negative. The pure interest result is sufficiently positive with more than 40 million in this number based on our favorable liquidity situation. So with this negative financial results we come to a 446.6 EBT. And with 150 million tax, which is a significant reduction in tax rates to 23.2% coming from the 26.7% in last year, driven by increase in deferred tax assets. we could manage to keep our net income somewhere in the range of 500 as you were used to see it also in the former periods. 6.0% is a record high for Andretz and is what we have announced in January last year in the capital market day as our net income target. So while on sales and on profits we might have a little bit of a delay, With regard to the net income margin, we are already in the target dimensions. So that's it on the net income. Having it not on the slide, but mentioning it quickly, equity increased to 27.9%, 2.2 billion. You might see when you look through our financial reports, which is a very favorable and a very sufficient equity portion, which later on is then also a basis combined with the cash to provide and pay sufficient and nice dividend also for 24. So that's it on the P&L. When we now look into cash flow, you see here the classical bridge from the net income to the cash flow and the nice thing is that we could turn in the Q4, this increase in net working capital, so the cash consumption due to increase of working capital in Q4 was stopped and it was even favorable, so 25.9 million TL in cash flow in the Q4, but for the total year, negative effect of 114 by increase in working capital As I explained several times, nothing serious or driven by this regular cycle of big projects which are in the early stage cash positive, in the late stage cash negative. We have no more projects in the late stage and this led to the fact that working capital increased. nothing special, everything regular and in total we achieved 636 million operating cash flow which is, at least from our perspective, but you have to judge it finally, a very favorable number to generate more than 600 million cash out of our 8.3 billion revenues and we invested 237 in fixed assets and in M&A activities, and this led them to a free cash flow of 399. Here you see the backup for the cash flow, which I mentioned already, Q4, with 233 million, very favorable operating cash flow. And this supports then the average, three years average, to stay consistently above the 550 million. And that means Andres is not only a profitable company, it's also a nicely cash generating group. So this then at the end leads to the fact that the treasure box stays filled nicely. We paid back in the current year 300 million of debt. And we did, as you know, these dividend payments in the last year. had a share buyback of 117 million, and beside all this usage of our liquidity, we kept the net liquidity still on a rough 900 million level, which gives us, as I said several times, sufficient room for strategic acquisitions in the next future. And with all of that, a good result, well-dimensioned equity and a good cash basis, we were able to increase the dividend to 2.6 euro. And this is now a payout ratio of 51.8. and supporting the average payout ratio of about 50% as we have announced it in the past. So that's about the numbers and I'd like to end with a quick view on the major KPIs and as we said already in Q3 we will look a little bit more intensive on the return on the invested capital in the future. You see here the development over the years. We are now at a 22% level in last year and current year level means more than 14% above weighted average cost of capital. So I would say a good investment of money into UNREADS with a very high value creation on invested capital. So, and here the summary, you know, are the details of all the numbers which were mentioned already, partly all the intake was mentioned by Joachim Strong, Q4, slight decrease in revenues. By the way, 100 million of this decrease is from foreign exchange currency effects. with a stronger euro compared to the REI and the renminbi. So this currency adjusted would be only a 3% decrease coming from this order backlog and order intake situation as explained. But when you then look into the numbers below all these relative profitability numbers on a very good, partly increased level, with the 500 million. And as I said before, the strong cash flow leads then to the sufficient liquidity of 900 million. So that's it from me. It's also the last time I have the chance to speak to you and the only thing I want to say is a big thank to all the people I spoke to in the last years. It was always perfect collaboration and a perfect communication. I wish you all the best and I wish Andres and my colleagues also all the best for the future. Joachim.

Thank you, Norbert. So let's have a more close look to the business areas, pipe and paper. As we said, difficult market in last year. Significant recovery towards the end of the year. Ended up in order intake in total. minus 8%. Backlog also drove down revenue down by 13%. Profitability nicely nicely up on a comparable EBITDA margin from 10.5% to 11% and on the EBITDA from 10.3% to 10.8%. We had a good growth in the service business that gives us good hope, good connection with the customers, definitely excellent basis to grow that further. The increasing activities in Q4 led to two very important orders for us. We received orders for two complete pulp mills in China. That is, I would say, a very good success. It also shows the appreciation of the market of our technology and the advantage the customers see to buy the complete pulp mill system from hundreds. As I said, the revenue decrease is due to the fact that the large pulp mill orders approaching at the end. For sure, I would say the record ramp up of our latest pulp mill in Brazil for Susano set a new industry benchmark, plate capacity of that asset was reached after five months of operation, never seen that before, proves the excellent cooperation we have with our customers, but definitely also supported by our full automation and simulation package that could help the operators a lot during this ramp-up phase. If we move to metals, I would say 12 months ago I also reported to you that the markets, the automotive side, on the steel side, I would say very subdued. This changed in the course of the year, which ended up that we could recover on the order intake in the Q4. So we had an increase of 6% compared to 23%, even though over the full year we are missing a gap of 15%. Revenue remained stable because we had a very good a very good backup. I would say excellent cost control in this area. We did, I would say, decisive actions to reduce capacities in Germany. That's on the way. On the cost, we have had to take the provisions needed to do that in Germany, which I would say, affected the reported EBITDA margin. But if we look to the comparable EBITDA margin, you could see that we are improved from 5.1% to 5.5%. So I would say we are on a good way. With the cost reductions initiated coming into full swing this and the next year, we definitely are very positive that we will be in our target range very soon. We had an excellent performance in the service, a record high order intake and sales in our service business, and we saw a particularly strong growth in China, as you know. While the automotive industry in Europe is rather in a very difficult situation, a lot of business is going on in China, and we are very happy that we can be part of that good market development. Hydropower is, I would say, fully exploiting the good market. the good development of the market. We had an extremely strong year in 2023. We made it an even better year in 2024. Order intake in total 2.2 billion euros, 7% up. Order backlog even 16% up. Only, as already said, the revenue only slides because the first the first year of a typical hydro order, only a very low sales recognition, but this will build up over the time. The profitability is increasing. Also here we need to follow the slow development of the new orders that we take. We have some, I would say, some old projects that need to be pushed out from our backlog in order to give the room for the new orders. for the margins to improve. I would say we are on a good way there. We won, I would say, a very sizable large-scale project in Q4 in the EMEA region. We hope that we can provide more details on that in the weeks to come. Revenue, EBITDA profitability, I told you the, so I would say we are on a good way there. The market looks favorable and we see a good trend. We see the... mode of partnership between our customers and us in the hydropower sector, moving from project to project, single transactions more into partnership modes. So we have signed, for example, with Hydro Quebeck, a frame agreement for projects over the next eight to ten years to come, which gives a us a better view on the future and also makes it more likely that we can work as partners to the benefit of the project. So I would say we will have a good outlook there. Environment and energy also definitely a highlight of the last year. Strong growth in order intake and in revenue. 8% in order intake, 15% in revenue. We could see a significant growth across all the industries we are serving and we see a continuing demand in the products we are We are supplying there. Profitability is very high even though we have, I would say, rather high R&D costs at the moment. As you know, Within environment and energy, a certain amount of our new products are included there, the green hydrogen, the carbon capture venture, so that usually takes a lot of development work. However, margins with 11.4% are comparable, sorry, 11.1% comparably, 11.3%. reported margins very high and supported for sure by a very good service business which we could also grow and see good potential to grow that further. Coming to the future, guidance for 25. We would like to give you a guidance for the revenue for the upcoming, for this business year, from 8.0 to 8.3 billion euro. And the comparable EBITDA margin, we are forecasting from 8.6 to 9%. We want to point out specifically that we changed the guidance from reported margin to comparable because I think it makes it more easy for everybody, also for you, to take out these one-offs that not really that are not recovering effects and is basically maybe distracting sometimes the view on the actual figure. So we changed from reported to comparable EBITDA margin. We believe that within this revenue, guidance. We are safe to land. We hope that we can narrow that down over the year we are talking to you. On the 2027 targets, we would like to revise the mid-term outlook a bit. We see a revenue target grow from 9 to 10 billion euro. We have it basically divided in two parts, what we call the base grow from the... Let's say increasing demand on the green products, normal smaller sized M&As. The regular growth that we see in the service business and also some expansion on the capital sales. And then we see, let's say, this extra effort, what we can, if there comes from, for example, from these investment initiatives announced in some of our own markets for the green product, any large-scale orders for hydro or for pipe and paper or large-scale M&A would then lift us up to that. revenue level. On the EBITDA, we have basically for your bookkeeping, we have adjusted these numbers now for the comparable EBITDA margin and not to the reported EBITDA margin just to be clear where we are. The picture basically has not changed in pulp and paper and environment and energy. We are basically in the target range. In hydropower and metals, we are not there, but I would say within reach and in a good way. And we are optimistic if we stay close on our strategy, good execution, cost awareness, that we can reach the targets. We point out to you, so if we summarize the new mid-term targets, 27, we see a revenue between 9 and 10 billion Euro, comparable EBITDA margin above 9%, and if the markets that we can only create to a very small amount. If the markets are there, we are very confident to reach that. So thank you very much for that. And I believe we are open for questions. I hand back to Matthias to guide us through.

Thank you, Dr. Schoenbeck, and to our executive board members for the elaborations. And we'll start the Q&A sessions right away. Please note that you need to register with your full name to be able to ask a question. Like a chorus called to go ahead. Thank you.

Gentlemen, we will now begin the question and answer session. A question from the webinar may click the Q&A button on the left side of the screen and then click the raise your hand button. If you are connected via phone, please press star followed by zero on your telephone keypad. If you wish to remove yourself from the question queue, you may press the lower your hand button or press star two by phone. Anyone who has a question may queue up now. One moment for the first question, please. And the first question comes from Akash Gupta from JP Morgan.

Please go ahead. Yes, hi, good morning, everybody. I have a few, and I'll ask one at a time. So my first one is on your change in guidance parameter. So you are now going to adjusted EBITDA from reported EBITDA, which I think may make sense given most of the company's guide on underlying numbers. But maybe a question if you can tell us about the need for restructuring in the coming years because you already took quite a large restructuring charge in 2024, so maybe if you can talk about what sort of restructuring we should expect in 25, 26, 27 to get to reported EBITDA from adjusted EBITDA that you're guiding. That's the first one, thank you.

So we have, I would say the capacity adjustments we had in mind have been initiated, have been announced, we are now in the process of executing that, so we will see in In 2025, the majority of these capacities will be adjusted, and then we will see the full-year P&L effect definitely later from 2026 onwards. At the moment, there is nothing more that is under planning.

Thank you. And then my second question is on your more than 9% margin target for 2027. So, like, once again, if we take 2020 for revenues and take the midpoint of individual segment guidance, I mean, the midpoint shall apply, would translate into 10% margin for the group. So maybe if you can elaborate on why you are still sticking with 9%, why not raising a margin target to above 9% to more like 10% level?

So we would be happy to report that your calculation is better than ours and we can be at 10%. I would say we say greater 9%. We also, I would say we see that not everything is in our hands. and we definitely see at the moment in a world where you're not very sure what will be the biggest news the next day. So I think we feel confident on the 9% to deliver on that, and you can be sure we will be happy to overachieve that.

And my last question is on any exposure to defense sector in any of your businesses, because maybe from outside you have a big metal business, and if there are new investments in ammunition, is there any benefit that we might see to your metal business or maybe any other business that may also benefit from higher defense spending in Europe? Thank you.

We are not a defense contractor, but we know that some of our customers are supplying the defense sector, and for sure shell lines for ammunition, they're based on forging and metals forming. So for sure our business is positively affected by that.

Thank you.

And the next question comes from Sven Weiher from UBS. Please go ahead.

Yeah, good morning. Thanks for taking my questions. The first one is the usual question around the pulp megamills. Maybe you can walk us through a little bit more detail on the activity level. I mean, we could see last year, end of last year, that Brasel is applying for the environmental permit. And I guess this usually takes 12 months. So would you say that you would see the mega mill activity, you know, picking up somewhere in the second half of this year? That's the first one. Thank you.

So I would say I cannot talk about individual customer projects because that is, they want a certain confidentiality which we do not would like to break. You can ask the public listed companies, you can ask in their calls. What we could see in Q in the second half of last year, three complete pulp mills had been on the market. The one was in Brazil that we lost to China, we won that. So apparently there is a market and we also see a pickup of project activity, as I said, across all industries, and that includes pipe and paper.

Okay, fair enough. Thank you. The second question was just on metals and was just wondering on the auto exposure that you have. I mean, obviously... Sentiment is weak, but would you say there's business activities at a trough when you see signs of improvement, or is that too early to see any green shoots there?

We see improvements. We saw a very low investment activity in automotive and automotive-related. In the first half of last year, we see a pickup. We see Chinese carmakers moving to Europe, not only with their cars but also with production assets. As I said, as we are a supplier to them in China, we see also that we can get a share of that once they're coming to Europe. I would say if the economy... in total would increase in Europe, also the automotive industry will improve and with the installed base that we have and the installed base our customers have that's definitely a big opportunity also for our service business because if you do not go for new investments then of course the repair and maintenance costs will increase and with our I would say the good service coverage we have in Western Europe, we definitely can also take a share there.

Thank you. The last question I have is just coming back also to the previous question on the defense exposure. I'm not sure if you can actually quantify it, whether we talk like 1% of your group sales or 5%. And the other question I have, obviously, when you look at the plans in Germany, not only a big defense stimulus, but also for the economy as a whole, right? I mean, infrastructure and possibly other things on climate transition. I mean, that all falls also in some of your neighborhoods in terms of customers. I mean, would you sense that This could really have a broad positive effect also on how your customers feel in Europe as a whole, that Germany is seen as a kind of an engine for the coming years, and that a lot of projects that have been on hold could start to move ahead on this. Any thoughts on that would be appreciated.

So as a European citizen, I can only hope that Europe will again be the engine of Europe, because if the largest economy is struggling, I would say Europe in total is definitely in a difficult position. So I'm quite happy that we have now two parties in Germany that apparently are very constructively talking. considering the high speed with which they made the decisions over the past two weeks, tells us that they apparently picked up the sense of urgency we somehow were missing in the previous years. So I would say I'm quite confident that investment decisions in that climate will probably be made more rapidly in Germany. We have announced, I think two or three days ago, we have announced another large order for a green hydrogen plant that is where we have the engineering order now, final investment decision pending. So I would say projects like that definitely will be supported by that, I would say, general sentiment. And the defense exposure, would you say that's really like 1% or 2% of your... Sorry, but I do not have a number to provide. But as I said, forging metal, metal forming, and heat treatment definitely are elements where we see there might be demand picking up. Okay. Thank you, Dr. Schoenweg.

And the next question comes from Lars von Kleff from Deutsche Bank AG. Please go ahead.

Yes, thank you very much. Good morning. Quickly following Sven Weyer, I would once again be interested in your view on the sentiment in the paper industry and your customers. I mean, you already said you're not commenting on individual customers. You expect more orders to come. all fine, but do you fear that the currently rising interest rates could postpone some of the orders you are hoping for? And also, I would be interested in your view that, I mean, Susanne seems to have said lately that it expects capacity to exceed demand for pulp at least for the next five years, given new capacity coming on stream in China. Is that something you're hearing as well, or would you rather expect demand and therefore your order intake for large pulp and paper orders picking up again?

Okay, so I'm reading the same press releases as you do, and we have a strong belief, and that's also what we pick up from the industries we are delivering to, pulp will be and will remain one of the strongest products to substitute plastics in many applications we see today. So I would say it's not only the paper and board exposure, it's much more where pulp fibers will be needed. So our view on the long run is really more positive. then assuming there will be an oversupply in five years. If we look to the pile prices, they don't give that sentiment. Interest rates, if they increase, that usually always hurts investment. No need, nobody will be surprised about that. But I would say the many more applications we see out of pulp give us a positive hope. On the paper side, we had seen many mill closures, especially in Europe over the past years. They have bottomed out, so they are ramping up production again, which means they also earn money. And if they earn money, there is also on their side, usually there is demand on modernization. So this is... I would say why we are not looking very negatively to the markets right now and also not to pulp and paper.

Thank you. And then maybe a quick follow-up question. I mean, modeling this year, you're guiding for flat group revenue at best, rather for a slight decline. I assume given the size of your pulp and paper business and order intake in 2024, the majority of that negative headwind for revenues we should see in the paper division, correct?

I would say... I cannot really, I don't know. I have not calculated that number. I have to ask my number specialist. You are right.

You are right. Okay, perfect. There is a simple rule. Order intake will determine sales. And this rule is also happening next year in our company.

Perfect. Thank you very much. I'll go back into the line.

And the next question comes from Christoph Dolleschal from HSBC. Please go ahead.

Yeah, good morning, everyone. So my first question is again on the 2020... You're breaking up?

Mr. Dobrishal, your line is still open, but we cannot hear you right now. Yes, very quietly. One second. Thank you. Maybe we can hear you now better. Please try again.

Can you hear me? Because on my end it should be working quite fine.

If you can speak up a bit, we can hear you now.

Is it better now? Now it's excellent. Thank you. Hello, can you hear me? Yes. Okay, perfect. Thanks very much. Sorry for that. So on the 2025 guidance, you talk about successful bolts on M1A. So does the guidance of 8 to 8.3 billion actually include some M1A, or is it organic?

Guidance includes what we know now. That's the LDX acquisition that I informed you about. We made it in January. Anything else would be on top.

Okay, thanks for clarifying that. Then on the 2027 targets, so basically you slightly revised your revenue target, and could you also tell us where that is mainly coming from? Because originally we talked about $10 billion, now we talk $9 to $10 billion, and the question is which segment that comes from mainly.

We did not attribute the discount to a specific segment or industry. I would say it is a more cautious approach to projections in the future, more taking into consideration, I would say, the very economic and political volatile environment we are currently in.

Okay, so all segments, I would say, then. And then two little ones, because we talked about defense. I also recall that you have some nuclear exposure, and I recall it is about 1%. Is that still the case? Yeah. Okay. And last but not least, the evergreen parasol. I mean, we've seen, let's say, last month there was – some chatter around that Paracel is seeking for other investors to probably even sell a majority stake in the business, which doesn't read that well if you're trying to sell 51% of the business because of, say, cost overhauls. How is that currently panning out on your side? Are you still speaking to them? Are you still in the phase of thinking it's going to happen? Or is the likelihood declining from your end?

I cannot comment on that further. We are talking to all our customers, but we cannot, as I said, we will not comment on individual orders.

Okay, but because it's such an important order, and I think that the market has, at least from what I see, baked it into the numbers now, at least from my end, it sounds a bit more cautious than it probably did three months ago. Would you agree to that?

As I said, I cannot comment on that.

Okay. Okay, thanks. I'll go back online.

Good. And the next question comes from Daniel Lyon from Ask the Group. Please go ahead.

Yeah. Hi, good morning. Actually, I would be interested in in your capital structure and what you actually plan to do or where your target is in terms of equity ratio. You're actually moving it up quarter by quarter more or less. Now it's 27% already. Are you seeing any larger M&A transactions coming? somewhere close to materialize or how do you expect actually to or where do you want to go or grow your equity base and your liquidity in the end

Okay Daniel, thanks for the question. This increase in equity is simply coming out of the game. We did a good result and this leads at the end to equity increase as long as you don't pay dividends or don't buy sharebacks. The group is well financed so we are not planning to take further debt on board as long as we don't have a huge investment so all the bolt-ons we can do out of the cash flow means we continue what we did. We continue to be committed to a stable and good dividend. We are committed to organic growth as before and we do what we can with regard to M&A. And as long as we can finance it out of our current balance sheet, we do it from the current balance sheet. As for the case that we need debt for a large investment, we will take it. The banks are ready to support us. So all is open. Nothing new. The topic is very simply the opportunities which are available in the M&A area. We are happy to tackle everything that makes sense for us. So nothing new. We are well prepared.

Okay, so basically it's just development. Okay, I understand. Thank you very much. That's it. Bye. Okay.

So there are currently no more questions in the queue, so I would hand back to Matthias Feifenberger.

Thanks a lot for your interest and for your questions. I think this concludes the earnings call today, and I hand back to Dr. Schönberg for concluding remarks.

So thank you very much for attending the call, and we hope that we can provide you more good news when we see you next time in two months. Thank you very much.