Andritz AG (ANDR) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to the Andritz webcast regarding the publication of the results for the full year 2022. My name is Stefan Schantl, and I will moderate today's webcast. I would like to welcome President and CEO, Dr. Joachim Schönbeck; and CFO, Norbert Nettesheim, who will present the financial highlights of the full year 2022 today. After the presentation, there will be an opportunity to ask questions. But now I would like to hand over to Mr. Schönbeck. Please go ahead, sir.

So Stefan, thank you very much. Good morning from my side to all of you. First of all, I'd like to thank Stefan for the kind introduction. And I would also like to introduce him to you as he will be -- is the successor of Michael Buchbauer, who has served you for the, I would say, since the IPO very well. And I would ask you to provide him the same comfort and trust that you have established with Michael. And I can guarantee to you it's a change in the spirit of continuity if you will receive the same service and guidance you usually got from Michael. So thank you very much and all the best for you. Coming now to the year results. I'm very, very happy that we could deliver really good results after this extremely challenging year that we had. I'm very proud how well the Andritz team has managed all the difficulties we faced during the past year. It's not only that war in Ukraine started, the sanctions took that part for us. We had supply chain disruptions. We still had the majority of the last year. We had COVID restrictions in China, a very important market for us to source from. And of course, we had the inflation, which nobody had encountered in the beginning of the year. So we are -- however, we are extremely happy that we could do well. And let's move to the summary of the year. We had, I would say, record results in all major financial parameters. We posted a record order intake of EUR 9.3 billion, that's up 18% from last year. We had a group revenue of EUR 7.5 billion. That's also up 17% from EUR 6.5 billion in the previous year. The EBITDA was up 19% to EUR 649 million, up from EUR 547 million. The net income increased even more by 25% to EUR 403 million. We could increase the net liquidity by another EUR 300 million over the year to now a very good number of almost EUR 1 billion. That's up 40%. We are happy that for the good year we will have the shareholders participate in the good results and propose to the general assembly, a dividend per share of EUR 2.10, which is up 27%. We've committed to a nonfinancial targets as well to the -- in the ESG program. We have set ourselves targets for -- we want to reach for 2025. And that's about reduction of greenhouse gas emissions, reduction of water consumption, reduction of waste. I think we are all well on track on these figures. For us, the most relevant figure for driving also the business in Andritz for sure, is the share of what we call the green products. We want to make every second euro of turnover, we want to make through these products. That's the target for 2025. We are -- year-to-date 2022, we are at 45%, so another 5% to go. However, that is really going well. And I'm happy to tell you that especially the share of these green products have a -- play a major role in the growth we are showing, and that makes us quite positive for the future that this trend into the rebuild of the economy into more sustainable solutions will demand more innovations from us and will be a good support for our business. We had -- in line with these targets, we have made 2 important acquisitions in 2022. We also did 2, which I did not focus on. The 1 is Ðuro Ðakovic, which is a manufacturer of high-quality pressure parts and of great boilers. They are located in Croatia in Slavonski Brod. We are very happy that we could finalize that deal. And then we acquired the Sovema Group from Italy, a leading technology provider to build battery plants. They have a long history for that. And combined with our capabilities from Schuler, to deliver manufacturing capacities to the automotive industry, we believe that we will -- we can become a very relevant supplier for the Giga factories for the batteries for the electro mobility. So that's, I would say, 2 very, very important steps. And I'm also -- that's a slide I like very much. This is the share of direct labor hours for manufacturing hours that we have in the developed world, compared to the emerging markets. And for 2022, for the first time, we could state that we have more manufacturing hours, more direct labor hours in the emerging markets than in the what we call the developed world, which gives a solid foundation to maintain and even increase our competitiveness for the worldwide business. If we look a bit further into the figures, the record order intake, and I think that's a very good news for you, and it's a perfect news for me that the growth in the order intake was supported by all 4 business areas. We had, by far, the highest hydro. They jumped up by 25% from last year to almost EUR 2 billion. That's very close to their peak number. That is very good and we see some further potential there. In Pulp & Paper, we had been up 16%, in Metals 13% and in Separation, it was 21%. In Metals, it is particularly well received that after the restructuring of Schuler, our cost position is very good. We regained competitiveness in a substantial way. And that really reflects on the market because we could pick up many orders, very important orders that gives us a good future. Also, the revenue growth, the strong revenue growth by 17% is supported by all areas. And here, Metals and Pulp & Paper are leading with 19%, respectively, 17%, but also Hydro, Separation are quite strong behind. And I can tell you the majority of this in average, 17%, more than 10%, comes from organic growth only little is related to currency effects or inflation. And you can see on the right side that we maintained the split of between capital and service, which gives a solid balance also for our profitabilities. So the growth of service is one of our main strategy over the past years. It will be very relevant for us for the next years. Over the past 5 years, we had a compound annual growth rate of 9%, and it's now almost EUR 3 billion. We can further grow. We want to grow further. Our customers are also slimming up their organizations and they rely on very fast, very reliable and high competent service which we are building up for all business areas. The total backlog almost -- is almost reached EUR 10 billion, which is a record high and gives us a solid workload for this year and also is a strong basis that we are quite confident that we can increase earnings as well as revenue during the current year. Of course, 75% of the backlog relates to Pulp & Paper and to Hydro. These are the large orders that usually take 2 to 3 years to execute, sometimes in Hydro even more. So the earnings on the -- all 4 business areas have been quite high. If you look at reported EBITDA margins, we are up from 8.5% to 8.6% EBITDA margin. If you look to adjusted by single effects, it remains the same at 8.5%. And we are -- we believe that is a very good number. If you look to the profitability by business area, you can see some differences. And except Pulp & Paper, all business areas reported increase in profitability, in Metals by 1 percentage point from 2.8% to 3.8%. If you look to the adjusted, it's even 2 percentage points from 1.9% to 3.7%, which is an excellent development in Hydro. In Hydro, we could increase from 7.1% to 7.5%. The adjusted EBITDA dropped a bit to 7.0%. And in separation, which was for many years, I would say a difficult area for us to get it to high profitability, a very nicely increase from 9.8% to 10.6%. In Pulp & Paper, we dropped from 11.3% to 10.8%, and that was mainly the impact of the price explosion that we could see during the middle of last year when the war broke out and the material prices surged. You know that we booked large orders for Pulp & Paper as well in the end of 2021 and in 2022. And these orders usually are on a fixed price basis. And we did not expect that impact on the inflation and on the material prices. So this is why we could increase the profits very nice, but we could not increase the profitability in the Pulp & paper, but we believe this is now behind and we can continue to grow here as well. So I give now the word to Norbert, who will lead us through the details of the financials.

Yes. Thank you, Joachim. Ladies and gentlemen, good morning also from my side. Today, it's a pleasure for me to have the opportunity to present to you the '22 financials for the group, covering P&L down to net income in the detail and covering cash flow and the liquidity numbers of the current year. This is the chart, which you know from former presentations. It starts at the left side with the EBITDA, increase of more than EUR 100 million, very favorable development. The depreciation also on the level, as we had it last year, have a slight increase, more or less due to some minor housekeeping measures, which we had to do to adjust the assets for those things which are not intensively used anymore. But as I said, it's more or less a housekeeping measure, leads then to the EBITA of 8.6%, as Joachim explained already, EUR 648 million, EUR 100 million more than last year. Then the next steps down to the net income is the IFRS 3 Amortization, which is also on the usual level, which you know from us already. It's mostly the Xerium and the Schuler adjustments or results from the big acquisitions from the past. And then also here, another housekeeping measure, the write-down of the goodwill for the compact Hydro business from former meetings that we restructured this business a little bit and concentrate there on the profitable part of the business, which then at the end led us to the fact that we will depreciate the goodwill there and have this EUR 10 million impact on our P&L from that, but it's not a big number. So in total, it doesn't hurt at the moment. Leads to the EBIT number of EUR 572 million, 7.6% is a 0.2 digit percent higher than last year. In the financial results, you see again an improvement by nearly EUR 10 million compared to last year. It's simply an effect out of the changed interest situation, especially the interest on our financial assets and investments in Brazil and in North America, got better interest. And for that reason, we were able to improve our financial results by about EUR 10 million. This then leads to the EBIT of 7.2%. And in this year, we also improved the tax rate from 26.8% in the last year to the 25.6% in the current year. And then this in the end leads to this record net income of EUR 403 million, which was 5.3% is now in the target range, which we have commuted to the markets in the early 2020, when we informed you in the Capital Market Day about our financial targets. So we are now there above 5%. And as Joachim explained to you already, the basis for staying there is good so that our expectations is that we also can, in the next calls give the same positive messages back to you. Starting with this EUR 403 million. Again, if you add the OCI of EUR 40 million, this leads to EUR 443 million total results. And this then is the basis for record high equity of EUR 1.8 billion and an equity ratio of 21.6% or the goodwill adjusted equity ratio of 13.6% in '22. And we are now back to the level where our new Andritz to be in the years before the crisis in the Metals business and before the crisis in the economy out from the COVID period. So back to above 13%, and the target is certainly further to increase it to something above 14%. All right. That's about the equity, and then we come in detail to the cash flow. I will speed up here a little bit because it's also compared to the last meetings. We had nothing really new. Starting with the EUR 403 million net income, adjusting all the noncash relevant elements and then, let's say, adding the net working capital development of the current year, which is also very favorable with an increase -- a decrease in working capital of EUR 150 million. And out of that, an increase in cash of EUR 150 million. And deducting the income tax paid, it leads to an operating cash flow of EUR 710 million, which is a number which Andritz also, as far as I remember, never saw and very high cash conversion due to this favorable development in the net working capital then is the basis also for the cash flow of EUR 710 million. And this EUR 710 million of cash flow deducted by the investments which we did also the acquisitions of more than EUR 60 million in the current year, and the dividend of the last year leads to the net liquidity of nearly EUR 1 billion. So an increase of nearly EUR 300 million, knowing that in this cash development and liquidity development, we have total CapEx of the last years of more than EUR 700 million, which we ever spent for future growth and for maintaining our production facilities between '18 and '22. And also the aggregate dividend payments of more than EUR 600 million in the last years. This was digested in these numbers. And now with the EUR 1 billion is a perfect basis for further growth and for further flexibility in the sense of acquisitions and in a sense of, let's say, investing into growth fields. Yes, that's it from the financial part. You see in your papers and in the things which we distributed now the summary page with all the financial numbers. And I don't want to repeat everything. I just want to bring your attention to the very right column. I personally never have seen a report where you have all numbers with double-digit growth. So it's really a pleasure to present you this kind of performance of the last year. And we are really proud on what we achieved and what our people managed to achieve because this is all the result of these 29,000 people, which worked for Andritz in a very, very demanding year. So that's the good news. And the next good news is what Joachim already presented to you and to the markets based on this very favorable development on our good equity position and our very good liquidity position. We are able to pay EUR 2.10 as a dividend this year. This is clearly in our target range of being above 50% payout of our results, a little bit increase compared to last year and a significant increase in the absolute amount of the dividends. Yes, that's it from my point of view, and I'm happy to pass back to you, Joachim.

So thank you very much. We had excellent figures. If we have a closer look just very quickly to the 4 business areas, Pulp & Paper, I would say, record numbers for order intake, revenue and EBITDA. We already discussed the EBITDA margin, which we explained to you. We had a good run on the market. We picked up several important orders for new pulp mills in Europe and in Asia. We had, I would say, a breakthrough for the pipe industry with the start-up of the largest dissolving pulp mill in the world, which we started up for a customer in Brazil. This was in the middle of last year. It went extremely well. And after the third day, we already produced 100% prime quality. So we are happy on that. That was a new technology in that scale. And I would say that will definitely be -- it's a milestone in the industry. And what we are very, very happy about is that the paper and the tissue business really contributed significantly to this growth. We could pick up several very important orders for paper and tissue in Europe and in Americas. And we believe that we are on a very good path there. If we go to -- if we look to Metals, I already told you that we consider the turnaround with Schuler successfully done. We significantly lowered our cost base. The market appreciated that together with the solid products we have and the cost competitive position, we could see a real unexpected increase in order intake. Now we have beaten the EUR 2 billion in total. There are important orders in -- with respect to e-mobility, and that is as well for cars itself, but also for batteries, 2 very important growth areas for us. We had an extremely good market in the U.S., and that looks like to continue, and that's true both for the Schuler business as well as the Metals processing. And we see also a strong trend of investments in the stainless steel area, which has been very low in investments over the past 6, 7 years. And we are very successful in regaining our strong market position there. In Hydro, our record business area and order intake, they increased order intake by 25% to a very strong, almost EUR 2 billion. And these are large orders for pump storage, for regular hydropower, but also a significant amount of modernizations and rehabilitations of existing power plants comes from the Americas, from Asia, a bit also from Europe, but not to the extent that is probably necessary to really drive the change of the energy systems in Europe to a sustainable -- to a sustainable mode. And therefore, we believe there is more to come, and we are quite positive on the further development of that market. In Separation, which has long been an area of thorough for you because we could not really get it up and running. And we are very happy that we can report to you not only very high profitability now with 10.6% already very close to Pulp & Paper, but we see a good opportunity. We have many innovative products. We see a good reception on the market. for them. So we see further growth there. And then we also expect a further growth in profitability. Let me summarize to the outlook. When we compare with our roadmap that we presented to you in the last Capital Market Day, I would say we are well on track. The business volume is, I would say, clearly in the range we promised to you with a EUR 7.5 billion sales last year. The EBITDA margin at solid 8.6%. Net income increased to 5.3%, and I think we had a good run last year with our M&A activities. Two of them I just presented to you, and we are well on our way to reach the ESG targets. And I believe that's it from my side. Now I would be happy to answer any questions you might have. Oh, sorry, this was the market outlook. That's probably the most important for you. Please apologize for that. So we see continued good market activity in all business areas across the regions. And we are monitoring the challenges, in particular, the inflation but also anything on the sanctions to Russia and in the other countries very, very closely. The guidance for '23 is that we expect to continue our profitable growth and we anticipate an increase in earnings and as well as in revenue compared to 2022. Thank you very much.

Thank you very much for your presentation. We are now ready to move on to the Q&A session. So to ask questions, please follow the guidelines you can see now on your screen. One moment for the first question. The first question comes from Sven Weier, UBS.

The next question comes from Weier from UBS. Please go ahead.

I hope you can hear me.

Very well.

Yes. Good morning, everybody. The first one, if I may, is referring to the Q4 order intake, which for the first time in a few quarters, has been below EUR 2 billion. But on the other hand, we could see you announcing EUR 500 million Hydro project in December for Q1. So is it fair to assume that this order could have also been easily booked in Q4 and so signaling to us that the underlying market development is basically unchanged. Is that fair to say?

No. That's unfortunately not fair. If you could have booked it, we would have. You can be sure about that. But we don't see any obstacle for the project to go ahead, but we have a rule about booking orders. We need to have firm commitments, and we have to have money in our accounts in order to make sure that we do not read to rebook it. That's -- and -- but we are positive about that project. And on the Q4 order intake, it's below EUR 2 billion. You are right. We would have been happy to have it above EUR 2 billion, be sure. But on the other side, without a major order, it's a good -- it shows a good solid base performance in all business areas.

And I think in the press release, you say you had an excellent start also into the year. Is that referring to all business divisions? Or did you refer that to this big order? Or how should we see that statement?

It's across -- it's -- actually, it's across all divisions. It's very good in Pulp & Paper. It's -- we assume it will be good in Hydro. And Metals is also -- Metal and Separation also quite good market, yes.

And on the Paracel project, are you still confident to book that midyear? Or is there any update on this one?

Yes. We -- it is not included in any of the numbers yet, and we do not anticipate to book it in the first quarter. So no update there. But we are ready.

And then if I may, regarding the backlog that you reported, you have around about a EUR 1.8 billion increase year-on-year there. How much of that EUR 1.8 billion increase is due for delivery in 2023?

Norbert, that you need to calculate very quickly.

Yes, it's about 60%. This is a huge increase from capital orders, which usually have 2 years processing time where most of the value added is then distributed over 2 years. So it's about 60%, which we -- out of this increase we have in the first year.

Okay. So that means that the increase in revenues that we should see this year is going to be rather significant then?

We will increase our revenues in 2023, as we have announced it. Most of the revenues which we see and which we have budgeted is supported by backlog and by this huge order backlog, which we communicated to you. So we are very confident that the sales increase will happen as long as no major disruptions will occur, but this is not in our hands. Everything works well and of course, continues, we are confident.

Last question from my side, if I may, just on the earnings outlook in the press release, you say on the one side, you want to increase earnings. You also mentioned profitability increase. I mean should we assume that the very good margin at around 8.5% should be at least stable? Or how should we connect all the dots of what you said also in the press release there?

We are cautiously optimistic on that. And we believe looking at last year where we had, I would say, significant external challenges. We managed, first, to deliver a rather growth in order intake and revenues and could keep the profitability stable despite the inflationary pressure. So we expect now we are much better prepared for that, that we are optimistic to improve there.

The next question comes from Ingo Schachel, BNP Paribas Exane.

The next question comes from Ingo Schachel from BNP Paribas Exane.

And the first one would be on the dissolving pulp opportunity. As you mentioned that your big Greek project in the dissolving part has started up very quickly at nicely. I think the other 1 that was in the market has also started up successfully. I was wondering whether there's no successful track record could be a catalyst for dissolving pulp players to accelerate investments now that this is sort of proven and feasible. Or do you rather think it will take a bit more time for the market to digest the capacity additions and the solving part that we might see, let's say, no bigger greenfields and maybe just a few small conversions in this area?

Now we see -- if you look at the market gurus from [indiscernible] and other and [indiscernible], they all predict significantly growth on the dissolving pulp area. You know the dissolving pulp market works a bit differently compared to the market pulp and kraft pulp as most of the huge consumers are vertically integrated. So probably the pace is a bit lower but we see a significant potential for dissolving pulp as cellulose-based fibers will definitely move much more into textile in the years to come. So we see a good supporting trend there, and we believe that with this new continuous technology that we have started up last year in Brazil, we are in an excellent position to participate from that trend.

Okay. And maybe on pulp margins. I think we you explained the profitability in '22. Of course, we're pointing to supply chain bottlenecks, input cost inflation that have burdened margins in '22. So if I read your statements correctly, it sounds as if you regard the margin level in '21, i.e., 11% plus as more normal and possibly already achievable in '23 if input cost and supply chain bottleneck eased? Or do you still have too much legacy fixed price backlog?

I would say from the inflations and the cost increases we know we have taken care of in the closing of the last year, so we don't know what is coming, I would say, also the prospects giving on inflation are quite different and changing on a weekly basis. So I would say we would be cautious. But at the moment, the material market and the material costs are quite stable and also rather dropping. But we have learned our lesson last year not to celebrate too early.

Thank you. The next question comes from Daniel Lion, Erste Group.

The next question comes from Daniel Lion from Erste Group.

I would like to focus a little bit on the Hydro business and the water levels, especially in Europe and the U.S. There's a lot of negative views on the water levels and. And I was actually interested to hear if this trend that we are seeing and which is expected to last somewhat if this is reflected already in your negotiations with Hydro operators? And if -- to what extent?

Now that is -- I would say that is more related to the profitability of the projects, but it's not driving our discussions with -- in the projects too much. And for sure, the low water levels are a concern, I'm fully with you, as the utilization rate is dropping and then the feasibility of the projects are decreasing. But on the other side, you can see in Europe, the prices for renewable energy are so high, but it's also very attractive. And we'd rather see that our customers, they are tempted to run their plants as much as they can and not to stop them for rehabilitation modes because the incoming revenues are so good because the markets are so -- the prices are so high. But for sure, the low water level are a concern, and need to be taken into consideration also for the projects how they are done.

Actually, I see actually both ways. On the one hand, of course, it's a general concern for the medium term, at least in the short term, I could also imagine that the sediments are getting more of an issue with low water levels, right? And this would be actually also a business case for renewing or moving into new generation turbines in order to bet a little bit the sediments.

I would say on the technical side, the sediment topic is under control. So with the rest, whatever is, and this very much depends on the geological formation at this site as well as the drought that you have there. I'd rather see that we have to take into consideration the water levels and the realities and if we're going to plan new sites, we understand and I believe more and more people understand if we want to move into renewable energy, there is no renewable energy grid without hydropower because wind and solar cannot deliver a stable grid. So we need hydropower, at least we need pump storage. And that is, I would say, this development is in process. We, of course, can buffer it also with fossil fuel power plants or nuclear plants. But if we want to move into a truly renewable, hydropower is a must. And I promise you we are -- we can deliver the innovations that are needed also to cope with sediments and also with low water levels.

Yes, clear. Can you maybe also provide an update in this respect on the battery storage projects out of your cooperation with, I think it was Daimler.

We don't have a cooperation, and our customers for the battery plants are very shy to announce their commitments. So I cannot further elaborate except that it is already last year in the order intake played a significant role, and the market is quite good. Many projects are announced.

And then also may be coming back to the Paracel project, just to see if I got it correctly, everything is on track, but you wouldn't like to commit to the second quarter, right?

No. We are committed. The customer needs to commit and you need to talk to your colleagues and the banks because the what is on the bottleneck is the financing, yes. So that's -- so we are committed. And I think that's very important also for Paracel that they have a partner there who is ready, who can deliver, yes and to have the team available.

Actually, saying what is going on in the banking world, it's not a kind of a -- is a process which is going on there. And as always, processes in these dimensions take time. So at the moment, we don't have any concerns that the banking world will get this managed questions on the timing of this whole exercise.

Yes. Okay. Understood. And then 1 word also to your dividend policy. A few years back, there was actually start change in the policy to move towards 55%, 60% payout ratio. Currently, we are at 50%, around about 50%, which is more or less also been like targeted in the past years. Is there still the risk or the trends to move up the payout ratio in the coming years?

I think we have communicated we would like to stay in the 50% to 60%, and this is what we definitely commit to.

Okay. And one word please to the expected personnel cost inflation for '23? What would you expect here? I understand that you have reflected this already in your prices, right? And how much?

Yes, we have in the major markets. We have union increases negotiated between 5% and 8% to 10%. So I would say it's a bit of an average inflation rate. Also, it's quite different from different markets. But I would say, if you say with -- that we are estimating 7% to 8% on the personal side, I think that's a fair assumption.

And this is already reflected in our new prices, right?

That is, yes.

Thank you very much. The next question comes from Peter Rothenaicher, Baader Bank AG. Your line is now open.

The next question comes from Peter Rothenaicher from Baader Bank AG.

Yes, firstly, on Metal processing. So in the past years, you had always problems in the execution, had some value corrections in here. Is this now over here now? And do you see here confidence for the upcoming years?

Yes. We have -- we still have 2 of these critical projects in our backlog. They significantly hit our earnings in last year. We believe we have both of them on the finish line, very close to startup and so we definitely are in the -- a positive that we will leave that behind. The new order intake is on a much more healthy level in terms of margin. We have improved our internal processes to make a more extended risk review beforehand. We also implemented the policy that we need to have a ready, defined execution team available before we are taking an order, that's particularly important as now the order intake is increasing, and we don't want to run into the same problem again. I would say, yes, it's done, and we hope that we can prove it to you through the numbers we will deliver this year.

Okay. Then you mentioned a good start in terms of demand and an order intake into 2023. We had already record order intake in the last year. We have big 2 projects on the hydro and parcel side coming in. So is it fair to assume that you see a good chance to repeat at least this order intake level in the current year?

We hope for that, but we don't know. We don't make -- we don't give guidance on order intake. As you know, this is driven by the large orders, and this is not in our hands. If we -- I would say, if customers decide, I would say we are well positioned.

Okay. So -- and with regard to the Pulp & Paper margin, I did understand it correctly that despite the fact that you have a stronger share of capital business in the current year. you are confident to improve the margin level versus 2022.

That's our target.

Yes. Then regarding M&A, is there something you could already mentioned that you are confident that we will see in the upcoming months here, some news flow? And what would be perhaps your target pace of acquisition?

It's -- unfortunately, we cannot announce anything. If we could, we would let you know very soon. We don't have a particular target size. Norbert reported that we have a good cash position. So we are not limited in size on that side, but it needs to be a good target. We will stay along the strategy we have on acquisitions. So basically along the value chain of our customers should not buy competitors and should be -- should preferably be in the service business or at least in a strong -- with a strong exposure to the service business.

Okay. And then perhaps some details on the P&L. The tax rate, which you have seen in last year, is this a sustainable level? What is your expectation here for 2023?

I didn't understand what rate?

Tax rate.

Tax rate.

Tax rate. Yes, the tax rate is, from my point of view, something which should stay in that range, maybe with a slight chance to improve. So we are in a good position with our balanced profitability structure over the world, and this leads us at the end to this kind of tax rates.

And the other aspect financial results. So I can imagine with a huge net cash position and the current trend in interest rates, there should be a strong improvement in the financial results in the current year?

At least for the interest part. In the financial results, you know well that there are some things which you can't really predict, which depend on currency and which depend on the interest rate developments. But I don't consider it as an area for sorrow in the next year.

Thank you very much. There is a follow-up question from Sven Weier, UBS. Your line is now open.

The next question comes from Weier from UBS.

The first 1 is on the backlog. You had a total reduction sequentially of EUR 850 million, and the sales were EUR 500 million higher than orders in Q4. So there's a gap of just over EUR 300 million. I was just wondering, is that all currency related? Or did you also have the cancellation in that?

We had to adjust our order backlog also by Russia projects, which we are not able anymore to proceed. So this was a correction of about EUR 100 million, which you took out of the order backlog and the rest is currency.

Okay. And that was all in Q4 then, yes?

Yes.

And the second follow-up I had is just on the PPA development, the IFRS 3 charge. I mean, how should we see that developing this year in the coming years? Is it still like around EUR 60 million for the time being? Or what's your guidance on that, Norbert?

The regular depreciation of Schuler will end this year, and depends on what we acquire. So I would not plan here with a major reduction because, certainly, when we acquire companies, they have a huge engineering part means we don't acquire huge asset base, and this often leads then to an intangible and to a goodwill. So to be fair, I would not predict here that it decreases significantly or completely deteriorates to 0. We will acquire further on, and this leads to these numbers then.

Well, 60 is the right number for this year and the coming years approximately.

If nothing happens for 2023, it will get a little bit lower. Say nothing happens. And I mean, if there is no major additional acquisition, this is what I meant. Sorry for explaining.

Thank you very much. There is another call from, yes, from U.K. So please go ahead, you line is now open. Unknown name. Okay. Okay. So we'll move on with the next call. The next comes from Teresa Schinwald from Raiffeisen Bank International. Your line is now open.

The next question comes from Teresa Schinwald from Raiffeisen Bank International.

Sorry, I had an interruption. So I have a few regulatory questions dealing with increased support for renewables. So the IRA has already announced the amount available. The green industrial plan is still in the making. What's your expectation on how much time it will take to translate these additional funds into new orders, especially in the Hydro business, but also in the batteries.

I would say on the hydro side, it will take a couple of years. As the processes are slow and a lot of approvals need to be taken, a lot of participation of society will take place. So that is rather long. On the, I would say, on the battery side, it's probably moving a bit quicker.

So long means in excess of 5 years and a bit quicker in 3?

A bit long means in excess of 3 years and quicker means within 1 year or 2.

All right. Great. Second, the technology targets that were also linked by the European Union, which by of your business, I mean, obviously, Hydro would count as being price as the self-sufficiency target. But also, your battery business because this obviously will also rate additional support.

Sorry, I didn't get -- we received additional support from whom?

No, through the minimum self-sufficiency targets that were announced in the EU like a minimum of 40% of own photo-type manufacturing. And there are also thresholds for battery and other renewable technologies.

We have not -- sorry, but we have not translated this into business for us. I mean that's more subsidies related to our customers. And we rather wait for them to develop projects from there. So we cannot really, I would say, I would have a general hope as I'm a positive person. But you know that especially with announcements from Brussels, the devil lies in the details and you never know when it really materializes into projects.

Great. And my last one is regarding pump storage, which is obviously attractive to store, also the renewable energy and ship, the peak production to the peak demand parts of the day. But I'm more looking at the economics. What's your estimate on power price or payment for negative energy that your customers would need to make pump storage an attractive investment?

I would say pump storage is an extremely attractive investment. Energy production costs are low. And we see projects investing into a combined wind farms, solar parks and pump storage to provide 24/7 renewable energy at a constant rate. We are partnering at the moment with an Indian customer. We are building the first of these types right now. We trust that it will start up next year. We have received a second order because they want to expand that, and we believe it's a very feasible concept, in particular, in the emerging markets where the grids are usually not that stable as we know it in Central Europe that is very attractive, and it's highly economical it works well without subsidies. And that's -- I would say that is a very good true commitment.

Thank you very much. As there aren't any further questions, I would like to thank you for your attention. In case of any further questions, please send me an e-mail or contact me directly. Thank you for your attention, and have a nice day.

Thank you very much. Bye-bye.

Thank you. Bye-bye.