GEA Group Aktiengesellschaft (G1A) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and thank you for joining us today for our third quarter 2025 earnings conference call. With me on the call are Stefan Klebert, our CEO; and Alexander Kocherscheidt, our new CFO. Stefan will begin today's call with the highlights of the third quarter, Alexander will then cover the business and financial review, before Stefan takes over again for the outlook 2025. Afterwards, we open up the call for the Q&A session. As always, please be aware of the cautionary language that is included in our safe harbor statement as in the material that we have distributed today. And with that, I hand over to Stefan.

Thank you very much, Oliver, and good afternoon, everybody. It's my pleasure to welcome you again to our conference call today. The biggest highlight of the quarter was clearly the DAX entry on 22nd of September via the fast entry procedure. Now we are officially belonging to the 40 largest and most valuable stock-listed companies in Germany. This marks a significant milestone for the company. Since 2019, we delivered quarter-by-quarter and year-by-year, and we did it on our own without any tailwind. I'm incredibly proud of all employees at GEA. Their dedication, engagement, passion and performance are the reasons for our success. And exactly for this reason, we celebrated the traditional opening bell ceremony at the Frankfurt Stock Exchange, not only with the Executive Board and members of the Supervisory Board, but with over 100 GEA employees from different countries and business areas and levels. With the symbolic ringing of the opening bell, GEA opened a new chapter. We are now playing in the Premier League. And we believe that there is more potential in the company and that it's now also the right time to take the company to the next level and to become even better. So we made the decision to reshape the organization, to accelerate growth and to become even more agile. Many of you probably saw the corresponding announcement and some might have had the opportunity to listen to our call. To ensure that everybody is aware of the changes we are making, I would like to run through the key effects in the next couple of minutes. Just as a quick reminder of what our organization looks like today. As you know, we have an Executive Board consisting of 3 members and we have the Global Executive Committee. This committee comprises the 5 division heads, the 4 regional heads as well as our Chief Sustainability Officer and our Chief Human Resource Officer. And all these people report to me. The full P&L responsibility lies solely with me. So the company is very focused and concentrated on my person. This organization is a matrix organization with a quite high complexity. We introduced it in 2019 to have a smoother transition from OneGEA. I would like to give you some additional insights here. Every year, we conduct an employee satisfaction survey to check what is going well and what are the areas for improvement. And I can share with you that the matrix organization and its complexity have continuously been an issue over the last years. So the question was twofolded. First, how can we eliminate the complexity of the matrix organization? And second, how can we make the company a little bit more independent from me? The answer is, in our view, the replacement of our 14 member Global Executive Committee by a new 6-member Executive Board. That means we are taking out several top leadership positions by dissolving the GEC and are basically eliminating the regional matrix organization. Regional CEOs and regional CFOs are not part of the future operating model, and will thus leave the company. From January 1, the regional operations will be managed out of the divisions. This new setup reduces complexity, decreases costs and finally contributes to our Mission 30 G&A saving target of EUR 100 million by 2030. From 1st of January '26, the Executive Board will look like as follows. Three divisions will be elevated to the Executive Board level. The COO department will be dissolved, and its functions will be integrated into other areas of responsibility. A new role, People and Sustainability, will complete the setup of the new Executive Board. After 2 years, Bernd left the company by mutual consent at the end of October. Alexander has been his successor as CFO since 1st of November. I will share some further details about Alexander in a few minutes. Let me just mention here that he has been one of the key people shaping the company since 2019. And I remember, he was, I think, one of the very first people I personally hired even before it was clear that Marcus become our CFO. Nadine will take over responsibility for People and Sustainability. Many of you know her already, as she played active roles in our past Capital Market Days, and is conducting dedicated ESG road shows together with our IR department. Four years ago, Nadine took over the responsibility for sustainability. Since then, she and her team positioned GEA extremely successfully as sustainability front runner. We were the first company in the DAX Index family with say on climate at the shareholders' meeting last year. And we see that our sustainability efforts are also relevant to our shareholders. We have many more ESG investors than 2 or 3 years ago. Kai is also one of our very successful managers. He started his career in 2004 in the business unit, Valves & Pumps, moved to China for GEA for several years, took then over responsibility for the homogenizer business unit before becoming CEO of Heating & Refrigeration Technologies almost 5 years ago. As you all know, this division developed very well under his leadership. Kai will be the CEO of Pure Flow Processing, which is the old Separation & Flow Technologies division combined with a business unit component from HRT. Klaus, who will take over responsibility for the new division, Nutrition Plant Engineering, is also very experienced and extremely successful. He made Separation & Flow Technologies to our crown jewel, a big success story during the last years. The new division consists of the of old Liquid & Powder Technologies division and the business unit solutions from Heating & Refrigeration Technologies. There is a simple logic behind this combination of the 2. Many customers are the same. They did a lot of projects together, so it's a perfect fit from the customers' point of view. Finally, Peter. Peter started in Farm Technologies. The impressive journey of Farm Technologies with good margins and strong growth rates was his achievement. Last year, he took over the responsibility for Food & Healthcare Technologies and managed successfully the turnaround of this division. He will remain at the helm of this division, which will be renamed into Pharma & Food Applications with an unchanged portfolio. To sum it up, I will have 3 extremely experienced colleagues now in the Executive Board managing together with me, the operational businesses and sharing the P&L responsibilities. All 3 are part and very successful contributor to the big success of GEA during the last years. The CEO of Farm Technologies, Andreas, will not have a seat on Board but continues to report directly to me. The reason behind this is simply the size of the division. It is too small. Its technology is also very different from the rest of the businesses. There is no strong business logic to integrate it into one of the other divisions like we are doing it with Heating & Refrigeration Technologies. Therefore, Farm Technologies will be kept separately, and as said, reporting directly to me. A very important change belongs to Johannes' organization, which will be dissolved with the transition period through mid of 2026. Johannes is an extremely successful colleague, and together with him, we achieved this impressive journey of GEA since 2019. He did a fantastic job, especially in procurement, where he centralized all global purchasing activities. His organization has significantly contributed to the increase in value of GEA in recent years. However, in this new setup with 3 strong divisions and given the meanwhile established strength of GEA, we feel that the divisions are now mature enough to manage the excellence programs by themselves. A centralized procurement function will be retained and will report directly to me. The other key functions of Johannes will be integrated into the businesses of the other Executive Board members. Johannes was closely involved in developing this new organization set up, and will stay with us for the transition period to ensure an orderly and smooth handover. The other big organizational change which we will make refers to China and India. These are fast-growing and strategically important markets, which will also report directly to me in the future. The new setup enables them to become more independent and entrepreneurial in order to act faster, simpler, more agile and without long decision-making processes. This should lead to an acceleration of growth in these countries. To sum it up, the new organization will enable us to reduce complexity in the matrix. This was one very important topic for us. And at the same time, we can decrease costs. We will save immediately EUR 10 million to EUR 15 million in '26 by reducing a 14-member Global Executive Committee to a 6-member Executive Board. These savings will grow to EUR 20 million to EUR 25 million until '27. This new organization setup is an important contributor to our G&A savings target of EUR 100 million by 2030. We will have a more focused and streamlined organization, which will support us on our journey to Mission 30. As you know, it is always important to take your people with you on the journey to make a successful -- make it a successful one. In the first week, after the announcement, my current and new Board members and I spent a lot of time to explain the new setup and the reasons for it in many internal meetings. Only 2 weeks after the announcement, we conducted anonymous pulse check with our managers, by the way, more than 2,000 managers, to see what they think about the organizational changes. Amongst others, we asked them the question, do you think we are going in the right direction with the organizational changes? And the absolute clear majority and overwhelming 94% answered, yes. This is an outstanding result, and it proves one more that it is the right time to dissolve the matrix organization and to reshape our organizational setup. And now let's change topics and have a look now at our third quarter results. After a successful first half of '25, GEA continued its positive development in the third quarter. We have accelerated growth in order intake and sales and have once again improved our profitability. Order intake rose strongly year-over-year by 5.5% to EUR 1.4 billion. Please note that this figure is not yet including the signed Baladna order. Alexander will give you an update on the status in a few minutes. As expected, sales growth accelerated in the third quarter due to the conversion of large orders which we received in the fourth quarter of '24 into sales. Consequently, sales grew organically by 4.5% year-over-year. EBITDA before restructuring expenses increased by 6.7% year-over-year to EUR 232 million. The corresponding EBITDA margin improved from 16.1% in the prior year quarter to a new record level of 17.0% in the third quarter of '25. Return on capital employed had again a strong development, rising significantly by 3.1 percentage points year-over-year to 35.4%, even slightly exceeding the remarkable ratio of 35.3% of the second quarter. Net liquidity decreased year-over-year by EUR 102 million to a minor net debt position of EUR 36 million because of the share buyback program, which was completed in the second quarter. Without the share buyback program, the net cash position of prior year quarter would have further increased. Now I would like to introduce you to our new CFO, Alexander. Alexander, has taken over responsibility, as said, for all functions from Bernd with effect from November 1. He has more than 20 years of experience in finance and investment banking and knows GEA extremely well. We started together with our previous CFO, Marcus, and me in 2019 as Head of Group Finance. Both Marcus and Alexander worked together in creating financial transparency and bringing down net working capital significantly. I'm quite sure that some of you still remember how the situation was. He is a man, together with Marcus, behind our net working capital success story. He has been one of the key people since 2019 in the finance department. In the last 2 years, Alexander has worked as a divisional CFO in our largest division, Liquid & Powder Technologies, where he did an excellent job in steering the division through a tougher environment, and could also have more touch base to the real life outside. Dear Alexander, welcome to -- on to the Executive Board. All the best for your new role, and I'm really looking forward to shaping with you, our next chapter.

Thank you very much, Stefan, and a warm welcome from me, ladies and gentlemen. As you just heard from Stefan, I'm deeply familiar with GEA. Since joining the company in 2019 as Head of Group Finance, I've had the privilege to gain comprehensive insights into our business. In my role as Head of Group Finance, I worked closely, as Stefan mentioned, with our previous CFO, Marcus Ketter, on all major finance projects. And over the past 2 years as CFO of Liquids & Powder Technologies, I gained an even deeper understanding of our operational business or real life, as Stefan just said. Now as Group CFO, I'm excited to continue to successfully achieve our Mission 30 and create value for our shareholders. I'm very much looking forward to my new role at GEA and to closely working with you, the investor and analyst community. I will now provide you with an overview of our business and financial performance in the third quarter. Starting with order intake. While all order intake brackets have contributed to the strong year-over-year organic growth rate of 8.4%, mid-sized orders between EUR 5 million and EUR 15 million showed a particularly positive development, driven by Food & Healthcare Technologies. We have received 3 large orders. So orders above EUR 15 million with a total value of EUR 64 million versus only one large order of EUR 59 million in the prior year quarter. As Stefan said, the large order signed with Baladna has not yet been booked in the third quarter. But I can share with you today that we have received the down payment now, which means the order has been booked already and will be included in our order intake figure for the fourth quarter. Please note that this order is split into 2 contracts, one with Liquid & Powder Technologies and one with Farm Technologies. Hence, both divisions will show their share of the order in the fourth quarter results. But as you can imagine, Liquid & Powder Technologies will hold the lion's share of this order. From a customer industry perspective, pharma, food and dairy farming were the main growth drivers in the quarter. On a reported basis, order intake was negatively impacted by a EUR 36 million translational FX effect this quarter. After an organic sales growth of 1.2% in the first half of '25, Q3 delivered the expected acceleration in organic sales growth to 4.5%. Year-to-date, we are now at 2.3%. Organic new machine sales turned into growth territory after 2 quarters of year-over-year declining sales, while the service business reported another quarter of strong growth. This marks the 20th consecutive quarter of year-over-year organic service sales growth, an impressive performance. On the back of that growth, the service sales share increased year-over-year from 39.2% to 14.1% (sic) [ 40.1% ]. The service business has been and continues to be an important pillar of our Mission 30. The initiatives and measures are bearing fruit. Within the last 3 years, the service sales share expanded by more than 5 percentage points. EBITDA before restructuring expenses rose by EUR 15 million to EUR 232 million, resulting in a corresponding year-over-year margin expansion of 90 basis points to 17.0%. This is an outstanding profitability improvement, marking a record EBITDA margin. Now I will continue with the figures of Separation & Flow Technologies division, which reported another good quarter. All major key performance indicators, order intake, organic sales growth and profitability improved again. Order intake increased organically by 14.9% year-over-year, to which a large order of EUR 16 million from the pharma industry contributed. Please note that even without this large order, the order intake would have had a strong year-over-year growth rate, underlining the strength of the business. This order intake strength has been broad-based as almost all customer industries have contributed, especially pharma, dairy processing, beverage and food. When looking at the order intake development on a reported basis, an adverse translational FX impact of EUR 13 million needs to be considered. Organic sales grew by 0.8% year-over-year, driven by a 4.1% increase in organic service sales. New machine sales declined by 2.4%. As a result of this development, the service sales share increased on a high level further from 48.7% to 50.4%. Despite slightly lower reported sales volume, EBITDA remained on prior year's level, while the corresponding EBITDA margin improved year-over-year by 70 basis points to 70 -- sorry, 27.8%. Driver of the margin improvement was the better gross margin, mainly resulting from the higher service sales share. Let's move on to Liquid & Powder Technologies, my home turf and my vision for the last 2 years. Order intake for the quarter was down organically by 6.8% year-over-year, mainly driven by lower total order volume in orders between EUR 1 million and EUR 5 million in size. Two large dairy processing orders with a total volume of EUR 48 million were booked in the quarter, while the prior year quarter contained one large order of EUR 59 million from the dairy processing industry. From a customer industry perspective, the positive development in food and pharma was not enough to offset the decline in the other industries. Of course, the order intake performance would have looked completely different if Baladna order had already been booked in the third quarter. But as I just said, in the meantime, the order has been booked in October. This quarter, an adverse translational FX impact of EUR 9 million needs to be considered when looking at the order intake. Sales rose by 6.6% year-over-year on an organic basis which was driven by both new machine and service business. While the service business continued its growth trajectory since Q4 2021, new machine sales rebounded after reporting a decline in the first half. As mentioned in previous calls, we expected an improvement in new machine sales in the second half of this year. The large orders, which we received in Q4 2024, are starting to be converted into sales. EBITDA before restructuring expenses increased from EUR 50 million in the prior year quarter to EUR 52 million in the third quarter of 2025 on the back of higher sales volume. The corresponding EBITDA margin of 12.4% remained almost stable at last year's level of 12.5%. Moving on to Food & Healthcare Technologies, which reported a strong set of numbers again, strong organic top line growth, coupled with continued sequential margin improvement and a record service sales share, a very successful turnaround story. Organic order intake increased significantly by 16% year-over-year, to which both major customers industries, pharma, and to a lesser extent, food, contributed. As in the second quarter, midsized orders with a volume of EUR 5 million to EUR 15 million were the main growth drivers. Sales grew organically by 4.1% year-over-year with contributions from both new machine and service business. New machine sales showed an organic growth rate of 2.0%, while service sales grew stronger by 7.9% organically. As a result, the service sales share increased from 35.4% to a new record of 37.0%. The EBITDA before -- the EBITDA margin continued its quarter-on-quarter improvement since its low point of 6.1% in Q2 2023. This marks the ninth quarter of sequential EBITDA margin expansion and impressive development. EBITDA before restructuring expenses reached EUR 33 million with a corresponding margin of 13.3% in the quarter, significantly up from 10.1% in the prior year quarter. Main driver behind this profitability expansion is a significantly better gross margin. Continuing with Farm Technologies, whose recovery continued this quarter but let me give you some more details here. After an already significant order intake, organic growth of 19.2% in the first half of 2025, the third quarter reported another extraordinary growth rate of 31.2% year-over-year. The new machine and service business benefited from the strong demand for conventional and automated milking systems in the quarter. The market recovery, which started at the end of last year, continued, and is largely driven by robust milk and favorable feed prices as well as the introduction of new product features. This environment contributed to the notable increase in order intake which is expected to remain on a high level for the remainder of the year. While organic sales declined in the first half, reflecting the low starting order backlog at the beginning of this year, they rebounded in the third quarter. Sales increased organically by 6.0% year-over-year, resulting from strong growth rates in new machine and service sales. New machine sales experienced an organic increase of 6.2%, which was even stronger than the organic growth of 5.9% in service sales. As a result, the service sales share declined from a high level of 49.0% to 48.3% in the quarter. EBITDA before restructuring expenses rose by EUR 4 million to EUR 36 million due to higher sales volume and an improved gross margin. The corresponding EBITDA margin increased by 180 basis points to 18.0% in Q3 2025. Finally, let us turn to Heating & Refrigeration Technologies. This division delivered solid sales growth combined with further EBITDA margin expansion. Order intake declined by 7.1% organically year-over-year due to missing midsized orders with a ticket size between EUR 5 million and EUR 15 million. While in the prior year quarter, orders with a total volume of EUR 18 million were reported in this order size bracket, no orders were booked in this size bracket this quarter. Base orders showed stable development. When looking at the customer industries, main declines were experienced in distribution and storage, food and dairy processing. Sales rose by 3.2% organically. New machine business showed another quarter of organic sales growth, the fifth in a row, of 4.1% year-over-year. Service sales grew by 1.8% organically so that the service sales share decreased from 37.8% to 37.1% in the quarter. EBITDA before restructuring expenses rose by 7.1% to EUR 21 million due to an improved gross profit resulting from volume and margin effects. The corresponding margin of 13.7% showed an expansion of 70 basis points compared to the margin in the prior year quarter. Closing the divisional chapter with the overview on the EBITDA growth contribution in the first 9 months and in the third quarter of 2025. There are 2 important messages. First, we have considerably increased our EBITDA before restructuring expenses in both time periods, even though operational costs were stable or higher in most cases. And this considerable increase is driven by all divisions, except for Farm Technologies in the 9 months period. So a broad-based improvement. And second, we have managed to improve or at least to keep gross profit stable across all divisions despite facing declining sales in some cases. This resilience is driven by GEA's price and cost discipline as well as the savings we have achieved through our procurement and production optimization efforts. Coming now to another important topic, net working capital. In a year-over-year comparison, net working capital declined by EUR 27 million to EUR 466 million. This reduction resulted mainly from higher trade payables and lower contract assets, which more than offset the increase in trade receivables and the decrease in the contract liabilities. On a quarter-on-quarter perspective, net working capital went up from 7.8% of sales in the last quarter to 8.6% in Q3, which is within the guided corridor of 7% to 9%. While we received more advanced payments quarter-on-quarter, higher trade receivables combined with higher inventories have triggered the uptick. Free cash flow has been solid for the third quarter. But let's have a look at the details. Operating cash flow of EUR 120 million this quarter is below prior year's quarterly figure of EUR 180 million. This decline was driven by a combination of higher net working capital outflow, higher cash outflow for taxes on the back of a higher tax rate and others. The pickup in CapEx related outflow of EUR 68 million is in line with our full year 2025 guidance of around EUR 255 million. This implies another step up in CapEx in the next quarter. As a result, free cash flow stands at EUR 52 million, leading to a net cash flow of EUR 30 million after deducting lease payments and interest paid. The solid net cash flow reduced the net debt position to EUR 36 million at the end of the third quarter. With the share buyback program completed and no longer impacting this position and given our typically strong cash generation in the fourth quarter, we most likely will return to a net cash position by year-end. Free cash flow generation over the last 4 quarters has been solid, reaching EUR 394 million, the corresponding cash conversion ratio, which indicates how much of the EBITDA before restructuring expenses have been converted into free cash flow before restructuring expenses, landed at 47%. With that, I hand back to Stefan for the outlook.

Thank you very much, Alexander. Before talking about our fiscal year guidance, let me share with you our view on the current order intake situation. As you know, large orders can be lumpy and we cannot perfectly predict when orders will be signed and booked. For example, last quarter, we announced that we signed the largest single order for GEA today, Baladna. We also explained that this order will -- would be booked in the second half of '25 once the respective down payment will be arrived. The down payment was not transferred until the end of September but came in only after the cutoff date like Alexander also said. Therefore, this order will be reflected in our order intake in Q4. This is a perfect example of how the timing of signing -- or booking of large orders can be difficult to predict. But most importantly, this does not affect GEA's overall performance. Therefore, it makes more sense to look at our order intake development on a rolling last 4 quarters perspective which you can see here on the chart. Here, it becomes clearly visible that we have seen good order intake development since the low point in the second quarter of '24. This positive trend continued in the third quarter of this year, and we are very optimistic that it will carry on in the coming quarters. As a result of the positive development in the first 9 months, we confirm our guidance for the fiscal year '25, which we have upgraded in July. Organic sales growth, 2% to 4%; EBITDA margin before restructuring expenses between 16.4% and -- 16.2% and 16.4%; and return on capital employed in the range of 34% to 38%. Finally, our road map for '25 and also '26. So that you can already save the date for our reporting date in '26 in your diaries. From beginning of '26 onwards, we will report our results on Mondays. The next important date will be the release of our full year results on March 9. In the meantime, we look forward to seeing many of you at the upcoming roadshows and conferences. Alexander, the Investor Relations team, and I will be meeting investors until the end of January. That concludes our presentation for today, and I hand back to Oliver for the Q&A.

Thank you very much, Stefan and Alexander. And yes, let me hand over to the operator, please open up the lines for the Q&A session.

[Operator Instructions] And now we're going to take our first question, and it comes from the line of Klas Bergelind from Citi.

Klas at Citi. My first question is on the margin at year-end. I mean, obviously, very solid margins again in the quarter, but you're keeping the full year margin guide unchanged. It looks like the upper end, i.e. 16.4%, is now likely. But if that would play out, the fourth quarter margin decline is now at the same level at the upper end, i.e., around 16.4%, at least according to my maths. That's down 60 bps quarter-on-quarter. It's obviously not unusual to see a margin decline at year-end quarter-on-quarter, but still quite a meaningful slowdown. Can you talk, Stefan, if this lower-margin machine sales helped the backlog at year-end relative to service? Or did some divisions thinking about farm tech in particular, see some very positive mix effects in the quarter that will not repeat.

Okay. First of all, Klas, I hope that the investment in your new headphone paid off, but it doesn't seem like that, so the voice quality was again a little bit weaker. But I think I got the point. The question about the margin development. I mean, look, if you look at the rolling last 12 months, this is 16.3%. So we also need improvement in the fourth quarter compared to last year's fourth quarter where we are very optimistic but we feel comfortable with that guidance. That is what I would say here. But as you can also see, there is no risk to underperform here on that side.

But are you -- okay. I hope you can hear me better now. Are you getting a higher margin when you ship, for example, automated milking systems in farm tech, obviously, your service share is down a bit, but you still do at 18% margin. I'm trying to understand this, if you got a bit better product mix for automated machines, and that will not repeat. I'm just trying to understand like what could effectively slow into the fourth quarter?

Yes. I mean you're also referring to FT division. So if we look at the year-to-date margin with 15.2% on the FT side, we are well in the guidance range of 14% to 16%. So that's why we confirm the overall guidance as Stefan said.

Okay. My final one is on end markets. As I think about the recovery in pharma, it seems to be broadening out across more divisions. You even got the large orders there in SFT. Could you talk a little bit about the outlook, what's going on? It seems like when I look through what has happened over the previous quarters, started in SFT, but now it's sort of almost in every division. So I'm curious in terms of what you see on the pharma side and the outlook.

I'm not sure if I got your question right because the voice quality is not so good anymore. But I think the question was also about the market, how we see the development also in pharma. I can see and I can confirm that we are really seeing interesting, good pipeline, interesting order activity. So Q4 will be a very good quarter also for order intake again. So everything we see looks really good. And I mean, if you look at the order intake growth we have so far this year, it is also very clear that you can expect for next year, a significant acceleration of growth. And without giving any guidance, let's say, for next year but it is very obvious that with that, we will be in a clear -- clearly in the range of what we promise as a CAGR for our Mission 30.

And now we're going to take our next question. And it comes to line of Adrian Pehl from ODDO BHF.

Yes. So actually, on SFT, I've got a couple of small questions. So looking at the developments on the margin side of things, obviously, Q2 was an outstanding quarter. I was just -- wanted to have from you some statements on what has changed on the mix? And is that a kind of margin normalization that we should accept also going into the fourth quarter? And having said this about Q4, so should we expect actually organic sales growth to slow a bit as we saw in Q3? And also with respect to the base business order intake which seems a bit soft, just wonder if there are kind of trends we should take into account here? And then I've got 2 more, but maybe let's stick with SFT first.

Yes. So let's start with the SFT question. So the Q2 margin was extremely strong. I think that -- and it also needs to be said that we are there on a very high level anyway. So the decline quarter-on-quarter mainly resulting from a less favorable product mix within the service business, I would say, and that's the driver for the development on the SFT side.

And then on...

Yes, sorry, I'm just recapping. So the sales development, we do not see a reason to believe that there are -- that this is going to continue the slowdown.

And on base business order intake, is there anything we should be aware of in SFT?

No solid development, I would say.

Okay. And first of all, welcome also Mr. Kocherscheidt, by the way. So in general, I mean, obviously, I think in past investor meetings and conference calls, I think you mentioned as a guidance for the whole group, something 5% growth. I mean, Mr. Klebert, you said something, should expect something in line with the midrange or what we should take into account on the top line. I was wondering, is that -- I mean, on the other hand, that you probably mean that besides the Baladna order, we should also expect some at least midsized but probably larger orders to be booked in Q4. I just wondered if you could share any kind of thoughts on the pipeline and what do you think you're going to convert? And the last one that I have is on the free cash flow. Actually, I mean, solid overall, I would say, I agree, the year-on-year comparison is a bit tough, I guess, the base was quite high last year. So it looks down in the third quarter, but I was wondering, should we assume that you already -- is there also some preparation in for the Baladna order or is it just kind of phasing on how working capital components moved? And what should we expect for Q4?

Let me first take the question about the potential order intake, we might see, Baladna is not the only large order we have or we will book in Q4. We are very optimistic that we can see others also quite significant. But as I said and as I repeated many times, sometimes it's very difficult to give a clear statement, what is the quarter when we can book a large order because this might be easily postponed for 3, 4, 5 weeks, and then it falls into the next quarter. So if I would need to bet today, I would say Q4 will become another really great quarter. But what is even more important to mention, the pipeline we have, the pipeline we see is not only a very solid one in terms of base business because you also might remember last quarter, Q2 was a quarter where we achieved a good order intake without any large order, and the large order begins in our terminology with EUR 15 million. So we really, really have a solid fundament of pipeline. We are very well positioned in interesting markets. We are becoming even more agile now with the new organization. We put a lot of activities in sales also during the last years which you see now, which is which is helping us. I mean you always have to consider the overall situation in the world, yes. I mean these are not the most bullish times worldwide. And if you look at other machine-building companies, they are significantly struggling and decreasing staff and declining the second or third year in a row. So I would say, when you look at our business and how our pipeline looks like, we see a very interesting and bright future also '26 and beyond.

I then pick it up with the free cash flow question. So yes, the free cash flow in Q3 as shown was negatively impacted mainly from the net working capital outflow and also higher taxes that we paid. And also the CapEx number was, compared to the last year in that quarter, higher. And as you also know, the quarter 4 free cash flow is always the strongest quarter in terms of cash generation. And we also expect that to continue in the year 2025. So Q4 should be also a strong one, and that's our expectation.

Now we're going to take our next question. And the next question comes from line of Sebastian Kuenne from RBC.

First of all, the EUR 15 million to EUR 25 million restructuring or reorganization charges, this is still coming in Q4. It's just a yes or no answer really. That's my first question.

Yes, it's not a yes or no answer because it's -- yes, a part of them will come in Q4, but also some parts might go into next year. But you're right, they will come, yes.

Okay. Then the Baladna order. I know it's the -- delivery spread out over a couple of years. But with these large orders, to what extent does it impact the gross margin? Because I recall, as soon as you go into project business, the profitability might drop quite a bit. Can you maybe tell us a little bit about the earnings profile of these type of orders?

Yes. I mean there is not a significant difference. We would not do any business, let's say, which does not meet our profitability targets.

Okay. A final question for the cash flow again. You paid higher tax -- cash taxes. Just for me to understand, is this related to the tax you expect this year? Or is this already the German tax authorities asking for prepayments for your expected tax budget for next year? So that's -- are we already seeing kind of more optimism on next year's earnings, basically?

The cash flow, of course, is based on the actual payment. And also, it's not only related to the German taxes we pay. Of course, we have to pay, fortunately, taxes in some other countries worldwide. So that's -- so the free cash flow that we are showing is based on the payments on actuals.

But actual meaning, what exactly already reported earnings or expected earnings for 2025?

Reported, so actual payments.

Okay. On historic earnings.

Yes.

[Operator Instructions] And now we're going to take our next question. And the question comes from the line of Lars Vom-Cleff from Deutsche Bank.

Two questions remaining, and I would ask them one by one, if I may. The first one, most likely for Mr. Kocherscheidt. Looking at the current and prevailing FX headwinds and then taking into account that your 9-month revenue so far is only up 0.6% on a reported basis, do you currently see a risk that you might have to report negative revenue growth for '25 as a whole?

No. No, we don't see that risk.

Okay. Perfect. And then maybe one for Mr. Klebert. I mean, we appreciate that you're currently reducing the complexity of the organization as well as the number of divisions at least on the Executive Board level. But can we expect this to also cascade down in your organization rather sooner than later now and lead to a market reduction of the overall complexity with your more than 200 subsidiaries? Or is that step rather still closely linked to your proceeding with the running SAP implementation so that we should not expect major changes here before, I don't know, 2027 or so?

I would say that both things have not necessarily something to do with each other. I mean the changes we intend to do now is a change on the top and how we steer the countries. And the question of how many legal entities, this is a program we started and we are running so-called ELSA, where we are also very well on track. But this is not linked to each other. At the end, the change which we do is now that we found out that the value of the regional coordination was in our understanding, creating a lot of alignment efforts. And like always, maybe we overestimated the synergies coming out of this kind of organization while the costs have been always there. So this is what we take out and we believe that the divisions can really directly steer the business worldwide. We also have in place some coordination on country level but this is something where we will continue to achieve some more savings in the future as well. That's also -- I mean, if we look to '27 -- for this year, I mean, in '26, we expect EUR 10 million to EUR 15 million savings immediately simply because of the changes in the top management, but until '27, we also can expect additional EUR 10 million more savings on top of that, let's say, and this is an interesting saving potential. At the same time, we believe that it will help us to become more agile, more dynamic. And yes, and the ELSA program where we are going to reduce the number of legal entity is not necessarily linked to that.

Now we're going to take our last question for today. And it comes from the line of Uma Samlin from Bank of America.

So first, a follow-up on the cost savings front. I see that you're planning to have like EUR 10 million to EUR 15 million of savings on the new organizational change. And we also are supposed to see a bit of a step up in 2027. Can you perhaps give us bit of more color on what is the reason to step up on the cost savings there? And also, would you be able to clarify, it sounds like, from your answer to the previous question, that this is not part of the EUR 100 million COGS plan you have for Mission 30. Would you be able to confirm whether this is included in that or not?

Thank you, Uma. Thank you. Well, I mean, the first, let's say, bucket of savings, which we can see already next year, is very clearly coming out from taking out top management people, actually 4 regional CEOs, 4 regional CFOs, and people working closely together with them. So assistance, there's a kind of very close people working with those top management level, like you always know. On the other hand, also, we -- I addressed it in my speech, we're dissolving the COO organization. We will also include the vast majority, but not all people from COO will find a new home. So we will also have savings here. And I fully believe in the power of a P&L. So now we reduced the number of organizations, which do not really own a full P&L, and give the responsibility to others. So the COO organization, for instance, we had no P&L in the COO organization. And we now integrated to a vast extent to the divisions. And therefore, we will see here also savings coming up during the next years, simply because of synergies, simply because of that we don't substitute everybody who is leaving, things like that.

Yes, that's super helpful. Just another question following up on your comments earlier on the sales, potential sales growth into next year. It seems like you're alluding to that we will see a bit of a step-up in terms of sales growth next year. Is that what you meant? And if so, what is the driver for that, please?

You mean the driver for the sales growth next year?

Yes, you're right. Potentially to be more in line with 5% to 6%, in line with your CMD Mission 30 rather than the 4% -- or 3%, 4% we're probably going to see this year.

I mean our Mission 30 guidance is that we want to grow with a CAGR of minimum 5%. And my message is that next year, we will definitely have a year where we will see minimum that. How much it will be, this is something we will give out as a guidance once we have closed the year and we have even more transparency. But if you just look at the sales we did this year at the phasing of the large projects, and if I look at the pipeline, I'm extremely confident that we will see next year, a full-fledged Mission 30 year, let's say that. And despite all the issues which are around, and I think that's maybe also important to mention again, you know that we are -- I mean sometimes we are like a bulldozer. Since then some years, yes, we are walking the talk. We are delivering despite corona crisis, despite supply chain crisis, despite the war in the Ukraine, despite the conflicts within Middle East, despite tax or tariff things, nothing stops us.

That's super helpful, Stefan. Just if I may squeeze in the last one. Now I see that you have taken a lot of roles, well, perhaps a bit new role, the role to lead Farm Tech, India, China in procurement. Would you be able to give us a bit more color on the rationale there? I mean it seems like GEA has made a lot of progress in procurement, for example, especially in the past few years. What are you thinking that you would do differently than your previous COO on these fronts? And what are the opportunities that you would like to pursue in China and India?

Yes. Yes. In procurement, I will do nothing different. And it's simply that this person will report to me to make sure also in the organization that we will keep a strong centralized purchasing organization. But purchasing alone is not, let's say -- let's say it's not justifying to have a seventh Board member, let's say, like that. That was the reason why we said we need to take it on a different organizational set up. And by making sure that it is the right structure, this person will report to me. India and China, it's different. In the existing or current organization until the end of the year, India and China are both reporting to a regional CEO. And if we look back, let's say, the last 5 or 10 years, and we ask ourselves, could we have been a bit more dynamic in China and India? The question might be, yes, or the answer might be yes. And this is simply also, let's say, in, I would say, quite typical for European machine building companies, everything which has to do with localization is still too much depending on Europe, on Germany, and it's not going in a speed which might be more helpful. So the idea is -- and that's also the message I gave into the organization. We want to leave China and India from the hook. We want to make them much more speedy, much more independent. We give them more resources to build up their own R&D teams. They, of course, will be coordinated and also influenced by the divisions and business units but we want to make them more independent. They will have the right to do more decisions in the future simply to speed up the growth and the development because both are very important markets. And that is also the reason why we are now anchoring them on the CEO level and why they are reporting to me.

Now we'll go and take our next question. And the question comes from the line of Louis Billon from AlphaValue.

So my question is about Food & Healthcare Technologies. So you -- the key driver in either pharma in your presentation, but in the report, you also mentioned new food. So I want to maybe have an idea of to what extent new food is driving your order intake in that region? And also, could you give us more color on what is the current environment for new food? And what kind of order intake do you expect for the full year?

Yes. I mean the vast majority of new food business is reported in the today's LPT division in the future, Nutrition Plant Engineering. Of course, we also see some of the components from SFT and sometimes also FHT going into that business. I mean, if you -- if you would have asked me 4 years ago, then I would have said the development in new food will be faster. It's picking up a little bit slower. However, you also know that we built the large -- the first world's largest factory for cell-based meat in the U.S. by Believer Meats, Believer Meats has now all the approvals they need. They will start beginning of next year with the production. This is an important milestone for the whole industry. We are also in touch with -- and very strong associated with other very promising companies like Solar Foods and I could mention much, much more. So we see that new food is picking up. It takes a little longer than originally expected, but we strongly believe that this is a big growth driver of the future and we are definitely extremely well positioned in that industry.

Dear speakers, there are no further questions for today. I would now like to hand the conference over to your speaker, Stefan Klebert, for any closing remarks.

Yes. Thank you, operator. Thank you, everybody, for listening and for your great questions. Let me sum it up. I think it is important to mention that we have delivered, again, a very strong set of Q3 results, with an acceleration in order intake and sales growth as well as a further improvement in profitability. We remain very positive for Q4, especially with regard to further strong order intake, baseline and also large orders. And for '26, we expect an acceleration of organic sales growth and a further margin improvement, though we fully confirm all our directions.