Agfa-Gevaert NV (AGFB) Earnings Call Transcript & Summary

Hello, and welcome to the Agfa Q2 results call. Please note this conference is being recorded. [Operator Instructions] I will now hand you over to your host, Pascal Juery, CEO, to begin today's conference. Thank you.

Thank you very much, and good morning, everyone. I'm sitting today in the room with Viviane Dictus, the Head of Investor Relations at Agfa and the Executive Committee team. For your information, our CFO, Dirk De Man, is still absent due to medical reasons. And we're not expecting him to be back in the next month. We'll give you more information as soon as we can. I wanted to say that. So therefore, I'm going to walk you through today, the Q2 results, of course. So key message, I think it was a solid quarter for us after a Q1 that was a little bit subdued, as you know. And two -- three very positive events. First, HealthCare IT, we are demonstrating this quarter, a clear transition to the cloud journey and a significant increase in order intake. The P&L delivery was okay, and it's showing the fact that we can continue to improve our margins. But truly, for me, the highlight of the quarter is the order intake, which was the highest ever. It's cloud, it's net new customers and it's a very dynamic order intake. So that's a strong positive. DPC also was very positive for the quarter and more here in the delivery side. And I want to stress that it's across the board. The [indiscernible], was up significantly, up in volume, but also I would say we are still making progress in our productivity. We're improving also the way we make -- and that reflects also our margins. And also, DPS had good growth in the quarter, 8%. But more importantly, in the ink side, which is exactly what we are trying to do. So we are pleased with the delivery of DPS. So very positive impact. I think the third item that I believe is very positive is we are launching a EUR 50 million productivity program for the film-related activity. Why do I believe it's positive? Because we have confirmed the potential to significantly rebase our cost setup. It's confirmed. I'm not yet in a position to give you all details regarding this plan. That will be done at the next results call. Today, I can ensure you that we have the potential to significantly change the competitiveness of our operations for film, which is mainly in Belgium, but not only [ global ]. The two other points, you know that, I would say, we are working on is the fact that if we launch this productivity plan for Mortsel, and the film-related operations globally, it's also because we are seeing a volume weakness in the film area in radiology. So that's something that we have seen already since the beginning of the year, that has a bit improved in Q2. It will remain for the next quarter. So that's why it's so important for us to have this transformation program to mitigate what we are seeing here. Another point is the cash outflow, the quarter was still significant on the strength of the working capital buildup, which is, frankly speaking, a bit higher compared to our expectations. But this being said, it's temporary. It's seasonal. And just like last year, we're going to get back to normal by the end of the year. So it's a seasonal impact. I think point number five, I'm going to come back to that a bit later, we had a good significant milestone for the -- settlement in payment -- final payments of the offset business. We've been trying for the first half of the month to get the experts nominated, the expert that will define the final price. It's done. After a little difficulty, this is done. Therefore, the process is, so to speak, back on track. We're expecting a report by the expert in September that should trigger a cash payment in Q4. So yes, it was too late. It was probably later than expected, but it is happening actually. The outlook for the rest of the year is pretty much what we are seeing in this quarter. I still expect the drive of -- and DPC. I'd like to remind yourself also that we have a seasonality on the Q4, again, will be in the last quarter of the year, very clearly. This is the way the markets work. And it's also the way our own dynamics in -- in DPS work. The FID, for instance, is really contain the second half. And for radiology, we will continue to see what we've seen already, meaning a weakness in this area. So it's not anecdotal, but I want also to point out that we have a positive net profit during the quarter. That's also reflecting the fact that we have less restructuring and nonrecurring. These programs are coming more or less to an end. And although we are launching a new transformation program, therefore, we will continue to have a restructuring effort. We expect also that this transformation program will have some positive cash elements in effect, that will make up for any restructuring in the United States in this program. So if I look at the numbers, the sales are pretty flat for the quarter, but it's a flat overall with very two distinct trends. The weakness of radiology, we can see it. Within radiology field, it is decreasing a bit more and DR is actually growing mid-single digits, but it's decreasing overall. You can see the dynamic of DPC, 8% on the quarter, which happens is a good and solid growth. And HealthCare IT is below last year. I think for two reasons. The first one is we are seeing, and that's totally in phase with what we are seeing in terms of cloud development, the fact that our hardware sales are decreasing rapidly. It's just really an external sign that our customers are moving to the cloud. Therefore, they stopped buying a bit [indiscernible] hardware. And also that's reflecting, I would say, of the cycle. We have a bit -- the order book was a bit lower. And the order intake that we have today, we issued the next quarter, but we had a bit of a lower delivery P&L. This is a combination of [indiscernible] overall so stable, but as you see in very different dynamics between business. In terms of EBITDA, in spite of this a bit weaker sales in HealthCare IT, you can see that we manage very well our P&L, efficiency -- cost efficiency, increasing margin and therefore, it has no bearing. It had no bearing, these decreased sales on our profit. To be noted also that the sales -- part of the sales that are decreasing are the less margin for these [ items ]. DPC -- need to exemplify that reflects the growth of DPS and -- and therefore, its volume, but it's also the fact that we are making progress in making [indiscernible]. We are also improving. And our margin here, remember -- is relatively long. We are not yet at the end of the road in terms of [ DPC ]. Radiology, we limited, I think, given what we see in the market. We limited the damage, but it's below after, frankly speaking, that's a trend that will continue for the next quarters. We are not expecting any bounce back of -- for radiology. What we are expecting is to make it is our self-help transformation program. Now if I turn to the P&L. Sales, I already commented on it. Gross profit, where you see a significant improvement versus last year in both absolute terms but also relative terms, reflecting a number of actions we are making, but also -- let's say [indiscernible]. We have affected our mix in the business. Operational expenses well on the control below last year. We continue to develop our productivity programs, and we are able to do more than just offsetting cost inflation. So that reflects in, I would say, a positive EBITDA and EBIT for the quarter. If I turn to the lower part of the P&L, you see that, indeed, as I was mentioning, less restructuring and nonrecurring, which is also normal. We've been made a lot of transformation program in the -- in the past year. We still are today continuing to deploy and therefore, indeed, we're still spending cash in this area, but much less. We have initiated no significant new program. And as I said, we'll guide specifically on the transformation program when we issue Q3 results. But again, we do have also some positive cash impact in both in this program, while we will also have the structure [indiscernible]. So nonoperating results, it's mainly financial results. And therefore, at the end of the day, for the first time in [indiscernible] number of quarters, I guess we have a positive net profit. Working capital. Working capital, we always have a build up actually during the first half. I said it a number of times. Look at '23 account, it's always Q2. It's always the peak working capital for the business and then increases quite significantly during the second half. We're expecting a similar factor this year, no change. And we expect to be at the same level as last year in terms of percent of sales. To be noted that in this number, that's not helping us are two things. Indeed, the fact that the shipping [indiscernible] are disrupted now for many, many months, and it means more products in the water [indiscernible] but on the water, of course. And as well, the [indiscernible] price means our inventory is a bit more costly. So free cash flow has been negative on the strength of this -- of two things, of this significant capital, working capital outflow for the quarter, which was probably also a bit higher than expected for us, but for specific reasons, as I told you. CapEx is kind of a peak CapEx. We are in the full swing of building the second plant. So it's representative of the high CapEx environment and pension this quarter actually was higher. But in fact, if you take the 6 months, it's absolutely in line with the guidance, which explains the cash outflow of this quarter. Now if I turn to business. I already commented on the sales of HealthCare, IT. I think really, again, the news of the quarter, more about the order intake. That is basically doubled this quarter to be clear than anything else. To be noted, given the nature of the contract we are taking and the move to cloud, it's larger contracts. It takes a bit longer to be written and contract. It takes a bit longer to be written and contracted, especially as it's a transition to the cloud. And therefore, the order intake quarter by quarter is and will be [ amended ]. It's not -- we are not the only one. Everybody operating in the same pattern. We have a lumpy order intake. What's important is also the last -- the comparison to last 12 months, we are plus 22% versus last 12 months. We expect to finish up the year lead the [indiscernible]. But again, the big news here is the cloud transformation train has left our station, and we are very successful today in this area. I'd like to remind you that this year -- last year, at this time, we had no cloud solutions. And today, it represents already a significant portion of what we do. So we are -- I think it's a good sign for us. What is reflected on the right-hand side of this slide is a good management of the P&L. But in spite of lower sales, we had more profitable sales actually and a better management of overall efficiency and [indiscernible]. Kudos to the team. If you look at the numbers, so lower sales, but same gross profit, 3% more than margin. Operational expenses well under [indiscernible]. It's not because you are in a growing business. You shouldn't take care of your operational expenses and that also reflects on your efficiency, under [indiscernible] quite a good quarter for [indiscernible]. The main comment is really, our business is changing. 40% of the deals in Q2 are cloud. For the first half, it's about 1/3. So this is happening. Net new customers, 35% of are order intake. That reflect the fact that we have momentum in the market. We are winning new accounts and significant ones. Project business is now 60% of our [indiscernible]. It was 90-plus percent last year. This year, it's 60% with recurring business and 42% for the quarter. So you see the nature of the business is changing. When we say recurring, it's kind of pay-as-you-go model. I'm not using the word SaaS, because SaaS is one of the way we can do it. And for the time being, we do have SaaS numbers on this, but it will develop further in the next quarter. But there is -- here is the shift, okay? And the good news is we are part of the shift, we are in the market and we have success in order intake. I think that's really the highlight of the quarter. Good example is one of the contracts we landed this year, Alliance -- Alliance Medical, which is U.K. based, 120 sites. We won this contract. This is the largest contract we won during the quarter. So that's a good example of that. And cloud, by the way, is not only the U.S. but this is in the [indiscernible]. And that's a cloud. Okay. So I continue as we told you to invest in this transition to go a bit faster with specific innovation program that is underway. So that's where we are. This being said, the transition to cloud has also a consequence. Revenue recognition, timing and the margin recognition timing will be spread over time. So the net consequence is the short term, you will see less growth, so to speak, revenue and margin. We'll probably try to give a lot more guidance on that when -- probably at the end of the year. But that is impact, whereby a project, we recognize most of the revenue in one go, and then we have an SMA. A recurring contract is higher in value, is higher in margin, but is spread out over a certain amount of time. But that's still also great visibility on the business with long-term growth is recurring. So this transition has really started now. For DPC, as I was saying, a [indiscernible] quarter, plus 8%, actually. 62% increase in [indiscernible]. I know it might be surprising to you because you hear in the newspapers, the green hydrogen market does not develop as fast as probably the ambitions were. Yes, but it's still happening, not as fast, but this is still happening. And we have a global footprint, and we are pretty much the reference in this market and [indiscernible] growth. 16% growth is not the yearly growth. I always say, and I repeat the yearly growth will be around 30% okay, or there [indiscernible]. But I want also to make clear, we are -- of course, we are very close to our big customers and we look at their announcements. But when you need to realize that we never took their [indiscernible] in our plan, we always are a lot more conservative. So the -- when we said -- when we commit about our prospects [indiscernible], which was taken into account, the fact that we never believe what our customers told us, in fact. And that we were a lot more cautious. So there is no negative [indiscernible] and everything is well. DPS sale growth of 8%. What I like is the fact that during the first months, we kind of renewed a very important part of our portfolio. So it's always a dedicate when we do that. And I can tell you today with a bit of confidence that it's a success. We are seeing good momentum in order intake in the part where we lead. We are seeing the EFI collaboration develop as we planned, but most of it is, of course, in the second half as we told you. And when you look at -- and so that works. Overall, the equipment sales in the first half were not great, I would say, due to all these transitions. But when I look at the Q3 and Q4, I'm very confident that we're going to get where we need to be, think 24% growth. I mean, that reflects also the success of our strategy. I'd like to remind you that we are always moving up market which is consuming more things. But also, we are very successful with the -- swaps. And out of the inkjet swaps, and out of these all inkjet swaps it's probably already a 1/3 of it. So it is working, the strategy. Therefore, in translated, indeed in the strong quarter for the DPC, indeed. And when we talk about improved manufacturing efficiencies, most of it is [indiscernible] impact. So it's the future. If you look at the P&L here, which is, I think, very, very interesting in terms of the transformation of DPC is the gross profit from 24% to 32%. Okay, so good quarter, okay? But that shows the direction of [indiscernible] and the fact that indeed DPS and -- when you have in [indiscernible] increases, these are good margin projects, as it should be. Operational expenses are also under control, although you see here, it's an investment area and indeed, we have invested a bit especially [indiscernible] to help [indiscernible] the cost of the [indiscernible] and the good quarter bottom line. So I'm not going to repeat what I already said. The only thing that I would add on this slide is really the fact that as we speak, and I have pictures in my computer as [indiscernible] said, being installed at Delta, a [indiscernible] customers. It's almost done, installed, when I look at it, and it will be started by the end of September. This is the goal. In the meantime, clearly, we have a lot of, what I would call, very hot prospects, people who are ready to close to a conclusion in terms of [indiscernible]. So in Q4, we'll be in a position to have our first running customer pay for chipset. That's a very important milestone for us, because as you know, this represent the entry in packaging and therefore, represents a significant growth area for us. In the meantime, we continue to recognize that's very good with some of the new products that we are putting to market, and not repeating about it [indiscernible] we just mentioned it that we see the expansion, but also on our new range of low to mid-end equipment. So overall, very positive for our business. Green Hydrogen Solutions, sales increased 60%, but this quarter, we are comparing ourselves in the first quarter of -- with the second quarter of last year. But again, for the year, it's more 30% that we're expecting in terms of growth. So nothing is broken [indiscernible]. The market development, of course, was lower for a number of reasons. First, all regulatory -- the rules of the game were not clear for the people having to make final investment decisions. And in some cases, by the way, in some countries, it's still not fully defined, okay? So that delayed a bit from what we [indiscernible]. Fully aware of that. But again, we never to keep to the bank. We were extremely cautious in the way we are planning for [ ZIRFON ]. And therefore, today, we are not surprised by the announcements being made in the market. We already had it in our forecast. This being said, we are also seeing some products. FIDs are increasing since a few months, and we remain confident that it is going to happen. And in the meantime, we are continuing to do manufacturing efficiency improvement. So ZIRFON is already indeed a profitable product. This being said, it's still very cash-related aspect because we are investing in the plant. So don't [indiscernible]. Let's also remind on that. But again, we know about the lull in the market that we are seeing today, the early side, we are seeing [indiscernible] on a few months of the early signs of the positive development. Radiology. A totally different story for radiology. So negative sales evolution. The only thing that grow in radiology is there in mid-single digits, which is kind of okayish when I look at the market, but a lot of challenges in film -- in film and [indiscernible] is declining technology. But in film -- and on top of that, as you know, we are totally reorganized our go-to-market in China, and it has an impact when you do that. I mean we have discipline -- differencing in the distribution channels. And we are also changing some practices. So it had an impact on us, but there is also a market impact as well. Volume decrease in film. So that is translated, of course, by profitability, which is negatively impacted by all that. And although we try to -- as you can see, gross project is almost on line with last year. So that you can see in the P&L, less sales, less gross profit. We make it up partly with operational expense, but we cannot compensate the full impact of volume. So I repeat, this is also why we are launching this transformation program to significantly reduce our cost sales in the film-related activities. So I'm not going to repeat all these. The only thing that I want to add is you know the way we do DR today is we believe it's as much an AI play than it is actually a modern equipment. All our innovation is really directed to offering customers software powered solutions and most of them AI [indiscernible] in order to differentiate our product. CONOPS, nothing really to report. I will skip it here, and I'm coming to the outlook. The outlook is pretty much a continuation of what we are seeing, actually. We confirm the growth and also further progress in DPC and HealthCare IT, HealthCare IT with the caveat of the impact of the cloud transition. But overall, all this goes in the right direction for the future. Radiology Solutions, we are not expecting any improvement in the market in the next quarter. We are very clear. And the necessity for us to deliver a cost reduction plan to make it up. Working capital, back to normal by the end of the year. All the actions are already in place and the out-shipping that already -- is already by the way deliver. And as I told you, the last and final payments for the offset disposal is progress, I mean, two times, but finally, the export has been appointed. And therefore, the process is back in the track. So of course, I'll give you more news as soon as we have a view on that, because I fully understand it's a material amount of cash for us. It's about EUR 30 million. By the way, the full EUR 30 million [indiscernible], part of it is already fully agreed. But a significant part is being discussed. But we expect -- as I told you, we expect to give the report by [ approximately ] September. Just a word on sustainability. We continue to make progress in terms of CO2 footprint. And we are committing to an objective of reduction that is aligned with Fit for 55 package. And we are also joined the science-based target initiative, meaning we will continue this drive in a very committed way, I would say. DEI is also something that is dear to my heart, and we are making specific progress in the area with now -- with very concrete initiatives for our employees. Gender balance, we have an objective to basically increase the percentage of females in our workforce. And for the Chinese, we are doing well. We are hiring at a much higher rate than the current ratio, and we continue this program. And I would say, for us, the next subject is really the compliance with CSRD. CSRD is a new -- as you know, a new reporting guidelines, which supposed to be a bit very comprehensive and very, I would say, very complete. And that's really what we are working on today in terms of sustainability road map. So I'm going to stop here, and I will take the questions. I suggest we take the questions from the room, where we have the analysts and the press. And from the web, I will take any question from the press.

Alexander, if you can speak in the microphone so that everyone can hear you.

Alexander Craeymeersch from Kepler Cheuvreux. So on -- just on radiology, you mentioned that trends will continue, but actually you resulted up quite a lot quarter-on-quarter. Just wondering what you exactly mean in the sense that, do we have -- have we reached now the trough? And do you mean that the level of profitability that we see in Q2 that we can expect this to remain in H2? Or do we mean that volumes are going to continue to decline and that we have not yet seen the trough in this area? And then the second question would be on DPC. So DPC was under pressure for many quarters. And you mentioned that now you had a good quarter, but basically, I think the story almost remains the same, which is around inks and ZIRFON. So I'm just wondering what happened in one quarter that is suddenly supported? And then yes, is this level of profitability in DPC now driven by CapEx for us? Or is it driven by CapEx [indiscernible]? So then maybe the last question would be on the subsidies from Europe. I think there were some subsidies on Europe related to the hydrogen project. I'm just wondering if you could give us an update on the timeline on when can we expect [indiscernible]?

Well, thank you. On radiology, Q1 was a bit impacted not only by market issues, but quality issues also that we had, which is why the Q1 where, I told you, was not kind of a repeat quarter. This being said, Q2 was a rather good rebound for us in radiology. Going forward, it's not a question of the trough, it's not a cycle. We monitor the market evolution. And we know that the direction of travel in a number of markets is a market decrease. It's not new, anyway. Now the question is the ramp-up and how it does. Then on top of that, which is a bit more complex analyze for us is the kind of inventory valuation part. But let me be clear, it's not a cycle. It will continue to go down over the next quarter and the pressure will remain absolutely the same. But again, Q1 was an outlier because we had more issues unrelated to the volume but [indiscernible], so to speak. So that's for radiology. For DPC, you want to comment on -- just before, [indiscernible] will comment. I just -- I mean DPC, No I think we had a very good Q4 in DPC last year in [indiscernible], but it was -- the problem in DPC we have, it's a bit lumpy quarter-by-quarter, okay? But here, what is different? [indiscernible] what is different is margin, the [indiscernible] development, the margin not different. That's different, okay? And that's very stable, okay? What is also different is the equipment -- the ink sales are continuing to grow, and that's a good stabilizing factor even in the first half, equipment sales were not that great for us, okay? So it shows the resilience and the way forward. Now will DPC be more regular? That's exactly what I believe so, but you will still continue to see quite early valuation in DPCs. Half of the DPC is still film. And here, we have a little bit more of variation on the P&L on the film, on the shown part. You want to add on these CapEx orders, OpEx orders, what is driving?

Yes. I can come back to -- several points. So indeed, I mean, I don't think it's more of the same. Absolutely not. If you look 2 years ago, we had a profitability of EUR 3 million EBITDA. Last year, we brought it back to EUR 19 million. This year. We, will have a double-digit growth in net EBITDA. So what we will continue to see is that there will be variations from quarter-to-quarter. I think Q1 to Q2 now was a bit extreme. But indeed, there are always tons of -- it's not one reason. It's tons of reasons both accounting-wise, both the recognition of equipment. The full general impact of the single equipment is always taking when we actually install it, and have that final installed. That's one of the reasons, for instance, that our Q4 is always a very high and good quarter for DPS. So we will always have some of that seasonality, but I'd just like to stress that, first of all, the profitability is really increasing of DPC as per plan. And also actually within DPC, we have a lot of different businesses, and it is shifting from the more mature film businesses. The profitability is growing and the growth is going to DPS and ZIRFON where that was almost -- that was a lot lower 2 years ago, and it's really that taking over. So there is a big shift happening there. OpEx to CapEx, I would say, in Q1, Q2, it's mostly, as you have seen, service and inks. So that's more on OpEx-related elements. Pascal mentioned that we're -- the sales of equipment was okay-ish, but not great. We will actually see from all of our product launches we did in the first half of the year, we will see an effect of that in the second half of the year, and those take time. Typically when a customer orders, it takes at least 2 months, but it can easily be 4, 5, 6 months before an install is happening, sometimes even longer when the customer is not ready on the side. So we will see the effect of that in the second half. The effect of our single pass machines and the really big machines like speed set, that was always actually as per plan. We said this year would be our first data, but we will not even see them on P&L. We have some ink sales of that, but the machine will be recognized we like next year. So as of next year, we'll receive the really making machines, the speed sets coming also into our revenue. Maybe also on the funding, the second question.

Subsidy, yes.

Subsidy -- the European subsidy for ZIRFON, so that's an EUR 11 million-ish subsidy. We had EUR 2 million of that this year. The next milestone is about an EUR 8 million milestone. That's the big one, and that should normally happen in the course of next year. But it's also something we do not have fully under our control. And so we have a timeline to respect. We have a lot of things to deliver to Europe. Our plant will be ready. But then of course, there is a certain time, and this is months that the European Commission has to review this and come back to the questions. So okay, we will -- we target for next year, but we don't have it fully under control. And then the last million is actually over years after that in [indiscernible]. The EUR 2 million is first half or second half?

First half.

First half.

Any other question from the room?

Guy Sips from KBC Securities. I have four questions. First is on the EUR 15 million productivity [indiscernible] transformation plan. You told us that you would get more permission at the moment about the 3Q results, but I'm going to make a one-shot anyway. Can you give some color, is it back-end loaded or [ completed ]? Are the costs -- yes, are there already costs in 2024? And is it only at a material level? So -- and is it a coincidence that we had EUR 50 million that are equal or close to your investment in ZIRFON? How should I see this? The second question is on HealthCare IT. You were mentioning that you were on -- on one side, it was indicated that your having a -- sorry, a EUR 10 million capitalization of a project on top of your R&D investments. Can you give some more color on that one? And third question is related to what Alexander was asking on EPC, is there some [indiscernible] as well in this quarter? And the last question is on Aurelius and you were saying that a significant part of EUR 30 million, is that still under negotiation? Or is that fixed? I'm not sure on that end. Can you give some more color on significant [indiscernible]?

Yes, sure. Sure, sure.

So some more color on -- yes. And to prevent that we are kicking the can down the road, is this now a fixed timeline that September will be the hearings and the decision and the payment in Q4? Or is it still possible that we will kick the can down the road?

Okay. Thanks. Now on the EUR 50 million program, no, it's absolutely unrelated to the amount of investment on ZIRFON. Absolutely not. It's not. It's what we believe is achievable in terms of reducing our cost base, and that's a significant reduction of the cost base, if you look at it with this amount. Is it front-end or back-end loaded? I'm sorry. But for the time being, I can tell you, yes, there will be a significant impact already in '25. But some of the measures that we are taking will take time to implement. So it's a bit too early to answer your question. But I can tell you, impact in '25 will already be significant, but we'll give more guidance a bit on how we see the things are developing in this area. And to be clear, we are leaving no stone unturned. We are looking at [indiscernible] capital [indiscernible], we are looking at operational experience, we are looking at maintenance reorganization, we are looking at operating the plant very differently from what we do today and reorganizing in the old labor setup of [indiscernible]. So it's quite a complemented program, and we are touching a number of [ elements ]. To your point, are there any costs already associated with this program? I would say, very little. The one cost that I can mention is the fact that we are doing with this program with the help of a consulting firm. But I would qualify the investment is quite modest or extremely modest [indiscernible] the potential reward. Okay. Does it address? You had a follow-up question, Alexander?

Maybe if I can just follow up. Just -- I know this has been always sensitive matters -- structuring. But is there like a minimum cost that you can already give us?

No, it's a bit too early. It's a bit too early. The only thing that I would mention is there will be restructuring, of course. There will be some restructuring. There will be some kind of social impact. But keep in mind here that we have a significant demographic situation in which -- that should -- we are not talking here of a massive layoff then. We don't need it actually with the demographic of the plant, okay? That's not what we are talking about, okay? Yes, there will be some impact. And by the way, it's not only Belgium. As I told you, it's global. But don't expect a significant kind of social layoffs impact. This being said, I prefer -- I wanted to give -- the unions are already aware. We have already engaged in preliminary discussions. Everybody is aware internally. That's why we are also communicating externally to be very clear about our intent. What we need right now, we are at a stage where we need to work out all, I would say, the implementation plan. And then we will give a specific update in a few months. Capitalization of projects in HealthCare IT, we are accelerating this transition to the cloud. And therefore, it's a very specific program in which we have -- we have actually -- we are relying on external contractors. It's well identified, and that's really to a company on our cloud transformation. That's really what it's all about, okay? And I think we are right to do it when I see today the market moving that quickly to the cloud. DPC [indiscernible] by effect.

And maybe just bouncing back on one question here, did you ask -- because somebody else asked me the same question, and I want to make sure there's absolutely no misunderstanding. So the investment we're making ZIRFON is going on as planned, and we're not stopping anything in that. It's totally unrelated. This is a one-off CapEx -- onetime CapEx versus the EUR 50 million OpEx recurring savings that we want to have...

We have nothing to do, yes? I'm a bit surprised.

So the total -- the two are unrelated. And again, the investment on ZIRFON is absolutely not impacted by [indiscernible]. I just want to [indiscernible] that. First by impacts, yes and no. I would say on the P&L, not too much. Yes. Because first [indiscernible] was in March. I said the customers at a special or close to start taking orders, and we did indeed do quite some product launches. But we do see in our order book right now, we do see quite the big impact of that. But that is not yet in our P&L because as I said, we take that in the P&L when actually the machines are installed. So I'm expecting Q3, Q4 to see the benefits of that.

And Aurelius, third question. It's about 1/3 is agreed to [indiscernible] 2/3 is not still in discussion, technically. Today, and can it slip? Well, the thing is we -- the expert is a bit to the master of the clock. So it's difficult. Normally, there is a time set in the contract, but that time could be extended if the experts believe it's necessary. So I'm not fully controlling this timing. But this being said, when I say September, it's what the staff indicated to us in terms of deadline. Now could the process drag further? Normally not, and especially once the expert is [indiscernible], it starts to be interest-bearing, okay, which has also probably an impact. But is it absolutely ironclad guarantee in terms of timing? I cannot tell you that, not fully. There is still a bit of a leeway. Laura, of course, a question in the room. Yes?

Laura Roba, Degroof Petercam. Three questions from my side. First on HealthCare IT. How should we look at top line growth for the coming quarters? I understand that with the return revenue contract, the order intake or machine intake [indiscernible]. So my question is when do you think [ it would ] translate into revenue growth? Second question on DPC. I understood that there will still be variability, but you still expect Q4 to be the strongest quarter of the year. And then on ZIRFON, yes, you mentioned that the market development has been [ in stores ] and expected initially, was this taken into account? Do you already have a view on when you think the focus for the base?

All excellent questions. On HealthCare IT, the trend we are looking at revenue will continue in Q3, probably less in Q4, maybe higher, right? That's our current plan. Nathalie is leading this business. Right, Nathalie? Now any comments on transition to cloud and the impact on the top line? Do you want to make -- speak in the mic?

So as Pascal mentioned, a detail that is relevant with your question is that the length of the contract -- the cloud contracts are much longer. So we're looking at 7, 10, even 15 years. We start -- the revenue is spread over that length of time. As we are acquiring more volume of cloud, it is important we do it fast, and that's how we should see our revenue growing in the recurring space. So I think we should see a decline, as we mentioned, and -- but then followed by a trend up within the timeline.

Okay. And then again, we are just at the start of the cloud transition. Our first cloud implementation is forecasted for Q4 -- beginning of Q4. And therefore, it's just a start. The more we have done -- I think you noticed that we try to give you more [indiscernible] every time. Now we tell you not only what is the order intake, but how much is cloud, how it is project and recurring, how much is making. I mean, we are sharing more and more information in this. We will continue to do so. We will continue to do so, and we'll try to guide you as best as we can, on the impact on the cloud transition. But there are still a lot of moving parts right now. So bear with us to do it, we'll do it. But again, the momentum here and China has left the station. DPC -- your question on DPC about Q4. But yes, we're expecting results from Q4, right? I don't know why. And I keep asking my teams, but we installed an astounding amount of machines between Christmas and New Year's eve, okay? And I'm wondering why these technicians are happy spending their holiday season doing that. But this is the reality of the market.

So yes, Laura, we are indeed expecting for DPS for the equipment side as every year a higher Q4. That being said on all of DPC, we will probably see some higher impact -- cost impacts of silver in the second half of the year. So just like you, we don't like variability. So we are trying very hard to actually get Q3 and Q4 more in line than not having one down or one up. At this stage, I'm actually expecting that both will be in the same ballpark, that will not have one down and one up. But -- so DPS specifically, on the equipment side, yes, that will be the highest quarter.

By far. Okay. So DPC Q4 is done. And so ZIRFON, I think we already settle up. What we can probably say is next year, we are still expecting a similar growth as what we've seen this year, in our plan and between about 30%, ZIRFON?

What we expect today is.

What we expect today. So you see, we don't -- we are not over optimistic on ZIRFON. We try to be very realistic, actually. But we keep -- when I look at the number of offers -- of commercial offers that we are making, it continues to go up at a very fast pace. Actually, right? Any more comments on ZIRFON...

No, I think it's correct, what you said.

So I understand there were probably like in many markets, at the beginning, there were probably higher expectations in the market. Because when you look at the number of projects of ZIRFON that exist today, you're close to almost 1,000 gigawatts, okay? However, today, we did the equivalent of what 1.5 to 2?

Maybe 2, yes.

Maybe, 2, okay, per year. So you see where we are versus the supply of the project. We [indiscernible] all the timelines of our customers. But again, as we told you, we take a significant [indiscernible] to the impact, and we never believe that we would go this year to 5 or 6 gigawatt [indiscernible] actually [indiscernible]. And actually, today, we are pretty much on plan. Any other question? Guy and [indiscernible], okay? Guy and [indiscernible].

One follow-up question on the outlook statement. The outlook statement is a lot of companies can take an example on that here. But it's rather qualitative. So can we make it a little bit quantitative? I just want to ask the question. The consensus of the amounts of the [ EBIT ] for this year is EUR 30 million. Are you are comfortable with that?

I'm okay with that. Yes. I think it's a good way to put it. We don't give qualitative guidance -- or quantitative guidance. But indeed, we look at the consensus for the year and when I see what you have, [indiscernible]. [ Ben ]?

Most of my questions were already asked by the room. So just one short follow-up maybe on Aurelius. I was wondering if you could shed some light on -- or elaborate a bit on what the discussion precisely is about? Because I feel pretty unclear to me, like can you maybe like give an indication on what the forecast between what you are asking and what they are offering, something like that, just something more.

Yes, I fully understand. Well, you have very objective elements, like the adjustment for the working capital, it's not a discussion, okay? But then you have elements that are a bit more complex, ZIRFON, especially when it comes to liabilities of the business for what is in, what is out, okay? So that's more about these elements that are not like fully fact-based but are based on assessments. According to practice, there is a very clear attractive for the assessment of some of these items that there might always have disagreeing views, okay? But I feel good, because I would like to remind everyone that this closing statements and the final price determination was audited by KPMG, okay? And that they confirmed basically our view. So today, it's a new expert but it's been looked at by what I believe is a pretty serious audit firm. So we're not starting from scratch in this process. But to your question, some elements are more an appreciation based on commonly accepted practice. Not everything is mathematics, so to speak.

There are no questions raised by participants on the phone. So I hand back to you, Mr. Juery to conclude.

Thank you very much. Okay. Again, what I believe is a solid quarter and validating the positioning we have on our three growth engines. Momentum in order intake and cloud transition for Healthcare IT momentum in DPS, ZIRFON business that is improving quarter after quarter, even if it's not like the explosive growth, so that we would like to see, it's still delivering very solidly. A challenge in the film-related area that we are addressing through a self-help program, that is one of the clear management priorities for the rest of the year. And last, but not least, a cash situation that will be similar as last year, I mean, a strong buildup of working capital in the second half and a strong decrease in the first half, a strong decrease in the second half to come back to the level of 27%. So overall, we'll see you at Q3. We'll give you more details on the transformation plan and we'll continue to also explain as much as we can, the cloud transition impact on HealthCare IT. So thanks, a lot for your attention. Thank you.

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