Krones AG (KRN) Earnings Call Transcript & Summary

So good afternoon, ladies and gentlemen, and thank you for joining us for our half year '23 earnings conference call. Krones with successful first half year '23. That was the headline of our press release in the morning. Now we want to present you the figures and more details about the first half year '23 and give you also the possibility to ask questions. I think you are very familiar with teams and need no technical advice. [Operator Instructions] So let's start with the presentation. I think we are all interested in the details and explanations about the figures. So -- and with that, I hand over to you, Christoph, the floor is yours.

Yes. Olaf, thank you very much. Warm welcome, ladies and gentlemen to the conference call for the first half year of Krones. It's a pleasure to have you here. Uta and myself will present as always, the numbers we share it, and we run you very briefly to the deck we have because we are looking for the Q&A later on. That's the reason why I skip Page 1, where the summary is, because we go in any detail, even those numbers who certainly have seen, and I can say -- comment to that, we are very happy with what we have achieved in the first half year of 2023, and we are quite optimistic for the remaining outlook for the remaining year. So all in all, we are standing here today being positive and happy what numbers we can present. Now first look on the order intake. And if you look to that, we are in line with the planning we have made. I mean, don't forget, we have all the time stated that the order intake in 2022 was an extraordinary with pickups effects. We had certainly after COVID-19. And when we see the order intake right now, we see, in particular, the Q2 as a new normal. And this is actually the size we do anticipate looking forward for the remaining year that we believe that a quarter will be between EUR 1.2 billion and EUR 1.3 billion per quarter. Q1 was good. We know all about that. We don't think it will go to that level. But again, I would say the new normal should be between EUR 1.2 billion and EUR 1.3 billion per quarter. And we wanted to bring that chart to your attention because it gives you a bit of a reflection where we stand with the real order intake without having those pickup demands we have seen in 2022. And I would say what you see here is that even in case we state that the order intake was going back by 10% from last year to this year, half year to half year. That's -- this is still a very good growth and outperforming the yields before because if you look to the good years, '17, '18 and '19, which have been on the profit side, not so good, but on the order intake side in terms of volume, they have been very good. If you see that line and you draw that further down to 2023, you see that we are outperforming order intake. That's the good message we have. And I mean, we have all seen a drop in share price this morning, which created headaches for both of us. We were quite desperate, of course, no choking. But I would say, most probably, my interpretation -- Uta and mine is that the 10% decrease, if you looked at isolated from 2022 to 2023 might have caused some of those, let me say, things we have seen this morning on the share price. But again, we believe this is a very good path we have in. It's a sustainable one. And as I said, if the outlook is per quarter, we see it approximately by EUR 1.2 billion to EUR 1.3 billion. Let us have a short look on our markets. And I don't go into categories or whatever. But the important thing is here, if you look to the 2.7% growth of the beverage markets all over, and this is in billion of liter, it's 1.75 trillion liter beverages which we see around the world in total. And if you see a 3% growth, it's actually 40 billion liter per year. This is what is standing here, and this is an outstanding number because you can assume that we have 8 billion people around the world. We serve around 60% of the needed beverages and liquid per day. So this is what is packed bottles and 40% is still tea and coffee. And if you add all that up, you come to the numbers I just said, and this is a remarkable number in terms of liter in case we have a growth of 2.7%, and if we translate that in bottling lines, I would say there is a good potential for all of us being in the industry that investments are going on. Now another look is what are the different packaging types are doing, and we see there a clear recovery of the PET bottle. We have stated that several times already, but here you see definitely let me say, in the analytics, and you see a slight decrease of the can, which we interpretate -- there was a shortage of cans at all in the market and in particular because of the shortage and second because the PET bottle is in terms of the CO2 footprint, a very attractive product, and recycling gets momentum. I would say those 3 things are leading to the fact that we see PET further growing. Now if you look to, let me say, where we are with that, these are Krones numbers. And our development since the '90s might be the long term, but if you see how nice PET has developed in our portfolio. This is the orange line you see there and has outperformed the other packaging categories, even if they have been not really going back, and this is something important, you see that glass and can is slightly growing, but the majority of the growth in the beverage consumption was absorbed by the PET bottle as such. And these are our numbers. And we believe that if you see the linear lines and eliminate the curves, that we see a further growth of PET in our portfolio, and we'll have a significant share in the revenues we are generating. And just to underline that, we have done customer interviews in 2023. As you know that from us, we have spoken to around 100 customers around the world. All the big ones, all the significant local ones, some of the smaller ones. And this is the takeaway of it. And I would say the takeaway of it is what we have said in earlier calls, that those who have invested in the crisis have outperformed at us. That's one statement and investment is needed in terms of getting costs down, getting sustainability ahead and getting new products on board in order to allow for new market shares. And of course, automatization and digitalization is playing a huge role in all of the demands. I would say I have to mention that, of course, the long lead times are something. If you look to the challenges on that slide on the -- is an issue for us. We are at the moment at 75 weeks. That's too long. I would say our competition is slightly better, not too much, but slightly better. And this is something we have autofied in the industry that delivery times will go down. This is something we are working on it, and we will let you know later on where we are with that. So lead times is an issue for us. We are going to bring, let me say, more output. And this is based on efficiency improvements. It's not on, let me say, extending facilities or something like that. It's just because we have utilized our capacities by 90% to 95%. And with the further supply of electric components, which is the major bottleneck, we believe that we can increase revenue in the core by around 10% to 12% just because of being more efficient and having the people on board. So that's a look on how we see the industry and these messages are here saying, okay, well, there will be a good investment pattern beyond 2023. So we do anticipate that this will continue for 2024 and 2025. And given the order backlog we have, I would say, we are on a quite stable fundament to continue in the next 3 to 4 years that we can manage Krones in the right direction. So that's the -- let me say, the takeaway from the market point. Now finally, I wanted to talk about sustainability. No new message for you. The only point I have to make, we are working hard on it. It's every day-to-day job. And it's amazing because it's attracting people. I would say one of the reasons why we get the talent on board we need is certainly having a reasonable and, I would say, authentic program around sustainability. So we're getting this feedback quite good from the people we hire. It's good to hear, and this is globally, so around the world, and we are very happy that we have people joining just because of that program, addressing different categories, how we do our commitment to address sustainability issues around the world. So if you look to that, of course, we have numbers. This is the Scope 1 and 2 footprint Krones is aiming to. We are on a good way for 2023. So we are, I would say, better than the planning which has certainly to do that, we have broad green power. This is an important factor in it. And we all know that as more as we go to 2030, it's becoming more difficult. So it's not a linear path to walk through. We have reserved significant money in our investment plans to get this along because it will not go without investments, but we are on a good path. And finally, to the sustainability issue. We have been joining the econsense Forum for Sustainable Development of the German business. You see the companies participating there. And we have been nominated for the German Sustainability Award. Not yet selected, but at least nominated, which is a great thing for us. And again, I can say, I mean, we are participating in any rating which is available, and in any initiative, which is at the moment carried out. So we take the whole thing in terms of sustainability very serious. And again, it's driving the motivation of our people. Now finally, let's have a look since we spoke about the markets and what is driving them. Finally, we have a look on the distribution in the markets. We still see North America and South America extremely strong. This will continue for the year. Europe is a bit on a decline, but I wouldn't say that this is, I would call it stable. There is no concern about Europe that this goes totally south. So you see that the numbers are still okay. What is a bit of a headache is Middle East, Africa. And this is mainly driven by FX issues. The currencies are weak. And I would say, to get hold of, let me say, foreign ex is difficult for our customers in the regions, which is the reason why this is weak. And of course, we know about the civil wars, which are carried out at the moment in several countries, Sudan, Kenya -- sorry, not Kenya, Ethiopia, Niger and Burkina Faso and we have some other instabilities in the area as well. So this is a bit of a headache for us. Asia Pacific is doing well. They came in latest out of the COVID-19 situation. So they are doing good. And even China, if you look to 8.5% in 2022 to 6.5% in 2023, is not of a concern, it's more a time -- a question of timing. It's going to recover. I would say that order intake in China is okay. This one is revenue. So this comes okay and maintains on a level. And Central -- Eastern Europe, Russia, Central Asia, I don't have to name. It's continuing, but you see definitely that since we have pulled out of Russia that you see the impact into revenue split globally. So that's from my side, just in a nutshell to give you an overview where we are, let me say, in markets and order intake and hand over to Uta to go more into numbers.

Thank you, Christoph. Good afternoon also from my side. Continuing on with revenue development. In the second quarter, Krones recognized EUR 1.122 billion revenue. That's a EUR 12.4 million increase in comparison to the -- comparable with quarter of '22. And you can see, including the very good first quarter, we are now at EUR 2.321 billion revenue, which is a EUR 16.9 million increase. And that's from our point of view, remarkable also because we are still facing quite some bottlenecks or shortages in the supply chain. So that's why that number is from our point of view, also a good one. Yes, Q2 is lower than Q1, that's simply because of the fact that Q1 had lower working days, and we had already indicated in Q1 that Q1 was a very strong quarter and that Q2 will be lower. We see an improvement for the second half of the fiscal year. And that's also one of the reasons why we increased the guidance for revenue growth from originally 11% now to 11% to 13%. We will also see later that our segments contributed to the growth. So overall, from our point of view, a very good development and also a development in line with our expectations. Same applies to EBITDA. Second quarter EUR 106.5 million, 9.5%. After a first quarter which was slightly higher, but still we are at 9.5% year-to-date which is a 0.7 percentage point increase in comparison to the same period of 2022. And the reason being also that we have implemented all the measures we have started in '20 and '21, and that we have now full year effect of these measures. We are also confirming our guidance for EBT 9% to 10% for fiscal year 2023. Continuing on with EBT. Development of EBT more or less follows what I have just said for EBT with one small additional point that we have a better interest result which, at the end, contributes to the fact that our increase in EBT is higher in percentage compared to '22 than EBT. So 42.3%, EUR 161.1 million, 6.9% overall. We want to mention at this point of time also that we have 2, if you want to call them special effects, both not being relevant for EBT or EBITDA or not having an impact or having a net effect of 0. On the one hand, we have in the financial income positive interest effect coming from an income of the adjustment of a contingent purchase price payment. And on the other hand, in the depreciation or amortization, we have a valuation adjustment of intangible assets both, as I said, equaling out to 0. So no net effect in EBITDA and EBT. And also for EBT, we are in line with our expectations. Now coming to personnel and material expense. Starting with personnel costs. Year-to-date, EUR 698 million, which is EUR 83 million higher than last fiscal year. And it comes, of course, from -- we will see that later on the one hand, additional headcount. And on the other hand, and we have mentioned that several times that we have increases in payroll, which are globally at about 6%. We are at 30.1% payable or personnel cost in comparison to total performance, a slight increase in comparison to quarter 1. I want to mention at this point of time also that we have turned temporary labor -- that we have turned temporary labor into own workforce, and that is also one of the reasons why we have a slight increase here in comparison to the first quarter, but still at a very stable ratio. Material cost, EUR 1.146 billion, also year an increase, which, of course, comes from volume. But we can see that with 49.4%, we are still -- we are stable below 50%. And also, if we compare that to the first quarter, we are slightly lower. So all in line with our expectations and also the cost increases we are still facing are covered by the price increases we have implemented. Continuing on with employees, Krones employed as of end of June, 17,746 employees. That's an additional of 582 in comparison to end of December. So 3.4%. So the growth far lower than our revenue growth. And looking at the distribution, most of the increase comes from the outside of Germany, 375, 6.4%; Krones AG, 184, 2.2% and outside of Krones AG, but Germany, rather minimal. Looking at where that headcount increase came from. I already mentioned that we have turned temporary labor into own workforce. We did that to make sure to ensure that we have the workforce available in terms of skills, but also in terms of availability, which we need to execute our backlog and so we have turned approximately 200 employees into own workforce in Germany, but also in Hungary. And on top of that, we have hired additional service technicians in order to execute, first of all, our backlog, but also to make sure that we can service our customers. On top of that, digital community, as already mentioned, Q1 an increase across the functions. Now continuing on with the segments. Also here, we see for all 3 segments, a stable development. And starting with filling and packaging. Technology revenue is now at EUR 1.927 billion, and that's an increase in comparison to the same period by 15.1%. It's slightly below group level. but that's also because of the supply chain shortages we are still having. Second quarter was a little bit lower than first quarter by the reasons I already mentioned. We increased also here the guidance for the same reasons I mentioned for the group. Looking at EBITDA, 10.2%, EUR 197 million. Second quarter, slightly below the first quarter but a very good development in comparison to 2022. And looking at the guidance also here, we are within our expectations of 9% to 11%. Process Technology, EUR 215 million revenue. Quarter 2 slightly higher than quarter 1 with EUR 115 million. After the 6 months, we have an increase in revenue by 23%. And we also increased the guidance from originally 15% to 20% revenue growth to now 20% to 25%. EBITDA margin, also in line with our expectations, in line with our guidance at 6.9% after 2 quarters, EUR 14.9 million, unless we can also see quite a substantial increase in comparison to 2022. We have very minimal effects here from the acquisition of Ampco Pumps because it's just 1 month in 2023, but we expect more, of course, during 2023. Continuing on with Intralogistics. Also here, EUR 179 million good performance in revenue, although as we mentioned several times, the first half year in Intralogistics is usually less strong than the second half. But still, we are having a 30.8% growth in comparison to 2022. And also here, the second quarter was slightly higher than the first quarter. We are keeping here the revenue growth in 2023 of 10% to 15%. Looking at EBITDA margin here applies the same as mentioned for revenue, it's usually a better second half of the fiscal year. But with 5.3%, we are above what we had in 2022, and we are also in line with our expectations. Continuing on with equity and liquidity. As you can see, Krones has added another EUR 38 million equity, and that's despite of the fact that we have paid out EUR 55 million dividend in the second quarter of 2023 out of the equity. So I mean, with the net income of EUR 121 million, we had sum FX exchanges, we came to the EUR 1.636 billion equity. That's a solid 38% equity ratio, we increased total sum of assets and liabilities also only by 3.3%. Looking at liquidity. Cash, EUR 329 million, net cash, EUR 325 million. I will comment later on when talking about working capital and free cash flow on the change on the decrease free credit lines at EUR 156 million. So taking all together, close to EUR 1.2 billion liquidity for Krones. So a very solid position. Working capital. Overall, looking at the average of the 4 quarters, we had 17.2%, so below what we had in 2022 and still very low. And you can see where the sources come from, and it's more or less what we had in all the other quarters. We are still carrying a high number of received prepayments from the high order intake we had, 22.9%. And also slightly higher than end of December. Inventory is 15.5%. I mean, we want to make sure that we are able to deliver. So that's why securing the supply chain. Payables 14.5%. If we are looking at the overall figure, it's more or less stable. In percentage points, it's a little bit less. And receivables here is reflected higher business activity, 40.6% increase in comparison to 2022. Looking at the overall value for working capital, end of December, Krones carried a working capital of EUR 594 million. And we already mentioned at that time that this is historically low for Krones. We are now at EUR 851 million and that's also the reason coming out to free cash flow, that our free cash flow in the second quarter but also in half year is negative. I mean, also here, we want to mention, this is in line with our expectation -- with our expectations, and as I said, main reason being change in working capital. But coming to the various sources. I mentioned earlier the change in cash. We can see that at the second from the bottom line of EUR 346 million in the fiscal year. Resources -- I mean, free cash flow before M&A, minus EUR 131 million. First quarter was minus EUR 21 million. So second quarter being minus EUR 110 million. And as you can see, main source the negative change in working capital, where we are executing the backlog. But on the other hand, we are also on a growth path, which leads to the fact that we are increasing working capital. Other noncash changes mainly depreciation, other assets and liabilities also payout from accruals, CapEx on normal level and other in -- not that relevant here. Free cash flow, minus EUR 131 million. M&A activities that's the 90% of Ampco we have paid out. And the third point, which led to the fact that we have a change in cash of EUR 345 million. That's EUR 100 million other financing activities. And this is, first of all, the payment of the dividend, EUR 55 million, but it's also lease payments, EUR 17 million. And then we had cash effects in foreign exchange because of devaluation. Christoph mentioned about Africa. So we had some effects there, which were EUR 26 million. So overall bringing us to a cash at the end of the period of EUR 329 million. As we have said several times, all has to be seen in relation with the extraordinary high free cash flow in '22 and '21 with cash conversion rates well above 1. And I want to say also at this point of -- this point of time, for fiscal year 2023, we are expecting a negative free cash flow as we have it already. But we expect the stabilization for the second half of the fiscal year. So we have said upper range 2-digit negative figure for 2023 whole fiscal year. And then looking at '24, we expect that free cash flow comes back to a normal positive level. Last but not least, from my side, return on capital employed stable at 17.8% and also in line with our guidance we have given or even slightly above our guidance, 15% to 17%. And in line with what we have forecasted or guided for midterm planning and it's all coming from growth in EBIT because capital employed -- average capital employed is more or less, at a little bit more than EUR 1.6 billion.

All right. Thank you, Uta. Just to give you -- guide you through the outlook 2023. Here you see the new target in terms of revenue growth, which we changed from previous 8% to 11% to 11% to 13%. We confirm EBITDA or 9% to 10% and confirm, of course ROCE at 15% to 17%. So as said earlier, we have a quite good view on the remaining year and quite positive that we are going to achieve those numbers, which we have laid out here. If we look to the segments, Uta mentioned that before, but here is the summary to say the revenue growth in Filling and Packaging technology is about 10% to 12%. So this is a slight increase from 7% to 9%. We confirm the 9% to 11% EBITDA margin. Then you move to Process Technology, you see a growth of 20% to 25% instead of the previous 15% to 20%. We confirm the EBITDA margin of 6% to 7%. And Intralogistics remains as we have it guided already at the beginning of the year. And if we sum all up, now we are -- the summary is we are optimistic at 2023. We have a very good base for 2024, and we certainly might talk in the Q&A section about the backlog and how we see that. So this gives a good fundament for 2024 and in for, let me say, our midterm targets we have in terms of growth and even more important in terms of profitability. For us, point number 3 is the essence of what we definitely need is an improvement of our supply chain and in particular, electronic components. All the rest seems to be okay. We have still 1 or 2 suppliers, which are, I would say, in -- not weak, but not in an optimal position. So this will go away until the end of the year. That's our assumption. So we have good programs in place. We have a very strong service business. This is a good fundament for the profitability in all regions. So there is no region where we have concerns about our service business. And I would say after the excellent generation of the good free cash flow in 2022, as we said all the time, 2023 is not as good as 2022. However, we are definitely on the way to get that back in 2024 and optimistic for that. So -- and I would say, as I said already, the guidance 2023 is good to reach our midterm targets. So that's in a nutshell from us where we are after 6 months with Krones, and now we are happy to hear your questions and go into Q&A. Thank you.

So thanks a lot to Uta and Christoph for the details. Yes, we have already some questions. The first questions are coming from Sven Weier from UBS. Sven?

Yes. Thank you, Olaf. And the first question I had was on Chart #8 where you show the annually installed filling capacity. And I was just wondering because in 2023, your sales are still growing, but the annually installed filling capacity, the chart basically says it's lower than last year, just was trying to make sense of that. That's the first one.

Yes. That's very easy to explain. If you look here, I would say, usually, we have ex works in mind. And we are looking to what is really at the customer fully commissioned and 6 months after because we have usually a period of 6 months after final commissioning at a customer once we start the service. And this was a view on, let me say, when the service gets into the, let me say, into the point where they can digest the installed capacity. That's where you see a bit of a deviation between let me say, the good year, you see, for example, that the peak of '18 and '19 comes into the market, 2021 into services because that was the view on it. And that's why you see a slight move on where things were going into the market or not. That's the only reason. But the thing we wanted to say here is not so much about predictability. You saw some of the deviation how PET was going and that PET is still on a stable basis, and our expectation is mid and long term that it will continue this way.

And could you quantify how big the growth in your installed base has been? Or is at the moment? So given the strong growth you have, can you quantify that?

I mean to be honest, I don't have a detailed number. But if you look to it, even with the low numbers of machines we are going to install in 2022 and 2023 or get them into service, I have to call it this way because of the low output '20 and '21. It's the machine base we said is still significantly growing because usually, we are serving 15 years. That's our calculation. And if you look 15 years back, the installed base was much smaller. So we get, let me say, smaller years away where we have lower installed base and even let me say, the lower yields right now of 2020 and '21 are significantly higher than the old one. So we have no concerns in terms of the installed base for the services. So this will continue. And maybe for the next time, we're going to prepare that, that we get an overview how big the growth is in the installed base we are going to serve. But there is definitely a continuous growth, and this is a quite linear curve if you look to it.

Because I was indeed looking for the tail effect that we see in the service business, right, after the installation, how many years it usually takes until you get the first kind of relevant service revenues out of the installation?

It's -- I would say it's between 12 and 18 months afterwards. If you look to really when revenue is closed because then in most of the cases, the customer has a set of spare parts delivered with and change parts more spare parts delivered with the machines once they are new. So he can run it for the first 6 to 9 months without help of Krones and then the business starts. And that's what we usually take as -- once we do service contracts that we wait this half a year because we want to definitely, in many of the cases, decouple it from the new machine business.

And I mean on the new equipment side, you keep a certain discipline on new capacity, right, which is also limiting combined with the supply chain, the revenue growth to some degree. I mean, do you also have these limiting factors on the service business? Or is -- do you have enough people to cater for this service growth?

Yes, the limiting factor is the service people. If you look to Uta's numbers where you see the increase outside of Germany, a big proportion of service technicians. And let me say, to keep them on board, became more difficult because traveling. And I do not talk about Germans, I talk globally about -- around the world that traveling becomes more of a problem for the people. And that one of our biggest focuses we have is to get good service -- qualified service technicians on board because we need between 2 and 3 years before they are really until qualified on Level 2 or 3 that are really good in the market. And we need that for our service business in addition. So I would say the limiting factor is service technicians. But nevertheless, I would say we are in a good path to get them on board, and I wouldn't see that growth is limited by that. At the moment, we can manage that quite well.

The final question I had was on the chart on Page 5, and thanks for the chart there, I think, quite useful where you show the trend growth since 2006. I mean, I guess, if you deduct your I think, total 10% price increase from the order intake, right? I mean it would show that even this year is actually slightly below the trend. So I think we cannot see any kind of overinvestment or something that you would maybe think if you look at the 2022 figure?

Well, I mean, even in case you deduct pricing, I would say it's a linear growth you see and a good growth, but nevertheless, it's not on a level that we would say we are now significantly increasing capacities and we are doing that even with a view on pricing because I think we all know that, I would say, in the economical environment we are facing might become a bit more difficult, and pricing might get -- might become a question, and we want to be stable on pricing. And we want -- don't want to, let me say, put ourselves under pressure with having capacities which we have to fill and then we have to do something on pricing. So -- this is one of the reasons why we want to keep the track for the future.

Then I meant really that also when you look at the 2022 bar, some people might be afraid that there's been some over investments, right? But I think if you look at it in real terms, right? It's -- in my view, it's probably not so.

Yes. You can perfectly fill the gap in 2020 and 2021.

Thanks to you, Sven, for the questions. I got some questions from Benjamin Thielmann from Berenberg. Benjamin, could you ask your questions, please?

Good morning. Or actually, good afternoon, everybody. Maybe 1 or 2 questions from my side. Do you actually see any order postponement going on so far? I mean you have quite some exposure to carbonated soft drinks. Are you seeing any order postponement over there? Or maybe a little bit of color on that?

Yes. Yes. I would say we see both. We see cancellations, but -- and I have to say cancellations are on the level which we have seen in 2017, '18 and '19. This is not unusual that 1 or 2 lines are going to disappear. So that's -- let me say that's on a very, I would say, normal level. Postponements, we see hardly any. Why? Because with the long lead times, the customers are usually anyway in desperate need of their lines. So -- and then I would say there is 1 factor coming into play since we have, for example, in Africa, some critical circumstances in some of the countries, customers are redirecting if they are multinationals, the equipment they have all to other countries. And this might lead then to, let me say, 2 or 3 months of postponement, but this is still on a very small scale. And I would say, let me -- giving the big order backlog we have on 1 side, and let me say, the uncertainty forward, we all see in the economy, I would say it's an extremely stable base we see right now.

Okay. Maybe 1 more question. You were mentioning that you currently have delivery times of roughly 75 weeks and that your competitors are doing slightly better over here. Can you give us a rough proxy what lead times do you expect maybe at the end of the year? You were mentioning that everything should ease a little bit in H2 2023? Can we expect -- I know it's hard to say a rough -- a hard number.

No, I can't say it. Unfortunately I can't predict that quite well. Because if you look at our book-to-bill ratio, if we are what we say at EUR 1.2 billion to EUR 1.3 billion per quarter, the book-to-bill ratio is above 1, and this would leave that the lead times will stay where they are. I would say they are not slightly slipping further away since we are increasing, let me say, performance and revenue for our core in the second half, but they stay where they are. And maybe it's the first time that I'm saying I would look more to a book-to-bill ratio closer to 1 that we get 1 day rid of those long delivery times. Nevertheless, I would say, for 2023, we hardly see any change and even 2024 is given more or less. So I would say this is something we are working on and by increasing capacities by efficiency measures, not by investing, let me say, in additional capacities, we might see during the year 2024 improvements, but not before.

Okay. Okay. And then maybe my last question in terms of passing through price increases. I mean, you have through 6% and 4% in the past. As maybe an update on whether you're into current negotiations and passing through another price increase in 2024 -- sorry, 2023?

Yes. We do not do at the moment. What we have done is we have -- in certain areas, we have done slight adjustments, but there is no general price increase. We believe that with what we see on the cost side and developments we see there, we are in a good position for 2023, 2024 and beginning of 2025. So that should be in good shape. And we didn't see that at the moment, you could push prices higher than right now through. So this is where we are.

Okay. Maybe 1 follow-up then. Given that lead times are relatively high, do you see the risk that your margin gets diluted kind of that the order backlog is at prices, let's say, when you order nowadays, including the 10% price increase and wait 75 weeks for your machine, then the delivery date is due in roughly 1.5 years. Do you see the risk that these prices are diluting your margin?

No. And I explained that. First of all, when we source material, I mean we know the order once it's getting on board. And I would say we are starting to execute around 12 months, maybe 10 months before we have the whole thing ex works. So this is far closer than you think because you think now about the 75 weeks where we have to anticipate costs, we have to anticipate cost on the material side when we have 75 weeks in around 30 to 40 weeks from today by the latest. And I would say, with the contracts we have in place, with the relationship we have with our suppliers, we have a good -- pretty good visibility on material cost development. So I would say with the order backlog we have on board, we are on the safe side. And what we do is we have learned over the last 3 years that we have reviewed every 3 months how costs in the individual areas, personnel costs, material costs, OEMs, we buy, service technicians we need to hire that we are reflecting those costs and build them in into our prediction on the time lines I have just said. And with that, we are pretty sure that we don't have a dilution effect once we are executing those orders.

So thanks to Benjamin for the questions. I got also -- or not some questions, but let me say Jorge, Jorge Gonzalez from Hauck Aufhäuser asking to ask questions. Jorge, may your questions, please?

Yes. Thank you very much. Thank you, Christoph and Uta for taking my questions. In fact, you answered most of my questions already, but I have 1 regarding the margin for the second part of the year. So with your current guidance, obviously, it is implied a stronger output in the second part of the year. And I was wondering if this means that you can improve the 9.5% margin you achieved in the first part of the year? Or if we should be careful with this consideration, what you can tell us in this regard, please?

I mean at this point of time, we are keeping the between 9% and 10%, and we also believe that we will be stable at what we are right now.

But this is related to the seasonality and maybe that you need to use additional seats? Or -- what is behind this?

Yes. It's also related to the fact that we will have the higher new machine business in the second half of the fiscal year, which is usually then a negative mix effect. So that's one thing. The other thing is that our segments will also contribute further and that's also a little bit lower than the group margin.

So I'm looking for further questions. I have got some questions received from Sebastian Growe from BNP, who is in a business travel. So I will try to read his questions and ask you, Christoph and Uta. So the first is about the order pipeline in brewers. Some brewers have started to see a decline in sales volumes as customers are more hesitant to accept implemented price hikes. Do you see a risk that slowing consumer spending might impact the timing of CapEx? Or do you see an investment mood as unchanged? So it's related to the brewers, I think more.

I mean, we anticipated already that even with what I was saying, the EUR 1.2 billion to the EUR 1.3 billion since I would say that the brewing business as such was quite good in the first half year, that this would go any way down to a certain extent not, I would say, to a significant extent, but we will see maybe a couple of investments less than we have seen in the first half year, but this is anticipated for the brews, and this is overcompensated by the other segments we have. So I would say, all in all, we still strongly believe in the EUR 1.2 billion to the EUR 1.3 billion per quarter and see, I would say, minimal impact on, let me say, the statements, I mean, we can name it, Heineken had today in the [indiscernible] big statement where they see themselves. But on the other side, they have made significant investments which will help us to have our revenues achieved. So I would say that's okay. Yes, brewing seems to be a problem in particular because of some of the brewers, I said it earlier, Africa is an important market, and this is not performing well. So this might have a slight impact, yes. But all the other markets are, I would say, doing to the expectation in the brewing section, and therefore, we believe that the other investments we see and we have in the pipeline are becoming due.

So thanks to Christoph. The next question is more or less similar to the question we already got from Jorge, but I'll read it again. So we have seen in the EUR 20 million, EUR 25 million higher EBITDA per quarter in the first half year versus 2022. And the question is, are there any reasons from a mix or cost structure? And what is the perspective for the second half year? Uta, I think you already have answered this, but we have Sebastian on the line.

Just reiterate that. I mean, we will have some mix effects because new machine business because we are adding -- or we are freeing up the efficiency or the capacity we are having there. So new machine equipment will be more. And so that's a mix effect. And in addition to that, higher revenue from the other 2 segments, which also come with a slightly lower margin. So that's why we are confirming first quarter approximately -- the first half year approximately where we were there.

Thanks to Uta. And the third and last question from Sebastian was about the working capital and the midterm growth. So we have seen an increase in working capital at the moment also for the growth. And the question is, what would be the development here in the net working capital in the next -- until 2024?

I mean, first of all, let's look at the current fiscal year. I mean, as I said, we are at EUR 851 million after 6 months now as of end of June, we are seeing that there will be a slight further increase in the second half of the fiscal year. And after that, it will stabilize and will only grow with the volume increase we are expecting and also for '24 and '25. So stabilization in terms of percentage then also for '24 and '25.

So thanks to Uta and to Christoph, for the question from Sebastian Growe. I see someone is -- Michail from Poland is raising his hands. Michail, your questions, please.

Yes. Can you hear me?

Yes.

I have the question about your order intake as you do not provide guidance on this KPI. By, I'm wondering, taking into account low level of manufacturing PMIs in Europe, this figure was down in first half, you mentioned from extremely very high base of the previous year. But how do you see development of order intake in coming quarters? Do you see any weakness on the market that may trigger that, for example, order intake can fall below this long-term trend line?

Well I just want to confirm what I said earlier. We believe that the -- let me say, with the outlook we have, and this is for the next 6 months, qualified by the quotation pipeline we have out at the customers and a good understanding when they are going to close those orders. I would say that we are looking for an average per quarter of EUR 1.2 billion to EUR 1.3 billion. And this -- if I say that, this would lead then, let me say, between EUR 4.8 billion and EUR 5.1 billion total order intake in a year. And if I say that, that's for the remaining 2023, and this anticipates all up and downs, let me say. But Africa is performing not at the moment as assumed in the beginning. But for that, I would say, Asia and North America is still very strong. We have anticipated, as I said earlier, that brewers might order less in the second half of the year, and we have anticipated what is coming, let me say, in other areas, in other segments. In addition to that, we have gone through our core business quite in deep to understand the investment schemes of our customers. We have gone through the life cycle business that we understand how this is going to develop over the next 6 months. And of course, we have seen in Process and Intralogistics the same exercise to understand. And once I'm saying here, the average will be between EUR 1.2 billion and EUR 1.3 billion per quarter, then it's a very qualified statement I made with all the -- let me say, the background I have just said of the various segments of the markets, of the regions that we really are aware of where we are with that. I hope that helps you.

So I have a look at my mail folder. I don't see any questions here. Perhaps somebody who wants to raise his hands and ask some questions? Not at the moment. Uta and Christoph, I don't see any further questions. No, it was just a thank you by Sebastian Growe. Okay. So no further questions.

Then thank you very much for joining us. I hope some of you still have your summer vacations in front of you and find some relaxing days. We hopefully as well. So -- and we are looking forward for the second half of 2023. And going to see you in -- after Q3. Thanks a lot. Have a good day.

Have a good day. Thank you.