Interroll Holding AG (INRN) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. It's 11:00 on my -- oh, it's not a Swiss watch. But we would like to start in time, and I would really like to welcome you on our analyst conference of the year 2022. You see at the first picture a roller coaster. This should describe a little bit the situation that we were facing last year. We started very good into the year, but then we were faced with situations such as the Ukraine war, supply chain challenges that probably almost everybody was facing, energy price increases, inflation. These were major topics that we had to deal with and also long delivery times because of the higher order intake we had in the year before with a big backlog starting into the fiscal year. So what we want to do today is we'd like to give you an overview of our entire group. After that, we will give you more details on the results and the ad hoc that we have issued this morning. This is going to be done by Mr. Heinz Hossli, our CFO. After that, we will talk about the backbone, how we get through the situation last year and what is now in front of us when we talk about production, and this will be done by Jens Struwing, our Executive Vice President for Product & Technologies. After that, we will take care about our most important topic, our customers. And Mr. Maurizio Catino, our Vice President for Sales and Solutions, will give you an idea of how we approach our customers and how we get into long-term relationships with our customers. And finally, I will go for wrap-up and also an outlook. And then we are open for questions. So we have, by the way, physically a lot of people here, and we really appreciate that because we like the interaction also physically. But this year, we also have a digital channel open, so we have also partners on the digital channel as well. Talking about the group figures. You read it, I guess, almost everybody of you. This year, we achieved CHF 664.4 million of sales, the highest sales ever in the history of Interroll, whereas our order intake just landed at CHF 572.6 million order intake, and Mr. Heinz Hossli will dive deeper why we achieved that order intake. On the EBIT, we achieved a CHF 105.2 million EBIT. This is the highest EBIT we ever achieved, and this equals an EBIT margin of 15.8%, which is 0.3 points above the value we achieved last year. Talking about the order intake and the distribution amongst our product portfolio, 8.5% on Pallet Handling; 40.5% on Conveyors & Sorters, our solution business; 31.6% on Drives, our product business; and 19.4% on Rollers, also our product business. You see that these numbers shows our long-term strategy and supports our long-term strategy that even in uncertain times, we were capable of dealing with these kind of challenges. Talking about growth. Our growth is being based on 3 major pillars. One is the solutions, second is customer end markets and the third pillar is service. What does it mean? Last year, we were really looking into our solution business, and we put a lot of effort into developing our portfolio further on. Last year, we issued in almost this time in the year, our new food conveyor platform. This is just a logical step because with our drum motor business, our product business, we were able to enter the food market, and now we extend this with our product platform business even further, and Mr. Struwing will give a detailed view into that. We extended our controls family. Based on the semiconductor shortages, we made a decision to come up with another controls family because we wanted to differentiate ourselves a little bit and have a brighter possibility to source semiconductors and not just rely on 1 semiconductor supplier. On top of that, we also upgraded our MPP platform. We just recently issued our new platform for Pallet Handling just 3 weeks ago, and this is what we really dealt with last year, and I'm very proud of that. And more so, we are now going to issue the LogiMAT in Stuttgart in beginning of April, our new CEP platform, which is for the high transport business in the e-commerce and parcel business. And here, I must say we will come up with a product that nobody else has, so we have really a big differentiator compared to our customers, and Mr. Struwing will give you more details on that afterwards. On the region, we -- you know that we plan to invest, over the last 3 years, a total volume of CHF 150 million in capacity increase. We postponed a couple of things last year because of the difficult situation that we were challenged, but this is now planned for this year depending on the development of the market. We invested further on in our plant digitization because we see this is one of our major strengths, especially when we talk about our own Interroll Production System, which does help us. In Americas, we are now gaining back market in Mexico. This is, for us, a very high developing market, and we just restructured our facility there with new people on board. And we extended our facility in Brazil. Asia Pacific, in Q3 last year, we opened up our new facility in Suzhou, completely new plant that went quite smoothly. And unfortunately, we have not had the chance to really celebrate it because of the travel restrictions but I think this will change now. And in Australia in the Asia Pacific region, we see a higher demand for project business coming up. Service, I'm happy to say that we have now our service organization full up and running in Europe with our spare part facility in catch. And we started to work already last year now for the rollout for the service business in the Americas, and Mr. Struwing will give you some more details on to that. And what I'm more really happy about is that with the high installed base that we're having, for example, more than 500 sorters in the field, we now have also the possibility for retrofit business in our service area. I talked about the long-term strategy, and I just wanted to show you what we mean with long term. And you see now a picture that is lasting back until 2000. This is what we understand as a long-term strategy, so we're thinking in decades. And we are now in the third decade of the strategy. And in this decade, we are basically focusing on 3 major topics: one is modularization and digitalization; second is industry solutions; and the third 1 is business excellence. So what do we mean with modularity and digitalization? When you were young, I guess, almost everybody of you played with LEGO. And this is what we understand as modularization. You can buy a brick or you can buy the full set of LEGO. And this is not just a mechanical topic that we're dealing with. It's just also electrical topic, and now we are also investing into software. So we go really into the digitization here as well to come up with a platform strategy for the software. The second major topic is we derived out of that complete system architecture. So if you buy a sorter from us, you can say, you can buy it as a mechanical part, probably as a mechanical and electrical or mechanical, electrical and software-wise. Second topic on the other topic is the customer value. We really focus not just on selling him a product. It's really selling him a solution, understand the customer pain and give him the respective product or solution for that, and we call that customization by configuration. So having a setup of modules and products, combining that and create good solutions. When we talk about industry solutions, for us, it's a deep understanding of the customer demand, so talking, asking, understanding, then delivering, that's for us very important. Second major topic here is sustainability. You know that we have issued first time ever, Mr. Hossli will go into that, our sustainability report, and we mean it as we say it, right? And you will see a video of what we think the future in our industry is going to be in sustainability and energy. So we really need to take care of the energy consumption. This is where we put focus on the total cost of ownership in the future with our customers. And also in industry solutions, we're also trying to sell more of our solutions with the customers, so getting in contact, for example, into the food business with drum motors and then open up doors for additional products and solutions out of our food platform. On business excellence, for us, 2 things are very important, learn from the best internally and externally. That is something that we are really taking serious, so we are looking into every industry to learn how to get better. And the second 1 is implementing global standards. So Interroll is one of the companies that has a global footprint, and we'd like to get really global standards in place for that. Second 1 is productivity and transparency. So if we talk about digitalization in production, we take that serious. We'd like to get more transparency into our processes to improve ourselves and to increase efficiency. And the third topic is the service business. We feel responsible for our customers. Therefore, we don't just want to sell the product. We also want to take care of the product if there is a demand out of the market. And having said this, I now would like to take the chance to give you an overview of the detailed numbers and the achievements of this year. And I would like to welcome Heinz Hossli on stage.

Thank you, Ingo. Ladies and gentlemen, also a very warm welcome from my side to this conference today. I have the pleasure to present you the figures of last year. And I would like to start with the orders released. The figure is not new. It's just confirmed. We published it in January already. To some of you, it looks somehow awkward in the picture and I try to give some explanation to it. If you look at the 5-year chart, you see very much what we said last year, '21 order intake is an outlier. Too many things have come together. We see this has to be flattened out. It all started in 2020, where we have seen many project postponements during the COVID crisis. People have not released projects even though the product business was doing good, but on the project side, we have seen a lot of postponements. Suddenly, spring '21, this golden knot was loosened, straightened up and we received a lot of orders in a very short period of time. And this is what is reflected in this peak of '21. At the same time, the supply chain issue started to really get bad and customers, as we also did, we increased our inventories, our customers did exactly the same. They ordered like there is no tomorrow. This is reflected in the order intake '21. And this was the case. Nobody knew exactly. Nobody was transparent. Nobody was really open to say, yes, I doubled my stock because then probably they would not have gotten the entire quantity. But this was the case. '22, we have seen that there is a normalization in supply chain, especially in the second half year, it came very fast, not really something what we have foreseen when we had the webcast beginning of August for the first 6 months. This was good news for us. We could reduce our delivery times to pre-COVID levels. Also, the entire supply chain improved a lot. We reduced our backlog so we could get risks out of our business by reducing the backlog, which we have accumulated with old prices. Since September on the product, we have new price in the market. This was supporting. And what we have seen is the project business, same situation like 2020, postponement, postponement, postponement. Strong pipeline. Probably we have the strongest pipeline ever in the history of Interroll, but projects are on the time line just skipped 1 month, postponed 2 months, postponed another months. And this is why it led to this order intake. When we go on -- towards the right side, you see the distribution. This is just a reflection of what I said. It's not 1 product group. It's across all 4 product groups. There's no big difference between the project business or the product business, it is really almost the same. When we come to sales, you see a different picture. The picture on sales is quite good. We have 3.8% growth in Swiss franc. We have 8% growth in local currency, so we have also faced a negative currency effect. The highlight, clearly, EMEA with a growth of 14.5%. This is the highlight of last year. Americas, a growth of 4.1% is also very good because we have to consider that America has grown more than 30% the year before. So it was a steep growth, now slower growth but still on a growth path and keeping the high level. Asia Pacific, minus 35.5%. This region really faced a lot of headwind last year. So it was the lockdowns, it was the COVID situation in China, this zero-COVID policy, then suddenly everything was changed late last year but also the travel restrictions. Everything came together, bad environment, and this is to result on the order intake. I comment later on a little bit what my personal thoughts are about this region. When we look at the split, you can see that now EMEA with this huge growth is again 58%. Americas could keep the share at the 33%. This is the same like last year. And Asia Pacific lost from 15% to 9%, 6 percentage points, which is quite a lot. Nevertheless, Asia Pacific as a region, mid, long term is clearly the region which has the biggest growth potential for us. This is the less mature region. Europe, EMEA is clearly the most mature region we are in. Americas has catched up a lot. And Asia Pacific is the region where we have much potential to go midterm. The entire Asia or ASEAN region is also in general region which will most likely grow over proportionally in the future. So I'm confident that we will still keep this 50-50 promise that we want to come back to 50% EMEA, 50% from the other 2 regions. And this will be the target unchanged to what has been in the past. This is hopefully a hiccup and then we go in the other direction again and gain market share in Asia Pacific. I would like now to come to the profitability, start with the EBITDA. The EBITDA grew 5.6% to CHF 129.3 million. The really good thing is that the EBITDA growth is higher than the top line growth. And the key driver for this is really our cost discipline, our cost fitness, our ability to react fast to changing environments. And this is underlined in '22, which was a difficult year for Interroll as for many other companies as well. The other part was clearly the improved supply chain, which helped us a lot in the second half year. And you see, if you go through the figures, you will see this, it's easily visible how the second half year has been, on the profitability side, very high. And there, we had factors which came in from the supply chain improvements, from orders which have been postponed where we could realize the sales in the last 2 months of the year, where it was always unclear to get postponed into the new year, to -- are we in a position to deliver still in '22. So this helped to improve in the second half year of '22. When we look at the EBIT, growth of 5.9%, so it's slightly higher than the EBITDA. The reason is because even though amortization and depreciation in absolute amount is higher than the year before, also due to the investments we have done, it is -- has not grown proportionally with the top line, slightly under proportional growth, slight increase on EBIT. When I come to the result to the net profit, you see an increase of 2.7% to 82.8%. Also this is a record value. And there is just 1 impact and this is what I mentioned already last year. The tax rate last year was incredibly low with 18.8%. If you consider our big operations in Germany, which is also the highest tax rate we have, so this was very low, not sustainable, and we are now coming back from this. We are now at 21%. The long-term rate is between 22% and 22.5%. And we see that we will also go back to these levels if there is no big change in tax rates. Operating cash flow, it also developed very positive, plus 51% to CHF 71.4 million. The base was clearly the result. But then also, we started to reduce our inventories. We have reduced CHF 18.7 million in inventories, which was the key driver for this improvement, and we have paid a little bit less tax, income tax, but this is just shifting from 1 year to the next. So overall, it's clear, higher profit, you will also see increased tax. But the key driver, reduction of inventories, and this is something which is ongoing in the industry. When we look at the free cash flow, this has increased a lot. We had a negative free cash flow last year when we have built up net working capital. We have now CHF 49.2 million free cash flow. The investments you will see are far below the CHF 50 million we always talked. We have the investments with CHF 32.5 million. It's not that we saved a lot on the investments. We have, we made savings on the investments, but we have postponements. And my colleague, Jens Struwing will elaborate a little bit on the postponements we have. When we come to these 2 KPIs, and we see this over the time, you can see that both return on equity and return on net assets have slightly come down compared to last year. Return on equity actually is positive. It's not a negative development because the reason is that we have the highest-ever equity in the balance sheet. The equity is more than 70%. So this is good from our view. We are fully independent from any financial institution. We can run our business. We have the freedom. This is what we want to have. This is what we want to continue. Looking at the return on net assets, we clearly still see the higher net working capital is having an impact there. But this should also improve when we go into normalization. Some words to the dividend proposal from the Board of Directors to the Annual General Meeting. The dividend is proposed at CHF 32, so it's CHF 1 more than last year. If we look at the payout ratio with 33%, this has basically unchanged, and I think this is exactly what the estimate also was. We have a clear policy, 1/3 dividend, 2/3 to reinvest in the company. We keep this and this is just a reflection of it, but it's nice to show that we can increase dividends over time. On this long-term chart, you can see this, the only time the dividend has been decreased was after financial crisis. Otherwise, it was flat or increasing. If you look at the value 2002, 2003, CHF 2.50, now CHF 32 per share, and there was no change in the -- it's the same shares. It's -- nothing has changed. It's a pure reflection of the development of Interroll, of the profitability of Interroll. And this is -- I think this chart shows it very well. It's a huge compound growth, if you calculate this from the CHF 2.50 to the CHF 22 (sic) [ CHF 32 ] and shows the strength of the company. Now some words to the sustainability report. We announced this a year ago. It was a journey. It was not always an easy journey. It is a lot of work involved. We mean it's serious so it's not only the paper what you see on the desk. It's really all what has gone in. You have it now. It's the first sustainability report with GRI '21 Standards. We have developed our materiality analysis. We have 12 material topics, which we described. We have also the policies on the Internet publicly available with all the KPIs per topic. And with this, we clearly show again a strengthening of our commitment to the UN Global Compact and to the Sustainable Development Goals. So it's really something we want to live. We drive it forward. This is how we have structured it. And this ESG, so #2, #3, #4 is clear. Everybody has it. We have added 1 and particularly as #1 in, even though they are all equally important, but the Economic is an important factor. If the company is not doing economically well, then ESG is only paper. So it is important that the company is doing well, can invest in doing better. And this is why we have these 4 pillars and not only 3 pillars in the framework. On the bottom is the purpose and the value. It is fully embedded in the corporate strategy, which, in my view, is key. This is the only way this can go into an organization. There is a lot of change management in the organization. And then we have built this framework on top and there is clear we have outside in views. We have ratings. We get rated. And we are really looking forward now how we -- how this will change. Because in the past, it was very clear. Ratings purely done on KPIs you publish. We were on close to 0. When ratings were made on the stories we had, on energy savings topics, then the ratings were quite good. And the MSCI rating is still an A, which is good, considering that we have never published any qualitative figures. On the -- you see the 4 impact areas and you see our 12 topics. I will not go into details. If you're interested, you are very welcome to read the report and go through the report. Before I close, I would only make 1 hint that we have now everything on our online digital platform. Sustainability report with all the documents but we also have the annual report there with all the documents. We have content which is online only so you will not have it in the printed version. It's multimedia content. It's a video with our CEO, Ingo Steinkruger. And please have a look at it, and we would also appreciate your feedback about this. It's more and more the way to go into digital -- full digitalization also on this end. The video you will see now is somehow a good bridge when I hand over to my colleague, Jens Struwing, because it is about sustainability, and it really makes a good bridge to his topic, the backbone of Interroll. Thank you very much. [Presentation]

Ladies and gentlemen, also a warm welcome from my side, and thank you very much, Heinz, for handing over. I really do think that the video really shows one of our focused topics we are dealing with at the very moment. One focus topic is energy saving. And here, we can combine our activities of our service organization going into retrofit and providing the -- for the customers a significant decrease in energy consumption. The second focus topic we are dealing with at the very moment is digitalization. Digitalization in terms of product digitalization and process digitalization. But I will come to this topics later during my speech. Going first into the operational challenges 2022. And I think you all do know where we have been coming with the COVID crisis, material availability was really hurting us. It was not just the semiconductors but it was also some other product roles like the polymers, but even some steel materials have been short. And having recovered this, we really have to focus on our P&L and balance sheet. And looking into the figures, what Heinz Hossli did and just showed you, I think we have been quite successful in the last year. And we were looking into 4 major initiatives. The first initiative is the flexibilities in capacities. Our customers are asking for shorter delivery times, for shorter lead times. And this is where we have to go into adoptions of our production system. The so-called breathing factory is key. And this is exactly what we are focusing on at the very moment. And the [ briefing ] factory goes absolutely in line hand-in-hand with digitalization. Information availability from the customer side and also going into the production side. The second hot topic for 2022 and going into 2023 is the inventory reduction. You all do know '21, with the semiconductor crisis, we were not able to serve all of our customers. And what we did do that time, we did significantly increase our inventory level just to secure the availability for our customer base. And as the situation did change, at least for most of the parts, we have to decrease now our inventory. And in 2022, we had a decrease here, we're pointing out the pure financials with CHF 80 million. It is a decrease of 16.6% what we have achieved in 2022 and more to come because at the moment, we're also changing our order pattern, going into a more intelligent planning method. On the purchasing side, we did also lose some percentages in 2021. With the material shortages, the material prices we are getting up. And in 2022, we were focusing with our purchasing organization to win back some of the points we did lose. I also do think it's a quite good result with 6.5% material cost reduction, which is reflected as well in the result Heinz Hossli has been showing. But we're also looking into alternative technology because, especially the electronic crisis is no more the semiconductor or the small DPLC, whatever goes into a cabinet. And even motors, you have a lead time up to 3 quarters of the year. And this is exactly what we're doing. We are, at the moment, reengineering some of our products to have here a second product line, so to be more independent from the 1 or the other supplier of these electronic components. And last but not least, process optimization is a major topic. We have our Interroll Production System in place, which we are, at the moment, trying to get more digitalized. We are looking into innovative products, but this is a topic I will want to tackle later in my presentation. First of all, I want to give you an insight on the capacities we are investing into at the moment, especially into last year and ongoing into the year 2023. And we are focusing on a certain growth pattern for the next year. And this has to go in line with having the respective capacities that you can serve the customer demands. We had the possibility in Europe, in the wider area of Düsseldorf, in our location at Baal to purchase a neighborhood building, which was a warehouse. And this 1 is being transferred at the moment into a production location, especially for our food conveyor platform. We will have an additional 7,000 square meters there. In Asia Pacific, we did start in the quarter 3 our own production facility, moving from a leased 1 into our own with 22,000 square meters. In China, we are producing there, the rollers, the drives and the conveyor systems for the boxes and for the pallets as well as the sorters. And last but not least, at the moment, we are heavily investing into our South American facility in Brazil, where we're extending our factory with a short -- with a small additional production space around about 800 square meters for the products we are producing there. But going into the innovation of last year, I did focus on the food. I can tell you from the food platform, 2 parts are in the market. It is the UHT and the SHC, and third 1 will come later this year, the 1 which is meeting at the so-called open food platform. And this 1 will be launched later this year. I want to focus on the control solution. Vertical integration was our buzzword. Vertical integration means besides the hardware, what we have been offering with our product and solutions, we are now more going into electric, electric installations but also into software and here, especially the controls. We did upgrade our multi-control with a new bus system, which is quite popularized well in the market, the so-called ASI Bus system. And last but not least, we have our top loader module and the top loader module is an extension of our light conveyor platform, where we will combine the robot systems, the AMRs, the automated motor robots with the stationary conveyors, our LTP. And we are offering -- we want to offer, starting in the third quarter of this year, a new product, this is called the top loader module, which will be a standardized module, which is then really connecting the different drive motors with the stationary conveyors. And we are testing this at the very moment with some of the major suppliers of this AMR robots. But I do think the highlight, which will now be launched at the LogiMAT in April is our high-performance platform. The high-performance platform is the missing gap to our sorter platform because you have to feed the sorters with a high-speed conveyor. And the throughput on those conveyors is quite high so it is a different setup than the MCP. And we did run an innovation process, which is now finished, which is close to the market launch. The better tests are done and we did got a real good feedback already from our customer base. The specification of this platform is speed up to -- convening speed up to 2.5 meters per second, especially it's a modular platform as we do know it from Interroll, so you can really plug-and-play the different modules. And you can set up your own solution here, your own conveyor system. The center heart of this platform is the so-called multi belt switch and Ingo Steinkruger was talking about the unique selling proposition. And this is exactly the unique selling proposition. We have here conveying capacity for this so-called diverter of 6,000 parcels per hour, which is basically double the speed that the competitors can offer today. And it is a proven Interroll solution. It means easy to blend with our digital layouter tool, easy to install with the modular platform but also easy to service at the end of the day from our service organization. Going into digitalization. Ingo was talking about the system architecture framework. This is our backbone of digitalization. It means this is basically our bible, which we have defined how digitalization should look like. And we are working on 3 pillars of digitalization. And one, you have the product, you have the processes and you have the production. On the processes, we want to be a partner easy to deal with. Easy to deal with means our product should be easy to be blend. It should be easy to install and it should be easy to service. And this goes for sure into a digital process with the respective tool. We have here online web shops, where the customer can order it with CRM, where you can follow up your projects and where you can give the customers all-time information on the respective lead time. Looking into the product itself, it's all about big datas. So we really want to serve the customers with the information on the actual status of their systems so that they can really go into preventive maintenance where we can also then support our customers with our service organization. And this is all connected with data collection, we are going into this one. Last but not least, we are looking into our process optimization. This is strongly connected with our internal production system, which is now going to be fully digitalized. So my last slide is a wrap-up of what I did present last year, the Interroll service. And I really can say, EMEA is done. We have now our central warehouse or Europe in the center heart of Europe, and the center heart of Europe is nearby Karlsruhe, where we have round about 4,000 parts on stock, and we can serve the entire customer base in Europe, from the very south to the very north from the very east to the very west within 48 hours, which is service above 92%. And this goes here, especially in the spare parts logistics, but this goes also into maintenance activities. So we have here a network of maintenance teams located in Europe, and this goes into installation support for these systems as well. More to come, as Ingo did say, Americas on the way. We did start in quarter 4. We want to finish in quarter 4, 2023. But as you can imagine, the Americas going from the very north, Canada to the very south in Patagonia, it's not that easy to handle than in Europe. So there's not just 1 center warehouse you can set up. So this is a little bit bigger challenge on what we are facing and this goes especially into our maintenance activities and the spare part activities. But we are looking forward to get this 1 finished in 2023. And then the last region, which is missing is then Asia, which goes into our strategy plan for 2024. But it's not just ramping up the business in the regions. We also want to extend the business. And 1 topic we are looking into is the consulting. We really want to support our customers in optimizing their own systems in finding new ideas when it comes to conveying. And we want to offer training to our partners. It means the system integrators and also the maintenance teams of our customers. And last but not least, and this closes the loop of my presentation, retrofit is 1 important topic. And I think this is really one of the most important topics for the future because retrofit will lead to severe changes. If you take a look at the total operational costs, which will be much, much more important in the future than the CapEx to be spent. It was a pleasure to give you a short insight about the operations and the products within Interroll. And I do want to hand over that point of time to Maurizio, giving you some insights on the customer promises. Now a few message I want to give you, if there are some questions, please post those questions after our presentation. We have some room for Q&A session. Thank you very much.

So good morning, ladies and gentlemen, also from my side. I'm Maurizio Catino, in charge of the sales organization. I'm here to explain you where are we with our customer journey. We believe that obviously, our customer is the most important asset for the company. And I wanted to show you what are we doing in this direction and where we see our opportunity for growth in this direction. So one of the very first move that was done a couple of years ago in regards to the sales organization was to move from the so-called transactional sales model into the solution sales model. In a nutshell, what does it mean? Mainly business-to-business sales organization in the last 20 years were built on the transactional, let's say, model. Transactional model is seize the sales organization like a sort of consultant on the level of product to the customers. So the customer has a problem very shortly, the salespeople tells them what product can solve this problem. The movement into the solution sales is a radical movement. So the customer doesn't know what problem they have. But the sales organization is able to tell them what we can do better, how he can improve this process and flows. And therefore, this creates a completely different trust with the customer. And easily as a last step, we can move the customer from a normal partnership into a strong partnership. And you know and I will show you how partnership can drastically influence our results into the sales team. Very briefly, I have some example here. These customers are customer where we have actually opened partnership. Why? I mean this partnership and why we are so optimistic and positive about this? Well, for our customers, especially system integrator and OEM, these are the 2 core customer for Interroll organization, as you know. Digitalization is one of big topic. And let's say, automation is another big trend. There are no people available. More and more companies want to automate. And obviously, they start to see that their core business is not anymore building conveyors. Their core business is digital solution, software, connection with the high level, let's say, end user systems. Therefore, they are willing to cooperate with companies which are good in that, where the core business is, they link [ in there ]. And therefore, they're approaching more and more Interroll Group, and they want us to cooperate and to outsource their conveyor technology to us. And this is -- it does goes in a completely different market because if you look at these 3 companies, Viastore is part of the Toyota Group, and they are in the general material ending. Smiths Detection, they are in the airport business. Marel in the food business. So as you see, this is a clear trend that is not specific to any single market. We have also, in parallel, a partnership program called Rolling on Interroll. And this is the proof of what I was telling you. You can read the number yourself. But at the end, this community is growing. The spending of key customers in this community, in average, is much higher than all other customers. This proves they are really, really close to us. And let's say, the share of wallet of these customers is completely 100% on Interroll portfolio. They don't even evaluate any competition solution when they know that Interroll as the solution. On top of that, they are also giving us a lot of opportunity in regards of the innovation because they are telling us what their customers are willing to have and therefore driving also our innovation process in the right direction being much more target-oriented with them. Another pillar for the sales organization in the future will be the digitalization. We are moving in this direction quite strongly. I'm a big fan of the fact that sales is not only on the past. Sales needs to see and look at the future. And the digitalization is the best way to look at the future. We have taken a lot of initiatives in this sense. The first was to establish, 1.5 year ago, a business intelligence team, which is now up and running. They are constantly working on our competition landscape and on our potential market growth. So they are feedback our sales organization on where are the areas of growth that have the highest potential, I mean, targeting specifically where we have highest chance to win customers. The successful rollout of CRM is another big topic. So we have now this CRM system, customer relationship management, globally rolled out, giving us a clear picture on the future focused. So we can really now see in the coming months what is the market trend, in which area we are doing okay, in which area we need some specific actions. We have implemented a digital platform online where customers now can do 2 things. One is buying online our product. But even more important, we have the so-called endless approach, where the sales and purchase in connection toward our customer is automatically and there is no human interaction in between. This goes automatically from system to system, freeing up our people, time and, obviously, giving more resources into the real sales activities. So what is our customer promise? I have summarized in these 3 words. And these are the 3 words that Interroll since a few years now is showing: quality, speed and simplicity. So quality is also not only going into the product quality, it goes into the team and people quality. It goes into the quality of our tool towards our customers. Second is speed. It's not only delivery time. It's how much we help our system integrators to be faster in their planning. And this is a big value for them. This is money, good money for them. Finally, simplicity. I mean, simplicity, it means we have to make our customer life easier and simple. And this is the way to the success for this organization in the future. Thank you very much. I'll give the word to Ingo for the conclusion.

Thanks for your part. I'm impressed. Ladies and gentlemen, just give me the chance to do a quick wrap-up before we go into the Q&A session. You've seen what we -- what kind of efforts we put into our organization and our company. And I was asked like, "Mr. Steinkruger, how can you achieve that?" And I said, this is hard work every day. It's not flying by. It's really the ambition that we're having, the motivation that we're having, and we have good pillars that support that. First of all, we're taking care of our customer end markets. And like Maurizio showed you, we are trying to extend our strategic partnerships, which is of essence for us. The Rolling on Interroll program now having 125 Rolling on Interroll partners globally from Uruguay from Chile to Australia, all in this program. We're extending this. The digital sales platform headless approach, no person interacted so we can take care of our customers and listen and understand. It's so important for us. And the global lifetime service, not leave the customer alone after he has bought the product, now taking care of him afterwards is of the essence. The strong innovation pipeline for us is a must because we'd like to keep ahead of our competition. So the food conveyor platform we discussed, the software and control is of core discipline that we're behind to extend right now. The CEP platform with the high-performance platform that we just showed. And for me, I highlighted as well the LCP top loader. It's not just a small product. It is more. It's a connection of the physically installed convening to the flexible installed robot business. And we are -- we're trying to -- or what we're actually doing is we're diluting the system -- the borders. We open it up. So we create interfaces for these 2 worlds working together and the extension of our sorter family is of the essence. Business excellence, 2 major things. Cost fitness and breathing facilities. This makes us reliable. This makes -- gives us the ability to react on whatever is coming along. And the capacities for future growth are in place. We have financial strength, impressively shown by Heinz and the -- our own internal production system gives us the ability to increase our efficiency. And the platform strategy for us, it's quite clear. We'd like to deepen our platform strategy even more so to give more value to the customer. We also wanted to -- with the digital tools that we put in place, accelerate the -- working together with our customers, enable our customers to do more business easier with their customers with the digital layout, for example. For us, as -- impress of we being showed, sustainability and energy savings. And here, we start discussion with our customers about total cost of ownership. It's not the investment at the front. It's the entire life cycle you need to put into consideration. And this is what we are working on. And last but not least, for us, what's the most important thing is, we'd like to be reliable. Our solutions are proven, not just the product itself, also the interaction that we have in our organization and with our customers. So giving you an outlook, for us, it's quite clear. The fundamental drivers of the markets are intact. And we are monitoring further the supply chain as this is developing. In principle, we are cautiously optimistic. But for economic, we also watch the economic development that harbors uncertainties as the global markets have not stabilized yet. And now we are open for questions. Thank you very much.

First question? If you speak up loud, and I repeat your question.

[indiscernible] Then you had the order intake the middle of last year. All the earnings were about e-commerce, but looking at the revenues generated with conveyors and sorters in particular, there's no such effect in the revenue figure. Is there yet the decline to come or is there some metric in there?

I didn't get the beginning of the question, sorry.

There was a very weak order intake in the second half of the -- in the first and second half of last year from U.S. e-commerce. I think that was the reason for a profit warning. But looking at the figures, I am so impressed by the conveyor and sorters revenues.

Yes. Can everybody come up on the stage because I guess we get more questions. But coming to that, right -- we told you in -- especially in the profit warning that we were not able to get all the prices into the market yet, right? We had a lot of big backlog, especially with bigger projects -- sorry, with bigger projects. We have worked that backlog off and we were able to input the prices now into the market. And this is the major impact of our profit increase in the second half, as we said.

But with regard to volumes, we see no remaining weakness from U.S. e-commerce [indiscernible] volumes, produced in the second avenue producing in this year.

Now maybe I jump in here. When you refer to it, the profit warning we did because we have seen in the project business a shift started in May, June and this has not recovered. We did never mention that this is coming from pure e-commerce. This is the general media, what you get from the media, everybody is talking about Amazon. It clearly say that also in the U.S., clearly, 1 thing is clear, Amazon, yes, they did stop investments. They did kill also greenfield announced investments where they have not even purchased the land. And our customers are much closer to this. The integrators, they are really suffering from it. We did not suffer any cancellation out of the U.S. out of this area on order intake. And it is clear, yes, these were the projects which also were in execution, postponed, postponed, postponed. This is what was I referring to in the last 2 months of last year. We could deliver quite a bit of such equipment to the customer and realize the sales. Does this answer?

Yes. And also because this e-commerce topic is always coming around. You know that e-commerce is like 20%, 25% of our entire sales. So we are not just depending on this one.

Serge Rotzer from Credit Suisse. First question about backup and second 1 is on [indiscernible]. So firstly, in H1, you mentioned is that you have CHF 150 million backlog. Can you tell us where this number is today, more or less? And with that, I'm wondering then you have [ CHF 170 million ] in orders in the second half of last year and normally the sum of the order of last year second half and the sum together with the first 6 months of this year is about the sales of the current fiscal year. So to remain stable, you would have to achieve about CHF 400 million order intake. So can you [ help me building out the ] row this year? Or will you have such a nice order intake or do you still have such a high backlog or you'll help me to understand the position.

Okay, good. Probably we'll start with the first part of your question. So the backlog that we had last year was on a very high ratio. I think the book-to-bill at end of December, Heinz, was 1.28?

1.26.

1.26, this was the order backlog. We started this year, end of December, with a book-to-bill of 0.88 (sic) [ 0.86 ]. But you know that we have -- our business is not just related on the book-to-bill, like in the system integrator business, we have a really short turnover from order to delivery. What we're currently seeing is that we basically are on track with our budget for this fiscal year. So we are quite confident that if that goes ahead and the market develops like it is, that we will achieve our target that we have set ourselves for this year. So this looks quite good.

Okay, let me do later on again. Second question then on CapEx. You mentioned that you have postponed some investments. Can you give us more flavor here what would have to change? This would be question #1. Question #2 is, you mentioned the slides that you had CapEx of CHF 32.5 million. But when I look into the annual report, I only count [ CHF 26 million ], but probably I don't know what happened here. And the third here on CapEx is you mentioned that you want to increase investment into software. What does this mean for CapEx? Or do you expense this also accounting treatment? What's -- what are the plans here?

Okay. So first and third question, Mr. Struwing, and second question, Mr. Hossli.

So looking into the CapEx, it just mainly goes into buildings and machines and there are 2 major projects, which we have postponed. This is the extension of our [indiscernible] operation, that means the Roller, RollerDrive production. And this was the 1 I did present the extension or the renovation of this building what we have purchased and putting here the food conveyor into operation has been postponed from 2022. And we are doing this now in 2023. This was the postponement basically on a roughly CHF 12 million investment. And if it comes to software, software, I think you do know that 2 years ago, we did acquire a small Austrian company, which has been growing significantly since that time. And we are investing a lot in software operation, which goes here especially into controls and not just the sort of controls, which we have in place right now but also in the decentralized controls for all of our conveyors business. So this goes more into an own investment into products.

Good. Just going on, on this third question. Everything what we do, which is R&D-related is fully expensed at the time. So we have never capitalized any R&D cost. And the other one, Mr. Rotzer, this is the view, the CHF 32.5 million are the gross investments. And what you look in the cash flow is the net and we also have sold assets. But the CHF 32.5 million is gross investments, really new.

Stefanie Scholtysik, Mirabaud. I have also 3 questions. Maybe 1 on this project delays. I'm not sure if I understood it correctly. You said the delay was sorted a bit by the end of the year. Has this to do with the supply chain? Or is all that orders that you talked or not firm orders that you talked about, that there could be orders and are coming now in? And can we expect that the stocks are going to continue and you will book some of those key project orders in 2023?

Thank you very much. It's a very good question. And sometimes there is always this, what is it? It is always the same. When we talk, we see postponements in the market, it means we do not have a PO. It is not yet a firm order. Now we are in the projects. We have there high visibility. We know discussions are going back and forth, but we are not sitting on a PO. It's important. This is why also we did not have any cancellations, whereas the integrators clearly had cancellations.

But we can expect that this postponement of talks that they are coming through this year?

Yes. This is what I said. The list of projects is the best we ever had.

We call it opportunities, right? The opportunity that transferred into -- in order.

The second 1 is on services. How much is -- of your current sales is coming now from services? And maybe also how much is coming from retrofit? And can you also give us a margin indication on your retrofit business?

So actually, what we are achieving right now is a service business of around 10%, right? So we are -- on the long term, we are aiming for more. And the margin in the service business, we are aiming like 50% higher than the usual margin that we're achieving.

And then maybe a last 1 on Brazil, if I may. I mean, you're investing there heavily. And what's the rationale behind that? That how much sales you're generating in Brazil right now? And how much exposure do you have?

It's a good question, but probably you can answer that.

So what is because it's a typical question. Our business is based on several, let's say, topics. One is e-commerce, as you said, and the other 1 is food. Brazil has 200 million people, so we see a lot of potential coming out of Brazil. They are growing stably and we see more and more opportunity there. And also, our customers are investing locally in their facility. So therefore, we'll keep following this trend in that market.

A follow-up on the CapEx plan. Originally you stated an amount of roughly CHF 150 million over 3 years and stated that this will be enough for a capacity of roughly CHF 1 billion revenue. Now you'll invest a little bit less. Does that mean that your capacity assumption for the next 3 to 4 years changed? Or is this misleading?

This is -- it's not misleading and because we did not stop the investments. We just postponed the investment. So with the growth, we will also release the investments further more. There's no contradiction. We're still on a plan.

The other 1 -- another question is on the -- your customers, the system integrators. The [indiscernible] currently a lot of margins are and everything. Do you see the trend that they're producing more own products, that they do not anymore rely on third-party products, that they produce more robust and everything by the self, for instance?

We saw the trend last year when the supply chain were a little bit disturbed, but we see it actually, honestly, the other way around because they need to focus what is their core competency. This is what they're aiming at right now. And this is project business. And the digitalization part becomes more and more important for them. And therefore, we seldomly see the opposite. So they're really thinking about, okay, what can we outsource to focus with the people that we have on board for their business model.

If I may clear 1 point, looking into the production volumes. We are a manufacturing and an engineering company. And therefore, we are focusing on volume production. And this is something what a single system integrator cannot do for sure. And this is our strength, for sure.

Remo Rosenau, Helvetische Bank. Your operating margins in the second half were up about 340 to 380 basis points versus the prior year second half. If I understood you correctly, this was mainly due to the improved supply chains, which make productions more efficient again. Now what does this mean for this year? I mean, supply chain is still okay? You get efficient -- more efficient anyway every year. Raw material input costs are rather going to be down, the other end, a bit higher wage cost but it paddles okay. You have a speedover effect on pricing still, a positive one. Probably you could quantify that. So in balance it does look that bad for the project, right?

The correct answer on this is we see how this year is going to develop. But I can tell you, it is a hard effort to stabilize the situation as it is, honestly, right? So we see the energy costs, not knowing where this is coming -- this is all going. We have a lot of counteraction that also work against our EBIT margin, but we are cautiously optimistic, as I said, with this year.

Okay. So cautiously optimistic on all that top line and margins.

No. Honestly, we watch the market how this is developing. And this is -- because last year we made some experience last year. Therefore, we are a little bit cautious, put it this way.

Okay, correct. Then on Rolling on Interroll, that is very -- an interesting program. Do I get that right? This is with the end users or is that with the system integrators?

This is both, OEM, system integrator, and these are our customer base. There are no end user in our program as we don't technically sell directly to the end user. We consult end user to let them specify our product to be both, by system integrator and OEM. So in the program, you only have our core customer, system integrator and OEMs.

Okay, okay. But your efforts the last 10 years to approach end users and to educate them on how important your products are, to get efficiencies up for them is one of the reasons probably why you didn't have cancellations, whereas your direct clients had.

Yes, you were right. I mean, we absolutely -- we have still a very strong focus on visiting and talking to end user. That's absolutely the case.

Then on the breathing production, which you mentioned a lot in the press release and here, could you make a few examples how that is achieved? I mean, temps is 1 thing, okay, of course, but there's certainly much more.

Absolutely. Jens?

Yes. I think the most important topic is here really the flexibility agreement with request council. If I take a look into our factories, we have working time models from minus 500 hours up to plus 500 hours on the individual work accounts. And we have the possibility to switch from 1 shift model to the others with a pre-announcement lead time of 2 days. And with this one, you can basically freeze about plus/minus 3 months, and this is the success factor on 1 side, but on the other side, it's also the planning, which is more digitalized, where we have more reference points on the production itself and having there the possibility to steer into control of production much more closer.

There's 1 other question. We also have online questions. So we now need to start also to distributing that a little bit.

Sebastian Vogel from UBS. I've got 3 questions. I will ask them 1 by 1. And the first 1 would be on incurred order momentum in your key verticals, if you can just guide us through, at the moment, what you see there, that will be greater to hear.

So would you like to answer that?

You mean the momentum? Actually, okay. So the momentum, actually, as we said, we have a pipeline which is quite full. But obviously, there is uncertainty in the market. So we don't have any cancellation, but we see a forecast, which is what good. On Q1, we have quite good, let's say, outlook that we can achieve our budget for Q1. So this is what we see now actually.

Got it. The second question would be on price increases. What sort of price increases you have in plan for 2023 already introduced? And how much of your backlog is already priced or not been yet priced?

Heinz?

We have no backlog on the products which have old prices, so this is what I mentioned in my presentation. Everything what we sell new and rolls and drives new prices in the market fully. On the project business, we only have a handful projects which come out of this peak order intake, the first 6 months '21, which will be delivered in the first month of '23. So basically, the pricing is in the market. This is also we did not do a price increase for January 1. We only increased a few components mainly because of semiconductor parts in it, but the rest we did not do a price increase. We did also not do a price decrease in fall '22 because especially steel price dropped. So we were saying, we keep it stable and we absorb the inflation basically on the salaries but also on a higher energy cost, much higher energy costs especially in Europe, and this is somehow flattened out. And we are confident, if there is no new shock, we will not need another price increase. So we are not planning a price increase for '23.

The last 1 would be on the investment capital. You mentioned inventory already in the presentation. If I would look more on the payables and foreseeable side of things, how do you see the situation there in terms of normalization of the course of 2023 [indiscernible]?

I gave you a hint already, now we invoiced a lot in November, December. So the accounts receivable balance, you see end of December is on the high level. And you can assume that customer pay within 60 days.

And on the payable side?

On the payable side, you can also look at the compare, we have been on the very low side.

Good. So there's 1 question, then we need to dive into the digital.

[indiscernible]. I have still a question about your project business. So we understand that last year the projects have been stuck. You were involved in many pipelines. What are the factors that really destocked the project, maybe it's from cost to cost, a little bit different and also from region to region a little bit different, but that we can really understand what makes the projects stuck and what made them flowing.

Yes. Well, first of all, I have to say that most of the projects are stacking independently from the region. So it's a real trend in the market. So what is the reason is obviously the uncertainty in general into the market. There is no -- any fear from our side that this will be released simply because the market we are in, we're very confident that this is keep growing. E-commerce is a trend, which is keep growing. We see more and more the last mile discussion, which will increase our potentiality. And our new product goes also into this direction. So the fall, I would say that when the situation globally is becoming a little bit more safe, all this will be released. Therefore, there is no cancellation actually in our pipeline, which has been other good news.

And probably, it's also the time factor now. The project is on and at sometimes simply gets realized or is that completely mistaken?

I think this is -- the projects are on and what we have seen, for example, in general, we could realize some of the projects which have been postponed very early, last summer already and step by step. So the projects, they are hot. So sooner or later, they will come -- the unsecurity of our customer and of the end user and it's the end user. A lot goes at the end into the B2C business. And the feeling that we can go into a recession, that the purchase power of the end customer is going down, this is what causes unsecured. Do I really now go into a cap expansion, if I may a distributor like Amazon, or do I wait and see what's happening?

Probably on that, what we also see that it's talking about the Amazons, whatever, we see also other parties going into that direction. So there will be other logistic companies looking into, okay, what can we do to get into that market. So there's a lot of discussion currently that are not physically feelable. So here we can't see that right now. But there's a lot of things going on as a hidden agenda. And what Heinz explained, once the markets are coming back, this is quite good business opportunities for us coming up.

Yes, Serge Rotzer. I have a follow-up question on the margin. Can you remind us what's the margin levels of the view in the regions when you talk about EMEA, Americas and Asia Pacific in regard to the group margin? Because you got still an impressive jump in Europe and you guide us that Americas and Asia Pacific could grow again. So what does this mean for your profitability?

Thank you very much for your question. But as you know, we are well aware, we do not disclose these figures.

You don't have to disclose it, but you can give me some hints, you know, whether these are at a positive impact or a negative impact?

The margin really -- this is what we disclosed. The margin is different from -- if you talk about product business or project business. But the margin globally is not so different. If you have a comparable project in Asia or in the Americas or in Europe, the margin is comparable.

Then I'll go into the online question. Could you discuss how you see 2023 unfolding in order intake standpoint, perhaps discussing by end market and more specifically, what are you seeing in e-commerce? Also could you comment on what was your order book end of 2022 and 2021 -- I think we discussed that 1 -- to get a sense on revenue visibility you have. So probably, we...

Yes, we kind of answered it already. I mean, what I want to say, which is pretty important, obviously, for whatever reason, everybody is associated Interroll and e-commerce, Interroll and e-commerce. We're not only in the e-commerce. So e-commerce is part of our business. But we have -- I mean, quite big, food, also revenue, and this food revenue is absolutely stable, if not growing. And we have investment in this food area, which just released this year with a new platform there, where we are also optimistic we can market this. So at the end of the day, the impact on the e-commerce drop is somehow visible. I probably have to add another detail. It's not only e-commerce, which is in a critical situation. It's part of the e-commerce. I don't want to go into the detail, which is struggling -- because the strategy of the big e-commerce provider is changing from big apps into smaller apps, which are closer to customers. They want to achieve faster delivery. And faster delivery means equipment which are flexible and not as big as the -- let's say, equipment that some big systems integrator are producing. But this fits 100% to Interroll portfolio. So for us, this is a next-level opportunity in reality that we see.

Yes. And I just want to elaborate on this. Not everybody is stopping big investments. It's a little bit like competition is coming along. So we can feed these ones with our product portfolio. But the good thing is because we have such a bright product portfolio, we can high speed, we can low speed, we can low investment, we can do high investment. We can give our products or supply our products into these demands that are coming. So this is a big strength of Interroll compared to others.

Would it be fair to assume that some verticals like postal systems, airports and so on, due to the need of automation and the reopening of some geographies do have nice order intake as well.

This is what we're currently assuming. This does goes up and we see it already.

I think the demographic effect is playing an important role because the logistics tasks and the logistics operations are the first ones, which will be affected by this effect. And this has to go into automation without any doubt.

We see that. If you compare that last year or the year before last year, I think there was a statistic and this was been shared with -- amongst ourselves with our American colleagues. A truck driver earned like USD 90,000. They are now on USD 150,000, USD 160,000. McDonald's USD 12 per hour, they are now at USD 18,000 or USD 19,000. So what you see is we are giving you an example, we had a discussion and discussion with suppliers for fastfood restaurants, how can food be supplied out of the kitchen directly in front of the desk to the operator. So these kind of discussions do start right now. And with the product portfolio that we have in place, we position ourselves like, okay, if that trend goes along, we have the appropriate product portfolio to get into that. So automation, next to digitization is the key success factor, and we see that especially now because of the shortages of human resources.

Walter Bamert with a follow-up question. Can we talk about product groups? Rollers was the only 1 with declining sales last year. Is there an easy [indiscernible] with the older product?

Yes, the easiest explanation is, if you look into the order intake the year beforehand, our customers still have a lot of rollers on stock, a lot of rollers on stock, right? So this is probably the easy explanation for that.

Also regarding product groups, can you range them by profitability? And is that profitability narrowing now as you have more controls also for the more sophisticated products, but is it still that there is some deviation between the different product groups.

So what we generally say is that the profitability on products, right, is higher than on our project business. And this is still the same. So generally we differentiate between products and projects. And projects is lower, it's quite lower than -- a little bit lower than on the product business. There's another question coming in. My impression is that until late, demand was solid. As orders were still strong in H1 2022, can you indicate whether you had been -- where you had been at a CHF 150 million run rate in Q1? And can you comment on the order pipeline in regards to the underlying volume versus last year?

I'm trying to get the question first. So it was still strong in H1 2022. Can you indicate whatever you had been at...

At CHF 150 million run rate in Q1.

So what is our, let's say, Q1 this year. That's the question. Okay. Let's put this way. We have seen the book-to-bill ratio going skyrocketing last year as you can in H1 '22. And this obviously had a drop later on, it was going below 1. Now we are again back above 1. So this, to answer the question that we are kind of going up. And then as Heinz said, the balance between how big was the peak and how is the bottom now is still quite positive, if you make the math.

Maybe there was -- on the other online question, and this is also somebody -- a few addressed it indirectly. When we started the year '22, we had a record high order backlog. We had CHF 200 million-plus in backlog. When we closed the year '22, we have worked off a lot of this backlog. If you take what I have shown, the book-to-bill ratio in '22 compared to '21 and you flatten it out, you will have a good picture where we are. So we are below CHF 100 million when we started the year, which is a figure, which has been also the case in the previous years before. The CHF 200 million was more a burden than a good thing where we started in '22.

Because we never said no to our customers. The only thing we said is the delivery time is longer than usual, right? And this is what we handled quite openly. Okay. There's another question. What is your view on APAC after the 35% drop down in fiscal year 2022? Is momentum improving in the region? Maurizio?

Well, APAC, as I said, is in line with what I mentioned before. The Q1 looks in line with the budget actually. So we see that, I mean, there is some improvement there.

But I can tell you, I've been -- and all of us have been into Southeast Asia just recently, talking to customers and end customers. And it's almost the same picture that we see in the U.S. and Northern Europe. This pipeline is there. People like, okay, we want to do this. We want to do that. But it now counts on, okay, when will this be released? Another question. Your focus remains on organic growth, not M&A, right? Did we say that? No. No. So what we actually do is, we are watching what's going on in the market. And for us, it's quite important to really look into what's out there. and what is attractive for us because we are judging our M&A projects based on 3 major topics. One is whatever we'd like to get on board needs to extend our product portfolio. It needs to fit in our product platform. Otherwise, it doesn't make any sense because we'd like to stay focused. Second of, if we do an M&A, it needs to culturally fit because we'd like to get it in very fast because this is what our strength is. And third of, it needs to be price attractive. It needs to be price attractive. And I can disclose that we have seen the one or the other companies that we are in discussion with, but criteria #3 is very important for us as well. So we keep cautiously watching what's going on out there. More? Can you please confirm us that you have no client risk, biggest client below 5%? How much are doing your -- how much are doing your 10 biggest clients in turnover, I guess? So our client risk, we have 28,000 customers. So we have a very good spread, I would say, in this overall regions in all the regions. We have major big ones. We have small ones. And this gives us an opportunity because we're trying to serve all of them. And if someone drops down, we have the opportunities to go into the other areas. And we have clients that are just specifically in specific industries. So we can also play -- we can also play this game. So the risk that we have exposed to just 1 customer is very, very limited.

To be specific, we don't have a client more than 5%.

Yes. That is true. Another one. The gross margin improved from 51% in H1 to 60% in quarter 2. Can you comment on how much of that improvement is related to volume, CHF 311 million to CHF 345 million versus tailwinds from price mix?

Okay. I would not say that there is a volume effect here. Most of this was the fact that we have been able to proactively push the price increase into the market. And we have been smart or like enough make it as you want to fix our offers at, let's say, first half of the year with an index so that our customers were indexed on the material price. So therefore, we have been able, in several cases, to renegotiate these orders. So this is why, I mean, we have increase so much in the second.

Two more. Okay. And then I think we should go for -- 2 more. How many new employees do you plan to hire in 2023 from where you are? From where are they coming from? Peers? Google? Okay. This is a Zurich question, I guess. Jens, will you?

Looking into our operations, we are going into production digitalization, production automation, that means on the production real estate quite flat. Where we are going into hiring is sure on the innovation. And that means, especially in the software electronic development is one of our key topics we are looking into at the very moment.

Okay. Then the last question, are there some disruptive start-ups kicking into your business, especially on the software side? The honest answer is yes. There are always start-ups kicking into our software. But we were clever enough to buy one of these start-ups quite early into the beginning of 2021. This is now part of our company. And therefore, we have these start-up mentality within Interroll. It is always start-up is easy. If you're nowadays looking for or AMRs or AGVs, who's manufacturing AMRs and AGVs to get a long, long, long list. It's always how can you translate that and how can you industrialize this. And I think with the clever step of us buying a start-up, that was the right step because we are now industrializing the solution, and we have seen how many products we already got out of that step. Okay. Then thank you for all these questions. Thank you for sitting here for 1.5 hour. It was quite interesting. I really appreciate you being physically here. We would like to invite you for a one-to-one [indiscernible] for the discussion and further questions, you're more than welcome. Thank you very much.

Thank you.