Gea Group Ag Ord

Yeah, Nadja, thank you very much. Good afternoon, ladies and gentlemen, and thank you for joining us for our first quarter 2023 earnings conference call. With me on the call are Stefan Klebert, our CEO, and Markus Ketter, our CFO. Stefan will begin today's call with the highlights of the first quarter. Markus will then cover the business and financial review. And afterwards, Stefan takes over again for the outlook. Afterwards, we open up the call for the Q&A session. As always, I would like to start by drawing your attention to the cautionary language that is included in our safe harbor statement as in the material that we have distributed today. And with that, I hand over to Stefan.

Thank you, Oliver, and good afternoon, everybody. It's my pleasure to welcome you to our conference call today. Once again, we had a strong start into the year, this time into fiscal year 2023. Despite a record order intake in Q1 last year, we have further increased order intake organically by 3.9% to almost 1.6 billion euro. With regard to sales, growth was even stronger, organically up to 13.9% to about 1.3 billion euro. Due to the fact that we are continuously passing on price increases, we managed to improve our EBDA before restructuring expenses significantly by 24.3% to 172 million euro. The respective EBDA margin was up by 120 basis points to 13.5%. Last but not least, we also increased our ROSI by 3.8 percentage points to 33.1%. On the back of this extraordinary strong performance in the first quarter, we decided to upgrade our guidance for fiscal 23 as follows. For organic sales growth, we are now expecting an increase of more than 8%. EBDA before restructuring expenses is forecasted to be in the upper part of the range of 730 to 790 million euro. The expectation for the respective EBDA margin is now raised to at least 14.0%, and with regard to ROSI, we are guiding for more than 32%. Please bear in mind that the guidance for EBDA and ROSI is based on constant exchange rates. Let me now come to two sustainable technologies and solutions for our customers. You all know that GEA is mainly operating in the food, beverage, and pharmaceutical sectors. Three energy-intensive industries where GEA technologies can make a big difference. But we are also able to support other high-emission industries on their journey to carbon-neutral production. Take the cement or glass industry, for example. We have engineered a process that captures CO2 from production before it is released into the atmosphere. This helps making industrial processes more eco-friendly. There are interesting options allowing for a sustainable use of the captured carbon. It can be safely stored, for example, in depleted oil or gas fields in a broach, which is referred to as carbon capture and storage, or the captured carbon may be used as a raw material in industrial processes. This is known as carbon capture and utilization. Those options help to reduce the carbon footprint of the industrial sector. We offer our customers flexible, small or medium sized CO2 capture plans. The pilot plan shown on this picture allows our expert to continuously advance the system in cooperation with our customers. Of course, carbon capture is just one lever in an overall system of climate friendly management. But we are convinced that it will take us a long way towards a more sustainable future. Let me now introduce another interesting technology to you, lithium production and processing. In view of the growing demand for electric vehicles, demand for lithium is increasing worldwide. Lithium hydroxide is used as a starting material for the production of batteries for electric vehicles. Other applications include photo developers, ceramic products, and the production of borates. GIA is offering technologies for all key process steps in lithium production and has won a large lithium order in the first quarter. We are equipping additional production lines of the energy storage and specialty chemical groups, Albemarle, for the production of lithium hydroxides. The order value for the two centrifuge packages is 24 million euros. The filtration and sedimentation centrifuges will be installed at the company's Chemerton lithium hydroxide processing plant in Western Australia. That concludes my first part of my presentation, and I hand over to Markus.

Thank you very much. Also, a warm welcome from my side. As you just said, we had a strong start into the year with a very healthy Q1 2023. We have even managed to exceed last year's Q1 record order intake number of 1.54 billion euro by 2.4% or 3.9% in organic terms. Five large orders with a total value of 126 million euro were received in this quarter in comparison to three large orders totaling 92 million euro in Q1 2022. The EBITDA for restructuring margin reached 13.5% and was driven by an improved growth margin. Operating costs increased due to higher expenses for selling and administration. I'll see improved further due to the strong improvement in EBIT before structuring expenses. Overcompensating the increase in capital employed. All divisions contributed to this positive development. Our net liquidity declined from 412 to 274 million euro, mainly because of the second tranche of our share buyback program, which we finished at the end of fiscal year 2022. Between the first quarter 2022 and year-end 2022, we bought back own shares for a total of €170 million. As you all know, these shares are held as treasury shares. So all in all, a very successful quarter. Looking a bit deeper into the group performance, order intake grew to a record €1.58 billion, a 3.9% year-over-year increase on an organic basis. Three divisions grew their order intake organically, while liquid and powder technologies and food and healthcare technologies reported a decline. From a customer industry perspective, dairy farming and beverage were strong again, but also new food has been a strong growth contributor. As I just said, this quarter has seen several large orders, four in liquid and powder technologies and one in separation and flow technologies. But also our base orders, these are orders below 1 million euro, have seen an increase year over year. Given the strong order backlog at the beginning of the year and the fading of supply chain bottlenecks, sales generation strongly accelerated to an organic growth rate of 13.9% in the quarter. Service sales grew organically by an outstanding 16% year over year, driven by healthy organic service sales growth of all divisions. Also, new machine sales have been very strong, growing by 12.7% year over year. Two divisions have been particularly strong, farm technologies and heating and refrigeration technologies, growing their new machine business even by more than 20% organically. The service sales share was 36.6%, 0.4 percentage points higher than last year. The strong organic sales growth combined with an increase in the gross margin overcompensated higher operating expense, resulting in an EBITDA of €172 million, a €34 million improvement versus Q1 2022. When looking at the EBITDA margin, we achieved a significant year-over-year improvement of 1.2%. Now, let me continue with the figures for the division separation and flow technologies, which had a very strong quarter. Order intake grew organically by 13.0% year-over-year. Demand was strong in the custom industry's chemical, dairy processing, and renewable resources, and in nearly all size brackets. As Stefan has told you a few minutes ago, SFT has won a large order with a total volume of €24 million for filtration and sedimentation centrifuges, which will be used at our customer LV Mail for lithium hydroxide processing. The order backlog is substantially up by 17% year-over-year and 13% quarter-over-quarter to €670 million, which lays a good foundation for further sales growth in the coming quarters. Organic sales grew considerably by 14.4% year-over-year, driven by double-digit organic growth rates of both service and new machines. The service sales share, while being already on a high level, increased further by 0.9 percentage points to 46.7% in the quarter. EBITDA increased strongly by 14 to 95 million euro, and the EBITDA margin improved by 0.6 percentage points to 25.5%. Higher sales, good capacity utilization in the new machine business, and a higher service sales share resulted in a significant increase in gross profits which overcompensated higher operating costs. Let's move on to liquid and powder technologies. Order intake decreased organically by 2.0% year-over-year, while the customer industry's beverage, food, and new food showed a positive development in this quarter. Dairy processing, chemical, and pharma were below prior year's level. Liquid and powder technologies has won four large orders totaling €102 million this quarter versus three large orders totaling €92 million in Q1 2022. These large orders were received from the following customer industries, two in dairy processing, one in food, and one in new food. The one in new food has been the cell-based meat order we talked about during the last conference call. When looking at our order intake performance year over year, I would classify Q1 as a strong quarter, even being 2% below last quarter. to 122 was an exceptional quarter as many orders were placed after rather soft COVID year 21. This was mainly the case for large dairy processing projects in Asia Pacific and North America. Since then, dairy is back on a long-term normalized level with a lot of good small and midsize projects as well as increased service business. Overall, we see a healthy project pipeline across all our customer industries. sales increased organically by 2.1% year-over-year. While the service sales grew organically by 11.6% year-over-year, the organic new machine sales declined slightly by 0.4% year-over-year. The high order backlog at the beginning of the year has not yet been processed, as many large orders are still in the engineering phase. This explains the muted new machine sales generation in the quarter and will lead to an acceleration of sales growth over the coming quarters. Despite the muted sales growth, EBITDA before infrastructure expenses rose by 2 million euro year-over-year to 30 million euro, and the EBITDA margin increased by 0.5 percentage points to 7.8%. Growth profit rose due to improved project margins while operating costs remained virtually unchanged. Continuing with food and healthcare technology. Order intake was down by 8.3% organically year over year. The decline is mainly driven by the business unit frozen foods due to some larger orders in the prior year quarter. Most other areas in food and farmer at similar order levels compared to Q1-22. Organic sales growth was 14.9% year over year, driven by both a very strong new machine and service sales growth. The service sales share increased by 0.4 percentage points to 32.2% in the quarter. Despite strong sales levels, order backlog remains at historically high levels, which indicates further sales growth momentum. EBITDA increased by €5 million year-over-year, and the respective margin improved from 9.6% in Q1 2022 to 10.4% in Q1 2023. Gross profit increased year-over-year due to healthy organic sales growth while operating costs were underproportionately impacted from higher administrative expenses. Moving to farm technologies. Q1 has been the fifth quarter in a row with strong year-over-year organic order intake growth, hitting a record order intake level of 253 milliliter. Solid global demand for automated milking and manure equipment is driving the 6.6 organic order intake growth. Given the strong organic order intake growth in the past, and our expectation that the contraction of milk prices as well as rising interest rates will lead to some slow decision-making processes, we might see a temporary phase of moderate order intake growth going forward. The order backlog is substantially up by 14% year-over-year and 90% quarter-over-quarter to 346 million euro, which lays a good foundation for further sales growth in the coming quarter. Sales increased organically by 24.7%. This very satisfactory development was driven by outstanding organic new machine sales growth of 29.7% year-over-year and a very healthy service sales growth of 19.9% year-over-year. Due to the very strong new machine business, the service sales ratio declined by 2.8% to 47.6%. EBITDA increased strongly by €13 million and the respective margin improved to 12.5% from 6.8% in Q1 2022. Gross profit has been significantly above prior year's level, driven by strong organic sales growth and also due to consistent price adjustments during the last month, which overcompensated the increase in operating costs from higher selling expenses. Finally, let us turn to heating and refrigeration technology. Another division with extremely strong order intake and sales growth in the quarter. Order intake increased organically by an outstanding 32.5% year over year. The strong development was driven by a significantly higher volume of orders in both between 1 and 5 million, as well as between 5 to 50 million euro and goods demand in North America. From a customer industry perspective, Distribution and storage centers, climate control, as well as marine have shown good growth in the quarter. The trading environment remains positive. The decarbonization of processes is a strong growth driver, which is reflected in a high demand for heat pumps. Almost all regions with a good outlook, and the U.S. in particular, look interesting. also in this division the order backlog is substantially up by 25 percent year over year and 20 percent quarter of a quarter to 268 million euro which is great for sales generation in the coming quarters organic sales increased strongly by 19.2 percent year over year and was driven by new machine sales growth accelerating from 7.4 in Q4 2022 to 21.1% year-over-year in this quarter. Also, service sales showed a healthy organic growth rate of 14.9%. Its sales share, however, declined by 3.5 percentage points to 38.4% due to the strong new machine sales. EBITDA rose by €3 million to €60 million, and the respective margin improved from 10.7% In Q122 to 11.8 this quarter, gross profit was up year over year due to higher sales and better gross margin, which overcompensated the increase in operating costs. Closing the divisional chapter now with the overview on the EBITDA contribution and, as you can see, all five divisions contributed to the profit improvement. There are, however, differences in the extent of the contribution, and it clearly stands out that SFT as well as FT have been the major drivers behind the year-over-year EBITDA improvement. In total, EBITDA before restructuring increased to €172 million from €138 million. There's been only basically zero translational FX impact this quarter. Coming now to another important topic, networking capital. As of the last year, the first quarter is showing the typical seasonal uptick in networking capital from year end. This quarter-by-quarter increase is driven by an increase in inventories, which in turn is triggered by a strong order backlog. In a year-over-year comparison, networking capital increased by €77 million to €369 million due to higher inventories and trade receivables as a result of the strong business development, partly offset by an increase in trade payables and advanced payments. Despite the year-over-year and quarter-over-quarter uptick in networking capital, we remain with a networking capital to sales ratio of 6.9%, well below the guided corridor of 8% to 10%. Coming now to another important topic, cash generation. Operating cash flow was a negative 49 million euro, which is below prior year's quarterly figure of minus 14 million euro. The decline is explained by the following. Firstly, a higher networking capital outflow resulting from the inventory buildup due to the elevated order backlog. Secondly, higher outflow in provisions of 88 million euro. And thirdly, a 46 million euro cash outflow for others. The provision position contains the outflow of bonus payments for fiscal year 22, which was, as you all know, a very successful year. In addition, we paid out the first tranche of the inflation compensation payment to all employees in Germany, which accounted for roughly 10 million euro. The position others. includes mainly cash outflows for prepaid expenses and a minor effect from valuing our currency derivatives the slide step up in capex related outflow of 2 million euro year over year to 35 million euro is in line with our fiscal year 23 guidance overall 240 million euros As a result, free cash flow is negative with 52 million euro and below prior year's quarterly number of negative 28 million euro. Consequently, our free cash flow conversion ratio before structuring, which was calculated over the last four quarters, has been below the target corridor of 55% to 65% as only 41% of EBITDA was converted into free cash flow. when reason for the lower cash generation has been the net working capital outflow of 80, 80 million euro over the course of the last four quarters. However, we expect to be within our cash conversion ratio of 55 to 65% for the whole year 23, even though that might be at the lower end of that range. Net cash, including lease liabilities, declined from €347 million at the end of the fourth quarter to €274 million, driven by the negative net cash flow of €72 million. Let me now talk about our financial headroom. On the left, you see our debt instruments, as well as their respective utilization and majority structure as per end of March 23. As per March 31st, merely 1 million euro out of the 61 million euro uncommitted bilateral credit lines were drawn and 100 million euro of a fixed rate borrows note loan which will be due in february 25. yes liquidity position is supported with an ungrown committed syndicated credit line of 650 million euro with majority due in 27. This debt instrument currently serves only as an additional liquidity backup facility for us. To sum it up, we have only 100 million Euro of financial debt. Continuing now on the right side of the slide, equity improved because of the higher net profit, resulting in an equity ratio of 40.4% after 37.7% at the end of Q1 2022. The decline in net liquidity is due to the second tranche of our share buyback program mentioned earlier. Adjusted for the buyback, the net liquidity position, including lease liabilities, would result to 444 million euro. And finally, some good news from our credit rating agencies. Moody's has confirmed our BAA2 rating and has upgraded the outlook from stable to positive in March 23. With that, I hand back to Stefan with the outlook.