Gerresheimer AG

Let me quickly introduce myself as this is my first earnings call with Gerasheimer since I recently joined the company in January. I personally started my career in investor relations in the late 90s. In 2007, I joined Extron, a supplier to the semiconductor industry. After 67 quarterly earnings calls there, I'm very happy having recently become a member of the Gerasheimer family, expanding that number even further with number 68 today. I'm looking forward to meeting many of you in due course. With that, I hand over to our CEO, Dietmar Siemsen, to run you through the highlights of the quarter and full year 2023, together with our CFO, Dr. Bernd Metzner. Dietmar?

Yeah, thank you, Guido, and welcome, everybody. Thank you for joining us this morning. Bernd Metzner, our CFO, and I will now run you through the highlights of the fourth quarter and, of course, the full year results 2023. As always, we will be then happy to take your questions. Implementing our strategy process formula G has proved to be a success story. Darius Hammer has successfully been transformed to an innovative system and solution provider and the strategic partner of choice for the global pharma and biotech industry. We are a key partner of our customers. Our products are essential for an effective drug therapy and positive results. With our containment solutions, we bring the drug safely protected to the patient. Our drug delivery systems enable the drug to be safely administered. With our connected devices and digital solutions for therapy support, we help to improve the health outcome for patients worldwide. What you see on this slide is a very important aspect of what makes us so strong, a broad, comprehensive portfolio from standard products and systems to highly sophisticated, customized solutions. This allows us to perfectly address our customers' needs and thus benefit from global megatrends on the market. 2023 showed impressively results of our growth strategy. Our priorities for 2023 were to accelerate our profitable growth and expand our margins. To consequently execute our excellence programs, further extend the order pipeline and expand our market leading position with highly innovative systems. And we checked all. With this, We laid the foundation for further profitable growth and long-term value creation. The successful transformation is driving our dynamic growth and our margin expansion. In 2023, we achieved double-digit growth and expanded our organic adjusted EBDR margin by 120 base points to 20.8%. Strong growth while improving profitability. is the sweet spot for a growth company. We expanded our systems and solution portfolio for the pharma and biotech industries, adding specialized solutions for biologics in all relevant segments. The market increasingly perceives and appreciates us as the system solution provider we have become. As such, we can now seize market opportunities. It resulted in the highest order intake in our corporate history. The key platforms we have won in 2023 are the foundation for our strong value creation in the future. We also executed our investment program. Clear focus again was expanding our global production capacities for medical devices and other high value solutions. We've made significant progress on our journey to become more sustainable Evident, for example, in improved external ratings. EcoVadis Gold in 2023 is just one example where we were able to increase our score. This program also becomes evident in new customer orders. We support more and more customers on their sustainability journey. For example, by applying our eco-design principles in the development process of customized systems and solutions. How effective the successful implementation of our Formula G strategy process has been comes clear in, in principle, just three key figures. 10.4% organic revenue growth, 17.5% organic adjusted EBITDA growth, and 7.1% adjusted earnings per share growth. And you must keep in mind that we had a capital increase last year which we already considered. Based on the strong results, the supervisory board and the management board will propose to the annual general meeting a dividend of €1.25 per share for the fiscal year 2023. That is a payout ratio of 28%, once again, at the upper end of our dividend payout policy range of 20% to 30%. Innovative systems and solutions for biologics are an important growth driver for us. Majority of our new order intake in 2023 has been orders for biologics. This includes systems and solutions for GLP-1 based drugs. The successful execution of our strategy process formula G enabled us to capitalize on these growth opportunities. The strong growth and margin expansion we demonstrated in the last years and our strong order book shows impressively that we are on track to reach also our mid-term guidance. We have come a long way from historical flattish development with a compound annual growth rate of around 2% to the profitable growth company we are today with an expected compound annual growth rate of 10% plus in the upcoming years. 2023 compared to 2021, just in the last two years, we were able to increase our top and bottom line by over 30%. We have strengthened our foundation by doing what we call the classic homework. We streamlined our operations and processes, utilized synergies, and implemented group-wide excellence and best practice programs. Be careful. selected and executed growth investments with a strong focus on expanding our global production capacities and upgrading our facilities with state-of-the-art technology. We strengthened our R&D activities to further broaden our system and solution offering for our customers. The successful implementation of our Formula G strategy process enables us now to leverage on global megatrends and to accelerate our profit growth in ways our company was not able to do in the past. We opened the door to new customers and businesses with our broad portfolio, including systems and solutions for even the most demanding biologics. With our ability to industrialize and scale production globally, one of Gerritsheimer's core competencies. With our state-of-the-art production capacities in all relevant markets and, of course, also with our services, which reduce the risk and shorten the time to market for our customers from regulatory support also to lab services. One important global trend that is very relevant to us is the dominance of biologic formulations in new drug developments. These new drugs, which by nature in most cases are injectables, are highly specific for the disease as well as for the individual patient. According to IQVIA, the pharma market overall is growing with a compound annual growth rate until 2028 of just 1.7%. The market for biologics, however, is expected to have a midterm compound annual growth rate of above 15%. Already today, more than half of the new drug approvals worldwide are biologics. This is a highly attractive market for us. We have to keep in mind that due to the high demands of these often sensitive drugs, systems and solutions for biologics are high value solutions. Within the biologic segments, there are niches that are expected to have an even stronger growth momentum. For example, the fast-growing market for GLP-1 or applications for cell and gene therapy with an estimated growth of 30%. With our innovative high-value systems and solutions, we have the right answers to address these markets, and we already have customers and new orders in all sub-segments, another base for growth in the mid- and also long-term. We have a unique value proposition for these customers, tailored to the needs of highly demanding biologics drug. What are these needs? Biologic customers need packaging for these highest requirement. Biologics are sensitive drugs which need to be protected, for example, against temperature fluctuations, light, vibrations, or pressure, or even adverse chemical reactions resulting from contact with the primary packaging. With a high number of biologic drugs in clinical trials and the trend to personalized medicine, biologic customers often need smaller batch sizes. Biologics are often cost-intense drugs. Therefore, customers have high interest to reduce the risk or, with other words, waste or interruptions in the fill and finish process. Requirements for a packaging solution for biologics are high. As these formulations are often both sensitive and aggressive, the right expertise is needed to support the customer's needs. The biologic market is a fast-growing market, and time to market is crucial for all players. And finally, sustainability is no longer a nice-to-have topic but becoming mandatory for all players in the market. Customers need to take this into account already in very early phase. We are the right partner to address all these needs for our unique system solution portfolio and our service offerings. Our high value solutions for biologics offer superior functionality and drug compatibility. They de-risk the fill and finish process and ensure an efficient line performance. Gerritsheimer has an extensive and impressive track record for designing efficient production processes and customizing line equipment, as well as scaling up production processes from small batch to mass production globally. We offer our customers technical and engineering services, regulatory support, and lab services, everything they need to shorten their time to market. And going forward, we also offer connected devices with digital solutions for therapy support. Connected devices with digital therapy support for medication adherence, side effect tracking, and patient monitoring have the potential to improve the health outcome for millions of people worldwide while reducing healthcare costs. You might have seen the announcement of our collaboration with APTA Digital Health in January. Together, we will develop an integrated solution for cancer therapies. Our on-body drug delivery device, GXSenseAir, for the subcontinuous administration for large molecule biologics will be connected to APTA's digital health platform, which facilitates therapy support from onboarding, to the management of possible adverse effects. Our strong odor intake, including odors for medical devices and high value solutions for biologics, are driving our global expansion. This is an overview of our currently ongoing large scale expansion projects worldwide. I take a couple of examples. In Morganton, we are expanding our capacities for ready to fill vials. In Peachtree, we are building a new production facility for medical devices, namely, here, autoinjectors. Together with the already ongoing expansion in PHD1, we will more than double our autoinjector capacities by the end of 2025. In Querétaro, Mexico, we are expanding our plant with new 7,500 square meters production building dedicated to high-quality pre-filled glass syringes suitable for injectable biologics such as GLP-1 and others. In Europe, we are expanding our production facility in Freimd, Skopje, and Hossowski-Thun for medical devices. Also in Asia, China, our expansion in Sanyang is dedicated to high-value radiofield wires. The successful transformation of Gerasim, our positive operational development, our strong order book, And our ongoing global expansion will enable us to continue our dynamic growth with an expected compound annual growth rate of 10%. And we are confident that we will deliver once again. Thank you very much. And with this, I will hand over to our CEO, Obert Metzner, for a deep dive into the figures in Q4 and, of course, the full year of 2023.

Thank you, Dietmar, and welcome everybody also from my side. Let's dive into the analysis of the key financials for the fourth quarter 2023. The last quarter of 2023 showed a solid performance with mid-single-digit organic revenue and double-digit organic adjusted EBITDA growth. Revenues grew organically from 516 million euros by 5.1% to 542 million euros. Reported revenue stands at 545 million euros. The impact from FX was minus 10 million euros and resulted mainly from a weaker US dollar. So organic revenue growth of 5.1% includes the temporary destocking effects in our wild business, which we are flagging since our Q2 release last year. Adjusted EBTA grew organically from 110 million euros by 10.5% to 121 million euros. Organically, adjusted EBTA margin increased from 21.3% by 110 BIPs to 22.4%, mainly driven by favorable product mix effects. Reported adjusted EBTA stands at 119 million euros. The impact from FX was minus 4 million euros. Adjusted EPS improved organically from 1.48 euros by 7.4% to 1.59 euros. Reported adjusted EPS stands at 1.51 euro. The impact from FX was minus 9 cents per share. The EPS figure in Q4 2023 is calculated based on the capital increase of April 2023, which leads to an increase of the numbers of shares from 31.4 million by 10% to 34.54 million shares. Let's move on to the divisional development in Q4 2023. First, plastics. Revenues grew organically. from €281 million by 9.5% to €307 million. Reported revenues stand at €310 million. The impact from FX was minus €4 million. The organic growth was driven especially by strong contributions from our syringe as well as our medical device business. Adjusted EBTA grew organically from 79 million euros by 14.2% to 90 million euros. Organically, adjusted EBTA margin increased from 28.2% by 120 bps to 29.4%, driven by an improved product mix. Reported adjusted EBTA stands also at 90 million euros. The impact from FX was minus 2 million euros. Second, primary packaging last. Revenue grew organically from 236 million euros by 0.5% to 238 million euros. Reported revenue stands at 238 million euros. The impact from FX was minus 6 million. The temporary destocking in our wide business is still ongoing, but was overcompensated by a strong growth in our molded glass business unit. Adjusted EBTA grew organically from 44 million euros by 3.1% to 45 million euros. Organically, adjusted EBTA margin increased from 18.6% by 50 pips to 19.1%. Reported adjusted EBTA stands at 43 million euros. The impact from FX was minus 2 million euros. Third, advanced technologies. Revenues declined organically from €4 million to €2 million. Reported revenue stands also at €2 million. Adjusted EBITDA declined organically from €-4 million to €-6 million. This result in Q4 is, however, not representative for the quarters to come. We expect for the financial year 2024 a slightly better outcome than in 2023 financially. We announced recently a collaboration with ABDA in the area of cancer. ABDA Digital Health is providing its health platform for monitoring side effects of cancer therapy, and we are providing our SenseAir device. With the development of a device for the delivery of large molecules, we are responding very well to the market needs and trends. Overall, We will continue to invest in advanced technologies to pursue our compelling strategy regarding own IP devices, being an original equipment manufacturer, and developing new digital business models. Coming now to the cash flow development in the fourth quarter of 2023. As discussed, adjusted EBITDA developed nicely. Our operating cash flow was strongly supported by a reduction of net working capital. we were able to generate 22 million more cash in Q4 2023 from our working capital release compared to the already good performance in Q4 2022. Cash outflow related to interest paid was higher year on year. The increase is primarily due to higher variable interest rates from the promissory loans. Net capex increased year on year as we continue to execute our investment program into highly, highly attractive growth opportunities. Reflecting on the full year 2023, during our Q2 2023 analyst call, we indicated that we expected a free cash flow to range between moderately negative to almost break even. In fact, we achieved this minus Euro 3 million almost break even. This good result is driven by our strong operating cash flow performance in 2023. We increased our cash flow from operating activities from €222 million by more than 30% to €294 million. That means that the net capex cash out of almost €300 million in 2023 could almost entirely be funded by our strong operating cash flow. As you know, our relative high net capex cash out in 2023 is a consequence of very, very attractive and unique business opportunities. We are especially ramping up our capacities for medical devices, GLP-1 products and biologics. Also, on the basis of our investment, we are planning to bring our ROCE of around 11% in 2023 to 15% in the medium term. Finally, let's turn to net financial debt as well as the adjusted EBITDA leverage. Both performance indicators improved year on year due to the capital increase and the strong EBITDA growth in 2023. Net financial debt stands now at 862 million euros compared to 1 billion euros at the end of 2022. Adjusted EBITDA leverage improved from 3.0 to 2.1. times EVTA. This results in a financial headroom of around 500 million euros and provides us with further flexibility. This slide shows the reconciliation of the reported to the adjusted financials for the financial year 2023. Revenues grew organically from 1.79 billion euros by 10.4% to 1.98 billion euros. Reported revenue stands at 1.99 billion euros and so achieved a new high for the group. The impact from FX was minus 14 million euros and resulted mainly from a weaker US dollar. Adjusted EBTA grew organically from 351 million euros by 17.5% to 412 million euros. Organically, adjusted EBTA margin increased by 120 bps to 20.8%. Reported adjusted EBITDA stands at 405 million euros. The impact from FX was minus 11 million euros. Let me briefly comment on our EBITDA adjustments, which amounted to 9 million euros in full year 2023. The 9 million euros consist, among others, of an inflation compensation premium paid. With this amount, we cut prior year's 19 million euro net exceptional expenses into half. The increase of the adjusted depreciation and amortization by €16 million to €143 million in 2023 is mainly reflected by the higher investments in our business in the most recent years. The adjustment of €39 million consists of amortization of fair value adjustments. Now, over to the next line item, the financial result. The decrease of the financial result is predominantly due to increased interest expenses from promissory loans and the revolving credit facilities. Regarding income taxes, the adjusted tax rate in financial year 2023 was 26.8%. Adjusted EPS improved organically from 4.63 euros by 7.1% to 4.96 euros. Reported adjusted EPS stands at 4.62 euros. The impact from FX was minus 32 cents per share. The EPS figure for 2023 is calculated based on the capital increase of April 2023, which leads to an increase of the number of average shares from 31.4 million for 2022 to 33.3 million for 2023. Moving now on to our sustainability strategy. Sustainability is the fifth pillar of our corporate strategy and is, as mentioned before by Dietmar, becoming increasingly important also in our customer interactions. To that end, we have included an ESG update on this slide as first time in this format. We want to particularly highlight our carbon emission reduction target. Our ambition is to reduce our scope one and two emissions from 570 tons in 2019 by 50% to 285,000 tons CO2 equivalent until 2030. And this against the backdrop of our growth plans. To reach this ambitious emission target, we focus on the electrification of our furnaces, energy efficiencies, and green electricity. We also have officially communicated to setting Scope 3 targets by 2025, validated by the science-based targets initiatives. We also make our progress transparent and measurable each year. In 2023, we were able to reduce our carbon emissions to 455,000 tons, representing 20% reduction versus the base year 2019. and this on the back of a green electricity share of 46%. As you see, we are on track to deliver on our 50% CO2 reduction target in 2030. As a production company, safety is also of utmost importance to us. We significantly reduced our lost time incident rate since full year 2019 from 12.8% by 50% to 6.4% in full year 2023. As important recognition of our achievements, we have been, as you know, awarded with EcoVadis Gold status for the second year. EcoVadis assesses the maturity of ESG management of companies. More than 100,000 companies worldwide turned to EcoVadis for the performance reviews. With the Gold status, we earned a spot in the top 5% of all companies assessed by EcoVadis. Before finally handing back to Dietmar, We would also like to welcome Guido to our Gerasimer team. He is bringing extensive investor relations experience to Gerasimer, supporting us to successfully communicate our profitable growth story. Welcome on board, Guido. With this, I hand back to Dietmar.