Krones AG (KRN) Earnings Call Transcript & Summary

So welcome to the conference call of Krones. Krones improved all financial KPIs in 2022 and forecasts further revenue and earnings growth in 2023. That was the headline of our press release in the morning. Now we want to present all the preliminary figures of the full year '22 and give additional explanations. I think you are already familiar with teams and need no technical advice and just for your information after the presentation held by Christoph Klenk and Uta Anders, you have the possibility to ask questions. I think you are also familiar how we handle the Q&A session. So if you want to ask questions, just send me a short e-mail, and I will hand over to you. So let's start with the presentation. I think we are all interested in the details and the explanations about the figures. I hand over to Christoph Klenk, CEO of Krones. Christoph, the floor is yours.

Yes, Olaf, thanks a lot. Good afternoon, ladies and gentlemen. A warm welcome to the Krones conference call to present the numbers of 2022 and giving you guidance for 2023. The first slide I'm going to skip because I think we will go through all the details you see here. But before I going to do that and reflect it, let me put 2 things forward. We are really proud to achieve all the numbers we're going to present today. And proud on the numbers on one side but proud as well on maintaining and improving our market position at Krones because that's the reflection of our customers, which is as important as having the right financial numbers at the end of the year. So that's both the reflection of our customers and, of course, of our numbers. And let me say the only thing -- and the biggest thing into that is our team because without the team, we wouldn't have been able to achieve those numbers you see here and strengthening the market position. So we are extremely proud on our team that we manage those results we are going to present. And if you see here the numbers, I mean, they are all good, and we come to those in details. I don't want to go into that on this first slide, but let me add once more here. Today, our first time with Uta together, and she's a great addition to the team, I can say, not only because of her financial expertise but even because she brings different views to our current problems and the ones which are popping up. That's very good for us. And she has a strong focus on risk management that we are not doing things which might be out of the frame. So a great addition, and it's a pleasure to have Uta today and to present the numbers together. So the order intake. If you look to that, I mean, this is really great what we have achieved here. I mean, even during the year, we all the time said that this will be an outstanding year, and with the first 3 quarters being at EUR 1.5 billion, I mean, it was obvious that we are on a record high in terms of order intake. I think we will reflect certainly later on about the Q4 order intake, which is not as high as the others, but this is as well in accordance to what we have said in many of the discussions because it was clear that the last quarter will be not as strong as the first 3 ones. If you look to the orders on hand, which we have today, and if you look to the backlog, which has been rising by 83%, which gives us an extreme sound fundament on the financial year 2023 and even '24 because we just had a discussion this morning that, once Q1's going okay, we might be already booked to a certain extent in Q3 for 2024, which is outstanding, and we have never seen that in that magnitude. So all in all, the order intake is great, and you see a 34% plus on an already good year. 2021 is really something we believe is an outstanding issue. Again, it's about the team. It's about what we have achieved during corona crisis with our customers. It's about innovation, and it's about the trust into Krones that we have this outstanding order intake. And it's, of course, some pent-up demand. We said it many times with the extended delivery times, which are today between 15 and 16 months. I mean, this is certainly something our customers have ordered beforehand just to make sure that they get the lines into the future. But all in all, great results. And with that, I'm all ready to give the word to Uta and to continue with the sales numbers we have achieved in 2022 and, of course, with the profitability. Sorry, I skipped that. So we have done a change here in the slides. I wanted to talk just briefly about the markets and where we are. It's not order intake what you see here. It's actually sales by percentage into the different markets. But the point here is it's still well distributed. There is not one market pulling out of it. If you -- if a word to be said, it's North America because we see it's still very strong in terms of the sales we have done in 2022, but even the order intake was extremely strong in North America in 2022, and it even looks good for 2023. So the other markets, I mean, Asia is still on not too high level with 11%, which is remarkable, but we see even there that it's coming back because Asia was the longest being actually infected by COVID-19, and the recovery is the latest we see. And even China was 8.2% of our total share, I would say, is on a good level, but even we see there a recovery out of the COVID-19 situation. I would say the rest -- I mean, you could argue about Africa/Middle East, why is it so low? But 2020 was an outstanding high yield. We had some breweries to be completed while '21 and '22 are in Africa/Middle East standard bottling lines -- no, let me say, major greenfield project in there. So we would see even this is on a good level. And last but not least, you see Eastern Europe/Russia/Central Asia, which dropped down by 1%. I mean, for those of you who are not so familiar, we are doing roughly 1.5% of our sales, which is EUR 70 million we have done in Russia, which is, of course, has disappeared and not existing anymore. So that's to the market. So I think we will have certainly later on in the Q&A session more time to talk about it. And now I'm really handing over to Uta.

Thank you, Christoph. Good afternoon from my side. Yes. I'm very pleased to stand here as Krones CFO and also to present to you the very good year-end figures of 2022. Starting with revenue. You see that overall in the fiscal year, we have recognized EUR 4.2 billion revenue. This is 15.8% above 2021, and it's also about the guidance we had given 10% to 12% growth in the fiscal year or over the fiscal year. It's actually the highest-ever revenue value Krones has recognized, and it's also above pre-COVID 2019 by 6.3%. Reason being for the very high revenue, I mean, all segments have contributed very well and show an increase as we will also show later. Very high order intake and order backlog but also Krones' ability to utilize the resources we have in a very flexible way and with that to continuously execute the projects despite of the bottlenecks we have in the supply chain, for instance. On a quarter-over-quarter comparison, we see that we have increased revenue to EUR 1.165 billion in quarter 4. This is the second highest quarter we have ever recognized, and it's a 17.6% increase in comparison to '21. In quarter 4 '22, we have also the first effect from the price increase August '21, and that's a low 2-digit million euro figure. EBITDA. Krones has achieved an EBITDA of EUR 373 million, which is 8.9%, and this is within the guidance or it's actually on the upper range of the guidance we had given of 8% to 9%. It's an increase by EUR 60.7 million or 19.4% compared to '21 for as-reported figures. As you -- as most of you are aware, in '21, we had positive onetime effects of about EUR 17 million. If you compare on -- without onetime effect, we have an 8.1% in '21 and 8.9% in '22. At this point of time, we also want to see that in '22, we don't have any significant onetime effects. Why do we have achieved that increase? Several reasons. First of all, of course, implementation of the performance measures, which we started the last years. But then also for the first time, full year effects from the structural measures here in Germany but also price discipline and order intake just to name a few of them. On a quarter-over-quarter comparison, EUR 103 million in quarter 4 2022, which is 8.9% and also here comparing 2 figures without onetime effect in quarter 4 2021, we had an 8.4% EBITDA margin. So also here, an improvement. And with that, we will also -- we are also confident that we are in line with the targets we had given midterm. Coming to EBT. You'll see that Krones has achieved a EUR 242 million EBT, equaling to 5.8 percentage points -- percent, and that's also in line with the expectations we had for '22. On a year-over-year or quarter-over-quarter comparison, the reasons I just gave for EBITDA apply also for EBT. That's why I don't want to go into more detail here. Apart from one information, financial income or financial result in '22 was often better than it was in '21. Personnel and material expense as the major 2 components of our cost base also developed on a stable level. First of all, take out material -- I want to take out material cost, which you see on the right side of the chart, 49% -- 49.7% material expense compared to total performance on the level we had in '21 but also throughout the fiscal year of '22, and we achieved that despite of increasing material cost and higher new equipment business, which come with a higher ratio. Looking at personnel costs. Also here, it's important for Krones that we have there a number of which is about or below 30%. We have achieved that with 29.8%. So we have in total EUR 1.27 billion personnel expense and increased by 7.9% in comparison to '21. At this point of time, I also want to inform you that '22 personnel costs also include first effects from the collective bargaining agreement concluded by the union end of '22. But as we will have those also in '23, as already mentioned, we don't see that as a special onetime effect. Coming then to employees. Krones employed as of end of 2022, 17,164 employees, which is 861 or 5.3% higher than '21. The increase was more outside of Germany than it was inside of Germany. Outside of Germany, 8.5%; inside of Germany or within Germany, 3.1%. And this is also in line with our overall target to increase value-add outside of Germany. Looking at which kind of employees we employed, I mean, first of all, we increased the headcount we have in Hungary but also more service technicians and employees working in the digitalization activities just to name a few of them. After profitability information on the group, coming to the segments, to start with our core segment, Filling and Packaging Technology, revenue, EUR 452 million higher or 15%. So that's above the guidance we had given, and we come to EUR 3.497 billion revenue. All the year reasons being very good order intake, order backlog and flexible utilization of resources. Looking at EBITDA, 9.5%, EUR 332.7 million for as-reported figures. If we compare to 2021, for-as reported, you see a slight increase by 0.2 percentage points, but as we had assigned the onetime effects mainly to the -- or only to the core segment, the comparison without onetime effect would be an increase by 0.8 percentage points. And this is in line -- the 9.5% are in line with the expectations over the guidance we had given of 9% to 10%. Reasons for the increase, mainly those -- I mean, for Krones group structure measures but also more efficient compared to '21 and improved price level in general. Second segment, Process Technology. Also here, increase in revenue by EUR 70 million or 24%. Here, we are on the upper end of the guidance we had given 20% to 25% revenue growth. We are also within the guidance we had given for EBITDA margin with 5.5% or EUR 20.4 million EBITDA. The guidance we have given here is 5% to 7%. You see that we have a deep -- an overall increase compared to '21, but on the EBITDA margin level, we have a slight decrease by 0.8 percentage points. This is mainly because, in '21, we still had some positive effects from the cap-out, which we don't have in '22. Intralogistics, last but not least, also here a very good revenue development, EUR 292 million to EUR 345 million, which is plus 18%, above the guidance we had given 13% to 16% revenue growth. With 5.9% EBITDA margin, we are on the upper end of the guidance we had given 4% to 6% and are also considerably higher than '21. Reasons in comparison to '21, stable project execution but also improved product mix. And as also in previous years, quarter 4 was in particular strong for Intralogistics. Now coming to equity and liquidity. I mean, you can read the headline yourself. We are financially very strong and have a resilient capital position and the 2 key figures here, liquidity but also equity show that. I want to start with liquidity. And here, one figure sticks out in particular. That's cash. End of 2022, we had the highest-ever cash position, EUR 675 million, which was very much impacted by the very high order intake we had under own prepayments we receive for that high order intake. And in addition to that, free credit lines, EUR 927 million used credit lines, EUR 5 million, bringing us to a liquidity position or liquidity reserves of EUR 1.6 billion, and that is a very good fundament to execute the projects but also to continue our transformation. Equity, you see that we have increased equity by EUR 206 million to close to EUR 1.6 billion equity. This is an increase by 14.8% compared to 2021. Despite of that considerable increase, our equity ratio decreases slightly. That's just because of the fact that our total balance sheet, some increased more than our equity is, in particular, also by the high cash position we are having. Working capital another very positive figure. 19% -- we finished the fiscal year with a 19% working capital as an average over the 4 quarters. Quarter 4 was in particularly low. Quarter 4, we were at 14.1%. Overall, our average working capital decreased in '22 by EUR 100 million from EUR 848 million to EUR 750 million, and that is mainly by the very high prepayments we have received for the order intake '22 and for the backlog we have to build going forward. You can see that on the very right chart, received payments increased by 4.9 percentage points from 16.5% to 21.4%. Inventory increased further. That's because we want to be able to deliver. And also, as we did in the previous quarters, continue to have to increase safety stock. Payables is also further increased as a result of our activities in the supplier finance programs, and receivables are stable with 37.3% in the range of 37%, 38% as we had it in previous years. ROCE as a result of EBIT and capital employed increases by 5.1 percentage points to 14.1%, and as mentioned, we have an increase in EBIT from EUR 154 million to EUR 230 million. Our capital employed, on the other hand, decreases by EUR 17 million. And that leads because we have such a low working capital and accordingly will see increases and is also moving towards our 2023 target of 15% to 17%. Free cash flow. Krones achieved in 2022 a free cash flow of EUR 370 million. So another record, I would say. And you can also see that, in comparison to '21, which was also already very strong is a further increase. It's driven, of course, by the good performance, earnings and before taxes to start with, but it's also driven by change in working capital, which is for another year positive and coming then to a cash flow from operating activities, which is higher by more than EUR 200 million compared to 2021, and we're using that for investing activities. 2% to 3% CapEx -- 2%, 3% CapEx in relation to revenue CapEx as shown, EUR 118 million. We have informed you that we have done an M&A activity, and together with some other smaller changes, free cash flow and that EUR 371 million, and then together with the lease payments and the dividend payments brings us to a net change in cash of EUR 291 million coming to EUR 675 million net cash at the end of the fiscal year. It's very important for us to frame that free cash flow because with 2022 being at EUR 371 million, '21 being at EUR 203 million and 2020 being at EUR 221 million, we have 3 very strong years in free cash flow and '22 and '21 had a cash conversion rate, which was considerably high. '22 was at 213% and '21 was at 158%. '21, we did not calculate it because we had a negative net income. But taking all together, we believe that we need to looking forward also. We need to see '22 and '23 as an average, and that's what we show on the very right side of the chart. We believe that '23 cash flow -- free cash flow will be negative. We believe that it's going to be a 2-digit high figure, and that's because the prepayments we have received in '22, and we will execute the orders out of the backlog in '23. And with that, also our cash position will come to a more normal level. And with that, I hand it over.

So far to the numbers of 2022 and now a look into 2023, and the guidance we are going to give. First of all, revenue growth, we expect a 8% to 11% growth in revenue from the EUR 4.2 billion which we have achieved in 2022. And the major limitation here is still material supply, and this is electrical components, at least for the first half of the year. Then EBITDA margin, let me say, cautious on that 9% to 10%, which is a further improvement of our profitability and in range with what we have promised in the long-term targets, where we're going to achieve EBITDA margin of 10% to 13% and the ROCE, which Uta just mentioned, of 15% to 17%. Of course, we have some disclaimers in here since the world is giving us a lot of surprises, but if the surprises are, let me say, not too big, I would say that's the numbers where we are quite confident with the big backlog we have, we are going to achieve and the sound life cycle business we have. And for the first time, in addition to that, we are giving you some guidance on our segments because we thought that's important even to show how confident we are with the smaller 2 segments. First, let me reflect the Filling and Packaging Technology. We see here a growth of 7% to 9%, which is definitely limited by what I said earlier, material supply. This is one of the big limitations in the electrical components. EBITDA margin, 9% to 11%. Processing is growing faster, and this reflects even a very good order backlog and good order intake, 15% to 20% growth for 2023 in terms of revenue and sales and a 6% to 7% EBITDA margin, which we are going to expect and why we are pretty sure that this can be achieved since we know the backlog pretty well. And I would say this proves that we have those segments under control, and they are developing in accordance to the clients we have. And the same is true for Intralogistics growth of 10% to 15%. Here, the biggest limitation is actually people because we are in need of more software specialists and, let me say, on-site project managers executing the big projects we have, so we are growing with that, and the order backlog we have to-date was about 10% to 15%, and the EBITDA margin should be between 6% and 7%, even here a strong confirmation that we are on the right track and that we have stabilized the performance situation in those 2 segments. Last but not least, before we enter into the Q&A session, let me say, a takeaway, which we have here. I mean, I said it earlier, we have an excellent base with the high order backlog that we can predict 2023 and, to a certain extent, 2024, at least with those orders we haven't bought. I would say we are really happy and proud that we have all targets achieved we had predicted and we had guided in 2022. That's a very big point for us, predictability. We had a good improvement of profitability, and in particular, our execution of the programs to improve profitability are working sound. That's important for us and that we are seeing the calculated results, which is another important point for the mid- and long term. Now Uta said about the excellent free cash flow. That was the bitter pill of 2023, so we want to name that very clear and straightforward. So don't rise expectations of free cash flow for 2023. That was extraordinary high in 2022 and should be seen as 2 years in combination. And still, we have -- I said that the global supply chain problems, which I think every machine does have at the moment. And last but not least, we have a good guidance which is in accordance to the midterm targets we have set for 2025, where we believe we'll make good steps forward to achieve this. So with that, we are through our presentation. Thanks a lot for listening. And now we are entering in the Q&A session, which might give you more light on where we are.

Thanks to Uta and thanks to Christoph for the deep dive in the figures for the full year and also for the guidance '23. So now we open the Q&A session. Just send me in a short e-mail if you have questions, and then I hand over to you. I already received a question. I've seen also via camera Sebastian Growe from -- sorry, from BNP. You have the first one. Please ask your questions.

Three questions or sets of questions at my end. The first one would be on the order pipeline. You mentioned on prior occasions that you would expect a book-to-bill rate of above 1 in fiscal '23. So obviously, I think we have all been surprised to the positive when it comes to fiscal '22 sales and also then the particular fiscal '23 sales guidance. I also recall that you had mentioned that you would expect eventually the combination of quarter 4 '22 and then quarter 1 '23 to come in at a run rate on the other side of EUR 1.5 billion. So now we had obviously lower quarter, the order intake in quarter 4 '22. So are we going too far to say EUR 1.8 billion in quarter 1. But yes, a long introduction to just a simple question. So can you just share with us what you see in terms of the order funnel and the pipeline, what do you expect book-to-bill-wise and fiscal '23 and especially, if you could comment on quarter 1, that will be first one.

Yes, sure. Thank you. Mr. Growe for the question. Yes, that's indeed a good point. Let me say, I mean, we have at least in the capital market communications we had by the end of the year, we have said already that the order intake in Q4 might be lower. There's one, let me say, mathematical background, it has one week less. So that's one of the reasons why it has been lower. But I would say the EUR 1.2 billion roughly in the fourth quarter is not an indication that the markets are going slow. That's not the case. And if you look to Q1, if you look to that, I would say -- let me just frame the order intake in total for 2023 despite what we see on the sales side, okay? We see that -- and this is the planning we have that the order intake in 2023 is lower than in 2022 because we will not see EUR 1.5 billion per quarter, and we are not heading to EUR 6 billion. That's unrealistic. And I'll tell you why. So our planning is around EUR 4.8 billion to EUR 5 billion order intake. This is what we see today out of the markets and as a rough estimate. This would give us definitely over the whole year, a book-to-bill ratio which is above 1, which is in the current situation even already something problematic. Not the markets and then come then to the Q1, we do not see that the markets are cooling down. I would say the problem we see is that, due to the high order intake we had in 2022, our delivery times are high. We said it 15 to 16 months, and it looks like their competition is a bit shorter since they had not that big growth in order intake, and that's with order backlog. So we are a bit in a difficult situation with the long lead times we have, number one. And second, we didn't want to slow pricing at all. So we want to stable pricing where we are. So that's our 2 targets and 2 things we are looking at. Price in Italy, where it is up. And I said it many times, price needs to go into the DNA of Krones. So this is something we have a strong, strong look on. So that's for the full year. Now how do we see Q1? Q1, from our point of view, will be not at EUR 1.4 billion because of the reasons I just said. But if you look to the EUR 5 billion, so a quarter should be at EUR 1.25 billion. And I would say we are really -- we will end up above that because the order channel looks good. What we have on hand is already good. So I would say we are above, let me say, if I divide the EUR 5 billion by 4, EUR 1.25 billion per quarter, we are above that number, and we will be not at EUR 1.5 billion. And again, I do say that this would be unlikely that it would continue on the level of EUR 1.5 billion per quarter [indiscernible]. So that gives you light. And maybe one further statement to that, one big initiative we are carrying out at the moment is we will talk to our customers about years 2024 and 2025. What life do they give to that? That's a big initiative actually covering 70% of our customers with our sales force to figure out what is the mid- and long-term development? And what can we expect in the current investment scheme. But even there, no concerns at demand. So that's hopefully a long answer to a short question, but I wanted to give a bit of light on how we see order intake and how we see that for 2023.

That's extremely helpful, and the next one, you mentioned pricing as one prerequisite also when it comes to order taking in fiscal '23. I think in the slide that you also pointed to first price effects in quarter 4 in execution. Can you quantify that impact, i.e., how much of the revenue growth in quarter 4 was coming from price? And how should we think of this very price effect spilling over into fiscal '23? That would be interesting to hear.

I mean, we estimate it at a low 2-digit million euro figure for quarter 4 '22 as an effect.

And for 2023, I mean, of course, that will be at the moment in the same magnitude. And we say that already for quite long that we see half of the growth coming out of the pricing.

Okay. If I then square that up with what you simply printed. So you had obviously EUR 500 million roughly organic sales growth in '22 with little price effect, as you just, I think, said -- as you also then put that in the quarter 4 slide deck. And considering now the tailwinds from pricing, say, 5 percentage points or so of the guidance is on obviously pricing. What explains that you're only guiding EUR 300 million to EUR 500 million higher sales in '23? Because on that metric, you should rather see EUR 500 million to EUR 700 million.

Yes, let me put it this way. It's material supply shortage. I mean, it might surprise everybody of you since everybody hears that the semiconductor issue is over, and there should be no problem at all. That's correct. The semiconductor issue is over, and the suppliers of our electrical components are receiving the semiconductors they need to build their equipment, but they have now a resource problem because they don't have enough people to go boost the high order backlog they have, at least those we have, I would say, that's the big ones in the industry. So their biggest problem is actually to get the big order backlog digested and to ship to their customers, which is us, enough equipment. We are still significantly in the lack of the electrical components. And keep in mind, we have done, let me say, a huge program that we equip our equipment later in the field. So we do the test runs here. But I would say, a big proportion of the equipment we take out of the machine, so they are shipped without the electrical components, and then they are equipped on site. And before we have really an impact, let me say, in a revenue growth and that we can utilize the higher supply here in our organization, first, we have to solve this, let me say, special circumstance that we are completing the machines in the field and saying that it will take at least until the second half of the year that we get benefits in our own production that we can increase sales with that. And this is not only true for, let me say, for our machines which we are going to ship. This is true for Processing. This is true for Intralogistics, and it's even true for some proportion of our aftermarket business because that is even related to electric components and has no different characteristics that I just said. So the limitation factor in growth for 2023 still material shortage.

But incrementally, you would say it's kind of stable for you but not an improvement? Or how should we read it?

It's a slight improvement. And otherwise, the growth. I mean still, we are growing if you -- if I take your mathematics, we are growing by EUR 200 million to EUR 250 million organically. It's still a number. And most of it is added in new machines and equipment and processing in intralogistics, which carries those components, and that's quite a move for us in particular if you compare it to 2021 where we are coming from and run to into that problem. So I would say the move we have made is big in -- let me say, in relation to the components we need for it. And that's the reason why we are in that shape, and we will see it's unrealistic to predict a strong growth even as the backlog would have room for it.

Okay. But that would also mean if and when you were to see further improvement in supply chains, then you might grow for us. Is that the right interpretation at this juncture?

To a certain extent because, yes, there is still some room, but it's not unlimited because we have a cost in resources in terms of the employees we have on board in accordance with the planning we have, and it couldn't be easy in the current situation on the employer's market that we can easily increase the numbers of people, which we'd need because some more people would be needed. And don't forget, in particular, the service and installation side is the issue. It's not so much, let me say, the production, but it's more in the field because we need to commission those lines. And these are technicians which are qualified all around the world. And this is as well a limitation -- limitating factor.

Okay. That's helpful. Then the very last question, one for you, Ms. Anders, probably. You're guiding for another ROCE expansion by about 100 to 300 basis points. The EBITDA you see at EUR 410 million to EUR 470 million or so in '23. For me -- to me that suggests that the capital employed that you have put behind the ROCE seems to be only very marginally up year-on-year. At the same time, you are pointing to free cash flow negative. So how much of a courtesy is simply then included? How should we think about then also working capital, not only on the prepayment part, but you also mentioned obviously safety stock on inventories. So yes, some comments around that would be interesting.

I mean, we -- looking at '23, we have said that we would want to keep the working capital at about 20% of revenue. And at other occasions, we also said that it's going to be challenging. And I mean, overall, our asset base is going to be the same and that as a total is the basis of our ROCE calculation then for 2023. But you are right, working capital is going to be, not a challenge, but it's something -- considering the free cash flow and considering the prepayments we have received, it's something we need to take care of again or even more in '23.

And if I may just quickly follow up on this one because you sort of went around pricing. The other aspect that is actually equally important are the payment terms and what have you for the working capital. Do you see any sort of for an improvement there eventually, so that you can even more cherry pick? Because obviously, I think from the statement you made, Mr. Klenk, it sounds very much like you are letting some orders go, which are just not kind of good enough if I may phrase it that way. So how do you think not only about pricing but also about working capital will be interesting.

Let me put it in terms of pricing before Uta comes to the working capital. But I would say we are doing already cherry-picking, and I wouldn't see that this is going beyond what we do right now. I would say that, that would be unlikely that we could improve payment conditions because this is, I would say, one of the biggest points our customers are arguing about that we are so firm on pricing conditions that are not moving, particularly with the interest rates we see rising, so they have a big interest to do that differently. So I wouldn't see any room for that. But let me say, pricing and such is a question for us for 2023, which is not yet answered, but we are considering seriously how this would go into the year and what measures we would have to take.

And if I may add then to the receivables, we had also said in previous quarters that this is something, in particular for '23 but also '24, we need to work on further. And it's also something which is currently also impacted by the overall supply chain situation and the execution issues we have from that. So we definitely see going forward, there some means for improvement, whereas looking at received payments ratio, that's something where we will come back to a more, let's call it, normal level than we are right now.

The next one will Christoph Dolleschal from HSBC.

Yes. Thanks very much and good day, everyone. A few questions if I may. First of all, a follow-up on that question on the supply shortages. Could you let us know where you're mainly sourcing the electrical and components? Are those [indiscernible] as China? And what about backup suppliers there?

First of all, I mean, we are sourcing from the big ones. There's hardly -- I mean, there is some electrical components, which you can choose from different suppliers, but we have the major ones, and I don't want to name them in particular. So I mean, the semiconductors we are using in our equipment is a generation 2 and 3 semiconductor technology, which you all know, with a certain nanometer wavelength, and mainly, they are produced in China. But however, we do not source directly any of those components. This is all sourced by our suppliers. Now you could argue, can we easily move from A to B and, to be honest, no, that's not possible. One of the big initiatives we had in 2021 and 2022 when this became obvious was the question could be moved and have a, let me say, alternative supplier here. But the technology we are offering, in particular with these electrical components are Krones-made development. And let me say, beverage industry-made developments and they are so specific in particular on their cost level that it's very difficult over the [indiscernible] to change those. So what we have in place is longer-term programs that we are getting more flexibility into that, but this will come in the next 3 or 4 years, not earlier. And it's questionable once you do a second supply because then it kills your cost position. So for us, it's more that -- we are talking to our suppliers how they can modify their supply chains and how they could get more flexible on those components they would need for the components developed for us and even some more competitors in the industry buying this equipment. So we have very limited influence on that. We can just talk to our suppliers. And dual sourcing will be really an issue here. There will be some opportunities, but they will take time. I want to be very honest and clear here with that.

Thank you very much for that very complex answer. So the next question would be on wage inflation. When we were talking about pricing and price inflation, but obviously, the downside to that is we have wage inflation as well. Could you just let us know what your expectations for your personnel costs are with regards to 2023 and '24?

Overall, we estimate for '23 about 5% wage increase and have in mind that we have only 60% of our employees here in Germany and 40% outside of journey. So it's really a mix of -- yes, of the different wage increases. And what we see actually is that what we had forecasted in '23 in our budget is also what the agreement which was concluded end of the fiscal year has had as an effect. And as I mentioned, for the person expense, first effect, we have also included already in '22 as an accrual to pay out in '23. So to make it on a very short 5%, which we also have in the budget.

Then if I remember correctly, you've given a midterm EBITDA margin target of 10% to 13%. You're already there now. So is there any -- at the lower end. Have any plan to update-upgrade that target and basically a question that comes along with that one is cash. Yes, you said you're going to have negative free cash flow in 2023, but still you're sitting on a pile of cash and the question is what to do with it.

Yes. I mean, you can debate if we are there or not. I mean say, we are there once we have really the numbers in the books, then I would say, and we have it proven to you that they are there. And I would say, once we are closer to it and 2023 might be over successfully, then we might be in a position to talk more about how the midterm governance should be adapted or not. But however, I would say 10% to 13% is a big range. And our point was all the time what we stated is to say we want to be a reliable company being in that range. I would say, in the good times on the other on the other level, it may be more difficult times on the lower level. And I would say there's still a lot of things to do that we are, in particular, in the critical times being on the lower level. So that's the reason why I was a bit wanting to discuss about that. We are working hard on that. It's clear in front of us. But first, we want to achieve that one. That's the first thing we want to do. The second point, what to do with all the money we have. I mean, Uta, maybe you spend a minute about that to say what -- how we see that and how we are going to spend the money.

I mean, first of all, as you said, '23, we expect a negative free cash flow. So we have to build the orders we got the prepayments for. So that's one thing. But that still leaves a lot of room for organic growth. I mean, up to the EUR 5 billion we had forecasted or we have guided midterm and to develop ourselves further into more sustainable and also push our digitalization activities. I mean, as you know, we want to increase activity. So a whole bunch of transformation activities where we will have to spend money on. And then we are also thinking, as we have as we have communicated also about further inorganic growth if we have the right target.

So we will [indiscernible] if they are applicable.

Yes.

And sorry, last question. So what in terms of budget do you give yourself? So is it EUR 0.5 billion maximum? Is it EUR 1 billion maximum? How much could you do?

For M&A, you mean?

Yes.

Well, we have not defined it this way. We have to find it in a different way. We said, actually, once we are going to acquire, let me say, we want to -- with the acquisition, first of all, improve, if possible, the profitability of the company. That's an important point. It should be in an area which helps us to do so. And let me say, we have a sweet spot, which would be on the other end as EUR 300 million because we don't want to risk anything in the existing business with an acquisition because we all know that things could go south with acquisitions. So EUR 300 million in sales. And that's, of course, then depending what the ticket would be and how much money we would have to spend depending on the models we see. And I would say this is just a rebate because we all know acquisitions in, let me say, the previous years and in the future will be a bit difficult because of the relation between the prices and what you get for it. So let's see we are careful on that. We are [indiscernible] some targets. We have a long-term pipeline where we would be interested in and what could be feasible for us, and you might see some more things coming up in 2023. So let me put it this way. But it will be let me say, digestible and the money we are going to spend will be reasonable in comparison to the overall risk.

The next one will be Peter Rothenaicher from Baader Bank.

Firstly, some more details on the personnel cost effect in Q4. So is it fair to assume that you paid 1,500 German employee then? And could you give us an effect on cost in the fourth quarter?

Yes, that's fair to say. I mean, we have repaid it in -- we set up an accrual for that, and that's in the number range, as you said. So it's a low 2-digit figure, yes, 2-digit million euro figure and paid out then in '23.

And then the same will apply in '23?

The same will apply in '23 to reflect the whole collective bargain agreement.

Then regarding your aftersales business, could you a bit comment on this, how did this perform in 2022? So what organic growth did you have here in aftersales? And what was here, there's a pricing effect? And were you able here to keep your margins relatively stable or even improve.

First of all I wouldn't -- let me say, coming, let me say from the last question, did we keep the margin stable in [ Lifestyle ]? Yes, we did. This is very encouraging because we think this is something which is, of course, under pressure because we have, outside of the normal competition, we have a lot of added competition in there. How about the growth which we have there? It's, of course, lower than the overall growth. I mean, to grow in life cycle, you saw at the time a bit more difficult because it's a consistent business, but it has never changed as we have seen in the [indiscernible] business. So it's steadily growing. And let me say, the underlying factor why this is the case, again number one, it's just the trust of the customers into Krones that in critical times we might serve them the best way. I mean you all know, we have invested a lot in our international setup to be close to our customers, which is really paying off. And second, now for the first time, we see some of the points of our digitalization program playing into that and just 1 minute to explain this is try to make it as simple as possible. We have now plus 50% of our lines are being connected, and we have the data online once they are shipped. And we have started to build our so-called digital service centers. They collect the data up to the point that they give, let me say, maybe a slight software upgrade, but even to the extent that our top service technicians talk to the customers beforehand, a problem appears and help them. It's not yet perfect, but it plays back to a certain extent because it's all about to improve the output at our customers. This is the only thing he is paying for. If they get more out of their lives, they are willing to pay more. And I would say we have made a step forward in that. And I would say we have gained some long-term contracts, not risky ones, I would say, still on a solid base in terms of the risk they carry because customers have seen that a long-term engagement will help them to better plan their maintenance because then it's easier to predict when the people should be there and do more beforehand rather than going into problems. So all of that, while the underlying factors by the life cycle business did grow really good in 2022 and is expected to be growing in 2023 as well.

And then a point on the electric components. Do you think there might be some risks that you have to experience here, price increases which were not reflected in your order prices then?

let me say to the first question, we do expect price increases there. I mean, this is a very critical one because, I mean, the pricing power they have at the moment is outstanding. But I would say, since we have already from Day 1 assumed very critical price development, I would say the surprises in the order backlog we have up to today are very limited. And don't forget, even in case we have 16 to 17 months delivery, we have, let me say, a predictability of the pricing we are carrying in our orders between 8 and 12 months, and we start, let me say, in 8 or 10 months, even those orders was a delivery time of 16 months. So we are matching at the moment with the prediction of the pricing we have and the price we have in the order backlog pretty much the order volume we have on board. So I would say never say no, but I would say we are pretty sound on what we have assumed on because in the material we need to buy and the personnel cost versus the order backlog and the orders we have to build. So that looks pretty same. I would say surprises are hopefully not there.

And then the last question also regarding prices. So did I understand it correctly for the time being, you're not planning price increases, but you do not exclude it for the course of the year. As you then are clearly going into 2024/2025 in terms of production.

Yes, absolutely. Yes. Right, understood. So at the moment, we are emulating where we are with that and how, let me say, next steps could look like our points. We want to decide about that by the end of Q1 and would be ready for if we would do it, let me say, somewhere mid- end of Q2 because we believe that will be the right timing to assume a next round maybe of material cost increases. And then we have to reflect how personnel costs might go beyond what we have seen up to September 2024.

Okay. And with that, for 2024, my colleague already asked, what is your planning then for 2024, personnel cost increases?

[indiscernible] that one is 5%. No difference to 2023. Let's see how this really turns out. Maybe note in, let me say, in the domestic market for the first 9 months because the agreements are running with the labor unions up to September 2024. And we certainly will see a significant increase. And we see even by the contract agreed right now that there is a further increase in 2024 already given. And then what we have to see what is globally happening with all the inflation we have around the world. So I would say 5% is the best guess we have at the moment.

The next questions are coming from Sven Weier from UBS.

And sorry if you discussed this already because I was stuck on another conference call. So sorry for that. But I try, so the first one is on the order intake, right? I think in the previous quarter, you said also at the CMD that you're aiming for a positive book-to-bill in 2023, right? And now obviously, you started with quite a good revenue assumption for 2023. So I was wondering if you still stick to that target that you will be also above 1.

Yes, we are going to stick to that, the book-to-bill ratio above 1. And I gave a bit light earlier, just to repeat that very briefly. We said order intake will go down significantly compared to 2022. Estimate is EUR 4.8 billion to EUR 5 billion order intake, and that brings us to around EUR 1.25 billion per quarter. And I would say this would allow us to give a book-to-bill ratio at around 1.1 if I have that right, in mind. I haven't calculated that exactly but could be around 1.1. And I would say, if you look to the first quarter, EUR 1.2 billion would be then the must. And I would assume that we are above that. And we will be not per quarter at EUR 1.5 billion quarter-after-quarter because that's not the size of the company for the moment.

It's good to hear. I mean, can you just describe what's going on in the pipeline activity, right, what you see with the customers and what the mood is. Do you see any differences regionally? Because I think what we see in the U.S. currently happening quite significantly, people are trading down massively, right? It's maybe not a long-term phenomenon yet, but is there any difference in the activity?

First of all, I would say the pipeline is still very strong. Our biggest limitation, I have to say, that the Krones limitation is our delivery times. We are at 15 to 16 months at the moment, while competition is slightly better in terms of delivery times. And that's maybe at the moment a critical point for us. Second, we want to maintain pricing where we make no compromises at all. And that is doing what I explained earlier in terms of the material cost increase you might see for deal components, et cetera. So these are the 2 limitating factors of Krones in market as such and pipeline, if you look at, it's really great. So no concerns about that. And if I look to the market dynamics, I would say we have just this morning made an estimate and have a deeper look on to the first 6 months. Pipeline looks good. Is there any change in the markets? Yes, we are definitely seeing that. Let me say, the high activity in North America might be a bit reduced but not significantly still on a very high level, maintaining if we look to the projects. Asia is recovering strongly. And of course, that has to do with that COVID-19 was disappearing there the latest. China is on a stable level. And what we are going to see to come back is Middle East, Africa and South America, where we see bigger projects to be applied. And I would say those 2 markets are getting the ones being the better ones, most probably, and picking up in 2023. And again, if you look to the overall thing, it's still pretty balanced. Yes, you see an up here, a down here, but it's not one where we would say, okay, markets are working totally different than before. It's quite stable around the world.

And then your delivery times, I mean, you said they are still the bottleneck, but if we have a positive book-to-bill, you still have the same situation at the end of this year, right? So is it only then improving in '24?

I mean, that's the most critical point we are working altogether on the Board at the moment to see and to figure out what would be a good way. On one side, seeing the risk that, let me say, what the economy is going and having a longer-term view and, on the other side, managing those long delivery times we have. I said it earlier, we need to go down to 7 to 10 months, let me say, in that ratio that it's really acceptable in the market, and we are working on that. Now what we don't want to do is, in the past, we hire X amount of people just -- and have it. And then we are looking into the next crisis, and then we are in deep trouble again. So what we are going to do is we are looking into what can we do in Germany with reasonable measures. And you have seen with the headcount increase we have done, which is quite reasonable. And this year, it will be similar size next year. We are wanting to utilize our location in Hungary much more and in China. Now China has the problem that there's uncertainty. So we are evaluating at the moment could be India an alternative, and number two, what do we need to do in the North American continent? And I say North American continent because is it Mexico, or is it the U.S.? So what do we need to do in order to get some capacities there and being prepared if the geopolitical tensions would increase further, and we would get further barriers in world trade. So I would say that's the things we are evaluating. And I would say that we are significantly reducing backlog. We'll start in 2023 once the material supply gets better. We have some possibilities to extend capacity, smaller ones, and it's more based on efficiency rather than on headcount. And it might be if things develop stable, it looks like right now that we even are going to increase the way I said in 2024 capacities that we get delivery times down. Fortunately, competition is a similar condition. They are a bit better, but they are not perfect as well. So that's good for us.

And then on the supply chain, because I was a bit surprised by the revenue guidance, which I thought was better than I would have expected from you at this stage, especially given where you came out in 2022. Is your assumption still that the supply chain only improves in the second half? Or has it improved a bit since the last quarter?

No, this is still the same. And this is -- we just went through that last week and having, let me say, was consuming a long meeting to figure out where are our suppliers. I would say the majority of them getting better but not to the, let me say, level that we really would need. And I have to emphasize that, once again don't forget, we have first to catch up with the special measures we have taken just to make sure that we can be 2022 revenue where we have made a process that we complete the machines here, test them. Once they are tested, a lot of the electrical components being taken out and then being applied on site, which is certainly not the most effective process you can imagine. And we need to get the process back to the old level that this is going flawless that we can have some productivity increases. Once that is done, then we can think about increasing the revenue or the sales. Before that, we need first to compensate for the special measure we have taken the years before. And this is one of the reasons why we say, if material supply shortage gets better, then we have the effects not for the end of Q3.

Understood. And maybe the last one is just on the free cash flow because I think you said that you expect this will be negative this year. Was just wondering if you also gave a number there, how negative you expect it to be?

You mean '23 right? High 2-digit million number. That's what we expect.

Okay, good. And that's just basically because you have lower order intake, lower prepayments than you had last year. You're building up the projects, and the normal cause of things.

Exactly.

The next questions are coming from Jorge Gonzalez from Hauck Aufhauser.

Going to be quick. Two questions from my side. First one, also about free cash flow, I'm sorry. Sorry to make so many questions about this. If you were giving us a range for free cash flow, taking into account your scenarios for order intake, in all the scenarios, were you expecting a negative number? That will be my first question.

Yes.

And can you then give us your expectation for CapEx over sales to...

It's about 2% to 3% of revenue. That's what we are expecting and spending.

Okay. And my second question is regarding the lead times. When you say that you see or you have 15 months more or less of lead times, this means that you already have visibility into the second half of '24?

Yes, [indiscernible].

Okay. Because technically speaking, your backlog is basically covering '23, but I imagine that the conversation that you have with your clients is knowing that basically the reality of the lead times that basically, yes, it's giving you visibility until the second part of '24. Is this linked to a lower impact from the economic downturn? Or is more related to a good replacement cycle, or what is the plan behind this strong demand?

I mean, the reasons behind this, let me say, several. I would say there's a pickup demand still from COVID-19, which is giving, let me say, the order intake and then doing these long delivery times. And it's still because our customers are investing so heavily, mainly driven in cost-cutting progress because new bottling lines are simply more effective than the old ones, and sustainability is driving a lot forward as well because our customers need to reach by 2030 their sustainability targets, and this is actually giving the strong push we see right now. And then not to make things more complicated, but I'm talking about exports delivery times. And I would say our reach in terms of our service installations is even going beyond 2024 already. That's why we are increasing headcount outside of Germany pretty strong because the high numbers of machines we are building at the moment, they are coming into the market, of course, 2023 but predominantly in 2024, and even we have some projects running into 2025 because exports, 16 months, if it goes to the U.S., it's 10-week shipment, and then installation and commissioning starts. So some of our customers reaching with those orders the [ seas ] in '25, and that's why things are a bit complicated for the future. And why I said earlier, this is why we do this [ stick ] in the use with our customers to figure out how they think beyond 2025.

Before I hand over to Daniel Gleim, I have received a mail from an investor who is on travel and he could not ask directly. So it's -- so I should -- could ask the questions. The first one is about the core business, where we have a margin of 9% to 11% in '23 for EBITDA. We have already -- sorry, 9.5% in '22. So with the price increases or combined with the price increases, why there is no more margin uplift. That was the question.

Yes, it's very simple. It's caution. I mean, I would say we see that the supply chain, and we spoke a lot about that they might carry. And I have to emphasize that might carry some surprises, and this is just to be cautious not to overpromise, if things are getting a bit out of the frame, we want to still have room to maneuver. The question is a reasonable one, I would say, when you look to the numbers we have achieved in 2022, but we are -- let me say, we have our business targets on one side, but on the other side, we don't want to overpromise. That's the simple reason behind. I think there's a good chance that we are even slightly improving in that area.

Thanks to Christoph. For the second question, I think we mainly also answered to it in the question around this [indiscernible]. Once again, it's about the capacity increase and the risks we see from perhaps losing some market share on one hand. But on the other side, what must happen is to see a higher capacity level in order to manage the big order backlog. I think, Christoph, you already answered that.

I mean, again, it's material supply which we need, and at a certain stage, we have still some, let me say, capacity we can utilize once we get more material, that we get back to our normal processes, which would be important then to increase productivity with the same setup to make more revenues. But it's well -- and we clearly stated that we need to add even some more people, predominantly abroad, not domestically in Germany. So there should be more outside of Germany. But I would say it's about people then, and we are going to hire even people in 2023. We have a relatively big number in terms of employees coming on board, supporting us in the critical areas, and this is predominantly software, and its field engineering in any regard. And most of those field engineers are software guys as well. So this is where we are going to invest. And I would say we are setting really the set to push more through in maybe 2024 without jeopardizing our flexibility for, let me say, more critical times because flexibility up and down is, from our point of view, the most important thing. I said it earlier, with the targets 2025, the long-term ones, that we are in critical times still at the 10% EBITDA level because that's the midterm target we wanted to achieve and flexibility and cautious on building up infrastructure is a big point into that.

Thanks, Christoph, for answering that question. So Daniel Gleim from Stifel, it's your turn.

Actually, 2 quick ones from my side. The first one is if you look at your current backlog gross margin, how does this compare to the revenue gross margin in '22?

It's a good question. The gross margin higher. I mean, what we can -- I hope I understood the question right, and I tried to translate it for you. I mean, what we do is, with each order, whatever we get on board, we get the gross margin where we are with that, and for each order, we have an assumed cost structure where the gross margin is as well assumed. And what I can say is when we compare order by order and the total backlog, this is the strongest, let me say, governance issue we have internally that we are at any stage of a project following the gross margins. And there is some, let me say margin dissolving during budget execution. I think that's normal. We have built-in contingencies for that. So -- and what we see in the order backlog as gross margin is definitely giving us for 2023 the level in order to achieve our profitability targets. That's granted at least for what we can see as of today. I hope that answers your question. And this is done with each order we can on board, individually calculated. This is the big change in the pricing system we made. And in comparison to material and personnel cost development that we have all the time, let me say, a very good balance for each order we get on board, where we are with that. And are the margins sufficient to achieve our overall profitability targets?

Very clear. Maybe you can talk a little bit about your cost assumption that is based on what costs as we speak today or some weeks before. How does the supplier contracting it upon debt? And maybe a little bit less academic. What do you think about your cost side developing in the coming months? And typically thinking about steel prices, freight rates, which has come down, maybe you can scale it a little bit for us how this has a total impact on your cost side at wage [indiscernible].

This is on how we are going to do that. We are doing that. We have categorized our material costs in 10 categories, which are different from electrical components, raw materials, and we buy some services. We buy premanufactured parts. So there are 10 categories. For each of those categories, every 6 weeks, there's a forecast. The forecast is on the next 6 to 12 months because the next 6 are not interesting because most of it will have fixed in contracts, okay. So whatever we get on material for the next 6 months should be on a contract at least 80% of it. Then we look at what is going to happen 6 to 12 months, 12 to 18 and 18 to 24, and this is done every -- for each category, every 6 weeks. And then we see together cost controlling is heading that thing and then sitting together with sales. What conclusion to -- do we have to make in terms of the order intake and the gross margins being in the order intake that we do not do mistakes here. The same is done on the personnel cost side. So that gives you a bit of smell on how detailed we are on the forecasting and how detailed we are going to do that. I would say this is the key on that we are standing here today and same with a, let me say, relatively high certainty that we'll not see surprises in our order backlog. Now if I would elaborate on all the individual categories how pricing would develop there, what I see here, and I shouldn't say too much because maybe some of our suppliers are listening, and then we'll hear from me, okay, we agree to set price increases in electrical components. And then they said, that's an easy stage for me. I would see this is the most critical area where we see price increases still coming because there's a big need of it. We see on raw materials already kind of a relief. If I look into a nutshell and tender, there's a big proportion of where we buy parts and where we buy services as, let's say manpower, which we see slightly increasing just because of the personnel cost increases we see. So we had more categories pricing than actually relaxing or decreasing, and we see the strongest increase definitely in the electrical components. I hope I give you-- I don't want to say because, otherwise, I do invite all our suppliers to talk to our procurement guys and say, look, your CEO said, this is the way it goes, which would be not good.

I have also some 1 or 2 questions from Stefan Augustin from [indiscernible] Warburg.

Just one actually, ant it's again back on the free cash flow, doing a bit on back of the envelope calculation. So if I take the advanced payments, and I strip out, let's say, the EUR 800 million less order intake, and I would use the same ratio, I have something like EUR 100 million to EUR 150 million lower, let's say, cash flow from operation. If I fall back to the percentage of last year, so with the idea we have maybe a very good percentage in 2022 then we may be at EUR 250 million, but I'm not getting down to a negative free cash flow. So is there a certain point I'm missing.

That's a good question. I mean, we went through that maybe too briefly in the beginning. But our mathematics did show, I would say what Uta just said earlier. We have not made on the back of the envelope calculation in more detail, but let me put it this way. I mean, it could be that we have been too conservative in that assumption. And it was a conservative assumption because my point was be careful on that. This is an outstanding free cash flow, and we don't want to rise expectations too high. And with that statement, we overdid it, the calculation. But what we can do, and I would say, we are in regular communication with all of you that we are going to reflect that once again and have a more detailed calculation where we are ending up with the free cash flow, and Olaf will be then happy to answer that. To be honest, at the moment, we are not able to really make a qualified statement on that. And it could be heavy in case of calculation would be right, then free cash flow would much better than 2023 than expected.

So also one question coming from Benjamin Thielmann from Berenberg.

Yes, everybody, I also have one question regarding wage inflation. We talked about it a little bit. So I hope I have the last question on this topic. I see that the total workforce being increased probably on employees. And we're seeing that the labeling in Germany is wage integration. And you put it was roughly 5%, as I mentioned. But you maybe can be like 60% of your well prices in Germany, 40% are not in Germany. What is your expectation on wage inflation outside of Germany in 2023?

It's roughly 6%, what we expect outside of Germany. And let me say, based on historical data during high inflation rates because this is not really something new because, many of our countries we are heading are in very high inflation areas, but this is the overall assumption we have. And that we are shifting as well some of, let me say, should I say, the portfolio. So since we are increasing IT people in India significantly, which is a big point. We are increasing those in Eastern Europe. I would say if we have this add-on, this is much cheaper. Sounds strange, but it's less cost to increase it in those countries. And if you look then to the increase of headcount we see and the 6% we see outside of Germany, that comes that all back down to 5% we have in the budget. I mean, this is one of the most discussed items we had during budget meetings, how this would actually turn out to be around the world.

So I have a quick look on my email folder and also on the list of the participants of the call, I do not see any further questions. Uta and Christoph, I think we are coming more or less to an end.

Yes. Okay. Thanks a lot for having with us today. And it was really a pleasure looking forward. And I would say, even with the challenging year 2023, we maintain optimism to go into that. Thanks a lot and looking forward to see you soon. Bye.

Thank you. Bye.