Andritz AG (ANDR) Earnings Call Transcript & Summary

Good morning to everybody. I would like to welcome you to the Andritz conference call on our Q3 2022 results. I hope you all are well and safe. Before we start the presentation conducted by our CEO, Mr. Schönbeck and our CFO, Mr. Nettesheim, I would like to give you some brief rules and procedures for this call to make the best out of it. [Operator Instructions] And finally, this meeting will be recorded. The recording will be available afterwards on our website. And also the presentation material is available on our website. So much about the basics, and I would like to hand over now to our CEO, Joachim Schönbeck, who will guide you through the presentation. Joachim, the floor is yours.

Thank you, Michael, for the kind introduction. Good morning to everybody on the call. I think a few comments before we start going into all the numbers. I think we had another quarter full of events. Unfortunately, the war in Russia did not stop further disruption in the supply chain globally, also our supply chain. We have seen inflation rates, apparently are not well under control, surging further. And I would say, energy commodity prices have rather declined and further increased. But the uncertainty on the outlook definitely is a bit of question to us, of course, but I think much more to our customers to going to invest. These -- I would say these challenges have been definitely hit us in our business and is reflected in the numbers that we present to you. Overall, despite these challenges, I think we can [indiscernible]. So despite these challenges, we look very good [indiscernible] intake, backlog, sales and [indiscernible] increased favorably fund rates and basically across all business areas, which is really good. There was the euro weakness definitely gave us a bit of a tailwind, and that's around 3% to 5%, depends a bit on the currency basket of each of these businesses. We -- furthermore, we had a -- we had -- we're successful in 3 important acquisitions for Andritz in the third quarter to strengthen our portfolio with respect to the green products to provide more sustainable products and solutions which help our customers to meet their challenges ahead. We acquired a small service company in Finland, who is doing services for the -- through glass cleaning systems we acquired that is definitely was very important for us, Italian company called Sovema, which together with Schuler now at least we have the target to become a leading supplier for battery cell manufacturing lines for the automotive industry and for other sectors, there is a huge demand, and we believe that in this combination, we will have a very good value proposition to these customers. Just a few days ago, we could close the acquisition of pressure part manufacturer in Croatia. It's 1 of the leading European manufacturer of customized fresher parts and for the development of our sector for renewable energies they have a strong record in providing boiler parts and complete boilers for biomass boilers and for waste energy applications. So we believe through that, we definitely could strengthen our portfolio into areas where we can expect more growth in the time to come than in other areas. So to summarize, we were quite pleased with the development in Q3 and we expect for the remaining months also further on solid project activity. So if we go to the detail, who is, Michael, you have control on this -- on the screen?

Yes.

Very good. So we had a very, very high order intake of EUR 2.7 billion. That's the fourth quarter in a row with an order intake above EUR 2 billion, which is really good on a quarter-to-quarter view. The Pulp & Paper doubled. The order intake Metals was strongly up, mainly driven by Schuler and Hydro as well as separation have also solid increase quarter-on-quarter. Then all cumulated to a record high order backlog of almost EUR 11 billion, which is 30% up compared to end of last year. Also, the revenue grew by 24% to EUR 1.9 billion. And also here, all 4 business areas did participate. The EBITA rose strongly. The margin was constant at 8.1%. Here, we had all 4 business areas contributed to that. Profitability in Pulp & Paper was a bit dropping because of the product mix, which came to say in Hydro, we could solidly increase the margin level and Metals here mainly [indiscernible], Schuler continues the positive margin trend and what's the separation next [indiscernible]. When we go to the next slide, please. So here, you could see a more closer view on the order intake. Pulp & Paper up from EUR 600 million to EUR 1.5 billion in the quarter 3. And if we compare one in Q3, we have an increase of about a bit more than 50%. Metals is nicely up, Hydro is growing, and we believe that this is -- this is a trend reversal. As you know, that the Hydro market was pretty much going down over the last couple of years, rebounded end of last year, and we see with a strong position of hydropower in the renewable sector that this will continue because hydropower is a necessary part of this energy changes that need to be done. In Separation, we were solidly up more than 20% in the quarter and also Q1 to Q3. So Overall, it's a good development, quite well balanced between Europe, North America and the emerging markets was around 50%. So we are not hedged against regional crisis, but we are at least balanced in that respect. We go to the next. Basically the same applies for the revenue. We had an increase in each quarter against the previous year. We have -- we see an increase in the revenue by business area, and that's definitely the result of the strong order backlog. The revenue split between capital and service turned a bit towards the capital side. It's now 60-40. That's, of course, because the large orders -- that's capital business and is now starting to be reflected in the revenue as well. To the next slide. Here, you see the split of the service business by business area. You see an upward trend over the average over the last 4 quarters for Pulp & Paper which shows that not only capital but service is nicely growing. You see in Metals, we are still at a rather low level of 25% to 26%. Increasing that is 1 of the key initiatives we have to consolidate the Metals business area and also sustainably reach better margin levels. On Hydro, we remain stable, while in Separation service business, it's continuously improving, and that is a very, very nice trend contributing to the good overall economic development of this business area. If we go to the next slide. You see the huge increase in order backlog that's very natural. The orders come in 1 time, and now we have to work it down. The EUR 10.8 billion too much for EUR 100 million. I can tell you, they are not. We can handle it. All projects are well staffed with good execution teams. We are quite happy that looking to the uncertainties of the year '23 that we at least have a backlog that gives us a solid work to overcome any kind of light recession that might be ahead of us. And of course, the majority of the backlog is from Pulp & Paper and Hydro. So the EBITA, you see EBITA increase from EUR 365 million to EUR 426 million from '21 to '22 in the first 3 quarters. It's an increase of 17%. The margin increased slightly to 8.2%. You see that for completeness, we showed you the adjusted figures, which are only slightly different. So no major one-offs are in these numbers. When we look to the -- to each of the business areas, you could see that we have -- there is a slight drop in margin in Pulp & Paper, even though the absolute EBITA increase that's -- that is because of the product mix of more large orders, which definitely have become under pressure from the cost explosion we saw coming with the world. In Metals, we have a development that's mainly driven by Schuler, where the turnaround is really now done, and we can see a very good development, and we might expect further. Hydro is not growing with the volume and in Separation, we remain stable at a very high EBITA margin level. Go to the next one, and I ask Norbert to introduce the income bridge to us.

Yes. Good morning also from my side. And as a good practice already from the last meeting, I take now this group financial part, the next 4 slides. When you compare it with the last meeting we had, the picture is the same. The numbers are slightly different. So no surprises, very stable development. Depreciation with EUR 131 million, a little bit up, including an extraordinary depreciation of an asset which we are not used anymore in this range of EUR 6 million. So that's only special thing to mention here in this picture. Amortization comes from Xerium and Schuler, as you are aware of, former acquisitions from the past years, will decline in the next years because most of the things are written off already. Financial results was EUR 20.6 million, 2 effects included. One is a favorable development on the real interest side with the raising interest rates in Brazil and other countries, we could improve our interest income. On the other hand, we had to devaluate some fixed interest financial assets, but this is only a temporary effect as you understand. So currently, we show a minus EUR 20 million including EUR 8 million to EUR 10 million onetime effects on fund evaluation, which come back when the investments will be paid back. So overall, also here, a good development on the interest side. And taxes, we quarterly, we calculate with our expected average tax rate, 26.5%, which we also see this year for the total year. Overall, now a 5% net income, which is exactly on the level which we communicated last year in the Capital Market Day as our target to achieve in short to midterm. All right. That's about the net income bridge. Going now to the cash flow, starting with EUR 262 million net income adjusting all the noncash effects coming to a gross cash flow of EUR 486 million, also a pretty stable development, as you saw in the last quarters and last years. Then from net working capital in the first 9 months, a tailwind of EUR 93 million cash from working capital. For those of you who have the numbers from the last meeting on the table, you see that we have here a slight decline in first half year, we reported here a better number. But this is the usual fluctuation, which you know from our business with huge down payments shortly after our orders received. And then we enter into the execution phase. And then over the next, let's say, 2 or 3 quarters, this, let's say, a positive effect in the order execution cash-wise will be then used for execution. We are now in these big capital projects, which we received earlier this year, especially in Hydro and in Pulp. We are now starting the execution the ordering of material, et cetera, also with down payments to suppliers. So that's a normal effect that we then also use part of this cash. So it's -- but still, overall, it's a benefit of EUR 93 million for the first 9 months in the cash flow. Leads then with the other pretty normal effects on the interest side, dividends, et cetera to EUR 442 million cash flow from operating activities. And then we used EUR 120 million of that for CapEx leads to a free cash flow of EUR 322 million. Pretty normal picture overall, I would say. Coming then to the next slide, which shows net liquidity, constantly growing. We are at end of quarter 3 at EUR 882 million net liquidity sitting on nearly EUR 2 billion available gross liquidity. So we are still the same picture as the last periods, which is, let's say, gives us a good basis for all kind of flexibility, which we need on the financial side. Shortly -- quickly to mention nearly EUR 80 million paybacks of loans included in this number. So we are also working on shortening the balance sheet by constantly bringing back our external debt by using funds for this position. So that's it more or less on the financial, and then you see the summary slide. You see here now the summary of the -- of all the numbers, most of them were mentioned by Joachim. What I would point out is simply all big positive numbers. So we bought the business really to a higher level now in '22 compared to '23. Major -- maybe the only negative thing I pointed out here is cash flow from operating activities in the third quarter, I have explained already execution of orders. And the CapEx, which is a little bit higher than in last year, this is simply because we are now back to the normal investing level have started after corona is over now some growth investments in several areas. So this -- and then you can see here in the increase in CapEx, but on the other hand is also a good thing that we can come back now to the core CapEx initiatives. So that's it from my side quickly through the numbers. Turn back to Joachim.

Thank you, Norbert for the explanation. Let's have a quick look on the business areas. Pulp & Paper nicely up in order intake, we could secure another large pulp mill from a customer who is relying on completely on Andritz technology. I think that's confirmed our good and reliable position and for the pulp industry to provide high-performing plants. The backlog is very solid and the revenue is going to be -- is growing, and it will be on a high level also in the year to come. As mentioned before, we have strengthened this business area with 2 acquisitions, [indiscernible] and Ðuro Ðakovic. So we believe that we can even more participate on the trend on renewable energy than we did before, of course, without neglecting our main activity, which is in Pulp & Paper. It might be worth to mention that not only the Pulp but also the Paper business contributed significantly to the very nice development in order intake. If we go to the next one to Metals. Also here, order intake sales backlog and EBITA are increasing compared to last year. You see we have a bit different split in -- on the regional side, we have 2/3 about in Europe and North America. That's definitely driven by the strongly by the automotive industry. The positive development is mainly driven by Schuler. However, we believe that in the latter's processing area, we have reached the bottom and have now all our challenging orders under control that we can -- that we do not see any further downturn from these business activities in the future. The order intake we had and the increase is definitely coming from a strong investment activity in the -- of the automotive industry towards electromobility. And that is true for the automotive itself, but as well as for the supplier industry like battery lines. If we go to the next one, the Hydro. As I said before, we see the very good development we see in the financials. We see this as a result of a change in the market trend. Also here, order intake, sales, EBITDA backlog are nicely up. We have a good and solid order backlog to enter into next year, and we have a continuing solid project work ahead of us. So we believe that the importance of Hydro to make the change into renewable energies is understood, and we can see a favorable development in the future. You see here, we have a balanced regional split of revenue. We have a bit higher percentage from Europe, North America in the order intake and that is due to a large order we received from Mexico beginning of this year. If we move to Separation, you see also here, our key figures are nicely up. It's true for order intake, backlog revenue and EBITDA, and I think this has triggered both equally by the solid liquid Separation division where environmental sludge thing is becoming more and more important as legislation forces these sludges to be treated instead of being dumped or deposited. We are very well prepared for that. But also feed and biofuel sector, especially biofuel is a very hot commodity at the moment and many investments is going on as the change from gas to more sustainable fuels basically, at least in Europe in all areas hit now by the high gas prices is definitely on the table. So if we go have a short outlook, so we can report that we have still a very solid project activity in our industries. We, of course, are a bit cautious as we don't know what the inflation, high interest rates really due to our customers when it comes to investment decisions. But apparently, demand is there and project activity is high. The geo-economical challenges, which we know, first and foremost, the Russian war and the implying sanctions. Supply chain disruptions and inflation, we monitor closely, and we prepare ourselves for new challenges to come up as we understood over the past 3 years that there is always something new even if we believe there is nothing more to come. We can confirm happily the guidance for this year. So group revenue will be up compared to last year. EBITDA will be up from last year and also the net income will increase. So that's about what I had to say. And if there is anything you would like to ask, I'm happy to answer.

Thank you very much for the presentation. I will now move over to the Q&A session, and I would like to start then with Sven Weier from UBS.

The first 1 is actually on the Pulp & Paper business. I was just wondering the EUR 1 billion year-on-year increase, if that was driven by a single project? Because I think you said the Paracel 1 is only booked in 2023. So that's the first one.

Yes. There is -- as I said, there was a new pulp in which was not Paracel of course, there is -- there are also other smaller projects and none of that size, but in other large Pulp industry, yes.

Okay. And regionally, is that -- where was that? Was that South America or?

This was Asia.

Okay. And then, if I may, on Paracel. I mean you announced the order, but you haven't booked it yet, obviously. So is it really only the debt financing of the mill that is missing because I saw the equity is there, so that's completed. So is it really only the debt financing that is missing for you to get the firm order then or any other restrictions still?

That's what we are told. We are active in supporting the customer in the talks with the banks and the ECAs that is going on. We do not have a full view. But from everything we hear from different sources, everybody is very positive about that. So but I would say your colleagues in the banks know probably much more than I do.

Yes. That's probably right. So let's see. But your timing-wise, you would see that to come in the first half? Or is that the base case at the moment?

I would say, realistic would be mid of next year. But as I said, I think you really -- the banks know much more than we do.

Okay. And I mean, have you seen that this pulp mill going ahead has also more triggered more activity also in the other greenfields in the region to go ahead?

What we see is that there are several players active in South America. South America is extremely attractive for the pulp producers. With Russia, basically being kicked out of the market, and Russia was major -- maybe the major supplier of fibers or at least of wood to Europe. So we see a lot of activity, and we also see a lot of planting activities by our customers preparing for probably more capacity to add. What we hear from the commodity markets, but also from our customers is that also biomass market is becoming tighter and tighter. So we believe that these activities are also focusing on that.

Okay. The other question I had on the other divisions, and in particular, in Hydro, right? I mean if you print another order intake like that in Q4, you will be almost back to the record highs. You had quite some number of years ago. But you sounded like on the back of climate change, the general structural activity is starting to pick up. So to me, it doesn't sound like this year is a bit of an exception and then we go all the way back, but it sounds like we could continue on a high level also in the coming years. Is that the right perception from my side?

I think we see -- we can see a much better market than we saw in the last 3 to 5 years. That's for sure. We don't believe that we will now climb from record to record from quarter-to-quarter. As you know that we also have other strong competitors in that market. But we see and we understand that there is a need, and it is -- by the decision makers, it's understood that Hydro needs to be increased in order to meet the challenges that we have.

And do you also see more activity now in the U.S. because Hydro is also subsidized by the Inflation Reduction Act? Is that a helpful and also for activity in the U.S. or it doesn't that not really make a difference?

North America is very active, yes.

Okay. And the last question from my side, if I may is on the financials. I think another time, I mentioned the EUR 6 million extra write-down. I was just wondering was that in Q3? Or was that in the first 9 months?

You have to unmute.

You're muted on Norbert.

I'm sorry. It was in Q3, and it's a normal housekeeping activity.

Let's move on then to Ingo from DNB.

The first 1 would be on your market outlook. I think you've done a very small change to your wording. In Q2, you spoke about a solid activity and order pipeline. Now it's solid in the next months. Just wondering why you've decided to add to this caveat that it's a few months. You talked about uncertainty, but I think uncertainty was even higher at the time of Q2 results. So curious to hear why you saw the need to add that wording now? Is it that it's because of, for example, on the pipe side, you've already converted more of the pipeline with a big Asia contract and Paracel and now you're less confident in the second half for next year? Or any other reason?

The main reason is that we saw the challenges 3 months ago, but we do not see that solutions are adequately provided. So the uncertainty did not decrease and a lot of that is out of our hands. It's in the environment. It's the way the Central Bank's handling interest, it's the way how energy prices are countermeasured by the government. So we don't see a very easy corridor of relief. So having that for an extended period now for more than half a year, we're getting a bit more cautious. As we know, we are depending on future investments by our customers, and we know that if uncertainty comes into play, these investments will be held back. That's the reason yes. But we don't believe in [indiscernible] next quarter, yes.

Okay. Very clear. And maybe 1 question on an aspect that is more under your control, the Metals processing related challenges. Can you clarify whether your Metals processing margin was negative in the third quarter? And also whether, let's say, the incremental deterioration of margins in Q3 compared to Q2, is this more a function of energy and quantity price inflation or whether the execution of those projects has also been more challenging than you had expected?

No, we had a few challenging projects still in our backlog, which hit last quarter. That was the impact. And we believe with the measures we have taken over the past 9 months basically of this year, that we have the situation under control that we see -- that we can see a much more stable future for the Metal processing area.

Any relative indication you can give us for margins in the quarter for Metal forming versus Metal processing?

I will not do that now.

Okay. Maybe just a quick 1 on the very strong 9-month cash flow and the M&A pipeline. You've obviously done a few small and medium-sized deals. For the next quarters, do you also see an improving pipeline of M&A targets in light of the change in capital market conditions?

Yes, you will be along the first to hear about that if we have anything to report. And as I said, we are constantly looking. We believe that we have a good portfolio on the sustainable products and solutions, but we definitely want to strengthen that further because we see more growth opportunities there than in some other areas. So we will continuously look. And the market on that side is okay.

Let's move on to Akash Gupta from JPMorgan.

My first question is on your capacity situation. Q3 was pretty strong, more than EUR 2 billion in orders, and it was for successive order with more than EUR 2 billion order intake. Obviously, there are various businesses here. And the question I have is that, are there areas where you might be maxing out in terms of your capacity and therefore, either you are not able to take further orders which may have some impact on coming period and order intake? And also, are there any need for increasing CapEx in light of these strong orders that we have seen in probably, I think your message earlier was also that some of these trends will likely continue with Paracel order going in the P&L next year?

So we do not -- as I said, we have all projects we could staff with excellent teams, and these teams are working well as they have to fight the challenges we see on the market. We do not see a CapEx increase due to that. And at the moment, we also are not in the position that we have to decline orders. But we need to stagger definitely the time schedule, but we are discussing that with the customer because we are not -- it's not our policy to provide unrealistic time schedule. So if there is a constraint on our side, we will be very -- very clear and transparent there. And -- but we don't see that this will be a major part. We have increased our manufacturing capacities in China in the last year for several of key products, key components for the Pulp & Paper. And in hindsight, I can tell you this also -- this was an excellent decision because a few months after start-up, these lines were already fully loaded from the orders we received.

And my second question is on Pulp order. I think Paracel is a big turnkey order and probably the largest order you have got in the Pulp business. We have seen some of the previous orders were split between you and Valmet while this time around, you have gone for the entire full turnkey order. The question was that, was that the customer decision to give the entire turnkey to single supplier? Like was it customer's choice? Or was it your decision to go for the whole rather than going for part of it? Like how shall we see this? And maybe if you can talk about risk in getting the whole turnkey project? How do you see risk in the project?

At the end, it's always a customer decision, but it's -- we definitely have to be ready to take that. I think the market, especially on the pulp side, the market has seen that if the technology comes from one hand, that usually execution and startup and also optimization of the production goes much smoother. We have with our metric technology, we have an overall automation and performance improvement system which is tied into the -- into our technology. And I think this really pays off. If you look at the startup curves, we could realize in recent projects. I think there's a strong argument. And -- so at the end, you have to ask the customer what was driving the decision. We believe that we can -- that we have quite a good value proposition there.

Thank you, sir. Just to double check there is no change in the risk profile from metric side. It was more of the technology that played the role better than risk.

Sorry, can you repeat?

Yes. I mean I was like just confirming that there was no change in the risk profile from your side that you are willing to take more risk than before, and it is more driven by the technology which you just mentioned.

No, we are not -- I think we -- in general, the business model we have contained a certain degree of risk, and we are not hungry to increase that, for sure not. And if you -- for example, as you asked about Paracel, one of the dominant parameters they had in their -- for the decision-making was that they would not accept any new technology. So everything we offered is something we have basically in the same size for the same application for the same [indiscernible] already in operation somewhere in order to exclude all the technological risk, which would then add to the project risk, there is anyway.

Now I would like to ask Daniel Lion from Erste Bank.

I would have a few ones. Could you help me understand what size this large greenfield order that you mentioned roughly has in the order intake in the third quarter? This was nothing that you communicated, right?

No, we just told you. So it's a good 3-digit million number.

Okay. Okay. And then having a look at -- we were actually really good in passing on the cost pressure, price pressure to your clients, obviously. Now we are slowly seeing prices to decrease. This might continue, of course, in maybe next year also due to the economic slowdown, maybe. Do you see chances that you could even increase your profitability as the prices are now passed on to the customers and your input prices could start to decrease?

Frankly speaking, we do not see that. As for the large orders for the 1 we just talked about and for the large order from Suzano, which we booked beginning of the year, they were basically -- we had to move into supplier commitments exactly in the sales when the war started and the material prices hiked. So that is -- and once the commitments are made, the project is going. So there is a little you can do. It's -- I would say it was a bad timing but it would be even worse for our customers and also for us if we would delay the project, speculating on material prices to drop. So we are working hard to bring it in with the margins we have. Yes, we do not expect an improvement there. But of course, the new projects coming will be based on the outlook. And that -- and that is then if we can keep it and don't pass it on to the customers, it could help.

Actually, I was, of course, not really reflecting on the capital business because obviously, you're partially also hedging your input costs when signing these orders. But what about after sales business components that should become cheaper? So business that's more or less your everyday business and services business. For this part, this is also true?

Yes. This is -- we had -- I think we had for some areas we had price increases 2 and 3x in the course of this year. And now we see that also we have to move down from that a bit, yes, as there is a request from the customer side. I think that is -- there is, of course, I would say there are more chances on the aftermarket side as the duration periods are not that long. Looking at that, yes.

And then 1 final question relating to the Metals business. How crucial will it be to increase the services share of the division in order to bring your profitability to the desired levels?

That's very crucial. So, that is 1 of the main -- there are 2 main initiatives. The 1 is to avoid project crisis and the other is to increase the service. And then, of course, to adapt the portfolio to growing markets like we have done now with these battery manufacturing lines, yes. So these are the 3 -- that's basically the 3 things you need to do.

And do you need further acquisitions in order to bring up the services business? Or can you do it with the current portfolio as well?

I think we can look -- we are looking to both yes.

Final question, we have from Richard Schramm from HSBC.

Yes. I hope you can hear me. I have a follow-up on Pulp & Paper first. Due to these big projects you now have booked -- is a sign that there is a risk of some overcapacity building up in this market? Or would you say that these projects are more kind of catch-up still from the previous crisis and we're already in the long-term playing of customers? So there's not the risk that will be in the foreseeable future, kind of, let's say, demand collapse in the market? That would be my first question.

Yes. It's -- I think very good question. On short term, there can be a demand collapse. On the medium term, definitely not. Demand on fibers is high. If we see all the product changes that are done in packaging and other industries where there is a move from plastics to more natural products, that's in hygiene, that's in packaging. So we see a trend there. All these new projects that we are now talking, they come into the market in '24 or later. So we don't know what the situation is there. And I would say the next important impact to the market will come from the startups in South America, which we will see in the first quarter next year, most probably. So then we can see also how stable and how solid the market is.

Okay. But you can confirm that there are still projects in the pipeline you are negotiating so that we have a chance to see still a reasonable order inflow also next year in this segment here?

We believe -- so we can confirm there is project work. As I said, we don't know under this geo-economical conditions when really a purchase order is placed, whether it's 6 months early or 6 months later. This is definitely not in our hands.

Of course. But there are at least some projects going on and so far there is good chance at least for some interesting bookings there. Okay. Then my question concerning Metals and here the metal processing side. How do you see the business opportunities there in the coming quarters here? Isn't that an area where we should see especially a very reluctant investment would due to the current problems, especially from the energy supply side in this industry?

No. I think that the Metals industry, especially steel industry is definitely under high pressure. From the energy price that they're under high pressure, from the CO2 point of view, but they're also under high pressure from their customers. And if you look into automotive, automotive development, the major driver to increase fuel efficiency still is the decrease of wage and the decrease of wage is basically driving the business also of our metals processing area. So we see despite these challenges that there will be investment done. And we have seen some particular examples. If you don't invest for a period of 3 to 6 years, it is difficult then to comply with the specifications of the customer. And that is why we believe there is demand and there will be demand.

Okay. And in respect of the margin side, do you feel the -- let's say, margin pressure from customers to they pass this on to you as an equipment supplier? Or can you push through your necessary prices for a decent margin level?

I can tell you that the capital business is a bias market. You will not be surprised about that.

Akash, you may have a follow-up question.

That was on M&A. And if I look at your announcement, I think you had announced 4 deals in the second half. Can you give maybe enough ballpark number in terms of the cash outlay for M&A this year? And in total?

Norbert.

The average -- general budget for these things for small acquisitions, which is somewhere in the area of EUR 50 million to EUR 100 million, and we are also in this year in this range.

Now move on to Peter Rothenaicher from Baader-Helvea.

Yes. Also on the acquisition. So I think yesterday, you announced this Croatian acquisition. Can you give us a little bit more on details. Is it a profitable company? I have seen sales are around EUR 60 million. What are your expectations? Do you see here some chances for cost savings and, yes, profitability about this?

Yes. It's a profitable company suffering a bit under the wall, but definitely profitable. High-quality manufacturing and high-quality engineering supplier in Europe with a good capacity. And we see -- so we open our -- we widen our portfolio for certain types of boilers that the great boilers, which we do not have in our portfolio. So we are opening the fields for the smaller boilers based on biomass, which are very much asked for now from the, I would say, the general industry in Europe who are converting their gas power plants to, for example, biomass or sludges. Then it is also important for us, 1 of the lessons learned from the recent crisis that we debottleneck our supply chain a bit in this -- on this pressure parts side where we very much heavily depend on China at the moment. So in that case, that's also securing our ability to perform when we see some supply chain disruptions on that side. And it's -- and it's a location. It's only 3 hours drive from our headquarter in Graz. So it really fits well also with our engineering activities. So we are extremely happy with this acquisition.

Okay. Another question would be on the wage development. So in Germany, we see the ongoing negotiations and trade unions are demanding 8% increase. Can you give us what is the situation in Austria? Have you already agreed wage increases and how are you able to cope with this wage increase in 2023? Might this have a negative impact on your margins?

We -- it's excellent timing. On the Metal side, they're just -- 2:00 tonight, they reached agreement. I think they -- I did not -- I had no time to study it deeply, but I would say it's around 7% increase. If you want to have a ballpark we have provisions for that. So we do not see margin deterioration from that source.

Any further questions from the auditorium for the audience? If this is not the case, then I will then finish the Q&A session. I would like to thank all of you for participating in this call and maybe hand over to Joachim again for final words.

Yes, very good. Thank you for your interest. Thank you for the questions. As I said, outlook is stable project activities. We are cautious on our outlook, but we are ready also to take more orders. We shouldn't be concerned about that.

Okay. Thank you very much.

Thank you very much.

Thank you. Bye-bye.

Bye-bye. Thank you.