Krones AG (KRN) Earnings Call Transcript & Summary

Good afternoon, and a warm welcome to our -- to the Krones conference call. My name is Olaf Scholz. I'm Head of Investor Relations here at Krones. We have had a good start into 2025, and so we continued our profitable growth path. With strong figures and an improvement in all key figures, we published our Q1 results in the morning. But nevertheless, there are also uncertainties in the world, which could affect the world economy. Well, that's the situation. Christoph Klenk and Uta Anders will give you more details about these figures, and we'll give you also additional information. After the presentation, you will have the opportunity to ask questions. [Operator Instructions] Additionally, please be reminded that this meeting will not be recorded. So please also deactivate any functions of recording at Teams. I think let's start with the presentation. So I hand over to Christoph Klenk. Christoph, the floor is yours. I'm sorry.

Thanks, Olaf. Yes, good afternoon. Warm welcome on behalf of the 2 of us here. Pleasure to have you here today and give you insights we have after Q1 and how we see actually the perspective of Krones in 2025 and beyond. I can say before I start, we are quite pleased where we are. So our results are good and in line with our planning, and we'll come to that in a minute. And as always, I'll skip, let me say, the overviews and we'll jump immediately into the order intake, which might be one of the important topics where we are with this and how our outlook is, in particular, under the view of the tariffs we are facing in the U.S. or we might face or might not face. Order intake, as you can see at a bit above EUR 1.4 billion. We are quite happy with the number we have achieved here and, again, in line with what we have discussed here. As we said, it should be between EUR 1.4 billion and EUR 1.45 billion, so quite being at the target with this one. We have seen in the order intake already a bit of a slowdown from the U.S. and could compensate that fortunately from other areas, in particular from Africa, Middle East and South America. So that helped quite a lot to be there. I mean, uncertainty, I'll come to that in a minute after I have spoken on how we are distributed over the world, then we can talk about the tariffs as well. But all in all, we are quite happy. And if we look further down the road for the next quarters, we would see the way that the pipeline is really strong. However, uncertainty plays a big role into it. And the question is how much is actually postponed or not. So we do expect, for Q2, a slightly lower order intake than we see in Q1. Nevertheless, we keep what we have said in terms of -- that we see that year-on-year, we should have a ratio around 1, so book-to-bill. So that should be the case after 2025, and we are still sticking to that target. If we look to our order backlog, this has been quite stable and okay. So a bit up and down, but on a very marginal level. We are quite happy that with that backlog, we have right now, we can, on one hand, utilize our capacities until end -- beginning of Q1, Q2 next year. So that's giving again a very good safety in terms of our planning. And we know exactly the margins, which are in that order backlog. So this is emphasizing even more that, for 2025, we have a clear view on where we are in terms of profitability. So all in all, we are quite okay with that one. And if you look to our delivery times, which is one of the issues we have, because competition is a bit better than we are. So we have been down 50 weeks. And for some products, we are even a bit better. So things going okay, and we are talking in that regard. Of course, all the time x works for bottling lines and other equipment we are delivering. Now coming to our distribution around the world. I mean markets have been going quite well. And you see that the U.S. is on a decline. And this time, we talk about revenue. Important, it's not order intake, we talk about revenue. And this is, of course, more than, I would say, a bit offset to order intake, of course, once we are going to realize the orders. Nevertheless, we have anticipated -- and that has, first of all, nothing to do with the tariffs that the U.S. might be not as strong as it has been in the past since there, we have seen that the investment activities already at the end of last year have been a bit going down. But you see on the other side that some of the other areas have picked up quite nicely and that we are heading in the right direction. So all in all, we believe things are quite balanced. There is a bit up and down, but no fundamental change in our markets. One thing is maybe a bit remarkable, that's Eastern Europe, Central Asia, that's going really from, let me say, Eastern Europe to the Western border of China. So everything which is in between without India, of course, that's belonging to APAC, but all this states like Kazakhstan, Uzbekistan, Azerbaijan and so on, they are all belonging into that region, and this worked quite well. So there have been quite significant investments and seems to be quite stable even in the outlook. Asia Pacific picked up quite nicely. So we are happy with that one in terms of how this is distributed. Nevertheless, mid and long term, we expect much more from Asia. Africa, Middle East is doing fine. We had just this week a review with our management team. There are 70 countries, 70, which we are actually dealing with in Africa, are well said. There's a couple of conflicts, but nevertheless, still the continent going okay. And South America, as already said, so was quite good. Now a few words, and we have no separate slide for North America because we believe there is so much uncertainty in how things are going with the tariffs that we were not, let me say, quite clear on, let me say, what slide we should for the long term prepare. But just to give you some insights, we have 20% of the revenue, as you see here, in average in the U.S. Half of it, we have local value creation. So we manufacture half of it in the U.S. So 10% are remaining. And I should say we have 1,600 people in the U.S. There are several entities processing, and Intralogistics is doing completely independent in the U.S. And for bottling and packaging, we do the complete life cycle services there independent, including spare parts, which is important because that's the biggest proportion usually, which for import, but we are doing spare parts manufacturing completely in North America. Now if we look to the 10%, which we are not manufacturing in the U.S., you have to see that out of this 10%, a bit more than half, we have no local competition or no bigger low competition. This is, in particular, blow molding, filling and labeling. These are the majority, let me say, of -- the core of our bottling lines where we have more or less no -- limited competition in the U.S. For the dry end, which is packaging machinery, it's around 4% of the revenue. There we have competition. And therefore, let me say, the tariffs would be, to a certain extent, critical. Now fortunately, we have already, last year, made some significant decisions. One has been that we have been ordering milling and laser machines just to make sure -- and machinery centers, just to make sure that we can do all the spare parts manufacturing, which we need in the U.S., we can do there. Those machines are arriving right now in Q2. And since we are manufacturing labeling machines in the U.S., this will help us to extend the portfolio. So this decision has been made. And of course, we are working on, let me say, the potential decision, which might have to be taken, but I'd stay very straightforward with the might. We are working on what would it mean in case the tariffs would be higher, can we do -- in a reasonable timing, can we shift production from here to the U.S. just to make sure that we are not losing the market? And the answer is yes, since with the labeling machines, we have all the processes in place. And second, this is the other important thing we have already decided last year, to extend our facilities there. We have a quite significant space added to our facilities in the U.S. So we would be even capable of getting the production there without any harm because this is existing right now. It's existing buildings, which we have rented, and this rent is starting right now. So we are moving in for the time being. So we would have all the options in the U.S. Just in a nutshell, where we are with that. So for this year, revenue, we are -- we do believe we are not concerned since tariffs are paid by our customer once they are bottling lines because this is not in our scope. Once we sell equipment directly from the U.S., we have already increased pricing for whatever we do in the U.S. in accordance to what we see because of tariffs and the manufacturing there. And this is already accepted by the customers because we had a huge communication already the last couple of weeks and have the feedback, which so far should be okay for us. So, so far, to, let me say, the tariffs, I would assume there might be questions later on more in deep. And with that, I'm handing over to Uta continuing with the revenue.

Yes. Good afternoon also from my side. I mean it's always talking about P&L segments first and then talking about everything which is related to the balance sheet. Let's look at revenue. We had a very good start into the fiscal year, as you can see, EUR 1.410 billion revenue. which is a 13.1% growth compared to the fourth quarter of 2024. And as you have read also in our communications, this is overproportional compared to our guidance because in the first quarter of 2024, there was no Netstal yet included, whereas now in the first quarter, we have approximately EUR 60 million from Netstal included and -- making it on a like-by-like basis we are in our 7% to 9% guidance which we had given. I mean the reason for the revenue increase is, I mean, as we had said, we have a very good backlog also with good price quality, then coming later on to EBITDA and overall full utilization of the capacities. And with that, we also confirm the guidance we had given for 2025 of revenue growth of 7% to 9% for the fiscal year. Moving on to EBITDA and its margin. I mean as you can see, also here, we had a very good start into the fiscal year. EUR 149.3 million, 19.1% increase and a margin of 10.6%. And I mean, here, I need to speak about Netstal also because, I mean, as you know, it has a dilutive effect and that dilutive effect is approximately 0.2 percentage points. And taking that out, I mean, the increase would have been even higher than it wouldn't have been 10.6%, but a little bit around 10.8%. So -- and why is that? I mean I talked already about the good utilization of the capacity. I talked about price quality. And so these were the main reasons, but also good mix. And overall, we are confirming our target for the fiscal year of 10.2% to 10.8%. Now moving on to EBITDA -- not EBITDA to EBT. And of course, as we have said always, this is very similar to the EBITDA development. Looking at the overall numbers, EUR 107.9 million EBT, which we have recognized 21.2% increase compared to last year. And on a margin basis, you can see 7.7% compared to 7.1%. Very small financial income only, close to EUR 2 million, but also that was within the expectations. So that's why also here, we can see the fiscal year -- the stat was within our expectations, and we also continue -- expect to continue like that. Now moving on to personnel and material expense, and let me start with personnel expense. I mean, as you can see, we have increased compared to the first quarter of '24 our personnel expense by EUR 57 million. And if you look at the ratio, it is 31.6%. And I mean, now all of you remember probably that we are always saying being around 30% is very important for us, and it still remains that sentence, first sentence on that we expect to come into that range again throughout the fiscal year. But let us talk about why are we now at 31.6% and not at around 30%. I mean it's a little bit also timing of the fiscal year. We had Easter in April. And Easter is the period where people take vacations, so we still have high vacation, of course. That's one of the reasons. The other reason is also the timing of the tariff increases because, I mean, last year also, the increase was April 1. So there's also some effect from that. But I think the important messages here, we expect to come back to a lower ratio than we have right now. Now the picture is different to material cost. In material cost, as you can see, I mean, EUR 664 million, EUR 44 million only increase, a significant decrease in the material cost ratio. And also here, we have several effects. I mean, first of all, the overall statement, we expect this ratio to increase throughout the fiscal year, more to, yes, 49% level. And why is it that low? I mean it's also realization of cost savings and material costs we have, but it's also efficiency we have. And it's also, to a certain degree, it's also some mix effects and some timing. But overall, our expectation and also our planning is a higher ratio where in personnel costs, it is a smaller one and all was confirmed also by our latest planning. Now talking about head count. I mean as you can see, 20,600 employees Krones has employed as of end of March 2025. So that's 204 more than we had end of December '24. So a 2% increase. Underproportional growth, but still growth. About 1/4 of that is service technicians. And I mean, you'll remember that we have always said, we will keep continuing or we will keep growing in service technicians. And everything else stand across the world, and it's also across the functions. Digitalization also playing a major role here. If we look at the composition of the head count, it's more or less the same also looking at what is in Germany, what is outside of Germany. So there is no major change here. But all in all, also looking at the resilience of the company, of course, we're going to slow down the head count growth, but that had already been talked about also when we did our planning for '25. Now coming to the segments. Filling & Packaging Technology, the development of this segment is very much like the group development. So starting with revenue, I mean, as you can see, EUR 150 million more revenue than we had last year. 14.5% in addition, so above the guidance. But also here, Netstal comes into play, and it's one of the reasons -- or is the reason why we are above the guidance. Also, I'll come to the guidance later. And the reasons are exactly the same I mentioned for the group. And now talking about EBITDA development. I mean as you can see, significant growth, 23% -- EUR 23 million compared to last year. And on a margin perspective, 10.9%, which is a 0.7% increase. And taking out the dilutive effect of Netstal, it is around 1% here the increase. And coming to the guidance of the segment, I mean, all I said earlier for the group applies here as well. 7% to 9% growth, 10.5% to 11% EBITDA margin, that's what we confirm. Process Technology. Looking at revenue from EUR 128 million to EUR 130 million, so small growth, EUR 2 million, 2.2%. But we had already guided that the growth in Process Technology is expected to be only 0% to 5%. So we are within our guidance here, so meeting our expectations. And looking at the margins, first of all, EBITDA, EUR 14 million, 10.7%. Yes, we are below last year, but we are above our guidance. So we summarize it for us a very good start also for Process Technology into the fiscal year 2025. And summarizing it now from a guidance point of view, we confirm also our guidance here. In terms of growth, 0% to 5%. And we also confirm our guidance in terms of EBITDA, 9% to 10%. So like last year, a very good start. First quarter is going to slow down a little bit in terms of EBITDA margin throughout the year. Last but not least, Intralogistics, EUR 86 million revenue, EUR 9 million in addition. And so it grows by 12.1%. The revenue growth expectation or guidance is 15% to 20%. And I mean you know that the second half of the fiscal year is usually the stronger one for Intralogistics. So we expect this to happen also in 2025. And looking at the margin and EBITDA, I mean, EUR 5 million, 5.8%, better than last year. But of course -- not, of course, still below the guidance, but that has to do also with revenue. And as I said earlier, usually a strong second half year, and we expect the same to happen this year. And so also here, we confirm the guidance we had given of 15% to 20% revenue growth and 6.5% to 7.5% EBITDA margin. Now coming to our balance sheet. And first of all, liquidity position in the middle of the chart and equity on the right side of the chart. I will start in the middle. I mean cash position is very strong. Again, we had a very good start into the fiscal year in terms of cash flow. So very similar, again, like we had it last year. And that brought us to a cash position of EUR 592 million. And taking together 3 credit lines used, ones, brings us to liquidity reserves of EUR 1.443 billion. And I mean, yes, that allows us to go further, allows us to invest, allows us also to deploy the backlog, but also allows us then to grow inorganically when there are options available. Equity ratio and equity in general, EUR 62 million addition to equity. And the equity ratio all in all stayed more or less on the same level as we had at end of last year. So more or less same growth in terms of equity and balance sheet -- total of the balance sheet, the sum of the balance sheet. And now let's look at working capital. I mean the reason why we are holding that very good cash position is because of the very good free cash flow. And when we look then in the slide thereafter, we will see that there was no change in working capital in the first quarter of 2025. Overall, our working capital remained at EUR 855 million, so that's the total number, which then with the increasing revenue, brought us to the share of 17.1%. And we had different developments over the different components of working capital. Starting with receivables POC, you can see that we kept it more or less on the same level as we had it end of December 2024. And on an overall level, about EUR 2 billion we are holding here compared to a little bit more than EUR 1.9 million we had at the end of 2024. Accounts payables, yes, 13.8% only compared to 15.4%. That tends to be a little bit under proportionate throughout the fiscal year. If we look at the overall number, also only EUR 756 million in comparison to EUR 813 million. But it's also just we think it's more a timing topic throughout the fiscal year. Inventory, I mean, you heard from me throughout the last calls that we had that security -- inventory security, looking for the word right now. We had built up inventory to have security in the supply chain. And you had heard from me that it's our task now and also our plan to deploy that inventory and to keep then the inventory on a stable level. And we achieved that also in quarter 1. You can see that with the 12.1% compared to 12.9%, but more remarkably compared to the 15% a year ago. And the overall number is EUR 660 million compared to EUR 682 million end of last year. And then received prepayments 18.5% compared to 17.5% last year. We are holding a little bit more than EUR 1 billion in received prepayments, yes, which is also a result of the good order intake. So all in all, as I said, stable development here and rather low working capital. Moving on to free cash flow. Yes, some things I have said already throughout the last -- or over the last slide. So starting first with free cash flow before M&A, EUR 165.2 million. Yes, it is lower than last year, EUR 184.2 million, but still we believe on a very high level, mainly resulting from cash flow from operating activities, as you can see from a little bit more than EUR 200 million. And you can also see the EUR 0.4 million, that's what I mentioned earlier, no change in working capital. CapEx is under proportional in the first quarter as it tends to be under proportional throughout the fiscal year or in the first quarter, so it was EUR 41.4 million and only 2.9%. But comparably to last year on a comparable level, and that bringing us all to the EUR 165 million. No major M&As, just the payout of earn-out. And then free cash flow reported, as you can see, financing activities, which is lease payments, bringing us then to the EUR 592 million cash at the end of the period. Free cash flow expectation for the end of the fiscal year, despite of the fact that we had EUR 165 million in the first quarter, we are holding our expectation, which we said will be around EUR 200 million. And this is why -- this is because I said, first of all, we expect working capital to increase throughout the fiscal year. And we also expect and have plans for higher CapEx. And so that's going to balance somehow with the other cash flow generation pools, and so coming approximately to that level. Last from my side, ROCE, 20.5%, so above the guidance we had given of 18% to 20%. And the reason for that is, first of all, good EBIT development. But secondly, also in particular, working capital still being under proportional. So that's why we are a little bit above our guidance. But also here, we expect to be -- to come back within our guidance of 18% to 20%. Yes, so far from my side.

Yes. Thanks, Uta. Now to the outlook before I come to the numbers we have here on the page. Once again, book-to-bill ratio for order intake, we stay with around 1. We have a good robust pipeline. Nevertheless, we need to see how much decisions might be postponed or not, or how much the unsecurity among our customers might be going away once the view is clearer on how tariffs will look like. Revenue growth, and here, I repeat only what Uta said, 7% to 9%. So with the backlog we have, we are pretty sure we're going to achieve that. EBITDA margin at 10.2% to 10.8% as well as mentioned and ROCE at 18% to 20%. So no changes here. We are going to confirm. And if you look to the segments here, no surprises. The only remark I want to make, of course, with Processing Technology, we are on an EBITDA level not on the group level. Nevertheless, since they have less depreciation on EBT level, it looks quite good. So I would say there is a bigger challenge for them to get up to the group level on EBITDA, which is our target definitely for the next years to bring them there. Intralogistics, even there, since the Q1 does not look too good in terms of our targets, which we have here, we are not concerned here. We definitely believe we have a huge backlog. We have a conservative planning, and we are looking forward even to achieve the targets here in revenue growth and EBITDA margin on Intralogistics. A long-term view, and I don't want to go in any details because you know the slides. But more important, we had this week 2 days management meeting, where we had the 70 managers from around the world together for 2 days looking into 2028 risks and chances on one side, and of course, strategies, how to fulfill the targets we have. And I can say even -- and maybe difficult to say that, but even with the problems around the world, we believe there is good reasons that we can execute in the direction of our targets. And certainly this year will be, in terms of the world economy, a bit more difficult. But if you look to our markets fundamentally, they are okay, and this is reflected even the robust pipeline, as I said. So we stay with those targets, and we see really a good possibility to go in that direction. With that final key takeaways, but nothing which we would have not said yet. So just a summary of what we have said and you have heard in the presentation and speaking. So with that, we are at the end of our presentation and looking for Q&A together with you.

Yes. Thank you to Christoph and Uta for these additional information. So I think we'll start the Q&A now. I've already gotten some questions from Benjamin Thielmann from Berenberg.

This is Ben from Frankfurt. Maybe one question on the U.S. demand. You already mentioned it that it seems that there is a little bit lower demand from U.S., which was offset by EMEA and APAC in particular. I was just wondering if you could give us some color, what are the growth catalysts you see in those emerging market regions? Is it that you're growing with new customers? Is it that your existing customers over there are already expanding and you're gaining some share from your competitors? Is it a mix of both? Or why was the growth quite strong in Q1? Or was that just driven that, I don't know, those customers that manufacture most of the less cyclical types of liquid food and beverage, so they're not really affected by economic downturns? Or any color on what is driving the growth over there, that will be very helpful.

I mean, first of all, for the Africa and Middle East market, there is one particular point in. They have been very late coming out with their investments from [ Cola ] in the supply chain crisis. And I would say, when you look back there, they have been under proportional even if you look to the long-term shares we had in Africa and Middle East, so they are coming strongly back. This is one reason. Second, even those markets are going now in high-speed lines, we have one of the fastest lines we run, we have in the Middle East. And if you look to Egypt and the size of the population, if you look to Saudi Arabia, these are big countries with a lot of population and water -- drinkable water being bottled is becoming their issue as well. So that was supporting. And then we had a couple of countries in Africa, where, I mean, we all know that there are conflicts in Sudan, Nigeria, Congo, and those conflicts are, I would say, influencing the investment scheme. Some of them once -- it sounds strange when I say that, but once people are in the region and our customers are used to those conflicts and they have a bit of a, let me say, an understanding how they work and how much they impact the market, then they start, still even with the conflicts there they do investments. So we had a bit of a, let me say, hesitating market in Africa and Middle East due to certain reasons, and don't forget about Israel and the Gaza. So all of that was slowing down the whole thing a bit. And we are now benefiting from, okay, they have, how to say, adapted to the situations. They see a bit of a perspective, and that's one of the reasons why those markets are doing good at the moment. For Asia, I would say it has mainly to do with population growth and even being some hesitant in ordering over the last 3 years. So those markets are actually picking up. That's the reason. And to North America, I mean, we have already predicted that North America without -- whatever happens, we predicted already that some of the investment scheme going a bit back. And don't forget, we have growing in all the other markets. And this automatically make then the share even in case it would stay stable, the share of North America a little bit smaller. So that's one of the reasons. But nevertheless, we have seen significant investments over the last 3, 4 years in the U.S., and it was pretty clear that they will not stay on the level they have been. So this is not a concern we had with the U.S. as a background. I hope that helps.

Yes, that's perfect. That's super helpful. Second question, if I may, would be on your top-down calculation that you provided on your group revenue exposure to the U.S. Just that I fully understand it, so you mentioned 20% of group revenues are exposed to the U.S., but 10% or half of that is manufactured in the U.S. So practically, 10% is -- would be exposed to tariffs. But for roughly half of that, you are basically the market leader with no local competition in the field of blow-molding. What would that mean that only 4% of your sales would, let's say, practically affected by tariffs because any associated costs you could pass through to, let's say, the remaining 6%, because you're -- given the competitive landscape? Or how can I -- is that the right way to think about it?

Yes. First of all, your calculation was right, 10% is manufactured in the U.S. And now we have to be very careful how we see that. Once we manufacture in the U.S., we have still tariff impact. Why is that? Because some of the, let me say, components we need to import. And this we have been carefully considering. And again, it's valid for Processing, Intralogistics and, most importantly, for our life cycle business in the U.S. And for all 3 categories, we have made the mathematics up. How much is cost and pricing influenced by the tariffs once we import some of the components we need for this equipment. And this is communicated with the customers and the price increases we have pushed in the market with that. They have been quite reasonable. They have been not as high as the tariffs, of course, because a lot of things have been done or are done in the U.S. So they have been accepted widely. We have noted feedback from all the customers. But from the majority, since we have been communicated, I think, 3 days after because we have been well prepared. And that's the reason 3 days after the Liberation Day -- so 3 days after the Liberation Day and then we have been quite quick in telling our customers where we are. So that's for those 10%. Now for those 10% we are manufacturing in Germany, there's one important thing to understand. These are bottling lines. And those bottling lines, we do not carry the tariffs. The customer buys x works, and on top of that comes installation and commissioning in the U.S. In many cases, we have freight in. This is okay, but we don't have the tariffs in. So customs clearance is done by our customers, and this is paid directly. So that's the reason why we have no price effect into that. Now what are our customers asking for? They are asking for, of course, can you do something that the import tariffs, because you might do more in the U.S. or you lower your overall pricing that we can influence to a certain extent their tariff situation. And I would say, if you have an order of EUR 10 million, it's between 25% and 30% of the stuff is done in the U.S. Why is that? There is services in, we buy cable trays, cables locally. There's OEM equipment, which we buy predominantly in the U.S. So out of this EUR 10 million, EUR 7 million would be under tariff. And then we manufacture labeling machines in the U.S., so we can put the labeling machines on that side. Then we can do maybe some easy work even in the U.S., so it comes down maybe to EUR 6 million. So the tariffs are going just -- and these are rough numbers and examples, don't fix me on those. But the tariff situation for them is not when I buy a line of EUR 10 million, I have to pay tariffs for EUR 10 million. It's more between EUR 6 million and EUR 7 million they have to put the tariffs on it. So that's the situation. And if I remain for this, let me say, roughly 10%, we are shipping from here, then we have around 4% direct competition in packaging machinery in the U.S. That's the case. I hope that gives some color on your question. I know it will be complicated, but it's very, very, how to say, diverse in terms of what we see on the tariff side, what does that mean in total.

No, that was very helpful. And then maybe one more question, if I may, and then I go back into the queue and give my colleagues some time to ask questions. If I remember back at your Capital Markets Day, you mentioned that you also want to internationalize your manufacturing footprint. And one of the company -- sorry, one of the countries you mentioned was, for example -- I think it was India, you mentioned China back then. How has that changed considering, well, what's going on in this world? I mean also India and the Pakistan situation is not looking very healthy, and then 20% of your revenues are from a country where the President is not the biggest fan of China. Has there been any change in your strategy in terms of where to move the footprint? Or at what pace? Any update on that, if there is a change to the strategy?

Yes. No, not at all. And why is the reason for it? Because exactly for those reasons, that we believe that the blocks are -- I would say, become more independent. We are going to invest. The reason for investing in China is that we can do more locally in China, having no burden on our shoulders in terms of import taxes nor any, let me say, limitations we might have because anything going to happen in the world, and of course, fighting the Chinese competition in China. So we continue on that. And India, I have to say, let's see, of course, how this conflict between Pakistan and India might turn out. But first of all, we start with the investment, which is not too big in India. But nevertheless, we have a very strong push of our customers in India that they want to see local content. In case we don't do, we won't be able to sell. And number two, very important, this is actually the door to the Global South because we believe India in the long run will be one of the most independent countries. Well, the doors are wide open to supply to the Global South in case it's really coming to an even more severe block situation around the world. And the only thing which have been changed in our consideration is that, of course, the options what we are going to do in the U.S. has been checked more thoroughly than in, let me say, the last 6 months. And as I said earlier, we have done already major decisions just to be flexible in the U.S. So as I said, we extended the plant there and have more space. We've ordered machines that we can do more manufacturing. But on the other side, we still have a 15% advantage in terms of costs between the U.S. and here in Germany. So that's the reason why we are checking options, but we have not yet made any decisions. And good or bad, I would say, of course, midterm, we have to reflect, of course, where we are with our setup in Germany then. I know that's not a good news, but if we would move more to the U.S., of course, this would have some impact here in Germany, which we have to consider. And nevertheless, it's not a pleasant issue, but we have to deal with, and we are thinking through that as well that we are prepared once things would come this direction. So we are really checking very carefully on how our global setup would look like.

Thanks to you, Ben, for your questions. I see also Lars Vom-Cleff from Deutsche Bank has additional questions. Lars, your questions, please.

I admit that I will be mainly a number cruncher today, so maybe I'll start with one more strategic question for the CEO. I mean given all the global turmoil regarding the economic and political environment, do you see your Chinese competitors more focusing on Europe now instead of other regions in the world? Or is the situation still unchanged?

No, I would say that they can't move that fast that you would see a different activity than you have seen before. But again -- and we mentioned that very clear and straightforward. Chinese competition is one of our focus issues. That's absolutely clear. And I mean we have nice examples. We all know from the car industry, from the solar panel industry, we don't want to get into that one. And I said it earlier, we are pushing our factory in China. And this does not mean only we have a factory in China, we do engineering there just to get, let me say, a competitive product portfolio against our Chinese competition. Yes, and they are moving in particular in APAC, in Africa and Middle East, and we have seen them moving in Europe before the whole thing happened with the tariffs. So we definitely believe they are attacking our markets and we have to defend them, very straight and clear forward.

Perfect. And then...

You're going to the number crusher...

Yes. Now Uta. I'll try to be nice, no. I mean you already shared your thinking about the development of personnel and material costs with us. Looking at the other operating expenditure, there was 14.2% of sales in Q1, which, in my model, compares to 15.1% for Q1 last year and even 15.7% for '24. Is 14-point something we should look for, for this year? Or was Q1 rather extraordinary?

I mean we are looking at it actually at the net of other operating expenses income and then also -- asking you to -- or whatever this is. And if you take that, actually, the share remains the same more or less, and that's also what we expect and throughout the fiscal year. So that's how we are looking at this some of numbers.

Okay. Perfect. And then if I remember correctly, you guided for a negative EUR 8 million to EUR 10 million financial result for this year. Is that still something we should keep in our model, although we saw plus EUR 2 million in Q1?

I mean, you should. If you take -- if you look at your model, you should increase that a little bit to probably in the middle of positive, so 1-digit positive financial income. That's what you should -- that's what the balance or consider in your model because having the EUR 2 million, as you said, and we expect to the next fiscal -- or to the next quarters, we also expect a little bit more dividend income and that then will develop a little -- yes, as said, will develop probably to EUR 5 million to EUR 6 million approximately income.

Thanks to you, Lars. I check. I see additional questions from Benjamin. Ben, do you have additional 2 questions, is that possible?

Yes, perfect. I just decided to join lastly some accounting questions, if I may. Just quickly on taxes. So taxes in Q1 came in at roughly 30% tax rate, which was up quite a bit compared to the 26-point-something you had in Q1 2024. Can you maybe help us what run rate we should assume? And why is it up year-over-year by 300 basis points?

I mean there are 2 reasons why it is up. First reason, large dividend, which we took in the first quarter and which then raised or led to withholding taxes. So that's one of the reasons. And we don't expect those withholding taxes in that magnitude to continue throughout the fiscal year. Just to make it concrete, we have taken a dividend from the United States just to be prepared for whatever may happen then in terms of retaliatory effects or whatever these measures are called. So that's one of the reasons why the tax rate is quite high in the first quarter. The second reason why the tax rate is quite high is also that we had some intercompany transfers of intangible assets, which were taxable, so extra tax that also led to quite -- to an impact in the tax rate. And then looking into the fiscal year, yes, it's probably be around the 27% again. And that's approximately the expectation we have. So to lower it over the next quarters, yes. Does that answer your question?

Yes, that's perfect. That's exactly what I needed. Maybe one more question, if I may. Recording Mr. Klenk, you already mentioned the risk of order postponements. I was wondering, I mean, the book-to-bill in Q1 was quite decent, slightly above 1. Were there actually already some order postponements that you have seen in Q1, let's say, from U.S. customers? Or do you expect that to be more risk skewed into Q2 out to Q4?

Yes, there has been already some, but very minor. But what we see right now in April that there has been a lot of hesitation in the U.S. in terms of placing the orders. So out of 4, we do expect that we have 4 big ones, we might have for the time being actually 2, which are going to be executed. All the rest sits anyway in Q3 and Q4. So this was scheduled for this area. So that's the reason why we are still hesitant to say how things are going. If we would see things moving as they are moving right now with all the tariff situations, and of course, we don't know how the European Union might negotiate in Germany. But nevertheless, it looks like there's kind of a relief what we see right now, and that's what we get reflected from our customers. And interestingly, I mean, we have the very big ones, Coke, Pepsi, and there's 2 or 3 other bigger ones in the U.S., they are talking even to the government and helping on pushing that those tariffs should be lower. So the expectation is that this is smoothening out a bit. And those customers pushing hard, even the government, therefore, let me say, that they are loosening a bit the ties on the tariffs. Those are the customers, definitely, they want to order within this year's because they need the projects. So Q2, and I want to repeat that, might be lower than what we have seen now in Q1. We still stay with, let me say, book-to-bill around 1 for the total year because the pipeline is so good. And this includes even, let me say, what we see from the U.S. that it's not disappearing totally. There might be the one or the other order, which might be not there. But still, the projects are robust there, and we believe that customers are ordering.

Okay. Very clear. And then just one final question would be on the earn-outs. Yes, Anders, you mentioned it already, there were a little bit more than EUR 2 million in Q1. Could you maybe remind us until when are these earn-outs running? Is there like a time frame? What is the -- until you guys have to pay this out?

Yes. I mean, for this fiscal year, this was everything. And then we have some for Ampco still for '26.

Same magnitude.

Exactly. Yes.

Okay. And this is the same magnitude we have seen like in 2025? Or what can we assume there?

Approximately, yes.

Thanks to you, Ben, but we have additional questions, sorry, but we'll join our weekend a little bit later. So at first, Peter Rothenaicher from Baader Bank. Peter, your questions, please.

Firstly, I've read about the trend towards more consumption of cans also in Europe and in Germany. Do you see here some impact, also some support in order intake?

Not outside of the normal scheme, not at all. I mean we have been quite good in terms of, let me say, our positioning in cans that was once a weak spot of Krones. But I think between 2019 and 2022, we had a lot of work on our portfolio, in particular, to get cost structures okay that we are attractive. So we might participate, but this is nothing which would give an extraordinary boost to us. It might be in the magnitude we have seen it from the other markets.

Okay. Then the second question on Netstal. You mentioned there's still some dilutive effect in the margin. So how is the integration progressing? And what do you see here from your key competitor, which is in Canada and here some effect from the Trump tariffs?

Yes. First of all, and we usually do not talk -- I know it's not usual, but we do not talk about integration of Netstal. It's -- we want to keep them stand-alone, even in case we are going to integrate, let me say, in a very deep manner their injection molding machine into our bottling lines. But these are 2 separate ways, because Netstal is quite good in the met section, so we have reasonable orders from one of the very big ones there. We are doing caps for bottles with converters, which is a significant business. And we are even with the -- in the packaging industry. So that's the reason why we want to keep Netstal with its own DNA. However, we are going to integrate some of it in our products. I have to say the joint work, and I would like to call it this way, it works really perfect in the sense of it's a good team. We are fitting together. The culture is okay, and we are moving forward. Uta will talk about the dilutive effect and where we are in terms of profitability. Now how are the markets working and how are doing we in comparison to Husky? I mean Husky is the market leader, there is no doubt. And what we are doing currently, we are extending our sales and, in particular, service infrastructure around the world because they have been, to some extent, being in the Krones multi-infrastructure, which has been not so much orientated to, let me say, the beverage industry. So we are investing into service people, we are investing in infrastructure and investing into stock that we get the service level of Netstal significantly up. In terms of order intake, it was doing quite well because we want to grow because one of their, let me say, profitability problems is certainly underutilization of the capacity. So this is going nicely ahead. And we had nice wins, I have to say, against Husky in certain cases. Again, Husky is a very good company, doing a great job. So this goes step by step, but the machine is excellent. Now to the U.S., it's, of course, right now a problem because we are shipping from Switzerland. And with the tariffs being applied from Switzerland and, let me say, the currency exchange problem we have, it's an issue. But nevertheless, no project in the U.S. has been disappearing so far because we have several customers who want to try for a long time. They are buying the first time Netstal machine again and they want to establish simply competition. So all in all, it's really going nice, even if the times are challenging. In particular, the injection molding business in other areas is really difficult. For us, we are on track with growth. That's good.

Yes. And I'll continue on with the dilutive effect. I mean 2 things you have already mentioned, Christoph. One is we want to grow the service business, which has a good margin. Secondly, we want to grow the top line in general. I mean they want to actually double their output of machines over the next years, so that will boost definitely. And then in addition to that, I mean, we are talking and we are jointly working together on reducing material cost. And that is one of the levers we are talking about also their manufacturing base where we can support also. And then they have also measures in place on increasing the efficiency, so throughput time, lead time and so on, which then also is going to reduce the cost of the individual machines and with that also increasing the EBIT. Overall, we -- '25 and '26, also most of the fiscal year, the dilutive effect will remain. We always said, yes, end of '26, '27, they will come somehow in our margin corridor given all the measures we talked about.

And the last point is on your luxury problems, the strong free cash flow and thus the high net cash position. So I got the impression that currently, there is nothing shortcoming up regarding M&A or bigger M&A projects. So with that the question, what do you intend to do with the cash? Is there some opportunity to increase the payout ratio? Or what do you think about that?

First to the question of M&A, yes, we have some M&A in the pipeline. And as you know, we usually don't go for very big things. So it would be reasonable. And in particular, we are looking in a couple of areas where technology is adding up to what we have already. And we are looking to technology, which gives us even a certain kind of lift in terms of profitability. And this is true for processing and for one or the other area out of the other business units. So yes, there are discussions. We are in -- let me say, in pre-final stages, I would call it this way, but not far away from doing the one or the other. And that's why we are happy to have that cash. And I would say the rest I led to Uta because she is keeping the money together to make sure that nothing is going to happen once we are going in more difficult times.

I mean it's also part of risk management.

Yes, right, right.

Keeping the cash to a reasonable level, whatever reasonable is. I mean answering your question on payout dividends, I mean, how do we look at it? First of all, the EUR 260 million this year is the highest ever dividend we had. We were close to our 30% payout ratio and you know our 25% to 30%, and we always want to be more on the upper end. And then we believe in our midterm targets. And we believe in our midterm targets in terms of revenue growth, first of all, but then also in terms of EBITDA growth. And taking that together, we also expect to see a higher dividend payout in an absolute number dividend per share. So that's how we look at it. We do not intend to increase the payout ratio as a ratio itself.

Thanks to Peter. So I check. I don't see any additional questions from the community, also not in my e-mail folder. So I think we are more or less to an end, Christoph, Uta. Perhaps some words at the end.

Yes. First of all, thanks a lot. And let's all keep thumbs pressed for all of us that this, let me say, tariff situation comes to a resolution that uncertainty is disappearing to a certain extent because we believe once that is going to happen, that the view around the world is looking much clearer. And then second, of course, hopefully, let's get some of those conflicts which are -- nobody has, I would say, on the agenda, the Pakistan-Indian conflict we see right now that this is not escalating and that we have not even once more of those conflicts around the world. So usually, I'm not so close to the church, but since yesterday, the pope has been announced. And he was actually -- the first thing he was actually asking for peace, I can only follow on this one. And then with that, I would finish off to say, okay, have a nice weekend. It looks like the weather is fine. So let's keep things crossed that things goes okay. And even the new government in Germany will have a good hand to move things forward. Thanks a lot.

Thank you very much. Have a good weekend. Thank you.