Gerresheimer AG

The conference is now being recorded. Ladies and gentlemen, welcome to the conference call regarding the publication of Gerritsheimer Q3 results 2023. At the moment, all participants have been placed on a listen-only mode. The floor will be open for questions following the presentation. Now I will hand you over to Mr. Bernhard Wolf, Corporate Senior Director Investor Relations. Please go ahead.

Hello everybody. A warm welcome to all of you from the whole Gerritsheimer This morning, we published our Q3 figures, and we are now happy to guide you through the data set, add some insights, and answer your questions. With me today are our CEO, Dietmar Simpson, as well as our CFO, Dr. Bernd Metzner. As usual, we are presenting a set of slides together with the management's notes, following by a Q&A session. Please note this call is being webcast live and will be filed on our website as always. Before we start, I have to remind you that the presentations and discussions are conducted subject to the disclaimer. We will not rate this disclaimer, but propose taking it as read into the records for the purpose of this conference call. And now it's my pleasure to turn the call over to Dietmar Simpsons. Dietmar, please go ahead.

Yeah, thank you so much. And welcome, everybody. Thank you for joining us this morning. Bernd Metzner, our CFO, and I will now run you through the highlights of our third quarter in 2023. As always, we will then be happy to take your questions. Our strong business development as a result is what you see on this slide. We have successfully transformed Gerasamer into a system solution provider, and the market now recognizes our strength. We offer one of the broadest, if not the broadest portfolio of containment solutions and drug delivery systems on the market. We develop digital solutions for therapy support and traceability. We scale industrial production for customized solutions globally while meeting the highest international pharmaceutical quality standards. We have the competencies and innovative solutions to tackle any challenge to support our customers to bring any drug to and into the patient. This includes highly demanding large molecule formulations as well. We provide the right solutions to our customers at any stage of the drug lifecycle in all major global markets. That makes us the strategic partner of choice for the global pharma and biotech industry. Organic revenue growth was 5.5% in Q3. The underlying growth course is unchanged, and we will deliver double-digit revenue growth for the full fiscal year as put forth in our guidance. The adjusted EBITDR showed an organic growth of 16.4%, resulting in a notable major margin expansion year on year. This is the Q3 snapshot. of healthy growth in line with our strategy. Our bottom line grows stronger than the top line. The transformation and repositioning of the company towards higher value products pays off, resulting consequently in better margins. The adjusted earnings per share, too, grew by 4.4%. We hereby confirm our guidance for the full fiscal year 2023 as well as our midterm guidance. Our profitable growth momentum will continue. All growth projects are on track and being implemented according to plan. Our order book, as mentioned several times, which is at record high, also impressively shows the transformation of our company. We currently have the highest order intake in our corporate history, even outperforming the very strong years 2021 and 2022. In our last call, we told you that we are working on new orders for GLP-1 obesity drug in the upcoming months and that the capital increase will finance necessary capacity expansions. We have now secured new additional orders at attractive terms and conditions. Our customers trust us to be the right partner going forward and to deliver the capacities they need, and we will. We worked hard during the last few years to build the foundation for our success today and in the future, optimizing and strengthening the existing business while expanding into new growth markets. We completed our broad product portfolio with new innovative solutions. Today, we are continuously innovating for a better life. We are now able to harness global megatrends in the pharma and biotech market. Our GLP-1 business is a very good example of this. Second, customer centricity. We definitely broke down the silos. We leverage synergies in our divisions and foster innovations to find the best tailored solutions for our customers. Third, operational excellence. Good was not enough. We examined each single process and optimized it. We industrialize. We scale production globally. Today, we are setting standards in the industry in terms of quality, as well as processes and cost efficiency. And finally, of course, leadership. We now have a team in place with an outstanding growth mindset, fully committed to grow the business and increasing our margin. This foundation opened highly attractive growth opportunities with existing and, this is even more important, with new customers. Just a few years back, these new customers may have turned to one of our competitors because they did not know that we could provide the right product or because they did not trust us that we could come up with an innovative solution. This perception has completely changed. We have proven our innovative strength and the ability to deliver the key pharma players in the market. They know they can entrust us with their new developments as well as with their new and existing drugs already in the market. They know that we will solve all the complex challenges of industrial production for the primary packaging solution or also drug delivery systems, shortening their time to market and reducing the total cost of ownership for their product. The transformation to a system and solution provider And the change of perception now results in the strongest order intake in our corporate history. And this will fuel our profitable growth in the years to come. We are addressing the needs of our customers with dedicated products for key therapeutic areas. Anything from chronic and autoimmune disease, cell and gene therapy, vaccines and infectious diseases, ophthalmology, oncology, respiratory, and cardiovascular diseases to diabetes or and metabolism disorder. In all these therapeutic areas, we have the capabilities and solutions to be the full service provider for pharma and biotech companies of any size and at any stage of the drug life cycle. As this slide visualizes, the GLP-1 business for treating obesity is certainly relevant and important, but it's just one therapeutic area for which we provide customized solutions. Our broad systems and solutions provide services as a much wider range for therapeutic areas. The number for the market potential for the treatment of chronic obesity with GLP-1 drugs vary, but all have one message in common. The market is big and is permanently growing. One of the largest or lightest market estimates was $80 billion. Considering that the primary packaging and drug delivery system market would represent 2 to 4% of the overall market, we would be looking at a potential market of roughly 1.6 to 3.2 billion euro or dollars. Maybe even more. And we are a key player in this market. We already have contracts for syringe systems, pens, autoinjectors, and containers for solids with the leading GLP-1 players in place. We have now signed new additional contracts for syringes, pens, and autoinjectors. Based on these and other long-term contracts, we are expanding our production facilities and our global footprint. For example, Peachtree in the U.S. for fens and order injectors, Keretorau in Mexico, Skopje, North Macedonia, in the Czech Republic, and in Germany for syringes, pens, and order injectors. We have one another order for GLP-1 solid containers just recently. Our broad systems and solution portfolio opens unique growth opportunities presented by global megatrends. Whatever solution is needed to contain or administer the drug. This slide gives you an impression how well positioned we are with our products, systems, and solutions in key therapeutic areas, including highly sophisticated solutions for biologics. For example, we offer shatterproof vials and syringes made of cycloolefin polymer, COP vials, and syringes. COP vials and syringes are the right solution for cell and gene therapy or, for example, mRNA vaccines which need cold storage. We offer ready-to-fill syringes with countless closure and needle options. Silicon-free syringes, for example, for ophthalmic and other therapies. Other special syringe solutions for large molecule applications. Elytic glass vials for an entire range of therapeutic areas, meeting the highest quality and safety requirements while reducing the total cost of ownership. Custom-made inhalers for respiratory therapies. Our sense air pump platform for antibody-based cancer therapy or any other large molecule application. Wearable and patch pumps for high-volume applications for these treatments of, for example, Parkinson's, cardiovascular disorders, or other rare diseases. Pens and autoinjectors for chronic diseases like diabetes. This includes our own solutions like the Inveneo auto-injector, which helps our customers to significantly shorten their time to market. We are one of the key players in the market with syringes, auto-injectors, cartridges, and pens. And we are a key player in the obesity care market. The contracts already won are clearly approved of this. We have high-value solutions in all product categories in place. We have retrofill options for syringes, cartridges, and vials. Whatever challenge our customer has, safe containment or sensitive drugs, precise, safe, and convenient way of administration, highly efficient and cost-effective production for the primary packaging solution or drug deliveries devices, we solve it, and we The rollout of our Formula G strategy transformed Garrison. As a system and solution provider and partner of choice for the global pharma and biotech industry, we support our customers to improve the quality of life and health of millions of patients worldwide. We have clearly expanded our portfolio with high quality and highly innovative products and solutions. We have fostered operational excellence. We have put our customers first. These measures were the prerequisite for strengthening of the market position, for being able to size market opportunities, and not to forget to accelerate our profitable growth. And this profitable growth is sustainable. Because it does not depend on one single application or trend, there is significantly more to come. Thank you very much. And with this, I will hand over to our CFO, Bernd Metzner, for a deep dive into our figure spin fuel 3.

Bernd, you have the floor. Thank you, Dietmar. And welcome, everybody, also from my side. Let's dive into the analysis of the key financials for the third quarter 2023. Once again, we showed a strong quarter with continued double-digit organic growth in earnings and solid revenue performance. Reported revenues increased from 473 million euros in Q3 2022 to 488 million euros in Q3 2023. Adjusted for FX effects, the organic revenue growth amounted to 5.5%. Our profitability once again developed very good with an overproportionate increase of adjusted EBTA versus revenues. FX adjusted EBTA increased from €88 million to €103 million in Q3 2023, representing an organic growth rate of 16.4%. Our EBITDA margin, FX adjusted, expanded substantially by 200 pips from 19.1% to 21.1%. Adjusted EPS increased organically from 1.13 euro by 4.4% to 1.18 euro. This increase considers already the dilutive effect of the pro rata recognition of additional shares after the capital increase in April this year let's continue with the deep dive into the divisions plastic and devices for plastics and devices reported revenues in q3 2023 grew from 244 million euro to 261 million euro adjusted for fx effects the organic revenue growth amounted to 8.7 percent in q3 2023 All business areas in plastic and devices contributed to the strong growth. Plastic containment solution benefited from higher customer demand across wide areas of the business. And we saw a particularly strong revenue acceleration in the medical system business, reflecting strong demand, especially for PENS. As a side note and already flagged in our Q2 call three months ago, We have seen a decline of the regime price in the last couple of quarters, which, as you know, we basically pass on to our customers over time, so reducing our top line whilst improving our EBITDA margin. The adjusted EBITDA increased from 59 million euro in Q3 2022 to 63 million euros in Q3 2023. Excluding FX effects, we delivered a strong organic growth of 11.4%. The margin has improved by 60 basis points from 24.1% to 24.7%. The bottom line benefited from both product mix effects and economics of scale. Primary packaging glass. The primary packaging glass division showed another strong quarter with solid revenue performance and very strong margin expansion. Reported revenues went from 229 million euros to 228 million euros. Adjusted for FX effects, the organic revenue growth amounted to 2.6%. So, we have seen continued organic revenue growth despite, as flagged already at our Q2 call three months ago, the temporary, I repeat, temporary decline in demand for injection vials after the COVID-19 pandemic. Demand for the high-value ready-to-fill vials, however, remains high and expanded compared to Q3 2022. We have increased our capacity for high-value glass vials in particular and are confident of benefiting from the global trend towards higher-quality vials going forward. On an as-reported basis, the adjusted EVTA increased significantly from €44 million to €49 million in Q3 2023. Excluding the FX headwind, we achieved an organic growth rate of 19.8%, and our EBITDA margin improved FX adjusted substantially from 19.2% to 22.5%. Our sustainable, here-to-stay price increases are taking hold. Advanced technologies. Advanced technologies performed according to plan. Reported revenues stand at 2 million euro in Q3 2023, and adjusted EBTA was minus 4 million Euro unchanged to previous year. We maintain our sharp focus on R&D in this division. At Advanced Technologies, we continue to strive to establish Gerrisimer as an innovative original equipment manufacturer for smart and connected devices in the healthcare industry. The project for the development of a micro pump for the treatment of chronic heart failure disease is running according to schedule and we are working closely with new customers on further innovative projects. The next slide shows the reconciliation from EBTA to adjusted EPS. Worth highlighting, the organic adjusted EPS growth of 4.4% for Q3 2023, despite the 3.14 million new shares in conjunction with the capital raise in April 2023. Based on this positive performance, and our outlook we expect to grow at least, I repeat, at least low single digit for the full year 2023. Let's turn now to cash flow and net financial debt. The free cash flow of plus 80 million euro was 64 million euro better than in the prior year quarter. If we compare the free cash flow with the second quarter 2023, One appreciates and sees how positive this performance was. We realized a swing of plus 120 million from minus 40 million euro in Q2 2023 to plus 80 million euro in Q3 2023. There are three main drivers for this positive development compared to Q3 2022. First, good bottom line performance with high earnings quality. Second, we received prepayments of almost €70 million in connection with the new GLP-1 contract wins. This is the result of our long-term oriented win-win partnership philosophy and reflects obviously also a strong commitment of our partners. Third, and additionally, we see a release in our networking capital overall and that, despite having material less cash-in contributions, from factoring realized compared to Q3 2022. As a consequence of these three positive drivers, we could overcompensate negative elements, our free cash flow statement like higher interest and taxes. Deep dive into capex. In Q3, our net capex increased by around 19 million euro to 79 million Euro compared with the previous year as we continue to invest in global injectable capacity and further ramp up contract manufacturing projects, including several projects related to GLP-1. Also, going forward, we will rigorously execute on our ongoing projects and expect to win further new attractive businesses in highly attractive niches such as GLP-1 and Biologics. Net financial debt decreased as we temporarily used the funds from the capital increase to reduce drawings on our revolving credit facilities. So, adjusted EBTA leverage came down to 2.3 times in Q3 2023. Looking at the full year, we expect a strong cash performance in the last quarter of the year, as usual. Generally, our free cash flow performance is strongly influenced by the execution of our investment program in profitable growth. Having said that, we should arrive at a range from the guided moderately negative to an even break-even free cash flow in 2023. With this, I hand back to Dietmar.

Thank you, Bernd. Thank you for nice figures. Based on the strong performance in the first nine months, it's not so difficult for us to reaffirm our four-year guidance with double-digit growth in revenue and adjusted EBITDA of at least 10%. You can also expect our adjusted EBITDA margin to improve in comparison to the previous year as scheduled in our long-term guidance. We are on track and we will deliver on our guidance. This includes also our EPS, earnings per share guidance, despite a higher number of shares from our capital increase this spring. Our midterm outlook, backed up by a very strong order book, remains strong and positive as well, with organic revenue growth of at least 10% and adjusted EBITDA margins of 23% and later above to 25%, resulting in organic growth and adjusted earnings per share of at least 10% per year. We are continuing our profitable growth path and would be delighted if you would accompany us going forward. Let's have a brief look into the financial calendar. The next opportunities to check in on our progress are the following. We will publish our results for the full fiscal year 2023 on February 22, 2024. First quarter results of the new fiscal year 2024 will be published on April 11. Second quarter and half year results on July 11, 2024. We hope you will join us again for prospective calls. Thank you. We are now happy to take your questions.

Thank you very much. You all let us switch now to the Q&A session. The lines are now open for questions. Anyone just ask a question, they press star followed by one on their touch-tone telephone. If you wish to remove yourself from the queue, please press star followed by two. The first question comes from Victoria. Victoria Lambert from Bernberg. Please go ahead.

Hi, thanks for taking my question. My first one is just given the new GLP-1 contract extensions, why haven't you raised your medium-term guidance? The second question is just how we should think about finance costs in Q4 and next year. And then the third one is just do you expect any impact from

vaccines or fx in q4 similar to the effect of q3 thank you yeah i think i can take the first one you take the second one because i didn't fully get it that's the third one again yeah thank you for your question yeah the new glp-1 orders are strong And very helpful. Why don't we increase the midterm guidance? I think the midtime guidance with double digital growth over the next year is strong enough. From my point of view, the market price in the strong development first before I give them further food and things. But there's no doubt. There is a certain robustness, of course, in the years out, especially if you go in the launch phases, 25, 26, where we definitely will show pretty strong performance. Can you take the second or should I do the first one? I do the third for first, because it's an easy one. The Q4 is usually always a good year, a strong year for a quarter for the syringes. We produce the syringes over the loop of the year, and then before the vaccines actually go to market, they are ordered, and we will see how this develops. I'm actually pretty optimistic, especially for the syringes in Q4.

Just taking your question regarding the finance cost for 424, I think the expected finance result should be around basically better than what you have seen now in Q3, maybe minus 9, minus 10. And this would bring us to a finance result of maybe 43, 44 million, something like this in the magnitude. Regarding the guidance for the full year, for the next year regarding financing, because I think it's too premature. And, um, I come back to what said when we release our Q4 numbers on the 22nd of February, we will also talk you through the, um, um, to the year 2024. but, uh. Conceptionally, I think I don't want to speculate, but, uh, conceptually, um. interest should go down and i think the as far as the variable interest is concerned i i would personally assume that somehow we see a certain release for the upcoming uh for the upcoming years as far as our finance costs are concerned on a cto spiral with clouds obviously regarding the fx effects for q4 also here is difficult to to um to predict and last year i looked at it we had um EPS strong support by Fx, positive Fx effects also just be excluded. Now the Fx effects are against us and I would not assume and we cannot speculate now what could be the Fx effect for Q4. But what is important that our operational performance is measured without any Fx effects, Victoria.

Thanks. Will there be any impact from COVID vaccines in Q4 like there was in Q3 with the take and pay?

Oh, I don't think we see, we will see a lot of COVID impact at the moment. The next wave that will most likely come is a combination of classic flu formulations with COVID, and I don't think that this is something we will see in 23.

Thank you.

Thank you. Thank you, Victoria. So the next is Fico. Fico Fredericks from Deutsche. Please go ahead.

Thank you very much. Good morning, everyone. My first question, going back to your GLP-1 contracts, nice to hear about those extensions. You've spoken about a peak sales potential of 200 to 300 million before. Are you able to give us a flavor for how much of an uplift we can now expect from these new contracts. Then my second question is you flagged the temporary lower demand in your injection vials business in the third quarter. Can you speak a little bit more about this? What exactly you're seeing there and also for how much longer that lower demand can potentially last? And then my last question is on the midterm targets, Thanks for the answer on growth. How should we think about your capex spend now going forward and also your free cash flow in light of these contract extensions? Thank you.

Thank you. Yeah, the GLP-1, interestingly, I never mentioned 200 to 300 million. I just said several million, but it's right. It's not so wrong. Uh, and there's no doubt the additional orders that are coming in at the moment are adding to this. Amount, so we are probably already beyond the figure you mentioned here. Uh, in, uh, the wilds. Yeah, there is what we see at the moment, uh, Q3 and you might also see this in Q4 certain what the stocking effect. It's not necessary that the, the COVID it's really in the COVID time. Some of our customers, many of our customers were cautious. They added to the safety stock in their warehouses and we see at the moment a certain destocking effect. How long this takes, we have to see until they are on their new target safety levels. We see that's what Bernd spoke about this as a more or less temporary effect. Whether this goes into the first quarter 24 or not, we have to see. Important for us is that It's not necessarily something we didn't plan with. Uh, the important point is that we are steadily replacing these volumes with high volume. A high value files, and this is what actually takes place. So, midterm target of of, uh. Of carpet spent, I think we discussed it several times. There's no doubt with all the orders flying in now at the moment. There is definitely a peak in CapEx in this year, and we expect a similar amount probably next year, also with the new orders that are bringing in. And I don't see the CapEx growing significantly above this figure that we are doing at the moment, where on the other side, the EBITDA every year is adding a chunk Dollars and euros, and that is definitely very helpful for the free cash flow.

Maybe just cycle to to add on and for you, but we're always saying, and this takes also hold and it's valid also for our plan. Midterm plan on Euro expansion CapEx translates in one Euro additional revenue. That's a concept we have, and this we have also in mind for our company going forward.

Okay, thank you.

Thank you. Oliver Metzger from Odo VHS. It's now your turn.

Yes, good morning from my side. First question is also on destocking. Can you elaborate about the importance of year-end orders and whether a different pattern might enlarge the destocking effect we saw recently? Second is about organic growth in the last quarter. So I assume the headwind from the regime prices will continue, however in PPG it should become a little bit better due to more attractive comps. So do you think that you might be able to report double-digit organic growth in the last quarter? And my last question is also conceptually how to think about 24. So if you use 23 as a base assumption, so can you share with us some of the major drivers which might have an incremental possible negative effect? So I mentioned regime price before because to my understanding that should also have some negative impact for H1 next year. Thank you.

Yeah, maybe I think we spoke about the D stalking is something we can't say, and the year end orders is something I don't even know whether this exists in this industry. Sometimes the orders are customers order a little bit. Sometimes not, I wouldn't say that this is a relevant impact at all for our industry. Uh, coming to the racing prices, the racing prices are something they are as they are. We are pretty cool. We have in many areas of the business. um clauses in the contracts that's why they have might be an impact on the top line but they have no impact on the bottom line with all the increase of the of the resin prices last year we had quite or the last two years we had quite some tailwind in this but it it actually weakened our bottom line margin if this is now coming back i'm pretty relaxed because this will further help in the on the bottom line and the margin and uh This is what we will expect. Actually, for the first quarter, I wouldn't see too much pressure on the resin prices at all.

Oliver, did we miss one question?

It was also about 24, so now we deal with resin, but are there any major drivers compared to 23, which basically push your organic growth in one or the other direction?

Yeah, there's no doubt some of the platforms that we invested into in 21, 22, they are now launched. We are expecting key SOPs in 24 and that will definitely help us. Even the first GLP-1, applications are starting to show reasonable volumes and maybe not in a total different maker as a volume but we are also expecting to launch the pump here sq innovation at and that will also drive the growth so 23 or 24 will also be an interesting year maybe just um

Might understand we are just in the face of finalizing our budget for the, for the next year to re, give us the guidance for the next year on the 22nd of February when we release our full year numbers. Um, that we will shed also light on this topic.

Yeah.

Yeah. Okay.

The price is 1 more time. They might, they might influence the top line, but they will definitely not negatively influence the, the bottom line. And here we will be very strong.

Yeah, okay, I've got this, but do you expect double digit growth in Q4?

We are not guiding quarter by quarter. We are expecting that there's no problem to reach our guidance for the total year.

Okay, but that would leave us a lot of room. Okay, then I'll leave it at that. Thank you.

Thank you, Oliver. So next is David Adlington from JP Morgan. Please, David, go ahead.

Thanks for the questions. So first of all, just following up on Oliver's point there, your EBITDA growth is about 20%. You only reiterated the more than 10% this morning. So to get down to that 10%, we've got to contract quarter. I just want to sort of square the circle here in terms of, is there any expectation that you could contract an EBITDA or you're just retaining conservative guidance, and I suppose the key question is, why not upgrade your full year guidance?

There's quite some interruption in the line. I didn't actually fully get the question.

Basically, the question, just to translate, David, you mentioned you are so strong so far in our ABTA growth. why you just say that we at least have a 10% EBTA growth for the full year, why we are not more precise? Let's put it that way. That's basically the question.

You can do your math. I'm not expecting that the bottom line will perform in the Q4 worse than over the loop of the year, so we will have a strong development. And then maybe it would be better than ten percent.

With some buffer and basically just to be very, very complete, you know, David, you never guide for a specific quarter. Um, did my just mentioned this before and, um, I know that so far very strong grows. And we are very good in shape and, um.

and we are saying at least 10 percent and we will release the we release also here the details obviously when we release our q4 numbers and then maybe just on the glp ones ipsomed recently talked about out licensing their ip on the glp one side have you been on the other side of that have you been licensed any ip from ipsomed and if not yet do you expect to

I can't disclose these details, as you can understand. I can't disclose details on customer projects that are in discussion or might be in discussion before they are signed.

Maybe just one follow-up question on the GLP-1s. You obviously raised the best part of 300 million of new capital, of which I think about two-thirds, as you said, is towards the GLP-1 additional capex. In terms of that 70 million contribution of prepayment, is that on top of the 200 million of capex you just sort of set aside for additional GLP-1 capacity?

David, no, the 207, This is 270, including also the prepayments. But in the end of the day, I mean, if we need funds for additional projects, we would be available. But for the calculation purposes, we actually would assume them. But it's quite artificial. If we get very attractive projects which fits our business, we would find the funds to invest in them. But to be crystal clear, and still valid, and mentioned before, this 270 million are basically earmarked for really attractive projects where we are investing in two-thirds for GLP-1, one-third for biologic, which is a rough direction because we have to win the orders all first.

But whether it's GLP-1 or not, it will be attractive orders because there is other very attractive business out there, especially in the area of large molecules that we are going for.

David, is that from your side? Okay, thank you very much. Next one is Oliver Ryan back from Kepler Chevrolet. Please, Oliver, go ahead.

Thanks very much for taking my questions, three FMA. Firstly, also on GP1, and I saw from earlier discussions part of your GP1 portfolio also include dual chamber syringes. So I was wondering, can you first just provide some kind of what drove the kind of decision to move into this kind of area? where you have a purely kind of attractive kind of monopoly decision. And also, can you just comment on whether the kind of new contract that you announced are also including expanded capacities for dual chamber syringes? That will be question number one. Secondly, on the topic of syringes in general, I mean, obviously the kind of supply of syringes was held back in Q3, I guess, on the back of the switching of your kind of production towards GP1. Can you just give us any kind of favor, what kind of top-line drag effect on top-line growth for the group you've seen on that? And also, is this kind of conversion now fully done? Are there any kind of further effects to be expected? And then the third question, just on vials, just on standard vials. I mean, apparently, obviously, demand is softer on the back of the COVID phase-out. But I guess at the same time, there's also a number of more capacity ramping up. So can you just talk generally about the kind of supply-demand situation in wilds, please? Thank you.

I'd pick the point with the syringes first. It was a very comprehensive question, actually. There are not so many players that are capable of producing a solid glass syringe in the world. There's only a handful. Gerritsheimer is very leading in, for example, special syringes like dual chamber. That's why we actually work with one of these customers for GLP-1 with the dual chamber carcassima syringe. And yes, we had to switch some details of the production of our window and towards dual chamber. And we're actually adding significantly capacities in North America, here in Mexico for this and of course, a couple of other syringes as well. The long term guidance I think I gave out of the capital markets, they were indicated. You have to understand that we are investing significantly in syringes, which is not only dual chamber, but also other applications. We will more or less double our capacity over the loop over the next years, but we will more than three double our sales. And that indicates that The transformation that goes on syringes is primarily also a shift into high-value products and high-value solutions. I hope this answers your question. To the vials, we see also here that the general thing is unchanged to what we said. Now, there is a clear trend towards more high-value products. We are benefiting from large molecules from biologic drugs that are very demanding in the packaging, primary packaging, and that is a clear switch of the market towards more and more high-value products. Might it be elite? Might it be ready to use? And I think this is what we benefit from. The fact that the moment of a certain destocking is something we see, and we feel you might not see this one-on-one because it's compensated for other effects, And on the long run, we have to see this. We are pretty convinced that the long-term trends towards more injectable drugs, which means more large molecule, they're all injections, they're all liquid, leads to a permanent increase of the demands of vials, cartridges, syringes, but also the secondary packaging, whether it's autoinjectors, pens, and pumps. And that is what we see not only midterm, but also long-term.

And just to follow up, I mean, on these dual chamber syringes, can you just clarify if there was any kind of additional contract for dual chamber syringes?

It's not, yeah, you can call it additional. You can call it an expansion of the contract because this specific syringe you are talking about is only for one customer. But of course, they are significantly expanding their demands. And that leads to capacity increases that we have to add.

Okay, super. And can you just quantify the on your general syringe capacity in Q3 from this kind of switching where capacity was not around?

I can get this. Can you repeat the question, please?

I mean, effectively, you talked also in earlier quarters about the fact that the growth in syringes was held back in the first nine months. as you switch it to switch phase your kind of production over to gop1 so it's just trying to get a kind of feeling for what was the kind of drag from this missing capacity that has not contributed to top line growth in q3 i mean the changeover of the glass forming lines that of course took out a certain capacity for a certain time that's true and you that's why you might you might expect uh

increasing volumes in the Q4 and, of course, to 24.

All right. Okay. Thanks so much.

Thank you. Thank you, Oliver. I see Sven Kirken from TZ Bank. Please go ahead.

Yeah, thank you. Firstly, talk about the very strong oil intake. Could give us a quantification of the oil intake in volume in terms of year-on-year growth rate. And secondly, there's a clarification question. And did you see a relevant market for drugs of 1.6 to 2.2 billion euros for Gerasimer? And what would be a realistic market share for Gerasimer on this market? And then, thirdly, which percentage of the total order is a typical prepayment in GFP1? Thank you.

It's a tricky question because you can't some of this we don't even okay the order intake is very strong and uh some of it one should not forget these orders are not unexpected they are definitely helping and they are giving the right foundation for the strong mid-term guidance and long-term guidance and we it gives more confidence into the guidance that we will deliver i think this is important don't think that this order intake is only on the area of GLP-1, because I think Gerasimer is providing a wide area of different solutions.

That's what we do. Regarding, maybe just regarding GLP-1, Sven, there's no precedence for that, so it's really something I would never say is representative somehow, because it's a very individual discussion, and what you have is the customers here.

What you see in general, though, and that is very clear, the way we are working with our customers has changed significantly over the loop over the last years. It's not only the perception that we are a better partner for products and solutions, it's the terms and conditions that have significantly improved for us because the customers see us as a partner on eye-to-eye level, and that of course leads to better terms and conditions, not only by prepayments, but also things like protections, like take-or-pay clauses, but also, should not forget this, in the classic margins.

In the market potential for basic rocks, you mentioned earlier in the call, I think September 1.6 to 2.2 billion euros relevant market for Gerritsheim. Did I understand that correctly?

That's the market potential for a packaging area, and there's no doubt. We are at the moment already on the way, and we are prepared to take a reasonable good chunk of this market.

But you have no target market share. You can put no number on that, probably.

It's not the market share I'm looking at. I'm looking at sustainable profit growth of the company. The more important is that you generate a company. I don't want to have a market share and you don't need to be the number one everywhere. More important is that the company is growing double digit at a very reasonable margin that is directionally above the 25% margin. That is what we are aiming for long term. In this, we will definitely also take a very attractive market share, not only in GLP-1, but also in other areas.

Okay, thank you.

For us, it's also important, we should not forget this, to balance our product portfolio in the right way. It's nice to benefit from the GLP-1 and it's a great party at the moment, but I also do not want to be completely depending on one story alone. That's why it is essential for the company to focus on the full broad portfolio, various customers and various therapy areas.

Thank you, Sven. I move to James. James from Jefferies. Please go ahead.

Hi, thanks for taking my questions, please. Just a few on the new GLP-1 contracts. Can you quantify at least the kind of magnitude this would have from the overall contracts you have so far? I appreciate you don't want to be specific numerically, but to give an idea of quantum of increase, that would be helpful. And secondly, what does this mean to the cadence of growth? You know, you mentioned an acceleration in 25 and 26. So if there's an acceleration of delivery, are you also able to allude as to whether these contracts are more in syringes or plastics? And then the final question is, with these new contracts, what does this mean for the directional trajectory of your margins, potentially if there's more upfront investments as you move towards your midterm targets? Thank you.

The entry contracts are key contracts also to deliver the return guidance, the double-digit growth, which is the CAGR, CAGR double-digit growth, and also margins toward the 25 plus. And the business we are talking about, whether it's GLP-1 or the other large molecule contracts that we've closed at the moment, are all very creative in regard of not only the top line, but also in the bottom line. It's very clear. The guidance that you are looking for, how much does it mean? I think we heard this already in this call. I never spoke about the 200 to 300 that we had in the pockets. I always spoke about several hundred, but in principle, I confirmed that. So the new contracts that are now, they are actually adding to the story, and that should give you a good understanding of what we are aiming

perhaps if i can just follow up i understand that they're incremental to numbers you've already given but i'm just sort of wondering overall whether we're talking an increase of you know five percent ten percent twenty percent just to give us a feel in terms of you know from how you kind of laid out the previously kind of announced contracts what what this does in terms of being additive to that seems to be might appreciate this also it's a quite sensitive information but

The magnitude of the prepayment of 70 million at least indicates that it's really a substantial relevant contract. And we're not talking here about peanuts.

Okay. And then just another kind of quick follow-up then. So to make sure I understand you correctly, these should be accretive to profitability. So at least in terms of the trajectory, whatever margin cadence was before. To make sure I've understood you correctly, is it fair to say that there's an acceleration of that, just given the mix of these new contracts coming in?

And it's in line with our guidance and in line with our planning. You have to see where we are now with the margin, and we are in principle adding 1% margin every year. And what we do now is say bringing the businesses in are ensuring that we also deliver.

Our plan is and is, was, and will be that we each year increase our profitability by one percentage points going forward. And that's our concept and all the details. And we'll discuss the mid-term guidance again in our Q4 release when we have really consistent data set. But it's clear that this is the way forward for our company, including the contracts.

Thank you. Thank you, James. Thank you, James. Alexander, please, it's your turn.

Yes, good morning. Thank you for taking the question. I would have a couple. The first one may be on the margin development. So, adjusted EBITDA margin increased, but one does not necessarily see such an increase in gross profit margin. In fact, I think it was down year-on-year and quarter-over-quarter, despite the fact that you have the positive effect from the pass-through clauses. So, I just was wondering how to explain that and whether you expect a much better margin than in the last quarter of this year. That would be the first one.

Regarding the margin development, I don't know how you calculate the gross profit margin. But what you actually see is that our EVTA margin is increasing, was increasing by 200 pips in the third quarter, so very strong, and that we are really on the way for the EVTA margin to outperform EVTR margin increased by one percentage point. Other than that, regarding the gross profit margin, why there should be a decline, maybe we both do reconcile this. We have this not in detail on the radar screen, I have to say. What could be the root cause for this? Okay, I was just looking. Maybe you give me your number set, and then I can probably just call.

Okay.

Maybe do the 101.

I'm not sure understood and then just to get an update on the advanced technologies division. Um, you mentioned that innovation is on track. I think you also have been mentioning a. Contract development contract with the U. S. client. Could you provide an update whether that has been any change in terms of the timeline of that? Contract or structure of it any kind of color.

I think the projects are in plan and the second project you're talking about is in development, so it's normally ongoing.

Okay, then lastly on the tax rate. I think after 9 months, you are roughly 29% percent. Um, I think previously you've been getting for, uh, maybe it wasn't obviously precise guidance, but you have been envisioning around 27%. Is it something you still see for 2023 or. Are we going to be higher than that?

We have obviously perspective to go for a tax rate of 25% even. We have each year a certain volatility because it depends how you assess in the end of the day net operating losses for the net operating losses in certain sites and how you assess for that. And this will be always evaluated for the year end. So in the end, our statement is as a company, we are striving for 25% tax rate. And there will be no surprise in Q4. That's basically and in line what we have so far, year to date. Understood. Thank you.

Thank you, Alexander. Victoria. Victoria Lambert from Bernbach. Thank you.

Thank you. I just wanted to follow up on the de-stocking risk involved. Just so I understand, yeah, is this because of Or I'm just trying to understand what's going on here and when this should possibly normalize.

Yeah, I think in the COVID time, the market was nervous. It's not only a question of the COVID vaccination. It's a question of no trucks available, more labor available sometimes. In this time, it seems that some of our customers increased their safety stocks for a while. And what we see at the moment, as things seem to normalize, they are a destocking effect. As I indicated before, we do not know. We see this at the moment. We see this also in the fourth quarter. And I can't tell you how long this will proceed because I do not know exactly the safety stock new goal that they have. in their warehouses. Honestly spoken, it's not an effect I see with a lot of, I'm not so concerned about this effect. The long-term trend is completely unbroken, and as I indicated before, the important point is for us to replace the classic wilds with steadily thick places with high-value products, and this trend is unbroken, ongoing.

Great, thank you.

Thank you, Victoria. Colleagues, I see no more questions on the screen. Anybody, any burning topics to discuss? Okay, that's not the case. As there are no further questions, we would like to thank you for joining us today. All the best for you. With this, we close the call. Thank you. Thank you.

Ladies and gentlemen, the conference is now concluded and you may disconnect. Thank you very much for joining and have a pleasant day.