AlzChem Group AG (ACT) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to today's earnings call of the AlzChem Group following the publication of the financial figures of 2023. I am delighted to welcome the CEO, Andreas Niedermaier, CFO, Andreas Lösler, as well as CSO, Dr. Georg Weichselbaumer, who will speak in a moment and guide us through the presentation and the results. [Operator Instructions] So having said this, I hand over to Mr. Niedermaier.

Yes. Thank you, and good morning together, and thank you for joining us today, and welcome to our 2023 year-end analyst call. As always, we will go through the presentation first and then be available for questions at the end. So let's skip the disclaimer and go directly to Page 5 where we can see the first slide. So today, we are pleased to present 2023 to you, which we believe has been another very successful year. Stable sales significant growth in earnings, and we are proud to be able to present our impressive development in recent years in this way. What makes the difference here. Our product portfolio protects us at the bottom. At the same time, the weight of higher-margin specialty is growing as planned, and we are constantly working on successfully launching further new products and applications to the market. Significantly, this proportionate growth drivers in 2023, we are Creapure, Creamino and Guanidine salts with Nitroguanidine. And especially Nitroguanidine for applications in airbags, crop protection and defense technologies. We compensate for our locational disadvantage for example, the high electricity prices with our strong market position and above all, with our high product quality, which we do not compromise on. We are now the only Western supplier of several products, for example, creatine, Creamino and Guanidine Salts. Awareness in the industry of the importance of a Western quality manufacturer has increased rapidly recently. On the one hand, this is due to the strained global supply chains, which have led to a rethink in many sectors from which we benefit in the long term. On the other hand, this development is also due to our quality promise which we keep every day. Now let's go to the next overview picture Ukraine war, energy crisis, weak economic growth. Despite all the crisis, we have been able to further develop our specialties. Our marketing approach which we pursue in the same way as Intel Insight is extremely helpful here. Food supplement manufacturers who use our creatine and conclude a brand license agreement with us are allowed to use the Creapure brand name as a seal of quality on their product labels. The Creapure logo guarantees that the product contains high-quality creatine manufactured in Germany and I would argue that Creapure has already become synonymous with high-quality creatine in the U.S. and almost every user knows it. This high level of awareness helps enormous LIVADUR expansion. Expansion is a good keyword here. We have gradually increased our creatine capacities, put them into operation and are working full capacity by the end of the year. The next expansion is already planned and on its way so that we will be able to offer additional capacities on the market at the beginning of the next year. On the financial side, we have probably been asked last year whether we can achieve our targets. With today's publication, we were able to confirm our raised guidance at a very high level, once again, demonstrating our reliability. At the same time, we have also focused on reducing our inventories together with the very good result. This led to a strong operating cash flow of approximately EUR 73 million. We will provide a detailed analysis later on here. In addition to the strong financial performance, we also made progress on a number of administrative issues. For example, we are working through the necessary investments in our climate roadmap. Many smaller measures have already been implemented and are helping to save CO2. For example, we are already using waste heat to heat our office buildings at many locations now. Our nonfinancial statement in future, the so-called CSRD report is already integrated in the annual report in line with the CSR requirements, and you can do the analysis on that. The reporting structure is defined by the requirement of the areas of E for environment, S for social and G for corporate governance. We have thus laid the foundation for an auditable starting point in 2024 and are also at the forefront of implementation in our view. In addition, we are in the middle of implementing the German Supply Chain Sustainability Act, and we can also report that this is now almost complete within our company. So Mr. Lösler will report on the outlook in more detail later on, but this much in advance things are moving forward positive. Now Mr. Lösler is also a good [indiscernible] you can see a picture here of him. He joined our team in January 4, and I would like to take this opportunity to extend a very warm welcome to him. Professionally, with his competence profile and his experience from previous positions, Mr. Lösler is a very good fit for us, but above all, as a person. This is very important to us at AlzChem with approximately 1,700 employees because our success is only possible as a team. So I will now hand over to Georg Weichselbaumer to analyze the segments, followed by Mr. Lösler with the analysis of the figures.

Yes. Thank you, Andreas. Let's start with Basics & Intermediates. In this segment, sales declined year-on-year by approximately EUR 35 million to approximately EUR 192 million. Nevertheless, the segment EBITDA increased significantly by EUR 4.5 million to EUR 9.5 million. In this segment, the results of the Optimization project launched in the previous year are very clear. The target here was to find the right pricing strategy in the energy-intensive product areas, taking into account the optimal production volume. The decline in sales is mainly attributable to volume effects. In some cases, however, the decline in volumes has been deliberately accepted. The keyword here is the optimal operating point. As a rule, the cost structure and pricing of products in the Basics & Intermediate segment are significantly more dependent on energy costs than in the Specialty Chemicals segment. Also energy costs did not make the massive jumps of the previous year in 2023 financial year, they were still well above of the time before the Ukraine war. In addition there were general inflation rates and increases in other raw materials, especially those produced on the basis of natural gas. As a result, the cost of production is significantly above historical levels. In the pharmaceutic sector with a building block Dicyandiamide, we are the only producer in Europe and supply customers with raw material for the production of diabetes drugs, amongst others. The Asian competition is severe and to operates at [indiscernible] pricing strategy. Nevertheless, important customers stayed with us, especially in Europe because price is only one condition in addition to security of supply and quality. The situation is similar in agriculture, with the fertilizer Perlka, also competition does not come from China, but predominantly from Russia. These natural gas-based fertilizers are currently sold at much lower prices in Europe as they are not subject to an embargo. Therefore, we had to accept significant volume declines. Nevertheless, the development in the fourth quarter of 2023 is promising and the expectation of the current [order] situation points to a slight recovery in demand. The need trials product area, which is used in the pharmaceutical, agrochemical and basic chemical industries was able to maintain almost the same level as in the previous year. But is also facing strong Asian competition. The raw materials required predominantly natural gas-based and have, therefore, become much more expensive on the European market. Also they are available. Competitors in India and China have access to lower-priced raw materials and therefore, benefit from a more favorable cost structure. Sales in the metallurgical business were also down from the previous year as a result of lower electricity prices interlinked with price escalation clauses. However, volumes were also unable to quite reach the previous year's level. So much for the Basics & Intermediates segment. Let us now move on to the Specialty Chemicals segment. Specialty Chemicals segment remains AlzChem's growth driver and was able to significantly increase revenue, EBITDA and EBITDA margin compared to the previous year. The segment share of sales amounted to 59% compared to 53% previously, and the segment contributed 90% to EBITDA compared to 86%. Revenue in the segment amounted to roughly EUR 320 million, some EUR 31 million or 11% higher compared to the previous year. While some areas continue to record strong growth volume, the current economic situation in other areas has led to lower sales volume. Looking at the segment as a whole, sales resulted from a stable volume development with higher prices, particularly remarkable in the development of the '23 financial year is the human nutrition and dietary supplement product area with a strong Creapure brand. At the beginning of the financial year, the large capacity expansion carried out in the previous year was fully online and allowed meeting significant increases in customer demand. In the fourth quarter, capacity was expanded again. With Creapure, we have established a brand that is globally recognized and in high demand. In fact, the vast majority of customers use the Creapure logo in the labeling of their own end customer products has a strong seal of quality made in Bavaria or Creapure Insight. The extension of this brand strategy is already bearing fruit. Initial sales of Creavitalis and various customer inquiries are very positive for the future growth opportunities of Creatine for use in the food and pharmaceutical industries. Significant growth was also achieved in the product area of Guanidine Salts, including Nitroguanidine. Nitroguanidine can be used as a so-called dual use product in civil as well as military applications. In the course of the '23 financial year, there were significant shifts away from the previous civilian applications of the agrochemical and automotive industry to defense applications that have been served for many years, albeit on low levels. Those are now contributing to a much higher degree. Based on the closed exchange with customers in the defense sector, debottlenecking projects are already underway. Some of those are expected to contribute to short-term volume growth while others are more in line with the strategic direction in this area. In the animal nutrition area with the Creamino brand, volume and sales growth was achieved despite the price-intensive competitive situation. The consistent presence as well as the further patient and sustainable expansion of sales activities in all major global markets are paying off and will contribute to growth. However growth was not recorded everywhere. Slight declines in sales were recorded in the customer manufacturing of multipurpose systems in the automotive sector with the DYHARD brand and in the pharmaceutical sector with Bioselect. The keyword here is the general chemical crisis. In line with sales, the segment's EBITDA also increased, which amounted to approximately EUR 73 million in '23 financial year approximately EUR 20 million or 38% above the previous year. Positive volume effects also support the positive development of the EBITDA margin, which rose from 18.4% to 22.9%. Let us now move on to our third segment, Others and Holdings. The Other and Holding segment turnover was slightly above the previous year with plus EUR 2.4 million. This corresponds mainly to the passing on of cost increases to chemical park customers. The services used by AlzChem's chemical park customers were mainly of variable nature, energy supply, technical services and network operations. However, the segment's result was slightly below the previous year's figure, which was primarily due to internal technical measures and network costs that cannot be [cast on] to the chemical park customers. Let's now hand over to Andreas Lösler and take a look at the group figures.

Okay. Good morning. Good morning also from my side, and thank you, Georg, for the insight in our segment. And thank you, Andreas Niedermaier, was a warm welcome words you mentioned earlier. I really do feel proud and grateful to be an official part of the team now. Let's have a look at the P&L figures first. We finished fiscal year '23 with the sales of EUR 540.6 million, which almost equals the record level from last year and which was totally in line with our adjusted guidance from October '23. As already experienced during the whole year and mentioned by my colleagues, the segments contributed differently to the sales development, while our Specialty Chemicals segment and continue to be our growth driver, the other operational segment, Basics & Intermediates showed a decline in sales and volume. The closer look at the last quarter of the year shows an increase in sales of 7% up to EUR 142.8 million for the whole group, which confirms the trend we saw in the last month and which also influences our ideas and our guidance for '24, which I will explain to you later. Our sales analysis gives a good overview of the background for the sales development in '23. For the 12 months period, '23, we lost approximately lost 9% in volume, which could be offset by price increases almost completely. However, the development in fourth quarter of '23 shows a different picture. Our sales growth was supported by 2% volume increases and 6.5% price increases. All compared to the same period in '22. The relevant sales driver within the single segment were already discussed in our segment analysis by my colleagues. On a regional basis and compared to the previous year, sales increased or at least remained stable in almost all of the regions of the world we act in. Only in Asia, we experienced a decline. EBITDA developed very well in '23 and was also totally in line with our adjusted guidance. We ended up at EUR 81.4 million EBITDA, which is an increase of EUR 20 million or almost 33% compared to last year. In addition to slightly decreased cost level, the significant improvement in EBITDA is mainly due to the permanently increased sales contribution of the Specialty Chemicals segment and the abandonment of low price strategy in the power intensive Basics & Intermediates segment. Furthermore, the pricing for our product has become somewhat more predictable than in the previous year when the almost daily fluctuations in raw material and energy prices could not be passed on to the market at the same speed. The still very high cost level is now more stable in the pricing mechanism and there's an increasing reliance on price escalation clauses. In terms of EBITDA, we have to admit that our strategy with more focus on higher-margin businesses paid off in '23. The increase in our EBITDA margin from 11.3% to 15.1% is part of this development. The increase in EBITDA led also to an increase in earnings per share. Even so, we have to report a negative interest result. Earnings per share increased to EUR 3.40 per share, which is 15% higher compared to the last year. That was the big picture of our P&L. Now let's move to the balance sheet. Our total assets slightly increased by EUR 1.8 million to EUR 424.7 million, whereas current and noncurrent assets have developed slightly in opposite directions. As a result of our cautious investment policy in '23 noncurrent assets were almost unchanged at the same level as the previous year. Deferred tax assets increased due to the interest related increase in pension obligation. Current assets are mainly influenced by inventories and trade receivables. Inventories could be reduced by approximately EUR 15 million, which is also an outcome of our working capital optimization project. We could mainly reduce volumes as safety stocks are no longer necessary due to a more reliable situation on logistics. The increase in our trade receivables is mainly influenced by 2 impacts. Firstly, sales in Q4, '23 were much higher as in Q4 '22 which led to an increase. Secondly, we reduced the amount of sold receivables in our factoring program as a result of our strong cash flow. Those trade receivables increased as well. Our equity increased by EUR 18 million to EUR 164 million, which also led to an increase in the equity ratio to 38.5% by the end of year 2023. Our equity development is generally influenced by 3 effects: Firstly, the positive consolidated income for the period leads to an increase, which amounted to EUR 35 million last year. Secondly, the dividend paid in the first half of '23 reduced equity by approximately EUR 11 million. Thirdly, equity decreased by EUR 6 million as outcome of an interest rate decrease for pension obligation. The interest rate for pension obligations decreased from 3.7% in last year, to 3.2% at the end of '23, which led to an increase in our pension obligation by approximately EUR 8 million. Noncurrent liabilities increased mainly as a result of a refinancing deal in the first quarter of '23, in which we converted EUR 30 million of short-term financing lines into long-term debt while keeping our maximum amount of possible financing lines. Current liabilities, on the other hand, could be reduced materially as our positive cash flow was used to completely repay short-term financing lines at an amount of EUR 56.4 million, which was much more than the EUR 30 million from the refinancing deal. That's it for balance sheet analysis. Let us now have some words about our cash flow. As experienced throughout the whole year, our operating cash flow increased materially compared to last year and ended up at EUR 73 million, which represents an increase of EUR 77 million. Operating cash flow, mainly influenced by our positive EBITDA development and working capital optimization. In 2023, AlzChem achieved a net outflow of only EUR 8 million from changes in working capital after recording a net outflow of EUR 58 million in the previous year comparison. Even though there was a decrease in inventory assets overall. The measures that have been initiated will continue to be implemented consistently and working capital will be closely monitored at the risk management level. Cash flow from investing activities was EUR 8 million lower than last year at approximately EUR 20 million. At the beginning of the year '23, we were surrounded by many uncertainties. Accordingly, we try to reduce capital expenditures and have analyzed each planned project again. However, growth investments as further expansion of our [creatine capacity] have been made and further projects are scheduled to be implemented in 2024. Financing cash flow was mainly impacted by repayment of bank loans and short-term financing lines in '23. We could use our strong operating cash flow to reduce our debt and we see our company on a very stable financing situation right now. That's all for the historical figures in 2023, and we will now have a closer look at our outlook for '24. Our operating targets for '24 consists of 3 target areas, again, improvement growth and sustainability. Improvement. Our top priority this year remains to pass on all raw material price increases to our customers. Conversely, if raw material prices were to fall significantly, this could also mean that we would give some of these back to our customers. We have decided to further increase flexibility in production. This means we will run one of our furnaces along the electricity price curve. In times of cheaper energy prices, we increase output, and when electricity is expensive, we reduce output or even shut down to carbide [indiscernible]. For reaching our financial growth targets, we need to use the full capacity of our chemical plants and constantly improve our efficiency. In the target area of growth, we are primarily focusing on filing -- fulfilling the remaining spare capacities in Creamino. This is important for our goal to examine further growth opportunities in the U.S. Once we created growth in the market, we should be able to supply our customers. Creapure has material further growth potential. If we want to stay #1 in the market, we need to serve the market and fulfill its demand. This can only be achieved by additional CapEx in our creatine capacities. EMINEX can be a substantial product for the avoidance of methane emission. In order to capture all its market potential, we will work on the acceptance of EMINEX on the most accepted and most valued certificate market. In the sustainability target group, we are persistently pursuing the goal of 0 accidents and 0 waste. After the successful implementation of our climate roadmap on last year's annual meeting, we will now focus on the realization of climate roadmap during the year. And last but not least, we are working on the EU taxonomy regulation and the CSRD, the Corporate Sustainability Reporting Director, so that we will be able to meet all requirements for a full scope audit of our CSRD report by the end of '24. Highly motivated employees are getting more and more important for a company's success. We will take all efforts to transform the feedback from our most recent employee survey into successful measures for satisfied and motivated employees. So -- but right at the top of the list is, of course, our sales and EBITDA target, which we will look at on the next page. From today's perspective, we see a further growth. Sales are expected to grow to approximately EUR 570 million and EBITDA is expected to grow to approximately EUR 90 million. The planned sales growth should continue to be achieved organically. The fundamental growth drivers are volume effects within segment Specialty Chemicals which shall overcompensate a sales decline in segment Basics & Intermediates. Further growth in the Specialty Chemicals segment shall be achieved through volume increases in the products Creapure, Creamino as well Nitroguanidine. The sales development in segment Basics & Intermediates will mostly be influenced by price formulas with stable volume development. Based on a stable cost structure at the level of the fourth quarter of 2023 and the growing importance of segment Specialty Chemicals for the whole group, we expect this segment to be the growth driver, this main impact on growing EBITDA, leading to an expected EBITDA margin of approximately 15.8% for the whole group. So that's it from our side with the information for the last year and the outlook. At this point, we would like to thank you for your appreciated attention and are now at your disposal for possible questions.

[Operator Instructions] And we will move on with the questions by Gerhard Orgonas.

I have a couple of questions, actually. I'm quite surprised about the EUR 30 million in additional revenues that you want to achieve, even though energy prices seem to be coming down. So prices seem to be working against you. Can you give us an idea where -- I mean, there seems to be volume, purely volume, the EUR 30 million within Creapure, Creamino and Nitroguanidine, how would you split this volume growth in 2024?

It's hard to come down to a split. What we can say is that those all 3 of them will continue to grow.

Okay. And then maybe you also talked about that you want to fill the Creamino capacity. I think you've got about 20-kilo tonnes in total capacity. Can you tell us how much utilization you have right now?

Not exactly in figures, but we are pushing hard the situation that -- we now have to run continuously rather than in the past where we had -- could shut on and off as the market requires. Now the world is more in production rather than on sales.

Have you gained any U.S. customers, additional ones recently?

Yes, some.

Okay. Then maybe a question on the electricity and coke prices, I understand you don't hedge electricity anymore, do you -- so you're just exposed to the spot price. And can we assume that it was around EUR 105 per megawatt hour last year, and it's coming down to maybe EUR 70 this year?

So hello Gerhard, that's Andreas speaking. So we do some forward buying for electricity, but only for the next 2, 3, 4 months, not the full year or a full 2-year forward buying. So from that point of view, you are right, we will see lower electricity prices for that year. So we will not see the lowest prices and only the spot prices, but quite low prices than in the last year, yes.

Okay. And how about Coke -- how is that developing?

Our coke -- I'm proud to say that way around very bad because -- so availability of coke is not as easy as we've seen before. So from that point of view, markets are short and prices are still very high. We have no -- not seen any high price reduction in coke prices, yes.

And my last question would be on CapEx, how much do you plan to invest in 2024, maybe for additional Creapure capacity and for the group?

So from our point of view, it would be a good figure if you calculate overall with approximately EUR 35 million of CapEx that year because there is a kind of rebound of the last year because we reduced last year CapEx, huge. And from that point of view, to increase CapEx for that year. So on the one hand, we have to do infrastructure CapEx. And on the other hand, we have to do the growth CapEx as well. So from our point of view, we want to invest approximately EUR 50 million in additional growth CapEx single for Creapure.

Thank you so much for your questions. I will now move on with the person who has dialed in as a Zoom user.

Konstantin Wiechert here from Baader-Helvea. First of all, Andreas, also congratulations from my side again for your new position. Very much looking forward to working with you. Maybe if I may, a couple of more outlook-related philosophical questions maybe as well. First of all, what is your view currently on the ceramics industry? I think the industry really came under massive pressure over the last 2 years and many permanent closures were also on the table. For example, then that led your chemical peer lanes to thinking about closing its chromium oxide plant. So I'm just curious what your expectations for [indiscernible] are and especially also given the fact that I believe it's not really integrated into your [ carbon ] system. Then maybe second one on Nitroguanidine, you already touched that you expect higher sales here. But it seems that we are only at the beginning of this large European military restocking cycle. So I was wondering where you see this business growing on your current capacities and what debottlenecking potential you see in that business? And if you would require bigger investments, how you would go with your customers here, if you would go only on defined orders or also would be proactively investing into this business. And maybe lastly, again, on the Basics & Intermediates segment. You touched that the recovery is mainly coming from your strong pricing position that pricing initiative that you had there. But should we expect that in last year, there was also some -- somewhat a positive pricing gap from the lower raw materials and lower energy costs, so that there's some normalization in the margin in '24 or is that not really a case?

Okay. Let's answer those questions one by one. The first question was about the ceramics industry which for us is the product silicon nitride or [indiscernible] . Here, the plant is still fairly full. We sell mainly into the ball bearings area. And here, we see very little decline. On the other side, we see a strongly growing trend because silicon nitride is used in the -- for electrical vehicles for substrates due to its good properties and there, we see a growth, which could lead also to an expansion of capacity very soon. That's answer to the first question. Second question on Nitroguanidine. It is surprising to us how little pressure from the supply chain comes to us view of the discussions about the Ukraine war. I mean we look at 2 things. We have already started debottlenecking initiatives and for certain if all the ammunition, which is required will be made, then we have to look also at a larger scale expansion, but we take a step-by-step approach.

And your last question for the development in Basics & Intermediates segment, you are right, we had a small -- we had a good recovery in margin in 2023. But we're not -- actually, we do not believe this margin to be in 2024 again or to see this margin. As I told in the outlook, we are expecting a sales decline in the Basics & Intermediates segment, which has also followed by a margin decline. So we do not see the same margin in '24 for the Basics & Intermediates segment as we saw in 2023.

So -- but the Specialty Chemicals will overcompensate like this year that effect. And from that point of view, we see a very stable growth -- overall growth of the company in sales and EBITDA here.

So we will go on with the person who is dialed in by phone number ending 553.

This is Peter Hasler speaking from Sphene Capital. I also have a question on the guidance -- on the CapEx guidance of EUR 35 million. Did I get it correct that you mentioned EUR 15 million in additional growth for Creapure?

Yes, EUR 15 million, but not all of that EUR 15 million, you will see that year already. So half of that we will see next year.

And I expect that you also want to expand the Nitroguanidine capacity. Is that still correct?

So there -- as Georg already recommended and said, so we are debottlenecking the plant a little bit and from that point of view, a low CapEx is used for that as well.

Okay. And you mentioned in the guidance that the inventory is supposed to remain flat. Is this also true for the working capital, so including accounts payables and receivables?

Yes. We see inventory, we will definitely will see an increase during the year due to our production process and production structure but by the end of the year, currently, we estimate the inventory level to be approximately the same as by the end of '23 which also applies.

Okay. So there's no change in working capital intensity.

No.

Okay. Then you wrote in the annual report that the logistics have become more reliable again. So there are no effects from the [indiscernible] and ship diversions?

Very little. I mean, we do not have so much raw materials from China. What we see is that shipping times go up because ships are not to take the longer routes. But now we see no real disruption in the supply chain.

Okay. Okay. And one final question. How come that fertilizers from Russia are not subject to any embargo yet?

That's a question which you have to address with somebody else.

I will be in Berlin next week. And from that point of view, I will take that question with me, yes.

Congratulations to the good figures. Thank you.

So now we will move on with the questions from Oliver. Unfortunately, we cannot hear you. But in the meantime, we will move on with the question from our chat box. So you indicated that you had identified possible M&A target in the U.S. during the recent earnings call. Can you provide us with an update on your M&A strategy and if the plans are still in place?

Yes. So that's a very big point that year, I tell you. So we try to evaluate some possible investments in CapEx in U.S., including some M&A targets. And from that point of view, we try to evaluate that. But to be honest, I'm not allowed to say more at this stage. So sometimes, we are close to an M&A deal, and sometimes we are far away. You know that. M&A business very well. And from that point of view, yes, it's going up and down. But yes, we are in the middle of evaluating such projects.

So maybe we can retry if Oliver still a question.

Sorry for that. It seems like the voice was rerouted to the wrong mic, so I was not loud enough. So basically, congratulations for the good results in 2023, well done, gentlemen. A couple of questions from my side. I'll take them one by one, if you don't mind. Firstly, you said that in the Specialty Chemical part of the business, growth was mainly driven by human animal nutrition as well as products for the defense sector. Can you flesh out how much is the percentage of sales either to compare to the company as a whole or to the Specialty Chemical sector was located in those 3 areas: human, animal nutrition as well as the defense sector.

So usually, we don't disclose that very detailed information because usually, we have a very close and very short end market. And from that point of view, we don't really like that. But so what you have seen and what we have already said is that 3 parts of the business carried out on a growth last year and the typical chemical business was reduced. And we have reported a growth -- overall growth of close to 10%, I think. And for that 3 profit centers, we have seen much more than this 10% up to 20% approximately.

In the Other business, you recorded a negative EBITDA in Q4, you said that was due to technical supply and network costs. Is this something to continue in 2024 as well? And can you highlight what this actually was?

There was a special situation in Q4. We are currently in an infrastructure project for our grid lines in electronic supply and not all of these costs which are maintenance cost can be passed on to our service customers, and we do not expect this impact again in 2024.

Yes, the effect is not that we cannot hand over that cost within short notice when they come up to the P&L. But on the long term, we can put that to the prices and will be recovered for that.

Okay. Any ideas regarding the dividend proposal? For 2023, did you mention?

Yes. So we have mentioned that in the annual report, but not today, fair enough. So EUR 1.20 is our suggestion.

Okay. Thank you for that. Sorry for not seeing it already. And lastly, you stated that if demand holds up in the defense sector, you probably will have to make, as you said, a large scale expansion. Judging from what is currently going on in Europe, not only in Ukraine but also the, let's say, the fallout on the respective members of the NATO and how much they are likely to spend on military equipment and also ammunition in the coming years, it seems to be quite a promising, let's say, landscape for and, let's say, a structural increase in demand. Hence, when timing-wise, when would we see such a large scale expansion? And when you're talking large scale, what CapEx would that require? Is that 10, 20 or more millions of euro from your perspective?

Regarding to the first question, when the increase in demand will occur, we not only need to look at our situation, but at the overall situation. The fact is that if we were to invest, we would be much quicker than all infrastructure investments, which are required for a fully fledged system. So the real ramp-up times are not dependent on us, but how all the metal parts and all the other parts, which go into the military equipment will ramp up those times are much longer. So for now, actually, with the current capacity, we can meet the requirements. We are also replacing -- continue to replace demands, which have gone into other applications by military applications. And I mean, to be honest, we have no clear picture about the overall demand because there is no consolidated military policy throughout Europe. We need to collect the information country by country, customer by customer and defense politics at a time. So it's very, very hard to really pinpoint down when the expansion needs to happen.

So -- and to summarize it like that way. So we are in deep discussions with our customers. For sure, we are in deep discussion with the Ministry of Defense. We are a part of that discussion, but we are wondering about that the pressure is not higher than we have expected that has already announced or has been announced by Georg a few minutes ago. So -- but to put it that way around, we are prepared to invest. And for sure, if we have to have substantial capacities, then we are talking about more than EUR 10 million CapEx, we are talking about EUR 50 million to EUR 100 million CapEx probably we can imagine about that number. But when we invest, we assume that we are very strongly supported and financed by our customers. So that's how we can summarize the discussion actually, I think, yes. So -- but I think personally that decision will definitely made in this year.

Okay. So would that -- let's say, if all the traffic lights go to green you want to also green light your part of the project. Hence, planning for said EUR 50 million, EUR 100 million CapEx. Would that in any shape or form, let's say, change your attitude to your probably upcoming U.S. project? Or would that be rather part of that?

Yes, Georg. I mean when we look at our Nitroguanidine business. It's a worldwide business. And it's hard to actually follow supply light because it's very interconnected. What we can say is that we supply the entire NATO demand, wherever it would occur and it's hard to predict what actually occurs. What we can say, however, you may have heard that there is European funding on the screen with a project called ASAP, ammunition in support of defense production, and we have applied for funds out of the project, how much we get is uncertain because as we understand, it's heavily oversubscribed. But we are doing our work in order to get into that investment mode.

So it seems that everything is discussed. So we will come to the end of today's earnings call. Thank you, everyone, for listening and joining and you've shown interest in AlzChem. So should further questions arise at a later time, please feel free to contact us or Investor Relations. And a big thank you also to the gentlemen to Mr. Niedermaier, Mr. Lösler and Dr. Weichselbaumer for the time you took to answer these questions. So from my side, have a lovely remaining Friday and weekend, and I hand over again to Mr. Niedermaier for some final remarks.

Yes. Thank you very much for your question. So at the very beginning, we have -- we had some struggles with the techniques here, but we did it quite well. And I think the sound was quite good. So what we can offer now is the opportunity to visit us again. So we have printed here all the conferences where we will be available. Next, otherwise, we will be back with Q1 information on April 30. So should we not see each again by then, stay safe and sound. Stay in our good graces and goodbye. Thank you.