Gerresheimer AG

Ladies and gentlemen, welcome to the Gareth Heimer AG's Q2 and first half 2024 results conference call. I am Shari, the chorus call operator. I would like to remind you that all participants will be in listen-only mode and the conference is being recorded. The presentation will be followed by Q&A session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, I will hand over to Mr. Guido Picard, Vice President, Corporate Investment Relations. Please go ahead.

Thank you, operator. Please note that the recording will be made available on our website sometime after this call. With that, I hand over to our CEO, Dietmar Siemssen, to run you through the highlights of the quarter together with our CFO, Dr. Bernd Metzner. Dietmar?

Yeah, thank you so much. And welcome, everybody. And thank you for joining us this morning. As you heard, Bernd Metzner, our CFO, and I will now run you through the highlights of our second quarter 2024. As always, we will then be happy to take your questions. You have seen this chart several times during the last update calls. With our containment solutions, we bring the drug safely protected to the patient. Our drug delivery systems enable the drug to be safely administered and with our connected devices and digital solutions for therapy support, we help to improve the health outcome for patients worldwide. Why do we bring and keep bringing this slide up? Our Q2 results underline the strategic strength of this broad portfolio. It ranges from standard products and systems to highly sophisticated customized solutions. The ability to meet our customers' needs to capitalize on global megatrends, to industrialize and to scale production globally is and will be a prerequisite for a strong competitive position and sustainable, profitable growth. This and that is why we are the strategic partner of choice for the pharma and biotech industry. And that is why we were able to secure these long-term contracts for which we are currently expanding our production capacities worldwide. Taking strong advantage of our broad portfolio is often underestimated. Resilience. This is particularly important. to keep in mind regarding our Q2 and six-month results. Yes, we are affected by the destocking in the market, mainly in our wine business, in our primary packaging glass division, and this impacts our results. Will this slow down our growth in the mid and long term? No, it will not. We still believe destocking effects to be temporary, and we are getting signals from the markets that the destocking begins to fade out. And we were able to offset this effect with a strong performance in our plastic and device division, and medical devices such as inhalers, pens, and auto-injectors, but also in plastic drug containers, the later being the much underestimated business, which I will come back to you in a moment. That's what I mean when I say that our broad portfolio makes us resilient. It enables us to offset market fluctuations in a particular business area. And you can see this on our results. Our performance was in line with the previous year's results. We were able to compensate destocking effects in primary packaging glass with a continued good performance in plastic and devices, including a notable margin expansion of 200 basic points. The decrease in adjusted earnings per share solely due to the dilutive effect of last year's capital increase that took place in April 23. Yes, we plan to see better results, but the main reason for the lower revenues is the dystopia. Important message here is that the underlying growth momentum is intact. With the destocking effects gradually decreasing and the ramp up of new lines and projects kicking in, we expect a strong second half 2024. We are on track for sustainable profitable growth and we confirm our guidance. Equally important in the first half of 2024, we have continued to lay the foundation for strong value creation in the years ahead. A very important milestone This regard on our growth path was the signing of the contract to acquire Formioli Pharma. We have shared our key priorities for 2024 in the last counts. We will accelerate our sustainable profitable growth by consistently increasing the share of high value systems and solutions and medical devices for injectables, in particular for large molecule biologics in our product portfolio. We will execute our ongoing growth projects and add global capacities for long-term contracts, including contracts for drug delivery devices such as pens, order injectors, and syringes for GLP-1 applications. We will further expand our product portfolio with highly innovative systems and solutions, including our own IP solutions, connected devices, and platform solutions for digital therapy support. In our Q1 call, we gave you an update on our ongoing capacity expansion projects. Today, I want to shed some light on how we plan to expand our portfolio and especially how we want to increase the share of high-value solutions in our plastic business. The basic principle of our garrison strategy is to combine a strong foundation business, solid growth, solid margins, and strong cash generation with growth drivers that generate over-proportional top and bottom line growth. This combination is key to ensuring consistent and sustainable profitable growth. The, you might say, old Gerritsheimer, before we actually initiated our Formula G strategy process, focused mainly on a commodity and pure volume business. By complementing our portfolio with new and innovative solutions and by focusing on customer centricity and operational excellence, we have significantly strengthened our existing business and opened the door for new high growth markets and customers. We have done our homework and have built that strong foundation. We now benefit from a resilient and strong-based business. This business grows stable in the mid-single-digit range and delivers solid margins and reliable cash flows. It includes, for example, bulk oils, bottles or cartridges, plastic containers, and, of course, also selected medical devices. On top of that, we systematically identify drivers for over-proportional growth. Products and solutions which allow us to grow faster than the market overall and to expand our margins. Because these solutions offer significantly added value for our customers, our high-value solutions. Growth drivers are, for example, our ready-to-fill products, including our easy-fill smart platform. Dedicated solutions for sensitive biologics. High-value syringes. metal, or especially tungsten-free for biologics, or silicon oil-free for ophthalmic applications. Own IP solutions, like our auto-injector GX-inBeneo or our GX Sense Air on-body drug delivery pump device for large molecule biologics. And digital solutions, like traceability or connected devices, which enable digital therapy support. The new Gersheimer now has a solid foundation of base business bolstered with high-value solutions growth accelerators, and we are continuously expanding our high-value solutions offering. The planned acquisition of BOMI Olifama is a perfect fit for this strategy, as it complements our portfolio, both in the base business as well as in the high-value solution business. In our call, Right after the announcement of the planned acquisition, we talked about the complementary portfolio in both glass and plastic in general, and especially how this acquisition will form a molded glass powerhouse with a diversified portfolio for pharma, cosmetics, as well as food and beverage. Today, I would like to show you how this transaction will strengthen our pharma plastic business, marked here in yellow. And in particular, I'm going to talk about high-value plastic solutions. With these acquisitions, we are taking a leap forward towards positioning ourselves as a system and solution provider for high-value solutions in both glass and plastics. Formuli's portfolio, regional footprint, and customer base are highly complementary to Gerasim. And this is also clearly visible in our plastic business. We will significantly broaden our plastic portfolio and especially our containment solutions with this transaction. The combined portfolio will enable us to provide a broader range of solutions for pharma plastics and containment solutions and even stronger one-stop shop for our pharma customers. Bormioli's pharma plastic portfolio is also highly accretive to our high-value solutions offerings, as it includes, for example, additional attractive IP solutions. High-value solutions, growth drivers with significant added value for our customers, are normally associated with containment solutions and drug delivery devices for injectables. But the plastic portfolio also offers high added value for our customers through system integration. For example, bottle closure solutions resulting in higher margin for garrison. Today, we already have a wide range of integrated plastic containment systems in our portfolio. The container plus closure, including own IP solutions. These are high value solutions in plastics, a very attractive system. Formioli's portfolio will allow us to significantly broaden our offering, including also a SAS OS. Formioli's closure options will enable us to create new systems through system integration, new high-value solutions, containment solutions consisting of a glass or plastic container, and the respective closure. What is the added value of the customer of buying complete systems instead of a container and, for example, a closure separate. Customers have just one source for the complete solution, one point of contact, one supply chain instead of two. They will also buy a fully qualified system with ensured functionality and tested container closure integrity instead of having to make sure internally that the selected closure option fits the container. Customers can tap into our primary packaging plastic product database to speed up their time to market with extensive technical documentation for their integrated systems, including documentation for fully customized solutions. That means considerably less effort, internal testing and documentation, and a smooth regulatory registration and approval process. That is why one and one equals more than two. A fully integrated system consisting, for example, of a PET or glass bottle and a closure of choice when becomes a high-value then becomes a high-value solution. The same goes for all other drug containers with various closure options, from desiccant closure to tamper-evident, child-resistant, or senior-friendly closures to droppers, sprayers, or nebulizes. Expanding our portfolio with innovative products and high-value solutions will help us to accelerate our growth of the top and bottom line. This will be visible mid-term and drive our strong development in the future. The Bomiuli acquisition is surely another important cornerstone for our mid- and long-term growth strategy. Thank you very much for the moment. And with this, I will hand over to our CFO, Bernd Metzner, for a deep dive into our figures of the second quarter 2024.

Thank you, Dietmar, and welcome everybody also from my side. Let's dive into the analysis of the key financials for the second quarter 2024. Revenues grew from 500 million euros to 502 million euros. This leads us to an organic revenue growth of 0.7%. The impact from FX was almost neutral. Our plastic and devices division continued its device-driven profitable growth in Q2 2024. Our primary packaging glass division developed in line with our expectations. Growth was muted due to the already known and anticipated temporary destocking effect. Adjusted EBTA remained at prior year's level of 107 million euros. This led us to an organic adjusted EBTA growth of 0.8%. Organically adjusted EBTA margin remained unchanged at 21.6%. The impact from FX was minus 1 million euros. Adjusted EPS went from 130 euros to 124 euros. This led us to an organic adjusted EPS decline of 3.1%, which is due to the dilutive effect of the capital increase of April 2023. More to this later. The impact from FX was minus 2 cents. Let's move on to the divisional development in Q2 2024. Plastic and devices. Revenues grew from €265 million to €283 million. This led us to an organic revenue growth of 6.7%. The organic growth was driven by strong contributions from the medical systems business. Especially the business with pens recorded a strong growth. The impact from FX was neutral. Adjusted EBITDA grew from €69 million to €79 million. FX contribution was almost neutral. This led us to an organic adjusted EBTA growth 12.4%. Organically adjusted EBTA margin increased from 26.3% by 140 basis points to 27.7% and was also driven by a better product mix. Now, primary packaging glass. Revenues declined from 234 million euros to 218 million euros. This led us to an organic revenue decline by 6.6%. The impact from FX was minus 1 million euros. The temporary destocking effect at our customer's level impacted our pharma glass business and was the reason for the revenue decline. unchanged from the development in the prior quarter. Adjusted EBTA declined from €49 million to €39 million. The impact from FX was minus €1 million. This led us to an organic adjusted EBTA decline of 17.4%. Organically adjusted EBTA margin decreased from 21.2% by 250 basis points to 18.7%. Now, advanced technologies. Revenues remained on prior year's level at 2 million euros. Adjusted EBTA is literally unchanged on prior year's level of minus 3 million euro. Advanced technologies continues to work intensively on new innovative solutions in the field of digital health and drug delivery solutions. slide shows the reconciliation of the reported to the adjusted financials for the second quarter of 2024. Revenues grew organically by 0.7% and adjusted EBTA by 0.8%, as discussed in all detail earlier. Let me briefly comment on our EBTA adjustments, which amounted to €4.7 million in Q2 2024. The majority of this amount is related to restructuring of business division and the meaningful ramp up of our new production sites in Mexico, North Macedonia and the United States. Adjusted depreciation and amortization was almost on prior year's level. The adjustment of 9.1 million euros consists of amortization of fair value adjustments. Regarding income taxes, the adjusted tax rate in Q2 2024 was 24.5% compared to 23.8% in Q2 2023. Adjusted net income after non-controlling interest increased organically by 2.2% compared to Q2 2023. As mentioned before already, the organic adjusted EPS declined by 3.1%. The reason for this is the dilutive effect of calculated 5.3% new shares in Q2 2024 in comparison to Q2 2023. Coming now to the cash flow development in the second quarter of 2024. The free cash flow developed as expected. The adjusted EBITDA remained unchanged compared to prior years Q2 at 107 million euros. Looking at net working capital, we see a cash outflow of 50 million euros in Q2, which is more pronounced than last year's Q2 with a cash outflow of 21 million euros. Taking a look at the first half of the year in total, however, our net working capital related cash outflow is still 39 million euros better than last year's figure. For the second half of the year, like last year, we expect a positive cash contribution from the release of working capital that should more than compensate for the negative development in the first half of 2024. Regarding cash taxes, the outflow of 10 million euros is significantly lower compared to last year due to different timings of tax payments. Moving now on how we utilize these funds. Net capex in Q2 2024 was almost on prior year's level as we continue to execute our investment program into highly attractive growth opportunities. As you know, our currently elevated net capex cash out is a consequence of very attractive and unique business opportunities. We are especially ramping up our capacities for medical devices, COP1 products, and biologics. Finally, let's turn to net financial debt as well as the adjusted EBTA leverage. Net financial debt, according to credit agreement in force, stands now at slightly above €1 billion. With this, our adjusted EBTA leverage slightly increased from 2.4 to 2.5 times. With this, I hand back to Dietmar.

Thank you, Bernd. Let's come to the final charts. Key priorities for 2024 represent the consequent execution of our Formula G strategy and, as very often mentioned, our transformation into a system and solution provider. And this is what will strengthen our solid foundation, accelerate our growth, help us expand our margins, and ultimately enable us to reach our ambitious goals. We expect a significant upturn of our business in the second half of 2024, and especially in the fourth quarter, as new production lines ramp up and we see the destocking effects fade out. Once again, confirm our guidance. This includes our 2024 and 2025 outlook, as well as our midterm guidance. In 2024, we expect revenue growth of 5 to 10%, and we are still expecting some destocking effects in the market, As or as we are still expecting some destocking effects in the market, we estimate revenue growth to be around the low end of our guidance range. Nevertheless, the adjusted EBITDA will once again be strong and reach between 430 and 450 million euros, in line with our plans for further margin expansion. The adjusted earnings per shares is expected to grow between 8 and 12%. We also confirm, as mentioned, our guidance for 2025 and our mid-term outlook guidance. As you can see, we are on track and stay on track on our profitable growth path and would be delighted if you would accompany us going forward. The next opportunity to check in on our financial performance in 2024 will be our Q3 results for our fiscal year 2024, which will be published on 10th of October, and we are planning a capital market day in December. We will keep you informed of the exact date. We hope you will join us again. Thank you, and I assume we are now happy to take your questions. Thank you.

Ladies and gentlemen, at this time, we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on their touch-tone telephone. If you wish to move yourself from the question queue, you may press star followed by two. The first question comes from the line of Oliver Reinberg, Capital Chauvreau. Please go ahead.

Thanks very much for taking my questions. The first one would be on destocking. If I listened correctly, I think in your prepared remarks, you referred to the fact that you see destocking mainly in vials. So can you just expand like in which kind of other product categories do you also see some kind of destocking effect? And also what kind of visibility do you have in the market here to differentiate between what is really destocking and what is potentially a kind of a broader scope and offering in general in terms of supply? And second question would be on Bomioli. I think when you presented the deal, you talked about more than EPS equation in the first year. I mean, I guess it's a bit challenging to get there in the back of the envelope calculation, but can you just provide a bit of color? What have you assumed there in terms of depreciation, financing costs and tax rate and also sales synergies that gives you the kind of confidence really to deliver 10% EPS equation here? then finally on gp1 um is there any kind of phasing to expect it that the growth contribution from gp1 is stronger in the second half than the first half because in order to deliver your guidance if there's only a certain improvement q3 you probably need to double the growth so just trying to get a kind of color how much visibility you have to get down thank you yeah oliver i think i take the first question i think that the

from Uniband you can take, and I can also take the GLP-1 beginning. Yeah, this destocking actually affects the vials, and for Gerrishammer primarily the bulk vials, and that's it. The question is very relevant. is this only destocking or is the long-term effect and the answer i think we answered it a couple of times we don't see that the general trends to more and more injectables more large molecules is is broken and as such we see this as a temporary effect coming to the glp-1 question there's no doubt the whole glp-1 solutions we are supplying into the market are at present still in the ramp up phase and in the logical consequence there will be stronger and stronger sales coming up not only quarter by quarter but also year by year over the loop not only by the next quarters but actually also by the next years and of course we also see new platforms and projects starting over the loop of this year they are just about to start and ramp we will steadily ramp them up over the loop of the next months and that will actually contribute to stronger sales in the second half of the year.

Regarding, Oliver, regarding, thanks for the question, regarding Bomioli, it's really, as you indicated, it's a little bit premature because we expect now that the closing takes place in Q4. obviously, but it's really too premature to discuss about the details now and how the phasing will be of the, regarding the EPS accretion. What is, be assured first, that we expect from day one, actually, from year one, that we have a 10% EPS growth, so really a dilutive effect here, and that we have also a robust margin expansion of 50 to 100 pips, including Zynga Gs near term. That's crystal clear and remains intact. But the details for Q4 is difficult to predict now.

I hope you understand. But can you just share some kind of color when you talk about more than 10% EPS equation for BOM-ULI, what you embedded for interest cost DNA and what kind of phase synergies you expect in the first year?

I think you need to do the clothing first. One is what we also said the last time when we acquired BOM-ULI, obviously, you have a we'll have funds available for the acquisition we talked about the acquisition price and the price versus debt related we need to have debt for this and the debt comes along with hundreds basically basis points on top of 3.7 3.8 percent uh uri bor that's something what you need to calculate and then you can make the math what does it mean for our for our interest costs for this acquisition okay and last follow-up is any kind of um spill over into garrison core when you have a kind of higher leverage is any kind of existing deadlines that will carry kind of high interest because the leverage for the group has overall increased no not really not not material oliver um there's no material impact for for the for the facility agreement and so on and so forth so just to remind ourselves we expect that we have an end of the year between 3.5 and 4.0 kind of leverage, and this goes down then throughout the year and will end in 2025 at a level of 3.0 or lower. Okay, perfect.

Thanks so much indeed.

The next question comes from the line of Victoria Lambert, Berenberg. Please go ahead.

Thanks for taking my question. My first one is just your ramp ups at the Peachtree facility and Morganton in the autumn. Are those expected to have more of a positive benefit in Q4 or will we start to see some of the benefit in Q3? And then my next question is just on the advanced technologies business. um is there any update there on uh your product submission with the fda um do you have any more um clarity on when the product could be approved and uh just if there any other updates uh on the advanced technology business that would be helpful thank you yeah i'm happy to take this question actually um the ramp ups we are talking about are not

only the ramp-ups in Petrie and Morganton. There are actually ramp-ups in Petrie and Morganton, but you have to see there are also new lines starting in Horshovsky Tun and Skopje and other facilities. So I think that That's all. We are now talk P3.1, where we have the ramp up already ongoing, and the next ramp up will actually be P3.2, the new facility, and here the ramp up actually will start in one year, means in summer 25. So coming to the advanced technology, actually there's not much news, neither positive nor negative. I think we said that the FDA approval of the pump, that is very relevant for us, is coming within this year and that is unchanged. The case are we waiting for the approval here and preparing ourselves for the start of production.

I think I hope this answers your question, sorry.

Yes, thank you. The next question comes from the line of Oliver Metzger. Odo, please go ahead.

yes good morning from my side first question is on um on this talking so can you give us an indication where the underlying development of ppg would have been if you exclude the glass files where the g-stocking occurred second um if you look for the first derivative of this docking do you see right now it's unchanged or do you see already a slight turn to be better And the last one, very technical, can you comment on the impact in the regime crisis currently and what do you see as for the second half? Thank you.

What crisis? That's the one? The regime crisis. Oh, so regime crisis. Yeah, yeah. Easy question, no problem. Yeah, through the destocking, That's a very interesting question. Let me see. We gave a guidance to the market that we would go between 5% and 10%. And we are now more guiding in the sales topic towards the lower end of this bandwidth. So if you want to know the impact, it's probably the difference in between the lower and the high end. Because we were clearly aiming for double-digit growth this year without the destocking. The second question, actually, I didn't get. Can you help me on the second question? And the third, I could talk about resin price, but you can do this.

Oliver, thanks for the question regarding resin price. We don't see here a high, let's say, impact now. We don't see an impact for resin prices now in Q2, looking back in this year, so no topic.

And the second question, you have to repeat. I didn't get it.

If you look for the first derivative of the destocking, is it basically now the headwind what you see? Is it unchanged compared to Q1 or do you see that the underlying headwind basically becomes lower?

Oliver, now we get it acoustically. Basically, what we see is that it's really getting better quarter by quarter. And this is also related to our phasing of the overall business, obviously. So Q1 was worse. Then basically, if you look at our Q2 regarding organic growth, it's basically at the low point. And now it should get improved in Q3 and then even get better in Q4. This is basically how we see the pattern for our organic growth overall. And I think the pattern for the destocking fits very well into this kind of concepts.

Okay, great, very helpful, thank you very much.

The next question comes from the line of Paul Knight, KeyBank. Please go ahead.

Thank you for the time and the question this morning. In the GLP-1 portion of the business, are you, it would seem logical, are you seeing GLP-1 product sales improved sequentially from Q1. And the same thing with destocking. It seems like sequentially things started to improve from the first quarter in the impact of destocking. Would that be a fair assumption?

Yeah, I'll start with GLP-1. As I mentioned before, the GLP-1 The whole GLP-1 market is actually in the race. All the capacities are built, and it's a similar picture in Gerritsheim. There are some lines now ramping up steadily. Others are starting. That's why very clearly it's a very clear yes. We will increase quarter by quarter, but also year by year. The next quarter will always be stronger. 25% will be much stronger than 24%. as 24 is stronger than 23, and 26, 27 will be the strongest year for GLP-1. And the destocking, I do not know how much to add. I think Bernd just said it. We see the destocking steadily, step by step, getting better. For us, it means that the sales are coming back in. First quarter, second quarter, we clearly see some impacts in the third quarter but it's still it's getting better and then we clearly see things fading out more and more so the fourth quarter will be even stronger than the third quarter and then hope we are and then hopefully the whole thing is solved because we are fed up with this meanwhile yeah thank you let's

Next question comes from the line of Anna Bain, Barclays. Please go ahead.

Hi, guys. Thanks very much for taking the call on my questions. Congrats on results today. Just a couple from me. I guess, firstly, thanks for your additional comments on the call on the Bormioli acquisition. I think the color and flavor of the rationale is very helpful. Just regarding the benefits that you'll have coming from the complete system offerings, Do you have a sense of the customer overlap between the two companies? If so, it would be great to kind of get any color there. And then regarding sort of, you know, having relevant documentation, studies for container closure integrity, what's the timeline to really be able to market and push these complete offerings? Is it sort of day one or will it take time for you to really, I guess, bring the sort of various components together? And then that's sort of the long-term question. And then, sorry, a few more boring questions on this year in guidance for me. Just sort of on the growth project ramp, you've obviously commented that, you know, acceleration quarter on quarter. So Q4 will have more of a contribution from growth projects than Q3. But are you able to quantify that at all? I guess sort of, you know, a lot of people are just trying to understand the shape of Q3 here. And on destocking, any regional differences you've been seeing? I think the U.S. in particular for vials has been weak. Is that improving? And, you know, I guess any granularity you can give us regarding customer orders or order book would be great. Thanks so much.

Thank you for your questions. They will keep us busy for the next minutes. I have to take the Bormioli portion first, as we, I think, indicated that the last call after the announcement of the signing, the business is really very complementary. This means the classic things like you are usually afraid of how much double customers do you have, the regional overlap. It's actually the little, there's very few customers. They're really moving into new customer bases and customer markets. more in the south europe area which is extremely complementary and then you have to look into the details of the businesses uh to your questions of accretive there's no doubt the business will be created from day one and then very fast additionally synergies will come into the in place and we are not talking the classic synergies cost cost cost only it's clearly also sales synergies and system integration synergies they have very interesting products that we would rate as high value products, especially in the sector of plastic. And a lot of the solutions they have or products they have are actually closures that fit extremely well into our system integration portfolio, both on plastic, but actually also in the glass side. So here, glass bottles need closures that, for example, come via plastic product and solutions out of the Bormioli. So it's a very, very good complementary fit, and that's why we are also very happy that we bring these new colleagues and products into the portfolio.

Just to take your second question regarding the detailing of the growth trajectory, and just to remind ourselves, we had in the first half of the year, we grew around 2%, I think between 1.5 and 2.0 percentage points. And what we said, we expect that Q3 will definitely improve. And compared to this number of the first half of this year, and Q4 will be then even better than our Q3. We don't want to go in further detailing because we also don't guide for specific quarters. What is important that ultimately combining the first half and the second half of the year together, we will have an organic growth at the lower end of our guidance range of 5% to 10% in our EBITDA will remain between 430 and 450 million for the full year 2024.

And just a quick follow-up though, I guess you're comfortable that within the bottom end of the guidance range Q3 doesn't have to be a knockout quarter, it has to be an improvement, but it's really then Q4 that will see the growth acceleration, just to confirm sort of, you know, the bottom end of guidance being a flaw.

Only the combination, that's important. Q3 trajectory, what we just said, Thank you for even higher improvement, and then we should get there, and this is our plan, and this is all data points leading to this. Yeah.

Great. Thanks. The next question comes from the line of Olivier Calvet, UBS. Please go ahead.

Hi, good morning. Just a couple of questions left. So first on the ramp up this year, I think at Q1 results, you mentioned six sites. So Peachtree, Morganton, the Czech Republic, Querétaro, Skopje and China. I was just wondering if that's the order of the ramp up you're seeing this year. And if you could just remind us what has started operations already, what starts in Q3 and what starts in Q4. That would be the first question on the ramp up. Then I just had a question on the food and beverage molded glass business. There's been a few question marks raised here, in particular given a recent market comment by a larger French molded glass player. I understand you cover different customers, but I just was wondering if you had any color on pricing versus volume in that segment. And I saw also that you're expanding capacity in Lore, which I think is new. What is the expected timeline for that project? That would be my first two questions.

I will try to cover this to the ramp-ups. The ramp-ups actually of this year are more or less the line ramp-ups, the big ones that you are referring to, P3 and Hossowski Twin. Actually, the ones that we are planning took place, but you have to see that if you start the line after the qualification, it's ramping up steadily. week by week, the volumes go up. That's why the real sales impact is only visible usually at the later fall side of the year. And that's why the impact is strongest at the fourth quarter, actually. Then there's always new line startups that take place with new machines. And also here, we see a couple of them starting, for example, in Morganton at the end of the year. The new facility, China, though, Is, that's too early because it's still empty, the Rambob takes place end of 25 actually. So, then there was a question in food and beverage. I'm not fully sure whether I got it. The customers we have in food and beverage are very, very long, many, many years customers, very specific customers. with very specific behavior, I would not automatically compare this 101 with the classic market of food and beverage. And lower furnace rebuild is planned. Of course, you see quite some companies moving into this right now, which is a lot of starting up companies, but actually the lower furnace build is planned for beginning of 25.

Okay, thanks.

The next question comes from the line of Klaus Brune, Plateau Fairlag. Please go ahead.

Yeah, good morning. Thanks for taking my question. I got two of them. One is in your prepared remarks, you said we are getting signals from the market that the destocking is fading out. Maybe you can add some color to that, what kind of signals you are getting. And in that connection, competitors are lowering their forecasts. You do that. You haven't done that. You only mentioned that revenue will be at the lower end. What's the reason you can be more optimistic than many of your competitors like Short and Devonato? Is there less of a corona pickup that is now being taken out for you or what's the reason there? Thank you very much.

The first answer is very easy because we see this in the orders. Just the order intake is getting better and the orders go up again. And I think it's similar to the pictures that some of our competitors see as well. To the second question, it's always difficult to compare companies one-on-one. You have to look at the total portfolio. As we indicated in the beginning of my speech, actually, today, you have to consider the fact that we have a broad portfolio, and wide areas of the portfolio actually are not affected by the stocking effect at all, even if you see that the growth plans I had this year might have been stronger, and we are affected by destocking. We should not forget that certain areas or the other areas of the business actually are doing extremely well, performing strong according to plan, and this gives us the opportunity to compensate impacts in one or other area that is not developing according to expectations.

One add-on, if I may have, why don't you give us any indications about order intake? I think you mentioned that in the past that you don't want to give out order intake numbers, but wouldn't that be something that would make it easier for us to see how the business is developing?

Yes, but it doesn't make too much sense because it's very highly complex. There's a lot of customers, a lot of facilities, a lot of things that... that come together in the end, whether it's the order or it's actually the calls that are relevant. We are disclosing some of the big new orders flying in, and I think that helps you much more than individual monthly calls out of the orders that we have.

Just to add, ultimately, it boils down. I mean, we give organic sales close guidance, and obviously, this is an always big risk order intakes, discussion with customers, and commitments from our customers. This way we are basically managing our guidance. So this is basically the starting point is obviously our guidance supported by the orders.

Thank you.

The next question comes from the line of David Edlington, JP Morgan. Please go ahead.

Good morning, guys. Thanks for the question. Most already been asked, maybe just on Borneoli. I just thought, I think you said that you're still expecting closing in Q4. I just wanted to get any updates on potential levels of interest from third parties you're seeing in that subsequent strategic review or disposal, and any thoughts on when that process might complete.

Thanks. Yeah, I can give you an update here. We have, of course, these things are always depending on the proofs from the antitrust authorities, we have filed everything, everything is in plan, and we have unchanged expectation that we can close with the fourth quarter. And that has not changed. And all the other topics is something we have to look into as soon as we have the closing.

Maybe you can follow up there. Have you had any early indications of interest from third parties?

We spoke about a strategic review, and that is something that we will do as soon as we have the full transparency on the data and the situation. That is something that we will identify.

Fair enough. Thanks.

The next question comes from the line of Ed Ho, Stifel. Please go ahead.

Perfect. Thank you. First question from my side would be on Q3 growth in plastics and devices. I mean, should we expect a similar sort of mid-single-digit growth that we saw in Q2, given we're not seeing as much capex ramp in Q3? And does this sort of imply that the utilization rate of the existing facilities is currently close to maximum, given a lot of the growth was attributed to product mix? And then my second question, again, was on Bormioli. Just on the overlap of furnaces you have on the production of tubular versus molded glass, are there any in the same facility or location? And what would this mean if there was a sale of this business? Thanks.

You can take the Q3 and I take the Bormioli.

Maybe just your question was regarding Q3 plastic and devices. I mean, if you look at the organic growth, 13.7% in Q1, Q2 was 6.7%. Q3 will be very consistent and in line with Q1, Q2, if one may say so. That's basically, and by the way, we are telling you more than what we actually do because we don't give guidance for specific quarters and for specific divisions, but just that you have a certain feeling so all good and very consistent.

These guys are doing strong. Bormiole, yeah, I think one more time, it's really a complementary business, and this is also the case for the furnaces. It's different businesses. It's really a creative. What we get in with Bormiole is type 1 Europe business, which we actually do not have at all. So there is no overlap. It's really complementary and creative what we expect to see here.

Perfect. Thanks. So maybe just to follow up there, you said it's in line with Q1, Q2. I think there's roughly a 600 basis point difference between the two. So, I mean, is it closer to... Maybe it takes the midpoint. The midpoint.

If you would calculate, it takes the midpoint, all good. Okay. As mentioned, very good. Business is running very good. Perfect. Thank you.

Next question comes from the line of Falco Friedrichs, Deutsche Bank. Please go ahead.

Thank you very much. My question is on destocking as well. Are you relatively confident that this could be all done and dusted by the end of this year so that we have sort of a more normal 2025? Or do you feel like this could continue into next fiscal year as well? Thank you.

So all the indications here at the moment is that it's fading out. From my point of view, we were a bit surprised that it took actually into the second half of the year. The explanation for this is that I think that the classic first initial destocking faded out earlier, but they got the awareness of our customer for full warehouses got stronger. So the destocking expanded to a couple of other areas. And that led to the fact that the destocking takes a little bit longer. I, we foresee that it's definitely ending over the loop of this year. And that's also what I would, yeah, head up with this mean right now.

As I indicated before.

Thank you. That's helpful. And then can you maybe give a little bit more flavor on your, assumption that there is no structural underlying weakness in the vials market. What are you basing your statements on here? Is there anything else you can give us maybe?

You have to look at the base trends of the market. What happens? Why out of a sudden do we have such a strong demand for solutions, Paul? drugs that actually are administered in a way that they are injected, and that is clearly all the products in the development of molecules. Biologics have difficulties to get concentrated, so most of them, if not all of them, actually will be administered as injectables, and that is driving clearly the trend. We also see this in other products. I mean, if you deliver a broader portfolio, of system and solution, you clearly see the demand in other areas that are also depending on injectables stable or even strongly growing, like pens, auto-injectors, and so on. And that clearly gives an indication there's no reason to see that the trend toward more injectables and the vials and cartridges are the classic solutions for injectables is not further growing.

Okay, and then my last question is just to sort of be very clear on guidance. So you're pointing us to the low end on sales, but on adjusted EBITDA, the entire range is still possible this year, correct?

Yes, it's correct.

Okay, thank you very much.

Which in principle confirms what you saw last year results, and it fits to our strategy. The bottom line grows stronger than the top line.

Understood. Thank you.

The next question comes from the line of Curtis Moyles, BNP Paribas. Please go ahead.

Hi. Thank you for taking my question. First, I wanted to see if I could get a little bit more color on the strong order backlog for the second half of the year. Can you point to any maybe strong product categories, like maybe syringes or plastic containment solutions or where you're seeing strength? And also, are you kind of seeing some orders come in for vials already that are making you confident that destocking is going to fade away in the second half? And then secondly, I wanted to ask a little bit more about your CapEx. Are you still expecting to end in the upper end of the range there? And maybe how are you expecting free cash flow to develop in the second half? Should we kind of expect a quarter-on-quarter improvement? Thank you.

The first question is complicated because the way we define backlog The peers use backlog of orders, I guess, as a synonym for we have high orders that are about to secure our sales in the next quarters and years. Here we have a strong backlog, if you might say so, because we have a strong order book and we are building the capacities as we talk. A backlog in our terms means the customer's ordering and we are not able to deliver and we do not have this. It's nothing you would like to have. The destocking, as I indicated, we clearly see in the orders that the destocking is fading out. Free cash flow, and I will not take this of your favorite questions away.

No, thanks. Thanks. Regarding just to start with your CapEx, we see and we have guided for 350 million euro And this is something that is still intact, still intact, plus minus 10 million. And for free cash flow, we see basically a very good showing in the second half of this year. I indicated this for working capital, for example. And therefore, we expect that it will be moderately negative for the free cash flow for the total year.

Thank you. And actually, sorry, if I could just have one quick follow-up on destocking. I think there's a little bit of confusion in the market around where maybe customer inventories are at and where they might normalize in the future. I know that's kind of hard for you to answer, but do you think there's going to be maybe a lower level of customer inventories going forward for vials, or is it going to normalize to sort of a pre-pandemic level? Thank you.

I think that was their target of the destocking, to bring the safety stocks down. And the end of the destocking means that the safety stocks are on their expected target levels. They might correct them in a certain way upwards, but we don't see this yet. What we see is that the orders are getting up, which means that destocking effects on our sales actually fading out step by step.

Okay, thank you.

The next question comes from the line of Alexander Galitza, HAIB. Please go ahead.

Yes, thank you. Just a couple of quick questions. One is to get a sense as to how much caution is built into the four-year guidance. Say that this stocking trend you're now seeing that it's improving will stall. Is the ramp up of new lines enough to get you still to the within your guidance range of the top line? That's the first one.

We just confirmed the guidance. We clarified that we expect with the ongoing destocking that sales guidance will probably be more in the direction of the lower end. then within the guidance, but we just confirmed the guidance.

Fair enough. And then on conversion opportunity that you have outlined where you bring or moving customers onto high value plastic with the Borneol closures. Could you give us a sense of the opportunity? How much revenue do you generate with those solutions? that you see in the first sort of ways that could be easily converted into the higher value offering?

The portfolio of high value solutions in plastic packaging is already pretty high. That's what I tried to explain within my speech. We never disclosed this in detail, but there's already quite some high content of systems with the respective value for the customer and the respective high margins for us. And the Bomioli acquisition with their portfolio will further give us opportunity to expand this. It's too early. We need to see this opportunity closing to go in every detail how much this makes, but the opportunities are highly attractive and very well because it will open the door for us not only for for portal closure solutions in plastic, but it will expand these opportunities towards portal closure solutions in glass closure, and this is an opportunity that we did not have because so far we do not have the capability in our house to do plastic closures for glass points.

Understood. Thank you.

The last question is a follow-up one from Olivia Reinberg, Kepler Showroom. Please go ahead.

Thanks very much for squeezing me in. Just quickly, two things. One, on the soft top line dynamic, obviously the main reason is the stocking, which is fully fair. I'm just wondering, is there any kind of other product category that is worth calling out that is tracking a bit below expectations? Any kind of color on cosmetics demand would be question number one. And secondly, I guess in GP1, it's still a kind of dynamic field. Any kind of flavor you can add, whether there's still any kind of relevant discussions for any kind of new contracts? Thank you.

The first one is easy to know. It's primarily to this talking and to the detailed question on cosmetic . There was another question here, which I didn't get fully. Maybe you can have any flavor on new contracts on GLP-1. There are no further contracts by the customer finally decided. And we hope that there will be final decisions made over the loop of the rest of the year. Especially, we hope that they also go in our favor.

Okay, super. Thank you.

Thank you very much to everyone. There are no further callers with questions in the queue at this time. We will therefore now conclude today's call. We are happy to organize follow-up calls, as you know, should you still have any questions, and we're looking forward to seeing many of you soon. Thank you and bye-bye.

Thank you so much. Thank you.

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